Friday, September 24, 2010

Insurers Critique Grandfather Provision, And Feds Provide Some Relief

The Department of Labor's Employee Benefits Security Administration (EBSA) will temporarily disregard certain changes in an insured group health plan's contribution rate which normally would cause the plan to lose its grandfathered plan status under health reform.

In newly released guidance (in the form of frequently asked questions (FAQ)) on implementing the Patient Protection and Affordable Care Act, EBSA addressed a variety of issues raised by employers and insurers, including insurers' concerns that they do not always have the information needed to know whether (or when) an employer plan sponsor changes its rate of contribution towards the cost of group health plan coverage.

This is important because the interim final regulations on grandfathered plans provide that a group health plan or health insurance coverage will cease to be a grandfathered health plan if the employer decreases its contribution rate towards the cost of coverage by more than 5 percentage points below the contribution rate on March 23, 2010.

According to EBSA, until the issuance of final regulations, an insured group health plan will not be treated as having ceased to be a grandfathered health plan immediately based on a change in the employer contribution rate if the employer plan sponsor and issuer take the following steps:

Upon renewal, an insurer requires a plan sponsor to disclose its contribution rate for the plan year covered by the renewal, as well as its contribution rate on March 23, 2010; and

The insurer's policies, certificates, or contracts of insurance disclose in a prominent and effective manner that plan sponsors must notify the insurer if the contribution rate changes at any point during the plan year.

For policies renewed prior to Jan. 1, 2011, insurers should take these steps no later than Jan. 1, 2011. If these steps are taken, an insured group health plan that is a grandfathered health plan will continue to be considered a grandfathered health plan.

Similar relief is available to multiemployer plans that do not know whether (or when) a contributing employer changes its contribution rate as a percentage of the cost of coverage.

The relief is terminated when the issuer knows that there has been at least a 5-percentage-point reduction.

Other Issues Raised

EBSA's new FAQs address a number of other issues in the Affordable Care Act, including these:

Grandfathered plans. Current rules state that grandfathered group health plan status is lost if the plan changes carriers. EBSA notes that implementing agencies will soon address the circumstances under which grandfathered group health plans may change carriers without relinquishing their status as grandfathered health plans.

External review. One of the standards set forth in a recent technical release on external claims reviews  requires self-insured plans to contract with at least three independent review organizations (IROs) and to rotate claims assignments among them (or to incorporate other independent, unbiased methods for selection of IROs, such as random selection). The FAQ noted that "a self-insured group health plan's failure to contract with at least three IROs does not mean that the plan has automatically violated PHSA Sec. 2719(b). Instead, a plan may demonstrate other steps taken to ensure that its external review process is independent and without bias."

EBSA also noted that the technical release does not require a plan to contract directly with any IRO: "Where a self-insured plan contracts with a TPA that, in turn, contracts with an IRO, the standards of the technical release can be satisfied in the same manner as if the plan had contracted directly. Of course, such a contract does not automatically relieve the plan from responsibility if there is a failure to provide an individual with external review. Moreover, fiduciaries of plans that are subject to ERISA have a duty to monitor the service providers to the plan."

In addition, the IRO is not required to be in the same state as the plan. Plans may contract with an IRO even if it is located in another state.

Dependent coverage of children. Plans may limits health coverage for children until the child turns 26 to only those children who are a son, daughter, stepson, stepdaughter, or an eligible foster child (IRC Sec. 152(f)(1)). For any other individual, 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. PHSA Sec. 2719A generally provides, among other things, that a group health plan must cover emergency services without regard to whether a particular health care provider is an in-network provider with respect to the services, and generally cannot impose any copayment or coinsurance that is greater than what would be imposed if services were provided in network. At the same time, the statute does not require plans to cover amounts that out-of-network providers may "balance bill." Accordingly, the interim final regulations under Sec. 2719A set forth minimum payment standards to ensure that a plan does not pay an unreasonably low amount to an out-of-network emergency service provider who, in turn, could simply balance bill the patient.

The EBSA FAQs noted that if a state law prohibits balance billing, plans are not required to satisfy the payment minimums set forth in the regulations. Similarly, if a plan is contractually responsible for any amount balance billed by an out-of-network emergency services provider, the plan is not required to satisfy the payment minimums. In both situations, however, patients must be provided with adequate and prominent notice of their lack of financial responsibility with respect to such amounts, to prevent inadvertent payment by the patient. Nonetheless, even if state law prohibits balance billing, the plan may not impose any copayment or coinsurance requirement that is higher than the copayment or coinsurance requirement that would apply if the services were provided in network.

For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform and other developments in employee benefits, just click here.

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