One Year Later: Healthcare Reform and Its Impact on Business

Almost one year ago, President Obama signed into law the Patient Protection and Affordable Health Care Act (PPACA). The most far-reaching piece of healthcare legislation in decades, the PPACA is redefining the healthcare landscape.

Recently, CBIA News spoke with Bruce Barth, partner in the law firm of Robinson & Cole LLP, about the PPACA’s impact on business so far and what’s in store for the months ahead. Barth is a presenter at CBIA’s 2011 Compensation and Benefits Conference on March 24 in Cromwell.

What aspect of federal healthcare reform is having the most impact on employer-sponsored medical plans?

I’d say the most important has to do with nondiscrimination. Once your plan is no longer grandfathered, it is subject to nondiscrimination rules that apply to employers of all sizes and types. (Group health plans created: or individual health insurance policies purchased: on or before March 23, 2010, are grandfathered, or exempted from many changes required under the Affordable Care Act.)

Discrimination may include

Offering 100% healthcare coverage to an employee in the top 25% of the pay range but not extending that rate to lower-paid employees

Pledging to pay all or a portion of healthcare coverage for employees granted severance agreements but not extending that offer to everyone

I hope we’ll gain some clarity in the coming months, but right now this issue isn’t getting the attention it needs. The good news is that in late December the IRS delayed the effective date of the nondiscrimination provision until after they issue guidance. That’s significant, because we need considerable direction to understand how it will work in practice.

The penalty for nondiscrimination is very different from what we were dealing with before, when only self-insured plans were subject to nondiscrimination rules. Once the new rules become effective, employers risk a fine of $100 a day for each participant who is not eligible for the discriminatory benefit.

What should employers know about grandfathered plans?

The original grandfathered plan rules said that if you change insurance carriers, you lose grandfathered status. In November, the Department of Labor issued guidance stating that as long as the health coverage itself doesn’t change, changing carriers alone will not take away your grandfathered status. However, you do lose grandfathered status if you significantly change your coverage, significantly increase the premiums that employees play, or make certain other changes to the plan.

What are some important dates to keep in mind for 2011?

Many healthcare reform provisions are generally effective for plan years commencing on or after Sept. 23, 2010. So for most plans, the effective date was Jan. 1, 2011. Those provisions include

No more lifetime limits on medical expenses

No more refusal of coverage due to preexisting conditions (currently applies only to children under 19; in 2014, it will apply to everyone)

An extension of coverage to dependents 26 years old and younger

What can you tell us about the small business healthcare tax credit?

Private or government employers who provide health insurance, have 25 or fewer employees, and whose employees earn an average of less than $50,000 per year are eligible for the credit, provided they meet certain requirements. Employers should become familiar with how the credit works and how to calculate it. For information, go to www.irs.gov/businesses and click Affordable Care Act Tax Provisions.

How is the legislation changing the way employers handle wellness?

You can now build certain wellness incentives into your healthcare plan. Prior to passage of the PPACA, you could reduce your premium by only 20% for wellness-related incentives. Now you can get up to a 50% reduction in premium.

Remember, however, that the rules dictate that you have to provide reasonable alternatives for employees who can’t meet your wellness standards. For example, if you offer a discount for individuals with a body mass index under 30, you have to provide reasonable alternatives to anyone who: perhaps for genetic reasons: can’t meet that standard.

What impact has the legislation had on flexible spending accounts (FSAs) and health savings accounts (HSAs)?

Employers need to be aware of two major changes:

As of Jan. 1, 2011, over-the-counter drugs are no longer reimbursable unless they are purchased pursuant to a prescription.

In 2013, the limit on contributions to an FSA will be $2,500.

What can we expect from your presentation at our conference?

In addition to healthcare reform, I’ll cover such issues as the Genetic Nondiscrimination Act, the Mental Health Parity Act, and the new Health Information Technology for Economic and Clinical Health Act. I expect to answer some challenging questions and even raise a few new ones. Employers and other key players in the business community shouldn’t miss this opportunity to examine these complex issues and discuss them with their peers.

Click here For more information about CBIA’s 2011 Compensation and Benefits Conference.