IRS DELAYS APPLICATION OF NONDISCRIMINATION RULES

On December 22, 2010, the Internal Revenue Service announced (in Notice 2011-1) that insured group health plans will not be required to comply with the nondiscrimination requirements under health care reform until some time after the IRS issues regulatory guidance on those requirements.

The Affordable Care Act provides that insured group health plans (other than certain "grandfathered" plans) must satisfy the requirements of Code Section 105(h)(2), which prohibits discrimination in favor of "highly compensated" participants in terms of either (i) eligibility to participate, or (ii) the benefits provided under the plan. The Act specifically provides that the terms "employer" and "highly compensated individual" (or "HCI") have the meanings given under Section 105(h). Prior to the Affordable Care Act, the nondiscrimination requirements of Section 105(h) applied solely to self-insured (i.e., self-funded) plans.

However, the consequences of violating the nondiscrimination requirements are quite different for insured plans. Code Section 105(h) currently provides that, if a self-insured plan discriminates in favor of one or more HCIs, those individuals will be taxed on some or all of the benefits that they receive under the plan (i.e., those individuals will "lose" the benefit of non-taxable health care reimbursements).

By contrast, if an insured plan violates the nondiscrimination rule, there are no tax consequences to the affected HCIs. Instead, the employer/plan sponsor is subject to an excise tax equal to $100 per day per non-highly compensated individual who is discriminated against. The employer may also be subject to a lawsuit by one or more federal agencies (or by the non-highly compensated individuals discriminated against) for the benefits that the non-highly compensated individuals did not receive.

Under the health care reform statute, these new requirements are to apply to non-grandfathered insured plans for plan years beginning on or after September 23, 2010. Thus, absent relief, these new rules would have applied to calendar-year insured plans beginning on January 1, 2011 (and they already apply to certain fiscal-year plans). However, Notice 2011-1 provides that insured plans will not be subject to the new rules -- and will not be subject to the $100 per day per affected non-HCI penalty for violation of the rules -- until plan years that begin after the IRS issues guidance on the application of these rules.

The IRS has also requested additional comments on how the Section 105(h) "eligibility" and "benefits" tests should be applied to insured plans. This additional comment period closes on March 11, 2011.

A Look at the Impact on Workers’ Compensation

A guest blog from Risk Management Specialist, Stuart Haker.

Healthcare reform has been arguably the most ferociously debated topic in recent years. Employers all over the United States are scrambling to learn what the impact of the Patient Protection and Affordable Care Act will be on their processes, compliance procedures, and bottom line. The trouble is that even the “experts” don’t know for sure what the answers are, as much is yet to be defined. One thing that has become apparent is the potential effect the Act may have on workers’ compensation.

The Act is designed to ensure that all Americans are covered by health insurance and at a capped level of premium. In order to achieve 100% coverage for Americans, approximately 1/3 of the uninsured will be moved into Medicaid programs and the remaining uninsured individuals would purchase insurance through Government health insurance exchanges. This means providers could be forced to ramp up the level of “cost shifting” to maintain operating revenues necessary to treat the increased number of insured patients. Cost shifting occurs when hospitals and doctors receive reimbursement rates from Medicare and Medicaid that are lower than the cost of providing care. To compensate for underfunded services provided, healthcare providers increase how much they charge other patients. Cost shifting is a troubling symptom of the Act as it will have a powerful effect on both private health plans and workers’ compensation carriers.

Currently, workers’ compensation makes up 2% of revenues on average for healthcare providers. However, providers are currently obtaining 16% of their margin from providing workers’ compensation treatment. The medical cost of workers’ compensation is expected to increase as providers will be forced to lean on the high margin services to make up for Governmental reimbursement losses. We are already seeing the early stages of the cost increase in Iowa as the Iowa insurance division announced that the National Council on Compensation Insurance Inc. has made a rate filing for employers to incur a 4.7% increase in workers' compensation insurance rates effective January 1, 2011.

In an environment where governmental intervention is leading to increased costs, a greater focus must be made on utilizing proven methods to minimize usage of the workers’ compensation system to maintain a healthy bottom line. In a commercial insurance program, the one area in which an employer can truly control costs is workers’ compensation. For example, a general liability policy may pay a $10,000 claim and renew with a decreased premium due to market conditions whereas a ‘work comp.’ policy factors the losses against the State rate structure to penalize employers with a poor loss experience and discount the top performers.

In risk management programs focused on reducing the cost of human capital, risk managers implement a workers’ compensation model that integrates three critical components.

1. Human Resources: HR processes need to be put into place to maintain compliance with State and Federal rules in keeping work comp predators off of your jobsite. Ensure that current employees are guided through the work comp system most effectively. And minimize the likelihood that employees will be putting themselves into future claim scenarios.
2. Prevention through Safety: Creating a “Culture of Safety” is essential to encourage the workforce to operate without injury on a daily basis. In order to change culture, everyone from the CEO to the part-time employees must buy in to working together to be safe. Culture change is not easy, but it is obtainable and the results are impossible to argue with.
3. Financial Modeling: In workers’ compensation, unlike group health insurance, employers have choices. There is not an 800 pound gorilla company that dominates the marketplace. Because of this, employers can align themselves with a carrier that provides the best network discounts, and buys into the employer strategy of financing claims using most cost effective methods.

The one certainty that we know is that the Patient Protection and Affordable Care Act will have an effect on your business. Taking a proactive approach to mitigate the negative effects of the legislation will only lead to future profits.

When hockey great Wayne Gretzky was asked to explain the success he had in his career, he responded, “I skate to where the puck is going to be, not where it has been.” Being proactive with your employees’ wellness is no different. Workers’ compensation can be a frustrating puzzle with an enormous cost, but through strategic planning and measured implementation, it can be a puzzle that leads to a profitable picture.

Stuart Haker, Senior Risk Advisor

319-739-1417, shaker@truenorthcompanies.com

Specializing in commercial risk management solutions, Stuart partners with his clients to design and implement long-term risk management strategies. Stuart advises on the reduction of client expenses through enterprise risk planning and the systematic deployment of firm resources on a proactive basis. As a part of his business, Stuart focuses on controlling the costs associated with worker's compensation plans.

Stuart is a member of several local organizations whose mission is to stimulate leadership and growth in the area, including Board participation, Rotary and he is a graduate of the Leadership for Five Seasons professional program.

More on Grandfathered Plans

We have previously offered assistance in translating whether it's worth it to remain a "grandfathered" plan under the new legislation.

Today we have further guidance on what all of this means thanks to our partners at ZyWave!

New Rule for Grandfathered Plans

Under the Patient Protection and Affordable Care Act (PPACA), health plans that existed on March 23, 2010 are generally considered “grandfathered plans.” Grandfathered plans are exempt from some of the health care reform requirements, including coverage of preventive care services with no cost-sharing and patient protections such as guaranteed access to OB-GYNs and pediatricians.

Regulations were issued on June 17, 2010 regarding grandfathered plans. These regulations provided that certain changes to an existing plan could cause the plan to lose its grandfathered status. For example, plans could lose grandfathered status by significantly increasing costs or reducing benefits under the plan. Under the initial rule, plans would also lose grandfathered status by changing insurance policies, even if no other prohibited changes were made to the plan.

