Contents Last Updated: December 6, 2010
DISCLAIMER: This content is provided solely for informational
purposes: it is not intended as and does not constitute legal advice. The
information contained herein should not be relied upon or used as a substitute
for consultation with legal, accounting, tax and/or other professional advisors.
The
Center for Health Transformation
has developed a brand new comprehensive
website
to help every American track the ramifications of the law. It's called
Health Reform Report.
The mission of Health Reform Report is simple: to provide
real
facts about the healthcare law and
trusted
analysis about how changes will affect individuals, doctors,
hospitals, employers and more.
Section 1:
Patient Protection and Affordable Care Act of 2010 ~ A
Partial Overview of Key Provisions
& Link to a Detailed Summary via the Kaiser Family Foundation.
+ Plus - Public Opinion & Poll.
Section 1A Alert -
Changes effective as of
September 23, 2010
Section 1A2
- Ways Employers Can Avoid Losing "Grandfathered" Plan Status & Save $
Section 1A
Interim Final Rule ("IFR") Update of June 2010
Section 1B -
Small Group Tax Credit Extends to Dental & Vision Benefits &
IRS Clarifies Small Employer Health Care Tax Credit (June 2010)
Section 1C -
Changes to Simple Cafeteria Plans are
effective January 1, 2011
Section 2:
How does the new
health law impact my HSA - Health Savings Account?
Section 3:
HCERA -
Tax Law Changes Summary
Section 4:
Community Living Assistance Services and Supports Act ("CLASS" Act) -- Planned
Effective/Implementation Date 2012-2013 (CLICK
HERE for Summary of Key Provisions and Details)
What all American consumers will come to understand is that this law, better known as
"Obamacare", contains taxes and increased costs at all levels for all
Americans.
Middle class Americans will be the most financially impacted as the various
components of all of this are implemented over the coming 10 years.
State's Governors are rebelling and filing law suits on at least the principal
that the Federal Government cannot compel or otherwise require free citizens to
have to buy a product they have the right to refuse or otherwise simply do not
want to purchase.
It will take years for all of this to sort itself out...so, brace yourselves for many
changes and the very real possibility that much, if not all of this, will end up
being both changed and also very likely repealed in part or in whole over the
coming years.
Public Opinion as of May-June 2010:
Americans Want Repeal of Health Care Reform:
A recently released
Rasmussen report suggests that Americans are strongly in favor of
repealing President Barack Obama's health care reform law. Sixty percent of
those polled favor repeal, while 62% believe the new legislation will increase
the budget deficit.
Majority of Americans Unhappy with Reform:
According to a new
Quinnipiac University
poll, 51% of Americans are unhappy with the new health care reform
legislation and 70% are "dissatisfied" or "very dissatisfied" with the way
things are going for the nation.
-----
For a detailed summary of all of the provisions of the PPACA is available by the
Kaiser Family Foundation via the following link (a 13-page .pdf downloadable
document):
Click Here
-----
Section 1: Partial Overview of Some Key Provisions:
•Medicare payroll taxes will rise 62% for higher-earning households beginning in
2013.
Over the next decade, federal funding of Medicare will be cut by $500 billion,
forcing the states to make up the shortfall by raising local taxes or curtailing
benefits to American retirees.
•A new 3.8% Medicare tax on gross investment income (interest, dividends,
capital gains, rental income, annuities and royalties) for higher-earning
households.
In addition to this new tax, capital gains taxes are set to rise in 2011 from
15% to 20% — a 33% increase.
•Health insurance plans that cost more than $10,200 for individuals ($27,500 per
family) will pay a new 40% tax on any coverage that exceeds the limit.
•For anyone without insurance, a new tax of 1% of household income. This tax
will rise to 2.5% per year (at least $695 per person) by 2016.
•Flexible Spending Accounts will be capped at $2,500 per year.
Flex Spending and Health Savings Accounts may no longer be used to pay for
over-the-counter drugs.
•Pharmaceutical manufacturers will collectively pay a new excise tax, starting
at $2.5 billion and rising over time, the cost of which may be passed on to
consumers.
•Medicare “donut hole” closed.
There is currently a gap in coverage with Medicare Part D, which covers
prescription drug benefits. The law closes this gap through a mix of federal
funds ($250 rebate) and mandated discounts from the pharmaceutical industry (50%
discount on brand-name drugs beginning in 2011 with 75% discounts on brand-name
and generic drugs by 2020).
•Patient protections.
