The Affordable Care Act, passed in 2010 and is being rolled out in stages. Many reforms, most notably the individual health insurance exchanges, won’t go into effect until 2014, but some small-business owners are experiencing sticker shock already and blame the new law for the rising health insurance rates they’ve seen over the past 2 years.

Supporters of insurance exchanges argue that they can be a game-changer for small-business owners in particular. Insurance exchanges can offer new options for covering employees at competitive and more realistic prices, they argue. Currently, small-business owners typically pay much higher premiums than large employers because they don’t have a large enough pool to spread out risk and reduce the cost of coverage.

Here are a few options small businesses can consider as they wait for healthcare reforms to kick in:

1. FIND OUT IF YOU QUALIFY FOR A SMALL-BUSINESS TAX CREDIT.

Businesses with fewer than 25 full-time employees paying staffers an average annual salary of less than $50,000 may now be eligible for tax credits of up to 35% of the cost of their premiums. Employers need to pay more than half the premium to qualify. It is difficult for many employers in a higher-wage market such as Chicago to qualify, but for those smaller businesses that fit the narrow definition, pursuing the credit may be well worth the effort. Tax experts estimate only half of small businesses even realize there’s a health care tax credit that they could qualify for.

2. ANALYZE WHETHER YOUR BUSINESS SHOULD CONTINUE OFFERING COVERAGE UNDER HEALTH REFORM.

Under the new law, employers with staffs of 50 or more could face penalties of $2,000 per employee if they don’t provide insurance. Some business owners say their coverage already exceeds that, so a penalty could be a more affordable option. If you run a mid-sized business, start analyzing whether it would make sense to continue offering coverage or to pay the penalty and send employees to a state exchange.

Illinois is among 17 states that have made significant progress toward developing health insurance exchanges, the new markets on which individuals seeking insurance will be able to purchase it that begin January 1, 2014, according to the AP analysis. Thirteen states have already adopted a plan, but are home to only 25% of the uninsured. The 20 states lagging behind account for the biggest share of the uninsured, 42 percent.

3. ADOPT A WELLNESS STRATEGY.

While a wellness incentive plan for employees may not pay big dividends right away, the plans help employers qualify for significant discounts on overall coverage. By providing employees with tools, resources, and incentives to make and maintain healthy lifestyle choices, health insurance premiums become lower over time as the overall health of the company improves. Insurance companies such as United Healthcare, Humana, and BlueCross BlueShield are also trying to provide a more robust solution around wellness by offering rewards-based programs to their members. Members have to do something for a healthy lifestyle to earn an incentive. For example, if a smoker attends a smoking cessation program, an insurance company may reward them with a gift card.

4. LOOK CLOSELY AT STATE-RUN HEALTH INSURANCE CO-OPERATIVE PLANS.

The ability of states to develop non-profit, member-run health cooperatives that could compete for better rates is part of the health reform legislation, and some advocates feel this aspect of reform hasn’t gotten the spotlight it deserves. While cooperatives have produced mixed results in the past, they can reduce costs when done right, particularly for small-business owners. Health cooperatives are a great opportunity, and hardly any small businesses know about this option. For small group employers, this could mean finding whole new ways to bring competitiveness to the table.

Tags: 2012 Small Business Health Care Reform, Illinois small business health insurance mandates 2012, Illinois small business health insurance options, Small Business health insurance laws, small business healthcare laws

The Obama administration defended its healthcare overhaul law before the U.S. Supreme Court on Friday, rejecting arguments by critics who warned that if the government can require people to have health insurance, it might next make them eat broccoli.

Administration attorneys, in court filings and at a briefing, said Congress was within its constitutional powers in requiring Americans to buy insurance by 2014 or pay a penalty, a centerpiece of the law known as the individual mandate.

The law’s opponents have argued that Congress overstepped its authority and have raised the hypothetical question of whether Congress next could require that all Americans eat broccoli because of the nation’s obesity crisis.

The Supreme Court has scheduled three days of oral arguments in the legal battle for March 26-28, with an election-year ruling expected by the end of June.

The law, Obama’s signature domestic policy achievement, seeks to provide health insurance to more than 30 million previously uninsured Americans. His prospective Republican presidential opponents all have strongly opposed the law.

A Supreme Court ruling striking down the law would be a major political and legal setback for Obama ahead of the election, while a decision upholding it would be vindication. Polls show Americans deeply divided over the law.

