Goodness gracious, will the healthcare changes never end? Probably not. Well, despite the ongoing discussion about healthcare it’s good to have a basic understanding of the most recent healthcare reform legislation, whether you’re an HR pro, an attorney, or just plain taxpayer. So, I’ll try to provide a user-friendly overview of the new Patient Protection and Affordable Care Act (PPACA), or Quality, Affordable Healthcare for All Americans. If anything, at least I’ll sort of understand it after writing this post!
Signed into law on March 23, 2010 by President Obama and the 111th Congress, the PPACA reforms the U.S. healthcare system by expanding health insurance availability, regulating health insurance coverage, and restructuring healthcare delivery. It was a tight race, passing in the House by only seven votes.
Over 2,000 pages long (who the heck is going to read all that, jeez!), in a nutshell, the Act does not require employers to offer healthcare insurance, but does include penalties and incentives to encourage it. PPACA is going to take about eight years to be fully implemented and employers will have until 2018 to comply with all the provisions, with the majority of the requirements starting in 2014. While a lot of the provisions haven’t been detailed through regulation yet, we do know enough right now to get started.
So, here’s what HR pros need to know now:
If your organization had a health care plan in effect prior to March 23, 2010, it will probably be “grandfathered” and not terribly affected by the new provisions.
No matter what plan you had or now have, your organization must:
- Offer coverage for adult children until that adult child is 26 years old, if your health plan offers dependent coverage for adult children. You don’t have to offer dependent coverage though, if you’re not doing so already; that decision is up to you and your organization.
- Not have a lifetime dollar limit or cap on “essential health benefits,” as defined by the U.S. Department of Health and Human Services. Currently, essential health benefits include ambulatory patient services, emergency services, hospitalization, lab services, maternity and new born care, mental health and substance abuse services, pediatric services, prescription drugs, preventative and wellness services (including chronic disease management), and rehabilitative devices and services.
- Not have any exclusions for preexisting conditions for anyone. This started in 2010 for folks under 19 years of age and by 2014 will cover everyone, regardless of age.
Ensure that by 2014, if your organization has 200 or more employees, it automatically enrolls new employees in the health plan, but new employees can elect to opt out.
States will need to offer health insurance exchanges (also known as small business health option plans or SHOPS) to facilitate health care coverage. By 2014, health insurance exchanges are to be available for small business owners and then by 2017 for all employers.
Incentives
Now, the feds are offering incentives to employers to encourage them to offer health insurance coverage. If your employer does, here’s what you can get:
- A subsidy of up to 35% of the coverage cost if you pay at least half of the premium cost for employees, which will increase to 50% for an additional two years starting in 2014. Here’s the rub though, you must be an organization with 25 or less full-time employees and have an average annual wage of $50k or less.
- No matter how big your organization is, if you offer qualified health benefits, you’ll get an employer tax deduction and there won’t be any payroll taxes on the benefits.
Penalties
By the same token, the law doesn’t require employers to offer health plans. But – and this is a big but – you can be penalized in certain circumstances if you don’t. The feds are calling it a shared responsibility payment (in other words, a fine). This is where things get a little crazy.
So, if you have 50 or more employees, and :
- Don’t offer health care coverage, you’ll be fined $2k per full time employee per year if any employee gets a federal premium tax credit to use in a health insurance exchange. When counting full time employees, the feds will subtract the first 30, so the shared responsibility payment will kick in after that.
- Do offer health care coverage, but have at least one employee getting the federal premium tax credit, you will be fined $3k for each employee receiving the credit, or $2k for each full time employee, whichever fine is smaller.
The good news is that if your organization has less than 50 employees, you’re off the hook – no penalties for not offering health care coverage for you!
Most of the PPACA’s provisions are supposed to be funded by different taxes and offsets, including a broader Medicare tax on annual incomes over $200k, annual fees on insurance providers, additional taxes on pharmaceuticals and high cost diagnostic equipment, and yes, even a 10% sales tax on indoor tanning! (Well, at least we know the sun’s rays are better for us anyway!)
The Congressional Budget Office estimates that the number of U.S. uninsured will drop by 32 million to 23 million folks in 2019 after all the provisions take effect. Interestingly enough, shortly after the bill was passed, a Rasmussen poll in Florida found that 54% of “likely” voters supported Bill McCollum’s lawsuit to prevent the Act’s implementation.
Currently, there are several court challenges at various stages of development, many of them seeking to overturn the individual mandate sections of the law and many of them challenging what they see is a violation of state sovereignty. Those in the know are pretty sure the Supreme Court will be reviewing the law at some point during the next couple of years.
In the meantime, if you offer one, check your health plan and make sure it meets the fed requirements. If you’re not sure, get more information here. Good luck!
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