Health Care Reform Update

There’s a lot of information out there to sort through on health care reform. But you don’t have to go it alone. PDRMA’s here to help!

We’re continuously watching and analyzing the latest developments for our members ... and posting regular updates here.

August 3 , 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 

Complying with PPACA

Lately you can’t pick up a newspaper or turn on the TV without seeing something about health care reform. Although this political football has taken on many names, including the increasingly used “Affordable Care Act,” its official name is the Patient Protection and Affordable Care Act (PPACA). But no matter what people call the new law, questions continue to abound regarding compliance.

What is PDRMA Health doing to comply?

The PDRMA staff is diligently working through the changes, which will be phased in over the next several years. Specific regulations are being released as they are completed by the various agencies charged with implementing PPACA — providing formal guidance on how to implement various aspects of the new law.

The specific actions currently underway include the following:

• PDRMA Health has identified the plan design changes required by January 1, 2011.



• Costs of the required changes are being estimated by PDRMA’s health benefits actuary. Many of the plan requirements under the new law will not add costs to PDRMA, because they’re already incorporated in the plan. Some requirements, however, will add costs — although we don’t anticipate that these increases will be significant:
• The removal of lifetime maximums (currently $5,000,000 under the PDRMA Health Program) and
• The removal of co-pays for preventive services

• Specific information regarding plan changes will be presented to the Health Benefits Committee in September and included in 2011 budget proposal.



• Plan changes and the 2011 budget will be submitted to Health Program Council for approval in October.

If your agency is enrolled in a health plan other than PDRMA’s, check with your plan administrator for specifics about how they are complying with PPACA.

What should PDRMA member agencies do?

W-2s issued for 2011 must include the cost of each employee’s health coverage. For now, we don’t expect that employees will be taxed on the value of their benefits. But in the future, they may be taxed if the value of their benefits exceeds some prescribed level.

The impact of PPACA on employers will not be significant until 2014. At that time, some employers will have choices of providing health benefits or paying a penalty. There are many complexities that will go into determining who, what, where, when and how much. But rest assured, PDRMA Health will share the key details you need to know as they’re determined.

In addition to the specific guidance you can count on PDRMA to provide, a good general source of information is www.healthcare.gov — a new, more user-friendly website developed by the federal goverment (replaces www.healthreform.gov). Designed primarily as a resource for consumers, the site also offers some general information for employers.

What should you tell employees?

If your employees inquire about how health care reform will affect them, let them know there’s generally nothing they need to do at the current time. One of PPACA’s objectives is to equalize insurance coverage at a standardized level of benefits for all Americans. But by design, employees of PDRMA Health member agencies already have comprehensive coverage. So very little will change until 2014, when the health insurance exchanges are established.

It is important that all involved be aware of some level of change to come. Like it or not, PPACA has been enacted, and most of its provisions create changes that the PDRMA Health Program, its member agencies and their employees cannot control.

However, there’s one vitally important area every one of us can control: our personal actions to promote our own health and wellness. It is critical that we all continue to focus on prevention as our best defense against increasing health care costs.

June 9 , 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 

Early Retiree Reinsurance Program effective June 1

The Patient Protection and Affordable Care Act (PPACA) includes a $5 billion Early Retiree Reinsurance Program (ERRP) that partially subsidizes the costs of covering retirees aged 55 – 64 as of June 1. This has been getting a lot of attention, because it’s a provision of the law with an early implementation date.

This update takes a closer look at ERRP, to ensure you have accurate information about how it will work. However, plan administrators such as the PDRMA Health Program will apply for the program and handle the details for members.

ERRP’s purpose is to encourage employers to provide health coverage for early retirees who aren’t eligible for Medicare (and their spouses, surviving spouses and dependents) by making it more affordable, until state health exchanges and federal subsidies are implemented in 2014.

Last month, the Secretary of Health and Human Services (HHS) issued an interim final rule to implement ERRP. The related guidance details the qualifications for eligibility, steps health plan providers must take to apply for the program, and requirements to receive reimbursement.

Employers providing coverage for early retirees may apply for reimbursement of 80% of the annual claims for the retirees and their covered family members:

• Between $15,000 and $90,000
• Incurred between June 1, 2010 and December 31, 2013
• For claims including medical, prescription drug and behavioral health

Early retirees eligible for a pension from the Illinois Municipal Retirement Fund (IMRF) or similar pension plan at the time of retirement may elect to continue their group health benefits through the PDRMA Health Program — which currently covers many of them.

