Group Health Insurance – Page 2 – Setnor Byer Insurance & Risk

What is a Grandfathered Group Health Plan?

Though the term ‘grandfathered’ is commonly used when discussing group health insurance under the Affordable Care Act (ACA), many people don’t know what it means. ‘Grandfathered’ is used to describe group health plans that are exempt from many of the ACA’s provisions. These exemptions were included in the ACA so groups that were happy with their health plans could keep them.

To be eligible for grandfathered status, a group health plan must have been in existence on March 23, 2010, which is the day the ACA became law. Plans starting after this date do not qualify for grandfathered status. Additionally, plans that have made significant changes since March 23, 2010 may lose their grandfathered status. For example, increased cost-sharing requirements, such as copayments and deductibles, decreased employer contributions, elimination of benefits, and changes in annual limits may cause a plan to lose its grandfathered status.

Grandfathered group health plans are exempt from many of the ACA’s provisions. For example, the following provisions do NOT apply to grandfathered plans.

Fair health insurance premiums: Under the ACA, health insurers may not charge discriminatory premium rates.
Guaranteed availability of coverage: Under the ACA, insurers must generally accept every employer group in the State that applies for coverage, though they can limit enrollment to annual open and special enrollment periods.
Guaranteed renewability of coverage: The ACA generally requires guaranteed renewability of coverage regardless of health status, utilization of health services, or any other related factor.
Comprehensive health insurance coverage: The ACA generally requires that insurers include coverage for defined essential benefits, provide a specified actuarial value, and comply with limitations on allowable cost sharing.
Coverage of preventive health: Under the ACA, group health plans must cover certain preventive services, immunizations, and screenings, without any cost sharing.
Prohibition on discrimination in favor of highly-compensated individuals: The ACA prohibits fully-insured group health plans from discriminating in favor of highly compensated individuals with respect to eligibility and benefits.
Patient protections: The ACA generally requires group health plans to permit an individual to select a participating primary care provider, to provide direct access to obstetrical or gynecological care without a referral.

Grandfathered group plans are not exempt from every provision of the ACA. There are a number of provisions that DO apply to grandfathered plans, such as:

Prohibition of preexisting condition exclusion or other discrimination based on health status: Under the ACA, group health plans may not impose a preexisting condition exclusion or discriminate based on health status.
Prohibition on excessive waiting periods: The ACA prohibits any waiting periods that exceed 90 days.
No lifetime or annual limits: The ACA generally prohibits group health plans from establishing lifetime limits and annual limits on the dollar value of benefits.
Extension of dependent coverage: Under the ACA, group health plans that provide dependent coverage are generally required to make such coverage available to children until age 26.
Prohibition on rescissions: Group health plans may not rescind health coverage except in the case of fraud or intentional misrepresentation.

The number of grandfathered group health plans is steadily decreasing. A 2013 study by the Kaiser Family Foundation found that 36 percent of those getting health coverage from an employer are enrolled in a grandfathered health plan, which is down from 48 percent in 2012 and 56 percent in 2011. The study also found that the number of employers offering grandfathered plans and the number of employees enrolling in them is also decreasing. This trend is expected to continue and more plans are expected to lose grandfathered status over time.

Very specific regulations govern grandfathered group health plans, so establishing and maintaining grandfathered status can be a complicated process. For example, grandfathered plans must disclose their status to participants and beneficiaries and must maintain any documents that are necessary to verify, explain or clarify a plan’s grandfathered status. Given the significance of the ACA’s grandfather exemptions, it’s important to seek guidance from reputable and experienced experts.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the changes coming in 2014. Check back with us periodically for future informational updates about the Affordable Care Act. If you have specific questions about the ACA or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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Counting Employees under the Affordable Care Act’s Pay-or-Play Provisions

Employers subject to the Affordable Care Act’s Employer Shared Responsibility provisions may be assessed a penalty if they do not offer affordable health coverage that provides a minimum level of coverage to their full-time employees and their dependents. Whether an employer is subject to these pay-or-play provisions depends on the number of people it employs. When counting employees, however, there are specific rules that must be followed.

