Industry Insights

Key Aspect of SHOP Exchanges Delayed

Fri, 14 Jun 2013 15:50:00 -0500

On May 31, the U.S. Department of Health and Human Services (HHS) issued a final rule delaying the implementation of a significant portion of the Federal Small Business Health Options Program (SHOP) Exchanges. The SHOP Exchanges, established in the Patient Protection and Affordable Care Act (PPACA), are intended to allow small businesses employees access to several health insurance plans. BenefitMall provided information on the SHOP delay in April in a legislative alert.

The initial concept was to allow employees in a small business to select from a number of plans on the Exchange. The new rule concedes that there is not enough time to implement this employee choice provision. Instead, employers will choose one plan that they will offer to their employees for 2014.

It is important to note that this one year delay will impact the 33 states that are using federally-facilitated or partnership SHOP Exchanges. The 17 states that will have state-based SHOP Exchanges have the option to choose between limiting a small group employer to one benefit plan choice for its employees or allowing the employees of a small group to choose among several Qualified Health Plans in 2014. For list of which states have state SHOP Exchanges, please visit the federal government’s health care reform website.

The new rule goes into effect July 1, 2013.

The views expressed in this post do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.

Finding Creative Solutions to 2014 PPACA Mandates: Verdict Still Out on Legality of Some Options

Wed, 12 Jun 2013 10:34:00 -0500

The federal government, through adoption of the Patient Protection and Affordable Care Act (PPACA), will require all employers employing 50 or more full-time equivalent employees to offer health benefits or pay a significant tax/penalty early next year. The penalty under this requirement also referred to as the “Employer Shared Responsibility” or “Play or Pay” mandate, can be significant for large employers that fail to comply.

Employer reaction to this mandate has been mixed. Some employers and union groups like the standardization and accessibility goals of PPACA. Other employers, especially large and self-funded groups, like the fact that their status allows them the flexibility to offer plans more closely tailored to the needs of their employees.

However, many employers are not pleased with the potential increase in the costs of doing business to comply with PPACA. The National Federation of Independent Business for instance, says “Small business needs Congress to replace the Patient Protection and Affordable Care Act (PPACA) with real healthcare reform that helps address the number-one problem small businesses face – the high cost of health insurance.”

Further, some employees, especially those with lower incomes, are not happy about spending 9.5 percent of their income on insurance or in the alternative paying the individual penalty that will increase over time. Similarly, some individuals who participate

Limited Benefit Plans

Some benefit consultants and employers think that they have found a way to provide a minimal level of health benefits to their employees and avoid the largest tax/penalty by offering limited benefit, fixed indemnity plans. The Wall Street Journal recently reported:

“Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage. Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn't cover surgery, X-rays or prenatal care at all. Others will be paired with limited packages to cover additional services, for instance, $100 a day for a hospital visit.”

Some experts believe the limited benefit plans appear, at least for now, to offer an affordable option with at least a base level of coverage. Large group and self-funded employers are only required to provide health benefits limited to preventive services, without a lifetime or annual dollar-value limit, in order to avoid the across-the-workforce tax/penalty. With a few other exceptions (like state mandated benefits), many of these employer groups can limit some of the core Essential Health Benefit requirements that are a cornerstone of PPACA. Small employers are not afforded the same degree of flexibility under PPACA.

The Wall Street Journal article states, “Federal officials say this type of plan, in concept, would appear to qualify as acceptable minimum coverage under the law, and let most employers avoid an across-the-workforce $2,000-per-worker penalty for firms that offer nothing. Employers could still face other penalties they anticipate would be far less costly.”

The WSJ article also quotes former White House health advisor, Robert Kocker, who says, “We wouldn't have anticipated that there'd be demand for these types of band-aid plans in 2014…Our expectation was that employers would offer high quality insurance. Part of the problem: lawmakers left vague the definition of employer-sponsored coverage, opening the door to unexpected interpretations, say people involved in drafting the law.”

Early Renewals

In addition to avoiding part of the costs by offering limited benefit plans, some insurers are advising their customers to change the renewal date to late 2013, thereby avoiding the more expensive January 1, 2014 changes until later in 2014. If a policy is renewed before January 1, 2014, this allows individuals to effectively postpone the impact of the more expensive elements of PPACA for most of 2014. Several large health insurance companies are notifying individual policyholders of this option. The Los Angeles Times report, that this strategy just applies to non-group coverage:

This issue could affect some of the 15 million people nationwide who purchase their own coverage and millions more of the uninsured who are expected to join government exchanges next year. It would not pertain to the 150 million Americans who get health benefits through their employers.

Experts disagree whether this is permissible under federal law. In addition, as reported in Kaiser Health News, some states are trying to adopt legislation to stop this practice. Other states are supporting this delay tactic.

Self-funding Options

Further, some third-party administrators and others are offering small employers a chance to switch to self-insurance, a form of coverage traditionally used by bigger employers that will face fewer changes under the law. However, many federal and state regulators historically have taken a dim view of small groups attempting to self-insure their health benefits plans. The actuarial concept of the law of large numbers simply does not apply to a small group and the ability to reasonably predict future claims becomes highly problematic.

While self-funded plans have traditionally been outside of the regulatory authority of state insurance regulators through ERISA’s preemption provision, some states are taking action to limit this option. The State of New Jersey recently enforced its Unfair Trade Practices Act on a company that was alleged to be “cherry picking” (only accepting small groups with excellent age/sex characteristics with low claims histories).

Federal regulators are taking an aggressive position on small group employers that are attempting to self-fund. The U.S. Departments of the Treasury, Health and Human Services, and Labor jointly asked the National Association of Insurance Commissioners (NAIC) to amend the Stop Loss Model Act to increase the individual stop loss attachment point from $20,000 per year to $60,000. The federal regulators are concerned that only the most healthy small groups will self-fund, causing the exchanges to be adversely selected. The NAIC, having recently rejected an attempt to amend the minimum attachment points for stop loss insurance, has commissioned an analysis of the potential impact of how self-funding will impact the small group market. If the report predicts a significant, adverse impact, the NAIC will likely re-open this issue for consideration.

BenefitMall will keep you posted on future developments in this area. Any employer considering a limited option plan as part of their insurance offerings should seek local legal counsel. It is possible that the federal government or one or more states could limit or restrict some of the concepts outlined in this blog update.

In the meantime, please visit www.benefitmall.com to view past blogs and Legislative Alerts. Or, you may visit www.HealthcareExchange.com for more blog posts, polls, surveys and numerous resources.

PCIP Program Continues to Endure Financial Shortages, States Being Asked to Absorb Excess Costs

Fri, 07 Jun 2013 09:03:00 -0500

Recent reports, and the fact that the federal Pre-Existing Condition Insurance Plan (PCIP) program stopped accepting new enrollees in February, indicate PCIP is encountering serious funding problems, a situation that could put more financial strain on states and threaten the availability of insurance premium subsidies for uninsured individuals with pre-existing conditions. The U.S. Health and Human Services Department (HHS) is now asking states to bear the burden of the cost overruns, but if the states are unwilling to pick up the expenses, cuts to benefits for high-risk individuals are likely to follow.

The PCIP program, established by the Patient Protection and Affordable Care Act (PPACA), took effect June 1, 2010 and currently serves over 100,000 beneficiaries nationwide. Designed to create high-risk pools for individuals with chronic conditions such as cancer, diabetes and heart disease, the program provides subsidized premium assistance to uninsured U.S. citizens and legal immigrants (for at least six months) with pre-existing conditions. BenefitMall published a blog earlier this year on the PCIP program.

State-Federal Partnership

Within the PCIP program, 27 participating states have opted to operate their own high-risk pools with federal funding, while the remaining 23 states are less supportive of the PCIP program or have otherwise refused to participate. The National Conference of State Legislatures (NCSL) posts an annotated graph and table with a state-by-state breakdown.

Funding Challenges

With $5 billion in funds from the federal government to subsidize the claims paid under the new program, PCIP was designed to transition the high-risk uninsured population into PPACA. The funds were allocated to states based on population and medical costs in a fashion similar to that of the State Children’s Health Insurance Program (SCHIP).

The costs of the program have far outstripped the administration’s initial estimates. In response to the program’s deficits, HHS announced that the risk of cost overruns would be transferred to the states.

A report released last September by the Commonwealth Fund revealed the PCIPs were not only operating at a loss, but becoming increasingly expensive. Unforeseen high medical costs were deemed the culprit, with cancer and advanced heart disease targeted as more excessive cost burdens. A report from the Centers for Medicare & Medicaid Services (CMS) states, “On average, the PCIP program has experienced claims costs 2.5 times higher than anticipated, which the data suggest are due to the acute, costly medical needs of the population PCIP is serving.”

With the states shouldering the extra costs, an increase in insurance premiums and out-of-pocket expenses will likely ensue as the states try to offset the deficits. As a result, thousands of beneficiaries may face termination due to the increased out-of-pocket costs.

Despite PCIP’s decision to suspend further acceptance of enrollment applications until further notice, the current 100,000 beneficiaries would continue to receive coverage, a far cry from CMS’s estimate of about 375,000.

States Ask for More Assistance

Nine states have requested additional funding from the federal government. To date, only two of those states, California and New Hampshire, have been granted additional funding. Alaska, Colorado, Montana, New Mexico, Oregon, South Dakota and Utah still have requests pending with the Center for Consumer Information and Insurance Oversight (CCIIO) and HHS. However, in order to negotiate the funding deficit, 17 states plan to switch to the federally-administered PCIP program starting July 1, 2013.

For additional information on the PCIP program, check out www.healthcare.gov and www.pcip.gov. Specific updates are posted here.

Continued Republican Support

Despite the Commonwealth Fund’s suggestion that PCIP’s use of high-risk pools to cover the uninsured with pre-existing conditions is “extremely expensive and likely unsustainable,” Republicans continue to support high-risk pools. Republicans favor these high-risk pools as alternative provisions of PPACA. However, Republican efforts to divert funding from other areas of PPACA to the high-risk pools have been met with Democratic resistance.

BenefitMall will keep you posted on future PCIP program developments. In the meantime, please visit www.benefitmall.com to view past blogs and Legislative Alerts. Or, you may visit www.HealthcareExchange.com for more blog posts, polls, surveys and numerous resources.

PPACA’s Final Wellness Incentive Rule Released

Mon, 03 Jun 2013 12:26:00 -0500

On May 29, federal regulators released the final rule outlining the guidelines for how employers may use incentives for employee wellness programs pursuant to the Patient Protection and Affordable Care Act (PPACA). The rule, which applies to group health benefit plans starting in 2014, was largely unchanged from the proposed interim final version which detailed the financial incentives and penalties available to employers.

Many employers already offered incentives for employees participating in wellness programs. The main change in the new rule is an increase in the maximum incentive levels for several PPACA designated programs. For smoking cessation efforts, employers will be allowed to offer a reward or penalty of up to 50% of an employee’s health plan cost. For all other wellness programs, the number will be 30%, up from the current 20%. These increases are intended to promote healthy behavior which in turn, advocates claim, reduce health care spending.

Types of Wellness Programs

PPACA’s wellness rule outlines two types of wellness programs: (1) participatory programs and (2) health-contingent programs.

Participatory programs simply require employees (or in some cases, their dependents) to take part in a program offered by his or her employer and do not depend on the health-status of an employee. Examples of such programs include reimbursement for membership in a fitness center, participation in a regular health-education seminar.

Health-contingent programs usually require an employee to meet a health standard such as smoking cessation, participating in a health-related activity, or maintaining low blood pressure. Individuals who meet these standards can be rewarded and those who don’t can be offered the opportunity (i.e., through taking a fitness course) to reach the same standard.

Health-contingent programs are divided into activity-based and outcome-based programs. Activity-based programs simply require an employee participate in a program related to improving one’s health such as a walking regimen. There must be a “reasonable alternative standard” for receiving the reward for people who cannot participate if doing so would be “unreasonably difficult” or if it is otherwise medically inadvisable to participate. Outcome-based programs require individuals to reach or maintain a specific health outcome. Individuals are tested for a health standard and those who meet this standard are given the reward. Those who do not meet the standard are given the opportunity to participate in an action to meet the initial standard. For outcome-based programs, a “reasonable alternative standard” must be provided for those who cannot reach the main goal. For example, if a worker cannot quit smoking, a reasonable alternative standard could be the use of a nicotine-replacement therapy.

Some Concerns

Wellness incentives have provoked some criticism by those who say that such programs, particularly health-contingent programs, discriminate against certain employees. Older employees, for instance, tend to have more health issues than younger workers and may therefore be forced to pay a larger share of their health plan. Regulators have attempted to rectify this potential problem by adopting the “reasonable alternative standards.”

Example

The final rule provides an example of how this reward/penalty might work:

An employer sponsors a group health plan. The annual premium for employee-only coverage is $6,000 (of which the employer pays $4,500 per year and the employee pays $1,500 per year). The plan offers employees a health-contingent wellness program with several components, focused on exercise, blood sugar, weight, cholesterol, and blood pressure. The reward for compliance is an annual premium rebate of $600…[T]he plan also imposes an additional $2,000 tobacco premium surcharge on employees who have used tobacco in the last 12 months and who have not enrolled in the plan’s tobacco cessation program (Those who participate…are not assessed the $2,000 surcharge).

The total of all the rewards (including the absence of a surcharge for participating in the tobacco program) is $2,600…which does not exceed the applicable percentage of 50% of the total annual cost of employee-only coverage ($6,000 x 50%=$3,000). Tested separately, the $600 reward for the wellness program [excluding] tobacco use does not exceed the applicable percentage of 30 percent of the total annual cost of employee-only coverage ($6,000 x 30%=$1,800).

For previous BenefitMall blogs on wellness, click here. BenefitMall will keep you posted on future PPACA wellness program opportunities. In the meantime, please visit www.benefitmall.com to view past blogs and Legislative Alerts. Or, you may visit www.HealthcareExchange.com for more blog posts, polls, surveys and numerous resources.

IRS/Treasury Department Public Hearing Exposes Divide Over Employer Mandate

Thu, 23 May 2013 11:33:00 -0500

An April 23 joint Internal Revenue Service (IRS) and Treasury Department hearing exemplified the split between labor and industry over how strictly the Employer Mandate (sometimes called the Shared Responsibility for Employers) provision of the Patient Protection and Affordable Care Act (PPACA) should be applied. A wide variety of stakeholders from the insurance brokerage, organized labor, education, legal and private industry communities testified before officials from the IRS and the Department of the Treasury on the controversial issue.

Under PPACA, employers subject to the Employer Mandate provision must offer health coverage to at least 95% of their full-time employees. Craig Rosenberg, representing benefits consultant Aon Hewitt, suggested that leaving only a 5% margin of error for employers is too restrictive for such a complicated issue. He recommended changing the requirement to 80% to ease the burden for large employers.

Nicholas Clark of the United Food and Commercial Workers Union (UFCW) disagreed. He said allowing employers a 5% exception would negatively impact thousands of workers. Seeming unswayed by either position, IRS representatives defended the current policy, indicating that:

decreasing the threshold would not incentivize employers to increase coverage; and
increasing the threshold would not really benefit employees all that much.

Both the business community and organized labor took issue with regulations governing the “look back period” under the Employer Mandate provision. Alden Bianchi, representing the ERISA Industry Committee (ERIC), argued that there is not sufficient flexibility for an employer using a “look back” period. He believes regulators have not been clear about whether employers can use a “look back” period for one group of employees but not another. Conversely, the UFCW contended that the flexibility allows employers to evade coverage for many employees. Allowing employers to use a “look back” period of their own choosing, the UFCW said, lets employers minimize the number of full-time workers.

Another issue emerged from the hearing regarding the issue of employees in the education field. Individuals representing several education related groups, from unions and public school districts to community colleges, voiced their concerns about counting hours for teachers, adjunct professors and other educational staff. Some representatives proposed safe harbors for certain professionals, but IRS and Treasury Department officials resisted these entreaties due to the difficulty of implementing a comprehensive rule that could be applied fairly.

In summary, the IRS hearing focused mainly on the issues that key stakeholders have seen building in the months leading up to the implementation of the Employer Mandate provision. Many of these issues surround the “look back” period system, the status of variable hour workers and flexibility of certain provisions of the rule. The IRS defended current policy throughout the hearing and appeared hesitant to make any of the recommendations suggested by the different stakeholder groups that testified.

Federal Government Details Role of Brokers in PPACA’s Marketplaces/Exchanges

Tue, 21 May 2013 09:25:00 -0500

On May 1, the Center for Consumer Information and Insurance Oversight (CCIIO) released new guidance on the role of “agents, brokers, and web-brokers” in Health Insurance Marketplaces/Exchanges. CCIIO describes how they foresee Brokers operating:

“Agents and brokers, including web-brokers, are among those who will play a role in educating consumers about Marketplaces and insurance affordability programs, and in helping consumers receive eligibility determinations, compare plans, and enroll in coverage. In particular, CMS anticipates that Brokers will play a critical role in helping qualified employers and employees enroll in coverage through the Small Business Health Options Programs (SHOPs)”

This guidance seeks to clarify the role of Brokers in Federally-facilitated Marketplaces /Exchanges (FFMs) and State Partnership Marketplaces/Exchanges (SPMs) as well as state-based Marketplaces. The federal government recently re-named Exchanges as “Marketplaces” in an attempt to make the purchasing cooperative system more user-friendly.

Federally-facilitated Marketplaces and State Partnership Exchanges

All Brokers in these states will have to register with the Centers for Medicare and Medicaid Services (CMS) in order to work within the Exchange. This online process should become available over the summer of 2013 and will likely include identifying questions, an exchange-specific training course and an agreement to comply with federal and state policy. Once registered, each Broker will be issued a “Federally-facilitated Marketplace user ID.” This will be used to identify you with consumers and issuers.

Brokers who want to assist consumers in FFMs or SPMs can do so in two ways: through an issuer’s website or through the Exchange’s website. Both options will allow issuers to access a Broker’s identifying information to ensure payment.

If a Broker is using an issuer’s website, he or she would log on to the site, then be redirected from the issuer’s agent website to the exchange website to complete the eligibility application using his or her user ID. Once the eligibility application is completed, the Broker would receive the consumer’s eligibility determination from the Exchange and be redirected to the issuer’s website to help the consumer with plan selection.

If a Broker is using the exchange website directly, the consumer would log directly into his or her exchange account. The Broker would then assist the consumer in completing the eligibility application. After the consumer receives an eligibility determination, the Broker would help the consumer compare the plans on the exchange website.

Regarding payment, FFMs and SPMs will not make payment to Brokers but will instead rely on negotiations between the issuers and Brokers themselves. The Department of Health and Human Services has established standards that may require some issuers to abide by the same compensation agreement in the exchange as it does outside the exchange for similar plans.

State-based Exchanges

States are given a great deal of latitude regarding the role that Brokers play in assisting consumers with their Exchanges. States will continue to license and regulate Brokers, including those that operate in FFM and SPM states. With respect to payment, states will be allowed to establish rules governing issuer compensation of Brokers, including for enrolling consumers in state Exchanges. States may allow Exchanges to compensate Brokers directly or provide for issuer payment.

Keep in mind that there will also be Navigators established in every state to educate and aide consumers in using the exchange. These navigators will not be able to receive compensation from issuers but will be funded by government grants. For more on the role of navigators, see Proposed Rule Updates Role of Navigators, Non-Navigators in Exchanges.

Web-Brokers

Within FFMs and SPMs, CMS is working to allow consumers the option of using web-brokers as an alternative to using the Exchange website directly. Web-brokers are considered simply to be “agents or brokers who enroll consumers through public-facing websites.” CMS is developing the ability to integrate the Exchange websites with web-brokers so that eligibility applications, enrollment information and other information can be accessed easily by consumers. Web-brokers will be required to display all Qualified Health Plans (QHPs) on their websites and will abide by CMS rules to ensure that all QHPs are accessible regardless of a web-broker’s financial concerns.

States are again given deference to develop their own rules for web-brokers. State Exchanges can allow web-brokers to display QHPs and offer information to help consumers compare and select QHPs. Determining eligibility will still be done through the state Exchange, however.

* * * * *

The entire guidance issued by CCIIO can be accessed at: Role of Agents, Brokers, and Web-Brokers in Health Insurance Marketplaces.

We will keep you posted on future PPACA regulations impacting Brokers. In the meantime, please visit www.benefitmall.com to view past blog and Legislative Alerts. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources.

A Glitch in PPACA and an IRS Regulatory Fix

Wed, 15 May 2013 12:33:00 -0500

A year-old Internal Revenue Service (IRS) rule regarding premium tax credits under the Patient Protection and Affordable Care Act (PPACA) faces controversy as it expands premium tax credits to people in states with a Federal Exchange. The rule was issued to address a missing provision in PPACA that would leave individuals in states operating under a federally operated health care Exchange ineligible for premium tax credits and lead to a serious challenge to the Employer Mandate. Now, two courts are hearing challenges to the IRS rule.

To recap, PPACA provides premium tax credits to people and households whose incomes fall between 133% and 400% of the poverty line who decide to buy health insurance on a state health benefits Exchange.

PPACA limits these premium tax credits to people who obtain coverage through a state Exchange and makes no mention of tax credits via a federal Exchange. As of today, 33 states have declined to form state-based health benefits exchanges opting instead for either complete federal control over the exchange or a partnership between the state and the federal government. This seemingly would leave these 33 states that adopt a federal Exchange without premium tax credits for its citizens.

