Alert
Alert
By Mark Jones
09.08.10
Over the last two months, the Departments of Labor, Treasury and Health and Human Services have issued a series of interim final rules implementing the market reform provisions of the Patient Protection and Affordable Care Act (“PPACA”) that first become effective. (For information on PPACA, see our client alerts dated March 30 and May 13 and our white paper dated July 12, 2010.) These regulations adopt an expansive interpretation, in many respects, of the health care reform legislation and impose administrative changes that must be implemented by employers that sponsor health care plans before the commencement of the new plan year.
No Lifetime Limits. Insured group health plans and self-insured plans, including plans that are grandfathered under PPACA, must remove any lifetime dollar limits they impose on “essential health benefits,” effective for plan years beginning on or after September 23, 2010 (January 1, 2011 for calendar-year plans). Although regulations specifically defining “essential health benefits” are still forthcoming, the term will include emergency services, in-patient treatment, maternity care, mental health and substance abuse services, prescription drugs, rehabilitative services and devices, laboratory services, preventive and wellness services and pediatric services. The regulations do not distinguish between in-network and out-of-network care.
Interim final rules issued on June 28, 2010 clarify that the prohibition on lifetime limits does not apply to health flexible spending accounts, medical savings accounts, health savings accounts or most health reimbursement arrangements. Employers may also continue to impose limits on benefits that do not constitute essential health benefits, such as limited scope dental and vision care. A plan’s failure to cover a particular condition at all is not treated, for this purpose, as a lifetime limit, but employers must ensure that any hole in coverage complies with federal and state requirements.
Employers that sponsor plans with lifetime limits are advised to amend their plan documents and summary plan descriptions now, so that this change will be in place in time for annual enrollment. Plan sponsors that want to retain lifetime limits on non-essential benefits should work with their administrators to implement a process to track those benefits separately. (Good-faith efforts to comply with a reasonable interpretation of “essential health benefits,” if applied consistently, will be honored until regulations providing a more complete definition are issued.) Employers should also consider whether additional changes in plan design may be needed to avoid a corresponding increase in premiums.
Download: Health Care Reform Update: Changes Plan Sponsors Should Make This Year