Health reform brings confusion

I’ve heard from many of my business clients and countless Michigan business owners who have attended our informational seminars regarding the recently enacted Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (health care bill). We presented a solid overview using simplified terminology and detailed information to assist our seminar attendees in understanding the bill’s language. It became quite evident, from the questions the participants were asking, that this new law is causing bewilderment and frustration for business owners.

Under the health care bill, employers will be expected to make a variety of changes with respect to health care coverage. But for many, confusion doesn’t stem from the bill’s health care requirements but from the mandatory administrative and labor-intensive procedures.

For example, Section 9002 — just a few lines buried deep in the 2400-page document — mandates that beginning with the 2011 tax year, all companies must report the cost of employer-sponsored health coverage to employees on Form W-2, and Section 1001(5) mandates that employers will have to provide plan participants with a new summary of benefits (in addition to the already required ERISA summary plan description) beginning in 2012. Other reports relating to employer-sponsored health care will be required.

These are some of the many changes that Michigan employers do have some time to prepare for. But there are changes that are affecting businesses immediately.

Employers may be reimbursed from the federal government for a portion of the cost of providing health coverage to early retirees.

A tax credit will be available for eligible employers who provide health insurance to their employees. An eligible employer is one with no more than 25 employees and annual average wages of no more than $50,000.

We can agree that the current health care system is broken, but the cure may be worse than the disease. Businesses may need to hire additional personnel or contract with suppliers in order to meet the myriad requirements — unwelcomed additional expenses at a time when businesses are struggling to keep the doors open.

Yes, reform is needed, but this health care bill is very complex, open-ended and labor intensive for most businesses.

Nancy Farnam is a partner at Varnum Law.