Carter's Benefits

eNewsletter Volume 3, Issue 8 August 2010

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The war rages on ...

There is a lot of opposition facing health care reform. Twenty (20) states are challenging the healthcare law passed March 23rd and signed into law by President Obama. Recently the citizens of Missouri voted 71% to 29% rejecting the federal law mandating that every American carry health insurance. I suspect this recent state vote along with the 20 other states opposing the legislation will work it's way up to the supreme court for final appeal. Stay tuned as the opposition is heating up at a rapid pace.

Will they be successful? It is hard to say at this point. I try not to take a position for or against healthcare reform as much as I try to give my readers different views each month and news of what is going on. Personally I believe there are some good aspects of the legislation passed, and there are some really bad aspects.

The biggest flaw in the legislation is the lack of "Affordablility". The law was titled "Patient Protection and Affordable Care Act" and yet there is nothing in the law which will reduce or dimish cost of health care. The law really should have been called "Patience Protection and Accessible Care Act" as it does provide vast changes to the system which are designed to proect patients and make access to health insurance better.

Recent News

This is an important month. This month we see the interim final regulations for "Preventive Care". These are the new guidelines which carriers will now use to provide "first dollar coverage" for individual and group plans

  1. Preventive Care Regulations Released
  2. Missouri Citizens Vote Against Insurance Mandate
  3. To Grandfather or Not: Advantages of Grandfathered Plans vs New Mandates
  4. Count "ALL" Employees When Determining Small Employer Exception to COBRA
  5. The latest from Gallup
  6. "Healthcare.Gov" New Website With Data On Government, Private Health Plans
  7. Survey Shows Most Consumers Successfully Negotiated Medical Bills
  8. Affordable Care Act is failing to address the top health care concerns of the American people
  9. Aetna says that a side effect of the health-care reform bill is that costs will increase
Preventive Care Regulations Released

The Departments of Health and Human Services, Labor and Treasury released an interim final regulation outlining the details of the preventive care coverage requirement for health plans established by the Patient Protection and Affordable Care Act (PPACA).

PPACA requires that all plans provide first-dollar coverage of specific preventive care services recommended by the United States Preventive Services Task Force beginning on the first day of the first plan year following September 23, 2010. The requirements apply to all individual and group health plans, including self-funded plans, but grandfathered plans are exempt as long as they retain their grandfathered status. The complete list of preventive care services that are required to be covered can be found here.

The new rules not only outline what screenings and preventive care services must be covered without being subject to cost-sharing, but they also establish how cost-sharing will work under a number of more complicated coverage scenarios. For example, when the preventive care is administered during an office visit, and that office visit would normally be subject to a deductible or co-payment, generally the preventive care will need to be billed separately for other cost-sharing to apply. Also, if a preventive care screening or service results in the patient needing additional care or medication, cost-sharing can apply to the patient’s treatment.

If the plan has a network, out-of-network cost-sharing rules will apply to any recommended preventive services a beneficiary receives from an out-of-network provider. And, if the federal recommendation or guideline for a preventive service does not specify the frequency, method, treatment or setting for the provision of that service, the plan or issuer can use reasonable medical management techniques to determine any coverage limitations. If a plan covers any preventive care services above and beyond the new federal requirements, then the plan can impose cost-sharing requirements on those services. 

Finally, the rules make it clear that if a federal preventive care service recommendation changes, the health plan is no longer required to provide first-dollar coverage of that particular service. Additional guidelines are being developed regarding preventive benefits and the utilization of value-based insurance designs by group health plans. 

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Missouri Citizens Vote Against Insurance Mandate.

Fox News' Special Report (8/4, Baier) reported, "Voters in Missouri have handed President Obama a very unwelcome birthday present. ... It was not even close. Missouri voters approved state proposition C rejecting a key portion of the landmark healthcare law by a whopping 71-29%. Prop C rejects the law's mandate that every American must have or buy medical insurance."

        The Washington Times (8/5, Lengell) reports, "Republicans say it exemplifies an electorate irate at a 'blatant power grab' by Democrats and ready to punish its supporters at the ballot box this fall. 'Americans weren't kidding when they said they opposed this healthcare bill, and they're not going away,' said Senate Minority Leader Mitch McConnell, Kentucky Republican. 'This is just the beginning.'"

        The New York Times (8/5, A18, Davey) reports, "The measure was meant to invalidate a crucial element of President Obama's healthcare law -- namely," the individual mandate. Advocates "of the measure said it would send a firm signal to Washington about how this state, often a bellwether in presidential elections, felt."

