Following Congress’ passage of historic health care reform legislation, three Harvard professors who have long been involved in health care issues, presented their views on the measure and what it bodes for the future on the Harvard Business School website.
Richard M. .J. Bohmer, contends that it will lead to further debate about managing the delivery of health care. Mr. Bohmer stated that the insurance aspects are but one concern in the overall health care problem, which also includes treatment concepts, disease management innovations, personnel restructuring, and information technology. “We need to make a distinction between debating how it will be paid for and what the ‘it’ is that will be paid for,” observed Mr. Bohmer.
Bill George regards the bill as a “momentous step” toward providing insurance coverage, but believes that there needs to be focus on the attendant issues of cost, quality, and lifestyle. Unless these other three challenges are addressed, Mr. George predicts that the U.S. will continue to have a dysfunctional system with unaffordable costs.
Regina E. Herzlinger, whom Money called the “godmother of consumer-driven health care,” believes the bill will result in spending that will damage the U.S. economy, and that its approach will lead to a government-controlled health care system. While she is encouraged by the move toward a universal health care model, she fears that the cost control mechanisms are ineffective, relying on the public health insurance marketplace or “exchanges,” which ctually involve only shifting costs, through deficits, cutbacks, and unfunded liabilities.
For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform and other developments in employee benefits, just click here.
Although one-fourth of employers anticipate that compliance with six major mandates of the Patient Protection and Affordable Care Act (P.L. 111-148), will boost their health care costs in 2011 by at least 3%, the greater proportion (41%) of employers see modest increases of 2% or less, and 30% did not know what the impact would be.These are among the findings of a recent survey by Mercer of nearly 800 employers.
In the survey, Mercer asked employers about the estimated impact of six mandates in the Affordable Care Act. The excise tax on high-cost plans (IRC Sec. 4980I, as added by Sec 9001(a) of the Affordable Care Act), which first takes effect in 2018, is of highest concern to employers—29% view it as a significant or very significant concern, another 29% see it as a “concern,” and 42% think it is not an issue or of slight concern.
The dependent coverage expansion to adult children up to age 26 (PHSA Sec. 2714, as added by Sec. 1001(5) of the Affordable Care Act) and the ban on lifetime dollar limits (PHSA Sec. 2711(a)(1), as added by Sec. 1001(5) of the Affordable Care Act), both effective in 2011, are each of significant concern to one-fifth of employers. Only 6% of survey respondents currently extend coverage to dependent children up to age 26. And although many insurers have agreed to begin to extend dependent coverage to adult children before the provisions’ effective date, for plan years beginning on or after Sept. 23, 2010, only about one-fourth (24%) of the survey respondents that don’t already cover children up to age 26 say they are likely to begin before their next renewal, which for most plans is January 2011. Large, self-insured employers are even less likely to act before they have to, Mercer reports: among respondents with 5,000 or more employees, just 16% say they are likely to implement this provision early.
To offset the potential increased cost of adding adult children to dependent coverage, half of surveyed employers would seriously consider requiring proof that adult children do not have coverage available to them through their own employers (before Jan. 1, 2014, grandfathered plans can exclude from dependent coverage adult children who have coverage available through another employer). One-fifth would seriously consider changing contribution rate tiers – for example, from just two rates for employee-only and family coverage, to four or more rates based on the number of dependents covered, shifting the additional cost to employees covering the most family members. Others (16%) likely will require higher contributions for all dependent coverage.
Another major provision of concern to employers is the requirement that they offer affordable coverage to part-time workers working an average of at least 30 hours per week during one month (IRC Sec. 4980H(c)(4)(A), as added by Act Sec. 1513(a) of the Affordable Care Act). This provision is of particular concern to retailers, 24% of them expressed a high level of concern, who use mostly part-time workers. Among the 26% of respondents that currently do not comply with the part-time worker health coverage offer, which goes into effect in 2014, one-fifth say they will strongly consider changing their workforce strategy so that fewer employees work 30 hours or more a week; 16% will strongly consider adding a lower-cost plan for these newly eligible employees rather than adding them to an existing plan for full-time employees. Few (8%) say they would pay the required penalty rather than make no or minimal changes to increase the number of eligible employees.
