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ALERT: Medicare Part D Creditable Coverage Notice Deadline
September 29, 2011
Employers are required to provide their annual "Creditable Coverage Disclosure Notice" to your Medicare-eligible covered individuals by October 15th, which is a month earlier than prior years.
This notification is a requirement of the Medicare Modernization Act (MMA), and requires plan sponsors that provide prescription drug coverage to anyone who is eligible for Medicare with a notice regarding whether their group plan provides "creditable" or "not creditable" prescription drug coverage. These notices are important because if an individual does not maintain creditable coverage for a period of 63 days or longer following his or her initial enrollment period for Medicare Part D, the individual will be subject to a late enrollment penalty.
As a complimentary service to clients, Benefit Pro Insurance provides assistance with this Disclosure Notice preparation.
For further information on Medicare Part D creditable coverage disclosure notices and CMS compliance requirements, visit the CMS website at http://www.cms.gov/creditablecoverage/.
Insurers Required to Cover Birth Control with "No Copay"
August 2, 2011
The Department of Health and Human Services (HHS) has issued a ruling that health insurance plans must cover birth control with no cost sharing or copays.
This new requirement will take effect for all health policies with plan years on or after August 1, 2012, except those that are "grandfathered" from the new preventative care requirements of the Patient Protection and Affordable Care Act (PPACA). Religious institutions are also exempt from this new regulation.
All forms of birth control approved by the Food and Drug Administration are covered, including the pill, intrauterine devices, the "morning after pill" (except RU-486) and new forms of long-acting implantable hormonal contraceptives. Health plans will be allowed to charge copays for brand name drugs in cases where a generic version is just as effective and safe for the patient.
IRS Announces HSA Limits for 2012
May 20, 2011
The IRS has announced the following adjustments for 2012, allowing the first cost-of-living increases since 2010:
HSA Contribution Limit: $3,100 individual / $6,250 family
HDHP Minimum Deductible: $1,200 individual / $2,400 family (unchanged)
HDHP Maximum Out-of-Pocket: $6,050 individual / $12,100 family
For more information, CLICK HERE.
New 1099 Reporting Rules Repealed
April 15, 2011
President Obama signed into law legislation to repeal the new Form 1099 reporting rules deemed to be burdensome by businesses of all sizes, marking the first successful rollback of Obama's signature health care overhaul by Congress.
H.R. 4 repeals language from the 2010 health care law requiring businesses to issue a Form 1099 for payments made to corporations for goods and services that exceed $600 per year to each vendor. It also repeals an expansion of those rules to include landlords, which was enacted under a small business law.
IRS: Medicare Part B Premiums Count as Qualified Expenses
March 10, 2011
For years, the IRS took the position that Medicare Part B premiums did not count as qualified health insurance premiums for purposes of the self-employed health insurance deduction. This was bad news for older small business owners, because Medicare Part B premiums for 2010 ranged from $1,157 to $4,243 depending on income level. For married couples, both spouses might be paying. So we can be talking about significant dollars here.
Now for the good news: With no fanfare, the IRS suddenly reversed course on the Medicare Part B premium issue. The 2010 instructions for Line 29 of Form 1040 explicitly allow you to include Medicare Part B premiums in your health insurance costs for purposes of the self-employed health insurance deduction.
Nondiscrimination Provisions of Health Care Reform Delayed
January 13, 2011
The Internal Revenue Service has announced that they will be delaying the enforcement of the new nondiscrimination provisions applicable to insured group health plans.
The Health Care Reform Law requires non-grandfathered insured group health plans to satisfy the requirements of Internal Revenue Code Section 105(h)(2), previously applicable only to self-funded group health plans. However, the revised law prohibits non-grandfathered insured group health plans from favoring highly compensated individuals with respect to eligibility or benefits. The Health Care Reform Law would require sponsors of noncompliant plans to pay a bulky excise tax of $100 per day per affected individual, effective at the start of the 2011 plan year.
The recent notice issued by the IRS delaying these provisions will provide relief from these excise taxes. The IRS has determined that the provisions will not be required until after regulations or other administrative guidance of general applicability have been issued. They are also predicting that once the regulations are issued, they will not apply until the plan years beginning some period of time thereafter.
IRS: W-2 Reporting on 2011 Health Costs is Optional
October 13, 2010
The IRS announced that it will defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan, making that reporting by employers OPTIONAL in 2011. Further, IRS has released the draft Form W-2, that includes codes that employers may use to report the cost of coverage under an employer-sponsored group health plan.
