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October 18, 2011

HRB 40 - ACA Updates: CLASS Act Suspended, Increase in ERRP Cost Thresholds, and What Are Essential Benefits?

Released October 18, 2011I Download as a PDF

October 18, 2011 --

Suspension of CLASS Act

Long term care needs were addressed in the health care reform law through the Community Living Assistance Services and Supports Act (CLASS Act). The Department of Health and Human Services (HHS) was charged with establishing a national, voluntary long term care insurance program beginning in 2012 whereby a participating individual would contribute to the CLASS Program for 5 years (vesting period) before benefits (up to $50/day cash benefit) became available. The payments could be used to purchase non-medical services and support necessary to maintain community residence, including, home modifications, assistive technology, accessible transportation, homemaker services, respite care, personal assistance services, home care aides, and nursing support.

The CLASS Program was to be financed entirely through voluntary payroll deductions. All working adults would be automatically enrolled in the program, unless they choose to opt-out. Employers could voluntarily choose to provide enrollment tools and process the premiums for the Program.

Kathleen Sebelius, the Secretary of HHS, issued a statement last week indicating that implementation of the CLASS Program is now indefinitely suspended. The reasons for suspension relate to actuarial and solvency concerns - a way to provide an affordable benefit through the CLASS Program that is financially sound and self-sustaining has not been found. Thus, the CLASS Program is suspended indefinitely.

Early Retiree Reinsurance Program: Increased Cost Thresholds and Amounts

The Centers for Medicare and Medicaid Services announced an increase in the cost threshold and cost amounts applicable to the Early Retiree Reinsurance Program (ERRP). The ERRP reimburses up to 80% of the cost of benefits in excess of $15,000 and below $90,000. Beginning October 1, 2011, the cost threshold is increased to $16,000; the cost amount threshold increased to $93,000.

Background CBIZ Health Reform Bulletins about the ERRP:

  • Grandfathered Status and ERRP Updates (4/4/2011)
  • Early Retiree Reimbursement Program Updates (10/5/10)
  • Update: Early Retiree Reinsurance Program (9/1/10)
  • Early Retiree Reinsurance Program Application Process Opened (6/29/10)
  • Early Retiree Subsidy – Initial Application Date is Approaching (6/11/10)
  • Early Retiree Reinsurance Program (5/5/10)

Essential Benefits – What Are They?

As part of the ACA, no lifetime and ultimately, no annual limits may be imposed on the dollar value of “essential benefits” provided under group health plans, including grandfathered plans. In addition, it is anticipated that the defined essential benefit package will be used to determine the basic health benefit coverage sold through the Exchanges. Thus far, implementing regulations have not been issued defining essential benefits. “Essential coverage” is the term used to define categories of coverage. For example, the categories of coverage for which no lifetime or annual limit can be imposed. The law provides the following types of classifications of coverage that constitute essential coverage:

  1. Ambulatory patient services.
  2. Emergency services.
  3. Hospitalization.
  4. Maternity and newborn care.
  5. Mental health and substance use disorder services, including behavioral health treatment.
  6. Prescription drugs.
  7. Rehabilitative and habilitative services and devices.
  8. Laboratory services.
  9. Preventive and wellness services and chronic disease management.
  10. Pediatric services, including oral and vision care.

The Institute of Medicine (IOM) was charged with reviewing and coming up with a proposal for HHS on how to define essential benefits. They have completed their study, and have given general guidance on how essential benefits should be defined. Of particular note, IOM has determined that essential benefits should be based on that which is covered by a typical small employer, rather than that which is covered by a large employer. Often, large employers have richer benefits; presumably, the IOM recommendation is, at least in part, ensuring that coverage is not cost-prohibitive. According to the IOM criteria, essential benefits should:

  • Be affordable to individuals, small employers, and taxpayers;
  • Maximize the number of uninsured and address particular vulnerable populations;
  • Encourage better care practices;
  • Focus on high value services;
  • Address medical concerns of enrollees; and
  • Protect against financial risks due to catastrophic events or illness.

Specific components of the benefits should be safe, medically-effective, demonstrate meaningful improvement, and cost-effective. In addition, the IOM recommends that the criteria for defining and updating essential health benefits be transparent, participatory, equitable and consistent, sensitive to value, responsive to new information, attentive to stewardship, encouraging to innovation, and data driven.

It is anticipated that HHS will establish an initial core essential benefit package by May, 2012.

 

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.

 

The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. This information is not intended to replace or substitute for accounting or other professional advice. You must consult your own attorney or tax advisor for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein. As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

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