Health Care Reform Update: Annual Dollar Limits; MLR and HSA's

THE LATEST HEALTH CARE REFORM UPDATE:

HHS Releases Guidance Related to Annual Dollar Limit Waivers
On Feb. 13, 2012, the Department of Health and Human Services (HHS) stated a health insurance issuer that has received a waiver of the annual dollar limit requirements pursuant to Section 2711 of the Public Health Service Act for a group health insurance product can sell that product to a self-insured grandfathered group health plan that has itself been granted a waiver and wishes to switch from being a self-insured plan to a fully insured plan, as long as the following criteria are satisfied:

1. In all cases, the plan sponsor must have been offering group health coverage to its employees before Sept. 23, 2010, for which it obtained from HHS a waiver of the annual limits requirement;
2. The issuer from which the group health plan is now obtaining the insured policy must have obtained a waiver from HHS for the newly purchased policy;---
3. The annual limits of the new policy may not be lower than the annual limits of the previous policy, except in the situation outlined in No. 4;
4. The plan sponsor may obtain a replacement policy with a lower annual limit only if other comparable coverage is not available.  If a plan purchases a lower annual limit policy due to lack of comparable coverage, this change would cause a loss of status under 45 CFR 147.140(g)(1)(vi)(C), relating to status as a grandfathered health plan.-
5. The health insurance issuer must obtain from the plan sponsor an attestation that the criteria outlined above are satisfied, and the attestation must be accompanied by documentation outlining the terms of the prior coverage. Issuers shall retain this information in accordance with the data retention requirements of the Sept. 3, 2010, and Nov. 5, 2010, annual limits guidance documents.
6. To the extent not superseded here, all prior HHS guidance regarding annual limits waivers continues to apply to the plan and policies described here.

Milliman Study Highlights the Impact of Medical Loss Ratio Rules on HSAs
A new report by Milliman Inc. says that high-deductible health plans, including those with health savings accounts (HSAs), will likely be more adversely impacted by the medical loss ratio requirements under PPACA than other types of comprehensive medical plans.  Consumers who rely on HSA-qualified plans to finance their health care may experience greater costs in their current health plans and may eventually have to find more expensive replacement coverage.

The primary issues of concern for high-deductible plans are that:

• The medical loss ratio formula doesn't take into account contributions to HSAs.  Many high-deductible health plans are accompanied by an HSA, which covers much of the first-dollar costs before the plan's deductible is reached. HSA contributions are currently not reflected in the medical loss ratio calculations.
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• High-deductible health plans may not be able to raise rates fast enough to keep up with rising costs.  High-deductible health plans will require larger annual rate increases than typical medical plans because medical inflation will have a greater impact on claim levels than plans with lower deductibles.
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• Every plan has fixed expenses that it covers with premiums.  Since high-deductible health plans have lower premiums than other plans, a greater percentage of the premium must be used to pay these fixed expenses. ---

High-deductible health plans have less predictable claims experience that could increase the risk of paying rebates.  High-deductible insurance plans pay fewer claims than plans with low deductibles.  But when high-deductible health plans pay claims, the claim dollar amounts tend to be larger.  This lower-frequency/high-payment creates less actuarial predictability which can result in high claims in one year and low claims in another.  If the plan has low claims, it may not meet the 80 percent medical loss ratio and be required to pay rebates.  If the plan has high claims, it may lose money that it cannot "make up" in other years.

Health Care Reform Update: SBC Rules; Essential Benefits; Auto-Enrollment

Happy Valentines Day everyone!

Today we've partnered with our partners at UBA to bring you the most recent updates to Health Care Reform.

Agencies Release PPACA Final Rule, Guidance and Templates for Summary of Benefits and Coverage (SBC) and Uniform Glossary of Terms

The Departments of Labor, Treasury and Health and Human Services have released final regulations under the Patient Protection and Affordable Care Act (PPACA) that require health insurers and group health plans to provide concise and comprehensible information about health plan benefits and coverage to those with private health coverage.  Under the rule, health insurers must provide consumers with clear, consistent and comparable summary information about their health plan benefits and coverage. The new explanations will be available beginning, or soon after, Sept. 23, 2012.

Specifically, these rules will ensure consumers have access to two key documents that will help them understand and evaluate their health insurance choices:

• A short, easy-to-understand Summary of Benefits and Coverage (SBC); and
• A uniform glossary of terms commonly used in health insurance coverage.

 All health plans and insurers will provide an SBC to shoppers and enrollees at important points in the enrollment process, such as upon application and at renewal.  A key feature of the SBC is a new, standardized plan comparison tool called “coverage examples,” which will illustrate sample medical situations and describe how much coverage the plan would provide in an event such as having a baby (normal delivery) or managing Type II diabetes (routine maintenance, well-controlled).

The rule's effective date is 60 days after publication in the Federal Register (scheduled for Feb. 14, 2012).  The applicability date is generally Sept. 23, 2012 (or the first day of the first plan year after this date, or the first day of the first open enrollment period after this date). 

• Final rule
• Guidance for Compliance
• Summary of Benefits and Coverage (SBC) Template | MS Word Format
• Sample Completed SBC | MS Word format
• Instructions for Completing the SBC - Group Health Plan Coverage
• Instructions for Completing the SBC - Individual Health Insurance Coverage
• Why This Matters Language for "Yes" Answers
• Why This Matters Language for "No" Answers
• HHS Information For Simulating Coverage Examples
• Uniform Glossary of Coverage and Medical Terms

HHS Provides Illustrative Information Regarding Benchmarks for Essential Health Benefits

The Department of Health and Human Services (HHS) provided illustrative information to complement its Dec. 16, 2011, bulletin on essential health benefits (EHB) under the Patient Protection and Affordable Care Act.  The information provides the names of the three largest products in the small group market in each state ranked by enrollment, as well as a list of the top three nationally available Federal Employee Health Benefit Program plans based on enrollment.

In an earlier bulletin released Dec. 16, 2011, HHS described the approach it intends to pursue in rulemaking to define these essential health benefits.  Under that approach, states would be able to select an existing health plan to set as a benchmark for the items and services included in the package. The options would be:

• one of the three largest small group plans in the state;
• one of the three largest state employee health plans;
• one of the three largest federal employee health plan options;
• the largest HMO plan offered in the state's commercial market.

Plans could modify coverage as long as they do not reduce the value of coverage.  States must also ensure the essential health benefits package covers items and services in at least ten categories of care, including preventive care, emergency services, maternity care, hospital and physician services and prescription drugs.   
 
For additional information:
Fact sheet
ASPE Issue Brief - summary of individual market coverage
ASPE Research Brief - information on comparing benefits in small group products and state and federal employee plans

DOL, HHS and Treasury Issue Technical Release on Automatic Enrollment, Waiting Periods and Employer Shared Responsibility 

Under PPACA

The Employee Benefits Security Administration (EBSA) has issued Technical Release 2012-01, which provides information on questions from employers and other stakeholders regarding the provisions of the Patient Protection and Affordable Care Act (PPACA) governing automatic enrollment, employer shared responsibility, and the 90-day limitation on waiting periods.  These provisions are scheduled to become effective in 2014.  Also outlined in the release are various approaches that the three regulatory agencies (Departments of Labor, Treasury and Health and Human Services) are considering proposing in future regulations or other guidance.

The full release can be found at http://www.dol.gov/ebsa/newsroom/tr12-01.html.  Comments are requested by April 9, 2012, may be submitted anonymously, and will be shared by the Departments.