Wednesday, February 29, 2012

PCIP costs, participation, are higher than experts anticipated

The CCIIO has issued a report detailing participation rates in the Pre-existing Condition Insurance Plan (PCIP) program to date. Participation rates and costs are, apparently, higher than the CCIIO and state-based PCIP actuaries anticipated they would be back in November 2010. PCIP provides private insurance to those locked out of the insurance market because of a pre-existing condition. The PCIP program serves as a bridge until 2014, when, under the ACA, insurance companies can no longer deny or limit coverage or charge higher premiums because of a pre-existing condition. Twenty-seven states operate their own PCIP program, often in coordination with their high risk pools, and 23 states and the District of Columbia have chosen to have federally-operated programs.

The CCIIO reports that it was estimated by state-based PCIP actuaries in November 2010 that per-member PCIP costs for calendar year 2012 would be $13,026, just slightly higher than estimated costs for state high risk pools. However, based on more recent figures, their estimates in August 2011 for calendar year 2012 reached $28,994. There are, according to the CCIIO, two likely reasons for this.

First, PCIP coverage differs from state high risk pool coverage in that PCIPs do not have the state high risk pool pre-existing condition exclusion periods, which range anywhere from three to 12 months for new enrollees who lack prior coverage. PCIPs have no waiting period, so high cost conditions are covered starting on the first day PCIP coverage begins. By contrast, people in state high risk pools often pay monthly premiums during their exclusion periods, before their coverage begins.

Second, a PCIP enrollee is more likely, says the CCIIO, to have an immediate need for care, compared to an enrollee in a state high risk pool. Many state high risk pool enrollees have had prior coverage, and are more likely to be receiving ongoing treatment for any pre-existing conditions. PCIP enrollees, conversely, have to be uninsured for a minimum of six months before applying for coverage, so, by the time they are covered by PCIP, they are more likely to need immediate treatment for an illness that has become serious or even critical during the waiting period. Furthermore, people who qualify for PCIP might be postponing paying for enrollment until their coverage needs become crucial, and, therefore, expensive, the CCIIO theorizes.

PCIP enrollment increased by nearly 400% between November 2010 and November 2011, and it is estimated that nearly 50,000 people with pre-existing conditions were enrolled in PCIP by the end of 2011. From August through November 2011, approximately 8,000 applications were received by PCIP every month. About half of those were submitted to the federally-administered PCIP.

Congress has, so far, provided $5 billion for payment of claims and administrative expenses in excess of premiums collected by enrollees. Claims have already been two-and-a-half times higher than anticipated, the CCIIO says.

PCIPs are a good deal for those who desperately need insurance, especially since costs for serious illnesses may easily exceed PCIP premium and out-of-pocket costs. Enrollees receive health coverage at premium rates that healthy people pay in the individual insurance market. Premiums may only vary based on age, geographic area, and tobacco use, and PCIP covers at least 65% of total average costs for covered benefits. Premiums can range, in the federally-administered PCIP, from $214 to $559, depending on an enrollee’s state of residence and plan option. Out-of-pocket costs are limited for covered, in-network services to the amount paid by someone enrolled in a high deductible health plan (HDHP) who is eligible for a health savings account (HSA). This amount is set by the Code every year. For 2012, it is $6,050.

For a comprehensive analysis of the ACA, and additional information on health reform and other developments in employee benefits, just click here

Monday, February 27, 2012

Republicans attack ACA's contraceptive coverage in court

It had to happen sooner or later. Republicans are taking the issue of the ACA's mandatory contraceptive coverage provisions to court. On February 15, the Labor Department, the HHS, and the IRS issued regulations reaffirming that certain religious employers are allowed an exemption for covering FDA-approved contraceptives as a part of a health plan. However, beginning August 1, 2012, most new and renewed health plans will be required to provide contraceptive services for women without cost sharing.

Previously-published regulations added eight preventive services for women, including contraceptive services, which health plans must cover at no cost to patients, under Public Health Service Act Sec. 2713, as added by the Patient Protection and Affordable Care Act (ACA). Certain nonprofit employers who, based on religious beliefs, do not currently provide contraceptive coverage in their insurance plan have until the first plan year that begins on or after August 1, 2013 to comply, but must provide certification that they qualify for the delayed implementation.

The DOL, HHS, and IRS have stated that they plan, during this temporary enforcement safe harbor, to develop and propose changes to the final regulations that would allow plans to provide contraceptive coverage without cost-sharing to those who want it and would accommodate non-exempted, nonprofit organizations' religious objections to covering these services.

Now, Nebraska Attorney General Jon Bruning and 6 other state attorneys general, from Florida, Michigan, Ohio, Oklahoma, South Carolina and Texas, have filed suit in the United States District Court, District of Nebraska, requesting a permanent injunction of the regulations. Co-plaintiffs include Pius X Catholic High School, Catholic Social Services, The Catholic Mutual Relief Society of America and private citizens Stacy Molai and Sister Mary Catherine, CK.

