FAQs on Health Care Legislation for Employers

The 8 Questions Employers are Asking about Health Care Legislation

Christian Brothers Services has been monitoring the proposed health care legislation prior to enactment and since President Obama's recent signing of the Original Bill and subsequent Reconciliation Agreement. While there is no argument that health care reform was needed, it is disappointing that the current legislation did not address the issues that needed to be addressed, including lack of incentives for wellness programs and the rising costs of health care, to name a couple. True health care reform is still needed.

There are many parts of the new legislation that are still vague or difficult to interpret. Numerous regulations and writings will be forthcoming as the new law is put into practice. The ultimate effect to an organization (taxable or tax-exempt) will require careful analysis with proper counsel.

Christian Brothers Services will keep you informed as the new law becomes clearer, the new regulations that affect your organization are determined, and new services and options are introduced to the health insurance market.

Hopefully, the following FAQ's will be useful in gaining a general understanding of how health care legislation will affect your organization. Please feel free to contact us with any further questions.

  1. As an employer, how is this going to affect my organization?
  2. How will this affect organizations with over 50 employees?
  3. How will the law affect organizations with 25 or fewer employees?
  4. My organization currently has a health plan we like, how will this affect us?
  5. What will happen to the lifetime dollar limit on coverage?
  6. Will new employees be subject to pre-existing conditions limitations?
  7. Is there a new dependent age limit for my employees?
  8. When does the health care law take effect?

Additional Questions

 

  1. As an employer, how is this going to affect my organization?
    Health care legislation will affect businesses and organizations of all sizes in different ways (see below for additional information.) It is now optional and not required for employers to report the value of health care benefits on employees' W-2 tax statements starting in 2011.

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  2. How will this affect organizations with over 50 employees?
    Starting in 2014, employers with more than 50 full-time workers may be subject to two types of penalties, one if they do not offer minimum essential coverage for their employees, and another if they do, but the amount charged employees is unaffordable.

    If a large employer does not offer minimum essential health coverage to its full-time employees, and one or more of its employees purchases coverage through a State Exchange and receives a premium tax credit or cost-sharing reduction, the employer will be assessed a penalty equal to $2,000 times the total number of full-time employees (not just the employees that received a credit) minus the first 30 workers. Employees will be eligible to receive a premium tax credit if their household income is between 100% and 400% of the federal poverty level, or FPL. The FPL varies depending on location and household size. For example, if the premium tax credit were available in 2010, 400% of the FPL would range from $43,320 for an individual to $88,200 for a family of four. The amounts are slightly higher for residents of Alaska and Hawaii.

    If a large employer offers unaffordable health coverage to its full-time employees, and one or more of its employees purchases coverage through a State Exchange and receives a premium tax credit or cost-sharing reduction, the employer will be assessed a penalty equal to $3,000 times the total number of workers actually receiving a premium tax credit. However, the total penalty for not offering affordable coverage cannot exceed the penalty described above if the employer did not offer minimum essential health coverage at all. Employer-provided coverage will be unaffordable if the employer pays less than 60% of covered claims cost or the employee’s cost exceeds 9.5 percent of the employee’s household income.

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  3. How will the law affect organizations with 25 or fewer employees?
    Tax credits will be provided to help small businesses with 25 or fewer employees to obtain and keep coverage for their employees if the average amount of annual wages for its full-time equivalent employees is less than $50,000. Tax credits begin in 2010. The IRS recently issued guidance about how to apply for the credits.

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  4. My organization currently has a health plan we like, how will this affect us?
    Initially, there may not be many changes to your organization’s health plan as a result of this new health care legislation. Plans in existence on the effective date of the law are eligible to be grandfathered, and do not have to make certain changes. However, certain changes will be required even for grandfathered plans, with some effective on the first plan year beginning on or after September 23, 2010. In 2018, a tax will be imposed on employer sponsored health insurance worth more than $10,200 for individual coverage, and $27,500 for a family plan, not including dental or vision benefits. The tax will be 40% of the value of the plan above the thresholds, indexed for inflation.

