Frequently Asked Questions

Annual limits

What are restricted annual limits and lifetime maximums under the PPACA?

Health care reform ends the lifetime limit on the cost of essential health benefits, known as the lifetime maximum limit. The law requires plan's starting on or after September 23, 2010 to follow the rule. The lifetime maximum rule does not apply to grandfathered individual plans.
The law also ends annual cost limits on the value of essential health benefits, known as annual dollar limits.Health care reform raises the annual dollar limit each year for all employer and new individual plans:

• Plan's beginning September 23, 2010 have a limit of $750,000
• Plan's starting September 23, 2011 have a limit of $1.25 million
• Plans effective on September 23, 2012 have a limit of $2 million

On January 1, 2014 the limits end for most plans.

 

The PPACA does allow some limits. There can be a limit on the cost per visit per hour and on the number of visits over a period of days. For example, a person can be limited to three annual visits, but with no cost limits per visit.

Some people may no longer be on their employer’s group health plans because they are at the plan’s lifetime maximum limit. This may also be true of dependents. The PPACA allows these people to rejoin plans during the open enrollment period on or after Sept. 23, 2010.

 

Health care reform allows these limits for non-essential health benefits.

 

Read more about annual limits

• Essential health benefits
• Sample special enrollment (PDF)
• Extending annual limits guidance alert

 

More questions about annual limits

• Dental benefit maximums
• Waiver process/special consideration

Appeals

What does the PPACA say about appeals?

Health care reform says that the appeals process must include an external appeal. The review must follow a state’s external review law. Or, if there is no state external review law, insurance carriers must have independent organizations that meet federal rules review their appeals. Cigna is in compliance with the federal external review rules.

 

Read more about appeals

• Claims and appeals amendment alert
• Internal and external claims and appeals amendment alert

Automatic enrollment

When does the PPACA automatic enrollment requirement begin?

Automatic enrollment begins January 1, 2014. However, the implementation date is unknown until The Secretary of Health and Human Services Secretary issues a regulation on this provision.

 

Health insurance reform requires that employers with more than 200 employees automatically enroll new full-time employees in coverage, with the opportunity to opt out if they demonstrate coverage from another source. Employers must continue to enroll current employees and are no longer able to require annual employee affirmative enrollments.

Behavioral health

How will the PPACA affect Cigna's behavioral health products and services?

The PPACA requires behavioral health services be included as essential health benefits, which are being defined by the Secretary of Health and Human Services. The law applies the federal mental health and substance abuse parity law to qualified health plans offered through the state insurance exchanges as well as those in the individual and small group market beginning in 2014.

 

Parity in the state insurance exchanges will not apply to individual policies or small groups (50 employees or less).

 

Health insurance reform legislation amended the 2008 Public Health Service Act, effective as of October 3, 2009, and extended mental health parity to individual insurance policies. There is no effective date for this change, so it is unclear when the extension on individual policies becomes effective.

Cadillac tax

What is the Cadillac Tax that begins in 2018?

The PPACA puts a 40 percent tax on employers that provides rich benefits to some employees.

 

The Consolidated Omnibus Budget Reconciliation Act (COBRA) rule determines benefits that should be taxed. This rule accounts for:

• all employer-sponsored coverage
• premiums
• flexible spending accounts
• health reimbursement accounts
• health savings accounts
• supplementary coverage

The employer must calculate the tax and report it to the plan administrator, who pays the tax to the Internal Revenue Service.

 

Beginning in 2018, health care reform limits benefits to $10,200 for single person plans and $27,500 for other plans, such as family plans. There are higher benefit limits ($11,850 for individual coverage and $27,500 for other coverage) for retirees and for people in high risk jobs. Beginning in 2019, PPACA matches the benefit limit to the urban consumer price index. Vision, dental, accident, disability and long-term care benefits are not included in the limits under the Cadillac Tax rule.

Read more about Cadillac tax

• Employer mandate

Clinical trials

Does the PPACA require coverage of clinical trials?

Yes. The legislation requires coverage of clinical trials beginning January 1, 2014. However, the requirement does not apply to grandfathered plans.

 

While final regulations are a few years away, we expect the financial impact to be relatively small as many of the expenses associated with clinical trials are already covered.

 

Read more about this topic

• Grandfathered status

Collective bargaining agreements

If employees are covered by a collective bargaining agreement, do employers have to follow health care reform rules, or is the plan grandfathered until the next collective bargaining agreement? Also, how does the law impact multiple unions in one benefit option?

Collectively bargained agreements must follow reform rules. If these plans were in place when the law passed on March 23, 2010, they are a grandfathered plan. If a grandfathered plan gets rid of some benefits, increases costs or reduces what employers pay than it would lose its status and have to follow health care reform rules.

 

All of the PPACA rules that apply to grandfathered plans also apply to grandfathered collectively bargained plans for all plans beginning on or after September 23, 2010. The law also allows self-insured plans with collective bargaining agreements to remain grandfathered under the same rules.

 

The PPACA says insured collectively bargained plan may maintain grandfathered status until the last of their agreements in place before March 23, 2010 ends. PPACA rules then apply after the final termination date, and then all plans must comply with health care reform.

 

If there are three collective bargaining agreements under one plan, then the PPACA will not apply until the last of the three agreements ratified prior to March 23, 2010 ends.

Read more about collective bargaining agreements

• Grandfathered plans
• Grandfathered status amendment alert
• Interim final rule for grandfathered health plan provisions alert

Dental benefit maximums

Will dental annual dollar maximums and orthodontic lifetime dollar maximums be removed from dental policies in 2014?

