The sweeping changes made by the health care reform legislation (the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010) will become effective over the course of several years. However, some employer-related changes are effective as early as the first plan year that begins on or after Sept. 23, 2010 (Jan. 1, 2011, for calendar-year plans). These first-up changes will impose the following on group health plans:
- Expansion of dependent coverage;
- Prohibition on excluding children based on pre-existing conditions;
- Coverage of preventive health services without cost-sharing requirements;
- Limitations on rescission practices; and
- Regulation of annual and lifetime limits on essential health benefits.
While insurance policies that were in effect on the date of enactment (March 23, 2010) are generally grandfathered (for both the current term and any renewal terms), four of these five insurance market reforms apply to grandfathered plans. Thus, except for the preventive health services coverage requirement, these principal reforms are effective for all plans for plan years beginning on or after Sept. 23, 2010.
Some programs established under the health care reform legislation are already in effect. The reinsurance program for early retirees (which reimburses participating employer plans for a portion of the cost of providing health insurance coverage to early retirees) became effective on the date of enactment. Employers accepted into this program will be reimbursed for costs incurred on or after June 1, 2010. The program is set to expire on Jan. 1, 2014 (or earlier, if the $5 billion in federal funding is exhausted).
Small businesses that provide health care coverage to their employees will be eligible for a special income tax credit for health insurance premiums they pay for their employees; eligible employers can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. The IRS has released a draft Form 8941, Credit for Small Employer Health Insurance Premiums, for employers seeking to claim the credit. To be eligible, the employer must have fewer than 25 full-time equivalent employees (FTEs) for the tax year, the average annual wages of its employees for the year must be less than $50,000 per FTE and the employer must pay at least half of the insurance premiums for the employees at the single (employee-only) coverage rate. The maximum credit is 35 percent of premiums paid in 2010 by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. In 2014, the maximum credit increases to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible employers that are tax-exempt organizations.
This article has been excerpted from the Journal of Accountancy. View the full article here.
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