Significant Changes for Health Care Providers, Health Plans, and Their Business Associates and Subcontractors in Final HIPAA Privacy Regulations

Source: United Benefit Advisors
By: Jackson Lewis LLP

The Office for Civil Rights ("OCR") of the U.S. Department of Health and Human Services published its long-awaited final privacy and security regulations ("Final Rule") under the Health Insurance Portability and Accountability Act ("HIPAA") on January 25, 2013. The Final Rule becomes effective March 26, 2013, and, in general, covered entities and business associates are required to comply by September 23, 2013.

The Final Rule addresses four key areas: (i) changes made by the Health Information for Economic and Clinical Health Act ("HITECH Act"); (ii) the HIPAA enforcement rule; (iii) updates to the data breach notification regulations; and (iv) changes made by the Genetic Information Nondiscrimination Act. Some significant changes are summarized below.

Business Associates and Subcontractors

One of the most significant changes under the HITECH Act is that it makes Business Associates (“BAs”) directly liable under certain provisions of the HIPAA privacy and security rules (“HIPAA Rules”). In addition, the Final Rule provides further guidance concerning which entities are BAs, resulting in the treatment of certain subcontractors of BAs as BAs themselves, directly subject to the HIPAA Rules. The Final Rule, for example, clarifies that a BA is a person who performs functions or activities on behalf of, or certain services for, a covered entity or another BA that involve the use or disclosure of protected health information (“PHI”).

Importantly, the Final Rule establishes that a person becomes a BA by definition, not by the act of contracting with a covered entity or otherwise. Therefore, direct liability for the BA under the HIPAA Rules and HITECH Act for impermissible uses and disclosures and other provisions attaches immediately when a person creates, receives, maintains, or transmits PHI on behalf of a covered entity or BA and otherwise meets the BA definition. As a result of some of these changes, covered entities and BAs should consider re-examining their relationships with their subcontractors to ensure they obtain the appropriate, satisfactory assurances concerning the PHI they make available to those subcontractors. For more information about identifying BAs and subcontractors, see Final HIPAA Regulations: “Business Associates” Include Subcontractors, Data Storage Companies (Cloud Providers?).

The Final Rule also clarifies the BAs are directly liable under the HIPAA Rules for:

  1. uses and disclosures of PHI not permitted under HIPAA;
  2. a failure to provide breach notification to the covered entity;
  3. a failure to provide access to a copy of electronic PHI to the covered entity, the individual, or the individual's designee (as specified in the business associate agreement ("BAA");
  4. a failure to disclose PHI to the Secretary of Health and Human Services to investigate or determine the BA's compliance with the HIPAA Rules;
  5. a failure to provide an accounting of disclosures; and
  6. a failure to comply with the HIPAA Security Rule.

BAs remain contractually liable for the other provisions of BAAs.

In attempting to minimize this liability, the Final Rule also confirms that OCR does not endorse any "certification" process for compliance with the HIPAA Rules or HITECH Act. Thus, BAs and subcontractors should not rely on such programs that may be available. However, it is critical that BAAs be updated to reflect new requirements and to allocate certain liabilities and responsibilities. A transition rule under the Final Rule permits covered entities and BAs to continue operation under certain existing contracts for up to one year beyond the compliance date (September 23, 2013). A qualifying BAA will be deemed compliant until the earlier of (i) the date such agreement is renewed or modified on or after September 23, 2013, or (ii) September 22, 2014. The transition rule applies only to the language in the agreements, the parties must operate as required under the HIPAA Rules in accordance with the applicable compliance dates.

Breach Notification Rule

The Final Rule retains many requirements from the interim final breach notification rule. However, it removes the "risk of harm" standard in exchange for a more objective standard for determining whether a "breach" has occurred. (Thus, inquiry into whether there is a significant risk of harm to privacy and security is no longer appropriate.) The Final Rule establishes a presumption that impermissible uses and disclosures of PHI are breaches, unless an exception applies. Covered entities can rebut that presumption (removing the notification requirement) by engaging in a risk assessment to determine whether there is a low probability that PHI has been compromised. However, because of the presumption, covered entities may avoid the risk assessment and provide notification.

A risk assessment would examine at least the following four factors:

  1. the nature and extent of the PHI involved, including the types of identifiers and the likelihood of re-identification;
  2. the unauthorized person who used the PHI or to whom the disclosure was made;
  3. whether the PHI was actually acquired or viewed; and
  4. the extent to which the risk to the PHI has been mitigated.

 

If no exception applies and, after reviewing all of these factors, the covered entity cannot demonstrate that there is a low probability of compromise to the PHI, notification is required. The OCR cautioned that, when working through these factors, many forms of health information can be sensitive, not just information about sexually transmitted diseases, mental health diseases or substance abuse. In addition, the OCR confirmed that violations of the minimum necessary rules also could result in breaches requiring notification.

