Health Reform: What You Can Do Now to Protect Your Business and Your Future

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The Patient Protection and Affordable Care Act (PPACA) was signed into law on March 23, 2010 and was amended by the Health Care and Education Reconciliation Act on March 30, 2010. The “Affordable Care Act (ACA)” is used to refer to the final, amended version of the law. The health reform legislation enacted significant changes in how Americans will purchase and utilize health insurance and health care for the next decade. This legislation will affect everyone – individuals and businesses – and has significant impact on how all of us manage our health, our finances and our businesses.

This newsletter highlights the areas of health reform that most impact employers. We developed the guide as an employer resource to help you understand the principal changes enacted by the health reform legislation.

Inside you’ll find some basic questions and answers that will help you understand current and upcoming changes, take advantage of new benefits and tax credits, and implement requirements established by the law. We’ve included a simple time line of what happens when, along with the 10 Things Every Employer Should Know About Health Reform.

Keep in mind that health reform legislation is complex. Specifics related to compliance and implementation details are still being worked out. Procedural guidelines from various state and federal agencies are still being developed.

We are happy to meet with you to make sure your business is properly prepared and to answer specific questions regarding changes to your benefits, how to select the best health plan for your business and new plan options that can keep your employees – and your business – healthy and strong.

If you have any questions regarding the information contained in this newsletter, please don’t hesitate to call Cavignac & Associates at 619-234-6848.

Will My Current Health Plan Benefits Change?

All new group health plans established after March 23, 2010, with plan years beginning on or after September 23, 2010, must include new elements as well as several other coverage requirements.

Note that fully insured health plans subject to collective bargaining agreements have been able to maintain their grandfathered status until their current agreement terminates. Retiree-only and “excepted health plans” such as dental plans, long-term care insurance or Medigap plans are currently deemed as exempt from new health reform requirements.

Changes to Existing Plans

  • Dependents covered until age 26
  • No lifetime benefit maximums
  • No annual limits for essential benefits*
  • Coverage can’t be rescinded except for fraud
  • 100% coverage for preventive care
  • Children under the age of 19 cannot be denied for pre-existing conditions
  • No prior authorization or referral for ob/gyn (can be primary provider)
  • No prior authorization or increased cost sharing for emergency care
  • Coverage for clinical trials
    *does not apply to individually purchased plans

Will I Pay Less For My Health Insurance Coverage–or More?

This question cannot be answered until after Health Insurance Exchanges are implemented in 2014. Health reform legislation requires health insurance companies to add new benefits to all policies and this could increase the cost of health insurance in the near future.

However, since more businesses and individuals will be entering the insurance-buying pool, it is hoped more buyers will help lower premiums for everyone. It is expected that Health Insurance Exchanges will encourage more competition in the health insurance industry to help bring down rates as well.

In the meantime, to help offset the cost of insurance, you should determine if you are eligible for the Small Business Health Care Tax Credit. Now is also a great time to contact us to review the benefits you have in place and evaluate your options for coverage. We can help you find ways to lower your premiums through HSAs, fixed contribution plans and others.

Can I Get Tax Credits for Providing Insurance to My Employees?

Yes! If you’re a small business or tax-exempt organization that provides health insurance coverage to your employees, you may qualify for the Small Business Health Care Tax Credit, which could allow your company to expense up to 35% of health insurance premiums (25% for tax-exempt organizations). Beginning in 2014, these tax credits will increase to 50% (25% for tax-exempt organizations) and are only available to qualifying employers who purchase coverage in the Exchange.

Are your average employee wages less than $50,000? Do you pay at least half of the insurance premium for your employees at the single (employee only) coverage rate?

If you said “yes” to both of the above, you may be able to claim the Small Business Health Care Tax Credit. Visit

What is a Health Insurance Exchange?

With health reform, Health Insurance Exchanges will be the marketplace where individuals and businesses with 100 or fewer employees can shop for insurance beginning in 2014. Exchanges allow individuals and small businesses to join together to get better pricing and more choices in health insurance programs, much like the programs big corporations can negotiate for their employees. Exchanges are being established on a state-by-state basis. In the Exchange, individuals will also be able to see if they qualify for a government subsidy to help pay for their insurance or enroll in a commercial plan when they don’t. The Exchanges must be operational in each state by 2014. States have the flexibility to make the group size maximum 50 for 2014-2015 then increase to 100 in 2016.

