On June 9, 2010, CVS Caremark – the Pharmacy Benefits Manager for BlueCross BlueShield of Tennessee – made the decision to terminate Walgreens’ participation in the CVS Caremark retail pharmacy networks effective July 9, 2010 (subject to state law and contractual obligations).  This came two days after Walgreens informed CVS Caremark that it would not participate in CVS Caremark’s pharmacy retail networks going forward for members covered under new or renewed plans. As a result, BlueCross members will no longer be able to fill or refill their prescription at a Walgreens retail pharmacy, and will need to transfer that prescription to another pharmacy within the CVS Caremark retail pharmacy network before July 9, 2010.

BlueCross understands the impact this change could have on its members and is working closely with CVS Caremark to guarantee that effected members are communicated to quickly and offered options for their prescription drug needs, including:

• Delivering to BlueCross members – via U.S. Mail – with a list of alternative retail pharmacies in the network so they can preserve uninterrupted access to their pharmacy benefit and their prescriptions.
• Directing BlueCross members to other nearby network pharmacies through the “Find a Doctor” feature on bcbst.com or the “Find A Local Pharmacy” tool on CVS.com (registration required).
• Providing BlueCross members with answers to commonly asked questions through an FAQ found in the Pharmacy section of bcbst.com, www.bcbst.com/learn/pharmacy/.

Note that this change does not affect the Walgreens’ specialty pharmacy benefits (SpecRx) as BlueCross holds this contract directly with Walgreens Specialty Pharmacy. Additionally, this change does not affect BlueCross’ contract with Walgreens’ mail order service for non-ERISA groups.

BlueCross and CVS Caremark are committed to ensuring that no disruption in pharmacy benefits is experienced by members due to the termination of Walgreens’ participation in the CVS Caremark retail pharmacy networks.  Frequent communications through email, U.S. Mail and bcbst.com are planned to assist all BlueCross customers – members, groups and brokers – during this transition period.

The IRS issued a notice providing guidance to small businesses that are eligible to claim a tax credit for employee health insurance coverage (Notice 2010-44).  The Patient Protection and Affordable Care Act (PL 111-148) enacted new IRC § 45R, which allows certain eligible small businesses to claim a tax credit if they offer health insurance to their employees. In 2010, small businesses—defined as businesses with 25 or fewer employees and average annual wages of less than $50,000—are eligible for credits of up to 35% of nonelective contributions the businesses make on behalf of their employees for insurance premiums. Tax-exempt organizations get a 25% credit against payroll taxes. After 2013, the credit increases to 50% (and 35% for tax-exempt organizations). The amount of the credit is based on a percentage of the lesser of: (1) the amount of nonelective contributions paid by the eligible small employer on behalf of employees under a qualifying arrangement during the tax year, and (2) the amount of nonelective contributions the employer would have paid under the arrangement if each employee were enrolled in a plan that had a premium equal to the average premium for the small group market in the state (or in an area in the state) in which the employer is offering health insurance coverage.  Notice 2010-44 provides the following steps for determining whether an employer is eligible for a credit under section 45R:

1. Determine the employees who are taken into account for purposes of the credit.
2. Determine the number of hours of service performed by those employees.
3. Calculate the number of the employer’s FTEs [full-time equivalent employees].
4. Determine the average annual wages paid per FTE.
5. Determine the premiums paid by the employer that are taken into account for purposes of the credit. Specifically, the premiums must be paid by an employer under a qualifying arrangement and must be paid for health insurance that meets the requirements of section 45R.

