Detailed Information About Health Care Changes During 2010 – 2018

The Patient Protection and Affordable Care Act includes sweeping provisions that will transform America’s health care system between 2010 – 2018.

Over time, our government has estimated that the law will extend coverage to 32 million Americans who are currently uninsured.

This page lists important provisions taking effect in 2010 – 2018. You also can view an interactive timeline of the provisions.

Didn’t find the provision you’re looking for? Additional provisions are listed here.

Effective on March 23, 2010

Change In Enrollment Period for Medicare Advantage and Part D

What is it?

The change in the enrollment period for Medicare Advantage means that the rules for Medicare Advantage enrollment are as follows: People with Medicare can enroll in a Medicare Advantage plan (with or without Part D included) or a stand-alone Part D plan during the Annual Election Period only.

Effective 2011, the Annual Election Period will occur between October 15 and December 7 every year.

How does it affect you?

During the Annual Election Period, beneficiaries can select a Medicare Advantage plan with or without built-in Part D coverage. During a disenrollment period from January 1 through February 15, Medicare Advantage enrollees may drop their plans for Original Medicare and enroll in a stand-alone Part D plan; however, once most people with Medicare leave Medicare Advantage, they cannot re-enroll until the next Annual Election Period.

What is your next step? As early as October of every year, people with Medicare can begin to consider their coverage options. October is the month when all Medicare Advantage and Part D carriers are required to post the next year’s plans and benefits information online. By doing research and talking to local carriers, people with Medicare can make smart decisions about their coverage.

Where can you get more information? Visit www.medicare.gov.

Grandfathered Status of Health Plans

What is it? The grandfathered status of health plans means that individual and group health plans that were issued on or before March 23, 2010, are “grandfathered” and do not have to comply with some of the provisions of the new law.

How does it affect you? According to the Obama Administration, the grandfathering provision in the new law “preserves the ability of insured Americans to keep their current plan if they like it, while providing new benefits” as well.

If a plan chooses to keep the coverage it provided as of March 23, 2010, largely intact, it will be exempt from some of the provisions in the new law, but it will nevertheless be required to implement others. However, if the plan chooses to make changes to the existing plan, some of those changes may cause the plan to lose its grandfathered status. To learn more about the specific changes that may or may not jeopardize grandfathered status, see the links below.

If your health coverage is provided through an insured plan that is maintained pursuant to a collective bargaining agreement, special rules apply. However, your plan will be required to adopt all provisions under health care reform that specifically apply to grandfathered plans at the same time that non-collectively bargained grandfathered plans must adopt such provisions.

What can you expect? Employer-sponsored group health insurance plans that are grandfathered are
not required to:

  • Eliminate cost sharing for certain preventive services as recommended
  • by governmental agencies
  • Prohibit discrimination in favor of highly compensated individuals for
  • coverage or premiums
  • Provide choice of providers/direct access requirements allowing members
  • to designate any participating primary care physician or pediatrician they
  • choose
  • Eliminate the requirement that female members must obtain a prior
  • authorization to visit a participating obstetrician or gynecologist
  • Eliminate the requirement for prior authorization for coverage or additional
  • cost-sharing for emergency hospital services, regardless of whether the
  • provider is in the plan’s network
  • Put a new internal appeals/external reviews process in place for coverage
  • determinations and claims decisions
  • An employer-sponsored group health insurance plan that maintains grandfathered
  • status is still required to comply with a number of the health care reform provisions.

Effective for the first plan year beginning on or after September 23, 2010,
grandfathered plans must:

  • Prohibit pre-existing condition exclusions for individuals under age 19 (and
  • all individuals for plan years beginning on or after January 1, 2014)
  • Prohibit lifetime limits on coverage
  • Restrict annual limits for plan years beginning on or after January 1, 2014,
  • and prohibit all annual limits for plan years beginning on or after January 1,
  • 2014
  • Prohibit rescissions other than for fraud or intentional misrepresentation of
  • material fact
  • Extend dependent child coverage to age 26, unless the dependent has other
  • eligible employer sponsored health coverage available
  • Report medical loss ratio with rebates to enrollees where required ratios are
  • not met
  • Provide uniform explanation of coverage document

What is your next step? Employers must decide if they wish to continue to offer the plan or coverage they had in effect on March 23, 2010, with only limited changes, and they must meet various other requirements to maintain grandfathered status. The grandfather regulation provides illustrations to help guide employers’ decisions.

Employers that believe their health plans are grandfathered must provide notice of the plan’s grandfathered status in any plan materials provided to participants and beneficiaries and maintain records needed to verify that status.

A model notice provided in the grandfather regulation can be used to satisfy the notice requirements. Although the grandfather regulation does not state when this notice must be provided, issuers are presuming that it must be provided in plan materials in the first plan year beginning on or after September 23, 2010.

Where can you get more information? Review a new FAQ from the Department of Labor (DOL) focused entirely on grandfathering. Read previous DOL regulatory guidance issued Sept. 20, Oct. 8,
and Oct. 13 on this provision.

Effective in June/July, 2010

Early Retiree Reinsurance Program

What is it?

The temporary early retiree reinsurance program (ERRP) was established by the U.S. Department of Health and Human Services to reimburse participating employment-based programs for a portion of the cost of providing health coverage to early retirees (age 55 or older who are not active employees and not eligible for Medicare and eligible spouses, surviving spouses, and dependents.

The goal of this program was to encourage employers to continue to provide early retirees with insurance coverage prior to 2014, when the insurance exchanges will be available. This program became effective June 1, 2010, but funding for it is limited.

How does it affect you? Employer-based health plans will be reimbursed for 80 percent of retiree claims between $15,000 and $90,000. Payments will be made to employer- sponsored plans on behalf of early retirees and are to be used to lower health costs for enrollees (including premiums, copayments, deductibles, etc.)

Where can you get more information? HHS realeased a state-by-state list of the sponsors that have qualified thus far for the reinsurance program and announced a website at www.errp.gov. The website includes a secure access portal for participating plan sponsors to submit claims and cost data.

Internet Web Portal

What is it? The Internet Web Portal was created by the U.S Department of Health and Human Services, in conjunction with the states, to enable individuals and small groups to identify health care coverage options in their state.

This portal is located at www.healthcare.gov.

How does it affect you? The portal is intended to provide a central location where individuals and small groups can explore their health care coverage options.

Where can you get more information? Read the interim final rule on this provision, publised in the Federal Register on May 5, 2010.

Temporary High-Risk Health Insurance Pool

What is it? The temporary high-risk health insurance pool provides health coverage to individuals who have a pre-existing medical condition and who have been uninsured for at least six months.

In most cases, the high-risk pool has been established by the states, and the pool may vary from state to state. If a state declines to establish a high-risk pool, then qualified individuals from that state will be able to access coverage through a high-risk pool established at the federal level.

This temporary insurance program became available July 1, 2010. This program is scheduled to remain available until January 1, 2014, or until the funding is exhausted. The funding is limited for this program.

Information about your state’s program is available at www.healthcare.gov.

How does it affect you? Until the health insurance exchanges are operating in 2014, the high-risk pool will make insurance coverage accessible to individuals who are currently uninsured, have a medical condition, and are unable to afford or access coverage in the individual insurance market.

To be eligible for insurance through the pool:

  • You must be a citizen or national of the U.S. or lawfully present in the U.S.
  • You must have been without coverage for six months before seeking coverage
  • through the pool.
  • You must have a pre-existing medical condition.

What is your next step? If you are interested and qualify, you consider applying. Limited funding has been set aside in the amount of $5 billion. The high-risk pool will remain in effect until January 1, 2014, or until the funding is exhausted.

Information about your state’s program is available at www.healthcare.gov.

Where can you get more information? Visit www.healthcare.gov for general information. The site also lists new plan choices
for people enrolling in the Pre-Existing Condition Insurance Plan (PCIP) for 2011.

Effective on September 23, 2010

Choice of Provider/Direct Access Requirements

What is it? The choice of provider/direct access requirements provide that individual plans, group health insurance plans, and self-funded plans that require or provide for the designation by the members of a participating primary care provider must permit the member to designate any participating primary care physician or pediatrician (for a child) who is available to accept the member.

In addition, insurers and employer plans that provide coverage for obstetrical or gynecological care and require members to choose an in-network primary care provider cannot require authorization or referral by the plan, health insurance issuer, or any person (including a primary care provider) for in-network obstetrical or gynecological care.

These regulations apply to all group health plans and issuers offering group or individual health insurance coverage.

