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HomeMy WebLinkAbout09/07/2010 10 2009 Year-End Medical Insurance Report • BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT � Item No. 7 l i For Meeting Of September 7, 2010 ITEM TITLE: 2009 Year -End Medical Insurance Report SUBMITTED BY: David Brush, Chair, Employees' Welfare Benefit Program Board Sheryl M. Smith, Human Resources Manager CONTACT PERSON/TELEPHONE: Sheryl M. Smith, 575 -6090 SUMMARY EXPLANATION: Attached is the 2009 Year -End Report for the City of Yakima's Self- Insured Health Care Plan. In reviewing this report, it is important to note that Healthcare Management Administrators ® utilizes a paid claims system of reporting expenditures. This differs from Generally Accepted Accounting Principles (GAAP), used by the City of Yakima for its records. The City recognizes expenditures on a claims incurred basis. Further, the report does not include any revenues or expenditures for City personnel and administrative costs, which are attributable to the City's Health Benefit Reserve Fund. Resolution Ordinance Contract Other (Specify) Report Funding Source APPROVED FOR SUBMITTAL: V City Manager STAFF RECOMMENDATION: Accept report. BOARD /COMMISSION RECOMMENDATION: COUNCIL ACTION: • • • . •,,, r EMSPRE . , July 26, 2010 City Council Members CITY OF YAKIMA 129 North 2nd Street Yakima, WA 98901 Re: Year 2009 Healthcare Plan Report 2010 Renewal and Current Status of Plan Dear Council Members: Enclosed are the Financial Summaries and related reports of the City's Employee Health Plan for the calendar year 2009 and first half of 2010. These reports are produced by Healthcare Management Administrators, Inc. (HMA) of Bellevue, Washington, and record actual claims and direct plan expenses on a cash basis of . accounting. This Plan continues to be well monitored and managed by a cooperative relationship between the City Manager's. Office, the Human Resource and Finance Divisions and a voluntary Board representing all employees and bargaining units. Except for Police, all Board representatives actively participate. Executive Summary - Health Care Reform As I'm sure you are aware, the Patient Protection and Affordable Care Act (H.R. 3590) was signed into law on March 23, 2010. A week later, the Health Care and Education Reconciliation Act of 2010 (H.R. 4872) was added and we now refer to both simply as federal health care reform. Since then, there has been a steady stream of new regulations published by Health and Human Services, the Department of Labor and the IRS that we are monitoring closely. While there are only a few requirements affecting the City's Plan in 2010, it is a safe assumption that the Plan and the City's role as the Plan Sponsor will change dramatically in the years ahead. Our Legislative Briefs on health reform - including a timeline and recent regulations addressing grandfathered plan status, extension of dependent coverage age to 26, the .Early Retiree Reimbursement Program, "Pay or Play" employer penalties, and the Patients' Bill of Rights - are included in Appendix B. This report is not intended to offer a political discussion of health care reform. We are focused exclusively on protecting the current and future interests of the City and . the Plan participants. Since reform will be implemented over a period of years, our first and foremost attention is given to the status of the Plan today and the challenges faced for the rest of 2010 and through 2011. _ ast v , 1, , a ;l 1:�r. ; 5 ; .F -�4:. , , —— .,�_ , t.. i l .: ' 7 �.a _. .. ?. �__ . i�C�: . , J . _, _: 4 /t,.' -3_ : f, I! ,_(.:l Healthcare Plan Report July 26, 2010 Page 2 ak Overview: What is the Plan? The current City of Yakima Employees' Welfare Benefit Program (the "Plan ") became effective April 1, 1994 when the seven separate benefit programs for - each collectively bargained group of employees consolidated into one Plan Document. At that time, a Board with representatives from all employee groups was formed and became responsible for defining eligibility and covered benefits, monitoring monthly Plan financial reports and the annual renewal, and making Plan recommendations to the City Manager. This Board meets every month and has been chaired by I.A.F.F. representative Dave Brush for several years. .Employee and employer premium contribution levels are outside of this Boar d's responsibilities and remain subject to the collective bargaining process. In 2009, 22% of the net Plan costs were paid with employee contributions through payroll deduction. In addition to meeting many of the statutory requirements for providing LEOFF 1 medical benefits, the purpose of this Plan is to attract and retain a productive 40 workforce by financing the collective health needs of City employees and their eligible dependents. The Plan has been self - funded with stop -loss insurance since the early 1980's. In recent years, the Plan has expanded its scope to include wellness services designed to encourage healthy lifestyles with modest quantifiable results. Administration: What is a Self - Funded Health Plan? The City of Yakima assumes the financial risk for providing covered medical, prescription and dental benefits to eligible and participating employees and their dependents. Rather than paying a monthly premium to an insurance company, a self- . funded employer pays claims as they are incurred out of general assets. The City of Yakima retains HMA (the third party administrator - not the owner of Yakima Regional Hospital) to manage the Plan and process medical claims. Washington Dental Service (WDS), though an insurer, acts only as a third party administrator for the City's dental claims. Both HMA and WDS are paid a flat monthly fee per employee and assume no financial risk for claims. It is the City's money combined with employee payroll contributions that pay for all Plan claims and expenses. To fund very large claims, the City purchases stop -loss insurance. This type of ' insurance reimburses only for catastrophic claims that exceed a certain amount. That amount, called a stop -loss deductible, was renewed with Sun Life at $175,000 effective January 1, 2010. Since this policy reimburses the City and not the plan participant, this is not considered health insurance. EMSPRING • Healthcare Plan Report July 26, 2010 Page 3 4 The City self -funds this Plan for several reasons. First, there are no prepayment requirements as claims are not paid with a monthly premium. The City also maintains its own Plan reserves and keeps any investment income. in addition to having more control over cash flow, the City has ultimate control over the Plan's benefits and can _ negotiate more favorable administrative fees. For example, administrative and consulting expenses for the Plan in 2009 were 5% of .Plan costs; a comparable fully- ': insured employer can easily pay from two to three times as much in their premium for administration and brokerage. • Actuaries commonly analyze three components of healthcare plans to project future claims: census (who is covered), benefits (what is covered) and administration. (how is it funded). Of the three components, who is covered is by far the biggest factor in determining the cost of any healthcare plan. Census: Who is on the Plan? in 2009, the Plan covered an average of 901 City employees: 151 are LEOFF 1 active and retirees, 39 are non -LEOFF 1 retirees, and the remaining are active employees, Council Members and self -pay COBRA participants. Counting all dependents, the Plan covered a monthly average of 2 590 total participants last year - 11 more people g 2,590 than P P Y P P in 2008. Of the 901 employees, 672 are men and 229 are women. For the first time this year, the Plan has covered triple the number of employees (active and retired) over the age of sixty (229) than under the age of thirty (61). Just in the past 15 months, 20 more employees joined the over age 60 category, while we lost 13 under the age of 30. As of today, the Plan covers 108 employees /retirees over the age of 65 (13 more than last year). Unfortunately, advancing ,age and increasing medical care costs are directly correlated. How this Plan can consistently keep its ' schedule of benefits intact at costs below most benchmarks while covering so many LEOFF 1 and over age 60 participants is truly remarkable. Benefits: What is covered under the Plan? All terms, conditions and benefits are detailed in the Plan Document (also called a Summary Plan Description). This Document is currently in the process of being copied and distributed in its entirety to all employees and retirees by your Human Resources Division. The Plan Document was rewritten by HMA and reviewed by your Benefits Board to include all amendments, and facilitate compliance with the latest federal and State regulations. Needless to say, it's been a challenge to keep up this year, but compliance isn't optional. Effective February 1, 2010, a Plan Amendment was adopted (and replacement Summary Plan Descriptions were written) that changed the schedule of benefits to EMSPRING Healthcare Plan Report July 26, 2010 Page 4 increase the annual deductible from $100 to $200, the out -of- pocket maximum from $600 to $1,200, add a $20 copay for most physician services, and increase the lifetime maximum from $1 million to $2 million. See Appendix A . for a summary of the changes. This represents the first substantive benefit changes since 1994. This • Amendment was adopted by all groups and bargaining units except Police, who remain under the previous schedule of benefits. While these changes will have no effect on LEOFF 1 employees or the incidence of large claims, we are already seeing a measurable drop in the number of claims in several categories - most notably office visits - from all groups except Police. Dental, vision, chiropractic and most other major categories of care are also included in this Plan. There is a free choice of providers, though the City's Plan includes "HMA Preferred / Regence Blue Shield" - a preferred network of physicians and hospitals that offers discounts and direct billing. How much did the Plan cost in 2009? Medical Paid Claims $6,415,034 63% Stop -Loss Reimbursement imburseme t - $378,744 Stop Loss * " ; J Premium $435,548 .s Dental Paid Claims Administrative Fees $702,321 • $476,114 Prescription Paid Vision Paid Claims 7% 4% Claims $98,038 $1,717,206 1% 17% Total 2009 Plan Cost: $9,465,517 EMSPRING Total 2009 Plan cost, as shown on the pie chart above, was $9,465,517 versus $9,144,672 in 2008. This represents a 3.5% increase. Like most employer plans, a disproportionate share of the Plan's money is spent on individuals with the highest • . claims. $2,380,689 of the total cost above • was incurred by 28 individuals. The attached Benefit Analysis Report for 2009 provides detail by diagnostic category and shows how every dollar was spent. The Plan includes coordinated disease management, case management, utilization review procedures, the best PPO network for medical (Regence) and dental (WDS) in 411) EMSPRING Healthcare Plan Report July 26, 2010 Page 5 '.: the State, and aggressive hospital bill. audits. From an administrative standpoint, there isn't anything else to squeeze unless we replace HMA with a less expensive third party administrator. • As in previous years, I continue to recommend additional benefit design changes, retiree eligibility restrictions and the formal adoption of financial incentives to promote wellness. With this much money at stake, it is simply unwise to sit back and wait for health reform to change things on our behalf. If we divide total annual plan costs by the number of employee participants (which include retirees, LEOFF 1, and COBRA participants), and divide again by 12 months, we get the Total Average Monthly Cost per Employee of $868.00 for 2009. CITY OF YAKIMA Health Care Plan Total Average Monthly Cost Per Employee u 884 - " Y-Yx- , 7 c�;.! t o� .,. "i n ] [�," i ( s '6 rr f J� 0:14, ,... 'J6kbc; 2Qp8X g ,Wsi ae a -- ' ern $83 50 A1Fj _ : tP tl s A it ,a ci T P 3 �. d 8T4 . Fi F',Nr r p 7R'h eye © ,� Pgr,t is,rr xt {,r z �u'r � Kit ° �i��4 „nk.a?laa r • i i t 7i 7 7 ,7777:::7 v } t t 7t 77 77: 7;2'(,�� �Y� O Gf>It??,�'r "hr d,�;,I;' V; 7 �'2tS ". ��rr tiiy� F ;yi"� Yea ; 4 °-'a'�1b�'f�'i" - 6..-7g2; nor-r-77-47,7777.1,Y2-7747:;;T. 717 r r r r r $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 EMSPRING Through the first half of 2010, we have been fortunate to avoid any new catastrophic claims and the average is holding steady. Unfortunately, the Plan has four new very large claims currently in case management, and the return to an average trend increase by the end of 2010 is very likely. EMSPRING Healthcare Plan Report July 26, 2010 Page 6 Consultants like to spend an inordinate amount of time projecting trend increases and analyzing return on investment of various cost control methods. I prefer to look at real dollars and take action accordingly. Here is my point: the average Plan "trend" increase over the last several years has been just over 6 %. That is better than just about every conceivable health benefits benchmark over the same period. Yet even at 6%, the Plan will drain an additional $570,000 from City cash and Plan reserves in • 2011. That's not sustainable no matter what the ROI numbers on alternatives or reform laws promise. Further benefit changes should still be considered. Unless the Participants get substantially younger (from normal turnover and hiring) or the schedule of benefits makes further dramatic changes, the City should consider adopting whatever health plan alternatives the reform law brings in 2014, and prepare bargaining agreements for the state insurance exchange and /or its taxes /penalties instead of supporting the cost of your own Plan. If the City had no LEOFF 1 liability and a young group, my advice would be different. Benchmarking: How do our costs compare to others? Over the last few years, national and regional surveys by Watson Wyatt and Hewitt Associates report average annual increases anywhere from 5% to 14 %, though all agree that increases have slowed down into the 6% range as shown in the chart below. 