Skip to main content

Publications

May 2010
20
May 20, 2010

Your To Do List

Overwhelmed by health care reform? Here's a quick glance at the major changes that may affect employers. Consult your Warner Norcross & Judd Employee Benefits attorney to review the impact of these changes on your employee benefit plans.

Effective for Taxable Years beginning on or after January 1, 2010

Change

What it means

Applies to Grandfathered Plans?*

Small Business Tax Credit

Employers who maintain a qualified health plan and have fewer than 25 full-time equivalent employees who earn less than an average of $50,000 are eligible to receive a tax credit for up to 35% of group health insurance premiums paid under the plan. The amount increases to 50% in 2014.

A plans grandfathered status will not affect eligibility.

Adoption Tax Credit Increased

The limit on the tax credit for adoption assistance expenses and the amount that may be excluded from income under an adoption assistnace reimbursedment program is increased by $1,000, amounting to $13,170, through the end of 2011.

A plan's grandfathered status will not affect eligibility.

Automatic Enrollment

Employers must automatically enroll new employees for coverage unless they opt out. When employers must start doing this is unclear at present.

No

Effective June 21, 2010

Change

What it means

Applies to Grandfathered Plans?

Retiree Medical Reinsurance

This program will reimburse employer-sponsored plans for some benefits provided to retirees between the ages of 55 and 64. Reimbursement is available for 80% of

A plan's grandfathered status will not affect eligibility for the credit

Temporary High Risk Insurance Pool

This national program is being created to provide health coverage to individuals with pre-existing conditions who have not had insurance for at least six months.

N/A

Effective for Plan Years Beginning on or after September 23, 2010

Change

What it means

Applies to Grandfathered Plans?

Coverage of Dependents Up to Age 26

Plans offering dependent coverage for children must provide coverage for adult children of covered employees until age 26. The requirement applies regardless of the child's marital or student status. This coverage is not taxable to the employee or child.

Yes, but until 2014, grandfathered plans do not have to provide coverage if child is coverage under another employer-sponsored plan

No Lifetime Limits

Plans may not impose lifetime limits on the amount of essential health benefits that will be covered. Limits on benefits that are not essential health benefits are permitted.

Yes

Restricted Annual Limits

A plans ability to impose annual limits on essential health benefits is limited until 2014, and then eliminated. Limits on benefits that are not considered essential health benefits are permitted.

Yes

No Rescission of Coverage

Plans are prohibited from rescinding a participants coverage, except for fraud or intentional misrepresentation.

Yes

Pre-Existing Condition Exclusions Limited

Plans may not have pre-existing condition exclusions for children under age 19. Pre-existing condition exclusions may not be imposed for any participant in plan years that begin on or after January 1, 2014.

Yes

Nondiscrimination Rules Imposed

The nondiscrimination rules that previously applied only to self-insured plans will now apply to fully insured plans as well. These rules prohibit discrimination in favor of highly compensated individuals.

No

Preventive Care Coverage Requirements

Plans must provide certain preventive care coverage without cost to employees. This includes certain preventive care and screenings for women, adolescents, and children, and some immunizations.

No

Patient Protections

Participants may designate a participating primary care provider of their choice. If the plan covers emergency hospital care, it must do so without requiring primary authorization and with the same requirements and costs as in-network services, regardless of whether the service provider is a participating provider. If the plan covers obstetrical and gynecological care, no referrals or prior authorization may be required.

No

Claims and Appeals Procedures

Plans must implement required internal and external claims and appeals procedures and provide written notice to participants describing the procedures.

No

Notice of Coverage Requirements

Plans must provide a summary of benefits and coverage that accurately describes benefits to employees prior to enrollment in a manner specified by the law and forthcoming guidance. Despite the effective date of this requirement, the deadline to provide the notice is March 23, 2012.

Yes

Reporting Requirements

Plans must provide reports to the Secretary of Health and Human Services and participants regarding quality of care, and to the Secretary of Health and Human Services regarding data to be made public.

No

Effective January 1, 2011

Change

What It Means

Applies to Grandfathered Plans?

Grants to Small Employers to Establish Wellness Programs

The Secretary of Health and Human Services will award grants to eligible employers for wellness programs. An employer is eligible if it has fewer than 100 employees who work 25 hours or more per week and if it did not have a wellness program prior to March 23, 2010.

N/A

Long-Term Care Payroll Deductions

Employees may participate in a new national long-term care insurance program by making contributions through voluntary payroll deductions. (See A Focus on Long-Term Care)

N/A

Effective for Taxable Years beginning on or after January 1, 2011

Change

What It Means

Applies to Grandfathered Plans?

No Reimbursement for Over-the-Counter Medicines

The costs of over-the-counter medications (except for immunizations and insulin) acquired without a prescription are no longer eligible for reimbursement under flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs).

N/A

Penalties Increased for HSA Withdrawals

The tax penalties for withdrawals from HSAs and Archer MSAs that are not used for qualified medical expenses is increased to 20% (from 10% for HSAs and 15% for Archer MSAs).

