Three federal agencies have issued interim Final regulations requiring non-grandfathered health care plans to provide internal claims and appeals procedures and external review processes effective September 23, 2010.

Internal Claims Appeal

The interim final regulations set forth six new requirements

Adverse Benefit Determination. The definition of an “adverse benefit determination” is broader than the definition under existing ERISA claims procedure regulations, in that an adverse benefit determination for purposes of these interim final regulations also includes a rescission of coverage.

An adverse benefit determination eligible for internal claims and appeals processes under these regulations includes a denial of, reduction of, termination of, or failure to provide or make a payment for a benefit, including the following:

A determination of an individual’s eligibility to participate in a plan or health insurance coverage;

A determination that a benefit is not a covered benefit;

The imposition of a preexisting condition exclusion, source-of-injury exclusion, network exclusion, or other limitation on otherwise covered benefits; or

A determination that a benefit is experimental, investigational, or not medically necessary or appropriate.

24-Hour Notice.  For urgent care claims, the regulations provide that a plan must notify a claimant of a benefit determination (whether adverse or not) as soon as possible, but not later than 24 hours after the receipt of the claim by the plan or health insurance coverage, unless the claimant fails to provide sufficient information to determine whether benefits are covered or payable.

Review. In addition to existing ERISA regulations, the regulations provide criteria to ensure that a claimant receives a full and fair review. A plan must provide the claimant, free of charge, with any new or additional evidence considered by the plan in connection with the claim. Such evidence must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided to give the claimant a reasonable opportunity to respond. Also, before the plan can issue an adverse benefit determination based on a new or additional rationale, the claimant must be provided, free of charge, with the rationale. The rationale also must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required.

Conflict Of Interest. New criteria are provided with respect to avoiding conflicts of interest. The plan or issuer must ensure that all claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. Thus, decisions regarding hiring, compensation, termination, promotion, or other similar matters must not be made based upon the likelihood that the individual will support a denial of benefits. For example, a plan or issuer cannot provide bonuses based on the number of denials made by a claims adjudicator. Similarly, a plan or issuer cannot contract with a medical expert based on the expert’s reputation for outcomes in contested cases, rather than based on the expert’s professional qualifications.

“Culturally Appropriate.” The regulations require a plan to provide a notice to enrollees “in a culturally and linguistically appropriate manner.” This provision applies to internal and external claims appeals processes. Plans and issuers are considered to provide relevant notices in a culturally and linguistically appropriate manner if notices are provided in a non-English language based on thresholds of the number of people who are literate in the same non-English language.

For group plans, the threshold differs depending on the number of participants in the plan. For a plan that covers fewer than 100 participants, the threshold is 25% of participants being literate only in the same non-English language. For a plan that covers 100 or more participants at the beginning of a plan year, the threshold is the lesser of 500 participants, or 10% of all plan participants.

In addition, a plan must ensure that any notice of adverse benefit determination or final internal adverse benefit determination includes information sufficient to identify the claim involved. This includes the date of service, the health care provider, and the claim amount (if applicable), as well as the diagnosis code, the treatment code, and the corresponding meanings of these codes.

Additionally, the plan or issuer must provide a description of available internal appeals and external review processes, including information regarding how to initiate an appeal. Finally, the plan or issuer must disclose the availability of, and contact information for, any applicable office of health insurance consumer assistance or ombudsman to assist enrollees with the internal claims and appeals and external review processes.

Failure to Comply.  If a plan fails to strictly adhere to all the requirements of the internal claims and appeals process, and the claimant “is deemed to have exhausted the internal claims and appeals process, regardless of whether the plan or issuer asserts that it substantially complied with these requirements or that any error it committed was de minimis.” Upon such a failure, the claimant may initiate an external review and pursue any available remedies under applicable law, such as judicial review.

External Review

The regulations provide that plans must comply with either a state external review process or the federal external review process.

These requirements do not apply to grandfathered health plans (see prior posts). How non-grandfathered self-insured group health plans may comply or be brought into compliance with the requirements of the new federal external review process will be addressed in future “sub-regulatory guidance.”

On July 14, 2010, Interim Final Regulations implementing provisions of the Patient Protection and Affordable Care Act (the “Act”), concerning mandatory preventive health care benefits were issued by the U.S. Departments’ of Health and Human Services, Labor and Treasury.  Unless grandfathered (see earlier posts) all insured and self-insured health care plans will be required to offer these benefits at no cost effective on or after September 23, 2010.  