A news release on Bruning’s website quotes him as stating that, “This regulation forces millions of Americans to choose between following religious convictions and complying with federal law.” He adds, “This violation of the 1st Amendment is a threat to every American, regardless of religious faith. We will not stand idly by while our constitutionally-guaranteed liberties are discarded by an administration that has sworn to uphold them.”

The plaintiffs are alleging that the newly-published regulations violate the First Amendment, as well as the Religious Freedom Restoration Act by requiring religious-affiliated organizations, including hospitals and schools, to purchase employee health insurance that covers services such as sterilization and provision of contraceptives.

One of the private plaintiffs, Sister Mary Catherine, is covered by Blue Cross Blue Shield of Nebraska through the Catholic Diocese of Lincoln, Nebraska. According to the complaint, her health insurance plan was specifically contracted for to exclude coverage for purposes of contraception, abortifacients, sterilization, and related services. The complaint states that she will drop her private health insurance coverage if retaining such coverage would result in the subsidization of those services.

Her plan is apparently not a grandfathered plan exempt from certain ACA requirements, so it is subject to the contraceptive coverage provisions.

Another private plaintiff, Stacy Molai, is a Catholic missionary employed by the Fellowship of Catholic University Students (“FOCUS”), and she is covered by a health insurance plan with Cigna through FOCUS. Her health insurance plan was also specifically contracted to exclude coverage for contraceptive and related services.

The complaint alleges that Molai suffers from an incurable chronic illness which requires substantial ongoing care involving costs of $300 to $400 per month, not including occasional hospitalization and surgery. Her coverage is necessary in order for her to avoid financial ruin, according to the court documents, but she is willing to drop her coverage if the contraceptive services will be covered. Because her plan is grandfathered from ACA requirements, she is alleging that, should FOCUS substantially change any aspect of her health insurance plan, the plan will immediately become subject to ACA requirements, including its contraceptive coverage rule.

For a comprehensive analysis of the ACA, and additional information on health reform and other developments in employee benefits, just click here.

Friday, February 24, 2012

HDHPs Will Be Adversely Affected By MLR Rules Under Health Reform

High-deductible health plans (HDHPs), including those compatible with health savings accounts (HSAs), likely will be more adversely affected by the medical loss ratio requirements under the Patient Protection and Affordable Care Act (ACA) than other types of comprehensive medical plans, according to a new report from actuarial and consulting firm Milliman and the American Bankers Association’s HSA Council. The report found that consumers who rely on HSA-qualified plans to finance their health care may experience greater costs in their current health plans and may eventually have to find more expensive replacement coverage. However, my own observation based on practical experience is that this purportedly “more expensive” coverage ultimately may provide more necessary coverage and better value over time.

According to Public Health Service Act Sec. 2718, as added by the ACA, insurers offering group or individual health insurance must report annually, to the Department of Health and Human Services (HHS), on the percentage of health premiums used for claims reimbursement and must maintain certain minimum medical loss ratios (MLRs). If minimums are not maintained, rebates must be provided to health plan participants.

HHS has established MLRs for large group plans, small group plans, and individual plans as follows (note that a state may impose a higher percentage):
• Large group plans (plans with 101 or more employees)--85 percent; and
• Individuals and small group plans (plans with 100 or fewer employees)--80 percent. HHS may adjust the percentage if it determines that an 80 percent loss ratio would destabilize the individual market due to the establishment of the state exchanges.

“HSAs were widely anticipated to be the low-cost bronze plans for consumers under the ACA,” said Kevin McKechnie, executive director of the HSA Council. “The MLR requirements make this very difficult and the requirements with respect to HSAs need to be adjusted.”

The study noted that the primary issues of concern for HDHPs are that:

• The medical loss ratio formula does not take into account contributions to HSAs. Many HDHPs are accompanied by an HSA, which covers much of the first-dollar costs before the plan’s deductible is reached. HSA contributions are currently not reflected in the medical loss ratio calculations (I note that this is probably because the participant is mostly, if not entirely, self-insuring the HSA portion).

• HDHPs may not be able to raise rates fast enough to keep up with rising costs. HDHPs will require larger annual rate increases than typical medical plans because medical inflation will have a greater impact on claim levels than plans with lower deductibles, the study noted.

• HDHPs have fewer premium dollars to cover their fixed expenses. Every plan has fixed expenses that it covers with premiums. Since HDHPs have lower premiums than other plans, a greater percentage of the premium must be used to pay these fixed expenses. For example, $400 of fixed expenses represents 40 percent of a $1,000 premium, but only 20 percent of a $2,000 premium and just 8 percent of a $5,000 premium. Therefore, it is harder for a lower premium plan to keep its non-claim expenses below 20 percent of its adjusted premiums as the MLR rule requires.

• HDHPs have less predictable claims experience that could increase the risk of paying rebates. HDHPs pay fewer claims than plans with low deductibles. But when HDHPs pay claims, the claim dollar amounts tend to be larger. This lower-frequency/high-payment creates less actuarial predictability which can result in high claims in one year and low claims in another. If the plan has low claims, it may not meet the 80 percent medical loss ratio and be required to pay rebates. If the plan has high claims, it may lose money that it cannot “make up” in other years.

