HRB 23 - Agencies Issue PPACA Clarifications
Released October 12, 2010I Download as a PDF October 12, 2010 --
In an on-going effort to assist employers and plans in complying with the PPACA, the governing Agencies (Departments of HHS, Labor and Treasury) responsible for implementing the Patient Protection and Affordable Care Act (PPACA) have issued three sets of frequently asked questions (FAQs). These FAQs are just that; they are not regulations, but they do give an indication as to how the agencies are interpreting the law. With regard to several PPACA notice requirements, EBSA has released the relevant notices in Spanish. In addition, the IRS recently released two pronouncements: one relating to the salary-based discrimination rules applicable to insured group health plans, and the other relating to a delay in the mandatory Form W-2 reporting of employer-provided health care costs.
PPACA Implementation FAQs
Of particular note, in the first set of FAQs, is the statement that it is the intent of the Agencies to assist employer plans and individuals with PPACA compliance; their intent is not punitive, but rather assistive. This should give some degree of comfort that a good faith effort to comply with the law will be acceptable.
Grandfathered Health Plans (FAQs Part I: Qs 2 – 6 and FAQs Part II: Qs 1-5)
Determining grandfathered status continues to be fertile ground for many questions. In response, the FAQs provide as follows:
- These FAQs affirm that grandfathered status is only lost based on one or more of the six standards listed in the regulations:
- Eliminating all, or substantially all, benefits to diagnose or treat a particular condition.
- Increase in percentage of a cost-sharing requirement, such as coinsurance, above the level at which it was on March 23, 2010.
- Increase of a fixed-amount cost-sharing requirement, other than co-pays, such as a $500 deductible, or a $2,500 out-of-pocket limit, by a total percentage measured from March 23, 2010, that is more than the sum of medical inflation and 15 percentage points.
- Increase in co-pays by an amount that exceed the greater of:
- A total percentage, measured from March 23, 2010, that is more than the sum of medical inflation, plus 15 percentage points, or
- $5 increased by medical inflation measured from March 23, 2010.
- A decrease in employer contribution by more than 5 percentage points, measured from March 23, 2010.
- Change in annual limits by group health plans in existence on March 23, 2010, such as:
- Addition of an annual limit on the dollar value of benefits;
- Decrease in limit for a plan with only a lifetime limit; or
- Decrease in limit for a plan with an annual limit.
Changes that are not listed above, and certainly, adding enhancements to the plan, would not cause loss of grandfathered status.
One of the ‘disconnects’ that has occurred in determining grandfathered status relates to a change in employer contribution. The FAQs offer a process whereby insurers can ask employers to keep them informed of any change in employer contribution. The intent is to provide insurers with the requisite information to determine grandfathered status.
The “change in insurer” event that can cause loss of grandfathered status has raised many questions. To this end, the FAQs indicate that future guidance may clarify circumstances in which a change of insurer will not cause loss of grandfathered status.
Other Highlights of FAQs – Part I
Claims and Appeals: Clarifications and Revised Model Notice of Adverse Determination (also see Part I, FAQs 7-13 relating to Claims and Appeals).
Technical Release No. 2010-02 provides clarification and relief with regard to some of the technicalities of the claims and appeals and external review requirements that will become applicable to non-grandfathered plans. Between now and July 1, 2011, there is an enforcement grace period regarding the following standards:
- Timeframe for making urgent care claims decisions;
- Providing notices in a culturally and linguistically appropriate manner;
- Requiring broader content and specific information included in notices; and
- Requiring substantial compliance with all of the claims and appeal regulations.
This Technical Release does not relieve the plan from complying with the rules; but rather it relieves them of any enforcement for failure to comply with the specific technicalities of the above requirements.
In addition, the DOL issued a Revised Model Notice of Adverse Benefit Determination, clarifying the timeframe for the initial benefit determination. The first notice provided was somewhat confusing on this point.
With regard to independent review organizations (IRO), these FAQs clarify that:
- A self-funded plan can contract with a third party administrator to then contract with an IRO to accomplish the external review process. However, such contract would not relieve the plan sponsor from responsibility if there is a failure to provide an external review process to an individual.