For new plans, patients will be permitted to select their primary care provider,
or pediatrician in the case of a child, from any available participating primary
care provider. No prior authorization or increased cost-sharing for emergency
services, whether provided by in-network or out-of-network providers. Referrals
aren’t needed for obstetrical or gynecological care.
•Effective for policies renewed after September 23, 2010: Eliminates lifetime
benefit limits and restricts annual benefit limits. Prohibits plans from placing
lifetime limits on coverage, and prohibits the use of restrictive annual limits
in all employer plans and new plans in the individual market.
For more personalized support please
email or call us at 800.482.5347.
Section 1A ALERT - Changes effective as of
September 23, 2010:
Under the recently-enacted health care reform laws, all group health plans and
all health insurance issuers offering group or individual coverage
(collectively referred to as “health plans”) will be subject to certain, new
reforms. These new requirements have different effective dates. This Alert
explains the new requirements that are effective for plan years beginning on or
after September 23, 2010 (i.e., January 1, 2011 for calendar-year plans).
Health Insurance Reforms
With certain exceptions for “grandfathered plans” (to be discussed in a
subsequent Alert), all health plans will be required to comply
with the following, new requirements:
• Prohibition on pre-existing-condition exclusions under 19. Health plans will
be prohibited from imposing pre-existing-condition exclusions with respect to
coverage for enrollees under 19 years of age. The prohibition on
pre-existing-condition exclusions will apply for enrollees 19 and over for plan
years beginning on or after January 1, 2014.
• No lifetime or annual benefit limits on “essential health benefits.”
Health plans will generally be prohibited from imposing lifetime or annual
limits on the dollar-value of the so-called “essential health benefits” for any
participant or beneficiary. The standard for what benefits constitute “essential
health benefits” will be determined by the Secretary of Health and Human
Services through future regulations, but must be equal to what is provided under
a “typical employer plan,” and must include, at a minimum, coverage for:
♦ Ambulatory patient services
♦ Emergency services
♦ Hospitalization
♦ Maternity and newborn care
♦ Mental health and substance abuse services, including behavioral health
treatment
♦ Prescription drugs
♦ Rehabilitative and habilitative services and devices
♦ Laboratory services
♦ Preventive and wellness services and chronic disease management
♦ Pediatric services (including oral and vision care).
Health plans are, however, allowed to place annual or lifetime per beneficiary
limits on specific, covered benefits that are not “essential health benefits,”
as long as these limits are otherwise permissible under federal or state law.
• Prohibition on rescissions. Health plans will be prohibited from
rescinding coverage for an enrollee once such an enrollee is covered under a
plan, except in cases of fraud, intentional misrepresentation or non-payment of
premiums by the enrollee. Prior notice will be required for any cancellation.
• No cost-sharing for certain preventive-services. Health plans will be
required to provide coverage for certain preventive-medicine services, and may
not impose any cost-sharing for these services. These preventive services
include:
♦ Services with a rating of “A” or “B” in the current recommendations by the
U.S. Preventive Services Task Force (available via the web at http://www.ahrq.gov/clinic/USpstfix.htm)
♦ Immunizations recommended by the Advisory Committee on Immunization Practices
♦ For women, infants, children, adolescents: preventive care and certain,
additional screenings provided for in the comprehensive guidelines supported by
the Health Resources and Services Administration.
• Extension of dependent coverage. If a health plan offers coverage for
dependent children, those plans must extend coverage to the dependent until age
26. This provision does not, however, require a plan to make coverage available
for a child of a child receiving dependent coverage.
• Extension of prohibition of discrimination in favor of highly compensated
individuals to fully-insured plan. A fully-insured group health plan will be
barred from discriminating in favor of “highly compensated individuals” as to
both eligibility to participate and benefits provided (self-insured plans are
already subject to this requirement). This requires, among other things, that
all benefits provided to participants who are highly-compensated individuals be
provided for all other plan participants.
• Appeals process. Health plans must implement a process for appeals of
coverage determinations and claims that:
♦ Include an internal claims appeals process (the process must initially comply
with the Department of Labor regulations at 29 C.F.R. Section 2560.503-1, with
new regulations to be issued by the Secretary of Health and Human Services)
♦ Provides notice to enrollees of available internal and external appeals
processes, and of assistance available through health insurance consumer
assistance or the office of that state’s “ombudsman” (state agencies to be
established under the new laws to assist with compliance by plans with federal
and state health insurance requirements and law)
♦ Allows enrollees to review their file, present evidence and testimony, and
receive continued coverage pending outcome of the appeals process
♦ Provides an external review process that complies with applicable state law,
and includes, at a minimum, the consumer protections from the Uniform External
Review Model Act of the National Association of Insurance Commissioners (or, in
the case of a self-insured plan not subject to state insurance regulation, a
similar, effective external review process that meets minimum standards that
will be set forth by the Secretary of Health and Human Services through
regulations)
Section 1A2 -
Ways Employers Can Avoid Losing
"Grandfathered" Plan Status & Save $
Changes to Employer Contributions on Medical Plans Can Result in Clients
Losing "Grandfathered" Status.