In June 2011, America's Health Insurance Plans' Center for Policy and Research reported that the number of people with HSA/HDHP coverage rose to more than 11.4 million in January 2011, up from 10 million in January 2010, 8 million in January 2009, and 6.1 million in January 2008. Overall, enrollment in HSA/HDHP coverage in the group market rose to 9.1 million in January, up from 8 million in January 2010. Enrollment in the individual market rose to 2.4 million covered lives in January 2011, up from 2.1 million in January 2010. HSA/HDHP plans accounted for 10 percent of all new health insurance purchases in January 2011.

Quite frankly, I have never been a fan of account-based HDHPs--they essentially shift significant cost burdens to participants at the times when they most need the financial coverage and forces them to postpone needed medical care. I speak from personal experience as a previous participant in one such plan. Insurance is meant to cover major expenses incurred as a result of unanticipatable accidents and incidents of illness, yet HDHPs leave participants vulnerable when they most need the support.

Wednesday, February 22, 2012

Essential Health Benefits Guidance Issued

The Center for Consumer Insurance and Oversight (CCIIO) has released 22 frequently-asked-questions about the essential health benefits packages required by the Patient Protection and Affordable Care Act (ACA). On Dec. 16, 2011, the Department of Health and Human Services (HHS) released a bulletin describing the approach it plans to take in future rulemaking about essential health benefits and this FAQ addresses questions that arose from the bulletin.

To provide all Americans access to quality, affordable health insurance, the ACA ensures that health insurance plans offered in the individual and small group markets, both inside and outside of the Health Insurance Exchanges, offer a comprehensive package of items and services, known as “essential health benefits. The ACA requires states to establish state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges by 2014. These Exchanges will be administered by a governmental agency or nonprofit organization, through which individuals and small businesses with 100 or fewer employees can purchase qualified coverage.

According to the HHS’ bulletin, states would have the flexibility to select an existing health plan against which to set the “benchmark” for the items and services included in the essential health benefits package. This benchmark plan can be either: one of the three largest small group plans in the state; one of the three largest state employee health plans; one of the three largest federal employee health plan options; or the largest HMO plan offered in the state’s commercial market. The FAQ confirms that states are allowed to select only one plan as its “benchmark” option.

In addition, the CCIIO will propose a process for revising the benchmark plan in future rulemaking, giving states the flexibility to update the benchmark plan as the plan makes benefits changes each year. Under the intended approach, the specific set of benchmark benefits selected in 2012 would apply for plan years 2014 and 2015. For 2014 and 2015, the benchmark plan selection would take place in the third quarter of 2012. A consistent set of benefits across these two years would limit market disruption during this transition period. As indicated in the Bulletin, HHS intends to revisit this approach for plan years starting in 2016, the FAQ noted.

If the benchmark plan is missing coverage in one or more of the ten categories required as essential health benefits, the FAQ notes that the state is required to supplement the benchmark plan. For example, if a benchmark plan covers newborn care but not maternity services, the state must supplement the benchmark to ensure coverage for maternity services. The default benchmark plan would be supplemented by looking first to the second largest small group market benchmark plan, then to the third, and then, if neither of those alternative small group market benchmark plans offers benefits in a missing category, to the FEHBP benchmark plan with the highest enrollment.

Got all that?

Friday, February 17, 2012

PPACA extended free preventive services to 54 million Americans with private health insurance in 2011, HHS reports

Health and Human Services Secretary Kathleen Sebelius has announced that the Patient and Protection and Affordable Care Act (PPACA), the 2010 health reform law, provided approximately 54 million Americans with at least one new free preventive service in 2011 through their private health insurance plans. Secretary Sebelius also announced that an estimated 32.5 million people with Medicare received at least one free preventive benefit in 2011, including the new Annual Wellness Visit, since the health reform law was enacted.

Together, this means an estimated 86 million Americans were helped by health reform's prevention coverage improvements. The new data were released in two new reports from HHS.

"Americans of all ages can now get the preventive services they need, like mammograms and the new Annual Wellness Visit, free of charge, as a result of the new health care law," Secretary Sebelius said. "With more people taking advantage of these benefits, more lives can be saved, and costly, and often burdensome, diseases can be prevented or caught earlier."

The PPACA requires many insurance plans to provide coverage without cost sharing to enrollees for a variety of preventive health services, such as colonoscopy screening for colon cancer, Pap smears and mammograms for women, well-child visits, and flu shots for all children and adults. The law also makes proven preventive services free for most people on Medicare.
The report on private health insurance coverage also examined the expansion of free preventive services in minority populations. The results showed that an estimated 6.1 million Latinos, 5.5 million Blacks, 2.7 million Asian Americans and 300,000 Native Americans with private insurance received expanded preventive benefits coverage in 2011 as a result of the new health care law.

The report discussing Medicare preventive services found that more than 25.7 million Americans in traditional Medicare received free preventive services in 2011. The report also looked at Medicare Advantage plans and found that 9.3 million Americans - 97 percent of those in individual Medicare Advantage plans - were enrolled in a plan that offered free preventive services. Assuming that people in Medicare Advantage plans utilized preventive services at the same rate as those with traditional Medicare, an estimated 32.5 million people benefited from Medicare's coverage of prevention with no cost sharing.

