This month the IRS released proposed regulations implementing health care reform’s requirement that issuers of certain health insurance policies and plan sponsors of certain self-insured group health plans pay excise taxes (i.e., a Patient-Centered Outcomes Research (PCOR) fee, sometimes referred to as the Comparative Effectiveness Research (CER) fee) to fund the Patient-Centered Outcomes Research Institute. 

Background

Health care reform contains numerous provisions that promote research to evaluate and compare health outcomes and the clinical effectiveness, risks, and benefits of medical treatments, services, procedures, drugs, and other strategies or items that treat, manage, diagnose, or prevent illness or injury.  One of these provisions establishes a private, nonprofit corporation, the Patient-Centered Outcomes Research Institute that will conduct such research.  The Institute will focus on advancing the quality and relevance of evidence-based medicine via comparative clinical effectiveness...

Final HIPAA/HITECH rules are in sight!  Last month, the rules reached the White House Office of Management and Budget (OMB), the final stop in the federal internal review process. 

The rules will modify HIPAA Privacy, Security, Enforcement, and Breach Notification Rules as necessary to implement the privacy, security, enforcement, and breach notification provisions of the Health Information Technology for Economic and Clinical Health Act (HITECH), and will modify the HIPAA Privacy Rule as required by the Genetic Information Nondiscrimination Act of 2008 (GINA). 

Generally, HITECH requires that covered entities under HIPAA notify affected individuals of a breach of unsecured protected health information, as well as the Secretary of the Department of Health and Human Services (HHS) and the media if a breach affects more than 500 individuals.  If a breach affects fewer than 500 individuals, the breach must be reported to HHS on an annual basis.  Additionally, HITECH mandates that business associates of covered entities report breaches directly to the covered entity.  HITECH also strengthens civil and criminal enforcement of HIPAA rules in a number of ways, e.g., by establishing tiered ranges of increasing minimum penalty amounts and by not allowing covered entities to escape penalties by claiming that the violation was unknown unless the covered entity corrects the violation within 30 days of discovery.   ...

April is National Autism Awareness Month.  Autism is a complex developmental disability that typically appears during the first three years of life and affects a person’s communication and social interaction abilities.  The disorder occurs on a spectrum, in that it affects individuals differently and to varying degrees.  The prevalence of autism has risen to 1 in every 110 births in the United States and almost 1 in 70 boys. 

Did you know that health care reform contains important provisions for individuals with autism? The law prohibits insurers from denying coverage for children with autism or other pre-existing conditions and prohibits lifetime dollar limits on coverage.  Additionally, new plans must cover autism screening at no cost to parents and young adults without employer-provided insurance may stay on their parents’ insurance until they turn 26.  Starting in 2014, individuals with autism will have expanded access to affordable insurance options under the insurance exchanges and Medicaid. ...

The IRS has provided a helpful list of tax provisions stemming from the Affordable Care Act – or health care reform – that are now in effect.  The IRS will update this page as more provisions go into effect over the coming years. 

http://www.irs.gov/newsroom/article/0,,id=220809,00.html

Today marks the 3rd day of oral arguments before the Supreme Court in the health care reform case – and what a week it’s been!

On Monday, the Court heard arguments on whether the Anti-Injunction Act prevents the Court from considering the individual mandate provision until its actual effective date in 2014.    The 145-year-old Act prevents federal courts from deciding cases in which taxpayers are trying to prevent the government from collecting taxes.  The tax has to be actually due, and then the courts can hear the case. 

Eight of the justices fired questions at the attorneys during the oral argument (Justice Thomas continued his six year trend of silence during oral arguments).   Although it's impossible to predict the outcome based on questions, the line of questioning appears to indicate that the Court is leaning towards ruling that the Anti-Injunction Act will not apply – which means they can decide the larger issue of whether the individual mandate is constitutional now.   

...

The Departments of Labor, Health and Human Services, and Treasury have issued a set of 24 FAQs on the summary of benefits and coverage (SBC) requirement under health care reform.  The FAQs attempt to answer some of the questions raised to date.

Agencies have been fond of releasing guidance in the form of FAQs lately, probably in response to the volume of legislation churning out of health care reform.  FAQs provide a timely means for agencies to provide information to the public.  It’s unclear the weight that a court would give an FAQ, but in this rapidly changing regulatory landscape they are a welcome source of additional guidance. 

The Departments’ basic approach to health care reform implementation is to assist plans and insurers into coming into compliance with the new requirements.  Notably, the FAQs do not provide for an extension of the effective date of open enrollment periods on or after September 23, 2012 for participants and beneficiaries and plan years beginning on or after...

