US watching Mass. fight on health costs

By Robert WeismanGlobe Staff / November 5, 2010

While the White House seems destined to spend the next two years fending off attacks on President Obama’s health care law, the administration of Governor Deval Patrick of Massachusetts will push forward with the next stage of health care overhaul: trying to contain the escalating costs of medical care.

That is likely to thrust the state back into the forefront of the national health care debate even as chastened Democrats skirmish with resurgent Republicans in Washington over implementing steps already taken here to expand access to health care.

“Just as Massachusetts has been several years ahead of the country in health care reform, we are several years ahead in the problems of health care reform,’’ said John L. Sullivan, research director for health care investment bank Leerink Swann in Boston. “Now Deval Patrick is going to have to figure out how to pay for it.’’

The task will be difficult, the stakes will be high, and the country will be watching. “If he succeeds,’’ said Sullivan, “he’s a hero.’’

As the governor’s lieutenants draft a bill on payment overhaul to submit to the Legislature in January, representatives of medical care providers, insurers, employers, and consumers met yesterday to try to craft a workable cost-control plan. The group was convened by JudyAnn Bigby, state secretary of health and human services, even before Patrick was reelected to a second term Tuesday.

Bigby said yesterday that the stakeholders group has yet to reach consensus on issues such as whether a board is needed to oversee a new payment system, what authority such a panel would have, and what outcomes it would monitor. The group is also debating a regulatory framework for how health care providers can form alliances, called accountable care organizations, under a new system.

“The biggest area of concern is over whether to regulate the price of health care,’’ Bigby said. The disagreement on the payment committee, she said, is “between those who don’t want the price of health care to be regulated and those who say you can’t make sure health costs are controlled unless you regulate the price.’’

Bigby said she plans to host a public hearing on recommendations next month before introducing the bill.

Medical spending in Massachusetts has climbed about 7.5 percent annually in recent years, far outstripping the rate of inflation. One reason for the increases is that a large share of care is provided in Boston’s academic medical centers rather than less expensive community hospitals. But the annual increases have placed a burden on businesses and individuals trying to cope with the severe economic downturn and slow recovery.

“Massachusetts is in the best position of any state to take the next step,’’ said Boston health care consultant Jon Kingsdale, former executive director of the Commonwealth Health Insurance Connector Authority, the online insurance exchange created by the state’s 2006 universal health care law to help people obtain coverage. “There’s still a lot of pride in the Massachusetts achievement of increasing access, and a recognition that the only way to preserve it is to deal with the costs."

But in Washington, the tone is sharply different. Incoming House Speaker John Boehner pledged yesterday to “lay the groundwork’’ for repeal of the health care bill signed into law by Obama in March. One lesson to be drawn from Tuesday’s midterm elections across the nation, Boehner said, was that “the American people were concerned about the government takeover of health care.’’

Few congressional watchers believe Republicans, who won control of the House of Representatives on Tuesday, will have enough leverage to repeal the law. But they may spend the next couple of years sniping at it in hearings and challenging its constitutionality in the courts, forcing the legislation’s supporters to defend the landmark overhaul in the run-up to the 2012 presidential election.

“There will be a lot of heated rhetoric,’’ said Arthur A. Daemmrich, faculty member at the Harvard Business School Healthcare Initiative. “But I would be surprised if Republicans in the House would be able to roll it back. The Senate has blocking power.’’

Daemmrich noted that while lawmakers have the means to defund government programs, most provisions in the federal health care law that take effect in the next two years — like allowing children up to 26 years old to remain on their parents’ insurance — don’t require government funding. Many measures that do require public funding, such as setting up Massachusetts-style insurance exchanges in other states, won’t be implemented until after the 2012 election, he said.

Still, with Republicans challenging every element of the new law, the Obama administration is likely to be handcuffed in its efforts to expand the revamping of the health care system. That will leave it to the states, especially Massachusetts, to pioneer new ways of delivering health care services without driving up costs. Patrick capped health insurance rates for individuals and small businesses earlier this year — a move that sparked months of acrimony — but said it was a temporary measure to give customers relief until a long-term plan could be readied.

