TrueNorth Employee Benefits

W-2 Health Coverage Value Reporting

2012-01-27T07:28:00.000-08:00

More IRS Guidance on W-2 Reporting of Health Coverage:

Among the provisions contained in the 2010 Patient Protection and Affordable Care Act was a requirement that employers report, on each employee's IRS Form W-2, the value of any employer-provided health coverage. As explained in our October 2010 article, this reporting requirement is optional for 2011, but mandatory for 2012 (that is, for W-2s to be provided in January of 2013). The IRS issued an initial round guidance on this reporting requirement in Notice 2011-28 (as summarized in our April 2011 article), but that Notice left many questions unanswered. A number of those questions have now been answered in Notice 2012-9.

Overview of Reporting Requirement

Before addressing the recent guidance, it is worth noting some key points that have not changed. For instance, this reporting requirement remains optional for 2011, but then required for 2012.

Also preserved is a postponement of this requirement for "small" employers. Any employer that is required to issue fewer than 250 W-2s for 2011 (or that would have been required to issue fewer than 250 W-2s had it not engaged an agent to handle this reporting) qualifies for this postponement. The soonest such a small employer might be required to report the value of its employees' health coverage is January of 2014 (on the 2013 W-2).

Once this reporting requirement does apply, the value of employer-sponsored health coverage is to be reported in Box 12 of the W-2, using the code "DD." Finally, this latest Notice reemphasizes that nothing in this new reporting requirement will cause an employee to be taxed on any employer-provided health coverage.

Calculating the Cost of Coverage

Although the Notice addresses numerous questions, most employers will simply want to know how to calculate the cost of the coverage to be reported on each W-2. The amount to be reported should reflect both the employer and employee portions of that cost, with the annual amount equal to the sum of all monthly amounts (and under all plans sponsored by the same employer).

If a plan is insured, the amount to be reported should be the insurance premium charged for whatever level of coverage an employee received. If a plan is self-funded, the general rule is to use the "applicable premium" calculated for COBRA purposes. An example in the Notice makes clear that this does not include the additional 2% administrative fee allowed to be charged to COBRA beneficiaries.

Although these few rules should cover the vast majority of cases, the Notice does provide certain permissible alternatives. For instance, a "modified COBRA premium method" may be used if an employer subsidizes a plan's COBRA premiums. If an employer makes a good-faith estimate of the "applicable premium" - and then uses that estimate in calculating a subsidized COBRA premium - the employer may report the estimated amount as the cost of coverage on an employee's W-2.

Similarly, if an employer chose to continue charging a prior-year COBRA premium during the reporting year (and determines in good faith that the reporting year's cost of COBRA coverage was at least as large as the prior year's), the employer may use that prior-year COBRA premium (again, minus the 2% administrative fee) to satisfy this W-2 reporting mandate.

Finally, the Notice provides a number of permissible options if an employer charges a "composite" rate for active employees (such as the same amount for either employee-only or employee-plus-spouse coverage), but then calculates separate rates for COBRA purposes. Subject to certain limitations, such an employer may report either the composite rate or the COBRA rate (minus the 2% administrative charge).

Employers wishing to rely on any of these special rules should read the Notice carefully for additional restrictions and limitations.

Recent Clarifications
Among the recent clarifications contained in Notice 2012-9 are the following:

There is no need to report any employee contributions to a flexible spending account ("FSA"). However, if an employee allocates any employer "flex credits" to a health FSA, those employer amounts must be reported.
Whether the value of dental or vision coverage must be reported on a W-2 depends on whether that coverage constitutes an "excepted benefit" under the HIPAA portability and nondiscrimination rules. In general, this would be the case if either (1) the coverage is offered under a separate policy, certificate, or contract of insurance, or (2) participants have the right to elect the dental or vision coverage and must pay an additional premium if they do so. The value of such excepted benefits need not be reported.
An employee assistance program ("EAP"), wellness program, or on-site medical clinic may be subject to this reporting requirement if it constitutes a "group health plan." However, the reporting of these benefits will be required only if the employer charges a separate premium for someone to receive COBRA coverage under these benefits.
Even if an employer is not required to report the value of certain types of health coverage - either the types listed immediately above, or coverage received under a health reimbursement arrangement ("HRA"), as noted in the prior guidance - the employer may choose to report these amounts. For some employers, this approach may be more consistent with the systems in place to track the value of the various types of coverage provided to each employee.
Pre-existing rules require an employer to provide a W-2 within 30 days of a request received from an employee who terminates during the calendar year. Under this recent Notice, however, such a W-2 need not report the cost of any health coverage received by that employee.
Moreover, if an employer waits until year-end to supply W-2s to terminated employees (the more usual case), those W-2s may report either the value of the coverage received only while an active employee or the value of the coverage received through the end of the year (thereby including the value of any COBRA coverage). The employer must be consistent, however, in selecting one of these two approaches.
In a bit of welcome news, the Notice provides that an employer need not report the value of health coverage received by any individuals who are not otherwise entitled to receive a W-2. These might include COBRA beneficiaries, retirees, non-employee directors, or independent contractors.
The IRS Form W-3 (which is used to transmit employee W-2 data to the IRS) need not report the cost of any health coverage.
In general, this W-2 reporting requirement applies even to the value of any health coverage that must be included in an employee's taxable income. This might include the value of coverage provided to an employee's domestic partner, or to a non-dependent child over age 27. Contrary to the earlier guidance, however, it is not necessary to report the value of coverage that is taxable only because (1) a self-funded plan discriminates in favor of highly compensated individuals (in violation of Section 105(h) of the Tax Code), or (2) an employee is a 2% or more shareholder in a Subchapter S corporation.
If a single plan provides both health coverage and non-health coverage (such as disability or life insurance), an employer may use any reasonable method to allocate the total cost of coverage between the two categories - and then report only the cost of the health coverage. Alternatively, if either the health coverage or the non-health coverage is merely "incidental" to the other type of coverage, the employer may treat the plan as though it provided only the primary type of coverage.
The value of the coverage provided to an employee may be determined on the basis of the facts known to the employer on December 31 of the reporting year. Accordingly, any information learned after that date may be disregarded, even if that information results in the employee's coverage during the reporting year either increasing or decreasing in value. The value might increase, for example, if an employee was allowed to retroactively add coverage for a newborn child who was born during the reporting year. It could decrease if an employee retroactively dropped coverage for a former spouse in connection with a divorce.
If the final pay period in a calendar year laps over into the following year, an employer may allocate the value of any health coverage received during that pay period between the two calendar years, based on a reasonable allocation of the days falling within each year. Alternatively, so long as it is done consistently, the employer may allocate that entire pay period to either of the two calendar years.
Although prior guidance suggested that both hospital indemnity insurance and coverage for a specific disease or illness were entirely exempt from this W-2 reporting requirement, the most recent Notice limits this exemption to plans under which an employee pays the full premium for that coverage on an after-tax basis. If an employer pays any portion of the premium - or if an employee pays any portion of the premium on a pre-tax basis - the entire value of the coverage must be reported. As a result, even some "voluntary insurance arrangements" (which are exempt from most requirements of ERISA) must be reported on a W-2 - that is, if employees pay their premiums on a pre-tax basis.

Although the first W-2s on which the value of health coverage must be reported are not due until January 31, 2013, employers will want to ensure that they are able to capture all the data they will need in order to comply with this reporting requirement. For instance, they will need to know the type and level of coverage received by each employee during each month (or pay period) during 2012. This may require that payroll software be reprogrammed in the very near term to preserve a record of these coverage levels.

The IRS expects to issue still further guidance on this reporting requirement. According to Notice 2012-09, however, any such guidance will be prospectively effective only. Moreover, it will apply only to calendar years beginning at least six months after that additional guidance is issued. For this reason, employers who are subject to this W-2 reporting requirement in 2012 should assume that this is the final guidance they will receive before reaching their compliance deadline.

HCR Update: Form W-2 Guidance; State Exchanges

2012-01-09T07:40:00.000-08:00

Thanks to our partners at UBA for helping us to provide you with the latest in Health Care Reform Updates:

IRS Issues Additional Guidance on Form W-2 Health Care Coverage Reporting Requirement
The U.S. Internal Revenue Service (IRS) has issued Notice 2012-9 to provide additional guidance on the informational reporting to employees of the cost of their employer-sponsored group health plan coverage on Form W-2. The IRS requested public comments on the W-2 reporting requirement in Notice 2011-28. Notice 2012-9 responds to these comments and amends, restates and supersedes Notice 2011-28. Specifically, the new notice includes guidance on the W-2 reporting as it relates to small employers, flexible spending accounts, dental and vision plans, COBRA and health reimbursement arrangements.

Health care cost information will have to be reported on 2012 W-2s, which will be issued in 2013. Under previous IRS guidance, smaller employers -- those that distribute fewer than 250 W-2s in 2011 -- are exempt from this requirement until at least 2014 and possibly longer.

The latest guidance, released Tuesday, makes clear that employers can -- but are not required to -- report contributions to health reimbursement arrangements in calculating health care costs. In addition, the cost of providing coverage through employee assistance programs, wellness programs or on-site medical clinics is not required to be reported if the employer does not charge premiums for the coverage to COBRA beneficiaries. The guidance also clarifies that the reporting requirement does not apply to Indian Tribal governments.

The latest guidance also reiterates numerous provisions in last year's guidance, including that that the cost of coverage that is taxable to employees, such as for a child over age 26, must be reported on the W-2, and that contributions employees make to flexible spending accounts are to be excluded from the health care cost figure.

The full 23-page text of the Notice can be found at:
http://www.irs.gov/pub/irs-drop/n-12-09.pdf.

CRS Analyzes Effect of Definition of Income in New Law on State Exchange Premium Credits A new law signed by President Barack Obama (P.L. 112-56) has changed the definition of modified adjusted gross income (MAGI) to include nontaxable Social Security income, for purposes of qualifying for both Medicaid and premium assistance for state exchanges that are being created as per the Patient Protection and Affordable Care Act (PPACA). According to a report issued by the Congressional Research Service (CRS), this is expected to reduce Medicaid enrollment by between approximately 500,000 to one million people, starting in 2014, although, under the PPACA, certain groups are exempt from income eligibility determinations for Medicaid based on MAGI anyway, including:

Foster children

Those receiving Supplemental Security Income (SSI)

The elderly

The disabled

The medically needy

Those enrolled in a Medicare Savings Program

Also, prior to 2014, states are not required to use MAGI when determining Medicaid eligibility for the new mandatory Medicaid eligibility group created by the PPACA, which includes all nonelderly, non-pregnant individuals, such as childless adults, certain parents, and certain people with disabilities, who are not otherwise eligible for Medicaid and are also not entitled to or enrolled in Medicare Part A or Part B.

Those losing Medicaid eligibility could include many early retirees, as well as some people receiving survivor benefits or disability benefits. Many of those people would, in turn, become eligible for premium assistance and cost sharing subsidies in the new state exchanges, although some people that would have been eligible for premium assistance prior to the enactment of P.L. 112-56 will now no longer be eligible.

The net effect of the new eligibility provisions is expected by the CBO and the Joint Committee on Taxation to increase enrollment in the health exchanges by about 500,000 in any given year between 2014 and 2021. Changing the definition of MAGI to include all Social Security benefits, both taxable and non-taxable, was also estimated by the CBO to reduce the deficit by three billion dollars over the period of 2012-2016 and by approximately $13 billion from 2012 to 2012.
In its report, the CRS points out that it was the intent of the ACA to make Medicaid eligibility and premium credit eligibility more inclusive and consistent with other low-income programs. The CRS is warning, however, that the inclusion of non-taxable income besides nontaxable Social Security income, which is something the government is considering, may be administratively cumbersome and expensive, because, unlike non-taxable Social Security income, not all nontaxable income is reported (for informational purposes) on tax returns. Verification of income for MAGI purposes is streamlined at the moment, but attempting to verify multiple sources of other nontaxable income would presumably be administratively complex.

