In March of 2010, Pres­i­dent Oba­ma signed two pieces of leg­is­la­tion into law, imple­ment­ing the most per­va­sive health-care reform since Medicare. Many of the reforms that relate to busi­ness and employ­ers don’t take effect until 2014. Here are some of the impor­tant high­lights of health-care reform from the per­spec­tive of employ­ers and busi­ness­es.

Health insur­ance not required but encour­aged

Con­trary to pop­u­lar belief, health-care reform does not actu­al­ly require all employ­ers to offer health insur­ance to their employ­ees. Instead, the new reforms use finan­cial penal­ties to encour­age employ­ers to offer afford­able health insur­ance cov­er­age. Specif­i­cal­ly, begin­ning in 2014, employ­ers who have at least 50 full-time employ­ees, and do not offer health insur­ance, may be assessed a fee of $2,000 for each full-time employ­ee (exclud­ing the first 30 employ­ees) if at least 1 employ­ee is receiv­ing a pre­mi­um cred­it. (A pre­mi­um cred­it can be used by eli­gi­ble indi­vid­u­als and fam­i­lies who pur­chase health insur­ance through state-based exchanges to reduce the pre­mi­um cost.)

Even employ­ers who do offer cov­er­age may face a fee if at least 1 full-time employ­ee is receiv­ing a pre­mi­um cred­it. The fee is either $3,000 per employ­ee receiv­ing the cred­it or $2,000 for each full-time employ­ee, whichev­er total is less. Employ­ers with few­er than 50 full-time employ­ees are exempt from these fees. But, employ­ers with 200 or more employ­ees must auto­mat­i­cal­ly enroll employ­ees in health insur­ance plans offered by the employ­er. The employ­ee may vol­un­tar­i­ly opt out of the employ­er’s plan.

In addi­tion, employ­ers that offer employ­ee health insur­ance must offer a free choice vouch­er to employ­ees who elect to enroll in a state-based Amer­i­can Health Ben­e­fit Exchange plan. The val­ue of the vouch­er is equal to the amount the employ­er would have paid to cov­er the employ­ee under the employ­er’s plan. Employ­ees may enroll in an Exchange plan if the employ­ee’s income is less than 400% of the Fed­er­al Pover­ty Lev­el (FPL) and the employ­ee’s cost to par­tic­i­pate in the employ­er’s plan is between 8% and 9.8% of the employ­ee’s income. The vouch­er can be used to off­set the employ­ee’s cost to par­tic­i­pate in the Exchange plan.

Employ­er incen­tives

As an incen­tive for small busi­ness­es to offer employ­ee health insur­ance, from 2010 to 2013, employ­ers with 25 or few­er full-time employ­ees with aver­age annu­al wages less than $50,000 may be eli­gi­ble for a tax cred­it of up to 35% of the employ­er’s total pre­mi­um cost. Begin­ning in 2014, small busi­ness­es that buy insur­ance through state Exchanges for their employ­ees may receive a cred­it of up to 50%. In either case, the cred­it decreas­es as the num­ber of employ­ees and aver­age annu­al wage increas­es.

By 2014, in an effort to pro­mote well­ness and decrease health insur­ance costs, employ­ers will be able to offer employ­ees rewards, such as pre­mi­um dis­counts and added ben­e­fits, for par­tic­i­pat­ing in well­ness pro­grams and meet­ing cer­tain health-relat­ed stan­dards. The val­ue of the rewards can equal as much as 30% of the cost of cov­er­age and may even reach 50% in some cas­es.

Employ­ers who pro­vide insur­ance for retired employ­ees who are over age 55, but not yet eli­gi­ble for Medicare, may receive reim­burse­ment for 80% of retiree claims between $15,000 and $90,000. This tem­po­rary rein­sur­ance pro­gram begins in 2010 and is avail­able until 2014. On the oth­er hand, employ­ers who cur­rent­ly receive a tax deduc­tion for Medicare Part D drug sub­sidy pay­ments will see that deduc­tion elim­i­nat­ed in 2013.

Small busi­ness­es with up to 100 employ­ees may be able to pur­chase health insur­ance through state-based Small Busi­ness Health Options Pro­gram (SHOP) Exchanges by 2014. The Exchanges will offer at least four ben­e­fit cat­e­gories of plans based on cov­er­ing an increas­ing per­cent­age of ben­e­fit costs.

Advi­so­ry ser­vices offered through The Wealth Advi­so­ry Team, LLC, a reg­is­tered invest­ment advi­sor.