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PPACA Update

PPACA Update. VSBA COSA – Fall Meeting Williamsburg, VA November 16, 2011 R. Craig Wood 434.977.2558 cwood@mcguirewoods.com. A Complex and Confusing New Law. Patient Protection and Affordable Care Act, P.L. 111-148 enacted March 23, 2010 (PPACA).

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PPACA Update

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  1. PPACA Update VSBA COSA – Fall Meeting Williamsburg, VA November 16, 2011 R. Craig Wood 434.977.2558 cwood@mcguirewoods.com

  2. A Complex and Confusing New Law • Patient Protection and Affordable Care Act, P.L. 111-148 enacted March 23, 2010 (PPACA). • Health Care and Education Reconciliation Act, P.L.111-152 enacted March 30, 2010 (HCERA), amends PPACA. • The laws amend ERISA, the Internal Revenue Code, Public Health Service Act, and Fair Labor Standards Act. • Regulatory guidance will come from DOL, IRS, and HHS. 30970291.2

  3. Recent Developments in Health Care Reform • Implementation of the Patient Protection and Affordable Care Act (“PPACA” or “health care reform”) continues. • Five major regulation packages, plus sub-regulatory guidance • Adult dependent coverage • Grandfathered plans • Pre-existing conditions, etc. • Preventive services • Internal claims/external review • Recent developments • Legal Challenges to Health Care Reform 30970291.2

  4. Changes to Claims and Appeals Procedures • DOL, HHS and IRS (the “Departments”) issued extension of grace period for compliance with the internal claims and appeals process and external review process for non-grandfathered plans • Until January 1, 2012 for certain requirements under the interim final regulations • Amendment to the 2010 interim final regulation issued June 22, 2011 • The amendment modifies 16 standards for appeals and review procedures of the 2010 interim final regulations, summarized in DOL Technical Release No. 2011-02 • Possible additional changes to health and welfare plans, SPDs and administrative procedures may be necessary once final regulations are issued • Non-grandfathered plans, for the 2012 plan year • Monitor compliance dates for grandfathered plans 30970291.2

  5. PPACA initial provisions • Grandfather Provision • Group health plans already in effect are grandfathered from PPACA indefinitely, except for insurance reform provisions • But very easy to lose grandfathered status 30970291.2

  6. Grandfather Rules • The employer enters into a new contract, certificate or policy of insurance after 3/23/2010 • The insurance ceases to provide all or substantially all benefits to diagnose or treat a particular condition • Any increase in a percentage cost-sharing requirement • Any increase in a a fixed-amount cost-sharing requirement (deductible or out-of-pocket limit) 30970291.2

  7. Grandfather Rules • Any increase in a fixed amount co-payment that is more than • $5.00 (increased by medical inflation), or • Medical inflation plus 15%. • Any employer decrease for tier coverage by more than 5% • Any change in lifetime or annual benefit limits 30970291.2

  8. Temporary High-Risk Pool • A temporary high-risk health insurance pool shall be established to provide coverage for eligible employees with a pre-existing medical condition who have no health coverage. • Must keep in place until 2014 (when exchanges are operational). 30970291.2

  9. Provisions in effect for all plans • Pre-existing exclusions – forbidden for enrollees under age 19 • Dependent coverage • Married and unmarried children qualify • Not offered to children of dependents or spouses • Unless adult child has offer of employer-covered insurance • Can be purchased with pre-tax dollars • In 2014, dependents can stay on parents’ plan even if have employer coverage available 30970291.2

  10. Appeals Procedures • Interim Appeals • Group plans must implement internal claims and appeals processes that comply with Section 503 of ERISA, including governmental plans • Recission of coverage is entitled to internal appeal • Urgent care claims must be decided in 24 hours (previously 72 hours) unless claimant does not provide sufficient information to make a determination • If an insurer fails to comply with any aspect of the internal appeals process, the claimant can immediately pursue an ERISA remedy 30970291.2