An employer is generally considered an “Applicable Large Employer” subject to the pay-or-play provisions if it employed an average of at least 50 full-time employees, including full-time equivalent employees (FTEs), on business days during the preceding calendar year. To determine whether an employer is considered an Applicable Large Employer for a calendar year:

Add the total number of full-time employees for each calendar month in the preceding calendar year, and the total number of Full Time Equivalent employees for each calendar month in the preceding calendar year.
Divide the sum by 12.
If the result is not a whole number, round it down to the next lowest whole number

If the result of this calculation is less than 50, the employer is not considered an Applicable Large Employer for the current calendar year. If the result is 50 or more, the employer is an Applicable Large Employer for the current calendar year.

[Note that transition relief was provided to qualifying employers with an average of 50-99 full-time and full-time equivalent employees on business days during 2014, so that they will not be assessed a penalty in 2015.]

The first step to counting employees is identifying full-time and full-time equivalent employees. A full-time employee, with respect to a calendar month, is an employee who works an average of at least 30 hours per week, or 130 hours in a calendar month. A full-time equivalent employee isn’t an actual person. Rather, it’s a term used to describe the combination of all non-full-time employees who are counted as the equivalent of a full-time employee.

The number of FTEs for each calendar month in the preceding calendar year is determined by calculating the aggregate number of hours of service for that calendar month for non-full-time employees (but not more than 120 hours of service for any employee) and dividing that number by 120. Fractions may be rounded to the nearest one hundredth.

For example, assume that during each calendar month of 2015, Employer W has 25 employees averaging 35 hours of service per week and 40 employees each of whom averages 90 hours of service per calendar month. Each of the 25 employees averaging 35 hours of service per week count as one full-time employee, so Employer W has 25 full-time employees for each calendar month in 2015.

To determine the number of FTEs for each calendar month, combine the hours of service of the 40 non-full-time employees (40 employees x 90 hours) and divide that number by 120. This calculation (40 x 90 = 3,600, and 3,600 / 120 = 30) shows that Employer W has 30 FTEs for each calendar month in 2015. Since Employer W had 55 full-time and full-time equivalent employees during each calendar month in 2015, Employer W will be considered an Applicable Large Employer for 2016.

The regulations contain a number of specific rules, methods and exceptions that must be considered when counting employees. For example, in some cases an employer may not have to include seasonal workers when counting employees. Given the complexity of some of these rules, methods and exceptions, employers should consult with an attorney to make sure they’ve counted correctly.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the changes coming in 2014. Check back with us periodically for future informational updates about the Affordable Care Act. If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

If you’d like to subscribe to our weekly newsletters please click here.

Summary Plan Descriptions under ERISA

The Employee Retirement Income Security Act (ERISA) is a federal law that sets minimum standards for most voluntarily established employee pension and welfare plans in the private sector. To protect individuals in these plans, ERISA requires plan administrators, which are oftentimes the employers, to provide plan participants and their beneficiaries with a Summary Plan Description (SPD).

SPDs are used to give plan participants and beneficiaries important information about pension plans, like 401(k) and profit sharing plans, and welfare plans, like group health, disability and pre-paid legal plans. SPDs provide information about the plan, what benefits are available under the plan, the rights of participants and beneficiaries under the plan, and how the plan works.

SPDs must generally be given to each plan participant and each beneficiary receiving benefits under the plan within 90 days after first becoming covered by the plan. Under ERISA, SPDs must generally:

Identify the plan name, plan number and employer identification number (EIN)
Describe the type of plan (ex. 401(k), profit sharing, group health, disability)
Describe the type of plan administration
Provide contact information for the plan administrator and service of process
Describe the plan’s eligibility requirements
Describe circumstances which may result in disqualification, ineligibility, denial, loss, forfeiture, suspension or reduction of benefits
State the date of the plan’s fiscal year
Describe the procedures governing claims for benefits, applicable time limits and remedies if claims are denied
Describe provisions governing termination of the plan
A statement of rights available to plan participants under ERISA