Employer Compliance Alert! Union Backed Election Rule Changes

2011-12-20T09:38:00.000-08:00

Thanks to our partners at UBA, we are able to provide you with an Employer Compliance Alert:

NATIONAL LABOR RELATIONS BOARD PASSES LIMITED VERSION OF UNION-BACKED ELECTION RULE CHANGES

On November 30, during a closely-watched session, National Labor Relations Board Chairman Mark Pearce and Member Craig Becker voted to proceed with preparation of a final rule modifying the Board's election procedures to speed up the process in certain circumstances. Member Brian Hayes, the only Republican Board member, opposed the majority's effort as a mistake that would "ultimately cause harm to the agency and the constituencies we serve."

The changes that ultimately were passed represent a substantially more limited version of what initially had been proposed by the Board's majority and are summarized as follows:

Elimination of pre-election appeals to the Board from the actions of the Regional Director on an election petition, providing instead only for a single, discretionary appeal of pre-election and post-election issues after the votes are cast. An appeal to the Board prior to the election is limited to issues that otherwise would escape Board review if not raised prior to the election.
Express direction that a pre-election hearing is to determine only whether a question concerning representation exists, and that the hearing officer has authority to limit evidence taken at the hearing where the evidence does not have relevance to a genuine issue of fact material to that issue. This means that questions of individual voter eligibility (as opposed to appropriate bargaining unit composition) will be litigated after the election, as opposed to before. Also, the hearing officer may decline requests of parties to submit post-hearing briefs, which right previously was guaranteed by the Board's rules.

Elimination of the current requirement that the vote may not be held sooner than 25 days after the Board's Regional Director issues a Direction of Election. As a result, some elections likely will be held sooner after the Direction of Election than was previously the case.

The new rules were passed notwithstanding substantial criticism from the business community and others who viewed this move as an attempt by labor-friendly Board members to speed up the election process prior to the end of Member Becker's recess appointment that ends on December 31. As a result of the criticism and the threat by Member Hayes to resign, which move would have left the Board with two members and would have divested the Board from authority to conduct its business, the majority watered down the original proposal, eliminating the following proposed changes:

The requirement that a hearing be held within seven days of the filing of a union's representation petition.

Allowing the union's petition to be filed electronically, rather than the current practice requiring filing by hand or regular mail.

The requirement that the employer prepare and file a comprehensive "statement of position" on the union's election petition no later than the date of the hearing, together with the requirement that any issues not raised by the employer in its statement are waived by the employer and may not be raised later.

The requirement that unions be given employees' email addresses and telephone numbers prior to the election.

The requirement that the voter eligibility list ("Excelsior list") be given to the union within two work days of the Direction of Election, instead of the current rule allowing for seven work days.

These additional proposals remain open to future debate and adoption by the Board. However, with the impending expiration of Member Becker's recess appointment, the question of whether these additional proposals stand a chance of passing remains unclear.
The Board will draft a final rule codifying the adopted changes. The final rule is intended to be issued prior to the expiration of Member Becker's term. Opponents of the changes are working to block even the more limited the changes via legislation (the Workforce Democracy and Fairness Act, H.R. 3094), and potentially through judicial action.

Even though the new rule will have less impact on employers than the originally proposed rule, the new rule still substantially shortens the period from filing of the petition to the date of election from the current Board election target of 42 days. Elections almost certainly will be held more quickly. The actual period will be determined by the circumstances of each case. The fact that elections will be held more quickly underscores the need of employers to remain constantly vigilant regarding potential union organizing efforts in order to address such efforts at the earliest possible opportunity.

Health Care Reform Update: Benefits Summary Deadline Delayed

2011-12-05T09:06:00.000-08:00

We have worked with our partners at UBA to provide you with the latest HCR Update:

Employer Health Care Reform Law Communication Mandate Delayed
Employers have more time to comply with rules dictated by the health care reform law that will require them to revamp how they communicate and explain their health care plans. In a notice published Nov. 17, the Department of Labor (DOL) said the reporting requirements would not go into effect until after final rules are published. "It is anticipated that the...final regulations, once issued, will include an applicability date that gives group health plans and health insurance issuers sufficient time to comply," the Labor Department said.

At the time the proposed rules were issued by the Health and Human Services (HHS), Labor and Treasury departments, federal regulators said they would go into effect on March 23, 2012. Among other things, the proposed rules would require employers to provide employees with an "easy-to-understand" summary of benefits and coverage (SBC) and, upon request, a glossary of commonly used health care coverage terms, such as deductible and copay. Plus, the summary of benefits and coverage would have to include the portion of expenses a health care plan would cover in each of three situations: having a baby, treating breast cancer and managing diabetes.

Agencies Issue FAQs on Health Care Reform's SBC Requirement and on Mental Health Parity Implementation
The DOL, HHS, and IRS have jointly issued a new set of frequently asked questions (Part VII) addressing health care reform's summary of benefits and coverage (SBC) requirement plus mental health parity implementation (MHPAEA). This new FAQ seems to confirm that the final regulations may be significantly different from the proposals and suggests that there may be relief as to the applicability date as well. While no one can predict exactly what the final requirements will be and although general preparation for future compliance probably remains advisable, relying too closely on current proposals may not be the best use of time and resources.

Also, plan sponsors and their advisors will want to study the mental health parity FAQs closely. The agencies characterize these as "clarifying FAQs" and stress that they will continue to investigate complaints regarding the MHPAEA requirements and will take enforcement action for violations to ensure compliance (these requirements took effect with plan years beginning on or after July 1, 2010).

The full text is available at http://www.dol.gov/ebsa/faqs/faq-aca7.html.

Health Care Reform Update: Tax Credits; NAIC Broker Vote; Supreme Court's Plans

2011-11-18T06:02:00.001-08:00

Small Business Tax Credit Finds Few Claimants
On Nov. 7, the Treasury's Inspector General for Tax Administration released a report regarding the small business tax credit. The preliminary evidence is now in, and the results show that despite IRS efforts to inform 4.4 million taxpayers who could potentially qualify for the credit, the volume of claims for the credit has been extraordinarily low. As of mid-May 2011, the IRS reported that slightly more than 228,000 taxpayers had claimed the credit for a total amount of more than $278 million. While some additional returns can be expected to continue to come in until the extension deadlines later this year, the Congressional Budget Office estimate that taxpayers would claim up to $2 billion in FY 2010 will be off by more than 500 percent.
The report cites the following reasons for the low take-up rate:

The legislation concerning which taxpayers qualify for the credit and how to calculate the credit amount is complex.
There are multiple steps to calculate the credit, and seven worksheets (http://www.irs.gov/pub/irs-pdf/i8941.pdf) must be completed in association with claiming the credit.
The rules themselves are complex, making it difficult for taxpayers to follow.
The credit is new so there's risk of errors or irregularities occurring when the credit is claimed or processed, as both taxpayers and IRS employees will need to acquaint themselves with the rules.
The credit is refundable to tax-exempt taxpayers, which is a high-risk factor for erroneous refunds.
The IRS had to complete new programming to accommodate the new Form 8941 and identify potential compliance risks.
Taxpayers have been slow to claim the credit, and both taxpayers and tax practitioners are making mistakes on Form 8941.
Some claims contained errors or were incomplete.

The full report is available at http://www.treasury.gov/tigta/auditreports/2011reports/201140103fr.pdf.

NAIC to Vote on Agent and Broker Resolution on Nov. 22
The National Association of Insurance Commissioners (NAIC) announced its Plenary Committee will meet on Nov. 22 at 4 p.m. EST to vote on a proposed resolution, titled "Resolution Urging the U.S. Department of Health and Human Services to Take Action to Ensure Continued Consumer Access to Professional Health Insurance Producers."
The measure calls on Congress to "expeditiously consider legislation amending the MLR provisions of the PPACA in order to preserve consumer access to agents and brokers." It also asks HHS to "take whatever immediate actions are available to the Department to mitigate the adverse effects the MLR rule is having on the ability of insurance producers to serve the demands and needs of consumers and to more appropriately classify independent producer compensation in the final PPACA MLR rule."
The resolution has been sponsored by the insurance commissioners of 22 states: Alabama, Arkansas, Delaware, Florida, Georgia, Idaho, Indiana, Kentucky, Louisiana, Mississippi, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, Tennessee, Utah and Wisconsin. NAHU has asked all members to encourage insurance commissioners in the other 28 states to support this measure.

Supreme Court Will Hear PPACA Challenge This Spring
The U.S Supreme Court granted a writ of certiorari in the challenge that 26 states and the National Federation of Independent Businesses (NFIB) have raised against the Obama administration regarding the constitutionality of the Patient Protection and Affordable Care Act (PPACA). Monday's announcement sets the stage for oral arguments by March and the potential for a decision in late June. When setting the scope of its hearing on the case, the Supreme Court allowed for five and a half hours of oral arguments. For the Supreme Court, this is a unprecedented amount of time.
The information released by the court regarding their consideration is significant because it gives a number of key clues as to how the case will progress in the months going forward.

Even though the justices discussed five appeal challenges to PPACA (and are slated to consider a sixth challenge by the Commonwealth of Virginia next week), they decided to only grant certiorari to the 26-state/NFIB challenge. This case was previously heard by the United States Court of Appeals for the 11th Circuit, in Atlanta, which has thus far been the only appeals court to declare the individual mandate provisions of PPACA unconstitutional. However, the 11th Circuit declined to strike down the rest of PPACA as the plaintiffs requested, even though the law does not contain a "severability clause." The 11th Circuit also upheld the law's expansion of the Medicaid program, rejecting the state's contention that that it also exceeded congressional authority.
The court has agreed to hear arguments about not only the mandate, but also the law's Medicaid expansion, and whether or not certain provisions of the law, like the individual mandate, may be "severed" from the rest of it. It's the contention of the NFIB and the states that if one provision is struck down, the entire law must be as well because the measure does not contain a "severability clause," and even the Obama administration has said publicly that it is "absolutely intertwined" with at least the insurance market reform provisions of the measure that make all policies guarantee issue and bar the consideration of preexisting conditions from 2014 on forward.

The justices will also hear at least an hour of arguments as to whether a federal tax law, the Anti-Injunction Act, should apply in this case. The Anti-Injunction Act prevents court action on a tax until it actually takes effect. The individual mandate penalties do not take effect until 2014, so if the court finds that the law applies, it would prevent review of the mandate until at least 2014. However, in defending the constitutionality of the individual mandate up until this point, the Obama administration has repeatedly argued that the penalties are just that--penalties--and not a tax, so the commerce clause of the Constitution should not apply. It would be hard for them to change their argument now and support a delay on a mandate ruling until 2014.

Health Care Reform Update: Marriage & Taxes

2011-11-08T08:41:00.000-08:00

Thanks to our partners at UBA, we are able to provide you with the latest in Health Care Reform Updates:

Health Law May Undermine Marriage

The health reform law could undermine marriage because once people tie the knot, they may no longer be eligible for tax incentives for insurance. The law links the tax credit to household income, so two people whose combined income goes above a certain level will not be able to get a tax credit if they are married and file together. But if they get divorced or stay single they might, individually, be eligible for a premium credit. Giving people pause about marriage could be a big "unintended consequence" of the law.

Under the law, families as well as individuals can qualify for subsidies on a sliding scale, up to 400 percent of the poverty level. The proposed rule issued by the administration disqualifies a family from claiming the credit if either spouse is offered an insurance plan at work with an out-of-pocket premium less than 9.5 percent of household income for self-only coverage.

The proposed rule on tax credits is somewhat unclear on the issue of affordability for families with employer-sponsored insurance. It could be interpreted to mean that if only one spouse receives insurance through his or her employer, the family could be forced to choose between:

a divorce and tax credits
buying individual insurance without a premium subsidy, or
paying a penalty and forgoing insurance.

