Presentation on theme: "Affordable Care Act (ACA) Health Care Reform: What it Means for Your School District’s Benefit Plans Presented to AASBO by: Nancy Hakes, West Region Health."— Presentation transcript:
1 Today’s Update is on the Immediate ACA Requirements Overall Impact of Affordable Care Act (ACA ) Who is not subject to ACA Grandfathered plans and Non-Grandfathered plans ACA rules that apply to all plans Penalties for non-compliance with ACA Your “To Do” List
2 The “Affordable Care Act” is the combination of: Patient Protection and Affordable Care Act (PPACA) Public Law No. 111-148 Signed March 23, 2010 PLUS Health Care and Education Reconciliation Act Public Law No. 111-152 Signed March 30, 2010 These two regulations are collectively referred to as the “Affordable Care Act” or ACA or sometimes “health care reform” or “health reform”
3 What We Know Government agencies (DOL, HHS, Treasury) will be issuing new interim regulations, final regulations, FAQs and Technical Bulletins for months to come Get used to CHANGE
4 Impact of the Affordable Care Act (ACA) ACA touched a lot of topics, some effective NOW and some effective LATER Employer requirements (dependents to be covered to age 26, remove lifetime/annual max, no pre-ex for children), plus auto enroll employees (no effective date yet) Expansion of public programs (Medicaid, CHIP, Medicare) Tax changes (starting 2014: Cadillac tax, pay or play mandates, free rider penalty, free choice voucher) Insurance company requirements: medical loss ratio must be certain level (and must provide rebate to enrollees if more than 15% of premium revenue is expended on non- claims costs - for large groups); temporary high risk pool; insurer rules on individual insurance policies, etc. Health insurance exchanges (starting 2014) Quality improvements (after 2012, comparative effectiveness research, ban on waiting periods, Medicare pilot programs, quality reporting) National preventive/wellness initiatives (chain restaurants/vending machines to disclose nutritional contents of items, Medicare improvements, etc) Long Term Care (e.g. national voluntary long term care insurance called “community living assistance services and supports” or the “Class” act) Nice Summary of Health Reform at http://www.kff.org/healthreform/upload/8061.pdf Nice Summary of Health Reform at http://www.kff.org/healthreform/upload/8061.pdf
5 HealthCare.gov is a new resource for information
6 Group Health Plan ACA Mandates for ALL Plans When Are These ACA Mandates Effective? First day of the first plan year on or after September 23, 2010 Plan Year Beginning: Effective Date: October 1October 1, 2010 January 1January 1, 2011 April 1April 1, 2011 July 1July 1, 2011 and think about your plan year
7 Affordable Care Act Key Rules that Apply to ALL Plans For Plan years beginning on or after Sept. 23, 2010 Children eligible to age 26, even if married or not in school No lifetime dollar value limits on essential benefits No annual dollar value limits on essential benefits No pre-existing condition exclusions for children <19 yrs. No rescissions (retroactive term of coverage) unless fraud, intentional misrepresentation of facts or non-payment of premium Medical Loss Ratio reporting for insured plans (must report annually on % of premium spent on non-claim costs and for large groups provide rebate if loss ratio <85%) Uniform benefits information disclosure required (~2012) Plan years beginning on or after January 1, 2014 No waiting period for benefits over 90 days No preexisting condition exclusion for anyone No annual dollar limits for anyone
8 Certain Plans Are Not Subject to ACA Retiree-only Plans Not Subject to ACA Retiree-only plans (e.g. plans with less than 2 active employees) are excluded from: Health Insurance Portability and Accountability Act (HIPAA) Mental Health Parity and Addiction Equity Act (MHPAEA) All of the new group health plan standards added by the Affordable Care Act Excepted Benefits (Limited Scope) Dental and Vision Plans Not Subject to ACA Means the plan is a separate insurance contract; OR If self-insured, is separately elected and separately paid for If the dental and/or vision plan is NOT an excepted benefit that plan must also comply with ACA
9 Grandfathering New law allows certain medical plans in existence on March 23, 2010 to remain unaffected by certain health care reform provisions Plans that meet this requirement are called “Grandfathered Plans” Plans that do not meet this requirement are called “NON- Grandfathered Plans” Being a grandfathered health plan means that your medical plan may not have to include certain consumer protections of the Affordable Care Act (e.g. preventive care, external claim appeals, ER payment, etc.) But trying to maintain “grandfathered” status is likely to be a very pricey endeavor….is it even worth it? It is projected that: 50% of plans will be NON-grandfathered in 2011 >90% of plans will be NON-grandfathered by 2014 It is projected that: 50% of plans will be NON-grandfathered in 2011 >90% of plans will be NON-grandfathered by 2014
10 Grandfathering Plan Sponsors must determine which of their medical plan options are and are not Grandfathered Each medical plan option is tested separately –Means that some medical plan options may be grandfathered while others may be non-grandfathered –Makes writing medical plan documents challenging when some plan options are non-grandfathered and must implement expanded benefits compared to lesser benefits for grandfathered options –Plan must maintain records documenting why you believe you have retained grandfathered status Grandfathered plans must provide a written notice in plan materials outlining that the plan is grandfathered –Feds have a “model” grandfather notice –Grandfather notice must appear in all documents that describe the benefits of the plan that is grandfathered
11 Grandfather regulations list types of changes that will result in LOSS of grandfathered status (if made after 3-23-10): 1. Elimination of a benefit for a condition Includes elimination of necessary element to diagnose or treat a condition 2.Increase in coinsurance percentage in any amount 3.Increase deductibles & out-of-pocket limits by more than 15% plus medical inflation 4.Increase copayment by more than greater of $5 (adjusted for medical inflation) or 15% plus medical inflation 5.Increase employee contribution percentage by more than 5% toward any tier of coverage (e.g., self-only, family) 6.Certain changes in annual/lifetime overall dollar limits 75 Federal Register 34538 (6/17/10) How Could a Plan Lose Grandfather Status?
