Understanding the new health insurance law

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US Health care reform and the important milestones from 2010 – 2018

Wednesday, September 29th, 2010

Good Neighbor Insurance (www.gninsurance.com and www.gnazhealth.com) is continuing to update our clients on the new health insurance laws. There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work. Many critical details of this new insurance law will be clarified in the months and years to come.

These six major coverage options are:

(1) Individual or family coverage ( www.gnazhealth.com/azhealthinsurance.asp )

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards (www.gnazhealth.com/senior_health_plans.asp)

(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service.

The president signed the Patient Protection and Affordable Care Act (PPACA) into law on March 23, 2010. Additionally, he signed the Health Care and Education Reconciliation Act of 2010 on March 30, 2010, which made amendments to the PPACA law. The president’s signature on the reform bills triggered a series of major changes to the health care system that will affect every American. There were several changes that became effective upon President Obama’s signature. The rest of the changes are scheduled to become effective at varying times over the next several years.

The law is wide-reaching and encompasses more than 2,700 pages and many more pages of expected new regulation. Many of the specific details are yet to be finalized by federal agencies and state officials. This guide outlines some of the major sections of the law, and we’ve indicated when guidelines are pending from the United States Department of Health and Human Services (HHS) and other federal or state agencies. These guidelines will help all health insurance companies comply more completely with the reforms.

Reforms in Effect on and after Sept. 23, 2010

Coverage of adult children: Allows children up to age 26 to receive dependent coverage under a parent’s group policy as long as they do not have access to insurance through their employer.

After 2014, no group may exclude from coverage a dependent age 19 to 26 even if the dependent has access to his or her own employer coverage. The adult child does not have to live at home or be a student and can be married. According to the PPACA, this goes into effect Sept. 23, 2010 or at the start of your group’s next plan year on or after Sept. 23, 2010.

Early retiree reinsurance: Employers may apply to receive reinsurance coverage if they provide health insurance coverage to early retirees, ages 55 to 64. The reinsurance covers 80 percent of claims between $15,000 and $90,000. The program expires in 2014 or when the $5 billion appropriation is exhausted. To be eligible, the employer’s plan must generate cost savings for people with chronic conditions, provide claim documentation, and the employer must apply to HHS for the coverage.

Network access:

• Emergency room – Out-of-network cost-sharing amounts must be the same as in-network cost sharing amounts for emergency room visits. A requirement for prior approval of emergency room visits is prohibited.

• Primary care – Insurance customers must be able to select any network primary care physician they want to see.

• OB/GYN – Women must have direct access to their network OB/GYN without requiring a referral from a primary care physician.

Appeals: Insurance customers will be able to object to coverage and payment decisions through internal and external appeals processes. Arizona law has long had similar requirements for insured business, but the external review provisions are new to self-funded plans.

Elimination of pre-existing condition exclusions for children: The law says children under age 19 can no longer be subject to pre-existing condition waiting periods. New HHS regulations amend the definition of pre-existing condition so that plans may no longer deny an application of coverage to an individual under 19 due to a pre-existing condition. Additionally, waivers or pre- existing condition waiting periods to these individuals will not be applied. This regulation applies to all group plans and only non-grandfathered individual plans. It does not apply to grandfathered individual plans. The term grandfathering means policies that were in effect on March 23, 2010, are exempt from many of the health care reforms.

Prevention services: The law prohibits cost sharing (deductibles, copays, coinsurance, etc.) for certain prevention and wellness services. Specific guidelines on these exact services are still pending from HHS.

Rescissions: Insurers may not rescind – or void – a policy without a showing of fraud or intentional misrepresentation.

Lifetime limits: Insurance policies will no longer be allowed to require a specific dollar cap on essential benefits. New regulations also permit individuals who previously reached a lifetime maximum and who are otherwise still eligible for coverage an opportunity to re-enroll. The prohibition on lifetime limits applies to all group and individual plans.

Annual limits: This provision restricts and later prohibits insurance policies from imposing dollar amount-based annual limits on essential benefit plan services. Annual limits are restricted for plan years beginning on or after Sept. 23, 2010 and prohibited for plan years beginning on or after Jan. 1, 2014. The limitation on annual limits does not apply to individual grandfathered plans. The term grandfathering means policies that were in effect on March 23, 2010, are exempt from many of the health care reforms. Specific guidelines for what is defined as essential benefits are pending from HHS.

Administrative cost caps or medical loss ratio: Health plan administrative costs will be limited to 5 percent for large group products and 20 percent for individual and small group business. Beginning in 2011, plans will have to issue rebates to customers if they exceed these administrative expense caps. HHS will develop the definitions and calculations to determine the administrative cost after consulting with state insurance commissioners.

Reforms in Effect Starting in 2011

Health savings accounts and flexible spending accounts: Penalties for unqualified withdrawals from health savings accounts (HSAs) increase. Spending on over-the-counter products will no longer be permitted for HSAs and flexible spending accounts.

Employer wellness discounts: Allows employers to offer wellness premium discounts up to 30 percent of employee-only premium and provides grants to small employers to establish wellness programs.

Employer obligations:

• Employers must inform new hires of the exchange and their potential eligibility for subsidies in the exchange.

• Must disclose value of benefits on W-2 form.

Reforms in Effect Starting 2012

Uniform coverage documents: Health plans will be required to publish a description of the policy in a uniform format and provide it to enrollees upon enrollment and renewal. The document must be no more than four pages, use 12-point font and include definitions and examples.

Quality: Insurers must report to HHS and enrollees on their ability to promote quality of care. F or example, insurers must provide incentives for hospitals to reduce the number of readmissions. Consumers will also find it easier to compare how well their health plan is performing in the areas of promoting quality health care and wellness.

Reforms in Effect Starting 2013

Flexible spending account limits: The maximum amount of flexible spending accounts becomes $2,500.

Medicare tax: The hospital insurance tax will increase 0.9 percent for upper income individuals and will extend to investment income. Single taxpayers with income exceeding $200,000 and married taxpayers who file joint returns with income exceeding $250,000 are considered upper income.

Medical expense deductibility: Increases the threshold for deducting medical expenses from 7.5 percent to 10 percent of adjusted gross income.

Medicaid expansion: The legislation expands Medicaid eligibility nationwide to those earning up to 133 percent of the federal poverty level (FPL).

Comparative effectiveness research: Research will begin on assessing the best treatments for certain conditions and disseminating that information to health care providers. To fund this research, a fee of $2 ($1 until 2014) per insured life will be assessed to the policyholder.

Reforms in Effect Starting September 2014

Guaranteed issue: The new law requires insurance companies to issue coverage even if the applicant has a pre-existing condition. Community rating: Under the new law, insurers can only vary premiums based on where the person lives, family size, smoking status and age. The amount of variation is strictly limited.

Exchange: The federal government creates a new health insurance marketplace to enable individuals and small businesses (and large businesses, if a state elects) to compare and purchase policies and apply for subsidies. There will be a fee for using the exchange. A person must buy insurance through the state-based exchange to be eligible for subsidies (described below).

