Nearly two-thirds of Americans have access to both health and retirement benefits

Approximately 64% of civilian employees in the U.S. had access to both an employer-sponsored health plan and an employer-sponsored retirement plan in 2009, according to the Bureau of Labor Statistics. The July 2010 Program Perspectives on Combined Benefit Plans also found that another 15% of employees had access to either a health care plan or retirement plan, but not both. The remaining 20% of civilian workers did not have access to either a health care or a retirement plan.

The results in the BLS report confirm commonly-held perceptions about the demographics of access to employer-provided benefits in America (presumably the Affordable Care Act will change this picture on the health care side).

Full-time workers have better access to benefits than part-time workers.  Seventy-seven percent of full-time civilian workers had access to both retirement and health care benefits, while only 20% of part-time workers did. In addition, 56% of part-time workers did not have access to either health or retirement benefits, while only 9% of full-time workers lacked access to either benefit.

Union workers have better access than non-union workers. Approximately 89% of union workers had access to both retirement and health care benefits, while 59% of nonunion workers had access to both.

Larger employers offer more benefit plans than smaller employers. BLS found that 86% of employees in establishments with 500 or more workers had access to both retirement and health care plans, while about 40% of workers in establishments with 1 to 49 workers had similar access.

These statistics are from BLS's National Compensation Survey: Employee Benefits in the United States, March 2009. For more information, visit http://www.bls.gov/ebs/#bulletins.

Wellness programs: employers like what they see

Employers generally believe that health and productivity management programs have a positive impact on their health-related goals, according to recent research from the Integrated Benefits Institute. The study, The Impact of Employer Health and Productivity Management Practices, found that employers believe that wellness programs reduce sick day/disability absences (44%), medical/pharmacy costs (43%), health-related lost productivity (36%), and presenteeism (32%).

IBI found that the three health and productivity management programs rated highest in overall effectiveness were early disability reporting (31.6% said the program "significantly improved" outcomes), transitional return to work (40.4%), and on-site providers (29.7%). While these were deemed the most effective at reaching corporate goals, they are used by fewer than half of responding employers.

In contrast, the two most prevalent wellness programs--employee assistance programs and smoking cessation programs--are used by more than three-fourths of employers, but are deemed to have a relatively low impact: 3.2% and 1.8%, respectively, said the program "significantly improved" outcomes.

The survey contained responses from 450 employers. For more information, visit http://ibiweb.org/.

Guidance on ACA market reforms: where do we stand?

So, the deadline for compliance with several of the market reforms contained in the Affordable Care Act--plan years beginning on or after September 23, 2010--is fast approaching. What help have employers and TPAs received from the tri-agency team (IRS, HHS, and DOL) charged with implementing the Act?

Well, you can't argue that our friendly federal regulators haven't been busy this summer. They've issued guidance--mostly in the form of interim final regulations--on the following market reforms, all contained in new sections in the Public Health Service Act (incorporated by reference into ERISA and IRC):

--PHSA Sec. 2704: prohibition of preexisting condition exclusions--rules relating to enrollees under age 19 (remember, for adults this rule won't kick in until plan years beginning on or after January 1, 2014);
--PHSA Sec. 2711: prohibits group health plans from establishing lifetime and annual limits on the dollar value of benefits (with restricted annual limits permitted until 2014);
--PHSA Sec. 2712: prohibits plans from retroactive rescission of coverage (except in cases of fraud or intentional misrepresentation);
--PHSA Sec. 2713: Requires plans to cover certain preventive services, without any cost sharing;
--PHSA Sec. 2714: Requires plans offering coverage of dependents to make that coverage available to adult children until age 26;
--PHSA Sec. 2719: Requires plans to provide an "effective" internal appeals process for coverage determinations and claims;
--PHSA Sec. 2719A: Requires plans to meet certain "patient protection" standards with respect to the selection of a participating primary care provider and for the use of out-of-network emergency services.

Go here for one-stop access to all these regulations.

No guidance has yet been issued on the following new PHSA provisions, also effective for plan years on or after September 23:

--PHSA Sec. 2715: Requires federal government to develop uniform standards for plans' benefit summaries and explanations of coverage;
--PHSA Sec. 2716: Prohibits fully-insured plans from discriminating in favor of highly-compensated individuals;
--PHSA Sec. 2717: Requires federal government to develop guidelines for health insurance issuers to report on quality of care initiatives and programs; and
--PHSA Sec. 2718: Sets minimum annual standards for medical loss ratio percentages of health insurers (note that the agencies requested comments on this provision in April).

