Good Neighbor Insurance is continuing to update our clients on the new health insurance laws. It may seem confusing at first but as we “walk” through these laws we will learn the “upside” and the “downside” of their impact on us.  With all the changes on the horizon, one of the most common questions asked us at Good Neighbor Insurance, www.gninsurance.com, is “What do these health care laws mean to me?”  The simplest answer is:  It all depends on how old you are and for whom you work.

Below are sample questions from clients along with answers.  We also have set up a category called “Understanding the new insurance law” on our blog site at www.gntravelinsurance.com or here at www.gntravelinsurance.com/category/us-health-insurance/2010-health-insurance-law-information/ .

NOTE:  This article was updated on 5-7-2010 with additional Questions and Answers.

General

Q – Do you know if the change to FSA/Health Saving Accounts – Over the Counter Drugs – takes effect Jan. 1, 2011 or upon plan year following Jan. 1, 2011?

A – This is effective the first tax year following 2010 – so Jan 1, 2011.

Dependents

Q – Can groups start re-enrolling dependents under 26 immediately? Are there any limitations? I thought I read if the dependent has access to coverage through a spouse’s employer, he or she cannot get on their parents’ plan.

A – This provision is effective for plan years beginning on or after six months after enactment (9/23/2010). We are presuming this means dependents can only be added at open enrollment and the first plan year affected will be 10/1/2010 plans. The dependent cannot have access to another employer-sponsored plan either through their own or a spouse’s employer.

Q – My understanding is that any child 26 or under is now able to be on their parents policy. I was wondering if this is correct? If it is effective as of now? If there are any stipulations in order for it to be done?

A – Right now most of the carriers have said if an adult child under age 26 is currently on the plan (either individual or group) they may stay on that plan until age 26. However, if an adult child has already aged off the plan, i.e. last year they graduated from college and were no longer eligible – there is no clarification that they must be allowed back onto their parents plan. The law does not go info effect until the first plan year after September 23, 2010; however, most of the carriers are implementing this provision immediately.

Pre-Existing Conditions – High Risk Pool (starting 7-1-2010 and ending on 12-31-2013)

Q – Adults who cannot get health coverage due to a pre-existing condition can join a high risk pool. How would they go about getting that done?

A – There is supposed to be a “state” high risk pool effective July 1, 2010. The individual wanting to join must not have had coverage for the previous 6 months due to a pre-existing condition. No details on the pool are available at this time.

Q – By removing preexisting clause can someone on a group policy shop around for individual coverage and a better rate or does that person with the preexisting condition have to go into the high risk pool?

A – Yes, they can go into the high risk pool but by going off of the group plan they will lose the employer contribution. The high risk pool is only available from July 1, 2010 until Jan 1, 2014 (the same time pre-existing conditions go away and Exchanges begin). Also, to be eligible for the high risk pool the enrollee must be without coverage for the previous 6 months (or longer) and have a pre-existing condition.

Q – I have a current client that was asking about options for her, due to the new legislation since she has preexisting conditions? I was not sure how it applied. I thought it was not active until the year 2014.

A – Pre-existing conditions will not be eliminated for adults until 2014. However, there will be a high risk pool as of July 1, 2010. The high risk pool is for individuals who have not had coverage for at least 6 months and have a pre-existing condition. No information on how to enroll in the high risk pool is available at this time.

Q – Pre-existing beginning 6/14/2010 coverage will be available to individuals who have been uninsured for at least 6 months through high risk pool programs in every state. Does this mean if someone is on a portability plan they can now go on a regular plan, regular individual rates 6/14/2010?

A – What they are talking about is the “high risk pool” that’s going to be available as of 7/1/2010. This pool will either be operated by the State or if the State chooses, they may utilize the Federal high risk pool. But, the person must be 6 months bare. Recent clarification indicates that if an individual has health insurance (it appears of any kind) they cannot access the high risk pool. The belief is this includes a HIPAA portability product – so no, they would not have access.

Q – Will the High-Risk pool have rates similar to normal individual insurance or closer to the HIPAA plans we see in place today?

A – From what we understand the rates on the High-Risk pool will be based on what the IRS identifies as Average Premium for each state, possibly times a multiplier. The 2010 Average Premium Rates for Arizona are $4,495 Individual, $10,239 Group.

Q – I am still getting children under 19 declined for Pre-existing, is this not in place yet for AZ?

A – This provision is effective plan years beginning 6 months after enactment – September 23, 2010. There is a definite possibility it will be implemented by some carriers earlier, but thus far, has not been implemented.

Q – Does pre-existing condition also refer to any condition, for example overweight, which the medical insurer finds unacceptable?

A – Yes, obesity is considered a pre-existing condition.

Q – Do you know what will happen with individuals that are covering their children and have a rider on their policy for one child’s pre-existing condition? Will carriers still be allowed to issue riders (waivers)? If not, what happens to the riders that are in place now?

A – Effective 6 months after enactment (9/23/10 – possibly first plan year following) carriers will NOT be allowed to rider conditions for policies on children under age 19. We have no guidance on current riders. Please keep in mind, we expect HHS Secretary to take this a step further and issue guidelines that the intent of the law was to have guarantee issue on these children, so it will be immaterial -if that happens, they can simply buy a new plan.

Q – People on Significa can’t go to the high risk pool without being bare for 6 months, correct? Or do they qualify because the company is leaving the state?

A – This is correct – they must have gone bare for 6 months.

Q – If you are uninsured for at least six months, are healthy, and then get pregnant – are you then eligible for the High Risk Pool Plan and will the pregnancy be covered?

A – Probably, the High Risk pool is meant to cover all pre-existing conditions.