If a dental-only policy is separate from a medical plan, PPACA rules do not apply. If the dental plan is part of an employee medical plan and defined as an essential health benefit, but is not an excepted benefit under Health Insurance Portability and Accountability Act, known as the health insurance rule, PPACA rules may apply to dental coverage.

 

Health insurance rules consider dental benefits as excepted benefits. When plans have dental/vision benefits on a separate policy, certificate or contract the health insurance rule treats dental/vision benefits as excepted benefits. They would also treat dental benefits as excepted benefits if the coverage is not a key part of a group health plan. If employees can decline dental benefits when they enroll for medical coverage, or if they have to pay an additional monthly premium or contribution for those dental benefits, than the dental benefits are not considered a key part of those medical plans.

 

If dental benefits are not part of a medical plan, annual limits and lifetime maximum limits could apply.

 

Read more about dental benefit maximums

• Essential health benefits

Dependent coverage

What are the rules for extending dependent coverage to age 26?

The PPACA requires all plans beginning on or after September 23, 2010 to give dependent coverage and benefits without limits to adult children until their 26th birthday*.

 

The PPACA Extended Dependent Coverage rule applies to all health insurance plans, including medical, behavioral and pharmacy benefits. The PPACA does not apply to Health Insurance Portability and Accountability Act, excepted benefits, which are dental/vision benefits offered separately from medical health benefits.

 

Health care reform also requires employee health plans to reimburse medical care expenses to any covered dependents as long as they do not reach age 27 before the end of the tax year. Health care reform does not require plans to cover any dependents of a covered dependent.

 

 The PPACA does not explain what a dependent is.However, the rule changing the tax code to update it to health care reform law says a child is an individual who is a son, daughter, stepson, stepdaughter or eligible foster child of the taxpayer. Student, military or marital status does not change child status.

 

Health care insurance reform says that plans must treat adult dependents the same as all other dependents. Employers can’t charge more for adult dependents, according to Health and Human Services rules.

 

*Some states require that insurance policies provide dependent coverage beyond age 26; these rules and any associated restrictions apply after age 26.

Can people use their flexible spending account, health reimbursement account and health savings account funds for dependents up to age 26?

Health care reform does allow people to use money from their health reimbursement account and flexible spending accounts on dependent children (up to age 26, or when their plan coverage ends, after their birthday).

 

Giving flexible spending account coverage to dependents may be an employer’s option under health care reform law. We advise clients to check with their legal counsel.

 

People may not use money from their health savings accounts for their covered dependents, unless their federal income tax returns also list the dependents. If the adult dependent child can’t be listed as a tax dependent, any HSA distributions for the dependent would be taxable and subject to an Internal Revenue Service penalty. In this situation, the adult child may open his/her own health savings account and contribute up to the plan’s allowable family maximum contribution.

 

Read more about dependent coverage

• Dependent coverage
• Sample special enrollment (PDF)

Doctor choice

What does the PPACA say about choosing a primary care physician (PCP)?

The PPACA requires that health insurance plan customers be allowed to designate any available participating PCP or pediatrician as their health care professional. Plans cannot require a referral for OB-GYN care and women can designate their specialist as their PCP.

Early Retiree Reinsurance Program

What is the PPACA Early Retiree Insurance Program?

The PPACA created the Early Retiree Insurance Program, a temporary program, for employers providing health insurance coverage to retirees over age 55 who can’t get Medicare. The government offers employers a tax break for a portion of health benefits costs they give to retired employees ages 55 and over and their spouses, surviving spouses and dependents that can’t be on Medicare.

 

The program is over when the federal funds set aside are gone. The Department of Health and Human Services announced on April 1, 2011 that it could no longer accept applications for the program after May 5, 2011. Early Retiree Insurance Program funds will run out in late 2011 or early 2012.

 

Health and Human Services requires all program reimbursement requests to have a claim listing. Cigna is designing the reports needed. The PPACA says a claim that can be reimbursed is between $15,000 and $90,000, adjusted annually per the consumer price index. Up to 80 percent of reimbursements made can be reimbursed. Employers must use the funds from the tax break to start Health and Human Services -certified programs that lower costs for plan participants with chronic and high-cost conditions.

Emergency care

What is the emergency care coverage for in-network versus out-of-network for grandfathered plans?

For non-grandfathered health insurance plans, the PPACA requires cost sharing for emergency services obtained either in-network or out-of-network to be equivalent.

 

There is no higher out-of-network cost share for emergency services and health plans and insurers will not be able to charge higher co-pays or coinsurance or require prior authorization for emergency services obtained out of network. This policy applies to all individual market and group health plans, except grandfathered plans.

Employer mandate

What are the penalties if employers do not offer coverage beginning in 2014?

Employers are not required to provide coverage. However, large employers, which employ an average of 50 full-time employees or the equivalent, are subject to a penalty if one full-time employee purchases insurance coverage through a state exchange and qualifies for federal premium assistance. The annual penalty is $2,000 per full-time employee after the first 30 employees.

 

If a large employer offers insurance coverage, but employees can’t afford the coverage because their contribution exceeds 9.5 percent of household income or the plan does not give what the PPACA defines as minimum value, the employer is subject to a penalty. The annual penalty is either $3,000 for each employee receiving premium assistance or $2,000 per full-time employee after the first 30 employees, whichever is less.

