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What do employers need to consider regarding healthcare benefits? The enactment of the Affordable Care Act (ACA) marks the latest step in a continuing shift from virtually no federal regulation of employer-sponsored health insurance to extensive substantive and administrative requirements. This regulation initially included the reporting, disclosure, and claims procedure requirements enacted in the Employee Retirement Income Security Act (ERISA). Through the years, additional federal requirements were added, including portability and coverage guarantees, minimum maternity stays, mental health parity, required coverage of reconstructive surgery following a covered mastectomy, coverage of adoptees, and pediatric vaccine requirements. During the same period, there was a large increase in state insurance law benefit mandates.
Employers need to be aware of the many coverage and benefit requirements related to healthcare insurance. There are many laws involved in such requirements, including, but not limited to:
• The ACA;
• ERISA;
• The Health Insurance Portability and Accountability Act (HIPAA);
• The Consolidated Omnibus Budget Reconciliation Act (COBRA);
• The Genetic Information Nondiscrimination Act (GINA);
• The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA);
• The Newborns’ and Mothers’ Health Protection Act (NMHPA);
• The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA);
• The Women’s Health and Cancer Rights Act of 1998 (WHCRA);
• The Pregnancy Discrimination Act (PDA);
Michelle’s Law; and
• Various state laws.
HIPAA applies to group health plans established or maintained by employers or employee organizations, or both.
HIPAA does not cover every type of insurance that might be considered part of an employer’s “health benefits” package (29 USC 1191b). For example, HIPAA does not apply to:
• Accident or disability income insurance;
• Liability insurance (e.g., automobile liability insurance);
• Workers’ compensation insurance; and
• Coverage for on-site medical clinics.
There are also other specific benefits that, if they meet certain conditions, are exempt from HIPAA. For example, certain benefits are not subject to the requirements if they are offered:
• Separately or are not an integral part of the plan (e.g., limited scope dental or vision benefits and benefits for long-term care, nursing home care, home health care, or community-based care);
• As independent, noncoordinated benefits (e.g., coverage only for a specified disease or certain illness and hospital indemnity or other fixed indemnity insurance); or
• As a separate insurance policy (e.g., Medicare supplemental health insurance).
End to preexisting condition exclusions. Group health plans, as well as health insurance issuers offering group or individual health insurance coverage, may not impose any preexisting condition exclusion with respect to such plan or coverage.
Preexisting condition exclusion defined. A preexisting condition exclusion is a limitation or exclusion of benefits (including a denial of coverage) based on the fact that the condition was present before the effective date of coverage (or if coverage is denied, the date of the denial) under a group health plan or group health insurance coverage (29 CFR 2590.701–2). It does not matter whether any medical advice, diagnosis, care, or treatment was recommended or received before that day. It includes exclusions applied as a result of health status information obtained before the individual's effective date of coverage or denial of coverage under a group health plan or group health insurance coverage, such as a condition identified as a result of a preenrollment questionnaire or physical examination given to the individual, or a review of medical records relating to the preenrollment period.
A plan exclusion that satisfies this definition is a preexisting condition exclusion even if it is called something else.
Since group health plans may not impose preexisting condition exclusions, HIPAA’s requirement to provide a certificate of creditable coverage has been superseded (29 CFR 2590.701-5).
Statutory provision. HIPAA makes it illegal for group health plans to have eligibility rules that discriminate on the basis of the following health-related factors:
• Health status;
• Medical condition (including physical and mental illnesses);
• Claims experience;
• Receipt of health care;
• Medical history;
• Genetic information;
• Evidence of insurability; or
• Disability (29 CFR 2590.702).
Evidence of insurability includes conditions arising out of acts of domestic violence and participation in activities such as motorcycling, snowmobiling, all-terrain vehicle riding, horseback riding, skiing, and other similar activities.
Definition of a “health factor.” The decision whether or when to elect health coverage (including when to enroll, such as under special enrollment or late enrollment) is not, itself, a health factor. However, a plan must treat special enrollees the same as similarly situated individuals (SSIs) who are enrolled when first eligible.
Eligibility rule prohibitions. A group health plan may not establish any rule for eligibility (or continued eligibility) to enroll for benefits that discriminates on the basis of any health factor that relates to that individual or a dependent of that individual. Eligibility rules include rules relating to:
• Enrollment;
• The effective date of coverage;
• Waiting (or affiliation) periods;
• Late and special enrollment;
• Eligibility for benefit packages (including rules for switching benefit packages);
• Benefits (including rules relating to covered benefits, benefit restrictions, and cost-sharing mechanisms such as coinsurance, copayments, and deductibles);
• Continued eligibility; and
• Terminating coverage (including disenrollment).
Benefit provisions. The nondiscrimination provisions do not require a group health plan to provide coverage for any particular benefit to any group of SSIs. However, benefits provided under a plan must be uniformly available to all SSIs, and any restriction on a benefit or benefits must apply uniformly to all SSIs and must not be directed at individual participants or beneficiaries on the basis of any health factor. Thus, for example, a plan may limit or exclude benefits in relation to a specific disease or condition, limit or exclude benefits for certain types of treatments or drugs, or limit or exclude benefits on the basis of a determination of whether the benefits are experimental or not medically necessary, but only if the benefit limitation or exclusion applies uniformly to all SSIs and is not directed at individual participants or beneficiaries on the basis of any health factor of the participants or beneficiaries.
In addition, a plan may require the satisfaction of a deductible, copayment, coinsurance, or other cost-sharing requirement in order to obtain a benefit if the limit or cost-sharing requirement applies uniformly to all SSIs and is not directed at individual participants or beneficiaries on the basis of any health factor of the participants or beneficiaries.
Note: The regulations provide that a plan amendment that applies to all individuals in one or more groups of SSIs and made effective no earlier than the first day of the first plan year after the amendment is adopted is not considered to be directed at any individual participants or beneficiaries.
SSIs. The HIPAA nondiscrimination requirements apply only within a group of individuals who are treated as SSIs. Participants and beneficiaries may be treated as belonging to separate groups of SSIs. If individuals have a choice of two or more benefit packages, individuals choosing one benefit package may be treated as a group of SSIs distinct from individuals choosing another package.
Participants. Plans may treat participants as two or more distinct groups of SSIs if the distinction is based on a bona fide employment-based classification. Whether a classification is bona fide and employment-based depends on all the relevant facts and circumstances including whether the employer uses the classification for purposes independent of qualification for health coverage (for example, determining eligibility for other employee benefits or determining other terms of employment). Examples of classifications of participants that may be bona fide include full-time versus part-time status, different geographic location, membership in a collective bargaining unit, date of hire, length of service, current employee versus former employee status, and different occupations. However, a classification based on any health factor is not a bona fide employment-based classification unless it results in favorable treatment of individuals with adverse health factors.
Beneficiaries. A plan may treat beneficiaries as two or more distinct groups of SSIs if the distinction is based on any of the following factors:
• A bona fide employment-based classification of the participant through whom the beneficiary is receiving coverage;
• Relationship to the participant (for example, as a spouse or as a dependent child);
• Marital status;
• For children of a participant, age, or student status; or
• Any other factor that is not a health factor.
If the creation or modification of an employment or coverage classification is directed at individual participants or beneficiaries on the basis of any health factor, the classification is not permitted unless it is permitted because it results in favorable treatment of individuals with adverse health factors. Thus, an employer may not modify an employment-based classification to single out, on the basis of a health factor, individual participants and beneficiaries and deny them health coverage.
Nonconfinement, actively at work, and continuous service prohibitions. A plan may not establish a rule for eligibility or set any individual’s premium or contribution rate based on the following:
• Whether an individual is confined to a hospital or other healthcare institution;
• An individual’s ability to engage in normal life activities (except under certain circumstances, to distinguish among employees based on the performance of services); or
• Whether an individual is actively at work (including whether an individual is continuously employed), unless absence from work due to any health factor (such as being absent from work on sick leave) is treated for this purpose as being actively at work.
Exception for the first day of work. A plan may establish a rule for eligibility that requires an individual to begin work for the employer sponsoring the plan (or, in the case of a multiemployer plan, to begin a job in covered employment) before coverage becomes effective, provided that such a rule for eligibility applies regardless of the reason for the absence.
Source of injury prohibitions. If a group health plan generally provides benefits for a type of injury, the plan may not deny benefits otherwise provided for treatment of the injury if the injury results from an act of domestic violence or a medical condition (including both physical and mental health conditions). This rule applies in the case of an injury resulting from a medical condition even if the condition is not diagnosed before the injury. For example, a suicide exclusion may not apply to injuries resulting from a suicide attempt if the suicide attempt was the result of a medical condition such as depression, even if the depression diagnosis was not made until after the suicide attempt.
Although HIPAA generally prohibits a plan from discriminating against SSIs based on health status, the law also recognizes that the nondiscrimination provisions were not meant to prevent a group health plan or an issuer from establishing premium discounts or discounts on copayments or deductibles in return for adherence to programs of health promotion and disease prevention (29 CFR 2590.702(b) and 29 CFR 2590.702(f)). The wellness regulations provide guidance for evaluating the permissibility of wellness programs.
Generally, the following are permissible under HIPAA:
• Programs that do not reward individuals based on health status; and
• Programs that meet HIPAA’s wellness program nondiscrimination requirements.
Generally, wellness programs that provide rewards for participation rather than based on outcome are permissible, including:
• Incentives to participate in a health fair or testing (regardless of outcome);
• Waiver of copayments/deductibles for participation in well-baby visits; and
• Reimbursement of health club membership.
These programs are generally acceptable under HIPAA because they do not reward participants based on health status.
If the program provides a reward based on a health factor (the program is “health-contingent”), it must satisfy the HIPAA wellness program requirements. There are now two types of “health-contingent” wellness programs:
• Activity-only wellness programs; and
• Outcome-based wellness programs.
Examples of “activity-only” programs include walking and diet programs. The participant is not required to achieve any particular result but must participate in the activity to earn the reward (or avoid the penalty). Examples of “outcome-based” wellness programs include smoking and biometric screenings where the participant is required to succeed (e.g., quit smoking) or meet a certain requirement (e.g., lower cholesterol). Despite their differences, both activity-only and outcome-based programs are considered “health contingent.”
To be a permissible health-contingent wellness program, it must:
• Be available to all similarly situated individuals;
• Give individuals the opportunity to achieve the reward at least once per year;
• Be reasonably designed to promote health or prevent disease;
• Not exceed 30 percent of the cost of coverage under the plan (or, in certain circumstances, 50 percent); and
• Disclose the existence of reasonable alternatives to achieve the reward.
Note: The rules for wellness programs may be different for grandfathered health plans. Although Equal Employment Opportunity Commission’s wellness rules largely follow the HIPAA requirements, there are key differences. Please see the national Wellness section.
Available to all similarly situated individuals. A wellness program must be available to all similarly situated individuals in the plan. This means that the plan must provide reasonable alternative standards to individuals who cannot meet the required health factor-related standard because it is unreasonably difficult due to a medical condition to satisfy the standard. It must also provide reasonable alternative standards to individuals who cannot meet the required health factor-related standard because it is medically unadvisable to meet the standard. A plan may require that an individual provide verification from the individual’s physician, for example, that a health factor makes it unreasonably difficult or medically inadvisable for the individual to satisfy the standard.
Available at least once per year. The wellness program must give individuals eligible for the program the opportunity to qualify for the reward at least once per year.
Reasonably designed. The program must be reasonably designed to promote health or prevent disease. A program satisfies this standard if it has a reasonable chance of improving the health of or preventing disease in participating individuals. It must not be overly burdensome, must not be a subterfuge for discriminating on the basis of a health factor, and must not impose a highly suspect method to promote health or prevent disease.
Reward percentage requirements. A wellness program reward cannot exceed 30 percent of the cost of employee-only coverage under the plan, unless it is a tobacco cessation program, in which case the reward cannot exceed 50 percent. (The previous limit was 20 percent.) If other dependents (e.g., children or spouses) may participate in the wellness program, the reward cannot exceed 30 percent of the cost of the coverage in which the dependents are enrolled. Cost includes both the employer and employee contributions for coverage.
This 30 percent limit includes all possible wellness rewards. For example, if your plan offers rewards for lowering cholesterol and exercising regularly, the rewards combined cannot exceed 30 percent of the cost of participant coverage under the plan.
Disclosing alternatives. A wellness program must describe the terms of the wellness program, including a statement that if it is unreasonably difficult due to a medical condition for an individual to achieve the health goal to receive the reward, a reasonable alternative standard will be made available to the participant. A program cannot just provide a reasonable alternative. It must also disclose that a reasonable alternative will be made available when the terms of the program are described.
GINA amends HIPAA to specifically bar discrimination based on genetic information and restrict the use of genetic information by group health plans and health insurers. Group health plans and health insurance companies offering group health insurance coverage in connection with a group health plan may not adjust premium or contribution amounts for a group covered under such a plan on the basis of genetic information (29 CFR 2590.702-1). A health insurance company may increase the premium for an employer based on the manifestation of a disease or disorder of an individual who is enrolled in the plan. But the manifestation of a disease or disorder in one individual cannot also be used as genetic information about other group members (such as family members) and to further increase the premium for the employer. GINA authorizes DOL to impose stiff financial penalties for violations.