The notice provides details for each of these steps. For example, in determining what employees are taken into account for purposes of the credit, the notice specifies that “sole proprietors, partners in a partnership, shareholders owning more than two percent of an S corporation, and any owners of more than five percent of other businesses are not taken into account as employees for purposes of the credit.” The notice defines a “qualifying arrangement” as “an arrangement under which the employer pays premiums for each employee enrolled in health insurance coverage offered by the employer in an amount equal to a uniform percentage (not less than 50 percent) of the premium cost of the coverage.” The notice also defines what qualifies as health insurance coverage for purposes of the credit. The notice specifies that different types of coverage are not aggregated for purposes of meeting the qualifying arrangement requirement, so if an employer offers a medical insurance plan and a stand-alone vision plan, for example, each type of coverage must separately satisfy the requirements for a qualifying arrangement. The notice also addresses situations in which an employer is entitled to a state tax credit or a premium subsidy that is paid directly to the employer. The notice says that in this situation, for purposes of determining whether the employer has satisfied the “qualifying arrangement” requirement to pay an amount equal to a uniform percentage (not less than 50%) of the premium cost, the premium payment made by the employer is not reduced by the state credit or subsidy. The notice specifies that eligible employers will claim the credit on their annual income tax returns, as part of the general business credit, and an unused credit amount may be carried back one year or forward 20 years. However, because the unused credit amount cannot be carried back to years prior to the enactment of the credit, for 2010 tax years unused credit amounts can only be carried forward.  The credit can be reflected in estimated tax payments and can offset an employer’s alternative minimum tax liability for the year (subject to certain limitations). The notice clarifies that an employer cannot take a deduction under IRC § 162 for that portion of the health insurance premiums paid that is equal to the amount of the section 45R credit. The IRS will provide tax-exempt employers with further information on how to claim the credit.

The notice provides transition rules for 2010 and numerous examples illustrating how the credit works.

NEW YORK (CNNMoney.com) — The federal government unveiled details this week about how people up to age 26 can get covered by their parents’ health insurance policies, as part of the health care reform law.

Consumers now have details about how one of the law’s most-buzzed about provisions will actually work — and how much it will cost them.

Expanding health coverage to twentysomethings is welcome relief for an age group that accounts for the majority of uninsured Americans.

Roughly 30% of young adults up to age 26 have no health insurance at all. That’s three times the rate of uninsured children, according to the Department of Health and Human Services.

HHS estimates that about 1.2 million young adults will elect to stay on a parent’s health plan in 2011 as a result of the reform.

Here’s what you need to know about the new regulations.

Who’s covered: The law takes effect for insurance plans that already cover dependents, starting on or after Sept. 23, 2010.

Those plans will cover policyholders’ children until age 26 — even if those adult children no longer attend college, don’t live with their parents and aren’t dependents on a tax return.

Finally! We can get health insurance

Under-26 children who were previously dropped from dependent coverage will also be able to re-enroll as long as they don’t have access to an employer-sponsored plan.

If an adult child has access to another employer-sponsored health plan, insurers can generally refuse coverage, but only until 2014.

Also, the re-enrollment option only applies to plans that already offer dependent coverage. If a company has such a plan, it must inform employees their children, who may have aged out of the plan, will be eligible again starting Jan. 1, 2011.

The policy applies to married and unmarried children, but does not extend to their spouses or children.

How much it will cost: Insurers must treat all dependents the same, regardless of age. That means that companies cannot jack up costs or limit coverage for the under-26 group.

Parents will face a 0.7% increase in insurance premiums, across the board, for adding dependents to their plans, according to HHS. That will rise by an additional 1% in 2012 and in 2013. “[E]ither … stockholders or consumers” will shoulder that extra cost, HHS said in its report.

For those who enroll in the dependent coverage, the average policy will cost $3,380 for each dependent in 2011; $3,500 in 2012; and $3,690 in 2013, according to HHS’s mid-range estimates. Those extra costs are tax-deductible.

How to get it: More than 65 health insurers have said they are now offering dependent coverage ahead of the September deadline.

But it’s up to individual employers to decide when to offer the provision, and experts say most companies will opt to do that during open enrollment. That period typically happens in early fall.

For plan-years that start on or after Sept. 23, insurers must give qualifying young adults a 30-day window to enroll, according to HHS

Last week, BlueCross BlueShield of Tennessee announced that it is extending the dependent age limit to 26, effective June 1, 2010, in accordance with the Patient Protection and Affordable Care Act (“PPACA”).  This change will impact members of group medical, dental and vision plans (fully insured) and members of individual medical and dental plans with renewal or effective dates of June 1, 2010 or later.  Dependents anticipated to “age-off” on May 1, 2010 or later will be allowed to remain as a covered dependent.  All insured groups with renewal dates of June 1, 2010 or later can allow subscribers to add coverage for eligible dependents up to age 26 at the time of open enrollment.  The extension of coverage will remain in effect until the dependent reaches the age of 26, as long as the dependent continues to qualify under other PPACA and BlueCross eligibility guidelines.

