health care reform · june 17, 2010 – dol, irs & hhs released joint guidance/regulations on...

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Crawford Advisors, LLC

• 200 International Circle, Suite 4500, Hunt Valley, MD 21031

• 555 East Lancaster Ave, Suite 640, Radnor, PA 19087

• 800.451.8519

• www.CrawfordAdvisors.com

Via E-mail to: Your Sales Executive or Account Manager:

Patrick Curran [email protected]

Brenda Winemiller [email protected]

1Health Care Reform –Grandfathered Plans, Waivers &

Recent Court Decisions

PPACA – law on 3/23/2010HCEARA – law on 3/30/2010

Patrick C. Haynes, Jr. Today’s presenter

As counsel for Crawford Advisors’ Employee Benefits and Executive Compensation Group, Mr. Haynes advises employers and plan sponsors in a variety of health and welfare benefit plan compliance matters, including, but not limited to, tax qualification and other Internal Revenue Code issues, ERISA, COBRA and HIPAA portability and privacy issues. Mr. Haynes lectures frequently and has published many articles on health and welfare benefit plan compliance topics.

Practice AreasEmployee Benefits & Exec Comp, ERISA, COBRA, HIPAA, §125, and §§ 105, 106, 129, 132

EducationTemple University School of Law, LL.M.Rutgers University School of Law, J.D. Rutgers University School of Business, M.B.A. Rutgers University College of Arts & Sciences, B.A.

Admitted to PracticeU.S. Supreme CourtFederal and State Courts of

New JerseyPennsylvaniaConnecticutDistrict of Columbia

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Agenda

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A Few Definitions – Key Terms defined

Waivers from HHS? / Cases, Courts & Appeals

Political Process- Bills are law, GF Regs are here

Timeline effective Dates, GF Status, Cost Share and Dependent-changes

Common Employer Missteps / Benefit Guides

Questions

June 17, 2010 – DOL, IRS & HHS released joint guidance/regulations on Grandfathered Plans

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d

c

b

Political Process – now Regs

aHouse approved the Senate’s bill - Patient Protection and Affordable Care ACT (PPACA, H.R. 3590)

• President Obama signed PPACA /H.R. 3590 into law just before noon on March 23, 2010

House passed the Health Care and Education Affordability Reconciliation Act of 2010 (HCEARA, H.R. 4872)

•Final Vote – Senate 56-43, House 220-207

•House passed HR 4872 [on 3/25/2010 at 9:02 p.m., vote was 220-207 (32 Democrats joined 175 Republicans in voting no)]

For any provision of the law that has an effective date of 6 months after the bill enacted, the clock started ticking on Tuesday, March 23, 2010 at noon

6/14/2010: Keeping the Health Plan You Have: The Affordable Care Act and “Grandfathered” Health Plans

http://www.crawfordadvisors.com/?p=750

6/17/2010: Q&A from the DOL: Keeping My Health Plan Grandfathered


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a

b

c

d

Key Terms

Grandfathered Plan (“GF Plan”) – a plan that was in place on Tuesday, March 23, 2010. While the law is silent on what changes to plan design or carriers might void GF status, as of June 17, 2010, we have regulations defining changes that will cost a plan its GF Status

Fully Insured Plans – If you change carriers you will lose your GF status. This changed 11/22/10

Changes – are relative to what the Plan had in place on March 23, 2010

Self Funded Plans – a change in your TPA or Claims Payer will NOT cause you to lose your GF Status

11/22/2010: Grandfathered Plans – Updates & New Wrinkles. Sub-Topic – HHS Changes its mind!”

http://www.crawfordadvisors.com/news/grandfathered-plans-updates

2010:First Plan Year Beginning After 9/22/10

a. Eliminate any lifetime maximums on essential benefits.

b. Eliminate any annual coverage maximums on essential benefits (GF plans may continue annual maximums until 2014)

c. Eliminate any rescission provisions (except for fraud or misrepresentation).

d. Eliminate pre-ex limitations for children under age 19.

e. Provide for coverage for children until age 26. (GF plans need not provide if other employer-based coverage available.)

f. Eliminate cost-sharing for preventive care. (GF plans: N.A.)