 

The provision states that any "bona fide resident of any possession of the United States" shall be "treated as having minimum essential coverage." If individuals residing in a territory (Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa) are deemed to have minimum essential coverage, they may not be eligible for federal premium assistance to purchase exchange coverage (if established in a territory), and this may affect their employer’s decision on whether to provide coverage.

 

Read more about employer penalties

• Employer mandate

Enrollment waiting period

What is the PPACA rule on enrollment waiting periods?

The PPACA prohibits employers from imposing enrollment waiting periods that exceed 90 days beginning January 1, 2014. This provision applies to both grandfathered and non-grandfathered plans.

Exchanges

What is an exchange?

The PPACA requires states to create health care insurance exchanges by January 1, 2014. They will be a new way for individuals and small businesses to purchase health insurance. They can be set up as an Internet portal.

 

Exchanges will offer individuals standard health plans and five benefit levels (bronze, silver, gold, platinum and catastrophic). The cost of establishing state exchanges is expected to reach $4.4 billion. All state exchanges must be self-sustaining by 2015.

 

Under PPACA, states can let the federal government set up exchanges for their people.

 

Read more about exchanges

• Exchanges

More questions about exchanges

• Individual mandate

Federal Premium Assistance Tax Credit

What is the Federal Premium Assistance Tax Credit?

Beginning in 2014, a Federal Premium Assistance Tax Credit is available to eligible individuals to subsidize the cost of insurance coverage purchased through a state exchange. In order to be eligible, the individual’s household income must be between 100 percent and 400 percent of the federal poverty level, and the individual must either:

• Not be offered minimum essential coverage by an employer, or
• Be offered minimum essential coverage, but the coverage is (i) unaffordable (i.e., the cost of coverage exceeds 9.5 percent of the employees household income), or (ii) does not provide the required minimum actuarial value (the plan’s share of the total allowed costs of benefits is less than 60 percent).

Current estimates indicate that 19 million people who secure healthcare coverage through a state insurance exchange are likely to be eligible for the subsidy.

Read more about this topic

• Health care exchanges

More questions about this topic

• Free choice vouchers repealed
• Individual mandate

Flexible spending accounts

How are flexible spending accounts affected by PPACA?

Health care reform changes how most over-the-counter drugs are now paid for. The law now requires a prescription for health saving and spending account reimbursements. Flexible spending accounts and health reimbursement accounts, which cover 213d expenses, and health savings accounts rules all change with health care reform law.

 

The PPACA affects flexible spending accounts the most. The debit cards may no longer be used to purchase over-the-counter drugs or medicines.

 

Most retailers can identify items that could be reimbursed at the time of purchase, so the flexible spending account debit cards will pay for only the eligible items. Individuals must pay for over-the-counter drugs and medicines another way.

 

If you have a flexible spending account, submit a doctor’s prescription and store receipt with the required reimbursement request form. A person can still use remaining FSA funds from the prior year to pay for eligible items, up to two and a half months after the end of the preceding plan year. Insurance carriers require people to keep prescriptions and receipts as documentation required for reimbursement.

 

IRS Notice 2010-59 gave retailers until January 15, 2011 to update their systems. If a retailer did not follow the rule by the deadline, FSA debit cards will not work at their location.

If a person has a prescription can he or she purchase over-the-counter drugs with a flexible spending account debit card?

If a person has a doctor’s prescription for an over-the-counter medication, and would like to use the flexible spending account, most retailers will need a different form of payment. That person must submit a reimbursement request form with the register receipt and prescription.

 

However, the Internal Revenue Service released clarification Notice 2011-05 on December 22, 2010, which says that if a prescription for an over-the-counter drug is filled by a licensed pharmacist and has an Rx number, then a pharmacy may process the transaction on the debit card as a prescription item. The pharmacy must hold a record of the Rx number, the name of the purchaser (or the person named on the prescription) and the date and amount of the purchase. These records must be available to the employer or the flexible spending account administrator when requested. Some pharmacies may not dispense an over-the-counter drug as a prescription item, so it won’t process on the flexible spending account debit card.

 

Because the way pharmacies handle over-the-counter prescriptions varies, we recommend you submit receipts and prescriptions for prescribed over-the-counter and medicine reimbursement through Cigna’s direct submit process.

 

The PPACA may allow coverage of your dependent’s eligible expenses. Speak with legal counsel to determine if and when your flexible spending account plan may provide coverage of a dependent’s expenses.

Flexible spending accounts contribution cap

How does the PPACA affect flexible spending account annual contributions?

Beginning in January 13, 2013, health care reform limits an individual’s annual maximum contributions to $2,500 for flexible spending accounts. The amount will be adjusted for inflation beginning in 2014.

 

The Department of Health and Human Safety is expected to decide how often the cap will be adjusted and when adjustments will take place.

Does the contribution cap impact the dependent care flexible spending account?

No. Health care reform impacts only the flexible spending account annual contribution limit. Dependent care contributions remain capped at $5,000 per year maximum.

How will health care reform affect flexible spending account contribution caps for flexible spending accounts that don't run on a calendar year?

The PPACA caps flexible spending account annual contributions to $2,500 for taxable years beginning after December 31, 2012. If a plan year ends sometime after this start date, all 2013 contributions count toward the new cap on contributions.

Free choice vouchers repealed

What is the free choice voucher?

