By Evie Zois Sweeney
Muchmore Harrington Smalley & Associates
Senior Lobbyist
August 20, 2013

Although it’s been a relatively quiet summer in Lansing, the hottest and really only legislative topic in town dominating the political landscape continues to be the potential expansion of Medicaid coverage to able bodied Michigan residents between 100%-133% of the Federal Poverty Level.

You will recall, one of the provisions under the 2010 Patient Protection and Affordable Care Act provides for the expansion. The Governor has been exceptionally public and vocal in his support and has been urging the Michigan Senate to follow the lead of the Michigan, which passed a bill in June.

In response, the Senate Majority Leader created a bipartisan Senate work group that was charged with reviewing and “improving” HB 4714, the House version of Medicaid expansion. Although two subsequent, separate proposals by two conservative Senators have also been introduced and passed out of committee, it is widely speculated that the Senate substitute to HB 4714 (S-7) that also passed out of the Senate Government Operations Committee recently is the only viable option, garnering enough support from the Administration and Democratic Senators whose votes will be imperative in passing the legislation. For that reason, this discussion is limited to HB 4714 (S-7). Senate work group members considered this legislation an opportunity to implement long-needed, overall reforms to Michigan’s Medicaid system, as such, the newest version of the bill proposes to:

1. Require the Michigan Department of Community Health (DCH) to seek a waiver from the U.S. Department of Health and Human Services (HHS) to expand Medicaid coverage. Eligible individuals would be placed into a contracted health plan where money from any source, including an enrollee and an enrollee’s employer could be deposited to pay for incurred health expenses, including co-pays.
2. The enrollee will be required to remit the average co-pay amount each month. The co-pay amount shall be adjusted periodically to reflect changes in the enrollee’s co-pay experience. The DCH will also pursue consequences for enrollees who consistently fail to meet their cost-sharing requirements.
3. Require enrollees with annual incomes between 100%-133% of the federal poverty guidelines to contribute not more than 5% of income for cost sharing requirements. Required contributions at a minimum shall be 2% of income. Notwithstanding this minimum, contributions can be reduced if the enrollee completes a health risk assessment identifying unhealthy characteristics, including alcohol and tobacco use, obesity and immunization status.
4. By April 1, 2015, develop incentives for enrollees and providers who assist DCH in detecting fraud and abuse in the medical assistance program.
5. By September 30, 2016, DCH shall implement a pharmaceutical benefit that utilizes co-pays to encourage the use of high-value, low-cost prescriptions, such as generic and 90-day prescription supplies.
6. Requires the Department of Insurance and Financial Services to examine financial reports of health insurers and evaluate the impact expanding coverage has had on rates. The department shall consider the evaluation in the annual approval of rates.
7. The DCH shall explore and develop innovations and initiatives to improve the effectiveness of the program and to lower overall health care costs in the state. The innovations shall include at a minimum: the identification of private sector, primarily small business, health coverage benefit differences compared to the medical assistance program services and justification for the differences; identification of private sector initiatives used to incent individuals to comply with medical advice; the minimum measures and data sets required to effectively measure the medical assistance program’s return on investment for taxpayers.
8. Require DCH to seek an additional waiver from HHS that would require individuals who are between 100%-133% of the federal poverty guidelines and who have received 48 cumulative months of coverage to choose one of the following options:

• a) Change their eligibility status to be considered eligible for federal advance premium tax credit and cost-sharing subsidies to purchase private insurance coverage through an American Health Benefit Exchange without financial penalty to the state.
• b) Remain in the medical assistance program, but increase cost-sharing requirements up to 7% of income.

If this waiver is not approved, medical coverage for these individuals is no longer provided. If the waiver is not approved by December 31, 2015, then by January 31, 2016, DCH shall notify enrollees that the program will be terminated on April 30, 2016.

The Senate is expected to return to Lansing the week of August 26, where a vote could come as early as Tuesday, August 27. The House would have to approve the Senate changes as well. Although it’s been a tumultuous battle, often pitting colleagues of the same party against one another and their Governor, should the legislation pass, many Lansing pundits would consider this one of the most significant legislative reforms in decades. August may have ushered in a slow legislative month, but it’s poised to end with a bang!

