First Effective Date for Compliance
Several changes under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (together, the “Health Care Reform Legislation”) become effective for plan years beginning on or after today, September 23, 2010. You may hear in the media that these changes are effective today, but don’t panic. For employers using calendar year plans, these changes will not become effective until January 1, 2011.
New Reimbursement Rules for Over-the-Counter Medicines or Drugs
The Internal Revenue Service (“IRS”) has now published guidance regarding the use of health flexible spending accounts (“health FSAs”), health reimbursement arrangements (“HRAs”) and health savings accounts (“HSAs”) to pay for over-the-counter (“OTC”) medicines under the Health Care Reform Legislation.
Under the IRS guidance, effective** January 1, 2011** (for both grandfathered and non-grandfathered health plans), an OTC medicine or drug may not be reimbursed from a health FSA, HRA or HSA unless (1) the individual obtains a prescription for the OTC medicine or drug, or (2) the medicine or drug is insulin. This rule becomes effective on January 1, 2011 regardless of whether an employer uses a non-calendar plan year or has implemented a grace period. Please note that the use of debit cards for OTC medicines or drugs has been severely restricted under the IRS guidance.
Prior to the effective date, employers should communicate with their third-party administrators for their health FSAs, HRAs and HSAs to ensure that their reimbursement processes have been updated to reflect these changes. In addition, employers should update their employee communication materials – such as plan documents, summary plan descriptions, and open enrollment materials – to ensure that employees understand the rules regarding reimbursements for OTC medicines or drugs.
Mini-Med Waiver Program
The regulations regarding the restrictions on annual limits for essential health benefits (the “Regulations”) provide that the annual limit restrictions may be waived by the Secretary of Health and Human Services (“HHS”) if compliance with the Regulations would result in a significant decrease in access to benefits or a significant increase in premiums. Certain limited benefit plans, known as “mini-med” plans, typically offered as a lower cost alternative to standard group health plans, often have annual limits well below the restricted annual limits set out in the Regulations. A waiver process was developed by HHS to ensure that individuals with coverage under mini-med plans would not be denied access to needed services or experience more than a minimal impact on premiums.
Under the HHS waiver program, a group health plan that was offered prior to September 23, 2010 may apply for a waiver from the restricted annual limits set out in the Regulations for the plan year beginning between September 23, 2010 and September 23, 2011 by submitting an application not less than 30 days before the beginning of the plan year. That is, for a calendar year plan (beginning on January 1, 2011), the waiver application must be submitted to HHS by December 1, 2010. Please note that either the employer or the insurance company may apply for the waiver.
The application must include the following information:
- The terms of the plan for which a waiver is sought;
- The number of individuals covered by the plan;
- The annual limits and rates applicable to the plan;
- A brief description of why compliance with the Regulations would result in a significant decrease in access to benefits for those currently covered by the plan, or significant increase in premiums paid by those covered by the plan, along with any supporting documentation; and
- An attestation, signed by the plan administrator certifying (1) that the plan was in force prior to September 23, 2010; and (2) that the application of restricted annual limits to the plan would result in a significant decrease in access to benefits for those currently covered by the plan, or significant increase in premiums paid by those covered by the plan.
In addition, the plan administrator is required to retain documents in support of the application for potential examination by HHS.
HHS will process complete waiver applications within 30 days of receipt. Importantly, a waiver granted by HHS applies only for the plan year beginning on or after September 23, 2010 and before September 23, 2011 – January 1, 2011 for calendar year plans. That is, a plan must reapply for subsequent years prior to January 1, 2014 when the waiver expires.
For more information on the rules regarding the reimbursement of OTC medicines or drugs, the mini-med waiver process, or other aspects of the Health Care Reform Legislation, please contact your SGR Executive Compensation and Employee Benefits counsel.