Therefore, the following issues must be addressed:

The first problem – Lower-income individuals who would like some financial support may not be able to receive the federal subsidies despite the fact that purchasing insurance is now mandatory.
This leads to a second issue – PPACA levies a tax/penalty on larger employers that do not offer insurance coverage to their employees as long as at least one employee receives a premium credit. Therefore, under current law, no employer in a state without a state Exchange could be issued a tax/penalty, effectively killing the Employer Mandate in those states.
All this leads to a third challenge – Financing PPACA. Without the revenue collected by the federal government from non-complying employers, a major source of funding for PPACA is eliminated and the law is virtually unworkable. The Congressional Budget Office, for instance, estimates that penalties on employers nationwide would raise $28 billion dollars between 2014 and 2019 alone. With over half of states choosing not to operate a state Exchange, much of this revenue would not be collected.

IRS Steps In
In a final rule issued on May 23, 2012, the IRS states that premium tax credits will be offered to people in both state and federal Exchanges. The IRS acknowledges the missing statutory language, but contends that Congress did not “intend to limit the premium tax credit to State Exchanges.”

The IRS rule has led to at least two court challenges nationwide. In Oklahoma (Pruitt v. Sebelius), the state is suing the federal government for overstepping its regulatory authority by reading language into PPACA that does not exist. On May 2, another lawsuit was filed in Washington, DC, challenging the Individual Mandate. Citizens from several states are suing the federal government, claiming they are ineligible for the tax credits and not subject to the Individual Mandate or the resulting tax/penalty. How courts decide the extent of the tax credit’s eligibility rules will have a significant impact on the future of PPACA.

BenefitMall will continue to provide updates on the status of any further regulations or court decisions related to this matter. In the meantime, please visit www.benefitmall.com to view past blogs and Legislative Alerts. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources.

Recent Congressional Action Evidences Intent to Amend Large Employer Definition and Hourly Requirements under PPACA

Thu, 09 May 2013 09:53:00 -0500

In recent weeks, Congress has demonstrated an intent to change certain definitions and thresholds under the Patient Protection and Affordable Care Act (PPACA). On March 22, 2013, Senator Susan Collins (R-ME) submitted Amendment 144, which would change the definition of a large employer and remove the 30 hour requirement to be considered a full-time employee under PPACA. The legislative amendment would apply to the Senate Fiscal Year 2014 Budget Resolution (S. CON. RES. 8). The amendment aims to establish a deficit-neutral reserve fund to restore a “sensible definition” of a full-time employee under PPACA. It was adopted by the Senate in a voice vote.

The amendment would repeal the 30 hour requirement to be considered a full-time employee, and would remove full-time equivalent employees from the total to be considered a large employer. Currently, both full-time and full-time equivalent employees are included in an employer’s calculations to determine if the employer is subject to the employer shared responsibility requirements. Employers with 50 or more full-time employees, or a combination of full-time and full-time equivalents, are subject to the shared responsibility provisions. The amendment would change this requirement so that only full-time employees would be counted in the calculation.

Senator Collins argued that the 30 hour requirement to be considered a full-time employee was “creating a perverse incentive where employers are actually reducing the number of hours their employees work in order to keep under that 30-hour threshold and thus avoid penalties.”

Additionally, on April 10, 2013, Senator Collins introduced Senate Bill 701, the “Forty Hours Is Full Time Act of 2013.” The bill would increase the threshold to be considered a full-time employee from 30 hours to 40 hours worked per week. In addition, the bill would amend the calculation method for determining the number of full-time equivalents. Specifically, instead of dividing the total number of hours of service of employees who are not full-time by 120, the bill would divide the figure by 174 to calculate an employer’s number of full-time equivalents.

Some believe that Senator Collins introduced Senate Bill 701 because it stands a greater chance of becoming law. The earlier Amendment that she sponsored would only take effect should the budget as a whole be passed by Congress, an outcome that seems unlikely at this point.

Senate Bill 701 has been referred to the Senate Committee on Finance. Both houses of Congress will have to agree to the bills before they will be passed into law. Whether this will happen remains unclear. We will keep you posted of Congressional action on the bills.

Wellness Programs in PPACA Spotlight

Tue, 30 Apr 2013 10:15:00 -0500

Under the Patient Protection and Affordable Care Act (PPACA), wellness is one element of health care reform that is taking center stage.

Generally, health plans may not discriminate based on a health factor against individual participants with regards to eligibility, benefits, or premiums (health factors include health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, and disability). However, an exception to this rule allows for premium discounts, rebates, or modifications to otherwise applicable cost sharing in return for adherence to certain programs of health promotion and disease prevention, otherwise known as wellness programs.

BenefitMall has published several blogs and legislative alerts in the past. Click here to see several examples.

Regulations promulgated under the Health Insurance Portability and Accountability Act (HIPAA) of 1996 and PPACA identify two distinct categories of wellness programs: (1) participatory wellness programs and (2) health-contingent wellness programs.

Participatory Wellness Program

Participatory wellness programs are those made available to all “similarly situated” individuals and either do not provide a reward for participation, or do not base the reward on an individual’s health-factor related condition. For example, a wellness program that reimburses for part of the cost of a gym membership is participatory in nature. The major requirement for participatory wellness programs is that they must be made available to all “similarly situated” individuals.

Health-Contingent Wellness Program

Health-contingent wellness programs, on the other hand, require an individual to either satisfy a standard related to a health factor in order to obtain a reward, or do more (for example, “doing more” could include smoking less or meeting exercise targets) than a similarly situated individual based on a health factor in order to obtain the same reward. An example of such a program is one that uses biometric screening or a health risk assessment to identify employees with specified medical conditions or risk factors (such as high blood pressure). The program would then reward employees who are within a normal or healthy range based on the identified factor, while requiring employees who are outside the normal or health range to take additional steps (such as meeting with a health coach) to obtain the reward.

The five requirements for health-contingent wellness programs include:

All eligible persons must have the opportunity to qualify for the reward at least once a year;
The size of the reward cannot exceed 30% of the total coverage cost (with the exception of smoking cessation programs, discussed below);
Rewards must be available to all similarly situated individuals and plans must provide a reasonable alternative standard for individuals for whom it would be unreasonably difficult or medically inadvisable to attempt to satisfy the standard conditions for reward;
Programs must be reasonably designed to promote health or prevent disease, not be overly burdensome, not be a subterfuge for health status discrimination, and not use a highly suspect approach; and
Plans must disclose the availability of other means of qualifying for a reward or the possibly of waiving a standard.

Regulatory Process

The proposed rule on wellness programs, published on November 26, 2012, made several amendments to the rules on wellness programs. For instance, the proposed rule would allow a 20% additional reward (up to 50% of the cost of coverage) for health-contingent wellness programs designed to prevent or reduce tobacco use. The proposed rule also requested comment on multiple issues (comments were due on January 25, 2013), such as whether additional consumer protections are necessary with regard to whether a health-contingent wellness program is reasonably designed. Because wellness programs are the primary tool health plans use to control the health of their population, and consequently the costs of their plans, any impediments to their use is expected to be strongly opposed by the employer community.

We will keep you posted on the status of a final rule on wellness programs. In the meantime, please visit www.benefitmall.com to view past blog and Legislative Alerts. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources.

The Employer Mandate and Controlled Groups

Thu, 25 Apr 2013 15:20:00 -0500

The Patient Protection and Affordable Care Act (PPACA) requires large employers – those with 50 or more full-time employees and full-time equivalents – to offer their employees the opportunity to enroll in coverage that is both affordable and provides minimum value. While determining whether an employer is subject to this employer mandate is complicated in its own right, this determination can get even more complex when several employers are commonly owned.

Bundling Multiple Employers

All employees of companies within the same controlled group must be aggregated to determine whether the commonly owned employers are subject to the employer mandate. For purposes of determining common ownership, PPACA adopts the controlled group rules set forth in sections 414(b) and 414(c) of the Internal Revenue Code. The controlled group rules are quite complex and fact-specific. Under those provisions, there are three types of controlled group relationships: (1) parent-subsidiary; (2) brother-sister; and (3) a combination of the two.

What is a Parent-Subsidiary Group?

A parent-subsidiary group exists when:

One or more chains of corporations are connected through stock ownership with a common parent corporation;
80% of the stock of each corporation (except the common parent) is owned by one or more corporations in the group; and
The parent corporation owns 80% of at least one other corporation.

What is a Brother-Sister Group?

A brother-sister controlled group is a group of two or more corporations in which five or fewer common owners own a controlling interest of each group and have effective control. Two terms are key here – controlling interest and effective control. A controlling interest generally means 80% or more of the stock of each corporation. Effective control is defined as more than 50% of the stock of each corporation, but only to the extent that such stock ownership is identical with respect to such corporations.

What is a Combined Group?

A combined group consists of three or more organizations where (1) each organization is a member of either a parent-subsidiary or brother-sister group, and (2) at least one corporation is the common parent of a parent-subsidiary, and is also a member of a brother-sister group.

Employer Mandate Applicability

When calculating penalties under the employer mandate, the first 30 full-time employees are excluded. Therefore, if a single employer does not offer coverage or offers coverage to less than 95 percent of its full-time employees, and an employee receives a premium tax credit, the employer must pay a penalty of $2,000 for each full-time employee minus the first 30.

For employers that offer coverage for some months but not others during a calendar year, the penalty will be computed separately for each month in which the employer did not offer coverage and at least one full-time employee received a premium tax credit. In such a case, the employer would be liable for a penalty of 1/12^th of $2,000 for each full-time employee employed for the month minus the first 30.

If an employer offers coverage to 95 percent or more of its full-time employees, but a full-time employee nonetheless receives a premium tax credit on the basis of the coverage not being affordable or not providing minimum value, the employer must pay a penalty equal to 1/12^th of $3,000 for each full-time employee who received a premium tax credit for the month. The amount paid under this scenario cannot exceed the amount the employer would have had to pay if it did not offer coverage – that is, 1/12^th of $2,000 for each full-time employee minus the first 30.

However, when multiple employers fall under the same controlled group, this 30 full-time employee exclusion must be proportionally allocated based on each employer’s number of full-time employees. Therefore, it will be important for entities to carefully analyze application of these controlled group rules, both to figure out whether they are subject to the employer mandate and if so, their potential liability.

Final Thoughts

The take away from the “Control Group” protocol is that many small employers might be bundled into a large group for purposes of PPACA’s employer mandate. Brokers are encouraged to work with their clients to make sure that they are proactively determining whether or not the obligation to offer affordable and provides minimum value coverage or pay a penalty extends to any grouping of companies with related ownership.

We will keep you posted on any major updates to this issue. In the meantime, please visit www.benefitmall.com to view past blog and Legislative Alerts. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources.

PPACA’s Impact on Insurance Premiums: Actuarial Study Predicts 32% Increase in Costs Over Next Five Years

Fri, 19 Apr 2013 09:28:00 -0500

A new report by the Independent Society of Actuaries predicts that individual market health insurers could experience as much as a 32% increase on average in health care costs from 2014 through 2017 due to changes brought on by the Patient Protection and Affordable Care Act (PPACA). This would result in higher premiums as the increased costs are passed on to those who purchase health insurance in the individual markets.

The report refers to an “average” increase in costs, but the actual increase in “per member per month” (pmpm) claims expenses will vary from state to state.

According to the report, some states could experience dramatic increases. By 2017, the study estimates the pmpm increases will be 62% for California, 67% for Maryland and over 80% for Ohio and Wisconsin. Other states will see less dramatic increases. Colorado, for example, could experience a 39.6% higher pmpm; Florida 26.5%; and Texas 33.8%. The higher claims costs would primarily be due to the increased level of health care services required by new entries to the insurance market.

However, some states that already have imposed extensive mandated benefits and community rating provisions could see a decrease in pmpm anticipated average claims, including Massachusetts (-12.8%), New Jersey (-1.4%), New York, (-13.9%), and Rhode Island (-6.6%).

The report also includes two other major findings:

After three years of Exchanges and insurer restrictions, the percentage of uninsured nationally will decrease from 16.6% to between 6.8 and 6.6%, compared to pre-ACA projections.
Under PPACA , the individual non-group market will grow 115%, from11.9 million to 25.6 million lives; 80% of that enrollment will be in the Exchanges. (See report at http://cdn-files.soa.org/web/research-cost-aca-report.pdf, page 6.)

The report does not address PPACA’s impact on large employer group health plans as the most affected will be individual and small employer group health benefits during this period.

The study immediately drew fire from the Obama Administration regarding the projected premium increases. The administration claims the analysis fails to consider cost relief strategies in the law, such as federal premium tax credits to make premiums more affordable, and the risk adjustment pools that would help subsidize health insurance carriers that attract a disproportionately higher share of those with expensive health conditions.

However, insurance experts countered that neither of these mechanisms actually will cut the cost of the claims’ pmpm. These mechanisms will simply transfer funds from the federal budget to individuals, or shift funds generated by a premium tax on individual health insurance companies to plans with a disproportionate share of adverse actuarial risks.

Rick Foster, former Medicare chief Actuary, says the report does "a credible job" of estimating potential enrollment and costs under the law "without trying to tilt the answers in any particular direction." He further notes that "actuaries tend to be financially conservative, so the various assumptions might be more inclined to consider what might go wrong than to anticipate that everything will work beautifully."

On a positive note, clearly PPACA will expand insurance coverage for many. However, the Democratic leadership promised that the passage of PPACA would save the country money. This Society of Actuaries study reminds us that this last promise is unlikely unless the Administration makes some modifications to the current reforms.

Proposed Rule Updates Role of Navigators, Non-Navigators in Exchanges

Wed, 17 Apr 2013 11:23:00 -0500

The Department of Health and Human Services (HHS) has released an interim final rule that clarifies the role of Navigator and non-Navigator assistance personnel employed by both state and federal health insurance Exchanges as established by the Patient Protection and Affordable Care Act (PPACA). The proposed rule was published in the April 5 Federal Register.

Navigators are those deemed by PPACA to provide assistance to consumers interested in purchasing health insurance coverage through state-based Exchanges. The non-Navigator assistance personnel are designated to provide additional consumer assistance, education, and outreach functions beyond the role of the Navigators.

The importance of Navigators is echoed throughout the rule: “Navigators are an important resource for all consumers, particularly communities that are under-served by and under-represented in the current health insurance market.” According to PPACA, Navigators will “play an important role in facilitating a consumer’s enrollment in a QHP by providing fair, impartial, and accurate information that assists consumers with submitting the eligibility application, clarifying the distinctions among QHPs, and helping qualified individuals make informed decisions during the health plan selection process.”

Standards for Navigators

HHS’ proposed rule would create conflict-of-interest, training and certification, and meaningful access standards for Navigators working with both federally-facilitated and state partnership Exchanges. The guidelines would also apply to non-Navigator assistance personnel working in state-based Exchanges funded by federal grants.

The regulation also would amend several existing Navigator rules. For example, the rule clarifies that navigator licensing, certification, or other standards prescribed by the Exchange must not contradict the provisions of Title I of PPACA, which includes key provisions related to Exchanges. The second amendment proposes to make entities with relationships to issuers of stop loss insurance, including those who are compensated directly or indirectly by stop loss carriers in connection with enrollment in qualified health plans (QHPs) or non-QHPs, to be ineligible to become Navigators. Finally, the rule would extend the same ineligibility criteria that currently apply to Navigators to non-Navigator assistance personnel.

For previous BenefitMall updates on Navigators, click here.

Non-Navigator Assistance Program

The non-Navigator assistance program is designed to “fulfill the consumer assistance, education, and outreach functions…through in-person consumer support, other than a Navigator program.” An Exchange may, but is not required, to create these programs. While the Navigator program must be a grant program, state-based Exchanges and state partners in a state-partnership Exchange may use contracts, direct hiring, or grants in the non-Navigator assistance program.

State-based Exchanges are not required to be financially self-sufficient during the initial year of operation, and may not have sufficient funds for a Navigator program. As a transitional policy, a state-based Exchange may use a non-Navigator assistance program in its initial year of operation to fill any gaps in its Navigator program.

Broker and Navigator Roles

Brokers are referenced several times in the rule. Specifically, the rule states that limiting Navigators to just being licensed agents or Brokers would violate PPACA, which requires at least two different types of entities serve as Navigators (i.e., brokers and advocacy groups). Also, holding a Broker license is neither necessary nor sufficient to perform the duties of a Navigator, according to the rule.

Brokers are also addressed in the conflict of interest provisions. The rule states:

“We note that agents and brokers have traditionally assisted consumers in obtaining health insurance. We anticipate that agents and brokers will continue to be an important source of assistance for many consumers…The proposed conflict-of interest standards for Navigators would permit agents and brokers to serve as Navigators in an Exchange operated by HHS, provided that the agent or broker can satisfy the standards that will apply to all Navigators in the Exchange.”

Additionally, the rule clarifies that “agents and brokers who sell other lines of insurance would not be prohibited from receiving consideration from the sale of those other lines of insurance while serving as Navigators, provided they complied with the disclosure requirement.” However, the next section of the rule clarifies:

“While a Navigator could retain staff members who serve as agents and brokers, those staff members – and the organization itself – could not receive compensation from health insurance or stop loss insurance issuers for enrolling individuals or employees in QHPs or health insurance plans outside of the Exchange. Such staff members, however, could continue to be compensated for selling other insurance products.”

Training
The rule proposes training standards, including up to 30 hours of training for all Navigators and non-Navigator assistance personnel. Re-certification is also contemplated in the rule to ensure Navigators have current information to offer consumers.

Comments
Comments on the proposed rule are due by 5:00 p.m. within 30 days after the date of publication in the Federal Register.

Portion of Small Business Health Options Program Delayed to 2015

Fri, 05 Apr 2013 10:06:00 -0500

The Obama administration has announced via new rules that they will delay a portion of the implementation of the Small Business Health Options Program (SHOP) to 2015.

The Patient Protection and Affordable Care Act (PPACA) calls for the creation and implementation of health benefits Exchanges for both individuals and small businesses. These marketplaces were to be operational by October 1, 2013 in time for the open enrollment period for a January 1, 2014 effective date. The individual mandate and employer shared responsibility provisions are scheduled to become effective on January 1, 2014.

The administration announced that SHOPs will only offer one health plan, instead of offering small employer groups a choice of several health plans. As reported in the Wall Street Journal, "For transitional purposes we have proposed that in 2014, a state may elect to have businesses choose one plan to offer employees, and in 2015 employees will be able to choose from the full range of plans in the marketplace," said Fabien Levy, an U.S. Department of Health and Human Services (HHS) official.

The delay will apply to the states in which the federal government will administer Exchanges, and makes the requirement optional for state-run Exchanges. The administration cited operational challenges as the reason for the delay.

The announcement has been met with disappointment by many small businesses. D. Michael Roach, the owner of a women’s clothing store in Portland, said of the delay, “It will limit the attractiveness of exchanges to small business." John C. Arensmeyer, the chief executive of Small Business Majority, echoed the sentiment, saying, “The vast majority of small employers want their employees to be able to choose among multiple insurance carriers.” The decision by HHS to delay the SHOP requirement was, “a major letdown for small business owners and their employees,” said Mr. Arensmeyer.

Senator Mary L. Landrieu (D-La.) also expressed disappointment at the administration’s decision to delay the requirement. Senator Landrieu provided crucial support for the SHOP Exchange in her role as chairwoman of the Senate Committee on Small Business and Entrepreneurship. The delay, Senator Landrieu stated, will “prolong and exacerbate health care costs that are crippling 29 million small businesses.”

While the delay has caused disappointment for some, others anticipated the delay due to HHS’ failure to issue detailed guidance or final rules for the SHOP until late March.

In a March 27th letter to Marilyn Tavenner of the Centers for Medicare and Medicaid Services, Representative Sam Graves (R-Missouri) criticized the Administration for their actions. “If one of the key goals of supporters of the health care law was to provide small business owners with a competitive process by which they could select from a number of affordable health insurance plans for their employees, then that goal is not in sight,” Graves writes.

Whether a similar delay will be announced for individual Exchanges remains to be seen.

The views expressed in this post do not necessarily reflect the official policy, position, or opinions of BenefitMall.This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.

Proposed Legislation to Streamline Insurance Agent Licensing while Preserving Key Areas of State Authority

Tue, 02 Apr 2013 16:01:00 -0500

Legislation has been re-introduced in both the U.S. Senate and House of Representatives to help streamline insurance agent licensing between states while preserving key areas of state authority. Called the National Association of Registered Agents and Brokers Reform Act of 2013 (NARAB II), the bill would create an independent nonprofit entity comprised of insurance market representatives, state insurance commissioners, and other key stakeholders to help facilitate the ability of Brokers to sell insurance coverage in multiple jurisdictions.

Traditionally, each state has maintained its own agent licensing requirements, which sometimes makes it difficult for Brokers to maintain licensure in different states when there is no reciprocity. NARAB II, however, is designed to streamline the licensing process for brokers between the states. Under the NARAB II bill, Brokers apply for membership in NARAB, and after passing a background check, are permitted to sell coverage in other states.

The National Association of Insurance Commissioners’ (NAIC) explains:

The legislation would create a non-profit entity to streamline non-resident market access for insurance agents and producers while ensuring that producers remain subject to the full range of state market conduct authorities to police bad actors. For producers, NARAB membership would be optional. Any insurance producer licensed in his/her home state would be eligible to join NARAB, provided the producer satisfied NARAB's membership criteria and any required background check.

Sens. Jon Tester (D-Mont.) and Mike Johanns (R-Neb.) introduced the Senate bill, S. 534, while Reps. Randy Neugebauer (R-Texas) and David Scott (D-Ga.) introduced the companion House bill, H.R. 1155. The NAIC supports the Senate version of the legislation (originally S. 2342, now S. 534) because S. 534 “more clearly preserves state authority and consumer protections.” Both bills have been referred to committee.