Automatically enrolling new hires in an employer-sponsored plan also is of significant concern for 16% of employers (FLSA Sec. 18A, as added by Sec. 1511 of the Affordable Care Act). Currently, the great majority of employers (88%) do not automatically enroll new hires into one of the employer’s plans. More than two-fifths (43%) of employers are strongly considering using the lowest cost plan as the default enrollment option (23% offer only one plan), and about one-fifth is considering imposing the maximum allowable waiting period (90 days) for eligibility.
Only 7% of respondents found of significant concern one other provision, that a plan pay for 60% of covered services to be a qualified plan in 2014 (Sec. 1301 of the Affordable Care Act).
“Average health benefit cost per employee has been rising consistently at about 6% for the past five years,” said Tracy Watts, a consultant in Mercer’s Washington, DC, office. “That seems to be employers’ threshold of pain. If compliance with health insurance reform pushes the cost increase up toward double digits, employers will be exploring ways to bring it back within their comfort zone.”
For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform and other developments in employee benefits, just click here.
Additional Tax on HSA and Archer MSA Distributions
(Note: Periodically, Health Reform Talk focuses on detailed explanations of specific provisions in the new health reform law. Click here for previous post on health reform provisions.)
So what’s included in Sec. 9004 of the Affordable Care Act, concerning the additional tax on HSA and Archer MSA distributions?
The additional tax on distributions from health savings accounts (HSAs) and Archer medical savings accounts (MSAs) not used for qualified medical expenses is increased to 20% of the amount of the distribution included in gross income.
Health savings accounts (HSAs) and Archer medical savings accounts (MSAs) provide tax-favored treatment for amounts that are contributed and used to pay the qualified medical expenses of the account beneficiary, his or her spouse, or dependent (IRC Secs. 220 and 223). Distributions are excludable from gross income if they are made for qualified medical expenses of the account beneficiary, his or her spouse or dependents. Distributions from an HSA or an MSA that are not used for qualified medical expenses are included in beneficiary's gross income and subject to an additional penalty, unless made after the beneficiary's death, or disability.
The additional tax on distributions made from HSAs not used for qualified medical expenses is increased from 10%to 20%of the amount includible in gross income. The additional tax on distributions made from Archer MSAs not used for qualified medical expenses is increased from 15 percent to 20 percent of the amount includible in gross income.
The increase in the tax imposed on nonqualified distributions from HSAs and Archer MSAs will not impact state taxation.
Effective date. The provision applies to distributions made 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. 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.
(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. 1201 of the Affordable Care Act, concerning the guaranteed availability and renewal of coverage?
Public Health Service Act (PHSA) provisions related to guaranteed issue and renewability of health insurance coverage for employers in the group market are revised and expanded to ensure availability and renewal of health insurance coverage to both employers and individuals, and to strictly limit the circumstances under which coverage may be denied or not renewed. Accordingly, health insurance issuers that offer health insurance coverage in the individual or group market in a state are required to “accept every employer and individual in the state that applies for such coverage,” except as permitted under the special rules for network plans and insurers that no longer have the financial capacity to underwrite additional coverage. Coverage enrollment may be restricted to open and special enrollment periods, and special enrollment periods must be established for COBRA qualifying events.
Guaranteed Availability Of Coverage
Subject to the following provisions regarding enrollment, and special rules for network plans and financial capacity limits, every health insurance issuer that offers health insurance coverage in the individual or group market in a state “must accept every employer and individual in the state that applies for such coverage.”
Enrollment. Insurance issuers may restrict enrollment in coverage to open or special enrollment periods, and must establish special enrollment periods for COBRA qualifying events, in accordance with regulations to be promulgated by the Department of Health and Human Services (HHS).
The HHS must promulgate regulations with respect to enrollment periods under this subsection.
Special rules for network plans. Where a health insurance issuer offers health insurance coverage in the group and individual market 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 market within that service area for a period of 180 days after the date that coverage is denied.
Financial capacity limits. A health insurance issuer may deny health insurance coverage in the group or individual market if the issuer has demonstrated, if required, to the applicable state authority that it:
(1) lacks the financial reserves necessary to underwrite additional coverage; and
(2) is applying this provision uniformly to all individuals and employers in the individual or group market in the state consistent with applicable state law and without regard to the claims experience of those individuals, employers and their employees (and their dependents), or any health status-related factor relating to those individuals, employees and dependents.
