January 15, 2010
A number of legislative changes affecting health and welfare plans require implementation in 2009 or 2010. This Legislative Brief provides a summary of major developments. Employers should review their benefit programs and documents to determine whether they are compliant with the new laws and make amendments as necessary.
COBRA SUBSIDY
ARRA initially provided a 65 percent COBRA premium subsidy for individuals losing health coverage due to involuntary termination of employment between September 1, 2008, and December 31, 2009. The subsidy is generally provided by the employer sponsoring the plan, which is reimbursed through payroll tax offsets. In December 2009, Congress approved an extension of the subsidy to individuals who lose health coverage because of involuntary terminations that occur through February 28, 2010, and to extend the premium subsidy period to 15 months.
Notice of the extension must be provided to eligible individuals. The Department of Labor is expected to issue model notices. Employees who are now eligible for the extended subsidy but who let their COBRA coverage lapse because they thought the subsidy was ending must be allowed to re-enroll in COBRA by paying the subsidized portion of the premium. Employees who paid the full amount of the premium must be reimbursed the excess amount or given a credit for future months.
GENETIC INFORMATION NONDISCRIMINATION
The Genetic Information Nondiscrimination Act of 2008 ("GINA") provides that group health plans and insurance issuers may not:
adjust group premium or contribution amounts on the basis of genetic information;
request or require individuals (or their family members) to undergo a genetic test (with limited exceptions such as for determinations regarding payment based on medical appropriateness); and
request, require or purchase genetic information prior to or in connection with enrollment, or at any time for underwriting purposes.
Further, GINA amends the definition of protected health information ("PHI") under the HIPAA Privacy Rule to include genetic information.
Recently published GINA regulations clarify that GINA's prohibition on collecting genetic information prior to or in connection with enrollment, or for underwriting purposes, will affect the use of Health Risk Assessments ("HRAs"). HRAs are tools commonly used by wellness and disease management programs. Pursuant to the regulations, group health plans may not:
provide a reward or incentive to an individual for completing an HRA that requests genetic information, such as family medical history; or
request genetic information as part of an HRA that must be completed before enrollment in the plan or eligibility for additional benefits under the plan, such as a disease management program.
GINA's rules applicable to group health plans and health insurance issuers are effective for plan years beginning after May 21, 2009 (January 1, 2010, for calendar year plans).
NEW HIPAA RULES
The American Recovery and Reinvestment Act of 2009 made a number of significant changes to the Privacy and Security provisions of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"). These changes affect Covered Entities and Business Associates (as defined by the Privacy and Security Rules) and have varying effective dates.
Under the new rules, Covered Entities now have an affirmative obligation to notify individuals if their "unsecured PHI" is breached. Business Associates must notify the applicable Covered Entity of a breach involving that Covered Entity's unsecured PHI. Unsecured PHI is PHI that is not secured through the use of a technology or methodology specified by the Department of Health and Human Services. HHS has specified that encryption and destruction are the two methods available for securing PHI. The breach notification rules were effective September 23, 2009.
In addition, HIPAA has been expanded to impose additional obligations on Business Associates that require revisions to any Business Associate Agreements. Business Associates are now directly subject to many provisions of the Privacy and Security Rules, rather than being governed merely by agreements with Covered Entities. Other changes include changes to the "minimum necessary" standard, restrictions on disclosures, expanded individual rights, and increased penalties for violations. Most of these changes are effective February 17, 2010.
MENTAL HEALTH PARITY
The Mental Health Parity and Addiction Equity Act of 2008 ("MHPAEA") imposes additional requirements on group health plans that offer mental health and substance abuse benefits. Under current law, plans may not impose lower annual and lifetime limits on mental health coverage than those imposed on medical and surgical benefits. The MHPAEA expands the parity requirements to prohibit plans from doing the following:
imposing higher copayments, deductibles or out-of-pocket limits on mental health and substance abuse treatment benefits than on medical and surgical benefits;
placing more restrictive limits on the number of covered office visits, days of inpatient coverage or the duration or scope of treatments available for mental health and substance abuse treatment benefits than those available for other types of medical treatment; and
excluding out-of-network treatment for mental health and substance abuse treatment benefits if out-of-network benefits are providing for medical and surgical benefits.
