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Thursday, May 6, 2010
How Will the Healthcare Reform Act Affect Construction Firms?
Love it or hate it, comprehensive healthcare reform is a reality - at least until the lawsuits reach the Supreme Court and the midterm election results are tallied. So, what does the new law mean for construction companies?
If your firm already provides a qualified healthcare benefit that does not include prescription drug coverage for retirees, the answer is, "not much." At least, not for several years. That's good news, considering the Senate version of the bill contained the onerous Merkley Amendment that would have forced all but the smallest construction companies to provide health insurance or pay a fine. The amendment, which singled out construction firms (it applied to companies with as few as six employees while the threshold for other industries is 50 workers) was removed from the House version and the final bill that was signed by President Obama.
While smaller contractors will be spared this additional expense, those with 50 or more full-time workers must comply or face a fine of $750 per full-timer. What's more, employees must be enrolled immediately to avoid penalties for imposing waiting periods.
Although the smaller companies will not be compelled to offer healthcare insurance, the new acts do offer incentives to entice them to provide the benefit to their workers. Companies with 25 or fewer employees can take advantage of tax credits for offering insurance. Down the road - starting in 2014, companies with 100 or fewer workers can form a "buyers group," banding together to act as one large company for insurance purchasing purposes. This pooling of assets and risks will allow them to take advantage of volume discounts from insurance providers. And businesses with 50 or fewer employees can access a "health insurance exchange," a one-stop shop for comparing rates and benefits.
If your company is small enough not to have to worry about this employer mandate, the most immediate effects probably will be felt by your company's benefits administrator and payroll department, as the Patient Protection and Affordable Care Act and the Health Care & Education Affordability Reconciliation Act of 2010 come online.
The bean counters will have to keep track of employees' flexible and health savings accounts to ensure they don't exceed the $2,500 yearly contribution limit beginning next year and that workers aren't reimbursed through the accounts for non-prescription drugs. The payroll department, beginning in 2013, will deduct another .9 percent from the wages of big earners ($200,000 or more per year) to cover an increase in the Medicare tax.
Additional recordkeeping will be required beginning next year to determine the cost of healthcare coverage the employer provides to each employee each year. Using a formula similar to COBRA calculations, according to international law firm Proskauer Rose LLP, the amounts must be reported on employees' W-2 forms.
The Proskauer firm notes that employer-run group health insurance plans may avoid some of the other new requirements. Plans will be "grandfathered" if it was in operation on March 23, 2010. According to Workforce Management magazine's website, new and non-qualified plans must offer coverage that extends to employees' children "up to age 26, eliminate lifetime dollar limits and remove pre-existing condition exclusions, if any, for children up to age 19."
Grandfathering provisions will exempt existing individual and group health plans from the age 26 rule, some lifetime limits, waiting period penalties, and required coverage of certain preventative care procedures.
Still, construction companies with grandfathered plans are not completely off the hook. For example, no employer group plan will be allowed to contain pre-existing condition exclusions from group health plans for children under the age 19 or drop coverage for a patient simply because the person's insurance claims for coverage become extraordinarily costly for the insurance provider. Of course, coverage still could be dropped in cases of insurance fraud.
All plans also must remove lifetime maximum limits on coverage of essentialbenefits and some other limits. Limits still will be allowed on the certain medical procedures
Additional costs and administrative requirements are in store for large contractors and those that offer high-end healthcare benefits. Builders who employ more than 200 workers must automatically enroll otherwise uninsured employees into the companies' health plan. Employers that provide "high-cost" health insurance plans (costing more than $8,500 per individual, $23,000 for families and $9,800 for retirees) eventually will incur a hefty tax of 40 percent of the excess benefit. These trigger thresholds will be indexed to inflation and will increase in states where healthcare costs are among the highest in the nation.
One of the biggest expenses the new healthcare law will impose will apply to companies that provide drug coverage for employees. The subsidies employers receive for providing these Medicare Part D benefits will no longer be excluded from taxation.
If your firm already provides a qualified healthcare benefit that does not include prescription drug coverage for retirees, the answer is, "not much." At least, not for several years. That's good news, considering the Senate version of the bill contained the onerous Merkley Amendment that would have forced all but the smallest construction companies to provide health insurance or pay a fine. The amendment, which singled out construction firms (it applied to companies with as few as six employees while the threshold for other industries is 50 workers) was removed from the House version and the final bill that was signed by President Obama.
While smaller contractors will be spared this additional expense, those with 50 or more full-time workers must comply or face a fine of $750 per full-timer. What's more, employees must be enrolled immediately to avoid penalties for imposing waiting periods.
Although the smaller companies will not be compelled to offer healthcare insurance, the new acts do offer incentives to entice them to provide the benefit to their workers. Companies with 25 or fewer employees can take advantage of tax credits for offering insurance. Down the road - starting in 2014, companies with 100 or fewer workers can form a "buyers group," banding together to act as one large company for insurance purchasing purposes. This pooling of assets and risks will allow them to take advantage of volume discounts from insurance providers. And businesses with 50 or fewer employees can access a "health insurance exchange," a one-stop shop for comparing rates and benefits.
If your company is small enough not to have to worry about this employer mandate, the most immediate effects probably will be felt by your company's benefits administrator and payroll department, as the Patient Protection and Affordable Care Act and the Health Care & Education Affordability Reconciliation Act of 2010 come online.
The bean counters will have to keep track of employees' flexible and health savings accounts to ensure they don't exceed the $2,500 yearly contribution limit beginning next year and that workers aren't reimbursed through the accounts for non-prescription drugs. The payroll department, beginning in 2013, will deduct another .9 percent from the wages of big earners ($200,000 or more per year) to cover an increase in the Medicare tax.
Additional recordkeeping will be required beginning next year to determine the cost of healthcare coverage the employer provides to each employee each year. Using a formula similar to COBRA calculations, according to international law firm Proskauer Rose LLP, the amounts must be reported on employees' W-2 forms.
The Proskauer firm notes that employer-run group health insurance plans may avoid some of the other new requirements. Plans will be "grandfathered" if it was in operation on March 23, 2010. According to Workforce Management magazine's website, new and non-qualified plans must offer coverage that extends to employees' children "up to age 26, eliminate lifetime dollar limits and remove pre-existing condition exclusions, if any, for children up to age 19."
Grandfathering provisions will exempt existing individual and group health plans from the age 26 rule, some lifetime limits, waiting period penalties, and required coverage of certain preventative care procedures.
Still, construction companies with grandfathered plans are not completely off the hook. For example, no employer group plan will be allowed to contain pre-existing condition exclusions from group health plans for children under the age 19 or drop coverage for a patient simply because the person's insurance claims for coverage become extraordinarily costly for the insurance provider. Of course, coverage still could be dropped in cases of insurance fraud.
All plans also must remove lifetime maximum limits on coverage of essentialbenefits and some other limits. Limits still will be allowed on the certain medical procedures
Additional costs and administrative requirements are in store for large contractors and those that offer high-end healthcare benefits. Builders who employ more than 200 workers must automatically enroll otherwise uninsured employees into the companies' health plan. Employers that provide "high-cost" health insurance plans (costing more than $8,500 per individual, $23,000 for families and $9,800 for retirees) eventually will incur a hefty tax of 40 percent of the excess benefit. These trigger thresholds will be indexed to inflation and will increase in states where healthcare costs are among the highest in the nation.
One of the biggest expenses the new healthcare law will impose will apply to companies that provide drug coverage for employees. The subsidies employers receive for providing these Medicare Part D benefits will no longer be excluded from taxation.
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