A senior administration official, who declined to be identified, told reporters that Congress, in adopting the law, responded appropriately to a national crisis after years of debate.

The broccoli hypothetical has “no relevance to the case at hand,” the official said, maintaining that the insurance purchase requirement was “not the same” as mandating that people eat or buy broccoli.

The healthcare law has been challenged by 26 of the 50 states and by an independent business group as an unprecedented move by Congress that exceeds its constitutional powers.

The states involved in the challenge, in a Supreme Court brief, on Friday said the entire law, which President Barack Obama signed in March 2010, should be struck down.

“The individual mandate is the centerpiece of the entire federal health care act,” said Attorney General Pam Bondi of Florida, a state that has led the legal challenge.

“If the court removes the individual mandate, the main hub of the act, the entire health care law must be invalidated.”

The administration’s arguments in its brief backing the law largely mirrored those previously made in its initial appeal to the Supreme Court filed at the end of September.

The attorneys said the law was an attempt by Congress to address a crisis in the national health care market, capping nearly a century-long effort to expand access to health care by making affordable health insurance more widely available.

They cited statistics showing that healthcare accounts for 17 percent of the nation’s economy and argued that the law was a valid exercise of Congress’s power under the Constitution to regulate economic activity affecting interstate commerce.

The brief also cited a law that Massachusetts adopted in 2006 when Mitt Romney was governor. Romney is the frontrunner for the Republican presidential nomination to face Obama in the November elections.

The brief said Congress cited the Massachusetts law as a model for key provisions, including the provision requiring that individuals purchase insurance or pay a tax penalty.

Opponents of the law also filed briefs with the Supreme Court on Friday.

The conservative American Center for Law and Justice filed a brief on behalf of 117 Republican members of the U.S. House of Representatives and 100,000 of the center’s supporters urging the justices to declare the entire law unconstitutional.

Thirty-six Republican U.S. senators said in a separate brief the entire law must fall if the individual mandate is struck down.

The Supreme Court cases are National Federation of Independent Business v. Sebelius, No. 11-393; U.S. Department of Health and Human Services v. Florida, No. 11-398; and Florida v. Department of Health and Human Services, No. 11-400.

For National Federation of Independent Business: Michael Carvin of Jones Day.

For Sebelius and the Department of Health and Human Services: Donald Verrilli Jr, Solicitor General of the United States.

For Florida: Paul Clement of Bancroft.

(Original Source from Reuters)

Tags: Healthcare Law, Healthcare Reform 2012, Obama Healthcare Reform Supreme Court, Obama Lawyers Defend Healthcare Law In Supreme Court

(Reuters) – The breakdown of deficit talks in Congress will exact little pain on the U.S. healthcare industry, but it’s a temporary reprieve from steeper cuts that could be put back on the table in 2013.

The failure of the congressional “super committee” to reach a deal triggers a 2 percent across-the-board cut to Medicare, the government program that provides coverage to millions of older and disabled Americans.

That translates into about $123 billion over the next decade — far lighter than the $500 billion to $700 billion in cuts that could have hit hospitals, doctors and beneficiaries, as well as insurers, drugmakers and nursing homes, if the panel had reached a deal.

But the writing is on the wall for deep healthcare cuts, as the nation’s population ages and draws on federal benefits.

If nothing changes, Medicare, Medicaid and Social Security will devour 100 percent of all tax revenues by 2047, according to the non-partisan Government Accountability Office.

“Congressional staffers and members have been pretty direct with healthcare industries: If you’re not on the list now, you probably will be later,” said Washington-based financial analyst Ipsita Smolinksi.

For the time being, the automatic cuts slated to begin in 2013 will be little more than a nick for both the health industry and politicians loathe to pull back Americans’ health benefits ahead of elections next year.

“Two percent is not a lot for Medicare to absorb. About all that happens is a few more providers, like doctors and hospitals, stop accepting new Medicare patients,” said Joseph Antos of the conservative American Enterprise Institute.

“It’s light compared to what we’ve seen with really big pieces of deficit reduction legislation in the past, particularly in the 1990s,” he added.

HOSPITALS, DOCTORS HIT BY CUTS

As stipulated, automatic cuts are likely to hit hardest among hospitals, which are the biggest recipients of Medicare payments and account for nearly 50 percent of program spending, federal statistics show.