Some experts believe HHS may issue further guidance about family affordability, but this would have consequences too: More people obtaining tax credits would drive up the overall cost of the law.

Lawmakers Urge IRS To Change Proposed Health Law Subsidies Rule

On Friday, 24 lawmakers sent a letter to the Commissioner of Internal Revenue pointing to the specific language in the health law (PL 111-148, PL 111-152) that says the tax credits would go to individuals who are enrolled in "an exchange established by the state." The lawmakers say that the proposed rule "expands individuals' eligibility for tax credits beyond PPACA's explicit text to individuals enrolled in qualified health plans who reside in states in which the federal government has established an exchange." They ask the commissioner "to amend the proposed rule's language to be consistent with the letter of the health law."

Health Care Reform Update: Co-Op Answers & ERRP Appeals

2011-10-11T17:35:00.000-07:00

CMS Answers Questions on Consumer Operated and Oriented Plan Program The Center for Consumer Information and Insurance Oversight (CCIIO) of the Centers for Medicare and Medicaid Services (CMS) on Oct. 6 published a list of frequently asked questions and answers (FAQ) pertaining to the Consumer Operated and Oriented Plan (CO-OP) program, adding to a another FAQ published on Sept 7.

Among the topics the FAQs cover is clarification that after receiving Letters of Intent (LOI) to apply for CO-OP loans, CMS does not anticipate to publicly post the names or locations of organizations filing such LOIs. However, LOI applicants should remember that all materials submitted to CMS are subject to the Freedom of Information of Act (FOIA) and any FOIA request will be examined against exceptions such as trade secrets outlined in the Department's FOIA regulation. The CMS has stated that applicants may access the Department's FOIA guidelines at http://www.hhs.gov/foia/45cfr5.html.

Whether or not approval will be available for start-up loan modifications necessary to satisfy the capital requirements associated with unexpected rapid growth or high enrollment, the CMS states that applicants should estimate their funding needs as accurately as possible in the business plan submitted as a part of the application, and should not assume that loan modifications will be available to provide additional funding.

CMS also has stated that an organization may not partner with an existing health insurance issuer to develop a CO-OP, since, under the PPACA, if an organization is a health insurance issuer that existed on July 16, 2009, a related entity, or any predecessor of either, that organization is not eligible for loans under the CO-OP program and cannot become a CO-OP. Also, a third-party administrator (TPA) may not develop a CO-OP unless the TPA was also a licensed health insurance issuer on July 16, 2009.

Whether or not an existing nonprofit entity has to form a separate entity to apply for funds and become a CO-OP, the CMS reiterated that, first, as a statutory requirement under the ACA, a health insurance issuer that was in existence on July 16, 2009 cannot sponsor a CO-OP. Under the proposed rule, the applicant must be the entity that will eventually become a CO-OP. Unless the sponsor wants to become a CO-OP, it should form a separate entity.

Finally, the CMS stated that a CO-OP can be founded by a consumer-run nonprofit self-insured multiple employer welfare arrangement (MEWA) that does not have an insurance license, but that is currently licensed in its domiciliary state as a nonprofit, self-funded MEWA, because entities not licensed as issuers on July 16, 2009, may apply.

HHS Issues Guidance on Appeals Process for Early Retiree Reinsurance Program
The Department of Health and Human Services (HHS) has issued guidance regarding how plan sponsors participating in the Early Retiree Reinsurance Program (ERRP) would submit a request for appeal of an adverse reimbursement determination, and how the appeals process works.

Definition of adverse reimbursement determination

An adverse reimbursement determination is a determination constituting a complete or partial denial of a reimbursement request.
This includes a determination regarding whether a given individual whom the sponsor has submitted to the Centers for Medicare and Medicaid Services (CMS) as an early retiree in advance of a reimbursement request satisfies the substantive criteria for being an early retiree for the entire time period claimed by the sponsor or whether a claim submitted in advance of a reimbursement request is for a health benefit, as defined by the ERRP statute, regulation, and other ERRP guidance.

Appealable determinations are ones that CMS makes based on the plan sponsor's submissions to CMS. A plan sponsor may not appeal a reimbursement determination on the ground that:

it neglected to include a given item or service in its reimbursement request;
it misstated data with respect to a given item or service; or
CMS could not process an Early Retiree List, Summary Claim Data, a Claim List, or a reimbursement request due to the fact that it was not submitted in the correct manner or format.

The ERRP statute and regulations do not permit plan sponsors:

to appeal CMS determinations to deny an ERRP application
to refuse to accept an application for processing, or
to terminate approval of an application.

The denial of an application, the refusal to accept an application, or the termination of an application approval are related to whether a plan sponsor may participate in the program, not a determination about reimbursement for participating plan sponsors.

Request for appeal

The ERRP regulations state that a sponsor has 15 calendar days from the date of receipt of an adverse reimbursement determination to submit an appeal. The 15-calendar day period does not begin to run until the sponsor receives the relevant email that notifies the plan sponsor about the adverse reimbursement determination. That email will describe the 15 calendar-day time limit for submitting an appeal.

Documentation to submit

A request for appeal must specify the findings or conclusions with which the plan sponsor disagrees and the reason(s) for the disagreement(s). In submitting a request for appeal, a plan sponsor should include all information and data necessary for the HHS Departmental Appeals Board to evaluate the request and CMS to respond to the appeal, including:

a copy of the email notifying the plan sponsor about the adverse reimbursement determination
the amount of reimbursement at issue
the application ID number
plan year
information about the items and services at issue including dates of service, and
information about the individuals to whom the items or services were provided

Because the Appeals Board is independent of CMS:

the plan sponsor should not assume that the Appeals Board would have information that the plan sponsor submitted to CMS, such as the plan sponsor's Claim List
the plan sponsor also may submit supporting documentation not previously submitted to CMS
the plan sponsor should not submit any documentation that is related to individuals, items or services not previously included in the Early Retiree List or Claim List, to the extent the adverse reimbursement determination being appealed is directly related to the response files sent with respect to those lists

How and where to submit documentation

If a plan sponsor wishes to submit its request for appeal and/or supporting documentation electronically, the plan sponsor should call the Appeals Board at 202.565.0208 as soon as possible before the applicable deadline to ascertain whether the Board is able to accept the submission electronically and to obtain any instructions for submission. Any electronic submissions must be made using the DAB web portal. Requests for appeal and supporting documentation must be mailed to the Department of Health and Human Services Departmental Appeals Board, MS 6127 Appellate Division 330 Independence Ave., S.W. Cohen Building - Room G-644 Washington, D.C. 20201.

Health Care Reform Update: Lab Rules; ERRP; Wellpoint Purchase

2011-09-27T09:33:00.000-07:00

Our partners at UBA have helped us to bring you this week's latest in the Health Care Reform Updates:

U.S. Plan Would Boost Access to Lab Results

The Obama administration proposed a new rule that would allow patients to have direct access to electronic medical records, including lab results without waiting to hear them from a doctor. At present, patients can only obtain lab results if their physicians provide authorization, or if they reside in a few states which allow such access.

The rules proposed by the Department of Health and Human Services are part of a broader effort to give patients greater access to medical data electronically so they can become more engaged in their care. They would replace a confusing patchwork of state laws and privacy statutes and affect more than 6 billion lab tests a year.

CMS Issues Changes to Claims Submissions for Early Retiree Reinsurance Program
The Centers for Medicare and Medicaid Services (CMS) has announced several changes to improve and streamline the process of submitting claims data for Early Retirement Reinsurance Program (ERRP) reimbursement requests.

On Monday, Oct. 3, 2011, CMS will begin providing specific, claim line-level feedback to sponsors who submit claim lists through a new, fully automated review system.

Given this expedited feedback, all claim lists submitted on or after Oct. 3 must be error-free (it must pass the automated review) in order for the plan sponsor to be able to submit a reimbursement request, and then be approved for payment.
If a claim list is determined to be invalid as a result of the automated review and cancelled from the system, the sponsor may resubmit a corrected claim list.
Similarly, before the automated processing system becomes effective in October 2011, Claim lists and reimbursement requests that have errors will be cancelled from the system, and plan sponsors may resubmit them.

To provide plan sponsors with sufficient time to prepare for this level of review, the deadline for plan sponsors to submit error-free claim lists in support of reimbursements received based on a summary of aggregated claims has been extended from Dec. 31, 2011, to March 30, 2012.

Finally, CMS is granting sponsors additional flexibility in submitting detailed claims information, offering options on some elements while maintaining fiscal integrity. Plan sponsors should refer to the updated claim list layouts provided on http://www.errp.gov/ for guidance on how to supply required data, and to the questions and answers provided below.

Plan sponsors that have questions or additional information should contact the ERRP Center at http://www.errp.gov/contact_us.shtml

For more information, visit:

http://www.errp.gov/newspages/20110912-cms-claim-list-update.shtml.

WellPoint Buys Insurance Exchange to Compete With State-Run Health Markets
WellPoint and two nonprofit health insurers purchased a 78 percent stake today in Bloom Health, a closely held benefits company in Minneapolis, for an undisclosed sum. Bloom is a two-year-old online private health-insurance exchange that offers a menu of health plans to about 20,000 workers at almost 50 companies.

Private exchanges compete for employers with the U.S. state-run marketplaces set to open in 2014 under President Barack Obama's health care overhaul. Using a private exchange such as Bloom would limit an employer's costs and provide consistency compared with separate state-run exchanges, each with their own regulations.

A study by New York-based consulting firm McKinsey & Co. said that as many as one-third of U.S. companies are considering giving up employer-sponsored health plans. Instead, they would send their workers to state-run exchanges for coverage, paying a federally mandated fine.

Under the Bloom model, companies pay employees a fixed amount to cover a portion of their health care coverage and workers provide the rest based on the plans they select. The Bloom exchange allows employers to maintain their tax deduction on the money paid annually into an employee's health reimbursement account to help cover the cost of insurance. It also allows workers to pick a plan that suits their health care needs and how much they are willing to spend.

The idea of the private health care exchange and its defined contribution model is similar to the trend in retirement benefits in which employers have been abandoning defined benefit pension plans for the relative financial safety of a 401(k) that allows companies to control how much they spend.

WellPoint's partners in the Bloom purchase are Chicago- based Health Care Services Corp., which operates former Blue Cross plans in Texas, Illinois, New Mexico and Oklahoma, and Blue Cross Blue Shield of Michigan.

It now will be able to offer employers choices of health plans in the 19 states where Bloom operates, which represent about 60 percent of the U.S. population. The objective of Bloom's new owners is to be in all 50 states in the next year.

Extend Health Inc. of San Mateo, California is currently the largest private exchange covering 300,000 participants. Its customers include Union Pacific Corp. in Omaha, Nebraska, and U.S. automakers Ford Motor Co., General Motors Co. and Chrysler Group LLC.

NLRA Posting Released

2011-09-22T07:41:00.000-07:00

The new, required "Right to Unionize" posting has been released. Click here to find 2 different layouts that you can print and post for your employees!

http://myemail.constantcontact.com/NLRA-Posting-Released.html?soid=1103281895770&aid=8XeI3nZ_BTM

HCR Update: Rate Review; Pre-existing Conditions; MLR

2011-09-12T06:41:00.000-07:00

The latest Health Care Reform Update is brought to you thanks to our partners at UBA:

Health Reform's Rate Review Begins; Final Rule Is Amended
The Center for Consumer Information and Insurance Oversight (CCIIO) has amended a final rule regarding the rate review program required by the Patient Protection and Affordable Care Act (PPACA). On Sept. 1, 2011, state-federal review of health insurance rate increases began under the final rule, and health insurers seeking to increase their rates by 10 percent or more must submit their request to state or federal reviewers to determine whether they are reasonable or not.