Grandfathered plans are exempt from this provision. This provision is effective for non-grandfathered plans in plan years beginning on or after September 23,
2010.

How does it affect you? Enrollees should find that their selection of physicians, as outlined in their plan information, meets these new requirements.

What can you expect? Changes related to the choice of provider/direct access requirements will be reflected in non-grandfathered health plans in plan years beginning on or after September 23, 2010.

Where can you get more information? Read the final rule and proposed rule on this provision, published in the Federal Register on June 28, 2010.

Coverage for Emergency Services

What is it? The coverage for emergency services provides that individual plans, group health insurance plans, and self-funded plans that cover hospital emergency services must cover those services without requiring prior authorization regardless of whether the provider participates in the health plan’s network. A subscriber’s cost sharing requirements for out-of-network emergency services must be the same as those applied to in-network services.

Grandfathered plans are exempt from this provision. This provision is effective for non-grandfathered plans in plan years beginning on or after September 23, 2010.

How does it affect you? You will be paying the same level of cost sharing for emergency services regardless of whether you stay in-network or go out of the network for the emergency services. Out-of-network providers may, however, also balance bill payments for the difference between the providers’ charges and the amount collected from the plan and from the member’s copayment or coinsurance amount.

What can you expect? Changes related to coverage for emergency services will be reflected in non- grandfathered health plans in plan years beginning on or after September 23, 2010.

Where can you get more information? See the final rule and proposed rule on this provision, published in the Federal Register on June 28, 2010.

Coverage for Preventive Services

What is it? The coverage for preventive services provides that individual, group insurance plans, and self-funded plans must cover certain preventive care services, as recommended by governmental agencies, without any subscriber cost sharing.

The goal of the preventive services provision is to promote wellness and prevention in the health care system and to reduce the high cost of treating and managing
disease. Private insurers pioneered large-scale wellness and prevention initiatives to help improve overall health among its members and to help reduce the high incidence of chronic disease.

Grandfathered plans are exempt from this provision. This provision is effective for non-grandfathered plans for plan years beginning on or after September 23, 2010. Additional guidelines related to coverage of women’s preventive services apply in plan years starting on or after August 1, 2012.

How does it affect you? You will not have to pay anything out of pocket for certain preventive care services when they are rendered by a network provider.

What you can expect? Changes related to coverage for preventive services will be reflected in non- grandfathered plans for plan years beginning on or after September 23, 2010. Additional guidelines related to coverage of women’s preventive services will be reflected in non-grandfathered plans beginning with the first plan year starting on or after August 1, 2012.

Please reference your individual policy or group health plan for more information on your preventive coverage.

A narrow group of nonprofit religious employers will be exempt from the requirement to provide coverage for contraceptive services for women. For the purpose of this exemption, a religious employer is one that: “(1) has the inculcation of religious values as its primary purpose; (2) primarily employs persons who shares its religious tenets; (3) primarily serves persons who share its religious tenets; and (4)is a non-profit organization described in section 6033 (a)(1) and 6033(a)(3)(A)(i) or (iii) of the Internal Revenue Code.” These sections of the Internal Revenue Code refer to churches, their integrated auxiliaries, and conventions and associations of churches.

Where can you get more information?
Read “Preventive Services Covered Under the Affordable Care Act” on healthcare.gov. Read the interim final rules on this provision publised in the Federal Register on July 19, 2010.

Elimination of Lifetime Dollars Limits

What is it? The elimination of lifetime dollar limits provides that all health plans (including individual plans, group health insurance plans, self-insured pland and grandfathered plans) are prohibited from imposing lifetime limits on the dollar value of “essential health benefits.”

The law provides a list of general categories to be covered under “essential benefits,” including:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance abuse disorder services
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Lab services
  • Preventive and wellness services
  • Chronic disease management
  • Pediatric services, including oral and vision care

The specific services covered under these categories have not been defined yet by the U.S. Department of Health and Human Services (HHS). Lifetime dollar limits on non-essential covered benefits may continue if allowed under state and/or federal laws.

This provision is effective for plan years beginning on or after September 23, 2010, for all health plans.

How does it affect you? Individuals will not exhaust coverage because of lifetime dollar limits if they have a costly medical episode.

Individuals who have reached a lifetime limit under a group health plan and are otherwise eligible under the plan may be able to reinstate their coverage.

Individuals who have reached a lifetime limit under an individual plan may be able to reinstate their coverage if such coverage is family coverage and other family members remain on the coverage. These individuals must be notified that their lifetime limit no longer applies no later than the first day of the first plan year beginning on or after September 23, 2010.

What can you expect? Changes related to the lifetime dollar limits provision will be reflected in all health plans for plan years beginning on or after September 23, 2010.

What is your next step? Notices to those who qualify for reinstatement must be provided no later than the first plan year beginning on or after September 23, 2010.

Where can you get more information? Read the final rule and proposed rule on this provision, publised in the Federal Register on June 28, 2010.

Extension of Dependent Coverage to Age 26

What is it? The extension of dependent coverage to age 26 provides that all health plans (individual plans, group health insurance plans, self-funded plans, and grandfatherd plans) that cover dependents must continue to make that coverage available until the dependent’s 26th birthday, regardless of whether the adult dependent is married or a student. The provision does not apply to the child of a dependent (that is, the grandchild of the policyholder).

Prior to 2014, grandfathered group health plans are not required to cover adult dependents who are eligible to enroll in other employer-sponsored group health plan.

This provision is effective for plans years beginning on or after September 23, 2010, for all health plans.

Young people ages 19-29 are the age group with the highest percentage of uninsured. This provision will help to reduce the overall uninsured population by extending coverage to many in this group.

How does it affect you? If you are enrolled in a plan that provides dependent coverage, effective for plan years beginning on or after September 23, 2010, you will be able to keep and/or add your dependents on your policy until they reach the age of 26.

Until plan years beginning on or after January 1, 2014, grandfathered group health plans are not required to cover adult dependents who are eligible for other employer-sponsored health coverage.

What is your next step? Beginning with your plan’s first plan year after September 23, 2010, coverage for dependents enrolled through insured group contracts will continue automatically until age 26.

Where can you get more information? See the interim final rule and proposed rule on this provision, published in the Federal Register on May 13, 2010.

Internal Appeals/External Reviews Process

What is it? This section of the law requires health insurers and group health plans to have in place internal appeals and external review processes for reviewing adverse benefit determinations.

Many states already require plans to have these processes in place today.

Grandfathered plans are exempt from this provision of the new law. This provision applies to non-grandfathered plans, both insured and self-insured.

How does it affect you? The Patient Protection and Protection Affordable Care Act (ACA) interim final rule on appeals creates greater opportunity for many consumers to receive more information and exercise the right to appeal certain decisions made by their health plan. Appeals can be used to challenge:

  • Decisions to deny coverage for care based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered service or benefit
  • Claims denials that are based on either plan exclusions or limitations
  • Decisions to cancel coverage, including those instances where the termination is based on information that the individual included in his/her application for coverage that was fraudulent or intentionally misleading

The rule also outlines additional new internal appeal/external review requirements beyond those that plans may have previously implemented to comply with the Department of Labor Claims Rule.

Insurers and group health plans will be required to provide certain information to enrollee, including the availability of mandated appeal and external review processes, when they issue notices involving claim denials, including urgent care claim decisions, and other adverse benefit determinations.

Under the provision, notices must also be provided in a culturally and linguistically appropriate manner. Federal regulators have defined this to mean that notices must be sent to individuals in certain parts of country to inform them that language assistance is available upon request.

In addition, notices must also disclose that a health insurance consumer assistance or ombudsman office may be available to assist the enrollee with the appeals and external review process. Furthermore, insurers and group health plans must also allow enrollees to review documents from their claim file and to present new or additional evidence and testimony as part of the internal appeals process. An enrollee’s health care coverage must be continued pending the results of the appeal.

Finally, non-grandfathered plans that currently do not provide enrollees access to an external review process must begin to do so. For insured plans, they need to meet the new standards. Self-funded plans are responsible for providing enrollees access to that process.

Where can you get more information? Read the amendment to th interim final rule published on June 23, 2011; the regulatory guidance issued by the Department of Labor on March 18, 2011; the guidance issued on Sept. 20, 2011; and the interim final rule published in the Federal Register on July 23, 2010.

Limitations on Rescissions

What is it? Limitations on rescissions provide that all health plans (individual plans, group health insurance plans, self-funded plans, and grandfathered plans) are prohibited from rescinding coverage once a subscriber is covered, except when an individual has engaged in fraud or made an intentional misrepresentation of a material fact under the terms of the health plan or policy.

