GrandFathered Health Plans

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					Health Reform

     MBI 101410A   1
This presentation will introduce you to the pressing
  issues concerning the Patient Protection and
  Affordable Care Act signed into law March 2010

Our goal is to help you better understand the impact
  this will have on you and your business, and to let
  you know how we may be able to assist you

Information in this presentation is not considered
   exhaustive nor is it considered legal advice

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Currently On-going

Grandfathered  Health Plans
Employer Subsides of Medicare D
Minimum Loss Ratios
Adoption Coverage
Breaks for Nursing Mothers

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         Grandfathered Health Plans
   A grandfathered health plan is any plan in which at least one individual
    was enrolled on March 23, 2010, and the policy or plan must have
    continuously covered someone since that date.
   Grandfathered plans remain subject to:
           Mental Health Parity provisions
           Newborns’ and Mother’s Health Protection Act provisions
           Women’s Health and Cancer Rights Act
           Michelle’s Law
   If an employer offers multiple health plan options, each option is treated
    separately in terms of its grandfathered status
   Grandfathered plan rules are not limited to individuals enrolled on the
    date of enactment but rather
     •   New employees (and their families) may be covered under an
         employer’s grandfathered plan
     •   Family members of current employees who are covered by the
         grandfathered plan may also be added, if their enrollment was
         permitted under plan terms on March 23, 2010

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   Grandfathered health plans are exempt from various
    provisions of the health reform law, including:
    •   Coverage of preventive services without cost-sharing
    •   Cost-sharing limits
    •   Insured group health plan nondiscrimination rules
    •   Claims appeals and review process
    •   Selection of doctors and referral requirements
    •   Coverage of clinical trials
    •   No discrimination against providers
   In addition, an exception is made for employers that
    have scheduled plan changes as a result of a
    collective bargaining agreement

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    Keeping Grandfathered Status
   Individuals and employer group plans that wish to keep their current policy on a
    grandfathered basis would only be able to do so if the only plan changes made were
    to add or delete new employees and any new dependents.
   Regulation allows for changes in plan benefit structure, except for the following:
      • Eliminating all or substantially all benefits to diagnose or treat a particular
      • Increasing a coinsurance or other percentage-based cost-sharing requirement
         above the level in effect on March 23, 2010
      • Increasing a fixed-dollar cost-sharing requirement, such as annual deductible or
         out-of-pocket limit, by total percentage – measured from march 23, 2010 – that
         exceeds the sum of the medical inflation rate plus 15% points
      • Increasing co-payment by an amount exceeding greater of
           • The amount just described for other fixed-amount cost-sharing requirements
           • $5 increased by the medical inflation rate since March 23, 2010.
      • Decreasing rate of employer contributions to the plan (for any tier, such as
         employee-only or family) by more than 5% points below rate that was effect on
         March 23, 2010
      • Adopting or decreasing an annual benefit limit, with the specific rules depending
         on whether the plan had already imposed an annual or lifetime limit as of March
         23, 2010

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   Provisions applicable to all group health plans as of
    the law’s relevant effect date, regardless of
    “grandfathered” status, include:
    •   Coverage of adult children up to age 26
        (grandfathered group health plans do not have to
        comply with this requirement until the first plan year
        beginning on or after January 1, 2014, if the adult child
        is eligible for coverage under another eligible
        employer-sponsored health plan)
    •   Lifetime/annual limit restrictions
    •   Rescission restrictions
    •   Preexisting condition exclusions
    •   90-days waiting period limit
    •   Uniform summary of benefits
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    Keeping Grandfathered Status
   As of now, other types of benefit modifications will not
    cause a loss of grandfathered status.
    •   Example: the regulation’s preamble asks for comments on
        whether changing a plan’s network provider, changing from
        an insured to a self-funded plan, or changing a prescription
        drug formulary should be added as events causing a loss of
        grandfathered status. The preamble assures us that any
        such change in the regulation would be applied only
   The regulations provide that the grandfathering rules apply
    separately to each “benefit package” made available under
    a health plan. Thus, a plan offering both an HMO and
    PPO option might choose to modify the PPO’s deductible
    or co-payment in a way that would cause the PPO to lose
    its grandfathered status, without thereby forfeiting the
    HMO’s grandfathered status.