Guidelines Issued For Appeals And External Claims Review In 2010 Health Reform

Six new requirements have been added for internal claims procedures and appeals, including a 24-hour notice requirement for benefit determinations, according to new interim final rules issued jointly by the Internal Revenue Service, the Department of Labor’s Employee Benefits Security Administration (EBSA), and the Department of Health and Human Services’ Office of Consumer Information and Insurance Oversight (OCIIO).

The rules implement the internal claims appeals and external review requirements in Public Health Service Act Sec. 2719, as added by the Patient Protection and Affordable Care Act (P.L. 111-148). The rules were published in the July 23 Federal Register.

Internal Claims Appeal

The interim final regulations set forth six new requirements in addition to those in the existing DOL claims procedure regulation to implement an effective internal claims and appeals process.

Adverse Benefit Determination. First, the definition of an adverse benefit determination is broader than the definition in the DOL claims procedure regulation, in that an adverse benefit determination for purposes of these interim final regulations also includes a rescission of coverage.

An adverse benefit determination eligible for internal claims and appeals processes under these regulations includes a denial of, reduction of, termination of, or failure to provide or make a payment for a benefit, including the following:

• A determination of an individual’s eligibility to participate in a plan or health insurance coverage;
• A determination that a benefit is not a covered benefit;
• The imposition of a preexisting condition exclusion, source-of-injury exclusion, network exclusion, or other limitation on otherwise covered benefits; or
• A determination that a benefit is experimental, investigational, or not medically necessary or appropriate.

24-Hour Notice. Second, for urgent care claims (as defined in existing DOL claims procedure regulations), the regulations provide that a plan must notify a claimant of a benefit determination (whether adverse or not) as soon as possible, but not later than 24 hours after the receipt of the claim by the plan or health insurance coverage, unless the claimant fails to provide sufficient information to determine whether benefits are covered or payable.

The current requirements of the DOL claims procedure regulation generally requires a determination not later than 72 hours after receipt of the claim by a group health plan for urgent care claims.

Review. Third, the regulations provide additional criteria to ensure that a claimant receives a full and fair review. In addition to complying with the requirements of the existing DOL claims procedure regulation, a plan must provide the claimant, free of charge, with any new or additional evidence considered by the plan in connection with the claim. Such evidence must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided to give the claimant a reasonable opportunity to respond. Also, before the plan can issue an adverse benefit determination based on a new or additional rationale, the claimant must be provided, free of charge, with the rationale. The rationale also must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required.

Conflict Of Interest. Fourth, new criteria are provided with respect to avoiding conflicts of interest. The plan or issuer must ensure that all claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. Thus, decisions regarding hiring, compensation, termination, promotion, or other similar matters must not be made based upon the likelihood that the individual will support a denial of benefits. For example, a plan or issuer cannot provide bonuses based on the number of denials made by a claims adjudicator. Similarly, a plan or issuer cannot contract with a medical expert based on the expert’s reputation for outcomes in contested cases, rather than based on the expert’s professional qualifications.

“Culturally Appropriate.” Fifth, the statute and the regulations require a plan to provide a notice to enrollees “in a culturally and linguistically appropriate manner.” This provision applies to internal and external claims appeals processes. Plans and issuers are considered to provide relevant notices in a culturally and linguistically appropriate manner if notices are provided in a non-English language based on thresholds of the number of people who are literate in the same non-English language.

In the group market, the threshold differs depending on the number of participants in the plan. For a plan that covers fewer than 100 participants, the threshold is 25% of participants being literate only in the same non-English language. For a plan that covers 100 or more participants at the beginning of a plan year, the threshold is the lesser of 500 participants, or 10% of all plan participants.

In addition, a plan must ensure that any notice of adverse benefit determination or final internal adverse benefit determination includes information sufficient to identify the claim involved. This includes the date of service, the health care provider, and the claim amount (if applicable), as well as the diagnosis code, the treatment code, and the corresponding meanings of these codes.

Additionally, the plan or issuer must provide a description of available internal appeals and external review processes, including information regarding how to initiate an appeal. Finally, the plan or issuer must disclose the availability of, and contact information for, any applicable office of health insurance consumer assistance or ombudsman to assist enrollees with the internal claims and appeals and external review processes. Model notices that can be used to satisfy all the notice requirements under these interim final regulations will be made available in the future at http://www.dol.gov/ebsa and http://www.hhs.gov/ociio/.

Failure To Comply. Sixth, if a plan fails to strictly adhere to all the requirements of the internal claims and appeals process, and the claimant “is deemed to have exhausted the internal claims and appeals process, regardless of whether the plan or issuer asserts that it substantially complied with these requirements or that any error it committed was de minimis.” Upon such a such a failure, the claimant may initiate an external review and pursue any available remedies under applicable law, such as judicial review.

External Review

The statute and the regulations provide that plans must comply with either a state external review process or the federal external review process. The regulations provide a basis for determining when plans must comply with a state external review process and when they must comply with the federal external review process.

