Group Health Plans That Fail to Cover In-Patient Hospitalization Services

Health plans that are trying to offer a stripped down Minimal Value plan to save costs and avoid penalties need to be careful.  The Fed is cracking down on these types of plans by requiring in-patient hospitalization services as part of the coverage.  Please see below release via IRS Guidewire. 

Group Health Plans That Fail to Cover In-Patient Hospitalization Services

VIA IRS GUIDEWIRE:  

Notice 2014-69 advises employers and other taxpayers that employer-sponsored health plans that fail to provide substantial coverage for in-patient hospitalization services or for physician services do not provide minimum value within the meaning of § 36B and that the IRS, the Treasury Department, and the Department of Health and Human Services (HHS) expect shortly to propose regulations to this effect.  The notice also advises that IRS, Treasury, and HHS are considering whether the continuance tables underlying the Minimum Value Calculator produce valid actuarial results for plans with these designs. Employers offering plans that fail to cover in-patient hospitalization or physician services should exercise caution in relying on the Minimum Value Calculator to demonstrate that these plans provide minimum value for any portion of a taxable year after publication of final regulations.

Notice 2014-69 will appear in IRB 2014-48 dated Nov. 24, 2014.

EMPLOYER MANDATE DELAYED.......AGAIN

On the heels of the Obama Administration delaying the Employer Mandate until 2015, today Treasury officials said that the Obama Administration is now delaying the Employer Mandate until 2016.  What this means is that employers with between 50 and 99 Full-Time Employees and/or Full-Time Equivalent employees won't be subject to fines/penalties associated with not offering affordable, minimal essential coverage for at least another year.

GREAT NEWS! KEY PROVISION OF HEALTH REFORM DELAYED UNTIL 2015

Do you remember when employers with 50 or more employees were either going to offer affordable, minimal essential coverage or pay stiff penalties?  Well, that provision has been delayed until 2015.  

"We recognize that the vast majority of businesses that will need to do this reporting already provide health insurance to their workers, and we want to make sure it is easy for others to do so. We have listened to your feedback. And we are taking action," Mark J. Mazur, assistant secretary for tax policy, wrote in a post on the Treasury Department's website.

"Obamacare costs too much and it isn’t working the way the administration promised,” Sen. Mitch McConnell, the Senate Minority Leader, wrote in response to the decision, adding: “The fact remains that Obamacare needs to be repealed and replaced with common-sense reforms that actually lower costs for Americans."

Any way you slice it, it's good news for larger organizations that are trying to implement the provisions of the law without getting themselves into a lot of hot water in the meantime.  This definitely gives them a bit of breathing room.

ESSENTIAL HEALTH BENEFITS COULD MAKE AFFORDABLE CARE UNAFFORDABLE

Essential Health Benefits

February 20th, 2013, the Department of Health and Human Services issued a final rule outlining essential health benefits and actuarial value requirements under the Affordable Care Act.

About the Final Rule

Under the ACA (Affordable Care Act), health plans in state health insurance exchanges must provide coverage for 10 broad categories of benefits, such as maternity care, prescription drugs and preventive care. 

The final rule goes beyond what regulators initially proposed and applies to non-grandfathered plans for individual and small group markets inside and outside of the health insurance exchanges.

Most of the rules include benefits that commonly are covered by plans, including:

Ambulatory patient services;
Chronic disease management;
Emergency care;
Hospital services;
Laboratory services;
Maternity and newborn care;
Mental health and substance use disorder services, including behavioral health treatment
Pediatric services, including oral and vision care
Prescription drugs; and
Preventive wellness services

However, some changes represent an expansion of coverage to include rehabilitative care, pediatric dental care and pediatric vision care. Further, the rule expanded coverage and federal parity protections for mental health and substance use disorder services, including behavioral health treatment, to both the individual and the small group market.  The problem is that the more coverage that is added to the "Essential Health Benefit List" the higher the costs will become until eventually "Affordable Care" is anything but affordable.  

The final rule also prohibits insurers from discriminating based on an “individual’s age, expected length of life, present or predicted disability, degree of medical dependency, quality of life or other health conditions”.....but not if you are a smoker.  If you are a smoker, you could be charged up to 50% more in premium.

Benchmark Plan

For 2014 and 2015 each state was to select a base-benchmark plan as the reference for defining EHB in the state.  States could choose 1) the largest plan by enrollment in any of the three largest small group insurance products in the state; 2) any of the largest three state employee health benefit plans; 3) any of the largest three Federal Employees Health Benefits Program plans; or 4) the largest insured non-Medicaid HMO in the state.  For Maryland the  Health Care Reform Coordinating Council selected the CareFirst State of Maryland PPO for State employees to be Maryland’s benchmark plan.


