Health Care Reform: Immediate Concerns for Employers

Tuesday, May 11, 2010
The following are some of  the key changes which take effect as of the first day of the plan year beginning on or after September 23, 2010. Failure to comply with these new requirements could subject an employer to an excise tax of $100 per day per person to whom the failure relates.
  • Expansion of Coverage for Young Adults.  A plan that provides dependent coverage for children must continue to make that coverage available to an adult child until the child turns 26.
  • No More Lifetime and Annual Limits on Essential Benefits.  A plan may not establish lifetime limits on the dollar value of “essential health benefits” for any participant or beneficiary.  Also, a plan’s annual limits on the dollar value of essential health benefits will be restricted.  The law prohibits these annual limits altogether after 2013.
  • W-2 Reporting. Employers must disclose the aggregate cost of employer-sponsored health coverage on each employee’s IRS Form W-2.  This amount will not include any salary reduction contributions made to flexible spending accounts, health savings accounts or Archer MSAs.
  • No Preexisting Condition Exclusions for Children Under Age 19. A plan may not impose any preexisting condition exclusion on enrollees who are under 19 years of age.  The law prohibits imposing preexisting condition exclusions altogether after 2013.
  • No Rescission.  A plan (whether insured or self-funded) may not rescind coverage with respect to an enrollee unless the enrollee has performed an act or practice that constitutes fraud or makes an intentional misrepresentation of material fact as prohibited by the terms of the plan.
  • Limit on Health FSA Deferral Contribution.  Annual salary reduction contributions to health flexible spending accounts are limited to $2,500 (an amount that may be adjusted for inflation after 2012).  This provision applies after 2010.
  • No Over-the-Counter Drug Reimbursement.  Distributions from health savings accounts, Archer MSAs, and health flexible spending accounts for medicine are not medical expenses excludable from income unless the medicine is prescribed or is insulin.
  • Breast-feeding Breaks.  An employer must give an employee who is a nursing mother reasonable break times to express milk for her child each time she needs to do so during the one-year period after the child’s birth.  The employer must provide a private place, other than a bathroom, for this purpose.
  • Preventive Care Benefits.  A plan must cover preventive services without any cost-sharing (e.g., deductibles, co-payments). Preventive services includes items like mammograms and immunizations. This mandate does not apply to grandfathered plans. Plans in effect on March 23, 2010, and plans maintained pursuant to one or more collective bargaining agreements ratified before March 23, 2010, are “grandfathered” in certain respects.
  • Emergency Room Visits. A plan that provides emergency service benefits must do so without requiring pre-authorization and imposing a different cost-sharing amount if the emergency service provider is out-of-network. This mandate does not apply to grandfathered plans.

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