Explaining Health Care Reform: Wrap Up For 2010 And What To Expect In 2011 Layna S. Cook Baker, Donelson, Bearman, Caldwell & Berkowitz, PC450 Laurel Street, 20th FloorBaton Rouge, LA 70801 225.381.7000E-mail: email@example.com
A Recap of Provisions Implemented in 2010. • Changes on the Horizon for 2011. • Into the Future – the Exchanges.
Health Reform • The Patient Protection and Affordable Care Act (H.R. 3200) • The Health Care Education and Reconciliation Act (H.R. 4872) • Totals more than 2,000 pages • The Congressional Budget Office (CBO) estimates the legislations will cost $940 billion over a 10-year-period. Newsweek April 5, 2010 3
Provisions Effective in 2010 Related To Health Coverage • New Rules on Rescission of Coverage • Changes to Pre-existing Exclusions • Extension of Dependent Coverage to Age 26 • Limitations on Lifetime and Annual Limits • Required Coverage for Preventive Services • Changes to Emergency Coverage • Access to Specialists • New Internal and External Appeals Processes
Prohibited Changes Under Grandfather Regulations • Cannot Enter into a New Policy, Certificate or Contract of Insurance • Cannot Significantly Cut or Reduce Benefits • Cannot Raise Co-Insurance • Cannot Significantly Raise Co-Payment Charges • Cannot Significantly Raise Deductibles • Cannot Significantly Lower Employer Contributions • Cannot Add or Tighten an Annual Limit
Provisions Applicable to Grandfather Plans PPACA provisions that apply regardless of grandfather status • No lifetime limits and restricted annual limits • New limitations on rescission of coverage • Extension of dependent coverage • Pre-existing exclusion changes Grandfathered plans are exempt from: • First dollar preventive care • Patient protections • Revised appeals processes
Government Estimate of Plans LosingGrandfathered Status Through 2013 Source: Department of Health & Human Services
New Rules On Rescission of Coverage • Coverage can only be rescinded retroactively in cases of fraud or intentional misrepresentation of a material fact. • Prospective cancellations are still permissible. • Retroactive cancellations are permitted if based on the participant’s failure to timely pay premiums. • Thirty day written notice must be given to the participant before a rescission can occur.
Preexisting Exclusions under Age 19 • For both group and individual policies no preexisting condition exclusions for those under nineteen years of age. • Takes effect for plan/policy years beginning on or after 9/23/10. • Has had the unintended consequence of causing many insurers to drop “child-only” policies.
Extension of Dependent Coverage to Age 26 • Dependent status remains regardless of marital status, financial dependency, residency or eligibility for other creditable coverage. • Not required of grandfathered group plans when dependent eligible for other group coverage. • Those dependents that are under 26 and aged out must be provided reinstatement via open enrollment provided the plan is still in force. • Applicable to individual and group plans beginning plan/policy years on or after 9/23/10.
Required Coverage for Preventive Services • Must cover without application of deductibles or coinsurance: • Services rated “A” or “B” by the U.S. Preventive Services Task Force. • Immunizations recommended by the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention. • Preventive care and screenings for children as recommended by the Health Resources and Services Administration. • Preventive care and screenings for women as recommended by the Health Resources and Services Administration. • The recommendations of these groups cover pages of preventive services, including such services as mammograms, colonoscopies, cancer screenings, blood pressure tests, counseling to quit smoking, health checkups, and immunizations for children.
No Lifetime Limits On Essential Benefits • No lifetime limits on dollar value of essential benefits. • Means that there cannot be a overall lifetime policy maximum. • This does s not apply to HSAs, MSAs, or FSAs. • This does not preclude a plan from excluding all benefits with respect to a particular condition. • Prohibition against lifetime limits on essential benefits begins for plan/policy years on or after 9/23/10 but • those that have already met lifetime benefit maximum and policy still in force have an open enrollment right to be reinstated • reinstatement must be no later than the first day of the plan/policy year beginning on or after 9/23/10 and coverage must begin that date
Phase In on Restriction on Annual Limits • Restricted annual limits allowed for a period of time: • $750,000 for plan/ policy years beginning on or after September 23, 2010, but before September 23, 2011; • $1.25 million for plan/policy years beginning on or after September 23, 2011, but before September 23, 2012; and • $2 million for plan/policy years beginning on or after September 23, 2012, but before January 1, 2014. • No annual limits after January 1, 2004.
