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Guest Article

(From the April 25, 2011 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

New Guidance on Opt-Out Elections by Sponsors of Self-Funded State and Local Government Plans

The Department of Health and Human Services' Center for Consumer Information & Insurance Oversight (CCIIO) has issued guidance on the procedures and requirements for sponsors of self-funded non-federal governmental plans to elect to exempt their plans from certain otherwise applicable requirements, such as mental health parity. The guidance includes a Fact Sheet and Model Exemption Election Document.

Background

The Patient Protection and Affordable Care Act (PPACA) reduced the number of requirements covered by the exemption election generally effective for plan years beginning on or after September 23, 2010. (A special effective date is available for plans subject to collective bargaining agreements ratified before March 23, 2010.) While sponsors of self-funded non-federal governmental plans previously were permitted to opt-out of seven specific provisions of the Public Health Service Act (PHSA), the PPACA made three of those provisions ineligible for opt-out as illustrated in the following table.

	Opt-Out Available
PHS Act Provisions	Pre-PPACA (Plan Years Beginning Before September 23, 2010)	Post PPACA (Plan Years Beginning On or After September 23, 2010)
1. Limits on Preexisting Condition Exclusions	Yes	No
2. Requirements for Special Enrollment Periods	Yes	No
3. Prohibition Against Discrimination Based on Health Status	Yes	No
4. Benefits for Newborns and Mothers	Yes	Yes
5. Parity in Mental Health and Substance Use Disorder Benefits	Yes	Yes
6. Coverage for Reconstructive Surgery Following Mastectomies	Yes	Yes
7. Coverage of Dependent Students on Medically Necessary Leave of Absence	Yes	Yes

Notwithstanding the effective date for this change, HHS has granted a brief transition period under which it will not take enforcement action with respect to opt-out elections for the first three requirements above for plan years that begin before April 1, 2011.

Opt-out Procedures and Requirements

For eligible plan sponsors wanting to opt-out of these four eligible PHSA requirements, the new HHS guidance makes the following points:

An exemption is not automatic. If the sponsor of a self-funded non-federal governmental plan wants to exempt its plan from one or more of the exemption-eligible requirements, it must notify the Centers for Medicare & Medicaid Services (CMS) in writing. A Model Exemption Election Document is available and can be used for this purpose. If the plan sponsor chooses not to use the model document it still must provide all of the requested information.
The election to opt-out of one or more of the exemption-eligible requirements should be sent to CMS via fax (301-492-4462) or by mail to the following address:
CMS
Center for Consumer Information and Insurance Oversight (CCIIO)
ATTN: HIPAA Opt-Out
200 Independence Avenue, SW
Room 737F
Washington, DC 20201
An election applies for a single specified plan year, or, in the case of a plan provided pursuant to a collective bargaining agreement, for all plan years encompassed by the agreement.
A plan sponsor may renew an opt-out election for a subsequent plan year (or period of plan coverage) by notifying CMS in writing. The Model Exemption Election Document also can be used for this purpose.
Plans taking advantage of the opt-out must provide notice to enrollees, on an annual basis and at the time of enrollment under the plan, of the fact and consequences of the plan sponsor's election. The annual notice generally must be disseminated before the plan year begins for a plan's initial exemption election. A Model Notice to Enrollees is available and can be used for this purpose.
A copy of the enrollee notice should be attached to the initial exemption election letter submitted to CMS.

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.

BenefitsLink is an independent national employee benefits information provider, not formally affiliated with the firms and companies who kindly provide much of the content and advertisements published on this Web site, including the article shown above.