1. Health and Legislative Reform
Year in Review and What’s Ahead by
Rae Anne Beaudry
Executive Vice President
The Horton Group

2. Agenda 2010 Federal Reform: A look at the past… Are you in compliance?
2011: Expectations for the current year
2012 and beyond (current view)

3. 2010 Federal Reform & Wisconsin: A look at the past…
2010 Federal Reform & Wisconsin: A look at the past… Are you in compliance?
Federal Agenda
What Federal mandates applied to all plans
Notices
What Federal mandates applied only to “grandfathered” plans
Federal Retiree Reinsurance—the early retiree subsidy
Notice
Other Notices
2010 Wisconsin Challenges

4. 2010 Federal Heath Reform - The Law Itself
Two laws combined to make up reform as we know it today.
Patient Protection and Affordable Care Act
Public Law No
Signed March 23, 2010
Health Care and Education Reconciliation Act
Public Law No
Signed March 30, 2010

5. 2010 Federal Reform: Mandates for All Plans
First plan year after September 23, 2010:
No annual or lifetime dollar limit on essential benefits (with certain restricted annual limits permitted)
DOL has provided list of essential items, additional clarification expected.
Can still limit non-essential benefits, impose visit limits, exclude all benefits for a condition (subject to federal/state law)
Can have restricted annual limit on essential benefits
$750,000 for 2011 (plan years beginning on or after September 23, 2010, but before September 23, 2011)
Note: only essential benefits can be counted toward the maximum
Child coverage to age 26 - Child only defined by relationship to the parent, without other eligibility requirements

6. 2010 Federal Reform: Mandates for All Plans
First plan year after September 23, 2010:
No rescission except for fraud or intentional misrepresentation
Some clarification provided by DOL – more expected
If a plan covers only active employees (subject to the COBRA continuation coverage provisions) and an employee pays no premiums for coverage after termination of employment, can terminate coverage back to the date of termination of employment, due to delay in administrative record-keeping, without being considered a rescission.
If a plan does not cover ex-spouses and the plan is not notified of a divorce and the full COBRA premium is not paid by the employee or ex-spouse for coverage, can terminate coverage retroactive to the divorce and not considered a rescission of coverage.
Written notification required for rescission.
No preexisting condition exclusions for children under age 19

7. 2010 Federal Reform: Notices for All Plans
Model Notice on Lifetime Limits No Longer Applying and Enrollment Opportunity
Model Notice of Opportunity to Enroll in Connection with Extension of Dependent Coverage to Age 26
“Grandfathered” plans have option to restrict coverage due to child’s access to other employer sponsored health plan (until loss of “grandfathered” status or 2014).

8. 2010 Federal Reform: What is a “Grandfathered” Plan?
To be grandfathered, must have enrolled individuals continuously since March 23, 2010
Does not have to be the same individuals
Plan may add new employees (newly hired or newly enrolled) and retain grandfathered status
With small exceptions, collectively bargained plans (insured and self-insured) are subject to the same requirements and effective dates as non-collectively bargained plans

9. 2010 Federal Reform: What Won’t Cause a Loss in Grandfathering?
Plan will not lose grandfathered status if . . .
Change plan to comply with federal or state law (unless they otherwise would result in loss of grandfathering)
Change third party administrators (TPA’s)
Change fully insured carriers
Change provider network
Change in a prescription drug formulary
Voluntary plan changes to comply with health reform mandates
Determined on a benefit package by benefit package basis

10. 2010 Federal Reform: How does a Plan Lose Grandfathering?
Elimination of benefits: eliminate all or substantially all benefits for particular condition (includes eliminating benefits for a necessary element to diagnose or treat a condition)
Coinsurance: any increase of coinsurance percentage to any extent (e.g., 1%)
Increase copayment: by more than greater of
$5 (adjusted for medical inflation); or
Medical inflation plus 15 percentage points (from )
When change can do three years plus 15% at one time - cumulative

