The $940 billion healthcare reform law is projected to extend insurance coverage to roughly 32 million additional Americans. Major coverage expansion begins in 2014. Most Americans will now be required to have health insurance or pay a fine. Larger employers will be required to provide coverage or risk financial penalties. Certain small employers will be provided a credit to offset the costs of providing coverage. Total individual out-of-pocket expenses will be capped, and insurers will no longer have the ability to deny coverage based on gender or pre-existing conditions. Insurance subsidies for middle- and lower-income families will be expanded. No government-run insurance plan was included in the legislation.

Actually there are. In the component that covers preventive care with no cost sharing, there are a few items regarding dental for children, including:

• Fluoride chemoprevention supplements for children without fluoride in their water source
• Oral health risk assessments for young children

Here's a quick summary of some of the more important provisions that go into effect September 23, 2010. Remember, the provisions go into effect at the start of a new plan year following the Sept. 23 date.

• Dependent coverage for eligible dependents extended up to age 26
• Restrictions of rescissions other than for fraud or intentional misrepresentation of an important fact on applications
• No pre-existing condition exclusion for children under age 19
• No lifetime dollar limits on health benefits and restricted annual dollar limits
• Ban on discrimination in favor of highly compensated workers (not applicable to grandfathered plans)
• Preventive services with no cost-sharing (not applicable to grandfathered plans)
• Right to designate a primary care provider and access to emergency services, pediatricians and OB/GYNs (not applicable to grandfathered plans)

Under the law:

• Plans have to provide a comprehensive set of services, cover at least 60% of the actuarial value of the covered benefits and limit annual cost-sharing to the current health savings account (HSA) limits ($5,950/individual and $11,900/family in 2010), effective January 1, 2014.
• Dependent coverage will be available for children up to age 26 for all individual and group policies, effective six months following enactment.
• Individual and group health plans are prohibited from placing lifetime limits on the dollar value of coverage, effective six months following enactment.
• Carriers are prohibited from rescinding coverage except in cases of fraud, effective six months following enactment.
• Individual and group health plans cannot place annual limits on the dollar value of coverage, as determined by HHS.
• Individual and group health plans cannot impose pre-existing condition exclusions, effective January 1, 2014.
• Guarantee issue and renewability are required and premium rating variation must only be based on age (limited to 3 to 1 ratio), premium rating area, family composition and tobacco use (limited to 1.5. to 1 ratio), effective January 1, 2014.
• Deductibles for health plans in the small group market are limited to $2,000 for individuals and $4,000 for families unless contributions are offered that offset deductible amounts above these limits, effective January 1, 2014.
• Employers cannot have a waiting period for coverage of more than 90 days, effective January 1, 2014.

The Patient Protection and Affordable Care Act, more commonly known as healthcare reform, requires group health plans that provide dependent coverage of children to continue to make such coverage available for an adult child until age 26. The law also amends the Internal Revenue Code to give certain favorable tax treatment to coverage for adult children. The IRS recently published guidance addressing questions about tax treatment of such coverage.

In Notice 2010-38, the IRS stated that employers that offer cafeteria plans can allow employees to begin making pre-tax contributions immediately for health coverage for dependents who are under 27, even if the changes to the plan have not yet been made on paper.

The IRS said the new law allows employers with cafeteria plans to permit employees to begin making pre-tax contributions to pay for this expanded benefit. Cafeteria plans allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits. Employees who have children who will not have reached age 27 by the end of the year are eligible for the new tax benefit from March 30, 2010, forward, if the children are already covered under the employer's plan or are added to the employer's plan at any time.

The notice said that employers with cafeteria plans may permit employees to immediately make pre-tax salary reduction contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. Plan sponsors then have until the end of 2010 to amend their cafeteria plan language to incorporate the change.

To clarify, the distinction in the provisions is that the "to age 26" is the requirement that dependent children up to age 26 have to be eligible for coverage under a group health plan. The "under 27" provision has to do with the definition of dependent for purposes determining if the cost of coverage of the dependent is tax free. It is not a coverage mandate. There is no requirement to cover adult children over age 26, but if they are covered, the coverage of those under age 27 is eligible for tax exemption.

Under the healthcare reform package, certain employer-sponsored group health plans must extend their dependent coverage to employees' children up to age 26 (the "Age 26 Requirement"). Plan sponsors must implement this change effective no later than the first day of the first plan year which begins on or after September 23, 2010 (January 1, 2011 for calendar year plans). On May 10, 2010, the U.S. Departments of Health & Human Services (HHS), Labor (DOL) and Treasury issued the first interim final regulations on the Age 26 Requirement. Those regulations provide the following guidance:

• Only plans providing dependent coverage of children are required to adopt the Age 26 Requirement. If a plan does not offer dependent coverage the plan need not cover an employee's children.
• Plans cannot impose requirements on the child for these purposes, such as being a full-time student, being the employee's tax-dependent or being single. However, until 2014, grandfathered plans (i.e., plans already effective prior to March 23, 20101) that are not materially changed, under standards not yet established, may deny coverage to a child who is eligible for coverage under another group health plan (other than a plan of the other parent). Also, a child is not required to be covered unless the employee-parent is covered.
• Plans are not required to cover a child's spouse or child.
• Plan premiums and coverage must be uniform, regardless of age, for all children not yet 26. A child under age 26 must be given a 30-day opportunity to enroll in the parent's health plan effective as of the effective date of the Age 26 Requirement. A special advance notice of this opportunity must be given prior to the effective date.
• All coverage options must be offered to a child entering the plan. A covered parent must also be offered the opportunity to elect the same coverage at the same time.
• A child will be eligible for COBRA (perhaps for a second time) upon being dropped from the plan at age 26.

Several of the reforms, such as the ban and limitations on lifetime and annual limits, go into effect "for plan years beginning on or after the date that is 6 months after the date of enactment." The date that is six months after enactment is September 23, 2010, so the answer depends on when the new plan year starts. If a new plan year starts January 1, 2011, any changes that are required under this effective date provision of the law must made for the plan beginning on January 1, 2011. If, however, a new plan year starts before September 23, 2010 - for example, on July 1, 2010 - such a plan must adopt the relevant changes starting July 1, 2011.

