Health Reform changes that are effective for 2013

This webinar reviews those Health Reform changes that are effective for 2013.
These changes include:

• Health FSA contributions capped at $2,500/year,
• An additional hospital insurance tax of .9 percent imposed on high income individuals ($200,000 individual, $250,000 joint ,
• An additional 3.8% Medicare payroll tax imposed on unearned income for high income individuals ($200,000 individual, $250,000 joint),
• Employers required to provide written notice to employees about exchange and subsidies, and
• Determination of full-time employees for variable hour and seasonal employee for health coverage in 2014.

Health Reform changes that are effective for 2013. from Larry Grudzien on Vimeo.

What premium tax credits and cost-sharing subsidies are available to individuals in 2014 and who is eligible for them?

What premium tax credits and cost-sharing subsidies are available to individuals in 2014 and who is eligible for them?

To assist individuals and families who do not qualify for Medicare or Medicaid and are not offered affordable health coverage by their employers, a refundable tax credit (the “premium tax credit”) and a cost sharing subsidy will be available beginning in 2014 to help pay for insurance purchased through an Exchange. Generally, taxpayers with income between 100% and 400% of the federal poverty line (FPL) who purchase insurance through an Exchange will qualify them, as provided in Code Section 36B. and Section 1402 of the Patient Protection and Affordable Care Act (“PPACA”).
A premium assistance tax credit will be provided monthly to lower the amount of premium the individual or family must pay for their coverage. Cost sharing subsidies will limit the plan’s maximum out-of-pocket costs, and for some individuals will also reduce other cost sharing amounts (i.e., deductibles, coinsurance or copayments) that would otherwise be charged to them by their coverage.
Both types of assistance will be tied in some way to the value of the coverage available in the Exchanges. Four levels of plans will be offered by insurers in the exchanges. All the plans must offer a set of essential health benefits. The four plan levels vary in the total value of coverage they must provide. This amount is sometimes called “actuarial value” and represents the proportion of health insurance expenditures for covered benefits that, for an average population, would be paid by the plan. Section 1302(d)(1) of PPACA requires that the actuarial value be 60% for “bronze” plans, 70% for “silver” plans, 80% for “gold” plans and 90% for “platinum” plans. In addition, the out-of-pocket maximum for any of these plans may not exceed a limit that is determined annually. For 2013, the limit is $6,250 for individual coverage and $12,500 for family coverage. It will be adjusted higher for 2014.

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Common Health Reform Questions: Employer Mandate

What employers are subject to the employer mandate in 2014? When are they subject to any penalties? What are these penalties?

In general

Beginning in 2014, certain large employers may be subject to a penalty tax (also called an “assessable payment”) for failing to offer health care coverage for all full-time employees (and their dependents), offering minimum essential coverage that is unaffordable, or offering minimum essential coverage under which the plan’s share of the total allowed cost of benefits is not at least 60% (referred to as “minimum value”). The penalty tax is due if any full-time employee is certified to the employer as having purchased health insurance through an Exchange with respect to which a tax credit or cost-sharing reduction is allowed or paid to the employee, as provided in Code section 4980H.

What is a large employer for purposes of the employer mandate?

The penalty tax (or assessable payment) applies to “applicable large employers.” An applicable large employer for a calendar year is an employer who employed an average of at least 50 “full-time employees” on business days during the preceding calendar year, as provided in Code Section 4980H(c)(2)(A).

What factors are used to determine whether an employer is an “applicable large employer”?

For purposes of determining whether an employer is an applicable large employer, an employer must include not only its full-time employees but also a full-time equivalent for employees who work part-time. To do so, the employer must add up all the hours of service in a month for employees who are not full-time and divide that aggregate number by 120. The result of that calculation is then added to the number of full-time employees during that month. Then, if the average number of employees for the year is 50 or more, the employer is an applicable large employer, as provided in Code Section 4980H(c)(2)(E).

Under Code Section 4980H(c)(2)(C)(i), all entities treated as a single employer under the employer aggregation rules will be treated as one employer.

Are seasonal employees counted in determined whether an employer is an “applicable large employer?

Under Code Section 4980H(c)(2)(B)(i), a special rule enables an employer that has more than 50 full-time employees solely as a result of seasonal employment to avoid being treated as an applicable employer. Under this rule, an employer will not be considered to employ more than 50 full-time employees if (a) the employer’s workforce only exceeds 50 full-time employees for 120 days, or fewer, during the calendar year; and (b) the employees in excess of 50 who were employed during that 120-day (or fewer) period were seasonal workers.*“Seasonal worker” means a worker who performs labor or services on a seasonal basis as defined by the DOL, including agricultural workers covered by 29 CFR § 500.20(s)(1) and retail workers employed exclusively during holiday seasons , as provided in Code Section 4980H(c)(2)(B)(ii).

Which employees are considered “full-time” for the employer mandate?

Under Code Section 4980H(c)(4)(A), a “full-time employee” for any month is an employee who is employed for an average of at least 30 hours of service per week.

What is the penalty if an applicable large employer does not offer minimum essential coverage to its employees?

Beginning in 2014, Code Section 4980H(a) provides that an applicable large employer will pay a penalty tax (i.e. make an assessable payment) for any month that—

(1) the employer fails to offer its full-time employees (and their dependents) the opportunity to enroll in “minimum essential coverage” under an “eligible employer-sponsored plan” for that month; and

(2) at least one full-time employee has been certified to the employer as having enrolled for that month in a QHP for which health coverage assistance is allowed or paid.

What is the amount of assessable payment (penalty tax)?

Code Section 4980H(a) provides that the penalty tax (assessable payment) is equal to the product of the “applicable payment amount” and the number of individuals employed by the employer (less the 30-employee reduction) as full-time employees during the month. The “applicable payment amount” for 2014 is $166.67 with respect to any month (that is, 1/12 of $2,000). The amount will be adjusted for inflation after 2014.

What is “minimum essential coverage”?

Under Code Section 5000A(f)(1), the term “minimum essential coverage” means coverage under any of the following: (a) a government-sponsored program, including coverage under Medicare Part A, Medicaid, the CHIP program, and TRICARE; (b) an “eligible employer-sponsored plan;” (c) a health plan offered in the individual market; (d) a grandfathered health plan; or (e) other health benefits coverage (such as a State health benefits risk pool) as HHS recognizes.

What is an “eligible employer-sponsored plan”?

Under Code Section 5000A(f)(2), it means a group health plan or group health insurance coverage offered by an employer to an employee that is (a) a governmental plan, or (b) any other plan or coverage offered in a state’s small or large group market

Under what circumstances will an applicable large employer be subject to the penalty tax if it offers its employees minimum essential coverage?

Beginning in 2014, Code Section 4980H(b)(1) provides that an applicable large employer will pay a penalty tax (i.e., make an assessable payment) for any month that—

(1) the employer offers to its full-time employees (and their dependents) the opportunity to enroll in “minimum essential coverage” under an eligible employer-sponsored plan for that month; and
(2) at least one full-time employee of the employer has been certified to the employer as having enrolled for that month in a QHP for which a premium tax credit or cost-sharing reduction is allowed or paid.

If an employee is offered affordable minimum essential coverage under an employer-sponsored plan, then the individual generally is ineligible for a premium tax credit and cost-sharing reductions for health insurance purchased through an Exchange.

When would employees offered minimum essential coverage by an employer be eligible for a premium tax credit and cost-sharing reductions for health insurance purchased through the Exchange?

Under Code Section 36B(c)(2)(C), employees covered by an employer-sponsored plan will be eligible for the premium tax credit if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of those costs (that is, the plan does not provide “minimum value”), or the premium exceeds 9.5% of the employee’s household income. The employee must seek an affordability waiver from the Exchange. The penalty tax applies for employees receiving an affordability waiver. In order to get the premium tax credit and cost-sharing reduction, however, an employee must decline to enroll in the coverage and purchase coverage through the Exchange instead, as provided under Code Section 36B(c)(2)(C)..

When would the penalty tax be assessed?

To be considered minimum essential coverage, the coverage will need to meet an affordability requirement (which compares cost to income and provide minimum value (i.e., it will need to pay at least 60% of the total allowed cost of benefits. The penalty tax is due if any full-time employee is certified to the employer as having purchased health insurance through an Exchange with respect to which a premium tax credit or cost-sharing reduction is allowed or paid to the employee. Employers who provide coverage under an eligible employer-sponsored plan that does not meet the affordability and minimum value requirements may nevertheless avoid the tax to the extent employees actually participate in the plan, as provided under Code Section 36B(c)(2)(C)(iii).

What is the amount of the assessable payment (penalty tax?)

Code Section 4980H(b)(1) provides that the penalty tax (assessable payment) is equal to $250 (1/12 of $3,000, adjusted for inflation after 2014) times the number of full-time employees for any month who receive premium tax credits or cost-sharing assistance (this number is not reduced by 30). This penalty tax (assessable payment) is capped at an overall limitation equal to the “applicable payment amount” (1/12 of $2,000, adjusted for inflation after 2014) times the employer’s total number of full-time employees, reduced by 30, as provided in Code Section 4980H(b)(2).

How will the minimum value for an employer-sponsored plan be determined?

