Is US Health Care Taking a Step Back?

As you know, in many cases, health insurance carriers are terminating or cancelling coverage because it would not comply with certain market reforms that are scheduled to take effect for plan or policy years starting on or after January 1, 2014, such as the new modified community rating and
essential health benefits package standards. These new policies resulted in higher premiums or higher out-of-pocket for some people. I would venture to guess the most hard hit areas were states that new to community rating and people who did not qualify for subsidies.

Not too many people could miss President Obama’s news conference announcing that he would allow issuers to choose to continue coverage that would otherwise be terminated or cancelled and that affected individuals and small businesses may choose to re-enroll in such coverage.

The transitional relief permits, with the approval of both a State’s insurance commissioner and the insurance carrier, the continuation of plans, subject to certain restrictions, that would not have otherwise complied with certain mandated benefit requirements for plan year years beginning in 2014.

The result is a mad scramble between state insurance departments and insurance carriers to decide whether to allow these policies to remain in effect; carriers to files new rates for 2014 and benefit designs and wait for their approval.  All of this must be done in a matter of weeks so the plans can be effective January 1, 2014.  And the public needs time to decide what they want to do. For these reasons, it not expected that state insurance departments or carriers are going to be receptive to this proposal.

There are several issues/questions that arise from this action and I would like to hear from my readers:

1. How will this impact health care reform? The exchanges are supposed to be profitable after their first year. If people or small businesses retain their off-exchange plans, what will be the effect on the ability of the exchanges to prosper?

2. It this action really transitional or just putting off the inevitable? How will people/businesses prepare for 2015 knowing what to expect? What will be different in 2015?

3. If the exchanges are not profitable enough to operate independently. What do you think the government will do?

Individual Health Insurance – Special Enrollment Periods

Starting April 1, 2014, individuals may not obtain or change their insurance plan without meeting one of 9 distinct Qualifying Events.
By meeting one of these events a Special Enrollment Period (SEP) is initiated whereby the individual has two months to enroll in a new health plan. These events include :

1. No-fault loss of Minimum Essential Coverage (Employer offered, Medicaid, or Chip)

2. The addition of a dependent through birth/ marriage/ adoption.

3. Becoming a citizen/ foreign national/ lawfully present alien.

4. You are a qualified individual who experienced an enrollment issue (subject to review, and can’t be the insured’s fault).

5. Change in income that makes an individual NEWLY eligible for subsidy, or a change in Cost Sharing Reductions (CSR) (specifically, a change in the amount of subsidy doesn’t count).

6. A permanent move of residence out of a network area or into an are with new plan options

7. If you can prove to the exchange that the Insurer “substantially violated a material provision of it’s contract”.

8. Individual is an Indian (Native American, with government approved proof).

Without a SEP, it is unlikely that individuals will be able to change plans until open enrollment. Dissatisfaction with a plan, claims to misunderstand contract benefits,etc will not trigger be considered a qualifying event nor open a SEP.

Health Reform: Extended Transition Relief

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OnWednesday, March 5, 2014, the Obama administrationannounced a further delay meant to allow certain non-ACAcompliant small group market and individual policies tocontinue until the policy year beginning on or before October1,2016.Thisannouncementeffectivelyextendsthe November14, 2013 transitional policy that allowed a one-year extensionfor non-ACA compliant small group and individual plans.Inaddition, the previously announcedACA individual mandatehardship exemption will continue until October 1, 2016.

