Changes Affecting All Existing Health Plans, Including Multiemployer Plans*
- Health care coverage for an employee’s child through year of 26th birthday is now tax free even if not a dependent (i.e., no “imputed income” to employee)
- Federal subsidy for certain pre-Medicare early retiree claims, covering 80% of individual claims incurred between $15,000 and $90,000 during a year; all payments must be used to lower participant costs – e.g., reductions in premiums or cost sharing
Effective for Plan Years Beginning after 9/22/10 – or if Later, at Expiration of Current CBAs:
- Lifetime limits prohibited
- Annual limits for “essential health benefits” subject to restrictions
- Must continue coverage for children until age 26, but only if no other coverage available
- Pre-existing condition exclusions prohibited for enrollees under age 19
- Prohibition on rescinding coverage except for fraud or intentional misrepresentation (scope of rule for multiemployer and other health plans is currently unclear)
- Insurers subject to annual reporting to HHS re: medical loss ratios, must pay rebates to policyholders if exceed prescribed limits – this only applies to insurers, but will indirectly impact plans (some uncertainty on effective date)
Effective Beginning in 2011:
- FSAs, HRAs and HSAs cannot reimburse expenses for OTC drugs unless prescribed (it appears this prohibition also extends to health plans generally)
- Penalty for non-qualified HSA distributions increases from 10% to 20%
Effective Beginning in 2012:
- Employers must report value of health coverage on employees’ Form W-2s (first applies to value of coverage provided in 2011 and reported in 2012)
- Must provide uniform summary of benefits and coverage explanation to participants (details to be established in regulations issued by 3/23/11, and initial deadline for compliance is 3/23/12 – or, if later, at expiration of current CBAs)
- Must give 60 days’ advance notice of any material plan changes (this rule appears to be effective only after the first uniform benefits summary is provided)
Effective Beginning in 2013:
- FSA annual limit capped at $2,500
- Beginning 3/1/13, employers must provide employees with notice regarding the Exchanges, eligibility for premium tax credits, and related information
Effective for Plan Years Beginning in & after 2014 – or if Later, at Expiration of Current CBAs:
- Must continue coverage for children until age 26 even if other coverage available
- Pre-existing condition exclusions prohibited for all participants
- Annual limits for essential health benefits completely prohibited
- Waiting periods over 90 days prohibited
Effective Beginning in 2018:
A 40% excise tax will apply to “excess benefits” under “Cadillac plans.” “Excess benefits” generally are annual benefit costs – determined similar to COBRA rates – over $27,500 per participant for multiemployer plan coverage (subject to increases based on CPI and other adjustments; different dollar limits apply to single-employer plans)
Additional Changes Affecting Only Non-Grandfathered Plans*
Effective for Plan Years Beginning after 9/22/10:
- Must continue coverage for children until age 26 even if other coverage available
- Must provide minimum preventative care benefits covered at 100%
- New standards for claims and appeals, including external review requirements
- Insured health plans now subject to nondiscrimination testing
- New patient protections related to OB/GYN and pediatric services and emergency care
- New reporting requirements regarding programs and activities related to qualify of care (e.g., wellness programs) – details and deadline for first report to be established in HHS regulations due by 3/23/11
Effective for Plan Years Beginning in 2014 and Later:
- Plans subject to annual cost-sharing limits tied to HSA/HDHP rules (currently $5,950 for self-only and $11,900 for family coverage)
- Plans in small group market subject to deductible limits (generally $2,000 for self-only and $4,000 for family coverage)
- Plans cannot discriminate against individuals participating in certain approved clinical trials (e.g., cancer)
- New wellness program standards – codification of HIPAA wellness program regulations with some improvements (inapplicability to grandfathered plans possibly an oversight)
- New reporting and transparency requirements – must submit certain administrative and financial information to HHS and state insurance commissioners and make available to the public.
Other Significant Changes Affecting Health Plans and Sponsors
Small Business Tax Credit – effective for tax years beginning after 2009
- Qualifying small businesses (generally those with less than 25 employees and average wages below $50,000) are eligible for tax credits for health insurance provided to employees; must pay for at least 50% of premiums. Rules change in 2014.
