Q7, Q 11, and MEC
SEAC Spring Meeting 2014
James H. Baum, MAAA
What is Medical Insurance For?
Old School View
•
Insurance for costs of
treatment of illness or
injury
•
Carrier acts as utilization
manager
New School View
•
Insurance to Maintain
Health
– Wellness
– Preventative
•
More patient cost share on
treatment of sickness and
injury, to get the patient to
act as utilization manager
ACA – The Journey Continues
We have to pass the bill so you can find out
what is in it, away from the fog of the
controversy.
Nancy Pelosi
Questions about Mysterious
Health Insurance Law
? And The Mysterians
•
http://www.youtube.com/watch?v=R7uC5m-IRns
•
The group took its name from the 1957
Japanese
science fiction
film
The Mysterians
, in which aliens
from the destroyed planet Mysteroid arrive to
conquer Earth, and may have been the first group to
be described as
punk rock
.
[2]They were also the first
Latino rock
band to have a mainstream hit record in
the United States with 1966's "
96 Tears
"
ACA Requirements
•
Minimum Essential Coverage (MEC)
•
Minimum Value
•
Affordable
Minimum Essential Coverage
Minimum Essential Coverage includes:• Government sponsored programs including: Medicare, Medicaid, Children’s Health
• Insurance Program coverage (CHIP), TRICARE, coverage through Veterans Affairs,
• and Health Care for Peace Corps volunteers;
• Employer-sponsored plans including governmental plans, grandfathered plans and other plans offered in the small or large group market;
• Individual market plans, including grandfathered plans; or
• Other coverage designated as minimum essential coverage by HHS and/or the Dept. of the Treasury.
PPACA § 1501, IRC §5000A(f)
Minimum Essential Coverage
•
More defined by Where From than What
•
Must include Preventative Care Requirements
of ACA
•
Satisfies the Individual Mandate Penalty (Tax)
and the $2,000 No Coverage Offered Employer
Mandate Penalty (Tax)
Individual Tax Penalty
•
The annual penalty for not having
minimum
essential coverage
will be the
greater of
a flat
dollar amount per individual
or
a percentage
of the individual’s taxable income. For any
dependent under the age 18, the penalty is
one half of the individual amount.
Individual Tax Penalty
•
The flat dollar amount per individual is $95 in 2014;
$325 in 2015 and $695 in 2016. After 2016, the flat
dollar amount is indexed to inflation. The flat dollar
penalty is capped at 300% of the flat dollar amount.
•
The percentage of taxable income is an amount equal
to a percentage of a household’s income (as defined by
the Act) that is in excess of the tax filing threshold
Minimum Essential Coverage
(Preventive Only)
•
MEC Preventative Only Plans allow Individuals to
meet their coverage responsibilities under ACA at
low/no cost
•
MEC Preventative Only Plans allow Employers to
avoid $2,000 per FTE employer penalty at low/no
cost.
•
May be a recruitment tool for workers not
interested in funding their share of a MVP Plan
New Law Redefines Playing Field
•
What Government Wants
– More People Covered
– Emphasis on Preventative
•
What Employers Want
– Low Cost Solutions
– Attract and Retain Workers
•
What Employees Want
– Some want protection from the high cost of major illness or injury
– Some want meaningful First Dollar Coverage
Private Sector Reaction to Government
Imposed New Rules
MEC Preventative Only & Fixed Indemnity
Everyone’s happy- End of Story
But Wait!!
FAQS ABOUT AFFORDABLE CARE ACT
IMPLEMENTATION (PART XI)
January 24, 2013
• Set out below are additional Frequently Asked Questions (FAQs) regarding implementation of various provisions of the Affordable Care Act. These FAQs have been prepared by the Departments of Labor, Health and Human Services (HHS), and the Treasury
(collectively, the Departments). Like previously issued FAQs
(available at http://www.dol.gov/ebsa/healthreform/), these FAQs answer questions from stakeholders to help people understand the new law and benefit from it, as intended.
Fixed Indemnity Insurance
•
Fixed indemnity coverage under a group health plan
meeting the conditions outlined in the Departments’
regulations3 is an excepted benefit under PHS Act section
2791(c)(3)(B), ERISA
•
3
See
26 CFR 54.9831-1(c)(4), 29 CFR 732(c)(4), 45 CFR
146.145(c)(4). 5 section 733(c)(3)(B), and Code section
9832(c)(3)(B).
•
As such, it is exempt from the health coverage
requirements of title XXVII of the PHS Act, part 7 of ERISA,
and chapter 100 of the Code.
The Departments have
noticed a significant increase in the number of health
insurance policies labeled as fixed indemnity coverage.
