Whether fully insured or self-insured, unions must implement the same provisions as other grandfathered plans for plan years beginning on or after September 23, 2010. However, fully insured plans get some special treatment in the interim final grandfathering rules. The following allowances are given to collectively bargained agreements (for the life of the agreement) that were ratified before March 23, 2010:

• The plans may change carriers and remain grandfathered.
• The plans may make benefit plan changes (such as plan design) or change employer/employee organization contribution amounts and remain grandfathered.
• The interim final rules on grandfathering are silent as to whether grandfathered health insurance coverage is exempt from the anti-abuse rules.

When the last of the collectively bargained agreements expires, the special allowances end as well. From that point on, the grandfathered status of fully insured plans will be determined as it is for any other health plan.

Self-funded plans that are kept as collectively bargained agreements are treated like any other plan. For self-funded plans, whether or not they are kept as collectively bargained agreements, a change in third-party administrators will not result in the loss of grandfathered status.

If a group customer requests that we implement health care reform changes earlier or later than its renewal date because its ERISA plan year differs from the renewal date, we will honor the request.

60-day notice of plan changes

Another health care reform law provision requires plans to create a uniform summary of benefits. And any material modifications to the terms of the plan must be communicated to members 60 days before those changes go into effect. Based on our review, we believe that the 60-day notice provision will not go into effect right away; however, it must be implemented before March 23, 2012 (two years after the law was enacted). The U.S. Department of Health and Human Services will be giving us more guidance on this provision. When it does, we will let you know.

No discrimination based on compensation

Benefits cannot be based on wages

The health care reform law notes that, effective September 23, 2010, plans may not discriminate in favor of highly compensated employees. This means that group health plans cannot base eligibility or the level of benefits on an employee’s wage. The group can offer different levels of benefits as long as they comply with ERISA and are not tied to the amount an employee makes. The legislation defines a highly compensated employee is someone who is:

• One of the five highest paid officers.
• A shareholder who owns more than 10% in value of the employer’s stock.
• Among the highest paid 25% of all employees (exceptions apply).

Waiting periods

We do not believe we will need to change our approach to allowing groups to offer different waiting periods to different employee levels. The health care reform law “nondiscrimination by compensation” provision is specific to the benefit offerings of a medical plan and not the waiting periods established by a company.

Grandfathered vs. non-grandfathered plans

No matter how a plan is structured, in order for it to be a grandfathered plan, it must have been in effect when the health care reform law was passed on March 23, 2010, and no changes are made to the benefits or the benefit plan. For non-grandfathered plans, the plan sponsor of a group health plan (other than a self-insured plan) may not set up rules about health insurance coverage eligibility (including continued eligibility) for any full-time employees based on the total hourly or annual salary of the employees. Nor can the sponsor set up rules that in any way favor employees who receive more compensation.

Offering benefits only to currently eligible employees

A group can retain grandfathering status by continuing to offer benefits only to currently eligible employees (instead of all employees), as long as the benefits are not tied to how much those employees make. In addition, the health care reform law notes that the plan sponsor of a group health plan (other than a self-insured plan) may not set up rules about health insurance coverage eligibility (including continued eligibility) for any full-time employees based on the total hourly or annual salary of the employees. Nor can the sponsor set up rules that in any way favor employees who receive more compensation.

Executive physicals

Because this health care reform law provision is specific to plans and not to benefits, executive physicals (and similar benefits) are not affected.

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The Internal Revenue Service has come out with guidelines for small commercial and nonprofit employers that want to take advantage of a new health insurance tax break.

The small employer health insurance tax credit guidelines, given in IRS Notice 2010-44, include examples that can help employers and their benefits advisors determine whether the employers are eligible for the tax break, and exactly how much of the new federal health insurance tax credit the employers can claim.

Calculating exactly how small an employer is for tax credit purposes will depend partly on the definition of “full-time equivalent” employee, officials write in the notice.

“In general, employees who perform services for the employer during the taxable year are taken into account in determining the employer’s FTEs, average wages, and premiums paid,” officials write.

But “partners in a business and certain owners are not taken into account as employees,” officials write. “Specifically, sole proprietors, partners in a partnership, shareholders owning more than 2% of an S corporation.

Owners and partners need not count family members or other dependents who are members of their households as employees when they are trying to qualify for the tax credit.

IRS officials devote another section to computing workers’ hours.

The IRS issued the notice to implement a new tax law, Section 45R of the Internal Revenue Code, which was added by Section 1421 of the new Patient Protection and Affordable Care Act.

PPACA and a companion act, the Health Care and Education Reconciliation Act, are part of what federal agencies have dubbed the Affordable Care Act.

