Skip to Content
  • Home
  • About the Bar
  • Mission
  • Forms
  • Sitemap
    • Member Directory
      Last Name:
      First Name:
      Bar Number:
      City:


    • Login
OSB Logo
Oregon State Bar Bulletin — JANUARY 2011



For attorneys who don’t make a practice of curling up by a warm fire with a copy of sweeping Congressional legislation, “Health Care Reform” can feel like an endless maze of statutory references and effective dates — such a maze, in fact, that many of you may have opted for a quick legal summary of the law or opted to ignore it completely in 2010. However, even if your attitude to date has been one of steadfast indifference, it’s not too late to learn the basics you need to point clients and your own law firm in the right direction and address Health Care Reform’s effects on your own plans. You and your clients will be impacted by Health Care Reform in the coming years, so one of your New Year’s resolutions should be to learn about its impacts. Accordingly, the following information will ensure that regardless of whether you manage to hit the treadmill three times a week, quit smoking or meet your billable hours in 2011, you’ll be able to tick this resolution off your list — and you’ll be able to do it before you finish your coffee.

1. Find the Correct Law.
Health Care Reform is not a light read. It’s technical, messy and long. Plus, it’s a bit of a web; provisions within the two main legislative pieces, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (“Health Care Reform”), amend themselves — sometimes twice — and the numerous regulatory documents provide piecemeal and often contradictory direction. In addition, because it is constantly evolving, handy law firm or consulting firm summaries of the law you may find on the Internet are likely to result in outdated, inaccurate results. Attorneys attempting to learn Health Care Reform must start with the correct legislation and review the latest guidance to determine the impact of today’s provisions and tomorrow’s potential requirements.

2. Health Care Reform does not require any employer to offer health coverage, but it penalizes some who do not.
America’s health care system is largely delivered through Medicare and employer-provided group coverage today. As enacted, Health Care Reform does not change today’s delivery system for health care. Employers are not required to offer or pay for health coverage at any time. Health Care Reform provides access to health insurance for those individuals not eligible for Medicare or employer provided health insurance. However, reform will penalize some employers who fail to provide qualifying coverage as a cost offset to the new individual delivery system.

Beginning in 2014, employers with 50 or more employees who fail to offer coverage will be subject to a yearly civil penalty of $2,000 per employee (less the first 30 employees) if at least one of those employees purchases insurance through an exchange (exchanges are state-based health insurance portals created by Health Care Reform) and qualifies for government cost-sharing assistance in purchasing that insurance. Employers that choose to offer coverage will be penalized $3,000 for each employee who purchases insurance through an exchange and qualifies for government cost-sharing assistance in purchasing that insurance. All individuals are mandated to purchase insurance beginning in 2014, and therefore, an employee who does not receive insurance from his or her employer will purchase from the exchange out of necessity.

Looking at these penalties in action, if a client with 62 employees elects to forgo health insurance in 2014, that client would be subject to a penalty fee of $64,000 ((62-30) x $2,000) if at least one of the client’s employees qualifies for government assistance. Alternatively, if the client elects to offer coverage, and two employees qualify for government assistance the client would be subject to a penalty fee of $6,000 ($3,000 x 2) plus the amount the health insurance costs.

Employers typically pay more than $2,000 per employee per year to provide their employees with health coverage, so paying the penalty will be less expensive than offering health insurance for most employers. However, many employers believe providing health insurance is a moral obligation, and many employees consider employer health insurance as an entitlement. As a result, some employers considering whether to offer health insurance in 2014 may ultimately find that they are best served by paying penalties and directing employees to purchase individual coverage through the exchanges, while other employers may decide that the qualitative benefits of providing health insurance outweigh the potential cost savings.

3. The Internal Revenue Service has delayed the W-2 reporting requirement and may delay other provisions.
Among its many objectives, Health Care Reform amends the Internal Revenue Code to require employers to report certain health care costs on Form W-2, providing for increased disclosure. This amendment was initially scheduled to take effect in 2011, but in October 2010, the IRS delayed this requirement’s effective date. The Internal Revenue Service did not designate a new effective date, but it did provide that employers will not be required to comply in 2011.

Employees have a right to request their W-2s early, so once this requirement does take effect, employers will need to ensure compliance by the start of the tax year to which it applies, e.g., January of 2012. Health Care Reform also requires businesses to provide a Form 1099 to all entities receiving $600 or more in compensation during a given year, and this provision and others may be delayed as well due to administrative complexity.

