[Title 45 CFR ]
[Code of Federal Regulations (annual edition) - October 1, 2019 Edition]
[From the U.S. Government Publishing Office]
[[Page i]]
Title 45
Public Welfare
________________________
Parts 140 to 199
Revised as of October 1, 2019
Containing a codification of documents of general
applicability and future effect
As of October 1, 2019
Published by the Office of the Federal National
Archives and Records Administration as a Special
Edition of the Federal Register
[[Page ii]]
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[[Page iii]]
As of October 1, 2019
Title 45, Parts 1 to 199
Revised as of October 1, 2018
Is Replaced by
Title 45, Parts 1 to 139
and
Parts 140 to 199
[[Page v]]
Table of Contents
Page
Explanation................................................. vii
Title 45:
SUBTITLE A--Department of Health and Human Services 3
Finding Aids:
Table of CFR Titles and Chapters........................ 665
Alphabetical List of Agencies Appearing in the CFR...... 685
List of CFR Sections Affected........................... 695
[[Page vi]]
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Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 45 CFR 144.101
refers to title 45, part
144, section 101.
----------------------------
[[Page vii]]
EXPLANATION
The Code of Federal Regulations is a codification of the general and
permanent rules published in the Federal Register by the Executive
departments and agencies of the Federal Government. The Code is divided
into 50 titles which represent broad areas subject to Federal
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name of the issuing agency. Each chapter is further subdivided into
parts covering specific regulatory areas.
Each volume of the Code is revised at least once each calendar year
and issued on a quarterly basis approximately as follows:
Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1
The appropriate revision date is printed on the cover of each
volume.
LEGAL STATUS
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HOW TO USE THE CODE OF FEDERAL REGULATIONS
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To determine whether a Code volume has been amended since its
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OMB CONTROL NUMBERS
The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires
Federal agencies to display an OMB control number with their information
collection request.
[[Page viii]]
Many agencies have begun publishing numerous OMB control numbers as
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PAST PROVISIONS OF THE CODE
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``[RESERVED]'' TERMINOLOGY
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INCORPORATION BY REFERENCE
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(b) The matter incorporated is in fact available to the extent
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(c) The incorporating document is drafted and submitted for
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CFR INDEXES AND TABULAR GUIDES
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that volume.
[[Page ix]]
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available at www.ecfr.gov.
Oliver A. Potts,
Director,
Office of the Federal Register
October 1, 2019
[[Page xi]]
THIS TITLE
Title 45--Public Welfare is composed of five volumes. The parts in
these volumes are arranged in the following order: Parts 1-139, 140-199,
200-499, 500-1199, and 1200 to end. Volumes one and two (parts 1-139 and
parts 140-199) contain all current regulations issued under subtitle A--
Department of Health and Human Services. Volume three (parts 200-499)
contains all current regulations issued under subtitle B--Regulations
Relating to Public Welfare, chapter II--Office of Family Assistance
(Assistance Programs), Administration for Children and Families,
Department of Health and Human Services, chapter III--Office of Child
Support Enforcement (Child Support Enforcement Program), Administration
for Children and Families, Department of Health and Human Services, and
chapter IV--Office of Refugee Resettlement, Administration for Children
and Families, Department of Health and Human Services. Volume four
(parts 500-1199) contains all current regulations issued under chapter
V--Foreign Claims Settlement Commission of the United States, Department
of Justice, chapter VI--National Science Foundation, chapter VII--
Commission on Civil Rights, chapter VIII--Office of Personnel
Management, chapter IX--Denali Commission, chapter X--Office of
Community Services, Administration for Children and Families, Department
of Health and Human Services, and chapter XI--National Foundation on the
Arts and the Humanities. Volume five (part 1200 to end) contains all
current regulations issued under chapter XII--Corporation for National
and Community Service, chapter XIII--Administration for Children and
Families, Department of Health and Human Services, chapter XVI--Legal
Services Corporation, chapter XVII--National Commission on Libraries and
Information Science, chapter XVIII--Harry S. Truman Scholarship
Foundation, chapter XXI--Commission of Fine Arts, chapter XXIII--Arctic
Research Commission, chapter XXIV--James Madison Memorial Fellowship
Foundation, and chapter XXV--Corporation for National and Community
Service. The contents of these volumes represent all of the current
regulations codified under this title of the CFR as of October 1, 2019.
For this volume, Ann Worley was Chief Editor. The Code of Federal
Regulations publication program is under the direction of John Hyrum
Martinez, assisted by Stephen J. Frattini.
[[Page 1]]
TITLE 45--PUBLIC WELFARE
(This book contains parts 140 to 199)
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Part
SUBTITLE A--Department of Health and Human Services......... 144
[[Page 3]]
Subtitle A--Department of Health and Human Services
--------------------------------------------------------------------
Editorial Note: Nomenclature changes to subtitle A appear at 66 FR
39452, July 31, 2001.
SUBCHAPTER B--REQUIREMENTS RELATING TO HEALTH CARE ACCESS
Part Page
140-143
[Reserved]
144 Requirements relating to health insurance
coverage................................ 5
145
[Reserved]
146 Requirements for the group health insurance
market.................................. 14
147 Health insurance reform requirements for the
group and individual health insurance
markets................................. 106
148 Requirements for the individual health
insurance market........................ 170
149 Requirements for the early retiree
reinsurance program..................... 188
150 CMS enforcement in group and individual
insurance markets....................... 196
151
[Reserved]
152 Pre-existing condition insurance plan
program................................. 212
153 Standards related to reinsurance, risk
corridors, and risk adjustment under the
Affordable Care Act..................... 219
154 Health insurance issuer rate increases:
disclosure and review requirements...... 248
155 Exchange establishment standards and other
related standards under the Affordable
Care Act................................ 255
156 Health insurance issuer standards under the
Affordable Care Act, including standards
related to exchanges.................... 385
157 Employer interactions with exchanges and
shop participation...................... 458
158 Issuer use of premium revenue: reporting and
rebate requirements..................... 460
[[Page 4]]
159 Health care reform insurance web portal..... 489
SUBCHAPTER C--ADMINISTRATIVE DATA STANDARDS AND RELATED REQUIREMENTS
160 General administrative requirements......... 491
162 Administrative requirements................. 516
163
[Reserved]
164 Security and privacy........................ 537
165-169
[Reserved]
SUBCHAPTER D--HEALTH INFORMATION TECHNOLOGY
170 Health information technology standards,
implementation specifications, and
certification criteria and certification
programs for health information
technology.............................. 598
171-199
[Reserved]
[[Page 5]]
SUBCHAPTER B_REQUIREMENTS RELATING TO HEALTH CARE ACCESS
PARTS 140 143 [RESERVED]
PART 144_REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE-
-Table of Contents
Subpart A_General Provisions
Sec.
