Health Care Reform Overview Focusing on Health Plan Reforms for Commercial Business For Producers and Employers | Updated: December 15, 2010

Introduction

This document provides a summary of reform requirements that we believe are of the most interest and relevance to producers and employers. Accompanying each summary is a short description of actions Group Health has taken to be in compliance with the reform requirements. The document starts with a short-term (2010) and long-term (2011–2020) reform timeline. Following these, you’ll find the title of a key reform issue at the top of each page, followed by its applicable timeframe, an overview, Group Health’s actions, and the type(s) of plans to which the reforms apply. Please note that this document does NOT describe every aspect of health care reform. In addition, issues are focused on health plan requirements (not delivery system requirements) and pertain only to commercial products (not government products like Medicare and Medicaid). Group Health's actions apply to both Group Health Cooperative and Group Health Options, Inc. unless indicated otherwise. Lastly, many requirements are awaiting promulgation of rules and are subject to change. Information in this document does not constitute legal advice and should not be substituted for employee benefits, financial, legal, or other advisors. Key terms defined: 

PPACA: The Patient Protection and Affordable Care Act (“reform”)



Small group: 1–50 employees



Medium/large group: 51+ employees



HHS: Health and Human Services

If you have any questions, please visit www.ghc.org or contact your Group Health account manager.

Health Care Reform Overview | Updated: December 15, 2010

i

Contents Section 1: Health Care Reform Timelines

1 

Reform Timeline: 2010

2 

Reform Timeline: 2011–2020

3 

Section 2: Plan Design and Benefits Grandfathering

4  5 

Annual and Lifetime Limits

7 

No Cost-Sharing on Preventive Services

8 

Emergency Service Cost-Share

9 

Section 3: Eligibility and Access to Benefits

10 

No Pre-Existing Condition Exclusions for Individuals Under Age 19

11 

Dependent Coverage to Age 26

12 

Restrictions on Rescissions (Retroactive Terminations)

13 

Individual Coverage and Employer Responsibilities

14 

State-based Insurance Exchanges

15 

Temporary High-Risk Pool

18 

Section 4: Provider Access

19 

Provider Access Section 5: Administration

20  21 

Medical Loss Ratio

22 

Internal Claims and Appeals Process

23 

HSA, Archer MSA, and FSA Changes

25 

Reporting and Transparency

26 

Section 6: Taxes and Fees

28 

Section 7: Tax Credits, Subsidies, Reinsurance, and Grants

31 

Health Care Reform Overview | Updated: December 15, 2010

ii

Section 1: Health Care Reform Timelines

Health Care Overview | Updated: December 15, 2010

1

Reform Timeline: 2010 JAN

January 1, 2010 Retrospective Requirements  Small Business tax credits (Phase 1)  Medicare Part D “donut hole” rebates

FEB MAR

March 23, 2010 Enactment Date

 Rate review for insured products  Grandfathered plan status if in effect on enactment

APR MAY JUN

90 Days Out  National high risk pool  Early retiree reinsurance program

JUL

July 1, 2010

 HHS internet portal for small groups and individuals

AUG SEP

September 23, 2010 For Plan Years Starting October 1           

No pre-existing condition exclusions under age 19 Dependent coverage to age 26 Restrictions on rescissions No cost-sharing on preventative services No lifetime limits on “essential benefits” Restricted annual limits on “essential benefits” Coverage for emergency services Internal claims & appeals process Pediatricians as primary care provider Direct access to OB/GYN Patient protections

OCT NOV DEC

Health Care Overview | Updated: December 15, 2010

2

Reform Timeline: 2011–2020 2011

2011–2013

2013

          

2014

January 1, 2014

2012

      

Medical loss ratio reporting and minimum medical loss ratio requirements Small employer wellness grants Branded pharmaceuticals tax Summary of benefits requirements Comparative effectiveness research fee Quality of care reporting Medicare tax increase Medical device manufacturer tax Retiree drug subsidy tax HSA/FSA changes High earner income tax

Guaranteed issue (no PEC period; all ages) Modified community rating rules Individual mandate for coverage and employer responsibility State-based insurance exchanges Medicaid expansion Small employer tax credits (phase 2) Insurer fee

2015 2016

2016  Offering plans in more than one state

2017 2018

2018

 40% excise tax on “Cadillac” plans

2019 2020

Health Care Overview | Updated: December 15, 2010

3

Section 2: Plan Design and Benefits

Health Care Reform Overview | Updated: December 15, 2010

4

Grandfathering

GROUP HEALTH ACTIONS Individual and Family

TIMEFRAME | March 23, 2010

Only non-grandfathered plans will be available to new members as of January 1,

OVERVIEW

2011.

