Nearly three years ago, having spent hundreds of hours immersed in ACA minutiae, we anticipated that clients would not react well to fees for services that consisted principally of telling them that they had asked the wrong question. So we decided, against tradition and much conventional wisdom, to sink lots of unpaid partner time into this education project. A casual reader of this blog should learn basic ACA terms and concepts, so that he or she can converse effectively with advisors. A regular reader should be able to identify, during such a conversation, a purported ACA expert who’s a poseur. Sadly, they abound. A colleague should find this a thought-provoking reference to ACA rules and guidance documents. Those are our goals.

Substitute nothing you read here for legal or other professional advice about any specific situation. ACA rules and sub-regulatory guidance change frequently and whimsically. Occasionally, the three main enforcement agencies (DOL, HHS, IRS) disagree. Sometimes, they publish a new rule unaware of a related, existing rule. Part of our service to you is to alert you to what we see coming. We usually have guessed right, but we often are guessing. And of course, apparently insignificant factual details can turn out to be determinative. If you regard this blog as cheap – i.e., free – legal advice, you’re rolling the dice at your own risk and the risk might be far bigger than you realize.

Finally, we invite constructive comments, including reasoned criticism, but not rants. We delete hissy-fits and block commenters who seem to be unable to comment otherwise. That goes triple for political hyperbole. Sometimes, we must explain political realities in order to explain a regulatory reality, but we try to be objective. You should, too.

Today, the ACA enforcement agencies (DOL, HHS, IRS) jointly published final rules, effective January 1, 2017, on grandfathered plan status, pre-existing condition exclusions, lifetime and annual limits, rescissions, dependent coverage, appeals and patient protections. Interim rules and sub-regulatory guidance issued since June 2010 are merged and finalized. On first reading (104 pages), we see no boat-rocking changes, but here are bits we think deserve review.

Grandfathered Plan Status

Grandfathered status is lost immediately, irrevocably, when a prohibited change is made, even in mid-year. However, since this applies separately to each benefit package within a plan – e.g., a PPO option, and HMO option and a POS arrangement – grandfathered status of the entire plan is not lost when the plan makes changes that forfeit the grandfathered status of one benefit package.

More good news for unions: multiemployer plans get substantial exemption from anti-abuse rules, permitting new employers to join expressly to take advantage of the plans’ grandfathered status.

Dropping coverage of anything needed to diagnose or treat a particular condition will be treated as eliminating substantially all benefits for that condition, forfeiting grandfathered status. For example, if a mental condition requires both drugs and counseling and the plan deletes counseling, grandfathered status is lost.

If employees pay a fixed dollar amount (including $0) that does not increase, a plan remains grandfathered even if the employer contribution rate declines by more than 5%.

A grandfathered plan offering self-only coverage may add family coverage and peg the employee contribution for the new family tier at more than 5% above the self-only rate.

When a generic alternative becomes available, a grandfathered plan may move the brand name drug to a higher cost-sharing tier without forfeiting its status due to increased costs imposed on those who continue to buy the brand name drug.

HRAs and Premium Reimbursement Plans

A stand-alone HRA remains illegal, as does a health FSA not offered through a § 125 plan. But very small employers (under 20), exempt from the duty to offer group health coverage to Medicare-eligible employees, now may integrate premium reimbursement plans with Medicare Part B or D as long as they offer group health coverage to employees not Medicare eligible.

Dependent Coverage

Some HMO plans require covered individuals to live within a stated geographic area. When a child under age 26 is away at college, she loses eligibility. This now will be deemed to violate the adult child coverage mandate. For dependents other than children (e.g., grandchildren), a plan may impose residence, financial dependence or similar coverage requirements.

External Appeals

Plans no longer may condition external review on payment of a filing fee, with one exception. In states with laws expressly permitting nominal filing fees, consistent with the 2004 NAIC model, a plan may charge a fee up to $25 per appeal (limited to $75 annually per claimant) if the plan refunds fees paid for successful appeals and waives fees that would impose a financial hardship.