The first round of PPACA provisions were implemented on September 23, 2010 and
clients with group medical coverage will be subject to these provisions upon
their next group renewal (on or after September 23, 2010).
If client's group medical and prescription drug coverage's meet the requirements
to be considered a "grandfathered" plan, as defined by the Department of Health
& Human Services (DHHS), the coverage's will be exempt from some of the
immediate and long-term reform provisions of PPACA.
There are several ways in which clients can lose "grandfathered" status, but one
way, in particular, is through a decrease in the employer contribution by more
than 5% compared to the rate for the coverage period on March 23, 2010. Most
Insurers will make written requests of Employers with Group coverage's asking
them to provide their contribution rate as of March 23, 2010 and for the
up-coming renewal period. If the Employer client does not provide the insurer
with the information on their employer contribution rate (whether it has changed
or not), insurer's will, in most all cases, be forced to remove "grandfathered"
status on the plan, which may result in an increase in the planholder's medical
plan renewal rates in order to cover the added costs imposed by PPACA.
Section 1A Interim Final Rule ("IFR")
- Update of June 2010
Patient Protection Provisions
The Department of Health and Human Services (HHS), the Department of Labor, and
the Department of the Treasury filed a 4-part interim final rule (IFR)
on June 23, 2010 that provides further detail on requirements related to
pre-existing condition exclusions for kids, lifetime and annual limits,
rescission, and other "patient protections". Below is an overview of key points:
Pre-existing Conditions
The recently enacted health care reform legislation prohibits health plans from
using pre-existing conditions to deny health care coverage to an individual
beginning in January 2014. Under the IFR, the Department of Health and Human
Services requires health plans to implement this provision for children under
the age of 19, beginning with plan years on or after September 23, 2010.
Annual Limits
The new legislation also prohibits contracts from having lifetime limits and
limits a health insurer's ability to have annual limits on "essential health
benefits" (which have yet to be completely defined). Regardless of whether
the plan is grandfathered, many companies plans will no longer include lifetime
dollar limits or certain annual caps for plan years beginning on or after
September 23, 2010 . Insurers continue to wait on additional guidance from HHS
that will further define "essential health benefits", while making good faith
efforts to comply with the regulation prohibiting annual limits on these
specified "essential" benefits.
Rescission
Rescission is now limited to fraud or intentional misrepresentation of material
fact. Based on the recent IFR, a health insurer may only terminate a member's
coverage in the event of a mistake in eligibility (without fraud or
misrepresentation) prospectively, not retroactively.
"Patient Protections"
The legislation also contains a number of other provisions that the
Administration is calling "patient protections." This group of provisions
includes:
• Primary care physicians - For plans that require a primary care physician,
allowing all members to choose any available in-network provider as their
primary care doctor, including a participating pediatrician for children
• OB-GYN providers - Allows individuals to seek care from an in-network OB-GYN
provider without requiring pre-authorization or referral from a primary care
physician
• Emergency room services - Emergency room services protection including no
pre-authorization for emergency services and limited cost-sharing for out of
network services
Insurers will be offering more information about these changes as matters become
more clear, and we will attempt to keep our readers updated herein as well.
Interim Final Rules for Preventive Care
There is a provision in the health care reform legislation that requires private
plans to cover preventive services with no copays or deductibles. This provision
is required to be implemented with plan years beginning on or after September
23, 2010 and is not required of grandfathered plans.
Under this provision, prohibition of cost-sharing on preventive benefits applies
to those services defined by the U.S. Preventive Services Task Force, American
College of International Physician recommended vaccinations, and Health
Resources and Services Administration recommended screenings and preventive care
for infants, children and adolescents.
This week interim final rules were released that provide additional guidance on
how the preventive care provision should be implemented. We are currently
working to review this new guidance and will provide our readers with additional
information on what impact this will have to you.
High Risk Pools ("Pre-existing Condition Insurance Plan - PCIP or PECIP")
Update
The Patient Protection and Affordable Care Act called for the formation
of a new high risk pool in each state within 90 days after its enactment.
