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Health Care Reform

 

February 2014

 

There has been a deluge of regulatory activity involving the Affordable Care Act (“Obamacare”), or the ACA. Some developments, such as the general postponement of the employer mandate until 2015 (and the recent postponement until 2016 for employers with 50-99 full time equivalent employees), have received significant press attention. Others involve details of interest primarily to lawyers and insurance companies. The most recent ACA regulatory developments that may be of interest to employers and HR professionals include: 

 

Wellness Programs
Recently issued regulatory FAQs deal with a number of topics including wellness programs that punish tobacco users with higher premiums. The expanded rules provide details on how employers can offer a reward of up to 50 percent of the cost of group health plan coverage for tobacco non-users or, alternatively to smokers who participate in programs that are directed at preventing or reducing tobacco use. The highlights of the new FAQs include:

 

  • A compliant wellness plan that charges tobacco users a premium “surcharge” (that is, it offers a premium reduction for non-use) must also make the premium reduction available for employees who complete tobacco cessation education program that is offered at the time of initial enrollment or annual reenrollment. For smokers who do not undertake the cessation education program, the premium surcharge can remain in place for the balance of the plan year. This is because the plan is not required (but is permitted) to provide another opportunity to enroll in the program later in the plan year.

  • Wellness programs which condition any premium “reward” on attaining a particular standard (such as obtaining a stated weight reduction or cholesterol level) must offer a reasonable compliance alternative to those who cannot attain the standard because it is medically inappropriate. The FAQs make it clear that the participants’ doctor (not a physician working for the program) should recommend an alternative compliance activity, such as participation in a weight reduction program for a participant who cannot attain a stated weight reduction for medical reasons. The wellness program, not the individual’s doctor, can then select a specific compliance activity (such as a particular weight loss program) but cannot be involved in the determination of whether that program should be offered to any particular participant for medical reasons.

For now, older smokers in particular may have a reprieve from the maximum premium penalties permitted under ACA rules. This is because of the ACA enrollment system that restricts the disparity in premiums between younger and older workers. This “glitch” will restrict enforcement of the maximum premium penalty at least until June, 2014 in accordance with a White House announcement. Market forces and state-imposed limits may also restrict smoker surcharges, which now average around 15 percent of premiums.

The Mini-Med Plan Lives On?
For larger employers, the prospect of covering their employees with a “fixed-indemnity” plan is still alive under the ACA. A recent Wall Street Journal article reports that AlliedBarton Security Services is offering its employees a low cost, non-compliant fixed indemnity plan as an alternative to a plan that meets ACA requirements. It expects that many of its security guard employees will elect the inexpensive coverage (say $80 per month) that pays a fixed amount for specific services regardless of actual cost. This would include plans that, for example, pay a flat $70 for a doctor visit and $20 towards each prescription. Catastrophic coverage is not included and the plan can carve out areas from coverage such as hospitalization and mental health services. This type of coverage has been criticized as substandard but still be may popular with younger, low paid workers who can spend less on cheaper coverage and even incur a penalty for not having ACA-compliant coverage for less cost than the cost of their employer’s more expensive plan. The bottom line for employers is that, if they offer at least one plan that meets ACA requirements, they may not be penalized by failing to offer “affordable coverage” to their employees. Regulators are aware of this situation and do not view it favorably. Recent guidance provides different requirements for fixed-indemnity group and individual policies, and it is unclear how these rules will impact group health plans when the employer mandate kicks in for larger employers in 2015.

