Tucker E-Updates June 2011
News and Industry Insights, Keeping You "Well-Informed"
H.R. 2010 Would Remove Rx Requirement for OTC Drug FSA Purchases
Senator Orin Hatch and Rep. Erik Paulsen have recently introduced H.R.2010 “Family & Retirement Health Investment Act of 2011. This bill will restructure the current PPACA regulations regarding the use of HSAs and FSAs. For example, it would:
- Remove the burdensome new restrictions on the use of HSA and FSA dollars to purchase of OTC drugs
- Allow individuals to roll over up to $500 from their FSA accounts
- Clarify the use of some prescription drugs as preventive care
- Reauthorize the use of Medicaid health opportunity accounts
- Promote wellness by expanding the definition of qualified medical expenses to encourage more exercise and better diet
- Allow seniors enrolled in Medicare Part A to continue contributing to their HSAs
- Allow a husband and wife to make catch-up contributions to the same HSA
- Allow for the purchase of a health plan during any period of continuation coverage required under any Federal law, and long-term care insurance with HSA dollars.
- Repeals the recently enacted deductible limits of $2,000 for single coverage and $4,000 for family coverage for plans sold to small employers.
Groups such as the Consumer Healthcare Products Association, the Health Choices Coalition, and the National Association of Chain Drug Stores have pushed for the repeal of the OTC provision, saying it undermines tax-advantaged health plans and increases costs for patients.
“This legislation will provide American workers and retirees with a common-sense way of improving access to quality, affordable health care,” said Senator Hatch. “These health plans empower Americans to take control of their health and well-being. Health Savings Accounts and Flexible Spending Accounts allow consumers to make informed decisions about their health care and will help restrain costs by putting people in charge of their health choices. ”
The bill has been referred to the Committees on Ways and Means, Judiciary, and Energy and Commerce.
Reminder on Opt-Out Rules for State and Local Government Plans
The Patient Protection and Affordable Care Act (PPACA) made a number of changes to the HIPAA opt-out rules for self-funded, nonfederal governmental plans. After a transition period, which ended April 1, 2011, these plans, when their next plan year begins, will no longer be able to opt-out of certain provisions of HIPAA. The transition period permitted these plans to continue their opt-out elections for plan years beginning prior to April 1, 2011.
For plan years beginning on or after April 1, 2011, self-funded, nonfederal governmental plans will no longer be able to opt-out of the following HIPAA provisions:
1. Limitations on preexisting condition exclusion periods.
2. Special enrollment periods.
3. Prohibitions against discriminating against individual participants and beneficiaries based on health status (but not including provisions added by the Genetic Information Nondiscrimination Act of 2008).
Self-funded, nonfederal governmental plans may continue to opt-out of the following rules:
4. Standards relating to benefits for newborns and mothers.
5. Parity in the application of certain limits to mental health and substance use disorder benefits (including requirements of the Mental Health Parity and Addiction equity Act of 2008).
6. Coverage for reconstructive surgery following mastectomies.
7. Coverage of dependent students on a medically necessary leave of absence.
| According to the September 2010 release from HHS, the opt-out election is not subject to the grandfather provision. Even if a self-funded, nonfederal governmental plan is a grandfathered plan, it will no longer be able to opt-out of the first three provisions. |
Does grandfather status impact the ability to opt-out?
According to the September 2010 release from HHS, the opt-out election is not subject to the grandfather provision. Even if a self-funded, nonfederal governmental plan is a grandfathered plan, it will no longer be able to opt-out of the first three provisions.
Special Rule for Collectively Bargained, Self-funded Nonfederal Government Plan
Self-funded, nonfederal government collectively bargained plans are allowed to retain their opt-out elections for the first three provisions noted above until a new bargaining agreement takes effect for a plan. According to the HHS letter, a group health plan that is maintained pursuant to a collective bargaining agreement that was ratified before March 23, 2010, and that has been exempted from any of the first three provisions noted above, will not have to come into compliance with those provisions until the commencement of the first plan year following the expiration of the last plan year governed by the collective bargaining agreement.
Opt-Out of Health Reform Group Market Reform Provisions
Many SPBA members have asked whether self-funded, non-federal government plans (i.e., state and local government plans) have the option to opt-out of the group market reform provisions of the new health care reform law. SPBA has confirmed with our contacts at HHS that these plans were not given any preferential treatment with respect to the new mandates in the health care reform law.
New Model Notice and Election Form
HHS has prepared a new model notice for enrollees that a plan may use to notify participants of the opt-out election, as well as a model opt-out election form to be sent to CMS.
Model Notice to CMS: http://cciio.cms.gov/resources/files/model_exemption_election_letter_04072011.pdf
Model Notice to Enrollees:http://cciio.cms.gov/resources/files/model_enrollee_notice_04072011.pdf
Please call us to discuss if you have any questions at 704-525-9666.
