Transcript PPACA Update

PPACA Update
VSBA COSA – Fall Meeting
Williamsburg, VA
November 16, 2011
R. Craig Wood
434.977.2558
[email protected]
www.mcguirewoods.com
A Complex and Confusing New Law
• Patient Protection and Affordable Care Act, P.L. 111-148
enacted March 23, 2010 (PPACA).
• Health Care and Education Reconciliation Act, P.L.111152 enacted March 30, 2010 (HCERA), amends PPACA.
• The laws amend ERISA, the Internal Revenue Code,
Public Health Service Act, and Fair Labor Standards Act.
• Regulatory guidance will come from DOL, IRS, and HHS.
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Recent Developments in Health Care Reform
• Implementation of the Patient Protection and Affordable
Care Act (“PPACA” or “health care reform”) continues.
• Five major regulation packages, plus sub-regulatory
guidance
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Adult dependent coverage
Grandfathered plans
Pre-existing conditions, etc.
Preventive services
Internal claims/external review
• Recent developments
• Legal Challenges to Health Care Reform
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Changes to Claims and Appeals Procedures
• DOL, HHS and IRS (the “Departments”) issued extension of grace
period for compliance with the internal claims and appeals process and
external review process for non-grandfathered plans
• Until January 1, 2012 for certain requirements under the interim final
regulations
• Amendment to the 2010 interim final regulation issued June 22, 2011
• The amendment modifies 16 standards for appeals and review
procedures of the 2010 interim final regulations, summarized in DOL
Technical Release No. 2011-02
• Possible additional changes to health and welfare plans, SPDs and
administrative procedures may be necessary once final regulations are
issued
• Non-grandfathered plans, for the 2012 plan year
• Monitor compliance dates for grandfathered plans
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PPACA initial provisions
• Grandfather Provision
• Group health plans already in effect are
grandfathered from PPACA indefinitely, except
for insurance reform provisions
• But very easy to lose grandfathered status
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Grandfather Rules
• The employer enters into a new contract,
certificate or policy of insurance after 3/23/2010
• The insurance ceases to provide all or
substantially all benefits to diagnose or treat a
particular condition
• Any increase in a percentage cost-sharing
requirement
• Any increase in a a fixed-amount cost-sharing
requirement (deductible or out-of-pocket limit)
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Grandfather Rules
• Any increase in a fixed amount co-payment that is
more than
– $5.00 (increased by medical inflation), or
– Medical inflation plus 15%.
• Any employer decrease for tier coverage by more
than 5%
• Any change in lifetime or annual benefit limits
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Temporary High-Risk Pool
• A temporary high-risk health insurance pool shall
be established to provide coverage for eligible
employees with a pre-existing medical condition
who have no health coverage.
• Must keep in place until 2014 (when exchanges
are operational).
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Provisions in effect for all plans
• Pre-existing exclusions – forbidden for enrollees
under age 19
• Dependent coverage
– Married and unmarried children qualify
– Not offered to children of dependents or spouses
– Unless adult child has offer of employer-covered
insurance
– Can be purchased with pre-tax dollars
– In 2014, dependents can stay on parents’ plan even if
have employer coverage available
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Appeals Procedures
• Interim Appeals
– Group plans must implement internal claims and
appeals processes that comply with Section 503 of
ERISA, including governmental plans
– Recission of coverage is entitled to internal appeal
– Urgent care claims must be decided in 24 hours
(previously 72 hours) unless claimant does not provide
sufficient information to make a determination
– If an insurer fails to comply with any aspect of the
internal appeals process, the claimant can immediately
pursue an ERISA remedy
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Non-discrimination issue
• Statute prohibits discrimination in favor of highly
compensated employees
• Rules temporarily suspended by IRS
• “Highly compensated employees” are the top 25%
compensated of all employees
• Under the new rule, a school could no longer pay
a higher percentage of the cost of health care
coverage for HCE’s
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Possible fixes
• IRS has suspended rule, and is considering
possible approaches
• Exempting health coverage from the rule
altogether
• Changing the definition of HCE to anyone making
more than $110,000 per year
• Exempting employees who pay income tax on the
excess benefit
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2011 Requirements
• Health Spending Accounts (HSAs), Flexible
Spending Accounts (FSAs) and Health
Reimbursement Accounts (HRAs) changes
• OTC medications not reimbursable except insulin
and OTC meds prescribed by a physician
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W-2 Reporting
• Originally for 2011, now deferred to 1/1/12, plan sponsors
must report the cost of coverage under an employersponsored group health plan on Form W-2
– Information only; employer-provided health coverage not taxable
• IRS issued new draft form W-2 for 2011 (to be distributed
in January 2012)
– Use Code DD in Box 12
– Mandatory beginning with 2012 W-2’s
– Copy of draft form can be found at http://www.irs.gov/pub/irsutl/draft_w-2.pdf
• Additional guidance expected later this year
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Amendments to IFR – Coverage of Preventive
Services under PPACA
• Interim final rule with request for comments was issued on August 3,
2011 (effective August 1, 2011)
• Amends the previous IFR published July 19, 2010 – Group Health
Plans and Health Insurance Issuers Relating to Coverage of Preventive
Services under the Patient Protection and Affordable Care Act
• The Health Resources and Services Administration (HRSA) was
required to develop comprehensive guidelines for preventive care and
screenings for women
• Implementation of these new required guidelines is required no later
than plan years beginning on or after the date that is one year from
when the new guideline is issued
• Provision of contraceptive services for all women
• Comments pending (period ends September 30, 2011)
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Other Recent Guidance
• Health Insurance Premium Tax Credit (IRC §36B)
– Notice of proposed rulemaking and notice of public hearing
released August 12, 2011
– Refundable tax credit to help individuals and families afford health
insurance coverage by reducing the out-of-pocket premium cost
– Affordability test (IRC §4980H(b)) will be based on an employee’s
Form W-2 (not total household income)
– Possible exclusion of self-funded plans and fully-insured large
group plans from requirement to provide “essential benefits” per
list of federally mandated benefits
– Open questions remain: “Minimum Essential Coverage”;
application of dual or family coverage; employer mandates under
§4980H(a)
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The CLASS Act
• CLASS = "Community Living Assistance Services and
Supports" Program:
– Federally-administered long term care insurance.
