January 17, 2014 New FAQs Issued About the ACA and Mental Health Parity On January 9, 2014, the Departments of Labor, Health and Human Services (“HHS”), and the Treasury (collectively, the “Departments”) issued their eighteenth set of frequently-asked questions (“FAQs”) clarifying a few items with respect to the Affordable Care Act (“ACA”) and mental health parity. Briefly, the guidance:  Beginning with the 2015 plan year, permits non-grandfathered plans with multiple service providers to divide the annual limit on out-of pocket maximums across multiple categories of benefits rather than aggregate them.  Expands the definition of preventive care services to make available risk-reducing medications without cost sharing for women who are at an increased risk for breast cancer.  Provides additional clarification on wellness program, fixed indemnity benefits, and mental health parity requirements that apply to small, non-grandfathered group plans. This is further summarized below. LIMITATIONS ON COS T-S HARING Background Effective the first plan year that begins on or after January 1, 2014, all non-grandfathered group health plans must comply with annual cost-sharing limitations on out-of-pocket maximums (adjusted annually). For 2014, these limits are $6,350 for single coverage and $12,700 for family coverage. For 2015, these limits are $6,750 for single coverage and $13,500 for family coverage. This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance develops. USI does not provide legal or tax advice. For advice specific to your situation, please consult an attorney or other professional. Cost-sharing includes deductibles, coinsurance, copays, or similar charges, and any other expenditure required by the health plan which is a qualified medical expense with respect to any essential health benefits (“EHB”) offered under the plan. Cost sharing does not include premiums, balance billing amounts for non-network providers, or spending for non-covered services. The Departments created a safe harbor that applies only to the first plan year that begins on or after January 1, 2014. A group health plan that utilizes more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket maximums may satisfy this requirement in this first year only if the following two conditions are satisfied:  The plan complies with the requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage); and  To the extent the plan includes an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies with respect to prescription drug coverage), such out-of-pocket maximum does not exceed the prescribed threshold. New Guidance EHB and Out-of-Pocket Maximums. Because the above safe harbor expires after the 2014 plan year, the guidance reminds us that nongrandfathered group health plans and group health insurance must have an out-of-pocket maximum which limits overall out-of-pocket costs on all EHB for plan years beginning on or after January 1, 2015. To determine which benefits are EHB, the Departments will consider self-insured group health plans to have used a permissible definition of EHB if the definition is one that is 1 authorized by HHS, including any available benchmark option. Furthermore, the Departments note that they intend to use their enforcement discretion and work with self-insured plans that make a good faith effort to apply an authorized definition of EHB. Division of cost-sharing limit across multiple categories of benefits. Plans, such as those with multiple service providers, may divide the annual limit on out-of-pocket costs across multiple categories of benefits, rather than reconcile claims across multiple service providers, if the combined out-of-pocket maximum for the year does not exceed the applicable annual limit. For example, for 2015, a plan that provides self-only coverage could have an out-ofpocket limit on the major medical plan of $3,750 and an out-of-pocket limit on a separate pharmacy benefit of $3,000 for a combined out-of-pocket limit of $6,750. Network. The FAQs clarify that plans have the option of whether the out-of-pocket limit should include expenses incurred towards out-of-network items and services (including balance-billing amounts) and non-covered items or services such as cosmetic surgery. 1 See Frequently Asked Questions on Essential Health Benefits Bulletin, Question 10 (February 17, 2012), available at: www.cms.gov/CCIIO/Resources/Files/Downloads/ehb-faq-508.pdf COVERAGE OF P REVENTIVE S ERVICES Background A non-grandfathered group health plan must provide coverage for in-network preventive items and services recommended by the United States Preventive Services Task Force (“USPSTF”), as amended from time to time, and may not impose any cost-sharing requirements (such as a copayment, coinsurance, or deductible) with respect to those items or services. On September 24, 2013, the USPSTF revised its recommendation regarding medications for risk reduction of primary breast cancer in women as follows: The USPSTF recommends that clinicians engage in shared, informed decision-making with women who are at increased risk for breast cancer about medications to reduce their risk. For women who are at increased risk for breast cancer and at low risk for adverse medication effects, clinicians should offer to prescribe risk-reducing medications, such as tamoxifen or raloxifene. New Guidance Accordingly, for plan years beginning on or after September 