Following Congress’ passage of historic health care reform legislation, three Harvard professors who have long been involved in health care issues, presented their views on the measure and what it bodes for the future on the Harvard Business School website.
Richard M. .J. Bohmer, contends that it will lead to further debate about managing the delivery of health care. Mr. Bohmer stated that the insurance aspects are but one concern in the overall health care problem, which also includes treatment concepts, disease management innovations, personnel restructuring, and information technology. “We need to make a distinction between debating how it will be paid for and what the ‘it’ is that will be paid for,” observed Mr. Bohmer.
Bill George regards the bill as a “momentous step” toward providing insurance coverage, but believes that there needs to be focus on the attendant issues of cost, quality, and lifestyle. Unless these other three challenges are addressed, Mr. George predicts that the U.S. will continue to have a dysfunctional system with unaffordable costs.
Regina E. Herzlinger, whom Money called the “godmother of consumer-driven health care,” believes the bill will result in spending that will damage the U.S. economy, and that its approach will lead to a government-controlled health care system. While she is encouraged by the move toward a universal health care model, she fears that the cost control mechanisms are ineffective, relying on the public health insurance marketplace or “exchanges,” which ctually involve only shifting costs, through deficits, cutbacks, and unfunded liabilities.
For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform and other developments in employee benefits, just click here.
Although one-fourth of employers anticipate that compliance with six major mandates of the Patient Protection and Affordable Care Act (P.L. 111-148), will boost their health care costs in 2011 by at least 3%, the greater proportion (41%) of employers see modest increases of 2% or less, and 30% did not know what the impact would be.These are among the findings of a recent survey by Mercer of nearly 800 employers.
In the survey, Mercer asked employers about the estimated impact of six mandates in the Affordable Care Act. The excise tax on high-cost plans (IRC Sec. 4980I, as added by Sec 9001(a) of the Affordable Care Act), which first takes effect in 2018, is of highest concern to employers—29% view it as a significant or very significant concern, another 29% see it as a “concern,” and 42% think it is not an issue or of slight concern.
The dependent coverage expansion to adult children up to age 26 (PHSA Sec. 2714, as added by Sec. 1001(5) of the Affordable Care Act) and the ban on lifetime dollar limits (PHSA Sec. 2711(a)(1), as added by Sec. 1001(5) of the Affordable Care Act), both effective in 2011, are each of significant concern to one-fifth of employers. Only 6% of survey respondents currently extend coverage to dependent children up to age 26. And although many insurers have agreed to begin to extend dependent coverage to adult children before the provisions’ effective date, for plan years beginning on or after Sept. 23, 2010, only about one-fourth (24%) of the survey respondents that don’t already cover children up to age 26 say they are likely to begin before their next renewal, which for most plans is January 2011. Large, self-insured employers are even less likely to act before they have to, Mercer reports: among respondents with 5,000 or more employees, just 16% say they are likely to implement this provision early.
To offset the potential increased cost of adding adult children to dependent coverage, half of surveyed employers would seriously consider requiring proof that adult children do not have coverage available to them through their own employers (before Jan. 1, 2014, grandfathered plans can exclude from dependent coverage adult children who have coverage available through another employer). One-fifth would seriously consider changing contribution rate tiers – for example, from just two rates for employee-only and family coverage, to four or more rates based on the number of dependents covered, shifting the additional cost to employees covering the most family members. Others (16%) likely will require higher contributions for all dependent coverage.
Another major provision of concern to employers is the requirement that they offer affordable coverage to part-time workers working an average of at least 30 hours per week during one month (IRC Sec. 4980H(c)(4)(A), as added by Act Sec. 1513(a) of the Affordable Care Act). This provision is of particular concern to retailers, 24% of them expressed a high level of concern, who use mostly part-time workers. Among the 26% of respondents that currently do not comply with the part-time worker health coverage offer, which goes into effect in 2014, one-fifth say they will strongly consider changing their workforce strategy so that fewer employees work 30 hours or more a week; 16% will strongly consider adding a lower-cost plan for these newly eligible employees rather than adding them to an existing plan for full-time employees. Few (8%) say they would pay the required penalty rather than make no or minimal changes to increase the number of eligible employees.
Automatically enrolling new hires in an employer-sponsored plan also is of significant concern for 16% of employers (FLSA Sec. 18A, as added by Sec. 1511 of the Affordable Care Act). Currently, the great majority of employers (88%) do not automatically enroll new hires into one of the employer’s plans. More than two-fifths (43%) of employers are strongly considering using the lowest cost plan as the default enrollment option (23% offer only one plan), and about one-fifth is considering imposing the maximum allowable waiting period (90 days) for eligibility.
Only 7% of respondents found of significant concern one other provision, that a plan pay for 60% of covered services to be a qualified plan in 2014 (Sec. 1301 of the Affordable Care Act).
“Average health benefit cost per employee has been rising consistently at about 6% for the past five years,” said Tracy Watts, a consultant in Mercer’s Washington, DC, office. “That seems to be employers’ threshold of pain. If compliance with health insurance reform pushes the cost increase up toward double digits, employers will be exploring ways to bring it back within their comfort zone.”
For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform and other developments in employee benefits, just click here.
Additional Tax on HSA and Archer MSA Distributions
(Note: Periodically, Health Reform Talk focuses on detailed explanations of specific provisions in the new health reform law. Click here for previous post on health reform provisions.)
So what’s included in Sec. 9004 of the Affordable Care Act, concerning the additional tax on HSA and Archer MSA distributions?
The additional tax on distributions from health savings accounts (HSAs) and Archer medical savings accounts (MSAs) not used for qualified medical expenses is increased to 20% of the amount of the distribution included in gross income.
Health savings accounts (HSAs) and Archer medical savings accounts (MSAs) provide tax-favored treatment for amounts that are contributed and used to pay the qualified medical expenses of the account beneficiary, his or her spouse, or dependent (IRC Secs. 220 and 223). Distributions are excludable from gross income if they are made for qualified medical expenses of the account beneficiary, his or her spouse or dependents. Distributions from an HSA or an MSA that are not used for qualified medical expenses are included in beneficiary's gross income and subject to an additional penalty, unless made after the beneficiary's death, or disability.
The additional tax on distributions made from HSAs not used for qualified medical expenses is increased from 10%to 20%of the amount includible in gross income. The additional tax on distributions made from Archer MSAs not used for qualified medical expenses is increased from 15 percent to 20 percent of the amount includible in gross income.
The increase in the tax imposed on nonqualified distributions from HSAs and Archer MSAs will not impact state taxation.
Effective date. The provision applies to distributions made after Dec. 31, 2010.
CCH Law, Explanation And Analysis Of Health Reform Act Available
CCH's Law, Explanation and Analysis of the Patient Protection and Affordable Care Act provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation.
CCH editorial staff, together with leading experts, provide clear and practical guidance on the many new areas of compliance in the law, so professionals can quickly understand, comply with new requirements, and plan for the future. Included inn the online version is the complete text of the law, integrating both the Affordable Care Act and the Health and Education Reconciliation Act. The book is available for $149.
For more information or to order, please call 1-800-248-3248 or click here. Discounts are available for multiple copies.