The full report on expanded preventive benefits in private health insurance is available at: http://aspe.hhs.gov/health/reports/2012/PreventiveServices/ib.shtml. The report on expanded preventive benefits in Medicare and other ways that the PPACA strengthens Medicare is available at http://www.cms.gov/newsroom/.

Source: HHS news release, February 15, 2012.

Wednesday, February 15, 2012

IRS, DOL issue FAQs on ACA auto-enrollment rules, shared responsibility, and waiting periods

The IRS, in conjunction with the HHS and the Labor Department, has issued a notice (IRS Notice 2012-17) containing frequently-asked questions and answers with regard to the Patient Protection and Affordable Care Act's (ACA's) provisions governing automatic enrollment, employer shared responsibility, and the 90-day limitation on waiting periods for health insurance coverage. The notice identifies various approaches under consideration for future regulations and other guidance.

The notice provides that the Labor Department has concluded that its guidance on automatic enrollment under the Fair Labor Standards Act (FLSA) section 18A will not be ready to take effect until 2014. The provisions of FLSA Sec. 18A direct certain employers to automatically enroll new full-time employees in one of their health benefits plans, and require adequate notice and the opportunity for employees to opt out of coverage in which they were automatically enrolled. According to the Labor Department, until final regulations are issued and applicable, employers will not be required to comply with those provisions.

The notice also states that the IRS intends to issue proposed regulations or other guidance on the following: permission for employers to use employees' Form W-2 wages instead of household income to determine the affordability of employer coverage, coordination of employer shared responsibility provisions under Code Sec. 4980H and the 90-day waiting period limitation under Public Health Service Act Sec. 2708, and an allowance for employers to use a "look-back/stability period safe harbor" method to determine whether a certain employee is a full-time employee.

Code Sec. 4980H shared responsibility provisions

More specifically, forthcoming guidance is expected to provide that, for three months after an employee's date of hire, an employer that sponsors a group health plan will not be subject to the employer responsibility payment assessed under Code Sec. 4980H by reason of failing to offer coverage under its plan during that three-month period. It is also expected to provide that employers generally have six months to determine if a newly-hired employee is a full-time employee for purposes of Code Sec. 4980H, meaning that they will not be subject to an assessed payment under Code Sec. 4980H during that six-month period for the employee in question.

PHSA provisions

Public Health Service Act (PHSA) Sec. 2708 states that, in plan years beginning on or after January 1, 2014, a group health plan or group health insurance issuer shall not apply any waiting period exceeding 90 days. The IRS has now stated that, after reviewing comments from the public, it has decided to retain, for purposes of PHS Act Sec. 2708, the definition in existing regulations that the 90-day waiting period begins when an employee is otherwise eligible for coverage under the terms of the group health plan.

Guidance is also expected to be issued under PHSA Act Sec. 2708 stating that eligibility conditions making certain classes of employees eligible for coverage once they complete a specified cumulative number of hours of service within a specified period will not be viewed as being designed to avoid compliance with the 90-day waiting period limitation. This would be the case so long as the required cumulative hours of service do not exceed a number of hours specified in the guidance.

Monday, February 13, 2012

Health reform’s SBC rules include 12 required content elements

There’s a lot to digest in the newly-released guidance on the Summary of Benefits and Coverage (SBC) requirements under the Patient Protection and Affordable Care Act (PPACA). Did you know, for instance, that there are a total of 12 required content elements under these regulations? There would’ve been 13 required items but a provision requiring the SBC to include premium or cost of coverage information was dropped from the final version of the guidance.

The first nine required content elements appeared in the text of the PPACA itself. Proposed regulations, issued in 2011, added four additional required content elements. Of those four additional elements, in the end, the agencies kept two of them, modified one (the one relating to a uniform glossary), and dropped a provision requiring the SBC to include premium or cost of coverage information.

Required content elements.
The 12 required content elements include:

  • Uniform definitions of standard insurance terms and medical terms so that consumers may compare health coverage and understand the terms of (or exceptions to) their coverage;
  • A description of the coverage, including cost sharing, for each category of benefits identified by the agencies;
  • The exceptions, reductions, and limitations on coverage;
  • The cost-sharing provisions of the coverage, including deductible, coinsurance, and copayment obligations;
  • The renewability and continuation of coverage provisions;
  • A coverage facts label that includes examples to illustrate common benefits scenarios (including pregnancy and serious or chronic medical conditions) and related cost sharing based on recognized clinical practice guidelines;
  • A statement about whether the plan provides minimum essential coverage as defined under Code Sec. 5000A(f), and whether the plan’s or coverage’s share of the total allowed costs of benefits provided under the plan or coverage meets applicable requirements;
  • A statement that the SBC is only a summary and that the plan document, policy, or certificate of insurance should be consulted to determine the governing contractual provisions of the coverage; and
  • A contact number to call with questions and an Internet web address where a copy of the actual individual coverage policy or group certificate of coverage can be reviewed and obtained;
  • For plans and issuers that maintain one or more networks of providers, an Internet address (or similar contact information) for obtaining a list of the network providers;
  • For plans and issuers that maintain a prescription drug formulary, an Internet address where an individual may find more information about the prescription drug coverage under the plan or coverage; and
  • Information for obtaining copies of the uniform glossary, which includes an Internet address where an individual may review the uniform glossary, a contact phone number to obtain a paper copy of the uniform glossary, and a disclosure that paper copies of the uniform glossary are available.
Dropped from the final version of the regulations was a provision in the proposed rules that would’ve required the SBC to include premiums or cost of coverage for self-insured group health plans. The agencies involved (the IRS, the Labor Department, and the Department of Health and Human Services) understand that it is administratively and logistically complex to convey this information to individuals in an SBC in differing circumstances in both the individual and group markets, citing as an example, a situation when premiums differ based on family size and when, in the group market, employer contributions impact cost of coverage. The agencies recognize that the inclusion of premium information in the SBC could result in numerous SBCs being required to be provided to individuals. However, if premium information is not required in the SBC, the agencies point out, only a single SBC might be necessary. The agencies believe that premium information can be more efficiently and effectively provided by means other than the SBC.

