June 10, 2016

In This Issue
New Guidance on SEPs, Expat Plans, Risk Adjustment, Data Matching, and More
Letter to Agencies on Employer Reporting Challenges
It’s Almost Summer Break–Time to Meet your Members!
Regulatory Roundup–Medicare Test, Mandate Penalty Calculator, PCORI Fees
Miss Yesterday’s Webinar on Health and Welfare Form 5500? Watch it Now!
The ShiftShapers Podcast with David Saltzman
HUPAC Roundup
What We’re Reading
E-mail the Editor
Visit the NAHU Website
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New Guidance on SEPs, Expat Plans, Risk Adjustment, Data Matching, and More

The federal agencies with regulatory authority over health insurance plans, the Affordable Care Act (ACA), the Health Insurance Portability and Accountability Act (HIPAA), and the Employee Income Retirement Security Act (ERISA) were certainly busy on Wednesday. A new proposed rule, request for information, blog posts, guidance, and a press release and fact sheet were released, covering a wide variety of topics of interest to health insurance agents and brokers and their clients. Some of the documents came solely from the Centers for Medicare and Medicaid Services (CMS). The information request was generated by the Department of Labor (DOL) in conjunction with the Office of Management and Budget. The proposed rule covering multiple topics was issued jointly by the DOL, and Departments of Health and Human Services (HHS) and Treasury. Comments on the entire proposed rule are due on August 9 and NAHU will be submitting a detailed letter on behalf of all members outlining our views on all the segments of the proposal.

Highlights from the document dump include new regulatory action and guidance on the following issues:

Short-term Policies
The proposed rule released by HHS, DOL and Treasury covers many topics, but the one that agents and others will likely consider the most controversial concerns the sale of short-term health insurance policies. Short-term major medical policies are considered to be “excepted benefits” under both HIPAA and the ACA and therefore are not generally subject to the federal health reform requirements. These policies have been sold for decades and are generally under the purview of state regulatory authority. The policies inherently last for a limited duration and can be medically underwritten in most states. Post-ACA, they have been frequently marketed to people who cannot obtain other more comprehensive individual coverage because they are seeking to purchase such coverage outside of the federally mandated open enrollment period and may not meet the criteria to purchase coverage during a special enrollment period (SEP). Federal statutes don’t define short-term coverage, but ACA regulations specify that such coverage DOES NOT meet the standard of minimum essential coverage under the law and therefore such coverage can’t be used to meet the individual mandate requirement.

The proposed rule released Wednesday would amend the regulatory definition of short-term coverage to prohibit insurers from offering short-term policies for periods longer than three months. Furthermore, the rule proposes that these policies be non-renewable and that issuers (and their agents) provide purchasers with detailed notices about the limitations of these policies during the sales and enrollment process.

The impetus for these proposed provisions is concern on the part of the Obama Administration that some insurers are using medically underwritten individual policies to “cherry-pick” the traditional individual marketplace, thereby undermining its stability and increasing costs for all consumers. However, the other side of that coin is that given the current restrictions on purchasing individual market coverage outside of the ever-shortening open enrollment period, short-term major medical policies can provide an important stopgap financial protection to some consumers who otherwise cannot purchase other coverage for many months. Also, there are questions as to the Obama Administration’s authority to regulate short-term policies on a federal level to this extent. Typically, the authority to regulate excepted benefits falls to the states and virtually all states have detailed laws and regulations both defining and governing the sale of limited-duration policies already. Moreover, the National Association of Insurance Commissioners (NAIC) is in the midst of overhauling model legislation and regulations on this very topic. Previous federal action to regulate short-term policies has been struck down by the courts, and a case on this topic is currently being appealed by the Obama Administration.

Other Excepted Benefits
The proposed rule also addresses some other “excepted benefit” policies, including those sold on a group basis. The proposal is targeted at the type of excepted benefit policies that some believe could be confused with traditional comprehensive individual or group major medical coverage, including hospital or other fixed indemnity coverage, travel insurance, and other supplemental coverage. Again, these proposed provisions will likely prove to be very controversial, and the Obama Administration’s authority to regulate these policies in the proposed manner is questionable.

Regarding fixed indemnity coverage, the rule would require such policies to pay a fixed amount per day or other time period of service without regard to the cost of the service or the type of items or services provided. So policies that may pay different types of providers’ different amounts or pay for a percentage of provider services could no longer be marketed as excepted benefits. The proposed rule would also require amendments to policy applications, enrollment and reenrollment materials for group and individual policies that include warnings about the limitations of such policies.

