2011-2012 Issues for Employers. How the law affects employers and health plans Grandfathered plans Small business tax credit Early Retiree Reinsurance.

2011-2012 Issues for Employers

How the law affects employers and health plans

Grandfathered plans

Small business tax credit

Early Retiree Reinsurance Program

Plan coverage and administration changes

Employer reporting and disclosure rules

Medical loss ratio (MLR) regulations

CLASS Act

Patient Protection and Affordable Care Act (PPACA) – signed on March 23, 2010

Health Care and Education Reconciliation Act (Reconciliation Act) – signed on March 30, 2010

The health care reform law makes sweeping changes to our nation’s health care system

Existing plans = grandfathered plans◦A group health plan or health insurance coverage in which an

individual was enrolled on the date of enactment of the health care reform legislation

Certain health care reform provisions don’t apply to grandfathered plans, even if coverage is later renewed◦New employees can still enroll◦ Family members of current enrollees can still join

Regulations provide guidance on changes to plan design that could take a plan out of “grandfathered” status

Patient Protections Nondiscrimination rules for fully insured plans New appeals process Quality of care reporting Insurance premium restrictions Guaranteed issue and renewal of coverage Nondiscrimination based on health status/in health care Comprehensive health insurance coverage Limits on cost-sharing Coverage for clinical trials

Health Insurance Changes – Prohibitions on:

◦ Lifetime and annual limits◦ Pre-existing condition exclusions◦Rescissions◦ Excessive waiting periods

Required coverage of adult children up to age 26

Summary of benefits and coverage

Reporting medical loss ratio

Permitted Changes◦Cost adjustments consistent with medical inflation

◦Adding new benefits

◦Modest adjustments to existing benefits

◦Voluntarily adopting new consumer protections under the health care reform law

◦Changes to comply with state or federal laws

Prohibited Changes◦Significantly reducing benefits or contributions

◦Significantly raising copayment charges or deductibles

◦Raising coinsurance charges

◦Adding or tightening annual limits

◦Changing insurance companies (not TPAs) – Changing insurers is now permitted!

Special Rule for Insured Collectively Bargained Plans Additional Requirements◦Disclose grandfathered status

◦Status can be revoked if try to avoid compliance

Changes made before March 23, 2010 are part of the plan on the date of enactment◦Must be legally binding◦Changes don’t have to be effective yet

Changes made before regulations issued can be revoked◦Must be adopted before June 14, 2010◦Must be revoked by first day of first plan year on or after

September 23, 2010

“Modest changes” may not be taken into account◦No clear guidelines

Qualifying small employers that provide health care coverage to employees are eligible for tax credit

◦Have fewer than 25 full-time equivalent (FTE) employees ◦ Pay wages averaging less than $50,000 per employee per year◦Has a “qualifying arrangement” (pays premiums for each employee

in a uniform percentage that is at least 50 percent of the cost of coverage)

Available beginning in 2010

IRS guidance clarifies how to calculate FTEs and wages 

Credit based on premiums paid by employer for health insurance coverage

Credit amount = up to 35 percent of premium costs paid (25 percent for tax-exempt employers)◦On Jan. 1, 2014, increases to 50 percent (35 percent for tax-

exempt employers)

Depends on employees and wages ◦The credit phases out gradually for:

Employers with average wages over $25,000 and Employers with more than 10 FTEs

Plans that are not health insurance coverage:◦ Self-insured plans (including HRAs and FSAs)◦Health Savings Accounts (HSAs)◦ Employer contributions to these plans are not counted for

credit

Contributions to multi-employer plans can count if for health insurance coverage

Contributions to church welfare plans count as insurance

2010 Transition Relief◦ Employer pays an amount that is equal to at least 50 percent of

the cost of single coverage for each employee enrolled◦ Even if the percentage paid is not uniform for each employee

2010-2013 Rules◦ Employer can choose approach for 2010◦Qualifying arrangement depends on number of plans and type

of billing (composite or list)

Effective on date of enactment?

◦Yes, but need regulations so compliance delayed

Large employers that offer health benefits must automatically enroll new employees

◦ Large employer = more than 200 full-time employees

Adequate notice and opt-out option required

Other questions to be addressed in regulations

Temporary program to reimburse costs of providing coverage for early retirees, spouses and dependents

Early retiree = 55 and older and not eligible for Medicare

Reimburses 80 percent of costs related to claims between $15,000 and $90,000◦ Must be used to lower plan costs (not for general revenue)

Apply and submit claims to HHS◦ New application for use after Nov. 9, 2010

Updated information at www.errp.gov

Plans that cover dependent children must make coverage available until child turns 26◦ Includes grandfathered plans, unless child has own employer

coverage (before 2014)◦Covers married and unmarried children◦Children and spouses of covered adult children do not have to

be covered

State mandates above this level continue to apply

Insurers complying early to avoid coverage gaps

Tax exclusion applies to coverage

Definition of dependent restricted◦Can only be defined by relationship◦Other factors (financial dependence, residency, student status,

employment, eligibility for other coverage) generally can’t be used as basis for denial

Qualified dependents must be:◦Offered same coverage as similarly situated individuals◦Given the same rates for coverage◦ Provided with a 30-day special enrollment opportunity and

notice

Favorable tax treatment extended for this coverage◦Coverage excluded from income for children who have not

attained age 27 at the end of the taxable year

◦Other dependent requirements do not apply

◦Applies to health FSAs and HRAs

Effective March 30, 2010

Transition rule for cafeteria plan amendments

◦Retroactive amendment permitted

Apply to new and grandfathered plans

No lifetime limits on essential benefits

Restricted annual limits on essential benefits◦Allowed for plan years beginning before Jan. 1, 2014

