LIUNA Health Care Conference: Responses To Submitted Questions

Transcription

1 LIUNA Health Care Conference: Responses To Submitted Questions Again, thank you to all who attended the LIUNA Health Care Conference in March During the conference, attendees were encouraged to leave with us questions or requests for clarifications, and we promised to address each of them on the Laborers Health and Safety Fund of North America s website. Below are the questions we received and our answers. You should, of course, consult with your health and welfare fund s counsel and consultants regarding their views on whether and how these answers apply to your particular fund. Questions Regarding Benefit Mandates #1. Do minimum essential benefits apply to all health plans (fully-insured/self-funded/exchanges) or just to exchanges? Starting January 1, 2014, all Qualified Health Plans (QHP) offered through a State s Health Exchange (including Federally operated State Exchanges), and all health insurance policies otherwise issued in the individual and small group markets, must offer the essential health benefits package set by each State in accordance with PPACA and Department of Health and Human Services (HHS) regulations. In contrast, large group insured and self-funded employment-based health plans, including multiemployer health and welfare funds, are not required by PPACA to provide a complete essential health benefits package. To the extent that a health and welfare fund provides types of benefits that fall within the definition of essential health benefits (which virtually all funds do), the fund cannot impose lifetime dollar limits on those benefits and, as of 2014, the fund will be prohibited from imposing annual dollar limits on such benefits. Also, non-grandfathered health plans will be subject to limits on out-of-pocket costs for essential health benefits starting in In other words, the meaning of the essential health benefits is relevant to multiemployer health and welfare funds need only for complying with the restrictions on lifetime and annual dollar limits and, for non-grandfathered plans, the out-of-pocket costs limits for essential health benefits. PPACA set forth ten general categories of essential health benefits : ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative services and devices, laboratory services, preventive and wellness services/chronic disease management services, and pediatric services, including oral and vision care. However, PPACA left it to HHS to more precisely determine the specific services, as well as the amount, duration, and scope of services, within these categories that must be covered.

2 HHS has issued regulations on how essential health benefits will be determined for QHPs offered through the Health Exchanges (each State will determine the scope of essential health benefits using a HHS-approved benchmark plan methodology). HHS has not yet issued guidance defining essential health benefits for employment-based large group insured plans and self-funded health plans (for purposes of the limits discussed above). See also answer #2, below. #2. Do plans have to include all of the essential benefits that are listed or just meet an overall minimum 60% equivalency? Health and welfare funds are not required to provide the complete essential benefits package, as explained in answer #1, above. Funds are not required by PPACA to meet the 60% minimum value standard either, although it is essential that they do so that participants can meet PPACA s individual mandate and contributing employers can avoid penalties. Most health and welfare funds offer coverage that is far better than the 60% minimum value. Coverage with an actuarial value of 80-90% is typical. Having said this, a health and welfare fund will have to provide benefits that fall within the essential health benefits categories in order to meet the 60% minimum value. #3. What does 60% equivalency mean and how can health and welfare funds meet it? 60% minimum value means that the health and welfare fund is designed so that it is expected to pay at least 60% of the allowable costs for covered medical services with the participant paying the other 40% (through deductibles, co-payments, etc). Most health and welfare funds currently offer coverage that is far better than the 60% minimum value. Indeed, the norm is probably 80-90% value. Your fund s actuarial consultant can tell you the value of your fund s coverage. #4. If funds do not have to provide all of the essential benefits, how do they determine which ones to cover and at what level? See answer #1. The process for a health and welfare fund deciding what benefits to provide can be the same as before PPACA. Typically, the board of trustees, with advice from the fund s professional service providers, designs the benefit programs (benefits, level of coverage, etc). #5. If a fund is in a state that has established minimum essential benefits, which prevails the federal or state list?