Emergency Services

The agencies believe that plans have been abusing out-of-network providers, resulting in excess balance billing of patients. Henceforth, plans must pay for out-of network emergency services at least the greatest of – (1) the median amount paid to network providers; (2) the product of the formula that the plan uses generally for out-of-network services (UCR, for example); (3) the Medicare payment amount.

ACA § 1557(a) (42 U.S.C. § 18116(a)) says:

Except as otherwise provided for in this title (or an amendment made by this title), an individual shall not, on the ground prohibited under title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.), title IX of the Education Amendments of 1972 (20 U.S.C. 1681 et seq.), the Age Discrimination Act of 1975 (42 U.S.C. 6101 et seq.), or section 794 of title 29, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under, any health program or activity, any part of which is receiving Federal financial assistance, including credits, subsidies, or contracts of insurance, or under any program or activity that is administered by an Executive Agency or any entity established under this title (or amendments). The enforcement mechanisms provided for and available under such title VI, title IX, section 794, or such Age Discrimination Act shall apply for purposes of violations of this subsection.

Sub-section (b) emphasizes that subsection (a) does not limit the previous application of the statutes referenced in subsection (a). Subsection (c) authorizes the HHS Secretary to “promulgate regulations to implement this section.” All of this has been in effect since March 2010. So, why did HHS need over five years to propose the set of rules published September 8? Here are a few highlights. For brevity’s sake, we omit foreign language service requirements, disability accommodation, compliance certification, grievance procedure and notice posting rules, among others.

Marketplace Insurers Are Covered Comprehensively

Receipt of non-procurement federal financial assistance, including ACA Marketplace subsidies, directly or indirectly, subjects a health insurer to § 1557 coverage, for all its health plans, not just those sold through the Marketplace. See preamble footnote 73 and accompanying text and see 45 C.F.R. § 92.4. Entities legally separate from those insurers might be able to serve as third party plan administrators for otherwise uncovered, self-funded group health plans, subject to “case-by-case inquiry” into § 1557 coverage.  No guidance is given about how that call will be made.

But wait, there’s more! “A health program or activity also includes all the operations of a State Medicaid program,” we learn in preamble footnote 16.

Insurer and Medicaid program exposure matter to the extent that HHS reads § 1557 to forbid otherwise lawful plan designs or practices or to mandate practices or coverages that had been optional. Surprise! According the proposed rules, § 1557 does both.

Gender Transition (Absolutely) and Sexual Orientation (Probably) Are Protected

The proposed rules say –

The term “on the basis of sex is defined to include, but is not limited to, discrimination on the basis of pregnancy, termination of pregnancy, recovery therefrom, childbirth or related medical conditions, sex stereotyping, or gender identity.

Consequently, “discrimination on the basis of sex includes discrimination in the basis of gender identity.” So, “failure to treat individuals in accordance with their gender identity may constitute prohibited discrimination.” Thus, a covered plan may not exclude services related to gender transition. HHS also announces its support for “banning discrimination in health programs and activities . . . also on the basis of sexual orientation,” while requesting comments about the legal authority to do so.

This new protection is augmented by HHS’ decision to forbid a covered entity to discriminate against an individual because he or she, though not in a protected group, is “associated with” someone in a protected group. See 45 C.F.R. § 92.209.

Permitted Discrimination: Age Rating? Dependent Pregnancy Exclusion?

In fifty pages of preamble and rules, HHS references § 1557’s limiting, introductory clause – i.e., “[e]xcept as otherwise provided for in this title” – just four times, saying only once, in preamble footnote 38, what it might mean. See 80 Fed. Reg. 54,181 (Sept. 8, 2015). We learn there that HHS considers the age rating permitted by 45 C.F.R. § 147.102(1)(1)(iii) to be beyond § 1557’s reach. Those rules implemented ACA § 1201(4), which enacted new PHS Act § 2701 (42 U.S.C. 300gg), limiting the age rating spread for individual and non-grandfathered small group plans to a 3:1 ratio. That limit was not imposed on grandfathered or large group plans. Should we infer from footnote 38 that § 1557 bans all age-rating except the 3:1 spread permitted for individual and non-grandfathered small group plans, effectively extending that limit to large group and grandfathered, plans? Or should we infer that age rating, up to 3:1 by individual and small group plans, and all age rating by large group and grandfathered plans is unregulated by § 1557?