The amendment to the May 2011 final rule amends the definitions of individual and small group markets (the effective date of the amendment is Nov. 1, 2011), as follows:

The definition of small group market includes coverage that would be regulated as small group market coverage if it were not sold through an association.
The definition of individual market also includes coverage that would be regulated as individual market coverage if it were not sold through an association.
This approach follows the definition under which an association itself will only be considered to be a group health plan if it complies with and is regulated under ERISA.

Most reviews will be conducted by the individual states, but in six states (Alabama, Arizona, Louisiana, Missouri, Montana and Wyoming) the Department of Health and Human Services (HHS) will conduct all of the reviews and in two more, (Pennsylvania and Virginia) the federal government will review group market rates.

However, it is possible that with the extension of the rate review provisions to association health plans, the federal government's authority in rate review may grow even stronger. HHS now needs to certify which states it feels are competent to review AHP plan rates. Even if a state has been deemed to have a sufficient review process for traditional individual and group products, it still may not pass muster concerning association plans. The AHP provisions of the rate review requirements begin on Nov. 1, so HHS has until then to determine who will be the ultimate authority on their pricing.

Another New GAO Report Highlights the Slow Start of the Federal Pre-existing Condition Insurance Plan
The General Accounting Office (GAO) released a report last week on the Federal Pre-existing Condition Insurance Plan (PCIP) that analyzes the program to-date and breaks down data by state. It includes enrollment information, cost-sharing breakdowns, premium prices and eligibility criteria.

When PPACA was being developed, the Congressional Budget Office estimated that it could serve up to 5 million Americans between 2010 and 2014. As of April 30, 2011, actual enrollment totaled 21,500 (about 15,800 in the state-run PCIPs and about 5,700 in the federally run PCIP). Due to the low enrollment numbers (0.43 percent of the number expected), only about 2 percent of the $5 billion allotted for PCIP has been spent so far.

The full report can be found at: http://www.gao.gov/new.items/d11662.pdf.

Average Medical Loss Ratios Exceeded Health Reform Standards
From 2006 through 2009, traditional medical loss ratios (MLRs) in the small group and large employer markets on average generally exceeded the loss ratio standards established under the Patient Protection and Affordable Care Act (PPACA) standards. According to a recent report from the General Accountability Office, these results came even without the additional components in the PPACA that generally will increase MLRs.

The loss ratio formula specified in PPACA differs from the way MLRs have traditionally been defined.

The traditional MLR is generally calculated by dividing an insurer's medical care claims by premiums.
In the PPACA MLR formula, the numerator includes insurers expenses for activities that improve health care quality such as patient-centered education and counseling, care coordination, and wellness assessments in addition to claims.
Further, the denominator of the PPACA MLR subtracts from insurers premiums all federal taxes and state taxes and licensing or regulatory fees.

Under the PPACA, if minimum loss ratio standards are not maintained, rebates must be provided to health plan participants. From 2006 through 2009, insurers traditional MLR averages generally exceeded the PPACA MLR standards: 80 percent for the small group markets and 85 percent for the large group market (see table below).

Average Traditional MLRs by Market for Insurers, 2006-2009

         Small group market        Large group market

Year      (N)       Mean             (N)      Mean

2006      281      79.5%         316      84.9%

2007      290       81.0              319      87.3

2008      287       80.6              311      87.3

2009      312       83.1               340     88.8

The average traditional MLRs reported for 2006 through 2009 were also relatively stable. Since traditional MLRs were calculated differently than they will be under the PPACA requirements, it is difficult to predict, based on these data, what insurers MLRs would have been using the PPACA formula, or to predict the MLRs that insurers will report in the future, according to the GAO.

The report, "Private Health Insurance: Early Experiences Implementing New Medical Loss Ratio Requirements," is available at: http://www.gao.gov/products/GAO-11-711.

Employer Compliance Alert!

2011-08-31T14:16:00.000-07:00

NEW RULE REQUIRES NON-UNION EMPLOYERS TO NOTIFY EMPLOYEES OF THEIR RIGHT TO UNIONIZE

The National Labor Relations Board (NLRB) has just issued a final rule obligating the vast majority of private sector employers to notify employees of their rights under the National Labor Relations Act (NLRA). The purpose of the notice is to inform employees of their rights to organize, form, join or assist a union; to bargain collectively with their employer; and to discuss their wages, benefits, and other terms and conditions of employment with their co-workers or a union. The new rule covers not only union workplaces, but also non-union workplaces.

The rule will pose new challenges for non-union employers and make it harder for all employers to defend themselves against allegations of unfair labor practices. For example, an employer’s failure to properly comply with the rule will toll the six-month statute of limitations period for filing a charge against the employer for unfair labor practices. An employer’s knowing violation of the rule can also be used against the employer as evidence of unlawful motive in anti-union discrimination and other unfair labor practice litigation.

Employers should take immediate steps to determine whether they are subject to the rule. Covered employers must be in full compliance by November 14, 2011. Human resource professionals, executives, and supervisors should be trained on how to properly respond to employees’ questions about their NLRA rights, as well as how to properly address union-related activities in the workplace.

The notice of rights that employers must post under the new rule is not yet available, but employers should periodically check the NLRB website for additional details.

Health Care Reform Update: HRA Limits; Federal Exchanges; Health Care Survey

2011-08-30T07:08:00.000-07:00

Thanks to our partners at UBA for supplying us with our most recent Health Care Reform Update:

CCIIO Exempts HRAs From Applying for Annual Limit Waivers
The U.S. Center for Consumer Information and Insurance Oversight (CCIIO) has issued guidance with respect to the application of the existing annual limit waiver criteria to Health Reimbursement Arrangements (HRAs). This supplemental guidance exempts HRAs that are subject to the restricted annual limits as a class from having to apply individually for an annual limit waiver.

An HRA in effect prior to Sept. 23, 2010 is exempt from applying for an annual limit waiver for plan years beginning on or after Sept. 23, 2010 but before Jan. 1, 2014. These HRAs still must comply with the record retention and Annual Notice requirements to participants and subscribers set forth in the supplemental guidance issued on June 17, 2011.

The guidance can be found at: http://cciio.cms.gov/resources/files/final_hra_guidance_20110819.pdf.

HHS's Big Problem with the Federal Fallback Exchange
When the Department of Health and Human Services (HHS) released the first regulation providing guidance to the states on forming a health benefit exchange in July, one thing many health policy wonks noticed right away is that it contained no specifics on how a federal fallback exchange might work. Finally, last week a Politico report shed some light as to why HHS might be so reticent with the details.

HHS has virtually unlimited funding to help states create their own exchanges, but a quirk in the Patient Protection and Affordable Care Act (PPACA) is that it did not appropriate any funds to HHS for the federal government to develop its own infrastructure to fulfill the PPACA requirement to create and operate exchanges in all the states that do not establish their own. According to Politico, "A federal exchange will have the same authority states do to impose fees on insurance sold through the exchange once it is open for business. But there is no money coming in until people start purchasing insurance, and there is a great deal of work to be done to prepare to open the doors of federal exchanges."

Buck Releases HCR Impact Survey of Health Care Organizations
Some of the key findings from a newly released Buck Consultants national survey of healthcare organizations regarding the impact of health care reform:

79 percent of the survey respondents indicated that reform will increase health care costs in the country (with 43 percent indicating that costs will increase significantly); only 20 percent believe it will reduce costs.
More than 70 percent believe the hospital industry and employer benefit plans will be worse off.
48 percent believe their families will be worse off, and only 21 percent believe they will be better off.
41 percent believe quality will decrease nationally, while 39 percent think quality will improve.
45 percent believe patients will be worse off versus 44 percent who believe they will be better off.
60 percent believe the country will be worse off because of health care reform, while 34 percent think it will be better off.
72 percent think health care reform will adversely affect employer health plans.
57 percent of the respondents lost grandfathering for some or all plans in 2011, and we anticipate that nearly 100 percent of employer plans will lose grandfathering by 2014.
The primary reason (65 percent) for loss of grandfathering was that plan design changes were implemented with plan savings that exceeded the additional cost of complying with the health care reform requirements
75 percent expect cost increases of 1 percent or more due to reform in 2011.
58 percent expect higher costs due to reform in 2014.
71 percent expect higher employer costs due to reform long term.
More than 90 percent of the survey respondents anticipate passing on some or all of these additional costs to employees through higher employee contributions or reduced coverage.

A full copy of the survey results may be downloaded free of charge by registering at http://www.bucksurveys.com/.

Health Care Reform Update: Federal PCIP Broker Registration & HCR Affordability Test

2011-08-16T08:39:00.000-07:00

We have teamed up with our partners at United Benefit Advisors to bring you the most recent Health Care Reform update:

Federal PCIP Broker Registration Process Open

In May, the Obama administration announced that the high-risk pool program created by PPACA would begin paying agents and brokers for successfully enrolling eligible people into the PCIP program this fall. The PCIP referral program is only open to the 23 states where the federal government runs the PPACA high-risk pool program. HHS will begin paying the $100 flat enrollment fee September 1.

Agents and brokers who wish to become involved can now register. To qualify to participate in the PCIP program, you must:

be an insurance broker in good standing in your state,
have your license confirmed through the NIPR database,
have a valid federal tax identification number (FTIN) or social security number (SSN),
agree to accept payments through EFT, and
submit a completed EFT form for electronic payment.

IRS to issue new health care reform law affordability test
The Internal Revenue Service said it will develop new rules that will make it easier for employers to determine if their health care plans are "affordable" and exempt from a stiff financial penalty mandated by the health care reform law. That notice is expected to be published in the Aug. 17 Federal Register.

In rules proposed Friday that were welcomed by employers, the IRS said it will develop a safe harbor in which coverage would be considered affordable so long as the premium contribution for single coverage did not exceed 9.5% of employees' W-2 wages, instead of employees' household income (which employers generally do not know). The IRS also affirmed that the 9.5% affordability test is to be applied only on single coverage, allowing employers to charge higher amounts for family coverage.

Contraceptives and ACA

2011-08-03T08:11:00.000-07:00

On Monday, August 1st, HHS released an amendment to the ACA preventive services regulations that focuses on women’s health issues. They have indicated that non-grandfathered health plans need to provide the following items at no cost-sharing to the patient:

Well-woman visits
Contraception
Screening and counseling for AIDS, HPV, sexually transmitted infections, gestational diabetes and domestic violence
Breastfeeding supplies and counseling

Plans provided by religious institutions can be granted a waiver of these requirements if they conflict with the religious beliefs of the employer.

The regulations also allow that if a generic equivalent is available, plans can apply copays and/or deductibles to non-generic supplies.

It’s difficult to estimate the financial impact of these changes until the marketplace develops a reaction, but it’s clear that the regulations, like any benefit mandate, will have an initial cost increase. Long-term, overall costs are expected to decrease as fewer unplanned pregnancies, early detection of adverse infections and domestic situations, as well healthier newborns should emerge as positive results.

It’s important to recognize these requirements are to be effective with plan years starting on or after August 2, 2012. Carriers and plan sponsors will need to adapt their systems and processes during the next year to accommodate these changes, but we shouldn’t expect a lot of details to materialize on these changes for the next few months. As these decisions are communicated to TrueNorth, we’ll be sure to keep you informed.

Let us know if you have any questions on this.

TrueNorth Benefits Team
319.364.5193

HCR Update: Preventive Services; ERRP; Claims Review

2011-08-02T07:01:00.000-07:00

We have partnered with our friends at UBA to bring you the latest Health Care Reform updates:

IOM Issues Recommendations for Required Preventive Services
A new report from the Institute of Medicine (IOM) recommends that eight preventive health services for women be added to the services that health plans will cover at no cost to patients under Public Health Service Act Sec. 2713, as added by the Patient Protection and Affordable Care Act of 2010 (PPACA).

