The enactment of the Affordable Care Act (ACA) in 2010 is ushering in changes to the health care system that impact individual consumers and employers alike. The law includes major health insurance market reform provisions that will expand access to coverage for many more Americans beginning in 2014.
A number of important provisions, however, will have an impact on the marketplace in 2012. What follows is a brief description of the key issues we are tracking for 2012. The list is not meant to be exhaustive, and other ACA-related issues may be of equal or greater concern to different individuals and businesses:
Scheduled for 2012
Women’s Wellness: When non-grandfathered plans become effective or renew on or after August 1, 2012, they must include 100 percent coverage of women’s preventive services when performed by an in-network physician. Aetna’s plans already comply with a number of the required women’s preventive services. Adjustments will be required for non-grandfathered plans to comply with the remainder including coverage for the following with no member cost-share: 1) prenatal visits, 2) additional gestational diabetes screening tests; 3) lactation support, devices and counseling; and 4) FDA-approved contraceptive methods, including prescribed drugs, implantable devices, sterilization procedures and patient education and counseling for women with reproductive capacity (certain religious employers may qualify for an exemption). Other changes may apply.
Summary of Benefits and Coverage: Insurers and group health plans must provide a summary of benefits and coverage document to enrollees/potential enrollees at specific times, including during enrollment and re-enrollment. The new rules also require 60-days-prior-notice to enrollees when a health plan or issuer modifies the terms of the plan or coverage and the change impacts a previously issued SBC. Per the final rule released by the U.S. Departments of Labor, Health and Human Services, and Treasury (the Departments) on February 14, 2012, the requirement is effective for open enrollment activity that begins on or after September 23, 2012.
An FAQ issued jointly by the Departments related to SBC documents released on March 19, 2012 says that the Departments will not impose penalties on plans and issuers during the first year of applicability, as long as they are working diligently and in good faith to provide the required SBC content in an appearance that is consistent with the final regulations. A subsequent FAQ released on May 11, 2012 says that the Departments will not impose penalties for failure to provide the SBC or uniform glossary on plans and issuers that are working diligently and in good faith to comply. Aetna will support production of SBCs for open enrollment and plan renewals occurring on or after the effective date of September 23, 2012.
MLR Reporting: The medical loss ratio (MLR) provision requires health plan issuers to meet new minimum medical spending requirements – 85 percent in the large group market and 80 percent in the small group and individual markets. Using 2011 data, insurers in 2012 begin to face the possibility of paying rebates to policyholders if the MLR thresholds are not met. In most instances, insurers/plan issuers must issue rebates to group health policyholders rather than to subscribers. Rebate process simplification in the new final rules released in December 2011 should help employers effectively manage rebates on behalf of their plan beneficiaries. Plan issuers must issue a notice of rebate to policyholders and subscribers, and rebates must be paid by August 1, 2012 for the 2011 experience year. Reporting and payment of any rebates that are due will occur annually thereafter.
W-2 Reporting: Employers must begin preparing this year to report on employees’ 2012 W-2 forms – to be issued in January 2013 – the aggregate cost of their employer-sponsored coverage. Employers, however, may have chosen to report earlier on employees’ 2011 W-2 forms issued in January 2012. For purposes of this reporting requirement, “applicable employer-sponsored coverage” includes coverage under any group health plan made available to an employee by the employer, regardless of whether the employer or the employee paid the cost. Applicable coverage as defined includes major medical and employer flex credits contributed to a health flexible spending arrangement (FSA), if the flex credits exceed the employee’s salary reduction to the FSA.
Employers are required to report the cost of coverage provided under hospital indemnity, other fixed indemnity or specified disease or illness policies only if the employers contribute to the cost of that coverage or if the coverage is purchased by employees on a pre-tax basis through a cafeteria plan. Employers do not need to report the cost of wellness programs, employee assistance programs (EAP) and on-site clinics unless the employers include the cost of these benefits when charging COBRA premiums.
Quality of Care Reporting: By March 2012, Health and Human Services (HHS) must develop annual reporting requirements for group health plans and insurers offering group and individual coverage. Reports must provide information about how the plan or coverage: 1) improve health outcomes through the plan’s quality of care provisions, 2) implement activities to prevent hospital readmissions, 3) implement activities to improve patient safety and reduce medical errors, and 4) implement wellness and health promotion activities. HHS has yet to issue regulations on this reporting requirement, and the details of what must be reported are still unclear. However, health plans and insurance issuers generally will be required to report on how health outcomes are improved through various programs and initiatives. The requirements only apply to non-grandfathered plans.
Administrative Simplification: The ACA mandates adoption of “operating rules” for the standard electronic transactions used in the administration of health plans. The new rules will improve the uniformity and utility of the existing electronic claims, remittance advice (ERA), referral certification and service authorization, premium payment, eligibility verification, and claims status inquiry transactions. The ACA also requires the adoption of two new standards, as well as associated operating rules, for electronic funds transfer (EFT) and claims attachment transactions.
