Download Final Edited Version- Krieg DeVault HC Reform Webinar Part III

Implementing Health Care
Reform: New Regulatory
Guidance for Group Health Plans
Kristen L. Gentry, Esq.
Catherine M. Stowers, Esq.
Health Care Reform Webinar Series: Part III
July 13, 2010
Health Care Reform Creates New
Obligations, Establishes New Rules
for Group Health Plans
 The Patient Protection and Affordable Care Act
and the Reconciliation Act (collectively
“PPACA”) establish eligibility and coverage
mandates and tax provisions for group health
plans, generally effective for plan years
beginning on or after September 23, 2010.
 Certain mandates apply to all group health plans
and policies, others apply only to “new” plans
and policies – those not in place on or before
March 23, 2010 (the “grandfathered plan” rule).
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Summary of Mandates Effective
Beginning in 2010 (All Plans)
Mandates applicable to all plans include:
 Elimination of lifetime limits, and restriction of annual
limits, on essential health benefits;
 Prohibition on rescission of coverage;
 Required extension of eligibility for dependent
coverage to adult children until age 26;
 Elimination of preexisting condition exclusions for
enrollees under age 19 (for all enrollees in 2014);
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Summary of Mandates Effective
Beginning in 2010 (All Plans)
 Medical loss ratio reporting and rebate requirements
(insured policies);
 Automatic enrollment requirement for large employers
(200+ employees, effective upon final regulation);
 Uniform summary of coverage requirement (March
2012) ;
 Elimination of tax-free reimbursement for OTC
medications and drugs from health FSA, HRAs and
HSAs (January 2011);
 $2,500 cap on allowable maximum annual election for
health flexible spending accounts (January 2013).
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Summary of Mandates Effective
Beginning in 2010 (New Plans)
Mandates applicable only to new plans and plans
losing grandfathered status include:
 First-dollar coverage required for preventive care;
 Implementation of “patient protections”;
 Application of IRC 105(h) nondiscrimination
requirements to insured health plans;
 New claims procedure requirements (after HHS rules
issued);
 New reporting requirements for plans and insurers.
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Grandfathered Plans: Interim
Final Regulations
 PPACA created many questions related to the
types of plan design changes that could be
made to an existing plan without loss of
grandfathered plan status.
 Interim final regulations issued on June 14, 2010
provide answers to many grandfathered plan
questions, complex rules for plan design
changes, transitional rules for changes already
made, and special disclosure and
documentation requirements.
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Permitted Design Changes for
Grandfathered Plans
 A grandfathered plan may enroll new
employees, and may enroll dependents.
 A self-funded plan can change its TPA.
 An employer can eliminate a plan or a plan
option if for a bona fide employment-based
reason (other than cost of coverage).
 An employer can make cost-sharing design
changes, but only if changes fall within strict
regulatory guidelines.
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Changes Causing Loss of
Grandfathered Status
 Any reduction or elimination of all (or
substantially all) benefits to diagnose or treat
a particular condition
 Applies even if only a few participants affected.
 Not expressly limited to essential health benefits.
 Dropping coverage for any necessary element to
treat a particular condition will trigger loss of
grandfathered status.
 Regulatory example is a plan providing coverage for treating
mental health conditions, through both counseling and drug
therapy – elimination of counseling would be an elimination of
substantially all benefits for this condition.
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Changes Causing Loss of
Grandfathered Status
 Any increase in participants’ coinsurance
percentage
 Example: Cannot change from requiring participant to
pay 20% of covered expenses (up to annual out-ofpocket max), and then change to requiring participant
to pay 30% of same charges.
 Increasing participant coinsurance percentage causes
automatic loss of grandfathered status based on
theory that coinsurance automatically rises with
medical inflation.
Changes Causing Loss of
Grandfathered Status
 Inclusion of an overall annual limit on the dollar value of
plan benefits if no overall annual limit imposed prior to
the enactment of the PPACA;
 Inclusion of an overall annual limit on the dollar value of
benefits that is lower than a previously-imposed lifetime
limit on the dollar value of benefits, if the plan previously
had no overall annual limit;
 Inclusion of a new annual limit for a particular covered
benefit if no annual limit (or a lower annual limit) imposed
for that covered benefit prior to enactment of the
PPACA.