Standalone document not required. Finally, the requirement that group health plans provide the SBC as a stand-alone document has been eliminated. The SBC may be provided either as a stand-alone document or in combination with other summary materials (for example, an SPD) if the SBC information is intact and prominently displayed at the beginning of the materials, such as immediately after the Table of Contents in an SPD.
Electronic ok. Assuming certain consumer safeguards are met, the final rule ensures that in the vast majority of cases, the SBC can be provided electronically, allowing a plan or issuer to post the SBC on its website or provide it by email. Electronic disclosure is expected to reduce costs while consumer safeguards are designed to ensure actual receipt by individuals.

Friday, February 10, 2012

ACA Summary of Benefits And Coverage Final Rule Applies Beginning September 23

The Departments of Health and Human Services, Labor, and the Treasury (the Departments) have released the final rule and glossary implementing the Summary of Benefits and Coverage (SBC) requirements of the Patient Protection and Affordable Care Act (ACA). The final rule and related materials will be published in the February 14 Federal Register. As provided in the final rule, starting on Sept. 23, 2012, health insurers and group health plans will be required to provide the SBC and the uniform glossary to consumers.

The ACA added a Public Health Service Act Sec. 2715 introducing new reporting and disclosure requirements for group health plans and health insurers. These new reporting and disclosure provisions require group health plans and health insurers to provide an SBC that clearly and accurately describes the benefits and coverage under the applicable plan or coverage. In August 2011, the Departments provided standards on communications and model forms that health insurers and group health plans may use to provide an SBC to those covered. Although the requirements were scheduled to become effective on March 23, 2012, but in frequently asked questions (FAQs) published on Nov. 17, 2011, the Departments had indicated that this compliance date may be delayed until final regulations are issued.

The SBC must be a concise summary (limited to four pages) of the key benefits and coverages provided through the health plan, the costs to the participant, lists of excluded services, and other significant conditions or limitations. These documents also must be prepared in a standardized format, type style, font size, and terminology so that comparisons can readily be made between different coverage offerings. The SBCs must be distributed in connection with any initial, special, or open enrollments, and any new plan coverages.

Specifically, the final rules ensure consumers receive two key forms that will help them understand and evaluate their health insurance choices:

  • A short, easy-to-understand SBC; and
  • A list of definitions (called the “Uniform Glossary”) that explains terms commonly used in health insurance coverage such as “deductible” and “copayment”

The final rules require that the SBC be provided to consumers as follows:
  • when they are shopping for coverage;
  • when coverage is renewed, before each new plan or policy year;
  • when there are coverage changes, to enrollees 60 days before the effective date of the changes, and
  • upon the consumer’s request for information, within seven business days of the request (including the Glossary of terms).

The glossary also will be publicly displayed at http://www.HealthCare.gov, http://www.cciio.cms.gov, and http://www.dol.gov/ebsa/healthreform.

The forms, SBC, and glossary were developed by the Departments based primarily on model forms created through a public process led by the National Association of Insurance Commissioners (NAIC) and a working group including representatives of health insurance-related consumer advocacy organizations, health insurers, health care professionals, patient advocates including those representing individuals with limited English proficiency, and other qualified individuals. The forms also reflect comments that the Departments sought directly from the public.

The SBC will include a new, standardized health plan comparison tool for consumers known as “coverage examples”—using a format modeled on the Nutrition Facts label required for packaged foods. The coverage examples will illustrate, for comparison purposes, what proportion of the cost of care a health insurance policy or plan would cover for a sample patient for two common medical situations—having a baby and managing type 2 diabetes. Additional scenarios will be added in the future as feedback is gathered from consumers. These examples will help consumers understand and compare a sample patient’s share of the costs of care under a particular plan and have a better idea of how valuable the health plan will be at times when they may need the coverage.

Assuming certain consumer safeguards are met, the final rule ensures that in the vast majority of cases, the SBC can be provided electronically, allowing a plan or issuer to post the SBC on its website or provide it by email. Electronic disclosure is expected to reduce costs while consumer safeguards are designed to ensure actual receipt by individuals. Additionally, the final rule provides flexibility in the instructions for completing the SBC in recognition of unique plan designs, the Departments asserted.

