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Health Care Reform

Marcia S. Wagner, Esq.

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IntroductionLegislation◦Patient Protection and Affordable Care Act◦Health Care and Education Affordability

Reconciliation Act of 2010

Main Objectives & Consequences◦ Increase transparency and efficiency of the

health care system◦Require health care coverage for individuals◦Provide premium subsidiaries for lower income

individuals◦ Impose new taxes, responsibilities, and penalties

on employers and others

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Mandatory Coverage for Individuals

Effective 2014

Most U.S. residents must have minimum “essential health benefits” or pay a penalty

Penalty:◦$95 or 1% of income in 2014◦$695 or 2.5% of income in 2016

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Premium Assistance

Small employer subsidies

Employees eligible if income between 100% and 400% of federal poverty level

Cost sharing subsidy for those with income below 200%

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American Health Benefit Exchanges

Operational in 2014

Offer Bronze, Silver, Gold, Platinum, and Catastrophic Plan coverage to individuals

Out of pocket costs reduced for lower income individuals

SHOP

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Insurance Market

Guaranteed IssueGuaranteed RenewabilityHigh Risk PoolRating only by:◦Family structure◦Community rating value of benefits◦Age◦Smoking

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Medicare and Medicaid

Reduce certain Medicaid payments

Independent Advisory Panel

Close Medicare Part D doughnut hole

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FundingAdditional taxes imposed on the insurance

industry:A 40% excise tax is imposed on “Cadillac” plansIncrease Medicare portion of FICAA 3.8% surtax is imposed in 2013 on net

investment incomeReduction of Medicare Part D premium subsidesElimination of the deduction for expenses

attributable to the Medicare Part D subsidyIncrease in the deduction threshold on medical

expenses from 7.5% to 10%A 10% excise tax on indoor tanning services

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Employer Group Health Plans – Future Consideration

Employers with more than 50 employees who do not offer minimum essential health coverage will be assessed a fee of $2,000 per employee, with an exception for the first 30 employees

If contributions are in excess of 9.8% of income, the employer will be assessed a penalty of $3,000 for each employee who receives a premium tax credit, with an exception for the first 30 employees

Maximum 90 day waiting periodEmployers with more than 200 employees must

automatically enroll their employees in the employer-sponsored group health plan

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Employer Group Health Plans – Future Consideration (continued)

Group health plans must have “effective” appeals processes

Employer must offer a “free choice” voucherHealth care flexible spending account plans

will be limited to $2,500Notification requirements◦Uniform summary of benefits◦W-2 reporting◦ Individual coverage report

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Grandfather RulesDefinitions:◦A group health plan that was in existence on

March 23, 2010◦ Identity of participants may change◦Each benefit package examined separately

To maintain grandfather status, a plan must:◦ Include a statement saying plan is a

grandfathered health plan;◦Maintain records that document the terms of the

plan in effect of March 23, 2010;◦Make records available;◦Provide contact information

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Grandfather Rules (continued)

Grandfather status will be lost if the plan:◦Enters into a new policy, certificate, or

contact of insurance after March 23, 2010◦Eliminates substantially all benefits for a

specific illness◦Increases co-insurance or cost sharing◦Decreases employer contribution

percentage◦Imposes certain new annual limits on

benefits

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Provisions Applicable to All PlansCoverage for adult childrenRestrictions on annual and lifetime benefit limitsElimination of pre-existing condition exclusionsLimitation of rescissionsOver-the-counter medications

Provide free preventative care servicesParticipants may select primary care providers,

including pediatric care providers, and OB/GYNsInsured group health plans will be subject to

nondiscrimination rulesEmergency care services must be provided without

prior authorization

Provisions Applicable toNon-Grandfathered Plans

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Coverage of Adult Children

Must make health care coverage available to children of plan participants until age 26

May not consider:◦ Tax dependency◦ Residency◦ Student status◦Marital status◦ Employment status

May exclude adult child who is eligible for health coverage under another employer’s plan

Cannot require additional contributions because child is adult

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Coverage of Adult Children (Continued)

Special enrollment period◦ For adult children who lost, or never had, coverage◦ Enrollment period must be at least 30 days◦Must receive written notice of enrollment

opportunityTaxation◦No imputed income even if adult child not tax

dependent until end of tax year in which child turned 27

◦ Pre-tax contributions to cafeteria plan permitted if plan amended

◦ Change in Status rules include adult, non-dependent children

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Restrictions on Annual and Lifetime Benefit Limits

No lifetime dollar limits on essential health benefits

Must notify individuals who reached prior lifetime limit of 30-day opportunity to re-enroll

Annual limits on essential health benefits must be at least:◦ $750,000 per plan years beginning after September

22, 2010◦ $1.25 million for plan years beginning after

September 22, 2011◦ $2 million for plan years beginning after September

22, 2012

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Restrictions on Annual and Lifetime Benefit Limits (Continued)

Annual limit applies separately to each individual

Annual limit cannot be offset by non-essential health benefits

Exceptions to annual limit:◦Health FSAs◦HSAs◦Mini-med or limited benefit plans

New open enrollment period

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Pre-Existing ConditionsPre-existing conditions definitionCannot impose on child under 19Cannot impose on anyone as of 2014Cannot exclude from coverage

RescissionRescission is a retroactive cancellation of

coverageRescission only permitted for fraud or intentional

misrepresentationThirty day notice requirement

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Over-the-Counter MedicationsEffective January 1, 2011Applies to all non-prescribed over-the-

counter medications, except insulinHealth Care FSAs, HRAs cannot reimburse.

HSA distributions taxablePreventative Care Services

Cannot have cost sharing such as co-pays or deductibles

Preventative Care includes:Well baby care; mammograms; services recommended by certain government agencies; services to be included by HHS

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Choice of Health Care Provider and OB/GYN Referrals

Must allow selection of any primary care or pediatric care provider in plan’s network

Referral to OB/GYN not required

Non-Discrimination Rules for Insured Plans

Non-discrimination rules for insured plans will be “similar” to self-funded plan rules

IRS guidance needed

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Emergency Care Services

Must be provided without prior authorization or regard to plan’s network

Out-of-network and cost sharing requirements must be the same as for in-network

Emergency Medical Conditions – expectation of serious jeopardy or impairment to bodily functions or organs

Emergency service provider may balance bill patient

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Penalties

$110 per day penalty for failure to provide compliant SPD

HIPAA Penalties:◦$100 to $50,000 based on number and nature

of violations◦Maximum penalty $1,500,000 per year◦Separate violation occurs on each day of non-

compliance

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Conclusion – Action Steps for Employers

Determine if you are a grandfathered planAssess plan with regards to new requirementsPrepare in advance for:◦Required open enrollments◦Plan amendments◦New required communication materials and notices◦Revisions of summary plan descriptions and new

summaries of material modifications◦Keep Alert! Government agencies will be issuing

additional regulations and revising those that have already been issued

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Marcia S. Wagner, Esq.

99 Summer Street, 13th FloorBoston, MA 02110

Tel: (617) 357-5200 Fax: (617) 357-5250 Website: www.erisa-lawyers.com

marcia@wagnerlawgroup.com

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