Guest Article

(From the January 10, 2011 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

More FAQs Are Released on Affordable Care Act and Mental Health Parity

A set of frequently asked questions jointly released by the Departments of Health and Human Services, Labor and Treasury provides useful insight into certain of the market reform provisions of the Patient Protection and Affordable Care Act and the implementation of the Mental Health Parity and Addiction Equity Act of 2008.

Value-Based Insurance Design for Preventive Care Benefits

The release of the FAQs corresponds with a request for information that was released at the same time regarding how the enforcement agencies could encourage value-based insurance design (VBID) with respect to preventive care services (i.e., how they could encourage the development of health plans designs that provide incentives for enrollees to use higher-value or higher quality services or venues of care for preventive services). One of the FAQs illustrates the potential in this regard - it explains that a plan that imposes no copayment for colorectal cancer preventive services at an in-network ambulatory surgery center, but which charges a $250 copayment for the same services at an in-network outpatient hospital, would not violate the Public Health Services Act § 2713 (which allows plans to use reasonable medical management techniques to control costs). According to the FAQ:

Auto-Enrollment and Child Coverage

While the Patient Protection and Affordable Care Act (PPACA) requires employers with more than 200 full-time employees to automatically enroll new full-time employees in the employer's health plan, the FAQs explain that employers are not required to comply with this new requirement until regulations are issued. The Labor Department expects to solicit the views of various stakeholders regarding the autoenrollment requirement, and to issue final regulations by 2014. Guidance on how to determine when a person is a "full-time employee" is also being formulated. FAQs-2&3.

Under the PPACA, the terms of a group health plan or health insurance that provide dependent coverage of children cannot vary based on age (except for children who are age 26 or older). However, this prohibition does not apply to age-based distinctions that are applied to all coverage under the plan. For example, a plan that normally charges a copayment for physician visits that are not for preventive services would be permitted to waive the copayment for enrollees under age 19 - provided that the design applies to all coverage under the plan (e.g., to employees, spouses and dependent children). If the copayments charged to dependent children are the same as those charged to employees and spouses, the design would not run afoul of the rule that prohibits dependent child coverage from varying based on age. FAQ-5.

In some circumstances, before offering a child-only policy, issuers in the individual market are permitted to screen applicants for eligibility for alternative coverage options. The FAQs state that the practice must be permitted under state law, must require that all child-only applicants (regardless of health status) undergo the same screening process, and must include alternative coverage options for which healthy children would potentially be eligible (e.g., CHIP and group health insurance). Additional limitations also apply. For example, Medicaid prohibits participating states from allowing issuers to consider whether an individual is eligible for Medicaid in making an enrollment decision. Also, the screening process may not significantly delay enrollment. The enforcement agencies encourage states that allow such screening to require the issuers to provide coverage to the applicant on the first day the child-only policy would have been effective had the applicant not been screened for alternative coverage, and to impose a reasonable time limit, such as 30-days, to enroll the child regardless of potential other coverage. FAQ-6.

Mental Health Parity and Addiction Equity Act - Exemptions & Rewards

The FAQs confirm that small employers - with 50 or fewer employees - are still exempt from the requirements of the Mental Health Parity and Addiction Equity Act (MHPAEA).

Although the MHPAEA contains a cost exemption (i.e., for plans that incur an increased cost of at least 2 percent in complying with the MHPAEA requirements in the first year, or at least 1 percent in any subsequent year), no guidance has been issued on how the exemption is implemented. (The exemption applies for only one plan year: the plan year following the cost increase.) The FAQs explain that, until guidance is issued, plans are permitted to utilize the earlier 1997 procedures to claim an exemption based on their first year of compliance.

The FAQs also set forth a brief overview of the wellness program requirements, including the application of HIPAA's nondiscrimination requirements. If the wellness plan requires satisfaction of a standard related to a health factor (e.g., a cholesterol level of less than 200) in order to obtain a reward (e.g., a 20 percent reduction in premiums) a five-part set of criteria must be met. The reward must be limited to 20 percent of the cost of coverage, the program must be reasonably designed to promote health or prevent disease, individuals must be able to qualify for the reward at least once per year, the reward must be available to all similarly situated individuals (i.e., a reasonable alternative standard must be available to individuals for whom it is unreasonably difficult to achieve the standard because of a medical condition or health factor), and all plan material describing the program must include the reasonable alternative . FAQs section on "Nondiscrimination Based on a Health Factor and Wellness Programs" and FAQs-12-15.

The PPACA changes the maximum reward from 20 to 30 percent effective in 2014. The FAQs disclose that the enforcement agencies expect to propose regulations that will enable wellness plans to provide a 30 percent maximum reward before the PPACA's 2014 effective date.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.220.2692, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955. Copyright 2011, Deloitte.