The Patient Protection and Affordable Care Act was enacted on March 23, 2010, and the Health Care and Education Affordability Reconciliation Act is expected to be enacted shortly. This health care legislation contains provisions that will strongly impact employers. These provisions include the requirement that employers with 50 or more employees offer qualifying health coverage or pay a penalty of $2,000 per uncovered employee, elimination of the Medicare Part D subsidy tax exemption and imposition of a 40 percent excise tax on health coverage that exceeds certain thresholds. In addition, the legislation limits health care reimbursement account contributions to $2,500 per year and no longer allows over-the-counter drugs to be reimbursed through health reimbursement accounts or health savings accounts unless prescribed by a physician.
The legislation also requires group health plans that cover dependent children to extend coverage to such dependents until age 26. Beginning in 2014, this coverage must be extended regardless of whether the dependent has access to other employer-provided coverage. Further, group health plans can no longer impose lifetime or restrictive annual limits on plan benefits or impose pre-existing condition exclusions on children under age 19, and no pre-existing condition exclusions are allowed beginning in 2014.
What’s at Stake
These provisions will cost employers monetarily and increase employers’ administrative burdens. Employers have many more compliance issues to monitor as a result of this legislation. Failing to comply with these requirements could result in additional expenses by way of substantial penalties.
These provisions also have the potential to decrease employer-provided benefits. For example, employers will find it much more expensive to provide retiree benefits without the prescription drug coverage subsidy tax exemption and active medical benefits, with the threat of a 40 percent excise tax on health coverage beyond the stated threshold and with the new restrictions on plan terms, such as no lifetime limits or pre-existing condition exclusions. This extra cost may serve as a deterrent to providing some benefits.
Steps to Consider
- Take steps to ensure all requirements are met to avoid penalties.
- Review effective dates for requirements pertaining to benefits and take action as necessary.
- Evaluate the impact of future requirements on benefits and take preemptive action.
- Modify open enrollment materials, summary plan descriptions and plan documents as necessary.
Click here to read a full news alert.