Health Care Reform: How do the new laws impact my business? How do the new laws affect me if I'm using a PEO to outsource employment functions? (2010)
The new health care reform law was signed into law in March. It contains over 2000 pages of regulations and new programs, most of which are expected to be implemented over the next four years. However, insurance companies, regulators and employers are faced with some challenges as the task of implementation draws nearer.
We intend to work together with you to comply with the new laws, and to be a resource in understanding them. Secondly, we are putting in place procedures to assist in the implementation of these new regulations. We must prepare to meet the timelines imposed, even while many states are preparing legal challenges to the law that may very well result in revisions taking place along the way. Furthermore, some aspects of the law have not been fully explained in the written regulations. The details will be clarified in the future, as federal boards and agencies address the finer points of the legislation.Nevertheless, it is our responsibility as a human resources partner to provide you with our best thinking on what this legislation will mean for you, and when we can expect implementation. We have attached a flow chart of key aspects and their projected timelines. Due to the complexity and number of changes, we are emphasizing the ones that most directly impact your business. One key issue is whether employers will be required to pay for employee health insurance. Under the legislation, there is no requirement for this until 2014, and that only affects businesses with over 50 workers.Another issue involves interpreting the new legislation in terms of clients that use a PEO service. The National Association of Professional Employer Organizations has issued a press release that “the legislative history of this new act 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”. This means that the employee count of a PEO does not affect the employee count of a business that uses a PEO. It also said that for health plans sponsored by a Professional Employer Organization, PEO, or a PEO client organization, the rules would be applied to each client organization separately and eligibility for the small business tax credits and employer shared responsibilities would also apply to each client organization separately, and not at the PEO level.”With those issues put to rest, there are several provisions to be implemented in 2010 that will affect existing health care plans. In six months, or on Sept. 23, 2010, the reform law will
1. prohibit health plans from setting lifetime or annual caps on benefits;
2. prohibit health plans from cancelling coverage for plan participants who become ill;
3. prohibit health plans from denying coverage to dependent children because of pre-existing conditions.
4. allow children to remain on their parents’ plans until they reach age 26.
5. include coverage for preventive services and immunizations, without a copay.
6. prohibit preauthorization requirements for emergency room visits or visits to ob-gyn specialists.
7. require insurers to report the medical/loss ratios of their plans, retro to 1/1/2010.
Beginning in 2011, plans that do not meet medical/loss ratio standards will be required to pay premium rebates to policy holders.Items 2 and 7 may already be in place with the group health plans. Item 4 is very similar to the wording in many group medical plans, or have been added recently by insurance carriers. Items 1, and 3 will not take effect until the anniversary renewal date of the group plans. These plans are ‘grandfathered’ under the legislation because they were existing group plans on 3/23/2010. Grandfathered plans are also not required to implement items 5 & 6 at least for a year and possibly not until 2014.At year end 2011, employers will be required to report the value of health insurance coverage benefits on the employee’s Form W-2. In 2013, employers with over 200 employees will be required to automatically enroll all employees in a health care plan. Employees can individually opt out, after initial enrollment.By no later than 2014, states will have to set up Small Business Health Option Programs or “SHOP Exchanges” where small businesses will be able to buy insurance. (Small businesses are defined as those with no more than 100 employees.)
Effective immediately, and for the next four years, until the SHOP exchanges are set up, businesses with 10 or fewer full-time equivalent (FTE) employees earning less than $25,000 a year on average will be eligible for a tax credit of 35 percent of health insurance costs. Companies with 11 to 25 FTE’s and an average wage of up to $50,000 are eligible for partial credits. The credit is based on the employer contribution to health insurance premiums, as long as the employer contributes at least 50% of the premium. Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. Pinnacle will be able to generate reports showing clients their number of FTE’s for 2010 and the amount of the credit earned.These are just some of the provisions of the new health reform act. Many of these and other provisions will have to be further defined by the U.S. Health and Human Services Secretary.We are following emerging details and information closely and will keep you informed on a regular basis through future memos and newsletters. Diamond Corporate Services is a company that sets up payroll, benefits, and human resources procedures for small to mid-sized businesses.
