By Frank Fiorille, Paychex, Inc.
Millions of Americans and small business owners across the country have more questions than answers about the sweeping health care law passed last year. No wonder. The law creates many new changes and requirements for employers: tax credits, reporting value of insurance plans on employee W-2s, option to maintain grandfathered plan status, coverage for dependents up to age 26, non-discrimination for fully insured plans, CLASS Act and others, including flexible spending account (FSA), health savings account (HSA) and health reimbursement account (HRA) changes.
What do these provisions mean for you, your employees and your business? Consider the provisions that have already taken effect and those that take effect in January.
Key provisions effective immediately:
Tax Credits for small businesses. Depending on your situation, tax credits may be available for Tax Year 2010. Employers may qualify to receive the tax credits if they have fewer than 25 employees, have average annual wages of less than $50,000, and contribute at least 50 percent of the single premium cost for each enrolled employee. The credits will be applied to an employer’s 2010 tax returns and are based on premiums, contributions and tax liability. Not every employer will qualify, and not every qualified employer will be eligible for the full credit. Be sure to keep records of your 2010 premium payments.
Continuing young adult coverage. Millions of young adults who currently have no health care insurance, or were previously dropped from a parent’s coverage because of an age limit, may be covered under a parent’s policy as of September 23, 2010. That means employers must continue health insurance coverage for dependent children until the dependent’s 26th birthday. In some cases, certain carriers allow dependents who would otherwise “age-off” the parent’s policy to remain on coverage, or even re-enroll before the renewal date.
You may be grandfathered in. The new health care law includes revisions to how your business administers and reports health care information for any health plans it sponsors. However, if your plan provided coverage on or before March 23, 2010, it may be exempt from certain requirements in the new healthcare law based on the grandfathered provision, including covering emergency services without authorization, annual cost-sharing limits, etc.
New updates to insurance discrimination protection. Currently in effect, the non-discrimination provision requires that new employer group health plans that are not grandfathered can no longer drop individuals from coverage if they get sick, deny coverage to children under age 19 with pre-existing conditions, impose lifetime or unreasonable annual limits on essential health benefits, or discriminate in favor of highly compensated employees.
Key provisions effective January 1, 2011:
An update to W-2 reporting. Employers will need to report on employees’ W-2 forms the aggregate value of their health benefits. Salary reduction contributions to medical FSAs, contributions to medical savings account (MSA) and HSA plans, and stand- alone dental and vision coverage plans are excluded. This is no longer required for Tax Year 2011, but will be mandatory for 2012.
CLASS Act. Effective January 1, 2011, the Community Living Assistance Services and Supports Act (CLASS Act), offered by the federal government, gives employers the option to help employees use payroll deductions to contribute to this voluntary program that makes long-term care insurance affordable and available to all Americans. Funded by premiums, this insurance will pay enrollees a minimum of $50 per day. Cash benefits can be applied to nursing-home care.
Wellness programs. Beginning in 2011, the federal government expects to offer $200 million in grants to small businesses to implement wellness programs. Your business may be eligible if you have 100 or fewer employees who work 25 hours per week or more, and only if you did not have a workplace wellness program as of March 23, 2010.
Impact on FSAs, HSAs and HRAs. Some provisions of the new health care law may have a substantial impact on how your employees use their FSAs and HSAs. If your business offers an FSA, HRA or HSA, your employees will be affected:
• Change in coverage guidelines for young adults (see above) also affects FSAs.
• FSAs, HSAs and HRAs: reimbursements for over-the-counter medication and drugs will not be permitted without a prescription.
• Increased penalties on improper distributions from health savings accounts.
Add it all up, and you’ve got one of the most sweeping changes to our health care system since Medicare in the 1960s. And it’s just the beginning. It may take several years to see the full effect, as states enact their own provisions.
For business owners like you, it’s now more important than ever to get informed and stay educated. You should also seek the support of a trusted health care advisor to help you navigate, decipher and decode what it all means to you, your employees, and your bottom line.
Frank Fiorille is the director of risk management of Paychex, Inc., headquartered in Rochester, New York. For more information on Paychex Insurance Agency and health care reform, visit: http://www.paychexinsurance.com/healthcarereform.