Plans and insurers that intend to rescind coverage must give the subscriber or policyholder advance written notice at least 30 days prior to the termination. This gives the affected individual time in which to appeal the termination.

Rescission is defined as a cancellation or discontinuance of coverage that has retroactive effect. Terminations of coverage that are prospective are not rescissions. The regulations also provide that retroactive cancellation or discontinuance of coverage due to a failure to pay premiums in a timely manner is not considered a rescission.

This provision is effective for plan years beginning on or after September 23, 2010, for all health plans.

How does it affect you? Your coverage cannot be rescinded unless you committed fraud or made intentional misrepresentations. It is important to note that Highmark does not rescind coverage unless these circumstances apply.

What can you expect? Changes related to limitations on rescissions will be reflected in all health plans for plan years beginning on or after September 23, 2010.

Where can you get more information? See the final rule and proposed rule on this provision, published in the Federal Register on June 28, 2010.

Prohibitions on Discrimination in Favor of Highly Compensated Individuals

What is it? The prohibition on discrimination in favor of highly compensated individuals prohibits fully insured group health plans from discriminating in favor of participants who are highly compensated individuals with respect to eligibility to participate in a group health plan and benefits provided. This provision also has been called “the ban on discrimination based on salary.”

Grandfathered plans are exempt from this provision. This provision was initially effective for non-grandfathered, insured group health plans for plan years beginning on or after September 23, 2010. However, the regulating departments subsequently determined that compliance would not be required until after further guidance is issued.

How does it affect you? In general, this provision creates parity in eligibility to participate and benefits provided under an insured group health plan, subject to certain exceptions.

What is your next step? Employers with non-grandfathered, fully insured group health plans will need to monitor further guidance to ensurethat their benefit plans comply in a timely manner with this provision.

Prohibitions on Pre-Existing Condition Exclusions on Children Under Age 19

What is it? The prohibition on pre-existing condition exclusions applied to children under age 19 means that no health plan — including individual, group, self-funded and grandfathered plans — may deny coverage or benefits to children under age 19 who have a pre-existing condition.

This prohibition does not apply to grandfathered individual health insurance coverage; however it does apply to all other plans (including grandfathered group health insurance coverage as well as non-grandfathered group plans, self-funded plans and individual coverage). This provision is effective for plan years beginning on or after September 23, 2010.

The prohibition on pre-existing condition exclusions extends to adults in 2014.

How does it affect you? If you are the parent or guardian of a child, a health plan cannot deny your childcoverage or benefits based on a pre-existing condition.

What is your next step? If your child has been denied coverage due to a pre-existing health condition, you should contact your health plan to inquire about coverage once this provision becomes effective on September 23, 2010.

Changes related to the prohibition on pre-existing condition exclusions for children under age 19 will be reflected in health plans in plan years beginning on or after September 23, 2010.

Where can you get more information? Read the final rule and proposed rule on this provision, published in the Federal Register on June 28, 2010.

Restrictions on Annual Dollar Limits

What is it? The restrictions on annual dollar limits provide that all health plans (individual plans, group health insurance plans, self-funded plans, and grandfathered plans) may impose a restricted annual limit on the dollar value of essential benefits prior to plan years beginning on or after January 1, 2014.

Regulations define “restricted” annual limits in terms of a three-phase approach as:

  • $750K for plan years beginning on or after September 23, 2010, but before September 23, 2011
  • $1.25M for plan years beginning on or after September 23, 2011, but before September 23, 2012
  • $2M for plan years beginning on or after September 23, 2012, but before January 1, 2014.

The limitations apply on a per individual basis so that each covered person has his/her own limit. The regulations also clarify that FSAs, HSAs, MSAs, and HRAs are not subject to the restrictions on annual limits.

For plan years after January 1, 2014, plans will be prohibited from imposing any annual dollar limits on essential health benefits.

The law provides a list of general categories to be covered as essential health benefits including the following categories:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance abuse disorder services, including behavioral
  • health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Lab services
  • Preventive and wellness services
  • Chronic disease management
  • Pediatric services, including oral and vision care

The specific services covered under these categories have not yet been defined by the U.S. Department of Health and Human Services (HHS). HHS has said it will take into account “good faith efforts” by group health plans and insurers to comply with a reasonable interpretation of the term “essential health benefits” for purposes of applying “restricted” annual limits for plan years that begin on or before January 1, 2014. The allowance for “good faith efforts” by a plan is intended to “fill the gap” until “essential health benefits” are defined by HHS.

This provision is effective for plan years beginning on or after September 23, 2010, for all health plans.

How does it affect you? Your health insurance coverage may provide higher annual dollar limits on care and services. All annual dollar limits will be eliminated for essential health benefits for plan years beginning on or after January 1, 2014.

What can you expect? Changes related to the restrictions on annual dollar limits will be reflected in all health plans for plan years beginning on or after September 23, 2010.

Where can you get more information? Employers will find information tailored to them in Close-Up: Essential Benefits (Dec. 13, 2010). Regulations Released on Specific Health Care Reform Provision (July 27, 2010).

Effective on January 1, 2011

Community Living Assistance Services and Supports (CLASS)

The Patient Protection and Affordable Care Act originally included
the Community Living Assistance Services and Supports (“CLASS”)
Program as a national voluntary insurance program that individuals
could use to purchase community living assistance services and
supports.

In October, 2011, HHS announced that the CLASS Program would
not be implemented.

Grants to Establish Wellness Program

What is it?Under this provision, small businesses may be eligible for federal grants to provide wellness programs for their employees.

How does it affect you? The Patient Protection and Affordable Act of 2010 authorizes appropriations of $200 million over five years, beginning in 2011, to provide grants to help small businesses implement comprehensive wellness programs.

To be eligible, businesses must have fewer than 100 employees who work 25 hours or more a week and have had no wellness program in place as of March 23, 2010 (the date ACA was enacted).

To qualify for the grant, the wellness program must be comprehensive and available to all employees as well as meet specific guidelines.

What is your next step? The grants will be available through the U.S. Department of HEalth and Human Services (HHS). The Secretary of HHS is to issue guidance regarding the requirements of the program, and Congress must appropriate funds to support the program. As of this time, guidance has not been issued and funds have not been appropriated.

Medical Loss Ratio Ratio Reporting and Rebates

What is it? The Patient Protection and Affordable Care Act (PPACA) requires that health= insurers submit data to the U.S. Department of Health and Human Services (HHS) detailing the proportion of premium revenues spent on clinical services and quality improvement, also known as the Medical Loss Ratio (MLR). It also requires them to issue rebates to subscribers if this percentage does not meet minimum standards. MLR requires insurance companies to spend at least 80% (individual and small group markets) or 85% (large group market) of premium dollars on medical care. If they fail to meet these standards, the insurance companies will be required to provide a rebate to their customers starting in 2012. This requirement applies to most insured group health plans.

The data submitted to HHS will be sent on an annual basis and posted on the HHS, Internet web portal at www.healthcare.gov.

How does it affect you? PPACA requires that insurers rebate subscribers if they fail to satisfy the applicable MLR. Under HHS regulations, subscribers in the individual market would receive the rebate directly from their insurer, whereas most group health plan subscribers would receive the rebate directly from the group health plan policyholder (the employer) in the form of a payment or a reduction in future premium costs. Any rebate must be provided to subscribers not later than August 1st following the year in which the rebate applies (for example, August, 1, 2012 for rebates applicable to the 2011 MLR reporting year).

Where can you get more information? The Center for Consumer Information and Insurer Oversight (CCIIO) is partof HHS and produces helpful information regarding the MLR and other PPACA requirements.

Rate Review

What is it? The Affordable Care Act requires the Secretary of the Department of Health and Human Services (HHS), in conjunction with the states, to create a process to ensure the annual review of health insurance base rate increases in both the individual and small group markets.

Beginning September 1, 2011, the regulation requires that all proposed base rate increases of 10 percent or more for non-grandfathered health plans sold to individuals and small groups must be specifically reviewed.

States that were certified by the HHS Secretary as having an effective rate review program will conduct rate reviews and report their findings to the Centers for Medicare and Medicaid (CMS). On behalf of HHS, CMS will accept the state’s determination of whether a particular base rate increase is unreasonable.

If a state lacks the resources or authority to perform the required actuarial reviews, CMS will perform the reviews and determine whether the base rate increase is considered unreasonable. CMS will continue to perform these reviews until such time as the state has an effective rate review program in place.