On May 10, 2010, HHS issued an Interim Final Rule on this provision, including its definition of dependent.  BlueCross will review the Interim Final Rule in its entirety and provide further detail and guidance.

An FAQ with questions and answers specific to the change in dependent age limits is available for review in the secure site of bcbst.com, BlueAccess. You can also request a copy of the FAQ from your broker, consultant or BlueCross sales or account executive.


New Insurance Oversight Office
The Department of Health and Human Services (“HHS”) has created The Office of Consumer Information and Insurance Oversight (“OCIIO”), which is tasked with helping HHS implement many of the provisions of the health care reform legislation.  The OCIIO website can be found at http://www.hhs.gov/ociio/index.html, and will be a resource for information on initiatives and programs such as the high risk pool program and MLR requirements, as well as providing links to proposed regulations and requests for comments.  Responsibilities for OCIIO include:

• Ensure compliance with new insurance market rules
• Provide guidance and oversight for state-based Exchanges
• Compile and maintain data for the HHS internet portal on insurance options
• Administer the temporary high risk pool program and early retiree reinsurance program

Early Retiree Reinsurance Program
HHS released an Interim Final Rule for the early retiree reinsurance program established by PPACA, with a 30-day comment period and to be effective June 1, 2010.

The program will reimburse sponsors of employment-based plans for a portion of the costs of providing health coverage to early retirees – including eligible spouses, surviving spouses and dependents. Employment-based plans include group health plans (fully insured and self-funded), state and local government employee plans, voluntary employees’ beneficiary associations and multiemployer plans.  An “early retiree” is defined as a plan participant age 55 or older who is not an active employee and is not eligible for Medicare coverage.

Under the provisions of PPACA, the program will pay for 80% of the claim costs for each retiree or covered dependent that exceed $15,000 but are below $90,000 during a plan year.  Funding for the reinsurance program is limited to $5 billion and the program will sunset on Jan. 1, 2014. Sponsors may apply for reimbursement for costs incurred during plan years that start before June 1, 2010, provided the plan year ends after that date (e.g., calendar year 2010 plans). Sponsors must file an application with the HHS Secretary to be certified for participation in the program.  The application must include the following information:

• The projected amount of reimbursement to be received for the first two plan-year cycles, with specific amounts for each plan year.
• An attestation that policies and procedures are in place to detect and reduce fraud, waste and abuse.
• A description of the procedures or programs the sponsor has in place with the potential to generate cost savings with respect to chronic and high-cost conditions.
• An assurance that the sponsor has a written agreement with its health insurance issuer or group health plan to provide the HHS Secretary with information and data necessary to verify compliance with the program requirements, including access to individually identifiable health information subject to the HIPAA Privacy Rule.
• A summary of how the sponsor will use reimbursed amounts to maintain a level of effort in contributing support to the plan (e.g., using funds to lower participant deductibles, coinsurance or copayments in future years).

Once a plan is certified by HHS, a reimbursement request may be made based on submitted claim costs.  If a request for reimbursement is denied, a plan sponsor has 15 calendar days from the date of determination to appeal to the HHS Secretary. According to the Interim Final Rule, the HHS Secretary will provide additional information on the reinsurance program, including the procedure for submitting reimbursement requests and for correcting any inaccuracies in submitted requests.

BlueCross is in the process of reviewing the Interim Final Rule and will be providing guidance on implementing the early retiree reinsurance program in the near future.

