Healthcare Reform Is the Law of the Land—What Do I Do Now?
The short answer?
Hit the "pause" button.
While there are a number of provisions that take effect in 2010 and still more in 2011, most employers in New York State will not be impacted by many of these provisions. In addition, plans that were in effect on March 23, 2010 are designated as "Grandfathered" plans and some of the new provisions have a delayed effective date for plans that meet the definition.
A Grandfathered Plan is defined as any group health plan (or individual coverage) that was in effect on March 23, 2010; even if new individuals or employees can subsequently enroll in the plan, that does not destroy its Grandfathered status. For the purposes of this review, information is provided in regard to “Grandfathered” Plans with over 50 full time equivalent employees. Here we will cover particularly what employers need to be prepared for over the course of 2010 and 2011.
Beginning 9/23/2010
The following Provisions are effective with the first plan on or after 9/23/2010:
- Pre-existing conditions eliminated for children under age 19. (Very few plans in New York State would exclude a Pre-existing condition as part of the plan. However, employers with self-funded plans should check your plan document relative to this provision. Insured plans in New York State seldom have this provision. If your plan has it, the carrier will be required to remove this provision.)
- Dependent Children Coverage will be required to be provided for adult children up to age 26 only if the child is not eligible to be covered under the “child’s” employer’s plan. There is no requirement for a health plan to cover a Dependent child’s child or spouse. Note: Beginning in 2014 the coverage must be made available regardless if the child has coverage available through the child’s employer.
- Coverage Limits Eliminated on coverage of essential benefits (HHS Secretary required to define these benefits) and elimination of certain annual limits, Group Health Plans will still be able to place limits on the amount covered of certain medical procedures.
- Increase “wellness” rewards: Employers can immediately increase the level of awards for participating in certain programs to 30%, up from 20% under the old rules.
Beginning in 2011
The following provisions are effective in 2011:
Reporting Health Coverage Costs on Form W-2: Requires employers to disclose the value of the benefit provided by the employer for each employee’s health coverage on the employee’s W-2 for the 2011 tax year.
Over the Counter medications no longer reimbursable: FSA’s, HRA’s and HSA’s will no longer be able to reimburse OTC expenditures from reimbursement accounts beginning January 1, 2011. If an OTC item is prescribed by a physician for an OTC item to treat a medical condition, than reimbursement will be allowed.
Standardize the Definition of Qualified Medical Expenses: Conforms the definition of qualified medical expenses for HSA’s, HRA’s and FSA’s to the definition used for itemized deductions. (Exception is OTC with Dr.’s prescription will qualify.) Currently, different Sections of the IRS code apply to Reimbursement Accounts and Eligible itemized deductions on Tax Form 1040. (As a side note this doesn’t mean that an employer has to allow all these expenses when establishing an HRA or FSA plan.)
CLASS Program Begins January 1, 2011: This “voluntary” program establishes a national community living assistance and supports that requires employers to automatically enroll employees and take deductions (to be determined), unless the employee opts out. The program provides individuals with functional limitations a cash benefit of $50 a day to purchase non-medical services and supports necessary to maintain community residence. A five year vesting period is required before an individual is eligible for benefits.
Retirees & Medicare Eligible
The following provisions may apply to employers with Retiree coverage for employees between the ages of 55 and Medicare eligibility beginning in June, 2010:
A new temporary reinsurance program is established until January 1, 2014 to help employers offset the costs of expensive claims for employers and retirees age 55 and 64. Applications will be available in June for employers with these plans. The program will reimburse employers or insurers for 80% of retiree claims between $15,000 and $90,000. Rules for participation must be provided by HHS.
Collectively Bargained Entities
The following provisions apply to collectively bargained plans:
For collectively bargained plans that were in effect on March 23, 2010 are not subject to the Reform Act (as amended by the Reconciliation Act) until the date on which the last of the collectively bargained agreements relating to the coverage terminates. Once it terminates it would fall under the then applicable Grandfather rules.
It goes without saying that there are many details missing from this legislation, and until they are provided, their full impact and the actions required cannot be predicted. At the same time, it is important to note that there are significant changes that come in 2013, 2014 and then 2017, that require the development of a comprehensive strategic plan. You should be prepared to analyze the impact of the various provisions and also to formulate a plan that best positions you to fully manage your medical plan to provide the best outcomes, which in turn will result in a more financially profitable and sound organization.
Relph Benefit Advisors is uniquely positioned to help your organization not just survive reform, but actually position your health plan as a catalyst to a healthier population and a healthier bottom line!
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