If a base rate increase is determined by the regulators, as a result of the review, to be unreasonable, the health plan may disagree. The ACA would not prohibit the plan from implementing the new rate, provided the plan submits its reasons or justification of why the rate increase is necessary and appropriate to both the Secretary and the state insurance department, and makes that information
available on http://companyprofiles.healthcare.gov

In addition, in 2014, the ACA authorizes state exchanges to consider excluding health plans that have demonstrated a pattern of unreasonable rate increases from participating in the state’s health insurance exchange.

How does it affect you? Consumers can now visit a federal website, http://companyprofiles.healthcare.gov, to see if a health insurer has raised its rates as well as what the justification is for the increase.

If a company has not raised its rates above the 10 percent threshold, it will not be listed on the website.

Also, in 2014, the ACA authorizes state exchanges to consider excluding health plans that have demonstrated a pattern of unreasonable rate increases from participating in the state’s health insurance exchange.

Where can you get more information? Visit http://companyprofiles.healthcare.gov, the link related to rate reviews on www.healthcare.gov

Small Business Health Care Tax Credit

What is it? The small business health care tax credit provides for a sliding-scale tax credit that can be claimed beginning with the 2010 tax return for qualified small businesses and small tax-exempt organizations to help them offset the cost of providing health care coverage to employees. The new credit is available to fully insured businesses and organizations with low to moderate income
workers.

For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers. According to the IRS at this link, “an enhanced version of the credit will be effective beginning Jan. 1, 2014. Additional information about the enhnaced version will be added to IRS.gov as it becomes available. In general, on Jan. 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.”

The credit is available to small businesses and small tax-exempt employers with fewer than 25 full-time equivalent employees and average individual annual wages of less than $50,000 that purchase health insurance for their employees. In addition, employers must cover at least 50 percent of the cost of single (not family) health care coverage for each employee. A full-time equivalent employee is one full-time employee or two half-time workers who combined count as one full-timer, e.g. 20 half-time workers count as 10 full-time workers. As far as average wages, use this example for calculation: If you pay total wages of $200,000 and have 10 full-time equivalents, to calculate average wages you divide $200,000 by 10 (the number of full-time equivalents) and the result is your average wage, which would be $20,000.

The amount of credit you receive works on a sliding scale. The smaller the business, the bigger the credit.

What is your next step? If you have a small business that meets the requirements, you should take advantage of the tax credit when you file your federal income tax return. Even if you are a small business employer who did not owe tax during the year you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claima business expense deduction for the premiums in excess of the credit. That’s botha credit and a deduction for employee premium payments. In addition the credit is
refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.

What is Franchise Benefit Solutions doing to help you? Use our Small Business Tax Calculator to determine your business’ eligibility for a health care tax credit and the amount of your potential savings.

Where can you get more information? Visit the Internal Revenue Service’s website for FAQs as well as detailed guidance, examples, forms and step-by-step guidance on the Small Business Health Care Tax Credit for Small Employers.

Tax Changes to HSAs, FSAs, MSAs, and HRAs

What is it? Effective for tax years beginning on or after January 1, 2011, reimbursements from Health Savings Accounts (“HSAs”), Medical Savings Accounts (“MSAs”), Health Flexible Spending Accounts (“FSAs”), and Health Reimbursement Accounts (“HRAs”) to pay to pay for a medicine or drug, including over-the- counter medications, will continue to retain their tax-favorable treatment only when dispensed pursuant to a prescription or when the medication is insulin.

Beginning January 1, 2011, the additional tax imposed on distributions from these accounts used to pay for non-qualified medical expenses increased from 10% to 20%.

How does it affect you? Effective January 1, 2011, eligible reimbursement from FSAs and HRAs will be permitted — and distribution for qualified medical expenses from an HSA and Archer MSA will be tax-free — for over-the-counter medicines or drugs only if the medicine or drug is prescribed or is insulin.

The new restrictions on over-the-counter medicines and drugs do not apply to items for medical care that are not medicines or drugs. For example, equipment such as crutches, supplies such as bandages, and diagnostic devices such as blood sugar test kits will still be considered eligible for reimbursement or a qualified medical expense regardless of whether such items are purchased using a prescription.

The amount of a distribution from an HSA or Archer MSA used for expenses that are not qualifying medical expenses will be includable in gross income and subject to an additional tax of 20%. Prior to January 1, 2011, distributions not used for qualified medical expenses were generally taxable as ordinary income and subject to a 10% penalty. This tax penalty does not apply to distributions due to death or disability or after the HSA account holder reaches age 65.

Where can you get more information? Read “Affordable Care Act: Questions and Answers on Over-the-Counter Medicines and Drugs” from IRS.gov.

Effective in 2012

Provisions to Disclose Value of Coverage on W-2 Forms

What is it? The provision to disclose the value of health insurance coverage on the Internal Revenue Service (IRS) Form W-2 provides that employers must calculate and report on each employee’s W-2 the aggregate cost (employee plus employer portion) of employer-sponsored coverage for the year.

Initially this requirement was to be effective for the 2011 tax year. However, the IRS deferred the requirement by a year, meaning the information must be included on W-2s in January 2013.

Small employers are the exception. IRS Notice 2011-28 provided further relief for smaller employers filing fewer than 250 W-2 forms by making the reporting requirement optional for them at least for 2012 and until further guidance is issued.

How does it affect you? Employers will need to include the aggregate cost of employer-sponsored health coverage on the Form W-2. This requirement applies to both insured and self-insured coverage.

IRS Notice 2011-28 includes information on how to report, what coverage to include and how to determine the cost of coverage.

Effective with W-2s issued in January 2013 for the 2012 tax year, employees will be able to see the cost (their portion plus employer’s portion) of employer- sponsored health coverage for the tax year on the Form W-2. This cost will not be considered taxable income by the IRS.

What is your next step? Employers can opt to include the aggregate cost of employer-sponsored health coverage on W-2s beginning in January 2012 for the 2011 tax year, although it is not mandatory. This requirement is effective for the 2012 tax year and applies to W-2s issued in January 2013 other than for certain small employers.

Small employers are the exception. IRS Notice 2011-28 provided further relief for smaller employers filing fewer than 250 W-2 forms by making the reporting requirement optional for them at least for 2012 and continuing this optional treatment for smaller employers until further guidance is issued.

Where can you get more information? IRS 2011 Form W-2 is available for viewing on IRS.gov. This is the Form W-2 that most employees will receive in early 2012 and includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan.

Medicare Part D Drug Savings

What is it? Medicare and Medicare Advantage enrollees with Part D prescription drug coverage who are not already receiving Medicare Extra Help and who reach the coverage gap informally known as the “donut hole” will receive a 50 percent discount on all brand-name and biologic drugs in the coverage gap.

And for generic prescription drugs, beginning in 2012, a fourteen percent discount will be applied in the coverage gap.

Finally, through the year 2020, additional discounts will be applied that will phase down the coinsurance in the coverage gap, eventually for all drugs, until it reaches 25 percent.

The average individual savings in the coverage gap will grow annually to $3,000 by 2020.

How does it affect you? The donut hole occurs when Medicare Part D prescription drug beneficiaries surpass the initial prescription drug coverage limit ($2,930) and they are responsible for the entire cost of the prescription drugs (versus making copayments) until their out-of- pocket costs reach $4,700.

The new discounts on brand, biologic, and generic drugs over the next decade for those not already receiving Medicare Extra Help could result in significant out-of- pocket savings for you.

What can you expect? When you buy your prescription drugs, whether at retail or through mail order, and present your Medicare or Medicare Advantage membership information, effective in 2011, you will realize new savings in the amount you are charged.

Where can you get more information? Visit www.medicare.gov

Patient-Centered Outcomes Research Fund (PCORTF)Fund

What is it? Effective each policy or plan year ending after September 30, 2012, and through September 30, 2019, insurance plans and plan sponsors or administrators of self-insured plans must pay a fee — based on the number of policyholders or enrollees – to fund activities of the Patient-Centered Outcomes Research Institute (PCORI), a new independent, non-profit organization established under the ACA to commission comparative clinical effectiveness research.

Initially, PCORI will be funded through federal appropriations. Beginning in fiscal years 2013-2019, PCORI will be funded primarily through fees imposed on plans. For policy or plan years ending during fiscal year 2013, the fee will be assessed at the rate of $1 per individual covered under the policy or plan. Health insurers and sponsors of self-insured group health plans with calendar-year policy or plans years will be required to pay the fee for 2012 by July 31, 2013. For the second year, the fee increases to $2 for each policyholder or enrollee and then beginning in the third year, it’s indexed to national health care expenditures each year until it is phased out in 2019.

