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.

COBRA PREMIUM ASSISTANCE SUBSIDY EXTENDED AGAIN

On March 2, 2010 the President signed the Temporary Extension Act of 2010 (H.R. 4691).  Section 3 of this act revises the COBRA premium assistance subsidy under the American Recovery and Reinvestment Act of 2009 (ARRA).

The full text of section 3 of HR 4691 can be found at:

http://www.dol.gov/ebsa/pdf/HR4691.pdf

Under the revisions:

• Extension of Eligibility Period for Involuntary Terminations.  Employees who experience an involuntary termination of employment on or before March 31, 2010 and meet all other requirements will now be eligible for the COBRA premium assistance subsidy.

• Addition of Qualifying Events That Are Reductions of Hours. Employees who experience a reduction of hours on or before September 1, 2008 and are involuntarily terminated on or after March 2, 2010, but before March 31, 2010, may now be eligible for the COBRA premium assistance subsidy.

• New Penalty Provisions. The employer/plan sponsor penalties and remedies that apply to the COBRA Notification requirement now appear to apply to the ARRA Notification requirements.

• Protection for Employers Making Involuntary Termination Determinations. The Internal Revenue Service (IRS) will honor any employer determination of an involuntary termination if certain conditions are met.

What does that mean for employers?

Current ARRA Notifications must be updated with the new law deadlines and also include the new reduction of hours eligibility information.

Notice explaining the new law must be mailed to the following individuals within the next 60 days:

• Any COBRA eligible employee whose qualifying event was a reduction of hours on or after October 1, 2008 and has incurred an involuntary termination on or after March 2, 2010.  These individuals would still be within the 18 months COBRA coverage period as measured from the date of his or her reduction of hours. Note: It appears that an individual who elects COBRA coverage after a reduction of hours and continues it through the date of a subsequent termination of employment will not be entitled to any period of subsidy.

• Any COBRA participant whose COBRA notice was mailed out between February 28, 2010 and March 3, 2010.

While the reduction of hours clarification was not unexpected, please note that this provision does not extend the time the person must be provided COBRA coverage and only applies to those employees who terminate employment after March 2, 2010.

So basically, if you have an employee who had a reduction of hours on October 5, 2008, lost health coverage effective October 31, 2008, and terminated employment on March 2, 2010, this employee would be able to elect COBRA coverage for the month of March, 2010 even if he or she declined it the first time and may be eligible for the COBRA premium assistance subsidy.

Their COBRA coverage would be effective March 1, 2010 and end on March 31, 2010 (the end of the original 18 months of COBRA coverage eligibility due to the reduction of hours) and the individual therefore would not be eligible for payment of any medical claims between November 1, 2008 and February 28, 2010.

Another second bite at the apple (New Special Enrollment Right)

For those employees who are involuntarily terminated between March 2, 2010 and March 31, 2010 and incurred a reduction of hours anytime on or after September 1, 2008, they will now have a second chance to elect COBRA coverage if they failed to elect COBRA at the time of the reduction of hours or elected COBRA and then stopped.  Such election period shall be the latest of:

• 60 days after enactment (March 2, 2010) or May 1, 2010;

• 30 days after receiving a notice; or

• the end of the 30 day grace period for paying COBRA premiums.

Employer’s Determination of Involuntary Termination

The IRS will now adopt and honor an employer’s determination of an employee’s involuntary termination so long as (1) the employer bases its determination “on a reasonable interpretation” of ARRA and related administrative guidance; and (2) “the employer maintains supporting documentation of the determination, including an attestation by the employer of the involuntary termination with respect to the covered employee.”

New Penalties

An individual, the Department of Labor (DOL) or the Department of Health and Human Services (HHS) may bring suit to enforce a determination made by DOL or HHS of involuntary termination.  DOL or HHS can penalize plan sponsors or insurers who fail to comply with the determination at a rate of not more than $110 per day for each failure (after a 10 day grace period after the plan sponsor or insurer receives the decision.)  These penalties are in addition to existing penalties’ for failure to comply with COBRA under ERISA and the Code

Special Action Required from Employers/Plan Sponsors

In the past, employers may not have notified its COBRA service provider when a person who lost coverage due to a reduction of hours later terminated employment.  Going forward, the employer must notify your COBRA service provider of anyone who terminates employment after March 2, 2010, as they should be notified that they may have a special enrollment right to elect COBRA and receive the COBRA premium assistance subsidy.

