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Insurance & Employee Benefits
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What You Need to Know if You Administer a Group Benefit Plan
By William F. Schaake, CIC, CRM, CLCS © 2012
Due to the recent decision by the Supreme Court to uphold the many of the changes of the Affordable Care Act, employers need to know important mandates or face strict repercussions and/or penalties. There are several mandates that have already passed such as raising the dependent age to 26, eliminating pre-
There has been discussion and debates concerning the non-
The first major change since the Supreme Court decision is the requirement for employers to provide a Summary of Benefit and Coverage (SBC) along with a Health Care Glossary to its employees. This requirement commences on September 23, 2012 for new group and all groups renewing thereafter.
For the most part, the insurance carriers will bear most of the responsibility by preparing this document unless the plan sponsor offers a self insured program or is subject to prepare it own SBC’s. However the employer is still responsible to notify their employees prior to any major change in the plan, provide all the SBCs for each plan offered on renewal & for new hires, and facilitate their employees with the accessibility of the summaries which includes an employee requests for the document. If electronic means of communication is the preferred method of disseminating benefit information, then the employer is required to provide computer access to this information. See Summary of Benefit of Coverage for more information.
ERISA and HIPAA requirements are not eliminated and in fact will undoubtedly be more regulated and enforced. The privacy act requires employers to maintain confidential information in a manner to protect information on their employees from being fraudulently shared with wrongdoers. This includes the storage, sharing, and transmissions of information. Hence, no longer is it safe to send information containing social security number by standard e-
Some other mandates that are now required or will be shortly include:
- Groups with over 250 lives, plan sponsors will have to report group health plan costs on box 12 of the W-
2 form using Code DD and for groups with less, provide a method for reporting the aggregate value of the benefits, even thought the information is for statistical purposes.
- FSA’s will have a $ 2500 limit starting on January 1, 2013, although there are inflation indexing measures and time frames that can affect the actual amount.
- In March of 2013, employers will be required to notify their employees of the Health Care Exchanges.
- Increase Medicare payroll tax withholding by 0.9% on high-
income individuals beginning January 1, 2013.
- Report the distribution of any Medical Loss Ratio rebates for group health plan.
- Limit waiting period for new hires to 90 days
- Provide the Department of Health & Human Service with certification of the minimum essential health benefits. See Essential Health Benefits for more information.
Other requirements including COBRA administration, CHIPRA, TEFRA, etc. will be examined separately, however it is our opinion that administering group health insurance is becoming more onerous.
Important Plan Sponsor Requirements - What Employers Need to Do to Comply
(Partial list in alphabetical order)
Age 26 Coverage for Young Adults
What plans are required to extend dependent coverage up to age 26? Source: US Department of Labor
The Affordable Care Act requires plans and issuers that offer dependent coverage to make the coverage available until a child reaches the age of 26. Both married and unmarried children qualify for this coverage. This rule applies to all plans in the individual market and to new employer plans. It also applies to existing employer plans unless the adult child has another offer of employer-
Model Language of Notice for Opportunity to Enroll
DOL FAQ’s - http://www.dol.gov/ebsa/faqs/faq-dependentcoverage.html
Children’s Health Insurance Program Reauthorization Act (“CHIPRA”) notice Source: U.S. Department of Labor, March 2010
Under the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA), group health plans and group health insurance issuers must offer new special enrollment opportunities. Effective April 1, 2009, plans and issuers must permit employees and dependents who are eligible for, but not enrolled in, a group health plan to enroll in the plan upon:
- losing eligibility for coverage under a State Medicaid or CHIP program, or
- becoming eligible for State premium assistance under Medicaid or CHIP.
The employee or dependent must request coverage within 60 days of being terminated from Medicaid or CHIP coverage or within 60 days of being determined to be eligible for premium assistance.
There are also new notice and disclosure requirements associated with CHIPRA. Read More >>
Continuation of Health Coverage — COBRA Source: US Department of Labor as of February 16, 2011
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.
COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.
COBRA outlines how employees and family members may elect continuation coverage. It also requires employers and plans to provide notice.