Individual mandate: Almost all Americans will be required to have health insurance, whether it is through an employer, a government program or the individual insurance market. The law penalizes people who fail to carry insurance. The penalty is phased in. When it is fully implemented in 2016, a person who fails to buy insurance will be subject to a penalty of $695 or 2.5 percent of their income, but not more than the cost of the lowest cost policy sold through the exchange. Penalties for uninsured children are half the adult penalty. Employers and insurers will report policy information to the Internal Revenue Service, which will play a role in enforcing the mandate. Subsidies: The law also offers subsidies to people who might have a difficult time buying insurance. Subsidies are available to those with household incomes of up to 400 percent of the federal poverty level (FPL). For a family of four, 400 percent FPL is $88,200. The subsidy is set up so that a person pays no more than a certain percentage of his or her income for health insurance. Subsidies are also available for cost-sharing expenses such as deductibles and copays. A person must buy insurance through the exchange to be eligible for subsidies. Employer requirements: The law requires employers to provide minimum essential coverage for full-time equivalent employees and dependents. Employers with more than 50 full-time employees (FTEs) that have any FTEs receiving subsidized coverage in the exchange are subject to penalties.

• If the employer does not offer coverage, the fine is $2,000 per FTE.*

• If the employer does offer coverage, but the coverage has less than 60 percent actuarial value, or the FTE’s share of premium exceeds 9.5 percent of income, the fine is $3,000 per FTE with subsidized coverage or $2,000 per FTE, whichever is less.*

* The penalties based on overall number of FTEs exclude the first 30 employees

Other employer obligations include:

• Employers with more than 200 employees must automatically enroll new full-time employees in coverage. • “Provide free choice vouchers.” Requires employers with more than 50 FTEs and who provide coverage to issue free choice vouchers to qualifying employees. Qualifying employees have a household income less than 400 percent of the FPL and their share for coverage is 8 percent to 9.8 percent of their household income. The free choice voucher enables the employee to buy coverage in the exchange with the employer’s usual contribution amount.

Employers issuing free choice vouchers are not subject to penalties. • Larger employers must report employee coverage information to the government. • Waiting periods in excess of 90 days are not allowed. Benefit requirements: Small group and individual policies sold on the exchange will have to meet federal standards. One of these standards is based on the policy’s actuarial value. Actuarial value represents the amount the insurer pays for an average claim versus the amount the customer pays in the form of cost sharing, such as deductibles and copays. The base level, or Bronze product, is established at 60 percent actuarial value. Richer benefit packages will also be available as follows:

• Silver – 70 percent actuarial value

• Gold – 80 percent actuarial value

• Platinum – 90 percent actuarial value

An insurer must offer the Silver and Gold plans if it wants to participate in the exchange. In addition to the actuarial value requirements, all policies, whether offered through the exchange or not, will have to cover “essential benefits.” The policies must contain specific coverage provisions, including:

• Mental health benefits comparable to health benefits

• Policies cannot deny participation in certain clinical trials or associated routine patient costs

• The rest of the major provisions in the essential health benefits list, which are pending clarification from HHS Even products that are not sold through the exchange, must meet cost-sharing limitations. They cannot exceed $2,000 for single coverage and $4,000 for family coverage. These amounts will increase with inflation.

Insurer tax: Insurers will be assessed a new phased-in tax. This is an industry-wide assessment based on market share. When fully implemented in 2018, the tax is expected to cost the insurance industry $14.3 billion. Similar taxes will apply to drug and device manufacturers. Name-brand drug manufacturers will pay, on average, a $2.8 billion per-year assessment beginning in 2011. Medical device manufacturers will pay a 2.3 percent tax on non-retail sales beginning in 2013. All of these assessments will add to the costs of health care for consumers.

Reforms in Effect Starting September 2018

“Cadillac plan” tax: A new tax on high-value insurance policies will become effective in 2018. If the premium for a group insurance policy exceeds $10,200 for a single policy or $27,500 for a family policy, the excess amount will be subject to a 40 percent excise tax.

Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care information with him at all times when he travels (check out his diving travels at www.douggulleson.com). Keep our blog close by you, www.gntravelinsurance.com , for continual updates on the changes with the US health care system.

Tags: Arizona insurance, health insurance law, US health insurance
Posted in 2010 updates |

Understanding the new US health insurance high risk pool

Saturday, August 21st, 2010

These six major coverage options are:

(1) Individual or family coverage

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

Note: Updated 8-20-2010

High-risk pools are temporary and will morph into Exchanges starting 1-1-2014. States may run their own high-risk pool or have the US federal government carry out the program which will be similar for all states. The high risk-pool has started on 7-1-2010 and will continue till 12-31-2013. Currently twenty-one states have asked the federal government to run their high-risk pool.

Eligibility

Individuals who have a pre-existing medical condition and have not had creditable coverage for the previous six months.

Benefits

The Secretary of HHS will determine the minimum benefits that must be included and plans must cover at least 65% of health care costs.

Premiums and Cost-Sharing

Set premiums as if for a standard population and not for a population with a higher health risk. Allow premiums to vary by age (4:1), geographic area, and family composition. Limit out-of-pocket spending to $5,950 for individuals and $11,900 for families, excluding premiums.

Funding

$5 billion currently

Q AND A

Who is eligible for coverage through the temporary high-risk pool?

U.S. citizens and legal residents who have a pre-existing medical condition and have not had creditable health coverage for the previous six months are eligible for coverage.

What benefits will high-risk pool enrollees receive?

The high-risk pools will cover a range of benefits, including primary and specialty care, hospital care and prescription drugs. The health plans will be required to cover pre-existing medical conditions upon enrollment. The high-risk pool programs must cover at least 65% of the health care costs for a standard population.

How much will high-risk pool health coverage cost?

The premium cost for high-risk pool coverage will be established for a standard population in the non-group market and will not be based on the health status of enrollees. Premiums will be allowed to vary by age (by a 4 to 1 ratio), geographic area, and family composition. Premiums for the high-risk pool operated by the federal government will be available on July 15, 2010. Yearly out-of-pocket costs will be limited to $5,950 for individuals and $11,900 for families, excluding premiums.

How will the high-risk pool be funded and administered?

The health reform law allocates $5 billion to administer the national high-risk pool. This funding will go toward health care claims and administrative costs that exceed the premiums collected for the high-risk pool. On April 2, 2010, U.S. Department of Health and Human Services Secretary Kathleen Sebelius issued a letter that gives states the following options for operating the temporary high-risk pool: (1) Operate a new high-risk pool alongside an existing state high-risk pool; (2) Establish a new high-risk pool if the state does not currently have one; (3) Build upon other existing coverage programs designed to cover high-risk individuals; (4) Contract with current HIPAA insurance carriers or insurers of last resort to provide subsidized coverage; or (5) Do nothing, in which case the U.S. Department of Health and Human Services would carry out the coverage program in the state.

When does the high-risk pool go into effect?

The federal high-risk pool will begin taking applications on July 1, 2010 and coverage will begin on August 1, 2010. States operating their own high-risk pools will also aim to begin coverage relatively soon, but may not all meet the August 1 date for coverage. The high-risk pools will terminate on January 1, 2014 when the state-based American Health Benefit Exchanges are established and other insurance market reforms go into effect, providing new coverage options for people with pre-existing health conditions.

Given that this is a temporary form of coverage, what happens to people when the high-risk pool terminates in 2014?

When the temporary national high-risk pool terminates on January 1, 2014, high-risk pool enrollees will transition into receiving health coverage through the state-based American Health Benefit Exchanges. Procedures will be developed to ensure that there are no lapses in coverage. Individuals without employer health coverage and small businesses with up to 100 employees will be able to purchase coverage through the Exchanges. Premium and cost-sharing subsidies will be available for individuals with incomes between $14,404 – $57,616 and for families of four with incomes between $29,327 – $88,200. People will also be able to choose to purchase coverage in the individual market. As of 2014, insurers will not be able to deny adults coverage or charge higher premiums based on health status.

How many high-risk pools currently exist in the United States and what will happen to enrollees?

