Viewing posts from: May 2013

Health Status Explains 75-85% of Medicare Cost Variations

Posted May 31, 2013 by PHaynes

As single-payer advocates cry, “Medicare for all”, and then begin efforts to “eliminate the waste and over-treatment”, we get caught up in the argument and we just accept their premise–that there is vast cost variations and that they are tied to over-aggressive physicians/providers and their billing practices.

PPACA/Obamacare was “influenced” by this thinking.  Yet, a new study, published yesterday, concludes that 75-85% of the cost variations are due to health differences.  See “Geographic Variation in Fee-for-Service Medicare Beneficiaries’ Medical Costs Is Largely Explained by Disease Burden”.

Their conclusions are based on wide differences in spending (using 2011’s data).  For example, Hawaii and Montana with per capita costs of less than $6850 while NJ, NY and MA are in the $11,000+ range.  Even after Medicare’s cost of living and other regional adjustments were made, the data appeared to bolster the single-payer’s arguments.  However, this new study took health status into account.  This is, by far, the sharpest & most focused attack on the Dartmouth study that made the theory of “unexplained regional differences” popular.  A theory that inspired a 2009 New Yorker article that continues to divide health policy experts.

EEOC Gets Tough With Companies on Genetic Privacy

Posted May 29, 2013 by Megan DiMartino

Corporate Counsel,

The U.S. Equal Employment Opportunity Commission filed its first lawsuit earlier this month accusing an employer of gathering illegal genetic information during a job applicant’s medical exam. It was quickly settled. The agency followed it up last Thursday by filing its first class action suit against another employer on similar grounds.

The Genetic Information Nondiscrimination Act (GINA) went into effect in 2009. Some individuals have sued companies under it. This, however, it the first time the government has taken official action to enforce GINA. To view the full article, click here. For more information on how this affects your business, contact us.

DOL – PPACA Implementation FAQs Part 14 and 15

Posted May 23, 2013 by PHaynes

The month of April saw two more sets of PPACA-related FAQs (Frequently Asked Questions) from the Department of Labor.

Part 14 / Part XIV

This part deals with the new SBC requirements.  As we look to the 2nd year of applicability (that is for plans beginning on or after January 1, 2014 and before January 1, 2015), we are all expected to use the new SBC templates.  Those templates are available here (HHS) and here (DOL).  The only change to the SBC template and sample completed SBC is the addition of statements of whether the plan or coverage provides MEC (Minimum Essential Coverage as defined under Section 5000A(f) of the Internal Revenue Code) and whether the plan or coverage meets the MV (Minimum Value) requirements (that is, the plan’s or coverage’s share of the total allowed costs of benefits provided under the plan or coverage is not less than 60 percent of such costs).

Template and Sample

On page 4 of the SBC template (and illustrated on page 6 of the sample completed SBC), a plan or issuer should indicate in the designated entry on the SBC template that the plan or coverage “does” or “does not” provide MEC and whether the plan or coverage “does” or “does not” meet applicable MV requirements.  This will assist your employees and plan participants with their decisions.  In order to avoid individual mandate penalties, taxpayers must have coverage that does meet these standards.

Also, there were no changes to the uniform glossary, nor where there any changes to the instructions for completing the SBCs.

Part 15 / Part XV

Annual Limit Waiver Expiration Date based on a Change to Plan or Policy Year

Certain plans (such as mini-med plans) offer, by design, benefits that do not comply with PPACA’s prohibition on annual or lifetime limits on essential health benefits.  Many of these plans obtained waivers from HHS, waivers which expire in 2014.  This new FAQ clarifies that waiver expiration dates cannot be extended by making a plan or policy year amendment.  So, for example, a waiver approval letter that was granted for a March 1, 2013 plan or policy year will expire on February 28, 2014 even if the plan or carrier amends either the plan or policy year.

Good Faith Standard

PPACA requires non-grandfathered group health plans (and insurance carriers) to not discriminate against providers based upon their licenses or certification under applicable state law.  So, if a provider is licensed by a state to perform certain procedures, a plan or a carrier may not discriminate against that provider.  (A commonly used example would be where a health plan will pay $X for Y procedure if performed by an orthopedic physician, but will only pay $Z for the same procedure if a chiropractor or physical therapist performed the same procedure).

