The clock is ticking . . . December 31, 2009, is a significant date for group health plans that are operated on a calendar year. Non-calendar year plans face the same changes but with different timing requirements. And some new requirements are already in place. Below is a brief description of some major new laws and rules that require implementation in 2009 or 2010.
1. What About the COBRA Subsidy in 2010?
The American Recovery and Reinvestment Act of 2009 (known as "ARRA") provides a 65% COBRA premium subsidy for individuals who lose health coverage because of involuntary termination of employment anytime between September 1, 2008, and December 31, 2009. This was intended to make COBRA more affordable to unemployed families during these difficult economic times and, in fact, it is reported that COBRA enrollment rates have doubled (from 19% to 38%) since the new subsidy was enacted. Involuntary termination of employment is broadly interpreted under the new law and includes layoffs, terminations on account of buy-outs, and failure to renew an expiring employment contract. Employers initially provide the subsidy subject to reimbursement through payroll tax offsets (IRS Form 941).
Employers were also required to update their COBRA election notices and election forms to contain information on the subsidy. You should continue to use these special COBRA notices and election forms for individuals both: (i) who experience qualifying events on or before December 31, 2009 (all qualifying events, not just involuntary termination of employment) and (ii) for whom COBRA coverage would begin by December 31, 2009. If Congress does not extend the COBRA subsidy program beyond December 31, 2009, employers may resume using their prior pre-ARRA COBRA notices and election forms for 2010. The Department of Labor has model COBRA notices available at www.dol.gov/cobra.
2. Have a HEART (Heroes Earnings Assistance and Relief Tax Act of 2008)
To eliminate some of the hardship for military reservists called to active duty, Congress has softened the "irrevocable election" rules that apply to health flexible spending accounts (FSAs) in a cafeteria plan. The HEART Act permits a reservist who is called to active military duty for at least 180 days (or for an indefinite period) to receive the balance in his or her FSA account in cash. These "qualified reservist distributions" are an exception to the rule that a health FSA may make distributions only for substantiated medical expenses.
In order for reservists to take advantage of this opportunity, employers must amend their cafeteria plan FSAs. If the amendment is adopted by the end of 2009, it can apply retroactively to an employee who was called to active duty any time after June 17, 2008, as long as the employee requests the cash distribution by the last day of the plan year in which the call to active duty occurred. So for a calendar year plan, reservists called to active duty during 2009 have until December 31, 2009, to request a QRD if the employer amends its plan by that date. A plan amendment that applies on a prospective basis can be adopted any time.
3. Where are those Cafeteria Plan Regulations?
Proposed cafeteria plan regulations were issued in August 2007 and final regulations were expected earlier this year. Although we don't yet have those final regulations, the proposed regulations can be relied on until final regulations are published. With a few exceptions, the proposed regulations contain no surprises but merely incorporate prior IRS guidance. However, the proposed regulations make clear that if there is no written cafeteria plan document in place or if the written plan does not comply with IRS requirements regarding content and timing of adoption, the plan is not a cafeteria plan and there will be negative tax consequences for both employers and employees. It is also important for employers with cafeteria plans to pay attention to nondiscrimination testing since it is widely anticipated that the new regulations will bring stepped-up IRS audit activity.
4. Who's GINA?
GINA is the Genetic Information Nondiscrimination Act of 2008, a law that prohibits group health plans and their insurance companies from discriminating on the basis of genetic information. Genetic information includes genetic testing as well as information about manifestation of a disease or disorder affecting an employee's family members.
For plan years beginning after May 21, 2009 (January 1, 2010, for a calendar year plan), group health plans and insurance companies in the group market are prohibited from any of the following:
adjusting group premiums or contribution amounts on the basis of genetic information;
requesting or requiring an individual or an individual’s family members to undergo genetic testing; or
requesting, requiring or purchasing genetic information for underwriting purposes or before enrollment.
While there are some exceptions for research, claims payment and other limited purposes, a number of questions remain to be addressed in regulations that are to be issued. Meanwhile, employers who request information on the medical history of family members in a health risk assessment that is part of their wellness program need to consider whether that request will put them in violation of GINA. Further guidance is needed.
5. HIPAA Part 1: Breach Notification
Although employers who sponsor self-insured health plan benefits have been operating under HIPAA privacy and security regulations for a number of years, there's never been a clear duty under these laws to notify individuals if there has been a data breach. Recent amendments to HIPAA now require notification, and new HIPAA breach notification regulations have been issued. If your plan is subject to HIPAA, you will need to evaluate incidents of inappropriate acquisition, access, use or disclosure of protected health information – whether by your company, your TPA, or some other contractor – to determine whether individuals who may be affected by the incident must be notified of the data breach.
The regulations went into effect on September 23, 2009, and require you to adopt written policies and procedures describing how you will comply with the new law.