12 Actions that Do Not Result in Loss of Grandfather Status These items do not appear to change grandfathered status: Changing a third-party administrator Changing an insurance company before 11-15-10 Changes to comply with a state or federal legal requirement –(such as changing benefits to comply with mental health parity regs is okay) Changes to voluntarily comply with provisions of the Affordable Care Act Certain instances of converting a lifetime maximum to an annual maximum
13 Affordable Care Act Key Rules that Apply to ALL Plans The following slides show you which rules apply to ALL plans starting with the first day of the first plan year beginning on or after Sept. 23, 2010
14 Dependent Coverage No requirement to cover children, but for plans that do: If offer coverage to natural son/daughter, stepchild, adopted child or foster child must do so to age 26, without regard to: –marital status –tax-qualified status such as financial dependency or residency with parents –student status/religious missionary, –child’s employment –child’s eligibility for other group coverage* *Grandfathered plans do not have to cover children who are eligible for other employment-based coverage (rule eliminated in 2014) Plans cannot vary benefits or the cost of coverage based on the age of the child 75 Federal Register 27122 (5/13/10)
15 Eligibility Rules Are Affected by Age 26 Mandate Can only set criteria for coverage of the 4 types of children based on: Relationship of child to the employee/retiree Child’s age No requirement to cover son-in-law or daughter-in-law Example: You have a 24 year old adult child on your plan who gets married and wants to bring her new husband on your plan under her HIPAA Special Enrollment rights For children under legal guardianship, children age 26 and older or child of a domestic partner, the plan is permitted to follow the age 26 rules or require the usual eligibility requirements of a tax-qualified dependent, such as coverage to a lower age, require student status, residence with employee. Plans need to reassess what categories of children they want to cover going forward The age-26 mandate applies until the child’s 26th birthday, but a tax provision allows tax-free coverage to continue through the end of the calendar year if you want.
16 Recent DOL FAQ #14 Helps Define Who is a Child Plans that cover these categories of children can only have eligibility rules pertaining to the child’s relationship to the employee and age (e.g. < 26 years): Natural son or daughter Adopted child (or child placed for adoption) Stepson or stepdaughter Foster child –(an individual placed with the participant by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction) Optional Children Categories where plan can apply additional eligibility rules if desired: child under a legal guardianship children age 26 and older disabled children; child of a domestic partner grandchildren, niece, nephew Notice 2010-38 located at http://www.irs.gov/pub/irs-drop/n-10-38.pdf and FAQ: (http://www.dol.gov/ebsa/faqs/faq-aca.html 16 IMPORTANT NOTE: if state law not in sync with federal law, you may need to impute income for some adult dependents. AZ is not in sync
17 Removing Lifetime and Annual Dollar Maximums No lifetime dollar value maximums permitted on “essential benefits” effective for the first plan year on/after September 23, 2010 May be able to convert the lifetime max to an annual max Annual dollar value limits on “essential benefits” may not be less than the following amounts (for plan years beginning before January 1, 2014): $750,000 for plan years beginning on or after September 23, 2010 $1.25 million for plan years beginning on or after September 23, 2011 $2 million for plan years beginning on or after September 23, 2012 –75 Federal Register 37188 (6/28/10)
18 Essential Health Benefits Plan sponsor may make a reasonable judgment about what is or is not an “essential health benefit” Agencies will not challenge that determination, assuming it is reasonable and applied consistently in the plan Guidance on “essential health benefit” definition will not be released until HHS makes rules on what benefits must be covered in the Exchanges (likely a year or more before further guidance) Section 1302(b) of the Affordable Care Act defines essential health benefits to include at least the following 10 general categories: Ambulatory patient services; Emergency services; Hospitalization; Maternity and newborn care; Mental health and substance use disorder services, including behavioral health treatment; Prescription drugs; Rehabilitative and habilitative services and devices; Laboratory services; Preventive and wellness services and chronic disease management; and Pediatric services, including oral and vision care. No guidance yet on what is (or is not) included within each of these 10 categories Section 1302(b) of the Affordable Care Act defines essential health benefits to include at least the following 10 general categories: Ambulatory patient services; Emergency services; Hospitalization; Maternity and newborn care; Mental health and substance use disorder services, including behavioral health treatment; Prescription drugs; Rehabilitative and habilitative services and devices; Laboratory services; Preventive and wellness services and chronic disease management; and Pediatric services, including oral and vision care. No guidance yet on what is (or is not) included within each of these 10 categories