Definitions. The following definitions apply for purposes of GINA:
• A "family member" of an individual is a dependent of the individual, including the spouse and child of the individual and any other person who is a first-degree, second-degree, third-degree, or fourth-degree relative of the individual or the individual's dependents.
• "Genetic information" means an individual’s genetic tests, the genetic tests of his or her family members of such individual, and the manifestation of a disease or disorder in family members of the individual. Genetic information does not include information about the sex or age of any individual.
• The term "genetic test" means an analysis of human DNA, RNA, chromosomes, proteins, or metabolites that detects genotypes, mutations, or chromosomal changes. Genetic tests do not include an analysis of proteins or metabolites that does not detect genotypes, mutations, or chromosomal changes or an analysis of proteins or metabolites that is directly related to a manifested disease, disorder, or pathological condition that could reasonably be detected by a healthcare professional with appropriate training and expertise in the field of medicine involved.
• "Genetic services" means a genetic test; genetic counseling (including obtaining, interpreting, or assessing genetic information; or genetic education).
• "Underwriting purposes" are rules for, or determination of, eligibility (including enrollment and continued eligibility) for benefits under a plan or insurance coverage; the computation of premium or contribution amounts under a plan or insurance coverage; the application of any preexisting condition exclusion under a plan or insurance coverage; and other activities related to the creation, renewal, or replacement of a health insurance contract or health benefits.
GINA enforcement. GINA also bars group health plans and health insurance companies offering group health insurance coverage from requesting or requiring an individual or a family member of such individual to undergo a genetic test. This provision is not intended to limit the authority of a healthcare professional who is providing healthcare services to an individual to request that such individual undergo a genetic test. A group health plan or a health insurer may obtain and use the results of a genetic test in making a determination regarding payment for healthcare services. A group health plan or insurer may request only the minimum amount of information necessary to accomplish the intended purpose. A group health plan or a health insurer may use the results of genetic tests for research purposes but may not use such information for underwriting purposes. Genetic information may not be requested, required, or purchased for genetic underwriting purposes. In addition, a group health plan or health insurer may not request, require, or purchase genetic information about any individual before the individual’s enrollment under the plan or coverage in connection with such enrollment.
Generally, employer-sponsored health plans allow employees and their dependents to enroll in coverage when the employee is first hired during “regular enrollment.” However, HIPAA requires group health plans to offer special enrollment periods under certain circumstances (29 CFR 2590.701-6). More specifically, HIPAA requires a group health plan to permit an otherwise eligible individual who did not initially enroll in a plan to have a special window to enroll if the individual:
• Lost previous health coverage; or
• Acquired a new spouse or dependent by marriage, birth, or adoption.
For an individual to be considered to have lost his or her previous health coverage, the employee or dependent must have lost the other coverage due to the exhaustion of a COBRA period, because he or she was no longer eligible for the other coverage, or because employer contributions ceased. An individual who loses coverage simply because he or she failed to pay the required premiums is not eligible for special enrollment under HIPAA.
In the case of a new spouse or dependent, it is the employee, spouse, and newly acquired dependent who receive special enrollment rights. Other dependents (such as siblings of a newborn child) do not receive special enrollment rights upon the birth or adoption of a child.
HIPAA’s special enrollment window is open for a limited time only. If your employee loses other health coverage, the employee must request enrollment in your health plan within 30 days of the loss of coverage. Your plan must begin coverage no later than the first day of the first calendar month that occurs after the date your plan receives the employee’s completed enrollment form.
If an employee acquires a new spouse or dependent, the employee must request enrollment within 30 days of the marriage, birth, adoption, or placement for adoption. For new coverage due to marriage, the coverage must be effective no later than the first day of the first calendar month that occurs after the date your plan receives the employee’s completed enrollment form. For newborns and newly adopted dependents, coverage must be retroactive to the date of birth or the date of adoption.
Notice requirement. On or before the time any employee is offered the opportunity to enroll in a group health plan, the plan is required to provide each employee with a description of the plan's special enrollment rules. For this purpose, the plan may use the DOL approved model description of the special enrollment rules.
The Children’s Health Insurance Program Reauthorization Act of 2009 extends and expands the state children’s health insurance program (CHIP), allows states to subsidize premiums for employer-provided group health coverage for Medicaid and CHIP-eligible children and families, provides additional special enrollment rights, and adds notice and disclosure obligations for employers that maintain group health plans.
Special enrollment rights. Effective April 1, 2009, a group health plan must permit an employee or dependent who is eligible, but not enrolled, for coverage under the plan to enroll for coverage under the terms of the plan if either of the following conditions is met:
Loss of Medicaid or CHIP eligibility. The employee or dependent's coverage under Medicaid or under a state CHIP is terminated as a result of loss of eligibility for such coverage, and the employee requests coverage under the group health plan within 60 days after the date of termination of such coverage.
Eligibility for employment assistance under Medicaid or CHIP. The employee or dependent becomes eligible under a Medicaid plan or CHIP for premium assistance for employment-based coverage if the employee requests coverage under the group health plan within 60 days after the date the employee or dependent was determined to be eligible for such assistance.
The Employer CHIP Notice.An employer that maintains a group health plan must annually provide to each employee living in a state that provides premium assistance for the purchase of group health plan coverage through a Medicaid plan or CHIP a written notice informing the employee of potential opportunities currently available in the employee’s home state. The Department of Labor (DOL) maintains a list of states offering the required assistance, which is included in the model Employer CHIP Notice that may be accessed athttp://savingmatters.dol.gov.
Employers subject to the Employer CHIP Notice requirement. If a group health plan provides benefits for medical care directly (such as through a health maintenance organization) or through insurance, reimbursement, or in some other way to participants, beneficiaries, or providers in any state listed by DOL, the plan is required to provide the Employer CHIP Notice, regardless of the employer’s location or principal place of business (or the location or principal place of business of the group health plan, its administrator, its insurer, or any other service provider affiliated with the employer or the plan).
Employees who must be provided with the Employer CHIP Notice. An Employer CHIP Notice must inform each employee, regardless of enrollment status, of potential opportunities for premium assistance in the state in which the employee resides. Thus, the notice must go to all employees who reside in one of the states listed by the DOL. The state in which the employee resides may or may not be the same as the state in which the employer, the employer’s principal place of business, the health plan, its insurer, or other service providers are located.
Notice to state Medicaid and CHIP agencies. The plan administrator of a group health plan that has participants or beneficiaries who are covered under a state Medicaid plan or a CHIP must disclose to the relevant agency, upon request, information about the benefits available under the group health plan. This disclosure is to allow the agency to make a determination concerning the cost-effectiveness to the agency of providing medical or child health assistance by subsidizing premiums for the purchase of coverage under the employer's group health plan or to provide supplemental benefits instead. The CHIP Coverage Coordination Disclosure Form that is to be used for this purpose may be downloaded at http://www.cms.gov/FACA.
HIPAA has a guaranteed availability requirement for the small group market only. Small employers are defined as those with 2 to 50 employees. Each issuer that offers health insurance coverage in the small group market must accept every small employer in the state that applies for coverage, and must accept for enrollment every eligible individual who applies for coverage during the period in which the individual first becomes eligible (45 CFR 146.150).
Insurers are required to guarantee issue. Insurers in the small group market are allowed to use rating variation based only on age (limited to a 3-to-1 ratio), rating area, family composition, and tobacco use (limited to a 1.5-to-1 ratio) in the individual and the small group market and the exchanges. If a state expands its exchange to include the large group market, the rating variation limits will also apply in that market.
An issuer offering group health insurance coverage in the small or large market is required to renew or continue in force coverage at the option of the plan sponsor (45 CFR 146.152). Coverage need not be renewed for one or more of the following reasons: nonpayment of premiums; fraud; violation of participation or contribution rules; termination of coverage in the market in accordance with state law; for network plans, no enrollees in the service area; and for membership associations, when membership ceases.
Exceptions to guaranteed renewability also apply if the issuer or plan no longer offers a particular type of group coverage in the small or large group market, so long as the issuer, in accordance with state law:
• Provided notice to each plan sponsor, participant, and beneficiary;
• Gave the sponsor the opportunity to purchase all (or in the case of the large group market, any) other plans offered by the issuer; and
• Applied the termination uniformly without regard to claims experience or any health status-related factor of any participant or beneficiary.
Another exception applies upon discontinuance of all coverage. The issuer, however, would be barred from offering coverage in the market and state involved for five years. Modifications of a product within a market are allowed if the modification was effective on a uniform basis among group health plans that used the product.
Insurers are required to guarantee renewability. Insurers in the small group market are allowed to use rating variation based only on age (limited to a 3-to-1 ratio), rating area, family composition, and tobacco use (limited to a 1.5-to-1 ratio) in the individual and the small group market and the exchanges. If a state expands its exchange to include the large group market, the rating variation limits will also apply in that market.
Insurers and plans generally may not rescind coverage unless there is fraud or an individual makes an intentional misrepresentation of material fact. This provision applies to both existing (grandfathered) and new plans. A group health plan or insurer offering group health insurance coverage must provide at least 30 days' advance written notice to each participant who would be affected before coverage may be rescinded, regardless of whether the coverage is insured or self-insured, and regardless of whether the rescission applies to an entire group or only to an individual within the group.
A rescission is a cancellation or discontinuance of coverage that has retroactive effect. For example, a cancellation that treats a policy as void from the time of the individual’s or group’s enrollment is a rescission. As another example, a cancellation that voids benefits paid up to a year before the cancellation is also a rescission for this purpose. A cancellation or discontinuance of coverage is not a rescission if it has only a prospective effect or it is effective retroactively to the extent it is attributable to a failure to timely pay required premiums or contributions towards the cost of coverage.
Under federal law, health plans must provide certain benefits or provide certain benefits at specified minimum levels if the benefit is provided. These provisions, unlike state-law benefit mandates, cover both insured and self-insured plans.
The NMHPA requires postdelivery hospitalization coverage for at least 48 hours following a normal delivery and 96 hours following a cesarean section. Plans are barred from offering incentives or imposing penalties to encourage mothers to stay less time in the hospital. A decision to leave early may be made by the mother or the mother's healthcare provider after consulting with the mother. Copayments, deductibles, or other cost-sharing provisions applied to postdelivery hospitalization may not be greater than those for predelivery hospitalization. Plans and insurers may not require a provider to obtain prior authorization for prescribing a length of stay that does not exceed the 48- or 96-hour minimums. Information about this coverage must be included in the plan's summary plan description.
The MHPAEA, which was passed by the U.S. Congress in October 2008, applies to most employers with more than 50 employees and is designed to provide mental health parity by making sure mental health and/or substance use disorder benefits offered by health plans are equivalent to the medical/surgical benefits the plans offer.
Defining basic terms. According to the final regulations, group health plans define the terms “mental health benefits” and “substance use disorder benefits,” but the definitions must be in accordance with applicable federal and state laws (29 CFR 2590.712(a)). The regulations also provide that the terms must be “consistent with generally recognized independent standards of current medical practice.” The regulations give a few examples of resources that would meet this requirement, including:
• The most current version of the Diagnostic and Statistical Manual of Mental Disorders (DSM);
• The most current version of the International Classification of Diseases (ICD); or
• State guidelines.
The general parity requirement. The main goal of the MHPAEA is to achieve parity regarding a plan’s financial requirements and treatment limitations. Financial requirements include copayments, deductibles, coinsurance, and out-of-pocket expenses and do not include aggregate lifetime or annual dollar limits (29 CFR 2590.712(a)). Treatment limitations include limits on treatment frequency (e.g., one therapy session per week), number of visits (e.g., 35 visits per year to a mental health professional), days of coverage (e.g., 30-day hospital stays), days in a waiting period, and other similar limits on the scope or duration of treatment.
Classification of benefits. The final regulations make clear that parity analysis must be conducted on a classification-by-classification basis. More specifically, a plan cannot apply “any financial requirement or treatment limitation to mental health or substance use disorder benefits in any classification that is more restrictive than the predominant financial requirement or treatment limitation of that type applied to substantially all medical/surgical benefits in the same classification” (29 CFR 2590.712(c)(2)(i)).
The regulations divide benefits into the following six classifications:
1. Inpatient, in-network;
2. Inpatient, out-of-network;
3. Outpatient, in-network;
4. Outpatient, out-of-network;
5. Emergency care; and
6. Prescription drugs (29 CFR 2590.712(c)(2)(ii)).
The regulations do allow plans and issuers to divide benefits furnished on an outpatient basis into two sub-classifications:
1. Office visits (e.g., physician visits); and
2. All other outpatient items and services (e.g., outpatient surgery, facility charges for day treatment centers, laboratory charges, and other medical items) (29 CFR 2590.712(c)(3)(iii)(C)).
However, the regulations do not allow any other sub-classifications, including for example, the separate classification of generalists and specialists.
The final regulations also provide that if a plan (or health insurance coverage) provides in-network benefits through multiple tiers of in-network providers, the plan may divide its benefits furnished on an in-network basis into sub-classifications that reflect those network tiers (29 CFR 2590.712(c)(3)(iii)(A)). However, such tiering must be based on reasonable factors and without regard to whether a provider is a mental health or substance use disorder provider or a medical/surgical provider.
