|
December 28‚ 2010
Departments of Labor and Health and Human Services
Issue Joint Guidance under the Affordable Care Act and MHPAEA
By Alden Bianchi
On December 23, 2010, the Departments of Labor and Health and
Human Services (the “Departments”) issued helpful new guidance under both
the Patient Protection and Affordable Care Act of 2010, as amended (the
“Affordable Care Act”) and the Paul Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act of 2008 (MHPAEA). The guidance—which
is in the form of Frequently Asked Questions (FAQs)—is the fifth in a
series of FAQs issued on the Department of Labor’s website.1 While the prior FAQs were limited to
issues arising under the Affordable Care Act, this FAQ also tackles
questions under MHPAEA. This client alert summarizes the important features
of this latest guidance, which is referred to below as the “FAQ.”
Affordable Care
Act
Value-Based Insurance
Design in Connection with Preventive Care Benefits
Public Health Service Act (PHSA) section 2713, as added by
the Affordable Care Act, generally requires non-grandfathered group health
plans and individual health insurance policies and contracts to provide
coverage for recommended preventive services without cost sharing. This
requirement is the subject of an interim final rule issued July 19, 2010,
which, among other things, generally encourages plans to apply reasonable
medical management techniques. The FAQ gives plans the green light to adopt
value-based insurance designs (VBIDs), i.e., “health plan designs that
provide incentives for enrollees to utilize higher-value and/or
higher-quality services or venues of care.”
The FAQ cites with approval the following VBID: A group
health plan that imposes no copayment for colorectal cancer preventive
services when performed in an in-network ambulatory surgery center may
impose a copayment on the same services when provided at an in-network
outpatient hospital setting, provided the plan accommodates any individuals
for whom it would be medically inappropriate to have the preventive service
provided in the ambulatory setting (as determined by the attending
provider) by waiving the otherwise applicable copayment for the preventive
services provided in a hospital.
Automatic
Enrollment
Under an amendment to the Fair Labor Standards Act (FLSA),
the Affordable Care Act requires employers with more than 200 full-time
employees to automatically enroll new full-time employees and continue
enrollment of current employees in the employer’s health benefits plans.
There is no effective date for this provision, which usually means that the
provision is effective on enactment. But the law also requires that this
rule will be applied “[i]n accordance with
regulations promulgated by the Secretary [of Labor].” Most practitioners
assumed that the rule would not take effect until the Departments issued
the rules that the statute envisioned.
The Departments used the FAQ to advise that rulemaking under
this provision has been delegated to the Departments’ Employee Benefits
Security Administration (EBSA). More to the point (at least from the
perspective of employers and their advisors), the FAQ confirms that
employers are not required to comply with the automatic enrollment
requirements until regulations are issued. The Departments intend to issue
this regulation by 2014.
Disclosure
under PHS Act Section 2715(d)(4)
PHSA section 2715 as added by the Affordable Care Act
requires group health plans to provide a summary of benefits and coverage
explanation that “accurately describes the benefits and coverage under the
applicable plan.” As is the case with the automatic enrollment requirement,
no effective date was specified. But the law directs the Departments to
develop standards for use by group health plans and health insurance
issuers in compiling and providing a summary of benefits and coverage
explanation not later than 12 months after the date of enactment. This FAQ
clarifies that “group health plans and health insurance issuers are not
required to comply with the 60-day prior notice requirement for material
modifications” until regulations are issued. (The regulators have not yet
issued these standards.)
Dependent
Coverage of Children to Age 26
An interim final rule issued under PHSA section 2714 (as
added by the Affordable Care Act) clarifies that group health plans or
health insurance coverage providing dependent coverage of children cannot
vary based on age (except for children who are age 26 or older). The FAQ
posits (and approves of) a group health plan design feature under which the
plan charges a copayment for physician visits that do not constitute
preventive services. The plan charges this copayment to individuals age 19 and
over, including employees, spouses, and dependent children, but waives it
for those under age 19. According to the Departments, distinctions based
upon age that apply to all coverage under the plan, including coverage for
employees and spouses as well as dependent children, are permitted. Here,
the copayments charged to dependent children are the same as those charged
to employees and spouses. Therefore, this arrangement does not violate PHSA
section 2714.
