EServing
UCLID MANAGERS
the independent agent since 1976
®
A Legislative Review Service by Euclid Managers
October 2010
EUCLID MANAGERS®
has served the independent agent
since 1976, offering a portfolio
of group health, professional
liability, individual life, health,
annuity and long-term
care products.
We proudly represent many
fine carriers including
Group Products:
UnitedHealthcare of Illinois
Delta Dental of Illinois
MetLife
Individual Products:
American General Life Companies
AXA/Equitable
Banner Life
Genworth Financial Insurance Co.
Guarantee Trust Life
HumanaOne
John Hancock Life
Lincoln National Life
MetLife
Prudential Financial
RBC Insurance
Transamerica
West Coast Life
…and many more!
Contact Information
Reflections
Health Reform FAQ
Health reform has become a “constant companion" – always there or on the mind.
But, like many companions, it still remains a mystery for many. To some extent, this
is due to the fact that so many questions need to be answered by regulation. But,
perhaps the biggest culprit is that so much is changing in a short period of time.
This issue of Legislative Review provides answers to some of health reforms
“Frequently Asked Questions" (FAQ).
Is it likely that health reform will be repealed?
It is expected that an effort to repeal health reform will occur. However, even should
the make-up of Congress change significantly after the November elections,
President Obama will retain the veto pen.
continued on page 2
A letter from Karen Knippen
I have never been more impressed of our industry than I have these past months.
In the face of uncertainty, brokers have spent hours and hours learning about
what health reform means – and then undertaken the task of working with their
clients to help them understand it. This has meant many long days – and nights –
reading the law, newly issued rules, analyses and articles.
Euclid Managers is your partner in deciphering the changes and disseminating
knowledge. We will continue to research your questions and concerns as reform
is implemented.
Sincerely yours,
234 Spring Lake Drive
Itasca, Illinois 60143
Phone: (630) 238-1900
Outside Chicagoland:
(800) 345-7868
Fax: (630) 773-8790
Visit us at:
www.euclidmanagers.com
Karen Knippen, RHU, REBC, CLTC
EUCLID MANAGERS® has been serving the independent agent since 1976 with a portfolio of group health, professional
liability and individual life and health, annuity and long-term care products. We proudly represent UnitedHealthcare,
Delta Dental of Illinois, MetLife and HumanaOne. We encourage your feedback and suggestions. Please call your
EUCLID MANAGERS® Marketing Representative or Marcy Graefen at (630) 238-2915 for more information. Outside
Chicagoland, call (800) 345-7868. Website: www.euclidmanagers.com
Congress may deny funding for some of the provisions of
reform. But, how this would affect the provisions of reform
regarding insurance is unclear. It is expected that the court
challenges to reform will not bear immediate fruit. Cases
in the courts are notoriously slow. Some experts believe
that the challenge regarding the constitutionality of the
individual mandate has merit.
In any event, further tinkering with health reform – while
great to dream about – may just prolong the paralysis in
the market that the uncertainty of reform has spawned.
Many employers and individuals are holding off on
decisions until they understand “what the rules are."
What is "Grandfathered status"?
Grandfathered status is meant to fulfill the administration’s
promise that “if you like your plan, you can keep it." A
grandfathered plan is able to delay or avoid certain
provisions of health reform. In order to be grandfathered,
a plan must have been in effect on March 23, 2010.
What are the benefits of grandfathered status?
A grandfathered plan does not have to comply with the
following provisions:
• First dollar coverage for preventive care
• Revised appeals process
• Limits on employee out-of-pocket expenses
• Nondiscrimination requirements.
There are other provisions that are delayed or avoided.
Among these is that while employers will have to cover
dependents until age 26, grandfathered plans can exclude
those dependents who have coverage available elsewhere.
What changes to a plan can cause a loss of
grandfathered status?
The list of changes that cause a loss of grandfathered status
are many, including:
• Significant cut or reduction of benefits including
cuts to a specific type of coverage such as that
for mental health, diabetes and the like
• Increase in co-insurance charges
• Significant increase in co-payments. Increases in
excess of $5 or a percentage equal to medical
inflation plus 15 percentage points result in a loss
of status
• Significant increase in deductibles. To maintain
grandfathered status, deductibles can be raised
only by a percentage equal to medical inflation
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Reflections
plus 15 percentage points. For example, a family
deductible of $1000 may increase by $190 or $200
between 2010 and 2011. It could increase by an
additional $50 for 2011 to 2012.
• Significant decrease in employer contributions.
Employers cannot decrease the percent of
premiums paid by the employer by more than
5 percentage points.
• Tighten or add an annual limit on what the
insurer pays. Plans cannot add an annual dollar
limit without losing grandfathered status unless
they are replacing a lifetime dollar limit with an
annual dollar limit that is “at least as high as the
lifetime limit."
• Change insurance companies. Coverage from the new
insurer will not be considered a grandfathered plan.
Can you still have a grandfathered plan if
you’ve changed insurers? What about if there
has only been a change in drug formularies?
The rules regarding grandfathered status issued in June are
interim final rules. As such, they may still be changed. But,
as they currently stand, they state unequivocally that
changing insurers (called issuers) will cause the loss of
grandfathered status.