Currently, 34 states operate high-risk pools that provide health coverage to nearly 200,000 individuals. State high-risk pools share a common structure and some similarities but differ by state in many ways including eligibility, benefit design, pre-existing condition exclusions, premium costs and cost-sharing, and administration, among other areas. People who currently obtain health coverage through a state high-risk pool will maintain their current coverage. In 2014, these individuals will likely transition into the state-based American Health Benefit Exchanges. Given that the Exchanges would prohibit people from being denied coverage or charged more based on health status and would limit cost-sharing, current state high-risk pool enrollees may receive more affordable coverage in the Exchanges than they currently have in the high-risk pool.

Additional information

Twenty-two of the states told the Department of Health and Human Services that they did not want to run their own risk pool and requested the US Federal government run it which is allowed in the new US health law signed in March 2010. You may see the US federal government high-risk pool plan by going to www.pciplan.com.

* The very minimum an individual will pay if you’re under 35 is right around $12,340 a year. This is including monthly premium, deductible, and co-insurance. The co-insurance part of the policy holder is $5,950 in-network or $7,000 out-of-network. There is no lifetime maximum or cap on the amount the plan pays for your care.

* HHS (United States Department of Health and Human Services), contracted out to a private insurance company called the Government Employees Health Association; the Government Employees — the insurance plan is called the GEHA / Government Employees Health Association. This plan is an HSA (health savings account) qualified high deductible health plan. The plan gives you greater control over how you use your health care benefits, and they want you to open an HSA account. The applicant must also show proof of US citizenship when applying for this US federal government high-risk pool plan.

* There are no benefits payables for anything other than preventive diagnoses until you pay out of pocket $2500. This means there is a $2,500 deductible before any benefits is paid besides preventative coverage. The next part is the co-insurance part which is an 80-20 split for in-network (maximum of your part of the coinsurance is $5,950) / 60-40 (maximum of your part of the coinsurance is $7,000) split out-of-network until you have paid out of your pocket, not including the $2,500 in-network deductible / $3,000 out-of-network deductible.

To recap; Part 1 is your deductible which you are fully responsible for. Part 2, you and the insurance company share the cost of medical care called coinsurance. When you see 80/20 that means you pay 20% of the medical bill and the insurance company will pay the 80% part. Once you meet $5,950 out of your pocket for your 20% of the coinsurance part then you are going into part 3. Part 3 is where the insurance company pays the full amount there-after for the duration of the calendar year.

So your maximum out of pocket for medical care is going to be your deductible + your co-insurance part and if you are using all in-network medical facilities, in this example, you would be spending a total of $8,450 + any copays annually; this is on top of your monthly premium. This starts over each January 1^st of the following year. You may view the schedule of benefits or what we call “looking under the hood of your insurance plan” at www.pciplan.com/forms/pdfs/BenefitsSummary.pdf .

* Here are the monthly PCIP premium rates for Georgia by the age of an enrollee.

Ages 0 to 34: $323

Ages 35 to 44: $387

Ages 45 to 54: $495

Ages 55+: $688

Here are the monthly PCIP premium rates for Arizona by the age of an enrollee.

Ages 0 to 34: $323

Ages 35 to 44: $387

Ages 45 to 54: $495

Ages 55+: $688

Doug Gulleson totally adores scuba diving and travels overseas throughout the year with his underwater camera in one hand and a cup of coffee in the other. Visit Good Neighbor Insurance at www.gnazhealth.com and www.gninsurance.com/tripcancellation for Arizona and international travel insurance coverage.

Tags: Arizona insurance, US health insurance, USA coverage
Posted in 2010 updates |

Employee W-2 forms pertaining to the new health insurance law

Thursday, August 5th, 2010

Note: Updated 8-16-2010

These six major coverage options are:

(1) Individual or family coverage

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

Q: The PPACA requires that businesses include the value of the health care benefits they provide to employees on W-2s, beginning with those issued for calendar year 2011. How will this work and what will it mean, tax-wise, for employees?

A: The law will require employers to include the value of applicable employer-sponsored coverage on each employee’s W-2 for taxable years after December 31, 2010. This means the reporting will appear on an employee’s W-2, beginning with the one that is issued in early 2012. However, this reporting will be more for informational purposes and will have no impact on the taxable income of an employee. Employees’ premiums will still be made on a pre-tax basis. The purpose of this reporting requirement is to allow each employee to understand the actual value of their employer-provided health care benefits.

Q: Does the new health care law require workers to pay income tax on the value of employer-provided health insurance?

A: No. The value will appear on employees’ W-2 form.

Q. I have heard that this new law will now require employers to include the value of health care benefits on our W-2s. Is this correct? If so, does this mean that we will now have the value of these health care benefits included in our taxable income?

A: Yes. The value of your health benefits will show up as a separate entry on your W-2, the notice of wages and income that your employer mails each January. But that will not happen until January 2012, when your employer reports your wages for the 2011 tax year.

You won’t be taxed directly, but your insurer might be, or your employer could be if it is self-insured, and either one could pass along that cost to you. But before you get upset, consider one more caveat: The tax is only on high-premium plans, better known as “Cadillac health plans,” and it doesn’t kick in until 2018. The tax, at 40 percent, won’t be on the full value of your health plan. Instead, it will be on the “excess benefit” — that is, the amount above $10,200 for a worker with single coverage and $27,500 for an employee with a family policy. Thresholds would go up with inflation. Most Americans’ plans don’t cost that much. The average employer-sponsored plan for a family costs $13,375, according to the Kaiser Family Foundation, with the employer picking up $9,860 of the cost.

Tags: Arizona insurance, US health insurance
Posted in 2010 updates for employers |

New rules on health insurance claims and appeals process

Wednesday, August 4th, 2010

These six major coverage options are:

(1) Individual or family coverage

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

Note: updated 8-2-2010

On 7-22-2010, HHS released Final Interim Rules enhancing a plan’s claims and appeals process. The new appeals regulations were issued by the Departments of Health and Human Services (HHS), Labor, and the Treasury. Consumers in new health plans in every State will have the right to appeal decisions, including claims denials and rescissions, made by their health plans. This includes the right to appeal decisions made by a health plan through the plan’s internal process and, for the first time, the right to appeal decisions made by a health plan to an outside, independent decision-maker, no matter what state a patient lives in or what type of health coverage. The newly issued rules apply to both group plans and individual policies. They do NOT apply to grandfathered plans, as long as the plan remains grandfathered. The effective date for these rules is the first day of the first plan anniversary following September 23, 2010.

General information:

All group and individual plans must comply with the ERISA regulations, even if the plan itself is not subject to ERISA (i.e. government or church plans).

Coverage Pending Outcome of Appeal – Benefits for an ongoing treatment cannot be reduced or terminated with advance notice as well as an opportunity for advance review.

Linguistically and Culturally Appropriate – Relevant group plan notices must be provided in a foreign language as requested, if the employer’s population meets a certain threshold of non-English speaking employees. In addition, a statement offering the non-English version must be included in all English language notices. Once a person has requested a non-English notice, all future notices to that person must be in their language of choice.

Individual Plans – If a certain percentage of the population of a county are literate only in the same non-English language, the notices must be provided in that language upon request.

External Review:

State Laws – Plans must comply with state external review requirements. However, states have a transition period until July 1, 2011 to amend their current requirements to comply with the federal requirements.
Federal Law – If a state law does not exist, plans must comply with the federal external review process. This has yet to be defined.

Six New Requirements:

1. The definition of “adverse benefit determination” has been revised to include rescission of coverage.

2. The notification of determination (either approval or denial) for an urgent care claim must be made within 24 hours after receipt of the claim. This presumes all necessary information has been received.

