Health care reform: planning for the future

Health care reform is a change of historical proportion that will affect companies and the benefits they provide to their employees during the next decade. Executives need to start planning for the myriad and complex provisions of health care reform – and the financial decisions that come with them. Failure to do so will bring about costly consequences, as an employer that does not comply with health care reform is fined $100 per day, per employee.

While some executives may feel they have a grasp on what health care reform means for their company, there are several details that may surprise them:
• Are you aware that if your plan expresses your employees’ cost-sharing as a percentage (such as a co-payment), your plan will lose its grandfathered status if you make any increase in the employees’ percentage that was in effect on March 23, 2010, no matter how small?
• Are you aware that if a participant in your plan has already reached a lifetime maximum, your plan must provide the participant the right to re-enroll in coverage and the re-enrollment right must be provided no later than the first plan year beginning on or after Sept. 23, 2010?
• Are you aware that if you mistakenly enroll a participant in your plan, you may not rescind the coverage retroactively, unless there was fraud or an intentional misrepresentation of a material fact?
• Have you developed an understanding of whether some of your employees may qualify for the health care tax credit (which will cause penalties to be imposed on you) and the actions you can take to avoid the penalties?

“What we are finding is that a lot of our clients know there are some big changes coming down the road with health care reform, but they are unsure about what they need to do in order to prepare for these changes and when they need to take action,” said Eddie Adkins, a Compensation and Benefits partner in Grant Thornton’s Washington National Tax Office. “With clients, we have tried to simplify the complex provisions and mandates of the health care reform and create a systematic approach that enables them to fully understand their unique situation, the decisions they will have to make, when they will have to make them, and what the overall financial impact will be to their companies.”

Health care reform will test a company’s ability to adapt to change. Grant Thornton has created a three-step approach that is designed to get executives asking the right questions and planning ahead for their particular situations:

STEP ONE: Companies should obtain a list of the new requirements for health care benefit plans, along with the date that the requirements go into effect. The U.S. Department of Health and Human Services has created a website (www.healthcare.gov) that provides information regarding the new requirements. Below is a list of major new requirements for health care benefit plans, along with other new rules related to plans, such as reporting and penalty rules.*
Plan years beginning after Sept. 23, 2010:
• Must cover children until age 26
• For children under age 19, no exclusion from coverage due to pre-existing conditions
• No lifetime maximum on benefits
• No rescission of an individual’s coverage
2011:
• W-2 reporting of the cost of health care benefits
• No reimbursements in a health care flexible spending account for over-the-counter drugs unless prescribed by a physician
2013:
• Employee contributions to health care flexible spending accounts limited to $2,500 per year
2014:
• No exclusion from coverage due to pre-existing conditions, regardless of the individual’s age
• No annual dollar limits on benefits
• Large employers pay penalties for providing no coverage or inadequate coverage (employers with 50 or more full-time employees)

*Numerous additional rules that are not listed here apply to new plans that go into effect after March 2010, as well as to existing plans that are modified in certain respects after March 2010.

Once you have a list of these new requirements, companies can proceed to Steps 2 and 3, which will be covered in Part 2 of this article next Thursday.

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