In IRS Notice 2012-31, the IRS requested comments on several approaches to the minimum value determination, including evaluating plan designs that will cover part or all of 2014 and suggestions for transitional relief for plan years that start before and end in 2014. This determination of minimum value for employer plans will be consistent with previous HHS guidance on “actuarial value,” which is relevant for determining coverage levels for QHPs offered through the Exchanges.
In IRS Notice 2012-31, the IRS described three potential approaches, for determining minimum value. They include:

– Minimum Value Calculator: The IRS will develop a MV calculator for use by self-insured plans and insured large group plans. Under this approach, plans with certain standard cost-sharing features (e.g., deductibles, co-insurance, and maximum out-of-pocket costs) will be able to enter information about four core categories of benefits (physician and mid-level practitioner care, hospital and emergency room services, pharmacy benefits, and laboratory and imaging services) into the calculator based on claims data of typical self-insured employer plans. The calculator would also take into consideration the annual employer contributions to an HSA or amounts made available under an HRA, if applicable. Comments are specifically requested on how to adjust for other benefits (e.g., wellness benefits) provided under a plan using the calculator.

-Design-Based Safe Harbor Checklists: As an alternative, an array of safe harbor checklists would be provided so plans may compare to their own coverage. The safe harbor checklists would be used to make minimum value determinations for plans that cover all of the four core categories of benefits and services (physician and mid-level practitioner care, hospital and emergency room services, pharmacy benefits, and laboratory and imaging services) and have specified cost-sharing amounts. Each safe harbor checklist would describe the cost-sharing attributes of a plan (e.g., deductibles, co-payments, co-insurance, and maximum out-of-pocket costs) that apply to the four core categories of benefits and services.

-Actuarial Certification: The last approach would be available for plans with “nonstandard” features (such as quantitative limits on any of the four categories of benefits, including, for example, a limit on the number of physician visits or covered days in a hospital) since these plans would not be able to use a calculator or the safe harbor checklists. Plans would be able to generate an initial value using a calculator and then engage a certified actuary to make appropriate adjustments that take into consideration the nonstandard features. Plans with nonstandard features of a certain type and magnitude would also have the option of engaging a certified actuary to determine the plan’s actuarial value without the use of a calculator.

How can employer determine whether its coverage is affordable when it will not know the employee’s household income?

In finalized regulations to implement the premium tax credit through the Exchange, the IRS indicated that it was their intention to issue proposed regulations or other guidance that would allow employers to use an employee’s Form W-2 earnings (instead of household income) in assessing affordability.

IRS Releases Guidance on Determining Full-Time Employees for Employer Mandate and the 90- Day Waiting Period

On August 31, 2012, the IRS released Notices 2012-58 and 2012-59. Notice 2012-58 describes safe harbor methods that employers may use (but are not required to use) to determine which employees are treated as full-time employees for purposes of the employer mandate under health care reform. In Notice 2012-59, the IRS provides guidance on the 90-day waiting period limitation requirement under health care reform. IRS indicated that employers can rely on the guidance provided in this notice until the end of 2014. The following discusses both of these notices.

Determination of Full Time Employees Status for the Required Coverage under the Employer Mandate

The requirement: Beginning in 2014, certain large employers may be subject to a penalty tax for failing to offer health care coverage for all full-time employees (and their dependents), offering minimum essential coverage that is unaffordable, or offering minimum essential coverage under which the plan’s share of the total allowed cost of benefits is not at least 60% (referred to as “minimum value”). The penalty tax is due if any full-time employee is certified to the employer as having purchased health insurance through an exchange with respect to which a tax credit or cost-sharing reduction is allowed or paid to the employee, as provided in Code Section 4980H.

Who is a “full-time” employee for required coverage under the employer mandate: Under Code Section 4980H(c)(4)(A), a “full-time employee” for any month is any employee who is employed for an average of at least 30 hours of service per week.

Notice 2012-58: In this notice, the IRS describes safe harbor methods that employers may use (but are not required to use) to determine which employees are treated as full-time employees for purposes of the employer mandate described above. These methods can be used to determine whether new, on-going employees or seasonal employees are considered full-time employees for the employer mandate and when an employer must provide coverage or be penalized.

Safe Harbor for new variable hour and seasonal employees: If an employer maintains a group health plan that would offer coverage to the employee only if the employee were determined to be a full-time employee, the employer may use both a measurement period of between three and 12 months and an administrative period of up to 90 days for variable hour and seasonal employees. However, the measurement period and the administrative period combined may not extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date (totaling, at most, 13 months and a fraction of a month).

Who is a variable hourly employee? A new employee is a variable hour employee if, based on the facts and circumstances at the start date, it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week. A new employee who is expected to work initially at least 30 hours per week may be a variable hour employee if, based on the facts and circumstances at the start date, the period of employment at more than 30 hours per week is reasonably expected to be of limited duration and it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week over the initial measurement period (defined below).

Who is a seasonal employee? Through at least 2014, employers are permitted to use a reasonable, good faith interpretation of the term “seasonal employee.”

What is an “initial measuring period”? For variable hour and seasonal employees, employers are permitted to determine whether the new employee is a full-time employee using an “initial measurement period” of between three and 12 months (as selected by the employer).

The employer measures the hours of service completed by the new employee during the initial measurement period and determines whether the employee completed an average of 30 hours of service per week or more during this period. The stability period for such employees must be the same length as the stability period for ongoing employees (described below). If an employee is determined to be a full-time employee during the initial measurement period, the stability period must be a period of at least six consecutive calendar months that is no shorter in duration than the initial measurement period and that begins after the initial measurement period (and any associated administrative period).The stability period is the first period in which the employer is required to provide health coverage to the employee.

If a new variable hour or seasonal employee is determined not to be a full-time employee during the initial measurement period, the employer is permitted to treat the employee as not a full-time employee during the stability period that follows the initial measurement period. This stability period for such employees must not be more than one month longer than the initial measurement period and, as explained below, must not exceed the remainder of the standard measurement period as defined below (plus any associated administrative period) in which the initial measurement period ends.

Transition from New Employee Rules to Ongoing Employee Rules: Once a new employee, who has been employed for an initial measurement period, has been employed for an entire standard measurement period, the employee must be tested for full-time status, beginning with that standard measurement period, at the same time and under the same conditions as other ongoing employees.

A standard measurement period is a defined time period of not less than three but not more than 12 consecutive calendar months, as chosen by the employer and is used to determine whether ongoing employee are eligible for health coverage.

An employee determined to be a full-time employee during an initial measurement period or standard measurement period must be treated as a full-time employee for the entire associated stability period. This is the case even if the employee is determined to be a full-time employee during the initial measurement period but determined not to be a full-time employee during the overlapping or immediately following standard measurement period. In that case, the employer may treat the employee as not a full-time employee only after the end of the stability period associated with the initial measurement period. Thereafter, the employee’s full-time status would be determined in the same manner as that of the employer’s other ongoing employees.. (as described below).

In contrast, if the employee is determined not to be a full-time employee during the initial measurement period, but is determined to be a full-time employee during the overlapping or immediately following standard measurement period, the employee must be treated as a full-time employee for the entire stability period that corresponds to that standard measurement period (even if that stability period begins before the end of the stability period associated with the initial measurement period). Thereafter, the employee’s full-time status would be determined in the same manner as that of the employer’s other ongoing employees.

Use if an administrative period: In addition to the initial measurement period, the employer is permitted to apply an administrative period before the start of the stability period. This administrative period must not exceed 90 days in total. For this purpose, the administrative period includes all periods between the start date of a new variable hour or seasonal employee and the date the employee is first offered coverage under the employer’s group health plan, other than the initial measurement period.

In addition to the specific limits on the initial measurement period (which must not exceed 12 months) and the administrative period (which must not exceed 90 days), there is a limit on the combined length of the initial measurement period and the administrative period applicable for a new variable hour or seasonal employee. Specifically, the initial measurement period and administrative period together cannot extend beyond the last day of the first calendar month beginning on or after the first anniversary of the employee’s start date. For example, if an employer uses a 12-month initial measurement period for a new variable hour employee, and begins that initial measurement period on the first day of the first calendar month following the employee’s start date, the period between the end of the initial measurement period and the offer of coverage to a new variable hour employee who works full time during the initial measurement period must not exceed one month.

Example (12-Month Initial Measurement Period Followed by 1+ Partial Month Administrative Period):

For new variable hour employees, Employer B uses a 12-month initial measurement period that begins on the start date and applies an administrative period from the end of the initial measurement period through the end of the first calendar month beginning on or after the end of the initial measurement period. Employer B hires Employee Y on May 10, 2014. Employee Y’s initial measurement period runs from May 10, 2014, through May 9, 2015. Employee Y works an average of 30 hours per week during this initial measurement period. Employer B offers coverage to Employee Y for a stability period that runs from July 1, 2015 through June 30, 2016.

Employee Y works an average of 30 hours per week during his initial measurement period and Employer B uses (1) an initial measurement period that does not exceed 12 months; (2) an administrative period totaling not more than 90 days; and (3) a combined initial measurement period and administrative period that does not last beyond the final day of the first calendar month beginning on or after the one-year anniversary of Employee Y’s start date. Accordingly, from Employee Y’s start date through June 30, 2016, Employer B is not subject to any payment with respect to Employee Y, because Employer B complies with the standards for the initial measurement period and stability periods for a new variable hour employee. Employer B also complies with the law. Employer B must test Employee Y again based on the period from October 15, 2014 through October 14, 2015 (Employer B’s first standard measurement period that begins after Employee Y’s start date).

Safe harbor for ongoing employees: For this purpose, an “ongoing employee” is generally an employee who has been employed by the employer for at least one complete standard measurement period. An employer determines each ongoing employee’s full-time status by looking back at the standard measurement period (a defined time period of not less than three but not more than 12 consecutive calendar months, as chosen by the employer). The employer has the flexibility to determine the months in which the standard measurement period starts and ends, provided that the determination must be made on an uniform and consistent basis for all employees in the same category.

