What Every Business Should Know About the New Health Reform Law
By Michael J. Hamblin
On Tuesday, March 23, 2010, President Obama signed into law historic legislation that aims to significantly reform the American health care and insurance system. This new law will have a significant impact on how businesses provide benefits to their employees.
The new law requires most legal U.S. residents to secure health insurance. The law also provides government funded subsidies to assist lower-income individuals to obtain health insurance through newly created state health insurance marketplaces or exchanges. The new law also imposes a number of important new responsibilities on employers across the country and over the course of time will likely change in a fundamental way the nature of employer-sponsored health care. Given these dramatic changes, no matter what field a business operates in, there are certain basics about the new health reform law of which all business mangers and executives should be aware.
On its face the law does not require businesses to provide or maintain health insurance for their employees. However, the new law contains certain "employer responsibility" requirements that would penalize businesses that do not provide sufficient or "affordable" health insurance to their employees. Businesses that have more than 50 employees and do not maintain or provide health insurance for their workers will have to pay a penalty. The purpose of the penalty will be to cover the cost of health insurance if any of the business’s employees receive government subsidies to obtain their own insurance through an exchange and the business does not provide coverage or its plan is determined to be too expensive for its employees. Beginning in 2014, the penalty would be $3,000 per full-time worker who gets a tax credit up to $750 multiplied by the total number of full-time workers. If a large employer does not offer any health insurance coverage at all, its penalty would be $2,000 per full-time worker if any of its workers get a tax credit for purchasing health care (with an exemption for the first 30 workers).
Besides imposing a penalty on employers that do not provide health insurance, the new law also mandates that businesses automatically enroll workers in their health insurance plans. The law helps small businesses to provide insurance to their employees by giving those businesses a tax credit. The premium tax credit would be available only to employers that have less than 25 workers. Certain low-income employees will be allowed to opt out of employer-sponsored health coverage if they cannot qualify for a federal subsidy. These workers would get "free-choice vouchers" from their employers, which would be equal to the value of the benefits provided by the employer plan. The employee could then use the vouchers to enroll in an exchange plan, and would even be allowed to cash in the amount of the voucher that exceeds the cost of coverage through the exchange plan.
There are also a number of restrictions that will be placed on group health plans, such as a prohibition on rescissions and lifetime limits, as well as a much publicized requirement that coverage be provided for a beneficiary’s non-dependent children up to age 26. Also, businesses that offer flexible spending accounts (“FSA’s”) and employees who use them will be subject to new contribution limits.
The new health care reform law is a sweeping and dramatic change and the impact it will have on employers cannot be overstated. Each business should review their employee benefit plans and practices to determine how best to comply with this new law. Consultation with knowledgeable legal counsel is imperative to ensure that businesses understand and meet their obligations under the health reform law.
Michael J. Hamblin is an attorney at Frank Haron Weiner, and focuses his practice on a wide range of litigation and transactional business law matters.
On Tuesday, March 23, 2010, President Obama signed into law historic legislation that aims to significantly reform the American health care and insurance system. This new law will have a significant impact on how businesses provide benefits to their employees.
The new law requires most legal U.S. residents to secure health insurance. The law also provides government funded subsidies to assist lower-income individuals to obtain health insurance through newly created state health insurance marketplaces or exchanges. The new law also imposes a number of important new responsibilities on employers across the country and over the course of time will likely change in a fundamental way the nature of employer-sponsored health care. Given these dramatic changes, no matter what field a business operates in, there are certain basics about the new health reform law of which all business mangers and executives should be aware.
On its face the law does not require businesses to provide or maintain health insurance for their employees. However, the new law contains certain "employer responsibility" requirements that would penalize businesses that do not provide sufficient or "affordable" health insurance to their employees. Businesses that have more than 50 employees and do not maintain or provide health insurance for their workers will have to pay a penalty. The purpose of the penalty will be to cover the cost of health insurance if any of the business’s employees receive government subsidies to obtain their own insurance through an exchange and the business does not provide coverage or its plan is determined to be too expensive for its employees. Beginning in 2014, the penalty would be $3,000 per full-time worker who gets a tax credit up to $750 multiplied by the total number of full-time workers. If a large employer does not offer any health insurance coverage at all, its penalty would be $2,000 per full-time worker if any of its workers get a tax credit for purchasing health care (with an exemption for the first 30 workers).
Besides imposing a penalty on employers that do not provide health insurance, the new law also mandates that businesses automatically enroll workers in their health insurance plans. The law helps small businesses to provide insurance to their employees by giving those businesses a tax credit. The premium tax credit would be available only to employers that have less than 25 workers. Certain low-income employees will be allowed to opt out of employer-sponsored health coverage if they cannot qualify for a federal subsidy. These workers would get "free-choice vouchers" from their employers, which would be equal to the value of the benefits provided by the employer plan. The employee could then use the vouchers to enroll in an exchange plan, and would even be allowed to cash in the amount of the voucher that exceeds the cost of coverage through the exchange plan.
There are also a number of restrictions that will be placed on group health plans, such as a prohibition on rescissions and lifetime limits, as well as a much publicized requirement that coverage be provided for a beneficiary’s non-dependent children up to age 26. Also, businesses that offer flexible spending accounts (“FSA’s”) and employees who use them will be subject to new contribution limits.
The new health care reform law is a sweeping and dramatic change and the impact it will have on employers cannot be overstated. Each business should review their employee benefit plans and practices to determine how best to comply with this new law. Consultation with knowledgeable legal counsel is imperative to ensure that businesses understand and meet their obligations under the health reform law.
Michael J. Hamblin is an attorney at Frank Haron Weiner, and focuses his practice on a wide range of litigation and transactional business law matters.