Birth Control Coverage Rules Announced by Obama Administration

Originally posted by Louise Radnofsky on July 10, 2015 on wsj.com.

WASHINGTON—The Obama administration on Friday set final rules for contraception coverage in workers’ health insurance plans, putting in place rules that are unlikely to satisfy some religious employers who object to birth control.

The rules reaffirmed that most health plans have to include birth control with no out-of-pocket costs as part of the 2010 Affordable Care Act. The regulations include alternative arrangements for employers such as Catholic universities that have moral objections to most forms of contraception, and other Christian institutions that object specifically to forms of emergency contraception such as the “morning-after pill.”

Under the rules, employers with such objections must tell their insurance company or the federal government. The insurance company then takes over responsibility for providing the coverage to employees who want it.

Federal officials said the arrangements also would be available to closely held for-profit companies such as Hobby Lobby Stores Inc. that last year won a Supreme Court case against the coverage requirement under the Affordable Care Act.

The high court said the Obama administration hadn’t done enough to take into account the religious objections of the owners of companies such as the arts-and-crafts chain. The justices didn’t specify what the federal government should do to address those concerns.

The White House and Christian leaders have tussled for years over the health law’s requirement that most insurance plans cover preventive services without charging co-pays or deductibles, and that prescription methods of contraception such as the pill and intrauterine device be counted among them.

Churches are excluded from the requirement, but Catholic bishops, in particular, have argued that religiously affiliated hospitals, universities and charities should be given the same exemption so they do not have to violate Catholic teachings by paying for something they believe to be immoral.

Women’s health advocates, for their part, have pushed the White House to hold firm and ensure that the provision of the 2010 health law is widely available.

To qualify for the alternative system outlined by the government, companies must be privately held and controlled by five or fewer individuals, federal officials said Friday. The company’s board must adopt a resolution stating the company’s objection to covering some or all forms of contraception.

Catholic bishops and other religious leaders have said the revised system is inadequate because it still uses the insurance plan they set up to provide something they believe to be wrong.

They have challenged the alternative system in the courts. Many of those challenges are working their way through the legal system, and the federal government has prevailed in several cases so far.

Attorneys representing many of the religiously affiliated litigants in those cases derided the final rules.

“The government keeps digging the hole deeper,” said Adèle Auxier Keim, legal counsel at the Becket Fund for Religious Liberty, adding that “there is no reason at all the government needs religious employers to help it distribute these products.”

A spokeswoman for the Department of Health and Human Services said she couldn’t comment on continuing litigation.

In a statement, HHS Secretary Sylvia Mathews Burwell said the regulations were intended to balance the religious objections with the government’s desire to guarantee access to no-cost contraception for women, regardless of where they worked.

“Women across the country should have access to preventive services, including contraception,” Ms. Burwell said.

“At the same time, we recognize the deeply held views on these issues, and we are committed to securing women’s access to important preventive services at no additional cost under the Affordable Care Act, while respecting religious beliefs,” she said.


Penalties Increased for Filing Errors

Originally posted on July 7, 2015 on acatimes.com.

Penalties in sections of the Internal Revenue Code relating to the failure to timely file correct and complete information in a return as well as the failure to timely distribute correct and complete statements were substantially increased – by up to 150% – with the passage on June 29 of  the Trade Preferences Extension Act of 2015 (“TPE Act”).

The penalties are related to IRC Sections 6721 and 6722.  Section 6721 pertains to the failure to file correct and complete information in a return.  Section 6722 pertains to the failure to furnish complete and correct information in the payee statements. Section 806 of the TPE Act substantially increases the penalties set forth separately under these IRC Sections.

The penalty for failing to timely file and/or failing to file correct and complete information will be $250 per return (previously $100.) The cap on all such failures is raised to $3,000,000 (previously $1,500,000) under Section 6721.

This increase also applies to penalty for the failure to furnish complete and correct information in the payee statements, under Section 6722.

Under provisions of Section 6721 and 6722 for reduced penalties if corrections are made within 30 days after the required filing date, those lower penalties are now $50 per return (previously $30), with a maximum of $500,000 (previously $250,000).

The reduced penalties under each Section 6721 and 6722 where the corrections are made by August 1 is increased to $100 (previously $60) per return, with a maximum of $1,500,000 (previously $500,000).

The lower limitations under each Section 6721 and 6722 for persons with gross receipts of not more than $5,000,000 have also been increased. Such persons are subject to a cap of (a) $1,000,000 (previously $500,000) for failing to timely file and/or failing to file correct and complete information, (b) $175,000 (previously $75,000) for corrections made within 30 days of filing deadline, and (c) $500,000 (previously $200,000) for corrections made by August 1.

Penalties under Section 6721 and 6722 in case of intentional disregard as would be applicable to ACA reporting is increased to $500 per return (previously $250), and no cap applies.

These penalties apply with respect to returns and statements required to be filed after December 31, 2015.

The timing of when these penalties will impact ACA reporting appears to be after December 31, 2016.  This is in view of the IRS’s previously announced availability of short-term relief for 2015 from ACA reporting penalties under Sections 6721 and 6722 if the employer can make a showing of good faith effort to comply with the ACA reporting requirements.

The penalties may also be abated based on reasonable cause and not due to willful neglect.

Presumably, the IRS could continue with that short-term relief and allow the TPE Act to go into effect with respect to ACA reporting penalties starting the following year, after December 31, 2016.