At the HHS's request, an IOM committee identified critical gaps in preventive services for women, as well as measures that will further ensure women's health and well-being. The recommendations are based on a review of existing guidelines and an assessment of the evidence on the effectiveness of different preventive services. The committee identified diseases and conditions that are more common or more serious in women than in men or for which women experience different outcomes or benefit from different interventions.

The report suggests the following additional services:

screening for gestational diabetes;
human papillomavirus (HPV) testing as part of cervical cancer screening for women who are older than age 30;
counseling on sexually transmitted infections;
counseling and screening for HIV;
contraceptive methods and counseling to prevent unintended pregnancies;
lactation counseling and equipment to promote breastfeeding;
screening and counseling to detect and prevent interpersonal and domestic violence; and
yearly well-woman preventive care visits to obtain recommended preventive services.

For more information, visit http://www.iom.edu/Reports/2011/Clinical-Preventive-Services-for-Women-Closing-the-Gaps.aspx.

New Guidance Available for Early Retirement Reinsurance Program
The Centers for Medicare and Medicaid Services has published supplemental program guidance and has updated existing program guidance under the Early Retiree Reinsurance Program (ERRP).

The supplemental guidance further clarifies ERRP reimbursement policy by identifying certain International Classification of Diseases, Ninth Revision (ICD-9) diagnosis codes that are not acceptable as principal diagnosis codes and procedure codes that are not acceptable under Medicare. Therefore, medical items and services associated with ERRP claims that include any such diagnosis codes as a principal diagnosis code or procedure codes will not be credited toward the ERRP cost threshold and will not be reimbursed. The guidance related to the ICD-9 codes applies to every reimbursement request, regardless of whether the reimbursement request was initially submitted before or after the publication of the guidance, July 18, 2011.

CMS has also updated existing program guidance, Claims Ineligible for Reimbursement under the Early Retiree Reinsurance Program. CMS has incorporated additional excluded Current Procedural Terminology (CPT) and Healthcare Common Procedure Coding System (HCPCS) codes to this guidance document.

These codes have also been added to the downloadable CSV file on the Regulations and Guidance page at http://www.errp.gov/.
The additional ineligible procedures are listed at http://www.errp.gov/download/ERRP_Additional_Ineligible_Procedures_and_Diagnoses.pdf

EBSA Issues Amendments to Interim Final Rules and Model Notices on Internal Claims and Appeals and External Review Processes
The U.S. Department of Labor, Department of Treasury and Department of Health and Human Services released a correction of amendment to interim final rules with request for comments. The full text is available at http://www.gpo.gov/fdsys/pkg/FR-2011-07-26/pdf/2011-18820.pdf.

The amendment to the interim final rule is effective July 22, 2011. Public comments on the amendment to the regulations must be submitted on or before July 25, 2011.

The agencies also released additional guidance and revised model notices related to the amended interim final rules.

Technical Release 2011-02
Revised Model Notice of Adverse Benefit Determination
Revised Model Notice of Final Internal Adverse Benefit Determination
Revised Model Notice of Final External Review Decision

Health Care Reform Update: State Exchanges

2011-07-18T06:45:00.000-07:00

Thanks to our partners at UBA, we are able to provide you the latest in Health Care Reform Updates:

Health Exchange Risk Programs Would Protect Insurers and Consumers

Health and Human Services Department officials have coupled the health exchange regulation released on Monday with another proposed rule designed to minimize the impact of covering sick, expensive patients on insurance companies. The federal government proposed to give insurers higher payments for patients whose claims cost more than average so insurers don't have an incentive to avoid covering high-cost patients.

The 103-page regulation includes three components that would encourage insurers to cover high-risk policy holders just as they would those who are healthy:

A permanent risk adjustment formula that would pay insurers higher rates for sicker patients, such as those with chronic conditions. The adjustment would apply to those in the individual and small group markets inside and outside of the exchanges.
A three-year reinsurance program that would establish a nonprofit entity to handle temporary payments for insurers that cover patients with high medical claims in the individual market.
A three-year risk corridor program that would give insurers inside the exchanges more certainty by limiting losses and gains. Insurers whose claims are at least 3 percent higher than projected would get more federal funding, while those whose costs are at least 3 percent less than projected would get fewer federal dollars.

The first component, the risk adjustment program, is the only one of the three components that is permanent. Payments will essentially transfer money from plans that cover mostly low-cost individuals to those whose enrollees have higher costs. The federal government or the states would calculate the payment formulas.

The reinsurance and risk corridor programs were made temporary because lawmakers felt that over time, more people would enter the new exchange program, insurers would have a better understanding of the risks of covering enrollees, and the market would mature.

The law requires that each state establish a reinsurance program to "help stabilize premiums for coverage in the individual market during the first three years of exchange operation," which are 2014-16. The money will come from all insurance plans and third-party administrators of self-insured group plans which will contribute funds to a nonprofit that will dole out additional money to insurers who have higher claims. Any insurance company in a state's individual market that was not grandfathered under the law -- including plans outside of the exchange -- could be eligible for the higher reimbursements. The law calls for states to collectively assess and disperse a total of $10 billion in 2014, $6 billion in 2015 and $4 billion in 2016 for reinsurance in addition to collecting other funds from insurers such as $2 billion in 2014-15 and $1 billion in 2016 for the general treasury.

The risk corridor program, which will be administered by the federal government instead of the states, would apply to insurers in the exchange's individual and small group markets during the first three years that the exchange is operating.

The three mechanisms are intended to help smooth the transition and provide more stability in the marketplace for insurers who end up with more sick people, or sicker people, than other insurers as well as for insurers who might not be able to predict their risk in the first couple of years. Risk corridors also could cap the profits of some insurers.

States could choose to change the details of reinsurance or risk adjustment from those set out by the federal standards. Any state that decides to make changes would need to publish a notice at least one year before the benefit year begins, and by March in the calendar year before the effective date.

The public has been given 75 days to comment on the proposal.

Milliman Identifies Key Questions That Will Drive the Creation of State Healthcare Insurance Exchanges
Milliman, Inc., today identified a series of considerations for states, health plans, and employers as they look toward the 2014 state exchange implementation deadline set forward in the Patient Protection and Affordable Care Act (PPACA) and reiterated in regulations issued by Health & Human Services on July 11. "The possibility that exchanges could serve a larger role in the rate review process introduces questions about interaction between state insurance departments and exchanges. Perhaps most importantly from an actuarial perspective, we are still awaiting regulations on essential benefits and other key aspects of pricing, which will be pivotal in dictating the design of plans in the exchange."

Some of the questions that still remain include:

How firm is the deadline? Exchanges are supposed to be established by the open enrollment period that begins on Oct. 1, 2013. However, the regulations indicate that some states could miss the 2013 deadline and then receive regular or conditional approval for an exchange in subsequent years.
How will essential benefit regulations shake out? Many of the plan design and cost considerations that will influence the insurance policies sold through an exchange begin with the question of which benefits are offered and at what level. The exact nature of insurance policies sold through exchanges will remain vague until these regulations are introduced.
What rating role will be played by exchanges? The exchange regulations suggest that exchanges may have a larger role in the rate review process, on top of a full review currently performed by state departments of insurance. Is there redundancy and, if so, how will that redundancy be reconciled?
Yet another complexity involves methodologies used for rating individuals versus rating families. The discussion in the exchange regulations is not conclusive and leaves open a variety of different approaches that may allow flexibility or may just foment confusion.
What about smaller insurers? The regulations indicate that health plans sold through the exchange can no longer determine their own geographic area, which introduces a new rating wrinkle. The same areas must be used within and outside of the exchanges. What should a health plan do if a state introduces a geographic area that is larger than the area served by a health plan?
How will federal exchanges operate? The federal government will create an exchange for any state that does not create its own exchange by the deadline, but the federal exchange concept remains undefined.
Who will pay for federal exchanges? Will federal exchanges need to be financially self-sufficient, as is the case with state-run exchanges?
What should we expect from "Navigators"? Navigators are entities intended to help consumers make insurance purchasing decisions in the exchange. To date, little detail on Navigators exists.

The regulations help by clarifying that Navigators must be in place by the exchange's first open enrollment period on Oct. 1, 2013.
The proposed rules now require that an exchange include two types of entities as Navigators.
The proposed rules ensure that a community-based or consumer-focused group will fill one of these slots.
Navigators will need to demonstrate an existing relationship to consumers before appointment.
Brokers and agents may act as Navigators as long as they are not receiving compensation from a qualified health plan.

How will exchanges interact with CO-OPs? PPACA allows for the creation of Consumer Operated and Oriented Plans (CO-OPs), but details of these plans are still unclear because CO-OP regulations are still pending. CO-OPs in theory will be sold on exchanges but they have some unique requirements; how will this interaction take place?
What does success look like? The criteria for determining the success of an exchange are still unclear. Presumably there will be milestones for measuring such criteria, but these too are undefined.
The regulations also do not get into quality measurement, though quality will likely feed success criteria; forthcoming regulations will pick up on the quality topic.

These details will have to come into focus before states can establish the proper exchange governance framework, before health plans can begin to establish their approach to rating and before employers can make purchasing decisions. To add additional complexity, the answers to some of these questions may vary from one state to another or otherwise be influenced by local dynamics, including the existing regulatory environments in each state and geographic cost variation.

HCR Update: External Claims & Appeals; Workplace Health Funds

2011-07-05T08:40:00.000-07:00

We have worked with our partners at UBA to provide you the most recent Health Care Reform Update:

EBSA Issues Amendments to Interim Final Rules and Model Notices on Internal Claims and Appeals and External Review Processes

The U.S. Employee Benefit Security Administration (EBSA) and Department of Health and Human Services (HHS) issued amendments to the Interim Final Rules implementing the requirements regarding internal claims and appeals and external review processes for group health plans and health insurance coverage in the group and individual markets under provisions of the Patient Protection and Affordable Care Act (PPACA).

These rules are intended to respond to feedback from stakeholders on the interim final regulations and to assist plans and issuers in coming into full compliance with the law through an orderly implementation process. Public comments on the amendment to the regulations are requested and must be submitted within 30 days.

The amendments focus primarily on six issues:

Expedited notification of benefit determinations involving urgent care
Additional notice requirements with respect to notice of adverse benefit determinations or final internal adverse benefit determination
Deemed exhaustion of internal claims and appeals processes
Providing notices in a culturally and linguistically appropriate manner
Duration of transition period for State external review processes
Scope of the Federal External Review Process

Some highlights:

Urgent care decisions
One change involves the amount of time health care plan enrollees have to be notified of an urgent care coverage decision.

Last year, regulators said enrollees would have to be notified of an urgent care decision within 24 hours of receipt of a claim.
But in a joint amendment to the 2010 regulations published in Friday's Federal Register, the Health and Human Services, Labor and Treasury Departments said they will allow plans to make notification of coverage decisions within 72 hours, closely following a Labor Department rule. Regulators, though, noted that the 72-hour limit is a maximum "and that in cases where a decision must be made more quickly based on the medical exigencies involved, the requirement remains that the decision should be made sooner than 72 hours after the receipt of the claim," according to the rules published in Fridays' Federal Register.

Notifications in languages besides English
The latest rules also amend a requirement that notices of available and external claims appeal processes and review be provided in a "culturally and linguistically appropriate manner."

Under the previous rules, the requirement to provide notices in a language other than English was based on the percentage of plan enrollees who were literate in a common non-English language. For plans that cover more than 100 participants, the threshold was 10 percent of plan participants, or 500 participants, whichever was less.
Under the latest rules, the requirement applies if at least 10 percent of the population residing in a county where an employer's health care plan enrollees reside are literate in the same non-English language. Currently, 255 U.S. counties meet this standard, including 78 of which are in Puerto Rico, according to the rules.

The agencies also released additional guidance and revised model notices related to the amended interim final rules.

