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health insurance coverage


									AUGUST 2011 UPDATE
   Status of health care reform
   Grandfathered plans
   Early Retiree Reinsurance Program
   Annual limit waivers
   Employer reporting/disclosure
   Claims and appeals rules
   Preventive care guidelines for women
   Medical loss ratios and controlling premium increases
   Free choice vouchers
   Small employer tax credit

   Patient Protection and Affordable Care Act
    (PPACA) – signed on March 23, 2010

   Health Care and Education Reconciliation Act
    (Reconciliation Act) – signed on March 30,

   The health care reform law makes sweeping
    changes to our nation’s health care system

   New plan rules generally apply to group health plan
   Exceptions
    ◦ Excepted benefits
     • Some health FSAs
     • Certain types of benefits (AD&D, liability insurance, etc.)
     • Limited scope benefits (dental-only, vision-only)
    ◦ Retiree-only plans
    ◦ Group health plans covering fewer than 2 employees

   Republicans control House and Democrats
    have majority in Senate
   GOP goal: repeal or change reform law
    ◦ Full repeal unsuccessful
    ◦ Form 1099 reporting requirement and free choice
      voucher program repealed
   Any changes will have to go through
    legislative process
   Legislative focus has recently shifted to other

   District courts split on constitutionality
    ◦ Individual mandate is main issue
    ◦ Does Congress have power to force individuals to
      buy a product?
    ◦ Florida court held that entire law is invalid – ruling
      was stayed
   Sixth Circuit appeals court ruled that the
    individual mandate is constitutional
   Supreme Court expected to ultimately decide
    the issue

   Grandfathered (GF) plans are exempt from
    some HCR requirements
    ◦ New employees can still enroll
    ◦ Family members of current employees can still join
   Certain changes to a plan’s design can cause
    loss of GF status
   Plans will have to analyze changes at each

   Patient Protections, including preventive care coverage
   Nondiscrimination rules for fully-insured plans
   New claims and appeals process
   Quality of care reporting
   Insurance premium restrictions
   Guaranteed issue and renewal of coverage
   Nondiscrimination based on health status/in health care
   Comprehensive health insurance coverage
   Limits on cost-sharing
   Coverage for clinical trials

   Health Insurance Changes – Prohibitions on:
    ◦   Lifetime and annual limits
    ◦   Pre-existing condition exclusions
    ◦   Rescissions
    ◦   Excessive waiting periods
   Required coverage of adult children up to age
   Automatic enrollment for large employers
   Summary of benefits and coverage
   Reporting medical loss ratio

   Permitted Changes
    ◦ Cost adjustments consistent with medical
    ◦ Adding new benefits
    ◦ Modest adjustments to existing benefits
    ◦ Voluntarily adopting new consumer protections
      under the health care reform law
    ◦ Changes to comply with state or federal laws
    ◦ Changing insurance carriers

   Prohibited Changes
    ◦   Significantly reducing benefits or contributions
    ◦   Significantly raising co-payment charges or deductibles
    ◦   Raising co-insurance charges
    ◦   Adding or tightening annual limits
   Special rule for insured collectively bargained plans
   Additional Requirements
    ◦ Disclose GF status
    ◦ Status can be revoked if try to avoid compliance

   Non-GF fully-insured plans must follow rules
    regarding nondiscrimination in favor of
    highly-compensated employees (HCEs)
    ◦ Cannot discriminate with respect to eligibility or
    ◦ GF plans exempt
   HCEs:5 highest paid officers, more than 10%
    shareholder, or highest paid 25% of all employees
   Effective date delayed for regulations

   Effective on date of enactment?
    ◦ Yes, but need regulations so compliance delayed
    ◦ Regulations to be issued by 2014
    ◦ Applies to GF and non-GF plans
   Large employers that offer health benefits must
    automatically enroll new employees
   Adequate notice and opt-out option required
   Other questions to be addressed in regulations

   ERRP established to provide reimbursement
    to employers that provide coverage for early
    ◦ Early retiree = 55 and older and not eligible for
    ◦ Reimburses 80 percent of costs related to claims
      between $15,000 and $90,000
    ◦ Must be used to lower plan costs (not for general

   Temporary Program
    ◦ $5 billion total funding – HHS expects to pay out by
      end of fiscal year 2012 (maybe sooner)
    ◦ Applications for the program were accepted beginning
      June 29, 2010
    ◦ Due to popularity and limited funding, deadline for
      applications was May 5, 2011
   Claims can still be submitted if employer was
   More information available at