– Voluntary for employees.
– Must participate in program for at least 60 months before receiving
benefits.
• Effective 2011: Employees may be automatically enrolled
in the CLASS program via payroll deduction.
– Contingent on implementation of the program and issuance of
regulations describing automatic enrollment procedures.
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CLASS Act
• However, in October, HHS Secretary Sebelius
sent a report and letter to Congress
• HHS study found that the CLASS Act was not
feasible, and has recommended suspension of the
program requirements
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ERRP Update
• The Early Retirement Reinsurance Program stopped
accepting applications after May 5, 2011; more than
5,000 employers accepted to the program; $1.8 billion
already disbursed
• Ongoing administration by plan sponsors;
maintenance of contribution requirements
• Guidance on “Complying with the Prohibition on
Using Early Retiree Reinsurance Program
Reimbursements as General Revenue”; Issued by
CMS on July 20, 2011
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2012 Changes
• Summary of Coverage – Insurers and plan
sponsors must provide a summary of benefits to
all participants in a for prescribed by HHS
• Plan must provide 60-days notice of any changes
to the Plan
• Quality of Care reporting – Reporting on
incentives to improve quality of care, patient
outcomes, disease management, reducing medical
errors and other such improvements in care
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Summary of Benefits and coverage
• Require documents that:
– Cover key terms of coverage
– Coverage facts label
• Examples of costs of common illnesses
– Uniform glossary of medical and insurance terms
• Not necessarily the same terms as plan and SPD use
• Mandates uniform appearance
– 4 pages, double-sided
– 12 point font
• Imposes 60-day advance notice for changes in the SBC
document
– At odds with ERISA rules for SMMs
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Summary of Benefits and Coverage
• Rule is effective 2 years after enactment (3/23/2012)
• $1,000 fine per enrollee for willful violations
– Other penalties may be assessed by DOL and Treasury
• Applies to both group health plans and insurance coverage
– So, it covers self-insured plans
• Intended to encourage comparison shopping by individuals
among available plans
• Published as a proposed regulation
– Not an interim final regulation
– Comments due 10/21/2011
• Agencies seek comments on many issues
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Summary of Benefits and Coverage
• No extension of effective date – YET
• Who must provide?
– Insurers provide to plan sponsor
– Plan administrator provides SBC for each option
available to the participant
• When provided?
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Initial enrollment/application
Renewal/reenrollment
Material change
On request
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Summary of Benefits and Coverage
• Content
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Uniform definitions
Description of coverage, exceptions, limitations
Cost-sharing provisions (deductibles, co-pays, co-insurance)
Continuation of coverage
Coverage examples
Statement on minimum essential coverage and percentage that
employer pays
Lots of contact information
Information on the glossary
Premium and cost information
More
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Summary of Benefits and Coverage
• Action Plan
– Which plans must provide SBC?
– Compare SBC template to existing communications
documents
– Work with insurer/TPA to determine who will provide
SBC
• Look at indemnification language
– How to combine with open enrollment materials
– Electronic delivery?
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What Happens in 2014?
• Health Insurance Exchanges:
– New market for individuals and small groups to be established
by states.
– In 2017 states may allow larger groups to participate.
– Massachusetts and Utah are current examples.
• Employer "pay or play" provisions.
– Employers may be penalized for failing to offer adequate
coverage.
• Annual limits on coverage eliminated – no “caps”
• No pre-existing condition limitations on new coverage
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Legal Challenges to Health Care Reform
• Challenging PPACA constitutionality; specifically the individual
mandate
– State of Florida v. Department of Health and Human Services
• January 31, 2011 ruling by Judge Vinson declaring all of PPACA unconstitutional
because cannot sever individual mandate from other PPACA provisions
• 11th Circuit Court of Appeals affirms (8/12/11)
– Commonwealth of Virginia v. Sebelius
• December 2010 ruling by Judge Hudson found PPACA’s individual mandate
unconstitutional
• Supreme Court denied cert for immediate review
• Appeal and cross-appeal pending in the 4th Circuit Court of Appeals
– Liberty University, Inc. v. Geithner
• Ruling upheld constitutionality of individual mandate
• Appeal pending in the 4th Circuit Court of Appeals
– Thomas More Law Center v. Obama
• Ruling upheld constitutionality of individual mandate
• 6th Circuit Court of Appeals affirms (6/29/11)
• Thomas More Law Center filed for Supreme Court review on July 26, 2011
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Legal Challenges to Health Care Reform
• On Nov. 14, the Supreme Court granted cert to the
Florida (11th Circuit) decision
• Issues on appeal:
– Are the “individual mandates” that all Americans
purchase health insurance constitutional?
– If not, does the rest of the law fail because the funding
is primarily the revenues from mandated insurance?
– Can states be forced to expand their share of Medicaid
costs by the federal government?
– Can states be required to provide their employees a
federally-mandated level of health coverage?
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PPACA Implementation – What to Do Now?
• Complete repeal is unlikely during the current
administration, although negotiated changes may
be possible
• Must continue to comply with all aspects of
PPACA until resolution occurs
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