After defeating Republican gubernatorial candidate Charles D. Baker, a former chief executive of insurer Harvard Pilgrim Health Care, Patrick is ready to move forward with a “global payment’’ plan that is supported in principle by most of the state’s health care companies, though they have yet to agree on the elements.

The plan, in broad form, would put hospitals and doctors on an annual budget for each patient’s care. Providers would be expected to assemble into partnerships — known as accountable care organizations — to coordinate care and distribute payments. It would replace the current “fee for service’’ system in which providers are paid negotiated fees for each visit and procedure.

James Roosevelt Jr., chief executive of Tufts Health Plan in Watertown and a member of the panel weighing payment overhauls, said Massachusetts has the chance to be a leader in reining in costs.

“The big question about the national bill, just like ours, is how we’re going to be able to afford it,’’ Roosevelt said. “And while they’re bickering about it in Washington, we’re doing something about it.’’

Medicare Notice Deadline is Nov. 15

Source: Warner Norcross & Judd LLP
[via BenefitsLink]

Norbert F. Kugele

Just a reminder that the deadline is Nov. 15, 2010 to distribute the annual Notice of Creditable Coverage required under Medicare Part D. The notice informs participants whether the prescription drug coverage offered under your health plan constitutes creditable or noncreditable coverage.

The Centers for Medicare and Medicaid Services (CMS) has posted forms and instructions for providing this notice. The forms have not changed since last year. They are available, both in English and Spanish, though the following links:

Employers who sponsor a health plan offering prescription drug benefits must provide an annual notice to all Medicare-eligible participants that explains whether the prescription drug benefits offered under the plan are at least as good as the benefits offered under the Medicare Part D plan. The only employers exempt from this notice requirement are those that establish their own Part D plan or that contract with a Part D plan.

The Notice of Creditable Coverage must be provided:

  • At least once a year before Nov. 15 (the start of the annual Medicare Part D enrollment period).
  • Whenever a Medicare-eligible employee, spouse or dependent enrolls in your health plan.
  • Whenever there is a change in the creditable or non-creditable status of your health plan's prescription drug coverage.
  • Whenever an individual requests the notice.

Because it is difficult to keep track of which employees (and their spouses or dependents) are eligible for Medicare benefits, we recommend that you make the Notice a part of your new-hire enrollment materials and your annual open enrollment materials. If distributed before November 15, this should take care of the first two bullet points above.

Remember that you must also submit a Disclosure to CMS Form each year, reporting whether your prescription drug coverage is creditable or non-creditable coverage. This form must be submitted electronically within 60 days of the beginning of each plan year. Thus, if you are on a calendar year, you must submit the form by March 1, 2011. The form is available on the CMS Creditable Coverage web site.

With New Majority in House, Republicans Vow to Attempt to Repeal Reform Law


WASHINGTON -(Dow Jones)- House Republicans plan a vote early in 2011 to repeal the health-care law, before settling in for a longer battle with the Obama administration targeting unpopular pieces of the law, GOP aides and lawmakers say.

Legislation to repeal the bill is expected to bog down in the Senate, where the GOP will still be well short of the votes needed to block it. But an early vote will be a thank you to the party's political supporters who helped make repeal of the bill a top-tier issue in this fall's House campaigns.

Buoyed by opposition to the law, Republicans are expected to wrest control of the U.S. House from Democrats in nationwide elections Tuesday.

"I believe we'll see a vote very quickly," said Rep. Charles Boustany (R., La.). "Whether or not there's a willingness of the Senate to move in that direction, it's important to have the vote. The American public supports" repeal, Boustany said.

Some GOP aides cautioned that a final decision has not been made, and will depend on input from the full House GOP conference following Tuesday's elections.

The real battle will unfold over weeks and months following that vote, as Republicans seek to block implementation of aspects of the bill.

While they'll have to contend with U.S. President Barack Obama's veto pen, the GOP may seek victories on some low-hanging fruit like a $10 billion grant program for preventive care, or funding for research on the relativecost- effectiveness of treatments.

"The legislation doesn't stand or fall on things like that. If they attempt to de-fund things that are more fundamental, the president will be forced to veto," said Neera Tanden, a healthcare expert at the left-leaning Center for American Progress.