The Treasury Department and the IRS have determined that this relief is necessary to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with the new reporting requirement. The IRS will be publishing guidance on the new requirement later this year.
Although reporting the cost of coverage will be optional with respect to 2011, the IRS said it continues to stress that the amounts reportable are not taxable.
Included in the Patient Protection and Affordable Care Act passed by Congress in March, the new reporting requirement is intended to be informational only, and to provide employees with greater transparency into overall health care costs.
New Health Insurance Tax Deduction for the Self-Employed New Health Insurance Tax Deduction for the Self-Employed
September 30, 2010
On September 27, 2010, the Small Business Jobs and Credit Act of 2010 was signed into law. The legislation provides self-employed business "owners" a temporary tax break to fully deduct the premium cost of their medical coverage from payroll taxes - a deduction previously available only to "employees" of companies.
For 2010, the self-employed can take a one year tax deduction for medical costs in determining the self-employment tax. To qualify, you must meet all of the following requirements:
- File a Schedule C (Form 1040) or a Schedule E with earned income - this comprises single member Limited Liability Corporations that have a single member, S-Corporations that are solely owned, and sole proprietors;
- File a Schedule SE (Form 1040) and pay self-employment taxes;
- Pay for individual or family medical coverage this year (2010).
On average, the self-employed can expect to save 15.3% taxes paid for their medical coverage (if their income is under $106,800 - less if greater). Based on average national health insurance costs of $2985 for single coverage and $6328 for family plans, the average tax savings can range between $457 and $968 per filing for 2010.
Final Interim Regulations Released by the DOL, HHS and Treasury
July 8, 2010
On June 23, 2010, the Departments of Labor, Health and Human Services, and Treasury released final interim regulations in regard to 1) pre-existing condition exclusions 2) lifetime and annual limits 3) rescissions and 4) other patient protections under the Patient Affordable Care Act.
Key highlights are outlined below. Unless specified otherwise, all changes are effective for plan years beginning on or after 9/23/10 and apply to grandfathered and non-grandfathered plans.
- Prohibition of Pre-existing Condition Exclusions for any individual under age 19. A group health plan may not impose any pre-existing condition exclusion for individuals under age 19. The Regulations now define pre-existing conditions as a health condition or illness that was present before an individual’s effective date of coverage in the health plan, regardless of whether any medical advice was recommended or received before that date. This is the same definition that is used under HIPAA.
- No Lifetime or Annual Limits. Group health plans may not establish any lifetime or annual limits on the dollar amount of essential benefits for any individual. The Regulations now provide the following clarifications:
- Definition of Essential Health Benefits. Essential health benefits are defined to include, at a minimum, ambulatory patient services; emergency services; hospitalization, maternity and newborn care; mental health and substance abuse services, including behavioral health treatment; prescription drugs; rehabilitative services and devices; lab services; preventive and wellness services, including chronic disease management; and pediatric services, including oral and vision care.
- Exceptions to the Lifetime and Annual Limits. The Regulations specifically state that FSAs are not subject to the lifetime/annual limits because they are subject to a separate annual salary contribution limit (beginning in 2013, $2500 indexed for inflation). The Regulations also state that the annual limit restriction does not apply to MSAs and HSAs. MSAs and HSAs are generally not treated as group health plans since the amounts available under the plans are for both medical and non-medical expenses. In regard to HRAs, when an HRA is integrated with other coverage as part of a group health plan, and the other coverage alone complies with the annual limit restriction, the fact that the HRA benefits are limited does not violate the annual limit restriction. Stand alone HRAs that are limited to retirees are also not subject to the annual limit restriction.
- Annual Limits Transition Rules. Group Health Plans are allowed to phase in the annual limit restriction. The annual limit on essential health benefits may be restricted as follows:
- For plan years beginning 9/23/10 but before 9/23/11, up to $750,000.
- For plan years beginning 9/23/11 but before 9/23/12, up to $1,250,000.
- For plan years beginning 9/23/12 but before 2014, up to $2,000,000.
- For plan years beginning 1/1/14, no annual limits are allowed on essential health benefits.
- Limited Benefits or “Mini-Med” Plans. The Secretary of Health and Human Services may establish a program under which the minimum annual limit requirement will be waived if the limits would result in a significant decrease in access to benefits or significant increase in premiums. This waiver would potentially allow such plans to continue until 2014. Additional guidance is expected soon.