Wall Street Journal (http://online.wsj.com) – Washington – Opening day for the new health-insurance marketplaces is two months away, but efforts to recruit and train workers to help people enroll are barely off the ground in many states.

With time running short before enrollment kicks off Oct. 1, the Obama administration last week cut back on training requirements for these “navigators.” Officials were concerned there might not be enough time to do more-extensive training before the health-insurance exchanges open.

Grants to hire and train the workers aren’t expected to be released for another two weeks for the 34 states where the federal government is running all or part of the marketplaces, which will offer insurance to those who don’t get it on the job or from Medicare or Medicaid. That leaves just 32 business days to hire and train thousands of helpers in these states.

“It’s definitely a tight timeline, and there’s a lot to do before Oct. 1,” said Jen Bersdale, executive director of Missouri Healthcare for All, a nonprofit advocacy group helping coordinate outreach activities in the state. “I imagine some people will be working overtime to do it.”
People will be able to sign up for coverage on a website or through a call center. The navigators will reach out to the uninsured and help people understand the rules and paperwork. The federal funding for the navigators is expected to be funneled mainly through nonprofit health groups, which will employ the helpers.

The navigator issue is one of many bedeviling federal and state officials working to launch the centerpiece of President Barack Obama’s health law this fall. Delays in issuing some rules and implementing the law have officials scrambling to get ready for October.

Republican efforts to overturn the law continue, and public support has been weak. In the latest Wall Street Journal/NBC News poll, in July, 47 percent of respondents called the law a bad idea, unchanged from a June poll.

Sixteen states are fully running their own marketplaces and already have funding — much of it from the federal government. Many of these states have already set up their training for navigators. Maryland plans to start training this month for some 5,000 insurance brokers, navigators and other helpers for the state’s marketplace. Vermont began training its navigators in early July.

But for the other 34 states, the Department of Health and Human Services released final rules on the navigators program only in mid-July. The Obama administration is still reviewing applications for $54 million available in grants to fund the navigators. Those awards are expected to be announced Aug. 15.

Once the money has been released, the navigators and others who will assist people with applications will be required to undergo training and pass a certification test. Federal training materials and tests still aren’t complete, although an administration official said they would be available in August.

Three weeks ago, the administration said navigators would need up to 30 hours of training before they start, but it said last week that 20 hours would be sufficient. “We view training as an ongoing process, and will continue to offer refresher training . . . throughout the six-month open-enrollment period as we respond to consumers’ needs,” said Joanne Peters, a Department of Health and Human Services spokeswoman.

Sixteen states – some that are helping run their own marketplaces and some that aren’t – have additional requirements for navigators. Florida, Texas and Ohio, for instance, require criminal background checks.
Federal navigators in Wisconsin will have to undergo an additional 16 hours of training and pass another test, state officials said recently. Indiana is preparing similar requirements, including a 60-question test.

“We would want to have some level of quality control over the navigators,” said Dennis Rosebrough, a spokesman for the Indiana Department of Insurance.

Excerpted from Wall Street Journal (http://online.wsj.com, August 7, 2013)
 

Excerpted from New York Times online, August 12, 2013,
http://www.nytimes.com/2013/08/13/us/a-limit-on-consumer-costs-is-delayed-in-health-care-law.html?ref=politics&_r=0

By Robert Pear

WASHINGTON — In another setback for President Obama’s health care initiative, the administration has delayed until 2015 a significant consumer protection in the law that limits how much people may have to spend on their own health care.

The limit on out-of-pocket costs, including deductibles and co-payments, was not supposed to exceed $6,350 for an individual and $12,700 for a family. But under a little-noticed ruling, federal officials have granted a one-year grace period to some insurers, allowing them to set higher limits, or no limit at all on some costs, in 2014.

