Employer Provision Highlights

Under the healthcare reform law, individuals and employers/employees have the right to keep the coverage they had as of March 23, 2010 and are exempt from many reforms. These individual and group health plans are considered "grandfathered plans". Collectively bargained plans that were ratified before the date of enactment are grandfathered until the date that the last collective bargaining agreement related to coverage ends.

The Department of Health and Human Services (HHS) will establish a process- in conjunction with states - for review of fully insured premium rate increases. The provision also provides grants to states for reviewing premium increases.

This provision requires the Department of Health and Human Services (HHS) to develop an Internet website for consumers and small businesses to shop for health insurance. To visit the HHS website, please visit healthcare.gov.

Provides tax credits to small businesses with fewer than 25 employees and average wages of less than $50,000 for their contributions to buying health insurance for employees. The tax credit starts at up to 35 percent and increases to 50 percent in 2014 when state insurance Exchanges become operational. A full tax credit may be available to small businesses with fewer than 10 employees and average wages of less than $25,000.

An example of how the tax credit could impact a small business

The Early Retiree Reinsurance Program is intended to reimburse employer-sponsored plans for higher-cost claims incurred by their early retirees. The idea is to encourage employers to continue covering their retirees and to keep businesses from discontinuing their retiree health plans.

Retirees must be 55 or older, not eligible for Medicare, not active employees and enrolled in the employer's health plan. Spouses, surviving spouses and dependents are also included.

The reform bill appropriated $5 billion to fund the program and participating employers or insurers will be reimbursed 80 percent of retiree claims between $15,000 and $90,000.

• Employers who contribute premium or pay for medical claims incurred can receive 80 percent of the claims cost for each early retiree for that retiree's total claims cost between 15- and 90-thousand dollars during any plan year. (ie Once a retiree's annual claims cost reaches $15k, those costs can be reimbursed, but costs above $90k will not be.)
• There are special rules for plans that begin their plan year before June 1, 2010. Claims incurred before June 1, 2010 count toward the $15k threshold and $90k limit, but only medical expenses incurred after June 1 would be reimbursed.

Reimbursement: Employers may reduce their own premiums or health benefit costs, or they can reduce member cost-sharing (premiums, deductibles, copays, coinsurance or other out-of-pocket costs), or any combination of member and employer costs. The regulations strictly forbid employers from holding onto their reimbursements as general revenue.

Requires plans that offer dependent coverage to make the coverage available until a child reaches the age of 26. Both married and unmarried children qualify for this coverage. This rule applies to all plans in the individual market and to new employer plans. It also applies to existing employer plans unless the adult child has another offer of employer-based coverage (such as through his or her job).

Any employer contribution toward the premium is a tax-deductible business expense for the employer and not taxable income for the member.

Beginning in 2014, children up to age 26 can stay on their parent's employer plan even if they have another offer of coverage through an employer.

Note: Some states have a higher dependent limiting age, pursuant to state law. Also, due to some state laws, parents can opt to carry their dependents beyond age 26. If you have questions about such laws, please consult your state regulations or contact your state Department of Insurance.

Individual and group health plans may not impose lifetime limits on the dollar value of essential benefits. Annual limits will be restricted until 2014 and eliminated altogether starting in 2014. Restricted annual limits do not apply to grandfathered individual plans.

Prohibits group health plans and health insurance issuers offering group or individual health insurance coverage from rescinding coverage except in the case of fraud or intentional misrepresentation of material fact.

Plans may no longer impose pre-existing condition exclusions for children under 19 (does not apply to grandfathered individual plans).

New policies must cover the full cost of preventive care as recommended by the U.S. Preventive Services Task Force: recommended immunizations, preventive care for infants, children and adolescents, and additional preventive care for women. To make it easier for our customers to understand what's covered, Humana developed a preventive services flyer for commercial members with a list a covered services. Please click here for a copy of the Preventive Services Flyer.

Preventive Services Flyer

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Non-discrimination rules that currently apply to self-funded health plans are expanded to group fully insured health plans. Plans cannot base an employee's eligibility or continued eligibility for coverage on hourly or annual salary. Employer-provided insurance may not discriminate between employees. This will prevent employers from providing enhanced insurance benefits based on an employee's length of service. Under the new rules, plans may be subject to penalties up to $100 per enrollee per day for violating the requirements.

Note: HHS has delayed application of the non-discrimination rules to fully insured health plans until regulations or other guidance is issued. The recent guidance makes clear that the Treasury Department will not apply the penalties until additional guidance or rules are issued on the nondiscrimination requirements. This decision is a positive development for group health plan sponsors because it is unclear how the non-discrimination requirements may apply for some insured plan designs.

Requires group health plans and health insurance issuers offering group or individual health insurance coverage to ensure choice of health care professionals and greater access to benefits for emergency services. Plans that require or provide for a primary care provider (PCP) designation must allow each member to designate any in-network PCP, or pediatrician for children, accepting new patients. Plans may no longer require an authorization or referral to an Ob-Gyn. Prior authorization or increased cost-sharing for emergency services is also prohibited.

If you have a flexible spending account, you should be aware that Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) may no longer be used to purchase over-the-counter drugs unless prescribed by a doctor.

Requires health plans to report the proportion of premium dollars spent on clinical services, quality, and other costs and provide rebates to consumers if the share of the premium spent on clinical services and quality is less than 85% for plans in the large group market and 80% for plans in the individual and small group markets. Requirement to report medical loss ratio effective for 2010; requirement to provide rebates effective beginning January 1, 2011.