Discrimination Ban
The ACA extended a ban on discrimination in health care benefits that has applied to self-insured plans for years to fully insured plans. The ban prohibits group health insurance plans from favoring highly compensated employees in terms of eligibility for such benefits or the value of such benefits. The general intent is to prohibit employers from offering enhanced or subsidized health care benefits to highly compensated management employees while at the same time not providing equivalent health benefits to rank and file employees. Enforcement of the new ACA provisions, which contain severe financial penalties for non-compliance, was formally postponed until publication of new IRS regulations which were expected to be in place by 2014. Recently, Treasury officials have advised that there will be further delay while the IRS wrestles with related regulatory concerns including the thorny issue of whether an employer violates the ACA non-discrimination rules if it offers the same coverage to all employees and rank and file employees choose to obtain coverage elsewhere, such as through a government sponsored health insurance exchange. While the IRS sorts this out, no enforcement action will be taken. However, it is still advisable for employers with fully insured plans to avoid obvious mistakes, such as offering executives free or subsidized health coverage, providing health coverage only to management employees, and making benefits available to dependents of highly paid executives that are not available on equivalent terms to dependents of other covered employees. Employees should avoid offering extended group health coverage (other than as required by COBRA) to departing executives as part of a severance package. This practice not only violates the ACA non-discrimination rules that the IRS is likely to finalize, but also ignores the terms of the group health plan, which typically extend coverage only to employees who satisfy an active employment requirement.


 

September 2013

 

Health care reform legislation, the Patient Protection and Affordable Care Act (ACA), requires employers to distribute an employee notice (exchange notice) about their rights to elect health coverage under government run state exchanges, or "marketplaces."

This notice must be distributed to all employees, including part-time employees and those not enrolled in coverage, by October 1, 2013 to advise them as to the features and availability of health care coverage through the government exchanges. The exchange notice also must be given to new employees at the time of hiring during the balance of 2013 and, for 2014, within 14 days of their start date. For this purpose (and not for general ACA compliance purposes), "employee" is broadly defined by applicable labor law precedent to include independent contractors who are economically dependent on the employer's business.

The exchange notice can be delivered by first class mail or by compliant e-mail. Details are in Department of Labor Technical Release No. 2013-02 which also explains the ACA Model COBRA notice. Bear in mind that open enrollment through the exchanges is supposed to be available by October 1, 2013 to afford individuals the right to elect coverage starting January 1, 2014.

The model text of the exchange notice for employees is available here (for employers that do not offer health plans to their employees) and here (for employers that do offer employee health coverage).

Recommendations:

Document the distribution of the exchange notice to all current employees by October 1, 2013. Group health insurers may not assist with this notice. Also consider distributing the notice to "economically dependent" independent contractors. Each employer's HR function also needs to include the exchange notice as part of the on-boarding process for 2013 because this notice must be distributed to new hires at the time of hiring (the more lenient 14-day notice period does not apply until 2014). Non-compliance will expose employers to possible employee claims although the general $100 per day ACA penalty for compliance failures will not apply with respect to the October 1, 2013 deadline.

 

June 2013

Government regulators continue to bombard group health administrators, HR staff and subject employers (those with 50 or more full-time employees, including "full-time" equivalents) with compliance tools. The general (and detailed) guidance on ACA compliance in checklist form is posted at www.dol.gov/ebsa/pdf/part7-2.pdf. Assistance with required ACA documentation also is available:

  • The model text of the exchange notice for employees is available here (for employers that do not offer health plans to their employees) and here (for employers who do offer employee health coverage). This notice must be distributed to all employees, including part-time employees and those not enrolled in coverage, by October 1, 2013 to advise them as to the features and availability of health care coverage through the government operated state-level exchanges. The exchange notice also must be given to new employees within 14 days of their start date. Bear in mind that open enrollment through the exchanges is supposed to be universally available by October 1, 2013 to afford individuals the right to elect coverage starting January 1, 2014.
  • COBRA notices and election forms need to be updated to reflect ACA features, including verbiage describing the "Health Insurance Marketplace". A model COBRA election notice has been posted at www.dol.gov/ebsa/healthreform. Although there is no stated deadline for adopting revised COBRA notices, they should be available for use no later than January 1, 2014, the date the ACA exchanges are supposed to be up and running.
  • Wellness programs are now subject to final regulations which implement the ACA increased general limit on "rewards" of 30 percent (up from 20 percent) of the cost of employee-only coverage.  Rewards of up to 50 percent of the cost of such coverage are permitted for wellness programs that prevent or reduce tobacco use. This means that employees can receive premium reductions and/or avoid a premium surcharge in these amounts to encourage them to participate in "health-contingent" wellness programs. Such limits do not apply to "participating" wellness programs, which are programs like fitness center reimbursement incentives that do not require participants to meet a specified "health related standard." The new rules are effective starting with the 2014 plan year.

