On January 9, 2014, the Departments of Labor, Health and Human Services and Treasury jointly published a set of FAQs relating primarily to three areas:
- Cost sharing under the Affordable Care Act (ACA) (i.e., application of the annual limitation on out-of-pocket costs);
- Wellness programs; and
- What plans/coverages are subject to the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).
I address each below.
Cost Sharing Under the ACA
The FAQs generally address questions relating to what items and services can be excluded from the annual out-of-pocket maximum and how to determine the out-of-pocket maximum in 2014 and later years.
The FAQs make the following points.
- The annual limitation on out-of-pocket costs for plan or policy years beginning in 2014 is $6,350 (for self-only coverage) and $12,700 (for coverage other than self-only coverage). These amounts will be increased in future years, as described in ACA § 1302(c)(4).
- For the first plan year beginning on or after January 1, 2014 (the first year of applicability), a plan will be deemed to have satisfied the out-of-pocket maximum requirement if its major medical coverage out-of-pocket maximum is no greater than the maximum permitted under the ACA (i.e., $6,350/$12,700 for 2014) and any separate out-of-pocket maximum applicable to coverage other than major medical coverage does not separately exceed the ACA maximum. Thus, for the 2014 plan/policy year, a plan or policy could have a separate out-of-pocket maximum for an essential health benefit (such as prescription drugs) where the two out-of-pocket maximums combined would exceed the ACA maximum. However, this rule only applies to plans or insurers that use more than one service provider to administer benefits subject to the cost-sharing limit.
- For plan years beginning on or after January 1, 2015, all non-grandfathered group health plans must limit the out-of-pocket maximum on all essential health benefits (EHB) to no greater than the ACA maximum for that year. This can be accomplished in one of two ways:
- A combined out-of-pocket maximum for all EHB—i.e., all covered expenses incurred in obtaining EHB would count toward the out-of-pocket maximum, or
- Separate out-of-pocket maximums for different EHB (i.e., an out-of-pocket maximum for major medical benefits and an out-of-pocket maximum for prescription drugs, applied separately) where those out-of-pocket maximums combined do not exceed the ACA maximum.
- Items and services that are not related to EHB may be excluded from the out-of-pocket maximum.
- Out-of-pocket spending for out-of-network items and services does not have to be applied toward the annual out-of-pocket maximum.
- Note that HHS “strongly encourages” health insurance issuers offering qualified health plans on an exchange to count enrollees’ out-of-pocket expenses on services or items not required to be covered as EHBs, but which HHS has urged qualified health plan issuers to cover anyway (e.g., non-formulary drugs and, during the first 30 days of coverage, formulary drugs that typically require prior authorization) toward the out-of-pocket maximum.
- Out-of-pocket costs for non-covered services do not have to be applied toward the annual out-of-pocket maximum.
The FAQs provide some of the sub-regulatory guidance that was promised in the wellness program final regulations (78 Fed. Reg. 33158 (June 3, 2013)), making the following points.
- If a plan has offered an employee the chance to qualify for a reward in exchange for participating in a wellness program at the beginning of the plan year, it is not required to continue to offer that reward to an employee who initially declines to participate but later decides to participate mid-year. Rewards for employees in this situation may, however, be given and may be pro-rated for partial years of participation.
- The reasonable alternative standard offered to individuals who qualify must accommodate the recommendations of the individual’s personal physician with regard to medical appropriateness. Thus, a single reasonable alternative standard may not work for all wellness program participants.
- Sample language provided in the wellness program final regulations that plans may provide to notify individuals of the availability of a reasonable alternative standard to qualify for a reward may be modified as long as all of the content required under the final regulations is included.
Application of MHPAEA after the ACA
By its own terms, the MHPAEA was applicable to certain types of plans and coverages and not others. With the passage of the ACA and the requirement for certain plans and coverages to cover EHB, which include some mental health or substance use disorder services, a group of plans/coverages (namely, those that were required to cover EHB) became part of a universe of plans/coverages that were also, by default, required to comply with MHPAEA parity requirements. The FAQs clarify how the MHPAEA interacts with the EHB requirement with respect to individual and small group market coverage.
As summarized in the FAQs, the following plans/coverages must include coverage for mental health and substance use disorder benefits in compliance with the MHPAEA parity requirements:
- All non-grandfathered individual market coverage
- All non-grandfathered small group market coverage
Grandfathered individual market coverage may have to comply with MHPAEA parity requirements, if such plans/coverages elect to cover mental health or substance use disorder benefits.
Finally, because exempt from the MHPAEA and not required under the ACA to cover EHB, small group market coverage will never have to comply with the MHPAEA, regardless of whether it offers coverage for mental health or substance use disorder benefits.
In addition, the FAQs make the following ancillary points regarding MHPAEA compliance:
- Plans should refer to the interim final regulations (issued in February 2010) for plan or policy years beginning before July 1, 2014 and to the final regulations (issued in November 2013) for plan or policy years beginning on or after July 1, 2014.
- Non-grandfathered individual market and small group market coverage that is continuing in reliance on the HHS transitional policy that allows an exemption from certain ACA requirements for the plan or policy year beginning between January 1, 2014 and October 1, 2014 if the coverage would otherwise be terminated or cancelled if required to comply with the ACA, will be exempt from otherwise-applicable MHPAEA requirements while relying on this policy.
The FAQs also more briefly address: (1) how and when to incorporate changes in medical recommendations governing what is a preventive service, (2) the extent to which expatriate health plans are subject to the ACA, and (3) the requirements for fixed indemnity insurance to be considered an excepted benefit.