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Patient Protection and Affordable Care Act Health Insurance Market Reforms

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Sherry A. Stein & Johanna M. Novak
Foster Swift Employment, Labor & Benefits E-News
June 22, 2010

PDF this pageOn March 23, 2010, the Patient Protection and Affordable Care Act of 2010 ("PPACA") was signed into law. PPACA places new burdens on health insurance plans and consequently, businesses that offer health coverage. This chart provides an overview of the PPACA's health insurance market reform provisions. If you have any questions about this chart or any of the PPACA provisions, please contact Foster Swift at (517) 371- 8100.

Provision Notes Applicability Effective Date

Exclusion from gross income of employer-provided health coverage for employee's child

An employee's gross income does not include the value of health coverage for the employee's child who has not reached age 27 at any time during the taxable year.   The child is not required to be a "dependent" for the exclusion to apply, and therefore does not have to meet the residency, support and other tests for a "dependent".

All plans 3/30/10
Mid-year change in status election

Employees may amend a salary reduction election to make pretax contributions for health benefits (including health insurance premiums and health FSA benefits) for children under age 27 if the cafeteria plan is amended by December 31, 2010.

All plans 3/30/10

Temporary high risk pool program

The Secretary will establish a temporary high risk health insurance pool program to provide coverage to individuals with preexisting conditions who have been without coverage for at least 6 months.

N/A

Not later than 6/21/10.

Temporary reinsurance program for early retirees

The Secretary of HHS will establish a temporary reinsurance program to reimburse employer plans for 80% of certain costs incurred by early retirees over the age of 55 but not eligible for Medicare.  The costs incurred must range between $15,000 and $90,000.

N/A

Not later than 6/21/10.

Annual and lifetime limits

Plans may not establish lifetime limits on the dollar value of essential benefits.  Plans may establish restricted annual limits until  January 1, 2014 on essential benefits as determined by the Secretary of Health and Human Services (HHS).

All plans

First plan year beginning on or after 9/23/2010.

Rescissions

Coverage may be cancelled only for fraud or intentional misrepresentation of a material fact as prohibited by the terms of the plan.  Notification must be made to policyholders prior to cancellation.

All plans

First plan year beginning on or after 9/23/2010.

Coverage preventive health services

Plans must provide first-dollar coverage without cost-sharing for preventive health services.

All non-grandfathered plans*

First plan year beginning on or after 9/23/2010.

Extension of adult dependent coverage to age 26

Plans that provide dependent coverage must extend coverage to adult children up to age 26, regardless of student or marital status. For plan years beginning before 2014, grandfathered group health plans will be required to cover adult children only if the adult child is not eligible for other employer-sponsored coverage.

All plans

First plan year beginning on or after 9/23/2010.

Transparency in Coverage

All plans must submit to the Secretary of HHS, the state insurance commissioner and make available to the public certain information in plain language, including claims payment policies and practices, data on enrollment and disenrollment and data on the number of claims that are denied.

All non-grandfathered plans

First plan year beginning on or after 9/23/2010.

Prohibition on discrimination based on salary

Extends current legal provisions prohibiting discrimination in favor of highly compensated employees by self-insured group plans to fully-insured group plans.

All non-grandfathered group health plans

First plan year beginning on or after 9/23/2010.

Bringing down the cost of health care

Insurers must annually report on the percentage of health premiums used for claims reimbursement and must maintain certain minimum medical loss ratios.  If minimums are not maintained, rebates must be provided to participants.

All plans

First plan year beginning on or after 9/23/2010.

Appeal process

Plans must implement an internal and external claims appeal process for appeals of coverage determinations and claims.

All non-grandfathered plans

First plan year beginning on or after 9/23/2010.

Patient protections

Patients can choose any participating primary care provider.  Emergency services must be provided without prior authorization.  Out-of-network cost-sharing for emergency services must be the same as in-network cost-sharing for emergency services.  A plan may not require authorization or referral for a female patient to receive obstetric or gynecological care from a participating provider.

All non-grandfathered plans

First plan year beginning on or after 9/23/2010.

Preexisting condition exclusions

A plan may not impose preexisting condition exclusions.

All plans

For insureds under 19 years of age: the first plan year beginning on or after 9/23/2010.  For all other insureds: 1/1/14.

Over-the-counter drugs are not eligible medical expenses

Over-the-counter drugs are not eligible for reimbursement through a health FSA or HRA.

All plans

Tax years beginning after 12/31/10 (i.e., 1/1/11 for calendar year taxpayers)

Uniform explanation of coverage

The Secretary of HHS will develop standards for a summary of benefits and coverage explanation to be provided by employers to all potential policyholders and enrollees.

All plans

No later than 3/23/12.

Ensuring quality of care

Plans must submit annual reports to the Secretary of HHS and to plan participants on whether the benefits under the plan improve health outcomes through activities such as quality reporting, case management, care coordination, and chronic disease management.

All non-grandfathered plans

Standards developed by HHS  by 3/23/12.

New limits on health FSA contributions

Pretax contributions to a health flexible spending account under a cafeteria plan will be limited to $2,500 per year.  The amount will be indexed for inflation after 2013.

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Tax years beginning after 12/31/12 (1/1/13 for calendar year tax payers)

Prohibition against excessive waiting periods

Plans and insurers cannot require a waiting period exceeding 90 days.

All plans 1/01/2014

Guaranteed renewability

Insurers must renew or continue in force coverage at the option of the employer or individual.

Non-grandfathered plans

1/01/2014

Guaranteed availability

Insurers must accept every employer or individual in the state that applies for coverage.

Non-grandfathered plans

1/01/2014

Non-discrimination based on health

Plans cannot establish rules for eligibility based on certain health-related factors.

Non-grandfathered plans

1/01/2014

Wellness programs

The maximum reward will increase to 30% of the cost of the applicable coverage.

Non-grandfathered plans

1/01/2014

Clinical trials

A group health plan or insurer may not deny an individual participation in a clinical trial, deny or limit coverage of routine patient costs for items and services furnished in connection with participation in the trial, or discriminate against the individual on the basis of the individual’s participation in the trial.

Non-grandfathered plans

1/01/2014

PDF this page* PPACA divides health insurance plans into two categories: grandfathered plans and non-grandfathered plans. A grandfathered plan is any health plan that was in effect on March 23, 2010. Non-grandfathered plans are those plans that were not in effect on March 23, 2010 or were modified after March 23, 2010, thereby losing grandfathered status.