OCR clarified other aspects of the breach notification rule:

  • The time for notification begins to run when the incident is known to have occurred, not when it has been determined to be a breach. However, a covered entity is expected to make notifications after a reasonable time to investigate the circumstances surrounding the breach in order to collect and develop the information required to be included in the notice to the individual(s).
  • The obligation to determine whether a breach has occurred and to notify individuals remains with the covered entity. However, covered entities can delegate these functions to third parties or BAs.
  • Written notification by first-class mail is the general, default rule. However, individuals who affirmatively agree to receive notice by e-mail may be notified accordingly. In limited cases, individuals who affirmatively agree to be notified orally or by telephone may be contacted though those means with instructions on how to pick up the written notice.
  • Notices of Privacy Practices must include a statement that covered entities must notify affected individual following a breach.

 

Enforcement Rule

The Final Rule implements the changes HITECH Act made to the enforcement provisions of the HIPAA rules, including penalty amounts, which now also apply to BAs. The HITECH Act penalty scheme can be summarized as follows:

  • "Did not know" penalty - amount not less than $100 or more than $50,000 per violation when it is established the covered entity or BA did not know and, by exercising reasonable diligence, would not have known of a violation;
  • "Reasonable cause" penalty - amount not less than $1,000 or more than $50,000 per violation when it is established the violation was due to reasonable cause and not to willful neglect;
  • "Willful neglect-corrected" penalty - amount not less than $10,000 or more than $50,000 per violation when it is established the violation was due to willful neglect and was timely corrected;
  • "Willful neglect-not corrected" penalty - amount not less than $50,000 for each violation when it is established the violation was due to willful neglect and was not timely corrected.

A penalty for violations of the same requirement or prohibition under any of these categories may not exceed $1,500,000 in a calendar year.

In addition, OCR made clear in the Final Rule that it will investigate a complaint and it will conduct a compliance review when the circumstances or its preliminary review suggests willful neglect is possible. Willful neglect is defined at 45 CFR § 160.401 as the "conscious, intentional failure or reckless indifference to the obligation to comply with the administrative simplification provision violated." The term not only presumes actual or constructive knowledge a violation is virtually certain to occur, but also encompasses a conscious intent or degree of recklessness with regard to compliance obligations. The proposed regulations provided examples of where willful neglect may be found:

  • A covered entity disposed of several hard drives containing electronic PHI in an unsecured dumpster, in violation of § 164.530(c) and § 164.310(d)(2)(i). HHS's investigation reveals the covered entity had failed to implement any policies and procedures to reasonably and appropriately safeguard PHI during the disposal process.
  • A covered entity failed to respond to an individual's request that it restrict its uses and disclosures of PHI about the individual. HHS's investigation reveals the covered entity does not have any policies and procedures for consideration of restriction requests it receives and refuses to accept any requests for restrictions from individual patients who inquire.
  • A covered entity's employee lost an unencrypted laptop that contained unsecured PHI. HHS's investigation reveals the covered entity feared its reputation would be harmed if information about the incident became public and, therefore, decided not to provide notification as required by § 164.400 et seq.

 

Genetic Information Nondiscrimination Act

The Genetic Information Nondiscrimination Act (GINA) prohibits discrimination on the basis of an individual's genetic information. GINA also contains privacy protections for genetic information that requires HHS to modify the HIPAA Rules. The protections require (i) clarification that genetic information is health information and (ii) health plans, health plan issuers and issuers of Medicare supplemental policies be prohibited from using or disclosing genetic information for underwriting purposes. The Final Rule implements these protections by incorporating certain definitions from GINA and other provisions relating to health plans (health care providers are generally not subject to these provisions). In addition, the Final Rule requires a change to the Notice of Privacy Practices for health plans. Namely, if a covered health plan will be using PHI for underwriting purposes (such as in a wellness program), the plan's Notice of Privacy Practices must include a statement that PHI that is genetic information may not be used for this purpose.

Action Needed

The Final Rule includes substantial changes to the HIPAA Final Rules for covered health care providers and health plans, as well as their BAs. These entities will need to review these regulations carefully and make appropriate adjustments in their policies and procedures, workforce training, privacy and other notices, systems, as well as their agreements. Most of this will need to be completed by September 23, 2013, although a transition rule will allow a one-year extension until September 23, 2014 to amend certain existing business associate agreements.

by 6d-destani

Exchange Notice Requirements Delayed

The Affordable Care Act (ACA) requires employers to provide all new hires and current employees with a written notice about ACA’s health insurance exchanges (Exchanges), effective March 1, 2013.

On Jan. 24, 2013, the Department of Labor (DOL) announced that employers will not be held to the March 1, 2013, deadline. They will not have to comply until final regulations are issued and a final effective date is specified.

This Power Group Companies Legislative Brief details the expected timeline for the exchange notice requirements.

Exchange Notice Requirements

In general, the notice must:

  • Inform employees about the existence of the Exchange and give a description of the services provided by the Exchange;
  • Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer's plan does not meet certain requirements;
  • Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of this employer contribution may be excludable for federal income tax purposes; and
  • Include contact information for the Exchange and an explanation of appeal rights.

This requirement is found in Section 18B of the Fair Labor Standards Act (FLSA), which was created by the ACA. The DOL has not yet issued a model notice or regulations about the employer notice requirement.

When do Employers have to Comply with the Exchange Notice Requirements?

Section 18B provides that employer compliance with the notice requirements must be carried out "[i]n accordance with regulations promulgated by the Secretary [of Labor]." Accordingly, the DOL has announced that, until regulations are issued and become applicable, employers are not required to comply with the exchange notice requirements.