House Republican committee chairmen will use hearings to highlight alleged flaws in the design of the bill, GOP aides said. They are expected to call Health and Human Services Secretary Kathleen Sebelius and Medicaid and Medicare director Donald Berwick to testify early in 2011.

Oversight hearings could also feature state officials who must work with the federal government to set up insurance exchanges under the law.

Congressional Republicans may also seek to prevent new industry taxes that will be coming on-line, including a fee on drug manufacturers that takes effect in 2012, and a tax on medical devices that will be triggered in 2013.

A 3.8% tax on investment income to fund Medicare, to take effect in 2013, will also be a prime GOP target.

DOL Expands Definition of ‘Fiduciary’


By Judy Ward

For the first time in a generation, the Labor Department has taken another crack at the definition of a fiduciary under the Employee Retirement Income Security Act (ERISA).

The proposed rule was unveiled today by the Department of Labor (DoL), which noted that its adoption “would protect beneficiaries of pension plans and individual retirement accounts by more broadly defining the circumstances under which a person is considered to be a ‘fiduciary’ by reason of giving investment advice to an employee benefit plan or a plan’s participants.”

The proposed rule is designed to “take account of significant changes” in both the financial industry and what was described as “the expectations of plan officials and participants who receive investment advice,” as well as to protect participants from “conflicts of interest and self-dealing.”

Testing, Tested

In explaining the proposal, the Labor Department noted that while Section 3(21)(A) of ERISA provided a “simple two-part test for determining fiduciary status,” a subsequent (1975) regulation served to “significantly narrow” the “plain language” of the legislation; effectively replacing the two-part test that would impose fiduciary status when a person renders investment advice with respect to any moneys or other property of a plan, or has any authority or responsibility to do so and receives payment (direct or indirect) for that advice, with a 5-part test that included conditions that: the advice regarding plan investments be rendered “on a regular basis,” that the advice would serve as a primary basis for investment decisions with respect to plan assets, that the recommendations are individualized for the plan, that the party making the recommendations receives a fee for such advice, and that it be pursuant to a mutual understanding of the parties.  Moreover, the Labor Department noted that it further limited the definition of “investment advice” in a 1976 advisory opinion, when it concluded that the valuation of closely-held employer securities in an employee stock ownership plan (ESOP) relied on in purchasing those securities would not constitute investment advice.

Well, that was then—and this is now, and the Labor Department noted that the financial marketplace and the types and complexity of services have expanded dramatically.  The proposal notes that although professionals such as consultants, advisers, and appraisers “…significantly influence the decisions of plan fiduciaries, and have a considerable impact on plan investments,” if they are not deemed fiduciaries under ERISA “…they may operate with conflicts of interest that they need not disclose to the plan fiduciaries who expect impartiality and often must rely on their expertise, and have limited liability under ERISA for the advice they provide.”

In essence, the Labor Department now says that ERISA does not compel it to apply its own five-part test, and that new facts and circumstances mean it is now time to update the investment advice definition.  Specifically cited is that the proposal no longer requires that the advice be provided on a “regular” basis, not does it require that there be a mutual understanding that the advice will serve as a primary basis for plan investment decisions.

Advice Description

As for what constitutes advice, the proposal now includes the provision of appraisals and fairness opinions as a type of advice, noting that the incorrect valuation of employer securities was a “common problem” identified in the DoL’s recent national enforcement project, including cases where plan fiduciaries have “reasonably relied on faulty valuations prepared by professional appraisers.”  The proposal also makes specific reference to advice and recommendations as to the management of securities and other property, including such things as voting proxies or recommendations regarding the selection of persons to manage plan investments.

Finally, in what was described as reflecting “the Department’s longstanding interpretation of the current regulation,” the proposal makes clear that fiduciary status “may result from the provision of advice or recommendations not only to a plan fiduciary, but also to a plan participant or beneficiary.”

CDC: 1 in 3 May Have Diabetes by 2050


Source: USA Today
[via BenefitsLink]

By Marry Brophy Marcus

The future of diabetes in America looks bleak, according to a new Centers for Disease Control and Prevention report out today, with cases projected to double, even triple, by 2050.

