Ready for Reform? Changes Coming to Health Care Insurance

In March Congress passed and the President signed into law the US Senate bill that reforms health care.  Most of the reform deals with health care insurance.  Employer-sponsored insurance plans must begin complying with the new law beginning in October 2010.  More changes and reforms take effect later – especially in 2014.  Unfortunately, the changes will very likely result in a significant double whammy of higher health insurance costs and higher taxes since benefits and coverage are significantly expanded with almost no provisions for any cost controls while at the same time significantly higher taxes and fees will be collected.

Some changes are discussed in the popular media.  Some changes are more obscure but still will have an impact on businesses.  It must also be noted that not all the details can be know until the regulations for the reform are finalized by HHS which may not happen for some time.

Here are some of the legislation’s provisions that will be effective this October:

  • Prohibits lifetime benefits limits on health care insurance;
  • Prohibits rescission of health insurance coverage;
  • Prohibits excessive waiting periods;
  • Requires family plan coverage for children until age 26 (regardless of dependency) (unless they have an offer of employer-sponsored coverage).
  • Prohibits pre-existing conditions exclusions for children under 19 (prohibits all pre-existing condition exclusions by 2014);
  • Mandated appeal process;
  • All plans required to provide first dollar coverage for preventative services.

Changes coming later than 2010:

  • The value of employer-sponsored health insurance must be listed on employee W-2;
  • Flexible Spending Account (FSA’s) contributions limited to $2,500;
  • New limits, restrictions, and penalties for Health Savings Accounts and Flex Spending Accounts (most over-the-counter medications will be excluded, penalties for non-qualified expenses double to 20%);
  • New requirements for annual IRS form 1099 reporting of every business-to-business transaction;
  • Annual fees on health insurance providers begin in 2014 and escalate to more than $14 billion by 2018;
  • “Cadillac Tax” imposed on health insurance coverage in excess of $10,200 for individuals and $27,500 for families.
  • Individual taxpayer deductibility for medical expenses raised to 10% of AGI from current 7.5%;
  • Increase in Medicare payroll taxes
  • Health insurance exchange is established;
  • Individuals mandated to purchase health insurance or pay penalties;
  • Employers mandated to provide health insurance or pay $2,000/employee penalty (employers with fewer than 50 employees are exempted).

There is much information about this bill available on various website, however, it is difficult to find good factual unbiased information that is helpful to employers to know how to implement the required changes.  Employers and other plan sponsors must work closely with agents, brokers or other benefits consultant in preparing for the required changes. 

Here are some resources with more detailed information, one biased on the side of the current administration, the other biased on the side of business:
www.HealthReform.gov (US Department of Health and Human Services)
www.uschamber.com/chambers/healthcare (U.S. Chamber’s Health Care Tool Kit)