For more information on COBRA Requirements: Read More >>
NYS Continuation of Coverage Source: New York State Department of Financial Services
Continuation Coverage Extension to 36 Months
On July 29, 2009, Governor Paterson signed into law Chapter 236 of the Laws of 2009, which improves access to health insurance for New Yorkers by making state continuation coverage (“mini-
Creditable Coverage Source: CMS.gov
The Medicare Modernization Act (MMA) requires entities (whose policies include prescription drug coverage) to notify Medicare eligible policyholders whether their prescription drug coverage is creditable coverage, which means that the coverage is expected to pay on average as much as the standard Medicare prescription drug coverage. For these entities, there are two disclosure requirements:
- The first disclosure requirement is to provide a written disclosure notice to all Medicare eligible individuals annually who are covered under its prescription drug plan, prior to October 15th each year and at various times as stated in the regulations, including to a Medicare eligible individual when he/she joins the plan. This disclosure must be provided to Medicare eligible active working individuals and their dependents, Medicare eligible COBRA individuals and their dependents, Medicare eligible disabled individuals covered under your prescription drug plan and any retirees and their dependents. The MMA imposes a late enrollment penalty on individuals who do not maintain creditable coverage for a period of 63 days or longer following their initial enrollment period for the Medicare prescription drug benefit. Accordingly, this information is essential to an individual's decision whether to enroll in a Medicare Part D prescription drug plan. For more information go to the “Creditable Coverage Guidance and Model Disclosure Notices to be used after January 1, 2009” Section on the left hand side of this page.
- The second disclosure requirement is for entities to complete the Online Disclosure to CMS Form to report the creditable coverage status of their prescription drug plan. The Disclosure should be completed annually no later than 60 days from the beginning of a plan year (contract year, renewal year), within 30 days after termination of a prescription drug plan, or within 30 days after any change in creditable coverage status. For more information go to the “Disclosure to CMS Form” Section on the left hand side of this page. -
- This requirement does not pertain to the Medicare beneficiaries for whom entities are receiving the Retiree Drug Subsidy (RDS).
This page provides guidance documents relating to Creditable Coverage requirements for employer and union-
CMS.gov: More Information on Medicare D Credible Coverage and Employers Responsibilities
United Healthcare: Medicare D Credible Coverage Frequently Asked Questions
Family and Medical Leave Act Source: U.S. Department of Labor http://www.dol.gov/whd/fmla/
Overview
The FMLA entitles eligible employees of covered employers to take unpaid, job-
- Twelve workweeks of leave in a 12-
month period for:
- the birth of a child and to care for the newborn child within one year of birth;
- the placement with the employee of a child for adoption or foster care and to care for the newly placed child within one year of placement;
- to care for the employee’s spouse, child, or parent who has a serious health condition;
- a serious health condition that makes the employee unable to perform the essential functions of his or her job;
- any qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or parent is a covered military member on “covered active duty;” or
- Twenty-
six workweeks of leave during a single 12- month period to care for a covered servicemember with a serious injury or illness if the eligible employee is the servicemember’s spouse, son, daughter, parent, or next of kin (military caregiver leave).
For more information from DOL including forms, posters, and tools go to: http://www.dol.gov/whd/fmla/
Involuntary Loss of Coverage Source: U.S. Department of Labor http://www.dol.gov/ebsa/publications/caghp.html
Ensure that the plan's special enrollment provisions permit individuals to enroll when a loss of eligibility for other group health plan or health insurance coverage occurs and when employer contributions toward other coverage cease
Example: A group health plan allows individuals to enroll through special enrollment for loss of other coverage only if the loss was due to an involuntary termination of employment.
Tip: The plan is required to permit individuals who declined health coverage under the plan because they had other group health plan or health insurance coverage to enroll in the plan through special enrollment upon any loss of eligibility for the other coverage or if employer contributions toward the other coverage cease.
Under HIPAA, individuals who are otherwise eligible, but had declined health coverage because they had other group health plan or health insurance coverage, must be permitted to enroll in the plan (regardless of any late enrollment provisions) upon loss of eligibility for the other coverage or if employer contributions toward the other coverage cease.
Loss of eligibility includes loss of coverage due to legal separation, divorce, voluntary or involuntary termination of employment, reduction in hours, children's aging out of coverage, or moving out of an HMO service area. It does not include loss of coverage due to a failure of the individual to pay premiums on a timely basis or termination of coverage for cause.
Under HIPAA, special enrollment rights are also triggered when employer contributions toward an individual's other coverage cease, regardless of whether the individual is still eligible for coverage under the other plan.
Qualifying Event -
A plan's special enrollment provisions must also permit employees and dependents (who are otherwise eligible) to enroll upon marriage, birth, adoption or placement for adoption
Example: A group health plan allows employees who are already enrolled for coverage to add dependents upon marriage, birth, adoption and placement for adoption. However, if an employee is not already enrolled, the plan does not permit any enrollment when these events occur.
Tip: HIPAA allows eligible employees and dependents to enroll upon marriage, birth, adoption or placement for adoption.
Group health plans are required to offer special enrollment to otherwise eligible employees, spouses and any new dependents upon marriage, birth, adoption or placement for adoption. Accordingly, an employee who is otherwise eligible, but not enrolled for coverage, can enroll (and can also enroll a spouse and any new dependents, if they are otherwise eligible under the plan) when any of these events occur.