The grace period has been outlined on the Labor Department’s Web site since February, but was obscured in a maze of legal and bureaucratic language that went largely unnoticed. When asked in recent days about the language — which appeared as an answer to one of 137 “frequently asked questions about Affordable Care Act implementation” — department officials confirmed the policy.

The discovery is likely to fuel continuing Republican efforts this fall to discredit the president’s health care law.

Under the policy, many group health plans will be able to maintain separate out-of-pocket limits for benefits in 2014. As a result, a consumer may be required to pay $6,350 for doctors’ services and hospital care, and an additional $6,350 for prescription drugs under a plan administered by a pharmacy benefit manager.

Some consumers may have to pay even more, as some group health plans will not be required to impose any limit on a patient’s out-of-pocket costs for drugs next year. If a drug plan does not currently have a limit on out-of-pocket costs, it will not have to impose one for 2014, federal officials said Monday.

The health law, signed more than three years ago by Mr. Obama, clearly established a single overall limit on out-of-pocket costs for each individual or family. But federal officials said that many insurers and employers needed more time to comply because they used separate companies to help administer major medical coverage and drug benefits, with separate limits on out-of-pocket costs.

In many cases, the companies have separate computer systems that cannot communicate with one another.

A senior administration official, speaking on condition of anonymity to discuss internal deliberations, said: “We knew this was an important issue. We had to balance the interests of consumers with the concerns of health plan sponsors and carriers, which told us that their computer systems were not set up to aggregate all of a person’s out-of-pocket costs. They asked for more time to comply.”

Health plans are free to set out-of-pocket limits lower than the levels allowed by the administration. But many employers and health plans sought the grace period, saying they needed time to upgrade their computer systems. “Benefit managers using different computer systems often cannot keep track of all the out-of-pocket costs incurred by a particular individual,” said Kathryn Wilber, a lawyer at the American Benefits Council, which represents many Fortune 500 companies that provide coverage to employees.

Last month the White House announced a one-year delay in enforcement of another major provision of the law, which requires larger employers to offer health coverage to full-time employees. Valerie Jarrett, Mr. Obama’s senior adviser, said that the delay of the employer mandate showed “we are listening” to businesses, which had complained about the complexity of federal reporting requirements.

Although the two delays are unrelated, together they underscore the difficulties the Obama administration is facing as it rolls out the health care law.

Advocates for people with chronic illnesses said they were dismayed by the policy decision on out-of-pocket costs.

“The government’s unexpected interpretation of the law will disproportionately harm people with complex chronic conditions and disabilities,” said Myrl Weinberg, the chief executive of the National Health Council, which speaks for more than 50 groups representing patients.

For people with serious illnesses like cancer and multiple sclerosis, Ms. Weinberg said, out-of-pocket costs can total tens of thousands of dollars a year.

Despite the delay, consumers in 2014 will still have many new protections. They cannot be denied health insurance or charged higher premiums because of pre-existing conditions, and many will qualify for subsidies intended to lower their costs.

In promoting his health care plan in 2009, Mr. Obama cited the limit on out-of-pocket costs as one of its chief virtues. “We will place a limit on how much you can be charged for out-of-pocket expenses, because in the United States of America, no one should go broke because they get sick,” Mr. Obama told a joint session of Congress in September 2009.
Advocates for patients said the promise of the law was being deferred.

“We have wonderful new drugs, the biologics, to treat rheumatoid arthritis, but they are extremely expensive,” said Dr. Patience H. White, a vice president of the Arthritis Foundation. “In the past, patients had to live in constant pain, often became disabled and had to leave their jobs. The new drugs can make a huge difference, and we were hoping that the cap on out-of-pocket costs would make them affordable. But now many patients will have to wait another year.”

The American Cancer Society shares the concern and noted that some new cancer drugs cost $100,000 a year or more.

“If a prescription drug plan does not currently have a limit, then it will not have to have one in 2014,” said Molly Daniels, deputy president of the lobbying arm of the American Cancer Society. “Patients who require expensive drugs could continue to have enormous financial exposure, despite the clear intent of the law to limit a patient’s total out-of-pocket exposure.”