Treatments for the prevention of alcohol abuse, depression and obesity are among services that will have no cost-sharing.   For adults, the list of covered services includes mammograms, colonosopies and other cancer screnings, diabetes screenings, counseling for tobacco use and prenatal care.

For children, covered services include pediatric visits, vision and hearing screenings, immunizations and obesity screenings.

The cost sharing probihition appy to the specific perventive services provided.  Therefore, if the preventive service is billed separately from an office visit, it is the preventive service that will be no cost, not the entire office visit.

If the preventive service is not billed separately from the office visit, if the primary purpose of the visit was to receive the preventive service, the entire visit will be no cost.

On the other  hand, plans will not be required to provide coverage for preventive care delivered by an out-of-network provider.  If out-of-network preventive services are provided, plans are allowed to impose cost sharing for out-of-network services.

The agencies’ estimate that no cost preventive care will increase the cost of premiums by at least 1.5% per year, although evidence suggests a healthier workforce and higher productivity will make up for the increase over time.

On June 21, 2010, Interim Final Regulations implementing major provisions of the Patient Protection and Affordable Care Act (the “Act”), including provisions relating to preexisting conditions, lifetime and annual limitations on benefits, rescissions on coverage, dollar limitations on benefits, and claims’ appeals, were issued by the U.S. Departments’ of Health and Human Services, Labor and Treasury.  Most of the provisions will become effective on or after September 23, 2010 and apply to insured and self-insured plans.  State laws that are more favorable to consumers remain in effect.

Preexisting Conditions Prohibited

The regulations amend the Health Insurance Portability and Accountability Act (HIPAA) relating to preexisting conditions.  For plan years beginning on or after January 1, 2014, a group health care plan may not impose any preexisting condition exclusion, but for enrollees who are under 19 years of age, this prohibition becomes effective for plan years on or after September 23, 2010.  Grandfathered plans (see previous post) must comply with this regulation.

Lifetime Limits on Coverage Eliminated

For plan years beginning on or after September 23, 2010, lifetime limits on “essential health benefits” will be prohibited regardless of whether a plan is grandfathered.  Essential health benefits include ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitation and habilitation services and devices, laboratory services, preventive and wellness services and chronic disease management, pediatric services, including dental and vision care.  

Individuals who reached, or will reach, a lifetime limit prior September 23, 2010 and who are still eligible for health care benefits must be provided with a notice that the lifetime limit no longer applies.  If such individuals are no longer enrolled in the plan, they must be given an opportunity to be enrolled as a special enrollee; that is, they must be given the right to enroll in all the benefit plans available to similarly situated individuals upon initial enrollment.   The notice and special enrollment opportunity must be provided beginning not later than the first day of the first plan year beginning on or after September 23, 2010.

Annual Limits on Dollar Value of Care Eliminated

The regulations phase out the use of annual dollar limits on essential health benefits and applies to all plans, including grandfathered plans.   The rule does not apply to health flexible spending arrangements (health FSAs), which are specifically limited to $2,500 (indexed for inflation) per year, Health Savings Accounts (HSAs) or Medical Savings Accounts (MSAs).

While the regulations generally prohibits annual limits on the dollar value of benefits, they allow for “restricted annual limits” with respect to essential health benefits for plan years beginning before January 1, 2014.  Annual limits on the dollar value of essential health benefits may not be less than the following for plan years beginning before January 1, 2014:

• For plan years beginning on or after September 23, 2010 but before September 23, 2011 - $750,000;
• For plan years beginning on or after September 23, 2011 but before September 23, 2012 - $1.25 million;
• For plan years beginning on or after September 23, 2012 but before January 1, 2014 - $2 million.

Annual dollar limitations imposed by Health Reimbursement Arrangements (HRAs) are permissible as long as the restrictions are satisfied when combined  with other coverage of essential health benefits.

Annual dollar limits can be imposed on non-essential benefits.

Rescissions Prohibited 

Beginning on or after September 23, 2014, insurers and insured and self-insured health care plans, including grandfathered plans,  will no longer be able to rescind or fail to renew essential health coverage except in cases of fraud or intentional misrepresentation.  Where a plan seeks to rescind coverage, at least 30-days advance notice must be given.  Future guidance on what constitutes adequate notice is expected.

Plans may still discontinue health coverage that is effective retroactively for failure to timely pay required premiums and employers can discontinue group coverage prospectively.