This year, the new ACA small business tax break will offer small employers a tax credit equal to at least half the cost of single coverage, if the employees earn average wages of less than $50,000 per year.

The tax credit is not available to ordinary government employers, but it is available to small businesses, small tax-exempt employers, and government-affiliated tax-exempt employers that can be described as section 501(c) organizations.

“For tax years 2010 to 2013, the maximum credit is 35% of premiums paid by eligible small business employers and 25% of premiums paid by eligible employers that are tax-exempt organizations,” officials write in a summary of the notice.

Employers with 10 or fewer FTE employees that pay annual average wages of $25,000 or less can qualify for the maximum credit.

Employers with 10 to 25 FTE employees that pay annual wages of $50,000 or less can qualify for a smaller tax credit.

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Tags: IRS Small Business Health Insurance Tax Credit Examples, IRS Small Business Tax Credits

Federal agencies are rushing young adult dependent coverage interim final rules into effect without going through the usual comment period.

The Employee Benefits Security Administration, an arm of the U.S. Department of Labor, has posted a preliminary version of the interim final rules on its website.

The Internal Revenue Service, an arm of the U.S. Treasury Department, and the Office of Consumer Information and Insurance Oversight at the U.S. Department of Health and Human Services also worked on the rules.

The agencies are set to publish the final version of the interim rules in the Federal Register Thursday.

The rules implement a provision in the new federal Affordable Care Act — the legislative package that includes the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act — that requires insurers to let insured parents keep children on the parents’ health coverage until the children are 26.

The ACA young adult coverage provision is set to take effect Sept. 23, but most major carriers say they will implement the provision earlier.

Federal agencies normally provide time for members of the public to comment before implementing major regulations. The agencies are implementing the young adult coverage interim rules before the comments come in because the secretary of Labor, HHS and the Treasury “have determined that it would be impracticable and contrary to the public interest to delay putting the provisions in these interim final regulations in place,” officials write in a preamble to the interim rules. “Having a binding rule in effect is critical to ensuring that individuals entitled to the new protections being implemented have these protections uniformly applied.”

Officials are estimating that, in 2011, the program will lead to about 1.2 million young adults having new health coverage, and that about 650,000 of those young adults will be people who were previously uninsured.

The number of uninsured young adults who gain coverage through the program in 2011 could range from 200,000 to about 1.6 million, officials estimate.

Although officials use the term “dependent” in connection with the regulation, group health plans can no longer use factors such as whether a child of an insured is a tax dependent in deciding whether to issue coverage to that child, officials write.

“Examples of factors that cannot be used for defining dependent for purposes of eligibility (or continued eligibility) include financial dependency on the participant or primary subscriber (or any other person), residency with the participant or primary subscriber (or any other person), student status, employment, eligibility for other coverage, or any combination of these,” officials write.

Implementing the young adult coverage program will require that the children who were denied coverage, or whose coverage ended, receive alerts about the new enrollment opportunity, officials write.

Federal agencies want to hear ideas about ways to minimize the burden on the notice senders and on the individuals who must fill out the notices, officials write.

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Tags: Dependent Care Regulations, Dependent Health Insurance to Age 26 Update, Health Insurance Dependent Care Law Regulation, Insurance Age 26 Law

As a result of changes made by the recently enacted Affordable Care Act, health coverage provided for an employee’s children under 27 years of age is now generally tax-free to the employee, effective March 30, 2010.

The Internal Revenue Service announced today that these changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit.

IRS Notice 2010-38 explains these changes and provides further guidance to employers, employees, health insurers and other interested taxpayers.

“These changes give employers a unique opportunity to offer a worthwhile benefit to their employees,” IRS Commissioner Doug Shulman said. “We want to make it as easy as possible for employers to quickly implement this change and extend health coverage on a tax-favored basis to older children of their employees.”

This expanded health care tax benefit applies to various workplace and retiree health plans. It also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.

Employees who have children who will not have reached age 27 by the end of the year are eligible for the new tax benefit from March 30, 2010, forward, if the children are already covered under the employer’s plan or are added to the employer’s plan at any time. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child. This new age 27 standard replaces the lower age limits that applied under prior tax law, as well as the requirement that a child generally qualify as a dependent for tax purposes.

The notice says that employers with cafeteria plans may permit employees to immediately make pre-tax salary reduction contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. Plan sponsors then have until the end of 2010 to amend their cafeteria plan language to incorporate this change.

In addition to changing the tax rules as described above, the Affordable Care Act also requires plans that provide dependent coverage of children to continue to make the coverage available for an adult child until the child turns age 26. The extended coverage must be provided not later than plan years beginning on or after Sept. 23, 2010. The favorable tax treatment described in the notice applies to that extended coverage.