24, 2014, non-grandfathered group health plans are required to cover such medications for applicable women without cost sharing, subject to reasonable medical management. WELLNES S P ROGRAMS Background On June 3, 2013, the Departments issued final regulations addressing rules applicable to wellness programs. In part, the rules: 1. Reiterated that the program must give individuals eligible for the program the opportunity to qualify for the reward under the program at least once per year; 2. Indicated that if an individual’s personal physician states that an outcomes-based wellness program’s standard is not medically appropriate for that individual, the plan or issuer must provide a reasonable alternative standard that accommodates the recommendations of the individual’s personal physician with regard to medical appropriateness; and 3. Provided sample language to satisfy notification requirements with respect to wellness programs. New Guidance Opportunity to qualify for the reward. FAQ-8 illustrates an example of when a plan sponsor would not be required to offer a reward for a smoking cessation program that a participant enters mid-year. Example A group health plan charges participants a tobacco premium surcharge but also provides an opportunity to avoid the surcharge if, at the time of enrollment or annual re-enrollment, the participant agrees to participate in (and subsequently completes within the plan year) a tobacco cessation educational program. A participant who is a tobacco user initially declines the opportunity to participate in the tobacco cessation program, but joins in the middle of the plan year. Is the plan required to provide the opportunity to avoid the surcharge or provide another reward to the individual for that plan year? No. As the participant is provided a reasonable opportunity to enroll in the tobacco cessation program at the beginning of the plan year and qualify for the reward under the program, the plan is not required to provide another opportunity to avoid the tobacco premium surcharge until renewal or reenrollment for coverage for the next plan year. Nothing prohibits the a plan or issuer from allowing rewards (including pro-rata rewards) for mid-year enrollment. Following recommendations of the plan’s medical professional. If an individual's personal physician states that the outcome-based wellness program is not medically appropriate for that individual and, for example, recommends a weight reduction program (an activity-only program) instead, the plan must provide a reasonable alternative standard that accommodates the recommendations of the individual's personal physician with regard to medical appropriateness. However, many different weight reduction programs may be reasonable for this purpose, and a participant should discuss different options with the plan; the plan can have input as to which program the plan participant will complete. Sample notices. Sample language provided by the Departments in the final regulations, including language specific to illustrated examples, may be modified to reflect details of a plan’s specific wellness program, provided all plan materials describing the terms of an activity-only wellness program, an outcomebased wellness program, and in any disclosure that an individual did not satisfy an initial outcomebased standard contain the following:  The availability of a reasonable alternative standard to qualify for the reward (and, if applicable, the possibility of a waiver of the otherwise applicable standard);  Contact information for obtaining a reasonable alternative standard; and  A statement that recommendations of an individual’s personal physician will be accommodated. If plan materials merely mention that such a program is available, without describing its terms, this disclosure is not required. FIXED INDEMNITY INS URANCE Background Fixed indemnity insurance provided under a group health plan meeting the conditions outlined in the Departments' regulations is an “excepted benefit.” As such, it is generally exempt from many of the requirements under health care reform. A previous FAQ provided guidance that, in order for a fixed indemnity policy to be considered an excepted benefit, it must pay on a per-period basis, and that a fixed indemnity policy that pays on a per-service basis is not an excepted benefit. New Guidance New guidance points out that insurance labeled as fixed indemnity insurance that provides benefits 2 other than on a per-period basis may qualify instead as “supplemental excepted benefits.” EXP ATRIATE HEALTH P LANS Background The Departments determined that, for plans with plan years ending on or before December 31, 2015, with respect to insured expatriate health plans, the Departments will consider these plans to 3 comply with most ACA requirements provided the expatriate health plan complies with pre-ACA laws such as the mental health parity provisions, the HIPAA nondiscrimination provisions, the ERISA claims procedures, and any reporting and disclosure obligations under ERISA. The Departments noted that coverage provided under an insured expatriate health plan generally is minimum essential coverage. New Guidance For purposes of the temporary transitional relief, the Departments clarify that an insured expatriate health plan is an insured group health plan with respect to which enrollment is limited to primary insureds for whom there is a good faith expectation that such individuals will reside outside of their home country or outside of the United States for at least 6 months of a 12-month period and any covered dependents, and also with respect to group health insurance coverage offered in conjunction with the expatriate group health plan. The 12-month period can fall within a single plan year or across two consecutive plan years. Any future regulations that are more restrictive will not be applicable to plan years ending on or before December 31, 2016. 