16.0% 14.7% 14.0% • 12.3% . ::: . . • - 9 2% nirr o "�r�at �: 79/0 I 6.0% 6.0% 6.0% 4.0% i{ S w a rt 4 5 i !t e 1 r o v f ;1 Y u Lt ;ft 444, 4 t i. - - 2.0% y � ° ��.7 + r �Rv} 4a- i 2002 - 03 2003 - 04 2004 - 05 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 (proj.) Source: Hewitt Health Value Initiative Our most relevant benchmark - the Association of Washington Cities -. increased their fully- insured premiums 10% for their most comparable Regence insured PPO plan effective January 1, 2010. Their trend increases have been higher than the City of Yakima's for several years now. The Washington Counties Insurance Pool (WCIP) has gib done better than the Association of Washington Cities in the recent past. Their increases are more in line with those of our Plan. Like the City of Yakima plan, the EMSPRING Healthcare Plan Report July 26, 2010 Page 7 WCIP is self- funded, though they have been unable to attract or retain any larger county or municipal employers. Both the AWC and the WCIP include LEOFF 1 and other retiree plans, and both are investing heavily in wellness benefits, incentives and promotions. Our Plan should continue to do the same. What changed in the last Plan renewal? The 2010 Renewal was presented to the City Manager and Benefits Board on November 19, 2009. The City's stop -loss deductible was renewed at $175,000 with Sun Life with a 9% increase. Sun Life is one of the largest and highest -rated stop -loss insurers in North America, and this policy includes a future renewal increase cap and a "no- laser" agreement (a provision hidden in many contracts that allows the insurer to exclude, or laser, a high cost individual upon renewal). Under competitive pressure from other administrators interested in the City's business, HMA handed down a rate pass on their administration fees. What can be done to control future cost increases to the P • Consideration for consumer - driven programs (HRAs and HSAs) as options to the current plan. "'' • Ignore "grandfathering" the current Plan and make changes as needed • Adopt financial incentives to support full participation in wellness and integrated disease management programs.. • Increasing out -of- pocket maximums from $1,200 to $2,000 or more • Increasing annual deductible from $200 to $500 • Adding a waiting period of 30 to 60 days for new hire eligibility • Adding stronger benefit disincentives for using out -of- network providers. • Carve -out transplant coverage and fully- insure risk for these potential claims • Eliminate early retiree eligibility and add a waiting period for new hires Conclusion The current economy has brought unprecedented financial pressure on the City of Yakima. Federal health care reform will not alleviate any of these cost pressures in the near future, and I would add that they are far more likely to exacerbate them. Regardless of our personal views of health reform, there is a huge "expectation gap" between what it offers and what people are expecting from it. These conditions have made the City's Health Plan even more valuable to employees. As jobs are lost and many local employers cut benefits and increase payroll . deductions, it's easy to consider the City of Yakima's Health Plan a community asset EMSPRING Healthcare Plan Report July 26, 2010 Page 8 protecting those who serve the public interest. Fortunately, the Plan is well managed and reserves are adequate. The mission of my firm, your Benefits Board and the City's Management team is to balance cost containment with meeting the long -term needs of the people whose financial security depend on this Plan. We've adopted an aggressive negotiating position with our vendors, but there really is no more to squeeze from the administrative costs and insurance markets. Claims cost will continue to climb at rates welt above the Consumer Price Index. The affordability gap continues to widen as health care costs outpace wage increases. The next steps have to include building a culture of wellness and employee engagement with a continuation of performance measurements for all Plan functions. Unfortunately, this means adding financial incentives to participate in wellness and that requires bargaining. In addition, we will continue to analyze alternatives and prepare for the implementation of health reform. Every year, I reflect on why the City has a health plan and what it means to those who are covered. My firm is committed to promoting additional changes, but we need everyone's help. Bargaining units will have to buy into the long term benefits of wellness. Management will have to continue to seek ways to engage all employees and quantify success with measurable outcomes. The tools are in place, just not the incentives to use them. We are all in this together. 1 appreciate very much the opportunity to work for the City of Yakima and to present this report to the Council. I take great pride in being the advisor to this Plan, and 1 look forward to any questions or instructions you may have. Sincerely, ir Sok D. Fisher, CE. attachments EMSPRING • • CITY OF Y A •. Financial Summary 1/ 131109 • Trust Excess Admin & • Dental Vision Caremark Medical Current Total Aggregate # Med # Med # Den # Den # Total Avg Cost Month Accrual . Premium PPO-Fees Pd Claims Pd Claims Pd Claims , Pd Claims Balance Cost Deduct Single Family Single Family • Med Emp Per Emp Jan • 8784680 $36,347 $39,620 $63,569 $10,862 $125,617 $413,828 $94,837 689,843 $944,288 377 529 259 493 906 5761.42 Feb $792,319 $36,507 $39,810 $68,295 57,221 $120,753 $287,837 $231,896 560,423 $948,424 380 529 266 497 909 $616.53 Mar 5794,788 $36,581 $40,108 556,163 $7,954 5143,544 $607,607 ($97,169) 891,957 $954,912 386 530 270 492 916 • $973.75 Apr $793,717 536,582 $39,882 $66,119 56,831 $130,076 $479,125 $35,102 758,615 $950,663 385 527 '268 490 • 912 $831.81 May $787,475 $36,255 $39,650 $51,377 $9,245 $205,604 5433,285 $12,058 775,417. $949,837 386 ' 525 270 '489 911 $851.17 Jun 5795,679 $36,671 $40,065 562,547, $9,461 $135,411 $776,661 ($265,137) 1,060,816 . $951,488 386 '• 527 267 490 913 51,161.90 _ • Jul $784,957 $36,163 $39,620 862,864 $7,422 $127,828 - $619,392 ($108,332) 893,289 $949,363 385 526 265 490 911 $980.56 Aug 5786,657 536,286 $39,668 $57,768 $7,199 $130,482 $545,263 (530,009) 816,666 $948,182 384. 526 266 487 910 $897.44 Sep 5779,216 535,933 $39,262 $52,374. $7,109 - 8141,427 $555,061 ($51,950) 831,166 $941,220 380 523 ' 265 485 903 $920.45 ' Oct $785,885 .836,255 $39,660• $48,801 $9,552 $127,445 $525,301 ($1,129) 787,014 $943,107 381 • 524 265 485 905 5869.63 Nov . $781,375 $36,021 $39,430 • $48,198 $8,547 $191,409 $548,557 ($90,787) 872,162 $942,870 382 523 265 483 905 . 8963.71 Dec $779,782 $35,946 $39,341 $64,246 $6,635 $137,610 $623,116 ($127,112) 906,894 $941,571 382 522 263 482 904 $1,003.20 Total $9,446,530 $435,547 $476,116 $702,321 $98,038 $1,717,206 $6,415,034 ($397,732) $9,844,262 $11,365,926 4,594- 6,311 3,189 5,863 10,905 $868.00 Avg Claims Per Emp Per Month - 2009 .$77.59 $8.99 $157.47 $588.27 Last Year Average Total Cost $839.50 Avg Claims Per Emp Per Month - 2008 $77.52 ' $12.23 $150.15 $550.22 ' Percentage Change in Cost 3.39% Percentage Change 0.09% - 26.49% 4.87% 6.91% • • Fund .Coverage Effective 1/1/2009 Total paid claims all coverages $8,932,599 Balance - Less . claims excess of $175,000 individual excess deductible • . $378,744 Aggregate Claim Factors Aggregate Deductible Analysis Less Rx reimbursements Factors include M /DN /Rx Net total claims 58,553,855 ($18,988) Contract Basis: Paid Expected Claim Cost Medical Composite $943.87 This plan year $833.81 Dental Composite . , $118.54 Protected Clm Cost Next Pln Yr . Reserves needed (15% of annual paid claims) • $1,399,722 Average Claim Cos $784.40 ' Aggregate Premiums - - Claim Lag Adjust 1.00 - .Beginning claim reserves $768,345 • ' Per Emp Per Month $3.42. Trend 1.15 Plan Change 1.00 • Plan reserves and surplus to date • $768,345 5175,000 Indiv Ex Loss Rates • Exp Paid Claims • $902.06 Contract Basis: Paid M /Rx ' Single $18.70 25% Margin 1.25 • Net total claims . • $8,553,855 Family • $49.61 Aggr Claim Factor $1,127.57 Less claims not covered under aggregate excess loss policy $0 . ' Net claims covered by aggregate excess loss $8,553,855 Accruals - • Current aggregate factor on a • • Med /Den Employee I $579.63 composite basis $1,042.27 ' Net Claims to Aggregate Deductible Loss Ratio 0.753 ' All Dependents $433.80 % change expectec 8.2% Average claims covered by aggregate per employee per month ' $784.40 - Leoff Average total claim cost per employee per month $784.40 Med. Employee $784.47 Carrier: • Sun Life . Last year average total claim cost per employee per month $763.72 All Dependents , $433.80 ,Group 130101 Percentage change in average cost per employee 2.71% - "Information on this Financial Summary is for illustrative purposes on/y. Actual claims and enrollment figures covered by the Excess Loss contract may be different." • • CITY OF YAKIMA Financial Summary 1/1/10 to 12/31/10 -Trust Excess . Admin & 'Dental Vision • _ Prescription Medical Current .. otal Aggregate' :: Med ` Med Den Den ' Total Avg Cost Month Accrual Premium , PPO'Fees ..:Pd Claims Pd Claims ;Pd Claims'. ' .Pd Claims' Balance ' Cost , `!Deduct Single Family Single Family . Med Errip Per Emp. + - - - = = + + Jan :- $823,507 $39,810 $41,460 $64,964 $16,384 $126,260 $363,153 $171,476 $652,031 $1,025,825 366 528 263 482 894 $729.34 Feb $832,005 $40,147 $42,045 $69,262 $11,553 $141,143 $473,478 $54,376 $777,629 $1,028,739 371. 526 261 481 897 $866.92 Mar;.. $825,614 $39,873 $42,441 $66,635 $9,804 $146,301 $552,468 ($31,907) $857,521 $1,022,526 367 524 . 264 480 891 $962.43 Apr'' ..•`i; $835,515 $40,200 $42,140 $69,802 $11,665 $205,075 $383,165 $83,467 $752,048 $1,030,191 374 524 266 480 898 $837.47 May ' . $831,026 $40,044 $41,913 $58,709 $7,148 $153,576, $626,975 ($97,340) $928,366 $1,031,066 375 524 264 • 480 899 $1,032.67 Jun; $831,675 $40,136 $41,841 $50,152 - $8,991 $147,177 $499,023 $44,355 $787,320 $1,030,778 374 525 264 477 899 $875.77 Jul Aug #DIV /0! #DIV /0! Sep;-... #DIVIO! Oct • #DIV /0! DeC #DIV/0! Total $4,979,341 $240,212 $251,840 $379,524 $65,545 $919,532 $2,898,261 $224,426 $4,754,914 $6,169,126 2,227 3,151 1,582 2,880 5,378 $884.14 Avg Claims Per Emp Per Month - 2010 $85.06 $12.19 $170.98 $538.91 Last Year Average Total Cost $868.00 Avg Claims Per Emp Per Month - 2009 $77.59 $8.99 $157.47 $588.27 Percentage Change in Cost 1.86% Percentage Change 9.62% 35.57% 8.58% -8.39% Total paid claims all coverages $4,262,863 Coverage Effective 1/1/2010. Less claims excess of $175,000 individual excess deductible - Net total claims $4,262,863 Aggregate Claim Factors ' Accruals Factors include M/DNIRx Med /Den Employee $618.87 Contract Basis: Paid All Dependents $466.74 Net total claims $4,262,863 MN /Rx Composite $1,067.48 Less claims not covered under aggregate excess loss policy $0 Dental Composite $95.97 Net claims covered by aggregate excess loss $4,262,863 LEOFF I Aggregate Premiums Med. Employee $802.65 Net Claims to Aggregate Deductible Loss Ratio 0.691 Employee per month $3.60 All Dependents $466.74 $175,000 Indiv Ex Loss Rates Average claims covered by aggregate per employee per month $792.65 Contract Basis: Paid Med /Rx [Carrier __ . . Stan Life I . Average total claim cost per employee per month $792.65 Single $20.57 Last year average total claim cost per employee per month $784.40 Family $55.56 • I Group BO101 Percentage change in average cost per employee 1.05% • • ' * *Information on.this Financial Summary is for illustrative purposes only. Actual claims and enrollment figures covered by the Excess Loss contract may be different.** . . 0 . • HEALTHCARE MANAG NT ADM : '05/13/2010 B e n e f i t A y s i s Page: 1 Thursday May 010 rbal up: BO101 CITY OF YAKIMA Period: 01/2009- 12/2009 Mem Total copay * - -- Deductibles - - -* C.O.B. Inel Total Code Description • Type Days Charge Amount Co -ins Benefit Savings • Amount Paid AAMB AIR AMBULANCE 126.00 13927.38 0.00 0.00 0.00 0.00 133.00 13539.73 ACUP ACUPUNCTURE 19.00 2395.5.9 0.00 0.00 0.00 0.00 2395.59 0.00 ADJM ADJUST PREV MEDICAL CLAIM '1.00 135.84 0.00 0.00 0.00 0.00 135.84 0.00 ALLI ALLERGY INJECTIONS 1061.00 22586.98 0.00 973.76 0.00 668.17 4161.64 14606.01 ALLT ALLERGY TESTING 835.00 8835.67 0.00 710.70 0.00 '604.24 2086.04 4441.87 . AMB' AMBULANCE 997.00 65407.07 0.00 312.97 0.00 7000.52 23239.34 32875.07 ANES ANESTHESIA SERVICES 5729.00 244476.91 0.00 366.56 0.00 7423.07 100623.78 130582.70 ASST ASSISTANT SURGEON 53.00 84285.30 0.00 0.00 0.00 446.56 69672.34 13798.37 AUDR BILL AUDIT REVENUE 0.00 12025.02 0.00 0.00 . 0.00 0.00 0.00 12025.02 CHEM CHEMOTHERAPY' 228.00 13298.29 0.00 92.83 0.00 3953.10 5771.70 3260.32 CHIR CHIROPRACTIC SERVICES 3074.00 153938.54 0.00 12889.79 0.00 3636.68 42485.29 79572.89 CNR MEDICAL- INELIGIBLE SERVICES 510.00 244081.07 0.00 0.00 0.00 0.00 244081.07 0.00 COLO COLONOSCOPY' 116.00 97753.45, 1155.00 0.00 0.00 3557.16 43696.14 49345.15 CONS CONTRACEPTIVE MGMT SURGERY 10.00 3450.52 0.00 0.00 0.00 0.00 3450.52 0.00 COSM COSMETIC INEL SERVICES 7.00 5582.00 0.00 0.00 0.00 0.00 5582.00 0.00 D&A DRUG /ALCOHOL INPT R &B PREAUT _ 1.00 85.00 0.00 0.00 0.00 0.00 0.00 68.00 D &AN DRUG & ALCOHOL R &B NO PREAUT 21.00 4410.00 500.00 0.00 0.00 0.00 1987.45 1922.55 • D &AO DRUG & ALCOHOL OUTPT 381.00 17719.97 0.00 250.00 0.00 1567.50 6288.36 8463.80 DBW BITEWING XRAYS 0.00 0.00 0.00 0.00 0.00 53.00' 4.00 57.00 - DCL DENTAL PROPHYLAXIS 0.00 0.00 0.00 0.00 0.00 95.00 2.00 97.00 - DEX DENT EXAMS NO SPEC /NO CONSUL 0.00 0.00 0.00 0.00 0.00 51.00 2.00 53.00 - DIAB DIETARY /DIABETIC EDUCATION 92.00 1693.71 0.00 118.84 0.00 540.93 278.25 671.19 DIAL KIDNEY DIALYSIS 80.00 107213.00 0.00 100.00 0.00 531.05 14874.12 91644.26 DME DURABLE MEDICAL EQUIPMENT. 1425.00 174047.88 0.00 1839.51 0.00 10376.00 94659.84 62124.36 DOMS DOCTORS OFFICE MISCELLANEOUS 321.00 64493.41' 0.00 317.73 0.00 12494.46 40945.22 10417.14 . DORX DOCTORS OFFICE PRESCRIPTION 29.00 451.89 0.00 0.14 0.00 0.00 128.64 323.08 DOSG DOCTORS OFFICE SURGERY 1049.00 203392.29 0.00 8817.11 0.00 15616.51 78162.36 88050.90 DOSP DOCTORS OFFICE SUPPLY 144.00 14948.92 0.00 53.90 0.00 1316.64 9376.61 3921.07 DOV DOCTORS OFFICE VISIT 6421.00 788232.83 0.00 0.00 0.00 61492.13 185581.35 541159.35 DOV1 DOCTORS OFFICE VISIT 2228.00 279308.97 31572..96 ' 0.00 0.00 9873.12 51350.93 186511.96 DOVP ROUTINE GYNECOLOGICAL EXAM 177.00 32422.49 , 2520.00 '0.00 0.00 1559.64 8894.57 .19448.28 DRG HOSPITAL PPO DRG AMOUNT 8.00 11440.36 0.00 0.00 0.00 .0.00 2056.54 9383.82 DXT DIAGNOSTIC TESTING 2638.00 555051.96 0.00 10550.79 0.00 39240.73 297467.09 186538.26 EMER EMERGENCY ROOM SERVICES - 550.00 669155.42 11800.00 6897.52 0.00 32800.56 329408.24 256654.91 . HEAR ROUTINE HEARING SERV INEL • 23.00 713.00 0.00 0.00 0.00 0.00 713.00 0.00 HH NURSING VISITS IN HOME 42.00 • 6036.45 0.00 0.00 0.00 0.00 3997.90 2038.55 ' HH1•'NURSING VISITS IN HOME 37.00 10321.22 0.00 0.00 0.00 0.00 5667.08 4654.14 HMAU BILL AUDIT SAVINGS 0.00 7679.84 0.00 0.00 0.00 0.00 7679,84 0.00 HOME. HOME HEALTH MISC SERVICES 5 14937.00 77891.72 0.00 1443.45 0..00 4982.67 34142.63 34782.61 HRB HOSPITAL ROOM & BOARD PREAUT 497.00 567884.32 0.00 566.12 0.00 74448.74 78514.01 405380.84 HSPC HOSPICE CARE /TERMINAL ILLNES 1.00 '753.00 • 0.00 0.00 0.00 • 0.00 112.95 640.05 ICU INTENSIVE CARE UNIT PREAUTH 147.00 306005.90 0.00 0.00 0.00 88553.14 41479.80 174362.94 IMX IMMUNIZATION SERVICES 1224.00 26217.86 0.00 0.00 0.00 340.80 4541.40 21335.66 INEL MEDICAL- INELIGIBLE SERVICES 1314.00 84260.04 0.00 0.00 0.00 0.00 84260.04 0.00 INFR INFERTILITY INELIGIBLE 74.00 7077.05 0.00 0.00 = 0.00 0.00 7077.05 0.00 INFT INFUSION THERAPY 653.00 25512.29 0.00 270.71. 0..00 0.00 13835.69 10962.59 • INJT INJECTIONS 7915.00 106854.30 0.00 1276.02 0.00 4035.61 46533.41 52513.03 • HEALTHCARE MANAGEMENT ADM Date: 05/13/2010 B e n e f i t A n a l y s i s Page: 2 Thursday May 13, 2010 rbal Group: BO101 CITY OF YAKIMA Period: 01/2009- 12/2009 Mem Total copay * - -- Deductibles - - -* C.O.B. Inel Total Code Description Type Days Charge Amount Co -ins Benefit Savings Amount Paid IPD1 INPATIENT DOCTORS VISIT 140.00 25100.33 0.00 0.00 0.00 0.00 7964.55 17123.78 IPDV INPATIENT DOCTORS VISIT 693.00 131471.85 0.00 0.00 0.00 13340.06 52459.77 65672.02 IPMM MENT /NERV INPT MISC PREAUTH 23.00 7697.23 0.00 0.00 0.00 0.00 5962.71 1677.52 IPMN MENT /NERV INPT R &B PREAUTH 7.00 13445.00 0.00 0.00 0.00 0.00 1539.65 11905.35 IPMS INPATIENT MISC PREAUTH 187.00 3394821.62 0.00 0.00 0.00 143612.59 2230201.19 1020256.09 IPNP INPATIENT MISC NO PREAUTH 25.00 122540.85 1016.20 0.00 0.00 8991.70 94366.77 18166.18 IPSG INPATIENT SURGERY 252.00 409828.24 0.00 333.16 0.00 8552.04 228276.22 163568.41 LAB LABORATORY ' 12559.00 595084.59 0.00 29133.27 0.00 13727.35 331978.19 194985.01 MAM ROUTINE MAMMOGRAMS AGE 0 -35 704.00 38998.38 0.00 0.00 0.00 1043.93 13517.56 24436.89 MASS MASSAGE THERAPY 103.00 2811.80 0.00 0.00 0.00 0.00 2811.80 0.00 MATD MATERNITY DEPENDENTS 89.00 28796.20 0.00 0.00 0100 0.00 28796.20 0.00 MRCT MRI OR CT -SCAN 464.00 386714.14 0.00 3011.50 0.00 13229.26 235748.03 116610.79 MRX PRESCRIPTION INVOICES 0.00 1717507.86 0.00 0.00 0.00 0.00 0.00 1717507.86 NEUR NEURODEVELOPMENTAL THERAPY 155.00 12111.00 0.00 500.00 0.00 0.00 2644.21 8153.15 NIPM MENT /NERV INPT R &B NO- PREAUT 3.