How does it affect you? The Internal Revenue Service and Treasury departments accepted comments until September 6, 2011, on issues that will be important in implementing the new fees. Guidance in the form of proposed regulations were published on April 17, 2012 in the Federal Register and are intended further assist insurers and plan sponsors in identifying what plans are subject to the fee and the methods and forms that may be used in calculating and paying the fee.

At this point, the federal agencies have indicated that it is the insurer of health insurance policies and, in the case of self-insured plans, the plan sponsor that will be expected to make the required reports and fee payments.

What is your next step? Self-insured employers should review the regulations and make arrangements to determine their liability and processes to ensure the fee is paid.

Where can you get more information? The proposed rules were published and can be found in the Federal Register at 77 Fed. Reg. 22691-22706.

Quality of Care Reporting Requirement

What is it? By March 23, 2012, the U.S. Department of Health and Human Services (HHS) Secretary will develop reporting requirements that plans and insurers will use to report whether their plan benefits, coverage, and health care provider reimburesement structures satisfy new requirements to improve health outcomes, prevent hospital readmissions, improve patient safety, reduce medical errors, and implement wellness and health promotion activities.

Once the standards are defined, plans and issuers begin submitting reports annually to the HHS Secretary and making the same information available to their enrollees during future open enrollment periods.

Grandfathered plans are exempt from this provision.

How does it affect you? This requirement is intended to promote disclosure of information on quality of care, including wellness and health promotion activities.

High-quality health care that includes actively promoted wellness and prevention components is key to lowering the incidence of disease among Americans.

What can you expect? You can expect to receive information on your plan’s quality and wellness programs during your open enrollment period. HHS is to develop reporting requirements no later than March 2012.

Summary of Benefits and Coverage Explanation

What is it? Health insurance insurers and plan sponsors or designated administrators of self- insured group health plans must provide, prior to any enrollment restriction, a new document called the summary of benefits and coverage (“SBC”) as required under the Affordable Care Act. The SBC must comply with format and content standards developed by the U.S. Department of Health and Human Services (HHS) Secretary.

Per guidance issued February 9, 2012, the SBC requirements are applicable to health insurance issuers and group health plans or designated administrators, as follows:

  • For disclosures to participants and beneficiaries who enroll or re-enroll in group health coverage through an open enrollment period (including re- enrollees and late enrollees) – beginning on the first day of the first open enrollment period that begins on or after September 23, 2012.
  • For disclosures to participants and beneficiaries who enroll in group health plan coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and individuals enrolling under a special enrollment right) – beginning on the first day of the first plan year that begins on or after September 23, 2012.
  • For disclosures to plans, and to individuals and dependents in the individual market – the requirements apply to health insurance issuers beginning on September 23, 2010.

A health insurance issuer and a group health plan (or its sponsor) must provide an SBC to participants and beneficiaries at the following times:

  • In General: no later than the first date of which the participant is eligible to enroll in coverage for the participant or any beneficiaries; and
  • Upon Application: as part of any written application materials distributed by the plan or issuer for enrollment (if no written application materials are distributed the SBC must be distributed no later than the first day on which the participant is eligible to enroll in coverage for the participant or any beneficiaries); and
  • First Day of Coverage: no later than the first day of coverage (if there are any changes to the information required to be in the SBC); and
  • Upon Renewal: if participant or beneficiary is required to renew in order to maintain coverage
    • if written application is required – then no later than the date on which written application materials are distributed
    • if renewal is automatic – then no later than 30 days prior to first day of the new plan year
  • Upon Request: no later than 7 business days following receipt of request.
  • Special Enrollees: no later than the date by which the plan must provide a summary plan description under the timeframe required under ERISA (90
  • days from enrollment).

A new SBC must be provided automatically upon renewal only for the benefit package in which the participant or beneficiary is enrolled. SBCs are not required to be provided automatically upon renewal for benefit packages for which a participant or beneficiary is eligible but not enrolled. However, if a participant or beneficiary requests an SBC for any benefit package for which he/she is eligible, the SBC (or SBCs) must be provided.

How does it affect you? The SBC is intended to help consumers better understand their health coverage options and evaluate their health plan and health insurance choices. Likewise, the SBC is also intended to assist employers in finding the best coverage for their business and their employees.

The SBC requirements ensure consumers have access to the following forms designed by HHS to provide standardized information about key features of a policy or plan:

In general, the SBC must include the following:

  1. uniform definitions of standard insurance and medical terms;
  2. a description of the coverage for specific categories of benefits;
  3. exceptions, reductions, and limits of coverage;
  4. cost-sharing provisions;
  5. renewability and continuation of coverage provisions;
  6. coverage examples;
  7. with respect to coverage beginning on or after January 1, 2015, a statement about whether the plan provides minimum essential coverage and whether the plan’s share of the total allowed costs of benefits meets applicable requirements;
  8. a statement that the SBC is only a summary and that the plan document, policy, certificate, or contract of insurance should be consulted to determine the governing contractual provisions of the coverage;
  9. contact information for questions and to obtain a copy of the plan document, insurance policy, certificate, or contract of insurance;
  10. for plans that maintain provider networks, an Internet address (or similar contract information) for obtaining a list of network providers;
  11. for plans that use a prescription drug formulary, an Internet address (or similar contact information ) for obtaining information on prescription drug coverage;
  12. and an Internet address for obtaining the uniform glossary and a disclosure that paper copies are available with a contact phone number.

Coverage Examples Coverage examples are intended to be a standardized comparison tool for consumers, illustrating benefits provided under the plan for common benefits scenarios (including pregnancy and serious or chronic medical conditions).

Notice of Modification If a group health plan, or health insurance issuer makes any material modification/ change in any of the terms of the plan or coverage that affects the content of the SBC, is not reflected in the most recently provided SBC, and the change will be effective other than at renewal or reissuance of coverage, notice of the change must be provided to enrollees no later than 60 days before the date on which the change will become effective.

Where can you get more information? To view the template developed by HHS for the Summary of Benefits and Coverage and the glossary, visit: http://cciio.cms.gov/resources/other/index.html#sbcug.

To view the Final Rule, visit: http://www.ofr.gov/inspection.aspx.

To read FAQs issued on March 19, 2012 by the Department of Labor related to the Summary of Benefits and Coverage Rule, visit this link.

Effective in 2013

Employer Notice to Employees of Exchange Coverage Option

Employers must provide written notice to inform each new employee at the time of hiring (or with respect to current employees, not later than March 1, 2013) of the existence of the health insurance exchange, including a description of services provided and how to contact the exchange to request assistance. The notice should also inform employees of their potential eligibility for premium assistance and cost- sharing reduction.

Grants and Loans to Establish CO-OPs

In 2013, the Secretary of the U.S. Department of Health and Human Services (HHS) will begin awarding loans and grants made available under the Consumer Operated and Oriented Plan (CO-OP) Program. The CO-OP program is intended to create new, qualified non-profit health insurance issuers that offer health plans in the individual and small group markets.

Increase in Threshold for Deduction of Medical Services

What is it? Effective January 1, 2013, the Affordable Care Act increases the threshold for the itemized deduction for unreimbursed medical expenses from 7.5 percent of adjusted gross income to 10 percent of adjusted gross income for regular tax purposes.

The increase is waived for individuals age 65 and older for tax years 2013 through 2016 and then becomes effective for this age group in 2017.

How does it affect you? Prior to 2013, unreimbursed medical expenses could be itemized as deductions on tax returns if they exceeded 7.5 percent of adjusted gross income.

The Affordable Care Act increases that threshold to 10 percent of adjusted gross income effective on January 1, 2013.

However, this increase is not applicable to individuals age 65 and older for tax years 2013 through 2016, becoming effective in 2017.

What is the next step? Keep this change in mind when filing tax returns for 2013 if you are under age 65. If you are age 65 or older, keep this change in mind when filing for 2017 and thereafter.

See your tax advisor for advice or information specific to your circumstances.

Where can you get more information? The Patient Protection and Affordable Care Act, section 9013, available at www.healthcare.gov.

Medical Device Excise Tax

What is it? Under health care reform, sales by manufacturers, producers, and importers of medical devices on or after January 1, 2013, will be subject to an additional excise tax. The amount of the new tax is 2.3% of the sales price of the item.