States were required to notify HHS by the end of April if the state would
establish its own high risk pool or defer formation of the high risk pool to the
federal government.
Earlier this month, HHS announced the creation of these "Pre-existing
Condition Insurance Plans" (PCIP) that will offer coverage to uninsured
Americans who have been unable to obtain health coverage because of a
pre-existing health condition. The PCIP is a temporary program to help
provide access to coverage until 2014, when coverage will be available
regardless of pre-existing conditions.
Those states that decided to establish their own high risk pool must either
contract with administrators or private health plans to operate and/or provide
coverage in the pool.
HHS is running the high risk pools in various states. To find out if your State
has an HHS or State run plan please go to the following website:
http://www.healthcare.gov/law/about/provisions/pcip/index.html
Ultimately, high risk pools include those who have been unable to obtain health
coverage because:
1. A pre-existing health condition
2. Private insurance being "unaffordable"
High risk pools that are run by HHS will require a denial letter for health
insurance which requires underwriting. The denial letter must be dated
within 6-months of the application to a PCIP and be from an insurance company or
health plan showing that an individual has been denied completely due to a
pre-existing condition, or the individual was offered coverage but was denied
certain benefits (for example, by a rider to an insurance policy) because of a
pre-existing condition.
We support the development of the high risk pools as a method to increase access
to health care coverage. We are focused on providing up-to-date and accurate
information to our customers.
Section 1B - Small Group Tax
Credit Extends to Dental & Vision Benefits:
The small group tax credit, which will benefit millions of
small businesses, has just become more attractive. That's because the IRS has
just released new details clarifying that the tax credit also applies to
premiums for dental and vision benefits - not just health benefits. And
there's more good news:
• Eligible companies that already get state tax breaks to
help pay premiums can also claim the federal assistance
.
• A business owner's salary won't be taken into account when figuring out
the company's average wages - helping more firms stay below the cutoff for
the federal credit. To qualify for the credit, companies must not employ
more than 25 employees and the average annual compensation of those
employees cannot exceed $50,000.
• Nonprofits - including churches and other religious congregations - are
eligible to claim a partial credit.
See the latest information at:
IRS.gov.
IRS Clarifies Small Employer Health Care Tax
Credit:
For businesses with fewer than 25
full-time equivalent (FTE) employees, the Affordable Care Act provides current
incentives for offering group health coverage in the form of the small
employer health care tax credit.
Recently, the IRS issued Revenue
Ruling 2010-13, providing good guidance on how to calculate the tax credit.
The tax credit is effective in 2010 (applicable to all premiums paid this
year, even those before health care reform became law) and is generally
available to small employers that pay at least half the cost of single
coverage for their employees. Through 2013, the maximum credit is 35 percent
of premiums paid by the employer with 10 or fewer FTEs, provided that they pay
annual average wages of $25,000 or less. The maximum credit is 25 percent for
nonprofit employers. The credit is fully phased out for employers with at
least 25 FTEs or with average wages of $50,000 or more.
The amount of the tax credit is
based on what the employer pays for coverage only and does not include
employee contributions. It is further limited by the premium payments the
employer would have made under the same arrangement if the average premium for
the small group market in the state were substituted for the actual premium.
That is where the Revenue Ruling
comes in. It lists what the average premium is for all 50 states and the
District of Columbia. The Revenue Ruling provides data on two coverage
categories: employee-only and employee-family. Interestingly, Idaho has the
cheapest coverage in the country; Alaska and Massachusetts have the most
expensive.
For the State of California the 2010 employee-only average premium is $4,628 and
the employee-family average premium is $10,957.
The IRS has provided several
resources related to the tax credit:
A step-by-step guide
An FAQ
Revenue Ruling 2010-13
Section 1C - Changes to Simple
Cafeteria Plans are effective January 1, 2011
The Patient Protection and Affordable Care Act makes broad
changes to the rules and mechanisms affecting certain types of health
policies, including significant changes to cafeteria plans and health flexible
spending accounts (FSA).
Under the new rules, a sponsor of a "simple cafeteria
plan" is not required to perform nondiscrimination testing. Thus, the
administrative burden of offering a cafeteria plan is lessened, making it is
easier for small employers to offer a cafeteria plan to their employees.
Effective January 1, 2011, certain employers that establish
"simple cafeteria plans" are exempt from the Code Section 125
non-discrimination requirements, as well as the non-discrimination
requirements applicable to the plans offered through the cafeteria plan (for
example, Code Section 129 non-discrimination testing for dependent care FSAs,
Code Section 105(h) non-discrimination testing for self-insured medical plans,
etc).