The Departments of Labor, Health and Human Services and Treasury (the Departments) have now amended the grandfathered plan regulations to permit insured group health plans to change insurance policies or carriers. Under the amended rule, group health plans will no longer automatically lose their grandfathered status merely because of a change in the plan’s insurance policy, certificate or contract of insurance. However, making any other prohibited change will still cause a loss of grandfathered status.

Reasons for the Amendment

The Departments stated the following reasons for reversing their position on this rule:

• The initial rule treated insured group health plans differently than self-funded group health plans. Insured group health plans were not able to change issuers or policies without losing grandfathered status, while self-funded plans could change their third-party administrators (TPAs), as long as they did not make any other prohibited change. The amended rule allows all group health plans to keep their grandfathered status when changing insurance companies or TPAs.
• A group health plan may not have a choice about changing its insurance issuer; for example, if the issuer withdraws from the market. Under the new rule, the plan sponsor can maintain grandfathered status if it has to contract with a new issuer.
• The initial rule unnecessarily restricted the ability of issuers to reissue policies to current plan sponsors for administrative reasons not related to the underlying terms of the plan. Issuers can now transition policies to a subsidiary or consolidate policies without losing grandfathered plan status.
• The initial rule potentially gave issuers undue and unfair leverage in negotiating the price of coverage renewals with grandfathered plan sponsors, which could interfere with competition and cost containment.

The New Rule Applies Only to Certain Plans
The amendment to the grandfathered plan regulations applies to insured group health plans only. For individual policies, a change in issuer is still considered a change in the health insurance coverage in which the individual was enrolled on March 23, 2010, and the new individual policy, certificate or contract of insurance would not be a grandfathered plan.

Also, whether the amended rule applies to your plan will depend on when the coverage under the new policy was effective. The amendment applies to changes to group health insurance coverage that are effective on or after November 15, 2010. The amendment does not apply retroactively to changes to group health insurance coverage that were effective before November 15, 2010.

For purposes of determining when a change is effective, the date the new coverage becomes effective is the operative date, not the date a contract for a new policy, certificate or contract of insurance is entered into.

For example, if a plan enters into an agreement with an issuer on September 28, 2010 for a new policy to be effective on January 1, 2011, then January 1, 2011 is the date the new policy is effective. Therefore, the relevant date for purposes of determining the application of the amendment is January 1, 2011. However, if the plan entered into an agreement with an issuer on July 1, 2010 for a new policy to be effective on September 1, 2010, then the amendment would not apply and the plan would lose its grandfathered status.

Other Grandfathered Plan Guidelines Still Apply
Although grandfathered plans can now change policies or issuers without automatically losing grandfathered status, the plan will still cease to be a grandfathered plan if the new policy includes changes that are prohibited by the regulations. As with the other provisions of the regulations, the amended rule applies separately to each benefit package made available under a group health plan.

To maintain status as a grandfathered health plan, a group health plan that enters into a new policy, certificate or contract of insurance must also give the new health insurance issuer documentation of the plan’s terms under the prior coverage, including information about benefits, cost-sharing, employer contributions and annual limits. This information must be sufficient to allow the insurer to determine whether a change causing a loss of grandfathered status has occurred.

What Are the New Insured Plan Nondiscrimination Rules?

On September 20, 2010, the IRS issued Notice 2010-63 (the "Notice"), requesting comments on the application of the Code § 105(h) nondiscrimination rules to insured group health plans and providing certain information regarding penalties.

The Patient Protection and Affordable Care Act ("PPACA") amends section 2716 of the Public Health Service Act ("PHSA") to apply certain nondiscrimination requirements of § 105(h) of the Internal Revenue Code (the "Code") to fully insured group health plans. PPACA also incorporates these new requirements into the Code and the Employee Retirement Income Security Act ("ERISA").

What guidance is provided in the Notice?
The Notice addresses PPACA's prohibition (in new PHSA § 2716 and conforming amendments to chapter 100 group health plan requirements in the Code and part 7 of ERISA) against discrimination in favor of highly compensated individuals in insured group health plans. The Notice states that PHSA § 2716 incorporates the substantive nondiscrimination requirements of Code § 105(h) that apply to self-insured plans -- but not the taxes on highly compensated individuals in Code § 105(h)(1) – and applies them to insured group health plans. The main purpose of the Notice is to solicit comments and announce the November 4, 2010 deadline for submitting such comments. The Notice does, however, include several clarifying points concerning the application of PHSA § 2716 and related penalties.

What specifically does the Notice provide regarding the penalties for violating the new nondiscrimination rules?
The Notice makes clear that the consequences of violating Code § 105(h) that apply to discriminatory self-insured health plans do not apply to insured plans that are subject to the substantive requirements of Code § 105(h) pursuant to PHSA § 2716. More specifically, it makes clear that the highly compensated individuals involved are not required to include all or a portion of the benefits received in income as they are in self-insured plans under Code § 105(h). Rather, the following penalties apply in the case of a violation under a fully insured arrangement:

• The Code: There is a $100 per day per individual excise tax in Code § 4980D that applies to violations of the chapter 100 group health plan requirements (capped at 10 percent of the aggregate amount paid or incurred by the employer during the preceding taxable year for the group health plan or $500,000, whichever is less). The Notice makes clear that this tax applies with respect to individuals who are discriminated against for each day the plan does not comply with the requirement (i.e., individuals who are not eligible for coverage under a plan). The excise tax is imposed on the employer or, in the case of a multiemployer plan, on the plan, and does not apply to small employers with between 2 and 50 employees. Employers have an affirmative obligation to report this tax liability on Form 8928.
• ERISA: There is an ability to bring a civil action to enjoin a noncompliant act or practice or for appropriate equitable relief under part 7 of ERISA. Thus, DOL may enforce this provision against a group health plan. In addition, participants, beneficiaries, and fiduciaries may sue to enforce this provision.
• PHSA: There are civil money penalties of $100 per day per individual discriminated against for each day the plan does not comply with the requirement (capped at 10 percent of the aggregate amount paid or incurred by the employer during the preceding taxable year for the group health plan or $500,000, whichever is less). This penalty appears to be limited in this context to non-federal governmental group health plans.

Does the IRS intend to issue any additional guidance regarding the specific nondiscrimination testing rules that will apply to insured plans?
In its request for comments, the Notice notes that the final regulations under Code § 105(h) were issued in 1981. It then states that the Department of Treasury and the IRS are considering issuing guidance on the extension of the Code § 105(h)(2) requirements to insured group health plans, and requests comments on what additional guidance relating to the application of Code § 105(h)(2) would be helpful. This suggests that any such additional guidance will supplement and/or amend the guidance contained in the final regulations issued in 1981. (It also suggests that Treasury/IRS may not intend to revise/clarify the rules under Code § 105(h) generally.)

The final regulations that were published in 1981 (Treas. Reg. § 1.105-11) leave many questions unanswered. As a result, it is often necessary to look to other, lesser forms of guidance (e.g., private letter rulings, informal IRS internal advice memorandums, and informal statements made by IRS officials) for clarification on basic issues. Obtaining certainty in this area is further complicated by the fact that the IRS will not issue private letter rulings on issues involving Code § 105(h). See Rev. Proc. 2010-3, § 3.01(10).

What reporting requirements apply to nondiscrimination testing failures?
If there is a failure to comply with the new nondiscrimination requirements applicable to insured plans, there is an affirmative reporting requirement (Form 8928) that requires an employer to report any violations of Code § 4980D and to pay associated excise tax to the IRS. In general, the excise tax and Form 8928 are due on or before the due date for filing the employer's federal income tax return (without extension). An extension to file the employer's federal income tax return does not extend the date for paying the excise tax and filing Form 8928. For multiemployer plans and multiple employer health plans, the return is due on or before the last day of the seventh month after the end of the plan year.

