This presentation highlights the changes required of small businesses to maintain compliance with Health Care Reform regulations. Cathy Harbison, director of operations for employee benefits at Neace Lukens, served as the expert speaker to explain upcoming changes for 2011 – 2014, and the implications for businesses with less than 50 employees.

1. Small Employer Groups

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3. Director of Compliance for Neace Lukens Employee
Benefits
20+ years experience in the healthcare field
Extensive clinical and management background
Experience with both public and private sector funding
RN degree from University of Miami
Certified Professional in Healthcare Quality

4. Small group definition
Grandfathered plans
Timeline for compliance

5. From now until 2016, states can define the size of
small groups:
◦ Small employer can be either 50 and under or 100 and under
Beginning in 2016, the definitions in the federal
reform law will apply:
◦ Small employers are those who had, on average, 1-100
employees in the preceding calendar year and at least 1
employee on the first day of the plan
◦ Definitions are not applied consistently throughout the law, as
noted throughout this presentation

7. Existing Plans = Grandfathered Plans
◦ A group health plan or health insurance coverage in which an
individual was enrolled on the date of enactment of the health
care reform legislation (March 23, 2010)
Regulations provide guidance on changes that could
take a plan out of “grandfathered” status

8. Health Insurance Changes – Prohibitions on:
◦ Lifetime and annual limits
◦ Pre-existing condition exclusions
◦ Rescissions
◦ Excessive waiting periods
Required coverage of adult children up to age 26
Summary of benefits and coverage
Reporting medical loss ratio

10. Qualifying small employers that provide health care coverage
to employees are eligible for tax credit
◦ Have fewer than 25 full-time equivalent (FTE) employees
◦ Pay wages averaging less than $50,000 per employee per year
◦ Has a “qualifying arrangement” (pays premiums for each employee in a
uniform percentage that is at least 50 percent of the cost of coverage)
◦ tax-exempt 501(c) organization also eligible
Credit based on premiums paid by employer
Claimed on employer’s annual income tax return

11. Amount of credit
◦ Up to 35 percent of health (includes dental & vision) premium
costs paid in 2010 (25 percent for tax-exempt employers)
◦ On Jan. 1, 2014, increases to 50 percent (35 percent for tax-
exempt employers)
Depends on employees and wages
◦ The credit phases out gradually for:
Employers with average wages between $25,000 and $50,000 and
Employers with the equivalent of between 10 and 25 full-time
workers

12. SMALL BUSINESS TAX CREDIT

13. Employees taken into account
◦ Employees who perform services for the employer during the
tax year
◦ Exceptions:
Partners and certain owners (and family members)
Seasonal workers

14. Employers not eligible
◦ Government employers
Federal
State
Local
Indian tribal
◦ Unless the employer is a tax-exempt 501(c) organization

16. Temporary federal program for insuring high-risk
individuals
◦ $5 billion funding
◦ Expires Jan. 1, 2014
High-risk individuals = pre-existing conditions and
no creditable coverage for 6 months
Cannot have employees drop coverage to join high-
risk pool
◦ Sanctions/reimbursement requirement will be imposed

17. (Plan Years Beginning on or after
September 23, 2010)

18. Plans that cover dependent children must make
coverage available until child turns 26
◦ Includes grandfathered plans, unless child has own employer
coverage (before 2014)
◦ Covers married and unmarried children
◦ Children of covered adult children do not have to be covered
State mandates above this level continue to apply
Insurers complying early to avoid coverage gaps

19. Definition of dependent restricted
◦ Can only be defined by relationship
◦ Other factors (financial dependence, residency, student status,
employment, eligibility for other coverage) generally can’t be
used as basis for denial
Qualified dependents must be:
◦ Offered same coverage as similarly-situated individuals
◦ Given the same rates for coverage
◦ Provided with a 30-day special enrollment opportunity and
notice

20. Apply to new and grandfathered plans
No lifetime limits on essential benefits
Restricted annual limits on essential benefits
◦ Allowed for plan years beginning before Jan. 1, 2014
Essential benefits generally include:
◦ Ambulatory patient services, emergency services, hospitalization, maternity and
newborn care, mental health and substance abuse services, prescription drugs,
rehab services, lab services, wellness and disease management, pediatric care
Some regulations issued, waiting on others