How does it affect you? The sale price of many medical devices will include the new 2.3% excise tax beginning in 2013. Devices that are subject to the tax are defined as any that are approved by the Food and Drug Administration (FDA) and are intended for human use. Examples may include an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent or other similar or related article.

Numerous items determined by the Secretary of the Treasury are not subject to the new medical device excise tax including eyeglasses, contact lenses and hearing aids and other medical devices generally purchased at the retail level for individual use.

Where can you get more information? See IRS Notice 2010-89.

Medicare Tax Increases on High Earners

What is it? The Affordable Care Act includes two tax increases on high-earning individuals to support the Medicare Hospital Insurance (HI) trust fund, which supports Medicare for those who are eligible. The new taxes are effective beginning with the tax year commencing January 1, 2013.

The Medicare payroll tax increase for high earners will increase 0.9 percentage points (from 1.45 percent to 2.35 percent) on wages and self- employment income in excess of $200,000 for single filers and $250,000 for joint filers.

The Medicare tax on unearned income means that individuals, trusts and estates will be subject to a 3.8 percent Medicare tax on the lesser of net investment income or modified adjusted gross income over $200,000 for single filers or $250,000 for joint filers. In general, unearned income includes interest, dividends, capital gains, rents and passive activity income, minus any allowable deductions.

The income threshold subject to this tax increase is not indexed for inflation and may result in more individuals being required to pay this additional tax over time.

How does it affect you? The tax increases are set to take effect for tax years beginning January 1, 2013. The payroll tax is usually abbreviated on payroll information as MWT or Med. Individuals will need to separately report and pay the Medicare tax on unearned income on their tax returns; it is not a payroll deduction.

Where can you get more information?
http://www.whitehouse.gov/health-care-meeting/proposal/titleix/targeted-healthcare-tax

New Health FSA Pre-Tax Contribution Limit

What is it? For calendar years beginning on and after January 1, 2013, annual pre-tax salary contributions to Health flexible spending accounts (FSAs) offered under a cafeteria plan (Internal Revenue Code Section 125 plan) are limited to $2,500, subject to annual cost-of-living increases. This new limit does not affect the Dependent Care Flexible Spending Account.

How does it affect you? Members Eligible employee members should limit their annual pre-tax Health FSA contribution to $2,500.

Employers Employers should consider timely amending their plan to incorporate the new annual pre-tax contribution limit in order to prevent employees from inadvertently exceeding the $2,500 maximum annual limit during the 2013 calendar year. Timely amending the plan (or considering other compliance strategies) may be particularly important for an employer who sponsors a Health FSA that operates on a fiscal (i.e., non-calendar) plan year as the election made for the fiscal year beginning in 2012 may impact the amount of the pre-tax contribution the individual can elect for the fiscal year beginning in 2013.

What is your next step? Members Members should consider their upcoming healthcare expenses and plan carefully in light of the new $2,500 annual pre-tax contribution limit.

Employers The employer should ensure that an individual’s maximum annual pre-tax contribution to a Health FSA does not exceed $2,500 during calendar years beginning on and after January 1, 2013.

Repeal of Retiree Drug Subsidy Program

What is it? Under health care reform, the Retiree Drug Subsidy Deduction will be eliminated for tax years beginning January 1, 2013.

The Retiree Drug Subsidy program is facilitated by the Centers for Medicare & Medicaid Services. It reimburses (subsidizes) plan sponsors (including private employers, municipalities, unions and other organizations who provide health benefits) for a portion of their eligible expenses in providing prescription drug coverage benefits to their retirees.

Certain plan sponsors are eligible under the program to receive a subsidy equal to 28 percent of the costs for prescription drugs for retirees.

In addition, plan sponsors are currently entitled to an income tax deduction on the subsidy when accounting for their retiree prescription drug expenses.

Under health care reform, plan sponsors receiving the subsidy will no longer be able to take the subsidy as a deduction for those retiree drug expenses.

This subsidy is one of several options available under Medicare that enables employers and unions to continue assisting their Medicare eligible retirees in obtaining more generous drug coverage.

How does it affect you? Plan sponsors, including private employers, unions and other organizations who provide prescription drug coverage benefits to retirees and take advantage of this deduction will likely see costs increase, and may look at alternative options for providing coverage to retirees.

Some of these costs may be passed along to retirees themselves.

In addition, financial accounting rules require plan sponsors to include the present value of the future tax as a current liability charged against earnings.

What is your next step? Plan sponsors should seek legal, human resource and accounting advice pertaining to this provision.

Retirees should be aware that Medicare Part D benefits and Medicare Advantage plans provide viable alternatives.

Effective in 2014

Annual Fees on Health Insurance Providers

What is it? Beginning in 2014, health care reform requires entities that provide health insurance to pay an annual non-deductible fee to the Internal Revenue Service according to market share based on premiums collected.

The fee will not apply to those entities whose net premiums are $25 million or less and will not apply to an employer to the extent that such employer self-insures its employees’ health risks.

For those covered entities whose net premiums are between $25 million and $50 million, 50 percent of their premiums will be taken into account in determining their fee.

For covered entities with net premiums of $50 million or more, 100 percent of their premiums will be taken into account in determining their portion of the fee.

The annual burden to be allocated among payers, based on their prior year’s ratio, is as follows:

  • 2014: $8 billion
  • 2015-2016: $11.3 billion
  • 2017: $13.9 billion
  • 2018: $14.3 billion
  • For the years following 2018, the annual assessment is the applicable amount for the preceding calendar year, increased by the rate of premium growth.

The fee will be calculated based on the net written premiums, including reinsurance premiums written, reduced by reinsurance ceded, and reduced by ceding commissions.

Health insurance for this purpose does not include coverage provided under the following types of policies: accident only, disability income, specified disease or illness, hospital indemnity or other fixed indemnity insurance, long-term care, or Medicare or supplemental insurance.

How does it affect you? The fee should not affect members or employers directly. It should be paid by health insurers. However, this additional tax is viewed by many in the health insurance industry as a financial burden that is unlikely to assist the industry’s overall efforts to control the rising cost of health insurance premiums.

What is your next step? Members and employers do not need to take any steps on this issue. The fee is assessed on and paid by health insurers.

Where can you get more information? Read the Kaiser Family Foundation’s Summary of the New Health Reform Law,
page 3, “Tax Changes Related to Health Insurance or Financing Health Reform.”

Auto-Enrollment of Employees

What is it? One of the provisions under health care reform designed to increase the number of people who are insured is the auto-enrollment of employees. It requires employers with more than 200 full-time employees who offer health coverage to automatically enroll all new full-time employees into one of its employer-sponsored group health plans and to automatically re-enroll current employees who have elected coverage. While regulations defining the term “full-time-employee” have yet to be issued, it is anticipated that a full-time employee will be defined as an employee who is employed on average at least 30 hours per week.

This provision applies to insured and self-insured plans, both grandfathered and non-grandfathered.

How does it affect you? Employers who automatically enroll a new employee must provide the employee with a comprehensive, easy-to understand written notice of their rights and obligations relating to the automatic enrollment requirement. The notice must explain an employee’s right to opt out of automatic enrollment, the length of time they have to opt out, and which level of benefits and employee premium level the employee will be automatically enrolled in if they choose not to opt out. It is anticipated that the U.S. Department of Labor will issue regulations more fully describing both the notice requirements as well as requirements for the opportunity to opt-out of coverage that must be afforded to employees.

What is your next step? The section of the Affordable Care Act (“ACA”) in which this provision appears does not provide a specific effective date; therefore, implementation dates for this requirement are contingent upon the issuance of further regulatory guidance.
The U.S. Department of Labor has indicated its intention to issue final regulations by 2014, and has stated that employers are not required to comply until such regulations are issued.

Basic Health Programs

What is it? Under health care reform, the Secretary of Health and Human Services shall establish a Basic Health Program under which states may contract with one or more standard health plans that will provide at least the essential benefits package to certain eligible individuals. Individuals that enroll in a Basic Health Program receive their coverage through that program in lieu of coverage under the state’s health insurance exchanges beginning in 2014.

How does it affect you? States electing this option will make coverage under the Basic Health Program available only to state residents who meet the following criteria:

  • Not eligible for Medicaid.
  • Under 65 years old at the beginning of the year.
  • Have a household income between 133% and 200% of the federal poverty level for U.S. citizens, or below 133% for lawfully present non-citizens
  • Not be eligible for affordable employer-sponsored coverage.
  • Be otherwise eligible for enrollment in a qualified health plan but for the existence of the basic health plan.