g. Apply new nondiscrimination rules to insured coverages (similar, but not identical, to Code Section 105(h) rules). (GF plans: N.A.)

h. Permit selection of any primary care provider. (GF plans: N.A.)

i. Permit children to select pediatrician as primary care provider. (GF plans: N.A.)

j. No pre-authorization required for emergency care. (GF plans: N.A.)

k. No pre-authorization or referral required for ob-gyn care. (GF plans: N.A.)

l. Provide required internal and external appeals mechanisms. (GF plans: N.A.)

m.“Simple” Section 125 plans available to employers with fewer than 100 employees.

n.“Qualified Small Employers” (e.g., generally, fewer than 26 FTEs with average wages of 50K or less) eligible for health plan tax credit.

* 6/23/10 – New federal re-insurance plan for self-funded early retiree plans opens and continues until $5B in funding is utilized.

2011:

a. OTC drugs not reimbursable from HCFSAs, HRAs and HSAs unless per a prescription.

b. Optional CLASS long term care program may be offered or auto enrolled by employers. Delayed until 2012; benefits pay out in 2017.

2012:

a. 20112012 W2s issued by 1/31/13 must include value of employer health plan coverage.

b. By 3/23/12, issue to employees new “Uniform Explanation of Coverage” in the form specified in HHS regulations and sample.

c. Beginning 3/23/12, satisfy requirement of 60 days’ advance written notice to participants of health plan “material changes”.

d. For plan years beginning after 9/30/12, pay the required federal fee of $1 times average number of covered lives (for “Patient-Centered Outcomes Research Trust Fund”).

2013:

a. $2,500 cap on HCFSAs.

b. Employee Medicare tax increases to 2.35% for Medicare wages over $250K joint/$200K separate.

c. Cease employer deduction for Part D retiree coverage subsidy.

d. Patient-Centered Outcomes Research Trust Fund fee increases from $1 to $2 times average number of covered lives.

e. Comply with HHS regulations on required annual reports to HHS and employees on health plan benefits that “improve health”.

f. Provide employees with HHS information notices about 2014 exchanges and subsidies.

a. Provide Employee Free Choice Vouchers to eligible employees.Budg.Compromise

b. Eliminate waiting periods over 90 days.

c. Eliminate all pre-ex limitations.

d. Report minimum essential coverage information to employees and regulators (per regulations to be issued).

e. Provide coverage for “routine costs”incurred in connection with clinical trials. (GF plans: N.A.)

f. Cease “discrimination” against licensed providers. (GF plans: N.A.)

g. Ensure that out-of-pocket exposure is no higher than is permitted for HDHPs. (GF plans: N.A.)

h. Ensure that deductibles are no higher than $2K for self-only coverage and $4K for other coverages. (GF plans: N.A.)

i. Qualifying wellness program penalties/rewards may be raised from 20% to 30% of cost (and perhaps as high as 50% if permitted by the regulators).

j. If 200 or more FTEs, auto enroll employees in health plan.

k. Continue to provide required notices concerning exchanges and subsidies.

l. Decide whether to participate through the exchanges, and whether to permit salary reduction contributions for exchange-based coverage. (Exchanges only open in 2014 for employers with fewer than 50 employees.)

m. Play, or pay ($2,000/FTE), under play-or-pay rules.

n. Grandfathered plans must remove annual maximums on essential benefits.

o. Grandfathered plans must begin coverage for children until age 26 even if other employment-based coverage is available.

2014:

2015:No Change

2016:Exchanges begin to operate for employers with up to 100 employees.

2017:Exchanges begin to operate for all employers.

2018:Excise tax on “Cadillac Plans” equal to 40% of excess value over the limit of $27,500 family, $10,200 self-only (as adjusted).

2020:Patient-Centered Outcomes Research Trust Fund fee no longer applicable.