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  5. What will happen to the lifetime dollar limit on coverage?
    One of the changes that will be required even for grandfathered plans is the elimination of lifetime limits. There will no longer be a lifetime dollar limit on coverage. In addition, coverage cannot be rescinded, except in cases of fraud or intentional misrepresentation, as prohibited by the plan. Certain annual limits will also be eliminated for group health plans under regulations soon to be issued by the Department of Health and Human Services.

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  6. Will new employees be subject to pre-existing conditions limitations?
    For plan years beginning on and after September 23, 2010, no pre-existing conditions limitations can be imposed for anyone under 19. Additionally, in 2014, all pre-existing conditions limitations will disappear. Currently, if a certificate of creditable coverage is provided for new employees, limitations on pre-existing conditions may be satisfied based on credits for prior coverage. Please know that pregnancy is never considered to be a pre-existing condition.

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  7. Is there a new dependent age limit for my employees?
    Effective for plan years beginning on and after September 23, 2010, all health plans must offer dependent coverage for children to age 26, even if the dependent is married. No school attendance or support requirements can be used by the plan to disqualify the dependent, although group health plans are not required to offer coverage if the dependent is eligible for other coverage as an employee under another employer-sponsored plan.

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  8. When does the health care law take effect?
    The effective dates of several provisions of the health care overhaul legislation begin with the signing of the law, March 23, 2010, with some of the major changes effective for plan years beginning on and after September 23, 2010. Below is the current schedule for a number of the new provisions:

    June 21, 2010 (90 days after enactment)
    New high risk pools will be established to provide immediate access to coverage for people who have not had insurance for at least six months because of pre-existing conditions. Federal risk pool coverage is due to begin July 1, 2010.

    Plan Years beginning on or after September 23, 2010 (Six months after enactment)
    No pre-existing conditions for children under age 19.

    No lifetime caps on coverage and no annual limits for certain essential health benefits for group health plans.

    Preventive care benefits required for certain specified tests and treatments. (Not applicable to grandfathered plans.)

    Dependents can remain on parents' policies/plans until age 26, in most cases.

    2010
    Provides a $250 rebate to Medicare prescription drug plan beneficiaries whose initial drug benefits run out by reaching the “donut hole.”

    Tax credits for small employers are available.

    2011
    Insurers will be required to spend 80 percent of premium dollars on medical services for individual and small employer policies. Insured large group plans would have to spend at least 85 percent of the premiums (minimum medical loss ratio.) Rebates will be paid to policy holders if the minimum medical loss ratio is not met.

    This requirement only applies to insurance companies. It does not apply to self-insured programs like the health benefit Trusts currently administered by Christian Brothers Services, for both religious and lay employees of Catholic organizations. In any event, all of the health benefit Trusts currently administered by Christian Brothers Services meet and have historically exceeded this performance threshold.

    2013
    High income employees will see an increase in the Medicare payroll tax and the tax will be expanded to include dividends, interest and other unearned income.
    Applicable to single filers earning more than $200,000 and joint filers making more than $250,000.

    2014
    Provides subsidies to purchase health insurance for families earning up to 400 percent of the federal poverty level.

    Large employers (50 or more full-time employees) may face penalties if employees purchase coverage through State Exchanges or receive tax credits.
    Requires most people to obtain health coverage or face tax penalties.
    Pre-existing conditions exclusions and limitations eliminated for all health coverages.

    2018
    Imposes a 40 percent excise tax on high-end (Cadillac) health coverage, includes self-insured plans.

    By 2019
    Expands health insurance coverage to 32 million people.
    For a more detailed description of the new health care legislation, click here to read The Henry J. Kaiser Family Foundation's 'Focus on Health Reform.'

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Additional Questions

What is the Church Plan Relief from Health Coverage W-2 Reporting Requirement?

On March 29, 2011, the Internal Revenue Service (IRS) issued interim guidance (Notice 2011-28) to employers about the new requirement to report the total cost (“value”) of health care coverage on each employee’s annual Form W-2.

To read Notice 2011-28 in its entirety please click here.

