The landscape of the American health insurance system has been in flux since President Obama signed the Patient Protection and Affordable Care Act (“PPACA”) into law on March 23, 2010.  Our commitment at Benchmark Benefits is to provide our clients with timelines, updates and guidance as this bill is interpreted by Government Agencies such as the Department of Health and Human Services, the Department of Labor, and the IRS. 

Our goal is to provide our Client companies with the information they need to stay in compliance with these evolving laws and regulations.  While we strive to make regular updates to this page, please feel free to contact us directly to discuss the most recent developments.

NON-DISCRIMINATION

One of the more impactful provisions of PPACA affecting employers is the requirement that all “Non-Grandfathered” fully insured medical plans must now comply with certain non-discrimination rules and annual testing requirements that previously only applied to self-funded plans.  This guideline is effective for all plan years beginning September 23, 2010 or later.

The PPACA includes rules that employer-sponsored health plans must not discriminate in favor of highly compensated individuals in regards to eligibility to participate, and health plans may not provide benefits that discriminate in favor of highly compensated employees.  These new non-discrimination rules do no apply to “Grandfathered” health plans.

On December 22, 2010, the IRS issued Notice 2011-1, which delays enforcement of this provision.  Further guidance will be provided no earlier than March 11, 2011, and we will provide more details when the new guidelines become available.  In the meantime, we are encouraging our client companies to be prepared to transition to a non-discriminatory benefits structure, or to consult with us regarding the possibility of “Grandfathering” their existing plans to avoid the non-discrimination requirements.

The following conditions could cause fully insured plans to fail non-discrimination testing:

• Different contribution amounts for different classes of employees.
• Different waiting periods for different classes of employees.
• Access to different plans for different classes of employees.
• Carve-outs and benefit plan options for management or any other highly compensated employees that are not made available for other employees.  This practice can include offering PPO plans for management and HMO plans for  other classes of employees.

This extension of the non-discrimination rules to fully insured health plans will require employers to revisit employment agreements, offer letters to new hires, and other extended health coverage for highly compensated employees.  Be aware that under PPACA, if a group health discriminates in favor of highly compensated individuals, that group may face a penalty of up to $100 per day per participant discriminated against. 

Benchmark Benefits is not a law firm.  We are not providing legal advice and this material is offered only as a guide.  This PPACA summary is based on current legislation and is subject to change and further interim guidelines from the Department of Health and Human Services.  Benchmark Benefits is providing this information to help assist you with any changes as a result of PPACA, and we encourage you to discuss this with your labor/employment law attorney.  We look forward to formulating a strategy that balances your organization’s needs with the PPACA moving forward.

GRANDFATHERING PLANS

Under PPACA, health plans in existence on March 23, 2010 may be eligible for “Grandfathered” status to avoid certain aspects of the bill, including the bill’s non-discrimination provisions.  Generally, a group is considered to be “Grandfathered” if it continues to offer the same benefit plan and contribution levels in which its employees were enrolled on March 23, 2010, with adjustments only for

enhanced benefits as required by PPACA or other State or Federal Law.

All plans renewing after September 23, 2010 will be adjusted to include the following benefit enhancements regardless of whether the plan is “Grandfathered” or “Non-Grandfathered”:

• All members will be allowed to add dependents up to age 26 (Young Adults) regardless of student status in accordance with the terms of your medical plan.
• Lifetime maximums will be eliminated on all policies.
• Pre-existing condition exclusions will be removed for any member under the age of 19.
• In-Network preventive care (based on national guidelines) will be covered at 100%.
• Medical plans will adjust certain other annual limits on policies.

If an entity makes certain changes to their medical coverage after September 23, 2010, said plan will not be considered “Grandfathered” and will therefore become a “Non-Grandfathered” health plan subject to all of the PPACA statutes at renewal.  All “Non-Grandfathered” medical plans must comply with the new non-discrimination rules under PPACA and certain contribution strategies and benefit access will need to be adjusted to comply with PPACA.

Certain carriers are offering certain clients who renewed April 1, 2010 through September 1, 2010 a one-time opportunity to revert back to the plans and contribution levels they had in place on March 23, 2010 and thereby regain their “Grandfathered” status.  If you are interested in discussing this potential option, we encourage you to consult with one of our experts today.

According to the interim final rules distributed by the Department of Health and Human Services, employers do have some flexibility to make certain plan/benefit modifications without losing “Grandfathered” status.  These changes may include:

• Changes to comply with Federal and State laws.
• Changes to voluntarily comply with PPACA.
• Routine changes like cost adjustments to keep pace with medical inflation (up to certain allowable amounts), adding new benefits, and making modest adjustments to existing benefits.
• Changing medical carriers to one offering substantially similar benefit options.
• Adding family members of an individual who is currently enrolled in the plan.
• Adding new employees of an employer who are newly eligible to the plan.
• Removing employees/members enrolled on March 23, 2010 from the coverage, provided that the plan has continuously covered someone since March 23, 2010.