Essential benefits generally include: ◦ Ambulatory patient services, emergency services, hospitalization, maternity and

newborn care, mental health and substance abuse services, prescription drugs, rehab services, lab services, wellness and disease management, pediatric care

Per beneficiary limits ok on non-essential benefits

Some regulations issued, waiting on others

Lifetime Limits◦Notice and special enrollment required for individuals who

reach lifetime limit

Restricted Annual Limits◦After September 23, 2010: $750,000◦After September 23, 2011: $1.25 million◦After September 23, 2012 (before January 1, 2014): $2 million

Waivers available for annual limit requirements

Plans can apply for waiver of annual limit minimums if access to or cost of benefits significantly affected

Plan or policy must have existed before September 23, 2010◦ Exceptions for certain mandated or group policies

Approval applies for one year◦ Plans must reapply for later years

If plan obtains a waiver, must notify participants

No rescission of coverage◦Applies to group and individual coverage◦Applies to new and grandfathered plans◦ Exception for fraud or intentional material misrepresentation◦ Individual must be given prior notice of cancellation for

permitted reasons (including nonpayment of premium or plan termination)

No pre-existing condition exclusions or limitations for children under age 19◦ This prohibition will apply to everyone in 2014◦Applies to new and grandfathered group plans

Apply to new plans Limits on preauthorization and cost-sharing

◦No cost-sharing for some preventive care (including well-child care) and immunizations

◦No preauthorization or increased cost-sharing for emergency services (in- vs. out-of-network)

◦No preauthorization or referral for ob/gyn care

Patients can chose any available participating primary care provider (or pediatrician)

Regulations issued

Apply to new fully insured plans

Fully insured plans must follow rules regarding nondiscrimination in favor of highly compensated employees (HCE)◦Cannot discriminate with respect to eligibility or benefits

HCE:

◦ 5 highest paid officers, more than 10 percent shareholder, or highest paid 25 percent of all employees

Effective date delayed for regulations

Apply to new plans Group health plans and health insurers must

implement effective internal appeals process◦ Include rescissions as denials

◦ Expedite urgent care claims

◦ Provide a full and fair review and avoid conflicts of interest

◦ Follow new notice standards

◦ Continue coverage until appeal is resolved Grace period until July 1, 2011 for some rules Plans and insurers must meet minimum requirements

for external review (state or federal)

Some small employers can provide a simple cafeteria plan for employees

◦ 100 or fewer employees during one of the last 2 years

Strict contribution, eligibility and participation requirements apply◦ Employer contributes minimum amount◦All employees with 1,000 hours of service can participate and

elect any benefit

Nondiscrimination rules will be treated as satisfied

Apply to Health FSAs, HRAs, HSAs and Archer MSAs

Medicine or drugs only treated as qualified medical expense for tax exclusion if they are prescribed or are insulin

◦ This means no reimbursement for OTC medicine or drugs without a prescription (except insulin)

Applies to expenses incurred after Dec. 31, 2010

HSA distributions not used for medical expenses currently subject to tax of 10 percent and inclusion in gross income◦Not monitored by employer◦ Taxation between employee and IRS

Tax amount increases to 20 percent if funds not used for medical expenses

Applies to distributions made after December 31, 2010

MLR rules: ◦ Insurers must spend 80-85 percent of premiums on medical

care and quality improvement (not admin. costs) or give rebates

◦ Effective January 1, 2011

HHS issued final rule ◦Adopted NAIC recommendations◦Outlines items counted as medical care/health care quality

improvement (and items that are not)◦ Provides rules for rebates

Issuer must provide proportionate rebate to each enrollee if MLR requirements not met (and notice)

Due by the August 1 after reporting year

Issuer can arrange with group health plans to distribute rebates to enrollees

Methods of payment◦ Premium credit◦ Lump sum check◦Reimbursement to account used to pay premium

Employers must disclose aggregate cost of employer-sponsored health coverage on Forms W-2

Optional for 2011 tax year; mandatory for later tax years

Includes group health plan coverage, whether paid by employer or employee

Does not include:◦ FSA contributions◦ Long-term care, accident or disability income insurance◦Coverage only for specific disease or illness◦Hospital or fixed indemnity insurance

Applies to new and grandfathered plans HHS to develop standards for uniform summary

within 1 year of enactment (March 23, 2011) Plans to start using within 2 years of enactment

(March 23, 2012) Standards ◦Easily understood language

◦Explanation of coverage

◦ 4 page limit, 12 point font

Community Living Assistance Services and Supports Program

Voluntary long-term care benefits program

Effective date◦ Technically effective on January 1, 2011◦HHS not required to determine details or establish benefits

until October 2012◦ Enrollment will be available sometime after that

Actively employed adults are eligible to contribute

Participating employers can automatically enroll employees

Eligibility for benefits:◦ Pay premiums for 5 years◦ Meet employment requirements for 3 years◦ Disabled or limited in daily activities

Average $50 per day, depending on disability

Benefits include:◦Cash ◦Advocacy services◦Advice and assistance counseling

Benefits can be used for:◦Assisted living facilities/nursing homes◦Home modifications◦Home care aides◦Assistive technology◦Accessible transportation

QUESTIONS?

THANK YOU!

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