This is the sixth in a series of articles about health care reform.
The Treasury Department, the Department of Labor and the Department of Health and Human Services recently issued interim final regulations implementing some health plan design changes required under the Patient Protection and Affordable Care Act of 2010 (PPACA). The regulations cover a mixed bag of changes, including preexisting condition exclusions, lifetime and annual limits, rescissions, and patient "protections." Generally, these topics have two things in common: they will influence health plan design and they will become fully or partially effective during the first plan year beginning on or after September 23, 2010. For the most part, the regulations affect both group health plans and individual health insurance policies. However, they do not apply to stand-alone dental or vision coverage, or to retiree only coverage.
Q.1 What is a preexisting condition exclusion?
A.1 A preexisting condition exclusion is defined as one that limits or excludes benefits relating to a condition based on the fact that the condition was present before the date of enrollment for the coverage, whether or not the condition was previously addressed, diagnosed or treated.
Q.2 Can a group health plan or individual health insurance policy impose preexisting conditions?
A.2 For plan years (or policy years for individual policies) beginning on or after January 1, 2014, a plan or policy may not exclude an individual from enrolling in coverage, or exclude an individual from benefits under the plan or policy, due to a preexisting condition. For individuals enrolled in coverage who are under age 19, an earlier effective date of the first plan or policy year beginning on or after September 23, 2010, applies. Group health plans that are "grandfathered" (in existence on March 23, 2010; click here to read related article) must comply with this requirement for children under age 19; individual grandfathered policies need not yet do so.
Q.3 Can a group health plan or individual health insurance policy have lifetime or annual limits on benefits?
A.3 The PPACA also does away with most annual/lifetime limits on benefits. Generally speaking, dollar-based annual limits on benefits are not allowed beginning with the first plan or policy year on or after September 23, 2010. However, the regulations do not prohibit a plan or policy issuer from imposing annual or lifetime dollar limits on specific "nonessential benefits." Further, a plan or policy issuer may impose a restricted annual limit for plan years beginning before January 1, 2014, on "essential benefits" that must be no less than a specified amount. The minimum limit is: $750,000 for a plan year beginning on or after September 23, 2010; $1,250,000 for a plan year beginning on or after September 23, 2011; or $2,000,000 for a plan year beginning on or after September 23, 2012, and before January 1, 2014. The rules restricting lifetime benefit limitations also apply to grandfathered individual policies and group plans, and the restrictions on annual limitations apply to grandfathered group plans (but not individual policies), as of the same effective date. Note that many changes to an existing plan's lifetime or annual limits will cause the plan to lose status as a "grandfathered" plan, but increasing an annual limit on essential benefits will not cause a plan to lose grandfathered status. Click here to read our article about retaining grandfathered status.
Q.4 What are "essential" and "nonessential" benefits?
A.4 The description of benefits constituting "essential benefits" has not yet been developed, but the regulations state that good faith efforts to implement the standard will be recognized. Nonessential benefits are all benefits that are not included in the set of essential benefits.
Q.5 What if a covered individual already exceeded a lifetime limit and lost coverage under a plan?
A.5 If an individual lost coverage because he or she exhausted a lifetime limit, and would otherwise meet the eligibility requirements for coverage under a group plan after the effective date of the regulations, then at the time the individual again becomes eligible for coverage he or she must be offered another opportunity to enroll in coverage. This new enrollment opportunity is treated as a "special enrollment" right under HIPAA. The plan must provide the individual with a notice describing the enrollment right no later than the first day of the first plan year beginning on or after September 23, 2010. The individual will have at least 30 days to re-enroll in coverage, effective as of the first day of the plan year in which the new rules become effective. This special enrollment right is also available to a family member who exceeded a lifetime limit under an individual health insurance policy that still covers other family members.
Q.6 Are there any exceptions to the rules regarding lifetime/annual limits on benefits?
A.6 The regulations recognize that certain "account" type plans, such as medical flexible spending accounts, medical savings accounts and health savings accounts, are by their nature limited to an annual amount. The regulations separately address health reimbursement arrangements, indicating that these account-based arrangements can impose annual limitations only if they are part of an integrated health plan and the health plan would otherwise comply with the annual limitation requirements.
Q.7 Under the new rules limiting preexisting condition exclusions and lifetime/annual limits, can a group health plan or policy still exclude all benefits related to a certain condition?
A.7 A policy or plan that excludes benefits for a specific condition does not violate the preexisting condition exclusion so long as the exclusion is not tied to the timing of when the condition first occurred (and so long as all "essential benefits" are offered). The prohibition on lifetime/annual benefits limitations also does not prohibit a plan or policy from being designed to completely exclude all benefits for a particular condition.
Q.8 What is a "rescission" of coverage, and is it still permitted?
A.8 Rescission is defined in the regulations as a retroactive cancellation of coverage. The regulations generally prohibit a group health plan or health insurance carrier from rescinding coverage for a covered individual unless the individual acts fraudulently or makes an intentional misrepresentation of material fact. In addition, in order to rescind coverage, the health plan or carrier must provide 30 days written notice to the covered individual. If a covered individual fails to pay a premium, a plan or carrier can still terminate an individual's coverage retroactively to the date through which coverage was last paid, although notice is now required. The regulations make it clear that minor, inadvertent failures to disclose facts, and administrative errors on behalf of the employer in determining eligibility, generally will not rise to the level allowing for rescission of the individual's coverage. State laws regarding rescission that are more protective of participants are not preempted by the PPACA. The new regulations may make it more difficult for employers to eliminate coverage retroactively for qualified beneficiaries where employees have failed to provide timely notice of a COBRA qualifying event. Grandfathered plans are subject to the rules regarding rescission and the advance notice requirement. These requirements are effective beginning with the first plan or policy year on or after September 23, 2010.
Q.9 What other design changes are described in the regulations?
A.9 The regulations implement a number of statutory provisions relating to patient rights for access to care. None of these requirements applies to grandfathered plans. All are effective with the first plan or policy year beginning on or after September 23, 2010.
- If a covered individual can or must choose a primary care provider under the terms of coverage, then a covered child must be allowed to designate a pediatrician as his or her primary care provider.
- A plan or policy cannot require a woman to obtain a referral to visit an obstetrician/gynecologist, although such providers must comply with general referral and authorization requirements under a plan or policy.
- Individuals must be given notice of the above rights in the summary plan description or similar document.
- Several new rules apply with respect to emergency services. A plan must provide reimbursement for services provided by out-of-network emergency providers that is comparable to the reimbursement for the services of in-network emergency providers. The formula for determining the comparable reimbursement is relatively complicated, and the provider may still bill the covered individual for expenses not covered by the plan. A plan must also apply coinsurance rates that are the same regardless of whether an emergency provider is in- or out-of-network. Plans may not require preauthorization to obtain emergency services. While other cost-sharing provisions that are generally applicable to out-of-network services are permissible for emergency services (e.g., deductibles/out-of-pocket maximums), emergency and non-emergency expenses must be treated the same in applying those provisions.
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