Health care reform update
Timeline for 2011 and forward

20 May 2010

The newly enacted federal Patient Protection and Affordable Care Act was signed into law on March 23, 2010. It makes significant changes to the health benefits and other benefits employers offer to their employees. Below are a few key changes that we have summarized for your convenience. For more details, we invite you to view the Health Care Reform Matrix. (We believe this matrix is well crafted and comprehensive, but it is for informational purposes only and subject to change.)

Changes for 2011

1. Changes to Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs), and Health Savings Accounts (HSAs) – Over-the-counter, non-prescribed medications will not be allowable expenses under these pre-tax reimbursements. The excise tax for nonqualified HSA withdrawals will increase from 10 percent to 20 percent. Effective beginning Jan. 1, 2011.
2. Reporting value of coverage - At present, it is unclear whether this provision applies to the value of health benefits provided in tax year 2010 or tax year 2011. This provision requires that employers report the value of employer-provided health coverage on each employee’s W-2 in 2011. Regulations that are yet to be issued will hopefully clarify the effective date of this requirement.
3. Enrollment in new long-term care program - Establishes a new, government-run voluntary long-term care program called the CLASS Act. Employers must automatically enroll employees into the program and make payroll deductions for the premiums, although employees can elect not to participate. Employers may choose not to participate in the program. Employees will not be eligible for benefits until after paying premiums for five years.

Changes for 2013

1. Flexible Spending Accounts (FSAs) - Employee contributions will be capped at $2500 annually, with the cap adjusted annually to the Consumer Price Index. Effective beginning Jan. 1, 2013.
2. New employee notice required - Requires employers to issue a new notice to employees containing information about state exchanges, the availability of premium assistance if the actuarial value of the employer’s plan is below 60 percent, and the availability of free choice vouchers in the upcoming plan year (2014). Effective beginning March 1, 2013.

Changes for 2014

1. Exchanges - States will begin to operate “exchanges” or marketplaces for individuals and some employer groups to obtain private health insurance choices. Small group employers with fewer than 100 employees are eligible to purchase health insurance coverage in the exchange. Beginning in 2017, states may choose to open the exchanges to employers with more than 100 employees. More guidance will be released regarding insurance rating rules and the actuarial value of benefits that can be sold in the exchange.
2. New employer penalties - Employers may be subject to penalties under the act if it has more than 50 full-time employees and provides either no health coverage or coverage that is not affordable.
3. Waiting period changes - An employer may not impose a waiting period greater than 90 days before an employee qualifies for health insurance.
4. New employer administrative reporting - Employers will be required to annually report to the IRS information such as:
   • Whether the employer offers minimum essential coverage to full-time employees;
   • Any waiting period for health coverage;
   • The monthly premium for the lowest cost option in each enrollment category under the plan;
   • The employer’s share of the total allowed cost of benefits provided under the plan;
   • The number of full-time employees during each month;
   • The name, address and social security number of each full-time employee, and the months each employee was covered under the employer’s plan; and
   • “Such other information as the HHS Secretary may require.”

Changes for 2018

1. Excise tax - A 40 percent excise tax on high-cost plans will be applied to plans costing more than $10,200 for individual coverage or $27,500 for family coverage. The tax will apply to the cost of benefits over these threshold amounts. Coverage subject to this tax include employee and employer contributions whether pre-tax or after-tax; contributions to FSAs, HRAs and HSAs; and on-site clinics or wellness plans.