Prohibiting Waiting Periods Longer Than 90 Days

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Each year approximately 400,000 employees are subject to waiting periods of four months or longer.

Last month, Labor, Treasury, and HHS jointly issued proposed regulations addressing healthcare reform’s prohibition on excessive waiting periods.  These new standards are expected to further drive implementation of a pending PPACA provision aimed at both insured and self-insured group health plans.

The proposed regulations are substantially similar to the agencies’ initial guidance (August 2012) and contain virtually no surprises.  This requirement is absolute; it confirms that all calendar days are counted, that “90 days” is not synonymous to “three months,” and that the waiting period cannot be extended.  For example, consider a healthcare plan that seeks to establish coverage on the first day of a calendar month—or if the 90th day happens to fall on a weekend or holiday. Such a plan may choose to commence coverage prior to and NOT later than the cutoff date.

Meanwhile, the regulations do not indicate that an employee be restricted to 90 calendar days in which to sign up for coverage (as long as said employee had the opportunity to elect coverage within that 90 day window).  We interpret this language to clarify that granting employees additional time to make enrollment decisions will not be considered a compliance violation.  Likewise, other eligibility conditions/criteria (i.e. job classification or licensure requirements) will also be permissible, assuming they are not intentionally designed to circumvent the spirit and intent of the law.

While some plans require employees to wait a set amount of time before collecting healthcare benefits, others mandate reaching a set number of hours worked.  This prohibition does not bar one-time cumulative hours of service requirements, as long as the requirement does not exceed 1,200 hours.  For eligibility conditions that require a minimum number of hours of service per period (such as working full-time), a plan may use a reasonable measurement period of up to 12 months to determine whether a new employee with variable hours meets the condition.  In such an instance coverage must be made available no later than 13 months from the employee’s start date.

These waiting period rules are expected to go into effect on January 1, 2014 (i.e. Plan years beginning on or after that date). All group plans/insurers will be affected, regardless of grandfathered status.  If final regulations are more restrictive, they will not be implemented until January of 2015 at the earliest.

While compliance with the 90-day limit may seem relatively straightforward, there are some potential traps for the unwary.  Does this apply to all employers?  Are benefit accounts (FSAs/HRAs/HSAs) included?  Do any exceptions exist?  For answers to these questions and more, be sure to attend Capital Connection’s next quarterly webinar on Wednesday, April 10th.

2013 Transportation Plan Limits Announced

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The Internal Revenue Service recently announced the annual inflation adjustments for tax year 2013, including the limits for Section 132 transportation plans and other changes from the recently passed American Taxpayer Relief Act (ATRA) of 2012.  

For tax year 2013, the monthly fringe benefits exclusion for transit passes and transportation in a commuter highway vehicle (i.e. vanpool) is $245, up from $240 for tax year 2012. And because the ATRA provides transit parity throughout 2013, the monthly parking limit will be raised to $245 as well.

Normally, transportation plan limits are announced in October or November of the prior year. This year, however, the announcement was delayed by the “fiscal cliff” debate. 

Details on this particular inflation adjustment—and others—are contained in IRS Revenue Procedure 2013-15.

Exchange Deadline Extended

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Originally, states were to submit their “blueprints” by November 16.

In acknowledging the fact that many governors and legislatures across the nation delayed planning until after the presidential election, the Obama administration will extend the deadline by which states must submit the initial framework of their health insurance exchanges.

While this Friday remains the deadline by which all states must tell federal regulators how they plan to proceed, ultimately states have until Dec. 14 to submit plans for the state-based online markets, according to a letter from HHS Secretary Kathleen Sebelius. What’s more, states wanting to partner with the federal government on this venture will have an additional two months…until Feb. 15.

The exchanges are a key element of Healthcare Reform. The provision reflects dual intentions: to make it easier to find an affordable plan, and to help people determine whether they qualify for new federal subsidies. It’s estimated that between 12-25 million people will obtain coverage through the exchanges starting in 2014. Under the law, the federal government will set up exchanges if states don’t.

Back in August, HHS issued a “blueprint” for the approval of state-based and state-partnership insurance exchanges. It grants states three implementation options:

  1. A state-based exchange, wherein the state operates all exchange activities (but may partner with the federal government regarding the premium tax credit, etc.);
  2. A state partnership exchange, wherein the state’s primary role is limited to plan management, consumer assistance, etc.; or
  3. A federally-facilitated exchange wherein the federal government runs everything.

Along with a declaration letter, state submissions must include an exchange application which requires completion or progress in 13 different categories.

