On March 23, 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law. After much debate, the new health care reform legislation attempts to expand coverage, control the costs of health care, and improve the overall health care system in the United States. While some of the effective dates are immediate, such as within 6 months of the date of enactment, other provisions will not go into effect until several years from now. This article sets forth the timeline for many of the new PPACA provisions targeting employee benefits and employer sponsored group health plans.
GRANDFATHERED PLANS
The general rule for grandfathered plans is that not all of the PPACA provisions apply to health plans that are in existence on the date of enactment. A “grandfathered” plan is a group health plan with participants as of March 23, 2010. Grandfathered status remains whether coverage is renewed or new employees are enrolled after such date. There is little guidance on what actions/plan amendments may cause a group health plan to lose its grandfathered status. Until further guidance is issued, any changes to a group health plan should be carefully reviewed for purposes of maintaining grandfathered status.
CHANGES WITH IMMEDIATE EFFECTIVE DATES:
Establish a Temporary National HighRisk Pool to Provide Health Coverage to Individuals with Pre-existing Medical Conditions. While this provision will not directly affect employers, insurance carriers and employers alike are prohibited from encouraging an employee to drop employer-provided coverage and move into the high risk pool. Whether an insurer or the employer has violated this provision will be determined by the Secretary of Health and Human Services (HHS) and based on criteria established by the HHS. This provision takes effect within 90 days.
Government Funded Reinsurance for Early Retiree Coverage. PPACA directs the Secretary of HHS to create a temporary reinsurance program for employers providing health insurance coverage to retirees over age 55 who are not eligible for Medicare. Under the program, a plan may be reimbursed up to 80% of the benefits paid during the plan year for an early retiree (including spouse or dependents). The reimbursement is determined by the amount of benefits paid over $15,000 up to a maximum of $90,000 in claims per person. Any reimbursement payments are to be used to reduce premiums, lower plan costs, deductibles, co-pays, or out-of pocket expenses. This provision is effective June 21, 2010 and will expire on January 1, 2014 (or earlier if the $5 billion in funds allocated to the program are exhausted).
CHANGES EFFECTIVE FOR PLAN YEARS BEGINNING ON OR AFTER SEPTEMBER 23, 2010 (EFFECTIVE JANUARY 1, 2011 FOR CALENDAR YEAR PLANS):
Provide Dependent Coverage to Adult Children up to Age 26. If a group health plan or insurer extends dependent coverage, it must allow an adult child (single or married) to continue dependent coverage until the child is age 26. The child of such covered dependent is not required to be covered under the group health plan. The tax exclusion extends to age 27 so that a plan that allows coverage through the end of the month or the year when the dependent attains age 26 will continue to qualify for the tax exclusion. This change applies to grandfathered plans.
Prohibition on Lifetime Limits on the Dollar Value of Coverage. A group health plan or insurer may not establish lifetime or annual limits on the dollar value of “essential health benefits.” The Secretary of HHS is directed to define such term for this purpose. Prior to January 1, 2014, a group health plan or insurer is permitted to impose an annual limit on coverage as determined by the Secretary. This change applies to grandfathered plans.
Minimum Coverage for Certain Preventative Services. A group health plan or insurer must provide coverage (without cost sharing) for certain preventative care services and recommended immunizations.
Nondiscrimination Requirements Applicable to Insured Plans. Previously, a fully insured group health plan was not subject to certain nondiscrimination requirements while a self-insured group health plan was subject to nondiscrimination requirements under Section 105(h) of the Internal Revenue Code. The nondiscrimination requirements that apply to self-insured plans will now also apply to fully insured group health plans.
Explanation of Coverage. Within 12 months of enactment, and as directed by the Secretary of HHS, a 4-page summary (using at least 12-point font) must be established to explain and summarize the group health plan or insurer coverage in terms understandable to the participant. The insurer of a fully insured group health plan or the plan administrator of a self-insured plan must distribute the summary explanation to employees or new hires at the time of enrollment (including reenrollment) beginning March 23, 2012. This change applies to grandfathered plans.
Notice of a Material Modification. If the group health plan or insurer make a material modification to the terms of the plan or the coverage provided which would affect the terms of the summary plan description, the plan administrator or insurer is required to provide notice 60 days prior to the effective date of such modification. This change applies to grandfathered plans.
Procedures for Appealing a Claim. A group health plan and insurer are required to provide an appeals process for claims and must meet the following requirements: (i) provide an internal claims process, (ii) provide notice to participant of appeals process and availability of applicable assistance, (iii) permit a participant to review the file and present evidence and testimony as part of the appeals process, and (iv) permit the participant to receive continued coverage pending the outcome of the appeals process. A fully insured group health plan will be required to further comply with any applicable state external review process and a self-insured plan will be required to comply with an external appeal process established by the Secretary of HHS.
Eliminate Pre-existing Condition Exclusions for Children. A group health plan will not be permitted to impose a pre-existing condition exclusion on participants under the age of 19. This change applies to grandfathered plans.
New Reporting Requirements. A group health plan must provide an annual report to HHS and enrollees regarding whether the group health plan benefits satisfy certain requirements. It is anticipated that further guidance will be issued with respect to these reporting requirements. This change applies to grandfathered plans.