Information on other health care provisions can be found on this website, IRS.gov.

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Tags: Affordable Care Act - Dependent IRS Tax Guidelines, Affordable Care Act IRS Tax Guidelines, Tax-Free Employer Provide Health Coverage, Tax-Free Employer Provide Health Coverags IRS Guidelines

The IRS recently released materials for those wishing to claim the small business health care tax credit for 2010. A provision of the Patient Protection and Affordable Care Act (PPACA), this tax credit is designed to encourage small groups to offer health care coverage for the first time or enable them to maintain the coverage they already have. It will likely provide assistance to about four million small businesses.

This tax credit can be significant for a qualifying small group. In 2010, the maximum credit is 35% of employer-paid premiums; for tax-exempt organizations, the maximum is 25% of employer-paid premiums. In 2014, the maximum increases to 50% of employer-paid premiums; for tax-exempt organizations, it increases to 35% of employer-paid premiums. In order to qualify for the credit, the employer must not employ more than 25 employees and the average annual compensation of those employees must not exceed $50,000.

Small Business Healthcare Tax Credit Eligibility Rules:

• Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate
• Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
• Average annual wage. A qualifying employer must pay average annual wages below $50,000.
• Both taxable (for profit) and tax-exempt firms qualify.

Here’s a look at how a company with 10 employees could benefit:

• Employees: 10
• Wages: $250,000 or $25,000 per worker
• Employer Health Care Costs: $70,000

2010 tax credit: $24,500 (35% credit)
2014 tax credit: $35,000 (50% credit)

• Employees: 40 half-time (equivalent of 20 full-time)
• Wages: $500,000 or $25,000 per full-time equivalent worker
• Employer Health Care Costs: $240,000

2010 Tax Credit: $28,000 (35% credit with phase-out)
2014 Tax Credit: $40,000 (50% credit with phase-out)

Example 3: 1st Street Family Services – Foster Care Non-Profit with 9 Employees

• Employees: 9
• Wages: $198,000 or $22,000 per worker
• Employer Health Care Costs: $72,000

2010 Tax Credit: $18,000 (25% credit)
2014 Tax Credit: $25,200 (35% credit)

Example 4: Acme Air Conditioning, LLC- Manufacturing Company with 12 Employees

• Employees: 12
• Wages: $420,000 or $35,000 per full-time equivalent worker
• Employer Health Care Costs: $90,000

2010 Tax Credit: $14,700 (35% credit with phase-out)
2014 Tax Credit: $21,000 (50% credit with phase-out)

While there is no formal guidance yet, the IRS has provided educational resources for small businesses wishing to claim the credit this year. Click here to see the following information:

• Eligibility rules
• Amount of credit
• Three simple step to determine a small group’s eligibility
• More tax credit scenarios
• FAQs

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Tags: 2010 Health Insurance Tax Credits for Small Business, 2010 Small Business Health Insurance Tax Credits, 2010 Small Business Tax Credit Eligibility, 2010 Small Business Tax Credits, Small Business Eligible for Healthcare Tax Credits, What businesses are eligibile for 2010 health care tax credit

The new health reform law is the most far-reaching health legislation since the creation of the Medicare and Medicaid programs.

The following is a look at the impact of the law, which will extend insurance coverage to 32 million additional Americans by 2019, but which will also have an effect on almost every citizen.

Here are some commonly-asked questions about how you might be affected:

Q: I don’t have health insurance. Will I have to get it, and what happens if I don’t?

A: Under the legislation, most Americans will have to have insurance by 2014 or pay a penalty. The penalty would start at $95, or up to 1 percent of income, whichever is greater, and rise to $695, or 2.5 percent of income, by 2016. This is the individual limit; families have a limit of $2,085 or 2.5 percent of household income, whichever is greater. Some people can be exempted from the insurance requirement, called an individual mandate, because of financial hardship or religious beliefs or if they are American Indians, for example.

Q: I already have insurance through my job. Is this plan going to cost me more?

No, if you have coverage you already like and you see providers you like, nothing should change for you. Premium prices should not change, and in fact, there are subsidies for people who struggle to pay their premiums in Massachusetts that will be increased under federal reform.

Your existing health premiums, your doctor and your hospital will not be affected by this law. But that said, if your employer decides to go with a different insurer or HMO, or decides to offer a more restricted network at a lower premium or a wider network at a higher premium, you might be forced to change doctors or hospitals.

Q: I’m a small business owner; Do I now have to buy insurance for all my employees like they require in Massachusetts- what’s the difference between the state plan and the federal plan?