144.101 Basis and purpose.
144.102 Scope and applicability.
144.103 Definitions.
Subpart B_Qualified State Long-Term Care Insurance Partnerships:
Reporting Requirements for Insurers
144.200 Basis.
144.202 Definitions.
144.204 Applicability of regulations.
144.206 Reporting requirements.
144.208 Deadlines for submission of reports.
144.210 Form and manner of reports.
144.212 Confidentiality of information.
144.214 Notifications of noncompliance with reporting requirements.
Authority: 42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-92.
Source: 62 FR 16955, Apr. 8, 1997, unless otherwise noted.
Subpart A_General Provisions
Sec. 144.101 Basis and purpose.
(a) Part 146 of this subchapter implements requirements of Title
XXVII of the Public Health Service Act (PHS Act, 42 U.S.C. 300gg, et
seq.) that apply to group health plans and group health insurance
issuers.
(b) Part 147 of this subchapter implements the provisions of the
Patient Protection and Affordable Care Act that apply to both group
health plans and health insurance issuers in the Group and Individual
Markets.
(c) Part 148 of this subchapter implements Individual Health
Insurance Market requirements of the PHS Act. Its purpose is to improve
access to individual health insurance coverage for certain individuals
who previously had group coverage, guarantee the renewability of all
health insurance coverage in the individual market, and provide certain
protections for mothers and newborns with respect to coverage for
hospital stays in connection with childbirth, and to provide certain
protections for patients who elect breast reconstruction in connection
with a mastectomy.
(d) Part 150 of this subchapter implements the enforcement
provisions of sections 2723 and 2761 of the PHS Act with respect to the
following:
(1) States that fail to substantially enforce one or more provisions
of part 146 concerning group health insurance, one or more provisions of
part 147 concerning group or individual health insurance, or the
requirements of part 148 of this subchapter concerning individual health
insurance.
(2) Insurance issuers in States described in paragraph (d)(1) of
this section.
(3) Group health plans that are non-Federal governmental plans.
(e) Sections 2791 and 2792 of the PHS Act define terms used in the
regulations in this subchapter and provide the basis for issuing these
regulations.
[64 FR 45795, Aug. 20, 1999, as amended at 74 FR 51688, Oct. 7, 2009; 75
FR 27137, May 13, 2010; 78 FR 13435, Feb. 27, 2013]
Sec. 144.102 Scope and applicability.
(a) For purposes of 45 CFR parts 144 through 148, all health
insurance coverage is generally divided into two markets--the group
market and the individual market. The group market is further divided
into the large group market and the small group market.
(b) The protections afforded under 45 CFR parts 144 through 148 to
individuals and employers (and other sponsors of health insurance
offered in connection with a group health plan) are determined by
whether the coverage involved is obtained in the small group market, the
large group market, or the individual market.
(c) Coverage that is provided to associations, but not related to
employment, and sold to individuals is not considered group coverage
under 45
[[Page 6]]
CFR parts 144 through 148. If the coverage is offered to an association
member other than in connection with a group health plan, the coverage
is considered individual health insurance coverage for purposes of 45
CFR parts 144 through 148. The coverage is considered coverage in the
individual market, regardless of whether it is considered group coverage
under state law. If the health insurance coverage is offered in
connection with a group health plan as defined at 45 CFR 144.103, it is
considered group health insurance coverage for purposes of 45 CFR parts
144 through 148.
(d) Provisions relating to CMS enforcement of parts 146, 147, and
148 are contained in part 150 of this subchapter.
[78 FR 13435, Feb. 27, 2013, as amended at 78 FR 65091, Oct. 30, 2013]
Sec. 144.103 Definitions.
For purposes of parts 146 (group market), 147 (group and individual
market), 148 (individual market), and 150 (enforcement) of this
subchapter, the following definitions apply unless otherwise provided:
Affiliation period means a period of time that must expire before
health insurance coverage provided by an HMO becomes effective, and
during which the HMO is not required to provide benefits.
Applicable State authority means, with respect to a health insurance
issuer in a State, the State insurance commissioner or official or
officials designated by the State to enforce the requirements of 45 CFR
parts 146 and 148 for the State involved with respect to the issuer.
Beneficiary has the meaning given the term under section 3(8) of the
Employee Retirement Income Security Act of 1974 (ERISA), which states,
``a person designated by a participant, or by the terms of an employee
benefit plan, who is or may become entitled to a benefit'' under the
plan.
Bona fide association means, with respect to health insurance
coverage offered in a State, an association that meets the following
conditions:
(1) Has been actively in existence for at least 5 years.
(2) Has been formed and maintained in good faith for purposes other
than obtaining insurance.
(3) Does not condition membership in the association on any health
status-related factor relating to an individual (including an employee
of an employer or a dependent of any employee).
(4) Makes health insurance coverage offered through the association
available to all members regardless of any health status-related factor
relating to the members (or individuals eligible for coverage through a
member).
(5) Does not make health insurance coverage offered through the
association available other than in connection with a member of the
association.
(6) Meets any additional requirements that may be imposed under
State law.
Church plan means a Church plan within the meaning of section 3(33)
of ERISA.
COBRA definitions:
(1) COBRA means Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
(2) COBRA continuation coverage means coverage, under a group health
plan, that satisfies an applicable COBRA continuation provision.
(3) COBRA continuation provision means sections 601-608 of the
Employee Retirement Income Security Act, section 4980B of the Internal
Revenue Code of 1986 (other than paragraph (f)(1) of such section 4980B
insofar as it relates to pediatric vaccines), or Title XXII of the PHS
Act.
(4) Continuation coverage means coverage under a COBRA continuation
provision or a similar State program. Coverage provided by a plan that
is subject to a COBRA continuation provision or similar State program,
but that does not satisfy all the requirements of that provision or
program, will be deemed to be continuation coverage if it allows an
individual to elect to continue coverage for a period of at least 18
months. Continuation coverage does not include coverage under a
conversion policy required to be offered to an individual upon
exhaustion of continuation coverage, nor does it include continuation
coverage under the Federal Employees Health Benefits Program.
