Voluntary Employer Participation in CLASS Program Premium Collection
CLASS stands for Community Living Assistance Services and Supports. The provision is found in Title VIII of the new healthcare law.
Specifically, the CLASS program is a long-term care insurance program which takes effect in 2011. Benefits will depend on a person’s degree of impairment, but will not be less than $50 per day (paid on a daily or weekly basis). Eligibility guidelines for benefits associated with the CLASS program require that an individual must pay premiums for at least five years before qualifying for benefits. There is no lifetime limit on the funds available.
The Secretary of Health and Human Services has not yet set premiums for the CLASS program. The Congressional Budget Office estimated in 2009 that premiums would begin at $123 per month, with fewer than 10 million persons enrolling in the program over a 10-year period.
The program itself is voluntary, but employees of participating firms would be auto-enrolled. That is, under Section 3204(a), employers that choose to participate must enroll workers automatically and become responsible for making automatic payroll deductions on a monthly basis for each of the employees enrolled in the program. A separate section of the law, Section 3204(b) states that workers may choose to opt out of the CLASS program.
You can read about the CLASS program beginning on Page 710 of the Patient Protection and Affordable Care Act.
Starting in 2011, Section 9002 of the healthcare law requires employers to calculate and report the aggregate cost of employer-sponsored health insurance coverage on employees' Form W-2s. Healthcare benefits continue to be a tax-free benefit; the new reporting requirement is simply for information purposes.
Reportable employer-sponsored costs include:
- Medical plans
- Prescription drug plans
- Health reimbursement accounts (HRAs)
- On-site medical clinics
- Amounts contributed by the employer to a health savings account (HSA) or medical savings account (MSA)
- Medicare supplemental coverage
- Employee assistance programs
- Dental and vision plans unless they are stand-alone plans
Flexible spending accounts, long-term care coverage, workers’ compensation insurance, coverage only for accidents, health savings accounts and specific disease or hospital/fixed indemnity plans are excludedfrom the reporting requirement.
Individual Premium Assistance
Beginning in 2014, tax credits will be available for people under age 65 who purchase coverage on their own and are not covered through an employer, Medicare or Medicaid.
The premium assistance credits are available on a sliding scale for individuals and families with household incomes between 100 and 400% of federal poverty level to help offset the cost of health insurance premiums. In 2009, 400% of the federal poverty level was $43,320 for an individual or $88,200 for a family of four. The sliding scale as outlined in the PPACA is included here.
Premium Assistance Caps as Percentage of Income
Income Range (% of poverty level) Premium Assistance Credit Cap on Percentage of Income
100% through 133% 2.0
133% through 150% 3.0
150% through 200% 4.0
200% through 250% 6.3
250% through 300% 8.05
300% through 400% 9.5
(1) FAMILY SIZE—The family size involved with respect to any taxpayer shall be equal to the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year.
Premium assistance credits may only be used to purchase a plan offered in the exchange, which will become operational and available in 2014. The value of the premium assistance will be tied to the lowest-cost silver plan, but can be used to purchase any plan purchased in an exchange including bronze, silver, gold and platinum level plans and, for those eligible, catastrophic plans. The IRS will be responsible for determining eligibility for premium assistance credits.
Factors Affecting All Employers Offering Health Insurance, Whether or not They Are Subject to the Employer Mandate
Paperwork Reporting Requirements: Any “offering employer” will be responsible for reporting certain information about health insurance coverage to both the IRS and their full-time employees.
§ The information required to be reported includes: (1) name, address and employer identification number of the employer; (2) certification as to whether the employer offers its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan; (3) the number of full-time employees of the employer for each month during the calendar year; (4) name, address and taxpayer identification number of each full-time employee employed by the employer during the calendar year and the number of months, if any, during which the employee (and any dependents) was covered under a plan sponsored by the employer during the calendar year; and (5) such other information as the government may require.
