How health care reform affects you

Matthew T. Milone

Fri, May 21, 2010 (3 a.m.)

Matthew T. Milone

Since President Barack Obama’s election in 2008 the issue of health care reform has dominated the headlines. For businesses, the changes made by the Patient Protection and Affordable Care Act are not just a topic for debate on the evening news. Rather, the act has real consequences that will affect decisions that business owners make every day.

The act attempts to provide health insurance to all U.S. citizens and legal residents through private insurance, state-based insurance exchanges, Medicare or Medicaid. Citizens and legal residents without coverage will be subject to a tax penalty beginning in 2014. Persons with incomes between 100 percent and 400 percent of the federal poverty level will be eligible for tax credits to purchase insurance.

However, employers with more than 50 employees will be penalized if any of their employees receive the tax credits. Additional provisions include a $600 per employee penalty for employers that require a waiting period for coverage of more than 60 days.

Employers having more than 200 employees will be required to automatically enroll employees in their employer-sponsored health plan. Starting in 2014, employer-sponsored health plans must provide minimum essential coverage (as defined in the act) to any employee or dependent receiving coverage. Health plans will be prohibited from placing lifetime limits on coverage. Likewise, plans will not be permitted to deny coverage for pre-existing conditions. Plans must also offer coverage to dependent children up to 26 years old.

Businesses should consult with tax and insurance professionals to determine the current status of their coverage and to determine what changes will be needed to comply with the act. Changes to the structure of benefits (such as adopting a program for self insurance) could be considered. Sole proprietors that currently do not have health insurance should consider the cost of potential tax penalties in comparison to the cost of obtaining coverage. Employers with high-cost plans should review the long-term feasibility of keeping a high-cost plan after the excise tax on such plans goes into effect in 2017.

Compliance with upcoming deadlines is also important. The auto-enrollment requirements for employers with more than 200 employees went into effect upon enactment of the act. Starting in 2011, employers must report the aggregate cost of employer-sponsored health coverage on each employee’s W-2. In 2012, the summary of benefits provided by a plan sponsor (usually the employer) to plan participants must comply with regulations that will be created by the federal government. In 2013, employers must provide notice to employees regarding eligibility for tax credits and participation in insurance exchanges created by the act. 2014 has several important deadlines including compliance with plan design changes, beginning of the individual coverage requirement and employer reporting regarding essential coverage. Also beginning in 2014 are tax penalties for employers with more than 50 employees that do not offer coverage, offer coverage that does not meet the act’s minimum coverage requirements or offer coverage that the act considers unaffordable.

Some businesses may be able to take advantage of programs under the act. Beginning this year, employers with no more than 25 employees and annual average wages of less than $50,000 may be eligible for tax credits of up to 35 percent of the employer’s contribution to employee coverage. Employers providing health insurance to retirees over 55 that are not eligible for Medicare may also be eligible to receive premium subsidies. Beginning Dec. 31, some employers may be eligible for the relaxed cafeteria plan requirements that are intended to encourage employers to provide tax-free benefits to employees. Employers can also obtain grants and other benefits for establishment of employee wellness programs.

The act has forever changed the landscape of health care in the United States. Businesses should continue to be vigilant in monitoring the enforcement of the act to determine the best course of action for the future.

Matthew T. Milone is a shareholder at the law firm Jones Vargas in Las Vegas