EBSA provides FAQs on Health Care Act implementation
By Richard Niles
The Department of Labor Employee Benefits Security Administration (EBSA) recently provided frequently asked questions (FAQs) regarding implementation of the market reform provisions of the Affordable Care Act. They were prepared jointly by the Departments of Health and Human Services (HHS), Labor, and the Treasury. They answer questions from stakeholders with a view to helping people understand and benefit from the new law.
The ongoing guidance that the departments are providing reflects their approach to implementation, which emphasizes assisting (rather than imposing penalties on) plans, issuers and others that are working diligently, and in good faith, to understand and come into compliance with the act.
Grandfathered health plans
(1) Reg. Sec. 54.9815-1251T(g)(1) lists six changes that cause a group health plan or health insurance coverage to stop being a grandfathered health plan. Any of the six changes are considered to change a health plan so significantly that they will cause a group health plan or health insurance coverage to lose grandfathered status. For a plan that is continuing the same policy, these six changes are the only changes that would cause a cessation of grandfather status.
The six changes are:
(i) Elimination of all or substantially all benefits to diagnose or treat a particular condition; (ii) increase in a percentage cost-sharing requirement (e.g., raising an individual’s coinsurance requirement from 20 percent to 25 percent); (iii) increase in a deductible or out-of-pocket maximum by an amount that exceeds medical inflation plus 15 percentage points; (iv) increase in a copayment by an amount that exceeds medical inflation plus 15 percentage points (or, if greater, $5 plus medical inflation); (v) decrease in an employer’s contribution rate towards the cost of coverage by more than 5 percentage points; and (vi) imposition of annual limits on the dollar value of all benefits below specified amounts. Note that the Departments are separately considering under what circumstances otherwise grandfathered plans may change issuers without relinquishing their status as grandfathered plans.
(3) A plan will lose grandfathered status if a decrease in an employer contribution rate towards the cost of coverage is more than five percentage points [see (v) above]. This applies on a tier-by-tier basis. As a result, if a group health plan modifies the tiers of coverage it had on March 23, 2010 — for example, from self-only and family to a multi-tiered structure of self-only, self-plus-one, self-plus-two and self-plus-three-or-more — the employer contribution for any new tier would be tested by comparison to the contribution rate for the corresponding tier on March 23, 2010. In this example, if the employer contribution rate for family coverage was 50 percent on March 23, 2010, the employer contribution rate for any new tier of coverage other than self-only (i.e., self-plus-one, self-plus-two, self-plus-three or more) must be within 5 percentage points of 50 percent (i.e., at least 45 percent). If, however, the plan adds one or more new coverage tiers without eliminating or modifying any previous tiers and those new coverage tiers cover classes of individuals that were not covered previously under the plan, the new tiers would not be analyzed under those standards. Therefore, for example, if a plan with only a self-only coverage tier added a family coverage tier, the level of employer contribution toward the family coverage would not cause the plan to lose grandfather status.
(4) A plan will lose grandfather status if it increases a copayment by an amount that exceeds medical inflation plus 15 percentage points (or, if greater, $5 plus medical inflation) [see (iv) above]. Since each change in cost sharing is separately tested, a plan will lose grandfather status if, for example, the plan sponsor raises the copayment level for a category of services (such as outpatient or primary care) by an amount that exceeds those standards, even if the plan sponsor retains the copayment level for other categories of services (such as inpatient care or specialty care).
(5) Group health plans may continue to provide incentives for wellness by providing premium discounts or additional benefits to reward healthy behaviors by participants or beneficiaries; by rewarding high quality providers; and by incorporating evidence-based treatments into benefit plans. However, penalties (such as cost-sharing surcharges) may implicate the standards for losing grandfather status and must be examined carefully. In addition, plans should take steps to ensure compliance with applicable nondiscrimination rules, such as the Health Insurance Portability and Accountability Act of 1995 (HIPAA), nondiscrimination rules for group health plans and group health insurance coverage with respect to an individual based on a health status related factor and any other applicable federal or state law.
Dental and vision
Under HIPAA, dental and vision benefits generally constitute “excepted benefits” exempt from HIPAA coverage if they are offered under a separate policy, and are not an integral part of the plan. Participants must have a right not to receive coverage, and must pay an additional premium if they do. According to the HHS, Labor and Treasury, this exception from coverage will carry forward to the Act’s market reform requirements, so that if a plan provides its dental or vision benefits pursuant to a separate election by a participant, and the plan charges even a nominal employee contribution towards the coverage, those benefits would constitute excepted benefits not covered by the reform provisions.
The Affordable Care Act generally provides that plans and issuers cannot rescind coverage unless there is fraud or an intentional misrepresentation of a material fact. The departments state that the exception to the ban on rescission is not limited to fraudulent or intentional misrepresentations about medical history. And, some retroactive terminations of coverage in the “normal course of business” are not considered to be rescissions. An example in the departments’ interim final regulations on rescissions clarifies that some plan errors (such as mistakenly covering a part-time employee and providing coverage upon which the employee relies for some time) may be cancelled prospectively once identified, but not retroactively rescinded unless there was some fraud or intentional misrepresentation by the employee. Preventive health services
The interim final regulations regarding preventive health services provide that if a recommendation or guideline for a recommended preventive health service does not specify the frequency, method, treatment or setting for the provision of that service, the plan or issuer can use reasonable medical management techniques to determine any coverage limitations under the plan. Thus, to the extent not specified in a recommendation or guideline, a plan or issuer may rely on the relevant evidence base and these established techniques to determine the frequency, method, treatment or setting for the provision of a recommended preventive health service.
Carriers in the health insurance individual market may designate a fixed policy year, but continue to issue policies throughout the year. For example, a carrier may designate a policy year of January 1 through December 31 for an individual policy under which coverage begins on October 1.
However, the statute and regulations consider implementation of the act requirements at the beginning of the first new period of coverage that begins on or after September 23, 2010, whether this new coverage period is a full or shortened period of coverage. If a policy begins to cover an individual effective on a date that is on or after September 23, 2010, the initial policy year for that individual, for purposes of determining the effective date of the act requirements, begins on the first date on which the coverage is effective. This initial period of coverage might be an abbreviated policy year. For example, it may run from October 1, 2010 through December 31, 2010, with a new calendar-based policy year beginning on January 1, 2011 (assuming the individual renews the policy), or from December 1, 2010 through June 30, 2011, with a new policy year beginning each July 1 (again, assuming the policy is renewed). It would be a “policy year” for purposes of the act effective date if it is a new period of coverage, regardless of when, or whether, the first subsequent 12 month policy year begins.
If issuers, however, have relied in good faith on guidance or instructions from a state insurance regulator indicating that the provisions of the act are not applicable until the beginning of the first full policy year of the individual coverage, then carriers will be afforded a reasonable period of time after the issuance of this guidance to come into compliance with the law. Nonetheless, subsequent to the issuance of this guidance, issuers may not rely in good faith on any contrary guidance or instruction issued by a state insurance regulator.