The DOL has concluded that the notice requirement will not take effect on March 1, 2013, for several reasons. First, this notice should be coordinated with HHS's educational efforts and IRS guidance on minimum value. Second, the DOL is committed to a smooth implementation process, including:

  • Providing employers with sufficient time to comply; and
  • Selecting an applicability date that ensures that employees receive the information at a meaningful time.

The DOL expects that the timing for distribution of notices will be the late summer or fall of 2013, which will coordinate with the open enrollment period for Exchanges.

The DOL is considering providing model, generic language that could be used to satisfy the notice requirement. As a compliance alternative, the DOL is also considering allowing employers to satisfy the notice requirement by providing employees with information using the employer coverage template as discussed in the preamble to the Proposed Rule on Medicaid, Children's Health Insurance Programs and Exchanges.

Future guidance on complying with the notice requirement under FLSA section 18B is expected to provide flexibility and adequate time to comply.

 

 

by 6d-destani

Medicare Part D Disclosure to CMS Due February 28

Have you made your 2012 Medicare Part D Disclosure to the Centers for Medicare and Medicaid Services (CMS) yet?

If not, we want to remind you that the deadline is approaching.

Employers who sponsor group health plans that cover any prescription drugs generally must disclose whether the plan provides creditable or noncreditable prescription drug coverage to CMS within 60 days of the start of a new plan year. The deadline for calendar year plans is February 28.

Filing is done electronically using the CMS web site. Instructions also are available there.

by 6d-destani

2013 Inflation Adjustments

Source: United Benefit Advisors
By: Chadron J. Patton

Following recent announcements by both the IRS and the Social Security Administration, we now know most of the dollar amounts that employers will need to administer their benefit plans for 2013.  Many of the new numbers are slightly higher than their 2012 counterparts. For instance, the annual 401(k), 403(b), or 457(b) deferral limit will increase from $17,000 to $17,500; the Section 415 limit on annual additions to a participant's account will go from $50,000 to $51,000; and the annual compensation limit will increase from $250,000 to $255,000.  (The annual retirement plan catch-up contribution limit -- $5,500 -- will remain unchanged for 2013.)

The annual compensation threshold used in identifying highly compensated employees (HCEs) remains unchanged for 2013 (at $115,000).  In identifying HCEs for 2013, employers should consider employees who earned at least $115,000 during 2012 (as well as 5% owners during either 2012 or 2013).  This is due to the "look-back" nature of the HCE definition.

The annual limit on IRA contributions (whether traditional or Roth) will increase from $5,000 to $5,500, while the annual limit on IRA catch-up contributions will remain at $1,000.

The maximum contribution to an HSA will increase slightly -- from $3,100 to $3,250 for individual coverage, and from $6,250 to $6,450 for family coverage -- while the maximum HSA catch-up contribution will remain at $1,000.  The minimum deductible for any high-deductible health plan (which must accompany any HSA) will also increase slightly -- from $1,200 to $1,250 for individual coverage, and from $2,400 to $2,500 for family coverage.

A new $2,500 limit on employee deferrals to health FSAs will apply for plan years beginning on or after January 1, 2013.  This $2,500 limit applies only to salary reduction contributions under a health FSA and not to employer contributions.  For this purpose, however, any employer FSA contributions that could have been received in cash are treated as salary reduction contributions.

The Social Security taxable wage base will increase for 2013 -- from $110,100 to $113,700.  A question yet to be answered is whether employees will continue to enjoy a temporary reduction in the long-standing 6.2% "OASDI" tax rate.  For 2011 and 2012, that rate has been temporarily reduced by two percentage points (to 4.2%), as a way of helping to stimulate the economy.  Although there does not appear to be significant sentiment in either of the major political parties to extend this reduction, there is a slight chance that the 4.2% rate will remain in effect for 2013.  (In any event, the employer OASDI tax rate will remain at 6.2%.)

The Medicare tax rate has long been set at 1.45% -- for both employees and employers.  Beginning in 2013, however, the employee Medicare tax rate will increase by 0.9% (to a total of 2.35%) on wages in excess of $200,000 for single filers or $250,000 for joint filers ($125,000 for married individuals filing separately).  Employers must start withholding this additional Medicare tax once an employee's Medicare wages have exceeded $200,000.  This additional Medicare tax does not apply to the employer's share.

To obtain a quick reference card listing the 2013 annual benefit plan amounts, please contact Saxon Financial Consulting

 

by 6d-destani

FAQs about Affordable Care Act Implementation Part XI

Source: https://www.dol.gov/ebsa/faqs/faq-aca11.html

Set out below are additional Frequently Asked Questions (FAQs) regarding implementation of various provisions of the Affordable Care Act. These FAQs have been prepared by the Departments of Labor, Health and Human Services (HHS), and the Treasury (collectively, the Departments). Like previously issued FAQs (available at https://www.dol.gov/ebsa/healthreform/), these FAQs answer questions from stakeholders to help people understand the new law and benefit from it, as intended.

The Departments anticipate issuing further responses to questions and issuing other guidance in the future. We hope these publications will provide additional clarity and assistance.

