Posted February 27, 2012 by Megan DiMartino
by Patrick Haynes, Esq., LL.M
On December 2, 2011, HHS and CMS (the Departments of Health and Human Services and the Centers for Medicare & Medicaid Services) released new final rules that addresses an assortment of issues with respect to the PPACA medical loss ratio (MLR) requirements. In conjunction with the new rules, the DOL (Department of Labor) has issued a Technical Release as well. Keep in mind that PPACA’s MLR requirements do NOT apply to self-funded health plans.
According to the existing MLR standard, private health insurers are required to spend 80% to 85% of consumer’s premiums on patient care. Insurers must provide rebates to enrollees if their spending for the benefit of policyholders for clinical services and quality improving activities, in relation to the premiums charged, is less than the MLR standards established.
The new rule and related DOL guidance include information that makes fundamental changes to the existing interim rules. The releases address how plans sponsored by ERISA and non-federal governmental employers must use rebates received from insurers and how insurers must calculate the amount of rebates. The HHS final rule directs health plan issuers to provide any rebates owed to the group policyholder and it also contains information regarding the notice insurers must provide to employers and employees.
Below are some selected highlights of the DOL guidance for employer-sponsored, fully insured plans.
Who Gets the Rebates?
The biggest news in the guidance is the change in the rule on who receives the rebates. Under the final regulations, insurers must provide the rebates for individuals covered by group health plans subject to ERISA or the PHSA to the policyholder—typically the employer sponsoring the plan. Keep in mind that ERISA generally applies to private-sector employer plans, while the PHSA generally applies to non-federal governmental employer plans. According to HHS, the interim final rule had unintended administrative and tax consequences for insurers, employers and enrolled members. In an effort to correct these problems, the final rule permits insurers to apportion and pay rebates directly to policyholders. Rebates must be paid by August 1st of each year and if handled properly in accordance with the final rule, will not be subject to taxes.
Guidance for ERISA Group Health Plans Receiving Rebates
The DOL Technical Release, which applies to ERISA plans, explains that existing fiduciary duty and plan asset rules govern treatment of insurer rebates. If the Affordable Care Act’s ratios aren’t met and MLR rebates are paid, the DOL notes that they may qualify as ERISA plan assets, in whole or part, depending on various factors, including the terms of governing documents, whether the insurance policy is issued to the plan itself (or a related trust), and whether insurance premiums are paid from trust assets. Other considerations may also apply, such as the relative proportion of premiums paid by plan participants and the amount of plan administrative expenses paid by the plan sponsor. Any portion of a rebate that constitutes plan assets must be used for the exclusive benefit of plan participants and beneficiaries, and ERISA fiduciary principles must be followed in choosing how to use that portion/allocation of the rebate.
The DOL notes that, in choosing an allocation method, “the plan fiduciary may properly weigh the costs to the plan and the ultimate plan benefit as well as the competing interests of participants or classes of participants provided such method is reasonable, fair and objective.” Examples of allocation methods mentioned in the guidance include refunds to participants or reductions in future participant contributions or benefit enhancements. [And, for Section 125 Cafeteria plans (such as premium only plans), they may collect/obtain and distribute the rebates without the need for a trust or other plan-asset-holding mechanism, provided the distributions are made or used with three (3) months of their receipt In addition, the new Technical Release references previous DOL Technical Releases 92-01 and 88-1 that excuse certain insured group health plans from the obligation to hold participant contributions in trust. The DOL indicated in these previous releases that no violation would be asserted solely because an employer failed to hold participant pre-tax (Cafeteria) health plan premium contributions in trust].
While carriers’ MLR ratios have been at or near the required levels during the past few years, these rules envision the potential that the receipt of these rebates could become a bit more commonplace for plan sponsors. In light of that, those plan sponsors and employers that are unfamiliar with the applicable ERISA fiduciary rules may wish to study them and consider what steps might be advisable in advance of the August 1, 2012 due date for the first rebates. Preparations might include, for example, amending plan documents to address how the plan assets portion of a rebate should be determined or to address the propriety of using the plan assets portion of a rebate for plan administrative expenses paid by the employer.
