FAQs on Health Care Legislation for Religious Orders
The 7 Questions Religious Institutes 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. For members of Catholic Religious Institutes, the employer-employee relationship does not exist if the member is included in the Religious Institute’s health benefit plan; such a relationship is congregation - religious member. This relationship will affect how Religious Institutes react to, and comply with, health care legislation.
Religious Institutes will have to react to the health care legislation both as associations of members (the Religious) and as employers of lay persons and members of other Religious Institutes. As an employer, all the rules of the legislation apply. You can read more about your responsibilities in The 8 Questions Employers are Asking about Health Care Legislation. For members (Religious), it is presently unclear how Religious Institutes and their members fit the puzzle. Religious Institutes and their members are more like the Knights of Columbus, the American Legion, or a labor union. There is no employer-employee relationship. Additional clarification should be coming in the near future.
Numerous regulations and writings are expected as the 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, as new regulations that affect your organization are determined, and as 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 Religious Institute. If your Religious Institute has a group coverage plan other than a Christian Brothers Services plan, you can contact your health insurance company, or call us for more information.
- Is health care legislation going to affect Religious Institutes and their members?
- Will this change how we provide health care coverage for our Religious Institutes?
- Will Medicare and/or Medicaid still be available?
- How will Medicare Prescription Drug Coverage (Part D) change?
- What’s a health “exchange”, and how will it affect my Religious Institute?
- How will individual taxes be affected by the reform?
- When does the health care law go into effect?
- Is health care legislation going to affect Religious Institutes and their members?
It will affect Religious Institutes as employers. It will also affect Religious Institutes trying to establish a program for their members, either internally administered, from an insurance company, or from a third party administrator, such as Christian Brothers Services.
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- Will this change how we provide health care coverage for our Religious Institutes?
If you currently participate in a plan administered by Christian Brothers Services (Religious Comprehensive Trust, Religious Community Deductible Trust or a Single Institute Trust) this legislation will not require any immediate change. If your Religious Institute has members covered by an employer, and not the Religious Institute, this legislation could affect their employer-provided coverage. Please refer to The 8 Questions Employers are Asking about Health Care Legislation for more information.
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- Will Medicare and/or Medicaid still be available?
Yes, Medicare remains available and will continue to be available for members of Religious Institutes, just as it has been. Medicare will also begin to pick up the tab for annual wellness visits. Medicare Advantage plans will begin to have their reimbursements from the government lowered. The plans will be subject to the minimum medical loss ratio requirements, spending at least 85 cents out of every dollar on medical costs, while leaving 15 cents for plan operations, including overhead and salaries. Any reductions due to cuts in Medicare funding will be phased in over the next three to seven years. Medicaid will remain available, and in fact vastly expanded. There is some concern as to the number of providers available to persons who get their coverage from Medicaid.
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- How will Medicare Prescription Drug Coverage (Part D) change?
Most members of Religious Institutes qualify for the low income subsidy and will not be affected at all. Health care legislation will bolster the existing Medicare prescription drug benefit by addressing part of its “donut hole” problem. For 2010, after a senior has spent $2,830 on drugs in a year, coverage stops until that same person has spent $6,830 on drugs, when it starts up again. Beginning in 2010, people who fall into this hole will get $250 from the government to help. Thereafter, the percentage of drug costs paid will gradually increase within this gap, including discounts offered by drug companies. By 2020, 75 percent of senior drug costs in this gap will be paid.
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- What’s a health "exchange", and how will it affect my Religious Institute?
Health care legislation calls for each state to set up an “exchange,” or marketplace, where people not covered through their employers would shop for health insurance offered by many insurers at competitive rates. Exchanges must be in place by 2014, and at this point, it is uncertain how exchanges are going to affect Religious Institutes.
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- How will individual taxes be affected by the reform?
The law provides for an increase in the Medicare Part A tax rate for high-income employees (but not the employer portion) by 0.9 percent, from 1.45 percent to 2.35 percent. This tax will be applied to annual compensation in excess of $200,000 for single filers.
There is also an entirely new tax of 3.8 percent on unearned income (dividends, interest, etc.) for people in a high-income bracket, beginning January 1, 2013.
The law will impose an excise tax on employer-sponsored health plans that cost more than $10,200 annually for individual coverage, or $27,500 annually for family coverage. The tax in question would be 40 percent of the cost of the plan that exceeds those dollar thresholds. This tax would not begin until 2018.
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- When does the health care law go into effect?
Some of the provisions begin for tax years starting in 2010, while others are phased in from the effective date of the law, March 23, 2010, throughout the year, and run through 2019. 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
Insurance companies 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 additional information on Medicare and the new health care legislation, click here to read the AARP article by A. Barry Rand, "Where We Stand: A New Beginning."
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