   General rule: plans cannot impose lifetime or
    annual limits on essential benefits
   Applies to GF and non-GF plans
   Until 2014, “restricted” annual limits are
   Minimum annual limits for years before 2014
      PY on or after 9/23/10: $750,000
      PY on or after 9/23/11: $1.25 million
      PY on or after 9/23/12 (before 1/1/14): $2 million

   Plans can apply for waiver of annual limit
    restrictions if compliance would:
    ◦ Result in a significant decrease in access to benefits;
    ◦ Significantly increase premiums
   Plan must have existed before Sept. 23, 2010
    ◦ Exceptions for certain mandated or group policies
   Waivers do not cover plan years beginning on
    or after Jan. 1, 2014 – when all annual limits
    on essential benefits are prohibited

   Under original guidance, plans were required
    to reapply for a waiver each year
   New guidance - Waiver application program
    will close on Sept. 22, 2011
    ◦ Plans that have already received waivers can apply
      for extensions
    ◦ Plans that have not yet received waivers can submit
      new applications
    ◦ Plans do not need to reapply each year - waivers
      will last until 2014

   If plan obtains waiver, must inform
   Must use model language (or obtain HHS
   Must be provided annually for each plan
    year covered by the waiver
   Notice must be given as part of plan
    materials that describe coverage terms
    (example: SPDs)

   Plans that receive waivers must
    provide annual updates to HHS by the
    end of each calendar year
   Must include same information as the
    waiver extension or new waiver
   Record retention requirements

   Employers must report aggregate cost of
    group health plan coverage on employees’
    Forms W-2
    ◦ Does not change the tax rules for health coverage
    ◦ Aggregate cost must be reported –
      employer/employee portions of cost do not
    ◦ Determined under rules similar for determining
      “applicable premium” under COBRA

   Originally effective for the 2011 tax year (W-2
    Forms provided in Jan. 2012)
   IRS later made 2011 reporting optional for all
   Recent IRS guidance
    ◦ For small employers (those that file fewer than
      250 Forms W-2), reporting requirement is
      delayed until further guidance issued
    ◦ For larger employers, reporting is mandatory for
      2012 (W-2 Forms provided in Jan. 2013)

   Coverage under employer-sponsored group
    health plans must be reported
   Some types of coverage do not need to be
    reported –
    ◦ HRA coverage
    ◦ Stand-alone dental or vision coverage
    ◦ Multiemployer plan coverage
    ◦ Self-insured plans not subject to COBRA (church
      plans, for example)
    ◦ Accident or disability income insurance, etc.
    ◦ Salary reductions to FSAs

   Form 1099 Reporting Requirement
    ◦ Scheduled to go into effect for 2012
   Quality of Care Reporting
    ◦ HHS must develop standards by March 2012
    ◦ Does not apply to GF plans
   Health Care Coverage Reporting
    ◦ IRS reporting requirement for “minimum essential
    ◦ Effective for 2014

   Expands on disclosure requirements for
    health plans
   Applies to GF and non-GF plans
   HHS to develop standards for uniform
    summary within 1 year of enactment -
    March 23, 2011 ??
   Plans must start using within 2 years of
    enactment – March 23, 2012

   Standards – What we know at this
    ◦ Appearance:
      Cannot be longer than four pages
      12-point or larger font
    ◦ Language:
      Easily understood language
      “Culturally and linguistically appropriate

◦ Content:
   Uniform definitions of standard terms
   Description of plan’s coverage
      Exceptions, reductions and limitations on coverage
      Cost-sharing provisions
      Renewability/continuation of coverage
      Examples of common benefits scenarios
      Statement whether coverage is “minimum essential
       coverage” and whether plan covers 60% of benefit costs
  Statement that outline is a summary of the plan
  Contact information for obtaining plan/SPD

   Must be provided to applicants (at the time
    of application) and enrollees (upon
    enrollment and re-enrollment)
   Updating summaries:
    ◦ Any material modification not contained in most
      recent 4-page summary must be described in a
      summary of material modifications (SMM)
    ◦ Must be provided at least 60 days BEFORE
      modification becomes effective

   Apply to non-GF plans
   Group health plans and health insurers
    must implement effective internal appeals
   Must meet minimum requirements for
    external review
   Grace period until plan year beginning on or
    after Jan. 1, 2012 for some requirements

   Must follow DOL claims procedure rules
   Must also incorporate additional standards
    ◦ Rescissions
    ◦ Urgent care claims – UPDATE: 72-hour rule
      remains permissible
    ◦ Full and fair review
    ◦ Conflicts of interest
    ◦ Notices – culturally and linguistically appropriate
    ◦ New content for notices
    ◦ Strict compliance