For health insurance coverage, if a state external review process includes, at a minimum, the consumer protections in the NAIC Uniform Model Act in place on July 23, 2010, then the issuer must comply with the applicable state external review process and not with the federal external review process. In such a case, to the extent that benefits under a group health plan are provided through health insurance coverage, the issuer is required to satisfy the obligation to provide an external review process, so the plan itself is not required to comply with either the state external review process or the federal external review process. According to the preamble to the regulations, “The Departments encourage states to establish external review processes that meet the minimum consumer protections of the NAIC Uniform Model Act. The Departments prefer having states take the lead role in regulating health insurance issuers, with federal enforcement only as a fallback measure.”

These interim final regulations do not preclude a state external review process from applying to and being binding on a self-insured group health plan under some circumstances.

While the preemption provisions of ERISA ordinarily would prevent a state external review process from applying directly to an ERISA plan, ERISA preemption does not prevent a state external review process from applying to some self-insured plans, such as nonfederal governmental plans and church plans not covered by ERISA preemption, and multiple employer welfare arrangements, which can be subject to both ERISA and state insurance laws. A state external review process could apply to such plans if the process includes, at a minimum, the consumer protections in the NAIC Uniform Model Act.

Any plan not subject to a state external review process must comply with the federal external review process.

These regulations set forth the standards that would apply to claimants, plans, and issuers under this federal external review process, and the substantive standards that would be applied under this process, which are similar to a state external review process. They also provide that the federal external review process, like the state external review process, will provide for expedited external review and additional consumer protections with respect to external review for claims involving experimental or investigational treatment.

These requirements do not apply to grandfathered health plans. How non-grandfathered self-insured group health plans may comply or be brought into compliance with the requirements of the new federal external review process will be addressed in future “sub-regulatory guidance.”

State Minimums

For a state external review to apply instead of the federal process, the state external review process must include the following elements from the NAIC Uniform Model Act:

• Provide for the external review of adverse benefit determinations that are based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit.
• Require issuers to provide effective written notice to claimants of their rights.
• Make exhaustion of internal review unnecessary if: the issuer has waived the exhaustion requirement, the claimant has exhausted the internal claims and appeals process under applicable law, or the claimant has applied for expedited external review.
• Provide that the issuer must pay the cost of an independent review organization (IRO) for conducting the external review.
• Not impose a restriction on the minimum dollar amount of a claim for it to be eligible for external review (for example, a $500 minimum claims threshold).
• Allow at least four months after the receipt of a notice of an adverse benefit determination or final internal adverse benefit determination for a request for an external review to be filed.
• Provide that an independent review organization will be assigned on a random basis or another method of assignment that assures the independence and impartiality of the assignment process.
• Provide for maintenance of a list of approved independent review organizations qualified to conduct the review based on the nature of the health care service that is the subject of the review.
• Provide that any approved IRO has no conflicts of interest that will influence its independence.
• Allow the claimant to submit to the IRO in writing additional information that the IRO must consider when conducting the external review and require that the claimant is notified of such right to do so.
• Provide that the decision is binding on the plan or issuer, as well as the claimant, except to the extent that other remedies are available under state or federal law.
• Provide that, for standard external review, within no more than 45 days after the receipt of the request for external review by the IRO, the IRO must provide written notice to the issuer and the claimant of its decision to uphold or reverse the adverse benefit determination.
• Provide for an expedited external review in certain circumstances and, in such cases, the state process must provide notice of the decision as expeditiously as possible, but not later than 72 hours after the receipt of the request.
• Require that issuers include a description of the external review process in the summary plan description, policy, certificate, membership booklet, outline of coverage, or other evidence of coverage it provides to claimants..
• Follow procedures for external review of adverse benefit determinations involving experimental or investigational treatment, substantially similar to what is set forth in the NAIC Uniform Model Act.

The interim final regulations are effective Sept. 21, 2010. However, the rules generally apply to group health plans and group health insurance issuers for plan years beginning on or after Sept. 23, 2010.

Note: If final rules are not issued within three years, the IRS version of these interim regulations expires (IRC Sec. 7805(e)). The DOL and OCIIO versions have no expiration date.

Comments on the interim rules, which must be received by Sept. 23, 2010, may be submitted through the federal eRulemaking Portal at http://www.regulations.gov. Comments to EBSA should be identified by RIN 1210- AB45; comments to HHS should refer to file code OCIIO-9993-IFC; and comments to the IRS should be identified by REG-125592-10.

For more information, contact the following: Amy Turner or Beth Baum, EBSA, (202) 693-8335; Karen Levin, IRS, (202) 622-6080; or Jim Mayhew, OCIIO, (410) 786-1565.