Supreme Court's Ruling Means No ACA Compliance Reprieve

Originally posted by Stephen Miller on June 26, 2015 on shrm.org.

In what many are viewing as an anticlimax, the U.S. Supreme Court’s June 25 ruling in King v. Burwell left the status quo in place regarding the Affordable Care Act’s (ACA's) tax-credit subsidies for individual “marketplace” coverage and, indirectly, the employer mandate to provide group health care coverage. Under the ACA, employer penalties are triggered when employees receive insurance tax credits because their employer-provided plan failed to meet ACA coverage specifications.

But health care policy wonks are pointing out what should have been obvious, though it is a lesson that some plan sponsors may have forgotten: As long as the law is the law, it's the law. In other words, some might wish that the courts, Congress or a future administration will alter or rescind the statute. But unless and until that happens, employers should take all necessary steps to maintain compliance with the ACA's coverage and reporting requirements—and not delay doing so in the hopes of a last-minute penalty reprieve.

Ruling's Impact for Employers

In an online commentary posted the day of the ruling, Timothy G. Verrall and Hera S. Arsen, attorneys with law firm Ogletree Deakins, explained that:

Importantly, the Court’s decision does not alter employer responsibilities under the ACA’s “employer mandate” and its related tax reporting obligations. Since the enforcement mechanism behind the employer mandate—tax penalties under Code Section 4980H—are premised on the availability of tax-credit subsidies for exchange coverage, had the Court rejected the IRS’s approach, the “teeth” of the employer mandate would have effectively been removed in the majority of states where federal exchanges operate. However, the Court’s decision affirms the IRS’s regulatory approach, thereby preserving the employer mandate as well.

“This court’s decision confirms the advice we have given since the Affordable Care Act was adopted,” added Joel A. Daniel, the practice group leader for Ogletree Deakin’s employee benefits practice, in the same commentary. “Employers should plan their compliance strategies based on the assumption that the act and the regulations issued under it are here to stay.”

In a similar vein, Shawn Jenkins, CEO of benefits management and administration firm Benefitfocus, commented that the ruling “is another strong indication that ACA is here to stay. The result is more clarity for employers and carriers as to the stability of ACA allowing them to move confidently forward in their benefits planning.”

Driving the point home, the takeaway highlighted in an analysis of the decision by consultancy PricewaterhouseCoopers confirmed that “full on implementation of the ACA may now proceed,” adding:

Employers and insurers are facing the ACA mandates and associated reporting, and must be diligent to gather all the required information and implement the processes and procedures to comply with these requirements and provide the annual forms to individuals and the IRS next January. Planning to avoid the employer mandate penalties, as well as the 2018 tax on high cost plans, will occupy the attention of tax professionals, HR administrators and payroll departments, as well as internal audit and finance.

Many HR benefit managers will consider that an understatement.

Options for Small Businesses

Maintaining the status quo doesn't imply there will be no other ramifications from the ruling beyond affirming the need for vigilant compliance, but the effects will likely be most pronounced on firms that are not subject to the ACA’s “shared responsibility” mandate to provide health coverage.

By upholding premium tax credits to individual policyholders for health care purchased through the ACA’s public exchanges, including the federal Healthcare.gov marketplace, the King ruling makes it more likely that small employers not subject to the coverage mandate (those with fewer than 50 full-time employees or part-time equivalents) will shift away from group coverage.

“Small business owners, who are most affected by increasing premiums, now have the certainty needed to help transition themselves and employees to the individual market, which we expect to increase to more than 100 million by 2025," predicted Zane Benefits, which helps small businesses reimburse employees for individual health insurance plans. “We expect small businesses [not subject to the employer mandate] to continue to offer health benefits to employees in the form of monthly allowances (or ‘stipends’)” in lieu of providing group health coverage.

Not the End of the Story

While it should not deter employers from complying with the act, there could still be some rather significant fixes and adjustments made to the ACA. “Knowing that the ACA will be upheld, one would expect Congress to get more aggressive in working to improve it rather than rescind it,” said Jenkins.

Congress is already moving to pass and send revisions of the law to the president (which he, of course, may veto). These include, as Zane Benefits pointed out, measures to simplify the overly complex employer IRS reporting requirements, and to change the definition of a full-time employee to 40 hours per week (versus the current 30), while at the same time adjusting the definition of large employers to only include employers with 100 or more employees.

Similarly, the ERISA Industry Committee (ERIC), representing benefit plan sponsors, issued a statement contending that while the Supreme Court had removed a source of potential uncertainty with its decision, much legislative work is still needed to fix the underlying law.

“With the legal case settled, Congress should use this opportunity to repeal the burdensome and unnecessary taxes, mandates and reporting requirements imposed by the ACA,” said Annette Guarisco Fildes, president and CEO of ERIC. “Specifically, we want Congress to repeal the 40 percent health care excise tax, the employer mandate and all the related reporting requirements.”

The Society for Human Resource Management (SHRM) also took note that “While [the tax-credit subsidy] provision of the statute remains intact, other challenges in the ACA remain for employers. SHRM pledges to work with policymakers to address these challenges, including the definition of a full-time employee, the pending excise tax on high-value health care plans, and employer flexibility in offering wellness programs.”