HHS will approve a state-based exchange once the state has demonstrated the ability to satisfactorily perform all required exchange activities. “Conditional” approval will be granted to a state-based exchange that does not meet all requirements but is making significant progress and intends to be operationally ready for the initial open enrollment period (beginning on Oct. 1, 2013). To be operationally ready, a state must be able to provide consumer support for coverage decisions, facilitate eligible determinations for individuals, provide enrollment in Qualified Health Plans (QHPs), certify health plans as QHPs, and operate a Small Business Health Options Program (SHOP) exchange.

For a current look at where the 50 states (and the District of Columbia) stand on the creation of health insurance exchanges, click here.  

 

90-Day Waiting Period

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Regulators define how it applies to enrollment in employee benefit plans

The federal agencies tasked with implementing healthcare reform have issued additional guidance that employers and their advisors need to be aware of. In this latest version, the Internal Revenue Service (IRS), Dept. of Labor (DOL), and Dept. of Health and Human Services (HHS) attempt to communicate what is considered compliant (at least initially) as it relates to “excessive” waiting periods for coverage. This “temporary” guidance will remain in effect at least through the end of 2014.

IRS Notice 2012-59 states that a “waiting period is the period of time that must pass before coverage for an employee—or dependent—who is otherwise eligible to enroll under the terms of the plan can become effective.” Being eligible for coverage means the employee or dependent has met all of the plan’s eligibility conditions.

In general, the intent is to prohibit a group health plan or health insurance issuer from imposing a waiting period beyond 90 days for coverage. Thus, eligibility based solely on the lapse of time is permissible only if the time period does not exceed 90 days. Other conditions are also generally acceptable as long as they do not undermine the 90-day rule. (Example: If an employee chooses to wait longer than 90 days before electing coverage, the employer will not be considered non-compliant.)

The guidance also addresses the circumstance in which a group health plan bases eligibility on a specified number of hours worked per week/pay period, specifically when it cannot be determined at the date of hire whether an employee will work sufficient hours to be covered. For this purpose, the guidance conforms to the applicable large employer rules under the “pay or play”[i] penalty. Generally, plans are allowed a reasonable period of time (up to 12 months) in which to determine if the employee meets the hourly requirement. The time period in which to determine whether the employee meets the plan’s eligibility condition will not be considered to violate the 90-day rule if coverage is made effective no later than 13 months from the employee’s start date. 

This guidance is certainly welcome, and will be useful for plans implementing design changes to comply by 2014 with the new waiting period rules. Meanwhile, some important questions remain unanswered. For instance, lacks clarity is lacking regarding how hours of service are counted, or whether a plan may use equivalencies.

[i] The Patient Protection & Affordable Care Act (PPACA) employer mandate/pay-or-play provisions require large and midsize employers to choose between providing health coverage for full-time employees or paying a penalty. Whether full-time, part-time, or variable, all employees (of large and midsize employers) who are not offered the opportunity to enroll in health insurance by their employer will be eligible for premium tax credits and cost-sharing reductions for Exchange coverage.

 

CONSTITUTIONAL

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The nation has been waiting with bated breath for the most consequential Supreme Court decision in over a decade.

This morning the Supreme Court issued its anxiously awaited ruling on the 2010 federal healthcare law–the Patient Protection & Affordable Care Act (PPACA). Specifically, the court announced three final opinions of the term before the summer recess.

It appears that the Supreme Court has upheld the healthcare reform law’s “individual mandate” in an opinion authored by Chief Justice John Roberts and joined in by Justices Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor.

The high court concluded, as did the majority of lower courts, that Congress was acting within its powers under the Constitution when it required most Americans to carry health insurance or pay a penalty.  That provision was at the center of the two-year legal battle.

The ruling is a victory for Democrats and President Barack Obama, who had passed the biggest reworking of the nation’s healthcare system since the creation of Medicare in the 1960s.  It also averts disruption for employers who have spent more than two years preparing for changes in the law.

Despite the ruling, the law’s future remains uncertain.  Healthcare reform will remain hotly contested, and is bound to play a prominent role in political campaigns between now and Election Day.  Republican presidential nominee Mitt Romney and GOP leaders have pledged to repeal the law if they take control of Congress and the White House in November.

TASC Governmental Affairs will fully digest the ruling and examine the opinions before commenting further. Meanwhile, rest assured that TASC will continue to execute on the implementation of programs/legislation per PPACA mandates, and that we will obtain additional governmental guidance if necessary.