Technical Release 2011-02
Revised Model Notice of Adverse Benefit Determination
Revised Model Notice of Final Internal Adverse Benefit Determination
Revised Model Notice of Final External Review Decision
Updated List of Consumer Assistance Programs, as of May 23, 2011

$10 Million in Affordable Care Act Funds to Help Create Workplace Health Programs
The U.S. Department of Health and Human Services announced today the availability of $10 million to establish and evaluate comprehensive workplace health promotion programs across the nation to improve the health of American workers and their families. The initiative, with funds from the Affordable Care Act's Prevention and Public Health Fund, is aimed at improving workplace environments so that they support healthy lifestyles and reduce risk factors for chronic diseases like heart disease, cancer, stroke, and diabetes.

Funds will be awarded through a competitive contract to an organization with the expertise and capacity to work with groups of employers across the nation to develop and expand workplace health programs in small and large worksites. Participating companies will educate employees about good health practices and establish work environments that promote physical activity and proper nutrition and discourage tobacco use -- the key lifestyle behaviors that reduce employees' risk for chronic disease.

Project funds will support evidence-based initiatives to build worksite capacity and improve workplace culture in support of health. Examples of such strategies include establishing tobacco-free campus policies, promoting flextime to allow employees to be more physically active, and offering more healthy food choices in worksite cafeterias and vending machines. A core principle of the initiative is to maximize employee engagement in designing and implementing the programs so they have the greatest chances of success.

Organizations interested in submitting proposals for the Comprehensive Health Programs to Address Physical Activity, Nutrition, and Tobacco Use in the Workplace can find more information at www.fbo.gov. The application deadline is Aug. 8, 2011. A separate funding opportunity is available for a national evaluation of the initiative and can also be found at www.fbo.gov.

HCR Update: PCIP; Quality of Care

2011-06-20T06:50:00.000-07:00

Here is the latest Health Care Reform Update, brought to you with the help of our partners at UBA:

HHS Announces Lower PCIP Premiums

The federal government announced on May 31 that they will increase subsidies to premiums in the Pre-Existing Condition Insurance Program (PCIP) in another effort to spur enrollment. The added subsidies, which will begin July 1, will result in premiums being reduced by up to 40 percent in 17 of the 23 states and D.C. which have the program administered by the federal government. (For example, the monthly premium for a person older than 55 in Florida will be $234.) The remaining 27 states, which each run their own plans, will be able to reduce premiums as well.

In addition, people who would like to enroll in the program no longer need to provide a letter from an insurance company denying them coverage. Starting July 1, 2011, program applicants can simply provide a letter from a doctor, physician assistant, or nurse practitioner dated within the past 12 months stating that they have or, at any time in the past, had a medical condition, disability, or illness. HHS officials cannot waive other eligibility requirements that are spelled out in the statute, such as a rule that people must be without insurance for six months before qualifying for the risk pool.

This announcement comes as enrollment in the Pre-Existing Condition Insurance Plan continues to lag far behind expectations. To date, only 18,000 Americans have signed up for the PCIP. Officials initially said it would reach over one million enrollees by the time the program is phased out in 2014, when it will become illegal for insurance companies to discriminate against the sick. $5 billion in funding for the program was included in PPACA legislation passed in March 2010.

Major New Effort to Give Consumers and Employers Better Information About Quality of Care
The Centers for Medicare & Medicaid Services (CMS) proposed rules that will allow organizations that meet certain qualifications access to patient-protected Medicare data to produce public reports on physicians, hospitals and other health care providers. These reports will combine private sector claims data with Medicare claims data to identify which hospitals and doctors provide the highest quality, cost-effective care.

This new program would provide for the following activities:

CMS would provide standardized extracts of Medicare claims data from Parts A, B, and D to qualified entities.
The data can only be used to evaluate provider and supplier performance and to generate public reports detailing the results.
The data provided to the qualified entity will cover one or more specified geographic area(s).
The qualified entity would pay a fee that covers CMS' cost of making the data available.
To receive the Medicare claims data, qualified entities would need to have claims data from other sources.
To prevent mistakes, qualified entities must share the reports confidentially with providers and suppliers prior to their public release, which gives providers and suppliers an opportunity to review the reports and provide necessary corrections.
Publicly released reports would contain aggregated information only, meaning that no individual patient/beneficiary data would be shared or be available.
During the application process, qualified entities would need to demonstrate their capabilities to govern the access, use, and security of Medicare claims data.
Qualified entities would be subject to strict security and privacy processes.
CMS would continually monitor qualified entities, and entities that do not follow these procedures risk sanctions, including termination from the program.

This initiative will be based on quality measures that hospitals have been reporting to the Hospital Inpatient Quality Reporting Program since 2004, and that information is posted on the Hospital Compare website. CMS will invest up to $1 billion to help drive these changes.

The proposed rule is on display at the Office of the Federal Register HERE. Comments are welcome on this set of proposed rules.

New Rules for Child Only Policies in Iowa

2011-06-09T12:21:00.000-07:00

Federal Healthcare Reform legislation passed in 2010 requires insurance companies to allow children under age 19 to enroll in a plan regardless of health status, claims history, or geographic status. A child only policy can be a good option for some families when traditional family coverage is not practical. But today you cannot buy a child only health insurance policy anywhere in the state of Iowa.

The Iowa Insurance Division (IID) issued a new Administrative Rule that requires all individual health insurance carriers doing business in Iowa to offer coverage to individuals under age 19 during an annual open enrollment period of July 1 through August 14 each year. Applications received during the open enrollment period will be offered coverage on a guaranteed-issue basis, regardless of past or present medical conditions. It’s important to note that insurance companies can charge a higher premium based on health status.

TrueNorth recommends that parents consider applying for a child only policy if:

A child has past or ongoing medical conditions that made it difficult (or even impossible) to obtain insurance coverage, or
Providing coverage for a healthy child through an employer plan is a financial burden for the family.

**Note that if an employee is contributing premium dollars for their dependents’ coverage on a pre-tax basis (through a Section 125 plan), there may be limitations regarding if/when a dependent may be dropped from the plan.

TrueNorth has specialists that are experts in the individual health markets, including child only health plans. If you think you might benefit from placing your child under such a policy, please feel free to contact:

Tana Studt, RHU at (319) 739-1414 or
Ted Messer, CLU, ChFC, LUTCF at (319) 739-1421.

HCR Update: Medicare Notices; HIPAA Rules

2011-06-06T11:47:00.000-07:00

CMS Makes Changes to Medicare Part D Creditable Coverage Notice Requirement
Organizations and "entities" that provide prescription drug coverage to Medicare Part D eligible individuals must annually notify these individuals whether the drug coverage they have is creditable or noncreditable.

The Centers for Medicare & Medicaid Services (CMS) has made two changes to this requirement:

CMS has issued new model disclosure notices that are to be used after April 1, 2011. The model notices, in both English and Spanish, can be found on the CMS website.
Because the Patient Protection and Affordable Care Act (PPACA) changed the Medicare enrollment period, beginning in 2011, the disclosure notice must now be sent to participants a month earlier. In the past, the Medicare enrollment period was Nov. 15 through Dec. 31, and the notice had to be given out by Nov. 15. PPACA changes the enrollment period to Oct. 15 through Dec. 7. Accordingly, creditable coverage notices must be sent by Oct. 15.

HHS Releases Proposed Rule on HIPAA Privacy Rule Accounting of Disclosures Under HITECH Act
The Department of Health and Human Services (HHS) released a proposed rule to modify the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy Rule's standard for accounting of disclosures of protected health information.

The proposed rule, in part, implements statutory requirements under the Health Information Technology for Economic and Clinical Health Act (HITECH Act) to require covered entities and business associates to account for electronic disclosures of protected health information to carry out treatment, payment and health care operations.

HHS proposes to expand the accounting provisions to provide individuals with the right to receive an access report indicating who has accessed electronic protected health information. Also proposed are changes to accounting requirements to improve workability and effectiveness. Comments are due on or before Aug. 1, 2011.

HCR Update: MLR Guidance; Insurance Rate Rules

2011-05-25T06:57:00.000-07:00

We have worked with our partners at UBA to provide you with the latest Health Care Reform Update:

Technical Guidance Issued Regarding Medical Loss Ratio Requirements

On May 13, 2011, HHS issued a bulletin which provided technical guidance regarding Medical Loss Ratio requirements for insurers.

This Bulletin contains seventeen Q&As on the following topics regarding the MLR Interim Final Rule:

• Definition of Small Employer;
• Mini-Med Plan MLR Reporting;
• Expatriate Plan MLR Reporting;
• Reimbursement for Clinical Services Provided to Enrollees (Incurred Claims);
• Third-Party Vendor Payments;
• Activities that Improve Health Care Quality; and
• A State Request for Adjustment to the MLR Standard.

The entire text can be found HERE.

HHS Issues Final Rules On Health Insurance Rate Reviews
Under new rules issued by the Obama Administration, health insurers will be "required to justify annual premium increases of 10 percent or more to state regulators." The regulations were contained in a 94-page document released on May 19.

"Starting in September 2012, the federal government will set a separate threshold for each state, reflecting trends in insurance and health care costs." Federal officials "acknowledged that they did not have the authority to block rates that were found to be unjustified," but they noted that many states already have that authority.

Moreover, the federal government is "providing $250 million to states to strengthen their capacity," although a few states opposed to the federal health care law "have turned down the money."

HCR Update: Wellness Ruling, Full-Time Threshold; Value-Based Purchasing

2011-05-09T11:06:00.000-07:00

Here is the latest Health Care Reform Update, brought to you with the help of our partners at UBA:

Important Legal Ruling for Employer-Sponsored Wellness Plans

In a decision filed April 11, the Southern District of Florida granted an employer health plan's motion for summary judgment in a case where the health plan's wellness program was charged with violating the Americans with Disabilities Act (ADA). The case, Seff v. Broward County, is important because it has never been clear whether wellness programs and health risk assessments that otherwise comply with the HIPAA wellness rules (particularly those that are mandatory or involve penalties) are also compliant with ADA.

The Equal Employment Opportunity Commission (EEOC), which administers the ADA, has questioned whether mandatory wellness programs or those that include penalties for noncompliance (as opposed to a reward for participation) would be permitted under this provision. However, the EEOC has not issued formal guidance. In this case, the court found that the ADA prohibition does not apply to a wellness program offered by an employer health plan where the program meets the ADA's safe harbor for bona fide benefit plans.

Importantly, the court did not address whether the county wellness program was "voluntary" under EEOC standards. Applicable regulations define a voluntary wellness program as one that neither requires employees to participate nor penalizes employees for non-participation. The EEOC has informally suggested that a wellness program may not be voluntary if the program includes a mandatory health risk assessment or a punitive trigger, but since the court did not address this, it remains an undecided issue.

Treasury Plan Would Help Determine Full-Time Workers for Health Cover
The U.S. Treasury Department unveiled potential approaches Tuesday to what constitutes a full-time employee as it pertains to the health care reform law requirement that employers offer full-time employees coverage or pay a penalty if they do not.

Under one approach suggested by Treasury in Notice 2011-36:

An employer would calculate each employee's full-time status by looking back "at a defined period of not less than three but not more than 12 consecutive calendar months" to determine if the employee worked an average of 30 hours per work during this "measurement" period
If the employee met the 30-hour standard by that measurement, the individual would be considered a full-time employee during a subsequent "stability" period, regardless of the number of hours the employee worked during that subsequent period.
For an employee determined to be a full-time employee during the measurement period, the stability period would be at least six consecutive months after the measurement period
If an employee were determined not to be full-time during the measurement period, the employer would be allowed to exclude the individual in calculating its full-time employees during a stability period

The Treasury Department said it is asking for public comment on determining whether an employee meets the 30-hour threshold. Comments are due June 17 and can be emailed to Notice.comments@irscounsel.treas.gov.. Notice 2011-36 should be included in the subject line.