Gambling in Rick’s Cafe (Casablanca)
•
Captain Renault: I'm shocked, shocked to find that
gambling
is going on in here!
Q7: What are the circumstances under which fixed
indemnity coverage constitutes excepted benefits?
• The Departments’ regulations provide that a hospital indemnity or other fixed indemnity insurance policy under a group health plan provides excepted benefits only if:
• • The benefits are provided under a separate policy, certificate, or contract of insurance;
• • There is no coordination between the provision of the benefits and an exclusion of benefits under any group health plan maintained by the same plan sponsor; and
• • The benefits are paid with respect to an event without regard to
whether benefits are provided with respect to the event under any group health plan maintained by the same plan sponsor.
• The regulations further provide that to be hospital indemnity or other fixed indemnity insurance, the insurance must pay a fixed dollar amount per day (or per other period)of hospitalization or illness (for example, $100/day) regardless of the amount of expenses incurred.
Q7: Continued
•
……
When a policy pays on a per-service basis as
opposed to on a per-period basis, it is in practice
a form of health coverage instead of an income
replacement policy. Accordingly, it does not
meet the conditions for excepted benefits.
•
The Departments plan to work with the States to
ensure that health insurance issuers comply with
Industry Response
•
You can’t be serious/What ??
•
Segmentation of Interests
•
Health Writers
•
Limited Medical Writers
•
Supplemental Writers
Periodicity Approach
•
Change Event Based to Event and Time Period
Payment Trigger
Supplemental Only Plans
•
Is Fixed Indemnity Sold Only to Individuals
with Medical Coverage?
–
California Model - Individuals must have Major
Medical in order to be eligible for less
comprehensive health coverage products
More FAQs
(January 9, 2014)•
Q11: If insurance labeled as fixed indemnity
insurance provides benefits other than on a
per-period basis, may the insurance
Q 11 (Continued)
• Yes. With respect to group health insurance coverage that does not meet the definition of fixed indemnity excepted benefits, coverage that supplements other group health plan coverage may, nonetheless, qualify as supplemental excepted benefits under sections 2722(c)(3) and 2791(c)(4) of the PHS Act, sections 732(c)(3) and 733(c)(4) of ERISA, and sections 9831(c)(3) and 9832(c)(4) of the Code. See 26 CFR 54.9831-1(c)(5); 29 CFR 2590.732(c)(5); 45 CFR 146.145(c)(5); the Department of Labor’s Employee Benefits Security Administration’s Field Assistance Bulletin No. 2007-04 (available at
http://www.dol.gov/ebsa/pdf/fab2007-4.pdf); HHS Centers for Medicare & Medicaid Services Insurance Standards Bulletin 08-01 (available at
http://www.cms.gov/CCIIO/Resources/Files/Downloads/hipaa_08_01_508.pdf); and Internal Revenue Service Notice 2008-23 (available at
http://www.irs.gov/irb/2008-07_IRB/ar09.html).16
Furthermore, HHS intends to propose amendments to 45 CFR 148.220(b)(3) that would allow fixed indemnity coverage sold in the individual health insurance market to be considered to be an excepted benefit if it meets the following conditions:
Q 11 (continued)
• It is sold only to individuals who have other health coverage that is minimum essential coverage within the meaning of section 5000A(f) of the Code;
• There is no coordination between the provision of benefits and an exclusion of benefits under any other health coverage;
• The benefits are paid in a fixed dollar amount regardless of the amount of expenses incurred and without regard to the amount of benefits provided with respect to an event or service under any other health coverage; and
• A notice is displayed prominently in the plan materials informing policyholders that the coverage does not meet the definition of
Q 11 (continued)
• If these proposed revisions are implemented, fixed indemnity insurance in the individual market would no longer have to pay benefits solely on a per-period basis to qualify as an excepted benefit.
Until HHS finalizes this rulemaking related to these proposed amendments, HHS will treat fixed indemnity coverage in the individual market as excepted benefits for enforcement purposes if it meets the conditions above in States where HHS has direct enforcement authority. For States with primary enforcement authority, HHS encourages those States to also treat this coverage as an excepted benefit and will not consider that a State is not substantially enforcing the individual market requirements merely because it does so.
Questions and Regulations
•
Fixed Indemnity
–
Q7 Periodicity permits as stand alone
–
Q11 Followed by CMS-9949-F followsCalifornia
Model for individual supplemental medical
indemnity products without time period
provisions
Questions?
"96 Tears"
Singleby ? & the Mysterians
from the album 96 Tears
B-side "Midnight Hour"
Released February 1966
Format 7"45 RPM
Genre Garage rock, protopunk
Length 2:56
Label Cameo-Parkway Records Writer(s) Rudy Martinez Producer(s) Rudy Martinez