Adding to the litany, the Business Roundtable, representing corporate CEOs, released a statement saying that “Moving forward, we believe Congress and the administration should address the problems that still accompany the Affordable Care Act, such as the medical device tax, insurance tax, pharmaceutical tax and the complexity of complying with the regulatory requirements.”

So while the Supreme Court's ruling ends a frontal assault on the act that could have undermined the foundation on which employer penalties rest, legislative skirmishes will continue. But that's no excuse for employers not complying with the ACA as it currently stands.


Final Rule Issued on Summary of Benefits and Coverage

Originally posted by Stephen Miller on June 16, 2015 on shrm.org.

The departments of Health and Human Services, Labor, and the Treasury issued a final rule regarding the health care Summary of Benefits and Coverage (SBC) and uniform glossary that must be provided to employees under the Affordable Care Act (ACA). The new rule was published in the Federal Register on June 16, 2015.

However, revisions to the SBC template and the uniform glossary included with the SBC, along with new coverage examples, are not anticipated to be finalized until January 2016, after the departments complete consumer testing and receive additional input from the public, including the National Association of Insurance Commissioners. The revisions will apply to SBCs for coverage beginning on or after Jan. 1, 2017.

The final regulation make few changes to the rule proposed in December 2014, which itself was a revision to an earlier final rule published in February 2012. However the new rule does include streamlined processes to help health insurance issuers and group health plans provide the required information to employees. For instance, it allows for avoiding unnecessary duplication when a group health plan uses a binding contractual arrangement in which another party assumes responsibility to provide the SBC. The rule also adopts the safe harbor for electronic delivery set forth in earlier FAQs.

“These clarifications will also make it easier for issuers and group health plans to provide the most accurate health coverage information to consumers,” according to a statement from the federal Centers for Medicare and Medicaid Studies, which also posted a fact sheet about the final rule.

SBC Requirements

In commentary on the final rule posted on the Health Affairs blog, Timothy Jost, a professor at the Washington and Lee University School of Law in Lexington, Va., noted that:

• A group health plan or group health insurer must offer participants and beneficiaries an SBC for each benefit package offered by the plan or insurer for which the participant or beneficiary is eligible.

• If the plan or insurer distributes application materials for plan enrollment, the SBC must be provided with the application materials.

• If the plan or insurer does not distribute application materials, the SBC must be provided no later than the first date on which a participant or beneficiary is eligible to enroll.

Under the new rule, health insurance issuers must also provide online access to a copy of the individual coverage policy for each plan or group certificate of coverage. And these documents must be made publicly available to all potential enrollees so that these individuals are clearly informed about what a plan will and will not offer.

“The SBC must include 12 elements under the statute and the 2012 rule,” Jost said. “The final rule does not address most of these elements, although the proposed template did and the final template is likely to do so.”

Also, the ACA requires that SBCs be presented in a uniform format not exceeding four pages in length, with a font size not smaller than 12 points. The federal departments interpreted the four-page requirement to mean four double-sided pages, or eight pages. “The departments indicated they will address the page length issue upon the publication of the final template,” Jost noted.


ACA Cost-Sharing Limits for 2016

Originally posted by Laura Kerekes on June 4, 2015 on thinkhr.com.

The Affordable Care Act (ACA) requires nongrandfathered group health plans to limit the total cost-sharing (deductibles, co-pays, and co-insurance) paid by participants for in-network essential health benefits in a plan year. For the 2015 plan year, the ACA cost-sharing limits are $6,600 if self-only coverage or $13,200 if other than self-only coverage (i.e., family coverage). Often referred to as “out-of-pocket maximums,” the limits are subject to change for inflation each year.

For 2016, two important changes will take effect. First, the cost-sharing limits will increase to $6,850 and $13,700, respectively. Secondly, the self-only limit of $6,850 will apply to each covered person regardless of whether enrolled for self-only coverage or family coverage.

FAQ XXVII, released jointly by the Departments of Labor, Health and Human Services, and the Treasury, provides that:

  • ACA cost-sharing limits apply to nongrandfathered group health plans, including “small” or “large” group policies and self-funded health plans.
  • Deductibles, co-pays, and co-insurance, paid by the participant, must be counted toward the annual cost-sharing limits (out-of-pocket maximums). However, plans are not required to count amounts paid for nonessential health benefits, services not covered by the plan, or services received from out-of-network providers.
  • For plan years beginning in 2016, the self-only cost-sharing limit applies to each person regardless of whether they have self-only or family coverage. The FAQ provides the following example:

“Assume that a family of four individuals is enrolled in family coverage under a group health plan in 2016 with an aggregate annual limitation on cost sharing for all four enrollees of $13,000 (note that a plan is permitted to set an annual limitation below the maximum . . . aggregate $13,700 limitation for coverage other than self-only for 2016). Assume that individual #1 incurs claims associated with $10,000 in cost sharing, and that individuals #2, #3, and #4 each incur claims associated with $3,000 in cost sharing (in each case, absent the application of any annual limitation on cost sharing). In this case, because, under the clarification discussed above, the self-only maximum annual limitation on cost sharing ($6,850 in 2016) applies to each individual, cost sharing for individual #1 for 2016 is limited to $6,850, and the plan is required to bear the difference between the $10,000 in cost sharing for individual #1 and the maximum annual limitation for that individual, or $3,150. With respect to cost sharing incurred by all four individuals under the policy, the aggregate $15,850 ($6,850 + $3,000 + $3,000 + $3,000) in cost sharing that would otherwise be incurred by the four individuals together is limited to $13,000, the annual aggregate limitation under the plan, under the assumptions in this example, and the plan must bear the difference between the $15,850 and the $13,000 annual limitation, or $2,850.”