PPACA required employers beginning in 2014 to provide financial subsidies for employees with income less than 400 percent of the Federal Poverty Level to purchase health coverage from a state insurance exchange, if the employer’s plan was not affordable. Employers offering coverage would have been required to provide any employee meeting the income requirement a free-choice voucher if the employee’s cost of coverage under the employer-sponsored plan was more than 8 percent, but less than 9.8 percent of such employee’s household income.

 

Congress repealed the PPACA free choice voucher provision on April 15, 2011.

 

Read more about this topic

• PPACA free choice vouchers repealed

More questions about this topic

• Individual mandate

Grandfathered plans

What are grandfathered plans?

Any plan (insured or self-insured) in effect on March 23, 2010, the date the Patient Protection and Affordable Care Act (PPACA) became law, is treated as a grandfathered plan. Plans established after PPACA cannot be grandfathered.

 

The advantage of being grandfathered is that these plans do not have to follow some health insurance reform provisions, such as the requirement to cover all preventive care services with no cost-sharing, for as long as they remain grandfathered.

 

The Departments of Health & Human Services, Labor, and Treasury developed rules for maintaining grandfathered status. The rules identify the types of benefit reductions or employer contribution reductions that will trigger a loss of a plan’s grandfather status. A change of insurance carriers, TPAs or switching funding type (insured to self-insured or vice versa) does not affect a plan’s grandfather status.

 

For a group health plan to decide to stay grandfathered, the plan must weigh the financial result of following health reform rules against being able to make cost-effective benefit plan changes.

 

Insured collectively bargained plans are subject to a special grandfathering rule. They do not have to follow any PPACA health insurance reforms until the last of the collective bargaining agreements under the plan in effect on March 23, 2010 ends. At this point, the PPACA’s other grandfathered rules would apply.

 

Read more about grandfathered plans

• Grandfathered plans

Health reimbursement accounts

How are health reimbursement accounts affected by PPACA?

Health care reform impacts purchases of most over-the-counter drugs that now require a prescription for reimbursement. Flexible spending accounts and health reimbursement accounts, which cover 213d expenses, as well as health savings accounts are impacted.

 

If you have a health reimbursement account that includes over-the-counter drugs, you must submit your doctor’s prescription and the store receipt along with a reimbursement request form. With the PPACA’s extension of Dependent Coverage up to age 26 rule, your health reimbursement account can cover eligible dependent expenses for children up to age 26, or when his/her coverage ends.

Health savings accounts

How are health savings accounts affected by PPACA?

Health care reform impacts purchases of most over-the-counter drugs—they now require a prescription for reimbursement. Flexible spending accounts and health reimbursement accounts, which cover 213d expenses, and health savings accounts are all impacted.

 

Unlike flexible spending account debit cards, eligible expenses purchased with your health savings account debit card will not be verified at the register. To avoid incurring the Internal Revenue Service Health Savings Account Distribution Tax Penalty it’s important to understand which expenses are covered.

 

While the new law applies to health savings accounts, people are responsible to use health savings accounts debit cards properly. Unlike flexible spending account debit cards, eligible expenses purchased with an health savings account debit card will not be verified at the register. Therefore, it is important individuals understand the new rules to avoid building up tax penalties.

Does the PPACA allow health savings accounts to cover dependent expenses?

As part of health care reform, the PPACA does not allow you to cover eligible dependent expenses with health savings accounts when the dependent is not listed on your federal income tax return.

 

If your adult child dependent does not qualify as a tax dependent, any health savings accounts payments for that dependent’s expenses would be taxed under the Internal Revenue Service Health Savings Account Distribution Tax Penalty. However, your adult dependent child may open his/her own health savings accounts and contribute up to your medical plan’s allowable family maximum.

 

People with health savings accounts must keep their prescriptions and receipts and submit them for reimbursement. Individuals should always keep a copy of these documents. If the Internal Revenue Service audits a tax return, it requires copies of all the prescriptions and receipts related to health savings accounts.

Health savings penalty increase

Is the Internal Revenue Service increasing the penalty on health savings account distributions for non-eligible expenses?

Yes. Health care reform increased the tax penalty on health savings account payments that are not used for eligible expenses from 10 percent to 20 percent of the payment amounts.

 

The PPACA does not allow you to cover eligible dependent expenses with health savings account when the dependent is not listed on your federal income tax return. If your adult child dependent does not qualify as a tax dependent, any health savings account payments for that dependent’s expenses would then be taxed under the Health Savings Account Distribution Tax Penalty.

 

Your adult dependent child could open his/her own health savings account and contribute up to your medical plan’s allowable family maximum.

If a health savings account does not run on the calendar year, does the Internal Revenue Service penalty increase on the health savings account's renewal?

No. The penalty is tied to the Internal Revenue Service tax year. The penalty increased to 20 percent beginning January 1, 2011. It is the same no matter what the previous plan year-end date is.

Individual mandate

What is the PPACA rule called the individual mandate?

The PPACA imposes tax penalties on individuals who do not maintain minimum essential coverage beginning January 1, 2014 and is referred to as the individual mandate. The penalty is on a sliding scale for three years and is 1/12th of the greater of:

• For 2014, $95 per uninsured adult in the household or 1 percent of the household income over the filing threshold
• For 2015, $325 per uninsured adult in the household or 2 percent of the household income over the filing threshold
• For 2016, $695 per uninsured adult in the household or 2.5 percent of the household income over the filing threshold

The penalty will be 1/2 of the amounts for individuals under the age of 18. The following exceptions to the penalty for not maintaining minimum essential coverage apply to individuals.

