legislative webinar - august 6, 2010

Coverage of Adult Children, Grandfathering, and the MLR

Presented by Sharon Alt

• Coverage of Adult Children to Age 26• Grandfathering Rules• Minimum Medical Loss Ratio (MLR)

TODAY’S AGENDA

Source: www.HealthCare.gov

Coverage of Adult Children

a.k.a. “The Slacker Mandate”

Quote: Greg Scandlen, President, Consumers for Health Care Choices

• Until now, most young adults “aged off” their parent’s health insurance when they turned 19 or graduated from college. This is about to change.

• Under the Affordable Care Act, starting as early as September 2010, if you’re currently covered under your parent’s policy, you may be able to remain covered up to age 26. You don’t need to live with your parents to be eligible for this coverage. You can also remain covered if you’re married.

Coverage Under your Parent’s HealthInsurance Until Age 26


• Even if you already “aged off” of your parent’s policy, you will have a chance to rejoin. Starting as early as September 2010, job-based health plans and insurance policies must give young adults who qualify an opportunity to enroll that continues for at least 30 days (many insurers started this protection early).

• Job-based health plans and insurance policies must provide written notice about this special enrollment opportunity.

Coverage Under your Parent’s HealthInsurance Until Age 26


• Young adults have the highest rate of uninsured of anyage group.

• Young adults have the lowest rate of access to employer-based insurance.

• Young adults’ health and finances are at risk.

Protecting Young Adults and Eliminating Burdens on Families and Businesses


• Plans and issuers that offer dependent coverage must offer coverage to enrollees’ adult children until age 26, even if the young adult no longer lives with his or her parents, is not a dependent on a parent’s tax return, or is no longer a student.

• There is a transition for certain existing group plans that generally do not have to provide dependent coverage until 2014 if the adult child has another offer of employer-based coverage aside from coverage through the parent.

• The new policy providing access for young adults applies to both married and unmarried children, although their own spouses and children do not qualify.

• Effective for plan or policy years beginning on or after September 23, 2010.

Providing Relief for Young Adults


All Eligible Young Adults will have a Special Enrollment Opportunity.For plan or policy years beginning on or after September 23, 2010, plans and issuers must give children who qualify an opportunity to enroll that continues for at least 30 days regardless of whether the plan or coverage offers an open enrollment period. This enrollment opportunity and a written notice must be provided no later than the first day of the first plan or policy year beginning on or after September 23, 2010.

Providing Relief for Young Adults


• Any qualified young adult must be offered all of the benefit packages available to similarly situated individuals who did not lose coverage because of cessation of dependent status. The qualified individual cannot be required to pay more for coverage than those similarly situated individuals.

• The new policy applies only to health insurance plans that offer dependent coverage in the first place: while most insurers and employer-sponsored plans offer dependent coverage, there is no requirement to do so.

Same Benefits/Same Price


Check for Immediate OptionsPrivate health insurance companies that cover the majority of Americans have volunteered to provide coverage earlier than the implementation deadline for young adults losing coverage as a result of graduating from college or aging out of dependent coverage on a family policy. This stop-gap coverage, in many cases, is available now. Ask your employer and insurer about this option.

Access to Insurance: What Young Adults and Parents Need to Do


Watch for Open EnrollmentIf early coverage is not an option with your employer or insurance company, then young adults will qualify for an open enrollment period to join their parents’ family plan or policy beginning on or after September 23, 2010. Insurers and employers are required to provide notice for this special open enrollment period.

Access to Insurance: What Young Adults and Parents Need to Do


The new regulation complements guidance issued by the Treasury Department on April 27, 2010, on the tax benefits provided for such coverage through the Affordable Care Act.

• Under a new tax provision in the Affordable Care Act and the Treasury guidance, the value of any employer-provided health coverage for an employee's child is excluded from the employee’s income through the end of the taxable year in which the child turns 26.

• This tax benefit applies regardless of whether the plan is required by law to extend health care coverage to the adult child or the plan voluntarily extends the coverage.

New Tax Benefits for Adult Child Coverage


• Tax benefit continues beyond extended coverage requirement

• Available immediately• Broad eligibility • Both employer and employee shares of health

premium are excluded from income

Key Elements


• The law says that the extension of dependent coverage for children is effective for plan years beginning on or after six months after the enactment of the law – that means plan years beginning on or after September 23, 2010.

• However, the Administration has urged insurance companies and employers to prevent a gap in coverage for young adults aging off of their parents’ policy prior to this effective date.