Grandfathered plans are individual and family (I&F) and group

Prior to passage of the health care reform

agreements with enrollment on March 23, 2010 (the date the

legislation, Group Health had some I&F

reform bill passed).

plans which were closed to new sales. Only these plans are being grandfathered under

Grandfathered plans are exempt from the following short-term reform requirements:

the new law. Members on these plans will



Restrictions on annual benefit limits (I&F only)

grandfathered plan, or switching to a non-



Prohibition on pre-existing condition exclusions for individuals under age 19 (I&F only)

have the option of renewing on the same grandfathered plan. Plans that were open and still accepting new sales prior to March 23, 2010 are not being



Prohibition on preventive services cost-shares



Internal claims and external appeals process

be renewed on non-grandfathered plans.



Coverage of any emergency services at in-network

Small Group

cost-share level

Only non-grandfathered plans will be

Patient protections and access to pediatricians for primary

available to new and renewing members.

care, OB/GYNs, and emergency services

Medium/Large Group



Additionally, grandfathered plans are exempt from some longer-term reform requirements:

grandfathered. Members on these plans will

New groups will only be allowed to purchase non-grandfathered plans. Current groups, upon renewal, may decide



Single risk pool for all I&F enrollees



Risk adjustment restrictions



Essential health benefits standards for mandated individual

grandfathered plan. The exception to this is

coverage

associations, which Group Health will only



whether to stay with their current plan as

Prohibition on salary-based discrimination

grandfathered or move to a non-

renew as non-grandfathered. Note: Ultimately, it’s the group’s responsibility to

Grandfathered plans are NOT exempt from the following short-term reform requirements: 

Restrictions on annual benefit maximums (group only)



Prohibition on pre-existing condition exclusions for

 

determine the grandfathered status of a plan.

individuals under age 19 (group only)

does it apply to:

Medical loss ratio requirements (fully insured only)

self-insured plans?

Incurred loss/claims reporting (fully insured only)

* Does not apply to self-insured, non-federal governmental plans

Health Care Reform Overview | Updated: December 15, 2010

yes*

5

Continued from previous page



Prohibition on lifetime benefit limits



Prohibition on rescissions



Extending dependent coverage to age 26



Uniform coverage documents and standard definitions

Health Care Reform Overview | Updated: December 15, 2010

6

Annual and Lifetime Limits

GROUP HEALTH ACTIONS Individual and Family

TIMEFRAME | Plans years that start after September 23, 2010

Lifetime limits will be removed for essential benefits when both grandfathered and nongrandfathered plans years begin on and

OVERVIEW

after January 1, 2011.*

This reform prohibits lifetime limits and restricts annual limits

Annual limits will be removed for essential

on “essential benefits.” Annual and lifetime per enrollee limits

benefits when non-grandfathered, catastrophic

on covered benefits that are not “essential benefits” are

plan years begin on or after January 1, 2011.

allowed.

We’ve requested a waiver to keep annual limits for non-grandfathered, comprehensive plans

ESSENTIAL BENEFITS (as described in the reform law)

starting January 1, 2011. Grandfathered plans will keep their limits.

Small Group



Inpatient and outpatient care



Hospitalization

after October 1, 2010.



Maternity and newborn care

Medium/Large Group



Behavioral health (mental health and chemical

Implemented as groups renew starting on or

dependency) 

Prescription drugs



Rehabilitative and habilitative services and devices (including durable medical equipment and prostheses)



Laboratory services



Preventive and wellness services



Chronic disease management



Pediatric services, including oral and vision care

The annual limit prohibition applies to dollar limits. Per visit/day limits are still allowed, provided that these limits are not established for the purpose of implementing a limit with an

Implemented as groups renew starting on or

after October 1, 2010. *Note: Lifetime limits are allowed for organ transplant services that do not fall under “essential benefits.” Since this would be such a small component of all transplant-related services, Group Health has decided to totally eliminate the transplant lifetime limit for all plans.

ANNU AL LIMIT RESTRICTIONS does it apply to: grandfathered plans – I&F? – Group?

no yes

self-insured plans?

yes

actuarial value equivalent to a prior dollar limit. Note: Beginning in 2014, annual limits on essential benefits are prohibited for all plans.

Health Care Reform Overview | Updated: December 15, 2010

LIFETIME LIMIT PROHIBITION does it apply to: grandfathered plans – I&F? – Group?

yes yes

self-insured plans?

yes

7

No Cost-Sharing on Preventive Services

GROUP HEALTH ACTIONS Group Health has a long history of leadership in preventive care and these reforms align well with the Group Health

TIMEFRAME | Plan years that start after September 23, 2010

philosophy and approach to care.

