Great job by Innovative’s Jeannine Bandiera, who found a way to make a member’s medication affordable!  Recently one of our members was made aware of a tier change for the medication that she needs to treat her condition.  The insurance carrier moved the medication to the Specialty Drug list from the Third Tier Formulary list, making the medication unaffordable to the member at $250 per month.  After contacting the insurance carrier, who said there wasn’t anything they could do, Jeannine decided to contact the manufacturer, Glaxo, Smith & Kline directly.  Jeannine discovered that Glaxo Smith & Kline has a co-pay assistance program that bases the cost of the medication on means. For this member the drug cost was reduced to $75, a savings of $175 monthly.  Way to go Jeannine, that’s the Innovative way!

There are similar programs offered by other manufacturers as well.  If you would like to learn more about this particular program follow this link to the Glaxo website:
http://www.rxassist.org/pap-info/company_detail.cfm?CmpId=125

A new report by Milliman Inc. says that high-deductible health plans, including those with health savings accounts (HSAs), will likely be more adversely impacted by the medical loss ratio requirements under PPACA than other types of comprehensive medical plans.  Consumers who rely on HSA-qualified plans to finance their health care may experience greater costs in their current health plans and may eventually have to find more expensive replacement coverage.

The primary issues of concern for high-deductible plans are that:

-The medical loss ratio formula doesn’t take into account contributions to HSAs.  Many high-deductible health plans are accompanied by an HSA, which covers much of the first-dollar costs before the plan’s deductible is reached. HSA contributions are currently not reflected in the medical loss ratio calculations.

-High-deductible health plans may not be able to raise rates fast enough to keep up with rising costs.  High-deductible health plans will require larger annual rate increases than typical medical plans because medical inflation will have a greater impact on claim levels than plans with lower deductibles.

-Every plan has fixed expenses that it covers with premiums.  Since high-deductible health plans have lower premiums than other plans, a greater percentage of the premium must be used to pay these fixed expenses.

-High-deductible health plans have less predictable claims experience that could increase the risk of paying rebates.  High-deductible insurance plans pay fewer claims than plans with low deductibles.  But when high-deductible health plans pay claims, the claim dollar amounts tend to be larger.  This lower-frequency/high-payment creates less actuarial predictability which can result in high claims in one year and low claims in another.  If the plan has low claims, it may not meet the 80 percent medical loss ratio and be required to pay rebates.  If the plan has high claims, it may lose money that it cannot “make up” in other years.

On Feb. 13, 2012, the Department of Health and Human Services (HHS) stated a health insurance issuer that has received a waiver of the annual dollar limit requirements pursuant to Section 2711 of the Public Health Service Act for a group health insurance product can sell that product to a self-insured grandfathered group health plan that has itself been granted a waiver and wishes to switch from being a self-insured plan to a fully insured plan, as long as the following criteria are satisfied:

1. In all cases, the plan sponsor must have been offering group health coverage to its employees before Sept. 23, 2010, for which it obtained from HHS a waiver of the annual limits requirement;

2. The issuer from which the group health plan is now obtaining the insured policy must have obtained a waiver from HHS for the newly purchased policy;—

3. The annual limits of the new policy may not be lower than the annual limits of the previous policy, except in the situation outlined in No. 4;

4. The plan sponsor may obtain a replacement policy with a lower annual limit only if other comparable coverage is not available.  If a plan purchases a lower annual limit policy due to lack of comparable coverage, this change would cause a loss of status under 45 CFR 147.140(g)(1)(vi)(C), relating to status as a grandfathered health plan.-

5. The health insurance issuer must obtain from the plan sponsor an attestation that the criteria outlined above are satisfied, and the attestation must be accompanied by documentation outlining the terms of the prior coverage. Issuers shall retain this information in accordance with the data retention requirements of the Sept. 3, 2010, and Nov. 5, 2010, annual limits guidance documents.

6. To the extent not superseded here, all prior HHS guidance regarding annual limits waivers continues to apply to the plan and policies described here.

As explained in our August 2011 article, the health care reforms enacted in March of 2010 will require employer health plans to provide a uniform “summary of benefits and coverage” (SBC) to all plan participants and beneficiaries.  The agencies charged with implementing this requirement have now finalized the regulations they proposed in August of 2011.  The final regulations ease certain of the more onerous requirements, and they also grant a six-month delay in the statutory effective date.

Compliance Deadlines
As enacted, this SBC requirement was to apply as of March 23, 2012.  This recent guidance allows compliance to be deferred until the first open enrollment period beginning on or after September 23, 2012.  For participants who are not a part of the open enrollment process (such as new hires or special enrollees), the compliance deadline is the first day of the first plan year beginning on or after September 23, 2012.