Notice of Coverage Options Available Through the Exchanges

Section 18B of the Fair Labor Standards Act (FLSA), as added by section 1512 of the Affordable Care Act, generally provides that, in accordance with regulations promulgated by the Secretary of Labor, an applicable employer must provide each employee at the time of hiring (or with respect to current employees, not later than March 1, 2013), a written notice:

  1. Informing the employee of the existence of Exchanges including a description of the services provided by the Exchanges, and the manner in which the employee may contact Exchanges to request assistance;
  2. If the employer plan's share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (the Code) if the employee purchases a qualified health plan through an Exchange; and
  3. If the employee purchases a qualified health plan through an Exchange, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for Federal income tax purposes.

 

Q1: When do employers have to comply with the new notice requirements in section 18B of the FLSA?

Section 18B of the FLSA provides that employer compliance with the notice requirements of that section must be carried out "[i]n accordance with regulations promulgated by the Secretary [of Labor]." Accordingly, it is the view of the Department of Labor that, until such regulations are issued and become applicable, employers are not required to comply with FLSA section 18B.

The Department of Labor has concluded that the notice requirement under FLSA section 18B will not take effect on March 1, 2013 for several reasons. First, this notice should be coordinated with HHS's educational efforts and Internal Revenue Service (IRS) guidance on minimum value. Second, we are committed to a smooth implementation process including providing employers with sufficient time to comply and selecting an applicability date that ensures that employees receive the information at a meaningful time. The Department of Labor expects that the timing for distribution of notices will be the late summer or fall of 2013, which will coordinate with the open enrollment period for Exchanges.

The Department of Labor is considering providing model, generic language that could be used to satisfy the notice requirement. As a compliance alternative, the Department of Labor is also considering allowing employers to satisfy the notice requirement by providing employees with information using the employer coverage template as discussed in the preamble to the Proposed Rule on Medicaid, Children's Health Insurance Programs, and Exchanges: Essential Health Benefits in Alternative Benefit Plans, Eligibility Notices, Fair Hearing and Appeal Processes for Medicaid and Exchange Eligibility Appeals and Other Provisions Related to Eligibility and Enrollment for Exchanges, Medicaid and CHIP, and Medicaid Premiums and Cost Sharing (78 FR 4594, at 4641), which will be available for download at the Exchange web site as part of the streamlined application that will be used by the Exchange, Medicaid, and CHIP. Future guidance on complying with the notice requirement under FLSA section 18B is expected to provide flexibility and adequate time to comply.

Compliance of Health Reimbursement Arrangements with Public Health Service Act (PHS Act) section 2711

Section 2711 of the PHS Act, as added by the Affordable Care Act, generally prohibits plans and issuers from imposing lifetime or annual limits on the dollar value of essential health benefits. The preamble to the interim final regulations implementing PHS Act section 2711 (75 FR 37188) addressed the application of section 2711 to health reimbursement arrangements (HRAs) and certain other account-based arrangements. HRAs are group health plans that typically consist of a promise by an employer(1) to reimburse medical expenses (as defined in Code section 213(d)) for a year up to a certain amount, with unused amounts available to reimburse medical expenses in future years. The preamble distinguished between HRAs that are "integrated" with other coverage as part of a group health plan and HRAs that are not so integrated ("stand-alone" HRAs). The preamble stated that "[w]hen HRAs are integrated with other coverage as part of a group health plan and the other coverage alone would comply with the requirements of PHS Act section 2711, the fact that benefits under the HRA by itself are limited does not violate PHS Act section 2711 because the combined benefit satisfies the requirements." (75 FR 37188, at 37190-37191). The corollary to this statement is that an HRA is not considered integrated with primary health coverage offered by the employer unless, under the terms of the HRA, the HRA is available only to employees who are covered by primary group health plan coverage provided by the employer and meeting the requirements of PHS Act section 2711.

Questions 2 through 4 below address certain issues relating to HRAs. The Departments anticipate issuing future guidance addressing HRAs.(2)

Q2: May an HRA used to purchase coverage on the individual market be considered integrated with that individual market coverage and therefore satisfy the requirements of PHS Act section 2711?

No. The Departments intend to issue guidance providing that for purposes of PHS Act section 2711, an employer-sponsored HRA cannot be integrated with individual market coverage or with an employer plan that provides coverage through individual policies and therefore will violate PHS Act section 2711.

Q3: If an employee is offered coverage that satisfies PHS Act section 2711 but does not enroll in that coverage, may an HRA provided to that employee be considered integrated with the coverage and therefore satisfy the requirements of PHS Act section 2711?

No. The Departments intend to issue guidance under PHS Act section 2711 providing that an employer-sponsored HRA may be treated as integrated with other coverage only if the employee receiving the HRA is actually enrolled in that coverage. Any HRA that credits additional amounts to an individual when the individual is not enrolled in primary coverage meeting the requirements of PHS Act section 2711 provided by the employer will fail to comply with PHS Act section 2711.

Q4: How will amounts that are credited or made available under HRAs under terms that were in effect prior to January 1, 2014, be treated?

