Temporary High Risk Insurance Pool Established

(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law. Click here for previous post.)

So what’s included in Sec. 1101 of the Affordable Care Act, concerning the temporary high risk insurance pool?

A temporary high risk insurance pool program must be established for individuals who have been uninsured for six months or who have been denied a policy because they have preexisting conditions. The funding for this high risk pool program is capped at $5 billion. The program is set to end on January 1, 2014.

Timing of high risk pool. By June 21, 2010 (within 90 days after the date of enactment), the Health and Human Services (HHS) must establish a temporary high risk health insurance pool. This pool is designed to provide health insurance coverage for eligible individuals for the period from the day the program is established until January 1, 2014.

Administration of high risk pool. The Affordable Care Act authorizes the HHS to carry out a federal national high risk pool program either (1) directly or (2) through contracts with eligible entities. An eligible entity is one that: is a state or nonprofit private entity; submits an application to the HHS, at the time and in the manner specified by the HHS and containing information required by the HHS; and agrees to use contract funding to establish and administer a qualified high risk pool for eligible individuals. In addition, to be eligible to enter into a contract with the HHS, a state must agree not to reduce the amount it spends annually for the operation of one or more state high risk pools during the year before the year in which it enters into such a contract.

Qualified high risk pools. A qualified high risk pool must meet the following rules:

(1) it provides health insurance coverage, without preexisting condition exclusions for the coverage, to all eligible individuals;

(2) it provides health insurance coverage (a) in which the issuer’s share of total allowed costs of provided benefits under the coverage is not less than 65% of the costs and (b) that has an out of pocket limit not more than the applicable amount described in IRC Sec. 223(c)(2) for the year involved (note that, for 2010, the Sec. 223(c)(2) out of pocket limits are $5,950 for self-only coverage or $11,900 for family coverage);

(3) it ensures that, with regard to the premium rate charged to eligible individuals through the high risk pool, the premium (a) varies only by age, rating area, individual or family enrollment, and tobacco use, as provided under Public Health Service Act 2701, as added by the Affordable Care Act; (b) varies on the basis of age by a factor of no more than 4 to 1; and is established at a standard rate for a standard population; and

(4) it meets any other requirements imposed by the HHS.

Eligibility for high risk pool. Under the Affordable Care Act, a person is considered an eligible individual for purposes of the high risk pool if he or she:

• is an American citizen or a U.S. national or is lawfully present in the U.S.;
• has not been covered under creditable coverage during the six-month period prior to the date on which the person is applying for coverage through the high risk pool; and
• has a preexisting condition, as determined under guidance issued by the HHS.

Funding of high risk pool. The Affordable Care Act provides $5 billion in funding to pay claims and administrative expenses of the high risk pool, beyond premiums collected from eligible individuals enrolled in the pool. There is no fiscal year limitation for the funding. If the total amounts available for paying expenses under the high risk pool program are estimated to be less than the program’s expenses, the HHS may make necessary adjustments to eliminate the deficit.

Termination of high risk pool program. Coverage under the national high risk pool program is scheduled to end on January 1, 2014. The HHS is ordered to develop procedures to transition eligible individuals enrolled in the high risk pool to qualified health plans offered through a Health Insurance Exchange. These procedures should ensure that there is no lapse in coverage for the individual. Further, the HHS may extend coverage after the termination of the high risk pool, if the HHS considers it necessary in order to avoid such a lapse.

Effective date. This provision is effective on the date of enactment (March 23, 2010).

CCH Law, Explanation And Analysis Of Health Reform Act Available

CCH's Law, Explanation and Analysis of the Patient Protection and Affordable Care Act provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation.

CCH editorial staff, together with leading experts, provide clear and practical guidance on the many new areas of compliance in the law, so professionals can quickly understand, comply with new requirements, and plan for the future. Included inn the online version is the complete text of the law, integrating both the Affordable Care Act and the Health and Education Reconciliation Act. The book is available for $149.

For more information or to order, please call 1-800-248-3248 or click here. Discounts are available for multiple copies.

