Six Months Since PPACA
Enactment: Is Your Plan Ready for Compliance?
Agencies
Issue PPACA Implementation Guidance
On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (PPACA). Six months later, the PPACA's "first round" of coverage mandates are set to go into effect. Group health plans must comply with the following coverage mandates beginning with their next plan year (Jan. 1, 2011, for calendar year plans):
· Extension of dependent coverage to age 26;
· Elimination of pre-existing condition exclusions for enrollees under age 19;
· Prohibition on lifetime and annual dollar limits;
· Prohibition on rescissions;
· Provision of first dollar coverage for preventive health services (non-grandfathered plans only);
· Internal claims and appeals procedures and external review process (non-grandfathered plans only);
· Mandated patient protections (non-grandfathered plans only);
· Non-discrimination rules extended to insured plans (non-grandfathered plans only); and
· No discrimination based on health status (non-grandfathered plans only).
Since the enactment of the PPACA, the Departments of Labor (DOL), Health and Human Services, and the Treasury have jointly published several phases of interim final regulations, issued sub-regulatory guidance, and invited comments concerning many of the changes that will impact employers and retirement systems that sponsor group health plans.
The most recent wave of guidance was issued on Sept. 20, 2010. The Departments issued frequently asked questions that provide implementation guidance on a range of first round coverage mandates. In addition, the DOL issued Technical Release 2010-02 to provide an enforcement grace period with respect to the internal claims and appeals procedures that apply to non-grandfathered plans. Lastly, the Department of the Treasury and the Internal Revenue Service (IRS) released Notice 2010-63, which invites comments concerning the application of rules prohibiting non-grandfathered insured group health plans from discriminating in favor of highly compensated individuals.
Frequently Asked
Questions on Implementing the PPACA
The frequently asked questions address implementation issues in the categories of (1) compliance; (2) grandfathered health plans; (3) claims, internal appeals and external review; (4) dependent coverage of children; (5) out-of-network emergency services; and (6) highly compensated employees. Following is a brief summary of the information provided in the frequently asked questions.
·
Good faith compliance efforts. The Departments' approach to
implementation will continue to be focused on assisting (rather than imposing
penalties on) group health plans that are working diligently and in good faith
to comply with the PPACA. The approach includes, where appropriate,
transition provisions, grace periods, safe harbors, and other polices to
minimize disruption to existing plans and practices.
· Grandfathering relief.
§ Until final regulations are issued, insured group health plans and multiemployer plans that intend to maintain grandfathered status but that may not always know whether or when an employer changes its rate of contribution toward the cost of coverage will not lose grandfathered status if the insurer or multiemployer plan takes prescribed steps to ensure communication regarding changes to the employer's contribution rate. The relief does not apply if the insurer or multiemployer plan knows that the contribution rate has changed.
§ Multiemployer plans that have either a fixed-dollar employee contribution or no employee contribution toward the cost of coverage will not lose grandfathered status due to a change in a contributing employer's contribution rate, provided there is no increase in the employee contribution and the changes in coverage terms would not otherwise cause a loss of grandfathered status.
§
Although the interim final regulations currently
provide that an insured group health plan will lose grandfathered status if the
plan changes insurance carriers, the Departments anticipate that they will
shortly address the circumstances under which grandfathered plans may change
carriers without losing grandfathered status.
·
Clarification and relief on claims mandate.
§ Self-insured plans that do not implement an external review process that satisfies the enforcement safe harbor provided in Technical Release 2010-01 will be considered on a case-by-case basis, and may in some circumstances be considered to be in compliance with the mandate (e.g., a failure to contract with at least three independent review organizations [IROs] does not mean the plan has automatically violated the coverage mandate).
§ Self-insured plans that contract with a third party administrator (TPA) that, in turn, contract with the IROs, will meet the standards of the safe harbor as if the plan had contracted with the IROs directly. However, this arrangement does not relieve the plan from responsibility from providing external review, and ERISA plans have fiduciary duties to monitor the plan's TPAs.
§ Plans may contract with an IRO even if it is located in another state.
§ The shortened time frame for making urgent care claim determinations only applies with respect to the initial benefit determination (not to the time limits under the internal appeals process). The model notice of adverse benefit determination has been revised to eliminate confusion.
§
The Departments are providing an enforcement
grace period for compliance with certain requirements under the internal claims
and appeals process. See section on DOL Technical Release 2010-02 below for details.
