Health Care Reform – Delayed Compliance Date for Summary of Benefits and Coverage

The Patient Protection and Affordable Care Act (PPACA) adds to the list of necessary health plan disclosures by requiring plans and issuers to distribute a summary of benefits and coverage (SBC) to applicants and enrollees. The SBC is intended to be a relatively short document that provides important plan information in plain language so that health consumers can better understand their coverage options. This disclosure requirement applies to both grandfathered and non-grandfathered plans.

On Aug. 22, 2011, the Departments of Health and Human Services, Labor and Treasury (Departments) issued proposed regulations for the SBC. The proposed regulations include guidance on providing and preparing the SBC as well as a proposed template for the SBC. The SBC regulations are not final. The Departments have indicated that they will likely make changes to the SBC regulations before they are finalized.

On Nov. 17, 2011, the Department of Labor (DOL) issued a set of Frequently Asked Questions (FAQs) that addresses when plans and issuers must start providing the SBC. The proposed regulations provided that plans and issuers must start providing the SBC by March 23, 2012. However, in the FAQs, the DOL delays the compliance date for providing the SBC. The DOL provides that plans and issuers can wait to start providing the SBC until after the final regulations are released. Thus, the March 23, 2012 deadline no longer applies.

It is uncertain when the final SBC regulations will be released. However, according to the DOL, plans and issuers will be given sufficient time after the final regulations are released to get ready for complying with the new requirements.

This delay is significant because it gives plans and issuers more time to develop the SBC. Also, because plans and issuers can wait until final regulations are released to complete the SBC, they will not need to prepare the SBC based on the proposed regulations only to have to update it later for the final guidance.

IRS Pushes Back PPACA Nondiscrimination Compliance Date

Last week, the Internal Revenue Service (IRS) issued Notice 2011-1, which delays until at least 2012 the effective date of nondiscrimination rules made applicable to fully insured non-grandfathered health plans under the Patient Protection and Affordable Care Act (PPACA). On the same day, the Departments of Health and Human Services, Labor and Treasury also released new guidance on the PPACA and the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). The most important features of these releases are summarized below.

IRS Notice 2011-1 essentially provides an enforcement safe harbor in that there will be no enforcement of the new nondiscrimination rules for non-grandfathered insured plans until the first plan year after regulations are issued. Since guidance will not be issued prior to 2011, the earliest these provisions could become effective would be January 1, 2012. This also means that employers will not be required to file IRS Form 8928 with respect to excise taxes prior to the date required for compliance with the new nondiscrimination rules.

Note that the IRC’s nondiscrimination rules under 105(h) will continue to apply to self-insured group health plans including grandfathered plans.  The regulatory relief announced in the Notice only affects insured group health plans.

The issuance of Notice 2011-1 means that for health plan provisions, as well as provisions touching on healthcare in employment contracts and separation agreements that extend into 2011, employers will not have to worry about the new nondiscrimination rules. This does not, however, impact plans, employment contracts and separation agreements with insured plan subsidies extending into 2012, nor does this Notice provide any relief from current nondiscrimination rules under self-insured medical benefit plans

Last week, the DOL and HHS also issued Part V of FAQs regarding implementation of the PPACA. The FAQs provide the following guidance:

  • A plan may charge a higher copay for a service provided in an in-network hospital than for the same service provided in an in-network ambulatory center;
  • A plan may make distinctions in coverage based on age without violating the rules on providing dependent coverage to age 26 as long as the distinction applies to all coverage under the plan;
  • In certain cases, an insurer may screen applicants for eligibility for alternative coverage options before offering a child-only policy;
  • Grandfathered health plans that determine cost-sharing based on a percentage-of-compensation formula will not lose grandfathered status if the formula is unchanged even though this may lead to cost increases in excess of the cost increase thresholds in the regulations; and
  • In line with other agency extensions of compliance deadlines due to a lack of regulatory guidance, the FAQs addressed two areas where employers will be provided with some relief. First, the Employee Benefits Security Administration (EBSA) has responsibility for rulemaking for a new requirement that large employers automatically enroll new full-time employees in the employer’s health plan. Until EBSA issues regulations under this new section of the Fair Labor Standards Act, however, employers will not be required to comply with this rule. Second, group health plans will not be required to comply with the 60-day notice requirement for material plan modifications under section 2715 of the Public Health Service Act until the federal agencies provide standards on benefits and coverage explanations.