The following changes to a medical plan will result in the loss of “Grandfathered” status:

• Substantially reducing or eliminating all benefits to diagnose or treat a specific condition.
• Increasing member coinsurance by any amount above the level set forth in PPACA.
• Increasing fixed dollar cost sharing (other than copays) by more than the sum of medical inflation plus 15% from their March 23, 2010 levels.
• Raising member copays by an amount that exceeds the greater of
• (1) a total percentage (measured from March 23, 2010) that is more than the sum of medical inflation plus 15%; OR
• (2) $5 multiplied by medical inflation, plus $5.
• Reducing employer or organizational contributions based on the cost of coverage or any like formula by more than 5% below the contribution level/rate on March 23, 2010.
• Ensuring that consumers change to a “Grandfathered” plan that, compared with the current plan, has fewer benefits and/or a higher member cost share as a means of avoiding the consumer protections introduced in PPACA.
• Any changes/additions to the benefit plan offerings available to members on March 23, 2010.
• Buying or merging with another plan to avoid complying with PPACA.

Benchmark Benefits will discuss “Grandfathering” its clients’ medical plans at every pre-renewal meeting to evaluate its clients’ individual circumstances.  If we decide together that “Grandfathering” your medical plans is your organization’s best option, we recommend you consult your labor/employment law attorney  for their additional guidance.

Benchmark Benefits is not a law firm.  We are not providing legal advice and this material is offered only as a guide.  This PPACA summary is based on current legislation and is subject to change and further interim guidelines from the Department of Health and Human Services.  Benchmark Benefits is providing this information to help assist you with any changes as a result of PPACA.  We look forward to formulating a strategy that balances your organization’s needs with the PPACA.

HEALTHCARE REFORM TIMELINE

Benchmark Benefits has prepared the below timeline which provides implementation dates for key provisions of the Patient Protection and Affordable Care Act (“PPACA”), which was signed into law by President Obama on March 23, 2010.  This summary is prepared as a guide only and is subject to change and modification as further interim guidelines are released by relevant Government agencies.

2010

• Establishes a temporary national high-risk pool to provide health coverage to individuals with pre-existing medical conditions (effective through January 1, 2014).
• Provide dependent coverage for adult children to age 26 for all individual and group policies.
• Prohibits individual and group health plans from placing lifetime dollar limits on coverage.
• Prohibit pre-existing condition exclusions for children.
• Requires qualified health plans to provide coverage without cost-sharing for preventive services rated A or B by the U.S. Preventive Services Task Force, recommended immunizations, preventive care for infants, children and adolescents, and additional preventive care and screenings for women.
• Provide tax credits to small employers with no more than 25 employees and average annual wages of less than $50,000 that provide health insurance for employees.
• Require health plans to report the proportion of premium dollars spent on clinical services, quality, and other costs and provide rebates to consumers for the amount of the premium spent on clinical services and quality that is less than 85% for plans in the large group market and 80% for plans in the individual and small group markets.
• Establish a process for reviewing increases in health plan premiums and require plans to justify increases.  Require states to report on trends in premium increases and recommend whether certain plans should be excluded from the exchange based on unjustified premium increases.

2011

• Establish a national, voluntary insurance program for purchasing community living assistance services and supports (CLASS program).
• Eliminate cost-sharing for Medicare covered preventive services that are recommended (rated A or B) by the U.S. Preventive Services Task Force and waive the Medicare deductible for colorectal cancer screening tests.
• Provide Medicare beneficiaries access to a comprehensive health risk assessment and creation of a personalized prevention plan and provide incentives to Medicare and Medicaid beneficiaries to complete behavior modification programs.
• Provide grants for up to five years to small employers that establish wellness programs.
• Establish the National Prevention, Health Promotion and Public Health Council to develop a national strategy to improve the nation’s health.
• Require chain restaurants and food sold from vending machines to disclose the nutritional content of each item.
• Require pharmaceutical manufacturers to provide a 50% discount on brand-name prescriptions filled in the Medicare Part D coverage gap.
• Provide a 10% Medicare bonus payment to primary care physicians and to general surgeons practicing in health professional shortage areas.
• Develop a national quality improvement strategy that includes priorities to improve the delivery of health care services, patient health outcomes, and population health.
• Exclude the costs for over-the-counter drugs not prescribed by a doctor from being reimbursed through an HRA or health FSA and from being reimbursed on a tax-free basis through an HSA.
• Increase the tax on distributions from an HSA or MSA that are not used for qualified medical expenses to 20% of the disbursed amount.
• Impose new annual fees on the pharmaceutical manufacturing sector.

2012

• Reduce Medicare payments that would otherwise be made to hospitals by specified percentages to account for excess (preventable) hospital readmissions.
• Provide bonus payments to high-quality Medicare Advantage plans.
• Reduce rebates for Medicare Advantage plans.
• Require enhanced collection and reporting of data on race, ethnicity, sex, primary language, disability status, and for underserved rural and frontier populations.