The plan year is irrelevant - the over-the-counter restriction applies starting January 1, 2011 for money contributed to the account after that date. Administrators may want to consider informing participants of the change now to give them an opportunity to use their funds to purchase non-prescribed over-the-counter drugs before the new restriction goes into effect.

Yes. U.S. citizens and legal residents are required to have health insurance or pay a fine. Some are exempted from the requirement due to financial hardship or religious reasons. The penalty for not having coverage is $95 in 2014 or 1% of an individual's income, whichever is higher. The penalty rises in 2016 to $695, or 2.5% of income.

No. Employees can join their spouse's coverage or purchase coverage through the exchange or the individual market. However, as of 2014 when individual responsibility requirements take effect, if an employee refuses employer coverage and doesn't obtain coverage on his or her own, the employee will be subject to penalty.

If an employee waives coverage for any reason other than that it doesn't meet the affordability test, s/he can still purchase coverage through the exchange but will not be eligible for the refundable tax credit.

If an employee's share of the premium for employer-sponsored coverage meets the law's definition of unaffordable (i.e., it exceeds 9.5% of their adjusted gross income), s/he can purchase coverage through the exchange. They can't receive a tax credit unless the employer plan does not have an actuarial value of at least 60 percent (as defined by DHHS's essential benefits package) or is deemed unaffordable. The exchange will determine if the coverage is unaffordable for the employee.

At this point we see nothing in the law that changes a qualifying event and can assume that a group could keep their open enrollment period - and if someone waives coverage they would have to wait until the next open enrollment period to get the employer coverage (unless there's a qualifying event).

This question does bring up a good point, however. Since there are no pre-exisitng conditions/medical underwriting, even on individual plans, beginning in 2014 an emplyee could decide to waive coverage, pay the penalty and the apply for an individual policy down the road if he/she gets sick. This is an issue insurance carriers are upset about. They believe the penalties aren't severe enough, and this "adverse selection" issue will become a problem and drive up costs. In other words, carriers fear healthy folks may forgo coverage until they have a real medical issue and then go to an exchange to buy individual coverage when needed. The penalties do increase over time - but still not nearly as high compared to the premium they'd pay to take coverage.

There is nothing per se wrong with the offer of an HMO to CA employees and a PPO for out-of-state employees. Out-of-state employees will most likely not want to elect the HMO because they will not be able to access the providers. CA employees will prefer the richer benefits of the HMO. If the two options are separate plans, there will be no discrimination issue. Hopefully, IRS will be providing guidance on when election options can be treated as separate plans for nondiscrimination testing. In addition, even if the two options are treated as a single plan, there would not be a discrimination issue unless the highly compensated individuals were primarily located in CA or out-of-state. Whether there is discrimination in the operation of a plan will depend on all of the facts and circumstances in each case. With many unanswered questions about how the rules against discrimination in favor of the highly compensated will apply to insured plans, IRS will be issuing guidance and allowing time for employers to adapt before initiating enforcement.

Pursuant to the Patient Protection & Affordable Care Act, Employers Are Required to Provide Employees With the Four Written Notices Below. (The sample language has been issued and approved by the Department of Labor and can be customized in the [Insert] sections.) The Notices Must Be Provided No Later Than the First Day of the First Plan Year Beginning On or After September 23, 2010. Note: The Notices May Be Included With Other Enrollment Materials That a Plan Distributes, Provided the Statements Are Prominent.

To: All Employees
From: [Insert company name]
Date: [Insert date]
Re: Employee Notice - Lifetime Limits
Employee Notice - To Age 26 Requirement
Employee Notice - Designation of a Primary Care Provider
Employee Notice - Grandfathered Plans

Employee Notice - Lifetime Limits

The lifetime limit on the dollar value of benefits under [Insert name of group health plan or health insurance issuer] no longer applies. Individuals whose coverage ended by reason of reaching a lifetime limit under the plan are eligible to enroll in the plan. Individuals have 30 days from the date of this notice to request enrollment. For more information contact [insert plan administrator or issuer] at [insert contact information].

Employee Notice - To Age 26 Requirement

Individuals whose coverage ended or who were denied coverage (or were not eligible for coverage) because the availability of dependent coverage of children ended before attainment of age 26 are eligible to enroll in [Insert name of group health plan or health insurance coverage]. Individuals may request enrollment for such children for 30 days from the date of notice. Enrollment will be effective retroactively to [insert date that is the first day of the first plan year beginning on or after September 23, 2010.] For more information contact the [insert plan administrator or issuer] at [insert contact information].

Employee Notice - Designation of a Primary Care Provider

[Name of group health plan or health insurance issuer] generally [requires/allows] the designation of a primary care provider. You have the right to designate any primary care provider who participates in our network and who is available to accept you or your family members. [If the plan or health insurance coverage designates a primary care provider automatically, insert: Until you make this designation, [name of group health plan or health insurance issuer] designates one for you. For information on how to select a primary care provider, and for a list of the participating primary care providers, contact the [plan administrator or issuer] at [insert contact information].
For children, you may designate a pediatrician as the primary care provider.

You do not need prior authorization from [name of group health plan or issuer] or from any other person (including a primary care provider) in order to obtain access to obstetrical or gynecological care from a health care professional in our network who specializes in obstetrics or gynecology. The health care professional, however, may be required to comply with certain procedures, including obtaining prior authorization for certain services, following a pre-approved treatment plan, or procedures for making referrals. For a list of participating health care professionals who specialize in obstetrics or gynecology, contact the [plan administrator or issuer] at [insert contact information].

Employee Notice - Grandfathered Plans

[Insert group health plan or health insurance issuer] believes this plan or coverage is a "grandfathered health plan" under the Patient Protection and Affordable Care Act. As permitted by the act, a grandfathered health plan can preserve certain basic health coverage that was already in effect when the law was enacted. Being a grandfathered plan means that your plan or policy may not include certain consumer protections of the act that apply to other plans (for example, the requirement for the provision of preventive health services without any cost sharing). However, grandfathered plans must comply with certain other consumer protections in the act (for example, the elimination of lifetime limits on benefits).

