Last year brought many big changes for health and welfare plans. The following summarizes major developments that have an impact on plan sponsors in 2010 and 2011.

HEALTH CARE REFORM

• Small Business Tax Credit: Qualified small employers can receive a credit for contributions to purchase health insurance for employees beginning with the 2010 tax year.
• Extension of Dependent Coverage: Effective for plan years beginning on or after September 23, 2010, group health plans that offer dependent coverage must provide coverage for adult dependent children up to age 26. Effective March 30, 2010, employer-provided health insurance coverage for these adult children is tax-free to employees.
• Elimination of Lifetime and Annual Limits: Effective for plan years beginning on or after September 23, 2010, group and individual plans may not establish lifetime limits on the dollar value of essential benefits. Group health plans may also not establish unreasonable annual limits.  
• Elimination of Pre-Existing Condition Exclusions: Effective for plan years beginning on or after September 23, 2010, pre-existing condition exclusions may not be applied to enrollees under age 19.
• Limits on Rescissions: Effective for plan years beginning on or after September 23, 2010, coverage may not be rescinded (retroactively cancelled), except in the case of fraud or intentional misrepresentation of material fact. Policyholders must be notified prior to cancellation.
• Coverage of Preventive Health Services: Effective for plan years beginning on or after September 23, 2010, non-grandfathered health plans must provide coverage for certain preventive health services without imposing cost-sharing requirements.
• Patient Protections:Effective for plan years beginning on or after September 23, 2010, the health care reform law puts the following rules in place for non-grandfathered plans:
  • Plans that require designation of a participating primary care provider must permit each participant, beneficiary and enrollee to designate any available participating primary care provider (including a pediatrician for children).
  • Plans that provide emergency services may not require preauthorization for receipt of emergency services and cannot impose higher cost-sharing requirements on out-of-network emergency services.
  • Plans that provide obstetrical/gynecological care and require a designation of a participating primary care provider may not require preauthorization or referral for obstetrical/gynecological care.
• Nondiscrimination Rules for Fully-Insured Plans:Effective for plan years beginning on or after September 23, 2010, non-grandfathered, fully-insured plans may not discriminate in favor of highly compensated individuals as to eligibility or benefits. Note: on December 22, 2010 the Department of Treasury issued Notice 2011-1 delaying implementation of the non-discrimination rules for insured plans. The Notice states that because regulatory guidance is essential to the operation of these new rules, the IRS, DOL, and HHS collectively have determined that compliance will not be required until after such regulatory guidance has been issued.
• New Appeals Process: Effective for plan years beginning on or after September 23, 2010, non-grandfathered plans must implement an effective appeals process and must follow minimum requirements for external claims review.
• Early Retiree Reinsurance Program: From 2010 until January 1, 2014, employers that provide health coverage to early retirees may be eligible to participate in a federally funded program providing reimbursement to plan sponsors for certain high-cost claims.
• Simple Cafeteria Plan: Eligible small employers can adopt a Simple Cafeteria Plan beginning 2011. If the employer meets certain requirements related to eligibility and contributions, it will be treated as meeting the cafeteria plan nondiscrimination requirements.
• Limits on OTC Reimbursements: Beginning in 2011, expenses for over-the-counter medicine or drugs may not be reimbursed by employer plans (such as FSAs and HRAs) without a prescription (except insulin).
• Increased HSA Penalty Tax: The penalty tax on HSA withdrawals prior to age 65 that are not used for qualified medical expenses will be increased from 10 to 20 percent in 2011.
• W-2 Reporting: Employers will be required to disclose the value of the health coverage provided by the employer to each employee on the employee’s annual Form W-2. Note that this requirement is effective, but optional, for the 2011 tax year and will be mandatory beginning with the 2012 tax year.

• Adjust group premium or contribution amounts on the basis of genetic information;
• Request or require individuals (or their family members) to undergo a genetic test (with limited exceptions such as for determinations regarding payment based on medical appropriateness); and
• Request, require or purchase genetic information prior to or in connection with enrollment, or at any time for underwriting purposes.

• Provide a reward or incentive to an individual for completing an HRA that requests genetic information, such as family medical history; or
• Request genetic information as part of an HRA that must be completed before enrollment in the plan or eligibility for additional benefits under the plan, such as a disease management program.

• Imposing higher copayments, deductibles or out-of-pocket limits on mental health and substance abuse treatment benefits than on medical and surgical benefits;
• Placing more restrictive limits on the number of covered office visits, days of inpatient coverage or the duration or scope of treatments available for mental health and substance abuse treatment benefits than those available for other types of medical treatment; and
• Excluding out-of-network treatment for mental health and substance abuse treatment benefits if out-of-network benefits are provided for medical and surgical benefits.