The Good Faith Standard also applies to the requirement that non-grandfathered health plans provide coverage to individuals participating in approved clinical trials.

Both of these requirements are considered “self-implementing”, meaning there will not be any regulations/guidance issued in the immediate future.  As such, any good faith efforts and reasonable interpretation of the law in this area will suffice for compliance.

Transparency Requirements for Carriers/Health Insurance Issuers in/through Exchange

PPACA requires that health insurance issuers seeking to offer QHP (Qualified Health Plans) (i.e., individual or small group policies that meet various exchange standards) through an exchange, must submit specified information to the exchange and other entities in a timely and accurate manner. FAQ-15 clarifies that these issuers need only begin providing that information after a QHP has been certified as a QHP for one benefit year.  The FAQs also clarify that certain related reporting requirements will become applicable to non-grandfathered group health plans and health insurance issuers offering group or individual coverage no sooner than when the transparency reporting requirements with respect to QHPs become applicable.


Your OOPMax, Your PBM and Your Non-Grandfathered Health Plan

Posted May 22, 2013 by PHaynes

Your first plan year that begins on or after January 1, 2014 will be subject to cost-sharing limitations under PPACA.  All non-grandfathered plans, and by all we mean all self-insured and insured plans in the large-group market, will need to comply with annual out-of-pocket limits, referred to as OOPMaxes (Out-Of-Pocket Maximums).  (See, ER-Timeline, 2014, letter g.).

The three federal agencies responsible for implementing the Affordable Care Act — HHS, DOL and IRS (the Departments of Labor, Health and Human Services and Treasury (collectively, the “Departments”) — have issued guidance in the form of answers to frequently asked questions (FAQs-ACA-12) that begins to explain how these cost-sharing limits will work in 2014.

Background – Annual Limits, OOPMaxes, 2014 and Beyond

For the plan year beginning in 2014, the annual limitation on out-of-pocket maximums (“OOPMaxes)  will be the same as those that apply in 2014 to high-deductible health plans (HDHPs) combined with Health Savings Accounts (HSAs). These maximums are $6,350 for an individual and $12,700 for a family.  For 2015 and beyond, the out-of-pocket maximum will be adjusted based on increases in the average per capita premium for health insurance coverage, and will no longer be linked to the out-of-pocket maximums for HDHP/HSAs.

Based on language in the Affordable Care Act and a final rule applicable to Exchange plans, it is likely that future rules will define the cost-sharing limit to include deductibles, coinsurance and copayments. Premiums, balance-billing amounts for non-network providers and spending for non-covered services would be excluded. [Accordingly, it is reasonable for Employers, Plan Sponsors, Consultants and Carriers to continue to apply these limits to the in-network coverages only].

As a result, plans could have an unlimited out-of-pocket maximum for out-of-network coverage. However, this has not been clearly stated by the Departments. It is also unclear whether the cost-sharing limits will apply only to benefits that qualify as essential health benefits under the Affordable Care Act or will apply more broadly.

Multiple Service Provider Transition Rule

The Departments recognize that employers and plan sponsors use multiple service providers to help administer benefits. For example, a plan might use a third-party administrator (TPA) to administer major medical coverage, a pharmacy benefit manager (PBM) for prescription drug coverage and a managed behavioral health organization. In order for a non-grandfathered plan to be able to comply with the annual limit on out-of-pocket maximums, the processes used by different administrators may have to be coordinated – to a degree and to an extent that they aren’t coordinating today.

The Departments announced a special transition rule for the first plan year beginning on or after January 1, 2014. The Departments will consider the annual limit on out-of-pocket maximums deemed to be met if the following two conditions are met:

  • The plan complies with the requirement for its major medical coverage (e.g., excluding prescription drug coverage), and
  • If the plan has an annual out-of-pocket maximum on other coverage (e.g., a separate out-of-pocket maximum applies to drug coverage), that separate out-of-pocket maximum does not exceed the allowed dollar amount.

The Departments further note that the plan must also comply with the Mental Health Parity and Addiction Equity Act (MHPAEA), which prohibits a separate out-of-pocket maximum for mental health or substance use disorder benefits.  So, while coordination with your TPA/ASO medical vendor and your PBM may enjoy a brief delay, your may not delay with integration/coordination efforts between your medical and mental health/substance abuse vendors.