4. Health Care Reform does not change the tax-exempt status of health care, and Oregon has not changed state income tax rules to conform to Health Care Reform.
Health care benefits have been exempt from taxation since 1954, and despite the W-2 reporting requirement, Health Care Reform does not eliminate this exemption. However, beginning in 2018, it will impose an excise tax on certain high-cost health plans (“Cadillac plans”). Health Care Reform allows tax-free coverage of dependents through the age of 27; however, as of the time of the writing of this article, the state of Oregon has not amended its tax code to allow for a similar tax-free status. Thus, for example, an employee covering a 25-year old dependent would be subject to Oregon state income tax for the value of the dependent’s coverage.

5. Employees who defer their salary for payment of medical expenses should be aware of new rules.
Tax-advantaged health care accounts — such as like flexible spending accounts, health savings accounts and health reimbursement accounts — are a common feature in many employer health plans, and employees are in the habit of using these accounts for a wide-range of medical purchases, including nonprescription drugs. However, effective Jan. 1, 2011, employees are no longer able to use these accounts to purchase over-the-counter drugs and medicines unless they have a doctor’s prescription (other than insulin). In conjunction with this change, the tax on nonqualified purchases using a health savings account will increase from 10 percent to 20 percent. Then, beginning Jan. 1, 2013, maximum annual deferrals to a flexible spending account will be limited to $2,500. (The current limit is $5,000, although some employers impose a lower limit.)

6. Clients (and law firms) with fewer than 25 employees may want to look into the small employer tax credit.
Employers with fewer than 25 employees and average wages of less than $50,000 per year may be eligible for a tax credit equal to up to 35 percent of the employer’s eligible premium expenses if they pay for at least 50 percent of the cost of employees’ health care. Eligibility is based on full-time equivalents, so employers with a significant base of part-time employees should review guidance from the Internal Revenue Service on counting employees to determine if they may qualify for the credit.

7. Grandfathering is simple (sort of).
The concept of “grandfathering” in Health Care Reform is simple in theory. Grandfathering, which was designed in response to questions regarding individuals’ ability to retain existing health coverage, essentially creates a carve-out in the health care reform legislation through which existing plans can avoid some of the legislative requirements (as discussed in sections 8 and 9, below).

A plan is “grandfathered” for purposes of Health Care Reform if it had at least one participant on March 23, 2010 (the date Health Care Reform was enacted). In the union context, the plan’s eligibility for grandfathering turns on the expiration date the last collective bargaining agreement relating to the plan that was in place on Sept. 23, 2009. In all other situations, however, a plan will remain grandfathered unless and until it 1) raises coinsurance charges; 2) raises copayment charges more than $5 or a percentage equal to medical inflation plus 15 percentage points; 3) raises deductibles more than a percentage equal to medical inflation plus 15 percentage points; 4) lowers employer contributions by more than 5 percentage points; 5) adds a new annual dollar limit (unless replacing a lifetime limit of a same or lesser amount); or 6) significantly cuts or reduces benefits. Notably, while a change in insurance companies was initially sufficient to trigger a loss of grandfathering, a recent amendment to the grandfathering regulations eliminated this trigger.

As is clear from the exhaustive list of changes that can trigger a loss of grandfathering, grandfathering is not designed to be a robust or long-standing status. Rather, most employers are likely to lose grandfathering in the relatively near future, and even those not losing their status may find that their insurance carriers will treat their plan as nongrandfathered for improved efficiency. Employers wishing to remain grandfathered will want to take a close look at plan amendments to determine if a loss of grandfathering has occurred and will need to include a notice of grandfathered status along with any plan changes. A model notice is available on the Department of Labor’s website.

8. All health plans are required to comply now (or in the near future).
Health Care Reform began to truly take effect on Sept. 23, 2010, six months after its enactment. Consequently, all plans beginning a plan year after that date (Jan. 1, 2011, for calendar-year plans), are required to make amendments as necessary to meet the following requirements:

Plans may not impose lifetime limits on coverage for essential benefits.

Plans may not impose annual limits on coverage below certain standards (annual limits will be phased out through 2014).

Plans may not rescind coverage for individuals who make unintentional mistakes on coverage applications.

Plans must extend coverage to dependents through age 26, and most limitations, including marital and student status, are now prohibited.

Plans may be required to provide 60 days’ notice of all material plan modifications. (The effective date of this requirement is not clear; however, it appears to take effect in 2012).

Plans may not include coverage exclusions for children with preexisting conditions.

9. Nongrandfathered plans are subject to additional requirements.
In addition to the requirements discussed in section 8, nongrandfathered plans must comply with the following additional mandates by the start of their first plan year after Sept. 23, 2010:

Plans must cover certain preventative and wellness benefits without any co-payments or cost sharing.