Assuming you have a health insurance carrier (issuer) that does not meet the Medical Loss Ratio (as specified for your group’s size), here are the questions to be answered before you can absolutely determine who gets what premium rebates
- Who is the policyholder?
- Do participants pay the entire cost of the insurance coverage?
- Do the employer and the employee each pay a fixed cost for the coverage?
- Does the policy require the employer to pay a specific dollar amount or set percentage?
- What does the employer/s/plan sponsor’s plan document state with regard to any such rebates?
- Can the employer/plan sponsor guarantee that premium rebates will be used within three (3) months of receipt by the policyholder?
- Would the employer/plan sponsor prefer, for example, to direct the insurer to apply the rebate toward future participant premium payments or toward benefit enhancements adopted by the plan sponsor? What would those enhancements be?
Please contact your Account Manager or one of our Sales Executives to discuss your fully-insured plan’s specifications, to determine how your carrier is performing, and what efforts your organization would like to make if, when and should your coverages be subject to premium rebates.
DOL/HHS/IRS Links – Medical Loss Ratio
Posted February 13, 2012 by Megan DiMartino
Healthcare Finance News, Chris Anderson, Senior Editor
More than half of all employers said they will continue to offer employer-sponsored health benefits after health reform is fully enacted according to the results of a survey of benefits decisions makers released by GfK Custom Research North America.
Even with many of the details of health reform uncertain, 56 percent of major employers surveyed indicated they would continue to offer health benefits compared with 12 percent who said they would be either very or somewhat likely to drop employee coverage. Thirty-two percent of the 502 private-sector employers surveyed were unsure what they would do once health reform is fully enacted.
“This survey suggests that firms aren’t considering a wholesale flight from employee healthcare coverage as healthcare reform is implemented,” said Tim Nanneman, vice president and director of health insurance research at GfK, in a press release announcing the survey results. “However, many employers are skeptical about the potential effects of healthcare reform.”
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Posted February 10, 2012 by PHaynes
While the final rule on the SBCs makes several, important improvements over the preliminary rule (which you read about here on 9/16/2011, and then read about the delay on 11/18/11) employers and plan sponsors will still need to use the additional time to wrestle with potential costs and resources required to deliver something that will arguably overwhelm their plan participants and quite possibly outweigh the benefits the federal government hopes to gain.
Today, prudent plan sponsors are already updating their benefit guides, open enrollment materials and SPDs (Summary Plan Descriptions) in order to provide clear, concise communications to help participants make decisions. These SBCs may require an overhaul of how information is presented to consumers. For employers whose policies/plans take effect on or after September 23, 2012 you’ll need to have SBCs prepared and ready to go.
Effective Date Language and Rules
The requirements to provide an SBC, notice of modification, and uniform glossary apply for disclosures to participants and beneficiaries who enroll or re-enroll in group health coverage through an open enrollment period (including re-enrollees and late enrollees) beginning on the first day of the first open enrollment period that begins on or after September 23, 2012.
But, what if you are outside of Open Enrollment? The requirements apply beginning on the first day of the first plan year that begins on or after September 23, 2012.
Example for a 1/1 plan that will renew on 1/1/2013. You will have SBCs ready for your 2013-plans and will distribute them in late-October for your mid-November open enrollment period. Luckily, you won’t also have to have 2012-SBCs ready for your post-9/23/2012 new hires, since this latest guidance doesn’t make the SBC requirement effective until the first day of the first plan year after 9/23/2012.
SBCs need now only contain information about two coverage examples: (1) having a baby (via a normal delivery) and (2) managing type 2 diabetes (routine maintenance of a well-controlled condition). This approach differs from the initial guidance that required a third coverage example for breast cancer treatment. The new guidance also permits grayscale or color to be utilized for the SBCs and the Uniform Glossary.