Transparency in Coverage

(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law. Click here for previous post).

So what’s included in Sec. 10101(c) of the Affordable Care Act, concerning transparency in coverage?

Group health plans and health insurance issuers offering group or individual health insurance coverage that are seeking certification as qualified health plans under the Health Insurance Exchanges are required to provide specified information under the transparency in coverage rules. Generally, this required information, involving claims and enrollment, is to be provided to the Health Insurance Exchange, the Department of Health and Human Services (HHS), and the state insurance commissioner and also made available to the general public.

However, the Affordable Care Act further clarifies that a health plan or health coverage which is not offered through a Health Insurance Exchange is obligated to submit the required information only to the HHS and the state insurance commissioner. This information should also be made available to the general public.

Effective date. The provision is effective for plan years beginning on or after the date that is six months after the date of enactment (Sept. 23, 2010).

CCH Law, Explanation And Analysis Of Health Reform Act Available

CCH's Law, Explanation and Analysis of the Patient Protection and Affordable Care Act provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation.

CCH editorial staff, together with leading experts, provide clear and practical guidance on the many new areas of compliance in the law, so professionals can quickly understand, comply with new requirements, and plan for the future. Included inn the online version is the complete text of the law, integrating both the Affordable Care Act and the Health and Education Reconciliation Act. The book is available for $149.

For more information or to order, please call 1-800-248-3248 or click here. Discounts are available for multiple copies.

IRS Confirms Tax Exclusion Available For Children Under Age 27

IRS Notice 2010-38 confirms that health coverage for children under age 27 can be excluded from an employee’s gross income, regardless of the age limit, residency, support, and other tests used to define a dependent in IRC Sec. 152. The notice, which provides guidance on Sec. 1004(d)(1) of the Patient Protection and Affordable Care Act, P.L. No. 111-148, is effective March 30, 2010.

“These changes give employers a unique opportunity to offer a worthwhile benefit to their employees,” IRS Commissioner Doug Shulman said. “We want to make it as easy as possible for employers to quickly implement this change and extend health coverage on a tax-favored basis to older children of their employees.”

General Provisions

According to the Affordable Care Act, employees who have children who will not have reached age 27 by the end of the year are eligible for the new tax benefit from March 30, 2010, forward, if the children are already covered under the employer’s plan or are added to the employer’s plan at any time. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child (IRC Sec. 152(f)). This new age 27 standard replaces the lower age limits that applied under prior tax law, as well as the requirement that a child generally qualify as a dependent for tax purposes.

According to the notice, the exclusion applies only for reimbursements for medical care of individuals who are not age 27 or older at any time during the taxable year. For example, a child born on Dec. 10, 1985, attains age 27 on Dec. 10, 2012. For this individual, the new tax exclusion is available only through 2011. Employers may rely on the employee’s representation as to the child’s date of birth.

Examples

The notice provides several examples of how the new provision works, including these:

Example (1). JJ Sporting provides health care coverage for its employees and their spouses and dependents and for any employee’s child who has not attained age 26. For the 2010 taxable year, JJ Sporting provides coverage to employee Daniel Keyes and his son Chris. Chris will attain age 26 on Nov. 15, 2010. During the 2010 taxable year, Chris is not a full-time student. Chris has never worked for JJ Sporting. Chris is not a dependent of Daniel because prior to the close of the 2010 taxable year Chris had attained age 19 (and was also not a student who had not attained age 24).

Chris is a child of Daniel within the meaning of IRC Sec. 152(f)(1). Because Chris will not attain age 27 during the 2010 taxable year, the health care coverage and reimbursements provided to him under the terms of JJ Sporting’s plan are excludible from Daniel’s gross income  for the period on and after March 30, 2010 through Nov. 15, 2010 (when Chris attains age 26 and loses coverage under the terms of the plan.