Recommendations:

Implement required employee communications along with the other ACA compliance requirements. The model notices can be used but specific circumstances may dictate modification of those documents. For wellness programs, consider enhanced incentives (and related plan document, employee communications and administrative adjustments) well in advance of the 2014 plan year. Bear in mind that compliance with ACA wellness program requirements does not necessarily assure compliance with the Age Discrimination in Employment Act (ADA), so proceed with caution (and good advice).

 

 

February 2013

 

Regulatory releases under the Patient Protection and Affordable Care Act (ACA), or "Obamacare," are coming fast and furious. Recent focus has been on how a "large employer" (one with at least 50 full-time employees including "full-time equivalents") can satisfy the "employer mandate" to provide group health coverage. The news is not all bad. Call or email me for my personal take on all this, or to discuss your specific situation.

The highlights of recent developments include: 

Coverage For All? 
The "employer mandate" generally requires subject large employers to offer "substantially all" of their full-time employees (and their dependents) the opportunity to enroll in group health coverage providing "minimum essential coverage." Such minimum essential coverage also must be both affordable and provide "minimum value." The employer mandate and associated penalties for non-compliance are effective January 1, 2014. The proposed regulations define "substantially all" for purposes of the ACA coverage mandate as an offer of coverage that excludes no more than five percent of the employer's full-time employees (and dependents) or, if greater, five such full-time employees. This rule applies regardless of whether or not the limitation of the offer is "inadvertent". So employers have some administrative wiggle room and can even consciously exclude a limited number of employees. However, such exclusions do not protect employers from the ACA "assessable payment" if an excluded full-time employee obtains exchange coverage and receives a premium tax credit or cost-sharing reduction.

Family Coverage Is Not "Affordable" Coverage 
Employer penalties for violating these requirements (referred to as "assessable payments" but regarded by most of us - including the Supreme Court - as a tax) apply only if at least one full-time employee obtains coverage through one of the state exchanges and receives a premium tax credit or cost-sharing reduction available to lower income employees (see here for details). The proposed regulations have stirred up some controversy because of what they don't provide. First, "dependents" are defined as children under age 26. This excludes spouses, so employers have no responsibility under this regulatory guidance to offer health coverage to the spouses of full-time employees. Second, affordability standards can be limited to the cost of employee-only coverage. Such coverage must be offered at a cost to the employee that does not exceed 9.5 percent of the employee's Form W-2 wages (this is a "safe harbor" rule that many employers will apply). Although subject employers also have to offer coverage to dependents of the employee (but not the spouse!), that coverage can be offered at any price. In short, family coverage has to be offered, but it doesn't have to be "affordable." So what if the cost of dependent coverage causes an employee to obtain dependent coverage on a state exchange? Will that trigger the employer-level ACA penalty (tax)? The answer is "No," at least for now. 

 

Affiliates Count! 
In determining the number of full-time employees for purposes of the 50 employee threshold, the proposed regulations require all employees working for entities that are members of a controlled group of corporations or an affiliated service group to be aggregated. However, any liability for the ACA "assessable payment" is applied separately to each employer that is a member of such a group. So, if a subject large employer includes a parent corporation and several wholly-owned subsidiaries, each of the subsidiaries along with the parent corporation is subject to the employer mandate regardless of the number of employees working for any individual corporation. However, any penalty payable by a separate corporation will be determined by the number of employees in that business unit, not the total of all employees engaged by all employers in the group.

