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Health Care Reform: The Near Term

Congressional passage of comprehensive health care reform legislation means that employers and other health plan sponsors can no longer take a wait-and-see approach to this subject. Like it or not, change is coming. And while many key provisions do not take effect until 2014, a surprising number of changes will apply to employer-based health coverage well before then. We are therefore devoting this entire issue of our quarterly newsletter to a discussion of several significant short-term changes.

But first, some necessary background. For reasons that were widely reported in the popular media, this reform legislation was adopted in the form of two entirely separate bills. The Patient Protection and Affordable Care Act (“PPACA”), based on the Senate version of health care reform, was signed into law by President Obama on March 23, 2010. A week later, the President signed the Health Care and Education Reconciliation Act (“HCERA”), a package of changes to the PPACA insisted upon by the House of Representatives (but, for procedural reasons, limited to changes having a revenue effect). Because the Obama administration refers to these two Acts as the “Affordable Care Act,” the articles in this newsletter will follow that same approach (often further abbreviating the name to simply the “Act”).

When the Act becomes fully effective in 2014, a number of related provisions are designed to reduce the number of Americans without health coverage. These include an “individual mandate” (requiring that all legal residents have some type of health coverage — or pay a tax penalty for failing to do so), the establishment of statewide clearinghouses (known as “exchanges”) as a way of connecting individuals and employers with health insurance policies, tax subsidies designed to assist individuals in obtaining health coverage through the exchanges, and penalties on larger employers (those with more than 50 full-time employees) that fail to offer their employees “affordable” health coverage.

But much will be happening in the next 3½ years. President Obama has directed the agencies responsible for administering the Act’s provisions (the Department of Health and Human Services [“HHS”], the Department of Labor [“DOL”], and the Internal Revenue Services [“IRS”]) to give top priority to issuing necessary guidance. Those agencies have taken that directive to heart, having already started to issue substantive guidance. We expect to see more such guidance throughout the remainder of 2010.

The purpose of this newsletter is to lay out some of the more significant aspects of health care reform that employers and their advisors should be considering right now. The members of Spencer Fane’s Employee Benefits Practice Group would be pleased to assist in that process.