Choice of Doctors

Beginning September 23, 2010, unless grandfathered, plans must provide notice to covered individuals that they are entitled to designate any available participating primary care provider as their provider.  Parents may choose any available participating pediatrician for their children.  Required referrals for OB-GYN care are prohibited.  Higher co-pays for out-of-network emergency care are likewise prohibited.

Insurance Industry Reform

Beginning January 1, 2011, small group issuers must spend at least 80% of premiums on direct medical care and efforts to improve health care quality; larger group issuers must spend at least 85%.  States will be eligible to apply for grants should they choose to do so to establish an office to review insurance premium increases.

Must Attend EANJ Health Care Reform Seminars Located Conveniently Near You.

On June 14, 2010, guidance explaining how group health plans are “grandfathered” from some healthcare changes under the Patient Protection and Affordable Care Act and how grandfathered status may be lost was issued by the U.S. Departments Health and Human Services and Treasury.

A grandfathered health plan is an insured or self-insured health plan in existence on March 23, 2010. Grandfathered plans do not need to immediately comply with all provisions under the healthcare legislation. The primary advantages to being a grandfathered plan include the ability to avoid dependent coverage up to age 26 if other coverage is available until 2014; and to avoid the need to implement an external review process in accordance with minimum standards to be established by the Department of Health and Human Services (for self-insured plans) and to avoid new internal appeals procedures (which already exist under ERISA). Important provisions contained in the guidance are as follows:

Protecting Patients’ Rights in All Plans:

All health plans - whether or not they are grandfathered plans - must provide certain benefits for plan years starting on or after September 23, 2010 including:

• No lifetime limits on coverage for all plans;

• No rescissions of coverage when people get sick and have previously made an unintentional mistake on their application;

• Extension of parents’ coverage to young adults under 26 years old. (Grandfathered plans may exclude this coverage if the adult child is eligible for coverage under another employer-sponsored plan.)

For people who get their health insurance through employers, additional benefits will be offered, irrespective of whether their plan is grandfathered, including:

• No coverage exclusions for children with pre-existing conditions; and

• No “restricted” annual limits (e.g., annual dollar-amount limits on coverage below standards to be set in future regulations).

Additional Consumer Protections Apply to Non-Grandfathered Plans:

Grandfathered health plans will be able to make routine changes to their policies and maintain their status. These routine changes include cost adjustments to keep pace with medical inflation, adding new benefits, making modest adjustments to existing benefits, voluntarily adopting new consumer protections under the new law, or making changes to comply with State or other Federal laws. Premium changes are not taken into account when determining whether or not a plan is grandfathered. Plans will lose their grandfathered status if they choose to make significant changes that reduce benefits or increase costs to consumers. If a plan loses its grandfathered status, then consumers in these plans will gain additional new benefits including:

• Coverage of recommended prevention services with no cost sharing; and

• Patient protections such as guaranteed access to OB-GYNs and pediatricians.

Under the Act, these requirements are applicable to all new plans, and existing plans that choose to make the following changes that would cause them to lose their grandfathered status. Compared to their policies in effect on March 23, 2010, grandfathered plans:

• Cannot Significantly Cut or Reduce Benefits. For example, if a plan decides to no longer cover care for people with diabetes, cystic fibrosis or HIV/AIDS.

• Cannot Raise Co-Insurance Charges. Typically, co-insurance requires a patient to pay a fixed percentage of a charge (for example, 20% of a hospital bill). Grandfathered plans cannot increase this percentage.

• Cannot Significantly Raise Co-Payment Charges. Frequently, plans require patients to pay a fixed-dollar amount for doctor’s office visits and other services. Compared with the copayments in effect on March 23, 2010, grandfathered plans will be able to increase those co-pays by no more than the greater of $5 (adjusted annually for medical inflation) or a percentage equal to medical inflation plus 15 percentage points. For example, if a plan raises its copayment from $30 to $50 over the next 2 years, it will lose its grandfathered status.

• Cannot Significantly Raise Deductibles. Many plans require patients to pay the first bills they receive each year (for example, the first $500, $1,000, or $1,500 a year). Compared with the deductible required as of March 23, 2010, grandfathered plans can only increase these deductibles by a percentage equal to medical inflation plus 15 percentage points. In recent years, medical costs have risen an average of 4-to-5% so this formula would allow deductibles to go up, for example, by 19-20% between 2010 and 2011, or by 23-25% between 2010 and 2012. For a family with a $1,000 annual deductible, this would mean if they had a hike of $190 or $200 from 2010 to 2011, their plan could then increase the deductible again by another $50 the following year.

