Jacqueline Mrachek and Megan Hladilek sat down with KSTP-TV to explain implications the new law will have on employers in Minnesota.

Today’s post was contributed by Nicholas P. Manetto.

Today’s post was contributed by Megan E. Hladilek

The first model notice applies to employers who offer a health plan to some or all employees.  The second model notice applies to employers who do not offer a health plan.  Employers are permitted to modify the model notices as long as they still meet the content requirements specified in the health care reform law.

Employers must provide the notice to all current employees by October 1, 2013, though the notice may be provided sooner.  Also starting October 1, 2013, new employees must receive the notice at the time of their hire.  For 2014, the DOL will consider a notice to be timely provided at hire if it is provided within 14 days of the employee’s start date.  The notice must be provided in writing and can be provided electronically if the DOL’s electronic disclosure safe-harbor requirements are met; otherwise, the notice may be provided by first-class mail. 

Also in connection with the new exchange notice, the DOL released a revised COBRA Model Election Notice that includes information about the health insurance exchanges.  The DOL included a redline document showing the changes made by the revised COBRA notice.

Today’s blog post was contributed by Jessica R.R. Faith

The reinsurance fees are intended to stabilize premiums in the individual market for the first three years that the Exchanges are in effect (2014-2016).  The reinsurance fees will be used to make payments to health insurance issuers that cover high-risk individuals in the individual market.  Following the proposed regulations that were released December 2012, the final regulations clarify and confirm the following points of interest to group health plans:

• Fee Amount.  Consistent with the proposed regulations, the annual fee will be $63 per covered life for 2014.  The fee may be paid from plan assets as a permissible plan expense under ERISA.
• Payment Responsibility.  Self-insured groups health plans are ultimately responsible for reporting enrollment counts and making reinsurance contributions to HHS.  However, self-insured plans may elect to use a third-party or administrative services only entity to perform these functions on behalf of the plan. 
• Due Date.  Plans must submit their enrollment counts to HHS by November 15 of each applicable year.  (The first enrollment counts will be due November 15, 2014.)  Within 30 days, HHS will notify the plan of its required contribution amount.  Contributions must then be made within 30 days of the notification from HHS.  HHS will provide details on the submission of enrollment counts and contributions in future guidance. 
• Applicable Coverage.  Contributions must be made for “major medical coverage.”  Retiree coverage is subject to the reinsurance fee, unless the coverage is secondary to Medicare or only provides prescription drug benefits.  COBRA coverage is also subject to the reinsurance fee to the extent that it constitutes major medical coverage.  Flexible spending arrangements (FSAs), health savings account (HSAs), integrated health reimbursement arrangements (HRAs), and expatriate coverage are not subject to the reinsurance fee. 
• Combining Plans.  If a plan sponsor maintains at least two group health plans that collectively provide major medical coverage for the same covered lives simultaneously, those multiple plans must be treated as a single group health plan for calculating the reinsurance fee.  A plan sponsor may treat multiple plans as separate group health plans if each separate group health plan is treated as offering major medical coverage.
• Counting Covered Lives.  Self-insured group health plans may use one of four methods for calculating the number of covered lives under a plan: an “actual count” method, “snapshot count” method, “snapshot factor” method, or “Form 5500” method.  Under the Form 5500 method, for example, plans look at the data from the Form 5500 for the last applicable plan year to determine the number of covered lives under the plan.  If the plan offers only self-only coverage, the number of lives equals the sum of the total participants covered at the beginning and at the end of the year, divided by 2.  If the plan offers self-only and other coverage, the number of lives equals the sum of the total participants covered at the beginning and at the end of the year (not divided by 2).

The Form 5500 method is also available for counting lives for purposes of the separate fee for the Patient-Centered Outcomes Research Trust Fund.  Note that the December 2012 final rules for the Patient-Centered Outcomes Research Trust Fund indicated that a plan sponsor cannot use the Form 5500 counting method if the Form 5500 is not filed by the July 31 due date for paying the fee for the plan year (for example, if the plan takes an extension to file the Form 5500).  There does not appear to be a similar restriction for using the Form 5500 counting method for purposes of the transitional reinsurance program fee.