Companies Responding to Secretary Sebelius’ Call for Early Implementation


Early implementation by health plan insurers will avoid gaps in coverage for new college graduates and other young adults and save on insurance company administrative costs of un-enrolling and re-enrolling them between May 2010 and the start of the plan or policy year beginning on or after September 23, 2010.

Companies Responding to Secretary Sebelius’ Call for Early Implementation


Plans must provide a notice of the enrollment opportunity to individuals whose coverage ended, or who were denied coverage (or were not eligible for coverage) under a group health plan or health insurance coverage because, under the terms of the plan or coverage, the availability of dependent coverage of children ended before the attainment of age 26.

The notice must be provided no later than the first day of the first plan year (in the individual market, policy year) beginning on or after September 23, 2010.

http://www.dol.gov/ebsa/dependentsmodelnotice.doc

Model Notice on DOL Website


http://www.dol.gov/ebsa/dependentsmodelnotice.doc�









Grandfathering Rules

Is Grandfather Dead?

Quote: Craig Keohan, Chairman Emeritus of ABA’s HSA Council

U.S. Departments of Health and Human Services, Labor and Treasury Issue

Regulation on “Grandfathered” Health Plans under the Affordable Care Act

Allowing Americans to Keep Current Health Plans or Choose a New Plan While Extending Important New

Benefits to All Consumers

The U.S. Departments of Health and Human Services, Labor and Treasury today issued a new regulation that makes good on President Obama’s promise that Americans who like their health plan can keep it.

News Release: June 14, 2010

Source: www.DHHS.gov

The Affordable Care Act gives American families more control over their health care by providing greater benefits, cost savings and protections.

Today, with the announcement of the new ‘grandfather’ rule, we’re providing the market stability and flexibility to ensure that families and businesses can make the choices that work best for them.

Kathleen Sebelius (HHS)


While the Affordable Care Act requires all health plans to provide important new benefits to consumers, under the law, plans that existed on March 23, 2010 are exempt from some new requirements.

Grandfathered Plans


All health plans – whether or not they are grandfatheredplans – must provide certain benefits to their customers forplan years starting on or after September 23, 2010 including:

• No lifetime limits on coverage for all plans;• No rescissions of coverage when people get sick and

have previously made an unintentional mistake on theirapplication; and

• Extension of parents’ coverage to young adults under26 years old.

Consumer Protections: All Plans


For the vast majority of Americans who get their healthinsurance through employers, additional benefits will beoffered, irrespective of whether their plan is grandfathered,including:

• No coverage exclusions for children with pre-existing conditions; and

• No “restricted” annual limits (e.g., annual dollar-amount limits on coverage below standards to be set in future regulations).

Consumer Protections: Employer Plans


The Affordable Care Act positions consumers, instead of insurance companies, as decision makers when it comes to their health care.

The rule we’re announcing today preserves individuals’ ability to keep their current plan and provides strong consumer protections that give Americans more control over their health insurance choices.

Michael Mundaca (Treasury)


Grandfathered health plans will be able to make routinechanges to their policies and maintain their status. Theseroutine changes include:

• Cost adjustments to keep pace with medical inflation, • Adding new benefits, • Making modest adjustments to existing benefits, • Voluntarily adopting new consumer protections under

the new law, or • Making changes to comply with state or other federal

laws.

“Routine Changes” are Okay


Premium changes are not taken into account when determining whether or not a plan is grandfathered.

Plans WILL lose their grandfathered status if they choose to make significant change that reduce benefits or increase cost to the consumers.

“Routine Changes” are Okay


If a plan loses its grandfathered status, then consumers in these plans will gain additional new benefits including:

• Coverage of recommended prevention services with no cost sharing; and

• Patient protections such as access to OB-GYNs and pediatricians without a referral by a separate primary care provider.

“Significant Changes” are Not


Cannot:• Significantly cut or reduce benefits• Raise co-insurance charges• Raise co-payment charges• Significantly raise deductibles

Compared to their Policies in Effect on March 23, 2010, Grandfathered Plans:


Cannot:• Significantly lower employer contributions• Add or tighten an annual limit on what the insurer pays• Change insurance company

Compared to their Policies in Effect on March 23, 2010, Grandfathered Plans:


To prevent health plans from using the grandfather rule to avoid providing important consumer protections, theregulation provides for:

• Promoting transparency;• Revoking a plan’s grandfathered status if it forces

consumers to switch to another grandfathered plan that, compared to the current plan, has less benefits or higher cost sharing as a means of avoiding new consumer protections; or

• Revoking a plan’s grandfathered status if it is bought by or merges with another plan simply to avoid complying with the law.

