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Navigating Healthcare Reform

November 2010, F&I and Showroom - Feature

by Christian Bergstrom

The first wave of healthcare reform regulations went live on Sept. 23. How many of you were prepared for the changes? An even bigger question is: Will your dealership be ready for the next wave of changes in 2011?

For consumers, the “go live” date meant that individuals who purchased or joined a new plan on or after Sept. 23 will not have to worry about out-of-pocket charges when it comes to preventative services. It also meant consumers can visit any doctor within their healthcare provider’s network without a referral. Additionally, consumers now have the ability to appeal their healthcare providers’ decisions.

For employers, the passage of the “go live” date raised more questions than answers. During the healthcare reform debates that ended this past spring, a central point of discussion was over whether employers and employees would have the ability to maintain their plans as they currently exist. Unfortunately, many employers came to realize that doing so was nearly impossible once the first phase of reforms took effect.

‘Grandfather’ Status Not a Sure Thing

The first issue to address is whether or not to seek “grandfather” status for a plan. That would allow employers to avoid some of the regulatory requirements in the new healthcare law for the interim period between 2011 and 2013. However, there are several new requirements within the law that will need to be incorporated if a plan is renewed after the September effective date.

And if that wasn’t enough, there are approximately 25 different issues employers will have to address come next year, several of which will have a direct impact on the medical insurance plans in place today. They include:

■ Certain dollar-benefit limits cannot remain in place.

■ Previously uninsured and ill children under the age of 19 cannot be subject to exclusions.

■ Employees’ children must be allowed to remain on your plan up to age 26.

■ New notification and administrative requirements.

For employers that find it cost-prohibitive to grandfather their old plans, significant attention must be paid to the new nondiscrimination testing requirement, which is described in Section 105(h) of the rules. This has brand-new applicability for guaranteed-cost or fully insured plans. Plan sponsors will have to reexamine their criteria for enrollment, as well as which — and at what cost — benefits are offered to highly compensated employees compared to the rank-and-file.

Based on numerous eligibility definitions in existence today, many plans will be deemed discriminatory under the new rules. Additionally, we have already seen some of our clients struggling to meet the minimum eligibility testing requirements, and this is without having to increase their premium subsidy in order to entice more employees to enroll.

The new law also calls for stiff penalties for noncompliance. Employers can be fined up to $100 per violation per day, with a maximum penalty of $500,000.

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