Health care reform has now become a reality, and we now have to determine what the impact will be to individuals, employers, and our health insurance coverage. Some provisions will impact us in the short term; others will take some time to materialize. It is important to recognize that we are collectively in uncharted territory from regulators to insurers, employers, and health care providers. A 2,730 page bill plus a

reconciliation package just became law and regulators will now be developing the regulatory structure that will execute the law. There is also latitude for states on several provisions, most notably in regards to the Exchange(s). The result is that there are many uncertainties.

Many of the major provisions take effect in 2014, however, you will see changes very soon. For example, the states are required to establish information portal options for consumers by July, 2010, which is the first phase of the Exchange. There are also coverage requirements that will take effect on all grandfathered plans within 6 months, including:

· Coverage for dependents up to age 26; (currently 25)

· No lifetime maximum benefit limits;

· And no cost sharing on preventative care for certain policyholders. (already included

in most HSAs)

This will factor into renewal rates along with new taxes hitting the insurers, medical device manufactures and pharmaceutical companies. We don't yet know what that will translate to regarding impact to premiums. It is also important to recognize that "grandfathered" plans are what you had at the date of enactment. This means that if you make a plan change at renewal, your plan could be required to meet coverage standards that require coverage of certain services such as pediatric oral and vision care. Other requirements limit deductibles and out of

pocket limits. All of these things could impact premiums depending on your plan. HSA compatible plans will provide the most stability as they remain the same. HSAs are subject to provisions such as meeting minimum loss ratio requirements along will all plans, and it is not clear how that could influence things like product availability and flexibility. Over the counter medications will no longer be an eligible expense starting in 2011, and the tax on nonqualified withdrawals also increases from 10% to 20%.

For companies, the reform law impacts you in several ways. For example, employers will be required to reduce waiting periods for new hires to no greater than 90 days by 2014. Employers will also need to ensure contributions meet coverage and affordability

standards to avoid penalties.

An employer does not have to offer coverage, but if they do not offer qualified coverage by 2014 and employ more than 50 full time employees (part-time employees must be taken into consideration based on aggregate number of hours of service) and one or more employees receives a premium assistance tax credit to buy coverage through an exchange, the employer must pay a fine of $2,000 per employee after the

first 30 employees, which are exempted from the calculation.

For example, an employer that employs 51 employees would pay $2,000 X 21 employees (51-30 = 21).

An employer with more than 50 employees that does offer coverage but has at least one full-time employee receiving the premium assistance tax credit will pay the lesser of $3,000 for each of those employees receiving a tax credit or $750 for each of their full-time employees total. This will require employers to make sure contributions are adequate to ensure employees will not qualify for a subsidy, which means the

employee cannot be required to pay more than 9.5% of their family income toward the cost of coverage. Employer coverage must also meet a 60% actuarial value requirement to be considered "qualified" coverage.

In addition, an employer that provides and contributes to health coverage for employees must provide free choice vouchers to each employee who is required to contribute between 8% and 9.8% of the employee's household income toward the cost of coverage, if such employee's

household income is less than 400% of FPL (Federal Poverty Limit) and the employee does not enroll in a health plan sponsored by the employer. Eight percent and 9.8% are to be indexed to the rate of premium growth. The value of vouchers would be adjusted for age, and the vouchers would be used in the exchanges to purchase coverage that would otherwise be unsubsidized.

There is also the issue of the 40% excise tax on Cadillac plans which will need to be taken into consideration starting in 2018. In addition, starting in 2014 all fully insured group plans for groups of 100 employees or less must comply with strict community rating rules. This means experience rating will no longer be allowed. Contributions to FSAs must not exceed $2,500 beginning in 2013, and employers will also be required to start auto enrolling employees in a new government long term care program. In addition, employers will need to comply with several new reporting requirements.

Many of these new requirements phase in over several years. In 2011, employers must include the aggregate cost of employer-sponsored health benefits on W-2s, and provide summary of benefits that meet new reporting standards by March, 2012. Employers will also need to submit reports to the Secretary of DHHS on whether plans include specific components. In addition, health plans, including self funded plans, must provide coverage documentation to both covered individuals and the IRS starting January 1, 2014.

Tax credits for small employers are available in 2010 and effect employers with no more than 25 full time employees and average annual wages of less than $40,000. The full credit is available to companies with 10 or fewer employees and average annual wages of less than $25,000, and it phases out as the size of the group increases, phasing out entirely after 25. The maximum subsidy is 50% of the premium for up to 2 years, however it comes in phases, the second requiring you purchase coverage through the exchange. This would mean losing you grandfathered plan, it is possible you would be purchasing more expensive coverage, so your savings may decrease.