Prevention: The Answer to Curbing Chronically High Health Care Costs: $80 AWAC® Hit = $400,000 Savings
Health risk management is becoming the foundation of the rapidly evolving group health plan market. The Patient Protection and Affordable Care Act (PPACA) influences health care benefits today and beyond. Tucker Administrators is dedicated to keep ahead of these changes by offering real-world solutions for employer-sponsored health care coverage. Largely preventable and highly manageable chronic diseases account for 75 cents of every dollar we spend on health care in the US.* The following AWAC® case demonstrates how Tucker Administrators helps clients contain those costs and still offer extra value.
A case in point is our AWAC® claims surveillance program for self-funded health plans. The AWAC® Engine detects potential problem claims by daily cross-referencing the medical and pharmacy claims information to a database powered by 80,000 physician-written clinical and financially driven algorithms, 90,000 actual cases and 50 million claim reviews to uncover claims that are likely to become catastrophic. This produces a significant cost benefit for employers and delivers opportunities for improved patient outcomes. Early detection by AWAC® not only minimizes stop loss claims, but in many cases prevents them entirely, resulting in significant hard and soft dollar savings for our clients. Here is a real-world example:
Mr. SE is a 50 year old man in kidney failure secondary to diabetes. He had a kidney transplant 16 years ago and pancreas transplant 11 years ago, and then began to exhibit signs of kidney rejection. For the next 9 months, he continued to show progressive kidney failure. His glucometer had broken and he was not monitoring his blood sugars. His doctors referred him back to the transplant center expecting further decline and the need for a second kidney transplant. AWAC® spotted an $80 claim for services related to kidney disease and received permission for the AWAC® Comprehensive Kidney Care (CKC) intervention. The CKC recommended major changes in his diet, and encouraged him to replace his glucometer. Within a few months his renal function had improved 20%. His swelling disappeared, potassium problems resolved and his diabetes came back under control. Epoetin, the expensive red blood cell stimulant, was not required. In eleven months, he was so improved that his transplant doctor discharged him from his clinic.
In the next 6 months Mr. ES took two family vacations. Excited about his improved kidney function, he now personally advocates for nutrition intervention for his friends and family with kidney disease or diabetes. He has even shared the nutrition therapy he learned with other patients and family, including his 85 year old father who has also had significant improvement in his kidney function.
What about savings? ES and his employer avoided any high cost medical treatment or procedures. Consider the costs avoided:
No transplant ($80,000)
No dialysis or epoetin for 8 months @
$39,000 per month ($312,000)
No vascular access surgery ($20,000)
Estimate of claims avoided, $400,000
Ask Tucker Administrators how we can help lower your health plan costs. Phone: 704-525-9666.
* From Kaiser Health News http://www.kaiserhealthnews.org Prevention: The Answer to Curbing Chronically High Health Care Costs. Kenneth Thorpe, Ph.D., and Jonathan Lever, Executive director of the Partnership to Fight Chronic Disease and vice president for health strategy and innovation at the YMCA of the USA.
How Do “Excepted Benefits” Relate to the PPACA Grandfathered Plan Status?
Plan sponsors looking for ways to minimize the impact of health care reform have been carefully scrutinizing a section of ERISA that has not received much attention up until the implementation of the Patient Protection and Affordable Care Act (PPACA). ERISA section 732(c) provides the definition of “excepted benefits.” If a plan falls into one of the categories of “excepted benefits,” the plan will not need to comply with the major group market reform provisions in the PPACA, such as prohibitions on lifetime and annual limits, dependent coverage extension, pre-existing condition prohibitions. How is a plan defined as an “excepted benefit”?
| There are different categories of “excepted benefits” highlighted below. A plan needs to fit into only one of the categories. This explanation of “excepted benefits” is taken from the final HIPAA portability regulations, Federal Register, Thursday, December 30, 2004, §2590.732(c). |
There are different categories of “excepted benefits” highlighted below. A plan needs to fit into only one of the categories. This explanation of “excepted benefits” is taken from the final HIPAA portability regulations, Federal Register, Thursday, December 30, 2004, §2590.732(c).
Plans probably have already performed the “excepted benefits” analysis to determine if the plan is subject to the HIPAA portability rules. If the plan is not subject to the HIPAA portability rules, then it will not be subject to the major group market reforms in PPACA.
LIMITED-SCOPE BENEFITS
Limited-scope dental benefits and limited scope vision benefits are “excepted benefits” if they are provided under a separate policy, certificate, or contract of insurance, OR are otherwise not an integral part of a group health plan.
Some question whether a self-funded plan could fall under the first option (provided under a separate policy, certificate, or contract of insurance), as this suggests a fully-insured plan. This is not a concern for self-funded plans as they can obtain comfort in the second option (not an integral part of a group health plan).
What does it mean to not be an “integral part” of a group health plan? Benefits are not considered an integral part of a group health plan (whether the benefits are provided through the same plan or a separate plan) only if the following two conditions are satisfied:
1) Participants must have the right to elect not to receive the coverage; and
2) If a participant elects to receive coverage for the benefits, the participant must pay an additional premium or contribution for that coverage.
Does a dental plan have to be a standalone plan? No. As long as the dental plan can meet the two requirements above, the dental plan will be considered an “excepted benefit.” Dental benefits can be packaged with a major medical plan and still meet the two threshold requirements above. However, some employers and administrators feel that it is too burdensome to unpackage the dental plan from the major medical plan.