        The AP (8/5, Alonso-Zaldivar, Lieb) says that the Missouri vote "puts one of the least popular parts of...Obama's healthcare overhaul law back in the political crosshairs. Even if the vote sets no legally binding precedent, it will help mobilize foes of Obama's agenda in the fall midterm elections, and that could make a difference in some states with close congressional races." The Wall Street Journal (8/5, Fields, subscription required), in an article titled, "Vote Sets Stage For New Health-Plan Challenges," presents a similar analysis. The Journal also notes that Senate majority leader Harry Reid explained away the vote with the argument that the voters "have a lack of understanding" of the details of the new law, but "once you explain what's in the bill, the American people of course like it."

          Similarly, the Washington Post (8/5, MacGillis) reports, "Lawmakers in several other states, such as Virginia, have already passed laws rejecting the 'individual mandate,' a central feature of the healthcare overhaul." But, the "state laws, including Missouri's, are largely symbolic because they are trumped by federal law." (1)

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To Grandfather or Not: Advantages of Grandfathered Plans vs New Mandates

Remember, you can not change anything on your existing individual or group health insurance plan if you want to keep your "Grandfathered" status. You can not change carriers, deductibles, co payment amounts or co-insurance amounts. As an employer you can not significantly lower your employer contribution. Any of these changes will push you out of grandfathered status. You can add or remove employees or dependents and not affect grandfathered status.

Grandfathered plans are permanently exempt from the following reforms:

  1. Expansion of Preventative Servies
    • Requires non grandfathered plans to cover preventive care on a first dollar basis.
    • This will likely increase cost.
  2. Limits on Cost Sharing
    • Requires plans that are not grandfathered to have specific limits on deductibles and out of pocket maximums.
    • Deductibles can not be more than $2,000 for single coverage and $4,000 for family coverage.
    • Out of pocket expenses cannot exceed the amount applicable to coverage related to health savings accounts.
    • This will also likely increase cost of plans.
  3. New External Appeals Process
    • The new rules for processing claims appeals do not apply to grandfathered health plans.
  4. Selection of doctors and referral requirements
    • Requires non grandfathered plans which make you choose a primary care physician, allow you to choose ANY available participating provider as your primary care phycian, not just a general practicioner.
    • You could choose an OB/GYN, or a even a cardiac specialsit as your primary care physician.
    • Requires that you be allowed to choose a pediatrician as your primary care doctor if you desire.
    • Prohibits the requirements of pre-authorization or referral to an OB/GYN provider.
  5. Coverage of Clinical Trials
    • Requires plans that are not grandfathered to cover the cost of clinical trials.
    • This will also likely increase cost of future plans.

All plans including Grandfathered plans will be subject to:

  1. Uniform explanation of coverage (summary of benefits)
    • Requires a new summary of benefits meeting specific criteria be given to the employee at various times during the course of the year.
  2. Notification of availability of the exchange and subsidies
    • Employers will have to provide a notice in 2013 to all employees informing them of the existence of the new exchanges which go into effect in 2014
    • The notice will have to advise the employee they may be eligible for a subsidy under the exchange.
  3. No Limitation on lifetime and annual limits
    • All plans by 2014 will remove annual limits on what the Department of Health and Human Services deems as an essential benefits.
    • All plans will also have no lifetime limit on services. Typically today you will find a lifetime maximum of 3 million to 5 million. This will go away.
  4. Prohibition on recisions
    • Carriers can no longer cancel your individual or group policy except in the case of fraud or intentional misrepresentation
  5. Limitations on waiting periods
    • Group insurance plans can not have a waiting period of more than 90 days for newly hired employees to be added to the plan.
  6. Coverage of adult children
    • Children will now be allowed to remain on their parents group policy up till the age of 26.
    • This has been expanded to include children who are married and who do not necessarily live in the same household as the parents.
    • What is interesting, is this does not extend to the adult children's children (or the grand children of the employee)
  7. Pre-Existing Conditions
    • Essentially makes all plans guaranteed issue with no pre-existing exclusions and guaranteed renewable.

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Count "All" Employees When Determining Small Employer Exception to COBRA!