Rebate Check FAQ's

Large Group MER FAQ

Small Group MER FAQ

Beginning in 2011, the law authorizes grants totaling $200 million over five years for small companies that start wellness programs focused on efforts such as nutrition, smoking cessation, physical fitness and stress management. The grants will be available to companies with fewer than 100 employees but only new wellness initiatives - those launched after March 23, 2010, the date the health reform bill was enacted - are eligible. In addition, employers can offer higher incentives to employees who participate in group-sponsored wellness programs beginning in 2014.

A new fee is imposed on individual and group health plans to fund comparative effectiveness research ($1 per participant through 2013; $2 per participant through 2019).

Contributions to flexible spending accounts for medical expenses are limited to $2,500 a year.

Creates state-based insurance Exchanges (on-line market places) and Small Business Health Options Program (SHOP) Exchanges, administered by a governmental agency or non-profit organization. In 2014, individuals and small businesses with up to 100 employees can purchase health insurance on the Exchanges. States can allow large employers to participate beginning in 2017.

As of 2014, Individual and group health plans can no longer impose pre-existing condition exclusions for any person of any age (does not apply to grandfathered individual plans).

As of 2014, Annual limits on essential health benefits are prohibited (does not apply to grandfathered individual plans).

As of 2014, Health insurers must accept every individual and employer who applies for coverage.

As of 2014, rating restrictions go into effect for new individual and fully insured small group plans. Insurance companies cannot base premiums on health status, claims experience or gender. Premiums can only vary by:

• Age
• Geography
• Family size
• Tobacco use (no more than 1.5:1)

As of 2014, States are allowed to merge the individual and small group markets.

As of 2014, HHS will establish procedures, which may include rate schedules for broker commissions, for a state to allow brokers to:

• Enroll individuals in any qualified health plans in the individual or small group market as soon as the plan is offered through an exchange in the state.
• Assist individuals in applying for premium tax credits and cost-sharing assistance for plans sold through an exchange.

As of 2014, an essential benefit plan is created, which mandates the level of benefits that must be included in plans offered on the insurance Exchanges, as well as in the individual and small group markets outside the Exchange. Deductibles are limited to $2,000 for individuals and $4,000 for families in the small group market (self-funded plans and grandfathered plans are exempt from this requirement).

As of 2014, cost sharing imposed under health plans is limited to current health savings account amounts (does not apply to grandfathered plans).

As of 2014, the law permits employers to offer employees rewards of up to 30%, potentially increasing to 50%, of the cost of coverage for participating in a wellness program and meeting certain health-related standards.

As of 2014, A temporary reinsurance program will be established for the individual market and funded by individual and group health plan assessments ($25 billion in 2014-2016) to provide payments to plans in the individual market that cover high-risk individuals.

With the passage of the Affordable Care Act (ACA), healthcare costs continue to pile up for employers. This year's Towers Watson survey of U.S. Employers shows:

• The estimated healthcare cost trend of medical and pharmacy rates is expected to rise by 8.2% in 2011
• 85% said they plan to raise medical or prescription drug plan premiums for active employees in 2011
• 59%, more than half, expect to make significant or moderate plan design changes in 2011
• 67% are actively planning significant or moderate plan changes in 2012

For employers, the task of managing premium cost-sharing is not simple. And with employees who vary widely in income and health, it gets even harder to predict what's in store. In 2014, for example, employers could be penalized if they have employees who coverage is subsidized through state insurance Exchanges because their premiums exceed a percentage of their household income.

And that's just one example of how complex managing healthcare reform can be for your company.

By preparing yourself and your organization with information, you can manage healthcare reform successfully.

According to the Towers Watson survey, some companies are already taking steps to inform and educate themselves on healthcare reform. Here are some steps you can take right away:

• Consider healthcare reform in the context of your total business
  • How can healthcare reform impact your business on a macro and micro level?
• Keep up with final regulations, as well as those that go into effect in the meantime
• Take a long view, but take short-term steps now
  • How does healthcare reform affect the business financially in the long term? How do the healthcare costs affect my employees right now?
• Keep up with your numbers. They may change over time.
  • Keep a close eye on your business' healthcare costs and monitor them for incrases or decreases.
• Balance cost-sharing tactics with other options
• Evaluate your retiree medical strategy
  • Pensions? Retirement benefits? Coverage? Consider it all.
• Don't assume that any provision will go away
  • It's best to plan for the current law. If it happens, you're ready. If not, you can modify your strategy.

As with all things in American politics, there are no guarantees. The recent mid-term elections changed the political landscape in Washington, even from what it was when healthcare reform was passed. With fresh faces in Congress, come fresh ideas. Fresh ideas could mean new plans and new changes.

The best thing you can do to protect your employees from this kind of uncertainty is to stay informed. Keep on top of the latest healthcare reform news at websites such as those from the Kaiser Family Foundation or the George Washington University and the Robert Wood Johnson Foundation.

The information provided in this correspondence is for informational purposes only and is not intended to constitute legal advice. It is not legal advice or a legal opinion on the status of any specific plan. It should not be relied upon in lieu of consultation with your own legal advisors as to the grandfather status of your plan.

As of 9/23/12, group health plans and health insurance issuers must provide a Summary of Benefits and Coverage (SBC) document to applicants, policyholders or certificate holders, and enrollees. The SBC document must meet the format and content criteria of the final regulations, in order to provide consumers with a clear, concise summary of their plan benefits and allow them to compare coverage across plans and/or carriers. The SBC must be provided at specified timeframes upon enrollment and at renewal.

For self-insured plans, the employer is responsible to provide the SBC. An employer offering a self-insured plan may make arrangements with the carrier providing administrative services to produce the document.

If a material modification is made to a plan, other than in conjunction with a renewal or reissuance of coverage, and the content of the SBC is changed, notice of the change or an updated SBC document is required to be provided at least 60 days prior to the effective date of such material modification.