   State External Review Process
    ◦ Applies to insured plans at least until end of
      transition period (Jan. 1, 2012)
    ◦ If process does not have minimum consumer
      protections, federal process will apply at end of
      transition period
   Federal External Review Process
    ◦ Process administered by HHS (insured plans)
    ◦ Process supervised by DOL and IRS (self-funded
      plans or insured plans)

   HHS issued new guidelines for preventive
    care for women on Aug. 1, 2011
   Applies to non-GF plans
   Must provide coverage for women’s
    preventive health services without any cost-
    sharing (no deductible, copayment or
   Effective for plan years beginning on or
    after Aug. 1, 2012

   Covered health services:
    ◦   Well-women visits
    ◦   Gestational diabetes screening
    ◦   HPV DNA testing
    ◦   Sexually transmitted infection counseling
    ◦   HIV screening and counseling
    ◦   Contraceptives and contraceptive counseling
    ◦   Breastfeeding support, supplies and counseling
    ◦   Domestic violence screening and counseling

   MLR Rules
    ◦ Insurers must spend 80-85% of premiums on
      medical care and quality improvement (not admin
      costs) or give rebates
    ◦ Effective Jan. 1, 2011
   HHS issued final rule
    ◦ Adopted NAIC recommendations
    ◦ Outlines items counted as medical care/health care
      quality improvement (and items that are not)
    ◦ Provides rules for rebates

   Issuer must provide proportionate rebate to each
    enrollee if MLR does not meet requirements
   Due by August 1st after reporting year (Aug. 1,
    2012 for 2011)
   Issuer can arrange with group health plans to
    distribute rebates to enrollees
   Methods of payment
    ◦ Premium credit
    ◦ Lump sum check
    ◦ Reimbursement to account used to pay premium

   If giving rebate, issuer must provide notice
    to each enrollee and a report to HHS
   Enrollee Notice:
    ◦ Description of MLR concept
    ◦ Purpose of setting MLR standard
    ◦ Applicable MLR standard
    ◦ Issuer’s MLR and aggregate premium revenue
    ◦ Rebate percentage and amount owed

   HHS required to develop process for annual
    review of “unreasonable” premium increases
    for health insurance
   HHS issued final rule in May 2011
    ◦ Applies to small group and individual markets
    ◦ Does not apply to GF plans or excepted benefits
   Starting:
    ◦ Sept. 1, 2011, proposed rate increases of 10% or
      more must be reviewed
    ◦ Sept. 1, 2012, 10% threshold will be replaced with a
      state-specific threshold

   Increases subject to review must be publicly
    disclosed, along with the justification
   Increases will be reviewed by state or
    federal experts to determine if
   Unreasonable = excessive, unjustified or
    unfairly discriminatory
   More information for consumers will be
    available at

   PPACA required certain employers to provide
    free choice vouchers to eligible employees
    beginning in 2014
    ◦ Applied to employers that offered minimum essential
      coverage and paid any portion of premium
    ◦ To be eligible, employees had to meet income
      restrictions and could not be participating in
      employer’s plan
    ◦ Voucher equal to monthly amount employer would
      have paid for coverage
   Repealed in April 2011 as part of federal
    budget bill

   Qualifying small employers that provide
    health care coverage to employees are
    eligible for the tax credit
    ◦ Have fewer than 25 full-time equivalent (FTE) employees
    ◦ Pay wages averaging less than $50,00 per employee per
    ◦ Have a “qualifying arrangement” (pays premiums for each
      employee in a uniform percentage that is at least 50% of
      the cost of coverage)
   Available beginning in 2010
   IRS guidance clarifies how to calculate FTEs
    and wages

   Credit based on premiums paid by employer
    for health insurance coverage
   Credit amount = up to 35% of premium costs
    paid (25% for tax-exempt employers)
    ◦ In 2014, increases to 50% (35% for tax-exempt
   Depends on employees and wages
    ◦ The credit gradually phases out for:
      Employers with average wages over $25,000 and
      Employers with more than 10 FTEs

   Credit based on employer’s premium
    payments for health insurance coverage
   Plans that are not health insurance coverage:
    ◦ Self-insured plans (including HRAs and FSAs)
    ◦ Health savings accounts (HSAs)
    ◦ Employer contributions to these plans are not
      counted for credit
   Contributions to multiemployer plans can
    count if for health insurance coverage
   Contributions to church welfare plans count
    as insurance




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