Consider also dependent pregnancy coverage. Pregnancy coverage for all is among the “Essential Health Benefits” required of individual and non-grandfathered, small group plans, but EHB are not mandated for grandfathered or for large group health plans. See ACA § 1302(b)(1)(d) (42 U.S.C. 18022) and ACA-added PHS Act § 2707 (42 U.S.C. § 300gg-6). Consequently, grandfathered and large group plans (like state Medicaid plans) typically exclude dependent pregnancy coverage. Does ACA Tile I “otherwise provide for” that exclusion? If not, does the exclusion violate § 1557’s prohibition of discrimination on the basis of sex?

The most obvious place for the rules to explain what “otherwise provided for” means is at 45 C.F.R. § 92.2(b)(2), titled “Limitations.” Here’s the complete text of that subsection: “[Reserved.]” Is HHS reserving its option to tell us later that § 1557 compels what was allowed elsewhere in Title I? That seems contrary to the limiting function of the opening clause. But if so, what specific discrimination, otherwise outlawed by § 1557, does Title I “provide for”? Is 3:1 age rating the sole example? Then why didn’t § 1557 reference only that section, as was done in § 1251, which distinguished the PHS Act amendments that would and would not apply to grandfathered plans?

A Broad Employee Health Plan Exemption

But for § 92.208 of the proposed rules, employer recipients of federal financial assistance might be exposed to significant new health plan mandates. However, that section seems to take back much, maybe all, of what may have been given to employees elsewhere. Here’s the entire section.

 §92.208 Employer liability for discrimination in employee health benefit programs.

A covered entity that provides an employee health benefit program to its employees and/or their dependents shall be liable for violations of this part in that employee health benefit program only when:

(a) The entity is principally engaged in providing or administering health services or health insurance coverage;

(b) The entity receives Federal financial assistance a primary objective of which is to fund the entity’s employee health benefit program; or

(c) The entity is not principally engaged in providing or administering health services or health insurance coverage but operates a health program or activity, which is not an employee health benefit program, that receives Federal financial assistance; except that the entity is liable under this part with regard to the provision or administration of employee health benefits only to the employees in that health program or activity.

The preamble summarizes that section helpfully, twice.

[W]here an entity that receives Federal financial assistance provides an employee health benefit program to its employees, it will be liable for discrimination in that employee health benefit program under this part only in the following circumstances [thereafter stating subs-sections (a) through (c) above].

[U]nless the primary purpose of the Federal financial assistance is to fund employee health benefits, we propose to not apply Section 1557 to an employer’s provision of employee health benefits where the provision of those benefits is the only health program or activity operated by the employer.

This seems to us to undercut any contention that § 1557 mandates dependent pregnancy coverage for employee health plans sponsored by recipients of federal financial assistance. Perhaps HHS did this to avoid having to specify the discrimination that is permitted by § 1557 because it is “otherwise provided for” in ACA Title I.

Note, however, that § 92.208 speaks only to employer liability. HHS sees the employer’s insurer as independently subject to § 1557 if it is a Marketplace participant. Therefore, in order to exclude coverages deemed mandated by § 1557, the employer’s plan might need to be self-funded and administered by a TPA that is not a Marketplace participant.

Comment Period

Comments on the proposed nondiscrimination rules must be received by November 9, 2015.

With group health plan premium increases limited by market and regulatory forces, insurers and self-insurers have raised deductibles, co-insurance, co-pays and other cost-shifting provisions, subject to the ACA’s 2015 maximum out-of-pocket (“MOOP”) limits – $6,600 per individual, $13,200 per family.  But “reference-based pricing” complicates MOOP enforcement.  In Frequently Asked Questions (“FAQ”) guidance issued October 10, 2014, DOL, HHS and IRS revealed their current views on the subject.