3. Claimants must also now be provided any additional or new evidence that was considered or relied upon or generated in connection to the claim prior to a decision being made.

4. All claims and appeals must be in a manner designed to ensure the impartiality of the person making the decision.

5. A notice of denial must include enough information to sufficiently identify. The claim involved:

Reasons for denial

Documentation of the appeal and review process

Contact information for any office of health insurance consumer assistance or ombudsman

Model notices will be issued in the near future

6. If the plan does not strictly follow all internal claims and appeals processes, the claimant will be allowed to proceed to external review and pursue other options under the law.

Additional Requirements for Individual Plans:

1. The Department of Labor claim and appeal regulations will also apply to “initial eligibility determinations”.

2. Individual plans are only permitted to have one level of internal appeals, after which the individual can proceed to an external review.

Questions and Answers:

Q- A client of ours is asking about hourly vs. salary employees. Would you provide me an answer or where I can go? From my readings both will have equal access. This group has only management on one plan and the employees on another option.

A – Then both plans need to be tested independently.

Q – Concerning the various services that are available at no cost beginning Sept. 23, 2010, how are the services obtained? Who pays? How? When?

A – The plans will be changed by the carriers, unless the plan is grandfathered. These will be plan changes, so any non-grandfathered plan will include these specific preventative services with no co-pays (in-network).

Q- If an employer currently has a “carve-out” in force and upon renewal in 2011 can’t pass 105(h) can the employer drop the “carve-out” coverage?

A – They can drop their coverage; but, please keep in mind, if this employer has more than 50 FTE’s, in 2014 they may be subject to a penalty for not offering coverage.

Q – On September 23 can an under 19 child with pre-existing conditions come off their parents group plan and qualify for an individual plan? Or do they have to wait for group open enrollment?

A – They can; however, the concern is whether or not the carriers will continue to offer “child” only policies or even “adult” policies for an 18 year old. I would not make this recommendation until we are certain there will be something for them to purchase.

Q – In regard to the Section 105 Non-discrimination testing:

1) If a medical carve-out group adds a second plan (dual option) at their 09-01-2010 renewal, will both plans (employer) be subject to discrimination testing at the 2011 renewal or just the new plan?

A – Just the new plan, assuming the other plan remains grandfathered.

2) If the same group waited to add a second option until the 2011 renewal, would both plans (employer) immediately become subject to discrimination testing?

A – Same as above.

Doug Gulleson totally adores scuba diving and travels overseas throughout the year with his underwater camera in one hand and a cup of coffee in the other. He knows through experience never to leave home without his travel insurance and credit card too. Visit Good Neighbor Insurance at www.gnazhealth.com and www.gninsurance.com/tripcancellation for Arizona and international travel insurance coverage.

Tags: Arizona insurance, US health insurance
Posted in 2010 updates |

All individuals are required to have health insurance or be fined starting in 2014

Tuesday, August 3rd, 2010

These six major coverage options are:

(1) Individual or family coverage

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

Note: Updated 7-30-2010

Beginning in 2014, all individuals are required to maintain “minimum essential coverage.”

Failure to maintain coverage for the entire year will result in a penalty or tax. The penalty is on a sliding scale for three years and is described as 1/12th of the greater of:

For 2014: $95 per uninsured adult in the household or 1% of the household income over the filing threshold,

For 2015: $325 per uninsured adult in the household or 2% of the household income over the filing threshold,

For 2016: $695 per uninsured adult in the household or 2.5% of the household income over the filing threshold

* The penalty will be ½ of the amounts listed above for individuals under the age of 18.

* The total household penalty may not exceed 300 % of the adult penalty or the national average annual premium for bronze level health coverage offered through the Exchange (the Exchange is another mandate scheduled for 2014).

Doug Gulleson totally adores scuba diving and travels overseas throughout the year with his underwater camera in one hand and a cup of coffee in the other. Visit Good Neighbor Insurance at www.gnazhealth.com and www.gninsurance.com/boomer/ for Arizona and international travel insurance coverage.

Tags: Arizona insurance, health insurance law, US health insurance
Posted in 2010 updates |

Frequent questions we get asked about the new health insurance law – Part 5

Monday, August 2nd, 2010

These six major coverage options are:

(1) Individual or family coverage

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

Note: updated 8-1-2010

Note 2: This information is not intended to be legal advice but based on current interpretations that may change depending on new federal and state rulings.

Preventative Services:

Q – Will in-force policies have to comply by covering Preventative with no cost sharing?

A – Only non-grandfathered plans must comply with this market reform.

Q – Will all size cases have to change their contract to comply with the list of Preventative Services?

A – Yes, if not grandfathered.

Q – Will these Preventative Services be covered the same way while under an HSA?

A – The legislation does not differentiate between HDHP and other health plans.

Q – Is this for group policies, or individual as well?

A – The preventative services apply to both Individual and Group non-grandfathered policies.

Q – Are these changes for under 65 plans only, or will they apply to senior plans like Medicare Advantage?

A – The changes apply to under 65 plans only.

Pre-existing Condition:

Q – I am a 50% disabled veteran with a condition that prevents me from buying insurance. The condition is covered by the VA Hospital but ALL other non-related issues are not.

The only insurance I have ever had was through my wife’s employer. She has been retired nearly ten years.

I noticed on the application for the High Risk Pool, that one of the questions is about government coverage including the Veterans Administration. Will I qualify for this program? Will they cover everything but what is covered by VA?

A – Unfortunately, there are very few details available until you apply and get either an acceptance or rejection from HHS. I would go ahead and apply and see if you are accepted.

Grandfathered Status – Tax Credit:

Q – If you opt to stay with your plan, which would put you into the “grandfathered” status, would you still be eligible for the small business tax credit?

A – Yes, as long as all other eligibility criteria is met.

Q – If you have individual coverage, is there any incentive to stay on an individual plan, or at some point in time, should we be telling our clients or prospects to create a group if they have a business so they can cash in on the tax credit? I have someone right now who owns a dental office and he is asking about reform and his situation. Currently, they do not offer coverage to their employees?

A – Individual plans like group plans can be grandfathered. The same situations between offering group and individual will continue to exist (except the guaranteed issue factor after 2014) i.e., the need for an employer contribution, meeting participation requirements, etc. Remember small employers are not going to be penalized if they don’t offer a group plan. But, the only way to receive the small business tax credit is with a group plan. If the only reason for creating the group is the tax credit, they should probably be certain they meet the necessary criteria.

Q – Beginning Sept. 23, 2010, employers are required to allow employees to add dependents up to the age of 26, EVEN WITH Grandfathered plans? If so, is September 23, 2010 considered an “open enrollment” period where employees can add older dependents? Or can older dependents only be added at the company’s open enrollment period?

A – The requirement that plans allow “children” to age 26 back onto the parents plan is effective the first day of the plan year following September 23, 2010 (so for calendar year plans January 1, 2011). This also applies to grandfathered plans (the difference is that if the “child” has coverage available through their own employer, the grandfathered plan does not have to let them on.) There will be a 30 day enrollment period – generally coinciding with open enrollment.

Q – As long as employers keep their EXACT same plan at renewal, this 105(h) code DOES NOT come into play (except for the dependents age 26 rule)?

A – 105(h) and the “to age 26” rules are not related (except by the fact they were both included in PPACA), but this is accurate the 105(h) does not come into play on grandfathered plans.

Carve-outs:

Q – This IRS code affects ALL businesses, big and small? Although some rules (like mandatory health insurance) don’t affect business with less than 50 employees, the IRS 105(h) code affects all businesses from implementing “carve-out” plans?