Treatment limitations. The regulations provide that the parity requirements apply to both quantitative and nonquantitative treatment limitations. A "quantitative treatment limitation" is a limitation that is expressed numerically, such as an annual limit of 50 outpatient visits per year (29 CFR. 2590.712(a)). A "nonquantitative treatment limitation" is a limitation that is not expressed numerically, but otherwise limits the scope or duration of benefits for treatment. A permanent exclusion of all benefits for a specific condition or disorder is not a treatment limitation. Nonquantitative treatment limitations include:
• Medical management standards limiting or excluding benefits based on medical necessity or medical appropriateness, or based on whether the treatment is experimental or investigative;
• Formulary design for prescription drugs;
• For plans with multiple network tiers (such as preferred providers and participating providers), network tier design;
• Standards for provider admission to participate in a network, including reimbursement rates;
• Plan methods for determining usual, customary, and reasonable charges;
• Refusal to pay for higher-cost therapies until it can be shown that a lower-cost therapy is not effective (also known as fail-first policies or step therapy protocols);
• Exclusions based on failure to complete a course of treatment;and
• Restrictions based on geographic location, facility type, provider specialty, and other criteria that limit the scope or duration of benefits for services provided under the plan or coverage (29 CFR 2590.712(c)(4)(ii)).
Application of the parity requirement to nonquantitative treatment limitations. The regulations generally prohibit the imposition of any nonquantitative treatment limitation to mental health or substance use disorder benefits unless certain requirements are met. Any processes, strategies, evidentiary standards, or other factors used in applying the nonquantitative treatment limitation to mental health or substance use disorder benefits in a classification must be comparable to, and applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in applying the limitation with respect to medical/surgical benefits in the classification (29 CFR 2590.712(c)(4)(i)).
Availability of plan information. The criteria for medical necessity determinations made under the plan for mental health or substance use disorder benefits must be made available by the plan administrator or the health insurance issuer offering the coverage to any current or potential participant, beneficiary, or contracting provider upon request (29 CFR 2590.712(d)(1)).
The reason for any denial under the plan (or coverage) of reimbursement or payment for services for mental health or substance use disorder benefits must be made available by the plan administrator or health insurance issuer to the participant or beneficiary as provided by the ERISA claims procedure regulations (29 CFR 2590.712(d)(2)).
Small employer exemption. In general, employers that have 50 or fewer employees are totally exempt from the requirements of the MHPAEA (29 USC 1185a(c)(1)and 29 CFR 2590.712(f)). Employers who employed at least two employees but not more than 50 employees on business days during the preceding calendar year are exempt from these requirements. Moreover, the parity rules do not apply to any group health plan for any plan year if, on the first day of the plan year, the plan has fewer than two participants who are current employees (29 CFR 2590.712(f)(1)).
Note: For nonfederal governmental plans, a "small employer" is an employer with 100 or fewer employees (42 USC 300gg-26(c)(1)).
Cost exemption. The mental health and substance abuse parity requirements do not apply during the next plan year to a group health plan if their application would result in an increase for the current plan year of the actual total costs of coverage for medical and surgical benefits and mental health and substance use disorder benefits by an amount that exceeds the "applicable percentage" of the actual total plan costs (29 CFR 2590.712(g)(1)). The applicable percentage is 2 percent for the first plan year in which the new parity requirements apply and 1 percent in each subsequent plan year (29 CFR 2590.712(g)(2)).
Notice of cost exemption. A group health plan that elects to implement a cost exemption must promptly notify the DOL, the appropriate state agencies, and participants and beneficiaries in the plan of the election.
The WHCRA requires that group health plans that cover mastectomies also cover reconstructive breast surgery following a mastectomy. The WHCRA not only requires reconstruction of the breast on which the mastectomy was performed, but also surgery and reconstruction of the other breast to produce a symmetrical appearance. Also mandated are coverage for prostheses and physical complications of mastectomy such as lymphedemas. The law specifically leaves it to the patient and the attending physician to determine how the covered services are to be provided.
The WHCRA's requirements apply only to group health plans and health insurance issuers that provide coverage for a mastectomy. Coverage of mastectomies is not mandated. The WHCRA also does not prohibit group health plans and health insurance issuers from imposing deductibles or coinsurance requirements for health benefits relating to reconstructive surgery in connection with a mastectomy as long as such requirements are consistent with those established for other benefits under the plan. State laws that require at least the same level of coverage as the WHCRA are not superseded.
Notice requirements. Both group health plans and group health insurers are required to give participants and beneficiaries notice of the availability this mandate upon enrollment and annually thereafter.
The PDA prohibits discrimination on the basis of pregnancy, childbirth, or related medical conditions. Please see the national Maternity and Pregnancy section.
Michelle’s Law prohibits group health plans from terminating the health coverage of a college, university, or trade school student who is a “dependent child” solely because the student takes a medically necessary leave of absence. If Michelle’s Law applies, the group health plan must provide the same benefits as if the student had not taken a leave for 1 year after the first day of the leave (or if earlier, the date coverage would otherwise have terminated under the terms of the plan or health insurance coverage).
Under the ACA, group health plans and issuers are generally required to provide dependent coverage to age 26, regardless of the dependent’s student status (see below). Nonetheless, under some circumstances, such as a plan that provides dependent coverage beyond the age of 26, Michelle's Law may still apply. The DOL provides additional information here: http://webapps.dol.gov.
Group health plans and health insurers that offer group or individual coverage that covers dependents must allow coverage of dependents on a parent’s plan until the dependent’s 26th birthday. There is no requirement to make coverage available to a grandchild even if that child’s parent is covered as a dependent.
Regulations defining which dependents are eligible for coverage specify that a plan or insurer must define "dependent" for purposes of eligibility for dependent coverage of children in terms of a relationship between a child and the plan participant (IRS Reg. Sec. 54.9815-2714T). Thus, a plan may not deny or restrict coverage for a child who has not attained the age of 26 based on the presence or absence of the child's financial dependency (upon the participant or any other person), residency with the participant or with any other person, student status, employment, or any combination of those factors. In addition, a plan may not deny or restrict coverage of a child based on eligibility for other coverage.
Keeping track of the coverage eligibility of dependents has always been a problem for employers. Employers should obtain all the information needed for determining dependents’ coverage eligibility and keep it up to date to minimize paying for ineligible dependents. Many states have existing laws that require insured plans to provide similar or more expansive coverage of dependents. These provisions still apply to insured plans in those states.
Age distinctions. The terms of a group health plan or health insurance coverage providing dependent coverage of children cannot vary based on age (except for children who are aged 26 or older).
Both coverage under an employer-provided health plan and amounts paid or reimbursed under such a plan for medical care expenses of an employee’s child who has not attained the age of 27 as of the end of the employee’s taxable year are excluded from the employee’s gross income under IRC Sec. 105(b) and IRC Sec. 106. An employer may assume an employee’s taxable year is the calendar year.
For this purpose, a child is the son, daughter, stepson, or stepdaughter of the employee, including those who are legally adopted or lawfully placed with the employee for legal adoption and “eligible foster children,” defined as individuals who are placed with an employee by an authorized placement agency or by judgment, decree, or court order. This provision applies to a child of the employee even if the child is not the employee’s dependent within the meaning of IRC Sec. 152(a). Thus, the age limit, residency, support, and other tests described in IRC Sec. 152(c) do not apply to a child for this purpose.
The ACA prohibits group health plans (including grandfathered plans) and health insurance issuers that offer group health plans from establishing lifetime dollar limits on the “essential health benefits” provided by the plan (29 CFR 2590.715-2711). This means that plans may not, for example, place a cap on the lifetime dollar amount of coverage for emergency services or preventive care, because those benefits are considered essential under the ACA.
The ACA lists the following categories that must be considered essential health benefits:
• Ambulatory patient services;
• Emergency services;
• Hospitalization;
• Maternity and newborn care;
• Mental health and substance use disorder services;
• Prescription drugs;
• Rehabilitative and habilitative services and devices;
• Laboratory services;
• Preventive and wellness services; and
• Pediatric services, including oral and vision care.
Additionally, annual dollar-amount limits on essential benefit coverage are prohibited. Lifetime and annual limits may continue for benefits that are not “essential,” provided that such limits are permitted under state and federal law.
Insurers and group health plans must provide coverage without cost sharing for preventive services (26 CFR 54.9815-2713); this provision does not apply to grandfathered plans. Related regulations provide that, generally, a group health plan or a health insurer offering group health insurance coverage must provide coverage for all of the following items and services without any cost-sharing requirements (such as a copayment, coinsurance, or deductible) for the items or services:
• Evidence-based items or services that have a rating of A or B in the current recommendations of the United States Preventive Services Task Force for the individual involved;
• Immunizations for routine use in children, adolescents, and adults that have in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention (CDC) for the individual involved (for this purpose, a recommendation from the Advisory Committee on Immunization Practices of the CDC is considered in effect after it has been adopted by the Director of the CDC, and a recommendation is considered to be for routine use if it is listed on the Immunization Schedules of the CDC);
• For infants, children, and adolescents, evidence-informed preventive care and screenings provided for in comprehensive guidelines supported by the Health Resources and Services Administration (HRSA); and
• For women, if not included by the first item above, evidence-informed preventive care and screenings provided for in comprehensive guidelines supported by the HRSA.
A plan may provide coverage for services in addition to those recommended and may deny coverage for services that are not recommended. A complete list of the current recommended preventive services is available at http://www.healthcare.gov.
Women's preventive services guidelines.The HHS has issued guidelines on women's preventive services supported by the HRSA. Nongrandfathered plans and issuers are required to provide coverage without cost sharing consistent with these guidelines. The additional women’s preventive services that must be covered without cost-sharing requirements include:
• Well-woman visits, including an annual well-woman preventive care visit for adult women to obtain the recommended preventive services, and additional visits if women and their providers determine they are necessary;
• Gestational diabetes screening for women 24 to 28 weeks pregnant and those at high risk of developing gestational diabetes;
• Human papillomavirus (HPV) DNA testing for women who are 30 years of age or older every 3 years, regardless of pap smear results;
• Annual sexually transmitted infection (STI) counseling and human immunodeficiency virus (HIV) screening and counseling;
• Contraception and contraceptive counseling, including access to all Food and Drug Administration-approved contraceptive methods, sterilization procedures, and patient education and counseling (this requirement does not apply to women who are participants or beneficiaries in group health plans sponsored by religious employers);
• Breastfeeding support, supplies, and counseling; and
• Interpersonal and domestic violence screening and counseling.
For additional information on women’s preventive services guidelines, visit https://www.hrsa.gov.
Cost-sharing requirements and office visits. Because an office visit where preventive services are provided may include other services, the regulations provide the following clarifications of the cost-sharing requirements when a recommended preventive service is provided during an office visit:
• If a recommended preventive service is billed separately (or is tracked as individual encounter data separately) from an office visit, a plan or insurer may impose cost-sharing requirements with respect to the office visit.
• If a recommended preventive service is not billed separately (or is not tracked as individual encounter data separately) from an office visit and the primary purpose of the office visit is the preventive service, a plan or insurer may not impose cost-sharing requirements for the office visit.
• If a recommended preventive service is not billed separately (or is not tracked as individual encounter data separately) from an office visit and the primary purpose of the office visit is not the preventive service, a plan or insurer may impose cost-sharing requirements for the office visit (26 CFR 54.9815-2713).
Out-of-network providers. The regulations make clear that a plan that has a network of providers is not required to provide coverage for recommended preventive services delivered by an out-of-network provider and may also impose cost-sharing requirements for recommended preventive services delivered by an out-of-network provider. However, if a plan or issuer does not have a provider in its network that can provide the recommended preventive services, the plan or issuer must cover the item or service when performed by an out-of-network provider and may not impose cost sharing with respect to the item or service.
Reasonable medical management. The regulations provide that a plan or issuer can use reasonable medical management techniques to determine the frequency, method, treatment, or setting for recommended preventive services to the extent such details are not specified in the relevant recommendation or guideline.
Insurers and plans must limit any waiting periods for coverage to 90 days (26 CFR 54.9815-2708). The regulations define a “waiting period” as the period that must pass before coverage for an individual, who is otherwise eligible to enroll under the terms of a group health plan, can become effective. If an individual enrolls as a late enrollee or a special enrollee, any period before such late or special enrollment is not a waiting period.
Eligibility. Under the regulations, in general, for individuals to be eligible to enroll under the terms of a group health plan, they must have met the plan’s substantive eligibility conditions. Such eligibility conditions include, for example:
• Being in an eligible job classification;
• Achieving job-related licensure requirements specified in the plan’s terms; or
• Satisfying a reasonable and bona fide employment-based orientation period.
However, the regulations make clear that nothing in this section requires a plan sponsor to offer coverage to any particular individual or class of individuals (e.g., part-time employees). The regulations just prohibit requiring otherwise eligible individuals to wait more than 90 days before coverage is effective.
Eligibility conditions based solely on the lapse of a time period are permissible for no more than 90 days. Other conditions for eligibility under the terms of a group health plan are generally permissible unless the condition is designed to avoid compliance with the 90-day waiting period limitation.
Variable-hour employees. If a group health plan conditions eligibility on an employee regularly having a specified number of hours of service per period (or working full-time), in some cases, it may not be possible to determine whether a newly hired employee is reasonably expected to regularly work that number of hours per period (or work full-time). In this situation, the plan may take a reasonable period of time to determine whether the employee meets the plan’s eligibility condition. This “reasonable period of time” cannot exceed 12 months and must begin on any date between the employee’s start date and the first day of the first calendar month following the employee’s start date.
