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National Health Insurance Reform Where Are We Now?
Webinar: Wednesday, December 1, 2010
2:00 pm – 3:00 pm EST
Today’s Speakers
 Joe DiBella
Executive Vice President of the Health & Welfare Practice
 Phyllis Saraceni, Esq.
Senior Vice President, Compliance & Audit Practice Leader
 Saniyyah Saka
Compliance Analyst, Compliance & Audit Practice
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Agenda
 Where Are We Now
 Implementation Issues
 Overview of Mandates, Notices, and Recent Guidance
 Help from Conner Strong and Resources
 Q&A
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Where Are We Now
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Affordable Care Act

The Patient Protection and Affordable Care Act (“Affordable Care
Act”)
- implementation timeline stretches over ten years with events
happening each year between now and 2018

Requires ongoing interpretation, monitoring, and a flexible approach

Government agencies releasing a plethora of regulations and
guidance with more to come over the coming months and years
(see Conner Strong website for Legislative Updates)
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New Republican-Led House

Likely to see a quick push for a symbolic repeal, amendment, or
replacement of the new law in 2011

But don't expect much in the way of change - at least not yet - as for
now, repeal is not a viable option

Republican pick-up of 10 state governorships may affect the willingness
of states to create exchanges and expand Medicaid

President Obama said he could live with “tweaking” some aspects of
health reform, such as the tax rule forcing businesses to report
transactions totaling more than $600
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Major Changes Not Likely in Near Future

The President is unlikely to sign legislation making big changes to the
law, so there is no real possibility of repeal

The number one focus of Congress will likely be the economy and jobs

The Supreme Court has turned down the first preliminary challenge to
the law

Two recent challenges to the health care reform law have been cleared
for trial, but the court process will take some time as it is expected to
produce several appellate court opinions (likely to ultimately reach the
United States Supreme Court)

The individual and employer mandates, the exchanges, tax credits, and
the “Cadillac” tax aren’t effective for several years
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What We Will Likely See in the Near
Future

Increased regulatory flexibility toward implementation of the law

Possible delays in effective dates, as well as potentially diminished
funding for implementing some parts of the law

Reductions in some taxes and fees imposed by the law

Increased support for HSAs, health FSAs, and consumer-directed health
care (members of the Republican House leadership are strong
supporters)

Greater focus on efforts to control costs both in Medicare and private
health care

Hearings and subpoenas to probe the Department of Health and Human
Services (HHS) decision-making process (there are hundreds of details
that the health reform law leaves for HHS to decide)
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What Employers are Considering

Trends in the area of health insurance reform (findings from recent
industry surveys):
- Employers remain committed to offering employer-sponsored
benefits despite increased plan costs
- Most employers waiting to extend coverage to adult children until
they are required by law
- Many employers not sure how they will address cost-sharing for
dependent coverage for their primary medical plan
- Not eliminating lifetime and annual maximums before legally
required to do so
- Few changing their funding approach as a result of health reform
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What Employers are Considering
- Some will implement changes to eligibility requirements for
dependents on other plans (e.g. dental, vision, life insurance, AD&D)
in order to conform to the rules of their medical plans
- Many not planning to change their HDHP offerings - those planning
to add or increase their emphasis on HDHPs in the next year will
focus primarily on account-based plans combined with HSAs
- Most employers feel that extending coverage to adult children until
age 26 is the major health care reform requirement impacting plan
costs
- Employers are looking to take advantage of financial incentives
provided to employees who participate in wellness programs
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What Employers are Considering
- Retiree medical benefit plan sponsors are focusing on revaluating
their medical strategy for retirees
> Most employers offering retiree benefits will use the early retiree
reinsurance program (ERRP)
> Elimination of deductions for expenses allocable to the Medicare
Part D retiree subsidy will not cause employers to eliminate
retiree prescription drug coverage
- Many employers not sure if they will offer Class Act long-term care
benefits - will wait until premiums and regulations are further clarified
- Emphasis on the importance of communication with plan participants
about health care reform legislation
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What Employers are Considering
- Begin looking at key considerations for 2014 and beyond:
> Employers must provide minimum essential coverage starting in
2014 or pay penalties to the federal government
> Employees must maintain minimum essential coverage or pay
penalties to the federal governmental
> Low-income employees will be eligible to receive governmental
assistance to purchase coverage
> Employers will need to analyze the value of continuing to directly
offer healthcare benefits compared with paying a penalty
> Employers will be looking to consider redesigning their health
plans to be sure that by 2018 their plans do not qualify for the
excise “Cadillac” tax for high-value plans
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Implementation Issues
Short Term Considerations

