The Department of Health and Human Services’ Centers for Medicare & Medicaid Services (CMS) has issued a final rule (pdf) that imposes a new reporting requirement on health insurance issuers in the group and individual markets that meet or exceed the applicable medical loss ratio (MLR) standard for the 2011 reporting year. The Affordable Care Act requires that health insurers, depending on the size of the insurance market, spend between 80 and 85% of premium revenue on reimbursement for clinical services or activities that improve health care quality, or provide a rebate to their enrollees. The law also imposes certain reporting requirements for insurers. Final regulations implementing the MLR requirement, including its application to mini-med plans and distribution of rebates to enrollees in group health plans, were issued in December 2011.
Agencies Issue New Guidance on Summary of Benefits and Coverage Requirement
The Department of Labor’s Employee Benefits Security Administration (EBSA) along with the Departments of Health and Human Services (HHS) and the Treasury have released a ninth set of Frequently Asked Questions (FAQs) on the Affordable Care Act’s implementation. This most recently issued guidance addresses questions regarding the health care reform law’s summary of benefits and coverage (SBC) requirement. The Affordable Care Act requires group health plans and health insurance issuers to provide consumers with a SBC that “accurately describes the benefits and coverage under the applicable plan or coverage” to enable enrollees and participants to better compare plan terms and benefits. This SBC must be provided during certain times, such as when potential enrollees are shopping for coverage, when they actually apply for coverage, at each plan year, and upon request. In addition, a notice must be sent to enrollees and policyholders informing them of any significant changes in coverage at least 60 days before such changes take effect. A uniform glossary of common healthcare-related insurance terms must also be provided to consumers at various points in the enrollment process. Final regulations implementing the SBC and uniform glossary requirements were issued in February 2012.
The new set of 14 FAQs provides guidance on a number of SBC issues, and details several temporary enforcement amnesty periods related to certain SBC provisions. Such information includes the following: Continue Reading
DOL Issues Guidance on Mental Health Parity and Addiction Equity Act
The Department of Labor’s Employee Benefits Security Administration (EBSA) has issued a new set of Frequently Asked Questions (FAQs) on the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). This law generally requires private group health benefit plans that provide mental health and/or substance use disorder benefits through a group health benefit plan that also offers medical and surgical benefits to do so on an equivalent basis. The Act imposes several plan design requirements on group health benefit plans that offer mental health and/or substance use disorder benefits including equity in cost sharing, treatment limitations, and coverage decision requirements. For example, the MHPAEA and its implementing regulations stipulate that plans and issuers may not impose a lifetime or annual dollar limit on mental health or substance use disorder benefits that is lower than the lifetime or annual dollar limit imposed on medical/surgical benefits.
The recently-issued guidance includes a set of 10 FAQs covering such topics as which agencies oversee the MHPAEA’s implementation, whether certain plan designs violate the MHPAEA, and how to seek redress if an individual believes his or her plan is in violation of the law.
Information Sought on Stop Loss Insurance Coverage
The Departments of Treasury, Health and Human Services, and Labor are soliciting input from group health plans and their sponsors regarding the use of stop loss insurance. Stop loss insurance protects against catastrophic or unpredictable health insurance claims and provides coverage to self-insured group health plans once a certain level of risk has been assumed by the plan. According to the request for information, the agencies lack sufficient data on the incidence or terms of stop loss insurance among self-insured employers’ group health plans. The concern, as discussed in the request, is that small employers with healthy employees might self-insure and purchase stop-loss insurance policies with relatively low attachment points (the specified dollar amount above which the stop-loss coverage pays for claims) to avoid triggering certain requirements under the Affordable Care Act. According to the agencies, “this practice, if widespread, would worsen the risk pool and increase premiums in the fully insured small group market, including in the Small Business Health Options Program (SHOP) Exchanges that begin in 2014.”
CMS Issues Guidance on Medical Loss Ratio Requirement
The Centers for Medicare & Medicaid Services (CMS) has issued new guidance (pdf) on the medical loss ratio (MLR) requirement under the Affordable Care Act. The new health care law mandates that health insurers, depending on the size of the insurance market, spend between 80 and 85% of premium revenue on reimbursement for clinical services or activities that improve health care quality, or provide a rebate to their enrollees. The law also imposes certain reporting requirements for insurers. Final regulations implementing the MLR requirement, including its application to mini-med plans and distribution of rebates to enrollees in group health plans, were issued in December 2011.
The new technical guidance, which is in question and answer format, responds to inquiries on the following topics: applicability of the MLR to certain types of plans; employer groups of one; counting employees for determining market size; individual association policies; offering policyholders a “premium holiday”; reinsurance and reporting; insurance exchange user fees; states with a higher medical loss ratio standard; application of the adjustment to “mini-med” plans; and the form of the rebate to be provided.