Feds validate TASC’s FSA position

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Aggressive pro-Client / pro-Provider stance helps set public policy

The wait is finally over! On Wednesday, May 30, the IRS issued final guidance regarding the $2,500 limit for health Flexible Spending Accounts (FSAs).

Specifically, IRS Notice 2012-40 (http://www.irs.gov/pub/irs-drop/n-12-40.pdf) provides the following highlights:

  • Because employees make salary reduction contribution elections for health FSAs only on a plan year basis, the term “taxable year” refers to the plan year of the plan. Accordingly, the $2,500 limit on health FSA salary reduction contributions applies on a plan year basis. Therefore, the rule will not affect any plans beginning prior to January 1, 2013. 
  • The $2,500 limit on salary reduction contributions to a health FSA applies on an employee-by-employee basis; meaning that each spouse may elect to make salary reduction contributions of up to $2,500, even if both participate in the same health FSA sponsored by the same employer.

Please note that the statutory $2,500 limit applies only to salary reduction contributions under a health FSA, and does NOT apply to employer contributions.

And that’s not all – here’s another very favorable development…the notice also solicits comments focusing on the “use or lose” requirement. This appears to signal that the administration is seriously considering modification (or perhaps even elimination) of this outdated and ineffective provision.

All of the above is great news, especially for non-calendar year plans and plan sponsors.

Score one for TASC!

IRS Proposed Rules to Cover PPACA Research Fees

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The Patient Centered Outcomes Research Institute (PCORI), a nonprofit corporation newly required by the Patient Protection and Affordable Care Act (PPACA), is being established to advance comparative clinical effectiveness research. Intended to assist patients, clinicians, purchasers, and others in making informed health decisions, PCORI will be funded in part by fees paid by issuers of certain health insurance policies and sponsors of self-insured health plans. Recently, the Internal Revenue Service (IRS) Dept. of Treasury issued proposed rules addressing the following…

Calculation of the Fee
The fee will be imposed for seven years (i.e. policy/plan years ending on or after October 1, 2012 and before October 1, 2019). The amount of the fee is equal to:

               Average Number of Lives Covered[1]   x   Applicable Dollar Amount

The applicable dollar amount is $1 for years ending on or after October 1, 2012 and before October 1, 2013 (Jan. 1, 2013–Dec. 31, 2013 for calendar year plans), but increases to $2 for years ending on or after October 1, 2013 and before October 1, 2014 (Jan. 1, 2014–Dec. 31, 2014 for calendar year plans). In the case of policies/plans beginning on or after October 1, 2014, the applicable dollar amount is to be adjusted to reflect projected increases in national health expenditures.   

Policies and Plans Subject to the Fee
The regulations define a health insurance policy—that is subject to the fee—as any health insurance policy (including under a group health plan) issued with respect to U.S.residents. The fees paid by self-insured health plan sponsors apply to plans established or maintained by an employer or employee organization that provides health coverage, as long as any portion of that coverage is not provided through an insurance policy.  NOTE: Health insurance policies/self-insured health plans that are not subject to the fee include any policy or plan in which essentially all coverage consists of excepted benefits (i.e. limited-scope dental or vision plans).

Benefit Accounts
The proposed rules do not exclude all such plans from the definition(s). However, if two or more arrangements have the same plan year and are established or maintained by the same plan sponsor, the arrangements may be treated as a single self-insured health plan. For example, if a plan sponsor maintains a HRA in addition to major medical coverage, the HRA and medical plan may be treated as one.

The regulations provide that a health FSA is excluded from the definition of an “applicable self-insured health plan” and therefore is not subject to the fee. They further clarify that Archer medical savings accounts and health savings accounts (HSAs) are not subject to the fees, but—unlike other PPACA provisions—that the fees may be imposed on retiree-only medical plans, even those with fewer than two active participants.

Payment of the Fee
Although excise taxes are generally reported and paid quarterly, the proposed rules state that issuers and plan sponsors may report and pay the PCORI fees once per year, on July 31.

The regulations provide detailed instructions regarding how to identify the plan sponsor of a self-insured health plan. In the case of a plan established or maintained by a single employer, the plan sponsor is the employer. If a plan is maintained by two or more employers, the plan sponsor is the employer identified as such in the plan’s documents (i.e. the Plan Document or Summary Plan Description). If no designation has been made, then each plan sponsor that maintains the plan is responsible for the portion of the fee that is attributable to said employer’s own employees.