21. No rescission of coverage
◦ Applies to group and individual coverage
◦ Applies to new and grandfathered plans
◦ Exception for fraud or intentional material misrepresentation
◦ Individual must be given prior notice of cancellation for
permitted reasons (including nonpayment of premium or plan
termination)
No pre-existing condition exclusions or limitations
for children under age 19
◦ This prohibition will apply to everyone in 2014
◦ Applies to new and grandfathered group plans

22. Apply to new plans
Limits on preauthorization and cost-sharing
◦ No cost-sharing for some preventive care (including well-child
care) and immunizations
◦ No preauthorization or increased cost-sharing for emergency
services (in- vs. out-of-network)
Patients can chose any available participating
primary care provider (or pediatrician)
◦ No preauthorization or referral for ob/gyn care

23. Apply to new fully-insured plans
Fully-insured plans must follow rules regarding
nondiscrimination in favor of highly-compensated
employees (HCE)
◦ Cannot discriminate with respect to eligibility or benefits
HCE:
◦ 5 highest paid officers, more than 10% shareholder, or highest
paid 25% of all employees

25. Apply to Health FSAs, HRAs, HSAs and Archer
MSAs
Medicine or drugs only treated as qualified medical
expense for tax exclusion if they are prescribed or
are insulin
◦ This means no reimbursement for OTC medicine or drugs
without a prescription (except insulin)
Applies to expenses incurred after Dec. 31, 2010

26. Grants for health education, screenings, and
wellness programs
Available only to eligible employers who implement
the programs after March 23, 2010
◦ Employers with up to 100 employees

28. Employers must disclose aggregate cost of
employer-sponsored health coverage on Forms W-2
Optional for 2011 tax year; mandatory for later
years
Includes group health plan coverage, whether paid
by employer or employee

30. Health FSA Limits: $2,500 per year
◦ Currently no FSA limit, although many employers impose
limit
◦ Limit is $2,500 for 2013; indexed for CPI after that
◦ Does not apply to dependent care FSAs

32. Jan. 1, 2014: individuals must enroll in coverage or
pay a penalty
Amounts indexed for CPI after 2016

33. States will receive funding to establish health
insurance exchanges
Individuals and small employers can purchase
coverage through an exchange (Qualified Health
Plans)
◦ Qualified employees use vouchers to buy coverage through
exchange
Individuals can be eligible for tax credits

34. Large employers subject to “Pay or Play” rule
Applies to employers with 50 or more full-time
equivalent employees in prior calendar year
Penalties apply if:
◦ Employer does not provide coverage and any FT employee
gets subsidized coverage through exchange ($2000 Penalty)
◦ OR
◦ Employer does provide coverage and any FT employee still
gets subsidized coverage through exchange ($3000 Penalty)

35. Employers will have to report certain information
to the government
◦ Whether employer offers health coverage to full-time
employees and dependents
◦ Whether the plan imposes a waiting period
◦ Lowest-cost option in each enrollment category
◦ Employer’s share of cost of benefits
◦ Names and number of employees receiving health coverage

36. No pre-existing condition exclusions or limitations
◦ Applies to everyone and all plans
Wellness program changes
Limits on out-of-pocket expenses and cost-sharing
No waiting periods over 90 days
Coverage of clinical trial participation
Guaranteed issue and renewal
Community Rating
◦ Insurers can vary premium only on self-only or family
enrollment, rating area, age and tobacco use

38. 40 percent excise tax on high-cost health plans
Based on value of employer-provided health
coverage over certain limits
◦ $10,200 for single coverage
◦ $27,500 for family coverage
To be paid by coverage providers
◦ Fully insured plans = health insurer
◦ HSA/Archer MSA = employer
◦ Self-insured plans/FSAs = plan administrator
More guidance expected

39. Neace Lukens Compliance Information
◦ www.neacelukens.com
US Department of Health & Human Services
◦ www.healthcare.gov
Kaiser Foundation
◦ www.kaiserfoundation.org
Small Business IRS tax credit FAQ
◦ www.irs.gov
Model Notice Requirements
◦ www.dol.gov

40. Rhonda Gage
Neace Lukens
Manager, Small Business Unit
800-860-9699 x1743
rhonda.gage@neacelukens.com