§ Employers who offer the opportunity to enroll in “minimum essential coverage” must also report: (1) in the case of an applicable large employer, the length of any waiting period with respect to such coverage; (2) the months during the calendar year during which the coverage was available; (3) the monthly premium for the lowest- cost option in each of the enrollment categories under the plan; (4) the employer’s share of the total allowed costs of benefits under the plan; and (5), in the case of an offering employer, the option for which the employer pays the largest portion of the cost of the plan and the portion of the cost paid by the employer in each of the enrollment categories under each option.
[1]
Grandfathered plans are plans that were in existence on March 23, 2010, when the PPACA was signed into law. This includes plans in the group market, self-insured plans and individual plans. The purpose of the “grandfather” status is to shield those plans in existence on or prior to March 23 from many of the requirements in the new law affecting insurance plans.
It’s not clear what might cause a plan to lose its grandfather status. In the summer of 2010, the Department of Health and Human Services and the Department of Labor issued an Interim Final Rule to outline what changes an employer or individual could make to their plan and still retain their grandfather status, and invited organizations to make comments on the rule. The Interim Final Rule outlined what might be considered changes that would result in a loss of grandfather status, as well as changes that would not result in a loss of grandfather status. Samples include:
Changes that would cause a plan to cease being a grandfathered plan:
Elimination of Benefits for Diagnosis and Treatment of Particular Conditions
If a plan eliminates a benefit to diagnose or treat a particular condition (e.g., if a plan stops offering coverage of cystic fibrosis) this will cause a plan to lose its grandfathered status.
Changing Insurers
If an employer offering a fully insured plan changes insurers, the plan will lose its grandfathered status.
Changes to Cost-Sharing Requirements
a.) A plan will lose its grandfathered status if it increases, from its March 23 amount, the fixed-amount cost-sharing for expenses other than co-payments (e.g. out-of pocket-limits or deductibles) by a total percentage that is greater than the maximum percentage increase (i.e., medical inflation—from March 23, 2010—plus 15 percentage points).
b.) A plan will lose its grandfathered status if it increases, from its March 23 amount, the copayment (e.g., an office visit co-pay from $30 to $50) by an amount that exceeds the greater of (A) the maximum percentage increase or (B) $5 increased by medical inflation.
Changes to Contribution Rates
A plan will lose its grandfathered status if it decreases from its March 23 amount, its contribution rate by more than five percent below the contribution rate (e.g., adjusting the employer-employee contribution of 80-20 to 70-30).
Changes that would not cause a plan to cease being a grandfather plan:
Adding New Employees
You can add new employees without affecting grandfathered status.
Application of Rules to a Collective Bargaining Agreement (CBA)
Collectively bargained agreements are permitted to change their plans up until the last CBA terminates without losing grandfathered status.
Declaration requirement
Any plan wishing to retain its grandfathered status must provide a statement to participants that includes a description of the benefits provided in the plan and that the plan sponsor believes the plan to be a grandfathered plan as defined by the PPACA.
It is important to note that as of September 1, 2010, final guidance codifying these regulations had not been issued. Based on a sensitivity analysis conducted by the government and featured in the Interim Final Rules, the government’s own analysis found that, under the proposed Interim Final Rule, upwards of 80 percent of small employers could lose the plan they have today by 2013. In response, NFIB filed comments urging the government to make changes to their Interim Final Rule. Stay tuned for updates.
Individual and Small Group Market Changes
Note: The degree to which you may be affected by insurance market reforms depends on whether:
- You have a grandfathered plan.
- You are newly insured.
- You changed plans after March 23, 2010.
- You are self-insured
There are currently several changes being made in the individual and small group marketplace. Over the next few years and in 2014, you will see significant changes in both of these markets.
There are currently many differences in how the individual market and small group market functions. The rules dictate how insurers can determine their expected costs and therefore, price your premium. The changes created by the new healthcare law will adjust these differences, making the two marketplaces somewhat more similar.
The following changes apply to new markets, including:
Individual, small group, large group and self-funded and grandfathered plans in the individual and group market
Pre-existing conditions
Changes to pre-existing conditions apply to all plans except grandfathered individual market plans. Beginning September 23, 2010, children under the age of 19 cannot impose exclusions from coverage based on pre-existing conditions.