"There are some positive reasons why we see prevalence going up. People are living longer with diabetes due to good control of blood sugar and diabetes medications, and we're also diagnosing people earlier now," says Ann Albright, director of the CDC's Division of Diabetes Translation.

A more diverse America - including growing populations of minority groups such as African Americans and Hispanics, who are more at risk for the disease - factors into the increase as well, Albright says. But an increasing number of overweight Americans also is fueling the stark predictions for diabetes, which should be taken seriously, Albright says.

Diabetes is the No. 1 reason for adult blindness, kidney failure and limb amputation, and it's a large contributor to heart attacks and strokes, she says. "It's also now linked to a form of dementia, some forms of cancer and some forms of lung disease. Diabetes impacts so many systems in the body," Albright says.

Programs and policies to prevent obesity and diabetes need to be put in place at every level, says Duke University Medical Center endocrinologist Susan Spratt, who says schools are a good place to start. Healthful food options in schools and daily physical education classes should be a priority, she says.

"Vending machines should not sell sugar soda or candy bars. School fundraisers should not revolve around unhealthy food," says Spratt, who adds that cities need to be pedestrian-friendly, bike-friendly and safe.

A price will be paid if the projections go unheeded, experts say. The CDC estimates the current cost of diabetes at $174 billion annually, $116 billion of which is in direct medical costs.

Previous research has suggested that the financial burden may easily double in the next 20 years, says David Kendall, chief scientific and medical officer of the American Diabetes Association.

"The financial burden is potentially a very, very troublesome one," Kendall says.  "There's a dual message here: prevention where it's feasible, and critical and early intervention for those already diagnosed," he says.

Without Guidance, Firms Must Tread Lightly Around In-Plan Roth Conversions


Source: McKay Hochman
[via BenefitsLink]

The in-plan Roth conversion provision of the Small Business Jobs and Credit Act (H.R. 5297) became effective on September 27, 2010. The absence of IRS guidance leaves us with many questions regarding how to implement, administer and report such conversions.

As we stated in our October 1st e-mail alert article, we believe it is best to wait for formal IRS guidance before amending the plan to add in-plan Roth conversions. However, we have received numerous calls that represent the plan sponsors concerns about the tax consequences of not permitting the conversion in 2010. This coupled with the fact that the end of the year is so administratively close has reinforced the urgency to provide answers to our clients’ questions of how to make in-plan Roth conversions happen this year. This article is our response to those questions and some additional outstanding issues.

Service providers and employers who want to add this provision pending release of formal guidance must ensure appropriate steps are taken. This article discusses some of the operational requirements that are needed to implement in-plan Roth conversions, as well as providing our views on some of the unresolved issues impacting ongoing administration, disclosure and reporting. Keep in mind that prior to IRS guidance, this article is only able to be based on the new law and its joint committee report and that we will be updating our website once IRS issues its guidance.

An Alternative Approach
Most document providers will likely wait to draft model amendments until the IRS releases guidance. This is not expected to occur until later this year or in 2011.  In the interim, employers who want to add the in-plan Roth conversion feature should draft an enabling board resolution. A plan must allow for designated Roth contributions in order to add the in-plan Roth conversion feature.  If a plan does not permit Roth contributions currently, it must be so amended before or simultaneously with the addition for in-plan Roth conversions. Further, a plan that does not permit in-service withdrawals must be amended to add appropriate distributable events before or simultaneously with the addition of in-plan Roth conversions.  Lastly, if the employer wishes to take advantage of the joint committee option to limit in-service withdrawals to Roth conversions, that limitation must be included in the enabling board resolution since current plan documents do not have such a provision.

Keep in mind, that after SBJPA in the late 1990s until the GUST prototype circa 2002, prototype safe harbor 401(k) plans were documented only by a board resolution because preapproved plans did not have 401(k) safe harbor language (until the GUST prototype).

Participant Disclosures
Participant disclosure may be accomplished by issuing a Summary of Material Modification (SMM) that must be distributed to inform participants of this amendment.  Normally, SMMs  do not have to be issued until 210 days after the end of the plan year in which the plan was amended, but in this case earlier issuance will be most helpful. The SMM should also clarify when in-service withdrawals are limited to in-plan Roth conversions, if this option is adopted. It may be advisable to clearly state that a distributable event is necessary for conversion. Even more importantly, it is recommended that a conspicuous statement regarding the tax consequences of an in-plan Roth conversion be included in the SMM.

