This page is an archived HR news item and may not reflect current university policies or procedures. Items with older posting dates may contain links to web pages that may be expired. References to individuals or groups may or may not be current or valid.

Federal Health Care Reform Legislation

Posted: May 18, 2010

The Health Care Reform Bill: What will impact the UVA Health Plan and what won’t?

Key provisions of the bill that could impact the UVA Health Plan or U.Va. employees:

  • Coverage for adult children. Group health plans would be required to extend coverage to adult children up to the age of 26 if the children do not have access to employer-sponsored group coverage. Note that such coverage will be excludable from federal income taxes. Effective within 6 months of passage—or plan year beginning after this effective date. For U.Va., this would be effective for the 2011 plan year (employees will be able to elect this benefit during our open enrollment period in November 2010).

Please note: A “child” includes a son, daughter, stepchild, adopted child or eligible foster child, regardless of whether they are dependents under the tax code. Married children can be covered, but the benefit does not extend to their spouses and children.

  • Elimination of lifetime benefit maximums. Group plans will be required to eliminate lifetime benefit maximums. Restrictive annual limits also will begin to be phased out. The Secretary of Health and Human Services will issue a determination on what constitutes “restrictive” annual limits.

  • Flexible Spending Accounts (Cap). A cap on maximum contributions to a health FSA will be set at $2,500 per year, effective in 2013.

  • Flexible Spending Accounts (OTC purchases). As of January 2011, over-the-counter (OTC) drugs and products will no longer be eligible for purchase through the FSA program.

  • Automatic enrollment of employees. Employers with 200 or more employees are required to automatically enroll employees in their group health plans, unless the employee is already enrolled in another plan or is eligible for the cost exemption. This automatic enrollment would become effective in 2014.

  • Tax on high income individuals. Effective 2013, individuals earning more than $200,000 a year and couples earning more than $250,000 per year would pay a higher Medicare payroll tax of 2.35 percent on earnings, up from the current 1.45 percent. An additional 3.8 percent tax would be applied on unearned income such as dividends and interest for individuals over the income threshold.

  • Individual mandate. Americans would be required to have insurance by 2014 or pay a penalty. The penalty would start at $95, or up to 1 percent of income, whichever is greater, and rise to $695, or 2.5 percent of income, by 2016. The maximum penalty imposed on a family would not exceed $2,085 per year.

  • Implementation of retiree reinsurance program. The bill implements a temporary reinsurance program for employers who offer early retiree coverage (for persons ages 55 through 64 who are not eligible for Medicare). The program will reimburse employers or insurers for 80 percent of retiree claims between $15,000 and $90,000. Payments from the reinsurance program would be used to lower the costs for enrollees in the employer plan. This provision would be effective 90 days after enactment of the bill through January 1, 2014.

Key provisions of the bill that will NOT impact the UVA Plan or U.Va. employees:

  • Elimination of pre-existing condition exclusions. Group health plans would be prohibited from imposing preexisting condition exclusions. This provision would become effective in 2014. The UVa Plan does not exclude pre-existing conditions so this legislation has no effect.

  • Penalty for offering “unaffordable” employee coverage. Employers with more than 50 employees who offer coverage that is “unaffordable” (premiums for coverage elected by the employee that exceed 9.5 percent of the family income) will be charged $3,000 per full time employee who enrolls in an “exchange” plan and receives a government subsidy. This penalty would become effective in 2014. The UVA plan premiums are considerably below the threshold.

  • Vouchers for employees eligible for “unaffordable plans”. Employees with incomes less than 400 percent of the federal poverty level (FPL) who are exempt from enrolling in their employer plan due to its high cost will be allowed to enroll in an insurance exchange. In order to avoid the $3,000 tax per employee, an employer can offer an employee a voucher equivalent to the employer’s contribution toward health care coverage under their group health plan. The employee would use the voucher to purchase coverage from the exchange and excess funds would be paid out to the employee in the form of cash. This provision would become effective in 2014. The UVA Plan does not offer an “unaffordable” plan.

  • Elimination of excessive waiting periods. Employers may no longer impose a waiting period for eligibility for benefits of more than 90 days. This provision would become effective in 2014. Benefits under the UVA Plan are available to employees the first of the month after they are employed. The UVA Plan does not impose a waiting period.

  • Excise tax on “Cadillac” plans. Insurers and self-insured plans will be charged a 40 percent tax on health insurance premiums in excess of $10,200 for individual coverage and $27,500 for family coverage (higher thresholds for plans covering retirees and certain high-risk industries). The tax excludes dental and vision premiums from the calculations. This new tax would become effective for all plans in 2018. The UVA plan would not qualify as a “Cadillac Plan” because the rate structure is considerably below the thresholds stated in the bill.

This page is an archived HR news item and may not reflect current university policies or procedures. Items with older posting dates may contain links to web pages that may be expired. References to individuals or groups may or may not be current or valid.