A typical group health plan pays substantially more for services rendered by a network provider than for the same services rendered by an out-of-network provider.  Reference-based pricing can be viewed as an alternative to provider network designation.  The insurer sets a price that it will pay for a certain service in a certain market.  All who provide the service for the reference price are, in effect, network providers. Providers who charge more can collect only the reference price from the insurer, leaving their patients exposed to balance billing.

Suppose that the normal covered cost of a procedure in your market is $26,600, and that a non-grandfathered, large group plan subject to the ACA’s 2015 individual MOOP limit therefore would pay at least $20,000.  What if, instead, the plan sets a reference price of $16,600? Is that equivalent to an unlawful, $10,000 individual MOOP provision?  And what if the reference price is so low that it’s accepted only by a single, over-booked surgeon 150 miles away?  Should that be treated the same as a traditional plan’s network adequacy problem?  Summarized briefly, here are major points emphasized in this FAQ guidance.

  • Reference-based pricing should apply only to services that can be delayed long enough to permit patients to shop around.  If reference-based pricing is applied to emergency services, balances paid must count toward the MOOP limit.
  • If the number or quality of providers of the service for the reference price would not meet applicable, functionally equivalent state network adequacy standards, PHS Act § 2707(b) won’t be satisfied, either.
  • Insurers should pay more than the reference price if the service is not reasonably available for the reference price from a high quality provider in the relevant area.

Finally, if the plan uses reference-based pricing, PHS Act § 2707(b) requires these disclosures (quoted verbatim):

Disclosure. Plans should provide the following disclosures regarding reference-based pricing (or similar network design) to plan participants free of charge.

a.  Automatically.  Plans should provide information regarding the pricing structure, including a list of services to which the pricing structure applies and the exceptions process. (This should be provided automatically, without the need for the participant to request such information, for example through the plan’s Summary Plan Description or similar document.)

b.  Upon Request.  Plans should provide:

  i.  A list of providers that will accept the reference price for each service;

  ii.  A list of providers that will accept a negotiated price above the reference price for each service; and

  iii.  Information on the process and underlying data used to ensure that an adequate number of providers accepting the reference price meet reasonable quality standards.

A dangerous notion is afoot – that an employer too small for “employer mandate” taxation under 26 U.S.C. § 4980H is therefore “exempt from Obamacare,” as we have heard it said too often.   That’s wrong for many reasons.  Every employer sponsoring a group health plan is obligated to comply with applicable coverage, cost sharing and anti-discrimination mandates, whether or not the employer is required to offer coverage at all.  Here’s one example that’s currently getting too little attention.

By adding new § 2716 to the Public Health Service Act, the ACA directed DOL, HHS and IRS to adopt for fully-insured plans non-discrimination rules like those already applicable to self-funded plans.  Violations would subject the plan to ERISA suits and to Code § 4980D taxes or PHS Act civil money penalties of $100 per day per non-highly compensated individual.  About six months later, the IRS renewed the warning in Notice 2010-63, inviting, “comments on what additional guidance relating to the application of section 105(h) (2) would be helpful with respect to insured group health plans.”

In Notice 2011-1 (December 2010), the IRS warned again that, “if a self-insured plan fails to comply with § 105(h), highly compensated individuals lose a tax benefit; if an insured group health plan fails to comply with § 2716, the plan or plan sponsor may be subject to an excise tax, civil money penalty, or a civil action to compel it to provide nondiscriminatory benefits,” adding that grandfathered, fully-insured plans will be exempt from the new rules.  Notice 2011-1 also told us that –

compliance with § 2716 should not be required (and thus, any sanctions for failure to comply do not apply) until after regulations or other administrative guidance of general applicability has been issued under § 2716. In order to provide insured group health plan sponsors time to implement any changes required as a result of the regulations or other guidance, the Departments anticipate that the guidance will not apply until plan years beginning a specified period after issuance.  Before the beginning of those plan years, an insured group health plan sponsor will not be required to file IRS Form 8928 with respect to excise taxes resulting from the incorporation of PHS Act § 2716 into § 9815 of the Code.

