On June 22, 2010, the Department of the Treasury, Department of Labor and Department of Health and Human Services jointly released interim final rules (“Rules”) addressing pre-existing condition exclusions, lifetime and annual dollar limits on benefits, rescissions, and other patient protections under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (together, the “Health Care Reform Legislation”).
Pre-Existing Condition Exclusions
The Health Care Reform Legislation prohibits group health plans from imposing any pre-existing condition exclusions effective with plan years beginning on or after January 1, 2014. For enrollees who are under 19 years of age, this prohibition becomes effective for plan years beginning on or after September 23, 2010 – January 1, 2011 for calendar year plans. The Rules state that these provisions apply to grandfathered health plans (except grandfathered individual health insurance policies). Before the effective date of these provisions, the rules regarding pre-existing condition exclusions under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) will continue to apply.
Annual and Lifetime Limits
The Health Care Reform Legislation generally prohibits group health plans and health insurance issuers from imposing lifetime or annual limits on the dollar value of health benefits. However, for non-essential health benefits, a plan or issuer may impose annual or lifetime per-individual dollar limits on specific benefits. Also, “restricted” annual limits on the dollar value of “essential health benefits” are permitted for plan years beginning before January 1, 2014.
Although regulations have not yet been issued to define “essential health benefits,” the Rules refer to the “essential health benefits” listed in the Health Care Reform Legislation – ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventative and wellness services and chronic disease management; and pediatric services, including oral and vision care.
The Rules adopt a three-year phased approach for “restricted” annual limits. Under the Rules, annual limits on the dollar value of essential health benefits may not be less than the following amounts before January 1, 2014:
- For plan years beginning on or after September 23, 2010 but before September 23, 2011 – $750,000;
- For plan years beginning on or after September 23, 2011 but before September 23, 2012 – $1.25 million; and
- For plan years beginning on or after September 23, 2013 but before September 23, 2014 – $2 million.
The Rules also impose specific notice requirements (and reinstatement opportunities if coverage was dropped) for individuals who reached a lifetime limit under a plan or health insurance coverage before the effective date of the Rules.
The Rules clarify that the provisions relating to annual limits do not apply to health flexible spending accounts (“health FSAs”), health savings accounts (“HSAs”), or medical savings accounts (“MSAs”). The Rules also state that the annual limit restrictions do not apply to health reimbursement arrangements (“HRAs”) that are integrated with other coverage, provided that the other coverage meets the requirements under the Health Care Reform Legislation. (Similarly, these limitations do not apply to stand-alone, retiree-only HRAs). The rules regarding annual and lifetime limits are applicable to grandfathered health plans, but are not applicable to grandfathered individual health insurance policies.
Under the Health Care Reform Legislation and the Rules, a group health plan or health insurance issuer may not rescind health coverage except in the case of fraud or intentional misrepresentation of a material fact. This means that a plan or issuer may not cancel or discontinue coverage with retroactive effect except in these limited circumstances. The rules regarding rescission apply to grandfathered health plans.
For group health plans or health insurance coverage with a network of providers, the Health Care Reform Legislation and the Rules provide the following three requirements:
- A group health plan or health insurance issuer must permit a participant to choose a primary care provider including a pediatrician when the plan or issuer requires designation of a primary care provider;
- A group health plan or health insurance issuer must permit a participant to obtain obstetrical or gynecological care without prior authorization; and
- Emergency services provided under a group health plan or health insurance coverage must be provided without prior authorization regardless of whether the health care provider providing the emergency services is a participating network provider.
The Rules also impose certain notice requirements under these patient protection provisions. Notably, these requirements are not applicable to grandfathered health plans.
Look for Additional Analysis in the Near Future
The Rules are subject to a comment period. Based on these comments, additional changes may be made to the Rules. As we further analyze the implications of these Rules, we will be issuing more detailed information through additional SGR Client Alerts and webinars. For more information on these Rules and the Health Care Reform Legislation, please contact your SGR Executive Compensation and Employee Benefits counsel.