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    Keeping Grandfathered Status
   Implies that, beginning in 2014, premiums can vary more
    widely for grandfathered plans than for non-grandfathered
    plans for employers with up to 100 employees
   Plan sponsors that have decided to maintain
    grandfathered status must provide participants with a
    statement that the plan intends to preserve the basic
    health coverage that was in effect on March 23, 2010, and
    that some of the consumer protections of the Act may not
    apply. In addition, to maintain status as a grandfathered
    plan, the plan sponsor must retain records of the plan
    terms in existence on March 23, 2010, including plan
    documents, insurance policies, summary plan descriptions
    (SPDs), and other cost-sharing documentation.

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        Grandfathered Provision:
            Transition Rules
   For plans that made changes prior to March 23, 2010 (even if
    they take effect after March 23, 2010), grandfather status is
    retained if such changes were adopted pursuant to a legally
    binding contract, insurance filing, or written plan amendment.
   For plans that made routine changes between March 23, 2010
    and June 17, 2010, a good faith compliance standard will be
    applied and any changes that only modestly exceed any
    grandfather requirements will be allowed for the current plan
    year. The good faith standard has been extended until July 1,
   For plans that made significant changes prior to June 17, 2010
    that would cause them to lose grandfathered status are allowed
    a grace period lasting until the start of the next plan year
    beginning after September 23, 2010 to bring their coverage
    terms in compliance with PPACA.

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    Grandfathered Plan Summary
   Summary of 2010-2014 changes

    (see handout)

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     Employer Subsidies of
    Medicare Part D Premiums
   Eliminates the deduction for the subsidy to
    employers who maintain prescription drug plans for
    their Medicare Part D eligible retirees.
   In order for coverage to be available under this part
    for covered part D drugs of a manufacturer, the
    manufacturer must:
    •   Participate in the Medicare coverage gap discount
        program under section 1860D-14A
    •   Have entered into and have in effect an agreement
        described in subsection (b) of such section with the

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• Have entered into and have in effect, under terms
  and conditions specified by the Secretary, entered
  into a contract with under subsection (d)(3) of
  such section:
   • (b) Effective date – shall apply to covered part D drugs
   • (c) Authorizing coverage for drugs not covered under
     agreement - subsection (a) shall not apply to the
     dispensing of a covered part D drug if:
       •   The Secretary has made a determination that the
           availability of the drug is essential to the health of
           beneficiaries under this part; or
       •   The Secretary determines that in the period beginning on
           July 1, 2010, and ending on December 31, 2010, there
           were extenuating circumstances.

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         Minimum Loss Ratios
   Health plans, including “grandfathered plans”, must
    annually report on the share of premium dollars spent on
    medical care and provide consumer rebates for excessive
    medical loss ratios. (regulatory process starts 2010)
     • Applies to “issuers” not employers directly
     • Administered by the HHS
     • States are permitted to set higher MLR standards
     • Self insured plans are exempt
   The amendment made by this section shall apply to
    taxable years beginning after December 31, 2009

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   The minimum loss ratios are as follows:
     • 85% for large group plans (101 or more employees)
     • 80% for small group plans (100 or less employees)
     • 80% for individual plans
   Carriers must issue rebates to each enrollee on a pro rata
    basis for plans that that fail to meet MLR requirements
    starting in 2011.
   By December 31, 2010, the NAIC is required to establish:
     • Uniform definitions
     • Standard MLR calculation methodology
     • Rebate calculation methodology

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          Adoption Coverage
   Limit for employer sponsored assistance for
    adoptions increase from $10,000 to $13,170
   Employee may exclude QAE from gross income
    that is reimbursed under employer provided
   Credit is extended through 2011
   Phased out for high income earners starting at
   Tax payer may file an amendment to claim credit
    for QAE for 2008 and 2009
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    Breaks for Nursing Mothers
   All employers with 50 or more employees to provide
    private areas (not restrooms) where mothers of children
    less than one year old can pump breast milk in private
   Employers must provide “reasonable” unpaid time for this
   Smaller employers may be exempted if undue hardship
    can be demonstrated

