Provisions

Who Is Affected?
Medicare Beneficiaries

Summary
The national health care reform law provides a $250 rebate to most beneficiaries who enter the coverage gap in 2010.

Starting in 2011, the law establishes progressively lower beneficiary co-insurance for generic drugs dispensed to beneficiaries in the coverage gap, such that the required co-insurance for generic drugs is 25 percent by 2020.

Starting in 2011, a discount program (through an agreement with pharmaceutical manufacturers) will generally make discounts of 50 percent off brand-name prescription drugs available to Part D enrollees during the coverage gap.

Starting in 2013, the law provides coverage in the standard Part D benefit for brand-name drugs, such that by 2020, the required beneficiary co-insurance plus the discount results in the beneficiary paying 25 percent of the cost of the drug or an actuarially equivalent amount.

Who Is Affected?
Most U.S. citizens and legal residents

Summary
Most U.S. citizens and legal residents will be required to have qualifying health insurance. Individuals who do not have this coverage will be required to pay a penalty.

The penalty amount will be determined by a formula set out in the new law. The fee will also be assessed for any dependent of the individual.

Massachusetts residents will be required to comply with all state mandated individual requirements through 2013. By 2014, it is expected that Massachusetts will reconcile any differences between the Massachusetts individual mandate and the federal government individual mandate.

Massachusetts Law
Massachusetts residents without health insurance currently pay a penalty, up to $1,116 per calendar year for 2010. (This penalty is half the price of the lowest priced plan sold in the Massachusetts Health Connector as of January 1, 2009.)

Federal Law
National health care reform law establishes penalties for failure to comply with the new mandate. The penalties are based on a formula that considers several factors, including individual income, a flat dollar amount, and a benchmark premium amount.

Who Is Affected?
Employers

• All fully insured policies with more than 50 employees
• All self-insured policies with more than 50 employees

Summary
Employers with more than 50 employees who do not offer coverage, and have at least one full-time employee who receives premium tax credits, will be assessed a fee of $2,000 for every full-time employee beyond the first 30 employees.

Employers that offer coverage and have more than 50 employees, but have one full-time employee receiving premium tax credits, will be required to pay premiums up to $3,000 for each employee receiving premium credits.

To determe whether an employer qualifies as a "large employer," the total number of hours worked in a month by part-time employees, divided by 120, will be added to the number of full-time employees.

Frequently Asked Questions
Will my company be subject to a penalty if it fails to provide health coverage to my employees?

• Depending on the size of your firm, you may be subject to a federal employer mandate in 2014.
• Beginning in 2014, employers with more than 50 employees who do not offer coverage, and have at least one full-time employee who receives premium tax credits, will be assessed a fee of $2,000 for every full-time employee beyond the first 30 employees.
• Employers that offer coverage and have more than 50 employees, but have at least one full-time employee receiving premium tax credits, will be fined either $3,000 for each employee receiving premium credits or $2,000 for each full-time employee, whichever is less.
• Employers with fewer than 50 employees are not subject to any of these penalties.
• Massachusetts health care reform law does still apply such that employers with 11 or more employees in Massachusetts must pay a $295 per full-time equivalent employee "fair share contribution" for failing to provide health insurance to their employees.

What size employer am I if my business primarily consists of part-time workers?

• Beginning in 2014, in determining the number of full-time employees, an employer must add up the total number of hours worked in a month by part-time employees, divide by 120, and add that number to the number of full-time employees.

Does the coverage that I am already offering my employees satisfy the employer responsibility?

• Employers that offer coverage must determine whether the current employee plan they offer adheres to the requirements established by the legislation. Regulations that will be issued by the federal government will clarify whether current coverage will satisfy federal standards.

Massachusetts Law
Employers with 11 or more full-time equivalent employees must make a "fair and reasonable" premium contribution or pay a "fair share contribution" for each employee, as specified in Massachusetts regulations.

Federal Law
Employers with more than 50 employees who do not offer coverage, and have at least one full-time employee who receives premium tax credits, will be assessed a fee of $2,000 for every full-time employee beyond the first 30 employees.