For example, if an employer chose a standard measurement period of 12 months, the employer could choose to make it the calendar year, a non-calendar plan year, or a different 12-month period, such as one that ends shortly before the start of the plan’s annual open enrollment season. If the employer determines that an employee averaged at least 30 hours per week during the standard measurement period, then the employer treats the employee as a full-time employee during a subsequent “stability period”, regardless of the employee’s number of hours of service during the stability period, so long as he or she remained an employee. The stability period is the period in which the employer is required to offer the employee coverage to comply with the employer mandate.

For an employee whom the employer determines to be a full-time employee during the standard measurement period, the stability period would be a period of at least six consecutive calendar months that is no shorter in duration than the standard measurement period and that begins after the standard measurement period (and any applicable administrative period. If the employer determines that the employee did not work full-time during the standard measurement period, the employer would be permitted to treat the employee as not a full-time employee during the stability period that follows, but is not longer than, the standard measurement period. This means that the employer is not required to offer the employee coverage and would not be penalized.

Employers may use measurement periods and stability periods that differ either in length or in their starting and ending dates for the following categories of employees: (1) collectively bargained employees and noncollectively bargained employees; (2) salaried employees and hourly employees; (3) employees of different entities; and (4) employees located in different States.

Use of an administrative period: Because employers may need time between the standard measurement period and the associated stability period to determine which ongoing employees are eligible for coverage, and to notify and enroll employees, an employer may make time for these administrative steps by having its standard measurement period end before the associated stability period begins. However, any administrative period between the standard measurement period and the stability period may neither reduce nor lengthen the measurement period or the stability period. The administrative period following the standard measurement period may last up to 90 days. To prevent this administrative period from creating any potential gaps in coverage, it will overlap with the prior stability period, so that, during any such administrative period applicable to ongoing employees following a standard measurement period, ongoing employees who are eligible for coverage because of their status as full-time employees based on a prior measurement period would continue to be offered coverage.

Example:

Employer W chooses to use a 12-month stability period that begins January 1 and a 12-month standard measurement period that begins October 15. Consistent with the terms of Employer W’s group health plan, only an ongoing employee who works full-time (an average of at least 30 hours per week) during the standard measurement period is offered coverage during the stability period associated with that measurement period. Employer W chooses to use an administrative period between the end of the standard measurement period (October 14) and the beginning of the stability period (January 1) to determine which employees worked full-time during the measurement period, notify them of their eligibility for the plan for the calendar year beginning on January 1 and of the coverage available under the plan, answer questions and collect materials from employees, and enroll those employees who elect coverage in the plan. Previously-determined full-time employees already enrolled in coverage continue to be offered coverage through the administrative period.

Employee A and Employee B have been employed by Employer W for several years, continuously from their start date. Employee A worked full-time during the standard measurement period that begins October 15 of Year 1 and ends October 14 of Year 2 and for all prior standard measurement periods. Employee B also worked full-time for all prior standard measurement periods, but is not a full-time employee during the standard measurement period that begins October 15 of Year 1 and ends October 14 of Year 2.

Because Employee A was employed for the entire standard measurement period that begins October 15 of Year 1 and ends October 14 of Year 2, Employee A is an ongoing employee with respect to the stability period running from January 1 through December 31 of Year 3. Because Employee A worked full-time during that standard measurement period, Employee A must be offered coverage for the entire Year 3 stability period (including the administrative period from October 15 through December 31 of Year 3). Because Employee A worked full-time during the prior standard measurement period, Employee A would have been offered coverage for the entire Year 2 stability period, and if enrolled would continue such coverage during the administrative period from October 15 through December 31 of Year 2.

Because Employee B was employed for the entire standard measurement period that begins October 15 of Year 1 and ends October 14 of Year 2, Employee B is also an ongoing employee with respect to the stability period in Year 3. Because Employee B did not work full-time during this standard measurement period, Employee B is not required to be offered coverage for the stability period in Year 3 (including the administrative period from October 15 through December 31 of Year 3). However, because Employee B worked full-time during the prior standard measurement period, Employee B would be offered coverage through the end of the Year 2 stability period, and if enrolled would continue such coverage during the administrative period from October 15 through December 31 of Year 2.

Employer W complies with the standards because the measurement and stability periods are no longer than 12 months, the stability period for ongoing employees who work full-time during the standard measurement period is not shorter than the standard measurement period, the stability period for ongoing employees who do not work full-time during the standard measurement period is no longer than the standard measurement period, and the administrative period is not longer than 90 days.

90-Day Waiting Period Requirement

Effective as of plan years beginning on or after January 1, 2014, group health plans and insurers are prohibited from applying a waiting period that exceeds 90 days, as provided in PHSA Section 2708, as added by PPACA, Pub. L. No. 111-148, Section 1201 (2010). A waiting period is defined as the period that must pass with respect to the individual before the individual is eligible to be covered for benefits under the terms of the plan, as provided in Code section 9801(b)(4); ERISA Section 701(b)(4);PHSA Section 2704(b)(4). For plan years beginning on or after January 1, 2014, any waiting period that exceeds 90 days will be considered an excessive waiting period, as provided in PHSA § 2708, as added by PPACA, Pub. L. No. 111-148, § 1201 (2010).

Notice 2012-59:

Other conditions for eligibility under the terms of a group health plan are generally permissible under PHS Act section 2708, unless the condition is designed to avoid compliance with the 90-day waiting period limitation. Furthermore, if, under the terms of a plan, an employee may elect coverage that would begin on a date that does not exceed the 90-day waiting period limitation, the 90-day waiting period limitation is considered satisfied. Accordingly, a plan or issuer will not be considered to have violated PHS Act section 2708 merely because employees take additional time to elect coverage.

Application of Waiting Period Requirement to Variable Hour or Seasonal Employees: If a group health plan conditions eligibility on an employee regularly working a specified number of hours per period (or working full time), and it cannot be determined that a newly hired employee is reasonably expected to regularly work that number of hours per period (or work full time), the plan may take a reasonable period of time to determine whether the employee meets the plan’s eligibility condition, which may include a measurement period that is consistent with the timeframe permitted for such determinations under Code Section 4980H. An employer may use a measurement period that is consistent with Code Section 4980H, whether or not it is an applicable large employer subject to Code Section 4980H. Except where a waiting period that exceeds 90 days is imposed after a measurement period, the time period for determining whether such an employee meets the plan’s eligibility condition will not be considered to be designed to avoid compliance with the 90-day waiting period limitation if coverage is made effective no later than 13 months from the employee’s start date, plus if the employee’s start date is not the first day of a calendar month, the time remaining until the first day of the next calendar month.

Example:

Under Employer Y’s group health plan, only employees who work full time (defined under the plan as regularly working 30 hours per week) are eligible for coverage. Employee C begins work for Employer Y on November 26 of Year 1. C’s hours are reasonably expected to vary, with an opportunity to work between 20 and 45 hours per week, depending on shift availability and C’s availability. Therefore, it cannot be determined at C’s start date that C is reasonably expected to work full time. Under the terms of the plan, variable hour employees, such as C, are eligible to enroll in the plan if they are determined to be full time after a measurement period of 12 months. Coverage is made effective no later than the first day of the first calendar month after the applicable enrollment forms are received. C’s 12-month measurement period ends November 25 of Year 2. C is determined to be full time and is notified of C’s plan eligibility. If C then elects coverage, C’s first day of coverage will be January 1 of Year 3.

In this example, the measurement period is not considered to be designed to avoid compliance with the 90-day waiting period limitation (and is, therefore, permissible) because the plan may use a reasonable period of time to determine whether a variable-hour employee is full time under PHS Act Section 2708 if the period of time is consistent with the timeframe permitted for such determinations under Code Section 4980H. In such circumstances, the time period for determining whether an employee is full time will not be considered to avoid the 90-day waiting period limitation if coverage can become effective no later than 13 months from C’s start date, plus the time remaining until the first day of the next calendar month.

Example:

Employer X’s group health plan limits eligibility for coverage to full-time employees. Coverage becomes effective on the first day of the calendar month following the date the employee becomes eligible. Employee B begins working full time for Employer X on April 11. Prior to this date, B worked part time for X. B enrolls in the plan and coverage is effective May 1.

In this example, the period from April 11 through April 30 is a waiting period. The period while B was working part time is not part of the waiting period because B was not in a class of employees eligible for coverage under the terms of the plan while working part time, and full-time versus part-time status is a bona fide employment-based condition that is not considered to be designed to avoid compliance with the 90-day waiting period limitation.

For copies of the notices, please click of the links below:

Notice 2012-58:

http://www.irs.gov/pub/irs-drop/n-12-58.pdf

Notice 2012-59:

http://www.irs.gov/pub/irs-drop/n-12-59.pdf

Health Reform Questions

Question 1 – “Free Standing” Health Reimbursement Arrangements

My client wants to establish a “free standing” Health Reimbursement Arrangement (“HRA”) for its employees for medical, dental and vision expenses incurred after December 31, 2011.  Under this plan, participants would be reimbursed up to $5,000 for medical, dental and vision expenses and/or premiums for individual insurance premiums.  Is it possible for an employer to sponsor such a plan considering the changes under health reform?