It should also be noted that HR 4691 does not extend any additional time for those who currently are receiving the COBRA premium assistance subsidy.  This remains 15 months for now.

However, there are still more changes likely to be coming in the near future as well as questions regarding the application of this recent amendment.

HIPAA Privacy Forms Package Now Available for Business Associates

The American Recovery and Reinvestment Act of 2009 (“Act”) makes some of the HIPAA privacy and many of the security standards, as well as the civil and criminal penalties for violating those standards, directly applicable to business associates in the same manner as they apply to covered entities (which include health plans). While business associates already are required to have certain privacy and security safeguards in place under business associate contracts with a covered entity, they will now be directly responsible under the privacy and security standards.

Many of these new provisions become effective on February 17, 2010.

Who is a “Business Associate”?

A “Business Associate” is an entity that:

• performs a function or activity on behalf of a covered entity or provides certain specific services for a covered entity; and
• has access to individually identifiable health information.

HIPAA Privacy Form Package

To comply with the new requirements, I have created a special HIPAA Privacy Forms Package for Business Associates.  This forms package contains the following documents:

• A HIPAA Privacy Policy and Procedure,
• A HIPAA Security Standards Checklist,
• A HIPAA Training Acknowledgement,
• A Notice of Privacy Practices,
• A HIPAA Privacy Compliance Checklist,
• An Authorization for Release of Information, and
• A Business Associate Agreement.

There are over forty (40) pages of documents in this package. It has been specially designed for third party administrators, brokers and others  to comply with the new requirements.  The forms have been designed to be easy to use and complete.  If you order, they will be provided to you in a word file and can be reused.

How do I order?

Please  send e an email and a check for $600 to:

Larry Grudzien
Attorney at Law
708 So. Kenilworth Ave.
Oak Park, IL 60304

As soon as I receive your check, I will send you a copy of the HIPAA Privacy Forms Package.

This forms  package will provide you with a quick and easy way to comply.  If you have any questions or would like a sample, please send me an email.

Questions????????????

If you have any questions before or after ordering the forms package, please call or e-mail.  My email address is:

larry@larrygrudzien.com

DOL Releases Final Participant Contributions Regulations

On January 14, 2010, the U.S. Department of Labor (“DOL”) published final regulations (DOL Regulation Section 2510.3-102) in the Federal Register on when participant contributions become “plan assets” subject to the Employee Retirement Income Security Act of 1974 (“ERISA”).  Participant contributions are considered any amounts that an employer receives from its employees or are withheld from wages for contribution to an employee benefit plan.  These rules apply to employee contributions to qualified retirement plans (401(k), Savings Incentive Match Plan for Employees (“SIMPLE”) Individual Retirement Accounts (“IRAs”), Salary Reduction Simplified Employee Pensions (“SEPs”), Cafeteria Plans, Health Savings Accounts withheld from payroll or any other employee contributions made to welfare plans.  These new regulations establish a safe harbor period of seven (7) business days for employers to forward employee contributions to small pension and welfare plans.

Background

In accordance with DOL Regulation Section 2510.3-102, employers must segregate participant contributions from general assets on the earliest date on which the contributions can be segregated from employer general assets.  The maximum time period employers may take to pay the contributions into the plan trust are:

• the 15th business day of the month following the month in which the participant contribution amounts are received by the employer (in the case of amounts that a participant pays to an employer), or

• the 15th business day of the month following the month in which the amounts would otherwise have been paid to the employee in cash (in the case of amounts withheld by an employer from a participant’s wages).

The shorter maximum period for segregation of participant contributions applies only to qualified retirement plans.  In the case of SIMPLE IRAs and Salary Reduction SEPs, the period during which employers must make contributions to a retirement trust is extended to the 30th calendar day following the month in which the participant’s contribution would otherwise have been payable to the participant.  Welfare benefit plans, as described in ERISA Section 3(1), have 90 days to segregate participant contributions from plan assets.

New Requirement

In complying with this requirement, there were many employers who were not clear what the “earliest date” on which the segregation of contributions was possible.  To provide a higher degree of certainty, the DOL was asked to create a “safe harbor.”  In February 2008, the DOL released proposed regulations that provided a safe harbor for plans that have fewer than one hundred (100) participants (determined at the beginning of the plan year).  Under these proposed regulations, these plans would be considered to have been timely under the “earliest date” requirement if the contributions are deposited within seven (7) business days.

