Health Reform Changes Effective in 2010

• Small Employer Tax Credit
  Effective for taxable years beginning on or after January 1, 2010, small employers with 25 or less “full time equivalent” employees and average annual wages of $50K or less are eligible for a tax credit equal to a portion of the employer’s cost to provide health insurance.  The credit begins to phase out for employers with more than 10 full-time equivalent employees and/or annual wages of more than $25K.
  
• Definition of “Dependent” for Tax Free Health Coverage to Include Children Under 27
  Children under the age of 27 (including natural, adopted, step, and eligible foster children) can now be covered as “dependents” on their parents’ health insurance policies, regardless of whether they otherwise qualify as dependents for income tax purposes. However, take note that this provision affects tax free health coverage only, and if the child is eligible for insurance coverage through his own employer but chooses not to elect, then he is NOT eligible to be covered as a dependent on parent plans. Furthermore, the new definition DOES NOT change the definition of “dependent” for income tax purposes, meaning it does NOT affect the vast majority of FSA plans (which reimburse qualified expenses only if incurred by a tax dependent). This provision can, however, affect your FSA plan if participant accounts are at least partially employer-funded; contact us for more information.
  
• Retiree Insurance
  By June 21, 2010, the Department of Health and Human Services will establish a retiree reinsurance program that will reimburse eligible employer-based plans for 80% of eligible claims between $15,000 and $90,000 for retirees and their covered dependents who are 55 or older (and not eligible for Medicare). Both fully-insured and self-insured plans are eligible for the program. All plans must apply in accordance with HHS procedures and all reimbursements must be used to lower the cost of the plan. The application process will be similar to that of the Medicare Part D subsidy and HHS has said applications will be available in June.
  
• High-Risk Pools
  By June 21, 2010, HHS will establish a high-risk pool for those who cannot otherwise obtain coverage due to a preexisting condition. The pool is set to be terminated in 2014, but until that date, group health plans must reimburse the high-risk pool for medical expenses incurred by the pool for individuals found to have been offered financial incentives to disenroll from the group health plan.

Health Reform Changes Effective in 2011

• Limitation on Over-the-Counter Reimbursements
  Beginning January 1, 2011, over-the-counter medicines or drugs will not be eligible for reimbursement under FSA, HRA or HSA plans without a prescription (regardless of whether a prescription is required to purchase the item). Examples of such medicines would be pain relievers or OTC allergy medications. This does not apply to other eligible items other than “medicines” such as bandages or contact solution.
  
• HSA Excise Tax
  As of January 1, 2011, the excise tax for nonqualified distributions from HSAs will go from 10% to 20%.
  
• Safe Harbor for “Simple” Cafeteria Plans
  Employers with 100 or fewer employees during either of the preceding two years (provided it is a full year) will now have a safe harbor from the normal applicable nondiscrimination rules for cafeteria plans (and plans such as group term life insurance, self-insured medical and dependent care assistance benefits) provided certain requirements are met.
  
• W-2 Reporting
  Beginning with 2011 calendar year plans, employers must begin to report the value of employer-provided health coverage on each employee’s W-2. (The first W-2 affected will be the W-2 sent no later than January 31, 2012).

Health Reform Changes Effective in 2012

• Comparative Effectiveness Research (CER) Fee
  For plan years ending after September 30, 2012, insurers of fully-insured plans and self-insured plans will be charge a fee equal to $2 ($1 in case of policy/plan years ending in fiscal year 2013.) The fee is for funding CER.

Health Reform Changes Effective in 2013

• FSA Salary Reductions
  Tax years beginning on or after January 1, 2013 will see a limit on health FSA reductions limited to $2,500 per year. The cap is not applicable to employer contributions but the limit is indexed for inflation based on the consumer price index in 2014.
  
• Retiree Medical Expense Deduction Eliminated
  Beginning January 1, 2013, the tax deduction permitted for the Medicare Retiree Part D subsidy is eliminated.
  
• Increased Medicare Taxes
  Beginning in 2013, there is a 0.9% increase in Medicare taxes for those earning over $200K or $250K for joint filers.
  
• Limit on Compensation Deduction
  Effective for taxable years beginning after December 31, 2012, the deduction for compensation for workers who provide services to a “covered health insurance provider”  is limited to $500K per year. For years beginning after 2012, a “covered health insurance provider” is a health insurance issuer with 25% or more of their gross premiums received from providing minimum essential coverage.
  
• Exchange Reporting
  As of March 1, 2013, employers must provide notice to employees of the existence of the exchange, how to qualify for a subsidy, and the fact that the employee will lose the employer’s contributions for health coverage if he/she enrolls in the exchange.
  
• Electronic Transaction Standards
  Plans must implement electronic transaction standards and certify compliance to HHS. The timing of these standards varies and we will alert you prior to the necessary implementation dates.

Health Reform Changes Effective in 2014

• Creation of State-based Insurance Exchanges
  Effective January 1, 2014, state-based insurance exchanges are created. Employers with less than 100 employers may participate. States may limit small employers to those with 50 or fewer employers if they choose, prior to 2016. As of 2017, states may allow employers of any size to participate.
  
• Individual Coverage Mandate
  As of January 1, 2014, most individuals are required to maintain “minimum essential coverage” or pay a penalty.
  
• Employer Responsibility Requirements
  As of January 1, 2014, an annual fee will be imposed on health insurance providers.

Health Reform Changes Effective in 2018

• High Cost Plan Tax (Cadillac Plans)
  As of 2018, the value of coverage in excess of certain thresholds is subject to a 40% excise tax.