Employee Benefits Update: Health Care Reform Medical Loss Ratios, Rate Programs, Fees, CO-OPs, and Age 26

Here is your latest Employee Benefits Update from Cindy Van Bogaert, Boardman Law Firm LLP. This Employee Benefits Update provides information on Health Care Reform developments involving medical loss ratios, fees to fund research, various insurance rate programs, CO-OP program, and age 26 health benefits in Wisconsin.

The government issued additional Health Care Reform guidance over the past months. Some of the guidance includes:

  • Medical Loss Ratios. Insurers are subject to medical loss ratios restrictions under Health Care Reform. For guidance on final regulations, see: http://cciio.cms.gov/resources/factsheets/mlrfinalrule.html. Health Care Reform limits the design of health insurance and provides for rebates to employer plans if certain medical loss ratio limits are not met. The Department of Labor has issued guidance on the proper handling of a rebate: http://www.dol.gov/ebsa/pdf/tr11-04.pdf.
  • Age 26 Children in Wisconsin. Wisconsin law was out of sync with the Health Care Reform age 26 mandate. Some adjustments have been made, but there still are some differences. The Wisconsin tax rules were changed effective January 1, 2011. See 2011 Wisconsin Act 49 (enacted November 4, 2011) creating Wisconsin Statutes Section 71.98(2). For information: http://www.revenue.wi.gov/taxpro/news/111107.html. The mandated coverage rules in Wisconsin also have been modified in 2011 Wisconsin Act 32 (enacted June 26, 2011), which is generally first effective January 1, 2012 with special effective dates including for certain collective bargaining situations. See Wisconsin Statutes Section 632.885: https://docs.legis.wisconsin.gov/statutes/statutes/632/VI/88. For the effective dates, see 2011 Wisconsin Act 32, Sections 9325 and 9425: https://docs.legis.wisconsin.gov/2011/related/acts/32.pdf.
  • Rate Programs. Health Care Reform includes reinsurance, risk corridors, and risk adjustment programs that are intended to mitigate the impact of potential adverse selection and stabilize premiums as insurance reforms and Exchanges are implemented, starting in 2014. Proposed regulations have been issued: http://www.healthcare.gov/news/factsheets/2011/07/exchanges07112011e.html. HHS has issued and amended its final regulations and issued other guidance implementing the rate review and disclosure to address coverage sold through associations. See http://www.healthcare.gov/news/factsheets/2011/09/ratereview09012011a.html and http://cciio.cms.gov/resources/files/association_coverage_9_1_2011.pdf.pdf. The Government Accountability Office did a report on state oversight of premium rates that might be of interest: http://www.gao.gov/assets/330/322333.pdf.
  • Plan Fees to Fund Patient-Centered Outcomes Research. Health Care Reform provided for an organization to advance research regarding making informed health care decisions. See www.pcori.org. The IRS has requested comments for funding paid by health plan insurers and self-insured health plan sponsors. See http://www.irs.gov/pub/irs-drop/n-11-35.pdf. Fees may start with plan or policy years ending on October 1, 2012 and do not apply to years ending after September 30, 2019. For calendar years, this means 2012-2018.
  • CO-OP Program. Health Care Reform includes an initiative known as the Consumer Operated and Oriented Plan (“CO-OP”) Program, which is designed to “provide loans to foster the creation of consumer-governed, private, nonprofit health insurance issuers” to offer qualified health plans under the new Exchanges. For more information: http://cciio.cms.gov/programs/coop/index.html.

What should employers do?

  1. Consult with experienced ERISA counsel regarding steps should you receive a medical loss ratio rebate. Review documentation for possible amendment prior to receiving a rebate.
  2. Address Wisconsin age 26 children coverage changes and consider effective dates for your plans. Evaluate the differences between the Federal and Wisconsin rules as may apply to your plans.
  3. Watch for more guidance on plan fees for Patient-Centered Outcomes Research.
  4. Monitor Health Care Reform developments and consider alternatives for 2014.

Please contact me if I can be of assistance.

This update is not legal advice. Individuals should seek advice based on their particular circumstances from their own counsel.