Except in cases in which a waiting period that exceeds 90 days is imposed in addition to a measurement period, the time period for determining whether such an employee meets the plan’s eligibility condition will not be considered to be designed to avoid compliance with the 90-day waiting period limitation if coverage is made effective no later than 13 months from the employee’s start date plus, if the employee’s start date is not the first day of a calendar month, the time remaining until the first day of the next calendar month.
Cumulative service requirements. If a group health plan or health insurance issuer conditions eligibility on an employee having completed a number of cumulative hours of service, the eligibility condition is not considered to be designed to avoid compliance with the 90-day waiting period limitation if the cumulative hours-of-service requirement does not exceed 1,200 hours.
Limitation on orientation periods. An orientation period is permitted only if it does not exceed 1 month. For this purpose, 1 month is determined by adding 1 calendar month and subtracting 1 calendar day, measured from an employee’s start date in a position that is otherwise eligible for coverage. For example, if an employee’s start date in an otherwise eligible position is May 3, the last permitted day of the orientation period is June 2.
Counting days. Under this section, all calendar days are counted beginning on the enrollment date, including weekends and holidays. A plan or issuer that imposes a 90-day waiting period may, for administrative convenience, choose to permit coverage to become effective earlier than the 91st day if the 91st day is a weekend or holiday.
A health insurance issuer that offers health insurance coverage in the individual or small group market must ensure that the coverage includes the essential health benefits package (as discussed above).
Group health plans are subject to certain cost-sharing limits. For more on such limitations on cost sharing, visit http://www.dol.gov.
Nongrandfathered plans must provide coverage of certain costs of clinical trials. Thus, a group health plan will not be allowed to:
• Deny (or limit or impose additional conditions on) the coverage of routine patient costs for items and services furnished in connection with participation in the trial, or
• Discriminate against the individual on the basis of the individual’s participation in a trial.
Nongrandfathered group health plans must provide patient protections that:
• Allow plan participants to choose any participating primary care provider.
• Allow participants or beneficiaries to choose a pediatrician as a child's primary care provider.
• Do not require prior authorization or referrals for visits to an obstetrician/gynecologist.
• Treat an obstetrician/gynecologist as a primary care provider.
• Provide coverage of emergency care services without prior authorization and with the same cost sharing both in and out of network (29 CFR Sec. 2590.715–2719A).
Designation of a primary care provider. If a group health plan or a health insurer issuer offering group health insurance coverage requires or provides for designation of a participating primary care provider, the plan or insurer must permit each participant or beneficiary to name any participating primary care provider who is available to accept the participant or beneficiary. The plan or insurer must inform each participant of the provision on designation of a primary care provider.
Designation of a pediatrician as a primary care provider. If a group health plan or a health insurer issuer offering group health insurance coverage requires or provides for the designation of a participating primary care provider for a child by a participant or beneficiary, the plan or insurer must permit the participant or beneficiary to name a physician (allopathic or osteopathic) who specializes in pediatrics as the child’s primary care provider if the provider participates in the plan or insurer's network and is available to accept the child. The plan or insurer must inform each participant of the provision on designation of a pediatrician as the child’s primary care provider.
Access to obstetrical and gynecological care. A group health plan or a health insurer issuer offering group health insurance coverage may not require authorization or referral by the plan, insurer, or any person (including a primary care provider) if a female participant or beneficiary seeks coverage for obstetrical or gynecological care provided by a participating healthcare professional who specializes in obstetrics or gynecology. The plan or insurer must inform each participant of the provision on access to obstetrical and gynecological care. The plan or insurer may require such a professional to agree to follow its policies and procedures, including procedures regarding referrals and obtaining prior authorization and providing services pursuant to a treatment plan (if any) approved by the plan or issuer.
A healthcare professional who specializes in obstetrics or gynecology is any individual (including a person other than a physician) who is authorized under applicable state law to provide obstetrical or gynecological care.
Obstetrician/gynecologist as primary care provider. A group health plan or a health insurer issuer offering group health insurance coverage must treat a participating health care professional who specializes in obstetrics or gynecology the same as a primary care provider when providing obstetrical and gynecological care and the ordering related obstetrical and gynecological items and services. The obstetrical or gynecological provider may be required to notify the primary care healthcare professional or the plan or insurer of his or her treatment decisions.
Notice of right to designate a primary care provider. If a group health plan or insurer requires the designation of a primary care provider, the plan or insurer must provide a notice informing each participant of the provision on naming a primary care provider and the participant's rights in this regard. The notice must be included whenever the plan or insurer provides a participant with a summary plan description or other similar description of benefits under the plan or coverage.
Model language. DOL regulations provide model language for use to satisfy this notice requirement. The model language can be located on the DOL’s website at http://www.dol.gov/ebsa.
Coverage of emergency services. If a group health plan or insurer provides coverage of any emergency room services for an emergency medical condition, it must cover:
• A medical screening examination that is within the capability of the emergency department of a hospital, including ancillary services routinely available to the emergency department to evaluate the condition, and
• Any further medical examination and treatment that is within the capabilities of the staff and facilities available at the hospital needed to stabilize the patient and to stabilize the emergency medical condition.
A plan or insurer must provide coverage for emergency services as follows:
• Without the need for any prior authorization determination, even if the emergency services are provided on an out-of-network basis;
• Without regard to whether the healthcare provider furnishing the emergency services is a participating network provider;
• If the emergency services are provided out of network, without imposing any administrative requirement or limitation on coverage that is more restrictive than the requirements or limitations that apply to emergency services received from in-network providers;
• If the emergency services are provided out of network, by complying with permitted cost-sharing requirements described below; and
• Without regard to any other term or condition of the coverage, other than the exclusion of or coordination of benefits; an affiliation or waiting period permitted by law; or applicable cost sharing.
Cost-sharing requirements for emergency services. Any copayment amount or coinsurance rate for out-of-network emergency services may not exceed the cost-sharing requirement for in-network services. However, a participant or beneficiary may be required to pay, in addition to the in-network cost sharing, the excess of the amount the out-of-network provider charges over the amount the plan or insurer is required to pay.
A group health plan or insurer is required to provide emergency services benefits in an amount equal to the greatest of the three following amounts:
• The amount negotiated with in-network providers for the emergency service furnished, excluding any in-network copayment or coinsurance imposed on the participant or beneficiary. If there is more than one amount negotiated with in-network providers for the emergency service, the amount is the median of these amounts, excluding any in-network copayment or coinsurance imposed.
• The amount for the emergency service calculated using the same method the plan generally uses to determine payments for out-of-network services (such as the usual, customary, and reasonable amount), excluding any in-network copayment or coinsurance imposed with respect to the participant or beneficiary. This amount is determined without reduction for out-of-network cost sharing that generally applies under the plan or health insurance coverage with respect to out-of-network services.
• The amount that would be paid under Medicare Part A or B for the emergency service, excluding any in-network copayment or coinsurance imposed with respect to the participant or beneficiary.
Other cost sharing. Any cost-sharing requirement other than a copayment or coinsurance requirement (such as a deductible or out-of-pocket maximum) may be imposed for emergency services provided out of network if the cost-sharing requirement generally applies to out-of-network benefits. A deductible may be imposed on out-of-network emergency services only as part of a deductible that generally applies to out-of-network benefits. If an out-of-pocket maximum generally applies to out-of-network benefits, that out-of-pocket maximum must apply to out-of-network emergency services.
Employers and the plan administrators of group health plans who receive an order from a state domestic relations court or a state agency (such as a Medicaid agency or other welfare department) requiring that the plan enroll a child of a plan participant must obey the order if the administrator determines that the order is a QMCSO. Such an order may require coverage of a child who does not live with the plan participant and may require withholding from the participant's wages to pay for the employee's share of the plan premiums. For an order to be a QMCSO, it must include the following information:
• The name and last known mailing address of the participant and the child to be covered;
• A reasonable description of the type of coverage to be provided or how the type of coverage should be determined;
• The time period for which the order applies; and
• The plan to which the order applies.
A QMCSO may generally not require a plan to provide any benefit or option not otherwise provided under the plan. The plan must have a written procedure for determining if an order is a QMCSO. The child must be allowed to designate a representative to receive required notices from the plan.
When a medical support order is received, the plan administrator must promptly notify the participant and the children of the receipt and of the plan's procedures for determining if the order is a QMCSO. A child who is covered under a plan pursuant to a QMCSO is considered as a plan participant and not a beneficiary for purposes of ERISA's reporting and disclosure requirements. Reimbursements of covered expenses paid by the child or his or her custodial parent or legal guardian must go to the child or the custodial parent or legal guardian and not to the employee. In some cases, the payment may go to a state official whose name and address has been substituted for the child's address in the order.
National Medical Support Notice (NMSN). The DOL and the HHS have adopted anNMSN for use by state agencies to notify the employer of a noncustodial parent that a state court or administrative agency has issued a child support order requiring the employer's group health plan to provide coverage for the child of the noncustodial parent and to serve as a QMCSO. The two-part notice includes:
• Part A--Notice to Withhold for Healthcare Coverage; and
• Part B--Notice to Plan Administrator.
The notice is first sent to the employer, which then has 20 business days to forward Part B to the plan administrator. If the administrator determines that the order is a QMCSO, the employer is obligated to determine whether withholding limitations or prioritizations allow the amount required to obtain the child's coverage from the employee's income and, if appropriate, withhold and send the necessary funds to the health plan. When properly filled out, the Notice is a QMCSO.
Employees' spouses and dependents are generally covered under all types of group health insurance. Many families, however, include two employees whose employers both provide health insurance. To prevent double payment for hospitalization and surgery, most insurance companies pay only the actual costs to the individual where more than one policy is in effect. In practice, hospitals apply the patient's policy first and look to other coverage only when the primary policy is exhausted. Formerly, children were customarily covered first under the father's policy; however, in many states children are now covered first under the policy of the parent whose birthday occurs earlier in the calendar year--the so-called “Birthday Rule.”
Self-insured plans are prohibited from discriminating in favor of the highly compensated. The ACA extends this prohibition to nongrandfathered, fully insured group health plans. However, enforcement of this provision has been delayed pending new regulatory guidance, so it is not yet in effect for fully insured plans.
ERISA has a variety of reporting and disclosure requirements, including special requirements that apply to summary plan descriptions (SPDs) and summaries of plan modifications of group health plans. There is more information available on specific ERISA requirements, as well as the ACA reporting and disclosure requirements. Please see the national Benefits Recordkeeping and Disclosures section.
Health insurers in the individual and small group market must maintain a medical loss ratio (MLR) of 80 percent, and insurers in the large group market must maintain an MLR of 85 percent. Insurers must provide a rebate to each enrollee on a pro rata basis equal to the amount of premium revenue spent on nonmedical costs that exceed the percentage limits. The MLR is the ratio of the amount of premium revenue expended by the issuer on reimbursement for clinical services provided to enrollees and for activities that improve healthcare quality to the total amount of premium revenue (excluding federal and state taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and specified reinsurance for the plan year).
Group health benefit plans covered by ERISA are required to have a reasonable claims procedure that must be set out in the plan's SPD. The description of the claims procedure must include the circumstances that might result in the loss or denial of benefits and the procedure for making a claim for benefits, including the procedures for appealing a claim denial. ERISA requires that claim denials must be in writing and must include a clear explanation of the specific reasons for the denial. The plan document and the SPD must provide a procedure for appealing a denial to an authorized plan official or committee for a full and fair review.
Most states require group health insurance policies to cover specific services.
Please see the state Health Care Insurance section.
For full details, check with your state insurance commissioner. ERISA exempts self-insured plans from regulation by state insurance laws and from the requirement to include mandated benefits. Self-insured employers that operate in more than one state can offer uniform benefits at all of their sites.
Coverage during leaves. The federal Family and Medical Leave Act (FMLA) requires employers to maintain group health insurance coverage for employees during FMLA leave. The coverage must be at the same level and with the same conditions that would have existed if the employee had not taken the leave. During the leave period, the employer and employee continue to pay their usual portions of the premium. Employees must also be allowed to continue coverage under medical reimbursement plans during an FMLA leave. FMLA applies to employers with 50 or more employees.
Age bias. The Age Discrimination in Employment Act (ADEA) requires employers with 20 or more employees to provide the same health insurance benefits to employees and their spouses aged 40 years and older as are provided to younger employees and their spouses.
Disability discrimination. The Americans with Disabilities Act (ADA) makes it illegal for employers to discriminate in the provision of health benefits based on a disability covered by the ADA. Employees with disabilities must have equal access to insurance coverage. The ADA covers employers with 15 or more employees.
HIPAA administrative simplification and privacy. HIPAA mandates the adoption of a series of provisions to simplify and ensure the privacy and security of healthcare information. These provisions have both direct and indirect impact on employer-sponsored group health insurance plans. Please see the national Health Information Privacy (HIPAA) section.
Coverage after termination. Both COBRA and many state laws give employees the right to continue coverage and/or convert to individual policies after leaving the group. Please see the national COBRA (Health Insurance Continuation) section.
The latest trend in health plan designs is consumer-driven health care, including defined-contribution health plans (health savings accounts (HSAs), health reimbursement arrangements (HRAs), and medical savings accounts (MSAs)) intended to make employees more conscious of, and responsible for, the cost of their health care.
Please see the Defined Contribution Health Plans section.
Last updated on June 1, 2017.