Employers that issue fewer than 250 Forms W-2 and employers that provide coverage through a self-insured church plan, exempt from COBRA, are relieved of the requirement through the 2012 tax year (for Forms W-2 due in January 2013).

This means that most church employers will not need to provide this information until January2014 or later.

This requirement was initially supposed to be effective for the 2011 tax year—which means the information would have been required on Forms W-2 issued in January 2012. Notice 2010-69, issued in October 2010, made this requirement optional for all employers for the 2011 tax year Forms W-2 (furnished in January 2012).

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Will there be extended relief for smaller employers?

Yes. The IRS Notice 2011-28 provides further relief for smaller employers that issue fewer than 250 Forms W-2. This requirement is optional for such employers for the 2012 tax year (i.e., Forms W-2 furnished in January 2013) and will continue to be optional for smaller employers until the IRS issues further guidance. Smaller employers – those who have fewer than 250 Forms W-2, will not be required to provide health care coverage cost information on employees’ Forms W-2 any earlier than January 2014.

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What about extended relief for certain types of coverage?

Notice 2011-28 provides additional temporary exemption with respect to certain types of
employer-sponsored coverage including:

  • coverage under a multiemployer (union) plan
  • coverage under a self-insured church plan
  • limited-scope dental and vision coverage, even if self-insured
  • contributions to health reimbursement arrangements (HRA), Archer medical savings
    accounts (MSA) or health savings accounts (HSA); and employees’ contributions to
    health flexible spending accounts (FSA)

This transitional relief will continue at least through the 2012 tax year (for Forms W-2 due in January 2013), or until the IRS issues further guidance.

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Will there be relief for self-insured church plans?

The IRS states that the cost of coverage provided under a self-insured group health plan that is not subject to any federal continuation coverage requirements (i.e., most self-insured church plans) is not required to be included in the aggregate reportable cost reported on Form W-2. The cost of coverage under a church plan that is subject to COBRA―e.g., if the plan has elected to be subject to the Employee Retirement Income Security Act of 1974 (ERISA)―is not given the same exemption. This temporary relief applies at least through the 2012 tax year (January 2013 Forms W-2) and would remain in effect until the IRS issues guidance to the contrary.

This means most churches and other small church employers that provide coverage to clergy and employees through self-insured (self-funded) denominational health plans will not be required to report the cost of that coverage to employees on Forms W-2 any earlier than January 2014.

Employers in insured church plans do not benefit from the same relief as those in self-funded church plans. Employers in insured plans, including insured church plans, must report the cost of coverage beginning with the 2012 tax year (January 2013). However, many employers in insured church plans will benefit from the transitional relief for smaller employers explained above. Those employers who issue more than 250 Forms W-2 and provide coverage through an insured church plan will need to begin reporting the value of that coverage (generally based on the premium charged by the insurer) in January 2013. Smaller church employers in insured plans will remain exempt until at least January 2014.

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Will the Free Choice Vouchers be Repealed?

Due to the recently agreed upon spending bill that will fund the government for the remainder of the Fiscal Year, the Free Choice Vouchers Provision will be eliminated from the PPACA (Patient Protection and Affordable Care Act) law. Since enactment, SIIA (Self-Insurance Institute of America) has lobbied for this provision to be repealed and hails this development as a success for self-insured health plans.

This provision would have allowed employees to have left an employer's plan to enter the exchange and forced the employer to pay through a voucher for them to do so. The voucher would have been equal to what the employer would have paid had the employee remained in the employer's plan. The provision also would have allowed for an employee to keep any leftover amount of the voucher not spent on the premiums of an exchange plan. The population most likely to have taken advantage of the rebate would have been the younger and healthier workers as they are permitted to purchase the low-cost catastrophic plan. The exiting from the employer plan by this population would have increased the risk of the employer's pool, as well as decrease its economies of scale to negotiate with providers - all of which would have led to higher costs for those remaining in the plan.

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Healthcare Legislation Information

FAQs on Health Care Legislation for Employers

FAQs on Health Care Legislation for Religious Orders
 
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