Beginning Monday March 26, the Supreme Court will begin hearing oral arguments in one of its biggest cases in decades – the Affordable Care Act, or health care reform.  Monday’s 90 minutes of argument will center on whether the Anti-Injunction Act bars the Court from considering the individual mandate.  Essentially, if the Court finds that the Act applies here, then the Court would not be able to consider the individual mandate until its effective date in 2014. 

Next, on March 27, the Court will hear 2 hours of argument on the constitutionality of the controversial individual mandate provision.  On Wednesday March 28 the Court will consider whether the rest of the law remains effective if the Court were to strike down the individual mandate as unconstitutional and whether the expansion of Medicaid amounts to unconstitutional coercion of the States. 

Not only will the Court’s decision have huge political implications, but the health care marketplace has already begun changing in fundamental...

On March 1, 2012 the Senate narrowly defeated a proposal by Sen. Roy Blunt, R-Mo. which would have allowed employers and health plans to refuse to cover medical services (including contraceptives) on religious or moral grounds.  The vote was 51-48.

Originally, health care reform required all employers, including religious institutions (e.g., hospitals and universities) to provide first dollar coverage for preventative services (including contraceptives for women).  The immediate political fallout caused the Obama administration to reverse course and move the burden of contraception coverage to insurers.  Churches have always been exempt from the rule.

While Blunt argued that the bill protects the First Amendment rights of religiously affiliated employers by effectively inserting a conscience clause into health care reform, Democrats contended that the bill attempts to deny women necessary medical services mandated by health care reform.  Some have pointed out that the broad drafting of the...

The Departments of Labor, Health and Human Services, and Treasury – the departments responsible for implementing certain health care reform requirements – have released guidance on several key health care reform provisions effective in 2014.  The guidance – in the form of FAQs from employers and other stakeholders – covers automatic enrollment, employer shared responsibility, and the 90-day limitation on waiting periods and outlines rulemaking approaches under consideration by the departments and invites public comments.

Below find a brief overview of each health care reform provision covered by the FAQs and the key takeaways. 

·        Automatic Enrollment – Employers with more than 200 full-time employees and those subject to the Fair Labor Standards Act are required to automatically enroll new full-time employees in one of the employer’s health benefit plans (with adequate notice and the opportunity to opt out) and to continue the enrollment of current employees.  The FAQs indicate that regulations...

Last week, the IRS released updated FAQs regarding reporting of employer provided health coverage on Form W-2. The updated FAQs incorporate guidance set forth in Notice 2012-9. Generally, employers filing more than 250 Forms W-2 must report the value of employer provided health coverage starting in calendar year 2012 (on Forms W-2 furnished to employees in 2013).

Find the FAQs here: http://www.irs.gov/newsroom/article/0,,id=237894,00.html

The FAQs include a link to a helpful chart that breaks down which types of coverage employers need to report on Form W-2.

Find the chart here: http://www.irs.gov/newsroom/article/0,,id=254321,00.html

It’s been a busy week!

The Departments of Labor and Health and Human Services, along with Treasury/IRS, released a final rule on the health care reform requirement that group health plans provide a summary of benefits and coverage (SBC) to consumers.

Originally slated for March 23, 2012, the final rule requires plans with plan years that start September 23, 2012 or later to supply SBCs in their next open enrollment. Other changes from the proposed rule include:

· allowing the SBC to be incorporated into the Summary Plan Description (SPD) if the SBC information is intact and prominently displayed at the beginning of the SPD;

· permitting reasonable attempts to comply with the 4 page, double-sided, page limit;

· reducing the number of coverage examples from three to two (normal delivery childbirth and Type 2 diabetes);

· recognizing that if a plan’s terms cannot be reasonable described using the template, the plan or insurer’s best efforts to comply with the template is permissible;

...

Recently, the Department of Health and Human Services (HHS) issued a statement indicating that nonprofit employers who, based on religious beliefs, do not currently provide first dollar contraceptive coverage in their health insurance plan, have until August 1, 2013 to comply with the rule. Some expected that such employers would be completely exempt from the rule because churches and other houses of worship are exempt. Since the statement was released, all sides have weighed in and tensions surrounding the issue are escalating.

In August of 2011, HHS issued an interim final rule, stemming from Health Care Reform, requiring most health insurance plans to cover preventative services for women, including FDA-approved contraceptives like the birth control pill and morning-after pill, without charging a co-pay, co-insurance or a deductible, effective August 1, 2012. In order to be exempt from the rule concerning contraceptives, an organization must serve primarily persons who share its religious tenets. After...