A health insurance issuer, upon denying health insurance coverage in connection with group health plans in a state in accord with this provision, may not offer coverage in connection with group health plans in the individual or group market in the state for a period of 180 days after the date coverage is denied, or until the issuer has demonstrated to the applicable state authority, if required by state law, that the issuer has enough financial reserves to underwrite additional coverage, whichever date is later. An applicable state authority may provide that this provision be applied on a service-area-specific basis.
Guaranteed Renewability Of Coverage
A health insurance issuer that offers health insurance coverage in the individual or group market must renew or continue in force such coverage at the option of the plan sponsor or individual, as applicable, subject to the following general exceptions and provisions for uniform termination of coverage, uniform modification of coverage, and coverage offered only through associations.
General exceptions. An issuer may not renew, or may discontinue coverage offered in connection with health insurance coverage offered in the group or individual market only based upon one or more of one of the following:
(1) the individual or plan sponsor has failed to pay premiums or contributions under the terms of the coverage or the issuer has not received timely premium payments;
(2) the individual or plan sponsor has “performed an act or practice that constitutes fraud,” or made an intentional misrepresentation of material fact under the terms of coverage;
(3) as to a group health plan, the plan sponsor has failed to comply with a material plan provision that relates to employer contribution or group participation rules, under applicable state law;
(4) the issuer ceases to offer coverage in the market in accordance with the rules requiring uniform termination of coverage, and applicable state law;
(5) when an issuer that offers health insurance coverage in the market through a network plan no longer has any enrollee in connection with the plan who lives, resides, or works in the issuer’s service area (or in the area in which the issuer is authorized to do business), and in the case of the small group market, the issuer would deny enrollment with regard to such plan under the special rules for network plans; or
(6) when the health insurance coverage is made available in the small or large group market only through one or more bona fide associations, the membership of an employer in the association (based on which the coverage is provided), ceases, but only if the coverage is terminated uniformly without regard to any health status-related factor related to any covered individual.
Uniform termination of coverage. When an issuer decides to discontinue offering a particular type of group or individual health insurance coverage, it may be discontinued by the issuer in accordance with applicable state law in such market, but only if:
notice of discontinuation is given to each individual or plan sponsor provided that type of coverage in such market (and covered participants and beneficiaries) at least 90 days prior to the date of discontinuation of coverage;
each individual or plan sponsor provided that type of coverage in such market is given the option to purchase all (or in the case of the large group market, any) other health insurance coverage currently being offered by the issuer in that market; and
in exercising the option to discontinue the particular type of coverage and in offering to plan individuals and plan sponsors the option to purchase other coverage offered by the issuer in such market, the issuer acts uniformly without regard to the claims experience of those individuals or plan sponsors, or any health status-related factor pertaining to any covered participants or beneficiaries, or new participants or beneficiaries who may become eligible for such coverage.
If a health insurance issuer elects to discontinue offering all health insurance coverage in the individual or group market, or all markets, in a state, health insurance coverage may be discontinued by the issuer in accordance with applicable state law, only if:
(1) the issuer provides notice to the applicable state authority and to each individual or plan sponsor (and covered participants and beneficiaries) of such discontinuation at least 180 days prior to the date of the discontinuation of coverage; and
(2) all health insurance issued or delivered for issuance in such market(s) in the state are discontinued and such health insurance coverage in such market(s) is not renewed.
When health insurance coverage is discontinued in a market, the issuer may not provide for issuance of any health insurance coverage in the state and market involved for a period of five years beginning on the date of discontinuation of the last health insurance coverage not so renewed.
Uniform modification of coverage. At the time of coverage renewal, a health insurance issuer may modify the health insurance coverage for a product offered to a group plan:
in the large group market, or
in the case of the small group market, only if, as to coverage in such market, other than only through one or more bona fide associations, the modification is consistent with state law and effective on a uniform basis among group health plans with that product.
In the case of health insurance coverage made available by an issuer in the small or large group market to employers only through one or more associations, any reference in this section to “plan sponsor” is deemed, with respect to coverage provided to an employer member of the association, to include a reference to such employer.
Effective date. The provision is effective for plan years beginning on or after January 1, 2014.
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.
(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. 1002 of the Affordable Care Act, concerning health insurance consumer information?
Beginning with fiscal year 2010, the Department of Health and Human Services (HHS) must award grants to eligible states (or to Exchanges operating within a state) to enable the state to establish (or expand) either (1) an office of health insurance consumer assistance or (2) a health insurance ombudsman program (“health insurance consumer program”), in order to provide consumers with assistance in navigating health insurance requirements under federal and state law.
