Except for the upon request requirement, the date by which the SBC needs to be provided is actually driven by the enrollment method.

Transcription

1 informed on reform KEEPING YOU UP-TO-DATE ON THE PPACA Web Meeting Q&A Summary This Q&A overview summarizes the question and answer session that followed Cigna's September 22, 2011 health care reform webinar, which covered the Summary of Benefits and Coverage and Exchanges, and provided a recap of legislation to date. For additional detailed information, please visit Summary of Benefits and Coverage Questions NOTE: Cigna's answers are based upon our current understanding of the law and current drafts of the National Association of Insurance Commissioners (NAIC) proposed documents and associated instructions, as of September 22, Q1: Our plan effective date is May 1st. Does the Summary of Benefits and Coverage need to be distributed at the start of the plan year or on March 23rd? Beginning March 23, 2012, health insurers and self-insured group health plans will be required to provide a standard Summary of Benefits and Coverage (SBC) to all individuals enrolling in medical coverage. This includes mid-year enrollment for new employees and those experiencing a special enrollment event. Except for the upon request requirement, the date by which the SBC needs to be provided is actually driven by the enrollment method. The legal requirements are: The SBC must be provided as part of any written application materials that are distributed by the plan or issuer for enrollment. If the plan does not distribute written application materials for enrollment, the SBC must be distributed no later than the first date the participant is eligible to enroll in coverage for the participant and any beneficiaries. In the case of renewal or reissuance, if the issuer requires written application materials for renewal (in either paper or electronic form), it must provide the SBC no later than the date the materials are distributed. If renewal or reissuance is automatic, the SBC must be provided no later than 30 days prior to the first day of the new policy year. To answer your specific question, if your employees are automatically enrolled, yes, they will need to receive the new SBC at least 30 days before May 1st. If they must enroll to continue coverage, the SBC must be provided when annual enrollment materials are distributed. Please visit the NAIC website to view the coverage examples: 9/27/2011 1

2 Q2: Is a broker allowed to create a summary of the plan that is different from the one issued by the carrier? In the case of a self-insured plan, the employer can delegate responsibility for preparation of the SBC to a third party such as its broker or consultant. The self-insured plan retains the compliance liability if the third party does not provide timely and complete SBCs. For fully insured clients, both the insurance company and the plan are responsible for compliance. While both have compliance responsibility, the proposed rules contemplate the parties agreeing for one or the other to do it and if the party delegated responsibility to meet the compliance requirements does so, then the other party s obligation is satisfied. CIGNA will not allow any changes to the SBC that it prepares for insured plans. Q3: Can you review what we know about the Summary of Material Modifications? If any material change is made to a plan during the plan year that is not reflected in the most recent Summary of Benefits and Coverage, a notice must be provided at least 60 days before the effective date of the change. A material change is any change that would be considered by an average participant to be an important enhancement or reduction in benefits. This timing applies only to changes that become effective during the plan year. Changes made at annual renewal do not require 60-day advance notice. Q4: Can you clarify further the information regarding carved in dental? If enrollment in a dental plan is dependent on electing health coverage, would this require that dental have an impact on the number of SBCs required? Dental is out of scope for PPACA unless it is packaged with a medical plan and is not provided in a separate certificate or booklet. If it is packaged with a medical plan, the only reference to dental on the SBC is whether or not a dental checkup is covered for children under the plan. Q5: Is the employer required to provide an SBC to all dependents over the age 18, similar to COBRA guidelines for notification? If the employee/participant and all beneficiaries reside at one address, only one SBC must be provided for that address. However, if the last known address of a beneficiary differs from that of the participant, a separate SBC must be provided to the beneficiary. 9/27/2011 2

3 Q6: Regarding alternate languages for plan documents, if the employer has a check box on the new hire application that reads, I understand and speak English, will they still need to translate the document into another language? The check box approach does not address the requirements in the proposed rule. If a certain percentage of the population in a county speaks a language other than English, the availability of materials in other languages must be communicated by: Including a notice of the availability of language assistance Providing translation upon request in certain limited languages Q7: Does the SBC have to include any info on an Health Savings Account (HSA) if that is offered? What if the employer contributes to the HSA? Currently, there no fields on the SBC to allow for HSA or Health Reimbursement Account (HRA) information to be included. However, an SBC will need to be provided for stand-alone HRA accounts. Q8: Will the Summary of Benefits also be required for Qualified Student Health Plans? Yes, Qualified Student Health Plans are subject to PPACA. Q9: Will the distribution of the SBC follow the electronic distribution requirements similar to the SPD? For group members, the SBC may be provided in paper form. Alternately, it may be provided electronically if the plan complies with the safe harbor of the ERISA electronic document rules. Q10: Regarding the SBC, is the document supposed to be specific to plan and tier? In other words, if you have 3 plans with 4 coverage tiers, do you need to provide 12 SBCs? Yes, an SBC will need to be created for every medical plan and coverage tier offering. To read more about the Summary of Benefits and Coverage, please visit our Fact Sheet at: 9/27/2011 3