• Religious reasons
• Not lawfully present in the United States
• Incarceration
• Inability to afford coverage where required contributions toward coverage exceed 8 percent of household income
• Income below 100 percent of the poverty level
• Hardship waiver obtained
• Not covered for a period of less than three months during the year

The provision states that any "bona fide resident of any possession of the United States" shall be "treated as having minimum essential coverage." If individuals residing in a territory (Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa) are deemed to have minimum essential coverage, they may not be eligible for federal premium assistance to purchase exchange coverage (if established in a territory), and this may affect their employer’s decision on whether to provide coverage.

 

Read more about this topic

• Exchanges
• Individual mandate
• Federal court upholds individual mandate

More questions about this topic

• Exchanges
• Minimum essential coverage

International and expatriate plans

How does the PPACA affect international and expatriate plans?

Group health plans providing coverage for expatriates are must follow PPACA rules if insured by a licensed U.S. insurance company. However, because expatriate plans are structured differently and have more administrative costs separate Medical Loss Ratio reporting and calculation rules apply.

 

Read more about international and expatriate plans

• International health plans advocacy paper

More questions about international and expatriate plans

• U.S. territories

Long-term care

What does the PPACA say about long-term care?

Health care reform includes the Community Living Assistance Services and Support Act (CLASS), a voluntary federal program for buying long-term care/disability type coverage (community living assistance services). The program begins in October 2012.

 

It offers services and support to help people stay independent. People over age 18 that work will have the opportunity to be in the CLASS program. Go to healthcare.gov for more informatio.

Medicaid

How does the PPACA affect Medicaid eligibility?

Under the PPACA, Medicaid eligibility is extended to 133 percent of the Federal Poverty Level, which in 2011 is $29,726 for a family of four. Subsidies will be made available to families and individuals raising eligibility to 400 percent of the poverty level. At 400 percent of poverty - approximately $89,400 - subsidies would be phased out.

Medical loss ratio

What are the new minimum medical loss ratio (MLR) requirements?

Under the health care reform law, health insurance companies have to spend at least 80 percent (for individual and small group) or 85 percent (for large group) of their policy premiums in a given state on claims. If their medical loss ratio (claims over premiums) is less than the required percentage, the difference has to be paid to enrollees and group policyholders as a rebate. The payment is in proportion to their contribution to the cost of coverage.

 

Rebates will be based on the MLR for a group of policies known as a “block” or “cell.” A block is defined by:

 

• Segment: Individual, small group or large group
• Company: The legal entity issuing the coverage (e.g. Cigna Health and Life Insurance Company), and
• State: The state where the policy was issued

 

Limited medical plans and plans covering expatriates have a different formula for calculating the medical loss ratio. This is due to the unique features of these plans.

 

Carriers were required to complete additional quarterly reporting through 2011. After reviewing this additional reporting, HHS adjusted the calculation for limited medical plans through 2014 and extended the adjustment for expatriate plans indefinitely.

 

-National Association of Insurance Commissioners (NAIC) Recommendations-

Medicare Part D coverage gap

Does the PPACA eliminate the Medicare Part D Coverage Gap, known as the "Donut Hole," for Seniors?

The law gradually closes the gap between 2010 and 2020 by establishing progressively lower coinsurance for generic drugs and providing coverage for brand-name drugs (with discounts from pharmaceutical manufacturers) in the gap. By 2020, the donut hole is reduced to 25 percent coinsurance instead of 100 percent.

 

The federal Medicare Part D 28 percent drug subsidy has been maintained.

Medicare Part D subsidy

How has the PPACA affected the Medicare Part D subsidy?

Beginning on January 1, 2013, the tax-free 28 percent federal Medicare Part D retiree drug subsidy can no longer be deducted by an employer as a business expense. From a policy perspective, this was viewed as double dipping.

 

Under the PPACA, accounting rules require that any changes in retiree liabilities be reported in an employer's financial statements in the quarter in hich the changes were enacted. This is not a cash charge, but represents a charge to liability/deferred tax assets. It’s not clear yet what impact this rule will have on retiree health care programs, but it does prompt employers to consider how they may structure retiree plans in the future.

Minimum essential coverage

How can the minimum essential coverage provisions be satisfied?

Individuals satisfy the minimum essential coverage requirement with:

• Eligible employer-sponsored coverage
• Individual health plan
• Grandfathered health plan
• Medicare part A
• Medicaid
• Children's Health Insurance Program
• TRICARE (military health system)
• Veterans Affairs
• Other coverage as may be designated by the Department of Health and Human Services
• Coverage purchased through a state insurance exchange or the federal exchange

Read more about this topic

• Exchanges
• Individual mandate

Over-the-counter drugs

What are over-the-counter drugs and medicines?

Drugs and medicines that people can buy without a doctor’s prescription and that do not require a pharmacist are called over-the-counter drugs and medicines. However, for health care reform, some of these over-the-counter drugs and medicines will require a prescription for reimbursement from health saving and spending accounts. Some examples are acid controllers, allergy and sinus medication, pain relievers and stomach remedies.

 

Some over-the-counter items like insulin, bandages, medical supplies and vision care supplies are still eligible for reimbursement without a prescription.

Is an official prescription required, or may a doctor provide another form of documentation, such as a note of medical necessity?

The Internal Revenue Service in Notice 2010-59 says that a prescription is a written or electronic order for a medicine or drug that meets the state’s legal requirements in which the medical expense is paid and issued by a person legally-authorized to issue prescriptions.

