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Employee Benefits

Health Care Overhaul:
What Happens When

A blow-by-blow rundown of when and how the health care bill will take effect.

The 2,400-page health care bill will gradually take effect over the next eight years, with many of the more popular provisions kicking in now, and more of the costs coming later. Here is a year-by-year rundown of what happens when:

In 2010:
• Provides tax credits to small employers with no more than 25 workers and average annual wages of less than $50,000 if they purchase health insurance for employees.

• Creates a temporary reinsurance program for employers that provide health insurance coverage to retirees over age 55 who are not eligible for Medicare. Effective 90 days after the bill’s signing.

• Establishes a temporary national high-risk pool to provide health coverage to individuals with preexisting medical conditions. Effective within 90 days of enactment.


• Requires that all individual and group policies offer dependent coverage for children up to age 26.

• Provides a $250 rebate to Medicare beneficiaries who reach the Part D coverage gap in 2010.

• Prohibits individual and group health plans from placing lifetime limits on the dollar value of coverage; prior to 2014, plans may only impose annual limits on coverage as determined by the Secretary of Health & Human Services. Prohibits insurers from rescinding coverage except in cases of fraud and prohibits preexisting condition exclusions for kids.

• Requires qualified health plans to provide, at a minimum, coverage without cost sharing for preventive services rated A or B by the U.S. Preventive Services Task Force, recommended immunizations, preventive care for infants, children and adolescents and additional preventive care.


In 2011:
• Requires employers to disclose the value of health benefits on workers’ W-2 IRS forms.

• Provides free preventive services to Medicare beneficiaries, such as screenings for colon, prostate and breast cancer.

• Sharply cuts government payments to Medicare Advantage, the private plans that wrap Medicare and supplemental benefits in a HMO/PPO-type package.

• Provides a 10% Medicare bonus to primary care doctors and general surgeons practicing in areas with shortages.


• Offers grants for up to five years to small employers that establish wellness programs.

• Creates a national, voluntary long-term care insurance program to help seniors buy services so they can continue to live in their community rather than a nursing home.

• Sets up a five-year demonstration program with grants to states to study alternatives to malpractice litigation.

• Requires chain restaurants and vending machines to disclose the nutritional content of each food item available for sale.


• Bars Health Savings Accounts, Flexible Spending Arrangements and Health Reimbursement Arrangements from reimbursing participants for over-the-counter drugs unless they are prescribed by a physician.

• Doubles (to 20%) the tax on distributions from an HSA that are not used for qualified medical expenses.

• Provides Medicare Part D beneficiaries who reach the “doughnut hole” a 50% discount on brand-name drugs.

• Imposes an annual fee on drug companies based on market share.

In 2013:
• Eliminates the deduction that employers now take for providing Medicare Part D Rx drug coverage to their retirees.

• Increases the threshold, from 7.5% to 10% of adjusted gross income, above which medical expenses can be itemized on Schedule A of the annual income tax form. Taxpayers age 65 and older will be exempt from this change through 2016.

• Limits contributions to an FSA for medical expenses to $2,500 per year, increased annually by the cost of living adjustment.

• Raises the Medicare Part A (hospital insurance) tax rate on wages by 0.9% on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly. There also would be a 3.8% assessment on unearned income for higher-income taxpayers.

• Imposes an excise tax on the sale of medical devices, except for items purchased at the retail level by the public.

In 2014:
• Mandates that all U.S. citizens and legal residents have health insurance. There would be a phased-in tax penalty for those without coverage, starting at the greater of $95 or 1% of income, in 2014, and rising to the greater of $695 or 2.5% of income in 2016.

• Mandates the start of operations for state-based Health Insurance Exchanges to serve as a marketplace in which individuals and small businesses can buy health insurance.

• Imposes fines on employers with 50 or more workers that do not offer coverage. The fine will equal $2,000 per worker, although the first 30 workers would not be counted.

• Limits any waiting period for coverage to 90 days.

• Provides a refundable tax credit to help low-income folks buy coverage. To be eligible, a person’s household income must be between 100% and 400% of the federal poverty level, generally around $11,000 to $44,000 for singles and $22,000 to $88,000 for families.

• Expands Medicaid to all individuals under age 65 with incomes up to 133% of the poverty level.

• Allows employers to offer employees rewards of up to 30% of the cost of coverage (possibly increasing to 50%) for participating in a wellness program and meeting certain health related standards.

• Establishes an Independent Payment Advisory Board made up of 15 members to submit recommendations to Congress to reduce the growth of Medicare spending if spending exceeds a target growth rate. • Requires that health insurance companies start paying fees to the government based on market share.

In 2018:
• Imposes an excise tax on high-cost health plans, defined as those providing coverage in excess of $10,200 for individuals and $27,500 for families.

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