Example (2). WhyNot, Inc., provides health care coverage for its employees and their spouses and dependents and for any employee’s child who has not attained age 27 as of the end of the taxable year. For the 2010 taxable year, WhyNot, Inc., provides health care coverage to Employee Edwina Noise and to her son, George. George will not attain age 27 until after the end of the 2010 taxable year. During the 2010 taxable year, George earns $50,000 per year, and does not live with Edwina. George has never worked for WhyNot, Inc. George is not eligible for health care coverage from his own employer. George is not a dependent of E because George does not live with Edwina, and Edwina does not provide more than one half of his support.

George is a child of Edwina within the meaning of § 152(f)(1). Accordingly, and because George will not attain age 27 during the 2010 taxable year, the health care coverage and reimbursements for George under WhyNot, Inc.’s plan are excludible from Edwina’s gross income for the period on and after March 30, 2010 through the end of the 2010 taxable year.

Effects On Sec. 125

Sec. 125 cafeteria plan regulations currently do not permit election changes for children under age 27 who are not the employee’s dependents. According to the notice, the IRS intend to amend the regulations under IRC Sec. 1.125-4, effective retroactively to March 30, 2010, to include change in status events affecting nondependent children under age 27, including becoming newly eligible for coverage or eligible for coverage beyond the date on which the child otherwise would have lost coverage.

The same rules for employee’s child under age 27 apply to a health reimbursement arrangement (HRA), an arrangement that is paid for solely by an employer (and not through a § 125 cafeteria plan) and which reimburses an employee for medical care expenses up to a maximum dollar amount for a coverage period.

Cafeteria plans may need to be amended to include employees’ children who have not attained age 27 as of the end of the taxable year. In general, cafeteria plan amendments may be effective only prospectively. However, the notice provides that, as of March 30, 2010, employers may permit employees to immediately make pre-tax salary reduction contributions for accident or health benefits under a cafeteria plan (including a health FSA) for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. However, a retroactive amendment to a cafeteria plan to cover children under age 27 must be made no later than Dec. 31, 2010, and must be effective retroactively to the first date in 2010 when employees are permitted to make pre-tax salary reduction contributions to cover children under age 27.

VEBAs, Sec. 401(h) Accounts, And Sec. 162(l) Deductions

The notice states that the same general rules for providing a tax exclusion to children under age 27 applies to these provisions:

• Voluntary employee beneficiary associations (VEBAs) providing for the payment of sick and accident benefits to members;


• IRC Sec. 401(h) accounts that provide for the payment of benefits for sickness, accident, hospitalization, and medical expenses;


• IRC Sec. 162(l), which allows self-employed individuals to deduct, amounts paid during the taxable year for insurance that constitutes medical care.

Requirement To Provide Coverage

The Affordable Care Act also added Sec. 2714 to  the Public Health Service Act  to require group health plans and health insurance issuers that provide dependent coverage of children to continue to make such coverage available for an adult child until age 26.

According to Notice 2010-38, “in certain respects, the rules of Sec. 2714 of the PHS Act extending coverage to an adult child do not parallel the gross income exclusion rules provided by the Affordable Care Act’s amendments…. For example, Sec. 2714 of the PHS Act applies to children under age 26 and is effective for the first plan year beginning on or after Sept. 23, 2010, while… the amendments to the Code addressed in this Notice apply to children who have not attained age 27 as of the end of the taxable year and are effective March 30, 2010.”

Guidance regarding PHSA Sec. 2714 has not yet been issued.

For more information on Notice 2010-38, contact Karen Levin of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities), (202) 622-6080.

Grandfathered Health Plans

(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law. Click here for previous post)

So what’s included in Sec. 1251 of the Affordable Care Act, concerning the grandfathered health plans?

Individuals who are enrolled in a group health plan or individual health coverage at the date of enactment of the Patient Protection and Affordable Care Act may not be required to terminate that coverage. Any group health plan or health insurance coverage to which this provision applies is considered a “grandfathered health plan.” Thus, individual or group health plans providing coverage on March 23, 2010 are grandfathered.