PPACA requires that the issuer of the policy pay the fee for fully insured health coverage (including a fully insured group health plan), and that the plan sponsor pay the fee in the case of a self-funded health plan. Although a TPA (like TASC) may agree to assist in calculating and/or remitting the payment, the responsibility ultimately rests with the issuer or plan sponsor.

While the PCORI fee is unlikely to drive plan design, it is one more factor that deserves a closer look. It may be most significant with respect to HRAs, since failing to adequately integrate one of these account-based plans with major medical coverage can result in effectively doubling the amount of the fee.

Further analysis will be provided during our next Capital Connection webinar on Tuesday, May 22.

[1] The average number of covered lives includes all participants and beneficiaries [i.e. covered employees (regardless of whether full- or part-time), covered retirees, covered spouses and covered dependents]. For health FSA and HRA coverage, each participant may be treated as a single life, regardless of how many other individuals (e.g., spouse, dependents, and other beneficiaries) are actually covered.

BREAKING NEWS: HHS Releases Final Exchange Regulations

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Under the long-awaited final rules released this week, and in an apparent effort to generate interest and spread the word, insurance brokers and third-party administrators (TPAs) (a) will be allowed to direct people to state insurance exchanges and (b) will be allowed to check to see whether the individual is qualified for tax credits.

That means a possible new business model for brokers and other companies looking to set up an access point to the exchanges. What’s more, the federal government will not regulate how these entities guide people into the exchanges’ charge-and-collect fees, as those relationships are regulated at the state level. Note: At least two states–Virginia and Pennsylvania–were already contemplating such arrangements.

States are essentially expected to build their exchanges from scratch, and have been eagerly anticipating (even clamoring) for these “rules of the road” before investing heavily in any type of infrastructure. 

HHS’s latest publication lays out several functions, which include: certifying qualified health plans;[1] operating a website for comparing plans; running a toll-free hotline for consumer support; providing grants to “navigators”[2] for consumer assistance; determining eligibility of consumers for enrollment; calculating how much government aid (if any) for which each household is eligible; etc. The rule also outlines the eligibility standards employers must meet to participate in the Small Business Health Options Program (SHOP).[3] 

The administration was quick to point out that the final rule differed slightly from its interim guidance. Most notably, insurers and other industry representatives will now get to fill as many as half of the seats on the governing boards, a move likely to seriously disappoint consumer advocates.

If a state is not ready to implement an exchange by the Jan. 1, 2014 start date, the law requires the federal government to step in. (Meanwhile, this round of instructions fails to explain exactly how it would do so.) The Obama administration’s request for $800 million to operate the federal exchange has received a frosty reception from congressional Republicans. 

Due to the mere fact that insurance companies will soon be vying for business on a level playing field, it’s assumed that the increased competition will drive down costs and give individuals and small businesses the same purchasing power already enjoyed by big business today.

TASC Governmental Affairs will continue to scan the 644 page document in order to fully understand its impact on our services and our customers. Rest assured, once potential opportunities and/or threats are identified, we will report back in depth. Stay tuned!

[1] State exchanges will determine the number and type of plans that are made available, as well as the minimum standards that health insurers must meet to participate in an exchange.
[2] Navigators are entities charged to assist individuals and small businesses in finding coverage, conducting outreach, providing education, etc.  States can choose at least two navigator organizations, one of which must be a community or consumer focused nonprofit.
[3] Starting in 2014, small employers purchasing coverage through a SHOP Exchange may be eligible for a tax credit of up to 50% if they have 25 or fewer employees, pay an average annual wage of less than $50,000, offer coverage, and pay at least 50% of the premium.  States can set the size of the small group market at either 1 to 50 or 1 to 100 employees.

Summary of Benefits and Coverage (SBC) Update

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NOTE: This is a follow-up to a previous Capital Connection entry (Much more than a “summary”) dated Dec. 22, 2011. The post below discusses the recent release of the final rule.

Although the health system overhaul continues to divide the public, a poll conducted by the Kaiser Family Foundation found that an overwhelming majority of Americans (84%) support insurance summaries. With that near consensus in mind, officials from three federal agencies have determined that starting later this year health plans will have to do exactly that…provide consumers with nationally standardized coverage descriptions. 

The requirement takes effect Sept. 23, 2012, applies to ALL private insurance (including employer coverage and plans purchased individually), and must be delivered at important points in the enrollment process, such as upon application and at renewal. It is estimated that this provision will affect between approximately 150 and 180 million Americans.