Questions regarding which protections apply and which protections do not apply to a grandfathered health plan and what might cause a plan to change from grandfathered status can be directed to the plan administrator at [insert contact information]. For ERISA plans, you may also contact the Employee Benefits Security Administration, U.S. Department of Labor at 1-866-444-3272 or www.dol.gov/ebsa/healthreform . This website has a table summarizing which protections do and do not apply to grandfathered health plans. You may also contact the U.S. Department of Health and Human Services at www.healthreform.gov.

Effective January 1, 2014, employers with more than 50 employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit are assessed a fee of $2,000 per full-time employee, excluding the first 30 employees. Employers with more than 50 employees that offer coverage but have at least one full-time employee receiving a premium tax credit will pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each full-time employee, excluding the first 30 full-time employees.

Employers with more than 200 employees must automatically enroll employees into health insurance plans offered by the employer. Employees may opt out of coverage.

Effective January 1, 2014, employers that offer coverage to their employees must provide a free choice voucher to employees with incomes less than 400% of the federal poverty level (FPL) whose share of the premium exceeds 8% but is less than 9.8% of their income and who choose to enroll in a plan in the insurance 'exchange.' The voucher amount is equal to what the employer would have paid to provide coverage to the employee under the employer's plan and will be used to offset the premium costs for the plan in which the employee is enrolled. Employers providing free choice vouchers will not be subject to penalties for employees that receive premium credits in the exchange.

While some sections of the Patient Protection and Affordable Care Act have prospective effective dates, the section amending the FLSA did not have any stated specific effective date. Absent an expressly stated effective date in federal legislation, a law or amendment to the law takes effect immediately. Thus, the provision regarding nursing took effect upon President Obama's signature on March 23, 2010.

The Patient Protection and Affordable Care Act amends the Fair Labor Standards Act (29 U.S.C. Sec. 207) by requiring that employers provide a reasonable break time for an employee to express breast milk for her nursing child for 1 year after the child's birth each time the employee has a need to express milk. Employers must now provide a place, other than a bathroom, that is shielded from view and free from intrusion from co-workers and the public, which may be used by an employee to express breast milk. The law does not require employers to pay employees for such break time.

The requirements do not apply to employers with less than 50 employees if such requirements would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature or structure of the employer's business. These provisions do not preempt a state law that provides greater protections to employees.

Yes. Every employer who files more than 250 W-2s will be required to report the value of the health insurance benefit for each employee on his or her annual W-2 beginning in 2012. This is to determine whether an individual has coverage as required and if his or her health plan will be subject to the excise tax.

1-100 for the market reform starting 2014. But for the employer responsibility requirements it is 50 employees or less, with part-time workers taken into the calculation on an aggregate basis.

Detailed information regarding the issues raised is available on HR.BLR.com . Some of the relevant portions are highlighted below:

Nondiscrimination Rules

A cafeteria plan must not discriminate in favor of highly compensated individuals (HCIs) as to eligibility for benefits, discriminate in favor of highly compensated participants (HCPs) as to contributions and benefits or discriminate in favor of key employees as to utilization of benefits. If the plan discriminates, the benefits of these employees are included in their taxable income.

Definitions. A "highly compensated individual" is any employee who, for the prior year (or the current year for a new employee), is an officer, 5 percent shareholder or employee whose compensation exceeds the IRC Sec. 414(q)(1)(B) amount (currently $100,000) and is in the top-paid group of employees. A "highly compensated participant" is a HCI who is eligible to participate in the plan. Statutory nontaxable benefits are qualified benefits excludable from gross income plus group term life insurance exceeding $50,000. Total benefits are qualified benefits plus taxable benefits.

Eligibility test rules. The benefit eligibility test requires that a cafeteria plan not discriminate in favor of HCIs as to eligibility to participate in the plan in the plan year being tested. For the eligibility test, a plan may exclude employees who do not meet a minimum service requirement only if the plan requires 3 years of service for participation. However, employees with less than 3 years of service may be treated as if they are covered by a separate plan.

Benefit availability test rules. The benefit availability test requires that either qualified benefits and total benefits or employer contributions (including salary reduction contributions) for statutory nontaxable benefits and for total benefits do not discriminate in favor of HCPs. For this test, all similarly situated employees must have the same opportunity to elect benefits, and HCPs must not disproportionately utilize or elect qualified benefits.

Utilization test rules. The utilization test requires that the statutory nontaxable benefits for key employees not exceed 25 percent of the aggregate statutory nontaxable benefits for all employees. A premium-only plan satisfies this test if it satisfies the eligibility test.

All members of a controlled group are treated as a single employer for purposes of these tests. Employers may, but need not, aggregate two or more cafeteria plans for purposes of the tests, as long as the plans are not aggregated to manipulate the results. If discriminatory benefits are provided to highly compensated participants, to highly compensated individuals or to key employees, the benefits are included in these employees' gross income.

Safe Harbor Cafeteria Plans for Small Employers

Effective for years beginning after December 31, 2010, a small business may adopt a "simple cafeteria plan" that provides a safe harbor from nondiscrimination requirements. A simple cafeteria plan must be established and maintained by an eligible employer and meet specific contribution, eligibility and participation requirements in order to qualify for the safe harbor. This provision should encourage small employers that would otherwise be vulnerable under the nondiscrimination rules to adopt a cafeteria plan.

Eligible employer. An eligible employer for any year is an employer that employed an average of 100 or fewer employees on business days during either of the 2 preceding years. A year may be taken into account only if the employer was in existence throughout the year. If an employer was not in existence throughout the preceding year, the determination of the number of employees is based on the average number of employees that it is reasonably expected the employer will employ on business days in the current year.

Treatment of growing employers. An employer that was an eligible employer for any year is treated as an eligible employer for subsequent years when it has grown to more than 100 employees until the employer employs an average of 200 or more employees on business days during any preceding year preceding any such subsequent year.

Contribution requirements. The contribution requirements are met if the plan requires the employer, without regard to whether a qualified employee makes any salary reduction contribution, to make a contribution to provide qualified benefits under the plan on behalf of each qualified employee in an amount equal to:

• A uniform percentage (not less than 2 percent) of the employee's compensation for the plan year, or
• An amount that is not less than the lesser of 6 percent of the employee's compensation for the plan year or twice the amount of the salary reduction contributions of each qualified employee.

