1 A Digital Insurance Health Care Reform Handbook for Employers Health care reform is complicated. Sifting through all the regulations and provisions can be time-consuming and confusing. That s why Digital Insurance has created this handbook for business owners, which includes a simplified overview and clear, concise answers to the health care reform issues facing employers.
2 Can I Get Tax Credits for Providing Insurance to My Employees? Yes, if you re a small business (less than 25 employees) or a tax-exempt organization that provides health insurance coverage to your employees you may qualify for the small business health care tax credit, where you can claim up to 35 percent of premiums (25 percent for tax-exempt organizations). You can start claiming the credit on the 2010 tax return your business files in Use this IRS worksheet to help see if you qualify. Your Digital Insurance benefits consultant can provide further assistance. Are your average employee wages less than $50,000? yes no Do you pay at least half of the insurance premium for your employees at the single (employee only) coverage rate? yes no If you said YES to both of the above you may be able to claim the credit and can visit for more details. IRS TAX CREDIT WORKSHEET STEP 1 Determine the total number of your employees (not counting owners or family members) # full-time employees (number of employees who work at least 40 hours per week) + add the number of full-time equivalent or part-time employees (calculate the number of full-time equivalents by dividing the total annual hours of part-time employees by 2,080) = total employees If you re total employee count is less than 25 go to step 2 STEP 2 Calculate the average annual wages of employees (not counting owners or family members) # Total annual wages you pay to employees divide it by the number of employees from STEP 1 (total wages number of employees) = average employee wages HEALTH CARE REFORM TIMELINE 2010 Dependents covered to 26 Dependents can remain on their parent s plan until their 26th birthday. No lifetime or annual limits No lifetime dollar maximum limits or annual maximum limits on essential benefits. No pre-existing restrictions for children Children under the age of 19 can t be denied coverage because of pre-existing conditions. Tax credits for small employers Businesses with less than 25 employees and an average wage under $50,000 could get a tax credit up to 35% of premiums. Preventive services coverage Plans must cover preventive services without making members share the cost of deductibles or copayments. Reinsurance for employers with retirees Program for employers providing insurance to retirees over 55 not eligible for Medicare. Nondiscrimination testing Employer plans are barred from favoring highly compensated employees. Pre-Existing Condition Insurance Plan Coverage available for those denied because of pre-existing conditions Employer disclosure notices required (If applicable to your plan: lifetime limits, coverage to age 26, designation of primary care provider and grandfathered plan status). Will I Pay Less for My Health Insurance Coverage or More? Unfortunately, this issue will take awhile to shake out and there are different schools of thought here. Health reform requires insurance companies to add new benefits to all policies, and this could increase costs in the near future. Others argue since more businesses and individuals will be entering the insurance-buying pool, it s hoped that more buyers will help lower premiums for everyone. New restrictions on HSA, FSA and HRA fund use Over-the-counter drugs can no longer be reimbursed without a prescription, and the tax for non-medical use increases to 20% Wellness grants for small businesses Employers with fewer than 100 employees can tap into over $200 million in federal grants. Summary of Benefits/Glossary of Terms A simplified 4-page summary of benefits coverage and commonly used terms must be provided to all consumers/employees. Moreover, a 60-day notice of material modifications to health plans must also be communicated to members 60 days before implementation.
3 Will I Be Required to Buy My Insurance From a State Health Insurance Exchange? No, the requirement is that everyone has health insurance. Health care reform doesn t dictate where individuals or groups must purchase it. An exchange is simply a new place to buy insurance that will be available to individuals and small businesses. Digital encourages you to utilize licensed health insurance brokers to make sure you re getting the best benefits for your employees and to help you find the best rates. Keep in mind that depending on plan participation, an exchange may not offer you the same number of choices and plan designs. Am I Required to Provide My Employees With Health Insurance? Although businesses aren t specifically required to provide insurance coverage, owners could pay hefty penalties if their employees get coverage through an exchange. Beginning in 2014, if you have more than 50 full-time employees and don t offer coverage and even one employee receives a government subsidy to purchase insurance through an exchange, you ll be required to pay a penalty. Penalties aren t tax deductible. Also, employers with more than 200 employees will be required to automatically enroll employees into health plans (although employees may opt out). Do you have less than 50 full-time employees? yes no Do you offer health coverage to your employees? yes no If you answered NO, you may be at risk for a penalty beginning in Penalties for employers who don t offer health insurance $2,000 for each full-time employee after the first 30 OR $3,000 for each employee who receives a government subsidy for health insurance or $2,000 for each full-time employee, whichever is less For information on affordable health plans for your business, visit Administration simplification Rules established making payment, enrollment, claims and authorization processes simpler. Medicare tax increase Medicare Part A tax rate on wages goes up from 1.45% to 2.3% for certain individuals. Employers must inform employees of health options Employers must provide employees with information on employer plans, health exchanges and subsidies. W-2 reporting for employers Employers who file 250 or more W-2s are required to report the cost of health benefits on W-2s distributed in 2013 for tax year 2012 (those filing less don t have to comply at this time). Reporting is informational only (i.e., employees will not be taxed). Pre-tax FSA contributions capped at $2,500 Itemized deductions for unreimbursed medical expenses Threshold increases to 10 percent of AGI (up from 7.5 percent) 2014 Individual mandate Everyone must have health coverage or pay a penalty. Employer mandate Employers with more than 50 employees must provide coverage or pay a penalty if any employee receives a subsidy. Large employer auto enrollment Employers with more than 200 full-time employees that offer coverage must auto-enroll employees (who can opt out). Exchanges open States must have exchanges up and running by 2014 or the government will come in and set up itself. Wellness incentives Employers can offer rewards of up to 30 50% of premiums to employees who take part in wellness and meet health standards. No pre-existing condition exclusions Coverage cannot be denied for those with pre-existing conditions. Comprehensive coverage requirement Individual and small group plans must include essential health benefits. Limits on deductibles and copayments Group health plan deductibles are limited to amounts allowed for HSA plans. Ban on all annual limits Plans may no longer impose any annual benefits limits.