How Will the 2010 Elections Affect Health Care Reform?

We can't predict the future but have leveraged our partners at ZyWave to give us insight on what the future holds for health care reform post election day.

The recent elections, held on November 2, 2010, are bringing big changes to Washington. Results of a few races are still to be finalized in the days after the elections, but it is already clear that we are looking at a new political landscape.

Republicans have taken control of the House of Representatives, gaining at least 60 seats there. These wins give the party the largest House majority it has had since the 1940s. However, Democrats are set to maintain a slim majority in the Senate.

Potential Health Care Reform Changes
Many Republican candidates included promises regarding health care reform in their campaigns. These promises ranged from making changes to the law to outright repeal. However, employers and plan sponsors should keep in mind that such changes will not be automatic or immediate. Any changes to health care reform will have to go through the same legislative process that the initial reform package endured.

Current House Minority Leader John Boehner (R-Ohio) is expected by many to become Speaker of the House. In the wake of the elections, Rep. Boehner has indicated that Republicans would move slowly with changes to “lay the groundwork before we begin to repeal” health care reform.

With a divided Congress, any efforts to completely repeal the legislation will face obstacles. Even if a full repeal could make it through the Senate, President Obama could still veto any repeal legislation. Because of that probability, some Republicans have indicated that that they would try to repeal the health care law “piece by piece,” using strategies like blocking funding or regulations. Other Republicans have also said they may try to replace, rather than repeal, parts of the law.

Provisions of the law that are likely to be targeted for revision or repeal include:

• The requirement for businesses to report payments in excess of $600 on a Form 1099;
• The employer responsibility provisions, which provide that employers can face penalties for not providing a certain level of health coverage to employees;
• The individual responsibility requirement, which imposes penalties on individuals who do not obtain coverage;
• The Cadillac Plan tax on high-cost, employer-sponsored health plans;
• The tax on manufacturers of medical devices; and
• Cuts to Medicare.

Republicans have also suggested changes to the planned health insurance exchanges, which will take effect in 2014, to give states more power in designing the exchanges. However, members of the GOP have also said that they may want to keep some of the law’s provisions that are popular with consumers. Some experts have warned that keeping some parts of the law while repealing others may not be practical.

Democrats are standing behind the health care package and some exit polls show that the public is split on whether health care reform should be repealed. However, party leaders, such as President Obama and Senate Majority Leader Harry Reid (D-Nevada) have indicated a willingness to revise some portions of the law, especially if changes will bring faster and more effective reform to the health care system.

What’s Next?

Despite all these changes, and potential future changes, the health care reform law as we know it is the law. Employers and health plan sponsors should make sure they are implementing the requirements as they become effective. If any changes are made to parts of the law that have already taken effect, there will likely be time for employers and plan sponsors to put changes into place.

IRS Releases Draft Form W-2

The IRs today released Notice 2010-69 that indicates the W-2 reporting of the cost of medical coverage will not be mandatory for tax year 2011.  Section 9002 of the Affordable Care Act originally required this information be provided to all employees on their 2011 W-2 statements.  The Treasury Department and the IRS, in labeling this decision as “interim relief to employers”, indicated they anticipate issuing guidance on the reporting requirement before the end of this year.  Click here to view the entire Notice.

Clarification: A New 3.8% Tax on Unearned Investment Income

We have gotten a few questions regarding this topic in the last few weeks and thought we'd address it here.  Take it away, Bob!

The health care reform legislation does indeed contain a new 3.8% tax on unearned investment income. However, that tax applies only to individuals who earn $200,000 or more ($250,000 for families) and applies to tax years beginning after December 31, 2012.

Misinformation surrounds how the tax will apply to the sale of a home. For the tax to have any impact the $200,000/$250,000 income threshold must be exceeded (thereby excluding the vast majority of Americans). Then the tax would apply only to the taxable net profit from the sale of a home. For example, let’s say you bought a home for $150,000 ten years ago and since then you made improvements equal to $150,000 (new kitchen, new roof, etc.). Now your cost basis is $300,000. There is currently a $250,000 exclusion for a single taxpayer ($500,000 for a married couple) for the taxability of profit on the sale of a home (if you lived in the house for a minimum period – generally 24 months out of the last 5 years). So, in this example, you could sell the home for up to $550,000 (single taxpayer) or $800,000 (married) and have no taxable profit and thus the 3.8% tax would not apply.

Perhaps the two most controversial aspects of this section of ACA is that the income thresholds are not indexed (so that over time more folks will be impacted by the tax) and that the revenue generated by this “Medicare contribution” will not be applied directly to Medicare (but will instead fund the overall healthcare reform program).

For what it's worth, here’s what the law says:
www.ncsl.org/documents/health/ppaca-consolidated.pdf

Essential Benefits Digging Out a Definition!

We have had a number of questions concerning the definition of "essential benefits."  So, here we go, let's see if we can dig out an "official definition."

The broad definition in the law is:

(1) IN GENERAL.—Subject to paragraph (2), the Secretary shall define the essential health benefits, except that such benefits shall include at least the following general categories and the items and services covered within the categories:

• (A) Ambulatory patient services.
• (B) Emergency services.
• (C) Hospitalization.
• (D) Maternity and newborn care.
• (E) Mental health and substance use disorder services, including behavioral health treatment.
• (F) Prescription drugs.
• (G) Rehabilitative and habilitative services and devices.
• (H) Laboratory services.
• (I) Preventive and wellness services and chronic disease management.
• (J) Pediatric services, including oral and vision care

But - as we know from taking this health care reform trip together - the devil’s particularly in the details – all these expense categories are contained in nearly all group plans, but there are many exclusions and limitations that aren’t addressed in the law. The law allows such limitations to be incorporated into the definition via a 5-step process:

1. The Secretary of DOL surveys employer-sponsored coverage to determine the benefits typically covered by employers and reports the survey results to the Secretary of HHS.
2. The HHS Secretary will then prepare a draft which benefits are essential.
3. The Chief Actuary of CMS must certify that the selected benefits equals the scope of those provided under a typical employer plan (a rather circular process that’s meant to keep things honest).
4. The HHS Secretary will then provide an opportunity for public comment on the definitions (a process that could last many months or be shortened considerably by the methods the Secretary has used for comments regarding the dependents to age 26 regulations [3 months] or grandfathering [2 months]).
5. The final definition is implemented. Periodic reviews of those definitions are mandated.

I see two broad results of this process:

• Employer healthcare benefits will be largely commoditized (a la group life and disability products).
• Protracted scrambling by special interest groups to get their services/products certified by the government as “essential” even though they may increase costs – think airbags for cars.

Many plans are facing a renewal that hinges on the definition of essential benefits. The regulators have ruled that plans that implement their own definition “in good faith” prior to the release of the final regulations will not be subject to sanctions.

Interim Guidance on External Review Procedures

AGENCIES ISSUE INTERIM GUIDANCE ON EXTERNAL REVIEW PROCEDURES

 

When the agencies responsible for administering the new claims and appeals procedures mandated under the Affordable Care Act issued their first round of guidance on this subject, they noted that additional guidance on the Act's new external review procedures would be coming out soon. That guidance has now been issued. It includes the following elements:

• Interim guidance for conducting external reviews by insured health plans;
• Interim procedures to be followed by self-funded, ERISA plans; and
• Model notices to be used in communicating denials after both internal and external reviews.