There’s really good news for small business owners. We know they struggle to pay for health care coverage for their employees and we know they want to be able provide health insurance for their employees. Under the federal bill, if you’re a small employer with 50 or fewer employees, you will qualify for a 35% tax credit on the money that you spend to pay for people’s health benefits.

If you’re a business in Massachusetts with 11 or more workers and you don’t provide health insurance, you have to pay an assessment of little under $300 a year or $25 dollars a month… The federal plan applies to employers with 50 or more workers, but the financial pressures are stronger.

Q: I want health insurance, but I can’t afford it. What do I do?

A: Depending on your income, you might be eligible for Medicaid, the state-federal program for the poor and disabled, which will be expanded sharply beginning in 2014. Low-income adults, including those without children, will be eligible, as long as their incomes didn’t exceed 133 percent of the federal poverty level, or $14,404 for individuals and $29,326 for a family of four, according to current poverty guidelines.

Q: What if I make too much for Medicaid but still can’t afford coverage?

A: You might be eligible for government subsidies to help you pay for private insurance that would be sold in the new state-based insurance marketplaces, called exchanges, slated to begin operation in 2014.

Premium subsidies will be available for individuals and families with incomes between 133 percent and 400 percent of the poverty level, or $14,404 to $43,320 for individuals and $29,326 to $88,200 for a family of four.

The subsidies will be on a sliding scale. For example, a family of four earning 150 percent of the poverty level, or $33,075 a year, will have to pay 4 percent of its income, or $1,323, on premiums. A family with income of 400 percent of the poverty level will have to pay 9.5 percent, or $8,379.

In addition, if your income is below 400 percent of the poverty level, your out-of-pocket health expenses will be limited.

Q: How will the legislation affect the kind of insurance I can buy? Will it make it easier for me to get coverage, even if I have health problems?

A: If you have a medical condition, the law will make it easier for you to get coverage; insurers will be barred from rejecting applicants based on health status once the exchanges are operating in 2014.

In the meantime, the law will create a temporary high-risk insurance pool for people with medical problems who have been rejected by insurers and have been uninsured at least six months. This will occur this year.

Starting later this year, insurers can no longer exclude coverage for specific medical problems for children with pre-existing conditions nor deny coverage to children with pre-existing illnesses.

Insurers later this year will also be barred from setting lifetime coverage limits for adults and kids. In 2014, annual limits on coverage will be banned.

New policies sold on the exchanges will be required to cover a range of benefits, including hospitalizations, doctor visits, prescription drugs, maternity care and certain preventive tests.

Q: How will the legislation affect young adults?

A: If you’re an adult younger than 26, you’ll be able to stay on your parent’s insurance coverage as long as you are not offered health coverage at work. This provision officially takes effect in September, but insurers may not have to comply until the beginning of a new health plan year – which often happens in January.

In addition, people in their 20s will be given the option starting in 2014 of buying a “catastrophic” plan that will have lower premiums. The coverage will largely only kick in after the individual has $6,000 in out-of-pocket expenses

Q: I own a small business. Will I have to buy insurance for my workers? What help can I get?

A: It depends on the size of your firm. Companies with fewer than 50 workers won’t face any penalties if they don’t didn’t offer insurance.

Companies can get tax credits to help buy insurance if they have 25 or fewer employees and a workforce with an average wage of up to $50,000. Tax credits of up to 35 percent of the cost of premiums will be available this year and will reach 50 percent in 2014. The full credits are for the smallest firms with low-wage workers; the subsidies shrink as companies’ workforces and average wages rise.

Firms with more than 50 employees that do not offer coverage will have to pay a fee of up to $2,000 per full-time employee if any of their workers get government-subsidized insurance coverage in the exchanges. The first 30 workers will be excluded from the assessment.

Q: I’m over 65. How will the legislation affect seniors?

A: The Medicare prescription-drug benefit will be improved substantially. This year, seniors who enter the Part D coverage gap, known as the “doughnut hole,” will get $250 to help pay for their medications.

Beyond that, drug company discounts on brand-name drugs and federal subsidies and discounts for all drugs will gradually reduce the gap, eliminating it by 2020. That means that seniors, who now pay 100 percent of their drug costs once they hit the doughnut hole, will pay 25 percent. Beginning in 2011, drug companies will be required to give a 50 percent discount on brand-name drugs for prescriptions filled in the doughnut hole.

And, as under current law, once seniors spend a certain amount on medications, they will get “catastrophic” coverage and pay only 5 percent of the cost of their medications.

Meanwhile, government payments to Medicare Advantage, the private-plan part of Medicare, will be frozen starting in 2011, and cut in the following years. If you’re one of the 10 million enrollees, you could lose extra benefits that many of the plans offer, such as free eyeglasses, hearing aids and gym memberships. To cushion the blow to beneficiaries, the cuts to health plans in high-cost areas of the country such as New York City and South Florida — where seniors have enjoyed the richest benefits — will be phased in over as many as seven years.