Hospital company stocks including HCA Holdings (HCA.N) and Health Management (HMA.N) moved lower with the broader market in trading on Monday.

Doctors suffer a double whammy from the collapse of the super committee. Physicians and clinics receive about 25 percent of Medicare spending.

Further, the breakdown in negotiations quashed hopes among doctors that the panel would eliminate an almost 30 percent cut in Medicare payments scheduled to go into effect in January under a 1997 balanced budget law.

A so-called permanent “doc fix” would have cost nearly $300 billion in lost savings, making it unlikely at a time of deficit reduction.

Analysts said the best healthcare providers can hope for is another short-term fix to stave off the payment reductions.

The automatic cuts would also reduce funding for insurers that participate in Medicare Advantage, a program segment that allows senior citizens to purchase private insurance.

PUNTING THE MAJOR CUTS

Analysts and lobbyists said the deeper pain for the healthcare sector is expected after the 2012 elections, when many expect Congress and the White House to face new calls to contain the deficit and the growing U.S. debt.

“There is no doubt that this will mean there will be enormous pressure in 2013,” said Ron Pollack of Families USA, a healthcare consumer advocacy group.

That could give new life to proposals to save more than $100 billion by raising copays, premiums and private insurance costs for beneficiaries of Medicare’s fee-for-service system.

Higher beneficiary costs could reduce the ability of millions of Americans to seek care from doctors, hospitals and nursing homes. But analysts say it could also benefit private insurers by making traditional Medicare less affordable.

If revived, a $135 billion proposal to extend Medicaid drug rebates to Medicare beneficiaries would mean a 2 percent to 7 percent hit to drug company revenues, according to a recent report from Moody’s Investors Service.

Hospitals could again face $9 billion in cuts to Medicare spending for medical education and another $20 billion in reduced federal support for coping with bad debts.

Tags: 2013 Healthcare Changes, Healthcare Reform Changes

The Department of Health and Human Services has issued new guidance stating that plan sponsors of all stand-alone Health Reimbursement Arrangements (HRAs) with rollover of unused funds in effect prior to September 23, 2010 will no longer be required to seek waivers from federal rules that restrict annual dollar limits on coverage of essential benefits.

Due to this new exemption, plan sponsors won’t have to apply for waivers from the annual minimum dollar limit of $750,000 in 2011, $1.25 million in 2012 and $2 million in 2013. As a result, large group plan sponsors will be able to continue to provide significant HRA benefits to their participants.

The good news is that through 2013 you can have a stand-alone HRA. The bad news is you can’t after 2013.

The latest guidance builds on an earlier notice in which HHS said that HRAs that are integrated with group plans would be exempt from the annual limit requirements as long as the plan to which it was linked met the annual limit requirements.

Truth be told, stand-alone HRAs are relatively unusual. They have, though, been used by employers to meet requirements set by a San Francisco law that requires employers to spend a minimum amount of money on health care coverage for employees in the city.

HRAs also have been used by employers to help retirees pay for health care coverage, though federal regulators made it clear earlier that annual limit requirements do not apply to retiree-only plans. As a result, stand-alone HRAs for retiree-only plans are not affected by the annual limit requirements.

Tags: 2011 HRA annual minimum dollar limit exemption, health reimbursement arrangement exemptions, HRA minimum dollar limits

The CEO of the nonprofit health insurance company Blue Shield of California, Bruce Bodaken, earned $4.6 million in 2010, according to documents made public by the California Department of Insurance Wednesday. Blue Shield paid its top ten executives more than $14 million combined last year. In January of this year, after Blue Shield announced its third major increase in less than a year, the nonprofit Consumer Watchdog sent a letter to Bodaken demanding that he disclose his annual salary. After public protests at Blue Shield headquarters and sharp criticism from Insurance Commissioner Dave Jones the company to withdrew plans for the third rate hike, but had not disclosed executive salaries until yesterday.

Legislation being considered in the California Assembly, AB 52 (Feuer), would authorize regulators to deny health insurance company rate increases on the basis of excessive administrative and overhead costs, including executive salaries. Blue Shield and other insurance companies have been aggressively opposing the legislation.

