Benefits Industry News

The Obama Administration released interim final regulations aimed at creating a system of checks and balances for the internal and external appeals processes of health claims.

Governed by the Patient Protection and Affordable Care Act, the interim final rule requires group health plans and insurers to establish a comprehensive appeals process for patients who appeal decisions on coverage, services and claim payments. The interim final regulations apply to self-funded health plans, but not to grandfathered plans under the PPACA.

The Departments of Health and Human Services, Labor and the Treasury issued the interim final rule, which will take effect on Sept. 21, 2010.

Health plans and insurers that are subjected to the regulations are required to establish an internal appeals process that:

• Allows consumers to appeal when a health plan denies a claim for a covered service or rescinds coverage;

• Gives consumers detailed information about the grounds for the denial of claims or coverage;

• Requires plans to notify consumers about their right to appeal and instructs them on how to begin the appeals process;

• Ensures a full and fair review of the denial; and

• Provides consumers with an expedited appeals process in urgent cases.

If a health plan or insurer denies the appeals case, the patient, under the regulations, can present his or her case to an independent reviewer not affiliated with the health plan or insurer.

Most states provide an external appeals process in which a second set of eyes reviews the case. However, state laws on external appeals of health claims can vary greatly depending on the state. As a result, the interim final rule calls for a federal standard for external reviews of claim appeals cases.

For external appeals, federal regulators are encouraging states to adopt the guidelines created by the National Association of Insurance Commissioners. The interim final rule calls for states to implement the NAIC standards before July 1, 2011. The NAIC rules require:

• External review of plan decisions to deny coverage for care based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit.

• Clear information for consumers about their right to both internal and external appeals – both in the standard plan materials and at the time the company denies a claim.

• Expedited access to external review in some cases – including emergency situations or cases where their health plan did not follow the rules in the internal appeal.

• Health plans must pay the cost of the external appeal under State law, and States may not require consumers to pay more than a nominal fee.

• Review by an independent body assigned by the State. The State must also ensure that the reviewers meet certain standards, keep written records, and are not affected by conflicts of interest.

• Emergency processes for urgent claims, and a process for experimental or investigational treatment.

• Final decisions must be binding so, if the consumer wins, the health plan is expected to pay for the benefit that was previously denied.

Source: Employee Benefits News article used by permission

By Kathleen Koster

July 15, 2010

Two integral provisions of the health care reform legislation, “dependent eligibility” and “affordability,” will likely result in much higher health care costs for employers than previously estimated by government officials and other industry consultants, according to a new report.

The bswift Special Report on the Impact of Health Reform on Employers analyzes the 2010 benefits premium, contribution and dependent data of 242 bswift client organizations. The sample includes mid-sized and large employers with 50 to 15,000 employees representing a variety of industries, including retail, manufacturing and professional services.

“The bswift Special Report highlights the dramatic differences in impact of PPACA among employers. For some, the impact is negligible. For many others, PPACA may increase costs substantially for 2011 and may also require a complete overhaul of the organization’s health strategies in the next three years,” says bswift CEO Rich Gallun.

“Dependent eligibility” provision’s impact on employers

HHS had originally determined the effect of requiring organizations to cover employees’ children up to age 26 to be 0.7% of total health care costs for employers. On the other hand, the bswift Special Report found the likely impact to be 1.6%, more than double the initial HHS estimate.

The HR and benefits administration firm looked at the statistical median and discovered that a company with 1,000 enrolled employees and a median health premium cost of $8,325 per employee annually is likely to experience $133,200 in additional costs for 2011 because of this provision.

Nevertheless, the bswift Special Report found a widely disparate impact of the provision among employers.

On the high end of the spectrum, the impact could be more than 13% of an employer’s total health care costs. On the low end, the impact could be less than 0.3% of total health care costs.Impact varies based on size, age and family composition of the company’s workforce, as well as the employer’s current dependent eligibility rules.