However, some plan sponsors would prefer to unpackage the major medical from the dental in order to satisfy the “excepted benefit” requirements. According to IRS’ Russ Weinheimer during an agency-sponsored webinar in September of 2010, if a plan sponsor carves out dental from major medical, then the major medical plan will lose grandfather status.
If the dental plan is not able to meet the requirements for an “excepted benefit,” the dental plan for adults is not an “essential health benefit,” so it will not be subject to the prohibitions on annual and lifetime limits. However, the dental plan would be subject to the other coverage mandates-prohibitions on preexisting conditions, dependent coverage extension. If the dental plan is not able to meet the requirements for an “excepted benefit,” the dental coverage for children will be considered an “essential health benefit” and consequently will be subject to the prohibitions on annual and lifetime limits for those aspects of the dental plan that are deemed “essential health benefits” (this may not include orthodontia).
FLEXIBLE SPENDING ARRANGEMENTS
FSAs are “excepted benefits” for a group of participants only if they satisfy the following two requirements:
1) Other group health plan coverage, not limited to “excepted benefits,” is made available for the year to the participants by reason of their employment; and
2) The arrangement is structured so that the maximum benefit payable to any participant for a year cannot exceed two times the participant’s salary reduction election under the arrangement for the year (or, if greater, cannot exceed $500 plus the amount of the participant’s salary reduction election).
For this purpose, any amount that an employee can elect to receive as taxable income but elects to apply to the health flexible spending arrangement is considered a salary reduction election (regardless of whether the amount is characterized as salary or as a credit under the arrangement). Most flexible spending arrangements satisfy the “excepted benefits” requirements.
NONCOORDINATED BENEFITS
Coverage for only a specified disease or illness (for example, cancer-only policies) or hospital indemnity or other fixed indemnity insurance is an “excepted benefit” only if it meets all of the conditions specified below. To be hospital indemnity or other fixed indemnity insurance, the insurance must pay a fixed dollar amount per day (or per other period) of hospitalization or illness (for example, $100/day) regardless of the amount of expenses incurred.
Conditions
1. The benefits are provided under a separate policy, certificate, or contract of insurance;
2. There is no coordination between the provision of the benefits and an exclusion of benefits under any group health plan maintained by the same plan sponsor; and
3. The benefits are paid with respect to an event without regard to whether benefits are provided with respect to the event under any group health plan maintained by the same plan sponsor.
Example (paraphrased from the HIPAA regulation): Facts. An employer sponsors a group health plan that provides coverage through an insurance policy. The policy provides benefits only for hospital stays at a fixed percentage of hospital expenses up to a maximum of $100 a day.
Conclusion: In this Example, because the policy pays a percentage of expenses incurred rather than a fixed dollar amount, the benefits under the policy are not “excepted benefits.” This is the result even if, in practice, the policy pays the maximum of $100 for every day of hospitalization.
SUPPLEMENTAL BENEFITS
The following benefits are “excepted benefits” if they are provided under a separate policy, certificate, or contract of insurance.
Medicare supplemental health insurance – as defined under section 1882(g)(1) of the Social Security Act; also known as Medigap or MedSupp insurance.
TRICARE supplemental coverage – coverage supplemental to the coverage provided under Chapter 55, Title 10 of the US Code.
“Similar supplemental coverage” provided to a group health plan – The Department of Labor (DOL) released guidance defining “similar supplemental coverage” in a December 7, 2007 Field Assistance Bulletin (FAB No. 2007-04). In the guidance, the DOL sets forth conditions for this coverage to fall under an “enforcement safe harbor.” The coverage must be in a separate policy, certificate, or contract of insurance and satisfy all of the following requirements:
1. Independent of Primary Coverage – The supplemental policy, certificate, or contract of insurance must be issued by an entity that does not provide the primary coverage under the plan. For this purpose, entities that are part of the same controlled group of corporations or part of the same group of trades or businesses under common control, within the meaning of section 52(a) or (b) of the Code, are considered a single entity.
2. Supplemental for Gaps in Primary Coverage – The supplemental policy, certificate, or contract of insurance must be specifically designed to fill gaps in primary coverage, such as coinsurance or deductibles, but does not include a policy, certificate, or contract of insurance that becomes secondary or supplemental only under a coordination-of-benefits provision.
3. Supplemental in Value of Coverage – The cost of coverage under the supplemental policy, certificate, or contract of insurance must not exceed 15 percent of the cost of primary coverage. Cost is determined in the same manner as the applicable premium is calculated under a COBRA continuation provision.
4. Similar to Medicare Supplemental Coverage – The supplemental policy, certificate, or contract of insurance that is group health insurance coverage must not differentiate among individuals in eligibility, benefits, or premiums based on any health factor of an individual (or any dependent of the individual).
To be similar supplemental coverage, the coverage must be specifically designed to fill gaps in primary coverage, such as coinsurance or deductibles. Similar supplemental coverage does not include coverage that becomes secondary or supplemental only under a coordination-of-benefits provision.
