Healthcare reform: What it means to your veterinary practice

What does human healthcare reform have to do with your veterinary practice? More than you may think. No, you won't get any extra government funds for the healthcare you provide pets. But the humans who handle patient care in your practice need care, too. And new rules just may change the healthcare plans you offer team members.

CLEAR AS MUD

I recently attended the Society of Human Resource Managers' annual conference in San Diego. I hoped to glean some information about the new healthcare reform act and what impact it would have on the veterinary profession, especially the practices I consult with. Unfortunately, I walked away realizing that I'm not the only one confused about these new laws and regulations. Even people who are supposed to know all about the subject admit they're confused.

For one thing, the law keeps changing. President Obama signed the legislation (officially titled the Patient Protection and Affordable Care Act) into law on March 23. A reconciliation bill passed three days later. Less than a month later, a set of final interim regulations came into play that "grandfathered" existing healthcare plans.

Despite the confusion, it's worth highlighting the changes that carry potential ramifications for veterinary practices both big and small. Keep in mind that while most of the healthcare reform act will affect practices that employ more than 50 employees, some provisions affect every practice, regardless of size. The main difference is that practices with 50 or fewer employees are exempt from the tax penalties the law will impose on employers that don't provide healthcare benefits.

Things to come

FIRST, THE GOOD NEWS

Let's start with the positive. Small veterinary practices (those with fewer than 25 employees) already offering health insurance coverage, or practices that start to offer this benefit for the first time, may qualify for a special tax credit. To qualify, you must pay at least half the cost of healthcare coverage for your employees, and the employees must earn an average of $50,000 or less per year.

Because the eligibility formula is based in part on the number of full-time equivalents on the payroll, your practice might qualify even if you employ more than 25 team members. The tax credit is granted on a sliding scale based on the number of employees and the percentage of the health insurance premium paid by the employer. To see if your practice qualifies, visit www.irs.gov/pub/irs-utl/3_simple_steps.pdf.

In the 2010 tax year, the maximum credit (available to qualifying employers with 10 or fewer full-time-equivalent employees who earn an average of $25,000 or less each year) is 35 percent of the premiums you pay. In 2014, the maximum credit will increase to 50 percent of premiums. The credit is set to expire in 2016.

DETAILS, DETAILS, DETAILS

While many of the other healthcare reform details are in flux, a few key issues are worth keeping an eye on. Here they are:

Grandfathered plans

Employer-provided healthcare plans that existed as of March 23, 2010, are considered grandfathered and don't have to comply with the new requirements, which include offering preventive healthcare without cost-sharing, establishing external review procedures for the claims appeal process, covering clinical trials, and complying with certain quality-of-care reporting requirements.

What this means to you: Losing your grandfathered status could be costly and require you to do a lot more paperwork and government compliance. So don't cut any benefits or significantly increase out-of-pocket spending for employees. You can, however, make routine changes to your grandfathered policy and still maintain your status. These changes include cost adjustments to keep pace with medical inflation, the addition of benefits, modest adjustments to existing benefits, voluntary adoption of new consumer protections, and changes that comply with state or other federal laws.

Keep in mind that even grandfathered plans are subject to new rules for plans starting after September 23. These include no lifetime limits, no restricted annual limits, no preexisting condition exclusion requirements, and the requirement to cover adult children until they reach the age of 26.

Shop exchanges

By no later than 2014, states must set up SHOP (Small-business Health Options Program) exchanges where small businesses can buy insurance. Small businesses are defined as those with no more than 100 employees, though states have the option of limiting pools to companies with 50 or fewer employees through 2016. Companies that grow beyond the size limit will be grandfathered in.

What this means to you: Your insurance premium costs may drop slightly, anywhere from 1 percent to 4 percent, while the amount of coverage would rise by up to 3 percent.

Reporting requirements

The reform law requires all businesses to report the value of healthcare benefits on employees' W-2 forms every year. In addition, businesses must create and submit a 1099 tax form for every payment of $600 or more to individuals and other businesses. However, in an interesting twist to this law, if you pay these businesses by credit card, you don't have to report the payments and submit a 1099.

What this means to you: Congress designed the 1099 reporting requirement to track business transactions that the IRS tends to miss and to tap into a potential new stream of tax revenue. They will be checking what the companies report as income and compare that to their customers' report (very sneaky). Talk to your accountant about this issue.

THE BOTTOM LINE

Above all, be cautious when making any changes to your health insurance coverage for employees at this time. Making changes could lose you your grandfathered position, cost you more money, and cause you more headaches. Check with your accountant before making any significant changes, and keep your eyes peeled for even more changes coming down the pipe.

Mark Opperman, CVPM, Veterinary Economics' Hospital Management Editor, owns veterinary consulting firm VMC Inc. in Evergreen, Colo. Please send questions or comments to ve@advanstar.com.