The IRS, DOL and HHS have published a final rule on grandfathered health plans, preexisting condition exclusions, lifetime and annual dollar limits on benefits, rescissions, coverage of dependent children to age 26, internal claims and appeal and external review processes, and patient protections under the Affordable Care Act.
The majority of the material in the final rule had already been published in the interim final rule and sub-regulatory guidance such as FAQs and Technical Releases. However, the rule also includes some clarifications not previously addressed. The material in this blog summarizes what is new.
Grandfather Status
Prior guidance has stated that in the case of a multi-employer, collectively bargained plan that requires either fixed-dollar employee contributions or no employee contributions, the plan will not lose grandfathered status if the employer contribution rate changes so long as there continues to be no employee contributions or no increase in the fixed-dollar employee contributions towards the cost of coverage and there are no corresponding changes in coverage terms that would otherwise cause the plan to cease to be a grandfathered plan.
The final rule expands this exception to all plans that require either fixed-dollar employee contributions or no employee contributions.
Out-of-Network Benefits
Lifetime and annual dollar limits on essential health benefits are generally prohibited, regardless of whether such benefits are provided on an in-network or out-of-network basis.
While this requirement was implicit in the language of the statute, the final rule makes it explicit.
Account-Based Plans
The final regulations include a definition of the term “account-based plans”. These are employer-provided group health plans that provide reimbursements of medical expenses other than individual market policy premiums, with the reimbursement subject to a maximum fixed dollar amount for a period. Examples include:
- Health Flexible Spending Arrangements (FSAs);
- Health Reimbursement Arrangements (HRAs); and
- Medical Reimbursement Plans.
Prior guidance had discussed account-based plans without actually defining the term. That guidance provided that account-based plans are subject to ACA market reforms unless they qualify as excepted benefits or are integrated with a group health plan that complies with those reforms.
One of the requirements for integration is that, under the terms of the account-based plan:
- an employee (or former employee) must be permitted to permanently opt out of and waive future reimbursements from the account-based plan at least annually; and
- upon termination of employment, either remaining funds are forfeited or the employee is allowed to opt out of and waive future reimbursements under the account-based plan.
The final rule clarifies that forfeiture or waiver occurs even if the forfeited amounts or waived reimbursements may be reinstated upon a fixed date, a participant’s death, or the earlier of the two events (the reinstatement event).
For this purpose, an HRA is considered forfeited or waived prior to a reinstatement event only if the participant’s election to forfeit or waive is irrevocable, meaning that, beginning on the effective date of the election, the participant and the participant’s beneficiaries have no access to amounts credited to the HRA until the reinstatement event. This means that the HRA may not be used to reimburse or pay medical expenses incurred during the period after the forfeiture or waiver and prior to reinstatement.
An HRA need not provide for reinstatement of forfeited amounts or waived reimbursements to be integrated with a non-HRA group health plan. The final regulations reflect this clarification, and this clarification applies for integration of other account-based plans, as well.
Prior guidance had also established that integration requires a plan sponsor offering an account-based plan to also offer employees an ACA-compliant group health plan. This included integration of a premium reimbursement arrangement for an employee’s Medicare part B or D premiums if the employer offers the employee another group health plan. However, this effectively excludes integration with Medicare coverage itself because Medicare coverage is not a group health plan. This was problematic for employers with fewer than 20 employees because those employers are not required by the applicable Medicare secondary payer rules to offer group health plan coverage to their Medicare-eligible employees and Medicare may be the only avenue for coverage of those employees.
Accordingly, the final rule permits integration between an account-based plan and Medicare for those employers.
Rescissions
A rescission is a retroactive termination of coverage and is generally prohibited by the ACA unless the person obtains coverage through fraud or an intentional misrepresentation of material fact. However, a plan may drop coverage retroactively if an individual requests it (assuming the individual is not influenced, pressured or coerced by the employer to do so.)
Previous guidance permitted rescission for failure to timely pay premiums. The final rule clarifies that this applies to COBRA participants. Note however, that COBRA itself contains rules about when COBRA premiums are due and how to handle de minimis shortfalls in premium.
External Review
The ACA requires plans to provide for external review of adverse benefit determinations where the determination involves the application of medical judgment. Prior guidance had provided a non-exhaustive list of examples.
The final rule adds two more items to that list:
- a determination of whether a participant or beneficiary is entitled to a reasonable alternative standard for a reward under a wellness program; and
- a determination of whether a plan is complying with the non-quantitative treatment limitation provisions of the Mental Health Parity and Addiction Equity.
Choice of Healthcare Professional
If a plan requires or provides for designation of a participating primary care provider for the child of a participant, then the plan must permit designation of a network provider who specializes in pediatric care (including subspecialties) who is available to accept the child.
More broadly, if a plan requires any covered person to designate an in-network primary care physician the plan may apply reasonable and appropriate geographic limitations with respect to which participating primary care providers are considered available for purposes of selection as primary care providers.