For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.

With Dependent Eligibility Expansion Looming, Plan Sponsors Should Take Action

In preparation for the January 1, 2011 expansion of health care coverage to children up to age 26, Mercer is urging plan sponsors to review their current health plan for cost-saving opportunities. The influx of newly eligible dependents will on average increase total health care costs from 0.25% to 2%, Mercer estimates.

Because of this anticipated increase in the cost of providing coverage, Mercer believes it is important for plan sponsors to begin 2011 from the lowest cost base possible. By conducting a dependent eligibility audit before the end of the year, for example, plan sponsors may not only reduce their costs in the short term, but also identify data trends and issues for coming plan years that can be better managed and communicated to all plan stakeholders.

“We believe that, even without dependent eligibility expansion, dependent audits just make good business sense,” explained Rich VanThournout, Health and Benefits Business Leader for Mercer’s U.S. Outsourcing business. “Not only do they almost always lower total plan costs, they also give plan sponsors some much needed clarity as to the demographics of their participant community, which empowers both sound cost forecasts and strategic plan design.”

Prior to the passage of health care reform, Mercer conservatively estimated that 3% to 8% of covered family members (spouses and dependents) could not produce valid verification of eligibility during an audit. Although this figure may decrease slightly with expanded dependent eligibility, ineligibles can still translate into a significant unnecessary expense to employers, who pay an average of $2,100* annually to cover a single dependent, according to an estimate based on data from Mercer’s National Survey of Employer-Sponsored Health Plans.

“With the recent economic volatility and difficult business environment, we have already seen a marked increase in clients conducting dependent eligibility audits,” said Dan Priga, National Business Leader of Mercer's Performance Audit Group. “If costs do in fact increase in the ranges we estimate, this will further stress the budgets of plan sponsors. Our message to plan sponsors is this—find every dollar you can now to help minimize the likely cost spike that is just around the corner.”

* Employers should consider their own cost per dependent when calculating their potential savings.

For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.

San Francisco Employer Mandate Shows Potential Effect Of National Reform

Under the Patient Protection and Affordable Care Act, in 2014, certain employers will be assessed a fee for not offering health care coverage to employees. Employers with more than 50 employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit will be taxed $2,000 per full-time employee (excluding the first 30 employees from the assessment). Employers with more than 50 employees that offer coverage but have at least one full-time employee receiving a premium tax credit, will pay the lesser of $3,000 for each employee receiving a premium credit or $750 for each full time employee. Employers with 50 or fewer employees are exempt from penalties.

If the experience of San Francisco is any guide, this employer mandate will increase the number of individuals with access to health care and receive support for a public health care option, according to the National Bureau of Economic Research (NBER).

In 2006, San Francisco became the first city to enact a pay-or-play employer minimum health spending mandate. The city also created Healthy San Francisco, a “public option” to allow affordable, universal access to care. The San Francisco Health Care Security Ordinance (HCSO) went into effect on Jan. 9, 2008, for employers with at least 50 employees, and on April 1, 2008, for employers with 20 to 49 employees. For-profit employers with fewer than 20 employees and non-profit employers with fewer than 50 employees were exempt from the minimum funding requirement. Employers can meet the HCSO requirement several ways, including providing insurance, reimbursing individuals directly for their health care expenses, paying into employees’ health savings accounts (HSAs) or health reimbursement arrangements (HRAs), or paying into the Healthy San Francisco program.

Unlike the Massachusetts health reform law, the San Francisco HCSO does not include an individual mandate to buy health insurance. Healthy San Francisco is a restricted medical provider network (not insurance) within the city of San Francisco. The mandate applies to all employees working at least ten hours per week, and to temporary and contract workers.

Using the 2008 Bay Area Employer Health Benefits Survey, the NBER found that most employers (75%) increased health spending to comply with the law, yet the majority (64%) supported the law. In the first year after implementation, 21% of firms used Healthy San Francisco for at least some employees. It appeared that few, if any, firms dropped existing insurance offerings. However, 28% added new insurance options, including an HRA (14%), a new high deductible health plan (HDHP, 10%), and a mini-medical plan (9%).

As of April 2009, more than 902 employers (out of a total 5,000 covered employers) elected to pay into Healthy San Francisco. According the San Francisco Department of Public Health, among the employees being paid for, approximately half live within San Francisco and are eligible for health care access through the Healthy San Francisco program, and half live outside San Francisco and receive their payments through a city-run HRA. As of June 4, 2010, Healthy San Francisco enrolled 53,058. There had been 60,000 uninsured adults at the time the program was implemented.

