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Highlights of New Healthcare Law's Impact on Businesses

With the new federal healthcare law just a few weeks old, large and small employers are scrambling to make changes to their company plans that take effect both immediately, and within the next few years.

Iris Tilley, a lawyer with Barran Liebman LLP in Oregon, highlights some of the main policy changes in the more than 2,500-page document, which contains enough information to confuse individuals, companies and insurers.

Nursing mothers can breathe a little easier, says Tilley, now that the law requires companies with 50 or more employees to provide a private place and a “reasonable break time” for them to express their milk. The law discounts use of a public bathroom and supports mothers so that they don’t feel rushed while they are pumping.

Oregon law already contains a similar requirement for employers with 25 or more employees; however, the lawyer says, employers with 50 or more employees are subject to both laws and will need to update their policies where the federal law is more generous.

Many of the updates and changes required by the federal bill are effective within six months of the legislation’s approval. Since most health plans operate on a Jan. 1 to Dec. 31 plan year, the following four areas that Tilley outlines will be effective Jan. 1, 2011.

However, plans with plan years ending after Sept. 23, 2010, but before Dec. 31, 2010, will need to comply before the end of the current year.

Parents or guardians will now be able to provide healthcare coverage for dependents up to age 26, which for those seeking a higher education extends through undergraduate and graduate studies. The provision, Tilley says, is open to unmarried individuals only.

The lawyer stresses that until 2014, this requirement applies only to dependents not offered their own coverage through an employer.

Tilley says employers must check annual and lifetime limits to ensure compliance and comply with new notification rules. New restrictions, she says, will begin to limit the lifetime and annual limits a plan may impose. Beginning in 2014, those limits will be strictly prohibited.
      
“Employers must notify employees of any planned material modifications at least 60 days before such modifications will take effect. The legislation does not address the specifics of what constitutes a ‘material modification,’ ” Tilley says, “but regulations on this point may arise in the future.”

Another change employers must address within the next six months is communicating new tax advantages to their employees.
 
The legislation amends the Internal Revenue Code to allow employees to avoid income tax on expenses for a dependent up to age 27. It also increases, from 10% to 20%, the HSA distribution tax on purchases not constituting qualified medical items, the lawyer says.

In addition, the legislation exempts or “grandfathers” collectively bargained health plans and those that had at least one active participant as of March 23. This means, Tilley says, employers will not need to amend their existing plans to offer free coverage of preventive services or to meet the new nondiscrimination requirements.

“While the new requirements may initially seem daunting,” Tilley says, “with good planning and an organized approach, employers can ensure both continuing compliance and the opportunity to take advantage of valuable tax credits and reimbursements.”

The final area of the new federal healthcare bill that Tilley highlights is reimbursement and tax credits.

Early retirees ages 55 to 64 will benefit from a change effective June 21 that allows them and their families to seek reimbursement for 80% of the cost of benefits provided per enrollee. This reimbursement, the lawyer says, applies only to costs in excess of $15,000 but below $90,000.

Small-business owners are also realizing some relief under the new bill. If an employer has fewer than 25 employees and total wages average less than $50,000 per employee, effective this year, the small-business owner may be eligible to receive a tax credit of up to 35% of contributions toward employee health-insurance premiums.

Conversely, tax-exempt entities are eligible to receive a credit of up to 25% of their contributions toward employee health-insurance premiums.

Iris Tilley is a lawyer at Barran Liebman LLP, where she focuses on ERISA compliance and compensation advice. She can be reached at 503-276-2155 or itilley@barran.com.


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