4 Exchange Questions Q11: It s my understanding that affordable coverage will be defined using household income. However, you mentioned an Employer Safe Harbor using the employee s W-2 income. Please explain. The Department of Treasury and the IRS have requested comments on a proposed regulatory safe harbor in which the affordability of coverage would be measured by whether the employee portion of the self-only premium exceeds 9.5% of the employee s W-2 wages. This would be based on the lowest cost coverage that provides minimum value. As proposed, a large employer would determine whether it met the affordability safe harbor at the end of a calendar year on an employee-by-employee basis. This is good news for large employers (1-50 or employees, depending on how the state defines; in 2016 and beyond, uniformly 1-100). The law requires that affordability be determined with reference to an employee s household income. The regulatory safe harbor has been proposed in recognition of the fact that employers typically would not have visibility into an employee s household income. This safe harbor will allow employers to monitor and track potential exposure and, if necessary, adjust their contribution strategy. Q12: When determining the employee s affordability of their health plan in 2014 and beyond, are both premiums and cost-share (deductibles, copays, coinsurance) considered? No, just the premium (amount from their paycheck) is considered. Q13: What is the penalty for businesses not offering benefits in 2014 and beyond? Is there an exception for businesses with less than 50 full-time employees? How will the government define full-time? Under the law, an employer is not required to provide or maintain health insurance. However, employers with an average of at least 50 full-time employees will face a penalty if they do not provide coverage and one full-time employee receives a government subsidy to purchase insurance through an exchange. The penalty is $2,000 for each full-time employee (exception granted on the first 30 employees). Full-time employees are defined as those working 30 or more hours per week. Even if an employer does provide coverage to its employees, it is subject to an assessment if the coverage is unaffordable or does not provide minimum value. The penalty is the lesser of $3,000 per full-time employee that receives federal premium assistance for exchange coverage or $2,000 per full-time employees employed (minus the first 30). continued on page 5 9/27/2011 4

5 As defined by HHS, a plan provides minimum value if it pays at least 60% of the cost of services. As defined by HHS, a plan is affordable if a full-time employee does not have to pay more than 9.5% of household income for premium. The Treasury and the IRS requested comments on a proposed regulatory safe harbor that would allow employers to determine affordability using an employee s W-2 wages. The regulatory safe harbor has been proposed in recognition of the fact that employers typically would not have visibility into an employee s household income. Q14: What will happen if employers convert employees to 1099 contractors to avoid the 50 full-time employee threshold? For purposes of determining whether an employer has more than 50 full-time or full-time equivalent employees and is, therefore, subject to the so-called employer mandate, employers will have to consult with their legal advisors to determine whether particular individuals can be considered 1099 independent contractors and not employees. In addition, they should be mindful that 1099 independent contractors may not be eligible for coverage under an insured group health plan and that they would likely be violating state insurance law by providing coverage to 1099 contractors under a self-insured plan. Accordingly, employers should consider carefully all the possible consequences of changing the employment status of individuals that work for them. Q15: If the penalty is less costly than the employer premium, what s the incentive for the employer to provide insurance for their employees in 2014 and beyond? It s important to consider health, wellness and productivity, in addition to costs. First, the exact costs are unknown as plan designs and benefits on the exchange are not yet defined (e.g., Minimum Essential Benefits ), so a true understanding and comparisons cannot yet be made. Second, the rewards of better health benefit your employees, your company and your bottom line. You also have to consider what happens if you send employees to the exchanges and those individuals opt to go without coverage. No coverage means a loss of productivity, plus greater strain and higher costs on internal management resources. Q16: Will health plans cost the same on and off the exchange? A Qualified Health Plan (QHP) must charge the same premium for a particular individual or small group policy on or off the exchange. 9/27/2011 5

6 Q17: Does an employer have to auto enroll someone who actively elects to waive coverage (because they have access to coverage elsewhere)? Employers with more than 200 full-time employees are required to automatically enroll new full-time employees in one of the plans offered (subject to any waiting period authorized by law) and to continue the enrollment of current employees in health plans. Of course, an individual can opt-out and enroll in an exchange plan. In addition, employers with 200 or more employees are also required to provide a written notice to all new hires at the time of hiring and to all current employees no later than March 1, It needs to inform them, among other things, of the existence of an exchange. It also needs to explain how the employee may contact the exchange to request assistance in enrolling for coverage through the exchange. Q18: Does the employer have to offer coverage to Employee + Spouse, Employee + Child(ren) and Employee + Family or does just offering Employee Only coverage meet the affordability requirements? Beginning in 2014, an employer has to offer coverage to its employees and their dependents to satisfy the employer mandate. However, the affordability of the coverage is determined based upon whether the employee portion of the self-only (employee-only) premium for the lowest cost coverage that provides minimum value exceeds 9.5% of the employee s household income. Comparative Effectiveness Research Fee Q19: Can you address the Comparative Effectiveness Research Fee that will be due next year. What is the effective date for this provision? The Comparative Effectiveness Research Fee is a tax on group health plans and health insurance issuers to fund comparative effectiveness research. Effective for plan years beginning on and after October 2, 2011, insurers and self-insured group health plans must pay $1 per participant. The fee increases to $2 per participant in 2013, then to an amount indexed to national health expenditures for future years. The comparative effectiveness fee phases out by We are still awaiting guidance from Treasury on when and how to pay the assessment. 9/27/2011 6