The DOL has adopted this seven (7) business day safe harbor rule, effective immediately.  This rule applies to both small qualified retirement and welfare benefit plans.  To comply with the safe harbor, deposits must be made to a small plan within seven (7) business days following, as applicable, the day on which elective deferrals would otherwise have been payable to the participant in cash or the day on which the employer receives plan loan repayments.  During the seven (7) business day safe harbor period, benefit plan contribution amounts that employers have received from employees will not be considered plan assets.

Under the final regulations, the safe harbor is available on a deposit-by-deposit basis, such that a failure to satisfy the safe harbor for any deposit of participant contribution amounts to a plan will not affect the unavailability of the safe harbor for any other deposit to the plan.

Why are these rules important?

Any late deposits of participant contributions and loan repayments (“delinquent contributions”) are a violation of ERISA’s trust requirement.  Participant contributions include elective deferrals (including catch-up and Roth contributions), after-tax contributions, any other participant contributions, and loan repayments that participants either have withheld from paychecks or pay directly to the employer for contribution into a plan.  A late deposit also may be a violation of the prudence rule and a prohibited transaction that can create excise tax penalties.

COBRA Subsidy Extension Becomes Law

The Congress passed legislation (H.R. 3326) extending the original federal COBRA subsidy created by the American Recovery and Reinvestment Act of 2009 (ARRA) which President Obama signed  into law on December 19, 2009.

Background

Under the ARRA, the federal government pays sixty-five (65%) percent of COBRA premiums for up to nine (9) months for employees who were involuntarily terminated between September 1, 2008, and December 31, 2009. This subsidy was set to expire at the end of this year and has already started to end for individuals who have been receiving this subsidy since March.

New Extension

Assistance-eligible individuals (“AEIs”) involuntarily terminated from employment on or before February 28, 2010, can now receive the subsidy.  The subsidy will remain at sixty-five 65% percent of the premium, but the maximum subsidy period will expand from nine (9) months to fifteen (15) months.  Only those individuals losing health coverage due to involuntary employment termination will continue to qualify for the COBRA subsidy. The following is a summary of the new law:

New Extended Eligibility Period:  AEIs involuntary terminated on or before February 28, 2010 will now be eligible for the subsidy, instead of December 31, 2009.  The new law eliminates the requirement that COBRA coverage must commence before COBRA subsidy sunset date (December 31, 2009 before the new law is effective and February 28, 2010, after).  Eligibility for the COBRA subsidy will only be conditioned on a qualifying event occurring on or before February 28, 2010, without regard to when the COBRA coverage period begins.  This means that AEIs involuntarily terminated on or before December 31, 2009, who become eligible for COBRA coverage after December 31, 2009 will now be COBRA subsidy eligible.  This new law reverses earlier guidance (IRS Notice 2009-27, Q/A-10).

Longer Subsidy Period: The maximum COBRA subsidy period has been extended from nine (9) months to fifteen (15) months.   Please remember that the new law does not change the maximum COBRA period that an individual is entitled to under COBRA or state continuation.

Notices For Those Who Exhausted Their COBRA Subsidy: Any AEI who exhausted their original nine (9) month COBRA subsidy period before the new law takes effect can receive the COBRA subsidy for another six (6) months if they remain an AEI and their maximum COBRA period has not ended.   AEIs who either dropped their COBRA coverage or kept their COBRA coverage but paid the full unsubsidized premiums must be notified that they may pay reduced premiums for retroactive coverage or receive credit for or reimbursement of overpayment.  These notices must be provided within sixty (60) days of the AEI dropping or first overpaying for COBRA.   Such AEI must pay for coverage no later than sixty (60) days after enactment (December 19, 2009) or February 17, 2010 (or if later, thirty (30) days after the notice was provided).

Other Notice Requirements: Anyone eligible for the COBRA subsidy or terminated from employment (voluntarily or not) on or after October 31, 2009 must be provided with a notice describing the revised program within sixty (60) days of the law’s enactment (December 19, 2009) or February 17, 2010 or, if later, the usual deadline for furnishing materials to individuals experiencing a COBRA qualifying event.

INSTRUCTIONS HOW TO COMPLETE PART I OF FORM 8889 FOR 2009

Introduction: Every year, I receive a number of questions regarding how to complete Part I of Form 8889.  The reason for this is that the instructions to Form 8889 are very complex and unclear.  To assist, the following shows how to complete Form 8889 in 23 different situations for 2009.

The discussion below is for example purposes only.  Individuals should be advised to seek professional tax assistance in the completion of Form 8889 or any other tax return.

Download the full PDF by clicking here.