Individual and Family

OVERVIEW This reform requires health plans to cover certain preventive

Implemented as non-grandfathered plan years begin on January 1, 2011

services without requiring cost shares (deductible, copayment,

Small Group

or coinsurance). These include:

Implemented as groups renew, on or after October 1, 2010



U.S. Preventive Services Task Force (USPSTF) “A” and “B” recommended services

Medium/Large Group Implemented for non-grandfathered plans as



CDC-recommended immunizations

groups renew, on or after October 1, 2010



Preventive care and screenings for women and children

For PPO and POS plans, Group Health

supported by federal Health and Recovery Services

offers a rider to waive cost shares for

Administration (HRSA) guidelines

covered out-of-network preventive care.



USPSTF-recommended breast cancer screening and mammography services

For POS and PPO plans, out-of network covered preventive care may be subject to cost shares.

does it apply to: grandfathered plans?

self-insured plans?

Health Care Reform Overview | Updated: December 15, 2010

No (until 2014) yes

8

Emergency Service Cost-Share

GROUP HEALTH ACTIONS Individual and Family

TIMEFRAME | Plan years that start after September 23, 2010

Implemented when non-grandfathered plan years begin on January 1, 2011

Small Group

OVERVIEW

Implemented as groups renew on or after

Under this reform, “emergency services” (those services

October 1, 2010

typically provided in a hospital’s emergency department)

Medium/Large Group

cannot be subject to higher cost shares if one gets emergency

Implemented for non-grandfathered plans as

care that’s out-of-network. This preempts Washington State

groups renew on or after October 1, 2010

law, which allowed a $50 differential. This reform uses the federal “prudent person” standard, and defines emergency services as, generally, screening, examination, stabilization, and treatment with respect to an emergency medical condition.

does it apply to:

Health Care Reform Overview | Updated: December 15, 2010

grandfathered plans?

no

self-insured plans?

yes

9

Section 3: Eligibility and Access to Benefits

Health Care Reform Overview | Updated: December 15, 2010

10

No Pre-Existing Condition Exclusions for Individuals Under Age 19

GROUP HEALTH ACTIONS Individual and Family Group Health will continue accepting applicants under age 19 as a family dependent or as a subscriber-only contract.

TIMEFRAME | Plan years that started after September 23, 2010

For 2011, applications for this age group will be accepted only during the annual open enrollment period (November 1–December

OVERVIEW Under this reform, individuals under age 19 with pre-existing conditions may not be denied enrollment or access to health coverage due to their health condition. Specific benefits that may have a waiting period to access coverage (i.e., organ transplants) are still allowed.

15) for an effective date of January 1, or other times of the year if there is a qualifying event. The SHQ will be used to determine eligibility for coverage for applicants age 19 and older, until 2014.

Small Group In Washington state, this preempts current law and

Starting with business that is new or

prohibits use of the standard health questionnaire (SHQ)

renewing on or after October 1, 2010,

for determining eligibility for coverage. However, the OIC

pre-existing condition exclusions will be

has advised that the SHQ may still be used for coverage

eliminated for members and applicants

starting November or December 2010, but cannot be used for

under the age 19.

coverage starting on or after January 1, 2011.

Medium/Large Group

PPACA allows an open enrollment period for individual

Starting with business that is new or renewing on or after October 1, 2010,

and family plans in states where open enrollment is

pre-existing condition waiting periods will

allowed. Washington state requires an open enrollment period

be eliminated for members and applicants

from November 1–December 15 for coverage starting in

under the age 19.

January. It is also requires that new members under age 19 be accepted throughout the year if they have a qualifying event (defined as a “special open enrollment”). Note: Starting in 2014, the prohibition on pre-existing condition exclusions will be extended to all ages (except for members on grandfathered I&F plans).

does it apply to:

Health Care Reform Overview | Updated: December 15, 2010

grandfathered plans – I&F? – group?

no yes

self-insured plans?

yes

11

Dependent Coverage to Age 26

GROUP HEALTH ACTIONS Group Health was an early adopter of this

TIMEFRAME | Plan years that start after September 23, 2010

rule and, for existing members, has allowed dependents up to the age of 26 to enroll in their parent’s plan since July 2010.

OVERVIEW

Individual and Family

This reform requires plans that provide dependent coverage

For new members, this has been in place

for children to continue providing this coverage until they turn

since October 2010.

