Healthcare Reform Resource Center

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Healthcare Reform Developments: Women's Preventative Services Rule Issued

As posted by PPC's Health Care Reform Update
August 3, 2011

Women's Preventive Services Rule Issued

The IRS, DOL, and HHS have jointly issued an interim final rule that requires health insurance plans that are not grandfathered under the Affordable Care Act to cover certain women's preventive health services without charging copayments, co-insurance, or deductibles for plan years beginning on or after August 1, 2012. The agencies adopted guidelines recommended by the Institute of Medicine that will require plans to cover a wide range of preventive services, including contraception, well-woman visits, screening for gestational diabetes, and other services. The IRS also issued a separate proposed regulation that amends the excise tax regulations applicable to a plan's failure to provide required preventive services. Preventive services are discussed in section 807 of PPC's Guide to Health Care Reform.bbb

Early Retirees Benefit Support

Support for health coverage for early retirees is included in the reform bill. An estimated 117,000 and 154, 000 people from New Jersey and Pennsylvania, respectively, retired before they were eligible for Medicare and have health coverage through their former employers. Beginning June 1, 2010, a $5 billion temporary early retiree reinsurance program will help stabilize early retiree coverage and help ensure that firms continue to provide health coverage to their early retirees. This subsidy will expire in 2013. This temporary “reinsurance” program will reimburse plan sponsors 80 percent of claims between $15,000 and $90,000 for eligible retirees between the ages of 55 and 64. Companies, unions and state and local governments are eligible for these benefits. It is important to note that once the $5 billion is exhausted, there is no provision for additional funding, and several experts have estimated that amount might not last two years.

Applications for Early Retiree Reinsurance Program can be found at http://www.errp.gov

Is it true that now employer's reporting of health insurace coverage on Form W-2 is now optional for 2011?

Yes, it is true. Under Notice 2010-69, the IRS deferred this new reporting requirement and employers will not have to report the aggregate cost of employer-sponsored group health plan coverage on Forms W-2 issued for 2011. The Treasury Department and the IRS determined that this relief is appropriate to provide employers with additional time to make the necessary changes to their payroll systems or procedures in preparation for compliance with the reporting requirement. Reporting of health insurance coverage for 2011 will be optional, and employers taking advantage of the reprieve will not be treated as if they failed to meet the reporting requirements or be subject to any penalties.

 

In addition, the announcement provided a draft Form W-2 for 2011. The draft Form W-2 includes the codes that employers may use to report the cost of coverage under an employer sponsored group health plan. The IRS anticipates it will publish additional guidance on the new requirement later this year.

 

Is the value of employer provided health insurance coverage a taxable benefit?

The HRAT team has received many questions with respect to the taxability of employer provided health insurance coverage since the value is going to be a required disclosure item on Form W-2 beginning with the 2011 year.  There are several sources providing incorrect information with respect to this issue claiming that the value of employer provided health insurance coverage would be a taxable benefit.  Below is an excerpt from the IRS Exempt Organization Update confirming that, as it stands currently, the value is indeed not a taxable benefit and merely a disclosure on the Form W-2.

Employer-Provided Health Coverage — Not Taxable

Starting in tax year 2011, the Affordable Care Act requires employers to report the value of the health insurance coverage they provide employees on each employee's annual Form W-2. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee's income and it is not taxable.

I wonder if you might be able to clarify for me… Our renewal was in June, 2010. Can you tell me if these preventive services take effect for us or did we miss this year’s window since the newsletter indicates a date of 9/23/2010?

You are okay until next year, as preventive does not need to be added yet.  There is also some relief for grandfathered plans that do not have the cost sharing requirements.

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Does the new health care law require workers to pay income tax on the value of employer-provided health insurance? I received an alarming e-mail stating this will be the case.

No. The value will appear on employees’ W-2 forms for information purposes, but will not be considered taxable income.

There is a chain e-mail circulating throughout the nation, which reads in-part something like this:

“You really need to read this……starts next year.  This is supposed to be part of the new Health Care Bill…

Starting in 2011 (next year folks) your W 2 tax form sent by your employer Will be increased to show the value of what ever health insurance you are Given by the company. It does not matter if that’s a private concern or Governmental body of some sort. If you’re retired ? So what; your gross WILL go up by the amount of insurance you get….

The dollar value (cost of what the company pays for your insurance) will be considered income and added to your gross pay. You will be taxed on the total. You will be required to pay taxes on a large sum of money that you have never seen.

Take your tax form you just finished and see what $15,000 or $20,000. Additional gross does to your tax debt. That’s what you’ll pay next year.  For many it also puts you into a new higher bracket so it’s even worse….

…Joan Pryde is the senior tax editor for the Kiplinger letters. Go to Kiplingers and read about 13 tax changes that could affect you. Number 3 is what I just told you about.  Why am I sending you this ?. The same reason I hope you forward this to every single person in your address book. People have the right to know the truth because an election is coming in November.”

This is just one of the many false claims about the new health care law.  It’s true that the value of employer-paid health insurance will be added as an information item on W-2 forms. But contrary to this widely circulating chain e-mail, it definitely will not be considered taxable income.

Contrary to the e-mail’s author claiming an article entitled, "Health Care Reform: Tax Hikes on the Way," by Joan Pryde, a senior editor of the Kiplinger letters, supports the claim, you can go to Kiplinger.com and note the last sentence in the referenced citation stating the amount "is not considered taxable income."

What is the small business tax credit and how do I know if I am eligible?

Effective January 1, 2010, tax credits are available to qualifying small businesses that offer health insurance to their employees. So if your business qualifies for a tax credit, you are eligible right now.

About 4 million small businesses will be eligible to receive tax credits if they provide insurance. A small business is generally considered to be from 2 to 50 employees. The tax credit is worth up to 35 percent of the premiums your business pays to cover its workers -- 25 percent for nonprofit firms. In 2014, the value of the credit will increase to to 50 percent -- 35 percent for nonprofits.

Your business qualifies for the credit if you cover at least 50 percent of the cost of health care coverage for your workers, pay average annual wages below $50,000, and have less than the equivalent of 25 full-time workers (for example, a firm with fewer than 50 half-time workers would be eligible).

The size of the credit depends on your average wages and the number of employees you have. The full credit is available to firms with average wages below $25,000 and less than 10 full-time equivalent workers. It phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.

What are the government's criteria for identifying an organization as "small business?"

The tax credit's value depends on a company's size and average wage. Businesses with 25 full-time employees or more aren't eligible for the credit. Neither are businesses that, on average, pay their employees more than $50,000 a year. The full value of the credit — 35 percent of a company's premium costs — is available only to businesses with 10 or fewer full-time employees and an average wage of $25,000 or less.

With regards to the Small Group Tax Credit, which type of employees are not included?

For purposes of this credit, the following types of workers are not included as "employees":

Seasonal workers not included in determining FTEs and average annual wages unless the seasonal worker works for the employer on more than 120 days during the tax year.

A sole proprietor, a partner in a partnership, a shareholder owning more than two percent of an S corporation, and any owner of more than five percent of other businesses are not considered employees for purposes of the credit and are not counted in determining either the number of FTEs or the amount of average annual wages, and premiums paid on their behalf are not counted in determining the amount of the credit.

A family member of any of the business owners or partners member of such a business owner's or partner's household, is also not considered an employee for purposes of the credit.

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