Timeline of New Health Care Law and Its Impact on American Businesses

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1 Timeline of New Health Care Law and Its Impact on American Businesses Summaries of the Patient Protection and Affordable Health Care Act (Public Law ) Health Care and Education Reconciliation Act of 2010 (Public Law ) Signed into law 3/23/10 Additional changes made in reconciliation package Below is a timeline of some of the major provisions of the new health care law. This document is meant to be informative and to help employers understand how their plans will change and should not be considered to be legal guidance of any sort. Also, please note that government agencies, most notably the Department of Health and Human Services, will be issuing multiple regulations and countless interpretive bulletins elaborating on the meaning of these provisions Insurance Reforms All existing health insurance plans are now subject to new regulations that prohibit lifetime limits, rescissions and excessive waiting periods compliance must be met in six months from the date of enactment (September 23, 2010), i.e. if your health plan year begins on October 1, 2010, then it will be subject to the new regulations, if on January 2011, then compliance must begin at that time Children may now stay on their parent s policies until age 26 effective six months after date of enactment However, prior to 2014, this requirement is limited to those adult children without an offer of employer-sponsored coverage Restricts annual limits for group health plans the Secretary must in regulation define restricted limits. The statute instructs the Secretary to ensure that access to necessary services is made available with only a minimal impact on premiums Requires all plans (individual and group) to provide first dollar coverage for preventive services Prohibits pre-existing condition exclusions for group plans Small Business Health Tax Credit Very few, if any, AAFA members will be able to fall within the parameters of the Small Business Tax Credit Small businesses with 10 or less employees who on average make less than $25,000 per year may receive a tax credit equal to 50% of the amount paid by the small employer for the plan For firms with employees, the credit is reduced per employee 1601 North Kent Street, Suite 1200, Arlington, VA p (703) (800) f (703)

2 Firms with more than 25 employees cannot receive the credit Only firms who pay their workers $25,000 or less are eligible for the full credit The credit is reduced as the average wage goes up, stopping at $50,000 The credit is only available for a maximum of five years and for only two years once the Exchanges are up and running in 2014 Early Retirees: Creates a temporary reinsurance program to help companies that provide early retiree benefits for those Medicare Cuts: After October 1, physicians Medicare reimbursement will be cut by more than 20 percent unless Congress enacts the so-called doc-fix to preserve or increase their payment levels W-2 Reporting: Employers will be required to report the value of employees health benefits on W-2s. Health Savings Accounts (HSAs) & Flexible Spending Account (FSAs) Limits Consumers can no longer use HSAs and FSAs to purchase certain items, including most over-the-counter medication unless prescribed by physicians The penalty for making non-qualified purchases with an HSA increases to 20%. Brand-name Drug Tax - annual fee will be imposed on manufacturers and importers of brandname drugs $2.5 billion for 2011 $2.8 billion per year for 2012 and 2013 $3 billion per year for 2014 through 2016 $4 billion for 2017 $4.1 billion for 2018 $2.8 billion for 2019 and thereafter This cost will likely be passed on to consumers Long-Term Care - Community Living Assistance Services and Supports (CLASS) Provisions Employers who choose to participate must automatically enroll employees and begin payroll deductions for premiums, unless employee affirmatively opts out Participants must pay premiums for five years before they become eligible to receive the intended long-term care benefits Enrollment is set to begin January 1, 2011 Benefit is limited (approximately $50/day) and is not intended to replace other long-term care insurance offered by employers Reporting: Businesses will have to complete 1099 forms for every business-to-business transaction of $600 or more 2