11. 2010 Federal Reform: How does a Plan Lose Grandfathering?
Other cost-sharing: Increase deductible or out-of-pocket max by more than medical inflation plus 15 percentage points (from )
Contribution rate decrease: decrease the employer or employee organization’s contribution rate toward the cost of any tier of coverage by more than 5%
Measured by each “tier” of coverage (e.g., self-only, family)
Changes in annual limits
No Previous Limits: impose an overall annual dollar limit if had no annual or lifetime dollar limit on March 23, 2010
Previous Lifetime Limits: impose an overall annual dollar limit that is lower than the lifetime dollar limit in effect on March 23, 2010 (and no annual limit existed at that time)
Previous Annual Limits: decrease dollar value of annual limit if imposed overall annual dollar limit on March 23, 2010

12. 2010 Federal Reform: How does a Plan Lose Grandfathering?
Anti-abuse:
Employee transfer: Revoking a plan’s grandfathered status if it forces consumers to switch to another grandfathered plan that, compared to the current plan, has less benefits or higher cost sharing as a means of avoiding new consumer protections
Merger/acquisition: If principal purpose of a transaction is to cover new individuals under a grandfathered plan

13. 2010 Federal Reform: “Grandfathered” Special Rule for Bargained Plans
Insured collectively bargained plan retains grandfather status, even if changes are made, until last CBA in effect on March 23, 2010 terminates
Once period ends, look back to plan as it existed on March 23, 2010 to determine if grandfathering is lost
This only applies to insured plans and does not extend effective date for mandates that apply to grandfathered plans (e.g., age 26)

14. 2010 Federal Reform: Documentation Requirements for “Grandfathered” Plans
Notice: must state in plan materials whether it “believes” it is grandfathered
In any plan materials provided to a participant or beneficiary describing the benefits provided
Maintain Records: must maintain records documenting plan in existence as of March 23, 2010 in order to verify status as grandfathered
Retain Plan document, SPD, service provider contracts that discuss benefits
Availability of records: must make records available upon request
i.e. to participants, beneficiaries, subscribers, state or
federal agency officials

15. 2010 Federal Reform: Notices for “Grandfathered” Plans
Grandfathered Notice
Grandfathered health plan

16. 2010 Federal Reform: Mandates for Non-Grandfathered Plans
First plan year after September 23, 2010:
No cost sharing for in-network preventive care and immunization
DOL provided list of preventive care items and services, additional guidance expected.
Internal and external appeal process
Establishes a framework and minimum standards for internal appeals and a new federal external review process.
Must allow pediatrician as child’s PCP

17. 2010 Federal Reform: Mandates for Non-“Grandfathered” Plans
First plan year after September 23, 2010:
Must allow women to choose OB-GYN without referral
No prior authorization for emergency care and must treat similar to in-network
Nondiscrimination for fully insured plans under IRC 105(h) (in addition to current rules for self-insured)
For insured plans, the penalty is $100/day, not taxation of benefit payments
Employers can implement a “simple cafeteria plan” to avoid testing
Among other things: Requires employers to contribute a minimum of employee contributions to non-HCE and non-key employees.
Delayed

18. 2010 Federal Reform: Notice for Non-“Grandfathered” Plans
Model Notice on Patient Protections
Appeals Process (applicable with new federal external appeals process) - provide a culturally and linguistically appropriate notice to participants regarding the new appeals process and their options for assistance. Applicable guidelines:
Plan covers at least 100 enrollees and lesser of 500 or 10% of plan’s enrollees speak the same non-English language, then all English plan communications about the appeal processes must include a notice in the non-English language that appeals and denial communications are available in the native language. Once an enrollee makes a request, all subsequent notices must be in the native language.
Plan covers fewer than 100 enrollees, the same requirement applies if 25% or more of the plan’s enrollees speak the same non-English language.
Plan maintains a telephone hotline to answer questions or assist in filing claims and appeals, such assistance must be available in the native language. This foreign language requirement appears to apply to all plan communications.