Patient Protection Requirements. A group health plan will be required to comply with certain patient protection requirements. For example, if a group health plan or insurer requires a participant to designate a primary care provider, the group health plan or insurer must permit any designated participating provider that will accept the participant.
Rescission of Coverage Prohibited. A group health plan cannot revoke or rescind coverage except for fraud or intentional misrepresentation, failure to pay premiums, or termination of the plan. This change applies to grandfathered plans.
CHANGES EFFECTIVE FOR YEARS BEGINNING AFTER DECEMBER 31, 2010:
Form W-2 Reporting. A Form W-2 issued in 2011 or later will be required to include the value of employer-sponsored group health plan coverage. Such value shall not include the costs of employer contributions to a health savings account (HSA), Archer medical spending account (MSA) or employer salary reductions to a health flexible spending account.
Increased HSA Tax. For HSA or MSA distributions beginning on or after January 1, 2011, the tax applied to such amounts that are not used for qualified medical expenses shall increase to 20%.
Qualified Medical Expenses. Participants will no longer be reimbursed for the costs of over-the-counter or non-prescription medicines (other than insulin) from HSAs, FSAs, and HRAs.
Comparative Effectiveness Tax. Employers will be required to pay an annual comparative effectiveness research fee of $1 per plan participant in 2012, increasing to $2 in 2013 through 2019. This provision is effective for plan years ending after September 30, 2012.
CHANGES EFFECTIVE FOR TAX YEARS BEGINNING ON OR AFTER JANUARY 1, 2013:
New Maximum Limit for Health Flexible Spending Accounts. A new maximum annual pre-tax contribution limit of $2,500 (adjusted for inflation) shall be imposed on employees participating in a health FSA.
Medicare Part D Deductions. An employer will no longer be able to deduct expenses allocated to Medicare Part D prescription drug subsidies.
CHANGES EFFECTIVE FOR PLAN YEARS BEGINNING ON OR AFTER JANUARY 1, 2014:
Failure to Provide Minimum Essential Coverage. Effective January 1, 2014, an employer that fails to provide “minimum essential coverage” for its employees will be subject to penalties. Applied on a controlled group basis, an employer will be exempt from penalties if the employer employs an average of fewer than 50 full-time employees. A full-time employee is defined as being employed at least 30 hours per week, and there are special rules for determining full-time equivalencies for part-time employees. The penalty applies where at least one employee is enrolled in a qualified plan through an Exchange (state program offering a choice of private health insurance plans), receives a premium tax credit, and did not receive a “free choice voucher” from the employer. The amount of the penalty depends on whether the employer offers its full-time employees an opportunity to enroll in coverage. If the employer does not offer coverage, then the annual penalty amount is $2,000 for each full-time employee of the employer. If the employer offers coverage, then the annual penalty amount is $3,000 for each full-time employee receiving assistance and does not receive a free choice voucher.
Free Choice Voucher. Effective January 1, 2014, an employer that provides “minimum essential coverage” and contributes to the cost of that coverage must also provide a “free choice voucher” to certain low income employees. For every “free choice voucher” that the employer provides to an eligible employee, the employer will pay an amount to the Exchange to help offset premium costs. The amount of the payment is equal to the portion of the monthly cost of coverage (individual or family) that would have been paid by the employer. To the extent that the employee uses the voucher for coverage, such amount shall not be included in the employee’s taxable income. The employer will be permitted a deduction for the amount of the “free choice voucher.”
Prohibition on Pre-Existing Condition Exclusions. A group health plan will no longer be permitted to deny coverage based on a pre-existing condition exclusion. This change applies to grandfathered plans.
Clinical Trials. A group health plan cannot deny a participant’s participation in a certain clinical trials or for standard/routine costs and services associated with the trial.
Wellness Programs. If an employee participates in a wellness program and satisfies a health standard, the reward cannot exceed 30% of the cost of employee-only coverage (increased from 20%).
Limits on Cost-Sharing. A group health plan cannot impose an annual cost-sharing requirement that exceeds the limitations for high deductible health plans (currently $5,950 for self coverage and $11, 900 for family coverage).
Excessive Waiting Periods. A group health plan will no longer be permitted to impose a waiting period exceeding 90 days. This change applies to grandfathered plans.
CHANGE EFFECTIVE JANUARY 1, 2018:
Tax on “Cadillac” Plans. A “Cadillac” plan is a plan that provides excessive benefits, defined as the total cost of coverage exceeding $10,200 for individual plans and $27,500 for family plans. Effective January 1, 2018, PPACA will impose a 40% excise tax on any excess benefits attributable to such plans. The tax is imposed on the coverage provider (i.e., the insurer for a fully insured plan, or the administrator for a self-insured plan).
CHANGE WITH AN UNKNOWN EFFECTIVE DATE:
Automatic Enrollment. Employers with greater than or equal to 200 fulltime employees and that offer at least one group health plan will be required to automatically enroll new employees into a plan. The employer must provide notice of automatic enrollment and offer employees an opportunity to opt out. The Secretary of Labor will issue regulations for this requirement as well as establish an effective date for compliance purposes.