No, unless the employer amends the HRA to only reimburse dental and vision expenses and/or premiums.  See the discussion below:

The health care reform law prohibits group health plans from establishing “lifetime limits on the dollar value of benefits for any participant or beneficiary” for plan years beginning on or after September 23, 2010, as provided under PHSA §2711(a)(1)(A), For plan years beginning on or after September 23, 2010 and prior to January 1, 2014, the health care reform law allows “restricted annual limits” on essential health benefits, but for plan years beginning on or after January 1, 2014, no annual limits on essential health benefits are permitted.

HRAs are group health plans that provide reimbursements up to a maximum dollar amount for a coverage period and generally, though not always, allow unused amounts to be carried forward to increase the maximum reimbursement in subsequent coverage periods as provided in IRS Notice 2002-45, 2002-28 I.R.B. 93. In essence, then, HRAs are account-based benefits which by their very nature impose upper limits on the dollar value of benefits.

There are three exemptions for HRAs from these annual limit requirements.  These include:

• Retiree-only HRAs, as provided in 75 Fed. Reg. 34537,
• Those HRAs that provide excepted benefits under the HIPAA portability rules, as provided in Treas. Reg. §54.9831-1(c); DOL Reg. §2590.732(c); and 45 CFR §146.145(c).  HRAs that provide only limited-scope dental or vision benefits will not be subject to the annual limit rules.
• HRAs that are integrated with other coverage as part of a (more comprehensive) group health plan will not violate the annual limit rules so long as the other coverage on its own would comply, as provided in Preamble to Interim Final Rules Relating to Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions, and Patient Protections Under PPACA, 75 Fed. Reg. 37188, 37190.

For any HRA that does not come under one of the above exemptions, there are offer two ways to obtain a temporary exemption from the annual limit restrictions: by applying for a waiver or by satisfying the requirements of a class exemption. The window of opportunity for filing waiver applications closed on September 22, 2011; and both the waiver and class exemption apply only to HRAs that were in effect prior to September 23, 2010.  This is provided in the CCIIO Supplemental Guidance (CCIIO 2011-1D): Concluding the Annual Limit Waiver Application Process; CCIIO Supplemental Guidance (CCIIO 2011-1E): Exemption for Health Reimbursement Arrangements that are Subject to PHS Act Section 2711.

A copy of each guidance can be obtained by clicking on the link below:

CCIIO Supplemental Guidance (CCIIO 2011-1D): Concluding the Annual Limit Waiver Application Process:

http://cciio.cms.gov/resources/files/06162011_annual_limit_guidance_2011-2012_final.pdf

CCIIO Supplemental Guidance (CCIIO 2011-1E): Exemption for Health Reimbursement Arrangements that are Subject to PHS Act Section 2711:

http://cciio.cms.gov/resources/files/final_hra_guidance_20110819.pdf

For the purpose of the waiver and the class exemption, the term “in effect” is not defined, but it presumably means the HRA had been formally adopted (and perhaps even providing benefits or accumulating account balances) prior to September 23, 2010. The exemption clearly does not apply to an HRA that was created significantly after that date—for example, a company that designs an HRA in 2011 to be effective January 1, 2012.

In order for any “free standing” HRAs adopted prior to September 23, 2010 to rely on the exemption, they must comply with the record retention and annual notice requirements that apply under the waiver program (which are discussed above). This is true even though that waiver program may not be available to the HRA (e.g., because the HRA did not submit an application prior to September 22, 2011).

Question 2 – Form W-2 Reporting

In meeting the new Form W-2 Reporting requirements, what coverages provided by the employer to employees must be reported?

The Form W-2 reporting requirement applies only to “applicable employer-sponsored coverage,” a term that generally includes any employer-provided group health plan coverage under an insured or self-insured health plan that is excludable from the employee’s gross income under Code § 106, or that would be excludable if it were paid for by the employer. It is subject to numerous exceptions, including exceptions for:

• any coverage for long-term care;
• any coverage (whether through insurance or otherwise) described in Code § 9832(c)(1), which includes accident and disability coverage, but no exception applies for coverage for on-site medical clinics;
• certain stand-alone vision or dental coverage (as discussed below); and
• any coverage described in Code § 9832(c)(3) (i.e., coverage only for a specified disease or illness and hospital indemnity or other fixed indemnity insurance) where such coverage is funded by the employee on an after-tax basis for which a deduction under Code § 162(l) is not allowable as provided in PPACA, Pub. L. No. 111-148, § 9002 (2010) (cross-referencing Code § 4980I(d)(1), which was added by PPACA, Pub. L. No. 111-148, § 9001 (2010)).

For purposes of determining whether a specific arrangement is a group health plan, employers may rely upon a good faith application of a reasonable interpretation of the statutory provisions and applicable guidance, including the definition under the IRS COBRA regulations as provided in Treas. Reg. § 54.4980B-2, Q/A-1(a). Thus, any coverage subject to the COBRA regulations’ definition of group health plan would, in the absence of an exception or transition rule, be subject to the W-2 reporting requirement, as provided in IRS Notice 2011-28, 2011-16 I.R.B. 656, Q/A-13.

Dental and Vision Coverage

Applicable employer-sponsored coverage subject to the reporting requirement does not include stand-alone, insured dental, or vision coverage, as provided in  Code § 4980I(d)(1)(B). Based on a plain reading of the statutory language, it appears that the cost of insured dental or vision coverage which is offered “under a separate policy, certificate, or contract of insurance” is excluded from the aggregate cost of employer-sponsored coverage to be reported on the employee’s Form W-2, as provided in Code § 4980I(d)(1)(B)(ii) By contrast, under the literal language of the statute, the cost of self-insured dental or vision coverage (whether a limited-scope stand-alone benefit or bundled with medical) appears to be included on the employee’s Form W-2. Interim guidance issued in IRS Notice 2011-28 conforms the treatment of self-insured and fully insured dental/vision plans by providing transition relief.

Transition Relief for Stand-Alone Dental or Vision Coverage (Whether Insured or Self-Insured).

IRS Notice 2011-28 provides transition relief by not requiring employers to include the cost of coverage under a dental or vision plan (provided on an insured or self-insured basis) if such plan is not integrated into a group health plan providing additional health care coverage subject to the reporting requirement, as provided under IRS Notice 2011-28, 2011-16 I.R.B. 656, Q/A-20.

Health Savings Account (HSA) and Archer MSA Contributions

HSA and Archer MSA contributions are included in the definition of applicable employer-sponsored coverage, but they are explicitly excluded from the W-2 reporting obligation, as provided in Code § 4980I(d)(2)(C) A special rule applies to health FSAs .

Special Rules for Health FSA Contributions

Health FSA contributions are included in the definition of applicable employer-sponsored coverage, but special rules apply with respect to the W-2 reporting obligation, as provided in Code § 4980I(d)(2)(B). The amount of any salary reduction election to a health FSA is excluded from the aggregate reportable cost and is not reported on Form W-2, as provided in IRS Notice 2011-28, 2011-16 I.R.B. 656, Q/A-16. Where the health FSA is offered through a cafeteria plan under which optional employer flex credits (expressed as a fixed amount, or as formula such as matching salary reduction) can be applied to the health FSA, special rules must be applied to determine whether any amount must be included in the aggregate reportable cost as follows:

• If the amount of the employee’s salary reduction (for all qualified benefits) equals or exceeds the amount of the health FSA for a plan year, then the amount of the employee’s health FSA is not included in the aggregate reportable cost.
• If the amount of the employee’s health FSA for a plan year exceeds the employee’s salary reduction for that plan year, then the amount of the employee’s health FSA minus the employee’s salary reduction election for the health FSA must be included in the aggregate reportable cost.

Coverage Under a Health Reimbursement Arrangements (HRA)

Under transition relief provided in IRS Notice 2011-28, 2011-16 I.R.B. 656, Q/A-18, an employer is not required to include the cost of coverage under an HRA in determining the aggregate reportable cost. Thus, if the only applicable employer-sponsored coverage provided to an employee is an HRA, no reporting is required on the Form W-2.

Transition Relief for Certain Employers and Coverage

For instances in which transition relief is provided under IRS Notice 2011-28, the IRS has indicated that future guidance may prospectively limit the availability of some or all of this transition relief—but it will not apply earlier than January 1 of the calendar year beginning at least six months after it is issued and will not limit the availability of the transition relief for the 2012 Forms W-2. Transition relief is available for the following:

• employers filing fewer than 250 Forms W-2,
• certain Forms W-2 furnished to terminated employees before the end of the year,
• relief with respect to multiemployer plans,
• HRAs,
• certain dental and vision plans, and
• self-insured plans of employers not subject to COBRA continuation coverage or similar requirements.

A copy of IRS Notice 2011-28 can be obtained by clicking on the link below:

http://www.irs.gov/pub/irs-drop/n-11-28.pdf

 

Question 3 – Wellness Programs

One of my clients sponsors a wellness program.  If an employee participates in the program, his or her group medical coverage premium will be reduced from 10% to 15%.  If for any year, an employee does not qualify for the discount under the wellness program and his or her premium increases 10% to 15%, will such an increase affect the grandfathered status of the employer’s group medical plan?

Yes. The various federal agencies caution that penalties related to wellness programs (such as cost-sharing surcharges) should be examined carefully as they could jeopardize the plan’s grandfather status-for example, by decreasing the employer’s contribution percentage by more than 5 percentage points below the contribution rate on March 23, 2010.

Question 4 – Form W-2 Reporting

Are all employers required to report “applicable employer -sponsored coverage” on an employee’s Form W-2 for 2012?

No. All employers that provide “applicable employer-sponsored coverage” during a calendar year are subject to the reporting requirement-including federal, state, and local government entities (a few exceptions apply, such as federally recognized Indian tribal governments).