Beginning this year, the law will make all Medicare preventive services, such as screenings for colon, prostate and breast cancer, free to beneficiaries.

Q: How much is all this going to cost? Will it increase my taxes?

A: The package is estimated to cost $938 billion over a decade. But because of higher taxes and fees and billions of dollars in Medicare payment cuts to providers, the package will narrow the federal budget deficit by $143 billion over 10 years, according to the Congressional Budget Office.

If you have a high income, you will face higher taxes. Starting in 2013, individuals with earnings over $200,000 and married couples earning more than $250,000 will pay a Medicare payroll tax of 2.35 percent, up from the current 1.45 percent. In addition, high-income taxpayers will face a 3.8 percent tax on unearned income such as dividends and interest over the threshold.

Starting in 2018, the law will also impose a 40 percent excise tax on the portion of most employer-sponsored health coverage (excluding dental and vision) that exceeds $10,200 a year for individuals and $27,500 for families. The tax is often referred to as a “Cadillac” tax.

The law also will raise the threshold for deducting unreimbursed medical expenses from 7.5 percent of adjusted gross income to 10 percent.

The law also will limit the amount of money you can put in a flexible spending account to pay medical expenses to $2,500 starting in 2013. Those using an indoor tanning salon will pay a 10 percent tax starting this year.

Q: Under the new law, do pre‐existing conditions no longer matter?

Effective September 23, 2010, insurance companies cannot limit coverage for children on individual or group policies with pre‐existing medical conditions. For adults with individual policies, this provision goes into effect in 2014.

Q: Are there annual or lifetime maximums on coverage under the new law?

Effective September 23, 2010, there are no lifetime maximum limits on coverage. In addition, there will be no annual limits on group plans. For individual plans, annual limits may be allowed based on what Health and Human Services deems reasonable. This information is not yet available.

Q:Under health care reform, what happens to rescission?

Effective September 23, 2010, rescissions will occur only in cases of customer fraud or intentional misrepresentation.

Q: Is it true that anyone who applies for coverage will be issued coverage?

Under the Guarantee Issue provision, effective in 2014, anyone who applies for coverage must be issued coverage.

Q: What will happen to my premiums?

A: That’s hard to predict and the subject of much debate. People who are sick might face lower premiums than otherwise because insurers won’t be permitted to charge sick people more; healthier people might pay more. Older people could still be charged more than younger people, but no more than three times as much.

The bigger question is what happens to rising medical costs, which drive up premiums. Even proponents acknowledge that efforts in the legislation to control health costs, such as a new board to oversee Medicare spending, won’t have much of an effect for several years.

Q: I have children in my 20s who can’t afford their own insurance. Does this new plan help them?

The national bill will extend health care benefits to young people up to the age of 26. We know that will bring peace of mind for both parents and young people who have not yet landed in the job market and been able to get their own health benefits.

The federal law has a provision similar to the one in Massachusetts. If a family has children under age 26, they can be covered under the family policy and this is an enormous benefit.

Q: What is the “Insurance Exchange”?

The insurance exchange will work in other states a little like the Massachusetts Insurance Connector works. They certify different insurance policies that can be purchased by small employers or individuals. The idea is each of the four different levels of insurance coverage would have different premiums but standard benefits.

The Insurance Exchange is built on some of the work we’ve already done here in Massachusetts. We have the Health Connector Authority which allows individuals and small businesses to go and competitively shop for their health insurance coverage. Exchanges will be available around the country.

Q: If I lose my job, can I keep my same insurance?

You can. There actually is a provision that will allow some assistance for maintaining your COBRA benefits. In Massachusetts, if you are somebody who has lost their job but wants to continue with the same insurance you have, you’ll receive a subsidy to help you pay for that COBRA coverage.

Q: Will it impact our taxes?

The Congressional Budget Office says the federal deficit drops by over $100 billion over the coming decade. For a small percentage of people who are highly compensated who make more than $200,000 a year, their Medicare taxes will go up less than one percent. For the rest of us, it will be the same.

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Tags: Health Care Reform - What it Means for You, Health Care Reform Common Questions, Health Care Reform Frequently Asked Questions, Healthcare Reform 2014 Changes, Healthcare Reform Common Concers, Healthcare Reform FAQ, Healthcare Reform Law Common Questions

Members of the Senate have just voted 56-43 to pass H.R. 4872, the Patient Protection and Affordable Care Act “fixer bill,” and the House is getting ready to re-vote on the bill.