“Lessons from the San Francisco mandates can help policymakers determine what to expect with implementation of a national-level benefit mandate,” the NBER concluded. “First, pay-or-play mandates of this size are feasible; employers in San Francisco have been able to absorb the extra cost of providing health benefits without significant negative effects on employment or earnings. Some firms in industries where most competitors are also subject to the mandate, such as restaurants, have been able to pass the costs of the mandate directly along to consumers.

“Second, employers are likely to choose the lowest-cost option available. In the San Francisco case, this has largely played out through use of HRAs, Healthy San Francisco, and mini-medical plans, which are designed to just meet the health spending requirement. Finally, despite most employers having to make changes in their benefit policies to comply with the mandate, most employers are supportive of the HCSO. This bodes well for implementation of the national employer mandate in 2014.”

The working paper No. 16179, How Do Employers React to A Pay-or-Play Mandate? Early Evidence from San Francisco, was published in July 2010. For more information, visit http://www.nber.org.

For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.

Preventive care takes the spotlight

Have you ever heard of the U.S. Preventive Services Task Force? If you’re like most people, you probably haven’t, though some of you might recall the brouhaha over the Task Force’s mammography recommendations last fall. However, members of this once obscure agency founded in 1984 are likely to find themselves the target of some serious lobbying as advocates push to have their top priorities considered covered services under Task Force guidelines. In fact, one commentator suggests that the Task Force “could become a political lightning rod” as insurers might not pay for a service that don't receive the backing of the Task Force.

 

So what? Why does this Task Force matter? You see, under health reform, health plans and issuers will be required to provide coverage, without cost-sharing, for certain preventive services. This provision applies to, among other things, evidence-based items or services that are currently recommended by the U.S. Preventive Services Task Force. Now, a trio of government agencies has issued regulations (to be published on July 19th) that clarify what this provision means.

 

Under these new rules, evidence-based items or services that have in effect a rating of A or B in the current recommendations of the U.S. Preventive Services Task Force with regard to the individual involved would have to be covered without cost-sharing requirements. Currently, the list of services with a rating of A or B is long but includes such things as:

 

1. screening and counseling to reduce alcohol misuse;
2. aspirin therapy for certain men age 45-79 years and women age 55 to 79 years;
3. assorted pregnancy-care screenings; and
4. screenings for depression, cholesterol abnormalities, anemia, hypothyroidism, obesity, colorectal cancer, tobacco use, and visual acuity in children.

 

The new rules also indicate that Task Force recommendations for mammography screening that were issued in 2009 which recommended routine screening for women age 50 and older, will not be considered current. Instead, those issued in 2002, which recommended earlier screening starting at age 40, will be used.

 

Beyond that, the new regulations clarify the cost-sharing requirements for recommended preventive services provided during office visits. For example, if a recommended preventive service (RPS) is billed separately from an office visit, then cost-sharing requirements for the office visit may be imposed. If an RPS is not billed separately and the primary purpose of the visit is the delivery of a preventive item or service, then cost-sharing requirements may not be imposed. If an RPS is not billed separately but the primary purpose of the office visit is not the delivery of a preventive item or service, then cost-sharing requirements may be imposed.

 

As with other issues arising out of health reform, stay tuned for developments. This is an area that is sure to be ever-evolving.

 

For more information. For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.

 

IRS faces barriers in implementing health reform

The IRS’s structure and funding will make it difficult to carry out its assigned obligations under health reform, according to IRS ombudsman, Nina E. Olson. In a recent report to Congress, Olson indicates that she has “no doubt the IRS is capable of administering social programs, including health care. However, Olson adds that the IRS itself “must recognize that the skills and training required to administer social benefit programs are very different from the skills and training that employees of an enforcement agency typically possess. While some enforcement measures are required to prevent inappropriate claims, the overriding objective of agencies that administer social benefit programs is to help as many eligible persons qualify for the benefits as possible.”

The IRS has been assigned a number of new tasks under health reform, such as verifying income for those applying for premium assistance credits and verifying that individuals are complying with the health insurance mandate.

In her report, Olson suggests that the IRS’s mission statement should be revised to explicitly acknowledge the agency’s dual role as part tax collector and part benefits administrator. “Such a revision would require the IRS to develop a strategic plan that gives sufficient attention to both roles and would underscore that the IRS requires sufficient funding to perform both functions effectively,” she says.

“If the IRS continues to ramp up enforcement while reducing taxpayer service programs, I would be concerned about its ability to administer the new health care credits and penalty taxes in a fair and compassionate way,” Olson concludes.

For more information. For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.

Survey reveals employers' reactions to various health care reform provisions

Now that health care reform legislation is law, how are employers responding to it? A key takeaway from a recent survey on this topic by the International Foundation of Employee Benefit Plans (IFEBP): Despite a slew of health care reform challenges, most (87%) employers remain confident that they will continue to offer health care benefits to their active employees because they are critical to employee recruitment, retention and remaining competitive.

