The Effects of Age Rating Band Changes Under Health Care Reform

The Affordable Care Act (ACA) includes provisions that prohibit discrimination by health plans against people with pre-existing conditions and provide certain protections for consumers. Effective for plan years beginning on or after Jan. 1, 2014, ACA extends guaranteed issue protections for individuals and employers, prohibits the use of health and other factors to set premium rates, limits age rating and prohibits insurers from dividing up insurance pools.

On Feb. 22, 2013, the Department of Health and Human Services (HHS) released an advance copy of a final rule regarding ACA’s health insurance market reforms and existing rate review program. These reforms apply to health insurance issuers offering non-grandfathered coverage both inside and outside of ACA’s health insurance exchanges (Exchanges).

Fair Health Insurance Premiums

ACA and the final rule limit the factors that can vary premium rates in small group and individual markets for non-grandfathered plans. Specifically, health insurance issuers will only be allowed to vary premiums based on:

  • Age (within a 3:1 ratio for adults);
  • Tobacco use (within a 1.5:1 ratio, subject to wellness program requirements in the small group market);
  • Family size; and
  • Geography.

All other rating factors are prohibited. This means that several factors frequently used to set premiums, such as health status, claims history, duration of coverage, gender, occupation, small employer size and industry, can no longer be used.

These limitations represent minimum federal standards for fair health insurance premiums. States can choose to enact stronger consumer restrictions. In addition, starting in 2017, states have the option of allowing large employers to purchase coverage through the Exchanges. For states that choose this option, these rating rules would also apply to all large group health insurance coverage.

Naturally, older patients tend to utilize health care more than younger patients. Currently the 5:1 age rate band, which is effective in 42 states, spreads the premium costs over 5 ranges of age groups. An older individual will pay no more than five times what a younger individual pays in premium, as set by the limits. On January 1, 2014, those premium costs will change overnight for both groups, with the younger patients’ premiums going up as much as 50% and the older patients’ premiums dropping up to 10%. While this is great news for some, it will likely drive premium rates even higher overall. If the younger population experiences an increase in premium that is unaffordable, they may choose not to purchase coverage or possibly drop current coverage. As the young patients drop off and leave only older patients who utilize health care more frequently, premiums will increase for everyone.

Age rating band changes, combined with limitations on other rating factors such as gender, health status and loss of SIC code discounts will increase your group coverage costs in 2014. Additionally, there are several fees which will become effective in January: exchange fees, insurance assessment fees, health insurance industry fees and the Patient-Centered Outcomes Research Institute Fee. While insurance companies are responsible for some of these fees, much of the cost will likely be shifted employers and in turn, employees.

Some industry experts expect fully insured health plans to experience minimum increases of 30% on 2014 renewals. As HHS releases new information almost daily, MedCon Benefit Systems Group, Inc. is assisting clients in plan design strategy and preparation to meet compliance rules. If you are unsure where you stand in the world of health care reform, MedCon is here to help.

Sources: Department of Health and Human Services and Insurance Network America

*The information discussed on this page is not intended to be exhaustive nor should any discussion or opinion be construed as legal advice. Readers should contact legal counsel for legal advice.

Exchange Notice Requirements Delayed

The Affordable Care Act (ACA) requires employers to provide all new hires and current employees with a written notice about ACA’s health insurance exchanges (Exchanges), effective March 1, 2013.

On Jan. 24, 2013, the Department of Labor (DOL) announced that employers will not be held to the March 1, 2013, deadline. They will not have to comply until final regulations are issued and a final effective date is specified.

This MedCon Benefit Systems, Inc. Legislative Brief details the expected timeline for the exchange notice requirements.

Exchange Notice Requirements

In general, the notice must:

  • Inform employees about the existence of the Exchange and give a description of the services provided by the Exchange;
  • Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer’s plan does not meet certain requirements;
  • Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of this employer contribution may be excludable for federal income tax purposes; and
  • Include contact information for the Exchange and an explanation of appeal rights.

This requirement is found in Section 18B of the Fair Labor Standards Act (FLSA), which was created by the ACA. The DOL has not yet issued a model notice or regulations about the employer notice requirement.