By way of background, the NAIC notes that a “provision in the federal Gramm-Leach-Bliley Act of 1999 (GLBA) sought to streamline producer licensing by requiring the states to enact certain reforms to the insurance producer-licensing process.” The association adds that it “remains committed to improving producer licensing and will continue to work toward non-resident licensing reciprocity in all states consistent with the GLBA.”

In terms of the balance between federal and state oversight, the NAIC explains:

NARAB II is intended to preserve state-based insurance regulation and consumer protections—it does not create a federal regulator for insurance and the states would retain their regulatory authority over consumer protection, market conduct and unfair trade practices. The states also would retain their rights over resident licensing, as well as supervision, discipline and the establishment of licensing fees for insurance producers.

BenefitMall will continue to track and provide updates on the progress of NARAB II in Congress.

HHS Issues New Rules on the Implementation of Health Insurance Reform

Thu, 28 Mar 2013 09:04:00 -0500

Earlier this month, the U.S. Department of Health and Human Services (HHS) released new proposed, final rules on a host of issues relating to the implementation of the Patient Protection and Affordable Care Act (PPACA). Many of these reforms will be implemented on January 1, 2014. The rule will be effective on April 30, 2013.

The rule, published on March 11, 2013, provides detail to a wide range of reforms under PPACA, covering additional explanations or updates to:

Federal Exchange user fees;
A number of insurance risk issues;
The federally-facilitated Small Business Health Option (SHOP) program; and
The medical loss ratio (MLR) program

This blog also highlights several aspects of the rule that impacts Brokers.

Federal Exchange User Fees
PPACA authorizes a federal Exchange to charge a fee to participating issuers to provide funding to support its operations. The rule implements these user fees for qualified health plans (QHP) participating in a federal health benefits Exchange. The rule also outlines HHS’s approach to calculating the fee. For the calendar year 2014, the user fee assessed to QHPs being offered through federal Exchanges will be 3.5% of the premium charged by the QHP. If you would like to learn more about the federal Exchanges, please go here.

Insurance Risk Updates
The rule also provides greater detail for the implementation of the permanent risk adjustment methodology, the transitional reinsurance program, and the temporary risk corridors program. These programs are intended to help stabilize premiums for the individual and small employer group markets and protect against the effects of adverse selection.

A primary goal of the reinsurance program is to mitigate insurance risk in the individual market by subsidizing the costs of more expensive enrollees. The risk corridors program will protect against uncertainty in rate setting for qualified health plans by limiting the extent of issuers’ financial losses and gains. The risk adjustment program will provide increased revenues to health insurance carriers that attract high-risk populations, including populations with chronic conditions, and remove the incentive for issuers to avoid higher-risk enrollees. Under the risk adjustment process, funds will be transferred from health insurance carriers with lower-risk enrollees to carriers with higher-risk enrollees.

MLR Updates
The rule also amends prior medical loss ratio (MLR) rules to require health insurance carriers to include premium stabilization amounts in the MLR and the rebate check calculations. The rule proposes to account for all premium stabilization amounts in a way that would not have a net impact on the adjusted earned premium used in calculating the MLR denominator and rebates. The rule amends prior rules to include all premium stabilization amounts as adjustments to incurred claims in calculating the MLR numerator. This final rule amends the MLR calculation formula to read:

MLR = [(i + q s + n r)/{(p + s n + r) t f (s n + r)}] + c

i = incurred claims
q = expenditures on quality improving activities
p = earned premiums
t = federal and state taxes and assessments
f = licensing and regulatory fees, including transitional reinsurance contributions
s = issuer’s transitional reinsurance receipts
n = issuer’s risk corridors and risk adjustment related payments
r = issuer’s risk corridors and risk adjustment related receipts
c = credibility adjustment, if any

Other sections of the rule provide clarification on the proposed process for advance payments of the premium tax credit and certain cost-sharing reductions.

SHOP Standards
The rule establishes operational standards for the SHOP, which will allow small employers to offer employees a greater variety of QHPs through a state or federal Exchange. This final rule establishes standards and processes for implementing SHOP Exchanges, including:

Standards for the definitions and counting methods used to determine whether an employer is a small or large employer and whether an employee is a full-time employee;
A methodology for employers to make a QHP available to employees in the federally-facilitated SHOP (FF–SHOP);
The minimum participation default rate in the FF–SHOP;
QHP standards linking federally-facilitated Exchange and FF–SHOP participation;
Standards ensuring broker commissions in FF–SHOP that are the same as those in the outside market;
Standards authorizing state and federal Exchanges and SHOPs to selectively list only brokers registered with the respective state or federal Exchange or SHOP.

The rule also details several other key elements to help a SHOP navigate through a variety of additional federal and state requirements. Finally, the rule provides transitional relief in some cases where existing state laws may conflict with new federal mandates.

Broker Impact
Some sections of the guidelines directly affect Brokers, including modifications to the Internet website disclosure standards. The rule authorizes a state or federal Exchange or SHOP to limit the display of Broker information to include only licensed Brokers registered with the respective Exchange or SHOP.

The rule explains, “Listing only brokers who have registered with the Exchange is in the best interest of the consumer, both because the registration and training helps assure that the agent or broker is familiar with the Exchange policies and application process and because the proposed listing will not contain large numbers of licensed brokers who are not active in the market.”

The rule also promotes the same commission rate schedules for broker both inside and outside of the Exchanges.

Final Thoughts
Clearly, the new rule covers a lot of territory and BenefitMall will provide additional guidance on the new requirements through its blogs, legislative alerts, webinars and other services provided to the public and its clients.

HHS Releases Draft Application for Individuals & Families as part of the Online Exchange Enrollment Process: Many Express Concerns about Complexity

Tue, 26 Mar 2013 13:38:00 -0500

Last week, the U.S. Department of Health and Human Services (HHS) released the draft paper application, and corresponding online version, to receive benefits through a state health benefits Exchange.

The application, available here, has been criticized by many industry insiders who were hoping for a simple, straight forward application that would ease the burden of the individual mandate on consumers. Others are more supportive, stating that “this is the government’s first stab at simplifying a notoriously complicated process.”

The draft application is 15 pages, accompanied by a 60 page description. The online version has been compared to TurboTax, and was released along with two explanatory videos detailing the process for a family, and for a single individual.

The complexity of the application clearly highlights the need for Brokers to have greater involvement in the application process. While the law may provide access to information, the ability to understand it will be missing. Brokers could easily fill this role, and utilize their knowledge and ability to communicate healthcare requirements to the public to ease the application and selection process.

For more information on the application, go here.

To find answers to other frequently asked questions about health care reform, or to submit a question, we invite you to visit the reform Q&A page at www.HealthcareExchange.com.

Most Health Plans Are Not Meeting PPACA’s EHB Requirements

Fri, 22 Mar 2013 10:17:00 -0500

EHB Approval Process Complicated by Potential State Flexibility

A new survey reveals that less than 2% of health insurance plans provide all the essential health benefits (EHB) required by the Patient Protection and Affordable Care Act (PPACA).

PPACA requires all health insurance plans to cover a standard set of EHBs. Beginning in 2014, Section 1302 of PPACA requires health insurance plans offered to individuals and small businesses to provide EHBs in each of ten categories. Beyond a baseline set of benefit requirements, the U.S. Department of Health and Human Services (HHS) has left the ability to define what services must be included as EHBs to the states, allowing for more flexibility.

Survey Findings

The survey, performed by HealthPockets, Inc., examined the coverage provided by over 11,000 health insurance plans. The data analyzed was obtained from insurance records made public by the Departmenf of Health and Human Services.

On a more positive note, plans offered an average of 76% of the EHBs. One hundred percent of the health plans reviewed in the survey are providing the mandatory preventative and wellness care, management of chronic disease coverage, hospitalization and emergency medical care coverage. Virtually all, or 99 percent, provide ambulatory medical services such as physician and physician extender office visits and lab services.

However, the study results demonstrate that significant coverage gaps exist when using EHBs as the benchmark. For example:

The benefit elements most frequently absent include pediatric dental and vision care.
Only 8% of plans provided coverage for dental check-ups.
Two thirds of health insurance plans included in the survey pool do not offer prenatal, delivery, and postnatal healthcare benefits in their base coverage.
Only half of the plans offer outpatient and inpatient health benefits for alcohol or drug addiction.
Mental health coverage is only slightly better, with six out of ten plans covering outpatient and inpatient treatment.

The survey also measured how health plans vary from state to state. Health plans offered in Massachusetts cover 94% of EHBs on average, followed closely by Rhode Island’s plans, which provide about 93%. Hawaii plans cover 90% of mandatory benefits and plans in California, Maryland and Vermont cover 89%.

Alaska plans have the lowest level of coverage at only 66% of EHBs. Wisconsin plans are at 67%, and both Texas and New Hampshire have the next lowest carrier coverage levels at 68%.

EHB History

The flexibility that PPACA affords to states in establishing their EHB package was applauded by state regulators, who previously were concerned that a single national EHB would cause significant market disruptions in many smaller and more rural states. Consumer and patient advocates as well as providers have criticized the decision, arguing that a national standard would reduce variation between states. These critics also are concerned that some plans currently have inadequate benefits. Many insurance carriers expressed initial support for the flexibility, but now face the prospect of creating EHB benefit plans that comply with their respective state designated EHBs. Further, they must navigate the proposed rates and forms through the appropriate state insurance regulatory approval processes in time for the sales season prior to the October – December 2013 open enrollments for the January 1, 2014, effective dates.

EHBs and Exchanges

The creation of state health benefit Exchanges in each of the 50 states has added an unforeseen layer of complexity to the implementation of EHB packages. While some states have chosen to establish their own Exchanges, a few states have decided to engage in a joint venture Exchange with the federal government. Approximately half of the states have refused to establish a state Exchange and have defaulted to the federal government to establish a federally-facilitated Exchange.

Insurance carriers that want to sell compliant EHB plans through their respective Exchanges must have their plans approved by the state insurance regulators and then submit their proposed products to the Exchange to become a certified Qualified Health Plan (QHP). Many states are lagging behind in the implementation of their Exchanges. As carriers wait for their plans to be approved, the sales season running up to the October 1, 2013, deadline for Exchanges to be operational is quickly approaching. It is becoming increasingly improbable that many Exchanges truly will be operational in time for October - December 2013 enrollments.

It remains to be seen whether the opening date for the Exchanges will have to be delayed. However, there is a great deal of work to be done in an exceedingly short amount of time. A rushed implementation with many misfires, and the concurrent bad press, will not help the President in moving his health reform policies forward.

To find answers to other frequently asked questions about health care reform, or to submit a question, we invite you to visit the reform Q&A page at www.HealthcareExchange.com.

OPM Issues Final Regulation on Multi-State Plan Program (MSPP)

Tue, 19 Mar 2013 10:10:00 -0500

Pursuant to the authority established in Section 1334 of the Patient Protection and Affordable Care Act (PPACA), the Office of Personnel Management (OPM) has released a 154-page final regulation entitled, Patient Protection and Affordable Care Act; Establishment of the Multi-State Plan Program for the Affordable Insurance Exchanges. According to OPM, the purpose of the regulation is “to balance adhering to the statutory goals of the Multi-State Plan Program (MSPP) while aligning its standards to those applying to qualified health plans to promote a level playing field across health plans.”

The rule establishes the framework for MSPP issuers to offer at least two Multi-State Plans (MSP) through each of the state health benefit Exchanges. It also outlines how OPM will establish and administer the MSPP, as well as the process for establishing standards and requirements for MSPP issuers and MSPs. While MSPP issuers have up to four years to phase-in the states in which they offer coverage, these plans must be offered in all states and the District of Columbia by the fourth year of MSPP participation.

OPM operates the Federal Employees Health Benefit Program (FEHBP), so it does have experience dealing with health insurance carriers across the nation.

Background: Defining Key Terms

State health benefit Exchanges are the state or federal marketplaces that will be established in each state. As stated in the rule, these Exchanges are aimed at enhancing competition in the health insurance market, improving the choices of affordable health insurance, and giving individuals and small businesses purchasing power comparable to that of large businesses.

The MSPP is the program established by Section 1334 of PPACA that authorizes the OPM to contract with MSPs to create additional health benefit options. The program also is designed to foster competition among plans competing in the individual and small group health insurance market through the Exchanges.

The MSPs are health plans offered under contract via an MSPP issuer to provide health benefits to individuals and small group employees seeking coverage via an Exchange.

An MSPP issuer is the health insurance provider that will offer and administer these plans. At least one of these private health insurance issuers must be non-profit.

Qualified Health Plans (QHP) are health insurance benefit plans that will be offered via the Exchanges. Essentially, these health plans will compete against MSPPs in the Exchange marketplace.

Why was the MSPP included in PPACA?

During PPACA debates in the U.S. Senate, it became evident that the inclusion of a “Public Option,” a federal government-sponsored health insurance plan, was preventing the bill from gaining sufficient support for passage. Lawmakers dropped the Public Option and replaced it with the MSPP as a compromise that resulted in the bill’s passage.

How will state laws impact MSPP issuers and MSPs?

Each MSPP must be authorized by each state and all MSPs must be licensed by the appropriate state regulator. Generally, all rules impacting MSPP and MSPs shall comply with state law, except the following as provided by the rule: “(1) State laws that are inconsistent with section 1334; (2) State laws that prevent the application of a requirement of part A of title XXVII of the PHS Act; and (3) State laws that prevent the application of a requirement of title I of the Affordable Care Act.”

MSPP issuers and MSPs are generally required to comply with applicable state statutes and regulations, including applicable non-discrimination statutes to prevent discrimination based on race, color, national origin, disability, age, sex, gender identity, or sexual orientation. Of course, federal oversight also will define how the MSPP and MSPs operate.

How will MSPs be operationalized?

OPM realizes these programs will take time to develop. Therefore, the rule allows an MSPP issuer to apply for OPM’s approval to provide partial state coverage and, if the application is accepted by OPM, the issuer would be bound by contract. To be approved, the applicant needs to provide a reasonable plan for ultimately offering coverage throughout the state. OPM intends to pay particular attention to the applicant’s plans to provide adequate provider network coverage, particularly in medically underserved areas. Attempts on the part of plans to cherry-pick or red-line will not be acceptable.

Health insurance carriers and other entities that are affiliated either by common ownership and control or by common use of a nationally licensed trademark may apply jointly as an MSP issuer. The rule stipulates OPM will likely use its expertise in administering federal health plans, stressing that OPM intends to protect consumers through its administration of the MSPP just as it protected enrollees in the FEHBP.

How will the MSPP function with Exchanges?

The federal rule requires an MSPP issuer to offer coverage for both individuals and small employer groups in a state with a merged individual and small group market Exchange. The rule also anticipates that some MSPPs will want to phase-in their participation in the small employer group SHOPs. The rule permits an MSPP issuer the flexibility to phase-in participation in the SHOP if the respective state has established a SHOP phase-in standard. MSPP issuers that are not immediately licensed in every state of coverage again have the option to enter into a contract with OPM, but only if licensed in every state where they initially offer MSP coverage through any Exchanges and they demonstrate a good-faith effort to become licensed in every state consistent with the four- year phase-in timeframe.

What benefits must an MSP offer?

Consistent with PPACA, the rule requires all MSPs to offer at least one plan at the Silver level of coverage and one plan at the Gold level of coverage in each Exchange in which the issuer is certified to offer an MSP. OPM will decide whether an MSPP issuer may offer products other than the required Gold and Silver products. Under the rule, Bronze level coverage is not required, but OPM has the discretion to approve other levels of coverage through contract negotiation with issuers. In cases where a state authorizes plans that offer catastrophic or Bronze products, OPM will take those options into consideration.

An MSPP issuer must offer a uniform essential health benefits (EHB) package for each MSP, and the benefits for each MSP must be uniform within a state, but not necessarily among states. The benefits package in all states must be substantially equal to either the respective EHB-benchmark plan in each state, or any EHB-benchmark plan selected by OPM.

What fees will be assessed against MSPs?

The rule authorizes OPM to collect an assessment or user fee from MSPP issuers to cover the administrative costs of performing the contracting and certification of MSPs, as well as ongoing costs. This fee, which is included as a condition of participating in the MSPP, is estimated to be no more than 0.2 percent of premiums, and will not be on top of any fees charged by the Exchanges.

The rule states that any MSPP user fee collected by OPM must be offset against any state Exchange or federal Exchange user fee that the MSPP issuer must pay. This offset would preserve a level playing field for MSPP issuers in that they would pay the same total assessment or user fee to participate in an Exchange as all other QHPs. OPM does not intend to collect an assessment or user fee in 2014, but may begin collecting fees in 2015. OPM intends to issue more rules on this subject before any implementation fee would take effect.

What are some of the unresolved issues?

The final rule goes a long way towards offering a better understanding of the formation, operation and impact the MSPP will have on the individual and small group health insurance markets. We applaud OPM’s flexibility in its approach to the MSPP, as it indicates the realization that a one-size-fits-all tactic would ultimately prove challenging. However, some unanswered questions remain –

How will MSPs fit within an active purchaser Exchange?
Will MSPs dilute the impact of an active purchaser Exchange in terms of channeling covered lives into the plans that provide the deepest discounts?
Will MSPs be at a disadvantage compared to state regulated QHPs due to the dual regulation presented by OPM and state regulators?
How will conflicts between state and federal regulation ultimately be resolved?

As state and federal regulators continue implementing the various provisions of PPACA, this rule will provide useful guidance and clarification on the role and structure of the MSPP.

To read more about the interim final rule issued in December 2012 on the MSPP, go here.

To find answers to other frequently asked questions about health care reform, or to submit a question, we invite you to visit the reform Q&A page at www.HealthcareExchange.com.

PPACA Fails to Simplify Administrative Process

Fri, 15 Mar 2013 11:45:00 -0500

The Patient Protection and Affordable Care Act (PPACA) is failing to live up to a key promise that was made when the law was enacted in 2010 —simplifying the administrative process to obtain health insurance coverage through a state health benefits Exchange.

The U.S. Department of Health and Human Services (HHS) recently issued a draft of the paper application and a 60-page description of the online version earlier this week. While the White House has supported the law, claiming Exchanges, or “marketplaces,” will “help you find health insurance that fits your budget, with less hassle,” it is becoming increasingly clear that is not the case.

The application is only the beginning of a lengthy, convoluted application process. Once your application is sent to the Exchange, your information will be forwarded to the Data Services Hub, which will forward the information to several federal agencies, including Social Security for birth records, the IRS for income information, and Homeland Security to verify immigration status. The information that comes back from the government clearinghouse determines whether the applicant is eligible for subsidies. The federal agencies will then send that verified information back to the information hub which will then send approval notification back to the Exchange. The Exchange will then notify the applicant who may then select a plan, which will involve additional steps.

Concerns about privacy aside, critics are now worried the process is so complex it will overwhelm many applicants who will just give up.

The amount of time needed to complete the online application is estimated to be around a half hour, the paper version is estimated to take forty-five minutes according to the federal government. Ron Pollack, the executive director of Families USA, says, “This lengthy draft application will take a considerable amount of time to fill out and will be difficult for many people to complete.” Pollack is calling for the simplification of the form and increasing the number of Navigators that will be able to assist consumers in the application and selection process.

According to a statement by HHS spokeswoman Erin Shields Britt, the application is “being refined thanks to public input,” but argues it will still “help people make apples-to-apples comparisons of costs and coverage between health insurance plans and learn whether they can get a break in costs.”

Although PPACA may give the average consumer more information, it is still not ensuring that information is easy to understand. Clearly this is an area where Brokers could prove invaluable – not only in terms of their knowledge, but their ability to articulate complex insurance processes to consumers. For decades brokers have simplified the enrollment and payment process for millions of Americans. President Obama is making an error by excluding licensed brokers from the exchange process.

To find answers to other frequently asked questions about health care reform, or to submit a question, we invite you to visit the reform Q&A page at www.HealthcareExchange.com.

HHS Completes Initial Review of State-Based and Partnership Exchange Blueprints

Tue, 12 Mar 2013 12:53:00 -0500

Last week, the U.S. Department of Health and Human Services (HHS) announced the conditional approval of four states to operate partnership Exchanges. Iowa, Michigan, New Hampshire and West Virginia had declared their intention to build their respective Exchange systems in collaboration with HHS – an option available to states under the Patient Protection Affordable Care Act (PPACA) – but HHS had to review each state’s plan or “blueprint” for the Exchange before moving forward.

To date, HHS has reviewed the blueprints of seven states that have elected to operate a partnership Exchange with HHS rather than a state-based Exchange. HHS also has reviewed the state-based Exchange plans submitted by 17 states and the District of Columbia. Under PPACA, states are required to offer some type of health insurance Exchange or “marketplace,” as HHS calls it, whether state-based or through a partnership with HHS.

Twenty-six states have defaulted to federally facilitated Exchanges, meaning the Center for Consumer Information and Insurance Oversight (CCIIO) within HHS will run the operations of those new marketplaces.

Last month, HHS denied Mississippi’s state-based Exchange blueprint, the only state blueprint to be rejected by the agency due to some political issues within the state. Mississippi will default to a federally facilitated Exchange in light of this decision.

The health insurance Exchanges are scheduled to begin operation in October of this year. These marketplaces are intended to act as “one stop shops” for individual consumers and small employers to purchase health insurance plans. Through the new marketplaces, health insurance issuers can offer individual and small group plans when those plans are certified by the Exchanges. Issuers also have the opportunity to offer plans in multiple states if the plans meet criteria determined by the Office of Personnel Management (OPM), which just released a final regulation on multi-state plans earlier this month.