26. This includes married children, but does not require

Small Group

coverage of spouses or children of dependents (i.e., contract

Implemented as groups renew starting on or

holder’s grandchildren).

after October 1, 2010; early adoption is at

This requirement is applicable whether or not the child is tax dependent, a student, or resides with or receives financial aid from their parent. In addition, rates and benefits cannot vary for children based on age.

the discretion of the employer.

Medium/Large Group Implemented as groups renew starting on or after October 1, 2010; early adoption is at the discretion of the employer.

For plan years beginning before 2014, grandfathered group plans are not required to extend coverage if the “child” is eligible for employer-sponsored coverage.

does it apply to:

Health Care Reform Overview | Updated: December 15, 2010

grandfathered plans?

yes

self-insured plans?

yes

12

Restrictions on Rescissions (Retroactive Terminations)

GROUP HEALTH ACTIONS Individual and Family This will be implemented when policy years begin on January 1, 2011.

TIMEFRAME | Plan years that start after September 23, 2010

Small Group This is being implemented as groups renew

OVERVIEW

on or after October 1, 2010.

Under this reform, employers and plans cannot retroactively

Medium/Large Group

terminate coverage except in the case of fraud or intentional

This is being implemented as groups renew

misrepresentation of a material fact.

on or after October 1, 2010.

Employers and plans must provide at least 30 days written notice to each member who would be affected before coverage may be retroactively terminated. Exceptions: employers and plans may still retrospectively disenroll members for non-payment of premiums. Also, if an employee is terminated and pays no premiums for coverage after termination of employment, it is not considered a rescission to retroactively cancel coverage back to the date of termination of employment. Similarly, if a health plan is not notified of a worker’s divorce, a plan’s termination of coverage of the employee’s ex-spouse retroactive to the divorce is not considered to be a rescission if no premium is paid.

does it apply to:

Health Care Reform Overview | Updated: December 15, 2010

grandfathered plans?

yes

self-insured plans?

yes

13

Individual Coverage and Employer Responsibilities

GROUP HEALTH ACTIONS These are individual and employer requirements.

TIMEFRAME | Januar y 1, 2014

OVERVIEW Individual mandate This reform requires individuals to maintain “minimum essential coverage” and imposes an annual penalty for not obtaining health coverage. Some of the exemptions for this requirement include those for individuals with a gap of less than three months, financial and other hardship, religious objection, unauthorized immigrant status, and incomes below the tax filing threshold. Employer mandate Employers are not mandated to provide employees with coverage; however, beginning in 2014, other coverage-related requirements apply, including the following: An employer with at least 50 FTEs who does not provide coverage may be subject to a penalty if at least one of its employees receives a federal premium subsidy. The penalty is calculated based on the entire FTE workforce. An employer with at least 50 employees who does provide qualifying coverage, but nevertheless has a full-time employee that gets a federal subsidy via the exchange must pay an amount to help defray the cost of the federal subsidy provided. 

An FTE generally is 30 hours/week or more



The employer does not pay penalties for part-time workers, even if they receive a federal subsidy. (But part-time employees are counted for purposes of determining whether employers have 50+ full-time equivalents.)

Health Care Reform Overview | Updated: December 15, 2010

14

State-based Insurance Exchanges

GROUP HEALTH ACTIONS Group Health is actively participating in state and federal workgroups to help establish Exchanges and to determine how we can

TIMEFRAME | Januar y 1, 2014

best serve our market and members in this future environment.

OVERVIEW

In the short-term, Group Health will

This regulation requires each state to establish state-based

participate in the state pilot Exchange for

insurance Exchanges for individual and small group markets.

small employers of low-wage workers, the

States must provide a blueprint for the Exchanges to HHS

Health Insurance Partnership, which is

by 2013.

currently taking program and subsidy applications for a January 1, 2011

The role of the Exchange is still being defined. At this time,

effective date.

HHS is determining the level of federal guidance they will provide around exchanges, and states are making high-level decisions, such as governance and oversight, group size, etc. There is much work to be done between now and 2014, but this much we know: Each state must establish an American Health Benefit Exchange (Exchange) that facilitates the purchase of qualified health plans (QHP). It also provides for the establishment of a Small Business Health Options Program (SHOP Exchange) to assist qualified small group employers in facilitating enrollment of their employees in QHPs. The requirement allows only one Exchange in a state for providing both Exchange and SHOP Exchange services but only if the one Exchange has adequate resources to assist individuals and employers. A variety of responsibilities are assigned to Exchanges, some of which include: 

Implementation of procedures for health plan certification



A website with comparative plan information



Assignment of plan ratings based on quality and price criteria to be established by HHS



Granting of certifications of exemption from the individual mandate or penalty

Health Care Reform Overview | Updated: December 15, 2010

does it apply to: grandfathered plans?