For 2012 Forms W-2 and until the issuance of further guidance, the IRS indicated in Notice 2011-28, Q/A-3 that an employer is not subject to the reporting requirement for any calendar year if the employer was required to file fewer than 250 Forms W-2 for the preceding calendar year. Therefore, if an employer files fewer than 250 Forms W-2 in 2011, the employer would not be subject to the reporting requirement for the 2012 calendar year.

Question 5 – Summary of Benefits and Coverage

The health care reform law  expands ERISA’s disclosure requirements by requiring that a four-page “summary of benefits and coverage” (“SBC”) be provided to applicants and enrollees before enrollment or re-enrollment. The SBC must accurately describe the “benefits and coverage under the applicable plan or coverage.”  The SBC applies in addition to ERISA’s SPD and SMM requirements.  Although effective for plan years beginning on or after September 23, 2010,  this requirement contains a special distribution deadline of 24 months after the enactment of PPACA (March 23, 2010).  Last week, new proposed regulations were released and provided important new guidance and clarification. The following reviews are two important questions.

Must the SBC be provided 60 days before the beginning of each renewal?

No. Individuals enrolled in a health plan must be notified of any significant changes to the terms of coverage reflected in the SBC at least 60 days prior to the effective date of the change. This timing applies only to changes that become effective during the plan or policy year but not to changes at renewal (the start of the new plan or policy year).

 

So if this rule does not apply, when must the SBC be provided?

In general, the proposed regulations direct that the SBC be provided when a plan or individual is comparing health coverage options. If the information in the SBC changes between the time of application, when the coverage is offered, and when a policy is issued (often the case only for individual market coverage), the proposal would require that an updated SBC be provided. If the information is unchanged, the SBC does not need to be provided again, except upon request.

An insurer also must provide a new SBC if and when the policy, certificate, or contract or policy is renewed or reissued. In the case of renewal or reissuance, if the insurer requires written application materials for renewal (in either paper or electronic form), it must provide the SBC no later than the date the materials are distributed. If renewal or reissuance is automatic, the SBC must be provided no later than 30 days prior to the first day of the new policy year.

Question 6 – Tax Free health Coverage

Under the Health Care Reform laws, which individuals qualify for tax free health coverage?

The Health Care Reform laws expanded the group of individuals who can receive accident or health benefits on a tax-free basis to include children “of the taxpayer” who have not attained age 27 as of the end of the taxable year, as provided in Code Section 105(b). This change means that, in addition to the employee and his or her spouse, the following individuals may now receive employer-provided health coverage on a tax-free basis:

• any child of the employee, until the end of the year the child turns age 26;
• an employee’s qualifying child; and
• an employee’s qualifying relative.

For purposes of this exclusion, a “child” means “a son, daughter, stepson, or stepdaughter of the taxpayer, or an eligible foster child of the taxpayer, “as provided under Code §152(f)(1) The terms “qualifying child” and “qualifying relative” are defined using the modified Code §105(b) definition.

Please remember that the tax-treatment provisions apply to all employer-provided accident or health coverage, including plans that provide only HIPAA-excepted benefits, such as limited-scope dental or vision benefits and most health FSAs.

Special Note: Under these new rules, coverage for a child of a civil union spouse or domestic partner will only be tax free if he or she meets the requirements for being a qualifying relative. In many situations, the child of a civil union spouse or domestic partner may not be the “child” or the “qualifying child” of the employee.

Further Note:  For distributions from  a Health Savings Account (HSA) to be tax free for account holder, the medical expense must be incurred by an individual who meets the requirements for being either a “qualifying child” or a “qualifying relative,” as defined using the modified Code §105(b) definition. Code §223 was not amended by the Health Care Reform laws to add a provision allowing expenses for children under age 27 who are not Code §105(b) dependents, so unlike health FSAs, HRAs, and HDHPs, HSAs cannot pay the expenses of such children tax-free.

Worksheet for Code § 105(h) Nondiscrimination Tests Now Available

Introduction

For Plan Years beginning after September 23, 2010, nongrandfathered insured health plans must pass the nondiscrimination tests under Code Section 105(h) or the employer may be penalized. These tests include a Benefits Test and an Eligibility Test.

In order to conduct these tests, the employer must collect information regarding the insured health plans offered to employees, individuals employed. employees covered, the details of various plan features, employees excluded from coverage and the businesses included in its controlled group.

Code Section 105(h) Nondiscrimination Testing Worksheet

To assist in collecting all of the above information and conducting the Benefits Test and the Eligibility Test, I have created a nine page worksheet that creates a guide in what information is needed and how to conduct the tests. It also provides step by step directions with a series of questions and answers.

The completion of this Worksheet is important because it provides evidence of the completion of the tests in case of an IRS audit. It also provides an early warning of any problems in passing the tests.

This worksheet will be updated at no cost when the IRS provides any new guidance. In addition, if you order the worksheet, I will answer any questions.

How do I order?
Call me at 708-717-9638 and pay by credit card.
OR
Just send me a check for $149 to:
Larry Grudzien
Attorney at Law
708 So. Kenilworth Ave.
Oak Park, IL 60304

Did you miss the Webinar? Click her to view it now!

Free Webinar “New Nondiscrimination Rules for Insured Health Plans under Health Care Reform”

I conducted a free Webinar on December 14 to introduce the nondiscrimination rules that apply to nongrandfathered insured plans under Code Section 105(h). This webinar is be approximately 1 hour in length.

From this Webinar, you will learn:

• When a health plan will lose grandfathered status and the new nondiscrimination rules apply,
• What policies will cause an employer’s health plan to violate the rules,
• What nondiscrimination tests will apply,
• Which employees are in the “prohibited group,”
• What employees can be excluded from the tests,
• Which plans must be tested, and
• What are the consequences for failing the tests for employers.

After this webinar, you will able to advise your employer and/or clients in how to prepare for these changes.

You can purchase the Worksheet for Code § 105(h) Nondiscrimination Tests by clicking here.

DEPARTMENTS OF TREASURY, LABOR AND HEALTH AND HUMAN SERVICES RELEASED INTERIM FINAL REGULATIONS ON GRANDFATHER STATUS

On June 14, 2010, the Departments of the Treasury, Labor and Health and Human Services released interim final regulations for group health plans and health insurance coverage relating to status as a grandfathered health plan under the Patient Protection and Affordable Care Act (“Affordable Care Act”).  These regulations are under Section 9815(a)(1) of the Internal Revenue Code (“Code”), Section 715(a)(1) of the Employee Retirement Income Security Act (“ERISA”) and Section XXVII of the Public Health Service Act (26 CFR 54.9815-1251, 29 CFR 2590.715-1251, 45 CFR 147.140).  These regulations outline:

• what group health plans and individual health plans are grandfathered;
• what changes under health reform apply to grandfathered plans;
• what changes under health reform do not apply to grandfathered plans;
• what changes a plan sponsor or an insurance company can make to a health plan and still maintain grandfathered status;
• what changes a plan sponsor or an insurance company can make that will cause a health plan to lose its grandfathered status;
• what disclosure and record retention requirements must a plan sponsor or an insurance company meet to retain its grandfather status for health plans;
• what relief a plan sponsor or insurance company can have if they either made changes to its health plans effective after March 23, 2010 but made them before March 23, 2010 or made changes after March 23, 2010 but before the publication of these regulations; and
• how the grandfather status rules apply to collectively bargained plans.

Q-1: What is a grandfathered health plan?

A-1: A grandfathered group health plan is a group or individual plan in which an individual was enrolled on March 23, 2010. A grandfathered plan can be a single employer plan, a multi-employer plan, or a multiple employer plan. It can also be an insured or a self-insured arrangement.

Q-2: Are all group medical plans that covered employees as of March 23, 2010 grandfathered?

A-2: Grandfathering applies to all group health plans that are welfare benefit plans under ERISA section 3(1) and all health insurance coverage to the extent that the plan or coverage provides medical care to employees and their dependents through insurance, reimbursement, or otherwise, even if coverage is offered through a medical service policy or an HMO offered by a health insurance issuer. The rules under the regulations apply separately to each benefit package made available under a group health plan or health insurance coverage.

Q-3: What tax reform changes apply to grandfather plans?

A-3: Grandfathered Plans need to comply with the following. All provisions are effective on the first renewal date after September 23, 2010, except where noted.

• Coverage of Dependents to Age 26: Fully-insured and self-funded health plans that offer dependent coverage must permit children to stay on family policies until age 26 if the dependent is not eligible for employer coverage. (Prior to 2014, this will only apply to those dependents who cannot secure employer-sponsored coverage). Coverage provided to these dependents will not result in imputed income to the employee.
• Elimination of Lifetime Benefit Limits: For fully-insured and self-funded health plans, lifetime limits on the dollar value of benefits under all health insurance plans must be eliminated. Certain limits may be allowed on specific benefits as long as they are not considered Essential Health Benefits (yet to be defined).
• Restriction on Annual Benefit Limits: For fully-insured and self-funded health plans, the Authority for the Secretary of Health and Human Services (“HHS”) is to define tight restrictions on annual limits placed on insurance plans. (Use of annual limits will be banned entirely in 2014 when the State Insurance Exchanges are operational.)
• No Rescissions of Coverage: Fully-insured and self-funded group health plans are prohibited from rescinding coverage once coverage has already been in place for that person, except in the event of fraud.
• Cost Ratio Requirements: Beginning January 1, 2011, health insurers must provide an annual rebate to each enrollee if the minimum loss ratio (“MLR”) is not met. The MLR is 85% in the large group market (100+ employees) and 80% in the small group market (less than 100 employees). This provision will have no effect on self-funded plans.
• Elimination of Pre-Existing Condition Exclusions for Children: Pre-existing condition exclusions on self-funded or fully-insured health plans cannot apply to children. This provision will extend to adults as of 2014.
• Waiting Period Restriction (for plan years on or after January 1, 2014): Fully-insured and self-funded group health plans may not impose a waiting period in excess of 90 days for coverage.
• Distribution of Uniform Notice of Coverage: Plan administrators, plan sponsors and insurers must provide a summary of benefits and coverage explanation that describes benefits and coverage to participants prior to enrollment. The Uniform Notice of Coverage will be in addition to  a Summary Plan Description which is already required by ERISA. This requirement will extend to those plans exempted from ERISA.