Grandfathered plans

Q – On a group of 600+ that renews on 7/1/2010 that is going to make a couple of benefit changes to the two plans, how will this affect their grandfather privilege? Also, what is the advantage of having this status? Don’t all groups have to comply with the new provisions in the health care bills, or if I have this status I don’t have to comply with some provisions until a certain year? I was reading that the Reconciliation bill pretty much eliminated this status anyways; can you please help me understand this?

A – Reconciliation eliminated the “grandfather” ability on a couple of provisions, but not on the entire plan. However, if you do anything more than add/delete members, the plan loses its grandfathered status.

Q – Would changes in employer contributions affect grandfathering?

A – No, if an employer chooses to contribute at a higher or lower percentage, it will not impact grandfathered status.

Q – Do you think employer contributions can change and still maintain grandfathered status?

A – Yes, it is our understanding that can happen.

Tax Credit/Income for Businesses

Q – For qualified clients under 25 employees… How do they apply for this government credit? Is there paperwork that needs to be completed? Or do we even know the process yet?

A – There has been no direction given on the process to apply for this tax credit. However, since it is a tax credit, we presume it will be done via either a line item or additional form submitted when the 2010 Corporate taxes are filed.

Q – I’m not sure if I follow the definition of “insurance costs.” Can qualified employers still receive a credit AND deduct premium payments (for all employees)?

A – The employer cannot take the full deduction for premiums paid if a portion of those premiums are offset by credits.

Q – Have you heard anything on Group coverage that is non-union base? Is there an immediate 40% tax increase on all groups that are non-union based?

A – This 40% tax on “Cadillac plans” does not go into effect until 2018.

Q – What is the interpretation of having to report the value of healthcare benefits on the W-2 in 2011? Will it be taxable as income for 2011?

A – In 2011 Employers will have to report the value of heath benefits; however, the tax on “Cadillac plans” does not begin until 2018.

Q – If an employer only changes their plan year and does nothing to plan design, will it impact their “grandfathered” status?

A – The legislation is silent on this situation. However, since there are no changes to plan design the presumption is that it would not impact their “grandfathered” status.

Employers paying Individual Plans

Q – What impact is on the employers who pay for individual plans for their employees? Will they be penalized for not having a group plan or does this qualify?

A – There is no mandate that employers sponsor a group health plan.  However, if any of the employees go to the exchange AND receive a tax credit – yes, the employer will have a penalty.

Discrimination Rules

Q – I’d like to get some clarification on the nondiscrimination rules; “plans cannot base an employee’s eligibility or continued eligibility on hourly or annual salary”. Does this mean the AMOUNT of hourly or salaried wages? Or, could it mean that an employer could no longer offer coverage to salaried employees only?

A – This does refer to the amount of the wage – the plans must meet IRS section 105(h) discrimination rules for highly compensated.

Q – Can a customer continue to contribute to premiums based on Position (Management, Sr. Management, All other as an example)?

A – They can contribution based on class, however must meet IRS Sec 105(h) non-discrimination rules.

CLASS Act

Q – Any simple explanation of the CLASS act in the legislation?

A – CLASS is a voluntary long term care insurance program designed to assist participants to maintain home and community living arrangements. It is effective Jan 1, 2011.

There is no underwriting except based on age to determine premiums and eligibility for the program. Enrollment is automatic through the employer, if the employer offers the program. Employees must opt-out if they do not wish to enroll. Employees may opt out at anytime and qualified individuals who are eligible to enroll may do so at anytime. To be eligible, the participant must be 18 years or older, receive taxed wages or taxed self-employment income, and be actively employed.

Miscellaneous Questions

Q – Are there any rules included in the reform that require an employer to contribute premium toward dependent coverage?

A – No rules specific to premium contributions for dependents. However, if an employee pays more than 9.5% of their wages for the health plan, it is considered “unaffordable” and the employer may be subject to a penalty.

Q – If you have a short term policy, will that disqualify you from “going bare”?

A – From what we understand, because a short term policy is a “comprehensive medical policy” yes it will disqualify a person.

Q –If a company that employs 100 people did a carve-out for the health of just 25 people, are they eligible for any funding/credits (if the average salary is under $50k) for the group on the carve-out, or are those credits only available if there are less than 25 employees?

A – The tax credit is only available to employers with less than 25 employees (not just 25 on the plan); so they are not eligible.

Q – Are there any laws that impact employers of more than 100 to date?

A – Yes, the 2010 reforms (i.e., covering dependents to age 26, no lifetime max, etc.) apply to these employers too.

Q – (Example) married daughter is covered on mom and dad’s policy and she has a baby, is there any obligation for the insurance company to pick up the newborn child (grandparents do not have legal guardianship)?

A – No.

Q – Do you know when the carriers are mandated to start covering all preventive care on individual plans?

A – The legislation reads….for plan years beginning 6 months after enactment (9/23/2010). In addition, only specific (yet to be identified) will be subject to no cost sharing.

NOTE:  Employer information from health care reform

Effective immediately (March 23, 2010), employers must now provide nursing mothers reasonable unpaid break time to express milk, for a period of up to one year following a child’s birth.

NOTE:  Carriers offering to extend dependent eligibility ahead of health care reform schedule

This month, April 2010, several carriers announced their intent to extend eligibility to young adults (up to age 26) who are currently covered on their parents’ plan. The carriers making this announcement include: Aetna, Humana and UnitedHealthCare. The processes to be followed have not yet been identified. Once these are identified, we will communicate accordingly.

Doug Gulleson loves to scuba dive overseas and makes sure he always takes his Amex card AND international travel insurance. Visit Good Neighbor Insurance at www.overseashealthinsurance.com/short-term.asp  for your next overseas trip health coverage and get a FREE quote or call one of our agents at 480-633-9500.