no

self-insured plans?

no

15

Continued from previous page

Qualified Health Plans (QHPs) Only QHPs can be offered through the Exchange. They must provide the “essential health benefits package” (see below) and at least one silver and one gold plan. In addition, they must charge the same premium rates for the plans offered whether through the exchange or outside of the exchange and whether using a producer or not. Certification by HHS as a QHP requires that a plan, at minimum, must: 

Meet marketing requirements that do not discourage enrollment by individuals with significant health needs



Ensure a sufficient choice of providers



Include within plan networks essential community providers, where available, that serve predominately lowincome, medically-underserved individuals



Be accredited with respect to local performance on clinical quality measures



Implement a quality improvement strategy



Use a uniform enrollment form



Use a standard format to show health benefit plan options



Provide information on applicable health plan performance

Small Group Defined Small employers are defined for this purpose as those with 1 to 100 employees, but for plan years beginning prior to 2016 a state may limit the definition to a maximum size of 50 employees. At present, Washington State defines small group as 1–50. Beginning in 2017, states may also choose to allow large group plans to be offered through an Exchange.

Health Care Reform Overview | Updated: December 15, 2010

16

Continued from previous page

Essential health benefits package The current requirements for the essential health benefits package that must be provided by all health plans in the Exchange include: 

A set of essential health benefits equal to the scope of benefits provided under a typical employer plan



Specified limits on cost sharing



Four defined levels of coverage, referred to as bronze, silver, gold, and platinum

Health Care Reform Overview | Updated: December 15, 2010

17

Temporary High-Risk Pool

GROUP HEALTH ACTIONS The temporary high risk pool is a

TIMEFRAME | • Started: June 2010 (90 days from date of enactment)

requirement that must be met by the state.

• Ends: 2014 with the establishment of the Exchange

Washington State has already established

It does not directly affect Group Health. this pool in addition to the existing state risk pool that is supported by assessments on

OVERVIEW

fully-insured plans. Information and

This reform creates a temporary high-risk pool available either

applications are available at

directly or through contract with the states and state high-risk

https://www.wship.org/pcip-wa.

pools. States have options for how they may participate, including: 

Operate a new high-risk pool alongside a state’s existing one



Establish a new high-risk pool (in a state that does not currently have one)



Build upon other existing coverage programs designed to cover high-risk individuals



Contract with a carrier to provide subsidized coverage for the eligible population



Do nothing, in which case HHS would develop a coverage program in the state

Individuals are eligible if they have a pre-existing condition and have not had creditable coverage for the six months prior to applying for the pool (must be a U.S. citizen or otherwise lawfully present, and either a state resident or residing within the pool’s service area). There may not be any pre-existing conditions limitations or out-of-pocket costs greater than the amount required by law for HSA-qualified high deductible health plans.

Health Care Reform Overview | Updated: December 15, 2010

18

Section 4: Provider Access

Health Care Reform Overview | Updated: December 15, 2010

19

Provider Access

GROUP HEALTH ACTIONS These rules align well with Group Health’s

TIMEFRAME | Plan years that start after September 23, 2010

practices and philosophy regarding access to care. Prior to PPACA, Group Heath had already allowed pediatricians as PCPs,

OVERVIEW

direct access to OB/GYNs, and access to

These reforms increase access to certain specialties and

emergency services with no prior

emergency services. Pediatricians If a plan requires enrollees to designate a participating primary

authorization.

Individual and Family Group Health is already in compliance with access provisions for pediatricians and

care provider (PCP), it must allow available pediatricians to be

OB/GYNs. We currently do not require prior

PCPs for children.

authorizations for emergency services and

OB/GYNs

will implement the emergency services cost

Plans are prohibited from requiring authorizations or referrals for OB/GYN services from participating providers. Emergency services

share requirements for non-grandfathered plan years when they begin on January 1, 2011.

Small and Medium/Large Groups

“Emergency services” provided in the emergency department

Group Health is already in compliance with

of a hospital cannot be subject to prior authorization

access provisions for pediatricians and

requirements and any administrative requirements or

OB/GYNs. We currently do not require prior

limitations must be the same for in-network and out-of-network

authorizations for emergency services and

services. Special rules pertaining to out-of-network cost-

will implement the emergency services cost

sharing also apply. This reform uses the federal “prudent person” standard and

share requirement on non-grandfathered plans as groups renew on or after October 1, 2011.

defines emergency services to include screening, examination, stabilization, and treatment with respect to an emergency medical condition.

does it apply to:

Health Care Reform Overview | Updated: December 15, 2010

grandfathered plans?

no

self-insured plans?

yes

20

Section 5: Administration

Health Care Reform Overview | Updated: December 15, 2010

21

Medical Loss Ratio

GROUP HEALTH ACTIONS Group Health has always been mindful of

TIMEFRAME | • Annual reporting starts in 2011 for calendar year 2010 • Annual rebates are first calculated and paid (if due) in 2012 for calendar year 2011.

how member premiums are used and has sought to maximize the amount of premium going to direct medical care. We are currently establishing procedures for reporting MLR.