What impact does health care reform have on what people can buy with their flexible spending accounts, health reimbursement accounts and health savings accounts?

Purchases of most over-the-counter drugs on or after January 1, 2011 require a prescription for reimbursement from flexible spending accounts, health reimbursement accounts and health savings accounts.

 

Unlike flexible spending accounts and health reimbursement accounts, Cigna does not check health savings accounts purchases. People are responsible to use the account only for eligible expenses, and prescriptions and receipts are needed when they complete federal income taxes. In the event of an audit, the Internal Revenue Service will require the documents.

 

The PPACA affects only over-the-counter drugs. Individuals may continue to buy eligible over-the-counter items without a prescription, such as insulin, bandages and medical supplies.

Which types of accounts are impacted by new rules for eligible over-the-counter drug expenses?

Purchases of most over-the-counter drugs require a prescription for reimbursement. Reform affects all flexible spending accounts and health reimbursement accounts which cover 213d expenses, and health savings accounts. The PPACA will affect flexible spending accounts the most. The debit cards can no longer buy over-the-counter drugs or medicines.

What if flexible spending accounts, health reimbursement accounts and health savings accounts are not based on calendar year?

Over-the-counter drugs purchased after December 31, 2010 require a prescription for reimbursement regardless of when the benefit-plan year started.

 

For example an FSA that runs from July 2010 to June 2011 should reimburse over-the-counter drugs purchased from July 1, 2010 through December 21, 2010 without prescriptions, but any over-the-counter drug purchased from January 1, 2011 through June 30, 2011 requires a prescription for reimbursement.

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Will the change in which over-the-counter drugs and medicines are eligible for reimbursement without a prescription drive up health care costs by encouraging more doctor visits?

Over-the-counter drugs products will still be a great value to people, even without the tax credits made possible by flexible spending, health reimbursement and health savings accounts.

 

Many individuals will likely not seek to be reimbursed for over-the-counter drugs and medicines-it could take time and effort it could take to request a reimbursement from the tax-deferred programs that require a prescription under reform.

 

People with many over-the-counter drug expenses, such as those managing long-term allergies, will likely seek a doctor's prescription. Over-the-counter prescriptions can be used for reimbursement up to one year from the date they are written. A good time to get an over-the-counter prescription is during an annual wellness exam or any scheduled visit.

Will physicians require individuals to go in for an office visit in order to receive prescriptions for over-the-counter drugs and medicines?

A doctor may choose to see a person before prescribing an over-the-counter drug. It's best if physicians know a person's medical history, along with learning if the person is taking any other drugs or medicines, before prescribing any other drug or medication.

 

Because prescriptions for over-the-counter medications could be up to one year from the date written, a good time to get a prescription is during an annual wellness exam or any scheduled visit.

Part-time employees

Does the PPACA provision known as the employer mandate extend to part-time employees?

The employer mandate applies to large employers, defined as employing an average of 50 full-time employees (i.e., employees working at least 30 hours per week) or equivalent.

 

Volunteers are not considered part-time employees under the new law. To determine whether an employer meets the PPACA's 50-full-time-employees threshold, take the aggregate number of hours worked by the part-time employees in a particular month and divide that total by 120 to determine the equivalent number of full-time employees. Add the full-time equivalent number to the total number of actual full-time employees to determine whether the employer meets the 50-full-time-employees threshold.

 

The calculation is used for the purpose of determining whether an employer is a large employer, and subject to the employer mandate. The provision does not apply to an employer’s part-time employees.

 

Read more about this topic

• Employer mandate

More questions about this topic

• Employer mandate

Pre-existing conditions

What does the PPACA say about pre-existing conditions?

Beginning with the first plan year beginning on or after September 23, 2010, all individual and group health insurance plans are prohibited from denying coverage to anyone under the age of 19 based on a pre-existing condition. The ban includes benefit limitations and coverage denials.

 

Beginning January 1, 2014 nobody can be denied coverage based on pre-existing conditions.

 

Grandfathered individual plans are exempt from this requirement.

Preventive care

How does the PPACA address preventive care?

All non-grandfathered plans must cover preventive care services and immunizations with no cost-sharing. Cost-sharing includes deductibles, coinsurance, copayments or any other payment required when care is received. Annual dollar limits are also prohibited for both non-grandfathered and grandfathered plans.

 

Read more about preventive care

• Final interim rules for coverage of preventive health services without cost-sharing
• Rules summary of coverage of preventive health services without cost-sharing
• Coverage of preventive services alert

More questions about preventive care

• Annual and lifetime maximums

What preventive care services are covered for women?

On August 1, 2011, HHS released an amendment to the Interim Final Regulations for preventive care. Beginning August 1, 2012, non-grandfathered plans will be required to cover the following additional preventive care services for women, with no cost sharing:

• Annual well-woman visits
• Screening for gestational diabetes
• HPV DNA testing for women 30 years and older
• Sexually-transmitted infection counseling
• HIV screening and counseling
• Food and Drug Administration (FDA)-approved contraception methods and contraceptive counseling
• Breastfeeding support, supplies and counseling
• Screening and counseling for interpersonal and domestic violence

Plans may impose cost sharing on brand name preventive drugs if a generic version is available and is just as effective and safe for the patient to use. Cost sharing would not be permitted on the generic drug.

