Small Group Employers and Health Care Reform Updates

The Washington Post (6/15, Hilzenrath, Aizenman) reports, "If you like your health plan, you can keep it. That's what President Obama promised during the long months of debate over health-care reform," and the new rules issued on Monday are meant "to fulfill that promise." The Post adds, "The administration estimates that many plans will end up changing, prompting Republicans to accuse the president of breaking his word."
According to the AP (6/15, Alonso-Zaldivar), "The Obama administration had a message Monday for employers who want to keep federal bureaucrats from rewriting the rules for their company medical plans: Don't jack up costs for workers, and you won't have to worry about interference from the new health care law." HHS Secretary Kathleen Sebelius, who made the announcement, said, "What we don't want is a massive shift of costs to employees." The AP points out that this "new regulation that spells out how health plans that predate the health overhaul law can avoid its full impact."
For instance, the "regulations empower the administration to revoke the so-called grandfather status of businesses that shift 'significant' new burdens onto employees -- a considerable penalty that would subject those plans to all the consumer protections in the Democrats' new healthcare reform law," The Hill (6/15, Lillis) notes. Under these new rules, Sebelius said, "employers can make 'routine and modest' adjustments to their premium, deductible and co-pay requirements," although "'significant' cost hikes or benefit cuts would cost them their exempted status. The goal is to ensure that grandfathered plans 'don't use this additional flexibility to take advantage of their customers,'" she added.
Kaiser Health News (6/15, Galewitz, Carey) reports, "Business groups gave mixed reviews Monday to new Obama administration rules limiting how much employers and insurers can change their health insurance plans -- while remaining exempt from potentially costly new consumer protections." Notably, "consumer groups praised the regulations, saying the rules would ensure that millions of Americans receive the full benefits of the new health-overhaul law." In contrast, "business groups that opposed the enactment of the health overhaul law denounced the regulation." Randel K. Johnson, a senior vice president at the U.S. Chamber of Commerce, stated, "Once grandfathered status is lost, employers will be forced to follow a number of expensive new insurance rules -- which will increase costs for employers and employees, threatening the coverage Americans currently have."
Reuters (6/15, Charles) notes that investors and analysts are paying close attention to these new rules, as well as to the others being issued as health reform is being implemented, in order to determine their impact on the health insurance industry. The USA Today (6/15, Kiely) "The Oval" blog also covers the story.

Federal Government Cutting Funds to Medicare Program

The States are all reporting in and on the record as saying that cuts to medicare funding will help cause an unfavorable chain of events! Here is what Senate Majority Leader is doing about it:

Reid Working To Restore Medicaid Funds In "Extenders" Bill. CQ Today (6/8, Rubin, subscription required) reports, "Senate Majority Leader Harry Reid wants to undo a cut in aid to states that the House made to a tax and benefits bill that the Senate is scheduled to consider this week." Notably, "the House passed the bill (HR 4213) last month after paring it to satisfy members concerned about its cost. Reid, D-Nev., said Monday that he wants to put back billions of dollars of funding designed to help states cope with higher Medicaid costs during the recession." This "bill would also revive expired tax breaks, extend expanded unemployment insurance through Nov. 30 and prevent a scheduled payment cut to doctors under Medicare through 2011."

Patient Lifestyles increase Health Care Services Usage and In Turn Drive Costs Up

 Patient lifestyles — Increasing numbers of patients who are challenged by obesity, smoking, drug abuse, poor nutrition and physical inactivity contribute to an increase in the use of, and therefore the cost of, health care services.8 These preventable risk factors9 can also contribute to chronic diseases, which account for 75% of the money spent on health care in the U.S. each year.10
 Obesity — The percentage of obese adults now exceeds the percentage of healthy weight adults.
 Tobacco use — One in five adults smoke.
 Sedentary lifestyle — Less than one-third of adults report getting regular exercise.
 Poor nutrition — One in six adults has high cholesterol

-Anthem Blue Cross

COBRA SUBSIDIES CONTINUE

Congress Agrees To Extend Jobless Benefits, Delay Medicare Payment Cuts.
The AP (5/21, Ohlemacher) reports, "Lawmakers have agreed on legislation to extend expanded jobless benefits for the long-term unemployed through the end of the year. Laid-off workers would also continue to get subsidies to buy health insurance through the COBRA program." The measure "would be paid for, in part, by tax increases on investment managers and some US-based multinational companies." The AP explains that "lawmakers had been negotiating a provision that would spare doctors from a scheduled 21 percent cut in Medicare payments. They agreed to delay the cuts until 2014, when they will have to address the issue again." The AP notes, "The House could vote on the bill as early as Friday, with the Senate voting next week."