Plans must allow for external independent claims reviews (though state requirements can be relied on until July 2011).

Plans must give out-of-network pediatric, ob-gyn and emergency care without preauthorization or increased cost sharing.

Plans that require participants to designate a primary care provider must permit each participant to designate any participating primary care provider who is available to accept such an individual.

Nondiscrimination testing on nongrandfathered insured plans was also initially required as of this date, but it has been delayed pending regulation further defining the new requirements.

10. Politics can change everything.
Health Care Reform is driven by legislation, regulation and appropriations. Health Care Reform is unlikely to be overturned in full, but its reliance on regulation and appropriations could nevertheless result in significant changes to its provisions in the years to come. The recent midterm elections shifted the majority in the House, so in the short term, the executive branch may have trouble securing appropriations to fund Health Care Reform. In addition, if the executive branch undergoes a political shift in the future, it could foreseeably issue administrative regulations designed to take much of the bite out of Health Care Reform. In short, it’s far too early to predict (or worry about) what provisions will ultimately take effect in 2014 and beyond.

ABOUT THE AUTHOR
Iris Tilley is an attorney at Barran Liebman in Portland, where she focuses on ERISA compliance and compensation advice. Contact her at (503) 276-2155 or itilley@barran.com.

© 2011 Iris Tilley


— return to top
— return to Table of Contents

  • For The Public

      Public Legal Information

    • Public Information Home
    • Legal Information Topics
    • Oregon Juror Guide
    • Submit Ethics Complaint

    • Getting Legal Help

    • Finding The Right Lawyer
    • Hiring A Lawyer
    • Lawyers Fees

    • Client Services

    • Client Assistance Office
    • Client Security Fund
    • Fee Dispute Resolution
    • Public Records Request
    • Locating Attorney Files

    • Unlawful Practice of Law

    • UPL Information
    • UPL FAQ

    • Volunteer Opportunities

    • Public Member Application
  • For Members

    OSB Login

    • Log In To OSB Site
    • Member Account Setup
    • Non-Member Account Setup
    • Reset Password

    OSB Resources

    • Attorney's Marketplace
    • Career Center
    • Events
    • Forms Library
    • Online Resources
    • OSB Group Listings
    • Performance Standards
    • Rules Regulations and Policies
    • Surveys and Research Reports
    • Unclaimed Client Funds
    • Voting Regions and By-City
      County Information

    Fastcase™

    • Log in to Fastcase
    • Overview
    • Scheduled Webinars
    • Inactive Member Subscriptions

    Legal Ethics

    • Legal Ethics Home
    • Find an Ethics Opinion
    • Bulletin Bar Counsel Archive

    Company Administrator

    • Company Administrator Home
    • Company Administrator FAQ
    • Authorization Form

    State Lawyers
    Assistance Committee

    • SLAC Info

    Volunteering

    • Volunteer Opportunities

    Court Information

    • Judicial Vacancies
    • Court Info | Calendars | Jury Info
    • Oregon Attorneys
      in Federal Court
    • Tribal Courts of Oregon

    OSB Publications

    • Bar Bulletin Magazine
    • – Bulletin Archive
    • – Legal Writer Archive
    • Capitol Insider
    • Disciplinary Board Reporter

    PLF Programs

    • (OAAP) Oregon Attorney
      Assistance Program
    • Practice Management Attorneys
    • Malpractice Coverage
  • CLE/Legal Publications

    CLE Seminars

    • CLE Seminars Home
    • Online Seminar Registration
    • General Info/FAQ

    My Account

    • My Content
    • My Events
    • Order History

    Legal Publications

    • Legal Publications Home
    • Log in to BarBooks®
    • BarBooks® FAQ
    • Online Bookstore
    • Legal Pubs Blog
  • Bar Programs

    Diversity & Inclusion

    • Diversity & Inclusion Home
    • Diversity Story Wall
    • D&I Programs
    • ACDI Roster
    • D&I Staff Contacts
    • D&I Links

    Legislative/Public Affairs

    • Legislative Home
    • Committee Contacts
    • Legislative Sessions
    • Staff Contacts
    • Useful Links

    Legal Services Program

    • LSP Home

    Oregon Law Foundation

    • OLF Home
    • Partners in Justice

    Fee Dispute Resolution

    • Fee Dispute Resolution Home

    Pro Bono

    • Pro Bono Home
    • Pro Bono Reporting
    • Volunteer Opportunities

    Lawyer Referral and Information Services

    • RIS Login
    • Summary of Referral and Information Services Programs
    • Lawyer Referral Service Info and Registration Forms
    • Modest Means Program Registration Forms
    • Military Assistance Panel Training Info and Registration Form
    • Problem Solvers Registration Form
    • Lawyer To Lawyer Registration Form