Note that none of these new claims and appeals procedures will apply to "grandfathered" plans.

Interim Guidelines for Insured Plans

As explained in the agencies' earlier guidance, an insured plan must comply with either a state's external review procedures (if any) or with federal standards that have yet to be determined. The Department of Health and Human Services (HHS) will be posting those federal standards on its website in the near future. In the case of an insured plan, the insurance carrier has the primary responsibility for complying with these external review standards.

 

Interim Procedures for Self-Funded Plans

During an interim period (commencing with the first plan year beginning on or after September 23, 2010, and ending when future guidance is issued), non-grandfathered, self-funded ERISA plans have two options for complying with this new external review requirement. First, they may voluntarily comply with a state's external review procedures (assuming a state makes those procedures available to self-funded plans). Alternatively, they may implement procedures outlined by the Department of Labor (DOL) in its Technical Release 2010-01.

 

These procedures are based on the "Uniform Health Carrier External Review Model Act," as promulgated by the National Association of Insurance Commissioners. They allow a claimant to request an external review after the denial of an internal appeal. Moreover, if the requirements for an expedited external review are satisfied, such a review may be available after the denial of a claim. Although plans must offer this external review option, a claimant need not take advantage of the option before seeking judicial review.

 

The Technical Release describes somewhat different procedures for "standard" and "expedited" external reviews. In general, an expedited external review is available if a claimant's medical condition is such that the timeframes for either an internal appeal of a denied claim or a standard external review would seriously jeopardize the claimant's life, health, or ability to regain maximum function. Not surprisingly, the timeframes for taking action under an expedited external review are generally shorter than those that apply to a standard external review.

 

Standard External Review Procedures

A claimant must be given up to four months to request an external review of the denial of an internal appeal. Once a plan receives such a request, it has only five days in which to determine whether an external review is available to the claimant and, if so, whether the claimant's request for such a review is complete. After making that determination, the plan has only one day in which to notify the claimant if an external review is not available or if the request is incomplete.

 

If a request for an external review is complete (and the claimant is entitled to exercise that option), the plan must promptly assign the request to an accredited independent review organization (IRO). Moreover, to avoid bias and assure independence of the IRO, a plan must contract with at least three different IROs. Requests for external reviews must then be assigned to these IROs either randomly or on a rotating basis.

 

Within five days after assigning a request to an IRO, the plan must provide the IRO with all of the documents and information the plan considered in denying the claim or appeal. If a plan fails to meet this deadline, the IRO may terminate the external review and simply reverse the plan's decision. For this reason, a plan's timely submission of documents and information will be vital.

 

The IRO must then act in accordance with the terms of its agreement with the plan. The Technical Release spells out a number of provisions that must be incorporated into such an agreement. For instance, an IRO must notify the claimant within ten business days of receiving a request for review, must promptly forward to the plan any additional information submitted by the claimant, and must notify both the claimant and the plan of the IRO's final decision within 45 days of receiving the request for review.

 

If an IRO reverses a plan's decision, the plan must immediately provide the requested coverage or pay the claims at issue.

 

Expedited External Review Procedures

Should the circumstances entitle a claimant to an "expedited" external review, that review may take place contemporaneously with any internal appeal. Upon receiving a request for an expedited external review, a plan must "immediately" determine whether the request meets the standards for such a review and then "immediately" notify the claimant of its determination on this point.

 

If the request is eligible for expedited review, the plan must transmit all of the necessary documents and information to the IRO "electronically or by telephone or facsimile or any other available expeditious method." The IRO must then make its determination "as expeditiously as the claimant's medical condition or circumstances require, but in no event more than seventy-two hours after the IRO receives the request for an expedited external review."

 

Model Notices

As a part of this recent guidance, the agencies responsible for administering these procedures have also issued three different model notices. These are captioned as follows:

• Model Notice of Adverse Benefit Determination
• Model Notice of Final Internal Adverse Benefit Determination
• Model Notice of Final External Review Decision

Plans and insurers may want to start using these model notices. In any event, they should probably modify any notices currently in use to ensure that they provide all of the information contained in these models.

 

The agencies also note that they will soon be issuing model language to be inserted into summary plan descriptions as a way of describing both the new internal claims and appeals procedures and the external review procedures addressed in this latest guidance. That model language will be posted on both the DOL and HHS websites. Non-grandfathered plans that are subject to these new rules will want to watch for this language and then incorporate it into their SPDs by the time the new rules take effect

UBA Survey Results

With responses from 17,113 health plans sponsored by 11,413 employers nationwide, the 2010 UBA Health Plan Survey is the nation’s largest and most comprehensive survey of plan design and plan costs. As the largest survey of its kind, the UBA Health Plan Survey defines benchmarks by a greater number of specific industries, regions, and employer size categories than is available from any other resource. The 2009 UBA Employer Benefit Perspectives (which delineates employers' positions and opinions on Employee Communications, Personal Health Management and Scope of Benefits Offered) and the 2010 UBA Employer Opinion Survey (Including the Special Supplement on Health Care Reform) serve as companion pieces to the 2010 UBA Health Plan Survey.

For more information please visit:
http://www.ubabenefits.com/Portals/29/UBA_HPS_2010.swf

A Health Care Reform Checklist

Ahh - Isn't keeping up with all of these regulations fun? We got a checklist one of our partners - ZyWave - this week and thought we'd share it here.

Compliance Checklist

Grandfathered Plan Status

• Determine if you have a grandfathered plan.
• A grandfathered plan is one that was in existence when health care reform was enacted on March 23, 2010.
• Grandfathered plans are exempt from some of the health care reform requirements.
• If you make certain changes to your plan that go beyond permitted guidelines, your plan is no longer grandfathered.

Plan Amendments – All Plans
Plan sponsors should take the following actions prior to the first day of the plan year beginning on or after September 23, 2010 (unless a different effective date is noted):

• Amend plans to cover dependents up to age 26.
• If your plan is grandfathered, it is not required to cover adult children who are eligible for coverage sponsored by their employer for plan years beginning on or before January 1, 2014.

• Amend plans to eliminate lifetime limits on essential benefits and to provide that individuals who previously reached the lifetime limit under the plan and who are otherwise eligible for coverage may re-enroll in the plan and will not be affected by the lifetime limit.

• Amend plans to either eliminate or restrict annual limits on essential benefits.
• Annual limits are being phased out over the next three years.
• For plan years beginning on or after September 23, 2010, a plan may impose a minimum annual limit of $750,000.
• For plan years beginning on or after September 23, 2011, a plan may impose a minimum annual limit of $1.25 million.
• For plan years beginning on or after September 23, 2012 (but before January 1, 2014), a plan may impose a minimum annual limit of $2 million.

• Amend plans to eliminate pre-existing condition exclusions for children under age 19.
• Pre-existing condition exclusions will be eliminated altogether for plan years beginning on or after January 1, 2014.

• Amend plans that include tax-advantaged medical accounts, such as FSAs, HSAs, HRAs or Archer MSAs, to reflect new requirements.
• Plans that permit reimbursement of over-the-counter medicine or drugs must be amended prior to January 1, 2011 to provide that these expenses are reimbursable only with a doctor’s prescription (except for insulin) if they are incurred after December 31, 2010.
• Plans that cover expenses of dependents must be amended to be consistent with any dependent eligibility changes related to the age 26 rule.