The act defines a simple cafeteria plan as a plan "which is
established and maintained by an eligible employer," and for which certain
contribution, eligibility and participation requirements are met. In general,
an eligible employer is an employer that employed an average of 100 or fewer
employees for either of the prior two years.
Plans that qualify as a simple cafeteria plan for any given
year are treated as meeting applicable non-discrimination requirements for
that year (that is, non-discrimination testing is not required for these
plans).
For more details, please see the
attached information.
Section 2: How does the new health law
impact my HSA? The following answers the top 10 FAQs:
UPDATE - Click Here for > Impact on HSAs Under the PPACA
- Health Care Reform
HSAs are a two component type of health care plan, with the first component
being a High Deductible Health Plan (HDHP) and the second being a Savings
Account. To learn more about
HSAs read here and for the most frequently
asked questions see below:
1. Does the new law eliminate HSAs (Health Savings Accounts)? No, the
new health law does not eliminate HSAs and you can continue to use your HSA as
you have - at least until the end of 2010.
2. What are the specific changes to HSAs in the new law? Starting in 2011, the
10% penalty for non-eligible (non-medical) distributions is increased to 20%
and you can no longer use your HSA for over-the-counter,
non-prescription drugs.
3. Can I continue to contribute the same amount to my HSA? The new law does
not change the HSA contribution limits. However, new rules on the definition
of what is a Qualified Health Plan could change your eligibility to contribute
to an HSA in 2014 or later.
4. Can I still use my HSA for over-the-counter drugs? Yes, for the rest of
2010, but not as of January 1, 2011 onward since such non-prescription
over-the-counter drugs are no longer considered eligible medical expenses.
Therefore, this is your last year (2010) to buy aspirin, non-prescription cold
medicine, contact lens cleaner and other over-the-counter items tax-free and
penalty-free with your HSA.
5. I heard that FSAs (Flexible
Spending Accounts - Cafeteria Section 125 Plans) are now limited to
$2,500. Does that limit apply to HSAs? No. The new law will limit FSA
contributions to $2,500 starting in 2013, but that new law does not
apply to HSAs.
6. Did the penalty increase for HSAs? Yes, the 10% penalty for using your HSA
for non-eligible medical expenses will increase to 20% in 2011.
7. Will the law change my HSA in the future? Other than items discussed, the
new law does not directly change HSAs. Indirectly, however, the new law may
eliminate the ability to make contributions in the future.
Starting in 2014, the new law requires Americans to buy "Qualified Health
Insurance" that offers an "Essential Health Benefits Package". Your current
High Deductible Health Plan (HDHP) may later be determined, under these new
standards, as no longer eligible and therefore you will be unable to make a
contribution to the HSA component since your underlying HDHP will then not
have been deemed a "Qualified Health Plan". In other words, you may have to
buy different insurance coverage in order to avoid taxes and penalties.
Regulatory agency rulings and interpretations will provide more information on
this point over the coming months.
8. What happens to my HSA balance in the case where I can no longer contribute
new money? You can continue to use any amounts in your HSA for eligible
medical expenses or save it for later even if you are no longer eligible to
contribute more to your HSA. This is important to know in case you do change
insurance plans to a non-HSA eligible plan to comply with the new law. The HSA
remains one of the best tax favored options available. One good strategy is to
accumulate assets now in the HSA to prepare for whatever happens.
9. Should I change anything based on the new law? The new law is a
foundational change to our health care and insurance system and mostly likely
will impact everyone. For now, however, the combination of a High Deductible
Health Plan (HDHP) and and HSA remain very competitive and a good choice for
many businesses and consumers.
10. How do I keep up on the changes as they take place? Watch our website for
the most current and updated information or simply give us a call at
800.482.5347 /
http://www.LeagueFinancial.com
Section 3: On March
30, 2010, the Health Care and Education Reconciliation Act (HCERA) of 2010
became law. In this Legislation are numerous changes to the tax laws
including provisions that require certain employers to provide health
insurance to employees. The Act creates new taxes on individuals and owners of
small businesses. The attached Adobe .pdf document presents a brief summary
overview of the Acts key provisions.
CLICK HERE.
Section 4: Community
Living Assistance Services and Supports Act ("CLASS" Act) -- Planned
Effective/Implementation Date 2012-2013 (CLICK
HERE for Summary of Key Provisions and Details)
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