Annual and Lifetime Limits
Beginning September 23, 2010 new plans will be prohibited from placing lifetime limits on the dollar value of coverage. For example, some policies today have a $1 million dollar cap on the amount the insurance company will pay out on a policy. The prohibition on lifetime limits takes full effect January 1, 2014. Until then, lifetime limits on coverage are allowed at discretion of the secretary of Health and Human Services. The new rules on lifetime limits will apply to all plans. The rules on annual limits will apply to all plans except for individual market plans that maintain grandfather status.
Rescissions
Beginning September 23, 2010, Insurers will be prohibited from rescinding coverage except in cases of fraud. This will apply to all plans.
Dependent Coverage
Beginning September 23, 2010 all plans will be required to provide dependent coverage for children up to age 26.
If you do not have a grandfathered plan or you purchase a new plan you will also be subject to all requirements related to preventative coverage.
Coverage of Preventative Services
Beginning September 23, 2010 all new plans that are not grandfathered plans will be required to provide 100% coverage (no cost-sharing – deductibles or co-pays) for:
- Items or services with an "A" or "B" rating in the current recommendations of the United States Preventive Services Task Force ("USPSTF");
- Immunizations for routine use as recommended by the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention;
- Preventive care and screenings for infants, children and adolescents provided for in the guidelines supported by the Health Resources and Services Administration ("HRSA"); and
- Preventive care and screening for women provided for in guidelines supported by the HRSA (to be issued no later than August 1, 2011).
Deductible Limits
Effective January 2014, deductibles in the small group marketplace will be limited to $2,000 for individuals and $4,000 for families.
Insurance Rating Reforms
Effective January 2014, all plans in the individual and small group markets (including those in the exchange) will be required to have guaranteed issue and renewability. Insurers can only vary premiums based on the following factors:
- Age (3:1 maximum)
- Tobacco (1.5:1 maximum)
- Geographic rating area
- Individual or family coverage (family composition)
The states, along with the Secretary of HHS will be responsible for developing standards for geographic rating areas. The Secretary of HHS, in collaboration with the National Association of Insurance Commissioners (NAIC) will develop the “age bands” used for the age rating process.
To obtain more information on how these changes affect your health insurance plan, please contact your agent or broker, or call your health insurer. There is also more helpful information on
your state insurance commissioner’s website.
Health Insurance Exchanges
New State Health Insurance Exchanges
The new healthcare law requires states to set up health insurance exchanges. If the state chooses not to participate, the federal government will create an exchange in that particular state. There are federal rules that set the foundation for these exchanges but beyond that, states have flexibility to design them in ways that meet the needs of their own population. Two state exchanges have already been created—the Utah Health Exchange and the Massachusetts Health Connector.
The exchange model was created to assist mostly the individual and small group markets. Beginning in 2014 the law requires that states establish an exchange to sell private health plans to individual and small group coverage. You will be able to purchase them directly through the exchange or through an agent of your choice.
There is a cap on the size of businesses that may purchase plans in the exchanges. For the first two years, the exchanges will be available to individuals and small businesses with up to 50 employees. Beginning in 2017, exchanges can open up to businesses with more than 100 employees, at state discretion.
Many states currently separate the individual and small group markets. That is, the two pools operate as separate risk groups. Under the new healthcare law, states have the option of merging these two markets.
The exchanges will not be the only place where you can purchase coverage. In addition to the new exchanges, there will continue to be a marketplace outside the exchange marketplace. The rules governing the health plans are the same in both marketplaces. However, it is critical to note that the exchanges will be the only marketplace for individuals and small businesses that are eligible for certain kinds of financial assistance.
These new exchanges will house
premium and cost-sharing credits to individuals and families with incomes between 133% and 400% of the federal poverty level. You cannot access premium credits outside of the exchanges. Access to premium credits are not allowed by individual employees if there is an offer of coverage from the employer, except in certain cases. These exceptions include: if the employer plan does not have an actuarial value of at least 60% (if you are fully insured, your carrier will certify the plan meets this value) or if the employee’s share of the premium exceeds 9.5% of their income.
