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SHRM: New Frequently Asked Questions on Health Care Reform Released
Tuesday, October 26th, 2010
Original Post: Society for Human Resource Managers (SHRM) Author: Allen Smith, J.D., is SHRM’s manager of workplace law content
On Sept. 20, 2010, the U.S. Departments of Labor (DOL), Health and Human Services (HHS) and Treasury issued new frequently asked questions on the Patient Protection and Affordable Care Act and grandfathered health plans, internal appeals and external review, coverage of children, out-of-network emergency services and highly compensated employees.
Grandfathered Health Plans
Some issuers commented that they do not always have the information needed to know whether or when an employer plan sponsor changes its rate of contribution toward the cost of group health plan coverage.
One of the frequently asked questions noted that the interim final regulations generally provide that a group health plan or health insurance coverage will stop being a grandfathered health plan if the employer decreases its contribution rate by more than 5 percentage points below the contribution rate on March 23, 2010.
What steps should issuers and plan sponsors take to communicate regarding changes to the plan sponsor’s contribution rate? The departments have determined that until the issuance of final regulations, they will not treat an insured group health plan that is grandfathered as having ceased to be a grandfathered plan based on a change in the employer contribution rate if the employer plan sponsor and issuer take the following steps:
Upon renewal, an issuer requires a plan sponsor to make a representation regarding its contribution rate for the plan year covered by the renewal, as well as its contribution rate on March 23, 2010.
The issuer’s policies, certificates or contracts of insurance disclose prominently that plan sponsors are required to notify the issuer if the contribution rate changes at any point during the plan year.
For policies renewed prior to Jan. 1, 2011, issuers should take these steps no later than Jan. 1, 2011. This relief will no longer apply as of the earlier of the first date on which the issuer knows that there has been at least a 5-percentage-point reduction or the first date on which the plan no longer qualifies for grandfathered status without regard to the 5-percentage-point reduction.
Another question asked whether the departments will change the current rules so that a grandfathered group health plan that changes carriers does not relinquish its status as a grandfathered health plan.
The departments expect that soon they will address the circumstances where grandfathered group health plans may change carriers without relinquishing their status as grandfathered health plans, the agencies stated.
Internal Appeals and External Review
What if a plan already provided an external review process before the reform law was enacted? Could the existing external review process be deemed to comply with Public Health Service Act Section 2719(b)?
If a plan is grandfathered, the new external review provisions do not apply, the agencies answered. But if a plan is not grandfathered and is insured, the departments have provided transitional relief under which plans can use existing state external processes in one of the states in which they operate to comply.
If a plan is not grandfathered and is self-insured, there is a safe harbor as outlined in Technical Release 2010-01. If the plan complies with one of the methods set forth in the release, the Department of Labor and the Internal Revenue Service (IRS) will not take any enforcement action with respect to Public Health Service Act Section 2719(b) during the transition period.
Coverage of Children
A plan or issuer does not fail to satisfy the requirements of Public Health Service Act Section 2714 because the plan limits health coverage for children until the child turns 26 to those children who are described in Section 152(f)(1) of the Code, another question and answer states. Section 152(f)(1) defines children to include only sons, daughters, stepchildren, adopted children and foster children. For an individual not described in Code Section 152(f), such as a grandchild or niece, a plan may impose additional conditions on eligibility for health coverage, such as a condition that the individual be a dependent for income tax purposes.
Out-of-Network Emergency Services
Another question noted that Section 2719A of the Public Health Service Act states that if a group health plan or health insurance coverage provides any benefits for emergency services, the plan or issuer must cover emergency services without regard to whether a particular health care provider is an in-network provider and generally cannot impose any copayment or coinsurance that is greater than what would be imposed if services were provided in network. But the statute does not require plans or issuers to cover amounts that out-of-network providers may “balance bill.” Accordingly, the interim final regulations under Section 2719A set forth minimum payment standards to ensure that a plan or issuer does not pay an unreasonably low amount to an out-of-network emergency service provider who, in turn, could balance bill the patient.
Are the minimum payment standards intended to apply where state law prohibits balance billing, one question asked. No, the departments answered, saying that the minimum payment standards were developed to protect patients from being financially penalized for obtaining emergency services on an out-of-network basis. If a state law prohibits balance billing, plans and issuers do not have to satisfy the minimum payments set forth in the regulations.
Highly Compensated Individuals
Another question asked whether the departments plan to issue any guidance on Public Health Service Act Section 2716, which prohibits discrimination in favor of highly compensated individuals in insured group health plans.
Yes, the departments said, noting that on Sept. 20, 2010, the IRS released Notice 2010-63, to be published in Internal Revenue Bulletin 2010-41, Oct. 12, 2010. The notice provides that an insured group health plan that fails to comply with the nondiscrimination requirements of Code Section 105(h) pursuant to Public Health Service Act Section 2716 is subject to an excise tax of $100 per day per individual discriminated against for each day the plan does not comply. Other remedies include a civil action to enjoin a noncompliant act or for equitable relief under Part 7 of the Employee Retirement Income Security Act and civil penalties of $100 per day per individual discriminated against for each day the plan does not comply.
The IRS invited comment on what additional guidance relating to the application of Section 105(h) would be helpful for insured group health plans. Comments are due Nov. 4, 2010, and may be sent to Comments@irscounsel.treas.gov with “Notice 2010-63” in the subject line.
Allen Smith, J.D., is SHRM’s manager of workplace law content.
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