Employers are advised to continue to monitor health reform
developments and proceed with implementation as there is still
much to do, and health reform isn't going anywhere, at least not for
a while

Focus for now is on the immediate reforms effective for plan years
beginning on or after September 23, 2010 (January 1, 2011 for
calendar year plans)
-
dependent coverage to age 26
-
lifetime dollar limit restrictions
-
restricted annual dollar limits on essential health benefits
-
no pre-existing condition exclusions for children under age 19
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New Notice Periods Under Health Reform
Health care reform requires two special notice periods:
 New 30 day special enrollment periods (may or may not coincide
with standard open enrollment period) for two events:
– Adult dependent extension coverage to age 26
– New enrollment for people who lost coverage hitting lifetime
maximum
 30 days to enroll
 one-time obligation
 model notices available
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Implementation Considerations

PPACA requires all group health plans to comply with certain mandates,
some of which are phased in over time

Changes for both grandfathered and non-grandfathered plans will need
to be considered for plan years beginning on or after September 23, 2010

Steps to implementation:
-
Step One: Determine plan year and health reform effective date
-
Step Two: Determine grandfathered status
-
Step Three: Determine plan mandates that apply
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Determine Plan Year
Step One: Determine plan year and health reform effective date

An employer must identify the plan year for its group health plan to
ensure timely compliance with the health care reform requirements

“Plan year” is not a defined term under health reform

For any ERISA plan, the plan year will generally be the same as the 12month plan year for Form 5500 filing purposes, which is typically the
enrollment year as disclosed in the plan’s summary plan description
(SPD)

Additional analysis needed to identify the plan year for an employer that
has not complied with the ERISA documentation, disclosure and
reporting requirements, or if the employer is not subject to ERISA
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Determine Plan Year

For a plan is not required to file a Form 5500 (e.g., state/local plan or a
fully insured plan with fewer than 100 participants), or a plan that has no
SPD -- plan year generally will be the policy/renewal year, presuming
that the plan is administered based on that policy/renewal year

Employers need to coordinate with the insurers/carriers regarding
implementation changes, including notifying the insurer if the employer’s
“plan year” for health reform implementation purposes is different from
the renewal date

There are potential penalties and court actions to consider and,
therefore, to be sure, a plan sponsor may want to make the final
determination with the advice of counsel
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Grandfathered Plan Status
Step Two: Assess grandfathered status

