Health Care & Insurance Committee Update
- The Devil’s In the Details: Federal Health Care Reform Implementation
- Grandfathered Plans: “If you like your coverage, you can keep it”
- Speed Dating 101: Quick Factoids on Some of the 2010 Coverage Mandates
- “If we don’t change direction soon, we’ll end up where we’re going” (Havelock Ellis)
Looking for some beach reading to ride out the heat wave? Look no further than the (at least) six sets of regulations issued from the federal government implementing aspects of the new health care reform law. Akin to War and Peace in the epic scope of their reach, these regulations provide the roadmap to carry out the Congressional vision of a transformed health insurance marketplace. As a heavily-regulated state, some of these changes will not be new or newsworthy in New York State. Others are new in their interpretation, and will require plan design changes and business practice changes to ensure employers are in compliance with the new federal mandates. Many of the mandates also require new employer disclosures to employees – so to keep the ‘gotcha’ gang at bay, it’s important that businesses take the time to understand how implementation will impact their business, and what needs to be done to ensure compliance.
Health insurance carriers are in overdrive to modify plans and plan designs to meet the coverage mandates which take effect in 2010. Some new mandates on health plans effective in the coming months include:
- Prohibitions on lifetime benefit limits (model notice language here).
- Prohibitions on rescissions except for fraud or intentional misrepresentation.
- Prohibitions on cost-sharing obligations for preventive services (fact sheet on what’s covered in this category can be found here).
- Dependent coverage up to age 26 is mandated.
- Coverage for emergency services at in-network cost-sharing level with no prior-authorization is mandated.
- Pre-existing condition exclusions for dependent children under 19 years of age are prohibited (the full rulemaking on this and lifetime benefit limits can be read here).
- Internal and external appeal processes must be established.
Grandfathered plans (discussed below) have longer timeframes to come into full compliance with the new plan coverage mandates.
No, this is not “What’s My Line” but the oft-heard marketing hook used as Congress debated health insurance reform. Consistent with the new law’s lack of focus on ‘bending the cost curve’, there is a cost to keeping the coverage you have. The regulations issued on retaining ‘grandfather’ status run over 30 pages and detail the rules of engagement by which an employer can keep the coverage he currently has. Retaining grandfather status is a business decision that requires planning with an employer’s agent/broker, the in-house benefits advisement team; and likely your tax advisor. Maintaining grandfather status under these regulations carries a business cost that needs to be understood before any plan changes are enacted. If you needed to renew your plan prior to the issuance of the regulations – and find that you are now out of compliance and thus unintentionally lost your grandfather status – there are special provisions to allow you to correct and come into conformance with the regulations.
In brief, to maintain grandfather plan status, businesses cannot:
- ‘significantly’ cut or reduce benefits within the plan;
- raise co-insurance charges which typically require a patient to pay a fixed percentage of a charge;
- ‘significantly’ raise deductibles;
- ‘significantly’ lower employer contributions;
- add or tighten annual limits on what an insurer pays; and
- change insurance companies.
‘Significantly’ in each instance referenced in the regulations is defined according to a formula for that category, translated to a percentage threshold by which that particular benefit, co-pay, deductible, etc. can be increased to retain grandfather status.
All employers retaining grandfather plan status must provide disclosure to employees and must provide contact information for questions and complaints. A model notice can be found here.
Ultimately, it is clear that Congress and HHS are not desirous of having grandfathered plans. The regulations in the preamble lay out the future: “deciding to relinquish grandfather status is a one-way sorting process: after some period of time, more plans will relinquish their grandfather status.”
For many businesses, the details will be less around what is within each of the issued regulations, but more around the business practice and decisionmaking procedures which will take your firm through implementation. Some things to keep in mind as you navigate these uncharted waters:
Non-Dependent Adult Coverage
- Only condition for dependent eligibility is participant’s relationship to the child and an age under 26.
- Current plan contribution structure for other dependents must be extended to adult children covered under this mandate.
- Surcharges or separate rates for adult child coverage are not permitted.
- Adult children of employees eligible must be given a 30 day special opportunity to enroll no later than the first day of the first plan year beginning on or after 9/23/10.
- Disclosure must be given to all employees (see model notice here).
- Employers are not obligated to offer coverage if the non-dependent adult child has declined coverage through his employer.
- Married young adults are not eligible for coverage under a mother or father-in-law’s plan.
- These regulations are in addition to NY’s mandated mini-COBRA coverage requirement to up to age 30 non-dependent adult children.
Early Retiree Insurance Option
- $5 billion set aside nationally; to be disbursed on a first-come, first-served basis on bills received, not applications receipt date.
- Covers ages 55-64, pre Medicare.
- Applies to plans with costs between $15,000 and $90,000.
- Employers must be able to show that subsidies were not used to reduce their level of support; and provides for an up to 80% subsidy for retirees.
- Employer applications can be found at www.hhs.gov.
As health insurance carriers work to incorporate all of the mandates required by federal health care reform, more changes are coming courtesy of actions taken by the State Legislature in the closing days of the NY legislative session. Additional coverage mandates – putting yet more upward pressure on premiums – were enacted. For more details on those mandates, scroll to the Health section of the End of Session Update. Additionally we have yet to see regulations from the federal government to implement sections of the federal law which will set the standards for what’s included in the medical loss ratios for large and small group plans; and the effective date for the mandate that employers with more than 200 employees automatically-enroll employees into an employer’s health plan (becomes effective upon issuance of the regulations from USDOL).
If you’re in need of an aspirin, make sure to stock up now before the 2011 changes kick in, which will limit the ability to purchase over-the-counter medication through your HSA or FSA!
As always, please feel free to contact me if you have further questions, or if I can provide you with any details on the issues addressed above.