OVERVIEW This reform sets the percentage of health care premium that must go toward clinical services and health care quality improvement activities. This minimum percentage is called the “medical loss ratio” (MLR). Minimum MLRs are as follows: 

Individual and family

80%



Small group

80%



Medium/large group

85%

Health plans are required to pay rebates to enrollees if they fail to meet the requirements. The MLR minimums for Individual and Family and Small Groups may be adjusted in a state if it could cause the market to destabilize. The MLR calculation represents clinical claims and health quality costs as a percent of premium after excluding taxes, licensing or regulatory fees, and accounts for risk adjustment, risk corridors, and reinsurance.

OUTSTANDING ISSUES It is not yet clear how rebates must be paid. Agency rules are forthcoming.

does it apply to:

Health Care Reform Overview | Updated: December 15, 2010

grandfathered plans?

yes

self-insured plans?

no

22

Internal Claims and Appeals Process

GROUP HEALTH ACTIONS Individual and Family This will be implemented for nongrandfathered plan years starting on

TIMEFRAME | Plan years that start after September 23, 2010

January 1, 2011. Group Health will be compliant with those features to which the Safe Harbor applies on or before July 1,

OVERVIEW These reforms require health plans to maintain certain internal claims and appeal processes, as well as an external appeals

2011.

Small Group This is being implemented as groups renew

process.

on or after October 1, 2010. Group Health

As part of the internal appeal process, members must be

will be compliant with those features to

able to:

which the Safe Harbor applies on or before July 1, 2011.



Remain covered under the plan during the internal appeal



Review their file

This is being implemented for non-



Present any evidence and testimony

grandfathered plans as groups renew on or

Medium/Large Group

after October 1, 2010. Group Health will be

Plans can follow a state’s external appeals requirements if

compliant with those features to which the

they meet the consumer protections outlined in the National

Safe Harbor applies on or before July 1,

Association of Insurance Commissioner's (NAIC) uniform

2011.

external review model act. Plans are also required to make urgent care claims determinations within 24 hours, provide notices in a "culturally and linguistically appropriate" format, include sufficient claims identification, and denial, diagnosis, and procedure codes and meanings on any notice of denial, including explanation of benefits. For plans not in compliance, claimants may automatically initiate external review or other remedies available under state law. A “safe harbor” enforcement period has been created through July 1, 2011 with respect to several of the new requirements. The Department of Labor (DOL), HHS, and the IRS will not take any enforcement action before July 2011 against any health plan in the group or individual market that is acting in good faith to implement the requirements with respect to:

Health Care Reform Overview | Updated: December 15, 2010

does it apply to: grandfathered plans?

no

self-insured plans?

yes

23

Continued from previous page



Responding to urgent care claims within 24 hours after receipt of the claim or appeal



Providing notices in a “culturally and linguistically appropriate” manner



Including diagnosis and procedure codes and other content on notices of adverse determination



Allowing claimants to initiate external review or other remedies available under state law if the plan or insurer fails to strictly adhere to all requirements of the new regulation

HHS external review standards for self-insured plans are forthcoming.

Health Care Reform Overview | Updated: December 15, 2010

24

HSA, Archer MSA, and FSA Changes

GROUP HEALTH ACTIONS Group Health partners with HealthEquity for administration of HRAs and HSAs starting January 1, 2011. We have confirmed with

TIMEFRAME | • Januar y 1, 2011— Exclusion of OTC Drugs • January 1, 2011— Increased taxes on non-qualified distributions

HealthEquity, which also administers FSAs, that its programs operate in compliance with these new requirements.

• 2013— $2,500 cap on FSA contributions

OVERVIEW These requirements modify the funding arrangements generally associated with “consumer-directed health plans.” OTC drugs This requirement excludes the costs of non-prescription (overthe-counter) drugs (other than insulin) from eligibility for reimbursement through an HRA or health FSA and from eligibility for reimbursement on a tax-free basis through an HSA or Archer MSA. Increased tax on non-qualified HSA/MSA distributions This requirement increases the additional tax on distributions from a health savings account or an Archer MSA that are not used for qualified medical expenses to 20 percent of the disbursed amount. FSA cap This requirement imposes a $2,500 annual cap on FSA contributions (indexed to inflation after 2013).

does it apply to:

Health Care Reform Overview | Updated: December 15, 2010

grandfathered plans?

yes

self-insured plans?

yes

25

Reporting and Transparency

GROUP HEALTH ACTIONS Group Health is working toward compliance

TIMEFRAME | Varies by Requirement

with all requirements within the required timeframe.