Changes Causing Loss of
Grandfathered Status
 For insured plans, issuance of a new group
insurance policy or entering into a new group
insurance contract.
 Prohibits employers from changing group health
insurance companies without automatic loss of
grandfathered status;
 Also prohibits changing policies or entering into a new
group contract with an existing insurer without
automatic loss of grandfathered status.
Changes Causing Loss of
Grandfathered Status
 Increasing a fixed-amount cost-sharing
requirement other than a copayment (such
as deductible or out-of-pocket limit), if total
percentage increase (as compared to
3/23/10) exceeds medical inflation
(expressed as a percentage) plus 15
percentage points.
Changes Causing Loss of
Grandfathered Status
 Increasing a fixed-dollar copayment by more
than $5 (indexed for medical inflation and as
compared to 3/23/10), or
 If a fixed-dollar copayment expressed as a
percentage, increasing by more than medical
inflation (expressed as a percentage) plus 15%
(as compared to 3/23/10).
Changes Causing Loss of
Grandfathered Status
 Decreasing the employer’s percentage
contribution rate to the total cost of
coverage by more than 5 percentage
points below the employer’s contribution
rate on 3/23/10
 “Total cost of coverage” is the applicable
COBRA premium (less the 2% admin fee).
Adjustment of Employer
Percentage Contribution: Example
 Assume total cost of coverage (COBRA rate) on 3/23/10 was $5,000
(single) and $12,000 (family).
 EE with single coverage paid $1,000 (20%) toward total cost, ER paid
$4,000 (80%)
 EE with family coverage paid $4,000 (33%) toward total cost, ER paid
$8,000 (67%)
 Assume total cost of coverage increases to $6,000 (single) and
$15,000 (family) on 1/1/2011. Employer adjusts contribution rates:
 EE with single coverage pays $1,200 (20%) toward total cost, ER paid
$4,800 (80%)
 EE with family coverage pays $5,000 (33%) toward total cost, ER pays
$10,000 (67%)
 Result: no increase to contribution rates based on total cost of
coverage, therefore, no loss of grandfathered status.
Status Determined Separately
for Each Plan/Benefit Option
 Rules require separate examination of changes
to each benefit option (even options under the
same plan or policy) to determine if
grandfathered plan status lost.
 Anti-abuse rules prohibit elimination of entire
plan or benefit option, if resulting change in
benefits or cost-sharing would be outside
changes permitted to retain grandfathered status
– in this case, remaining plan/option(s) will lose
grandfathered status.
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Transitional Rules
 Changes made prior to 3/23/10 but not yet
effective when PPACA enacted will not cause
loss of grandfathered status if:
 Changes are being made pursuant to legally binding
contract entered into on or before 3/23/10;
 Changes are being made pursuant to filing with a
state insurance department made on or before
3/23/10;
 Changes are being made pursuant to written
amendments that were adopted on or before 3/23/10.
 What about plan changes announced prior to 3/23/10 that do not
require a written plan amendment?
Transitional Rules
 Changes adopted after 3/23/10 but prior to
6/14/10, when interim final regulations issued,
will not cause loss of grandfathered status if
those changes are modified or revoked prior to
the effective date of PPACA. A change is
considered “adopted” if:
 The change was effective prior to 6/14/10;
 If change effective after 6/14/10, the change would be
made pursuant to a legally binding contract entered
into before 6/14/10, or pursuant to a written
amendment adopted before 6/14/10.
Disclosure Requirements for
Grandfathered Plans
 To maintain grandfathered status, all plans and policies
must include a written statement to participants that it is
a grandfathered plan under the PPACA, and must
provide contact information for questions and
complaints.
 Statement must be included in any plan materials
provided to participants describing the benefits provided
in the plan or policy (such the SPD, benefit summaries
and insurance certificates).
 Interim final regulations provide model statement
intended to satisfy this requirement.
Documentation Requirements for
Grandfathered Plans
 For as long as a plan or policy takes the position
that it is a grandfathered plan, the plan or policy
must maintain records documenting terms of the
plan or coverage in effect as of 3/23/10, and
“any other documents necessary to verify,
explain, or clarify its status as a grandfathered
health plan” under the PPACA
 What records will satisfy this requirement?
