The Department of Health and Human Services (HHS), Department of Labor (DOL), and the Internal Revenue Service have issued a new set of frequently asked questions (FAQs) on the implementation of an assortment of provisions of the Patient Protection and Affordable Care Act (ACA), including the ACA’s effect on provisions of the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).
Coverage of risk-reducing medications. In September 2013, the United States Preventive Services Task Force (USPTF) recommended that physicians offer to women who are at increased risk for breast cancer and at low risk for adverse medication effects, risk-reducing medications. In response to the USPTF recommendation, the FAQs stipulate that, for plan or policy years beginning on or after Sept. 24, 2014, both non-grandfathered group health plans and non-grandfathered health insurance coverage offered in the individual or group market must cover breast cancer risk-reducing medications such as tamoxifen or faloxifene without cost sharing subject to reasonable medical management. This requirement does not apply to grandfathered health plans.
Limits on cost-sharing. The FAQs state that, for plan years beginning on or after Jan. 1, 2015, non-grandfathered group health plans and group health insurance coverage are required to apply the out-of-pocket maximum across all essential health benefits (EHBs). The IRS, HHS, and DOL have announced their intent to use their enforcement discretion and work with plans that make a good faith effort to apply an authorized definition of EHB.
Plans and issuers may divide the ACA’s annual limit on out-of-pocket costs across multiple categories of benefits, provided that the combined amount of any separate out-of-pocket limits applicable to all EHBs under the plan does not exceed the annual limitation on out-of-pocket maximum for that year under ACA Sec. 1302(c). For 2014, the ACA’s annual limit on out-of-pocket costs is $6,350 for self-only coverage and $12,700 for coverage other than self-only.
The FAQs also state that, for out-of-network items and services, a plan may, but is not required to, count out-of-pocket spending toward the plan’s annual maximum out-of-pocket limit.
The IRS, HHS, and DOL are “encouraging” issuers offering qualified health plans (QHPs) through the health insurance marketplace to count enrollees’ out-of-pocket expenses on certain services and items toward the QHPs’ annual maximum out-of-pocket limits. The items and services include in-network benefits for any provider listed in the version of the provider directory as of the date of that enrollee’s enrollment for the beginning months of coverage, in cases where issuers are unable to maintain provider directories in a current status. They also include, for the first 30 days of coverage, starting on Jan. 1, 2014, non-formulary drugs and drugs that are on a QHP issuer’s formulary by typically require prior authorization or step therapy prior to being covered.
The FAQs provide that plans are allowed to count an individual’s out-of-pocket costs for non-covered items or services (such as cosmetic services) towards the plan’s annual maximum out-of-pocket costs, but this is not a requirement. The FAQs include a reminder, however, that “cost-sharing” does not include spending for non-covered services, nor does it include premiums or balance billing amounts for non-network providers, but nothing prevents a plan or issuer from counting those expenses toward the plan’s annual maximum out-of-pocket limit.
Wellness programs. The FAQs advise that, if a participant is given a reasonable opportunity to enroll in a tobacco cessation program at the beginning of the plan year and qualify for a reward, such as avoiding the tobacco premium surcharge, the plan may, but does not have to, provide another opportunity to avoid the surcharge until the next renewal or enrollment period. Plans also may allow pro-rated rewards for mid-year enrollment in a wellness program.
If a qualified plan participant’s doctor advises that an outcome-based wellness program’s standard for obtaining a reward is medical inappropriate for the participant, the plan must provide a reward for satisfying a reasonable alternative standard that accommodates the recommendations of the doctor. Sample language is found in the final regulations that may be used to satisfy the requirement to provide notice of the availability of a reasonable alternative standard. This language may be modified if it includes all required content found in the regulations.
Effect of ACA on MHPAEA. The FAQs clarify the influence the ACA has on the effect of the MHPAEA on non-grandfathered individual and small group coverage, and on grandfathered individual coverage. The MHPAEA generally requires that financial requirements and treatment limitations imposed on mental health and substance use disorder benefits cannot be more restrictive than the same limitations applicable to medical/surgical benefits.
Because the ACA extends the protections of the MHPAEA to the entire individual market, the FAQs explain, all non-grandfathered individual market coverage not subject to the HHS transitional policy must include, for policy years beginning on or after Jan. 1, 2014, coverage for mental health and substance use disorder benefits, and that coverage must comply with the federal parity requirements of interim final regulations issued in 2010. The same applies to non-grandfathered small group market coverage. The final regulations apply for policy and plan years beginning on or after July 1, 2014, which, for calendar year policies, is Jan. 1, 2015. The same also applies to grandfathered individual market insurance coverage, but only to the extent that mental health or substance use disorder benefits are covered under the policy. Grandfathered small group market coverage is not required to comply with either the ACA’s EHB provisions or with the MHPAEA.
Expatriate health plans. The FAQs also clarify that an insured expatriate health plan is an insured group health plan for which enrollment is limited to primary insureds for whom there is a good faith expectation that such individuals will reside outside their home country or outside the United States for at least six months of a 12-month period (which can fall within a single plan year or across two consecutive plan years) and any covered dependents, and also with respect to group health insurance coverage offered in conjunction with the expatriate group health plan.
Any new and more restrictive guidance or regulations will not be applicable to plan years ending on or before Dec. 31, 2016, the FAQs say.
Fixed indemnity insurance. Fixed indemnity insurance is an excepted benefit under the Public Health Service Act (PHSA) Sec. 2791(c)(3)(B), ERISA Sec. 733(c)(3)(B), and Code Sec. 9832(c)(3)(B), and, as such, it may be exempt from various health coverage requirements. After noticing a significant increase in the number of health insurance policies that were claimed to be fixed indemnity insurance, the HHS, IRS, and DOL reiterated that fixed indemnity insurance that pays on a per-service basis, as opposed to a per-period basis, does not meet the conditions for excepted benefits. However, the FAQs now state that, with respect to group health insurance coverage that does not meet the definition of fixed indemnity excepted benefits, coverage that supplements other group health plan coverage may qualify as supplemental excepted benefits under other PHSA, ERISA, and Code provisions. The HHS also intends to issue proposed regulations allowing fixed indemnity coverage sold in the individual health insurance market to be considered excepted benefits under certain conditions, even when benefits are not paid solely on a per-period basis.
The HHS states that, until it issues regulations on the proposed amendments, in states where it has direct enforcement authority, it will treat fixed indemnity coverage in the individual market as excepted benefits if it meets the following conditions:
• It is sold only to individuals who have other health coverage that is minimum essential coverage within the meaning of IRC Sec. 5000A(f);
• There is no coordination between the provision of benefits and an exclusion of benefits under any other health coverage;
• The benefits are paid in a fixed dollar amount regardless of the amount of expenses incurred and without regard to the amount of benefits provided with respect to an event or service under any other health coverage; and
• A notice is displayed prominently in the plan materials informing policyholders that the coverage does not meet the definition of minimum essential coverage and will not satisfy the individual responsibility requirements of IRC Sec. 5000A.
The HHS is urging states with primary enforcement authority to also treat this coverage as an excepted benefit.
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