In December 2010 the troika of governmental agencies in charge of implementing the PPACA (the DOL, HHS, and IRS – here, the “Departments”) issued more “soft guidance” in the form of Frequently Asked Questions, the fifth such set the Departments have published. The FAQs offer more clarity and deadline relief, as summarized below:
• Percentage of Comp Cost Sharing Formulas Under Grandfathered Plans: The FAQ provides that a health plan may continue to determine employee cost sharing based on a percentage of compensation formula, without losing grandfathered status, so long as the formula (the percentage level) does not increase, even if the employee’s increasing rate of compensation will result in cost increases that exceed the thresholds set forth in the grandfathering regulations. The example in the FAQ was an out-of-pocket spending limit, such as an out-of-pocket limit or deductible, but not a copayment.
• 60-Day Prior Written Notice Rule Postponed: The PPACA includes a requirement that, by March 23, 2011, the Departments develop standards for use by plan sponsors and insurers in creating a “summary of benefits and coverage explanation” to be provided to plan participants no later than March 23, 2012. The PPACA also provides that if a plan sponsor or insurer makes any material modification in that summary of benefits/coverage explanation, it must provide written notice of the change at least 60 days prior to its effective date. Prior to this rule, ERISA required written notice of a material reduction in health benefits be provided 60 days after corporate action (e.g., adoption of board resolutions) to make the reduction. The prior notice rule under PPACA created some confusion, with some believing that it applied to any change to a health plan or policy, not just to changes to some new form of disclosure document that had not been fully defined yet. The FAQ makes it clear that the prior notice rule only applies to the summary of benefits/coverage explanation and that prior notice of a benefit change will not be required until the Departments issue guidance on this new type of disclosure. The 60-day “after” notice under ERISA still applies.
• Auto-Enrollment for Large Plans: PPACA requires employers with more than 200 full-time employees to automatically enroll new full-time employees in the employer’s group health plan. There is no set deadline for this requirement and the definition of “full-time” for purposes of the rule is unclear. The FAQ states that compliance with auto-enrollment will not be required until regulations are issued by the DOL, and that EBSA (the DOL’s benefits division) will work with the Treasury Department to develop rules defining full-time status for this purpose. Regulations are expected to issue by 2014.
• Dependent Coverage to Age 26: The FAQs state that, although health care reform prohibits distinctions in dependent coverage based on age (except for children aged 26 or older), it does not prohibit distinctions based on age that apply to all coverage under the plan. Therefore it is permissible for a plan to charge a copayment for an office visit for non-preventative services to all covered participants aged 19 and over, whether employee, spouse, or dependent, but not to participants under age 19.
• Value-Based Insurance Design: Although the PPACA requires non-grandfathered health plans to provide “first-dollar” coverage for recommended preventive services, the FAQ states that this rule is tempered by the need for “reasonable medical management techniques” to steer patients towards more efficient treatment settings. Thus, the FAQ sanctions an arrangement in which a group health plan waives a copayment for a preventative screening when it is performed in an ambulatory surgery center, but charges $250 when the same screening is performed in a hospital outpatient setting, except in instances where the patient’s medical condition rules out the lower-cost treatment setting. The Departments are requesting public comments on “value-based insurance design” of this type as a prelude to issuing regulations or other written guidance.
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