ppaca update

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PPACA Update

VSBA COSA – Fall MeetingWilliamsburg, VA

November 16, 2011

R. Craig [email protected]

McGuireWoods LLP | 2 CONFIDENTIAL30970291.2

A Complex and Confusing New Law

• Patient Protection and Affordable Care Act, P.L. 111-148 enacted March 23, 2010 (PPACA).

• Health Care and Education Reconciliation Act, P.L.111-152 enacted March 30, 2010 (HCERA), amends PPACA.

• The laws amend ERISA, the Internal Revenue Code, Public Health Service Act, and Fair Labor Standards Act.

• Regulatory guidance will come from DOL, IRS, and HHS.


Recent Developments in Health Care Reform

• Implementation of the Patient Protection and Affordable Care Act (“PPACA” or “health care reform”) continues.

• Five major regulation packages, plus sub-regulatory guidance– Adult dependent coverage– Grandfathered plans– Pre-existing conditions, etc.– Preventive services– Internal claims/external review

• Recent developments• Legal Challenges to Health Care Reform


Changes to Claims and Appeals Procedures

• DOL, HHS and IRS (the “Departments”) issued extension of grace period for compliance with the internal claims and appeals process and external review process for non-grandfathered plans

• Until January 1, 2012 for certain requirements under the interim final regulations

• Amendment to the 2010 interim final regulation issued June 22, 2011• The amendment modifies 16 standards for appeals and review

procedures of the 2010 interim final regulations, summarized in DOL Technical Release No. 2011-02

• Possible additional changes to health and welfare plans, SPDs and administrative procedures may be necessary once final regulations are issued

• Non-grandfathered plans, for the 2012 plan year• Monitor compliance dates for grandfathered plans


PPACA initial provisions

• Grandfather Provision• Group health plans already in effect are

grandfathered from PPACA indefinitely, except for insurance reform provisions

• But very easy to lose grandfathered status


Grandfather Rules

• The employer enters into a new contract, certificate or policy of insurance after 3/23/2010

• The insurance ceases to provide all or substantially all benefits to diagnose or treat a particular condition

• Any increase in a percentage cost-sharing requirement

• Any increase in a a fixed-amount cost-sharing requirement (deductible or out-of-pocket limit)


Grandfather Rules

• Any increase in a fixed amount co-payment that is more than– $5.00 (increased by medical inflation), or– Medical inflation plus 15%.

• Any employer decrease for tier coverage by more than 5%

• Any change in lifetime or annual benefit limits


Temporary High-Risk Pool

• A temporary high-risk health insurance pool shall be established to provide coverage for eligible employees with a pre-existing medical condition who have no health coverage.

• Must keep in place until 2014 (when exchanges are operational).


Provisions in effect for all plans

• Pre-existing exclusions – forbidden for enrollees under age 19

• Dependent coverage– Married and unmarried children qualify– Not offered to children of dependents or spouses– Unless adult child has offer of employer-covered

insurance– Can be purchased with pre-tax dollars– In 2014, dependents can stay on parents’ plan even if

have employer coverage available


Appeals Procedures

• Interim Appeals– Group plans must implement internal claims and

appeals processes that comply with Section 503 of ERISA, including governmental plans

– Recission of coverage is entitled to internal appeal– Urgent care claims must be decided in 24 hours

(previously 72 hours) unless claimant does not provide sufficient information to make a determination

– If an insurer fails to comply with any aspect of the internal appeals process, the claimant can immediately pursue an ERISA remedy


Non-discrimination issue

• Statute prohibits discrimination in favor of highly compensated employees

• Rules temporarily suspended by IRS• “Highly compensated employees” are the top 25%

compensated of all employees• Under the new rule, a school could no longer pay

a higher percentage of the cost of health care coverage for HCE’s


Possible fixes

• IRS has suspended rule, and is considering possible approaches

• Exempting health coverage from the rule altogether

• Changing the definition of HCE to anyone making more than $110,000 per year

• Exempting employees who pay income tax on the excess benefit


2011 Requirements

• Health Spending Accounts (HSAs), Flexible Spending Accounts (FSAs) and Health Reimbursement Accounts (HRAs) changes

• OTC medications not reimbursable except insulin and OTC meds prescribed by a physician


W-2 Reporting

• Originally for 2011, now deferred to 1/1/12, plan sponsors must report the cost of coverage under an employer-sponsored group health plan on Form W-2– Information only; employer-provided health coverage not taxable

• IRS issued new draft form W-2 for 2011 (to be distributed in January 2012)– Use Code DD in Box 12– Mandatory beginning with 2012 W-2’s– Copy of draft form can be found at

http://www.irs.gov/pub/irs-utl/draft_w-2.pdf• Additional guidance expected later this year

http://www.irs.gov/pub/irs-utl/draft_w-2.pdf


Amendments to IFR – Coverage of Preventive Services under PPACA

• Interim final rule with request for comments was issued on August 3, 2011 (effective August 1, 2011)

• Amends the previous IFR published July 19, 2010 – Group Health Plans and Health Insurance Issuers Relating to Coverage of Preventive Services under the Patient Protection and Affordable Care Act

• The Health Resources and Services Administration (HRSA) was required to develop comprehensive guidelines for preventive care and screenings for women

• Implementation of these new required guidelines is required no later than plan years beginning on or after the date that is one year from when the new guideline is issued

• Provision of contraceptive services for all women• Comments pending (period ends September 30, 2011)


