Health Care Reform: How will it affect business owners and executives?

Unless you’ve been taking a hiatus from the newspaper, Internet, radio or television, you have inevitably heard much in the way of US news surrounding National Health Care Reform and the differing opinions that are accompanying the breaking story. After much debate, Congress passed health care reform legislation on March 21, 2010.  The Senate then approved the reform on March 28, 2010.

As a Massachusetts resident and employee benefits professional with many clients in this state, as well as throughout the country, I recognize that the initial regulatory impact of National Health Care Reform in Massachusetts will not be as great as it will be on the rest of the country. This is largely due to the fact that the federal government modeled its reform around our already implemented Massachusetts Health Care Reform. However, that doesn’t mean that there won’t be any impact on Massachusetts business owners. There are some regulations that will be effective for plan years beginning six months after the date of enactment and others which will impact businesses over the next eight years.

And whether you own a business in Massachusetts or in any of the other 49 states, it’s important to understand some of the key changes that will affect businesses:

1. Dependent Coverage for adult children up to age 26

In Massachusetts, employers have already enacted coverage for adult children up to age 26,  Going forward on a national basis, for plan years beginning after September 23, 2010, plans would be required to provide coverage for adult children up to the age of 26. If an adult child is not eligible to enroll in an employer-sponsored plan, they can be covered by their parents’ employer-sponsored health plan. The value of the coverage for the adult child will not be included in the employee’s income, as is currently the case.

2. No Lifetime/Restrictive Annual Limits

For plan years beginning after September 23, 2010, existing plans are prohibited from having lifetime limits on coverage or restricted annual limits (as determined by the Health and Human Services Secretary). Health plans will no longer be able to impose lifetime benefit limits nor will they be able to have restrictive annual limits.

3. Small Employer Tax Credit

For years 2010 through 2013, businesses with fewer than 25 employees and average wages of less than $50,000 are eligible for a tax credit of up to 35 percent of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50 percent of the total premium cost.

4. Employer Mandate

Effective in 2014, employers with more than 50 employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit will be fined an amount equal to $2,000 per full-time employee, excluding the first 30 employees from the assessment. Employers with more than 50 employees that offer coverage but have at least one full-time employee receiving a premium tax credit because coverage is “unaffordable,” will pay the lesser of $3,000 for each employee receiving a premium credit or $750 for each full-time employee. Coverage would be considered “unaffordable” if the premium for the class of coverage selected by the employee exceed 9.5 percent of family income. Employers with 50 or fewer employees are exempt from penalties.

This law is extremely complex and the regulations that Washington will be issuing will determine how employers are required to modify their existing practices.  Advisors can be extremely important in helping employers decipher how reform will affect them and in proactively strategizing ways to stay ahead of the curve.

About the Author

This editorial was written by Ed Maguire. Ed has over 35 years of experience in the industry. As the Executive Vice President of Sapers & Wallack’s Group Benefits Advisory Department, Ed leads his staff of experienced professionals in providing day-to-day support to the personnel and financial staffs of approximately 300 corporate clients in the area of employee welfare programs. Ed has been in his current position as leader of Sapers & Wallack’s Group Benefits Department for 24 years. He joined the firm after four years of marketing group insurance products for a major commercial carrier. Prior to joining the marketing area, he spent ten years as a Senior Group Underwriter with responsibility for the regulatory, financial, and administrative integrity of the insurer’s key accounts. In addition to having taught courses for the Health Insurance Association of American and Northeastern University, Ed Maguire is a frequent speaker at industry seminars. Ed is also member of the New England Employee Benefits Council. If you have any specific questions about how the new reform will directly impact you, please feel free to contact Ed by phone 617-225-2600 or email him at emaguire@sapers-wallack.com.