 

Religious Exemption:
A religious employer is defined as an organization that meets all of the following criteria:

• The promotion of religious values is the purpose of the organization
• The organization primarily employs individuals who share the religious beliefs of the organization
• The organization serves primarily people who share the religious beliefs of the organization
• The organization is a nonprofit organization as described in the Internal Revenue Code Sections 6033(a)(1) and 6033(a)(3)(A)(i) and (iii).

 

These requirements are based on recommendations by the independent Institute of Medicine (IOM). There was an opportunity for public comments to be submitted by September 30, 2011.

 

On January 20, 2012, HHS issued a news release stating their intent to modify the August 2011 interim final regulations for preventive care. This will allow non-profit employers who, based on religious beliefs, do not currently provide contraceptive coverage in their insurance plans and do not qualify for the exemption, to delay compliance. These groups will be allowed an additional year, until August 1, 2013, to comply with the new requirement to cover contraceptive services.

 

All other non-grandfathered plans will be required to cover FDA-approved contraceptive services for plan years beginning on or after August 1, 2012, unless they qualify for an exemption as a religious employer.

 

Please visit hrsa.gov to read the Guidelines for Women’s Preventive Services*.

 

*Selecting this link will take you away from Cigna.com. Cigna does not control the linked site's content or links. Read the full details. 

Qualified health plans

What is a Qualified Health Plan?

A qualified health plan is coverage offered through a state insurance exchange, which will be open to individuals and small groups in 2014.

 

Under the PPACA, qualified health plans may not have pre-existing condition limitations or lifetime maximums or annual limits on the dollar amount of essential health benefits, which the Secretary of Health and Human Services will define.

 

Each state exchange's qualified health plans must cover essential health benefits at five levels: bronze (60 percent), silver (70 percent), gold (80 percent), platinum (90 percent) and young adult. Only an insurer or health maintenance organization with a license and in good standing in the state may offer exchange plans.

 

Read more about qualified health plans

• Exchanges
• Employer mandate

More questions realated to qualified health plans

• Exchanges
• Employer mandate

Rescissions (cancellation) of self-insured plans

What does the PPACA provision prohibiting rescissions (cancellation) mean for individual policyholders and covered individuals?

The PPACA bans rescission (cancellation) of healthcare coverage of an individual except for fraud or material misrepresentation provided the policy/plan provides for rescission.

 

The ban applies to individual policies and insured and self-insured group health plans (including grandfathered plans). If coverage is rescinded, the law requires 30 days advance notice to the enrollee.

 

The PPACA requirements are consistent with Cigna's prior business practice.

 

More questions about this topic

• Appeals

Self-insured client and ERISA

Does the Employee Retirement Income and Security Act (ERISA) shelter self-insured plans from provisions of the PPACA?

No. Health insurance reform provisions of PPACA are incorporated into ERISA, so they apply to all self-insured plans governed by ERISA.

Small business subsidy - small business healthcare reform

Who qualifies for the small business subsidy?

Under the PPACA small business subsidies are provided to businesses that employ the equivalent of 25 or fewer full-time employees (excluding the owner) with average annual compensation below $50,000 per employee.

 

For tax years 2010 through 2013, the maximum credit for a for-profit business is 35 percent of the employer's cost of health insurance, if the employer provides more than 50 percent of employee premium expenses. The credit is claimed on the employer's annual income tax return. If the small business is a not-for-profit, the maximum subsidy is 25 percent. The Internal Revenue Service will provide further information on how tax-exempt employers claim the credit.

 

Subsidies will increase in 2014 to 50 percent of the for-profit employer's cost of health insurance and 35 percent for the not-for-profit businesses. The subsidies will phase by 2014 for firms having 10 to 25 full-time workers, or the equivalent, with average wages between $25,000 and $50,000.

 

More questions about this topic

• Employer mandate
• Part-time employees

Summary of Benefits and Coverage

When will employers begin delivering the Summary of Benefits and Coverage to their employees?

On February 9, 2012, the Department of Health and Human Services’ Center for Consumer Information and Insurance Oversight (CCIIO) issued its final rule regarding the Summary of Benefits and Coverage provision. 

 

The rule applies to employees and dependents of domestic and international group and individual health plans. It applies to all fully insured and self-insured plans, regardless of grandfathered status. It does not apply to Medicare plans. 

 

Beginning September 23, 2012, health insurers and self-insured group health plans will be required to provide a standard Summary of Benefits and Coverage (SBC) document to all individuals enrolling in medical coverage. This includes mid-year enrollment for new employees and those experiencing a special enrollment event, and 'upon request' by other enrollees. 

 

Effective Dates

 

Group:

 

• For participants enrolling or reenrolling at open enrollment (including late enrollees) – prior to the first day of open enrollment beginning on/after 9/23/2012
• For participants enrolling other than through open enrollment (including newly eligible and special enrollees) – starting on the first day of the plan year beginning on/after 9/23/2012
• For SBCs provided to insured plan sponsors – immediately on 9/23/2012 upon application, when changes occur, at renewal and upon request

 

Individual:

 

• Immediately on 9/23/2012

 

Except for the 'upon request' requirement, the date by which the SBC needs to be provided is actually driven by the enrollment method:

 

The SBC must be provided as part of any written application materials that are distributed by the plan or issuer for enrollment.

 

If the plan does not distribute written application materials for enrollment, the SBC must be distributed no later than the first date the participant is eligible to enroll in coverage for the participant and any beneficiaries.

 

In the case of renewal or reissuance, if the issuer requires written application materials for renewal (in either paper or electronic form), it must provide the SBC no later than the date the materials are distributed. If renewal or reissuance is automatic, the SBC must be provided no later than 30 days prior to the first day of the new policy year

What is a "material modification" and how do employers communicate this to their employees?