Pre-existing Condition
Exclusions for Children in the Individual Market
The FAQ recognizes and expressly allows states to permit
carriers to screen applicants for eligibility for alternative coverage
options before offering a child-only policy, if allowed under applicable
state law. This is an important concession on the part of the Departments,
since it was feared that carriers would cease offering “child-only” polices
in the face of a complete bar on medical underwriting. The FAQ does impose
some limits, however. Screening is limited to circumstances in which all
child-only applicants, regardless of health status, undergo the same
screening process, and the alternative coverage options include options for
which healthy children would potentially be eligible, such as the
Children’s Health Insurance Program (CHIP). The screening process may not
be limited to programs targeted to individuals with a pre-existing
condition, such as the state’s high risk pool, nor may it be applied to
offers of dependent coverage for children (in light of the Affordable Care
Act requirement of offering coverage to dependents up to age 26).
Grandfathered
Health Plans
The grandfather rules continue to be a source of confusion.
This FAQ posits a plan term under which out-of-pocket spending limits
(e.g., a deductible or out-of-pocket limit but not copayment) are based on
a formula (a fixed percentage of an employee’s prior year compensation). If
the formula stays the same, but a change in earnings results in a change to
the out-of-pocket limits, will the plan relinquish grandfather status?
“No,” say the Departments. If a plan or coverage has a fixed-amount
cost-sharing requirement other than a copayment that is based on a
percentage-of-compensation formula, that cost-sharing arrangement will not
cause the plan or coverage to cease to be a grandfathered health plan as
long as the formula remains the same as that which was in effect on March
23, 2010.
The Mental
Health Parity and Addiction Equity Act of 2008
Generally, MHPAEA requires that the financial requirements
and treatment limitations imposed on mental health and substance use
disorder benefits under the group health plans of all employers (other than
“small employers”) cannot be more restrictive than the predominant
financial requirements and treatment limitations that apply to
substantially all medical and surgical benefits. The FAQ addresses the
following questions under MHPAEA:
How is “Small
Employer” Defined?
For nonfederal governmental plans, the Affordable Care Act
amended the PHSA to define a “small employer” as one that has 100 or fewer
employees. The FAQ explains that the definition of “small employer” under
the Employee Retirement Income Security Act (ERISA)—i.e., an employer with
50 or fewer employees—has not changed. Therefore, group health plans of
employers with 50 or fewer employees continue to be exempt from MHPAEA’s
requirements.
Access to
Medical Necessity Determinations/Medical Necessity Standards
The FAQ notes that, under MHPAEA and its implementing
regulations, the criteria for medical necessity determinations made under a
plan or health insurance coverage with respect to mental health or
substance use disorder benefits must be made available by the plan
administrator or health insurance issuer to any current or potential participant,
beneficiary, or contracting provider upon request. Similarly, ERISA
requires plan administrators to provide copies of plan documents,2 which
include information on the medical necessity criteria for both
medical/surgical benefits and mental health/substance use disorder
benefits. (Since these rules are well-settled under current law, this FAQ
appears to be intended to provide claimants with ready access to applicable
law.)
MHPAEA
Increased Cost Exemption
MHPAEA contains an increased cost exemption that is available
for plans that make changes to comply with the law and incur an increased
cost of at least 2% in the first year that MHPAEA applies to the plan
(i.e., the first plan year beginning after October 3, 2009) or at least 1%
in any subsequent plan year (generally, plan years beginning after October
3, 2010). Interim final regulations implementing MHPAEA did not provide
guidance for implementing the increased cost exemption. This FAQ fleshes
out an interim enforcement safe harbor under which a plan that has incurred
an increased cost of 2% during its first year of compliance can obtain an
exemption for the second plan year by following the exemption procedures
described in the Departments’ 1997 MHPA regulations, with some minor
modifications.
Non-Discrimination
Based on a Health Factor and Wellness Programs
The FAQ includes a surprisingly comprehensive discussion of
Health Insurance Portability and Affordability Act (HIPAA) rules
prohibiting discrimination in eligibility, benefits, or premiums based on a
health factor and the accompanying exception for certain “wellness
programs” under a final regulation issued in 2006. The final regulations
generally divide wellness programs into two categories.
1.
First, programs that do not require an individual to meet a standard
related to a health factor in order to obtain a reward are not considered
to discriminate under the HIPAA nondiscrimination regulations and,
therefore, are permissible. The FAQ refers to these as “participatory
wellness programs.” (Examples include a fitness center reimbursement
program, a diagnostic testing program that does not base rewards on test
outcomes, a program that waives cost-sharing for prenatal or well-baby
visits, a program that reimburses employees for the cost of smoking
cessation aids regardless of whether the employee quits smoking, and a
program that provides rewards for attending health education seminars.)
