Lockton | Market Update - Health & Welfare

U.S. Benefits - Health & Welfare - Healthcare Reform

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The Health Reform Train Arrives at Last

Health reform is now law with the passage of the main bill and the tag-along “reconciliation” or “fix-it” measure that President Obama has signed. U.S. Healthcare

What’s in the Health Reform Legislation?

The main health reform law includes the following key requirements (effective in 2014, except as noted below):

All Americans must buy health insurance; the bill includes large federal subsidies to those without employer-sponsored coverage if their household incomes do not exceed four times the poverty level.
Employers with at least 50 full-time employees must provide qualifying and affordable health coverage to full-time employees or risk paying a “free rider” penalty; the penalty could be as large as $2,000 times the total number of the employer’s full-time employees. Coverage will not be considered “affordable” if employees must pay more than 9.5 percent of their household income for it. “Qualifying coverage” means coverage designed to pay at least 60 percent of the enrollee’s covered medical costs.
Employers that offer a health plan, but ask full-time employees to pay between 8 and 9.5 percent of their household income for it, must offer most of these employees the choice to decline coverage and accept a cash voucher from the employer, to help the employee purchase an individual insurance policy in new “insurance exchanges” that states or the federal government will establish.
Beginning in 2018, if the total value of employee- and employer-paid health benefits exceeds $10,200 for single coverage e or $27,500 for family coverage, the excess value will be taxed at 40 percent.
Health flexible spending account benefits are capped at $2,500 beginning in 2013.

There are also more immediate provisions that require action by most employers by the beginning of their plan’s fiscal year that commences after September of this year:

Pre-Existing Conditions—The law abolishes pre-existing condition restrictions.

No Lifetime Dollar Limit on Benefit—Lifetime dollar limits on benefits are no longer allowed under the new law. This leaves limited medical plans or “mini-med” plans with an uncertain future. Many employers will consider elimination of retiree medical programs as a result. Annual dollar limits on “essential services” (to be defined later by the federal government) are banned after 2013.

Adult Child Coverage—Benefit plans must offer health coverage for adult children up to age 26 regardless of student or marital status. This may increase costs for some employers.

No Over-the-Counter Rx Reimbursement—Health flexible spending accounts and health reimbursement arrangements may not reimburse nonprescribed drugs, and health savings accounts may not treat reimbursement for such drugs as nontaxable (this change applies beginning in 2011).

What’s Next for You?

As we have said on our recent webinars, your first step is to take a deep breath. There is a lot of information to absorb in this new law. We expect specific guidance on the law in the coming weeks, and we are still early in the process. Lockton will continue to provide streams of information, so you can get practical insights into the issues that matter most for your business.

You can listen and watch our recent webinar that reviews, in detail, the key components of the new health reform law. At the end, you can also hear answers to questions from others like you.

For a strategic look at the dynamics of the market, you can also see our recent Industry Report from Lockton’s Eric Hirschberg, Ken Grant, and John Vargas.

In May, Lockton will host a pair of National Health Reform Summit simulcasts. Lockton’s Health Reform Advisory Practice compliance attorneys, actuaries, physicians, and other professionals will offer clear direction and practical advice about what you need to do to address the health reform requirements within your business.

Click here for additional information regarding the National Health Reform Summit.

Please contact your Lockton Representative for further information regarding any information contained in this market update.

	Ed Fensholt Senior Vice President Compliance Services Lockton Health Reform Advisory Practice Tel: 816.960.9775 E-mail: efensholt@lockton.com
	Mark Holloway Senior Vice President Co-Director of Compliance Lockton Health Reform Advisory Practice Tel: 816.960.9567 E-mail: mholloway@lockton.com