On this Thursday, September 23, a series of health reform provisions impacting employer-based health plans begin to take effect. Among the provisions of the Patient Protection and Affordable Care Act (P.L. 111-148) which become effective for plan years beginning on or after Sept. 23, 2010, are the following:
Covering dependents up to age 26. Group health plans with dependent child coverage must make available coverage for the enrollee's adult children who are younger than age 26, regardless of whether or not the dependent is a full-time student, disabled, or married.
Prohibition on lifetime and annual benefits. Lifetime or annual benefit limits cannot be imposed by group health plans. A phase-in rule applies for annual benefit limits and "essential health benefits."
Prohibition on rescissions of health coverage. Health insurance issuers in the group and individual market may not rescind an enrollee's coverage, except where an individual has engaged in fraud or made an intentional misrepresentation of material fact as prohibited under the terms of the plan or coverage.
Requirement to provide preventive care services. All plans are required to cover, without any cost-sharing, preventive services and immunizations that are recommended by the U.S. Preventive Services Task Force and the Centers for Disease Control (CDC). Also required to be covered, without any cost-sharing, are certain child preventive services recommended by the Health Resources and Services Administration. Not applicable to grandfathered plans.
Requirement that insurers maintain minimum loss ratios. Insurers offering group or individual health insurance must annually report on the percentage of health premiums used for claims reimbursement and must maintain certain minimum medical loss ratios. If minimums are not maintained, rebates must be provided to health plan participants.
Developing standards for summaries of benefits. Effective for plan years beginning on or after Sept. 23, 2010, the Department of Health and Human Services (HHS) has been ordered to develop standards for use by group health plans and health insurers in compiling and providing a summary of benefits and explanation of coverage. The summaries must be in a uniform format, using easily understood language, and must include uniform definitions of standard insurance and medical terms. The explanation also must describe any cost-sharing, exceptions, reductions, and limitations on coverage, and use examples to illustrate common benefits scenarios.
Insured health plan compliance with nondiscrimination rules. Insured group health plans must comply with existing nondiscrimination rules for self-funded plans. These include nondiscrimination rules for eligibility and benefits. Previously there were no federal laws for fully insured health plans that prevented discrimination in favor of the highly compensated. In other words, employers could establish fully insured medical reimbursement plans for a select group of employees, such as key employees. That is no longer true. Not applicable to grandfathered plans.
Group health plan reporting requirements. The HHS will establish reporting requirements for group health plans and health insurers offering group or individual health insurance coverage. Reporting will include information on plan or coverage benefits and health care provider reimbursements. Ed. Note: The HHS has two years after enactment to publish regulations that provide criteria for health provider reimbursement structure. Then, within 180 days of the publication of regulations, the Government Accountability Office must submit a report to Congress reviewing the impact of the requirements on the quality and cost of care.
Implementing effective claims appeals processes. Group health plans and a health insurer must implement an effective process for appeals of coverage determinations and claims, including an internal and external claims appeal process and employee notification. Not applicable to grandfathered plans.
Expanding patient selection of providers. Effective for plan years beginning on or after Sept. 23, 2010, health insurance plans must allow enrollees to select any participating primary care provider available, including a pediatrician for children, and to cover emergency services provided at a hospital emergency department regardless of the hospital's participation in the plan preferred provider network and without prior authorization requirements. Female enrollees must be able to obtain obstetrical/gynecological specialist services without a referral from another primary care provider. Not applicable to grandfathered plans.
Provisions Already In Effect
A number of provisions in the Affordable Care Act already have taken place, including the following:
Small employer health insurance credit. For amounts paid or incurred in tax years beginning in 2010, an eligible small employer may claim a 35% tax credit (25% in the case of tax-exempt eligible small employer) for the premiums it pays toward health coverage for its employees in tax years beginning in 2010 through 2013.
Special deduction change for Blue Cross and Blue Shield. For tax years beginning after Dec. 31, 2009, the special deduction from regular tax that Blue Cross and Blue Shield organizations, and other qualifying health insurance organizations, are allowed under IRC Sec. 833 is modified to provide that these organizations will only be entitled to this special tax treatment if 85% or more of their insurance premium revenues are spent on clinical services.
Grandfathered plans. Individuals who are enrolled in a group health plan or individual health coverage at the date of enactment (March 23, 2010) may not be required to terminate that coverage. Any group health plan or health insurance coverage to which this provision applies is considered a "grandfathered health plan..
Tax code change in the definition of dependents. Effective on March 23, 2010, children younger than age 27 will be considered dependents of a taxpayer for the following situations:
- for purposes of the general exclusion for reimbursements for medical care expenses of an employee, spouse, and dependents under an employer-provided accident or health plan,
- the deduction for the health insurance costs of a self-employed person, spouse, and dependents,
- the rule that allows a qualified pension or annuity plan to provide benefits for sickness, accident, hospitalization, and medical expenses to retired employees, spouses, and dependents, and
- the rule that treats a voluntary employee benefits association (VEBA) that provides sick and accident benefits to its members and their dependents as a tax-exempt organization.
State grants for health ombudsman programs. Beginning with fiscal year 2010, the HHS must award grants to eligible states (or to Exchanges operating within a state) to enable the state to establish (or expand) either an office of health insurance consumer assistance or a health insurance ombudsman program, in order to provide consumers with assistance in navigating health insurance requirements under federal and state law. States receiving such a grant must comply with relevant criteria established by the HHS.
Increase in adoption credit. For tax year beginning in 2010, the dollar limitation for the adoption credit and income exclusion for employer-paid or employer-reimbursed adoption expenses through a qualified adoption assistance program is increased by $1,000 to $13,170 per eligible child (including a special needs child). In addition, the adoption credit has been made refundable.
Breastfeeding at work. Effective on March 23, 2010, an employer must provide a reasonable break time for an employee to express breast milk for her nursing child each time the employee needs to express milk for one year after the child's birth.
Automatic enrollment. Effective on March 23, 2010, employers who have more than 200 full-time employees and who offer one or more health benefit plans are required to automatically enroll new employees in a plan. Automatically enrolled employees must have the opportunity to opt out of the coverage.
Temporary reinsurance program for early retirees. Beginning 90 days after enactment (June 23, 2010) and ending on Jan. 1, 2014, the HHS must establish a temporary reinsurance program that reimburses part of the claims cost for participating employment-based plans that provide health insurance coverage for early retirees (ages 55 to 65), eligible spouses, surviving spouses, and dependents of such retirees. The reimbursement is for 80% of plan claims that are between $15,000 and $90,000.
Temporary high-risk insurance pool. Within 90 days after enactment (June 23, 2010), the HHS was ordered to establish a temporary high risk health insurance pool. This pool is designed to provide health insurance coverage for individuals who have been uninsured for six months or who have been denied a policy because they have preexisting conditions. The pool will run for the period from the day the program is established until Jan. 1, 2014.
Tanning tax. For services (whether paid by insurance or otherwise) performed on or after July 1, 2010, a 10% excise tax is imposed on amounts paid for indoor tanning services.
Review of premium increases. Beginning with the 2010 plan year, an annual review process of "unreasonable increases" in premiums for health insurance coverage is established. Prior to implementing premium increases, a health insurance issuer must submit to both HHS and the relevant state a justification for the premium increase.
Government health care internet portal. No later than July 1, 2010, the HHS must establish an Internet portal to help beneficiaries and small businesses identify affordable health insurance coverage options in each state.
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.