The contribution requirements will not be met if, under the plan, the rate of contributions for any salary reduction contribution of a highly compensated or key employee at any rate of contribution is greater than that for an employee who is not a highly compensated or key employee. The contribution requirement does not prohibit an employer from making additional contributions to provide qualified benefits under the plan.

Minimum eligibility and participation requirements. The minimum eligibility and participation requirements are generally met for any year if:

• All employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate, and
• Each employee eligible to participate in the plan may, subject to terms and conditions applicable to all participants, elect any benefit available under the plan.

The requirement takes effect in 2014 - and it does not vary by employer size.

Starting in the 2012 tax year, health care reform legislation will require you, as an employer, to report the aggregate value of your employees' health benefits on their W-2 forms (regardless of whether the employer or the employee paid the cost). The intent of the law is to improve health care transparency and cost awareness.

It's important to note upfront that the cost of an employee's health benefits will not be included in the employee's taxable income. The coverage costs that must be reported include:

• Medical plans
• Prescription drug plans
• Dental and vision plans, unless they're 'stand alone' plans (i.e. an employee may elect only dental or only vision and is not required to also enroll in medical coverage)
• Executive physicals
• On-site clinics (providing full-scale medical treatment)
• Medicare supplemental policies
• Employee assistance programs
• MSA, HSA, HRA and health FSA contributions by the employer

Employers will not be required to provide a breakdown of the various types of coverage but must report the total cost (say for medical, dental and drug coverage).

The following employer-provided benefits are not required to be reported on the W-2:

• Long-term care, accident or disability income benefits
• Specific disease or illness policies and hospital (or other) indemnity insurance policies where the full premium is paid by the employee on an after-tax basis
• Archer MSA or HSA contributions of the employee or employee's spouse
• Employee contributions through salary reductions to FSAs

The employer will calculate the value of the premiums under the rules for COBRA continuation coverage (not the portion of the premium that the employee has to pay).

Yes, the rules governing coverage of adult children require that a non-enrolled employee be given the opportunity to enroll during the special open enrollment, along with the employee's eligible adult child.

To: All Employees From: [Insert company name] Date: [Insert date] Re: Employee Notice - Lifetime Limits Employee Notice - To Age 26 Requirement Employee Notice - Designation of a Primary Care Provider Employee Notice - Grandfathered Plans

Employee Notice - Lifetime Limits

The lifetime limit on the dollar value of benefits under [Insert name of group health plan or health insurance issuer] no longer applies. Individuals whose coverage ended by reason of reaching a lifetime limit under the plan are eligible to enroll in the plan. Individuals have 30 days from the date of this notice to request enrollment. For more information contact [insert plan administrator or issuer] at [insert contact information].

Employee Notice - To Age 26 Requirement

Individuals whose coverage ended or who were denied coverage (or were not eligible for coverage) because the availability of dependent coverage of children ended before attainment of age 26 are eligible to enroll in [Insert name of group health plan or health insurance coverage]. Individuals may request enrollment for such children for 30 days from the date of notice. Enrollment will be effective retroactively to [insert date that is the first day of the first plan year beginning on or after September 23, 2010.] For more information contact the [insert plan administrator or issuer] at [insert contact information].

Employee Notice - Designation of a Primary Care Provider

[Name of group health plan or health insurance issuer] generally [requires/allows] the designation of a primary care provider. You have the right to designate any primary care provider who participates in our network and who is available to accept you or your family members. [If the plan or health insurance coverage designates a primary care provider automatically, insert: Until you make this designation, [name of group health plan or health insurance issuer] designates one for you. For information on how to select a primary care provider, and for a list of the participating primary care providers, contact the [plan administrator or issuer] at [insert contact information]. For children, you may designate a pediatrician as the primary care provider.

You do not need prior authorization from [name of group health plan or issuer] or from any other person (including a primary care provider) in order to obtain access to obstetrical or gynecological care from a health care professional in our network who specializes in obstetrics or gynecology. The health care professional, however, may be required to comply with certain procedures, including obtaining prior authorization for certain services, following a pre-approved treatment plan, or procedures for making referrals. For a list of participating health care professionals who specialize in obstetrics or gynecology, contact the [plan administrator or issuer] at [insert contact information].

Employee Notice - Grandfathered Plans

[Insert group health plan or health insurance issuer] believes this plan or coverage is a "grandfathered health plan" under the Patient Protection and Affordable Care Act. As permitted by the act, a grandfathered health plan can preserve certain basic health coverage that was already in effect when the law was enacted. Being a grandfathered plan means that your plan or policy may not include certain consumer protections of the act that apply to other plans (for example, the requirement for the provision of preventive health services without any cost sharing). However, grandfathered plans must comply with certain other consumer protections in the act (for example, the elimination of lifetime limits on benefits).

Questions regarding which protections apply and which protections do not apply to a grandfathered health plan and what might cause a plan to change from grandfathered status can be directed to the plan administrator at [insert contact information]. For ERISA plans, you may also contact the Employee Benefits Security Administration, U.S. Department of Labor at 1-866-444-3272 or www.dol.gov/ebsa/healthreform . This website has a table summarizing which protections do and do not apply to grandfathered health plans. You may also contact the U.S. Department of Health and Human Services at www.healthreform.gov.

A small employer (no more than 25 employees and average annual wages of less than $50,000, not including the owner's) who purchases health insurance for employees is entitled to a tax credit as follows:

Phase I: For tax years 2010 through 2013, there will be a tax credit of up to 35% of the employer's contribution toward the employee's health insurance premium if the employer contributes at least 50% of the total premium cost or 50% of a benchmark premium. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size and average wage increases. Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 25% of the employer's contribution toward the employee's health insurance premium.

Phase II: For tax years 2014 and later, for eligible small businesses that purchase coverage through the exchange, there will be a tax credit of up to 50% of the employer's contribution toward the employee's health insurance premium if the employer contributes at least 50% of the total premium cost. The credit will be available for two years. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size and average wage increases. Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 35% of the employer's contribution toward the employee's health insurance premium.