• Cannot Significantly Lower Employer Contributions. Many employers pay a portion of their employees’ premium for insurance and this is usually deducted from their paychecks. Grandfathered plans cannot decrease the percent of premiums the employer pays by more than 5 percentage points (for example, decrease their own share and increase the workers’ share of premium from 15% to 25%).

• Cannot Add or Tighten an Annual Limit on What the Insurer Pays. Some insurers cap the amount that they will pay for covered services each year. If they want to retain their status as grandfathered plans, plans cannot tighten any annual dollar limit in place as of March 23, 2010. Moreover, plans that do not have an annual dollar limit cannot add a new one unless they are replacing a lifetime dollar limit with an annual dollar limit that is at least as high as the lifetime limit (which is more protective of high-cost enrollees).

• Cannot Change Insurance Companies. If an employer decides to buy insurance for its workers from a different insurance company, this new insurer will not be considered a grandfathered plan. This does not apply when employers that provides their own insurance to their workers switch plan administrators or to collective bargaining agreements.

A plan retains its grandfathered status when changes effective after March 23, 2010 pursuant to written amendments to a plan were adopted on or before March 23, 2010.

Protecting Against Abuse of Grandfathered Health Plan Status:

To prevent health plans from using the grandfather rule to avoid providing important consumer protections, the regulation provides for promoting transparency by requiring a plan to disclose to consumers every time it distributes materials whether the plan believes that it is a grandfathered plan and therefore is not subject to some of the additional consumer protections of the Act. This allows consumers to understand the benefits of staying in a grandfathered plan or switching to a new plan.

• The plan must also provide contact information for enrollees to have their questions and complaints addressed;

• Revoking a plan’s grandfathered status if it forces consumers to switch to another grandfathered plan that, compared to the current plan, has less benefits or higher cost sharing as a means of avoiding new consumer protections; or

• Revoking a plan’s grandfathered status if it is bought by or merges with another plan simply to avoid complying with the law.

June 18th Webinar: What HR Needs to Know about the Patient Protection and Affordable Care Act before Leaving for Vacation.

The Patient Protection and Affordable Care Act requires employers with 200 or more full-time employees to automatically enroll all new full-time employees in the firm’s group health care plan.  Current employees will be automatically re-enrolled.  Employees will be allowed to opt out, similar to how many employers enroll employees in a 401(k) plan.

Important questions have emerged.  First, it is unclear when this requirement becomes effective, since the specific statutory section is silent on when auto enrollment becomes effective.  The Society for Human Resouce Management website suggests the intent of the missing effective date is to make auto-enrollment effective on January 1, 2014, when other provisions, such as the employer “shared responsibility” penalty become effective.  However, the legal publisher CCH believes that the correct view is that when a section has no effectice date, it is effectively immediately.  In any event, the section requires regulations to implement, so time will tell.

More troubling is the fact that the auto-enrollment section does not define “full-time” employee.  In another section, “full-time” is defined as any employee who works on average at least 30 hours per week.  Again, this definition refers to whether an employer with 50 or more full-time employees will be assessed a shared responsibility penalty.  But read casually,  this definition means that any employee who works on average at least 30 hours per week must be auto-enrolled in the group health care plan, a dramatic consquence for the many employers that require at least 35 hours for full-time status and therefore eligibility for health care benefits.

John Sarno, EANJ’s president believes that the statute should be read as requiring the auto-enrolling of employees who work at least 30 hours per week if they are otherwise eligible for health care benefits under the employer’s policy.  However, Frank Palmieri, EANJ’s legal advisor, tentatively thinks that the law requires plans (insured and self-insured) to offer health care benefits to all employees who work at least 30 hours per week, regardless of the employer’s policy.   However, he says that his views require constant update.

What does HR need to know about the Patient Protection and Affordable Care Act before leaving for summer vacation?  Click here.

On May 10, 2010, the Internal Revenue Service, U.S. Department of Labor and the U.S. Department of Health and Human Services issued interim final rules for group health plans and health insurance issuers relating to dependent coverage of children to age 26 under the Patient Protection and Affordable Care Act (the “Act”).

