Health Care Reform & Compliance 2009-2010 Peter J. Marathas, Jr., Esq. 617.526.9704...

Health Care Reform & Compliance 2009-2010

Peter J. Marathas, Jr., Esq.617.526.9704

[email protected]

Chapman-Schewe, Inc.

September 2009

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© 2009 Proskauer Rose LLP

Today’s Agenda

High Level Overview of National Health Care Proposals

Use of HRA’s—A Caution

American Recovery and Reinvestment Act—COBRA

HiTech HIPAA—Compliance tips, traps and changes

Mental Health Parity

Michele’s Law

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National Health Care Proposals

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National Health Care ProposalHouse of Representatives—Background

Three House Committees with jurisdiction: Ways and Means; Education and Labor; and Energy and Commerce

Democratic chairs of these committee (and subcommittees) drafted combined bill (H.R. 3200)

— Bill drafted without input from industry groups or others

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Senate—Background

Two committees with jurisdiction: the Health, Education, Labor and Pensions Committee (“HELP”) and the Finance Committee

—HELP Committee (Kennedy/Harkin) HELP Committee released American Health Care Choices

Act in early June

—Finance Committee (Baucus) Finance Committee released a series of three “policy

option” papers in May and “Framework” in September

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Key Components of Proposals

Individual Mandates

Employer Mandates—Play or Pay

Public Plan/Exchange/Co-Op Program

Impact on Existing Law

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Individual Mandates

Would require all adults to obtain and maintain “qualifying coverage” or “acceptable coverage” for themselves and dependent children

Generally based on Massachusetts Model

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Qualifying Coverage:

— Certain grandfathered individual and employer coverage

— Government Coverage (Medicare, Medicaid, Tri-Care, VA Insurance)

— Insurance obtained through the Gateway

— Employer coverage that meets requirements of qualifying coverage

Individual Mandates

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— Penalties: 2.5% tax on modified AGI (HR 3200), or up to $750 per year (Senate) for those without coverage

— Certain exceptions to apply

Individual Mandates

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Individual Mandates

Qualifying Health Insurance Minimum Standards:

— Hospitalization

— OP/ambulatory services/clinical laboratory services

— Emergency Care

— Physician office visits, medical and surgical care

— Maternity and Pediatric Care

HR 3200: well child until age 21

— Mental Health & Substance Abuse Care

— Rehabilitation and Medical Devices

— Preventive & Wellness Care

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Individual Mandates

House & Senate Bills Prohibit Annual and Lifetime Maximums

HR 3200 establishes annual out-of-pocket maximum at $5,000/$10,000

Concept of “affordability” present in both HR 3200 and Senate Bill

Concept of qualifying health insurance or minimum standard is important for both Individual Mandate and Employer Mandate

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Employer Mandates—Play or PayPlay or Pay

“Play or Pay”—requires employers to offer subsidized qualifying coverage or pay a penalty to the government

— Again, based loosely on Massachusetts Model

HR 3200:

— Requires comprehensive eligibility to Full- and Part-Time Employees

— Employer must PlayPlay by underwriting 72.5% of individual coverage and 65% of family coverage or

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— PayPay a penalty equal to 8% of average total wages

Penalty applies with respect to those who opt Exchange insurance (phased in)

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Senate:

— Requires comprehensive eligibility to Full- and Part-Time Employees

— Employer must PlayPlay by underwriting 60% of coverage or

— PayPay a penalty equal to $750 per FTE/$375 per PTE

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Coverage generally has to be qualifying to avoid the Play or PayPlay or Pay penalty

Outright prohibition on pre-existing condition restrictions

Plan must meet certain loss ratios or sponsor/carrier must make refund to enrollees (HR 3200)

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HR 3200 Requirements:

Require coverage of dependent children to age 26

Plans must pay 100% for preventive care services

Prohibit eligibility rules for FTEs based on pay

COBRA extended to earlier of date individual is eligible for other group coverage OR is eligible for coverage thru an Exchange

Establishes network adequacy standards

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Wellness Changes:

Current rules:

— Premium differentials based on health status can be as high as 20%

Proposed:

— Increases maximum incentive to 30% of total cost of employee-only coverage

— HHS could increase to 50% under regulations (HR 3200)

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Wellness Changes:

Permits insurers to create incentives for wellness/ disease prevention (Senate Bill)

Creates temporary “Right Choices” program to provide preventive services to uninsured adults (Senate Bill)

Limit Medicare/Medicaid to providing only “proven” preventive services and eliminates cost sharing for some (HR 3200)

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Exchange Program/Public Plans

Health Insurance Exchanges:

— Effective in 2013 (also referred to as “Gateways”)

— Provides mechanism for individuals and small employers to obtain qualifying health insurance coverage

— Available generally to employers with 10 or fewer employees (feds/state have ability to offer to larger employers)

States are to establish Exchanges, with federal government to provide if states don’t

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Public Plans

— As proposed in HR 3200, a government-run health insurance plan, like Medicare, that would compete beside private insurers in Exchange that the bill would set up

— Public plan would have to meet certain minimum standards for care – minimum services that must be covered, mental health benefits parity, a fair grievance and appeals mechanism, etc.

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Co-Ops

— Response to public concern to public plans

— No substance as of yet—concept analogous to association or union plans

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Impact on ExistingLaw

Senate Bill:

— Substantial amendments to reflect changes

— Retains existing ERISA structure—preemption/ savings/deemer clause

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Impact on Existing Law

HR 3200:

— Substantial amendments to reflect changes

— Substantial erosion of ERISA “Administrative Scheme”

— States that pass “single payer” system can ignore ERISA preemption and require employer participation

— Applies state law individual rights and remedies to employer coverage purchased through an Exchange

— Can sue for breach of contract, fraud, negligence, misrepresentation, etc., and seek consequential and punitive damages

— Potential for employers: 50 States, 50 Different Rules

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Use of HRA’s—A Caution

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Health Risk Assessments—A Caution

DOL has stated that conditioning eligibility for GHP on completion of a Health Risk Assessment (HRA) does not violate law, as long as the results are not used in any way to impact eligibility, cost or benefits

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EEOC in an opinion letter in March 2009 says that use of HRAs in an involuntary manner violates ADA

— Opinion letter has no precedential effect

— Proskauer has informally registered its concern about this position with the EEOC

— EEOC may well engage in actual rule-making—which may result in them working from a more informed position


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Federal agencies (including DOL) have indicated a concern that collecting Genetic Information in HRA may violate GINA

Always work with informed counsel when implementing these programs

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ARRA COBRA Subsidy QuestionsSubsidy Questions

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Summary

Government-provided subsidy of 65% of the COBRA premium

Applies for a maximum nine-month period

Reimbursement of employers through a payroll tax credit

COBRA eligibility must be the result of an employee having been involuntarily terminated between September 1, 2008 and December 31, 2009

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Subsidy began March 1, 2009

Applies to group health, stand alone dental, vision, HRAs and EAPs, but not Health FSAs

Summary

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Who is Eligible for the Subsidy?

An Assistance Eligible Individual (AEI) - A COBRA qualified beneficiary who:

— Involuntarily terminated from employment (not for gross misconduct) between September 1, 2008 and December 31, 2009

Other qualifying events are not eligible for subsidy

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— Is/was eligible to elect COBRA between September 1, 2008 and December 31, 2009

Spouse and dependent children are also eligible

Same-sex spouse, domestic partner, civil union partner, age-extended dependents NOT eligible

— Elects COBRA coverage

Who is Eligible for the Subsidy?

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Who is Eligible for Special Enrollment Opportunity?

Individuals who were eligible to elect COBRA between September 1, 2008 and February 16, 2009 due to an involuntary termination and

— Did not elect COBRA or

— Elected and is no longer enrolled on February 17, 2009 (for reasons other than other group health coverage)

Note: IRS has informed one of nation’s largest COBRA TPAs that employees have an indefinite period to elect the subsidy

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Do You and Your HR Employees Know What Constitutes an Involuntary Termination?

