Do You Offer Health Insurance? Here's What You Need to Know Now

Do You Offer Health Insurance? Here’s What You Need to Know Now

The new Healthcare Reform laws have passed, and there are many provisions that employers will need to be aware of.  However, the majority of these changes don’t happen for a couple of years.  Here’s a quick summary of what you need to be aware of now to prepare for existing or upcoming changes in your company sponsored health insurance plan.

1) Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA)

The interim final rules were issued back in February, before Healthcare Reform was passed.  The new rules apply to plans with 50 or more employees with health plans that choose to offer mental health and substance use disorder benefits, and plan years beginning on or after July 1, 2010.  The original Mental Health Parity Act of 1996 only required that aggregate annual or lifetime limits for mental health treatments be equal to general medical or surgical benefit limits.  These new rules take it further by requiring health plans to treat mental health and substance treatments the same as general medical benefits in the way of financial requirements (meaning deductibles, coinsurance, out-of-pocket costs, annual and lifetime limits, etc.) and treatment limits (number and duration of treatments, out-of-network coverage, etc.) not just overall lifetime limits.  Plan sponsors should review their plan to confirm that these expanded requirements are met.

2) Michelle’s Law and Other State Dependent Coverage Mandates

Michelle’s Law was passed in late 2008 by President Bush and took effect in late 2009.  This law extends health coverage to full time college students who lose their full time student status because of the need to take a medical leave of absence.  The new healthcare reform laws regarding dependent children build upon this, and therefore Michelle’s Law in and of itself could become obsolete in most health care plans.  However, it could still apply to ERISA Retiree Plans and standalone plans not subject to healthcare reform such as dental or vision.  Several states have also increased the age that dependent children remain eligible for coverage under their parents’ policy.  Here is a chart that shows each state’s rules about dependent coverage.

3) Excise Tax for Health Plan Noncompliance

Beginning January 1, 2010, the IRS began requiring employers to self-report any violations of various federal group health plan laws such as COBRA, HIPAA, MHPAEA (see #1), Michelle’s Law (see #2), GINA, among others.  The IRS will impose an excise tax on those violations that were not corrected.  Even if the violations are corrected and no tax is due, all violations are reported on IRS Form 8928. For more information, see Instructions for Form 8928.

4) Healthcare Reform “First Round of Changes”

If your group health plan was in effect as of March 23, 2010, your plan is considered to be “grandfathered” and therefore not all of the new law requirements apply to these plans.  Here are some key provisions that do apply to grandfathered plans effective for plan years beginning after September 23, 2010:

  • Pre-existing conditions for children. Elimination of pre-existing condition exclusions from group health plans for children under age 19.
  • Dependent coverage (before Jan. 1, 2014) Requirement that group health plans provide coverage for adult dependent children up to age 26, even if they are married, only if the child is not eligible to enroll in other employer-provided coverage (other than in a grandfathered plan).  After 1/1/14, dependent coverage up to age 26 will be required to be offered, even if the child is eligible to enroll in other employer provided coverage.
  • Elimination of coverage rescissions. Rescission refers to the practice of canceling coverage after someone has submitted medical claims. Rescission would still be permitted if an individual committed fraud or made an intentional misrepresentation of a material fact.
  • Coverage limits. Group health plans are required to eliminate lifetime maximum limits on coverage of essential benefits and the elimination of certain annual limits. It should be noted that group health plans will continue to be able to place limits on the amount covered for certain medical procedures.

Other Changes Effective January 1, 2011:

  • FSA/HRA/HSA and Over-The-Counter drug expenses. Expenses will only be reimbursed for drugs for which a physician writes a prescription, and insulin.
  • HSA Penalty Increase. The tax penalty for using an HSA for non-approved expenses will increase from 10% to 20%.
  • W-2 Reporting for 2011.  Employers will be required to report the aggregate cost of health insurance for each employee on Form W-2.  So come January 2012, the W-2’s for 2011 will need to show this amount.

Many more changes will follow in future years, and in the meantime, employers need to communicate with their benefits broker and providers to ensure that their plans are designed and communicated in accordance with these new laws. Also, be aware that offering health coverage through the Affordable Care Act could qualify your small business for a health insurance tax credit.

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