The Secretary of HHS will provide specific standards for the summary. The summary must state if the plan provides Minimum Essential Coverage (yet to be defined) and if it pays less than 60% of the total cost of benefits provided under the plan. In addition, modifications to the group health plan must be summarized and sent to participants no later than 60 days prior to the change. There will be a penalty for willful non-compliance.

Grandfathered plans are exempt from mandatory compliance with many of the other new requirements imposed on new plans under the legislation.

Q-4: What tax reform changes do not apply to grandfathered plans?

A-4: Grandfathered Plans do no need to comply with:

All provisions are effective on the first renewal date after September 23, 2010, except where noted.

• Information to the Secretary of HHS: Group Health Plans, both fully-insured and self-funded, must provide information regarding claims payment, enrollment data, number of claims denied, rating practices, non-network cost-sharing, enrollee and participant rights, among other data.
• Employer Annual Reporting Requirements regarding Quality of Care: An annual report must be supplied to participants at Open Enrollment that describes health care provider reimbursement rates that improve quality of care, including wellness activities. The Secretary of HHS is to collect this data and make it available on the Internet. Reporting requirements and regulations from HHS will be available by March 23, 2012.
• First Dollar Coverage for Preventive Services: All fully-insured and self-funded health plans will be required to provide first dollar benefits for Preventive Care Services, such as immunizations, screenings and routine care for adults and children.
• Mandated Patient Protections: PCPs, OB-GYNs, and Emergency Care: In fully-insured or self-funded health plans that require the designation of a Primary Care Physician (“PCP”) members must be allowed to select any participating provider as their PCP.
• OB-GYNs and pediatricians: Women must be granted direct access to OB-GYN care without a referral and emergency services offered in a health plan must provide coverage at the in-network level, regardless of facility used and without need for prior-authorization.
• Code Section 105(h) Non-Discrimination Requirements for Fully-Insured Plans: Previously only applying to self-funded plans, group fully-insured health plans will be required to satisfy Section 105(h) non-discrimination requirements stating that employers must not establish any eligibility rules for health care coverage, or levels of coverage that has the effect of discriminating in favor of higher-wage employees.
• Mandated Claims Appeals Process: In addition to the existing ERISA internal claims appeals process for disputed claims, a new external claims procedure must be implemented in fully-insured and self-funded group health plans that will assure the review of disputed claims by a third party.
• Guaranteed Availability and Renewability of Coverage (for plan years on or after January 1, 2014): This provision requires insurance companies to make available health coverage for employers to purchase for their employees. The Act does not address or guarantee that this coverage will be affordable, however. The provision prevents health insurers from canceling an employer’s group plan in the event the plan has poor claims experience in a given year.
• No Discrimination Based on Health Status (for plan years on or after January 1, 2014): Both fully-insured and self-funded group health plans may not establish rules for eligibility to enroll based on health status factors. This same requirement was put forth by HIPAA in 1996.
• Mandated Cost-Sharing Limits (for plan years on or after January 1, 2014): Fully-insured and self-funded group health plans must limit cost-sharing amounts (deductibles, coinsurance and co-pays) to the limits applicable to high deductible health plans under Code Section 223. (For example, in 2010, the out of pocket limits on a high-deductible plan are $5,950 for single and $11,900 for family). Also, deductibles cannot exceed $2,000 per single and $4,000 per family.
• Mandated Coverage for Clinical Trials (for plan years on or after January 1, 2014): Both fully-insured and self-funded health plans must provide coverage for routine costs associated with clinical trials. An individual is eligible for coverage for clinical trials if his or her participating physician deems it appropriate with respect to the protocols of treatment of cancer or other life threatening diseases or conditions.

Q-5: What changes can a plan sponsor or an insurance company make to a health plan and keep its grandfathered status?

A-5: Plan sponsors and insurance companies can make voluntary changes to increase benefits, to conform to required legal changes, add new employees and dependents as participants, change third party administrators, renew an insurance policy and to adopt voluntarily other consumer protections in health care reform.

Q-6: What changes can a plan sponsor or an insurance company make to its health plan to cause it to lose grandfathered status?

A-6: A health plan will no longer be considered a grandfathered health plan if a plan sponsor or the insurance company:

• Eliminates all or substantially all benefits to diagnose or treat a particular condition. The elimination of benefits for any necessary element to diagnose or treat a condition is considered the elimination of all or substantially all benefits to diagnose or treat a particular condition;
• Increases a percentage cost-sharing requirement (such as coinsurance) above the level at which it was on March 23, 2010;
• Increases fixed-amount cost-sharing requirements other than copayments, such as a $500 deductible or a $2,500 out-of-pocket limit, by a total percentage measured from March 23, 2010 that is more than the sum of medical inflation and 15 percentage points;
• Increases copayments by an amount that exceeds the greater of: a total percentage measured from March 23, 2010 that is more than the sum of medical inflation plus 15 percentage points, or $5 increased by medical inflation, measured from March 23, 2010;
• For a group health plan or group health insurance coverage, an employer or employee organization decreases its contribution rate by more than five percentage points below the contribution rate on March 23, 2010;
• With respect to annual limits
  1. a group health plan, or group or individual health insurance coverage, that, on March 23, 2010, did not impose an overall annual or lifetime limit on the dollar value of all benefits imposes an overall annual limit on the dollar value of benefits;
  2. a group health plan, or group or individual health insurance coverage, that, on March 23, 2010, imposed an overall lifetime limit on the dollar value of all benefits but no overall annual limit on the dollar value of all benefits adopts an overall annual limit at a dollar value that is lower than the dollar value of the lifetime limit on March 23, 2010; or
  3. a group health plan, or group or individual health insurance coverage, that, on March 23, 2010, imposed an overall annual limit on the dollar value of all benefits decreases the dollar value of the annual limit (regardless of whether the plan or health insurance coverage also imposes an overall lifetime limit on the dollar value of all benefits); or
• Enters into a new policy, certificate or contract of insurance with an insurance company.

For purposes of these regulations, “medical inflation” is defined by reference to the overall medical care component of the Consumer Price Index (“CPI”) for all Urban Consumers, unadjusted, published by the Department of Labor.

Q-7: What notice and record retainer of records requirement must a plan sponsor or an insurance company meet to retain its grandfathered status of its health plans?

A-7: To maintain status as a grandfathered health plan, a plan sponsor or a insurance company must include a statement, in any plan materials provided to participants or beneficiaries (Summary Plan Description) describing the benefits provided under the plan or health insurance coverage, that the plan or health insurance coverage believes it is a grandfathered health plan and providing contact information for questions and complaints. The following model language can be used to satisfy this disclosure requirement:

This [group health plan or health insurance issuer] believes this [plan or coverage] is a “grandfathered health plan” under the Patient Protection and Affordable Care Act (the Affordable Care Act). As permitted by the Affordable Care Act, a grandfathered health plan can preserve certain basic health coverage that was already in effect when that law was enacted. Being a grandfathered health plan means that your [plan or policy] may not include certain consumer protections of the Affordable Care Act that apply to other plans, for example, the requirement for the provision of preventive health services without any cost sharing. However, grandfathered health plans must comply with certain other consumer protections in the Affordable Care Act, for example, the elimination of lifetime limits on benefits.

Questions regarding which protections apply and which protections do not apply to a grandfathered health plan and what might cause a plan to change from grandfathered health plan status can be directed to the plan administrator at [insert contact information]. [For ERISA plans, insert: You may also contact the Employee Benefits Security Administration, U.S. Department of Labor at 1-866-444-3272 or www.dol.gov/ebsa/healthreform. This website has a table summarizing which protections do and do not apply to grandfathered health plans.] [For individual market policies and nonfederal governmental plans, insert: You may also contact the U.S. Department of Health and Human Services at www.healthreform.gov.]

In addition, to maintain status as a grandfathered health plan, a plan sponsor  or insurance company must  maintain records documenting the terms of the plan or health insurance coverage that were in effect on March 23, 2010, and any other documents necessary to verify, explain, or clarify its status as a grandfathered health plan. Such documents could include intervening and current plan documents, health insurance policies, certificates or contracts of insurance, summary plan descriptions, documentation of premiums or the cost of coverage, and documentation of required employee contribution rates. In addition, the plan or issuer must make such records available for examination. The plan sponsor or insurance company must also make such records available for examination.  Accordingly, a participant, beneficiary, State or Federal agency official would be able to inspect such documents to verify the status of the plan or health insurance coverage as a grandfathered health plan.

Q-8: What relief is provided under the regulations for a plan sponsor or an insurance company which makes a change to its health plan before March 23, 2010, but which is not effective until after March 23, 2010?

