From Issue 2 April 8, 2010 of Ceridian Health Care Compass

Download a PDF of this issue

As a first step, employers will need to sort out immediate priorities for this year and 2011.

In this issue:

• Health Care Reform: Beginning at Square One
• Actions to Consider Right Now
• Tax-Advantaged Benefits' Changes to OTC Eligibility
• Insurance Reform' Dependent Coverage to Age 26
• Employer Mandates' Automatic Enrollment

Health Care Reform' Beginning at Square One

With the final health care reform law now complete, the focus turns to what comes next- and when, especially for employers considering their 2011 benefit plans.

The effective date for many key provisions in the Patient Protection and Affordable Care Act is plan years beginning after September 23, 2010, less than six months away. For many companies, that date coincides with another open enrollment season.

Although technically many key provisions in the law become effective this year, from a practical standpoint employers have until their 2011 plan year renewal dates to implement them. Employers need to understand the new requirements and prepare for incremental changes ahead — from the extension of dependent coverage to the restrictions on purchasing over–the–counter medicines with pretax health account funds.

"What's more, the approximately 2,900 pages of legislation will soon be followed by thousands of pages of regulations, clarifying and possibly expanding some of the requirements," said Jim O'Connell, Ceridian's expert on legislative affairs in Washington, D.C.

The Secretary of Health and Human Services, along with other federal agencies, is expected to commence regulatory interpretations of the law within 90 days, O'Connell said.

President Obama signed the Patient Protection and Affordable Care Act on March 23, 2010. He then signed the Health Care and Education Affordability Reconciliation Act of 2010 into law on March 30, 2010, amending several components of the original legislation. Changes included postponing to 2018 the start of a new tax on high–cost employer-sponsored insurance policies.

Meanwhile, several states' attorneys general have filed lawsuits challenging the constitutionality of certain provisions in the new law, specifically the individual mandate. "Although there is discussion regarding the appeal of reform legislation or striking certain provisions within it, employers shouldn't count on that happening," O'Connell said. "The best course of action is to prepare for changes ahead."

Actions to Consider Right Now

• Educate your employees: What do the new laws mean to your employees and their coverage? Surveys indicate that employees and their families need more information about health care reform legislation. They will look to their employers for communications about what the new laws mean for their health benefits now and in the future.
• Prepare for open enrollment and the implementation of requirements scheduled to take effect for your next plan year, particularly those that affect plan design and plan documents.
• Put in place a mechanism to track the value of employer–provided coverage so you can report it on 2011 W–2s.
• Consider informing employees of the following:
  • under age–19 children whose pre–existing conditions were not previously covered will be covered under the new law.
  • under age–26 adult children previously ineligible will become eligible.
  • people whose coverage was capped under previous lifetime limits will become eligible for coverage.
• Confer with legal counsel, insurer or administrator ASAP about health plan redesign and/or cost sharing, including High–Deductible Health Plans.

Tax–Advantaged Benefits: Changes to OTC Eligibility

Effective January 1, 2011, your employees will be required to submit a manual claim and provide supporting documentation in order to be reimbursed for over-the-counter (OTC) medications from their tax–advantaged health accounts.

The OTC eligibility provision brings significant changes to Health Care Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) for participating employees, who have been able to be reimbursed for these expenses without additional documentation since 2003.

"It's important to know that this change affects 'medicines and drugs,' not OTC supplies or equipment," said Geoffrey Mann, a compliance manager for Ceridian. "Many of the items available at drugstores and pharmacies will remain eligible without a need for a prescription." Mann also said insulin receives special treatment and remains eligible without a prescription.

Debit cards linked to health care FSAs or HRAs (including Ceridian's Benefits Card) will be prohibited from automatically approving or substantiating OTC drug and medicine purchases, since these expenses will require the additional documentation to establish eligibility. Merchants will be required to remove OTC drugs from their eligibility lists and employees will have to provide another form of payment when purchasing OTC drugs and medications.

Examples of OTC drugs and medicines that no longer will be eligible for reimbursement without supporting documentation include products in the following categories:

Cough, cold & flu	Acid controllers	Digestive aids
Pain relief	Allergy and sinus	Antibiotics
Sleep aids	Stomach remedies	Anti–itch and insect bite

Because vitamins, minerals and other supplements are not considered OTC drugs or medicines, existing documentation requirements for these expenses should not change based on the new law, Mann said. More information regarding required documentation for these items will be forthcoming.

Ceridian will be updating its eligible expense list to include the changes, and will keep you informed of any required process changes.

HSAs and OTC Eligibility
Distributions from Health Savings Accounts made after January 1, 2011, for OTC drugs and medicines without supporting documentation are subject to taxation and a penalty that increases from 10 percent to 20 percent.

Insurance Reform' Dependent Coverage to Age 26

Effective 2010, health plans will be required to cover adult children up to age 26.

The provision says that if a plan provides coverage for 'dependents,' it must extend the coverage to adult children until they reach age 26. This coverage must be extended to adult children regardless of other factors, notably their full-time student status or marital status. However, there is no requirement that plans or employers provide dependent coverage; only those plans that provide dependent coverage must provide the coverage to adult children until age 26.

The new provision, effective for plan years beginning on and after September 23, 2010, creates a new dependent classification of individuals called 'adult child.' The definition of dependent under this mandate may be more limited than the definition of a dependent under the group health plan; it includes only the son, daughter, stepchild, adopted child or foster child of a plan participant.

Additional federal regulations regarding this provision are forthcoming.

Under an interim rule effective for plan years that begin from September 23, 2010, until December 31, 2013, the plan is not required to provide coverage if the adult child is eligible for coverage under an employer–sponsored health plan.

The penalty for non–compliance of this provision is an excise tax of $100 per day per affected individual, although there are a number of exemptions and restrictions that apply to the penalty.

Employer Mandates: Automatic Enrollment

Employers with more than 200 full–time employees that offer coverage must automatically enroll new full–time employees in coverage with the opportunity to opt–out.

An effective date, however, was not included along with this mandate. Once regulations are issued by the Secretary of the U.S. Department of Labor, we expect to have a better understanding as to the timing of this provision and will pass on that information.

Download a PDF of this issue