ERISA Impact of Health Care Reform


By Scott Rain

The nation’s health care system has recently undergone some dramatic changes with the recent passage of both the “Patient Protection and Affordable Care Act” (PPACA) and, the “Health Care and Education Reconciliation Act of 2010.” The Patient Protection Act and the Reconciliation Act will affect nearly every element of our health care system: large employers, small employers, individuals, insurers and medical providers. The PPACA will have the most significant impact on employer-sponsored health plans since the enactment of ERISA over 30 years ago.
Medium to large employers, i.e., employers with over 50 employees, currently offering traditional health care coverage will see the fewest yet most significant changes.  Implementation of the legislation rolls out over the next 8 years. The changes include, but are not limited to, the following:
·         If an employer does not offer “minimum essential coverage,” the employer will likely pay an annual fee per employee.
·         If an employer offers health coverage, but an employee does not select it because the required employee contribution is too large and, therefore, the coverage is not affordable, and if the employee is eligible for a federal subsidy for coverage, then the employer may be penalized annually for each of these employees. (The “affordability” test examines whether the employee’s cost exceeds 9.5% of the employee’s household income.)
·         The Patient Protection Act and the Reconciliation Act would impose requirements on the type of health care coverage that must be offered by employers. Requirements such as:
(a)    Covering adult children up to age 26 in some circumstances;
(b)   Elimination of lifetime limits and restrictive annual limits;
(c)    Elimination of preexisting condition exclusions; and
(d)   Required coverage of certain preventative services (e.g., immunizations and infant screenings).
·         As of now, there is some uncertainty about whether some plans will be “grandfathered” from some of these changes because the Reconciliation Act seems to eliminate the “grandfathered” exception for many plans.
·         Certain plan coverage information must be reported to the federal government.
·         Offering retiree health coverage may make an employer eligible for a federal subsidy.
·         Retiree reinsurance program for employers providing health insurance coverage to retirees over the age 55 who are not eligible for Medicare. This program will reimburse employers, or insurers, for 80% of retiree claims between $15,000 and $90,000
Small employers will face many of the same restrictions noted above, however, employers with 50 or fewer employees will not face the per-employee tax for failing to offer coverage. Further, certain small employers with no more than 25 employees and annual wages of less than $50,000 will receive a tax credit based on the employer’s contributions toward plan coverage.
Although it is premature to determine the ultimate impact of the health care reform, it is never too early to take the time to understand the implications and ensure that a plan is in place to address the issues as they arise to allow for the best possible resolution.


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