President Obama signed the Patient Protection and Affordable Care Act on March 23, 2010 and also signed the Health Care and Education Reconciliation Act of 2010 on March 30, 2010 (together, the "Acts"). The Acts provide a sweeping overhaul to the health care system in the United States. They were drafted to implement health care reform over a period of time, with certain key provisions becoming effective for some group health plans as early as September 23, 2010. This article will focus on those provisions; future EmployNews articles will cover the provisions that will be implemented at a later date.
The following provisions of the Acts will affect both fully-insured and self-insured group health plans not subject to the grandfather rule (described below) and will be effective for plan years that begin after September 23, 2010:
Dependent Coverage Until Age 26 - The Acts require group health plans that cover dependents to provide coverage for children until they reach age 26, regardless of student status or marital status. However, until 2014, coverage need not be offered if a dependent is eligible to enroll for coverage under a group health plan offered by the dependent's employer.
Restrictions on Annual and Lifetime Limits - Group health plans may not impose lifetime limits on coverage or "unreasonable" annual limits on the aggregate dollar value of benefits for any plan participant or beneficiary. For plan years beginning on or after January 1, 2014, group health plans may not impose any aggregate annual limit. However, plans may still apply per participant and per beneficiary lifetime and annual limits with respect to specific covered benefits.
Restrictions on Preexisting Conditions - The Acts mandate that group health plans may not impose any preexisting condition exclusions for eligible children under age 19. In the future, this mandate will be expanded, and for plan years beginning on or after January 1, 2014, plans may not impose any preexisting condition exclusions for any individual.
Prohibition on Retroactive Cancellation of Coverage - Group health plans may not retroactively cancel a participant's coverage once the participant is enrolled in the plan unless the individual has engaged in fraud or made an intentional misrepresentation of fact.
Nondiscrimination Testing - The existing Internal Revenue Code rules for nondiscrimination testing apply only to self-insured plans. The Acts require that the same nondiscrimination tests apply to fully-insured health plans in an effort to curb plans aimed at insuring only high ranking individuals inside an organization.
Preventative Care Benefits - The Acts require that group health plans offer certain preventative care benefits, such as immunizations and breast cancer screening, without cost to participants.
W-2 Reporting of Health Benefits - Employers will be required to report the value of health benefits on Form W-2 effective for the first taxable year after December 31, 2010.
While these provisions go into effect for some plans as of September 23, 2010, the Acts include a significant exception for group health plans that were in existence upon enactment of the Acts. Such "grandfathered" plans are permanently exempt from many requirements under the Acts, including the following that were discussed above:
- restrictions on annual and lifetime limits;
- prohibition on retroactive cancellation of coverage;
- dependent coverage until age 26;
- nondiscrimination testing
- external review of claim denials and appeals; and
- restrictions on preexisting conditions.
Employers should acquaint themselves with the changes that will impact them in the short-term future, and work to ensure that their plans will comply with such requirements. Additionally, employers should continue to review guidance as it is released to learn which health care changes will affect them and their plans in upcoming years. As further guidance is provided and future effective dates approach, we will continue to keep employers apprised of the changes brought under the Acts.