What is your next step? State health insurance departments are likely to begin making their residents aware of whether their state will operate a basic health program sometime in 2013. At that time, you could also check with your state’s individual health insurance department to see if such a program is offered.

Consumer Operated and Oriented Plan Program (CO-OP)

What is it? Beginning in 2014, a new federal CO-OP program is to be established by the U.S. Department of Health and Human Services (HHS). The program will facilitate the creation of qualified nonprofit health insurance CO-OPs. CO-OP coverage will be made available through the exchanges and the CO-OPs will be exempt from federal taxes.

How does it affect you? The goal of the CO-OP program is to establish at least one new qualified health plan in every state to help expand the number of individual and small group coverage options available in the exchanges.

Where can you get more information? The Department of Health and Human Services issued a final rule on the CO-OP program in Dec. 2011.

Employer Responsibility Requirement

What is it? Under health care reform, large employers that do not offer coverage and that have at least one full-time employee (FTE) receiving a premium tax credit through the exchange must pay a penalty equal to the number of FTEs employed for that month multiplied by 1/12 of $2,000. The first 30 FTEs are not included as part of the penalty calculation.

Large employers that continue to offer coverage but that have at least one FTE receiving a premium tax credit through the exchange must still pay a penalty equal to the number of FTEs receiving the credit for that month, multiplied by 1/12 of $3,000. The maximum penalty the employer will pay may not exceed the penalty amount the employer would have paid if it did not offer coverage.

These provisions apply to employers that have at least 50 FTEs and count part-time employees’ hours for the purposes of determining if an employer has 50 FTEs.

How does it affect you? The Affordable Care Act does not include a mandate requiring employers to provide acceptable health care coverage to their employees. However, it creates new monetary penalties that will be assessed against employers having more than 50 workers when one of more of their full-time employees (FTEs) takes advantage of new premium tax credits or cost-sharing subsidies — either because the employer does not offer coverage or the employer offers coverage that does not meet certain requirements.

Beginning in 2014, employees who are not offered employer-sponsored coverage and who are not eligible for Medicaid or other government-sponsored programs may qualify for tax credits to help pay insurance premium in connection with coverage purchased through an exchange. These individuals will generally have household incomes between 100 percent and 400 percent of the Federal Poverty Level.

Federal Poverty Level guidelines are issued annually by the U.S Department of Health and Human Services, whare are used in part to determine financial eligibility for certain federal programs based on income and family size. In 2011, for example, the federal poverty guidelines for all states (except for Alaska and Hawaii, where the guideline are somewhat higher) and the District of Columbia are $10,890 for an individual and $22,350 for a family of four.

Employees who are offered employer-sponsored coverage may also qualify for exchange coverage premium tax credits. To be considered eligible for tax credits, employees must meet the same income requirements and be ineligible for Medicaid and other public programs as stated above. In addition, employees must not be enrolled in their employer’s plan, and their employer’s coverage must either be unaffordable or not provide minimum coverage value. This means that the employer’s plan either requires that the employee contribute more than 9.5 percent of their household income toward the cost of self-only coverage, or the benefits of the plan are expected to pay, on average, less than 60 percent of an enrollee’s covered health care expenses.

Where can you get more information? Additional information on this topic can be found at www.healthcare.gov.

Essential Health Benefits

What is it? Essential Health Benefits are a package of comprehensive diagnostic, preventive and therapeutic services and products that must be covered by certain health insurance plans, including those participating in the health insurance exchanges.

Individual and small group non-grandfathered insured plans and policies must offer Essential Health Benefits starting in 2014. In addition, plans and policies must cover the Essential Health Benefits package to be certified as Qualified Health Plans offered on the state-based health insurance exchanges.

Essential Health Benefits are required by the law to include at least the following 10 general categories of health care services and items:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance abuse disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care

The Department of Health and Human Services (HHS) has released a pre-regulation bulletin and other information indicating that it will propose an approach whereby each state will have the opportunity in 2012 to select a benchmark plan that will be used to define Essential Health Benefits in their individual and small group market for years 2014 and 2015. HHS would then determine in future guidance
how Essential Health Benefits will be defined in 2016 and beyond.

How does it affect you? If you are an employer, be aware that small group, non-grandfathered insured plans must cover Essential Health Benefits beginning in 2014.

If you are an individual with a non-grandfathered individual health insurance policy, your policy will be required to cover Essential Health Benefits beginning in 2014.

Some plans including self-insured plans, grandfathered group and individual plans and non-grandfathered large group plans are not required to offer Essential Health Benefits. However, another part of the law requires that these plans not apply annual or lifetime dollar limits to the Essential Health Benefits that they choose to cover.

To determine which benefits are Essential Health Benefits for purposes of complying, this same pre-regulation Bulletin states that HHS will consider a self-insured group health plan, a large group market health plan, or a grandfathered group health plan to have used a permissible definition of Essential Health Benefits (in determining which benefits should not have these dollar limits applied) if the definition is one that is authorized by the Secretary of HHS (including any available benchmark option, supplemented as needed to ensure coverage of all ten statutory categories).
Furthermore, the Departments intend to use their enforcement discretion and work with those plans that make a good faith effort to apply an authorized definition of EHB to ensure there are no annual or lifetime dollar limits on Essential Health Benefits.

Where can you get more information? Visit the www.healthcare.gov website at this link.

Financial Assistance to Purchase Coverage

What is it? Beginning in 2014, qualified individuals will be eligible to receive premium tax credits to help them purchase health insurance coverage on an exchange and comply with the individual mandate.
The extent of the credit will vary based on the individual’s income, but it is not available to any individual whose household income exceeds 400% of the Federal Poverty Level. Financial assistance may also include reduced also include reduced cost-sharing amounts and is available only through the health insurance exchanges.

How does it affect you? To make health coverage more affordable for many individuals and families, the Affordable Care Act includes both premium tax credits and cost-sharing subsidies for people with low and moderate household incomes who elect to purchase coverage through a health insurance exchange. This assistance is available to people who are unemployed, self-employed, or who work for businesses that don’t offer adequate or affordable coverage, provided they have incomes between 133 percent and 400 percent of the FPL. Today, for a family of four, this ranges between $22,000 and $89,000 a year.

There are three types of help: Premium tax credits, cost-sharing subsidies, and Medicaid.

Where can you get more information? Additional information on this topic can be found at www.healthcare.gov.

Free Choice Vouchers

The Patient Protection and Affordable Care Act originally included free choice vouchers that certain employees could obtain through their employers for purchasing health insurance coverage on the exchanges.

The free choice voucher provision of health care reform was repealed by Congress in April 2011 and thus will not be among the many changes that will take place in 2014.

Guaranteed Issue

What is it? Under health care reform, the expanded guaranteed issue provision means that beginning in 2014, all health insurance products sold by an issuer in the individual and group market, including both the small and large group, must be made available to every employer or individual in the state that applies for coverage. However, this does not necessarily mean that individuals can apply at any time. Restrictions relating to open or special enrollment periods may continue to apply.

This provision applies to both the individual health insurance market and to fully insured groups but does not apply to self-funded group or grandfathered plans.

How does it affect you? Individuals may find that they have additional health insurance options beginning in 2014 when most individuals are required to carry health insurance, whether purchased directly from an insurer or through the new public health insurance exchanges that will offer a range of qualified health plans.

Employers may also find that they have additional group health insurance product options available beginning in 2014.

Where can you get more information? http://www.healthcare.gov/

Guaranteed Renewability of Coverage

Beginning in 2014, all insurance coverage purchased in the individual and group market shall be guaranteed renewable.

Health Insurance Exchanges

What is it? By January 2014, the Affordable Care Act (ACA) requires each state to establish an online health insurance exchange that permits qualified individuals to purchase qualified health plan coverage. States that do not establish exchanges will be served by a federally facilitated exchange.

Beginning in 2014, state exchanges will also be required to operate a Small Business Health Options Program, or a SHOP program, that allows small employers to pool together to provide health coverage choices to employees.

On March 27, 2012, the U.S. Department of Health and Human Services (HHS) published in the Federal Register the final rules on the exchanges, providing guidance on how state exchanges must be structured, the criteria that health plans must meet in order to be certified and offered on an exchange and employer responsibilities when participating in a SHOP program.

How does it affect you? Health exchanges are expected to provide access to a health insurance marketplace that better helps consumers shop for coverage by making it easier to compare available plan options based on price, benefits, services, and quality.

