The new health care law (a combination of the Patient Protection and Affordable Care Act, PL 111-148) and the Health and Education Reconciliation Actg of 2010 (PL 111-152)) contains a wide range of provisions that will be implemented over the next several years, with the most significant changes taking effect in 2014. Here is a timeline of the provisions that have the greatest impact on restaurants.
Health Care Reform Becomes Law
Congress passes and President Obama signs the Patient Protection and Affordable Care Act into law on March 23. The Health and Education Reconciliation Act of 2010 was signed on March 30, 2010. Combined, the health care provisions of these two laws make up what is known as the new health care law.
Small Business Tax Credit
Certain small businesses that provide health benefits to their employees are eligible for health care tax credits of up to 50 percent of the cost of providing coverage, determined by the size of their workforce, their wages and the employer contribution toward health benefits. The credit, which starts at a maximum of 35 percent and increases to 50 percent after 2014, is targeted specifically to help businesses and organizations that employ moderate- and low-income workers. Employers must pay at least 50 percent of the premium for less than 25 full-time-equivalent employees with wages under $50,000 to be eligible to use the tax credit.
Dependent (Adult Child) Coverage -- Up to Age 26
Plans that provide coverage for dependents are required to extend the coverage to age 26, regardless of participants’ eligibility for other insurance coverage, effective Sept. 23, 2010. Plans must provide coverage to all eligible dependents, including those who are not enrolled in school, not dependents on their parents' tax returns, and those who are married.
Other insurance reforms also went into effect on Sept. 23, 2010, including no recission of coverage, no lifetime limits, and other reforms.
Small Business Wellness Grants
The law makes available about $200 million in grants from 2011 to 2015 to employers with 100 employees or less who work 25 or more hours a week. The grants are designed to fund new comprehensive health promotion programs for small employers.
The Internal Revenue Service will require employers who file 250 or more W-2 forms per year to report the total cost of employer-provided medical benefits on employee W-2 forms, beginning with the 2012 tax year. Although the value of health benefits is reportable on the W-2, it is not taxable. All other employers must comply with this reporting mandate for tax year 2013.
Notification to Employees
Beginning in late summer or early fall 2013, employers must inform all current employees and any new hires after this date about the existence of the exchange in their state and how employees can access it. The Labor Department has indicated it will issue guidance and a template about how the information must be provided.
FICA Tax Increases
Beginning in 2013, higher-income taxpayers pay a 3.8 percent Medicare tax on unearned income. This is the first time Medicare taxes have been assessed on investment income. The tax applies to taxpayers with incomes in excess of $200,000 (single filers), $250,000 (married filing jointly) and $125,000 (married filing separately).
These higher-income taxpayers also pay the 3.8 percent Medicare tax on wages above $200,000 (single), $250,000 (married filing jointly) and $125,00 (married filing separately). This boosts an employee's Medicare tax rate by .9 percent, moving it from 1.45 percent on wages below the wage thresholds to 2.35 percent on wages above the thresholds.
The employer is responsible for withholding the extra .9 percent on wages it pays to an employee in excess of $200,000 in a calendar year. NOTE: The extra .9 percent on higher wages is paid by employees only; there is no "employer match" required. Medicare taxes remain 2.9 percent on wages up to $200,000 (split between employers and employees at 1.45 percent each, with the self-insured paying the full 2.9 percent). The IRS offers a Q&A to help answer employers' questions.
Flexible Spending Accounts Limited
Beginning in 2013, employees' contributions to flexible spending accounts are limited to $2,500.
Exchange open enrollment
Beginning October 1, 2013, individuals will be able to enroll in coverage purchased on the exchanges for plans beginning January 1, 2014. Based on Massachusetts’s experience with an exchange, many people are expected to look into coverage through an exchange.
mployers with 50 or more full-time-equivalents must offer “minimum essential coverage” to all employees who average 30 or more hours a week in a given month, or potentially be liable for penalties. How calculations are made, how often, and how penalties will be assessed is the subject of current regulatory action by the Department of Treasury.
Employers with 200 or more full-time employees must automatically enroll their full-time employees into one of the plans the employer offers after the applicable waiting period. However, the Department of Labor has concluded that its automatic-enrollment guidance on this section of the law (Section 18A of the Fair Labor Standards Act) will not be ready to take effect by 2014. The DOL says employers will not be required to comply with FLSA Section 18A until final regulations are issued and become applicable.
90-Day Waiting Period
All group health plans are allowed up to a 90-day waiting period before offering coverage. The IRS in August 2012 offered preliminary guidance on implementation of the 90-day rule, but has not provided a proposed regulation on the 90-day waiting period yet.
The law requires most individuals to obtain basic health insurance coverage, through their employers, state exchanges, Medicaid/Medicare, or elsewhere, or face an annual tax penalty. In 2014, the tax penalty will be $95 for not obtaining minimum coverage.
State Health Insurance Exchanges
Each state must establish an American Health Benefit Exchange by Jan. 1, 2014, to provide affordable health care options to individuals and small group employers. If they choose not to, the Department of Health and Human Services will set up and operate one in that state. The exchanges are envisioned as marketplaces that will offer individual and small group plans that are administered by private insurance companies. It is anticipated that all restaurateurs will have a great deal of interaction with the exchanges in their states, even if they do not purchase coverage through the exchange, because of the reporting requirements in the law. If employees go to the exchange for coverage they will be asked to provide:
- employer contact information and identification number;
- whether the applicant is employed on a full-time basis;
- whether the employer offers minimum essential coverage (affordable and of minimum value);
- and if so, the required employee contribution to the employer’s lowest-cost plan.
Exchange reinsurance fee
From 2014 to 2016 health insurers and self-funded plans will be required to contribute to a fund that will be used to make sure the exchanges function properly. This will be accessed on a per-capita basis of $5.25 a month or $63 in the first year. Small employers can expect to see some of these costs passed down by health insurers.
From 2014 to 2016, only individuals and small group employers are eligible to participate in the state exchanges; beginning in 2017, states may elect to allow large group plans (100-plus) to be sold on the exchange as well. States may also form regional exchanges.
Beginning in 2018, the law imposes a new 40 percent excise tax on the value of coverage that exceeds certain dollar thresholds. For 2018, the dollar thresholds for the excise tax are $10,200 for individual coverage and $27,500 for family coverage.