Don't Try This 
At least one planning possibility mentioned in the proposed regulations is likely to be foreclosed in future guidance. The IRS is aware of proposed arrangements in which staffing agencies employ individuals for part of a week (say 20 hours) for one of their employer clients, and the same individuals are employed to do the same job for the balance of the week (another 20 hours or so) by another staffing agency or by the employer client. This arrangement would be intended to classify the individuals as part-time employees not subject to mandated health coverage by splitting each individual's hours worked between two separate "employers." The IRS is of the opinion that the primary purposes of such an arrangement is to avoid ACA's employer mandate and that, except in "rare circumstances," the employees in question would be treated as full-time employees.

Another Postponement 
Employers are required to issue an employee notice describing the state exchanges and details concerning the purchase of individual health insurance through such exchanges (see here for details). The March 31, 2013 deadline for the distribution of this notice has been postponed indefinitely pending issuance of further regulatory guidance which is expected to include an official template for the notice. Such guidance should be available by October 1, 2013 when the exchanges are supposed to be available to accept open enrollment applications for coverage.

Recommendations
Planning opportunities are presented by recent regulatory clarifications of the ACA. Alternatives to canceling group coverage and paying statutory penalties include increasing employee contributions to the cost of family coverage or even eliminating spousal coverage. Other possibilities include excluding up to five percent of an employer's full-time employees (or five such employees if that number is greater than five percent) or splitting off employees into smaller business units to mitigate liability for any employer penalties. Grandfathered plans may be restricted in making certain changes if they want to retain grandfathered status. Also bear in mind that any changes responsive to the ACA need to be carefully thought out and evaluated in terms of employee impact. Of course, subject employers will need to start documenting the status of their employees as either full-time or part-time during 2013 and operating their group plans in compliance with other existing ACA requirements (see here for details). 

 

December 2012

You have completed all the 2012 compliance steps required by Obamacare (the Affordable Care Act, or ACA) as set out in the September Benefits Bulletin (go here).  Now what?  With the current uncertainty over the ACA exchanges (and bearing in mind the open enrollment for exchange coverage starts in less than eleven months) and possible plan changes, administrators of group health plans should not lose sight of the following:

Background

Effective January 1, 2014, employers with 50 or more “full time equivalent employees” must either provide affordable qualified health coverage for all full-time employees or pay a penalty of $2,000 times the number of full-time employees reduced by 30 (so the first 30 employees are “free”).  If coverage is provided and it is not “affordable” as to any employee, the penalty is $3,000 per affected employee up to a maximum equal to the penalty that would apply if no coverage were offered ($2,000 times the number of full time employees less 30).  Coverage is affordable if the cost of employee-only coverage does not exceed 9.5% of the employee’s “family income” (an employee’s W-2 income can be used for this purpose).  “Full-time” employees are those who work 30 hours or more per week or 120 hours or more per month.

 

(a)        Who is a Full-Time Employee?

 

The IRS has issued Notice 2012-58 that provides “safe harbors” to assist employers in making the full-time determination for ACA purposes.  For example, contributing employees can be classified as part-time if they average less than 30 hours per week over an employer-designated “standard measuring period.”  Their status is then locked in during an immediately following “stability period” regardless of the employee’s actual number of hours during the stability period.  Because the employer’s measurement period can be between 3 and 12 consecutive calendar months, employers who want to use a 12 month measuring period (say an employer with a seasonal work force or a significant number of employees who may be right on the line between full-time and part-time employment) will need to be geared up to track work hours starting January 1, 2013 in order to have a “stability period” starting January 1, 2014 (that’s when the ACA coverage penalties kick in).  Also consider whether any temp agency employees need to be included in your head count for this purpose.  Because of the complexity of the IRS safe harbor rules, employers with concerns about the full-time/part-time status of their work force and those anticipating changes in their current employment arrangements (such as a shift to more part-time employees) will want to dig into the IRS safe harbor rules as quickly as possible.

