As a local health insurance agent and insurance professional for over twenty five years I am frequently asked to explain the new health care legislation recently passed in Congress. Although the rules for how the new health care reform law will be implemented are still being written, I have compiled a basic summary of what is included in The Patient Protection and Affordable Care Act, (PPACA).
Happening in 2010:
- First, if you are a small business owner that offers coverage to employees, and the average wages of your employees are less than $50,000 per year, you may be eligible for a tax credit to help with the cost of coverage. The credit will start at 35% of health insurance premiums in the first year and will vary depending on your circumstances. Confer with your tax professional or go to the IRS website, (www.irs.gov) for more information.
- A number of new benefits will be required on all health plans starting as early as September 23, 2010. The effective date of these new benefits will vary depending on what month your plan went into effect, (this is called your renewal date).
- One new benefit is that the overall limits on your health benefits, referred to as the policy Lifetime Maximum and the limit on how much certain benefits can be paid each year, will be eliminated. For example, if your current health plan has a $1 million lifetime maximum, it would change to an unlimited maximum. If your current plan limits, for example, prescription drugs to $1,000 per year, that limit would go away. However, as always, medical services still have to be medically necessary before they will be covered by your policy.
- Another new benefit is that if you cover your dependents on your health plan, they can be covered until their 26th birthday, even if they are not full-time students or if they are married. Guidance from the Department of Health and Human Services is expected soon to answer many of the questions on the timeframe of the enactment of this benefit.
- The new law also provides enhanced coverage for preventive services. This means that benefits for preventive care will be covered at 100% with no deductible. This benefit applies to most, but not all plans and the exact benefits that must be covered will be announced very soon. If your plan is grandfathered, which means it is exactly the same as before the bill was enacted on March 23, 2010, the new benefit provisions will not apply until 2014.
Keep in mind that although these benefits may be beneficial, there will also be higher costs associated with them. Unfortunately, you do not have a choice on this as they are required benefits which must be included on all health plans now.
Happening in 2011:
- If you have a Health Savings Account and you withdraw funds for non-medical reasons, your penalty will be larger this year. The cost for using HSA funds on non-medical expenses will be that the money you spend will now be taxable income to you, plus a 20% fine.
- If you have an HSA or you have an employer sponsored FSA or HRA, you will no longer be able to turn in expenses for over-the-counter drugs unless you have a prescription.
Happening in 2012 and 2013:
- If you are an employer who provides coverage for employees, you will notice a new tax for Comparative Effectiveness Research beginning in 2012. The cost will start at $1 and go to $2 per enrollee and is to cover the cost of research on which medical treatments work best.
- If you are an employer who offers FSA’s for employees or an employee who participates in an employer FSA, you will only be able to set aside $2,500 each year starting in 2013.
- Employers will be required to provide several different notices to employees about changes that will be coming in 2014 as a result of the new law.
Happening in 2014:
- Beginning in 2014, health insurance companies cannot turn anyone down for health insurance coverage or even ask any questions about their health when coverage is applied for. This is referred to as Open Enrollment. In addition, strict rules for how much premiums can vary from one person to another will go into effect.
- There will be a new market for health insurance in each state, in addition to the sources of coverage that exist today. These markets will be called “Exchanges.” If a person does not have employer-sponsored coverage, he or she may be eligible for a subsidy to help pay for the cost of the coverage and, in some cases, an increased level of benefits with lower deductibles and co-payments.
Although these benefits sound good, you should be aware that they will increase the cost of coverage and they are not optional – all plans are required to have them. Whether they result in a cost increase for you or your employers will depend on your specific situation.
To go along with these changes, there will also be a requirement that everyone carry a minimum level of coverage or be subject to a fine. Very low income people will be exempt from the fine.
Employers with more than 50 employees generally will be required to offer a minimum threshold of health insurance coverage or potentially be subject to one or more fines. Employers can also be subject to fines to cover the cost if their employees choose government subsidized coverage through the exchange.Lastly, a variety of new taxes are scheduled to go into effect at different times between 2011 and 2014 which will increase the tax liability for certain individuals and businesses.