19. 2010 Federal Reform: Early Retiree Reinsurance Program
Temporary program to reimburse plans offering health coverage to pre-Medicare retirees between ages 55 and 64
Reimburses employer for 80% of medical, hospital, surgical and prescription drug claims (before co-pays, co-insurance and deductibles) between $15,000-$90,000 (indexed for inflation)
Only $5 billion available (program terminates when funds eliminated or in 2014)
Applications processed in order received and defective applications go to end of the line
Claims processed in order received
After acceptance required annual claims documentation

20. 2010 Federal Reform: Early Retiree Reinsurance Program Notice
Employers seeking payment from the ERRP program must furnish a notice to all active employees, early retirees, Medicare-eligible retirees, as well as spouses, surviving spouses and dependents.
Required within reasonable time after sponsor receives its first ERRP reimbursement but can be delivered before the sponsor receives its first reimbursement.
May be delivered by mail or courier – may mail one form per family as long as notice is addressed to all plan participants who are family members.
Active Employees - electronic delivery allowed. Must be able to access sponsor’s electronic information system on a daily basis as part of their work duties.

21. 2010: Other Notices
Medicare Part D Notice – by November 15th each year
CHIP/CHIPRA – two required notices and draft of upcoming 3rd notice
HIPAA Privacy Notice
HIPAA Special Enrollment Rights
USERRA
Michelle’s Law
Still applicable even though benefit of limited value due to expansion of adult dependent child benefits
Newborns’ and Mothers’ Health Protection Act
Women’s Health and Cancer Rights Act
FMLA
Optional, posting required
COBRA General Notice
Required when eligible for health plan

22. 2010: Wisconsin Challenges
Coordinating:
Wisconsin age 27 (to end of month turn 27) adult dependent child coverage (applicable to fully insured plans and non federal governmental entities)
with
Federal reform adult dependent child coverage to age 26 (to end of month turn 26).
Wisconsin did not follow the Federally granted tax free status.
Wisconsin continues to perform qualifying child or qualifying relative imputed income analysis regardless of age*.
Federal up until December 31 of the year the child turns 26, Federal imputed income is not applicable.**
Federal must perform qualifying relative imputed income analysis* as of January 1 of the year the child turns 27.
*Qualifying child (full time student up to age 24) and qualifying relative analysis (50% support).
** January 1 through March 31 of 2010, must perform qualifying child and qualifying relative analysis. Federal law did not change until passage of reform in March.

23. 2010: Wisconsin Challenges
What is Imputed Income? Imputed income is the addition of the fair market value of cash/non-cash compensation (insurance premiums) that is income and taxable wages to an employee. These should be imputed/added to an employee’s income via the W-2.
Wisconsin
Employers must either (1) include the amount that is taxable for Wisconsin purposes (but not taxable for federal purposes) in Box 16 of the 2010 Form W-2, or (2) provide employees with a supplemental "Wisconsin only" Form W-2 with the taxable benefits shown in Box 16.
Federal
Potentially, included in Federal gross income in the year the child turns 27. Must perform qualifying relative analysis.

24. 2010: Wisconsin Challenges
Wisconsin Department of Revenue requires employer to impute income as reported by employee.
Wisconsin Age 27 allows for annual dependent eligibility audit/certification to be requested by employer.

25. Questions on the past year (2010)?

26. 2011 Current Year… 2012 and Beyond
Wisconsin HSA Update
Federal Reform Status
2011: Expectations for the current year
2012 and beyond (current view)

27. NEW 2011: Wisconsin Health Savings Accounts
For tax year 2011 and filing in 2012, Wisconsin is now allowing HSA contributions to be made tax free.

28. NEW 2011: Federal Reform Status
Federal Judge, U.S. District Judge Roger Vinson from Florida, ruled that Congress violated the Constitution by requiring Americans to buy insurance.
Indicated the entire health care reform law “must be declared void”.
Plaintiff’s attorney, David Rivkin, said the ruling meant the twenty-six (26) states challenging the law must halt implementation of the pieces that apply to states and certain small businesses represented by plaintiffs.
Judge Vinson is the second Judge to declare the health care reform to be unconstitutional – but the Virginia Judge stopped short of declaring the entire law unconstitutional.
Expected to be settled by U.S. Supreme Court

29. NEW 2011: Federal Reform Status
The individual insurance mandate is not severable from the rest of the law. Reform does not contain a severability clause.
Obama administration argued that requiring Americans to carry insurance is within their power under the Commerce Clause of the Constitution.
The states argued the addition of 16 million Americans to Medicaid violates the Spending Clause of the Constitution by burdening the states and not providing an opt-out of the program.
Judge Vinson indicated that the reform expansion of the Medicaid federal-state insurance program for the poor does not violate the Constitution.
What this means remains to be seen.

