What You Need to Know About
Health Care Reform Compliance
Presented by
Marcia S. Wagner, Esq.
The Wagner Law Group
Kim Buckey, Principal
HighRoads
1
Introductions – Marcia S. Wagner
Marcia S. Wagner is a specialist in pension and
employee benefits law, and is the principal of The
Wagner Law Group in Boston, Massachusetts,
which she founded approximately 15 years ago. A
summa cum laude and Phi Beta Kappa graduate
of Cornell University and a graduate of Harvard
Law School, she has practiced in Boston for over
twenty-four years.
Ms. Wagner is recognized as an expert in a variety of
employee benefits issues and executive
compensation matters, including qualified and nonqualified retirement plans, “rabbi” trusts, all forms
of deferred compensation, and welfare benefit
arrangements.
Introductions – Kim Buckey
Kim Buckey is the Principal for the HighRoads
Communications consulting practice focused
on delivering high value strategic and practical
solutions for clients in an efficient manner
leveraging the HighRoads technology platform.
Previously, Kim served as national compliance
champion and global quality leader for Watson
Wyatt's communication practice. In her 30-year
career Buckey has helped dozens of
companies meet their compliance requirements
by completing hundreds of health and welfare
and retirement plan SPDs.
From the Beginning
• Legislation
– 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
4
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
5
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%
6
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
7
Insurance Market
•
•
•
•
Guaranteed Issue
Guaranteed Renewability
High Risk Pool
Rating only by:
– Family structure
– Community rating value of benefits
– Age
– Smoking
8
Medicare and Medicaid
• Reduce certain Medicaid payments
• Independent Advisory Panel
• Close Medicare Part D doughnut hole
9
Funding
•
•
•
•
•
•
•
•
Additional taxes imposed on the insurance industry:
A 40% excise tax is imposed on “Cadillac” plans
Increase Medicare portion of FICA
A 3.8% surtax is imposed in 2013 on net investment
income
Reduction of Medicare Part D premium subsides
Elimination of the deduction for expenses
attributable to the Medicare Part D subsidy
Increase in the deduction threshold on medical
expenses from 7.5% to 10%
A 10% excise tax on indoor tanning services
10
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 period
• Employers with more than 200 employees must
automatically enroll their employees in the employersponsored group health plan
11
Employer Group Health Plans –
Future Consideration (continued)
• Employer must offer a “free choice” voucher
• Health care flexible spending account plans will
be limited to $2,500
• Notification requirements
– Uniform summary of benefits
– W-2 reporting
– Individual coverage report
12
Grandfather Rules
• Definitions:
– 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
13
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
14
Provisions Applicable to All Plans
•
•
•
•
•
Coverage for adult children
Restrictions on annual and lifetime benefit limits
Elimination of pre-existing condition exclusions
Limitation of rescissions
Over-the-counter medications
Provisions Applicable to Non-Grandfathered Plans





Provide free preventative care services
Participants may select primary care providers, including pediatric
care providers, and OB/GYNs
Insured group health plans will be subject to nondiscrimination rules
Emergency care services without prior authorization
Internal and External Appeals Process
15
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
16
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 opportunity
• Taxation
– 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
17
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
18
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
19
Pre-Existing Conditions
•
•
•
•
Pre-existing conditions definition
Cannot impose on child under 19
Cannot impose on anyone as of 2014
Cannot exclude from coverage
Rescission



Rescission is a retroactive cancellation of coverage
Rescission only permitted for fraud or intentional
misrepresentation
Thirty day notice requirement
20
Over-the-Counter Medications
• Effective January 1, 2011
• Applies to all non-prescribed over-the-counter
medications, except insulin
• Health Care FSAs, HRAs cannot reimburse. HSA
distributions taxable
Preventative 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
21
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

22
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
23
Internal and External Reviews
• Internal
– Comply with DOL’s current claims requirements plus
six new requirements including:
• Urgent care claims resolved within 24 hours
• Plan must hire independent decision makers
• Must provide “culturally and linguistically appropriate” notices
• External
– Comply with state external review process for insured
plans, or
– Comply with procedures in new DOL Technical
Release
Communicating About Health Care Reform
• Employees are looking for information about how health
care reform will affect them and their benefits
• Opportunity for employers to enhance employee
perception about their plans
• Potential for improved employee engagement
– Recent studies show that employers with good benefits
communications have more satisfied and engaged employees
25
There’s a Lot to Communicate
Year
Topics
2010
• Auto enrollment and opt out
• Dependent eligibility
• Changes to annual and lifetime
limits
2011
• OTC drugs no longer eligible medical
expenses
• W-2 reporting
2012
Benefit summaries
2013
• Changes to FSA contribution limit
• Information about the Exchange and
how employer plan coordinates
26
Your Options
Approach
Pros
Cons
Update your SPDs
•
•
•
May be out of
compliance anyway
Long shelf life
•
Issue SMMs
•
•
Other tools (enrollment
materials, newsletters,
meetings)
•
•
Often less costly to
produce and mail
Can be generated
relatively quickly
•
Timely
May have more
visual impact
•
•
May not have time
before the end of the
year, especially if
you have many, or
complex, SPDs
Can be costly to
produce
May get separated
from SPDs
Fulfillment may be a
challenge (who gets
what)
Likely to end up in
the trash
27
The Role of SPDs
• Legally required
– Every five years if plan has changed
– Every 10 years if no changes
• “User guides” for benefits
– Can help participants make informed decisions about what
coverage to elect
– Explain how to use the benefits
• Regulations spell out:
– Content (specific to the type of plan being described)
– Style (easily understood by average participant; no jargon)
28
The Role of SPDs (cont’d)
• Not all plans require SPDs
– Non-ERISA plans
• DC FSA
– May depend on services provided
• EAP
• Severance
• Distribution is an issue
– Print vs. electronic
– Answer may depend on the audience
– Trend is definitely away from print
• Cost
• “Green” initiatives
29
What’s Next?
– Summaries of coverage
• Distributed on or before March 30, 2012, and at enrollment
– 60-day advance notice of changes to benefits
(effective 2012)
30
You Need a Plan
• The volume, frequency and complexity of changes over the coming
years demand a strategy
• Map out:
–
–
–
–
–
–
–
–
What needs to be communicated when
When guidance is coming from HHS
Who needs what information when
Who needs to review and approve what information
What decisions will need to be made about benefit strategy and design
What is best timing/media to get messages across
Who’s going to do the work
How can technology help
31
Why worry?
32
Penalties
• $110 per day penalty for failure to provide
compliant SPD
• Potential back benefits & court fees if SPD found
to be lacking
• 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 noncompliance
33
Conclusion – Action Steps for Employers
 Determine if you are a grandfathered plan
 Assess plan with regards to new requirements
 Prepare 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
34
Q&A
Have a question later? Ask the Experts
Marcia Wagner
Tel: (617) 357-5200 marcia@wagnerlawgroup.com
Website: www.erisa-lawyers.com
Kim Buckey
Tel: (781) 503-4000 x 3085 kbuckey@highroads.com
Blog: http://newsroom.highroads.com/
Thank you
Thank for attending today’s webinar. You will be
receiving several reference materials
-
Electronic distribution guideline
SPD Content Checklist
What Plans Require an SPD
Best Practices of Health Care Reform Compliance
article by the presenters