Employer Healthcare Reform Requirements in the Near-Term

Transcription

1 Employer Healthcare Reform Requirements in the Near-Term On March 23, 2010, President Obama signed into law The Patient Protection and Affordable Care Act (H.R. 3590). As of this writing, 1 the Congress has passed The Health Care and Education Reconciliation Act of 2010 (H.R. 4827), and the bill goes to President Obama for his signature. H.R. 3590, when combined with H.R. 4827, comprises the overall healthcare reform legislation package. 2 Effective dates of the various provisions in the combined package range from the date of enactment 3 through the year What are the mandatory employer requirements that become effective immediately? This article identifies the healthcare reform requirements employers must address as early as the next plan renewal cycle, as well as other important requirements that become effective in the nearterm following enactment of healthcare reform. The following provisions in the legislation should be reviewed and then compared against the employer s plan(s) and plan operations for compliance. Plan design changes and plan amendments may be required in order to implement these changes. Coverage of dependents to age 26 4 Requirement: Group health plans covering dependents must cover adult children, married or unmarried, whether a tax-dependent or not, to age 26. There is no requirement to cover the children of covered adult children. The tax exclusion 5 for employer-provided coverage is extended to adult children through age March 25, This analysis is based on the combined healthcare reform package of The Patient Protection and Affordable Care Act (H.R. 3590) and The Health Care and Education Reconciliation Act of 2010 (H.R. 4827) as passed by the Senate on March 25, Should H.R fail to be enacted in its current form, the information contained herein would change substantially and should not be used as is. 3 March 23, For some plans, compliance will be required before January 1, These plans would typically include those with plan years beginning on or after October 1, November 1, or December 1, for which compliance will be required during the plan start date in Although the legislation requires plans to cover children until the date of their 26 th birthday, the new law permits employees to exclude the value of employer provided health coverage through the end of the year in which the dependent reaches age 26. This will provide additional relief for employers who must impute income on employees in states where mandates currently extend coverage beyond age 26. Page 1 Gallagher Benefit Services, Inc. 2010

2 Exceptions: For plan years beginning prior to January 1, 2014, grandfathered plans 6 are not required to cover such dependents if they are eligible for other employer-sponsored coverage. Otherwise there is no exception for grandfathered plans. No lifetime or annual dollar limits permitted Requirement: Group health plans are banned from imposing lifetime limits or annual limits on the dollar value of benefits for any participants. Exceptions: For plan years beginning prior to January 1, 2014, a group health plan may establish a restricted annual limit on the dollar value of benefits with respect to essential benefits 7 as determined by the Secretary of the Department of Health and Human Services. 8 There is no exception for grandfathered plans. No pre-existing condition exclusions for children under age 19 Requirement: Group health plans are prohibited from imposing any pre-existing condition exclusion on children under age 19. Beginning in 2014 group health plans and insurers will be prohibited from applying any preexisting condition limitation to any covered participant. Rescission of coverage only if fraud or intentional misrepresentation Requirement: Group health plans may not rescind health coverage except in the case of fraud or intentional misrepresentation of material fact 9 where so prohibited by the plan. 6 Grandfathered plans are those in effect as of the date of enactment, or March 23, Essential benefits as defined under H.R are to be defined by the Secretary of the Department of Health and Human Services ( HHS ). Essential benefits shall consist of at least the following categories or services: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse services; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services; and pediatric services, including oral and vision care. 8 Practice pointer: Employers may wish to consider removing all annual dollar limits on essential benefits until further guidance is given as to what types of restricted annual limits are permissible. 9 Practice pointer: This issue is more likely to arise in the insurance context than in the self-funded arena, yet the requirement applies to self-funded plans as well. Page 2 Gallagher Benefit Services, Inc. 2010

3 Qualified medical expense for HSAs, FSAs and HRAs excludes OTC medications Effective date: Taxable years after December 31, Requirement: The definition of qualified medical expense for purposes of HSAs, FSAs and HRAs is now limited to prescribed medications and insulin. The previous expansion to include over the counter medications has been repealed. Note: prescribed medication includes medications that are also available over the counter as long as the medication requires a prescription for the covered individual. 10 Form W-2 Reporting Requirement Effective date: Taxable years beginning January 1, 2011 (i.e., the Form W-2 that will be distributed in January 2012). Requirement: Employers must report the value (or aggregate cost) of employer-sponsored coverage for each employee (using the COBRA rules for determining "applicable premium") on an employee's Form W-2. The value does not include HSA or salary reduction FSA contributions. First dollar coverage for preventive care benefits Requirement: Group health plans are required to provide coverage for a broad list of preventive health services, and may not impose any cost-sharing requirements on such services. These services 11 include: o Immunizations o Preventive care and screening for infants, children, and adolescents o Preventive care screenings for women Emergency services 10 This represents a reversal of the relatively recent expansion of such definition to include over-the-counter medications. Plans that were amended to include reimbursement for OTC medications will need to be changed again. 11 H.R describes in further detail the types of immunizations and screenings required. Page 3 Gallagher Benefit Services, Inc. 2010

4 Requirement: If emergency services are covered at all at a hospital, there may be no requirement for pre-authorization, whether the provider is in-network or out-of-network. Emergency services at nonnetwork providers where the plan provides some benefits must be covered on the same basis as innetwork providers. Exceptions: Grandfathered plans are not subject to this requirement. Choice of healthcare professional, pediatrician Requirement: If a group health plan requires designation of a participating primary care provider, the participant may designate any available participating primary care provider. In the case of children, any participating pediatrician may be designated as the primary care provider. Exceptions: Grandfathered plans are not subject to this requirement. Obstetrical or gynecological care Requirement: If obstetrical or gynecological services are covered and the plan requires designation of a participating primary care physician, there may be no requirement for pre-authorization or referral for a woman to seek obstetrical or gynecological care from a participating obstetrician or gynecologist. Nondiscrimination requirements apply to fully-insured plans Requirement: Fully insured plans must now fulfill the nondiscrimination requirements of Internal Revenue Code Section 105(h), which prohibits discrimination in favor of highly compensated employees. This is an expansion of the current nondiscrimination requirement for self-funded plans, which remain subject to these rules. Appeals Process Page 4 Gallagher Benefit Services, Inc. 2010

5 Requirement: Group health plans will be required to establish an effective appeals process with respect to coverage determinations and claims. Participants must be able to continue receiving coverage during the appeal. The processes must include internal and external review procedures meeting certain requirements. 12 Currently, plans subject to ERISA must comply with the Department of Labor claims regulations. The new requirement applies to ERISA and non-erisa plans alike. Exceptions: Grandfathered plans are not required to implement the above. There are many issues included in the healthcare reform legislation that are not addressed in this analysis, including other provisions that become effective in the near term. The intent of this analysis is to address the immediate mandatory requirements affecting employers. GBS is committed to helping you effectively navigate this significant change for the benefit of your organization, your employees and their families. There is more to come and we look forward to assisting you. Please contact your Gallagher Representative with any questions The intent of this analysis is to provide you with general information regarding the provisions of current healthcare reform legislation. It does not necessarily fully address all your organization s specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues should be addressed by your organization s general counsel or an attorney who specializes in this practice area. 12 The requirements for internal review include notice to enrollees of available appeals processes, plus the opportunity to review their file and present evidence. The requirements for external review include consumer protections and standards to be established by HHS. Page 5 Gallagher Benefit Services, Inc. 2010