Comments were invited on these thirteen topics (summarized briefly here):

  1. What “benefits” should be tested?  “For example, is the rate of employer contributions toward the cost of coverage (or the required percentage or amount of employee contributions) or the duration of an eligibility waiting period treated as a “benefit” that must be provided on a nondiscriminatory basis?”
  2. Should there be an alternative that tests only coverage availability?
  3. How this relates to employer and individual mandate taxation.
  4. Which employee groups might be tested separately.
  5. Which separate employer locations might be tested separately.
  6. Safe harbor options.
  7. Aggregation of “substantially similar” coverages.
  8. Application to expatriate employees.
  9. Application to multi-employer plans.
  10. Testing, or not, of after-tax coverages provided to the highly compensated.
  11. Treatment of voluntary waivers of employer coverage.
  12. Treatment of corporate mergers, acquisitions and similar transactions.
  13. Penalty application.

The anticipated rules next were referenced next in a set of proposed rules on “wraparound” plans, published on Christmas Eve, 2013.  See 78 Fed. Reg. 77,740, to be codified at 26 CFR § 54.9831-1(c)(3)(vi).  Neither the rule text nor the preamble gave any further hint about the content of the coming rules.  See 79 Fed. Reg. 77,636.

Then, news broke in January 2014 that the IRS would delay issuance of related ACA rules until after the November 2014 elections, perhaps well into 2015.   That caused many employers to tune out.

We suspect that existing rules for self-funded plans are being reconsidered and perhaps rewritten to match the new rules for fully-insured plans.  If so, the new rules could make a big splash with small employers who have adopted self-funded plans to escape the ACA’s impact on their insurance markets.  A lot is happening that deserves the attention of employers large and small. Don’t get caught napping.

Recently, we have received requests to re-post prior articles on the 90-day waiting period, the employer mandate final rules (supplemented here, here, here and here), and our pop quiz for ACA consultants.  As we approach our 100th article, some readers apparently find the scroll-down browsing process tedious.  So do we.  Here are two other ways to find the articles that most interest you.

You may search by “Tags” or by search terms.  We have attached all our present “Tags” to this article, appearing just under the author’s name, so that you may see your options.  Click any Tag and the server will show you a list of all articles similarly tagged.  Or, enter your search term(s) in the “Search” box, in the green bar above and to the right of the article, just above “ABOUT THIS BLOG.”  The server then will show you a list of articles that contain your search term(s).

We genuinely seek to help employers, providers, insurers and brokers understand ACA compliance issues, but please remember that the articles posted on this site are not legal advice and should not be substituted for legal advice.  They are offered as educational introductions to the subjects addressed.  ACA legal advice should be obtained confidentially from a lawyer who knows the ACA and who knows all your relevant facts.

On April Fools’ Day, HR 4302 officially became Public Law 113-93.  It was the latest in a long line of so-called “Doc fix” bills, delaying scheduled Medicare reductions of payments to physicians.   Few onlookers noticed this, inserted between provisions on ICD-10 Code set delay and a GAO child health care report mandate:

SEC. 213. ELIMINATION OF LIMITATION ON DEDUCTIBLES FOR EMPLOYER-SPONSORED HEALTH PLANS.

(a) IN GENERAL.—Section 1302(c) of the Patient Protection and Affordable Care Act (Public Law 111–148; 42 U.S.C. 18022(c)) is amended—

(1) by striking paragraph (2); and

(2) in paragraph (4)(A), by striking ‘‘paragraphs (1)(B)(i) and (2)(B)(i)’’ and inserting ‘‘paragraph (1)(B)(i)’’.