BCBSA Letter on “Good Faith Compliance”
Given the September effective dates for many of the “immediate impact” provisions – no lifetime limits, restricted annual limits, bans on cost-sharing for preventive services and dependent coverage changes – employers and health plans will be making many changes, including policy and contract revisions, IT system upgrades and modifications to marketing materials, either in the absence of final regulations or with little time between the issuance of rules and their effective dates. Given this short timeframe and the number of changes required, the Blue Cross and Blue Shield Association (“BCBSA”), along with key employer organizations, including the U.S. Chamber of Commerce, the NFIB and the National Association of Manufacturers, sent a letter to HHS Secretary Kathleen Sebelius, Treasury Secretary Timothy Geithner and Labor Secretary Hilda Lucia Solis requesting that the agencies provide affected entities with a “good faith compliance standard”.   You can view the letter by clicking here.

WASHINGTON ― The Internal Revenue Service this week began mailing postcards to more than four million small businesses and tax-exempt organizations to make them aware of the benefits of the recently-enacted small business health care tax credit.

Included in the Patient Protection and Affordable Care Act approved by Congress last month and signed into law by President Obama, the credit is one of the first health care reform provisions to go into effect. The credit, which takes effect this year, is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.

“We want to make sure small employers across the nation realize that — effective this tax year — they may be eligible for a valuable new tax credit. Our postcard mailing — which is targeted at small employers — is intended to get the attention of small employers and encourage them to find out more,” IRS Commissioner Doug Shulman said. “We urge every small employer to take advantage of this credit if they qualify.”

In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ low- and moderate-income workers.

For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. The maximum credit goes to smaller employers — those with 10 or fewer full-time equivalent (FTE) employees — paying annual average wages of $25,000 or less. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals. The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more.

Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt organizations, the IRS will provide further information on how to claim the credit.

On March 23, 2010, President Obama signed comprehensive health reform, the Patient Protection and Affordable Care Act, into law. Click here to view the timeline.

It provides implementation dates for key provisions and reflects provisions in the new law and incorporates modifications to the law included in the Health Care and Education Reconciliation Act of 2010 passed by the House and the Senate.

Although Congress will likely extend the COBRA subsidy under the American Recovery and Reinvestment Act of 2009 (ARRA), they did not pass legislation in time to avoid the subsidy’s March 31, 2010, expiration date.

Short-term extension legislation, which would have provided another month of eligibility for the COBRA subsidy program, was not approved by the Senate last week before the U.S. Senate and House of Representatives adjourned for a two-week recess.

Congress will reconvene on April 12, 2010, to consider an extension of unemployment and COBRA benefits retroactive to April 1.

Without an extension, employees laid off after March 31, 2010, will not be eligible for the COBRA premium subsidy. The subsidy pays 65 percent of an individual’s COBRA premiums for up to 15 months.

The final stages of health care reform have essentially formed a two-act play. In the first act, on March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (PPACA), HR 3590. In the second act, the Health Care and Education Tax Credit Reconciliation Act of 2010, HR 4872 (Sidecar Bill), currently awaits the President’s signature after passing both houses last week.

The Sidecar Bill makes technical corrections to the PPACA. All told, these two pieces of legislation will drastically change the health care landscape in the years to come. Health FSAs and cafeteria plans will be affected. There is no direct change to COBRA.

The following is a time line of some (but certainly not all) of the relevant provisions that will most directly affect the services provided by Infinisource (assuming that the President signs the Sidecar Bill):

Changes for plan years starting after September 23, 2010.

• Lifetime plan limits. Group health plans and insurance carriers may not impose lifetime limits on the value of essential benefits for any participant or beneficiary. The Department of Health and Human Services (HHS) will issue guidance on what is considered an essential benefit.
• No rescission of coverage. Group health plans and insurance carriers cannot rescind coverage except where fraud or intentional misrepresentation occurs.
• Preventive care. First-dollar coverage must be available for preventive care, which at a minimum includes immunizations and screenings for infants and children.
• Adult children coverage. If a plan covers dependent children, it must continue to do so for unmarried and married children until age 26. The tax exclusion has been adjusted accordingly. For plans already in existence on March 23, 2010, the age 26 limit only applies if the child is not eligible for other coverage. This exception ends in 2014.
• Nondiscrimination testing. The Subsection 105(h) tests that previously applied only to self-insured plans (e.g., health reimbursement arrangements [HRAs] and Health FSAs) apply to fully-insured plans.
• Pre-existing condition exclusions (PCE), Part I. For children under age 19, plans cannot have a PCE.