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 NOTC NOT COVERED 100.00 5943.79 0.00 0.00 0.00 0.00 5943.79 0.00 OBES OBESITY 86.00 96673.94 0.00 306.27 0.00 78.88 30159.51 65365.52 OONS OUT OF NETWORK SAVINGS 0.00 25606.08 0.00 0.00 0.00 0.00 0.00 25606.08 OPDV OUTPATIENT DOCTORS VISIT 626.00 188099.53 0.00 3733.04 0.00 8549.97 101714.29 65103.33 OPMN OUTPATIENT MENTAL & NERVOUS 916.00 103992.72 0.00 4249.21 0.00 2052.50 24970.46 56259.48 OPMS OUTPATIENT MISCELLANEOUS 19228.00 2552474.28 0.00 1891.77 .0.00 129891.31 1087203.63 1311030.26 OPRH OUTPATIENT REHABILITATION 2781.00 183922.28 0.00 2524.99 0.00 9120.13 86472.75 78655.02 OPRM OUTPATIENT REHAB - MULT SVCS 3673.00 191304.96 0.00 1234.52 0.00 6325.61 84707.99 89755.27 OPSG OUTPATIENT SURGERY 635.00 502908.79 0.00 2640.81 0.00 21104.75 304804.16 160384.42 PAP ROUTINE PAP SMEAR LAB TEST 276.00 14508.80 0.00 0.00 0.00 289.34 4515.64 9703.82 RADT RADIATION THERAPY 30.00 8546.00 0.00 0.00 0.00 0.00 5139.14 3406.86 SACC SUPPLEMENTAL ACCIDENT 9.00 724.26 0.00 0.00 0.00 0.00 197.28 526.98 SGCT SURGICAL FACILITY FEE PREAUT 294.00 381109.34 0.00 991.27 0.00 9848.98 201423.60 154907.01 SMOK SMOKING CESSATION 13.00 806.34 0.00 0.00 0.00 0.00 260.88 436.38 SNF SKILLED NURSING FACILITY 170.00 25845.98 0.00 0.00 0.00 0.00 25845.98 0.00 SUP MEDICAL SUPPLY 17.00 1952.55 0.00 100.00 0.00 0.00 1641.40 194.29 TMJ MEDICAL TMJ SERVICES 2.00 200.00 0.00 0.00 0.00 0.00 200.00 0.00 TRAN TRANSPLANTS 43.00 3857.96 0.00 48.38 0.00 517.66 1387.08 1833.24 VEXM ROUTINE VISION EXAM 81.00 7802.25 0.00 0.00 0.00 0.00 7852.25 50.00 - VHDW VISION HARDWARE 18.00 11899.64, 0.00 0.00 0.00 0.00 11899.64 0.00 VINL VISION- INELIGIBLE SERVICES 29.00 1091.45 0.00 0.00 0.00 0.00 1091.45 0.00 WELC PREVENTIVE WELLNESS - COPAY 595.00 82650.49 7995.00 0.00 0.00 1113.01 20427.80 53114.68 WELL ROUTINE /WELLNESS SERVICES 852.00 31348.68 0.00 0.00 0.00 340.14 16749.56 14258.98 WELO ROUTINE /WELLNESS OFFICE VLSI 26.00 4417.54 0.00 0.00 0.00 0.00 1367.97 3049.57 WORK WORKMANS COMPENSATION CLAIMS 21.00 3163.20 0.00 0.00 0.00 0.00 3070.86 92.34 XRAY X -RAY SERVICES 2858.00 625404.81 0.00 14078.84 0.00 20093.35 410893.74 159957.15 cobr not on file 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1995.65 *Totals 8 efit codes 103978.00 56559.16 0.00 7673744.36 17066639.47 625.48 799081.29 81 .85 AP NDIX A Effe 2/1/2010 CITY OF SIMA Medical Coverage Plan Design Changes Medical Benefit Terminating t Benefit n fit Plan 31, 2 1 0 • Effective February 1, 2010 1. Effective February 1, 2010 ° 3 Preferred Provider Non-Preferred 'Provider- Preferred Provider Organization HMA Preferred /Regence BlueShield is HM A Preferred /Regence BlueShield Benefits will be paid at a (PPO) the preferred provider network is the preferred provider network lower coinsurance percentage contracted by the City of Yakima. contracted by the City of Yakima. when an out -of network provider The level of benefits received is based is utilized. upon the participant's decision at the The plan does not contain a Charges will be paid at the preferred time treatment is needed to access coinsurance incentive to utilize network level when: care through either preferred or non- services. preferred providers. Benefits are The services are billed by a preferred payable at the preferred level by provider, hospital or medical facility. accessing your care through a _ Preferred Physician, Preferred The services are for a non - preferred Medical Facility or from a Preferred assistant surgeon where the medical Hospital. Out -of- network charges will facility and the primary surgeon are be paid at the out -of- network level of both preferred providers. benefits. . The services are considered emergency services and are billed by a non - preferred provider If you are traveling and incur medical expenses. Deductible Individual $100 $200 $200 _Fa _ $200 $400 $400 Out -of Pocket Maximum Individual $600 $1,200 $1,200 Family $1200 $2,400 $2,400 Includes the deductible • Does not include the deductible. Does not include the deductible. Inpatient Pre - Authorization $500 penalty for non - compliance. $500 penalty for non - compliance. • $500 penalty for non - compliance. Chemical Dependency 80% 80% 60% «n�- __• - - -.- Treatment Allergy Treatment 80 % 80% 60% Ambulance (Air. and Ground) 80% 80% 80% 'Anesthesiologist 80% - 80% . 80% Chiropractic Services 80% $20 copay then 100% 60% _ _ �_� Limited to $1,000 per calendar year. Limited to $1,000 per calendar year. Limited to $1,000 per calendar year. Deductible waived. • Medical benefit 1 �n �anufar. �31 ��,:2010 .. � Preferred_ • Provider.l 2010 �ff Pr f Februar V 2010 . Terminating- 3 o n e er ed Pro der Dietary Education 8 0% ° y � $20 copay then 100 /° 60% Diabetic Education Only. Deductible waived. Limited to $500 lifetime maximum. Limited to $500 lifetime maximum. Durable Medical Equipment 80% • 80% 60% Emergency Room • $25 copay,.then 80 %. - $100 copay, then 80 %. $100 copay, then 60% _ _ __ __�T _� .. waived if admitted. Copay waived if admitted. Copay waived if admitted. Home Health Care 80% 80% 60% - - Hospice.. Care 80% 80% 60% , _ . _ _ _____ ��_ 6 month lifetime maximum. ., Infusion Therapy 80% • 80% . 60% _ ��_' _'_. . Limited to $25,000 per calendar year. Limited to $25,000 per sal endar gear. . Limited to $25,000 per calendar year. . Inpatient Hospital Stays 80% 80% 60% Mental Health Treatment . 80% , 80% 76 0% Neurodevelopmental Therapy 80% 80% 60% Limited to children up to age six. Limited to children up to age six. Limited to children up to age six. _ Limited to $4000er. calendar year Limited to $4 per calendar year. Limited to $4,000 per calen_dar year Physician Office Visits Visits 1 -5: 1.00 %, deductible waived $20 copay, then 100% 60% • Visits 6 +: $15 copay then 100% Deductible waived. Pre- Admission Testing 100% 100% Preventive Care $15 copay p y then 100 %. $20 copay then 100% 60% Deductible waived. Deductible waived Prosthetics 80% 80% . 60% Rehabilitation (Outpatient) 80% 80% 60% Limited to $3,000 per calendajjear. Limited to $3,000 per calendar_year.. Limited to $3,00 per calendar year. Rehabilitation (Inpatient) 80% 80% 60% Limited to 45 days,per calendar year. 'Limited to 45 days per calendar year._ Limited to 45 days per calendar year. Second Surgical O inion .... 80% 80% 60% Skilled Nursing Facility 80% 80% 60% Limited to 120 days lifetime maximum. Limited to j2Iclayslifeern aximum Limitedly � s lifetime maximum Smoking and Tobacco 80% 80% 80% Cessation Deterrent Classes - 100 %, limited to Deterrent Classes - 100 %, limited to Deterrent Classes - 100 %, limited to • $50 per calendar year. $50 per calendar year. $50 per calendar year. Limited to a $500 lifetime maximum; Limited to a $500 lifetime maximum; Limited to a $500 lifetime maximum; deductible waived. deductible waived. • deductible waived. Tnsplants 80% 80% ra 60% Donor benefit limited to $20,000 per .Donor benefit limited to $20,000 per Donor benefit limited to $20,000 per transplant. transplant. _ :transplant. ' X ray and Lab 80% . .. 80% „I 60% Lifetime Maximum $1,000,000 . _ $2;000,000 ** • .1 $2,000,000 ** • Prescrip ' , Vision and.Dental benefits remain unchang • . APP NDIX B • HEALTH: CARE REOIRM TIMELINE 210 •� f : 2013 2014 4 201 - 0 20 2011 1 Health insurance policies that provide dependent Voluntary long -term care insurance Improvements on electronic Individuals must obtain health Health insurance provider coverage must make coverage available for options available for adults who exchange of health information to insurance coverage or pay a fee imposed in 2015 and dependents up to age 26 become disabled • reduce paperwork, administrative penalty (some exemptions apply) increased annually burdens and costs • • Uninsured individuals with pre - existing ' • Consumer rebates for excessive " " Annual health flexible. s ? m foyers With conditions obtain " � � • .: . 9 E p Y th 50 or more High cost plan excise tax n health insurance through . medical loss ratios account (FSA) contributions limited employees must offer coverage to established in 2018 a high risk health insurance pool program • to $2,500 ', their employees or pay a penalty Affordable coverage will be identified by the HHS Employers required to report health Medicare Part D subsidy deduction State health insurance exchanges • and a website will be established for residents of coverage costs on form W -2 eliminated to be established any state to locate coverage Reinsurance for covering early retirees will `Qualified Medical Expenses". will Income threshold for claiming Health insurance companies will provide reimbursement for a portion of the cost conform to the definition used fo r the itemized deduction for medical not be able to d'isc'riminate of providing health insurance (program will end itemized.tax deduction :• expenses increased against individuals based on. • January 1, 2014) health status Limits on lifetime dollar value of benefits for any Simple Cafeteria Plan will be created to Hospital insurance tax for high wage Individual health care tax credits individual covered by group or individual health provide small businesses an easier • workers increased - available for certain individuals insurance eliminated way to sponsor a cafeteria plan Pre- existing condition exclusions will be Medicare Part D discounts (50% Medical device excise tax Second phase of small business eliminated for children discount on brand -name drugs). established; tax credit Group health plans and health insurance issuers Increase of taxes on withdrawals from Assessment of health insurance offering group or individual health insurance HSAs (prior to age 65) and Archer provider fee coverage must cover preventive health services MSAs which are not used for qualified medical expenses Rescissions in all new and existing plans'will be Free annual wellness visit for Medicare No limits on annual dollar value of prohibited in most cases; plan coverage may not beneficiaries and elimination of cost benefits for any individual be cancelled without prior notice to the enrollee sharing covered by group or individual health insurance. • Fully- insured group health plans must satisfy Pre- existing condition health nondiscrimination rules regarding participation insurance exclusions eliminated and benefit eligibility • for adults Employers must improve the appeals process for appeal§ of coverage determinations and claims Small business tax credit available Rebates for the Medicare Part D "Donut Hole" sent to eligible enrollees. States may expand Medicaid eligibility Indoor tanning services tax imposed EMSPRING I 0"), ,1` �� 4 . X p SPRING ° i Fe • l6ll - {(Z kllL { 4 i • \ \ i "Y t _ it t N { ; 7v as Legislative Le e a • 130- b _ - -- Health Care Reform: Regulations �f Pt: Issued on Grandfathered Plans rC' - EXECUTIVE SUMMARY The health care reform law passed earlier this year brings many changes to employers and health plans. The extent of the impact will depend, in part, on whether you maintained a health care plan on March 23, 2010, the date the primary legislation was enacted. If your company sponsored a plan on that date, it is considered a "grandfathered" plan. Grandfathered plans are exempt from certain health care reform requirements, such as no cost- sharing for preventive care and other patient protections. On June 14, 2010, the Departments of Health and Human Services (HHS), Labor and Treasury issued regulations regarding . grandfathered plans. Importantly, it clarifies what types of changes can be made to existing plans that will allow them to retain their "grandfathered" status. This EmSpring Legislative Brief summarizes the new regulations as follows. MIF SUMMARY OF THE REGULATIONS The regulations essentially state that plans will lose their grandfathered status if they choose to significantly cut benefits or increase out -of- pocket spending for consumers. Losing grandfathered status means that a plan would have to comply with additional health care reform requirements, such as first- dollar coverage of recommended prevention services and patient protections such as guaranteed access to OB -GYNs and pediatricians. Permitted Changes Grandfathered health plans will be able to make routine changes to their policies and maintain their status. These routine changes include cost adjustments to keep pace with medical inflation, adding new benefits, making modest adjustments to existing benefits, voluntarily adopting new consumer protections under the new law, or making changes to comply with state or other federal laws. Premium changes are not taken into account when determining whether or not a plan is grandfathered. Prohibited Changes Plans will lose their grandfathered status if they choose to make significant changes that reduce benefits or increase costs to consumers. Specifically, making the following changes would cause a plan to lose its grandfathered status: • Significantly Cutting or Reducing Benefits. For example, if a plan decides to no longer cover care for people with diabetes, cystic fibrosis or HIV /AIDS. • Raising Co- Insurance Charges. Typically, co- insurance requires a patient to pay a fixed percentage of a charge (for example, 20 percent of.a hospital bill). Grandfathered plans cannot increase this percentage. • Significantly Raising Co- Payment Charges. Frequently, plans require patients to pay a fixed - dollar amount for doctor's office visits and other services. Compared with the copayments in effect on March 23, 2010, grandfathered plans will be able to increase those co -pays by no more than the greater of $5 (adjusted annua, for medical inflation) or a percentage equal to medical inflation plus 15 percentage points. For example, if a pla raises its copayment from $30 to $50 over the next two years, it will lose its grandfathered status. • Significantly Raising Deductibles. Many plans require patients to pay the first bills they receive each year (for example, the first $500, $1,000 or $1,500 a year). Compared with the deductible required as of March 23, 2010, grandfathered plans can only increase these deductibles by a percentage equal to medical inflation plus 15 � a�''f A, z fir. ;.., "' �` n �`-�'. d'�r �:n?