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HCR Update: Re-enrollment Rights, Discrimination Based on Comp & FSAs

Sep 08, 2010

Health Care Reform Update

August 27, 2010


Letting our members know about certain re-enrollment rights   

Next week we are sending federally required notices to our fully insured subscribers, fully insured employers and ASO employers to explain re-enrollment rights under two health care reform provisions: removal of lifetime dollar limits on benefits and adding dependents under the age of 26. Note that subscribers in minimum premium plans will receive the notice.

Members who reached their lifetime dollar limit and had to leave their health plan may re-enroll on the plan's renewal date. And, from that point on, lifetime dollar limits on benefits no longer apply. 

Members whose children were taken off of their health plan because they reached the previous age limit, can add those children back on to their plan on the plan's renewal date if they are younger than 26.

More information on "no discrimination based on compensation" regulation 

The health care reform law notes that, effective September 23, 2010, plans may not discriminate in favor of highly compensated employees. This means that group health plans cannot base eligibility or the level of benefits on an employee's wage. The group can offer different levels of benefits as long as they comply with ERISA and are not tied to the amount an employee makes. The legislation defines a highly compensated employee is someone who is:

  • One of the five highest paid officers.
  • A shareholder who owns more than 10% in value of the employer's stock.
  • Among the highest paid 25% of all employees (exceptions apply).

The health care reform law does not prohibit companies from offering plans such as executive medical plans, but it could have tax implications for the employees in those plans. We may continue to offer such plans, but it's possible that the tax issues could make these plans less attractive.  

Groups will be responsible for following this section of the health care reform law because health insurance companies are not privy to employee compensation figures.  

Waiting periods 

We do not believe we will need to change our approach to allowing groups to offer different waiting periods to different employee levels. The health care reform law "nondiscrimination by compensation" provision is specific to the benefit offerings of a medical plan and not the waiting periods established by a company.   

Grandfathered vs. non-grandfathered plans 

This part of the law does not apply to grandfathered plans.  No matter how a plan is structured, in order for it to be a grandfathered plan, it must have been in effect when the health care reform law was passed on March 23, 2010, and no changes are made to the benefits or the benefit plan. For non-grandfathered plans, the plan sponsor of a group health plan (other than a self-insured plan) may not set up rules about health insurance coverage eligibility (including continued eligibility) for any full-time employees based on the total hourly or annual salary of the employees. Nor can the sponsor set up rules that in any way favor employees who receive more compensation.  

Flexible spending accounts 

As health care reform was being shaped into a law, the cap on contributions for flexible spending accounts was rewritten several times. Earlier versions had the cap going into effect in 2011, but the final version states 2013. When the provision does go into effect in 2013, the cap will be $2,500 and it allows for annual inflation.  

The one change that does start in 2011 has to do with reimbursements. Members using flexible spending accounts will not be reimbursed for over-the-counter, nonprescribed drugs bought on or after January 1, 2011.

Getting to the bottom of your health care costs       

Did you know: Eating habits directly relate to the rising cost of health care? 

Increasing numbers of patients who are challenged by obesity, smoking, drug abuse, poor nutrition and physical inactivity contribute to an increase in the use of, and therefore the cost of, health care services, according to PriceWaterhouseCoopers in its publication, The Factors Fueling Rising Health Care Costs 2008. These preventable risk factors also contribute to chronic diseases, which account for 75% of the money spent on health care in the United States each year, reports Thorpe, et al, in Health Affairs.

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