Headaches, Heartburn and Healthcare Reform: An overview of healthcare reform mandates for businesses

This month, March 23, Healthcare Reform celebrates its first birthday.  Although it is nearly a year old, many people, including many agents, still do not understand much of the bill, what it means or how it relates to them.  There is much confusion over the “how to” of the Bill. 

The Bill spells out what will happen, but does not say how it will happen.  There are five main government agencies working on “how to” make it all work: 1) Health and Human Services (HHS), 2) Department of Labor (DOL), 3) Internal Revenue Service (IRS), 4) Centers for Medicare and Medicaid (CMS), and 5) Department of the Treasury.  Five major divisions of the government, along with their lawyers, are trying to figure out how to make it all work.  Getting 5 attorneys to agree can be a challenge, let alone five major departments of the federal government.

There are 14 main mandates they are working diligently to define.  While there are many others, we are going to focus on the mandates that impact businesses and brokers. 

1.    No pre-existing condition exclusions (PCE) – One of the major goals of Healthcare Reform was to expand coverage.  The main mechanism for this is the elimination of pre-existing conditions.  It started for children under age 19 on September 23, 2010 and beginning in 2014, there will be no pre-existing conditions for anyone regardless of age.  This is a major change in the way companies underwrite their policies.

The impact will be the greatest in the individual market.  Group health plans are already subject to the Health Insurance Portability and Accountability Act of 1996 which states that when an insured moves from group to group coverage, as long as there is not more than a 63 day break in coverage, they will not be subject to any pre-existing conditions.  However, individual plans are currently free to underwrite based upon health status and decline individuals as well as place restrictions on coverage based on health conditions.  Beginning in 2014, insurance companies will no longer be allowed to do this.   This provision will in effect do away with the HIPAA certificates of creditable and breaks in coverage and allow anyone to change coverage without fear of facing pre-existing condition exclusions.

2.    Elimination of Lifetime Limits – As of September 23, 2010, plans can no longer have lifetime limits on their coverage options.  As a cost control measure, many plans place a lifetime limit of $1 to $5 million.  Under Healthcare Reform, there can be no limits.  This places plans that are often referred to as “mini meds” or “limited benefit plans” which supply benefits for doctor visits and hospital stays on a limited basis in jeopardy. 

Many of the larger corporations offer plans such as these to hourly employees.  In order to not cause a loss of coverage for these employees, HHS is allowing companies to apply for waivers for these types of plans.  In order to qualify, the plan must have been in effect as of March 23, 2010, and as a result of the new provision either cause a significant increase in the premiums for the plan or a significant loss of coverage.  More information can be found at www.hhs.gov.

3.    Elimination of Annual Limits – By 2014, plans can no longer have annual benefits on essential benefits.  Plans can still have limits on non essential benefits (these are still being defined).  There is a phase in period for this listed in the chart below.

Once again, companies can request a waiver on these restrictions through HHS.  Applications must be received at least 30 days prior to the beginning of the plan year and are valid for one year.  If the waiver is granted, notification must be given to the affected employees.

4.    Prohibition on Rescissions – A rescission is when a plan terminates coverage back to the effective date of the policy.  It has a retroactive effect.  It is not a rescission if it only has a prospective effect or if it is as the result of lack of payment of premiums.  Rescissions are still allowed for intentional acts of fraud; however, it is difficult to prove intent.  It is effective for plan years beginning after September 23, 2010.

5.    Dependent Coverage of Children to Age 26 – Starting with plan years renewing after September 23, 2010, dependents must be covered through their 26th birthday regardless of their tax dependence, residency, student status, marital status, or employment status.  The exception to this is if they are covered by their employer plan.  However, beginning in 2014, this will not apply. This provision applies to biological or adopted children, stepchildren, or eligible foster children.  It does not apply to children of a domestic partner, grandchildren or the spouse of a child. A special notice should be distributed to all employees informing them of this provision and their right to re-enroll dependents who may have aged off the plan previously.

6.    Patient Protections – Beginning with plan years after September 23, 2010, patients will now be allowed, if the plan requires it, to elect any in network provider as their Primary Care Physician (PCP) including pediatricians.  Women will also be allowed to visit OB/GYNs without prior authorization from their PCP.  They can also see other licensed specialists, such as midwives, without prior  authorization.  The impact of this provision varies greatly from state to state.  Generally the more metropolitan the state is, the bigger impact it will have.  Many plans in rural states do not require PCPs.

If a plan covers emergency services, they must now be covered whether in or out of network with the same cost sharing provisions and no pre-authorization. The services must be provided in connection with an “emergency medical condition”. According to the HHS definition, an emergency medical condition is evidenced by acute symptoms of sufficient severity so that a prudent layperson, with average knowledge of health and medicine, could reasonably expect that absence of immediate medical attention would place the individual’s health in serious jeopardy, or seriously impair bodily functions, bodily organs, or parts. 

This provision does not apply to Grandfathered Plans.

7.    Coverage of Preventive Health Services – For new plans and plans that are not Grandfathered, beginning after September 23, 2010, preventive services must be covered at 100% with no cost sharing.  HHS has developed a list of these services.  There can be a doctor’s co-pay if 1) the primary reason for the visit was not preventative in nature, or 2) there is separate billing and the primary reason for the visit was preventive, but other issues were discussed.  Wellness exams do not have to be covered out of network and there can be cost sharing.