HEALTH CARE REFORM TIMELINE

Revised timelines: http://www.crawfordadvisors.com/news/health-care-reform-timelines-2

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a. Eliminate any lifetime maximums on essential benefits.b. Eliminate any annual coverage maximums on essential benefits (GF plans may continue annual maximums until 2014, Regs released 2pm on Tuesday, June 22, 2010)c. Eliminate any rescission provisions (except for fraud or misrepresentation).d. Eliminate pre-ex limitations for children under age 19.e. Provide for coverage for children until age 26. (GF plans need not provide if other employer-based coverage available.)f. Eliminate cost-sharing for preventive care. (GF plans: N.A.)g. Apply new nondiscrimination rules to insured coverages (similar, but not identical, to Code Section 105(h) rules). (GF plans: N.A.)h. Permit selection of any primary care provider. (GF plans: N.A.)i. Permit children to select pediatrician as primary care provider. (GF plans: N.A.)j. No pre-authorization required for emergency care. (GF plans: N.A.)k. No pre-authorization or referral required for ob-gyn care. (GF plans: N.A.)l. Provide required internal and external appeals mechanisms. (GF plans: N.A.)m. “Simple” Section 125 plans available to employers with fewer than 100 employees.n. “Qualified Small Employers” (e.g., generally, fewer than 26 FTEs with average wages of 50K or less) eligible for health plan tax credit.


First Plan Year after 9/23/2010

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a. Eliminate any lifetime maximums on essential benefits.b. Eliminate any annual coverage maximums on essential benefits (GF plans may continue annual maximums until 2014, Regs released 2pm on Tuesday, June 22, 2010)c. Eliminate any rescission provisions (except for fraud or misrepresentation).d. Eliminate pre-ex limitations for children under age 19.e. Provide for coverage for children until age 26. (GF plans need not provide if other employer-based coverage available.)f. Eliminate cost-sharing for preventive care. (GF plans: N.A.)g. Apply new nondiscrimination rules to insured coverages (similar, but not identical, to Code Section 105(h) rules). (GF plans: N.A.) - IRS Notice 2011-1 delaying enforcement until regs**h. Permit selection of any primary care provider. (GF plans: N.A.)i. Permit children to select pediatrician as primary care provider. (GF plans: N.A.)j. No pre-authorization required for emergency care. (GF plans: N.A.)k. No pre-authorization or referral required for ob-gyn care. (GF plans: N.A.)l. Provide required internal and external appeals mechanisms. (GF plans: N.A.)m. “Simple” Section 125 plans available to employers with fewer than 100 employees.n. “Qualified Small Employers” (e.g., generally, fewer than 26 FTEs with average wages of 50K or less) eligible for health plan tax credit.


** http://www.crawfordadvisors.com/employee-benefits-news/irs-enforcement-discrimination-rules-delay

First Plan Year after 9/23/2010 – What GF status means

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GF Plans – Annual Limits•What limits do you have now? Have you ever hit them?•How do they compare to the Regs released on 6/22/2010?

(i) $750,000 for a Plan Year beg on/after 9/23/2010, but before 9/23/2011(ii) $1,250,000 for a Plan year beg on/after 9/23/2011, but before 9/23/2012(iii) $2,000,000 for a Plan year beg on/after 9/23/2012, but before January 1, 2014

GF Plans – cover natural, adopted & stepchildren to age 26But you can exclude them (until 2014) if they have access to other ER-based coverage (the other parent’s ER’s plan does not count towards excluding them; and if Parent & Child both work for the same ER, they can sign up as Parent & Child or Family, etc.).

Preventive Care – do you subject all Medical claims to a $500 deductible?A GF Plan can continue to do soA Non-GF plan must carve out preventive care from that deductible

Do you offer Fully Insured health benefits to a select class?That coverage will be subject to IRC Section 105(h) discrimination testing unless it’s a GF Plan (so don’t change carriers)

Access to Coverage – Non-GF Plans Must•Permit selection of any primary care provider•Permit children to select pediatrician as primary care provider•Not require a pre-authorization for emergency care•Not require a referral or pre-auth of OB-GYN care

First Plan Year after 9/23/2010 – What GF status means

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Plans can Lose GF Status – How?