To comply with this requirement, an SBC must be included in any application materials provided as a part of the open enrollment process.  If there are no such materials, the deadline for providing an SBC is the first day on which a participant is eligible to enroll.  Plans have additional time to provide an SBC to any special enrollee.  The deadline in that case is 90 days after the participant’s enrollment date (i.e., the same as the deadline for providing a summary plan description).

Covered Plans
These SBC rules apply to both insured and self-funded plans.  The plan administrator (typically, the sponsoring employer) is responsible for providing the SBC.  In the case of an insured plan, however, the insurer is equally responsible.  Moreover, if an insurer provides a timely and accurate SBC, the plan administrator is not required to do so.

This is another health care reform requirement to which even “grandfathered” plans are subject.  The same is true for even stand-alone health reimbursement arrangements, as well as “mini-med” plans that have received a waiver from the prohibition on annual benefit limitations.

Certain employer plans are exempt from this SBC requirement, however.  These include HIPAA “excepted benefits,” such as stand-alone dental and vision plans and most flexible spending arrangements.  Health savings accounts are also exempt.  The agencies note, however, that even exempt FSAs or HSAs may need to be referenced in an SBC for a comprehensive medical plan, as a way of explaining that plan’s deductibles and other co-payment features.

Recent Changes
Although the final regulations track most of the August 2011 proposals, certain changes should make it somewhat easier to comply with this SBC requirement.  These include the following:

• An SBC need not disclose information concerning premiums.
   
• An SBC may be combined with other plan materials, such as a summary plan description, so long as the SBC is prominently displayed.  In the case of an SPD, the agencies suggest that the SBC immediately follow the SPD’s table of contents.
•  Although the agencies continue to emphasize the importance of using the published template when preparing an SBC, they now acknowledge that certain modifications are permissible.  These might be needed to describe discounts available through provider networks, benefits that vary with the type of facility, multi-tier drug formularies, or incentives for participation in wellness programs.
   
• The proposed regulations described three examples to be included in the “Coverage Facts” portion of each SBC:  maternity care, management of type 2 diabetes, and treatment of breast cancer.  Responding to concerns raised by various commenters, the breast cancer example has now been removed.  However, the agencies have specifically reserved the right to require up to six different examples, so future guidance may require examples of more acute medical conditions.
   
• The version of the SBC template issued in August of 2011 was drafted by a task force organized by the National Association of Insurance Commissioners.  Perhaps for that reason, it spoke in terms of a “policy” or “insurer.”  Recognizing that these terms are not appropriate for self-funded plans, the revised template substitutes “coverage” and “plan” for these two terms.
   
• The final regulations make it somewhat easier to distribute an SBC via electronic means, rather than on paper.  The rules have not changed for participants and beneficiaries who are currently enrolled in the plan (for whom electronic delivery is permissible only in accordance with the DOL’s stringent requirements), but somewhat more liberal rules now apply to individuals who are merely eligible to enroll.  Assuming an SBC is in a “readily accessible format,” it may be posted on the Internet.  The plan or its insurer would then notify the eligible individual (either on paper or via e-mail) that the document is available online, providing both the Internet address and a statement that the SBC will be provided in paper form upon request.

The penalty for failing to comply with this SBC requirement is $1,000 for each participant and beneficiary who fails to receive a timely and accurate SBC.  Plan administrators should therefore take immediate steps to prepare appropriate SBCs (one for each benefit option), well in advance of the upcoming open enrollment season.  Administrators of insured plans will want to coordinate with their insurers, but self-funded plans should familiarize themselves with both the final regulations and numerous pieces of related guidance.  Follow this link for more information http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=25818.

The Department of Health and Human Services (HHS) provided illustrative information to complement its Dec. 16, 2011, bulletin on essential health benefits (EHB) under the Patient Protection and Affordable Care Act.  The information provides the names of the three largest products in the small group market in each state ranked by enrollment, as well as a list of the top three nationally available Federal Employee Health Benefit Program plans based on enrollment.

In an earlier bulletin released Dec. 16, 2011, HHS described the approach it intends to pursue in rulemaking to define these essential health benefits.  Under that approach, states would be able to select an existing health plan to set as a benchmark for the items and services included in the package. The options would be:

• one of the three largest small group plans in the state;
• one of the three largest state employee health plans;
• one of the three largest federal employee health plan options;
• the largest HMO plan offered in the state’s commercial market.

Plans could modify coverage as long as they do not reduce the value of coverage.  States must also ensure the essential health benefits package covers items and services in at least ten categories of care, including preventive care, emergency services, maternity care, hospital and physician services and prescription drugs.  

For additional information:
Fact sheet
ASPE Issue Brief - summary of individual market coverage
ASPE Research Brief - information on comparing benefits in small group products and state and federal employee plan

The Departments of Labor, Treasury and Health and Human Services have released final regulations under the Patient Protection and Affordable Care Act (PPACA) that require health insurers and group health plans to provide concise and comprehensible information about health plan benefits and coverage to those with private health coverage.  Under the rule, health insurers must provide consumers with clear, consistent and comparable summary information about their health plan benefits and coverage. The new explanations will be available beginning, or soon after, Sept. 23, 2012.