  11. Non-discrimination issue • Statute prohibits discrimination in favor of highly compensated employees • Rules temporarily suspended by IRS • “Highly compensated employees” are the top 25% compensated of all employees • Under the new rule, a school could no longer pay a higher percentage of the cost of health care coverage for HCE’s 30970291.2

  12. Possible fixes • IRS has suspended rule, and is considering possible approaches • Exempting health coverage from the rule altogether • Changing the definition of HCE to anyone making more than $110,000 per year • Exempting employees who pay income tax on the excess benefit 30970291.2

  13. 2011 Requirements • Health Spending Accounts (HSAs), Flexible Spending Accounts (FSAs) and Health Reimbursement Accounts (HRAs) changes • OTC medications not reimbursable except insulin and OTC meds prescribed by a physician 30970291.2

  14. W-2 Reporting • Originally for 2011, now deferred to 1/1/12, plan sponsors must report the cost of coverage under an employer-sponsored group health plan on Form W-2 • Information only; employer-provided health coverage not taxable • IRS issued new draft form W-2 for 2011 (to be distributed in January 2012) • Use Code DD in Box 12 • Mandatory beginning with 2012 W-2’s • Copy of draft form can be found at http://www.irs.gov/pub/irs-utl/draft_w-2.pdf • Additional guidance expected later this year 30970291.2

  15. Amendments to IFR – Coverage of Preventive Services under PPACA • Interim final rule with request for comments was issued on August 3, 2011 (effective August 1, 2011) • Amends the previous IFR published July 19, 2010 – Group Health Plans and Health Insurance Issuers Relating to Coverage of Preventive Services under the Patient Protection and Affordable Care Act • The Health Resources and Services Administration (HRSA) was required to develop comprehensive guidelines for preventive care and screenings for women • Implementation of these new required guidelines is required no later than plan years beginning on or after the date that is one year from when the new guideline is issued • Provision of contraceptive services for all women • Comments pending (period ends September 30, 2011) 30970291.2

  16. Other Recent Guidance • Health Insurance Premium Tax Credit (IRC §36B) • Notice of proposed rulemaking and notice of public hearing released August 12, 2011 • Refundable tax credit to help individuals and families afford health insurance coverage by reducing the out-of-pocket premium cost • Affordability test (IRC §4980H(b)) will be based on an employee’s Form W-2 (not total household income) • Possible exclusion of self-funded plans and fully-insured large group plans from requirement to provide “essential benefits” per list of federally mandated benefits • Open questions remain: “Minimum Essential Coverage”; application of dual or family coverage; employer mandates under §4980H(a) 30970291.2

  17. The CLASS Act • CLASS = "Community Living Assistance Services and Supports" Program: • Federally-administered long term care insurance. • Voluntary for employees. • Must participate in program for at least 60 months before receiving benefits. • Effective 2011: Employees may be automatically enrolled in the CLASS program via payroll deduction. • Contingent on implementation of the program and issuance of regulations describing automatic enrollment procedures. 30970291.2

  18. CLASS Act • However, in October, HHS Secretary Sebelius sent a report and letter to Congress • HHS study found that the CLASS Act was not feasible, and has recommended suspension of the program requirements 30970291.2

  19. ERRP Update • The Early Retirement Reinsurance Program stopped accepting applications after May 5, 2011; more than 5,000 employers accepted to the program; $1.8 billion already disbursed • Ongoing administration by plan sponsors; maintenance of contribution requirements • Guidance on “Complying with the Prohibition on Using Early Retiree Reinsurance Program Reimbursements as General Revenue”; Issued by CMS on July 20, 2011 30970291.2

  20. 2012 Changes • Summary of Coverage – Insurers and plan sponsors must provide a summary of benefits to all participants in a for prescribed by HHS • Plan must provide 60-days notice of any changes to the Plan • Quality of Care reporting – Reporting on incentives to improve quality of care, patient outcomes, disease management, reducing medical errors and other such improvements in care 30970291.2