3 See answer #1. #6. What is the definition of pediatric dental? Is there a specific age range? What services need to be covered? See answer #1. As noted therein, PPACA s list of essential health benefits includes pediatric services, including oral and vision care. The specifics regarding the pediatric dental requirement will be determined as other essential health benefits : HHS has issued regulations on how they will be determined by each State for Health Exchange QHPs, but has not yet issued guidance defining essential health benefits for employment-based large group insured plans and self-funded health plans. The HHS guidance did recommend that pediatric services be defined as services to individuals under the age of 19. #7. Do multi-employer funds have to follow the internal and external appeals process outlined in PPACA or do the appeal processes under ERISA/HIPAA that funds currently follow meet the requirements? Only non-grandfathered plans are subject to PPACA s claims and appeal procedure requirements (internal and external review). The PPACA requirements are more extensive than the ERISA s. #8. Once PPACA is fully implemented, will there be any penalties for funds that modify/reduce benefits to avoid the Cadillac tax? There would be no penalties for the fund provided that all procedural requirements (e.g., notices to affected participants) are followed. If the health and welfare fund is still in grandfathered plan status at that time, the benefit reductions could trigger a loss of that coverage. Congress intended that the threat of the 40% high cost plan excise tax will cause plans to reduce benefits. The legislators theory is that a reduction in benefits will cause a reduction in employer contributions and that the employers will pass on the savings to employees in the form of taxable wages (hence raising federal tax revenue to help pay for PPACA). Questions Regarding Eligibility Rules #9. What happens if a member is working but does not attain the required number of hours to be eligible for coverage within a 12-month period? Is there any point in time when the fund must provide coverage even if the required number of hours for eligibility are not met? PPACA prohibits all health plans (grandfathered and non-grandfathered alike), from requiring waiting periods longer than 90 days effective plan years beginning on and after January 1, A waiting period is the time period between when an employee or dependent becomes eligible for coverage and

4 when the coverage begins. In other words, generally speaking, the waiting period does not begin to run until an employee has enough hours of contributions to be eligible for coverage. In the words of the Government agencies proposed regulations, the regulations prohibit requiring otherwise eligible participants and beneficiaries to wait more than 90 days before coverage is effective. (Emphasis added.) Under the regulations, health and welfare funds will still have discretion to set their own rules for obtaining eligibility for coverage. However, those regulations set some limits so that eligibility rules are not designed to avoid the 90-day waiting period limit. If the fund s eligibility rules require an employee to work a certain number of hours in covered employment to obtain eligibility, the fund cannot require an employee to accumulate more than 1,200 hours before he becomes eligible. For example, if a fund requires 1,000 hours of covered employment within a 12-month period to become eligible for coverage and coverage begins within 90 days after the employee meets the 1,000 hour requirement, the fund would be in compliance with the waiting period limit. Additional regulatory guidance from the agencies is expected and needed. The following statement was included in a March 21, 2013, proposed regulation on the waiting period rules: The Departments recognize that multiemployer plans maintained pursuant to collective bargaining agreements have unique operating structures and may include different eligibility conditions based on the participating employer's industry or the employee's occupation. For example, some comments received on the August 2012 guidance gave examples of plan eligibility provisions based on complex formulas for earnings and residuals. As discussed earlier, the Departments view eligibility provisions that are based on compensation as substantive eligibility provisions that are not designed to avoid compliance with the 90-day waiting period limitation. In addition, hours banks, which are common multiemployer plan provisions that allow workers to bank excess hours from one measurement period and then draw down on them to compensate for any shortage in a succeeding measurement period and prevent lapses in coverage, function as buy-in provisions, which were discussed earlier as permissible. It is the Departments' view that the proposed rules provide flexibility to both multiemployer and singleemployer health plans to meet their needs in defining eligibility criteria, while also ensuring that employees are protected from excessive waiting periods. Comments are invited on these proposed rules and on whether any additional examples or provisions are needed to address multiemployer plans. (Emphasis added.)

5 #10. If a member has not accrued enough hours for eligibility, can they opt for coverage through an exchange plan until they are eligible? Would the employer be penalized? Could the spouse apply for an exchange plan for the family during a period when the member is not eligible for coverage? A member who is not yet eligible for coverage under a health and welfare fund may purchase Qualified Health Plan (QHP) coverage though a Health Exchange for himself and his spouse. If the member and spouse otherwise qualify for a Government subsidy (premium assistance tax credit) to help pay the premium for the QHP, the fact that contributions are being made on the member s behalf to the health and welfare fund should not disqualify him from subsidy eligibility because he is not yet eligible for coverage. He would lose eligibility for the subsidy once he earns coverage under the health and welfare fund. An employer is generally liable for an employer responsibility penalty only if it is a large employer and at least one of its full-time employees obtains Government-subsidized QHP coverage through a Health Exchange. Even assuming that the employer is a large employer and the employee is a full-time employee of the employer, the employer should not be penalized so long as it complies with its collectively bargained obligation to contribute to the health and welfare fund. #11. Can a fund move away from hours eligibility and move towards dollars accumulated? PPACA does not prohibit a health and welfare fund from making such a change in its eligibility rules provided that the new rules do not violate the waiting period restrictions. #12. If a member goes into the exchange because he isn t eligible yet and his account has, for example, $5, in it, is that considered employer provided coverage? See answer #10 above. Questions Regarding Drug Benefits #13. If a fund offers a plan for pharmacy benefits only (offered to members when they are not eligible to participate in the health and welfare plan), are those benefits subject to the PPACA requirements (unlimited dollar amounts, minimum benefit standards, etc.)? We would need to know more about the nature of the arrangements to give a definitive answer, but generally the answer is yes.