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Health Reform


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   Non-Discrimination Testing
   Early Retiree Re-insurance
   Pre-existing Conditions
   Increase in Dependent Coverage
   OBGYN Non Referral Provision
   Coverage of Preventive Care
   Coverage Appeals Process

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   Wellness Grants
   Tanning Tax
   HSA and MSA Tax
   Emergency Service Coverage
   Designation of Primary Care Doctor
   Web Based Information Portal

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      Non-Discrimination Testing
   Requires all group health plans to comply with current
    IRC § 105(h)(2) rules that prohibit discrimination in favor
    of highly compensated individuals in terms of eligibility
    and benefits.
   All non-Grandfathered plans must pass discrimination
    testing similar but not exactly like other cafeteria plans.
   Under the new nondiscrimination rules, fully insured
    group health plan need to meet these requirements:
     • It cannot discriminate in favor of highly compensated
     • It must demonstrate that it benefits at least 70% of all
     • It cannot discriminate in favor of participants who are
        highly compensated individuals

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     Non-Discrimination Testing
    Penalties for Non-Compliance
   $100 per day for each employee whose benefits are
    not in compliance capped at 10% of the cost of the
    group health plan or $500,000 which ever is less.

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    Early Retiree Re-insurance
   Creates a new temporary reinsurance program to help
    companies (including self-funded plans) that provide early
    retiree health benefits for those ages 55-64 offset the cost of
    that coverage. Employers must apply to the HHS in order to
    participate in this program.
   The federal government will allocate $5 billion toward the
    creation of a temporary reinsurance program for employer-
    sponsored early retiree coverage that will reimburse 80% of
    claims between $15,000 and $90,000. The purpose of the
    program is to encourage employers that currently offer
    retiree medical coverage to continue to do so until the
    Exchanges are up and running.

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   Cumulative health benefits incurred in a given plan year and
    paid for a particular early retiree that fall between those
    amounts will be eligible for reimbursement (rather than
    reimbursement being made only for discrete health benefit
    items or services whose reimbursement total falls between
    those amounts). Reimbursement will be made only for claims
    that are incurred during the applicable plan year, and paid.
    Thus, eligible employers can save up to $60,000 per early
    retiree each year.
   Eligible claims are those for individuals at least age 55 (and
    their dependents) who are not eligible for Medicare and are not
    active workers.
     •   Includes documented retiree cost-sharing (deductibles, copays,
         coinsurance, etc.)
     •   Includes medical and prescription drug claims.
     •   Excludes HIPAA-excepted benefits (e.g., long-term care and
         limited scope dental or vision benefits).

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   Eligible plans must apply for the program and meet minimum
    requirements for management of participants with chronic and high-
    cost conditions. Reinsurance payments received by employers must
    be used to reduce participant and/or sponsor costs. A sponsor must
    be able to explain how reimbursements will be applied to maintain
    its level of effort in contributing to support the plan.
   Reimbursements are not treated as taxable income to the employer.
   The program is effective June 1, 2010, and ends January 1, 2014,
    or sooner, if funds are depleted. Sponsors may apply for plan
    years that begin before June 1, 2010, but end after that date. In that
    case, the amount of claims incurred before June 1, 2010 (up to
    $15,000) count toward the $15,000 cost threshold and the $90,000
    cost limit. The amount of claims incurred before June 1, 2010, in
    excess of $15,000 is not eligible for reimbursement and does not
    count toward the cost limit. The reinsurance amount to be paid is
    based solely on claims incurred on and after June 1, 2010, and that
    fall between the cost threshold and cost limit for the plan year.