Related Topics:
National
What do employers need to consider regarding healthcare benefits? The enactment of the Affordable Care Act (ACA) marks the latest step in a continuing shift from virtually no federal regulation of employer-sponsored health insurance to extensive substantive and administrative requirements. This regulation initially included the reporting, disclosure, and claims procedure requirements enacted in the Employee Retirement Income Security Act (ERISA). Through the years, additional federal requirements were added, including portability and coverage guarantees, minimum maternity stays, mental health parity, required coverage of reconstructive surgery following a covered mastectomy, coverage of adoptees, and pediatric vaccine requirements. During the same period, there was a large increase in state insurance law benefit mandates.
Employers need to be aware of the many coverage and benefit requirements related to healthcare insurance. There are many laws involved in such requirements, including, but not limited to:
• The ACA;
• ERISA;
• The Health Insurance Portability and Accountability Act (HIPAA);
• The Consolidated Omnibus Budget Reconciliation Act (COBRA);
• The Genetic Information Nondiscrimination Act (GINA);
• The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA);
• The Newborns’ and Mothers’ Health Protection Act (NMHPA);
• The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA);
• The Women’s Health and Cancer Rights Act of 1998 (WHCRA);
• The Pregnancy Discrimination Act (PDA);
Michelle’s Law; and
• Various state laws.
HIPAA applies to group health plans established or maintained by employers or employee organizations, or both.
HIPAA does not cover every type of insurance that might be considered part of an employer’s “health benefits” package (29 USC 1191b). For example, HIPAA does not apply to:
• Accident or disability income insurance;
• Liability insurance (e.g., automobile liability insurance);
• Workers’ compensation insurance; and
• Coverage for on-site medical clinics.
There are also other specific benefits that, if they meet certain conditions, are exempt from HIPAA. For example, certain benefits are not subject to the requirements if they are offered:
• Separately or are not an integral part of the plan (e.g., limited scope dental or vision benefits and benefits for long-term care, nursing home care, home health care, or community-based care);
• As independent, noncoordinated benefits (e.g., coverage only for a specified disease or certain illness and hospital indemnity or other fixed indemnity insurance); or
• As a separate insurance policy (e.g., Medicare supplemental health insurance).
End to preexisting condition exclusions. Group health plans, as well as health insurance issuers offering group or individual health insurance coverage, may not impose any preexisting condition exclusion with respect to such plan or coverage.
Preexisting condition exclusion defined. A preexisting condition exclusion is a limitation or exclusion of benefits (including a denial of coverage) based on the fact that the condition was present before the effective date of coverage (or if coverage is denied, the date of the denial) under a group health plan or group health insurance coverage (29 CFR 2590.701–2). It does not matter whether any medical advice, diagnosis, care, or treatment was recommended or received before that day. It includes exclusions applied as a result of health status information obtained before the individual's effective date of coverage or denial of coverage under a group health plan or group health insurance coverage, such as a condition identified as a result of a preenrollment questionnaire or physical examination given to the individual, or a review of medical records relating to the preenrollment period.
A plan exclusion that satisfies this definition is a preexisting condition exclusion even if it is called something else.
Since group health plans may not impose preexisting condition exclusions, HIPAA’s requirement to provide a certificate of creditable coverage has been superseded (29 CFR 2590.701-5).
Statutory provision. HIPAA makes it illegal for group health plans to have eligibility rules that discriminate on the basis of the following health-related factors:
• Health status;
• Medical condition (including physical and mental illnesses);
• Claims experience;
• Receipt of health care;
• Medical history;
• Genetic information;
• Evidence of insurability; or
• Disability (29 CFR 2590.702).
Evidence of insurability includes conditions arising out of acts of domestic violence and participation in activities such as motorcycling, snowmobiling, all-terrain vehicle riding, horseback riding, skiing, and other similar activities.
Definition of a “health factor.” The decision whether or when to elect health coverage (including when to enroll, such as under special enrollment or late enrollment) is not, itself, a health factor. However, a plan must treat special enrollees the same as similarly situated individuals (SSIs) who are enrolled when first eligible.
Eligibility rule prohibitions. A group health plan may not establish any rule for eligibility (or continued eligibility) to enroll for benefits that discriminates on the basis of any health factor that relates to that individual or a dependent of that individual. Eligibility rules include rules relating to:
• Enrollment;
• The effective date of coverage;
• Waiting (or affiliation) periods;
• Late and special enrollment;
• Eligibility for benefit packages (including rules for switching benefit packages);
• Benefits (including rules relating to covered benefits, benefit restrictions, and cost-sharing mechanisms such as coinsurance, copayments, and deductibles);
• Continued eligibility; and
• Terminating coverage (including disenrollment).
Benefit provisions. The nondiscrimination provisions do not require a group health plan to provide coverage for any particular benefit to any group of SSIs. However, benefits provided under a plan must be uniformly available to all SSIs, and any restriction on a benefit or benefits must apply uniformly to all SSIs and must not be directed at individual participants or beneficiaries on the basis of any health factor. Thus, for example, a plan may limit or exclude benefits in relation to a specific disease or condition, limit or exclude benefits for certain types of treatments or drugs, or limit or exclude benefits on the basis of a determination of whether the benefits are experimental or not medically necessary, but only if the benefit limitation or exclusion applies uniformly to all SSIs and is not directed at individual participants or beneficiaries on the basis of any health factor of the participants or beneficiaries.
In addition, a plan may require the satisfaction of a deductible, copayment, coinsurance, or other cost-sharing requirement in order to obtain a benefit if the limit or cost-sharing requirement applies uniformly to all SSIs and is not directed at individual participants or beneficiaries on the basis of any health factor of the participants or beneficiaries.
Note: The regulations provide that a plan amendment that applies to all individuals in one or more groups of SSIs and made effective no earlier than the first day of the first plan year after the amendment is adopted is not considered to be directed at any individual participants or beneficiaries.
SSIs. The HIPAA nondiscrimination requirements apply only within a group of individuals who are treated as SSIs. Participants and beneficiaries may be treated as belonging to separate groups of SSIs. If individuals have a choice of two or more benefit packages, individuals choosing one benefit package may be treated as a group of SSIs distinct from individuals choosing another package.
Participants. Plans may treat participants as two or more distinct groups of SSIs if the distinction is based on a bona fide employment-based classification. Whether a classification is bona fide and employment-based depends on all the relevant facts and circumstances including whether the employer uses the classification for purposes independent of qualification for health coverage (for example, determining eligibility for other employee benefits or determining other terms of employment). Examples of classifications of participants that may be bona fide include full-time versus part-time status, different geographic location, membership in a collective bargaining unit, date of hire, length of service, current employee versus former employee status, and different occupations. However, a classification based on any health factor is not a bona fide employment-based classification unless it results in favorable treatment of individuals with adverse health factors.
Beneficiaries. A plan may treat beneficiaries as two or more distinct groups of SSIs if the distinction is based on any of the following factors:
• A bona fide employment-based classification of the participant through whom the beneficiary is receiving coverage;
• Relationship to the participant (for example, as a spouse or as a dependent child);
• Marital status;
• For children of a participant, age, or student status; or
• Any other factor that is not a health factor.
If the creation or modification of an employment or coverage classification is directed at individual participants or beneficiaries on the basis of any health factor, the classification is not permitted unless it is permitted because it results in favorable treatment of individuals with adverse health factors. Thus, an employer may not modify an employment-based classification to single out, on the basis of a health factor, individual participants and beneficiaries and deny them health coverage.
Nonconfinement, actively at work, and continuous service prohibitions. A plan may not establish a rule for eligibility or set any individual’s premium or contribution rate based on the following:
• Whether an individual is confined to a hospital or other healthcare institution;
• An individual’s ability to engage in normal life activities (except under certain circumstances, to distinguish among employees based on the performance of services); or
• Whether an individual is actively at work (including whether an individual is continuously employed), unless absence from work due to any health factor (such as being absent from work on sick leave) is treated for this purpose as being actively at work.
Exception for the first day of work. A plan may establish a rule for eligibility that requires an individual to begin work for the employer sponsoring the plan (or, in the case of a multiemployer plan, to begin a job in covered employment) before coverage becomes effective, provided that such a rule for eligibility applies regardless of the reason for the absence.
Source of injury prohibitions. If a group health plan generally provides benefits for a type of injury, the plan may not deny benefits otherwise provided for treatment of the injury if the injury results from an act of domestic violence or a medical condition (including both physical and mental health conditions). This rule applies in the case of an injury resulting from a medical condition even if the condition is not diagnosed before the injury. For example, a suicide exclusion may not apply to injuries resulting from a suicide attempt if the suicide attempt was the result of a medical condition such as depression, even if the depression diagnosis was not made until after the suicide attempt.
Although HIPAA generally prohibits a plan from discriminating against SSIs based on health status, the law also recognizes that the nondiscrimination provisions were not meant to prevent a group health plan or an issuer from establishing premium discounts or discounts on copayments or deductibles in return for adherence to programs of health promotion and disease prevention (29 CFR 2590.702(b) and 29 CFR 2590.702(f)). The wellness regulations provide guidance for evaluating the permissibility of wellness programs.
Generally, the following are permissible under HIPAA:
• Programs that do not reward individuals based on health status; and
• Programs that meet HIPAA’s wellness program nondiscrimination requirements.
Generally, wellness programs that provide rewards for participation rather than based on outcome are permissible, including:
• Incentives to participate in a health fair or testing (regardless of outcome);
• Waiver of copayments/deductibles for participation in well-baby visits; and
• Reimbursement of health club membership.
These programs are generally acceptable under HIPAA because they do not reward participants based on health status.
If the program provides a reward based on a health factor (the program is “health-contingent”), it must satisfy the HIPAA wellness program requirements. There are now two types of “health-contingent” wellness programs:
• Activity-only wellness programs; and
• Outcome-based wellness programs.
Examples of “activity-only” programs include walking and diet programs. The participant is not required to achieve any particular result but must participate in the activity to earn the reward (or avoid the penalty). Examples of “outcome-based” wellness programs include smoking and biometric screenings where the participant is required to succeed (e.g., quit smoking) or meet a certain requirement (e.g., lower cholesterol). Despite their differences, both activity-only and outcome-based programs are considered “health contingent.”
To be a permissible health-contingent wellness program, it must:
• Be available to all similarly situated individuals;
• Give individuals the opportunity to achieve the reward at least once per year;
• Be reasonably designed to promote health or prevent disease;
• Not exceed 30 percent of the cost of coverage under the plan (or, in certain circumstances, 50 percent); and
• Disclose the existence of reasonable alternatives to achieve the reward.
Note: The rules for wellness programs may be different for grandfathered health plans. Although Equal Employment Opportunity Commission’s wellness rules largely follow the HIPAA requirements, there are key differences. Please see the national Wellness section.
Available to all similarly situated individuals. A wellness program must be available to all similarly situated individuals in the plan. This means that the plan must provide reasonable alternative standards to individuals who cannot meet the required health factor-related standard because it is unreasonably difficult due to a medical condition to satisfy the standard. It must also provide reasonable alternative standards to individuals who cannot meet the required health factor-related standard because it is medically unadvisable to meet the standard. A plan may require that an individual provide verification from the individual’s physician, for example, that a health factor makes it unreasonably difficult or medically inadvisable for the individual to satisfy the standard.
Available at least once per year. The wellness program must give individuals eligible for the program the opportunity to qualify for the reward at least once per year.
Reasonably designed. The program must be reasonably designed to promote health or prevent disease. A program satisfies this standard if it has a reasonable chance of improving the health of or preventing disease in participating individuals. It must not be overly burdensome, must not be a subterfuge for discriminating on the basis of a health factor, and must not impose a highly suspect method to promote health or prevent disease.
Reward percentage requirements. A wellness program reward cannot exceed 30 percent of the cost of employee-only coverage under the plan, unless it is a tobacco cessation program, in which case the reward cannot exceed 50 percent. (The previous limit was 20 percent.) If other dependents (e.g., children or spouses) may participate in the wellness program, the reward cannot exceed 30 percent of the cost of the coverage in which the dependents are enrolled. Cost includes both the employer and employee contributions for coverage.
This 30 percent limit includes all possible wellness rewards. For example, if your plan offers rewards for lowering cholesterol and exercising regularly, the rewards combined cannot exceed 30 percent of the cost of participant coverage under the plan.
Disclosing alternatives. A wellness program must describe the terms of the wellness program, including a statement that if it is unreasonably difficult due to a medical condition for an individual to achieve the health goal to receive the reward, a reasonable alternative standard will be made available to the participant. A program cannot just provide a reasonable alternative. It must also disclose that a reasonable alternative will be made available when the terms of the program are described.
GINA amends HIPAA to specifically bar discrimination based on genetic information and restrict the use of genetic information by group health plans and health insurers. Group health plans and health insurance companies offering group health insurance coverage in connection with a group health plan may not adjust premium or contribution amounts for a group covered under such a plan on the basis of genetic information (29 CFR 2590.702-1). A health insurance company may increase the premium for an employer based on the manifestation of a disease or disorder of an individual who is enrolled in the plan. But the manifestation of a disease or disorder in one individual cannot also be used as genetic information about other group members (such as family members) and to further increase the premium for the employer. GINA authorizes DOL to impose stiff financial penalties for violations.
