Individual Health Insurance Reform Update January 2011

Last Wednesday, Jan. 19, the United States House of Representatives voted 245-189 to repeal the nation’s individual health insurance reform law, the Affordable Care Act. While a full repeal is not expected, we should see a number of congressional hearings on the topic over the next few months.

The Affordable Care Act extended to insured group health plans the non-discrimination provisions found in the Internal Revenue Code, which previously had been applicable only to self-insured group plans. Effective for Plan Years which begin after Sept. 23, 2010, non-grandfathered health insurance plans are prohibited from discriminating in favor of highly compensated employees, and a penalty is imposed of $100 per day per participant on plans that discriminate. However, in Notice 2011-1, the IRS has delayed the application of the non-discrimination provisions of the Affordable Care Act until after regulations or other administrative guidance of general applicability have been issued. Notice 2011-1 also indicates that the penalty for failure to comply with the non-discrimination provisions will also not apply until the required regulatory guidance is issued.

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