4 Do Individuals Have to Buy Insurance? Starting in 2014, every U.S. citizen and legal resident will be required to have health insurance. If you aren t covered through your employer and don t purchase coverage on your own, you ll have to pay a yearly fine of $695 per person (maximum of $2,085 per family) or 2.5 percent of household income, whichever is greater. (Note: This is one area of the law being challenged by the courts and may vary by state depending on legal outcomes.) 2018 Cadillac plan excise tax Tax on employer plans valued at over $10,200 for individuals and $27,500 for families. Where Can Individuals Find Good Rates on Health Insurance? Digital Insurance is a great way to find the best rates for individual and group health insurance and all at no cost to you. Better still, we ll take complete care of you and your employees throughout the year, providing you with your own benefits consulting team, a Customer Advocate Center to answer your employees questions directly (so you don t have to), an online Ask the Expert benefits resource center for next-day answers to your HR and legal questions and much, much more. An Employer Checklist: 10 Things to Remember 1. Tax credits for small employers 2. Dependent coverage to age Wellness grants for small businesses 4. W-2 reporting of health benefits 5. Informing employees about their health options; 60-day notice of plan changes 6. Grandfathering plans/nondiscrimination rules 7. Employer play or pay 8. Tax on Cadillac plans 9. Automatic enrollment of employees 10. Breastfeeding accommodations Want to get started? Check us out at
5 Your Guide to Health Care Reform The health care reform legislation signed into law on March 23, 2010 affects everyone. This handbook highlights the areas of health care reform that most impact employers. The guide includes some basic questions and answers to help employers prepare for the upcoming changes, take advantage of new benefits and tax credits and plan for new requirements. A simple timeline showing what happens when is included, along with an employer checklist. Will My Current Benefits Change, and What Does Grandfathering of Health Plans Entail? If you currently have a health plan for your business, you ll probably see few immediate changes. The law provides for grandfathering of policies that were in effect on or before March 23, 2010, allowing employers to keep their benefits for currently enrolled employees, dependents and new hires. Minor changes to a plan are allowed. Major changes are not. Routine Plan Changes That Won t Trigger a Loss of Grandfathered Status > Cost adjustments to keep pace with medical inflation > The addition of new benefits > Modest adjustments to existing benefits > Voluntarily adopting new consumer protections under the law > Making changes to comply with state or federal laws Changes That Would Cause a Health Plan to Lose Its Grandfathered Status > Significantly cut or reduce benefits > Raise co-insurance charges > Significantly raise co-payment charges > Significantly raise deductibles > Significantly lower employer contributions Keep in mind that there are many moving parts to this legislation. Several legal specifics have yet to be worked out. Digital Insurance recommends that you stay in close contact with your benefits consultant team to ensure your business is properly prepared and to answer specific questions regarding potential changes to your benefits plan and available options that can keep your employees and your business healthy, happy and strong. > Add or lower annual limits > Change insurance companies (prior to 11/15/2010) New Plan Requirements Summary > Dependents covered until age 26 > No lifetime benefit maximums > No pre-existing condition exclusion for children under 19 > No annual limits for essential benefits > Coverage can t be rescinded except for fraud > 100 percent coverage for preventive care (N/A if grandfathered) > Ban on discrimination in favor of highly compensated workers (N/A if grandfathered) > Right to designate a primary care provider (pediatrician, OB/GYN, etc.) and access to emergency care without increased cost-sharing (N/A if grandfathered)
6 400 Galleria Parkway, Suite 300 Atlanta, GA Note: This handbook is based on a general review of widely available sources and does not represent legal advice. PPACA changes occur frequently and may not be reflected in this handbook. Up-to-date reform modifications can be found here: (Revised 1/2012)
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