Posted by: danielrashke | December 27, 2011

Extreme Makeover – Healthcare Edition – Part 2

As I wrote in my last blog, I recently sat on a panel of healthcare experts to discuss the impact of recent legislation and regulation. The legislative phase of healthcare reform may be over for now, but the implementation phase shows no sign of letting up. Meanwhile, astute employers are constantly evaluating and revaluating what healthcare reform means to them and how they will be impacted. Previously, I looked at the impact of this legislation on employee benefits accounts. In this post I focus on the new documentation and notice requirements created by the Patient Protection & Affordable Care Act of 2010 (PPACA) and other related regulatory actions.

Now mandated by the new regulations is the requirement—imposed on various benefits Plans—that certain notices be distributed to employees directly or disclosed to them in written Summary Plan Descriptions (SPDs).  Compliance is even more challenging and confusing because some notices must be distributed only once, and some must be distributed annually. Because the Public Health Service Act (PHSA) amended the Health Insurance Portability and Accountability Act (HIPAA), failure to comply can be quite costly for an employer/Plan Sponsor. For example, failure to comply with these reforms—much like failure to comply with HIPAA portability rules under ERISA—is punishable with a $100/day penalty per employee (for every employee who is affected by the violation)  until said violation is corrected. In addition, such noncompliance also requires self-reporting, and even after the violation is corrected any failure to self-report may result in additional fines/penalties.

Beginning in 2012, all healthcare plans and insurers must create and distribute a document summarizing benefits to plan enrollees and policyholders. To be separate from the SPD, this document must include the following:

  • Definitions of standard medical and insurance terms.
  • A summary of the coverage provided, including any cost-sharing provisions.
  • A description of any exceptions to or limitations on coverage, and the renewability and continuation of the plan/policy coverage terms.
  • Examples of common benefits scenarios to illustrate coverage.
  • A statement clarifying whether the plan or policy provides minimum essential coverage.
  • Contact information for consumer convenience.
  • The Act prescribes specific formatting requirements for this summary document.

Who is responsible for ensuring that documentation and notice requirements are met? Per the regulations, health insurers of fully insured plans are responsible for providing notification. But the requirement doesn’t stop there…  As also spelled out in the regulations:  it is the ultimate responsibility of the Employer Plan Sponsor to ensure Participants receive Notices. Yes, that’s right, ultimate responsibility again falls on the employer.

Of course, this comes down to just one question: Where do employers go for assistance? They can look to their broker or agent. They can seek legal counsel. They can resolve to stay on top of this issue—and to avoid the inevitable pitfalls—all by themselves. The healthcare scene is constantly developing and transitioning, and I certainly wouldn’t advise any of those options. Instead, of course, I’d suggest they put their trust in TASC, an administrator which is already all over this! As always, stay tuned for future updates.


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