A-8: Transitional rules are provided for plan sponsors and insurance companies that made changes after the enactment of health reform pursuant to a legally binding contract entered into prior to March 23, 2010; made changes to the terms of health insurance coverage pursuant to a filing before March 23, 2010 with a State insurance department; or made changes pursuant to written amendments to a plan that were adopted prior to March 23, 2010. If a plan or insurance company makes changes in any of these situations, the changes are effectively considered part of the plan terms on March 23, 2010 even though they are not then effective. Therefore, such changes are not taken into account in considering whether the plan or health insurance coverage remains a grandfathered health plan.

For purposes of enforcement, the Departments of the Treasury, Labor and Health and Human Services will take into account good-faith efforts to comply with a reasonable interpretation of the statutory requirements and may disregard changes to plan and policy terms that only modestly exceed those changes described in the regulations and that occur before publication of the regulations.

Q-9: Is there any relief provided under the regulations to a plan sponsor or insurance company if it makes changes to the plan or contract after March 23, 2010 but before the publication of the regulations?

A-9:  Plan sponsors and insurance companies are provided with a grace period within which to revoke or modify any changes adopted prior to the date of the publication of the regulations, where the changes might otherwise cause the plan or health insurance coverage to cease to be a grandfathered health plan. Under this rule, grandfather status is preserved if the changes are revoked, and the plan or health insurance coverage is modified, effective as of the first day of the first plan or policy year beginning on or after September 23, 2010 to bring the terms within the limits for retaining grandfather status in these regulations. For this purpose and for purposes of the reasonable good faith standard, changes will be considered to have been adopted prior to when these regulations are published if the changes are effective before that date; the changes are effective on or after that date pursuant to a legally binding contract entered into before that date; the changes are effective on or after that date pursuant to a filing before that date with a State insurance department; or the changes are effective on or after that date pursuant to written amendments to a plan that were adopted before that date.

Q-10: How do the grandfather rules apply to collectively bargained plans?

A-10: Health insurance coverage maintained pursuant to one or more collective bargaining agreements that were ratified before March 23, 2010, are not subject to the insurance market reforms and coverage mandates of the Affordable Care Act and do not apply until the date on which the last collective bargaining agreement relating to coverage terminates. Before the last of the applicable collective bargaining agreements terminates, any health insurance coverage provided pursuant to the collective bargaining agreements is a grandfathered health plan, even if there is a change in insurance companies during the period of the agreement. The law refers solely to “health insurance coverage” and does not refer to a group health plan; therefore, these interim final regulations only apply this provision to insured plans maintained pursuant to a collective bargaining agreement and not to self-insured plans. After the date on which the last of the collective bargaining agreements terminates, the determination of whether health insurance coverage maintained pursuant to a collective bargaining agreement is grandfathered health plan coverage is made under the regulations.

Under the regulations, this determination is made by comparing the terms of the coverage on the date of determination with the terms of the coverage that were in effect on March 23, 2010. A change in insurance companies during the period of the agreement, by itself, will not cause the plan to cease to be a grandfathered health plan at the termination of the agreement; however, for any changes in insurance companies after the termination of the collective bargaining agreement, the issue of a new policy, certificate or contract of insurance will not be grandfathered. In addition any coverage amendments made pursuant to a collective bargaining agreement that amends the coverage to conform to health care reform will not cause the plan to lose its grandfathered status.

Collectively bargained plans (both insured and self-insured) that are grandfathered health plans are subject to the same requirements as other grandfathered health plans, and are not provided with a delayed effective date for changes under healthcare reform with which other grandfathered health plans must comply. Thus, the provisions that apply to grandfathered health plans apply to collectively bargained plans before and after termination of the last of the applicable collective bargaining agreement.

DEPARTMENTS OF TREASURY, LABOR AND HEALTH AND HUMAN SERVICES RELEASED INTERIM FINAL REGULATIONS ON PREEXISTING CONDITIONS, LIFETIME AND ANNUAL LIMITS, RESCISSIONS, AND PATIENT PROTECTIONS

On June 22, 2010, the Departments of the Treasury, Labor and Health and Human Services (“HHS”) released interim final regulations for group health plans and health insurance coverage relating to status as a preexisting conditions, lifetime and annual limits, rescissions, and patient protections under the Patient Protection and Affordable Care Act (“Affordable Care Act”).  These regulations are under Section 9815(a)(1) of the Internal Revenue Code (“Code”), Section 715(a)(1) of the Employee Retirement Income Security Act (“ERISA”) and Section XXVII of the Public Health Service Act (26 CFR 54.9815-2704T,2711T, 2712T, and 2719AT, 29 CFR 2590.715-2704, 2711, 2112, and 2719A and 45 CFR 147.108, 126, 128 and 138,  The following will summarize the provisions of the regulations.

Prohibitions on Preexisting Condition Exclusions

Group health plans and insurance companies will be prohibited from excluding individuals from coverage on the basis of any pre-existing condition exclusion. This rule will apply with respect to enrollees under the age of 19 for plan years beginning on or after September 23, 2010. For enrollees age 19 and over, the prohibition will apply for plan years beginning on or after January 1, 2014. This prohibition on pre-existing condition exclusions will also apply to grandfathered health plans. In addition, a blanket prohibition is created on pre-existing condition exclusions for all individual insurance policies and employer plans.

What is not considered a Preexisting Condition? These regulations make it clear the prohibition applies not just an exclusion of coverage of specific benefits associated with a preexisting condition in the case of a participant, but a complete exclusion from such plan or coverage, if that exclusion is based on a preexisting condition. These regulations do not prohibit a plan or a policy from excluding benefits if the exclusion applies regardless of when the condition arose relative to the effective date of coverage. Such exclusion will not be considered excluding a preexisting condition.

Lifetime and Annual Limits

Group health plans, and insurance companies are also prohibited from providing coverage that contains a lifetime limitation on the dollar value of “essential health benefits” for any participant or beneficiary. Similarly, group health plans and insurance companies are prohibited from imposing annual limitations on the dollar value of “essential health benefits” to any participant or beneficiary. This provision is otherwise applicable for plan years beginning on or after September 23, 2010, and it will apply to grandfathered health plans. Prior to January 1, 2014, however, a group health plan is free to establish a “restricted annual limit” on the dollar value of an individual’s benefits that are part of “essential health benefits” as determined by HHS. Additionally, group health plans and insurance companies will remain free to impose either lifetime or annual limits on benefits that will not constitute “essential health benefits.”

What are Essential Health Benefits? The regulations define “essential health benefits” by referencing Section 1302(b) of the Affordable Care Act, but do provide any detail. Regulations on Section 1302(b) of the Affordable Care Act have not been released. However, Section 1302(b) of the Affordable Care Act provides that these items must be included:

• Ambulatory patient services.
• Emergency services.
• Hospitalization.
• Maternity and newborn care.
• Mental health and substance use disorder services, including behavioral health treatment.
• Prescription drugs.
• Rehabilitative and habilitative services and devices.
• Laboratory services.
• Preventive and wellness services and chronic disease management.
• Pediatric services, including oral and vision care.

What Plans are excluded? Certain account–based plans are exempt from the restriction on annual limits. Health Flexible Spending Accounts, Medical Savings Accounts and Health Savings Accounts are specifically exempt. Health Reimbursement Accounts (“HRA”) are specifically exempt if they are integrated with other coverage as part of a group health plan. The regulations also exempt retiree-only HRAs. The regulations reserve judgment on standalone HRAs.

Are full exclusions of conditions still possible? The regulations clarify that the prohibitions from providing coverage that contain a lifetime limitation on the dollar value of “essential health benefits” does not prevent a plan or an insurance company from excluding all benefits for a condition, but if any benefits are provided for a condition, then all of the requirements will apply. An exclusion of all benefit for a condition is not considered to be an annual or lifetime dollar limit.

What are the limits on “restricted annual limits“? In order to mitigate the potential for premium increases for all plans and policies, while at the same time ensuring access to “essential health benefits“, the regulations adopt a three-year phased approach for restricted annual limits. Under these regulations, annual limits on the dollar value of benefits that are “essential health benefits” may not be less than the following amounts for plan years (in the individual market, policy years) beginning before January 1, 2014:

• For plan or policy years beginning on or after September 23, 2010 but before September 23, 2011, $750,000;

• For plan or policy years beginning on or after September 23, 2011 but before September 23, 2012, $1.25 million; and

• For plan or policy years beginning on or after September 23, 2012 but before January 1, 2014, $2 million.

As these are minimums for plan years (in the individual market, policy years) beginning before 2014, plans or insurance companies may use higher annual limits or impose no limits. Plans and policies with plan or policy years that begin between September 23 and December 31 have more than one plan or policy year under which the $2 million minimum annual limit is available; however, a plan or policy generally may not impose an annual limit for a plan year (in the individual market, policy year) beginning after December 31, 2013.

How do these limits apply? The minimum annual limits for plan or policy years beginning before 2014 apply on an individual-by-individual basis. Thus, any overall annual dollar limit on benefits applied to families may not operate to deny a covered individual the minimum annual benefits for the plan year (in the individual market, policy year). These interim final regulations clarify that, in applying annual limits for plan years (in the individual market, policy years) beginning before January 1, 2014, the plan or health insurance coverage may take into account only “essential health benefits“.

How do these restricted annual limits apply to mini-med plans? The restricted annual limits provided in these regulations are designed to ensure, in the vast majority of cases, that individuals would have access to needed services with a minimal impact on premiums. So that individuals with certain coverage, including coverage under a limited benefit plan or so-called “mini-med” plans, would not be denied access to needed services or experience more than a minimal impact on premiums, these regulations provide for HHS to establish a program under which the requirements relating to restricted annual limits may be waived if compliance with these regulations would result in a significant decrease in access to benefits or a significant increase in premiums. Guidance from HHS regarding the scope and process for applying for a waiver is expected to be issued in the near future.