Employers that offer coverage and have more than 50 employees, but have one full-time employee receiving premium tax credits, will be assessed a fee of either $3,000 for each employee receiving premium credits or $2,000 for each full-time employee beyond the first 30, whichever is less.

Employers with fewer than 50 employees will be exempt from any of these penalties.

Who Is Affected?
People newly eligible for Medicaid, as defined by the law

Summary
The national health care reform law expands Medicaid eligibility to certain individuals with incomes of up to 133 percent of the federal poverty level.

This bill specifies that in all states, the federal government will cover 100 percent of the cost of coverage to newly eligible people as defined in the law—including both parents and childless adults—from 2014 through 2016.

In 2017, matching federal funds for all states will cover 95 percent of the costs for the newly eligible people as defined in the law, and the rate will be 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and later years.

Massachusetts Law
Medicaid currently applies to those with an annual income of up to 300 percent of the federal poverty level (children) and up to 200 percent of the federal poverty level (adults).

Federal Law
Expands Medicaid eligibility to certain individuals with incomes of up to 133 percent of the federal poverty level.

Who Is Affected?
Individuals at the federal poverty level

Summary
Subsidies are provided to help pay for insurance. Subsidies will become available for certain people with incomes between 100 percent and 400 percent of the federal poverty level.

Massachusetts Law
Subsidies are available for people with incomes up to 300 percent of the federal poverty level.

Federal Law
Subsidies are available for certain people with incomes between 100 percent and 400 percent of the federal poverty level.

Who Is Affected?
Individual

• All individual policies

Employer

• All small group policies

Summary
Rating rules are the process by which the insurer evaluates, or underwrites, a group or individual in order to determine a premium rate relative to the financial risk of possible health care needs for the person or group.

Massachusetts Law
Individuals and small group rates may vary by:

• Age
• Industry
• Participation rate
• Wellness program
• Tobacco (within overall 2:1 band) and adjustments allowed for benefit level
• Area
• Family
• Group size (outside of rate band)

• Age (3:1 for adults)
• Individual or family coverage
• Tobacco (1.5:1)
• Geographic rating areas established by states

The law addresses how to apply the rating variations permitted for age and tobacco to family coverage.

Flexible Spending Account (FSA), Health Saving Account (HSA), and Health Reimbursement Account (HRA)

Who Is Affected?
Individual

• All individual policies

Employer

• All small group policies
• All large group policies

Summary
Effective January 1, 2011, the additional taxes on distributions from an HSA that are not used for qualified medical expenses will increase from 10 percent to 20 percent (and from 15 percent to 20 percent for medical savings accounts) of the disbursed amount.

Effective January 1, 2011, distributions from FSAs, HSAs, and HRAs for over-the-counter medicines (other than insulin) will no longer be permitted, unless the purchase is for a prescription.

Effective January 1, 2013, salary reductions by an employee for a taxable year for the purposes of coverage under an FSA under a cafeteria plan are limited to $2,500. For taxable years beginning after December 31, 2013, the dollar amount will be increased by a cost-of-living adjustment.

Effective January 1, 2011, employers must include the value of salary deduction contributions to FSAs and contributions to HSAs and HRAs on employees, W-2 forms.

Who Is Affected?
Employers

• Fully insured policies
• Self-insured policies

Summary
Beginning in 2011, some small employer groups will be eligible to receive federal grants in order to provide employees with comprehensive workplace wellness programs.

To be considered for a small employer wellness grant, employers must have fewer than 100 employees working 25 or more hours per week. If the employer meets this requirement, and also did not have a wellness program in place as of March 23, 2010, a wellness program adopted after this date will be eligible for the federal grant.

It has not yet been determined how the government will allocate funds to qualifying employers. In total, the government has directed $200 million to this temporary program. This amount will be used to support the program in federal fiscal years 2011 to 2015, or until the funds have been exhausted.