= 3d ',F'., • 'ipl s r e,",y r '4. .?ry s +N TS '�F r q ,. : *egis "fief Health Care Reform: Regulations Issued ®n Grandfathered Plans percentage points. In recent years, medical costs have risen an average of 4 -5 percent so this formula would allow deductibles to go up, for example, by 19 -20 percent between 2010 and. 2011, or by 23 -25 percent between 2010 and 2012. For a family with a $1,000 annual deductible, this would mean if they had a hike of $190 or $200 from 2010 to 2011, their plan could then increase the deductible again by another $50 the following year. • Significantly Reducing Employer Contributions. Many employers pay a portion of their employees' premium for insurance and this is usually deducted from their paychecks. Grandfathered plans cannot decrease the percent of premiums the employer pays by more than 5 percentage points (for example, decrease their own share and __ increase the workers' share of premium from 15% to 25 %). • • Adding or Tightening an Annual Limit on What the Insurer Pays. Some insurers cap the amount that they will pay for covered services each year. If they want to retain their status as grandfathered plans, plans cannot tighten . any annual dollar limit in. place as of March 23, 2010. Moreover, plans that do not have an annual dollar limit cannot add a new one unless they are replacing a lifetime dollar limit with an annual dollar limit that is at least as high as the lifetime limit (which is more protective of high -cost enrollees). • • Cannot Change Insurance Companies. If an employer decides to buy insurance for its workers from a different 4) insurance company, this ,new insurer will not be considered a grandfathered plan. This does not apply when employers that provide their own insurance to their workers switch plan administrators or to collective bargaining agreements. Additional Requirements for Grandfathered Plans The regulations also contain additional requirements to keep health plans from using the grandfather rule to avoid providing important consumer protections. To promote transparency, the regulations require a plan to disclose to consumers, every time it distributes materials, whether the plan believes that it is a grandfathered plan and therefore is not subject to some of the additional consumer protections of the health care reform law. This allows consumers to understand the benefits of staying in a grandfathered plan or switching to a new plan. The plan must also provide, contact information for enrollees to have their questions and complaints addressed. The regulations also provide that a plan's grandfathered status may be revoked if it forces consumers to switch to another grandfathered plan that, compared to the current plan, has less benefits or higher cost sharing as a means of avoiding new consumer protections. Grandfathered status may also be revoked if a plan is bought by or merges with another plan simply to avoid complying with the law. • PROJECTED IMPACT ON CONSUMERS AND PLANS The Departments have provided information on the expected impact the grandfathered .plan rules will have on health coverage. For additional information, access the fact sheet at: www.healthreform.00v /newsroom /keeping the health plan you have.html. Large Employer Plans It is expected that large employers (100 or more workers) - who make up the vast majority of those with private h insurance today - will not see major changes to their coverage as a result of this regulation. The regulations that most of these plans will remain grandfathered — more than three - quarters of firms in 2011 — based on the hey changed cost sharing from 2008 -2009. Most of these plans already offer the patient protections applied to grandfathered plans such as no pre- existing condition exclusions for children and no rescissions of coverage when a person gets sick. In addition, they are likely to 2 '' Brief Health Care Reform: Regulations Issued on Grandfaihered Plans already give their workers and families protections like a choice of OB -GYN and pediatrician, and access to emergency rooms in other states without prior authorization. Based on past patterns of behavior, it is expected that large employers will continue to make adjustments to the health plans they offer from year to year so that, by the time the health insurance Exchanges are established in 2014, fewer - but still most - large employer plans will have grandfather status. However, the assumed market changes depend on the choices large employers make in the future. Small Business Plans The roughly 43 million people insured through small businesses will likely transition from their current plan to one with the new protections over the next few years. Small plans tend to make substantial changes to cost sharing, employer contributions, and health insurance issuers more frequently than large plans. As such, it is estimated that 70 percent of . plans will be grandfathered in the first year, but depending on the choices these employers make, this could drop to about one -third over several years. Individual Health Market The 17 million people who are covered in the individual health insurance market, where switching of plans and substantial changes in coverage are common, are expected to receive the health care reform protections sooner rathe than later. Roughly 40 percent to two - thirds of people in individual market policies change plans within a year. Given this "churn," the transition for the 17 million people in this market may be swift, irrespective of the grandfather plan definition. Special Types of Health Plans Fully- insured health plans subject to collective bargaining agreements will be able to maintain their grandfathered status until their agreement terminates. After that point, they are subject to the same rules as other health plans; in other words, they will lose their grandfathered status if they make any of the substantial changes described above. Retiree -only and "excepted health plans" such as dental plans, long -term care insurance, or Medigap, are exempt from the health care .reform insurance reforms. This EmSpring Legrsative. Update is not Intended to be exhaustive no should an; discussion or opinions be construed as I advice. Readers should contact leola! counsel tor legal advice. Content cc? 2010 Zywave, Inc. imac.ec c; 2000 Gem.. Images, inc. Al rights reserved. EAS 6/10 • 3 �4;,. d. A_ , ,,,ni � s a? eaa w 3x a ' b� `�, - :t' a f e 5 �^�5, �x 3}� i s�ts. � .a� ti 9 r r.� "k, , .* ✓.'?�,aSb .M ; i 6 - � �. ':5 .+§" k t F 1 � �i<, a :. , � � c .E ,.'�_ , , � .,, Ira �t> .,..., c<, .+, � - �, & ;� � .. �,f,t tru �5] k...,�_ .. �*" ,r•,3 3. ,r. � . ,�:.. :t, r .a,. `� e ESP'RING • y � ''�� '� LTy L ih y �3v bEti{ t}, ' LY „,� { ! h l r` e ' ' a"- " t ' ry, i k4w41-- , � `� i 9 4 ; A � ¢ ;', ' ' a •' . 4j ; 7' r y tl 1 , 4) '1 M1 Q u N 1 a u n ,; , {' y , 4 a . e k. i ` . � °"'' v „ L 21fi{ k '4! .. r 1 . 9 � ` 1 , M1 .,' .„,,,L - "a.' . .:,:,,,,., 4 t ! �Ji , plc+k 't �_� 4�� e �s' w� i i m zt r w , .:.m «' -,,... � 7 a .;:v ,0, i';:y; � � b i a�a�3 °z' 5� ; *r ,, a i fibre: . ffi 3., --' ti y a� ' ., : lit,,4124 6,1 . 40 . ,. 1 . P . :r i° , ,,$ �,e'4���� � ,� ` 3�" v ,. YE'r• 7 ili „ 61':lil Benefit and insurance issues important to you- brought to you by the insurance specialists at EmSp H ealth Care Reform:. Extension of Dependent Coverage to Age 26 . . . . The recently passed health - care immediately allow employers with • -- a parent's premium: costs will be ' reform legislation makes sweeping cafeteria plans - plans that allow affected by having a qualified young changes to the U.S. health care employees to choose from a menu adult remain on their policy. system, including an extension of of tax -free benefit options and cash • Although, any qualified individual health insurance coverage to young or taxable benefits - to permit must be offered all of the benefit adult children up to age 26. employees to begin making pretax packages available to children who contributions to pay for the did not lose coverage because of Who is Eli ible? g 9� expanded benefit. This guidance loss of dependent status. The The extension of dependent also applies to health FSAs and qualified young adult cannot be verage applies to plans in ence on the date the health reform legislation was passed health reimbursement arrangements required to pay more for coverage (HRAs). than similarly situated individuals who did not lose coverage due to andfathered plans) and new When Does the Dependent the loss of dependent status. plans. Coverage must be made Coverage Extension Begin? available to qualifying young adults The extension of dependent What if My State Already up to age 26 whose parents carry coverage provision takes effect for 'Extends Covers a to Youn private group or non - group health plan years beginning on or after Adults? g g coverage. September 23, 2010. That means Qualifying young adults include that for October plans, the start already an More t have laws that two - thirds of states sons, daughters, stepsons, date would be October 1, 2010. anquir stepdaughters, adopted children or Plans that run on a calendar -year insured group health plans t cover eligible foster children of the parent, basis must cover an employee's dependents past age 18, often into ' ' cases mid to late xa pie i i some regardless of the qualifying young young adult child up to age 26 cases later. For example, in New adult's marital status. It does not starting on January 1, 2011. Plans Jersey, unmarried children can stay matter whether the qualifying young that begin July 1 must cover on a parent's plan until age 31. adults are tax dependents for dependents up to age 26 starting Such state mandates, including federal income tax purposes. on July 1, 2011. Some insurers those requiring coverage past age Parents may decide whether to add have said that they will begin to 26, will continue to apply. Also, the adult children to their plan, but . extend dependent coverage prior to favorable tax treatment applies only there is no requirement to cover the September 23, 2010, for individuals for adult children through the tax child of a dependent child. . • who would otherwise lose coverage. year in which they turn 26 and does Tax - Free Coverage For grandfathered plans, before not vary depending on state Effective March 30, 2010, health January 1, 2014, the extension of requirements. Employees in states coverage provided for an coverage will apply only with that extend coverage past age 18, employee's children under 27 years respect to dependent children `not now be able not not .all e he way to age dvantag tag w i l l f of age is the federal ext generally tax -free to the eligible for coverage under another x n e of employee. Although the coverage employer's health plan. On and • tensisi a on. requirement ends on the child's 26 after January 1, 2014, the provision This brochure is for informational purposes birthday, employers can continue to applies to all plans regardless of a only and is not intended to replace the offer the benefit on a tax- dependent child's eligibility for advice of an insurance professional. a ntaged basis until the end of • coverage under another employer xable year in which the child health plan. 26. • nternal Revenue Service How Much Will it Cost? announced that these changes The provision does not specify how Em5pring Corporatio ; 3911 Castlevale Rd `Suite.109 • Yakima, WA :iv 98902 Phone S09:575.6497 www:`emspringcom ui y i» E /SP1! PSG a h Sir, �u e q v -( 1 �, o, yi • Legislative Brief ReP7 5 Health Care Reform; Early Retiree Reinsurance Program Frequently Asked Questions _; 9.F .'a f f t _.H rn N, " i .,:� 'a�`�1 r. r ur ,t r 1r i ,X ti<� - •: The Early Retiree Reinsurance Program (ERRP) was established by the health care reform law to provide reimbursement to participating employer -based plans that provide coverage to early retirees. These plans may be reimbursed for a portion of the cost of health benefits for early retirees and their spouses, surviving spouses and dependents. The ERRP was officially implemented on June 1, 2010. On June 29, 2010, the Department of Health and Human Services' Office of Consumer Information and Insurance Oversight (OCIIO) announced that it will begin accepting applications for the program and issued Frequently Asked Questions (FAQs) regarding the program. This EmSpring Legislative Brief provides the FAQs issued by the OCIIO on June 29, 2010. DEFINITIONS Question: The definition of "early retiree" at 45 C.F.R. 149.2 states that, among other criteria, the individual "is not a active employee of an employer maintaining, or currently contributing to, the employment -based plan or of any employer that has made substantial contributions to fund such plan." (This criterion does not apply to individuals who might satisfy the definition of early retiree by virtue of being a spouse or dependent). The definition further states that the determination of whether an individual is not an active employee is made by the sponsor in accordance with the rules of its plan, but that an individual is presumed to be an active employee if, under the Medicare Secondary Payer (MSP) rules at 42 C.F.R. 411.104 and related Centers for Medicare & Medicaid Services' guidance, the person is considered to be receiving coverage by reason of current employment status. Under the regulation, this presumption applies whether or not the MSP rules actually apply to the sponsor. How does a sponsor resolve any discrepancy between its plan rules and the MSP rules with regard to whether any individual is an active employee for purposes of the Early Retiree Reinsurance Program? Answer: With respect to the Early Retiree Reinsurance Program, the U.S. Department of Health and Human Services (HHS) will generally defer to a plan's rules to determine whether a given individual is an active employee. Such plan rules should be a written plan document, published and in effect as of the day a claim for health benefits for an individual was incurred for which the sponsor seeks credit toward the $15,000 cost threshold or reimbursement, that indicates whether or not the individual in question is an active employee for all plan purposes. Absent such a document, or in situations in which the plan rules regarding the definition of an active employee are vague and unclear, the determination of whether an individual is an active employee for purposes of the program, is determined by whether such individual is considered to be receiving coverage by reason of current employment status under the MSP rules at • 42 C. F.R. 411.104 and related Centers for Medicare & Medicaid Services' guidance. Question: Under the regulatory definition of "early retiree" at 45 C.F.R. 149.2, an early retiree is an individual, who, among other criteria, is not an active employee of an employer maintaining or currently contributing to, the employment -based plan or of any employer that has made substantial contributions to fund such a plan. In instances when the plan sponsor is not an employer, does this mean that the individual cannot be an active employee of the sponsor? - Answer: No. In instances when the plan sponsor is not an employer, the individual cannot be an active employee of an employer maintaining or currently contributing to, the employment -based plan or of any employer that has made substantial contributions to fund such a plan. This clarification to the regulatory definition of "early retiree" reflects what our intent was when drafting the definition. Y �� :��ti r .' '!'•* } .: 'z F' z �" f3`�.a as � µ�zYe ;� ,'� as u �",LS .Y',...: 'Y. �,,, a }i $ j�k, l e'" �m - :e. a at f at. " W a 'e az . • 04 . c .egislative I tief Health Care Refo Early Retiree Reinsurance Program Frequently Asked Questions Question: When do different health benefit arrangements constitute different employment - based.plans, as opposed to different benefit options within the same plan, for purposes of the Early Retiree Reinsurance Program? Answer: Plan sponsors should submit a separate Early Retiree Reinsurance Program (ERRP) application for each employment -based plan for which it intends to seek program reimbursement. Internal Revenue Service regulations at 26 C.F.R. 54.49808 -2 address the question of how the number of group health plans that an employer or employee • organization maintains is determined, for purposes of COBRA. We believe that some of the principles articulated in that regulation can be applied to. ERRP. Therefore, for purposes of ERRP, a sponsor may consider multiple health benefit arrangements as one employment -based plan, ,unless (1) it is clear from the instruments governing an arrangement or arrangements to provide health benefits that the benefits are being provided under separate plans and (2) the arrangement or arrangements are operated pursuant to such instruments as separate plans. However, a multi- employer plan and a non- multiemployer plan are always separate plans. Question: How does a plan sponsor determine whether different health benefit arrangements within a single employment -based plan are different benefits options? er: The regulations. at 45 C.F.R. § 149.2 define benefit option as "a particular benefit design, category of benefits, t- sharing arrangement offered within an employment -based plan." In its application, a sponsor must define each t. option for. which it might request program reimbursement. We believe it generally to be true that when a single i e employment -based plan uses different health insurance issuers or different third -party administrators (TPAs) for different health benefit arrangements, each such issuer or TPA is offering a different benefit design, category of benefits, and /or cost - sharing arrangement from each other. Therefore, in the portion of the application where the sponsor is required to identify each benefit option, the sponsor should identify each different health insurance issuer or TPA through which health benefits are provided or administered. We realize that a given health insurance issuer or TPA might offer multiple discrete benefit designs, categories of benefits, and /or cost- sharing arrangements. But for purposes of ERRP, we are not requiring sponsors to provide that level of detail. For example within a single employment -based plan.