The SBC will make it easier for health insurance consumers to find the best coverage for themselves and their families—and for employers to find the best coverage for their business and their employees, the Departments said.

The SBC and glossary are meant to eliminate technical or confusing language from insurers’ marketing materials that sometimes make it difficult for consumers to understand exactly what they are buying, the Department explained. The new rules also will make it easier for people and employers to directly compare one plan to another.

“Consumers, for the first time, will really be able to clearly comprehend the sometimes confusing language insurance plans often use in marketing,” said Kathleen Sebelius, HHS Secretary. “This will give them a new edge in deciding which plan will best suit their needs and those of their families or employees.”

For a comprehensive analysis of the ACA, and additional information on health reform and other developments in employee benefits, just click here.

Wednesday, February 8, 2012

Fewer Than Half Of Employers Are Ready To Distribute Summary Of Benefits And Coverage

While 81 percent of employers plan to update their summary plan descriptions (SPDs) for plan design and the Patient Protection and Affordable Care Act (ACA) changes this year, they continue to wrestle with cost containment and resource strain for the implementation and review process required to execute SPD changes, according to findings from HighRoads’ annual survey of U.S. companies and their current and future compliance communication plans and processes. HighRoads is a Woburn, Mass.-based provider of technology to automate benefits management.

“Cost containment was clearly top of mind for our respondents this year,” said Kim Buckey, SPD Practice Lead at HighRoads. “Employers are taking steps to reduce both the hard and ‘soft’ costs of producing SPDs even if they don’t have a handle on how much they’re actually spending. It is clear that those responsible for SPD costs have been given a mandate to reduce spend. Given the anticipated expense of producing the ACA required Summary of Benefits and Coverage (SBC, final regulations are expected to be released Friday, April 13) and other ERISA and ACA-related communications, this is no surprise,” she added.

In its November Pulse Survey report, HighRoads reported that nearly three-fifths (58 percent) of respondents said they were prepared to comply with the new SBC requirement under health care reform by the original March 2012 deadline. Nearly all of the respondents (91 percent) in HighRoads’ November study also stated that they would not consider eliminating some benefits coverage currently offered based on the complexity of the SBC requirements.

However, in Highroads’ SPD Survey, fewer than half of respondents (48 percent) expect to be ready to distribute SBCs by the end of March, the original deadline for initial SBC production, while 43 percent planned to be ready with the required SBCs by open enrollment.

The great majority of respondents (84 percent) plan to communicate to employees the 2012 plan changes required by the ACA through enrollment materials and more than half (52 percent) will revise SPDs. More than three-quarters (77 percent) of respondents will handle these communications in house.

Mid- to large-sized employers throughout the United States, representing approximately 2.2 million total plan participants responded to the HighRoads Third Annual SPD Survey. For more information, visit http://www.highroads.com.

For a comprehensive analysis of the ACA, and additional information on health reform and other developments in employee benefits, just click here.

Monday, February 6, 2012

Federal Health Care Spending Expected To Double Over Next Decade

Federal health care spending is projected to more than double in the coming decade, according to the Congressional Budget Office in its report, The Budget and Economic Outlook: Fiscal Years 2012 to 2022.

Total federal health care spending on mandatory programs, such as Medicare and Medicaid, will grow from $847 billion in the current fiscal year to $1.8 trillion in fiscal 2022, according to the CBO.

The provisions of the Patient Protection and Affordable Care Act (ACA) that will have spending impacts include new state health insurance exchanges, on which the federal government will spend $645 billion over the ten-year span. Also, the ACA’s Medicaid provisions are projected to drive growth in its enrollment from 67 million to 95 million people and federal spending on it from $275 billion to $605 billion over the next ten years.

The projection also includes an “alternative fiscal scenario,” based on likely congressional actions, such as extending a popular tax cut that is scheduled to expire. A significant health care item under the alternate scenario is the additional $360 billion Medicare is likely to spend over the ten years above the baseline projections if it replaces a planned 27.4 percent physician payment cut in March with a continuation of current rates.

“If those payments were increased over time, the impact on Medicare outlays would be even greater,” according to the report.

For more information, visit

For a comprehensive analysis of the ACA, and additional information on health reform and other developments in employee benefits, just click here.

Friday, February 3, 2012

Experts discuss where we’ve been, where we are, where we’re going on health care reform journey

Adopting necessary changes to plan documents and training internal staff regarding the new heath care reform requirements are just two of the suggestions that Ann M. Caresani, CPA, and Richard P. McHugh, both partners at Porter Wright Morris & Arthur, LLP, made during a recent webcast sponsored by the International Foundation of Employee Benefit Plans (IFEBP). Caresani and McHugh discussed which reforms under the Patient Protection and Affordable Care Act (ACA) are currently in place, which ones will be forthcoming in the next few years, and how employers can prepare for them.

Reforms currently effective. Caresani and McHugh first reviewed the reforms that were phased in during 2011. These reforms range from the prohibition on annual and lifetime limits on “essential health benefits” to the simple cafeteria plan alternative for small employers.

