Health Care Reform: What’s Next? Mark C. Nielsen, Esq. Groom Law Group California Public Employers-Employees Health Care Coalition Conference January 17, 2012
Health Care Reform – Where Are We Now? 2011 Insurance Reforms Complete Age 26, rescissions, appeals, preventative services, MLR, rate review, portal 2014 Looming Exchanges, Tax Subsidies, Insurance Reforms, Employer and Individual Mandates
Health Care Reform – What’s Next? Uncertainty Court Challenges, Elections, Budget . . . Exchanges in the Offing Employer Mandate Upcoming Requirements
Challenges to Health Care Reform • Key Cases: • VA v. Sebelius and Liberty Univ. v. Geithner (2011 WL 3925617 and 2001 WL 3962915): • 4th Circuit vacated—on lack of standing and Anti-Injunction Act grounds—trial court’s ruling that individual mandate was unconstitutional.
Challenges to Health Care Reform Key Cases: Thomas More Law Center v. Obama (651 F3d 529): 6th Circuit affirmed trial court’s ruling that individual mandate is constitutional. Seven-Sky v. Holder (661 F.3d 1): DC Circuit Court of Appeals ruled that the individual mandate is constitutional.
Challenges to Health Care Reform • Florida v. HHS (648 F.3d 1235): 11th Circuit struck down the individual mandate as unconstitutional. • However, court ruled that the individual mandate was “severable” from the rest of the health care reform law. • Result is that all aspects of massive health care reform go into effect, other than the individual mandate.
Supreme Court Review Supreme Court will hear oral arguments on March 26th (applicability of Anti-Injunction Act); March 27th (constitutionality of the individual mandate), and March 28th (severability and Medicaid expansion). Key Question: what happens if unconstitutional?
Other Change Agents 2012 Elections Budget deficits Compressed timeframe for implementation States
New Preventive Health Rules For non-grandfathered plans, “preventive care” and immunizations must be covered with no cost sharing (based on government-approved recommendations). Special rules applicable to women’s health preventive services These rules apply to the first plan year that begins on or after August 1, 2012 – meaning that for calendar year plans the rules will be effective beginning January 1, 2013.
Summary of Benefit Coverage Proposed rule issued August 2011 Requires plans to deliver a 4-page (front and back) document that describes the benefits under the plan, in addition to the SPD or certificate of coverage plans or insurers already provide. Also requires plans to provide a uniform glossary of terms to participants. Applies to insured and self-funded plans; effective March 23, 2012—but deferred until further notice
Summary of Benefit Coverage Who Must Provide the SBC? For group health plans, the Plan Administrator. For insured plans, either the insurer or the plan (not both). Must be provided free of charge.
Summary of Benefit Coverage What Information Must Be Included in the SBC? Generally, all SBCs will include the same information in the same format and order so that applicants and enrollees can compare this information. Must include: • Uniform definitions; • A description of coverage; • A description of the plan's exceptions, reductions, and limitations; • The plan's cost-sharing provisions (deductibles, coinsurance, and copays); • Renewability and continuation of coverage provisions; • For coverage beginning on or after 1/1/14, a statement whether the plan provides minimum essential coverage, and whether the plan’s share of total allowed costs of benefits meets applicable requirements; • A statement that the SBC is a summary only and that the plan document or policy should be consulted to determine governing provisions;
Summary of Benefit Coverage When Must the SBC Be Delivered to Plan Participants and Beneficiaries? At Enrollment: Must provide an SBC for all options for which an individual is eligible to enroll with any written application materials distributed by the plan. If the plan does not distribute written application materials for enrollment, the SBC must be distributed no later than the first day the participant is eligible to enroll. If there is any change to the SBC before the first day of coverage, the plan must provide an updated SBC no later than the first day of coverage. The plan also must provide an SBC to HIPAA special enrollees within 7 days of a request for enrollment. The proposed rules allow a plan to deliver a single SBC to participants and beneficiaries residing at the same address, unless the plan has a different last known address on file for any of the covered individuals.
Summary of Benefit Coverage Delivery At Renewal – The plan must provide an SBC for the option in which the individual is enrolled at renewal. The plan also must provide SBCs for options in which the participant or beneficiary is eligible, but not enrolled, upon request. If a written application is required for renewal, the plan must provide the SBC no later than the date application materials are distributed. If benefits automatically are renewed, the plan must provide the SBC at least 30 days prior to the first day of the new plan year. Delivery Upon Request: If a participant or beneficiary requests, the plan must provide an SBC as soon as practicable, but no later than 7 days after request. Modifications to SBC: If a plan makes a mid-year “material modification” to coverage that would affect the content of the SBC, the plan or insurer must provide notice of the modification to enrollees no later than 60 days prior to the date the modification becomes effective.