In making the announcement, HHS Secretary Sebelius said, “HHS will continue to work collaboratively with all states to build the Marketplace….Working together, we will be ready in seven months when consumers will be able to use the new marketplace to easily purchase quality, affordable health insurance plans.”

Some policy experts continue to express concern about the existing timelines and whether the “Exchange” system will be ready for open enrollment by the fall.

To find answers to other frequently asked questions about health care reform, or to submit a question, we invite you to visit the reform Q&A page at www.HealthcareExchange.com.

Exchange Deadline Passes: 50% of States Default to Federally-Facilitated Exchanges

Tue, 26 Feb 2013 17:18:00 -0600

As implementation of President Obama’s health insurance reform law continues, a major deadline has come and gone.

States were required to notify the U.S. Department of Health and Human Services (HHS) by Friday, February 15, if they planned to establish a state-based health benefits Exchange. If HHS did not receive notification, the state is deemed to default to a federally-run Exchange. Regardless of whether the state or federal government is in charge, the Patient Protection and Affordable Care Act (PPACA) requires that Exchanges be operational by October 1 of this year.

As of February 15, the following 26 states defaulted to a federal Exchange: Alabama, Alaska, Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Wisconsin and Wyoming. As a result, the final tally implies the federal government will be tasked with implementing and maintaining Exchanges in at least half of the states.

Seven states are currently planning to implement a partnership Exchange, where the federal government will assist the states with certain portions of their Exchanges. Those states are Arkansas, Delaware, Illinois, Iowa, Michigan, New Hampshire and West Virginia.

Seventeen states and the District of Columbia are establishing state-based Exchanges. These states are California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont, Washington and the District of Columbia.

The final count indicates that the federal government will be at least partially involved in 33 Exchanges, while 17 states and D.C. will maintain their own Exchange marketplace.

The divide largely mirrors the political divide in Washington – states with Democrats in power largely chose to establish Exchanges and states with Republican leadership mostly defaulted to federal Exchanges Lucy Nashed, spokeswoman for Governor Rick Perry, explains the state’s decision to default to a federal Exchange as “Texas is not interested in being a subcontractor to Obamacare.” Other states have taken a less political approach. According to Christine Ferguson, director of the Rhode Island Health Benefits Exchange, “Many of the states have just run out of time for a variety of reasons. I’d be surprised if in the longer run every state didn’t want to have its own approach.”

While Friday appeared to be a hard deadline, HHS Secretary Kathleen Sebelius has indicated a willingness to continually work with states as they implement various provisions of PPACA. Exchanges are the centerpiece of PPACA, and are a necessary corollary of the law’s individual mandate requirement that will take effect January 1, 2014.

Regardless of whether a state or the federal government takes control of an Exchange, leadership must move quickly to meet the October 1 deadline in order to begin the open-enrollment process for qualified health plan (QHP) coverage effective January 1, 2014. We will keep you posted on the progress made on Exchanges.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

HHS Issues Final Rule on Essential Health Benefits

Thu, 21 Feb 2013 13:32:00 -0600

The Department of Health and Human Services (HHS) has released a 149-page final rule detailing the essential health benefits (EHB) requirements. Beginning in 2014, all new small group and individual market plans will be required to cover EHB categories. The rule largely codifies proposed rules that were released last November.

HHS Secretary Kathleen Sebelius praised the rule, stating, “People all across the country will soon find it easier to compare and enroll in health plans with better coverage, greater quality and new benefits.”

Insurers must cover EHBs offered in 10 categories of care including emergency services, maternity, mental health, substance abuse, and prescription drugs. States are given substantial flexibility in selecting a benchmark plan, and many have been moving forward based on the proposed rule issued in November. Ian Spatz, a senior advisor for Manatt, Phelps and Philips, says the rule is good news for states as they continue to implement the Patient Protection and Affordable Care Act (PPACA). “Over the summer, we’ll get to see what the plans look like and especially how much they will cost,” Spatz said.

The rule also clarifies that insurers must have policies that permit patients to get “clinically appropriate” prescriptions, even if those drugs are not on the insurer’s list of covered medications. This will provide a great deal of relief to cancer patients that may have been hit with tens of thousands of dollars in prescription drug costs.

Stephan Finan, director of policy for the American Cancer Society’s Cancer Action Network, lauds this as an improvement. “It suggests that if you need a drug and that’s not on the formulary, you can get it, which was not the case before,” he said.

Under the new rule, insurers will not be able to charge a co-payment if a polyp is removed during a colonoscopy. Until this new provision, insurers were able to reclassify the procedure as “diagnostic,” thus forcing liability back to the patient. The new rule also greatly expands mental health and substance abuse services.

While many are praising the final rule, the Children’s Hospital Association (CHA) expressed disappointment that HHS did not provide a strong definition of “habilitative” services for children. CHA released a statement expressing concern “that the flexibility HHS has given states to select services to include in essential health benefits packages could result in the exclusion of critical services for children, particularly those with severe disabilities and lead to state-by-state disparities.”

Although the final rule may, in fact, lead to disparities among states, the rule suggests HHS is taking a comprehensive approach to incorporating over 11,000 comments on previous EHB bulletins. According to HHS, comments were received by a wide variety of stakeholders including states, tribes, health plan issuers, consumer groups and health care providers. The final rule appears to be an effort to address many of these comments in a single, integrated platform.

For more information on EHB packages, go here.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

President Obama Links Health Care Reform to Rising Debt during State of the Union Address

Wed, 20 Feb 2013 14:53:00 -0600

During President Barack Obama’s state of the union address on February 12, the President touched on a number of key health care reform issues signaling that he will continue to push forward his agenda during his second Presidential term.

Early on in his speech, President Obama addressed the rising deficit, and the potential sequester in particular. While the President stated that the sequester would “slow our recovery and cost us hundreds of thousands of jobs,” Congress’ proposed alternative of making cuts to Medicare and Social Security benefits was described as “even worse.”

“Yes, the biggest driver of our long-term debt is the rising cost of health care for an aging population,” he said. “But we can’t ask senior citizens and working families to shoulder the entire burden of deficit reduction while asking nothing more from the wealthiest and the most powerful.”

President Obama noted that he is willing to enact additional reforms related to Medicare; reforms that he argued “will achieve the same amount of health care savings by the beginning of the next decade as the reforms proposed by the bipartisan Simpson-Bowles commission.”

This sentiment, while laudable in theory, may not lead to successful action. Many public policy and economic experts continue to criticize the Patient Protection and Affordable Care Act (PPACA) as unaffordable, although the President asserts that the Act is already helping to slow the growth of health care costs.

Clearly a large part of the President’s second term agenda will be focused on the successful implementation of PPACA with many of the more substantive changes going into effect next year (e.g., individual mandate, state health benefit Exchanges, and employer shared responsibility provisions, to name a few).

Among other health care reforms, the President will ask Congress to reduce taxpayer subsidies to prescription drug companies, ask more from the wealthiest seniors, and change Medicare billing to be based on the quality of care seniors receive. He concluded his statements on health care by indicating he was open to additional reforms, “so long as they don’t violate the guarantee of a secure retirement.”

As CNN’s Kevin Bohn wrote, much of the President’s legacy will be tied to what he accomplishes during his second term: “With the recovery still weak, unemployment at 7.9% and the nation's growth rate shrinking the last three months of 2012, the president and his team know much of his legacy may be dependent on helping reignite the economy.”

President Obama began his speech with a quote from President John F. Kennedy, “It is my task to report the state of the union. To improve it is the task of us all.” While everyone may be called upon to improve the state of the union, the wealthy are going to be called on to address the increasing deficit. “To hit the rest of our deficit reduction target, we should do what leaders in both parties have already suggested and save hundreds of billions of dollars by getting rid of tax loopholes and deductions for the well-off and the well-connected. After all, why would we choose to make deeper cuts to education and Medicare just to protect special interest tax breaks? How is that fair?”

Interestingly, the number of Americans watching the President’s state of the union address was lower than past President’s. In fact, Politico.com reports: “In general, viewership for Obama's State of the Union addresses has been in constant decline. He drew 52.4 million in 2009, 48.0 million in 2010, 42.8 million in 2011 and 37.8 million in 2012. His 2013 address was the second-lowest rated since Nielsen began recording viewership in 1993.”

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

Spike in Health Insurance Premiums Likely as PPACA Reforms Roll Out

Thu, 14 Feb 2013 00:00:00 -0600

With key elements of the Patient Protection and Affordable Care Act (PPACA) taking effect in the coming year, many health care and financial pundits foresee up to double-digit premium increases for insurance coverage. Yet others disagree, believing PPACA has the potential to keep insurance affordable. In fact, President Obama made this assertion during his recent State of the Union address.

One issue grabbing headlines is the looming implementation of employer and individual mandates as part of PPACA’s health benefit expansions and insurance reforms. This blog briefly examines several key factors that could impact future insurance premium levels.

Initial CBO Estimates
In 2011, the Congressional Budget Office (CBO) projected PPACA would have a mild impact on small and large employer plans – citing estimated premium increases of “somewhat less” than 10-13%. “Although premiums in the individual market will be higher on average, many people will end up paying less for health insurance,” said CBO Director Douglas W. Elmendorf in a statement before the U.S. House of Representatives’ Subcommittee on Health. “Premiums for employment-based coverage obtained through large employers will be slightly lower than they would otherwise be.”

However, many experts now disagree with the earlier CBO estimates, including some insurance actuaries that estimate insurance premiums could increase as much as 25-50% in the small-group and individual markets in coming years.

Tracking Costs
Two significant indicators of potential premium hikes are the Medical Care Index (MCI) and the Consumer Price Index (CPI). These indices effectively show the average change over time in the prices paid by consumers for certain goods; specifically, the MCI reflects changes in the cost of medical care.

The CPI has increased at a relatively low rate of 1.7% in the past year. However, the MCI has consistently exceeded the CPI, and last year increased at an annualized rate of 3.2%. These figures reflect a larger increase in the cost of medical care over other types of goods and services. In future years, the MCI rate might grow at an even faster clip as more uninsured and underinsured Americans, including high-risk individuals, have full access to the health care system through individual and employer mandates, along with program subsidies. This in turn could have significant impact insurance premiums.

Another reason for rising insurance costs looms – the PPACA mandate for community rating premiums with no pre-existing exclusions. Under PPACA, insurers will not be permitted to charge drastically different premiums to individuals with chronic conditions, even if the cost differential is due to anticipated costs of care. While some states already have modified community rating premiums, many do not. According to a recent Wall Street Journal article, some experts are predicting states such as Arizona, Arkansas, Georgia, Idaho, Iowa, Kentucky, Missouri, Ohio, Oklahoma, Tennessee, Utah, Wyoming and Virginia will experience the largest premium increases, as much as 65-100%. An additional 18 states, including Texas and Michigan, will likely see rate increases between 35-65%.

The PPACA mandate of richer benefit plans that offer additional services is also increasing costs. The minimum acceptable qualified health plan for 2014, also known as a Bronze Level plan, will have to cover 60% of the anticipated costs of benefits, and is required to cover services known as essential health benefits. These additional services necessitate higher costs to insurers, and in turn, to covered individuals.

While some of the increasing costs of medical care will be alleviated by federal government subsidies to qualifying individuals, consumers most likely will see an additional tax increase to pay for those subsidies, as well as fees associated with state and federal health benefits Exchanges. Age bands are also being utilized to manipulate premium costs. As part of this provision, young people will pay significantly more than actuarially anticipated costs to defray some of the expenses incurred with the care of older individuals. Even with this additional source of funding, it is not clear how long the federal government can defray some of these higher expenses.

Certain states are already calling for huge increases in premiums to cover some of these costs. In California, Aetna has proposed a rate increase of 22%, Anthem Blue Cross 26% and Blue Shield of California 20%. Florida and Ohio also have seen increases of at least 20% for some policy holders. Many of these proposed rate hikes have been approved by state regulators. Some states, such as New York, have maintained the ability to hold rate increases to under 10%.

However, not all of the evidence is pointing to skyrocketing medical costs in the near future. Several studies indicate health care costs have slowed in recent years, including a recent report by PricewaterhouseCoopers. “Health care spending in the United States has slowed considerably since 2009,” the report states. PricewaterhouseCoopers predicts medical costs will increase 7.5% for 2013, representing “the fourth year in a row of relatively flat growth.”

Absorbing Higher Costs
Many believe insurers have no choice but to pass on the costs of PPACA and its multitude of tax penalties to the consumer, in large part because PPACA did not address some of fundamental issues that lead to over-utilization and lack of personal accountability. To that end, Robert Zirkelback, a spokesman for America’s Health Insurance Plans (AHIP), says, “There’s a massive new health insurance tax that starts in 2014. For policies that are sold in 2013 and extend into next year, there’s going to be taxes imposed…As a result, like all taxes, they will be reflected in premiums charged.”

At the same time, many consumer advocates are taking issue with any attempt to pass the costs on to consumers. Some, including California insurance commissioner Dave Jones, have called for a federal provision that would give regulators the ability to deny excessive tax rates. And others, like Mr. Jones, argue that the premium hikes may not justifiably be passed on to the consumer. “California state law requires that premiums bear a relationship to the insurance sold to a particular customer,” Jones states. “In this case, what’s happening is that Anthem Blue Cross is collecting from customers…a fee that Anthem Blue Cross doesn’t have to pay until 2014.”

The Need to Expand the Insurance Risk Pool
One of the underlying goals of PPACA is to add more covered lives to the risk pool. However, National Association of Insurance Commissioners (NAIC) officials have pointed out that rate hikes could force young, healthy Americans to accept the tax/penalty instead of obtaining coverage. In a letter to the Centers for Medicare & Medicaid Services (CMS), the NAIC wrote, “States need as much flexibility as possible under the law to work with issuers to address this problem.”

Moving Forward
Balancing the needs of maintaining a healthy insurance market with the public policy goals of providing affordable coverage to all Americans is an important goal. The reality is that PPACA is not a silver bullet in accomplishing both goals. With the individual and employer mandates going into effect next January, government officials, consumer advocates and industry representatives will need to work together to navigate the best pathway going forward. Clearly, a one-size-fits-all approach will not work. States need to have the flexibility to identify local solutions that can keep a check on healthcare inflation while expanding coverage to as many residents as possible.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

Obama Administration Proposes Change to Contraception Rules

Fri, 08 Feb 2013 00:00:00 -0600

Earlier this month, the Obama administration announced a proposed rule change under the Patient Protection and Affordable Care Act (PPACA) that would relieve certain religious employers from paying for contraceptives for their female employees.

The proposed regulation, published by the U.S. Department of Health and Human Services (HHS) in the Federal Register, further expands and defines the groups that would be exempt from covering the costs of female contraception. The rule also addresses where the money to pay for the guaranteed coverage would come from, ensuring that religious groups will not be paying any portion.

The proposed rule states:

The guidance provides that, under the temporary enforcement safe harbor, the Departments will not take any enforcement action against an employer, group health plan, or health insurance issuer for failing to cover some or all recommended contraceptive services in a non-grandfathered group health plan (or any group health insurance coverage provided in connection with such a plan) where the plan is established or maintained by an organization meeting all of the following criteria:

The organization is organized and operates as a nonprofit entity.
From February 10, 2012, onward, the group health plan established or maintained by the organization has consistently not covered all or the same subset of recommended contraceptive services, consistent with any applicable state law, because of the religious beliefs of the organization.
The group health plan established or maintained by the organization (or another entity on behalf of the plan, such as a health insurance issuer or third party administrator) provides to participants a notice indicating that some or all contraceptive services will not be covered under the plan for the first plan year beginning on or after August 1, 2012, as set forth in the guidance.
The organization self-certifies that it satisfies the foregoing three criteria and documents its self-certification, as set forth in the guidance.

The temporary enforcement safe harbor is also available for insured student health insurance coverage arranged by nonprofit institutions of higher education with religious objections to contraceptive coverage that similarly meets the four criteria.

It appears that by changing the definition of a “religious employer,” the proposed rule ensures more organizations will be able to claim the exemption. Furthermore, an exempted organization will not be disqualified from claiming the exemption when:

1) Its express purpose extends beyond the inculcation of religious values;
2) It employs people of different religions; and
3) It does not primarily serve people with the same religious values. The revised regulation raises a new set of questions in terms of the expanded scope that will need to be addressed in the final rule.

Although the final details will need to be sorted out, female employees of exempt organizations will qualify for a separate insurance policy that only covers contraception and is not paid for by the employer or the employee. The proposed regulations imply that commercial insurers would cover the costs for standalone conception coverage because such coverage is “cost neutral” for the underwriter. For self-funded plans, the third party administrator (TPA) would help coordinate the funding of the coverage by claiming an adjustment in Federally-facilitated Exchange (FFE) user fees.

The original PPACA requirement that employers cover the cost of contraceptives as a preventive service was strongly opposed by religious employers who feel the requirement violated their 1st Amendment Rights and religious beliefs. Churches have been exempt from the requirement for some time, and recently the exemption was expanded to include some religiously affiliated institutions. The exemption will not extend to private businesses whose owners express moral reservations about the requirement. Several lawsuits challenging the provision are currently in litigation, and it is anticipated the issue will ultimately reach the U.S. Supreme Court.

President Obama supports the new regulation under the premise it guarantees contraception for women while respecting religious beliefs. HHS Secretary Kathleen Sebelius mirrored this sentiment, stating, “Today, the administration is taking the next step in providing women across the nation with coverage of recommended preventive care at no cost, while respecting religious concerns. We will continue to work with faith-based organizations, women’s organizations, insurers and others to achieve these goals.”

While the proposed rule is being praised by some, critics say the compromise is not enough. The president of the U.S. Conference of Catholic Bishops, Cardinal Timothy Dolan of New York, expressed his dissatisfaction with the regulation saying, “Throughout the year, we have been assured by the Administration that we will not have to refer, pay for, or negotiate for the mandated coverage. We remain eager for the Administration to fulfill that pledge and to find acceptable solutions – we will affirm any genuine progress that is made, and we will redouble our efforts to overcome obstacles or setbacks.”

Similar sentiments were echoed by parties to current litigation challenging the mandate. “After over a year of litigation, our clients and many others like them were hoping for much, much more from the administration,” Kyle Duncan, general counsel for the Becket Fund for Religious Liberty, stated on a conference call. “The rights of family businesses like Hobby Lobby are still being violated.”

The proposed regulation remains open for public comment through April 8, 2013.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

Concerns Linger Whether PPACA Can Achieve Public Policy Goals

Tue, 05 Feb 2013 00:00:00 -0600

Although we often hear both from the supporters and critics of the Patient Protection and Affordable Care Act (PPACA), a rising chorus of concern is being heard almost daily now in major media outlets. The news and analysis now is being driven by a more pragmatic and somber approach as many new programs and requirements will go in effect in 2014. A recent opinion piece in The Wall Street Journal by Daniel P. Kessler, a professor at Stanford University, showcases this trend.

In his letter to the Journal, Mr. Kessler outlines four distinct ways PPACA has failed to meet expectations. He notes that PPACA has failed to lower health care costs, reduce deficits, preserve existing insurance structures, or increase productivity – the four grounds PPACA originally was sold on. Each of these failures, he asserts, “have become increasingly implausible.”

Lower Health Care Costs
Perhaps the key selling point PPACA proffered was reducing the costs of health insurance. That argument is becoming increasingly invalid, particularly in light of anticipated premium hikes. Original estimates projected that families would save approximately $2,500 a year as a direct result of the law. Now, insureds are facing premium increases up to 85% in some areas.

Federal agencies also expect premium payments to soar, as evidenced by a final regulation issued by the Internal Revenue Service on January 30. The regulation, which features practical, “real world” scenarios, the cheapest health insurance plan for a family costs $20,000 a year. Proponents argue that when subsidies are taken into account, PPACA will lead to lower insurance prices. Mr. Kessler refutes this claim, pointing out that the funding for subsidies “has to come from somewhere.”

Reduce Deficits
In 2010, the year PPACA was signed into law, the Congressional Budget Office (CBO) estimated the cost of expanding insurance would be $154 billion. That number has grown to $186 billion for 2012, and will likely still rise. Even given these expanded estimates, the CBO continues to rate the law as reducing the deficit. The rationale behind the positive budget score stems from savings derived from Medicare – a difficult rationale to make given the consistent unwillingness of Congress to make cuts to Medicare.

Preserve Existing Insurance
According to healthcare.gov, a website maintained to inform consumers about PPACA, individuals will be able to maintain their existing insurance coverage under the law. This claim was reiterated by President Obama in June 2012 after PPACA was largely upheld by the U.S. Supreme Court. This claim, however, also is not likely.
In his opinion piece, Mr. Kessler cites several facts that demonstrate existing insurance is changing, including the required coverage of services deemed essential by the Secretary of the Department of Health and Human Services (HHS), and the imposition of an excise tax on premium health plans. Mr. Kessler also cites the fact that many employers who currently sponsor coverage for their employees may choose to drop that coverage due to rising costs and instead pay the tax/penalty.

Increase Productivity
Finally, Mr. Kessler says the claim that expanded coverage under PPACA will lead to reduced absenteeism, disability and mortality is doubtful. He cites the Robert Wood Johnson Foundation’s Economic Research Initiative on the Uninsured, which found a lack of evidence supporting the claim that health insurance improves the health of non-elderly adults. Mr. Kessler also argues that income-based subsidies create disincentives for individuals to continue working.