When do Employers have to Comply with the Exchange Notice Requirements?

Section 18B provides that employer compliance with the notice requirements must be carried out “[i]n accordance with regulations promulgated by the Secretary [of Labor].” Accordingly, the DOL has announced that, until regulations are issued and become applicable, employers are not required to comply with the exchange notice requirements.

The DOL has concluded that the notice requirement will not take effect on March 1, 2013, for several reasons. First, this notice should be coordinated with HHS’s educational efforts and IRS guidance on minimum value. Second, the DOL is committed to a smooth implementation process, including:

  • Providing employers with sufficient time to comply; and
  • Selecting an applicability date that ensures that employees receive the information at a meaningful time.

The DOL expects that the timing for distribution of notices will be the late summer or fall of 2013, which will coordinate with the open enrollment period for Exchanges.

The DOL is considering providing model, generic language that could be used to satisfy the notice requirement. As a compliance alternative, the DOL is also considering allowing employers to satisfy the notice requirement by providing employees with information using the employer coverage template as discussed in the preamble to the Proposed Rule on Medicaid, Children’s Health Insurance Programs and Exchanges.

Future guidance on complying with the notice requirement under FLSA section 18B is expected to provide flexibility and adequate time to comply.

Source: U.S. Department of Labor

 

*This MedCon Benefit Systems, Inc. Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

2013 Compliance Checklist

In light of the Supreme Court’s June 28, 2012, decision to uphold the health care reform law, or Affordable Care Act (ACA), employers must continue to comply with ACA mandates that are currently in effect. Employers must also prepare to comply with ACA changes that will go into effect in the future. To prepare for upcoming changes, employers need to be aware of the ACA mandates that will go into effect in 2013.

This MedCon Benefit Systems, Inc. Legislative Brief provides a compliance checklist for employers for 2013. Please contact your MedCon Benefit Systems, Inc. representative for assistance or if you have questions about changes that were required in previous years.

GRANDFATHERED PLAN STATUS

A grandfathered plan is one that was in existence when health care reform was enacted on March 23, 2010. If you make certain changes to your plan that go beyond permitted guidelines, your plan is no longer grandfathered. Contact your MedCon Benefit Systems, Inc. representative if you have questions about changes you have made, or are considering making, to your plan.

□    If you have a grandfathered plan, determine whether it will maintain its grandfathered status for the 2013 plan year. Grandfathered plans are exempt from some of the health care reform requirements. A grandfathered plan’s status will affect its compliance obligations from year-to-year.

□    If you move to a non-grandfathered plan, confirm that the plan has all of the additional patient rights and benefits required by ACA. This includes, for example, coverage of preventive care without cost-sharing requirements.

ANNUAL LIMITS

Effective for plan years beginning on or after Jan. 1, 2014, health plans will be prohibited from placing annual limits on essential health benefits. Until then, however, restricted annual limits are permitted.

□    Unless a health plan received an annual limit waiver, its annual limit on essential health benefits for the 2013 plan year cannot be less than $2 million. (This limit applies to plan years beginning on or after Sept. 23, 2012, but before Jan. 1, 2014.)

SUMMARY OF BENEFITS AND COVERAGE

Health plans and health insurance issuers must provide a Summary of Benefits and Coverage (SBC) to participants and beneficiaries. The SBC is a relatively short document that provides simple and consistent information about health plan benefits and coverage in plain language. A template for the SBC is available, along with instructions and examples, and a uniform glossary of terms.

Plans and issuers must provide the SBC to participants and beneficiaries who enroll or re-enroll during an open enrollment period beginning with the first open enrollment period that begins on or after Sept. 23, 2012. The SBC also must be provided to participants and beneficiaries who enroll other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees) effective for plan years beginning on or after Sept. 23, 2012.

□    If your plan has an open enrollment period beginning on or after Sept. 23, 2012, confirm that the SBC is included with the open enrollment package. For participants and beneficiaries who enroll outside of the open enrollment period, confirm that the SBC will be provided to these individuals beginning with the plan year starting on or after Sept. 23, 2012.