Summary of Coverage SBC requirement that plans and insurers issue a “summary of coverage” beginning in 2012 will lead to lawsuits alleging, among things: Conflicts between the summary of coverage, the SPD, and/or the plan document; Plan failed to timely distribute Plan failed to provide 60-day advance notice of benefit change Summaries for particular products will cut across contracts, opening door to class action lawsuits in state or federal court. Remedies could include cost of denied claims, interest, coverage of future claims, and attorney fees; Also administrative penalties by HHS or state regulator; further, $1000 penalty for each “willful” failure to distribute Invalidation of amendments adopted without 60-day advance notice to enrollees Under Amara decision, misleading communications could also result in “other equitable relief” such as reformation of the insurance policy, estoppel, and “surcharge.”
Essential Health Benefits General Rule: Small group and individual insured plans offered inside or outside of an Exchange must cover the “essential health benefits” (“EHB”) package. Note: self-funded plans and insured large group plans are not required to cover the EHB package. But any plan that offers EHBs (including self-funded plans) are prohibited from imposing lifetime or annual limits on EHBs. Note: “Restricted” annual limits on EHBs permissible, if: $1.25 million for 2012 plan year $2 million for 2013 plan year
Essential Health Benefits (cont.) HHS issued a “bulletin” on 12/16/2011, outlining the process it intends to propose in defining the EHB package. Comments regarding HHS’s proposed approach are due via email by January 31, 2012.
HHS Proposal re: EHB Package For 2014 and 2015, each state would select a “benchmark plan” from among the following: 1. The largest plan by enrollment in any of the three largest small group insurance products in the state; 2. Any of the largest three state employee benefit plans; 3. Any of the largest three national Federal Employee Health Benefits Program ("FEHBP") plans; or 4. The largest commercial HMO in the state. Note: Bulletin would require a state to "supplement" a benchmark plan to the extent that the benchmark was "missing a category of benefits."
EHB Proposal (cont.) Bulletin provides the following examples of benefits that are "consistently covered:" 1. Physician and specialist office visits; 2. Inpatient and outpatient surgery; 3. Hospitalization; 4. Organ transplants; 5. Emergency services; 6. Maternity care; 7. Inpatient and outpatient mental health and outpatient substance use disorder services; 8. Generic and brand prescription drugs; 9. Physical, occupational and speech therapy; 10. Durable medical equipment; 11. Prosthetics and orthotics; 12. Laboratory and imaging services; 13. Preventive care and nutritional counseling services for patients with diabetes; and 14. Well-child and pediatric services, such as immunization.
Observations re: EHB Proposal HHS’s list of "consistently covered" benefits includes some costly services (e.g., transplant services and DME). Although the Bulletin does not expressly define these services as "essential," under the benchmark process those services are likely to be covered. Are these services too expansive? Due to comprehensiveness of currently-offered plans, makes it difficult to design bronze and possibly even silver level plans that adopt the benchmark's benefits and limits.
Proposed EHB Package and State Mandates Proposed benchmark process is weighted toward adopting the most common insured plan in a state. Accordingly, the benchmark is likely to cover all of a state's benefit mandates, effectively making any state's mandates "essential," at least thru 2015. Only exception is when a state chooses a FEHBP plan as the benchmark (FEHB plans are exempt from state mandates). Inclusion of state benefit mandates as “essential” thru 2015 will be costly, making it more difficult to reach bronze level coverage. Also raises the possibility of 50 different EHB packages, rather than a national, uniform benefit package.
Proposed EHB Design Flexibility Design Flexibility: Insurers will be able to "adjust benefits, including both the specific services covered and any quantitative limits provided [issuers] continue to offer coverage for all 10 statutory EHB categories." However, "[a]ny flexibility provided would be subject to a baseline set of relevant benefits, reflected in the benchmark plan as modified." Pharmacy Benefits: Bulletin provides that plans will be required to cover "categories and classes" covered under the benchmark plan, but "may choose the specific drugs that are covered within the categories and classes." Designed to mirror flexibility permitted under Medicare Part D to choose which specific drugs are covered within a category or class.
Pediatric Oral and Vision Services Pediatric Oral: two options for supplementing benchmarks-- Option 1: The Federal Employees Dental and Vision Insurance Program ("FEDVIP") with the largest enrollment, or Option 2: The state's CHIP program. Non-medically necessary orthodontic services would not be included. Pediatric Vision: State must supplement the benchmark with pediatric vision services covered by the FEDVIP vision plan with the largest enrollment
Medical Loss Ratio (“MLR”) Rebates HHS issued new rules in December 2011, regarding MLR rebates that will be distributed beginning in 2012. In group market, insurers now required to issue entirety of MLR rebates to group policyholder. Special rules for how groups may utilize the rebates.
MLR Rebates For ERISA plans: if portion of rebate is attributable to participant contributions, must treat as a “plan asset,” and therefore subject to fiduciary standards of conduct. Very specific rules as to how such rebates may be used.