According to the IRS FAQ, a family member of any of the business owners or partners, or a member of such a business owner's or partner's household, is not considered an employee for purposes of the credit. A family member is defined as a child (or descendant of a child); a sibling or step-sibling; parent (or ancestor of a parent); a niece or nephew; an aunt or uncle; or a son-in-law, daughter-in-law; father-in-law; mother-in-law; brother-in-law or sister-in-law.

Unionized employees are counted when determining if the employer is eligible for the small business tax credit. An employer with 25 or more full-time equivalent employees is not eligible for the credit.

The credit is claimed on the employer's annual income tax return (e.g. Form 1120 and presumably Form 3800) as a nonrefundable general business tax credit, which can be carried forward 20 years.

Governmental employers are not eligible for the Small Business Health Care Tax Credit.

The credit is claimed against the non-profit's income tax and Medicare tax withholding from employees and the employer's share of Medicare taxes. The amount of the credit cannot exceed the total amount of income and Medicare (i.e. hospital insurance) tax the employer is required to withhold from employees' wages for the year and the employer's share of Medicare tax on employees' wages for the year. The IRS has stated that it will be providing further information on how tax exempt organizations can claim the credit.

In 2014, 30 hours is considered full-time regardless of grandfathered status.

Insurance reform, including grandfathering, does not apply to limited dental and vision plans offered separately from a medical plan.

Under the Affordable Care Act grandfathered plans are those in existence on March 23, 2010. A major change in such a plan could result in the loss of grandfathered status. Guidance is expected on what types of changes could affect grandfathered status. The following are the primary provisions that do not apply to grandfathered plans:

Minimum Coverage Without Cost-Sharing for Preventive Services
Plans established after March 23, 2010 must provide coverage without cost-sharing for preventive services, including immunizations; preventive care for infants, children and adolescents; and additional preventive care and screenings for women for plan years beginning after September 23, 2010.

Nondiscrimination Testing
The existing rules barring discrimination in favor of the highly compensated employees apply to insured group health plans established after March 23, 2010, effective for plan years beginning on or after September 23, 2010.

Other Coverage Requirements
Effective for plan years beginning on or after September 23, 2010, group health plans established on or after March 23, 2010 will:

• Have to allow plan participants to choose any participating primary care provider.
• Be prohibited from requiring prior authorization or referrals for visits to an obstetrician/gynecologist.
• Have to treat an obstetrician/gynecologist as a primary care provider.
• Have to provide emergency care services without prior authorization and with the same cost-sharing both in and out of network.
• Have to provide coverage for costs of participating in a clinical trial.

On June 17, 2010, the Internal Revenue Service (IRS), Department of Labor (DOL) and Department of Health and Human Services (HHS) jointly issued interim final regulations regarding a group health plan's status as a "grandfathered health plan" (i.e., one in existence on March 23, 2010). Generally, grandfathered health plans are able to make routine changes to their policies and maintain their status.

Changes That Will Cause a Plan to Lose Grandfathered Status
A plan will lose its grandfathered plan status if changes are made to the plan's coverage that significantly decrease the benefits, materially increase cost sharing by participants in ways that might discourage covered individuals from seeking needed treatment or substantially increase the cost of coverage paid by participants. Specifically, the following changes cannot be made to maintain grandfathered status:

• Cannot significantly cut or reduce benefits. For example, if your plan covers care for people with diabetes, cystic fibrosis or HIV/AIDS, it cannot drop coverage for those diseases
• Cannot raise co-insurance charges. For example, it increases your share of a hospital bill from 20% to 25%
• Cannot significantly raise co-payment charges. For example, it raises its copayment from $30 to $50 over the next 2 years
• Cannot significantly raise deductibles. For example, it raises a $1,000 deductible by $500 over the next 2 years
• Cannot significantly lower employer contributions by more than 5 percent. For example, it increases its workers' share of the premium from 15% to 25%
• Cannot add or tighten an annual limit on what the insurer pays. Some insurers cap the amount that they will pay for covered services each year. If they want to retain their status as grandfathered plans, plans cannot tighten any annual dollar limit in place as of March 23, 2010. Moreover, plans that do not have an annual dollar limit cannot add a new one unless they are replacing a lifetime dollar limit with an annual dollar limit that is at least as high as the lifetime limit (which is more protective of high-cost enrollees)
• In addition, changing policies (or insurance carriers prior to 11/15/2010) will cause a plan to lose grandfathered status. Finally, keep in mind that premium amounts are not included among the above restrictions on plans that wish to maintain grandfathered status.

No. The regulatory guidance on grandfathering specifically states that changes made by plans to comply with federal or state laws will not cause loss of grandfathered status.

No. The regulatory guidance on grandfathering specifically states that changes made by plans to comply with federal or state laws will not cause loss of grandfathered status.

Yes, it's applicable.

Not applicable. Health plans offering group or individual health insurance coverage must cover certain preventive services, immunizations and screenings without any cost sharing - but grandfathered plans aren't required to do so.

The law provides grants for up to five years to small employers that establish wellness programs, beginning in fiscal year 2011. It also permits employers to offer employee rewards in the form of premium discounts, waivers of cost-sharing requirements or benefits that would otherwise not be provided of up to 30% (or 50%, if Health and Human Services deems appropriate) of the cost of coverage for participating in a wellness program and meeting certain health-related standards.

Below is the text directly from the legislation. The 5-year grant program refers to small businesses offering a qualified wellness program. Currently, few details have been provided about this program. A government agency reporting to the Health and Human Services secretary will be responsible for implementing this program.

SEC. 10408. GRANTS FOR SMALL BUSINESSES TO PROVIDE COMPREHENSIVE
WORKPLACE WELLNESS PROGRAMS.