Sen. Johnny Isakson, R-Ga., did not vote. All other Republicans voted against the bill. The Democrats who voted against the bill are Sens. Blanche Lincoln, D-Ark., Mark Pryor, D-Ark., and Ben Nelson, D-Neb.

Democrats have been using the budget reconciliation process rules to get H.R. 4872, the Reconciliation Act of 2010, through the Senate with just 51 votes, rather than the 60 votes that normally would be required.

Alan Frumin, the Senate parliamentarian, ruled early today that two college student aid provisions in H.R. 4872 are ineligible for consideration under budget reconciliation process rules.

Democrats are holding the re-vote on H.R. 4872 in the House to avoid the need to try to pass the bill in the House using ordinary Senate rules.

The student aid provisions would protect students from future cuts in grants if Congress does not provide enough money to pay for the grants. The provisions violate budget reconciliation process eligibility rules because they do not produce savings, according to Jim Manley, a spokesman for Senate Majority Leader Harry Reid, D-Nev.

The provisions are “minor,” but because they are likely to be subject to procedural challenges on the floor, and ultimately struck from the bill, they are being removed from the bill, Manley says.

The bill is going back to the House for a new vote because the House and Senate must approve the same version of the bill before President Obama can sign the bill into law.

House Majority Leader Steny Hoyer, D-Md., said today that the House would set to work on the H.R. 4872 re-vote as soon as the Senate wrapped up its work on the bill.

President Obama already has signed the PPACA bill, H.R. 3590, into law.

That bill will lead to many major changes, such as the creation of a health insurance exchange system, nonprofit health insurance cooperatives and a voluntary long term care benefits program, regardless of what happens to H.R. 4872.

If H.R. 4872 takes effect as written, without being amended, it would make a number of changes in PPACA.

H.R. 4872 would, very example, increase the penalty for affected individuals who fail to own qualified health coverage to $2,000, from $750; ease the effects of a proposed 40% “Cadillac plan excise tax” on issuers of expensive health insurance plans; and impose a new tax on income from annuities and other investment vehicles.

State regulators already are suing to block implementation of PPACA and H.R. 4872, and federal and state agencies likely will spend years implementing bill provisions.

Federal agencies are still developing regulations to implement the Health Insurance Portability and Accountability Act of 1996, a much less ambitious act.

The list of federal agencies responsible for implementing PPACA includes the Internal Revenue Service, the U.S. Department of Labor’s Employee Benefits Security Administration, and the U.S. Department of Health and Human Services.

Internal Revenue Service Commissioner Douglas Shulman talked about PPACA implementation during a House Ways and Means Committee oversight subcommittee hearing.

The IRS will not be auditing taxpayers to determine whether they have insurance, Shulman said.

Instead, HHS officials will work with insurers to verify whether taxpayers have the minimum required coverage, Shulman said.

Insurers will give the IRS standard forms “so they can, in turn, deliver about $500 billion in tax relief to help middle class families and small businesses pay for health insurance,” Shulman said.

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Tags: H.R. 4872, HR 4872

nsurance and employer groups are talking about the lack of cost control provisions in H.R. 3590, the Patient Protection and Affordable Care Act bill, which passed by a 219-212 vote at 10:48 p.m. Sunday in the House.

H.R. 3590 is the same bill that the Senate passed early on Christmas Eve a few months back, and it now is awaiting the signature of President Obama.

House members also voted 220-211 at 11:36 p.m. to pass H.R. 4872, the Reconciliation Act of 2010. The Senate still must approve that bill, but it would revise and extend many provisions of H.R. 3590. Senate leaders have told House leaders that they have the votes to pass H.R. 4872 using a special budget reconciliation process.

Under normal Senate rules, bills need 60 votes to pass. Budget reconciliation measures need just 51 votes.

Some Republican lawmakers said during floor debate that they or colleagues would try to block implementation of H.R. 3590 — and of H.R. 4872, if H.R. 4872 becomes law — by turning to the courts for relief.

H.R. 3590 and H.R. 4872 passed with no Republican support; 34 Democrats voted against H.R. 3590, and 33 voted against H.R. 4872.

Democrats were jubilant about winning the H.R. 3590 battle and getting H.R. 4872 to the Senate.

“This is what change looks like,” Obama said during an appearance shortly after the vote on H.R. 3590 took place.

“I know this wasn’t an easy vote for a lot of people,” Obama said. “But it was the right vote.”

House Majority Leader Steny Hoyer, D-Md., smiled at the reporters at a press conference on Capitol Hill. “For all of you who pursued all of us: We had the votes,” Hoyer said.

Insurance say they still have concerns the current versions of the bills.