The rules generally apply to group and individual health plans for plan years beginning on or after September 23, 2010 and applies to both insured and self-insured health care plans and to all group health care plans and health insurance issuers offering group or individual health insurance whether or not such coverage qualifies as a grandfathered health plan (coverage existing as of March 23, 2010).

The rules clarify that, with respect to children who have not attained age 26, factors such as financial dependency, residency, student status, employment, or eligibility for other coverage cannot be used to deny coverage. 

Plans cannot exclude coverage irrespective of whether or when a child was enrolled in a plan and became ineligible because of age but transitional coverage for a child is available where coverage ended or was denied because of age.

Plans cannot deny or limit coverage based on whether the child is married.  However, a plan is not required to cover the spouse of the eligible child, or the child’s children.

Surcharges for coverage of eligible chldren are not allowed except where surcharges apply regradless of age and plan benefits cannot vary based on the age of the child.

The rules require a plan or issuer to give such eligible child an opportunity to enroll that continues for at least 30-days (including written notice of the oppotunity to enroll) regardless of whether the plan offers open enrollment and regardless of when any open enrollment period might otherwise occur.

The enrollment opportunity (including the written notice) must be provided not later than the first day of the plan year beginning on or after September 23, 2010.  Thus, many plans can use their existing annual enrollment periods, which commonly begin and end before the start of a plan year, to satisfy the enrollment opportunity.

If the child is enrolled, coverage must begin not later than the first day of the first plan year beginning on or after September 23, 2010, even if the request for enrollment is made after the first day of the plan year.  In subsequent years, dependent coverage may be elected for an eligble child in connection with normal enrollment opportunties under the plan.

Notice may be provided to an employee on behalf of the employee’s child and notice may be included with other enrollment materials, provided that the notice is prominent.

For a group health plan, if notice is provided to an employee whose child is entitled to an enrollment opportunity, the obligation to provide the notice to the child is satisfied for both the plan and the issuer.

Any child enrolling in group health coverage is to be treated as a special enrollee, as provided under HIPAA portability rules.  Accordingly, the child must be offered all the benefits packages available to similarly situated individuals who did not lose coverage by reason of cessation of dependent status.  The child also cannot be required to pay more for coverage than a similarly situated individual who did not lose coverage by reason of cessation of dependent status.

If a child qualifies for an enrollment opportunity and the parent is not enrolled but is otherwise eligible to enroll in the group plan, the plan must provide an opportunity to enroll the parent, in addition to the child.

If a plan has more than one benefits option, a child will be eligible for enrollment in any option, regardless of which option applies to the parent.

A parent must be given the opportunity to switch plans should the child enroll in an option to which the parent is not otherwise enrolled.

A child who qualifies for an enrollment opportunity who is covered under COBRA continuation must be given the opportunity to enroll as a dependent as an active employee, other than as a COBRA-qualified beneficiary.  In this situation, if the child loses eligibility for coverage due to a qualifying event (including aging out of coverage at age 26), the child has another opportunity to elect COBRA continuation coverage.  If the qualifying event is aging out, the COBRA continuation coverage could last 36 months from the loss of eligibility that relates to turning age 26.

A covered employee who has never enrolled a child because the child was too old under the terms of the plan but who has not yet turned 26, must be provided an opportunity to enroll the child though the child was not previuously covered by the plan.  If the parent is no longer eligible for coverage (for example, the parent no longer works with the employer) as of the first date on which the enrollment opportunity would be required to be given, the plan would not be required to enrll the child.

Fact Sheet: http://www.dol.gov/ebsa/newsroom/fsdependentcoverage.html

FAQs:  http://www.dol.gov/ebsa/faqs/faq-dependentcoverage.html

A Special Alert from Palmieri & Eisenberg (P&E):

On April 27, 2010, the IRS issued Notice 2010-38.  This Notice is the first round of guidance by the IRS under the new healthcare reform legislation, generally referred to as the Patient Protection and Affordable Care Act (“PPACA”). 

In the guidance the IRS explains that employers may provide tax-free medical coverage to children up to age 27.  This tax-free guidance should not be confused with the new healthcare requirement to provide coverage to dependent children up to age 26 (i.e., until their 26^th birthday).  The PPACA changes to the Public Health Service Act (“PHS Act”) do not parallel the changes to the Internal Revenue Code (the “Code”)

More specifically:

·                 The PHS Act extends coverage to children up to age 26 effective for plan years beginning on or after September 23, 2010.