(b) CONFORMING AMENDMENT.—Section 2707(b) of the Public Health Service Act (42 U.S.C. 300gg–6(b)) is amended by striking ‘‘paragraphs (1) and (2)’’ and inserting ‘‘paragraph (1)’’.

(c) EFFECTIVE DATE.—The amendments made by this Act shall be effective as if included in the enactment of the Patient Protection and Affordable Care Act (Public Law 111–148).

Shorn of legalese, it says that the ACA’s annual cap on small group health plan deductibles  – $2,000 individual, $4,000 family in 2014 – is repealed, retroactive to the date of the ACA’s passage, as if it had never been in the Act.  Was it just six months ago that our government shut down over failed attempts to repeal various ACA bits and pieces?  Yes.  So why this, why now?  Any why no uproar?

In ACA §  1302(c), Congress capped non-grandfathered, small group health plan deductibles, but not individual or large group plan deductibles.  That’s why so many of the plans being sold through www.healthcare.gov feature deductibles near the out of pocket maximum limit.  It was either a Congressional drafting error or a poison pill that only Congress could fix.  Part XII of the enforcement agencies’ Frequently Asked Question publications and the proposed rules on the subject (45 CFR § 156.130) effectively said, “It is what it is.”

But imposing similar limits on individual and large group plans probably would have been rejected even by ACA supporters, because www.healthcare.gov sticker shock would be much worse without high deductibles.  And the premium inflation consequences for small group plans contributed to the ACA’s unpopularity in an election year.  So, ACA opponents got a scalp.  ACA defenders hope it was not theirs.

We have been concerned for many months that some of our clients and friends are getting unreliable ACA compliance advice.  This is not a knock on insurance agents, or brokers, or TPA’s or any other class of advisors.  We work with some who are as helpful to our mutual clients as we are to them.  But too many (lawyers included) plainly do not know the subject. 

We have wondered how, unless they have mastered the ACA, executives can distinguish good advice from bad, trustworthy advisors from . . . not so much.  So, we created a pop quiz (below) that any reliable ACA advisor should ace, but that many others will bomb.  Whether you use it, and how, is up to you.  But now you have a tool that you did not have yesterday. 

If you like, we will grade your advisor’s paper, e-mailed to us – acareview@balch.com – without charge, assuming that we have no ethical conflict with that evaluation, and limited to the first 100 requests that we receive. We won’t contact your advisor without your advance, written permission and we won’t shame him or her, on this site or elsewhere; our aim is to help you, not to hurt others.

ACA Employer/Plan Compliance Pop Quiz

Read all questions, then answer each question completely and legibly, in writing.

  1. Do you personally study the ACA and the implementing regulations and guidance documents, or do you rely on someone else to do that and keep you current?  To the extent that you rely on someone else, provide his or her name and contact information.
  2. Provide the URL of a web site where we may read your published writings on ACA compliance.
  3. List the principal ACA federal enforcement agencies and the primary enforcement sub-agencies of each.
  4. What risks does an employer run if it funds an HRA for each employee to use to purchase an individual health insurance policy, through a private exchange or otherwise?
  5. Identify the Fair Labor Standards Act section, added by the ACA, for which no implementing rule has yet been proposed.
  6. State the effective date of the new ACA rules forbidding non-grandfathered, fully insured group health plans to discriminate in favor of the highly compensated.
  7. In a leased employee arrangement, what determines whether the leasing firm or its customer bears the Employer Shared Responsibility Cost obligation to offer coverage to full time employees and their dependents?
  8. Explain how a group health plan may recover its grandfathered status if it has been lost due to a minor error such as a clerical mistake.
  9. What is an employer’s potential exposure for permitting a health care provider to pay group health plan premiums for an employee?
  10. Is each following statement True (T) or False (F)? (Circle one).
A grandfathered group health plan need not comply with the coverage and cost-sharing mandates that the ACA added to the Public Health Service Act.

T

F

A group health plan is grandfathered if it has made no coverage or cost-sharing changes adverse to employees since March 23, 2010.

T

F

The ACA’s Employer Shared Responsibility Cost rules do not apply to state or local government employers.

