What Businesses Need to Know Now about Health Reform
By Tom Swayne
We are fast approaching Sept. 23rd – six months from when the Patient Protection and Affordable Care Act was signed into law and start date for several important provisions that will impact business owners.
Although we’ll be addressing changes in health care for years to come, business owners need to prepare for three immediate provisions.
Grandfathered Plans
All plans in existence prior to March 23, 2010, have “grandfathered status.” The advantage of grandfathered plans is they do not have to implement certain new provisions, which may keep premiums down.
Yet, employers need to be aware that significant plan changes may cause them to lose their grandfathered status, thereby subjecting their plan to the new provisions of PPACA. Those plan changes include increasing deductibles and out-of-pocket limits, raising co-pays, changing carriers, reducing benefits, adding or tightening annual limits, decreasing employer contribution, or changing the co-insurance limit.
Grandfathered groups will be required to maintain all documents necessary to support their grandfathered position. Also, employers will be required to notify all employees that the plan is in fact a grandfathered plan. Groups will see information distributed by insurance carriers regarding grandfathered status beginning with Oct. 1st renewals.
Tax Credits
Beginning with the 2010 tax year, if you employ fewer than 25 employees with an average annual wage of less than $50,000 and you contribute at least 50 percent of the single premium on the health plan, you may be entitled to the new small group tax credit.
The actual amount of the credit will vary but could be as much as 35 percent. Most businesses currently take a tax write-off for the premiums paid, so tax advice is essential in determining which method is more advantageous to the bottom line.
W-2 Reporting
Employers will be required to include the aggregate cost of employer-sponsored health insurance coverage on every employee’s W-2 form beginning with the 2011 taxable year. The cost will not be included in the employee’s taxable income. Rather, the intent of the W-2 reporting is to track benefit values for the 40 percent excise tax on Cadillac plans beginning in 2018.
Reporting amounts must include gross premiums, not just employer contributions, for medical plans, prescription drug plans, employee assistance programs, Medicare supplement policies, executive physicals, certain on-site clinics, dental and vision plans (if not stand alone plans) as well as reimbursement from an employer-sponsored HRA.
Also, while a majority of W-2s will be issued in January, terminated employees do have the right to request their W-2 early. Payroll systems need to be updated by February 2011 to reflect health insurance costs in case a W-2 is requested.
Tom Swayne is the president of David M. Gilston Insurance Agency, which supports insurance agents and brokers across South Carolina. www.dgilston.com