Recently the Department of Health and Human Services (HHS) issued interim final rules adopting HIPAA transaction standards for health care electronic fund transfers (EFT) and electronic remittance advice (ERA).

Background

The interim final regulations implement parts of the Affordable Care Act – health care reform – which requires the adoption of standards to support and facilitate health care EFT transactions.

Health plans send health providers EFT payments separately from ERA because the information is sent in different electronic formats, through different networks and with different data for different business uses. The ERA contains information regarding the adjustments that the health plan has negotiated with the provider – rarely does a health plan pay the provider the exact amount that the provider bills. In turn, the providers use the ERAs to post payments, but cannot automatically link the postings to the EFT. Providers end up spending a significant amount of time manually reconciling...

In recent blog posts, our guest contributor, Peter Antonie, summarized IRS guidance on Form W-2 reporting requirements and I’ve covered the $2,500 Health Care FSA limit. I’d like to send readers on over to our News Center for some excellent coverage of W-2 Reporting and the $2,500 limit.

Some quick comments on the $2,500 limit. We’ve received several questions regarding how the $2,500 Health Care FSA limit) applies to plan years that cross into 2013. Employers with plan years beginning at any point between February 1, 2012 and December 1, 2012 who plan to set a Health Care FSA limit above $2,500, should ensure that employees understand the implications of their elections.

Example: Company QRS offers a Health Care FSA with an upcoming plan year of February 1, 2012 – January 31, 2013. Company QRS does not set a maximum salary reduction contribution limit for the Health Care FSA. Edward is expecting some pretty high medical expenses for the upcoming plan year, so he elects $12,000 for his Health Care FSA ($12,000 / 26 pay periods = $461.53 per pay period in salary reductions). Come February 1, 2013 Edward decides to elect the maximum of $2,500 for his Health Care FSA ($2,500 / 26 pay periods = $96.15 per pay period in salary reductions). This will result in salary reduction contributions of $3,230.66 for taxable year 2013 (2 pay periods * $461.53 + 24 pay periods * $96.15 = $3230.66). Edward will need to be taxed on the $730.66 that exceeds the limit.

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2011 certainly kept us busy with health care reform taking up the bulk of our efforts. As we kickoff 2012, I thought I would highlight some of the upcoming issues affecting the benefits world.

Supreme Court & Health Care Reform – The Supreme Court will hear challenges to health care reform just as the presidential election swings into high gear. Expect oral arguments in March 2012 and a possible decision in June. W-2 Reporting – Beginning with tax year 2012, employers who file more than 250 Form W-2s must report the aggregate cost of applicable employer-sponsored health coverage on W-2s provided to employees (using Box 12 and code DD). Employers who file less than 250 Form W-2s get a pass until the IRS issues further guidance. See IRS Notice 2012-9 (http://www.irs.gov/pub/irs-drop/n-12-09.pdf). $2,500 Limit on Health Care FSA Salary Reductions – Although the limit is effective beginning in tax year 2013, non-calendar year Health...

Beginning in 2014, health care exchanges are expected - indeed, mandated – to play a key role in the implementation of reform legislation. Exchanges are intended to serve and address consumers who don’t have employer-sponsored coverage or cannot afford employer-sponsored coverage. The basic concept of the exchange is to facilitate the interaction between insurance companies and consumers, using a common platform for comparison of qualified health plans.

 

On Friday, President Obama announced that his Administration will implement a policy that seeks to accommodate religious liberty while protecting the health of women. Under the new policy, women will still have access to free preventive care that includes contraceptive services – no matter where she works. And as previously announced, churches and houses of worship will be exempt from the requirement to refer or provide coverage for contraception. But if a woman’s employer is a charity, hospital or other religious organization that has a religious objection to providing contraceptive services as part of its health plan, her insurance company – and not the hospital or charity – will be required to reach out and offer her contraceptive care free of charge. This policy has earned praise from a wide range of individuals and organizations, including many organizations that will be directly affected by this policy.

In an effort to help consumers make more informed health insurance decisions, the Obama administration released new rules requiring insurers to provide clear, consistent and comparable summary information about their health plan benefits and coverage. Insurers must communicate what each health plan will cover, what limitations or conditions will apply, and what each service will cost, all in standardized and straightforward language.