Grandfathered plans are exempt from many of the provisions governing new plans, including these:

• Insured health plan compliance with nondiscrimination rules


• Requirement to provide preventive care services


• Implementation of effective claims appeals processes


• Selection of any participating primary care provider


• Insurance premium rates limitations


• Guaranteed availability and renewal


• Prohibition on discrimination based on health status


• Essential benefits coverage package and limited insured annual cost-share

However, grandfathered plans are subject to the following new provisions in the Public Health Service Act (PHSA):

• PHSA Sec. 2708, prohibiting excessive waiting periods (effective for plan years beginning on or after Jan. 1, 2014);


• PHSA Sec. 2711 prohibiting lifetime limits (effective for plan years beginning on or after Sept. 23, 2010);


• PHSA Sec. 2712, prohibiting rescissions (effective for plan years beginning on or after Sept. 23, 2010);


• PHSA Sec. 2714, extending coverage to adult children under age 26 (effective for plan years beginning on or after Sept. 23, 2010).

Grandfathered plans that are group health plans also are subject to these provisions:

• PHSA Sec. 2711 prohibiting annual limits(effective for plan years beginning on or after Sept. 23, 2010);


• PHSA Sec. 2704, eliminating pre-existing condition exclusions (effective for plan years beginning on or after Jan. 1, 2014);


• PHSA Sec. 2714, relating to extension of dependent coverage in a grandfathered group health plan, but only if the dependent is not eligible to enroll in an eligible employer-sponsored health plan (effective for plan years beginning before Jan. 1, 2014.).

Finally, grandfathered plans also must comply with these reform provisions for plan years beginning on or after March 23, 2010:

• Requirements to provide uniform explanations of coverage and standardized definitions (PHSA Sec. 2715).


• Requirements to provide loss-ratio reports and rebate premiums if loss ratios fall below 80% (Sec. 2718).

Family members, new employees. As long as the terms of the group plan or insurance coverage allow it, family members of an individual may enroll in a grandfathered plan in which that individual is enrolled. This rule applies if the individual was enrolled in the grandfathered plan on the date of enactment and the coverage is later renewed.

A grandfathered group health plan may provide for the enrollment of new employees and their families.

Although the law does not require individuals to terminate their existing coverage, the law also does not prevent a group health plan or insurance coverage from dropping those grandfathered plans. Thus, whether an individual can maintain her existing coverage will depend in large part on whether the plan sponsor or insurer continues to provide that type of grandfathered plan.

So far, there are no guidelines for maintaining a grandfathered plan or for determining what changes to the plan (such as cost, deductibles, coverage) would end the grandfathered status.

Effective date. This provision is effective on March 23, 2010.

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CCH's Law, Explanation and Analysis of the Patient Protection and Affordable Care Act provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation.

CCH editorial staff, together with leading experts, provide clear and practical guidance on the many new areas of compliance in the law, so professionals can quickly understand, comply with new requirements, and plan for the future. Included inn the online version is the complete text of the law, integrating both the Affordable Care Act and the Health and Education Reconciliation Act. The book is available for $149.

For more information or to order, please call 1-800-248-3248 or click here. Discounts are available for multiple copies.

Internet Portal for Health Coverage Information

(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law. Click here for previous post.)

So what’s included in Sec. 1103 of the Affordable Care Act, concerning the creation of an Internet portal for health coverage information?

An Internet portal is established to help beneficiaries and small businesses identify affordable health insurance coverage options in each state. The Department of Health and Human Services (HHS) must establish this Internet portal no later than July 1, 2010.

The Internet portal must, to the extent practicable, provide ways for residents of any state to receive information on at least the following coverage options:

• health insurance coverage offered by issuers (excluding coverage that only provides for the treatment of a single disease or conditions (i.e., cancer insurance); or an unreasonably limited set of diseases and conditions (as determined by the HHS);
• Medicaid coverage;
• coverage under the state Children’s Health Insurance Program;
• coverage under the state’s health benefits high risk pool, if one exists in the state;
• coverage under the high risk pool, as created under Sec. 1101 of the Affordable Care Act; and
• coverage within the small group market for small businesses and their employees.
  