What Qualifies as a Wellness Program?
A wellness program provides initiatives that support and engage employees in raising health awareness, changing unhealthy behaviors, and encouraging healthy lifestyle choices. In order to qualify for the federal grant, the wellness program must incorporate the following components:

• Health awareness initiatives, such as health education, preventive screenings, and health risk assessments
• Efforts to maximize employee engagement in the program
• Initiatives to change unhealthy behaviors and lifestyle choices, such as counseling, seminars, online programs, and self-help materials
• Supportive environment efforts to encourage healthy lifestyle choices, such as workplace policies to promote healthy eating, increased physical activity, and improved mental health

Who Is Affected?
Medicare Beneficiaries

Summary
The national health care reform law provides a $250 rebate to most beneficiaries who enter the coverage gap in 2010.

Starting in 2011, the law establishes progressively lower beneficiary co-insurance for generic drugs dispensed to beneficiaries in the coverage gap, such that the required co-insurance for generic drugs is 25 percent by 2020.

Starting in 2011, a discount program (through an agreement with pharmaceutical manufacturers) will generally make discounts of 50 percent off brand-name prescription drugs available to Part D enrollees during the coverage gap.

Starting in 2013, the law provides coverage in the standard Part D benefit for brand-name drugs, such that by 2020, the required beneficiary co-insurance plus the discount results in the beneficiary paying 25 percent of the cost of the drug or an actuarially equivalent amount.

Who Is Affected?
Direct Pay

• New individual policies

Employer

• New plans in small group markets
• New plans in large group markets

Summary
Group health plans or health insurers that offer group or individual health coverage and provide or cover services in an emergency department of a hospital will be required to:

• Cover services without the need for any prior authorization and without the imposition of coverage limitations, regardless of the provider's contractual status with the plan
  
  
• If the emergency services are provided out-of-network, the cost-sharing requirement will be the same as the cost-sharing for an in-network provider
  

Who Is Affected?
Medicare Beneficiaries

Summary
The national health care reform law provides a $250 rebate to most beneficiaries who enter the coverage gap in 2010.

Starting in 2011, the law establishes progressively lower beneficiary co-insurance for generic drugs dispensed to beneficiaries in the coverage gap, such that the required co-insurance for generic drugs available is 25 percent by 2020.

Starting in 2011, a discount program (through an agreement with pharmaceutical manufacturers) will generally make discounts of 50 percent off brand-name prescription drugs available to Part D enrollees during the coverage gap.

Starting in 2013, the law provides coverage in the standard Part D benefit for brand-name drugs, such that by 2020, the required beneficiary co-insurance plus the discount results in the beneficiary paying 25 percent of the cost of the drug or an actuarially equivalent amount.

Who Is Affected?
Individual

• New individual policies

Employer

• New policies in small group markets
• New policies in large group markets

Summary
If a group health plan or health insurer requires that a "participant, beneficiary, or enrollee" has a designated primary care provider, they must allow the "participant, beneficiary, or enrollee" to choose "any participating primary care provider who is available to accept such an individual."

In the case of pediatric care, "physician" is defined as allopathic or osteopathic.

Who Is Affected?
Employer

• Fully insured policies with 25 or fewer full-time equivalent employees (FTEs)
• Self-insured policies with 25 or fewer full-time equivalent employees (FTEs)

Summary
The credit is available immediately through 2013 for small employers (up to 25 FTEs) with less than $50,000 in average annual wages that contribute at least 50 percent to total premium cost. The credit amount is up to 35 percent of employer costs (25 percent if the small employer is tax-exempt), with a sliding scale for firm size and wages.

Beginning in 2014, the credit will be valued at up to 50 percent of employer costs (35 percent if tax-exempt), but will only be available for employers who purchase coverage through the Exchange. The tax credit is limited to the first two years of coverage, starting in 2014.¹

Eligible employers may count premium contributions made for the entire 2010 tax year as part of the credit, starting with the 2010 income tax return they file in 2011. Eligible employers can claim this credit for all four years.

The amount of the credit available to a company is determined by the number of FTEs and/or the average wages of its employees, with the smallest companies and those with the lowest average wages eligible for the maximum credit.

Employers with 10 or fewer employees and average annual wages of less than $25,000 may be eligible for the full credit.

