Health Care Reform Act: Interim Rules
On June 28th, three federal agencies - Treasury, Labor, and Health and Human Services - issued interim rules regarding certain provisions of the Patient Protection and Affordable Care Act (PPACA). Plan Administrators are obligated to following these rules until final rules are adopted after the end of the public comment period scheduled to end in August.
Preexisting Condition Exclusion
The PPACA generally states that medical insurers and benefit plans may not impose preexisting condition exclusions. The interim rules restate the law and provide further guidance. Plans and insurers may not exclude certain coverage for conditions based on when the condition occurred, but they can still exclude coverage for a condition or injury if it applied uniformly and is not based on when the condition or injury takes place. For example, insurers and plans can exclude coverage for cosmetic or oral surgery related to a traumatic injury if it applies to all plan participants.
The interim rules also expands the definition of a Preexisting Condition Exclusion to include information regarding an individual's health status such as "a condition identified as a result of a pre-enrollment questionnaire, or physical examination given to the individual, or a review of medical records relating to the pre-enrollment period." For example, coverage for type 2 diabetes may not be denied it is was discovered in a questionnaire or physical examination prior to enrollment.
Lifetime and Annual Limits on Essential Health Benefits
The PPACA prohibits lifetime dollar limits on essential health benefits for plan years beginning on or after September 23, 2010. The provision applies to grandfathered plans as well.
Annual dollar limits on essential health benefits are restricted and regulated for plan years beginning on or after September 23, 2010 over the next three years based on the following schedule:
Plan Year:
Beginning on or after 9/23/10 but
before 9/23/11 or 2011 calendar year plan
Annual Dollar Limit Floor: $750,000
Plan Year:
Beginning on or after 9/23/11 but
before 9/23/12 or 2012 calendar year plan
Annual Dollar Limit Floor: $1,250,000
Plan Year:
Beginning on or after 9/23/12 but
before 9/23/13 or 2013 calendar year plan
Annual Dollar Limit Floor: $2,000,000
The regulation states that annual dollar limit restrictions are applicable for individuals and that family plan maximums cannot be imposed if they restrict an individual's right to the annual amount of coverage for essential health benefits. As a reminder, Essential Health Benefits under the PPACA are broadly defined as ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance abuse including behavioral health services, prescription drugs, rehabilitative services and devices, laboratory services, preventive and wellness services, chronic disease management, pediatric services including oral and vision care. Plans are advised by the federal government to use good faith efforts regarding coverage for essential health benefits until more detailed rules are in place.
Plans must provide an enrollment period for individuals who previously reached a plan's lifetime maximum. This provision applies to plan years starting on or after September 23, 2010 and must include a 30 day decision period for affected individuals. Plan Sponsors can include the required notice in open enrollment materials, but the notice and information must be prominently displayed. A model notice from the Department of Labor is available from JHG Benefits.
The annual dollar limits are not applicable to Flexible Spending Accounts, Medical Savings Accounts, or Health Savings Accounts. Furthermore, Health and Human Services is obligated to put a waiver program in place with respect to annual dollar limits for essential health benefits if the current rules result in a significant increase in premiums or a significant decrease in access to benefits.
Rescission of Coverage
The interim rules clarifies the PPACA in that a plan or insurer may not rescind health coverage once an individual is covered, unless an individual or person seeking coverage for an individual performs an act, practice or omission that constitutes fraud or makes an intentional misrepresentation of material fact, as prohibited by terms of the plan. The interim rules provides the following example: A full-time employee is reclassified as a part-time employee and part-time employees are not eligible for medical benefits. The company fails to cancel medical benefits at the time of the reclassification, but discovers their error at a later time and cancels/rescinds coverage retroactively to the date the employee was reclassified as part-time. This action is in violation of the new rules since there was no fraud or misrepresentation of material fact. In this example, the plan may only cancel coverage prospectively.
A 30 day notice must be given to participants whose coverage is legally rescinded; as in the case of fraud or misrepresentation of material facts. This provides an opportunity for affected individuals to contest the decision, look for alternative coverage and explore their rights.
Patient Protections
Plans that require designation of a primary care physician must allow adults to choose any participating primary care network provider who is available to accept that individual. Furthermore, females must be allowed to see in-network obstetricians and gynecologists, without referrals or authorization, who is available to accept that covered female. Children that are required to designate a primary care physician must have physicians available in the network who specialize in pediatrics and who are available to accept the child. These rules must be communicated to participants in Summary Plan Descriptions and other similar benefit descriptions of benefits.
Covered emergency room services may no longer require prior authorization even if the hospital is out of the provider's network. Further, additional administrative requirements or limitations of benefits for out-of-network hospitals cannot be imposed if they are not applied to in-network hospitals as well. Co-payment and coinsurance provisions for emergency services cannot be greater for out-of-network hospitals. Higher deductibles and out-of-pocket maximums can apply to out-of-network hospitals for emergency services if these same deductibles and out-of-pocket maximums apply to other out-of-network services.
The interim rules allow for balanced billing by out-of-network providers under certain circumstances. For example, an out-of-network emergency room provider often bills patients for the amount above what a plan or insurer pays for in-network coverage. The agencies are concerned that low provider reimbursements for emergency services could, in effect, transfer an unfair financial burden to individuals. Therefore, the interim rules state plans and insurers must pay a "reasonable amount" to providers before a balanced billing situation becomes a patient's responsibility. The rules provide guidance in this area. The plan cannot pay the out-of-network provider less than they would an in-network provider. The plan should use the same methodology they use for other out-of-network services, and the plan should take into account what Medicare pays for similar services.
Conclusion
As we've stated in prior newsletters, the scope of the PPACA and the forthcoming regulations will have broad impact on employers, benefit plan sponsors, and covered employees. The most recent interim rules are intended to provide guidance and clarity to the legislation. But, in practice the "new rules" may really create uncertainty, confusion and the real opportunity to become non-compliant with this broad and complex legislation. The purpose of this communication is to provide a brief overview of the recent federal rules, but not provide legal advice or replace the content of the interim rules published in the federal register.
JHG benefits can help your organization plan and comply with the PPACA.