- Notice of Special Enrollment to those who previously reached Lifetime Limits. Individuals who previously reached a lifetime limit, and who are still eligible for benefits, must receive a special notice stating the lifetime limit no longer applies and they have a 30 day special enrollment period to enroll in any benefit option available to similarly situated employees. The notice may be included with other enrollment materials and may be provided to employees on behalf of dependents.
- Prohibition on Rescissions. Group health plans may not terminate coverage retroactively except in case of fraud or intentional misrepresentation of material fact. Additionally, the plan must provide 30 days advance written notice of rescission. The new Regulations clarify that a retroactive cancellation or discontinuance does NOT constitute a rescission if it is on account of failure to timely pay a required premium or contribution.
- Primary Care Physicians (PCPs) (not applicable to Grandfathered Plans). Participants must be permitted to designate any PCP who is accepting new patients; Pediatricians can be designated as PCPs for children; and a group health plan may not require authorization or referrals for OB/GYNs. The regulations now also impose a notice requirement that tells individuals of their rights to access PCPs. The Regulations include model language to satisfy the requirement.
- Coverage for Out-Of-Network Emergency Services (not applicable to Grandfathered Plans). Emergency services must be covered the same whether the service is provided in or out-of-network. However, the Regulations permit out-of-network providers to “balance bill” participants (the provider may charge the excess of the out-of-network provider rate over the amount the plan pays), provided the plan pays the greatest of three possible amounts. .
Agencies Publish Guidance Regarding “Grandfathered” Health Plans
June 28, 2010
On June 17, 2010, the Internal Revenue Service (IRS), Department of Labor (DOL) and Department of Health and Human Services (HHS) jointly issued interim final regulations regarding a group health plan’s status as a “grandfathered health plan” (i.e., one in existence on March 23, 2010) under provisions of the recent healthcare reform legislation. This legislation creates a multitude of new requirements for group health plans ranging from the minimum level of benefits that must be provided to dictating which individuals must be offered coverage under a plan.
However, various provisions of the new laws either do not apply at all or have extended compliance deadlines for grandfathered plans. The interim regulations help explain what changes a group health plan that was in existence on March 23, 2010 may make to its plan terms without losing its status as a grandfathered plan.
The regulations are designed to take into account reasonable changes routinely made by plans or insurance issuers without the plan or health insurance coverage losing its grandfathered status, so that individuals may retain the ability to remain enrolled in the coverage they had on March 23, 2010. As such, plans and issuers are generally permitted to make voluntary changes to increase benefits, to conform to required legal changes and to voluntarily adopt other provisions of the new healthcare reform laws that the plans, as grandfathered plans, would not otherwise be required to adopt. A group health plan’s status as a grandfathered health plan also is not affected by new enrollees enrolling in the plan after March 23, 2010.
Changes That Will Cause A Plan To Lose Grandfathered Status
A plan will lose its grandfathered plan status if changes are made to the plan’s coverage that significantly decrease the benefits, materially increase cost sharing by participants in ways that might discourage covered individuals from seeking needed treatment, or substantially increase the cost of coverage paid by participants. Specifically, the following changes will cause a health plan to lose its grandfathered status:
- increasing non-fixed amount cost sharing requirements (such as increasing an employee’s portion of all costs from 20% to 25%);
- increasing fixed-amount co-payments by an amount that exceeds the greater of (i) a percentage that is more than 15% plus the amount of medical inflation above the levels in effect on March 23, 2010 or (ii) $5 increased by medical inflation above the levels in effect on March 23, 2010; increasing fixed-amount cost sharing payments other than co-payments (such as deductibles and out-of-pocket limits) by a percentage that is more than 15% plus the amount of medical inflation (set by the DOL using the overall medical care component of the Consumer Price Index for All Urban Consumers, unadjusted) above the co-payment levels in effect on March 23, 2010; or
- decreasing the employer contribution rate by more than 5% below the contribution rate in effect on March 23, 2010. The “contribution rate” for this purpose is defined as the amount of contributions made by an employer compared to the total cost of coverage, expressed as a percentage. This rule applies to all tiers of coverage.
The regulations provide that if the principal purpose of a corporate merger, acquisition or similar business restructuring is to cover new individuals under a recipient grandfathered health plan or if a recipient plan is different enough from a transferor plan to be considered a change that would cause the transferor plan to lose its grandfathered status if the recipient plan terms were considered to be an amendment to the transferor plan, then the recipient plan will cease to be a grandfathered health plan.