A –The highly compensated test also applies to small employers. However, carve-outs could continue to exist, if the carve-out favors the non-highly compensated.

Q – With the 105(h) code, are employers (or is the business) required to “cover” the same percentage of health insurance premiums for all employees? I have several groups that offer insurance to all of their employees, but the upper management usually covers 100% of employee and dependent premiums, while only covering 50% of the employee’s premium (and 0% of the dependents, would this still be okay under 105(h)?

A – If there are two different contribution levels, then each separate level would be tested as if it were a separate plan. Generally, this would cause one of the two (if not both) to fail the highly compensated test.

Q – There’s some concern and lack of information on the anti-discrimination – are carve outs still allowed?

A – Technically “carve-outs” are not disallowed; but the plan must be able to pass the IRC 105(h) test or there’s a sizable penalty to the employer (if fully insured, if self insured the benefit becomes taxable to the highly compensated employee).

Q – It seems if the employee works less than 30 hours a week, they do not have to be considered eligible for employer based benefits?

A – This is true however, in 2014 when you “count” employees to determine if there are 50 or more, you count hours, but you do not have to offer coverage to part-time (<30 hours) or seasonal.

Q – Specifically: I have a client who has close to 200 employees—home health agency. They provide benefits for only their admin staff and none of the other employees. To what rules are they subject?

A – If they don’t remain grandfathered, they’ll need to pass 105(h).

Q – Some of their caretakers work for more than one agency, how does that affect the employer if they work the 30 hours?

A – The determination of part-time versus full-time is still relative to just that employer (may be an issue if there’s common ownership).

Q – If a group is under 50, and they are not required to offer health insurance to their employees, can they still do a “carve out”?

A – As long as they can meet the highly compensated test in IRC 105(h).

Miscellaneous

Q – What is PPACA and DHHS?

A – Patients Protection and Affordable Care Act (PPACA)

Department of Health and Human Services (DHHS)

Doug Gulleson totally adores scuba diving and travels overseas throughout the year with his underwater camera in one hand and a cup of coffee in the other. He knows through experience never to leave home without his travel insurance and credit card too. Visit Good Neighbor Insurance at www.gninsurance.com/travel-A/international_travel_insurance.asp for international travel and www.gnazhealth.com for Arizona insurance coverage.

Tags: Arizona insurance, FAQ, US health insurance
Posted in 2010 updates; FAQ and Answers |

Frequent questions we get asked about the new health insurance law – Part 4

Friday, July 30th, 2010

These six major coverage options are:

(1) Individual or family coverage

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

(6) Full government health plans like Medicaid based mostly on financial criteria

Note: updated 8-14-2010

Note 2: This information is not intended to be legal advice but based on current interpretations that may change depending on new federal and state rulings.

Grandfathered Status

Q – When will management carve-outs no longer be allowed?

A – Non-grandfathered plans must comply with IRS 105(h) the first day of the first plan year following 9/23/10.

Q – What about a grandfathered plan?

A – If the carve-out plan remains grandfathered – they are exempt from the “highly compensated test”.

Q – Will all employees have to be offered the same plan or can there be choices?

A – If not grandfathered, there can be choices, but the offerings must be available to all eligible employees and each component will be tested on-its-own. If grandfathered, the choices in place on 3/23/2010 may remain.

Q – What can an employer who presently has a management carve-out plan do if the vast majority of his employees are paid minimum wage (and are rather transient)?

A – Either keeps the current plan grandfathered or put in a 90 day wait to eliminate the employees who do not remain employed longer than 90 days.

Q – Will the new laws regarding the elimination of carve out plans affect PEO’s as well, or are they immune to these changes?

A – There are no laws eliminating carve out plans. There are regulations that apply to discriminating in favor of the highly compensated, but carve outs (depending on how they are structured and if they maintain their grandfathered status) may or may not be impacted by the highly compensated rules. Either way, the same rules apply to PEO’s – the exception would be if it is under a collective bargaining agreement or self-funded.

High Risk Pool

Q –Can I find the High Risk Plan options online?

A – No, the plan design is not available online. When an individual applies (via the U.S. mail) they will receive an acceptance with the appropriate rate and plan design at that time.

Pre-Existing Medical Condition(s)

Q –Are there any provisions that effect children covered under their parents private insurance related to pre-existing conditions being covered?

A – That is under the Patients Bill of Rights, but it affects children under the age of 19 and plan years beginning after 9/23/2010 (unless the plan is grandfathered), which applies to both group and individual insurance plans.

Q –Can parents cover children up to age 26, and after 9/23/2010 they can cover children under 19 without pre-existing conditions on both group and individual policies?

A – Yes, on the first day of the plan year following 9/23/2010, assuming the plan is not grandfathered.

Miscellaneous

Q – Does the reform address the specific limits for Physical Therapy?

A – Department of Health and Human Services (DHHS) has identified Rehabilitative Services as an “essential benefit”.

Preventative Services Update

DHHS identified the preventative services for which there will be no cost sharing beginning with the first day of the plan year following September 23, 2010. Below are the services included:

Screening for abdominal aortic aneurysm
Screening and counseling to reduce alcohol misuse
Aspirin to prevent CVD
Screening for bacteriuria
Screening for high blood pressure
Mammography
Chemoprevention of breast cancer
Interventions to support breast feeding
Screening for cervical cancer
Screening for chlamydial infection
Screening for cholesterol abnormalities
Screening for colorectal cancer
Chemoprevention of dental caries
Screening for depression
Screening for diabetes
Counseling for a healthy diet
Supplementation with folic acide
Screening for gonorrhea
Screening for hearing loss
Screening for hemoglobinopathies
Screening for hepatitis B
Screening for HIV
Screening for congenital hypothyrodism
Screening for Anemia
Iron supplements in Children
Screening and Counseling for Obesity
Screening for Osteoporosis
Screening for PKU
Screening for Rh incapatability (during pregnancy
Counseling for STIs
Screening for Syphilis
Counseling for tobacco use
Screening for visual acuity in children

Additional Information

Another topic that has been in the news this week is the PPACA requirement that employers report aggregate costs of employer-sponsored benefit coverages on employees’ W-2s for tax years beginning after December 31, 2010. Please remember there have yet to be guidelines issued on this topic.

Payroll systems need to be updated for this change by January 2011 to accommodate employees who terminate during the year and are, thus, entitled to request their W- Form early. Please note: the aggregate cost of an employee’s health benefits will not be included in the employee’s taxable income. This is for reporting purposes only to accommodate various studies and begin preparation for the “Cadillac tax” in 2018.

The coverage costs (whether under an insured or self-insured plan) that must be reported under the new requirement include:
• Medical plans
• Prescription drug plans
• Dental and vision plans, unless they are “stand alone” plans (i.e., an employee may elect only dental or
only vision and is not required to also enroll in medical coverage)
• Executive physicals
• Certain On site clinics
• Medicare supplemental policies
• Employee assistance programs

The benefits exempt from Form W2 reporting requirements include:

• Long term care, accident or disability income benefits
• Voluntary specific disease or illness policies, and hospital indemnity insurance paid with after-tax dollars.
• Archer MSA or HSA contributions of the employee or the employee’s spouse
• Salary reduction contributions to a Health FSA

Tags: Arizona insurance, health insurance law
Posted in 2010 updates; FAQ and Answers |

Preventative services update for individual/family and group health insurance in the US

Thursday, July 29th, 2010

These six major coverage options are:

(1) Individual or family coverage

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

(6) Full government health plans like Medicaid based mostly on financial criteria

On July 14, the Departments of Treasury, Labor, and Health and Human Services jointly released Interim Final Rules (IFRs) for group health plans and health insurance issuers related to coverage of preventive services under the Patient Protection and Affordable Care Act (PPACA).