2013

• Create the Consumer Operated and Oriented Plan (CO-OP) program to foster the creation of  non-profit, member run health insurance companies in all 50 states and the District of Columbia to offer qualified health plans  (Appropriate $6 billion to finance the program and award loans and grants to establish CO-Ops by July 1, 2013).
• Simplify health insurance administration by adopting a single set of operating rules for eligibility verification and claims status, electronic funds transfers and health care payment and remittance, and health claims or equivalent encounter information, enrollment and disenrollment in a health plan, health plan premium payments, and referral certification and authorization.  Health plans must document compliance with these standards or face a penalty of no more than $1 per covered life.
• Provide states that offer Medicaid coverage of and remove cost-sharing for preventive services recommended (rated A or B) by the U.S. Preventive Services Task Force and recommend immunizations with a one percentage point increase in the federal medical assistance percentage (FMAP) for these services.
• Begin phasing-in federal subsidies for brand-name prescriptions filled in the Medicare Part D coverage gap (to 25% in 2020, in addition to the 50% manufacturer brand-name discount).
• Increase Medicaid payments for primary care services provided by primary care doctors for 2013 and 2014 with 100% federal funding.
• Require disclosure of financial relationships between health entities, including physicians, hospitals, pharmacists, other providers, and manufacturers and distributors of covered drugs, devices, biological, and medical supplies.
• Increase the threshold for the itemized deduction for unreimbursed medical expenses from 7.5% of adjusted gross income to 10% of adjusted gross income for regular tax purposes; waive the increase for individuals age 65 and older for tax years 2013 through 2016.
• Increase the Medicare Part A (hospital insurance) tax rate on wages by 0.9% on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly and impose a 3.8% assessment on unearned income for higher-income taxpayers.
• Limit the amount of contributions to a flexible spending account for medical expenses to $2,500 per year increased annually by the cost of living adjustment.
• Impose an excise tax of 2.3% on the sale of any taxable medical device.
• Eliminate the tax-deduction for employers who receive Medicare Part D retiree drug subsidy payments.

2014

• Require U.S. citizens and legal residents to have qualifying health coverage (phase-in tax penalty for those without coverage).
• Assess employers with 50 or more employees that do not offer coverage and have at least one full-time employee who receives a premium tax credit a fee of $2,000 per full-time employee, excluding the first 30 employees from the assessment.  Employers with 50 or more employees that offer coverage but have at least one full-time employee receiving a premium tax credit, will pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each full-time employee, excluding the first 30 employees from the assessment.  Require employers with more than 200 employees to automatically enroll employees into health insurance plans offered by the employer.  Employees may opt out of coverage.
• Create state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges, administered by a governmental agency or non-profit organization, through which individuals and small businesses with up to 100 employees can purchase qualified coverage.
• Require guarantee issue and renewability and allow rating variation based only on age (limited to 3 to 1 ratio), premium rating area, family composition, and tobacco use (limited to 1.5 to 1 ratio) in the individual and the small group market and the Exchanges.
• Reduce the out-of-pocket limits for those with incomes up to 400% of the Federal Poverty Line.
• Limit deductibles for health plans in the small group market to $2,000 for individuals and $4,000 for families unless contributions are offered that offset deductible amounts above these limits.
• Limit any waiting periods for coverage to 90 days.
• Create an essential health benefits package that provides a comprehensive set of services, covers at least 60% of the actuarial value of the covered benefits, limits annual cost-sharing to the current law HSA limits ($5,950/individual and $11,900 family in 2010), and is not more extensive than the typical employer plan.
• Require the Office of Personnel Management to contract with insurers to offer at least two multi-state plans in each Exchange.  At least one plan must be offered by a non-profit entity and at least one plan must not provide coverage for abortions beyond those permitted by federal law.
• Permit states the option to crate a Basic Health Plan for uninsured individuals with incomes between 133%-200% FPL who would otherwise be eligible to receive premium subsidies in the Exchange.
• Allow states the option of merging the individual and small group markets.
• Create a temporary reinsurance program to collect payments from health insurers in the individual and group markets to provide payments to plans in the individual market that cover high-risk individuals.
• Require qualified health plans to meet new operating standards and reporting requirements.
• Provide refundable and advanceable premium credits and cost sharing subsidies to eligible individuals and families with incomes between 133% and 400% FPL to purchase insurance through the Exchanges.
• Require Medicare Advantage plans to have medical loss ratios no lower than 85%.
• Expand Medicaid to all non-Medicare eligible individuals under age 65 with incomes up to 133% FPL based on modified adjusted gross income.
• Permit employers to offer employees rewards of up to 30%, increasing to 50% if appropriate, of the cost of coverage for participating in a wellness program and meeting certain health-related standards.  Establishes 10-state pilot programs to permit participating states to apply similar rewards for participating in wellness programs in the individual market.
• Impose fees on the health insurance sector.

2015 and Later

• Permit states to form health care choice compacts and allow insurers to sell policies in any state participating in the compact.
• Reduce Medicare payments to certain hospitals for hospital-acquired conditions by 1%.
• Impose an excise tax on insurers of employer-sponsored health plans with aggregate values that exceed $10,200 for individual coverage and $27,500 for family coverage.