Boca Benefits Consulting Group Inc.

The below info is excerpted from a Zane Benefits information piece published Sunday, Sep 15, 2013.  The entire technical discussion can be accessed at their RSS blog feed by clicking here.  The essence of the discussion is that unlike what some major group insurance carriers have been indicating, newly stuctured HRP’s ( i.e., a limited healthcare reimbursement plan) can be used as the vehicle to shift employees from a group plan to individual purchases on exchanges. Wallgreens is the most recent large company to announce such a shift (click here for info on annoncement today 9/18/2013). IBM and Time Warner have made similar announcements.

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Now, the good news

Employers can still reimburse employees for individual health insurance premiums.

For the first time, the Department of Labor, the Department of Treasury, and Health and Human Services have coordinated to issue formal confirmation that employers are 100% allowed to reimburse individual health insurance premiums tax-free under the tax code. This is a MAJOR positive.

We repeat – employers are still allowed to reimburse employees tax-free for individual health insurance premiums.

What is the solution for plan years beginning on or after January 1st, 2014?

For plan years beginning on or after January 1st, 2014, the solution is to adopt a limited Healthcare Reimbursement Plan (HRP), such as ZaneHealth.

The HRP is structured to only reimburse:

1. Health insurance premiums up to a specified monthly healthcare allowance,
2. Preventative care as required by PHS Act Section 2713 at 100% without cost-sharing.

This structure ensures the HRP complies with the PHS Act 2711 annual limit requirements and the PHS Act 2713 preventative care requirements as outlined in the Technical Release.

Additionally, care must be taken in the design and administration of the HRP to ensure the plan does not meet the definition of an eligible employer-sponsored plan in IRC Section 5000A and consequently qualify as minimum essential coverage. This ensures employees participating in the HRP are able to receive a tax subsidy via the new health insurance marketplaces assuming they meet additional eligibility criteria.

Conclusion / Next Steps

With the Departments all in agreement, everyone should be excited there is finally a clean, final process for employers to reimburse employees for individual policies that are guaranteed-issue.

Sponsors of stand-alone HRAs should begin preparing to convert their plan to an HRP for plan years beginning after 2014.

Finally, our nation can rid itself of one-size-fits-all employer group health insurance policies that hamper businesses, employees and their families.

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Following on CIGNA’s earlier announcement this week regarding early implementation of the PPACA “to age 26” provision, CIGNA has announced today that they will also implement early the “anti-rescission” provisions of PPACA prior to the statutory requirement of 9/23/2010. CIGNA has announced they will make the policy change effective 5/1/2010.

It would appear that CIGNA is attempting to capture the public relations high ground on these decisions relative to their healthcare insurance competitors. However, these are relatively easy changes to effect and will not substantially alter the competitive balance as other major carriers make similar decisions to implement certain PPACA provisions early.

Below Excerpt from CIGNA Press Release:

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CIGNA’s business practices are already compliant with the suggested reforms that are to be implemented on September 23, 2010. CIGNA is confirming that it will not rescind the coverage of any premium-paying customer except in cases of deliberate fraud or intentional misrepresentations of material facts. CIGNA will also institute a policy of third party review if a rescission is to be made.

>>>

Click here for full press release.


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Health Care Reform Impact on Employer-Sponsored Health Plans

Excerpted from Various Insurance and Benefits Industry Sources

(impact on self-insured plans is annotated in bold text below)