Phase-Out of Medicare Part D Donut Hole – occurs over 10-year period starting this year
- $250 rebate to Medicare beneficiaries who reach donut hole in 2010; donut hole phased out by 2020, in part by requiring drug manufacturers to discount brand name drugs in donut hole.
“Simple” Cafeteria Plan Nondiscrimination Testing Safe Harbor – effective for plan years beginning after 2010
- A new nondiscrimination testing safe harbor is available to small employers (generally those with 100 or fewer employees) that maintain a cafeteria plan meeting certain minimum coverage and employer contribution requirements.
Voluntary Public Long-Term Care Insurance Program Established – effective 1/1/11, but likely not operational until 2013
- Details on eligibility, benefits, premiums, enrollment, and employer responsibilities to be established in HHS guidance.
Annual Fee on Health Plans – effective for plan years ending after 9/30/12; expires after 2019
- Self-insured health plans are subject to an annual fee equal to $1 per covered life for the first year and $2 per covered life thereafter (subject to potential adjustment). Insured plans are subject to the same fee, but imposed on insurer.
Elimination of Single-Employer Plan Deduction for Medicare Part D Subsidy – effective for tax years beginning after 2012
- Employers with single-employer plans that receive the federal subsidy for retiree Medicare Part D prescription drug coverage lose the tax deduction related to the subsidy; this change may have an immediate impact on employers’ financial accounting requirements. (This provision does not affect multiemployer plans receiving Medicare Part D rebates.)
Increase in Medicare Part A Hospital Insurance (HI) Tax – effective for tax years beginning after 2012
- The employee share of the HI tax is increased by 0.9% on wages exceeding dollar threshold; tax on net investment income added.
New Fees and Taxes on Insurers and Medical Suppliers – various effective dates
- Insurance companies and pharmaceutical and medical device manufacturers are subject to new fees and taxes beginning over the next several years – these will presumably be passed through to employer-sponsored health plans.
New Uniform Standards and Operating Rules for Electronic Information Exchanges – effective beginning in 2013
- Details to be established in guidance to be provided by government agencies.
Universal Coverage Rules – effective for calendar years beginning after 2013
Insurance Market Reforms:
- State Insurance Exchanges Created – individuals and small businesses (generally those with 100 or fewer employees) may purchase individual or group health insurance coverage through Exchanges.
- Minimum Standards for Health Insurance – in addition to the plan design requirements described above, individual and group health insurance policies (whether offered through an Exchange or otherwise) must cover benefits in prescribed categories (called “minimum essential benefits”), have an actuarial value of at least 60%, and satisfy rules limiting out-of-pocket costs and deductibles. Insurers are also subject to new rules on rating practices, guaranteed availability and renewability of coverage, and new reporting and disclosure rules.
Employer “Play or Pay” Mandate:
- Large employers (generally those with 50 or more full-time employees) must offer health coverage to all full-time employees or face a tax penalty. Also, if the coverage offered has an actuarial value of less of than 60% or premiums exceed 9.5% of an employee’s household income, a tax penalty applies for any employee who purchases insurance coverage on an Exchange in lieu of employer coverage and qualifies for governmental premium assistance (requires income less than 400% of FPL).
- Employers of any size that offer health coverage to employees and pay a portion of the cost must provide certain low-income employees with a “free choice voucher” (with a value equal to the amount the employer would have paid for their coverage) that they can use to purchase health insurance coverage through an Exchange.
- Individuals must have health care coverage or face tax penalties (certain exceptions apply).
- Governmental assistance is available to individuals with household income up to 400% of FPL.
Large Employer Automatic Enrollment Requirement – effective date and details to be established in regulations
- Health plans of large employers (over 200 full-time employees) must have automatic enrollment and default (“evergreen”) election features.
*Significant questions remain regarding the effective dates for multiemployer plans under Health Reform. This Highlights summary is subject to change based on further guidance from Congress, government agencies, and other authorities.