McHugh also noted the automatic enrollment provision for employers with 200 or more full-time employees was supposed to take effect, but is on hold until regulations are issued. “We don’t know when it will become applicable,” he said.

Regarding non-grandfathered plans, the nondiscrimination requirements for insured plans are also postponed indefinitely “amid regulatory confusion,” according to McHugh.

Other reforms with respect to non-grandfathered plans include:
  • providing preventive care with no cost sharing for specified items,
  • prohibiting prior authorization or increased cost-sharing for emergency services, whether in-network or out-of-network,
  • permitting enrollees to select a primary care provider from any available participating care provider, and
  • prohibiting authorization or referral for OB/GYN care by a specialist.
McHugh also noted that the new claims and appeals requirements are in effect now for 2012 calendar year plans. While the internal process required is not too difficult to comply with, the external review process is a new, complicated step for plans, he said. These ACA provisions require changes to plan documents. “There’s a lot of catch up to be done here,” McHugh said.

Reforms in 2012. Caresani and McHugh next explained the reforms that are taking place this year. Most notable is the Form W-2 information reporting requirement on the value of employer-sponsored health coverage. This reporting is optional in 2011 and required for 2012, Caresani explained. Small employers (fewer than 250 Forms W-2 in 2011) are exempt for 2012, and reporting is optional for numerous types of plans. If a Form W-2 is not otherwise required, such as for retirees, then this reporting requirement doesn’t apply, she said.

Caresani wondered about the purpose of this requirement and advised plans to start on it sooner rather than later, especially focusing on who is going to collect this information. “This is a tough requirement from a systems standpoint,” she said.

Providing a Summary of Benefits and Coverage is another provision that was supposed to take effect in 2012. Employers were supposed to provide this notice by March 23, 2012, but this deadline has been extended, and we are waiting on guidance, McHugh said. Such guidance could be issued in the next few months, he added.

Other provisions taking effect in 2012 include the quality reporting requirement (from which grandfathered plans are exempt), and the medical loss ratio rebates. Although the rebate provisions apply to insurance plans only, when the first rebates, if any, come out this summer, plan sponsors will be faced with various decisions about such rebates. Caresani said plan sponsors might have to determine whether these rebates are plan assets or must be shared with participants. Further, if a plan receives a rebate, that plan might want to question why it did and may want to check the plan’s coverage.

Reforms in 2013. Moving onto a discussion about 2013, McHugh described it as a “respite year” for health care reform. One provision that will take effect is the notification of the availability of state health exchanges in 2014. The standards on this notice have not been issued yet, however. There could be some initial guidance on the notice this year, McHugh said.

Another change in 2013 is that FSA benefits will be capped at $2,500 annually. Although there were some rumblings in the legislature about getting this provision changed, there’s not a challenge to it right now. McHugh said to keep an eye on the issue and, in the meantime, realize this provision requires plan administration changes.

Also in 2013, the deduction for expenses allocable to the Medicare Part D prescription drug subsidy expires. Companies will have to decide whether to keep or terminate their retiree drug plans. “Many companies are likely to drop these plans,” McHugh predicted.

Reforms in 2014. Unlike 2013, 2014 is a “big year” for health care reform, McHugh said. In 2014, the state health exchanges will be established. In addition, the nondeductible excise tax for employers that don’t offer health coverage will kick in. This tax is $2,000 per affected employee. The nondeductible monthly excise tax for unaffordable coverage also will take effect. This is the lesser of 1/12 of $3,000 times the number of employees receiving a premium tax credit or cost share reduction, or 1/12 of $2,000 times the number of full-time employees, he explained.

For non-grandfathered plans, eligibility discrimination based on health status will be prohibited, and cost-sharing cannot exceed certain limits. In addition, discrimination as to participation or coverage against health care providers is prohibited, except that reimbursement rates may vary based on quality.

Also in 2014, clinical trial coverage kicks in. McHugh explains that this provision applies to life-threatening diseases and applies only if your plan already covers that disease. It does not require plans to add a certain type of coverage. Note that grandfathered plans are exempt from this provision.

In addition, 2014 will bring requirements such as limitations on waiting periods, increases in wellness program incentive caps, and premium rating requirements for insured plans.

Some additional reporting requirements will be effective in 2014, too. Employers providing health plan coverage must provide information to the IRS on prescribed forms. In addition, employers must report to the IRS if any employee is required to pay more than a set percentage of wages. The range of information that will be required is unknown, McHugh said.

Reforms beyond 2014. Caresani noted there are a few reforms that take place beyond 2014. In 2017, the health exchanges may be open to large employers. In addition, in 2018 the “Cadillac plan” tax takes effect. There’s uncertainty as to what these plans are, Caresani said. In addition, this provision is controversial and she wonders whether it will stay in place. She also pointed out that a lot of collectively bargained plans could be affected by this provision.

Short-term preparation. There are some steps employers can take in the short term to prepare for these reforms, McHugh said. He suggested making changes to health care plans only after careful consideration of grandfather plan status. Also, consider and adopt necessary changes to health care plan documents to conform to the changes. Keep in mind that cafeteria plan documents might need changes as well and should not conflict with the health plan documents, McHugh advised.

