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Health Care Reform

Health Care Reform

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Health Care Reform

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  1. Health Care Reform Marcia S. Wagner, Esq.

  2. Introduction • Legislation • Patient Protection and Affordable Care Act • Health Care and Education Affordability Reconciliation Act of 2010 • Main Objectives & Consequences • Increase transparency and efficiency of the health care system • Require health care coverage for individuals • Provide premium subsidiaries for lower income individuals • Impose new taxes, responsibilities, and penalties on employers and others

  3. Mandatory Coverage for Individuals • Effective 2014 • Most U.S. residents must have minimum “essential health benefits” or pay a penalty • Penalty: • $95 or 1% of income in 2014 • $695 or 2.5% of income in 2016

  4. Premium Assistance • Small employer subsidies • Employees eligible if income between 100% and 400% of federal poverty level • Cost sharing subsidy for those with income below 200%

  5. American Health Benefit Exchanges • Operational in 2014 • Offer Bronze, Silver, Gold, Platinum, and Catastrophic Plan coverage to individuals • Out of pocket costs reduced for lower income individuals • SHOP

  6. Insurance Market • Guaranteed Issue • Guaranteed Renewability • High Risk Pool • Rating only by: • Family structure • Community rating value of benefits • Age • Smoking

  7. Medicare and Medicaid • Reduce certain Medicaid payments • Independent Advisory Panel • Close Medicare Part D doughnut hole

  8. Funding • Additional taxes imposed on the insurance industry: • A 40% excise tax is imposed on “Cadillac” plans • Increase Medicare portion of FICA • A 3.8% surtax is imposed in 2013 on net investment income • Reduction of Medicare Part D premium subsides • Elimination of the deduction for expenses attributable to the Medicare Part D subsidy • Increase in the deduction threshold on medical expenses from 7.5% to 10% • A 10% excise tax on indoor tanning services

  9. Employer Group Health Plans – Future Consideration • Employers with more than 50 employees who do not offer minimum essential health coverage will be assessed a fee of $2,000 per employee, with an exception for the first 30 employees • If contributions are in excess of 9.8% of income, the employer will be assessed a penalty of $3,000 for each employee who receives a premium tax credit, with an exception for the first 30 employees • Maximum 90 day waiting period • Employers with more than 200 employees must automatically enroll their employees in the employer-sponsored group health plan

  10. Employer Group Health Plans – Future Consideration (continued) • Group health plans must have “effective” appeals processes • Employer must offer a “free choice” voucher • Health care flexible spending account plans will be limited to $2,500 • Notification requirements • Uniform summary of benefits • W-2 reporting • Individual coverage report

  11. Grandfather Rules • Definitions: • A group health plan that was in existence on March 23, 2010 • Identity of participants may change • Each benefit package examined separately • To maintain grandfather status, a plan must: • Include a statement saying plan is a grandfathered health plan; • Maintain records that document the terms of the plan in effect of March 23, 2010; • Make records available; • Provide contact information

  12. Grandfather Rules (continued) • Grandfather status will be lost if the plan: • Enters into a new policy, certificate, or contact of insurance after March 23, 2010 • Eliminates substantially all benefits for a specific illness • Increases co-insurance or cost sharing • Decreases employer contribution percentage • Imposes certain new annual limits on benefits

  13. Provisions Applicable to All Plans • Coverage for adult children • Restrictions on annual and lifetime benefit limits • Elimination of pre-existing condition exclusions • Limitation of rescissions • Over-the-counter medications Provisions Applicable to Non-Grandfathered Plans • Provide free preventative care services • Participants may select primary care providers, including pediatric care providers, and OB/GYNs • Insured group health plans will be subject to nondiscrimination rules • Emergency care services must be provided without prior authorization

  14. Coverage of Adult Children • Must make health care coverage available to children of plan participants until age 26 • May not consider: • Tax dependency • Residency • Student status • Marital status • Employment status • May exclude adult child who is eligible for health coverage under another employer’s plan • Cannot require additional contributions because child is adult

  15. Coverage of Adult Children (Continued) • Special enrollment period • For adult children who lost, or never had, coverage • Enrollment period must be at least 30 days • Must receive written notice of enrollment opportunity • Taxation • No imputed income even if adult child not tax dependent until end of tax year in which child turned 27 • Pre-tax contributions to cafeteria plan permitted if plan amended • Change in Status rules include adult, non-dependent children

  16. Restrictions on Annual and Lifetime Benefit Limits • No lifetime dollar limits on essential health benefits • Must notify individuals who reached prior lifetime limit of 30-day opportunity to re-enroll • Annual limits on essential health benefits must be at least: • $750,000 per plan years beginning after September 22, 2010 • $1.25 million for plan years beginning after September 22, 2011 • $2 million for plan years beginning after September 22, 2012

  17. Restrictions on Annual and Lifetime Benefit Limits (Continued) • Annual limit applies separately to each individual • Annual limit cannot be offset by non-essential health benefits • Exceptions to annual limit: • Health FSAs • HSAs • Mini-med or limited benefit plans • New open enrollment period

  18. Pre-Existing Conditions • Pre-existing conditions definition • Cannot impose on child under 19 • Cannot impose on anyone as of 2014 • Cannot exclude from coverage Rescission • Rescission is a retroactive cancellation of coverage • Rescission only permitted for fraud or intentional misrepresentation • Thirty day notice requirement

  19. Over-the-Counter Medications • Effective January 1, 2011 • Applies to all non-prescribed over-the-counter medications, except insulin • Health Care FSAs, HRAs cannot reimburse. HSA distributions taxable Preventative Care Services • Cannot have cost sharing such as co-pays or deductibles • Preventative Care includes: Well baby care; mammograms; services recommended by certain government agencies; services to be included by HHS

  20. Choice of Health Care Provider and OB/GYN Referrals • Must allow selection of any primary care or pediatric care provider in plan’s network • Referral to OB/GYN not required Non-Discrimination Rules for Insured Plans • Non-discrimination rules for insured plans will be “similar” to self-funded plan rules • IRS guidance needed

  21. Emergency Care Services • Must be provided without prior authorization or regard to plan’s network • Out-of-network and cost sharing requirements must be the same as for in-network • Emergency Medical Conditions – expectation of serious jeopardy or impairment to bodily functions or organs • Emergency service provider may balance bill patient

  22. Penalties • $110 per day penalty for failure to provide compliant SPD • HIPAA Penalties: • $100 to $50,000 based on number and nature of violations • Maximum penalty $1,500,000 per year • Separate violation occurs on each day of non-compliance

  23. Conclusion – Action Steps for Employers • Determine if you are a grandfathered plan • Assess plan with regards to new requirements • Prepare in advance for: • Required open enrollments • Plan amendments • New required communication materials and notices • Revisions of summary plan descriptions and new summaries of material modifications • Keep Alert! Government agencies will be issuing additional regulations and revising those that have already been issued

  24. Marcia S. Wagner, Esq. 99 Summer Street, 13th Floor Boston, MA 02110 Tel: (617) 357-5200 Fax: (617) 357-5250 Website: www.erisa-lawyers.com marcia@wagnerlawgroup.com A0041410