6 #14. Does a prescription drug only plan qualify as a health care plan and if so, would it then be subject to a transitional reinsurance fee? (public employee plan). A stand-alone prescription drug plan that does not provide major medical coverage appears to be exempt from the transitional reinsurance assessment under proposed HHS regulations. Questions Regarding Individual Mandate & Subsidized Health Exchange Coverage #15. Retirees and the subsidy/individual mandate: Are we doing our retirees a disservice because if a Fund is giving/offering them coverage, they can t go into an exchange and get the benefit of a subsidy?. Since they aren t employees, is it true that Grandfathered status will not be impacted by changing plans to exclude retirees, especially those non-medicare eligible? Each health and welfare fund must decide for itself what to do about retiree coverage. There are various factors, both pro and con, to be considered in making that decision. Pre-Medicare retirees will be permitted to buy Qualified Health Plan (QHP) coverage through a Health Exchange and, if they qualify based on household income, receive a government subsidy to help them buy and maintain the coverage. However, the cost of the QHP to the retiree, even with a government subsidy, could be more than the retiree s cost of coverage under the health and welfare fund. QHPs are permitted by PPACA to charge higher premiums (within limits) based on older ages. A health and welfare fund that maintains its grandfathered status should also consider whether terminating retiree coverage could trigger a loss of that status. Only retiree coverage that is provided through a retiree only plan is exempt from PPACA s mandated benefit rules. #16. When examining one s salary, do they look at gross income or adjusted gross income? Eligibility for a Government subsidy (premium assistance tax credit) to help pay the premium for QHP coverage through a Health Exchange is based on the individual taxpayer s household income relative to the Federal Poverty Level applicable to him and his family. Household income is the taxpayer s modified adjusted gross income plus the modified adjusted gross income of all other individuals in the family required to

7 file a tax return. Modified adjusted gross income means adjusted gross income increased by tax-exempt interest received, Social Security benefits received but not included in gross income, and certain other amounts. #17. What constitutes a family or household for determining income and subsidies? What about non-marrieds? See answer #16. A taxpayer s family means the individuals for whom a taxpayer properly claims a deduction for a personal exemption, according to IRS PPACA regulations. #18. If an individual lost his/her job and therefore now becomes entitled to a subsidy, can he/she go back and get reimbursed for some of the monies they spent on premiums? No. Government subsiding QHP coverage through a Health Exchange is prospective. #20. Do VA benefits qualify as a health plan? Depends on what you mean by VA benefits. PPACA s individual mandate requires that every person, unless excepted, have minimum essential coverage. This mandate can be met by, among other ways, coverage under certain government health programs. The types of government health programs that qualify as minimum essential coverage include the following, according to agency regulations: (1) the Medicare program under part A of title XVIII of the Social Security Act, (2) the Medicaid program under title XIX of the Social Security Act, (3) the Children s Health Insurance Program (CHIP) under title XXI of the Social Security Act, (4) medical coverage under chapter 55 of title 10, United States Code, including the TRICARE program, (5) veterans health care programs under chapter 17 or 18 of title 38, as determined by the Secretary of Veterans Affairs, in coordination with the Secretary of Health and Human Services and the Secretary of Treasury, (6) a health plan under section 2504(e) of title 22 relating to Peace Corps volunteers, and (7) the Nonappropriated Fund Health Benefits Program of the Department of Defense, established under section 349 of the National Defense Authorization Act for Fiscal Year 1995, Public Law (10 U.S.C note). (Emphasis added.) Chapter 17 of Title 38 of the United States Code relates to Hospital, Nursing Home, Domiciliary, and Medical Care benefits. Chapter 18 relates to Benefits for Children of Vietnam Veterans and Certain Other Veterans.