A change in formulary is unlikely to cause a loss of this
status. However, federal regulators have indicated that
eliminating a range of drugs, such as those that treat
depression, could cause a loss of grandfathered status.
I thought only self-funded health plans had to
test their plans for discrimination. I heard this
is changing for health plans that are not
grandfathered. Is this true?
All insured plans will be subject to testing for discrimination.
As such, carve out plans will likely fail nondiscrimination
testing. What is unclear at this point is whether the $100
per day per participant penalty will be enforced on small
employers or if any other penalties will be assessed small
employers. Some insurers and analysts are of the opinion
that small employers (50 or fewer employees) will be
required to comply but will not face any penalties for
discriminatory plans.
Given this uncertainty and lack of guidance, employers are
well-advised to consider whether their current plans can
pass the nondiscrimination tests. They can then consider
how to meet the tests and plan for any necessary changes.
Can an employer still cover only
management or only salaried employees?
If the plan is grandfathered it can clearly do so. However, a
non-grandfathered plan cannot – except in rare cases –
restrict eligibility to such a class of employees and pass the
nondiscrimination tests. The critical issue to be clarified is
whether there will be penalties for maintaining such plans.
One of the provisions of health reform makes Simple Cafeteria
Plans available to small employers. The requirements for
these plans state that an employer offering one of these
plans will be deemed to have met all nondiscrimination
rules. One has to wonder why this provision is in the law if
small employers can continue to offer discriminatory plans.
I’ve heard that many of the provisions of
health reform were effective September 23,
2010. Is this true? What are they?
It’s important to remember that the provisions will apply to
plans at the beginning of a new plan year occuring on or
after September 23, 2010.
Plans will be prohibited from imposing any preexisting
condition exclusions on enrollees under age 19. In most
cases, this will mean changes for dependents. However,
employers should be aware that this provision applies
equally to any employees who meet the age requirement.
The ban includes both benefit limitations and outright
coverage denials.
Also of importance is that any persons meeting this age
limit and already under the plan and subject to a preexisting
condition waiting period will be affected. A plan with a six
month waiting period that comes under the provision will
have to shorten the period for these individuals.
What are some of the preventive
services that must be covered at 100%?
The list of “preventive" services is extensive. For adults
services include:
• Screening for men for an abdominal aortic aneurysm
• Depression screening
• Diet counseling for adults at higher risk of
chronic disease
• Obesity screening and counseling
• Tobacco use screening and cessation interventions
• Various maternity related services.
The list of “preventive services" for children includes:
• Alcohol and drug use assessments for adolescents
• Autism screening for children at 18 and 24 months
• Iron supplements for children ages 6 to 12
months at risk for anemia
• Obesity screening and counseling
• Oral health risk assessments
• Vision screening.
What other provisions of health reform are
effective in the coming months?
Effective January 1, 2011, flexible spending accounts,
health savings accounts and other similar plans will no
longer be able to provide reimbursement for over the
counter drugs unless a person has a doctor’s prescription.
Employers will have to include the costs for health
insurance on W-2 statements issued for the year 2011.
Won’t employers just cancel their plans and
let employees take care of health insurance on
their own?
Dependents must be covered to age 26. Coverage does not have
to be extended to spouses or children of these “adult children."
This is a valid concern and some employers may, indeed do
so. However, employers offer health plans now and there is
no requirement to do so. This fact does not change with the
implementation of reform.
Lifetime limits on “essential health benefits" will also be
prohibited. Annual dollar limits may be implemented in
lieu of lifetime limits.
Can the small business tax credit that starts
this year be used for dental and vision plans?
Annual dollar limits are subject to new restrictions, leading
to a phase out of dollar limits over the next three years
until 2014 when the Affordable Care Act bans them for
most plans. Plans will be allowed to set annual limits no
lower than $750,000.
Preventive benefits must be provided without any deductibles
or copayments when provided by a network provider.
Yes, provided each plan meets the requirements for the credit.
IRS Notice 2010-41 provides details and includes plans:
limited scope dental or vision; long-term care, nursing home
care, home health care, community-based care, or any
combination thereof; coverage only for a specified disease
or illness; hospital indemnity or other fixed indemnity
insurance; and Medicare supplemental health insurance;
certain other supplemental coverage, and similar supplemental
coverage provided to coverage under a group health plan.
Reflections
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EServing
UCLID MANAGERS
the independent agent since 1976
®
A Legislative Review Service by Euclid Managers
October 2010
Reflections
A service publication for brokers from
Euclid Managers®, proudly representing
UnitedHealthcare of Illinois, Delta Dental of Illinois,
MetLife and HumanaOne.
EUCLID MANAGERS
®
Serving the independent agent since 1976
Visit us online www.euclidmanagers.com.
Editor: Pamela D. Mitroff
Legislative Review is published by Euclid Managers®, 234 Spring Lake Drive., Itasca, IL 60143. For more information, contact your Marketing Representative or Marcy Graefen
at (630) 238-2915 or fax your request to (630) 773-8790. Outside Chicagoland: (800) 345-7868, Fax (877) 444-2250. © Permission to quote with credit to source.
Health Reform FAQ
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EServing
UCLID MANAGERS
the independent agent since 1976
®