ARA

Patient Protection and Affordable Care Act

Beginning in 2014, insurance companies must provide health insurance to all who seek insurance, employers with the equivalent of 50 or more full-time workers will have to offer health insurance and almost every American will be required to have health insurance from a public or private source or face penalties.

The president signed the Patient Protection and Affordable Care Act (H.R. 3590) into law Tuesday, March 23, 2010, and he signed the Health Care and Education Affordability Reconciliation Act of 2010 (H.R. 4872) on Tuesday, March 30, 2010.

While the thrust of these health care reforms don't take effect until 2014, other provisions have already begun. In April, the Alabama Retail Association mailed members a detailed summary of the laws' provisions, compiled by Lehr, Middlebrooks and Vreeland P.C. Below is a recap of some of the more pertinent points as provided by Lehr and other sources. This information is intended as general background, please work with your legal counsel, accountants and insurer to determine the exact effect on your business.

EMPLOYER REQUIREMENTS AND PROVISIONS BY EFFECTIVE YEARS

2010

Small Business Tax Credit: Small businesses are eligible for up to a 35 percent tax credit for the employer's contribution toward health insurance for employees for tax years 2010-2013. The credits are only available to employers with 25 or fewer full-time equivalent employees with average annual wages of $50,000 or less. Only smaller employers (10 employees or fewer) with even lower average annual wages can claim the full credit, which grows to 50 percent for tax years 2014 and beyond. The credit is available for a maximum of five years, with a two-year maximum beginning in 2014.

Space, Breaks for Nursing Mothers: Effective now, employers must provide unlimited, unpaid breaks for nursing mothers to express milk while at work. Employers must provide a suitable place, other than a restroom to express milk for up to a year after the birth of a child. Employers with 50 or fewer employees are exempt if the requirements would cause the employer significant difficulty or expense.

Excise Tax on Indoor Tanning Services: Effective July 1, tanning salons must collect and remit a 10 percent excise tax on indoor tanning services.

2011

Reporting Responsibilities: Employers must disclose the value of group health benefits on their employees' W-2 forms. No taxes will be assessed on the value of the health coverage.

Simple Cafeteria Plan Available for Some Small Employers: The U.S. Department of Health and Human Services will make available a simple cafeteria plan as a vehicle for small employers to provide tax-free benefits to their employees. Small employers in this instance are defined as those who have employed on average 100 or fewer employees over the previous two years.

Calorie Labeling for Chain Restaurants: The healthcare law contains language that requires calorie labeling on chain restaurant menus, menu boards, and drive-through displays, as well as on vending machines. The legislation applies to chains with 20 or more outlets, and requires the restaurants to provide additional nutrition information on request. The law sets a new national standard rather than the patchwork of state laws that had begun to develop.

The law exempts small businesses and does not apply to daily or temporary specials and customized orders.

Preliminary guidelines issued Aug. 25, 2010, by the U.S. Food and Drug Administration extends the scope of the law beyond restaurants to encompass airlines, trains, grocery-store food courts, movie theaters and convenience stores that qualify as chains. Within grocery stores, the agency is considering including salad bars, store bakeries, pizza bars and delicatessens.  Comments on the guidelines are due by Oct. 21, 2010, to regulations.gov

2012

1099 Reporting: Businesses will have to complete 1099 forms for every business-to-business transaction of $600 or more. Bills have been introduced to repeal this provision. Tell your lawmaker to vote against provisions that make the repeal revenue-neutral by increasing taxes or removing tax incentives from business.

2013

Summary Plan Descriptions: Summary plan descriptions must meet format, content and timing requirements.

Health Care Flexible Spending Accounts: A $2,500 cap, indexed for inflation, on annual salary reduction contributions will apply to health flexible spending accounts offered under cafeteria plans. Reimbursement of over-the-counter medicines or drugs (other than insulin) without a doctor's prescription will no longer be allowed.

Medicare Part D Deduction No Longer Allowed: Employers who provide prescription drug coverage for Medicare Part D-eligible retirees will no longer receive a deduction. This does not apply to multiemployer plans.

2014

EMPLOYER-REQUIRED COVERAGE
Employers who have 50 or more employees are required by 2014 to offer coverage to employees or pay a $2,000 penalty per employee, with the first 30 workers exempted, under the new law. If an employer offers coverage but the coverage is deemed unaffordable to a full-time employee, that employee can opt out to a purchasing exchange. The company would then be assessed $3,000 for each employee who opts to use an exchange or up to $2,000 for every full-time worker on the payroll, whichever is less. The 50-worker threshold is to be calculated based on full-time equivalents, meaning part-time workers would be counted even though employers are not required to offer them insurance. Employers can offer increased incentives to employees for participation in a wellness program or for meeting certain health-status targets.

STATE EXCHANGES
By no later than 2014, states will have to set up Small Business Health Options Programs, or SHOP exchanges, in which small businesses will be able to pool together to buy insurance. Small businesses are defined as those with no more than 100 employees, although states have the option of limiting pools to companies with 50 or fewer employees through 2016; companies that grow beyond the size limit will be grandfathered in. Until the SHOP exchanges are set up, tax credits of 35 percent to 50 percent of premiums will be available now to small businesses that offer coverage (see 2010)

TAX ON HIGH-COST EMPLOYER-SPONSORED INSURANCE
A new tax on high-cost employer-sponsored insurance policies begins in 2018. The reconciliation act raises the thresholds at which policies are hit by that tax. The new law also will make it more expensive for companies to offer prescription drug coverage for retirees because companies will receive smaller tax deductions for those benefits.

INSURER REQUIREMENTS
In 2014, insurers will have to cover everyone, regardless of their health problems. According to an actuarial report commissioned by Blue Cross and Blue Shield of Alabama, the reform in five years' time will increase family premiums in Alabama by $3,500 annually for those buying insurance on their own and $2,800 a year for those getting coverage through small business employers. Group health plans may not impose preexisting condition exclusions or establish annual limits on benefits. Group health plans offering minimum essential coverage must report plan details to the IRS; and waiting periods as a condition of eligibility may not exceed 90 days.

CONSUMER REQUIREMENTS
The new law also requires that consumers get coverage or face a penalty. The penalty fee starts at $95 in 2014 or 1 percent of the family income and ultimately rises by 2016 to a range from $695 to $2,085, or 2.5 percent of the household income. 

MEDICAID

The law also expands Medicaid coverage. Under the new guidelines, a family of four with an income of up to $29,327 – or up to 133 percent of the federal poverty limit – would qualify for Medicaid.

2017

States may allow employers with more than 100 employees to offer health care coverage through the state health benefit exchange.

2018

Excise Tax on High-Cost Plans (Cadillac Tax): Group health plans with premium levels above $10,200 for individuals and $27,500 for family coverage will be subject to a 40 percent excise tax.

THE TOTALS

All told, the Congressional Budget Office estimates the legislation will extend health coverage to 32 million Americans now without insurance, including close to 642,000 Alabamians. Among Alabama’s residents, 400,000 would qualify for coverage under the Medicaid expansion, which will be about a 50 percent increase in Alabama's federal and state medical program for the poor. Other Alabamians who are uninsured would be able to get insurance starting in 2014 through the state-run insurance exchange, regardless of their health status.

ADDITIONAL RESOURCES:
U.S. Chamber of Commerce Health Care Implementation Timeline