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Landmark legislation making major changes to health care insurance practices in the United States was enacted in March 2010.
The act reforms the health care system by expanding the availability of health insurance, regulating health insurance coverage, and restructuring health care delivery, including how it is paid for.
A number of different mechanisms are used to increase coverage, including expanding Medicaid, which provides insurance to low-income parents and children at very small cost; establishing state-based insurance exchanges with subsidies for low- and middle-income households; requiring individuals to obtain coverage; and mandating that most employers offer health insurance.
Mandated Benefits: Beginning six months after the law’s enactment, all existing health insurance plans must:
Beginning in 2014, group health plans must prohibit pre-existing condition exclusions and must prohibit annual limits.
Health Care Exchanges: The law requires states to create and maintain health care “exchanges” in which health insurance providers compete for customers on equal terms. The exchanges will be open to anyone without employer-provided coverage who wants to purchase a health insurance plan. If a state does not create an exchange, the federal government will create one for it.
Employer Penalty for Not Offering Coverage: The law will not require employers to offer health insurance; however, beginning January 1, 2015, employers with more than 50 full-time employees that do not offer coverage will have to pay a penalty of $2,000 per full-time equivalent employee for all full-time employees in excess of 30 if even one employee receives a federal government subsidy and purchases coverage in an exchange.
Employer Penalty for Unaffordable Coverage: If an employee opts out of an employer plan because coverage is “unaffordable”—that is, if the premium exceeds 9.5 percent of family income—the employer must pay a $3,000 penalty for each full-time employee who receives a government subsidy and purchases coverage through an exchange.
Employer Penalty for Low-value Plans: Employer health care coverage must have an actuarial value of at least 60 percent. If it does not, penalties will be assessed.
No Penalty for Waiting Periods: Employers will not be required to pay a penalty for employees during a waiting period that is required before an employee can enroll in an employer-provided health insurance plan. Beginning in 2014, however, a waiting period cannot exceed 90 days.
Employer-Provided Free-Choice Vouchers: Employers that offer coverage must provide a free-choice voucher to employees with incomes less than 400 percent of the federal poverty level whose share of the premium exceeds 8 percent but is less than 9.8 percent of their income and who choose to enroll in a plan in the exchange. The voucher amount must be equal to what the employer would have paid to provide coverage to the employee under the employer’s plan. Employers providing free-choice vouchers will not be subject to penalties for employees that receive premium credits in the exchange.
Automatic Enrollment Procedure: The law will require employers with more than 200 employees to enroll employees automatically into health insurance plans offered by the employer, allowing for an employee opt-out. The law is silent as to the effective date of this requirement.
Restrictions on Cafeteria Plans: The law caps flexible spending account (FSA) contributions at $2,500 and excludes over-the-counter medications without a doctor’s prescription as reimbursable expenses under FSAs, health reimbursement accounts, medical spending accounts (MSA) and health savings accounts (HSA). Penalties on nonmedical HSA and MSA distributions are increased to 20 percent.
Incentives for Wellness: The law allows employers to offer premium discounts and other financial incentives for up to 30 percent of the total premium to individuals who satisfy a health standard. It includes provisions designed to ensure that discriminatory practices do not occur. The secretary of Health and Human Services has the authority to issue regulations to allow financial incentives up to 50 percent. The law provides for grants for up to five years to small employers that establish wellness programs.
Tax on High-value Plans: Beginning in 2018, there will be a 40 percent excise tax on insurance companies and plan administrators for group health coverage that exceeds a threshold of $10,200 for single coverage and $27,500 for families, not counting stand-alone dental and vision plans. For retirees above age 55 and for plans that cover employees in high-risk professions, the thresholds are $11,850 for single coverage and $30,950 for families. The tax will apply to the amount of the premium that is in excess of the threshold. Beginning in 2019, the thresholds will be indexed to the rate of general inflation plus 1 percentage point.
Required W-2 Reporting: Beginning in 2011, employers will be required to report the value of employees’ health benefits on W-2 forms.
Long-Term-Care Enrollment Procedures: The law creates a national social insurance program that provides limited long-term-care coverage for active employees through the workplace. All premium costs can be charged to employees. Beginning in 2011, employers must have in place automatic enrollment procedures that allow workers to opt out or procedures that allow workers to initiate enrollment.
Breaks for Nursing Mothers: A provision in the law amends the Fair Labor Standards Act to require employers, with some exceptions, to furnish “reasonable break time for an employee to express breast milk for her nursing child” for one year after the child’s birth. It requires employers to provide a place, other than a bathroom, that is shielded from view and free from intrusion from co-workers and the public, that may be used by an employee to express breast milk.
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