Recent guidance clarifies important issues under the Affordable Care Act, including mental health parity requirements; coverage of preventive care services; cost-sharing requirements; and out-of-pocket maximums, wellness programs and expatriate plans.
The U.S. Departments of Labor (DOL), Health and Human Services (HHS), and Treasury (collectively, the Departments) issued Frequently Asked Questions (FAQs) on January 9, 2014, clarifying the implementation of the market reform provisions under the Affordable Care Act (ACA). This included coverage of preventive services, limitations on cost-sharing, fixed indemnity insurance, expatriate plans and wellness programs. The FAQs also clarify certain requirements under the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).
Coverage of Preventive Services
The ACA and its implementing regulations require non-grandfathered group health plans and health insurance issuers in the group and individual markets to provide coverage of certain preventive services recommended by the U.S. Preventive Services Task Force (USPSTF). These recommendations include preventive services, such as mammograms and immunizations, along with new recommendations that the USPSTF issued on September 24, 2013, regarding the treatment of breast cancer. A plan or issuer can use reasonable medical management techniques to determine any limitations to such coverage.
Under the FAQ, the Departments clarify that for plan or policy years beginning on or after the date the USPSTF issued the September 24, 2013, guidance, non-grandfathered group health plans and health insurance issuers in the group and individual markets must offer prescription medication designed to reduce the risk of breast cancer in women, without cost-sharing and subject to reasonable medical management.
Limitations on Cost-Sharing
The ACA provides that any annual cost-sharing imposed under a non-grandfathered group health plan may not exceed the out-of-pocket cost limitations provided for under the ACA. For plan or policy years beginning in 2014, the annual limitation on out-of-pocket costs is $6,350 for self-only coverage and $12,700 for coverage other than self-only coverage. Future limits will be increased by a statutorily defined percentage.
Under a previously issued FAQ, the Departments provided a 2014 safe harbor providing transition relief to a group health plan or group health insurance issuer with more than one service provider. Under this guidance, the group health plan or group health insurance issuer is deemed to comply with the out-of-pocket limitation if the cost-sharing limit with respect to major medical coverage and separately with respect to coverage that is not major medical coverage, such as prescription drug coverage, each have in place an out-of-pocket maximum that does not exceed the 2014 annual limit.
The FAQ makes several important clarifications regarding what charges are intended to be applied towards the out-of-pocket maximum under the annual cost sharing limitation and how to divide the out-of-pocket maximum across multiple service providers. First, for plan years beginning on or after January 1, 2015, non-grandfathered group health plans and group health insurance issuers must have an out-of-pocket maximum that applies across all essential health benefits (EHB). The guidance clarifies that plans are not required to apply the annual limitation on out-of-pocket maximums to benefits that are not EHB. The Departments intend to use discretion in enforcing this provision of the ACA and work with large group health plans and self-insured plans that make a good faith effort to apply an authorized definition of EHB. State benchmark plans may serve as a useful resource for self-insured plans in making this determination.
Second, plans and issuers that have multiple service providers may continue to apply separate annual out-of-pocket limitations, so long as the combined value of those out-of-pocket limitations does not exceed the limit in effect for the plan year. Alternatively, plans and issuers may reconcile claims across multiple service providers and apply one overall annual out-of-pocket limit.
Third, a plan that includes a network of providers is not required to count out-of-pocket spending on out-of-network items and services towards the annual out-of-pocket limit and is not required to count out-of-pocket spending on noncovered items or services towards the annual out-of-pocket limit. The guidance clarifies that the term “cost-sharing” does not include premiums, balance billing amounts for non-network providers or spending for noncovered services.
Fixed Indemnity Insurance
Fixed indemnity insurance offered under a group health plan that meets certain regulatory requirements is an excepted benefit and, thus, is generally exempt from the ACA market reforms. For a fixed indemnity insurance policy to be an excepted benefit, it must pay on a per-period and not on a per-service or some other basis. The Departments noted that there has been a significant increase in the number of health insurance plans labeled as fixed indemnity insurance that may not technically qualify for an exemption from the ACA market reforms.
The FAQ clarifies that there are certain situations in which fixed indemnity coverage that pays on a basis other than a per-service basis may still be considered as excepted benefits. Notably, the Departments intend to amend existing regulations to allow fixed indemnity coverage sold in the individual health insurance market to be considered an excepted benefit, if it meets the following conditions:
- It is sold only to individuals who have other health coverage that is minimum, essential coverage within the meaning of section 5000A(f) of the Code;
- There is no coordination between the provision of benefits and an exclusion of benefits under any other health coverage;
- The benefits are paid in a fixed dollar amount, regardless of the amount of expenses incurred and without regard to the amount of benefits provided with respect to an event or service under any other health coverage; and
- A notice is displayed prominently in the plan materials informing policyholders that the coverage does not meet the definition of minimum essential coverage and will not satisfy the individual responsibility requirements of section 5000A of the Code.