The distribution of a revised 2010 Safe Harbor Notice (and 2011, if already distributed) also will be required to disclose the new conversion option and it's impact on the plan’s in-service withdrawal options and the addition of Roth deferrals, if applicable.

Distribution Forms
An in-plan Roth conversion option can be added to the forms, or participants may simply write in their election if an “Other” section is available as a distribution reason option on the current distribution form.

Form 1099-R
As described in the joint committee report, the transaction is a direct rollover taxable distribution (only permitted for eligible rollover distributions) and a rollover into the designated Roth account. Even though the transaction is generally processed like a transfer within the plan (i.e. no check needs to be written or processed), it is a direct rollover. Thus, since there is a taxable event, a Form 1099-R would be the information return issued to report taxable events from retirement plans. The reason code to be utilized needs to be addressed by the IRS, it may be a Code G for direct rollover or it may be a new code designed to distinguish this transaction.

Additional Open Issues for Those Considering Adding In-Plan Roth Conversion Prior to IRS Guidance

Joint Committee 401(b) Amendment Deadline Suggestion
The Joint Committee report suggested that the IRS permit a remedial amendment period under Code Section 401(b). This permits amendments to be made as late as the end of the remedial amendment period (RAP) deadline. Since the RAP deadline under the six-year cycle for defined contribution plans just ended on April 30, 2010, theoretically, the next RAP will be in accordance with the next six-year cycle, which hypothetically could be in the year 2016.

Generally, under Revenue Procedure 2007-44, discretionary amendments must be made by the end of the plan year for which they are effective. However, due to the special tax circumstances surrounding making a conversion in 2010, if the IRS does not issue guidance in time for amendments to be drafted and signed by employers before year end, hopefully they will use 401(b) to provide some additional RAP beyond December 31, 2010 for any new model amendment and model language to be amended to a plan.
There Are No Designated Roth Ordering Rules

The under age 59½ early withdrawal 10% excise tax that is waived when the conversion was made will be applied as a “recapture tax” if the conversion funds are withdrawn within five years after the conversion. IRS guidance is required to create ordering rules or to provide another method of handling a partial distribution that occurs before age 59½ to a participant that has both Designated Roth deferrals and an in-plan conversion to a Designated Roth within 5 years of the conversion. Currently, nonqualified designated Roth distributions are required to be treated as pro-rata earnings and designated Roth contributions. Since there are no ordering rules, this would require guidance and likely a change to current designated Roth regulations. It may be wise to segregate Roth conversions from any designated Roth deferrals until the IRS issues guidance.

NAIC Agrees on Medical Loss Ratios

NAIC unveils medical loss ratio rules under health reforms

Health Care Reform

Source: Business Insurance

By Joanne Wojcik

WASHINGTON—The National Assn. of Insurance Commissioners adopted a model regulation Thursday that includes definitions of which medical expenses can be counted toward insurers’ medical loss ratios under the Patient Protection and Affordable Care Act.

Under PPACA, insurers operating in the large group market must spend at least 85% of premiums on medical services and quality improvement, rather than on administrative costs or profits. The MLR for individual and small group plans must be at least 80%. Insurers that spend less than these minimums on patient care will be required to rebate to plan members a portion of the premium paid for coverage.

Many of the definitions included in the model MLR regulation, which was passed by the NAIC’s Executive and Plenary committees meeting in Washington, are based on the proposed financial template, or “blank” that was approved by the NAIC in August, according to a statement issued by the Kansas City, Mo.-based group of state insurance regulators.

The NAIC’s MLR model regulation now will be submitted to the U.S. Department of Health and Human Services, which will decide whether to adopt the proposals as regulation or to make changes. HHS Secretary Kathleen Sebelius has said the agency would like to act on the regulations this month.

Under PPACA, insurers are required to implement the spending changes by Jan. 1, 2011. However, in an Oct. 13 letter to Secretary Sebelius, the NAIC recommended that they be phased in to prevent market disruption.

