In This Issue:

  • Tax-Free Employer-Provided Health Coverage Now Available for Children under Age 27
  • Reminder: Distribute CHIP Notice by May 1
  • Another COBRA Subsidy Extension Passes
  • Blue Cross Blue Shield Will Not Cover "Never Events"
  • Insurance Carriers Implement Dependent Coverage to Age 26 Earlier than Required
  • DOD Releases Final Regulations Regarding TRICARE Incentives
  • DOL FAQs about Health Care Reform's Interaction with COBRA
  • DOL Launches Website of Form 5500 and Other Enforcement Data
  • State Updates: CA, CO, ME, VA, WA and WY

National Updates

Tax-Free Employer-Provided Health Coverage Now Available for Children under Age 27

As a result of changes made by the recently enacted Patient Protection and Affordable Care Act (PPACA), health coverage provided for an employee's children under 27 years of age is now generally tax-free to the employee on a nationwide basis, effective March 30, 2010. These changes immediately allow employees to begin making pre-tax contributions under a Section 125 cafeteria plan to pay for health insurance coverage for children under 27 years of age. The Internal Revenue Service (IRS) also confirms that effective March 30, 2010, reimbursements made under a health Flexible Spending Account (FSA) or Health Reimbursement Arrangement (HRA) are also tax-free for dependent children under 27 years of age. For these purposes, a child includes a son, daughter, stepchild, adopted child or eligible foster child. This new under age 27 standard replaces the lower age limits that applied under prior tax law, as well as the requirement that a child generally qualify as a dependent for tax purposes. The notice also states that employers may rely on the employee’s representation as to the child's date of birth and no age limit, residency, support or other test applies.

IRS Notice 2010-38 explains these changes and provides further guidance to employers, employees, health insurers and other interested taxpayers. The ability to pay premiums pre-tax through a Section 125 cafeteria plan or reimburse qualified medical expenses under health FSAs and HRAs apply to employer-sponsored plans, retiree health plans and voluntary employees' beneficiary associations (VEBAs). It also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. As a result of this change, employers with Section 125 cafeteria plans may permit employees to immediately make pre-tax salary reduction contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. Plan sponsors then have until the end of 2010 to amend their cafeteria plan language to incorporate this change.

Click here to view IRS Notice 2010-38.

Reminder: Distribute CHIP Notice by May 1

The CHIP notice is an annual notice required to be provided to employees in states that provide Medicaid or State Children's Health Insurance Program (SCHIP) assistance. Employers are required to give notice to their employees of the potential opportunities for premium assistance currently available in the state in which the employee resides to help them pay for group health coverage. The Department of Labor (DOL) released a model notice to assist with this requirement on Feb. 4, 2010, therefore plan years beginning after Feb. 3, 2010 and before May 2, 2010 must send the notice by May 1, 2010. For plan years beginning on or after May 2, 2010, they must send notice by the first day of the next plan year.

Additionally, the DOL recently updated the model notice to include updated contact information for Arizona, Idaho, Louisiana and Oregon. Employers with employees in these states should ensure they are using the most current model notice available.

Click here to view the model notice.

Another COBRA Subsidy Extension Passes

President Obama signed H.R. 4851, known as the "Continuing Extension Act of 2010," into law on April 15, 2010. The Act included an extension and improvement of premium assistance for COBRA benefits. The extension of COBRA benefits is effective immediately and retroactive to April 1, 2010. Under COBRA as amended, eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee's employment. The involuntary termination must generally occur during the period that began Sept. 1, 2008 and ends on May 31, 2010. An involuntary termination of employment that occurs on or after March 2, 2010 but by May 31, 2010, and follows a qualifying event that was a reduction of hours that occurred at any time from Sept. 1, 2008 through May 31, 2010 is also a qualifying event. The premium reduction applies to periods of health coverage that began on or after Feb. 17, 2009 and lasts for up to 15 months. The DOL has also updated the fact sheet regarding the COBRA Premium Reduction with the newest information.

Click here to view the Continuing Extension Act of 2010.

Click here to view the DOL fact sheet.

Blue Cross Blue Shield Will Not Cover "Never Events"

Effective Jan. 1, 2010, all Blue Cross and Blue Shield companies are following Medicare's lead and are prohibiting reimbursement for events or medical errors that are identifiable and preventable. These events include surgery performed on the wrong body part, wrong procedure performed, air embolism and foreign objects retained after surgery.

Click here to learn more.

Insurance Carriers Implement Dependent Coverage to Age 26 Earlier than Required

Under the Patient Protection and Affordable Care Act (PPACA), both fully-insured and self-funded group plans that provide dependent coverage must provide coverage until age 26 for dependent children regardless of student or marital status. The new requirement is effective for plan years beginning on or after Sept. 23, 2010. This meant that many children, especially those graduating school this summer, would lose eligibility under their plan's current eligibility definition and would have a gap in coverage before being permitted to re-enroll under the new PPACA definition of eligible dependent. To resolve this issue, many insurance carriers including Humana, Blue Cross Blue Shield, United Healthcare and Wellpoint have all issued statements indicating that they will work with employers to continue coverage for any dependent children currently enrolled in the plan until age 26, regardless of the plan's next renewal date.

