Government to Reduce Premium, Ease Rules on Health Plans for Uninsured

The Federal Government will be making  health insurance more affordable and accessible for Americans who have been denied coverage because they are sick as part of Health Reform.   Premiums will be reduced for uninsured people with conditions such as cancer or diabetes.  Restrictions will also be relaxed on who may sign up for  preexisting condition insurance plans.

These plans were created by the health overhaul that President Obama signed last year. They are meant to provide temporary aid to sick Americans until 2014, when insurance companies will no longer be allowed deny coverage to people who are sick.

The number of people signing up for these plans has lagged, in part because of high premiums and stringent eligibility guidelines.  Premiums in some states could come down as much as 40%, thanks to a more refined analysis of what the plans should charge.

The administration is directly slashing premiums in the District of Columbia and most of the 23 states that have elected to have the federal government run their health plans. The remaining 27 states, which each run their own plans, will be able to reduce premiums, as well.

The administration will no longer require applicants for these plans to furnish a letter from an insurance company showing they had been denied coverage. Instead, applicants will need only a letter from a doctor, nurse or physician’s assistant stating they have a medical condition.  Applicants will still have to show they had been without coverage for at least six months.

The expansion of preexisting condition insurance plans is made possible by $5 billion that was set aside in the new law.  Because just 18,000 people nationwide had signed up for a plan, much of that has not been spent, according to the Department of Health and Human Services.

Additional information about signing up for a preexisting condition insurance plan is available at http://www.pcip.gov or by calling (866) 717-5826.

Federal Funding for Health Insurance Exchanges Repealed

 House Republicans voted on Tuesday to deny funding for a central element of the law that sets up marketplaces for people to shop for health insurance coverage.  The bill passed by the House of Representatives would rescind some $1.9 billion in grants that are being made available under the health care law to help states establish insurance exchanges where individuals and small businesses can shop for medical coverage plans.

Democratic Representative Frank Pallone said the effort to deny federal grants to the states would not kill the exchanges. Rather, it would make it harder for cash-strapped states to establish their own marketplaces and give more power to the federal government, Pallone said.

The health care law calls for the federal government to set up exchanges for states that fail to establish their own.

The nonpartisan Congressional Budget Office said the House bill would delay establishment of state exchanges and save $14.6 billion over the next 10 years mostly because fewer people would purchase government-subsidized insurance.

About 500,000 people would be without health coverage in 2015 because of the delay, CBO said in a recent analysis of the bill.

California Tax Change AB36 Passed Due to PPACA

California Assembly Bill (AB) 36 was enacted on April 7, 2011. This bill conforms California personal income tax law with federal income tax law by adopting a specified provision of the Affordable Care Act signed into law by the President in March 2010. (The Affordable Care Act refers to Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010.) AB 36 is effective immediately, and generally applies to the same taxable periods as federal law.  The Patient Protection and Affordable Care Act requires benefit plans that provide coverage for family members to cover adult children of the employee, to age 26 whether or not they qualify as dependents for tax purposes.  The Health Care and Education Reconciliation Act of 2010 extends the general exclusion for reimbursements for medical care expenses under an employer-provided accident or health plan to any child of an employee who has not attained age 27 as of the end of the taxable year.

Impact on Income Tax – The Affordable Care Act amends federal income tax laws to exclude the value of an eligible adult child’s medical coverage from the taxable income of the parent-employee, even if the child is not a dependent. The law also allows self-employed individuals a deduction for health insurance premiums for an adult child under age 27, even if the child is not a dependent.

New California law – California personal income tax law, as amended by AB 36, conforms to the 2010 federal income tax rules which exclude the value of the medical coverage provided to nondependent adult children from California gross income and allow a deduction to self-employed individuals for health insurance premiums for nondependent adult children under age 27.

  • Any amount paid by an employee for such additional coverage is excluded from California taxable wages.
  • Self-employed individuals may deduct the health insurance premium paid for an adult child under age 27.

How to File

Form 540 – On an original tax return

If the employer issued Form W-2 including the amount of medical coverage for your nondependent adult children in your California wages, contact your employer to have them issue you Form W-2C excluding the amount from your California wages. Use form FTB 3525 as a substitute for federal Form W-2C if your employer does not issue you a Form W-2C.

