Health Care Law Update

January 9, 2013

pic-HealthCostsFive major health care regulations implementing the Patient Protection and Affordable Care Act (PPACA) were released during the holiday season by the Department of Health and Human Services (HHS), the Internal Revenue Service (IRS), the Department of Labor (DOL) and the Office of Personnel Management (OPM).  The regulations include rules overseeing: the essential health benefits package; insurance market reforms and rate review; wellness programs; the establishment of multi-state plans under the exchanges; and the employer penalty.

Essential Health Benefits Package

Beginning in 2014, all non-grandfathered health insurance coverage in the individual and small group markets will be required to cover essential health benefits (EHB), which include items and services in 10 statutory benefit categories, such as hospitalization, prescription drugs, and maternity and newborn care, and are equal in scope to a typical employer health plan. In addition to offering EHB, these health plans will meet specific actuarial values (AVs).  These AVs are labeled with various “metal levels” as follows:

  • 60 percent for a bronze plan,
  • 70 percent for a silver plan,
  • 80 percent for a gold plan, and
  • 90 percent for a platinum plan.

The metal levels are designed to assist consumers in comparing and selecting health plans by allowing a potential enrollee to compare the relative payment generosity of available plans.  These regulations detail how these calculations are to be made.

The EHB-benchmark plan would serve as a reference plan, reflecting both the scope of services and limits offered by a typical employer plan in that state.  The rule would require that a health insurance issuer that offers health insurance coverage in the individual or small group market, whether inside or outside of the Exchange, must ensure that such coverage offers the EHB package.  The rules propose that the state may select its base-benchmark plan from among four types of health plans. These are:

  1. The largest plan by enrollment in any of the three largest small group insurance products in the state’s small group market;
  2. Any of the largest three state employee health benefit plans by enrollment;
  3. Any of the largest three national Federal Employees Health Benefits Program (FEHBP) plan options by enrollment that are open to Federal employees; or
  4. The largest insured commercial non-Medicaid Health Maintenance Organization (HMO) operating in the state.

Formally titled, “Patient Protection and Affordable Care Act; Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation,” the rule was prposed by HHS.

This rule may be read here.  

Insurance Market Reforms and Rate Review

The PPACA establishes rules so that individuals and employers will be able to obtain coverage when it currently can be denied, by: continuing current guaranteed renewability rules; prohibiting the use of factors such as health status, medical history, gender, and industry of employment to set premium rates; limiting age rating; and prohibiting issuers from dividing up their insurance pools. These reforms are effective for plan years (group market) and policy years (individual market) starting on or after January 1, 2014.

The proposed rule provides details about how rates should be calculated for various permissible underwriting factors.  The permissible rating factors are: 1) whether the plan or coverage applies to an individual or family; 2) the rating area; 3) age, limited to a variation of 3:1 for adults; and 4) tobacco use, limited to a variation of 1.5:1.  The practice of “re-underwriting” also is prohibited. Re-underwriting refers to issuers increasing premiums at renewal for existing customers because they incurred claims or experienced worsening health during a policy year.  For purposes of family coverage, any premium variation for age and tobacco use must be applied to the portion of premium attributable to each family member.

With respect to adults ages 21 to 63, HHS has proposed one-year age bands so that consumers will experience steady, relatively small premium increases each year due to age.  The regulation includes a table that indicates the degree to which premiums may escalate with age.

Formally titled, “Patient Protection and Affordable Care Act; Health Insurance Market Rules; Rate Review,” this rule was proposed by HHS.

This rule may be read here.

Wellness Programs

These proposed regulations would increase the maximum permissible reward under a health-contingent wellness program offered in connection with a group health plan (and any related health insurance coverage) from 20 percent to 30 percent of the cost of coverage starting Jan. 1, 2014. The proposed regulations would further increase the maximum permissible reward to 50 percent for wellness programs designed to prevent or reduce tobacco use.

These proposed regulations would continue to divide wellness programs into two categories: “participatory wellness programs,” which are a majority of wellness programs, and “health contingent wellness programs.” Participatory wellness programs are programs that are made available to all similarly situated individuals and that either do not provide a reward or do not include any conditions for obtaining a reward that are based on an individual satisfying a standard that is related to a health factor. Contingent wellness programs would be more heavily regulated and will have to meet five tests to qualify.

This rule, formally titled: “Incentives for Nondiscriminatory Wellness Programs in Group Health Plans” was jointly proposed by the IRS, DOL and HHS.

This rule may be read here.

Establishment of Multi-State Plans Under the Exchanges

The PPACA directs OPM to implement the multi-state plan program (MSPP) in a manner similar to its contracting role with the Federal Employees Health Benefits Program (FEHBP). OPM has proposed requiring that MSPP issuers offer coverage in the state Small Business Health Options Programs (SHOPs) as well as in the individual Exchanges. A SHOP is effectively an on-line small employer health insurance structured market created by the PPACA.

The rule proposes to allow issuers to phase-in SHOP participation. OPM is seeking comments on this approach, including whether SHOP participation should be required from the outset or whether the SHOP phase-in period should be longer than three years.  Under the rule as proposed, MSPP issuers may offer coverage in the individual Exchanges and not in the SHOPs throughout the three year phase-in period, so long as the issuers provide OPM their plan for expanding coverage to the SHOPs in all states. NSBA has urged OPM to require MSPP coverage in the SHOPs immediately so that this potentially less expensive option is available to small businesses immediately.

This rule was proposed by OPM and is formally titled, “Patient Protection and Affordable Care Act; Establishment of the Multi-State Plan Program for the Affordable Insurance Exchanges”

This rule may be read here.

Employer Penalty

These regulations implement the PPACA employer penalty for “applicable large employers” that fail to offer to their full-time employees (and their dependents) the opportunity to enroll in “minimum essential coverage.”   It provides rules about how to determine the number of full-time employees an employer has and rules for calculating the employer penalty.  An “applicable large employer” with respect to a calendar year is an employer that employed an average of at least 50 full-time employees (taking into account FTEs).

NSBA is evaluating these regulations and will provide comments by the March 18 due date.

Formally titled, “Shared Responsibility for Employers Regarding Health Coverage,” this rule was proposed by the IRS.

This rule may be read here.