DHHS also identified the preventative services for which there will be no cost sharing beginning with the first day of the plan year following September 23, 2010. Below are the services included:

Under the regulations, plans must cover without copay, coinsurance or deductible – certain preventive services that have “strong scientific evidence of their health benefits.”

These are interim final rules (IFRs), which means final rules may eventually differ, but these rules are final in the interim.

General highlights of new regulations:

Grandfathered plans are exempt for as long as they remain grandfathered.
Non-grandfathered plans (i.e., plans either not in effect on 3/23/10 or that made changes since then resulting in loss of grandfathered status) must comply with the no-cost-sharing requirement beginning with the first plan year on or after September 23, 2010.
Preventive services are to be covered without any cost-sharing requirement when delivered by a network provider.
Employers and insurers are not required to provide coverage for recommended preventive services delivered by an out-of-network provider or may impose cost-sharing for recommended preventive services delivered by an out-of-network health care provider.
If a guideline for a recommended preventive service does not specify the frequency, method, treatment, or setting for the service, the plan or issuer may use “reasonable medical management techniques” to determine any coverage limitations on the service.

General list of services to be offered without copay, coinsurance or deductible:

Evidence-based preventive services: This list of items is taken from the current recommendations of the United States Preventive Services. They are included only if they have a rating of A or B. This broad list generally includes:

Breast cancer and cervical cancer screenings
Colon cancer screenings
Screening for vitamin deficiencies during pregnancy
Screenings for diabetes, high cholesterol and high blood pressure

Routine vaccinations: A list of immunizations – recommended by the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention – are included in the rule. They are considered routine for use with children, adolescents, and adults and range from childhood immunizations to periodic tetanus shots for adults.

Prevention for children: The rule includes preventive care guidelines for children – from birth to age 21 – developed by the Health Resources and Services Administration with the American Academy of Pediatrics. Services include regular pediatrician visits, vision and hearing screening, developmental assessments, immunizations, and screening and counseling to address obesity.

Prevention for women: The regulation mandates certain preventive care measures for women. These recommendations will be in place until new requirements for prevention for women are issued by the United States Preventive Services Task Force or appear in comprehensive guidelines supported by the Health Resources and Services Administration.

Billing and Office Visits:

If a recommended preventive item or service is billed separately from an office visit, then cost-sharing may be applied to the office visit

If a recommended preventive item or service is not billed separately from an office visit and the primary purpose of the office visit is the delivery of such item or service, then cost-sharing requirements may not be imposed with respect to the office visit.

If a recommended preventive item or service is not billed separately from an office visit and the primary purpose of the office visit is not the delivery of the preventive item or service, them cost-sharing made be applied to the office visit.

Tags: Arizona insurance, health insurance law, US health insurance
Posted in 2010 updates |

Frequent questions we get asked about the new health insurance law – Part 3 (mostly about employer/group coverage below)

Thursday, July 8th, 2010

These six major coverage options are:

(1) Individual or family coverage

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

(6) Full government health plans like Medicaid based mostly on financial criteria

Note: Last updated: 8-20-2010

Note: Mostly about group/employer – employee insurance below

Non-Discrimination

Q – Varying health plan rules based on salary, requires all group health plans to comply with the IRS section 105h rules that prohibit discrimination in favor of highly comp individuals. Nondiscrimination rules regarding participation and benefit eligibility.

Do you know if this means groups cannot have different waiting periods?

A – If there are different waiting periods, each separate waiting period must be tested independently to determine compliance.

Q – No discrimination between hourly and salaried employees, does this mean no discrimination in plan design or a group covering only salaried and not hourly, or both?

A – Both, IRS Section 105(h) say that 70% of the employees must be covered or 80% covered with 70% eligible.

Q – Group renews 11-1-2010. They have two classes: Management and non-management/hourly. Currently they pay 90% of premium for managers and 50% of their hourly employee’s premium. Managers are all on one plan design, non-management on the other less rich plan.

If they lose their grandfather status- I understand both classes will be tested separately, right? And, in order to avoid non discrimination problems: – Will the waiting period need to be the same?

A – Yes, to both, assuming they want to be in compliance

Q – Will the contribution need to be the same?

A – Yes, assuming they want to be in compliance

Q – Who monitors?

A – IRS

Dependent Coverage

Q – I have a group that the owner’s son graduated from college last year, has relocated to another state, is working and has group health insurance offered to him through his employer. The question came up whether they (the owner) can add him on to their family plan since he is less than 26 years of age. I reviewed the regulations and did not find anything definitive that would answer the question. He is not an IRS dependent, unmarried, age 22, has a full time job, has group insurance. The owner said that since they are already paying for family coverage, their thought was that with the new legislation, they could just add him back as a dependent. Can the employee add him to their group plan?

A – No. This rule does not go into effect until plan years beginning after September 23, 2010. In addition, if the owner’s plan is “grandfathered” because the son has coverage through his employer, the grandfathered plan is not required to add him back.

Q – One company asked if there has been any clarification on the Act concerning the re-instatement of a dependent, who is under the age of 26, but had been termed last year when he completed undergraduate school?

A – The legislation says that group and individual plans must cover dependents (not as defined by the IRS) to age 26. This is effective first day of the plan year following 9-23-2010. For those under age 26 who’ve previously aged off of a group plan the group will need to have an open enrollment of 30 days to allow these dependents back onto the plan. This open enrollment may coincide with the regular group open enrollment. In addition, a special notice to the plan participants is required. Again, this is effective for plan years beginning after 9-23-2010

Q – I have a friend that is insured with CIGNA on a large group account. In June, CIGNA removed their 19 year old son as he had graduated and lost student status effective June 1. Their account renewed July 1, 2010, and she was not advised the son could be added back on the family medical plan, due to the dependent, HCR guidelines. I know most of the Companies are honoring as of June 1, allowing the dependent to be on the health plan if they were already on and would normally lose coverage, due to graduation. Can you tell me if CIGNA will allow her son to be put back on for coverage now?

A –While most carriers didn’t remove college students in May, they didn’t extend that to high school graduates. Unfortunately, this rule is actually effective the first day of the plan year following 9-23-2010, so next June 1.

Miscellaneous

Q – 60 day notification of plan changes, how can this be? We all know we don’t even get renewal rates until 60 days prior.

A – This is for the carrier to notify groups or individual policy holders of a product change.

High-Risk Pool

Q – If someone is looking for other insurance (and is currently insured by another carrier) he would not qualify for a high risk pool and be allowed to be insured so he can switch carriers would he?

A – Correct, the applicant must be 6 months bare to be eligible for the high risk pool.

Q – Also if he is under 26 and was on his parent’s group plan he could not get on if he is currently insured right?

A – Whether or not he’s insured has nothing to do with going onto his parents plan. It depends on 2 things; is the plan grandfathered (if so, and he currently has coverage available through his employer) he cannot go onto the plan or, if the plan is not grandfathered or he does not have coverage available through his own employer…the parents plan doesn’t have to allow him on until the first plan year following 9-23-2010.

Q – Isn’t September when the new law goes into effect that an individual can get insurance but they go into a high risk pool only if they were uninsured for 6 months?

A – The high risk pool is supposed to be available for enrollments beginning July 1, with an effective date of August 1

Q – Can a person apply through the HRP if they have a rider or an exclusion on their current plan?

A – They can apply if they have been 6 months bare, but another requirement is that they provide proof they were unable to get insurance – for the proof they can provide either a decline or documentation that a specific condition was not covered. This would be as valid as a decline….but the 6 months bare remains.