“The access expansions are a significant step forward” Karen Ignagni, president of America’s Health Insurance Plans, Washington, says in a statement about the health bills. “But this legislation will exacerbate the health care costs crisis facing many working families and small businesses.”

The bill “does little to stem the skyrocketing cost of health care and will be financed on the backs of small business during one of the most delicate financial periods in American history,” says Robert Rusbuldt, president of the Independent Insurance Agents and Brokers of America, Alexandria, Va..

WHAT’S IN H.R. 3590?

H.R. 3590 — the PPACA bill that the Senate passed late on Christmas Eve — is on track to become law whether or not the Senate approves H.R. 4872.

The final version of H.R. 3590 would:

- Enact the Community Living Assistance Services and Supports Act long long term care benefits program.

- Require insurers selling in the individual market, in the small group market and through the exchange system to sell coverage on a guaranteed issue and guaranteed renewable basis. Plans could base rating variations only on age, family use, tobacco use and location, and the rates for the oldest insureds could be only 3 times higher than the rates for the youngest insureds. Rates for tobacco users could be only 50% higher than the rates for non-tobacco users.

- Create a new health insurance exchange system that individuals and employers with up to 100 employees could use to buy subsidized health coverage, and 4 “tiers” of coverage, ranging from catastrophic plans to platinum plans.

- Create a new system of nonprofit health insurance co-ops.

- Permit states to form multi-state health insurance compacts, to create multi-state markets for health insurance.

- Create a health insurance tax credit for employers with 25 or fewer employees and average annual wages of less than $50,000.

- Impose penalties on employers with more than 50 employees that fail to provide health coverage and on inidividuals with incomes over a minimum income threshold who fail to have health coverage.

- Require employers with more than 200 employees to enroll employees in health plans automatically.

- Impose a $750 per-employee penalty on employers with more than 50 employees that fail to provide health coverage.

- Impose minimum medical loss ratios that are similar to those in H.R. 3590: 85% for group plans with more than 100 participants; 80% for small group plans; and 85% for Medicare Advantage plans.

- Impose a 40% “Cadillac plan” excise tax on insurers that sell relatively expensive health plans. Insurers now would pay the tax when they sold plans that cost more than $8,500 for individuals and $23,000 for families.

- Tighten health savings account and flexible savings account reimbursement rules. Individuals could not use account funds to pay for over-the-counter medications unless the medications were prescribed by doctors.

- Cap annual FSA contributions at $2,500, but increase the limit annually by a cost of living adjustment, starting Jan. 1, 2011.

- Apply the existing Medicare payroll tax to investment income starting in 2013, and increase the tax by 0.9 percentage points, to 2.35%, for wages over $200,000 per year for individuals and over $250,000 per year for couples.

- Adopt a national standard for eligibility verification and claims status by Jan. 1, 2013; a standard for electronic fund transfers by Jan. 1, 2014); and a variety of other standards by Jan. 1, 2016.

- Give states 5-year grants to develop medical malpractice reform programs.

WHAT’S IN H.R. 4872?

Originally, the Reconciliation Act was going to include health insurance rate regulation provisions. The version passed Sunday by the House excludes that version, because the Senate parliamentarian ruled that H.R. 4872 backers could not handle the provision using the budget reconciliation process.

H.R. 4872 echoes the language of H.R. 3590 in many places and changes it in others.

Provisions that are still in H.R. 4872 would:

- Create a $1 billion Health Insurance Reform Implementation Fund.

- Exempt the first 30 employees of any employer from the no-coverage penalty.

- Increase the per-employee penalty imposed on employers that fail to provide health coverage to $2,000 per employee, from $750.

- Require individuals making more than $200,000 per year and couples making more than $250,000 per to pay a new 3.8% tax on interest, dividends, capital gains and other investment income. (This new tax is higher than the 2.9% tax on investment income recently proposed by President Obama.)

- Increase the Cadillac plan tax limits to $10,200 for individuals and $27,500 for families, and to $11,850 and $30,950 for for retirees and high-risk professionals. Calculations of health benefits value now will exclude dental plans and stand-alone vision plans.- Push the effective date of the $2,500 cap on annual FSA contributions back to Jan. 1, 2013.

- Increase the no-coverage penalty for individuals with relatively high incomes and decrease the penalty for low-income individuals.

