Health Care Reform: New Guidance on Patient Protections in Group Health Plans

Recently, federal agencies issued new interim final rules to address several patient-protection provisions of health care reform. The new regulations provide guidance on pre-existing condition exclusions, annual and lifetime dollar limits, rescissions, and other patient protections. Generally, these requirements are effective with respect to insured and self-insured group health plans beginning with the first plan year commencing on or after Sept. 23, 2010 (Jan. 1, 2011, for calendar-year plans).

Pre-existing condition exclusions

Health care reform prohibits group health plans from imposing pre-existing condition exclusions on participants under age 19 effective for plan years commencing on or after Sept. 23, 2010. Pre-existing condition exclusions can continue to be applied to participants age 19 or older until the 2014 plan year, at which time no such exclusions are allowed. This prohibition on pre-existing condition exclusions applies to both grandfathered and nongrandfathered plans.

The regulations amend the definition of “pre-existing condition exclusion” under the Health Insurance Portability and Accountability Act (HIPAA). Under this change, a pre-existing condition exclusion includes both a limitation and an exclusion of benefits for a specific pre-existing condition, as well as an exclusion of coverage under a plan as a whole, based on such condition. Currently, HIPAA prohibits group health plans from denying plan coverage on the basis of certain pre-existing conditions.

Annual and lifetime limits

Health care reform prohibits group health plans from imposing lifetime limits on “essential health benefits” for plan years commencing on or after Sept. 23, 2010. Plans may impose “restricted” annual dollar limits on essential health benefits until the 2014 plan year. These limits are as follow:

• $750,000 for the plan year beginning on or after Sept. 23, 2010, but before Sept. 23, 2011
• $1.25 million for the plan year beginning on or after Sept. 23, 2011, but before Sept. 23, 2012
•  $2 million for the plan year beginning on or after Sept. 23, 2013, but before Jan. 1, 2014

Beginning in 2014, no annual dollar limits are permitted.

These limits apply on a participant basis and may not be applied to a family as a whole. The regulations do not state whether a plan can apply annual limits to specific benefits, which, in the aggregate, total the annual maximum allowed, or if a plan can have only one overall annual limit. A plan may continue to exclude all benefits for a condition, but if any benefits are provided for such condition, then the prohibitions apply.

Certain plans are not affected by these limits, such as flexible spending arrangements, health savings accounts, health reimbursement accounts (HRAs) that only cover retirees, and HRAs offered with group health plan coverage, as long as the underlying plan complies with the dollar limit rules. In addition, a program pursuant to which plan sponsors could request a waiver of these limits will be implemented before Jan. 1, 2014.

If a participant has already reached a plan’s lifetime maximum, the participant must be able to re-enroll. The re-enrollment period must last at least 30 days and begin no later than the effective date of the requirement for the specific plan. The U.S. Department of Labor (DOL) has issued a model re-enrollment rights notice. Many employers may wish to include this notice as part of their regular open enrollment packet. If so, they should ensure that the packet is sent to all of the appropriate persons, including those whose coverage was previously terminated as a result of a formerly applicable maximum.

The prohibition on annual and lifetime limits applies only to the provision of “essential health benefits.” Such benefits include: ambulatory-patient services, emergency services, hospitalization, maternity and newborn care, mental-health and substance-use disorders, prescription drugs, rehabilitative services and devices, laboratory services, preventive and wellness services, chronic-disease management, and pediatric services, including oral and vision care. Until guidance is issued to define these categories with more detail, employers must apply a good faith, reasonable interpretation of the term “essential health benefits.”

The annual and lifetime limit prohibitions apply to both grandfathered and nongrandfathered plans.

Prohibition on rescissions

Health care reform prohibits group health plans from rescinding coverage except in cases of fraud or intentional misrepresentation of material fact. The regulations clarify the “rescissions” are generally limited to retroactive terminations of coverage, but do not include a retroactive termination for failure to pay premiums timely. Under the regulations, a plan may not retroactively rescind coverage once a person is covered under the plan, unless the person performs an act or omission that constitutes fraud or makes an intentional misrepresentation of material fact.

A plan must provide 30 days’ advance written notice to each participant whose coverage will be rescinded.

The prohibition on rescissions applies to both grandfathered and nongrandfathered plans.

Other patient-protection rules

The regulations also contain guidance on other patient protections set forth in health care reform. This guidance only applies to nongrandfathered plans.

Choice of providers. If a plan has a network of providers, the regulations contain the following rules:

• If a participant must choose a primary care provider (PCP), it must allow the participant to select any available participating PCP.
• For a child, the plan must allow a participating pediatrician to be chosen as a PCP.
• No preauthorizations or referrals are permitted in order for a participant to have access to an OB/GYN provider.

The DOL has issued a model notice for the choice of provider rules. The notice must be included with the plan’s summary plan description.

Coverage of emergency services. Health care reform prohibits plans from requiring prior approval for emergency care, whether in- or out-of-network. The regulations clarify that a plan must cover emergency services:

• Without regard to whether the service is provided by a participating provider
• Without imposing any requirement or limitation on coverage more restrictive for out-of-network, than for in-network, services
• In compliance with certain copay and coinsurance requirements