 

(b)        Employee Exchange Notice.

 

The ACA requires employers to provide written notice to employees about the state exchanges by March 1, 2013 (new hires after that date should receive the notice at the commencement of their employment).  The notice must include a description of services available through the exchange and contact information as well as eligibility requirements for premium tax credits and the possible loss of employer contributions towards the cost of coverage if the employee purchases health coverage through the exchange.  An official template for this notice has been promised but is not yet available.

 

(c)        Plan Audits.

 

The Employee Benefits Security Administration (EBSA), the responsible branch of the Department of Labor, has added ACA items (as well as compliance with the Genetic Information Nondiscrimination Act, or GINA, and wellness program design) to its menu for group health compliance reviews.  With that in mind, plan administrators will want to make sure they have the following documents available in case the EBSA pays a visit:

 

(1)        For grandfathered plans: 

 

a copy of the grandfathered health plan status disclosure statement and records memorializing the terms of the plan as of March 23, 2010, the ACA grandfather date.

 

(2)        For non-grandfathered plans:

 

a copy of the participant choice of provider notice advising of rights to designate a primary care provider; records of any covered emergency room services and all preventive services for plan years on or after September 23, 2010; a copy of the plan’s internal claim and appeal as well as external review processes; notices of adverse benefit determinations, final internal adverse determinations, and final external review decisions; any contract with an independent review organization or TPA providing external claims review.

 

(3)        For all subject group health plans:

 

Sample notice describing dependent coverage of children to age 26; a list of any participants or beneficiaries whose coverage has been rescinded, the reason for rescission and the notice of rescission provided 30 days in advance of such rescission.

 

(d)       Cost Control.

 

The ACA will impose additional costs on most employers, but there are cost control options that do not require benefit cuts or increased premiums for employees.  Self insured group health plans may want to consider cost control options already included in their plan documents.  See here for details.

 

Recommendations:  The ACA has triggered much discussion about employer coverage issues, plan design changes and possible switches from a full-time work force to a part-time work force.  Don’t lose sight of the compliance requirements that apply no matter what.  With EBSA likely to be more active with ACA compliance reviews, bear in mind that compliance starts by maintaining the array of documents and data listed above.

 

September 2012

The Supreme Court has ruled that the Affordable Care Act, or ACA, is here to stay – at least for now.  Employers, HR professionals and outside advisors need to gear up for compliance.  Major requirements (such as the individual mandate) won’t kick in until 2014, but the ACA requires attention now to the following current requirements:

  • A four page (double sided) Summary of Benefits and Coverage (SBC) in standard format must be provided to health plan participants and beneficiaries as of the first open enrollment period and first plan year beginning on or after September 23, 2012 (see here for details).

  • Claims, appeals and review procedures of non-grandfathered group health plans are subject to ACA requirements, including the external claims review by “independent review organizations” for self-funded ERISA plans.  The enforcement grace period for these rules ended December 31, 2011 for calendar year plans and subject plans should have implemented compliant claims procedures by now (see here for details).

  • Employers required to file 250 or more employee Form W-2s for the preceding tax year must report the cost of group health coverage in Box 12 (Code DD) of its W-2s for 2012.  Employers with fewer employees are exempt from this requirement.  The cost determination can be based on COBRA premium rates excluding any administrative fee.

  • The ACA currently requires employers with 50 or more employees (and employers with fewer employees if compliance would not be “unduly burdensome”) to provide nursing mothers private space and reasonable break time to express breast milk (details are at www.dol.gov/whd/nursingmothers/).

  • Employee salary reduction contributions to healthcare flexible spending accounts offered through employer cafeteria plans are capped at $2,500 effective for plan years starting after December 31, 2012.  Cafeteria plan amendments do not have to be adopted until December 31, 2014, but employee election materials for calendar year plans will have to be revised for the 2012 election period, and cafeteria plans will have to implement the new limit for the 2013 plan year.

