Alert: Year-End Update

Transcription

1 Alert: Year-End Update December 19, 2011 This issue of Alert reviews recent updates in federal and local benefit requirements taking effect in For further information on these or other topics, please contact your EPIC Benefits Consulting Team. SUMMARY OF BENEFITS AND COVERAGE (SBC): DELAYED REQUIREMENT The Summary of Benefits and Coverage (SBC) is a standardized benefit summary that insurers and employers will be required to distribute to health plan participants. The SBC is designed to provide clear, consistent and comparable information in plain language focusing on cost sharing provisions (deductibles, coinsurance and copays), exclusions (reductions and coverage limits) and coverage examples (cost estimates for hypothetical medical scenarios). Originally scheduled for implementation March 23, 2012, federal agencies released proposed regulations last summer including SBC templates and instructions. At that time, the agencies requested comments from the public and interested parties regarding the design and timing requirements. On November 17, 2011, the agencies posted a statement online delaying the SBC requirement. Insurers and employers will not be required to implement the new SBC requirements until final regulations are issued and they have sufficient time to comply. Excerpt from ACA Implementation FAQs posted 11/17/2011: The Departments received many comments on the proposed regulations and templates and intend to issue, as soon as possible, final regulations that take into account these comments and other stakeholder feedback. PHS Act section 2715 provides that group health plans and health insurance issuers shall provide the Summary of Benefits and Coverage and Uniform Glossary pursuant to standards developed by the Departments. Accordingly, until final regulations are issued and applicable, plans and issuers are not required to comply with PHS Act section It is anticipated that the Departments final regulations, once issued, will include an applicability date that gives group health plans and health insurance issuers sufficient time to comply.

2 For more information about the SBC the Alert from September 13 is reprinted below. PRETAX TRANSPORTATION BENEFITS: NEW LIMITS FOR 2012 Many employers sponsor a qualified transportation benefit plan (QTB) offering tax advantages for their workers parking and mass transit/vanpooling expenses. Federal tax law sets monthly limits on the maximum expenses allowed for pretax reimbursement. Last year s Tax Relief Act continued the $230 transit limit through 2011 only. Congress is not expected to take any last minute action this time, so the following changes take effect January 1, 2012: Commuting Expense 2012 Monthly Limit 2011 Monthly Limit Parking $240 $230 Transit (mass transit/vanpooling) $125 $230 Bicycle $ 20 $ 20 W 2 REPORTING OF HEALTH CARE COSTS The Affordable Care Act requires employers to report health care coverage costs on each employee s Form W 2 starting with tax year 2012 (that is, Forms W 2 that will be issued in January 2013). This W 2 reporting is informational only and has NO tax consequences. Small employers that file fewer than 250 Forms W 2 annually are exempt from the reporting requirement. Employers and payroll administrators should ensure that their systems begin capturing the required health coverage cost data starting January 1. Reportable amounts include all group health coverage, whether paid by the employer or employee, pretax or post tax, self funded or insured, grandfathered or nongrandfathered. For details about the W2 reporting requirement and links to IRS guidance, click here. STATE DISABILITY INSURANCE: 2012 CHANGES Three states California, Hawaii and New Jersey have announced changes to their state disability insurance programs. These changes take effect January 1, 2012: California Feature Contribution Rate/Wage Base 1.0% of first $95, % of first $93,316 Weekly Benefit Maximum $1,011 $987 Hawaii Feature

3 Contribution Rate Employer pays cost but may charge employee up to $4.52 per week. Weekly Benefit Maximum $524 $513 New Jersey Employer pays cost but may charge employee up to $4.42 per week. Feature Contribution Rate/Wage Base Employer pays cost but may charge employee up to 0.26% of first $30,300 of annual wages. Weekly Benefit Maximum $572 $559 Employer pays cost but may charge employee up to 0.56 of first $29,600 of annual wages. SAN FRANCISCO HEALTH CARE SECURITY ORDINANCE San Francisco has enacted Health Care Security Ordinance changes impacting employers that contribute to Health Reimbursement Accounts (HRAs). The changes take effect January 1, 2012 and employers must take action before the end of December 2011 in order to comply. Background: Since 2008, the San Francisco Health Care Security Ordinance (SF HCSO) has required employers to spend a minimum amount of money each calendar quarter on their employees health care. The required amount, called the Spending Requirement, is calculated as a dollar amount per hour based on the number of hours worked in San Francisco. Part time employees that work as little as eight hours a week may be covered. The Ordinance applies to companies with any workers in San Francisco regardless of where the company s headquarters or main work sites are located. Companies with fewer than 20 total employees (or non profits with fewer than 50 employees) are exempt. To meet the Spending Requirement, the employer may count all amounts that it contributes for the employee s (and dependents ) health care, e.g., insurance premiums, self funded plan payments, direct payment of health services, and various types of medical spending accounts including HRAs. If the employer s contributions do not meet the minimum Spending Requirement, the employer must make up the shortfall, usually by making quarterly payments to the City s Healthy San Francisco program. Changes for 2012: The Ordinance changes pertain to employers that make contributions to Health Reimbursement Accounts (HRAs). City officials expressed concern that HRA plans have often contained use it or lose it provisions without allowing account balances to roll over to the next year. (A recent study estimated that 80% of HRA contributions have reverted back to employers.) The Ordinance changes for 2012 are intended to protect workers HRA balances and improve communications. Starting January 1, 2012, HRA contributions will count toward the employer s Spending Requirement only if the following requirements are met: HRA balances as of December 31, 2011 are rolled over to January 1, 2012 HRA contributions are available to the employee for at least 24 months after date of the contribution (on a rolling quarter basis)