Definitions. The following definitions apply for purposes of GINA:
• A "family member" of an individual is a dependent of the individual, including the spouse and child of the individual and any other person who is a first-degree, second-degree, third-degree, or fourth-degree relative of the individual or the individual's dependents.
• "Genetic information" means an individual’s genetic tests, the genetic tests of his or her family members of such individual, and the manifestation of a disease or disorder in family members of the individual. Genetic information does not include information about the sex or age of any individual.
• The term "genetic test" means an analysis of human DNA, RNA, chromosomes, proteins, or metabolites that detects genotypes, mutations, or chromosomal changes. Genetic tests do not include an analysis of proteins or metabolites that does not detect genotypes, mutations, or chromosomal changes or an analysis of proteins or metabolites that is directly related to a manifested disease, disorder, or pathological condition that could reasonably be detected by a healthcare professional with appropriate training and expertise in the field of medicine involved.
• "Genetic services" means a genetic test; genetic counseling (including obtaining, interpreting, or assessing genetic information; or genetic education).
• "Underwriting purposes" are rules for, or determination of, eligibility (including enrollment and continued eligibility) for benefits under a plan or insurance coverage; the computation of premium or contribution amounts under a plan or insurance coverage; the application of any preexisting condition exclusion under a plan or insurance coverage; and other activities related to the creation, renewal, or replacement of a health insurance contract or health benefits.
GINA enforcement. GINA also bars group health plans and health insurance companies offering group health insurance coverage from requesting or requiring an individual or a family member of such individual to undergo a genetic test. This provision is not intended to limit the authority of a healthcare professional who is providing healthcare services to an individual to request that such individual undergo a genetic test. A group health plan or a health insurer may obtain and use the results of a genetic test in making a determination regarding payment for healthcare services. A group health plan or insurer may request only the minimum amount of information necessary to accomplish the intended purpose. A group health plan or a health insurer may use the results of genetic tests for research purposes but may not use such information for underwriting purposes. Genetic information may not be requested, required, or purchased for genetic underwriting purposes. In addition, a group health plan or health insurer may not request, require, or purchase genetic information about any individual before the individual’s enrollment under the plan or coverage in connection with such enrollment.
Generally, employer-sponsored health plans allow employees and their dependents to enroll in coverage when the employee is first hired during “regular enrollment.” However, HIPAA requires group health plans to offer special enrollment periods under certain circumstances (29 CFR 2590.701-6). More specifically, HIPAA requires a group health plan to permit an otherwise eligible individual who did not initially enroll in a plan to have a special window to enroll if the individual:
• Lost previous health coverage; or
• Acquired a new spouse or dependent by marriage, birth, or adoption.
For an individual to be considered to have lost his or her previous health coverage, the employee or dependent must have lost the other coverage due to the exhaustion of a COBRA period, because he or she was no longer eligible for the other coverage, or because employer contributions ceased. An individual who loses coverage simply because he or she failed to pay the required premiums is not eligible for special enrollment under HIPAA.
In the case of a new spouse or dependent, it is the employee, spouse, and newly acquired dependent who receive special enrollment rights. Other dependents (such as siblings of a newborn child) do not receive special enrollment rights upon the birth or adoption of a child.
HIPAA’s special enrollment window is open for a limited time only. If your employee loses other health coverage, the employee must request enrollment in your health plan within 30 days of the loss of coverage. Your plan must begin coverage no later than the first day of the first calendar month that occurs after the date your plan receives the employee’s completed enrollment form.
If an employee acquires a new spouse or dependent, the employee must request enrollment within 30 days of the marriage, birth, adoption, or placement for adoption. For new coverage due to marriage, the coverage must be effective no later than the first day of the first calendar month that occurs after the date your plan receives the employee’s completed enrollment form. For newborns and newly adopted dependents, coverage must be retroactive to the date of birth or the date of adoption.
Notice requirement. On or before the time any employee is offered the opportunity to enroll in a group health plan, the plan is required to provide each employee with a description of the plan's special enrollment rules. For this purpose, the plan may use the DOL approved model description of the special enrollment rules.
The Children’s Health Insurance Program Reauthorization Act of 2009 extends and expands the state children’s health insurance program (CHIP), allows states to subsidize premiums for employer-provided group health coverage for Medicaid and CHIP-eligible children and families, provides additional special enrollment rights, and adds notice and disclosure obligations for employers that maintain group health plans.
Special enrollment rights. Effective April 1, 2009, a group health plan must permit an employee or dependent who is eligible, but not enrolled, for coverage under the plan to enroll for coverage under the terms of the plan if either of the following conditions is met:
Loss of Medicaid or CHIP eligibility. The employee or dependent's coverage under Medicaid or under a state CHIP is terminated as a result of loss of eligibility for such coverage, and the employee requests coverage under the group health plan within 60 days after the date of termination of such coverage.
Eligibility for employment assistance under Medicaid or CHIP. The employee or dependent becomes eligible under a Medicaid plan or CHIP for premium assistance for employment-based coverage if the employee requests coverage under the group health plan within 60 days after the date the employee or dependent was determined to be eligible for such assistance.
The Employer CHIP Notice.An employer that maintains a group health plan must annually provide to each employee living in a state that provides premium assistance for the purchase of group health plan coverage through a Medicaid plan or CHIP a written notice informing the employee of potential opportunities currently available in the employee’s home state. The Department of Labor (DOL) maintains a list of states offering the required assistance, which is included in the model Employer CHIP Notice that may be accessed athttp://savingmatters.dol.gov.
Employers subject to the Employer CHIP Notice requirement. If a group health plan provides benefits for medical care directly (such as through a health maintenance organization) or through insurance, reimbursement, or in some other way to participants, beneficiaries, or providers in any state listed by DOL, the plan is required to provide the Employer CHIP Notice, regardless of the employer’s location or principal place of business (or the location or principal place of business of the group health plan, its administrator, its insurer, or any other service provider affiliated with the employer or the plan).
Employees who must be provided with the Employer CHIP Notice. An Employer CHIP Notice must inform each employee, regardless of enrollment status, of potential opportunities for premium assistance in the state in which the employee resides. Thus, the notice must go to all employees who reside in one of the states listed by the DOL. The state in which the employee resides may or may not be the same as the state in which the employer, the employer’s principal place of business, the health plan, its insurer, or other service providers are located.
Notice to state Medicaid and CHIP agencies. The plan administrator of a group health plan that has participants or beneficiaries who are covered under a state Medicaid plan or a CHIP must disclose to the relevant agency, upon request, information about the benefits available under the group health plan. This disclosure is to allow the agency to make a determination concerning the cost-effectiveness to the agency of providing medical or child health assistance by subsidizing premiums for the purchase of coverage under the employer's group health plan or to provide supplemental benefits instead. The CHIP Coverage Coordination Disclosure Form that is to be used for this purpose may be downloaded at http://www.cms.gov/FACA.
HIPAA has a guaranteed availability requirement for the small group market only. Small employers are defined as those with 2 to 50 employees. Each issuer that offers health insurance coverage in the small group market must accept every small employer in the state that applies for coverage, and must accept for enrollment every eligible individual who applies for coverage during the period in which the individual first becomes eligible (45 CFR 146.150).
Insurers are required to guarantee issue. Insurers in the small group market are allowed to use rating variation based only on age (limited to a 3-to-1 ratio), rating area, family composition, and tobacco use (limited to a 1.5-to-1 ratio) in the individual and the small group market and the exchanges. If a state expands its exchange to include the large group market, the rating variation limits will also apply in that market.
An issuer offering group health insurance coverage in the small or large market is required to renew or continue in force coverage at the option of the plan sponsor (45 CFR 146.152). Coverage need not be renewed for one or more of the following reasons: nonpayment of premiums; fraud; violation of participation or contribution rules; termination of coverage in the market in accordance with state law; for network plans, no enrollees in the service area; and for membership associations, when membership ceases.
Exceptions to guaranteed renewability also apply if the issuer or plan no longer offers a particular type of group coverage in the small or large group market, so long as the issuer, in accordance with state law:
• Provided notice to each plan sponsor, participant, and beneficiary;
• Gave the sponsor the opportunity to purchase all (or in the case of the large group market, any) other plans offered by the issuer; and
• Applied the termination uniformly without regard to claims experience or any health status-related factor of any participant or beneficiary.
Another exception applies upon discontinuance of all coverage. The issuer, however, would be barred from offering coverage in the market and state involved for five years. Modifications of a product within a market are allowed if the modification was effective on a uniform basis among group health plans that used the product.
Insurers are required to guarantee renewability. Insurers in the small group market are allowed to use rating variation based only on age (limited to a 3-to-1 ratio), rating area, family composition, and tobacco use (limited to a 1.5-to-1 ratio) in the individual and the small group market and the exchanges. If a state expands its exchange to include the large group market, the rating variation limits will also apply in that market.
Insurers and plans generally may not rescind coverage unless there is fraud or an individual makes an intentional misrepresentation of material fact. This provision applies to both existing (grandfathered) and new plans. A group health plan or insurer offering group health insurance coverage must provide at least 30 days' advance written notice to each participant who would be affected before coverage may be rescinded, regardless of whether the coverage is insured or self-insured, and regardless of whether the rescission applies to an entire group or only to an individual within the group.
A rescission is a cancellation or discontinuance of coverage that has retroactive effect. For example, a cancellation that treats a policy as void from the time of the individual’s or group’s enrollment is a rescission. As another example, a cancellation that voids benefits paid up to a year before the cancellation is also a rescission for this purpose. A cancellation or discontinuance of coverage is not a rescission if it has only a prospective effect or it is effective retroactively to the extent it is attributable to a failure to timely pay required premiums or contributions towards the cost of coverage.
Under federal law, health plans must provide certain benefits or provide certain benefits at specified minimum levels if the benefit is provided. These provisions, unlike state-law benefit mandates, cover both insured and self-insured plans.
The NMHPA requires postdelivery hospitalization coverage for at least 48 hours following a normal delivery and 96 hours following a cesarean section. Plans are barred from offering incentives or imposing penalties to encourage mothers to stay less time in the hospital. A decision to leave early may be made by the mother or the mother's healthcare provider after consulting with the mother. Copayments, deductibles, or other cost-sharing provisions applied to postdelivery hospitalization may not be greater than those for predelivery hospitalization. Plans and insurers may not require a provider to obtain prior authorization for prescribing a length of stay that does not exceed the 48- or 96-hour minimums. Information about this coverage must be included in the plan's summary plan description.
The MHPAEA, which was passed by the U.S. Congress in October 2008, applies to most employers with more than 50 employees and is designed to provide mental health parity by making sure mental health and/or substance use disorder benefits offered by health plans are equivalent to the medical/surgical benefits the plans offer.
Defining basic terms. According to the final regulations, group health plans define the terms “mental health benefits” and “substance use disorder benefits,” but the definitions must be in accordance with applicable federal and state laws (29 CFR 2590.712(a)). The regulations also provide that the terms must be “consistent with generally recognized independent standards of current medical practice.” The regulations give a few examples of resources that would meet this requirement, including:
• The most current version of the Diagnostic and Statistical Manual of Mental Disorders (DSM);
• The most current version of the International Classification of Diseases (ICD); or
• State guidelines.
The general parity requirement. The main goal of the MHPAEA is to achieve parity regarding a plan’s financial requirements and treatment limitations. Financial requirements include copayments, deductibles, coinsurance, and out-of-pocket expenses and do not include aggregate lifetime or annual dollar limits (29 CFR 2590.712(a)). Treatment limitations include limits on treatment frequency (e.g., one therapy session per week), number of visits (e.g., 35 visits per year to a mental health professional), days of coverage (e.g., 30-day hospital stays), days in a waiting period, and other similar limits on the scope or duration of treatment.
Classification of benefits. The final regulations make clear that parity analysis must be conducted on a classification-by-classification basis. More specifically, a plan cannot apply “any financial requirement or treatment limitation to mental health or substance use disorder benefits in any classification that is more restrictive than the predominant financial requirement or treatment limitation of that type applied to substantially all medical/surgical benefits in the same classification” (29 CFR 2590.712(c)(2)(i)).
The regulations divide benefits into the following six classifications:
1. Inpatient, in-network;
2. Inpatient, out-of-network;
3. Outpatient, in-network;
4. Outpatient, out-of-network;
5. Emergency care; and
6. Prescription drugs (29 CFR 2590.712(c)(2)(ii)).
The regulations do allow plans and issuers to divide benefits furnished on an outpatient basis into two sub-classifications:
1. Office visits (e.g., physician visits); and
2. All other outpatient items and services (e.g., outpatient surgery, facility charges for day treatment centers, laboratory charges, and other medical items) (29 CFR 2590.712(c)(3)(iii)(C)).
However, the regulations do not allow any other sub-classifications, including for example, the separate classification of generalists and specialists.
The final regulations also provide that if a plan (or health insurance coverage) provides in-network benefits through multiple tiers of in-network providers, the plan may divide its benefits furnished on an in-network basis into sub-classifications that reflect those network tiers (29 CFR 2590.712(c)(3)(iii)(A)). However, such tiering must be based on reasonable factors and without regard to whether a provider is a mental health or substance use disorder provider or a medical/surgical provider.