  • Insurers under individual health insurance policies and employers who sponsor self-funded plans must pay an annual “patient-centered research outcome fee” of one dollar times the average number of covered lives under the plan effective as of plan years ending after September 30, 2012.  For calendar year plans, that’s the plan year 2012.  For plan years ending on or after October 1, 2013 and prior to October 1, 2019, the annual fee is two dollars times the average number of lives covered by the plan (a total that includes participating employees and covered dependents). HRAs (health reimbursement arrangements) offered in connection with a fully-insured group health plan are considered to be self-funded plans subject to this fee.  Plan sponsors are required to report and pay the fees on IRS Form 720 by July 31 of each calendar year.

  • Non-grandfathered health plans must cover women’s preventive services without participant cost sharing (that is, “free”).  Covered services include wellness visits, PAP screening, contraceptives (with an exemption for some religious organizations) and counseling for domestic violence.  The requirement is effective for plan years beginning on or after August 1, 2012.

  • The medical loss ratio provisions of the ACA require insurers to spend a minimum percentage of health insurance premium dollars (85 percent for plans covering more than 50 employees and 80 percent for smaller group plans and individual policies) on payment of medical claims and activities to improve health care quality (as opposed to insurer overhead costs, commissions, and profits).  If these percentage requirements are not satisfied in a particular year, the insurer is required to rebate an amount based upon aggregate market data in each state, not the experience of a particular group health plan.  Rebate checks for 2011 were due August 1, 2012.  The Department of Labor (DOL) considers the portion of the insurer’s rebate that is allocable to participant contributions to be plan assets that must be applied to enhanced benefits, credited to or paid to participants or, if the plan permits, applied to administrative expenses (any balance can be retained by the employer).  Guidance on this allocation and possible payment to former participants as well as current participants is provided in DOL Technical Release 2011-04. Rebate amounts allocable to participants must either be applied for the participants’ benefit or deposited to the account of those participants in the plan’s trust fund (if the plan has one) within three months of receipt.

  • The ACA has targeted non-grandfathered, fully insured group health plans with nondiscrimination rules similar to those which currently apply to self-funded plans.  These rules restrict insured arrangements that provide executives and other highly compensated employees with enhanced health benefits or subsidized coverage.  Although enforcement of the new rules has been postponed pending the issuance of clarifying regulations by DOL Notice 2011-1, employers should proceed cautiously with any contract arrangement that offers executives additional or enhanced group health coverage, or provides post-termination benefits such as COBRA reimbursement.

March, 2012

The Health Care Reform legislation (now referred to as the Affordable Care Act, or ACA) requires group health plans (both grandfathered and non-grandfathered) and insurers to provide participants and beneficiaries a Summary of Benefits and Coverage (SBC) in order to allow consumers to compare available health coverage options in a standard format. The final rules generally apply as of open enrollment periods and plan years beginning on or after September 23, 2012 (health care insurers must comply as to both group and individual policies by September 23, 2012), which is an extended effective date.  
Click here to read more

November, 2011

The Health Care Reform legislation (the Patient Protection and Affordable Care Act, or “PPACA”) requires group health plans (including grandfathered plans) to prepare and issue to participants a four page (two sided) Summary of Benefits and Coverage (“SBC”) in a prescribed format incorporating a “uniform glossary.” Proposed regulations released in August provided a March 23, 2012 effective date for compliance with the SBC requirements, and invited comments on the proposed regulations. Based on those comments, the Departments of Labor, Treasury and Health and Human Services recently published an FAQ noting the above circumstances and postponing required compliance with the SBC rules until final regulations have been issued. Accordingly, compliance with the SBC rules has been postponed indefinitely for both subject plans (and their third party administrators) as well as health insurance carriers. The FAQ also advises that final SBC regulations, when issued, will provide interested parties “sufficient time” to comply. See here for more details.