(as that term is defined in 45 C.F.R. 149.2),. a sponsor offers a • self - funded major medical arrangement administered by Third Party Administrator "A ", as well as separate insured • major medical coverage arrangements through Insurer "B" and Insurer "C ". Insurer "C" offers both a 'low" and a "high" option of major medical coverage. The self - funded arrangement and Insurer "B" offer prescription drug benefits through Prescription Benefit Manager "D ", while Insurer "C" offers prescription drug benefits through Prescription Benefit Manager "E ". The sponsor should assign names, and identifiers, to the arrangements provided by Third Party Administrator "A", Insurer "B", Insurer "C ", Prescription Benefit Manager "D" and Prescription Benefit Manager "E." (The sponsor should assign only one name, and only one identifier, to the arrangement provided by insurer "C', notwithstanding the fact that Insurer "C" offers both a low and a high coverage option). The sponsor should list those names, and the identifiers, as the benefit option names and benefit option identifiers, respectively, in the application. APPLICATIONS Question: Are applications being accepted on a first -come, first- served basis? • Answer: For the Early Retiree Reinsurance Program, it's important to make the distinction between the application process and the claims process; which operate separately. lified applications will be approved. Applications will be processed in the order in which they are received. A . nts are made based on when claims are submitted, not when the employers' applications for the program were submitted. All employers who are accepted into the Early Retiree Reinsurance_ Program are eligible to receive . reimbursement for costs incurred on or after June 1, 2010, regardless of the date on which the employer was accepted 2 �f �� S., °.. S �t�: � � �.�,Y a'`�,!. 4�2 '3 a+ti �:, ., ^N�� �,. +"�.'1+ ;,e .r ,','::.� r.. : +, <�,� -. r : y , � r ;..,. ;;; t _ _ �.. ,., ... .... l: ..5. :s �`t;;s,.,o-� sJirr�rP rtti «., - d:'x'. -.*r 5.41T - -� Y - , . i e 5.v,.:�k F,'L�i,..5.,,7 J I r;�. t ,., e�, �;:;r',� �: i *'g r z : z ,., r; t s4�sx �.: a�,+ s � ��"��� 4..! '?'�,5...,.�4.a� ?t °i:.- (,'�i!�. �" .rN��l..l�.�st.��i �Fj_ }�F Ftiy��F ry�7l.a `�„r�41r �;7 i� ,i� } � � ,h� .�y .s4... 54<i gal., �5�,.,.k.,�4 . tS?1,a ,,,, ?...,.., .x.,.`Fi'^�, �P,e;„..�ti» r.,. .� �.4...: -3 x4 ..r� ?:1; Legislative • Health Care Reform: Early Retiree Reinsurance Program Frequently Asked Questions into the program. Once an employer is accepted into the program, they can submit claims for their retirees and these claims will be processed in the order in which they are received. Question: Is there a pre- determined number of applications that HHS is planning to accept? Answer: No. There is no predetermined number of applications that HHS will accept. All qualified applications will be approved. Applications will be processed in the order in which they are received. HHS does have the authority to stop accepting applications, but only if it appears that the $5 billion in federal funding is insufficient, as program reimbursements are being paid out. Question: The Early Retiree Reinsurance Program application must be signed by an authorized representative. The regulation at 45 C.F.R. 149.2 defines authorized representative as an individual with legal authority to sign and bind a sponsor to the terms of a contract or agreement. What are some examples of individuals who typically have such legal authority? Answer: Common examples of individuals who typically have the requisite authority to serve as the Early Retiree 41 Reinsurance Program authorized representative for a sponsor include the sponsor's Chief Executive Officer (CEO), Chi Financial Officer (CFO), President, Human Resources (HR) Director and General Partner. For plan sponsors that are unions, a member of the union fund's board of trustees typically would have the requisite authority. Please note that this list is not exhaustive. The authorized representative and account manager identified in the application must be different individuals. Question: How important is it to be the first application to be submitted? • Answer: It is not important to be the first application submitted. While applications will be processed in the order in which they are received, the application process is separate from the claims process. Payments are made based on when claims are submitted, not when the employers' applications for the program were submitted. The critical step in receiving reimbursement is actually the submission of the request for claims reimbursement. All qualified claims submitted by participating employers will qualify for reinsurance. If the $5 billion in federal funding available for the program is spent before the program's end in 2014, then the Secretary can stop accepting applications and reinsurance payments for qualified claims will end. If a sponsor is the first one to submit an application to participate, but waits a significant amount of time after its application is approved to request reimbursement, the sponsor may, in fact, not . receive the reimbursement if funds are exhausted. Question: Where should I send the application for the Early Retiree Reinsurance Program once it is completed? Answer: Please mail applications to the following address: HHS ERRP Application Center 4700 Corridor Place, Suite D Beltsville, MD 20705 Question: What if a sponsor, which intends 'to use all or part of its program reimbursement to reduce its own health benefit costs (i.e., to offset increases in such costs), believes that the increases in its costs will but not definitely, be significant enough to consume the program reimbursement. What should the sponsor do? application, the sponsor should account 111 Answer: In the a pP p ccount for the possibility that it might receive reimbursement that exceeds its cost increases. For example, in its explanation of how the sponsor will use program reimbursement, it could state that any overages will be applied to offset its health benefit cost increases for the following plan year, or that it 3 • TomI . s.., ' . . Health Care Reform: Early Retiree Reinsurance Program Frequently Asked Questions d 1 t -,�! x t j s rx x r ., y .� ti . p :r a �� , fir i h �! r�,U t F =''. ;� �'ti.. i .� � x r t �! : , f ,� �,. ' will use the overage to reduce plan participants' health benefit costs for the current or following plan year. This list of alternatives is not exhaustive. Question: Do a plan's programs and procedures for chronic and high -cost conditions have to be in place at the time the sponsor submits the application? • Answer: Yes. The program's regulations state that as part of the application, the applicant must include a summary of .. the programs and procedures it has in place that have generated, or have a potential to generate, cost - savings with respect to participants with chronic and high -cost conditions. The regulation defines a chronic and high -cost condition as a condition for which $15,000 or more in health benefit claims are likely to be incurred during a plan year by any one plan participant. It would be helpful in the summary for the applicant to explain how it determined which conditions to address (Le. how was.it determined that the chronic and high -cost condition has generated, or is likely to generate, $15,000 in claims in a plan year), how the program and procedures will generate cost savings with respect to plan participants with these conditions, a description of the programs and procedures, and who benefits from the cost savings (i.e. the plan sponsor and /or plan participants). This list is not exhaustive. While the Secretary only expects a summary, the applicant must describe how it would support its assertions in the event of an audit. ion: Does a sponsor need to make the Secretary aware of any changes in information reported on the sponsor's a cation? Answer: Yes. We understand that information on a sponsor's application may need to be updated as the program progresses. We expect that a sponsor will update us as soon as it is aware of any change in the information provided. in the application. The specifics as to how to update us will be clarified in further guidance. It should be noted that . . changes in information could, if the sponsor no longer meets the requirements of the program or was not truthful in the original application, cause the sponsor's application to be retroactively denied or terminated. Question: Can sponsors in the U.S. territories, including territorial governments, participate in the Early Retiree Reinsurance Program? - Answer: No. CLAIMS SUBMISSIONS AND REIMBURSEMENT REQUESTS Question: When can sponsors begin submitting claims data and reimbursement requests to the U.S. Department of Health and Human Services for the Early Retiree Reinsurance Program? Answer: The. U.S. Department of Health and Human Services (HHS) is currently developing the infrastr needed to accept claims data and reimbursement requests. HHS will announce instructions detailing the manner and timing for submitting this information in the near future. A sponsor will then be able to submit claims' data and reimbursement requests. We encourage interested parties to regularly monitor this Web page for this and other program information. Question: The Early Retiree Reinsurance Program regulation at 45 C.F.R. 149.310 states that, for employment -based plans for which a provider in the normal course of business does not produce a claim, such as a staff -model health maintenance organization, the information required in a claim must be produced and provided to the. Secretary, as set out in the regulation and applicable guidance. Does this principle also apply in the context of self- funded plans? r: Yes. For example, a self - funded plan might pay a capitation rate to all or some providers in its provider ni rk. To the extent the sponsor wishes to receive reimbursement for items and services furnished by such providers, the information required in a claim must be produced and provided to the Secretary, as set out in the regulation and . applicable guidance. 4 � ,v, S rr 33's",nt G3; � - ra� t' e ea l� ate' s -at _a{. "lut:n a -.,�. .xa �sl:..; � x ,^ _., ,,. K r �,�, } . s.: �.... �. ..: �:. ., .., ,;. d:r4s : r tt5. F r �q I ti4 , r ra , ,i e a;a t Z iii a , e t ,^ 1 , . . ,. 6 ,.t.,,, C..i�.._..,a, ts3 .� f � "x, ,w`ti �uY r,�' jR` ����55 cf '�y 9, r ,� r x 1�?e, � � - t x.� Y � ±l...a ..a a7�. +m.4.x.2R tr�'.:t;£�. +(ye�i�, .'�,d3�tie.;? iy� 5 iw . k:':�^t�� S'G u r sf,�4 ' ,.�_,,..._ � �..,,K.,e3 :a ^ n!�� ur{,: ��, �'£d�ti�„4�a�}�.,4niin egislative Brief • Health Care Reform.: Early Retiree Reinsurance Program Frequently Asked Questions USE OF REIMBURSEMENT Question: How can sponsors use the reimbursement? Answer: Pursuant to 45 CFR §149.200, a sponsor must use the proceeds under this program (1) to reduce the sponsor's health benefit premiums or health benefit costs, (2) to reduce plan participants' health benefit premium contributions, copayments, deductibles, coinsurance, or other out -of- pocket costs, or any combination of these costs or (3) to reduce any combination of these costs specified in (1) and (2). Proceeds received pursuant to this program cannot be used as general revenue of the sponsors. In order to ensure that the reimbursement under this program is not de facto used as general revenue, sponsors must maintain their level of financial effort in supporting the applicable plan or plans. In other words, to the extent a sponsor decides to use the reimbursement for its own purposes, it can use the reimbursement only to offset increases in the sponsor's health benefit premiums or health benefit costs. The sponsor must explain in the program application how it will maintain its level of effort for the plan. Question: To the extent a sponsor wishes to use some or all of the proceeds it receives under this program to reduce plan participants' health benefit premium contributions, copayments, deductibles, coinsurance or other out -of- pocket costs, must it do so for all plan participants, and not just for early retirees? Answer: Yes. If a sponsor chooses to use some or all of the proceeds it receives under this program to reduce plan participants' health benefit premium contributions, copayments, deductibles, coinsurance or other out -of- pocket costs, it must do so for all plan participants, and not just for early retirees. As we discussed in the regulation, the statute uses the term "plan participant" (as opposed to "early retiree ") when setting out the requirements for how a sponsor is to use the reimbursement. §1102(c)(4). The term "plan participant "is. defined in the regulations as "anyone enrolled in an applicable plan including an early retiree, as defined in this regulation, a retiree, a retiree's spouse and dependent, an active employee and an active employee's spouse and dependent." 45 C.F.R. §149.2. Also, we note that nothing in the program waives the non - discrimination rules promulgated under the health insurance portability provisions of the Health Insurance Portability and Accountability Act at 45 CFR 146.121(6)(2) and (c). Those rules continue to apply regardless of participation in the program. Question: Can sponsors use the reimbursement to pay increased administrative costs generally related to the administration of the plan? Answer: Generally, no. We interpret the statutory and regulatory prohibition on using program funds as general revenue to mean that a sponsor, to the extent it is using program funds for its own purposes, must use them only to offset increases in health benefit costs or increases in health benefit premiums. The term "health benefits" is defined in Section 149.2. Based on this interpretation, a sponsor should not use program funds to offset increases in its administrative costs relating to maintenance of its plan(s) generally, as such costs are not health benefit costs nor are they health benefit premiums. One exception, however, arises when all three of the following circumstances apply: (1) a sponsor maintains an insured plan, (2) the premium it pays the insurer for health benefits includes administrative costs and (3) the insurer does not quantify for the sponsor the portion of the premium that is allocated to such costs. When all three of these circumstances exist, the sponsor can use program funds to offset increases in its health benefit premium costs or to reduce, or offset increases in, plan participants' health benefit premiums, even though the premium includes administrative costs. Question: Can 'sponsors use reimbursement funds from the Early' Retiree Reinsurance Program to pay for expenses that are created by participation in the program? Answer: No. The regulations state that the reimbursement may only be used to reduce the sponsor's health benefit premiums or health benefit costs (keeping in mind that the sponsor must show maintenance of effort), to reduce the health benefit premium contributions, copayments, deductibles, coinsurance, or other out -of- pocket costs for plan participants or any combination of these costs. Administrative costs created in order to participate in the Early Retiree g 5 Fi 4!; z,V,u, lid. egis ; ; • . ,a • lative Health Care Reform: Early Retiree Reinsurance Program • Frequently Asked Questions Reinsurance Program are not health benefit premiums nor are they health benefit costs, nor do they reduce costs for plan participants. The term "health benefits" is defined in Section 149.2. Question: Some self- funded plans establish an ongoing reserve to fund the .health benefits of their plan participants. Can reimbursement under this program be placed into the ongoing reserve to be used to fund health benefits for plan participants? Answer: Upon audit, the sponsor will need to be able to show that it used the reimbursement funds as is required under the program (and as it said it would use the reimbursement in its application to participate in the program). We are unsure if a sponsor could make such a showing if