U.S. health care reform comes into effect years from now, right? Well, not quite. A number of important provisions will be coming into effect soon, generally on January 1, 2011 for non-union calendar year plans. U.S. plan sponsors need to know about them even if their plans are insured. In fact, in addition to making sure that certain family members are eligible for coverage under the new rules, companies with retiree coverage (particularly retiree drug coverage) need to make decisions now.

These significant new requirements include the following:

  • Both insured and uninsured plans must cover adult children of employees up to age 26 if they have no other employer coverage available.
  • All plans must cover children under the age of 19 with pre-existing conditions.
  • Lifetime and certain annual benefits caps will be prohibited.
  • Plans may not apply deductibles against preventive care.
  • New insured group health plans will be subject to non-discrimination rules for the first time.
  • Beginning in 2011, over-the-counter medicines not prescribed by a physician cannot be reimbursed in a pre-tax flexible spending account.
  • Employers who provide retiree medical coverage must decide as soon as possible -
    • How to deal with the elimination, in tax years beginning after December 31, 2012, of the tax deduction for the subsidy to providers of drug coverage to Medicare Part D retirees. Accounting rules are reported to require a current charge to reflect the loss of the future deduction.
    • Whether to apply to participate in a new reinsurance program to reimburse employers providing pre-65 medical coverage to retirees not yet eligible for Medicare. The new program, which reimburses certain employer costs, is supposed to be up and running within 90 days. Since this program has a fixed amount allocated for these reimbursements to employers, benefits might be limited to employers who apply right away.
  • In tax years beginning after December 31, 2009, qualified small employers will be entitled to a tax credit for purchasing health insurance for employees. The Internal Revenue Service has issued some initial guidance on eligibility for this credit.

These are important examples, but this is not an exhaustive list. Further, some of these provisions, such as the new non-discrimination requirements for insured plans, will not apply to "grandfathered plans" in existence on March 23, 2010, even if they take in new participants. It is not yet clear what changes to plan terms might end grandfathered status.

Despite all those far off effective dates for many of the new law's provisions, it is clear that U.S. group health plan sponsors need to be thinking in terms of short term as well as long term compliance, and should be monitoring carefully all guidance issued interpreting this complicated new law.

Carol Buckmann has practised in the employee benefits field for over 25 years, advising clients on all aspects of employee benefits and retirement plans, including questions relating to 401(k), defined benefit and employee stock ownership plans, welfare plans, fiduciary responsibility, prohibited transactions and plan asset issues arising in investment fund formation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.