Changes starting on January 1, 2011.

• Over-the-counter drugs. Over-the-counter medicines or drugs are not eligible for reimbursement under a Health FSA, HRA or HSA without a doctor’s prescription.
• HSA Excise Tax. The excise tax for non-medical HSA distributions increases from 10 percent to 20 percent.
• New safe harbor for small employer cafeteria plans. The Subsection 125 nondiscrimination rules do not apply for cafeteria plans (and some plans offered through a cafeteria plan, such as group term life insurance, self-insured medical and dependent care assistance) if certain requirements are met. For example, all non-excludable employees must be eligible to participate, and the employer must make a minimum level of contribution. Eligible employers must have 100 or fewer employees during either of the two preceding years (provided it is a full year).

Changes starting on March 23, 2012.

• New explanation of coverage document. The plan administrator (self-insured plans) or the insurance carrier (fully-insured plans) must give a coverage summary to all applicants and enrollees, at initial enrollment and open enrollment. This is in addition to the Summary Plan Description (SPD). HHS will provide standards by March 23, 2011. The document can be no more than four pages long and address covered benefits, exclusions, cost sharing and continuation. A $1,000 penalty applies for each failure to provide.

Changes for plan years starting or after January 1, 2013.

• Health FSA limit. Contributions are capped at $2,500 each year, indexed for Consumer Price Index (CPI) starting in 2014. The effective date for noncalendar plan years is currently unclear.
• Medicare Retiree Drug Subsidy (RDS) tax deduction. Employers offering retiree drug coverage have long been able to receive a 28 percent subsidy on the costs. The RDS has been tax deductible. That will end as of this effective date.

Changes for plan years starting or after January 1, 2014.

• Annual plan limits. Group health plans and insurance carriers may not impose any annual limit.
• Exchange plans offered through cafeteria plans. Before 2017, only small employers (up to 100 employees) may participate in the Health Exchange. Before 2016, a state may cap participation to employers with 50 or fewer employees. These employers can use their cafeteria plan to allow participants to pay for Exchange-related coverage that is offered by the employer.
• PCEs, Part II. Plans cannot have any PCEs.
• No health status discrimination. The PPACA basically codifies existing HHS HIPAA regulations with one exception. The maximum incentive amount for a wellness program is increased from 20 percent to 30 percent of plan cost, and the government has discretion to increase it to 50 percent.
• Cost-sharing. Out-of-pocket (OOP) expenses and deductibles cannot exceed those applicable with the HSA-eligible high-deductible health plans.
• Reduced waiting periods. Plans can impose waiting periods that are 90 days or less.
• Individual mandate. Individuals who do not enroll in qualifying coverage are subject to an excise tax. They generally pay the greater of a flat dollar amount (2014: $95, 2015: $325, 2016 and beyond: $695) or a percentage of income (2014: one percent, 2015: two percent, 2016 and beyond: 2.5 percent). There is a hardship exemption for those with incomes below a certain level.
• Employer mandate. Employers with 200 or more full-time employees must automatically enroll all new hires. All employers must provide an Exchange-related notice to new hires. Failure to provide health coverage results in a monthly penalty equal to 1/12 of $2,000 after disregarding the first 30 employees. Therefore, a penalized business with 32 employees would pay a monthly tax equal to two times $183.33 (1/2 of $2,000), or $366.66.

Changes starting on January 1, 2018.

• Cadillac Plan tax. A 40 percent tax is imposed on the monthly value of coverage over 1/12 of $10,200 (single) and 1/12 of $27,500 (family) coverage, indexed to the CPI plus one percent in 2019, then simply CPI thereafter. Allowances are made for retiree coverage, multiemployer plans and high cost states

Situation Review
After the Senate’s Health Care Reform bill was passed by the House of Representatives on March 21, 2010, the health insurance and health care industries are faced with many questions about how the bill may change the way we conduct business.

We Are Focused on the Future
BlueCross BlueShield of Tennessee has been preparing for and modeling the implications of health care reform since President Obama first introduced the effort.

