Implementing Health Care ReformGrandfathered Plans,New Consumer Protectionsand What’s on the Radar ScreenNational Association of Health UnderwritersAugust 2, 2010
Recap on Legislation • President signed Patient Protection and Affordable Care Act (PPACA) on March 23 • Makes significant statutory changes affecting the regulation of and payment for many types of private health insurance – many insurance market reforms • Will require almost all private sector employers to evaluate the health benefits they currently offer and consider whether they are compliant • For those without access to employer coverage, new individual mandate to purchase and maintain minimum coverage
Grandfathered Plans • Essentially all plans in effect on date of PPACA enactment (March 23, 2010) are “grandfathered” • Very few changes are permitted if a plan wants to retain grandfathered status • Plans must provide a statement to participant that it believes it is a “grandfathered” plan • Plans that made changes between March 23 and June 14 have an opportunity to reverse any significant changes made without losing grandfathering status. • This must be done by the plan year following September 23, 2010
The “Why” of Grandfathered Plans • PPACA requirements that are waived if a plan remains “grandfathered • The requirement that emergency services must be provided without pre-authorization and treated as in-network • The rating limits, guaranteed issue, guaranteed renewability, and essential benefits packages that begin in 2014 • The cost-sharing and deductible limits, non-discrimination for clinical trial participants, non-discrimination on providers acting within scope of license • No cost sharing for preventive care • The non-discrimination rules for fully insured plans • The requirement that pediatricians must be an allowable primary care physician choice • The requirement that females can go to an OB/GYN without a referral • The requirement that plans must provide an internal and external appeals process
What Grandfathered Plans Can’t Do • Can’t increase Co-insurance rate • Can’t increase Co-pay more than the greater of $5 (adjusted annually for medical inflation) or medical inflation plus 15% • Can’t reduce employer contribution more than 5% • Can’t increase deductible more than 15% plus medical inflation
What Grandfathered Plans Can’t Do • Can’t use a merger, acquisition or business restructuring for the purpose of covering new individuals under a grandfathered plan • Can’t change carriers if you are fully insured • Can’t move employees to a grandfathered plan with lower benefits • Can’t make a significant cut to benefits such as eliminating benefits for a particular condition
What Grandfathered Plans Can Do • Add family members or new employees • Disenroll employees • Make changes as a result of state or federal regulations • Make changes to voluntarily adopt some or all of the law’s requirements • Change third party administrator if you are self-funded • Increase premiums
Effective Plan Years after Sept. 23 All Plans, Including Grandfathered • Restrictions on lifetime and annual limits • Plans may not impose lifetime limits on dollar value of “essential benefits” • Plans may impose only “restricted annual limits” on the dollar value of “essential benefits”. • HHS to establish what annual limits may be permitted on non-essential benefits. • On and after January 1, 2014, no annual limits will be permitted
Effective Plan Years after Sept. 23All Plans, Including Grandfathered • Coverage for dependents to age 26 • If a plan offers dependent coverage of children, such coverage must extend to a child until the child reaches age 26 • For grandfathered plans, this requirement applies before January 1, 2014 only if the adult child is not eligible to enroll in another plan • An additional premium may not be charged for this expanded eligibility
Effective for Plan Years after Sept. 23, other than Grandfathered • Preventive care without cost sharing • Very specific benefits • May include significant expansions on well child care • Nondiscrimination rules under IRS Code 105(h) applies to fully-insured plans • For all group and individual plans, including self-insured plans, emergency services covered in-network regardless of provider
Effective for Plan Years after Sept. 23, other than Grandfathered • Pre-Ex Restrictions • Plans may not impose any preexisting condition restriction on children under the age of 19. • Coverage for children must be issued regardless of health status. • Plans may have limited enrollment periods • After January 1, 2014, plans may not impose preexisting condition restrictions on anyone
Minimum Loss Ratios • Minimum loss ratio requirements will be established for insurers in all markets. • The MLR is 85% for large group plans and 80% for individual and small group plans (100 and below). • May impact provisions that reduce claims cost, such as pay for performance, nurse lines, disease management, etc. • May result in fewer carriers offering coverage in some areas, particularly rural, resulting in less consumer choice • Carriers will have to issue a premium rebate to individuals for plans that fail to meet the minimum MLR requirements.
PPACA in 2011 and 2012 • All employers must include on their W2s the aggregate cost of employer-sponsored health benefits • If employee receives health insurance coverage under multiple plans, the employer must disclose the aggregate value of all such health coverage, • Excludes all contributions to HSAs and Archer MSAs and salary reduction contributions to FSAs • Applies to benefits provided during taxable years after December 31, 2010 • A new federal tax on fully insured and self-funded group plans, starting at $1 and moving to $2 per enrollee, takes effect to fund federal comparative effectiveness research takes effect in 2012
PPACA in 2012 and 2013 • All plans must provide new summary of benefits to enrollees at specified times. • Can be no more than 4 pages in length • Must be cultural and linguistically appropriate • $2,500 Cap on Medical FSA contributions annually indexed for inflation begins. • All employers must provide notice to employees of the existence of state-based exchanges.
