| Greetings! We
hope that you find the May edition of the PBG Newsletter interesting and informative.
As always, should you have any questions or like additional information on a topic,
please contact our office.
CThe Affordable Care Act
allows young adults to stay on their parents' health care plan until age 26. Before
the President signed this Act into law, many health plans and insurers could and
did remove young adults from their parents' policies because of their age, leaving
many college graduates and others with no insurance. This helps to explain problems
like: - Young adults have the highest rate of insured of
any age group
- Young adults have the lowest rate of access to employer-based
insurance
- Young adults' health and finances are at risk
Providing
Relief for Young Adults
The Affordable Care Act requires plans and issuers
that offer coverage to children on their parents' plan to make the coverage available
until the adult child reaches the age of 26. Many parents and their children who
worried about losing health insurance after the children moved away from home
or graduated from college no longer need to worry. The Department
of Health and Human Services, Labor, and Treasury have issued regulations implementing
the Affordable Care Act by expanding dependent coverage for adult children up
to age 26. Key elements include: - Coverage Extended
to More Children: The goal of this new policy is to cover as many young adults
under the age of 26 as possible with the least burden. Plans and issuers that
offer dependent coverage must offer coverage to enrollees' adult children until
age 26, even if the young adult no longer lives with his or her parents, is not
a dependent on a parent's tax return, or is no longer a student. There is a transition
for certain existing group plans that generally do not have to provide dependent
coverage until 2014 if the adult child has another offer of employer-based coverage
aside from coverage through the parent. The new policy providing access for young
adults applies to both married and unmarried children, although their own spouses
and children do not qualify.
- Effective for Plan or Policy Years
Beginning On or After September 23, 2010: Secretary Kathleen Sebelius called
on leading insurance companies to begin covering young adults voluntarily before
the implementation date required by the Affordable Care Act (which is plan or
policy years beginning on or after September 23rd). Early implementation would
avoid gaps in coverage for new college graduates and other young adults and save
on insurance company administrative costs of dis-enrolling them between May 2010
and September 23, 2010. Over 65 companies have responded to this call saying they
will voluntarily continue coverage for young adults who graduate or age off their
parents' insurance before the implementation deadline.
- All Eligible
Young Adults Will Have A Special Enrollment Opportunity: For plan or policy
years beginning on or after September 23, 2010, plans and issuers must give children
who qualify an opportunity to enroll that continues for at least 30 days regardless
of whether the plan or coverage offers an open enrollment period. This enrollment
opportunity and a written notice must be provided not later than the first day
of the first plan or policy year beginning on or after September 23, 2010. The
new policy does not otherwise change the enrollment period or start of the plan
or policy year.
- Same Benefits/Same Price: Any qualified young
adult must be offered all of the benefit packages available to similarly situated
individuals who did not lose coverage because of cessation of dependent status.
The qualified individual cannot be required to pay more for coverage than those
similarly situated individuals. The new policy applies only to health insurance
plans that offer dependent coverage in the first place; while most insurers and
employer-sponsored plans offer dependent coverage, there is no requirement to
do so.
New Tax Benefits for Adult Child Coverage
The
new regulation complements guidance issued by the Treasury Department on April
27, 2010, on the tax benefits provided for such coverage through the Affordable
Care Act. Under a new tax provision in the Affordable Care Act and the Treasury
guidance, the value of any employer-provided health coverage for an employee's
child is excluded from the employee's income through the end of the taxable year
in which the child turns 26. This tax benefit applies regardless of whether the
plan is required by law to extend health care coverage to the adult child or the
plan voluntarily extends the coverage.
Key Elements Include: - Tax
Benefit Continues Beyond Extended Coverage Requirement: While the Affordable
Care Act requires health care plans to cover enrollees' children up to age 26,
some employers may decide to continue coverage beyond the child's 26th birthday.
In such a case, the Act provides that the value of the employer-provided health
coverage is excluded from the employee's income for the entire taxable year in
which the child turns 26. Thus, if a child turns 26 in March but stays on the
plan through December 31st (the end of most people's taxable year), all health
benefits provided that year are excluded for income tax purposes.
- Available
Immediately: These tax benefits are effective on March 30, 2010. The exclusion
applies to any coverage that is provided to an adult child from that date through
the end of the taxable year in which the child turns 26.
