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.

Continue Reading DOL, HHS & Treasury Issue Final Rules on ACA Market Reforms

On May 26, the Departments of Health and Human Services (“HHS”), Labor (“DOL”) and Treasury (collectively, the “Departments”) issued Part XXVII of their FAQs about Affordable Care Act implementation. This latest FAQ provides additional guidance regarding limitations on cost sharing under the ACA, as well as further information and guidance regarding the ACA’s “provider non-discrimination” provision.

With regard to the ACA’s limitations on cost sharing (i.e., the maximum annual limitation on cost sharing/out-of-pocket costs), the FAQ notes that the maximum annual limitation will rise in 2016 to $6,850 for self-only coverage and $13,700 for other than self-only coverage (up from the 2015 amounts of $6,600 for self-only coverage and $13,200 for other than self-only coverage). The FAQ then notes that HHS, in the final HHS Notice of Benefit and Payment Parameters for 2016 (“2016 Payment Notice”), had clarified that the self-only maximum annual limitation on cost sharing applies to each individual, regardless of whether the individual is enrolled in self-only coverage or in coverage other than self-only.

Notably, the FAQ then goes on to expand this “clarification” from the 2016 Payment Notice to all non-grandfathered group health plans, including non-grandfathered self-insured and large group health plans. As a result, for all non-grandfathered group health plans, the self-only limit applies on an individual-by-individual basis, whether the individual is enrolled in self-only, family or some other variant of coverage. Hence, for example, if an employee enrolled in family coverage in 2015 incurs $10,000 in cost sharing, that individual would be limited to the self-only cost-sharing limit for 2015 (i.e., $6,600), and “the plan is required to bear the difference” between the $10,000 in actual cost sharing and the applicable limit – in this case, $3,400. The FAQ is unclear as to how a plan will “bear the difference” in such a situation, and hence there is a lack of certainty as to whether this would involve separately tracking (and limiting) each individual’s cost sharing against the overall self-only limit and/or refunding directly to the individual the “difference.” The FAQs make clear that this interpretation applies to all non-grandfathered group health plans (including high deductible health plans) and is to be applied prospectively, for plan or policy years that begin in or after 2016.
Continue Reading DOL, HHS & Treasury Issue Guidance on Cost Sharing and Provider Non-Discrimination Under ACA

On May 11, the Departments of Health and Human Services (HHS), Labor (DOL) and Treasury (collectively, the “Departments”) issued Part XXVI of their FAQs about Affordable Care Act implementation. This latest FAQ provides additional guidance regarding “first-dollar” coverage of preventive services under the ACA (i.e., the requirement to provide certain preventive services without the imposition of cost sharing).

The FAQ focuses primarily on the coverage of Food and Drug Administration (FDA) approved contraceptives within the context of the ACA’s first-dollar preventive services mandate. The FAQ notes that the FDA has currently identified 18 different “methods” of contraception for women (including, among others, the patch, the sponge and three kinds of oral contraceptives). The FAQ then makes clear that plans and issuers must cover, without cost sharing, at least one form of contraception in each of these 18 “methods,” and that this coverage must include the clinical services, including patient education and counseling, needed for provision of the contraceptive method. For example, the FAQ states that a plan or issuer that covers, without cost sharing, some forms of oral contraceptives, some types of IUDs and some types of diaphragms, but excludes completely other forms of contraception, is not compliant with the ACA preventive services mandate.

Continue Reading DOL, HHS & Treasury Issue Guidance on Contraceptives and Other Preventive Services under ACA

Ensuring that wellness plans are legally compliant has been challenging in recent years, with the Equal Employment Opportunity Commission challenging as unlawful certain wellness plan features expressly permitted by the Departments of Labor, Health and Human Services and Treasury (the “Departments”). However, proposed EEOC regulations on the use of incentives under wellness plans promise to bring the EEOC’s position largely (although not entirely) in line with the position of the Departments. Click here for more information on these proposed regulations from Crowell & Moring’s team.

According to a new study focusing on consumer information, nearly 25 percent of group health plans provided through Affordable Care Act (“ACA”) exchanges may be violating federal mental-health parity laws.

The study was led by associate professor Colleen Barry of the Johns Hopkins Bloomberg School of Public Health, and is published in the current issue of Psychiatric Services. To conduct the study, Barry and her colleagues reviewed benefit brochures offered in two state-run exchanges during the first ACA enrollment period between 2013 and 2014.

The study alleges two significant problems. First, according to the study plans in the exchange often had financial disparities. For example, the study found that plans would include different co-pays for mental-health and substance-use disorder services from medical/surgical services. Second, according to the study some mental-health and substance-use disorder services had more stringent “prior authorization” requirements than their medical/surgical counterparts. These disparities, the report suggests, can dissuade people from selecting more expensive plans with more generous mental-health and substance-use-disorder benefits. According to the study, because mental-health and substance-use disorder services are often more expensive than medical/surgical services, insurers may benefit when consumers are dissuaded from joining plans with more generous mental-health and substance-use disorder benefits.

Continue Reading Study Suggests Many ACA Exchange Plans Violate Federal Parity Laws

On February 23, the Department of Treasury and the Internal Revenue Service (collectively, the “Agencies”) issued Notice 2015-16, the first piece of guidance on the Affordable Care Act’s “Cadillac Tax.” The Cadillac Tax is a 40 percent excise tax that is imposed on high-cost health plans under Section 4980I of the Internal Revenue Code (Code), which provision was added to the Code by the Affordable Care Act (ACA).