8 #21. In regard to notices to members giving them information for them to meet their individual mandate proof requirement: if funds do provide them, should they drill down to say 6 months you were covered; 3 months you were not or just a blanket statement that the person had coverage? PPACA requires every person who provides minimum essential coverage to an individual during a calendar year to file with the IRS each year a special return containing the name, address, and SSN of each covered employee (and the employee s spouse and dependents, if covered), the dates during which such individual was covered under minimum essential coverage during the calendar year... and certain other information. In addition, the person that files such a return must also provide to each individual named in the return a copy of the information set forth in the return with respect to that individual. The IRS has not yet issued regulations regarding these reporting and disclosure requirements. The regulations will provide details on the content of the notices to participants and beneficiaries, as well as clarify the extent to which this PPACA requirement applies to multiemployer health and welfare funds as distinct from contributing employers. #22. The two-trust system and using supplemental funds to pay employer payroll taxes confirming that this would violate anti-kickback rules under Davis-Bacon? The Copeland Anti-Kickback Act makes it a criminal offense for any person to...by force, intimidation, or threat of procuring dismissal from employment, or by any other manner whatsoever induces any person employed in the construction, prosecuting, completion or repair of any public building, public work, or building or work financed in whole or in part by loans or grants from the United States, to give up any part of the compensation to which he is entitled under his contract employment. Questions Regarding Alternative Plan Designs #23. How can funds create HRAs that will be compliant with the PPACA requirements? According to FAQs published on the Labor Department s website ( on January 24, 2013, a Health Reimbursement Account (HRA) will not violate the PPACA s prohibition on annual dollar limits if the HRA is integrated into a health plan that does satisfy the annual dollar limit ban. This means that the employees covered by the HRA must also have primary health plan coverage. It is possible that a stand-alone

9 retiree-only HRA will be permissible because retiree only plans are not subject to PPACA s annual dollar limit ban. By way of background, a HRA is a employer-funded spending account from which a covered employee can receive reimbursements for qualified medical expenses on a tax-free basis. Account balances can be carried over from year to year if the plan permits. #24. If the fund gets out of offering essential health benefits and offers wrap around coverage, does that wrap around coverage qualify as employer provided? We assume that this question asks whether an employee could be eligible for government subsidized QHP coverage through a Health Exchange if he has available only wrap coverage from a multiemployer health and welfare fund, or does this wrap coverage disqualify him from the Government subsidy on grounds that he has employer provided health plan coverage. There is no definitive answer to this question at this time, although the prevailing view is that if an employee accepts any employer-provided coverage, even if its value is less than 60% (for example, wrap coverage ), the employee is disqualified from eligibility for Government-subsidized QHP coverage. Another view is that an employee should not be disqualified from a subsidy for core health coverage through a QHP if the employer merely offers wrap coverage with a value that is less than 60%. As discussed during the conference and in the Discussion Guide, there are various other factors that should be considered before a fund ceases to provide core health benefits, including the cost of QHP coverage and the possibility of contributing employers incurring penalties. Questions Regarding Health Exchanges #25. If one of the 26 states that previously said no to starting their own exchange changes its mind in the future and decides it now wants to run its own exchange, can it? According to a letter from HHS to State Governors dated November 15, 2012, even though PPACA required HHS to certify a State s plan to run its own Exchange for 2014 by January 1, 2013: A state may apply at any time to run an Exchange in future years. #26. Can H&W Funds legally send out the Employer required notices? PPACA required all employers to provide written notices regarding the establishment of the Health Exchanges by March 1, However, the Labor Department, which is primarily responsible for administration of the notice

10 requirement, has deferred the notice date until an indefinite time in late summer or early fall of The Labor Department has promised to issue regulatory guidance in advance of any new notice date regarding the content of the notice, the method of delivery to employees, and related questions. That future guidance may address the question of whether multiemployer health and welfare funds may, if they choose, send the notice to participants for contributing employers. Among the issues is whether a health and welfare fund would be misusing plan assets for the employers benefit if the fund sends out notices that PPACA requires employers, not health plans, to provide. However, it is possible that the Labor Department may regard the issuance of such notices as primarily benefitting the plan participants and only incidentally benefitting the employers. In any event, there is no doubt that multiemployer health and welfare funds may send letters to fund participants, or otherwise communicate to fund participants, regarding the employer notices and Health Exchanges. There likely will be a lot of confusion among fund participants when the employer notices are issued to employees. Miscellaneous Questions #27. Uninsured Pool Costs (ex., NY) do they go away with PPACA? PPACA does not prohibit States from continuing assessments like New York s HRA covered lives assessment. Expectations are, however, that there will be fewer uninsured persons by virtue of the Health Exchanges and expanded Medicaid, so perhaps there will be less need for States to assess health plans for the uninsured.