[[Page 7]]
(5) Exhaustion of COBRA continuation coverage means that an
individual's COBRA continuation coverage ceases for any reason other
than either failure of the individual to pay premiums on a timely basis,
or for cause (such as making a fraudulent claim or an intentional
misrepresentation of a material fact in connection with the plan). An
individual is considered to have exhausted COBRA continuation coverage
if such coverage ceases--
(i) Due to the failure of the employer or other responsible entity
to remit premiums on a timely basis;
(ii) When the individual no longer resides, lives, or works in the
service area of an HMO or similar program (whether or not within the
choice of the individual) and there is no other COBRA continuation
coverage available to the individual; or
(iii) When the individual incurs a claim that would meet or exceed a
lifetime limit on all benefits and there is no other COBRA continuation
coverage available to the individual.
(6) Exhaustion of continuation coverage means that an individual's
continuation coverage ceases for any reason other than either failure of
the individual to pay premiums on a timely basis, or for cause (such as
making a fraudulent claim or an intentional misrepresentation of a
material fact in connection with the plan). An individual is considered
to have exhausted continuation coverage if--
(i) Coverage ceases due to the failure of the employer or other
responsible entity to remit premiums on a timely basis;
(ii) When the individual no longer resides, lives or works in a
service area of an HMO or similar program (whether or not within the
choice of the individual) and there is no other continuation coverage
available to the individual; or
(iii) When the individual incurs a claim that would meet or exceed a
lifetime limit on all benefits and there is no other continuation
coverage available to the individual.
Condition means a medical condition.
Creditable coverage has the meaning given the term in 45 CFR
146.113(a).
Dependent means any individual who is or may become eligible for
coverage under the terms of a group health plan because of a
relationship to a participant.
Eligible individual, for purposes of--
(1) The group market provisions in 45 CFR part 146, subpart E, is
defined in 45 CFR 146.150(b); and
(2) The individual market provisions in 45 CFR part 148, is defined
in 45 CFR 148.103.
Employee has the meaning given the term under section 3(6) of ERISA,
which states, ``any individual employed by an employer.''
Employer has the meaning given the term under section 3(5) of ERISA,
which states, ``any person acting directly as an employer, or indirectly
in the interest of an employer, in relation to an employee benefit plan;
and includes a group or association of employers acting for an employer
in such capacity.''
Enroll means to become covered for benefits under a group health
plan (that is, when coverage becomes effective), without regard to when
the individual may have completed or filed any forms that are required
in order to become covered under the plan. For this purpose, an
individual who has health coverage under a group health plan is enrolled
in the plan regardless of whether the individual elects coverage, the
individual is a dependent who becomes covered as a result of an election
by a participant, or the individual becomes covered without an election.
Enrollment date means the first day of coverage or, if there is a
waiting period, the first day of the waiting period. If an individual
receiving benefits under a group health plan changes benefit packages,
or if the plan changes group health insurance issuers, the individual's
enrollment date does not change.
ERISA stands for the Employee Retirement Income Security Act of
1974, as amended (29 U.S.C. 1001 et seq.).
Excepted benefits, consistent for purposes of the--
(1) Group market provisions in 45 CFR part 146, subpart D, is
defined in 45 CFR 146.145(b); and
(2) Individual market provisions in 45 CFR part 148, is defined in
45 CFR 148.220.
[[Page 8]]
Federal governmental plan means a governmental plan established or
maintained for its employees by the Government of the United States or
by any agency or instrumentality of such Government.
First day of coverage means, in the case of an individual covered
for benefits under a group health plan, the first day of coverage under
the plan and, in the case of an individual covered by health insurance
coverage in the individual market, the first day of coverage under the
policy or contract.
Genetic information has the meaning specified in Sec. 146.122(a) of
this subchapter.
Governmental plan means a governmental plan within the meaning of
section 3(32) of ERISA.
Group health insurance coverage means health insurance coverage
offered in connection with a group health plan. Individual health
insurance coverage reimbursed by the arrangements described in 29 CFR
2510.3-1(l) is not offered in connection with a group health plan, and
is not group health insurance coverage, provided all the conditions in
29 CFR 2510.3-1(l) are satisfied.
Group health plan or plan means a group health plan within the
meaning of 45 CFR 146.145(a).
Group market means the market for health insurance coverage offered
in connection with a group health plan.
Health insurance coverage means benefits consisting of medical care
(provided directly, through insurance or reimbursement, or otherwise)
under any hospital or medical service policy or certificate, hospital or
medical service plan contract, or HMO contract offered by a health
insurance issuer. Health insurance coverage includes group health
insurance coverage, individual health insurance coverage, and short-
term, limited-duration insurance.
Health insurance issuer or issuer means an insurance company,
insurance service, or insurance organization (including an HMO) that is
required to be licensed to engage in the business of insurance in a
State and that is subject to State law that regulates insurance (within
the meaning of section 514(b)(2) of ERISA). This term does not include a
group health plan.
Health maintenance organization or HMO means--
(1) A Federally qualified health maintenance organization (as
defined in section 1301(a) of the PHS Act);
(2) An organization recognized under State law as a health
maintenance organization; or
(3) A similar organization regulated under State law for solvency in
the same manner and to the same extent as such a health maintenance
organization.
Health status-related factor is any factor identified as a health
factor in 45 CFR 146.121(a).
Individual health insurance coverage means health insurance coverage
offered to individuals in the individual market, but does not include
short-term, limited-duration insurance. Individual health insurance
coverage can include dependent coverage.
Individual market means the market for health insurance coverage
offered to individuals other than in connection with a group health
plan, or other than coverage offered pursuant to a contract between the
health insurance issuer with the Medicaid, Children's Health Insurance
Program, or Basic Health programs.
Internal Revenue Code means the Internal Revenue Code of 1986, as
amended (Title 26, United States Code).
Issuer means a health insurance issuer.
Large employer means, in connection with a group health plan with
respect to a calendar year and a plan year, an employer who employed an
average of at least 51 employees on business days during the preceding
calendar year and who employs at least 1 employee on the first day of
the plan year. A State may elect to define large employer by
substituting ``101 employees'' for ``51 employees.'' In the case of an
employer that was not in existence throughout the preceding calendar
year, the determination of whether the employer is a large employer is
based on the average number of employees that it is reasonably expected
the employer will employ on business days in the current calendar year.
