11 What You Need to Know About Health Care Reform Compliance Presented by Marcia S. Wagner, Esq. The Wagner Law Group Kim Buckey, Principal HighRoads

Introductions – Marcia S. Wagner Marcia S. Wagner is a specialist in pension and employee benefits law, and is the principal of The Wagner Law Group in Boston, Massachusetts, which she founded approximately 15 years ago. A summa cum laude and Phi Beta Kappa graduate of Cornell University and a graduate of Harvard Law School, she has practiced in Boston for over twenty-four years. Ms. Wagner is recognized as an expert in a variety of employee benefits issues and executive compensation matters, including qualified and non- qualified retirement plans, “rabbi” trusts, all forms of deferred compensation, and welfare benefit arrangements.

Introductions – Kim Buckey Kim Buckey is the Principal for the HighRoads Communications consulting practice focused on delivering high value strategic and practical solutions for clients in an efficient manner leveraging the HighRoads technology platform. Previously, Kim served as national compliance champion and global quality leader for Watson Wyatt's communication practice. In her 30-year career Buckey has helped dozens of companies meet their compliance requirements by completing hundreds of health and welfare and retirement plan SPDs.

4 From the Beginning Legislation –Patient Protection and Affordable Care Act –Health Care and Education Affordability Reconciliation Act of 2010 Main Objectives & Consequences –Increase transparency and efficiency of the health care system –Require health care coverage for individuals –Provide premium subsidiaries for lower income individuals –Impose new taxes, responsibilities, and penalties on employers and others

5 Mandatory Coverage for Individuals Effective 2014 Most U.S. residents must have minimum “essential health benefits” or pay a penalty Penalty: –$95 or 1% of income in 2014 –$695 or 2.5% of income in 2016

6 Premium Assistance Small employer subsidies Employees eligible if income between 100% and 400% of federal poverty level Cost sharing subsidy for those with income below 200%

7 American Health Benefit Exchanges Operational in 2014 Offer Bronze, Silver, Gold, Platinum, and Catastrophic Plan coverage to individuals Out of pocket costs reduced for lower income individuals SHOP

8 Insurance Market Guaranteed Issue Guaranteed Renewability High Risk Pool Rating only by: –Family structure –Community rating value of benefits –Age –Smoking

9 Medicare and Medicaid Reduce certain Medicaid payments Independent Advisory Panel Close Medicare Part D doughnut hole

10 Funding Additional taxes imposed on the insurance industry: A 40% excise tax is imposed on “Cadillac” plans Increase Medicare portion of FICA A 3.8% surtax is imposed in 2013 on net investment income Reduction of Medicare Part D premium subsides Elimination of the deduction for expenses attributable to the Medicare Part D subsidy Increase in the deduction threshold on medical expenses from 7.5% to 10% A 10% excise tax on indoor tanning services

11 Employer Group Health Plans – Future Consideration Employers with more than 50 employees who do not offer minimum essential health coverage will be assessed a fee of $2,000 per employee, with an exception for the first 30 employees If contributions are in excess of 9.8% of income, the employer will be assessed a penalty of $3,000 for each employee who receives a premium tax credit, with an exception for the first 30 employees Maximum 90 day waiting period Employers with more than 200 employees must automatically enroll their employees in the employer- sponsored group health plan

12 Employer Group Health Plans – Future Consideration (continued) Employer must offer a “free choice” voucher Health care flexible spending account plans will be limited to $2,500 Notification requirements –Uniform summary of benefits –W-2 reporting –Individual coverage report

13 Grandfather Rules Definitions: –A group health plan that was in existence on March 23, 2010 –Identity of participants may change –Each benefit package examined separately To maintain grandfather status, a plan must: –Include a statement saying plan is a grandfathered health plan; –Maintain records that document the terms of the plan in effect of March 23, 2010; –Make records available; –Provide contact information

14 Grandfather Rules (continued) Grandfather status will be lost if the plan: –Enters into a new policy, certificate, or contact of insurance after March 23, 2010 –Eliminates substantially all benefits for a specific illness –Increases co-insurance or cost sharing –Decreases employer contribution percentage –Imposes certain new annual limits on benefits

15 Provisions Applicable to All Plans Coverage for adult children Restrictions on annual and lifetime benefit limits Elimination of pre-existing condition exclusions Limitation of rescissions Over-the-counter medications Provide free preventative care services Participants may select primary care providers, including pediatric care providers, and OB/GYNs Insured group health plans will be subject to nondiscrimination rules Emergency care services without prior authorization Internal and External Appeals Process Provisions Applicable to Non-Grandfathered Plans

16 Coverage of Adult Children Must make health care coverage available to children of plan participants until age 26 May not consider: –Tax dependency –Residency –Student status –Marital status –Employment status May exclude adult child who is eligible for health coverage under another employer’s plan Cannot require additional contributions because child is adult

17 Coverage of Adult Children (Continued) Special enrollment period –For adult children who lost, or never had, coverage –Enrollment period must be at least 30 days –Must receive written notice of enrollment opportunity Taxation –No imputed income even if adult child not tax dependent until end of tax year in which child turned 27 –Pre-tax contributions to cafeteria plan permitted if plan amended –Change in Status rules include adult, non-dependent children