-
Consider changes that end grandfather status
-
Grandfathered plans are exempt from many, but NOT ALL, health
care reform standards
-
Some new standards apply to both grandfathered and nongrandfathered plans
-
Certain other standards apply for purposes of plans that are not
grandfathered
If grandfathered:
-
provide disclosure regarding grandfathered status in all plan materials
describing the benefits, including contact information
-
retain documentation/records of the terms of the plan as of March 23,
2010 supporting grandfathered status
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Grandfathered Plan – Notice
 Provide disclosure regarding grandfathered status in all plan
materials describing the benefits, including contact information
This [group health plan or health insurance issuer] believes this [plan or coverage] is a “grandfathered
health plan” under the Patient Protection and Affordable Care Act (the Affordable Care Act). As permitted
by the Affordable Care Act, a grandfathered health plan can preserve certain basic health coverage that
was already in effect when that law was enacted. Being a grandfathered health plan means that your
[plan or policy] may not include certain consumer protections of the Affordable Care Act that apply to
other plans, for example, the requirement for the provision of preventive health services without any cost
sharing. However, grandfathered health plans must comply with certain other consumer protections in
the Affordable Care Act, for example, the elimination of lifetime limits on benefits.
Questions regarding which protections apply and which protections do not apply to a grandfathered
health plan and what might cause a plan to change from grandfathered health plan status can be directed
to the plan administrator at [insert contact information]. [For ERISA plans, insert: You may also contact
the Employee Benefits Security Administration, U.S. Department of Labor at 1-866-444-3272 or
www.dol.gov/ebsa/healthreform. This website has a table summarizing which protections do and do not
apply to grandfathered health plans.] [For individual market policies and nonfederal governmental plans,
insert: You may also contact the U.S. Department of Health and Human Services at
www.healthreform.gov.] See http://www.dol.gov/ebsa/grandfatherregmodelnotice.doc)
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Grandfathered Plan

Recent Guidance:
- Notice: FAQs clarify that a plan must include the model disclosure
language whenever a summary of benefits is provided, such as at
initial eligibility for benefits, during an open enrollment period, or
during other enrollment, renewal, or coverage modification periods. It
is not necessary to provide disclosure language in every
communication (e.g., an EOB).
- Carrier Change: New amendment clarifies that an insured group
health plan does not lose grandfathered status merely by changing
issuers or insurance contracts. The amended rule does not apply
retroactively to plans with coverage effective dates between June 14,
2010 and November 15, 2010.
Final regulations to be published “in the near future”
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Determine Plan Mandates That Apply
Step three: Determine applicable plan mandates

Many reforms apply to all plans, regardless of grandfathered status -such as:
- coverage to age 26,
- annual and lifetime limits on essential benefits,
- no pre-existing conditions under 19,
- and in later periods (post implementation) > W-2 reporting of
employee health coverage, the shared-responsibility mandate, freechoice vouchers, new-hire auto-enrollment and the excise tax on
high-cost plans

See Conner Strong Updates for information on which cost-sharing and
coverage standards apply for non-grandfathered plans
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Determine Plan Mandates That Apply

If a plan is fully-insured, cooperation by the insurance carrier will be
crucial, to prevent changes to the plan that may result in a loss of
grandfathered status

Address changes to:
- open enrollment materials,
- plan design, and
- communication needed prior to health reform effective date
applicable to employer plan
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Uncertainties and Transition Relief

In written FAQs and informal comments, regulators from the three
agencies have acknowledged health reform’s ambitious initial effective
date and the complex implementation issues involved.

Agencies will take an enforcement approach that stresses good-faith
compliance efforts by employers and plans rather than one that focuses
on imposing penalties.

Agency intent is reflected in various transition rules, safe harbors, grace
periods and other policies, including good-faith compliance standards
incorporated in regulations.

Welcome news for employers and others striving to comply with the new
rules and aggressive deadlines.
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Many Important Issues Still Not Clear

Agencies indicate they expect to finalize in 2011 the various sets of
interim final health reform regulations issued this year.

Although regulators addressed some uncertainties and gave some
transition relief, they acknowledged that many significant questions
remain:
- What will the instructions require for Form W-2 reporting of the value
of employer-provided group health coverage? (W-2 information is for
reporting purposes only; employer-provided group health coverage
remains nontaxable.)
- Recent Guidance: The IRS announced that employers won't have to
report the value of employer-sponsored group health plan coverage
on Forms W-2 issued for 2011. Reporting for the 2011 tax year will
be optional. The IRS anticipates issuing guidance on this reporting
requirement before the end of 2010.
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Many Important Issues Still Not Clear

How will “essential health benefits” be defined? Without an official
definition of essential health benefits, plans have to use a good-faith
approach when determining whether to treat a particular item or service
as an essential health benefit for purposes of rules restricting lifetime
and annual dollar limits.