CMS Implements Medicare Value-Based Purchasing for Hospitals
A new initiative launched by the Department of Health and Human Services (HHS) will reward hospitals for the quality of care they provide to people with Medicare and help reduce health care costs. Authorized by the Patient Protection and Affordable Care Act (PPACA), the Hospital Value-Based Purchasing program for the first time changes how Medicare pays health care providers and facilities--3,500 hospitals across the country will be paid for inpatient acute care services based on care quality, not just the quantity of the services they provide. The final rule establishing the Hospital Value-Based Purchasing Program will be published in the May 6 Federal Register; the proposed rule was published on Jan. 13.

In fiscal year 2013 (beginning on Oct. 1, 2012), an estimated $850 million will be allocated to hospitals based on their overall performance on a set of quality measures that have been proven to improve clinical processes of care and patient satisfaction. This funding will be taken from what Medicare otherwise would have spent, and the size of the fund will gradually increase over time, resulting in a shift from payments based on volume to payments based on performance.

The better a hospital does on its quality measures, the greater the reward it will receive from Medicare.

PPACA FAQs; Senate Votes to Repeal 1099 Reporting

2011-04-26T14:10:00.000-07:00

From TrueNorth and our partners at UBA, we are happy to provide you with the latest Health Care Reform Update:

PPACA FAQs released on the Grandfathered Plan Rules:
The Employee Benefits Security Administration (EBSA) has released a sixth set of frequently asked questions (FAQs) about the Patient Protection and Affordable Care Act (PPACA). Specifically, they address:

• the anti-abuse rule;

• changing cost sharing for newly-generic drugs

• no cost sharing for preventive services under a value-based health care initiative,

retiree health care, and

• the timing of the relinquishment of grandfather status.

The full FAQ can be found here: http://www.dol.gov/ebsa/faqs/faq-aca6.html

U.S. Senate Votes to Repeal 1099 Reporting Requirement
Bowing to pressure from business groups worried about an avalanche of paperwork, the U.S. Senate voted 87-12 Tuesday to pass legislation that repeals a requirement for businesses and landlords to file a Form 1099 document with the IRS for purchases of goods and services exceeding $600 a year. The legislation earlier was passed by the House of Representatives and now goes to President Barack Obama, who is expected to sign it into law.

The bill adjusts the health insurance tax subsidies to be given to middle-income people under the health care law. It would require anyone who receives excessive tax subsidies for health insurance to pay back a greater share than currently required under the law. Some Democrats argued that the payback provision for excessive subsidies would discourage individuals and small businesses from complying with the law's requirement that they obtain health insurance.

HCR-Update: IRS Delays W-2 Reporting; Self Funding Report

2011-04-11T09:42:00.000-07:00

Highlights of recent regulations released by the IRS:

The regulations emphasize that the reported amounts are for employee information only and does not cause excludable employer-provided health care to become taxable. Separate legislation would need to be enacted for this to occur.
Reporting is optional for the 2011 calendar year, but mandatory for many employers beginning with the 2012 calendar year (i.e., for W-2s produced in January 2013).
Employers who issue fewer than 250 W-2s for the 2011 calendar year (i.e., produced in January 2012), are exempt from the reporting requirement for at least the 2012 calendar year. Such employers will be required to report for future years if/when additional regulations are issued.
The cost of an employer-sponsored health plan is the amount to be reported. This includes any amounts contributed by the employer and the employee.
Amounts attributable to an HSA are not reported. The amount for the underlying QHDHP are reported.
The amount of any salary reduction election to a medical reimbursement FSA is not included. Any employer contribution to the medical FSA is included.
Plans that provide benefits generally limited to dental, vision, specified illness/disease or fixed indemnity reimbursements (typically hospital indemnity plans) are not included. This is the case even if the dental and vision are packaged with the medical if they are provided under a separate plan (i.e., not an integral part of the medical plan).
Fully insured plans can rely on the premium charged by the carrier in determining the amount to be reported.
Self-funded plans can rely on the COBRA costs they calculate at the beginning of each plan year, including any amounts the employer may contribute to the COBRA coverage.
For employees that are not enrolled in a health plan for the entire tax year an employer may use any reasonable, consistent method for calculating the pro-rata amount to be reported.

This is obviously not an exhaustive list of the regulations, nor does it constitute tax advice. Employers and employees should consult their own tax consultants for details regarding their specific situation.

HCR-Update: State Strategies; Claims Appeals Rules

2011-03-29T14:12:00.000-07:00

Thanks to our partners at UBA, we have more information surrounding Health Care Reform. Read below to learn the latest.

HHS and Treasury Propose Rules for States to Adopt Innovative Strategies to Meet the Goals of PPACA; Comments Accepted

The Departments of Health and Human Services (HHS) and Treasury have proposed new rules outlining the steps states may pursue in order to receive a state innovation waiver under the Patient Protection and Affordable Care Act (PPACA). The Act gives states the flexibility to receive a state innovation waiver (beginning in 2017 -- some elected officials would like to see this date changed to 2014) so they may pursue their own innovative strategies to ensure their residents have access to high-quality, affordable health insurance. The proposed regulation describes the content of the waiver application and how such proposals may be disclosed to the public, monitored and evaluated.

State innovation waivers are designed to allow states to implement policies that differ from those in PPACA so long as they:

Provide coverage that is at least as comprehensive as the coverage offered through health insurance exchanges -- new competitive, private health insurance marketplaces
Make coverage at least as affordable as it would have been through the exchanges
Provide coverage to at least as many residents as otherwise would have been covered under PPACA
Do not increase the federal deficit

States could use a variety of strategies to innovate through a waiver, provided they meet the above requirements. For example, they could develop a new system for providing tax credits, which links small business tax credits to the tax credits for moderate-income families. Or they could change the benefit levels or add new benefit levels for health plans offered in the exchanges, providing consumers and employers even more choices.

The proposed rule says that an application must include the following:
The provisions of the law that the state seeks to waive
An explanation of how the proposed waiver will meet the goals related to coverage expansion affordability, comprehensiveness of coverage and costs
A budget plan that does not increase the federal deficit, with supporting information
Actuarial certifications and economic analysis to support the state's estimates that the proposed waiver will comply with the comprehensive coverage requirement, the affordability requirement and the scope of coverage requirement; and
Analyses of the waiver's potential impact on provisions that are not waived, access to health care services when residents leave the state, and deterring waste, fraud and abuse
Under the proposed rule, states with waivers submit quarterly and annual reports. They track measures in the four key areas: affordability, comprehensiveness of coverage, the number of people covered and impact on the federal deficit.

A summary of the proposed rules is available at http://www.healthcare.gov/news/factsheets/stateinnovation03102011a.html.

EBSA Provides Additional Grace Period for Health Care Reform's Claims Appeals Regulations
The Department of Labor's Employee Benefit Security Administration has extended and modified an enforcement grace period for some of the new standards required under the Patient Protection and Affordable Act (ACA) for health care internal claims and appeals and external reviews until plan years beginning on or after Jan. 1, 2012. Technical Release 2011-1 is intended to give group health plans more time to change plan or policy procedures and to modify computer systems in order to comply with the new interim final claims regulations issued on July 23, 2010, and Aug. 23, 2010, to implement Public Health Service Act (PHSA) Sec. 2719. The Department of Health and Human Services, the Internal Revenue Service, and EBSA jointly issued these 2010 regulations, and they intend to issue amendments to these rules soon.

Specifically, this Technical Release 2011-01 extends the enforcement grace period until plan years beginning on or after Jan. 1, 2012 with respect to the following:

A plan or issuer must notify a claimant of a benefit determination (whether adverse or not) with respect to a claim involving urgent care as soon as possible, taking into account the medical exigencies, but not later than 24 hours after the receipt of the claim by the plan or issuer
Notices must be provided in a culturally and linguistically appropriate manner, as required by the statute, and as set forth in the 2010 interim final regulations)
If a plan or issuer fails to strictly adhere to all the requirements of the 2010 interim final regulations, the claimant is deemed to have exhausted the plan's or issuer's internal claims and appeals process, regardless of whether the plan or issuer asserts that it has substantially complied, and the claimant may initiate any available external review process or remedies available under ERISA or under state law

During the grace period, the Department of Labor and the IRS will not take any enforcement action against a group health plan, and HHS will not take any enforcement action against a self-funded non-federal governmental health plan, with respect to these provisions. Similarly, HHS is encouraging states to provide similar grace periods with respect to insurers, and HHS will not cite a state for failing to substantially enforce PHS Act section 2719(a) in these situations.

Will Congress Repeal Health Care Reform?

2011-03-03T08:37:00.000-08:00

Attempts to Repeal the Health Care Reform Law
In January, the House passed repeal legislation by a vote of 245 to 189, with three Democrats crossing the aisle to vote with their Republican colleagues. The Senate also voted on repeal in February. However, that attempt was defeated, with Senators voting along party lines. Sixty votes were required for repeal; the measure failed 47 to 51.

It is possible that further attempts to repeal the health care reform law will be introduced in Congress.

Potential Health Care Reform Changes
Because full repeal of the health care reform law will be difficult, Republicans have indicated that they will use other strategies to prevent the law from being fully implemented in its current form. These strategies include replacing, rather than repealing, parts of the law, or repealing the law “piece by piece,” using approaches like blocking funding or regulations.

Provisions of the law that may be revised or repealed 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 the various attempts to repeal the law, 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.

Healthcare Reform: Major Updates and Look Ahead at 2011!

2011-02-08T09:41:00.000-08:00

As we approach the one-year anniversary of the enactment of the Patient Protection and Affordable Care Act (“ACA”), we thought it would be a good idea to review the changes that have occurred as well as look forward to what can be expected in 2011. While there are many aspects of ACA, we’ll limit this discussion to those elements that could have significant impact on municipal employers.

Published Regulations

Grandfathered Status. Interim Final Regulations (IFRs) were released last June and Final Regulations are scheduled to be released by the end of 2011. An employer that makes very little or no changes to their medical plan that was in effect on March 23, 2010 (the date ACA was signed into law), can postpone some of the mandated benefits required by ACA, fulfilling the promise that “if you like your health insurance plan you can keep it”. When the IFR was released, Federal regulators predicted that, on average, 82% of large employers (100+ employees) would retain their grandfathered status in 2011, while 70% of small employers would. Results since September would seem to indicate that many more employers than anticipated are making plan changes that result in their loss of grandfathered status.
Preventive Care Benefits Provided Without Cost-Sharing . IFRs were released last July and Final Regulations are scheduled to be released in April of this year. This is the most significant mandate required when a plan loses its grandfathered status. Applicable benefits are based on the recommendations of the U.S. Preventive Services Task Force, but since many of those recommendations are vague, insurance carriers and self-funded plans are challenged to develop specific plan provisions. Hopefully the Final Regulations will provide some clarity.
Removal of Lifetime Dollar Limits. One of the few clearly-defined mandates in ACA, making this change seems to have had little financial or administrative impact to employer plans.
Dependent Children Eligible Until Age 26 . While Final Regulations are scheduled for release in April, this mandate also seems to have presented minimal administrative challenges for employers and insurance carriers. Not enough data is available yet to gauge this mandate’s effect on enrollment or plan costs.
Non-Discrimination Testing Applicable to Insured Plans. This mandate applies to insured plans that lose their grandfathered status, and was designed to be very similar to the testing applied to self-funded programs since the 1980s. Plans are tested to ensure they don’t disproportionately favor highly-compensated employees, both in terms of availability and participation. If the plan is found to be discriminatory, the employer is subject to substantial excise taxes. Originally set to apply to plan years beginning after September 23, 2010, federal regulators were besieged with questions that weren’t addressed in the existing rules. Recognizing the need for more concise guidance, they have postponed enforcement of the testing and penalties until after they publish more clearly defined regulations, which are expected in September 2011.
Consumer Operated and Oriented Plans (“CO-OP Plans”). HHS has just published a request for input concerning these non-profit alternatives to traditional insurance programs for the individual and small group markets. Loans and grants are scheduled to be dispersed starting in July 2013 for these programs and HHS is looking for feedback as to the structure, sponsorship and operational requirements that would help ensure sustainable success. It’s expected that there be at least one CO-OP plan in each state and a plan could be regional (I.e., cross state lines).

