We’ve come a long way since March 23, 2010, the date President Obama signed the Patient Protection and Affordable Care Act (PPACA) into law. So far, in fact, that the tri-agency series of FAQ guidance has reached the age of majority in this latest FAQ XVIII. This seems appropriate, given that the law has now matured to (mostly) full implementation as of the 2014 plan year.
Of course, there are still many unsettled areas of the law in PPACA. The agencies responsible for implementing and enforcing the law — Departments of Labor, Health and Human Services, and the Treasury (collectively, the Departments) — have helped answer a number of those lingering questions with the set of 12 questions and answers issued on January 9, 2014.
When Does a Non-Grandfathered Plan Have to Cover New Preventive Services?
PPACA requires that non-grandfathered health plans provide preventive coverage for certain preventive services, and that any in-network preventive coverage not be subject to any cost-sharing requirements (e.g., deductibles, copayments, coinsurance). The preventive items and services subject to the mandate are those enumerated on the United States Preventive Services Task Force (USPSTF) A and B recommendations, the Health Resources and Services Administration (HRSA)’s women preventive services guidelines and guidelines for infants, children, and adolescents, as well as immunizations recommended for routine use by the Advisory Committee on Immunization Practices (ACIP).
FAQ XVIII addresses the requirements for plans to incorporate new preventive recommendations and guidelines by the USPSTF, HRSA, or ACIP as they are added. Specifically, the Departments refer to a new September 24, 2013 USPSTF recommendation regarding medications for risk reduction of primary breast cancer for women who are at increased risk (e.g., tamoxifen or raloxifene).
Takeaway: When a new preventive item or service is added to the USPSTF, HRSA, or ACIP list of required coverage, the plan must cover the new item or service without cost-sharing (in-network) for plan years that begin on or after the date that is one year after the date the recommendation or guideline is issued. Accordingly, non-grandfathered plans must add the new USPSTF recommendation regarding risk-reducing medications for women at high risk for breast cancer in the first plan year beginning on or after September 24, 2014 (as of January 1, 2015 for a calendar-year plan).
How Will Separately-Administered Benefits be Subject to the New OOPM for Non-Grandfathered Plans?
For plan years beginning on after January 1, 2014, PPACA requires that non-grandfathered health plans impose an out-of-pocket maximum (OOPM) on essential health benefits (EHB) that initially mirrors the OOPM for high deductable health plan (HDHP) coverage. In the first year, the limit is $6,350 for employee-only coverage and $12,700 for all other levels of coverage. (Note: PPACA indexes these OOPM amounts for future years in a different manner than the HDHP indexing from Internal Revenue Code (IRC) section 223. The PPACA and HDHP OOPM amounts are therefore likely to diverge over time).
Last February in FAQ XII, the Departments issued a one-year grace period from the OOPM requirement for plans that utilize more than one service provider to administer benefits subject to the OOPM. Under the nonenforcement policy, for the first plan year beginning on or after January 1, 2014, to the extent separately-administered non-major medical benefits such as prescription drugs (e.g., administered by a PBM) include a separate OOPM, tracking that OOPM separately from the other EHB offered under the plan (e.g., the major medical) will comply as long as the OOPM for the separately-administered benefit does not exceed the PPACA maximum. Separately-administered non-major medical benefits that do not include an OOPM can continue not to impose any maximum for this first year of applicability. In either case, the nonenforcement policy requires that the plan’s major medical coverage comply with the PPACA OOPM.
In other words, separate administrators generally are not required to coordinate out-of-pocket costs in the first year, which means that a participant may incur out-of-pocket expenses exceeding the overall PPACA OOPM. After the first year (as of January 1, 2015 for calendar-year plans), these administrators may need to establish regular communication mechanisms to ensure that participants do not exceed the overall OOPM on EHB across all covered health benefits (major medical, prescription drug, mental health, etc.).
This nonenforcement policy from the FAQ went largely unnoticed in the first six months until the New York Times published an article in August 2013 that brought major media attention to the delay. The article revealed the administration’s internal reasoning for the FAQ: “A senior administration official, speaking on condition of anonymity to discuss internal deliberations, said: ‘We knew this was an important issue. We had to balance the interests of consumers with the concerns of health plan sponsors and carriers, which told us that their computer systems were not set up to aggregate all of a person’s out-of-pocket costs. They asked for more time to comply.’”
Perhaps because of the widespread media attention placed on this OOPM issue, FAQ XVIII addresses in more detail how it will apply when the combined limit takes full effect in 2015.
Takeaway #1: The Departments confirmed that the one-year nonenforcement policy will end, and the full OOPM requirement across all EHB will apply, as of the first plan year beginning on or after January 1, 2015.
Takeaway #2: The Departments also confirmed that the OOPM applies only to benefits that are EHB. As a reminder, grandfathered plans, self-funded plans, and large group insured plans are not required to cover EHB, but they are still prohibited from imposing lifetime or annual limits on EHB or imposing an OOPM on EHB in excess of the PPACA maximum. This FAQ confirms a previous CMS FAQ stating that these plans may use any state definition of EHB for these purposes, as well as the Departments’ intent to use its enforcement discretion to work with these types of plans that make a good faith effort to apply an authorized definition of EHB. (Note: At this point, many consider Utah’s definition of EHB to be the least restrictive.)
