Healthcare Reform and Its Effect on Business

This article appears in MD News Magazine, November/December 2010

It is certainly not news to anyone reading this periodical that in March 2010, President Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. Combined, these laws are what we commonly refer to as “Healthcare Reform.” With few exceptions, physicians have been bombarded during the past 6 months with information regarding the effect of Healthcare Reform on their lives as providers of healthcare. While these issues are very important to physicians and non-physicians alike, what may be lost is the very significant impact of Healthcare Reform may have on the lives of physicians in their roles as employers.

Although all of the new provisions will not be enacted until 2014, many of the provisions are currently effective or will be effective by January 1, 2012. Some of the key provisions for employers are:

• Grandfathered Status (effective March 23, 2010): For those employers with a healthcare plan already in place, this year poses a one-time opportunity to grandfather a health plan from many of the changes required under the new healthcare law. Employers should talk to their insurance brokers or carriers to determine whether grandfathering makes sense. There is a downside to grandfathering as it limits passing on rate increases to employees and does not allow employers to shop carriers for a better rate. With the seemingly annual rise in costs, these limits could make grandfathering a bad deal for many employers.
• Expanded Dependent Coverage (effective January 1, 2011, nationally, July 1, 2010, in Ohio): Adult children of employees up to the age of 26 (up to 28 in Ohio) must be provided coverage under the employer’s healthcare plan.
• No Lifetime Limits for “Essential Benefits” (effective January 1, 2011): Limits on a defined minimal essential coverage are prohibited.
• Preventative Care (effective January 1, 2011): Certain preventative care (well-child care and immunizations) must be provided without cost to the employee.

The bulk of changes required by Healthcare Reform will not be effective until 2014 including state health insurance exchanges, individual mandates, employer penalties, taxes on health insurers, pharmacy and DME suppliers and expansion of Medicaid eligibility.

In 2014, every individual will be mandated to have health insurance. Healthcare Reform does not require an employer to provide health insurance to its employees but an employer who employs on average at least 50 full-time employees (full-time employee is defined to mean an individual who works at least an average of 30 hours per week) may face significant penalties for not providing any health coverage to its employees or for providing health coverage that is deemed too costly to employees. Employers with more than 50 employees who do not offer heath insurance will be penalized and required to pay an annual penalty of $2,000 per full-time employee, exempting the first 30 full-time employees.

In preparation for 2014, it is essential that physician groups start running numbers as to whether it will be more beneficial to offer health insurance in compliance with the rules of Healthcare Reform or pay the penalties, if any, for not offering health insurance.

So while the focus of many physicians since the passage of Healthcare Reform has been on the provision of patient care and the immediate impact on reimbursements and physician compensation – perhaps, rightfully so – physician-employers cannot lose sight of their obligations as employers under Healthcare Reform.

NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.

Michael J. Bogdan is an attorney with the law firm of Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A. in Canton. He is a member of the firm’s Labor & Employment Practice Section.