Notice 2009-27—IRS definition:

— “Severance from employer due to the independent exercise of unilateral authority of the employer to terminate the employment”

— A behest test

— Employers must consider facts and circumstances

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Termination by employer with or without cause

Failure of employer to renew an employee’s contract at the time the contract expires, if employee was willing and able to renew on similar terms/conditions

Employee-initiated termination of employment for good reason following an employer’s action that causes a material negative change in the employment relationship for the employee

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Voluntary termination (or retirement) where the employee knew that the employer would otherwise have terminated the employee’s services

Layoffs, furloughs, or other suspensions of employment, even if temporary and even if there is a right of recall, if a reduction to zero hours of employment

Employer’s action to end an individual’s employment status while individual absent due to illness or disability


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Lockout initiated by the employer

Termination elected by the employee in return for a severance package (i.e., a “buy out”) where the employer indicates that, after the offer period for the severance package, a certain number of remaining employees in the employee’s group will be terminated


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COBRA qualifying events other than an involuntary termination of employment (e.g., death of an employee, divorce, or a dependent child ceasing to be a dependent child under the applicable requirements of the health plan)


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Do You and Your HR Employees Know What is NOT an Involuntary Termination?

Reduction in hours of employment that is not a reduction to zero hours of employment

—NOTE: An employee’s voluntary termination of employment in response to an employer imposed reduction in hours may be considered involuntary if the reduction in hours is a material negative change in the employment relationship

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Absence from work due to illness or disability (prior to the employer taking action to end the individual’s employment status)

Retirement, unless the employee knew that the employer otherwise would have terminated the employee’s services

A work stoppage as a result of a strike initiated by employees or their representatives

Do You and Your HR Employees Know What is NOT an Involuntary Termination?

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Former employees (spouses, dependents) who are denied subsidy by employer may appeal to DOL

— DOL has On-Line Form at http://www.dol.gov/ebsa/COBRA/main.html

— Under the ARRA, DOL is required to respond to each request within 15 business days of submission

De novo review and final

Court will grant deference to DOL determination

ERISA remedies still available

What Happens if Plan Denies Request for Premium Subsidy?

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Scenario 1:

— COBRA monthly premium is $800

Employer pays 0

Employee pays $280 (35% x $800)

Subsidy is $520 (65% x $800)

Scenario 2:

— COBRA monthly premium is $800

Employer pays $640 (80% x $800)

Employee pays $56 (35% x ($800-$640))

Subsidy is $104 (65% x ($800-$640))

How to Calculate Premium Reduction - Scenarios

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Scenario 3:

— Employer puts involuntarily terminated employee on COBRA after termination

— For six months, employee pays 100% of COBRA premium

— No reimbursement for subsidized portion for employer

How to Calculate Premium Reduction - Scenarios

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When Does the Premium Assistance End?

Eligibility for the subsidy ends at the beginning of the month on or after the earlier of:

— Eligibility for another group health plan (other than health FSA, dental or vision only, employer on-site medical facility) or Medicare

— Nine months after the subsidy became available to the individual

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— When COBRA coverage no longer required

E.g., non-payment of premium

Employee must notify the plan in writing if eligible for other group health coverage

— Penalty: 110% of subsidy

— IRS Recently Reminded Employees of Need to Report Other Coverage (9/1/09)

Reminds employees of penalty and


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Noted that employees who fail to notify their plan sponsor that they are no longer eligible for the subsidy can self-report that they are subject to the penalty by calling the IRS at 800-829-1040, but must still notify the plan

IRS added that anyone who suspects that someone may be receiving the subsidy after becoming eligible for group coverage or Medicare may report this to the agency by completing Form 3949-A, Information Referral (http://www.irs.gov/pub/irs-pdf/f3949a.pdf)


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New Privacy and Security Requirements under the Health Information

Technology for Economic and Clinical Health Act (HITECH)

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Business Associates

— Previously, HIPAA applied only to “covered entities”—health plans, health care providers, and clearinghouses

