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

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

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

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

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

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

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!

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.