30. 2011 Federal Reform: Expectations for the current year
No reimbursement for over the counter drugs (without a prescription) - Effective for all flex and HSA plans on January 1, 2011.
Notice required.
Form W-2 reporting on value of benefits
Delayed, new W-2 released but waiting for more information on reporting the cost of employer-sponsored health coverage.
Long term care program
Waiting on further guidance.

31. 2011 Federal Reform : Expectations for the current year
Increased penalty for non-medical HSA withdrawals.
Effective January 1, 2011 (increased from 10% to 20%).
Non-discrimination testing for fully insured plans (plan years after September 23, 2010).
Delayed, waiting on more information.
Automatic enrollment for large groups over 200 employees.
Delayed waiting on further clarification, DOL intends to complete this rulemaking by 2014.
Can have restricted annual limit on essential benefits
$1,250,000 for 2012 (plan years beginning on or after September 23, 2011, but before September 23, 2012)
Note: only essential benefits can be counted toward the maximum

32. 2012 and beyond (current view) Mandates for All Plans
March 23, 2012: Guidance to be provided by March 23, 2011.
Uniform standards for certain benefits communications to be distributed by this date.
Health FSA election limited to $2,500
Can have restricted annual limit on essential benefits
$2,000,000 for 2013 (plan years beginning on or after September 23, 2012, but before January 1, 2014)
Note: only essential benefits can be counted toward the maximum

33. 2012 and Beyond (current view) Mandates for All Plans
First plan year beginning in 2014:
No more restricted annual dollar limits
Child coverage to age 26 regardless of other coverage
Applicable regardless of grandfathered status
No preexisting condition exclusions at all
No waiting periods over 90 days
If an employer imposes a waiting period before their employees can enroll in coverage, the employer is subject to a one-time fine of $400 for a full time employee for a day waiting period and $600 for a day waiting period.
Change in rules on wellness incentives

34. 2012 and Beyond (current view) Mandates for Non-Grandfathered Plans
March 2012:
Quality of care reporting to HHS
2014
Insured plan reform (ratings limits, guaranteed issue and renewability, cover essential benefits)
No discrimination against participation in clinical trial
No discrimination on health care providers acting within scope of license
Limits on deductibles and out of pocket
Deductibles limited to $2,000 for individual or $4,000 for family (indexed)
May be increased by the maximum reimbursement available from a health FSA
Out of pocket maximum limited to OOP for HSA- qualified high deductible health plans (indexed)
2011: $5,950 for individual and $11,900 for family

35. 2014: Employer Mandates
Employers that have 50 or more employees and do not provide health coverage are assessed $ monthly for those (above the first 30) not offered coverage (2014)
Employers providing coverage deemed unaffordable (generally, exceeds 9.5% of household income or plan pays less than 60% of allowed benefit costs) pay $250 per month for each employee who declines coverage and received support in the exchange (2014)

36. 2014: Exchange Program Exchange Insurance
Individuals and small groups will be able to choose from four different levels of coverage (bronze, silver, gold and platinum) at 60-90% of the full actuarial value of the benefits provided under the plan
Effective January 1, 2014, states will establish and operate or HHS will do so
Prior to 2016, states may limit to 50 employees or fewer
Prior to 2017: only small employers (100 employees or fewer) can participate
Starting in 2017 and thereafter: states may allow all employers
Employers may permit employees to pay through a cafeteria plan, with some restrictions
Free Choice Vouchers: in 2014, employers offering health coverage must give vouchers to certain low income employees to purchase coverage through the Exchange
Avoids tax for unaffordable coverage

37. Executive Vice President
Questions?
Rae Anne Beaudry
Executive Vice President
The Horton Group
N19 W24101 N. Riverwood Drive
Waukesha, WI 53188
Direct Phone: (262)