On March 23, President ObamaÂÂ’s long awaited health care bill was signed into law, but that was only the beginning of major changes to come in U.S. health care. This monthÂÂ’s tax and accounting article discussed some of the issues of the new Healthcare Act as it relates to individuals. Here we will look at them from a business perspective.
Beginning June 21, a new reinsurance program will become effective for businesses that provide insurance for early retirees. The federal government will reimburse 80 percent of the cost of benefits that employers provide to retirees aged 55 through 64. The reimbursement will be based on costs incurred in excess of $15,000 but less than $90,000. The reinsurance program will end by 2014 or when the $5 billion set aside for the program is exhausted.
Beginning with the 2011 plan year, employer health plans must offer coverage to adult children of plan participants through age 26. To qualify, the adult child does not have to be the participantÂÂ’s dependent, but they cannot be eligible for coverage under another health plan. After 2014, the adult child can participate in his or her parentÂÂ’s plan even if he or she is eligible for other employer coverage.
Other reforms effective in 2011 include:
- Prohibition on lifetime limits; however, restricted annual limits will be allowed; annual limits are no longer allowed beginning in 2014;
- Prohibitions against imposing pre-existing condition limitations will be enforced in 2011 for children under age 19 and in 2014 for any participant;
- An employerÂÂ’s plan must satisfy nondiscrimination rules of the Internal Revenue Code, applicable previously only to self-insured plans.
Beginning in 2011, employers will be required to report the value of employee health care coverage on Form W-2.
Fees on Certain Industries
Pharmaceutical companies and health insurance companies will be required to pay certain fees beginning in 2011. These fees will almost certainly be passed onto consumers. Additionally, beginning in 2011, pharmaceutical companies will be required to provide a 50 percent discount to Medicare Part D beneficiaries on brand-name drugs.
The pharmaceutical industry will pay total new fees of $2.5 billion in 2011; $2.8 billion in 2012 and 2013; $3 billion in 2014-2016; $4 billion in 2017; $4.1 billion in 2018; and $2.8 billion in 2019 and thereafter. The health insurance industry will pay total new fees of $8 billion for 2014; $11.3 billion for 2015 and 2016; $13.9 billion in 2017; and $14.3 billion for 2018. After that, the fee will be indexed to the rate of premium growth.
After December 31, 2013, applicable large employers (generally those with at least 50 full-time employees) will be required to offer affordable coverage to all of their full-time employees. They will pay a penalty if one of their employees is certified as having purchased health insurance through a state exchange and the employee receives a tax credit or cost-sharing reduction.
Employers offering coverage through an eligible employer-sponsored plan and paying a portion of the cost will have to provide vouchers to their employees that can be applied to the cost of a health plan with an insurance exchange.
Certain small employers might be eligible for a credit if they provide health coverage to their employees.
ItÂÂ’s too soon to see whether small business and the consumer will be in better shape as a result of the new law. But one thing is certain: health care reform has been a long time in the making and will be a long time in the implementation. The provisions are complex and the economic implications for business owners (in terms of health care costs and taxes) are significant. It is not too early to begin planning how to best position your company to respond to changes that are on the horizon.
Enjoy the spring weather.