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    Pre-Existing Condition Coverage
         for Individual Market
   Federal High Risk Pool for Individuals with a Pre-Existing Condition
    (June 2010)
     •   Provides eligible individuals access to coverage that does not impose any
         coverage exclusions for pre-existing health condition. This provision ends
         when Exchanges are operational.
          •   May be administered by nonprofit organizations under contract from HHS.
          •   No preexisting condition limitations
          •   Plan must cover at least 65% of medical costs
          •   Limitation on total out of pocket expenses
          •   Rates based upon a standard population with age rating factor max of 4:1
          •   Eligibility:
                 • Legal resident of the United States
                 • No creditable coverage six months prior to March 23, 2010 or the date on
                     which they apply for coverage under the pool
                 • Has preexisting condition, as determined in a manner consistent with
                     guidance issued by Secretary.
                 • Health plans and employers must reimburse the program if they have
                     discouraged individuals from being enrolled based on health status.
                 • 5 billion dollars appropriated to pay claims in excess of premiums.

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   As of 10/5/10, most health insurance
    carriers in the state of VA have
    voluntarily removed themselves from
    offering health insurance for children
    under the age of 19 for child only
    policies. Many carriers will still write
    policies assuming there is at least 1
    adult on the policy.

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    Eliminating Pre-Existing
Conditions Exclusion for Children
   Bars health insurance companies from
    imposing pre-existing condition exclusions on
    children less than 19 years of age (October

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       Increases in Dependent
   Increases the age of a dependent (regardless of status
    regarding marriage, full-time student, place of residence,
    or financial dependency) for health plan coverage until
    the age of 26 (coverage is not provided on the
    dependent’s 26th birthday) for:
          Fully insured individual health plans
          Fully insured group plans
          Self Insured group health plans
          COBRA coverage
   Dependent children include: son/daughter; stepchildren;
    adopted children; foster children.

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   If child is eligible under these rules, and parent not
    currently covered, the parent must be allowed to enroll or
    switch to another plan.
   For grandfathered plans until 2014, they only have to
    offer to those dependents NOT eligible for other source of
    employer sponsored coverage.
   Transition rules say a plan or issuer must provide a
    written notice to enroll within 30 days.
   Nothing in this section shall be construed to modify the
    definition of ‘dependent’ as used in the Internal Revenue
    Code of 1986 with respect to the tax treatment of the cost
    of coverage.

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   This provision generally is effective for the first plan
    year beginning on or after September 23, 2010 (i.e.,
    January 1, 2011, for calendar year plans), although
    collectively bargained plans may have a later
    effective date. Until the first plan year beginning on
    or after January 1, 2014, grandfathered group health
    plans are not required to extend coverage to adult
    children (up to age 26) who have access to another
    eligible employer-sponsored health plan (a group
    health plan or group health insurance coverage
    which is a governmental plan, or any other plan or
    coverage offered in the small or large group market
    within a State).

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           OBGYN Non Referral
   General Rights
    •   Direct Access- A group health plan, or health insurance
        issuer offering group or individual health insurance
        coverage, described in paragraph (2) may not require
        authorization or referral by the plan, issuer, or any person
        including a primary care provider described in
        paragraph(2)(B)) in the case of a female participant,
        beneficiary, or enrollee who seeks coverage for
        obstetrical or gynecological care provided by a
        participating health care professional who specializes in
        obstetrics or gynecology. Such professional shall agree
        to otherwise adhere to such plan's or issuer’s policies
        and procedures, including procedures regarding referrals
        and obtaining prior authorization and providing services
        pursuant to a treatment plan (if any) approved by the
        plan or issuer.

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    CARE.—A group health plan or health insurance
    issuer described in paragraph(2) shall treat the
    provision of obstetrical and gynecological care, and
    the ordering of related obstetrical and gynecological
    items and services, pursuant to the direct access
    described under subparagraph (A), by a participating
    health care professional who specializes in obstetrics
    or gynecology as the authorization of the primary care

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    Coverage of Preventive Care
   In general – a group health plan and a health insurance issuer
    offering group or individual health insurance coverage shall, at a
    minimum provide coverage for and shall not impose any cost
    sharing requirements for:
     •   1. Evidence-based items or services that have an effect a rating of ‘A’ or ‘B’ in
         the current recommendations of the United States Preventive Service Task

         (See handout)