According to Sally Natchek, Senior Director of Research at the IFEBP, “employers at this point are reacting to the first wave of requirements, knowing they need to make some initial immediate decisions. They are also looking at the next few years and how the timeline of regulations will impact their organizations.”

Extension of health care benefits to children up to age 26. Twenty percent of employers are taking immediate action to change eligibility requirements for employees' adult children up to age 26. The majority of employers however (67%), report that they will not extend coverage to dependents up to age 26 until required by law; about 5 percent of respondents' plans say they currently meet legal requirements and 9 percent are not sure.

A large majority of employers (75%) identify extending coverage to adult children until age 26 as the major reform requirement impacting plan costs.

Early retiree reinsurance program. The survey found that just over half (52%) of employers who currently offer medical benefits to retirees plan to take advantage of the one-time federal reinsurance program established by health care reform legislation. Many (35%) have not yet decided whether they will apply and just 13 percent have decided not to apply.

"Even before health care reform, employers offering benefits to retirees experienced increased financial strain in the form of an aging population and escalating health care costs," explained the IFEBP’s Natchek. "New requirements such as eliminating the federal income tax deduction for the subsidy that employers receive for maintaining drug coverage for Medicare-eligible retirees could increase the likelihood that employers will take a fresh look at their medical strategy for retirees."

Other key findings. Additional results from the survey are as follows:

• One in five employers (21%) is planning to add or increase emphasis on high-deductible health plans in the next 12 months. Close to 70% of these employers are likely to focus on account-based plans linked to health savings accounts.
• Close to half of all respondents (48%) are focusing on redesigning their health plans so that by 2018, their plans will avoid triggering the excise "Cadillac" tax for high-value plans.
• Sixty-six percent of employers agree that their organizations will take advantage of the new legal provision that will offer increased levels of financial incentives available to employees who participate in employer-provided wellness programs; 9% disagree, and 25% are not sure.
• Employers are planning to communicate and educate their employees on the new legislation through e-mails to participants (51%), special written communication pieces (49%) and their organization's Web site (42%). Only one-third of employers (37%) have already communicated with employees; almost half (42%) are planning communication efforts for annual enrollment.

For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.

Report Gauges Impact Of Health Reform On Small Group Plans

The impact of the Patient Protection and Affordable Care Act on small group and individually purchased health insurance will depend upon many important factors, according to a recent paper issued by the Urban Institute.

According to the paper’s author, Linda J. Blumberg, some of the factors are the characteristics of the health insurance markets prior to reform, whether plans are grandfathered or are newly created under reform, the health status and claims experience of the covered group or individual, individual coverage decisions, policy decisions that will be made at the state level, and success of cost containment efforts.

Changes to Be Implemented in 2010

While the most significant changes to private health insurance markets under the Affordable Care Act will not occur until January 1, 2014, there are a number of provisions that take effect in 2010. These changes affect both group and non-group plans and include prohibitions on lifetime benefit limits and unreasonable annual limits, extension of dependent coverage to adult children up to age 26, prohibitions on rescissions, elimination of pre-existing condition exclusions for children, and elimination of waiting periods of more than 90 days.

The impact of these provisions on the premiums of current policy holders is a function of the type of coverage currently held, according to Ms. Blumberg.

Those policies that did not include lifetime or annual limits prior to reform should see no premium impact of these provisions. For plans with lifetime maximums of $2 million or higher, removing the limits entirely will tend to increase premiums by less than 1% (with the small group impact being smaller than non-group). And according to America’s Health Insurance Plans, the vast majority of individual market plans have limits of $5 million and above, making it highly unlikely that this change will cause a noticeable impact on non-group premiums. Because small group plans tend to be more comprehensive than non-group plans, a measurable impact in that sector of the market is even less likely, according to Ms. Blumberg.

Federal agencies estimate that the provisions related to annual and lifetime limits will increase group premiums by about 1/2 of 1 percent and will increase non-group premiums by less than 1%. While premiums could increase modestly in such a way, out-of-pocket costs for those using care will fall as a result, potentially leading to very significant savings for those with serious health care needs, according to Ms. Blumberg.

The prohibitions against pre-existing condition exclusion periods for children, including denials of coverage due to such conditions, should have little to no impact in the small group market, which already is required to guarantee issue policies. The federal agencies estimate the effect to be negligible in the group market. Again, the provision will decrease out-of-pocket costs for those who would have had care excluded from reimbursement without the reform.

Ms. Blumberg notes in the paper that if the insurer charges a significantly higher premium for the family newly enrolling in coverage with a sick child, then the premium impact will fall on those families specifically and will not affect the premiums of others. This is the most likely scenario, as it is typical of rating practices in most non-group markets today. Federal  agencies estimate the average effect of the prohibition on pre-existing condition exclusions for children will be 1% or less in the non-group market.

