Health Care Reform - 2010 Changes

The Patient Protection and Affordable Care Act (PPACA) includes provisions expected to have an impact in 2010. Visit the "Top 5 Things to Know" for Small Employers and explore Healthcare Reform website for complete information. We have provided a brief description of three important changes below:

Extension of Dependent Coverage:
Effective September 23, 2010, all health plans will need to cover dependent children up to age 26. Please see US Department of Health and Human Services Q & A regarding coverage for additional information. Coverage is available to the members' child regardless of their marital status, financial dependence, residency, or school status. It is important to note that "grandfathered" plans can exclude adult children who have access to other employer-based coverage. This exception expires for plan years beginning on or after January 1, 2014. It is also important to note that dependent coverage is only extended to the child, not the child's dependents (i.e. if the 25-year daughter of a covered employee is married, the insurer is only required to cover the daughter, NOT the son-inlaw). Any applicable state extensions still apply (i.e. NJ covers dependent children until age 31)

Small Employer Tax Credit:
If you have up to 25 employees, pay average annual wages below $50,000, and provide health insurance, you may qualify for a small business tax credit of up to 35% (up to 25% for non-profits) to offset premiums paid. Please see IRS FAQ on Small Business Health Tax Credit. Starting in 2014, the tax credit goes up to 50% (up to 35% for non-profits) for qualifying businesses.

Early Retiree Reinsurance Program:
This program can benefit employers who contribute toward health benefits for early retirees (age 55 and older, but not yet Medicare eligible) and their spouses, surviving spouses and dependents. Please note that this program does have significant requirements, such as having programs and procedures in place likely to generate cost savings for participants with chronic and high-cost conditions (i.e. disease management programs) and having policies and procedures in place to detect fraud, waste and abuse. Please see ERRP website for additional information/requirements.

This information should be considered a summary and is not considered legal or compliance guidance.

Source:
www.healthcare.gov
www.hhs.gov
www.irs.gov
www.errp.gov

W-2 Reporting Under Health Care Reform

Beginning with 2011 tax year, health care reform requires employers to report the value of employer-sponsored health care coverage on employee W-2 forms. Employers are not required to provide a specific breakdown of various types of coverage, but must report on aggregate cost.


Please note that this does not affect the employee's gross income and they will not be taxed on the value of this coverage as part of his/her regular earnings.



What's included?
Employers should include the value of the following:

• Medical plans (including HRA)
• Executive physical benefits
• Prescription drug coverage
• On-site clinics
• Medicare supplemental policies
• EAPs (except referral-only programs)
• Health Care FSA - employer contributions only
• Dental and Vision, unless stand-alone plans (i.e. employees may elect without requirement to also enroll in Medical)

What's not included?

• Long Term Care, Accident or Disability Income benefits
• Specific disease, indemnity, etc. coverage if not excludable from employee's gross income
• Specified illness or disease policies (i.e. cancer policies) where full premium is paid by the employee on an after-tax basis
• Hospital (or other) Indemnity insurance policies where the full premium is paid by the employee on an after-tax basis
• Archer MSA or HSA contributions of the employee or the employee's spouse
• Salary reduction contributions to a Health FSA

Source:
HR Daily Advisor powered by BLR
US Senate; 111th Congress, 2nd Session, H.R. 3590, "The Patient Protection and Affordable Care Act"

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