·                 The Code creates an income tax exclusion for children under age 27 as of the end of a taxable year, effective as of March 30, 2010.

Important issues to consider include the following:

·                 The new tax exclusion applies to coverage provided on or after March 30, 2010.  Accordingly, coverage prior to March 30, 2010 is subject to taxation if an individual does not qualify as a dependent under the Code, in the same manner as income is “imputed” for domestic partners.

·                 The exclusion only applies to coverage in the tax year “before” the child turns age 27.  Thus, if a child turns age 27 in 2011, the tax exclusion ceases to apply effective as of December 31, 2010. 

·                 Changes will be permitted under Flexible Benefit Plans (“Flex Plans”) to allow employees to pay for the cost of existing or new coverage on a pre-tax basis even if Flex Plans are not immediately amended to allow “mid-year” changes in status.

·                 Employers will have until December 31, 2010 to amend their Flex Plans.  P&E anticipates preparing all necessary amendments when we amend client Flex Plans to also exclude over the counter (“OTC”) prescription drugs for 2011, except where such OTC drugs are prescribed by a physician or are for insulin.

As indicated in prior P&E Alerts, some insurance carriers are implementing dependent age 26 coverage prior to 2011.  However, coverage is being implemented inconsistently between various carriers.  For example, we understand some carriers (i.e., CIGNA) are allowing coverage for dependents up to age 26 for new hires in addition to continuing coverage for those dependents that would have aged out due to loss of full-time student status.  Other carriers (such as United Healthcare) appear to only cover dependents that are currently graduating college. Therefore, employers who maintain multiple health plans may wish to wait until January 1, 2011 to introduce consistent coverage for adult children up to age 26. 

P&E is carefully monitoring all healthcare guidance and will continue to keep you apprised of all changes.  Frank Palmieri will be meeting with representatives of the IRS and DOL on May 5 and 6, 2010, as part of the American Bar Association and will report back any new developments.

Mr. Palmieri will also be serving on a Blue-Ribbon Panel of experts at EANJ’s May 19th Annual Meeting. Click here for details:

EANJ’s Membership Meeting

May 19, 2010 (Wednesday)
9:00am - 12:00noon
Register (at least 24 hours in advance)

A New Era for Employers

Strategies for Affordable, Better Quality Health Care, Employee Wellness and Engagement

As national Health Care Reform continues to rile the economy, sky-rocketing health care costs, recession-weary employees and stressed out managers threaten business survival as the economy slowly picks up steam.  EANJ has convened a Blue Ribbon panel of national experts to give practical advice to employers.  The Agenda includes:

Uncovering employers’ power to purchase higher quality health care and lower cost: Strategies that the health care insurance industry wishes would remain secret.

    David L. Knowlton
    President and CEO
    New Jersey Health care Quality Institute
    Chair, Governor’s Health Care Transition Team

PANEL
With or without Health Care Reform, employers must learn to drive a better health care bargain, lower health care costs with wellness programs, increase employee engagement and productivity, and comply with HIPAA privacy.

    Sharon Seitzman
    Executive Vice President and COO
    Qualcare, Inc.

    Frank J. Palmieri, Esq.
    Palmieri & Eisenberg

    Phillip J. Cohen
    President & CEO
    Broad Reach Benefits

    Fikry W. Isaac, M.D. (Invited)
    Chief Medical Officer, Global Wellness & Prevention
    Johnson & Johnson Company

    John J. Sarno, Esq. (Moderator)
    President
    Employers Association of New Jersey

View a brief special video from John Sarno

Exceptional Employer Award

EANJ Members invited:

    Treasurer’s Report
    Election of Officers/New Board Members

Location:
The Imperia
Somerset, NJ

Time:
9:00am — 12 noon
Registration begins at 8:30

Registration Information:
$35 EANJ Members
$55 Non-Members

Provisions of the Patient Protection and Affordable Care Act are phased in over a ten-year period but important reforms are required to be implemented before year-end.

The uninsured will receive access to coverage through high-risk pools if they are uninsured because of a pre-existing condition.  But the complexity of that task presents big challenges.

The federal risk pool isn’t allowed to contract with for-profit companies and creating a new non-profit risk pool is a formidable undertaking.  An alternative would be to partner with a state risk pool; 34 states have such programs.

