CCIIO Technical Guidance Released with FAQs on MLR

On April 20, 2012, CMS issued CCIIO Technical Guidance (CCIIO 2012-002), which primarily provides details concerning actual calculation and reporting of medical loss rebates (MLRs) by insurers. As background, insurers are required to make the first round of rebates by August 2012 based on their 2011 MLR requirements. Although the obligation to calculate MLRs and provide rebates falls on health insurers, in many cases, the rebates will be provided with respect to group health plans and, thus, employers must determine proper application of any rebates provided. Some of the topics covered by the technical guidance include:

• Applicability of the MLR to certain types of plans
• Employer groups of one
• Counting employees for determining market size
• Individual association policies
• Offering policy holders a “premium holiday” in order to avoid having to pay rebates
• Reinsurance and reporting
• Exchange user fees
• States with a higher MLR standard
• “Mini-med” experience - application of the adjustment
• Form of rebate

To elaborate on one item above, according to the guidance, if during an MLR reporting year, an insurer finds that its MLR is lower than the standard required, it may institute a “premium holiday” to avoid having to pay rebates (if this is permissible under state law). The MLR regulations already allow insurers to provide a required rebate in the form of a premium credit, applicable in the next policy year. This question and answer, however, contemplate avoiding the rebate issue by providing a premium holiday in a current policy year, which may trigger administrative challenges for the employer (e.g., cafeteria plan issues).

CCIIO Technical Guidance (CCIIO 2012-002)

Kaiser Family Foundation Report on Potential Impact of MLR Rebates in 2012

On April 26, 2012, the Kaiser Family Foundation released a report estimating the impact the MLR provisions will have on health insurance consumers in 2012 in the form of premium rebate checks. While the total amount of all projected rebates appears large - $1.3 billion - when you read the details in the report, the projected rebates on a per-person or per-enrollee basis are much less than some people have been predicting.

The highest rebates are estimated to be paid in the individual market, where the best guess is that 31 percent of insurance consumers nationally will be getting a yearly rebate of about $127 per person. In the small group market, about 28 percent of groups will be eligible for a rebate, with the average amount going to employers expected to be $21 per enrollee. In the large group market, 17 percent of fully insured large groups are sharing an estimated $541 million in rebates. That translates to an average of $14 per enrollee over a year’s time.

Kaiser based its estimates on preliminary data that health insurance carriers provided to their state insurance departments and the National Association of Insurance Commissioners on April 1. Actual rebate amounts, which will be reported to HHS using a slightly different form, have not yet been calculated and could vary. In addition, individuals and employers may receive a future premium credit from the insurance carrier, rather than an actual rebate check. Further, the MLR rules allow employers to keep the portion of the rebate directly attributable to their employer contribution and use the remainder of the funds to benefit the employer plan generally. So most employees won’t see any direct rebate cash.

Kaiser Family Report
News Release

IRS Requests Comments on Determining Minimum Value Under PPACA

On April 26, 2012, the IRS issued Notice 2012-31, Notice 2012-32 and Notice 2012-33. The three notices request comments on determining whether employer-sponsored health coverage provides “minimum value” under PPACA. The minimum value of such coverage is relevant for two reasons. First, it is relevant for individuals seeking premium credits for coverage under a state exchange. Second, it is relevant for determining whether applicable large employers will be responsible for shared responsibility payments (sometimes called the “employer mandate” or the “pay or play penalty”) under PPACA.

Notice 2012-31 outlines three methods for determining the minimum value of employer-sponsored health coverage. The first is to use an actuarial value calculator or a minimum value calculator, which would be made available by HHS and the U.S. Department of the Treasury. The second method is a checklist method, whereby an array of design-based safe harbors would be offered in the form of checklists. This method would not require the employer to perform any actuarial calculations. The third method is to have the employer obtain an actuarial certification, which must be in accordance with prescribed continuance tables and recognized actuarial standards.

Notice 2012-32 outlines the reporting and disclosure requirements for insurers and employers that provide minimum essential coverage. The notice also requests comments on the reporting requirements, including how to determine when an individual’s coverage begins and ends for purposes of the dates of coverage, how to coordinate and minimize reporting between insurers and employers and by exchanges, and how electronic information reporting comes into play.

Notice 2012-33 outlines the employer’s responsibilities under the employer mandate. The notice also indicates that the IRS intends to propose regulations implementing the employer mandate, and invites comments on issues that would be helpful for the proposed regulations to address, including possible approaches for coordinating and minimizing duplication between the employer mandate reporting requirements and other applicable IRC or PPACA reporting requirements.

The three notices are not official guidance on the topic, and may not be relied upon as such. However, the notices do indicate the direction that the IRS is headed in with respect to the methods for determining what constitutes “minimum value” with respect to employer-sponsored health coverage under PPACA. Employers should review the notices and respond to the IRS with any comments by June 11, 2012.

IRS Notice 2012-31
IRS Notice 2012-32
IRS Notice 2012-33

DOL Provides Report to Congress on Self-insured Plans

PPACA requires the DOL to provide Congress with an annual report containing general information on self-insured employee health benefit plans and financial information regarding employers that sponsor such plans. The first report was provided to Congress in March 2011. In April 2012 the DOL provided the second report to Congress.