 

Background

On November 14, 2013, CMS announced that, if permittedby applicable state authorities, health insurance issuers maychoose to continue certain coverage that would otherwisebe cancelled, and affected individuals and small businesses may choose to re-enroll in such coverage.CMS further statedthat, under the transitional policy, non-grandfathered healthinsurance coverage in the individual or small group marketthat is renewed for a policy year starting between January 1, 2014 and October 1, 2014 will not be considered to be outof compliance with certain market reforms if certain specificconditions are met.To the extent an individual policy or smallgroup plan is permitted to renew for 2014 under this transitionrule, the followingACA mandated benefit requirementprovisions would not apply:

 

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1.  .           Section 2701 (relating to fair health insurancepremiums);

 

 

2.  .           Section 2702 (relating to guaranteed availability ofcoverage);

 

 

3.  .           Section 2703 (relating to guaranteed renewability ofcoverage);

 

 

4.  .           .   .  Section 2704 (relating to the prohibition of pre-existingcondition exclusions or other discrimination based

on health status), with respect to adults, except withrespect to group coverage;

 

 

5.  .           Section 2705 (relating to the prohibition ofdiscrimination against individual participants andbeneficiaries based on health status), except withrespect to group coverage;

 

 

6.  .           Section 2706 (relating to non-discrimination in healthcare);

 

 

7.  .           Section 2707 (relating to comprehensive healthinsurance coverage);and

 

 

8.  .           Section 2709, (relating to coverage for individualsparticipating in approved clinical trials).

 

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Extension of Relief

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Specifically, the new policy allows states the option to allowhealth insurance issuers that have issued or will issuepolicies under the previously-announced transitional policyto renew such policies through October 1, 2016, therebyallowing individuals and small groups to re-enroll in suchcoverage through October 1, 2016.If a state did not adoptthe transitional policy when it was released on November 14,2013, it may choose to implement the transitional policy forany remaining portion of the 2014 policy year (i.e., this policycould apply to“early renewals”from late 2013).States canelect to extend the transitional policy for a shorter period thanthrough October 1, 2016 (but may not extend it to policy yearsbeginning after October 1, 2016).

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States may choose to adopt both the November 14, 2013transitional policy as well as the new extended transitionalpolicy released on March 5, 2014 through October 1, 2016, oradopt one but not the other, in the following manner

 

 

 

     For both the individual and the small group markets;

 

     For the individual market only;or

 

     For the small group market only.

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A state may also choose to adopt the transitional relief policyonly for large businesses that currently purchase insurancein the large group market but that, for policy years beginningon or after January 1, 2016, will be redefined as smallbusinesses purchasing insurance in the small group market.

Health insurance issuers offering coverage under thisextended transitional rule must provide a notice to affectedindividuals and small businesses.

At this time, it is unclear which states, if any, will allow healthinsurance issuers to provide non-ACA compliant plans underthis extended transitional rule.

 

 

 

Hardship Exemption

 

On December 19, 2013, CMS issued guidance indicatingthat individuals whose policies are cancelled because thecoverage is not compliant with theAffordable CareAct qualifyfor a hardship exemption if they find other options to be moreexpensive, and are able to purchase catastrophic coverage.This hardship exemption will continue to be available untilOctober 1, 2016 for those individuals whose non-compliantcoverage is cancelled and who meet the requirementsspecified in the guidance.

Relief for Exempted Benefits

Relief for Vision, Dental and EAP Benefits and New Wraparound Coverage

The Departments of Labor, Treasury and HHS issued a proposed rule that provides helpful guidance regarding
certain excepted benefits, including vision benefits, dental benefits, employee assistance programs (EAPs) and certain
wraparound programs. In essence, the proposed rule:
• Removes the participant contribution requirement for certain limited-scope vision and dental arrangements.
Under a revised definition, vision and dental benefits are excepted benefits when offered under a separate
policy, contract or certificate of insurance or when the participant has the right to elect not to receive the
coverage.
• Establishes four criteria to qualify an EAP as an excepted benefit in 2015.
• Creates a new classification of excepted benefit called a “wraparound program,” subject to specific rules

Background
Group health plans are subject to various requirements, including new mandates under the Affordable Care Act.
However, many of the ACA provisions do not apply to excepted benefits including:
• coverage of children up to age 26;

EAPs, are considered group health plans under ERISA. To the extent such benefits are not excepted benefits, they may
be considered Minimum Essential Coverage. Under the ACA, an individual who has Minimum Essential Coverage
is disqualified from subsidies in the Exchange marketplace. Due to these issues, the Departments are providing further
guidance to simplify and clarify when these arrangements may qualify as excepted benefits.

