Dependent Age Limits for Group Health Care Coverage:
Dependent children of insured group health care plan members may remain on the parent’s plan until attainment of age 26. According to the Health Care Reform any group whose health care plan has ended coverage for non-student dependent children due to attaining age 19, will have the opportunity to re-enroll those children effective with the group’s next renewal date, post Sept. 23, 2010.
However, if the “aged dependents” were dropped from coverage, the plan will not pick up payment for any claims incurred while the individuals were off the plan.
Lifetime Benefit Caps and Waiting Period for Newly Eligible:
Lifetime benefit caps end on all plans upon first policy renewal date after 9/23/2010. Additionally, an employer may no longer stipulate a new-hire enrollment waiting period longer than 90 days.
Tax Changes to HSAs, FSAs, MSAs and HRAs
Spending accounts have enabled employers to empower their employees with the tools they need to take charge of their health and assume greater responsibility for their own health care spending decisions. For employers who have implemented these products, the Patient Protection and Affordable Care Act (PPACA) includes provisions that affect Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), Archer Medical Savings Accounts (MSAs) and Health Reimbursement Arrangements (HRAs). These changes include:
The following categories of medications and products are affected: |
• Digestive aids |
| • Motion sickness remedies |
• Allergy and sinus |
| • Anti-parasitic treatments |
• Antibiotic |
| • Pain relief |
|
• Anti-diarrheas |
| • Respiratory treatments |
• Hemorrhoid preparations | • Sleep aids and sedatives |
• Anti-gas |
| • Cold sore remedies |
• Laxatives |
| • Stomach remedies |
|
• Anti-itch and insect bite | • Cough, cold and flu |
|
- Over-the-counter drugs - Starting January 1, 2011, over-the-counter drugs will no longer be treated as non-taxable medical expenses unless they are prescribed. See what over-the-counter medications and products are affected at right. A distribution from an HSA, FSA or HRA will be treated as a non-taxable medical expense only for a medicine or drug that is prescribed by a physician or for insulin. Funds from an HSA, FSA or HRA can continue to be used for eligible out-of-pocket expenses, including prescription drugs, medical plan copayments, lab work, deductibles, coinsurance, and vision and dental expenses.
- Tax on HSA distributions - Distributions from HSAs made after December 31, 2010, that are not used for qualified medical expenses will be subject to a 20 percent tax penalty, increased from the current 10%. The tax penalty does not apply to distributions due to death, disability or after the HSA account holder reaches age 65.
- New FSA contribution limits - Beginning January 1, 2013, annual FSA contributions will be limited to
$2,500. This dollar amount will be adjusted for inflation starting after 2013. Employers with FSA plans that allow health care maximums in excess of $2,500 per year must amend their plans to abide by the new regulation.
New Reporting/Disclosure Requirements for Employers
TAX REPORTING CHANGES
- What are the new FormW-2 requirements?
Effective for taxable years beginning after December 31, 2010, employers will be required to calculate and report the aggregate cost of employer-sponsored health coverage on each employee’s annual Form W-2. The W-2 reporting is a way to track coverage values for an excise tax (effective in 2018) on the cost of employer- based medical coverage that exceeds certain thresholds (the so-called “Cadillac” tax). The aggregate cost of an employee’s health benefits will not be included in the employee’s taxable income. This requirement applies to both insured and self-insured plans, beginning with the 2011 W-2 issued in January 2012.
- What costs must be reported on the Form W-2?
Generally, some of the coverage costs that must be reported include medical plans, prescription drug plans, employee assistance programs, and dental and vision plans that are not “stand-alone” plans but that are integral to the medical coverage. Generally, the value of health care coverage is the aggregate premium calculated under the COBRA continuation coverage rules.
UNIFORM EXPLANATION OF COVERAGE DOCUMENTS AND STANDARDIZED DEFINITIONS REQUIREMENT
Not later than March 23, 2011, the Department of Health and Human Services (HHS) will develop standards that all plans can use to provide a summary that describes a plan’s benefits and coverage. This is in addition to current Summary Plan Description requirements.
Not later than March 23, 2012, health issuers or, in the case of a self-insured group health plan, the plan sponsor or designated administrator must provide a summary of benefits and coverage in the following:
• To an applicant at the time of application
• To an enrollee prior to the time of enrollment or reenrollment.
• To a policyholder or certificate holder at the time the
policy is issued or the certificate is delivered.
HHS will provide guidelines for the summary as well as a listing of those items that must be included.
** Reminder** Small business tax credits
The Patient Protection and Affordable Care Act provides a tax credit for eligible businesses, worth up to 35% of a small business’ premium cost in 2010. To qualify, firms must cover at least 50% of the cost of health care coverage for some of its workers, based on the single rate. The firm must have less than the equivalent of 25 full-time workers and pay annual wages below $50,000 per employee. Both for-profit and tax exempt firms qualify.
Health Insurance Premium Rebates
To ensure health insurance plan premium dollars are spent primarily on health care, the Patient Protection and Affordable Care Act has set benchmark percentage levels for all premium dollars collected by insurance companies compared to the money amounts spent on benefits and quality improvement. If insurance companies do not meet these goals because their administrative costs or profits are too high, they must provide rebates to consumers. Group employers should be alert for insurance company solicitations regarding number of employees enrolled, number eligible, etc. The insurers are gathering information to begin calculations of rebates to employer groups.