How will the auto-enrollment requirement for employers with more than
200 full-time employees work? (guidance not expected before July 2011)

For provisions taking effect in 2014, and how will “full-time employee” be
defined for various purposes? Regulators also say that they are working
on a definition of “full-time employee” but don’t expect to release
guidance any time soon.

When must plans begin providing certain notices and disclosures, such
as a 60-day advance notice of material plan changes?
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Overview of Mandates, Notices, and
Recent Guidance
Coverage Mandate to Age 26
Grandfathered and non-grandfathered health plans offering coverage to dependent
children must extend eligibility to adult children to age 26
Until 2014, grandfathered plans may limit extended coverage to adult children
ineligible for another employer sponsored plan
Coverage is tax-free for young adults through age 27
- Revise/review definition of eligible dependent and update open enrollment
materials
-
Offer adult children a special enrollment opportunity of at least 30 days and
provide a one-time written notice of provision
-
Grandfathered plans limiting coverage to adult children ineligible for another
employer plan must state that requirement in employee communications
-
Coordinate applicable dependent child state mandates for insured plans
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Coverage Mandate to Age 26 - Notice
 Notice applies to grandfathered and non-grandfathered insured and self
insured plans
– Must be given at least 30 days prior to enrollment deadline for the
first plan year on or after September 23, 2010
– Retroactive enrollment to the first day of the plan year is permitted
Individuals whose coverage ended, or who were denied coverage (or were not eligible
for coverage), because the availability of dependent coverage of children ended
before attainment of age 26 are eligible to enroll in [Insert name of group health plan
or health insurance coverage]. Individuals may request enrollment for such children
for 30 days from the date of notice. Enrollment will be effective retroactively to [insert
date that is the first day of the first plan year beginning on or after September 23,
2010.] For more information contact the [insert plan administrator or issuer] at [insert
contact information]. (See http://www.dol.gov/ebsa/patientprotectionmodelnotice.doc)
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Lifetime Limits
Grandfathered and non-grandfathered insured and self-insured group
health plans may not impose lifetime dollar limits on individual coverage
- Open enrollment materials must expressly state that plan has no
lifetime dollar limit on the value of “total plan benefits” and that
individuals previously affected by such limits are again eligible for
plan benefits
- Update administrative processes to offer individuals who reached the
lifetime limit a special enrollment of at least 30 days
- Update vendor contracts as necessary and coordinate with vendors
(including stop-loss carriers)
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Lifetime Limit – Notice

Notice applies to all grandfathered and non-grandfathered plans
subject to health care reform that have lifetime limits on benefits
– Notice must be given to all employees who lost coverage due to
reaching the lifetime limit
– Notice must be given at least 30 days prior to enrollment deadline
for the first plan year on or after September 23, 2010
– Retroactive enrollment to the first day of the plan year is permitted
The lifetime limit on the dollar value of benefits under [Insert name of group health
plan or health insurance issuer] no longer applies. Individuals whose coverage ended
by reason of reaching a lifetime limit under the plan are eligible to enroll in the plan.
Individuals have 30 days from the date of this notice to request enrollment. For more
information contact the [insert plan administrator or issuer] at [insert contact
information]. (see http://www.dol.gov/ebsa/patientprotectionmodelnotice.doc)
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Lifetime Limits

Recent Guidance:
- FAQ clarifies that if an employer offers—in a plan separate from
primary medical coverage—coverage that reimburses expenses for
special treatment and therapy of eligible employees’ children with
physical, mental, or developmental disabilities, the agencies will treat
a plan sponsor’s position that such a plan does not violate the
lifetime limit prohibitions as a reasonable good faith interpretation of
health reform.
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Annual Limits