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     Update as of August 1, 2010
   Be sure preventive service is separate from an office
    visit unless purpose of the visit is preventive in
   In-network ONLY
   All new group health plans and plans in the
    individual market must provide first dollar coverage
    for preventive services
    •   This provision appears to eliminate deductibles or
        other cost sharing mechanisms for preventative care

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        Coverage Appeals Process
         Update as of July 2010
   Requires that any new group health plan or new plan
    in the individual market implement an effective
    appeals process for coverage determinations and
    •   (Update as of July 23, 2010): Under new rules, non-
        grandfathered heath plans must implement an internal
        appeals process for denied claims that conforms to new
        requirements which are MORE RIGOUROUS than those
        currently required under ERISA. Furthermore, plans must
        allow for an external appeals process to be utilized in the
        event that the internal appeal does not yield a favorable
        result for the participant.

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        Coverage Appeals Process
         (Internal Claims Appeal)
   A group health plan and the health insurance issuer
    offering group and individual health insurance
    coverage shall implement an effective appeals
    process for appeals of coverage determinations and
    claims for:
    •   1- determination of an individual’s eligibility to participate in
        a plan
    •   2- determination that a benefit is not a covered benefit
    •   3- Imposition of a preexisting condition exclusion on
        otherwise covered benefit
    •   4- determination that a benefit is experimental,
        investigational or not medically necessary

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      Coverage Appeals Process
       (Internal Claims Appeal)
   Plan or insurer must notify claimant of benefit
    determination not later than 24 hours (if
    urgent care is involved)
   Claimant must be provided with new
    evidence considered, rationale, notice to
    enrollees, impartiality of personal involved
    making the decision and reason(s) for final
   Continued coverage will be provided during
    internal review process.

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        Coverage Appeals Process
        (External Appeal Process)
   State or Federal external review can be filed
    within four months of adverse internal claims
    review determination
   During external appeals process, the
    following will be considered:
    •   Medical records, health professional’s
        recommendation, terms of coverage, appropriate
        practice guidelines, documents from health carrier
   Within 45 days, written decision of
    determination will be provided
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               Wellness Grants
   The Secretary shall award grants to eligible
    employers to provide their employees with access to
    comprehensive workplace wellness programs.
   The grant program established under this section
    shall be conducted for a 5-year period.
   The term “eligible employer” means an employer
    (including a non-profit employer) that:
    •   A. employs less than 100 employees who work 25
        hours or greater per week
    •   B. does not provide a workplace wellness program as
        of the date of enactment of this Act.

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   An eligible employer desiring to participate in the
    grant program under this section shall submit an
    application to the Secretary, in such manner and
    containing such information as the Secretary may
    require, which shall include a proposal for a
    comprehensive workplace wellness program that
    meet the criteria and requirements.
   For purposes of carrying out the grand program
    under this section, there is authorized to be
    appropriated $ 200,000,000 for the period of fiscal
    years 2011-2015. Amounts appropriated pursuant
    to this subsection shall remain available until

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                   Tanning Tax
   To help pay for the plan, a 10% tax on indoor tanning
   Began July 2010

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    HSA and MSA Tax Increases
   Increases the additional tax for HSA withdrawals prior to
    age 65 that are not used for qualified medical expenses
    from 10 to 20 percent. The additional tax for Archer MSA
    withdrawals not used for qualified medical expenses
    would increase from 15 to 20 percent.
   HSAs- Section 223(f)(4)(A) of the Internal Revenue Code
    of 1986 is amended by striking “10 percent” and inserting
    “20 percent”.
   Archer MSAs- Section 220 (f)(4)(A) of the Internal
    Revenue Code of 1986 is amended by striking “15
    percent” and inserting “20 percent”.
   Effective Date- The amendments made by this section
    shall apply to distributions made after December 31,

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           Emergency Services
   Mandates coverage of emergency services at in-network level
    regardless of provider for:
     • Fully-insured individual health plans
     • Fully-insured group plans
     • Self-insured group health plans
   Carriers only have to pay the provider at the greater level of:
     • Amount you would have paid in network
     • The insurance carrier’s normal reasonable and customary level
     • Medicare
   Patients can be balance billed

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    Designation of Medical Provider
         as a Primary Doctor
   Allows for designation of any participating primary care
    doctor or pediatrician as primary care doctor
   No preauthorization or referral necessary for OB/GYN

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            Web-Based Portal
          Update as of July 2010
   Immediate establishment – not later than July 1,
    2010, the Secretary, In consultation with the States,
    shall establish a mechanism, including an Internet
    website, through which a resident of any state may
    identify affordable health insurance coverage options
    in that State.