Essential Benefits For Annual and Lifetime Limits • Ambulatory patient services • Emergency services • Hospitalization • Maternity and newborn care • Mental health and substance use • Prescription drugs • Rehabilitative and habilitative services/devices • Laboratory services • Preventive/wellness/ chronic disease management • Pediatric services
Coverage Of Emergency Services • Prior authorization is not required for emergency services regardless of whether the provider is a participating provider. • Services provided by a nonparticipating providers must be provided with cost-sharing that is no greater than that which would apply for a participating provider. • Does not prohibit balance billing.
New Appeal Provisions • Internal Appeals Process • The new regulations broaden the definition of adverse benefit determination that to include rescissions, eligibility, pre-existing exclusions, benefit not covered, experimental/investigational determination, and other claim denials. • It requires 24 hour notification on urgent care requests. • Full and fair review including free copies of evidence as well as rationale, and avoidance of conflict of interest. • New notice standards.
New Appeal Provisions • External Review • An additional right for persons not satisfied with internal review process. • An appeal to an Independent Review Organization (IRO) which is an outside nationally recognized entity to conduct reviews of denials. • What does federal law require • State may adopt NAIC Uniform External Review Model for fully insured plans. • States rules must meet federal standards. • Self-funded plans may follow Technical Release or State rules that meet federal standards until interim final regulations are issued for external review of self-funded plans.
New Appeal Provisions • There are three major areas of external review: • Standard • Can be requested any time during the four months following an adverse benefit determination. • After notification, carrier must determine eligibility for external review . • If request determined eligible, IROs assigned on a random basis. • IRO not bound by carrier decisions or conclusions in review process. • Following a decision by IRO reversing carrier determination, carrier must immediately approve coverage. • Expedited • If regular time frames would jeopardize the life, health, or ability to regain maximum function of covered person. • Immediate determinations as to eligibility for expedited review required • IRO decision must be made within 72 hours. • If carrier determination reversed by IRO, then carrier must immediately approve coverage.
New Appeal Provisions • There are three major areas of external review: • Review of Experimental or Investigational Determinations • Review available if treatment is otherwise covered under plan but considered experimental or investigational and if treatment is not explicitly an excluded benefit and • Appropriately licensed treating physician determines: • standard services not effective nor medically appropriate • no available standard treatment that is more beneficial • Recommends that experimental/investigational treatment more beneficial
New Appeal Provisions • External Review IRO approval • IROs must be accredited by nationally recognized entity. • IRO must apply to Director for certification to be eligible. • Approvals by Director are for 2 years. • Minimum quality assurance mechanisms must be in place. • Clinical reviewers of IRO must be experts, be appropriately licensed, and have no substantial disciplinary history. • No conflict of interest and must be unbiased.
And Now For 2011. . .
Report Cost on W-2 • The aggregate cost of employer sponsored coverage must be reported on an employee’s W-2. • Tax years beginning after 12/31/2010. • The amount is not taxed; it is merely reported.
Limitations on Tax Exempt Accounts • The cost of over-the-counter medicine (other than doctor prescribed) may not be reimbursed through health FSA, HRA, HSA or Archer MSA. • Tax years beginning 1/1/2011.
HSA Excise Tax • The ten percent (10%) excise tax on HSA distributions for non-medical purposes is increased to twenty percent (20%). • Distributions beginning 1/1/2011.
Medical Loss Ratios • Requires refunds annually for amounts of premiums that exceed amounts for claims and improvement of health care quality by 20% for group coverage and 25% for individual coverage. • Health care quality improvement standards are to be developed by NAIC and submitted to HHS. • Health care quality expenses, as defined by the NAIC are those that: • Improve health outcomes including increasing the desired outcomes compared to a baseline and reducing health disparities among specified populations. • Prevent hospital readmissions. • Improve patient safety and reduce medical errors, lower infection and mortality rates. • Increase wellness and promote health activities; or • Enhance the use of health care data to improve quality, transparency, and outcomes.