Federal officials said they were offering transition relief to certain health plans in 2014. But, they said, by 2015, health plans must comply with the law and must have an overall limit on out-of-pocket costs for medical, drug and other benefits combined.

Theodore M. Thompson, a vice president of the National Multiple Sclerosis Society, said: “The promise of out-of-pocket limits was one of the main reasons we supported health care reform. So we are disappointed that some plans will be allowed to have multiple out-of-pocket limits in 2014.”

The law also requires coverage of dental care for children, but these benefits can be offered in a separate health plan with its own limit on out-of-pocket costs.

Federal rules say that a free-standing dental plan must have “a reasonable annual limitation on cost-sharing.” In states where the new health insurance marketplace will be run by the federal government, the limit on out-of-pocket costs for pediatric dental benefits can be no more than $700 for coverage of one child and $1,400 for a plan covering two or more children in the same family.

A version of this article appeared in print on August 13, 2013, on page A1 of the New York edition with the headline: A Limit on Consumer Costs Is Delayed in Health Care Law.
 

By Larry Grudzien, J.D.

August 12, 2013 – On June 26, 20013, the Supreme Court, in U.S. v. Windsor, ruled that Section 3 of the federal Defense of Marriage Act (“DOMA”) is unconstitutional. Section 3 of DOMA had provided that only persons of the opposite sex could be recognized as “spouses” and “married” for purposes of federal law.  Because DOMA had limited the definition of “marriage” and “spouse” to only opposite-sex couples, same-sex couples that were legally married under the laws of their respective states were subject to differential legal protections and tax treatment of spousal retirement and health care benefits.

The majority ruled that DOMA violates the U.S. Constitution’s equal protection clause by singling out a class of persons entitled to marry under state law. Same-sex couples currently may marry in California, Connecticut, Delaware (starting July 1), the District of Columbia, Iowa, Maine, Maryland, Massachusetts, Minnesota (Aug. 1), New Hampshire, New York, Rhode Island (Aug. 1), Vermont, and Washington.  Nothing in the ruling requires other states to issue same-sex marriage licenses or recognize same-sex marriages performed elsewhere — raising important questions about which state’s marriage laws will come into play when applying federal law.

Impact of the Supreme Court Ruling on Employee Benefit Plans:

By holding that Section 3 of DOMA is unconstitutional, the Court’s decision means that same-sex couples legally wed under state law now must be treated as spouses under the US tax code, ERISA, and more than 1,000 other federal laws. The ruling may require extensive revision to, among other things, retirement plan documents, health plan documents, COBRA and FMLA policies, and an employer’s income tax withholding and employment tax payroll practices.

Some of the changes include:

1. Modifying Tax Treatment of Health Coverage. Before the ruling, the cost of a same-sex spouse’s benefits had to be treated as imputed income for federal income tax purposes if the individual did not qualify as a qualifying relative under Code Section 105(b). After the ruling, employees will no longer be required to pay federal income taxes on the cost of same-sex spouse health coverage in states that recognize same-sex marriages.

2. Modifying COBRA Continuation Practices. Before the ruling, a domestic partner could not qualify as a federally recognized spouse, even if state law were to recognize a same-sex domestic partner as an employee’s spouse.  A same-sex spouse, even if covered under the group health plan, was not considered to be a qualified beneficiary and did not have independent COBRA election rights even if a qualifying event occurred. After the ruling, a same-sex spouse will be able to elect COBRA benefits upon any qualifying event in states recognizing same-sex marriages.  This will include divorce and legal separation.

3. Modifying Administration of Cafeteria Plans. Before the ruling, entering into a same-sex marriage or terminating a same-sex marriage did not constitute a qualifying event that would permit an employee to make a mid-year election change under the employer’s cafeteria plan.  After the ruling, these events will be recognized as qualifying events that permit mid-year employee election changes in states that recognize same-sex marriage.

4. Modifying Surviving Spouse Annuities and Death Benefits under Retirement Plans. Before the Ruling, a same-sex spouse could not receive an annuity or death benefit under a qualified retirement plan regulated by federal law that precluded him or her from being a “spouse”.  After the ruling, same-sex spouses can receive surviving spouse annuities or death benefits in those states that recognize same-sex marriage.