Vision and Dental Benefits
Under current regulations, vision and dental benefits are considered excepted benefits if they are limited in scope
(described as benefits, substantially all of which are for treatment of the eyes or mouth respectively) and are:
• provided under a separate policy, certificate or contract of insurance; or
• otherwise not an integral part of a group health plan. Benefits are not an integral part of a group health plan
(whether provided through the same plan or a separate plan) if a participant (1) has the right to elect not to receive
coverage for the benefits; and (2) if a participant elects to receive coverage for the benefits, the participant must pay an
additional premium or contribution for that coverage (even if that contribution is nominal).
The new proposed regulations eliminate the additional premium or contribution requirement for vision or dental
benefits to qualify as excepted benefits. Under this revised definition, vision and dental benefits are excepted benefits if
they are limited in scope and are either (1) provided under a separate policy, certificate, or contract of insurance, or (2) the
participant has the right to elect not to receive coverage for the benefits. For example, a self-insured dental plan where
the participant has the right to decline the dental but if the participants takes the dental, the employer pays 100% of the
cost would not be an excepted benefit under the old rule, but would be an excepted benefit under the proposed rule.
Employers and plans may rely on the proposed regulations with respect to vision and dental benefits at least through
2014. If final regulations on this matter are more restrictive than the proposed regulations, such guidance would not be effective prior to January 1, 2015.
• no pre-existing condition exclusions;
• no annual or lifetime dollar limits on essential health benefits;
• compliance with out-of-pocket limitations (non-grandfathered plans only);
• W-2 reporting (if applicable); and
• compliance with SBC disclosure rules.
Prior to this proposed rule, self-insured vision and dental

Employee Assistance Programs
Earlier guidance provided that through the end of 2014, the Departments will consider an EAP to constitute an excepted
benefit only if the EAP does not provide significant benefits in the nature of medical care or treatment. For this purpose,
employers may use a reasonable, good faith interpretation of whether an EAP provides significant benefits in the nature of
medical care or treatment. Beginning in 2015, the proposed rule lays out new requirements that the EAP will need to
satisfy to qualify as an excepted benefit:
• The EAP cannot provide significant benefits in the nature of medical care. The proposed rule seeks comments
on how to define the term “significant.” The guidance asks whether a program that provides no more than
10 outpatient mental health/substance use disorder counseling sessions, an annual wellness checkup,
immunizations, and diabetes counseling with no inpatient benefits should be considered to provided significant
benefits in the nature of medical care.
• The EAP cannot coordinate with benefits under another group health plan. To satisfy this requirement, three
conditions must be met:
• Participants cannot be required to exhaust EAP benefits before an individual is eligible for benefits
under the group health plan (no EAP “gatekeeper”).
• Eligibility for the EAP cannot be conditioned on participation in another group health plan.
• The EAP must not be financed by another group health plan.
• No employee premiums or contributions are required to participate in the EAP. The EAP must be 100% employerpaid.
• No cost-sharing under the EAP. Employees are not required to pay anything toward the cost of coverage such
as copays.