Implications for Non-Grandfathered Plans

Sponsors of non-grandfathered group health plans should begin to plan for the new annual limitation on out-of-pocket maximums for the 2014 plan year. This would include:

  • Identifying current out-of-pocket maximums, and whether they apply on an in-network only or on both an in-network and out-of-network basis,
  • Determining whether there are charges that are not counted toward the out-of-pocket maximum, but will now need to be considered, including benefits provided by service provider (e.g. PBM), and
  • Discussing the new annual limit on out-of-pocket maximums with service providers to determine how they are addressing these new rules.

Links referenced above:



Webinar: Final Regulations on HIPAA HITECH and ACA

Posted May 22, 2013 by Megan DiMartino

The Department of Health and Human Services (HHS) has released final regulations on the HITECH Act, the Health Information Technology for Economic and Clinical Health Act. The final regulations are similar to the proposed regulations, some of which are already in effect, though additional components were added that can and likely will have an impact on many organizations. Join subject matter expert, attorney Haynes, as he reviews these changes. Topics include:

  • HITECH Act changes, HIPAA & ACA
  • Regulation refinements and effective dates
  • Compliance & Penalties
  • Privacy disclosure requirements

Wednesday, May 29, 2013, 12:00 PM – 12:35 PM EDT

Use the following link to register for this complimentary webinar:

New HHS Memo on Federally Facilitated Exchanges

Posted May 13, 2013 by Megan DiMartino

HHS/CMS recently issued a memo focusing on the role of agents and brokers in federally facilitated Exchanges now being established by the federal government in states that opt not to have their own state-based Exchanges. The memo, referring to both Exchanges and Marketplace, also addresses certain questions related to state-based Exchanges. Previous final regulations addressed the ability of states to permit brokers and agents to assist employers and individuals purchasing Exchange coverage, including clarification that although they may help individuals with QHP enrollment, they cannot perform eligibility determinations.

Read the memo on the CMS website here:

Employer Must Advertise the New Federal Exchanges – Model Notices Released

Posted May 9, 2013 by PHaynes

Last evening the US Department of Labor (“DOL”) released guidance regarding the notice you must provide to employees about the state exchanges (now being called “marketplaces”).  You may recall from our Healthcare Reform timelines (2013, letter “f”) that employers were scheduled to begin distributing these notices in March of 2013, but the DOL delayed the enforcement of that until they were able to put together their model notices.

Who has to send these notices out?  Any employer to whom the Fair Labor Standards Act (FLSA) applies. (Section 18B of the FLSA was added by section 152 of the Affordable Care Act).  In general, the FLSA applies to employers that employ one or more employees who are engaged in, or produces goods for, interstate commerce.

Which employees must get these notices?

You must provide a notice of coverage options to each employee, regardless of: plan enrollment status, full-time status or part-time status.  You are not required to provide a separate notice to dependents or other individuals who are (or may become) eligible for coverage under the plan (unless they too are an employee).

When must these notices be sent?

  • Annually – regarding all current employees (before October 1, 2013), you are required to provide the notice not later than October 1, 2013.  The notice must be provided automatically and free of charge.
  • New Hires – you are required to provide the notice to each new employee at the time of hiring beginning with new hires hired on or after October 1, 2013.  From that date, and throughout 2014, the DOL will consider a notice to be provided at the time of hiring if it is provided within 14 days of the employee’s start date (not effective date; and remember, this is for all new hires, not just benefit -eligible new hires).

How must the notice be sent?

The notice must be provided in writing in a manner calculated to be understood by the average employee. It may be provided by first-class mail. Alternatively, it may be provided electronically if the requirements of the Department of Labor’s electronic disclosure safe harbor at 29 CFR 2520.104b-1(c) are met.

Can we change the Model Notice?

The links below contain printable PDFs of the model notices along with a header indicating which notice is for employers that “offer a plan” and which notice is for employers that “do not offer a plan”.  Please note, the notices are very similar.

Technically you are not required to use the model notice, it is just recommended that you do, since the model notices touch upon all the required data points that employers must communicate.  However, there is nothing in the DOL’s guidance or the statute that requires an employer to make a customized notice for each and every employee.  And, since the model notice asks the employer to indicate if coverage meets the minimum value, if it is affordable, how much it costs and how often the employee will be asked to contribute that amount, etc. it is anticipated that most employers will choose to answer these globally and generically for their multi-state/multi-site workforces.  (So, if coverage met the requirements, and was affordable for all employees, it would be more reasonable to indicate it that way than to separately list coverages, charges and frequency for each location).