As a percentage of policies sold, the number of rescissions is actually very small. Consequently, the prohibition under the Affordable Care Act should not have a significant effect on premiums in either market, according to Ms. Blumberg. Some insurers are concerned that the language of the law will increase the number of applicants misrepresenting their health status, which, if true, could have larger effects. The federal agencies estimate the rescission provisions will increase premiums by no more than a few tenths of 1 percent, while acknowledging that this is the roughest of the estimates provided.

Estimates of the group premium effect of extending coverage for young adults on parents’ policies are provided in May 13 interim final rules. The effect of this provision can be expected to be small in the group market as well, with estimates ranging from .5 to 1.2% of premiums, depending upon the participation assumptions made, according to Ms. Blumberg. With regard to non-group coverage, similar issues arise as detailed for the pre-existing condition exclusion period for children. Carriers are expected to charge the specific families enrolling high-cost young adults in non-group plans significantly higher premiums than similar families with healthier adult children, then there will be little to no impact on the general population of insureds.

The full report, How Will the PPACA Impact Individual and Small Group Premiums in the Short and Long Term?, is available at http://www.urban.org/publications/412128.html.

Employers Will Maintain Plans Under Reform

Many employers will continue to maintain health coverage under health reform, but for small employers that won’t be so easy, as they continue to be hit hard by health care costs, according to two recent surveys.

Employers Already Deciding Whether To Keep Coverage After Health Reform

Almost one-half of organizations have decided not to drop health care coverage for employees as a result of the new health care reform law, the Society for Human Resource Management (SHRM) found in a new poll released on June 28. Less than 2% of organizations surveyed said they have decided to drop coverage in light of passage of the Patient Protection and Affordable Care Act..

In its poll, “Organizations’ Response to Heath Care Reform,” SHRM found that 46% of organizations surveyed this month would not be ending health care coverage for employees because such a move would lower employee morale and job satisfaction. Organizations also cited competitiveness in recruiting and retaining employees and the fact that they value the health of their employees as reasons.

“Early indications are that employers are taking a prudent and thoughtful review of the implications of the health care reform law on their plans," said Michael Aitken, SHRM’s director of governmental affairs, "and that’s good news.”

Added Mark Schmit, SHRM’s director of research: “HR professionals and business leaders are taking an analytical approach to the decisions that they are making as a result of the new legislation. This is a strategic issue in which organizations are clearly recognizing the need to consider the costs in both monetary and human capital terms.”

Cost savings is the primary reason organizations would be likely to drop health care coverage and pay resulting opt-out fines. But for half of the respondents, it’s too early to know whether they will take such action.

Of the organizations that have decided not to drop health care coverage, 34% made the decision without conducting a formal analysis to determine the impact that reform will have on their health care plans. Twelve percent did an analysis before concluding that they would not end coverage, while 22% are currently conducting an analysis.

Overall, 41% of organizations are likely and 23% are highly likely to pass along any increased costs of health care coverage to employees next year, regardless of whether the increases are related to reform or not, the survey showed. And 34% of organizations are considering alternative health care plans — health savings accounts, for example — for employees as a result of health care reform.

The health care reform poll surveyed 819 randomly selected human resource managers and compensation and benefits professionals at private, public and government organizations with 50 or more employees. It was conducted June 16-23.

For more information go to http://www.shrm.org.

High Costs For Employees In Small Businesses

In the second survey, nearly 13% of workers with employer-sponsored health plans who worked in firms with 10 or fewer employees had premiums of $7,200 or more a year for single-coverage plans in 2008. These results are in a a recent  News and Numbers from the federal Agency for Healthcare Research and Quality. This amount is significantly higher than the $4,704 average, national premium for employer- sponsored single-coverage health plans in 2008.

The federal agency's analysis also found that:

• By comparison, only about 4% of workers enrolled in plans sponsored by large businesses - with 1,000 workers or more - had premiums of $7,200 or more for employer-sponsored, single-coverage health plans. The national average premium in large business for this type of coverage was $4,340.


• For family coverage, about 7%  of enrolled workers in small businesses had premiums of at least $19,000 in 2008, but only about 4.5% of employees in large companies had premiums that high. The national average premium for a family-coverage health plan in 2008 was $11,650 (less than 10 employees) and $12,595 (1000+ employees), respectively.


• Across all businesses, 5% of employees with single coverage had premiums of $7,200 or more, while 5% of employees with family coverage had premiums of $19,000 or more.