  21. Summary of Benefits and coverage • Require documents that: • Cover key terms of coverage • Coverage facts label • Examples of costs of common illnesses • Uniform glossary of medical and insurance terms • Not necessarily the same terms as plan and SPD use • Mandates uniform appearance • 4 pages, double-sided • 12 point font • Imposes 60-day advance notice for changes in the SBC document • At odds with ERISA rules for SMMs 30970291.2

  22. Summary of Benefits and Coverage • Rule is effective 2 years after enactment (3/23/2012) • $1,000 fine per enrollee for willful violations • Other penalties may be assessed by DOL and Treasury • Applies to both group health plans and insurance coverage • So, it covers self-insured plans • Intended to encourage comparison shopping by individuals among available plans • Published as a proposed regulation • Not an interim final regulation • Comments due 10/21/2011 • Agencies seek comments on many issues 30970291.2

  23. Summary of Benefits and Coverage • No extension of effective date – YET • Who must provide? • Insurers provide to plan sponsor • Plan administrator provides SBC for each option available to the participant • When provided? • Initial enrollment/application • Renewal/reenrollment • Material change • On request 30970291.2

  24. Summary of Benefits and Coverage • Content • Uniform definitions • Description of coverage, exceptions, limitations • Cost-sharing provisions (deductibles, co-pays, co-insurance) • Continuation of coverage • Coverage examples • Statement on minimum essential coverage and percentage that employer pays • Lots of contact information • Information on the glossary • Premium and cost information • More 30970291.2

  25. Summary of Benefits and Coverage • Action Plan • Which plans must provide SBC? • Compare SBC template to existing communications documents • Work with insurer/TPA to determine who will provide SBC • Look at indemnification language • How to combine with open enrollment materials • Electronic delivery? 30970291.2

  26. What Happens in 2014? • Health Insurance Exchanges: • New market for individuals and small groups to be established by states. • In 2017 states may allow larger groups to participate. • Massachusetts and Utah are current examples. • Employer "pay or play" provisions. • Employers may be penalized for failing to offer adequate coverage. • Annual limits on coverage eliminated – no “caps” • No pre-existing condition limitations on new coverage 30970291.2

  27. Legal Challenges to Health Care Reform • Challenging PPACA constitutionality; specifically the individual mandate • State of Florida v. Department of Health and Human Services • January 31, 2011 ruling by Judge Vinson declaring all of PPACA unconstitutional because cannot sever individual mandate from other PPACA provisions • 11th Circuit Court of Appeals affirms (8/12/11) • Commonwealth of Virginia v. Sebelius • December 2010 ruling by Judge Hudson found PPACA’s individual mandate unconstitutional • Supreme Court denied cert for immediate review • Appeal and cross-appeal pending in the 4th Circuit Court of Appeals • Liberty University, Inc. v. Geithner • Ruling upheld constitutionality of individual mandate • Appeal pending in the 4th Circuit Court of Appeals • Thomas More Law Center v. Obama • Ruling upheld constitutionality of individual mandate • 6th Circuit Court of Appeals affirms (6/29/11) • Thomas More Law Center filed for Supreme Court review on July 26, 2011 30970291.2

  28. Legal Challenges to Health Care Reform • On Nov. 14, the Supreme Court granted cert to the Florida (11th Circuit) decision • Issues on appeal: • Are the “individual mandates” that all Americans purchase health insurance constitutional? • If not, does the rest of the law fail because the funding is primarily the revenues from mandated insurance? • Can states be forced to expand their share of Medicaid costs by the federal government? • Can states be required to provide their employees a federally-mandated level of health coverage? 30970291.2

  29. PPACA Implementation – What to Do Now? • Complete repeal is unlikely during the current administration, although negotiated changes may be possible • Must continue to comply with all aspects of PPACA until resolution occurs 30970291.2

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