SPDs for employee pension plans must include additional information, such as:

The plan’s normal retirement age
A description of benefits, eligibility, vesting and accrual
A statement about whether the plan is covered by termination insurance from the Pension Benefit Guaranty Corporation
Source of contributions to the plan and the methods used to calculate contributions amounts

Similarly, SPDs for employee welfare plans must also include additional information, such as information about:

Cost-sharing provisions, including costs of premiums, deductibles, coinsurance and copayment requirements
Annual or lifetime caps or limits on benefits
Coverage for preventive services
Coverage for drugs, medical tests, devices and procedures
The use of network providers, the composition of provider networks and whether, and under what circumstances, coverage is provided for out-of-network services
Conditions or limits on the selection of primary care providers or providers of specialty medical care
Conditions or limits applicable to obtaining emergency medical care
Preauthorization requirements or utilization review as a condition to obtaining a benefit or service

Since comprehension is the key, SPDs must follow strict style and formatting requirements. For example:

SPDs must be written in a manner calculated to be understood by the average plan participant
SPDs must be sufficiently comprehensive to apprise the plan’s participants and beneficiaries of their rights and obligations under the plan
SPDs must not be formatted in a way that misleads, misinforms or fails to inform participants and beneficiaries
Advantages and disadvantages of the plan must be presented without either exaggerating the benefits or minimizing the limitations
Exceptions, limitations, reductions, and restrictions of plan benefits cannot be minimized, rendered obscure or otherwise made to appear unimportant (style, caption, printing type and prominence must be the same as that used to describe plan benefits)

In fulfilling these requirements, plan administrators must consider the level of comprehension and education of typical participants in the plan and the complexity of the terms of the plan. In most cases, this will usually require limiting or eliminating technical jargon and long, complex sentences, and using clarifying examples, illustrations, clear cross references and a table of contents.

Unlike the general descriptions provided in this article, the SPD requirements are highly technical and very specific. To avoid violations, employers must confirm strict compliance with ERISA’s SPD requirement. If you have questions about your employee welfare plans, or if you would like to see how Setnor Byer Insurance & Risk can help, contact us.

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The Affordable Care Act’s Summary of Benefits and Coverage

The complexity of group health insurance makes it difficult for employers to shop for health plans and for employees to choose among several employer-provided options. Unfortunately, helpful consumer information is not typically found in the patchwork of various non-uniform and intricate consumer disclosures, such as the Summary Plan Description required by ERISA. To help consumers make informed decisions about health care coverage, the Affordable Care Act created the Summary of Benefits and Coverage and Uniform Glossary requirement.

Under this requirement, insurers and employers are required to give group health plan participants and beneficiaries, which are generally employees and their dependents, a short, plain-language Summary of Benefits and Coverage (SBC). A Uniform Glossary of terms used in health coverage and medical care must also be made available to plan participants and beneficiaries.

Insurers must provide the SBC to employers:

Upon Application (no later than 7 business days following receipt of the application)
By 1st Day of Coverage (if any changes to the initial SBC were made)
Upon Renewal (if renewal is automatic, no later than 30 days before the new plan year; if renewal applications are required, no later than the date application materials are distributed)
Upon Request (no later than 7 business days following receipt the request)

Plan participants and beneficiaries must also receive the SBC:

Upon Application (at the same time written application materials are distributed)
By 1st Day of Coverage (if any changes to the initial SBC were made)
Upon Renewal (if renewal is automatic, no later than 30 days before the new plan year, or within 7 business days after the new policy is issued; if renewal applications are required, no later than the date applications are distributed to participants)
Upon Request (no later than 7 business days following receipt the request)

Though insurers and employers are both responsible for providing the SBC to plan participants and beneficiaries, only one SBC is required. Under the regulations, the obligation of one is satisfied if the other provides the required SBC in a timely manner. To avoid violations, employers must confirm, not assume, that the insurer is providing the required SBCs to plan participants and beneficiaries.

