New Law Updates

MASS Health Letter

New Model COBRA Notices Released

March 19, 2009

EARLY THIS MORNING THE DOL POSTED THE LONG AWAITED MODEL COBRA NOTICES AND UPDATED FAQs RELATED TO THE NEW COBRA PROVISIONS CONTAINED IN THE RECOVERY ACT. THE MODEL NOTICES ARE DESCRIBED BELOW, ALONG WITH A HYPERLINK TO EACH NOTICE. HAPPY READING. NOTICES IN CONNECTION WITH THE EXTENDED COBRA ELECTION PERIOD ARE DUE BY APRIL 18, 2009.

The following updates to www.dol.gov/COBRA were just posted:

• Model notices
• FAQs for Employers on the COBRA Premium Reduction
• Expanded FAQs for Employees on the COBRA Premium Reduction
• Updated FAQs for Employees on General COBRA Provisions

ARRA mandates that plans notify certain current and former participants and beneficiaries about the premium reduction.

The Department created model notices to help plans and individuals comply with these requirements. Each model notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA’s notice provisions.

General Notice (Full version) Plans subject to the Federal COBRA provisions must send the General Notice to all qualified beneficiaries, not just covered employees, who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event. This full version includes information on the premium reduction as well as information required in a COBRA election notice.

General Notice (Abbreviated version) The abbreviated version of the General Notice includes the same information as the full version regarding the availability of the premium reduction and other rights under ARRA, but does not include the COBRA coverage election information. It may be sent in lieu of the full version to individuals who experienced a qualifying event during on or after September 1, 2008, have already elected COBRA coverage, and still have it.

Alternative Notice Insurance issuers that provide group health insurance coverage must send the Alternative Notice to persons who became eligible for continuation coverage under a State law. Continuation coverage requirements vary among States, and issuers should modify this model notice as necessary to conform it to the applicable State law. Issuers may also find the model Alternative Notice or the abbreviated model General Notice appropriate for use in certain situations.

Notice in Connection with Extended Election Periods Plans subject to the Federal COBRA provisions must send the Notice in Connection with Extended Election Periods to any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who:

1. Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and
2. Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

This notice includes information on ARRA’s additional election opportunity, as well as premium reduction information. This notice must be provided by April 18, 2009.

Consumer Alert: Fact Sheet for Consumers Premium Assistance for Employees of Small Employers

March 19, 2009

Fact Sheet for Consumers: Premium Assistance for Employees of Small Employers

On February 17, 2009, the President signed into law the American Recovery and Reinvestment Act of 2009 (ARRA), a federal stimulus package. Under ARRA, if you are or were involuntarily terminated from employment, you may be eligible for premium assistance under the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA is a federal law that provides continuation coverage to employees after certain qualifying events. COBRA applies to employer groups of 20 or more employees.

Massachusetts law provides similar continuation coverage to employees of small employer groups of 2 to 19 employees. This is commonly called "mini-COBRA" and is generally available to employees of small employers for certain qualifying events. Some of the benefits available under ARRA to COBRA recipients, such as premium assistance, are also available to employees who are eligible for mini-COBRA.

Am I eligible for mini-COBRA with premium assistance?

If you have coverage through mini-COBRA now, or if you became eligible for mini-COBRA on or after February 17, 2009, and you lost your job on or after September 1, 2008, it is likely that you are eligible for the premium assistance. You will not be eligible for mini-COBRA with premium assistance if you were involuntarily terminated for "gross misconduct" or if you elected mini-COBRA coverage before September 1, 2008.

How much do I have to pay per month for my mini-COBRA continuation coverage if I am eligible for mini-COBRA premium assistance?

You will pay no more than 35% of the total monthly premium for your continued health plan coverage through your former employer. The amount will depend on your former employer’s plan and the monthly premium.

How will I know if I am entitled to mini-COBRA and, if I am, how will I know how much my payment will be?

