health care reform marcia s. wagner, esq.. 2 introduction legislation ◦ patient protection and...
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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
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