  • If you have a self-funded plan, the plan administrator is responsible for providing the SBC.
  • If you have an insured plan, both the plan and the issuer are obligated to provide the SBC, although this obligation is satisfied for both parties if either one provides the SBC. Thus, if you have an insured plan, you should work with your health insurance issuer to determine which entity will assume responsibility for providing the SBC. Please contact your MedCon Benefit Systems, Inc. representative for assistance.

60-DAY NOTICE OF PLAN CHANGES

□    A health plan or issuer must provide 60 days’ advance notice of any material modifications to the plan that are not related to renewals of coverage. Notice can be provided in an updated SBC or a separate summary of material modifications. This 60-day notice requirement becomes effective when the SBC requirement goes into effect for a health plan.

PREVENTIVE CARE SERVICES FOR WOMEN

□    Effective for plan years beginning on or after Aug. 1, 2012, non-grandfathered health plans must cover specific preventive care services for women without cost-sharing requirements.

The covered preventive care services for women include: well-woman visits; gestational diabetes screening; human papillomavirus (HPV) testing; sexually transmitted infection (STI) counseling; human immunodeficiency virus (HIV) screening and counseling; FDA-approved contraception methods and contraceptive counseling; breastfeeding support, supplies and counseling;  and domestic violence screening and counseling. Exceptions to the contraception coverage requirement apply to certain religious employers. The preventive care guidelines for women are available at: www.hrsa.gov/womensguidelines/.

$2,500 CONTRIBUTION LIMIT FOR HEALTH FSAs

□    Effective for plan years beginning on or after Jan. 1, 2013, an employee’s annual pre-tax salary reduction contributions to a health flexible spending account (FSA) must be limited to $2,500. (The $2,500 limit will be indexed for cost-of-living adjustments for 2014 and later years.)

Health FSA plan sponsors are free to impose an annual limit that is lower than the ACA limit for employees’ health FSA contributions. Also, the $2,500 limit does not apply to employer contributions to the health FSA and it does not impact contributions under other employer-provided coverage. For example, employee salary reduction contributions to an FSA for dependent care assistance or adoption care assistance are not affected by the $2,500 health FSA limit.

W-2 REPORTING

□    Beginning with the 2012 tax year, employers that are required to issue 250 or more W-2 Forms must report the aggregate cost of employer-sponsored group health coverage on employees’ W-2 Forms. The cost must be reported beginning with the 2012 W-2 Forms, which are issued in January 2013.

ACA’s W-2 reporting requirement is optional for smaller employers until further guidance is issued. Also, the reporting is for informational purposes only; it does not affect the taxability of benefits.

RETIREE DRUG SUBSIDY

The Medicare Part D program includes a Retiree Drug Subsidy (RDS) to encourage employers to continue providing prescription drug coverage to Medicare-eligible retirees. The RDS is available to certain employers that sponsor group health plans covering retirees who are entitled to enroll in Medicare Part D but elect not to do so. Employers receive RDS payments tax-free. In addition, before 2013, employers receiving the RDS could take a tax deduction for their retiree prescription drug costs, unreduced for the subsidy amount.

□    Beginning in 2013, employers receiving the RDS will no longer be permitted to take a tax deduction for the subsidy amount.

MEDICARE TAX INCREASES

□    Effective Jan. 1, 2013, the Medicare Part A (hospital insurance) tax rate increases by 0.9 percent (from 1.45 percent to 2.35 percent) on wages over $200,000 for an individual taxpayers and $250,000 for married couples filing jointly. (The tax is also expanded to include a 3.8 percent tax on unearned income in the case of individual taxpayers earning over $200,000 and $250,000 for married couples filing jointly).

An employer must withhold the additional Medicare tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year. An employer has this withholding obligation even though an employee may not be liable for the additional Medicare tax because, for example, the employee’s wages or other compensation together with that of his or her spouse (when filing a joint return) does not exceed the $250,000 liability threshold. Any withheld additional Medicare tax will be credited against the total tax liability shown on the individual’s income tax return (Form 1040).

EMPLOYEE NOTICE OF EXCHANGES

□    Effective March 1, 2013, employers must provide all new hires and current employees with a written notice about ACA’s health insurance exchanges (Exchanges). In general, the notice must:

  • Inform employees about the existence of the Exchange and give a description of the services provided by the Exchange;
  • Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer’s plan does not meet certain requirements;
  • Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of the employer contribution to employer-provided coverage may be excludable for federal income tax purposes; and
  • Include contact information for the Exchange and an explanation of appeal rights.