(a) ESTABLISHMENT.-The Secretary shall award grants to
eligible employers to provide their employees with access to comprehensive
workplace wellness programs (as described under subsection (c)).
(b) SCOPE.-
(1) DURATION.-The grant program established under this
section shall be conducted for a 5-year period.
(2) ELIGIBLE EMPLOYER.-The term ''eligible employer''
means an employer (including a non-profit employer) that-
(A) employs less than 100 employees who work 25
hours or greater per week; and
(B) does not provide a workplace wellness program
as of the date of enactment of this Act.
(c) COMPREHENSIVE WORKPLACE WELLNESS PROGRAMS.-
(1) CRITERIA.-The Secretary shall develop program criteria
for comprehensive workplace wellness programs under this section
that are based on and consistent with evidence-based
research and best practices, including research and practices
as provided in the Guide to Community Preventive Services,
the Guide to Clinical Preventive Services, and the National
Registry for Effective Programs.
(2) REQUIREMENTS.-A comprehensive workplace wellness
program shall be made available by an eligible employer to
all employees and include the following components:
(A) Health awareness initiatives (including health education,
preventive screenings, and health risk assessments).
(B) Efforts to maximize employee engagement
(including mechanisms to encourage employee participation).
(C) Initiatives to change unhealthy behaviors and lifestyle
choices (including counseling, seminars, online programs,
and self-help materials).
(D) Supportive environment efforts (including workplace
policies to encourage healthy lifestyles, healthy
eating, increased physical activity, and improved mental
health).
(d) APPLICATION.-An eligible employer desiring to participate
in the grant program under this section shall submit an application
to the Secretary, in such manner and containing such information
as the Secretary may require, which shall include a proposal for
a comprehensive workplace wellness program that meet the criteria
and requirements described under subsection (c).
(e) AUTHORIZATION OF APPROPRIATION.-For purposes of carrying
out the grant program under this section, there is authorized
to be appropriated $200,000,000 for the period of fiscal years 2011
through 2015. Amounts appropriated pursuant to this subsection
shall remain available until expended.

High deductible health plans (HDHPs) are covered by the requirements of the health care reform law in the same way as other group health insurance plans. Thus, unless a plan has grandfathered status, coverage without cost-sharing must be provided for preventive services. This provision is effective for the first plan year beginning on or after September 23, 2010, but does not apply to grandfathered plans (plans that were in existence on March 23, 2010 and which have not been amended).

[Additional background information for those interested: Interim final regulations provide that a group health plan, or a health insurer offering group health insurance coverage, must provide coverage for all of the following items and services without any cost-sharing requirements (such as a copayment, coinsurance, or deductible) for the items or services:

• Evidence-based items or services that have a rating of A or B in the current recommendations of the United States Preventive Services Task Force for the individual involved (Note: recommendations of the United States Preventive Services Task Force on breast cancer screening, mammography, and prevention issued in or around November 2009 are not considered to be current);
• Immunizations for routine use in children, adolescents, and adults that have in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention for the individual involved (for this purpose, a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention is considered in effect after it has been adopted by the Director of the Centers for Disease Control and Prevention, and a recommendation is considered to be for routine use if it is listed on the Immunization Schedules of the Centers for Disease Control and Prevention);
• For infants, children, and adolescents, evidence-informed preventive care and screenings provided for in comprehensive guidelines supported by the Health Resources and Services Administration (HRSA); and
• For women, if not included by the first item above, evidence-informed preventive care and screenings provided for in comprehensive guidelines supported by the HRSA.

A plan may provide coverage for services in addition to those recommended by U.S. Preventive Services Task Force and may deny coverage for services that are not recommended by the Task Force.

HHS is authorized to set a minimum interval of not less than 1 year between when a preventive services recommendation or guideline is issued and the plan year for which the recommendation or guideline applies. Interim final regulations provide that coverage must be provided for plan years beginning on or after the later of September 23, 2010, or 1 year after the date a recommendation or guideline is issued. Thus, recommendations and guidelines issued before September 23, 2009, must be provided for plan years beginning on or after September 23, 2010. A recommendation or guideline of the Task Force is considered to be issued on the last day of the month on which the Task Force publishes or otherwise releases the recommendation. A recommendation or guideline of the Advisory Committee is considered to be issued on the date on which it is adopted by the Director of the Centers for Disease Control and Prevention.

A recommendation or guideline in the comprehensive guidelines supported by HRSA is considered to be issued on the date on which it is accepted by the administrator of HRSA or, if applicable, adopted by the Secretary of HHS.

For recommendations and guidelines adopted after September 23, 2009, the information at http://www.HealthCare.gov/center/ regulations/prevention.html will be updated on an ongoing basis and will include the date on which the recommendation or guideline was accepted or adopted.

Cost-sharing requirements and office visits. Because an office visit where preventive services are provided may include other services, the interim final regulations provide the following clarifications of the cost-sharing requirements when a recommended preventive service is provided during an office visit:

• If a recommended preventive service is billed separately (or is tracked as individual encounter data separately) from an office visit, a plan or insurer may impose cost-sharing requirements with respect to the office visit.
• If a recommended preventive service is not billed separately (or is not tracked as individual encounter data separately) from an office visit and the primary purpose of the office visit is the preventive service, a plan or insurer may not impose cost-sharing requirements for the office visit.
• If a recommended preventive service is not billed separately (or is not tracked as individual encounter data separately) from an office visit and the primary purpose of the office visit is not the preventive service, a plan or insurer may impose cost-sharing requirements for the office visit.

Tracking individual encounter data applies to plans that use capitation or similar payment arrangements and do not bill individually for items and services.

Out-of-network providers. The interim final regulations make clear that a plan that has a network of providers is not required to provide coverage for recommended preventive services delivered by an out-of-network provider and may also impose cost-sharing requirements for recommended preventive services delivered by an out-of-network provider.

Coverage limitations. The interim final regulations provide that if a recommendation or guideline for a recommended preventive service does not specify the frequency, method, treatment, or setting for the provision of that service, the plan or insurer can use reasonable medical management techniques to determine any coverage limitations. The use of reasonable medical management techniques allows plans and issuers to adapt such recommendations and guidelines to the coverage of specific items and services where cost-sharing must be waived.

Thus, a plan or insurer may rely on established techniques and the relevant evidence base to determine the frequency, method, treatment, or setting for which a recommended preventive service will be available without cost-sharing when not specified in a recommendation or guideline.]