the program reimbursement is placed into an ongoing pool of funds. If sponsors could make such a showing, for instance by placing the funds into a separate account so that, when audited, it could show how and when the reimbursement was used, this arrangement could be consistent with program. requirements. • REPORTIING DATA INACCURACIES * ion: When and how must sponsors disclose the amount of post -point of sale negotiated price concessions that eceived but not accounted for in their submitted claims data and reimbursement requests (as required by 45 149.110), and report other data inaccuracies (as required by 45 C.F.R..'149.600)? Answer: The U.S. Department of Health and Human Services will announce the manner and timing of making such disclosures on our Web page, www.hhs.gov: We encourage interested parties to regularly monitor the Web page for this and other program information. FRAUD, WASTE AND ABUSE Question: Do the policies and procedures that a sponsor must have in place to detect and reduce fraud, waste and abuse, have to be in place at the time the sponsor. submits its application? Answer: Yes. Question: The regulations require that the sponsor attest that it has fraud, waste and abuse policies and procedures in place, in order for an application to be approved.. Is this requirement satisfied if an entity that is contracted with a sponsor that pays the sponsor's claims, and /or submits Early Retiree Reinsurance Program reimbursement requests to the Secretary of the U.S. Department of Health and Human Services, has fraud, waste and abuse procedures in place? Answer: Provided the contracted entity's fraud, waste and abuse policies and procedures have the ability to effectively - detect and reduce fraud, waste and abuse related to the Early Retiree Reinsurance :Program, and the sponsor can ' ensure that the policies and procedures are produced upon the request of the Secretary of the U.S. Health and Human Services, the contracted entity's fraud, waste and abuse policies and procedures would satisfy this requirement. We would expect that any entity contracting with a sponsor that is vulnerable to fraud, waste and abuse would have policies and procedures in place. Question: Do the policies and procedures that a sponsor must have in place to detect and reduce fraud, waste and abuse have to specifically reference, or be specifically designed: for, the Early Retiree Reinsurance Program? r: No. However, the policies and procedures must have the ability to effectively detect and reduce fraud, waste use related to the Early Retiree Reinsurance Program. Sponsors will be required to attest, in their program applications, that they have such policies and procedures. MAINTENANCE OF EFFORT 6 d !yrn .i v�7 rfih ,Y -'t a "v r 9lfi rr '"rl .: °5ti 4 ; y � l -; "` �^-`� u"1�.'�s }� '�'+ >eF : .fir r, �,u � ._ :�, a ,.. .h,. ...{ A,, . ti r5 „.k...,.v -i t ; t, P t r � i1 : 4 ,OS v..3'a9 .wti ��+w w;5 i {.0 �'" ;n slk�S ! .K r „',*° yr { �.tt i � rt. fi icy B� '. ,ca i." Ac's AW AI.:„ t d y ; 5U 4 ? ' y tk.1� 5 ., k.. , S .igi i;": • 1 ,egislative Brief Health Care Reform: . Early Retiree Reinsurance Program Frequently Asked Questions Question: Does the maintenance of effort expectation apply to plan sponsors that use Early Retiree Reinsurance Program funds exclusively to reduce or offset increases in plan participants' health benefit premium contributions, copayments, deductibles, coinsurance or a combination of these costs? • Answer: No. But the sponsor must be able to demonstrate that it used program funds exclusively to reduce or offset increases in plan participants' health benefit premium contributions, copayments, deductibles, coinsurance or a combination of these costs. Question: Some sponsors, such as certain states, negotiate their health benefit contracts on a biennial basis. Can the sponsor show maintenance of effort based on a biennial cycle? Answer: A sponsor can show maintenance of effort on a biennial basis, provided the contract for health benefits is traditionally negotiated on a biennial basis. We do not expect sponsors to change their health benefit contracting cycle for purposes of showing maintenance of effort. Question: Some states' legislatures have cut their budgets for funding health benefits. Therefore a state (or politica subdivision that is an Early Retiree Reinsurance Program plan sponsor) may not be able to show that it is maintainin level of effort. How should a state or political subdivision address this in its application? Answer: We expect sponsors to maintain their level of effort to ensure that the reimbursement under this program is not used as general revenue. If a state's health benefits budget or the health benefits budget of a political subdivision are cut, it would be problematic for the state or political subdivision to use the reimbursement for its own purposes because it would not be maintaining its level of effort, as required by the regulation. Furthermore, private companies may also be in the same budgetary situation as a state or political subdivision, therefore to carve out an exception for a state or political subdivision would create an unlevel playing field between states, political subdivisions and private entities. We want to encourage states, political subdivisions and private entities to maintain their level of effort to their plan participants' health benefits. In instances when a sponsor, whether a state, political subdivision or a private entity, has finalized a budget before the start of the Early Retiree Reinsurance Program, the baseline for showing level of effort will be the finalized budget provided it was finalized before June 1, 2010. The sponsor must be able to show upon audit that the budget was finalized prior to June 1, 2010. • Question: Except as specified in the immediately preceding Q & A, in order to show maintenance of effort, what year is the baseline year for determining the level of effort that must be maintained? Answer: The baseline year is the plan year cycle that ended immediately preceding the application submission. Question: If a sponsor reimburses plan participants, with the sponsor's own funds, for health benefit premiums, copayments, deductibles, coinsurance or other out -of- pocket costs for health benefits, can those amounts count toward the amount the sponsor pays toward its own share of health benefit or heath benefit premiums, in order to satisfy the maintenance of effort test? Answer: Yes, but the sponsor must be able to demonstrate that those amounts were not comprised of program reimbursement funds. Question: Can a sponsor show it is maintaining its level of effort by showing that it is paying the same percentage of total plan and participant health benefit costs and /or premium costs that it paid during the baseline year, or must it show that it is paying the same specific dollar amount as it did during the baseline year? Answer: We interpret our regulations to require that the sponsor show that it is contributing the same specific dollar amount. The regulations explain that the purpose of the maintenance of effort requirement is to prohibit sponsors from using program funds as general revenue. If a sponsor could show maintenance of effort by showing it paid the same 7 ' y - ¢ ' . 1 n:. .a Z+ M a _F.cN 1N ¢ : S C a" lfia ,Y R i ,� ' n n y y x ks P! y-cIFK4 . � . r K f 1 y i i a .: .. _.. .: anti +...�'.,vSD.�,..ui,.. �+.�'�ak��.��'L'isT.h�.� ..�U?.c'�.. �,s.: d.=ie -. �- w..,a. - �_... �, .. .,�:�' k g . • 4., egisla tiv e Irief Health Care Reform: . Early Retiree Reinsurance Program Frequently Asked Questions . • percentage of total costs, such an approach would incentivize the deterioration of health benefits because sponsors • could pay less to sponsor a plan by sponsoring a less robust plan but receive the same amount of reimbursement under the program, which is contrary to the purpose of the statute and our regulations. Question: With respect to sponsors maintaining their level of effort to a plan, must a sponsor in the Early Retiree Reinsurance Program maintain the same level of historical contribution per plan participant, or can a sponsor maintain its same level of historical contribution in the aggregate, for all plan participants? Answer: The Early Retiree Reinsurance Program regulation requires a sponsor to maintain its level of effort toward the plan as a way of ensuring that the sponsor does not violate the statutory prohibition on using program reimbursement funds as general revenue. We interpret this requirement as applying•with respect to the plan, and not necessarily with respect to each plan participant. A sponsor must demonstrate that it meets the maintenance of effort requirement in the aggregate, for all plan participants. Question: For a multi - employer plan, how is it determined whether the sponsor met the maintenance of effort test? Vi er: A multi - employer plan satisfies the maintenance of effort test if the amount the sponsor spent from the trust Ith benefits and /or health benefit premiums, in the applicable year, is at least as much as what it spent on health s and /or health benefit premiums in the baseline year. Question: A single - employer plan sponsor puts money into a discrete fund or a trust to pay for health benefits and /or health benefit premiums. How is it determined whether the sponsor met the maintenance of effort test? Answer: If an arrangement a sponsor has with the discrete fund or trust is such that the sponsor relinquishes its ability to get those amounts back from the fund or trust, and the fund or trust is prohibited from using the money for purposes other than health benefits (as defined in 45 C.F.R. 149.2) or health benefit premiums, the maintenance of effort.test will be conducted by comparing the amount the sponsor paid into the fund or trust in the baseline year vs. the applicable year. If the arrangement is such that the sponsor does not relinquish its ability to get those amounts back from the fund or trust, and /or the fund or trust is not prohibited from using the money for purposes other than health benefits (as defined in 45 C.F.R. 149.2) or health benefit premiums, the maintenance of effort test will be conducted by comparing the amount the fund or trust paid out in health benefit claims and /or health benefit premiums in the base line year vs. the applicable year. The answer to this question varies from the answer in the previous question because in the scenario to which the previous question applies, the sponsor is the multi - employer plan or its governing board or committee. Therefore, for purposes of the maintenance of effort test, it is irrelevant what the employers, who are not the sponsors, contribute. In contrast, in this question, the employer is the sponsor. So what the employer pays toward maintaining the plan is relevant. To the extent the employer- sponsor's payments into the fund are irrevocable and can be used only for health benefits as defined in 45 C.F.R. 149.2, we view that as similar to the sponsor paying premiums to an insurer. Thus, what the sponsor pays into the fund, rather than what the fund pays in claims, is the relevant amount for purposes of the maintenance of effort test. • • • 8 • a ,� x s'S,. M1' "' rr r k �. -; a+� #..; r.:- ,.: �, m , d :. i .r \ a J, c4 _. ..R;. +?"L.: G at li ,i :,,'IE fr 4,l' . n . ..'S ,,,E"FV , M .`SLY.'' �d r,�'p YS,^ '-a x Y r;,RS, y -t �S m +.: f r, .: ,t ,..,.m:,..,>, �,.,. ., 1 rr .w...,.,S r"..,.d ,. s.. ..p�.x�., ,:,,.,•.� `9 S`�ii�. t....� 3,4`f.F,: ,� u.�. .an,.,�,; €.r �., +en ,S - �'��h So��.f'.,�,- �S.S.s, ��.,F'�;'c.��S,�v �.�''.v. iF :��t�Si.IIb. .'�•$: St'kF. ri a�7.p.i_,.. 1'dyI . ,.5 �"'k�, 1�;� `�" '�, 7� w� +� eft'" �.. ,��, tr Psa �t�4i .Lf Sa..xl: a. nS,rCSSdN ,� r .�.w4 #�::,k. i. ,, x ^i .+n .1,:.. .m a � ...�1,4..tib..� Health Care Reform: Early Retiree Reinsurance Program Frequently Asked Questions sC MISCELLANEOUS Question: If a sponsor has an approved application for the Early Retiree Reinsurance Program, and subsequently decides not to request reimbursement, or stops requesting reimbursement at some point while possessing an approved application, must it notify the U.S. Department of Health and Human Services that it will not, or will no longer, be requesting reimbursement? Answer: No. However, the fact that a sponsor will not be requesting reimbursement not relieve it of any obligations it has under the program, such as maintaining and furnishing records pursuant to 45 C.F.R. 149.350, or reporting data inaccuracies pursuant to 45 C.F.R 149.600. Because funding for the program is limited, we encourage sponsors to tell us that they will not be requesting reimbursement so that we will not rely upon the sponsor's reimbursement projections that it submitted with its application. Additional Resources The following resources are available for employers that wish to apply for reimbursement through the ERRP: Official ERRP Application Form: www.hhs.gov/ ociio %Documents /aDplication.pdf Official ERRP Application Instructions: www.hhs.gov /ociio /Documents /application instructions.pdf Application Submission Dos and Don'ts: www.hhs.gov /ociio /Documents /errp dos donts.pdf Fact Sheet: www.healthreform.gov /newsroom /early retiree reinsurance program.html • Source: Department of Health and Human Services' Office of Consumer Information and Insurance Oversight This En inc Legislative Brief IS not Intended to be exnaustive nor shoulc any discussion or opinions be construed es legal advice. Readers should contact Iecai counsel for legal advice. Design G= 2010 Zywave, inc. images iC' 2000 - ett , images, Al! i. i s �. � � EvJ. uci. � ' !Ti c!}, c� Inc. 11.., rights reserver:. EAS 7/10 9 • ..y a r i - VI i' f i F2KIZ �,� �' * k 41 �1 2 n 1 i; f2�9 gi l�. „y . R 4 _ 3 r � 5 ,; � .: R s j ' � -< a , :.� ,.� .,;.. .b... �£, ,�,r.i�,.'�`. 1 �'_+�.,, S+ Ra, )2kh I »�kk �'r3�4"�r � ' ``��� + � �a.a ... ..�_... '(, . _`h3� a.� l� .� . eY-s.. ..H. -�0 i* 1' .. Eigil EMS �t Z ti „, ..,.. ,.,..._, • .�� .�� 4 Yr JV ,....,,,,,_ L egis lat i v e rie ' . .• . ..:,.• . . . _,.:..) . - ,:... Health Care Reform: : Potential Penalties For Employers to ers H EALTH CA Under the "Pa or Play” Rules . �e �{(!'y^Y�, ; , R �J, L . • : ..., i , tr;, ? ,4 + �, i, ..;;, W. • rl ''w ,, , ,� aAS r R :. - .. + . 'F k:,U $ i,fi�j:;: Ml's � d:_47! „ a EXECUTIVE SUMMARY The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act • • (together, PPACA), will force .many changes upon employers and health plans. The biggest such change for employers with more than 50 employees may be the requirement to offer health care coverage to employees or face a monthly penalty. These employers will either pay the penalty to the federal government, or play by offering an "affordable" health plan that provides coverage for "essential services" determined to be above a "minimum value." While everything in quotes has yet to be dearly defined, it's important for all employers to understand these pay or play rules now. PPACA does not explicitly mandate an employer to offer employees health insurance. However, beginning in 2014, ' i n employers with at least 50 full -time equivalent employees will face penalties if one or more of their full -time c ees obtains a premium credit through an exchange — a federally controlled and state administered insurance place that also doesn't start until 2014. An individual may be eligible for a premium credit either because the employer does not offer coverage or the employer offers coverage that is either not "affordable" or does not provide "minimum value." This EmSpring Legislative Brief summarizes the potential penalties applicable to employers under the PPACA. For a quick overview, please see the Flowchart on the last page. From our perspective, it appears many employers will gladly trade payment of the penalties in return for eliminating the administrative hassle and cost burden of their current health insurance plans. SUMMARY OF THE "PAY OR PLAY" RULES Application Only to "Large Employers" Only a large employer may be subject to these penalties. A "large employer" is one with more than 50 full-time equivalent employees during the preceding calendar year. So, if you currently have 48 or 49 employees, think twice before hiring another. In order to determine whether an employer is large enough to be penalized, both full -time and part-time employees are included in the calculation. Full -time employees are those working 30 or more hours per week. The number of full -time employees excludes full -time seasonal employees who work for less than 120 days during the year. The hours worked by part-time employees (i.e., those working less than 30 hours per week) are included in the calculation of a large employer, on a monthly basis, by taking their total number of monthly hours worked divided by 120. Example. A company has 35 full -time employees (30+ hours). In addition, the company has 20 part-time • employees who all work 24 hours per week (96 hours per month). These part - time employees' hours would be treated as equivalent to 16 full -time employees, based on the following calculation: • 20 employees X 96 hours /120 = 1920/120 = 16 his company would be considered a large employer, based on a total full -time equivalent count of 51. That is, 35 full -time employees plus 16 full -time equivalents based on part-time hours. i, + +.l.., fu �'.4 .''G,zl� 3 rf S -I: C 43;_x, t }i. �i r ,,.. t, 4x15 "c,, h: ':w n�d,d V. •? 