Massachusetts Issues Final Regulations Establishing Minimum Creditable Coverage Standards

On October 17, 2008, the Massachusetts Health Insurance Connector Authority (“Connector”) issued final regulations establishing minimum creditable coverage standards for health plans. These final regulations are effective January 1, 2009.


Pursuant to the Massachusetts Health Care Reform Act (the “Act”), which became effective July 1, 2007, Massachusetts residents age 18 and older must have health coverage that satisfies “minimum creditable coverage” standards. While these minimum creditable coverage standards do not apply directly to employers, employees who are enrolled in an employer plan that does not satisfy these requirements could be subject to significant tax penalties. Accordingly, employers that cover employees who are Massachusetts residents may want to offer health plan options that satisfy the minimum creditable coverage standards.

Required Benefits

Beginning January 1, 2009, in order to meet the minimum creditable coverage requirements, a health plan must provide “core services” and a “broad range of medical benefits.” Core services include:

  • physician services;
  • inpatient acute care services;
  • day surgery; and
  • diagnostic procedures and tests.

The final regulations modify the list of benefits that a health plan must provide in order to satisfy the “broad range of medical benefits” requirement. Under the final regulations, at a minimum, a health plan must cover the following beginning on January 1, 2009:

  • Preventative and primary care
  • Emergency services
  • Hospitalization
  • Ambulatory patient services
  • Prescription drugs
  • Mental health and substance abuse services

Beginning January 1, 2010, the list of items that constitute a broad range of medical benefits is expanded to include (at a minimum) the following:

  • Ambulatory patient services, including outpatient, day surgery and related anesthesia
  • Diagnostic imaging and screening procedures, including x-rays
  • Emergency services
  • Hospitalization including, at a minimum, inpatient acute care services which are generally provided by an acute care hospital for covered benefits in accordance with the member’s subscriber certificate or plan description
  • Maternity and newborn care
  • Medical/surgical care, including preventive and primary care
  • Mental health and substance abuse services
  • Prescription drugs
  • Radiation therapy and chemotherapy

Co-payments, Deductibles, and Co-Insurance

A health plan may impose varied levels of co-payments, deductibles and co-insurance, as long as all of the following requirements are met:

  • Deductibles, co-payments, and co-insurance amounts for in-network and out-of-network covered services must be disclosed to participants
  • Any deductible for in-network services cannot exceed $2,000 for an individual and $4,000 for a family
  • Any separate deductible for prescription drugs cannot exceed $250 for an individual or $500 for a family

Out-of-Pocket Maximums

A health plan that has deductibles or co-insurance for in-network covered core services must include an out-of-pocket maximum for such services that does not exceed $5,000 for an individual and $10,000 for a family. Co-insurance and deductibles, and any co-payments over $100 made by an individual or family for in-network covered services, must be included in calculating any out-of-pocket maximums. However, deductibles, co-payments and co-insurance for prescription drugs do not have to be taken into account when calculating these outof- pocket maximums.

Benefit Limits

A health plan cannot impose an annual maximum benefit limitation that applies to all services collectively. Similarly, it cannot impose an overall annual maximum benefit limit based on a dollar amount or on utilization (e.g., office visits or hospital days) that caps covered “core services” for a year, or for any single illness or condition.

We note that a health plan generally may apply maximum benefit limits to non-core services. However, beginning January 1, 2010, the Connector has the discretion to determine that a health plan does not provide creditable coverage if the maximum benefit limitations established by the health plan:

  • are clearly inconsistent with standard employer sponsored coverage; and
  • do not represent innovative ways to improve quality or manage utilization or cost of services delivered.

Accordingly, maximums placed on even non-core services may cause a health plan to fail the minimum creditable coverage standards if these limitations do not meet the requirements described above.

Preventive Care Services

The final regulations include a revised definition of “preventive care services.” Under this revised definition preventive care services include, but are not limited to, routine adult physical exams, well baby care, prenatal maternity care, medically necessary child or adult immunizations, and routine gynecological exams.

The final regulations also clarify that a health plan which includes a deductible for in-network covered core services must cover at least three in-network preventive care visits for an individual and six in-network preventative care visits for a family before imposing the in-network deductible. Alternatively, a health plan may meet this pre-deductible requirement if it covers preventive care in accordance with nationally recognized preventive care guidelines that are comparable to the Massachusetts Health Quality Partners’ Preventive Care guidelines.

Plan Combinations

A health plan that does not meet creditable coverage standards on its own may be combined with additional health plans so that the combined plans provide creditable coverage. For example, a health benefit plan that excludes prescription drug coverage may be combined with a separate prescription drug-only health benefit plan so that the combined health benefit plans satisfy the minimum creditable coverage requirements.

High Deductible Health Plans with an HSA

Under the final regulations, starting in 2010 a High Deductible Health Plan/Health Savings Account arrangement will be deemed to provide minimum creditable coverage if:

  • the High Deductible Health Plan (“HDHP”) complies with the requirements of Internal Revenue Code section 223;
  • the carrier or plan sponsor facilitates access to a Health Savings Account (“HSA”) administrator (e.g., by arranging for an HSA vendor, offering to make HSA contributions via payroll deduction, etc.); and
  • the HDHP provides core services and a broad range of medical benefits, satisfies the maximum benefit limitations (to the extent not inconsistent with federal requirements), and satisfies the rules for preventive care.

Actuarial Equivalence

Under the proposed regulations, health plans were required to satisfy each of the minimum creditable coverage requirements. If a plan failed to satisfy any of these requirements, it would fail to comply with the minimum creditable coverage standards. The final regulations provide some flexibility to health plans. These final regulations authorize the Connector Board to determine that a health plan satisfies the minimum creditable coverage requirements on the basis of actuarial equivalence as long as the health plan meets all of the following requirements:

  • The plan must cover the required core services and broad range of medical benefits required under the final regulations
  • Any annual maximum benefit limitations must satisfy the minimum creditable coverage requirements
  • The plan must have an actuarial value equal to or greater than any Bronze level plan offered through Connector, as certified by an actuary

In other words, a health plan may meet the minimum creditable coverage requirements by demonstrating that the relative value of the plan’s health benefits are comparable to the value of the health plans sold by the Connector.

We anticipate that health plans seeking a determination on their minimum creditable coverage status on the basis of actuarial equivalence will do so by applying for a Minimum Creditable Coverage Certification from the Connector. The Connector has posted a draft Minimum Creditable Coverage Certification Application Form (with accompanying instructions) on its website. It is expected that additional guidance will be issued regarding this safe harbor in the near future.

Collectively Bargained Plans

The final regulations include a delayed effective date for collectively bargained plans. The Connector may, in its discretion, deem that a health plan maintained pursuant to a collectively bargained agreement in effect on January 1, 2009, complies with the minimum creditable coverage requirements for up to one year following the expiration of the applicable collectively bargained agreement. Further, a plan that is part of a multi-employer health plan may be deemed compliant for up to one year following the date of the last renewing applicable collectively bargained agreement.