Q – Can a person apply through the HRP if they have a rider or an exclusion on their current plan?

Grandfathered Plans

Q – Since the regulations were just released on grandfathering plans, what can groups do who have already renewed between March and June? Can they go back and grandfather their plans?

A – Groups that renewed or otherwise changed their plans; and the changes caused a lose in “grandfathered” status are able to “revoke” these changes. We are currently surveying the carriers for the exact manner to be utilized to process these revocations. Upon survey results, this information will be distributed to all BGA producers.

Q – According to what we have read, as of 2014 reform is going to limit out-of-pocket max and deductibles. We have seen where out-of-pocket max will be protected by grandfathering but have not seen anything definitive on the deductibles. We are being conservative and if a group already has a $2,500 or $3,000 deductible we have been talking grandfathering basics to them to hopefully protect that. Any thoughts?

A – The number we’ve seen most for deductibles in 2014 is $2,000, but again that will not apply to plans that are grandfathered. So, certainly, anyone who has a deductible greater than $2,000 and wants to keep it, should make every effort at staying grandfathered.

Q – Regarding rates on non-grandfathered plans, are they going to go way up in 2014, but grandfathered plans might fare better?

A – Because grandfathered plans are not required to implement all of the market reforms (only a few), the rates for a grandfathered plan should be lower in 2014. That doesn’t mean the carriers won’t make changes, which may cause the loss of grandfathered status anyway.

Q – I had a question on the Grandfathering of the Health Reform Bill …. I have a group with 15 Salaried Employees (120 hourly employees not covered). The Broker and I discussed the renewal but I indicated that the group could lose the “Grandfather” status by making changes to the plan designs offered. Additionally, there could be a penalty to the Employer in 2014 for not covering these 120 hourly employees. I have two questions:

1. When would the penalty for not covering these employees be imposed on the employer if no “Grandfather” status is in place?

A – If the plan is not grandfathered and thus is subject to 105(h); and subsequently fails the test. The penalty (beginning this year) is $100 per day for each individual with respect to which the failure relates.

Q – 2. In 2014, the Employer will have to cover these 120 employees for medical. If the penalty is imposed in 2014, why is the Grandfathering status important?

A – The highly compensated test and penalty is applicable in 2010 (plan years beginning after 9-23-2010). In 2014, the employer may or may not need to offer coverage to the additional 120 – if they are above 400% of FPL, there’s no tax credit available and thus, no penalty if one of their employees purchases through the Exchange. The penalty is only applicable if a group, with greater than 50 employees, has at least one purchasing through the exchange and receiving a tax credit. Otherwise, there is no penalty.

Q – If a group has a more favorable contribution structure for the highly compensated compared to the rank and file, we have been having them stay grandfathered to protect that. Again have not seen contribution structure addressed directly but we do consider it favoring. Are we wrong?

A –To maintain different contribution strategies between highly compensated and non-highly compensated, the plan must stay grandfathered. While, not prohibited, if there are different contribution structures, each structure must be tested on its own merit and in all likelihood, one will fail the test.

Q – Do the grandfather conditions apply to small groups?

A – All size groups, as well as individual plans.

Q – Under the Internal Revenue Code Section 105(h) does it mean that management carve-out plans would no longer be allowed in order to pass plan discrimination testing?

A – Assuming the management staff is also the top 5 highly compensated and the plan loses it’s grandfathered status, that’s correct it will not be in compliance.

Below is information on Grandfathered Status, as well as, Discrimination under PPACA.

Retiree health plans, stand alone dental and vision plans are exempt from all of the provisions of PPACA.

Q – With small group, 10 or fewer employee’s, is there any difference being grandfathered or not?

A –The size of the group has nothing to do with whether or not a group maintains grandfathered status. The market reforms and discrimination issues apply to all non-grandfathered groups.

Q – Having “grandfathered status” doesn’t seem like a big deal. Is there really any great advantage having grandfathered status, and it seems like in 6 months to a year the status will be obsolete unless the November elections turn things around.

A –For a discriminatory or carve out plan maintaining grandfathered status is essential to continue operating the plan in this manner.

Q – What do you think is the greatest concern regarding grandfathered status with individual plans?

A – The cost of the market reforms in 2014.

Q – If a group renewed on March 1st this year, is the Grandfathered Plans model notice not an issue until next anniversary?

A – Correct – not an issue this was before the date of enactment.

Q – Just had an interesting conversation with a carrier and was informed by a supervisory person that even though we grandfathered the plan this year effective 8-1-2010 they will not be able to stay grandfathered because they will NOT be offering the current plans and will be replacing all plans to the reformed plans, therefore eliminating the grandfathered status next year

A – Absolutely true…if the carrier makes changes to cause the loss of grandfathered status, the client has no option.

Applicable to all Plans INCLUDING Grandfathered

Section 2708 – no waiting periods in excess of 90 days

Section 2711 – no lifetime limits (no annual limits)

Section 2712 – rescissions only in the event of fraud

Section 2714 – extension of dependent coverage to age 26 (for groups only-applicable if the adult child is not eligible for coverage through their own employer)

Group Plan Deductibles

Q – We have a group – not a carve-out, thank goodness! – that has received some very competitive quotes from alternate carriers. One of the options would have the group purchasing a $2,500 deductible but offering the employees a zero deductible. How would this situation come 2014, when there will be legislation limiting the amount of deductibles on group plans? If the ceiling is around $2,000 as expected, this plan would exceed this limitation. But if it is not passed on to the employee, it shouldn’t be a problem, no?

A – The current understanding is that in 2014 the deductible amount an employee will pay will be limited to $2000, so the plan could have a greater deductible, but the employees cost would be at $2000…but, a lot can change by 2014.

Temporary Reinsurance Program

Q – Do you know anything about a bill that supposedly passed about Temporary Reinsurance Program?

A – The temporary reinsurance program is for groups that offer coverage to early retirees.

Tax Credit

Q – Is the small employer tax credit – refundable?

A – If there is no tax liability, I don’t know if it’s refundable but it can be carried over.

Q – Can it be used towards future liabilities?

A – Yes.

Highly-Compensated

Q – If a group already has a plan but adds an additional plan – what is subject to the Highly Compensated test?

A – If the current plan is grandfathered then only the new plan is subject to the test. If the original plan is no longer grandfathered, both plans must be tested.

Q – If a group has 3 plans and they drop 1 of the 3 what happens with the highly compensated testing?

A – If the other plans make no changes causing them to no longer be grandfathered, no testing is necessary.

Q – Can you clarify the “carve out” penalties and when they will become effective for “grandfathered” and “non-grandfathered” health plans?

A – If a plan fails the highly compensated test for plan years beginning after September 23, 2010, the penalty is $100 per day per incident. This does NOT apply to grandfathered plans.

Grandfathered plans are EXEMPT from the following:

Section 2713 – no cost sharing on preventative

Section 2715 – uniform explanation of coverage and standardized definitions

Section 2716 – prohibition of discrimination based on compensation

Section 2719 – internal and external appeals process

Section 2701 – affordability test

Section 2702 – guaranteed availability

Section 2703 – guaranteed renewability

Section 2705 – guaranteed issue

Section 2707- comprehensive health insurance coverage

Section 2709 – coverage for individuals participating in clinical trials

There are a variety of other Sections from which grandfathered plans are exempt, but they deal with quality of care, etc. One of the most critical sections to be concerned about right now is Section 2716 – discrimination in favor of the highly compensated. This is especially true if you have a group carve-out plan.