b

Plan or Employer3 Fails to keep records of its GF provisions4 Fails to make the above Plan Docs/Records available for inspection by participants & regulators5 Engages in a business transaction (a merger, a purchase, a sale, etc.) for the purpose of "buying or selling" the plan's GF status6 Transfers an EE from one GF plan to another GF plan for purposes of evading the GF provisions affecting the EE in the transferor plan7 Eliminates/reduces all benefits necessary to diagnose or treat a particular condition

a

Plan Docs1 Fail to include a statement explaining GF status*2 Fail to identify the person/party to whom GF questions/complaints can be directed*

*Recommendation: Using the DOL Model/Sample notice as a guide, plan sponsors should adopt the Model GF Status language & distribute it to plan participants.

c

Cost changes can cost you your GF Status too• Cost Increases to Co-

Insurance, Co-Pays, deductibles

• Decreases in Employer Cost-Sharing (meaning you ask the Employees to pay more)

• Next slide…..

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a

b

c


Raise* the Co-Insurance percentage

Raise* the deduct. or OOPMax by more than the Med Inflation Rate plus 15%

Raise* co-pay by more than (greater of):i) Med Inflation Rate plus 15% orii) $5 time Med Inflation Rate plus $5**

d

*As measured from the baseline of where your Plan was on 3/23/2010.

**Note – there is a great deal of ambiguity in this provision-watch for a clarification soon.

Reduce* Employer contribution toward total plan cost by more than 5%

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a

b

c


Raise* the Co-Insurance percentage

Raise* the deduct. or OOPMax by more than the Med Inflation Rate plus 15%

Raise* co-pay by more than (greater of):i) Med Inflation Rate plus 15% orii) $5 time Med Inflation Rate plus $5**

d

*As measured from the baseline of where your Plan was on 3/23/2010.

**Note – there is a great deal of ambiguity in this

provision-watch for a clarification soon.

Reduce* Employer contribution toward total plan cost by more than 5%

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a

b

c

Raise EE Cost Share – Example A

On 3/23/2010, health plan offers two tiers of coverage "Self Only" and "Family"

ER contributes 80% of the total cost of "Self Only" and 60% of the "Family" cost.

ER decides to contribute 80% for "Self Only" but only 50% for "Family" cost

d

Example # 7 taken from the end of the Regulations released on June 17, 2010.


Conclusion: The 10% decrease in contribution rates for family coverage causes the plan to "cease to be a GF health plan". Keeping the "Self Only" rate the same does not affect the result.

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a

b

c

Raise EE Cost Share – Example B

On 3/23/2010, health plan has 2010-Plan Year COBRA-rates (less 2%) of $5,000 for "Self Only" coverage and $12,000 for "Family" coverage

They require employees to contribute $1,000 for Self Only coverage and $4,000 for Family coverage

Self Only contribution rate is 80% ($5000 less $1000) / $5000 yields an 80% ER-contribution

Family contribution rate is 67% ($12000 less $4000) / $12000 yields an 67% ER-contribution

d



Regs, tell us to use COBRA rates or premium

equivalents to determine percentages of ER-cost

share

Changes - 2011 COBRA Rates: $6000 (Self Only), $15000 (Family)

Calculate poss increases to avoid losing GF Status� Self Only EE-Contribution 80% ($1,200); 75% (Max $1,500)� Family EE-Contribution 67% ($5,000); 62% (Max $5,750)

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Raise EE Cost Share – Example B



a

b

d

•Must be your natural, adopted or step-child•Do not have to be a student•Do not have to be the EE’s IRC §152 tax dependent

•The term “unmarried” is removed•Spouses & children of these children are not eligible (no Fed Req’mt to cover grandchildren)

IRC modified so that value of ER-paid coverage is not taxable income to employee

c

•Until 2014 (GF Plans), if child has access to employer based coverage, then the child is not eligible•Plans cannot impose a pre-existing condition exclusion on a child under the age of 19

Dependents to Age 26: First Renewal Following 6 Months Post Enactment (09-23-2010)

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Impute Income For?