Bundled with Other Documents
The Departments’ 2011 proposed regulations (IRS, DOL, HHS) would have required that a group health plan and a health insurance issuer provide an SBC as a stand-alone document. This requirement was eliminated with respect to group health plan coverage in the final regulations.
Now, the Departments authorize the SBC to be provided either as a stand-alone document or in combination with other summary materials (for example, a Summary Plan Description or an Open Enrollment Benefit Guide), if the SBC information is intact and prominently displayed at the beginning of the materials (such as immediately after the table of contents in an SPD).
For health insurance coverage provided in the individual market, the SBC must be provided as a stand-alone document.
Culturally and Linguistically Appropriate Manner – Retained
The Health Plan or Carrier satisfies this requirement by following the rules established under the Public Health Service Act (section 2715-2719) by providing such notices when 10 percent or more of the population residing in the claimant’s county are literate only in the same non-English language, as determined based on American Community Survey data published by the United States Census Bureau. The Departments note that at “the time of publication of this guidance document, 255 U.S. counties (78 of which are in Puerto Rico) meet this threshold. The overwhelming majority of these are Spanish; however, Chinese, Tagalog, and Navajo are present in a few counties, affecting five states (specifically, Alaska, Arizona, California, New Mexico, and Utah).”
- HHS’ CCIIO (Center for Consumer Information & Insurance Oversight), Revised SBC guidance
- Uniform Glossary, Instructions, Guidance and Samples (in Word and PDF, some blank for use, others are PDF samples)
- DOL, Affordable Care Act Links and Guidance
- DOL, Final SBC Regulations
- Counties where non-English languages are spoken more than 10% of the time (see page 21 of 39, Table 2)
- Center for Consumer Information (CMS/CCIIO) update, Culturally & Linguistically Appropriate Services (CLAS) County Data – more condensed format than original posting (above)
Posted February 6, 2012 by Megan DiMartino
Join us for this complimentary, educational webinar and learn the 15 most common COBRA mistakes, which can have a negative impact on your bottom line. Attorney Patrick Haynes will review current and upcoming regulations and legislation, and deliver an in-depth review of these 15 common mistakes, including Notification Requirements, Severance Subsidies, COBRA vs. ARRA, and Open Enrollment changes. Other topics covered will include:
* Enrollment tracking
* Direct billing to qualified beneficiaries
* Status changes and Qualifying Events
* COBRA requirements for dental, vision, and FSAs
* When to terminate COBRA coverage
Date & Time: Wednesday, February 15, 2012 @ 12:00 pm – 12:40 pm ET
Reserve your space now at: https://www1.gotomeeting.com/register/458173537
Posted February 2, 2012 by Megan DiMartino
By Rhonda Willingham, RN, BSN
EVP Health Improvement, Alere Health
More than 70 percent of the nation’s employers have put their faith in wellness initiatives to improve health and reduce costs, yet they continue to be challenged with disappointing participation rates in their worksite wellness programs. This belief in improving wellness has been so strong that many employers are willing to pay their employees to participate. Consider the following:
- According to the 2011/2012 Staying@Work survey, the use of financial rewards increased by 50 percent between 2009 and 2011.
- Use of penalties more than doubled from 8 percent to 19 percent from 2009 to 2011, and it is expected to double again to 38 percent by 2012.
- The National Business Group on Health reported that one-third of their members will reward or penalize in 2012, up from 7 percent in 2011.
- Of 563 employers completing The HERO EHM Best Practice Scorecard through August of 2011, 61 percent offered incentives for specific behavior modifications.
Traditionally, employers have offered incentives for participation and avoided penalties, but as healthcare costs continue to escalate, many feel pressured to implement stricter measures. Increasing numbers of employers are moving from simply rewarding participation to rewarding progress in specific behaviors or clinical measures. Outcomes-based incentives are appealing as they demonstrate a tangible, real result and allow individuals to choose their own means of achieving goals. Many employers are also willing to implement penalties for non-participation and/or unhealthy behaviors.