Today’s post was contributed by Jessica R.R. Faith.

In a Special Fraud Alert released on March 26, 2013, OIG reiterated its long-standing position that physician-owned distributors (PODs) are inherently suspect under the anti-kickback statute. Although the specific concerns expressed by OIG are not particularly novel or surprising, the announcement should serve as a warning signal for PODs with identified suspect characteristics.  It seems likely that providers will be wary of working with these entities, as OIG may well take enforcement actions against certain PODs in order to create an additional deterrent effect.

In the Alert, OIG expressed concern with PODs “that derive revenue from selling, or arranging for the sale of, implantable medical devices ordered by their physician-owners for use in procedures the physician-owners perform on their own patients at hospitals and ambulatory surgical centers.”  Picking up on analytical factors identified in prior OIG alerts, the agency stated that such arrangements cause significant concerns related to corruption of medical judgment, overutilization, increased costs, and unfair competition.  

According to OIG, PODs that exhibit any of the following characteristics may implicate the concerns the typically inform an Anti-Kickback Statute enforcement action: 

• Selection or retention of physician-investors is related to the physicians’ ability to refer, recommend, or arrange for the purchase of the POD’s devices.
• The POD generates extraordinary returns on investment. 
• The size or price of the investment offered to each physician varies with the expected or actual volume or value of devices used by the physician.
• Distributions are not proportionate to ownership interests because of the expected or actual volume or value of devices used by the physicians.
• Physician-owners condition referrals on their purchase of the POD’s devices.
• Physician-owners are required, pressured, or actively encouraged to refer, recommend, or arrange for the purchase of the POD’s devices.
• The POD is a shell entity that does not conduct appropriate product evaluations, maintain or manage sufficient inventory in its own facility, or employ or contract with operations personnel.
• The POD does not maintain continuous oversight of all distribution functions.
• The physician-owners do not disclose their ownership interest in the POD as required by hospital or ASC policy. The Physician Sunshine Act, which goes into effect this August, will generally require physicians to disclose their interest in PODs even though a significant proportion of physicians are opposed to such disclosures.

OIG has long emphasized that parties on both sides of a kickback arrangement are open to liability. Perhaps anticipating enforcement actions, The Wall Street Journal reported that some hospitals have already ceased doing business with PODs matching the criteria described in the Alert, and more hospitals and ASCs are likely to follow suit in the wake of OIG’s pronouncement.  It is also likely that enterprising whistleblowers will seek to identify PODs matching the Alert criteria, on the theory that the government is likely to intervene in a False Claims Act case based on allegations matching the suspect characteristics listed by OIG.

While the OIG Alert is hardly the death knell for PODs that some industry observers had hoped for, it should cause serious indigestion for operators and their business partners where the arrangement reflects the highlighted criteria. 

The alert is available here.

Today’s post was authored by Thomas Beimers and Eric Marshall.

1.   Pay or Play Penalty.

The “pay or play” penalty applies to employers beginning in 2014.  The recent January 3, 2013 proposed regulations (as clarified by the technical amendment) have reserved comment on how the penalty may apply for multiemployer plans after 2014.  The pay or play regulations include transitional relief through 2014 and request comment on how these rules should apply to employers participating in multiemployer plans. 

Under the transitional relief, an employer will not be subject to a pay or play penalty if:

• the employer is required by a collective bargaining agreement to make a contribution to a multiemployer plan on behalf of some or all of its employees who satisfy the plan’s eligibility conditions,
• coverage is offered to full-time employees (and their dependents), and
• such coverage is affordable and provides minimum value (the terms in this third requirement, “affordable” and “minimum value,” are both in the process of being defined by regulations). 

2.   90-day maximum waiting period.