A material modification is any change that an average participant would consider an important enhancement or reduction in benefits.

 

If a material change is made to a plan during the plan year that is not reflected in the most recent Summary of Benefits and Coverage, a notice must be provided at least 60 days before the effective date of the change.

 

For example, if a 1/1 renewal wants to make a change on 2/1, they will need to communicate it on 2/1 and make the change effective in April, which thus gives the requisite 60-day advance notice.

 

Note: This timing applies only to changes that become effective during the plan year.

Where can an individual customer go to view a sample of the Summary of Benefits and Coverage?

Please visit the U.S. Department of Labor's Employee Benefits Security Administration* site to view the documentation.

 

* Selecting this link will take you away from Cigna.com. Cigna does not control the linked sites' content or links. Read the full details.

What are some of the key differences between the proposed and final rules?

Differences include:

 

• If an individual customer is eligible for coverage but not yet enrolled, plans may send a paper postcard electronically or through regular mail to provide instructions for accessing the SBC online.
• "Best efforts" are allowed for describing terms that do not lend themselves well to plain language; e.g., tiering for prescriptions and providers.
• Coverage examples illustrative of how plans would cover treatment and services were reduced from three medical scenarios to two (Having a Baby and Managing Type 2 Diabetes).
• SBCs for group health plans may now be included with other documents (e.g., summary plan description) as long as it is "prominently displayed" at the beginning of the document.

Taft Hartley funds

Does PPACA impact Taft-Hartley Funds/Groups the same as employers?

Yes. However, a special grandfathering rule for insured collectively bargained plans says they do not have to follow all health insurance rules at the beginning. When the last of the plan’s collective bargaining agreements that started on or before March 23, 2010 ends, then all other grandfathered plans rules apply.

 

Many Taft-Hartley plans had annual limits on the dollar amount of essential health benefits and, like all other plans, could apply for a waiver from the ban on annual limits.

 

More questions about Taft Hartley funds

• Grandfathered plans

U.S. territories

How does the PPACA apply to U.S. territories, such as the U.S. Virgin Islands and Puerto Rico?

PPACA applies to the territories to the same extent that the Internal Revenue Services rules and the Public Health Service Act apply.

 

However, certain PPACA requirements have been modified for the territories (Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa). For example, the legislation provides funding to establish exchanges, but if a territory declines, the Medicaid funding cap will be increased for that territory.

 

The Individual Mandate provision states that any "bona fide resident of any possession of the United States" shall be "treated as having minimum essential coverage." If individuals residing in a territory are deemed to have minimum essential coverage, they may not be eligible for federal premium assistance to purchase exchange coverage (if established in a territory), and this may affect their employer's decision on whether to provide coverage.

 

Read more about this topic

• Exchanges
• Employer mandate
• Individual mandate

More questions about this topic

• Cadillac tax

W-2 reporting

What are the PPACA rules relating to W-2 reporting of the value of employer-sponsored health coverage?

For taxable years after December 31, 2010, the PPACA requires employers, for information purposes only, to include the value of applicable employer-sponsored coverage on each employee's W-2 Form.

 

IRS Notice 2010-69, released on October 12, 2010, makes this reporting requirement for the 2011 tax-year voluntary. Employers that choose not to report the aggregate cost of employer-sponsored coverage on 2011 Form W-2 will not be subject to any penalties for failure to meet the PPACA requirement. For employers that choose to report, IRS released a draft Form W-2 with instructions. The form itself didn't change. The IRS added a code "DD" that employers should put in box 12 to report the value. See the IRS sample W-2 form.

 

Reporting the value of health care benefits under the PPACA becomes mandatory beginning with tax-year 2012. There will be no impact on the taxable income of an employee and employee premiums may still be made on a pre-tax basis.

Waiver process/special consideration

How do employers and insurers apply for a waiver to delay following the PPACA annual limit rule?

If compliance with the PPACA’s annual limit for essential health benefits rule causes a big loss of coverage or increase in monthly premiums, the interim final rules allow for one-year waivers. Plans must get waivers annually until 2014 when all plans need to follow the annual limits rule.

 

Limited benefit plans or mini med plans, often have annual limits well below what the PPACA interim final regulations require. These plans offer health benefits to part-time employees, seasonal workers and volunteers who otherwise may not be able to get health insurance they can afford.

 

The Health & Human Services Secretary issued waiver application guidance on September 3, 2010. Cigna applied and received a waiver for Starbridge Voluntary limited medical plans for plan years beginning September 23, 2010 through September 23, 2011.

The waiver process does not impact any state laws that talk about annual benefit limits in group health plans, or group and individual health insurance coverage.

 

On June 17, 2011, the Centers for Medicare and Medicaid Services issued guidance that allows health plans to have annual limits waiver approval through 2013. The new guidance will help ensure that employers can still give employees access to health care coverage they can afford.

 

Waiver extension requests must in by September 22, 2011, and Annual Limit Updates must be in by December 31, 2012 to extend the waiver through 2013. Any plan that started before September 23, 2010 that wants to keep its annual limit but never asked for a waiver must make the request to by September 22, 2011. There are also new rules how health plans with waivers must explain coverage limits to plan participants.

 

Read more about waiver process/special consideration

• Annual limits waiver extension alert

More questions about waiver process/special consideration

• Annual and lifetime maximums
• Dental benefit maximums