At Alere, we are seeing more of our customers move toward developing and expanding their programs to include individual accountability for health improvement through the use of outcomes-based incentives. In 2012, Alere is incorporating incentives for its own employees that have maintained or achieved specific health outcomes and to those that commit to making progress in specific behaviors known to improve health.
Carrot v. Stick Debate
The growing movement to outcomes-based incentives has resulted in an industry-wide debate on the merits and disadvantages of using this approach to drive engagement. Those in support contend that penalizing individuals for not at least attempting to meet minimum health measures is appropriate and fair. As 85 percent of healthcare policies in the United States are group-based, health coverage premiums are uniquely set compared to other insurance coverage, such as auto and life. How an individual behaves has no bearing on healthcare premiums, thus encouraging poor lifestyle behaviors to continue. Those opposed say there is a danger of discrimination against people with hereditary illnesses or other legitimate reasons for not being able to achieve certain health outcomes.
Recent statutes have supported incentives in wellness programs. The Patient Protection and Affordable Care Act (PPACA) will increase the maximum incentive reward from 20 percent to 30 percent of premium cost by 2014. If the higher incentive is found to be effective, the reward will increase to 50 percent by 2017.Wellness in general is also included in the American Recovery & Reinvestment Act (ARRA) which offers a $1 billion prevention and wellness fund. And the Genetic Information Non-Discrimination Act (GINA) preserves employer-sponsored wellness programs.
In the September/October 2011 issue of the American Journal of Health Promotion, the American Cancer Society, the American Diabetes Association and the American Heart Association jointly stated they are supportive of financial rewards linked to participation, but not “incentive programs based on an individual satisfying a standard that is related to a health status factor.” They oppose what they call medical underwriting – the act of using health status factors to determine a person’s health insurance costs. But they did not comment on the value of changing controllable, lifestyle behaviors that are known to increase an individual’s likelihood of developing diseases.
These issues are why Alere and other organizations within the industry are encouraging a compromise via the use of progress-based incentives. In this approach, incentives are tied to small, realistic changes that are impactful, rather than higher-reach outcomes that may not be possible for some people.
It is important for the health of the United States that healthcare organizations compromise and avoid conflict and opposition. It is critical that the healthcare industry presents an aligned and experience-based perspective to guide and direct employers as they make decisions on supporting worksite wellness for their employees. Recent discussions are demonstrating a movement toward working together to identify various ways to accomplish common goals. Time will tell.
Incentives Not a Magic Bullet
As employers continue to evaluate this issue, it is important that they keep in mind that incentives alone are not the magic bullet to increase participation and health. Incentives are effective when they are a strong component of an integrated strategy with a focus on building an overall culture of health, including corporate leadership, clear and consistent program marketing and communications, online health information, social media, wellness champions and a program with engaging and compelling components.
Each employer’s incentives strategy will be different based on their needs and culture. They would be wise to consider the following:
- What kind of culture do they have? Is it a second home for employees or the kind of atmosphere where there is high turnover or the employees clock in and clock out?
- What is their business? How can a healthier workforce improve their bottom line?
- Is the purpose of the wellness program to save money or retain employees?
- Is there trust between the employer and the employees? If not, it may be necessary to implement incentives slowly.
- How will outcomes-based incentives fit within their overall culture?
- Do leaders live what they preach?
- How have other successful employee programs been communicated and deployed?
- What are the legal ramifications of incentives? They should work with their legal departments and be familiar with the PPACA, GINA and Americans with Disabilities Act.
Since this is a recent and evolving topic in the industry, it remains to be seen how the issue will unfold in the coming years, how outcomes incentives will be implemented and how employees will manage them, or if they will even be effective.
AP Benefit Advisors Links
HRAs and GINA and the ADA
Employee Health Improvement Strategies