Health Care and Your Benefits

The passage of the recent health care reform bill, as historic and unprecedented as it may be, has left many Americans confused and questioning what exactly this bill will do for them. According to CNN Money, the new health care legislation’s first changes will be seen in benefits from employer-based insurance.

Though it is not required that companies make immediate changes to their insurance plans, they will incorporate several federally mandated modifications by open enrollment time later this year, said Tracy Watts, partner with employee benefits consulting firm Mercer. The health care changes will come into effect in 2011, followed by more changes phased in until the law becomes fully implemented in 2018 or later.

Watts said that some of the changes will increase costs for employers, and companies could share more of that burden by charging employees higher deductibles and premiums. What exactly should you expect in 2011? Here’s what CNN Money has to say.

Dependent Coverage to Age 26

Watts notes this as one of the most significant changes. As of now, there are different laws that vary from state to state regarding the timeframe for independent coverage. Usually, employers provide coverage for dependents until they reach age 22 or 23.

In 2011, however, employers will be required to provide coverage for dependents of employees who don’t have access to other employer-based health care benefits until age 26, with the exception of a few states that require this coverage until age 28 or 29. Watts said this stipulation could raise costs for companies, but the actual increase in companies’ costs will depend on how many workers they have with dependents in this age range.

“This measure goes into the ‘cost increase’ column for employers and could potentially result in higher premiums for employees overall,” Watts said.

No Lifetime Dollar Limits

Quite a few employer-based health insurance plans have lifetime maximum limits on insurance of $1 or $2 million. The reform bill eliminates all lifetime caps, said Watts.

“This is a very good benefit for employees. In the event of a catastrophic accident or illness, employees no longer have to worry that their benefit will run out,” Watts said.

No Reimbursement for Over-the-Counter Drugs

Now, employees can be reimbursed for the money they spend on over-the-counter drugs from their flexible spending accounts (FSA) or Health Savings Account (HSA) to buy over-the-counter drugs. These accounts usually allow individuals and their families to pay for out-of-pocket medical expenses not covered by their insurance plans with tax-free dollars.

The reform bill removes these reimbursements when the accounts are tapped for buying non-prescription drugs, according to Watts.

Higher Penalty for Misusing Health Savings Accounts

The new reform bill brings stricter consequences for employees who use their HAS money for non-qualified medical expenses.

Watts said, “The most frequent example of a non-qualified expense is if you use your HAS money to buy a flatscreen TV.”

The new bill, however, will increase the penalty from 10% to 20% of the value of the offending claim.

Report Health Coverage on W-2 Forms

Upon the implementation of the new bill, employers will be required to report the value of an employee’s health care plan on filed W-2 forms.

According to Watts, “This is not the value of your claims but the value of the coverage you elected.”

Cap on Flexible Spending Account Contributions

This change won’t be implemented until 2013, but when it is put into effect it will limit employee contributions to FSAs to $2,500 a year. Many employers have their own caps on FSA contributions, and the cap for federal employees is currently $5,000.

Watts said, “This seems like a significant change but our surveys shows that the average amount put into an FSA is typically $1,500 a year.”