 A new report from Highlands, a leader in employer health care compliance and benefits management, finds that less than half of U.S. employees are ready to comply with healthcare reform provisions that call for the distribution of standardized Summaries of Benefits and Coverage (SBCs).

In a controversial, but not completely unexpected decision, the Obama administration announced this past week that health insurance plans, excluding specific categories of “religious employers,” must cover contraceptives for women free of charge. In August, the administration had made it known that it intended to require coverage of contraceptives for women, as recommended by an expert panel of the National Academy of Sciences, but the White House decided to reconsider the issue after hearing protests from the Catholic Church and prominent Republicans.

The U.S. Supreme Court is preparing to make historical rulings regarding the constitutionality of the Affordable Care Act’s “individual mandate” or “minimum coverage” provision. Even if the “mandate” is deemed unconstitutional, there will be plenty of debate as to whether it can be severed from the rest of the legislation. They will be hearing testimony in March and will likely give their ruling in June or July.

On December 16, 2011, the Department of Health and Human Services (HHS) released a bulletin outlining its intended approach to rulemaking to define “essential health benefits” (EHB). 

Background

Effective for plan years beginning on or after January 1, 2014, health care reform requires that certain health plans ensure that coverage includes an EHB package, which means the plan must provide EHB, limit cost-sharing, and provide either 60%, 70%, 80%, or 90% of the full actuarial value of benefits provided under the plan (known as “metal levels of coverage”).

The health plans that must provide EHB coverage include non-grandfathered plans in the individual and small group markets, Medicaid, and Basic Health Programs.  Self-insured group health plans, plans in the large group market, and grandfathered health plans are not required to cover EHB. 

The Secretary of HHS has been tasked with the role of defining EHB, subject to certain requirements and limitations spelled out in health care...

On December 5, 2011, the U.S. Department of Labor’s (DOL) Employee Benefits Security Administration announced two proposed rules under health care reform that greatly strengthen DOL’s oversight and enforcement authority for MEWAs.    

Background

In general, a multiple employer welfare arrangement (MEWA) is an employee welfare benefit plan, or any other arrangement which provides health coverage to the employees of two or more unrelated employers who are not parties to a bona fide collective bargaining agreement.  MEWAs are attractive to small employers who seek access to the low cost health coverage available to large employers.    

Although there are legitimate MEWAs operating in the marketplace, too often MEWAs have become a vehicle for criminals to defraud consumers and employers.  MEWAs take advantage of gaps in the law to avoid State insurance regulations (such as the requirement to maintain sufficient funding and adequate reserves to pay claims). 

Here’s how it works: employers...

On December 2, 2011, the Department of Health and Human Services (HHS) released the final medical loss ratio (MLR) rule.  Under the final rule, broker commissions remain administrative expenses in the MLR calculation. 

Background

In an effort to ensure that consumers receive more value from insurers for their premium dollars, health care reform requires insurers to spend 80% (individual and small group markets) or 85% (large group markets) of premium dollars on medical care and health care quality improvement in 2011.  Effective 2012, if insurers do not spend the threshold amount on patient care, as opposed to administrative expenses, then they must provide rebates to consumers.

In December of 2010, HHS issued implementing regulations of the rule, which became known as the medical loss ratio.  HHS requested comments and now that comment period has closed, HHS has issued a final rule. 

Final Rule

The gist of the original rule as described above has not changed.  Changes in the final rule mostly focus on technical issues in the way insurers calculate and report their MLR and the process for distributing rebates. 

...

The Supreme Court has agreed to review several challenges to health care reform, most likely in March, with a decision in June.   While the fact that the court has agreed to hear the case is not surprising, the time allotted to oral arguments highlights the significance of the case and the complexity of the issues involved – five and a half hours instead of the usual one. 

The court will focus on the following issues:

Individual Mandate - Whether Congress has the Constitutional power to require that Americans obtain health insurance by 2014 or pay a tax penalty; At issue is whether the commerce clause of the Constitution allows Congress to essentially force all Americans to buy an expensive product for the rest of their lives.  Severability  - Whether the rest of the health care reform law survives if the individual mandate is found to be unconstitutional, i.e., whether the individual mandate can be “severed” from the rest of the law; Anti-Injunction Act...

You may have heard that health care reform imposes a $2,500 limit on annual salary reduction contributions to Health Care FSAs, effective for taxable years beginning after December 31, 2012.  The $2,500 limit is indexed for inflation for taxable years starting with 2014.  As we await more guidance from the IRS, we’d like to discuss a few issues related to the limit and offer some examples to help you in the interim. 