Self-employed individuals may deduct the health insurance premium paid for nondependent adult children under age 27. No California adjustment is needed.

Form 540X – On a previously-filed tax return

If you have already filed Form 540 with Form W-2 that included the amount of medical coverage for your nondependent adult children in your California wages, contact your employer to have them issue you Form W-2C excluding the amount from your California wages. Use form FTB 3525 as a substitute for federal Form W-2C if your employer does not issue you a Form W-2C. File Form 540X to report the reduction in your California wages.

For self-employed individuals who reported a California adjustment excluding the health insurance premium paid for nondependent adult children, file Form 540X to report the allowed deduction for California.

Please note we are not tax professionals.  Please refer to your tax advisor for information on how this may relate to your tax filing.

Form w-2 Reporting Requirements for Large Group Employers

Beginning in 2013, employer groups with more than 250 employees will need to report on Forms W-2 the cost of the group health coverage that they provide to their employees.  This will not apply to the following for the time being:

  • employers issuing fewer than 250 Forms W-2 in the previous year;
  • multiemployer plans;
  • health reimbursement arrangements;
  • stand-alone dental and vision plans (in other words, dental and vision plans that are not otherwise integrated or incorporated into comprehensive medical plans);
  • self-insured plans that are not subject to COBRA or similar Federal requirements; and
  • employers furnishing Forms W-2 mid-year to employees who terminate during that year.

For a fully-insured plan, the premium charged is the cost of coverage.  For a self-insured plan, the cost of coverage is the COBRA applicable premium.  In calculating this cost, the employer must be sure to comply with the requirements for calculating the COBRA premium provided in the COBRA statute.  If the employer subsidizes the cost of COBRA so that the premium charged to qualified beneficiaries is less than the COBRA applicable premium, the employer may determine the reportable cost based upon a reasonable good faith estimate of the COBRA applicable premium, if such reasonable good faith estimate is used as the basis for determining the subsidized COBRA premium.

 To prepare for this reporting obligation, employers should begin working with their payroll administrators to make sure that their systems are updated by the end of 2011, so that they can track the cost of any coverage provided in 2012 and report it on the Forms W-2 that will be issued in January 2013.

1099 Reporting Requirement Repealed

Legislation that would repeal the 1099 tax reporting requirement for businesses included in the Affordable Care Act (or the health care reform law) was signed by President Barack Obama today.  This now cancels the reporting requirement that  would have required businesses to file a 1099 form with the Internal Revenue Service every time they spent more than $600 a year with another business.  To offset the revenue losses by the repeal of this provision, the repeal legislation requires eligible individuals to repay the subsidies they are eligible for under the health care reform law if their income rises above 400% of the federal poverty level. Passage of the 1099 repeal legislation is considered a victory for business groups that have expressed opposition to the provision since the health care reform law’s passage last year, but this also represents the first time the health care reform law has been successfully changed.

Preventive Services Covered under the Affordable Care Act

If you have a new health insurance plan or insurance policy beginning on or after September 23, 2010, the following preventive services must be covered without your having to pay a copayment or co-insurance or meet your deductible. This applies only when these services are delivered by a network provider. 

Covered Preventive Services for Adults

  • Abdominal Aortic Aneurysm one-time screening for men of specified ages who have ever smoked
  • Alcohol Misuse screening and counseling
  • Aspirin use for men and women of certain ages
  • Blood Pressure screening for all adults
  • Cholesterol screening for adults of certain ages or at higher risk
  • Colorectal Cancer screening for adults over 50
  • Depression screening for adults
  • Type 2 Diabetes screening for adults with high blood pressure
  • Diet counseling for adults at higher risk for chronic disease
  • HIV screening for all adults at higher risk
  • Immunization vaccines for adults–doses, recommended ages, and recommended populations vary:
    • Hepatitis A
    • Hepatitis B
    • Herpes Zoster
    • Human Papillomavirus
    • Influenza
    • Measles, Mumps, Rubella
    • Meningococcal
    • Pneumococcal
    • Tetanus, Diphtheria, Pertussis
    • Varicella
  • Obesity screening and counseling for all adults
  • Sexually Transmitted Infection (STI) prevention counseling for adults at higher risk
  • Tobacco Use screening for all adults and cessation interventions for tobacco users
  • Syphilis screening for all adults at higher risk

