The Impact of Health Care Reform

4/13/2010By Julie Arnott

On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act. A subsequent "reconciliation bill" was passed and signed into law by the president on March 30. This Health Care and Education Reconciliation Act of 2010 made modifications to the first act. Without these modifications, a crucial number of House lawmakers would not have voted for the patient protection legislation. Collectively, these two bills comprise what is known as Health Care Reform.

There are many changes which will affect individuals, insurers and employers, some of which go into effect within the next few months. Others are not effective until 2014 or later. The following information is a preliminary snapshot of some of the provisions in the reform package. We expect to learn more details over the coming weeks and months. Please see the links below for more comprehensive information and items you may need to comply with immediately.

Effective 6 months after enactment:  

  • Health plans may not set lifetime caps on coverage and annual caps on benefits will be restricted as defined by Health and Human Services
  • Health plans may not cancel coverage for participants who become ill. Cancellation is allowed in cases of fraud or intentional misrepresentation of health conditions by participants
  • Children may be covered under their parents’ health insurance plan until age 26 as long as they are not eligible for coverage under another employer’s health plan
  • Health plans may not deny coverage to dependent children of plan participants because of preexisting health conditions
  • Health insurance plans must provide first dollar coverage for preventive health services
  • Small businesses that offer health insurance may be eligible for a tax credit (effective beginning calendar year 2010)

Effective 2011:

  • FSAs, HSAs and HRAs will no longer reimburse for over-the-counter medicines or drugs without a doctor's prescription
  • The additional 10% tax penalty on Health Savings Account distributions that are not used for qualifying medical expenses is increased to 20%
  • Employers must disclose annually on the Form W-2 the value of employer provided health insurance coverage

Effective 2013:

Healthcare Flexible Spending Account annual contributions are capped at $2,500 (indexed for inflation) Increase of 0.9% in the Medicare tax on wages in excess of $200,000 (single) or $250,000 (joint filers)

Effective 2014:

  • Health plans may not impose any preexisting condition exclusion or limitation for anyone enrolled in the plan, including adults as well as children
  • Plans are prohibited from establishing annual limits on the dollar value of benefits
  • States must create Health Insurance Exchanges where individuals and small employers can purchase health insurance
  • Employers with 50 or more employees may be subject to penalties for not providing affordable minimum essential health coverage. Employers that offer health care coverage and make a contribution toward the cost of the coverage must provide “free choice vouchers” to qualified employees for the purchase of qualified health plans through the exchanges.
  • Most adults and children must have health insurance coverage or pay a penalty
  • Plans may not have waiting periods in excess of 90 days

Effective 2018:

  • An excise tax will be imposed on high cost health plans

Click here to access a link with key provisions that take effect immediately.

Sources: US Department of Health and Human Services, CCH, SHRM, International Foundation of Employee Benefit Plans

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