- It is permissible to contract with an IRO located out of state, if there is none located in the particular state.
Coverage for Dependents (FAQ Part I, Q-14)
This FAQ clarifies that a dependent, for purposes of the extension of dependent coverage to age 26, includes a biological child, a stepchild, an adopted child, or a foster child. Eligibility restrictions can be placed on individuals who do not fall within one of these categories. It is important to note that state insurance law or plan provision may expand the definition of eligible dependent beyond the federal standard.
Other Highlights of FAQs – Part II
Wellness Programs (Part II, Q-5)
This FAQ confirms that a wellness premium discount will not cause loss of grandfathered status; but, cautions that a change in co-payment or other cost-sharing may cause a loss of grandfathered status. The FAQ also cautions that any wellness incentive or disincentive must comply with the HIPAA nondiscrimination rules.
Dental, Vision and Retiree-only Plan Exceptions (Part II, Q-6 and Part III, Qs 1-2)
FAQ-6 confirms that the insurance provisions of the PPACA will not apply to HIPAA-exempt programs, such as limited scope dental and vision plans. To meet the “limited scope” exemption under HIPAA, the plan must specifically, and only provide benefits for, in the case of dental plans, issues relating to the function and structure of the mouth, and for vision coverage, issues relating to the function and structure of the eye.
Further, to qualify for these exemptions, the plan must be a separate and independent policy; or, if it is not a separate and independent policy, for example, in the case of a self-funded situation, the dental or vision plan must not be integral with the health plan. What this means is that the participants must have the right to elect or decline the dental or vision coverage, and if elected, there must be a separate cost for the dental or vision coverage.
In the third set of FAQs, the Agencies affirmed that this exception extends to plans covering “less than 2 participants who are current employees”. Retiree-only plans, thus, are excepted from the insurance market provisions of the PPACA.
Plan Rescission (Part II, Q-7)
This FAQ addresses the issue of plan rescission. Generally a rescission is a retroactive termination of coverage. The only time coverage can be retroactively terminated is failure to pay premium, or for fraud or intentional misrepresentation. Of particular note, this Q&A provides some relief for administrative issues. For example, if, administratively, records are only reconciled monthly, a modest retroactive termination, due to the administrative issue, would be permissible.
Likewise, if a plan is subject to COBRA continuation, and is not notified of a divorce and the premium goes unpaid, the DOL would not consider a plan’s termination of coverage retroactive to the divorce to be a violation of the rescission rules.
PPACA Notices Available in Spanish
In response to several notice requirements relating to the Patient Protection and Affordable Care Act (PPACA), the DOL’s Employee Benefit Security Administration (EBSA) issued the relevant model notices in Spanish:
For information about these required notices and links to the English versions, please refer to these CBIZ Health Reform Bulletins:
It does provide a couple of points of clarification, particularly, as it relates to penalties. Specifically, the IRS pronouncement affirms that the penalty for a discriminatory insured plan is the imposition of a $100 per day excise tax, not to exceed 10% of the aggregate amount paid or incurred by the employer during the preceding tax year for the group plan, or $500,000, whichever is less.
The Notice also affirms that the penalty is determined based on the individuals against whom the discrimination occurs. In other words, anyone who does not receive the discriminatory benefit is counted in the assessment of the penalty. While employers employing fewer than 50 employees who sponsor insured group health plans are subject to the salary-based discrimination rules, they are not subject to the excise tax and the self-reporting requirement.
- IRS delays W-2 reporting of employer health coverage. The IRS just issued some relief for employers (IRS Notice 2010-69) relating to the Form W-2 reporting requirement. The PPACA requires that the aggregate cost of employer-provided health coverage be reported on the Form W-2, beginning with the 2011 plan year. According to this Notice, for the 2011 year, the W-2 reporting requirement will be voluntary, rather than mandatory.
The aggregate cost of health coverage will be calculated in the same manner as the COBRA premium is calculated, less the 2% administrative fee. This information is to be reported on the Form W-2 (draft W-2 here), in Box 12, using Code DD.
About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Leawood, Kansas office.
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