Implementing Health Care Reform

Grandfathered Plans,New Consumer Protections

and What’s on the Radar ScreenNational Association of Health Underwriters

June 29, 2010

Grandfathered Plans• Essentially all plans in effect on date of PPACA

enactment (March 23, 2010) are “grandfathered”

• Very few changes are permitted if a plan wants to retain grandfathered status– Plans must provide a statement to participant that it believes

it is a “grandfathered” plan

• Plans that made changes between March 23 and June 14 have an opportunity to reverse any significant changes made without losing grandfathering status.– This must be done by the plan year following September 23,

2010

The “Why” of Grandfathered Plans• PPACA requirements that are waived if a plan remains

“grandfathered– The requirement that emergency services must be provided without pre-

authorization and treated as in-network

– The rating limits, guaranteed issue, guaranteed renewability, and essential benefits packages that begin in 2014

– The cost-sharing and deductible limits, non-discrimination for clinical trial participants, non-discrimination on providers acting within scope of license

– No cost sharing for preventive care

– The non-discrimination rules for fully insured plans

– The requirement that pediatricians must be an allowable primary care physician choice

– The requirement that females can go to an OB/GYN without a referral

– The requirement that plans must provide an internal and external appeals process

What Grandfathered Plans Can’t Do

• Can’t increase Co-insurance rate

• Can’t increase Co-pay more than the greater of $5 (adjusted annually for medical inflation) or medical inflation plus 15%

• Can’t reduce employer contribution more than 5%

• Can’t increase deductible more than 15% plus medical inflation

What Grandfathered Plans Can’t Do• Can’t use a merger, acquisition or business

restructuring for the purpose of covering new individuals under a grandfathered plan

• Can’t change carriers if you are fully insured

• Can’t move employees to a grandfathered plan with lower benefits

• Can’t make a significant cut to benefits such as eliminating benefits for a particular condition

What Grandfathered Plans Can Do• Add family members or new employees

• Disenroll employees

• Make changes as a result of state or federal regulations

• Make changes to voluntarily adopt some or all of the law’s requirements

• Change third party administrator if you are self-funded

• Increase premiums

Effective Plan Years after Sept. 23 All Plans, Including Grandfathered

• Restrictions on lifetime and annual limits– Plans may not impose lifetime limits on dollar value of

“essential benefits”

– Plans may impose only “restricted annual limits” on the dollar value of “essential benefits”.

– HHS to establish what annual limits may be permitted on non-essential benefits.

– On and after January 1, 2014, no annual limits will be permitted

Effective Plan Years after Sept. 23All Plans, Including Grandfathered

• Coverage for dependents to age 26– If a plan offers dependent coverage of children, such

coverage must extend to a child until the child reaches age 26

– For grandfathered plans, this requirement applies before January 1, 2014 only if the adult child is not eligible to enroll in another plan

– An additional premium may not be charged for this expanded eligibility

Effective for Plan Years after Sept. 23, other than Grandfathered

• Preventive care without cost sharing– Very specific benefits

– May include significant expansions on well child care

• Nondiscrimination rules under IRS Code 105(h) applies to fully-insured plans

• Pre-Ex Restrictions– Plans may not impose any preexisting condition restriction on children under the

age of 19.

– After January 1, 2014, plans may not impose preexisting condition restrictions on anyone

• For all group and individual plans, including self-insured plans, emergency services covered in-network regardless of provider

Minimum Loss Ratios• Minimum loss ratio requirements will be established for

insurers in all markets.

• The MLR is 85% for large group plans and 80% for individual and small group plans (100 and below). – May impact provisions that reduce claims cost, such as pay

for performance, nurse lines, disease management, etc.

– May result in fewer carriers offering coverage in some areas, particularly rural, resulting in less consumer choice

• Carriers will have to issue a premium rebate to individuals for plans that fail to meet the minimum MLR requirements.   

What We are Watching…

PPACA in 2014• All individuals are required to carry coverage

– Tax penalties for non-compliance

– Exceptions for hardship and certain other income related circumstances

• Imposes new annual taxes / fees (non-deductible) on private health insurers based on net premiums– $8.1 billion annually beginning in 2014 and rising to $14.3

billion by 2018 (and indexed for medical inflation thereafter)

– Small businesses and employees could be disproportionately affected because tax only applies to fully insured health benefits (self-funded plans exempt)

PPACA in 2014• Coverage must be offered on a guarantee issue basis in all

markets and be guarantee renewable

• Exclusions based on preexisting conditions would be prohibited in all markets

• Significant restrictions on rates for individuals and small groups.– Age difference limited to 3-1, some additional changes for

smoking status and participation in wellness programs

• Redefines small group coverage as 1-100 employees. – States may also elect to reduce this number to 50 for plan years

prior to January 1, 2016

Essential Benefits Defined• In 2014, the benefits that are considered to be

“essential” will be fully defined.

• These minimum benefit levels apply to all plans, except grandfathered plans and self-funded plans.

• Self-funded plans, while not required to adhere to minimum benefit requirements, may choose to comply with at least the minimum requirement to avoid other fines.

PPACA in 2014• Requires each state to create an Exchange to facilitate the sale of

qualified benefit plans to individuals, including new federally administered multi-state plans and non-profit co-operative plans. – States will have a great deal of flexibility in the structure of exchanges

– The NAIC is beginning work on model language

• Creates sliding-scale tax credits for non-Medicaid eligible individuals with incomes up to 400% of FPL to buy coverage through the exchange. – Subsidies also available for those making 250% FPL or less for cost

sharing such as co-pays and coinsurance, in addition to the premium subsidies.

– In general, a person is not eligible for a subsidy if they have employer sponsored coverage, unless it is unaffordable.

Employer Responsibilities

Employer Responsibilities

• Effective starting January 1, 2014

• Employer must count all full-time employees and part-time employees – on a full-time equivalent basis – in determining if they have 50 or more employees– Certain seasonal workers are not counted in determining if

employer has 50 workers

– Full-time = 30 or more hours per week, determined on a monthly basis

• Penalties assessed for “no coverage” or coverage that is not “affordable”

It is critical that employers continue to offer coverage..

Communicating that message and improving costs for employer

sponsored plans will be a major NAHU objective

Other Responsibilities• Employers must automatically enroll “new full-time employees” in

employer-sponsored coverage– Must provide adequate notice and opportunity to opt out

– Applies to employers with “more than 200 full-time employees”

– No effective date specified, but must be “in accordance with regulations promulgated by the Secretary (of DOL)…” (so presumably not effective until regulations are issued)

• Notice to current employees and new hires about exchange and subsidies– Existence of exchange, services and how to obtain assistance

– Availability of premium assistance if plan value below 60%

– Loss of employer contribution and tax exclusion for contribution

– Effective March 1, 2013

 

Still Unknown and Causing Heartburn…

• 60 day notice in advance of plan changes

• Nondiscrimination testing under Section 105(h)

• 1099 for goods

• Class Act

• Part-time employees