Health & Welfare Notes

Vol. 18, Issue 3    July/August 2013

REMINDER: Notice to Employees Must Be Provided by October 1, 2013.  As discussed in our May/June 2013

Health and Welfare Notes, all Employers must comply with DOL Technical Release 2013-02 and provide their employees by October 1, 2013 a written notice containing information about the new Health Insurance Marketplace (Exchanges). Technical Release 2013‑02 and the model notices are available on the DOL’s website www.dol.gov/ebsa/healthreform.

Transition Relief for 2014 for Employers and Insurers for Health Care Information Reporting. On July 2, 2013 the Department of the Treasury announced that it is delaying the Affordable Care Act (ACA) employer pay‑or‑play mandate and accompanying employer reporting requirements by one year. Accordingly, employers will not be subject to penalties for failing to offer full‑time employees healthcare coverage that meets certain standards until 2015. Under Section 4980H of the Internal Revenue Code (IRC), “applicable large employers” must offer their full‑time employees “minimum essential coverage” that provides “minimum value” and is “affordable” or pay a penalty. The question of whether to play by offering such coverage or pay the penalty has become an important issue for many employers, and one that involves strategic choices about benefits structure and workforce composition. While the delay is certainly welcome news for employers, it does not mean that they can ignore the ACA or the critical decisions it calls upon employers to make. [Littler Publications, August 14, 2013]      

The IRS issued Notice 2013‑45 providing for this 2014 transition relief from (1) the information reporting requirements for insurers, self‑insuring employers, and certain other providers of minimum essential coverage pursuant to section 6055; (2) the information reporting requirements for large employers pursuant to section 6056; and (3) the employer‑shared responsibility provisions pursuant to section 4980H. This IRS guidance includes a series of Q&As concerning the transition relief which is intended to (1) provide additional time for input from employers and other reporting entities so as to simplify information reporting consistent with effective implementation of the health care law; and (2) provide employers, insurers, and other providers of minimum essential coverage time to adapt their health coverage and reporting systems.  This transition relief through 2014 for the information reporting and employer shared responsibility provisions has no effect on the effective date or application of other Affordable Care Act provisions.

One Year Delay on Out‑of‑Pocket Caps. As explained in a Frequently Asked Questions (FAQ) publication jointly published by the Labor Department, Health and Human Services Department, and the IRS (collectively, the Departments) on February 20, 2013, the annual limitation on out‑of‑pocket (OOP) maximums for non‑grandfathered group health plans, originally set by the Patient Protection and Affordable Care Act (ACA) to go into effect in 2014, are delayed one year, to 2015. The Departments recognize that plans may use more than one service provider to help administer benefits (for example, a third‑party administrator for major medical coverage, a separate pharmacy benefit manager and a separate managed behavioral health organization). Separate plan service providers may impose different levels of out‑of‑pocket limitations and may utilize different methods for crediting participants’ expenses against any out‑of‑pocket maximums. These processes will need to be coordinated to comply with the annual OOP maximum limit, which may require new regular communications between service providers.

For only the first plan year beginning on or after January 1, 2014, if a group health plan or group health insurance issuer uses more than one service provider to administer benefits that are subject to the annual limitation on OOP maximums, the Departments will consider the annual limitation to be satisfied if the following two conditions are met: (I) the plan must comply with the OOP maximum limit with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and (ii) to the extent there is an OOP maximum on coverage that does not consist solely of major medical coverage (for example, if a separate OOP maximum applies with respect to prescription drug coverage), this OOP maximum does not exceed the maximum dollar amount under the ACA. The 2014 OOP maximum is $6,350 for individuals and $12,700 for families.

The Departments do note that the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) does not allow group health plans to apply separate out‑of‑pocket maximums to mental health or substance use disorder benefits separately from the maximum established for medical/surgical benefits.

This one‑year “transitional period” does not apply to insurance obtained through the state exchanges/ marketplaces, where a single out‑of‑pocket maximum will apply.

REMINDER: HIPAA – Final Regulations Require Changes by September 23, 2013 (Reprinted from January/February 2013 Health and Welfare Notes) On January 25, 2013, the Office for Civil Rights (OCR) of the Department of Health and Human Services (HHS) published in the Federal Register a final rule (Final Rule) which implements the amendment to HIPAA made by the Health Information Technology for Economic and Clinical Health Act (the HITECH Act) and the Genetic Information Nondiscrimination Act (GINA). The effective date of the Final Rule is March 26, 2013 and covered entities and business associates must comply by September 23, 2013.

Generally, the Final Rule modifies the HIPAA privacy, security, and enforcement rules to: incorporate increased and tiered monetary penalties and expanded enforcement structure of the HITECH Act; make business associates directly liable for compliance with certain privacy and security rules; modify the rules for breach notification; require modifications to notices of privacy practices; strengthen limits on use and sale of protected health information; expand rights to electronic copies of health information and restrict disclosures to health plans where the individual has paid for the treatment; and adopt additional HITECH Act provisions.  The Final Rule also modifies the HIPAA privacy rule to strengthen and implement the privacy protections for genetic information under GINA.

The Final Rule adopts the increased and tiered civil money penalty structure set out in the HITECH Act, creating significant impetus for group health plan sponsors and other covered entities to exercise diligence in using and disclosing protected health information.

The Final Rule requires HHS to formally investigate complaints of violations due to willful neglect, and impose civil money penalties upon finding such violations; makes business associates of covered entities directly liable for civil money penalties for violations of certain of the HIPAA rules; requires HHS to determine civil penalty amounts based on the nature and extent of harm resulting from a violation; and provides that HHS’s authority to impose civil penalties will be barred only to the extent criminal penalties have been imposed.

Action highlights:

• Employers, health plans, providers and their business associates must be aware that the expanded penalty structure of HIPAA is now fully in effect and these entities are directly liable for civil penalties for violations of the HIPAA requirements.
• Covered entities should review their operations to determine if any additional parties are business associates under the expanded definitions, and should revise their contractual agreements with these parties.
• Business associate agreements now in effect should be reviewed and revised and renegotiated if necessary.
• Policies and procedures must be reviewed and revised to incorporate the new standards for breach notifications and other rules, such as incorporating genetic information under the protections.
• Notices of Privacy Practices must be reviewed, revised, and distributed in a timely manner.

(Excerpts from HRS Insight, 2013, Issue 5)

Disclaimer – This newsletter’s purpose is to inform our clients and friends of recent legislative health care-related developments. It is not intended, nor should it be used, as a substitute for specific legal advice.

Health and Welfare Notes is prepared four to six times annually and will accompany Retirement News. If there are questions concerning the information discussed, call richard Gabriel associates and ask for Gabe Zinni, Karen Irwin, Cindy Swartz or Nancy Cunningham.