The Obama administration recently released three important proposed regulations under the Patient Protection and Affordable Care Act (the "ACA"). These proposed regulations, the highlights of which are discussed below, aim to:
- Govern wellness programs
- Implement rules promoting nondiscrimination in health coverage and insurance rate transparency
- Provide guidance regarding essential health benefits
The proposed regulations were published in the Federal Register November 26, 2012, and would be effective January 1, 2014. If you have any questions or comments regarding the proposed regulations or would like more detailed information, please contact the authors of this alert or the Reed Smith attorney who sent you this alert.
The issued proposed regulations on wellness programs under the ACA were issued by the Internal Revenue Service, Department of Labor, and Department of Health and Human Services ("HHS"). The proposed regulations are significantly the same as existing regulations, but include some changes. Comments on the proposed regulations are due by January 25, 2013.
As before, the proposed regulations provide for two categories of wellness programs: "participatory wellness programs" and "health contingent wellness programs." Participatory wellness programs are generally available to all similarly situated individuals and either do not provide a reward or do not condition a reward on a health factor. Health contingent wellness programs are wellness programs that do not satisfy the definition of a participatory wellness program, and as a result must satisfy certain conditions identified below to ensure that they are not discriminatory. The regulations maintain the five general requirements of a health contingent wellness program but with the following notable differences:
- Frequency. This was the only requirement not modified.
- Limited Reward Size. Increases the amount of rewards permitted under a health contingent wellness program from 20 percent to 30 percent of the total cost of employee-only coverage (employer and employee contributions) under the plan. The regulations go even further for programs designed to prevent or reduce tobacco use allowing for rewards equal to 50 percent of the total cost of employee-only coverage.
- Uniform Availability/Reasonable Alternative Standards. Provides that plans are required to pay for programs designed to satisfy the alternative standard and, where applicable, the alternative standard must reflect the recommendations of the employee’s own physician.
- Reasonably Designed to Promote Good Health. Adds the requirement that to the extent a wellness program is based on the results of a measurement, test, or screening relating to a health factor, the program must make available for any individual who did not meet the applicable standard an alternative method for satisfying the standard.
- Notice of Other Means to Qualify for the Reward. Provides sample language that plans are permitted to use to satisfy this requirement.
Nondiscrimination and Rate Transparency
HHS issued proposed regulations aimed at preventing discrimination against individuals with pre-existing conditions, and promoting transparency in rate increases. The proposed regulations implement the ACA’s policies related to fair health insurance premiums, guaranteed availability of health coverage, guaranteed renewability of health coverage, and risk pools, and define catastrophic plans. Comments on the proposed regulations are due by December 26, 2012.
- Fair Health Insurance Premiums. To standardize the calculation of health insurance rates, health insurance issuers operating in the individual and small group markets will only be permitted to use the following factors to calculate premiums: (i) whether the plan applies coverage to an individual or family, (ii) rating area, (iii) age, and (iv) tobacco use. Other factors, such as health status and pre-existing conditions, are prohibited.
- Guaranteed Availability of Health Coverage. Issuers offering non-grandfathered health insurance must offer coverage to, and accept, all individuals or employers in the state that apply for the coverage, with limited exceptions. Coverage cannot be denied because of a pre-existing condition. Coverage would be purchased during open enrollment and special enrollment periods.
- Guaranteed Renewability of Coverage. The right of consumers to renew coverage is protected; renewal cannot be refused based on health conditions.
- Single-Risk Pool. All premiums for non-grandfathered plans must be based on a single statewide risk pool for the health insurance issuer’s individual and small-employer markets, reducing the ability of insurance issuers to manipulate premiums based on impermissible factors.
- Catastrophic Plans. To qualify as a catastrophic plan, a plan must only provide coverage for people who cannot otherwise afford coverage or for individuals under the age of 30. A catastrophic plan must also provide coverage for the essential health benefits, but only after the deductible has been satisfied, and must cover recommended preventive services without cost sharing.
The proposed regulations also clarify the approach used to enforce ACA requirements and amend the standards for data collection for the insurance rate review program.
Essential Health Benefits and Affordable Coverage
The essential health benefits and affordable coverage regulations tackle three areas: the definition of essential health benefits, permitted cost sharing for individual and small group health plans, and guidance regarding the actuarial value of benefit plans.
- Essential Health Benefit. The ACA defines 10 categories of items and services that make up essential health benefits. Guidance released in December 2011, indicated essential health benefits would be defined further by reference to a benchmark plan selected for each state. The proposed regulations issued by HHS do not provide hoped-for guidance regarding the 10 categories of essential health benefits, but do identify how the benchmark plan for each state will be selected (the benchmark plan for each state can be found at the following link http://cciio.cms.gov/resources/data/ehb.html). The proposed regulations also provide guidance regarding the treatment of certain state-mandated benefits that do not otherwise qualify as essential health benefits.
- Cost-Sharing Limitations. The proposed regulations provides guidance regarding how carriers may satisfy two cost-sharing requirements that will be imposed on plans in the individual and small group health insurance market that provide essential health benefits: (i) the annual cost-sharing limitations and (ii) the annual deductible limits.
- Actuarial Value. A plan’s actuarial value is used to calculate consumers’ responsibility for the costs of covered benefits. Non-grandfathered plans must meet certain minimum actuarial value levels, which differ based on the level of the plan (i.e., 90 percent for platinum, 80 percent for gold, 70 percent for silver, and 60 percent for bronze). Actuarial value is calculated as a percentage of total average costs for covered benefits under a plan. HHS will provide an actuarial value calculator, which will be available online to the public.
The proposed regulations also establish standards for the accreditation of qualified health plans on federally facilitated exchanges, including a timeline for the accreditation requirement. In addition, the proposed regulations allow for entities to apply to be recognized as accrediting entities, in addition to the National Committee for Quality Assurance and URAC, which were recognized as accrediting entities in a concurrent Federal Register Notice. Comments on the proposed regulations are also due by December 26, 2012.