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Developments in Healthcare Legislation

October 31, 2011

The U. S. Department of Health and Human Services announced on October 14, 2011 in a letter to Congress that the law's program to provide long-term care insurance through the workplace was unworkable and would not be implemented. The program was to begin in 2013.

The Community Living Assistance Services and Supports (CLASS) Act although sponsored by the government, was supposed to function as a self-sustaining voluntary insurance plan, open to working adults regardless of age or health. Workers would pay a monthly premium during their careers and could later use the money for services to help them with home care or nursing home bills. But a central design flaw dogged CLASS from the beginning. Unless large numbers of healthy people willingly signed up during their working years, soaring premiums driven by the needs of sick beneficiaries would destabilize it, eventually requiring a taxpayer bailout.

Previous Changes to the Law

Since passage of the Patient Protection and Affordable Care Act (PPACA) in March 2010 there have been several developments that will provide some relief for employers. Beginning in 2012 the Act would have required all businesses to file 1099 forms for every business and individual they made payments to in excess of $600. The purpose of the regulation was to help collect taxes on supposedly unreported income. From the outset, businesses cried foul at the imposition of this new administrative burden. Earlier this year, with bi-partisan support in both houses, Congress passed H.R. 4 which eliminated this reporting requirement.

The PPACA provides that employers are required to report the cost of employer-provided health care coverage on the Form W-2. The IRS has emphasized that this new reporting to employees is for their information only and does not cause excludable employer-provided health coverage to become taxable. An IRS Notice in October 2010 made this requirement optional for employers for the 2011 Form W-2 (furnished to employees in January 2012). A subsequent IRS Notice (2011-28) provided further relief for small employers (those filing fewer than 250 W-2 forms) by making this requirement optional for them at least through the tax year 2012 as well. Furthermore, the notice stated that the optional treatment for smaller employers would be in effect until further guidance is issued from the IRS.

In April 2011, President Obama signed into law H.R. 1473 – the Department of Defense and Full-Year Continuing Appropriations Act. One portion of the act repeals the Free Choice Voucher program that was created by the PPACA. The program would have required large employers (those with more than 50 full-time employees) to provide certain low-income workers who declined their employer's health care coverage with an employer-paid voucher to seek potentially cheaper plans in the health insurance exchanges. The amount of the voucher would have been the amount the employer would have contributed toward the employee's coverage. The Free Choice Voucher program was set to begin in 2014. The repeal simply means that the free choice voucher provision will no longer be a part of the Affordable Care Act, and large employers will not be required to provide free choice vouchers in 2014.

Should you have questions about these changes to the healthcare reform legislation, contact us at or by phone at 423-764-4127.