— Indirectly to business associates—through business associate agreements

— Business associates, like brokers and consultants, perform PHI-related functions for group health plans

— Under HITECH, all of the HIPAA rules apply directly to business associates, including penalties

— Fall 2009 implementation

New Privacy and Security Requirements under HITECH Act

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New Notification Requirement Upon Breach of “Unsecured” PHI (regulations issued August 24, 2009; effective September 23, 2009; sanctions will not be imposed until February 22, 2010)

— New Requirements apply if:

There is a “breach” (unauthorized acquisition, access, or disclosure of PHI)

The PHI is “unsecured” (it is not rendered “unusable, unreadable, or indecipherable to unauthorized individuals”)

— If follow standard for “securing” PHI, acts as safe harbor


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The breach “compromises the security of the PHI” (occurs where there is significant risk of financial, reputational, or other harm to the individual whose PHI has been compromised)

— Timing of Notice

“without unreasonable delay” but in no event later than 60 days from discovery of the breach or the date breach reasonably should have been discovered


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— Content of Notice

Brief description of what happened, date of breach, and date of discovery of breach (if known)

Types of unsecured PHI involved in breach (e.g., full name, SSN, DOB, home address, account number)

What individuals should do to protect themselves from potential harm from breach

Actions covered entity taking to investigate, mitigate losses, and protect against future breaches

How to find more information

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— Nature of notification

If business associate discovers breach, must notify covered entity (i.e., the group health plan) so it can notify affected individuals

— Currently, contractual obligation to disclose “security incidents;” now direct statutory notification obligation

— Covered entity may contract with business associate to handle administrative details on its behalf; pay for notifying affected individuals


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If covered entity experiences breach, must give notice to affected individuals (at last known address) or by e-mail (if specified as preference)

If contact information for individual insufficient or out of date, and if 10 or more individuals, notice must be posted on covered entity’s website for 90 days or broadcast in local media and active toll free number for 90 days; if urgency required “because of possible imminent misuse,” notice must be by telephone or other means, as appropriate

—Must report to HHS on annual basis any breaches

Action Item (Now): Covered entities must keep internal logs of breaches starting September 23, 2009


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If breach involves 500 or more individuals, must notify HHS and prominent media outlet, immediately

Privacy and Security Standards Applicable to Business Associates

— Makes some of Privacy and many of Security provisions as well as civil and criminal penalties directly applicable to business associates


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Other New Requirements, generally effective February 17, 2010

— New minimum necessary standard guidance expected in summer of 2010

— Individuals may request restrictions on disclosure of PHI to the plan for purposes of payment or health care operations if PHI relates to an item or service for which individual paid a doctor out-of pocket costs in full

— New accounting disclosures (will have to account for electronic disclosures for treatment, payment health care operations); access of electronic PHI (individuals may ask covered entity to transmit information to designated entities)

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Action Items (Now):

— Covered entities should contact existing business associates to ensure that they will be ready to meet heightened HIPAA obligations, including development of security policies and procedures, staff training and other activities

— Recommend that covered entities receive similar assurances from any new vendor with whom they will work

— Covered Entities should prepare to meet safe harbor for treating PHI as “secured” or implement breach notice policies and procedures

— If applicable, covered entities should amend and distribute the plan’s HIPAA privacy notice with revised information; send copies to business associates


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Action Items (By 2/17/10):

— As necessary, covered entities should sign amended or new BA agreements

— Conduct HIPAA Audit of policies and procedures to honor requests and general compliance

— Update policies and procedures for marketing restrictions, minimum necessary standard

— Implement training


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MHPAEA was part of the Emergency Economic Stabilization Act

— The MHPAEA amends ERISA and the Public Health Service Act prohibits group health plans covering 50 or more employees from imposing more burdensome financial requirements for mental health or substance use disorder benefits than required for substantially all medical or surgical benefits covered by the plan

— Prohibits separate cost sharing requirements that are applicable only to mental health or substance use disorder benefits


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Effective Date

— Act applies to plans beginning in the first plan coverage year beginning after October 3, 2009; this means an effective date of January 1, 2010 for calendar year plans