The SBC must include the following:

Uniform definitions of standard insurance and medical terms
Descriptions of coverage, including cost sharing, for each category of benefits
Exceptions, reductions and limitations of coverages
Cost-sharing provisions, including deductible, coinsurance and copayment obligations
Renewability and continuation of coverage
Coverage examples
A statement about whether the plan or coverage provides minimum essential coverage and whether the share of the total allowed costs meets applicable requirements
A statement that the SBC is only a summary of coverage
contact information (telephone number, Internet address) for asking questions or requesting copies of plan or policy documents
An Internet address (or similar contact information) for obtaining a list of network providers (for plans with one or more networks of providers)
An Internet address (or similar contact information) for obtaining coverage information (for plans that use a formulary for prescription drug coverage)

The SBC must also provide an Internet address and phone number that plan participants and beneficiaries can use to obtain the Uniform Glossary, which provides definitions for a number of health-coverage-related and medical terms. Insurers and employers must provide the Uniform Glossary, in either paper or electronic form, no later than 7 business days after receiving a request from a plan participant or beneficiary.

The SBC and Uniform Glossary requirements, which also apply to grandfathered plans, became effective on September 23, 2012. However, the administration extended various safe harbors and enforcement relief through the end of the second year of applicability, so penalties will not be imposed on those working diligently and in good faith to meet the requirements.

Unlike the general descriptions provided in this article, the regulations are highly technical and very specific. For example, the SBC cannot be more than 4 double-sided pages in length and cannot use print smaller than 12-point font. Paying attention to the details is critical. Since a willful failure to provide the required information can result in a $1,000 fine for each plan participant or beneficiary, employers cannot afford a casual approach to SBCs.

At Setnor Byer Insurance & Risk, we are committed to serving as a resource for Affordable Care Act compliance. If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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Affordable Care Act Update

Despite becoming law over four years ago, the Affordable Care Act continues to make headlines. Since it’s not easy to keep track of all the changes, let’s take a look at some of the more significant recent developments.

Elimination of Small Group Deductible Limits

A significant ACA change scheduled to take effect in 2014 involves annual deductible limits for small groups. Under this provision, small group health plan deductibles could not be more than $2,000 for individuals or $4,000 for families. Those who were concerned about the lack of flexibility caused by these deductible limits no longer have to worry.

The small group deductible limits were rather unceremoniously eliminated by the Protecting Access to Medicare Act, which was signed into law on April 1, 2014. Since these limits were retroactively eliminated back to the day the ACA was originally enacted, it’s almost like they never existed. This is welcome news for many small groups, which are typically those employers with up to 50 employees, but which may be employers with up to 100 employees.

However, it is important to note that the ACA’s annual out-of-pocket cost-sharing limits have not changed. Since these cost-sharing limits specifically apply to deductibles, among other things, employers must still be aware of indirect deductible limitations. The 2014 annual out-of-pocket limit is $6,350 for individuals and $12,700 for families.

Updated Model COBRA Notices

Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), employees and their families may have the option of staying on their former employer’s health insurance plan for a limited period of time after their employment ends. Despite having to pay the entire premium, including any portion previously paid by their employer, COBRA coverage has typically been cheaper than individual or family coverage because the premiums are based on the employer’s group rates. However, with the new Health Insurance Marketplace created by the ACA, this may no longer be the case.

Phyllis C. Borzi, Assistant Secretary of Labor for Employee Benefits Security, said that, “in many cases, workers eligible for COBRA continuation coverage can save significant sums of money by instead purchasing health insurance through the Marketplace…It is important that workers know that in some cases there is a Marketplace option as well.”

To let employees know they may have an alternative to continuing their health care coverage under COBRA, the Department of Labor updated its Model COBRA General Notice and Model COBRA Election Notice. According to the Department of Labor, these updated notices make it clear to workers that if they are eligible for COBRA continuation coverage when leaving a job, they may choose to instead purchase coverage through the Health Insurance Marketplace.