You should receive a notice in the mail. That notice may come from the employer, or an administrator on behalf of the employer, or the insurance carrier. You should also receive information about your payment amount and instructions on where to send the payment.

What if I do not get a notice?

If you do not receive a notice, you should contact your former employer or the insurance carrier for your former employer’s insurance coverage.

When does my mini-COBRA coverage with premium assistance begin?

If you already have mini-COBRA from September 1, 2008 or after, or if you have just become eligible for mini-COBRA, you will have sixty days from the date of the notice to elect mini-COBRA coverage with premium assistance. If you elect the coverage, it will be effective as of March 1, 2009 and you will be responsible for 35% of the premium beginning March 1, 2009. Keep in mind that by the time you receive a notice and elect coverage, it may be April or May, but that coverage is retroactive to March 1, 2009 and you will have to pay for the prior months.

How long will my mini-COBRA coverage and the premium assistance last?

Mini-COBRA is generally available for up to eighteen months and the premium assistance is available for nine months, so long as you do not qualify for other group health coverage during that time and as long as the employer continues to offer a group health plan. The time period for length of coverage will begin as of the date of your qualifying event.

What if I was eligible for mini-COBRA on or after September 1, 2008, but did not elect it, or declined it, or elected it and then was terminated for lack of payment because I could not afford it?

You will not be able to elect mini-COBRA now, or qualify for premium assistance, unless the Massachusetts legislature changes the mini-COBRA law. ARRA does not extend the second chance or "special election period" that is available to employees who were eligible for federal COBRA to employees who were eligible for mini-COBRA.

Contact Information

For questions related to federal COBRA and ARRA: http://www.dol.gov/COBRA

For questions related to the Medical Security Plan: http://www.mass.gov/dua/msp

For questions related to health insurance options: http://www.MAhealthconnector.org

For information on all insurance carriers authorized to offer individual health plans in Massachusetts: http://www.mass.gov/DOI

If you have additional questions, please contact the Division of Insurance at 617-521-7794.

Note: The information in this fact sheet is subject to change as further guidance becomes available from the federal government and/or as changes may be contemplated by the Massachusetts legislature.

Massachusetts Faces Costs of Big Health Care Plan

By KEVIN SACK
Published: March 15, 2009

BOSTON – Three years ago, Massachusetts enacted perhaps the boldest state health care experiment in American history, bringing near-universal coverage to the commonwealth with Paul Revere speed.

To make it happen, Democratic lawmakers and Gov. Mitt Romney, a Republican, made an expedient choice, deferring until another day any serious effort to control the state’s runaway health costs.

The day of reckoning has arrived. Threatened first by rapid early enrollment in its new subsidized insurance program and now by a withering economy, the state’s pioneering overhaul has entered a second, more challenging phase.

Thanks to new taxes and fees imposed last year, the health plan’s jittery finances have stabilized for the moment. But government and industry officials agree that the plan will not be sustainable over the next 5 to 10 years if they do not take significant steps to arrest the growth of health spending.

With Washington watching, the state’s leaders are again blazing new trails. Both Gov. Deval Patrick, Mr. Romney’s Democratic successor, and a high-level state commission have set out to revamp the way public and private insurers reimburse physicians and hospitals.

They want a new payment method that rewards prevention and the effective control of chronic disease, instead of the current system, which pays according to the quantity of care provided. By late spring, the commission is expected to recommend such a system to the legislature.

If Massachusetts becomes the first state to make this conversion, health policy experts argue that it would be as audacious an achievement as universal coverage. The state faces several hurdles, including securing federal permission to impose the changes on Medicaid, a shared state and federal program, and more unusually on Medicare, which is financed entirely by Washington.

Those who led the 2006 effort said it would not have been feasible to enact universal coverage if the legislation had required heavy cost controls. The very stakeholders who were coaxed into the tent – doctors, hospitals, insurers and consumer groups – would probably have been driven into opposition by efforts to reduce their revenues and constrain their medical practices, they said.

