Provisions of the Patient Protection and Affordable Care Act slated to take effect for plan years beginning on or after Sept. 23, 2010, will have a significant impact on employer-based health plans.
Among the provisions are new restrictions on imposing lifetime or annual benefit limits; requirements to cover, without cost sharing, preventive services and immunizations (for nongrandfathered plans); and requirements to comply with existing nondiscrimination rules for self-funded plans, according to an analysis by Wolters Kluwer Law & Business, a provider of business research and software.
“The provisions will have a widespread effect on businesses throughout the country in how employers provide insurance coverage to their employees and how plans will operate,” said Stephen Huth, managing editor at Wolters Kluwer Law & Business and regular contributor to the blog Health Reform Talk.
New and Renewing Plans
Below are highlights of the major provisions that take effect for plan years beginning on or after Sept 23, 2010. Note that for calendar-year plans, these changes will take effect on Jan. 1, 2011.
Covering dependents up to age 26. Group health plans with dependent child coverage must make available coverage for the enrollee’s adult children who are younger than age 26, regardless of whether or not the dependent is a full-time student, disabled, or married. (To learn more, see "Young Adult Coverage Until Ages 26 or 27 Explained.")
Prohibition on lifetime and annual limits. Lifetime or annual benefit limits cannot be imposed by group health plans. A phase-in rule applies for annual benefit limits and “essential health benefits.” (To learn more, see "Interim Final Rule on Pre-existing Conditions and Benefits Limits Issued.")
Prohibition on rescissions of health coverage. Health insurance issuers in the group and individual market may not rescind an enrollee’s coverage, except where an individual has engaged in fraud or made an intentional misrepresentation of material fact as prohibited under the terms of the plan or coverage. (To learn more, see "SHRM and CUPA-HR Comment on Dollar Limits and Rescissions.")
Requirement to provide preventive care services. All plans are required to cover, without any cost sharing, preventive services and immunizations that are recommended by the U.S. Preventive Services Task Force and the Centers for Disease Control (CDC). Also required to be covered, without any cost sharing, are certain child preventive services recommended by the Health Resources and Services Administration. (Not applicable to grandfathered plans.) (To learn more, see "Administration Issues Regulations on First-Dollar Preventive Care.")
Requirement that insurers maintain minimum loss ratios. Insurers offering group or individual health insurance must report annually on the percentage of health premiums used for claims reimbursement and must maintain certain minimum medical loss ratios. If minimums are not maintained, rebates must be provided to health plan participants.
Developing standards for summaries of benefits. Effective for plan years beginning on or after Sept. 23, 2010, the U.S. Department of Health and Human Services (HHS) has been ordered to develop standards for use by group health plans and health insurers in compiling and providing a summary of benefits and explanation of coverage. The summaries must be in a uniform format, using easily understood language, and they must include uniform definitions of standard insurance and medical terms. The explanation must describe any cost sharing, exceptions, reductions and limitations on coverage, and it must use examples to illustrate common benefits scenarios.
Insured health plan compliance with nondiscrimination rules. Insured group health plans must comply with existing nondiscrimination rules for self-funded plans. These include nondiscrimination rules for eligibility and benefits. Previously there were no federal laws for fully insured health plans that prevented discrimination in favor of the highly compensated. In other words, employers could establish fully insured medical reimbursement plans for a select group of employees, such as key employees. That is no longer true. (Not applicable to grandfathered plans.)
Group health plan reporting requirements. HHS will establish reporting requirements for group health plans and health insurers offering group or individual health insurance coverage. Reporting will include information on plan or coverage benefits and health care provider reimbursements. (HHS has two years after enactment to publish regulations that provide criteria for health provider reimbursement structure. Then, within 180 days of the publication of regulations, the Government Accountability Office must submit a report to Congress reviewing the impact of the requirements on the quality and cost of care.)
Implementing effective claims appeals processes. Group health plans and a health insurer must implement an effective process for appeals of coverage determinations and claims, including an internal and external claims appeals process and employee notification. (Not applicable to grandfathered plans.) (To learn more, see "New Health Care Claims and Appeal Rules Will Include a Tax Bite.")
Expanding patient selection of providers. Effective for plan years beginning on or after Sept. 23, 2010, health insurance plans must allow enrollees to select any participating primary care provider available, including a pediatrician for children, and to cover emergency services provided at a hospital emergency department regardless of the hospital’s participation in the plan preferred provider network and without prior authorization requirements. Female enrollees must be able to obtain obstetrical/gynecological specialist services without a referral from another primary care provider. (Not applicable to grandfathered plans.)
