On May 2, 2014, the Internal Revenue Service, Department of Health and Human Services, and Department of Labor (the “Departments”) collectively released the Affordable Care Act’s (ACA) nineteenth set of Frequently Asked Questions (FAQs). The FAQ addressed outstanding questions regarding Health Care Continuation Coverage (COBRA) and Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) releases, out-of-pocket maximums and limitations on cost-sharing, coverage of preventive services, FSA carryover and excepted benefits, and summary of benefits (SBA) requirements.
COBRA and CHIPRA
Following the Department of Labor’s (DOL) release of proposed COBRA regulations to better align COBRA with the ACA, the Departments issued FAQ guidance discussing COBRA’s general and election notice requirements, specifically when the notice is to be provided and the content of the notice. Although the proposed regulations eliminate the current model notice, although the FAQs state that the old version can still be used as good faith compliance with the notice requirement. (FAQ 1). Once the updated model notice is finalized it will be available on the DOL website. Additionally, the Departments noted that qualified beneficiaries may want to compare the price of COBRA coverage with coverage under the Health Insurance Marketplace (the Marketplace). The FAQs state that “[q]ualified beneficiaries may be eligible for a premium tax credit (a tax credit to help pay for some or all of the cost of coverage in plans offered through the Marketplace) and cost-sharing reductions (amounts that lower out-of-pocket costs for deductibles, coinsurance, and copayments), and may find that Marketplace coverage is more affordable than COBRA.”
The Department also clarified the CHIPRA notice requirement for group health plans located in a State that provides premium assistance. Under CHIPRA each employee must be provided notice of the potential opportunities for premium assistance in the State that the employee resides.
The FAQs clarify how the ACA’s requirement that a group health plan’s cost-sharing limitation cannot exceed the ACA’s out-of-pocket and deductible limitations apply to the coverage of out-of-network items, non-generic prescriptions, and reference pricing. For 2014, the ACA’s limit on the out-of-pocket expenses that a participant in a non-grandfathered health plan may incur is $6,350 for self-only coverage and $12,700 for other than self-only coverage.
Under the FAQs, if a plan provider chooses to count out-of-pocket spending for out-of-network items and services towards the plan’s annual out-of-pocket maximum (balance billing), the provider must use a reasonable method for calculating the balance billing. The FAQs provided the following example of a reasonable method: if plan pays 75% of the usual, customary, and reasonable amount of out-of-network services and the participant pays the remaining 25%, the 25% paid by the participant may be reasonably counted towards the out-of-pocket maximum without including the 75% of usual, customary, and reasonable amount of out-of-network services paid by the plan. (FAQ 2).
Additionally, the Departments reiterate previous guidance that large group market coverage and self-insured group health plans have the discretion to define what qualifies as “essential health benefits” for prescription drug coverage. They further state that a plan may choose to cover only generic prescription drugs, if the generic drug is found to be medically appropriate, so long as the plan provides a separate option of allowing the brand name drug to be purchased at a higher cost sharing amount (not qualifying as an essential health benefit). In determining if a generic drug is medically appropriate, the plan may defer to recommendations of an individual’s personal physician or offer an exception process, which meets the requirements of 45 CFR 156.122(c). Under the FAQs, in excluding coverage for brand name drugs, a plan may choose to exclude all or part of the cost of the brand name drug from being counted towards the participant’s annual out-of-pocket maximum. For example, the plan may only count the different between the cost of the brand name drug and the cost of the generic drug towards the annual out-of-pocket maximum. (FAQ 3).
The Departments invited comment with respect to the a question on how the ACA’s out-of-pocket limitation works if a large group market or self-insured group health plans have a reference based pricing structure. In the interim, the Departments will not consider a plan as failing to comply with the out-of-pocket maximum requirement because “it treats providers that accept the reference amount as the only in-network providers,” so long as the plan has a reasonable method ensure equal access to quality providers. (FAQ 4).
The FAQs provided further guidance on the ACA’s requirement to cover tobacco use counseling and intervention. Under these new guidelines, a plan will be in compliance with the requirement to cover tobacco use counseling and intervention, if the plan covers (1) screening for tobacco use and (2) at least two forms of tobacco cessation per year, involving four tobacco counseling sessions of at least 10 minutes each and 90 days’ worth of cessation medications. (FAQ 5)
The Departments discussed the October 31, 2013 modification to the “use-or-lose” rule for health FSAs, which allows up to $500 of a participant’s remaining FSA balance to be carried over to the following plan year. The FAQs note that the carried-over amounts should not be taken into account when determining if the health FSA satisfies the maximum benefit payable limit prong under the excepted benefits regulations. (FAQ 6).
Summary of Benefits and Coverage
The Departments continue to authorize use of the April 2013 SBC template and sample. They advise that to the extent that plan terms differ from the temple, plans are instructed to describe relevant plan terms while maintaining reasonable consistency with the instructions and template format. (FAQ 7). Additionally, the FAQs announced that the Departments are extending enforcement and transition relief as to the requirement to provide an SBC and a uniform glossary for the first and second years of applicability of the rules. (FAQ 8).