Qualified individuals and employers will be able to purchase health insurance on the exchanges. Qualified individuals must generally reside in the state in which their choice of exchange coverage is offered and may not be someone who, at the time of enrollment, is incarcerated. Qualified individuals include U.S. citizens and legal immigrants who are not incarcerated and who do not have access to adequate or affordable employer coverage.

Generally, small employers with 1 to 100 employees can be served by the SHOP. However, states have the option to limit participation in their SHOP program to groups up to 50 employees until 2016. Beginning in 2017, states can elect to let businesses with more than 100 employees buy coverage on the SHOP.

The qualified health plans that participate on exchanges will offer uniform benefit packages, which is designed to make comparisons among plans easier. The uniform benefits package, known as essential health benefits, must include the following categories of services:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health benefits and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care

The exchanges will offer benefit packages with four predetermined levels of coverage.The four levels of coverage differ based on how much the plan’s benefits are expected to pay in terms of the health care costs incurred by a typical population. The coverage levels and benefits equivalents are:

  • Bronze: equal to 60 percent of the full value of benefits under the plan
  • Silver: equal to 70 percent of the full value of benefits under the plan
  • Gold: equal to 80 percent of the full value of benefits under the plan
  • Platinum: equal to 90 percent of full value of benefits under the plan

Qualified health insurers must offer at least one plan at the silver level and one plan at the gold level of coverage in each exchange in which their plans are offered.
Insurer may also elect to offer catastrophic coverage at a lower premium.
These plans provide a lower level of coverage than the four metallic levels of coverage and are only available to enrollees under the age of 30 or those who would otherwise be exempt from the requirement to purchase coverage due to affordability or hardship reasons. These catastrophic plans still provide coverage for essential health benefits, however they will require enrollees to
incur liability for substantial cost-sharing amounts before they begin to pay benefits. Those amounts will be comparable to the annual out-of-pocket amounts that enrollees currently pay today under qualified high deductible plans.

Where can you get more information? Healthcare.gov provides information on health insurance exchanges at this link.

Individual Mandate to Purchase Health Insurance Coverage

What is it? A key component of the Affordable Care Act, also known as health care reform, is the mandate that individuals be enrolled in health coverage. By 2014, U.S. citizens and legal residents are generally required to maintain minimum essential coverage (further defined below) for themselves and their dependents or pay a phased-in shared responsibility payment. The law refers to this payment as a penalty. In June, 2012, the United States Supreme Court upheld the constitutionality of the payment as a permissible exercise of Congress’ taxing power.

By being enrolled in minimum essential coverage, individuals avoid the individual mandate penalty. Generally, while there may be differences in benefits that employer-sponsored plans can choose or are required to cover, it is important to know that by enrolling in available employer-sponsored health coverage, the individual mandate penalty will not apply.

Other health plans are also considered under the mandate’s rules as providing “minimum essential coverage” including Medicare, Medicaid, CHIP, TRICARE, state- based risk pools and certain other government-sponsored coverage recognized by the Department of Health and Human Services (HHS). Coverage purchased in the individual health insurance market also qualifies. However, coverage under an “excepted benefits” plan alone, such as a stand-alone dental plan that individuals may purchase, does not qualify as minimum essential coverage, even if offered through an employer.

How does it affect you? Generally, if you are a U.S. citizen and legal resident of the U.S., by 2014, the health care reform law requires you to maintain minimum essential coverage or pay a phased-in shared responsibility payment, or penalty.

Several exemptions from the penalty will apply, including members of certain religious groups and Native American tribes; individuals who are not lawfully present in the United States; incarcerated individuals; individuals with income below the income tax filing threshold; individuals whose period without coverage does not exceed three continuous months; and individuals whose health insurance
premium contributions for the calendar year exceed eight percent of household income.

The penalty for not purchasing coverage in 2014 is the greater of $95 per person for the individual and each dependent without coverage, up to $285 or 1% of income; the penalty increases in 2015 to the greater of $325 per person for the individual and each dependent without coverage, up to $975, or 2% of income. In 2016, the penalty will become the greater of $695 per person for the individual
and each dependent without coverage, up to $2085, or 2.5% of income. In 2017 and beyond, the $695 amount will be adjusted thereafter annually to reflect changes in the cost of living. For each individual under age 18, the penalty is one-half of the dollar amount set forth above, as follows: the 2014 penalty is $47.50; the 2015 penalty is $162.50; the 2016 penalty is $347.50; thereafter the amount will adjust. Income maximums still apply as indicated above.

The penalty will be assessed by the Treasury Department as a federal tax liability on the income tax returns that individuals file every year. Beginning in 2014, federal tax returns will include a new form for detailing the source of health insurance. Individuals who don’t carry insurance, but are required to by the health care reform law, will be penalized as outlined above.

What is your next step? If you do not currently have health insurance and are not exempt from needing to have coverage as described above, you need to consider your coverage options.

In addition, you may be eligible for new health insurance subsidies.

Where can you get more information? This chart shows you how the Individual Mandate to Purchase Health Insurance
Coverage works.
www.healthcare.gov

Insurance Rating Reforms

What is it? Under health care reform, beginning in 2014, the only permissible rating factors that health insurance issuers can use to vary health insurance premium rates will be family composition, geographical rating areas, age and tobacco use.

In the case of age, premiums cannot vary by more than a 3 to 1 ratio, and tobacco use may not be utilized to vary premium by a ratio greater than 1.5 to 1.

This provision applies to both individual and small group health insurance but does not apply to self-funded groups or grandfathered plans or policies.

How does it affect you? In the past, health insurance carriers have been able to use a wider range of factors to establish the amount that individuals and/or families will pay in premiums for their health insurance. Some insurers, for example, would use gender, claims history and/or health status as a basis for establishing the cost of health insurance premiums.

Under health care reform, health insurers will be restricted as to what factors can be used to determine the cost of the premium for your health insurance.

The factors that can be used include:

  • Family composition (individual-only or family coverage)
  • Geographic rating area as determined by the state in which you live subject to HHS approval
  • Age (but cannot vary by more than a 3:1 ratio) and
  • Tobacco use (but cannot vary by more than a 1.5:1 ratio)

Health care reform directs the states to define their geographic rating areas. In addition, the Department of Health and Human Services (HHS) will establish standard age bands. With respect to family coverage, the Affordable Care Act stipulates that rating variations for age and tobacco use shall be applied based on the portion of premium that is attributable to each family member covered under the plan.

The insurance rating reforms may lower the cost of health insurance premiums for some individuals, raise it for others, or be inconsequential to some.

Where can you get more information? http://www.healthcare.gov/

Multi-States Plans

Each state health insurance exchange must permit at least two multi-state health plans to provide individual and small group coverage. The federal Office of Personnel Management (OPM), which currently administers the Federal Employees Health Benefits Program (FEHBP), will contract with health insurers to offer these plans. At least one contract must be with a non-profit entity.

No Annual Limits on Essential Benefits

All annual dollar limits on essential health benefits are prohibited. Prior to 2014, plans and issuers are permitted to continue imposing such limits on benefits provided they comply with the restrictions established bythe U.S. Department of Health and Human Services (HHS) Secretary in regulations issued in 2010.

Nondiscrimination Involving Participants in Clinical Trials

Plans may no longer discriminate against individuals and enrollees who particpate in clinical trials. Plans must also cover the routine costs associated with items and services furnished as part of a clinical trial.

Prohibition on Pre-Existing Condition Limitations

In 2010, the law prohibited the imposition of pre-existing condition limitations on individuals under age 19. Starting in 2014, the prohibition against such limitations extends to all enrollees.

Effective in 2016

Health Care Choice Compacts

Effective January 1, 2016, states can create health care choice compacts in which two or more states can enter into an agreement to offer one or more qualified health plans in the individual markets in a multi-state region. The plan(s) would generally be subject to laws and regulations of the state in which the plan was written or issued.

Effective in 2017

Optional State Expansion of Exchange to Large Employers

Beginning in 2017, states may elect to permit issuers in the large group market to offer qualified health plans through its exchange to large group employers.

Effective in 2018

High-Value Health Plan Excise Tax (aka Cadillac Tax)

What is it? Beginning in 2018, a 40% excise tax will be imposed on high-value health plans. The tax is based on premium amounts in excess of the high-value health plan limits of $10,200 for self-only coverage and $27,500 in the case of family coverage.

The provision establishes higher limits for retirees (individuals over age 55) and employees in high-risk professions — $11,850 for individuals and $30,950 for a family. Standalone vision and dental plans are excluded from this excise tax.

This provision applies to both insured and self-insured plans, grandfathered and non-grandfathered.