The data in are taken from the Medical Expenditure Panel Survey (MEPS), a detailed source of information on the health services used by Americans, the frequency with which they are used, the cost of those services, and how they are paid. For more information, go to http://www.ahrq.gov/news/newsnumix.htm.

Mental Health Parity Rules Eased

Mental health parity rules implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAE) apply to qualified health plans in the Patient Protection and Affordable Care Act in same manner as they apply now group health plans, and on July 1 the Employee Benefit Security Administration made it a little bit easier to apply those parity rules

EBSA has provided a temporary safe harbor for outpatient mental health benefit provisions that commonly require a copayment for office visits (for example, physician or psychologist visits) but coinsurance for other outpatient services (for example, outpatient surgery, facility charges for day treatment centers, laboratory charges, or other medical items).

Interim final rules to the MHPAEA state that separate sub-classifications for generalists and specialists generally are not allowed except as permitted for multi-tier prescription drug formularies. The safe harbor extends that sub-classification allowance to office visits and non-office visits.

However, in a July 1 FAQ, EBSA noted that until final rules are issued, an “enforcement safe harbor” will allow a plan or issuer to divide its benefits furnished on an outpatient basis into two sub-classifications for purposes of applying the financial requirement and treatment limitation rules under MHPAEA, as follows:

(1)   office visits, and

(2)   all other outpatient items and services.

According to EBSA, “After the sub-classifications are established, the plan or issuer may not impose any financial requirement or treatment limitation on mental health or substance use disorder benefits in any sub-classification (i.e., office visits or non-office visits) that is more restrictive than the predominant financial requirement or treatment limitation that applies to substantially all medical/surgical benefits in the sub-classification using the methodology set forth in the interim final rules.”

The FAQ is at http://www.dol.gov/ebsa/faqs/faq-mhpaea.html

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.

High Risk Pool In Place, Public Health Efforts Launched

On July 1, Kathleen Sebelius, Secretary of Health and Human Services announced the implementation of “a new Pre-existing Condition Insurance Plan (PCIP) that will offer coverage to uninsured Americans who have been unable to obtain health coverage because of a pre-existing health condition. The PCIP is a provision of the Patient Protection and Affordable Care Act which established a temporary high risk insurance pool program for individuals who have been uninsured for six months or who have been denied health insurance coverage because they have preexisting conditions.

States, many of which have their own high-risk pools, have the option of running a PCIP themselves or having HHS run the plan. Starting on July 1, the national PCIP opened up to applicants in these 21 states where HHS is operating the program: Alabama, Arizona, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Kentucky, Louisiana, Massachusetts, Minnesota, Mississippi, Nebraska, Nevada, North Dakota, South Carolina, Tennessee, Texas, Virginia, and Wyoming. The remaining 29 states, which are operating their own PCIP, will begin enrollment by the end of the summer, with many beginning enrollment on July 6.

HHS set up a consumer Website linking individuals directly to the federal application page for residents of states where the HHS is running the PCIP, and providing information on how and where to apply for residents of states with their own PCIP.

Also on July 1, the National Prevention, Health Promotion, and Public Health Council submitted its first status report to Congress. The Affordable Care Act provided for the creation of the Council and mandated the development of a National Prevention and Health Promotion Strategy. This strategy is to take a community health approach to prevention and wellness and identify and prioritize actions across many sectors to reduce the incidence and burden of the leading causes of death and disability.

The Council Chair is the U.S. Surgeon General Regina M. Benjamin; council members include Cabinet Secretaries, chairs, directors, or administrators of federal departments. The members’ organizations will be involved in developing and implementing disease prevention and health promotion and wellness programs within their jurisdictions.

The Affordable Care Act requires that the Strategy establish actions within and across federal departments and agencies relating to prevention, health promotion, and public health according to science-based prevention recommendations and guidelines. The Council identified the following guiding principles:
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1. Prioritize prevention and wellness and high impact interventions.
2. Establish a cohesive federal response.
3. Focus on preventing the leading causes of death, and the factors that underlie these causes.
4. Promote high-value preventive care practices, health equity, and alignment between the public and private sectors.
5. Ensure accountability.

The Council’s 2010 Annual Status Report outlines the preliminary work carried out from March to June 2010, including an overview of the Strategy development process, proposed guiding principles, plans to convene the Advisory Group, a work plan and timeline, and a list of Council activities to date, including the preparation of the Annual Report to Congress.

Preliminary analysis includes a review of data on the leading and underlying causes of death, and identify and conducting a preliminary review of existing national prevention plans and strategies (U.S. and international. The Council’s Annual Report also presents guiding principles, data on the leading and underlying causes of death, examples of current federal programs, and brief descriptions of types of interventions that will form the basis of the National Prevention and Health Promotion Strategy.

Thus, implementation of the various health reform provisions continues apace.