2 A “supplemental excepted benefit,” under a safe harbor, is a separate policy, certificate, or contract of insurance that satisfies all of the following requirements: 1. 2. 3. 4. 3 Independent of primary coverage. The supplemental policy, certificate, or contract of insurance must be issued by an entity that does not provide the primary coverage under the plan. For this purpose, entities that are part of the same controlled group of corporations or part of the same group of trades or businesses under common control, within the meaning of section 52(a) or (b) of the Code, are considered a single entity. Supplemental for gaps in primary coverage. The supplemental policy, certificate, or contract of insurance must be specifically designed to fill gaps in primary coverage, such as coinsurance or deductibles, but does not include a policy, certificate, or contract of insurance that becomes secondary or supplemental only under a coordination-of-benefits provision. Supplemental in value of coverage. The cost of coverage under the supplemental policy, certificate, or contract of insurance must not exceed 15% of the cost of primary coverage. Cost is determined in the same manner as the applicable premium is calculated under a COBRA continuation provision. Similar to Medicare supplemental coverage. The supplemental policy, certificate, or contract of insurance that is group health insurance coverage must not differentiate among individuals in eligibility, benefits, or premiums based on any health factor of an individual (or any dependent of the individual). No lifetime or annual limits; Prohibition on rescissions; Coverage of preventive health services; Extension of dependent coverage; Summary of benefits and coverage; New nondiscrimination rule; Quality of care reporting; Medical loss ratios; New appeals process; Small group rate review; Prohibition of preexisting condition exclusions; Community rating for small group; Guaranteed availability and renewability of coverage; Essential health benefits package ; Prohibition on excessive waiting periods. THE MENTAL HEALTH P ARITY AND ADDICTION EQUITY ACT OF 2008 Background In general, the Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”) requires employers with more than 50 employees who provide mental health or substance use disorder benefits to impose the same limitations on these benefits as they do for medical and surgical benefits. On November 13, 2013, the Departments published final regulations on MHPAEA, which contain some clarifications regarding the statute's protections. New Guidance The guidance reminds us that, beginning with the 2014 plan year, under ACA, all insured, nongrandfathered, small group plans must cover EHB. EHB include mental health and substance use disorder services, including behavioral health treatment. The final rules require small, insured, nongrandfathered plans to comply with the MHPAEA regulations, regardless of MHPAEA’s small employer exemption. The final regulations apply for plan years beginning on or after July 1, 2014. The guidance goes on to note that transition relief was issued for certain insured, non4 grandfathered, small group plans. Small group plans eligible for this transition relief have a one5 year exception from the otherwise applicable EHB and MHPAEA requirements. For the FAQs, visit: www.dol.gov/ebsa/faqs/faq-aca18.html. USI 555 Pleasantville Road Suite 160 Suite 160 South Briarcliff Manor, NY 10510 914.747.6300 www.usi.biz Disclaimer: This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws, regulations or to address specific client situations. It should not be construed as legal advice or opinion. USI is a leading provider of employee benefit programs, commercial insurance, and retirement plan services operating nationally with 77 offices. In today's climate of escalating healthcare costs, USI has the knowledge and resources to support your company's critical employee benefits decisions. We offer strategic cost containment solutions, integrated wellness programs, compliance services, and administration and communication services. Please contact your USI representative or call (877) 470-9100 for additional information. Copyright © 2014 USI Insurance Services. All Rights Reserved. 4 5 http://www.cms.gov/CCIIO/Resources/Letters/Downloads/commissioner-letter-11-14-2013.PDF The transitional relief:    Applies to policies that were in effect as of October 1, 2013. Any new policies are subject to the ACA mandates. Is available only if a state and the insurance carriers opt to extend otherwise cancelled policies. Offers a one-year extension of certain non-grandfathered small market group health plans that would not otherwise comply with various mandates under the ACA. If adopted, these plans are not required to comply with certain mandates, including the requirement to provide essential benefits and certain cost-sharing provisions.