<em>Legally</em> <strong>Speaking</strong>


What you need to know about health care reform
Jim Juliano - Spring 2011

The days of shopping for new health care insurance every year or two are over. Under federal health care reform, you need a professional who understands the trapdoors of changing plans and the tactics needed to successfully plan ahead as the various provisions of the new act take shape over the next several years.

The Patient Protection and Affordable Care Act was signed into law and made effective on March 23, 2010, with certain provisions to be phased in through Jan. 1, 2018. Congress enacted a quick amendment, effective March 31, 2010. We will refer to these two acts of Congress as the new act.

While Congress grapples with possible changes and some states have taken up court challenges, certain provisions of the new act are the law of the land and are likely to remain in effect. If you haven't already, you should adapt your plan, ideally with the assistance of an insurance professional, or make sure your health insurance carrier has implemented any needed revisions to bring your plan into compliance.

Following is an overview of the changes under the new act.

Mandatory changes for all plans

  • Plans that provide dependent coverage must make coverage available to dependent children until age 26, effective for plan years beginning on or after Sept. 23, 2010.

  • Also effective Sept. 23, 2010, plans are prohibited from imposing lifetime dollar limits on essential benefits. Until 2014, only certain restricted annual dollar limits on essential benefits are permitted. Beginning in 2014, all annual dollar limits are prohibited.

  • Plans may not rescind coverage except in cases of fraud or intentional misrepresentation.

  • Plans may not refuse coverage based on pre-existing conditions for participants under age 19. Beginning in 2014, this prohibition applies to all ages.

  • Starting with the first plan year beginning on or after January 2014, no plan may impose a waiting period for coverage of more than 90 days.

Required changes that may be deferred

These changes apply to any group health plan, effective for plan years after Sept. 23, 2010, but may be deferred under the new act's grandfather status requirements, so long as the plans remain essentially unchanged in key ways:

  • Plans must provide coverage for certain preventive care services, including immunizations, with no cost-sharing by the participant.

  • Plans must provide patient protections, including choice of primary care physician or pediatrician in network, direct access to an ob-gyn without a referral, coverage of emergency services without preauthorization and out-of-network emergency services covered at essentially the same level as in-network.

  • Plans must provide an enhanced claims appeals process for claim denials.

  • Plans must make claim denial information, claim payment policies, financial disclosures and disenrollment data available to the public. Plans must also report quality of care to the U.S. Department of Health and Human Services.

A plan may lose its grandfather status—meaning these changes cannot be deferred—if it does any of the following:

  • Changes its insurance policy, certificate or contract of insurance.

  • Eliminates all or substantially all of the benefits used to diagnose or treat a particular condition.

  • Decreases the employer contribution rate for any tier of coverage by more than 5 percent below the March 23, 2010, contribution rate.

  • Increases a fixed amount of payment by the employee above the March 23, 2010, amount by more than $5 or medical inflation plus 15 percent, as measured from March 23, 2010.

  • Increases the deductible or out-of-pocket limit above the March 23, 2010, amount by more than medical inflation plus 15 percent, as measured from March 23, 2010.

  • Increases the percentage of a cost-sharing requirement above the March 23, 2010, level.

  • Decreases or imposes a new annual limit on the dollar value of benefits payable.

Grandfather status is determined on a package-by-package basis. A plan may make some changes without losing grandfather status.

A plan may raise overall premiums, so long as this does not shift an impermissible share of the burden of that increase to the employees.

A plan may enroll new participants and family members, and it may make changes to comply with federal or state legal requirements, including changes to comply with the new act.

Large and small employers

The new act also introduces special incentives for small employers to provide health insurance for their employees. Large employers are penalized if they do not offer insurance for their full-time employees and if they do not offer affordable coverage for all their employees.

A small employer is defined by the law as one that has fewer than 25 full-time equivalent employees and average annual wages of less than $50,000.

Starting in 2010, a small employer that contributes at least 50 percent of the cost of single coverage toward buying health insurance for employees is eligible to receive a tax credit of up to 35 percent of its contribution. A full premium credit will be available to very small employers (those with 10 or fewer full-time equivalent employees and average annual wages of $25,000 or less).

Starting in 2014, the small business tax credit jumps to up to 50 percent of the employer's contribution toward the employee's health insurance premium, if the employer provides at least half of the total premium cost. This increased credit will be available for two years.

Also starting in 2014, large employers (those with 50 or more full-time employees) that do not offer coverage to their full-time employees will have to pay $2,000 annually for each full-time employee over the first 30, if at least one of their employees receives a premium tax credit.

If a large employer offers coverage but its employees receive premium tax credits, the employer will have to pay $3,000 for each worker receiving a tax credit to an aggregate cap of $2,000 per full-time employee.

Premium tax credits will be available, starting in 2014, to individuals with household incomes of less than 400 percent of (four times) the federal poverty level, those whose employer-sponsored coverage requires employee contributions of more than 9.5 percent of household income and those whose employer-sponsored coverage covers only 60 percent of the total allowed cost of benefits under the plan.

We hope this brief survey will give you some orientation as to the extent of the changes that are here and more so the changes that are down the road.

We are available to answer your questions, but an insurance consultant who is familiar with the insurance provisions would be a valuable addition to your professional team.



This website contains general information that should not be considered legal advice or legal opinion concerning individual situations. Legal counsel should be consulted for specific advice.

Copyright 2011 by L. James Juliano Jr.
Legally Speaking® is a registered trademark of the law practice of L. James Juliano Jr.