Application of this rule to multiemployer plans is unclear.  The 2014 pay or play transitional relief does not apply to waiting periods. 

3.   Exchange Notice.

Although the notice has been delayed, it is unclear whether employees who receive health coverage under a collective bargaining agreement will even be able to get coverage through the exchanges. 

4.   Application of New Fees.

Also for 2013, there are two new temporary fees that will need to be paid by multiemployer plans: reinsurance fees and PCORI fees.

The transitional reinsurance fee funds a program designed to stabilize premiums in the individual health insurance market during the first three years that state-based health insurance exchanges are in effect.  Group health plans must pay the fee to fund the transitional reinsurance program.  For 2013, HHS has proposed an annual contribution rate of $63 per individual covered for each group health plan.  Of interest to multiemployer plans, the proposed regulations include a footnote that permits the transitional reinsurance fee to be paid from plan assets.

The Patient-Centered Outcomes Research Institute (PCORI or sometimes called PCOR) fee was discussed in our earlier post, but recent guidance has clarified this fee can be paid from multiemployer plan assets.  The agencies’ FAQs (which are also discussed in prior posts about the delay of the exchange notice and the effect on HRAs) discuss who can pay for the PCORI fee.  The agencies acknowledge that multiemployer fund sponsors do not have independent sources of funding the PCORI fee.  Also, although the PCORI fee is technically an excise tax, it is unlike other excise taxes for which trustees may be independently liable.  As a result, the PCORI fee can be paid from multiemployer plan assets. 

5.   Collective Bargaining Contract Language.

Employers and unions continue to struggle with the annual cost increases associated with health plans.  The problem is further complicated for employers and unions due to the lack of clarity in how health care reform applies to multiemployer plans.  As bargaining negotiations start, both sides may want to consider adding flexibility, rather than rigid benefit levels and costs, to be able to react to future guidance.  Employers may want to work with our labor management relations team to address health care reform in upcoming negotiations.  

Today’s post was contributed by Megan E. Hladilek and Maureen M. Maly.

 The proposed regulations:

• adopt much of the guidance provided in the Notice,
• provide guidance on the complicated process of determining when compensation is earned for purposes of applying the limitation,
• and provide that specific entities and compensation will not be subject to the limitation.

For highlights of the proposed regulations, see our April 8, 2013 Benefits Update.

Today’s post was contributed by Audrey A. Fenske

Determinations made on aggregate basis.  Two determinations under the proposed regulations are made on an aggregate controlled group basis:

1. Whether a member of a controlled group is considered a large employer (that is, an employer with at least 50 full-time employees) is determined by counting all employees within the controlled group. 
2. A large employer is permitted a reduction of 30 full-time employees per month for purposes of calculating penalties due for failing to offer coverage under 4980H(a).  This 30-employee reduction must be done ratably across all members of a controlled group based on each member’s number of full-time employees, so employers can’t chose which members will benefit from the reduction.  However, if the controlled group has more than 30 members and the ratable allocation to some members is greater than zero but less than one, the proposed regulations allow rounding up to one employee for that member—which could result in an overall reduction to all members of more than 30 employees. 

Separate 4980H calculation and liability for members.  Compliance with and liability under 4980H is otherwise determined separately for each member of the controlled group.  For example, if a controlled group is considered a large employer and consists of a parent corporation and 20 subsidiary corporations, there will be 21 different determinations regarding whether each member (the parent plus 20 subsidiaries) owes a payment for its full-time employees.  Any penalties would only be assessed for a member’s own full-time employees, and each group member would be liable for only for its own separate 4980H payment.

De minimis rule.  The proposed regulations provide for a “de minimis” rule, which treats an employer as offering coverage to all full-time employees if it offers coverage to all but 5% (or, if greater, 5) of its full-time employees.  It appears this rule applies on a member-by-member basis as well, and would not be applied by looking at whether the controlled group as a whole offers coverage to 95% of full-time employees.