As HHS continues to announce millions of dollars in grants for PPACA implementation, it becomes increasingly difficult to justify the funding as beneficial to the majority of Americans. Perhaps, as Mr. Kessler mentions, there is a moral justification to provide health insurance coverage regardless of cost. However, this was not the original purpose of PPACA.

“If we are ever to have an honest debate about entitlement spending, we will need to distinguish these positions from one another,” Mr. Kessler states, “and see them for what they really are, rather than what we wish they would be.”

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

HHS Announces New Rule to Strengthen HIPAA

Mon, 28 Jan 2013 00:00:00 -0600

On January 17th, Secretary Kathleen Sebelius of the Department of Health and Human Services (HHS) announced a new rule aimed at strengthening the privacy and security provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

The 563-page rule provides the public with more protection, and control over personal health information. Secretary Sebelius lauded the rule stating, “The new rule will help protect patient privacy and safeguard patients’ health information in an ever expanding digital age.”

Business Associate Definition Expanded

The rule expands the category of persons subject to HIPAA requirements (i.e., beyond health care providers, health plans, clearing houses, and existing business associates,) to directly cover other business associates that might have direct or indirect access to protected health information (PHI). The expanded business associates include health information exchanges, e-prescribing gateways, and personal health record vendors acting for covered entities. Data storage providers are also included as business associates, even if the entity never views or accesses the data. Traditionally, some of these companies took the position that they were not business associates per se, but the new rules make it clear that they are now part of the PHI transaction.

Expanded Penalty Provision

The new rule makes clear that all business associates, as well as covered entities, are directly subject to the HIPAA rules and are subject to penalties for failing to comply with HIPAA provisions. In addition, penalties for any entity that knowingly or willfully committed multiple violations of the same provision is increased to a maximum of $1.5 million per violation. The rule also clarifies when breaches of information must be reported to the HHS Office of Civil Rights.

Patient Rights

The new rule expands a patient’s ability to access a copy of their medical information both in electronic format – as well as paper from their treating provider. The provision of HIPAA that allowed an individual to access their PHI traditionally operated in a paper-based format, thus the expansion of the rule to include electronic forms signals a shift towards the acceptance of new technology.

Further when paying by cash, patients can instruct their provider not to share information about their treatment with their health plan.

An individual’s ability to authorize the use of their personal health information for research purposes is also expanded under the new rule. Previously, any release of PHI had to be study specific. Under the new rule, an authorization for future study is acceptable so long as the research is adequately described and the individual has a reasonable expectation their PHI will be used or disclosed for that research. Parents will find it easier to share their child’s immunization records with schools due to the rule’s new provisions.

However, the revised rule also requires more transparency in certain cases as to how the patient’s PHI will be used under any waiver. For example, a covered entity must obtain a valid authorization from the patient before using or disclosing PHI for marketing communications that involve financial remuneration. The authorization must disclose the fact that the covered entity or business associate is receiving reimbursement from a third party.

Final Thoughts

Director Leon Rodriguez of the HHS Office of Civil Rights also praised the rule, stating,

“This final omnibus rule marks the most sweeping changes to the HIPAA Privacy and Security Rules since they were first implemented. These changes not only greatly enhance a patient’s privacy rights and protections, but also strengthen the ability of my office to vigorously enforce the HIPAA privacy and security protections, regardless of whether the information is being held by a health plan, a health care provider, or one of their business associates.”

Most privacy experts are advising their clients to re-evaluate their current HIPPA compliance program and requirements to make sure that all the new changes and exemptions are incorporated into the covered entities or business associates policies and procedures.

The rule will be effective as of March 26, 2013. Entities have until September 21, 2013 to be in compliance with the rule’s provisions.

Brokers and Payroll administrators also should take a closer look at the new regulations. BenefitMall will likely post additional updates before the changes go into effect later this year.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

Employer Mandate to Be Based on 2013 Numbers

Wed, 23 Jan 2013 00:00:00 -0600

Beginning on January 1, 2014, the employer mandate provision of the Patient Protection and Affordable Care Act (PPACA) will become effective. This provision requires employers with 50 or more full-time equivalent employees to offer those employees health insurance benefits that satisfy certain affordability thresholds. Many employers do not realize that the application of the employer mandate will be based on the number of employees on the books in 2013.

According to guidance issued on December 28 , the government will rely on employer’s 2013 data to determine whether the employer is subject to a penalty for failure to comply with the requirement. Under the proposed regulation, if a company has 50 or more full-time equivalent employees on the record, that employer must provide those employees with insurance that meets affordability and minimum value requirements.

The guidance provides some clarification on how to determine the size of the firm. For example, employers can choose to calculate the number of full-time equivalent employees by averaging all 12 months of 2013, or by using a consecutive six-month period within the year.

A tax/penalty will apply if:

1) An employer is subject to the threshold and either does not provide any coverage.

2) The employer provides insurance that does not meet affordability or minimum value thresholds, and one or more employees receives a premium subsidy for coverage obtained via a state health benefits Exchange.

This guidance should spur employers to make decisions as to the composition of their work force now. Employers must take a proactive approach to remain compliant with PPACA and its various provisions.

To read more on the employer mandate, please click here .

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

Proposed IRS Rule Clarifies PPACA's Employer Coverage Requirements and Tax Penalties

Thu, 17 Jan 2013 00:00:00 -0600

On December 28, the Internal Revenue Service (IRS) released a long anticipated proposed regulation that clarifies the employer shared responsibility provisions created by the Patient Protection and Affordable Care Act (PPACA). The proposed rule, which is based upon Section 1513 of PPACA and is now codified in Section 4980H of the Internal Revenue Code, has emerged as a cause of concern for many large employers.

Under Section 4980H, many large employers must provide minimum essential coverage to their employees or pay a tax/penalty. The tax/penalty kicks in if:

The employer fails to offer minimum essential coverage and an employee is certified as having received a premium tax credit; or
The employer does offer minimum essential coverage but one or more employees have to pay more than 9.5% of their salary for the coverage and are certified as having received a premium tax credit.

The new rule outlines the long-awaited rules relating to the administration and assessment of tax/penalties. In addition, the new proposed regulation clarifies several outstanding issues covering how a large employer:

Determines who qualifies as a full-time employee;
Determines assessable payments; and
Verifies whether an employer is subject to tax/penalties pursuant to Section 4980H(b).

For more information, the IRS also posted a new question and answer section on their webpage.

Determining Applicable Large Employers

Several questions have arisen in terms of calculating whether an employer is a large employer under the statute. The proposed regulation clarifies that the common law definition of an employer will be used, where an employment relationship exists “when the person for whom the services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished.” This definition will be used in place of the definition used in the Fair Labor Standards Act.

In terms of determining whether a large employer has over 50 full-time equivalent employees, the proposed rule bases the calculation on a “look-back” basis, using data from the prior year. Specifically, the employer will include the hours of services of all employees during the prior year to calculate the number of full-time equivalents. Employers will also be permitted to use any six-consecutive-month period in 2013 in determining whether they have 50 full-time equivalent employees.

The rule also provides some clarification on seasonal workers. Under Section 4980H(c)(2)(B)(ii), if an employer’s workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year, and if the employees over the 50 threshold who were employed during that year worked no more than 120 days, the employer will not be qualified as a large employer. The proposed rule clarifies that for the seasonal worker exception, an employer may utilize either the 120-day period or the four-month period, whether or not either time frame is consecutive.

The proposed rule also provides guidance in determining whether an employee is a full-time employee. The rule clarifies that a full-time employee is employed on average at least 30 hours of service per week. The original regulation had defined a full-time employee based on number of hours worked, whereas the proposed regulation adopts the term hours of service that includes time where an employee is entitled to payment even when no work is performed.

Regulatory Framework

If an employer fails to provide coverage under an employer-sponsored plan, liability is incurred under Section 4980H(a); if an employer fails to provide coverage that is affordable or fulfills minimum value requirements, liability is incurred under Section 4980H(b).

The calculation of the tax/penalty depends on whether liability has arisen due to a violation of Section 4980H(a) or (b). Under Section 4980H(a), the penalty will be assessed based on all full-time employees, excluding the first 30, while under Section (b), the penalty is based on the number of full-time employees who are certified as receiving a premium tax credit.

Additional Clarifications

The proposed rule has ruffled some feathers in regards to an employer’s liability for penalties. Whereas PPACA calls for large employers to offer coverage to all its employees, the rule states that the tax/penalty will be triggered if:

1) The employer does not offer health coverage or offers coverage to less than 95% of its full-time employees, and at least one of the full-time employees receives a premium tax credit; or

2) The employer offers health coverage to at least 95% of its full-time employees, but at least one full-time employee receives the tax credit due to the coverage being unaffordable, not satisfying minimum value requirements, or was not offered to the employee.

Coverage must be offered to 95% of full-time employees and their dependents in order to avoid paying the tax/penalty. The proposed rule differs from industry norms in that a dependent is defined as a child under the age of 26, but does not include spouses.

If an employer offers multiple coverage options, the affordability test will be applied to the lowest-cost option available to that employee. The rule incorporates various safe harbor methods for determining affordability that were set forth in previous guidance.

The amount of the tax/penalty is also clarified in the rule. For employers that do not offer health care coverage to their full-time employees, and their dependents, the penalty will be $2,000 per full-time employee (excluding the first 30 employees). For employers that offer coverage that does not satisfy minimum value or affordability requirements, the amount of the penalty will be $3,000 per employee that receives a premium tax credit.

The proposed rule also specifies that the IRS will contact employers directly to inform them of their potential liability and afford the employer a chance to respond. Any payments assessed against an employer will not need to be included on a tax return.

Finally, the proposed rule provides transition relief for some employers that already offer health coverage through a fiscal year plan. If an employee is eligible to participate in the plan as of December 27, 2012, the employer will not be subject to a potential payment until the first day of the fiscal plan year beginning in 2014. Also, if the fiscal year plan was offered to at least one third of the employer’s employees at the most recent open season or the fiscal year plan covered at least one quarter of the employees, the employer will not be subject to any payments until the first day of the fiscal plan year in 2014.

Final Thoughts

These regulations provide some much-needed clarification for large employers to assist them in complying with shared responsibility requirements under PPACA. There will likely be additional clarification guidance issued by HHS as the January 1, 2014, individual mandate implementation date comes closer.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

HHS Issues Update on PPACA’s Pre-Existing Condition Insurance Plan (PCIP) Program

Tue, 15 Jan 2013 00:00:00 -0600

The Department of Health and Human Services (HHS) recently issued an update highlighting state involvement with the Pre-Existing Condition Insurance Plan (PCIP) Program. The purpose of the PCIP Program is to make health insurance available to individuals who have been denied coverage by insurance companies because of a pre-existing condition.

The PCIP Program is aimed at the approximately 9.4% of the health insurance market for individual coverage (i.e., those individuals who do not have group coverage). The group health insurance and self -funded plans were already prohibited from refusing to cover applicants with pre-existing exclusions who were new hires, were in open enrollment periods or who had portability certificates. The PCIP will provide useful benefits to these individuals, including primary and specialty care, hospital care, and prescription drugs. Eligibility for the program is not based on income.

The PCIP Program was created by the Patient Protection and Affordable Care Act (PPACA) and is administered by either the state or federal government. To date, 23 states and the District of Columbia have deferred to the federal government to administer the program, and 27 states have elected to run their own program.

The HHS update includes state-by-state specific information on who is administering the PCIP in each state and the number of individuals who have enrolled in the program as of October 31, 2012. As an aside, the PCIP Program will no longer be available as of January 1, 2014, when the PPACA provision prohibiting insurers from denying coverage based on pre-existing conditions will go into effect.

Unfortunately, many experts believe the PCIP Program has delivered mixed results. The Congressional Budget Office estimated that about four million individuals had pre-existing exclusions preventing them from obtaining health insurance. Initial estimates projected that 200,000 Americans would actually enroll in the program. In June of 2011, due to the low number of individuals signing up, the Obama Administration lowered the eligibility standards and cost of coverage as an enticement to increase enrollment. Although the revised premiums and eligibility standards did help increase enrollment, the total numbers did not hit the initial predictions. As of October 31, 2012, 94,458 individuals had signed up for the PCIP Program. California boasts the highest number of participants at 13,584, whereas Alaska has the fewest participants at 42. Both Massachusetts and Vermont are guarantee issue states, and have very few participants.

In addition to the on-going PCIP Program enrollment challenges, these high-risk pools are experiencing higher than expected costs. As a result, the PCIP Program is at risk of exceeding the $5 billion budget before 2014. A report from CMS states, “On average, the PCIP program has experienced claims costs 2.5 times higher than anticipated, which the data suggest are due to the acute, costly medical needs of the population PCIP is serving.”

To the extent that this program is currently providing health insurance to some individuals who need the coverage, it is meeting that goal. To the extent that it is exceeding its anticipated costs by a factor of 2.5, it calls into question the administration’s ability to accurately predict the overall costs of the health insurance reform initiative.

For more information on the PCIP, please go here. To view the fact sheet, please go here.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

How to Report Health Care Costs on an Employee’s W-2

Wed, 09 Jan 2013 00:00:00 -0600

As of January 1, 2013, certain employers must report the cost of health care coverage provided under an employer-sponsored group health plan on employees’ W-2 forms. This requirement became effective as of January 1, 2012 but was deferred by making the requirement optional for employee’s Tax Year 2011 W-2 forms. The requirement is now effective for employee Tax Year 2012 W-2 forms that will be issued in 2013.

The IRS has provided some additional relief to employers who issue fewer than 250 W-2 forms in the previous calendar year, as those employers do not have to report health care costs on Tax Year 2012 W-2 forms. Key information related to this new requirement stemming from the Patient Protection and Affordable Care Act (PPACA) can be found in the latest Legislative Alert from BenefitMall.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

State Health Benefit Exchanges: An Update

Mon, 07 Jan 2013 14:47:00 -0600

Last week, many of us heard news updates about the status and development of State Health Benefit Exchanges pursuant to the Patient Protection and Affordable Care Act (PPACA). States were supposed to relay their intent to run an Exchange at the beginning of the year to the U.S. Department of Health and Human Services (HHS).

There is a lot going on, so let’s give you a brief update on what the state and federal governments are up to since the “Exchange System” is a cornerstone of PPACA and scheduled to go live in 2014. Because there is so much going on, it is likely that the information in this blog will change weekly as states move towards, or away, from creating their Exchange. Under PPACA, each state must implement a state health benefits Exchange or defer to the federal government to create a federal Exchange. States also can partner with the federal government to jointly create and operate an Exchange.

For previous BenefitMall blogs on Exchanges, click here.

States Moving Forward with a State-Based Exchange

As of January 3, HHS announced conditional approval had been granted for 17 states and the District of Columbia to run a state-based Exchange. The states are California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont and Washington.

Secretary Sebelius congratulated the states on moving forward. “In ten months,” she said, “consumers in all fifty states will have access to a new marketplace where they will be able to easily purchase affordable, high quality insurance plans, and today’s guidance will provide the information states need to guide their continued work.”

"We continue to work with the states," CCIIO Director Gary Cohen said during a conference call the same day of HHS’ announcement. "Each state is in a different stage, so we don't feel that we need to have a deadline today, but the commitment is that they'll either operate a state-based Exchange or we'll have a federally facilitated Exchange in each state."

However, most states are still not explicitly on board in running their own exchanges. The rest of the blog highlights what is going on.

Creating a Joint State-Federal Exchange

Those states that did not declare an intent to establish a state-based exchange may still decide to partner with the federal government to create a joint Exchange. Other states that may choose this pathway have until February 15, 2013, to make this election. Conditional approval was granted by HHS for Arkansas and Delaware to operate a state-federal partnership health benefits Exchange.

More states will likely follow this option in the future. For example, other states that are planning for a partnership exchange include: Illinois, Iowa, Michigan, North Carolina and West Virginia.

HHS also just released additional guidance on how states can partner with the federal government to coordinate running of an Exchange. The guidance delineates the areas in which states can take control and ownership within the Exchange, specifically in terms of plan management, consumer assistance and outreach.

HHS also leaves the door open for states to run their local Exchanges in the future:

“The State Partnership Exchange options provide states with a high level of participation in plan management and consumer assistance/outreach either on a permanent basis or as a stepping stone to a State-based Exchange in the future.”

To read the guidance in its entirety, please click here

States Defaulting to a Federal Exchange

Twenty-five states have made the affirmative decision to refuse to create an Exchange, and default to the federal government to create and implement an Exchange within the state. The states that are defaulting to a federal Exchange as of January 3 include Alabama, Alaska, Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Maine, Missouri, Montana, Nebraska, New Hampshire, New Jersey, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Wisconsin, and Wyoming.

State Decision-Making

All states share common concerns about how the Exchanges will be funded long term and most states have concerns that are unique to their jurisdiction regarding which approach is best.

Many public policy experts are weighing in on the matters – with varying perspectives.

Most of the governors of those states refusing to establish a state health benefits Exchange are concerned with the undefined, ongoing operating costs. To further complicate matters, the federal government has indicated it plans to assess a 3.5% fee on plans sold through federal Exchanges to help raise funds.

Bryon York, writing for the Washington Examiner, notes that there are significant reasons for states to reject health insurance Exchanges. Due to the recently released regulations, states will have little if any control over these Exchanges. They have little incentive to set them up and be exposed to the undefined cost of running them. There is also widespread suspicion that these Exchanges may become a bureaucratic swamp and if they don’t work, it will be better for the state if the blame falls on the federal government.

In contrast, Sabrina Corlette of the Center for Health Insurance Reforms at Georgetown University believes the federal government will not be as effective as local governments at delivering information to the state’s population. “It’s a heck of a lot harder for the feds to do this because health care is local,” she says. “The kind of public education campaign, the billboards and the ads and the words you use to describe this stuff might be quite different from Alabama to Oregon or Minnesota to Texas.”

Undoubtedly things will heat up during the course of the year, as the Exchange System will need to be ready for open enrollment this fall for 2014 coverage. We will keep you up to date as states continue to establish Exchanges, and the federal government clarifies its role in Exchanges moving forward.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

HHS Issues New Rules on Market Reform

Wed, 26 Dec 2012 00:00:00 -0600

Last month, the U.S. Department of Health and Human Services (HHS) issued a series of proposed rules that clarify how the federal government intends to implement various portions of the Patient Protection and Affordable Care Act (PPACA). The 131 page rule addresses market reform, wellness programs, and essential health benefits (EHB) packages. This blog focuses on the market reform requirements that are promulgated in the proposed regulations.

The market reform rule provides greater detail on key implementation elements addressing health insurance premiums, risk pools, guaranteed issue, guaranteed renewability, and the catastrophic plans. The rule closely follows the provisions of PPACA; however, there is very little new regulatory ground covered in this release.

Insurance Premiums

Non-grandfathered insurance coverage sold through an Exchange and effective after January 1, 2014, must meet new premium underwriting requirements. Specifically, premium variations must be limited to four factors: age, tobacco use, family size and geography. In addition, the rule limits the impact of these factors by designated rating bands. For example, premium variation according to age is limited to a factor of three. Variations due to tobacco use may only vary by a factor of 1.5, and are further subject to restrictions based on the individual’s participation in wellness programs. Insurers can also use family size and geographic factors in their rating system.

As of January 1, 2014, other factors currently employed in individual and small group insurance premium rating systems will be excluded, including: pre-existing conditions, health status, medical history, length of coverage, sex, occupation, small employer size and industry classification. The rules provide that a state may require more stringent rating requirements.

Guaranteed Renewability of Coverage

This rule mandates that health insurers providing coverage to individuals in the non-group market and employees (along with their dependents) of small group employers must guarantee renewal of coverage with a few exceptions. In the individual and small group markets, exceptions include failure to pay the premium or an act of fraud. For the small group market, additional exceptions include the failure of a plan sponsor to comply with material insurance contract provisions relating to employer contributions, group participation rules, or other key state requirements. A few other exceptions exist including insurers who are exiting the entire individual or small group market in a state.

Risk Pools

In order to limit adverse risk selection, the rule mandates that each state maintain one risk pool for the non-grandfathered individual health insurance market and one risk pool for the non-grandfathered small employer insurance health market that is covered by PPACA. This will guarantee that future premium increases will be based upon one overall population in each market. The rule also offers states the opportunity to merge the two risk pools into a single risk pool to further minimize the opportunity for adverse selection.

Next Steps

All three rules issued by HHS on November 20 remain in the “proposed” stage, which means HHS could make additional changes. The agenda is requesting feedback on the updated essential health benefits and market reforms rules, with comments due by December 26, 2012.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

OPM Reveals Proposed Rule on Multi-State Plan Program

Thu, 20 Dec 2012 00:00:00 -0600

On December 5^th, the Office of Personnel Management (OPM) released its proposed rule on the Multi-State Plan (MSP) Program. The rule, issued in accordance with section 1334 of the Patient Protection and Affordable Care Act (PPACA), outlines the process that OPM will follow when it establishes the MSP Program. It also delineates the standards and requirements for multi-state plans.

The draft regulations are based on feedback OPM received after a June 16, 2011, Request for Information, as well as several meetings with stakeholder groups, including the National Association of Insurance Commissioners (NAIC). This blog takes a closer look at the MSP Program and what the proposed rule means for the health care community moving forward.