Rules released for Adult Children On Parent's Plan

The New York Times -May. 11: Washington -

The White House issued rules on Monday allowing young adults to remain covered by their parents' health insurance policies up to age 26.The promise of such coverage has attracted great interest. Employers and insurers say they have been flooded with inquiries.Under the rules, an employer-sponsored health plan or a company selling individual insurance policies must offer coverage to subscribers' children up to the age of 26, regardless of whether a child lives with his or her parents, attends college, is a dependent for income-tax purposes or receives financial support from the parents.

Coverage is to be available to married and unmarried children alike.Kathleen Sebelius, the secretary of health and human services, estimated that 1.2 million people would gain coverage because of the new requirement.The health department estimated that the average cost to cover each new enrollee would be $3,380 in 2011, $3,500 in 2012 and $3,690 in 2013.The cost will be borne by all families with employer-sponsored insurance, with family premiums expected to rise by about 1 percent, the government said.

The rules generally take effect for insurance plan-years that begin on or after Sept. 23 this year.However, the rules allow an exception for employer-sponsored health plans that were in existence on March 23, when President Obama signed the health care bill. In general, such health plans can exclude adult children of workers until 2014 if the children have access to insurance through another employer-sponsored health plan. That might occur, for example, if a 24-year-old child is working for a business that offers health benefits to employees.

Many insurance companies have voluntarily agreed to provide dependent coverage immediately, without waiting for the requirement to take effect in September 2010 or in January 2011, when many companies renew their coverage.

On Monday, the White House urged employers to follow the example of insurance companies and extend coverage to their employees' adult children up to age 26 immediately.Under the rules, insurers and employers must provide young adults with a 30-day opportunity to enroll in their parents' coverage. Terms of coverage cannot vary based on the age of young adults under 26. Thus, the White House said, an insurer violates the law if it imposes a surcharge on premiums for children 19 to 25.

The administration offered another example, involving a company that covers employees' children up to age 19, or up to 23 if the children are full-time students. If a worker's child lost coverage on turning 23, the company must notify the worker that the child is again eligible for coverage starting Jan. 1, 2011.Aaron B. Smith, executive director of Young Invincibles, an organization for people 18 to 34, welcomed the new rules, saying they would help secure affordable coverage for college graduates and other young adults looking for jobs.But James P. Gelfand, director of health policy at the United States Chamber of Commerce, said: 'Regulatory agencies may have stretched their authority in writing these rules.

Adult children can live 2,000 miles away from their parents, be married and not have spoken to Mom and Dad in a year, and they could still be added to the parents' employer-sponsored health plan just like any other child.'Douglas H. Shulman, the commissioner of internal revenue, said that coverage provided to an employee's adult children would generally be tax-free to the employee.

Tax Credit for Small Business

"New for 2010: Tax credit for small businesses

Good news for small businesses: The IRS recently released materials for those wishing to claim the small business health care tax credit for 2010. A provision of the Patient Protection and Affordable Care Act (PPACA), this tax credit is designed to encourage small businesses to offer health care coverage for the first time or enable them to maintain the coverage they already have. It will likely provide assistance to about four million small businesses.

If your business qualifies, this tax credit could be a significant benefit for your company. In 2010, the maximum credit is 35% of employer-paid premiums; for tax-exempt organizations, the maximum is 25% of employer-paid premiums. In 2014, the maximum increases to 50% of employer-paid premiums; for tax-exempt organizations, it increases to 35% of employer-paid premiums. To qualify for the credit, your company must not employ more than 25 employees and the average annual compensation of those employees cannot exceed $50,000.

Here's a look at how a business with 10 employees could benefit:
Wages: $250,000 total, or $25,000 per worker
Employee health care costs: $70,000
2010 Tax Credit: $24,500 (35% credit)
2014 Tax Credit: $35,000 (50% credit)
For more examples, click here.

While there is no formal guidance yet, the IRS has provided educational resources for small businesses wishing to claim the credit this year. Click here to see the following information:
Eligibility rules
Amount of credit
Three simple steps to determine a small group's eligibility
More tax credit scenarios
FAQs
You can expect more health care reform updates like this one throughout the year. We're eager to get information out to you as soon as possible, so your business can get the most from the new legislation. As always, please contact your agent or account representative with questions or for more information." -Anthem Blue Cross Health Care Reform Update April 2010

This content is provided solely for informational purposes: it is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.

Anthem Blue Cross offers dependent coverage extension ahead of the provision date!

To help these dependents, we're working in collaboration with the US Department of Health and Human Services and state regulators to allow young men and women to remain on their parents' policies even before this health care reform provision takes effect. Beginning June 1, we will continue to provide health benefits to dependents who - because of their age, student status or other factors - would lose coverage during the gap period between June 1, 2010, and the September 23, 2010, effective date. This extension of coverage will not be retroactive; however, dependents that aged out before June 1, 2010, can be added back onto a parent's policy during your group's next open enrollment period on or after September 23 in accordance with the new law.

~Anthem Blue Cross Health Care Reform Update April 2010