(From the September 27, 2010 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)
Labor Department Releases Practical Guidance on New PPACA Rules
Recently released "Frequently Asked Questions" by the Department of Labor shed light and provide new information on how certain Patient Protection and Affordable Care Act (PPACA) requirements are to be implemented. In a set of sixteen questions, the Department addresses particular concerns regarding grandfathered plans, claims procedures, dependent coverage of children, and out-of network emergency services. Among other worthwhile guidance, the Department clarifies the following:
- Grandfathered Insured Plans - Changes in Contribution. Responding to issuers concerns that they will not necessarily know when an employer plan sponsor changes its rate of contribution to the group health plan (and, thereby, causes the plan to lose grandfathered status), the FAQs state that the Departments of Labor, Treasury, and Health and Human Resources have agreed - until the issuance of final regulations - to treat an insured group health plan as not losing its grandfathered status if:
- At renewal the issuer requires the plan sponsor to make a representation regarding the sponsor's contribution rate for the renewal period and, if the issuer does not already have it, the sponsor's contribution rate as of March 23, 2010; and
- The issuer's policies, certificates, or contracts prominently disclose that the plan sponsor is required to notify the issuer if its contribution rate changes at any time during the plan year.
These steps must be taken at renewal. However, for policies that are renewed before January 1, 2011, they must be taken no later than January 1, 2011.
Importantly, the relief (i.e., the retention of grandfathered status) will no longer apply as of the date the issuer knows there has been a more than 5 percentage point reduction in the contribution rate or, if earlier, the date the plan otherwise fails to qualify for grandfathered status.
Moreover, the Department points out that the PPACA does not prohibit an issuer from requiring the plan sponsor to provide advance notice (e.g., 30 or 60 days) of a change in the contribution rate. Q&A-2.
- Grandfathered Insured Plans - Change in Carrier. The FAQs disclose that guidance is forthcoming on how grandfathered group health plans can change carriers without losing grandfathered status. Q&A-6.
- Dependent Child Coverage - Proof of Dependent Status. The PPACA generally requires group health plans that provide dependent coverage to expand the coverage to include employees' children until they turn age 26. For this purpose, a child is defined under Code § 152(f)(1), as the employee's son, daughter, stepson, stepdaughter, adopted child, or eligible foster child. The FAQs make clear that, for other dependents not subject to this mandate (e.g., a grandchild, niece or nephew), the plan may condition eligibility for coverage on other conditions, such as satisfying the requirements for a dependent for income tax purposes (e.g., conditioning eligibility on support, residency, or other dependency factors). Q&A-14.
The FAQs also provide a useful overview of the new claims review requirements, outlining the transitional relief available for non-grandfathered plans. The FAQs recognize that a self-insured plan may not be contracting directly with an independent review organization (IRO), but rather the plan's third-party administrator may be doing so. The Department advises that such arrangements may satisfy the requirements, but notes that the plan fiduciaries would, nonetheless. have a duty under ERISA to monitor the IRO and the other plan service providers. Q&A-9.
|The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations.
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