MLR Rebates For non-federal governmental plans, rebates attributable to employee contributions may be used to: Reduce the employees’ portion of the annual premium for the next policy year for all enrollees covered under any group health policy offered by the plan; Reduce the employees’ portion of the annual premium for the next policy year, but only for those enrollees covered by the group health policyon which the rebate was based; or Provide a cash refund only to subscribers that were covered by the group health policy on which the rebate is based In all three options, the rebate is used to reduce premiums or is paid to enrollees enrolled during the year in which the rebate is actually paid, rather than the MLR reporting year on which the rebate was calculated.
Exchanges in the Offing Marketplace for individual and small employer coverage Enrollment in 2013, coverage in 2014 4 proposed rules – Eligibility, Enrollment, Tax Credits and Risk Adjustment (total over 500 pages); with more to come
Exchanges Exchanges are to be state-based and coverage is subject to state insurance law Comparable rules inside and outside of Exchange Exchange is only venue for individual tax credits and small employer tax credits
Exchanges – Key Considerations Will insurers participate in the Exchange? What incentives are created for employers? What happens if states do not establish an Exchange?
Employer Mandate Must employ an average of at least 50 full-time employees on business days during the preceding calendar year. Full-time employee means an employee who is employed on average at least 30 hours per week (seasonal employees may be excluded).
Employer “Play or Pay” Mandate Whether employer offers “minimum essential coverage;” and Whether any employee qualifies for premium credits under Exchange (because income at or below four times the federal poverty level).
Employer “Play or Pay” Mandate “Minimumessential coverage” means any of the following: Eligible employer-sponsored plans; Individual coverage; Grandfathered health plans; Government sponsored plans (e.g., Medicare). Minimum essential coverage is different from “essential benefits” under insurance market reform and Exchange rules.
Employer “Play or Pay” Mandate If employer offers no coverage and at least one employee receives premium assistance under Exchange: Must pay annual fee of $2,000 for each full-time employee minus first 30 employees. For example, if employer has 100 full-time employees and one is eligible for premium assistance under the Exchange, employer must pay $2,000 times 70 (100 full-time employees minus 30).
Employer “Play or Pay” Mandate If employer does offer “minimum essential coverage” and an employee receives premium assistance under Exchange, employer must pay fee if either test met: Employer coverage not affordable – costs more than 9.5% of income; or Plan does not provide 60% actuarial value of benefits. Annual fee is the lesser of: $3,000 for each full-time employee receiving premium assistance; or $2,000 for each full-time employee, minus first 30 employees.
Where We Are Now: 2010 and 2011 All Plans No Annual or Lifetime Limits on Essential Benefits No Rescission Dependent Coverage to Age 26 No Pre-Existing Condition Exclusion under Age 19 Non-Grandfathered Plans* Preventive Care Coverage Appeals & External Review Choice of Providers Emergency Care *Grandfathered plans should consider when they will lose grandfathered status because these requirements will then apply to them.
Oncoming Requirements2012 / 2013 Appeals & External Review Foreign language requirement (1/1/12) EOB content (1/1/12) External Review – 2 IROs by 1/1/12, 3 IROs by 7/1/12 Preventive Care Review recommendations annually for updates New services for women’s health (plan years on or after 8/1/12)
Upcoming Requirements2012 / 2013 W-2 Reporting For 2012 Tax Year (on January 2013 W-2) Comparative Effectiveness Fee For plan years ending after 9/30/12 - $1/covered life (actives & dependents) For plan years ending after 9/30/13 – increases to $2/covered life Applies to insured & self-funded
Upcoming Requirements2012 / 2013 Health FSA limit $2,500 (1/1/13) Exchange Notice (3/1/13) Employers must notify employees about Exchange Automatic Enrollment Must auto-enroll employees in employer plan (with opportunity to opt out) Applicability date uncertain; likely for 2014 plan year
Future Requirements2014 No pre-existing condition exclusions Waiting period limited to 90 days Wellness Reward Increased to 30% cost of coverage Coverage for clinical trials Deductible limit - $2,000 individual / $4,000 family Out-of-Pocket Maximum - $5,950 individual / $11,900 family Rating Limits (insured – individual & small group) Guaranteed Issue & Renewability (insured) Must cover Essential Health Benefits (insured – individual & small group)
Enforcement of Health Care Reform Public Enforcement (Federal and State) State Insurance regulators (against insurers) HHS (against insurers and non-federal governmental plans) DOL (against ERISA group health plans) IRS (against ERISA group health plans and church plans) Private Litigation Class actions by individual and group participants and beneficiaries (including employers as plan fiduciaries) Individual lawsuits by individual and group participants and beneficiaries (including employers as plan fiduciaries)
Penalties for Non-Compliance: Non-Federal Governmental Plans HHS enforces insurance market reforms against non-federal governmental plans. Enforcement mechanism: May impose civil monetary penalties of up to $100 per day, per violation, per affected individual. Penalty assessments subject to administrative and judicial review. Enforcement strategy is currently compliance driven, but HHS is hiring enforcement staff
Questions?Comments? Mark C. Nielsen email@example.com 202.861.5429