Never rely on the number of employees enrolled in the employer's heatlh plan for the purpose of determining COBRA's Small Employer Exception.  Remember to "always" count "all" employees.  For instance:

- Count All Employees, Not Just Plan Participants
- Count Only Common-Law Employees
- Fractional Rule for Counting Part-Time Employees
- Employees of Related Employers (and Successor Employers)
- Employees Outside the United States

Follow up:

Count All Employees...Not Just Plan Participants

COBRA's small employer exception focuses on the number of employees working for all employers maintaining the plan, not just on the number of employees covered by the group health plan. This means that the plan must count all employees, including both full-time and part-time employees!

Count Only Common-Law Employees

Under the IRS COBRA regulations, only common-law employees are counted as "employees" for purposes of the small employer exception.  Common-law employee status is not determined on the basis of a worker's title or job description but instead depends on several factors enumerated by the IRS and the courts.

Therefore, a worker who is thought to be an independent contractor or a self-employed individual might in fact be common-law employees if enough factors are present indicating an employment relationship with an organization (such as that organization's right to direct and control the manner in which the individual performs services).

Groups not counted as employees include self-employed individuals, independent contractors, and members of a corporate employer's board of directors, unless of course these individuals are also common-law employees of the employer or of any member of the employer's controlled group.

One group of workers that might be overlooked in this connection are workers providing services through a leasing arrangement. Frequently, these workers are actually common-law employees of the organization for which they are performing services (the recipient) even though they may be getting paychecks (and benefits) from the leasing organization (sometimes called a professional employer organization or PEO). Workers providing services through a leasing arrangement who qualify as common-law employee of the recipient should be counted.

Fractional Rule for Counting Part-Time Employees

The IRS COBRA regulations create a special rule for counting part-time employees for the small employer exception. Under the regulations, a part-time employee counts as a fraction of an employee. The fraction is equal to the number of hours that the part-time employee works divided by the number of hours that an employee must work in order to be considered a full-time employee. The number of hours that must be worked for an employee to be considered full-time is determined in a manner consistent with the employer's general employment practices (but cannot be more than eight hours a day or 40 hours a week). An employer may count employees for each typical business day or may count employees for a pay period and attribute the total number of employees for that pay period to each typical business day that falls within the pay period.  An employer also may count part-time employees on an aggregate basis (rather than on an individual basis) by totaling the hours worked by part-time employees and dividing that sum by the number of hours required for one worker to be considered working full-time. The employer must use the same method for all employees and for the entire year for which the small employer plan determination is made.

Employees of Related Employers (and Successor Employers)

For purposes of determining whether an employer has 20 or more employees, all employees of all related employers under common control must be counted.

Employees Outside the United States

When counting employees, one should count not only employees in the United States, but also employees outside the United States. For example, an employer with 500 employees in China and ten employees in the United States does not satisfy the small employer exception and is subject to COBRA. The Second Circuit reached a similar conclusion with respect to the Age Discrimination in Employment Act (ADEA), which applies to an employer "who has twenty or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year." The court held that foreign employees employed outside the United States are counted for purposes of the ADEA's 20-employee requirement. And the Ninth Circuit concluded that non-U.S. citizens should be counted toward the employee minimum under Title VII of the Civil Rights Act of 1964, which applies to employers with 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding year. (2)

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The latest from Gallup
  • Americans remain divided on health care reform. In June, 49 percent of those surveyed by Gallup said say passage of health care reform was a good thing; 46 percent said it was a bad thing (a statistically insignificant shift from April, when 45 percent thought it was good and 49 percent thought it was bad).
  • 50 percent of Americans are in favor of Congress’ repealing all or much of the law.
  • Views of the law remain highly partisan. Independents lean against, 51 percent to 43 percent, which has not changed since April.
  • Among age groups, seniors are the most opposed: 60 percent call passage of the bill a bad thing, up from 57 percent in April.

To see the results of other polls, go to Real Clear Politics. (3)

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Administration Unveils "HealthCare.Gov" Website With Data On Government, Private Health Plans

The Washington Post (7/1, Aizenman) reports, "A Web site that the Obama administration unveiled June 30th, aims to give everyone the full range of public and private health insurance plans available to them based on their individual circumstances." Consumers who use "will not need to divulge personal information," although "the site asks a series of questions...then uses a person's answers to produce a detailed list of potential coverage options from among 5,500 private plans as well as the full array of federal and state programs such as Medicare and Medicaid." Commenting on the site, HHS Secretary Kathleen Sebelius said, "This is an incredibly impressive consumer tool. ... This information can give folks choices that they just didn't have any idea they had available to them." (4)

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Survey Shows Most Consumers Successfully Negotiated Medical Bills