Protecting Against Abuse of Grandfathered Health Plan Status


The 133 million Americans with employer-sponsored health insurance through large employers (100 or more workers) —who make up the vast majority of those with private health insurance today—will not see major changes to their coverage as a result of this regulation.Note: By 2011, between 71% and 87% of large employers will remain grandfathered. By 2013, between 36% and 66% are expected to maintain their grandfathered status.

Projected Impact: Large Employer Plans


The roughly 43 million people insured through small businesses will likely transition from their current plan to one with the new protections over the next few years.

Note: By 2011, between 58% and 80% of small employers will remain grandfathered. By 2013, between 20% and 51% are expected to maintain their grandfathered status.

Projected Impact: Small Employer Plans


The 17 million people who are covered in the individual health insurance market, where switching of plans and substantial changes in coverage are common, will receive the new protections of the Affordable Care Act sooner rather than later.

Projected Impact: Individual Health Market


Fully-insured health plans subject to collective bargaining agreements will be able to maintain their grandfathered status until their agreement terminates.

Projected Impact: Special Types of Plans


MLRMinimum Medical Loss Ratios

MLR.. Does that mean Money Lost Rapidly?

PPACA sections 1001 and 10101 added Section 2718 of the PHS Act, which, among other provisions, requires health insurance issuers offering individual or group coverage to submit annual reports to the Secretary on the percentages of premiums that the coverage spends on reimbursement for clinical services and activities that improve health care quality, and to provide rebates to enrollees if this spending does not meet minimum standards for a given plan year.

Public Reporting of the Ratio of Incurred Claims to Earned Premiums (Medical Loss Ratio)

Source: www.HealthReform.gov

Section 2718(a) requires that each report include the percentage of total premium revenue -- after accounting for collections or receipts for risk adjustment and risk corridors and payments of reinsurance -- that the coverage spends:

Public Reporting of the Ratio of Incurred Claims to Earned Premiums (Medical Loss Ratio)

• On reimbursement for clinical services provided to enrollees;

• For activities that improve health care quality; and• On all other non-claims costs, including an explanation of

the nature of these costs, and excluding federal and state taxes and licensing or regulatory fees.


Section 2718(c) of the PHS Act directs the National Association of Insurance Commissioners (NAIC) to establish uniform definitions of the activities being reported to the Secretary under Section 2718(a), and standardized methodologies for calculating measures of these activities no later than December 31, 2010.

Uniform Definitions


Section 2718(c)• Specifies that NAIC’s responsibilities relating to this

provision are to define which activities constitute the activities that improve quality (under Section 2718(a)(2)).

• Directs that the uniform methodologies that NAIC develops are to be designed to take into account the special circumstances of smaller plans, different types of plans, and newer plans.

• Specifies that the uniform definitions and standardized methodologies that NAIC develops are to be subject to the certification of the Secretary.

Uniform Definitions – Section 2718(C)


The “applicable minimum standards” are as follows:

• 85% for coverage offered in the large group market(or a higher percentage that a given state may have determined by regulation); and

• 80% for coverage offered in the small group market or in the individual market (or a higher percentage that a given state may have determined by regulation), except that the Secretary may adjust this percentage for a state if the Secretary determines that the application of the 80% minimum standard may destabilize the individual market in that state).

Minimum Medical Loss Ratios


Section 2718(b)(1)(A) requires that the annualrebate be paid to each enrollee on a “pro ratabasis”. Section 2718(b)(1)(B)(i) specifies that the total amount of the annual rebate required under this provision shall be equal to the product of:

• The amount by which the applicable minimum standard exceeds the actual ratio of the issuer’s expenditures to its premium revenue as described above; and

• The total amount of the premium revenue described above.

Annual Rebate for Failure to Meet MLR


PPACA requires the Secretary to publish regulations for enforcing the provisions of this section, and specifies that the Secretary may provide for appropriate penalties.

Enforcement


Section 1004(a) of the PPACA provides that the provisions of Section 2718 of the PHS Act shall become effective for plan years beginning on or after the date that is six months after the date of enactment of PPACA. (The date of enactment of PPACA is March 23, 2010).

Effective Dates


Thank You

Additional Questions can be submitted through

HealthcareExchange.com

legislative webinar - august 6, 2010

Documents