But the bottom line—a policy’s price—is missing. Although an estimated premium price was included in the draft rules, it has been dropped and won’t be required on the form. Another provision that was abandoned in the final rule is the mandate that insurers provide all of the required information in only four pages. The new guidance issued last week apparently will allow more lengthy disclosures (up to six pages) if absolutely necessary. Further, any “fine print” will be unacceptable, and all information must be printed in 12-point type, a size larger than the typical newspaper font.    

The forms will also include estimated out-of-pocket costs for two basic examples of care: pregnancy and Type 2 diabetes care. This too is a change from the earlier rule, as it reduces the number of coverage scenarios from three down to two (had previously included breast cancer).

How will the SBC be provided?  Last year’s proposed regulations would have required that plans/issuers provide the SBC as a stand-alone document only. As now modified in the final rule, group plans may provide the SBC together with the summary plan description if prominently displayed at the beginning of the document, such as immediately after the table of contents. This is not the case for non-group plans, which must continue to provide the SBC as a separate document.

Another popular query concerned whether the SBC may be provided electronically, as insurers and employers had complained about the huge expense of providing paper copies. The administration’s final rule appears to provide flexibility, while still addressing the information needs of consumers. Assuming certain “consumer safeguards”[1] are met, the rule ensure that in the vast majority of cases, the SBC may be provided electronically, thereby allowing it to be posted online or delivered via email. 

For additional guidance related to specific SBC documents (i.e. template, instructions, samples, the uniform glossary, etc.), please visit: http://www.dol.gov/ebsa/healthreform or http://www.cciio.cms.gov/programs/consumer/summaryandglossary/index.html.

[1] These requirements include written notice of availability to be sent via mail or emailed together, as well as the right to request a paper copy at any time.

Feds “Punt” Essential Benefits to States

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Definition is among the most important steps in PPACA implementation

The Obama administration is in the process of rolling out the health benefits framework for millions of Americans, and has established that states get to decide the specifics. This recent announcement is the first formal indication of the route the Dept. of Health & Human Services (HHS) will take on the “essential benefits package.”

The Patient Protection & Affordable Care Act (PPACA) aimed to provide the American people with access to quality, affordable health insurance. To achieve this goal, the law ensures that health plans offered in the individual/small group markets, both in and outside of the Exchanges, offer a comprehensive package of items and services known as “essential health benefits” beginning in 2014. This package must include items and services within at least the following 10 categories:

  • Ambulatory
  • Emergency
  • Hospitalization
  • Maternity & newborn care
  • Mental health & substance abuse
  • Prescription drugs
  • Rehabilitative
  • Laboratory
  • Preventive & wellness
  • Pediatric

Many states already set minimum standards in regulating insurers. Idaho, for instance, mandates insurers to cover 13 types of health services, while Rhode Island requires coverage of 69.

Under the HHS intended approach, states would have the flexibility to select a benchmark plan that reflects the scope of services offered by a “typical employer plan.” This approach would allow states flexibility when selecting plans to best meet the needs of their citizens.

States would choose one of the following benchmark insurance plans:

  1. One of the three largest (by enrollment) small group plans in the state;
  2. One of the three largest (by enrollment) state employee health plans;
  3. One of the three largest (by enrollment) federal employee health plans; OR
  4. The largest (by enrollment) HMO plan offered in the state’s commercial market.

Ultimately, the benefits and services included in the elected plan would be the essential health benefits package for that particular state. Plans could modify coverage within a benefit category, but only if doing so would not reduce the value of coverage. If a state opts not to choose a benchmark, HHS will then set Option #1 (above) as the default.

PPACA distinguishes between a health plan’s covered services and the plan’s cost-sharing features, such as deductibles, copayments and coinsurance. Those cost sharing features will be addressed by separate rules (presented in future bulletins), and will determine the actuarial value of the plan (i.e. bronze-level = 60%, silver-level = 70%, gold-level = 80% and platinum = 90%). Although final regulations are still months away, we in the TASC Governmental Affairs shop are watching closely. We know the federal government’s decision is likely to set the new national standard for health insurance.

NOTE – Grandfathered plans, self-insured group health plans, and health insurance coverage offered in the large group market are not required to offer essential health benefits. Nevertheless, the definition of said “essential health benefits” is of concern to employers, advisors, and insurers, since—beginning in 2017—states may allow large employers to obtain coverage through an Exchange and, thus, will be obliged to provide the essential benefits package.

This process could be especially burdensome to multi-state plans, since these would be exposed to 50 different essential health benefits definitions. In addition, while ERISA usually preempts state law with respect to self-funded plans, this is a federal mandate, so ERISA’s preemption provisions may not apply.