• Prohibition of lifetime limits – Prohibits all plans from establishing lifetime limits. Only applicable to self-insured plans established after 6 months from date of enactment.
• Prohibition of annual limits – Prohibits all plans from establishing annual limits on the dollar value of benefits starting in 2014. Prohibits plans from setting limits that would “impair essential health benefits” in subsequent years. Only applicable to self-insured plans established after 6 months from date of enactment.
• Prohibition on rescissions – Prohibits all plans from rescinding coverage except in instances of fraud or misrepresentation. Only applicable to self-insured plans established after 6 months from date of enactment.
• Coverage of preventive health services – Requires all plans to cover preventive services and immunizations, recommended by various Federal agencies, also specifically includes certain child preventive services and women’s preventive care. Plans are prohibited from imposing any cost-sharing requirements. Only applicable to self-insured plans established after 6 months from date of enactment.
• Dependent coverage – Requires all plans offering dependent coverage to make coverage available to dependents that are under the age of 26 and unmarried. Plans are not required to cover dependents of dependents. Only applicable to self-insured plans established after 6 months from date of enactment.
• Prohibition of preexisting conditions – No group health plan or insurer offering group or individual coverage may impose any pre-existing condition exclusion or discriminate against those who have been sick in the past. Only applicable to self-insured plans established after 6 months from date of enactment.
• Prohibiting discrimination based on health status – No group health plan may set eligibility rules based on health status, medical condition, claims-experience, receipt of healthcare, medical history, genetic information or evidence of insurability – including acts of domestic violence or disability. Permits employers to vary insurance premiums by as much as 30 % for employee participation in certain health promotion and disease prevention programs. Only applicable to self-insured plans established after 6 months from date of enactment.
• Prohibition on waiting periods – Prohibits any waiting periods for group or individual coverage that exceed 60 days. Employers are penalized $600 per full-time employee for each employee required to wait beyond 60 days. Only applicable to self-insured plans established after 6 months from date of enactment. 
• Required Plan Information Disclosure
  • Requires plans to issue a summary of benefits and explanation of coverage to beneficiaries with the following criteria:
    • In uniform format
    • In “easily understood” language
    • Inclusion of uniform definitions of standard insurance and medical terms
    • Explanation of cost-sharing exceptions, reductions and limitations on coverage
    • Provide common benefits scenarios 
• Expanded Beneficiary Appeals Availability
  • Requires plans to implement a process for external appeals of coverage determinations and claims
  • Requires self-insured plans to comply with minimum standards to be established by the Secretary of DOL
  • Only applicable to self-insured plans established after 6 months from date of enactment.
• Health Information Technology Standards and Plan Requirements
  • Adoption of uniform standards and operating rules for the electronic transactions that occur between providers and health plans that are governed under HIPAA (such as benefit eligibility verification, prior authorization and electronic funds transfer payments)
  • Establishes a process to regularly update the standards and operating rules for electronic transactions and requires health plans to certify compliance or face financial penalties collected by the Treasury Secretary
• “Young Invincibles” Plan
  • Allows health insurers to offer a catastrophic, high-deductible plan as an exchange option
  • To be eligible for plan, individuals must be either
    • Under the age of 30
    • Exempt from the individual responsibility requirement because coverage is unaffordable to them
    • Individuals with access to employer-sponsored plans who meet criteria may join
  • Plan must
    • Cover essential health benefits
    • Cover at least 3 primary care visits
    • Require cost-sharing up to the HSA out-of-pocket limits
• Allowable Prevention and Wellness Incentives
  • Allows employers to discount up to 30% of the premium or cost-sharing requirements for participants in a workplace wellness program
  • Provides discretion to HHS to permit discounts up to 50%
• Low-Income Tax Subsidies Effects on Employer-Sponsored Health Plans
  • Employees with access to employer-sponsored coverage are eligible for credit (for use in an Exchange only), if:
    • Plan covers less than 60% of total coverage cost
    • The premium exceeds 9.8 of total income
• Employer Responsibility
  • Requires an employer with more than 50 full-time employees that offers coverage, but has employees receiving the “premium assistance” tax credit, to pay the lesser of $3,000 for each employee receiving the credit, or $750 for each full-time employee – adjusted annually and non-deductible
  • An employer with more than 50 full-time employees that maintains an enrollment waiting period would be required to pay
    • $600 for any full-time employee subjected to longer than a 60 day waiting period – adjusted annually and non-deductible
• Employee “Free Choice” Voucher
  • Allows employees with access to an employer-sponsored plan, under certain income eligibility, to receive a voucher from their employer, equal to their employer’s contribution (“free choice” voucher), to purchase coverage through an Exchange participating plan.
  • To be eligible for a voucher, an employee would have to meet both of the following criteria:
    • The cost of the employee’s coverage needs to be between 8% and 9.8 percent of the employee’s household income
    • Employee has a household income below 400% FPL
  • The contribution amount to the voucher must be equal to the amount the employer contributes to their own health plan
  • If the employee chooses coverage that costs less than the voucher, the employee keeps the remainder amount
  • Vouchers cannot be taxed as income
• Automatic Employee Enrollment
  • Requires employers with more than 200 employees to automatically enroll new full-time employees in coverage
  • Requires employers to provide adequate notice and the opportunity for an employee to opt out of any coverage the individual or employee was automatically enrolled in 
• Reporting Requirements for Employer-Plan Sponsors
  • Requires large employers (over 200 employees) to report the following
    • Whether it offers to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan
    • The length of any applicable waiting period
    • The lowest cost option in each of the enrollment categories under the plan
    • The employer’s share of the total allowed costs of benefits provided under the plan
    • The number and names of full-time employees receiving coverage
    • Disclose the value of the benefit provided by the employer for each employee’s health insurance coverage on the employee’s annual Form W-2 
• Requirement to Disclose Coverage Options
  • Requires that an employer provide notice to their employees informing them of the existence of an exchange
• Excise Tax on Generous Plans
  • Levies an excise tax of 40% on insurance companies and plan administrators for any health coverage plan that is above the threshold of:
    • $8,500 for single coverage
    • $23,000 for family coverage 
• Fees on Self-Insured Plans
  • In 2013, the plan sponsor of a self-insured plan is required to pay $2 multiplied by the average number of covered lives
  • From 2013-2019 the previous year’s fee is multiplied by projected per-capita amount of National Health Expenditures
  • Plans are not required to pay fees beyond 2019 
• Termination of Deductibility of Medicare Prescription Drug Subsidies
  • Elimination of the deductibility of Federal subsidies for Medicare Rx programs 
• Limitation on Health Flexible Spending Arrangements
  • Limits the amount of contributions to health FSAs to $2,500 per year indexed by CPI 
• Annual Report on Self-Insured Plans
  • Requires the Secretary of DOL to prepare an annual report, using information obtained from submitted Form 5500, on various aspects of self-insured, group health plans. Report will include:
    • Plan type
    • Number of participants
    • Benefits offered
    • Funding arrangements
    • Benefit arrangements
    • Data from the financial filings including:
      • Information on assets
      • Liabilities
      • Contributions
      • Investments
      • Expenses 
• Indirect Health Industry Fees Likely to Increase Plan Costs 
  • Fees on Pharmaceuticals
    • Imposes an annual flat fee of $2.3 billion on the pharmaceutical manufacturing sector beginning in 2010
  • Fee on Medical Devices
    • Imposes an annual flat fee of $2 billion on the medical device manufacturing sector in years 2011 – 2017
    • Imposes an annual flat fee of $3 billion on the medical device manufacturing sector in years after 2017