Additionally, the proposed rule would require that “similar supplemental coverage” marketed to employer groups as an excepted benefit must either fill in cost-sharing gaps or cover only services that do not qualify as essential health benefits (EHBs) according to the EHB standard adopted by the state in which such policies are being marketed.

Finally, the proposal defines “travel insurance” as coverage for personal risks incurred during planned travel, including trip interruption or cancellation, loss or damage to luggage, or damage to accommodations or rental vehicles. It can also include sickness, accident, disability or death coverage during travel, but only if the health benefits are not offered on a comprehensive, standalone basis and are incidental to other coverage. Travel insurance would be limited to coverage of less than six months and could not be used to cover people employed overseas, such as expatriates or members of the armed forces.

While the rule does not, at this time, propose additional restrictions on individual or group disease-specific excepted benefit policies, it does request comment on these policies and suggests that further regulatory action may be needed to either limit the scope of these policies and/or adequately warn consumers about their limitations.

Expatriate Policies
Legislation passed in 2014, and supported by NAHU, established that expatriate health insurance coverage is automatically deemed minimum essential coverage for ACA purposes, and the law also exempts individuals with expatriate health plans, employer sponsors of expatriate health plans, and expatriate health plan insurers from almost all of the requirements of the ACA. This proposed rule addresses the implementation of that legislation. Of particular note to brokers is that an exception to the expatriate plan exemption is that employers and coverage providers still have IRC 6055 and 6056 reporting obligations for any expatriate coverage offered and provided to employees and individuals under these plans. Furthermore, under some circumstances, the plans that cover expatriates who are assigned (rather than transferred back) to work in the United States will also be subject to the looming excise tax for high-cost employer-sponsored plans.

Lifetime and Annual Limits
The proposed rule provides a clarifying definition of “essential health benefits” specific to the ACA requirement that annual and lifetime limits cannot be imposed on essential health benefits (EHBs) offered by large group health plans. For this purpose, the proposed rule would define EHBs as benefits covered by the benchmark plan of a state, including state-mandated benefits considered to be EHBs, or benefits covered by one of the three Federal Employee Health Benefit program plans that may be used as benchmark plans by the states.

Group Plan Documents and Required Disclosures to Employees
The Department of Labor and the Office of Management and Budget released an information collection request titled, Summary Plan Description Requirements Under the Employee Retirement Income Security Act of 1974, as amended for review and approval for continued use without change. The DOL has to periodically undergo review about whether the requirements on employers to create summary plan descriptions for their group health insurance benefit plans and to provide all related employee disclosures and notices are necessary. Clearly the DOL still feels that plan documents are necessary and aren’t proposing changing any current employer requirements. However, in the request, the OMB notes it is particularly interested in comments that:

  • Evaluate whether the proposed information collection is necessary;
  • Evaluate the accuracy of the agency’s estimate of the burden of the proposed information collection;
  • Enhance the quality, utility, and clarity of the collected information;
  • And minimize the burden of the information collection.

Comments are due by July 11 and NAHU is planning to submit comments on the cost, liability and human capital burden the preparation of summary plan descriptions, material modifications and required disclosures and notices plans on employer-sponsored plans, particularly those maintained by smaller employers.

Individuals Transitioning From Private Coverage to Medicare
To make sure consumers understand the steps they need to take to move to Medicare, CMS announced via press release and a fact sheet that this summer they will start contacting enrollees as they near their 65th birthday. This outreach will provide consumers with the information they need to enroll in Medicare if they are eligible and end their marketplace coverage if applicable.
Special Enrollment Periods
Starting June 17, CMS just announced that individuals enrolling in coverage through Special Enrollment Periods will be asked to provide certain documents to prove their eligibility for their SEP. Consumers will receive eligibility notices modeled on these sample notices and will be required to provide the appropriate documents by the deadline listed in their notice to confirm eligibility for a SEP to avoid any disruptions to their coverage.

Data Matching Efforts
The health insurance exchange marketplaces verify subsidy eligibility for most consumers through electronic trusted data sources, but if consumers’ data cannot be matched electronically they generate a data matching request letter to request additional information from enrollees. Consumers who do not provide the necessary information have their coverage or financial assistance ended or modified. CMS has announced additional outreach efforts to help consumers resolve data matching issues to minimize coverage disruptions.

Risk Adjustment Program
Finally, CMS has announced it will be refining the risk adjustment program to more accurately reflect the cost of partial-year enrollees and to incorporate prescription drug utilization data that provide a more complete picture of enrollees’ health status.

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