• Amend plans to incorporate new rules regarding rescissions.
• A rescission is a termination of coverage that has a retroactive effect. However, a retroactive cancellation is not a rescission to the extent it is caused by a failure to pay premiums.
• Rescissions are only permitted in cases of fraud or intentional misrepresentation of a material fact.

Plan Amendments – Non-Grandfathered Plans Only
Plan sponsors of non-grandfathered plans should also take the following actions prior to the first day of the plan year beginning on or after September 23, 2010:

• Amend plans to cover recommended preventive services with no cost-sharing requirements.

• Establish an effective claims appeal process by amending current claims procedures to incorporate new definitions and requirements.
• Revise definition of adverse benefit determination.
• Update deadline for notice regarding urgent care claims.
• Adopt procedures to provide full and fair review and avoid conflicts of interest.
• Provide culturally and linguistically appropriate notices regarding the process and options for assistance.
• Ensure plan is following appropriate external review process.

• Amend fully-insured plans to eliminate impermissible discrimination in favor of highly compensated employees.
• Plans may not longer discriminate with respect to eligibility or benefits.

• Amend plans to include patient protections.
• If the plan requires participants to choose a primary care provider, allow participant to choose any available participating primary care provider or pediatrician.
• Permit participants to obtain OB/GYN care without a pre-authorization or referral.
• Eliminate pre-authorization requirement for emergency services.
• Eliminate increase coinsurance or copayment requirements for out-of-network emergency services.

Special Enrollment Opportunities

• Provide a 30-day special enrollment opportunity (and notice) to adult children eligible for coverage under the age 26 rule.
• The enrollment opportunity (and notice) must be provided no later than the first day of the first plan year beginning on or after September 23, 2010.
• The coverage must begin no later than the first day of the first plan year beginning on or after September 23, 2010.

• Provide a 30-day special enrollment opportunity (and notice) to individuals who have reached the lifetime limit under the plan but are otherwise eligible for coverage.
• The enrollment opportunity (and notice) must be provided no later than the first day of the first plan year beginning on or after September 23, 2010.
• The coverage must begin no later than the first day of the first plan year beginning on or after September 23, 2010.

Participant Notices
If you have a grandfathered plan, you must include information about the plan’s grandfathered status in plan materials describing the coverage under the plan, such as summary plan descriptions (SPDs) and open enrollment materials. This information must inform participants that the plan is not subject to some of the consumer protections of the health care reform law. Model language is available regarding this requirement.

There are a number of other health care reform provisions that require notices to be provided to plan participants. Model notices are available for some of these notices at www.dol.gov/ebsa/healthreform/.

Employers should make sure they are prepared to provide the following notices prior to the first plan year beginning on or after September 23, 2010 (unless another deadline is noted). To be thorough, plans should include these notices in their SPDs, as applicable.

• Notice that eligibility for dependent coverage has been extended for children up to age 26 (including any restrictions for grandfathered plans) and that a special enrollment period is available for eligible dependents. A model notice is available.
• Notice to participants affected by a lifetime limit (including former participants that are otherwise eligible for coverage) that the lifetime limit no longer applies to them and they are eligible for a special enrollment opportunity if they are no longer enrolled in the plan. A model notice is available.
• Notice to participants in non-grandfathered plans regarding the patient protections that are available. A model notice is available.
• Prior to January 1, 2011, notice should be provided to employees that over-the-counter medication and drugs (except insulin) may only be reimbursed through medical account plans with a prescription.

Going forward, plans will be required to provide certain notices to plan participants, including the following:

• Written notice of any rescission must be provided at least 30 days in advance.
• Non-grandfathered plans must provide a culturally and linguistically appropriate notice to participants regarding the new appeals process and their options for assistance.

A Question about HSAs!

Q: One of the guys at work heard that when Reform passes, we won’t be able to buy OTC drugs, band-aids, etc. with our HSA acct. do you know if this is true?

A: Sounds like you're talking about OTC drugs no longer being eligible for reimbursement beginning w/ 2011 tax year. There’s specific paragraphs for HSAs, Archer MSAs, FSAs and HRAs. But they all say you can expense the “amount paid for medicine or a drug only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin.” So it’s clear Tylenol is out, but band-aids may very well still be eligible. All this is pending release of final IRS regs.

Hope this helps and as always we will offer further clarity as we get it!

Grandfathering - Is it Worth It?

We've been asked by many clients recently how far they can go in changing their plans and still remain in grandfathered status or, for that matter, what's the big deal about being grandfathered? At TrueNorth we have put together a formula to help you calculate the maximum changes that can be made so that you stay in grandfathered status. Call a specialist today for more information: 800-798-4080.

Regulations Issued on Lifetime and Annual Limits

Close on the heels of their regulations concerning grandfathered plans, the Departments of Labor, Health and Human Services (HHS), and Treasury have now released interim final regulations relating to preexisting condition exclusions, lifetime and annual limits, rescissions, and other patient protections under the Affordable Care Act (the “Act”).

So, what does this mean for you and your company? We stopped by local TrueNorth Employee Specialist's, Bob Mreen, desk this morning and asked.

It’s expected insurance carriers will address these requirements by amending client’s fully insured policies at the appropriate time, so little, if any, action is required by an employer group. Self funded groups, however, must initiate their own plan changes in order to remain compliant.

It might also be worth mentioning that there are no provisions in the legislation that limit an insurance carrier’s rate adjustments for these mandates.

See the below "legislative update" for the nitty-gritty information on the regulations.

Lifetime Limits
Under the Act, a group health plan may not establish any lifetime limit on the dollar amount of "essential health benefits" provided to any individual. This requirement is effective for plan years beginning on or after September 23, 2010. It applies to both grandfathered and non-grandfathered plans, although not to health FSAs or health savings accounts.

According to the Act, essential health benefits include, at a minimum, items and services in the following categories: ambulatory patient services; emergency services; hospitalization, maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. Interestingly, the regulations provide no further guidance on the definition of "essential health benefits" -- except to say that, until HHS issues such guidance, the regulatory agencies will take into account good-faith efforts to comply with the "guidelines" set forth in the Act.

A group health plan may still impose lifetime limits on non-essential health benefits. Thus, the key will be to determine which benefits are "essential." For example, would treatment for autism be considered a "mental health service"? If so, it would be an essential health benefit.

Annual Limits
With respect to plan years beginning before January 1, 2014, a group health plan, including a grandfathered plan, may establish a "restricted" annual limit on the dollar amount of essential health benefits for any individual. The new regulations define "restricted" by providing for a three-year phase-out of annual limits. Under this phase-out, the annual limit may not be less than:

• $750,000 for any plan year beginning on or after September 23, 2010, but before September 23, 2011;
• $1.25 million for any plan year beginning on or after September 23, 2011, but before September 23, 2012; and
• $2 million for any plan year beginning on or after September 23, 2012, but before January 1, 2014.

For plan years beginning on or after January 1, 2014, a plan may not impose any annual limit on essential health benefits.

When determining whether an individual has reached one of these annual limits, only essential health benefits may be taken into account. The regulations make clear that a plan is free to lower its current annual limit to these levels. However, as discussed in our recent Alert on grandfathered plans, lowering a plan's annual limit (or imposing such a limit for the first time) may result in the plan's loss of grandfathered status.

