New Jersey's Health
Benefit Programs and
Health Care Reform
By Florence J. Sheppard,
New Jersey Division of Pensions and Benefits
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act—referred to collectively as National Health Care Reform—made sweeping changes to the governance of employer-sponsored group health plans, individual health coverage, and governmental health programs. The reforms affect both insured and self-insured employer health plans and thereby require changes to provisions of the State Health Benefits Program (SHBP) and the School Employees’ Health Benefits Program (SEHBP).
This article summarizes several changes under National Health Care Reform that affect the over 850,000 employees, retirees, and dependents receiving coverage from the SHBP and SEHBP. Areas of change include grandfathered status, the coverage of children until age 26, limitations on pre-existing conditions, changes to annual and lifetime limits on coverage, changes to Medicare Part D prescription drug coverage, and the Early Retiree Reinsurance Program.
Grandfathered Status Several requirements of National Health Care are effective immediately or with the 2011 plan year. Other provisions of the law are scheduled to be phased in between now and 2020. However, some of the requirements of National Health Care do not apply to plans in existence on March 23, 2010—known as “grandfathered plans.” There are specific standards regarding the changes that plans are permitted to make and still preserve their grandfathered status. Most employer-provided plans anticipate losing their grandfathered status within the next two years, recognizing that certain cost-saving measures hold more value than the increased cost of complying with National Health Care Reform requirements.
The SHBP/SEHBP is currently reviewing this matter and will apply necessary changes to policies or procedures where required by any changes in the plan status.
Coverage of Children until Age 26 Effective with the plan year beginning 2011, the SHBP/SEHBP plans cover children until age 26. In addition, eligibility is no longer based on financial dependency and an eligible “child” is now defined as a subscriber’s child until age 26, regardless of the child’s marital, student, or financial dependency status—even if as a young adult the child no longer lives with his or her parents.
A stepchild, foster child, or a child in a guardian-ward relationship is also included under this definition when additional supporting documentation is provided that attests to the legal guardianship by the subscriber.
Until 2014, coverage of a child until age 26 is only available if the child is not eligible to enroll in any other employer-based coverage (aside from coverage through the parent/subscriber).1 In addition, SHBP/SEHBP rules permit only one participating SHBP/SEHBP subscriber to cover an eligible child.
Coverage for an enrolled child ends on December 31 of the year in which the child turns age 26. Continuation of coverage under COBRA is available in most circumstances, in addition to specialized continuation of coverage provisions for “Dependent Children with Disabilities”2 and “Over Age Children from Ages 26 to 31.”3
Coverage of Pre-existing Conditions Effective in September 2010, National Health Care Reform prohibits group health plans from denying access and/or coverage to children up to age 19 with pre-existing conditions. Beginning in 2014, the prohibition on pre-existing conditions is scheduled to become effective for all individuals.
Limitations on pre-existing conditions are not currently applied in determining any individual’s eligibility for coverage under the plans offered by the SHBP/SEHBP. Therefore, all SHBP/SEHBP plans are in full compliance with this provision of the federal law.
Changes to Annual and Lifetime Insurance Limits National Health Care Reform prohibits insurers from imposing lifetime limits on benefits and regulates a plan’s use of annual limits.
Effective with the plan year beginning 2011, the SHBP/SEHBP eliminated lifetime maximums for coverage under the plans, including the annual and lifetime dollar limits on non-biological-based mental health conditions under both In-Network and Out-of-Network coverage under the NJ DIRECT10 and NJ DIRECT15 plans.
Medicare Part D Prescription Coverage The prescription drug benefits provided to retirees through the SHBP/SEHBP are equal to or better than the benefits provided by standard Medicare Part D plans. Therefore, most Medicare eligible SHBP/SEHBP subscribers need not enroll in Medicare Part D.
Some retired subscribers who qualify for low income subsidy programs may find it beneficial to enroll in Medicare Part D, however, once a subscriber and/or their covered dependent enrolls in a Medicare Part D plan, the individual enrolled in Medicare Part D will lose SHBP/SEHBP prescription drug coverage.
For SHBP/SEHBP eligible subscribers who do enroll for Medicare Part D prescription drug coverage, National Health Care Reform will implement several provisions between 2010 and 2020 to close—and eventually eliminate—the gap in Medicare Part D prescription drug coverage known as the “donut hole.” Under current plans, the “donut hole” is scheduled to be closed completely by 2020.
Early Retiree Reinsurance Program Beginning in June 2010, the federal government has allocated $5 billion toward the creation of the Early Retiree Reinsurance Program (ERRP)—a temporary reinsurance program for employer-sponsored health plans. The intent of the ERRP is to encourage plans to continue coverage for retirees who are not yet eligible for Medicare by reimbursing employers 80 percent of claim costs between $15,000 and $90,000 per claimant. The ERRP is scheduled to run to no later than December 31, 2013, or until the funds set aside for the program are exhausted.
The SHBP/SEHBP submitted its ERRP application at the end of June 2010 and was approved in August for participation in the ERRP. The SHBP/SEHBP began its claims submission process in November 2010 and will continue to submit claims for reimbursement for as long as ERRP funds remain available.
Any ERRP reimbursements received by the SHBP/SEHBP will be applied towards the cost of the SHBP/SEHBP, including the anticipated cost increases for early retirees, Medicare eligible retirees, and active employees and their dependents. ERRP proceeds are expected to be used until exhausted in plan years 2012 through 2014.
1. Should the SHBP/SEHBP lose its grandfathered status in the future, children who are eligible to enroll in other employer-based coverage would qualify for enrollment in the SHBP/SEHBP to age 26.
2. A child who is not capable of self-support when he/she reaches age 26 due to mental or physical disability may be eligible for a continuance of SHBP/SEHBP coverage. The eligibility for this coverage has not been changed by the provisions of National Health Care Reform.
3. Certain dependent children over age 26 may be eligible for coverage until age 31 under the provisions of Chapter 375, P.L. 2005. This coverage is authorized under provisions of New Jersey statutes and eligibility has not been changed by the provisions of National Health Care Reform.
First published in New Jersey
Volume 88, Number 4, April 2011