We intend to work together with you to comply with the new laws, and to be a resource in understanding them. Secondly, we are putting in place procedures to assist in the implementation of these new regulations. We must prepare to meet the timelines imposed, even while many states are preparing legal challenges to the law that may very well result in revisions taking place along the way. Furthermore, some aspects of the law have not been fully explained in the written regulations. The details will be clarified in the future, as federal boards and agencies address the finer points of the legislation.Nevertheless, it is our responsibility as a human resources partner to provide you with our best thinking on what this legislation will mean for you, and when we can expect implementation. We have attached a flow chart of key aspects and their projected timelines. Due to the complexity and number of changes, we are emphasizing the ones that most directly impact your business. One key issue is whether employers will be required to pay for employee health insurance. Under the legislation, there is no requirement for this until 2014, and that only affects businesses with over 50 workers.Another issue involves interpreting the new legislation in terms of clients that use a PEO service. The National Association of Professional Employer Organizations has issued a press release that “the legislative history of this new act 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”. This means that the employee count of a PEO does not affect the employee count of a business that uses a PEO. It also said that for health plans sponsored by a Professional Employer Organization, PEO, or a PEO client organization, the rules would be applied to each client organization separately and eligibility for the small business tax credits and employer shared responsibilities would also apply to each client organization separately, and not at the PEO level.”With those issues put to rest, there are several provisions to be implemented in 2010 that will affect existing health care plans. In six months, or on Sept. 23, 2010, the reform law will
1. prohibit health plans from setting lifetime or annual caps on benefits;
2. prohibit health plans from cancelling coverage for plan participants who become ill;
3. prohibit health plans from denying coverage to dependent children because of pre-existing conditions.
4. allow children to remain on their parents’ plans until they reach age 26.
5. include coverage for preventive services and immunizations, without a copay.
6. prohibit preauthorization requirements for emergency room visits or visits to ob-gyn specialists.
7. require insurers to report the medical/loss ratios of their plans, retro to 1/1/2010.
Beginning in 2011, plans that do not meet medical/loss ratio standards will be required to pay premium rebates to policy holders.Items 2 and 7 may already be in place with the group health plans. Item 4 is very similar to the wording in many group medical plans, or have been added recently by insurance carriers. Items 1, and 3 will not take effect until the anniversary renewal date of the group plans. These plans are ‘grandfathered’ under the legislation because they were existing group plans on 3/23/2010. Grandfathered plans are also not required to implement items 5 & 6 at least for a year and possibly not until 2014.At year end 2011, employers will be required to report the value of health insurance coverage benefits on the employee’s Form W-2. In 2013, employers with over 200 employees will be required to automatically enroll all employees in a health care plan. Employees can individually opt out, after initial enrollment.By no later than 2014, states will have to set up Small Business Health Option Programs or “SHOP Exchanges” where small businesses will be able to buy insurance. (Small businesses are defined as those with no more than 100 employees.)
Effective immediately, and for the next four years, until the SHOP exchanges are set up, businesses with 10 or fewer full-time equivalent (FTE) employees earning less than $25,000 a year on average will be eligible for a tax credit of 35 percent of health insurance costs. Companies with 11 to 25 FTE’s and an average wage of up to $50,000 are eligible for partial credits. The credit is based on the employer contribution to health insurance premiums, as long as the employer contributes at least 50% of the premium. Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. Pinnacle will be able to generate reports showing clients their number of FTE’s for 2010 and the amount of the credit earned.These are just some of the provisions of the new health reform act. Many of these and other provisions will have to be further defined by the U.S. Health and Human Services Secretary.We are following emerging details and information closely and will keep you informed on a regular basis through future memos and newsletters. Diamond Corporate Services is a company that sets up payroll, benefits, and human resources procedures for small to mid-sized businesses.