Treatment limitations. The regulations provide that the parity requirements apply to both quantitative and nonquantitative treatment limitations. A "quantitative treatment limitation" is a limitation that is expressed numerically, such as an annual limit of 50 outpatient visits per year (29 CFR. 2590.712(a)). A "nonquantitative treatment limitation" is a limitation that is not expressed numerically, but otherwise limits the scope or duration of benefits for treatment. A permanent exclusion of all benefits for a specific condition or disorder is not a treatment limitation. Nonquantitative treatment limitations include:
• Medical management standards limiting or excluding benefits based on medical necessity or medical appropriateness, or based on whether the treatment is experimental or investigative;
• Formulary design for prescription drugs;
• For plans with multiple network tiers (such as preferred providers and participating providers), network tier design;
• Standards for provider admission to participate in a network, including reimbursement rates;
• Plan methods for determining usual, customary, and reasonable charges;
• Refusal to pay for higher-cost therapies until it can be shown that a lower-cost therapy is not effective (also known as fail-first policies or step therapy protocols);
• Exclusions based on failure to complete a course of treatment;and
• Restrictions based on geographic location, facility type, provider specialty, and other criteria that limit the scope or duration of benefits for services provided under the plan or coverage (29 CFR 2590.712(c)(4)(ii)).
Application of the parity requirement to nonquantitative treatment limitations. The regulations generally prohibit the imposition of any nonquantitative treatment limitation to mental health or substance use disorder benefits unless certain requirements are met. Any processes, strategies, evidentiary standards, or other factors used in applying the nonquantitative treatment limitation to mental health or substance use disorder benefits in a classification must be comparable to, and applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in applying the limitation with respect to medical/surgical benefits in the classification (29 CFR 2590.712(c)(4)(i)).
Availability of plan information. The criteria for medical necessity determinations made under the plan for mental health or substance use disorder benefits must be made available by the plan administrator or the health insurance issuer offering the coverage to any current or potential participant, beneficiary, or contracting provider upon request (29 CFR 2590.712(d)(1)).
The reason for any denial under the plan (or coverage) of reimbursement or payment for services for mental health or substance use disorder benefits must be made available by the plan administrator or health insurance issuer to the participant or beneficiary as provided by the ERISA claims procedure regulations (29 CFR 2590.712(d)(2)).
Small employer exemption. In general, employers that have 50 or fewer employees are totally exempt from the requirements of the MHPAEA (29 USC 1185a(c)(1)and 29 CFR 2590.712(f)). Employers who employed at least two employees but not more than 50 employees on business days during the preceding calendar year are exempt from these requirements. Moreover, the parity rules do not apply to any group health plan for any plan year if, on the first day of the plan year, the plan has fewer than two participants who are current employees (29 CFR 2590.712(f)(1)).
Note: For nonfederal governmental plans, a "small employer" is an employer with 100 or fewer employees (42 USC 300gg-26(c)(1)).
Cost exemption. The mental health and substance abuse parity requirements do not apply during the next plan year to a group health plan if their application would result in an increase for the current plan year of the actual total costs of coverage for medical and surgical benefits and mental health and substance use disorder benefits by an amount that exceeds the "applicable percentage" of the actual total plan costs (29 CFR 2590.712(g)(1)). The applicable percentage is 2 percent for the first plan year in which the new parity requirements apply and 1 percent in each subsequent plan year (29 CFR 2590.712(g)(2)).
Notice of cost exemption. A group health plan that elects to implement a cost exemption must promptly notify the DOL, the appropriate state agencies, and participants and beneficiaries in the plan of the election.
The WHCRA requires that group health plans that cover mastectomies also cover reconstructive breast surgery following a mastectomy. The WHCRA not only requires reconstruction of the breast on which the mastectomy was performed, but also surgery and reconstruction of the other breast to produce a symmetrical appearance. Also mandated are coverage for prostheses and physical complications of mastectomy such as lymphedemas. The law specifically leaves it to the patient and the attending physician to determine how the covered services are to be provided.
The WHCRA's requirements apply only to group health plans and health insurance issuers that provide coverage for a mastectomy. Coverage of mastectomies is not mandated. The WHCRA also does not prohibit group health plans and health insurance issuers from imposing deductibles or coinsurance requirements for health benefits relating to reconstructive surgery in connection with a mastectomy as long as such requirements are consistent with those established for other benefits under the plan. State laws that require at least the same level of coverage as the WHCRA are not superseded.
Notice requirements. Both group health plans and group health insurers are required to give participants and beneficiaries notice of the availability this mandate upon enrollment and annually thereafter.
The PDA prohibits discrimination on the basis of pregnancy, childbirth, or related medical conditions. Please see the national Maternity and Pregnancy section.
Michelle’s Law prohibits group health plans from terminating the health coverage of a college, university, or trade school student who is a “dependent child” solely because the student takes a medically necessary leave of absence. If Michelle’s Law applies, the group health plan must provide the same benefits as if the student had not taken a leave for 1 year after the first day of the leave (or if earlier, the date coverage would otherwise have terminated under the terms of the plan or health insurance coverage).
Under the ACA, group health plans and issuers are generally required to provide dependent coverage to age 26, regardless of the dependent’s student status (see below). Nonetheless, under some circumstances, such as a plan that provides dependent coverage beyond the age of 26, Michelle's Law may still apply. The DOL provides additional information here: http://webapps.dol.gov.
Group health plans and health insurers that offer group or individual coverage that covers dependents must allow coverage of dependents on a parent’s plan until the dependent’s 26th birthday. There is no requirement to make coverage available to a grandchild even if that child’s parent is covered as a dependent.
Regulations defining which dependents are eligible for coverage specify that a plan or insurer must define "dependent" for purposes of eligibility for dependent coverage of children in terms of a relationship between a child and the plan participant (IRS Reg. Sec. 54.9815-2714T). Thus, a plan may not deny or restrict coverage for a child who has not attained the age of 26 based on the presence or absence of the child's financial dependency (upon the participant or any other person), residency with the participant or with any other person, student status, employment, or any combination of those factors. In addition, a plan may not deny or restrict coverage of a child based on eligibility for other coverage.
Keeping track of the coverage eligibility of dependents has always been a problem for employers. Employers should obtain all the information needed for determining dependents’ coverage eligibility and keep it up to date to minimize paying for ineligible dependents. Many states have existing laws that require insured plans to provide similar or more expansive coverage of dependents. These provisions still apply to insured plans in those states.
Age distinctions. The terms of a group health plan or health insurance coverage providing dependent coverage of children cannot vary based on age (except for children who are aged 26 or older).
Both coverage under an employer-provided health plan and amounts paid or reimbursed under such a plan for medical care expenses of an employee’s child who has not attained the age of 27 as of the end of the employee’s taxable year are excluded from the employee’s gross income under IRC Sec. 105(b) and IRC Sec. 106. An employer may assume an employee’s taxable year is the calendar year.
For this purpose, a child is the son, daughter, stepson, or stepdaughter of the employee, including those who are legally adopted or lawfully placed with the employee for legal adoption and “eligible foster children,” defined as individuals who are placed with an employee by an authorized placement agency or by judgment, decree, or court order. This provision applies to a child of the employee even if the child is not the employee’s dependent within the meaning of IRC Sec. 152(a). Thus, the age limit, residency, support, and other tests described in IRC Sec. 152(c) do not apply to a child for this purpose.
The ACA prohibits group health plans (including grandfathered plans) and health insurance issuers that offer group health plans from establishing lifetime dollar limits on the “essential health benefits” provided by the plan (29 CFR 2590.715-2711). This means that plans may not, for example, place a cap on the lifetime dollar amount of coverage for emergency services or preventive care, because those benefits are considered essential under the ACA.
The ACA lists the following categories that must be considered essential health benefits:
• Ambulatory patient services;
• Emergency services;
• Hospitalization;
• Maternity and newborn care;
• Mental health and substance use disorder services;
• Prescription drugs;
• Rehabilitative and habilitative services and devices;
• Laboratory services;
• Preventive and wellness services; and
• Pediatric services, including oral and vision care.
Additionally, annual dollar-amount limits on essential benefit coverage are prohibited. Lifetime and annual limits may continue for benefits that are not “essential,” provided that such limits are permitted under state and federal law.
Insurers and group health plans must provide coverage without cost sharing for preventive services (26 CFR 54.9815-2713); this provision does not apply to grandfathered plans. Related regulations provide that, generally, a group health plan or a health insurer offering group health insurance coverage must provide coverage for all of the following items and services without any cost-sharing requirements (such as a copayment, coinsurance, or deductible) for the items or services:
• Evidence-based items or services that have a rating of A or B in the current recommendations of the United States Preventive Services Task Force for the individual involved;
• Immunizations for routine use in children, adolescents, and adults that have in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention (CDC) for the individual involved (for this purpose, a recommendation from the Advisory Committee on Immunization Practices of the CDC is considered in effect after it has been adopted by the Director of the CDC, and a recommendation is considered to be for routine use if it is listed on the Immunization Schedules of the CDC);
• For infants, children, and adolescents, evidence-informed preventive care and screenings provided for in comprehensive guidelines supported by the Health Resources and Services Administration (HRSA); and
• For women, if not included by the first item above, evidence-informed preventive care and screenings provided for in comprehensive guidelines supported by the HRSA.
A plan may provide coverage for services in addition to those recommended and may deny coverage for services that are not recommended. A complete list of the current recommended preventive services is available at http://www.healthcare.gov.
Women's preventive services guidelines.The HHS has issued guidelines on women's preventive services supported by the HRSA. Nongrandfathered plans and issuers are required to provide coverage without cost sharing consistent with these guidelines. The additional women’s preventive services that must be covered without cost-sharing requirements include:
• Well-woman visits, including an annual well-woman preventive care visit for adult women to obtain the recommended preventive services, and additional visits if women and their providers determine they are necessary;
• Gestational diabetes screening for women 24 to 28 weeks pregnant and those at high risk of developing gestational diabetes;
• Human papillomavirus (HPV) DNA testing for women who are 30 years of age or older every 3 years, regardless of pap smear results;
• Annual sexually transmitted infection (STI) counseling and human immunodeficiency virus (HIV) screening and counseling;
• Contraception and contraceptive counseling, including access to all Food and Drug Administration-approved contraceptive methods, sterilization procedures, and patient education and counseling (this requirement does not apply to women who are participants or beneficiaries in group health plans sponsored by religious employers);
• Breastfeeding support, supplies, and counseling; and
• Interpersonal and domestic violence screening and counseling.
For additional information on women’s preventive services guidelines, visit https://www.hrsa.gov.
Cost-sharing requirements and office visits. Because an office visit where preventive services are provided may include other services, the regulations provide the following clarifications of the cost-sharing requirements when a recommended preventive service is provided during an office visit:
• If a recommended preventive service is billed separately (or is tracked as individual encounter data separately) from an office visit, a plan or insurer may impose cost-sharing requirements with respect to the office visit.
• If a recommended preventive service is not billed separately (or is not tracked as individual encounter data separately) from an office visit and the primary purpose of the office visit is the preventive service, a plan or insurer may not impose cost-sharing requirements for the office visit.
• If a recommended preventive service is not billed separately (or is not tracked as individual encounter data separately) from an office visit and the primary purpose of the office visit is not the preventive service, a plan or insurer may impose cost-sharing requirements for the office visit (26 CFR 54.9815-2713).
Out-of-network providers. The regulations make clear that a plan that has a network of providers is not required to provide coverage for recommended preventive services delivered by an out-of-network provider and may also impose cost-sharing requirements for recommended preventive services delivered by an out-of-network provider. However, if a plan or issuer does not have a provider in its network that can provide the recommended preventive services, the plan or issuer must cover the item or service when performed by an out-of-network provider and may not impose cost sharing with respect to the item or service.
Reasonable medical management. The regulations provide that a plan or issuer can use reasonable medical management techniques to determine the frequency, method, treatment, or setting for recommended preventive services to the extent such details are not specified in the relevant recommendation or guideline.
Insurers and plans must limit any waiting periods for coverage to 90 days (26 CFR 54.9815-2708). The regulations define a “waiting period” as the period that must pass before coverage for an individual, who is otherwise eligible to enroll under the terms of a group health plan, can become effective. If an individual enrolls as a late enrollee or a special enrollee, any period before such late or special enrollment is not a waiting period.
Eligibility. Under the regulations, in general, for individuals to be eligible to enroll under the terms of a group health plan, they must have met the plan’s substantive eligibility conditions. Such eligibility conditions include, for example:
• Being in an eligible job classification;
• Achieving job-related licensure requirements specified in the plan’s terms; or
• Satisfying a reasonable and bona fide employment-based orientation period.
However, the regulations make clear that nothing in this section requires a plan sponsor to offer coverage to any particular individual or class of individuals (e.g., part-time employees). The regulations just prohibit requiring otherwise eligible individuals to wait more than 90 days before coverage is effective.
Eligibility conditions based solely on the lapse of a time period are permissible for no more than 90 days. Other conditions for eligibility under the terms of a group health plan are generally permissible unless the condition is designed to avoid compliance with the 90-day waiting period limitation.
Variable-hour employees. If a group health plan conditions eligibility on an employee regularly having a specified number of hours of service per period (or working full-time), in some cases, it may not be possible to determine whether a newly hired employee is reasonably expected to regularly work that number of hours per period (or work full-time). In this situation, the plan may take a reasonable period of time to determine whether the employee meets the plan’s eligibility condition. This “reasonable period of time” cannot exceed 12 months and must begin on any date between the employee’s start date and the first day of the first calendar month following the employee’s start date.