Medical Loss Ratios • Excluded items include: • Retrospective and concurrent Utilization Review. • Fraud Prevention activities. • The cost of developing and executing provider contracts and fees associated with establishing or managing a provider network. • Provider Credentialing. • Marketing expenses. • All Accreditation Fees. • Costs associated with calculating and administering individual enrollee or employee incentives. • Beginning January 1, 2011, health insurers providing coverage that does not meet the minimum loss ratios must provide an annual rebate to each enrollee under such coverage, on a pro rata basis.
Tax Credits For Small Employers • For 2010 tax year, there is a tax credit available for “small employers” who contribute towards health plan premiums. • Tax credit is 35% of employer contribution towards health plan premium (25% if employer is tax-exempt). • Credit increases to 50% in 2014 (35% if employer is tax-exempt) if coverage is purchased through an Exchange • Must have 10 or fewer employees and average wage of less an $25,000.00. Lower level credit for employers with less 25 employees and average wage less than $50,000.00.
Health Insurance Exchanges Health Insurance
The Purpose of an Exchange • To promote transparency in health insurance • Increase competition • Increase portability of coverage • Facilitate ease of enrollment in health insurance plans
Timeline of Events • 2011 • Federal funds to establish Exchanges available one year from enactment (2011-2015) • 2013 • Secretary to step in if determined state will not have exchange in place by 2014 • 2014 • States required to establish American Health Benefit (AHB) Exchange and Small Business Health Options Program (SHOP) Exchanges: • States are permitted to merge AHB and SHOP into one exchange • States permitted to form more than one exchange, if that exchange serves a specified geographical area • Allows multi-state exchanges • Exchanges can charge insurers user fees
Requirements of Exchanges • Must be operated by a State-established governmental agency or nonprofit entity (i.e. not an insurance company or broker) • Required to publish average costs of licensing, regulatory fees as well as administrative costs • Must make qualified health plans (QHP) available to individuals and small businesses and barred from including non-qualified plans
Functions of the Exchanges • Implement procedures for certification, recertification and decertification of health plans as QHP. • Provide a telephone hotline to respond to requests for assistance. • Provide an Internet portal for enrollees to obtain comparative plan information. • Assign a rating of plan premiums and quality. • Utilize a standardized format for presenting benefit options. • Inform individuals of eligibility requirements for Medicaid, CHIP or any applicable state or local public program and enroll such individual if he or she is eligible. • Establish an electronic calculator to determine cost of coverage. • Grant a certification attesting that an individual is exempt from the individual mandate to have insurance because no affordable QHP is available and notify the Treasury Secretary. • Provide each employer name of employee who ceases coverage in a QHP during the year. • Require QHPs to submit justification for any premium increase prior to implementation of increase.
Qualified Health Plan • QHP is defined as a plan that: • Is certified by the Exchange through which it is offered that it meets the Act’s certification criteria • Provides the Essential Health Benefits • Is offered by an insurer that is: • Licensed and in good standing in each state in which it offers coverage • Agrees to offer at least one QHP in the silver and gold levels in each Exchange • Complies with the regulations promulgated by the Secretary
Essential Health Benefits • Each QHP must offer a core set of “essential health benefits” set by HHS. • The scope of essential health benefits must equal the scope of benefits provided under a typical employer plan. • If a State mandates additional benefits, it must provide payment to the enrollee, or to the plan on the individual’s behalf, for the incremental premium cost attributable to the extra mandated benefit. • No impact on state benefit mandates outside Exchange.
Eligible Individuals • Any person qualifies for individual Exchange QHP coverage if he or she lives in the State, is not incarcerated (except for those awaiting disposition of charges) and is a citizen or an alien anticipated to be lawfully in the country for the enrollment period • Refundable premium assistance credit only available to individuals purchasing through the Exchange • Individuals purchasing through Exchange may be eligible for cost sharing reduction
Eligible Small Groups • A small employer with an ERISA group health plan can participate in the Exchange if all full-time employees are eligible for coverage. • “Small group” means an employer that in the previous year averaged 1 or more employees but not more than 100. • Until 2016, a State can substitute 50 for 100. • A small employer in the Exchange will continue to be treated as small until it leaves the Exchange, even if it becomes larger
Eligible Large Groups • Large groups may not participate in state Exchanges until 2017. • Starting in 2017, a State may permit insurers to provide coverage for large employers through the Exchange.