1, ., 1 ... �.r i t -�;r,c ,- � ,.. .. :.�: : 't?+; 2...: t.2.k 1 :. Y #° , ..u. r. ..iq �,,j . ;' + te`',A ie4P m el d fC 5 r. -4 d ": i. a ' �x� '':�11 it , r jf •r r . i . + xs�� +..r 'r ii,+i .y r. ?'t *.i. . ro. ., .s.,, 4 s ... J,.F t .s ke ,, 4 f -��,'" . .. c�'3,,., . j r7 „ .,,,..�. 4±1.s,4 . >.�"�:,,�.F; .: .,k,�?i. �;t,�t�'. ..::,;:kll7 cl i;�, �r,�. ti'.4.�`. � °r I ,egislative. Brief • Health Care Reform: Potential Penalties For Employers Under the " Pav or Play" Rules • { Table 1. Determination and Potential Application of Employer Penalty for Categories of Employees Once an employer is How is this category of determined to be a large Employee category employee used to determine employer, could the employer "large employer "? be subject to a penalty if this type of employee received a premium credit? Full-time Counted as one employee, based Yes on a 30 -hour or more work week Pro -rated (calculated by taking, Part-time the hours worked by part -time No employees in a month divided by 120) Seasonal Not counted, for those working Yes, for the month in which the less than 120 days in a year seasonal worker is full -time Generally, counted as working for • Yes, for those counted as Temporary Agency the temporary agency (except for working for the temporary those workers who are independent contractors) agency Potential Tax Penalties in 2014 on Large Employers Regardless of whether or not a large employer offers coverage, it will be potentially liable for a penalty beginning in 2014 only if at least one of its full -time employees obtains coverage through an exchange and receives a premium credit. A full -time employee includes only those individuals working 30 hours per week or more. As shown in Table 1, part-time workers are not included in penalty calculations, even though they are included in the determination of whether an employer is large. An employer will not pay a penalty for any part-time worker, even if that part-time worker receives a premium credit. This will take a good majority of smaller employers off the hook for the. penalties. Conversely, seasonal workers are not included in the calculation of large employer. However, if an employer is determined to be large (over 50), without counting its seasonal workers, it could still potentially face a penalty for each month that a full -time seasonal worker received a premium credit for exchange coverage. 2 x , ,. 1 .,.1 ice.. 'f •.. +T yi ✓5.. .. 41.. . : „e...'h &, ...x ikegislAtive Brief • Health Care Reform: Potential Penalties For Employers Under the "Pay or Play" Rules Beginning in 2014, individuals who are not offered employer- sponsored coverage and who are not eligible for Medicaid or other programs may be eligible for premium credits for coverage through an exchange. These individuals will generally have income between 138 percent and 400 percent of the federal poverty level (FPL). It's a safe bet that the vast majority of seasonal workers (legal ones, anyway) and many part time workers will qualify for a premium credit. Individuals who are offered employer- sponsored coverage can only obtain premium credits for exchange coverage if, in addition to the other criteria above, they also are not enrolled in their employer's coverage, and their employer's coverage meets either of the following criteria: the individual's required contribution toward the plan premium for self - only coverage exceeds 9.5 percent of their household income OR the plan pays for less than 60 percent, on average, of covered health care expenses. Basically, this means many of those full time employees who have already waived off their employer plan will qualify for a premium credit. Other PPACA provisions will also affect whether full -time employees obtain premium credits for exchange coverage. For example, exchanges are required to have "screen and enroll" procedures in place for all individuals who apply for premium credits. This means that individuals who apply for premium credits must be screened for Medicaid and the State Children's Health Insurance Program (CHIP) and, if found eligible, are to be enrolled in those programs. Exchange O M credits will not be an option. This could have a major affect on whether any of an employer's full -time ees obtain premium credits in an exchange, and if so, how many. Every employer will face a different scenario. Penalty for Large Employers Not Offering. Health Insurance Coverage Beginning in 2014, a large employer will be subject to a penalty if any of its full -time employees receives a premium credit toward an exchange plan. In 2014; the monthly penalty assessed on employers that do not offer coverage will be equal to the number of full -time employees (minus 30) multiplied by 1/12 of $2,000 for any applicable month. After 2014, the penalty amount would be indexed by the premium adjustment percentage for the calendar year. Penalty for Large Employers Offering Health Insurance Coverage Employers that do offer coverage may still be subject to penalties if at least one full -time employee obtains a premium credit in an exchange plan because the employer's coverage is unaffordable or insufficient. To trigger a penalty, in addition to meeting the other eligibility for credits, the employee's required contribution for self -only coverage must exceed 9.5 percent of the employee's household income, or the employer's plan must pay for less than 60 percent of covered. expenses. According to the Congressional Budget Office (CBO), about 1 million individuals per year will enroll in an exchange plan because their employer's plan was unaffordable. That's bunk. The number of people running for the exchange coverage will be much, much larger. In 2014, the monthly penalty assessed on an employer for each full -time employee who receives a premium credit will be 1/12 of $3,000 for any applicable month. However, the total penalty for an employer would be limited to the total number of the company's full -time employees (minus 30), multiplied by 1/12 of $2,000 for any applicable month. After 2014, the penalty amounts would be indexed by the premium adjustment percentage for the calendar year. Let's see: 1/12 of $2,000 is $167, but let's gross that up to $200 per month since the penalty is a non- deductible business expense. Compare that $200 to your current health plan's employee only premium. Which would you rather pay? A tic Enrollment Requirement • Companies with more than 200: full -time employees that offer coverage must automatically enroll new full -time employees in a plan (and continue enrollment of current employees). Automatic enrollment programs will be required to 3 m ' .a! ! n .iW;a:w�9 4 ; ' "n k in `.�P u5 r,,.tt Yl'x g "� y ():.. �i'tt 4M }y''A yt� .t4 M "v'4 r�.„ ? !:a .�1 N� . . `t .. ,.. <.. 1 ,..,. ,rka?a�''.,,;s 3 : ��,s.�,,`>g Y'��.. ._��`�,�f� ...r,'. ;. "r` �h�.. �x�>M°�� +"n'��;"e�..a, t.z? ;i}�n�"N r?, ;�,�'ti��,'4 N:Ys r �,a . MV,. i �5e~'�'i -rya At 7; �.��„:S t � , a 1 egistative ; 1 .ef • Health Care Reform: . Potential Penalties For Employers . Under the "Pay or Play" Rules include adequate notice and the opportunity for employees to opt out. Most of the, provisions discussed in this Legislative Brief are not effective until 2014, but this particular provision could be in effect as soon as regulations are issued. Examples Table 2. shows four types of scenarios reflecting health insurance offerings of four large employers (columns A through D) and whether any employer penalty applies. In these large- employer scenarios, the employer size is assumed to remain constant, at 50 full -time employees, throughout the year. The table provides examples of the penalty consequences based on whether the employer offers coverage and whether an employee receives a premium credit. Scenario A The large employer does not offer coverage, but no full -time employees receive credits for exchange coverage. No penalty would be assessed. Scenario B The large employer does not offer coverage, - 9 erage, and one or more full-time employees receive credits for exchange coverage. The annual penalty calculation is the number of full -time employees minus 30, times $2,000. In this example (50 full - time employees), the penalty would not vary if only one employee or all 50 employees received the credit. The employer's annual penalty in 2014 would be (50 -30) X $2,000, or $40,000. Scenario C The large employer offers coverage and no full -time employees receive credits for exchange coverage. No penalty would be assessed, but they will have a whopping health insurance premium invoice every month! Scenario D The large employer offers coverage, but one or more full -time employees receive credits for exchange coverage. The number of full -time employees receiving the credit is used in the penalty calculation for an employer than offers coverage. The annual penalty is the lesser of: • The number of full -time employees, minus 30, multiplied by $2,000 - or $40,000 for . the employer with 50 full- time employees; or • The number of full -time employees who receive credits for exchange coverage, multiplied by $3,000. Although the penalties are assessed on a monthly basis (with the dollar amounts above divided by 12), this example uses annual amounts, assuming the number of affected employees is the same throughout the year. If the employer with 50 full -time employees 10 full -time employees who received premium credits, then the potential annual penalty on the employer for those individuals would be $30,000. Because this is less than the overall limitation for this employer of $40,000, the employer penalty in this example would be $30,000. However, if the employer with 50 full -time employees had 30 full -time employees who received remium credits, the P , the potential annual penalty on the employer for those individuals would be $90,000. Because $90,000 exceeds this employer's overall limitation of $40,000, the employer penalty in this example would be limited to $40,000. 4 a - tiv e B rie f Health Care Reform: • • Potential Penalties For .Employers Under the "Pay or Play" Rules Table 2. Potential Annual Penalties Beginning in 2014 for Large Employers Applies to For - profit and Nonprofit Organizations Large employer: 50 or more full -time equivalent employees Not a large Does not offer coverage Offers coverage employer: less than 50 full -time A B C D equivalent No full -time 1 or more full -time No full -time 1 or more full -time employees employees get employees get employees get employees get credits for credits for credits for credits for exchange exchange exchange exchange coverage _ coverage coverage. - coverage Lesser of: • Number of full -time employees minus 30, multiplied by Number of full-time $2,000. employees minus 30 multiplied by $2,000 Number of full -time No penalty No penalty No penalty employees who get (Penalty is $0 if credits for exchange employer has 30 or coverage, multiplied . fewer full -time by $3,000. . employees) (Penalty is $0 if employer has 30 or fewer full -time ' employees) Free Choice Vouchers (the vouchers aren't free, just the choice to have one) An employer who offers minimum essential coverage and pays any portion of the premium must provide free choice vouchers to each qualified employee. A qualified employee is defined as an employee: • whose required contribution to the employer plan for self-only coverage is greater than 8 percent and less than 9.8 percent of the employee's household income for the taxable year; • whose household income is not greater than 400 percent of the FPL for the relevant family size; and • who does not participate in the plan offered by the employer. Beginning after 2014, the.8 percent and 9.8 percent would be indexed by the rate of premium growth over the rate of into e growth. T cher will be equal to the monthly amount that the employer would have contributed toward the plan for which the employer pays the largest portion' of plan costs, for either self or, if elected by the employee, family coverage. 5 • 4 � . '� tg �i 'a' /.k 6 "�, �s, `�k.t3 S+ f J C ';i r i;4d,1 '. Y.. at. yc .. .. >_�.. ..... „i id '4 i . -rN ;2�+. N .'y�� a -. � e J.:, t,�..{�n+r.C; 4 }x.�b,��de�d,,s3�.. �., �.�.���n: +�' 7� YZa�.1 �r L�ira�iMdrT +�S.ap�.o�sk�l��S�.�G �d:;Y�t�S'��Ae.�'�'�ie'rYt.�r.., fi:.lYa �.�:'.�.�„,�tr -'- t'.r.� ".:..;Ynv�}ut.. �z- ,.��e <� .;�„k "n r",�Irn"kE y���".7r bkt,_. �1�C lative Health Care Reform: Potential Penalties For Employers Under the "Pay or Play" Rules . • An exchange will credit the amount of a voucher to the monthly premium of an exchange plan in which the qualified employee is enrolled, and the employer will pay the exchange the credited amount. If the amount of the voucher exceeds the premium, the excess will be paid to the employee. An individual receiving a free choice voucher will not be eligible for the exchange premium credits or cost - sharing subsidies. Why would any employer do this? Because no penalty will be imposed on an employer with respect to any employee who is provided with a voucher. Reporting and Other Requirements - Regulations will be issued requiring employers to provide employees with a written notice regarding coverage at the time of hiring (or no later than March 1, 2013 for current employees). The notice must contain information regarding: • the existent of an exchange, including services and contact information; • the employee's potential eligibility for premium credits and cost - sharing subsidies if the employer plan's share of covered health expenses is less than 60 percent; and • the employee's potential loss of any employer contribution if the employee purchases a plan through the exchange and is not eligible for a free choice voucher. Employers will be subject to this requirement beginning March 1, 2013. No worries: we'll have shiny new model notices for you well before then. Beginning in 2014, large employers and offering employers (those who offer minimum essential coverage through an employer sponsored plan and pay for a portion of the costs) will have certain reporting requirements with respect to their full -time employees. They will have to provide a return including: • the employer's name, address and employer identification number; • a certification as to whether the employer offers its full -time employees (and dependents) the opportunity to enroll in minimum essential coverage under an eligible employer- sponsored plan; • the length of any waiting period; • months coverage was available; • monthly premiums for the lowest -cost option; • the employer plan's share of covered health expenses; • the number of full -time employees; and • the name, address and tax identification number of each full -time employee. Additionally, an offering employer will have to provide information about the plan for which the employer pays the largest portion of the costs (and the amount for each enrollment category). The employer must also provide each full- time employee with a written statement showing contact information for the person required to make the above return, and the specific information included in the return for that individual. An employer may enter into an agreement with a health insurance issuer to provide necessary returns and statements. Sounds kind of like a Form 5500 on steroids to me. Now that you have a better idea of the pay or play rules, which sounds, better to you? Are you more or less likely to continue your employer- sponsored health plan beyond January 1, 2014? If you are less likely, then your employees wi up with coverage through the exchanges. Do you think the drafters of this legislation might have planned it this way? 6 • . . • . r Health Care.Reform: .Potential. Penalties For Employers • • Undei:.;the "Pay or Play" Rules Determining If an Employer Will Pay a, Penalty Are eEi a EarF e eft, y t ? • . Will the Employer ri i�,�,r 6I fifll i,Iiite�,llli ,ilr llr Ii X14. including rrrlli 1.irne,[ 0 ltouur�. per ctrl r h' tiro Pay r 1)efa1t I ''rrl l �II'l l workers 111I:oftrt6d - ( Iudirf� Slit �?licil fC'rR Cs,,U3. i tOy 120 day', per +ind beginning in 2014 1 ,10 • • • • 3 of yr, ttr, e O Co- e s. an exchaniile pi an and fre j •' • prernittif i cl etr ? • • . . De you have mere penalty • • . 