The ACA required HHS to adopt standard operating rules for eligibility and claims status by July 1, 2011 and fully implement them by January 1, 2013. The adoption of operating rules for ERA, as well as the adoption of a standard and a set of operating rules for the EFT, is required by July 1, 2012 with an effective date of January 1, 2014. The adoption of operating rules for claims payment, premium payments, certification and authorization and enrollment transactions, as well as the adoption of a standard and a set of operating rules for claims attachments, is required by July 1, 2014 with an effective date of January 1, 2016.
The ACA also mandates that a new health plan identifier standard be established by Oct. 1, 2012.
The Patient-Centered Outcomes Research Fee: Health insurance issuers and sponsors of self-funded group health plans will be assessed an annual fee to fund patient-centered outcomes research. The fee is imposed for a limited number of years, beginning in 2012 and ending in 2019. The trust funds the Patient-Centered Outcomes Research Institute, which was created “to assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing the quality and relevance of evidence concerning the manner in which diseases, disorders, and other health conditions can effectively and appropriately be prevented, diagnosed, treated, monitored, and managed”.
Possible impact in 2012
Health Insurance Exchanges: The ACA requires states to set up health insurance exchanges by 2014, opening a new marketplace for individuals and small businesses to buy health coverage. The federal government will operate a federal exchange to serve residents of states that have opted not to create their own exchanges or are unable to operate an exchange by January 2014. As of December 2011, HHS has awarded more than $220 million in grants to help a number of states create exchanges, a process that will continue in 2012. HHS also issued proposed rules and guidance in 2011 for the future operation of exchanges. Having solicited comments on the proposed rules in the fall of 2011, HHS is expected to issue additional rules and guidance in 2012.
Wellness Incentives: A five-year/$200 billion grant program will be available to small employers (less than 100 employees) that did not provide a wellness program as of March 23, 2010. The program was slated to open up in 2011, but guidance has not yet been issued that would clarify various aspects of the program, including the application process. Guidance is expected in 2012. What is known is that the grants are intended to apply to "comprehensive" wellness programs that include health awareness initiatives (including health education and preventive screenings), efforts to maximize employee engagement, initiatives to change unhealthy behaviors and lifestyle choices, and efforts to create a supportive environment. Starting in 2014, employers will be permitted to offer employees rewards of up to 30 percent of the cost of coverage for participating in a wellness program and meeting certain health-related standards (potentially increasing to 50 percent of the cost of coverage).
Essential Health Benefits: As of 2014, the ACA requires that non-grandfathered health insurance coverage offered in the individual and small group markets, both inside and outside of the health insurance exchanges, offer a “comprehensive” package of coverage known as “essential health benefits.” Guidance from HHS on what exactly should be considered an essential benefit, and what should not, has been eagerly awaited since this clarification will determine to a great extent what a compliant plan design looks like and how costly it will be. HHS issued preliminary guidance on December 9, 2011, that indicates states will have the flexibility to determine essential health benefits by selecting a benchmark plan “that reflects the scope of services offered by a typical employer plan” in their respective states. If states choose not to select a benchmark, HHS intends to propose that the default benchmark be the small group plan with the largest enrollment in the state. HHS is soliciting additional comments on essential health benefits that are due by January 31, 2012. It is unclear when final guidelines will be available.
90-Day Maximum Waiting Period: Starting in 2014, waiting periods for coverage that are greater than 90 days cannot be applied by group health plans or insurers offering group coverage. Existing plans will need to be amended to reduce waiting periods that are longer than 90 days, and group health plans and insurers may need to begin preparing for this change in 2012.
Definition of a Full-Time Employee: A key definition for the employer mandate that becomes effective in 2014 is the definition of full-time employee. The number of full-time employees will determine application and cost of the employer mandate. The definition of full-time employees is also relevant to ACA’s automatic enrollment provision, which will become effective after final regulations are issued (anticipated to be 2014).
For purposes of the employer mandate, the ACA defines full-time employees as those who work an average of at least 30 hours per week. However, it is unclear how this definition is measured and over what time period it is measured. When determining the number of full-time employees relative to the employer’s affordable coverage requirement, employers will be allowed to exclude those full-time seasonal employees who work less than 120 days during the year. Part-time employees are counted as full-time equivalent employees in determining whether an employer is subject to the employer mandate, but part-time employees are excluded from the penalty calculation. The ACA does not define full-time employee for purposes of the automatic enrollment provision. The agencies have announced that they intend to coordinate the definition of full-time employees for purposes of the employer mandate with the definition for purposes of automatic enrollment.