What You Need to Know About

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What You Need to Know About Health Care Reform
Compliance

Presented by Marcia S. Wagner, Esq. The Wagner
Law Group Kim Buckey, Principal HighRoads
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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.

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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.

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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

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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

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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

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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

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Insurance Market

• Guaranteed Issue
• Guaranteed Renewability
• High Risk Pool
• Rating only by
• Family structure
• Community rating value of benefits
• Age
• Smoking

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Medicare and Medicaid

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

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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

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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

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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

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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

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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

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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

Provisions Applicable to Non-Grandfathered Plans

• 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

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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 employers plan
• Cannot require additional contributions because
  child is adult

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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

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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

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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

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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

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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

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Choice of Health Care Provider and OB/GYN
Referrals

• Must allow selection of any primary care or
  pediatric care provider in plans 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

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Emergency Care Services

• Must be provided without prior authorization or
  regard to plans 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

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Internal and External Reviews

• Internal
• Comply with DOLs 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

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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

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Theres a Lot to Communicate
Year Topics
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
2012 Benefit summaries
2013 Changes to FSA contribution limit Information about the Exchange and how employer plan coordinates
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Your Options
Approach Pros Cons
Update your SPDs May 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
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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)

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The Role of SPDs (contd)

• 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

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Whats Next?

• Summaries of coverage
• Distributed on or before March 30, 2012, and at
  enrollment
• 60-day advance notice of changes to benefits
  (effective 2012)

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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
• Whos going to do the work
• How can technology help

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• Why worry?

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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

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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

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QA

• Have a question later? Ask the Experts
• Marcia Wagner
• Tel [phone] marcia_at_wagnerlawgroup.com
• Website www.erisa-lawyers.com
• Kim Buckey
• Tel [phone] x 3085 kbuckey_at_highroads.com
• Blog http//newsroom.highroads.com/

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Thank you

• Thank for attending todays 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