The Departments anticipate that future guidance will provide that, whether or not an HRA is integrated with other group health plan coverage, unused amounts credited before January 1, 2014, consisting of amounts credited before January 1, 2013 and amounts that are credited in 2013 under the terms of an HRA as in effect on January 1, 2013 may be used after December 31, 2013 to reimburse medical expenses in accordance with those terms without causing the HRA to fail to comply with PHS Act section 2711. If the HRA terms in effect on January 1, 2013, did not prescribe a set amount or amounts to be credited during 2013 or the timing for crediting such amounts, then the amounts credited may not exceed those credited for 2012 and may not be credited at a faster rate than the rate that applied during 2012.

Disclosure of Information Related to Firearms

Q5: Does PHS Act section 2717(c) restrict communications between health care professionals and their patients concerning firearms or ammunition?

No. While we have yet to issue guidance on this provision, the statute prohibits an organization operating a wellness or health promotion program from requiring the disclosure of information relating to certain information concerning firearms. However, nothing in this section prohibits or otherwise limits communication between health care professionals and their patients, including communications about firearms. Health care providers can play an important role in promoting gun safety.

Self-Insured Employer Prescription Drug Coverage Supplementing Medicare Part D Coverage Provided through Employer Group Waiver Plans

Medicare Part D is an optional prescription drug benefit provided by prescription drug plans. Employers sometimes provide Medicare Part D coverage through Employer Group Waiver Plans (EGWPs) under title XVIII of the Social Security Act and often supplement the coverage with additional non-Medicare drug benefits. For EGWPs that provide coverage only to retirees, the non-Medicare supplemental drug benefits are exempt from the health coverage requirements of title XXVII of the PHS Act, Part 7 of the Employee Retirement Income Security Act (ERISA), and Chapter 100 of the Code. (For ease of reference, the relevant provisions of the three statutes are referred to here as "the health coverage requirements.") Moreover, for EGWPs that are insured under a separate policy, certificate, or contract of insurance, the non-Medicare supplemental drug benefits qualify as excepted benefits under PHS Act section 2791(c)(4), ERISA section 733(c)(4), and Code section 9832(c)(4) and are, therefore, similarly exempt from the health coverage requirements.

Q6: Must self-insured prescription drug coverage that supplements the standard Medicare Part D coverage through EGWPs comply with the health coverage requirements?

Pending further guidance, the Departments will not take any enforcement action against a group health plan that is an EGWP because the non-Medicare supplemental drug benefit does not comply with the health coverage requirements of title XXVII of the PHS Act, part 7 of ERISA, and chapter 100 of the Code. This enforcement policy does not affect other requirements administered by the Centers for Medicare & Medicaid Services that apply to providers of such coverage. The Centers for Medicare & Medicaid Services intends to issue related guidance concerning insured coverage that provides non-Medicare supplemental drug benefits shortly.

Fixed Indemnity Insurance

Fixed indemnity coverage under a group health plan meeting the conditions outlined in the Departments' regulations(3) is an excepted benefit under PHS Act section 2791(c)(3)(B), ERISA section 733(c)(3)(B), and Code section 9832(c)(3)(B). As such, it is exempt from the health coverage requirements of title XXVII of the PHS Act, part 7 of ERISA, and chapter 100 of the Code. The Departments have noticed a significant increase in the number of health insurance policies labeled as fixed indemnity coverage.

Q7: What are the circumstances under which fixed indemnity coverage constitutes excepted benefits?

The Departments' regulations provide that a hospital indemnity or other fixed indemnity insurance policy under a group health plan provides excepted benefits only if:

  • The benefits are provided under a separate policy, certificate, or contract of insurance;
  • There is no coordination between the provision of the benefits and an exclusion of benefits under any group health plan maintained by the same plan sponsor; and
  • The benefits are paid with respect to an event without regard to whether benefits are provided with respect to the event under any group health plan maintained by the same plan sponsor.

The regulations further provide that to be hospital indemnity or other fixed indemnity insurance, the insurance must pay a fixed dollar amount per day (or per other period) of hospitalization or illness (for example, $100/day) regardless of the amount of expenses incurred.

Various situations have come to the attention of the Departments where a health insurance policy is advertised as fixed indemnity coverage, but then covers doctors' visits at $50 per visit, hospitalization at $100 per day, various surgical procedures at different dollar rates per procedure, and/or prescription drugs at $15 per prescription. In such circumstances, for doctors' visits, surgery, and prescription drugs, payment is made not on a per-period basis, but instead is based on the type of procedure or item, such as the surgery or doctor visit actually performed or the prescribed drug, and the amount of payment varies widely based on the type of surgery or the cost of the drug. Because office visits and surgery are not paid based on "a fixed dollar amount per day (or per other period)," a policy such as this is not hospital indemnity or other fixed indemnity insurance, and is therefore not excepted benefits. When a policy pays on a per-service basis as opposed to on a per-period basis, it is in practice a form of health coverage instead of an income replacement policy. Accordingly, it does not meet the conditions for excepted benefits.

The Departments plan to work with the States to ensure that health insurance issuers comply with the relevant requirements for different types of insurance policies and provide consumers with the protections of the Affordable Care Act.

