(This post was provided by the law firm Bernstein Shur)
Last week Congress passed H.R. 4872, the Health Care and Education Reconciliation Act of 2010, which will result in a massive overhaul of U.S. health care. The new law will have a significant effect on taxpayers, employers, and the health care industry. The provisions affecting employers will be implemented in stages between now and 2018. Appearing below is a list of the date on which key provisions becomes effective:
- The date the new law is signed by President Obama: Employees will be able to cover dependents under the employer’s health plan up to (and including) age 26, and coverage for such dependents under an employer’s group health plan will qualify as a nontaxable benefit.
- Beginning of employer’s 2010 tax year: So-called small employers will receive a tax credit for amounts they pay for employee health coverage. Small employers are defined as employers who have 25 or fewer full-time employees who have wages averaging no more than $50,000 per year. The amount of the tax credit varies on a sliding scale. Employers with 10 or fewer employees who have wages averaging no more than $25,000 per year will receive the full credit of 35%.
- January 1, 2011: Purchase of over-the-counter medications cannot be reimbursed from health reimbursement accounts (“HRAs”), health savings accounts (“HSAs”), medical care flexible spending accounts (“FSAs”), or Archer medical savings accounts (“MSAs”).
- Beginning of employer’s 2011 tax year: Employers must disclose the value of the health care benefit provided by them on each employee’s Form W-2. Starting in tax year 2013, other reporting requirements will apply to employers who self insure.
- January 1, 2013: Pre-tax contributions to medical care flexible spending accounts will be limited to $2,500 per year.
- January 1, 2013: The deduction for employers who receive Medicare Part D retiree drug subsidy payments will be eliminated.
- January 1, 2014: The so-called pay-or-play provision will go into effect. This means that employers with 50 or more full-time employees will be required either to offer affordable “minimum essential coverage” to all full-time employees and must pay at least 60% of the cost, or the employer must pay an excise tax that is determined using the following formula: the number of full-time employees over a 30 employee threshold, multiplied by $2,000 divided by 12. The excise tax is paid monthly.
- January 1, 2014: Employers will be required to provide “free choice vouchers” to employees who are not covered under the employer’s health plan and who meet certain qualifications. Employees will be able to use the vouchers towards the purchase of health coverage on the Insurance Exchange. The amount of the voucher will be equal to the amount the employer would have paid towards the employee’s coverage if the employee were to participate in the employer’s plan. To qualify for a voucher, the employee must meet the following income limitations:
- If the employee were to participate in the employer’s health plan, the required employer contribution would be between 8% and 9.5% of the employee’s household income; and
- Total household income of employee and family is at or below 400% of the poverty line.
- January 1, 2018: The so-called “Cadillac plan” provisions go in to effect. Employers and insurers will pay a 40% nondeductible excise tax for Cadillac plans, which is any employer-sponsored health plan whose annual premium exceeds $10,200 for single coverage and $27,500 for family coverage. The 40% excise tax will apply only to the portion of the plan’s cost that exceeds these dollar amounts.