IRS Guidance on Dependent Coverage to Age 26

The Internal Revenue Service (IRS) has issued guidance on the tax treatment of adult dependent health care coverage under an employer-sponsored health plan.  This guidance confirms that the employer subsidy for adult children is treated with the same tax favorability as traditional health benefits.  Notice 2010-38 explains that health coverage costs for an employee's child under age 27 are excluded from gross income, and are thus not considered wages for FICA or FUTA purposes and are also exempt from income tax withholding.  Retroactively effective March 30, 2010, employees with cafeteria plans are allowed to immediately begin making pre-tax contributions to pay for this new, expanded benefit.  The new health reform law enacted in March enables adult children to be covered by their parents' health insurance plan until they reach age 26, even if they are married.  For these purposes, eligible children include a son, daughter, stepchild, adopted child or eligible foster child.  In addition, children do not have to qualify as a dependent for tax purposes to take advantage of this new health care provision.

Click here to read the IRS press release.

Transparency & Public Reporting in Hospital Safety

In a recent Commonwealth Fund perspectives piece, Dr. Lucian Leape of Harvard's School of Public Health asserts that out of three approaches to improving patient safety, transparency and public reporting are the most effective.  The other two approaches, regulation/accreditation and financial incentives, Leape contends, do not provide the same impetus for improvement that public reporting does, especially in a world where consumers increasingly and regularly access online rankings and publicly available data.

The complete piece can be found by clicking here.

Health Reform and Part-Time Employees

Bass, Berry, & Sims, PLC, a law firm based in Tennessee, has released an issue brief on the impact of health reform on part-time employees.  While the new health law does not require that employers provide coverage to part-time employees, if part-time workers are indeed provided coverage, then there is no differentiation between full-time and part-time employees when it comes to provisions in the bill that expand coverage, including those that ban lifetime and annual dollar limits on coverage, prohibiting pre-existing condition exclusions, and extending dependent coverage through age 26.

The new law, however, does distinguish between full-time and part-time employees when calculating the employer "pay-or-play" mandate.  Although the mandate applies only to full-time employees, part-time workers are employees' hours of service are calculated to determine the number of FTEs.

Click here to read the entire issue brief.

HHS Implementation Office Established

The US Department of Health and Human Services (HHS) has announced the creation of a new division to oversee and manage health reform implementation efforts.  Speculated by some to be eventually headed by Jon Kingsdale, former executive director of the Massachusetts Connector, the Office of Consumer Information and Insurance Oversight will provide leadership in implementing the new health reform law.  Within this divisions will be five different offices:

1. Office of the Director
2. Office of Oversight
3. Office of Insurance Programs
4. Office of Consumer Support
5. Office of Health Insurance Exchanges

The notice published in the Federal Register outlines the responsibilities of each office and can be found by clicking here.

Insurers to Cover Dependent Children through Age 26 Before Law Requires

A number of health insurance carriers have announced that they will begin covering adult dependent children through age 26 before the new health reform law requires it beginning on September 23, 2010.  The announcements by UnitedHealthcare, Humana, Kaiser Permanente, and WellPoint, among other health plans, come just before many of the country's college graduates potentially enter a coverage gap as they search for a job that provides employer-sponsored coverage.

More information on this developing story can be found by clicking here.

Poll Indicates Employers Will Still Offer Coverage

A recent survey by Crain Communications' publications Business Insurance and Workforce Management indicates that a majority of employers will not be eliminating their health benefits offerings. 

The new health reform law, the Patient Protection and Affordable Care Act of 2010, penalizes employers that do not offer coverage $2,000 per full-time employee.  According to the survey, 52.5% of the 3,700 responding executives strongly disagreed that it would be better for their firm to stop offering health benefits and pay the penalty.  On the other end, only 14.1% of respondents strongly believe that dropping health benefits altogether would be better for their organization.

Click here for the rest of story, from Employee Benefit News.

CMS Launches New Transparency Tool

Last week, the Centers for Medicare and Medicaid Services (CMS) released a beta version of a new interactive website that allows user to view variations in Medicare spending data stratified by state.

NPR's Shots blog reports that, "The dashboard shows the number and total cost of payments to hospitals for treating 25 top diagnoses and allows you to compare spending by state. Joint replacements lead the list with more than 400,000 performed last year. The chart also lists which hospitals were the most frequent providers of care for a given diagnosis. A separate bubble chart illustrates total spending for each state between 2006 and March of this year."

To access the site, click here. This link brings you to the descriptive web page. To launch the tool, click on "Render Dashboard BETA" near the upper-left corner.

Health Savings Accounts and Retirement Report

A recent analysis by the Employee Benefit Research Institute (EBRI) reports on the savings potential of health savings accounts.  The authors conclude that the current statutory limits on yearly contributions relegate HSAs to playing merely a minor role in covering health costs in retirement.  

Their analysis examines the potential savings of individuals who begin contributing to their HSA at age 55 and contribute $3,000 and a $1,000 catch-up contribution each year until age 65.  With a 2 percent interest rate, one would save approximately $48,300 after 10 years and if the interest rate were 5 percent, just over $55,000 would be accumulated over 10 years. 

Click here to access the complete report.

IRS Guidance on Small Business Tax Credits

The Internal Revenue Service (IRS) has launched a website explaining the new small business health care tax credits that were borne out of the new health law. Users can browse the site to find information on: eligibility as well as calculating average annual wages and full-time equivalents.

These credits are available to small businesses with fewer than 25 employees and average annual wages of less than $50,000.

To access the site, click here.

Delivery System Reform Elements in Health Reform

The Consumer-Purchaser Disclosure Project, a coalition dedicated to advocating for health care delivery system reforms, has recently published a review of some of the major delivery system reform components in the new health reform law. Major areas related to fostering improvements in how care is delivered are in this brief and include payment reform, comparative effectiveness research, promoting population health and wellness, performance measurement, quality improvement, public reporting, health information technology, and administrative efficiency.

Click here to access the summary.

Financing Health Reform

The Tax Foundation recently posted a pie chart on their website outlining how lawmakers plan to finance the new health law.

Penalty payments by employers and individuals amount to $69 billion, an increased Medicare tax on high-earners is expected to raise $210 billion, and the excise tax on high-cost "Cadillac" plans is estimated to rake in $32 billion.

Click here to read more from the Tax Foundation.