Health Insurance Info for Colorado

news & commentary on health insurance and benefits

DOI advises on change in statute interpretation

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In May 2010, the Colorado Legislature passed HB 10-1021, which amended the Colorado Revised Statutes to “expand the state’s mandatory maternity coverage to individual [health insurance] policies”. This change in the law is effective January 1, 2011.

On December 3, 2010, the Colorado Division of Insurance has issued a new bulletin, B-4.36 “Statutory Interpretation of Possible Conflicting Provisions in HB 10-1021”, which advises carriers of the Division’s position and interpretation of the statute’s language in Section 10-16-104(3). According to the DOI, “bulletins are the DOI’s interpretation of existing insurance law or general statements of Division policy”.

In issuing their bulletin, the Division has found conflicting provisions in the law between the statute and the applicability clause in HB 10-1021. In part, the bulletin reads “based on the Division’s reading of the statute… the clear intent… was to expand coverage only to policies issued (and not renewed) on or after January 1, 2011…”.

The statute is in conflict with the applicability clause in HB 10-1021, which uses the term “issued or renewed”,  whereas the statute language simply uses the word “issued”.  The Division takes the position that “the language to the contrary in the applicability clause was an inadvertent mistake”. The Division cites discussions with the bill sponsor and Legislative Legal Services in making this interpretation of the statute.

Therefore, while insurers are encouraged to offer maternity and contraceptive coverage to renewing policies, they are not required to do so, and the change in law only applies to individual and group sickness and accident policies issued after January 1, 2011.

 

UPDATED: This interpretation of statute has been overruled – see my new post, dated March 15th, 2011.

Follow-up: medical-loss-ratios

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To recap, interim regulations concerning the new minimum-loss-ratios (MLRs) were recently released for public comment.

OVERVIEW: Beginning in 2011, health insurers must spend at least 80%, or 85% for the large group (more than 100 employees) market, of premiums for medical care claim expenses and “health-care quality improvement”. Otherwise, they will be penalized – beginning in 2012, they will be required to provide rebates to their customers.

The National Association of Insurance Commissioners (NAIC) was entrusted with writing and creating the definitions and formula for calculating MLRs. The Department of Health and Human Services (HHS) reserved the authority to make final decisions about these regulations, based on the NAIC recommendations.

As previously mentioned in a prior post, HHS went along with the NAIC on their recommendations, for the most part. A review of the interim regulations shows that:

  1. insurers are allowed to deduct state and federal taxes from premiums used to calculate MLRs.
  2. agent/broker commissions, rather than being treated as pass-through expenses, will be treated as administrative expenses. (More on this in a moment)
  3. anti-fraud programs are counted as admin expenses, rather than as quality improvements, as many in the health insurance industry had hoped.
  4. MLRs, rather than being judged collectively, are required to be accounted for separately in every state.

Regarding so-called “mini-med” policies, of the kind that have elicited so much press recently concerning waivers from the new regulations on coverage, these plans will have at least another year to gather data before falling under the requirement. Mini-med plans are used in many service industries, in place of traditional health insurance policies, primarily due to costs. [Senator Rockefeller, D-WV, is holding a hearing Dec. 1 on whether limited-benefit “mini-med” plans should even be classified as health plans, which is certainly a shot-across-the-bow in the battle to have these  so-called “mini-med” plans removed from the market, forcing employers to provide much more expensive policies for all full and part-time employees – a jobs killer, for sure!]

States may apply to have the MLR standard adjusted or modified if the requirement would result in the destabilization of their individual health insurance market; some states have already said they will apply for such adjustments.

The agent/broker issue: Many in the industry are puzzled about why compensation, in the form of commissions, were treated as administrative expenses. It’s been argued that commissions aren’t premium income, but are a service charge or fee that is tacked on to the total premium and relayed to the agent as a pass-through expense. NAIC side-stepped this issue on first examination, but the truth is many people are concerned that, without insurance agents and brokers, state agencies would be overwhelmed with questions about how to purchase coverage, what kind of coverage, and so on. HHS, along with the NAIC, is participating in a working group, studying the agent-broker issue further, because of the concern that the market could be destabilized without properly trained and experienced professional agents and brokers helping consumers make informed choices. Developing…

Health reform at-a-glance: spending accounts

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Health care reform will change how employees may use their health care flexible spending accounts, health reimbursement arrangements, health savings accounts, and Archer medical savings accounts, starting on January 1, 2011.

The IRS issued Notice 2010-59 which provides information about these changes. Two important changes are an increased penalty for nonqualified HSA and MSA distributions, up from 10% to 20%, and that prescriptions are now required for over-the-counter (OTC) drugs, with the exception of insulin. Flexible spending account holders who have valid prescriptions for OTC items must pay up front and then provide proof when they request reimbursement.

For OTC items that aren’t drugs, such as bandages, blood sugar testing supplies, catheters and so on, members can continue to use spending account funds to pay for these expenses.

TIP: If an employer has a cafeteria plan allows members to use spending account funds for OTCs, the plan will need to be amended. There is a transition period allowed for this change – an amendment made before June 30, 2011 may be made retroactively for expenses incurred on or after January 1, 2011. Contact your third party administrator (TPA) to get this accomplished.

Health reform at-a-glance: small group/large group

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The new health care reform law established, for the first time, federal definitions of “small employer” and “large employer” for health insurance markets. Prior to the passage of this legislation, states defined these markets for themselves.

Here are the new rules:

  • From now until 2016, states can define the size of small employer groups as either 50 and fewer employees, or 100 and fewer.

Colorado has defined “small employer” for group insurance purposes as 50 or fewer, and there doesn’t seem to be any rush to change this with the passage of federal law, for now.

Beginning in 2016, the new definitions will apply – businesses with, on average, 1-100 employees in the preceding calendar year will be “small employers”. “Large employers” will be those who had, on average, 101 or more employees in the preceding calendar year (and at least one employee on the first day of the plan year).

For employers who are used to calculating COBRA continuation eligibility, the full-time calculation accounts for both full-time and part-time employees, using the same general formula (part-time employees counted as fractions).

TIP: Full-time seasonal employees who worker fewer than 120 days during the year are excluded.

There are inconsistencies in the application of these new federal definitions that will need to be ironed out, assuming the entire health reform act isn’t amended, repealed and replaced, or successfully challenged in court.

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