IRS and HHS Release Guidance for Determining What Constitutes “Minimum Value” for Employer-Sponsored Health Plans and Health Coverage Reporting and Verification Requirements
The Internal Revenue Service has issued three new guidance documents related to certain requirements the Affordable Care Act imposes on employer-provided health plans. The Department of Health and Human Services (HHS) also issued a bulletin regarding verification of access to employer-sponsored coverage.
IRS Notice 2012-31
The first guidance document, Notice 2012-31, (pdf) suggests various possible ways for determining whether the coverage offered through an employer-sponsored health plan constitutes “minimal value” under the health reform law. Beginning in 2014, the Affordable Care Act will permit certain eligible individuals who purchase health insurance through insurance exchanges to receive a premium tax credit unless they are eligible for other minimum essential coverage, including affordable employer-sponsored coverage that also provides minimum value. A plan lacks minimum value if “the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs.” An applicable large employer, one with 50 or more full-time employees or equivalents, will be subject to a penalty if any full-time employee receives a tax credit because the employer-sponsored plan does not provide minimum value.
The Evolving Say on Dodd-Frank’s Say-on-Pay
The so-called “say-on-pay” provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act are beginning to make headlines as more domestic public companies grapple with shareholder advisory votes on executive compensation. In 2011, the Securities and Exchange Commission (SEC) adopted final rules implementing Dodd-Frank section 951’s requirement that SEC-registered issuers provide shareholders at least once every three calendar years with a separate non-binding say-on-pay vote regarding the compensation of the company’s named executive officers, the chief executive officer, the chief financial officer, and the company’s three other most highly compensated officers. Although the vote on compensation is non-binding, the company must include a statement in the Compensation Discussion and Analysis of the proxy statement whether and, if so, how its compensation policies and decisions have taken into account the results of the shareholder say-on-pay vote. As a result, the vote of the shareholders will be taken seriously not only by the company, but other companies in the same marketplace.
IRS Issues Proposed Rule on Comparative Effectiveness Research Fees
The Internal Revenue Service (IRS) has issued a proposed rule addressing the fees imposed by the Affordable Care Act on issuers of certain health insurance policies and plan sponsors of certain self-insured health plans to fund comparative effectiveness research. These fees are designed to support the Patient-Centered Outcomes Research Trust Fund (“Trust Fund”). The Affordable Care Act includes provisions establishing the Patient-Centered Outcomes Research Institute (the “Institute”), a private, nonprofit corporation whose purpose is to “assist, through research, patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing the quality and relevance of evidence-based medicine through the synthesis and dissemination of comparative clinical effectiveness research findings.” The Institute is to be paid for by the Trust Fund, which, in turn, will be partly financed by fees paid by issuers of specified health insurance policies and sponsors of applicable self-insured health plans.
The Affordable Care Act imposes a fee on an issuer of a specified health insurance policy for each policy year ending on or after October 1, 2012, and before October 1, 2019 to support the Trust Fund. The fee is two dollars (one dollar in the case of policy years ending before October 1, 2013) multiplied by the average number of lives covered under the policy. For policy years ending on or after October 1, 2014, the fee is increased based on increases in the projected per capita amount of National Health Expenditures. With respect to applicable self-insured health plans, the fee will be paid by the plan sponsor. In the case of (1) a plan established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations, (2) a multiple employer welfare arrangement, or (3) a voluntary employees’ beneficiary association described in section 501(c)(9), the plan sponsor is the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the plan.
Eighth Circuit Holds that Stovepipe Model in Target Benefit Plan Did Not Violate ERISA or the ADEA
In Northwest Airlines Inc. v. Phillips, (pdf) an employer/plan sponsor and union sought a declaratory judgment that the following planned contribution scheme for a money purchase plan did not violate ERISA or the ADEA: The company would make no contribution if the employee is 55 or older, a contribution of 0-17% of pay if the employee is 50-54, up to 25% of pay if the employee is 40-49, and one of 9-21% of pay if the employee is 30-39. The defendant participants counterclaimed alleging that the scheme violated ERISA, the ADEA and state laws prohibiting age discrimination. The Eighth Circuit affirmed the district court’s holding that the planned contributions did not violate ERISA or the ADEA. Continue Reading
IRS Issues New COBRA Audit Guidelines
By Russell D. Chapman, Lisa A. Taggart and Andrea R. Jackson
Recently, the Internal Revenue Service (IRS) published Revised Audit Guidelines for use by IRS auditors in examining group health plans for COBRA compliance. The revised Guidelines incorporate changes to account for laws that have affected COBRA since the previous guidelines were developed, such as the Health Insurance Portability and Accountability Act (HIPAA) and the Family and Medical Leave Act (FMLA). The Guidelines appear to herald a new COBRA compliance audit effort by the IRS. Continue Reading