Steps to Consider Now to Reduce Health Reform Cost Impacts
MyHealthGuide Source: Todd Leeuwenburgh, Editor, The Guide to Self-Insuring Health Benefits newsletter, Employer Health Benefits, Thompson Publishing Group, 5/20/2010, www.Thompson.com
Employers have a set of immediate action items to comply with newly promulgated federal health reform laws. How employers implement those changes will determine whether health coverage costs remain steady after health reform exigencies are met.
The Patient Protection and Affordable Care Act (Pub L. 111-148) and the Health Care and Education Reconciliation Act (Pub. L. 111-152) contain health insurance changes that very likely will increase the cost of providing health coverage. However, some of these increases can be tempered by changes in plan design and other measures, he notes. Since some reform provisions go into effect in 2010, employers should not delay thinking about these issues.
HHS is drafting regulations and guidance to clarify requirements; meanwhile, employers can expect to be under tight deadlines to finalize plan designs, update enrollment forms and complete modified enrollment processes before the end of 2010.
Dependent Rule Won’t Save.
One such rule clarification — details on how plans and insurers must admit newly qualified dependent children up to age 26 — has been issued as interim final rules published in the May 13 Federal Register (75 FR 27122). These do not offer much promise for cost savings.
Not only do plans have to take all dependent children up to age 26, they may not vary age eligibility due to student status, residency with the participant or financial support. (Common models like: “Dependents up to 19 and not in school and dependents up to 23 who are full-time students are eligible” will no longer be allowed.)
Plans and insurers also won’t be allowed to deny coverage to a dependent child under 26 based on eligibility for other coverage — although grandfathered group health plans will retain that right until 2014 (see below for details).
And moves to pin the costs of extending dependent care coverage on workers by increasing worker contributions was expressly addressed in the May 13 rule. “Any difference in benefits or cost-sharing requirements constitutes a different benefit package,” the rule states, using language that reads like such a move could jeopardize grandfather status.
In spite of that, there are some strategies be best for making the most of a potentially costly reform situation.
Don’t Jeopardize ‘Grandfathered’ Plans.
Don’t implement changes that may jeopardize your plan’s ‘grandfather’ status. Plans that were in existence on March 23, 2010 are considered “grandfathered” and exempt from implementing certain reform requirements. HHS has begun drafting rules on grandfathered plans, and the question on all employers’ lips is: What changes to the plan or coverage, if any, will compromise grandfathered status?
“Implementing changes and controlling costs will challenge a plan that does not want to lose its grandfathering status,” warns attorney Alexander Clark, Fulbright & Jaworski, Dallas.
The law provides no guidance on how a grandfathered plan may lose its grandfathered status. However, HHS is expected to issue guidance on grandfathered plans (including how to lose the status) this summer, so “grandfathered” plan sponsors should hold off on the following changes until it’s clear that these changes will not threaten a plan’s grandfather status.
Changing third-party administrators or insurers.
Vast changes in plan design.
New PPO networks.
Imposing higher employee cost-sharing to cover a reform mandate (for example, new dependents who must be allowed to join under reform).
New employees (and their families) who join a plan and family members of current employees who join for the first time will not impact grandfather status, under the legislation.
Take advantage of the retiree health subsidy.
The law creates a temporary reinsurance program to reimburse employer-sponsored health plans up to 80% of early retirees’ (ages 55 through 64) health care costs between $15,000 and $90,000. But the government has only funded $5 billion for this program, so if you quality for it, file your application quickly. “This money will go fast,” warns Dean Hatfield with Sibson Consulting in New York. The program is to be established by the government no later than June 23, 2010. Interim final rules were published May 5, 2010; comments on the rules are due June 4. To learn more about the subsidy, view the rules and obtain instructions for filing comments on them, go to http://edocket.access.gpo.gov/2010/pdf/2010-10658.pdf.
Remove ineligible individuals.
Remove ineligible individuals from the plan before the rescission prohibition becomes effective. The law bars employers from rescinding health insurance coverage for any reason other than fraud or intentional misrepresentation as of Sept. 23, 2010. If the plan has ineligible dependants on its roster, it will be easier to remove them before that date, suggests Brennan Clipp, senior VP for sales at HRAdvance, Dallas, a company that helps employers deal with the eligibility process. You should review and update your list of eligibles accordingly.
Think about reducing benefits.
PPACA prohibits lifetime and annual limits on the dollar value of “essential” health benefits as of Oct. 1, 2010 (Jan. 1, 2011 for calendar year plans), although HHS will publish a rule allowing some restrictions on annual limits. One way to reduce costs is to reduce or even eliminate some non-essential benefits currently offered, suggests Clark. “It’s hard to take away benefits, but now is the time to think about it,” suggests Hatfield.
Revisit your stop-loss insurance policy.
Since some of the provisions in the health reform law, such as the prohibition on annual and lifetime limits, can potentially increase an employer’s exposure, it’s more important than ever to make sure that your stop loss coverage is adequate. Employers with stop loss insurance coverage may need to change their stop loss coverage amounts, says Hatfield.
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