Although the Affordable Care Act bars annual and lifetime limits, annual or lifetime per-beneficiary limits on specific covered benefits that are not essential health benefits are allowed to the extent that such limits are otherwise permitted under federal or state law. Essential health benefits include at least the following general categories and the items and services covered within these categories:

• Ambulatory patient services
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health and substance use disorder services, including behavioral health treatment
• Prescription drugs
• Rehabilitative services and devices
• Laboratory services
• Preventive and wellness services and chronic disease management
• Pediatric services, including oral and vision care

Regulations will be issued defining other items that are essential benefits so that an essential benefits package equals in scope the benef

Although the Affordable Care Act bars annual and lifetime limits, annual or lifetime per-beneficiary limits on specific covered benefits that are not essential health benefits are allowed to the extent that such limits are otherwise permitted under federal or state law. Essential health benefits include at least the following general categories and the items and services covered within these categories:

• Ambulatory patient services
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health and substance use disorder services, including behavioral health treatment
• Prescription drugs
• Rehabilitative services and devices
• Laboratory services
• Preventive and wellness services and chronic disease management
• Pediatric services, including oral and vision care

Regulations will be issued defining other items that are essential benefits so that an essential benefits package equals in scope the benefits provided under a typical employer plan. For plan years beginning before the issuance of regulations defining "essential health benefits," for purposes of enforcement, IRS, DOL and HHS will take into account good faith efforts to comply with a reasonable interpretation of the term "essential health benefits." For this purpose, a plan or issuer must apply the definition of essential health benefits consistently.

A group health plan or group health insurer may exclude all benefits for a particular condition unless barred by federal or state law. However, if any benefits are provided for the condition, then the ban on annual and lifetime limits will apply.

It would appear that a lot of carriers believe that out-of-network benefits are not essential benefits. Note, however, that PPACA Sec. 1302(b)(4)(D) provides that a qualified health plan shall not be treated as providing coverage for the essential health benefits unless the plan provides that coverage for emergency department services will be provided without imposing any requirement under the plan for prior authorization of services or any limitation on coverage where the provider of services does not have a contractual relationship with the plan.

its provided under a typical employer plan. For plan years beginning before the issuance of regulations defining "essential health benefits," for purposes of enforcement, IRS, DOL and HHS will take into account good faith efforts to comply with a reasonable interpretation of the term "essential health benefits." For this purpose, a plan or issuer must apply the definition of essential health benefits consistently.

A group health plan or group health insurer may exclude all benefits for a particular condition unless barred by federal or state law. However, if any benefits are provided for the condition, then the ban on annual and lifetime limits will apply.

It would appear that a lot of carriers believe that out-of-network benefits are not essential benefits. Note, however, that PPACA Sec. 1302(b)(4)(D) provides that a qualified health plan shall not be treated as providing coverage for the essential health benefits unless the plan provides that coverage for emergency department services will be provided without imposing any requirement under the plan for prior authorization of services or any limitation on coverage where the provider of services does not have a contractual relationship with the plan.

An individual who had been previously covered and who had reached his or her lifetime limit is once again eligible for benefits under the plan. Health plans must now give written notice to all employees, stating that individuals whose coverage ended by reason of reaching a lifetime limit under the plan are again eligible to enroll in the plan. Individuals have 30 days from the date of the notice to request enrollment

The law requires carriers to report the proportion of premium dollars spent on clinical services, quality and other costs and provides rebates to consumers for the amount of the premium spent on clinical services and quality that is less than 85% for plans in the large group market and 80% for plans in the individual and small group markets. Carriers must justify premium increases.

The client's statement deals with medical loss ratio (MLR). As quick background: HCR requires health plans to spend a percentage of premium revenues on clinical services and "activities to improve health-care quality." That percentage is 85% for plans in the large group market and 80% for plans in the individual and small group markets. Said differently, a carrier (small group) must spend at least 80% of premiums on claims cost for the block of business. A carrier can spend more than 80% on claims (and therefore less than 20% on administrative costs), but they can't spend less than 80%. If they do spend less they will need to refund that portion of the premium to policyholders that were impacted. It is important to note, however, that this is not handled at the individual client level. These MLR requirements apply to a carrier's entire block of business in a particular market. Finally, carriers will be required to report MLR for 2010 and provide rebates to consumers and businesses effective January 1, 2011.

The terms are pretty straightforward: All existing insurance plans will be barred from imposing lifetime caps on coverage. Restrictions will also be placed on annual limits on coverage. Insurers can no longer cancel insurance retroactively for things other than outright fraud.

The Patient Protection and Affordable Care Act, more commonly known as healthcare reform, requires group health plans that provide dependent coverage of children to continue to make such coverage available for an adult child until age 26. The law also amends the Internal Revenue Code to give certain favorable tax treatment to coverage for adult children. The IRS recently published guidance addressing questions about tax treatment of such coverage.

In Notice 2010-38, the IRS stated that employers that offer cafeteria plans can allow employees to begin making pre-tax contributions immediately for health coverage for dependents who are under 27, even if the changes to the plan have not yet been made on paper.

The IRS said the new law allows employers with cafeteria plans to permit employees to begin making pre-tax contributions to pay for this expanded benefit. Cafeteria plans allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits. Employees who have children who will not have reached age 27 by the end of the year are eligible for the new tax benefit from March 30, 2010, forward, if the children are already covered under the employer's plan or are added to the employer's plan at any time.

The notice said that employers with cafeteria plans may permit employees to immediately make pre-tax salary reduction contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. Plan sponsors then have until the end of 2010 to amend their cafeteria plan language to incorporate the change.

To clarify, the distinction in the provisions is that the "to age 26" is the requirement that dependent children up to age 26 have to be eligible for coverage under a group health plan. The "under 27" provision has to do with the definition of dependent for purposes determining if the cost of coverage of the dependent is tax free. It is not a coverage mandate. There is no requirement to cover adult children over age 26, but if they are covered, the coverage of those under age 27 is eligible for tax exemption.

The Patient Protection and Affordable Care Act includes an early retiree reinsurance program that is available to group health plan sponsors who provide medical coverage to early retirees and their spouses, surviving spouses and dependents.

It is intended to encourage employers to provide health coverage to early retirees until state health exchanges and federal subsidies for health coverage are implemented. This temporary program will provide $5 billion to help employers to continue to provide coverage to certain retirees. The program provides for reimbursement of an early retiree's (and covered dependents') healthcare claims in an amount equal to 80% of the costs between $15,000 and $90,000.