— Plans maintained under collective bargaining agreements ratified before the enactment date are not subject to the Act until they terminate (or until January 1, 2010, if this is a later date)

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— The current 1996 Mental Health Parity Act requirements for annual and lifetime dollar limits remain in effect for all plans, while the annual sunset in the 1996 parity act is eliminated, effective January 1, 2009

— Mental health or substance use disorder benefit coverage is not mandated. However, if a plan offers such coverage, it must be provided at parity in accordance with this Act


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Treatment Restrictions. Prohibits plans from imposing greater treatment limitations on mental health or substance use disorder benefits than those applicable to substantially all medical or surgical benefits and prohibits plans from imposing treatment limitations only on mental health or substance use disorder benefits

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Financial Restrictions. Parity required for all financial requirements, including deductibles, co-payments, co-insurance, and out-of-pocket expenses and frequency of treatment, number of visits, days of coverage, or other similar limits

If a plan offers two or more benefit packages, the requirements of this Act will be applied separately to each package


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Out-Of-Network Benefits. A group health plan that provides out-of-network coverage for medical/surgical benefits must also provide out-of-network coverage, at parity, for mental health/substance use disorder benefits


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Benefits Management and Transparency. As under the 1996 Mental Health Parity Act, a group health plan will manage the benefits under the terms and conditions of the plan

— A plan must make mental health/substance use disorder medical necessity criteria available to current or potential participants, beneficiaries or providers upon request

— A plan must also make reasons for payment denials available to participants or beneficiaries on request or as otherwise required

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Preservation of State Law. Current HIPAA preemption standard applies—only a state law that “prevents the application” of the Act is preempted

Cost Exemption. If a group health plan experiences an increase in actual total costs with respect to medical/surgical and mental health/substance use benefits of 1% (2% in the first plan year that this Act is applicable), the plan can be exempted from the law

— An employer may elect to continue parity coverage regardless of this cost increase


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— The exemption shall apply for one plan year

— A qualified actuary determines and prepares a written report regarding a plan’s cost increase after a plan has complied with the Act for the first six months of the plan year involved

Plan must promptly and timely notify the Department of Labor (if self-funded) or the Department of Health and Human Services (if fully-insured), the appropriate State agencies, and participants and beneficiaries when it elects an exemption

— Plan notification to Labor or HHS is confidential and will provide a description of covered lives in the plan and the actual costs for which the exemption is sought


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Labor or HHS (as appropriate) and State agencies may audit a plan to determine compliance with MHPAEA when the plan has elected an exemption

Action Item: Review all plan designs and amend as necessary to comply prior to effective date


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Michelle’s Law

Effective Date. Plan years on or after October 9, 2009 (for calendar year plans, January 1, 2010)

Extended Coverage

— Requires group health plans to extend coverage for dependent college students who take medically necessary leave of absence for up to 1 year or, if earlier, the date on which coverage would otherwise end under the plan

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— “medically necessary leave of absence” means a leave of absence from a post-secondary educational institution or any other change in enrollment that

commences while the child is suffering from a serious illness or injury;

is medically necessary; and

causes the child to lose student status for purposes of coverage under the terms of the plan

— Extended coverage must provide the same benefits as if the child was not on a medically necessary leave of absence

Michelle’s Law

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Certification by Physician Required. Written certification must be provided by the child's treating physician stating the child is suffering from a serious illness or injury, and the leave (or change of enrollment) is medically necessary

Notice of Extended Coverage. Plan must include a description of the terms for continued coverage when sending any notice describing the plan's student certification requirements for coverage

Michelle’s Law

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Action Items. Conform operations (and confirm that insurers and TPAs do so); update plan documents and enrollment materials

Michelle’s Law

Health Care Reform & Compliance 2009-2010 Peter J. Marathas, Jr., Esq. 617.526.9704...

Documents

Transcript of Health Care Reform & Compliance 2009-2010 Peter J. Marathas, Jr., Esq. 617.526.9704...