Note that the current ACA cost-sharing limits, and the changes for 2016, only affect plans with high out-of-pocket maximums. Many plans are not affected because they have out-of-pocket maximums that are much lower than the amounts allowed by the ACA, or because they already apply reasonable individual maximums for both single and family coverage plans. Group policies issued in certain states also may be subject to lower limits due to state insurance laws. Therefore, many plans may not be affected by the ACA changes for 2016. On the other hand, high deductible health plans (HDHPs) that are designed for compatibility with health savings accounts (HSAs), are likely to be affected by the changes.

HSA-Compatible High Deductible Health Plans

HDHPs that qualify as permissible coverage in connection with an HSA — called HSA-compatible HDHPs — must comply with IRS rules for minimum deductible amounts and maximum out-of-pocket amounts. Most HSA-compatible HDHPs are nongrandfathered health plans, so they are subject to the ACA cost-sharing limits or the IRS maximum out-of-pocket amounts, whichever is less.

For 2016, the maximum out-of-pocket amounts for a HSA-compatible HDHP will be:

  • $6,550 if self-only coverage, or
  • $13,100 if family coverage.

If, however, the 2016 HDHP is a nongrandfathered health plan, the maximum out-of-pocket amount foreach individual with family coverage will be limited to $6,850 with respect to in-network essential health benefits. For many HDHPs, this will be a significant change for 2016.

Summary

The guidance provided in FAQ XXVII does not affect grandfathered health plans or any plans for plan years before 2016. For nongrandfathered plans, including HSA-compatible HDHPs, employers and benefit advisors are encouraged to review the guidance to ensure compliance with the ACA cost-sharing limits for 2016.


Patient-Centered Outcomes Research Institute Fee

Originally posted by irs.gov.

The Affordable Care Act imposes a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Institute. The fee, required to be reported only once a year on the second quarter Form 720 and paid by its due date, July 31, is based on the average number of lives covered under the policy or plan.

The fee applies to policy or plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2019. The Patient-Centered Outcomes Research Institute fee is filed using Form 720, Quarterly Federal Excise Tax Return. Although Form 720 is a quarterly return, for PCORI, Form 720 is filed annually only, by July 31.

Please refer to the following chart for the filing due date and applicable rate depending upon the month a specified health insurance policy or an applicable self-insured health plan ends.

Specified Health Insurance Policies and Applicable Self-Insured Health Plans
The fee is imposed on an issuer of a specified health insurance policy and a plan sponsor of an applicable self-insured health plan. For more information on whether a type of insurance coverage or arrangement is subject to the fee, see this chart.

Calculating the Fee
Specified Health Insurance Policies

For issuers of specified health insurance policies, the fee for a policy year ending before Oct. 1, 2013, is $1, multiplied by the average number of lives covered under the policy for that policy year. Generally, issuers of specified health insurance policies must use one of the following four alternative methods to determine the average number of lives covered under a policy for the policy year.

  1. Actual Count Method: For policy years that end on or after Oct. 1, 2012, issuers using the actual count method may begin counting lives covered under a policy as May 14, 2012, rather than the first day of the policy year, and divide by the appropriate number of days remaining in the policy year.
  2. Snapshot Method: For policy years that end on or after Oct. 1, 2013, but began before May 14, 2012, issuers using the snapshot method may use counts from the quarters beginning on or after May 14, 2012, to determine the average number of lives covered under the policy.
  3. Member Months Method and 4. State Form Method: The member months data and the data reported on state forms are based on the calendar year. To adjust for 2012, issuers will use a pro rata approach for calculating the average number of lives covered using the member months method or the state form method for 2012. For example, the issuers using the member months number for 2012 will divide the member months number by 12 and multiply the resulting number by one quarter to arrive at the average number of lives covered for October through December 2012.

For more information on these methods to determine the average number of lives covered under a policy for the policy year, please see the final regulations (PDF).

Applicable Self-Insured Health Plans

For plan sponsors of applicable self-insured health plans, the fee for a plan year ending before Oct. 1, 2013, is $1, multiplied by the average number of lives covered under the plan for that plan year. Generally, plan sponsors of applicable self-insured health plans must use one of the following three alternative methods to determine the average number of lives covered under a plan for the plan year.

  1. Actual Count Method: A plan sponsor may determine the average number of lives covered under a plan for a plan year by adding the totals of lives covered for each day of the play year and dividing that total by the total number of days in the plan year.
  2. Snapshot Method: A plan sponsor may determine the average number of lives covered under an applicable self-insured health plan for a plan year based on the total number of lives covered on one date (or more dates if an equal number of dates is used in each quarter) during the first, second or third month of each quarter, and dividing that total by the number of dates on which a count was made.
  3. Form 5500 Method: An eligible plan sponsor may determine the average number of lives covered under a plan for a plan year based on the number of participants reported on the Form 5500, Annual Return/Report of Employee Benefit Plan, or the Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan.

However, for plan years beginning before July 11, 2012, and ending on or after Oct. 1, 2012, plan sponsors may determine the average number of lives covered under the plan for the plan year using any reasonable method.