The ERRP will last until January 1, 2014 or until the $5 billion set aside for the program is depleted. Because this is a temporary program with limited funding — available on a first come, first serve basis — PDRMA will apply promptly once the application becomes available.

At this time, it’s too early to say:

• Whether the PDRMA Health Program will be approved by HHS (Although our benefits counsel has encouraged us to apply, they cannot guarantee that we will meet all the requirements as defined or interpreted by HHS)
• Whether there will be claimants for whom we will receive reimbursements
• Exactly how any reimbursements will be used

Any reimbursements received by the PDRMA Health Program must be used according to HHS’ expectations. In general, HHS intends that reimbursements will be used to reduce the plan’s health benefit premiums or costs, and/or reduce health benefit premium contributions, copayments, deductibles, coinsurance, or other out-of-pocket costs for plan participants. Since much of PDRMA Health’s activities are focused on plan cost control to benefit the pool as a whole, using the reimbursement in an acceptable manner will be business as usual.

HHS is expected to announce additional information about the appropriate use of the reimbursements, as well as how it plans to monitor use of funds by plan sponsors, in the coming months.

Coverage requirements and part-time employees

Since early information about HCR was unclear regarding whether it would require employers to cover part-time employees, we addressed this topic briefly in our May 6 update. Although no further rules or guidance have been issued on this topic by government agencies, we thought it might help to take a broader look at how part-time employees figure into the new law.

Starting in 2014, any employer with more than 50 employees will be required to offer coverage or pay an annual fine of $2,000 per employee if the employer does not provide “minimum essential coverage” and an employee (even just one) receives a subsidy to buy insurance through the new state health insurance exchanges.

The determination of minimum essential coverage is based on several factors including:

• How much the employee contributes to the cost of coverage
• The employee’s total household income
• The ratio of a plan’s cost to the value of the coverage 

Even if an employer with more than 50 employees does offer health benefits, it will be fined $3,000 annually for each “full-time” employee who opts out (most likely due to high premiums) and receives an insurance exchange subsidy instead. This is where part-time employees come into the picture — as “full-time equivalents” the PPACA defined as working 30+ hours per week. Such employees will be included in calculating the employer’s total fine.

As a result, even though there is no mandate to cover part-time employees, the new law will likely encourage more employers to offer coverage to anyone working 30+ hours per week.

The criteria and legalities are complex, and benefits experts are still working through the legislation to clarify how this will be measured and administered. Fortunately, these provisions are not effective until 2014, and the PDRMA Health Program will be assisting members in planning for their compliance as employers.    

We understand that many of our member agencies employ individuals who work 30 or more hours per week but are not currently eligible for the health plan under the members’ personnel policies. We also know that offering coverage to part-time employees who aren’t currently eligible for coverage may have a significant impact on your agency’s budget and operations.

Until the regulations are issued, this and other interpretations don’t provide all the information necessary to fully evaluate this issue and determine the best approach for each member agency. We will continue to monitor developments on this topic and will share the latest information in our next Health Care Reform Update in July.

You can count on PDRMA to keep you posted! If you have any questions, contact PDRMA Health at 630-435-8998 or PDRMA’s main office at 630-769-0332.

May 6 , 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 

Recent legislation covers the “what” of  health care reform.
An ongoing series of federal regulations will clarify the “how.”

As promised in our March 23 email, this is the first in our series of monthly updates about health care reform (HCR). We’ll keep you informed about developments stemming from the Patient Protection and Affordable Care Act (enacted March 23) and the Health Care and Education Reconciliation Act (enacted March 30) — which together comprise the new law.

Through this legislation, Congress laid out myriad ways it intends to restructure the health care industry including self-insured groups such as the PDRMA Health Program. However, the specifics regarding how things will change are still unfolding. Regulations gradually issued by federal agencies — including Health and Human Services, the Department of Labor, and the Internal Revenue Service — will help connect the legislation’s dots.

As each new set of regulations is released in the coming months and years, PDRMA will gain a more comprehensive understanding of HCR’s impact. This will help us adjust the PDRMA Health Plan for full compliance, as well as provide guidance to all PDRMA members as employers.

In the meantime, PDRMA will keep monitoring developments affecting our Health Plans and all employers. Listed below are some of things we’re watching closely  … awaiting more regulations to learn the exact impact.

PDRMA Health Plan

We expect that ours is a “grandfathered plan,” since it was in place on March 23. As a result, some of the requirements of the legislation don’t currently apply to us. We’ll monitor the regulations for more insight on what changes may cause a plan to lose its grandfather status. Meanwhile, we’ll act as a grandfathered plan.