  

The Web site is required to provide information on eligibility, availability, premium rates, cost sharing, and the percentage of total premium revenues spent on health care, rather than administrative expenses, by the issuer. The information must be presented in a standardized format, which the HHS must establish no later than 60 days after the date of enactment. The HHS may contract with qualified entities to establish the Web site.

Effective date. This provision is effective on the date of enactment (March 23, 2010).

CCH Law, Explanation And Analysis Of Health Reform Act Available

CCH's Law, Explanation and Analysis of the Patient Protection and Affordable Care Act provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation.

CCH editorial staff, together with leading experts, provide clear and practical guidance on the many new areas of compliance in the law, so professionals can quickly understand, comply with new requirements, and plan for the future. Included inn the online version is the complete text of the law, integrating both the Affordable Care Act and the Health and Education Reconciliation Act. The book is available for $149.

For more information or to order, please call 1-800-248-3248 or click here. Discounts are available for multiple copies.

Prohibition on Rescinding Coverage

(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law. Click here for previous post)

So what’s included in Sec. 1001 of the Affordable Care Act, concerning the prohibition on rescinding coverage?

The guaranteed renewability of health insurance coverage provisions of the Public Health Service Act (PHSA) are expanded to expressly prohibit group health plans and health insurance issuers offering group or individual coverage from rescinding coverage of an enrollee once the enrollee is covered, except where an individual has performed an act or practice constituting fraud or has made an intentional misrepresentation of material fact as prohibited under the terms of the plan or coverage. Such plan or coverage may not be cancelled without prior notice to the enrollee, and only as permitted under the rules for network plans and the general exceptions to guaranteed renewability of individual coverage.

Special rules for network plans. Where a health insurance issuer offers health insurance coverage in the group and individual markets through a network plan, the issuer may:

(1) limit eligible employers to those having eligible individuals who live, work or reside in the service area of the network plan; and

(2) within the service area of the plan, deny coverage to employers and individuals if the issuer has demonstrated, if required, to the applicable state authority that—

(a) it lacks the capacity to deliver services adequately to enrollees of any additional groups or additional individuals because of obligations to its existing group contract holders and enrollees, and

(b) it is applying the denial of coverage uniformly to employers and individuals without regard to the claims experience of individuals, employers and their employees, and their dependents, or any health status-related factor related to those individuals, employees and dependents.

(3) Upon denying health insurance coverage in any service area, an issuer may not offer coverage in the group or individual markets within that service area for a period of 180 days after the date that coverage is denied.

Exceptions to guaranteed renewal of individual coverage. In the individual market, a health insurance issuer is allowed to discontinue coverage of an individual only based on one or more of the following:

• Nonpayment of premiums or contributions or untimely payments.
• Fraud or intentional misrepresentation of material fact under the terms of coverage by an individual or a plan sponsor.
• Cessation of the particular type of coverage in the market.
• When coverage is offered in the market through a network plan, and the individual no longer lives within the service area, or an area where the issuer is authorized to do business, but only if coverage is terminated uniformly without regard to health status-related factors of the covered individuals.
• Coverage is offered through an association and an employer ceases to be a member, but only if coverage is terminated uniformly without regard to health status-related factors of the covered individuals.

Effective date. The provision is effective for plan years beginning on or after the date that is six months after the date of enactment (Sept. 23, 2010).

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CCH's Law, Explanation and Analysis of the Patient Protection and Affordable Care Act provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation.

CCH editorial staff, together with leading experts, provide clear and practical guidance on the many new areas of compliance in the law, so professionals can quickly understand, comply with new requirements, and plan for the future. Included inn the online version is the complete text of the law, integrating both the Affordable Care Act and the Health and Education Reconciliation Act. The book is available for $149.

For more information or to order, please call 1-800-248-3248 or click here. Discounts are available for multiple copies.

Reporting Minimum Loss Ratios

(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law. Click here for previous post.)

So what’s included in Sec. 10101(f) of the Affordable Care Act, concerning minimum loss ratios?