The employer is then expected to use the reimbursement to help lower healthcare costs (such as premium contributions, copays and deductibles) for participating enrollees. The program provides for reimbursement of an early retiree's (and covered dependents') claims in an amount equal to 80% of health benefits costs between $15,000 and $90,000.

This program is expected to be effective from June 1, 2010, to January 1, 2014. After January 1, 2014, retirees will have additional coverage options through the health insurance exchanges. Both self-insured and fully insured employer groups can participate. To participate in the program, employers must first submit applications (likely available beginning in June) to the Department of Health and Human Services.

It goes into effect for plan years that start on or after 2014. However, for children younger than 19, the prohibition goes into effect for plan years that start on or after September 23, 2010.

The law generally does not distinguish between in-network and out-of-network benefits plans with respect to the market reforms. For example, the prohibitions on annual and lifetime limits apply regardless of whether the participant is using in- or out-of-network benefits. Note: There is one isolated instance we've seen that pertains to the requirement that participants be given the right to designate a primary care physician: A plan can require that the particular primary care physician a participant designates be an in-network physician.

There's an excise tax on certain high-cost employer-sponsored health plans (referred to as "Cadillac" plans), effective January 1, 2018. The tax is equal to 40% of amounts over the cost limit for health coverage.

The cost limit for health coverage is the annual premium cost (determined using COBRA principles) of $10,200 for employee-only coverage and $27,500 for family coverage. This amount is increased for those in 17 high-cost states, as determined by HHS, by 120% for 2013, 110% for 2014 and 105% for 2015. There's also an increase for retirees age 55-65 and those engaged in a high-risk profession or employed to repair or install electrical or telecommunications lines of $1,650 for employee-only coverage and $3,450 for family coverage. All amounts are adjusted annually.

The annual amount is determined by aggregating monthly amounts for which each employee has an excess benefit. Per a Kaiser Foundation study, in 2009 the average annual premiums for employer-sponsored health insurance were $4,824 for employee-only coverage and $13,375 for family coverage.

The benefit provided under the health plan is not a factor.

The health coverage is any employer-provided health coverage, whether insured or self-insured, whether employer-paid or employee-paid. Health coverage includes coverage under medical, wellness programs, flexible spending accounts ("FSAs"), HSAs and Archer medical savings accounts ("MSAs").

Health coverage does not include:

• Dental plans
• Vision plans
• Any coverage only for accident or disability income insurance or any combination thereof
• Long-term care
• Coverage only for a specified disease or illness or hospital indemnity or other fixed indemnity insurance where the payment is not excludable from gross income and for which a business deduction is not allowable.

The employer determines the allocation of amounts between the various benefits.

The tax is paid by the carrier with respect to insured health coverage, the person who administers the plan benefits with respect to self-insured health coverage (which could be a third party administrator (TPA), other vendor or the employer) and the employer with respect to any HSA or Archer MSA contribution.

The law increases the tax on distributions from an HSA that are not used for qualified medical expenses to 20% of the disbursed amount, effective January 1, 2011; does not permit over-the-counter drugs to be reimbursable through an HSA, Archer medical savings account, health reimbursement arrangement or flexible spending arrangement for medical expenses effective January 1, 2011; and limits the amount of contributions to a flexible spending account for medical expenses to $2,500 per year, effective January 1, 2013.

Per the law, insurance exchanges are run by each state in conjunction with the federal government, and states are allowed to create additional mechanisms for offering insurance to their residents. Traditional insurance companies are allowed to compete for customers through the exchanges, provided they meet a set of requirements set by the federal government. The least expensive plans offer catastrophic coverage only and aren't available to everyone. There are several other levels of coverage, priced more for each bump-up in benefits. The exchanges go into effect in 2014.

There will be a state-by-state creation of exchanges, where individuals and small employers can purchase qualified health benefits plans. No new federal agency would be created under the law to oversee the process. HHS would be charged with establishing and operating an exchange in any state that fails to establish one on or before January 1, 2014. The exchanges will initially be limited to employers of fewer than 101 employees. States would have the option to reduce this to employers with less than 51 employees. In 2017, a state would also have the option of expanding its exchange to accommodate larger employers.

Ambulatory patient services, emergency services, hospitalization, maternity, newborn care, mental health and substance abuse treatment, including behavioral health treatment, prescription drugs, rehabilitative services and devices, laboratory services, wellness and preventive services, chronic disease management and pediatric services, including oral and vision care. Bronze, silver, gold and platinum coverage levels at 60%, 70%, 80% and 90% respectively.

Under the law, people who cannot obtain traditional coverage on account of a pre-existing medical condition are eligible for insurance under a new national high-risk pool, with rates comparable to those for the general population. The pool goes into effect quickly - within 90 days of enactment.

The Community Living Assistance Services and Supports (CLASS) Act requires HHS to create a national, voluntary long-term care program that would provide a cash benefit to participants if they become unable to perform at least two activities of daily living, such as dressing and bathing. Workers would pay a monthly premium to buy coverage, most likely through their employer. They would have to pay into the program for at least five years before qualifying for benefits. The benefit would be at least $50 a day. The program is intended to be self-supporting, and the HHS would determine premium amounts. Employers are not required to participate in the program.

Under the law, there are penalties for those who do not obtain coverage and employers that do not provide coverage. The Medicare payroll tax rate will increase from 1.45% to 2.35% for individuals who earn more than $200,000 a year and families that earn more than $250,000. The law also subjects the investment income of these households, such as dividends, interest and rent, to a 3.8% Medicare tax. The Cadillac plan tax will help subsidize the cost, and the law also raises the threshold for deducting unreimbursed medical expenses from 7.5% of adjusted gross income to 10%. Beginning in 2010, there is an additional 10 percent tax on the cost of indoor tanning services. Finally, the law imposes new fees on healthcare companies, such as pharmaceutical companies, medical device manufacturers and insurance carriers.

Reform is also supposed to be financed from savings from the following:

• Reducing Medicare overpayments to private insurance carriers through competitive payments

• Reducing drug prices

• Improving Medicare and Medicaid payment accuracy

• Improving care after hospitalizations and reducing hospital readmission rates

• Expanding the hospital quality improvement program

• Reforming the physician payment system to improve quality and efficiency