Employer Mandate

In February 2014, the Internal Revenue Service provided transition relief from the ACA’s employer responsibility provisions. Employers with 100 or more employees wanting to avoid the penalty must offer coverage to 70% of their full-time employees in 2015, and 95% in 2016 and beyond. Large employers that do not meet these standards will have to make employer responsibility payments beginning in 2015. Employers with 50 to 99 full time employees will not be subject to a penalty until 2016, provided they meet certain conditions.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the changes coming in 2014. Check back with us periodically for future informational updates about the Affordable Care Act. If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

If you’d like to subscribe to our weekly newsletters please click here.

Offering Health Insurance to Same-Sex Spouses

Under the Affordable Care Act, health insurance issuers in the individual and group markets are generally required to guarantee insurance coverage to every employer and individual that applies. Beginning in 2015, this guarantee will extend to same-sex spouses.

On March 14, 2014, the Department of Health & Human Services (HHS) announced that insurance companies offering non-grandfathered health insurance plans can no longer refuse to offer health insurance coverage to same-sex spouses. In taking this position, the HHS relied on federal regulations prohibiting health insurance issuers from employing marketing practices or benefit designs that discriminate on the basis of, among other things, an individual’s sexual orientation.

According to HHS, an issuer is considered to employ discriminatory marketing practices or benefit designs if the issuer:

Offers health insurance coverage to a spouse in an opposite-sex marriage; and
Does not offer the same coverage to a spouse in a same-sex marriage that was validly consummated in a jurisdiction where the law authorizes same-sex marriages.

Importantly, the prohibition against discriminating against same-sex spouses applies regardless of the jurisdiction in which the insurance policy is offered, sold, issued, renewed, in effect, or operated, and regardless of where the policyholder resides. This means that insurance companies must offer coverage to legally married same-sex spouses even if they live in a state that does not allow same-sex marriages.

HHS noted that its position regarding coverage for same-sex spouses does not require a group health plan to provide coverage that is inconsistent with the terms of eligibility for coverage under the plan, or that otherwise interferes with the ability of a plan sponsor to define a dependent spouse for purposes of eligibility for coverage under the plan. It only prohibits an issuer from refusing to offer the option to cover same-sex spouses on the same terms and conditions as opposite sex-spouses.

According to HHS, it is only clarifying the current regulations’ prohibition against discrimination based on sexual orientation in a manner that is consistent with the policy of ensuring that all individuals have access to health coverage. However, since “some issuers may not have understood the prohibition,” HHS is not requiring immediate compliance. Rather, health insurance issuers must implement changes for plans or policies years beginning on or after January 1, 2015.

Though fewer than half the states allow same-sex marriages, employers in every state need to be aware of health insurance requirements for same-sex spouses. Beginning in 2015, the focus will need to be on the legality of the marriage rather than the gender of the spouses.

Recent developments with the Affordable Care Act suggest that change rather than stability should be expected. At Setnor Byer Insurance & Risk, we are committed to guiding you through the changes coming in 2014 and beyond. Check back with us periodically for future informational updates about the Affordable Care Act.

If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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Affordable Care Act’s Employer Mandate Delayed…Again

On February 10, 2014, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued final regulations implementing the employer responsibility provisions under the Affordable Care Act (ACA). Despite being previously delayed, the final regulations provide transition relief to employers with 50 or more employees, which, according to the administration, should ensure a gradual phase-in of the employer mandate.

Since the employer mandate does not apply to employers with fewer than 50 employees, small employers are not required to provide coverage or fill out any forms in 2015, or in any year, under the ACA. For employers with 50 or more full-time employees, the final regulations provide the following transition relief.

Large Employers (100 or more employees): The final regulations reduce the percentage of full-time employees that must be offered health coverage. To avoid paying a penalty, large employers must offer coverage to 70% of their full-time employees in 2015, and 95% in 2016 and beyond. Large employers that do not meet these standards will have to make employer responsibility payments beginning in 2015.

