What to tell your clients as health care reform takes effect

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Love it or hate it, your business clients have known for six months that the first bells of the Patient Protection and Affordable Care Act (PPACA) soon would begin to toll.

For plan years beginning on or after September 23, 2010, a slew of changes are about to kick in, mostly for plans that were not grandfathered when the PPACA was signed into law in March.

Following is a list of items you need to go over with your clients to ensure their health plans and cafeteria plans are compliant.

Dependent coverage to age 26. Health insurance plans must now permit parents to keep dependents on their policies to age 26. This is true even for dependents who no longer live with their parents, who are no longer students, and who are married. This older-age dependent health care coverage is tax-favored. Grandfathered plans have till January 1, 2014, to comply. IRS Notice 2010-38 states that flexible spending accounts also can be amended to pay for uncovered expenses for dependent children under the age of 27.

Preexisting medical conditions. Your clients' insurers are now prohibited from excluding preexisting medical conditions for children under age 19. Insurers still can ask medical questions, but cannot deny coverage based on the answers. In 2014, this rule will be extended to children through age 26. The Department of Health and Human Services is in the process of developing rules to govern premiums based on age.

Preventive services. Insurers can’t charge co-payments or deductibles for medical screenings on new insurance plans, or for preventive services. This includes such services as mammograms and colonoscopies, and blood pressure, cholesterol, and diabetes tests. A more complete list is available at Healthcare.gov. Beginning in 2011, Medicare patients will be eligible for annual wellness exams and certain preventive services with no cost sharing.


Medicare gap. If your clients have employees who are covered by Medicare Part D and who have reached the donut hole, they will receive rebate checks for $250 to help cover part of the out-of-pocket costs they have incurred. In 2011, the gap will be reduced by 50 percent, and is scheduled to disappear by 2020.

Spending caps and coverage limits. Insurers will be limited in their ability to enforce unreasonable annual limits on the dollar value of minimum essential benefits for participants or beneficiaries. Beginning on September 23, 2010, the limits cannot be lower than $750,000. The limit will be raised to $1.25 million on September 23, 2011, and to $2 million on September 23, 2012. Lifetime spending limits also will be expanded. By 2014, spending caps will be completely eliminated for all plans issued or renewed. There is a process by which employers can petition the federal government for an alternate spending limit under certain circumstances.


Highly compensated individuals. Current rules that prohibit self-funded plans from discriminating in favor of highly compensated individuals will be extended to all new plans.


Rescinding coverage. Insurers cannot drop your insured employees once they are covered unless there has been fraud or an intentional misrepresentation of material facts. This prevents insurers from dropping coverage when your employees become sick or when an unintentional error is made in the paperwork process.

Early Retiree Reinsurance Program. This program provides partial reimbursement to participating employers who offer health benefits for early retirees and their spouses, surviving spouses, and dependents.


Temporary credit program. The PPACA offers a temporary credit to certain employers to help them offset the cost of insurance. Employers with fewer than 25 employees may qualify for a credit of up to 35 percent and up to 25 percent for not-for-profits.


Indoor tanning services. If you have clients who provide indoor tanning services, those services are subject to an additional 10 percent tax. They’ll need advice from you on how to report and pay that tax.


Web site. The Secretary of Health and Human Services is expected to develop a Web site to provide consumer insurance information for individuals and small businesses.


Transparency about costs. Insurance companies will have to disclose the true costs of administration and executive expenses.


Appeals. An independent appeals process will be available for group health plans. This will include external review processes in some cases. Plan participants will have the right to appeal decisions made by their health plans. Regardless of the state of residence, insured individuals will have the right to request that an outside, independent decision maker review the case.


Fraud detection. Efforts to curb abuse in Medicare, Medicaid, and the Children’s Health Insurance Program will be enhanced to help bring down overall costs. Focus will be on payment errors, waste, and other abuses.


Rural areas. Investment in community health centers and medical facilities will be increased to create greater access to medical care, regardless of geographic location.


Non-profit Blue Cross insurers. These companies must maintain a loss ratio of 85 percent or higher to take advantage of IRS tax benefits.

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