Eligibility requirements. For states to be eligible to receive grants, the health insurance consumer programs must, either directly or in coordination with state health insurance regulators and consumer assistance organizations, respond to consumer inquiries and complaints regarding health insurance requirements under federal and state law. In addition, the state must comply with such additional criteria as the HHS may establish.
Duties of the health insurance consumer programs. The health insurance consumer programs must:
(1) help consumers file health insurance complaints and appeals, including the internal appeals process of a group health plan or health insurance issuer, and provide information about the external appeals process;
(2) collect, track, and quantify problems and inquiries encountered by consumers;
(3) educate consumers on their rights and responsibilities;
(4) assist consumers with enrollment in a group health plan or health insurance coverage; and
(5) resolve consumers’ problems with obtaining premium tax credits under IRC Sec. 36B.
Funding. Funds to be appropriated to the HHS to finance this provision are $30 million for the first fiscal year when the section applies and as needed for the program’s operation in subsequent years.
Data collection. The health insurance consumer programs must collect and report data to the HHS on the types of problems encountered by consumers. The HHS must use the data to identify areas where increased enforcement is necessary, and also must share the information with state insurance regulators and the Secretaries of Labor and of the Treasury.
Effective date. The provision takes effect 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.
(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(5) of the Affordable Care Act, concerning additional claims appeals procedures?
A group health plan and a health insurer must implement an effective process for appeals of coverage determinations and claims. This appeals process must include, at a minimum, the following:
an established internal claims appeal process;
a notice to participants, in a “culturally and linguistically appropriate manner,” of available internal and external appeals processes, including the availability of assistance with the appeals processes; and
a provision allowing an enrollee to review his or her file, to present evidence and testimony as part of the appeals process, and to receive continued coverage during the appeals process.
The meaning of “culturally and linguistically appropriate manner” will have to be defined in regulations.
Use established processes. Until the Department of Labor issues standards for an appeals process, plans must provide claims and appeals processes required in existing DOL regulations.
Health insurers offering individual coverage and any issuers not subject to existing DOL claims appeals rules may initially use claims and appeals procedures under any other applicable law, such as individual state insurance requirements. Insurers are required to update these procedures when the HHS issues new standards.
External review. Group health plans and insurers have two options regarding the implementation of external reviews:
(1)Plans and insurers must comply with State external review requirements that are binding and at a minimum include the consumer protections in the Uniform External Review Model Act from the National Association of Insurance Commissioners; or
(2)If state requirements do not meet the above minimums or if the plan is self-funded and not subject to state insurance regulations, then the plan must implement an external review process that is similar to that in the Uniform External Review Model Act and that meets standards established by the Department of Health and Human Services.
According to America's Health Insurance Plans (AHIP), all the states and the District of Columbia have a required external claims review process, except Alabama, Idaho, Mississippi, Nebraska, South Dakota, and Wyoming (http://www.healthclaimappeals.org/state-appeal-process.html).
The Secretary of HHS has the authority to determine whether the external review process of a plan or insurer, that is in operation as of the date of enactment is in compliance.
Effective date. The provision is effective for plan years beginning on or after 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.
(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. 9005 of the Affordable Care Act, concerning the limitations placed on health flexible spending arrangements (FSAs) offered in cafeteria plans?
Effective for tax years beginning after Dec. 31, 2012, a health FSA will not be a qualified benefit under a cafeteria plan unless the plan provides for a $2,500 maximum annual salary reduction contribution to the FSA. If the plan does not specifically prohibit salary reductions in excess of $2,500, the benefit under the health FSA will not be qualified. Under such circumstances, an employee will be subject to tax on distributions from the health FSA, thereby eliminating any of the tax benefits of health FSA contributions, including those under $2500.
According to John Garner, a Principal with Garner Consulting of Pasadena, California and author of the Health Insurance Answer Book, there is a silver lining to the new limitation in that it will protect employees from large forfeitures and protect employers from employees who game the system by signing up for large amounts, submitting large claims early in the year and then terminating employment, leaving the employer stuck with the bill.
State Tax Consequences. The limitation of FSA contributions to $2,500 for tax years after 2012 will not impact states that conform to the federal exclusion by the time the provision takes effect. Because most states start their tax calculations with federal adjustable gross income, there should be no impact on those states. States that do not conform may allow an exclusion from taxation for amounts above the federal limitation as well.
