Clarifying Plan Year Issues
The first thing to do is confirm when your “plan year” begins (many schools have plan years that begin on July 1). As certain of the changes coming into effect only apply for plan years beginning after September 23, 2010, it is important to confirm with your broker when these requirements come into effect for your school (are the changes effective for your purposes on September 23, or not until your next plan year—such as January 1, 2011 or July 1, 2011, for example?).
How Is Your Insurance Carrier Handling the September 23 Changes?
Schools may not be aware that your insurance carrier may proactively decide to implement the required plan changes before the required dates. For example, Anthem is taking this approach, making changes to its small group plans on September 23—in advance of plan renewal dates. Check with your carrier, as this may save you considerable work and confusion (you don’t need to figure out what the changes should be if the carrier is making the changes for you and all of their plans universally).
The Grandfathering Issue
The PPACA exempted certain “grandfathered” plans from complying with requirements of the new legislation. The two questions schools should be asking themselves and their broker are:
1. Is there an advantage to us to maintain grandfathered status for our plans?
2. If we decide we wish to maintain grandfathered status, what changes (if any) can we make now or in the future without invalidating grandfathered status?
What Type of Actions Could Cancel the Grandfathered Status of a Plan?
Plan changes that you may be contemplating could cancel the grandfathered status of your plan; some of these are intuitive, others are not. Potential issues include:
- Cuting or reducing benefits—that is no longer covering health care services for a major diagnosis category such as diabetes, HIV/AIDS, or cystic fibrosis.
- Raising coinsurance charges.
- Significantly increasing copayment levels—e.g., increasing copayment levels by more than the greater of $5, or a percentage equal to medical inflation plus 15 percentage points.
- Significantly raising deductibles by more than the medical inflation percentage plus 15 percentage points.
- Significantly lowering employer contributions by decreasing the percentage of employer cost sharing by more than 5 percentage points.
- Adding or tightening annual limits on what the insurer pays—like capping or decreasing the annual dollar amount covered by a plan for specific services or adding an annual dollar limit maximum where one did not exist on March 23, 2010.
- Changing insurance companies after March 23, 2010.
As long as your plans retain grandfathered status, the benefits of any future changes that you contemplate need to be contrasted against the cost (in dollars and/or flexibility) of potentially losing grandfathered status.
What Are the September 23 Changes?
Before the school can determine whether or not it should maintain grandfathered status for its plans, it needs to assess each of the required changes and costs/benefits/limitations involved in each change. Changes for plan years beginning after September 23 include:
- Adult children up to age 26 are eligible to receive coverage under their parents’ plans, regardless of student status or marital status
- No lifetime benefit limits may be imposed, nor may maximum benefit limits be imposed on “essential benefits”
- Plans cannot limit coverage for pre-existing conditions for children under age 19
- Plans must provide preventive care without cost sharing and must cover certain preventive services for children
Note: January 1, 2011, will see certain changes come into effect regarding Flexible Spending Accounts (FSAs). These changes do not depend on plan year dates but go into effect across the board as of January 1st.
What Do We Need To Do Now?
We recommend that all schools that offer employee benefits plans take the following steps:
1. Meet with your broker and/or insurance carrier.
2. Determine when the September 23 requirements will impact your plan.
3. Determine if you wish to maintain grandfathered status for your plan.
4. Determine if the insurance carrier is making unilateral changes to their plans.
5. Determine what changes to plan documents will be necessary, based on the above decisions—and work with the carrier to change the documents.
6. Establish a communication plan for informing employees of all changes to your plans.
7. Communicate, communicate, communicate.
The healthcare reform legislation is very lengthy (2,000 pages), and many more details need to be clarified as September 23 and subsequent required changes come into place. Stay in close contact with your broker/carrier and lean on their expertise for answers to specific questions regarding your plans.
For more information visit the United States Department Of Labor.