Other Regulations Expected to Be Released in 2011

Uniform Explanation of Benefits, Coverage Facts and Standardized Definitions (March). Establishes national definitions and standard formats for communicating plan details to participants. This must be provided to all participants by March 2012. Coincident with providing this information, beginning in April 2012 plans/carriers must provide a summary of material modifications a minimum of 60 days prior to the effective date of any such plan changes.
Requirements to Implement American Health Benefits Exchanges (March). Will lay out the requirements, processes and timetables to establish the State Exchanges for the individual and small group markets. If a state is unable or unwilling to follow these rules, HHS will set up and run an exchange for that state. Iowa has already been working for several years on creating this type of program and it is hoped the new Federal regulations will have minimal impact on that effort.
Transparency Reporting Rule (March). Plans/carriers must provide information on claims payment policies, number of claims denied and rating practices. Upon request from a covered individual, must provide the amount of cost-sharing for a specific item or service by a plan participating provider.
Community Living Assistance Services and Supports (CLASS) Act (September). Enrollment and eligibility regulations are expected to be spelled out for the Federally-administered long-term care program. Many industry and policy experts have raised concerns regarding the sustainability of the program as set up in the ACA legislation. In fact, the bipartisan National Commission on Fiscal Responsibility and Reform established last fall by President Obama proposed eliminating the CLASS Act and legislation to do so was introduced in both the last and the current Congress. Given this environment, it’s quite possible this specific portion of ACA will not be implemented.

Court Challenges to the ACA

Sixteen filings have been entered in U.S. District Courts since the ACA was signed into law last March. So far, the score is:

2 judges have ruled the ACA constitutional
2 judges have ruled it to be unconstitutional ( either in whole or in part)
12 judges have dismissed challenges

In each of the four rulings, the losing parties have indicated their intent to file petitions with the appropriate Appellate Court. Many legal and legislative experts expect the issue will ultimately be decided by the Supreme Court. In the meantime, most carriers and employers are making the plan revisions mandated by the ACA, while recognizing they may eventually need to make even more changes based on future court decisions.

Over the Counter Drugs Q&A

2011-01-31T10:09:00.000-08:00

Health care reform changes the rules for reimbursement of over-the-counter drugs through HSAs, HRAs, MSAs and FSAs. These questions and answers from the IRS clarify the new rules.

Q. How are the rules changing for reimbursing the cost of over-the-counter medicines and drugs from health flexible spending arrangements (health FSAs) and health reimbursement arrangements (HRAs)?
A. Section 9003 of the Affordable Care Act established a new uniform standard for medical expenses. Effective Jan. 1, 2011, distributions from health FSAs and HRAs will be allowed to reimburse the cost of over-the-counter medicines or drugs only if they are purchased with a prescription. This new rule does not apply to reimbursements for the cost of insulin, which will continue to be permitted without a prescription.

Q. How are the rules changing for distributions from health savings accounts (HSAs) and Archer Medical Savings Accounts (Archer MSAs) that are used to reimburse the cost of over-the-counter medicines and drugs?

A. In accordance with Section 9003 of the Affordable Care Act, only prescribed medicines or drugs (including over-the-counter medicines and drugs that are prescribed) and insulin (even if purchased without a prescription) will be considered qualifying medical expenses and subject to preferred tax treatment.

Q. When will the changes become effective?
A. The changes are effective for purchases of over-the-counter medicines and drugs without a prescription after Dec. 31, 2010. The changes do not affect purchases of over-the-counter medicines and drugs in 2010, even if they are reimbursed after Dec. 31, 2010.

Q. How do I prove that I have purchased an over-the-counter medicine or drug with a prescription so that I can get reimbursed from my employer's health FSA or an HRA?
A. If your employer’s health FSA or HRA reimburses these expenses, you would provide the prescription (or a copy of the prescription or another item showing that a prescription for the item has been issued) and the customer receipt (or similar third-party documentation showing the date of the sale and the amount of the charge). For example, documentation could consist of a customer receipt issued by a pharmacy that reflects the date of sale and the amount of the charge, along with a copy of the prescription; or it could consist of a customer receipt that identifies the name of the purchaser (or the person for whom the prescription applies), the date and amount of the purchase, and an Rx number.

Q. How does this change affect over-the-counter medical devices and supplies?
A. The new rule does not apply to items for medical care that are not medicines or drugs. Thus, equipment such as crutches, supplies such as bandages, and diagnostic devices such as blood sugar test kits will still qualify for reimbursement by a health FSA or HRA if purchased after Dec. 31, 2010, and a distribution from an HSA or Archer MSA for the cost of such items will still be tax-free, even without a prescription.

Q. Will I need a prescription to use my health FSA, HRA, HSA or Archer MSA funds for insulin purchases after Dec. 31, 2010?
A. No. You can continue to use your health FSA, HRA, HSA or Archer MSA funds to purchase insulin without a prescription after Dec. 31, 2010.

Q. I use health FSA funds for my copays and deductibles. Will I still be able to reimburse those expenses with health FSA funds after Dec. 31, 2010?A. Yes. Copays and deductibles continue to be reimbursable from a health FSA after Dec. 31, 2010. Similarly, funds from an HRA can continue to be used for these expenses and a distribution from an HSA or Archer MSA for these purposes will be tax-free.

Q. My company gives me two extra months beyond the end of the year to submit claims for health FSA expenses incurred during the year. What happens if I purchase over-the-counter medicines or drugs without a prescription in 2010 but do not submit the claim for those expenses until January 2011? Will they qualify for reimbursement?
A. Yes. The new restriction on plan reimbursements for the cost of over-the-counter drugs without a prescription applies only to purchases that are made after 2010.

Q. My company’s health FSA includes a provision for a grace period, so that if I don’t spend all of the money in my health FSA by Dec. 31, I can still use the amount left at the end of the year to reimburse expenses I incur during the first 2 ½ months of the following year. If I buy over-the-counter medicines or drugs without a prescription during the 2 ½ month grace period of 2011, can I still use the amount left in my health FSA from 2010 to reimburse those expenses?
A. No. The change applies to any purchases made on or after Jan. 1, 2011. Thus, even if your employer’s plan includes the 2 ½ month grace period provision, the cost of over-the-counter medicines and drugs purchased without a prescription during that grace period in 2011 will not be eligible to be reimbursed by a health FSA.

Q. If my health FSA or HRA issues a debit card that I use to pay for over-the-counter medicines or drugs, will I still be able to use the card to purchase over-the-counter medicines or drugs after Dec. 31, 2010?
A. Generally, yes, if you have a prescription for the medicine or drug. For expenses incurred in 2010, you may continue to use an FSA or HRA debit card to purchase over-the-counter medicines or drugs (whether or not you have a prescription) at pharmacies and from mail order and web-based vendors that sell prescription drugs. Starting after Jan. 15, 2011, you may continue to use an FSA or HRA debit card to purchase over-the-counter medicines or drugs at these vendors, so long as you obtain a prescription for the medicine or drug, the prescription is presented to the pharmacist, and the medication is dispensed by the pharmacist and given an Rx number.

For further information, including guidance on purchases of over-the-counter medicines and drugs from health care providers other than pharmacies and mail order and web-based vendors (such as physicians or hospitals), see IRS Notice 2011-5. For guidance on debit card purchases at “90 percent pharmacies,” see IRS Notice 2010-59.

Q. If I use HSA or Archer MSA funds to reimburse the cost of over-the-counter medicines or drugs purchased after Dec. 31, 2010, without a prescription, what taxes will I incur?
A. If you have an HSA or Archer MSA, the amount of the distribution for expenses that are not qualifying medical expenses will be includable in your gross income and subject to an additional tax of 20 percent.

Smoking Cessation, ACA and MHPAEA

2011-01-11T10:09:00.000-08:00

The topic of smoking cessation has hit our radar a few times recently and we decided to dig a little deeper. Remember that in no way are we providing legal advice, just helping to navigate topics concerning employee benefits.

We need to separate the social aspect of stop-smoking programs from the legal requirements. Don’t confuse someone’s desire to provide coverage because it’s the “right thing to do” with the mandates required of insured/self-funded plans.
The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) does not require that smoking cessation be provided as part of a health plan. In fact it doesn’t mandate any specific service be provided – only that if a service is provided as of the plan year on or after July 1, 2010, then that service must continue to be provided. If provided, benefit levels for the MH/SA service cannot be less than benefit levels for medical/surgical benefits under the plan.
MHPAEA applies only to plans (insured or self-funded) with more than 50 employees.
Since most plans exclude services for smoking cessation, they can continue to exclude those services and still be in compliance with MHPAEA.
The ACA mandates that non-grandfathered plans must provide specific preventive services at no cost sharing on the part of the employee/patient. Those services are designated by recommendations from the United States Preventive Services Task Force (USPSTF). Two of the services address tobacco use:

That clinicians ask all pregnant women about tobacco use and provide augmented, pregnancy-tailored counseling to those that smoke.
That clinicians ask all adults about tobacco use and provide tobacco cessation interventions for those who use tobacco products.

Much of the current debate revolves around the word “interventions”:

If pregnant women should receive counseling, shouldn’t that also be the extent of the intervention for other smokers?
The recommendation doesn’t require that all interventions be provided. Does counseling alone meet that recommendation, just as it does for pregnant women?
The preventive care interim regulations indicate that treatment resulting from a preventive care screening can be subject to cost-sharing. Since nicotine addiction is a recognized medical condition, isn’t any intervention (including counseling and drug therapies) a “treatment”?

ACA requires that beginning 1/1/2014, smoking cessation drugs will be eligible under Medicaid. This is the only specific reference to smoking cessation drugs in either MHPAEA or ACA.
Given all the confusion and contradictions, it’s not surprising that there will be different solutions to this issue. Hopefully some clarity will come out of the final regulations (regulators aren’t required to meet specific deadlines for these), but no one should expect perfectly clear answers even then.

IRS DELAYS APPLICATION OF NONDISCRIMINATION RULES

2010-12-27T09:44:00.000-08:00

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

2010-12-06T10:56:00.000-08:00

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.

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.
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.
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

2010-11-24T11:35:00.000-08:00

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?

2010-11-19T08:35:00.000-08:00

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?

2010-11-05T10:49:00.000-07:00

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.

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

2010-10-12T14:09:00.001-07:00

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

2010-09-29T14:29:00.000-07:00

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!

2010-09-17T07:56:00.000-07:00

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:

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.
The HHS Secretary will then prepare a draft which benefits are essential.
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).
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]).
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

2010-09-13T14:02:00.000-07:00

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

2010-08-31T12:50:00.000-07:00

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

2010-08-10T12:00:00.000-07:00

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!

2010-07-27T09:41:00.000-07:00

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?

2010-07-26T09:00:00.000-07:00

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

2010-07-14T06:23:00.000-07:00

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

2010-07-08T11:01:00.000-07:00

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.

2010-07-02T13:16:00.000-07:00

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:

Small employer tax credit for premium payments that start in 2010 tax year;
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;
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

2010-06-18T12:21:00.000-07:00

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

2010-06-14T10:15:00.000-07:00

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

2010-05-21T06:41:00.000-07:00

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

2010-05-18T06:44:00.000-07:00

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!

2010-05-04T08:52:00.000-07:00

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.

Dependent coverage will be extended to age 26. See below for a more detailed definition.
There will no longer be lifetime limits on benefits.
There are restrictions on annual limits. This change is not in affect until 2014 and we are still awaiting further definitions.
There are no pre-existing condition restrictions on children under 19 years of age. See below for a more detailed definition.
Rescission of is not allowed. See below for a more detailed definition.
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.
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.