Wraparound Programs
The proposed rule contemplates a new type of “wraparound” coverage that would constitute an excepted benefit. This
coverage is intended to provide additional benefits to certain employees who have unaffordable group health plan
arrangements that are 100% employer-paid were considered non-excepted benefits, and subject to the various market
reforms. Additionally, vision and dental benefits, and most coverage offered by an employer and choose to purchase an
individual health insurance policy instead of the employer’s group health plan. The wraparound plan would provide
benefits beyond the essential health benefits offered by the individual policy and may also assist with cost-sharing such
as out-of-network costs or other expenses. For example, the wraparound coverage could provide benefits for items
and services that cannot be (or are unlikely to be) essential health benefits including routine adult vision and dental
care, long-term/custodial nursing home care, non-medically necessary pediatric orthodontia, and coverage that extends
beyond the benchmark plan’s coverage of wellness programs, manipulative treatment, infertility, home health care, private
duty nursing, hospice or certain non-traditional treatments. To be considered an excepted benefit, the wraparound
coverage must satisfy the following five requirements:
1. The coverage wraps around non-grandfathered individual health insurance coverage that does not consist solely of
excepted benefits.
2. The coverage is specifically designed to provide benefits beyond those offered by the individual health insurance
coverage. Specifically, the limited wraparound coverage must provide either benefits that are in addition to essential health benefits or reimburse the cost of health care providers considered out-of-network under the individual health insurance coverage, or both. Thecoverage may, but is not required to, provide benefits for the participant’s otherwise applicable cost-sharing
under the individual health insurance policy (however, this cannot be its primary purpose). The wraparound
coverage cannot provide benefits solely pursuant to a coordination-of-benefits provision that simply pays
benefits whenever the individual health insurance policy does not cover all or part of the expense.
3. The wraparound coverage cannot be an integral part of the group health plan. The plan sponsor must sponsor
another group health plan that meets minimum value for the plan year, referred to as the primary plan. This
primary plan must be affordable for a majority of the employees who are eligible for the coverage. Future
regulations will clarify which of the three IRS affordability safe harbor tests can be used to satisfy the affordability
requirement.

4.The wraparound coverage must be limited in amount. Specifically, the total cost of coverage under the limited
wraparound coverage must not exceed 15% of the cost of coverage under the primary plan offered to employees
eligible for the wraparound coverage. For this purpose,the cost of coverage is the total cost of coverage
(inclusive of both employer and employee contributions)and is determined in the same manner as the applicable
premium for purposes of COBRA. To the extent an employer sponsors two or more major medical plan
options and one does not satisfy the 15% standard but another plan does, the 15% threshold will be met if the
average value of the primary plan options meets the 15% standard.
5. There is no discrimination. The limited wraparound 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), and may not impose any pre-existing condition exclusions. In addition, both the primary
plan and the limited wraparound coverage must not discriminate in favor of highly compensated individuals
under the provisions of PHS Act 2716 and Code Section 105(h). These nondiscrimination rules help ensure that
employers will not be able to use wraparound coverage to send excessive numbers of low-wage workers to the
Exchange marketplace.

Employers have the option of offering a wraparound plan.This coverage is not intended to replace group coverage for employers who drop coverage or who otherwise do not provide a minimum value plan. Offering this coverage will not satisfy the ACA’s employer shared responsibility mandate for applicable large employers. The proposed rule acknowledges that wraparound coverage is targeted to a narrow group of plan sponsors – those that offer a minimum value plan that is affordable to a majority of employees. The Departments are seeking comments as to whether the majority level is appropriate (or whether the primary plan should provide
coverage that is affordable to a large or smaller fraction of employees) as the goal is to prevent plan sponsors from shifting employees from the primary plan to the individual market with limited wraparound coverage.

Employer Action
Employers should review vision and dental plans for excepted status. As long as the vision and/or dental coverage is written
under a separate policy or contract of insurance, it is an excepted benefit. If the vision or dental benefit is self-insured,
under the proposed rule, the plan only needs to allow the participant “choice” (the right not to elect the coverage) inorder to retain excepted status. If the dental or vision is a non-excepted benefit, the plan must comply with various ACA mandates, including the market reforms.
EAPs should also be reviewed for excepted status under both the 2014 and 2015 relief; employers should await further
guidance. Employers should also await further guidance and clarification around wraparound programs to understand potential risks
and possible benefits to offering this coverage

COLA Adjustments for 2014

Below are highlights of the recently released cost-of-living (COLA) adjustments by the Internal Revenue Service (IRS) and Social Security Administration. The reason for the increase is that the CPI (Consumer Price Index) rose enough during the past year to warrant an increase in some, but not all, indexed figures for 2014.