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Imputed Income – correct method*EE: BobElection: Family - wife, 4 children (one child, “David” is 23 and has just graduated college and is now working).Pre-Tax Election Family----------------------------------------------------------------------------------Impute Income (for David) Single COBRA rate minus 2%

EE: SallyElection: EE + Domestic PartnerPre-Tax Election EE + Domestic Partner (EE-Spouse Tier)----------------------------------------------------------------------------------Impute Income (for DP) Single COBRA rate minus 2%

*See Question and Answer number three in the American Bar Association, Section of Taxation, May Meeting 2009, Committee on Employee Benefits, Joint Committee on Employee Benefits meeting with the Internal Revenue Service, document, May 7-9, 2009. http://www.abanet.org/jceb/2009/IRS2009.pdf

Both are covering One non Sect. 152 Dep. &

Both are being charged the value of the benefit they received. The EE cost and the ER cost

for the coverage.

Per IRS –stop this as of 4/1/10

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a

b

d

•HSA – fix. A “fix” bill is pending. Currently the penalty for invalid distributions is 20%. IRC Section 152 was no changed, neither were HSAs.

•Qualifying child/relative – pre-health reform definitions age 19, or up to 24 if a FTS.•So, non-152 deps are only exempt from Fed. Tax for their coverage.

GA, HI, IN have pending legislation to fix this “gap”.

c

•Group Health plans covering EE’s deps in a non-conforming state, that health coverage is potentially taxable: AZ, GA, HI, ID, IN, MA, ME, VA, WV, WI.•AR, CA, KY, MN, OR, SC amended their laws to conform. VT won’t enforce.

Dependents to Age 26: State-by-State

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Common Employer Missteps:

The Open Enrollment Benefit Guide after Health Care Reform

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They are not excluding Deps that have “access” to other, ER-based coverage, so they are NOT a GF Plan

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Not applicable when Dental & Vision are

bundled with

Medical/Rx.

ERISA“excepted benefits”

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Not applicable for children 19 years old and younger

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Mental Health Parity?

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CAP: 60 inpatient day

Pre-Auth after 8 visits

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These “status change” rules come from the Internal Revenue Code Section 125 and its regulations. They follow Federal law.

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Rules behind domestic partners listed throughout open enrollment documents

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Are they a GF plan or not?

State group’s rule – don’t ask participants to guess about GF status.

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Must be a GF Plan

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OE Benefit Guide - Checklist

I. Coverages Illustrated?Carrier Names? Group Numbers? Contact Information? Benefit Summaries?A. MedicalB. Prescription DrugsC. DentalD. STDE. LTDF. Life, Supplemental/Voluntary Life, Spousal Life, Dependent LifeG. Accidental Death and DismembermentH. EAPI. LegalJ. Exec-U-Care, SML Select, Etc.

II. Affordable Care Act ConsiderationsA. Grandfathered or Nongrandfathered health plan?B. Medical/Rx bundled with Dental & Vision?C. Mini-Meds - applied for waiver?

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OE Benefit Guide - Checklist

III. EligibilityA. Spouses? B. Domestic Partners? Same, Opposite Sex, Both?C. Children: Natural, Adopted & Step children to age 26

• Don't have to live with you.• Don’t have to be full-time students.• Can be married &have their own kids

D. Grandchildren? Foster Children?E. Children of Domestic Partners?

IV. Mental Health / Substance Abuse Parity Act (2008)A. MH/SA copays/coinsurance the same as comparable Medical/Surgical claimsB. MH/SA pre-auths the same?C. Visit limits the same?

V. Status ChangesA. Outline requirements/rules?B. Point out what aren't status changes?C. Describe Status changes that don't apply to HCFSAs.D. Highlight monthly changes to HSA deferrals?E. Exclude Domestic Partners (not IRS/IRC recognized Status Changes)?

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a

b

c

Waivers – who, why, how?

Plans that won’t offer at least $750,000 of coverage for this plan year must apply for a Waiver from HHS. So far, 2.5 million workers’ coverages have been granted HHS-waivers, 40% of them from Union workforces. State of Maine obtained a waiver to offer plans with a loss ratio of less than 80%. (NV, NJ and MA – are on the list too…)

Mini-Meds from large employers and Unions sought & obtained waivers & can offer coverage below the minimum threshold for essential care.