Health insurers offering group or individual insurance coverage must submit an annual report to the Department of Health and Human Services for each group and individual coverage for each medical plan year. This report must describe the ratio of the incurred claims plus a loss adjustment expense to earned premiums, typically called a medical loss ratio.

Loss adjustment expenses usually include legal and other fees and expenses related to the settlement of an insurer's claims. Earned premium in health care usually means the portion of a premium that has been "used up" during a policy term. With a one-year policy, half of the total premium has been earned after six months.

Reports also must be made for grandfathered plans.

The report must include the percentage of total premium revenue that such coverage expends on the following:

(1)      reimbursement for clinical services;

(2)      activities that improve health care quality; and

(3)      all other non-claims costs, including an explanation of the nature of such costs, but excluding Federal and State taxes and licensing or regulatory fees.

HHS is directed to make the reports available to the public on an HHS internet site.

Required minimum loss ratios. Minimum loss ratios are established for large group plans, small group plans, and individual plans:

The minimum loss ratio for large group plans is 85%, or a higher percentage if a state requires it.

The minimum loss ratio for individuals and small group plans (plans with 100 or fewer employees is 80%, or a higher percentage if a state requires it. HHS may adjust the percentage if it determines that an 80% loss ratio would destabilize the individual market.

Beginning no later than January 1, 2011, health insurers providing coverage that does not meet the minimum loss ratios must provide an annual rebate to each enrollee under such coverage, on a pro rata basis.

The annual rebate is calculated by multiplying the amount by which the coverage fails to meet the minimum loss ratio by the total amount of premium revenue. Premium revenue excludes federal and state taxes, licensing and regulatory fees, and payments or receipts for risk adjustments, risk corridors, and reinsurance.

Example

ABC Insurance Company earns $2.5 million on premiums for coverage for Large Employer, Inc.’s 280 employees. Incurred claims plus a loss adjustment expense total $2.05 million, which results in a loss ratio of 82%. Assuming the earned premium already has excluded taxes, fees, and other adjustments, 3% is the amount by which the coverage fails to meet the minimum loss ratio by the total amount of premium revenue. That 3% is multiplied by $2.5 million, resulting in a total annual rebate of $75,000. This would produce an average pro rata rebate of $267.86 (75,000 divided by 280 employees) for each enrollee.

Effective date. The provision is effective for plan years beginning on or after Sept. 23, 2010.

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CCH's Law, Explanation and Analysis of the Patient Protection and Affordable Care Act provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation.

CCH editorial staff, together with leading experts, provide clear and practical guidance on the many new areas of compliance in the law, so professionals can quickly understand, comply with new requirements, and plan for the future. Included is the complete text of the law, integrating both the Affordable Care Act and the Health and Education Reconciliation Act. The book is available for $149.

For more information or to order, please call 1-800-248-3248 or click here. Discounts are available for multiple copies.

Review of Premium Increases

(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law.)

So what’s included in Sec. 1003 of the Affordable Care Act, concerning unreasonable premium increases?

The Secretary of Health and Human Services (HHS), in conjunction with the states, must establish an annual review process, beginning with the 2010 plan year that will require insurers to submit a justification for any “unreasonable” premium increases prior to implementation. Insurers also will be required to “prominently” post information regarding premium increases on their Web sites.

The HHS will establish a program of grants available to the states to assist them with carrying out the review process. The review process will require a state, through its Commissioner of Insurance, to provide the HHS with information about trends in premium increases in health insurance coverage in premium rating areas in the state and to make recommendations, as appropriate, about whether particular health insurance issuers should be excluded from participation in the state’s Exchange based on a pattern of excessive or unjustified premium increases.

Beginning with the 2014 plan year, the HHS, in conjunction with the states, will be required to monitor premium increases of health insurance coverage offered both inside the Exchange and outside of the Exchange.

Effective date. The provision took effect on the date of enactment.

CCH Law, Explanation And Analysis Of Health Reform Act Available

CCH's Law, Explanation and Analysis of the Patient Protection and Affordable Care Act provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation. CCH editorial staff, together with leading experts, provide clear and practical guidance on the many new areas of compliance in the law, so professionals can quickly understand, comply with new requirements, and plan for the future. The book is available for $149.