Will I Be Required to Buy My Insurance From the State Health Insurance Exchange?

No. While the law requires that everyone have health insurance – health reform doesn’t dictate where you must purchase it. The state Health Insurance Exchange is simply a new place to buy insurance that will be available to individuals and small businesses.

In fact, for small employers it will allow them to offer health benefits to permanent, full-time employees, while temporary or part-time employees can purchase health insurance on their own via the Exchange.

Businesses can continue to utilize their licensed health insurance broker to make sure they’re getting the best benefits for their employees and to help find the best rates. Keep in mind that depending on plan participation, the state Health Insurance Exchange may not offer you the same number of choices and benefit plan designs that allow you to choose what works best for your business.

2014 Health Insurance Plan Requirements

  • Deductibles for small groups are limited to $2,000 for individuals and $4,000 for families (in-network providers only)
  • Waiting periods for coverage are limited to 90 days (60 days in California) – small group only
  • Guaranteed issue and renewability
  • Premium rating will be based on age, area, family composition and tobacco use*
    *tobacco use does not apply in California

Am I Required to Provide My Employees with Health Insurance?

Although businesses are not specifically required to provide health insurance coverage, you could pay hefty penalties if your employees get coverage through a state Exchange. Beginning in 2014, if you have 50 or more full-time equivalent employees and you do not offer “affordable” coverage (the plan’s share of the total costs of covered essential benefits is at least 60%) to your full-time employees, and if even one employee receives a government subsidy to purchase insurance through a state Exchange, you will be required to pay a penalty fee. These penalty fees are not tax-deductible. Also beginning in 2014, employers with more than 200 employees will be required to automatically enroll employees into health insurance plans, although employees may opt out of coverage.

Do you have less than 50 full-time equivalent employees? Do you offer health coverage to your full-time equivalent employees? Is the health care you offer “affordable”? If you answered “no” to these questions, you may be at risk for a penalty fee beginning in 2014.

Penalty for employers with 50 or more full-time equivalent employees who do not offer health insurance (effective 2014)

    • $2,000 for each full-time employee after the first 30 if any full-time employee receives a government subsidy for health insurance in the Exchange.

Penalty for employers with 50 or more full-time equivalent employees who offer health coverage that is not affordable (effective 2014)

    • $3,000 for each full-time employee who receives a government subsidy for health insurance in the Exchange; or
    • $2,000 for each full-time employee after the first 30, whichever is less.

Where Can Individuals Find Good Rates on Health Insurance?

When comparing plans, be careful about buying a “no-frills” plan from a company you don’t recognize. You may be in for a shock at what is left out of the coverage when it comes time to use it. We can make sure the plan you select fits your needs and provides coverage that will protect your health and that of your family.

Keep in mind too that some insurers offer coverage directly to consumers, while others write policies exclusively through authorized brokers. It’s important to pick the option that works best for you and your family.

Do Individuals Have to Buy Insurance?

Yes, or pay a penalty. Starting in 2014, if you aren’t covered through your employer and don’t purchase coverage on your own, you will have to pay a yearly fine of $95 per person or 1.0% of your taxable in- come, whichever is greater. In 2015, the penalty increases to $325 or 2% of your taxable income, whichever is greater. In 2016, the penalty is $695 or 2.5% of your taxable income, whichever is greater. In 2017, and thereafter, the penalty will be increased annually by the cost-of-living adjustment.

I’ve Heard of “Metal Plans” Being Offered Through Health Exchanges. What are These Plans?

In order to participate in a state or federal government Health Insurance Exchange, an insurance company must offer plans that fit within four levels of coverage, which are being called “metal” plans: Bronze, Silver, Gold and Platinum. An insurance company doesn’t have to offer plans in all four levels, but must offer at least one Silver and one Gold plan.

While each plan must cover the same scope of benefits, the value of these benefits will vary. For example, Bronze plans will offer the least generous coverage, while Platinum plans will have more coverage with lower deductibles, lower copayments, etc. As a result, Platinum plan premiums will be the highest, while Bronze plan premiums will be the lowest.