For more information on these methods to determine the average number of lives covered under applicable self-insured health plans for the plan year, please see the final regulations (PDF).

Reporting and Paying the Fee
File the second quarter Form 720 annually to report and pay the fee no later than July 31 of the calendar year immediately following the last day of the policy year or plan year to which the fee applies. Issuers and plan sponsors who are required to pay the fee but are not required to report any other liabilities on a Form 720 will be required to file a Form 720 only once a year. They will not be required to file a Form 720 for the first, third or fourth quarters of the year. Deposits are not required for this fee, so issuers and plans sponsors are not required to pay the fee using EFTPS.

Please see the instructions for Form 720 on how to fill out the form and calculate the fee. If for any reason you need to make corrections after filing your annual Form 720 for PCORI, write “Amended PCORI” at the top of the second filing.

The payment, if paid through the Electronic Federal Tax Payment System, should be applied to the second quarter (in EFTPS, select Q2 for the Quarter under Tax Period on the "Business Tax Payment" page).

Related Items:

  • The IRS and the Treasury Department have issued final regulations on this fee.
  • Notice 2014-56 establishes the applicable dollar amount for policy and plan years ending after Sept. 30, 2014, and before Oct. 1, 2015.
  • For information on the fee, see our questions and answers and chart summary.
  • Form 720, Quarterly Federal Excise Tax Return, was revised to provide for the reporting and payment of the patient-centered outcomes research fee.

New Guidance on Preventive Services Required Under the Affordable Care Act

Originally posted by www.simandlhrlaw.com

Recently, the Departments of Labor, Health and Human Services, and Treasury jointly issued guidance on the coverage of preventive services required under the Affordable Care Act (ACA). By way of background, the ACA requires that non-grandfathered group health plans provide preventive services, such as screenings, immunizations, contraception, and well-woman visits, without cost-sharing requirements. The preventive services are based upon recommendations of the United States Preventive Services Task Force (USPSTF) and comprehensive guidelines supported by the Health Resources and Services Administration (HRSA). The new guidance is outlined in Part XXVI of the series FAQs About Affordable Care Act Implementation and clarifies the coverage of preventive services specifically related to: 

  • Contraceptives;
  • BRCA Testing;
  • Gender-Specific USPSTF Recommendations; and
  • Pregnancy Care for Dependents.

Contraceptive Coverage

Prior guidance issued by the Departments required that women have access to the full range of FDA-approved contraceptive methods without cost-sharing. However, the guidance also provided that health plans were permitted to use reasonable medical management techniques to control costs such as imposing cost-sharing on brand name drugs to encourage the use of generic equivalents. The new FAQs provide further guidance on the scope of coverage required for contraception and what constitutes "reasonable" medical management techniques.

The individual FAQs on contraception clarified the following requirements:

  • Health plans must cover without cost-sharing at least one version of all the contraception methods identified in the FDA Birth Control Guide. Currently, the guide lists 18 forms of contraception including, but not limited to: oral contraceptives; intrauterine devices; barriers; hormonal patches; and sterilization surgery.
  • Plans may use reasonable medical management such as imposing cost-sharing on some items and services to encourage individuals to use other items or services within the contraception method. For example, a plan may impose cost-sharing (including full cost-sharing) on brand name oral contraceptives to encourage use of generics or impose different copayments to encourage the use of one of several FDA-approved intrauterine devices.
  • If the health plan is using medical management to control costs within a specified contraception method, the plan must have an exception process that is "easily accessible, transparent and sufficiently expedient" and that is not unduly burdensome on the individual, provider or individual acting on the individual's behalf. Also, the plan is required to defer to the determination of the individual's attending provider. Thus, the plan must cover an item or service without cost-sharing if a treating physician deems it medically necessary.
  • Plans that try to offer coverage for some - but not all - FDA-identified contraceptive methods will not comply with the health care reform law and its rules. For example, plans cannot cover barrier and hormonal methods of contraception while excluding coverage for implants or sterilization.

BRCA Testing

The preventive services required under the ACA include screening for women who have a family member with breast, ovarian, tubal or peritoneal cancer to identify a family history that may be associated with an increased risk related to the breast cancer susceptibility genes - BRCA 1 or BRCA 2. Prior guidance clarified that women with positive screening results should receive genetic counseling and, if indicated after counseling, BRCA testing. However, there was confusion as to whether or to what extent the recommendation applied to a woman with a personal history of cancer that was not BRCA-related.

The new guidance clarifies that the USPSTF recommendation applies to women with a history of non-BRCA related cancer. Thus, a plan or issuer is required to cover without cost-sharing preventive screening, genetic counseling, and if deemed appropriate by her treating physician, BCRA tests for such women. The new guidance further clarifies that these preventive services must be provided regardless of whether a woman is exhibiting any symptoms and even if she is currently cancer-free.

Coverage of Preventive Services Based on Gender Identity

A number of the preventive services required by the ACA are gender-specific such as mammograms and BRCA testing for women and prostate exams for men. The new guidance clarifies that non-grandfathered health plans cannot limit coverage of preventive services based on an individual's sex assigned at birth, gender identity, or gender recorded by the plan. Rather, if the individual otherwise satisfies the criteria under the recommendation or guideline and is eligible under the terms of the plan, the plan must provide the preventive services that the individual's provider determines are medically appropriate. This means, for example, providing without cost-sharing a mammogram for a transgender man who has residual breast tissue.