4 HRA balances are available to former employees for at least 90 days after date of employment termination The employer provides detailed account summaries including the account balance and any forfeiture rules: For active employees, within 15 days after each quarterly HRA contribution For terminated employees, within three days after employment ends. A notice of employee rights and employer obligations must be posted at the workplace. (City to design the notice.) The employer provides an annual report to the City describing the HRA plan terms, e.g., eligible expenses, any forfeiture rules. (City to design the report format.) In addition, companies that impose health care surcharges on customer s bills typically local restaurants and hospitality businesses will have to demonstrate that the surcharges they collect are used for their workers health care. Action Required: Amend plan to comply with new requirements. (Amendment must be adopted before January 1, 2012 effective date.) Review requirements with your TPA or record keeper, including the 24 month contribution tracking requirement and methods for producing and distributing account summaries. Resources for Employers: The City and County of San Francisco s Office of Labor Standards Enforcement (OLSE) enforces the requirements of the Ordinance. (OLSE also is the enforcement agency for San Francisco s sick leave ordinance and commuter benefit ordinance.) The OLSE web site at provides guidance and FAQs, forms and other useful information. OLSE also maintains an list for employers and other interested parties to receive alerts when new information is posted. To subscribe, HCSO@sf.gov/org and indicate subscribe for alerts in the subject line. CALIFORNIA PREGNANCY DISABILITY LEAVE Starting January 1, 2012, California SB 299 requires employers to allow up to four months pregnancy disability leave. There is no requirement to provide paid leave but the employer must continue the disabled employee s group health coverage on the same basis as for active workers. This means that the employer cannot charge the employee on pregnancy disabled leave more than the contribution amount that she would be paying if at work. Companies with 50 employees or more generally are subject to the federal Family Medical Leave Act which has a similar requirement regarding employment protection and health coverage continuation during approved leaves. For employers with fewer than 50 workers, however, the new California law is a significant change. Certain exceptions may apply to collectively bargained plans and public agencies. For a copy of SB 299, click here.

5 CALIFORNIA DOMESTIC PARTNERSHIPS Under current California law, group insurance policies issued in California that cover spouses must extend the same eligibility and benefit provisions to registered domestic partners (RDPs). Starting January 1, 2012, two additional provisions apply: California SB 757 requires group insurance policies issued outside California to extend the same provisions to registered domestic partners residing in California that they do to spouses. It is not clear how California will enforce this provision on policies issued in other states. For a copy of SB 757, click here. California SB 651 changes the criteria for becoming a registered domestic partner. In the past, couples needed to share a common residence at the time they filed the declaration form to register their partnership. Starting January 1, 2012, the common residency requirement no longer applies. For a copy of SB 651, click here. For further information on this or other topics, please contact your EPIC Benefits Consulting Team. This Legislative Update is offered for general informational purposes only. It does not provide, and is not intended to provide, tax or legal advice.

6 ALERT: Q&A about the new Summary of Benefits September 13, 2011 In the August 26 issue of Alert, we announced the proposed federal rules for the new Summary of Benefits and Coverage (SBC) requirement starting March This issue of Alert follows up with additional information and addresses typical questions from employers. Your EPIC Employee Benefits Consulting Team Starting March 23, 2012, health insurance companies and employers will begin using the new Summary of Benefits and Coverage (SBC) required by the health care reform law. GENERAL 1. What is the Summary of Benefits and Coverage (SBC)? The Affordable Care Act health care reform requires health plans and insurers to distribute a summary of benefits and coverage (SBC) using a standardized format in accordance with federal rules. The SBC is sometimes referred to as the uniform four page summary but it may be up to eight pages due to double siding. The Departments of Labor, Health and Human Services (HHS) and Treasury recently issued PROPOSED regulations about the SBC format, content and delivery requirements. The SBC regulations provided by the Departments are not final. On August 17, 2011, the Departments issued proposed regulations and opened a two-month period for the public to offer comments and suggestions. The Departments may revise the requirements when the final regulations are issued. In the meantime, the proposed regulations are a good reference point and provide sample SBC templates and instructions. 2. Do the new SBC rules change anything we are doing TODAY? No. The requirements for producing and distributing SBCs do not begin until March 2012 and even that date may be delayed when the Departments issue final regulations. The SBC rules do not have any impact on health plans this year.

