By Tamara S. Killion
Groom Law Group, Chartered
On March 23, 2010, President Barack Obama signed the Patient Protection and Affordable Care Act into law. Among other things, the Act dramatically changes health insurance coverage, including employer-provided health insurance and employer-sponsored group health plans (together, “group health plans”).
The law is complex and has many important provisions. Below, we briefly summarize a few key provisions of the Act that are effective for plan years beginning on or after September 23, 2010.
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Special Issue: Grandfathered Plans
Generally, the Act does not require individuals who like the insurance coverage they have now to obtain different coverage. For example, if an employer offered a health plan on March 23, 2010, as a general matter, that plan may continue to provide the same benefits that it provided before the Act was passed and would not be required to offer some of the additional benefits or meet some of the conditions that new plans offered after March 23 must meet. This provision is referred to as the “grandfather” clause, and plans that fall under this clause are “grandfathered health plans.”
Employers should note, however, that even grandfathered health plans are required to comply with many new requirements.
Immediate Changes to Group Health Plans
Prohibition on rescissions. Group health plans (including grandfathered health plans) may not rescind an individual’s health insurance once the individual is enrolled unless the individual has intentionally misrepresented material facts related to the coverage or has otherwise obtained the insurance fraudulently. Rescission means the retroactive termination of coverage. However, a retroactive termination of coverage for failure to pay the premium is not a rescission. Employers should be particularly careful when auditing dependent coverage to ensure they do not run afoul of the new rescission rule.
Lifetime and annual coverage limits. The Act prohibits group health plans (including grandfathered health plans) from establishing lifetime dollar limits on the “essential” benefits provided by the plan. The U.S. Department of Health and Human Services (HHS) will determine precisely which benefits are considered essential, but the Act lists the following categories that must be considered essential benefits:
- ambulatory patient services;
- emergency services;
- hospitalization;
- maternity and newborn care;
- mental health and substance abuse services;
- prescription drugs;
- rehabilitative and habilitative services and devices;
- laboratory services;
- preventive and wellness services; and
- pediatric services, including oral and vision care.
Annual limits are treated differently than lifetime limits. Until 2014, group health plans may place “restricted” annual limits on the dollar amount of coverage for essential benefits. For plan years beginning on or after September 23, 2010, a group health plan may place an annual limit of $750,000 on essential health benefits.
Lifetime and annual limits may continue for benefits that are not “essential,” provided that such limits are permitted under state and federal law. HHS has created a “waiver” program for plans; if approved, a plan may receive a waiver from the restricted annual limits.
Extended coverage for dependents. The Act does not require group plans to cover dependents. However, if a group health plan (including grandfathered health plans) provides coverage for dependents, it must continue that coverage for adult children until the age of 26 — even if the child is not living with the parent, is not in school, or is married. In addition, plans may not treat covered children differently based on age (unless the child is over age 26). For example, a plan may not impose a higher premium for adult child coverage than for coverage of children under 18.
There is a special rule for grandfathered group health plans. For plan years before January 1, 2014, grandfathered group health plans are not required to extend coverage if the child is eligible to enroll in another employer-sponsored health plan (e.g., if the child is eligible for coverage from his or her employer).
Prohibition of preexisting condition exclusions for dependents under age 19. Group health plans (including grandfathered health plans) will eventually be prohibited from excluding coverage of preexisting conditions for all participants, but preexisting condition exclusions for dependents under the age of 19 are prohibited beginning with plan years that start on or after September 23, 2010.
Preventive services. Nongrandfathered group health plans must cover preventive health services and may not require participants to share in the costs of such coverage. This means that plans may not require copayments, coinsurance, or the satisfaction of a deductible before the plan pays for health benefits that meet the definition of preventive coverage. Employers should visit www.healthcare.gov for a list of preventive services.
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Patient protections. The Act provides a number of rights to participants of nongrandfathered group health plans termed “patient protections.” Emergency care, designation of primary care providers, and the provision of obstetrical and gynecological care all have certain conditions with which nongrandfathered group health plans must comply. Employers should note that the patient protection provisions may require new notices to be provided to employees.
Internal and external appeals. Nongrandfathered group health plans must have both an internal and external appeals process. Group health plans must comply with the U.S. Department of Labor (DOL) claims regulation requirements (already applicable to group health plans); additional requirements, including expanded notice requirements, have also been added. The DOL has released guidance on the required external review processes, and plans should note particularly the requirement that they contract with at least three independent review organizations for external review assignments and must rotate claims or otherwise ensure unbiased methods of selection.
The first step
September 23, 2010, is just the first step on the road to compliance with the Act. Additional insurance and benefit mandates, reporting and record-keeping requirements, and eventually, brand new insurance markets (Exchanges) will be implemented. The Act contains many complicated provisions, many of which will require guidance from federal regulatory agencies to properly execute. Employers should be aware that as a result, the precise requirements under the Act will continue to evolve for some time.
Tamara S. Killion is an associate with Groom Law Group, Chartered, a Washington, D.C. firm, and her practice includes health and welfare and fiduciary responsibility practice areas. She is actively involved in health care reform, advising and educating clients on compliance. She also works with clients on employee benefit plans, including plan design, claims administration, and compliance with ERISA’s fiduciary responsibility provisions.
The health care “reform” should be repealed. Sorry, but this will make our care levels drop lower with costs rising higher. The layers of bureaucracy at which this article only hints, are causing free market reforms in many European countries. Bottom line-it is immoral for the Federal government to pass such a law.
Immoral? To try and provide healthcare? A strange way to characterize the move into the 21st century – finally the US has done it. I’m sure there will be difficulties and changes will need to be made to the law, but I have a feeling that future generations will look on this the same way we look on Social Security now (that was another change that conservatives were up in arms about, and now you can’t dare to touch the program). Plus, every European I’ve talked to is fairly happy with their health care, more so then the American’s I talk to, so I’m not sure where this draconian vision of European and Canadian health care is coming from. And, by the way, the federal gov’t is within it’s rights to pass such a law – talk to someone who knows the law.
No one can argue that there is a great need. If we do not get it right going out door, we will adjust it later. Be brave, innovative, and with pragmatic concern for all dream a better America.