Another component of the Rules issued last week is the ability for a plan that made changes between 3-23-2010 and 6-17-2010; and those changes would cause the plan to lose it’s grandfathered status, to revoke those changes. We are surveying the carriers to find out the process for these revocations.

Group ONLY

To maintain grandfathered status, a plan must include a statement that the plan believes it is a grandfathered health plan within the meaning of section 1251 of the Patient Protection and Affordable Care Act and must provide contact information for questions and complaints. The DOL model language can be found at: http://www.dol.gov/ebsa/grandfatherregmodelnotice.doc .

Non- Discrimination Rules for Insured Plans

PPACA mandates that group plans satisfy the requirements of 105(h) of the Internal Revenue Code – prohibition on discrimination in favor of the highly compensated). Insured plans are now subject to this testing. Also, if you have a plan with multiple waiting periods, each waiting period group must be tested on it’s on.

The following information is necessary to perform this test:

All employees

All eligible employees

Compensation for all employees

Who is an officer

Who is a shareholder and the percent of company stock they own

Date of hire

Age

FTE, PT or seasonal identifier

Anyone covered by a collective bargaining agreement

The eligibility test is as follows:

The plan must pass one of 3 coverage tests:

- 70% of all employees must benefit under the plan

- the plan must benefit 80% of the eligible’s and 70% of the employees are eligible

- the plan benefits a non-discriminatory classification of employees

If a plan provides different benefits to different groups of employees, each benefit structure (i.e. waiting period) must be tested as if a separate plan.

Tags: Arizona insurance, health insurance law, US health insurance
Posted in 2010 updates; FAQ and Answers |

Individual, Family, and Employer responsibilities in the new health insurance law

Tuesday, June 29th, 2010

Good Neighbor Insurance, Inc, www.gninsurance.com and www.gnazhealth.com, is keeping up with the changes in our US health care system and will be, over the course of the next months and years, expanding this section with up-to-date information. Health care overhaul will bring change but it is going to happen slowly. There will be a lot of minor as well as major changes over the course of the next few years with a bulk of these changes happening in 2014 and the last parts being implemented by 2018.

There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work.

These six major coverage options are:

(1) Individual or family coverage (private health insurance)

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options, two or more plans, through the state you are residing in (fully integrated 1-1-2014) are quasi-government and private insurance coverage combined

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards, www.gninsurance.com/medicare.asp

(6) Full government health plans like Medicaid, CHIP, Veterans insurance, and others based mostly on financial criteria

Overview

The health reform package is made up of two parts: a bill that passed the Senate on Christmas Eve, passed the House on March 21, and was signed into law by the President on March 23, and a second piece of legislation: the House’s reconciliation bill, which makes changes to the original law, passed both chambers on March 25, and was signed by the President on March 30.

Many of the provisions in the law will not take effect for several years. At the earliest, provisions that affect employer-sponsored health plans will take effect six months from the date of enactment – in late September. Even then, those early provisions will not affect plans until they renew for the next plan year. The health reform law has thousands of pages and hundreds of provisions. So it’s important to remember that before many of those provisions are put in place, additional laws and regulations will need to be developed. That could be a lengthy process. Here are some highlights of the major provisions.

Individual responsibility

Starting in 2014, everyone must have coverage or pay a penalty, which will be enforced by the Internal Revenue Service. The penalties will be phased in over time:

• In 2014, an individual without insurance must pay whichever amount is greater: $95 or 1 percent of income.

• For 2016 and beyond, that penalty rises to $695 or 2.5 percent of income, whichever is greater (the $695 is indexed from 2016 on).

• Families will pay half the penalty for children, with a cap of $2,085 per family.

• There will be exemptions to this requirement, such as in cases of financial hardship and other limited circumstances. Subsidies to buy insurance in new state exchanges will be available in the form of tax credits and cost-sharing assistance for people above Medicaid eligibility but below 400 percent of the federal poverty level. Medicaid eligibility will be increased to 133 percent of the federal poverty level.

Employer responsibility

New employer penalties and obligations

Starting in 2014, employers don’t have to offer their employees health insurance coverage, but most of them with more than 50 employees will pay an assessment if they don’t, or if they offer coverage that isn’t affordable. Full-time and part-time employees are included when determining whether an employer has 50 employees (based on current full-time employee equivalency rules).

• Employers with 50 or more employees that do not offer “minimum essential coverage” will pay $2,000 for each employee over the first 30 employees if one of their employees gets a tax subsidy to buy insurance under an exchange.

• Employers with 50 or more employees that do offer minimum essential coverage but have at least one full-time employee receiving subsidized coverage under an exchange will pay whichever is less: $3,000 for each employee receiving a premium credit, or $2,000 for each full-time employee.

*Employers must provide “free choice” vouchers to employees with incomes below 400 percent of the federal poverty level if the employee’s contribution to coverage is between 8 percent and 9.8 percent of income and the employee chooses to purchase coverage in the exchange. No penalties will be imposed on employers with respect to employees who receive these vouchers.

*Employers with more than 200 employees that offer coverage must automatically enroll new full-time employees in coverage. Employees may opt out.

New employer reporting requirements

• Beginning in 2011, employers will be required to disclose the value of health care benefits on an employee’s annual W-2.

• Employers will be required to notify employees:

– About the availability of the exchange

– for new employees, at the time of hiring; for current employees, by March 1, 2013

– They may be eligible for a subsidy under the exchange if the employer’s contribution to the plan is less than 60 percent of total allowed costs of the benefits;

– If the employee purchases coverage in the exchange, he or she will lose the employer’s coverage contribution.

• In 2014, large employers will be subject to expanded 5500 reporting requirements to include information on the health insurance coverage of their employees.

Small business tax credits

Beginning in 2010, small businesses with fewer than 25 employees and average wages of less than $50,000 get a tax credit for their contributions to buying health insurance for employees.

The tax credit starts at up to 35 percent and increases to 50 percent in 2014 when the exchange is operational. A full tax credit may be available to small businesses with fewer than 10 employees and average wages of less than $25,000.

Taxes and fees on small business

*Starting in 2014, a small business (when talking about the new health insurance law the US government states that small businesses employ 2 to 49 employees) that already offers group insurance can pay a $3,000 per-year tax on each employee if that employee qualifies and accepts government health care premium subsidies or government-run health care. Thus, if the employee takes the government-run plan over the employer’s plan even for one month of the calendar year the employer will have to pay a $3,000 annual tax. This can happen even though the employer’s plan may have stronger benefits than the government-run plan. Government-run plans can be Medicare, Medicaid, CHIPS, Veteran, and other possible State government plans including exchanges. This also is applicable if your employee’s spouse takes any government-run plan you as an employer will be liable for this $3,000 tax. Thus, the employer of your employee’s spouse and you will be paying a total of $6,000 annual tax if one takes any government-run insurance plan.

*Businesses electing not to have group coverage for their employees will be charged an 8% tax on payroll. This tax will be applied for each employee not meeting the government’s minimal coverage requirement.

*A small business could incur two types of taxes for the same employee if the employer does not provide group insurance and if an employee receives premium subsidies from the government to help pay for health insurance.

Doug Gulleson loves to scuba dive overseas. He makes sure he always takes his credit card AND international travel insurance. Visit Good Neighbor Insurance at www.onlineglobalhealthinsurance.com/trip-cancellation for your next overseas trip and get a FREE quote.

Tags: Arizona insurance, health insurance law, US health care
Posted in 2010 updates |

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Frequent questions we get asked about the new health insurance law – Part 3 (mostly about employer/group coverage below)

Individual, Family, and Employer responsibilities in the new health insurance law

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