“When a nonprofit insurance company’s CEO makes more than four million dollars a year, but patients can’t keep up with rate hikes, then something has to change,” said Consumer Watchdog Executive Director Doug Heller. “Blue Shield’s CEO has become the poster child for the insurance company greed that must be stopped.”

In its letter to Bodaken in January – http://www.consumerwatchdog.org/resources/bs_letter012011.pdf – Consumer Watchdog wrote:

“The burden imposed on hundreds of thousands of Blue Shield customers by the company’s massive rate hikes is almost unfathomable…Blue Shield has been able to drastically increase rates on policyholders without disclosing compensation to its executives. The public, and the policyholder members of your “not-for-profit mutual benefit corporation,” have a right to know how much you and your top management team earn.”

Consumer Watchdog estimates that it takes the annual premium of more than 1,000 Blue Shield policyholders to cover Bodaken’s salary and more than 3,500 policyholders to cover the pay packages for the top ten Blue Shield executives. Under Proposition 103, which regulates the rates and premiums of auto and homeowners insurance the way proposed in AB 52, the insurance commissioner can limit how much policyholder premium can be used to pay executives.

“It costs Californians so many hard earned dollars to pay for health insurance, we should be making sure that our premiums aren’t being wasted on corporate excess, waste and fraud,” said Heller. “Since we can’t afford to go without health insurance, it is imperative that we regulate insurance companies to stop the gouging.

AB 52 will be voted on by the Assembly Appropriations Committee on Friday and, if passed, will go to a vote of the entire Assembly by June 3.

Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Find us on the web at: http://www.ConsumerWatchdog.org

SOURCE Consumer Watchdog

Tags: BCBS CA CEO Salary, BCBS California 2010 CEO salary

Due to the enactment of the National Health Law (PPACA – Patient Protections and Affordable Care Act) beginning January 1, 2011 the following changes will affect Health Savings Accounts:

1. The Excise Tax on ineligible HSA reimbursements increases from 10% to 20%. This is in addition to the normal income taxes for an ineligible HSA reimbursement.
2. Over the Counter (OTC) medicine or drugs (i.e. Tylenol & Claritin), with the exception of insulin, are no longer eligible to be reimbursed from an HSA unless you have a doctor’s prescription.

What exactly is considered an OTC medicine or drug? Below are abbreviated lists of OTC items that will be eligible for reimbursement, broken out into whether or not a prescription is or is not required. This list is not comprehensive. It is intended to be a reference guide until further guidance from the federal government is issued:

NO PRESCRIPTION REQUIRED: bandages, birth control, blood pressure monitors, braces and supports, catheters, contact lenses supplies, denture adhesives, diagnostic testing devices and monitors, elastic bandages and wraps, first aid supplies, insulin and diabetic supplies, ostomy products, reading glasses, wheelchairs, crutches, walkers and canes.

PRESCRIPTION REQUIRED: acid controllers, allergy and sinus medicines, antibiotics, anti-diarrhea medicines, anti-gas medicines, anti-itch and insect bite medicines, anti-parasitic treatments, baby rash ointments and creams, cold sore remedies, hemorrhoid preps, laxatives, motion sickness medications, pain relief medicines, respiratory treatments, sleep aids and sedatives, stomach remedies.

For more information, visit the IRS website at http://www.irs.gov/newsroom/article/0,,id=227308,00.html

2011 HSA Contribution Limits

In May of 2010 the IRS published Revenue Procedure 2010-22, which provides the 2011 cost-of-living contribution and coverage adjustments for HSAs (health savings accounts) as required under Code Section 223(g). The amounts for 2011 are unchanged from the amounts for 2010 because, after the application of the cost-of-living adjustment rules of § 223(g), the changes in the Consumer Price Index for the relevant period do not result in changes to the amounts for 2011.

2011 HSA Maximum Contribution Limit

• Self-only $3,050
• Family $6,150

2011 HSA Catch-Up Contribution Limit

• $1,000

2011 HDHP Minimum Annual Deductible

• Self-only $1,200
• Family $2,400

2011 HDHP Out-of-Pocket Maximum

• Self-only $5,950
• Family $11,900

Tags: 2011 Health Savings Account Changes, 2011 HSA Over the Counter Drug Changes, 2011 HSA Updates, Over the Counter (OTC) drugs no longer HSA Eligible, Patient Protections and Affordable Care Act Affects 2011 Health Savings Accounts

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.

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.

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.

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.

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