 

Are Employer Contributions included in the limit?

Possibly.  Employer contributions to Health Care FSAs will not factor into the limit unless it is a contribution that can also be received as additional compensation (i.e., cash) that the employee allocates to the Health Care FSA.  This makes sense because the limit really focuses on employee salary reduction contributions to the Health Care FSA. 

 

Example: Company DEF contributes $500 to each employee’s Health Care FSA.  The contribution cannot be cashed out or used for any other purpose.  Jim may still elect...

In August, the Eleventh Circuit Court of Appeals rejected the individual mandate provision of the Obama administration’s health care reform law, that everyone must purchase insurance or be covered by an employer’s group health plan, as a “wholly novel and potentially unbounded assertion of congressional authority,” but upheld the rest of the law.  The Eleventh Circuit was one of three federal courts of appeal that have issued decisions on the law so far – all reaching different conclusions.  Many watched and waited to see the Obama administration’s strategy unfold.  Would the Justice Department seek a review of the decision by the full Eleventh Circuit (a condensed three-judge panel issued the first decision) or go straight to the Supreme Court? 

Although the Supreme Court petition was not due until November, last week the Justice Department filed their petition formally appealing the Eleventh Circuit decision.  The Obama administration asked the Court to uphold the individual mandate along with the rest...

The Patient Protection and Affordable Care Act (PPACA) contains Medical Loss Ratio (MLR) provisions that require insurance companies to spend at least 80% of revenue on health care for small employers and 85% of revenue for large employers.  If the insurance company fails to meet these new standards, the new provision will require the insurance companies to provide a rebate beginning in 2012.

The loss ratio formula in PPACA differs from the way MLRs have traditionally been defined. Traditionally, the MLR is calculated by dividing an insurer's medical care claims by premiums. Under PPACA’s MLR formula, the numerator includes the insurer’s expenses for activities that improve health care quality such as education, counseling, care coordination, and wellness assessments in addition to medical claims. Additionally, the denominator of the MLR subtracts from insurer’s premiums all federal and state taxes, licensing and regulatory fees.

The HSA Council of the American Bankers Insurance Association in a...

Beginning March 12, 2012, health care reform requires group health plans to provide a four-page summary of benefits and coverage (SBC) and access to a separate glossary with uniform definitions of specific medical and coverage-related terms to all eligible individuals.  The goal of the SBC is to provide consumers with access to information in plain English to help them understand the coverage they have or the differences in the coverage and benefits by health plans when they are shopping for a new plan.  In the August 22, 2011 Federal Register, the Internal Revenue Service, Department of Labor, and Department of Health and Human Services (the agencies responsible for implementing many of health care reform’s requirements) issued long-anticipated proposed regulations that detail the requirements of the SBC.  The guidance also includes templates of proposed formats.

The 34-page proposed regulations clarified that the statutory reference to a four-page summary actually means four double-sided pages in at least...

As the third party administrator of Health Reimbursement Arrangements (HRAs), we have closely followed the implementation of various provisions of the Patient Protection and Affordable Care Act (PPACA), better known as Health Care Reform, and how those provisions might impact the plans we offer.

One of the provisions is a prohibition on a health plan imposing an annual cap on the reimbursement of essential health benefits.  This no-annual limit provision went into effect September 23, 2010 and health plans that were in effect on that date and have an annual cap were provided the opportunity to apply for a waiver from the provision. Waivers must be filed no later than September 22, 2011. The waiver would allow the cap to remain in effect until the plan removes the limit, but no later than January 1, 2014.

By their very nature, virtually all HRAs have an annual limit that applies to reimbursement of expenses, which is the maximum funding of the account available to the covered employee, and family if any.

...

Recently, a 2-to-1 majority of the Eleventh Circuit Court of Appeals, in Atlanta, found that the individual mandate provision of the Obama administration’s health care law is unconstitutional.  The provision, known as the “individual mandate,” would require Americans to purchase health insurance or pay a tax penalty beginning in 2014.  The decision was a victory for the 26 Republican attorneys general and governors who challenged the law on behalf of their states. 

The case essentially turns on whether the Commerce Clause of the Constitution – which allows Congress the broad power to regulate commerce – is so broad as to allow Congress to force individuals to purchase a product or pay a penalty.  The Obama administration had argued that, by making a choice not to purchase insurance, such individuals usually end up passing on the cost of their inevitable health care needs to hospitals, insured individuals and governmental agencies – actions that Congress can legislate under its broad authority to regulate...