Limited Benefit or "Mini-Med" Plans
Subsequent to the Act becoming law, many in the industry have wondered about the fate of limited benefit (or "mini-med") plans. Such plans typically provide benefits that are capped at relatively low annual amounts. As a result, many benefits consultants and advisors have speculated that such plans would cease to exist once the Act's restrictions on lifetime and annual limits take effect.

Surprisingly, however, the regulations provide that HHS may establish a program (for years prior to 2014) under which the minimum annual limit requirement will be waived if establishing such a limit would result in either a significant decrease in access to benefits or significantly increased premiums. This program may provide temporary relief for mini-med plans. HHS is expected to issue additional guidance on this waiver process in the near future.

Notice of Special Enrollment Opportunity
All group health plans must provide written notice to any individual who has already effectively lost coverage because he or she reached a lifetime limit on benefits. This notice must be provided no later than the first day of the first plan year beginning on or after September 23, 2010. It must explain that the lifetime limit no longer applies and that the individual -- assuming he or she is still otherwise eligible -- has a 30-day special enrollment period in which to enroll in any benefit option under the plan that is available to similarly situated employees.

This notice may be included with other enrollment materials, and notice to an employee will satisfy the notice requirement for the employee's dependents, as well. Model language for this notice has just been issued by the Department of Labor and is available on the EBSA website.

PPACA Update

Last week, the departments of Health and Human Services, Labor, and Treasury published a new Interim Final Rule addressing several provisions of the Patient Protection and Affordable Care Act (PPACA) [75 Fed. Reg. 37188 (June 28, 2010)].

To assist you in understanding these regulations, we are pleased to provide the attached Summary Analysis prepared by the Groom Law Group in affiliation with the National Association of Health Underwriters (NAHU).

You Asked, We Answered.

You asked, we answered. Following our recent webinars we received a few questions, see below and please let us know if we can answer more for you.

Q: I remember first hearing about a penalty for employees who didn’t have a good enough (hard to define again) plan and when the employees choose to go into the state program or risk pool that we (employer) could have a monthly penalty because of this, do you remember anything on that?

A: I think you’re first referring to the individual mandate and then to potential employer penalties. Some comments that might be helpful:

Individual mandate: All US citizens and legal residents will be required to have insurance coverage starting 1/1/14. Being enrolled in either an employer plan, a plan offered in the state exchange, Medicare or Medicaid will satisfy this requirement. If a person chooses to not get coverage through one of these programs, they’ll be assessed a penalty. Many folks familiar with the current costs for insurance feel the 2014 penalty and maybe even the 2015 penalty aren’t large enough to encourage enrollment. It could be difficult to find an insurance plan that costs a person only $95 a month, so it’s suspected some folks will simply pay the penalty instead of the higher insurance premium. After all, if they do get sick, they can simply join a plan at that time with no consequences since there will no longer be any pre-existing condition exclusion. While it’s tough to argue with the concept from a financing perspective, we suspect the numbers will be tweaked upward as we get closer to 2014.

Employer penalties: First off, note that these penalties apply only to employers with more than 50 FTEs. Also, the penalties are assessed on a monthly basis, since each employee (and perhaps each dependent) can jump from any available employer or exchange plan to another each month.

If an employer chooses to not provide a health insurance program and any employee gets coverage through a state exchange, the employer will pay an annual, non-deductible penalty of $167 per month for each employee (not counting the first 30 FTEs). The likelihood of an employee getting coverage through an exchange is enhanced by tax credits for individuals and families with incomes less than 400% of the Federal Poverty Level (FPL). 400% of the 2010 FPL for a family of 4 is about $88,000, so it’s likely that many folks will qualify for some level of that tax credit.

If an employer does choose to offer their own medical plan, they may still be subject to penalties if any employee elects to purchase their coverage through the exchange rather than through the employer’s plan. Tax credits are available to employees with family incomes less than 400% of FPL or if the employee must contribute more than 9.5% of their family income toward the employer’s insurance plan, increasing the likelihood of an employee opting for coverage through the exchange. The monthly employer penalty is the lesser of $250 for each employee receiving a tax credit or $167 for each FTE (again, not counting the first 30).

Lots of numbers and possibilities here and unfortunately there’s no straightforward, simple explanation of how it’s supposed to work. All of this is still more than 3 years (and a national election) away, so I wouldn’t count on things staying the way the current law is written. Still, I hope I’ve been able to give you a sense of what could happen. If you have any other questions on this, please don’t hesitate to let us know.

Q: Starting in 2011—next year— will the W-2 tax form sent by your employer be
increased to show the value of whatever health insurance you are provided? Will you be required to pay taxes on a larger sum of money than you actually received?

A: I’ve seen this before and it falls into the urban myth category. While there was some discussion early on in the reform debate about removing the tax-exempt status of employer-sponsored benefits in order to generate revenue, it was quickly squashed by many interests (most notably unions). I’m not sure the best way to counter bad information other than to ask the author to show me where in the law it says what they claim – if nothing else, it sends the author away while they look for something that doesn’t exist! Provided you’re not much of a conspiracy theorist, you can go to http://www.whitehouse.gov/blog/2010/05/25/health-reform-your-taxes-and-rumor-mill and see the official administration response. Hope this helps!

Q: Have you heard anything on the small group tax credit for wellness that is part of the health reform bill?

A: This one I’ve dealt with before. There’s no such “tax credit for wellness” in federal law, but there’s some states that provide for it (I know Indiana does it). I’d bet the confusion comes from trying to combine different elements from the law:

1. Small employer tax credit for premium payments that start in 2010 tax year;
2. Small employer wellness grants: start in 2011; $200 million in grants over 5 years; employers w/ fewer than 100 employees; available only for new wellness programs launched after 3/23/10; grant applications yet to be published;
3. Starting in 2014, premium differentials can increase to 30% for members who participate in wellness programs (applies to all employer plans). HHS Sec is given discretionary authority to increase this to a 50% differential.
   

Hope this helps and please don't hesitate to keep the questions coming.

Understanding Grandfathered Plans

This week the Department of Labor's Employee Benefits Security Administration posted the following related to grandfathered health plans under the Affordable Care Act:

Fact Sheet, available at:
http://www.healthreform.gov/newsroom/keeping_the_health_plan_you_have.html

FAQs, available at: http://healthreform.gov/about/grandfathering.html

A couple key points that we, at TrueNorth, think you should keep in mind in reference to the above "Fact Sheet":

• Medical plans can undergo some modifications and still retain their grandfathered status, which exempts them from some of the new mandates (modifications listed under “Additional Consumer Protections…”).
• The exempted mandates are expected to increase a plan’s costs slightly (generally less than 2%-5%) and increase an employer’s reporting requirements (creating additional internal cost) if/when a plan loses its grandfathered status.
• Some mandates will still apply to all plans – even grandfathered ones (listed under “Protecting Patients’ Rights…”).
• It’s expected that small employer and individual plans will lose their grandfathered status more frequently than large employer plans since they tend to more frequently reduce their benefits and/or increase employee contributions in an effort to cope with rising costs.

That's it for now. Stay tuned - as always - for more as we hear and digest the information!