Social Security and Medicare Wage Base
For 2014, the Social Security wage base increases to $117,000 from $113,700 in 2013. The Social Security rate of 6.2% is applied to wages up to the maximum taxable amount for the year; the Medicare portion of 1.45% applies to all wages.
Social Security Wage Base:  $117,000
Employee Social Security: Rate 6.2%
Employee Medicare Rate : 1.45%
Total Employee Rate:  7.65%
Employer Matching Rate:  7.65%


Healthcare FSA

The maximum contribution, $2,500, remains the same for 2014. However, employers may no longer make contributions to FSAs to pay for individual health insurance policies (also known as Premium Reimbursement Accounts)

Health Savings Account (HSA)
Minimum deductible amounts for the qualifying high deductible health plan (HDHP) remain the same at $1,250 for self-only coverage and $2,500 for family coverage in 2014. Maximums for the HDHP out-of-pocket expenses increase to $6,350 for self-only coverage and $12,700 for family coverage.

Maximum contribution levels to an HSA also increased for 2014 to $3,300 for self-only coverage and $6,550 for family coverage. The catch-up contribution allowed for those 55 and over is set at $1,000 for 2014. Remember, qualifying HDHPs and no other impermissible coverage (such as coverage under another employer’s plan or from a health care flexible spending account that is not specifically compatible with an HSA) are required in order to fund an HSA.
Minimum deductible amounts for the qualifying high deductible health plan (HDHP) in 2014 are:
Individual coverage: $1,250
Family coverage: $2,500
Maximum contribution levels for 2014 are:
Individual coverage:  $3,300
Family coverage:  $6,550
Catch up allowed for those 55+ :   $1,000
Maximums for HDHP out-of-pocket expenses are:
Individual coverage:  $6,350
Family coverage:  $12,700


Small Business Health Care Tax Credit

For 2014, the average annual wage level at which the tax credit begins to phase out for eligible small employers is $25,400. The maximum average annual wages to qualify for the credit as an “eligible
small employer” has been increased to $50,800.

Commuter Accounts
For 2014, the monthly parking amount increases to $250, up from $245 in 2013. However, the monthly limit for transit passes and van pooling decreases in 2014 to $130 from $245 in 2013.


Long-Term Care

For a qualified long-term care insurance policy, the maximum non-taxable payment is now $330 per day for 2014. This is important to note for indemnity policies.  Payments above this amount must be backed up with receipts for long term care expenses or they will be considered taxable income.

Premium deductions  on Federal tax returns are  as follows

Attained age in tax year Limitations on premiums
Age 40 or less $360
Age 41 – 50 $680
Age 51 – 60 $1,360
Age 61 – 70 $3,640
Age 71 and Older $4,550

Medical expense deduction is allowable to extent that such expenses (including payment of eligible LTCi premium) exceed 10% of A GI IRC §213(a)

You can access the full version of IRS Revenue Procedure 2013-35 at http://www.irs.gov/pub/irs-drop/rp-13-35.pdf

How Does the Individual Mandate Work?

Minimum Essential Coverage and the Exchange

Minimum essential coverage includes most major medical coverage such as all of the following:
• Employer-provided medical coverage;

• Medicare Part A, Medicaid, the CHIP program, and TRICARE; and
• A qualified health plan through the individual market under an Exchange (“QHP”).

Minimum essential coverage does not include things like workers’ compensation, dental or vision benefits.

An Exchange, also know as the Marketplace, is basically an online marketplace for health insurance in each state.
Policies offered in the Exchange will be provided by the major insurance carriers in the United States. The coverage options are:

• Bronze: pays 60% of covered benefits (least expensive);

• Silver: pays 70% of covered benefits;

• Gold: pays 80% of covered benefits; and

• Platinum: pays 90% of covered benefits (most expensive).

The Tax

All individuals (with limited exceptions) are subject to the tax. The following individuals are not subject to the tax:

• Individuals who are not lawfully present in the United States;

• Individuals whose household income does not exceed the threshold for filing a federal income tax return; and

• Individuals who cannot afford coverage – defined as individuals for whom a required contribution for coverage would cost more than 8% of their household income.