The tax credit does not apply to expenses for certain employees who have an ownership interest in the company. Specifically, the tax credit does not a apply to: (a) self-employed individuals; (b) individuals who, on any day during the taxable year, own two percent of shares, two percent of outstanding stock, or a stock with a total, combined voting power of two percent of an S Corporation; (c) individuals who own more than five percent of the outstanding stock, or possess more than five percent of the total, combined voting power of all stock of a corporation (or if the small employer is not a corporation, any individual who owns more than five percent of capital or profits interest in the employer); and, (d) any individual who is related to an individual described in conditions (a) through (c).

Massachusetts Law
No employer subsidies are available.

Federal Law
Small employers that (1) have 25 or fewer full-time equivalent employees (FTEs), (2) pay less than $50,000 per FTE in average annual wages, and (3) contribute at least 50 percent to total premium cost are eligible for the tax credit. Credit amount is up to 35 percent of employer costs (25 percent if the small employer is tax-exempt), with the premium capped by the average premium for the local small group market. There is a sliding scale for firm size and wages. Beginning in 2014, the subsidy grows to 50 percent (35 percent if tax-exempt), but is only available to employers who purchase coverage through the exchange.

1. For further information beyond what is listed here, the IRS has issued detailed guidelines (e.g., Notice 2010-44), as well as answers to common questions, which can be found at www.IRS.gov.

Who Is Affected?
Individual

• Individual policies, grandfathered policies excluded

Employers

• All fully insured policies, grandfathered policies excluded
• All self-insured policies, grandfathered policies excluded

Summary
All group health plans and issuers offering group coverage or individual health insurance coverage may only establish a restricted annual limit on the dollar value of essential health benefits. We are removing annual limits on those essential benefits that currently apply an annual dollar limit.

Who Is Affected?
Individual

• All individual policies

Employers

• All fully insured policies
• All self-insured policies

Summary
The Patient Protection and Affordable Care Act (PPACA), enacted on March 23, 2010, requires plans that provide coverage to dependents to offer coverage to all adult children up to age 26, regardless of the dependent's IRS tax qualification status, marital status, or student status. This provision is effective for fully insured and self-insured business for plan years¹ beginning on or after September 23, 2010.²

Mandated 30-Day Enrollment Period
Extending dependent coverage to age 26 provides transitional relief for children whose coverage ended, or who were denied coverage (or were not eligible for coverage), because the availability of dependent coverage of children ended before attainment of age 26. The regulations require that you give dependents an opportunity to enroll for at least 30 days (including written notice of the opportunity to enroll), regardless of: (1) whether the plan or coverage offers an open enrollment period and (2) when any open enrollment period might otherwise occur.

You must provide this enrollment opportunity no later than the first day of the first plan year beginning on or after September 23, 2010. The notice may be included with other enrollment materials that your plan distributes, provided the statement is prominent. Enrollment must be effective as of the first day of the first plan year beginning on or after September 23, 2010.

Your Responsibility to Communicate Dependent Coverage Extension: Model Language for Notifying Employees
To satisfy your employer requirement to communicate enrollment opportunities for dependent coverage, you can use the model language below.
In addition, we have created a customizable model language document that you can use to notify your employees of this enrollment opportunity:

Dental Coverage Expansion
Although the mandate does not apply to dental plans, Blue Cross Blue Shield of Massachusetts will apply the dependent coverage provisions to our dental plans, effective on anniversary, beginning January 1, 2011. Accounts with 100 employees or more will be able to opt out of the benefit.

Very Important Information Regarding Student Certification and Reporting
The following information applies only to self-insured accounts, excluding those accounts that:

• Previously adopted the Massachusetts health care reform eligibility provisions
• Manage their own student recertification process or opted out of the student recertification process for the 2010/2011 school year
• Extended coverage to currently enrolled dependents prior to their next anniversary, on or after September 23, 2010
• Opted to implement the PPACA provisions prior to their next anniversary date, on or after September 23, 2010
• Will renew and adopt the PPACA eligibility provisions by December 1, 2010

Blue Cross Blue Shield of Massachusetts will conduct the annual student recertification process for the 2010/2011 school year as we have done in
past years. However, accounts with renewal dates of October 1, 2010 through December 1, 2010, will be excluded from the process to ensure compliance with the eligibility provisions in the PPACA. Accounts who have managed their own student recertification in the past can continue to do so until they adopt the new eligibility provisions on their next renewal, on or after September 23, 2010.

