Health Care Reform Grandfathered Plans, Waivers & Recent Court Decisions Questions

Transcription

1 Health Care Reform Grandfathered Plans, Waivers & Recent Court Decisions Questions 1 Crawford Advisors, LLC 200 International Circle, Suite 4500, Hunt Valley, MD East Lancaster Ave, Suite 640, Radnor, PA Via to: Your Sales Executive or Account Manager: Patrick Curran pcurran@crawfordadvisors.com Brenda Winemiller bwinemiller@crawfordadvisors.com PPACA law on 3/23/2010 HCEARA law on 3/30/2010

2 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 Areas Employee Benefits & Exec Comp, ERISA, COBRA, HIPAA, 125, and 105, 106, 129, 132 Education Temple 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 Practice U.S. Supreme Court Federal and State Courts of New Jersey Pennsylvania Connecticut District of Columbia

3 3 Agenda Political Process- Bills are law, GF Regs are here A Few Definitions Key Terms defined Time Line of Important Effective Dates / GF Status Waivers from HHS? Cases, Courts & Appeals Questions

4 4 Political Process now Regs a b c d House approved the Senate s bill - Patient Protection and Affordable Care ACT (PPACA, H.R. 3590) President Obama signed PPACA /H.R 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 House passed HR 4872 [on 3/25/2010 at 9:02 p.m., vote was (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 June 17, 2010 DOL, IRS & HHS released joint guidance/regulations on Grandfathered Plans 6/14/2010: Keeping the Health Plan You Have: The Affordable Care Act and Grandfathered Health Plans 6/17/2010: Q&A from the DOL: Keeping My Health Plan Grandfathered

5 5 Key Terms a b Grandfathered Plan ( GF Plan ) a plan that was in place on Tuesday, March 23, 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 Changes are relative to what the Plan had in place on March 23, 2010 c d Fully Insured Plans If you change carriers you will lose your GF status. This changed 11/22/10 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! fathered-plans-updates

6 HEALTH CARE REFORM TIMELINE 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 : a 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. 2014: a. Provide Employee Free Choice Vouchers to eligible employees. 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 exchangebased coverage. (Exchanges only open in 2014 for employers with fewer than 50 employees.) m. Play, or pay ($2,000/FTE), under play-orpay 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. 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. Revised timelines:

7 7 First Plan Year after 9/23/2010 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. * 6/23/10 New federal re-insurance plan for self-funded early retiree plans opens and continues until $5B in funding is utilized.

8 8 First Plan Year after 9/23/2010 What GF status means 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. * 6/23/10 New federal re-insurance plan for self-funded early retiree plans opens and continues until $5B in funding is utilized.

9 9 First Plan Year after 9/23/2010 What GF status means 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 26 But 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 so A 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

10 10 Plans can Lose GF Status How? a Plan Docs 1 Fail to include a statement explaining GF status* 2 Fail to identify the person/party to whom GF questions/complaints can be directed* b Plan or Employer 3 Fails to keep records of its GF provisions 4 Fails to make the above Plan Docs/Records available for inspection by participants & regulators 5 Engages in a business transaction (a merger, a purchase, a sale, etc.) for the purpose of "buying or selling" the plan's GF status 6 Transfers an EE from one GF plan to another GF plan for purposes of evading the GF provisions affecting the EE in the transferor plan 7 Eliminates/reduces all benefits necessary to diagnose or treat a particular condition 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.. *Recommendation: Using the DOL Model/Sample notice as a guide, plan sponsors should adopt the Model GF Status language & distribute it to plan participants.

11 11 Plans can Lose GF Status How? a Raise* the Co-Insurance percentage b Raise* the deduct. or OOPMax by more than the Med Inflation Rate plus 15% d c Raise* co-pay by more than (greater of): i) Med Inflation Rate plus 15% or ii) $5 time Med Inflation Rate plus $5** Reduce* Employer contribution toward total plan cost by more than 5% *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.

12 12 Waivers who, why, how? a b c d 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 HHSwaivers, 40% of them from Union workforces. State of Maine obtained a waiver to offer plans with a loss ratio of less than 80%. 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 ERISAexcepted 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. Full List of all companies, employers, plan sponsors & Unions that have applied for & obtained waivers: or_waiver.html

13 13 Cases on their way to the U.S. Supreme Court a b 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 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. c Oklahoma Attorney General Scott Pruitt filed OK s lawsuit in U.S. District Court in Muskogee. FYI OK Voters, Nov 2 nd, 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:

14 14 Judge held mandate invalid Obama administration appealed 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 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.

15 15 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 4 th 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. Oklahoma Lawsuit just starting 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 2 nd, 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.

16 16 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 4 th 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 11 th Circuit Court of Appeals.

17 17 VA case appealed to 4 th Circuit. FL case appealed to 11 th Circuit. OK case could be appealed to the 10 th Circuit (it hasn t been heard in District Court Yet). 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 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.

18 18 Questions Crawford Advisors, LLC 200 International Circle, Suite 4500, Hunt Valley, MD East Lancaster Ave, Suite 640, Radnor, PA Via to: To Download These Slides:

19 Health Care Reform Grandfathered Plan, Waivers & Recent Court Decisions PPACA law on 3/23/2010 HCEARA law on 3/30/2010 What needs to be done? And, when? Grandfathered plan? Apply for waivers? Cases in the courts? CrawfordAdvisors, LLC Consulting, Brokerage & Administration