Large group market means the health insurance market under which
individuals obtain health insurance coverage (directly or through any
arrangement)
[[Page 9]]
on behalf of themselves (and their dependents) through a group health
plan maintained by a large employer, unless otherwise provided under
State law.
Late enrollee means an individual whose enrollment in a plan is a
late enrollment.
Late enrollment means enrollment of an individual under a group
health plan other than on the earliest date on which coverage can become
effective for the individual under the terms of the plan; or through
special enrollment. (For rules relating to special enrollment and
limited open enrollment, see Sec. Sec. 146.117 and 147.104 of this
subchapter.) If an individual ceases to be eligible for coverage under a
plan, and then subsequently becomes eligible for coverage under the
plan, only the individual's most recent period of eligibility is taken
into account in determining whether the individual is a late enrollee
under the plan with respect to the most recent period of coverage.
Similar rules apply if an individual again becomes eligible for coverage
following a suspension of coverage that applied generally under the
plan.
Medical care means amounts paid for--
(1) The diagnosis, cure, mitigation, treatment, or prevention of
disease, or amounts paid for the purpose of affecting any structure or
function of the body;
(2) Transportation primarily for and essential to medical care
referred to in paragraph (1) of this definition; and
(3) Insurance covering medical care referred to in paragraphs (1)
and (2) of this definition.
Medical condition or condition means any condition, whether physical
or mental, including, but not limited to, any condition resulting from
illness, injury (whether or not the injury is accidental), pregnancy, or
congenital malformation. However, genetic information is not a
condition.
Network plan means health insurance coverage of a health insurance
issuer under which the financing and delivery of medical care (including
items and services paid for as medical care) are provided, in whole or
in part, through a defined set of providers under contract with the
issuer.
Non-Federal governmental plan means a governmental plan that is not
a Federal governmental plan.
Participant has the meaning given the term under section 3(7) of
ERISA, which States, ``any employee or former employee of an employer,
or any member or former member of an employee organization, who is or
may become eligible to receive a benefit of any type from an employee
benefit plan which covers employees of such employer or members of such
organization, or whose beneficiaries may be eligible to receive any such
benefit.''
PHS Act stands for the Public Health Service Act (42 U.S.C. 201 et
seq.).
Placement, or being placed, for adoption means the assumption and
retention of a legal obligation for total or partial support of a child
by a person with whom the child has been placed in anticipation of the
child's adoption. The child's placement for adoption with such person
ends upon the termination of such legal obligation.
Plan means, with respect to a product, the pairing of the health
insurance coverage benefits under the product with a particular cost-
sharing structure, provider network, and service area. The product
comprises all plans offered with those characteristics and the
combination of the service areas for all plans offered within a product
constitutes the total service area of the product. With respect to a
plan that has been modified at the time of coverage renewal consistent
with Sec. 147.106 of this subchapter--
(1) The plan will be considered to be the same plan if it:
(i) Has the same cost-sharing structure as before the modification,
or any variation in cost sharing is solely related to changes in cost or
utilization of medical care, or is to maintain the same metal tier level
described in sections 1302(d) and (e) of the Affordable Care Act;
(ii) Continues to cover a majority of the same service area; and
(iii) Continues to cover a majority of the same provider network.
For this purpose, the plan's provider network on the first day of the
plan year is compared with the plan's provider network on the first day
of the preceding plan year (as applicable).
[[Page 10]]
(2) The plan will not fail to be treated as the same plan to the
extent the modification(s) are made uniformly and solely pursuant to
applicable Federal and State requirements if--
(i) The modification is made within a reasonable time period after
the imposition or modification of the Federal or State requirement;
(ii) The modification is directly related to the imposition or
modification of the Federal or State requirement.
(3) A State may permit greater changes to the cost-sharing
structure, or designate a lower threshold for maintenance of the same
provider network or service area for a plan to still be considered the
same plan.
Plan sponsor has the meaning given the term under section 3(16)(B)
of ERISA, which states, ``(i) the employer in the case of an employee
benefit plan established or maintained by a single employer, (ii) the
employee organization in the case of a plan established or maintained by
an employee organization, or (iii) in the case of a plan established or
maintained by two or more employers or jointly by one or more employers
and one or more employee organizations, the association, committee,
joint board of trustees, or other similar group of representatives of
the parties who establish or maintain the plan.''
Plan year means the year that is designated as the plan year in the
plan document of a group health plan, except that if the plan document
does not designate a plan year or if there is no plan document, the plan
year is--
(1) The deductible or limit year used under the plan;
(2) If the plan does not impose deductibles or limits on a yearly
basis, then the plan year is the policy year;
(3) If the plan does not impose deductibles or limits on a yearly
basis, and either the plan is not insured or the insurance policy is not
renewed on an annual basis, then the plan year is the employer's taxable
year; or
(4) In any other case, the plan year is the calendar year.
Policy year means, with respect to--
(1) A grandfathered health plan offered in the individual health
insurance market and student health insurance coverage, the 12-month
period that is designated as the policy year in the policy documents of
the health insurance coverage. If there is no designation of a policy
year in the policy document (or no such policy document is available),
then the policy year is the deductible or limit year used under the
coverage. If deductibles or other limits are not imposed on a yearly
basis, the policy year is the calendar year.
(2) A non-grandfathered health plan offered in the individual health
insurance market, or in a market in which the State has merged the
individual and small group risk pools, for coverage issued or renewed
beginning January 1, 2014, a calendar year for which health insurance
coverage provides coverage for health benefits.
Preexisting condition exclusion means a limitation or exclusion of
benefits (including a denial of coverage) based on the fact that the
condition was present before the effective date of coverage (or if
coverage is denied, the date of the denial) under a group health plan or
group or individual health insurance coverage (or other coverage
provided to Federally eligible individuals pursuant to 45 CFR part 148),
whether or not any medical advice, diagnosis, care, or treatment was
recommended or received before that day. A preexisting condition
exclusion includes any limitation or exclusion of benefits (including a
denial of coverage) applicable to an individual as a result of
information relating to an individual's health status before the
individual's effective date of coverage (or if coverage is denied, the
date of the denial) under a group health plan, or group or individual
health insurance coverage (or other coverage provided to Federally
eligible individuals pursuant to 45 CFR part 148), such as a condition
identified as a result of a pre-enrollment questionnaire or physical
examination given to the individual, or review of medical records
relating to the pre-enrollment period.