3 2013 Fewer Deductible Medical Expenses New limits are placed on the deductibility of medical expenses on individual income tax returns by raising the 7.5% adjusted gross income (AGI) floor on medical expenses deductions to 10% AGI floor for those 65 and older (and their spouses) stays at 7.5% through 2016 Medicare Payroll Taxes The Medicare payroll tax on wages and self-employment income in excess of $200,000 ($250,000 joint) will increase by 0.9% Earners in excess of $200,000 ($250,000 joint) will pay an additional 3.8% Medicare tax on investment income Medical Device Tax: A 2.3% excise tax on manufacturers and importers of certain medical devices will begin. These costs will ultimately be borne by the consumer Health Insurance Exchanges States must establish an American Health Benefit Exchange that will facilitate the purchase of qualified health plans and includes a Small Business Health Options Program (SHOP) exchange for small businesses Individuals can enroll in a plan through the state exchange and small employers can offer a choice of plans to their employees through the exchange Small employers (less than 100 workers) may enroll in the exchange Free Choice Vouchers If an employer pays a portion of the cost of coverage under an employer-sponsored plan, then the employer must also provide free choice vouchers to certain low-income employees (see below for eligibility) The free choice voucher represents the monthly portion of the cost of coverage that the employer would have otherwise paid if the employee was covered under the employer s plan An employee can use the free choice voucher to purchase alternative coverage through health care exchanges The employer must pay the amount of the voucher directly to the Exchange and, if the amount of the voucher exceeds the cost of the Exchange coverage, the excess is to be paid to the employee The amount of the free choice voucher is deductible by the employer To be eligible to receive a free choice voucher, the employee must: o Be required to contribute between 8 percent and 9.5 percent of his or her household income to receive coverage under the employer-sponsored plan o Have a household income not more than 400 percent of the poverty line (currently $88,000 per year for a family of four) o Choose not to participate in the employer-sponsored plan By March 1, 2013, employers will be required to provide a notice to employees to educate them about the Exchange. 3

4 Benefits Package Federal government defines essential benefits package, which must include: ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, including behavioral health treatment, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, pediatric services, including oral and vision care All qualified health plans must offer the essential health benefits package Individual Mandate All U.S. citizens and legal residents must have qualifying health coverage or pay penalties (other than individuals who meet a hardship or religious exemption) Failure to obtain coverage will result in a $95 fine in 2014, $325 fine in 2015 and a $695 fine in 2016 (indexed for inflation moving forward) levied by the Internal Revenue Service (IRS) Employer Mandate The bill contains a complex employer mandate requiring some firms to provide insurance, pay penalties (penalties levied by the IRS) or both The penalties are based on (1) the number of full-time employees, (2) whether or not the firm offers coverage, and (3) whether or not one or more employees qualify for government subsidies toward the purchase of health insurance An employee qualifies for a subsidy if his or her household income is below 400% of the federal poverty line ($88,000 for a family of four) If a company has more than 50 full-time employees, does not offer insurance and has one or more employees receiving premium subsidies, then the first 30 workers are subtracted from the calculation and the penalty is calculated at $2,000 per employee If more than 50 full-time employees, offers insurance and has one or more employees receiving premium subsidies, then the penalty is the lesser of $3,000 per subsidized employee or $2,000 per employee If more than 50 full-time employees, offers insurance and has no employees receiving premium subsidies, then no penalty If 50 or fewer full-time employees, then no penalty Premium Credits The federal government begins subsidizing individuals up to 400% of the federal poverty line These credits will subsidize individuals purchasing insurance in exchanges, but generally speaking, will not be available to those with traditional employer-sponsored plans Subsidies will be paid directly to insurers, not individuals Medicaid Eligibility Expands The income level for Medicaid eligibility rises, bringing tens of millions of new people into Medicaid This expansion of Medicaid will account for around half of the total increase in insurance coverage and will place considerable new financial pressure on states who will likely raise their own taxes 4

5 2017 Large Employers in Exchange: At this point, states may choose to permit large employers to offer coverage to their employees through the exchanges Cadillac Tax The government will collect a 40% excise Cadillac Tax on the highest cost health plans that have annual premiums in excess of $10,200 for an individual or $27,500 per family The law also creates increased thresholds of $11,850 individual and $30,950 family for certain high-risk professions and retirees over the age of 55 (such as firefighters) The tax is to be paid by the insurer, who will likely pass the cost onto the business or entity with the coverage, which could very well lead to companies providing reduced coverage 2019/2020 Indexing of Premium Subsidies: To slow the growth of premium subsidies, beginning in 2019, the indexing of these subsidies is adjusted if premiums are growing faster than CPI. Indexing of the Cadillac Tax Thresholds: Beginning in 2020, the thresholds for the high premium tax will be indexed to the general rate of inflation. 5