Now those stakeholders and the state government have a huge investment to protect. But the task of cost-cutting remains difficult in a state with a long tradition of heavy spending on health care. Massachusetts has more doctors per capita than any state, Boston is home to some of the country’s most expensive academic medical centers, and a new state law requires comprehensive benefits like prescription drug and mental health coverage.

Alan Sager, a professor of health policy at Boston University, has calculated that health spending per person in Massachusetts increased faster than the national average in seven of the last eight years. Furthermore, he said, the gap has grown exponentially, with Massachusetts now spending about a third more per person, up from 23 percent in 1980.

"Just as this may have been the easiest place to do coverage, it may be the most difficult place to do cost control," said Jonathan Gruber, a health economist at the Massachusetts Institute of Technology.

But Mr. Patrick has shown signs of playing tough with the state’s hospitals and insurers. Responding in January to a series in The Boston Globe that exposed how the state’s most influential hospitals negotiate high reimbursement rates, Mr. Patrick announced that he would explore whether the state could regulate insurance premiums.

"Frankly, it’s very hard for the average consumer, or frankly the average governor, to understand how some of these companies can have the margins they do and the annual increases in premiums that they do," Mr. Patrick said in an interview. "At some level, you’ve just got to say, ’Look, that’s just not acceptable, and more to the point, it’s not sustainable.’ "

The threat seems to have been heard. Insurers seeking to participate in the state’s subsidized insurance program, Commonwealth Care, recently submitted bids so low that officials announced last week that they would keep premiums flat in the coming year. That may provide cover for the program as the state seeks ways to fill a nearly $4 billion gap in its 2010 budget.

The state expects to spend $595 million more on its health insurance programs this year than in 2006, a 42 percent increase. But about 432,000 people have gained coverage, leaving only 2.6 percent of the population without insurance, according to a recent state survey. At only one-sixth the national average, that is by far the lowest rate in any state.

Massachusetts achieved its high coverage rates by mandating in its landmark law that almost every resident have health insurance, and that all but the smallest businesses make some contribution toward their employees’ costs. Those who do not enroll but are deemed able to afford insurance can be fined up to $1,068 in the 2009 tax year.

To make the mandated insurance affordable, the state subsidizes premiums for those earning up to three times the federal poverty level, or $66,150 for a family of four. Massachusetts already had a law requiring insurers to accept all applicants regardless of their health status.

Although nearly 60 percent of the newly insured are covered by public programs, Massachusetts also seems to be a rare state where the percentage of employers offering health benefits is actually growing. And the state government has realized substantial savings, worth about $250 million last year, from lower payments to hospitals for uncompensated care for the uninsured and underinsured.

In its first full year of operation, Commonwealth Care drew higher enrollment than anticipated, and the state found itself facing an inaugural budget gap. Mr. Patrick and the legislature filled it by assessing insurers and hospitals, raising the penalty on noncompliant businesses, increasing premiums and co-payments for consumers, and raising the state tobacco tax.

The fear was that such tree-shaking would become an annual ritual. But enrollment in the $820 million Commonwealth Care program peaked last May and then declined before hitting a plateau.

Some modest provisions to control costs were included in the original health care bill, including a merger of the small group and individual insurance markets and new spending on electronic record-keeping and hospital infection control.

More efforts were made last year in legislation that provided incentives for doctors to practice primary care, required uniform billing procedures among providers, toughened the state’s regulation of new hospital construction, and established the payment reform commission.

The commission is looking at various options, but all would do away with the fee-for-service system, which provides perverse incentives by paying physicians and hospitals for each patient visit. The changes under consideration include reimbursing for episodes of care rather than individual visits and bundling payments to groups of providers who would together take responsibility for a patient’s health.