OVERVIEW

Group Health already meets the rate review

PPACA includes a number of requirements to enhance both

requirement as this is currently included in

reporting and information transparency.

Washington State law. The current requirements for participation in the HHS

Rate review for insured products

Internet Portal have also been met.

(2010 plan year) Effective immediately, HHS and each state is granted the authority to review "unreasonable" premium increases for individual and group products beginning with the 2010 plan year (in Washington this is already done by the OIC). Health plans must submit a justification for an unreasonable premium increase prior to implementation. Beginning in 2014, rate review will be required for premium increases for coverage inside and outside the Exchange. It’s worth noting that the term “unreasonable” has yet to be defined. Medical loss ratio (MLR) reporting (For 2010 financials) The first reporting of MLR to regulators is based on calendar 2010 financials; a year before required compliance with MLR standards. MLR calculated as clinical claims and health quality improvement costs as a percent of premium after excluding taxes, regulatory fees and adjusting for risk adjustment, risk corridors and reinsurance Summary of benefits and coverage documents (By April 2011) HHS will establish standards for summaries of benefits and coverage documents and by April 2012, plans

R ATE REVIEW AND MLR does it apply to: grandfathered plans?

yes

self-insured plans?

no

must provide a summary of benefits for an applicant at the time of application, for an enrollee prior to the time of enrollment or re-enrollment, and for a policyholder or certificate holder at the time of issuance of the policy or delivery of the certificate.

Health Care Reform Overview | Updated: December 15, 2010

SUMM ARY OF BENEFITS & QU ALITY OF C ARE REPORTING does it apply to: grandfathered plans?

yes

self-insured plans?

yes

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Continued from previous page

Quality of care reporting (By April 2012) HHS is required to initiate the development of health plan reporting requirements for use by a group health plan or health insurance issuers in the group and individual markets. When implemented, plans will begin to submit an annual report to HHS and members regarding the use of designated reimbursement structures and quality initiatives aimed at improving health outcomes though quality reporting, case management, care coordination and chronic disease management, as well as implementation activities to prevent hospital readmissions, improve patient safety, and address wellness and health promotion. HHS Internet portal (By July 1, 2010) HHS was required to create an Internet portal with standardized criteria and formats for presenting information to facilitate consumer (I&F) and small employer purchasing of coverage. The intent of the portal is to make information available about different coverage options including access to public programs, high risk pools, and private market coverage. This portal is already up and running at www.healthcare.gov.

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Section 6: Taxes and Fees

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Taxes and Fees

GROUP HEALTH ACTIONS Group Health will work toward compliance

TIMEFRAME | Varies by Requirement

with the insurer fee and Cadillac plan excise tax in the required timeframe.

OVERVIEW

Other fees/taxes described are the

A number of taxes and fees will be implemented in the next

responsibility of other organizations.

few years to pay for reform. Dates in parentheses indicate

However, where taxes and fees may impact

when the taxes begin.

health premiums, there will likely be an adjustment in annual rates.

HSA/MSA tax increase (2011) Increases the additional tax on distributions from a health savings account or an Archer MSA that are not used for qualified medical expenses to 20 percent of the disbursed amount. Branded pharmaceuticals tax (2011) Imposes an annual aggregate fee on manufacturers or importers of branded prescription drugs, including foreign corporations. Fees will be apportioned to each entity based on the entity's share of the total annual branded drug sales taken into account, and will be credited to the Medicare Part B trust fund. Fees are not deductible for U.S. income tax purposes. High earners income tax (2011) The Medicare hospital insurance tax will increase by 0.9 percent on wages in excess of $200,000 ($250,000 for couples filing jointly; $125,000 for married individuals filing separately). This applies to self-employed earnings. Employers will be required to withhold the additional Medicare tax from all wages over $200,000, without regard to the taxpayer's filing status, or any wages that may be earned by the taxpayer's spouse. Medical device manufacturer tax (2013) A tax on the sale of certain medical devices by a manufacturer, producer, or importer equal to 2.3 percent of the sales price. Exempted are eyeglasses, contact lenses, hearing aids, and any other device determined by HHS to be a type which is generally purchased by the general public at retail for individual use.

