Health Reform Act The work of Flanagan, Miller, Pagano, and Wood (2010) entitled "Employee Benefit Plan Review -- Meyerowitz, Health care Reform Is Here -- Now What?" states that health care reform laws are expected to have an impact that is significant in nature and this is on the health insurance industry as well as on employee benefit issues as well. The Patient Protection and Affordable Care Act (PPACA), which was then supplemented and modified, less than one week later, by the Health Care and Education Tax Credit Reconciliation Act (HCERA)." (Flanagan, Miller, Pagano, and Wood, 2010) Those two laws are referred to as "Health Care Reform" or "Health Reform Laws." (Flanagan, Miller, Pagano, and Wood, 2010) The Health Reform Laws are reported, while being extremely lengthy and in depth and very detailed to "leave open a host of issues that will have to be resolved either through agency regulations or further action by Congress" and this is stated to include potential technical and conformance of amendments to the Health Reform Laws. Because of this guidance that is definite in nature is not possible in many of the provisional areas of Health Care Reform while simultaneously it is necessary that employers, plan sponsors and employee benefits plans start examining the specifics of Health Care Reform in order to be better prepared for the health care changes that are quite numerous and which are approaching rapidly for implementation. It is important to remember that the Health Reform Laws take effect with the first plan year's beginning following September 23, 2010, however, none of the new coverage mandates is applicable prior to January 1, 2011.

I. Impacts of Health Care Reform on Employers

There are specific impacts that Health Care Reform will have on employers including the aspect of 'Automatic Enrollment' and specifically it is reported that PPACA amended the FLSA to require than an employer of more than 200 employees that are full-time are required to:

(1) enroll new full time employees automatically however, subject to permitted waiting period and must reenroll current employees;

(2) must provide new employees with a notice of such automatic enrollment; and (3) must provide new employees with an opportunity to opt-out of automatic enrollment. In addition, PPACA makes provisions for state payroll laws being preempted as needed to permit such automatic enrollment. However, the date of effectiveness of its provision is unknown since PPACA states only that it is effective "in accordance with regulations" but does not state a specific date for regulations to be issued. (Flanagan, Miller, Pagano, and Wood, 2010

'Mandated Coverage' is also an aspect of importance to the employer in that the Health Reform Laws state the provision that employers who employ at least 50 full time employees are required to offer minimum essential plan coverage or pay a penalty ($2,000 or $3,000 per participant) The penalty amount (not deductible) is reported to be "indexed to the rate of premium growth after 2014, and there is an exception to the 'unaffordable' coverage penalties for situations coverage by 'free choice vouchers." (Flanagan, Miller, Pagano, and Wood, 2010)

'Free Choice Vouchers' must be offered by employers of any size that offer health coverage and pay a portion of the premium beginning January 1, 2014 to qualified employees. Free Choice Vouchers -- Health Reform Law requires that employers of any size offering health coverage and paying a portion of the premium must starting January 1, 2014 "provide free choice vouchers to 'qualified employees.[footnoteRef:1] Failure to offer the voucher does not result in tax or penalty but instead is reported to relieve the employer "of the $3,000 unaffordable-coverage penalty for each employee receiving the voucher. The voucher is stated to be deductible to the employer and tax-excludable to the employee. The amount of the voucher is the dollar value of the employer's contribution to the health plan, or, if multiple plans are offered, the dollar value of the plan with the largest percentage of employer-paid cost. A "qualified employee" can use the voucher as a credit against premiums required for Exchange-provided coverage, and the employee may retain the excess amount if the premium is less than the voucher." (Flanagan, Miller, Pagano, and Wood, 2010) [1: Qualified employees are those who do not participate...

It is reported that specific "conditions and exemptions may apply and if the state law that is applicable would offer greater protections to the employees that those provided under the FLSA amendments, then employers in those states will be required to adhere to state law. Employers are further required by the Health Reform Laws to report "…the value of each employee's health coverage on the employee's W-2." (Flanagan, Miller, Pagano, and Wood, 2010) Simplified Cafeteria plans may be established by employers with under 100 employees and this plan may have "…simplified nondiscrimination rules that would apply if certain contribution and eligibility requirements are met." Flanagan, Miller, Pagano, and Wood, 2010
The Health Reform Laws will not allow employers, following 2012, to take a tax deduction for the amount of any Medical Part D subsidy they receive for providing prescription drug coverage to their retirees.[footnoteRef:2] The Health Reform Laws require that beginning January 1, 2013, the "…employee portion of the Medicare tax increases to 2.35% for wages over $200,000 (for single filers) or $250,000 (for married filing jointly) The employer's withholding liability for any employee is based on wages in excess of $200,000 paid by that employee for the year, without regard to filing status or wages of the employee's spouse." (Flanagan, Miller, Pagano, and Wood, 2010) [2: This will not occur until 2013. accounting rules will require employers to immediately writedown deferred income-tax assets to reflect this loss. (Flanagan, Miller, Pagano and Wood, 2010) ]

The Health Reform Laws are reported to amend the FLSA and to require that employers make the provision for existing employees and for new employees and that the employers give notice to employees of: (1) the availability of the Exchanges[footnoteRef:3] (2) if the employer's share of health plan costs is under 60%, eligibility for certain credits and reductions if purchasing through the Exchange; and (3) if the employee purchases Exchange insurance, the employee will lose the employer contribution toward the value of coverage. (Flanagan, Miller, Pagano, and Wood, 2010) [3: the exchanges are not operational until 2014]

The Health Reform Laws amended the Code to make provision that every insurer and each employer that provides a health plan[footnoteRef:4] are required to report certain health insurance coverage data to the IRS and to each individual covered on a specific IRS provided form.[footnoteRef:5] The PPACA makes a literal requirement of this information however, this is only is the plan is insured. There is stated to be however, "reason to believe that this requirement will also be imposed on self-insured plans."[footnoteRef:6] (Flanagan, Miller, Pagano, and Wood, 2010) [4: This includes grandfathered plans] [5: This includes the portion of the premium the employer pays.] [6: Under a separate amendment to the Code some employers will be required to file an additional information return with the IRS. This information must also be provided to the full-time employee if the required employee contribution exceeds 8% of the wages the employer pays to that employee. While these two reporting requirements are separate the IRS may combine the two reports. ]

The Health Reform laws further amend the Public Health Service Act to require issuers of health insurance to pay their customers rebates "if their medical loss ratios fall below 80%[footnoteRef:7] "averaged over three years." (Flanagan, Miller, Pagano, and Wood, 2010) These percentages may be increased by states however, this is subject to be adjusted by HHS. While employer plans are affected by this increase, self-insured plans will not be affected and it remains unclear whether the rebates will be paid to the plan, individual participants or to the employer. (Flanagan, Miller, Pagano, and Wood, 2010, paraphrased) [footnoteRef:8] [7: In some cases this is set at 85%. ] [8: "This provision generally applies to plan years beginning on or after September 23, 2010, but it appears to apply to grandfathered plans (which are described in more detail below) for plan years beginning on or after March 23, 2010, i.e., the date of enactment of PPACA. Because this results in an earlier effective date for grandfathered plansthan for nongrandfathered plans, it is possible that this effective date may be altered by further guidanceand/or statutory changes." ( ) ]

The Health Reform Laws are stated to "extend the same nondiscrimination rules currently applicable only to self-insured plans to insured group health plans. These rules prevent plans from providing significantly better coverage to higher-paid employees than to other employees. This provision has a separate $100-per-day penalty per affected participant, and the provision does not apply…