Federal agencies are expected to issue more specific guidance on this notice requirement and provide a model notice for employers to use.

CER FEES

ACA created the Patient-Centered Outcomes Research Institute (Institute) to help patients, clinicians, payers and the public make informed health decisions by advancing comparative effectiveness research. The Institute’s research is to be funded, in part, by fees paid by health insurance issuers and sponsors of self-insured health plans. These fees are called comparative effectiveness research fees or CER fees.

□    Self-funded plans and health insurance issuers must pay a $1 per covered life fee for comparative effectiveness research. Fees are effective for plan years ending on or after Oct. 1, 2012. Fees increase to $2 the next year and will be indexed for inflation after that. Full payment of the research fees will be due by July 31 of each year. It will generally cover plan years that end during the preceding calendar year. Thus, the first possible deadline for paying the CER fees is July 31, 2013.

HIPAA CERTIFICATION

□    Health plans must file a statement with the Department of Health and Human Services (HHS), certifying their compliance with HIPAA’s electronic transaction standards and operating rules. Under ACA, the first deadline for certifying compliance with certain HIPAA standards and rules is Dec. 31, 2013. HHS has indicated that it intends on issuing more guidance on this requirement in the future.

This MedCon Benefit Systems, Inc. Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.
© 2012 Zywave, Inc. All rights reserved. EEM 10/12

Legislative Brief: HSA Limits Will Increase for 2013

The Internal Revenue Service (IRS) issued Revenue Procedure 2012-26, which increases limits for health savings accounts (HSAs) effective for calendar year 2013. The following HSA limits will increase for 2013.

  • Annual contribution limits for single and family coverage;
  • Maximum out-of-pocket expense limits for coverage under a high deductible health plan (HDHP); and
  • Minimum deductibles for HDHPs.

HSA Contribution Limits

For 2013, the annual HSA contribution limit for an individual with self-only coverage under an HDHP is $3,250 (up from $3,100 for 2012).

For 2013, the annual HSA contribution limit for an individual with family coverage under an HDHP is $6,450 (up from $6,250 for 2012).

HDHP Out-of-Pocket Expense Limits

The maximum out-of-pocket expense (deductibles, co-payments and other amounts, but not premiums) limit for self-only HDHP coverage for 2013 is $6,250, which is up from $6,050 for 2012.

For family HDHP coverage, the maximum out-of-pocket expense limit for 2013 is $12,500, which is up from $12,100 for 2012.

HDHP Deductible Limits

For 2013, the deductibles under an HDHP must be at least $1,250 for self-only coverage (up from $1,200 for 2011 and 2012) and $2,500 for family coverage (up from $2,400 for 2011 and 2012).

**This MedCon Benefit Systems, Inc. Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. © 2012 Zywave, Inc. All rights reserved.

The Future of HSAs and Consumer-Driven Plans

Do you understand the new HHS guidelines on actuarial value, or how the minimum medical loss ratio regulations impact your business? if you now have or are considering implementation of an HSA or HRA, you won’t want to miss this 90 minute webinar conducted by the Healthcare Choice Coalition to find out what the future holds for these plans. Hear HSA expert Roy Ramthun, and actuarial expert Mac McCarthy explain the new HHS bulletin and review the final regulations on “minimum medical loss ratios”. You will gain practical, insightful, high quality information to help you understand the new requirements create challenges and what you can do in response.

Choose from one of three options to hear the webinar live:

Tuesday, March 13, 2012

11:00 am – 12:30 pm ET (8:00 am – 9:30 am PT)

Wednesday, March 21, 2012

12:00 pm – 1:30 pm ET (9:00 am – 10:30 am PT)

Thursday, March 29, 2012

11:00 am – 12:30 pm ET (8:00 am – 9:30 am PT)

Cost: $50 (FREE For Healthcare Choice Coalition Members)

 

To register and find more information, please visit:

http://www.healthcarechoicecoalition.org/join-now.html.