Health Care Reform: The Near Term

Recognizing that the key provisions of the Affordable Care Act do not take effect until 2014, Congress included a number of short term incentives for the expansion of health coverage during the intervening period. Three of these programs are as follows:

• “Reinsurance” for certain claims incurred by early retirees under an employer sponsored
  plan;


• A tax credit for small employers with a low paid workforce who pay a significant portion of their employees’ health insurance premiums; and


• State-wide “high-risk pools” for individuals who are unable to obtain health coverage
  due to a preexisting condition.

Early Retiree Reinsurance Program
According to the Obama Administration, the percentage of large employers offering health coverage to early retirees (i.e., those between age 55 and Medicare eligibility) has declined precipitously in recent years, from 66% in 1988 to 31% in 2008. As a way of stemming that slide, the Affordable Care Act allocates $5 billion to a program under which the federal government will reimburse employer health plans (whether insured or self-funded) for certain claims incurred by early retirees or their covered dependents. During 2010, this program will reimburse 80% of an individual’s claims of more than $15,000 and less than $90,000. These two dollar amounts will be adjusted for inflation in later years.

To be eligible to participate in this reinsurance program, a health plan must submit an application to the Department of Health and Human Services (“HHS”) demonstrating that the plan has implemented “programs and procedures to generate cost-savings with respect to participants with chronic and high-cost conditions.” As an example of such a cost savings program, recent HHS regulations mention a diabetes management program that includes monitoring and behavioral counseling to prevent complications and hospitalizations. Those regulations define a “high-cost condition” as one that is likely to result in claims of $15,000 or more during a plan year by any one participant.

Any reimbursements received under this program must be used by the plan to “lower costs for the plan.” For example, these funds might be used to reduce retiree premiums, copayments, deductibles, coinsurance, or other out-of-pocket costs. Apparently, they could also be used to reduce any employer premiums for the retiree coverage. However, they could not be used as general revenues of the plan sponsor. HHS is required to audit this program on an annual basis to ensure the appropriate use of all reimbursements. These reimbursements will not be taxable to the plan sponsor.

This program is slated to end on January 1, 2014 – or sooner, if the $5 billion appropriation is exhausted before then. Applications to participate in the program will be available by the end of June. Because reimbursements will be made to qualifying plans on a first-come, first-served basis, any sponsor interested in participating in this program should plan to apply early.

*Additional TrueNorth Insight* Some actuarial analyses indicate the $5 billion allocated to the Early Retiree Reinsurance Program will be exhausted well before the program’s expiration date of January 1, 2014. One can only speculate as to the source of any additional funding or if the program will be continued, making participation in the program a risky proposition.

Small-Employer Tax Credit

Beginning in 2010, small employers (those with fewer than 25 full-time employees, including full-time equivalents [“FTEs”]) with a relatively low-paid workforce (an average annual wage of less than $50,000) may qualify for a federal tax credit equal to a portion of the amounts the employer pays for its employees’ health insurance. To receive the full credit, an employer must have 10 or fewer FTEs and an average annual wage of less than $25,000. The credit is phased out for employers with 10 to 25 employees or average annual wages of $25,000 to $50,000.

This tax credit is equal to a percentage of the total health insurance premiums paid by the employer. For 2010 through 2013, taxable employers may receive a credit of up to 35% of these premiums, while tax-exempt employers may receive a credit of up to 25%. Taxable employers will claim this amount as a general business credit, thereby allowing it to be carried back one year and forward for up to 20 years. The credit also applies to liability under the alternative minimum tax. Tax-exempt employers will claim the credit as an offset against their payroll tax liability. For such employers, the credit is limited to this annual amount.

Beginning in 2014, the program will be slightly modified. The maximum credit percentage will increase to 50% for taxable employers and 35% for tax-exempt employers. However, the credit will then apply only to coverage purchased through one of the state-wide exchanges that are to be established under the Act. Moreover, the credit will then be available to an employer for only two consecutive years. In order to qualify for this credit, an employer must pay at least 50% of the total insurance premiums charged to its employees. For 2010, the employer must simply pay the same dollar amount for each employee, regardless of whether an employee elects single or family coverage. Beginning in 2011, however, the employer must pay a uniform percentage of each employee’s actual premium, even if an employee’s premium is higher due to his or her election of family coverage.

A complicating factor stems from the fact that the credit is actually calculated on the basis of the lesser of (1) the employer’s actual premiums paid on behalf of its employees, or (2) the amount that the employer would have paid (based on the same uniform percentage of the premium) if its employees had enrolled in a plan under which the premiums were equal to the average premiums charged in the small group market in the state where the insurance is purchased. In its recent Revenue Ruling 2010-13, the IRS has listed the dollar amounts of these “benchmark” employee and family premiums to be used during 2010. HHS will redetermine these state-wide benchmarks on an annual basis, and may also establish higher benchmarks for certain areas within a state.

In determining whether an employer meets the 25 FTE and $50,000 average wage thresholds, an employer may disregard any self-employed individuals, any 2% S corporation shareholders, and any 5% owners of other entities. The number of FTEs is then determined by dividing the total number of hours worked by all employees by 2080. The applicable wage definition is the one used for FICA contribution purposes, but disregarding the annual FICA wage cap. Any small employer that would qualify for this tax credit – or that would qualify by making only minor adjustments to the premium amounts it currently pays on behalf of its employees – should investigate the credit’s availability. Claiming the credit may significantly ease the cost of maintaining the employee health plan. Moreover, although an employer may not deduct any premium payments that give rise to the credit, any additional employer premiums will still be
deductible.

*Additional TrueNorth Insight* Employers should view the Small Employer Tax Credit as one option in determining tax liability, since only the Credit or the standard business deduction for medical premium can be used. For those employers “on the cusp” of the variables (9 or 24 employees; $24k or $49k of average wages), the impact of hiring more employees or increasing wages should be factored into any wage/expansion plans.

High-Risk Pools for Long-Term Uninsured

One of the programs included in the Affordable Care Act was proposed by congressional Republicans. It is designed to encourage states to establish temporary pools to provide health coverage to individuals who are otherwise unable to obtain such coverage due to a preexisting condition. To qualify for coverage through one of these “high-risk pools,” an individual must be lawfully in the United States, have a preexisting condition (as determined under guidance to be issued by HHS), and not have been covered under creditable coverage (as defined for HIPAA purposes) during the six months prior to applying.

This program is to be available starting on July 1, 2010. It will end on January 1, 2014, when coverage with no preexisting condition exclusions should be available through the exchanges. The Act appropriated $5 billion to support these high-risk pools, which are to be funded entirely by the federal government. Each state may either establish its own high risk pool or allow HHS to establish and maintain such a pool for its residents. As of May 3, thirty states had announced that they would maintain their own pools and 17 had elected to allow HHS to do so. The remaining four states were still considering their options. Although employers will have no direct involvement with these high-risk pools, they should be aware of a provision in the Act that requires an insurer or self-funded plan to reimburse a pool if the insurer or plan sponsor is found to have encouraged an individual to disenroll from existing coverage in order to obtain coverage through a pool.

-Robert A. Browning, Partner
Spencer Fane Britt & Browne LLP

This publication is designed to provide accurate and authoritative information. It is distributed with the understanding that the author, publisher and editors are not rendering legal or other professional advice or opinions on specific matters, and accordingly, assume no liability in connection with its use. The choice of a lawyer is an important decision and should not be made solely upon advertisements. Past results afford no guarantee of future results. Every case is different and must be judged on its own merits.