Why has the Model COBRA Notice changed?

In general, the Model COBRA notice is very similar.  So, let’s just focus on what has changed:

  • A reminder that COBRA Qualified Beneficiaries aren’t “stuck with COBRA” – that they have options called exchanges (now called “Health Insurance Marketplace (coverage)”).
  • A reminder about tax credits/subsidies available through the Health Insurance Marketplace
  • Softening the language about pre-existing condition exclusions (if you fail to elect COBRA or secure other coverage during a 63-day gap).

DOL – Update from 9/11/2013

There have been many questions regarding whether employers can be penalized for failing to provide employees with the Exchange/Marketplace Notice, due by October 1, 2013. On September 11, 2013, the U.S. Department of Labor issued an FAQ regarding the Exchange Notice. The DOL has provided that while employers covered by the Fair Labor Standards Act should provide the Exchange Notice by October 1, there is no fine or penalty under the law for failing to provide the notice.

The FAQ also states that the Notice must include information:

  • About the Exchange (now known as the Marketplace);
  • That depending on their income and what coverage may be offered by the employer, they may be able to get lower cost private insurance in the Marketplace; and
  • That if they buy insurance through the Marketplace, they may lose the employer contribution (if any) to their health benefits.

It is important to note that whether the coverage meets minimum value is not required.   There are two model notices for employers to utilize: one for employers who do not offer a health plan and another for employers who offer a health plan or some or all employees.

PDF – Links:


CMS Releases Hospital Pricing Data

Posted May 9, 2013 by Megan DiMartino

Yesterday, the Centers for Medicare & Medicaid Services took an unprecedented step in making public extensive hospital cost data. This action shocked healthcare providers, payers, and consumers alike.

The massive file contains what is commonly referred to as “sticker price” for the 100 most common Medicare inpatient diagnostic related groups or DRGs. The data does not include physician costs. But it does provide an inside look at how average covered Medicare charges can significantly vary from hospital to hospital within the same city or geographic area.

The data is for 3,400 hospitals and represent 92% of all hospital inpatient charges in fiscal year 2011. To read more, visit

Underwhelming Results from Leapfrog Group

Posted May 9, 2013 by Megan DiMartino

The Leapfrog Group has encountered unsettling issues recently, and unveiled its third controversial hospital safety report card Wednesday showing miniscule improvement over last November’s grades. “So far, these numbers aren’t really moving,” said Leapfrog Group president and CEO Leah Binder. “It’s depressing,” she added, because even though the scores for acute care facilities reflect measures from 2011 and 2010, long before her group launched the safety score last year, hospitals for years have been saying they are trying to make care safer. To read more, visit

IRS Releases 2014 HSA Limits

Posted May 7, 2013 by PHaynes

Breaking news!   The Internal Revenue Service has just released the 2014 cost-of-living-adjusted HSA limits.  The following takes effect for calendar year 2014.

Annual contribution limits

  • $50 increase (EE Only): The annual limitation on deductions for an individual with employee-only coverage under a high deductible health plan (HDHP) is $3,300 — up $50 from 2013.
  • $100 increase (Family, or more than EE-Only): The annual limitation on deductions for an individual with family coverage under a HDHP is $6,550 — up $100 from 2013.

Minimum deductible – No increases in 2014

  • EE Only – No increase: The minimum deductible for employee-only HDHP coverage remains $1,250 — the same amount as 2013’s minimum deductible.
  • Family, or more than EE-Only – No increase: The minimum deductible for family HDHP coverage remains $2,500 — the same amount as 2013’s minimum deductible.

Out-Of-Pocket (OOP) Max

  • $100 increase (EE Only): The limit on maximum out-of-pocket expenses (including deductibles, co-pays and co-insurance — but not premiums) for employee-only HDHP coverage is $6,350 – up $100 from 2013’s limit.
  • $200 increase (Family, or more than EE-Only): The limit on maximum out-of-pocket expenses for family HDHP coverage is $12,700 — up $200 from 2013’s limit.

To read IRS Revenue Procedure 2013-25 click here.

See also AP Benefit Advisors’ multi-year HSA/FSA/HRA reference chart.


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