In order to minimize employee confusion surrounding the dependent eligibility extension and reduce administrative hassle, many companies have already changed their dependent eligibility rules in advance of the law’s 2011 deadline, analysts at bswift found.

The “affordability” provision’s impact on employers

Companies with more than 50 employees will face stiff penalties beginning in 2014 if they do not offer full-time employees an affordable health plan option that costs less than 9.5% of the employee’s total household income.

Under the provision, the new law will penalize employers $3,000 per year for each full-time employee who receives a federal tax credit or subsidy to buy coverage within a state-based insurance exchange because his or her health plan is considered unaffordable. To qualify for the credit, employees must disclose household income information to the government.

Using employee salary data, bswift analysts estimated an organization’s risk of failing the “affordability” test in 2014. They uncovered that 52% of employers are likely to have more than 5% of employees in the “danger zone” (who pay more than 9.5% of their compensation for health premiums).

Again, bswift looked at the statistical median and found that a company with 1,000 employees is likely to have 5.8% (58 employees) in this “danger zone,” which entails $174,000 annually in penalties or 2% of the employer’s total health care costs.

Unfortunately, some employers face a more expensive problem. For employers with more lower-salaried employees and less generous health contributions, the “affordability” provision has even more costly repercussions.

In this case, bswift found that a company with 1,000 employees and 20% in the “danger zone” could experience penalties of $600,000 annually or 7.5% of the employer’s total health care costs.

Overall, the bswift Special Report finds that approximately one in three employers has more than 20% of their employees in the “danger zone.”

“For employers, this legislation puts a whole new level of urgency not only around compliance but also around the evolution of their health and employee benefit strategies. In response to PPACA, employers are modifying their health plans and employee contribution programs for 2011 and beyond. We are also seeing employers re-visit how health care fits into their employees’ total compensation package,” says Gallun.

The bswift CEO concludes, “As employers modify their health programs over the next several years, the role of the Exchanges should remain top of mind – not just as a negatively perceived ‘dumping ground’ (‘Pay or Play’) but rather as an opportunity to refine the implicit health care contract between employer and employee. Some leading edge employers are looking seriously at a Defined Contribution approach – with the Utah Health Exchange and also in the large employer market – as an incremental pathway out of the relentless burden of providing increasingly expensive health coverage to employees.”

Source: Employee Benefit News article used by permission

July 14, 2010

By Kelley M. Butler

Like Santa, I imagine you’ll be making a list and checking it twice (20 times?) to make sure you have all your talking points in order so you can communicate effectively to employees how the Patient Protection and Affordable Care Actwill affect their benefits enrollment options.

(You might even envy Santa, in that he only has to check his list for young children, not adults up to age 26!)

At any rate, to help you ensure you communicate anything and everything, Mercer’s developed a list of what you’ll want to do and say before enrollment season kicks off this fall — and surely before many PPACA provisions take effect for plan years beginning on or after Sept. 23 (for most plans, Jan. 1, 2011). Take notes, pros. Here’s what to do if you have:

- Plans providing dependent coverage.
• Describe adult child eligibility (including restrictions, if grandfathered plan)
• Provide prominent written notice of special enrollment opportunity
• Offer special enrollment opportunity of at least 30 days (may run concurrent with open enrollment period)
• Make coverage effective as of first day of plan year

- Plans eliminating lifetime dollar limits.
• Expressly state in writing that plan has no lifetime dollar limit and that persons previously affected by a limit are again eligible for coverage
• Provide written notice of special enrollment opportunity
• Offer special enrollment opportunity of at least 30 days (may run concurrent with open enrollment period)
• Make coverage effective as of first day of plan year

- Plans imposing per-beneficiary limits.
• Describe essential health benefits and permitted per-beneficiary annual limit ($750,000 for 2011)
• Describe nonessential health benefits and permitted per-beneficiary annual limit