Is there a new notice requirement for those who now eligible because of the repeal of life time limits? These regulations also provide that individuals who reached a lifetime limit under a plan or health insurance coverage prior to the issuance of these regulations and are otherwise still eligible under the plan or health insurance coverage must be provided with a notice that the lifetime limit no longer applies. If such individuals are no longer enrolled in the plan or health insurance coverage, the employer’s plan or insurance company must  provide an enrollment (in the individual market, reinstatement) opportunity for such individuals. In the individual market, this reinstatement opportunity does not apply to individuals who reached their lifetime limits on individual health insurance coverage if the contract is not renewed or otherwise is no longer in effect. It would apply, however, to a family member who reached the lifetime limit in a family policy in the individual market while other family members remain in the coverage. These notices and the enrollment opportunity must be provided beginning not later than the first day of the first plan year (in the individual market, policy year) beginning on or after September 23, 2010. Anyone eligible for an enrollment opportunity must be treated as a special enrollee. This means that they must be given the right to enroll in all of the benefit packages available to similarly situated individuals upon initial enrollment.

Prohibition on Rescission

Group health plans and insurance companies will generally be prohibited from rescinding coverage with respect to an enrollee once such enrollee is covered. The exceptions will be for fraud or intentional misrepresentation by the enrollee, nonpayment of premiums, termination of the plan, or loss of eligibility. This standard applies to all rescissions, whether in the group or individual insurance market, and whether for insured or self-insured coverage. These rules also apply regardless of any contestability period that may otherwise apply. This new rule is effective for plan years beginning on or after September 23, 2010, and will apply to grandfathered health plans.

How do these new standards apply? These regulations include several clarifications regarding the standards for rescission. First, these regulations clarify that these rescission rules apply whether the rescission applies to a single individual, an individual within a family, or an entire group of individuals. Thus, for example, if an insurance company attempted to rescind coverage of an entire employment-based group because of the actions of an individual within the group, the standards of these regulations would apply. Second, these regulations clarify that these rescission rules apply to representations made by the individual or a person seeking coverage on behalf of the individual. Thus, if a plan sponsor seeks coverage from an insurance company for an entire employment-based group and makes representations, for example, regarding the prior claims experience of the group, the standards of these regulations would also apply.

What is fraud? These regulations clarify that, to the extent that an omission constitutes fraud, that omission would permit the plan or issuer to rescind coverage under this section. An example in these interim final regulations illustrates the application of the rule to misstatements of fact that are inadvertent.

What is considered a rescission? For purposes of these regulations, a rescission is a cancellation or discontinuance of coverage that has retroactive effect. For example, a cancellation that treats a policy as void from the time of the individual’s or group’s enrollment is a rescission. As another example, a cancellation that voids benefits paid up to a year before the cancellation is also a rescission for this purpose. A cancellation or discontinuance of coverage with only a prospective effect is not a rescission, and neither is a cancellation or discontinuance of coverage that is effective retroactively to the extent it is attributable to a failure to timely pay required premiums or contributions towards the cost of coverage.

When coverage is rescinded, must advance notice be sent? In addition to setting a new Federal floor standard for rescissions, the new law also adds a new advance notice requirement when coverage is rescinded where still permissible. Specifically, the new law provides that coverage may not be cancelled unless prior notice is provided. These regulations provide that a group health plan, or insurance company offering group health insurance coverage, must provide at least 30 calendar days advance notice to an individual before coverage may be rescinded. The notice must be provided regardless of whether the rescission is of group or individual coverage; or whether, in the case of group coverage, the coverage is insured or self-insured, or the rescission applies to an entire group or only to an individual within the group. This 30-day period will provide individuals and plan sponsors with an opportunity to explore their rights to contest the rescission, or look for alternative coverage, as appropriate.

Patient Protections

Group health plans and insurance companies will be subject to several “patient protection” requirements. A plan that requires the designation of a participating primary care provider will be required to allow participants to choose any such provider who is available (including the choice of a pediatric specialist as the primary care provider for a child). Additionally, group health plans that cover emergency services will be required to cover such services without the need for prior authorization and without regard to any term or condition of the coverage, or whether the provider participates in such plan. Group health plans also will not be able to require authorization or a referral before a female participant/beneficiary could seek obstetrical or gynecological care from a professional specializing in such care. These requirements will be effective for plan years beginning on or after January 1, 2014, but will not apply to grandfathered health plans.

Choice of Health Care Professional: Under these regulations, the plan or insurance company must provide a notice informing each participant (or in the individual market, the primary subscriber) of the terms of the plan or health insurance coverage regarding designation of a primary care provider. Accordingly, these regulations require such plans and insurance companies to provide a notice to participants (in the individual market, primary subscribers) of these rights when applicable. Model language is provided in these regulations. The notice must be provided whenever the plan or insurance company provides a participant with a summary plan description or other similar description of benefits under the plan or health insurance coverage, or in the individual market, provides a primary subscriber with a policy, certificate, or contract of health insurance. The following model language can be used to satisfy this disclosure requirement:

(A) For plans and issuers that require or allow for the designation of primary care providers by participants or beneficiaries, insert:

[Name of group health plan or health insurance issuer] generally [requires/allows] the designation of a primary care provider. You have the right to designate any primary care provider who participates in our network and who is available to accept you or your family members. [If the plan or health insurance coverage designates a primary care provider automatically, insert: Until you make this designation, [name of group health plan or health insurance issuer] designates one for you.] For information on how to select a primary care provider, and for a list of the participating primary care providers, contact the [plan administrator or issuer] at [insert contact information].

(B) For plans and issuers that require or allow for the designation of a primary care provider for a child, add:

For children, you may designate a pediatrician as the primary care provider.

(C) For plans and issuers that provide coverage for obstetric or gynecological care and require the designation by a participant or beneficiary of a primary care provider, add:

You do not need prior authorization from [name of group health plan or issuer] or from any other person (including a primary care provider) in order to obtain access to obstetrical or gynecological care from a health care professional in our network who specializes in obstetrics or gynecology. The health care professional, however, may be required to comply with certain procedures, including obtaining prior authorization for certain services, following a pre-approved treatment plan, or procedures for making referrals. For a list of participating health care professionals who specialize in obstetrics or gynecology, contact the [plan administrator or issuer] at [insert contact information].

Emergency Services: These regulations require that a plan or health insurance coverage providing emergency services must do so without the individual or the health care provider having to obtain prior authorization (even if the emergency services are provided out of network) and without regard to whether the health care provider furnishing the emergency services is an in-network provider with respect to the services. The emergency services must be provided without regard to any other term or condition of the plan or health insurance coverage other than the exclusion or coordination of benefits, an affiliation or permitted waiting period applicable or cost-sharing requirements. For a plan or health insurance coverage with a network of providers that provides benefits for emergency services, the plan or insurance company may not impose any administrative requirement or limitation on benefits for out-of-network emergency services that is more restrictive than the requirements or limitations that apply to in-network emergency services.

Cost-sharing requirements expressed as a copayment amount or coinsurance rate imposed for out-of-network emergency services cannot exceed the cost-sharing requirements that would be imposed if the services were provided in-network. Out-of-network providers may, however, also balance bill patients for the difference between the providers’ charges and the amount collected from the plan or issuer and from the patient in the form of a copayment or coinsurance amount. The Affordable Care Act excludes such balance billing amounts from the definition of cost sharing, and the requirement that cost sharing for out-of-network services be limited to that imposed in network only applies to cost sharing expressed as a copayment or coinsurance rate.

Because the Affordable Care Act does not require plans or issuers to cover balance billing amounts, and does not prohibit balance billing, even where the protections in the statute apply, patients may be subject to balance billing.

To avoid the circumvention of these new protections, it is necessary that a reasonable amount be paid before a patient becomes responsible for a balance billing amount. Thus, these regulations require that a reasonable amount be paid for services by some objective standard. In establishing the reasonable amount that must be paid, a wide variation had to bet taken into account in how plans and insurance companies determine both in-network and out-of network rates. Accordingly, these regulations consider three amounts: the in-network rate, the out-of-network rate, and the Medicare rate. Specifically, a plan or issuer satisfies the copayment and coinsurance limitations in the law if it provides benefits for out-of-network emergency services in an amount equal to the greatest of three possible amounts:

1)    The amount negotiated with in-network providers for the emergency service furnished;

2)    The amount for the emergency service calculated using the same method the plan generally uses to determine payments for out-of-network services (such as the usual, customary, and reasonable charges) but substituting the in-network cost-sharing provisions for the out-of-network cost-sharing provisions; or

3)    The amount that would be paid under Medicare for the emergency service.

Each of these three amounts is calculated excluding any in-network copayment or coinsurance imposed with respect to the participant, beneficiary, or enrollee.

In applying the rules relating to emergency services, the law and these regulations define the terms emergency medical condition, emergency services, and stabilize. These terms are defined generally in accordance with their meaning under the Emergency Medical Treatment and Labor Act (“EMTALA“), section 1867 of the Social Security Act. There are, however, some minor variances from the EMTALA definitions. For example, both EMTALA and PHS Act section 2719A define “emergency medical condition” in terms of the same consequences that could reasonably be expected to occur in the absence of immediate medical attention. Under EMTALA regulations, the likelihood of these consequences is determined by qualified hospital medical personnel, while under the new law the standard is whether a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of immediate medical attention to result in such consequences.