2.
The second category of wellness programs consists of programs that
require individuals to satisfy a standard related to a health factor in
order to obtain a reward. The FAQ calls these “health-contingent wellness
programs.” (Examples include a program that requires an individual to
obtain or maintain a certain health outcome in order to obtain a reward, such
as being a non-smoker, attaining certain results on biometric screenings,
or exercising a certain amount.) Health-contingent wellness programs must
include the following safeguards:
· The
total reward for the wellness programs offered by a plan sponsor must not
exceed 20% of the total cost of employee-only coverage under the plan.
· The
program must be reasonably designed to promote health or prevent disease.
· The
program must give eligible individuals an opportunity to qualify for the
reward at least once per year.
· The
reward must be available to all similarly situated individuals. For this
purpose, a reasonable alternative standard (or waiver of the original standard)
must be made available to individuals for whom it is unreasonably difficult
due to a medical condition to satisfy the original standard during that
period (or for whom a health factor makes it unreasonably difficult or
medically inadvisable to try to satisfy the original standard).
· In
all plan materials describing the terms of the program, the availability of
a reasonable alternative standard (or waiver of the original standard) must
be disclosed.
Effective in 2010, the Affordable Care Act largely
incorporates the provisions of the Departments’ joint final regulations
with a few clarifications; it also changes the maximum reward that can be
provided under a health-contingent wellness program from 20% to 30%.
The Departments clarified the following items:
Scope of the
Wellness Program Rules
Not all “wellness programs” are subject to the HIPAA wellness
program rules. Recognizing that “employers offer a wide range of programs
to promote health and prevent disease,” the Departments said that “a
wellness program is subject to the HIPAA nondiscrimination rules only if it
is, or is part of, a group health plan.” Therefore, for example, a program
that provides or subsidizes healthier food choices in the employee
cafeteria, provides pedometers to encourage employee walking and exercise,
pays for gym memberships, or bans smoking on employer facilities and
campuses is not a “wellness program” for HIPAA purposes. These programs may
be covered by other federal or state nondiscrimination laws, but they are
not subject to the HIPAA nondiscrimination regulations.
Premium
Discounts that Exceed 20%
The rule limiting the amount of the reward for
health-contingent wellness programs to 20% of the cost of coverage applies
only to health-contingent wellness programs. Therefore, a group health plan
may provide an annual premium discount of 50% of the cost of employee-only
coverage to participants who adhere to a wellness program which consists of
attending a monthly health seminar.
Health-contingent
Wellness Programs Limits
Wellness program based on a health factor (e.g., achieving a
cholesterol count of 200 or lower) are health-contingent wellness programs,
which are subject to the HIPAA nondiscrimination regulations, including the
five criteria described above. Thus, the program must be available to all
similarly situated individuals and provide a reasonable alternative
standard, and the reward must be limited to no more than 20% of the total
cost of coverage. For example, a group health plan that gives an annual premium
discount of 20% of the cost of employee-only coverage to participants who
achieve a cholesterol count of 200 or lower satisfies this rule, provided
that if it is unreasonably difficult or medically inadvisable to achieve
the targeted cholesterol count within a 60-day period, the plan will make
available a reasonable alternative standard that takes the relevant medical
condition into account.
Combined
Participatory Wellness Program and Health-contingent Wellness Program
Plans may maintain both participatory wellness programs and
health-contingent wellness programs, provided that the reward under the
health-contingent wellness component is limited to 20% of the cost of
coverage and the component otherwise satisfies the five factors described
above.
Conclusion
As is the case with the previous four FAQs, this most recent
installment is both welcome and useful. The clarifications on automatic
enrollment and the effective dates of benefits summaries are particularly
important. The positions taken in the FAQs on these items reflect what many
thought to be the rules. Having official word, however (even if only
in sub-regulatory guidance), provides an important measure of comfort. The
MHPAEA clarifications appear to have a different purpose. Anecdotal
evidence (and, to a much more limited extent, our own experience) indicates
that compliance with these rules was “spotty” at best. The Departments
appear to have chosen this vehicle to call attention to the rules in a
format that is likely to attract widespread attention.
* * *
Click here to view Mintz Levin’s Employee Benefits
attorneys.
1 Click here for
a copy. The previous FAQs were issued on September 20,
2010, October 8, 2010, October 12, 2010, and October 29, 2010.
2 ERISA § 104(b); 29 CFR 2520.104b-3.
|
