Four Things Employers May Have Overlooked in the Health Care Bill

Posted on March 25, 2010

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Now that President Barack Obama has signed into law the Patient Protection and Affordable Care Act, many people are turning to the task of understanding what exactly reform will mean.

Most of the really big provisions of the bill (don’t worry, no “f-bombs” here; it’s a family blog) – the individual mandate, insurance exchanges, taxes on high-cost health insurance – are not only pretty well-known at this point, but don’t come into effect for several years. Other provisions, however, while not as dramatic or far-reaching, come into effect much sooner. In addition, many of the rules scheduled to be implemented sooner will have a direct impact on employers. Here are four such provisions that employers should keep their eyes on:

  • Changes to Flexible Spending Accounts (FSAs) – The first change to FSA plans is scheduled to occur in 2011, when over-the-counter medications will no longer be eligible for reimbursement from these plans. The more significant change to FSA plans takes place in 2013 when pretax contributions to health flexible spending accounts will be capped at $2,500 per year.
  • Health Coverage Costs on W-2 Forms – Starting with W-2 forms prepared for 2011, employers will be required to include the cost of health insurance on employees’ W-2s.
  • High Earners to Pay Additional Payroll Tax – Starting in 2013, individuals whose wages exceed $200,000 (single taxpayers), or $250,000 (taxpayers filing a joint return) will pay an additional 0.9% in Medicare tax on wages over $200,000 (or $250,000). However, the employer portion will not change. So, for all wages up to the $200,000/$250,000 limit, both the employer and employee will pay Medicare taxes of 1.45%. For wages exceeding the threshold, employees will pay 2.35% while employers will pay the same 1.45%.
  • Increased Wellness Incentives – The new law allows employers to provide “rewards” of up to 30 percent of health plan costs to employees who participate in a wellness program. In addition, the law provides for an increase of up to 50 percent if regulators determine that such an increase is appropriate.

Needless to say, there is a lot of information available about the law. Here are just a few suggested resources: