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Recent CCIIO and IRS Medical Loss Ratio Guidance

Recent CCIIO and IRS Medical Loss Ratio Guidance

May 7, 2012

Authored by: benefitsbclp

Both the Center for Consumer Insurance Information and Oversight (CCIIO – a division of the Centers for Medicare and Medicaid Services) and the IRS have recently issued guidance related to the Medical Loss Ratio requirement under the Patient Protection and Affordable Care Act (“PPACA” or “health reform”). As you may know, the MLR requirements generally mandate that insurers spend a certain percentage of premiums (85% for “large group” plans, 80% for “small group” and individual plans) on (1) claims and (2) healthcare quality improvement activities. If they do not, they must provide rebates to enrollees. Insurers are also required to report on MLR compliance to CCIIO. Employers must properly allocate such rebates between the employer and employees, and satisfy applicable reporting and withholding obligations.

CCIIO FAQs

The FAQs released on April 20, provide very few surprises, but provide some helpful answers. They confirm that self-funded plans, Medicaid MCOs, and Medicare Advantage and Part D plans are not subject to the MLR requirements. The FAQs also state that insurance coverage labeled as “blanket” coverage may be subject to the requirements if it qualifies as coverage in the group market or individual market under the Public Health Service Act. Additionally, the FAQs state that coverage issued to a sole proprietor covering the proprietor and his/her spouse is considered individual market coverage.

Under health reform guidance, whether a policy is considered to be part of the “small group” or “large group” market turns on the number of employees of the employer

IRS Updates COBRA Audit Guidelines

The IRS recently updated its audit guidelines for field agents conducting reviews of employers COBRA programs.

In these updated guidelines, the IRS has advised agents that any COBRA audit should consist of a review of the following minimum level of documentation: (i) the employers procedure manual; (ii) form letters; (iii) internal audit procedures; (iv) the underlying group health plan documents; and (v) details of any past or pending COBRA-related litigation. If any of the foregoing materials appear deficient or problematic, agents are advised to make follow-up inquiries relating to the number of qualifying events, the method of notifying qualified beneficiaries, the method of notifying the plan administrator in connection with qualifying events, qualified beneficiary elections and the amount of premiums paid by COBRA beneficiaries. In performing more comprehensive reviews, the IRS advises agents to request an employer’s federal and state employment tax returns; lists of individuals affected by qualifying events; and lists of individuals covered by each group health plan and to compare those lists against the employer’s personnel records.

In outlining these materials, the IRS appears to have the expectation that agents will be seeking to confirm that an employer is offering COBRA coverage under all of the group health plans that are legally required to offer COBRA coverage, that all participants terminating employment are being offered COBRA coverage; that those being offered COBRA coverage are being provided the opportunity to elect any and all appropriate coverages and that the cost of those coverages are in conformance

IRS Fires Shot Across the Bow on Health Reform Minimum Value and Reporting Guidance – Part 1

On April 26, the IRS released three “requests for comment” on various provisions under the Patient Protection and Affordable Care Act (“PPACA” or “health reform”). While the IRS is soliciting comment, it also gave some indication of how it was leaning on each of the issues it addressed. This first post (of three) discusses the comments on the determination of “minimum value.”

Under PPACA, if an employer plan does not provide “minimum value,” then an employee may be eligible for a premium tax credit through the state-based insurance exchanges, if he or she meets the other applicable requirements. If an employee takes advantage of that tax credit, the employer will be subject to “pay or play” penalties under health reform. Therefore, “minimum value” matters. (It is worth noting that HHS previously found that about 98% of individuals covered by employer-sponsored plans were enrolled in plans providing minimum value as described in the IRS guidance.)

In Notice 2012-31, the IRS basically outlined three approaches it may use to determine minimum value:

  • The use of an actuarial value or minimum value calculator that will be provided by HHS and the IRS. Using either calculator, employers would enter certain plan information into the calculator (such as benefits, cost-sharing, etc.) and the calculator would determine if the plan provides minimum value.
  • Self-funded plans and insured large group plans would be allowed to use the minimum value calculator, which is expected to use claims data reflecting typical self-insured employer plans.

IRS Releases Proposed Rules on New Comparative Effectiveness Fee for Health Plans

On April 12, the IRS released proposed regulations regarding the collection of the fee for the Patient-Centered Outcomes Research Trust Fund (the “Fund”) under the Patient Protection and Affordable Care Act (“PPACA”). The Fund will be used to pay for the Patient-Centered Outcomes Research Institute which has the goal of helping health care providers and consumers make informed health decision by synthesizing research comparing the outcome effectiveness of various treatments.

Who Pays for This

Here’s the kicker: insurers and self-insured health plans get to pay for this, along with multiemployer plans, state and local governmental plans, stand-alone VEBAs and other health plans. We focus primarily on private employer plans, but many of the rules apply similarly to other types of plans.

How Much

Initially, the fee is $1 per covered life. It will first apply for plan or policy years ending between October 1, 2012 and October 1, 2013, which means it is coming soon. After October 1, 2013, it increases to $2 per covered life until October 1, 2014. After that, it is indexed based on projected increases in per capita medical expenditures. It is set to expire on October 1, 2019. The tax return to pay the fee is generally due by the end of July following the end of the applicable plan or policy year.

Overview and “Gotchas”

Generally, the proposed regulations provide that the fees apply to policies or plans that provide medical coverage. Insurers pay the fee on behalf of insured plans, although

How do you think the Supreme Court will rule in the health reform case?

Now that oral arguments  have concluded in U.S. Department of Health and Human Services, et al. v State of Florida, et al., we want your opinion!  How do you think the Supreme Court will rule on the issues below.  For more information on each of these, please see our prior posts from Monday (Anti-Injunction Act), Tuesday (Individual Mandate), and Wednesday (Severability/Medicaid).  Feel free to leave a comment explaining how you voted!

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Thank you!

What the Supreme Court is Hearing Today: Wednesday – Severability and Medicaid

Update (12:45 PM ET): Audio and transcript from this morning’s arguments is available here.

Update (3:12 PM ET): Audio from the afternoon arguments is available here.

Over the last few days we have posted brief descriptions of the arguments the Supreme Court will hear in U.S. Department of Health and Human Services, et al. v State of Florida, et al., the case challenging the landmark health reform law, the Patient Protection and Affordable Care Act (“PPACA”). As the audio of the oral arguments is released, we will post links to the audio here. Go to our prior posts for some background and a discussion of Monday’s and Tuesday’s arguments. As with Tuesday’s arguments, the individuals challenging the law are joined by the National Federation of Independent Businesses (“NFIB”). Additionally, similar to the arguments over the AIA described in Monday’s post, the Court appointed a special counsel to argue in favor of complete severability of the Individual Mandate.

Today, they will hear a total of two and a half hours of argument: 90 minutes on the issue of Severability, a break for lunch, and then 1 hour on PPACA’s expansion of Medicaid. We will take each argument separately.

Severability

What are they arguing about? If the Court determines that the Individual Mandate is unconstitutional (as discussed in yesterday’s post), then can the Mandate be removed from the law by itself with the rest of the

What the Supreme Court is Hearing Today: Tuesday – The Minimum Coverage Provision (a.k.a. the Individual Mandate)

Update: The audio and transcript of  today’s oral arguments is now available here.

Yesterday, today, and tomorrow we are posting brief descriptions of the arguments the Supreme Court will hear in U.S. Department of Health and Human Services, et al. v State of Florida, et al., the case challenging the landmark health reform law, the Patient Protection and Affordable Care Act (“PPACA”). As the audio of the oral arguments is released, we will post links to the audio here. Go to our first post for some background and a discussion of Monday’s arguments. Note that, in arguing over the constitutionality of the Individual Mandate, the individual respondents are joined by the National Federation of Independent Businesses (“NFIB”).

Today, the Court will hear two hours of argument on the Minimum Coverage Provision (a.k.a. the Individual Mandate).

What are they arguing about? Does Congress have the power to force you to buy health insurance or pay a penalty? The issue is fundamentally about Congress’s authority to regulate interstate commerce under the Commerce Clause of the Constitution (for an additional discussion of this point, see our October post on this issue). The Court will consider whether the Individual Mandate falls within Congress’ ability to regulate commerce among the states or to tax and spend for the general welfare.

