Health Care Reform and Employers
Update: June 28, 2012 – U.S. Supreme Court upholds health care reform law
On March 23, 2010, President Barack Obama signed the Patient Protection and Affordable Care Act (PPACA) into law, and on March 30, 2010, he signed the Health Care and Education Affordability Reconciliation Act of 2010 (HCEARA), which contained amendments to the PPACA, into law. The two laws make up an expansive health care reform package that will have many far-reaching effects on employers.
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The health care reform package contains several provisions that immediately affect employers. Such provisions include:
- Changes to health plans;
- Tax credits for small businesses; and
- A temporary retiree reinsurance program.
Penalties. The health care reform package doesn’t require employers to provide insurance coverage to their employees. However, beginning in 2014, employers that don’t offer coverage or don’t offer coverage that is considered good enough will be penalized.
Free choice vouchers. Additionally, beginning in 2014, employers may have to provide certain qualified employees with “free choice vouchers” to be used to purchase qualified health care plans on the health care exchanges created by the new reform package. (States will have set up Small Business Health Options Programs (SHOPs or SHOP exchanges) by 2014 where small businesses with up to 100 employees can purchase coverage.)
Automatic enrollment. Under the health care reform package, if an employer has more than 200 employees, it will have to automatically enroll its employees in one of the health insurance plans it offers (if it offers a health insurance plan). Employees can opt out of coverage.
Cadillac tax. The package of bills also creates a tax on employer-sponsored high-end “Cadillac” coverage that will begin in 2018. The tax is 40 percent of the “excess benefit” of plans that exceed the thresholds of $10,200 for individual coverage and $27,500 for family coverage.
Reporting responsibilities. Employers may have more reporting requirements under the new health care reform package. The new laws will require certain large employers to report the health insurance coverage they offer on a return and will require employers to report the cost of employer-sponsored health coverage on Form W-2s.
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The new legislation also contains many other provisions that will affect employers and become effective in the next several years. Among other things, the new package contains provisions affecting:
- preexisting condition exclusions;
- annual limits on coverage;
- waiting periods;
- annual contributions to health flexible spending arrangements (FSAs) under cafeteria plans;
- the deduction for expenses allocable to the Medicare Part D subsidy;
- distributions for qualified medicine under health savings accounts (HSAs), Archer medical savings accounts (MSAs), FSAs, and health reimbursement arrangements (HRAs); and
- rewards offered to employees who participate in a wellness program and meet certain health-related standards.