Health Care Reform Overview | Updated: December 15, 2010

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Continued from previous page

Insurer fee (2013/2014) A new annual fee is being implemented on premium revenues received on health insurers’ fully insured and government business. The fee is to be apportioned among insurers based on their relative market share, measured in premiums, for the prior year. The first fee payment is due in 2014 based on 2013 premiums. Cadillac plan excise tax (2018) This is a tax on health insurers and plan administrators (for self-funded plans) equaling 40 percent of the amount by which the aggregate value of employer-sponsored health benefits for an employee exceeds a threshold amount of $10,200 for an individual and $27,500 for a family, adjusted for health costs, age and gender, and indexed for inflation. The cost, age and gender adjustments are made relative to the Blue Cross/Blue Shield (BC/BS) standard benefit option under the Federal Employees Health Benefits Plan (FEHBP). This includes active employees, former employees (i.e., retirees), surviving spouses and other primary insured individuals. Plans that cover those in professions that are in harms way (firefighters, police officers) have an increase threshold to meet prior to triggering the tax.

Health Care Reform Overview | Updated: December 15, 2010

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Section 7: Tax Credits, Subsidies, Reinsurance, and Grants

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Tax Credits, Subsidies, Reinsurance, and Grants

GROUP HEALTH ACTIONS These reforms apply to employers and individuals rather than health plans. However, through the Health Insurance

TIMEFRAME | Varies by Requirement

Partnership (HIP), a Washington State Exchange pilot in which Group Health

OVERVIEW

participates, there may be an opportunity for

These regulations are designed to support individual and

employers to leverage the small business

group participation and compliance with health care reform.

tax credit. Through the HIP pilot, qualified small businesses may be able to combine

Small business tax credits

the benefits of the federal tax credit with

Small businesses that meet specific eligibility criteria may

subsidies for low wage workers. More

receive tax credits on their contribution toward employee

information on HIP can be found at

health premiums.

http://www.hip.hca.wa.gov/.

Businesses eligible for a partial tax credit must have no more than 25 full time employees, who earn no more than $50,000 in average annual wages, and where the employer contributes at least 50 percent to the total premium costs. Businesses eligible for the full tax credit must have 10 or fewer full time employees and $25,000 or less in average annual wages. Phase I (2010–2013): Maximum tax credit is up to 35 percent of employer contribution toward employee health premium (25 percent if tax exempt) Phase 2 (2014 and beyond): Eligibility is limited to businesses in the Exchange, and only for the first two years of coverage. The maximum tax credit is up to 50 percent of the employer contribution toward employer health premiums (35 percent if tax exempt).

Health Care Reform Overview | Updated: December 15, 2010

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Continued from previous page

Retiree drug subsidy (2014) Revises the rules for deductions for retiree drug expenses so that employers may deduct retiree prescription drug expenses only to the extent that the amount is reduced by the amount of excludable federal Medicare Part D subsidies received for prescription drugs. This essentially means that Employers will no longer be able to deduct the 28 percent subsidies received for maintaining retiree drug coverage for Medicare eligible employees. Early retiree reinsurance program (started June 2010 and ends in 2014) HHS has established a temporary reinsurance program to reimburse employment-based plans for the cost of health benefits to early retirees (and to eligible spouses, surviving spouses and dependents). Eligible early retirees are persons who are 55–64 and not active workers or dependents of active workers and are not Medicare-eligible. Qualified plans must have a coverage offering that includes demonstration programs that generate cost savings for chronic and high cost conditions, provide documentation of claims costs and be certified by HHS. Plans will submit claims to HHS. HHS then will determine if a claim is valid and in such cases would pay 80 percent of the portion of costs that exceeds $15,000, but is less than $90,000. Amounts paid to plans must be used to reduce premium and out-of-pocket costs. $5 billion was appropriated for this program.

Health Care Reform Overview | Updated: December 15, 2010

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Continued from previous page

Small employer wellness grants (2011) Provides grants for up to five years to small employers that establish wellness programs (funds appropriated for five years beginning in fiscal year 2011). It also provides technical assistance and other resources to evaluate employer-based wellness programs. Premium and cost share assistance (2014) Starting in 2014, federal subsidies will be available to provide premium and cost sharing assistance for low and moderate income families (available up to 400 percent of the Federal Poverty Level). This is only available through use of the Exchange. In addition, the Medicaid minimum eligibility expands to 133 percent of the FPL (around $29,000 for a family of four). These changes are expected to help about 350,000 people purchase coverage in Washington.

570GG-2010-12

Health Care Reform Overview | Updated: December 15, 2010

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