The April 2012 report includes information on self-insured and mixed health benefit plans that are required to file a Form 5500 Annual Return/Report of Employee Benefit Plan. According to the report, more than 50,000 health plans filed Form 5500s for the 2009 plan year, an increase of almost 7 percent over the filings in the 2008 plan year. The DOL estimates that 14,800 health plans filing a Form 5500 for 2009 were self-insured and 6,300 mixed self-insurance with insurance. These plans covered 24 million and 26 million participants, respectively. Many self-insured health plans do not meet the filing requirements and therefore do not file the Form 5500. Therefore, it is likely that the report underestimates the total number of self-insured plans. This report presents data on such plans for 2009, the latest year for which complete data are available.

DOL Report

CMS Issues Medicare Part D Benefit Parameters for 2013

On April 2, 2012, CMS issued an announcement relating to Medicare Part D benefit parameters for 2013. In the announcement, CMS released the following parameters for the defined standard Medicare Part D prescription drug benefit, which will assist plan sponsors in determining whether their plan's prescription drug coverage is creditable for 2013:

• Deductible: $325 (a $5 increase from 2012)
• Initial coverage limit: $2,970 (a $40 increase from 2012)
• Out-of-pocket threshold: $4,750 (a $50 increase from 2012)
• Total covered Part D spending at the out-of-pocket expense threshold for beneficiaries who are not eligible for the coverage gap discount program: $6,733.75 (a $76.25 increase from 2012)
• Estimated total covered Part D spending at the out-of-pocket expense threshold for beneficiaries who are eligible for the coverage gap discount program: $6,954.52 (a $224.13 increase from 2012)
• Minimum copayments under the catastrophic coverage portion of the benefit
  • $2.65 for generic/preferred multi-source drugs (a 5-cent increase from 2012)
  • $6.60 for all other drugs (a 10-cent increase from 2012)

CMS Medicare Part D Benefit Parameter Announcement

Annual HSA Contribution Amounts Adjusted for 2013

On April 27, 2012, the IRS released Revenue Procedure 2012-26, which sets forth the 2013 inflation adjusted deduction limitations for annual contributions made to an HSA. For 2013, the annual limitation on HSA deductions for an individual with self-only coverage under a high deductible health plan (HDHP) is $3,250 and with family coverage under a HDHP is $6,450. This represents an increase from $3,100 and $6,250 respectively. The HSA contribution limits are effective for individual HSA account holders on the basis of their taxable year, which, for almost everyone, is the calendar year 2013.

For 2013, an HDHP must have an annual deductible that is not less than $1,250 (an increase of $50 from 2012) for self-only coverage or $2,500 (an increase of $100 from 2012) for family coverage, and the annual out-of-pocket expenses (deductibles, copayments and other amounts, but not premiums) do not exceed $6,250 for self-only coverage (an increase of $200 from 2012) or $12,500 for family coverage (an increase of $400 from 2012). As a reminder, an individual may take an above-the-line deduction for contributions made to the individual's HSA (i.e., the amounts will reduce the individual's adjusted gross income).

Revenue Procedure 2012-26

Two FMLA Cases Recently Decided, Including One U.S. Supreme Court Case

Two recent FMLA cases were decided that may affect employers with respect to their FMLA obligations. Coleman v. Maryland Court of Appeals, 132 S. Ct. 1327 (March 20, 2012), decided by the U.S. Supreme Court, relates to governmental employers. The other, decided by the U.S. Court of Appeals for the Sixth Circuit, Roman v. Michigan Dept. of Human Services, 668 F.3d 826 (6th Cir. 2012), relates to the definition of the FMLA term “caring for.”

In Coleman v. Maryland Court of Appeals, the issue before the U.S. Supreme Court was the extent of the sovereign immunity doctrine under FMLA. This case involved a former state of Maryland employee who claimed he was fired for taking FMLA leave for his own serious health condition. The state defended its action by claiming sovereign immunity, which is a legal doctrine in which the state is immune from civil lawsuits or criminal prosecution. In this case, the individual filed suit against his former state employer under a federal law.

The court looked at why FMLA was passed and the exceptions to the sovereign immunity doctrine. Previously, the Supreme Court held that states can be sued for leaves related to other persons’ serious health conditions because this addressed a long-standing sexual bias issue. However, this employee requested time for his own illness, and the Supreme Court refused to extend the exception to FMLA for an individual’s own serious health condition. Please note that this ruling only affects governmental employees. Employees in the private sector can still sue for FMLA violations related to their own serious health conditions.

In Roman v. Michigan Dept. of Human Services, the issue before the Sixth Circuit involved FMLA interference and retaliation. The employee left his work shift due to his “need to care for” his mother, who was being cared for by his sister. The care involved helping to make a decision on whether to discontinue life support. On appeal, the court determined that he was “needed for care” because there were arrangements for changes in care, including the removal of life support. The employer lost on the retaliation claim related to a one-day suspension for “abandoning his shift” when he left his post without permission, because this was FMLA-protected leave.

Interestingly, this case also involved a state employee. The case began as an EEOC claim of discrimination filed by the employee who had obtained a right-to-sue letter, meaning the state would not raise the issue of sovereign immunity. After his termination, the plaintiff filed suit, alleging race discrimination under 42 U.S.C. 2000e and violation of FMLA. While the lower court entered summary judgment for the defendants, the Sixth Circuit overturned the summary judgment on the FMLA issue, because the plaintiff created a genuine issue of material fact regarding whether the defendant retaliated against him for exercising his FMLA rights.

Coleman v. Court of Appeals of Maryland
Romans v. Michigan Dept. of Human Services