Disclosure Of Grandfather Status Required
In order to maintain grandfathered status, a plan must include a statement in any plan materials provided to participants and beneficiaries describing the benefits provided under the plan (such as a summary plan description, or SPD) that the plan believes it is a grandfathered health plan. This statement must include contact information for questions and complaints. The new regulations provide model language for this disclosure statement.
The regulations also require that a plan maintain records documenting the plan or policy terms in connection with the coverage in effect on March 23, 2010 to verify the plan’s continued status as a grandfathered health plan. Such records must be made available for examination upon request.
The Importance Of Grandfather Status
Every plan, eventually, whether it is fully-insured or self-insured, will lose its grandfathered status. Something as basic as changing insurance carriers will cause a fully-insured plan to lose its grandfathered status. Paying fewer claims during a plan year could cause an unfunded self-insured plan to lose its grandfathered status. Since most plans will lose their grandfather status eventually, it is useful to focus on why a plan sponsor might want to retain grandfathered status at all. Why not just embrace non-grandfathered status and its requirements now to gain the most flexibility for ongoing plan design?
One healthcare reform change – the extension of coverage to children under age 26 – provides for an extended compliance date for grandfathered plans. Non-grandfathered plans must extend coverage to dependents under age 26 (regardless of student, marital or financial status) as of the first day of the first plan year that begins on or after September 23, 1010. Grandfathered plans must fully comply with this rule beginning in 2014. But before 2014 grandfathered plans do not have to extend coverage to a dependent if the dependent has access to medical coverage under the dependent’s employer’s group health plan.
Many employers may find this exception difficult to administer and therefore decide to offer coverage to all dependents under age 26 at the beginning of their next plan year even though they could take advantage of the exception for grandfathered plans. For plans that do want to take advantage of the exception, maintaining grandfathered status is important. For those that do not, maintaining grandfathered status may be less important.
Healthcare reform changes that will never apply to grandfathered plans include some of the changes with near term effective dates: 1) the requirement to install an external review process; 2) mandatory 100% coverage of preventive care services (to be defined, but will most likely include immunizations, mammograms, pap smears, etc.); 3) greater access to emergency services (removal of increased cost sharing for out-of-network emergency services); 4) participants’ freedom to choose any network doctor as their primary care provider (such as a pediatrician or OB/GYN); and 5) most significantly, the application of the nondiscrimination rules of Internal Revenue Code section 105(h) to fully-insured plans (these rules already apply to self-insured plans).
Many plans already provide some of these new coverage mandates, such as 100% coverage of most preventive services. Accordingly, it could be that for most employers that sponsor fully-insured plans, the importance of maintaining grandfathered status will come down to the impact of having to apply the 105(h) nondiscrimination rules to their plans. These rules require that a plan not discriminate in favor of “highly-compensated individuals” with regard to both contributions and benefits. For purposes of these rules, a “highly-compensated individual” is an employee who 1) is one of the 5 highest-paid officers, 2) owns more than 10% of the value of the employer’s stock or 3) is among the highest 25% ofn employees ranked by pay. Accordingly, roughly 25% of employees (including most closely-related domestic affiliates) will be classified as “highly compensated” under this definition, regardless of how much compensation they earn.
Having different waiting periods for different classes of employees or contributing different amounts of employer subsidies towards premiums for different classes of employees could cause a plan to fail its annual 105(h) nondiscrimination test. Also, a plan with two or more benefit options that do not have substantially the same benefits could fail nondiscrimination testing if the highly-compensated individuals tend to elect the benefit option with the better benefit and the non-highly-compensated individuals elect the other option. If any of these circumstances apply to a plan, compliance with the 105(h) nondiscrimination rules could have a significant impact.
Summary
Before getting overwhelmed with the restrictions on maintaining grandfathered plan status, it’s important to take a step back and evaluate the relative benefits of such status. In many cases, the only significant upside to grandfathered status may be the ability to avoid the 105(h) nondiscrimination rules. If this is not important to you, then the restrictions of maintaining grandfathered status may be more hassle than they are worth. But if you wish to avoid the 105(h) nondiscrimination rules or any of the other rules that apply to non-grandfathered plans, then it will be important to ensure that any future changes to your plan are within the parameters set by the new interim regulations