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Implementing Health Care Reform: New Regulatory Guidance for Group Health Plans

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Implementing Health Care Reform: New Regulatory Guidance for Group Health Plans Kristen L. Gentry, Esq. Catherine M. Stowers, Esq. Health Care Reform Webinar Series ... – PowerPoint PPT presentation

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Title: Implementing Health Care Reform: New Regulatory Guidance for Group Health Plans


1
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

2
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).

2
3
Summary of Mandates EffectiveBeginning 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)

3
4
Summary of Mandates EffectiveBeginning 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).

4
5
Summary of Mandates EffectiveBeginning 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.

5
6
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.

6
7
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.

7
8
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.

8
9
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-of-pocket 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.

10
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.

11
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.

12
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.

13
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).

14
Changes Causing Loss of Grandfathered Status
  • Decreasing the employers percentage contribution
    rate to the total cost of coverage by more than 5
    percentage points below the employers
    contribution rate on 3/23/10
  • Total cost of coverage is the applicable COBRA
    premium (less the 2 admin fee).

15
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.

16
Status Determined Separatelyfor 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.

16
17
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?

18
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.

19
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.

20
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.

21
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).

21
22
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).

22
23
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

24
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.

25
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.

26
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.

27
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

28
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.

29
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.

30
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.

31
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.

32
Prohibition on RescissionNotice 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.

33
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

34
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).

35
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 in-network 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.

36
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.

37
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.

38
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.

39
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 full-time student, tax dependency,
    residency or marital status.

39
40
Adult Child Eligibility ExtensionImplementation
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
    employer-sponsored coverage (cannot exclude due
    to availability of coverage through another
    parent).

40
41
Adult Child Eligibility ExtensionImplementation
Rules
  • Important provisions
  • Plans are not required to extend eligibility to
    an eligible adult childs 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).

41
42
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.

42
43
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.

43
44
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.

44
45
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.

45
46
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.

46
47
Thank You for Participating!Questions??
  • Kristen L. Gentry
  • (317)238-6288
  • kgentry_at_kdlegal.com
  • Catherine (Katy) Stowers
  • (317)238-6257
  • cstowers_at_kdlegal.com

47
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