Transcript The 2010 Election Cycle

Implementing
Health Care Reform
Grandfathered Plans,
New Consumer Protections
and What’s on the Radar Screen
National Association of Health Underwriters
August 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 preauthorization 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 selffunded
• 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. 23
All 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 cooperative 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 selffunded 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
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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
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
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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 employerprovided 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
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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
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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