Provisions Already in Effect
A number of provisions in the health care reform law already are in effect, including the following:
Grandfathered plans. Group health plans in existence on March 23, 2010 and which have not been significantly altered are considered “grandfathered” health plans and are exempt from some but not all health reform provisions. (To learn more, see "U.S. Agencies Clarify Restrictions on 'Grandfathered' Health Plans.")
Automatic enrollment. Under section 1511 of the Patient Protection and Affordable Care Act, employers with more than 200 full-time employees who offer enrollment in one or more health benefits plans are required to automatically enroll new employees in one of the plans offered. Employees must have the opportunity to opt out of the coverage.
No effective date is provided for the automatic enrollment provision. Several policy analysts have advised that, under general rules of statutory construction, the requirement is effective on the law's enactment date (that is, March 23, 2010). Others, however, advise that either a technical correction will be required by Congress to clarify the effective date for implementing the automatic enrollment requirement, or regulations will be promulgated to set such date.
Small employer health insurance credit. For amounts paid or incurred in tax years beginning in 2010, an eligible small employer may claim a 35 percent tax credit (25 percent in the case of tax-exempt eligible small employers) for the premiums it pays toward health coverage for its employees in tax years beginning in 2010 through 2013. (To learn more, see "Guidance on the Small Employer Health Care Tax Credit.")
Special deduction change for Blue Cross and Blue Shield. For tax years beginning after Dec. 31, 2009, the special deduction from regular tax that Blue Cross and Blue Shield organizations, and other qualifying health insurance organizations, are allowed under IRC Sec. 833 is modified to provide that these organizations will be entitled to this special tax treatment only if 85 percent or more of their insurance premium revenues are spent on clinical services.
Tax code change in the definition of dependents. Effective March 23, 2010, children younger than age 27 will be considered dependents of a taxpayer for the following situations:
• For purposes of the general exclusion for reimbursements for medical care expenses of an employee, spouse and dependents under an employer-provided accident or health plan.
• The deduction for the health insurance costs of a self-employed person, spouse and dependents.
• The rule that allows a qualified pension or annuity plan to provide benefits for sickness, accident, hospitalization and medical expenses to retired employees, spouses and dependents.
• The rule that treats a voluntary employee benefits association (VEBA) that provides sick and accident benefits to its members and their dependents as a tax-exempt organization.
State grants for health ombudsman programs. Beginning with fiscal year 2010, HHS must award grants to eligible states (or to exchanges operating within a state) to enable the state to establish (or expand) an office of health insurance consumer assistance or a health insurance ombudsman program in order to provide consumers with assistance in navigating health insurance requirements under federal and state law. States receiving such a grant must comply with relevant criteria established by HHS.
Increase in adoption credit. For tax years beginning in 2010, the dollar limitation for the adoption credit and income exclusion for employer-paid and employer-reimbursed adoption expenses through a qualified adoption assistance program is increased by $1,000 to $13,170 per eligible child (including a special needs child). In addition, the adoption credit has been made refundable.
Breastfeeding at work. Effective March 23, 2010, an employer must provide a reasonable break time for an employee to express breast milk for her nursing child each time the employee needs to express milk for one year after the child’s birth. (To learn more, see "Employers Must Provide 'Reasonable Breaks' for Nursing Mothers.")
Temporary reinsurance program for early retirees. Until Jan. 1, 2014, HHS must establish a temporary reinsurance program that reimburses part of the claims cost for participating employment-based plans that provide health insurance coverage for early retirees (ages 55 to 65), eligible spouses, surviving spouses and dependents of such retirees. The reimbursement is for 80 percent of plan claims that are between $15,000 and $90,000. (To learn more, see "2,000 Groups Approved for Early-Retiree Health Care Funds; Applications Still Being Accepted.")
Temporary high-risk insurance pool. HHS must establish a temporary high-risk health insurance pool. This pool is designed to provide health insurance coverage for individuals who have been uninsured for six months or who have been denied a policy because they have pre-existing conditions. The pool will run until Jan. 1, 2014.
Review of premium increases. Beginning with the 2010 plan year, an annual review process of “unreasonable increases” in premiums for health insurance coverage is established. Prior to implementing premium increases, a health insurance issuer must submit to HHS and to the relevant state a justification for the premium increase.
Government health care Internet portal. HHS must establish an Internet portal to help beneficiaries and small businesses identify affordable health insurance coverage options in each state.
Stephen Miller is an online editor/manager for SHRM.
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