Very generally, the Cadillac Tax applies to taxable years beginning after December 31, 2017 (i.e., the 2018 plan year for calendar-year plans), and provides that a 40 percent excise tax will be imposed on “applicable employer-sponsored coverage” in excess of statutory thresholds (in 2018, $10,200 for self-only coverage, and $27,500 for “other than self only” coverage (e.g., family coverage)). Notably, the excise tax applies only to the “excess benefit,” i.e., the amount by which the cost of the applicable employer-sponsored coverage exceeds the statutory thresholds. Furthermore, this excise tax is to be calculated on a monthly basis, so that it applies only in the months in which there is an “excess benefit.” The cost of the applicable coverage is to be determined under rules similar to those used to calculate COBRA premiums.

Under Section 4980I, the employer is responsible for calculating the total amount of the excise tax and the excess benefit, while the actual liability for the excise tax rests with the insurer (in the case of an insured plan), the employer (in the case of a Health Savings Account (HSA)), or the “person that administers the plan” (in the case of other types of coverage). Hence, in the case of self-funded coverage that does not involve an HSA, it is unclear who (i.e., the plan sponsor, the third-party administrator, etc.) will be responsible for this liability (and note that Notice 2015-16 does not provide any guidance or clarity on this last point).

Continue Reading IRS Provides First Guidance on ACA’s ‘Cadillac Tax’

On February 13, the Departments of Health and Human Services (“HHS”), Labor (“DOL”) and Treasury (collectively, the “Departments”) issued Part XXIII of their FAQs about Affordable Care Act implementation. This latest FAQ provides additional guidance regarding “excepted benefits,” i.e., benefits that are exempt from the portability rules under HIPAA as well as various requirements under ERISA (including MHPAEA) and the ACA, including the ACA’s market reforms (such as the prohibition on lifetime and annual limits, etc.). Specifically, the FAQ focuses on a subcategory of excepted benefits known as “supplemental excepted benefits,” which generally are benefits provided under a separate policy, certificate or contract of insurance which are designed to “fill gaps” in primary coverage.

The FAQ notes that, in determining whether insurance coverage sold as a supplement to group health coverage can be considered “similar supplemental coverage” (and hence an excepted benefit), they will continue to apply four criteria previously set forth by the Departments in subregulatory guidance issued in 2007 and 2008:

  1. The policy, certificate, or contract of insurance must be issued by an entity that does not provide the primary coverage under the plan;
  2. The supplemental policy, certificate, or contract of insurance must be specifically designed to fill gaps in primary coverage, such as coinsurance or deductibles;
  3. The cost of the supplemental coverage may not exceed 15 percent of the cost of the primary coverage; and
  4. Supplemental coverage sold in the group insurance market must not differentiate among individuals in eligibility, benefit or premiums based upon any health factor of the individual (or any dependents of the individual)

Continue Reading DOL, HHS & Treasury Issue Additional Guidance Regarding Excepted Benefits

The last several weeks of 2014 brought with them a flurry of guidance from the Departments of Health and Human Services (“HHS”), Labor (“DOL”) and Treasury (collectively, the “Departments”) regarding group-health plan employee benefits issues, including issues under the Affordable Care Act (“ACA”), the Employee Retirement Income Security Act (“ERISA”) and the Mental Health Parity and Addiction Equity Act (“MHPAEA”). As we start into 2015, care should be taken not to overlook these important pieces of guidance that came in at years’ end:

1. No More “Skinny Plans”

On November 4, the Internal Revenue Service (“IRS”), in collaboration with HHS, issued guidance (Notice 2014-69) aimed at shutting the door on the use of so-called “skinny plans,” i.e., plans that provide “minimum value” within the meaning of the ACA, and which cover preventive services, but which exclude substantial hospitalization and/or physician services. (Some consultants have argued that such plans technically satisfied the ACA’s “minimum value” standard). The intent of such “skinny plans” is usually not to provide group health coverage, but to allow employers to partially or fully avoid application of any penalties under the ACA’s “pay or play” provisions (and a consequence of such actions is that employees covered under such “skinny plans” are generally ineligible for premium tax credits on ACA exchanges).

The IRS Notice unequivocally states that “plans that fail to provide substantial coverage for in-patient hospitalization services or physician services (or for both) . . . do not provide minimum value.” The Notice goes on to state that HHS and Treasury will amend the applicable regulations to incorporate this reading. The Notice gives limited grandfathering relief, protecting “skinny plans” adopted (through a binding written commitment) before November 4, 2014, but only as to plan years beginning on or before March 1, 2015 (regardless of such grandfathered coverage, employees offered affordable coverage under one of these plans can turn down such coverage and still be eligible for a premium tax credit on the exchanges). However, employers offering a “skinny plan” under this grandfathering provision must not state or imply that the plan precludes the employee from receiving a premium tax credit, and they must timely correct any disclosures to that effect that have previously been made.

2. Premium Reimbursement Plans

On November 6, the Departments issued additional FAQs (Part XXII) on ACA Implementation, specifically addressing premium reimbursement arrangements. The Departments clarified that an employer may not offer employees cash to reimburse the purchase of an individual market health policy, regardless of whether the cash is paid as taxable compensation or not. Any such reimbursement plan or arrangement would be considered by the Departments to be a “group health plan” within the meaning of ERISA and the Public Health Service Act (“PHSA”), and hence would be subject to the market reform provisions of the ACA. In keeping with prior guidance on integration of employer health care arrangements with individual coverage, the Departments stated that such a premium reimbursement plan fails to comply with the ACA’s market reforms because it could not be integrated with an individual market policy (and the reimbursement plan could not, on its own, satisfy the market reforms).

Continue Reading HHS, Labor, and Treasury Issue Flurry of Rulemakings and Guidance on Employee Benefits to Close 2014 with a Bang