National health care reform became a reality in March of 2010 by the passage of two pieces of federal legislation. The legislation is designed to provide access to health insurance coverage for most Americans by imposing new responsibilities on employers, individuals and insurers, Medicare and Medicaid as well as states. Although the bulk of the legislation becomes effective in 2014, there are several important changes either already effective or that will become effective January 1, 2011 that affect employers and employees alike.
Changes Already Effective
Two changes are already in effect. First, the legislation established a high risk pool to provide insurance coverage for individuals who have been unable to obtain insurance because of pre-existing conditions. Second, federal tax incentives have been created to encourage smaller employers having no more than 25 full-time equivalent employees to provide health coverage to their employees. The federal tax credit offsets up to 35 percent of health insurance costs.
Changes Effective January 1, 2011
The legislation contains several changes that are effective for the first plan year beginning on or after the date that is six months following enactment of the legislation which is January 1, 2011 for calendar year plans. The legislation requires a group health plan to extend coverage to an employee’s children until age 26. This is required even if the child is married, although the plan is not required to cover the child’s children or spouse. The legislation does prohibit an employer from charging a higher premium for adult children. The Tax Code was also changed so that adult children who are receiving health care under a parent’s plan will no longer cause their parents to pay tax on the value of the health care received. Previously, in states like New Hampshire that mandated coverage of adult children, employers had to “impute income” to employees who covered children over the age of 18 who were not federal tax dependents.
The legislation contains numerous provisions impacting the design of employer health plans some of which are effective in 2011. Effective January 1, 2011, expenses for over-the-counter drugs may no longer be reimbursed from a health care flexible spending account, health reimbursement account or health savings account, unless prescribed by a physician. In order to remove cost barriers to utilization, the legislation requires that certain preventive care benefits and immunizations no longer be subject to deductibles and cost-sharing. In order to prevent employers from discriminating in their health insurance coverage, the legislation provides for new non-discrimination rules similar to existing non-discrimination rules that were previously applicable only to self-insured health plans. Employers who previously utilized plan designs with different coverages for highly-compensated employees will now need to closely examine their plan designs and possibly change them.
A number of patient protection rules are effective January 1, 2011. Group health plans will no longer be able to impose lifetime or annual limits on benefits under the plan. Group health plans will also not be able to impose pre-existing condition exclusions on children under age 19. The legislation makes it illegal for a plan or insurer to cancel coverage retroactively, unless the individual has committed fraud or made an intentional misrepresentation. Plans must now allow an individual to select his or her primary care provider; allow a child to designate a pediatrician as his or her primary care physician; and allow a woman to see a health care professional specializing in obstetrics or gynecology without an authorization or referral requirement. Emergency care services must now be covered by health plans without prior authorization regardless of whether or not the provider is in the plan’s network.
The legislation establishes detailed new claims procedures for both internal and external appeals and requires that employees continue to receive coverage during the appeal process. Coverage during the appeals process could require employers and insurers to pay for scheduled procedures and then attempt to recapture the cost if the employee later loses the appeal.
Employers and employees need to start familiarizing themselves with the changes to their health plans made by the 2010 health care legislation. Assuming that the legislation is not repealed or amended by the new Congress, employers and employees will need to stay tuned as more of the new legislation becomes effective.