The following Health Plan items may change as of January 1, 2011:

• Lifetime maximum benefits — The PDRMA Health PPO medical plans currently have a lifetime maximum benefit of $5 million. It appears that the lifetime maximum benefit may need to change to unlimited.
• Dependent child age limit — The PDRMA Health Program currently defines a dependent child as “an employee’s unmarried child from birth until the date he attains age 26.” It seems that HCR may require us to remove the “unmarried” requirement.
• Pre-existing conditions — The PDRMA Health Program Plans currently include a pre-existing condition limitation, which is reduced by the period of other creditable coverage unless there’s a lapse in coverage of 63 days or more. It appears that HCR may require us to remove the pre-existing limitation for children under 19. In the future, this requirement will be expanded to include adults.
• Calendar year maximums — Certain benefits currently have a calendar year maximum benefit. HCR may require PDRMA Health to remove or increase the calendar year maximums.

At this time, we do not expect the above changes to have a major cost impact on the PDRMA Plans.

All employers

• Part-time employees — Although HCR refers to “part-time employees” and “30 hours per week” in various contexts, it does not clearly mandate that employers (or health plans) define full-time, benefits-eligible as 30+ hours per week. But by 2014, such employees are expected to be considered full-time for the purpose of calculating employers’ annual penalties for providing no or “unaffordable” coverage (when an employee buys coverage in future “insurance exchanges”). As a result, employers may be forced to use the 30+ hours definition to avoid penalties. More to come on this topic next month.  
• Flexible Spending Accounts — If your agency offers a Health Care Flexible Spending Account (FSA), over-the-counter medications will be reimbursable only with a prescription, effective January 1, 2011.
• Dependent child tax code — As a companion to the change in dependent age, the tax code definition of “dependent child” will change as well. The IRS will consider a child to be a dependent until the day before they turn 27 (as long as they meet the other requirements of dependency). You will recall that PDRMA Health issued a memo on February 15 regarding taxation of benefits for dependents. As a result of the March 30 legislation, calculating the fair market value and reporting the imputed income for dependent children enrolled in PDRMA Health Plans will not be necessary in most cases. The effective date of these changes appears to be March 30, 2010.

Again, the ongoing regulations will further illuminate the impact of the items listed above. In addition, a helpful “Timeline for Calendar-Year Group Health Plans” from The Segal Group (www.segalco.com/health-care-reform/HCR-timeline.pdf) has a more detailed list of provisions that will affect group health plans and employers through 2018.

Although the details of how you’ll be affected are still developing, you can count on PDRMA to keep you posted.

Rely on PDRMA

There’s a lot of information out there, especially online … some of which may not actually impact you. So don’t worry! Instead, rely on us for the facts you need.

If you’re looking for more information, here are some reputable sites we’re monitoring:

www.healthreform.gov — The official U.S. government website on the new law
www.segalco.com — Benefits and human resources consultants
www.siia.org — The Self-Insurance Institute of America, Inc.
www.ifebp.org  — The International Foundation of Employee Benefit Plans

And as always, contact PDRMA Health at 630-435-8998 or PDRMA’s main office at 630-769-0332 if you have any questions.

March 23, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Health care reform signed into law

The Patient Protection and Affordable Care Act (HR 3590), approved by the Senate on December 24 and by the House of Representatives on March 21, was signed into law by President Obama today.

Legislation is expected in the near future which will modify many provisions of the Act. One such bill, the Health Care and Education Affordability Reconciliation Act of 2010, was approved by the House on March 21 but has not yet been considered by the Senate — which is expected to pass a separate package of changes.

You may wonder how this legislation will impact the PDRMA Health Program and your agency as an employer. You can rely on us to continue to monitor related developments as they unfold and communicate important information to you.

There are countless articles available regarding this legislation, but it will not be clear what specific actions the PDRMA Health Program or your agency will need to take until the detailed regulations are issued by the appropriate federal agencies. Once issued, we will review the regulatory details — working with external benefits consultants and legal counsel to clarify the impact of the legislation. This information will be communicated to you as it becomes available.

In some cases, public entities are not subject to federal mandates or have the ability to opt out. However, it is not yet clear if there are portions of this legislation for which the PDRMA Health Program or your agency may be able to opt out.

At this stage, it’s impossible to know all the answers. But rest assured we’ll stay on top of these legislative developments, determine their applicability to our members, and communicate the changes you need to know.

If you have questions, please contact Laura Ganschow at 630-435-8929 or Martha Rademacher at 630-435-8908.