A series of agency Q&As resolves a few questions relating to complying with federal health care reform, such as correctly counting participants’ out-of-pocket expenditures; wellness program reward administration; and the status of “carved-out” benefits.
In latest set of Frequently Asked Questions, the U.S. Departments of Labor, Health and Human Services and the Treasury provide some answers and promise they will be working on clear-cut rules that may help in the future.
Out-of-pocket Costs
Starting in 2014 plan or policy years, out-of-pocket costs must be limited to $6,350 for self-only coverage and $12,700 for self-plus or family coverage, to comply with Section 1302(c) of the Affordable Care Act.
The tricky part is when the benefits are spread among two or more benefits administrators; for example, between major medical coverage and a pharmacy benefits manager.
For the first year of implementation (that is, the plan year beginning on or after Jan. 1, 2014), the annual limitation on out-of-pocket costs will be satisfied if the major medical coverage complies with the out-of-pocket limits; and if the carved-out benefit also does not exceed the out-of-pocket maximum, the agencies stipulated in question 2 of FAQ series XII.
But after that first year, starting in 2015 plan and policy years, plans must observe reform’s out-of-pocket limits on all essential health benefits even if they are spread over more than one benefits administrator, they said in the current FAQ.
To do this, plans and insurers may use different out-of-pocket limits for different benefit categories, provided that the total of all out-of-pocket limits for all EHBs combined does not exceed Section 1302(c)’s limits for that year (the limits are indexed for medical inflation).
Of course, some components of an EHB may be experimental, unproven, cosmetic or dangerous, and plans retain the right to restrict those services. Plans’ interpretations of which services fall in and which fall out of the EHB definition will be respected if plans and insurers use definitions aligned with those of the U.S. Department of Health and Human Services. HHS will be working with plans on aligning such definitions, the agencies said.
Wellness Incentives
The FAQs, published on EBSA’s website, addressed some questions that have been raised on the final HIPAA/ACA wellness program rules since their issuance in June 2013.
If a participant is given a chance to enroll in a tobacco cessation program at the beginning of the plan year and declines, the plan may deny that participant his or her reward for wellness program participation (for example avoiding the tobacco premium surcharge) even if he or she enrolled in the cessation program in the middle of the year. Plans may give participants another chance to avoid the tobacco premium surcharge in the event of mid-year enrollments, but they do not have to do so, one FAQ says.
If a participant’s physician says a plan’s outcome-based wellness incentive is medically inappropriate, the agency notes in another FAQ, the plan must provide the same reward if the individual satisfies a reasonable alternative standard, as suggested by his or her physician — even if the alternative is an activity-only program not based on a health outcome. However, the agencies suggest, if the physician recommends a weight reduction program, the plan still has a say in choosing the program, because many different ones could be reasonable for this purpose.
The final rules included sample language for notifying participants that a reasonable alternative standard is available, but plans may modify this language to reflect the details of their wellness programs as long as their notice includes all the required content, the agencies added.
Fixed Indemnity Insurance
Fixed indemnity insurance provided by plans is an excepted benefit under government rules, and it is generally exempt from HIPAA’s portability requirements and the ACA’s creditable coverage rules. But in order for a fixed indemnity policy to be considered an excepted benefit, it must pay on a per-period basis, and not on a per-service basis, the agencies said in question 7 of FAQ series XI.
But even if a fixed indemnity plan pays on a per-service basis, it still might qualify as an excepted benefit. It can do so by qualifying as supplemental to major medical coverage. It can do this by meeting the following conditions.
- it is sold only to individuals who have minimum essential health coverage through the plan;
- there is no coordination between the provision of benefits and an exclusion of benefits under any other health coverage;
- the benefits are paid in a fixed dollar amount regardless of the amount of expenses incurred and without regard to the amount of benefits provided by any other health coverage; and
- a notice is displayed prominently in plan documents that the coverage does not meet the definition of minimum essential coverage and by itself, will not satisfy health care reform’s individual mandate.
HHS needs to go through formal rulemaking to implement this safe harbor. Until then, it will treat fixed indemnity coverage as an excepted benefit if it meets the four conditions above.
For more information on health care reform’s employer mandates, go to Section 410 of The New Health Care Reform Law: What Employers Need to Know.