Some individuals will also be able to purchase “catastrophic” plans that cover essential benefits but have high deductibles. Only young adults (under 30) and individuals who’ve been exempted from the individual mandate because there’s no available affordable coverage will be able to purchase catastrophic plans.

Plans will be compared using a measure called “actuarial value” that compares what percentage of health costs are covered by the plan. The chart below gives you an idea of how the actuarial values will be applied to different plans levels.

Plan Level Actuarial Values

  • Platinum plans cover 90%, you pay 10%
  • Gold plans cover 80%, you pay 20%
  • Silver plans cover 70%, you pay 30%
  • Bronze plans cover 60%, you pay 40%

Essential Benefit Plans Effective 2014

Each non-grandfathered plan must provide coverage for a set of minimum Essential Health Benefits that will include items and services in the following ten categories:

  • Outpatient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive, wellness and chronic disease services
  • Pediatric services, including oral and vision care

What is the Difference Between a Public Exchange and a Private Exchange?

Private health exchanges, operated by insurance brokers or insurance companies, give employers another way to shop for a variety of medical plans and supplemental insurance products like disability, dental and vision plans. Online portals make it easy to compare plans, shop for the best rates and even enroll.

Private exchanges often include benefit support services such as assistance from brokers to help with administrative tasks like enrollment and renewal.

Private health exchanges also make it easy for businesses to expand employee benefits and offer other health coverage not included in most major medical plans in a one-stop shop without a lot of administrative work. Dental coverage, vision exams, chiropractic services and even life insurance are some examples.

10 Things Every Business Should Know About Health Reform

  1. Consult a Knowledgeable Insurance Professional
    A licensed health insurance broker, serving as your consultant, can be valuable to you in understanding the facts of health reform.
  2. Public and Private Health “Exchanges” Come Online
    Open enrollment is scheduled to begin in October of 2013 for Health Insurance Exchanges, with coverage effective January 2014. Private health insurance exchanges are also expanding to offer businesses and employees more choices for coverage at an affordable rate.
  3. Health Plans Will Be Classified in “Metal” Categories
    Health insurance plans will receive a metal rating – Platinum, Gold, Silver or Bronze – based on “actuarial value” calculations. For example, Platinum plans will provide coverage for 90 percent of costs while policyholders pay 10 percent. Bronze plans would offer 60 percent coverage while policyholders would pay the remaining 40 percent of medical costs out-of-pocket.
  4. Tax Credits for Small Employers
    Employers with fewer than 25 employees whose average annual wages are less than $50,000 may claim a tax credit for the cost of providing insurance beginning with 2011 tax returns. Beginning in 2014 this tax credit is only available to eligible small employers who purchase coverage through the Exchange.
  5. W-2 Reporting
    Businesses that issued 250 or more W-2s in 2011 must begin to report on 2012 W-2s (issued Jan. 2013) the aggregate value of health benefits provided to each employee including medical, dental and vision coverage.
  6. “Essential Health Benefits” Defined
    Beginning in 2014, health plans must provide coverage for a minimum set of products and services in the following 10 categories: outpatient services, emergency services, hospitalization, maternity and newborn care, mental health and substance abuse disorder services, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive wellness and chronic disease services and pediatric services including oral and vision care.
  7. Requirement to Inform Employees
    Beginning in 2013, employers must provide each employee with written information on the employer health plan, health exchanges, available subsidies for insurance and guidelines on how to purchase insurance. Further guidance is scheduled for release in late summer or early fall of 2013, postponed from the original March 2013 deadline.
  8. Automatic Enrollment
    Employers with more than 200 employees must automatically enroll employees in employer-sponsored plans. However, the IRS has said that final rules for this requirement will not be issued until 2014. Employees may opt out.
  9. Limits on Flexible Spending Accounts (FSAs)
    Beginning January 1, 2013, FSAs, which allow employees to use tax-free dollars to pay medical expenses not covered by insurance plans, will have a plan year limit of $2,500 in 2013 (indexed for cost of living adjustments after 2013).
  10. Employer Play or Pay
    Beginning in 2014, employers with 50 or more full-time equivalent employees will pay a penalty fee if they do not offer “affordable” health coverage and at least one full-time employee receives a premium subsidy.

The information contained in this newsletter is not intended as specific legal, medical, financial or other advice. This information is subject to change based on changes in the law or administration of the law.