“Health insurance companies in some markets will need a transitional period to comply with the 80% MLR limit. In the absence of the transitional period, the markets of some states are likely to be ‘destabilized,’” the NAIC letter states.

Under the NAIC’s model regulation, health insurer MLRs will be calculated by dividing incurred claims plus any expenses to improve health care quality by earned premiums, minus federal and state taxes and licensing or regulatory fees.

However, Washington-based America’s Health Insurance Plans issued a statement saying it is concerned that expenses attributable to quality improvement is being defined too narrowly. It also is disappointed that fraud prevention and detection programs and initial startup costs associated with implementing a new, more expansive, health care claims coding system were not included in the NAIC’s proposed MLR calculations.

Health insurers have been transitioning to a new ICD-10 coding system from the existing ICD-9 coding system for the past several years, and want to include those costs in the MLR calculations, an AHIP spokesman said.

The Alexandria, Va.-based Independent Insurance Agents & Brokers of America Inc. said it was disappointed that agent compensation was not excluded from the proposed methodology for calculating MLRs.

“If the NAIC and HHS do not fix this language, the role of the agent in the health care delivery process could be diminished, which would lead to market disruption and considerable consumer confusion,” said Charles E. Symington Jr., senior vp for government affairs.

More Employers Offer Tuition Reimbursement as Benefit


By Rebecca Moore

Eighty-five percent of employers in a recent survey report that their organization offers tuition assistance to their employees, compared with 52 percent that said so in late 2007.

However, according to the survey of tuition assistance plan practices by BLR, this increase in companies providing tuition was accompanied by a narrowing of the most common employer tuition reimbursement prerequisites.

According to a press release, virtually all (96 percent) organizations offering tuition assistance in the current survey require verification of the grade earned, compared with 50 percent having that requirement in 2007.  More than three-fourths (76%) of companies require the course to be job related, as compared to 47% which had this requirement in late 2007.

The survey, which garnered nearly 1,100 responses, was conducted by BLR's HR Daily Advisor in August-September, 2010.

HHS Issues New Guidance On Kids’ Insurance Policies

By Mary Agnes Carey
KHN Staff Writer
OCT 13, 2010

Health insurers can't have different rules for when individual policies are sold for children with medical problems than for healthy kids, the Department of Health and Human Services said today.

Some insurers want to allow healthy children to enroll year-round but only have a limited "open season" for ones with pre-existing conditions. Not so fast, HHS Secretary Kathleen Sebelius said in a letter to the National Association of Insurance Commissioners. Such an approach is legally questionable and "inconsistent with the language and intent" of the health care law, Sebelius wrote.

But, as Sebelius acknowledged in her letter, rates can "be adjusted for health status as permitted by state law," until 2014, when the federal law prohibits such variation. Since some states do not place limits on how much can be charged for coverage, parents trying to buy an individual policy for a sick child may still face availability and cost challenges.

For policies that begin after Sept. 23, the new health law bars insurers from denying coverage to children up to 19 with pre-existing medical conditions. While HHS had previously said that insurers and states could have a limited enrollment period, today's letter offered additional guidance: insurers can't have a window of enrollment for some kids and not others.

Insurers reacted to the letter, claiming HHS "has created a powerful incentive for parents to defer purchasing coverage until after their children need it – which could significantly raise costs and cause disruptions for families whose children are currently covered by child-only policies," said Robert Zirkelbach, spokesman for America’s Health Insurance Plans, a trade group representing insurers.

Some insurers, worried about an influx of sick children who would be expensive to cover, have dropped out of the child-only individual market entirely.

In a conference call Wednesday with reporters, Jay Angoff, director of the HHS Office of Consumer Information and Insurance Oversight, said that HHS could establish a uniform open-enrollment period for child-only policies. "And if that would result in companies who stopped writing child-only business starting again to write child-only business, that’s something that makes a lot of sense."

States, however, can often move faster, Angoff said. Beth Sammis, Maryland’s acting insurance commissioner, told reporters that after she established a uniform open enrollment period – which the Maryland legislature must approve -- two insurers said they would continue to sell child-only insurance policies in the state.