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MBI 101410A   47
   Connecting to affordable coverage- An Internet website
    established under paragraph (1) shall, to the extent
    practical, provide ways for residents of any States to
    receive information on at least the following coverage
    •   Health insurance coverage offered by health insurance issuers,
        other than coverage that provides reimbursement only for the
        treatment or mitigation
    •   Medicaid coverage under title XIX of the Social security Act.
    •   Coverage under title XXI of the Social Security
    •   A State health benefits high risk pool, to the extent that such
        high risk pool is offered in such State; and
    •   Coverage under a high risk pool under section 1101.

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Health Reform


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   Reporting on W-2’s
   Qualified Medical Expenses
   Cafeteria Plan Safe Harbor
   Non-Retaliation Provision
   CLASS Act

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             Reporting on W-2’s
   Employers must include on annual Forms W-2 the aggregate
    cost of group health plan benefits (excluding FSA, HSA, or
    Archer MSA contributions, or the cost of long term care, and
    certain other excepted benefits) provided to employees for
    taxable years beginning on or after January 1, 2012 (i.e., Forms
    W-2 issued in 2013 for 2012 wages, and issued thereafter for
    subsequent years).
   Employers can calculate the reportable value based on a
    methodology similar to that used under COBRA (minus the 2%
    COBRA administrative fee, if charged). If the plan provides for
    the same COBRA continuation coverage premium for both
    individual coverage and family coverage, the plan would be
    required to calculate separate individual and family premiums
    for this purpose.
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    Qualified Medical Expenses
   Standardizing the Definition of Qualified Medical
    •   Conforms the definition of qualified medical expenses for
        HSAs, FSAs, and HRAs to the definition used for the
        itemized deduction. An exception to this rule is included so
        that amounts paid for over-the-counter medicine with a
        prescription still qualify as medical expenses.
         •   Most over the counter drug purchases will no longer qualify as
             “medical expenses.”
         •   Administrators must eliminate all coverage for over the counter
             drugs or establish procedures for verifying that beneficiaries
             hold valid prescriptions.

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   Increases the additional tax for HSA withdrawals
    prior to age 65 that are not used for qualified medical
    expenses from 10 to 20 percent. The additional tax
    for Archer MSA withdrawals not used for qualified
    medical expenses would increase from 15 to 20

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   Effective for taxable years beginning on or after
    January 1, 2011, OTC medications (except insulin)
    that are not prescribed by a physician will no longer
    be considered qualified medical expenses that can
    be reimbursed through health accounts, including
    health FSAs, HSAs, and HRAs.
   It appears that expenses for excluded OTC
    medicines that are incurred on or after January 1,
    2011, would no longer be reimbursable through
    health accounts (but expenses incurred before that
    date could be reimbursed after that date).

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    Cafeteria Plan Safe Harbor
   Creates a Simple Cafeteria Plan to provide a vehicle through
    which small businesses can provide tax free benefits to their
     •   Designed for business with less than 100 employees.
     •   Broader eligibility rules which may allow owners to participate.
     •   Employers must contribute towards cost of benefits under this plan.
   The amendments made by this section shall apply to benefits and
    coverage provided after the date of the enactment of this Act.
   Nothing in the amendments made by this section shall be
    construed to create and inference with respect to the exclusion
    from gross income of benefits provided by and Indian tribe or
    tribal organization that are not within the scope of this section and
    benefits provided prior to the date of the enactment of this Act.

