How health care reform will affect you

BY DEBORAH STAYMAN and JOHN MURPHY
The recently signed federal health reform legislation is the most sweeping health policy change enacted since Medicare was established in 1965. More than 32 million Americans who are currently uninsured are expected to obtain health insurance coverage under this law.
 
Although federal guidelines and regulations to implement the law have yet to be drafted or adopted, the state Department of Civil Service already is reviewing the legislation to analyze how it may affect state employee benefits and the NYS Health Insurance Program (NYSHIP).

As information and insights about how the law will affect PEF’s PS&T members becomes available, it will be posted online in an answers-to-frequently-asked-questions format at www.pef.org.

The following reflects our current understanding of the effect this legislation will have on state employee health benefits.

Rate review
Although no starting date for it is established in the law, a new Federal Insurance Rate Authority will be created to oversee and assist states in examining the rate increases proposed by insurance carriers. These insurance companies will be required to lower their premiums or pay rebates to policy holders if their proposed rate increases are deemed unreasonable and unjustified.

Dependent coverage
Starting next year (when the next state health plan year begins January 1), both married and unmarried dependent’ children through age 25, who are not already covered by their own employer-provided health plan, will be allowed to remain on their parents’ health plans. (See related story.)

Excise tax
Many members are concerned they will be taxed on their health benefits. The law provides for a new 40 percent excise tax on insurers to begin in 2018 on health plans that cost more than $10,200 for individual coverage or $27,500 for family coverage. The thresholds will be higher for persons, such as police and firefighters, in certain high-risk jobs.

The insurance companies may try to pass the cost of the tax on to employers and their employees.

Currently, Empire Plan premiums of $5,972 for individual coverage and $13,943 for family coverage are well below these thresholds, but they could meet or surpass it by 2018 if the reforms fail to sufficiently reduce costs. Current HMO rates under NYSHIP also are below the thresholds.

W-2 reporting
Starting next year, the value of your employer-paid health benefits will be reported on your W-2 forms.

Flexible spending limits
Starting next year, you will need a prescription to get reimbursed for over-the-counter drugs through your Health Care Spending Account that allows you to use pre-tax income to pay out-of-pocket heath care costs. Currently, no prescription is required.

Starting in 2013, contributions to the Health Care Spending Account that allows you to use pre-tax income to pay out-of-pocket heath care costs will be capped at $2,500 per year. In future years, the cap would rise with inflation. The current cap is $4,000 and is set by the state as employer.

Medicare payroll tax
Starting in 2013, to help pay for covering more Americans, the Medicare payroll tax will increase by 0.9 percent for individuals earning more than $200,000 and couples earning more than $250,000, plus a 3.8 percent assessment on unearned investment income. The employer’s share of the Medicare tax will not increase.

Individual responsibility
Beginning in 2014, nearly everyone will be required to be insured or be subject to a fine. Exemptions will be made for hardship, certain religious beliefs, Native Americans, undocumented immigrants, and individuals with income below the income-tax filing threshold.
This means state employees, who work less than half-time and who are not currently eligible for health insurance through NYSHIP, will be required to show proof of coverage or buy coverage through the state exchange.