Health Care Reform: What Employers and Employees Need to Know
Learn about the 2010 health care reform law and how it affects you.
The health care reform law -- officially called the Patient Protection and Affordable Care Act of 2010 -- was signed by the President in March 2010. As widely reported, the law makes substantial changes to the health insurance system in this country. Because many people currently receive their health insurance through their jobs, the law will have a significant impact on employers and employees alike. However, most changes don't take effect right away; this article explains some of the basic changes employees and employees can expect in the coming years. (For a general background on the health care reform law, see Nolo's article The Health Care Reform Bill: 10 Things to Know.)
In keeping with the health care reform law's emphasis on preventive health care and promoting healthy habits, it includes a provision requiring employers to allow new mothers to express breast milk. Employers must provide reasonable break time for nursing mothers to pump for up to one year after birth. The employer need not pay for this time unless state law requires it; many states already require employers to offer lactation breaks. The employer must provide private space (other than a bathroom) for this purpose.
Employers with fewer than 50 employees don't have to provide lactation breaks if doing so would impose an "undue hardship" -- meaning it would take significant expense or difficulty, considering the employer's size, structure, and resources.
Because the law didn't set a future date when the lactation break requirement will take effect, most experts agree that it became effective immediately upon the President's signature.
Tax Credit for Small Businesses That Offer Health Insurance
Beginning in tax year 2010, small businesses -- defined as those with fewer than 25 full-time employees (or equivalent) and an average annual salary of less than $50,000 per employee -- are eligible for a tax credit if they provide health insurance to their employees. To qualify, the business must pay at least half of the premium for covering a single person (not a family). Businesses can get a credit of up to 35% of the premiums they paid; nonprofit employers can get a credit of up to 25% of the premiums they paid (these percentages are set to increase in 2014). The maximum credit is available to the smallest employers -- those with ten or fewer employees with average annual wages of less than $25,000.
Temporary Reimbursement to Employers That Provide Retiree Health Coverage
A provision of the law called the Early Retiree Reinsurance Program gives a subsidy to employers that provide health care coverage to retirees who do not yet qualify for Medicare (those between the ages of 55 and 64). Coverage for spouses, surviving spouses, and dependents of the retiree is also covered. The subsidy will cover up to 80% of claims incurred after June 1, 2010, but only after the retiree has made at least $15,000 in annual claims. (And the subsidy cuts off once the retiree has made $90,000 in annual claims.)
Plan sponsors must apply for this subsidy. This is a temporary program, scheduled to end on January 1, 2014, when retirees will be able to get insurance through state insurance exchanges. However, the program has a limited budget, to be paid out on a first-come, first-served basis.
Requirements and Restrictions on Health Care Plans
For plan years that begin on October 1, 2010 or later, new restrictions and requirements apply to health care plans. There are more requirements for new plans; existing (grandfathered) plans won't have to comply with all of these requirements right away.
Rules for Existing Plans
Here are some of the requirements that will apply to existing plans:
- There can be no lifetime dollar limits on the care provided for essential health benefits. Which benefits go on this list will be decided by the Health and Human Services (HHS) Department, but the list must include certain items -- such as emergency care, hospitalization, maternity and newborn care, prescription drugs, laboratory services, mental health, and preventive care.
- Insurers can apply annual benefit limits, but subject to certain restrictions in order to ensure access to necessary services.
- Children up to the age of 26 who are not covered at their own jobs must be allowed to enroll in a parent's plan. (The IRS recently issued guidance explaining that this additional benefit is tax-free to the parent/employee.)
- Children up to the age of 18 may not be denied coverage for preexisting conditions.
- Plans may rescind (cancel) coverage only if the insured commits fraud or intentionally misrepresents a material fact.
Additional requirements for grandfathered plans will start in 2014.
Rules for New Plans
New plans will have to comply with the rules for existing plans, along with some additional requirements, including:
- Plans must fully cover preventive care, with no deductible or co-pay.
- Employers that choose to offer wellness programs must pay the full cost, with no deductible or co-pay.
- Employees must be able to go to the emergency room and ob-gyn visits without prior authorization; participation in clinical trials must be covered.
- Group health plans may not discriminate in favor of highly compensated employees.
Again, additional requirements will apply in 2014.
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