The Chicago Tribune (6/25, Elejalde-Ruiz) notes that although "consumers will readily fight an incorrect cable or phone bill, they're often more reluctant to take on a suspicious medical bill." But according to a "May poll of 1,237 Angie's List members, it's worthwhile to fight." The survey found "74% of members who did negotiate were successful." Angie's List founder Angie Hicks says that "people can lower their healthcare costs through negotiation, price shopping and catching billing errors." She also recommends consulting "the 'Healthcare Blue Book' beforehand," which provides the "average compensation that medical providers accept from insurers for services ranging from surgery to dental and eye-care procedures." Calling the Blue Book "a great tool," Hicks admits Angie's List is "partnering with them, and will have a service in place" this summer. (5)

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WASHINGTON BUREAU -- Two Republican senators say the Affordable Care Act is failing to address the top health care concerns of the American people.

Sen. Tom Coburn, R-Okla., and John Barrasso, R-Wyo. – GOP lawmakers who are both physicians –  have combed through government budget analyst reports, think tank reports and other documents for what they say is evidence that the ACA – the legislative package that includes the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act – will hurt patients and employers, produce unintended consequences, and, in some cases, do less than Democratic supporters have promised.

The table of contents, headed “Prognosis: Grim Consequences,” includes chapters with titles such as “Health Costs Skyrocket” and “Millions Could Lose Their Current Health Plan.”

In a section on the new Pre-existing Condition Insurance Plan (PCIP) program, which is supposed to help uninsured people with health problems get access to affordable, subsidized health coverage before a ban on medical underwriting takes effect in 2014, Coburn and Barrasso cite estimates from the chief actuary of the Center for Medicare and Medicaid Services that the $5 billion in program funding will run out in 2011 or 2012.

“According to one report, between 5 million and 7 million individuals with pre-existing conditions may be eligible for the new risk pool, while only 200,000 would be able to be covered under existing funds,” Coburn and Barrasso say. “The question then becomes: What would happen to the patients enrolled in the program when the money runs out?”

One possibility is that PCIP managers will have to start rejecting applications from thousands of Americans with preexisting conditions as early as 2011, and “the other possible scenario is the administration and Congress could pass the buck onto the states,” Coburn and Barrasso says. “This may be the reason why 20 states are already opting out of participating in the new high risk pool program.”

Coburn and Barrasso predict in another chapter, on expanded Form 1099 tax reporting requirements, that complying with the requirements could force a typical small business to spend an additional $6,000 per year on accounting services.

Coburn and Barrasso also repeat earlier Republican predictions that the new health care laws will make health care more expensive, not less expensive. (6)

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Aetna Chairman and CEO Ronald Williams says that a side effect of the health-care reform bill is that costs will increase.

Appearing last week on The Wall Street Journal's online Marketwatch program, Aetna Chairman and CEO Ron Williams gave a very substantive interview during which he provided a number of key insights into the continuing health care cost conundrum and the "unfinished business" of health care reform. Williams explained that the Patient Protection and Affordable Care Act (PPACA) contains many beneficial provisions but that it will not help solve the problem of rapidly rising costs any time soon. "In the short term, health care costs are going up as a result of some of the increase in benefits that are being provided, which is great for people. But the absolute fact is it will cost more," he said. He also talked about the need for greater use of health information technologies and modifying current payment systems. (7)

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How does Carter's Benefits help ?
Carter's Benefits has immediately begun to notify clients of the changes as they occur. We will continue to stay on top of changes in this industry. In a consultative role, Eddie Carter has begun hosting live seminars to update employers and Human Resource Managers on these changes. If you would like to host a meeting with your local community or civic organization, please contact me for details.

Eddie Carter,
Benefit Consultant


(1) NAHU Newswire, August 05, 2010 "Legisltion and Policy"

(2) The TCO Compliance Blog, March 20th, 2010 posting titled "Count "All Employees When Determining Small Employer Exception to COBRA!"

(3)"The Latest from Gallup" appeared in Humana Connections newsletter "The reform beat goes on" dated July 7, 2010

(4) NAHU Newswire, July 01, 2010 "Also in the News"

(5) NAHU Newswire, June 25, 2010 Consumer Directed Healthcare News

(6) Republicans Keep Up Attacks on New Health Laws  from National Underwriter published July 7, 2010

(7) July 30, 2010 online issue of Market Watch, Wall Street Journal.

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If you have questions or would like more information please give us a call or send us an email.  Our email address is Questions@CartersBenefits.Com

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