Multi-State Plans

PPACA authorizes OPM to contract with private health insurance issuers to offer at least two multi-state plans in state health insurance Exchanges. MSPs will be offered to individuals and small employers purchasing coverage through state health benefit Exchanges beginning in 2014, and will “foster competition among plans competing in the individual and small group health insurance markets on the Affordable Insurance Exchanges on the basis of price, quality, and benefit delivery.” The rule states several objectives, including:

Ensure a choice of at least two high-quality products for consumers participating in each Exchange
Promote competition in the health insurance marketplace to the benefit of all consumers
Offer plans from the same issuer to families or small businesses that may reside or operate in more than one state
Provide strong, effective contractual oversight of the issuers that choose to offer MSPs, and
Work cooperatively with states and HHS to ensure a level playing field between Qualified Health Plans (QHP) and MSPs

The program also has several stated benefits. In areas with limited health care coverage options, the MSP Program will offer consumers at least two coverage options. Insurers will also benefit from additional participation opportunities in all Exchanges.

To become an MSP, an insurer must offer at least two plans, one at the silver level of coverage, and one at the gold level. The proposed rule also requires that MSP Program issuers be accredited, or become accredited according to QHP requirements. The coverage issued by MSP Program issuers may be phased-in over a four-year implementation period, starting with 60% of states involved the first year then growing to 100% by year four. According to the rule, all issuers will be considered on a level playing field for MSP Program participation, and will not enjoy any competitive advantages or disadvantages.

MSP Plan Requirements

Each MSP must comply with several key requirements as outlined in the proposed rule, including essential health benefit (EHB) and cost-sharing requirements. With respect to EHBs, each MSP must conform to the state’s EHB package, or a package as determined by OPM. The list of benefits, including the prescription drug list, must be submitted to OPM and approved. Each MSP also needs to fulfill cost-sharing requirements as mandated by section 1302(c) of PPACA and OPM standards. Plans must also make available any premium tax credits to eligible individuals.

Each plan must also adhere to several requirements aimed at ensuring a level playing field. These requirements specify guaranteed renewal, rating requirements, preexisting condition coverage, non-discrimination requirements, quality improvement and reporting measures, fraud and abuse protections, licensure, solvency and financial requirements, market conduct, prompt payment, appeals and grievances procedures, privacy and confidentiality regulations, and benefit plan material or information requirements.

Contracting of MSPs

The rule outlines a proposed contracting process to obtain MSPs. The proposed rule states that OPM will not be required to enter into contracts with issuers based on competitive bidding processes, but rather will contract with issuers for one year terms that can be automatically renewed. The rule also stipulates that OPM will enter into a contract with at least one non-profit entity. The Director of OPM can withdraw approval of an MSP Program contract after notice and opportunity for a hearing. The Director of OPM is also tasked with negotiating with each MSP the medical loss ratio, a profit margin, the premiums to be charged, and such other terms and conditions of coverage as benefits the plan enrollees. In particular, the Director of OPM is given the authority to determine whether the plan complies with EHB requirements. Throughout this process, the Director of OPM is to keep the MSPs separate from the federal plans.

Conflicts with State Law

One facet of the proposed rule deals with state laws that may conflict with OPM regulations. OPM suggests that while they require MSP Program issuers to comply with all state laws that relate to section 1324(b) of PPACA, the agency proposes a process allowing states to seek to change the regulations, OPM guidance, or OPM contracts in order to phase-in the program’s compliance with the laws.

Request for Public Comment

OPM is seeking public comment on three specific areas of the proposed rule: 1) appeals; 2) rating; and 3) benefit plan material or information:

Appeals : In the proposed rule, OPM proposes it will resolve external conflict through an approach similar to that utilized in governing federal health plans – a contract administration approach. This strategy is delineated in Section 2719 of the Public Health Service (PHS) Act and its implementing regulations at 45 CFR 147.136.

Rating : OPM proposes that to comply with PPACA, rating factors contained in PHS Act section 2701 should be utilized. The rule specifically states that OPM does not consider “rating” to have the same meaning as “rate review,” and indicates OPM will conduct its own rate review process.

Benefit Plan Material or Information : The proposed rule defines the term “benefit plan material or information” as including explanations or descriptions, whether printed or electronic, that describe a health insurance issuer’s products, but does not include a policy or contract for health insurance coverage. In the proposed rule, OPM writes that MSPs will be subject to both federal and state laws governing benefit plan material or information.

Comments are due back to OPM on or before January 4, 2013.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

HHS Unveils New Regulations Pertaining to Wellness Programs

Mon, 17 Dec 2012 00:00:00 -0600

On November 20^th, the Department of Health and Human Services (HHS) released a proposed explanatory rule that provides further guidance for Patient Protection and Affordable Care Act (PPACA) implementation. The rule addresses market reform, wellness programs, and essential health benefits (EHB) packages. This update highlights some of the key elements of the 81 pages of proposed regulation addressing wellness programs.

The regulation, which applies to both grandfathered and non-grandfathered plans in the insured and self-insured markets, will become effective for plans beginning on or after January 1, 2014.

Encouraging Uniform Access to Rewards

In an effort to motivate individuals to take control of their own health, PPACA expands upon various wellness programs by increasing incentives for individuals and encouraging opportunities to support healthier workplaces. The proposed rule, which largely mirrors wellness program guidance that was issued in the past by the federal government, focuses on wellness programs that are appropriately designed and applied in a nondiscriminatory manner. The rule attempts to move providers away from rewarding participants based on actual health measures to recognizing individuals for simply participating in a wellness program. Thus, the regulation proposes certain guidelines for company wellness programs designed to protect consumers from unfair practices. The rule includes:

A requirement that the plan be reasonably designed to promote health or prevent disease, in that there is a reasonable alternative means of qualifying for the reward available to an individual who does not meet the standard
Plans must be reasonably designed to be available to all similarly situated individuals
Each individual must be given notice that they may qualify for the reward through other means

For example, a wellness program that seeks to reward individuals for not smoking would be compliant if the employer sends a form to all individuals that, when signed, would certify that the individual has not used tobacco in the past year. If an individual would like to receive the reward, but is addicted to nicotine, a reasonable alternative for qualifying for the reward would be if the individual could still receive the reward after participating in a smoking cessation program.

The amount of the reward a recipient may receive can range from 20 to 30 percent of the cost of health care coverage, and can be further increased to 50 percent if the program is designed to reduce or prevent the use of tobacco. Individuals must be able to qualify for the reward at least once per year.

Positive Reaction from Healthcare Personnel

Industry insiders such as Dr. Stephanie A. Mills of Franciscan Health and Wellness Services, Inc. say the regulation is a good starting point and provides a good framework. “I believe that it can be instrumental in providing clarity for the path forward for employers and decreasing that anxiety to jump into this by addressing the top concerns that employers have,” Dr. Mills states. “Overall, for those of us who are supporting wellness programs, this is well in line with the best-practice approach.”

While initial costs may be higher due to increased coverage of programs, there is potential for long-term savings. The focus on affordability of health care and insurance was the main theme of Karen Ignagni, president of America’s Health Insurance Plans (AHIP). Ms. Ignagni said, “We appreciate that the proposed rules issued today seek to minimize coverage disruption and we look forward to working with the department to achieve this goal.”

Next Steps

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

Close-Up Look at PPACA's Ground Rules for Health Plan Offerings Inside and Outside of Exchanges

Wed, 12 Dec 2012 00:00:00 -0600

By January 1, 2014, nearly all health plans need to be in full compliance with the provisions and associated guidance and rules of the Patient Protection and Affordable Care Act (PPACA). This blog addresses some basic questions for health plans that want to offer individual and small group coverage both inside and outside of the state health benefit exchanges.

Do all health plans have to be compliant with PPACA provisions in 2014?

Individual and group health insurance benefit plans that were in effect when PPACA became law on March 23, 2010, and that have retained grandfathered status, shall remain exempt from the following requirements: lifetime and annual benefit limits on essential health benefits; certain consumer protection requirements; pre-existing condition exclusions for children under age 19; excessive waiting period prohibitions; and the requirement to extend dependent coverage to age 26. Likewise, Taft Hartley plans are also exempt from certain PPACA requirements and will be able to maintain their existing benefits. Plans that received waivers from PPACA requirements are due to lose their existing waivers on January 1, 2014, absent any additional action by the federal government. All other plans will have to comply with the provisions of PPACA.

Will the new Exchanges only offer individual insurance plans to consumers in 2014?

No. PPACA specifically contemplates that there will be an individual market inside each state or federal Exchange, and an individual market that will operate outside of the Exchange. In an effort to prevent adverse selection by consumers in terms of selecting to purchase their coverage inside or outside a state health benefits Exchange, insurance companies must use a single community rate for all individual policies sold in that geographic area. In addition, individual health insurance policies sold both through a health benefits Exchange/SHOP or outside a state health benefits Exchange/SHOP will have the same mandated benefits and the same premiums structures.

How will small group coverage be sold in 2014?

The same approach will be taken for health insurance policies sold to small group employers whether inside or outside an Exchange. Health plans must use one community rating system for policies sold inside the Small Business Health Options Program (SHOP) exchange or sold directly to small group employers outside the SHOP Exchange. Likewise, small group coverage sold through a health benefits Exchange/SHOP or outside a state health benefits Exchange/SHOP will have the same mandated benefits and the same premium structures.

What will happen to the health plan market outside of the Exchanges?

We anticipate individual and small group markets outside of the state or federal health benefit Exchange will remain active. Although PPACA focuses on promoting health benefits Exchange offerings, some health plans may choose to offer non-qualified coverage to the self-funded market or other employer groups that are grandfathered or have limited exceptions.

Are there any advantages for individuals to purchase coverage inside an Exchange?

The major difference between the policies will be that individuals who are eligible for premium subsidies will only be able to obtain premium subsidies from a policy sold in a state health benefits Exchange/SHOP. As the law is currently written, there are no premium subsidies for policies sold to eligible persons outside of a state health benefits Exchange/SHOP.

Additional Resources

If you would like to learn more about grandfathered status plans, please go here. If you would like to learn more about the timeline for the implementation of PPACA changes, please go here. If you would like to read more about premium subsidies available through state health benefits exchanges, go here.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

HHS Issues New Regulations on Essential Health Benefits

Mon, 03 Dec 2012 00:00:00 -0600

On November 20^th, the U.S. Department of Health and Human Services (HHS) issued a series of regulations that clarify how to implement various portions of the Patient Protection and Affordable Care Act (PPACA). The 119-page rule addresses market reform, wellness programs, and essential health benefits (EHB) packages. This blog focuses on the EHB requirements that are promulgated in the new regulations.

Defining EHBs in Each State

As of January 1, 2014, small group health plans must offer – both within as well as outside of state health benefit Exchanges – benefits and services within 10 defined categories, known as essential health benefits or EHBs. To provide states with more latitude in implementing PPACA, HHS is permitting each state to select an EHB package equal in scope to benefits offered by a “typical employer plan.” Each state will select a benchmark plan from one of four options:

1) The largest plan by enrollment in any of the three largest products in the state’s small group market;

2) Any of the largest three state employee health benefit plan options by enrollment;

3) Any of the largest three national Federal Employees Health Benefits Program (FEHBP) plan options by enrollment; or

4) The largest insured commercial HMO in the state.

The new rule provides that if a state fails to select a benchmark plan, HHS will select the largest small group product in the state by enrollment in the small group market.

The new rule also provides additional standards meant “to protect consumers against discrimination and ensure that benchmark plans offer a full array of EHB benefits and services.” Specifically, the rule:

“…prohibits benefit designs that could discriminate against potential or current enrollees; includes special standards and options for health plans for benefits not typically covered by individual and small group policies today, including habilitative services; and includes standards for prescription drug coverage to ensure that individuals have access to needed prescription medications.”

Establishing the Actuarial Value

Additionally, health plans must comply with specific cost-sharing limitations and actuarial value requirements that correspond to several levels in PPACA referred to as the bronze, silver, gold, or platinum tiers. PPACA requires non-grandfathered health plans in the individual and small group markets to meet actuarial value requirements, calculated as the percentage of total average costs for covered benefits that a plan will cover. By 2014, a plan must have an actuarial value of 60% to qualify as a bronze plan, 70% for a silver plan, 80% for a gold plan, and 90% for a platinum plan. Self-funded and large employer plans will not be required to offer an EHB package.

The rule also resolves some initial confusion about PPACA by clarifying that the restrictions on cost sharing (i.e., maximum deductibles and out-of-pocket maximums) will only apply to plans offering EHB packages; thus, self-funded and large employer plans will not be subject to these requirements. However, large group market health plans, grandfathered group health plans, and self-insured group health plans are subject to annual and lifetime dollar limits under PHS Act section 2711. Guidance on this topic states, “These plans are permitted to impose non-dollar limits, consistent with other guidance, on EHB…these plans can continue to impose annual and lifetime dollar limits on benefits that do not fall within the definition of EHB.” For these plans, the definition of EHB is “one that is authorized by the Secretary of HHS (including any available benchmark option, supplemented as needed to ensure coverage of all ten statutory categories.)” The guidance also states that the federal government may use their discretion to work with plans that make a good faith effort to comply with the law.

HHS also is offering a calculator to assist plans in determining their actuarial value. The new rule allows states to submit alternate, state-specific data for the calculator beginning in 2015. Also, plans with benefit designs that the calculator cannot adequately address will be governed by new standards set forth in the rule.

The rule also allows for a 2% point deviation for plans to still meet each metal tier; for example, a health plan with an actuarial value of 68% will still meet the silver standard.

Next Steps

To read more about essential health benefits, please go here. To read the regulations in full, please go here. To access a summary issued by HHS, click here.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

The President's Health Insurance Reform Faces Additional Lawsuits

Fri, 30 Nov 2012 00:00:00 -0600

This past June, the United States Supreme Court issued the first decision addressing the legality of the Patient Protection and Affordable Care Act (PPACA). While that decision largely upheld PPACA, several other legal actions were also filed challenging various provisions of the law. These cases were put on hold pending the outcome of June’s decision; however they are now under active consideration again.

For example, the U.S. Supreme Court just revived Liberty University’s challenge of the law’s alleged violation of the school’s religious freedom. Liberty University’s court case will be added to dozens of additional lawsuits currently making their way through the court system.

Although several more court cases will likely emerge challenging PPACA’s legal merits, the pending litigation can be generally divided into three different types of actions that may eventually make their way to the U.S. Supreme Court.

Challenge to the Contraception Coverage Mandate: Can PPACA require certain employers, who are not a religious group per se, provide contraceptive coverage for their employees even though the employer may object on religious or moral grounds?
Challenge to the Taxing Power: What are the proper procedures the federal government must follow when levying additional taxes under Article I, Section VII of the Constitution?
Challenge to how Federally-Run Exchanges are Funded: Does the executive branch of the federal government have the right to move funding earmarked for state-based Exchanges to federally-run Exchanges?

This update examines each of these legal challenges under consideration by the courts regarding PPACA’s constitutionality.

The Contraceptive Mandate/Religious Conscience Issue

One facet of PPACA being challenged by Liberty University is the mandate that employers offering health benefits provide preventive health care for women, including contraceptive services recommended by the Institute of Medicine (IOM), and additionally cover contraceptive drugs approved by the Food and Drug Administration (FDA). A religious exemption was established to this requirement; however, it only covers religious organizations that inculcate religious values as their primary purpose, are tax-exempt, and primarily employ and serve only those who share their faith.

According to the Becket Fund for Religious Liberty, over 40 lawsuits have been filed by more than 110 employers alleging that the contraceptive requirement violates an employer’s right to exercise their religion without government interference. A recent article in Politico summarizes the Justice Department’s argument that the contraceptive requirement is:

“[N]arrowly tailored to serve two compelling government interests to improve the health of women and children and to promote gender equality. The administration argues that with contraceptive coverage without a co-pay, women can choose to be part of the workforce ‘on an equal playing field with men.’ The Justice Department also says that when a person opens a commercial business, he or she cannot impose their religious beliefs on employees.”

Secretary Kathleen Sebelius of the U.S. Department of Health and Human Services (HHS) issued a statement on the requirement, saying:

“I believe this proposal strikes the appropriate balance between respecting religious freedom and increasing access to important preventive services. The administration remains fully committed to its partnerships with faith-based organizations, which promote healthy communities and serve the common good. And this final rule will have no impact on the protections that existing conscience laws and regulations give to health care providers.”

So far, one district court has upheld the contraceptive requirement mandate, while two other district courts have issued temporary injunctions forbidding the federal government from enforcing the contraceptive requirement provision against private, nonreligious companies. The Justice Department has stated that it would not object to the issue being referred to the Fourth Circuit Court of Appeals. Due to the high number of cases, some are predicting the U.S. Supreme Court will likely hear a case dealing with the contraceptive requirement.

Constitutional Origination Taxing Clause

The key argument relied upon by the U.S Supreme Court to uphold the majority of PPACA centered on the ability of the federal government to raise revenue via their power to tax. That line of reasoning is now being challenged by a new batch of court cases. The Origination Clause of the U.S. Constitution, contained in Article I, Section 7, provides, “All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.” In other words, revenue raising bills must originate in the U.S. House of Representatives.

The plaintiffs of Sissel v. U.S. Department of Health and Human Services argue that the version of PPACA ultimately signed into law violates the Origination Clause because it arose in the U.S. Senate. The Justice Department has dismissed this argument stating that the Senate substitutes bills from the House on a frequent basis. The U.S. Supreme Court has allowed bills to originate in the Senate in the past, but only to the extent that the bills were germane to the subject. The plaintiffs in Sissel are hopeful that the case will eventually be heard by the U.S. Supreme Court.

Federal Exchange Funding

One major component of PPACA, with a quickly approaching implementation deadline, is the creation of state health benefits Exchanges. While PPACA provides extensive federal funding to assist states in establishing their Exchanges, in the form of grants and premium subsidies, PPACA does not include any funding authorization for the federal government to establish Exchanges in the states that fail to establish their own Exchanges. PPACA is also silent on providing funding authorizations for health insurance premium subsidies through federal exchanges for persons who would otherwise qualify if they were seeking health insurance through a state exchange.

Funding for the federal Exchanges must be addressed, as they are a huge expenditure. Of the $1 billion allocated to establish federal Exchanges, HHS has already distributed a quarter of the funds and many are anticipating that the total will not be enough. Federal officials have stated that the omission was nothing more than a drafting error and they have the authority to move funds around from different accounts to provide the start-up funding for federal exchanges. The IRS has stated that funding for premium subsidies will be available for eligible applicants whether they participate in a state health benefits exchange or a federal exchange. Opponents of PPACA are maintaining that the law is explicit in failing to provide funding.

This issue will be settled in the courts. The State of Oklahoma recently filed an amendment to a lawsuit against Secretary Sebelius seeking to enjoin the federal government from funding the start-up costs of the federal Exchanges and the funding of health insurance subsidies through federal Exchanges. The complaint further alleges that if the court holds that there is no funding authorization for a federal Exchange or for premium subsidies to be offered through a federal Exchange, there can be no tax/penalty for Oklahoma employers who refuse to provide health benefits to employees.

Heading into 2013

With a myriad of outstanding cases against PPACA, it is likely the law will be heavily featured in the 2013 judicial calendar. However, many agree that the time for challenging the law is quickly running out. Randy Barnett, a law professor at Georgetown University, says, “It’s going to become increasingly difficult because courts are much less willing to overturn something that’s already entrenched.” How the law looks after these suits have been litigated to conclusion is the only question that remains. Some believe that regardless, PPACA is here to stay. Virginia Attorney General Ken Cuccinelli says a “take-the-whole-law-down assault probably doesn’t exist at this point.”

Please visit www.BenefitMall.com to view past Legislative Alerts. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources.

The views expressed in this Legislative Alert do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.

Federal Government to Operate Health Insurance Programs Through State Exchanges

Tue, 27 Nov 2012 00:00:00 -0600

In the waning days of the March 2010 debate on the Patient Protection and Affordable Care Act (PPACA), the authors of the Act were forced to abandon a “single payor” clause (also called the “public option”) in order to assemble enough votes to pass the legislation. Some of the more ardent supporters of the public option threatened to withhold their support for PPACA due to the exclusion of the public option from the bill. In a compromise with the public option supporters, the authors of PPACA added section 1334 authorizing the federal government to operate two federal nationwide, multi-state insurance programs.

These federal health insurance plans will be offered in every state to individuals and small employer groups through the state or federal health benefits Exchanges/SHOPS. They will compete directly with private health insurance providers that are participating in the health benefits Exchanges/SHOPS. The U.S. Office of Personnel Management (OPM) will negotiate on behalf of the federal health benefit plans, leveraging its extensive experience in this arena, as it currently negotiates the benefits for federal employees.

The rollout schedule for these plans requires they be available in 60% of states in year one, 70% in year two, 85% of states by year three, and all states in subsequent years. The plans must operate separately from the Federal Employees Health Benefit Plan (FEHBP), and must have a separate risk pool to ensure finances cannot be comingled.

Proponents of the federal health insurance programs hope the programs will have a strong impact on the availability and cost of health insurance coverage, especially in states that are dominated by a single major health insurance provider. They also note that this coverage will be completely portable across state lines.

Opponents of this concept note that the federal health insurance plans will not have to pay taxes, will not have to comply with the state health benefit Exchange/SHOP certifications, and may enjoy an economy of scale that will allow them to undercut private insurance providers. However, others disagree saying that the federal plans will have to comply with the state laws including insurance licensure requirements.

These plans must meet the same federal requirements as other qualified health plans (QHPs), including offering certain essential health benefits and setting premiums that do not discriminate based on pre-existing health conditions, and must comply with state insurance laws. If the federal health insurance plans are exempt from several key provisions, including tax requirements, they could have a competitive advantage over the state regulated insurance companies.