PPACA in 2014 • All individuals are required to carry coverage • Tax penalties for non-compliance • Exceptions for hardship and certain other income related circumstances • Imposes new annual taxes / fees (non-deductible) on private health insurers based on net premiums • $8.1 billion annually beginning in 2014 and rising to $14.3 billion by 2018 (and indexed for medical inflation thereafter) • Small businesses and employees could be disproportionately affected because tax only applies to fully insured health benefits (self-funded plans exempt)
PPACA in 2014 • Coverage must be offered on a guarantee issue basis in all markets and be guarantee renewable • Exclusions based on preexisting conditions would be prohibited in all markets • Significant restrictions on rates for individuals and small groups. • Age difference limited to 3-1, some additional changes for smoking status and participation in wellness programs • Redefines small group coverage as 1-100 employees. • States may also elect to reduce this number to 50 for plan years prior to January 1, 2016
PPACA in 2014 • Requires each state to create an Exchange to facilitate the sale of qualified benefit plans to individuals, including new federally administered multi-state plans and non-profit co-operative plans. • States will have a great deal of flexibility in the structure of exchanges • The NAIC is beginning work on model language • Creates sliding-scale tax credits for non-Medicaid eligible individuals with incomes up to 400% of FPL to buy coverage through the exchange. • Subsidies also available for those making 250% FPL or less for cost sharing such as co-pays and coinsurance, in addition to the premium subsidies. • In general, a person is not eligible for a subsidy if they have employer sponsored coverage, unless it is unaffordable.
Essential Benefits Defined • In 2014, the benefits that are considered to be “essential” will be fully defined. • These minimum benefit levels apply to all plans, except grandfathered plans and self-funded plans. • Self-funded plans, while not required to adhere to minimum benefit requirements, may choose to comply with at least the minimum requirement to avoid other fines.
Services Already Recognized as Essential in the Legislation • ambulatory patient services; • emergency services; • hospitalization; • maternity and newborn care; • mental health and substance use disorder services; • prescription drugs; rehabilitative services and devices; • laboratory services; • preventive and wellness services; • chronic disease management and pediatric services
More on Essential Benefits • Actual plans offered will cover essential benefits using four coverage tiers • Benefits are based on various percentages of the amount of health care used by an average person in a year • The Bronze level will be 60% of what an average person uses, Silver will be 70%, Gold 80%, and Platinum 90% • Actual benefits in each tier can vary as long as their benefits are actuarially equivalent to the percentage category for the plan tier • There will also be a plan designed to appeal to younger people under age 30 with a lower premium and a lower level of benefits. • Deductibles will be restricted to $2,000 for individuals and $4,000 for families but this can be increased if the employer contributes to an account that can be used to offset the higher deductible • For example, a plan could have a $3,000 individual deductible if the employer deposits $1,000 into the employee’s HSA, HRA, or FSA
Health & Wellness In 2014, new opportunities for companies to provide wellness and prevention programs to employers and to new health care exchanges Enhances HIPAA’s rules regarding wellness programs, with an increase in the limit applicable to wellness incentives from 20% to 30%. The reward for satisfying wellness program objectives may not exceed 30% of the cost of employee-only coverage under the plan Secretaries of HHS, Labor, and the Treasury would have the discretion to increase the reward up to 50% of the cost of coverage if the increase is determined to be appropriate
Employer Responsibilities • Effective starting January 1, 2014 • Employer must count all full-time employees and part-time employees – on a full-time equivalent basis – in determining if they have 50 or more employees • Certain seasonal workers are not counted in determining if employer has 50 workers • Full-time = 30 or more hours per week, determined on a monthly basis • Penalties assessed for “no coverage” or coverage that is not “affordable”
No Coverage • If an employer fails to provide its full-time employees (and their dependents) the opportunity to enroll in “minimum essential coverage,” and • One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost-sharing reduction, then • Employer penalty = $2,000 for each of its full-time employees in the workforce • This penalty is non-deductible • Penalty does not offset the cost of employee coverage
Unaffordable Coverage • If employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, and • One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost sharing reduction because • The employee’s share of the premium exceed 9.5% of income, or • The actuarial value of the coverage was less than 60%, then • Employer penalty = $3,000 for each full-time employee who receives a tax credit or cost-sharing reduction • If the employer has many employees in this category, the alternative penalty reverts to $2,000 per FT employee
Vouchers • The third prong of the employer responsibility requirements. • Requires employers to provide a voucher to use in the exchange instead of participating in the employer-provided plan in limited circumstances. • Employees must be ineligible for subsidies • Employees share of premium must be more than 8% to 9.8% of family income that is less than 400% of FPL • Employee can keep amounts of the voucher in excess of the cost of coverage
Additional Details • Penalties assessed on a monthly basis. • No penalties assessed on first 30 full-time employees. • No penalties apply to part-time employees. • No penalties for waiting periods (if any), not exceeding 90 days. • Total “affordability” penalty is capped. May not exceed penalty for “no coverage.” • Employer does not determine if employee is eligible for premium tax credit based on household income, but is notified by the exchange if full-time employee qualifies.
Other Responsibilities • Employers must automatically enroll “new full-time employees” in employer-sponsored coverage • Must provide adequate notice and opportunity to opt out • Applies to employers with “more than 200 full-time employees” • No effective date specified, but must be “in accordance with regulations promulgated by the Secretary (of DOL)…” (so presumably not effective until regulations are issued) • Notice to current employees and new hires about exchange and subsidies • Existence of exchange, services and how to obtain assistance • Availability of premium assistance if plan value below 60% • Loss of employer contribution and tax exclusion for contribution • Effective March 1, 2013
PPACA Bill Beyond 2014 • 40% excise tax on insurers of employer-sponsored health plans with aggregate values that exceed $10,200 for singles and from $27,500 for families takes effect in 2018. • Values of health plans include reimbursements from FSAs, HRAs and employer contributions to HSAs. • Stand-alone vision and dental are excluded from the calculation. • Premium values are indexed to CPI • Allows plans to take into account age, gender and certain other factors that impact premium costs