T

F

An Applicable Large Employer that offers minimum essential coverage to at least 70% of its full time employees and their dependents in 2015 will be exempt from assessments under Code § 4980H for 2015 coverage months.

T

F

To determine whether an employer is an Applicable Large Employer subject to the Employer Shared Responsibility Cost rules beginning in January 2015, the employer should count its number of full time employees in each month of 2015 and determine whether it employed, on average, at least 50 full time employees per month.

T

F

For purposes of the preceding statement, a full time employee is one who works at least 130 hours per month (equivalent to 30 per week).

T

F

Self-funded group health plans are not required to pay annual PCORI fees unless they are required to file an annual Form 5500.

T

F

Self-funded group health plans are not required to remit annual reinsurance fees to HHS.

T

F

An employer that receives an erroneous employee subsidy certification notice from the Federally Facilitated Exchange will have 60 days to appeal the error.

T

F

The penalty for a fully-insured group health plan’s discrimination in favor of the highly compensated is taxability of plan benefits to the highly compensated employee.

T

F

Group health plan changes that an employer makes in order to comply with the ACA are not mandatory subjects of bargaining with the affected employees’ union representatives.

T

F

Because employees who have lost their jobs are eligible for immediate Exchange enrollment, employers no longer need to provide COBRA notices.

T

F

Employees who believe that they have suffered employer retaliation for their exercise of an ACA right may file an EEOC Charge to obtain relief.

T

F

 

If you read only last Thursday’s headlines, you probably concluded that the Administration had decided not to enforce the ACA’s 2014 health care coverage mandates until after the 2016 Presidential election.  If you clicked the hyperlinks and read the actual CMS notices, you got a headache, as did your humble correspondent.  As a supplement to a November 2013 letter to state insurance commissoners, the Administration actually issued a two sets of rules, dealing with separate ACA problems.  Here, we address only the set that grabbed the headlines.

Many small employers with calendar year group health plans renewed those plans before January 1, 2014, to avoid one or more of the new coverage mandates that became effective for plan years beginning on or after January 1, 2014.  In September 2014, people covered by those plans were scheduled to receive 90-day cancellation notices, because their plans could not be renewed again in December.  The same was true of individuals whose cancellations the Administration had allowed to be rescinded for 2014.  The government feared that the pre-election 2014 cancellation wave might become a political tsunami.  Here’s a short summary of how the Balch ACA Strategists think the government solved this problem.

First, nothing was said about grandfathered plans.  The concern was for plans that, due to non-grandfathered status, were exposed to all the new mandates for plan years beginning on and after January 1, 2014.  The new mandates that apply even to grandfathered plans still apply to grandfathered plans.

Plans not in effect by October 1, 2013 got no relief.  And, non-grandfathered, large employer group health plans that were in effect by that date got only a right that they already had, i.e., to be treated as small when the “small” cap goes from 50 to 100 employees in 2016, assuming that the employer’s workforce was between 50 and 100 during the relevant measurement period.

The big news was made for non-grandfathered, individual and small group plans that were in effect by October 1, 2013 and that, absent this relief, would have been cancelled for failure to comply with these new Public Health Service Act mandates effective for plan years beginning on or after January 1, 2014:

§ 2701 (modified community rating);

§ 2702 (guaranteed issue);

§ 2703 (guaranteed renewal);

§ 2704 (individual plan pre-existing condition exclusions);

§ 2705 (barring certain health status discrimination)

§ 2706 (barring discrimination against certain providers);

§ 2707 (Essential Health Benefits and cost-sharing caps);

§ 2709 (clinical trial coverage).