However, New Jersey has no high- risk pool program.  Under the federal law, the high-risk plan must cover at least 65% of the costs of care on average and caps out-of-pocket charges at $5,950 a year for an individual or $11,900 for a family.  It can’t exclude coverage for pre-existing conditions.

Since New Jersey has no high-risk pool, legislation will need to be passed to create one before year-end.  With the focus on cutting the state budget, it is unclear at this time whether there is sufficient attention on this issue.  In fact, the states are required to implement much of the reform, including a purchasing exchange, in 2014.

Also in 2010, insurance companies will be barred from dropping coverage when a person gets sick and also will not be able to deny coverage to children when they have pre-existing conditions.  At present, the insurance carriers read this requirement as covering the costs of children with pre-existing conditions who are already insured.  Regulations will be issued to clarify that insurance companies must accept children with pre-existing conditions who lack insurance.  Litigation is sure to follow to resolve this disagreement.

Small employers can receive tax credits to  purchase insurance in 2010 (see March 19th post) and children can remain on parents’ plans until they are 26 years old.  Implementation is expected within 90-days.

One more impressive step has been taken toward health care insurance reform in the United States.  The requirements of the monumental bill will be phased in over several years and tens of thousands of pages of regulations will be issued over time.  For the time being,  EANJ summaries the major points of interest and responsibility for employers.

Nearly every American will be required to have health care coverage by 2014. Employers that provide health insurance will need to sponsor a “qualified health plan” that will guarantee essential health care benefits.  Employers are required to report annually to the IRS.

Employers with 200 or more employees are required to auto-enroll new full-time employees, with adequate notice and opportunity for an opt-out.  Should an employee opt-out, they will pay a penalty and be required to purchase coverage elsewhere.  The employer must inform all employees of their coverage options, including the existence of a state-operated Insurance Exchange.

Individuals and employers with 100 or fewer employers will be able to purchase health care plans through the Insurance Exchange in 2014, the purpose of which is to require insurers to pool the risk of all enrollees in the Exchange.  Employers with over 100 employees may be allowed to participate in 2017.

Employers with fewer than 25 employees and average annual wages of less than $40,000 are eligible for a sliding scale tax credit to purchase health care insurance.

Americans with incomes up to 400% of the federal poverty level ($88,200 for a family of four) will be eligible for a subsidy to purchse health care insurance.  Employers with more than 50 full-time workers that do not provide health care insurance will be assessed a penalty if employees receive a subsidy to purchase insurance on their own.  Employers with 50 or fewer employees are exempt from this penalty, although part-time workers are included in the calculations, counting two part-timers  as a full-time employee.

The non-coverage penalty is $2,000 per full-time employee, which would be assessed on the company’s entire workforce, not just on the employees that are receiving a subsidy.   In calculating the penalty, the first 30 full-time employees are excluded (ie: a firm with 51 employees that does not provide coverage will pay an amount equal to 51 minus 30, or $42,000, if the government subsidizes employee coverage.)

For employers that do not provide coverage to employees, it is likely that many, if not most, employees will be eligible for a subsidy to purchase health care on their own.  The non-coverage penalty increases with the size of the employer.

There is no penalty for employees in a waiting period, although a waiting period cannot exceed  90 days.

Most employers are required to report health care coverage data, including employee census data, to the U.S. Department of Health and Human Services.

Federal discrimination statutes and the Fair Labor Standards Act are amended.  An employer cannot discriminate because of participation in or the denial of benefits under any health program or activity or because of receiving a government subsidy.  Employees are protected from retaliation for reporting health care fraud.

The FLSA has also been amended for employers with 50 or more employees to require granting an unpaid break to an employee for the purpose of expressing breast milk.  The employer must also provide a private and safe place other than a rest room for this activity unless to do so imposes an undue hardship.

Employer-sponsored wellness programs are encouarged.  Employers can give a participation award up to 30% of the cost of coverage in the form of premium discounts or waiver of co-pays.

All existing health insurance plans would be subject to several reforms. More specifically, the legislation would:

• prohibit lifetime limits and rescissions;
• restrict annual limits;
• place limitations on excessive waiting periods; and
• require certain plans to provide coverage for dependent children up to age 26.

With or without Health Care Reform, employers must learn to drive a better health care bargain, lower health care costs with wellness programs, increase employee engagement and productivity, and comply with HIPAA privacy.

EANJ’s Annual Meeting on May 19th convenes a Blue Ribbon Panel of experts.

Click here for details.