· Coverage of Adult Children.
§ The adult child mandate that requires plans to extend coverage to children until age 26 without restriction extends only to children who are sons, daughters, stepchildren, adopted children (including children placed for adoption) and foster children of eligible employees.
§
If a plan chooses to cover children outside of
the mandate (e.g., grandchildren or
domestic partner children), the plan may continue to impose additional
conditions on eligibility, such as support, residency, student status or other
dependency factors.
·
Out-of-Network Services. The PPACA
generally requires non-grandfathered plans to provide out-of-network emergency
services at the in-network level of coverage.
However, the PPACA does not require plans to
cover amounts that out-of-network providers may "balance bill." To protect patients from being financially
penalized for obtaining emergency services out-of-network, the interim final
regulations set forth minimum payment standards on the plan. The frequently asked questions clarify that
such minimum standards do not apply either:
(1) where state law prohibits balance billing; or (2) where the plan is
contractually obligated to bear the costs of any amounts balance billed.
·
Highly Compensated Employees. The Departments are developing
guidance with respect to the prohibition on discrimination in favor of highly
compensated individuals in insured group health plans. See section on IRS Notice 2010-63 below for details.
The PPACA requires that non-grandfathered plans establish an internal claims and appeals process and an external review process. With respect to the internal process, the plans must provide a process that initially incorporates the ERISA claims procedures, and then update such procedures in accordance with the additional standards set forth in interim final regulations. For more details on these standards see the Ice Miller Health Reform Alert on PPACA claims procedures.
DOL Technical Release
2010-02 provides an enforcement grace period for compliance with certain new
standards required under the internal claims and appeals process. In order to give plans and insurers more time
to implement procedures and make changes to computer systems, an enforcement
grace period is in effect until July 1, 2011, with respect to the following
standards:
· The expedited time frame for making urgent care claim determinations (shortened from 72 to 24 hours);
· The requirement to provide claims and appeals in a culturally and linguistically appropriate manner;
· The requirement to provide additional and more specific content in notices; and
· The strict adherence standard whereby a plan's failure to strictly adhere to all the requirements of the interim final regulations will result in the claimant's deemed exhaustion of the internal process, permitting the claimant to initiate external review or to seek other remedies available under ERISA or state law.
During the enforcement grace period, plans must nonetheless be working in good faith to implement these additional standards.
IRS Notice 2010-63
The PPACA provides that non-grandfathered insured plans may not discriminate in favor of highly compensated individuals. Non-grandfathered insured plans will therefore be subject to nondiscrimination requirements similar to those described under Section 105(h) of the Internal Revenue Code (Code) that currently apply to self-insured plans.
IRS Notice 2010-63 states that the Department of the Treasury and the IRS are considering issuing guidance on the extension of the requirements of Code Section 105(h)(2) to insured group health plans. The notice requests comments on what additional guidance related to the application of Code Section 105(h)(2) would be helpful with respect to insured group health plans. Comments must be submitted by Nov. 4, 2010.
Time for Implementation
With the issuance of this latest round of guidance, employers are able to move toward finalizing plan design changes and preparing for open enrollment. While we expect some additional guidance yet this year (such as the circumstances under which a group health plan may change insurance carriers without losing grandfathered status), a critical mass of guidance has now been issued that allows group health plans to implement the PPACA coverage mandates that are effective at the start of the next plan year. Plan sponsors should be actively working toward compliance right now. Read Ice Miller's list of action steps that plan sponsors should be taking.
Ice Miller has been tracking the regulations and other guidance issued under the PPACA, and you can read about the regulations that have been issued thus far, including the grandfather rule, the adult-child rule, the prohibition on annual and lifetime limits, mandated preventive services, and the internal and external claims review process on Ice Miller's Health Care Reform Web site.
For more information regarding compliance with the first round of coverage mandates under the PPACA, or for any other questions regarding how health care reform impacts group health plans, please contact Mary Beth Braitman, Terry A. M. Mumford, Christopher Sears, Tara Sciscoe, Shalina Schaefer, or the Ice Miller Employee Benefits attorney with whom you work.
This publication is
intended for general information purposes only and does not and is not intended
to constitute legal advice. The reader must consult with legal counsel to
determine how laws or decisions discussed herein apply to the reader's specific
circumstances.