Federal Health Care Reform Update
President Obama signed the Patient Protection and Affordable Care Act (also referred to as “health care reform”) into law on March 23, 2010. Shortly after, a reconciliation bill was also signed into law by President Obama.
Provisions of the legislation will take effect over time with additional regulations and guidance issued, as well as possible amendments to the Act by Congress. A timeline with key provisions that may impact cities is provided below. Additional details are provided for those provisions that have a more immediate impact. The League will provide updates as guidance is issued or changes are made.
Health care reform tools
- FREE Health Care Reform Workshops
LMC has partnered with Gallagher Benefits to offer several workshops throughout the state to help cities understand the implications and avoid penalties.
Read more and register now
- Phone consultation with Gallagher Benefits
In partnership with Gallagher Benefits, the League is offering and subsidizing a half-hour phone consultation for a limited number of member cities with a Gallagher consultant who specializes in employee benefits and health care reform. This service will be especially helpful for cities that are on the borderline between being a large and small employer. This service is limited to 100 cities and available only until Aug. 30, 2013. If you would like to take advantage of this free consultation, please contact HR Manager Donyelle Mikacevich, email@example.com or (651) 281-1202. Act fast as this service is limited.
- Additional consulting services
The League has also negotiated a reduced rate for cities who may be interested in contracting with Gallagher on an individual basis. In this service, Gallagher will provide answers to individual questions and offer suggestions to cities on how best to comply with Health Care Reform and provide access to Gallagher’s compliance and health care reform newsletters, bulletins, webinars and seminars. The rate for this service is based on population. For cities under 10,000 population, the retainer is $500 a month for a minimum of a three-month commitment or $300 a month for a six-month commitment. For cities over 10,000 population (likely to meet the 100 FTE mark), the rate is $500 a month for a minimum of a six-month commitment.
- Financial modeler
Gallagher has also developed a financial modeler that will allow cities to calculate the potential cost of health care reform and has the potential to be a helpful tool with workforce planning. This tool is available for purchase by cities who are not currently clients of Gallagher, at a cost of $2,500 which includes a phone consultation to discuss the results. If additional consultation is desired, additional fees may apply.
- NEW! “MNsure”–New Minnesota Insurance Marketplace
Under federal health care reform, states are required to either create a state “health insurance exchange” or use one supported by the federal Department of Health and Human Services. Minnesota has chosen to create its own exchange, and legislation was signed by Gov. Dayton on March 20, 2013, creating “MNsure,” the new Minnesota Insurance Marketplace.
Read more about MNsure (pdf)
- Employer Shared Responsibility Requirements
One of the biggest issues facing cities is determining if they are a large or small employer for purposes of health care reform and how seasonal employees affect that determination. This new document created by Gallagher Benefit Services explains how to account for full-time, part-time and seasonal employees.
View the document (pdf)
- Health care reform and the small employer
While most health care reform provisions apply to employers uniformly, regardless of size, there are a few provisions that may benefit small employers. A new document created for the League by Gallagher Benefit Services explains those provisions.
View Health Care Reform Provisions Unique to Small Employers (pdf)
- Health care reform timeline
This timeline, created by Gallagher Benefit Services, shows key changes for employers taking effect over the next few years.
Access the timeline
- Health Care Reform FAQs
This is an extensive list of frequently asked questions and answers about health care reform, prepared by Gallagher Benefit Services.
View the FAQs (pdf)
IRS amends interim guidance on W-2 reporting requirements
On Jan. 4, 2012, the Internal Revenue Service issued further guidance on the reporting of health care coverage on 2012 W-2s. This reporting is for informational purposes only and is intended to inform employees of the cost of their health care coverage. Reporting in 2011 is optional for all employers.
Small employers, those that issued fewer than 250 W-2s in 2011, are exempt from the reporting requirement until at least 2014 and possibly longer. Employers that provide coverage under a self-insured plan that is not subject to any federal continuation coverage requirements (generally those with fewer than 20 employees) are also excluded from this reporting requirement.
For other employers, health care coverage costs will have to be reported on 2012 W-2s, which are issued in 2013. As mentioned earlier, reporting in 2011 is optional for all employers.
Other issues addressed include:
- Dental and vision coverage are not to be included if those plans are separate from the group medical plans.
- Amounts contributed to any health savings accounts or health flexible spending accounts are not included in the aggregate reportable cost.
- Employers have the option to report contributions to health reimbursement arrangements as part of the cost calculation.
- An employer may apply any reasonable method of reporting the cost of coverage for an employee who terminated employment during the calendar year. (Example 1: Report only for the months the employee was employed. Example 2: Report for the months the employee was employed as well as the time period the employee elects continuation coverage). Either is acceptable provided that the method is used consistently for all employees who terminate employment during that plan year.
- If an employee terminates before year end and requests a W-2 at that time, employers are not required to report health care costs for that employee.
- The cost of coverage that is taxable to employees, such as for a child over age 26, must be reported on the W-2.
- Employers do not have to report for retirees who receive health coverage if they do not receive a salary.
- The aggregate reportable cost is reported on Form W-2 in box 12, using code DD.
This interim guidance is applicable until any further guidance is issued.
View information on methods of calculating the cost of coverage and the full interim guidance (pdf)
Other key provisions
Key health reform provisions that cities need to think about and take action on now or very soon include:
- Early Retiree Reinsurance Program.
- Expansion of dependent coverage—state definition of dependent amended for 2010 tax year.
Early Retiree Reinsurance Program
This program provides temporary reimbursements for employers providing health insurance coverage to early retirees age 55 and older who are not eligible for Medicare to help offset the cost of providing this coverage. This program began on June 1, 2010, and ends on Jan. 1, 2014.
—Read more about the Early Retiree Reinsurance Program
Dependent coverage expanded to age 26
Health reform deals with two aspects of covering “adult children”—expanded coverage and federal tax consequences.
Expanded coverage: For plan years beginning after Sept. 23, 2010, dependent coverage is expanded to age 26 regardless of financial dependency, full-time student status, or marital status. This applies to all group health plans, including medical, dental, health flexible spending accounts (health FSAs), health reimbursement arrangements (HRAs and VEBAs), etc., but does not include health savings accounts (HSAs).
Tax consequences: Effective March 31, 2010, group health plan coverage (including health FSAs and HRAs/VEBAs) provided to the employee’s “adult child” is now excluded from the employee’s income for federal income tax purposes. The tax benefit is available until the end of the calendar in which the adult child turns age 26.
Note: On March 21, 2011, Gov. Dayton signed into law Chapter 8 which excludes from state income tax the value of health insurance for adult children to age 26 for the 2010 tax year. Employers were not required to issue new W-2 forms if they had already issued W-2s showing the value of health insurance coverage provided to these adult children. Tax committees are working on a conformity bill that would fix this issue for tax years after 2010.
—Read more about expansion of dependent coverage
—Read more about key near-term provisions
—Read about key long-term provisions starting in 2013 and beyond
Following are links to additional resources:
- HealthCare.gov website: This is the official government web site for health care reform. You can register to receive free alerts and updates from the U.S. Department of Health & Human Services as regulations and guidance are issued.
Visit the HealthCare.gov website
- Internal Revenue Service: Some guidance on health care reform will be issued by the IRS. Search “health care reform” or “affordable care act.”
Visit the IRS website