Patient Protection & Affordable Care Act

November 12, 2010

We are committed to keeping you informed about health care reform and the Patient Protection and Affordable Care Act (PPACA). The PPACA has a 10-year implementaion period. Some PPACA reforms become effective as early as September 23, 2010. This newsletter is intended to provide a summary of some of the immediate implications of the reform act. Insurance companies have begun mailing notices to policyholders informing them of the companies’ filings for proposed future rate adjustments.

Below is a list of benefit and eligibility enhancements that become effective on September 23rd. It is advised that these changes be communicated to employees. Note that “grandfathered plans” may not need to immediately comply with provisions affecting adult preventive care, discrimination, claims appeals and access to physicians. The September 23rd changes are:

1. Annual and lifetime dollar limits on network coverage are eliminated: Group health plans may no longer set lifetime limits on “essential health benefits.”
2. Pre-existing condition limitations are waived for enrollees under age 19.
3. Dependents may remain on their parents’ health plan until age 26 (some New York plans extend to age 29). If you have children in their 20’s, or your employees do, you may want to consider adding such dependents to your plan.
4. There is no in-network cost-sharing for preventive care services. Plans will provide first dollar coverage for in-network preventive care.
5. Emergency Services must be covered without prior authorization and treated as in-network.
6. Plan members must be allowed to designate a child’s pediatrician as the primary care provider. Plans may not require authorization or referrals for a participating OB-GYN.

The PPACA contains information defining discrimination in health plans. Under these new non-discrimination rules, group plans may not discriminate in favor of highly compensated employees (under IRC Section 105h). The term “highly compensated” is defined as one of the five highest paid officers, a shareholder owning 10% of the value of the stock, and/or an employee among the highest paid 25% of the employees. This may mean the end of certain plan designs where executives have a benefit separate from other employees (executive carve-out). Groups with low participation may also be affected.

The PPACA provides a tax credit for employer paid premiums for qualified firms. From 2010 to 2013, small businesses with 25 or fewer employees and an average wage of $50,000 or less are eligible for premium tax credits (for two years) of up to 35% of their contribution. To qualify, the business must contribute at least 50% of premium based on the rate of a single employee. Employers with 10 or fewer employees and average wages of $25,000 or less will be eligible for the 35% credit. In 2014, the credit will increase to 50% of eligible employer contributions. Groups with 11 – 25 employees with average earnings of $25,001 to $50,000 will be subject to a phase-out of the credit.

The PPACA will affect a business’s reporting requirements. Companies will be required to report the cost of the employee sponsored health coverage to their employees on IRS Form W2.

On a state level, the New York State Legislature passed S58099 on June 7, 2010. This notice provides group policyholders information, or “Advance Notice,” about the insurers filing for changes in premium rates for 2011. These filings are subject to review and approval by the New York State Insurance Department. The actual size of the increase will be released in a renewal letter approximately 60 days before renewal date. The total estimated percent increase includes multiple components: a basic increase or trend increase, an additional increase resulting from the cost of benefit enhancements required by the new PPACA, and the elimination of the New York State subsidy for small group mental health benefits (Timothy’s Law).