We will also continue to certify dependents who reach the maximum dependent age, as defined in your plan, for dependents with birthdays up to the month prior to the next plan renewal, on or after September 23, 2010. Accounts who have managed their own initial certification in the past can continue to do so until they adopt the new eligibility provisions on their next renewal, on or after September 23, 2010.

The following information applies to all insured business and those self-insured accounts that previously adopted the Massachusetts health care reform eligibility provisions:

In anticipation of the implementation of the dependent eligibility provisions that are effective for plan years on or after September 23, 2010, Blue Cross Blue Shield of Massachusetts has made the following changes:

• We will no longer mail the annual notification, which outlines eligibility requirements for dependents, to subscribers with dependents age 18 and over
• We will discontinue the monthly student reports that identify students approaching age 25

1. Please note that Blue Cross Blue Shield of Massachusetts assumes that your plan year begins on your anniversary date, unless you inform us otherwise.

2. If you have elected to maintain "grandfathered" status of your plan, your obligation may be different; check with your legal counsel.

The information in this document regarding dependent coverage to age 26 is provided for informational purposes only and does not constitute legal advice. Please consult your legal counsel regarding your specific situation.

Who Is Affected?
Employers

• All self-funded policies
• All fully insured policies

Summary
As a result of the Patient Protection and Affordable Care Act (PPACA) of 2010, the U.S. Department of Health and Human Services (HHS) has established a temporary reinsurance program to assist employment-based plans with the costs of providing health benefits to early retirees and their dependents. Blue Cross Blue Shield of Massachusetts is committed to supporting you with information and updates regarding these PPACA provisions that may affect your business. This update is intended for your information only and does not constitute legal advice.

HHS will reimburse 80 percent of claims between $15,000 and $90,000, and will adjust these numbers annually based on the medical care component of the Consumer Price Index (CPI). There is currently $5 billion appropriated for the program. When the program funds run out, the program is expected to end.

If you determine that completing an application is in your best interest, you will first be required to file an application with the HHS Secretary and be certified for participation in the program.

The program began accepting applicants on June 29, 2010. You can download application forms at www.healthcare.gov.

Definition of Early Retiree
Early retirees are defined as individuals who are age 55 and older, but are not eligible for Medicare and are not active employees of an additional employer-based plan. Under the temporary reinsurance program, coverage also extends to early retirees' spouses, surviving spouses, or covered dependents.

Application Requirements
Blue Cross Blue Shield of Massachusetts can provide the general information below to assist you in navigating the temporary reinsurance application requirements should you choose to file an application.

Please note: This is a general description of data and programs Blue Cross Blue Shield of Massachusetts can provide and/or has in place today. We are providing this information to the extent that you may find it helpful in applying for the new federal Early Retiree Reinsurance Program. We make no representation as to whether this information or the programs referenced below satisfy the requirements of HHS with regard to the Early Retiree Reinsurance Program application. You must make that determination independently.

According to the regulations, an application will require you to include the following:

1. The projected amount of reimbursement to be received for the first two plan-year cycles with specific amounts for each plan year. Blue Cross Blue Shield of Massachusetts is prepared to give you, to the extent permitted by HIPAA, aggregate dollar amounts for claims incurred by all early retirees identified by you in calendar years 2008 and 2009. We will also provide you with overall estimated health care trends developed by Blue Cross Blue Shield of Massachusetts actuaries based on the aggregate historical claim experience of all Blue Cross Blue Shield of Massachusetts members in Insured Managed Care or PPO products.

2. An attestation that policies and procedures are in place to detect and reduce fraud, waste, and abuse. Blue Cross Blue Shield of Massachusetts has policies and procedures in place to detect and reduce fraud, waste, and abuse.

3. A description of procedures or programs in place with the potential to generate cost savings with respect to chronic and high-cost conditions. Please contact your account executive for information regarding the programs that Blue Cross Blue Shield of Massachusetts has in place that could potentially generate cost savings with respect to chronic and high-cost conditions.