30 fail -t c e ec e io e ?. • • Do ,y pro vide leafl f . :s atitce • • • • Pay Monthly Penalty, lesser of . Pay Monithly. Penalty • • 1/12 x S2,000 1.112 3,000 . 1/12 X1;2,000 r f . .ltn1-11)et o r • ,,:'-.1timberof full t:ilrrrrtbe 1_if Iull -inm. . Employee, - l is ernployee, .^ ho r� t Lt'E employees - 3 r, i11 Ior ) Cilalitge 10Vfe t , • Source: Congressional Research Service This EmSpring Legislative Brief is not intended to be exhaustive nor should any discussion or opinibris be construed as legal advice. Readers should contact legal counsel for legal advice. 2000 Getty images, Inc'. All rights reserved. . • 201.0 • 7 :srt , �k �g'k h -... �t g Fx ` I ., vgl ° ,a :�:;" 519 K.;. '„ x..,L.. :r„:, -� f,. mow... . +i: - s�i:. v . ,. sae,F+.,. i.tiYd 4�1"`. rk. �. la k. a.,... .�.. t1 .1.4,t+. -_ .�.�yfs.s� .R .t ,t .�. n,a �F r 3 � r.J uSF. „)hr N� y5 -. r �..� n. � s. �,(. , k,. u. ,, ,. _. .. ,5 11 �,. :4..._.. e:�,_..c,,i.0 �L., �'':4.a5 �}G -.... ;.s�av +l t,.. _ :?.3 ., a,�.c� }�a 3 e4,;c�A� }d o-1,":t "S�_a'Y�r. x�.x.�.., ,..�.'Ss���- ��,,.L,'.x. }- `��f.;�.':��T �',31'���7: :?,..,R�4 !£ 4>.r�,(;,:�a �v�;{ �.; �' � 'vF�'`rtiGl�rlgbMiQn. EN) . . EMSPRING , • • 1 ; . • • • Health Care Reform: Interim Final HEALTHI ARE Rules on a Patients Bill of Rights REFO " . „ EXECUTIVE SUMMARY The Departments of Treasury, Labor (DOL) and Health and Human Services (NHS) have issued interim final rules.related to the provisions of the Patient Protection and Affordable Care Act .(PPACA) regarding pre- existing condition exclusions, lifetime and annual limits, rescissions and other patient protections. Most of these provisions are effective for plate years beginning on or after. September 23, 2010. Plan sponsors should become familiar with these requirements in order to determine whether the new rules apply to their plans and whether their plans must be amended accordingly: This EmSpring Legislative Brief describes the provisions of PPACA regarding these rules, as well as the clarifications made by the interim final rule. Remember, these aren't interim and they are not final; they're Interim Final! EXPLANATION OF THE INTERIM FINAL RULE • Pre - existing Condition Exclusions , PPACA prohibits any pre - existing condition exclusions from being imposed by group health plans or group health insurance coverage, including grandfathered group health plans. PPACA also extends this prohibition to individual health insurance coverage, although it does not apply to grandfathered individual policies. I believe grandfathered plans will die off quickly, so most everyone will have access to coverage without pre- existing exclusions soon. This prohibition generally is effective with respect to plan years beginning on or after January 1, •2014: However, for enrollees who are under 19 years of age, this prohibition takes effect for plan years beginning on or after September 23, 2010. A pre- existing condition exclusion is a limitation or exclusion of benefits related to a condition, based on the fact that the condition was present before the date of enrollment for the coverage, whether or not any medical advice, diagnosis, care or treatment was recommended or received before that date. Based on this definition, PPACA prohibits exclusions of coverage of specific benefits and a complete exclusion from a plan based on a pre - existing condition. Until these new rules take effect, the rules regarding pre - existing condition exclusion rules in the Health Insurance Portability and Accountability Act of 1996 (HIPAA) will continue to apply. The rules do not change the HIPAA rule that an exclusion of benefits for a certain condition under a plan is not a pre- existing condition exclusion if the exclusion is not based on the date the condition arose. Lifetime and Annual Limits PPACA generally prohibits group health plans, and group and individual health insurance issuers, from imposing lifetime or annual limits on the dollar value of health benefits, effective for plan years beginning on or after September 23, 20 Although annual limits are generally prohibited, "restricted annual limits" are permitted for essential health ,� benefits for plan years beginning before January 1, 2014. Restricted Annual Limits The interim final rules establish a three -year phased approach for restricted annual limits. Annual limits may not be less than the following amounts for plan years beginning before January 1, 2014: w.0410 u1g rvr 3 t A "'; 19-:_.z s5,47Aifq,',V4_ , WIa'tR. :.: Srti 0- S :, _;.e #I ii , , 6 . ., ,. ., 6, , ,o, , . ' ecrislative Bi lef • Health Care Reform: Interim Final . Rules on a Patients' Bill of Rights . ., , . s � >r� , a , c t ,P t ,.. t , , ,S � . , :a $ , `'oF.k. ,,, x c ° ' :: • $750,000 for plan years beginning on or after September 23, 2010, but before September 23, 2011; , • $1.25 million for plan years beginning on or after September 23, 2011, but before September 23, 2012; and • $2 million for plan years beginning on or after September 23, 2012, but before January 1, 2014. • These are minimums for plan years; plans may use higher annual limits or impose no limits. The limits apply on an individual -by- individual basis, so that any annual limit on benefits applied to families cannot cause an individual to be denied the minimum annual benefit for the plan year. The restricted annual limits are designed to ensure that individuals would have access to needed services with a minimal impact on premiums. However, they could affect limited benefit plans or "mini -med" plans. Therefore, the interim final rule provides for the establishment of a program for waiving the annual limit restrictions if they would cause a significant decrease in access to benefits or increase in premiums. HHS is expected to issue guidance regarding . these waivers in the near future. Covered Plans * prohibition on lifetime and annual limits applies to both new and grandfathered group health plans. However, it not apply to grandfathered individual policies. The restrictions on annual limits do not apply to account -based plans like health flexible spending arrangements (health FSAs), medical savings accounts (MSAs), health savings accounts (HSAs) and health reimbursement arrangements (HRAs). Essential. Health Benefits PPACA specifically provides that plans may impose annual or lifetime per - individual limits on specific covered benefits that are not "essential health benefits." Regulations still need to be issued on the definition of essential health benefits, but it will include at least the following general categories of items and services: • Ambulatory patient services; • Emergency services; • Hospitalization; • Maternity and newborn care; • Mental health and substance use disorder services, including behavioral health treatment; • Prescription drugs; • Rehabilitative and habilitative services and devices; • Laboratory services; • Preventive and wellness services, including chronic disease management; and. . . • Pediatric services, including oral and vision care. ' Until those regulations are issued, plans can use a good faith effort to comply with a. reasonable interpretation of essential health benefits and must apply it consistently. The interim final rules clarify that a plan can still exclude all benefits for a condition. Such an exclusion will not be considered an annual or lifetime limit as long as no benefits are provided for the condition. Enrollment Opportunities r the interim final rules, 'individuals who reached a lifetime limit prior to the date the regulations are effective and therwise eligible for plan coverage must be given a notice that the lifetime limit no longer applies. They must also be permitted to re- enroll in the plan if they are no longer enrolled. The notices and enrollment opportunity must be provided no later than the first day of the first plan year beginning on or after September 23, 2010. Anyone who is 2 x 4," tib �'1 �, 1 m { 4 ix;:,j'�' 'e ^ a t�f ,Wf n : 1't-a. �. ., r h} 4t n y +,,,� �'F. ,�` n `'VO-''. ''a s r >_. : " l n<4..,e .. ., ..: a: ..,r �.�.::.r L_r k: l.rri..v�n �4.e.. G � Zvi - �fl k;; ��5§ �v °3{ ' x � 3 I� s � r S::F: . +�. .�:.,.: ,.:i.lr z s.v .tu:r!v ,ttd.,f�,y,r N+c� €�:����.'s t�'v,i�,, -'" �e�,r, r,: �t^a ,.:.�'.. � ur. ..;.. .w.<.,s? ,v. 4 3y..,.:� .t ..,, <�'�';: �' ,'�,,,5.�:.,• . ,1.� IF eccislative o a • Health Care Reform: Interim Final . Rules on a Patients' Bill of Rights eligible for the enrollment opportunity must be treated as a special enrollee who is eligible to enroll in all of the benefit packages available to similarly situated individuals upon initial enrollment. Rescissions • PPACA and the interim final rules place limits on the ability of a group health plan, or group and individual health insurance issuer, to rescind health coverage. Effective for plan years beginning on or after September 23, 2010, coverage may be rescinded only in the case of fraud or intentional misrepresentation of a material fact. Fraud may include an omission of relevant facts. This standard applies to all rescissions, whether in the group or individual market, and whether the coverage is insured or self- funded. If a state law is more protective of individuals than the federal law, . the state law will continue to apply. For purposes of the interim final rule, a rescission is a cancellation or discontinuation of coverage that has a retroactive effect. For example, a cancellation that treats a policy as void from the time of enrollment is a rescission. Prospective cancellations and retroactive cancellations due to a failure to pay required premiums would not be considered rescissions. The prohibition on rescissions applies whether the rescission applies to an individual, an individual within a family, o an entire group of individuals. The rules on rescissions also apply to representations made by the individual or a per seeking coverage on behalf of the individual, such as the plan sponsor. In addition to setting federal requirements for rescissions, PPACA adds a new advance notice requirement when coverage is rescinded where still permissible. Group health plans and group health insurance issuers must provide at least 30 calendar days advance noticed to an individual before coverage may be rescinded. This 30 -day period will provide individuals and plan sponsors with an opportunity to contest the rescission or look for alternative coverage. The rules regarding rescission and advance notice apply to all grandfathered health plans. Patient Protections PPACA imposes three new requirements on group health plans and group or individual health insurance coverage that are referred to as "patient protections." These patient protections relate to the choice of a healthcare professional and benefits for emergency services and are effective for plan years beginning on or after September 23, 2010. They do not apply to grandfathered plans. The rules regarding choice of health care professional apply only to plans that have a network of providers. Choice of Primary Care Provider If a group health plan, or group or individual health insurer, requires a participant to designate a primary care provider, the participant must be able to choose any participating primary care provider who is able to: accept the participant as a patient. This rule includes a pediatrician as the primary care provider for a child. The plan must provide a notice informing each participant of the plan's terms regarding primary care provider designation. The notice should be included in the plan's summary plan description. The interim final rules include model language for this notice. OB /GYN Care Plans that provide coverage for obstetrical and /or gynecological care (ob /gyn care) and require the patient to desig an in- network primary care provider may not require preauthorization or referral for a female participant seeking su care.. The plan must inform each participant of these rules and should include the notice in its summary plan description. Model language is included in the interim final rules. A plan may still require the ob /gyn provider to follow any policies or procedures regarding referrals, prior authorization for treatments and the provision of services. 3 �1-'y' x : �y , . h,+ b� . ...u; � � n :: =i . 4 , .�Sx�„'_f,J i�. ��,. n�'.:s � @.. .2v?u;+"a �� k � ` i'� i c�',� nt.0 t. a'�'�. h'1'��+ F,F�S, TM- .n� r"n �,.j b ^. sk: M1, „'��:: „ x.vy •. �' _, t�.L.A�`ez�,� �., �tm�,..a� _�7 .r,,. , t�: , a , k, .£, �., r. �.� t IiG�- , ;..i ?3 �, :, .: F`. =: ��, i .; Health Care Refo m.: Interim Final Rules on a Patients' Bill of Rights Emergency Services PPACA places additional requirements on plans and health insurance issuers that provide hospital emergency room . benefits. Plans and issuers must provide those benefits without requiring prior authorization and without regard to whether the provider is an in- network provider. Also, the plan or issuer may not impose requirements or limitations on out -of- network emergency services that are more restrictive than those applicable.to in- network emergency- services. Cost sharing requirements, such as copayments or coinsurance rates, imposed for out -of- network emergency services cannot exceed. the cost - sharing requirements for in- network emergency services. Despite this rule, out., -of- network providers may balance bill patients, as long as the plan or issuer has paid a reasonable amount for the services. The interim final rules provide guidance on determining whether the amount paid is reasonable. Also, other cost- sharing requirements, such as deductibles or out -of- pocket maximums, may be imposed on out -of- network emergency services if the cost - sharing requirement generally applies to out -of- network benefits. ' This EmSpring Legislative Brief is not intende d to be exhaustive nor should cane discus_ for o;' opinions be construed s leg_ al advice. Readers should contact legal counsel for legal advice. Images ` 2000 Getty Images, Inc. Ali rights reserved. 6/10 4 . -�:'� M1� a~�K.�' �- e��. "' .w �W ,,, �.. �.; +�.Re i ? ".; *�^ ?:�' -^jh^ 'ke ^r.;•< '3 ;v z �kr � ^:a- z e.a.a� � •.� r � 3..,5 %; •a" '4 64, Rt,+:tOgie .:x,�em�.k :ei : 1 ?!k:.'S . , iAt = ,1�, tin =( F yt + ..,;ts ASI ,,' „ t ,� 1 m A r h ,rA+^, AT a d 5 y ,.;: ors .., .,����,.i:: '�..v,w> kr ew 3 {fit ... _. _.. ,. .J.4 3 .., C.:'Cl