Coverage for Dependents of Preventive Services Related to Pregnancy

Traditionally, a group health plan was able to restrict coverage for maternity care to employees and employees' spouses. However, under the ACA those benefits must now be provided to an eligible dependent. The new FAQs clarify that to the extent the maternity care is a preventive service under the ACA, the plan must provide prenatal benefits and other services intended to assist with healthy pregnancies to an eligible dependent without cost-sharing. The guidance further clarifies that an eligible dependent must be provided all other age appropriate women's health services without cost-sharing.

Action Steps

This recent guidance is a clarification of the existing preventive services required under the ACA rather than a modification. Accordingly, there is no delayed effective date typically applied to changes in preventive services. Employers and plan sponsors should review their plan documents and their administrative practices to ensure the plan is providing coverage of preventive services in accordance with the new guidance. Failure to provide the preventive services as required by the ACA could subject the employer to penalties of up to $100 per day per participant.


Supreme Court debates future of Affordable Care Act

Originally posted on March 5, 2015 by Ariane de Vogue on www.wqad.com.

WASHINGTON (CNN) — The future of health care in America is on the table — and in serious jeopardy — Wednesday morning in the Supreme Court.

After more than an hour of arguments, the Supreme Court seemed divided in a case concerning what Congress meant in one very specific four-word clause of the Affordable Care Act with respect to who is eligible for subsidies provided by the federal government to help people buy health insurance.

If the Court ultimately rules against the Obama administration, more than 5 million individuals will no longer be eligible for the subsidies, shaking up the insurance market and potentially dealing the law a fatal blow. A decision likely will not be announced by the Supreme Court until May or June.

All eyes were on Chief Justice John Roberts — who surprised many in 2012 when he voted to uphold the law — he said next to nothing, in a clear strategy not to tip his hand either way.

“Roberts, who’s usually a very active participant in oral arguments, said almost nothing for an hour and a half,” said CNN’s Supreme Court analyst Jeffrey Toobin, who attended the arguments. “(Roberts) was so much a focus of attention because of his vote in the first Obamacare case in 2012 that he somehow didn’t want to give people a preview of how he was thinking in this case. … He said barely a word.”

The liberal justices came out of the gate with tough questions for Michael Carvin, the lawyer challenging the Obama administration’s interpretation of the law, which is that in states that choose not to set up their own insurance exchanges, the federal government can step in, run the exchanges and distribute subsidies.

Carvin argued it was clear from the text of the law that Congress authorized subsidies for middle and low income individuals living only in exchanges “established by the states.” Just 16 states have established their own exchanges, but millions of Americans living in the 34 states are receiving subsidies through federally facilitated exchanges.

But Justice Elena Kagan, suggested the law should be interpreted in its “whole context” and not in the one snippet of the law that is the focus of the challengers.

“We look at the whole text. We don’t look at four words,” she said. Kagan also referred to the legal challenges to the law as the “never-ending saga.”

Justice Sonia Sotomayor was concerned that in the states where the individuals may not be able to receive subsidies, “We’re going to have the death spiral that this system was created to avoid.”

And Sotomayor wondered why the four words that so bother the challengers did not appear more prominently in the law. She said it was like hiding “a huge thing in a mousetrap.”

“Do you really believe that states fully understood?” she asked, Carvin, that those with federally run exchanges “were not going to get subsidies?”

Justice Ruth Bader Ginsburg suggested the four words at issue were buried and “not in the body of the legislation where you would expect to find” them.

Justice Anthony Kennedy asked questions that could be interpreted for both sides, but he was clearly concerned with the federalism aspects of the case.

“Let me say that from the standpoint of the dynamics of Federalism,” he said to Carvin. “It does seem to me that there is something very powerful to the point that if your argument is accepted, the states are being told either create your own exchange, or we’ll send your insurance market into a death spiral.”

He grilled Carvin on the “serious” consequences for those states that had set up federally-facilitated exchanges.

“It seems to me that under your argument, perhaps you will prevail in the plain words of the statute, there’s a serious constitutional problem if we adopt your argument,” Kennedy said.

The IRS — which is charged with implementing the law — interprets the subsidies as being available for all eligible individuals in the health exchanges nationwide, in both exchanges set up by the states and the federal government. In Court , Solicitor General Donald B. Verrilli, Jr. defended that position. He ridiculed the challengers argument saying it “revokes the promise of affordable care for millions of Americans — that cannot be the statute that Congress intended.”

But he was immediately challenged by Justice Antonin Scalia.

“It may not mean the statute they intended, the question is whether it’s the statute they wrote,” he said.

Although as usual, Justice Clarence Thomas said nothing, Justice Samuel Alito was also critical of Verrilli’s argument. He said if it were true that some of the states were caught off guard that the subsidies were only available to those in state run exchanges, why didn’t more of them sign amicus briefs. And he refuted the notion that the sky might fall if the challengers were to prevail by saying the Court could stay any decision until the end of the tax season.

On that point Scalia suggested Congress could act.

“You really think Congress is just going to sit there while all of these disastrous consequences ensue?” he asked.