Department of Labor Announces Form 5500 Electronic Filing Requirement Changes

On May 13, 2010, the Department of Labor announced a significant change in the electronic filing requirements for the 2009 Form 5500 series annual reports. There is now an option for a service provider to obtain signing credentials and submit electronic returns (Form 5500 and Form 5500-SF) on behalf of their benefit plan clients. In order to use this new option, however, the service provider must be able to verify that it has received written authorization from the plan administrator to submit the electronic filings. In addition, the plan administrator must sign a paper copy of the completed filing, and the service provider must attach a PDF of that manually signed return as an attachment to the electronic filing that is submitted under EFAST 2.

The DOL News Release announcing the new electronic signature option may be found at http://www.dol.gov/ebsa/newsroom/2010/10-680-NAT.html, and the DOL's updated "Fact Sheet" regarding the Form 5500 electronic filing requirements may be found at http://www.dol.gov/ebsa/pdf/fsEFAST2.pdf . The DOL has also updated its Frequently Asked Questions about EFAST2. The new signature option is addressed in Q & A 33a of that publication. The updated FAQs may be found at http://www.dol.gov/ebsa/faqs.

Robert A. Browning, Partner
Spencer Fane Britt & Browne LLP

This publication is designed to provide accurate and authoritative information. It is distributed with the understanding that the author, publisher and editors are not rendering legal or other professional advice or opinions on specific matters, and accordingly, assume no liability in connection with its use. The choice of a lawyer is an important decision and should not be made solely upon advertisements. Past results afford no guarantee of future results. Every case is different and must be judged on its own merits.

CLASS Program

We were recently able to be a part of a conference call conducted by the National Long Term Care Network. The call was broadly focused on the 'CLASS' - Community Living Assistance, Services and Supports - portion of the Health Care Reform Act. This is a voluntary program. If employers want to participate, they must OPT IN. However, if an employer does opt in then all employees are automatically included unless they OPT OUT.

A few other high-points:

• No penalties for employers who don't opt-in, no tax or other enticements to opt-in, either.
• Pays benefits for "non-medical services and supports that the beneficiary needs to maintain his or her independence at home or in another residential setting of their choice in the community, including (but not limited to) home modifications, assisting technology, accessible transportation, homemaker services, respite care, personal assistance services, home care aides and nursing support."
• Takes effect 1/1/2011, but gives the Secretary of the HHS until 10/1/2012 to come up with all the program requirements then asks for public comment.
• Premiums must be paid for 60 months before benefits can be received
• Guaranteed issue
• Unlimited benefit period
• Triggers for benefits expected to be similar to standard "long term care" definition but may not exactly be the same. May be a bit more stringent.
• By statute, must be supported by premiums, must assure solvency for 75 years and is prohibited from using taxes.
  

Of course, more information will continue to become available and we will keep you up to date!

Health Care Reform - A Good Time to Start a Blog!

Health Care Reform is an extremely important and sensitive issue for employers of all sizes. The Employee Benefit Specialists at TrueNorth recently came together and decided that now is as good a time as ever to get information out to our clients and community about these impending changes. So, hold onto your seats as we embark on this journey of Health Care Reform together.

First stop? Let's answer the question - what does this mean for me and my business? We have tried to break the thousands of pages of legislation into 7 Simple Things You Need to Know.

1. Dependent coverage will be extended to age 26. See below for a more detailed definition.
2. There will no longer be lifetime limits on benefits.
3. There are restrictions on annual limits. This change is not in affect until 2014 and we are still awaiting further definitions.
4. There are no pre-existing condition restrictions on children under 19 years of age. See below for a more detailed definition.
5. Rescission of is not allowed. See below for a more detailed definition.
6. Flexible Spending Accounts (FSAs) as well as Health Savings Accounts (HSAs) and Health Reimbursement Accounts (HRAs) will no longer be used for over the counter drugs staring 1/1/2011.
7. The penalty for using your HSA for non-qualified withdrawals has increased from 10% to 20%.

Now, having said that, let us help you define what some of these things are referring to:

• Annual Benefit Limits: these are specific dollar limits set for specific benefits within a plan. Final regulations are still needed to clarify specific benefits that are not allowed to have these limits.
• Dependent Coverage to Age 26: dependent children (even if married) can continue to be covered on the parent's health coverage. If other employer-sponsored coverage is available for the dependent they are not eligible to stay on parent's plan.
• Grandfathered Plans: a plan that makes no changes after the enactment of this legislation is expected to be allowed to remain active. Final regulations are still needed to determine if the required changes under the legislation will impact this status or if there is any value in remaining "grandfathered".
• Lifetime Maximums: this is the maximum benefits an insured can receive over their lifetime through an insurance policy. Policy will no longer be able to include this limitation.
• New Hire Auto-Enrollment: employers with 200 or more employees will automatically enroll employees into an employer-sponsored health plan.
• Out of Pocket Maximums: this is the maximum amount an insured expects to pay in a specific time period for treatment. These limits will not be allowed to exceed the limits established for high deductible health plans.
• Plan Rescission: prevents insurance carriers from cancelling coverage.
• Pre-Existing Condition: typically a pre-existing condition is a condition that an insured received treatment and/or medical advice (including prescriptions) in a set time period prior to their first day of coverage. Many plans provide a waiting period for such conditions. This legislation will remove this limitation immediately.
• Preventive Services: typically these include annual physicals (including gynecological exams), immunizations, PSA testing, mammograms, etc. Final regulations are still needed to determine the definition of "preventive services". Once that is determined, those services will be covered at 100% - no cost-sharing such as co-payments, coinsurance and/or deductibles.

And finally, when can you expect these changes to occur?

Following are the required changes to health plans beginning on or after September 23, 2010.

2010

• Remove pre-existing conditions for children under age 19
• Extend coverage to dependent children until age 26
• Remove lifetime maximums
• Begin restricting use of annual limits
• Any in-network doctor may be designated as a primary care physician
• First dollar benefits for specific preventive services

2011

• Over the counter drugs not reimbursed through FSA, HRA, HSA or Archer Medical Savings Accounts
• Penalty for non-medical distributions from HSA or Archer Medical Savings Account increases from 10% to 20%.
• Employers must report the cost of the employer sponsored health benefits on employee W-2

2012

• No changes reported for employer plans

2013

• Medical FSA contributions capped at $2,500 annually
• Uniform standards for electronic exchange of health information for health plans

2014

• Remove all annual limits
• Remove all pre-existing condition limits
• No waiting period longer than 90 days for employer benefits
• Individual requirement to buy insurance - or pay penalty
• State health exchanges open
• Employers must provide vouchers for employees who qualify for affordability exemption but not health care premium tax credits
• Employers that do not offer health insurance: $2,000 penalty for full-time employee (after 30 FTEs)
• Employer penalty for employees who receive tax credits (do not take employer health plans). Penalty of $3,000 per person receiving the tax credit or $750 per full-time employee (whichever is less).

2018

• Excise tax on "Cadillac Plans" that are valued more than $10,300 for single coverage and $27,500 for family coverage

Although this information is in no way all encompassing, we are hopeful that it begins to lay the groundwork for an understanding of the legislative changes. We will continue to add to this skeleton outline and work through the questions we all have, together.

For more information and to ask questions to experts please join us at Mercy Medical Center's Hallagan Education Center on May 6, 2010. Registration and breakfast begins at 7:30 am with a presentation running from 8-10 am.