Payment of PCORI Fees

Section 4376 of the Code, as added by the Affordable Care Act, imposes a temporary annual fee on the sponsor of an applicable self-insured health plan for plan years ending on or after October 1, 2012, and before October 1, 2019. The fee is equal to the applicable dollar amount in effect for the plan year ($1 for plan years ending on or after October 1, 2012, and before October 1, 2013) multiplied by the average number of lives covered under the applicable self-insured health plan during the plan year. In the case of (i) a plan established or maintained by 2 or more employers or jointly by 1 or more employers and 1 or more employee organizations, (ii) a multiple employer welfare arrangement, or (iii) a voluntary employees' beneficiary association (VEBA) described in Code section 501(c)(9), the plan sponsor is defined in Code section 4376(b)(2)(C) as the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the plan.

Q8: Does Title I of ERISA prohibit a multiemployer plan's joint board of trustees from paying the Code section 4376 fee from assets of the plan?

In the case of a multiemployer plan defined in ERISA section 3(37), the plan sponsor liable for the fee would generally be the independent joint board of trustees appointed by the participating employers and employee organization, and directed pursuant to a collective bargaining agreement to establish the employee benefit plan. Normally, such a joint board of trustees has no function other than to sponsor and administer the multiemployer plan, and it has no source of funding independent of plan assets to satisfy the Code section 4376 statutory obligation. The fee involved is not an excise tax or similar penalty imposed on the trustees in connection with a violation of federal law or a breach of their fiduciary obligations in connection with the plan. Nor would the joint board be acting in a capacity other than as a fiduciary of the plan in paying the fee.(4) In such circumstances, it would be unreasonable to construe the fiduciary provisions of ERISA as prohibiting the use of plan assets to pay such a fee to the Federal government. Thus, unless the plan document specifies a source other than plan assets for payment of the fee under Code section 4376, such a payment from plan assets would be permissible under ERISA.

There may be rare circumstances where sponsors of employee benefit plans that are not multiemployer plans would also be able to use plan assets to pay the Code section 4376 fee, such as a VEBA that provides retiree-only health benefits where the sponsor is a trustee or board of trustees that exists solely for the purpose of sponsoring and administering the plan and that has no source of funding independent of plan assets.

The same conclusion would not necessarily apply, however, to other plan sponsors required to pay the fee under Code section 4376. For example, a group or association of employers that act as a plan sponsor but that also exist for reasons other than solely to sponsor and administer a plan may not use plan assets to pay the fee even if the plan uses a VEBA trust to pay benefits under the plan. The Department of Labor would expect that such an entity or association, like employers that sponsor single employer plans, would have to identify and use some other source of funding to pay the Code section 4376 fee.

Footnotes

  1. An HRA may be sponsored by an employer, an employee organization, or both. For simplicity, this section of the FAQs refers to employers. However, this guidance is equally applicable to HRAs sponsored by employee organizations, or jointly by employers and employee organizations.
  2. With respect to HRAs that are limited to retirees, the exemption from the requirements of ERISA and the Code relating to the Affordable Care Act for plans with fewer than two current employees means that retiree-only HRAs generally are not subject to the rules of PHS Act section 2711. See the preamble to the interim final rules implementing PHS Act section 2711 (75 FR 37188, at 37191). See also ACA Implementation FAQs Part III, issued on October 12, 2010 (available at https://www.dol.gov/ebsa/faqs/faq-aca3.html).
  3. See 26 CFR 54.9831-1(c)(4), 29 CFR 732(c)(4), 45 CFR 146.145(c)(4).
  4. See generally, ERISA Field Assistance Bulletin 2002-02 (trustees of multiemployer plans, if allowed under the plan documents, may act as fiduciaries in carrying out activities that otherwise would be settlor in nature), available at https://www.dol.gov/ebsa/regs/fab2002-2.html.

by 6d-destani

HHS Issues Proposed Rule on Exchange Liability; IRS Provides Coordination Options for Noncalendar-Year Plans

On Jan. 14, 2013, the Department of Health and Human Services (HHS) issued another lengthy proposed rule under the Patient Protection and Affordable Care Act (PPACA).  Among other things, the proposed rule provides some information on how employers will be notified if an employee applies for a premium subsidy / tax credit and how an employer may appeal a determination of premium subsidy eligibility that it believes is incorrect.  The proposed rule is HERE

Employee Requests for Premium Subsidies

An employee will be eligible for a premium subsidy only if:

  • His household income is less than 400 percent of federal poverty level,
  • He purchases coverage through the public exchange,
  • He does not have access to affordable, minimum value coverage through his employer, and
  • He is not covered by a plan through his employer that provides minimum essential coverage (even if that coverage is not affordable or it does not provide minimum value)

The employee will be required to provide information to the exchange about his income and access to employer-provided affordable, minimum value coverage.  The exchange (or HHS if the state asks HHS to do this) will attempt to verify this information from available data bases, but in all likelihood it will need to contact the employer for verification of information regarding coverage.

HHS is considering the use of a one-page template that the employer would complete with respect to the employee’s eligibility for coverage, plan affordability and plan value.

Employee Eligibility for a Premium Subsidy

Under the proposed rule, HHS or the exchange would notify the employer if an employee is determined to be eligible for a premium subsidy (“certified under Section 1411”).  The employer would have 90 days to appeal the determination if it believed the employee should not be eligible for the subsidy.  (All employers, regardless of size, would receive the notice that an employee has been found to be eligible for a premium subsidy. Employers large enough to be responsible for paying a penalty on employees who receive a premium subsidy would receive a separate notice from the IRS actually assessing the penalty. The IRS notice most likely would be sent during the second quarter after the calendar year for which the premium subsidy was provided.)