N/A

"Simple Cafeteria Plan"

Eligible small employers may establish a simple cafeteria plan, which will be treated as automatically meeting the nondiscrimination rules. Employers with an average of 100 or fewer employees in the preceding two years are eligible. Minimum contribution and eligibility requirements must be met.

N/A

Cost of Benefits on W-2

Beginning with the 2011 Form W-2, employers must disclose the value of employer-sponsored medical coverage.

N/A

Effective for Plan Years ending after September 30, 2012 (generally this means plans years beginning on or after November 1, 2011)

Change

What It Means

Applies to Grandfathered Plans?

Annual Fee on Health Insurance and Self-Insured Plans

An annual fee of $2 ($1 in the case of plan years ending during fiscal year 2013) times the average number of covered lives under a health plan will be assessed to finance the Patient-Centered Outcomes Research Trust Fund. The fee is specifically imposed on policy issuers of health insurance and sponsors of self-insured health plans through 2019.

Yes

Effective March 23, 2012

Change

What It Means

Applies to Grandfathered Plans?

Advance Notice of Material Modifications

If a group health plan or health insurance issuer makes any material changes to the terms of the plan or coverage that are not covered in the most recent summary of benefits and coverage for the plan, notice of the changes must be provided to participants at least 60 days prior to the effective date.

Yes

Effective for Taxable Years beginning on or after January 1, 2013

Change

What It Means

Applies to Grandfathered Plans?

New Health FSA Contribution Limit

Health FSA salary reduction contributions are limited to $2,500 each year. This limit does not apply to employer health FSA contributions.

N/A

No Medicare Part D Subsidy Deduction

There will no longer be a deduction available for the cost of providing prescription drug coverage to participants eligible for Medicare.

N/A

Employer Notice Regarding Exchanges

Employers must notify new employees of the existence of Exchanges, the standards for receiving a subsidy under the Exchange, and the consequences of purchasing a policy through an Exchange without the employer providing a voucher.

Yes

Medicare Payroll Tax Increase

An increased Medicare payroll tax of 0.9% will apply to wages of an individual taxpayer in excess of $200,000 ($250,000 in the case of a married taxpayer filing jointly).

N/A

Effective for Taxable Years beginning on or after January 1, 2014

Change

What It Means

Applies to Grandfathered Plans?

No Coverage Penalty for Employers

Employers with at least 50 employees who do not offer minimum essential health coverage must pay a penalty in any month during which a full-time employee receives coverage through an exchange. The penalty for any month is calculated by multiplying the number of full-time employees over 30 times 1/12 of $2,000.

N/A

Health Insurance Exchange Coverage for Small Employers

Small employers may obtain coverage for employees through an exchange. An employer with less than 100 employees will be considered small unless a state limits small employers to those with less than 50 employees.

N/A

Qualified Employee Vouchers

Any employer who sponsors a health plan and contributes toward the cost of coverage must offer qualified employees vouchers for use under an exchange if the employee chooses to opt out of the employer-sponsored plan.

Yes

New IRS Reporting Requirement

Through a new IRS reporting requirement, employers must demonstrate minimum essential coverage under a health plan is being provided.

Effective for Plans Years beginning on or after January 1, 2014

Change

What It Means

Applies to Grandfathered Plans?

All Pre-Existing Conditions Prohibited

Plans may not impose pre-existing condition exclusions on any participants.

Yes

Annual Limits Prohibited

Plan may not impose any annual limits.

Yes

Wellness Incentive Limit Increases

The maximum penalty permitted under wellness plans increases from 20% to 30% of the cost of coverage. Regulators may choose to increase this limit to any amount up to 50%.

N/A

Waiting Periods Prohibited

Plans may not impose a waiting period of more than 90 days.

Yes

Cost-Sharing Limits

A plan may not have a deductible in excess of $2,000 for single coverage ($4,000 for family coverage).

No

Clinical Trials Protected

Plans must cover participation costs for certain clinical trials.

No

Effective for Taxable Years beginning on or after January 1, 2018

Change

What It Means

Applies to Grandfathered Plans?

Cadillac Tax on High Cost Plans

If the value of employer-sponsored coverage exceeds a threshold amount ($10,200 for single coverage and $27,500 for family coverage), a 40% excise tax will apply to the amount of coverage that exceeds the threshold. The tax applies to coverage providers, including insurers of insured plans, administrators of self-insured plans or FSAs, and employers contributing to an HSA or Archer MSA.

Yes

*Read about Grandfathered Plans here.

NOTICE. Although we would like to hear from you, we cannot represent you until we know that doing so will not create a conflict of interest. Also, we cannot treat unsolicited information as confidential. Accordingly, please do not send us any information about any matter that may involve you until you receive a written statement from us that we represent you.

By clicking the ‘ACCEPT’ button, you agree that we may review any information you transmit to us. You recognize that our review of your information, even if you submitted it in a good faith effort to retain us, and even if you consider it confidential, does not preclude us from representing another client directly adverse to you, even in a matter where that information could and will be used against you.

Please click the ‘ACCEPT’ button if you understand and accept the foregoing statement and wish to proceed.

ACCEPTCANCEL

Text

+ -

Reset