Verrilli paused and to laughter said, “Well, this Congress? ”

Kennedy did ask Verrilli a question that could go to the heart of the case wondering if it was reasonable that the IRS would have been charged with interpreting a part of the law concerning “billions of dollars” in subsidies.

Only Ginsburg brought up the issue of standing — whether those bringing the lawsuit have the legal right to be in Court which suggested that the Court will almost certainly reach the mandates of the case.

President Barack Obama has expressed confidence in the legal underpinning of the law in recent days.

“There is, in our view, not a plausible legal basis for striking it down,” he told Reuters this week.

Wednesday’s hearing marks the third time that parts of the health care law have been challenged at the Supreme Court.

In this case — King v. Burwell — the challengers say that Congress always meant to limit the subsidies to encourage states to set up their own exchanges. But when only 16 states acted, they argue the IRS tried to move in and interpret the law differently.

Republican critics of the law, such as Texas Sen. Ted Cruz, filed briefs warning that the executive was encroaching on Congress’ “law-making function” and that the IRS interpretation “opens the door to hundreds of billions of dollars of additional government spending.”

In a recent Washington Post op-ed, Orrin Hatch, R-Utah, and two other Republicans in Congress said that if the Court rules in their favor, “Republicans have a plan to protect Americans harmed by the administration’s actions.”

Hatch said Republicans would work with the states and give them the “freedom and flexibility to create better, more competitive health insurance markets offering more options and different choices.”

In Court, Verrilli stressed that four words — “established by the state” — found in one section of the law were a term of art meant to include both state run and federally facilitated exchanges.

He argued the justices need only read the entire statute to understand Congress meant to issue subsidies to all eligible individuals enrolled in all of the exchanges.

Democratic congressmen involved in the crafting of the legislation filed briefs on behalf of the government arguing that Congress’ intent was to provide insurance to as many people as possible and that the challengers’ position is not consistent with the text and history of the statute.

Last week, Health and Human Services Secretary Sylvia Mathews Burwell warned that if the government loses it has prepared no back up plan to “undo the massive damage.”


Self-insurance draws new converts among small employers

Originally posted by Richard Stolz on March20. 2015 on ebn.benefitnews.com.

An Affordable Care Act-fueled surge in self-insurance for medical benefits among smaller employers appears to have leveled off somewhat, but not due to any disenchantment with the cost-management strategy.

Rather, many that were open to giving self-insurance a try already have done so, observers suggest. Yet a steady flow of hold-outs continues to make the switch, and employers who already are self-insured are gaining the benefit of more competition among stop-loss carriers for their business.

“Brokers are continuing to ask us what we can do to help these groups,” says Rob Melillo, who is responsible for the medical stop-loss line at Guardian, a recent entrant to that market. Guardian began rolling out the coverage at the end of 2013, and has found a strong market among the small to mid-sized employers that represent its primary market for insurance sold to employers.

In 2013, 16% of employees at companies with fewer than 200 workers were covered under a self-insured plan, up from 13% two years prior, according to the Kaiser Family Foundation.

Regulators ill at ease

Meanwhile, state insurance regulators have been expressing more and more concern about smaller employers moving to the self-insurance model, and are working to persuade their legislatures to adopt laws that would impede the trend. California already has done so, and several other states may be close behind.

The growing acceptance of self-insurance among smaller employers is not just about changes wrought by the ACA; the steady increases in health benefit costs are the underlying motivator.

“You’re going to have to make a serious change if you’re going to impact the health care spend,” observes Melillo. And switching from a fully insured model to self-insurance represents “serious change.”

Whereas employers with fewer than 500 employees and dependents were once generally deemed unsuitable for self-insurance, some stop-loss carriers today think nothing of signing up employers with 50 or fewer employees.

Presumably they can do so profitably. Employers suited to self-insurance anticipate savings in the 5% to 10% range, or more, industry participants say.

Part of that stems from savings from avoiding ACA-imposed taxes on fully insured plans. Beyond that, however, is the promise of employers gaining a better vantage point to identify and address specific problem spots in their plans.

The adage, “You can’t manage what you can’t measure,” applies perfectly to this arena, according to Melillo. “When you self-insure, you have access to every claim that’s submitted to your group, every aspirin, every complicated surgery. As that data grows, you can benchmark against industry norms,” and try to figure what’s causing any aberrations.

Although carriers offering fully insured plans typically also try to help employers in this regard, the transparency just isn’t the same, Melillo maintains.

Drilling down

He recalls once, when he was a broker, “drilling down” into some claims data concerning a client’s emergency room utilization. In doing so he discovered that a walk-in clinic used by many employees would code all services rendered after 5:00 p.m. as emergency room treatment, even though nothing had changed but the time of day.

With that insight the employer was able to adjust its plan design to preclude coverage for services at that clinic after 5:00 p.m.

The other fundamental draw of self-insurance is the fact that you are no longer “at the mercy of the carrier for what they will charge for risk pooling,” notes Michael Tesoriero, a consultant with Segal Consulting. That is, the claims experience of an employer that’s too small to be individually underwritten is aggregated with claims of other small employers, many of whose claims track records may be worse, leading to higher than necessary premiums.

Self-insuring also allows employers to:

  • Avoid being subject to state insurance regulation and mandates of benefits not otherwise required by federal law, such as fertility treatments required in some states;
  • Customize (within the broader confines of the ACA) the health plan design; and
  • Control funds reserved to pay health claims, and benefit – initially, last least – from the cash flow benefit of the lag between the accrual of claims, and having to pay them.