Specifically, these rules will ensure consumers have access to two key documents that will help them understand and evaluate their health insurance choices:  a short, easy-to-understand Summary of Benefits and Coverage (SBC); and, a uniform glossary of terms commonly used in health insurance coverage.

All health plans and insurers will provide an SBC to shoppers and enrollees at important points in the enrollment process, such as upon application and at renewal.  A key feature of the SBC is a new, standardized plan comparison tool called “coverage examples,” which will illustrate sample medical situations and describe how much coverage the plan would provide in an event such as having a baby (normal delivery) or managing Type II diabetes (routine maintenance, well-controlled). 

The rule’s effective date is 60 days after publication in the Federal Register (scheduled for Feb. 14, 2012).  The applicability date is generally Sept. 23, 2012 (or the first day of the first plan year after this date, or the first day of the first open enrollment period after this date).

• Final rule
• Guidance for Compliance
• Summary of Benefits and Coverage (SBC) Template | MS Word Format
• Sample Completed SBC | MS Word format
• Instructions for Completing the SBC – Group Health Plan Coverage
• Instructions for Completing the SBC – Individual Health Insurance Coverage
• Why This Matters Language for “Yes” Answers
• Why This Matters Language for “No” Answers
• HHS Information For Simulating Coverage Examples
• Uniform Glossary of Coverage and Medical Terms

Though not the norm, some Cafeteria Plans (Section 125 plans) are not calendar year plans but instead are fiscal year plans (e.g. February 1-January 31).  Be careful if this applies to you because if your fiscal year plans include Health Care Spending Accounts (HCSA), then as the plan sponsor, you must institute the $2,500 pre-tax contribution account maximum beginning with the first day of the 2012 fiscal year.

The Patient Protection and Affordable Care Act (PPACA) Section 9005 provides the following:  “ if a benefit is provided under a cafeteria plan through employer contributions to a health flexible spending arrangement, such benefit shall not be treated as a qualified benefit unless the cafeteria plan provides that an employee may not elect for any taxable year to have salary reduction contributions in excess of $2,500 made to such arrangement, for any taxable year beginning after December 31, 2012”.  The potential trap is that the taxable year referred to is not the plan year of the plan but rather, the employee’s income tax filing year, or calendar year.  Therefore, if an employee were to elect an amount in pre-tax contributions in excess of $2,500 (e.g. $2,800), that would result in the benefit remaining available in 2013, the plan would be disqualified.

As a result of this situation, the entire Cafeteria Plan would lose its tax favored status for the 2012 plan year, under the PPACA provision.  Penalties for underreporting wages, under withholding income tax, FICA, and FUTA plus interest and other accumulated penalties would result.  In order to avoid this occurring, plan sponsors with fiscal year plans must limit pre-tax contributions to HCSAs to $2,500 in 2012.   Another alternative is to end the fiscal year plan short on December 31, 2012.  For those employers who plan to set a Health Care FSA limit above $2,500 and have a fiscal year plan, it is imperative that they ensure that their employees understand the implications of their elections should they exceed the $2,500 limit.  Any contribution amount above the $2,500  is susceptible to taxation.

Important to note:
• The $2,500 maximum for pre-tax contributions will apply regardless of “grandfathered” status.
• The $2,500 maximum is per employee regardless of the number of eligible dependents covered under the plan.
• In the instance that an employee has participated in more than one HCSA, perhaps due to a change in employment, tax practitioners believe it is the aggregate amount to which the $2,500 maximum will apply.
• If a plan has a grace period in which employees may collect benefits on claims up to 2 ½ months beyond the end of the plan year, the grace period is still permitted since the collection of the pre-tax contributions occurred during the plan year.
• The $2,500 limit only applies to the employee pre-tax contribution amount.  If the employer offers a contribution, annual reimbursement amounts may exceed the $2,500 limit but only by the amount of the employer contribution.
• The limit is per participant, not per household.  A husband and wife may each contribute $2,500 to their FSA plans resulting in a combined $5,000 pre-tax contribution but neither may exceed the $2,500 per person maximum.

Be prepared by implementing a strategy that will ensure that the collection of pre-tax contributions will not exceed $2,500 in 2013.  Make sure to amend the Cafeteria Plan accordingly and to have safeguards in place for the plan administrator.  Especially important is to notify all eligible participants in the 2012 fiscal year plan that there is a $2,500 pre-tax contribution limit for 2013 so that they can plan for any elective procedures (e.g. braces) in 2012.  As 2013 approaches, employers that offer FSAs can help employees make informed decisions on what degree to participate in the Flexible Spending Plan while being mindful of the tax implications of the new $2,500 cap.