There is also a tax credit available to small businesses that purchase health insurance in the exchange. A maximum credit equal to 35% of the employer contribution is available from 2010 to 2013.
Beginning in 2014, a 50% credit is available for an additional two years, but only if the small business purchases health insurance through a health insurance exchange.
Click here for more information on whether your business qualifies for the small business tax credit.
Exchanges will be required to maintain a call center and establish procedures for enrolling individuals and businesses. Agents and brokers will be able to sell plans inside and outside the exchanges.
Exchanges will offer four benefit categories and offer a separate catastrophic plan for certain qualified individuals. The four benefit categories and catastrophic plans will be available based on eligibility and will be sold inside and outside the exchange. The plans will be identified as either bronze, silver, gold, or platinum level. The levels of coverage, as described in a summary of the new law provided by the National Association of Insurance Commissioners (NAIC) are defined in the following way.
Bronze level-Must provide coverage that provides benefits that are actuarially equivalent to 60% of the full actuarial value of benefits under the plan.
Silver level-Must provide coverage that provides benefits that are actuarially equivalent to 70% of the full actuarial value of benefits under the plan.
Gold level-Must provide coverage that provides benefits that are actuarially equivalent to 80% of the full actuarial value of benefits under the plan.
Platinum level-Must provide coverage that provides benefits that are actuarially equivalent to 90% of the full actuarial value of benefits under the plan.
An individual who is either under 30 years old or is exempt from the individual mandate because of lack of affordability or hardship may purchase a catastrophic plan. That plan provides the essential benefits package with a deductible equal to the total limitation on cost-sharing above and first-dollar coverage of at least three primary care visits.
As exchanges are developed, more information will be available here. Check back often for updates.
Minimum Essential Coverage
Individuals will be required to have qualified health insurance by 2014 or face penalties. This is the individual mandate requirement in the new healthcare law. You can either meet this requirement by maintaining your grandfathered plan or by purchasing a plan that meets the new minimum essential coverage standards.
If you or your business is able to maintain your grandfathered plan (i.e., plans that were in existence on March 23, 2010, when the law was signed), you will be deemed as meeting your obligations for the individual mandate. For all other health plans following March 23, 2010, there are new minimal essential coverage requirements.
Minimum essential coverage has not been fully defined yet by the Department of Health and Human Services (HHS). Defining regulations will be released by HHS throughout 2010 and 2011.
However, the law does outline the types of benefits that are required to be included in any package deemed to meet minimum essential coverage. Section 1302 of the new healthcare law specifies that all plans meeting these requirements will include at least the following categories:
(A) Ambulatory patient services.
(B) Emergency services.
(C) Hospitalization.
(D) Maternity and newborn care.
(E) Mental health and substance use disorder services,
including behavioral health treatment.
(F) Prescription drugs.
(G) Rehabilitative and habilitative services and devices.
(H) Laboratory services.
(I) Preventive and wellness services and chronic disease
management.
(J) Pediatric services, including oral and vision care.
This will be a floor of required services and the states can go above this floor.
Employers who offer coverage will be required to offer minimum essential coverage to their employees worth at least 60% of the actuarial value of the covered benefits the insurance carrier pays out or face penalties. For the policyholder, that means paying no more than 40% of costs.
There will be limits on annual cost sharing and they are tied to current HSA limits ($5,950 for individual and $11,900 for a family). The HHS Secretary will be allowed to review and update the minimal essential coverage annually beginning in January 2014.
All plans inside and outside the exchange (including those in the individual and small group market) will be required to meet or exceed the new coverage requirements set forth in the new healthcare law.
To access the timeline for overall implementation of the healthcare law, please visit our
reform timeline.
[1] Joint Committee on Taxation,
Technical Explanation of the Revenue Provisions of the “Reconciliation Act of 2010,” as amended, in combination with the “Patient Protection and Affordable Care Act” (JCX-18-10), March 21, 2010. Page 39