Except in cases in which a waiting period that exceeds 90 days is imposed in addition to a measurement period, the time period for determining whether such an employee meets the plan’s eligibility condition will not be considered to be designed to avoid compliance with the 90-day waiting period limitation if coverage is made effective no later than 13 months from the employee’s start date plus, if the employee’s start date is not the first day of a calendar month, the time remaining until the first day of the next calendar month.
Cumulative service requirements. If a group health plan or health insurance issuer conditions eligibility on an employee having completed a number of cumulative hours of service, the eligibility condition is not considered to be designed to avoid compliance with the 90-day waiting period limitation if the cumulative hours-of-service requirement does not exceed 1,200 hours.
Limitation on orientation periods. An orientation period is permitted only if it does not exceed 1 month. For this purpose, 1 month is determined by adding 1 calendar month and subtracting 1 calendar day, measured from an employee’s start date in a position that is otherwise eligible for coverage. For example, if an employee’s start date in an otherwise eligible position is May 3, the last permitted day of the orientation period is June 2.
Counting days. Under this section, all calendar days are counted beginning on the enrollment date, including weekends and holidays. A plan or issuer that imposes a 90-day waiting period may, for administrative convenience, choose to permit coverage to become effective earlier than the 91st day if the 91st day is a weekend or holiday.
A health insurance issuer that offers health insurance coverage in the individual or small group market must ensure that the coverage includes the essential health benefits package (as discussed above).
Group health plans are subject to certain cost-sharing limits. For more on such limitations on cost sharing, visit http://www.dol.gov.
Nongrandfathered plans must provide coverage of certain costs of clinical trials. Thus, a group health plan will not be allowed to:
• Deny (or limit or impose additional conditions on) the coverage of routine patient costs for items and services furnished in connection with participation in the trial, or
• Discriminate against the individual on the basis of the individual’s participation in a trial.
Nongrandfathered group health plans must provide patient protections that:
• Allow plan participants to choose any participating primary care provider.
• Allow participants or beneficiaries to choose a pediatrician as a child's primary care provider.
• Do not require prior authorization or referrals for visits to an obstetrician/gynecologist.
• Treat an obstetrician/gynecologist as a primary care provider.
• Provide coverage of emergency care services without prior authorization and with the same cost sharing both in and out of network (29 CFR Sec. 2590.715–2719A).
Designation of a primary care provider. If a group health plan or a health insurer issuer offering group health insurance coverage requires or provides for designation of a participating primary care provider, the plan or insurer must permit each participant or beneficiary to name any participating primary care provider who is available to accept the participant or beneficiary. The plan or insurer must inform each participant of the provision on designation of a primary care provider.
Designation of a pediatrician as a primary care provider. If a group health plan or a health insurer issuer offering group health insurance coverage requires or provides for the designation of a participating primary care provider for a child by a participant or beneficiary, the plan or insurer must permit the participant or beneficiary to name a physician (allopathic or osteopathic) who specializes in pediatrics as the child’s primary care provider if the provider participates in the plan or insurer's network and is available to accept the child. The plan or insurer must inform each participant of the provision on designation of a pediatrician as the child’s primary care provider.
Access to obstetrical and gynecological care. A group health plan or a health insurer issuer offering group health insurance coverage may not require authorization or referral by the plan, insurer, or any person (including a primary care provider) if a female participant or beneficiary seeks coverage for obstetrical or gynecological care provided by a participating healthcare professional who specializes in obstetrics or gynecology. The plan or insurer must inform each participant of the provision on access to obstetrical and gynecological care. The plan or insurer may require such a professional to agree to follow its policies and procedures, including procedures regarding referrals and obtaining prior authorization and providing services pursuant to a treatment plan (if any) approved by the plan or issuer.
A healthcare professional who specializes in obstetrics or gynecology is any individual (including a person other than a physician) who is authorized under applicable state law to provide obstetrical or gynecological care.
Obstetrician/gynecologist as primary care provider. A group health plan or a health insurer issuer offering group health insurance coverage must treat a participating health care professional who specializes in obstetrics or gynecology the same as a primary care provider when providing obstetrical and gynecological care and the ordering related obstetrical and gynecological items and services. The obstetrical or gynecological provider may be required to notify the primary care healthcare professional or the plan or insurer of his or her treatment decisions.
Notice of right to designate a primary care provider. If a group health plan or insurer requires the designation of a primary care provider, the plan or insurer must provide a notice informing each participant of the provision on naming a primary care provider and the participant's rights in this regard. The notice must be included whenever the plan or insurer provides a participant with a summary plan description or other similar description of benefits under the plan or coverage.
Model language. DOL regulations provide model language for use to satisfy this notice requirement. The model language can be located on the DOL’s website at http://www.dol.gov/ebsa.
Coverage of emergency services. If a group health plan or insurer provides coverage of any emergency room services for an emergency medical condition, it must cover:
• A medical screening examination that is within the capability of the emergency department of a hospital, including ancillary services routinely available to the emergency department to evaluate the condition, and
• Any further medical examination and treatment that is within the capabilities of the staff and facilities available at the hospital needed to stabilize the patient and to stabilize the emergency medical condition.
A plan or insurer must provide coverage for emergency services as follows:
• Without the need for any prior authorization determination, even if the emergency services are provided on an out-of-network basis;
• Without regard to whether the healthcare provider furnishing the emergency services is a participating network provider;
• If the emergency services are provided out of network, without imposing any administrative requirement or limitation on coverage that is more restrictive than the requirements or limitations that apply to emergency services received from in-network providers;
• If the emergency services are provided out of network, by complying with permitted cost-sharing requirements described below; and
• Without regard to any other term or condition of the coverage, other than the exclusion of or coordination of benefits; an affiliation or waiting period permitted by law; or applicable cost sharing.
Cost-sharing requirements for emergency services. Any copayment amount or coinsurance rate for out-of-network emergency services may not exceed the cost-sharing requirement for in-network services. However, a participant or beneficiary may be required to pay, in addition to the in-network cost sharing, the excess of the amount the out-of-network provider charges over the amount the plan or insurer is required to pay.
A group health plan or insurer is required to provide emergency services benefits in an amount equal to the greatest of the three following amounts:
• The amount negotiated with in-network providers for the emergency service furnished, excluding any in-network copayment or coinsurance imposed on the participant or beneficiary. If there is more than one amount negotiated with in-network providers for the emergency service, the amount is the median of these amounts, excluding any in-network copayment or coinsurance imposed.
• The amount for the emergency service calculated using the same method the plan generally uses to determine payments for out-of-network services (such as the usual, customary, and reasonable amount), excluding any in-network copayment or coinsurance imposed with respect to the participant or beneficiary. This amount is determined without reduction for out-of-network cost sharing that generally applies under the plan or health insurance coverage with respect to out-of-network services.
• The amount that would be paid under Medicare Part A or B for the emergency service, excluding any in-network copayment or coinsurance imposed with respect to the participant or beneficiary.
Other cost sharing. Any cost-sharing requirement other than a copayment or coinsurance requirement (such as a deductible or out-of-pocket maximum) may be imposed for emergency services provided out of network if the cost-sharing requirement generally applies to out-of-network benefits. A deductible may be imposed on out-of-network emergency services only as part of a deductible that generally applies to out-of-network benefits. If an out-of-pocket maximum generally applies to out-of-network benefits, that out-of-pocket maximum must apply to out-of-network emergency services.
Employers and the plan administrators of group health plans who receive an order from a state domestic relations court or a state agency (such as a Medicaid agency or other welfare department) requiring that the plan enroll a child of a plan participant must obey the order if the administrator determines that the order is a QMCSO. Such an order may require coverage of a child who does not live with the plan participant and may require withholding from the participant's wages to pay for the employee's share of the plan premiums. For an order to be a QMCSO, it must include the following information:
• The name and last known mailing address of the participant and the child to be covered;
• A reasonable description of the type of coverage to be provided or how the type of coverage should be determined;
• The time period for which the order applies; and
• The plan to which the order applies.
A QMCSO may generally not require a plan to provide any benefit or option not otherwise provided under the plan. The plan must have a written procedure for determining if an order is a QMCSO. The child must be allowed to designate a representative to receive required notices from the plan.
When a medical support order is received, the plan administrator must promptly notify the participant and the children of the receipt and of the plan's procedures for determining if the order is a QMCSO. A child who is covered under a plan pursuant to a QMCSO is considered as a plan participant and not a beneficiary for purposes of ERISA's reporting and disclosure requirements. Reimbursements of covered expenses paid by the child or his or her custodial parent or legal guardian must go to the child or the custodial parent or legal guardian and not to the employee. In some cases, the payment may go to a state official whose name and address has been substituted for the child's address in the order.
National Medical Support Notice (NMSN). The DOL and the HHS have adopted anNMSN for use by state agencies to notify the employer of a noncustodial parent that a state court or administrative agency has issued a child support order requiring the employer's group health plan to provide coverage for the child of the noncustodial parent and to serve as a QMCSO. The two-part notice includes:
• Part A--Notice to Withhold for Healthcare Coverage; and
• Part B--Notice to Plan Administrator.
The notice is first sent to the employer, which then has 20 business days to forward Part B to the plan administrator. If the administrator determines that the order is a QMCSO, the employer is obligated to determine whether withholding limitations or prioritizations allow the amount required to obtain the child's coverage from the employee's income and, if appropriate, withhold and send the necessary funds to the health plan. When properly filled out, the Notice is a QMCSO.
Employees' spouses and dependents are generally covered under all types of group health insurance. Many families, however, include two employees whose employers both provide health insurance. To prevent double payment for hospitalization and surgery, most insurance companies pay only the actual costs to the individual where more than one policy is in effect. In practice, hospitals apply the patient's policy first and look to other coverage only when the primary policy is exhausted. Formerly, children were customarily covered first under the father's policy; however, in many states children are now covered first under the policy of the parent whose birthday occurs earlier in the calendar year--the so-called “Birthday Rule.”
Self-insured plans are prohibited from discriminating in favor of the highly compensated. The ACA extends this prohibition to nongrandfathered, fully insured group health plans. However, enforcement of this provision has been delayed pending new regulatory guidance, so it is not yet in effect for fully insured plans.
ERISA has a variety of reporting and disclosure requirements, including special requirements that apply to summary plan descriptions (SPDs) and summaries of plan modifications of group health plans. There is more information available on specific ERISA requirements, as well as the ACA reporting and disclosure requirements. Please see the national Benefits Recordkeeping and Disclosures section.
Health insurers in the individual and small group market must maintain a medical loss ratio (MLR) of 80 percent, and insurers in the large group market must maintain an MLR of 85 percent. Insurers must provide a rebate to each enrollee on a pro rata basis equal to the amount of premium revenue spent on nonmedical costs that exceed the percentage limits. The MLR is the ratio of the amount of premium revenue expended by the issuer on reimbursement for clinical services provided to enrollees and for activities that improve healthcare quality to the total amount of premium revenue (excluding federal and state taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and specified reinsurance for the plan year).
Group health benefit plans covered by ERISA are required to have a reasonable claims procedure that must be set out in the plan's SPD. The description of the claims procedure must include the circumstances that might result in the loss or denial of benefits and the procedure for making a claim for benefits, including the procedures for appealing a claim denial. ERISA requires that claim denials must be in writing and must include a clear explanation of the specific reasons for the denial. The plan document and the SPD must provide a procedure for appealing a denial to an authorized plan official or committee for a full and fair review.
Most states require group health insurance policies to cover specific services.
Please see the state Health Care Insurance section.
For full details, check with your state insurance commissioner. ERISA exempts self-insured plans from regulation by state insurance laws and from the requirement to include mandated benefits. Self-insured employers that operate in more than one state can offer uniform benefits at all of their sites.
Coverage during leaves. The federal Family and Medical Leave Act (FMLA) requires employers to maintain group health insurance coverage for employees during FMLA leave. The coverage must be at the same level and with the same conditions that would have existed if the employee had not taken the leave. During the leave period, the employer and employee continue to pay their usual portions of the premium. Employees must also be allowed to continue coverage under medical reimbursement plans during an FMLA leave. FMLA applies to employers with 50 or more employees.
Age bias. The Age Discrimination in Employment Act (ADEA) requires employers with 20 or more employees to provide the same health insurance benefits to employees and their spouses aged 40 years and older as are provided to younger employees and their spouses.
Disability discrimination. The Americans with Disabilities Act (ADA) makes it illegal for employers to discriminate in the provision of health benefits based on a disability covered by the ADA. Employees with disabilities must have equal access to insurance coverage. The ADA covers employers with 15 or more employees.
HIPAA administrative simplification and privacy. HIPAA mandates the adoption of a series of provisions to simplify and ensure the privacy and security of healthcare information. These provisions have both direct and indirect impact on employer-sponsored group health insurance plans. Please see the national Health Information Privacy (HIPAA) section.
Coverage after termination. Both COBRA and many state laws give employees the right to continue coverage and/or convert to individual policies after leaving the group. Please see the national COBRA (Health Insurance Continuation) section.
The latest trend in health plan designs is consumer-driven health care, including defined-contribution health plans (health savings accounts (HSAs), health reimbursement arrangements (HRAs), and medical savings accounts (MSAs)) intended to make employees more conscious of, and responsible for, the cost of their health care.
Please see the Defined Contribution Health Plans section.
Last updated on June 1, 2017.
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