Hour of service definition.  The proposed regulations note that when determining whether an employee is a full-time employee, all hours of service performed for members of the controlled group must be taken into account.  If an employee is employed by more than one member during a month, the liability for penalties under 4980H(b) is allocated among the members in accordance with the hours of service that the employee had with each member. 

Code section 6056 Reporting.  The agencies have not yet issued regulations regarding reporting under Code section 6056, which requires large employers to file an information return with the IRS reporting and certifying certain information about health care coverage offered to employees.  The proposed regulations did note that the Code section 6056 regulations are expected to apply to each applicable large employer member as defined for purposes of 4980H.

Today’s post was contributed by Jessica R.R. Faith

Under the Minnesota bill, the stated purposes of the exchange include:

• Promoting informed consumer choice regarding health benefit plans.
• Facilitating and simplifying the comparison, choice, enrollment and purchase of health benefit plans for individuals and small group market employers and employees.
• Assisting small employers with access to small business health insurance tax credits.
• Assisting individuals with access to income-based health insurance, including Medicaid, premium assistance tax credits, and subsidies and certificates of exemption from individual responsibility requirements.
• Reducing the rate of uninsurance in Minnesota.

Details of the exchange are as follows:

• The exchange will be governed by a seven-member board of directors, including the Commissioner of Human Services or a designee, and six members appointed by the governor, representing various specified interests with a stake in the exchange.
• Board members must establish that they have no conflicts of interest (such as employment by a health carrier or broker that sells health plans offered through the exchange).
• Meetings of the board will be subject to Minnesota’s open meeting laws, with certain exceptions.
• The exchange is intended to supplement, not replace, continued operation of a private marketplace for individual and small group health insurance in Minnesota.
• The board will be responsible for seeking funding for the exchange from a combination of government agencies, philanthropic organizations, and public and private sources, with the restriction that revenue-raising efforts must not advantage any specific health benefit plan, health carrier or insurer producer active in the exchange.
• Operations of the exchange will be funded initially by collecting a fee of up to 3.5 percent of total premiums for individual and small group market plans sold through the exchange. The state projects an annual cost of $50-60 million to fund the exchange.
• Health plans offered through the exchange are generally prohibited from providing coverage for abortions, with certain limitations, such as abortions performed to prevent the death of the mother or when the pregnancy resulted from rape or incest.
• Insurance producers authorized to sell health benefits through the exchange must meet specified certification and training requirements. Producers will be compensated by health carriers that offer plans on the exchange, and compensation must be equivalent for health benefit plans sold through the exchange and outside the exchange.
• Health carriers are not required to participate in the exchange, but if they wish to participate, they must apply by May 17, 2013. For 2014, all carriers certified for participation under state and federal certification guidance in place on January 1, 2013, will be able to participate. Starting in 2015, the exchange board will approve health carriers eligible to participate under new rules, considering factors such as affordability, value, promotions of high-quality care, promotions of prevention and wellness, ensuring access to care, and alignment and coordination with state agency and private sector purchasing strategies and payment reform efforts.
• Health carriers that offer coverage both inside and outside the exchange must follow certain specified rules about the plans they offer both inside and outside the exchange at the catastrophic, bronze, silver and gold actuarial levels.
• The exchange is considered a state agency for purposes of the Minnesota Government Data Practices Act, which generally protects private data regarding individuals and employers participating in the exchange.
• The exchange must file annual reports with the legislature regarding its performance and budget. The exchange will also publish its administrative and operational costs on a consumer website, including premium amounts and federal premium subsidies collected by the exchange, as well as the amounts and sources of all fees and revenue.
• The exchange will replace the Minnesota Comprehensive Health Association (MCHA), which currently offers individual health insurance to Minnesotans who have been turned down for health insurance in the private marketplace because they have a preexisting health problem. The MCHA is scheduled to phase out beginning January 1, 2014.

Today’s post was contributed by Maureen M. Maly.