7 3. What is the purpose of the SBC? The SBC is a standardized benefit summary that insurers and employers will distribute to all eligible plan participants (employees, dependents, COBRA beneficiaries). Using the templates and instructions provided in the federal rules, insurers and employers will complete the templates with plan specific benefit information. The SBC is designed to provide clear, consistent and comparable information in plain language focusing on cost sharing provisions (deductibles, coinsurance and copays), exclusions (reductions and coverage limits) and coverage examples (cost estimates for hypothetical medical scenarios). 4. Will an SBC be required for every health plan? A separate SBC will be required for each health plan or health benefit package (plan option). Future regulations may allow combining SBCs for multiple plan options, but until then a separate SBC will be needed for each option. Additionally, it appears that a separate SBC will be required for each coverage level (single, family). SBCs do not pertain to excepted benefits such as stand alone dental and vision plans and typical FSAs. 5. Our health plan has grandfathered status. Will the SBC requirement apply to grandfathered plans? Yes, grandfathered and nongrandfathered plans whether insured or self funded are subject to the SBC requirements. 6. Will the SBC replace other plan materials, such as the summary plan description (SPD) or insurer s booklet/certificate? No. The SBC will be an additional requirement and will not replace any other materials. One of the issues that the Departments may address in the final regulations is the possibility of including the SBC in the SPD to take advantage of one distribution. 7. What are the penalties for failing to provide the SBC? Insurers and employers subject to the Public Health Service Act (PHSA) may be fined up to $1,000 per plan participant for each willful violation. Generally, plans subject to ERISA may be fined up to $100 per plan participant per day.

8 SBC FORMAT AND CONTENT 8. Who designed the SBC template? The Affordable Care Act directed the Department of Health and Human Services (HHS) to work with the National Association of Insurance Commissioners (NAIC) to design the SBC. This work began many months ago and the NAIC had posted early drafts on its website so insurers, consultants and advisors have had a good sense of the style and content requirements being developed. Drafts also were reviewed by consumer groups and insurers including Consumers Union and America s Health Insurance Plans (AHIP). The templates released in the proposed regulations are very similar to the early drafts. 9. How is the SBC designed? The general concept behind the SBC is that it should provide useful information about the health plan in an easy to understand and easy to compare manner. Think of the nutrition facts on a box of cereal. The consumer can easily see how much fiber, how much sugar, and compare one cereal to another. The SBC is designed to present key information cost, coverage, exclusions and examples in a standardized format so the consumer (health plan participant) can evaluate the plan and compare one plan to another. 10. What is included in the SBC? For a sample, click here Sample SBC Template. The SBC may be produced in black and white or color. The maximum length is four double sided pages and the type font cannot be less than 12 point. The SBC begins with the Summary of Coverage: What this Plan Covers & What It Costs. The first section is divided into three columns Important Questions, Answers and Why this Matters. For each template question, the plan must fill in the answer and explain why it matters. Questions include: What is the premium? What is the overall deductible? Are there other deductibles for specific services? Is there an out of pocket limit on my expenses? What is not included in the out of pocket limit? Does this plan use a network of providers? Do I need a referral to see a specialist? Are there services this plan doesn t cover?

9 The next SBC section shows the employee s cost for common services, such as office visits, x rays, prescriptions and emergency room services. Brief information about COBRA rights and grievance and appeal rights also appears. The SBC ends with Coverage Examples intended to illustrate the portion of health care expenses that the plan will cover for three different hypothetical benefit scenarios: having a baby, treating breast cancer, and managing diabetes. (HHS has indicated it may add three additional benefit scenarios in the future.) For each scenario, the amount owed to providers (total cost) will be a government supplied dollar figure, then the plan will fill in dollar amounts for plan pays and you pay. Unfortunately, this method for illustrating coverage examples likely will create confusion. The government supplied health cost amount, such as $10,000 for having a baby, is a national average without regard to regional cost differences and/or the availability of discounted network provider fees. It will be very interesting to see whether these challenges are addressed in the final regulations. The SBC also will include contact information, such as phone numbers or web addresses for the participant to obtain the policy or certificate, lists of network providers, and prescription drug formularies. 11. What is the Uniform Glossary? In addition to the SBC, plans must make available the Uniform Glossary of insurance and medical terms. The Glossary is prepared by HHS; it currently includes definitions for about 40 terms and HHS may add others in the future. The terms and definitions are generic, not plan specific, and cannot be changed by insurers or employers. The Glossary will be posted online at There is no requirement to distribute copies of the Glossary unless a plan participant requests a paper copy. 12. Are there any foreign language requirements? The SBC must be presented in a culturally and linguistically appropriate manner. This does not mean, however, that the plan is required to produce SBCs in many different foreign languages. The requirement is based on whether the plan participant resides in specific U.S. counties where at least 10% of the population is literate only in the same non English language (based on US Census Bureau data). For residents in those counties, the English version of the SBC must disclose the availability of language services in the relevant language (currently limited to Spanish, Chinese, Tagalog or Navaho).