• Over the past two years, key leaders have been meeting to assess and model the different scenarios that could play out through health reform legislation.
• We have worked with other industry leaders to adapt this modeling to our various lines of business and market segments and developed plans. We are prepared to act when the final details of health reform legislation are known.

Impact to Our Stakeholders
It is our understanding that the prescribed changes apply to all health plans and plans governed by ERISA; however the timing may differ. We strongly encourage ERISA plan administrators to engage counsel to determine the necessary steps and timelines required to be fully compliant. Considering that many provisions in the Senate bill will be amended in the upcoming Reconciliation bill, we are currently most interested in the key provisions that may have an immediate impact on the way in which we operate and serve our stakeholders.

Some of the key provisions we are monitoring closely – all expected to go into effect immediately to six (6) months from enactment – are:

• Eliminating pre-existing condition exclusions for individuals under age 19
• Reducing pre-existing waiting periods and look-back provisions
• Prohibiting lifetime and annual dollar limits on benefits paid
• Including full coverage of preventive health services with no cost-sharing to members
• Expanding dependent coverage to include coverage until dependent is 26 years old
• Adding consumer transparency and disclosure requirements applicable to Exchange-participating plans (e.g., claim payment policies, rating practices, cost-sharing, etc.)
• Establishing ceilings for Medical Loss Ratios by market segment
• Providing multiple patient protections based on choice of providers

Next Steps
As our commitment to you, we will continue to keep you informed as we evaluate our business practices and adapt them as necessary based on final passage. BlueCross BlueShield of Tennessee will remain focused on providing peace of mind to our members, providers and customers by offering high-quality, affordable health benefit plans.

A senior White House official said Thursday that Democratic negotiators are resolving final differences in House and Senate health bills that passed last year with virtually no Republican help. The White House plans to post the proposals online by Monday morning, three days ahead of the Feb. 25 summit, which GOP leaders are approaching warily.

The comments signal that Obama and Congress’ Democratic leaders still plan to use assertive and sometimes controversial parliamentary powers to enact a far-reaching health care bill if no GOP lawmakers get on board. Republicans and conservative activists have denounced such a strategy, and it’s unclear whether enough House and Senate Democrats would back it. Both parties have used the strategy, known as reconciliation, in the past.

Obama says he is open to Republican ideas for changing the health care legislation. But many Democrats seriously doubt GOP leaders will support compromises that could draw enough lawmakers from both parties to create a bipartisan majority.

The negotiations, led by Democratic leaders with White House input, are meant to determine what changes must be made to the Senate-passed bill for House Democrats to accept it, the administration official said. The goal is to craft a reconciled measure that Senate Democrats can pass, under rules barring GOP filibusters, unless Republicans offer acceptable changes at next week’s summit.

Democrats lost their ability to block filibusters when Massachusetts Republican Scott Brown won a Senate seat last month.

The White House official spoke on the condition of anonymity to discuss private negotiations.

Health and Human Services Secretary Kathleen Sebelius said Thursday that Obama plans to have a health care proposal that “will take some of the best ideas and put them into a framework” ahead of the Feb. 25 summit.

House Democrats insist on several changes to the bill the Senate passed on Christmas Eve. They include reducing or eliminating a proposed tax on generous employer-provider health plans, and eliminating a Medicaid subsidy aimed only at Nebraska.

Overall, the Democratic plans would provide health insurance to more than 30 million people now uninsured and end the industry practice of denying coverage to those with medical problems. Most Americans would be required to carry health coverage, with new government subsidies available to reduce the cost for many.

The main beneficiaries would be small businesses and people who now buy their own insurance. They now have few choices, and premium prices can spike unpredictably from year to year.

Under the Democrats’ legislation, they would be able to pick a plan in a new insurance marketplace offering a range of choices similar to those available to federal employees.

The cost of the legislation — about $1 trillion over 10 years — would be paid for through Medicare cuts and a series of tax increases. In the short run, the nation would spend more on health care under the Democratic plans, since newly covered people would be able to get care they had previously put off. Over time, however, the rate of increase in medical costs would begin to slow.