Over the last year, Congress and the White House struggled to create health reform legislation aimed at increasing the quality of health care in America, while reducing its cost. Although health care reform is now “the law of the land,” the future of the legislation and how it will ultimately impact employers and workers is still unknown.

The legislation’s affect on the nation’s health care system isn’t yet solidified. Several states' Attorney Generals have filed or are in the process of filing lawsuits alleging that the federal health care reform law is unconstitutional, and a handful of state legislatures have passed laws preventing the federal law from taking effect in their states. ADP TotalSource will be monitoring how the enacted health reform legislation will impact employers in each state.

So, where do America’s employers, their employees and the nation go from here with respect to health care reform legislation?

Implementation Timeline for Health Care Reform
Here’s an overview of some health care reform provisions that employers can anticipate over the next eight years:

Year	Event(s)
2010	For plan years beginning on or after September 23, 2010: Pre-existing condition limitations will be eliminated for children under the age of 19 Lifetime coverage limits will be eliminated and annual limits are to be restricted Young adults will be able to stay on parents’ health plans until age 26 Subsidies begin for small businesses that provide coverage to employees and make a certain level of employer contribution to that coverage Federal funding increased for state high-risk pool
2011	Small employers that establish wellness programs will be eligible for grants for up to five years Employers will be required to disclose value of health benefits on employees’ W-2 IRS forms Medicare beneficiaries will get free annual wellness visits and personalized prevention plan service Over-the-counter medications not prescribed by a doctor will no longer be reimbursable through a health care FSA or HSA
2012	Executive compensation deductibility will be limited to $500,000 per applicable individual for health insurance providers
2013	FSA contributions will be capped at $2,500 per year Tax credits and subsidies for lower income individuals begin $6 billion will be appropriated for non-profit health care cooperatives Annual fees will be imposed on pharmaceutical manufacturers and medical device manufacturers
2014	Insurance Exchanges will be created Employer mandate requirements (auto-enroll, temporary reinsurance program) will begin Individual mandate will begin Pre-existing condition limitations for adults will be eliminated Annual fees on health insurers and clinical labs will begin
2015	States may form agreements to allow purchase of non-group health insurance across state lines Medicare program rewarding quality of care, rather than volume of services, will begin
2018	Excise tax of 40% on high-cost ‘Cadillac Plans’ that exceed $10,200 (individuals) and $27,500 (family) will begin

Small Businesses Split on Reaction
Small business owners continue to be divided on their reaction to health reform. Some are concerned that increased employer responsibility could drive up their health care costs to an unsupportable level, forcing them to stop offering coverage to their employees altogether. They argue that such cost increases could dramatically decrease their competitiveness with larger businesses in vying for top talent; it’s widely acknowledged that large companies’ health coverage costs per worker average 18% less than small businesses’ costs. Others who support the reform legislation anticipate that subsidies included in the legislation for small businesses should allow them to offer plans at a lower overall cost, and that the reform will impose greater regulation of insurance companies to protect them from sudden premium increases when an employee gets sick or their population’s age increases.

Will Reform Reduce Health Care Cost Trends?
The only clear mechanism to reduce medical trend in the health care reform legislation for employers is an increase in wellness program incentives. Other provisions, including increased use of electronic medical records, global provider payments and comparative effectiveness research are long-term approaches with uncertain cost savings for employers. Some experts believe that because of health care reform legislation, employers may actually see increased cost trends due to:

• Reduced provider reimbursement from Medicare in future years that could increase cost shifting to employers
• Insurance market reforms that may increase costs for private health plans offered through Insurance Exchanges
• Additional taxes/fees imposed on health carriers that could increase employer costs

What will this mean for health plan premiums? The impact will vary widely based on each plan’s current structure and limits that will have to change as the legislation’s provisions go into effect. But, according to PricewaterhouseCoopers findings, annual premiums for a family plan could cost $4,000 more per year, and an individual plan could cost $1,500 more per year by 2019¹:

How ADP TotalSource Helps Clients Navigate Health Care Reform
Regardless of the ultimate impact health care reform has on the insurance industry, it appears likely that the employer system will remain the source of coverage for more than half of the American population. That’s why ADP TotalSource believes it’s critical that companies continue to have access to cost-effective, efficient and responsive plans for their employees. Although we can’t specifically predict the impact health care reform legislation will ultimately have on your business, ADP TotalSource can provide you with the tools, resources and expertise needed to meet complex compliance challenges as they arise, while providing you the ability to focus on your business in these challenging economic times.