Employers that provide mental health or substance abuse benefits must review their benefit plans to ensure they are compliant with the MHPAEA. The MHPAEA does not apply to employers with 50 or fewer employees during the prior plan year. There is also a limited exception for employers for whom compliance would cause a demonstrated financial hardship. The MHPAEA is effective for plan years beginning after October 3, 2009 (January 1, 2010, for calendar year plans).
MICHELLE'S LAW
Michelle's Law allows seriously ill college students, who are covered dependents under health plans, to continue coverage for up to one year while on medically necessary leaves of absence. The leave must be medically necessary as certified by a physician, and the change in enrollment must commence while the dependent is suffering from a serious illness or injury and must cause the dependent to lose student status.
Under the law, a dependent child is entitled to the same level of benefits during a medically necessary leave of absence as the child had before taking the leave. Further, if any changes are made to the health plan during the leave, the child remains eligible for the changed coverage in the same manner as would have applied if the changed coverage had been the previous coverage, so long as the changed coverage remains available to other dependent children under the plan.
The law requires group health plans to provide notice of the requirements of Michelle's Law, in language understandable to the typical plan participant, along with any notice regarding a requirement for certifying student status for plan coverage.
Michelle's Law is effective for plan years beginning on or after October 9, 2009. Calendar year plans must comply beginning January 1, 2010.
BENEFITS FOR MILITARY EMPLOYEES AND FAMILIES
The Heroes Earnings Assistance and Relief Tax Act of 2008 ("HEART Act") was enacted on June 17, 2008. The HEART Act provided a special rule allowing "qualified reservist distributions" ("QRDs") of unused amounts in a health FSA to reservists called to active duty. Under the existing rules for health FSAs, distributions could only be made to reimburse substantiated medical expenses, and any funds left unspent at the end of the plan year would be lost. This special rule allows reservists to make a distribution before leaving for active duty so as not to lose those savings.
Permitting QRDs is optional for employers. Employers that want to allow QRDs from their health FSAs must amend their plans. Prospective amendments may be made at any time. A transition rule allows plans to be amended effective retroactively to provide for QRDs prior to January 1, 2010. If the amendment is adopted by December 31, 2009, it can apply retroactively to an employee who was called to active duty after June 17, 2008. However, the employee must request the distribution by the last day of the plan year in which the call to active duty occurred.
In addition, amendments to the Family and Medical Leave Act ("FMLA") that were adopted and effective on October 28, 2009 expand leave benefits for military families. Eligible military family members may take up to 12 weeks of "qualifying exigency leave" for purposes of things like preparing for a short-notice deployment, arranging for child care, making financial or legal arrangements, and resting and recuperating. Pursuant to the FMLA amendments, this leave is available to eligible families of any member of the Armed Forces who is on "covered active duty" in a foreign country, not just those in the Reserves or National Guard. The FMLA amendments also expand the 26-week military caregiver leave to the families of veterans with serious injuries or illnesses as well as active members.
Employers subject to the FMLA should review their policies and procedures regarding military leave to ensure that they are in compliance with the new requirements as soon as possible, and make revisions as necessary. Employers should also communicate the changes to their employees and expect that more employees will be entitled to leave. The Department of Labor is expected to issue an updated FMLA notice to include the changes.
MEDICARE REPORTING RULES
The Medicare, Medicaid and SCHIP Extension Act of 2007 ("MMSEA") added new mandatory reporting requirements with respect to Medicare beneficiaries who have coverage under group health plans as well as for Medicare beneficiaries who receive settlements, judgments, awards or other payment from liability insurance (including self-insurance), no-fault insurance, or workers' compensation. The purpose of the new reporting rules is to enable Medicare to correctly pay for the health insurance benefits of Medicare beneficiaries by determining whether Medicare or other insurance is required to pay first.
In general, employers will not have any reporting obligations if they have an insurer or third-party administrator to assume the role of responsible reporting entity ("RRE"). Employers with self-insured benefit programs will have to register as an RRE and will remain responsible for reporting. Reporting for group health plans is scheduled to being October 1, 2009. Reporting for self-insured liability arrangements such as workers' compensation is scheduled to begin July 1, 2010.
Please contact your A.E. Mourad Agency, Inc. representative with any questions.
A.E. Mourad Agency, Inc.
28277 Dequindre, Madison Heights, MI 48071
Phone: (248) 336-1600
Fax: (248) 336-1607
Web: www.aemourad.com