Even though President Obama and Congress have signed into law sweeping health care reform many employees are still in the dark about how their employer sponsored health care benefits will be affected and wondering when new provisions in the approved health care bills will go into effect. Rather than reading through thousands of pages of legislation, here is a summary of the key provisions and their impact on your company health care benefits
- Some insurers such as Aetna and Kaiser are implementing the age 26 dependent eligibility opportunity immediately in their fully insured plans, howerver many companies are adopting these provisions because there are a number of implementation issues associated with these new provisions that require additional clarification and guidance from the Department of Health and Human Services before employers can effectively implement them. As such, a number of employer health care benefits will continue under their current design until January 2011. That is, If you have an adult child who is graduating from college in the coming months, the options will remain the same as they have been in the past. They will be eligible to elect COBRA health care plans or they may seek health care insurance independently. See this post for more details on this provision.
- Going forward, the value of the health care benefits provided to each employee has to be stated on their W-2 at the end of each year starting in 2011. This is to check that people have health insurance. If they do not have health insurance they will be subject to fines starting in 2014. The first year, consumers who did not have insurance would owe $95, or 1 percent of income, whichever is greater. But the penalty would subsequently rise, reaching $695, or 2 percent of income. Families who fall below the income-tax filing thresholds would not owe anything. Nor would people who are unemployed or cannot find a policy that costs less than 8 percent of their income.
- Prescription drug benefits to retired employees will most likely be canceled based on new provisions in the health care bill. The current law allows your company to receive a tax benefit of $1,330 per worker if you allow your retired workers to receive prescription drug benefits. The new law will take this benefit away from your company. This was essentially a tax deduction that your company will lose. It is estimated that many firms will drop the prescription drug benefit for retirees because of the change in the law. The change takes effect in 2013. However this is offset to some extent by the $250 rebate to cover the Medicare prescription drug program and its unpopular “doughnut hole” — a big, expensive gap in coverage that affects millions.
- Pre-existing conditions no longer a reason to deny insurance. Under the new law, effective from September 2010, insurers will no longer be able to deny coverage to children with pre-existing conditions. Beginning in 2014, spouses with pre-existing conditions cannot be denied coverage by health insurance companies.
- So-called “Cadillac” plans costing more than $10,200 a year for individuals or $27,500 for family coverage (not counting dental and vision plans) will be subject to a 40% tax on the portion of the cost that exceeds the limit. Though the tax would actually be paid by insurers, it’s expected that it would be passed along to plan holders in the form of higher premiums.
- A new limit on FSA’s (Flexible Spending Accounts) and a higher threshold on using medical deductions. Starting in 2013 The legislation for the first time would place a $2,500 limit on what can be contributed to employer-sponsored flexible spending accounts. The cap will receive annual cost-of-living adjustments. Employers currently set their own limits, typically between $3,000 and $5,000 in the absence of a government cap. This change would cost an average worker about $625 in tax savings
The health care reform bill will probably have little effect on companies that already provide health insurance to their employees unless the coverage they provide is poor. In fact, according to the independent and non-partisan Congressional Budget Office, people who get coverage through their employer today will likely see lower premiums.