Government, Courts, and the World of Work

Provisions of the Patient Protection and Affordable Care Act are phased in over a ten-year period but important reforms are required to be implemented before year-end.

The uninsured will receive access to coverage through high-risk pools if they are uninsured because of a pre-existing condition.  But the complexity of that task presents big challenges.

The federal risk pool isn’t allowed to contract with for-profit companies and creating a new non-profit risk pool is a formidable undertaking.  An alternative would be to partner with a state risk pool; 34 states have such programs.

However, New Jersey has no high- risk pool program.  Under the federal law, the high-risk plan must cover at least 65% of the costs of care on average and caps out-of-pocket charges at $5,950 a year for an individual or $11,900 for a family.  It can’t exclude coverage for pre-existing conditions.

Since New Jersey has no high-risk pool, legislation will need to be passed to create one before year-end.  With the focus on cutting the state budget, it is unclear at this time whether there is sufficient attention on this issue.  In fact, the states are required to implement much of the reform, including a purchasing exchange, in 2014.

Also in 2010, insurance companies will be barred from dropping coverage when a person gets sick and also will not be able to deny coverage to children when they have pre-existing conditions.  At present, the insurance carriers read this requirement as covering the costs of children with pre-existing conditions who are already insured.  Regulations will be issued to clarify that insurance companies must accept children with pre-existing conditions who lack insurance.  Litigation is sure to follow to resolve this disagreement.

Small employers can receive tax credits to  purchase insurance in 2010 (see March 19th post) and children can remain on parents’ plans until they are 26 years old.  Implementation is expected within 90-days.

One more impressive step has been taken toward health care insurance reform in the United States.  The requirements of the monumental bill will be phased in over several years and tens of thousands of pages of regulations will be issued over time.  For the time being,  EANJ summaries the major points of interest and responsibility for employers.

Nearly every American will be required to have health care coverage by 2014. Employers that provide health insurance will need to sponsor a “qualified health plan” that will guarantee essential health care benefits.  Employers are required to report annually to the IRS.

Employers with 200 or more employees are required to auto-enroll new full-time employees, with adequate notice and opportunity for an opt-out.  Should an employee opt-out, they will pay a penalty and be required to purchase coverage elsewhere.  The employer must inform all employees of their coverage options, including the existence of a state-operated Insurance Exchange.

Individuals and employers with 100 or fewer employers will be able to purchase health care plans through the Insurance Exchange in 2014, the purpose of which is to require insurers to pool the risk of all enrollees in the Exchange.  Employers with over 100 employees may be allowed to participate in 2017.

Employers with fewer than 25 employees and average annual wages of less than $40,000 are eligible for a sliding scale tax credit to purchase health care insurance.

Americans with incomes up to 400% of the federal poverty level ($88,200 for a family of four) will be eligible for a subsidy to purchse health care insurance.  Employers with more than 50 full-time workers that do not provide health care insurance will be assessed a penalty if employees receive a subsidy to purchase insurance on their own.  Employers with 50 or fewer employees are exempt from this penalty, although part-time workers are included in the calculations, counting two part-timers  as a full-time employee.

The non-coverage penalty is $2,000 per full-time employee, which would be assessed on the company’s entire workforce, not just on the employees that are receiving a subsidy.   In calculating the penalty, the first 30 full-time employees are excluded (ie: a firm with 51 employees that does not provide coverage will pay an amount equal to 51 minus 30, or $42,000, if the government subsidizes employee coverage.)

For employers that do not provide coverage to employees, it is likely that many, if not most, employees will be eligible for a subsidy to purchase health care on their own.  The non-coverage penalty increases with the size of the employer.

There is no penalty for employees in a waiting period, although a waiting period cannot exceed  90 days.

Most employers are required to report health care coverage data, including employee census data, to the U.S. Department of Health and Human Services.

Federal discrimination statutes and the Fair Labor Standards Act are amended.  An employer cannot discriminate because of participation in or the denial of benefits under any health program or activity or because of receiving a government subsidy.  Employees are protected from retaliation for reporting health care fraud.

The FLSA has also been amended for employers with 50 or more employees to require granting an unpaid break to an employee for the purpose of expressing breast milk.  The employer must also provide a private and safe place other than a rest room for this activity unless to do so imposes an undue hardship.

Employer-sponsored wellness programs are encouarged.  Employers can give a participation award up to 30% of the cost of coverage in the form of premium discounts or waiver of co-pays.

All existing health insurance plans would be subject to several reforms. More specifically, the legislation would:

• prohibit lifetime limits and rescissions;
• restrict annual limits;
• place limitations on excessive waiting periods; and
• require certain plans to provide coverage for dependent children up to age 26.

With or without Health Care Reform, employers must learn to drive a better health care bargain, lower health care costs with wellness programs, increase employee engagement and productivity, and comply with HIPAA privacy.

EANJ’s Annual Meeting on May 19th convenes a Blue Ribbon Panel of experts.

Click here for details.