What does the U.S. Government say? Of course Congress can do this, says the U.S. Government. The health care market accounts for 17.6%

What the Supreme Court is Hearing Today: Monday – Anti-Injunction Act

Update: Audio of today’s arguments are now available here.

Over the next few days we are going to post brief descriptions of the arguments the Supreme Court will hear in U.S. Department of Health and Human Services, et al. v State of Florida, et al., the case challenging the landmark health reform law, the Patient Protection and Affordable Care Act (“PPACA”).  As the audio of the oral arguments is released, we will post any links to the audio here.

By way of background, there are three parties to this litigation: (1) the U.S. Government who is defending the constitutionality of the law, (2) individuals (sometimes jointed by the National Federation of Independent Businesses) who are essentially arguing that they are harmed by the requirement to purchase insurance, and (3) 26 States, some of which are advocating that the individual mandate violates laws they have passed and some of which are advocating that the Medicaid expansion enacted under the health reform law is unconstitutionally coercive.

First up is the 90 minutes of argument on the Anti-Injunction Act.

What are they arguing about? The Anti-Injunction Act (the “AIA”) is a tax statute that prevents anyone from suing to preemptively prevent the collection or assessment of a tax.  Its purpose is to keep all of us from suing about taxes we do not like until after the IRS has had a chance to determine how the tax will be enforced and assessed.  Once the tax is assessed,

Preventing Assignment of Health Plan Benefits

Preventing Assignment of Health Plan Benefits

March 22, 2012

Authored by: benefitsbclp

A recent South Carolina federal district court case underscores the importance of a robust anti-assignment clause in health plan documents.  In the case, the court held that a hospital could not stand in the shoes of a plan participant and sue a health plan to force payment of benefits to the hospital.  Prior to receiving treatment, the participant had signed a standard form assigning his benefits to the hospital.  When the plan denied benefits, the hospital sued to force the plan to pay.

The plan in question had a strong anti-assignment provision.  The court basically said that the plan’s anti-assignment clause governed and rendered the participant’s assignment invalid.  The court said that the fact that the plan could, and did, pay benefits directly to providers on behalf of participants in other circumstances did not change the result.  The court stated that the direct payment of benefits to providers was not inconsistent with the anti-assignment provision because payment to a third party (here, the hospital) made that party a beneficiary, not an assignee.  The hospital had its own rights as a third-party beneficiary, but was not an assignee because it did not receive an assignment of the participant’s rights due to the anti-assignment provision in the plan.

This case highlights the need for plan sponsors to make sure their health plan documents and SPDs contain robust, unambiguous anti-assignment provisions.  While this case involved a single provider and a single participant, there are circumstances where a single provider could acquire

Data Security Breaches – Are you Prepared?

Data Security Breaches – Are you Prepared?

March 16, 2012

Authored by: Denise Erwin

In the event of a data security breach, evaluating the situation and taking action right away is important. One type of data security breach that employers need to be aware of and that has been receiving attention lately relates to the privacy and security of health information. Over the past year, enforcement of the HIPAA Privacy and Security Rules has become a priority for the Department of Health and Human Services (“HHS”) Office of Civil Rights (“OCR”), as seen by the amount of settlement fines related to violations and the recent flurry of HIPAA compliance audits. For example, last year, Massachusetts General Hospital was fined $1 million to settle potential HIPAA violations related to patient information left on a train by an employee commuting to work. Just this week, HHS announced that Blue Cross Blue Shield of Tennessee agreed to pay $1.5 million to settle possible violations of the HIPAA privacy and security rules, which was the first enforcement action which resulted from a breach report required by the Health Information Technology for Economic and Clinical Health (“HITECH”) Act Breach Notification Rule.

This increased activity in HIPAA enforcement is the result of provisions in the HITECH Act, which introduced new breach notification standards and requires OCR to develop procedures for auditing compliance with HIPAA.

HITECH Requirements

The HITECH Act, enacted in 2009, addresses the privacy and security concerns associated with the electronic transmission of health information, in part, through several provisions that

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