For more information or to order, please call 1-800-248-3248 or click here. Discounts are available for multiple copies.

Limitation of Distributions from Health Accounts for Over-the-Counter Medicines

(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law.)

So what’s included in Sec. 9003 of the Affordable Care Act, concerning limitations on distributions from health accounts for over-the-counter medications?

The definition of qualified medical expenses, for purposes of reimbursements from health flexible spending arrangements (health FSAs) or health reimbursement arrangements (HRAs), and distributions from health savings accounts (HSAs) or Archer medical savings accounts (Archer MSAs), has been modified to include amounts 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.

Therefore, reimbursements for over-the-counter medicines through a health FSA, HRA, or other employer-provided accident or health plan may not be excluded from the employee’s gross income. Also, distributions from a HSA or Archer MSA to pay for over-the-counter medicines may not be excluded from the employee’s gross income and will be subject to the additional penalty. This modification conforms to the definition for purposes of the itemized deductions for medical expenses.

State Tax Consequences. The exclusion of over-the-counter medicines and drugs from qualified medical expenses for purposes of the rules on HSAs, Archer MSAs, health FSAs, and HRAs will not affect those states, like California and Alabama, that do not recognize HSAs. Some states, such as Pennsylvania, that refer to qualified medical expenses under federal law, will be affected by this change unless/until the state updates its code conformity date.

Effective date. This provision is effective with respect to tax years beginning after Dec. 31, 2010.

CCH Law, Explanation And Analysis Of Health Reform Act Available

CCH's Law, Explanation and Analysis of the Patient Protection and Affordable Care Act provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation. CCH editorial staff, together with leading experts, provide clear and practical guidance on the many new areas of compliance in the law, so professionals can quickly understand, comply with new requirements, and plan for the future. The book is available for $149.

For more information or to order, please call (800) 248-3248 or click here. Discounts are available for multiple copies.

Dependent Coverage Requirements

(Note: For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law.)

So what’s included in Sec. 1001(5) of the Affordable Care Act and Sec. 1004(d)(1) of the Health Care and Education Reconciliation Act, concerning dependent coverage?

A group health plan and a health insurance issuer offering group or individual health insurance that provides dependent coverage of children must continue to make health coverage available for an adult child until the child turns 26 years old, regardless of whether or not the dependent is a full-time student, disabled, or married.. Health plans or health insurers are not, however, required to cover a child of the adult child receiving dependent coverage

Additional Change For Dependent Coverage

Although the Affordable Care Act requires that group health plans and health issuers that cover dependent children must do so "until the child turns 26 years of age,” this provision does not affect the income tax exclusion for employer-provided health benefits under the Internal Revenue Code.

In a separate change made by the Health Care Reconciliation Act of 2010 (Sec. 1004(d)(1)), the tax exclusion for employer-provided health benefits has been extended to include any adult child “who as of the end of the taxable year has not attained age 27,” regardless of whether or not the dependent is a full-time student, disabled, or married.

Note that the basic definition of a dependent in IRC Sec. 152 has not been changed. Under these rules, a child is a dependent for whom a dependency exemption may be claimed only if he or she is a qualifying child (IRC Sec. 152(c)) or a qualifying relative (IRC Sec. 152(d)). For health care purposes however, the two health reform provisions govern.

Thus, employers now need to pay attention to three separate provisions when designing plans to cover dependents:

• the existing definition of dependent in IRC Sec. 152 (for purposes other than health care);


• the requirement that children be covered until age 26;


• the ability to provide a tax exclusion for dependent coverage until age 27.

New Standard Set

The young adult age group tends to have a greater proportion of uninsured than do other age groups because young adults often are employed in low-wage jobs that either do not provide health insurance or provide health insurance that the young workers cannot afford. These two new provisions set a nationwide standard to require employers to cover adult children younger than age 26, and to provide a tax exclusion for this coverage until age 27, regardless of whether or not the dependent is a full-time student, disabled, or married.

