On November 18, 2015, the Departments of Health and Human Services (“HHS”), Labor (“DOL”) and Treasury (collectively, the “Departments”) issued final rules regarding a variety of market reforms under the Affordable Care Act, including grandfathered plans, pre-existing condition exclusions, lifetime and annual limits, rescissions, dependent coverage, claims and appeals procedures and patient protections. This rulemaking—which finalizes the current interim final rules on these matters with very few changes—is effective on the first day of the plan year beginning on or after January 1, 2017. Some key takeaways from the final rules, including some of the changes made by the final rules, are as follows:

• Grandfathered Plans:
  • Under the final rules, determination of grandfathered status for group health plans or group health insurance policies applies separately with respect to each benefit package offered by the group health plan or group health insurance coverage, and if any benefit package ceases grandfathered status, it will not affect the grandfathered status of the other benefit packages.
  • To maintain status as a grandfathered plan, a group health plan or group health insurance coverage must include, in any summary of benefits provided to participants, a statement that it is a grandfathered plan, as well as contact information for questions or complaints. Prior model notice language has been retained in the final rules.
  • Elimination of “all or substantially all” benefits to diagnose or treat a particular condition will cause a plan to lose its grandfathered status. The Departments declined to establish a bright-line test with regard to what constitutes “substantially all benefits,” leaving it instead to a facts-and-circumstances determination.
  • Although not addressed in the final rules themselves, the preamble to the final rules notes that the imposition of wellness programs, particularly wellness programs that impose penalties, may threaten grandfathered status.

• Preexisting Condition Exclusions:
  • The final rules did not make any notable changes to the preexisting-condition rules, and group health plans (or issuers offering group or individual health insurance coverage) generally may not impose any preexisting condition exclusions.

• Lifetime and Annual Limits:
  • The ACA generally prohibits annual and lifetime dollar limits on “essential health benefits” (“EHBs”). The final rules state that a reasonable interpretation of EHBs includes only those EHBs contained in benchmark plans that have actually been selected to be the benchmark plan for the state (whether actively by a state or by default), rather than all plans that are potentially authorized.
  • The final rules clarify that lifetime and annual dollar limits on EHBs are generally prohibited regardless of whether such benefits are provided on an in-network or out-of-network basis.
  • For those plans or policies that are not required to provide EHBs (such as self-insured group health plans), the final rules state that such plans or policies may, for the purposes of determining which benefits cannot be subject to annual and lifetime dollar limits, select among any base-benchmark plan selected by a State or the District of Columbia, or may use the base-benchmark plan selected by the Federal Employees Health Benefits Program.
  • The Departments noted that some account-based products have been marketed that attempt to circumvent or undermine the application of the ACA’s lifetime and annual limit and preventive care requirements, and further stated that they will continue to address the noncompliance of any such products.

• Rescissions:
  • The ACA generally prohibits group health plans and issuers offering group or individual health insurance coverage from rescinding coverage except in the event of fraud or intentional misrepresentation of a material fact. In the final rules, the Departments declined to define the term “material fact,” but did state that they may provide further guidance if additional questions arise.
  • The final rules clarify that a rescission does not include a retroactive cancellation or discontinuance of coverage if it is either initiated by an Exchange or initiated by an individual (provided that the plan, issuer, employer or plan sponsor does not take any actions to influence such individual’s decision or to retaliate against such individual).
  • The final rules also clarify that a retroactive termination of coverage due to non-payment of COBRA premiums is permissible.

• Dependent Coverage:
  • The final rules note that eligibility restrictions requiring individuals to work, live or reside in a service area cannot be applied to dependent children up to age 26 (although plans and issuers can continue to offer coverage only within a certain service area). Hence, any plans or policies that contain such eligibility restrictions will need to be updated with regard to dependent children.

• Claims and Appeals:
  • The final rules state that plans and issuers must provide a claimant who has filed an internal appeal, free of charge, with new or additional evidence considered, relied upon, or generated by the plan or issuer in connection with the claim, as well as any new or additional rationale used in the denial of an internal appeal, as soon as possible and in advance of the notice of final adverse benefit determination. According to the final rules, this information must be provided automatically, and merely providing a notice informing participants of the availability of such information or rationale is not sufficient.
  • If the new or additional evidence discussed above is received so late that it would be impossible to provide it to the claimant in time for the claimant to have a reasonable opportunity to respond, the period for providing a notice of final internal adverse benefit determination is tolled until such time as the claimant has had a reasonable opportunity to respond.
  • Adverse benefit determinations involving medical judgment are deemed to include, for purposes of the final rule, determinations of whether a claimant is entitled to a reasonable alternative standard for a reward under a wellness program and determinations of whether a plan is complying with the nonquantitative treatment limitation provisions of the Mental Health Parity and Addiction Equity Act of 2008. As a result, both such determination may be subject to external review.

• Patient Protections:
  • The Departments declined in the final rules to define the term “primary care provider,” but rather stated that classification of a primary care provider is determined based on applicable state law as well as the plan or policy terms.
  • The plan or issuer must allow any physician who specializes in pediatrics (including pediatric subspecialties), provided they are in-network and available to accept the child, to be designated as the primary care provider (if the plan or issuer requires the designation of a participating primary care provider for a child).
  • The final rules state that emergency care is not limited to treatment within 24 hours of the onset of an emergency.