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HCR Update: Grandfathering Clarity, Tax Treatment of OADs, etc.

Nov 09, 2010

Health Care Reform Update

November 5, 2010


New fact sheet clarifies grandfathering for off-cycle renewals     

Plans are required to implement changes required by health care reform starting with their first renewal on or after September 23, 2010. If a group makes off-cycle plan changes before its first renewal after September 23, 2010, grandfathered status will not be affected until the next renewal date. The only exception would be if the plan change resulted in a new contract. For example, if a group moved from an HMO legal entity to a PPO legal entity, this would cause its grandfathered status to be lost immediately.  

For more details, refer to the new Grandfathering and Off-cycle Plan Changes Fact Sheet.


New fact sheet clarifies tax treatment of adult dependent coverage    

To align with the health care reform law, the IRS has clarified that health care coverage for employees' young adult dependents is not taxable. However, the rules have not changed for health savings account (HSA) expenses. That means employees can use HSA funds tax-free only for eligible expenses of family members who meet the IRS's definition of a "tax dependent."

For more details, refer to the Tax Treatment of Dependent to Age 26 Fact Sheet.   

This Week in Health Care Reform: November 5, 2010 

Post-Election Wrap-Up 

Millions of Americans went to the polls on Tuesday, feeling anxious about the economy and health care reform, and yielding election results that gave Republicans control of the House of Representatives and weakened the Democratic majority in the Senate. Republicans picked up at least 60 House seats and at least six Senate seats in the election, removing Democrat Nancy Pelosi from her powerful position as speaker of the House and putting Republicans in charge of House leadership and committees.  

The Republican sweep extended from coast to coast and removed more than 30 Democratic incumbents from the House of Representatives, including Armed Services Committee Chairman Ike Skelton, Budget Committee Chairman John Spratt and Transportation Committee Chairman James Oberstar. 

Exit polling shows more than eight in 10 voters feel the economy is the No. 1 issue facing the nation, and three times as many people believe it is getting worse rather than better. Health care reform followed as the second-most important issue for voters during this election cycle. Nearly three in four voters expressed dissatisfaction with Congress and six in 10 say they believe the country is headed in the wrong direction. 

With the midterm elections close to complete, we encourage you and others to see how health care reform affected congressional races by visiting the updated Health Action Network

Health Care Reform 

How the Election Results Affect the Future of Health Care Reform: With the new Republican majority in the House, a stronger showing in the Senate and greater numbers of GOP governors, the health care debate is expected to focus on implementation of the law, as well as efforts to repeal it. While full repeal will face a presidential veto, lawmakers will most likely pursue incremental changes, "tinkering and tweaking" the law to keep the debate top of mind for voters leading up to the 2012 elections. 

According to political strategists, Republicans could also use the oversight authority of Congress to slow down or block regulations, essentially stalling the law's progress. Congressional hearings are likely to focus on the impact of the immediate reforms on costs and coverage, the outlook for reforms that take effect in 2014 and stronger direct oversight of federal regulators. Additionally, the annual appropriations process is likely to serve as a battleground for health care reform issues, with a focus on funding for federal agencies involved in the implementation process.

Two More States Vote to Reject Health Insurance Mandate: At the polls this week, voters in Oklahoma and Arizona resoundingly supported ballot initiatives to opt out of the federal health care reform law. Missouri voters approved a similar measure, Proposition C, with 71% support on a primary ballot in August. A similar proposal on Tuesday's ballot in Colorado would have prohibited the state from forcing residents to buy public or private health insurance. However, the measure was rejected by a narrow margin. 

Public Opinion

Exit Polls Show Half of Americans Still Want Repeal:
According to the Pew Research Center, voters were divided over whether to repeal health care reform (48%) or maintain or even expand it (47%) in exit polls on Tuesday. However, the major priorities for 2011 include reducing the deficit, creating jobs and boosting the economy.   

Looking Ahead 

President Barack Obama has invited the Republican and Democratic leaders of Congress to the White House on November 18 to discuss the new political landscape and ways to work together in the future. The meeting with Rep. John Boehner, Senate Minority Leader. Mitch McConnell, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid is expected to take place during the first week of Congress' "lame-duck session," which begins on November 15.  

Getting to the bottom of your health care costs         

Did you know: Diabetes accounts for 23% of total hospital spending? 

An August 2010 Agency for Healthcare Research and Quality report states diabetes costs Americans $83 billion a year in hospital fees - 23% of total hospital spending. According to the American Diabetes Association, diabetes affects nearly 25 million Americans. The Centers for Disease Control lists diabetes as the seventh leading cause of death in America.

This content is provided solely for informational purposes: it is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.

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