Covered Preventive Services for Women, Including Pregnant Women

  • Anemia screening on a routine basis for pregnant women
  • Bacteriuria urinary tract or other infection screening for pregnant women
  • BRCA counseling about genetic testing for women at higher risk
  • Breast Cancer Mammography screenings every 1 to 2 years for women over 40
  • Breast Cancer Chemoprevention counseling for women at higher risk
  • Breast Feeding interventions to support and promote breast feeding
  • Cervical Cancer screening for sexually active women
  • Chlamydia Infection screening for younger women and other women at higher risk
  • Folic Acid supplements for women who may become pregnant
  • Gonorrhea screening for all women at higher risk
  • Hepatitis B screening for pregnant women at their first prenatal visit
  • Osteoporosis screening for women over age 60 depending on risk factors
  • Rh Incompatibility screening for all pregnant women and follow-up testing for women at higher risk
  • Tobacco Use screening and interventions for all women, and expanded counseling for pregnant tobacco users
  • Syphilis screening for all pregnant women or other women at increased risk

Covered Preventive Services for Children

  • Alcohol and Drug Use assessments for adolescents
  • Autism screening for children at 18 and 24 months
  • Behavioral assessments for children of all ages
  • Blood Pressure screening for children
  • Cervical Dysplasia screening for sexually active females
  • Congenital Hypothyroidism screening for newborns
  • Depression screening for adolescents at higher risk
  • Developmental screening for children under age 3, and surveillance throughout childhood
  • Dyslipidemia screening for children at higher risk of lipid disorders
  • Fluoride Chemoprevention supplements for children without fluoride in their water source
  • Gonorrhea preventive medication for the eyes of all newborns
  • Hearing screening for all newborns
  • Height, Weight and Body Mass Index measurements for children
  • Hematocrit or Hemoglobin screening for children
  • Hemoglobinopathies or sickle cell screening for newborns
  • HIV screening for adolescents at higher risk
  • Immunization vaccines for children from birth to age 18 —doses, recommended ages, and recommended populations vary:
    • Diphtheria, Tetanus, Pertussis
    • Haemophilus influenzae type b
    • Hepatitis A
    • Hepatitis B
    • Human Papillomavirus
    • Inactivated Poliovirus
    • Influenza
    • Measles, Mumps, Rubella
    • Meningococcal
    • Pneumococcal
    • Rotavirus
    • Varicella
  • Iron supplements for children ages 6 to 12 months at risk for anemia
  • Lead screening for children at risk of exposure
  • Medical History for all children throughout development
  • Obesity screening and counseling
  • Oral Health risk assessment for young children
  • Phenylketonuria (PKU) screening for this genetic disorder in newborns
  • Sexually Transmitted Infection (STI) prevention counseling and screening for adolescents at higher risk
  • Tuberculin testing for children at higher risk of tuberculosis
  • Vision screening for all children

While it’s easy to simply say that preventive care is covered at 100%, the actual administration of this benefit is exceedingly complex. Here are some common concerns and things you can do now to address them:

* Eligible expenses. Some items on the list of covered services are not currently covered under most medical plans, such as aspirin, fluoride and iron supplements.   We recommend providing the list of covered items to your insurer early and ask them about their plan to address these types of items. If they do not yet have a plan of action, request semi-annual updates on the status.

* Participant confusion. Finding a clear definition of the difference between preventive and routine care, and educating your participants, is also key.  Many services that a participant considers preventive are not, such as screening for skin cancer, follow-up care and colon cancer screenings for individuals under age 50.  We recommend requesting a list from your insurance company of the items considered preventive care and make this easily available internally to assist with minimizing confusion.

As a precaution, we recommend contacting either your carrier or insurance broker to determine how any of the above items will be covered by your insurance carrier.