On March 25, 2010, Congress passed H.R. 4872, the Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act”). The Reconciliation Act amends the Patient Protection and Affordable Care Act (“PPACA”) which became law on March 23, 2010. President Obama signed the Reconciliation Act into law on March 30, 2010.
The Reconciliation Act will be generally effective once the President signs it. However, the provisions of the Reconciliation Act, like the PPACA, have various effective dates. Certain provisions are effective upon enactment of the Reconciliation Act; others will not become effective until as late as 2018. This alert is a general overview of certain provisions of the Reconciliation Act.
Summary of Changes Affecting Group Health Plans
The Reconciliation Act was passed to address concerns that the members of the House of Representatives had with the PPACA, but did not believe they could address through the normal legislative process because of the Senate Democrats’ loss of a filibuster-proof majority. Below is Michael Best’s table summarizing the PPACA (including changes introduced by the Reconciliation Act), as the PPACA affects employers and their group health plans.
With regard to employer-sponsored group health plans, the Reconciliation Act:
Removes the requirement that an adult child must be unmarried to qualify for dependent coverage under a group health plan.
Excludes from taxation amounts paid by employers to reimburse coverage for adult children who have not attained age 27 during such taxable year.
Delays effective date on limit on flexible spending account contributions to $2,500 until taxable years beginning after December 31, 2012.
Amends the calculation of the penalties for a large employer’s failure to provide minimum essential coverage to its employees from $750 per year to up to $2,000 per year, but also reduces the number of employees used to determine the penalty by 30. Amends the calculation of the penalty for employers who offer minimum essential coverage but have employees who fail to enroll in such coverage.
Eliminates penalty for large employers with a waiting period exceeding 60 days (but does not remove the restriction on waiting periods over 90 days).
- Delays the effective date of the “Cadillac” tax (40%) on the excess benefit from 2013 to 2018 and increases the annual limits of $8,500 for individual coverage and $23,000 for family coverage to $10,200 and $27,500, respectively.
- Applies the following plan requirements to plans grandfathered under the PPACA:
- Excessive waiting periods: Effective for plan years beginning on or after January 1, 2014, grandfathered plans cannot apply any waiting period that exceeds 90 days.
- Lifetime and annual limits: Effective for plan years beginning on or after 6 months after the date of enactment, grandfathered plans may not apply annual or lifetime limits on the dollar value of benefits for the participant or beneficiary.
- Rescission of coverage: Effective for plan years beginning on or after 6 months after the date of enactment, a grandfathered plan may not rescind coverage unless the participant has defrauded or intentionally misrepresented a material fact to the plan and the plan provides that such offenses are grounds for rescinding coverage.
- Extension of dependent coverage: Effective for plan years beginning on or after 6 months following the date of enactment, a grandfathered plan must offer dependent coverage to a participant’s adult child until such child turns 26 years of age. However, a grandfathered plan need not provide dependent coverage to an adult child for plan years beginning prior to January 1, 2014 if the child is eligible to enroll in an eligible employer-sponsored health plan (other than the grandfathered plan). The Reconciliation Act also provides a tax change that will be helpful to many employers and employees: the value of employer-provided coverage to older dependents (through age 26) will not be taxable.
A copy of the Reconciliation Act can be found at: http://www.rules.house.gov/111/LegText/111_snamnd2_hr1586.pdf
The attached table summarizes many (but not all) of the changes the PPACA and the Reconciliation Act introduced. The table generally focuses on the changes for medium and large employers.
View the Summary of Changes Affecting Large Employers Under the PPACA - Amended.
Michael Best has diligently followed the government’s health care reform efforts, and will continue to keep our clients informed of changes affecting group health plans and group health plan administration. If you have any questions regarding the health care reform bills or its affect on your group health plan, please contact a member of the Employee Benefits Group or your Michael Best attorney.