19 ONE TIME 30-day Special Enrollment Must hold a one time 30-day special enrollment period before your next plan year, for two reasons: Allow adult dependent children on the plan Allow anyone who exceeded the lifetime maximum (and is still otherwise eligible) to come back on the plan Many plans are combining these Special Enrollments with Open Enrollment, making the next open enrollment 30 days long instead of a shorter period Once enrolled during this special enrollment period, coverage is effective on the first day of the plan year beginning on or after September 23, 2010 Model Notices for the Special Enrollments are available at: http://www.dol.gov/ebsa/healthreform/
20 Pre-existing Condition Exclusions ACA prohibits pre-existing condition exclusions for children under age 19 years Effective the first plan year on or after September 23, 2010 Must remove pre-existing condition exclusions for all individuals for plan years beginning on or after January 1, 2014 37188 Federal Register / Vol. 75, No. 123 / Monday, June 28, 2010
21 Anti-Rescission Rule Generally, group health plans cannot rescind coverage except in cases of fraud or intentional misrepresentation of fact Rescission is a cancellation or discontinuance of coverage that has a retroactive effect If rescission is valid, must provide a 30-day advance notice before coverage is rescinded to allow person to dispute the issue Retroactive cancellation because of failure to pay a premium is permitted Prospective cancellations are not rescissions 37188 Federal Register / Vol. 75, No. 123 / Monday, June 28, 2010
22 Added Rules that Apply to NON-Grandfathered Plans For Plan years beginning on or after September 23, 2010 Add preventive care with no cost-sharing (at least in-network) Must cover the new comprehensive list of preventive services (located at http://www.healthcare.gov/law/about/provisions/services/lists.html) Consumer/Patient protections Pay Emergency Room (ER) care same in-network and out-of-network, plus new definition of “emergency medical services” If require PCP selection, allow any provider to be a PCP Allow women unrestricted access to OB-GYN provider Detailed internal appeals process (now mirrors ERISA regs plus extra provisions) New requirement for an external review process Prohibits fully-insured group health plans from discriminating in favor of highly compensated individuals with respect to eligibility and benefits Quality reporting requirements (~2012) For Plan years beginning on or after January 1, 2014 Limit on out-of-pocket maximum and deductibles (based on HSA maximums) Clinical trials—payment for routine costs furnished in connection with the clinical trial Provider nondiscrimination (but is not an “any willing provider” provision) Wellness incentives/penalties on individuals can be increased to 30% of costs
23 Making the Decision You’ll need to weigh the choice between maintaining grandfathered status and having the flexibility to make needed plan changes. Your benefits budget will be an influencing factor….can you afford to stay grandfathered?
24 Penalties for Non-Compliance with ACA? Internal Revenue Code Section 4980D excise tax penalty on a group health plan that fails to meet requirements….generally $100/per day for each affected individual from date of failure to comply through date of correction Penalty will not be assessed if failure not discovered despite exercise of reasonable diligence or was corrected within certain time periods Maximum penalty is lesser of $500,000 or 10% of amount paid for health plan costs for unintentional failures Enforcement DOL will place “emphasis on assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law” –http://www.dol.gov/ebsa/faqs/faq-aca.html
25 Your “To Do” List for 2011 Determine the effective date of compliance for your plan Which of your medical plan options are grandfathered? Are dental and vision plan benefits “excepted” benefits? Will desired or necessary plan changes impact your plan’s status as a grandfathered health plan? –If so, what NON-grandfathered plan rules must be implemented for the next plan year? –What’s does ACA compliance cost, in addition to the usual annual claims and trend increases? –What premium increases are needed? Plan a 30-day period for Open Enrollment for 2011 and draft open enrollment materials including required notices Rewrite your benefit plan documents to incorporate appropriate ACA changes Work closely with your benefits/actuarial consulting firm Understand that more guidance will be published
26 What’s the Future of Health Reform after 2012 Presidential Elections?
27 More information at: http://www.segalco.com/health-care-reform/ Nancy Hakes firstname.lastname@example.org 602-381-4025 Please keep in mind that our presentation is intended to provide our views as employee benefits professionals and is NOT intended to provide legal advice. As with all such issues involving laws/regulations you should refer to your legal counsel for authoritative advice.