Effective date. The provision requiring dependent coverage until age 26 is effective for plan years beginning on or after Sept. 23, 2010 (six months after the date of enactment).  The provision allowing a tax exclusion until age 27 is effective on March 23, 2010 (the date of enactment).

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For more information or to order, please call 1-800-248-3248 or click here. Discounts are available for multiple copies.

Patient Protections

(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law.)

So what’s included in Sec. 10101(h) of the Affordable Care Act, concerning patient protections?

Group and individual health insurance plans must allow plan enrollees to select, when the plan requires it, any primary care provider that participates in the plan’s network.

Pediatric care access. An individual or group health plan that requires enrollees to designate a primary care physician (PCP) must allow parents or legal guardians of a child enrollee to designate a physician who specializes in pediatric care as the child’s PCP if that physician participates in the plan’s network. This provision does not waive any exclusions of coverage under the terms and conditions of the plan or health insurance coverage with respect to coverage of pediatric care.

OB/GYN specialist. Plans must allow female enrollees to obtain OB/GYN specialist services without seeking a PCP referral. The OB/GYN specialist must adhere to the health plan’s or insurer’s policies and procedures for referrals and prior authorization and provide services according to a treatment plan approved by the plan or insurer. For a plan or insurance policy that covers OB/GYN services and that requires an enrollee to designate a PCP, provision of OB/GYN care and related services will be treated the same as authorization of the PCP. However, the plan or insurer’s terms and conditions for OB/GYN coverage still apply and the plan or insurer may require the OB/GYN to notify the patient’s PCP of treatment decisions.

Coverage of emergency services. When services are provided in an emergency services department of a hospital, emergency services must be covered:

(1) without any required prior authorization;

(2) regardless of whether or not the provider participates in the plan’s network; and

(3) nonparticipating provider services must be covered without any limitations and in the same manner, with the same cost-sharing requirements, as coverage for emergency services from a participating provider.

Effective date. This provision is effective for plan years beginning on or after Sept. 23, 2010 (six months after the date of enactment).

CCH Law, Explanation And Analysis Of Health Reform Act Available

CCH's LAW, EXPLANATION AND ANALYSIS of the Patient Protection and Affordable Care Act of 2010 provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation. CCH editorial staff, together with leading experts, provide clear and practical guidance on the many new areas of compliance in the law, so professionals can quickly understand, comply with new requirements, and plan for the future. The book is available for $149.

For more information or to order, please call 1-800-248-3248 or click here. Discounts are available for multiple copies.

Preexisting Condition Exclusion

(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law.)



So what’s included in Sec. 1201 of the Affordable Care Act, concerning the preexisting condition exclusion?



The Patient Protection and Affordable Care Act eliminates the use of a preexisting condition exclusion for plan years beginning on or after January 1, 2014. The term “preexisting condition exclusion” means, with respect to coverage, a limitation or exclusion of benefits relating to a condition based on the fact that the condition was present before the date of enrollment whether or not any medical advice, diagnosis, care, or treatment was recommended or received before that date.



Group or individual health insurance. The Affordable Care Act also clarifies the application of the preexisting condition exclusion to both group and individual insurance. Eliminating the use of a preexisting condition exclusion is the first of the standards for guaranteeing access to affordable coverage.



Effective date. Generally, this provision becomes effective for plan years beginning on or after January 1, 2014. However, the provision, as it applies to enrollees who are under 19 years of age, becomes effective for plan years beginning on or after September 23, 2010 (6 months after the date of enactment).



CCH Law, Explanation And Analysis Of Health Reform Act Available Soon



CCH's Law, Explanation and Analysis of the Patient Protection and Affordable Care Act of 2010 provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation. CCH editorial staff, together with leading experts, provide clear and practical guidance on the many new areas of compliance in the law, so professionals can quickly understand, comply with new requirements, and plan for the future. The book is available for $149.



For more information or to order, please call (800) 248-3248 or click here. Discounts are available for multiple copies.