The National Association of Insurance Commissioners (NAIC) has expressed significant concerns over a potential double standard. In a letter to OPM, NAIC wrote it is absolutely essential that multi-state plans compete on a level playing field with other QHPs that are subject to state insurance laws. The NAIC letter noted that while PPACA empowers OPM to negotiate and enter into contracts with multi-state plans, the law does not provide any exemption from state regulation and laws for which the multi-state plans are obligated to comply as licensed entities.

PPACA provides that at least one of the federal plans shall be offered by a not-for-profit and many industry experts predict that the role will fall to the Government Employees Health Association (GEHA). GEHA currently provides health benefits to over 900,000 federal employees, dependents and retirees. It is the second largest health benefit plan for federal workers and dependents. GEHA recently acquired a company that has licenses for every state in the nation.

Many questions remain to be answered about these federal, multi -state health benefit plans. The legislation authorizing this activity is relatively scant, and to date, the rules supporting this activity have not been written. We will report on them as soon as the federal rules are released for comment.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com view previous Legislative Alerts.

HHS Grants States an Extension to Decide on Health Benefits Exchange

Thu, 22 Nov 2012 00:00:00 -0600

The Patient Protection and Affordable Care Act (PPACA) mandates that every state shall establish a health insurance Exchange. If a state is not able, or chooses not to establish an Exchange, the federal government is authorized to establish and run the state’s health insurance Exchange. These health insurance Exchanges are a central part of PPACA and are designed to give individuals and small employer groups the ability to purchase health insurance with the same purchasing power of large employers. Under PPACA, a state had until November 16, 2012 to notify the federal government of its intention to establish a state health insurance Exchange or to partner with the federal government to establish a health insurance exchange.

As of November 19, 2012 , only 17 states and the District of Columbia have enacted legislation or are under an executive order to establish a state-based health insurance Exchange. States that have conclusively declared their intent to establish a state based Exchange include: Vermont, New York, Massachusetts, Rhode Island, Connecticut, Maryland, Kentucky, Mississippi, Minnesota, Iowa, Colorado, New Mexico, California, Nevada, Oregon, Washington, Hawaii and the District of Columbia. Many states have also declared their intent to default to a federal Exchange. These states include: Maine, New Hampshire, South Carolina, Georgia, Alabama, Wisconsin, Missouri, Louisiana, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Texas, Wyoming and Alaska. An additional five states are in the planning process for a state health insurance Exchange, but the governing bodies of these states have not yet declared their intent for either a federal or state based Exchange. These states include Michigan, Ohio, Illinois, Arkansas and North Carolina. North Carolina, for example, has hotly debated type of Exchange that will be ultimately established, with a May 25, 2011 bill passing through the state house that would establish a state Exchange; however, the outgoing Democratic governor recently intimated the state would establish a federal Exchange. That leaves a large majority of states that have either rejected the concept or have been unable to reach a consensus on the issue.

Many of the states that delayed their decision on whether to establish an Exchange until after the recent elections must now move forward in planning for an Exchange. The political make-up of the White House and Congress is staying the same with President Obama being re-elected, the U.S. Senate will stay under the control of the Democrats, and the U.S. House continue to be controlled by the Republicans. Now those states are facing the reality that the President’s health care reform will not be repealed in the foreseeable future, and that the Exchange requirement will be enforced within their respective jurisdictions. The question now becomes whether the Exchange will be run by the state or by the federal government.

In order to give the states more time to address this issue, the Secretary of U.S. Department of Health and Human Services (HHS) Kathleen Sebelius sent a letter to the Governors of hold-out states notifying them that she was delaying the blueprint submission deadline. She writes that the “administration is committed to providing significant flexibility for building a marketplace that best meets your state's needs."

While that letter only extended the deadline to submit blueprint plans, another letter sent on November 15^th, 2012, also extended the deadline to submit a letter of intent to build an Exchange. States now have until December 14, 2012 (about a 30 day extension) to submit both a letter of intent to build an Exchange and submit blueprint plans to operate a state health insurance Exchange. States also will have until February 14, 2013 to decide if they want to partner with the federal government to jointly operate a state health insurance Exchange. States that do not provide such notifications will have a federally run health insurance Exchange operated within their state.

We have written extensively on the state health insurance Exchange concept. You can go here for more information on the health insurance exchange concept. You can also go here, if you want to find further information on the status of each state health insurance exchange.

Pricewaterhouse Coopers Report Examines Those Newly Covered by PPACA

Wed, 14 Nov 2012 00:00:00 -0600

No doubt, the Patient Protection and Affordable Care Act (PPACA) is dramatically transforming the health insurance industry. One of the biggest changes will be the significant increase in the number of covered lives, as millions of individuals will be added to the insurance rolls. This represents the largest increase in the insured population since the inception of the federal Medicare program. As a result, PPACA is facilitating the expansion of coverage to approximately 30 million Americans via state-based Medicaid programs, state health insurance Exchanges, and other regulatory initiatives.

These newly covered individuals as a population will be different from those we have traditionally assisted in obtaining health insurance coverage. Pricewaterhouse Coopers’ (PwC) Health Research Institute recently published a report analyzing this new population and the impact they will have on the state health insurance Exchanges and the health insurance industry as a whole.

The report, Health Insurance Exchanges: Long on Options; Short on Time, provides one of the first comprehensive examinations of this new population. PwC's Institute analyzed projections from the Congressional Budget Office and data from two massive federal databases to create a profile of the 30 million Americans under age 65 who will have the opportunity to obtain health insurance coverage via PPACA mandates.

Of the 30 million currently uninsured individuals under 65 who will gain coverage under PPACA, the report notes the following demographic trends regarding this new population:

Only 42% are employed full time, as compared to 59% of currently insured individuals;
Their median income is about 166 percent of the federal poverty level, or $38,263 for a family of four;
About 60% have incomes at or below 200% of the federal poverty level (FPL);
Approximately 30 percent consider English to be a second language;
Approximately one-third will obtain coverage through state Medicaid programs;
A majority are single and relatively young with a median age of 33;
A majority are considerably less educated and much more likely to be unemployed or underemployed than the current population;
More than 85 percent do not hold a college degree; and
A large majority, 88%, are in relatively good health.

The 30 million new Americans most commonly will be enrolled in one of the following three insurance arrangements:

Approximately one-third will obtain coverage through state Medicaid;
Approximately one-fourth will enroll in employer-sponsored plans;
An estimated 45 percent will obtain coverage via state health insurance exchanges.

While Medicaid programs have typically addressed the uninsured or underinsured, state health insurance exchanges also will have to address a similar population as they start-up their operations. For example, the PwC report states that in 2014 approximately 75% of the public exchange enrollees will be newly insured. The report observes that large insurers and Medicaid-managed care plans with experience assessing the needs of low income or less educated populations may have an early advantage. Both public and private entities will need to engage in additional outreach and education efforts.

In this emerging insurance marketplace made up of both private and public sector offerings, the traditional actuarial assumptions driving pricing and risk selection will have to be updated as this new population secures coverage. Many individuals will likely cycle back and forth between Medicaid and private insurance, a process called ‘churning.’ Coordinating care for these individuals will likely be a substantial challenge compounded by language differences, a lack of preventive care, and a prevalence of undiagnosed conditions. The report notes that well organized accountable care organizations (ACOs) and provider-owned plans may have an advantage in the care coordination necessary to address the health conditions of this new population.

On the flip side, the report indicates that this influx of new lives will generate an additional $205 billion in new health insurance premiums by the year 2015, when PPACA will be fully implemented.

The PwC report also acknowledges that the “exchange” concept is not new and that private exchanges have been serving the needs of many people for years. “These private exchanges are in many ways the precursor to public exchanges,” the report states, “and in the future may create an alternative both for employers and for individuals who do not qualify for government-subsidized insurance.”

BenefitMall has been a “best-in-class” example of a private exchange for years, and will continue to assume an integral role in the emerging insurance marketplace. As a result, BenefitMall will continue to provide a menu of services for Brokers and clients to help navigate through ever-changing healthcare system.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

President Barack Obama Wins Re-Election for Second Term

Wed, 07 Nov 2012 00:00:00 -0600

PPACA Implementation will continue but with some challenges from the Republicans and States

With razor thin margins in key swing states, President Barack Obama has been elected to a second term, beating out his Republican challenger, former governor Mitt Romney.

Pundits and political insiders waited to call the election until poll results came in from Ohio. After it was clear President Obama had won that state, and another key swing state of Virginia, many media outlets announced that he had won this re-election bid to stay in the White House. Mr. Romney conceded the race early Wednesday morning.

In his victory speech, President Obama told onlookers he had never been more hopeful about America. The President said, “Tonight you voted for action, not politics as usual. You elected us to focus on your jobs, not ours. And in the coming weeks and months, I am looking forward to reaching out and working with leaders of both parties.”

Although Florida has still not yet been called for either candidate, Mr. Romney gave his concession speech before a crowd of supporters in Boston. After thanking friends, families and supporters, Mr. Romney echoed President Obama’s call for bipartisan legislative action, saying “The nation, as you know, is at a critical point. At a time like this, we can’t risk partisan bickering and political posturing. Our leaders have to reach across the aisle to do the people’s work.”

Working with bipartisan support will be key to moving forward, as Congress remains divided. The U.S. House of Representatives remains in control of the Republicans, with 233 Republicans to 191 Democrats (at press time, 11 House seats were yet to be called). The U.S. Senate will be controlled by the Democrats, with 51 Democrats to 45 Republicans (at press time, 2 Senate seats were yet to be called). In addition, the Senate has 2 Independents Senators who will presumably caucus with the Democrats. This bifurcation of the political parties mirrors what has existed for the last two years, and could lead to another two more years of gridlock until the 2014 midterm elections.

Moving forward, it is clear the Patient Protection and Affordable Care Act (PPACA) will remain largely in place, due to support in the Democratic Senate and the President’s veto power. Although House Republicans, several states, and other interested parties will likely continue to challenge key elements of the law through legislative, regulatory and legal challenges, it is likely the law as a whole will remain in place for the foreseeable future.

Personnel at the U.S. Department of Health and Human Services (HHS) and other key federal agencies will undoubtedly pick up the pace publishing more regulations implementing PPACA as key healthcare reform deadlines approach. States also will have to comply with many upcoming mandates, including the requirement to have an Exchange system operational in each state by 2014, whether state-based or federally-operated.

The past four years have proved more than challenging for our industry and there’s no doubt that President Obama’s next term in office will be more challenging as the key initiatives of PPACA are implemented. BenefitMall will continue to educate and advocate on the behalf of you and your clients, just as we have for the past four years. Continued lobbying on behalf of brokers, distribution of pertinent legislative information through HealthcareExchange blogs, guides and presentations and e-mail communications like Industry Insights will continue as we work to ensure your place in the changing health care landscape.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

Election 2012 A Comparison of Romney and Obamas Health Care Platforms

Mon, 05 Nov 2012 00:00:00 -0600

With the Presidential election approaching in the next twenty-four hours, health care reform has taken center stage in debates and in the minds of voters. The U.S. Supreme Court’s decision to uphold the majority of the Patient Protection and Affordable Care Act (PPACA) provided a boost for President Obama heading into the fall campaign season. At the same time, a significant number of American voters are not in favor of PPACA and therefore support Mitt Romney’s call for the repeal of major elements of the health care reform plan.

The political discord mounting between the two parties is creating a polarized environment between the presidential candidates and several key issues such as the economy and health care reform. In fact, various polls either show the candidates in a dead heat, or one candidate in a slight lead over the other, depending on how the poll is conducted and presented.

In such a close race means, the candidates’ platforms on key issues will affect the election’s outcome. Clearly many of the key public policy and business issues highlighted in both tickets are inter-related. As a result, many Americans were hoping that the debates would help pressure test and shed light on each political party’s positions – from fixing the economy to the best way to repair the health care system.

Mitt Romney

A staunch PPACA opponent, Mitt Romney has pledged to issue an executive order providing waivers to states opposed to PPACA on his first day in office. This will be Romney’s first step to implement a “repeal and replace” strategy. In place of PPACA, Romney has proposed giving states control to create their own reform plan most appropriate for their citizens.

Romney’s plan centers on three tenets: restoring state leadership and flexibility; promoting free markets and fair competition; and finally, empowering consumer choice. For each tenet, Romney has proposed several steps including limiting the scope of federal oversight on private insurance and Medicaid coverage, empowering individuals and small businesses to form purchasing pools, and encouraging Consumer Report-type ratings of alternative insurance plans.

Barack Obama

President Obama unequivocally stands behind his health care reform law, and is vowing to veto any attempts to repeal portions of PPACA if re-elected. In support of the law, President Obama argues PPACA ends insurance company abuses, strengthens Medicare, and puts women in control of their health. On the whitehouse.gov website, the President lists several statistics in support of PPACA, including:

17.6 million children with pre-existing conditions can no longer be denied coverage
105 million Americans no longer have lifetime dollar limits on their coverage
360,000 small businesses received a tax credit in 2011 to help them pay for health insurance for an estimated 2 million workers
3.1 million young adults have coverage on a parent’s plan through age 26

The Presidential Debates

With compelling arguments on each side, it’s no surprise health care reform, including the future of Medicare, was a central focus in the first and second presidential debates. During the first debate, President Obama credited both Social Security and Medicare with helping his grandmother live an independent life, and vowed to continue funding both programs. He referred to the Republican’s proposed changes as converting Medicare into a voucher program that would expose seniors to financial risks. In response, Governor Romney emphasized that current seniors would not see any significant changes to their Medicare plan coverage today, while individuals 55 and younger would have more options. Romney also noted that in the future some “means” testing would be necessary to ensure the Medicare program remains solvent, so some wealthier Americans would have to pay more.

In addition, Governor Romney presented several arguments in support of PPACA repeal during the first presidential debate. He argued PPACA has increased costs by $2,500 per family, cuts $716 billion from Medicare, puts in place an unelected board that will have influence over the types of treatments individuals can have, and directly results in employers shutting down hiring practices. President Obama responded to this argument that Governor Romney had set up a similar plan in Massachusetts that did not result in eliminating jobs.

Women’s health was mentioned several times in the first and second presidential debates. Specifically, each candidate has discussed their view on access to contraceptives and abortion. In the second debate, President Obama stated, “In my health care bill, I said insurance companies need to provide contraceptive coverage to everybody who is insured, because this is not just a health issue. It’s an economic issue for women. It makes a difference.” In response, Governor Romney stated, “I’d just note that I don’t believe that bureaucrats in Washington should tell someone whether they can use contraceptives or not, and I don’t believe employers should tell someone whether they could have contraceptive care or not. Every woman in America should have access to contraceptives.”

Governor Romney argued that PPACA is creating a chilling effect for small businesses when it comes to hiring new employees. On the topic, Governor Romney stated, “I want to make sure that regulators see their job as encouraging small business, not crushing it. And there’s no question but that Obamacare has been an extraordinary deterrent to enterprises of all kinds hiring people. My priority is making sure that we get more people hired.” Of course, the President disagrees.

In the near future, the question of what health care will look like going forward will be answered in part based upon the Presidential election. In addition to the White House, the future of PPACA will be affected by which parties control the U.S. Senate and House of Representatives.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

States Are Designating Essential Health Benefits

Wed, 31 Oct 2012 00:00:00 -0500

The Patient Protection and Affordable Care Act (PPACA) describes the health benefits Exchange concept as the process of participating insurers conforming to a list of mandatory benefits. These mandatory benefits are called Essential Health Benefits (EHBs). This blog will examine the concept of EHBs, the benefits selected by member states, and the challenges states face in selecting their EHB package.

Section 1302 of PPACA addresses EHBs. Section 1302 (b)(1) contains a list of 10 coverage areas that must be included in a state health benefits Exchange insurance policy. Effective January 1, 2014, individual and small group health insurance plans sold both inside and outside of a state health benefits Exchange must substantially comply with the respective state’s designated EHBs. There are some exceptions, however – this EHB mandate does not apply to grandfathered plans, large group health plans or self-funded health plans.

Section 1302 (b) of PPACA also provides that the Secretary of the U.S. Department of Health and Human Services (HHS) shall issue guidance and rules that further define EHBs. On the one hand there was considerable pressure on the Secretary to define a very rich series of mandatory benefits. Others were lobbying hard for a less expensive mandatory series to keep the plans affordable. Some observers also noted that a rich benefits plan that is the norm in a relatively wealthy urban area might be more than a less wealthy region could afford.

Ultimately, the Center for Consumer Information and Insurance Oversight (CCIIO) of HHS issued a bulletin that allows each state to identify its own EHB as long as the designated benchmark complies with one of the following:

the largest plan by enrollment of any of the three largest small-group insurance products in the state;
any of the three largest state employee’s health benefit plans in the state;
any of the three largest federal employee health benefit plans; or
the largest non-Medicaid commercial Health Maintenance Organization (HMO) operating in the state.

The Secretary must submit a report to Congress along with a certification from the Chief Actuary of the Centers for Medicare & Medicaid Services (CMS) that the scope of the EHBs is equal to the range of benefits provided under a typical employer plan. If a state does not designate an EHB, the benchmark will be the largest small group plan by enrollment in the state that complies with the list of 10 coverage areas referenced above.

Some States Progress in Defining EHB Package

As of early October, 16 states and the District of Columbia have designated an EHB benchmark, with approximately 16 additional states expected to submit their lists in the next few weeks. Most of these states have chosen to designate one of the non-federal or state employee health benefit options. This is not surprising in that by designating one of the existing commercial small group plans, a state is choosing a benefit plan that already complies with the state’s mandates and regulatory requirements. Here are the states that have determined their EHB benchmark:

California has designated the Kaiser small group HMO plan.
Colorado also adopted a Kaiser HMO plan.
New York selected the largest small group plan in the state, Oxford EPO, as its benchmark.
The Maryland Health Care Reform Coordinating Council chose to model insurance policies under reform after the plans currently offered to the state's employees.
Illinois has picked a Blue Cross and Blue Shield small group plan for a benchmark.
Florida, New Jersey, Georgia, Ohio and Texas, among others, are deferring their decision for now.

Inconsistency Among States

Because states have the authority within broad directives to establish their own EHBs, EHB benchmarks vary significantly between states. Some states, such as California and Washington, are mandating acupuncture be included in the list of EHB services. Arkansas’ list of coverage does not provide for expensive fertility treatments. Oregon will not cover bariatric surgery. Nebraska is proposing a benchmark comprised of a high-deductible plan combined with a Health Savings Account that will have to be reviewed by HHS. Although many were hoping HHS would take a more proactive approach in defining a consistent, national EHB, ultimately it was determined that state flexibility would be less disruptive to the local markets and further preserve state oversight of health care.

Those who had hoped HHS would be more proactive are seeking amends from HHS. Pennsylvania Insurance Commissioner Michael Consedine, co-chair of the new NAIC committee on federal Exchanges, recently wrote a letter to Secretary Sebelius seeking further guidance on several issues.

According to Commissioner Consedine:

“The PPACA clearly states that the Secretary of HHS is to define the EHB package for policies offered both inside and outside of health insurance exchanges. While the language in PPACA was plain that this statutory responsibility fell on HHS, in December of last year HHS issued guidance preliminary indicating states must select a benchmark design, with HHS potentially acting as final arbiter…HHS indicated that any selection by the states will be subject to additional review, but we have no definitive guidance as to what, if any, weight will be given to a state’s selection. The minimum amount of information provided to date invites concern that your agency will alter or override a state’s submission…raising serious questions as to whether states have any meaningful ability to make a definitive selection of an EHB benchmark.”

Commissioner Consedine’s letter indicates considerable confusion regarding the definition of various terms in the EHB mandate, including the habilitative services requirement as well as the deadline. Although CMS directed states to send in their EHB plans by October 1, the agency has rescinded that directive. In the meantime, CMS will continue to work with states as they strive to establish their EHB benchmarks.

We will continue to track developments, as the EHB issue is both dynamic and complex. If you would like to learn more, please go here. To view an excellent state-by-state chart (maintained by the Academy of State Health Policy Analysts) that tracks the development of state EHB designations, look here.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com view previous Legislative Alerts.

Research Unveils 2012 Health Care Trends, Makes 2013 Predictions

Tue, 23 Oct 2012 00:00:00 -0500

Results of a new study reveal the struggle employers face as they try to balance implementation of the Patient Protection and Affordable Care Act (PPACA ) while controlling costs. The 17^th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care polled mid-sized and large employers about their 2013 health benefits, yielding responses from 512 participants with a total of $87 billion in 2011 health care expenditures. The employer responses reflect a broad range of businesses, covering over 6.6 million employees.

The study identified several key themes, with affordability of health care in the lead as costs continue to grow and affordability continues to challenge employers. In spite of rising costs, the study found many employers are reaffirming their commitment to provide health care benefits for active employees. However, employers’ long-term confidence in providing benefits has dropped sharply.

Of the employers who are renewing this commitment to provide benefits, many are re-shaping their view towards these benefits, putting them in a total rewards context. Employers’ commitment to provide health care benefits applies more to active employees, rather than retirees, whom the study found will likely have to turn to state health benefit Exchanges if they were not employed by one of the growing number of companies utilizing account-based health benefit plans (ABHP).

For active employees, employers are demanding a more proactive approach from both their employees and their health care providers. Employers are now providing more incentives to encourage employee participation, while demanding increased transparency and accountability from vendors.

Let’s take a deeper dive into some of these key themes.

Affordability and Costs

Health care costs continue to be a significant expense for most employees, and employers continue to struggle with providing adequate benefits and keeping costs low. For active employees, the study begins by stating that health care costs have been remarkably stable for the last five years. Although costs have increased from 5.4% in 2011 to 5.9% in 2012, these numbers are substantially lower than the anticipated 8% that was predicted if employers had not made various changes to plan design and increases in employee contributions.

