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Cypen & Cypen
MARCH 30, 2010

Stephen H. Cypen, Esq., Editor

EXAMINING HEALTH REFORM LEGISLATION:  Now that the Patient Protection and Affordable Care Act has become law, the Employee Benefit News has released a helpful analysis.  Although health care reform is generally not effective until 2014, there are a number of reforms that are effective for plan years that begin on or after six months from enactment date, and there are a number of tax provisions with varying effective dates.  The following is an overview of some relevant, health-plan-related provisions of PPACA.  Except as noted below, reforms are effective for plan years beginning six months after date of enactment, meaning January 1, 2011 for calendar year plans and as soon as this year for plans having plan years beginning October 1 or later:

Annual and lifetime limits:  Plans may not impose lifetime limits and only restricted annual limits on value of essential benefits for any participant or beneficiary.  For plan years beginning on or after January 1, 2014, group health plans and group health insurers may not impose any annual limit. 

Prohibition on rescissions:  Plans may not rescind coverage except in cases of fraud or intentional misrepresentation.  (Caveat:  The provision does not appear to prohibit employers from terminating an entire group health plan.)

Coverage of preventive care:  Plans must provide first dollar coverage for certain evidence-based preventive care and certain immunizations.

Coverage of adult children:  Plans that cover dependent children must provide for coverage of unmarried children until age 26. 

Uniform explanation of coverage:  The plan administrator or the insurer must prepare and distribute a paper or electronic summary of coverage to all applicants and all enrollees, both at the time of initial enrollment and annual enrollment.  This provision is in addition to the Summary Plan Description otherwise required by ERISA. 

Nondiscrimination rules for insured plans:  The nondiscrimination rules of the Internal Revenue Code previously applicable only to self-insured health plans are extended to fully-insured group health plans. 

Pre-existing condition exclusions:  With respect to children under age 19, plans may not impose a pre-existing condition exclusion or limitation.  

Cost reporting and rebate requirements:  A health insurance issuer offering group coverage must submit to the Secretary of Health and Human Services a report relating to loss ratios.  Rebates to enrollees must be provided if the medical loss ratio is 85% or such higher amount as permitted under state law.

Claims procedures:  Plans must establish an internal claims appeals process, details of which are set forth in the law.  Plans must also establish an external review process that complies with applicable state law and that includes certain specified consumer protections. 
Patient protections:  Plans that require or provide for a designation of a primary care provider must permit each participant to designate any participating primary care provider who is available to accept such individual.

High risk pools:  Until the high risk pool established under PPACA for individuals with pre-existing conditions is terminated in 2014, a group health plan must reimburse the high risk pool for medical expenses incurred by the pool for individuals found to have been offered financial incentives to disenroll from the group health plan.

Automatic enrollment:  Large employers with 200 or more full-time employees that offer at least one health plan benefit option must automatically enroll all new employees in a benefit option and continue enrollment of current employees in a health benefit plan offered by the employer. 

“Free choice vouchers:”  Employers that offer minimum essential coverage and make a contribution must offer “free choice vouchers” to qualified employees for purchase of qualified health plans through exchanges.  The free choice voucher must be equal to the contribution that the employer would have made to its own plan.  Employees qualify if their household income does not exceed 400% of the federal poverty level, and the required contribution under the employer’s plan would be between 8% and 9.8% of their income.  Free choice vouchers are excludible from employees’ incomes and deductible by the employer.  Voucher recipients are not eligible for tax credits through the exchange. 

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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.

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