DOD Releases Final Regulations Regarding TRICARE Incentives

On April 9, 2010, the Department of Defense (DOD) released final regulations regarding the relationship between TRICARE and employer-sponsored group health coverage. TRICARE is the health care program for active and retired military personnel and family members. Under the regulations, an employer with 20 or more employees is not permitted to provide a financial incentive to TRICARE-eligible individuals to encourage them to drop the group health plan resulting in TRICARE being primary coverage. It is permissible to offer employees an opt-out incentive under a Section 125 plan to those who voluntarily waive group coverage, as long as the incentive is provided to all eligible participants and not just those who are TRICARE-eligible. This is similar to the rules prohibiting incentives for Medicare-eligible individuals. The new TRICARE regulations are effective June 18, 2010 and are similar to the proposed regulations that were published in March 2008.

Click here to learn more.

DOL FAQs about Health Care Reform's Interaction with COBRA

The DOL has launched a website section on health care reform which contains a page of frequently asked questions (FAQs) about health care reform and COBRA. Three of the four questions are about specific COBRA issues:

  • Was the COBRA premium subsidy extended by health care reform?
  • Was the 18-month COBRA maximum coverage period extended by health care reform?
  • Was COBRA eliminated or changed by health care reform?

    • The answer to all of these questions is "No." The fourth FAQ addresses how health care reform affects an individual's group health plan coverage. The DOL explains generally that the health care reform legislation makes many changes to employer-sponsored group health plans. The DOL also provides resources where more information about the health care reform changes may be found.

    Click here to view the FAQs.

    DOL launches Website of Form 5500 and Other Enforcement Data

    The DOL has launched a website containing searchable enforcement data gathered from several agencies including the Employee Benefit Security Administration (EBSA). The data can be searched by agency and up to five states at a time (each search can also be narrowed by zip code). The EBSA data includes information on closed Form 5500 cases that resulted in penalties under the agency's programs for deficient, late or unfiled Form 5500s. The EBSA data is to be updated quarterly. On the website's homepage, the DOL acknowledges that the site is a work-in-progress and that additional features, functionality and search criteria will be added over time.

    Click here to learn more.

    State Updates

    California

    Effective Jan. 1, 2011, the minimum spending requirement under the San Francisco Health Care Security Ordinance will increase. Large employers, those with 100 or more employees) will be required to spend $2.06 per hour, which is an increase from the current $1.96. Medium-sized employers, those with 20 to 99 employees, will be required to spend $1.37 per hour, which is an increase from the current $1.31. Employers with fewer than 20 employees are exempt from the ordinance.

    Click here to learn more.
    Colorado

    Governor Ritter signed four major bills on April 20, 2010 in Colorado's first step towards accelerating the health reform passed on a federal level. Of the bills signed into law, two are of significant interest to employers and insurance carriers. The two remaining bills are concerned with loan programs. The two bills of interest are:

    • House Bill 1004 — This act aims to protect consumers and help them better understand their insurance coverage by standardizing policy forms used by carriers and the explanation of benefits received. This applies to health benefit plans, limited benefit health insurance and dental plans issued or delivered on or after Jan. 1, 2012.

      Click here to learn more.

    • House Bill 1166 — Effective Jan. 1, 2012, requires health benefit plans, limited benefit health insurance, dental and auto policies to be written in plain language at no greater than the tenth-grade level and must not be printed with less than 10 point font.

      Click here to learn more.

    Click here to view the press release.
    Maine

    The Maine legislature passed LD 1708, known as "An Act to Expand the Opportunity for Persons to Acquire Health Care Coverage under the State's 'Mini-COBRA' Program." Pursuant to the title, the Act added an additional opportunity for eligibility under the state's mini-COBRA law. The law permits individuals who terminate under one of the three reasons listed below to be considered eligible for mini-COBRA:

    • Member or employees who are temporarily laid off.
    • Member or employees who are permanently laid off and eligible for premium assistance under Federal law.
    • Member or employees who lost coverage due to specific injuries or diseases.

    Click here to learn more.
    Virginia

    HB 554 was signed into law as an emergency rule and was effective March 1, 2010. The Act amended existing Virginia law relating to continuation coverage following involuntary termination of employment. In order to parallel federal amendments to the state's "mini-COBRA" law, continuation coverage for employer-sponsored group insurance policies is available for 15 months. The subsidy is also available to employees involuntarily terminated through May 31, 2010. The emergency regulation clarifies that as long as federal law continues to be amended, Virginia state continuation will permit assistance-eligible employees to receive the subsidy for the full time periods available under federal law.

    Click here to learn more.
    Washington

    The Governor signed HB 2521 on March 18, 2010 which changed the timeframe in which an individual has to apply and pay for conversion coverage. An insured now has 31 days from termination of coverage or 31 days from the date of the termination notice, whichever is later to apply and pay for conversion coverage. This new deadline applies to group disability insurance policy, group health care service contract, or group health maintenance agreement issued, entered into, or renewed on or after Jan. 1, 2011.

    Click here to learn more.
    Wyoming

    Enrolled Act Number 30 implements a provision effective for policies or plans that are delivered, issued, renewed, modified, amended or extended on or after July 1, 2010 that amends the law concerning continuance of coverage. If one carrier contract replaces benefits provided by another carrier contract, and a person who experiences complications as a result of a condition which was paid for under the previous contract, then the new carrier contract is liable to provide coverage at the copayment and deductible level provided within the new carrier's contract.

    Click here to learn more.

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