- Plans with pre-existing condition exclusions.
• Delete all references to preexisting condition exclusions for children under age 19

- Plans offering tax-advantaged accounts (FSAs, HSAs, HRAs or Archer MSAs).
• Explain new limits on reimbursements for over-the-counter medications
• Explain nonqualified distribution penalties for HSAs and Archer MSAs (optional)

- Nongrandfathered plans.
• Delete cost-sharing for preventive services
• Delete preauthorization requirements for emergency services and referrals for OB/GYN services
• If designation of primary care provider required, ensure that participants have adequate range of choices

- Employers participating in CLASS program:
• Describe program and costs
• Provide automatic enrollment and facilitate payroll deductions

- Plan cancellation conditions:
• Update communications to describe cancellation practices meeting new standards
• Even in cases where rescission is permitted, plans must provide participants with written notice at least 30 days before coverage is terminated.

Source: Employee Benefits News article used by permission

Federal regulators released interim final rules implementing a new Patient’s Bill of Rights under the Patient Protection and Affordable Care Act. The guidance addresses preexisting condition exclusions, retroactive rescissions, lifetime limits and annual dollar limits.

“These rules effectively put in place a basic set of consumer protections known over the years as the ‘Patient’s Bill of Rights.’ This is a concept introduced 15 years ago and supported by both Democrats and Republicans,” said Secretary of Health and Human Services Kathleen Sebelius in an e-mail statement.

The Federal Register will publish the rules on June 28. The new regulations, issued by the Departments of Health and Human Services, Labor and Treasury, will take effect for most plans on or after Sept. 23. For calendar year plans, the rules will take effect Jan. 1, 2011.

The interim final rules, which are nearly 200 pages, focus on PPACA provisions that apply to all health plans, including grandfathered health plans. According to consultants at Hewitt Associates, the provisions in the interim final rules adopt the following:

Preexisting condition exclusions: Prohibits preexisting condition exclusions for both benefit limitations and coverage.

Retroactive rescissions: Prohibits retroactive rescissions of coverage except in cases of fraud or an intentional misrepresentation of material facts, with no exception. Insurers and plans are required to provide at least 30 days advance notice of a rescission with time to appeal.

Lifetime limits: Prohibits lifetime limits on the dollar value of “essential health benefits” for any individual participating in a group health plan or group health insurance coverage. Additional notice and enrollment opportunity rules apply for individuals whose coverage or benefits ended by reason of reaching a lifetime limit.

Annual dollar limits: Restricts annual dollar limits on “essential health benefits” to no less than $750,000 beginning Sept. 23, 2010, $1.25 million beginning Sept. 23, 2011, and $2 million beginning Sept. 23, 2012 but before Jan. 1, 2014. Good faith compliance with a “reasonable interpretation” of what is an essential health benefit will be allowed until regulations defining that term are issued.

“The interim final rule allows group health plans or health insurance coverage that has an annual dollar limit on benefits below the restricted annual limits permitted, such as limited benefit plans, to seek a waiver to delay compliance with the rules on restricted annual limits if the plan can prove that its current annual limits are necessary to prevent a significant loss of coverage or increase in premiums,” Hewitt experts note. “The restriction on annual limits does not apply to health flexible spending arrangements, medical savings accounts or health savings accounts.”

The guidance also clarifies that the annual limit restriction does not apply to health reimbursement arrangements that are integrated with a group health plan that meets the requirements under health care reform or to stand-alone retiree-only HRAs.

The rules also provide consumer-protection mandates that apply to non-grandfathered plans, including:

• Prohibiting group health plans or health insurance issuers from requiring a referral for OB-GYN care or from allowing a pediatrician to be a designated primary care provider;
• Prohibiting prior approval for emergency care or higher cost-sharing amounts for out-of-network emergency care; and
• Requiring a “reasonable” reimbursement for providers of out-of-network emergency care before balance billing is allowed.

Source: Employee Benefits News article used by permission