Last January, due to the new PPACA rules, people who wanted to use their Health Savings Accounts (HSA) or Flexible Spending Accounts (FSA) to purchase over the counter medication had to get a prescription from their physician. Without a prescription, the over the counter medications did not qualify as a medical expense for HSA or FSA. Well, things may be changing – for the better.

Last week, Congress introduced bipartisan legislation to remove restrictions on tax-exempt health spending accounts – a revenue-raising provision of the Affordable Care Act that was estimated to garner $5 billion over 10 years. The bill would end a provision that since January has required a prescription for buying over-the-counter medicines with medical savings accounts, such as Flexible Spending Accounts and Health Savings Accounts.

The language was originally added as a way to keep the Affordable Care Act’s costs down by reducing unnecessary drug purchases. However, the provision appears to have had the opposite effect of increasing costs, as many people are scheduling doctor visits for the sole purpose of obtaining prescriptions for over-the-counter medications. The proposed legislation would restore the ability of people participating in a medical savings account to use funds from those accounts to purchase over-the-counter medications without a prescription.

Employers will be responsible for reporting to employees the total cost of their group health benefit plan coverage on their W-2 forms under the Patient Protection and Affordable Care Act. The reporting requirements are expected to apply to the 2012 W-2 forms, which is information employers must report to employees in January 2013.

This requirement is informational only and does not mean that employer-provided coverage will become taxable. Employers filing fewer than 250 W-2 forms in 2011 will not be required to report the cost of coverage on any forms furnished to employees before January 2014.

Some benefits are not subject to the W-2 requirement:

• HIPAA “excepted benefits” plans (accident, disability income, supplemental liability, workers’ compensation insurance).
• Stand-alone dental and vision plans.
• Coverage under an HRA, amounts contributed to an HSA or an Archer MSA, as well as salary reduction contributions to a health FSA.
• Coverage under a self-funded plan that is not subject to any federal continuation requirements (COBRA, PHSA continuation, FEHBP continuation), such as a group health benefit plan sponsored by a church.Coverage provided by the federal government, state government or agency of the government under a plan maintained primarily for members of the military and their families.
• Coverage for a specific disease or illness or hospital indemnity insurance.

The Temporary Extension Act of 2010 (the Act) was signed into law by President Obama on Tuesday, March 2, 2010. The Act extends the COBRA subsidy eligibility period originally introduced under the American Recovery and Reinvestment Act of 2009 (ARRA), as amended by the Department of Defense Appropriations Act, 2010, until March 31, 2010.

New Rules
Individuals who experienced a qualifying event that was a reduction in hours of employment, on or after September 1, 2008, and who later experienced an involuntary termination of employment as defined by ARRA between March 2 and March 31, 2010, are eligible for the subsidy if they are otherwise an Assistance Eligible Individual (AEI). This new rule only applies to periods of coverage beginning after March 2, 2010.

New Election Period
Individuals who experienced a qualifying event due to a reduction in hours of employment and did not elect COBRA coverage, or elected and then lost COBRA coverage, are entitled to a new COBRA election period if they later experience an involuntary termination of employment between March 2, 2010 and March 31, 2010.

Civil Action and Penalties
To enforce the provisions of ARRA and the Act, the Treasury and/or Department of Labor (DOL) or an affected individual may bring a civil action to enforce any determinations and/or appropriate relief. Plan sponsor or health carrier failure to comply with Treasury or DOL determinations within 10 days after receiving notice of the determination could result in $110 a day penalty.

On February 4, 2009, President Obama signed the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA, Pub. L. 111-3). CHIPRA includes a requirement that the Departments of Labor and Health and Human Services develop a model notice for employers to use to inform employees of potential opportunities currently available in the State in which the employee resides for group health plan premium assistance under Medicaid and the Children’s Health Insurance Program (CHIP).

On February 4, 2010, the DOL provided a model notice for use by employers with group health plans, in accordance with the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA).