Product means a discrete package of health insurance coverage
benefits that are offered using a particular product network type (such
as health maintenance organization, preferred provider organization,
exclusive provider organization, point of service, or indemnity) within
a service area. In the case
[[Page 11]]
of a product that has been modified, transferred, or replaced, the
resulting new product will be considered to be the same as the modified,
transferred, or replaced product if the changes to the modified,
transferred, or replaced product meet the standards of Sec. 146.152(f),
Sec. 147.106(e), or Sec. 148.122(g) of this subchapter (relating to
uniform modification of coverage), as applicable.
Public health plan has the meaning given the term in 45 CFR
146.113(a)(1)(ix).
Short-term, limited-duration insurance means health insurance
coverage provided pursuant to a contract with an issuer that:
(1) Has an expiration date specified in the contract that is less
than 12 months after the original effective date of the contract and,
taking into account renewals or extensions, has a duration of no longer
than 36 months in total;
(2) With respect to policies having a coverage start date before
January 1, 2019, displays prominently in the contract and in any
application materials provided in connection with enrollment in such
coverage in at least 14 point type the language in the following Notice
1, excluding the heading ``Notice 1,'' with any additional information
required by applicable state law:
Notice 1:
This coverage is not required to comply with certain federal market
requirements for health insurance, principally those contained in the
Affordable Care Act. Be sure to check your policy carefully to make sure
you are aware of any exclusions or limitations regarding coverage of
preexisting conditions or health benefits (such as hospitalization,
emergency services, maternity care, preventive care, prescription drugs,
and mental health and substance use disorder services). Your policy
might also have lifetime and/or annual dollar limits on health benefits.
If this coverage expires or you lose eligibility for this coverage, you
might have to wait until an open enrollment period to get other health
insurance coverage. Also, this coverage is not ``minimum essential
coverage.'' If you don't have minimum essential coverage for any month
in 2018, you may have to make a payment when you file your tax return
unless you qualify for an exemption from the requirement that you have
health coverage for that month.
(3) With respect to policies having a coverage start date on or
after January 1, 2019, displays prominently in the contract and in any
application materials provided in connection with enrollment in such
coverage in at least 14 point type the language in the following Notice
2, excluding the heading ``Notice 2,'' with any additional information
required by applicable state law:
Notice 2:
This coverage is not required to comply with certain federal market
requirements for health insurance, principally those contained in the
Affordable Care Act. Be sure to check your policy carefully to make sure
you are aware of any exclusions or limitations regarding coverage of
preexisting conditions or health benefits (such as hospitalization,
emergency services, maternity care, preventive care, prescription drugs,
and mental health and substance use disorder services). Your policy
might also have lifetime and/or annual dollar limits on health benefits.
If this coverage expires or you lose eligibility for this coverage, you
might have to wait until an open enrollment period to get other health
insurance coverage.
(4) If a court holds the 36-month maximum duration provision set
forth in paragraph (1) of this definition or its applicability to any
person or circumstances invalid, the remaining provisions and their
applicability to other people or circumstances shall continue in effect.
Significant break in coverage has the meaning given the term in 45
CFR 146.113(b)(2)(iii).
Small employer means, in connection with a group health plan with
respect to a calendar year and a plan year, an employer who employed an
average of at least 1 but not more than 50 employees on business days
during the preceding calendar year and who employs at least 1 employee
on the first day of the plan year. A State may elect to define small
employer by substituting ``100 employees'' for ``50 employees.'' In the
case of an employer that was not in existence throughout the preceding
calendar year, the determination of whether the employer is a small
employer is based on the average number of employees that it is
reasonably expected the employer will employ on business days in the
current calendar year.
[[Page 12]]
Small group market means the health insurance market under which
individuals obtain health insurance coverage (directly or through any
arrangement) on behalf of themselves (and their dependents) through a
group health plan maintained by a small employer.
Special enrollment means enrollment in a group health plan or group
health insurance coverage under the rights described in 45 CFR 146.117.
State means each of the 50 States, the District of Columbia, Puerto
Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana
Islands; except that for purposes of part 147, the term does not include
Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern
Mariana Islands.
State health benefits risk pool has the meaning given the term in 45
CFR Sec. 146.113(a)(1)(vii).
Student health insurance coverage has the meaning given the term in
Sec. 147.145.
Travel insurance means insurance coverage for personal risks
incident to planned travel, which may include, but is not limited to,
interruption or cancellation of trip or event, loss of baggage or
personal effects, damages to accommodations or rental vehicles, and
sickness, accident, disability, or death occurring during travel,
provided that the health benefits are not offered on a stand-alone basis
and are incidental to other coverage. For this purpose, the term travel
insurance does not include major medical plans that provide
comprehensive medical protection for travelers with trips lasting 6
months or longer, including, for example, those working overseas as an
expatriate or military personnel being deployed.
Waiting period has the meaning given the term in 45 CFR 147.116(b).
[69 FR 78781, Dec. 30, 2004, as amended at 74 FR 51688, Oct. 7, 2009; 75
FR 27138, May 13, 2010; 75 FR 37235, June 28, 2010; 77 FR 16468, Mar.
21, 2012; 78 FR 65091, Oct. 30, 2013; 79 FR 10313, Feb. 24, 2014; 79 FR
13833, Mar. 11, 2014; 79 FR 14151, Mar. 12, 2014; 79 FR 30335, May 27,
2014; 80 FR 10861, Feb. 27, 2015; 80 FR 72274, Nov. 18, 2015; 81 FR
12333, Mar. 8, 2016; 81 FR 75326, Oct. 31, 2016; 81 FR 94172, Dec. 22,
2016; 83 FR 38243, Aug. 3, 2018; 84 FR 29014, June 20, 2019]
Subpart B_Qualified State Long-Term Care Insurance Partnerships:
Reporting Requirements for Insurers
Source: 73 FR 76968, Dec. 18, 2008, unless otherwise noted.
Sec. 144.200 Basis.
This subpart implements--
(a) Section 1917(b)(1)(C) (iii)(VI) of the Social Security Act,
(Act) which requires the issuer of a long-term care insurance policy
issued under a qualified State long-term care insurance partnership to
provide specified regular reports to the Secretary.