HRAs• Integrated-HRA (integrated with Medical plan), then it is an ERISA-

excepted benefit & is exempt from PPACA. • Stand-Alone-HRA (you can get it w/o selecting a Medical plan) then

compliance with PPACA is required, hence, a waiver should be applied for and obtained.

d

Full List of all companies, employers, plan sponsors & Unions that have applied for & obtained waivers:

http://www.hhs.gov/ociio/regulations/approved_applications_for_waiver.html

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a

b

c

Cases on their way to the U.S. Supreme Court

State of Florida et al v. United States

Department of Health and Human Services et

al, U.S. District Court, Northern District of Florida (Pensacola), No. 3:10-cv-00091. 26 States involved.

Commonwealth of Virginia et al v. Sebelius et al, U.S. District Court, Eastern District of Virginia (Richmond), No. 3:10-cv-188.

Oklahoma Attorney General Scott Pruitt filed OK’s lawsuit in U.S. District Court in Muskogee.

FYI

OK Voters, Nov 2nd, passed State Question 756: which added a provision to the OK-State-Constitution that Oklahomans cannot be forced to participate in a health care system.

The Washington Post, 25 lawsuits challenging the Constitutionality of the Affordable Care act – are tracked here:

http://www.washingtonpost.com/wp-srv/special/health-care-overhaul-lawsuits/

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State of Florida et al v. United States Department of Health and Human

Services et al, U.S. District Court, Northern District of Florida (Pensacola), No. 3:10-cv-00091.

Was originally filed by: Alabama, Alaska, Arizona, Colorado, Georgia, Indiana, Idaho, Louisiana, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Pennsylvania, South Carolina, South Dakota, Texas, Utah and Washington.

In January of 2011, 6 more states joined that lawsuit. Those states are: Iowa, Kansas, Maine, Ohio, Wisconsin and Wyoming.

Judge held mandate invalid – Obama administration appealed

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Judge held mandate to be valid –Commonwealth of VA appealed

Federal Court in Virginia: The VA case is being appealed by the government to the 4th Circuit Court of Appeals. The VA Attorney General is considering an immediate appeal to the US Supreme Court. The Virginia case is Commonwealth of Virginia et al v. Sebelius et al, U.S. District Court, Eastern District of Virginia (Richmond), No. 3:10-cv-188.

Federal Court in Oklahoma: Oklahoma Attorney General Scott Pruitt filed OK’s lawsuit in U.S. District Court in Muskogee. His suit, like others, challenges the so-called “individual mandate” to purchase health insurance.

OK Voters, Nov 2nd, passed State Question 756 – which added a provision to the OK-State-Constitution that Oklahomans cannot be forced to participate in a health care system. http://tinyurl.com/67d6ggc

Oklahoma Lawsuit – just starting

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Commonwealth of Virginia et al v. Sebelius et al, U.S. District Court, Eastern District of Virginia (Richmond), No. 3:10-cv-188. Is being appealed to the 4th Circuit Court of Appeals.

State of Florida et al v.

United States

Department of Health

and Human Services et

al, is being appealed to the 11th Circuit Court of Appeals.

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• Even if all three circuits agree, it remains possible that any one of the 28 states could appeal their Circuit Court’s decision to the U.S. Supreme Court.

• The current administration will appeal any negative Circuit Court Decisions to the U.S. Supreme Court.

• Expect the U.S.S.C. to hear the case in 2012 or 2013.

The Affordable Care Act was not intended to be the “final bill”, but politically ended up being “THE” bill/law. It does not contain a severability clause.

Conclusion? If the USSC finds the mandate invalid, and holds that the mandate cannot be severed from the remainder of the Act, as Judge Vinson in Florida found/held, the Court can strike down the entire law.

• VA case – appealed to 4th Circuit.

• FL case – appealed to 11th

Circuit.

• OK case – could be appealed to

the 10th Circuit (it hasn’t been

heard in District Court Yet).

Questions

Crawford Advisors, LLC

• 200 International Circle, Suite 4500, Hunt Valley, MD 21031

• 555 East Lancaster Ave, Suite 640, Radnor, PA 19087

• 800.451.8519

• www.CrawfordAdvisors.com

Via E-mail to: [email protected]

To Download These Slides: www.crawfordwebinars.com

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health care reform · june 17, 2010 – dol, irs & hhs released joint guidance/regulations on...

Documents