Blue Cross and Blue Shield of Massachusetts, the state’s largest insurer, recently devised an innovative model that pays doctors a flat fee per patient, with adjustments for age, gender and health status, and then adds bonus payments for high standards of care.

Blue Cross officials say they believe that the new plans can cut the growth of premiums in half over five years and expect them to account for 15 percent of their business by June. "We’re very committed to this path because we feel it’s the only credible place to go," said Cleve L. Killingsworth, the company’s chairman.

Some health policy experts argue that changes in payment practices will not be enough to slow the growth in spending, even when combined with other cost-cutting strategies. To truly change course, they say, the state and federal governments may need to place actual limits on health spending, which could lead to rationing of care.

"Really controlling costs requires just stopping spending," said Stuart H. Altman, a professor of health policy at Brandeis University.

Because Massachusetts now requires its residents to be insured, it cannot fall back on the strategy used by other states in hard times – to simply remove people from the public insurance rolls by restricting eligibility.

’It forces us to look in the mirror and say, ’What do we do about health care spending?’ " said Jon M. Kingsdale, executive director of the agency that administers Commonwealth Care. "And the reason that’s so challenging is that it means limiting resources for people doing really good stuff.

"It’s not like the fat sits out here easily identified and you just slice it off. It’s marbled throughout the meat."

Helpful info on Cobra

Quickly (because who has time for anything else these days), here are two new regulatory developments that you should know about.

The first deals with unemployment insurance (UI) claimants that are eligible for the DUA’s Medical Security Plan (MSP) as well as for the new COBRA premium reduction benefit created by ARRA. Basically, the DUA will change how it administers the premium assistance portion of its MSP to leverage the new 65% COBRA premium reduction under ARRA to save the state money.

• Massachusetts is the only state that provides health insurance coverage for the unemployed, through the Medical Security Plan (MSP), for UI claimants whose family income is less than 400% of the federal poverty limit ($84,000 for family of 4). There are presently two options available under MSP: (1) direct coverage, where MSP pays the entire costs of health care on a fee-for-service basis; and (2) premium assistance, in which MSP reimburses claimants for up to 80% of their health insurance continuation costs, which are usually COBRA premiums.

• For those UI claimants eligible for MSP and the new federal COBRA premium reduction benefit, MSP will continue to reimburse its claimants for 80% of their COBRA premiums. However, the COBRA premiums for these UI claimants will be reduced from 100% of the COBRA premium to 35% of the COBRA premium for up to 9 months. Therefore, for any enrollee taking advantage of the COBRA premium reduction benefit, MSP’s contribution to the premiums will be reduced from 80% to 28% (which is 80% of the enrollee’s 35% COBRA contribution after the 65% COBRA premium reduction), and each enrollee’s premium will be reduced from 20% to 7% (which is 20% of the enrollee’s 35% COBRA contribution after the 65% COBRA premium reduction). This administrative change by DUA will provide a savings to both UI claimants and the Medical Security Trust Fund which is funded through employer contributions.

Click here for the link to the DUA guidance on COBRA/ARRA.

Next, the Division of Health Care Finance and Policy (DHCFP) has proposed an amended Health Insurance Responsibility Disclosure (HIRD) regulation to be effective April 1, 2009. The amendments are technical revisions for the most part. In addition to more consistent use of defined terms and section headings, the proposal would also:

• amend the regulation to ensure that the Employer HIRD forms continue to be due at the same time as Fair Share Contribution filings are due.

• update the Employer HIRD to eliminate information that the Division of Health Care Finance and Policy has determined is unnecessary, and

• add new Employer HIRD disclosures, including whether there is a waiting period before a full-time employee becomes eligible for the employer’s plan.

A copy of the proposed HIRD regulation, 114.5 CMR 18.00, is attached. There is a public comment period for the proposed amended HIRD regulation until Friday, March 20, 2009.

Rick Szczebak

Richard A. Szczebak
Of Counsel
PARKER BROWN & MACAULAY, P.C.