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Healthcare & Benefit News :: Health Care Reform: New Guidance on “Pay or Play,” Annual Limit Rules, and More

A new wave of final rules and FAQs provides guidance for employers and group health plans on a number of upcoming requirements under Health Care Reform.

The following are key highlights:

Determining Minimum Value for Employer “Pay or Play”
Beginning in 2014, certain large employers (generally those with at least 50 full-time employees and full-time equivalents) may be required to pay a penalty if they do not offer full-time employees affordable health coverage that provides “minimum value.”

A final rule outlines acceptable methods for plans to determine minimum value, including a Minimum Value Calculator (now available for informal external testing) for use by employer-sponsored group health plans that are not in the individual or small group market.As an alternative to using the calculator, an employer-sponsored plan will be able to use a number of safe harbor checklists (not yet available) to determine whether the plan provides minimum value without the need to perform any calculations.

Guidance on Integrated vs. Stand-Alone HRAs for Compliance with Annual Limit Rules

A new set of FAQs provides guidance regarding the distinction between integrated and stand-alone HRAs for purposes of compliance with the upcoming prohibition on annual dollar limits with respect to coverage of “essential health benefits.” In general, HRAs that are “integrated” with other coverage as part of a group health plan that itself has no annual limits will be deemed to comply with the requirement to eliminate annual limits, while “stand-alone” HRAs will violate the rules.

The FAQs clarify that:

  • An HRA is not considered integrated with primary health coverage offered by the employer unless the HRA is available only to employees who are covered by primary group health plan coverage provided by the employer and meeting the annual limit requirements.
  • An employer-sponsored HRA cannot be integrated with individual market coverage or with an employer plan that provides coverage through individual policies.
  • An employer-sponsored HRA may be treated as integrated with other coverage only if the employee receiving the HRA is actually enrolled in that coverage.
  • Future guidance is expected to provide that unused amounts credited before January 1, 2014, consisting of amounts credited before January 1, 2013 and amounts credited in 2013 under the terms of an HRA as in effect on January 1, 2013, generally may be used after December 31, 2013 to reimburse medical expenses in accordance with those terms without causing the HRA to fail to comply with the annual limit rules.

Standards for Essential Health Benefits and Limits on Cost-Sharing

Also beginning in 2014, non-grandfathered health plans offered in the individual and small group markets will be required to cover “essential health benefits” and meet certain actuarial values (the percentage of total average costs for covered benefits a plan will cover), detailed in the final rule.

In addition, non-grandfathered group health plans will need to ensure that cost-sharing under the plan for such coverage does not exceed certain limitations, including limits on both out-of-pocket maximums and deductibles. Under the final rule and FAQs:

  • The annual limitation on out-of-pocket expenses applies generally to all non-grandfathered group health plans, and is tied to the enrollee out-of-pocket limit for high deductible health plans in connection with health savings accounts (HSAs); and
  • Non-grandfathered plans in the small group market must comply with the annual limitation on deductibles, which may not exceed $2,000 (for self-only coverage) or $4,000 (for non-self-only coverage) for plan years beginning in calendar year 2014. Contributions to flexible spending arrangements (FSAs) are not taken into account when determining the deductible maximum.

Guidance on Coverage of Preventive Services
A new set of FAQs addresses a number of issues related to the requirement that non-grandfathered group plans cover recommended preventive services without cost-sharing, including clarification regarding coverage of over-the-counter recommended items and services and preventive services for women.

Guaranteed Availability of Coverage and Limits on Premium Variations

A final rule has been issued regarding the requirements related to guaranteed availability of coverage and fair premiums for issuers offering non-grandfathered health insurance coverage in the individual or small group market.

  • For plan years beginning on or after January 1, 2014, issuers are required to accept every individual and employer in the state that applies for coverage, subject to certain exceptions.
  • In addition, issuers will be allowed to vary premiums only based on age (within a 3:1 ratio for adults), tobacco use (within a 1.5:1 ratio for adults and subject to wellness program requirements in the small group market), family size, and geography.

Contact G.R. Reid Healthcare & Benefit Services for more information regarding these updates and to stay on top of changes.

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