NEW INTERIM FINAL GINA REGULATIONS AFFECT WELLNESS PROGRAMS

Introduction

On October 1, 2009, the Internal Revenue Service, Department of Labor and Department of Health and Human Services jointly released an advanced copy of interim final regulations on the Genetic Information Nondiscrimination Act (“GINA”).  GINA’s group health plan provisions are effective for plan years beginning on or after May 21, 2009.  For calendar year plans the effective date will be January 1, 2010.

These regulations will be effective for group health plans beginning on or after 60 days after the regulations are formally published in the federal register.

The following questions and answers describe what GINA is, what GINA requires or prohibits, what genetic information or testing is and how GINA affects wellness programs.

What is “GINA?”

In regard to group health plans, GINA amended §702 of the Employee Retirement Income Security Act of 1974 (“ERISA”) to:

• Prohibit enrollment restriction and premium adjustment on the basis of genetic information or genetic services;

• Prevent group health plans and insurance companies from requesting or requiring that an individual take a genetic test; and

• Cover all health plans, including those under ERISA, state-regulated plans, and the individual market.

GINA also prohibits:

• Group health plans and health insurers from setting premiums or employee contribution levels based on genetic information;

• Mandatory genetic testing by group health plans or health insurers; and

• Group health plans and health insurers from requesting, requiring, or purchasing genetic information for underwriting purposes; or from seeking such information from individuals who have not yet enrolled.

The group health plan provisions also require amendments to the Health Insurance Portability and Accountability Act (“HIPAA”) privacy regulations to ensure that genetic information is treated as health information, and to prohibit group health plans and health insurers from using or disclosing protected health information (“PHI”) for underwriting purposes.

GINA provides that the prohibition does not: (1) limit the authority of a health care professional to request an individual to undergo a genetic test; or (2) preclude a group health plan from obtaining or using the results of a genetic test in making a determination regarding payment.  GINA requires plans to request only the minimum amount of information necessary to accomplish the intended purpose.

What is Genetic Information?

Genetic information is defined as information about an individual’s genetic tests, information about the genetic tests of an individual’s family members, or information about the manifestation of a disease or disorder in an individual’s family members.  Genetic information includes any request for, or receipt of, genetic services (including genetic testing, counseling, or education), or participation in clinical research which includes such services, by the individual or family member.

Genetic information also includes genetic information of any fetus carried by an individual or family member who is a pregnant woman, as well as genetic information of any embryo legally held by an individual or family member who is utilizing assisted reproductive technology.  Genetic information does not, however, include information about the sex or age of any individual.

What is genetic testing or monitoring?

A genetic test is defined as “an analysis of human DNA, RNA, chromosomes, proteins, or metabolites, that detects genotypes, mutations, or chromosomal changes.”  This does not include “an analysis of proteins or metabolites that does not detect genotypes, mutations, or chromosomal changes.”

Genetic monitoring refers to the periodic examination of employees to evaluate acquired modifications to their genetic material, such as chromosomal damage or evidence of increased occurrence of mutations that may have developed during employment due to exposure to toxic substances in the workplace.  In order to qualify as an exception to the prohibitions on genetic monitoring, the purpose of the monitoring must be to identify and control adverse environmental exposures in the workplace.

How does GINA affect wellness programs?

The regulations provide that GINA prohibits group health plans and insurance companies from collecting genetic information, either for underwriting purposes or prior to or in connection with enrollment.  If an individual seeks a benefit under a group health plan, the plan may limit or exclude the benefit based on whether the benefit is medically appropriate (and a determination of whether the benefit is medically appropriate is not within the meaning of underwriting purposes).

The regulations further provide that genetic information is considered collected prior to enrollment if it is collected before the individual’s effective date of coverage under the plan.  If any genetic information is collected after initial enrollment (and not for underwriting purposes) and the individual later drops coverage, but then later reenrolled in the plan, the collection of genetic information after the initial enrollment would not be considered collected prior to reenrollment.  In addition, incidental collections of genetic information that could not be reasonably anticipated do not violate GINA.  But this exception does not apply if it is reasonable to anticipate that genetic information would be provided unless there is an explicit statement that genetic information should not be provided.

The regulations clarify that underwriting purposes include changing deductibles or other cost-sharing mechanisms or providing discounts, rebates, payments in kind or other premium differential mechanisms in return for activities such as completing a health risk assessment (“HRA”) or participating in a wellness program.