Consumer advocates praised the guidance. In a written statement, Georgetown University’s Center for Children and Families said that "While only a small number of families are in need of individual insurance coverage for their children, they are a particularly vulnerable group" who often make too much to qualify for Medicaid or the Children’s Health Insurance Program. Child-only policies make up about 8 to 10 percent of the individual insurance market.

For years, insurers – principally those in the individual insurance market -- have denied coverage to children, as well as adults, with medical conditions. In some cases, they have accepted them but refused to cover their preexisting conditions for a set period.

HHS has estimated that 31,000 to 72,000 uninsured children with pre-existing conditions will gain coverage due to the provision between now and 2013. And 90,000 insured children will get coverage for pre-existing conditions that have been excluded from coverage, the department estimates. In 2014, no one can be denied coverage due to a medical condition and people will be required to buy insurance or pay a fine.

Some states, including Maine, Massachusetts, New Jersey, New York and Vermont, already prohibit insurers from excluding coverage of pre-existing medical conditions and about a dozen states allow families to purchase coverage through the Children’s Health Insurance Program. Uninsured children may also be able to obtain coverage through another program in the health law created to help people with pre-existing medical conditions who have been denied coverage, Angoff said.

Agencies Tweak Rules on OTC Drugs, Claims

More than six months have passed since President Barack Obama signed the health care reform bill into law. A number of provisions are now in effect, and federal agencies are working to clarify lingering questions in the legislation.

One aspect that could have a significant impact on employers and employees -- reimbursement for medical expenses from flexible spending accounts (FSAs), health savings accounts (HSAs), Archer medical savings accounts (MSAs) and health reimbursement arrangements (HRAs) -- has received special attention from the IRS.

In late September, the IRS posted new guidance regarding reimbursement for over-the-counter (OTC) drugs under the Patient Protection and Affordable Care Act (PPACA). According to a report in PLANSPONSOR, the agency states that expenses for OTC drugs will be considered reimbursable on or after Jan. 1, 2011, only if:

1. A prescription is required to obtain the medicine or drug;
2. The item is available as an OTC drug, but an individual has obtained a prescription for it; or
3. The drug is insulin.

The guidance, however, still begs for more clarity, experts say. For instance, many consumers might not understand what constitutes a prescription. According to a report in Employee Benefit News, a prescription is defined as "an electronic or written order for a medicine or drug that meets the legal requirements of a prescription in the state in which the medical expense is incurred, and that is issued by an individual authorized to issue a prescription in that state." In other words, if a doctor simply tells a patient "Take two aspirin," a purchase of OTC aspirin is not reimbursable under PPACA because no formal prescription is issued.

Also, the definition of a "medicine or drug" remains foggy. For instance, the new law still permits reimbursements for some medical supplies and diagnostic devices, such as contact lens solution and blood sugar test kits. However, the recent guidance doesn't give much detail on what actually constitutes a "medicine or drug."

Although many questions remain, attorneys from Alston & Bird suggest employers start communicating what they know now to plan participants and touch base with their third-party administrators (TPAs) and debit card issuers to make sure the regulations will be followed come Jan. 1, 2011. Employers also should create a new process to ensure that every claim for an OTC medicine or drug has a valid prescription number or otherwise satisfies a state's prescription requirements.

More from the DOL
The Department of Labor (DOL) also recently issued some guidance regarding provisions in PPACA. The DOL relaxed some previous rules on how health care plans handle disputed claims and answered some questions on the expansion of medical coverage to an employee's adult children.

The law allows employees covered under self-insured plans to request a "federal external review" following a claims denial through internal reviews by employers and administrators, according to a report in Business Insurance. Previous rules required employers to contract with at least three different independent review organizations and to shift cases among them. In the recent guidance, however, the DOL states that employers do not have to contract directly with the review organizations, but instead can obtain those services through a TPA.

The DOL also clarified a provision that extends an employee's health coverage to his or her adult children up to age 26 without restrictions as of Jan. 1, 2011. The DOL states employers who voluntarily extend benefits beyond adult children (such as nieces, nephews and grandchildren) can continue to impose restrictions or conditions, such as requiring "the individual be a dependent for income tax purposes," according to the Business Insurance report.