Effective for tax years beginning after December 31, 2013, the $2,500 limitation is adjusted annually for inflation. Any inflation adjustment that is not a multiple of $50 will be rounded down to the next lowest multiple of $50.
Effective date. The amendments apply to tax years beginning after Dec. 31, 2012.
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.
(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. 1343 of the Affordable Care Act, concerning risk adjustment in the individual and small group market?
The Patient Protection and Affordable Care Act requires states to assess a charge on health plans and health issuers in the event that the actuarial risk of the enrollees in such plans or coverage for a year is less than the average actuarial risk of all enrollees in all plans or coverage in the state for the year that are not self-insured group plans.
Alternatively, states would be required to provide a payment to health plans and health insurance issuers if the actuarial risk of the enrollees in such plans or coverage for the year is greater than the average actuarial risk of all enrollees of such plans and coverage in the state for the year that are not self-insured group health plans.
Risk adjustment limited to plans in individual and small group markets. The assessment on low actuarial risk plans and the payments to high actuarial risk plans is limited to plans in the individual and small group markets. However, the risk adjustment will not apply to a grandfathered health plan or to the issuer of a grandfathered health plan with respect to that plan.
Risk adjustment criteria. The criteria and methods to be used in implementing risk adjustment are to be developed by the Department of Health and Human Services in consultation with the states. The methods and criteria may be similar to those utilized under the Social Security Act, governing the Medicare Choice Program and the Prescription Drug Benefit Program.
Effective date. No specific effective date is provided by the Act. The provision is, therefore, considered 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.
(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(b) of the Patient Protection and Affordable Care Act, concerning new reporting standards for health plans?
Within 12 months after enactment of the Patient Protection and Affordable Care Act, the Secretary of Health and Human Services has been ordered to develop standards that can be used by group health plans and health insurance issuers offering group or individual coverage in providing benefits summaries and coverage explanations that accurately explain the benefits and coverage provided under the plan. These summaries and explanations are to be provided to plan applicants and enrollees, as well as to policy or certificate holders.
Though the new standards would need to be developed within 12 months after the date of enactment, plans would have to start using these new standards within 24 months after the date of enactment.
Under the Act, the HHS Secretary must consult with the National Association of Insurance Commissioners (NAIC) and with a working group including consumer advocacy organizations, patient advocates, and others, as well as other qualified individuals, in developing the standards.
Language And Appearance. The Act imposes a 4-page length limit on the new summary of benefits and coverage. Also, the new document is to be presented in a “uniform format” that does not include print smaller than 12-point fonts.
According to Edward Fensholt, , and Mark Holloway, , senior vice presidents and directors of compliance services at Lockton Benefit Group, the four-page limit of the new summaries might be problematic. It has become common for ERISA plan administrators to simply issue the plan document itself to participants, and allow the document to double as the summary plan description (SPD), because it is difficult to summarize detailed information about covered services, eligibility, payment rates, exclusions and other matters. Also, courts have sometimes resolved perceived variations, between a summary and the actual plan document, in favor of the insured, even where the summary expressly says the actual plan document controls.
ERISA does not contain rules governing the length of SPDs.
In terms of language, the new summary of benefits and coverage is to be presented in a “culturally and linguistically appropriate manner.” The document must use terminology that is understandable by the average plan enrollee.
Presumably, all of these details will be clarified in regulations or other guidance.
Contents of new summaries. The summary of benefits and coverage must include the following:
uniform definitions of standard insurance and medical terms (consistent with definitions to be developed by the HHS Secretary) so that health plan consumers can compare coverage and understand the coverage terms and any exceptions to the coverage terms;
a coverage description, including cost sharing for (1) each of the categories of essential health benefits and (2) other benefits identified by the HHS Secretary;
coverage exceptions, reductions, and limitations;
cost-sharing provisions, including descriptions of deductibles, coinsurance, and co-pays;
renewability and coverage continuation provisions;
a “coverage facts label” that includes examples illustrating common benefit scenarios, such as pregnancy or chronic medical conditions, as well as any related cost-sharing (all based on recognized clinical practice guidelines);
a statement as to whether the plan (1) provides minimum essential coverage and (2) ensures that its share of the total allowed benefit cost under the plan is no less than 60% of those costs;
a statement that the outline is a policy summary and that consumers should consult the plan’s coverage document to determine the plan’s governing contractual provisions; and
a contact number for additional questions and an Internet website where actual plan policies and certificates can be reviewed and obtained by consumers.