Other Recent Guidance

• Health Insurance Premium Tax Credit (IRC §36B)– Notice of proposed rulemaking and notice of public hearing

released August 12, 2011– Refundable tax credit to help individuals and families afford health

insurance coverage by reducing the out-of-pocket premium cost– Affordability test (IRC §4980H(b)) will be based on an

employee’s Form W-2 (not total household income)– Possible exclusion of self-funded plans and fully-insured large

group plans from requirement to provide “essential benefits” per list of federally mandated benefits

– Open questions remain: “Minimum Essential Coverage”; application of dual or family coverage; employer mandates under §4980H(a)


The CLASS Act

• CLASS = "Community Living Assistance Services and Supports" Program:– Federally-administered long term care insurance.– Voluntary for employees.– Must participate in program for at least 60 months before

receiving benefits.• Effective 2011: Employees may be automatically enrolled

in the CLASS program via payroll deduction.– Contingent on implementation of the program and issuance of

regulations describing automatic enrollment procedures.


CLASS Act

• However, in October, HHS Secretary Sebelius sent a report and letter to Congress

• HHS study found that the CLASS Act was not feasible, and has recommended suspension of the program requirements


ERRP Update

• The Early Retirement Reinsurance Program stopped accepting applications after May 5, 2011; more than 5,000 employers accepted to the program; $1.8 billion already disbursed

• Ongoing administration by plan sponsors; maintenance of contribution requirements

• Guidance on “Complying with the Prohibition on Using Early Retiree Reinsurance Program Reimbursements as General Revenue”; Issued by CMS on July 20, 2011


2012 Changes

• Summary of Coverage – Insurers and plan sponsors must provide a summary of benefits to all participants in a for prescribed by HHS

• Plan must provide 60-days notice of any changes to the Plan

• Quality of Care reporting – Reporting on incentives to improve quality of care, patient outcomes, disease management, reducing medical errors and other such improvements in care


Summary of Benefits and coverage

• Require documents that:– Cover key terms of coverage– Coverage facts label

• Examples of costs of common illnesses– Uniform glossary of medical and insurance terms

• Not necessarily the same terms as plan and SPD use• Mandates uniform appearance

– 4 pages, double-sided– 12 point font

• Imposes 60-day advance notice for changes in the SBC document– At odds with ERISA rules for SMMs


Summary of Benefits and Coverage

• Rule is effective 2 years after enactment (3/23/2012)• $1,000 fine per enrollee for willful violations

– Other penalties may be assessed by DOL and Treasury• Applies to both group health plans and insurance coverage

– So, it covers self-insured plans• Intended to encourage comparison shopping by individuals

among available plans• Published as a proposed regulation

– Not an interim final regulation– Comments due 10/21/2011

• Agencies seek comments on many issues



• No extension of effective date – YET• Who must provide?

– Insurers provide to plan sponsor– Plan administrator provides SBC for each option

available to the participant• When provided?

– Initial enrollment/application– Renewal/reenrollment– Material change– On request



• Content– Uniform definitions– Description of coverage, exceptions, limitations– Cost-sharing provisions (deductibles, co-pays, co-insurance)– Continuation of coverage– Coverage examples– Statement on minimum essential coverage and percentage that

employer pays– Lots of contact information– Information on the glossary– Premium and cost information– More



• Action Plan– Which plans must provide SBC?– Compare SBC template to existing communications

documents– Work with insurer/TPA to determine who will provide

SBC• Look at indemnification language

– How to combine with open enrollment materials– Electronic delivery?


What Happens in 2014?

• Health Insurance Exchanges:– New market for individuals and small groups to be established

by states.– In 2017 states may allow larger groups to participate.– Massachusetts and Utah are current examples.

• Employer "pay or play" provisions.– Employers may be penalized for failing to offer adequate

coverage.• Annual limits on coverage eliminated – no “caps”• No pre-existing condition limitations on new coverage


Legal Challenges to Health Care Reform

• Challenging PPACA constitutionality; specifically the individual mandate – State of Florida v. Department of Health and Human Services

• January 31, 2011 ruling by Judge Vinson declaring all of PPACA unconstitutional because cannot sever individual mandate from other PPACA provisions

• 11th Circuit Court of Appeals affirms (8/12/11)– Commonwealth of Virginia v. Sebelius

• December 2010 ruling by Judge Hudson found PPACA’s individual mandate unconstitutional

• Supreme Court denied cert for immediate review• Appeal and cross-appeal pending in the 4th Circuit Court of Appeals

– Liberty University, Inc. v. Geithner• Ruling upheld constitutionality of individual mandate• Appeal pending in the 4th Circuit Court of Appeals

– Thomas More Law Center v. Obama • Ruling upheld constitutionality of individual mandate• 6th Circuit Court of Appeals affirms (6/29/11)• Thomas More Law Center filed for Supreme Court review on July 26, 2011


Legal Challenges to Health Care Reform

• On Nov. 14, the Supreme Court granted cert to the Florida (11th Circuit) decision

• Issues on appeal:– Are the “individual mandates” that all Americans

purchase health insurance constitutional?– If not, does the rest of the law fail because the funding

is primarily the revenues from mandated insurance?– Can states be forced to expand their share of Medicaid

costs by the federal government?– Can states be required to provide their employees a

federally-mandated level of health coverage?


PPACA Implementation – What to Do Now?

• Complete repeal is unlikely during the current administration, although negotiated changes may be possible

• Must continue to comply with all aspects of PPACA until resolution occurs

ppaca update

Documents

health coverage

affordable care act

public health service

amends ppaca

insurance reform provisionsbut

nongrandfathered plansuntil

policy of insurance

insurance ceases