 Records must be made available for
examination upon request.
Grandfathered Plan Status:
Unanswered Questions
 Interim final regulations do not address eligibility
changes outside of adding new employees and
additional family members
 Impact on elimination of eligible class of participants (such as
implementing a spousal carve-out, or eliminating participation for
part-time employees) on grandfathered status not addressed
 Are benefits of grandfathering worth strict restrictions on
cost and benefit design?
 Considerations include existing plan design, current funding
method (insured v. self-funded).
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Grandfathered Plan Status:
Unanswered Questions
 Regulations also do not address whether an employer
can make changes to benefits that are part of a health
plan or policy, but not considered to be essential health
benefits under the PPACA, without impacting
grandfathered status (such as dental and vision).
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Patient Protection Provisions:
Guidance from Interim Final Rules
 Published on June 28, 2010
 Interim Final Rules address:




Preexisting Condition Exclusions
Lifetime and Annual Limits
Rescissions
Patient Protections
Preexisting Condition Limitations
 The PPACA amends the HIPAA preexisting
condition limitation rules to provide that a group
health plan and a health insurance issuer
offering group or individual health insurance
coverage may not impose any preexisting
limitation exclusion.
 Generally effective for plan years beginning on
or after January 1, 2014.
 For enrollees under age 19, effective for plan
years beginning on or after September 23, 2010.
Preexisting Conditions Limitations
 HIPAA generally defines a preexisting condition
exclusion as:
 A limitation or exclusion of benefits relating to a condition based
on the fact that the condition was present before the date of
enrollment for the coverage, whether or not any medical advice
diagnosis, care or treatment was recommended or received
before that date (an exclusion of coverage of specific benefits).
 The PPACA not only prohibits the exclusion from
coverage of specific benefits but also the complete
exclusion of an individual from a plan or coverage, if that
exclusion is based on a preexisting condition.
 Applies to grandfathered group health plans but not to
grandfathered individual policies.
Lifetime and Annual Limits
 For plan years beginning after September 23, 2010,
group health plans and health insurance issuers are
prohibited from imposing lifetime limits on the dollar
value of health benefits.
 For plan years beginning on or after January 1, 2014,
group health plans and health insurance issuers are
prohibited from imposing annual limits on the dollar
value of essential health benefits.
 “Restricted” annual limits may be imposed until plan
years beginning on or after January 1, 2014.
Restricted Annual Limits
 Restricted annual limits are permitted with respect to “essential
health benefits” until plan years beginning on or after January 1,
2010.
 Restricted annual limits are applied on a per person basis, and thus
any overall annual dollar limit applicable to families cannot operate
to deny any individual participant the minimum annual benefits for
the plan year.
 Restricted annual limits are:
 For plan or policy years beginning on or after September 23,
2010 but before September 23, 2011: $750,000
 For plan or policy years beginning on or after September 23,
2011 but before September 23, 2012: $1.25M
 For plan or policy years beginning on or after September 23,
2012 but before September 23, 2014: $2M
Restricted Annual Limits
 The rules defining “essential health benefits” have yet to
be published.
 Until the rules defining “essential health benefits” are
published, the Departments will “take into account good
faith efforts to comply with a reasonable interpretation of
the term ‘essential health benefits”’.
 For this purpose, a plan or issuer must apply the
definition of “essential health benefits” consistently.
 A waiver process will be available if compliance with the
“restricted annual limits” rule “would result in a significant
decrease in access to benefits or a significant increase
in premiums”.
 Guidance from the Sec. of Health and Human Services
regarding the scope and process for applying for a
waiver is expected soon.
Notice and Open Enrollment
Requirements
 Group health plans and health insurance issuers must provide
notice that the lifetime limit no longer applies to individuals who have
reached a lifetime limit and who are otherwise still eligible under the
plan or health insurance coverage.
 These individuals must also be given an opportunity to re-enroll into
the plan or policy.
 The notices and enrollment opportunity must be provided beginning
not later than the first day of the first plan year (or policy year)
beginning on or after September 23, 2010.