August, 2011

Health Care Reform legislation (the Patient Protection and Affordable Care Act, or “PPACA”) imposes additional claims processing requirements on subject group health plans and insurers. There are new claims notices, revised procedures and, for self-funded ERISA plans, a Federal external claims review requirement.
click to read more...

April 2011

Health care reform legislation, the Patient Protection and Affordable Care Act (or “PPACA”), continues to evolve as the challenge to its constitutionality winds through the courts.

In a significant legislative development, the President recently signed a bill that repeals the PPACA requirement for businesses to report all purchases of goods and services from a single vendor of more than $600 in a calendar year on IRS Form 1099-MISC.  This legislation eliminates a previously postponed requirement that had been the target of advocacy groups as unduly burdensome for small business owners.  The reporting requirement continues, as under pre-PPACA law, but applies only to payment of rent for real estate, salaries and other forms of compensation for services rendered.

More recently, budget legislation which has been signed into law repeals the PPACA “free choice” voucher program.  This program would have allowed lower income employees to receive vouchers for the employer-paid portion of group health coverage under an employer-sponsored plan.  The vouchers could be used to purchase an individual policy through the state-run insurance exchanges that are scheduled to begin operating in 2014.  The repeal reflects concerns about an employer’s ability to identify employees who would be eligible for the program, which was based on an employee’s household income level.

Other recent PPACA regulatory developments include:

·         Certain PPACA provisions relating to the internal claims denial and appeal procedure have been postponed in Technical Release 2011-01.  PPACA initially required compliance as of the first plan year starting on or after September 23, 2010.  The recent postponement extends required compliance until the first plan year on or after July 1, 2011 as to the issuance of a denial code and its meaning in an adverse benefit determination, providing a description of the internal and external claims review processes, and including a “discussion” of the decision in any final internal benefits denial.  Other provisions are extended to plan years beginning on or after January 1, 2012, and include a requirement to provide notices in a “culturally and linguistically appropriate manner,” mandatory response to “urgent” claims in 24 hours, strict employer adherence to all internal claims and appeal processes as a condition for requiring claimants to “exhaust” the claim and appeal processes before filing suit, and automatic disclosure of diagnosis and treatment codes that are currently available only on patient request.  None of the PPACA claims denial and appeal requirements apply to grandfathered plans, and PPACA’s external review requirements are not subject to the administrative postponement.

·         The Department of Health and Human Services has proposed regulations applicable for policy years beginning on or after January 1, 2012 that would exempt student health plans from PPACA’s guaranteed availability and guaranteed renewability requirements as well as PPACA’s prohibition of annual benefit limits.  The proposed regulations treat insured student health plans as individual plans, not as covered “group health plans,” because there is no employment relationship.

·         The Department of Labor has published Frequently Asked Questions and a Fact Sheet offering guidance on the Nursing Mothers Law which is part of PPACA.  This provision has been effective since March 23, 2010, and requires employers to provide nursing mothers private space and reasonable break time to express breast milk for up to a one year period following childbirth.  The Department of Labor guidance at www.dol.gov/whd/nursingmothers/ specifies that the private space cannot be a bathroom but also need not be a dedicated space for nursing mothers.  Breaks are expected to be required two or three times per day on the average and can be expected to last at least 15 or 20 minutes.  The Department of Labor guidance suggests that both nursing mothers and employers should ask about appropriate arrangements and the nursing mother’s interest to express breast milk at work.  Employers with fewer than 50 employees may be exempt from the law if compliance would be unduly burdensome.

Recommendations:  The PPACA tinkering reflected in recent legislative and regulatory developments clearly does not indicate any material change in the PPACA approach to health care delivery.  Subject to any holding by the Supreme Court that PPACA is unconstitutional, the continuing legislative and regulatory adjustments merely pave the way for full scale implementation.  Employers, HR staff and their service providers should take prudent steps towards implementation based on the latest guidance and the best available professional advice.