5. Spousal Consents to 401(k) Plan Beneficiary Designations. If an employer requires spousal consent to the designation of a beneficiary other than a spouse, a same-sex spouse’s consent is required in states that recognize same-sex marriages.

6. Providing Benefits under Self-Funded Health Plans. Before the ruling, if an employer offered spousal coverage, an employer was not required to offer coverage to those who entered into same sex marriages.  After the ruling, an employer must provide current coverage to same-sex spouse under the same terms as heterosexual spouses in states that recognize same sex marriages.

7. Modify Employer’s Payroll Practices. Before the ruling, same sex spouses were not recognized as spouses for income tax filing purposes.  After the ruling, employers should allow employees to amend Form W-4 to change withholding in states that recognize same sex marriages.  Depending when the ruling is effective, employers may have to amend Form W-2s for previous years for employees who enter into same sex marriages in previous years.

8. Amend Family and Medical Leave Act Procedures.   Before the ruling, same sex spouses were not considered a family member and employees were not eligible for leave to care for ill same-sex spouses.  After the ruling, employers must extend rights to employees with respect to their same sex spouses in those states that recognize same sex marriages.

When is the Ruling Effective?

The ruling takes effect immediately (possibly even retroactively). If marital status affects the delivery of benefits to an employee’s same-sex spouse or that spouse’s child, employers may need to amend the plan’s “spouse” definition; reprogram tax reporting systems; and update enrollment forms, distribution election packages, tax notices, beneficiary designation forms, SPDs, and the like. Other steps may involve filing refund claims for taxes paid on the value of same-sex spouses’ health care coverage, revisiting domestic partner policies, and evaluating whether DOMA “workarounds” adopted in the past are still needed to achieve HR objectives.

What is Left to be Determined?

Because there are many questions unanswered by the ruling, it is anticipated that federal government will clarify how and when the ruling decision will apply. For example, if an employee enters into a same-sex marriage in one state but then moves to another state that does not recognize same-sex marriages, will he or she be afforded the federal benefits and protections? Also, does the decision apply only to prospective same-sex marriages or will it apply retroactively? For now,  it is recommended  to apply the decision in all states that recognize same-sex marriages and to all employees that are currently in same-sex marriages or enter into same-sex marriages in the future in those states.

For a copy of the Supreme Court decision, please click on the link below:

http://www.supremecourt.gov/opinions/12pdf/12-307_6j37.pdf

Larry Grudzien is an attorney practicing exclusively in the field of employee benefits. He has experience in dealing with qualified plans, health and welfare, fringe benefits and executive compensation areas. He has more than 35 years of experience in employee benefit law and is an adjunct faculty member of John Marshall Law School’s LL.M. program in employee benefits and at the Valparaiso University School of Law, where he teaches a number of courses.
 

June 2013 – The Department of Health and Human Services (HHS), Treasury, and the Department of Labor (DOL) recently released the final rules on nondiscriminatory employment-based wellness programs under the Affordable Care Act (ACA).

The final guidance establishes standards for all grandfathered and non-grandfathered group health plans with plan years beginning on or after January 1, 2014.

Wellness programs are divided into two categories, “participatory wellness programs” and “health-contingent wellness programs.”

Participatory Wellness Programs
Programs which are made available to all employees and that either do not provide a reward, or do not include any conditions for obtaining a reward which are based on the participant meeting a health related standard.

Health-Contingent Wellness Programs
Programs which generally reward individuals who meet specific standards related to their health. Examples of these programs include programs that provide a reward to those who do not use or decrease the use of tobacco, or programs that reward for the achievement of specific health related goals such as a specified cholesterol level, weight or body mass index.

The annual reward available under this category of wellness program may not exceed 30 percent of the cost of coverage. If the program is tied to tobacco cessation, an additional 20 percent incentive may be provided. Group health plans have the flexibility to determine how program rewards will be appropriated among family members.

The final rule was issued May 29, 2013.