As mentioned in a previous alert, the Patient Protection and Affordable Care Act (PPACA), signed into law on March 23, 2010, as modified by the Health Care and Education Reconciliation Act (“Reconciliation Act,” and combined, the “Health Care Act”) prohibited group health plans and insurers from imposing preexisting condition exclusions, annual and lifetime dollar limits on benefits, and from rescinding coverage retroactively. The Health Care Act also imposed additional mandates related to preventive care. The Departments of Labor, Health and Human Services, and Treasury issued interim final regulations relating to these rules last June. The new rules are effective for the first plan year beginning on or after September 23, 2010. For calendar-year plans, the following significant changes will go into effect on January 1, 2011.
Preexisting Condition Exclusions
Group health plans, including grandfathered plans, may not impose preexisting condition exclusions for any individual under age 19. In other words, if a condition is covered, it must be covered without consideration of any prior diagnoses or prior or existing treatment of the condition.
Lifetime and Annual Dollar Limits on Benefits
Group health plans, including grandfathered plans, may not establish any lifetime limit on the dollar amount of essential health benefits, and must not set annual limits below a specified dollar limit.
Individuals who were dropped from coverage once they reached their lifetime limit but who are still otherwise eligible to participate, must be notified about this change and be afforded an opportunity to re-enroll. Both notice and opportunity to re-enroll must be provided no later than the first day of the first plan year beginning on or after September 23, 2010.
The prohibition on annual limits will be phased-in over a period of three years. Specifically, for plan years beginning on or after September 23, 2010, annual limits may not be lower than $750,000.
Group health plans, including grandfathered plans, may not cancel or terminate coverage retroactively. However, discontinuance of coverage on a prospective basis is not a rescission and is permitted. Further, cancellations related to a failure to pay required premiums on time (even if retroactive) are not considered rescissions. Finally, coverage may be rescinded in cases of fraud or intentional misrepresentation of material fact.
There are also new rules aimed at patient protection. Only non-grandfathered plans will be required to follow these rules.
Choice of Health Care Professionals
Group health plans providing for the designation of a primary care provider (PCP) must allow participants to designate any available participating PCP. Pediatricians may be designated as the PCP for children. Further, OB/GYN providers must be treated as a PCP for such services, and preauthorization or referrals may not be required.
Emergency care coverage, if provided, must not be subject to prior approval regardless of whether it is in-network or out-of-network. Further, emergency services provided out-of-network cannot be subject to more restrictive requirements or limitations (e.g., co-pays, coinsurance).
Finally, non-grandfathered plans must provide certain preventive services without imposing any cost-sharing. As a result, no deductibles, co-pays, co-insurance, or other cost-sharing may be imposed on such services. However, out-of-network restrictions can still be imposed by the plan with respect to preventive care.
For employers with calendar-year plans, the time is now to prepare for these changes. For employers with plan years beginning in October, November or December, the need to consider these issues is even more urgent.
The text of the regulations and related information may be found here.