When Labor Secretary Hilda L. Solis released a statement on March 22, 2010, it reflected the hope and promise of a better future. “A new day is finally dawning,” she said, “for every American family that has seen its wages and dreams eroded by a healthcare system that has only worked for insurance companies – at the expense of regular people.” She was, of course, referring to the Patient Protection and Affordable Care Act, signed into law on March 23, 2010. In her statement, Solis went on to say that healthcare reform answered a decades-old call, that it would benefit American workers, and that it would strengthen the economy.
What she did not say was exactly how healthcare reform would look during its implementation. She was not alone; no one, from the person on the street to the best educated healthcare consultants, really knew how the theoretical would translate into the practical.
In an effort to assist individuals and companies in implementing provisions of the Act, the Employee Benefits Security Administration (EBSA) began publishing in September 2010 a series of Frequently Asked Questions. We’ve chosen a few of them for the edification of our corporate benefits staff readers; you can see the complete series at the EBSA’s website. To conserve space, we’ve paraphrased some questions and/or answers, and we’ve bolded what we feel are the key parts of the questions.
From Part 1 (September 20, 2010):
Question 1: Under the Affordable Care Act, there are various provisions that apply to group health plans and health insurance issuers and various protections and benefits for consumers that are beginning to take effect or that will become effective very soon. What is the Departments’ basic approach to implementation?
Answer 1: Our approach to implementation is and will continue to be marked by an emphasis on assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law. This approach includes, where appropriate, transition provisions, grace periods, safe harbors, and other policies to ensure that the new provisions take effect smoothly, minimizing any disruption to existing plans and practices.
From Part 2 (October 8, 2010):
Q6: What if my dental (or vision) benefits are structured as excepted benefits under HIPAA? Does the exemption except my dental (or vision) plan from the Affordable Care Act’s market reforms?
A6: Yes. If benefits constitute excepted benefits under HIPAA, the requirements of the Affordable Care Act’s market reforms do not apply. Under HIPAA, dental (and vision) benefits generally constitute excepted benefits if they:
- Are offered under a separate policy, certificate, or contract of insurance; or
- Are not an integral part of the plan. For dental (or vision) benefits to be considered not an integral part of the plan (whether insured or self-insured), participants must have a right not to receive the coverage and, if they do elect to receive the coverage, must pay an additional premium.
Accordingly, if a plan provides its dental (or vision) benefits pursuant to a separate election by a participant and the plan charges even a nominal employee contribution towards the coverage, the dental (or vision) benefits would constitute excepted benefits, and the market reform provisions would not apply to that coverage.
Q7: The Affordable Care Act generally provides that plans and issuers must not rescind coverage unless there is fraud or an individual makes an intentional misrepresentation of material fact. A rescission is defined as it is commonly understood under the law – a cancellation or discontinuance of coverage that has a retroactive effect, except to the extent attributable to a failure to pay timely premiums towards coverage.
Is the exception to the statutory ban on rescission limited to fraudulent or intentional misrepresentations about prior medical history? What about retroactive terminations of coverage in the “normal course of business”?
A7: The statutory prohibition related to rescissions is not limited to rescissions based on fraudulent or intentional misrepresentations about prior medical history. An example in the Departments’ interim final regulations on rescissions clarifies that some plan errors (such as mistakenly covering a part-time employee and providing coverage upon which the employee relies for some time) may be cancelled prospectively once identified, but not retroactively rescinded unless there was some fraud or intentional misrepresentation by the employee.
On the other hand, some plans and issuers have commented that some employers’ human resource departments may reconcile lists of eligible individuals with their plan or issuer via data feed only once per month. If a plan covers only active employees (subject to the COBRA continuation coverage provisions) and an employee pays no premiums for coverage after termination of employment, the Departments do not consider the retroactive elimination of coverage back to the date of termination of employment, due to delay in administrative recordkeeping, to be a rescission.
Similarly, if a plan does not cover ex-spouses and the plan is not notified of a divorce and the full COBRA premium is not paid by the employee or ex-spouse for coverage, the Departments do not consider a plan’s termination of coverage retroactive to the divorce to be a rescission of coverage.
From Part IV (October 29, 2010):
Q1: The Departments’ interim final grandfather regulations provide that, to maintain status as a grandfathered health plan, a group health plan or health insurance coverage must include a statement, in any plan materials provided to a participant or beneficiary describing the benefits provided under the plan or health insurance coverage, that the plan or coverage believes it is a grandfathered health plan. Must a grandfathered health plan provide the disclosure statement every time it sends out a communication, such as an explanation of benefits, to a participant or beneficiary?
A1: A grandfathered health plan will comply with this disclosure requirement if it includes the model disclosure language provided in the Departments’ interim final grandfather regulations (or a similar statement) whenever a summary of the benefits under the plan is provided to participants and beneficiaries. For example, many plans distribute summary plan descriptions upon initial eligibility to receive benefits under the plan or coverage, during an open enrollment period, or upon other opportunities to enroll in, renew, or change coverage.
While it is not necessary to include the disclosure statement with each plan or issuer communication to participants and beneficiaries (such as an EOB), the Departments encourage plan sponsors and issuers to identify other communications in which disclosure of grandfather status would be appropriate and consistent with the goal of providing participants and beneficiaries information necessary to understand and make informed choices regarding health coverage.
From Part V (December 22, 2010):
Q12: Are all employment-based wellness programs required to check for compliance with the HIPAA nondiscrimination provisions?
A12: No. Many employers offer a wide range of programs to promote health and prevent disease. For example, some employers may choose to provide or subsidize healthier food choices in the employee cafeteria, provide pedometers to encourage employee walking and exercise, pay for gym memberships, or ban smoking on employer facilities and campuses. A wellness program is subject to the HIPAA nondiscrimination rules only if it is, or is part of, a group health plan.
If an employer operates a wellness program as an employment policy separate from its group health plan(s), the program may be covered by other Federal or State nondiscrimination laws, but it is not subject to the HIPAA nondiscrimination regulations.
From Part VI (April 1, 2011):
Q4: A plan operating on a calendar plan year is considering an amendment to plan terms that will cause it to relinquish grandfather status. If the plan sponsor decides to adopt this amendment on July 1, 2011, and the change becomes effective for the plan year beginning January 1, 2012, at what point in time does the plan relinquish grandfather status?
A4: A plan or coverage will cease to be a grandfathered health plan when an amendment to plan terms, which exceeds the thresholds described in paragraph (g)(1) of the interim final regulations, becomes effective – regardless of when the amendment is adopted. Therefore, in this example, the plan would cease to be a grandfathered health plan on January 1, 2012, the first day of the first plan year for which the change is effective.
Much more information is available at EBSA’s website. Plan sponsors would likely benefit from a quick scan of the topics presented for clarification in the FAQs, particularly those whose plans are grandfathered under the new regulations. From the volume of grandfathering information presented there, it is apparent this area is somewhat confusing. See www.dol.gov/ebsa.