Takeaway #3: Plans may divide the annual OOPM across multiple categories of benefits rather than reconciling claims across multiple administrators, provided the combined amount of the separate OOPMs does not exceed the overall PPACA OOPM limit. For example, the plan could impose an employee-only OOPM on major medical of $5,000, and an employee-only OOPM on prescription drugs administered by a PBM of $1,350 (for a total of $6,350). This will avoid the need for constant claims communication between the plan’s different administrators.
Takeaway #4: Out-of-pocket expenses for out-of-network items and services are not required to count toward the plan’s OOPM.
Takeaway #5: Out-of-pocket costs for non-covered items or services (e.g., cosmetic services) are also not required to count toward the plan’s OOPM.
Which Types of Insured Expatriate Plans Are Not Subject to Much of PPACA?
In FAQ XIII, the Departments issued a nonenforcement policy for insured expatriate plans for many PPACA provisions for plan years ending on or before December 31, 2015. The Departments have now clarified which types of insured expatriate plans qualify for this treatment.
Takeaway #1: An insured expatriate health plan must meet the following requirements to qualify for the transitional relief:
- It must be insured
- Enrollment must be limited to primary insureds for whom there is a good faith expectation that such individuals and any covered dependents will reside outside of their home country or outside of the U.S. for at least six months of a 12-month period,
- The applicable 12-month period can fall within a single plan year or across two consecutive plan years.
Takeaway #2: The Departments extended this transitional relief for expatriate health plans through plan years ending on or before December 31, 2016. For years after that date, the Departments intend to consider “narrowly tailored guidance…that takes into account the ability of such coverage to reasonably comply….”
What’s Up with Wellness Programs?
A lot, actually. Last year, the Departments issued new final regulations that made significant changes to the HIPAA nondiscrimination compliance requirements for wellness programs beginning first plan year on or after January 1, 2014, particularly in relation to the reasonable alternative standard rules for health-contingent programs.
Under the new regulations, participatory wellness programs continue to have far fewer rules that apply. Health-contingent programs, which are defined as programs that require an individual to satisfy a standard related to a health factor to obtain a reward, are now divided into two sub-categories: activity-only programs and outcome-based programs. Different rules apply to each type of wellness program. See our July 2013 newsletter for a detailed analysis of these new requirements.
FAQ XVIII clarifies new questions raised by the final wellness program regulations.
Takeaway #1: The final regulations retain the requirement that individuals eligible for the wellness program have the opportunity to qualify for any reward at least once per year. The FAQ offers an example of a program that charges a tobacco premium surcharge but also provides an opportunity to avoid the surcharge if, at the time of enrollment or annual enrollment, the participant agrees to participate in a tobacco cessation program. In the example, the participant (a smoker) initially declines to participate in the tobacco cessation program, but later joins in the middle of the plan year. The Departments confirm that the plan is not required to provide the opportunity to avoid the surcharge or provide another reward to the participant for that plan year because the plan offered a reasonable opportunity to enroll in the tobacco cessation program and qualify for the program reward (i.e., avoiding the surcharge) at the beginning of the plan year.
Takeaway #2: In many cases, health-contingent programs must offer participants a reasonable alternative standard to qualify for the reward, including where a physician states that a program standard is not medically appropriate for the participant. In this case, the reasonable alternative standard must accommodate the recommendations of the physician with regard to medical appropriateness. The FAQ clarifies that the plan still has “a say” in the exact reasonable alternative standard that will apply. For example, if the physician recommends a weight reduction program, the plan may consider the many different weight reduction programs that may be reasonable for this purpose, and the participant may consult with the plan in this process.
Takeaway #3: The final regulations provide sample language for satisfying the requirement to notify participants of the availability of a reasonable alternative standard. The FAQs confirm that plans may modify the sample language to reflect the details of their wellness programs, provided the notice includes all of the required content specified in the regulations (generally that a reasonable alternative standard is available for health-contingent programs, contact information for obtaining one, and a statement that the program will accommodate a physician’s recommendations).
Reminder: Employer Mandate Delay to 2015 Still May Require Action in 2014
As described in our July 2013 Special Alert, IRS Notice 2013-45 officially delayed enforcement of PPACA’s employer mandate (also commonly referred to as “play or pay,” or “employer shared responsibility”) until 2015. This means that in 2014, applicable large employers are not subject to any excise tax penalties under IRC section 4980H for failure to offer minimum essential coverage to full-time employees (employees who average at least 30 hours of service per week) and their children that is both affordable and minimum value. See our January 2013 Special Alert for details on these compliance requirements.
However, employers that intend to utilize the look-back measurement safe harbor to determine employees’ full-time status are likely currently in a measurement period right now. The results of this measurement period will be used to determine whether the employee averages 30 hours of service per week, and thereby whether the employee will be considered a full-time employee for purposes of the first stability period beginning in 2015. Accordingly, even though the potential liability will not apply until 2015, many employers need to take action now to ensure proper recordkeeping of employees’ hours of service during the 2014 measurement period. Please contact us if you have any questions about this process.