Group Health Coverage

ACA Required Revalidation of Providers

Tuesday, March 20, 2012 by Meghan McNab

The Affordable Care Act (“ACA”) requires Indiana Health Coverage Programs (“IHCP”) to revalidate all provider enrollments, applying ACA criteria. ACA criteria involve screening providers according to their assigned risk level of either high, moderate, or limited. Providers newly enrolled after January 1, 2012 are screened against the ACA criteria at initial enrollment and will not be revalidated for 3 years (if durable medical equipment of home medical equipment providers) or 5 years (all other providers). Beginning March 2012, IHCP will begin revalidating providers enrolled before January 1, 2012. Such revalidations will be scheduled in phases and therefore providers should not begin the revalidation process until they receive a notification letter from IHCP. Notification letters with instructions will be sent 90 days before providers revalidation deadline with a second notification letter being mailed 60 days before the revalidation deadline. If a provider has multiple service locations, each location will receive a separate letter and must revalidate individually. However, rendering providers will not have to revalidate individually, as providers enrolled with a group classification will be responsible for revalidating the rendering providers associated with the revalidating service location. To ensure providers receive their notification letter, providers should verify the accuracy of the Mail To address on file with IHCP.

Because the revalidation process may take up to twenty business days to process, providers are encouraged to submit revalidation paperwork well in advance of the deadline stated in the notification letter. If a provider does not timely submit the revalidation paperwork, the provider will be deactivated at the established deadline. Deactivation will cause claims billed with dates of service on or after the deactivation date to be denied; for providers participating in managed care programs, their members will be reassigned to other primary medical providers (“PMPs”); and members may be denied benefits if they have level-of-care (“LOC”) services or are in the Right Choices Program (“RCP”). If a provider submits revalidation paperwork after being deactivated and meets all other enrollment requirements, the provider will be re-activated, but because the re-enrollment date cannot be back-dated the provider will have a period that it was inactive.

Future revalidation will occur every 3 years (if durable medical equipment of home medical equipment providers) or 5 years (all other providers) and providers will be notified by IHCP when it is time to revalidate. If you have any further questions please contact Meghan Linvill McNab at 317-808-5863 or Kristen L. Gentry at 317-238-6288.

Wound Care as an Audit Target

Tuesday, March 6, 2012 by Meghan McNab

Wound care centers are under increased scrutiny by Medicare administrative contractors (“MACs”) and will be a big target when recovery audit contractors (“RACs”) expand their scrutiny of medical necessity from the inpatient to the outpatient side. Because wound care centers are very complex, and do not have a special designation, often times care is not properly and adequately documented causing centers to be a target upon MAC or RAC review. Clinicians and coders need to understand the difference between documenting indications and documenting medical necessity. Indications are the diagnoses, while medical necessity documentation provides evidence that services are used correctly and patients are improving. Auditors are looking for medical necessity spread throughout the patient’s chart, like a story. Clinicians and coders also need to be aware of documentation challenges with electronic health records (“EHRs”). Even if they are putting a lot of data into field, if the software does not have the payers’ logic written into it behind the screen or the clinicians are not consistent in their entries, it may not translate the data into a compliant medical record.

Another challenging area for hospitals is the new codes for wound care on the outpatient side. CPT 2011 update changed the definition of CPT codes 11042 to 11044: CPT 11042 is “debridement, subcutaneous tissue” (which is skin), 11043 is “debridement, muscle and/or fascia,” and 11044 is “debridement, bone” (which includes skin and muscle along the way). Debridement is reported according to the depth of the tissue removed and by the surface area of the wound. CPT codes 11042, 11043, and 11044 are for the first 20 square centimeters of the wound, and there are three add-on codes for additional increments of 20 square centimeters (11045 for skin, 11046 for muscle, and 11047 for bone). Also, effective January 1, 2012, the CPT book deleted 24 skin biologic and skin-substitute codes that were linked to products and replaced them with eight new application codes (15271-15278) which are grouped by the size of the wound and location on the patient’s body. Skin-substitute products will still have unique HCPCS codes, but they must be used with the eight new application codes. As skin substitutes are considered a drug/biologic, any part of the sheet that is discarded must be reported to Medicare as waste.

Because wound care is subject to repetitive billing to Medicare, hospitals may lump the wound care services over a thirty-day period on one claim. However, MACs want expensive therapies and modalities to be reported on the claim with a primary code to ensure they correlate to the patient’s problem and Medicare coverage. This is problematic when multiple services are provided in the same month and their primary diagnoses vary because the hospital UB-04 claim form has only one primary-code box available, and MACs may deny the claim if the primary diagnosis code doesn’t support all the services on the claim.

All CPT codes on Medicare claim forms must be linked to a revenue code, but because wound care centers do not have their own revenue code, the wrong revenue code is often used, which will affect hospital reimbursement through the cost report. Most services performed at wound care centers are reported with the revenue codes for clinic or treatment rooms (0761 and 0510). To improve wound care center compliance and reimbursement, clinic managers, billers, coders, registration, and compliance department should trained on proper coding of services at wound care centers. If you have any further questions please contact Meghan Linvill McNab at 317-808-5863 or Kristen L. Gentry at 317-238-6288.

IHCP to Allow CORFs and IDTFs to Enroll as Medicaid Providers

Wednesday, February 29, 2012 by Meghan McNab

Effective January 1, 2012, the Indiana Health Coverage Programs (“IHCP”) expanded the provider enrollment classifications to include comprehensive outpatient rehabilitation facilities (“CORFs”) and independent diagnostic testing facilities (“IDTFs”). CORFs and IDTFs may enroll in the following IHCP programs: traditional Medicaid, Assistance to Residents in County Homes (“ARCH”), 590 Program, Hoosier Healthwise, and Care Select. CORFs and IDTFs are enrolled under the moderate risk category and are subject to an application fee during enrollment or revalidation.

A CORF is a facility primarily engaged in providing outpatient rehabilitation services to the injured or disabled, or patients recovering from illness with a plan of treatment under the supervision of a physician. CORFs are required to provide outpatient mental health services (405 IAC 5-20-8), physical therapy and physician services; and may provide speech-language therapy and occupational therapy services. CORFs should use provider type code “04-Rehabilitation Facility” and provider specialty code “041-Comprehensive Outpatient Rehabilitation Facility.” The billing criteria states CORF services should be billed on a CMS-1500 Professional claim form or the Health Insurance Portability and Accountability Act (“HIPAA”) 837P transaction using place-of-service code 62-CORF.

An IDTF is a diagnostic testing facility that is independent of a physician’s office or hospital and furnishes diagnostic tests but does not use test results to directly treat patients. An IDTF can be differentiated from similar facilities by ownership structure and types of services provided. Before enrolling in IHCP, an IDTF must be enrolled in Medicare where it will be required to provide a list of all the Current Procedural Terminology (CPT®1) and Healthcare Common Procedure Coding System (HCPCS) codes for the services to be performed as well as a list of equipment used to perform the tests. In order to perform additional tests not on the original Medicare application, the IDTF will need to amend its Medicare application to add codes and equipment. An IDTF must also employ at least one supervisory physician, not a physician group practice, who is proficient in the performance and interpretation of each type of diagnostic procedure performed by the IDTF. IDTFs should use provider type code “28-Laboratory” and provider specialty code “282-Independent Diagnostic Testing Facility” or “283-Independent Diagnostic Testing Facility, Mobile.” The billing criteria states IDTF services should be billed on a CMS-1500 Professional claim form or HIPPA 837P transaction using place-of-service code 81-Independent Laboratory. If you have any further questions please contact Meghan Linvill McNab at 317-808-5863 or Kristen L. Gentry at 317-238-6288.

ASC Notice Rule Eased

Friday, October 21, 2011 by Krieg DeVault LLP

ASC Groups can rejoice in the recently posted Final Rule which eases the cumbersome requirements relating to patients' rights notices that were to be provided prior to the date of a patient's surgery. Under the original version of the patients' rights requirements under the Conditions for Coverage applicable to ASCs, the ASC was required to provide the patient with certain notices at least a full day before the date of the patient's surgical procedure. In reaction to significant backlash from the provider community, the Centers for Medicare and Medicaid Services ("CMS") provided a half-hearted exception to the rule only in instances where the patient's referral for the ASC services was given on the same day as the ASC service, and where delay in providing the service would adversely effect the patient's health. The Final Rule, which will be published in the Federal Register on October 24, 2011, provides significant flexibility with respect to this rule by further easing the patients' rights notice requirement by mandating that the notice simply be given "prior to the start of the surgical procedure."

If you have questions about this article, or about other ASC compliance requirements, please contact Leigh Ann Lauth O'Neill at 317-238-6346.

HHS Awards $109 million in Affordable Care Act Grants

Tuesday, October 4, 2011 by Catherine Sabatine

On September 20, 2011, HHS Secretary Kathleen Sebelius announced PPACA grant awards of $109 million to 20 states and the District of Columbia that will help fight health insurance premium increases and protect consumers. HHS also released its report Rate Review Works, which details how previous rate review grants are fighting premium hikes and helping the health insurance marketplace become more transparent.

As of September 2011, the PPACA requires health insurers seeking to increase their rates by 10 percent or more in the individual and small group market, to submit requests to experts to determine whether the rates are unreasonable. The PPACA also requires insurance companies to publicly justify unreasonable premium rate increases.

The PPACA provides states with $250 million in Health Insurance Rate Review Grants, $48 million of which has previously been awarded to 42 states, the District of Columbia and five territories. The grants awarded on September 20 will improve how states review proposed health care insurance rates and hold insurance companies accountable for disclosing information about unjustified rate increases. States are proposing to use these grants in the following ways:

Introduce legislation: Seven states are introducing legislation to strengthen their authority to review and/or publicize proposed rate increases.
Expand scope of rate review: Nineteen states and the District of Columbia are proposing to use grant funds to expand the scope of rate review, for example, by reviewing rates in new markets or by reviewing rates for new products.
Improve rate filing requirements: All 28 states and the District of Columbia are proposing to use grant funds to improve rate filing requirements, such as requiring insurers to provide additional information on administrative costs and requiring insurers to file rate increases in a standardized format.
Improve transparency and consumer interfaces: All 28 states and the District of Columbia are proposing to use grant funds to improve consumer interfaces, such as developing a Rate Review Home Page at the Department of Insurance Website and providing opportunities for consumers to comment on proposed rate hikes via the website.
Hire new staff: Twenty-three states and the District of Columbia are proposing to hire new staff during Cycle II to help review rates and protect consumers.
Improve IT: Twenty-seven states and the District of Columbia are proposing to use grant funds to enhance IT capacity through the development of new or improved rate reporting systems designed to collect more robust rate data and allow for advanced analysis of rate filings.

The Rate Review Works report contains a summary of how each state will use the new resources. Other steps the PPACA takes to help make insurance more affordable include:

Insurers are generally required to meet a medical loss ratio standard to spend at least 80 percent of premium dollars on health care and quality-improvement activities as opposed to overhead, advertising, and executive bonuses. Insurers that fail to meet that standard must either reduce premiums or pay rebates to consumers and employers;

Small businesses are eligible for Federal tax credits of up to 35 percent of the cost of coverage for their workers. That amount rises to 50 percent by 2014; and

In 2014, the Affordable Insurance Exchanges will use competition and transparency, including information on excessive or unjustified premium increases, to help make insurance more affordable.

CMS Materials From ICD-10 Conversion Teleconference Available Online

Wednesday, May 4, 2011 by Susan Ziel

This week, CMS hosted a national provider teleconference on “CMS ICD-10 Conversion Activities.” Subject matter experts discussed the ICD-10 conversion process currently taking place within CMS and included a case study from the CMS Coverage and Analysis Group on their transition to ICD-10 for the lab national coverage determinations (NCDs). A question-and-answer session followed the presentation. To access a copy of the teleconference handout materials, go to www.cms.gov/ICD10/Tel10/list.asp and click on the 5/18/11 document in the list.

The next CMS ICD-10 national provider teleconference will be held August 3—so save the date! Registration information will be posted to the CMS ICD-10 Teleconferences web page listed above which is a valuable resource to help prepare for the health care industry’s change from ICD-9 to ICD-10 October 1, 2013, for medical diagnosis and inpatient procedure coding.

For additional information, contact Susan Ziel at (317) 238-6244 or sziel@kdlegal.com.

Application Period for Participation in Early Retiree Reinsurance Program is Coming to an End

Sunday, April 17, 2011 by Krieg DeVault LLP

In a notice published in the April 5, 2011 issue of the Federal Register, the Department of Health and Human Services ("HHS") announced that the Early Retiree Reinsurance Program ("ERRP") will soon stop accepting new applications for participation in the program. According to the HHS notice, applications for ERRP certification from group health plan sponsors will no longer be accepted after 5:00 p.m. ET on May 5, 2011.

The ERRP was created as part of the Patient Protection and Affordable Care Act ("PPACA"), in order to encourage employers to continue providing or implement new group health plan coverage for retired employees between the ages of 55 and 64. According to an agency report released on March 31, 2011, the program has been widely utilized by both private and public sector employers since its inception, and has funded nearly $1.8 billion in payments to certified employers since it began disbursing claim reimbursements in October of 2010. However, in order to participate in this funding reimbursement opportunity, sponsors of group health plans providing early retiree coverage must apply to HHS and receive certification. The program has limited funding, and in accordance with PPACA requirements, will be offered only as long as funding is available. It is due to the anticipated exhaustion of PPACA funding that HHS is formally ending the certification process for new applicants.

According to the HHS announcement, any ERRP applications received on or before May 5, 2011 will be processed, and plan sponsors will be permitted a limited period of time to submit additional information requested by HHS in support of an incomplete application, as long as the application was initially received by the deadline. However, any incomplete application already pending as of March 31, 2011 must be completed on or before May 5, 2011 in order to be processed. Additional information about the ERRP is available on our Health Care Reform page.

If you need more information about this topic, or would like assistance with the submission of an application before the close of the application period, please contact Katy Stowers at 317-238-6257, or at cstowers@kdlegal.com.

Employee Benefit Plan: Department of Labor Issues Useful Guidance Concerning Mental Health Parity

Tuesday, February 22, 2011 by Kristen Gentry

The Department of Labor has issued guidance that is useful for Employee Benefit Plans in determining their compliance with the mental health parity requirements. Specifically, Form M-1, which applies to multiple employer welfare arrangements (MEWAs), contains a self-compliance tool, Determining Compliance with the Mental Health Parity Act and Mental Health Parity and Addiction Equity Act Provisions in Part 7 of ERISA. An employer offering group health coverage can utilize this self-compliance tool by responding to straight forward questions and checking "Yes" and "No" boxes. The compliance tool provides useful tips, citations to federal rules and also delineates a safe harbor for outpatient benefits. Employers offering group health coverage for mental health services should review these materials to determine whether their group health insurance coverage is in compliance with the current mental health parity laws and, if not, what they need to do in order to gain compliance. If you have any questions on your organization's compliance with the mental health parity provisions, please contact Kristen Gentry.

Group Health Insurance Benefits: Breast Pumps and Supplies Considered Medical Care by Internal Revenue Service

Tuesday, February 22, 2011 by Kristen Gentry

The Internal Revenue Service (Service) issued Announcement 2011-14 explaining its conclusion that "breast pumps and supplies that assist lactation are medical care under Section 213(d) of the Internal Revenue Code." This new interpretation affects group health insurance benefits as it allows expenses paid for breast pumps and supplies that assist lactation to be deductible medical expenses, allowing them to be reimbursable under flexible spending arrangements, Archer medical savings accounts, health reimbursement arrangements or health savings accounts. As a result of this change, employers should review their informational materials regarding their employee benefits plan and group health coverage, relating specifically to eligible medical expenses, to ensure the materials are consistent with the Service's newest conclusion. If you have any questions regarding how this change may affect you and your organization, please contact Kristen Gentry.

HHS Issues Guidance and Process for Obtaining Limited Medical Plan Waivers

Tuesday, December 21, 2010 by Krieg DeVault LLP

Over the past several weeks, HHS has issued guidance related to the treatment of limited medical plans - so called "mini-med" plans - in light of the PPACA's elimination of lifetime dollar limits and eventual elimination of annual dollar limits on essential health benefits provided under a health plan or policy. By definition, limited medical plans provide annual dollar limits on medical coverage that are significantly lower than the $750,000 restricted annual dollar limit required for plan years beginning after September 23, 2011.

The Interim Final Regulations known as the "Patients Bill of Rights" give HHS latitude to grant waivers from the PPACA's restricted annual limits to group health plans and policies, where a waiver is necessary either to prevent a large increase in premiums to participants in limited medical plans, or to prevent sponsors of such plans and policies from canceling coverage.   Such waivers are only available until 2014 when the state-run insurance exchanges are in place.

In sub-regulatory guidance issued by HHS over the past few months, HHS established an application process for obtaining a wavier.  This sub-regulatory guidance and the waiver application can be found here. Applications must be submitted at least 30 days prior to the first day of the plan or policy renewal to which the PPACA applies.  Waiver may be sought by the health plan or health insurance issuer, and must be accompanied by a certification that waiver is needed to prevent either a significant premium increase or a decrease in access to coverage.   Waivers last for one year, at which time a new application must be filed.  Any health plan or health insurance issuer receiving a waiver must notify all participants of the limited nature of the benefits offered, and direct them to www.HealthCare.gov to get more information regarding available coverage options.

Beginning January 1, 2014, all annual dollar limits on essential health benefits are eliminated and waiver will not be permitted, spelling the near-certain end of limited medical plans.   Employers who currently provide benefits through a limited medical plan or policy should consult with their insurer to ensure that a waiver has been granted prior to the policy renewal date, and begin planning for future years when these plans and policies are no longer available.

For more information regarding the PPACA's impact on limited medical plans, and for assistance with the waiver process, please contact Katy Stowers at 317-238-6257, or cstowers@kdlegal.com.

Health Care Reform and Employer Sponsored Health Plans: Agencies Seek Comments Regarding Third Party Review

Wednesday, November 17, 2010 by Kristen Gentry

Under PPACA, group health plans and health insurance issuers are required to offer an external review process for claims decisions. On November 17, 2010, a request for information (RFI) was published in the federal register seeking comments on operational issues associated with the implementation of a Federal external review process for health coverage in States that do not have an applicable external review process that meets the minimum Federal standards. The RFI contains a list of questions soliciting information on best practices and standards used by Independent Review Organizations (IROs) including comments regading qualified organizations and staff, infrastructure, data collection and evaluation. Comments must be submitted by December 8, 2010. If you have questions concerning the RFI or would like assistance in preparing comments to submit to the agencies, please contact Kristen Gentry or Katy Stowers.

Model Regulations on MLR Suggested by NAIC

Tuesday, October 26, 2010 by Krieg DeVault LLP

On October 21, 2010 the National Association of Insurance Commissioners published their suggested Model Regulations for Uniform Definitions and Standardized Methodologies for Medical Loss Ratio ("MLR") for Plan Years 2011, 2012, 2013. The suggested model regulations come in response to Section 1001 of the Patient Protection and Affordable Care Act (PPACA) which amends section 2718 of the Public Health Service Act. Section 1001 impacts health insurance reform by requiring health insurance issuers offering group health plans or individual coverage, beginning on January 1, 2011, to report their MLRs to the Secretary of Health and Human Services. An insurer whose MLR is less than 85%, or 80% in the small market, will be required to rebate “excess” premiums annually to plan enrollees.

In response to the issuance of the model regulations, the Secretary of Health and Human Services provided the following statement:

"These recommendations are reasonable, achievable for insurers and will help to ensure insurance premiums are, for the most part, supporting health benefits for consumers. Not only do they ensure consumers receive better value for their health care dollar, they recognize special circumstances in different markets to preserve market stability and employee coverage as we transition to the new marketplace in 2014."

“The next step is for the Department of Health and Human Services to issue a medical loss ratio regulation that will provide clear guidance to stakeholders in the coming weeks."

“We will work quickly to promulgate this regulation, using the NAIC recommendations as a basis, because we believe these new policies will help ensure not only cost savings but higher quality care for consumers. We look forward to working closely with NAIC throughout the process.”

Click here to view the suggested Model Regulations on health insurance changes.

If you have any questions about the model regulations or any other impact of health care reform, visit us at Health Reform Connect or contact one of our health care reform lawyers: Kristen Gentry or Leigh Ann O'Neill.

Health Care Reform Grants Announced

Wednesday, October 20, 2010 by Krieg DeVault LLP

Yesterday the Department of Health and Human Services (HHS) announced a round of health care reform grants originating under the Patient Protection and Affordable Care Act (PPACA) which are aimed at assisting consumers with insurance purchasing issues. Specifically, these grants will:

Help consumers enroll in health coverage;
Help consumers file complaints and appeals against health plans;
Educate consumers about their rights and empower them to take action; and
Track consumer complaints to help identify problems and strengthen enforcement.

The grants were awarded to 35 states, 4 territories, and DC, and amount to almost $30 million in health care reform funding. This particular grant program originates under Section 1002 of the PPACA which requires HHS to award grants to states (or Exchanges operating within the state) for the establishment, expansion, or support for offices of health insurance consumer assistance or health insurance ombudsman programs. To be eligible, states must designate independent offices that will: assist consumers with filing complaints and appeals, educate them regarding their rights and responsibilities, track and quantify consumer problems and inquiries concerning health insurance coverage under federal and state law, assist them with enrollment in group health plans, and aid in the resolution of problems with obtaining tax credits under section 36B of the Internal Revenue Code. As a condition of receiving the grant, the State office must collect and report data to the Secretary of HHS regarding the problems and inquiries encountered by consumers. The Secretary can then utilize the data to identify areas where more enforcement action is necessary.

The $30 million granted thus far represents the total amount of funding appropriated under PPACA section 1002 for this fiscal year. Click here to view a full listing of total health care reform grants under this program.

For additional questions regarding this grant program or other health care grant programs available to States, providers, and other organizations, please visit us at Health Reform Connect, or contact Leigh Ann Lauth O'Neill at 317-238-6346 or loneill@kdlegal.com.

Health Care Reform's Early Retiree Reinsurance Program: A Race for Reimbursement Dollars

Wednesday, August 18, 2010 by Krieg DeVault LLP

Overview

Is your company or organization the sponsor of an employment-based group health plan providing coverage to "early retirees?" If so, you may be eligible to receive reimbursement for a significant portion of the early retirees' claims paid by your plan under a new program established under the provisions of federal health care reform. However, the funding is available on a first-come basis, so you need to treat this as a sprint - not a distance race - for the reimbursement dollars!

Section 1102 of the Patient Protection and Affordable Care Act (PPACA), which was signed into law on March 23, 2010, established an Early Retirement Reinsurance Program (the "Program") under which reimbursements will be made available to sponsors of participating employment-based group health plans for qualifying medical claims incurred by plan participants who are early retirees. On May 4, 2010, the Department of Health and Human Services ("HHS") issued interim final regulations establishing the Program, which provide much of the detail for the Program's implementation and administration.

Under the Program, reimbursements are available to sponsors of eligible employment-based group health plans. The reimbursable amount is equal to 80 percent of the claims incurred and paid on behalf of "early retirees" during the plan year that exceed $15,000 but do not exceed $90,000. The Program defines an "early retiree" as an individual who is age 55 or older but is not eligible for coverage under Medicare, and who is not an active employee either of the employer maintaining (or currently contributing to) the plan, or of any employer who has made substantial contributions to fund the plan. The term also includes the early retiree's spouse, surviving spouse and dependents, if they participate in your plan.

The Program is effective June 1, 2010 and is temporary in nature. The Program will end on the earlier of: (1) the date that the Program has received requests for reimbursements that equal the $5 billion allocated to the Program or (2) January 1, 2014. Therefore, time is of the essence! It is essential to apply as early as possible to have access to the funding available for the reimbursements.

What Should Sponsors Do Now?

In order to participate in the Program, an "employment-based plan" must be certified by the Secretary of HHS (the "Secretary") and the sponsor must submit an application. Because the Program has limited funding and reimbursements will be made on a first-come basis, it is important for sponsors who provide health plan coverage to early retirees to immediately begin planning for the application and certification process, by reviewing their current early retiree benefit structure and implementing the policies and procedures necessary to participate in the Program.

While additional guidance and an application form are expected to be issued by the Secretary in the near future, we already know that as part of the certification process sponsors will need to take the following actions:

1. Determine whether their plan provides "health benefits" to early retirees, as defined in the Program, either on a self-funded or fully-insured basis.

2. Implement cost-saving procedures and programs with respect to chronic and high-cost conditions, as required by the Program, if such programs are not already in place.

3. Enter into all required agreements with the plan's health insurance issuer and/or administrator (as applicable) which satisfy the Program requirements with regard to the maintenance of records and disclosure of information, data, documents and records to the Secretary, and develop similar procedures for maintenance of records and information disclosures to HHS by the sponsor.

4. Develop policies and procedures to protect against fraud, waste and abuse under the Program.

5. Finally, in order to be certified, plan sponsors must submit an application to the Secretary with respect to each plan for which it wants to receive reimbursements. Applications are processed in the order received.

The timing aspect of the completed application cannot be overemphasized, since applications are processed in the order received by HHS, and incomplete applications will be rejected, requiring a new application and relegating the sponsor to the back of the priority line. As part of the application process, the plan sponsor must estimate the amount of claims over a two-year period for which reimbursement will be sought. As these estimates are received, the Secretary will determine when estimated claims will exhaust the $5 billion allotted for the Program. Once that determination is made, the Program will stop accepting applications and the opportunity to participate will be lost.

An application for the Program and additional guidance regarding claims submission is expected to be issued by HHS very soon. Given the temporary nature of the Program and the first-in-line nature of the distribution of funds, you should begin to take action now to determine your plans' qualifications, so that you are ready to complete and submit the Program application as soon as possible after its release by HHS.

If you need more information about this topic or would like assistance with the Program's application and certification process, please contact Patricia L. Beaty at 317.238.6278 or pbeaty@kdlegal.com.

"Grandfathered" Health Plans: Finally Some Answers

Tuesday, August 17, 2010 by Krieg DeVault LLP

This article was also published in our Employee Benefits' Benefits Alert on June 18, 2010.

The wait is over! Guidance has finally been issued on what changes can be made to a group health plan without causing it to lose its grandfathered status.

Overview

The Patient Protection and Affordable Care Act, as modified by the Health Care and Education Reconciliation Act (collectively the "PPACA"), includes various group health plan eligibility and coverage mandates, many of which are effective as soon as the first day of the first plan year beginning on or after September 23, 2010. However, in an effort to allow individuals to keep existing health plan coverage, Congress exempted plans in existence on March 23, 2010, called "grandfathered plans," from some of the PPACA's mandates. Until now, it has not been clear what types of plan design changes made to a grandfathered plan will cause the plan to lose its grandfathered plan status. On June 14, 2010, the Departments of Health and Human Services, Labor, and Treasury issued an Interim Final Rule which provides some answers. Although the Rule was effective on June 14, 2010, it is open for public comment and is subject to future revision.

Under the Interim Final Rule, as long as changes made to an existing group health plan stay within certain parameters, the plan will maintain its grandfathered plan status, and will not be required to comply with many of the PPACA's mandates for group health plans and health coverage. Some PPACA provisions from which grandfathered plans are exempt include the requirement to provide recommended preventive care services to participants on a first-dollar basis, and the requirement to apply certain "patient protections" to plan participants, including provider choice and emergency room access provisions. Grandfathered plans are also exempt from the application of federal tax code nondiscrimination rules, which currently apply only to self-funded group health plans, to fully-insured group health plans. In addition, although all plans are required to extend eligibility coverage to adult children until the child's 26^th birthday, grandfathered plans are permitted to exclude adult children who are eligible for other employer-sponsored coverage until January 1, 2014. A health plan that loses grandfathered plan status will become subject to these and other PPACA mandates. See http://www.dol.gov/ebsa/pdf/grandfatherregtable.pdf for the Department of Labor's chart showing the PPACA provisions that do not apply to grandfathered plans.

What Changes Cause Loss of Grandfathered Plan Status?

The Interim Final Rule outlines specific plan design changes which will result in a loss of grandfathered plan status. All changes are measured against the plan terms in effect on March 23, 2010. These include:

Eliminating all, or substantially all, benefits related to diagnosis or treatment of a particular condition;
Increasing plan participants' coinsurance percentage;
Decreasing an employer's premium contribution rate for any class of similarly-situated participants by more than 5 percentage points;
Adding a new annual limit on a type of benefit (unless the annual limit replaces a lifetime limit and is at least as high as the lifetime limit it replaces), or decreasing an existing annual limit;
Increasing fixed-dollar copayments by more than $5 (adjusted annually for medical inflation) or by more than a percentage equal to medical inflation plus 15 percentage points;
Increasing plan deductibles by more than a percentage equal to medical inflation plus 15 percentage points;
For an insured health plan arrangement, entering into a new policy, certificate, or contract of insurance that is not a renewal of an existing policy, regardless of the terms of the new policy, certificate, or contract. However, a change in a self-funded plan's third-party administrator alone will not cause a loss of grandfathered status.

