The Impact Of Health Reform On Your Business:

Why an integrated approach is critical to success. You've got the questions; we've got the answers…

The signing into law of comprehensive health care reform legislation in late March 2010 marked a watershed event in the evolution of the U.S. health care system. With the stroke of a pen, President Barack Obama set in motion a series of complex, interrelated changes that will dramatically reshape the way care is delivered and paid for over the next ten years.

Whether the administration's goals of creating a more accessible, more efficient and higher quality system can be achieved remains to be seen. However, what is clear is that in the not-too-distant future, most health care stakeholders will begin to experience – to a greater or lesser extent – the first wave of changes triggered by this sweeping legislation.

Easing Fears

Given the law's daunting complexity and vast scope, it is no surprise that uncertainty and anxiety regarding the implications of reform abound. This is true not only for employees currently covered by health insurance, but also for the tens of thousands of employers who will be responsible for understanding, implementing, explaining and following the new regulations.

The good news for these companies is that CBIZ is uniquely qualified to provide expert guidance and counsel on the journey ahead. As the nation's leading provider of integrated business services to small- and mid-sized firms, we're able to bring an unmatched array of disciplines to bear on the challenges and opportunities that health care reform represents.

Our expertise in health benefit design, productivity and wellness, tax and accounting services, payroll management and related areas creates the comprehensive intellectual framework needed to help organizations develop viable strategic responses to the reform initiative.

In the weeks and months ahead, CBIZ experts in benefits, tax and payroll will work with your organization to design an integrated approach to this cross-discipline reform. We will then help you execute the plan as efficiently and effectively as possible. Through communications like this one, we will also offer a global perspective on the process of change, as well as tactical guidance regarding specific aspects of reform. In this inaugural edition of CBIZ Health Reform Brief, we highlight provisions of the law that take effect immediately, along with the changes coming in the near future.

The Big Picture

In simplest terms, the Patient Protection and Affordable Care Act represents an attempt to broaden coverage for the uninsured and eliminate perceived insurance company abuses and exclusions. These objectives are accomplished through a variety of new mechanisms, including a high-risk pool and later, an insurance exchange; subsidies to low-income individuals and families; myriad insurance reforms; and perhaps most significantly, individual mandates that will require the purchase of insurance coverage for those not covered by Medicare or Medicaid.

While the act is ambitious in intent, it is incremental in design. That means key elements of the legislation will be rolled out at successive intervals across the next decade. Consequently, the easiest way to understand the law is for companies to become familiar with the overall implementation timeline and then focus on addressing the earliest deadlines first.

Steps to Reform

Below is a brief overview of some of the major reform elements that will impact both self-insured and fully-insured employers this year. To learn more about how 2010's changes will affect your company and for details about the entire reform timeline, consult with your CBIZ representative. You may also contact your local CBIZ office to be put in touch with a member of our health reform team who can address your questions.

2010's Key Changes:

• High-risk Pool: A temporary, national high-risk pool will be created to provide health coverage to individuals with pre-existing medical conditions. However, the pool is not intended to be a place for employers to send high-risk individuals, and the new law includes specific penalties for employers who attempt to do this.

• Small Business Tax Credits: Employers with no more than 25 employees and average annual wages of less than $50,000 will receive a tax credit of up to 35 percent of premiums, as long as they pay at least half the cost of the insurance for covered employees. The credit increases for smaller employers.

• Retiree Coverage: A temporary reinsurance program will be created for employers providing health coverage to retirees over age 55 who are not eligible for Medicare. This program will reimburse employer plans for 80 percent of the cost of benefits provided to retirees age 55 through 64 in excess of $15,000 and below $90,000. The program will end by 2014 or when program funding of $5 billion is exhausted.

• Carrier Prohibitions: Individual and group health plans will be prohibited from placing lifetime limits on the dollar value of coverage and prohibited from rescinding coverage except in cases of fraud. The imposition of pre-existing condition exclusions for children also is prohibited.

• Dependent Coverage: Health plans must provide dependent coverage for adult children up to age 26 for all individual and group policies and also provide coverage without cost sharing for preventive services. However, for grandfathered plans, dependents who are ineligible to enroll in employer-sponsored health plans need not be offered the coverage extension until 2014.

• Coverage Value Reporting: In 2010, all employers are required to report, via the employee's W2, the value of employer-provided health coverage.

• OTC Drugs: During open enrollment 2011 (occurring in 2010), employers should be aware that over-the-counter drugs will no longer be an allowable expense for FSA, HAS and HRA plans, except when prescribed by a physician.

• Rate Review: A process will be established to review increases in health plan premiums and require plans to justify increases.

Because many of 2010's reforms affect insurance policy provisions, companies that are either rebidding or renewing their employee health coverage should meet with their CBIZ representatives to ensure that the new policies conform to the reform mandates.

At the same time, companies should begin working with their representatives to develop a response to more employer-focused provisions taking effect in 2011 and beyond. Some of the most important of these include:

• New Form W-2 Reporting Rules: Beginning with the 2011 tax year, employers will be required to disclose the aggregate cost of any employer-sponsored health insurance coverage on the Form W-2.

• Consumer-Directed Health Plan Changes: Beginning in 2011, FSAs, HRAs, Archer MSAs and HSAs can no longer be reimbursed for the cost of over-the-counter prescription drugs.

• FSA Cap: Effective for tax years beginning in 2013, the maximum amount of salary contributions to a flexible medical spending account is capped at $2,500.

• Uniform Benefit Statements: Beginning in 2012 (or 12 months after issuance of standardized forms), plans must provide applicants and enrollees with an additional disclosure document that explains in detail the health benefit coverage. The document must meet uniform standards, such as format, appearance, language and content.

• Medicare Contribution: Beginning in 2012, individuals earning more than $200,000 will see their Medicare Tax Rate increase from 1.45% to 2.35% for wages over this threshold. Employers will need to ensure that their payroll systems are designed to accomplish this rate change at exactly the right level. The rate change will also apply to couples who collectively earn over $250,000; however, only in cases where one spouse exceeds $250,000 would there be an effect on the employer payroll systems. Most importantly, the employer Medicare portion will remain unchanged at 1.45% even after the thresholds are reached.

• Auto-Enrollment: Although details have yet to be worked out, employers with 200 or more associates will be required to auto-enroll associates in their health plans starting in 2014.

A Strong Partnership

The Patient Protection and Affordable Care Act represents perhaps the most far-reaching federal legislation to emerge in generations. It will ultimately affect virtually every person, company and organization in America. From the vantage point of the present, both the details and scope of the act can seem overwhelming, even to those with years of experience in benefit design and human resources.

Yet CBIZ clients can take heart. Our company was expressly designed to address just this sort of complexity. In fact, few, if any, other service providers to small- and mid-sized companies can deliver the comprehensive range of services, expertise and experience CBIZ brings to this historic transition. It's an opportunity we relish, and we look forward to working beside you as together we construct the future of health care.

Please note that the information provided herein is not intended to be, and should not be construed as, a legal or tax opinion or advice. It is recommended that you consult with your own attorney or other adviser relating to your specific circumstances or those of any person or entity you advise.