(b) Section 1917(b)(1)(C)(v) of the Act, which specifies that the
regulations of the Secretary under section 1917(b)(1)(C)(iii)(VI) of the
Act shall be promulgated after consultation with the National
Association of Insurance Commissioners, issuers of long-term care
insurance policies, States with experience with long-term care insurance
partnership plans, other States, and representatives of consumers of
long-term care insurance policies, and shall specify the type and format
of the data to be reported and the frequency with which such reports are
to be made. This section of the statute also provides that the Secretary
provide copies of the reports to the States involved.
Sec. 144.202 Definitions.
As used in this Subpart--
Partnership qualified policy refers to a qualified long-term care
insurance policy issued under a qualified State long-term care insurance
partnership.
Qualified long-term care insurance policy means an insurance policy
that has been determined by a State insurance commissioner to meet the
requirements of sections 1917(b)(1)(C)(iii)(I) through (IV) and
1917(b)(5) of the Act. It includes a certificate issued under a group
insurance contract.
Qualified State long-term care insurance partnership means an
approved Medicaid State plan amendment that provides for the disregard
of any assets or resources in an amount equal to the insurance benefit
payments that are made to or on behalf of an individual who is a
beneficiary under a long-term
[[Page 13]]
care insurance policy that has been determined by a State insurance
commissioner to meet the requirements of section 1917(b)(1)(C)(iii) of
the Act.
Sec. 144.204 Applicability of regulations.
The regulations contained in this subpart for reporting data apply
only to those insurers that have issued qualified long-term care
insurance policies to individuals under a qualified State long-term care
insurance partnership. They do not apply to the reporting of data by
insurers for States with a Medicaid State plan amendment that
established a long-term care partnership on or before May 14, 1993.
Sec. 144.206 Reporting requirements.
(a) General requirement. Any insurer that sells a qualified long-
term care insurance policy under a qualified State long-term care
insurance partnership must submit, in accordance with the requirements
of this section, data on insured individuals, policyholders, and
claimants who have active partnership qualified policies or certificates
for a reporting period.
(b) Specific requirements. Insurers of qualified long-term care
insurance policies must submit the following data to the Secretary by
the deadlines specified in paragraph (c) of this section:
(1) Registry of active individual and group partnership qualified
policies or certificates. (i) Insurers must submit data on--
(A) Any insured individual who held an active partnership qualified
policy or certificate at any point during a reporting period, even if
the policy or certificate was subsequently cancelled, lost partnership
qualified status, or otherwise terminated during the reporting period;
and
(B) All active group long-term care partnership qualified insurance
policies, even if the identity of the individual policy/certificate
holder is unavailable.
(ii) The data required under paragraph (b)(1)(i) of this section
must cover a 6-month reporting period of January through June 30 or July
1 through December 31 of each year; and
(iii) The data must include, but are not limited to--
(A) Current identifying information on the insured individual;
(B) The name of the insurance company and issuing State;
(C) The effective date and terms of coverage under the policy.
(D) The annual premium.
(E) The coverage period.
(F) Other information, as specified by the Secretary in ``State
Long-Term Care Partnership Insurer Reporting Requirements.''
(2) Claims paid under partnership qualified policies or
certificates. Insurers must submit data on all partnership qualified
policies or certificates for which the insurer paid at least one claim
during the reporting period. This includes data for employer-paid core
plans and buy-up plans without individual insured data. The data must--
(i) Cover a quarterly reporting period of 3 months;
(ii) Include, but are not limited to--
(A) Current identifying information on the insured individual;
(B) The type and cash amount of the benefits paid during the
reporting period and lifetime to date;
(C) Remaining lifetime benefits;
(D) Other information, as specified by the Secretary in ``State
Long-Term Care Partnership Insurer Reporting Requirements.''
Sec. 144.208 Deadlines for submission of reports.
(a) Transition provision for insurers who have issued or exchanged a
qualified partnership policy prior to the effective date of these
regulations.
The first reports required for these insurers will be the reports
that pertain to the reporting period that begins no more than 120 days
after the effective date of the final regulations.
(b) All reports on the registry of qualified long-term care
insurance policies issued to individuals or individuals under group
coverage specified in Sec. 144.206(b)(1)(ii) must be submitted within
30 days of the end of the 6-month reporting period.
(c) All reports on the claims paid under qualified long-term care
insurance policies issued to individual and
[[Page 14]]
individuals under group coverage specified in Sec. 144.206(b)(2)(i)
must be submitted within 30 days of the end of the 3-month quarterly
reporting period.
Sec. 144.210 Form and manner of reports.
All reports specified in Sec. 144.206 must be submitted in the form
and manner specified by the Secretary.
Sec. 144.212 Confidentiality of information.
Data collected and reported under the requirements of this subpart
are subject to the confidentiality of information requirements specified
in regulations under 42 CFR part 401, subpart B, and 45 CFR part 5,
subpart F.
Sec. 144.214 Notifications of noncompliance with reporting requirements.
If an insurer of a qualified long-term care insurance policy does
not submit the required reports by the due dates specified in this
subpart, the Secretary notifies the appropriate State insurance
commissioner within 45 days after the deadline for submission of the
information and data specified in Sec. 144.208.
PART 145 [RESERVED]
PART 146_REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET-
-Table of Contents
Subpart A_General Provisions
Sec.
146.101 Basis and scope.
Subpart B_Requirements Relating to Access and Renewability of Coverage,
and Limitations on Preexisting Condition Exclusion Periods
146.111 Preexisting condition exclusions.
146.113 Rules relating to creditable coverage.
146.115 Certification and disclosure of previous coverage.
146.117 Special enrollment periods.
146.119 HMO affiliation period as an alternative to a preexisting
condition exclusion.
146.120 Interaction with the Family and Medical Leave Act. [Reserved]
146.121 Prohibiting discrimination against participants and
beneficiaries based on a health factor.
146.122 Additional requirements prohibiting discrimination based on
genetic information.
146.123 Special rule allowing integration of Health Reimbursement
Arrangements (HRAs) and other account-based group health plans
with individual health insurance coverage and Medicare and
prohibiting discrimination in HRAs and other account-based
group health plans.
146.125 Applicability dates.
Subpart C_Requirements Related to Benefits
146.130 Standards relating to benefits for mothers and newborns.
146.136 Parity in mental health and substance use disorder benefits.
Subpart D_Preemption and Special Rules
146.143 Preemption; State flexibility; construction.
146.145 Special rules relating to group health plans.
Subpart E_Provisions Applicable to Only Health Insurance Issuers
146.150 Guaranteed availability of coverage for employers in the small
group market.