It is important to note that these conditions apply separately to each benefit option offered by an employer, even if different options are offered under a single group health plan. Modifications to one benefit option could cause that option to lose grandfathered plan status, while the benefit options that remain unchanged or are modified within the permitted limitations, remain eligible for grandfathered plan status. If an employer eliminates one benefit option offered under a group health plan, so that participants must move to another benefit option (e.g., forcing participants to move from a PPO option to a high-deductible option), the remaining plan will lose grandfathered status if the coverage change either reduces benefits or increases cost-sharing for those participants in a amount above what is permitted to maintain grandfathered plan status.

What are the requirements for collectively-bargained plans?

The Interim Final Rule clarifies that there is no delayed effective date for group health plans maintained pursuant to one or more collective bargaining agreements ("multiemployer plans"). Grandfathered multiemployer plans are permitted to maintain grandfathered status indefinitely, as long as they continue to meet the same requirements applicable to other grandfathered health plans. However, a special rule applicable only to fully-insured multiemployer plans allows a change in insurance issuers during the period after March 23, 2010 and prior to expiration of all collective bargaining agreements relating to that plan without loss of grandfathered status. Such plans are permitted to maintain grandfathered status as long as they continue to meet all other requirements to do so.

What are the Disclosure and Recordkeeping Requirements for Grandfathered Plans?

To keep grandfathered plan status, group health plans must meet specified disclosure and recordkeeping requirements. Specifically, all group health plan materials (including the SPD, insurance certificate, and any other materials describing plan benefits) distributed to participants must contain a statement telling participants that the plan is a grandfathered plan, and that as a result, certain "consumer protections" under the PPACA do not apply. Plan materials must also provide participants with a contact person for questions or complaints. Click here for the model notice.

In addition, the plan sponsor must maintain records documenting the terms of the plan in effect on March 23, 2010, as well as "any other documents necessary to verify, explain, or clarify its status as a grandfathered health plan." These documents provide the basis against which any future plan changes will be measured. The Interim Final Rule does not specify what forms of documentation are acceptable, so it is important for employers to keep and have readily available all plan documentation, including the ERISA plan document, SPD, insurance certificates, and benefit summaries, as well as all enrollment materials, insurance or administrator contracts and any other records that memorialize the plan benefits, costs and any relevant details of the arrangement as of March 23, 2010. We are available to assist in reviewing documents and putting together a record to evidence the terms and costs of a grandfathered plan as of March 23, 2010. These records should be retained indefinitely.

What About Plan Changes Already in the Works?

Special transitional rules are available for changes made to group health plans after the effective date of the PPACA. Specifically, changes effective prior to March 23, 2010, or changes effective after that date but adopted on or before March 23, 2010, will be considered part of the grandfathered plan. Moreover, changes made after March 23, 2010 and adopted prior to June 14, 2010 will not cause a plan to lose grandfathered plan status, but only if those changes are revoked or modified to come within the permitted modifications prior to the first day of the next plan year.

What Should Plan Sponsors Do Now?

Perhaps most importantly, plan sponsors will need to analyze the benefits of maintaining grandfathered plan status in light of the specific regulatory requirements, and answer the question of whether the benefits of grandfathered plan status outweigh the compliance costs. If the answer to that question is "yes," then the plan sponsor should immediately review any plan changes implemented after March 23, 2010, or that are under consideration for the next plan renewal, to determine whether those changes would cause a loss of grandfathered plan status, and, if so, if any action is necessary to take advantage of the transitional rules. Plan sponsors should also compile all plan-related documentation necessary to demonstrate that grandfathered plan status requirements are met and what plan provisions and costs have been grandfathered. They should also revise all written plan materials to include the required grandfathered plan disclosures.

If you would like additional information, please contact:

Katy Stowers 317-238-6257; cstowers@kdlegal.com
Kristen Gentry at 317-238-6288; kgentry@kdlegal.com