 Anyone eligible to re-enroll must be treated as a HIPAA special
enrollee.
 Applies to grandfathered plans.
 Does not apply to certain account-based plans (Medicaid, health
FSAs, MSAs, certain HRAs (those which are either integrated with
other group health plan coverage that would comply with the
lifetime/annual limits rule or stand-alone retiree HRAs) or to
individual health savings accounts.
Prohibition on Rescissions
 Prohibits plans and health insurance issuers
from retroactively rescinding benefits coverage,
unless the individual was involved in fraud or
intentional misrepresentation of materials fact.
 Meant to prohibit rescissions for inadvertent
misstatements of fact.
 Applies to a single individual, an individual within
a family or an entire group of individuals.
Prohibition on Rescission: Definition
 Rescission is defined as a cancellation or
discontinuance of coverage that has
retroactive effect.
 Note: A cancellation or discontinuance of
coverage with a prospective effect is not a
rescission, nor is a retroactive cancellation
due to failure of individual to timely pay
premiums or contributions to coverage.
Prohibition on Rescission:
Notice Requirement
 Where rescission is still permissible, advance notice is
required.
 The group health plan or health insurance issuer must
provide at least 30 calendar days advance notice to an
individual before coverage can be rescinded.
 Guidance on any new notice requirements for
cancellations of coverage other than in the case of
rescission is expected to be issued by HHS, DOL and
the IRS soon.
 Guidance on new rights to appeal rescissions is also
expected soon.
 Applies to all health plans, including grandfathered
plans.
Patient Protections
 Choice of health care provider
 Applies only with respect to a plan or health
insurance coverage participating in a network
of providers.
 Emergency Services
Patient Protections: Choice of
Health Care Provider
 If a plan or health insurance issuer requires a participant
to designate a primary care provider, then each
participant, beneficiary or enrollee must be permitted to
designate any participating primary care provider in the
network who is available to accept him/her.
 A plan or health insurance issuer must now provide a
notice informing each participant of the terms of the plan
or health insurance coverage regarding designation of a
primary care provider.
 If the enrollee is a child, the plan or health insurance
issuer must give him/ her the ability to designate as the
primary care physician any participating pediatrician who
is available to accept him/ her (and provide notice of the
designation process).
Patient Protections: Choice of
Health Care Provider
 If a plan or health insurance issuer provides coverage for
OB/GYN care and requires designation of an in-network
primary care provider, the plan is prohibited from requiring
authorization or referral by the plan, issuer or any person
(including a primary care provider) for a female participant,
beneficiary or enrollee seeking OB/GYN care from an innetwork provider of OB/GYN care.
 The plan or health insurance issuer must provide notice to
each participant that the plan or issuer may not require
authorization or referral for OB/GYN care by a participating
health care provider. Notice must be provided when the plan
provides SPDs or the insurance issuer provides the
subscriber with a policy, certificate or contract.
Patient Protections: Choice of
Health Care Provider
 Model language related to the required participant
notice is included in the Interim Final Rules.
 General terms and exclusions of the plan or policy
are not affected (i.e. medical necessity, covered
benefits, etc.)
 Choice of Health Care Provider Rules do NOT apply
to grandfathered plans.
Patient Protections: Emergency Services
 A plan or health insurance issuer providing coverage for
emergency services cannot require the individual or the
health care provider to obtain prior authorization for
services (even if provided out-of-network).
 The plan or health insurance issuer must also not
impose any administrative requirement or limitation of
benefits for out-of-network emergency services that is
more restrictive than the requirements or limitations that
apply to in-network emergency services.
 Does NOT apply to grandfathered plans.
Patient Protections: Emergency Services
and Cost-Sharing Requirements
 Cost-sharing requirements expressed as a copayment amount or
coinsurance rate imposed for out-of-network ER services cannot
exceed those imposed if the services were provided in-network.
 However, providers may balance bill patients for the difference
between the billed charges and the amount paid by the plan or
insurance issuer.
 To ensure patients are not required to pay unreasonable balance bill
amounts, the rules require the plan or insurance issuer to pay a
“reasonable amount” for out-of-network services, equal to the
greatest of:
 The in-network negotiated amount for the same service;
 The amount for the emergency service calculated using the
same method the plan generally uses to determine payments for
out of network services but using in-network cost sharing
provisions rather than out-of-network cost sharing provisions.