146.152 Guaranteed renewability of coverage for employers in the group
market.
146.160 Disclosure of information.
Subpart F_Exclusion of Plans and Enforcement
146.180 Treatment of non-Federal governmental plans.
Authority: 42 U.S.C. 300gg-1 through 300gg-5, 300gg-11 through
300gg-23, 300gg-91, and 300gg-92.
Source: 62 FR 16958, Apr. 8, 1997, unless otherwise noted.
Subpart A_General Provisions
Sec. 146.101 Basis and scope.
(a) Statutory basis. This part implements the Group Market
requirements of the PHS Act. Its purpose is to improve access to group
health insurance coverage, to guarantee the renewability of all coverage
in the group market, and to provide certain protections for mothers and
newborns with respect to coverage for hospital stays in connection with
childbirth. Sections 2791 and 2792 of the PHS Act define terms used in
the regulations in this subchapter and provide the basis for issuing
these regulations, respectively.
[[Page 15]]
(b) Scope. A group health plan or health insurance issuer offering
group health insurance coverage may provide greater rights to
participants and beneficiaries than those set forth in this part.
(1) Subpart B. Subpart B of this part sets forth minimum
requirements for group health plans and group health insurance issuers
offering group health insurance coverage concerning certain consumer
protections of the Health Insurance Portability and Accountability Act
(HIPAA), as amended, including special enrollment periods, prohibiting
discrimination against participants and beneficiaries based on a health
factor, and additional requirements prohibiting discrimination against
participants and beneficiaries based on genetic information.
(2) Subpart C. Subpart C of this part sets forth the requirements
that apply to plans and issuers with respect to coverage for hospital
stays in connection with childbirth. It also sets forth the regulations
governing parity between medical/surgical benefits and mental health
benefits in group health plans and health insurance coverage offered by
issuers in connection with a group health plan.
(3) Subpart D. Subpart D of this part sets forth exceptions to the
requirements of subpart B for certain plans and certain types of
benefits.
(4) Subpart E. Subpart E of this part implements requirements
relating to group health plans and issuers in the Group Health Insurance
Market.
(5) Subpart F. Subpart F of this part addresses the treatment of
non-Federal governmental plans, and sets forth enforcement procedures.
[62 FR 16958, Apr. 8, 1997, as amended at 63 FR 57559, Oct. 27, 1998; 71
FR 75046, Dec. 13, 2006; 74 FR 51688, Oct. 7, 2009, as amended at 75 FR
27138, May 13, 2010; 79 FR 10313, Feb. 24, 2014]
Subpart B_Requirements Relating to Access and Renewability of Coverage,
and Limitations on Preexisting Condition Exclusion Periods
Sec. 146.111 Preexisting condition exclusions.
(a) Preexisting condition exclusion defined--(1) A preexisting
condition exclusion means a preexisting condition exclusion within the
meaning of Sec. 144.103 of this subchapter.
(2) Examples. The rules of this paragraph (a)(1) are illustrated by
the following examples:
Example 1. (i) Facts. A group health plan provides benefits solely
through an insurance policy offered by Issuer S. At the expiration of
the policy, the plan switches coverage to a policy offered by Issuer T.
Issuer T's policy excludes benefits for any prosthesis if the body part
was lost before the effective date of coverage under the policy.
(ii) Conclusion. In this Example 1, the exclusion of benefits for
any prosthesis if the body part was lost before the effective date of
coverage is a preexisting condition exclusion because it operates to
exclude benefits for a condition based on the fact that the condition
was present before the effective date of coverage under the policy. The
exclusion of benefits, therefore, is prohibited.
Example 2. (i) Facts. A group health plan provides coverage for
cosmetic surgery in cases of accidental injury, but only if the injury
occurred while the individual was covered under the plan.
(ii) Conclusion. In this Example 2, the plan provision excluding
cosmetic surgery benefits for individuals injured before enrolling in
the plan is a preexisting condition exclusion because it operates to
exclude benefits relating to a condition based on the fact that the
condition was present before the effective date of coverage. The plan
provision, therefore, is prohibited.
Example 3. (i) Facts. A group health plan provides coverage for the
treatment of diabetes, generally not subject to any requirement to
obtain an approval for a treatment plan. However, if an individual was
diagnosed with diabetes before the effective date of coverage under the
plan, diabetes coverage is subject to a requirement to obtain approval
of a treatment plan in advance.
(ii) Conclusion. In this Example 3, the requirement to obtain
advance approval of a treatment plan is a preexisting condition
exclusion because it limits benefits for a condition based on the fact
that the condition was present before the effective date of coverage.
The plan provision, therefore, is prohibited.
[[Page 16]]
Example 4. (i) Facts. A group health plan provides coverage for
three infertility treatments. The plan counts against the three-
treatment limit benefits provided under prior health coverage.
(ii) Conclusion. In this Example 4, counting benefits for a specific
condition provided under prior health coverage against a treatment limit
for that condition is a preexisting condition exclusion because it
operates to limit benefits for a condition based on the fact that the
condition was present before the effective date of coverage. The plan
provision, therefore, is prohibited.
Example 5. (i) Facts. When an individual's coverage begins under a
group health plan, the individual generally becomes eligible for all
benefits. However, benefits for pregnancy are not available until the
individual has been covered under the plan for 12 months.
(ii) Conclusion. In this Example 5, the requirement to be covered
under the plan for 12 months to be eligible for pregnancy benefits is a
subterfuge for a preexisting condition exclusion because it is designed
to exclude benefits for a condition (pregnancy) that arose before the
effective date of coverage. The plan provision, therefore, is
prohibited.
Example 6. (i) Facts. A group health plan provides coverage for
medically necessary items and services, generally including treatment of
heart conditions. However, the plan does not cover those same items and
services when used for treatment of congenital heart conditions.
(ii) Conclusion. In this Example 6, the exclusion of coverage for
treatment of congenital heart conditions is a preexisting condition
exclusion because it operates to exclude benefits relating to a
condition based on the fact that the condition was present before the
effective date of coverage. The plan provision, therefore, is
prohibited.
Example 7. (i) Facts. A group health plan generally provides
coverage for medically necessary items and services. However, the plan
excludes coverage for the treatment of cleft palate.