                                    MBI 101410A                      55
   An eligible employer maintaining a simple cafeteria plan
    with respect to which the requirements of this subsection
    are met for any year shall be treated as meeting any
    applicable nondiscrimination requirement during such
   The term ‘simple cafeteria plan’ means a cafeteria plan
    •   Which is established and maintained by an eligible employer
    •   Under the plan the employer is required, without regard to
        whether a qualified employee makes any salary reduction
        contribution, to make a contribution to provide qualified
        benefits under the plan on behalf of each qualified employee in
        an amount equal to a uniform percentage (not less than 2
        percent) of the employee’s compensation the plan year or an
        amount which is not less than the lesser of 6 percent of the
        employee’s compensation for the plan year, or twice the
        amount of the salary reduction contributions of each qualified
                                MBI 101410A                    56
    Non-Retaliation Provisions
   The Fair Labor Standards Act of 1938 is
    amended by inserting after section 18B.
   An employer may not discriminate or retaliate
    against an individual on account of the fact
    the individual:
    •   Notifies the government of the employer’s violation
        of the health reform laws
    •   Qualifies for federal insurance subsidies or tax

                            MBI 101410A               57
   No limitation on Rights- nothing in this
    section shall be deemed to diminish the
    rights, privileges, or remedies of any
    employer under any Federal or State law
    or under any collective bargaining
    agreement. The rights and remedies in
    this section may not be waived by any
    agreement, policy, form, or condition of

                     MBI 101410A       58
                            CLASS Act
   The purpose of this title to establish a national voluntary insurance
    program for purchasing community living assistance services and
    supports in order to-
     •   Provide individuals with functional limitations with tools that will allow them
         to maintain their personal and financial independence and live in the
         community through a new financing strategy for community living
         assistance services and supports.
     •   Establish an infrastructure that will help address the nation’s community
         living assistance services and supports needs;
     •   Alleviate burdens on family caregivers; and
     •   Address institutional bias by providing a financing mechanism that support
         personal choice and independence to live in the community
     •   No underwriting allowed except for age
     •   Administration expenses limited to 3%
     •   No federal funds allowed (except program premiums and interest) to fund
     •   Insurance industry may offer coverage through an exchange beginning
         2014 and may coordinate benefits

                                        MBI 101410A                            59
Health Reform


     MBI 101410A   60
   Benefits Summary
   Plan Provision
   Quality Information Reporting
   1099 information

                     MBI 101410A    61
                Benefits Summary
   Requires that all:
    •   Group health plans (including self-insured plans)
    •   Group health insurers
    •   Individual health insurers
   Provide a summary of benefits and a coverage
    explanation to:
    •   All applicants at the time of the application
    •   To all enrollees prior to the time of enrollment or re-
    •   All policyholders or certificate holder at the time of
        issuance of the policy or delivery of the certificate.

                                 MBI 101410A                  62
   The summary must include specific information to be
    determined by the Secretary of DHHS in consultation
    with the National Association of Insurance
   It may not exceed four pages (DHHS will provide a
    template) and must be linguistically appropriate.
   The summary can be provided in paper or electronic
   Employers and health plans that willfully fail to
    provide the information required can be fined up to
    $1,000 for each such failure
   Each failure to provide information to an enrollee
    constitutes a separate offense

                         MBI 101410A             63
    Material Modification of Plan
   If a group health plan or health insurance issuer
    makes any material modification in any of the terms
    of the plan or coverage involved that is not reflected
    in the most recently provided summary of benefits
    and coverage, the plan or issuer shall provide notice
    of such modification to enrollees not later than 60
    days prior to the date on which such modification will
    become effective on or before March 23, 2012
   Employers and health plans that willfully fail to
    provide required information can be fined up to
    $1,000 for each such failure, and each failure to
    provide information to an enrollee constitutes a
    separate offense
                           MBI 101410A              64
Quality Information Reporting
   No later than 2012, guidelines must be developed for
    group health plan or insurer offering group or individual
    health insurance coverage to ensure structures that
    •   Improve health outcomes
    •   Include information regarding wellness programs and may
        include information on smoking cessation, weight
        management, stress management, physical fitness, nutrition,
        heart disease prevention, healthy lifestyle support, diabetes
   Requirements are yet to be fully developed and
   Reporting takes effect in 2014