The U.S. Internal Revenue Service (IRS) has issued Notice 2012-9 to provide additional guidance on the informational reporting to employees of the cost of their employer-sponsored group health plan coverage on Form W-2.  The IRS requested public comments on the W-2 reporting requirement in Notice 2011-28. Notice 2012-9 responds to these comments and amends, restates and supersedes Notice 2011-28.  Specifically, the new notice includes guidance on the W-2 reporting as it relates to small employers, flexible spending accounts, dental and vision plans, COBRA and health reimbursement arrangements.

Health care cost information will have to be reported on 2012 W-2s, which will be issued in 2013. Under previous IRS guidance, smaller employers — those that distribute fewer than 250 W-2s in 2011 — are exempt from this requirement until at least 2014 and possibly longer.

The latest guidance, released Tuesday, makes clear that employers can — but are not required to — report contributions to health reimbursement arrangements in calculating health care costs.  In addition, the cost of providing coverage through employee assistance programs, wellness programs or on-site medical clinics is not required to be reported if the employer does not charge premiums for the coverage to COBRA beneficiaries.  The guidance also clarifies that the reporting requirement does not apply to Indian Tribal governments.

The latest guidance also reiterates numerous provisions in last year’s guidance, including that the cost of coverage that is taxable to employees, such as for a child over age 26, must be reported on the W-2, and that contributions employees make to flexible spending accounts are to be excluded from the health care cost figure.

The full 23-page text of the Notice can be found at:
http://www.irs.gov/pub/irs-drop/n-12-09.pdf.

On Dec. 8, the Centers for Medicare and Medicaid Services (CMS) released the Final Rule produced by the Department of Health and Human Services (HHS) to establish the Consumer Operated and Oriented Plan (CO-OP) Program under Section 1322 of the Patient Protection and Affordable Care Act (PPACA).  The following are some of the highlights:

“Substantially All” Requirement:
-The Final Rule confirms that many larger employers will be able to participate in CO-OPs by permitting up to one-third of all CO-OP contracts to be purchased by such large employers.  It provides that Section 1322′s requirement that “substantially all” health insurance issued by the CO-OP is placed in the individual and small group markets is satisfied where two-thirds of its contracts are in those markets.  The Final Rule confirms also that the two-thirds standard applies to all of the activities in the CO-OP, an interpretation that HHS believes properly encourages providers who may want to offer a CO-OP option to their employees to participate in CO-OP provider networks.

-In response to concerns regarding extensive state licensure requirements and in an attempt to provide flexibility for and ensure the viability of CO-OP providers, the Final Rule significantly extends the timeline when CO-OPs are required to be offering qualified health plans (meeting the “substantially all” requirement).  As a result of this change, a loan recipient will now have two years from the solvency loan draw down dates to begin providing health care coverage in the exchanges and to meet all minimum CO-OP requirements.
 

CO-OP Governance:
-The Final Rule extends the transition period from the formation to the operational board from one to two years after the CO-OP enrollment begins, permits the staggered election of the operational board, and permits the formation board to fill its vacancies, without a contested election. 
-Providers are prohibited from composing a majority of the CO-OP board of directors unless, as will sometimes be the case, the provider-board members purchase the product themselves, in which case they can serve as board members in their capacity as CO-OP members.

Eligible Participants and Sponsor: Under the proposed rule, the following were listed as not eligible to apply for or receive a loan under the CO-OP program:
-Pre-existing insurance issuers;
-Trade associations whose members consist of pre-existing issuers;
-Entities related to pre-existing issuers; 
-Predecessors of pre-existing issuer or related entity
-Organizations sponsored by a state or local governments
-Foundations established by a pre-existing issuer
-Holding companies that control pre-existing issuers
-Organizations sponsored by pre-existing issuers; and
-Organizations that receive more than 25 percent of their total funding (not including loans under the CO-OP program) from pre-existing issuers.

The Final Rule clarifies that private non-profit hospitals and physician hospital organizations, or other organizations that receive financial support from a state or local government are not instrumentalities of a state or local government, and are therefore eligible CO-OP participants, so long as:
-The entity is not a government organization under state law;
-No employee of state or local government acting in his or her official capacity serves as a senior executive; and
-State or local government employees acting in their official capacities do not comprise the majority of the CO-OP board of directors.

Additionally, the Final Rule permits applicants to receive up to 40 percent of CO-OP funding from a state or local government without being considered an instrumentality of such government entity.

On Dec. 16, the Department of Health and Human Services (HHS) issued a bulletin outlining the approach (and proposed policies) that HHS intends to pursue in rulemaking to define essential health benefits.  The bulletin can be found at http://www.healthcare.gov/news/factsheets/2011/12/essential-health-benefits12162011a.html.