10 SBC PRODUCTION AND DISTRIBUTION 13. Who will produce the SBC? For a group insurance health plan, the insurer (insurance carrier or HMO) is responsible for producing the SBC in accordance with the federal rules. For a self funded health plan, the plan sponsor (employer) is responsible for producing the SBC, although in most cases, the employer will contract with its TPA or claims administrator for this service. A portion of the SBC requires completing coverage examples (e.g., the plan s maternity benefits expressed as a dollar amount) so the claims administrator will be the best source of the needed information. Although a carrier or vendor may produce the SBC, the employer will be responsible for distribution since all eligible participants whether or not currently enrolled must be included in the distribution. If, however, the insurer provides the SBC to the plan participant, the employer will not need to provide another copy to that participant (unless requested). 14. Will SBCs be required only at open enrollment or during the year? The plan (insurer or employer) must distribute the SBC at each of the following times (but not before March 23, 2012): Within seven (7) days of the participant s request for the SBC, Within seven (7) days of receiving the participant s request for a special enrollment, With written enrollment materials (or, if the plan does not distribute written application materials for enrollment, the SBC must be distributed by the first day the participant is eligible to enroll), By the first day the participant is eligible to enroll during open enrollment, and At least 30 days prior to the first day of the new plan year if the participant s election automatically renews. Participants must receive an SBC for each plan for which they are eligible. During subsequent open enrollment periods, only the SBC for the plan in which the participant is enrolled will be required (unless the participant requests SBCs for the other plans).

11 15. Do SBCs have to be distributed separately to family members? If the employee and eligible dependents have the same mailing address, the distribution requirement will be met by providing a single SBC to that address. Similar to the rules for COBRA notices, separate mailings will be required if the dependent is known to have a different address than the employee. 16. May we distribute the SBC electronically instead of hard copy? Yes, the SBC may be provided in either paper or electronic form. The proposed regulations confirm that plans and insurers may provide SBCs electronically provided that they satisfy the Department of Labor s (DOL) regulations on electronic distribution. That means that the DOL regulations currently in place for distributing SPDs and other notices electronically also will apply to SBCs. CHANGES AND REVISIONS 17. Are there more requirements if the benefits are changed or modified? Yes. Plans and insurers will be required to give at least 60 days advance notice of any material modification in plan terms or coverage (other than changes made at renewal). According to the proposed regulations, a material modification includes: Coverage enhancement, such as covering previously excluded benefits or reducing cost sharing, Material reduction in covered services or benefits, such as increasing premiums or cost sharing, or More stringent requirements for receiving benefits, such as a new referral requirement. The proposed regulations state that the material modification notice can be provided in a separate summary of material modification or through an updated SBC. EFFECTIVE DATE 18. When do plans have to start distributing the new SBC? The SBC requirement begins March 23, 2012, regardless of the plan year basis of the particular health plan. It is possible that this date may be delayed, or the date may be phased in based on plan year, when final regulations are issued.

12 19. We hold open enrollment in November. Should we distribute the SBC in November 2011 so we will not have to do it next March? The Departments issued the proposed regulations in late August and they are accepting public comments and suggestions through October 21, The Departments will review the comments and may revise the SBC format, content and delivery requirements when they issue final regulations. It is unlikely that the Departments will release final regulations in time for plans to coordinate SBC production and distribution with this Fall s open enrollment season. Distributing the SBC early to take advantage of open enrollment season may sound like a good way to avoid separate distributions, but it does not appear feasible this Fall. The bulk of the work in producing the SBC will fall to the carriers and claims administrators and they will prefer to design their procedures based on final regulations. Not surprisingly, the insurance industry is encouraging the Departments to delay the March 23, 2012 implementation date. MORE DETAILS For copies of materials issued by the Departments: Click here for Sample SBC Template Click here for the Proposed Regulations Click here for Proposed Templates and Instructions We will continue to keep you posted on developments regarding implementation of health care reform. This ALERT is offered for general informational purposes only. It does not provide, and is not intended to provide, tax or legal advice.