18 Restrictions on Annual and Lifetime Benefit Limits No lifetime dollar limits on essential health benefits Must notify individuals who reached prior lifetime limit of 30-day opportunity to re-enroll Annual limits on essential health benefits must be at least: –$750,000 per plan years beginning after September 22, 2010 –$1.25 million for plan years beginning after September 22, 2011 –$2 million for plan years beginning after September 22, 2012

19 Restrictions on Annual and Lifetime Benefit Limits (Continued) Annual limit applies separately to each individual Annual limit cannot be offset by non-essential health benefits Exceptions to annual limit: –Health FSAs –HSAs –Mini-med or limited benefit plans New open enrollment period

20 Pre-Existing Conditions Pre-existing conditions definition Cannot impose on child under 19 Cannot impose on anyone as of 2014 Cannot exclude from coverage Rescission Rescission is a retroactive cancellation of coverage Rescission only permitted for fraud or intentional misrepresentation Thirty day notice requirement

21 Over-the-Counter Medications Effective January 1, 2011 Applies to all non-prescribed over-the-counter medications, except insulin Health Care FSAs, HRAs cannot reimburse. HSA distributions taxable Preventative Care Services Cannot have cost sharing such as co-pays or deductibles Preventative Care includes: Well baby care; mammograms; services recommended by certain government agencies; services to be included by HHS

22 Choice of Health Care Provider and OB/GYN Referrals Must allow selection of any primary care or pediatric care provider in plan’s network Referral to OB/GYN not required Non-Discrimination Rules for Insured Plans Non-discrimination rules for insured plans will be “similar” to self-funded plan rules IRS guidance needed

23 Emergency Care Services Must be provided without prior authorization or regard to plan’s network Out-of-network and cost sharing requirements must be the same as for in-network Emergency Medical Conditions – expectation of serious jeopardy or impairment to bodily functions or organs Emergency service provider may balance bill patient

Internal and External Reviews Internal –Comply with DOL’s current claims requirements plus six new requirements including: Urgent care claims resolved within 24 hours Plan must hire independent decision makers Must provide “culturally and linguistically appropriate” notices External –Comply with state external review process for insured plans, or –Comply with procedures in new DOL Technical Release

Communicating About Health Care Reform Employees are looking for information about how health care reform will affect them and their benefits Opportunity for employers to enhance employee perception about their plans Potential for improved employee engagement –Recent studies show that employers with good benefits communications have more satisfied and engaged employees 25

There’s a Lot to Communicate YearTopics 2010 Auto enrollment and opt out Dependent eligibility Changes to annual and lifetime limits 2011 OTC drugs no longer eligible medical expenses W-2 reporting 2012Benefit summaries 2013 Changes to FSA contribution limit Information about the Exchange and how employer plan coordinates 26

Your Options 27 ApproachProsCons Update your SPDsMay be out of compliance anyway Long shelf life May not have time before the end of the year, especially if you have many, or complex, SPDs Can be costly to produce Issue SMMs Often less costly to produce and mail Can be generated relatively quickly May get separated from SPDs Fulfillment may be a challenge (who gets what) Other tools (enrollment materials, newsletters, meetings) Timely May have more visual impact Likely to end up in the trash

The Role of SPDs Legally required –Every five years if plan has changed –Every 10 years if no changes “User guides” for benefits –Can help participants make informed decisions about what coverage to elect –Explain how to use the benefits Regulations spell out: –Content (specific to the type of plan being described) –Style (easily understood by average participant; no jargon) 28

The Role of SPDs (cont’d) Not all plans require SPDs –Non-ERISA plans DC FSA –May depend on services provided EAP Severance Distribution is an issue –Print vs. electronic –Answer may depend on the audience –Trend is definitely away from print Cost “Green” initiatives 29

What’s Next? –Summaries of coverage Distributed on or before March 30, 2012, and at enrollment –60-day advance notice of changes to benefits (effective 2012) 30

You Need a Plan The volume, frequency and complexity of changes over the coming years demand a strategy Map out: –What needs to be communicated when –When guidance is coming from HHS –Who needs what information when –Who needs to review and approve what information –What decisions will need to be made about benefit strategy and design –What is best timing/media to get messages across –Who’s going to do the work –How can technology help 31

Why worry? 32

33 Penalties $110 per day penalty for failure to provide compliant SPD Potential back benefits & court fees if SPD found to be lacking HIPAA Penalties: –$100 to $50,000 based on number and nature of violations –Maximum penalty $1,500,000 per year –Separate violation occurs on each day of non- compliance

34 Conclusion – Action Steps for Employers  Determine if you are a grandfathered plan  Assess plan with regards to new requirements  Prepare in advance for: –Required open enrollments –Plan amendments –New required communication materials and notices –Revisions of summary plan descriptions and new summaries of material modifications –Keep Alert! Government agencies will be issuing additional regulations and revising those that have already been issued

Q&A Have a question later? Ask the Experts Marcia Wagner Tel: (617) Website: Kim Buckey Tel: (781) x 3085 Blog:

Thank you Thank for attending today’s webinar. You will be receiving several reference materials -Electronic distribution guideline -SPD Content Checklist -What Plans Require an SPD -Best Practices of Health Care Reform Compliance article by the presenters