That relief, for plan years beginning not later than October 1, 2016, is conditioned on each of these things (paraphrasing CMS):

  • The coverage was in effect on October 1, 2013;
  • The insurer notifies all individuals and small businesses that received a cancellation or termination notice with respect to the coverage, and all that would otherwise receive a cancellation or termination notice with respect to the coverage, explaining (1) any changes in the options that are available to them; (2) which of the specified market reforms would not be reflected in any coverage that continues; (3) their potential right to enroll in a qualified health plan offered through a Health Insurance Marketplace and possibly qualify for financial assistance; (4) how to access such coverage through a Marketplace; and (5) their right to enroll in health insurance coverage outside of a Marketplace that complies with the specified market reforms. Where individuals or small businesses have already received a cancellation or termination notice, the issuer must send this notice as soon as reasonably possible. Where individuals or small business would otherwise receive a cancellation or termination notice, the issuer must send this notice by the time that it would otherwise send the cancellation or termination notice.
  • State insurance officials elect to implement the relief;
  • To the extent of discretion left to them by state officials, insurers elect to implement the relief.

If an individual plan qualifies for relief that is denied by state officials, then the individual may avoid the individual mandate penalty by buying a cheap, “catastrophic coverage” plan.

The relief does not extend to these new PHS Act mandates:

§ 2708 (maximum 90-day waiting period);

§ 2711 (no lifetime or annual limits);

§ 2712 (no rescission except for fraud);

§ 2713 (coverage of preventive health services);

§ 2714 (adult child coverage up to age 26);

§ 2715 (summary of benefits and coverage);

§ 2716 (prohibition of discrimination favoring the highly compensated);

§ 2719 (appeal rights).

Simplified media reports of a complex ACA rule change should never be deemed adequate for compliance planning purposes.  If you think you may have a related compliance issue after reading this, please seek current, competent legal advice about your particular situation.

 

We leave to the media what it does well for you – recent reportage of ACA-induced policy cancellations and premium increases, for example.  This blog examines ACA-related risks and opportunities that our employer, insurer and provider clients have not yet identified or understood adequately.  Here’s a problem that is just coming into focus.

Since late 2010, major insurers have been asking their fully insured group health plan sponsors to attest annually, before open enrollment, to the plan’s continued grandfathered status.  If the insurer receives that attestation, it includes in its open enrollment materials the mandatory notice to participants and beneficiaries.  If not, then those materials lack the required notice.   Some employers have failed to execute and return their attestation forms, but have, until now, experienced no adverse consequence.  They may have continued to consider their plans grandfathered, because they have made no changes adverse to employees since March 23, 2010. 

Non-grandfathered, fully insured group health plans are subject to several new coverage and cost sharing mandates that will raise premiums for plan years beginning on or after January 1, 2014.  Asking for explanations of those surprising increases, some employers recently have been told that their plans forfeited their grandfathered status when they failed to inform participants and beneficiaries of that status during prior year open enrollments.   Because they failed to execute and return their status attestations, the mandated notices were not added to open enrollment materials.  That’s a reasonable reading of this June 17, 2010 HHS rule, found at 45 C.F.R. § 147.140(a) (2):

Disclosure of grandfather status—(i) To maintain status as a grandfathered health plan, a plan or health insurance coverage must include a statement, in any plan materials provided to a participant or beneficiary (in the individual market, primary subscriber) describing the benefits provided under the plan or health insurance coverage, that the plan or coverage believes it is a grandfathered health plan within the meaning of section 1251 of the Patient Protection and Affordable Care Act and must provide contact information for questions and complaints.

The next question is whether such plans can recover their forfeited grandfathered status.  As the rules currently are written, corrective measures, when allowed, must be taken quickly.  For many, status recovery will be impossible without rule changes.

Some may be tempted to execute and submit a new attestation form to the insurer, in order to avoid the immediate rate increases.  But even if the insurer allows this, it may not dissuade enforcement authorities from imposing penalties of up to $100 per day, per violation.  This predicament is particularly acute for non-grandfathered, fully insured plans that discriminate in favor of highly compensated employees – so-called “management carve-out plans,” for example.  After the new rules are published, probably in early 2014, those plans will be exposed to penalties of up to $100 per day per non-highly-compensated employee.

If you have been blind-sided as just described, you need competent, confidential legal advice about your options and you need it now.