Timing and compliance issues. Within 24 months after the date of enactment, entities covered by the standards, such as group health plans, must provide, before any enrollment restrictions, a summary of benefits and coverage explanation under these new rules. The summary must be provided to the following:
(1)an applicant at the time of application;
(2)an enrollee before enrollment or re-enrollment; and
(3)a policyholder or certificate holder at the time of policy issuance or certificate delivery.
Entities required to provide the new summary of benefits and coverage can use either paper or provide the information inelectronic form
Covered entities. The entities required to provide the new summary of benefits and coverage include the following:
health insurance issuers, including group health plans that are not self-insured, offering coverage within the U.S.; or
for self-insured group health plans, the plan sponsor or designated plan administrator (as defined in ERISA Sec. 3(16)).
Modification notices. Whenever a group health plan or health insurance issuer makes any material modification to plan terms or coverage under ERISA Sec. 102 that is not reflected in the most recent summary of benefits and coverage, the plan or issuer must provide notice of the modification to enrollees. This notice must be provided at least 60 days before the effective date of the modification.
Preemption issues. According to the Act, the new standards for the summary of benefits and coverage preempt any state-provided standards regarding benefit and coverage summaries that provide less information to consumers than what is required to be provided by this section.
According to Messrs. Fensholt and Holloway, one potentially disturbing aspect of the Act, for insurers, is a statement that state laws governing the content of summaries might still apply, to the extent they require more information than does the Act. It is unclear how the “four-page maximum” requirement would continue to apply where a state law requires substantially more information be included in a summary. Perhaps, as appears to be the case with SPDs, the new summary will be provided in addition to the state-required document.
Penalties for failure to provide summary. A group health plan or health insurance issuer covered by the summary of benefits and coverage rules faces penalties for willfully failing to provide required information. Under the Act, a fine of up to $1,000 can be imposed for each failure. Note that a failure to provide a summary of benefits and coverage is considered a separate offense for each enrollee, subject to an additional fine.
Standard definitions. Via regulations, standards for the definitions of terms used in health insurance coverage will be developed, including insurance-related terms and medical terms. Insurance-related terms that are to be defined include such terms as premium, deductible, co-insurance, and co-payments, among others. Medical terms that will need to be defined include such terms as hospitalization, prescription drug coverage, and durable medical equipment.
For both insurance-related terms and medical terms, the HHS Secretary has the authority to define other terms considered important to consumers for purposes of plan comparison and understanding.
Periodic review and updates. Standards developed by the HHS must be reviewed and updated periodically by the HHS. The Act does not specify what “periodically” means.
Application to grandfathered health plans. This provision is applicable to grandfathered health plan.
(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. 1102 of the Affordable Care Act, concerning the reinsurance for early retirees?
The Patient Protection and Affordable Care Act establishes a temporary reinsurance program that begins 90 days after enactment and ends on January 1, 2014. The temporary reinsurance program reimburses part of the claims cost for participating employment-based plans that provide health insurance coverage for early retirees, eligible spouses, surviving spouses, and dependents of such retirees.
Under this provision, an employment-based plan is defined as a group benefits plan providing health benefits that is maintained by one or more current or former employers (including state and local government plans), employee organizations, voluntary employees’ beneficiary associations (VEBAs), a committee or board of individuals appointed to administer the plan, or a multiemployer plan. Health benefits are defined as medical, surgical, hospital, prescription drug, and such other benefits as shall be determined by the HHS. The plan can be self-funded or insured.
An “early retiree” is an individual who is age 55 or older, but who is not yet eligible for Medicare. This individual must not be an active employee of the employer maintaining the plan, or any employer that makes a substantial contribution to the fund for such plan.
Certification. To participate in this reinsurance program, the employment-based plan must submit an application for certification to the HHS. To be certified, the plan must implement programs and procedures to generate cost-savings with respect to participants with chronic and high-cost conditions and provide documentation of the actual cost of medical claims involved.
Payments from program. Upon submission of a valid claim, the HHS will reimburse a plan for 80% of that portion of the costs attributable to such claims that are $15,000 or more but are less than $90,000. These amounts are to be adjusted each fiscal year based on the percentage increase in the Medical Care Component of the Consumer Price Index for all urban consumers (rounded to the nearest multiple of $1,000) for the year involved.
