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.
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?
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.
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.
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.
Posted by Doug Gulleson at www.gntravelinsurance.com