The taxpayer pays the tax on his or her behalf, as well as on the behalf of his or her tax dependents. The tax is paid in connection with the taxpayer’s Form 1040 filing. Married
individuals who file a joint return for a taxable year are jointly liable for any tax. For each taxable year, the tax is:

• For 2014: the greater of $95 per household member* (up to $285 per family) and 1% of household income;

• For 2015: the greater of $325 per household member* (up to $975 per family) and 2% of household income;

• For 2016: the greater of $695 per household member* (up to $2,085 per family) and 2.5% of household income.

* For children under the age of 18, use half of the applicable dollar amount.
The tax is capped at the sum of the monthly national average bronze plan premiums for the family and is assessed monthly based on the annual amounts above.

Government Assistance

Effective January 1, 2014, certain individuals may receive government assistance to purchase a QHP. There are two forms of government assistance: a premium tax credit and a cost sharing subsidy. A premium tax credit is a refundable government subsidy for some of the premium paid toward a QHP. A cost sharing subsidy is a government subsidy for
some of the cost-sharing (e.g., deductibles, coinsurance and copayments) toward a QHP.

Premium Tax Credits

To receive a premium tax credit, an individual must:

• have household income between 100% and 400% of the Federal Poverty Level;

• be enrolled in a QHP;

• be legally present in the United States and not incarcerated;

• not be eligible for other qualifying coverage, such as Medicare, Medicaid, or affordable employer-sponsored coverage of a minimum value; and

• not be enrolled in an employer-sponsored plan, even if the plan does not meet the affordability and minimum value conditions.

It is important to note that individuals and their families are not eligible for government assistance when the employer offers affordable employee-only coverage of a minimum value.

The amount of the premium tax credit is dependent on income. For a calculator, visit: http://healthreform.kff.org/ SubsidyCalculator.aspx. For the fact sheet, visit: http://www. treasury.gov/press-center/Documents/36BFactSheet.PDF.

Individuals receiving premium tax credits will get an average of over $5,000 per year.

Can family members qualify for the premium tax credit when only the employee is eligible for affordable, minimum value coverage? An employer plan is affordable for family members if the cost of self-only coverage does not exceed 9.5% of the employee’s household income. In other words, for purposes of determining whether family members are eligible for premium
tax credits, the cost of family coverage is not taken into account
– all that matters is whether the cost of self-only coverage is affordable to the employee. For example, if Jack is married to Jill and Jack’s employer’s plan requires Jack to contribute $5,300 for Jill’s coverage for 2014 (11.3% of their household income), because Jack’s required contribution for self-only coverage ($3,450) does not exceed 9.5% of household income, Jack’s employer’s plan is affordable for Jack and Jill.
In contrast to the affordability test for purposes of eligibility for premium tax credits, affordability for purposes of an exemption from the individual shared responsibility penalty does look at the cost of family coverage. Therefore, it is possible that an employee’s family members may not qualify for premium tax credits (since the cost of self-only is deemed to be affordable for the whole family), but they may nevertheless avoid the individual shared responsibility penalty if the lowest-cost family coverage is not affordable to them; the individual mandate does not apply to individuals who cannot afford coverage – defined as individuals for whom a required contribution for coverage would cost more than 8% of their household income.

Cost-Sharing Reductions

To receive a cost-sharing reduction an individual must:

• be eligible for the premium tax credit;

• have household income between 100% and 250% of the Federal Poverty Level; and

• be enrolled in a silver level of coverage in a QHP.

The term “cost-sharing” includes deductibles, coinsurance, copayments, or similar charges, and any other expenditure required of an insured individual with respect to essential health benefits covered under the plan. Such term does not include premiums, balance billing amounts for non-network providers, or spending for non-covered services.

The amount is expected to range from 33% to 90%, depending on the income level of the individual.