The plan should amend its special enrollment provisions to allow employees and dependents who are otherwise eligible to enroll upon these events.
For individuals who enroll through special enrollment, ensure that the effective date of coverage complies with HIPAA
Example: After an individual enrolls through special enrollment, a group health plan makes coverage effective on the first day of the first calendar month following the date a completed request for enrollment is received.
Tip: HIPAA sets forth specific dates when coverage is required to be made effective for special enrollees. In this case, the plan is not making coverage effective early enough for some individuals.
For special enrollment upon birth, adoption or placement for adoption, group health plans are required to make coverage effective as of the date of the birth, adoption or placement for adoption. For these events, this plan, in this example, is not making coverage effective early enough. Therefore, the plan should change the effective date of coverage provision to comply with HIPAA.
On the other hand, for special enrollment upon loss of eligibility for other coverage, upon loss of employer contributions toward other coverage, or upon marriage, coverage is required to be made effective no later than the first day of the first calendar month following the date a completed request for enrollment is received. Therefore, the plan's effective date of coverage provision is permissible with respect to these special enrollment events.
Summary of Benefits and Coverage (SBC) Source: Healthcare.gov
As directed by the Affordable Care Act, health insurance companies and group health plans will soon provide consumers with a concise document detailing, in plain language, simple and consistent information about health plan or individual insurance policy benefits and coverage. The SBC will help consumers better understand the coverage they have and allow them to easily compare different coverage options. It will summarize the key features of the plan or coverage, such as the covered benefits, cost-
The SBC will include a new, standardized health plan comparison tool for consumers known as “coverage examples” – using a format modeled on the Nutrition Facts label required for packaged foods. The coverage examples will illustrate, for comparison purposes, what proportion of the cost of care a health insurance policy or plan would cover for a sample patient for two common medical situations—having a baby and managing type 2 diabetes. Additional scenarios will be added in the future as feedback is gathered from consumers. These examples will help consumers understand and compare a sample patient’s share of the costs of care under a particular plan and have a better idea of how valuable the health plan will be at times when they may need the coverage.
The SBC will make it easier for health insurance consumers to find the best coverage for themselves and their families – and for employers to find the best coverage for their business and their employees.
Uniform Glossary of Health-
Consumers will also have a new resource to help them understand some of the most common, and sometimes confusing, language used in health insurance documents. Health insurance companies and group health plans will be required to make available a uniform glossary of health-
Accessing this Information
Starting on September 23, 2012, health insurers and group health plans will begin providing the summary of benefits and coverage and the uniform glossary to consumers. Insurers and group health plans will provide:
- Information when shopping for coverage: In the past, consumers shopping for health coverage might only be able to obtain marketing materials about a policy, offering consumers only a limited understanding of what they’d be buying. Now, consumers will be able to receive the critical information on their choices upfront, before they buy coverage, helping them to choose the coverage that best meets their needs
- Information when coverage is renewed: Consumers will receive the SBC before each new plan or policy year so they can see how their coverage is changing before deciding whether to renew or reenroll in coverage.
- Information when coverage changes: If there are any significant changes in coverage in the middle of the plan or policy year, health plans and insurers will be required to notify their enrollees and policyholders at least 60 days before the changes take effect.
- Information on demand: Whether shopping for health insurance or already enrolled in coverage, consumers will be able to request the SBC at any time, and health plans will have to provide it within seven business days. Consumers will also be able to request and receive the uniform glossary within seven business days. In addition, the glossary will be publicly displayed on www.HealthCare.gov, www.cciio.cms.gov, and www.askebsa.dol.gov/.
Use of Information Technology and Reducing Burden on Employers and Insurers
These final rules seek to provide flexibility to plans and insurers while addressing the information needs of consumers. Assuming certain consumer safeguards are met, the final rule ensures that in the vast majority of cases, the SBC can be provided electronically, allowing a plan or issuer to post the SBC on its website or provide it by email. Electronic disclosure is expected to reduce costs while consumer safeguards are designed to ensure actual receipt by individuals. Additionally, the final rule provides flexibility in the instructions for completing the SBC in recognition of unique plan designs.
To view the final template for the summary of benefits and coverage, visit:
http://cciio.cms.gov/resources/other/index.html#sbcug
Waiting Periods Source: U.S. Department of Labor http://www.dol.gov/ebsa/publications/caghp.html
If the plan has a waiting period for coverage, ensure that any pre-
Example: A group health plan imposes a 30-
Tip: The pre-
HIPAA requires that the maximum pre-
In this example, the plan must begin counting the 12-
Employer Resources
Understanding Your Fiduciary Responsibilities Under A Group Health Plan by DOL.gov