- Broad
Eligibility: This expanded health care tax benefit applies to various workplace
and retiree health plans. It also applies to self-employed individuals who qualify
for the self-employed health insurance deduction on their federal income tax return.
- Both Employer and Employee Shares of Health Premium Are Excluded
from Income: In addition to the exclusion from income of any employer contribution
towards qualifying adult child coverage, employees can receive the same tax benefit
if they contribute toward the cost of coverage through a "cafeteria plan."
This benefit is available immediately, even if the cafeteria plan document has
not yet been amended to reflect the change. To reduce the burden on employers,
they have until the end of 2010 to amend their cafeteria plan documents to incorporate
this change.
The
Patient Protection and Affordable Care Act (PPACA) and related legislation will
impact the administration of your Flexible Spending Account (FSA) and/or Health
Reimbursement Arrangement (HRA). - As of January 1,
2011, over-the-counter (OTC) drugs and medicines will require a letter of medical
necessity (with specific diagnosis) from a licensed provider. Without a letter
of medical necessity, these items will be ineligible for reimbursement from a
Medical FSA or HRA.
- Current regulations prohibit changes to Medical
FSA elections without the occurrence of a qualified change-in-status event. The
new requirement above is not a qualified change-in-status event.
- Plan
sponsors with less than 100 employees will be exempt from all annual Non-Discrimination
testing provided that certain requirements are met.
- Qualified expenses
for eligible adult children may be reimbursed from an employee's Medical FSA and/or
HRA provided that such dependent will not reach age 27 during the year.
- Employee
contributions toward insurance premiums to cover the eligible children listed
above may be taken from an employee's pay on a pre-tax basis.
- As
of January 1, 2013, a $2,500 annual cap will be placed on individual salary reductions
for Medical FSAs.
As a result of National Health
Care Reform, the U.S. Department of Health and Human Services (HHS) will establish
a temporary reinsurance program to assist certain employment-based plans with
the costs of providing health benefits to early retirees and their dependents.
More specifically, HHS will reimburse sponsors of participating, certified group
health plans 80% of the claims between $15,000 and $90,000 for early retirees,
their spouses or dependents each plan year. HHS will adjust these dollar amounts
annually. There is currently $5 billion appropriated for the program. When the
program funds are expended, the program is expected to cease. Below
is information you may find helpful if you choose to participate in the Early
Retiree Reinsurance Program. This brief overview of the program is intended for
your information only and does not constitute legal advice.
Who is
eligible to participate in the program?
Sponsors of most self-funded and
fully insured employer group health plans that cover early retirees are eligible
to participate in the temporary reinsurance program. This includes plans offered
by private entities, state and local governments, nonprofits, religious entities,
and unions. It does not include stand-alone dental or vision plans. Early
retirees and their dependents include (1) a plan participant age 55 and older
who is not eligible for Medicare and is not an active employee and (2) his or
her spouse, surviving spouse, and dependents regardless of their age or Medicare
eligibility.
Getting Started...
Should employers participate
in the program? To get started, employers should consult their own legal counsel
to determine specific factors that may apply to them and whether or not filing
for reinsurance is in their best interest.
If an employer decides to participate
in the reinsurance program, they are required to file an application with the
HHS Secretary to be certified for participation. As part of the application to
HHS, the following are some of the types of information that must be included:
- The projected amount of reimbursement to be received
under the program for the first two plan-year cycles with specific amounts for
each plan year.
- An attestation that policies and procedures are in
place to detect and reduce fraud, waste, and abuse.
- A description
of the procedures or programs the employer has in place with the potential to
generate cost savings with respect to plan participants with chronic and high-cost
conditions.
- An assurance that the sponsor has a written agreement
with its health insurance issuer or group health plan to provide HHS with information
necessary to verify compliance with the program requirements. This includes access
to individually identifiable health information subject to the HIPAA Privacy Rule.
- A summary of how the employer will use reimbursed amounts to maintain
its level of contribution to the plan and reduce costs to the plan (e.g. using
funds to lower participant deductibles, co-insurance, or copayments in future
years).
The Process...
Insurance
carriers are awaiting further guidance from HHS about this application process
but the expectation is that HHS will make the applications available on or around
June 21, 2010. HHS may stop accepting applications if funds under the program
are exhausted. Partners Benefit Group will provide employers
with additional information as it becomes available.
Sincerely,
Brittany Powers
Partners Benefit Group,
Inc. |
