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Notice to Clients on Health Care Reform

On March 30, 2010, President Obama signed into law the Health Care & Education Reconciliation Act that finalizes his comprehensive overhaul of the U.S. health care system. Comprised of more than over 2900 pages, this dual package is destined to grow even more confusing as the regulations are written to enforce the new law.  The primary intent is to require that everyone either have health insurance or pay a penalty starting in 2014. To help ease the financial burden on small businesses that employ low wage workers, the government will provide tax credits to offset a portion of the cost. Businesses that fail to comply with the mandatory coverage requirements will also be subject to a penalty.

There are many questions that individuals and businesses have regarding how the new law will affect them.  While many answers remain unclear, we will work to provide some of the answers that are readily available.

Questions:


Will my current health plan be affected by the changes?

“Grandfathered” health plans are those plans that were already in existence at the time the law was signed.  These plans are exempt from certain requirements until their annual renewal.  Upon renewal, the requirements that they will be subject to include the lifetime and certain annual limits provisions, coverage of adult children through their 26th birthday, extended waiting periods, and the pre-existing condition clause for children under age 19. 


What tax credits are available for small businesses? 

Beginning in 2010, small businesses with fewer than 25 employees and average annual wages of less than $50,000 per employee will be eligible for a tax credit of up to 35 percent of their contributions toward the cost of health insurance for their employees.  This tax credit is scheduled to increase to 50% in 2014 when the state-based insurance exchanges are operational.  A 100 percent tax credit may be available to certain small businesses with fewer than 10 employees and average annual wages of less than $25,000 per employee.


If my business contracts with a PEO, will that have any effect on the tax credits that my company is eligible for? 

The legislative history of this new law includes language indicating Congressional intent that in a PEO arrangement, the small business tax credits, employer mandates and non-discrimination testing all apply at the client level.  Congressional intent is reflected in the form of a colloquy that occurred in the Senate debate between the Chairman of the Finance Committee, Senator Baucus, Senator Nelson of Florida and the Finance Committee Ranking Minority Member, Senator Grassley.


If my business has 50 or more employees, how will I be affected?

  Starting in 2014, employers with 50 or more employees will have to choose between providing health insurance to their employees or face the potential of paying penalties.  Full-time and part-time employees are included when determining whether an employer has 50 employees (based upon current full-time employee equivalency rules); however, part time employees are not subject to a penalty.

Employers must provide “free choice” vouchers to employees with incomes below 400 percent of the federal poverty level if the employee’s contribution to coverage is between 8 percent and 9.8 percent of their income and the employee chooses to purchase coverage in the exchange.  No penalties will be imposed on employers with respect to employees who receive these vouchers.

Employers with more than 200 employees that offer coverage must automatically enroll new full-time employees in coverage; however, employees may opt out.
While further interpretations to the above requirements are anticipated, there are several requirements that take effect as early as 90 days and 6 months.


90 Days after Enactment
6 Months after Enactment

While many other key provisions remain, one key provision is the Nondiscrimination rule which will start 6 months after the law’s enactment date and does not include “Grandfathered plans”.

Nondiscrimination rules that apply to self-funded health plans are expanded to fully insured group health plans.  Plans cannot base an employee’s eligibility or continued eligibility on their hourly rate of pay or annual salary.

There are still many questions that will ultimately be answered in the regulations that are being written.  There is a flood of information on this subject and sometimes one source can directly conflict with another.  Know that Odyssey OneSource is prepared to help guide you through this maze and ensure that you are informed as answers become available. 

Please, contact your account manager or one of our business consultants if you need help in interpreting this new law. For more information, call us toll free at (888) 680-8800.



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