CHIPRA requires employers offering group health plans to notify all employees of their potential CHIPRA rights to receive premium assistance under a state’s Medicaid or CHIP program.

The requirement applies to employers that offer medical care benefits in any of 40 states that currently provide premium assistance. The 10 states that do not currently provide premium assistance are: Connecticut, Delaware, Hawaii, Illinois, Maryland, Michigan, Mississippi, Ohio, South Dakota and Tennessee.

Employers must send the notice annually, starting with the first plan year after February 4, 2010. For plan years from February 4, 2010, through April 30, 2010, the initial notice deadline is May 1, 2010. For plan years starting after May 1, 2010, the notice deadline is the first day of the next plan year.

Get the EBSA sample CHIPRA notice HERE

On November 19, 2009, Senate Majority Leader Harry Reid (D-NV) released health reform legislation, the Patient Protection and Affordable Care Act, that combines the bills reported out of the Finance and Health Education, Labor and Pensions (HELP) Committees. CBO is projecting that the bill’s spending provisions would total  $849 billion over ten years and that the bill would reduce the federal budget deficit by $127 billion over the first ten years.  CBO further estimates that the bill would cover 94 percent of Americans and reduce the number of uninsured persons by 31 million after ten years.

The combined Senate bill retains most provisions from the Finance legislation and adds several new ones. The merged legislation calls for state-based exchanges and includes a public option with a state opt-out feature. The legislation also provides start-up funding to establish a member-operated cooperative that would participate in the exchanges.  The merged bill includes all of the industry fees defined in the Senate Finance legislation for manufacturers and health plans, but cuts the device manufacturer fee in half. The bill keeps the health plan industry assessment at the same level, but now includes insurers’ administrative services fees for managing self-insured business.

The first crucial vote on the Senate floor – a cloture vote on a motion to proceed to consideration of the bill – may occur Saturday night, November 20, at 8 pm. If 60 senators vote for cloture on the motion to proceed to the bill, this will pave the way for the Senate floor debate on health reform after the Thanksgiving recess – on or about November 30. At this time, 2-4 weeks of debate are expected. Although opponents of the bill previously had signaled that they planned to slow down the legislative process by calling for a full reading of the bill (all 2,074 pages), it now is our understanding that they will not pursue this strategy.

Immediate Reforms — The following reforms would take effect within the first year after the bill’s enactment:

• a ban on lifetime limits and unreasonable annual limits;
• a prohibition on rescissions except in cases of fraud;
• an option for unmarried individuals through age 25 to remain on their parent’s coverage as dependents;
• a benefit mandate for preventive services;
• reporting requirements on medical loss ratios and administrative costs;
• rebates to be paid by plans with non-claims costs exceeding 20 percent in the group market and 25 percent in the individual market (or a lower percentage established by the state);
• a premium justification process established by the HHS Secretary in conjunction with the states, including discretionary authority to exclude plans from the health insurance exchanges that have had unjustified premium increases in the 2010-2014 period;
• a $5 billion temporary high-risk health insurance pool program to provide coverage to uninsured individuals with preexisting conditions;
• a $5 billion temporary reinsurance program for employer-based plans providing coverage for early retirees; and
• an internet portal to provide consumer information on coverage options.

Other key issues concerning this legislation can be found in this attachment.

Insurance Market Reforms
Individual Coverage Requirement
Government-Run Plan
Health Care Cooperatives
Exchanges
Excise Tax on High-Value Health Plans
Health Insurance Premium Tax
Interstate Sale of Insurance
Benefit Options
Medicaid Eligibility Expansion

The following documents pertaining to the Senate bill can be found on-line:

• Legislative language at http://democrats.senate.gov/reform/patient-protection-affordable-care-act.pdf
• CBO score at http://www.cbo.gov/ftpdocs/107xx/doc10731/Reid_letter_11_18_09.pdf
• JCT revenue estimates at http://www.jct.gov/publications.html?func=startdown&id=3635