Actuarial Value

Actuarial Value, or AV, is calculated as the percentage of total average costs for covered benefits that a plan will cover. For example, if a plan has an AV of 60 percent, on average, a consumer could expect to be responsible generally for 40 percent of the costs of all covered benefits in that plan.

Starting in 2014 plans in the Individual and Small Group Markets will need to meet certain Actuarial Values.  The Center for Consumer Information and Oversight has posted an Actuarial Value Calculator to help determine if your plan meets those requirements. 

The plans offered (Metals) will consist of the Bronze Plan with an Actuarial Value of 60% of cost, Silver, 70% of cost, Gold at 80% of Cost and Platinum 90% of Cost.  In addition there will be a Catastrophic for those individual who are eligible (under 30 and other metal plans are unaffordable)  This age used to be younger and will only hurt the loss ratio of the exchange even further.


Cost of Coverage

Insurers and some business groups had lobbied the federal government to scale back the scope of mandated coverage categories because of concerns that such coverage would make policies too costly, the Wall Street Journal reports. However, rather than scale back benefits, the rule includes several ways to limit the costs to consumers, such as capping total out-of-pocket costs and limiting the deductible amount for plans offered in the small-group market to about $2,000 for an individual and $4,000 for a family.  Again, adding all of these additional benefits and limiting exposure to the covered person will only add cost to the final product and have the exact opposite effect of what the Affordable Care Act was designed to do, make care more affordable and available to all who need it.

SO WHAT'S IT GOING TO LOOK LIKE?

I know, everyone is on the edge of their seats wondering what the health care environment is going to look like come the big day....January 1, 2014.  The date of the full enactment of the Affordable Care Act (Health Reform) in all its glory.  Well, it's anybody's guess but I'll give you mine.  Carriers will be offering their guaranteed issue Medal Coverage's (bronze, silver, gold, platinum plans) through the Maryland Health Benefit Exchange.  Coverage may be accessed by individuals or groups of up to 50 employees.  Our firm will be able to help you access those coverage options in the same way we do now.  Carriers will also be offering the same coverage directly through them.  So, in a sense, they will be competing against themselves.  

Plans that probably will start to become very popular are the partially self-funded medical plans.  These are plans that look at the medical history of the group and come up with a premium much as plans are now.  However, if you have a good claims year and dollars aren't spent on claims, these will come back to the employer.  If they don't, then your only exposure is what you've already paid in premium, no more. 

 In time, the exchanges become full of unhealthy people and will probably become unattractive to most healthy employer groups and individuals who will purchase on the underwritten private market.  It seems that the exchanges are going to be a death spiral unable to sustain itself.  So in order to keep it breathing those life support dollars will need to come from somewhere.......fines, taxes and penalties.  

In the meantime........................

Employers of all sizes need to:

1. Make sure their plans aren't discriminatory based on income.
2. Not allow waiting periods longer that 90 days
3. Make sure their part-time employees are working 29 or less hours a week on average
4. Notify ALL employees of the existence of the Health Exchanges (was in March now June/July maybe)
5. Issue Summary of Benefits Coverage of medical plans to ALL eligible employees
6. Let employees also know that they will be charged an additional 50% surcharge for medical plans offered through the exchanges if they are smokers.

In addition, those employers over 50 employees:

1. To avoid potential penalties associated with offering "Affordable" "Minimal Essential Coverage" Do a "Pay or Play Calculation".  (We will/have worked with our clients to arrive at these numbers)
2. Show value of health plan for those employers issuing more than 250 W-2's

This is simply a snap-shot of what the health care landscape could look like come 2014 and some areas needing to be addressed to avoid fines or penalties.

PPACA-HHS DEFINES "ESSENTIAL HEALTH BENEFITS"

In December the Department of Health and Human Services outlined proposed policies defining what exactly are "Essential Health Benefits" to be included in health plans.  All insurance policies must cover these services in order to be certified and offered in the exchanges.  Below are a list of those services:

Ambulatory Patient Services
Emergency Services
Hospitalization
Maternity and Newborn Care
Mental Health and Substance Abuse Disorders
Prescription Drugs
Rehabilitative and Habilitative Services
Lab Services
Preventive and Wellness Services, Including Chronic Disease Management
Pediatric Services, Including Oral and Vision Care

Each state would need to select a "Benchmark Plan" which could include at least all of the services above.  Could be from the largest plan in the state, largest state plan, largest federal plan, largest hmo plan offered in state.  This is the HHS's way of saying we are flexible.  If the state does not elect their own, the default benchmark plan will be the small group plan with the largest enrollment in the state. 

This "benchmark plan" is not to be confused with "Minimal Essential Coverage" which if you have more than 50 employees, could determine whether your health plan could set you up (or help you avoid) a big penalty from the fed. More to come later on that...........

So basically this means that all health plans would need to include an array of services in each of those ten areas identified in order to be offered through the state exchanges.