8.    Non Discrimination Testing – Originally in effect for September 23, 2010, the requirement stated that fully insured plans, except Grandfathered Plans must now begin to comply with Section 105(h)(2) of the Code.  The IRS has pushed this date off until they can further clarify the guidelines and the testing requirements.  Self insured plans are already subject to these rules. 

9. Quality of Care Reporting - In 2012, HHS will release guidance on annual quality of care reporting requirements for plans that address plan structure, benefit structure and reimbursement arrangements.  The purpose of this is to determine whether coverage is satisfying the following criteria:

• Whether the coverage improves health outcomes through activities such as quality reporting, case management, care coordination, etc.
• Whether coverage implements activities to prevent hospital re-admissions
• Whether coverage improves patient safety and reduces medical errors through best clinical practices, evidence-based medicine, and HIT
• Whether coverage implements wellness and health promotion activities

10.  4 Page Benefits Summary - Beginning in 2012, plans must distribute a new 4 page benefits summary to insureds at open enrollment and each time a change is made to their coverage.  This is different than the summary plan description.  It must be no more than 4 pages in length, in 12 point font, on an 81/2” X 11” page and written in a culturally and linguistically appropriate manner. It must include the following information: Uniform Definitions, Description of Coverage,  Cost-Sharing Requirements, Essential Health Benefits Covered, Renewability, “Coverage Facts Label”, Clear Statement about “Minimum Essential Coverage”, Summary of the Plan, and a phone number to call for additional questions.  This is different from the Summary Plan Description.  More guidance will be given on this.

11.  Automatic Enrollment - Employers who are subject to the Fair Labor Standards Act (FLSA), basically those with 200 or more full time employees, and that offer more than one benefits plan, must begin to auto enroll employees in one of the health plans and continue coverage of existing enrolled employees.  This was originally thought to be in effect with the enactment of the law, however the Department of Labor (DOL) has stated it is still working on the definition of “full time employee” and will have the regulations finalized by 2014.

12. Limits on Cost Sharing – In 2014 there are limits on the amount of cost sharing allowed.  Cost sharing under this definition includes deductibles, co-insurance, co-payments and other   charges related to essential health benefits.  It does not include premiums, balance billing for out of network providers or charges for services not covered.  Under the guidelines the cost sharing can be no greater than the provisions set forth by the IRS for High Deductible Health Plans.  The current limits for out of pocket expenses, which do allow Cost of Living Adjustments (COL) are $5,950 for an individual and $11,900 for a family.

13.    Restrictions on Waiting Periods – Beginning January 1, 2014, waiting periods for new employees cannot be longer than 90 days.  Traditionally, this has been used as a cost control measure for industries with high turn over among employees.  It eases the administrative burden and reduces the cost for employees that leave quickly.  This will increase the cost for businesses with longer waiting periods as they will need to add employees more quickly and increase the administrative burden of adding and deleting employees and reconciling invoices. 

14. Clinical Trial Coverage – Beginning in 2014, a group health plan may not: 1) deny any qualified individual the right to participate in an approved clinical trial, 2) deny, limit, or impose additional conditions on coverage in connection with participation in the clinical trial, and

3) may not discriminate against any qualified individual who participates in a clinical trial.  More guidance on this is sure to come, but the mandate basically states that the part of the treatment attributable to items and services that would normally be covered such as IV supplies and materials should be covered on the same basis as for any other type of routine covered procedure.  The treatment must be for a life threatening condition.

A complete list of all mandates, the text of the law and the updated mandates can be found at hhs.gov. 

This is a changing time for every American as we are all impacted in some way by health care.  Now is the time to stay active and to learn what these mandates mean to you, your business, and your clients.

About The Author

Cammie Scott, LUTCF, RHU, REBC, CLTC

Cammie Scott graduated with honors with a Master of Science in Industrial Engineering (MSIE) in 1997 from the University of Arkansas in Fayetteville.  While at the University, she participated in many extra curricular activities including serving as President of the Industrial Engineering Honor Society and as President of the Student Chapter of the Institute of Industrial Engineers.

She obtained her license to sell life and health insurance in 1996.  Cammie began her career in insurance when her mother needed help enrolling employee benefits in some of her accounts.  Cammie has earned numerous sales and productivity awards.  She obtained her Life Underwriter Training Council Fellow (LUTCF) in 2000, became a Registered Health Underwriter (RHU) in 2001, a Registered Employee Benefits Consultant (REBC) in 2002, and obtained a Certification in Long Term Care (CLTC) in 2003.

Cammie served as the President of the Northwest Arkansas Association of Insurance and Financial Advisors (NAIFA – Northwest Arkansas) in 2002 – 2003, then as the Arkansas State Association of Insurance and Financial Advisors (NAIFA – Arkansas) in 2005 – 2006.  She graduated from the Leadership in Life Institute in 2006.  This is an intensive six month training course that encourages participants to examine themselves, their motives, goals, ambitions and where they want to fit into the world.  She went on to serve on the National Board for the Leadership in Life Institute as the chair of Quality Control and Governance, Moderator Training, and currently serves as the Chair of the Board.

Currently, she is the President of CK Harp & Associates, a company located in Springdale, AR that specializes in working with businesses to create, implement, and administer employee benefit plans.

She lives in Lowell. AR with her husband Tim and two sons Sidney and Samuel (Sid and Sam – the two tornados), five horses, two dogs and two cats.