December 30, 2010

Nondiscrimination Rules Postponed

PPACA nondiscrimination rules for nongrandfathered, insured group health plans – and substantial penalties for not complying with the new rule – have been postponed by a recent notice issued jointly by the IRS, Department of Labor and Department of Health and Human Services (Notice 2011-1). The nondiscrimination rules are similar to those that currently apply to employer-funded health reimbursement arrangements, but provide stiffer penalties on employers with 50 or more employees and insurers who provide health plans that discriminate on the basis of benefits or eligibility. The target of the new rules includes arrangements that provide executives and other highly compensated employees with enhanced benefits or subsidized coverage. Compliance has been postponed for an indefinite period following the issuance of clarifying regulations, which will not happen for at least several months (the public comment period is open until March 11, 2011, and regulations will not be issued until public comments can be considered). 

December 13, 2010

Health Care Reform Update: External Claims Review

There are a number of reasons an eligible group health plan may want to qualify as a “grandfathered” plan under the Patient Protection and Affordable Care Act (“PPACA”). One of the more burdensome requirements that can be avoided by perfecting grandfathered status is the implementation of a new claims and appeal procedure that applies to non-grandfathered plans. The new procedures include a requirement that subject plans provide an “external” review of denied claims. These new requirements apply as of the first plan year that begins on or after September 23, 2010 (that would be January 1, 2011 for calendar year plans).

Department of Labor guidance on the PPACA external review process provides compliance “safe harbors.” The alternative safe harbors are not the exclusive means of complying with the new external claims review requirement. Compliance is stated to be determined on a “case-by-case basis under a facts and circumstances analysis” to determine if the external review process is “independent and without bias.” However, the safe harbor options should be considered as a way of removing uncertainty, especially by larger plans with a significant number of claims appeals.

One safe harbor alternative requires self-insured plans to contract with at least three independent review organizations, or “ IROs,” and to rotate claims assignments among them in a manner that avoids any “bias” in their selection. The IROs must enter into a contract with the plan (or its third party administrator) that incorporates requirements set out in Department of Labor Technical Release 2010-01. Calendar year group health plans that select this safe harbor will need to act quickly to complete the required documentation by December 31, 2010.

**

November 11, 2010

The “grandfathered” plan rules allow group health plans in existence on March 23, 2010 to avoid certain requirements of the Health Care Reform legislation (“PPACA”). So, under Health Care Reform, “if you like your current plan, you can keep it.” One problem for the smaller plans that are usually fully insured is that initial guidance stated that a change in the plan’s health insurance company by itself would cause a plan to lose its gradfathered plan status. However, it became evident that this would keep grandfathered plans from shopping for less expensive coverage among competing insurance companies.

The PPACA regulatory agencies recently announced that this rule is being reconsidered. As stated in a recent FAQ on PPACA implementation, the regulators will “shortly address the circumstances under which grandfathered group health plans may change carriers without relinquishing their status as grandfathered health plans.” This may be government-speak for “we goofed, now we know it, and we’ll fix it when we get around to it.” In the meantime, fully insured plans that want to retain grandfathered plan status may want to shop carriers to try to get a better offer. Just make sure any plan design changes are permitted under the grandfathered plan rules 
a(see http://benefitslawgroupofchicago.com/HTML/2010/health-care-reform-2010.htm ) .

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October 22, 2010

The controversial requirement that employers report the “aggregate cost” of employer-provided group health coverage along with employee wages on Form W-2 has been postponed. Initially effective for taxable years beginning on or after January 1, 2011, a recent IRS notice advises that this reporting requirement will not be mandatory for 2011. Future IRS clarification of this reporting requirement is in the works, and we expect that compliance for 2012 and subsequent tax years will be required.

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Andrew S. Williams has practiced in the employee benefits and ERISA arena since ERISA was passed in 1974.  He has been recognized by his peers through a survey conducted by Leadings Lawyers Network as among the top 5 percent of Illinois lawyers in Small, Closely and Privately Held Business Law and Employee Benefits Law. 

   
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