A number of provisions of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 ("PPACA") will take effect on September 23, 2010. Most of these provisions relate to insurance coverage reforms. However, the changes will directly impact employers that sponsor self-insured plans. The changes will indirectly affect all employers that offer health insurance benefits to employees by changing the coverage the employees will receive. The U.S. Departments of Health and Human Services, Labor and the Treasury have issued final rules on a number of provisions that take effect on September 23.
1. Pre-existing Condition Exclusions Prohibited
PPACA prohibits the imposition of pre-existing conditions exclusions on children under the age of 19 for a plan or policy years beginning on or after September 23, 2010, group health plans, whether grandfathered or not. An absolute prohibition on pre-existing conditions exclusions for all group health plans takes affect on January 1, 2014. Thus, an individual cannot be excluded from coverage for a condition based on the fact that the condition was present prior to receiving the coverage; nor can benefits be limited because of a condition in existence prior to the effective date of coverage. PPACA does not change the current rule that a plan can exclude benefits for a specific condition regardless of when that condition arose.
2. Lifetime and Annual Limits Prohibited
Also beginning on September 23, 2010, PPACA prohibits group health plans and group health
insurance issuers from imposing lifetime or annual limits on the dollar value of health benefits. The lifetime limit prohibition is immediate, not phased in. The prohibition on annual dollar limits, however, is phased in through 2014 for "essential health benefits." This rule also applies to both grandfathered and non-grandfathered plans. The interim final rule clarifies that PPACA does not prohibit a plan or issuer from excluding all benefits for a specific condition. The regulations clarify that the prohibition on lifetime and annual limits does not apply to health care flexible spending accounts, or integrated [what does "integrated" mean?] or retiree-only health reimbursement arrangements.
In an attempt to address the fact that the lifetime and annual limits effectively eliminate the option of limited scope benefit plans, the interim final regulations give the Secretary of Health and Human Services the authority to waive restricted annual limits if compliance would result in a significant decrease in access to benefits or a significant increase in premiums.
For individuals whose coverage previously ended due to reaching a plan's lifetime limit, the plan must provide written notice of the lapse of the lifetime limits and that the individual is once again eligible for benefits. In the event an individual is eligible for benefits but no longer enrolled, the plan and the issuer must provide a 30-day opportunity to enroll and written notice of the enrollment opportunity. The written notice and the enrollment opportunity must be provided beginning no later than the first day of the first plan year beginning on or after September 23, 2010. Such individuals must be offered all of the benefit packages available to, and cannot be required to pay more than, similarly situated individuals who did not lose coverage as a result of imposition of lifetime limits under the plan. The U.S. Department of Labor (DOL) has issued a model notice for this purpose.
3. Prohibition on Rescissions
Effective for plan or policy years beginning after September 23, 2010, PPACA prohibits group health plans and group health insurance issuers from rescinding coverage, except in the case of actual fraud or an intentional misrepresentation of a material fact. The new standard applies to both grandfathered and non-grandfathered health plans.
A rescission is a cancellation or discontinuation of coverage that has a retroactive effect. If a plan or health insurance issuer wants to rescind coverage, written notice must be provided to the individual at least 30 days before the rescission.
4. Patient Protections
Effective for plan or policy years beginning on or after September 23, 2010, PPACA protects a patient's right to choose a health care professional and receive benefits for covered emergency services. The patient protections apply only to non-grandfathered health plans, however, other federal or state laws may also apply to grandfathered plans.
Plans and issuers that allow individuals to select an in-network primary care provider or pediatrician must permit an individual to select such a provider that is available to accept the individual. In addition, if coverage is provided for obstetrical or gynecological care, a plan or issuer cannot require authorization or referral for a female participant to seek care from an in-network specialist. As part of this requirement, the plan or issuer must inform participants of their rights whenever they provide a summary plan description or other similar description of benefits. The DOL has recently issued a model notice for this purpose.
5. Preventive Health Services
For plans beginning on or after September 23, 2010, PPACA also requires non-grandfathered group health plans and insurers to provide coverage of certain "recommended preventive services" furnished by in-network providers. This coverage is not mandatory for out-of-network providers.
6. Internal Claims and Appeals
The most recently published interim final rules clarified the scope of the internal claims and appeals procedures and external review processes. These rules apply to non-grandfathered group health plans and health insurance issuers and are effective for the first plan year commencing on or after September 23, 2010. Generally, under PPACA, group plans and insurers offering group coverage must implement internal claims and appeals processes that comply with the claims and appeals procedures requirements under Section 503 of the Employee Retirement Income Security Act (ERISA), if they are not already subject to those requirements. In addition, the interim final rule creates new requirements for group health plans and insurers. Model notices will be issued on the U.S. Departments of Labor and Health and Human Services websites. Group health plans and insurers must also comply with new external review processes.
H&B Recommendations
Employers and insurers should review their current health plan designs to ensure compliance with these interim final rules. Plans, policies, summary plan descriptions, certificates and contracts for health insurance should be amended by the effective date to provide for the new requirements. In addition, employers should coordinate with their insurance providers or third party administrators to assign responsibility to send required notices to employees.
The Hiscock & Barclay, LLP Health Care Reform Team consists of members of the firm's Labor and Employment, Health and Human Services and Insurance Coverage Practice Areas.