The new Patient Protection and Affordable Care Act of 2010 and its accompanying reconciliation law will cause changes to health insurance benefits for our members over the next few years.

Here is a brief summary and time line of some of the key provisions. It is important to note that many of these reforms and their effective dates are subject to the rules and regulations process both at the state and federal levels, which could alter the intended timing of implementation.

Changes Starting after September 23, 2010  (Please note: If your dealership is enrolled in the GCADA Group Health Plan, the following changes will begin on January 1, 2011.)

• Lifetime Plan Limits. Group health plans and insurance carriers may not impose lifetime limits on the value of essential benefits for any participant or beneficiary. The Department of Health and Human Services (HHS) will issue guidance on what is considered an essential benefit.
• No Rescission of Coverage. Group health plans and insurance carriers cannot rescind coverage except where fraud or intentional misrepresentation occurs.
• Preventive Care. Preventive care will now be covered at 100%, which at a minimum includes immunizations and screenings for infants and children.
• Adult Children Coverage. If a plan covers dependent children, it must continue to do so for unmarried and married children until age 26. The tax exclusion has been adjusted accordingly. For plans already in existence on March 23, 2010, the age 26 limit only applies if the child is not eligible for other coverage. This exception ends in 2014.
• Pre-existing Condition Exclusions, Part I. Plans cannot exclude pre-existing conditions for children under age 19.
• Small Business Tax Credit. Businesses with fewer than 25 employees and average wages of less than $50,000 could qualify for a tax credit of up to 35 % of the cost of employees' premiums.
• Doughnut Hole Rebate. $250 rebate for Medicare members who reach the doughnut hole.
• Temporary National High Risk Pool. $5 billion in federal funding available through existing State high risk pools programs (or otherwise) to provide guaranteed issue coverage to individuals who can't obtain coverage due to health status or a pre-existing condition and have been uninsured for at least 6 months. A separate $5 billion government funded reinsurance pool is also established for employer sponsored and state/local government early retiree coverage. The High risk pools are for the individual market and it starts within 90 days of enactment until January 1, 2014.

Changes Starting on January 1, 2011

• Over-the-Counter Drugs. Over-the-counter medicines or drugs are not eligible for reimbursement under a Health FSA, HRA or HSA without a doctor's prescription.
• HSA Excise Tax. The excise tax for non-medical HSA distributions increases from 10 percent to 20 percent. Insurance Reforms. Minimum medical loss ratios are mandated.
• W-2 Reporting. Employers are required to report the value of health care benefits, including medical, dental, vision and supplemental coverage, on employees' W-2 tax statements. It is expected that this requirement would apply to Forms W-2 for the year 2011 that are made available to employees in January 2012.

Changes Starting on March 23, 2012

• New Explanation of Coverage Document. The plan administrator (self-insured plans) or the insurance carrier (fully-insured plans) must give a coverage summary to all applicants and enrollees, at initial enrollment and open enrollment. This is in addition to the Summary Plan Description (SPD). HHS will provide standards by March 23, 2011. The document can be no more than four pages long and address covered benefits, exclusions, cost sharing and continuation. A $1,000 penalty applies for each failure to provide.

Changes for Plan Years Starting on or after January 1, 2013

• Health FSA Limit. Contributions are capped at $2,500 each year, indexed for Consumer Price Index (CPI) starting in 2014. The effective date for noncalendar plan years is currently unclear.
• Medicare Retiree Drug Subsidy (RDS) Tax Deduction. Employers offering retiree drug coverage have long been able to receive a 28% subsidy on the costs. The RDS has been tax deductible. That will end as of this effective date.
• Medicare Payroll Tax. Individuals making $200,000 a year or couples making $250,000 would have a higher Medicare payroll tax of 2.35% on earned income, up from the current 1.45%. A new tax of 3.8% on unearned income, such as dividends and interest, is also added.

Changes for Plan Years Starting on or after January 1, 2014

• Health Insurance Exchange. State individual and small group health insurance exchanges are operational.
• Employer Mandate 200+ Employees. Employers with 200 or more full-time employees must automatically enroll all new hires. All employers must provide an Exchange-related notice to new hires.
• Employer Mandate 50+ Employees. Employers with 50 or more employees are required to offer coverage to their employees or pay a fine of $2,000 per full-time employee, if even one employee obtains a federal subsidy to buy health insurance from one of the new state-based health insurance exchanges. The first 30 employees are exempt from the calculation of the penalty. The mandate also requires an employer who does provide coverage to pay either of the following: an "assessment" of $3,000 for each employee who qualifies for subsidized coverage from an exchange either because the employer pays less than 60% of the full actuarial value of the coverage provided or because the employee's cost is greater than 9.8% of their adjusted gross income; or $2,000 per full-time employee, whichever is less.
• Exchange Plans offered through Cafeteria Plans. Before 2017, only small businesses (up to 100 employees) may participate in the Health Exchange. Before 2016, a state may cap participation to businesses with 50 or fewer employees. These employers can use their cafeteria plan to allow participants to pay for Exchange-related coverage that is offered by the employer.
• Pre-existing Condition Exclusions, Part II. Plans cannot exclude pre-existing conditions for anyone.
• Cost-Sharing. Out-of-pocket expenses and deductibles cannot exceed those applicable with the HSA-eligible high-deductible health plans.
• Reduced Waiting Periods. Plans can impose waiting periods that are 90 days or less. Waiting periods exceeding 90 days are prohibited.
• Individual Mandate. Individuals who do not enroll in qualifying coverage are subject to an excise tax. They generally pay the greater of a flat dollar amount (2014: $95, 2015: $325, 2016 and beyond: $695) or a percentage of income (2014: one percent, 2015: two percent, 2016 and beyond: 2.5 percent). There is a hardship exemption for those with incomes below a certain level.
• Increase in Small Business Tax Credit. The 35% tax credit that goes into effect in 2010 for businesses with fewer than 25 employees and average wages of less than $50,000 increases to up to 50%.
• Guaranteed Issue. Guaranteed issue, guaranteed renewability, modified community rating and minimum benefit standards ("essential benefits" plan) effective.
• Annual Plan Limits. Group health plans and insurance carriers may not impose any annual limit.

Changes Starting on January 1, 2018

• Cadillac Plan Tax. A 40% excise tax will be applied to the excess value of a health plan above a statutory threshold. For most health plans, the threshold in the law will be established at $10,200 for single coverage and $27,500 for family coverage. The threshold for the new excise tax will be adjusted annually for general inflation.

Changes Starting on January 1, 2020

• Medicare Reform. Doughnut hole coverage gap in Medicare prescription benefit is fully phased out. Seniors continue to pay the standard 25% of their drug costs until they reach the threshold for Medicare catastrophic coverage.

Click here for an article regarding tax implications published by Maloney and Novotny.

COBRA subsidy extension. Congress has approved legislation extending the federal COBRA premium subsidies to employees involuntarily terminated from employment through May 31, 2010.

The previous extension of the 15-month, 65 percent federal premium subsidy for involuntarily terminated employees expired March 31. The Continuing Extension Act further extends the COBRA subsidy eligibility period by two months to May 31, 2010. Assistance-eligible individuals will be eligible for up to 15 months of the subsidy.

If you would like to request a GCADA Group Health Insurance quote or have any questions regarding the impact of the discussed changes on your dealership, please contact Christine Horvath at chorvath@gcada.org or at 440 746-1500. As always, we will keep you informed! Thank you for your support. This memo and its contents should not be construed as legal advice.