Role of community rating

In the ACA world, perhaps the biggest factor that has spurred greater interest in self-insurance among smaller employers is the community rating requirement, which virtually eliminates insurers’ ability to offer preferential rates to employees with healthy workforces.

On the flip side, however, some smaller employers with aging workforces and/or particularly bad claims experience might find community rating works to their advantage. But going that route might sap an employer’s motivation to take aggressive steps to lower employee claims through a focus on what Brian Ball, national vice president, employee benefit strategies and solutions for USI Insurance Services, calls “population health.”

Still, self-insuring isn’t for everyone. One consideration is the cost of stop-loss insurance, as well as the employer’s appetite for claims risk. For smaller employers, an important variable in the cost of stop-loss coverage is their degree of “credibility,” Ball says. That refers to the degree to which a stop-loss carrier will base premiums on the employer’s experience. Often only a portion of the premium will be based on experience, and the rest on a standard formula.

An employer with about 300-350 employees and dependents covered by the plan might be “50%-60% credible,” Ball says. It might take about 500 covered individuals before a stop-loss carrier would deem an employer group “fully credible,” according to Segal Consulting’s Tesoriero.

The larger the group, the less the potential for a year of unusually high claims making the stop-loss policy a losing proposition for the carrier. Stop-loss carriers also, of course, base premiums on the level of the “specific” limit (i.e. the dollar threshold for the stop-loss to begin absorbing claims for a particular individual over the course of year.

Naturally, the lower the threshold, the higher the premium.

Sending the wrong message

In addition, however, when specific low stop-loss thresholds are particularly low, the message to stop-loss carriers is that the employer isn’t fully buying into the self-insurance concept, and therefore may be less motivated to manage claims aggressively. That conclusion would tend to raise the premium as well.

From the employer’s perspective, the level of exposure must not be a cause of sleepless nights. Even smaller employers with balance sheets strong enough to navigate occasional claim spikes that fall below the specific limit have to consider the prospect of a truly horrendous year. That’s where setting the aggregate stop-loss level comes in.

Stop-loss carriers review the employer’s claims history, and produce a number that represents its estimate of total claims for the year. The aggregate limit, also called the attachment point, is set as a percentage (125% is typical) of expected total claims.

There can be some haggling on the estimate of total claims; the lower the number, the greater the probability of being protected by the aggregate limit. However, convincing a stop-loss carrier to make a significant adjustment is a rare event.

If the prospect of being on the hook for claims exceeding the norm by 25% (i.e. 125% of the total) is too daunting, “if you want to pay a little more [in premium], you can take it down to 120% or 115%,” says Ball.

Cash flow considerations

Another common source of employer anxiety is managing corporate cash flow when monthly claims bounce up and down dramatically. But recently a level-funding option has become more widely available. Under that arrangement the total expected claims for the year are divided into 12 equal monthly installments, with a reconciliation of variances at the end.

Several other relatively new bells and whistles are giving employers more options than before. Many state insurance regulators, meanwhile, are not thrilled by the growing popularity of self-insurance among smaller employers.

For one, they don’t like the fact that by self-insuring, employers are evading state-mandated benefits.

Another state concern is adverse selection – that employers with healthy employees (and thus lower costs) that self-insure leave carriers offering fully insured plans with a disproportionate share of high-claims policyholders, driving premiums higher and higher.

A third concern is that some self-insured arrangements with very low stop-loss limits are the functional equivalent of insured plans, and therefore are abusing the system by avoiding state regulation.

Last year California governor Jerry Brown signed a measure setting minimum specific deductibles for employers with under 100 employees at $35,000 (rising to $40,000 in 2016). Minimums are also set for aggregate stop loss, based on a formula.

The law contained several other provisions, including a ban on “lasering,” the carrier practice of demanding higher deductible levels or higher premiums for individuals expected to have unusually high claims due to history or a known ongoing critical illness.

Other states, including Rhode Island and Minnesota, are considering similar measures or have adopted less stringent ones.

Ball is not particularly nervous about the prospect of states’ stamping out self-insuring for smaller employers. In his view, unfolding market dynamics “can only improve” the appeal of self-funding.

New stop-loss options

Stop-loss carriers have been becoming more creative in recent times, according to Segal Consulting consultant Michael Tesoriero. The following are some examples he offers:

  • Caps on future rates. In some competitive situations carriers agree to limit rate increases for the next one or more years. This relieves employers of the risk of a big jump in rates following a year of high claims, when stop-loss thresholds were exceeded significantly.
  • Dividend-eligible policies. Sometimes offered to established clients, under these arrangements employers with below-than-expected claims can receive a slice of the savings the stop-loss carrier enjoys.
  • No new “laser” contracts. Often, stop-loss carriers, based on claims experience, will require an employer to accept a higher deductible, or pay a higher premium, for employees who are expected to have substantial claims over the course of the year, perhaps due to a chronic condition or ongoing critical illness. That is known as lasering. A “no new laser contract” is one limiting the carrier’s ability to establish new laser coverage.
  • Defined rate renewal formula. The carrier eliminates the subjective element of determining new rates at renewal. Instead, rates are adjusted based on a transparent formula linking specified premium increase percentages to the ratio of prior year claim reimbursement totals to premiums paid.