Payments to the plan will be used to lower costs for the plan. They cannot be used as general revenues for the sponsoring entities involved. The payments may be used to reduce the premium costs for sponsoring entities, or can be used to reduce premium contributions, copayments, deductibles, coinsurance, or other out-of-pocket costs for plan participants. The payments are not included in the gross income of the sponsoring entities (Act Secs. 1102(c)(4) and (5) of the Affordable Care Act).
Submission of claims. Claims for reimbursement will be submitted to the HHS. The claim must contain documentation of the actual costs of the items and services involved with the claim that were paid by the participating employment-based plan. In determining the amount of the claim, the plan must take into account any negotiated price concessions (such as discounts, direct or indirect subsidies, rebates, and direct or indirect remunerations) obtained by such plan with respect to such health benefit. The amount of the claim includes any deductibles, copayments, or coinsurance paid by the early retiree, retiree’s spouse, surviving spouse, or dependent.
The HHS must establish an appeals process so that participating employment-based plans may appeal a determination by the HHS with respect to the claims submitted. The HHS also must establish procedures to protect against fraud, waste, and abuse under the program. The law specifies that the HHS shall conduct annual audits of claims submitted by participating employment-based plans to ensure that such plans are in compliance with the requirements of this section.
The law appropriates $5 billion to carry out the provisions of this section, without fiscal year limitation. The HHS has the authority to stop taking applications for participation in the program based on the availability of the $5 billion in funding.
Effective date. This provision is effective on the date of enactment (March 23, 2010).
Investor Alert: Target Date Retirement Funds
Note: on May 5, the Department of Health and Human Services (HHS) issued an interim final rule regarding the Early Retiree Reinsurance Program. Review that interim rule here.
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.
(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. 1511 of the Affordable Care Act, concerning the automatic enrollment for employees of large employers?
Employers with more than 200 full-time employees who offer enrollment in one or more health benefits plans are required to automatically enroll new employees in one of the plans offered.
John Garner, a Principal with Garner Consulting of Pasadena, California and author of the Health Insurance Answer Book, notes that the automatic enrollment requirement for large employers (over 200 employees) will undoubtedly increase enrollment in employer-sponsored plans, much as automatic enrollment has done for 401(k) plans that have elected it. Even so, the Congressional Budget Office estimates that overall enrollment in employer-sponsored plans will decline by about 3 million people. This is because the impact of the individual mandate and the automatic enrollment provision will be more than offset by small employers dropping coverage and lower income employees opting for coverage in exchanges where they can receive tax credits.
The Affordable Care Act specifies that new full-time employees will automatically be enrolled in one of the plans (subject to any waiting period authorized by law) and current employees will continue to be enrolled. The automatic enrollment program must include adequate notice and the opportunity for an employee to opt out of any coverage the individual or employee was automatically enrolled in. This federal law does not supersede any state law which establishes, implements, or continues in effect any standard or requirement relating to employers in connection with payroll unless the state law would prevent an employer from instituting the automatic enrollment program.
Notice. Employers are required to provide an employee, at the time of hiring (or, with respect to current employees, not later than March 1, 2013), written notice—
(1) informing the employee of the existence of an Exchange, including a description of the services provided by such Exchange, and the manner in which the employee may contact the Exchange to request assistance;
(2) if the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60%, that the employee may be eligible for a premium tax credit and a cost sharing reduction under the Affordable Care Act, if the employee purchases a qualified health plan through the Exchange; and
(3) if the employee purchases a qualified health plan through the Exchange and the employer does not offer a free choice voucher, that the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for federal income tax purposes.
Because of the new requirement that applies to employers that pay less than 60% of the premium to provide expanded notices to employees, 60% may become the new norm, notes Garner. If an employer has been paying 80% of the employee premium and 50% of the family premium, they may switch to 60% of both in order to avoid providing more than the minimum notice.
Regulations. The Secretary of Labor must issue regulations with respect to both the automatic enrollment provision and the notice provision.
Effective date. No effective date is provided for the automatic enrollment provision. The provision is, therefore, considered effective on the date of enactment (March 23, 2010). The notice provision will take effect with respect to employers in a State beginning on March 1, 2013.
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.