If these proposed revisions are implemented, fixed indemnity insurance in the individual market could qualify as an excepted benefit even if it does not pay benefits solely on a per-period basis. Until these proposed amendments are finalized, HHS will treat fixed indemnity coverage in the individual market meeting the conditions above as excepted benefits for enforcement purposes.
A previous FAQ addressed in a prior McDermott publication provided temporary transitional relief for insured expatriate health plans to comply with certain provisions of the ACA. The temporary transitional relief applies for plan years ending on or before December 31, 2015.
This most recent FAQ defines an insured expatriate health plan as “an insured group health plan with respect to which enrollment is limited to primary insureds for whom there is a good faith expectation that such individuals will reside outside of their home country or outside of the United States for at least six months of a 12-month period and any covered dependents, and also with respect to group health insurance coverage offered in conjunction with the expatriate group health plan.” The applicable consecutive 12-month period can span two plan years.
The FAQ also confirms that coverage provided under an insured expatriate health plan is generally a form of minimum essential coverage under Section 5000A of the Code. This means that the opportunity to enroll in an insured expatriate health plan will be considered an opportunity to enroll in minimum essential coverage for purposes of determining whether an employer satisfies the employer shared responsibility rules (pay or play). More information on the shared responsibility rules can be found here. The FAQ also provides that the Departments will continue to consider narrowly tailored guidance and that any new regulations or guidance that is more restrictive on plans or issuers will not be applicable to plan years ending on or before December 31, 2016.
On June 3, 2013, the Departments issued final regulations addressing incentives for nondiscriminatory wellness programs in group health plans under Public Health Service Act (PHSA) Section 2705 and related provisions of Employee Retirement Income Security Act of 1974, as amended (ERISA). Notably, the final regulations increased the maximum permissible award under a health-contingent wellness program from 20 percent to 30 percent, with a limit of up to 50 percent for wellness programs designed to prevent or reduce tobacco use.
The FAQ clarifies that a participant must be provided a reasonable opportunity to enroll in a tobacco cessation program at the beginning of each plan to qualify for any increased permissible award. If a participant who is a tobacco user declines to participate at the beginning of the year but joins the program in the middle of the plan year, the plan is not required to provide the participant with an opportunity to qualify for the award and avoid the tobacco surcharge until the next renewal or enrollment period.
Additionally, the FAQ clarifies what alternative standard a plan must offer in a situation where a participant’s doctor determines that a plan’s standard for an outcome-based wellness program is medically inappropriate and recommends an activity-only program, such as a weight-reduction program. While the plan must prove a reasonable alternative standard in this situation that accommodates the physician’s recommendation, the plan is not necessarily required to implement a specific program recommended by the physician and may choose among a range of reasonable programs. Lastly, the FAQ clarifies that plans and issuers may modify the model notice of availability of a reasonable alternative standard so long as all of the required items are included.
Mental Health Parity
The MHPAEA generally requires group health plans (or health insurance coverage offered in connection with such a plan) to provide parity between medical and surgical benefits and mental health and/or substance use disorder benefits and provides that mental health and substance use disorder services are essential health benefits. The Departments published final regulations and an FAQ on MHPAEA in November 2013. This most recent FAQ clarifies the effect of the ACA on mental health parity by providing that:
- For policy years beginning on or after January 1, 2014, non-grandfathered health insurance coverage in the individual market that is not otherwise subject to the HHS transitional policy must include coverage for mental health and substance use disorder services that complies with the federal parity requirements set forth in the interim final regulations issued in February 2010; the final regulations for policy years beginning on or after July 1, 2014;
- For all policy years, grandfathered health insurance coverage in the individual market is not subject to the EHB requirements and, therefore, is not required to cover mental health or substance use disorder benefits. However, to the extent mental health or substance use disorder benefits are covered under the policy, coverage must comply with the federal parity requirements set forth in final regulations for policy years beginning on or after July 1, 2014; and
- For plan years beginning on or after January 1, 2014, all non-grandfathered small group market coverage that is not otherwise subject to the HHS transitional policy must include coverage for mental health and substance use disorder benefits, and that coverage must comply with the federal parity requirements set forth in the interim final regulations issued in February 2010; the final regulations apply for plan years beginning on or after July 1, 2014.
Grandfathered small group market coverage is not required to comply with either the EHB provisions or MHPAEA.