Family history or other genetic information can be collected if the purpose of such collection is neither for underwriting purposes nor prior to or in connection with enrollment.  An example of when genetic information can be collected is that genetic information may be collected when making a determination whether a benefit is medically appropriate for the purpose of payment.  The determination of whether the benefit is medically appropriate is not within the meaning of underwriting purposes either.

The regulations also provide that genetic information includes the collection of family medical history.  Any wellness program that provides rewards for completing HRAs that request genetic information, including family medical history, violates the prohibition against requesting genetic information for underwriting purposes.  This is the result even if rewards are not based on the outcome of the assessment.

Genetic information can be collected as long as no rewards are provided (and if the request is not made prior to or in connection with enrollment).  A group health plan or health insurer can provide rewards for completing a HRA as long as the HRA does not collect genetic information.

Conclusion

GINA impacts HRAs in two areas:

• HRAs cannot request genetic information prior to enrollment in the Plan, and

• No rewards or penalties may be offered in conjunction with a HRA that requests genetic information, even if the request is made after the enrollment.

As a result of the regulations, employers and administrators:

• Should review all wellness and disease management plans to determine how a HRA is used and what information is requested;

• Remove any financial incentives or penalties if genetic information is collected in the HRA; and

• Remove any genetic information from the HRA if financial incentives or penalties want to be offered.

HRAs or HSAs, How Does an Employer Decide?

Introduction

As health care costs soar, employers are forced to find ways to (1) cut costs and/or (2) shift more of the costs to participants.  They are accomplishing this by increasing deductibles, co-pays and co-insurance amounts and reducing benefits.  The theory is if participants are more responsible for paying health expenses they will be more responsible with their own dollars.

Two vehicles that employers are considering in cutting costs and/or shifting more of the cost to employees are Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs).  Because the interplay between these two vehicles in any year is very limited, an employer must decide which one is best for its situation.  To assist an employer in deciding between HRAs and HSAs, the following discussion compares the important features of each in a question and answer format and then discusses their advantages and disadvantages.

Click here to DOWNLOAD the complete “HRAs or HSAs,How Does an Employer Decide?” Guide.

AN EMPLOYER’S GUIDE TO HEALTH SAVINGS ACCOUNTS (HSAs)

Introduction to the Guide

The following provides you, as an employer, with information about Health Savings Accounts (“HSAs”) under Internal Revenue Code (“Code”) Section 223.  You should read this explanation to evaluate whether HSAs may be used either as an alternative to, or in addition to, health flexible spending accounts (“Health FSAs”) under Code Section 125 or Health Reimbursement Arrangements (“HRAs”) under Code Section 105(h).

To fully understand the requirements of these new accounts, the following discusses their terms and compares their advantages and disadvantages over Health FSAs and HRAs in a question and answer format.  In addition, a chart comparing both Health FSAs and HRAs with HSAs is included at the end of this explanation.

It is important to remember that this explanation is not intended to serve as a substitute for the advice of your lawyer, accountant, or other personal tax or financial advisor.

Click to DOWNLOAD the complete document”AN EMPLOYER’S GUIDE TO HEALTH SAVINGS ACCOUNTS” (HSAs)”

Revised Compliance Notice Forms Package Now Available

As a result of the American Recovery and Reinvestment Act of 2009, your COBRA notices and forms will have to be revised to reflect the COBRA Premium Assistance Subsidy. I revised my COBRA Notice Compliance Forms Package to reflect these new changes and to add new required forms.

My revised COBRA Notice Compliance Forms Package includes the following notices,

forms and explanations:

• An Explanation of the COBRA rules,

• A Sample Initial COBRA Notice,

• A Sample COBRA Insert for Summary Plan Description,

• A Sample Election Notice, Election Form and Attachments,

• A Sample Application for the COBRA Premium Assistance Subsidy with Attachments,

• A Sample Notice of Eligibility for Other Group Insurance Coverage or Medicare,

• A Sample COBRA Premium Assistance Subsidy Waiver Notice Form,

• A Sample Notice of Qualifying Events from the Employer,

• A Sample Notice of Qualifying Events from Covered Employees and Qualified Beneficiaries,

• A Sample Notice of Unavailability of COBRA Coverage, and

• A Sample Notice of Termination of COBRA Coverage.

The entire revised COBRA Notice Compliance Forms Package is available now for only $400.  To order, please follow the directions contained below.

Questions and Order Information

Please contact me at largru@comcast.net or 708-717-9638 with any questions or samples.

Click here to download and print the ORDER FORM

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