How can employers make the best decision on grandfathering their health plan?

The interim regulations on grandfathered plans under the Patient Protection and Affordable Care Act (PPACA) are designed to allow employers to keep their current plans and at the same time ensure that employees are protected from significant loss of benefits or increased costs. Federal guidance, effective Sept. 23, 2010, attempts to lay down the rules for employers who want to retain grandfathered status.

These restrictions pose a serious challenge to employers who wish to keep their plans under the grandfathering clause. With calendar-year plan renewal season in full swing, many employers are anxious to make decisions. However, various factors — especially a company’s location — make a one-size-fits-all solution for employers unrealistic and impracticable.

This white paper addresses advantages and disadvantages of grandfathered status as a variety of experts share insight about key employer concerns, financial options and seeking guidance. As a UBA Member Firm we are please to offer you this white paper on, How Employers Can Make the Best Decision on Grandfathering Their Health Plans.ee theTheir Health Plans

Special Enrollment Periods for 2011

Special Enrollment Right

The Rules contain a one-time special enrollment right for adult children who become eligible for coverage under the Act. An adult child who was denied health coverage or lost coverage due to the attainment of a certain age (and is still under age 26) will have the right to enroll or re-enroll in the plan, regardless of whether he or she has continued coverage under COBRA. A plan or issuer must give such a child an opportunity to enroll that continues for at least 30 days (including written notice of such opportunity). The enrollment opportunity and notice must be provided no later than January 1, 2011 for calendar year plans (i.e. the first day of the first plan year beginning on or after September 23, 2010). The special enrollment period must last at least 30 days even if your open enrollment period is typically less than 30 days.

The Rules state that any child who enrolls during this special enrollment period must be offered all the benefit packages available to similarly situated individuals (i.e. those who did not lose coverage nor were denied coverage because of age). If the employee is not a participant in the plan, the employee and the adult child must both be offered the opportunity to enroll in any benefit option available.

Required Notice and Effective Date of Coverage

A written notice must be given to all adult children with this special enrollment right explaining the availability of dependent coverage to a child whose coverage ended, or who was denied coverage, before attainment of age 26. It is sufficient to provide the notice to an employee on behalf of the employee’s child, and the notice may be included with other enrollment materials provided the notice is prominent.

If a child enrolls within the 30-day special enrollment period, coverage must begin no later than the first day of the first plan year beginning on or after September 23, 2010 (for calendar year plans, January 1, 2011), even if the request for enrollment is made after the first day of the plan year. This means that coverage may be effective retroactively in some instances, provided that enrollment occurs during the 30-day special enrollment window. For example, if notice is provided on December 20, 2010, an adult child who enrolls in the plan on or before January 19, 2011 will have coverage retroactive to January 1, 2011.

Model notices are available at http://www.dol.gov/ebsa/healthreform/

Guidance Issued on Grandfathered Health Plan Status

The DOL has released a frequently asked questions (FAQs) document in which the Departments of Health and Human Services, Labor and the Treasury offer additional guidance as to the implementation of the Act. The FAQs verify the events that jeopardize grandfathered status and clarify the grandfathered-status implications for certain plan modifications related to cost-sharing features, benefit options, coverage tiers and wellness programs. In addition, the FAQs provide limited guidance on general implementation issues related to preventive health services, policy rescission, dental and vision benefits, policy years and effective dates and compliance exemptions for retiree health plans.  Click here for the DOL FAQ 

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