The new healthcare reform law passed last month dramatically changes the landscape of employment practices. Many provisions apply to all employers, regardless of size or whether the employer currently sponsors a group health plan. Certain provisions take effect immediately. Others will be phased in over the next several years. While the law is no doubt complex and touches on many facets of our economy and society, our nation’s employers are in many ways on the front line of these changes. Discussed below are some key provisions employers should be aware of now.
- Changes to Existing Health Plans. The law provides for sweeping changes to all new fully and self-insured group health plans. Plans in existence on March 23, 2010 are exempt from many of the new insurance requirements. However, existing plans must still comply with certain of the new requirements, including:
Interpretive regulations will be issued to provide further explanation regarding the above provisions, with a particular focus on the new dependent care coverage requirements.
- if the plan covers dependents, those dependents must be offered coverage up to age 26, unless the dependents are eligible to enroll in another eligible employee sponsored plan;
- children with pre-existing conditions cannot be excluded from coverage;
- plans and insurers may not place lifetime dollar limits or unreasonable annual limits on essential health benefits; and
- insurers and plans may not rescind coverage except in cases of fraud or intentional misrepresentation.
- Tax Credits for Small Employers. Small employers choosing to offer health coverage to employees may be eligible for a tax credit starting in the 2010 tax year. To be eligible, the small employer must:
The initial credit may be as much as 35 percent of the employer’s premium cost, increasing to 50 percent by 2014. There is a phase down for the maximum credit based on the number of employees and average wages.
- employ 25 or fewer full-time equivalent employees;
- pay average wages of less than $50,000; and
- pay at least 50 percent of employees’ total premiums.
- Penalties for Large Employers. Employers with more than 50 full-time equivalent employees may be subject to an annual penalty of up to $2,000 per employee if the employer fails to offer employee healthcare coverage. This penalty provision is not effective until 2014.
- Breaks and Facilities for Nursing Mothers. Under a less-publicized provision of the new law, employers must provide an unpaid, reasonable break time for an employee to breastfeed or otherwise express breast milk for her nursing child (each time the employee determines that she needs to do so). Employers must provide a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public. Employers with less than 50 employees may be exempted if they can establish that such requirements would impose an undue hardship. Employers must comply with either the new healthcare law or applicable state or local law, whichever provides the greatest protections and benefits to nursing mothers.
- Wellness Programs. The new law also addresses employer wellness programs offering premium discounts or other rewards for participation and provides for grants to fund small employer wellness programs. Before implementing any wellness program, employers should consult with legal counsel regarding the new law’s requirements, as well as other considerations under relevant disability and other anti-discrimination laws.
- Form W-2 Disclosure. Starting Jan. 1, 2011, employers must report on Forms W-2 the total cost of employer-provided group health coverage excluded from an employee’s gross income.
- Automatic Enrollment. Certain large employers with more than 200 full-time equivalent employees will be required to automatically enroll new full-time employees in their lowest-cost health plan option and provide adequate notice and an opportunity to opt-out of coverage. The effective date of this provision has yet to be announced.
Cutting through the confusion of this landmark and complex legislation may prove difficult for many businesses. With extensive experience developing effective employment strategies for business clients, and providing regulatory and litigation counseling to major health insurers, Stradley Ronon's Employment & Labor and Insurance Practice Groups are available to assist clients in understanding and implementing the changes in the new healthcare law.
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