What’s New in Healthcare?
When it comes to benefits, we have something for everyone’s area of interest.
If you’re looking for timely healthcare information or simply want to find the latest guidance regarding a compliance issue, there’s a link to a respected benefits authority here. As part of our consultative approach to everything benefits, WestLake prides itself on keeping our clients abreast of any outside influences that could affect their plan. In a time of uncertain health care reform legislation, it’s important as ever to reaction cost containment efforts and fiduciary responsibilities. To help you better steer through the endless legislation we’ve compiled 16 points of interest that will come into effect over the coming years. The Act does not apply to stand-alone dental or vision plans. In addition to the penalties for failing to satisfy the employer mandates described above, there is an additional excise tax imposed upon employers for failing to make the plan design changes described below of $100 per day for each affected participant during the period of noncompliance, up to $500,000 per year. It is understood that more restrictive state laws will not be preempted by the Act.
- Adult children
- Effective 2011 plans must cover adult children (whether or not married or in school) until the child reaches age 26. Plans may elect to exclude such adult children until 2014 if the child is eligible for other group coverage. The extent to which an adult child must be economically dependent to qualify for such coverage is to be defined by the HHS, not by the IRS. The expanded coverage, however, will not be taxable to the child or participant.
- Lifetime limits
- Plans may no longer impose lifetime dollar limits on so-called “essential health benefits” as defined by HHS in yet unpublished regulations. The changes are effective 2011.
- Annual limits
- Annual caps on “essential health benefits” will be eliminated according to regulations to be promulgated by HHS. The change is to be phased in from 2011 to 2014.
- Preexisting conditions
- Plans may no longer impose any preexisting condition exclusions. The changes are effective 2011 with respect to children under the age of 19, and 2014 for all other participants.
- Automatic enrollment
- An employer with more than 200 full-time employees must provide for automatic enrollment of new full-time employees in its group health plan option with the lowest employee premium, subject to applicable waiting periods. Employees may make an affirmative election to opt-out or select a different coverage option. The effective date of this requirement is unclear, but it appears to be effective upon issuance of Department of Labor regulations.
- Notice of plan changes
- The Act requires that notice of any material changes to the plan (including premium and cost-sharing increases) must be provided at least 60 days in advance of the date in which the modification becomes effective. There is uncertainty with respect to the effective date of this requirement. Some are interpreting the requirement to be effective in 2011, while others point to a March 23, 2012 effective date.
- Uniform explanation of coverage
- The Act requires employers to provide a new uniform explanation of coverage and benefits effective March 23, 2012. This requirement is in addition to the ERISA requirement to provide a traditional summary plan description. The form must be updated at annual enrollment. Explanations are limited to four pages in length and must describe the health benefits covered under the plan, exceptions to coverage, cost-sharing provisions and any provisions on renewal or continuation of coverage. There must also be examples of common benefit scenarios. An additional penalty for noncompliance of $1,000 for each failure applies.
- Flexible spending accounts
- Over-the-counter medicines will not be reimbursable effective 2011. Pre-tax contributions to FSAs will be limited to $2,500 per year (indexed) effective 2013.
- Waiting periods
- The Act eliminates waiting periods for eligibility in excess of 90 days effective 2014.
In addition to the above requirements that apply to existing insured and self-insured plans, certain additional requirements apply to new plans, i.e., those plans that were not in effect on March 23, 2010, the date of enactment of the Act. Plans in existence on that date are considered to be “grandfathered plans,” regardless of whether new hires are later enrolled or beneficiaries of existing participants are added. It is presently not clear to what extent changes in plan design and operation beyond those required to comply with the requirements of the Act will cause a health plan to lose grandfathered status. Employers seeking to preserve grandfathering should be cautious about changing rules on eligibility or cost-sharing until additional guidance is issued.
- Adult children
- New plans are subject to the same coverage requirement for adult children as described above for all plans, except that beginning in 2011 the directive applies even if an adult child is eligible to enroll in another employer’s plan.
- Preventive care
- Effective 2011, new plans will be required to provide first dollar coverage (i.e., no cost sharing such as co-payments, co-insurance or deductibles) for certain wellness, preventive care and screenings and immunization services as determined by three US government agencies.
- No preauthorization or referral can be required for certain OB/GYN, pediatrician or emergency room services provided by new plans effective 2011. (Due to Congressional drafting, there is some concern that this requirement might apply to grandfathered plans, too.)
- Nondiscrimination rules for insured plans
- At present, only self-insured plans are generally prohibited from discriminating in favor of current and former highly compensated employees as to eligibility for coverage or premium sharing under Section 105(h) of the Internal Revenue Code. The Act extends similar prohibitions to new fully insured plans effective 2011. A separate $100 per day penalty applies with respect to each affected participant.
- Appeals procedures
- In addition to the current ERISA claims review procedures, new plans will be required effective 2011 to also offer an appeals procedure to be issued by HHS. The process is to include access to an impartial initial review, greater access to plan records, continued coverage during the appeals process and access to an external review by an independent party.
- Cost sharing
- Effective 2014, the sum of maximum annual deductibles, co-payments and other out-of-pocket expenses (excluding insurance premiums) of new plans may not exceed the health savings account limits for high deductible health plans (as indexed), presently $5,950 for individual coverage and $11,900 for family coverage. The maximum deductible itself is limited to $2,000 for individual and $4,000 for family coverage, subject to cost-of-living adjustments.
- Clinical trials
- New plans may not deny individuals from participating in certain clinical trials effective 2014.
- The foregoing is a brief description of some of the many changes contained in the Act which will be expanded and clarified by thousands of pages of regulations expected to be issued by the various government agencies. In addition, there are other health care reform provisions not summarized by this notice relating to additional employer reporting obligations, a temporary subsidy for early retiree health benefits, insurance market reform for individuals and groups, state health insurance exchanges and government run voluntary long-term care.