Even More Health Reform Guidance: Patient Protections Clarified

While I was on vacation last week, The Departments of Health and Human Services, Labor and Treasury issued interim final regulations that provide guidance on these provisions of the new law. The rules regarding preexisting conditions exclusion, lifetime and annual dollar limits, and rescissions apply to all group health plans regardless of grandfather status. The "patient protection" provisions apply only to plans that do not qualify as grandfathered health plans. To recap, the Health Care Reform legislation includes provisions designed to ensure that individuals can obtain and keep their health coverage regardless of their health status or other factors. The law includes prohibitions on preexisting condition exclusions and the imposition of annual and lifetime dollar limits on health benefits. The proposed interim regulations are available here. Preexisting Conditions The health reform law provides that effective for plan years beginning on or after September 23, 2010, group health plans and insurers may not impose any preexisting condition exclusion on enrollees under age 19. An exclusionary period that applies to an enrollee at the time the prohibition goes into effect must end. For example, if a child enrolled in October 2010 has a preexisting condition that is subject to a six-month exclusionary period, the exclusion must end on January 1, 2011 if the plan is operated on a calendar year basis. Plans and insurers may continue to apply preexisting condition exclusions consistent with the HIPAA portability rules on enrollees age 19 and older until the 2014 plan year, at which time no preexisting condition exclusions will be permitted. Also, non-grandfathered plans must notify participants of the choice of provider rules whenever the plan or issuer provides a participant with an SPD or other similar description of benefits. In conjunction with this guidance, the DOL issued a Patient Protection Model Disclosure that is available here. There is also a Model Language for Notice of Opportunity to Enroll in connection with Extension of Dependent Coverage to Age 26 available here. Lifetime and Annual Dollar Limits The new law generally prohibits group health plans from imposing lifetime or annual limits on the dollar value of "essential health benefits." This prohibition applies to group health plans, without regard to their grandfathered status, for plan years beginning on or after September 23, 2010 (January 1, 2011, for calendar year plans), except that "restricted annual limits" on essential health benefits are allowed for plan years beginning before January 1, 2014. The prohibition on lifetime and annual dollar limits does not prohibit a complete exclusion of benefits for any particular condition (although other laws, such as the Americans With Disabilities Act, might), but if coverage is provided to any extent with respect to a condition, the annual and lifetime dollar limit rules apply. Remember that "essential health benefits" generally includes, but is not limited to, the following categories and items and services covered within the categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. Unfortunately, no guidance has been issued to date regarding which other benefits qualify as "essential health benefits." Until guidance is issued, the regulators have stated that for plan years beginning before additional guidance is issued, they will take into account consistent and good faith efforts to comply with a reasonable interpretation of the term "essential health benefits." In conjunction with this guidance, a Model Language Notice Lifetime Limit No Longer Applies and Enrollment Opportunity is available here. The regulations provide the minimum annual dollar limit that may be imposed on essential health benefits until 2014 as follows: $750,000 for the plan year beginning on or after September 23, 2010 but before September 23, 2011 $1,250,000 for the plan year beginning on or after September 23, 2011 but before September 23, 2012 $2,000,000 for the plan year beginning on or after September 23, 2012 but before January 1, 2014. (No annual dollar limit is permitted for plan years beginning on or after January 1, 2014.) The regulations allow a plan to reduce an annual dollar limit as long as the dollar limit exceeds the applicable threshold, although it could lose its grandfather status. A plan may also "convert" a lifetime limit to an annual limit, in which case it will retain its grandfather status. Prohibition on Rescissions The concept of rescission is usually associated with the individual insurance marketplace and involves a situation in which an insurer terminates the coverage of an individual retroactively after he or she has incurred large claims. To address this abuse, the health reform law prohibits both insurers and group health plans from rescinding coverage except in cases of fraud or intentional misrepresentation of material fact. The regulations clarify that the term "rescission" is generally limited to retroactive terminations of coverage but does not include a retroactive termination for failure to pay premiums in a timely manner. Generally, rescissions are only permitted in the case of fraud or misrepresentation and individuals must be provided written notice at least 30 days in advance of termination. A termination with prospective effect is not considered a rescission and may be permitted without proof of fraud or misrepresentation. As anticipated, there is a lot of information out there to be digested as we approach the start of compliance. We continue to recommend you work closely with your plan service providers to see how these changes impact your plans and the administration of them.

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