Medium Employers (50 to 99 employees): The employer responsibility provisions will not apply to employers with 50 to 99 full-time employees until 2016. However, to be eligible for this transition relief, employers must certify that they meet the following conditions:

Limited Workforce Size. The employer must employ an average of at least 50 but fewer than 100 full-time employees (including full-time equivalents) on business days during 2014. The number of full-time employees (including full-time equivalents) is determined in accordance with the otherwise applicable rules in the final regulations for determining status as an applicable large employer.
Maintenance of Workforce and Aggregate Hours of Service. From February 9, 2014 to December 31, 2014, the employer may not reduce the size of its workforce or the overall hours of service of its employees in order to qualify for the transition relief. However, an employer that reduces workforce size or overall hours of service for bona fide business reasons is still eligible for the relief.
Maintenance of Previously Offered Health Coverage. From February 9, 2014 to December 31, 2015 (or, for employers with non-calendar-year plans, the last day of the 2015 plan year), the employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014. An employer will generally not be treated as eliminating or materially reducing health coverage if: (i) the employer contributes at least 95 percent of the dollar amount or at least the same percentage of the cost of coverage that was offered on February 9, 2014; (ii) any changes in benefits to employee-only coverage continue to provide minimum value; and (iii) the employer does not narrow or reduce the classes of employees (or the employees’ dependents) to whom coverage under was offered on February 9, 2014.

Since the final regulations cover a number of different topics and are highly technical, employers looking to take advantage of the transition relief should consult with a licensed professional.

Though many welcome the transition relief provided in the final regulations, it doesn’t look like 2014 will bring stability and predictability to health care under the Affordable Care Act. At Setnor Byer Insurance & Risk, we are committed to guiding you through the changes coming in 2014. Check back with us periodically for future informational updates about the Affordable Care Act. If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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Final Rules Issued for Mental Health Parity and Addiction Equity Act

The Departments of Labor, Health and Human Services and the Treasury issued final rules implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Act). Though interim final rules implementing the Act were published and became effective in 2010, these final rules will become effective 60 days after their November 13, 2013 publication date.

Under the Act, group health plans and group and individual health insurance coverage are required to treat mental health and substance use disorder benefits on par with medical/surgical benefits. Though the Act does not require group health plans to provide mental health benefits or substance use disorder benefits, if they are provided, financial requirements and treatment limitations cannot be more restrictive for mental health and substance use disorders than they are for medical/surgical benefits.

Financial requirements include deductibles, copayments, coinsurance and out-of-pocket maximums, but do not include aggregate lifetime or annual dollar limits. Treatment limitations include limits on the frequency of treatment, number of visits, days of coverage, days in a waiting period, and other similar limits on the scope or duration of treatment.

According to a press release issued by the administration, the final rules include specific consumer protections, such as:

Ensuring that parity applies to intermediate levels of care received in residential treatment or intensive outpatient settings;
Clarifying the scope of transparency required by health plans, including the disclosure rights of plan participants, to ensure compliance with the law;
Clarifying that parity applies to all plan standards, including geographic limits, facility-type limits and network adequacy; and
Eliminating an exception to the existing parity rule that was determined to be confusing, unnecessary and open to abuse.

Health and Human Services Secretary Kathleen Sebelius said, “This final rule breaks down barriers that stand in the way of treatment and recovery services for millions of Americans. Building on these rules, the Affordable Care Act is expanding mental health and substance use disorder benefits and parity protections to 62 million Americans. This historic expansion will help make treatment more affordable and accessible.”

The final rules generally apply to group health plans and health insurance issuers offering group health insurance coverage for plan years beginning on or after July 1, 2014; however, they do not apply to small employers with between 2 and 50 employees. Since the Affordable Care Act extended the Act to grandfathered and non-grandfathered individual health insurance coverage, the final rules apply to individual coverage with policy years beginning on or after July 1, 2014.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the constantly changing health care reform landscape. Check back with us periodically for future informational updates.

If you have specific questions about the Mental Health Parity and Addiction Equity Act or the Affordable Care Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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