 The amount that would be paid under Medicare for the service.
Adult Child Eligibility Extension:
Interim Final Regulations
 Under PPACA, all plans and policies providing
dependent coverage must extend eligibility for
coverage to adult children of participants until
26th birthday.
 Interim final regulations issued on May 10, 2010.
 Regulations make clear that adult child eligibility
cannot be conditioned on any criteria other than
relationship to participant – cannot consider fulltime student, tax dependency, residency or
marital status.
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Adult Child Eligibility Extension:
Implementation Rules
 Important provisions:
 Extended eligibility requirements effective for first
plan year beginning on or after 9/23/10;
 Many insurers and TPAs are implementing part of
this requirement now, allowing adult children to
remain covered even if no longer eligible under
existing criteria.
 Until plan years beginning on or after January 1,
2014, grandfathered plans may exclude adult
children who are eligible for their own employersponsored coverage (cannot exclude due to
availability of coverage through another parent).
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Adult Child Eligibility Extension:
Implementation Rules
 Important provisions:
 Plans are not required to extend eligibility to an
eligible adult child’s spouse or child.
 Plans must treat all children (including adults) the
same with respect to terms and conditions of
coverage - cannot charge an increased premium
or limit available plan options based on any other
requirement (other than relationship to parent).
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Adult Child Eligibility Extension:
Special Enrollment Requirements
 Plans must implement a special enrollment period for
adult children on or before first day of plan year after
9/23/10
 Must treat adult children as “special enrollees” under HIPAA
 Must allow employee and spouse to enroll at same time as adult
child, and
 Must allow election of any available plan options during enrollment
opportunity.
 Must inform all employees in writing of special enrollment
opportunity.
 Must allow a minimum of 30 days for enrollment.
 Can meet these requirements in conjunction with annual open
enrollment.
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Adult Child Eligibility Extension:
Tax Issues
 PPACA amends Sections 105 and 106 of federal tax code to
exclude from employees’ gross income the value of coverage
provided to adult children until tax year in which child turns 27.
 Imputed income calculations no longer necessary for coverage provided
to children who are not tax dependents under Code Section 152,
effective 3/30/10.
 Allows reimbursement of qualified medical expenses incurred
by adult children under health FSAs and HRAs, individual
HSAs still require that Code Section 152 tax dependency
established to reimburse expenses from HSA.
 Tax changes can be implemented immediately, but cafeteria
plan and HRA documents should be amended on or before
12/31/10 to reflect change in law.
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Early Retiree Reinsurance Program
 Available to employers who provide health
coverage to retirees between ages 55 and 64.
 Reimburses 80% of claims costs incurred by a
retiree participant between $15,000 and $90,000
(similar to stop-loss coverage).
 Program begins 6/1/10 (with respect to claims
incurred) and ends either when exchanges are
in place, or when $5 billion in allocated funding
is exhausted.
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Early Retiree Reinsurance Program
 Reimbursements must be used to reduce health benefit
or health premium costs of the employer, and/or to
reduce participant premiums or cost-sharing amounts;
cannot be used for “general revenue” of plan sponsor.
 To qualify, plan must include “programs and procedures”
to generate cost savings for chronic and high cost
conditions (e.g. disease management programs).
 Such programs and procedures could include those already in
place, or new programs.
 Insurer/plan must agree in writing to disclose all required
data for program participation with HHS, and attest that
written policies to reduce fraud and waste are in place.
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Next Steps to Receive Early
Retiree Reinsurance Payments
 Plan sponsors must apply to HHS and be accepted to
the program; reimbursements received on a first-come,
first-served basis
 Incomplete or insufficient applications will be rejected
and corrected application will go to back of the line
 Final application was issued by HHS on June 29, 2010,
and HHS is now accepting applications.
 HHS recently clarified that HHS will continue to accept
applications until funds depleted.
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Thank You for Participating!
Questions??
 Kristen L. Gentry
 (317)238-6288
 [email protected]
 Catherine (Katy) Stowers
 (317)238-6257
 [email protected]
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