Coordinating Exchange and Plan Open Enrollments

On Jan. 2, 2013, the IRS issued a detailed rule that, among other things, provides that noncalendar-year plans may amend their Section 125 plans to allow employees to make midyear changes because of PPACA.  Open enrollment for the exchanges will begin in October 2013 for a Jan. 1, 2014, effective date, and the individual coverage mandate also begins Jan. 1, 2014.  The proposed rules provide that employers with noncalendar-year plans may amend their Section 125 plans to allow participants to drop coverage as of Jan. 1, 2014, to enroll in an exchange plan.  Employers also may amend their plans to allow employees who had declined coverage to enroll and pay premiums on a pre-tax basis as of Jan.1, 2014, so that the employee can meet the coverage requirement.  (Employers considering allowing a special enrollment for those who had declined coverage should obtain the consent of their carrier or reinsurer before implementing this option.)   The proposed rule is here:
https://www.gpo.gov/fdsys/pkg/FR-2013-01-02/pdf/2012-31269.pdf

 

Important: The HHS rules are still in the “proposed” stage, which means that there may be changes when the final rule is issued.  Employers should view the HHS proposed rule as an indication of how plans will be regulated beginning in 2014, but need to understand that changes are entirely possible.

 

 

by 6d-destani

Saxon University Session 1-2013

SAXON UNIVERSITY Session 1-2013

cordially invites you to attend Session 1 of the 2013 year

"Health Reform Updates" "2013 - what does this New Year have in store for us? What changes should we anticipate?"

Thursday January 24th Lunch at 11:30 am

Location: EXECUTIVE CENTER 25 Merchant Street - 1st Floor Cincinnati, OH 45246
Please RSVP to Sandy Burchwell @ 513-774-5482 or sburchwell@saxonconsultants.com by Friday, January 18th Thank you!

 

Saxon Financial Consulting
8825 Chapelsquare Ln Ste A
Cincinnati, Ohio 45249-4702

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Summary of Benefits and Coverage and the Uniform Glossary

The Health Care Reform law requires plan sponsors to provide two new government-developed documents to plan participants. The "Summary of Benefits and Coverage" (SBC) and the "Uniform Glossary" are intended to provide high-level descriptions of a plan (and definitions of standard terms) and are in addition to the ERISA requirement to provide a Summary Plan Description (SPD). An SBC need not be provided for plans, policies, or benefits packages that constitute excepted benefits. If a plan sponsor intends to make any material modifications in coverage, such as increases in cost-sharing or benefit reductions, the law requires the sponsor to notify participants at least 60 days before the modifications become effective. Penalties for non-compliance are significant.

The federal agencies published final regulations and template versions of the SBC and Uniform Glossary on February 9, 2012. The final regulations are very similar to the proposed regulations. The templates were developed by the National Association of Insurance commissioners for insurance policies and the final regulations relaxed the requirement about completing the template "as is". If the plan's terms cannot reasonably be described "in a manner consistent with the template and instructions, the plan or issuer must accurately describe the relevant plan terms while using its best efforts to do so in a manner that is still consistent with the instructions and template format as reasonably possible.". Plan sponsors (or their health insurance carriers) must begin distributing the SBC to participants and beneficiaries eligible to enroll in group health coverage through an open enrollment period beginning on the first day of the first open enrollment period that begins on or after September 23, 2012. For participants and beneficiaries who enroll in group health plan coverage other than through an open enrollment period, the requirements begin on the first day of the first plan year that begins on or after September 23, 2012. Distribution is required with enrollment materials, by the first day of coverage if there are changes since the enrollment, upon renewal, and upon request. An SBC may be distributed in paper or electronic form. The Uniform Glossary may also be distributed in paper or electronic form, but distribution is required only upon request. Click here to see a completed SBC template.

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HIGHLIGHTS OF THE PATIENT-CENTERED OUTCOMES / COMPARATIVE EFFECTIVENESS FEE

Important:  these highlights describe the rules based on the actual law and proposed regulations.  Most likely, therefore, the rules will take effect largely as described here, but some of the details may change.

