Employers Take Note, Part Two: Dependent Coverage, Expansion Of Disclosure Requirements, And Limits To Insurers’ Loss Ratios

As the Senate proceeds with its debate on health reform, Health Reform Talk continues a series examining health reform provisions that will affect employer-sponsored health plans and would take effect soon after enactment of any legislation. This series will look at features of the legislation already passed in the House (H.R. 3962) and the bill being considered in the Senate (H.R. 3590). These are features likely to survive in health reform legislation and which will directly affect employers. Today coverage of dependents, expansion of disclosure requirements, and limits to insurers’ loss ratios are discussed.

Coverage Of Dependents

H.R. 3590: Sec. 1001 would require a group health plan that provides dependent coverage of children to continue to make the coverage available to an adult unmarried child under the age of 26.

Sec. 1001 would take effect for plan years beginning on or after six months after the date of enactment.

H.R. 3962: Sec. 105 would require a group health plan that provides dependent coverage of children to continue to make the coverage available to an adult unmarried child under the age of 27.

Sec. 105 would take effect for plan years beginning on or Jan. 1, 2010.

Development And Utilization Of Uniform Explanation Of Coverage Documents

H.R. 3590: Sec. 1001 requires group health plans to provide summary of benefits and coverage explanation that accurately describes the benefits and coverage under the applicable plan or coverage. The summary may not exceed four pages in length, must be presented “in a culturally and linguistically appropriate manner” and utilize terminology understandable by the average plan enrollee, and must describe benefits provided in accordance with the essential benefits package outlined in the Senate bill.

The Department of Health and Human Services would have one year from enactment to develop standards for the summary, and benefit plans would have a year after that to provide the new summaries to participants.

H.R. 3962: Sec. 233 has similar requirements for health plans to provide summary information on health care plans; however, the House provision does not take effect until 2013 at the earliest (and 2018 for many existing employer-based plans).

Loss Ratio Limitations

H.R. 3590: Sec. 1001 requires that health insurers annually provide reports on the percentage of premiums spent on (1) reimbursement for clinical services provided to enrollees under such coverage; (2) for activities that improve health care quality; and (3) on all other non-claims costs, including an explanation of the nature of such costs, and excluding State taxes and licensing or regulatory fees.

If the percentage of premium in group health plans spent on all other non-claims costs exceeds 20%, each enrollee under the group health plan will receive a pro-rata rebate

This provision of Sec. 1001 would take effect for plan years beginning on or after six months after the date of enactment and would end after Dec. 31, 2013.

H.R. 3962: Sec. 102 also provides a rebate to participants in insured group plan in which the medical loss ratio falls below a certain level, in this case 85%.

Sec. 102 would take effect for plan years beginning on or Jan. 1, 2010, and would expire when health insurance is offered through the Health Insurance Exchange.