    (LRAP) Loan Repayment Assistance Program

    • LRAP Home
    • LRAP FAQ
    • LRAP Policies
  • Member Groups

    Sections

    • Section Info/Websites
    • Joining Sections
    • CLE Registration Services
    • Standard Section Bylaws (PDF)
    • Leadership Resources
    • Treasurers Tools

    Committees

    • Home
    • Leadership Resources
    • Professionalism Commission
    • Volunteer Opportunities

    House of Delegates

    • HOD Home
    • HOD Resources
    • Meetings
    • Rules (PDF)
    • Roster (PDF)
    • Staff Contacts

    Board of Governors

    • BOG Home
    • Meetings & Agendas
    • Members
    • Liaisons
    • Committees
    • Resources
    • Task Forces

    Oregon New Lawyers Division

    • ONLD Home
    • Law Students
    • Student Loan Repayment
    • Committees
    • Upcoming Events

    Task Forces and Special Committees

    • Task Forces Home

    Volunteer Bars

    • List/Contacts
    • Leadership Resources

    Volunteering

    • Volunteer Opportunities
  • Licensing/Compliance

    Admissions

    • Admissions Home
    • Alternative Admittance
    • Applicants for Admission
    • Admissions Forms
    • Past Bar Exam Results

    Supervised Practice Portfolio Examination

    • SPPE Home

    Licensed Paralegal Program

    • LP Home

    Lawyer Discipline

    • Discipline Home
    • Disciplinary Board Reporter
    • Disciplinary Boards
    • Client Assistance Office
    • (SPRB) State Professional Responsibility Board

    Membership Records

    • Address Changes
    • Good Standing Certificate
    • Request Discipline File Review

    MCLE

    • MCLE Home
    • Program Database
    • Forms
    • Rules (PDF)

    IOLTA Reporting

    • IOLTA Home
    • IOLTA FAQ

    Licensing Fees

    • Licensing Fee FAQ
    • Licensing Fee Payment

    Status Changes

    • Status Changes FAQ
    • Inactive Status Form
    • Retired Status Form
    • Active Pro Bono Status Form
    • Reinstatement Forms
    • Resignation Form A
    • Pending Reinstatements

    Unlawful Practice of Law

    • UPL Information
    • UPL FAQ

    Pro Hac Vice/Arbitration

    • Pro Hac Vice
    • Arbitration

    New Lawyer Mentoring Program

    • New Lawyer Mentoring Program Home

    Professional Liability Fund

    • Professional Liability
      Fund Website
For The Public

Public Information Home
Legal Information Topics
Oregon Juror Guide
Finding The Right Lawyer
Hiring A Lawyer
Lawyers Fees
Client Assistance Office
Public Records Request
Unlawful Practice of Law
Fee Dispute Resolution
Client Security Fund
Volunteer Opportunities
for the Public

For Members

BarBooks®
Bulletin Archive
Career Center
Fastcase™
Judicial Vacancies
Legal Ethics Opinions
OSB Group Listings
OSB Login
OSB Rules & Regs
SLAC Info
Surveys and Reports
Volunteer Opportunities

CLE/Legal Pubs

CLE Seminars Home
Legal Publications Home

Bar Programs

Diversity & Inclusion
Fee Arbitration/Mediation
Legal Services Program
Legislative/Public Affairs
Loan Repayment
Assistance Program

Oregon Law Foundation
Pro Bono

Member Groups

Board of Governors
Committees
House of Delegates
Volunteer Bars
Oregon New
Lawyers Division

OSB Sections
Professionalism
Commission

Volunteer Opportunities

About The Bar

About the Bar
ADA Notice
Contact Info
Copyright Notice
Directions to the Bar
Meeting Room Rentals
Mission Statement
OSB Job Opportunities
Privacy Policy
Staff Directory
Terms of Use

Licensing/Compliance

Admissions
Client Assistance Office
Client Security Fund
IOLTA Reporting
Lawyer Discipline
MCLE
Member Fee FAQ
New Lawyer
Mentoring Program

Professional Liability Fund
Status Changes

Oregon State Bar Center

Phone: (503) 620-0222
Toll-free in Oregon: (800) 452-8260
Facsimile: (503) 684-1366

Building Location:
16037 SW Upper Boones Ferry Road
Tigard, OR 97224

Mailing Address:
PO Box 231935
Tigard, OR 97281

Oregon State Bar location Map

Copyright ©1997 Oregon State Bar  ®All rights reserved | ADA Notice | Mission Statement | Privacy Policy | Terms of Use