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Health Care Reform Health Insurance Info

IMPORTANT: This document is designed to provide a general overview of the new health reform law. It does NOT attempt to cover all of the law’s provisions and should NOT be used as legal advice for implementation activities. We encourage you to seek any professional advice, including legal counsel, regarding how the new requirements will affect your specific plan.


The health reform package is made up of two parts: a bill that passed the Senate on Christmas Eve, passed the House on March 21, and was signed into law by the President on March 23, and a second piece of legislation: the House’s reconciliation bill, which makes changes to the original law, passed both chambers on March 25, and was signed by the President on March 30, 2010.

Many of the provisions in the law will not take effect for several years. At the earliest, provisions that affect employer-sponsored health plans will take effect six months from the date of enactment – in late September. Even then, those early provisions will not affect plans until they renew for the next plan year.

The health reform law has thousands of pages and hundreds of provisions. So it’s important to remember that before many of those provisions are put in place, additional laws and regulations will need to be developed. That could be a lengthy process.

Here are some highlights of the major provisions.

Individual responsibility

Starting in 2014, everyone must have coverage or pay a penalty, which will be enforced by the Internal Revenue Service. The penalties will be phased in over time:

  • In 2014, an individual without insurance must pay whichever amount is greater: $95 or 1 percent of income.
  • For 2016 and beyond, that penalty rises to $695 or 2.5 percent of income, whichever is greater (the $695 is indexed from 2016 on).
  • Families will pay half the penalty for children, with a cap of $2,085 per family.
  • There will be exemptions to this requirement, such as in cases of Financial hardship and other limited circumstances.

Subsidies to buy insurance in new state exchanges will be available in the form of tax credits and cost-sharing assistance for people above Medicaid eligibility but below 400 percent of the federal poverty level. Medicaid eligibility will be increased to 133 percent of the federal poverty level.

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Employer responsibility

New employer penalties and obligations

Starting in 2014, employers don’t have to offer their employees health insurance coverage, but most of them with more than 50 employees will pay an assessment if they don’t, or if they offer coverage that isn’t affordable. Full-time and part-time employees are included when determining whether an employer has 50 employees (based on current full-time employee equivalency rules).

  • Employers with 50 or more employees that do not offer “minimum essential coverage” will pay $2,000 for each employee over the first 30 employees if one of their employees gets a tax subsidy to buy insurance under an exchange.
  • Employers with 50 or more employees that do offer minimum essential coverage but have at least one full-time employee receiving subsidized coverage under an exchange will pay whichever is less: $3,000 for each employee receiving a premium credit, or $2,000 for each full-time employee.

Employers must provide “free choice” vouchers to employees with incomes below 400 percent of the federal poverty level if the employee’s contribution to coverage is between 8 percent and 9.8 percent of income and the employee chooses to purchase coverage in the exchange. No penalties will be imposed on employers with respect to employees who receive these vouchers.

Employers with more than 200 employees that offer coverage must automatically enroll new full-time employees in coverage. Employees may opt out.

New employer reporting requirements

  • Beginning in 2011, employers will be required to disclose the value of health care benefits on an employee’s annual W-2.
  • Employers will be required to notify employees:
    • About the availability of the exchange – for new employees, at the time of hiring; for current employees, by March 1, 2013;
    • They may be eligible for a subsidy under the exchange if the employer’s contribution to the plan is less than 60 percent of total allowed costs of the benefits;
    • If the employee purchases coverage in the exchange, he or she will lose the employer’s coverage contribution.
  • In 2014, large employers will be subject to expanded 5500 reporting requirements to include information on the health insurance coverage of their employees.

Small business tax credits

Beginning in 2010, small businesses with fewer than 25 employees and average wages of less than $50,000 get a tax credit for their contributions to buying health insurance for employees. The tax credit starts at up to 35 percent and increases to 50 percent in 2014 when the exchange is operational. A full tax credit may be available to small businesses with fewer than 10 employees and average wages of less than $25,000.

Health plan changes

Under the new law, individuals and employers/employees have the right to keep the coverage they had as of March 23, 2010 and are exempt from many reforms. These individual and group health plans are considered “grandfathered plans.” Collectively bargained plans that were ratified before the date of enactment are grandfathered until the date that the last collective bargaining agreement related to coverage ends.

Health plan changes that impact individuals and employers (both fully insured and self-funded plans unless otherwise noted) over the next few years:


  • Federal rate review. The Department of Health and Human Services (HHS) will establish a process for federal review of fully insured premium rate increases.


  • Internet portal. By July 1, an Internet portal will be created for consumers and small businesses to shop for health Insurance.
  • High-risk pool. $5 billion has been appropriated to create a temporary high-risk insurance pool to help adults with pre-existing conditions get coverage if they have been uninsured for six months. The program will be effective through 2013.
  • Reinsurance for early retirees. A temporary reinsurance program will be established for employers providing coverage to early retirees over age 55 who are not eligible for Medicare. The federal government will provide $5 billion to fund the program. Participating employers or insurers will be reimbursed 80 percent of retiree claims between $15,000 and $90,000. The program will be effective through 2013.


Effective for new plans and plans renewed six months after the law’s enactment date, unless otherwise noted (includes “grandfathered plans”):

  • Lifetime and annual limits. Plans may not impose lifetime limits on the dollar value of essential benefits. Annual limits will be restricted (to be determined by HHS). Restricted annual limits do not apply to grandfathered individual plans.
  • Rescissions. No rescissions are permitted, except in cases of fraud or intentional misrepresentation.
  • Coverage for adult children. Children may stay on their parents’ policies until age 26 if coverage isn’t available through their work, regardless of their marital status. Any employer contribution toward the premium is a tax-deductible business expense for the employer and not taxable income for the member.
  • Pre-existing conditions. Plans may no longer impose pre-existing condition exclusions for children under 19 (does not apply to grandfathered individual plans).

Effective for new plans and plans renewed six months after the law’s enactment date (does not include “grandfathered plans”):

  • Preventive services. New policies must cover the full cost of preventive care as recommended by the U.S. Preventive Services Task Force, recommended immunizations, preventive care for infants, children and adolescents, and additional preventive care for women.
  • Appeals. New minimum requirements for internal and external claims appeals processes.
  • Patient protections. Plans that require or provide for a primary care provider (PCP) designation must allow each member to designate any in-network PCP, or pediatrician for children, accepting new patients. Plans may no longer require an authorization or referral to an Ob-Gyn. Prior authorization or increased cost-sharing for emergency services is also prohibited.
  • Nondiscrimination rules. Nondiscrimination rules that apply to self-funded health plans are expanded to group fully insured health plans. Plans cannot base an employee’s eligibility or continued eligibility on hourly or annual salary.

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