  • The fee applies from 2012 to 2019, based on plan/policy years ending on or after Oct. 1, 2012, and before Oct. 1, 2019
  • The fee is due by July 31 of the year following the calendar year in which the plan/policy year ended
    • The first fee is due July 31, 2013, for calendar year plans and for those on October, November and December plan years
    • The first fee is not due until July 31, 2014, for those with plan years that start February through September.
  • The fee will be calculated and paid by:
    • The insurer for fully insured plans (although the fee likely will be passed on to the plan)
    • The plan sponsor of self-funded plans
      • This includes health reimbursement arrangements (HRAs)
      • Third-party administrator (TPA) may assist with calculation, but plan sponsor must file
      • If multiple employers participate in the plan, each must file separately unless the plan document designates one as the plan sponsor
  • The fee is based on covered lives (i.e., employees, retirees and dependent spouses and children)
    • May exclude employees/dependents residing outside U.S.
    • May exclude dependents, and only count the employee/retiree, when counting for an HRA
  • For the first year, the fee is $1 per covered life during the plan/policy year
  • For the second year, the fee is $2 per covered life during the year
  • For the third through seventh years, the fee is $2, adjusted for medical inflation, per covered life during the year
  • Applies to private, government, not-for-profit and church employers
  • Applies to grandfathered plans
  • "Group health coverage" includes:
    • Medical plans
    • Retiree only plans
    • HRAs
  •  "Group health coverage" does not include:
    • Stand-alone dental and vision (stand-alone means these benefits are elected separately from medical and have discrete premiums)
    • Life insurance
    • Short- and long-term disability and accident insurance
    • Long-term care
    • Health flexible spending accounts to which only employee contributions are made
    • Health savings accounts
    • Hospital indemnity or specified illness coverage
    • Employee assistance programs and wellness programs that do not provide significant medical care or treatment
    • Stop loss coverage
  • Several options have been proposed for calculating the fee:
    • Actual count method -- count the covered lives on each day of the year, and average the result
    • Snapshot method -- determine the number of covered lives on the same day of each quarter or month, and average the result
      • Could multiply the employee/retiree count by 2.35 to approximate the number of covered dependents rather than actually counting them
    • 5500 method - determine the number of participants at the beginning and end of year as reported on the 5500
      • If dependents are covered, add the participant count for the start and the end of the plan year
      • If dependents are not covered, add the participant count for the start and the end of the plan year and average the result (this method cannot be used by insurers)
  • If there are multiple self-funded plans (e.g., self-funded medical and HRA) with the same plan year, only one fee would apply to a covered life
  • If there are both fully insured and self-funded plans (e.g. insured medical and a self-funded HRA), a fee would apply to each plan -- the insurer would pay the fee on the insured coverage and the plan sponsor would pay the fee on the HRA
  • Plan sponsor reporting and paying the fee would be done electronically on IRS Form 720 each July 31
    • This would be an annual filing, even though form 720 is generally filed quarterly

Action Steps:

  • Insured plans may want to:
    • Ask their carrier if/when this fee will be reflected in rates
    • Include the anticipated fee in their budget
  • Self-funded plans may want to:
    • Include the anticipated fee in their budget
    • Review the likely calculation methods, determine which is best for their situation and close any data gaps
    • Verify there is a named plan sponsor if more than one employer participates in the plan, and if a plan sponsor has not been named, amend the plan to name a plan sponsor before the first fee is due

Note:  PPACA created a private, non-profit corporation called the Patient-Centered Outcomes Research Institute.  The Institute's job is to research the comparative effectiveness of different types of treatment for certain diseases, and to share its findings with the public and the medical community.  The goal is to improve quality of treatment and reduce unnecessary spending.  This fee is to support this research.

Reminder:  These highlights describe the rules based on proposed regulations. Some of this may change.

by 6d-destani

Preparing for the SCOTUS ruling

By Brian M. Kalish
June 18, 2012

Industry groups are being proactive in preparing their membership for the Supreme Court’s ruling on health care reform — which is expected at any time — as they know no matter the ruling, the business has changed forever.

At the National Association of Health Underwriters they have readied their membership by covering the topic across numerous mediums, including weekly e-newsletters, town halls and web seminars, says Jessica Waltman, NAHU’s SVP of government affairs.

After the decision comes out, NAHU members will want to know what will happen, Waltman says, adding she believes the ruling may come out during the organization’s annual convention, which begins June 24 in Las Vegas, so they are making plans to have plenty of time to discuss it.

“We need to inform our membership, so we have a variety of information tools that we are preparing that cover the eventualities as far as we can see them,” she says. “We believe no matter the ruling; [our] members will start receiving calls from their clients. … Our goal is to have tools at the ready so they can best assist their clients.”

The Council of Insurance Agents & Brokers is taking a similar approach, and has already had discussions with its membership about the potential impact of the ruling, says Scott Sinder, partner, Steptoe & Johnson LLP, and The Council’s general counsel.

The Council and its attorneys at Steptoe & Johnson LLP “have folks anxiously awaiting and ready to read the opinions,” and the organization intends to send notice to its members within hours of the ruling that reports on “the big picture,” which will be followed up with more in depth analysis within 24-28 hours.

A series of web seminars, including an initial one for its membership and a second one for members to share with their clients, will follow.

One broker, who says he started his business expecting health care reform, says he’s enjoyed watching the buildup to the ruling. “In the last three to four months it’s been interesting to see brokers still holding onto that hope that we’re going to go back five or six years and broker commissions will go back up and we’re not going to have government involvement in health care. But I don’t see that scenario occurring,” says Reid Rasmussen, owner of Benefit Brainstorm, Inc, adding he believes 30% of brokers will leave the business in the next two years.

“That will open opportunity up to the insurance professionals that are still left figure out how to better serve their clients,” he says. “Smart agents are expanding their horizons and serving their client better than ever before. … It’s not going to make a difference in the end what the Supreme Court rules.”

Even so, Waltman says, NAHU cannot wait for the ruling to come out, as presently “it’s very difficult to plan anything and it affects a lot of our dealings [and] feelings. … It affects everything we are doing.”

“Just having the closure will be very helpful,” she adds. “I think we are looking for that and then we can plan accordingly. No matter what the Court does … there needs to be changes to market reform in the coming year.”

 

by 6d-destani