4. Assurance of a written agreement with your health insurance issuer or group health plan to provide the HHS Secretary with information and data necessary to verify compliance with the program requirements, including access to individually identifiable health information subject to the HIPAA Privacy Rule. Blue Cross Blue Shield of Massachusetts is currently in the process of drafting an agreement that would permit us to submit data on your behalf. Self-insured employers may instead choose to submit claims data directly to HHS.

5. A summary of how reimbursed amounts will be used to maintain your level of contribution to the plan and reduce costs to the plan (e.g., using funds to lower participant deductibles, co-insurance, or copayments in future years). Blue Cross Blue Shield of Massachusetts cannot assist you in determining how you must use reimbursed amounts. We recommend that employers consult with their own legal counsel or benefit consultant to determine how to use reimbursements to lower costs for the plan.

Claims Submission
Once HHS approves a final application and you are certified for participation in the program, you should notify your Blue Cross Blue Shield of Massachusetts account executive that you have been certified for participation in the Early Retiree Reinsurance Program. Once notified, Blue Cross Blue Shield of Massachusetts will begin the process of submitting claims data in excess of the $15,000 threshold to HHS for reimbursement on your behalf.

Use of Reimbursement Payments
Reinsurance payments will need to be used to lower the cost for the employer-based plan, including employer costs and retiree costs (e.g., premiums and cost-sharing).

HHS will conduct oversight on reinsurance payments to ensure that employers do not direct funds for reinsurance to other parts of their business.

Frequently Asked Questions
How does this apply to temporary reinsurance for early retirees?

• Employers that provide health insurance coverage for early retirees (over age 55) who are not eligible for Medicare may be reimbursed up to 80 percent of the cost of retiree coverage between $15,000 and $90,000. This provision is effective 90 days after enactment.
  
  
• Employers will submit claims for reimbursement to the HHS Secretary, which will contain documentation of the actual costs of the items and services. These amounts will be adjusted annually by the medical care component of the Consumer Price Index for All Urban Consumers (CPI-U), rounded to the nearest multiple of $1,000.
  

Who Is Affected?
Individual

• All individual policies

Employers

• All fully insured policies
• All self-insured policies

Summary
Beginning with plan years that start September 23, 2010, group health plans and health insurers are prohibited from establishing lifetime limits on essential benefits for any participant or beneficiary.

Who Is Affected?
Employers

• Fully insured policies, grandfathered plans excluded
• Self-insured policies, grandfathered plans excluded

Individual

• Individual policies, grandfathered plans excluded

Summary
All group health plans and issuers offering group coverage or individual health insurance coverage may not impose cost-sharing for preventive coverage, including, but not limited to, immunizations, screenings, and other services, as recommended by certain federal agencies. Coverage of certain preventive services is also required. In order to meet this requirement, for in-network benefits, we will be removing all cost-sharing, including deductibles, copayments, and co-insurance. In certain plans, we will also be adding coverage for preventive care services with no cost-sharing.

Who Is Affected?
Employer

• New policies in small group markets
• New policies in large group markets

Individual

• New individual policies

Summary
All group health plans and issuers offering group coverage or individual health insurance coverage are prohibited from establishing lifetime limits on "essential" benefits for any participant or beneficiary. In order to meet this requirement, we will be removing the lifetime limits from our standard plans that currently have a lifetime limit.

OB/GYNs are required to adhere to plan, policies, and health insurer procedures regarding referrals, obtaining prior authorization, and treatment planning. The OB/GYN may be required to notify the plan, insurer, or PCP of treatment decisions.

Who Is Affected?
Employers

• Fully insured policies, grandfathered plans excluded
• Self-insured policies, grandfathered plans excluded

Individual

• Individual policies, grandfathered plans excluded

Summary
Blue Cross Blue Shield of Massachusetts already has a comprehensive internal and external member appeals process in place. This process is explained in detail in our member benefit materials, when applicable. However, given the new national health care reform provisions, certain changes may apply. Currently, we are working on evaluating and implementing any changes that may be required.

As we make appropriate changes to our policies, we will be communicating this information to our accounts.