However, costs do continue to grow at about twice the rate of the general consumer price index. An active employee will now incur a total health care cost of $11,664 annually, up from $10,982 in 2011. The employer share of these costs will increase from $8,453 in 2011 to $8,900 in 2012. Employee costs are also increasing from 23.0% in 2011 to 23.7% in 2012.

When asked to rate the importance of employer subsidies and health and productivity to a company’s employee value proposition in 2012 and beyond, 71% of employers said it is very important. Only 3% of employers indicated they are somewhat likely to discontinue health care plans for active employees and direct employees to the Exchanges with no financial subsidy. Last year’s survey also reported that 3% of employers planned to decrease their commitment to offer health care benefits to active employees.

Retirees

While more employers may be counting on Exchanges to provide benefits to retirees, 90% of employers anticipate they will continue to provide health benefits for active employees. Although employers remain committed to providing benefits to active employees, the situation for retirees is different. Before a retiree reaches 65, that individual faces more affordability challenges than his or her active employee counterparts, paying $4,226 per year for individual coverage and $10,500 for family coverage. Once a retiree is eligible for Medicare, however, affordability is improved dramatically and retirees pay on average $2,000 for individual coverage and $5,200 for family coverage. Many employers are counting on the new health benefit Exchanges to provide retirees with more adequate coverage at lower prices.

As a contribution alternative, the report notes the strong growth of individual account-based health plans (ABHPs). “In fact, account-only coverage for pre-65 retirees is expected to increase to 13% by 2014 or 2015 from only 1% today,” the report states. It remains to be seen how these accounts will fare under the full implementation of PPACA.

A New Approach to Benefits

Employers are committed to providing benefits, but many are taking a new approach that employees should be more proactively involved in their health. The number of employers utilizing incentives has increased. Approximately 40% of employers are working towards developing a workplace culture where employees are accountable and supported for their health, and 33% are taking steps to educate employees to be more informed health care consumers.

Even though employers are implementing new and effective methods to control costs, employer confidence in their ability to provide future benefits sharply decreased to 23% in 2011. When asked to name the biggest challenges in maintaining affordable benefit coverage, 61% of employers listed employees’ poor health habits. More than half of employers also expressed frustration at the lack of employee engagement. Without actively engaged employees, employers likely will continue to doubt their ability to provide benefits in the future.

Employers are also demanding more from their health care vendors. Nearly one-third of employers have consolidated their health plan vendors with an additional 11% planning to do so in the near future. Many employers express frustration with vendors’ inability to influence employee behavior, tying back to the lack of employee engagement in their health.

Where Are Employers Headed?

Although the majority of the Towers Watson findings are positive, employers are certainly taking a more proactive approach toward health care, notably to ensure full compliance with PPACA mandates. Thirty-four percent of respondents said staying up-to-date and complying with PPACA are the primary focus of their health care strategy. Other tools cited by employers to facilitate this process include making long-term changes to avoid the excise tax on Cadillac health plans – placing more emphasis on effective condition management – and adopting the use of new technologies to improve employee engagement.

Clearly, the Towers Watson study shows that employers are re-assessing their approach to health care benefits.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com view previous Legislative Alerts.

PPACA Tax on Medical Devices Could Prove Problematic for Manufacturers

Wed, 10 Oct 2012 17:15:00 -0500

Over the past year, BenefitMall has published over a dozen updates that identify and discuss key tax provisions authorized through the Patient Protection and Affordable Care Act (PPACA). One of these provisions, a 2.3% tax assessed against medical device manufacturers that takes effect in January, was recently featured in a Wall Street Journal opinion piece written by former Democratic Senator Evan Bayh of Indiana. In the piece, ObamaCare’s Tax Raid on Medical Devices, Senator Bayh called for the tax’s repeal. Although the tax is widely unpopular, the government expects the funds generated from the tax will offset PPACA implementation costs.

The excise tax will be imposed on the sale of any taxable medical device by the product’s manufacturer, producer, or importer. The tax applies to medical devices sold in the United States after December 31, 2012, but excludes such items as eyeglasses, contact lenses, hearing aids and devices readily available for individual purchase at retail stores. The tax does apply to pacemakers, implanted defibrillators, hip and knee joint replacements, and dental implants.

The majority of the public is not in favor of the tax according to recent press reports. In the Wall Street Journal piece, Senator Bayh urges Congress to repeal the tax in order to stymie the still-weak economy. Legislators had been hoping the increased number of individuals entering the health care system due to the individual mandate would offset the increased cost faced by manufacturers – anticipated to be around $30 billion. This does not appear to be the case, however, as Senator Bayh explains: “That calculation ignored the fact that the vast majority of medical-device consumers already are covered by Medicare, Medicaid or private insurance. So there will be little or no increase in sales volume.”

Although the amount of the tax appears large, some argue the tax is only detrimental when viewed in conjunction with the weak economy. “These fees are not large compared to total revenues of the companies, but the burden of the fees is a concern for an industry that has been recovering from the recession,” stated Bruce Carlson, publisher of a Kalorama Information report that details the effects of PPACA, and the recent Supreme Court ruling, on medical device manufacturers.

According to Senator Bayh’s calculations, the tax will be equal to a 15% tax on profits. When added to a 35% corporate tax, many medical device manufacturers will be paying a combined tax rate of more than 50%.

As a result, many are predicting smaller manufacturers, such as MAKO Surgical and Stryker, will feel the tax’s consequences more acutely. This has led many manufacturers to announce lay-offs, cancel expansions, and decrease research and development budgets. On a more positive note, many of the more established manufacturers, such as Johnson & Johnson, Medtronic, and Intuitive Surgical, will likely be able to offset the cost of the tax due to their ability to produce large quantities of goods quickly.

However, any actual disruption of these manufacturers is concerning given the fact that this health care market segment is making important strides to revolutionize medicine in the form of new electronic applications and improved medical devices. The quality of care may also suffer a blow, as medical device manufacturers struggle to stay afloat.

Repeal may be a valid option, according to Senator Bayh. Rep. Erik Paulsen of Minnesota sponsored a bill to repeal the tax, which ultimately cleared through the U.S. House of Representatives earlier this year. The bill passed the House with 233 Republicans and 37 Democrats voting in favor. Republicans in the Senate are also on record of approving repeal, but the bill has stalled in the Senate due to the Democrat majority. As with many PPACA provisions, the outcome of November elections will likely help determine whether the tax stands or is repealed.

Please visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources, or you may visit www.benefitmall.com to view past Legislative Alerts.

Oklahoma Files New Lawsuit Challenging PPACA

Wed, 03 Oct 2012 00:00:00 -0500

The Patient Protection and Affordable Care Act (PPACA) is back in court.

On Wednesday, Oklahoma’s Attorney General Scott Pruitt filed an amended complaint challenging PPACA’s individual mandate provision and new IRS regulations put in place to implement the law. Oklahoma was one of 26 states that sought to have PPACA declared unconstitutional in this summer’s Supreme Court case. Ultimately, the Supreme Court largely upheld the majority of PPACA.

The state originally filed suit in January, 2011 in the U.S. District Court for the Eastern District of Oklahoma. Judge Ronald White put the suit on hold until the Supreme Court issued its ruling in June. The suit argued that PPACA is unconstitutional under the Commerce Clause, and that the federal government does not have the power to require individuals to buy health insurance. While the Supreme Court agreed the individual mandate is not a legitimate use of Congress’ power under the Commerce Clause, the Court did uphold the mandate under Congress’ power to tax.

Attorney General Pruitt requested the stay be lifted so the District Court can hear a new challenge focusing on how PPACA is being implemented. Specifically, the suit asks the court to address whether a new IRS rule violates the Administrative Procedures Act and actually conflicts with PPACA. Oklahoma has also passed an amendment to their state constitution that prohibits any government from requiring Oklahomans to purchase health insurance. The new litigation will address whether this constitutional amendment supersedes the individual mandate.

While the fresh legal challenge cannot argue issues included in the Supreme Court’s recent ruling, a new action could be considered by lower courts if the complaint asserts another legal concern, such as a challenge to the PPACA “implementation” process. If the new challenge is upheld, this court action could have a significant impact how the federal government moves forward implementing key elements of PPACA.

Several states are frustrated with the lack of clarity of some PPACA provisions, from implementing Exchanges to defining essential health benefits. Attorney General Pruitt shares the states’ concern, stating:

“Oklahoma is in a unique position with the only active lawsuit against the Affordable Care Act to hold the federal government accountable in how it implements the law. Now that the Supreme Court has deemed the ACA a tax, and therefore constitutional, the federal government must follow the law and proper procedures, and that is not being done.”

Although the Supreme Court’s ruling has allowed PPACA to remain, the new wave of litigation clearly indicates the legal challenges to health care reform laws are far from over. Several other states are planning to amend or file new legal actions as well. In addition to this newest legal challenge, the November elections will also likely have a substantial effect on PPACA’s future.

We have covered many PPACA-related issues since its inception, and will continue to follow these issues for you. Please visit www.HealthcareExchange.com for those and other blog posts, polls, surveys and numerous resources or www.benefitmall.com to view past Legislative Alerts.

PPACA Implementation: Spotlight on Employer Tax Penalties

Thu, 27 Sep 2012 00:00:00 -0500

Based on several recent inquiries, Brokers, employers and other interested parties are seeking guidance on how to determine the applicability of tax penalties for designated employers who do not fulfill the “shared responsibility” provisions pursuant to Section 1511 of the Patient Protection and Affordable Care Act (PPACA). Beginning January 1, 2014, mid-size to large employers will have to comply with these “shared responsibility” provisions of PPACA or face potential tax penalties. This blog provides an overview of this issue.

To determine whether a business is required to fulfill the requirements of the “shared responsibility” provisions, there are several considerations.

First, the provision defines the size employees subject to the provisions. PPACA shared responsibility provisions apply to “mid-size to large employers” defined as at least 50 full-time equivalent employees (FTE’s). Under the act, a full time employee is defined as working at least 30 hours per week. Each of these employees is considered one FTE. Total hours worked by part-time employees (those working less than 30 hours per week) in an entire month are totaled, then divided by 120 to determine the number of FTE’s represented by part-time employees. If the sum of full-time employees and part-time FTE’s is at least 50, then the employer is subject to the “shared responsibility” provisions.

Employers with significant seasonal changes in employment will not be subject to the provisions if they had 50 or more FTE’s for only 120 days, or less during the prior year.

If, based on the above calculation, an employer is determined to be subject to the “shared responsibility” provisions, the tax penalty is calculated on a monthly basis using only full-time employees, not FTE’s . The monthly penalty is equal to $2,000 divided by 12, multiplied by the difference of the number of full-time employees employed during the applicable month minus the first 30 full-time employees. For example:

(Number of Full-Time Employees) – 30 x (2,000/12) = tax penalty

An employer may also be subject to a tax penalty even if health insurance is offered, but does not meet the “affordability” thresholds. The health benefits are deemed to be unaffordable if:

The full time employee’s required contribution toward the plan premium for self-only coverage exceeds 9.5% of their household income, or
The plan pays for less than 60%, on average, of covered health care expenses.

If an employer provides coverage that fails to meet the affordability threshold, and a full-time employee obtains coverage via a state health benefit exchange and receives a premium supplement, the employer will have to pay a tax penalty.

The monthly tax penalty in this instance is equal to the lessor of, (1) the number of full-time employees who are receiving a premium subsidy through an exchange, times one-twelfth of $3,000, or (2) the penalty (discussed above) owed as if the employer offered no health insurance at all (number of FTE’s – 30 x $2,000/12).

Complicated? …you bet!

Keep in mind this is just a summary of the provisions, and there are additional considerations including treatment of employees of a “controlled group,” or those who are eligible for Medicaid, among others.

Not only is this complicated, it is an evolving process. It is important that Brokers be able to assist their clients to anticipate and understand potential penalties and opportunities under PPACA.

We will continue to track developments and report them to you. For further information on the tax-penalty issues, please go here. To access the Congressional Research Service document on the tax-penalties in PPACA, which is an excellent resource, go here.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

PPACA Implementation Questions: Spotlight on MLR Rebate Checks

Thu, 20 Sep 2012 00:00:00 -0500

During the past month, BenefitMall has received several inquiries regarding the issuance of “MLR rebate” checks as required by the Patient Protection and Affordable Care Act (PPACA). The medical loss ratio (MLR) poses a number of questions generated from the tracking, reporting and refund process by health plans as required by PPACA and related regulations. This blog provides insight to help Brokers and other interested parties understand how employers can allocate the MLR refunds.

According to the White House, the MLR “encourages insurers to give you better value for your premium dollar, and holds them accountable if they don’t.” If an insurer fails to spend at least 85% of its health insurance premiums for large groups and 80% for small groups on claims and quality improvements, as required by PPACA, the insurer must offer a rebate to covered individuals. If an individual is insured through an employer-sponsored health plan, employers are faced with how to most effectively deliver these rebates.

PPACA specifies explicitly how an employer should apply the proceeds of these checks, including mandating that the employer utilize the proceeds within 90 days of the receipt of the check. The law, rules and U.S. Department of Labor (DOL) Guidance are explicit in that they hold the employer to strict standards of ERISA fiduciary responsibility for handling the proceeds of the checks. In most, if not all cases, health plans should have issued the rebate checks this summer and employers have 90 days or less to determine how the funds will be used.

In a nutshell, employers have four options regarding MLR rebate check proceeds:

Distribute rebates to current (and, if desired, also to the applicable plan year) participants
Enhance benefits provided to plan participants by additional benefits or wellness programs
Pay reasonable plan expenses
Reduce future premiums for current plan participants, but this can be a complicated process that is best undertaken with legal counsel

Unfortunately, the process for MLR rebate issuance is less straight-forward than the White House intimates, and questions remain for many employers and their employees. Due to some confusing language in letters that accompany MLR rebate checks, many employees are uncertain as to what the MLR rebate means for them.

Some press accounts have highlighted some of these challenges. In August, a New York Times article, entitled Health Insurer Refunds May Stall in Employers’ Hands, highlighted some of this confusion. The article quoted Carina Kleter, a project coordinator at Parsons the New School for Design, said, “It’s confusing, because it almost seems like it’s all in the employers’ hands and it’s up to you, the person who got the letter to ask your employer about how the money is going to come through…I haven’t gotten any letters from the H.R. department about how it’s going to work.”

According to Michael Trupo, a spokesman for the Department of Labor’s Employee Benefits Security Administration, the DOL is working both with employers and employees to ensure MLR rebate checks are appropriately delivered, adding that the agency has a hotline employees can contact with questions. According to the Times article, “employees who suspect they are not benefiting from a rebate provided to their company can contact the agency at 1-866-444-3272.”

Another element of confusion is determining which portion of the MLR check is a plan asset versus the amount that can be retained by the employer. The portion of the MLR rebate check that must be treated as a plan asset is dependent upon the amount of health benefit premiums that were initially paid.

If all premiums are paid by the employees, the entire rebate constitutes plan assets;
If the premiums are shared by a fixed percentage (e.g., employer pays 75% of the premium cost and employees pay 25% of the premium cost), that ratio determines the amount of the rebate that constitutes plan assets (25%);
If an employer pays a fixed amount and the employees pay the remaining amount (the employer pays $350 per month, the employees pay the balance), the rebate constitutes plan assets up to the amount paid by employees; and
If the employees pay a fixed amount and the employer pays the remaining premium (the employees pay $350 per month, the employer pays the balance), the rebate constitutes plan assets only to the extent it exceeds the amount paid by the employer.

The employer can never retain a higher percentage of the MLR rebate check than the percentage of the health benefit premiums that the employer paid. Here is a sample calculation:

Step 1: Calculate total premium employer paid to carrier in the 2011 plan year = $100,000

Step 2: Calculate total contribution paid by employees and COBRA participants for the same year = $25,000

Step 3: Divide Step 2 by Step 1 = the total percentage of the premium paid by employees and COBRA participants ($25,000/$100,000 = 25%)

Step 4: The percentage calculated in Step 3 is multiplied by the total rebate check that equals the amount due the employee/COBRA participants ($5,000 x 25% = $1,250)

Step 5: Calculate the total amount of 2011 plan year contribution paid by employees and COBRA participants currently insured using payroll records = $20,000

Step 6: Take the amount paid by each employee or COBRA participant in the 2011 plan year and convert it to a percentage of the total in Step 4. Employee A contributed $200/ $20,000 = 1%

Step 7: The percentage calculated in Step 6 would then be applied to the net plan participant portion of the rebate check (Step 4) and the resultant sum is what that plan participant should receive (Employee A 1% x $1,250 = $12.50)

Employers and plan fiduciaries must document the process. Under the DOL Technical Release, the plan fiduciary is given discretion in applying the rebate, subject to ERISA fiduciary obligations, as highlighted above. “Similarly, if distributing payments to any participants is not cost-effective (e.g., payments to participants are of de minimis amounts, or would give rise to tax consequences to participants or the plan), the fiduciary may utilize the rebate for other permissible plan purposes including applying the rebate toward future participant premium payments or toward benefit enhancements."

It is important to note that for the purposes of MLR rebate checks, COBRA plan participants are considered plan participants. As many employer groups received their checks around August 1, the conclusion of the 90-day time limit is fast approaching.

Please visit www.healthcareexchange.com for blog posts, polls, surveys and numerous resources, or www.benefitmall.com to view previous Legislative Alerts.

PPACA Federal Exchange Update

Tue, 11 Sep 2012 00:00:00 -0500

Last week, we highlighted the progress of states in establishing their own state health benefit Exchange for individuals, SHOP Exchange for small group employers, or an integrated Exchange. If a state is unable to create an Exchange, or refuses to do so, the Patient Protection and Affordable Care Act (PPACA) requires the federal government to step in and implement a federally-facilitated Exchange in each state. This would occur under the direction of the U.S. Department of Health and Human Services (HHS).

Several options exist for a federally-based Exchange: 1) it can take the form of a standalone Exchange sponsored by the federal government; or 2) it can be a joint venture between HHS and the state, with the state having the option of controlling several facets of the Exchange.

Limited Time Left to Implement a State-Based Exchange

According to PPACA, an Exchange must be established and operational in every state by October 1, 2013 (in anticipation of an enrollment period prior to January 1, 2014). Nearly all the states that have rejected legislation to create an Exchange, or have taken no action to create an Exchange, were participants in the lawsuit against PPACA that was largely upheld by the U.S. Supreme Court in June. The legislators of the states that continue to fight against or delay implementing an Exchange in their respective jurisdictions are now waiting to see what the outcome of the November elections will be before they select their next course of action. Delaying until November, however, allows these states little time to implement their own state health benefits Exchanges, and will likely increase the likelihood that they will default to a federally-facilitated Exchange.

Establishing a Federally-Facilitated Exchange

States that default to a federal Exchange will have several options in terms of the structure of the Exchange. One is to form a joint venture with the federal government and be responsible for some of the operational aspects of the Exchange. Another option is to allow the federal government to run the entire Exchange, but under this scenario, local support will be needed. Under each scenario, many details need to be worked out between HHS and the local state governments.

For example, a federally-run Exchange will need to operate concurrently with the existing state regulated private health insurance system. This will likely pose significant challenges as two sets of government officials will be approving and/or setting rates and benefits and creating expansive sets of rules, not all of which will be congruent.

On May 16^th, the federal Center for Consumer Information and Insurance Oversight (CCIIO) issued guidance on the federal Exchange concept. While the guidance does not provide the same level of certainty that final rules would provide, it does provide insight into the strategy of the federal government, and where they plan to go with their federal Exchanges. The guidance also addresses critical operational policies, organized by function, and indicates how states can partner with HHS to implement selected functions in a jointly run Exchange.

Many questions remain about the structure of the federally-run Exchange. These questions will only be answered by final federal Exchange rules. Several states will likely default to a federal Exchange by choice, and will ultimately find their local markets run either in part or wholly by the federal government.

Given the short amount of time between now and October 1, 2013, it is unlikely HHS employees will be able to customize the federal Exchange structure to conform to individual insurance markets of these hold-out states.

Funding Challenge

An even greater challenge to the federal Exchange concept concerns the funding. Although PPACA mandates that every state offer consumers an Exchange, the funding authorization for federally operated Exchanges was not included in the final version of PPACA.

Under the current “pay as you go” federal legislative rules, it is unclear what program funding would be cut, or what taxes would be increased, to pay for this potentially significant expense. Equally problematic – the subsidies provided to persons who qualify for insurance purchased through the federal Exchange are missing from PPACA.

Proponents of PPACA claim that lack of funding provisions were simply drafting errors and have written a rule that will provide the funding. Opponents of PPACA argue that the proponent’s argument makes no difference. The funding omissions likely will provide grounds for another legal challenge of PPACA. Given the partisan split in Congress, passage of a spending authorization to remedy this omission will likely fail.

Need for Final Regulations

Even if the spending authority to fund federally-run Exchanges was included in PPACA, an immense amount of work to create federal Exchanges remains to be done in a short amount of time. HHS has not given any indication of when the final rules governing federal Exchanges will be released. When those rules are published, we will bring them to your attention. States that have rejected the Exchange concept, as well as the hold-out states, have yet to come up with a viable alternative.

We will continue to keep you up-to-date on these and other developments in our ever-evolving marketplace. We have written extensively about implementation issues associated with Exchanges, you can go here to read more.

Please visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources, or you may visit www.benefitmall.com to view past Legislative Alerts.