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Tags: Health Care Bill H.R. 3590, Health Care Legislation, House Health Care Bill, House of Representives Passes Health Care Bill

As we head into July, the federal debate has become more defined as four of the five Congressional committees with jurisdiction over health reform have released draft health reform bills. On June 19th , the Education and Labor, Energy and Commerce, and Ways and Means Committees in the House of Representatives released a joint tri-committee draft health reform bill. Earlier in June, the Senate Health, Education, Labor, and Pensions (HELP) Committee released its health reform bill. The final committee with jurisdiction over health reform, the Senate Finance Committee, is expected to release its health reform bill soon after the 4th of July Congressional recess. House and Senate leadership hope to pass legislation in their respective chambers before August and get a final compromise bill to the President in October. Key components of the recently released House tri-committee bill include:

National Health Insurance Exchange: By 2013, a National Health Insurance Exchange is to be established to replace the current individual health insurance market and provide an option for employers and public program enrollees in Medicaid and the Children’s Health Insurance Program (CHIP). States would be allowed to apply to the federal government to establish state or regional exchanges. The Exchange is to establish health plan standards, facilitate the provision of comparative information, enrollment, billing, and other administrative functions, administer coverage subsidies, and respond to consumer grievances.

Public Plan: No later than 2013, the Department of Health and Human Services is to develop and offer a Public Plan through the Exchange to compete with private insurers. The Public Plan is to comply with the same requirements as other private health plans participating in the Exchange, but provider payments from the Public Plan are to be similar to Medicare rates and providers participating in Medicare would be required to participate in the Public Plan for five years. The federal government would provide start up funding for the Public Plan, but it must become self-sustaining after initial start up.

Insurance Market Reform: The legislation requires changes to the individual and group markets that prohibit pre-existing condition exclusions, prohibit premium rating based on health status, gender, or occupation and limit rating by age, require guarantee issue and renewal of coverage, require a medical loss ratio of 85 percent, prohibit annual or lifetime benefit limits and limit annual cost sharing, establish a Benefits Advisory Committee to recommend a minimum benefit package and three additional standard benefit plans, and establish a risk spreading mechanism to minimize unequal risk selection in health plans.

Coverage Mandates: By 2013, all individuals would be required to have health insurance coverage. Those not complying with the mandate are to be assessed a tax up to the cost of the minimum benefit plan. Exceptions to the mandate are granted for religious objection and financial hardship. Employers would be required to provide 72.5 percent for single coverage and 65 percent for family coverage of the lowest cost minimum benefit set plan or pay an eight percent tax on wages. Certain small businesses with payroll below a set level would be exempt.

Coverage Subsidies: Sliding scale subsidies varying by income would be available through the Exchange for individuals and families with incomes below 400 percent of the federal poverty level ($88,000 for a family of four) so that premiums would not exceed 10 percent of income. Sliding scale subsidies varying by employee income and employer size worth up to 50 percent of premium would be available to employers with less than 25 employees whose average wage is below $40,000.

Medicaid Reform: The legislation expands Medicaid eligibility for all individuals to 133 percent of the federal poverty level ($14,000 for an individual) and requires an 85 percent medical loss ratio for Medicaid managed care organizations. It also establishes new preventive services benefits, increases payments for primary care, and implements a medical home pilot project to reduce costs and improve outcomes through use of preventive services and care coordination.

Medicare Reform: The legislation restructures provider payment rates and requires the Department of Health and Human Services to develop new payment methods to promote coordinated care and reward quality and efficiency in areas such as hospital readmissions, post-acute care, imaging, and primary care. The bill reduces payment rates and establishes an 85 percent medical loss ratio for Medicare Advantage plans. The legislation also eliminates the coverage gap (donut hole) in Part D by 2023 and reauthorizes Special Needs Plans (SNPs) that integrate care for beneficiaries with coverage through Medicaid and Medicare.

Other Health System Reforms: The legislation also makes investments in the health care workforce to improve access to primary care, makes investments in prevention and public health programs, establishes national centers for quality improvement and comparative effectiveness research, establishes mechanisms to simplify administrative functions, and enhances efforts to reduce fraud, waste, and abuse.

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Tags: House Health Committee bill, House Health Subcomittee, House insurance bill, House of representative insurance proposal

The House and Senate have approved a compromise budget resolution that sets parameters for spending and revenue legislation. As requested by the President, the budget resolution includes a reserve fund for health care reform initiatives that must be deficit-neutral for fiscal years 2009 through 2014 or fiscal years 2009 through 2019. The resolution allows Medicare physician payment legislation, that would likely prevent cuts to physician payment rates for two years, to be exempt from the deficit-neutral requirement.

The budget resolution also allows for the ability to consider health care reform legislation under the reconciliation process. Reconciliation is a procedure that Congress may use to make it easier to pass budget bills related to tax and entitlement spending programs. A reconciliation bill can not be filibustered as debate is limited to 20 hours, and this allows a bill to be passed quickly with a simple majority vote.

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Tags: Health care reform, health care reform agreement