6. HIPAA Part 2: Revised Business Associate Agreements and Other New Requirements
HIPAA has also been amended to require revisions to business associate agreements, changes to the "minimum necessary" rule, additional restrictions on marketing, expansion of certain individual rights, and substantially higher penalties for HIPAA violations. Most of these changes will go into effect February 17, 2010. To comply, you will need to review and probably revise your HIPAA policies and procedures and amend your business associate agreements with third-party administrators and other contractors who provide services for your self-insured health plans.
7. Bringing Parity to Mental Health and Addiction Benefits
Health plans that include mental health or substance abuse benefits must begin offering these benefits on the same terms as most other medical and surgical benefits offered under the plan. This means that your health plan cannot have:
- lower annual or lifetime dollar maximums for mental health and substance abuse treatment benefits;
- more restrictive limits on the number of covered office visits, days of inpatient coverage, or similar limits on the duration or scope of treatments available;
- higher copays, deductibles or out-of-pocket limits for mental health and substance abuse treatment benefits than for medical and surgical benefits;
- exclusions for out-of-network treatment if out-of-network benefits are provided for medical and surgical services.
Before the start of your next plan year after October 3, 2009 (January 1, 2010 for a calendar year plan), you will need to align your mental health and substance abuse benefits with these new requirements and make sure that these are reflected in benefits-at-a-glance summaries, summary plan descriptions, and other documents related to your health plan.
These new mental health parity requirements do not apply to employers with 50 or fewer employees during the preceding calendar year.
8. Students Medical Leave Coverage under Michelle's Law
Many group health plans cover dependent children over age 18 only if they are full-time students. For plan years beginning on or after October 9, 2009 (January 1, 2010, for a calendar year plan), a group health plan must continue coverage of a dependent child who is a full-time student for up to one year when the dependent takes a "medically necessary leave of absence" from a college or other post-secondary educational institution. A "medically necessary leave of absence" is one that starts while the dependent is suffering from a serious illness or injury, is medically necessary, and causes the dependent to lose student status for purposes of coverage under the group health plan. Written certification from a physician is required. To comply with Michelle's Law, you will need to review and update your plan, SPDs, enrollment and election change materials. In addition, if your plan requires periodic certification of student status, you must include a notice regarding Michelle's Law with each certification request.
It is not yet clear how Michelle's Law (named for a New Hampshire college student who faced loss of health insurance under her parents' health plan when her doctor recommended that she cut back her college course load to undergo chemotherapy treatment for colon cancer) will coordinate with COBRA. Specifically will the 36-month COBRA period begin after the one-year Michelle's Law extension? More guidance is needed.
9. Special Enrollment Rights under Medicaid and SCHIP Programs
Effective April 1, 2009, federal legislation expanded the State Children's Health Insurance Program (SCHIP) to require new health plan enrollment rights for employees and their dependents. The new special enrollment rights apply when employees or their dependents become eligible for a premium subsidy for coverage under an employer's group health plan through Medicaid or SCHIP, or when employees or their dependents lose Medicaid or SCHIP coverage. Employees must request coverage under their employer's health plan within 60 days of becoming eligible for the premium subsidy or losing Medicaid or SCHIP coverage. In addition to updating your plan, SPDs, and enrollment materials, you will eventually have to provide notice to employees about the premium assistance opportunities available under state law after the Department of Health & Human Services has issued model notices.
10. Reporting to Medicare
Going into effect this year are new mandatory reporting requirements for group health plans and certain other benefit programs, such as workers' compensation. The purpose of these reporting requirements is to enable the Centers for Medicare & Medicaid Services (CMS) to determine whether those covered by Medicare are also covered by other insurance that, by law, must pay primary to Medicare.
For employer-sponsored group health plan benefits, the employer who sponsors the plan will generally not have any reporting obligations; instead, the insurer or the third-party administrator will usually be the responsible reporting entity (RRE). However, the employer will have a reporting responsibility for a self-insured workers’ compensation program. In that case, the employer will have to register with CMS as the RRE. An RRE may use an agent to submit required data, but the RRE remains responsible for timely and accurate reporting.
Reporting for group health plans is scheduled to begin October 1, 2009, and you may want to verify that your insurer/third-party administrator is reporting on your behalf. For other benefit programs, such as a self-insured workers' compensation program, RREs should have registered electronically by September 30, 2009, and reporting is scheduled to begin July 1, 2010. CMS has provided User Guides for both group health plans and non-group health plans, which are available at http://www.cms.hhs.gov/MandatoryInsRep/.
For clarification or additional information on these new rules, feel free to contact any of the authors, Norbert Kugele (firstname.lastname@example.org), Scott Hancock (email@example.com) or Sue Conway (firstname.lastname@example.org).