                                MBI 101410A                    65
              1099 Information
   All Persons engaged in trade of business and making
    payment of $600 or more to another person of rent,
    salaries, wages, premiums, annuities or compensations
   Must furnish name and address of recipient of income
    with statements to be furnished to persons with respect to
    whom information is required

                            MBI 101410A                66
Health Reform


     MBI 101410A   67
   FSA Limits
   Increased Medicare Health Insurance

                    MBI 101410A       68
                     FSA Limits
   Limiting Health Flexible Spending Arrangement
    •   Limits the amount of contributions to health FSAs to
        $2,500 per year, indexed by CPI for subsequent
   The Limit apply only to health FSAs; they do not
    apply to dependent care FSAs, health
    reimbursement arrangements (HRAs), or HSAs.
    (Current law continues to limit contributions to
    dependent care FSAs and to HSAs.)

                             MBI 101410A                69
       Increased Medicare Health
             Insurance Tax
   An additional 0.9% Medicare Hospital Insurance (HI) tax is
    imposed on every taxpayer (other than a corporation, estate, or
    trust) with respect to earnings and wages received during the
          Above $200,000 for individuals
          Above $250,000 for joint filers
          Above $125,000 for married taxpayers filing

   If the employer does not withhold the tax, the employee must
    pay the tax, but an employer is not relieved of penalties or
    additions to tax applicable to its failure to deduct and withhold
    any amount subject to employer withholding.

         (see handout for additional revenue provisions)

                                MBI 101410A                    70
Health Reform


     MBI 101410A   71
   Pre-existing Condition Exclusion
   Employer Waiting Period for Coverage
   Penalties for Non-Compliance
   Employer Wellness Plans

                    MBI 101410A       72
          Pre-existing Condition
   Elimination of all Pre-existing Condition Exclusion
    •   Implements strong health insurance reforms that prohibit
        insurance companies from engaging in discriminatory
        practices that enable them to refuse to sell or renew policies
        due to an individual’s health status. Insurers can no longer
        exclude coverage for treatment based on pre-existing health
        conditions. It also limits the ability of insurance companies
        to charge higher rates due to health status, gender, or other
        factors. Premiums can vary only on age (no more than 3:1),
        geography, family size, and tobacco use.

                                MBI 101410A                   73
Employer Waiting Period for
• Precludes waiting periods over 90 days

                   MBI 101410A             74
Penalties for Non Compliance
   with Benefit Mandates
   Employer Mandate
    •   Requires employers with 50 or more employees who
        do not offer coverage to their employees to pay
        $2,000 annual for each full-time employee over the
        first 30 as long as one of their employees receives a
        tax credit.
    •   Requires employers who offer coverage but whose
        employees receive tax credits to pay $3,000 for each
        worker receiving a tax credit up to an aggregate cap of
        $2,000 per full-time employee.
        (see chart)

                             MBI 101410A                75
Penalties for Non-Compliance
   Penalties will be assessed due to
    • Improper disclosure of information (PP 113)
    • False information imposed on an individual
        (PP 112)
    •   Certification and compliance failures from carriers
        (PP 32-33)
    •   Individual penalties for not having minimum
        coverage (PP 131-133)
    •   Large group penalties for not reporting employee
        health information (PP 137-1390)

                            MBI 101410A              76
     Employer Wellness Plans
   Increases the reward possible for these programs from
    20% to 30% with a possible increase in up to 50% of the
    cost for employee coverage or the cost of family
   In addition, the Secretary shall evaluate community
    prevention and wellness programs to be sure they are
    evidence-based, and have demonstrated potential to
    help beneficiaries (particularly beneficiaries that have
    attained 65 years of age) reduce their risk of disease,
    disability, and injury by making healthy lifestyle choices,
    including exercise, diet, and self-management of chronic

                             MBI 101410A                 77

   MBI 101410A   78
Thank You!

    MBI 101410A   79

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