Annual limit ($750,000 minimum for 2011)
- Grandfathered and non-grandfathered insured and self-insured
group health plans generally cannot impose annual dollar limits on
individual coverage. For plan years before 2014, plans can impose
“restricted” annual dollar limits on essential health benefits
- Update open enrollment materials and employee communications to
describe permitted annual limits for essential health benefits
- Update vendor contracts as necessary and coordinate with vendors
(including stop-loss carriers)
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Pre-Existing Condition Limits

Pre-existing condition exclusions (for children under 19)
- Grandfathered and non-grandfathered insured and self-insured
plans cannot impose pre-existing condition exclusions for children
under age 19
- Update open enrollment materials and employee communications to
delete pre- existing condition exclusions for children under age 19
- Update vendor contracts as necessary and coordinate with vendors
(including stop-loss carriers)
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Recission

Grandfathered and non-grandfathered insured and self-insured group
health plans may not retroactively rescind coverage after enrolling a
participant, except in the event of fraud or intentional misrepresentation
of material fact
- Update employee communications
- Work with vendors to ensure individuals will not be improperly
dropped retroactively from coverage
- Provide 30 days advance written notice to each participant who
would be affected by a rescission
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OTC Medications

Starting January 1, 2011, costs of OTC medications will not be
reimbursable from FSA, HSA, HRA and Archer medical savings
accounts (applies to grandfathered and non-grandfathered plans)
- Coordinate with service providers: Clarify expectations related to
expenses vendors will reimburse and adjust service agreements to
reflect new responsibilities (qualified health care expenses such as
medical devices, eyeglasses, crutches, contacts, bandages, co-pays
and deductibles will still qualify if purchased after 12/31/10)
- Update descriptions of new limitations for inclusion in open
enrollment materials, employee communications accordingly and
claim forms if necessary
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For New and Non-Grandfathered Plans
Establish internal and external appeals procedures

Implement appropriate procedures (guidance and model forms related to claims,
appeals and external reviews for non-grandfathered health plans have been
released)

Update open enrollment materials

Coordinate with vendors and update vendor contracts as necessary
Recent Guidance:

Enforcement grace period: DOL will not take any enforcement action before July
1, 2011, against non-grandfathered group health plans that fail to comply fully
with some of the new internal claims and appeals standards, including these
obligations:
-
Meeting the 24-hour deadline for deciding an urgent-care claim and notifying the
claimant about the determination
-
Providing culturally and linguistically appropriate notices
-
Including new broader and more specific content in claim denial notices
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For New and Non-Grandfathered Plans
Comply with new nondiscrimination rules

Confirm insured plans are not discriminatory (under rules once
applicable to self-insured plans only)

Perform testing of insured plans

Guidance to be released shortly: IRS is contemplating the issuance
of guidance on the extension of the Code Section 105(h) requirements to
insured group health plans. Comment deadline on how this guidance
should be formulated was November 14, 2010.
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For New and Non-Grandfathered Plans
Preventive services

No employee/participant cost sharing permitted for preventive
services

Update open enrollment materials and coordinate with vendors
and update vendor contracts as necessary
2010 Preventive Care Guidelines Released:

The 2010 Preventive Care Guidelines incorporate health reform
requirements and list preventive-care recommendations rated “A” or “B” (
the highest evidence-backed grades) by the US Preventive Services
Task Force. The guidelines can help employers understand preventive
services, create plan designs and offerings, and work with insurers to
create the tools needed to implement and measure preventive care
services.
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For New and Non-Grandfathered Plans
Emergency services

coverage cannot require preauthorization, be limited to innetwork providers or impose higher cost sharing for out-ofnetwork services

Update open enrollment materials and other employee
communications accordingly

Coordinate with vendors and update vendor contracts as
necessary
Recent Guidance:

Non-grandfathered plans that cover emergency services in a hospital emergency
department generally must meet minimum payment standards for out-of-network
providers. Those standards are designed to protect patients from incurring high
bills for the balance owed after the plan makes its provider payment.
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For New and Non-Grandfathered Plans
OB/GYN pre-authorization

Plans may not require a referral for OB/GYN services

Update open enrollment materials (and for model language)

Coordinate with vendors and update vendor contracts as
necessary
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For New and Non-Grandfathered Plans
Physician designations

Plans calling for designation of primary care physicians and
pediatricians must allow reasonable choice (see model notice
language)

Include model notice language in SPD

If designation is part of an electronic enrollment process,
reprogramming may be necessary

Coordinate with vendors and update vendor contracts as
necessary
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Physician Designation - Notice
New and non-grandfathered plans must give notice of option for designating a
primary care physician
-Participants have right to designate any participating PCP including a
pediatrician or OB/GYN
-Notice must be given no later than the first day of the first plan year on or
after or after September 23, 2010 (notice must also be provided in SPD)

For plans and issuers that require or allow for the designation of primary care providers by participants or beneficiaries, insert:
[Name of group health plan or health insurance issuer] generally [requires/allows] the designation of a primary care provider. You
have the right to designate any primary care provider who participates in our network and who is available to accept you or your
family members. [If the plan or health insurance coverage designates a primary care provider automatically, insert: Until you make
this designation, [name of group health plan or health insurance issuer] designates one for you.] For information on how to select a
primary care provider, and for a list of the participating primary care providers, contact the [plan administrator or issuer] at [insert
contact information].
 For plans and issuers that require or allow for the designation of a primary care provider for a child, add: For children, you may
designate a pediatrician as the primary care provider.
 For plans and issuers that provide coverage for obstetric or gynecological care and require the designation by a participant or
beneficiary of a primary care provider, add:
You do not need prior authorization from [name of group health plan or issuer] or from any other person (including a primary care
provider) in order to obtain access to obstetrical or gynecological care from a health care professional in our network who
specializes in obstetrics or gynecology. The health care professional, however, may be required to comply with certain procedures,
including obtaining prior authorization for certain services, following a pre-approved treatment plan, or procedures for making
referrals. For a list of participating health care professionals who specialize in obstetrics or gynecology, contact the [plan
administrator or issuer] at [insert contact information]. (See http://www.dol.gov/ebsa/patientprotectionmodelnotice.doc)
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Help from Conner Strong and Resources
Help from Conner Strong

Conner Strong Healthcare Reform website page at
http://www.connerstrong.com/healthcare_reform
- News updates
- Online library of client updates and alerts
- Summary of major provisions of the new law
- Detailed Year-by-Year timeline of changes
- Outline of all aspects of the new law

Check back for updates, news and analysis, and updated tools to
help you navigate this complex process.
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Other Resources from
Conner Strong

Periodic Webinars
- Web-based presentations on health care legislation,
regulations and innovative ideas

Email Alerts and Updates
- High level, quickly produced articles about emerging
issues intended to alert clients to legislative and
regulatory developments
- Historic library available on line

Perspectives
- Thought pieces intended to identify trends and issues,
helping clients anticipate challenges
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Resources

Patient Protection and Affordable Care Act:
http://frwebgate.access.gpo.gov/cgibin/getdoc.cgi?dbname=111_cong_bills&docid=f:h3590enr.txt.pdf

Reconciliation Bill: http://frwebgate.access.gpo.gov/cgibin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4872eh.txt.pdf

White House Web site for employers and individuals with information
about the new reform law: http://www.whitehouse.gov/healthreform

Agency healthcare reform sites:

-
Health and Human Services (HHS): http://healthreform.gov/.
-
Department of Labor (DOL): http://www.dol.gov/ebsa/healthreform/
-
Internal Revenue Service (IRS):
http://www.irs.gov/newsroom/article/0,,id=220809,00.html?portlet=6
Call Conner Strong at 877-861-3220
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Q&A
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