Also, it’s important to start reviewing the new reporting and disclosure requirements. Figure out what needs to be done and when to do it, he said.

Also in the short term, train your internal staff regarding the new requirements and update administrative procedures (including payroll systems) to ensure compliance. Further, develop an employee communication strategy concerning health plan changes, McHugh advised.

Long-term preparation. Caresani concluded with some steps to take in the long term to prepare for the reforms. She said to identify future changes that must be made to health care plans to comply with ACA’s phased-in requirements, and analyze whether to retain grandfathered status.

Also, consider the cost and competitive implications of eliminating your health care program altogether. After 2014, plans should begin modeling plan costs, she said.

Finally, monitor future legislative, judicial and regulatory developments. (You can do this by checking back often to Health Reform Talk!)

SOURCE: “Health Care Reform Developments in 2012 and Beyond: Don’t Wait!,” IFEBP webcast, January 23, 2012.

Wednesday, February 1, 2012

U.S. files brief with Supreme Court on severability issue

The severability of most of the provisions of the Patient Protection and Affordable Care Act (ACA) may not be considered, according to the Solicitor General’s brief on behalf of the U.S. government filed with the Supreme Court last week in response to two of the pending health reform cases, NFIB, et al. v. Sebelius and Florida, et al. v. HHS. If the Supreme Court reaches the severability question, it should hold that the ACA is severable from the minimum coverage provision except for the guaranteed-issue and community-rating provisions that take effect in 2014, the government argues.

Lower court proceedings. The Court of Appeals for the Eleventh Circuit upheld the district court’s ruling that the minimum coverage provision (i.e., individual mandate) exceeded Congress’ power under the Commerce Clause, but reversed the finding that the provision is not severable from the remainder of ACA, thus keeping the law’s other provisions intact. The court of appeals concluded that Congress would have enacted the guaranteed-issue and community-rating reforms without the minimum coverage provision. Thus, it invalidated only the minimum coverage provision.

The court of appeals did not address the government’s contention that petitioners lack standing to challenge the vast majority of the ACA’s provisions as inseverable.

Severability arguments not properly presented. The government contends the Supreme Court may not consider the petitioners’ severability arguments for several reasons. First, the Anti-Injunction Act bars pre-enforcement consideration of the validity of the tax collection provisions of the ACA. Second, the provisions that revise Medicare payment rates are subject to exclusive administrative and judicial review provisions, which may not be invoked by petitioners because those provisions do not directly affect them. Third, a holding that the minimum coverage provision is unconstitutional would not provide a basis for the Court to consider the validity of other provisions that do not apply to the petitioners.

“Whether viewed as a matter of Article III and prudential standing, a limitation on the scope of equitable relief, application of the principle that facial challenges are disfavored, or simply a matter of judicial restraint, the Court should not consider the validity of provisions of the Act that are not directed to petitioners but instead affect numerous parties not before the Court,” according to the brief.

ACA is severable from minimum coverage provision. The government argues that if the Court reaches the severability question, it should find that the rest of the ACA’s provisions are severable from the minimum coverage provision except for the guaranteed-issue and community-rating provisions that take effect in 2014. Without a minimum coverage provision, “the guaranteed-issue and community-rating provisions would drive up costs and reduce coverage, the opposite of Congress’s goals,” the brief states.

The government contends that, according to the Court’s own precedent, the “Court invalidates as inseverable no more of a statute than is strictly necessary.” As such, the Court must “limit the solution to problem” and “try not to nullify more of a legislature’s work than is necessary.” The Court must “retain those portions of the Act that are (1) constitutionally valid, (2) capable of functioning independently, and (3) consistent with Congress’ basic objectives in enacting the statute,” according to the brief.

ACA provisions are already in effect. To invalidate provisions as inseverable under these standards, the petitioners must demonstrate that it is “evident” Congress would have wanted the entire ACA to fall if the minimum coverage provision were invalidated. The government contends the petitioners have failed to do so for a variety of reasons. Foremost, many of the ACA’s provisions are already in effect, several years before the minimum coverage provision becomes effective in 2014. According to the government, this time lag shows that much of the Act operates independently of that provision.

“One need not speculate whether Congress would have wanted such provisions to operate in a world without the minimum coverage provision. We are in that world now,” the government writes.

Minimum coverage provision essential to other reforms. Lastly, the government argues the guaranteed-issue and community-rating provisions that take effect in 2014 are inseverable from the minimum coverage provision. Congress’s findings and the experience in the states support this argument, according to the brief. Congress expressly found that the minimum coverage provision is “essential” to the success of these provisions because it minimizes adverse selection, expands the health insurance risk pool and, thereby, lowers health insurance premiums.

In addition, Congress had empirical support for its conclusion that the minimum coverage provision is essential to make the other reforms effective. Some states had enacted guaranteed-issue and community-rating requirements without a minimum coverage provision. “The result in each state was a general destabilization of individual markets, increases in premiums, and declining enrollment,” according to the brief.