(ii) Conclusion. In this Example 7, the exclusion of coverage for
treatment of cleft palate is not a preexisting condition exclusion
because the exclusion applies regardless of when the condition arose
relative to the effective date of coverage. The plan provision,
therefore, is not prohibited. (But see 45 CFR 147.150, which may require
coverage of cleft palate as an essential health benefit for health
insurance coverage in the individual or small group market, depending on
the essential health benefits benchmark plan as defined in Sec. 156.20
of this subchapter).
Example 8. (i) Facts. A group health plan provides coverage for
treatment of cleft palate, but only if the individual being treated has
been continuously covered under the plan from the date of birth.
(ii) Conclusion. In this Example 8, the exclusion of coverage for
treatment of cleft palate for individuals who have not been covered
under the plan from the date of birth operates to exclude benefits in
relation to a condition based on the fact that the condition was present
before the effective date of coverage. The plan provision, therefore, is
prohibited.
(b) General rules. See Sec. 147.108 of this subchapter for rules
prohibiting the imposition of a preexisting condition exclusion.
[69 FR 78783, Dec. 30, 2004, as amended at 75 FR 37235, June 28, 2010;
79 FR 10313, Feb. 24, 2014; 80 FR 72274, Nov. 18, 2015]
Sec. 146.113 Rules relating to creditable coverage.
(a) General rules--(1) Creditable coverage. For purposes of this
section, except as provided in paragraph (a)(2) of this section, the
term creditable coverage means coverage of an individual under any of
the following:
(i) A group health plan as defined in Sec. 146.145(a).
(ii) Health insurance coverage as defined in Sec. 144.103 of this
chapter (whether or not the entity offering the coverage is subject to
the requirements of this part and 45 CFR part 148 and without regard to
whether the coverage is offered in the group market, the individual
market, or otherwise).
(iii) Part A or B of Title XVIII of the Social Security Act
(Medicare).
(iv) Title XIX of the Social Security Act (Medicaid), other than
coverage consisting solely of benefits under section 1928 of the Social
Security Act (the program for distribution of pediatric vaccines).
(v) Title 10 U.S.C. Chapter 55 (medical and dental care for members
and certain former members of the uniformed services, and for their
dependents; for purposes of Title 10 U.S.C. Chapter 55, uniformed
services means the armed forces and the Commissioned Corps of the
National Oceanic and Atmospheric Administration and of the Public Health
Service).
(vi) A medical care program of the Indian Health Service or of a
tribal organization.
(vii) A State health benefits risk pool. For purposes of this
section, a State health benefits risk pool means--
[[Page 17]]
(A) An organization qualifying under section 501(c)(26) of the
Internal Revenue Code;
(B) A qualified high risk pool described in section 2744(c)(2) of
the PHS Act; or
(C) Any other arrangement sponsored by a State, the membership
composition of which is specified by the State and which is established
and maintained primarily to provide health coverage for individuals who
are residents of such State and who, by reason of the existence or
history of a medical condition--
(1) Are unable to acquire medical care coverage for such condition
through insurance or from an HMO, or
(2) Are able to acquire such coverage only at a rate which is
substantially in excess of the rate for such coverage through the
membership organization.
(viii) A health plan offered under Title 5 U.S.C. Chapter 89 (the
Federal Employees Health Benefits Program).
(ix) A public health plan. For purposes of this section, a public
health plan means any plan established or maintained by a State, the
U.S. government, a foreign country, or any political subdivision of a
State, the U.S. government, or a foreign country that provides health
coverage to individuals who are enrolled in the plan.
(x) A health benefit plan under section 5(e) of the Peace Corps Act
(22 U.S.C. 2504(e)).
(xi) Title XXI of the Social Security Act (State Children's Health
Insurance Program).
(2) Excluded coverage. Creditable coverage does not include coverage
of solely excepted benefits (described in Sec. 146.145).
(b) Counting creditable coverage rules superseded by prohibition on
preexisting condition exclusion. See Sec. 147.108 of this subchapter
for rules prohibiting the imposition of a preexisting condition
exclusion.
[69 FR 78788, Dec. 30, 2004, as amended at 79 FR 10314, Feb. 24, 2014]
Sec. 146.115 Certification and disclosure of previous coverage.
(a) In general. The rules for providing certificates of creditable
coverage and demonstrating creditable coverage have been superseded by
the prohibition on preexisting condition exclusions. See Sec. 147.108
of this subchapter for rules prohibiting the imposition of a preexisting
condition exclusion.
(b) Applicability. The provisions of this section apply beginning
December 31, 2014.
[79 FR 10314, Feb. 24, 2014]
Sec. 146.117 Special enrollment periods.
(a) Special enrollment for certain individuals who lose coverage--
(1) In General. A group health plan, and a health insurance issuer
offering health insurance coverage in connection with a group health
plan, is required to permit current employees and dependents (as defined
in Sec. 144.103 of this chapter) who are described in paragraph (a)(2)
of this section to enroll for coverage under the terms of the plan if
the conditions in paragraph (a)(3) of this section are satisfied. The
special enrollment rights under this paragraph (a) apply without regard
to the dates on which an individual would otherwise be able to enroll
under the plan.
(2) Individuals eligible for special enrollment--(i) When employee
loses coverage. A current employee and any dependents (including the
employee's spouse) each are eligible for special enrollment in any
benefit package under the plan (subject to plan eligibility rules
conditioning dependent enrollment on enrollment of the employee) if--
(A) The employee and the dependents are otherwise eligible to enroll
in the benefit package;
(B) When coverage under the plan was previously offered, the
employee had coverage under any group health plan or health insurance
coverage; and
(C) The employee satisfies the conditions of paragraph (a)(3)(i),
(ii), or (iii) of this section and, if applicable, paragraph (a)(3)(iv)
of this section.
(ii) When dependent loses coverage--(A) A dependent of a current
employee (including the employee's spouse) and the employee each are
eligible for special enrollment in any benefit package under the plan
(subject to plan eligibility rules conditioning dependent enrollment on
enrollment of the employee) if--
[[Page 18]]
(1) The dependent and the employee are otherwise eligible to enroll
in the benefit package;
(2) When coverage under the plan was previously offered, the
dependent had coverage under any group health plan or health insurance
coverage; and
(3) The dependent satisfies the conditions of paragraph (a)(3)(i),
(ii), or (iii) of this section and, if applicable, paragraph (a)(3)(iv)
of this section.
(B) However, the plan or issuer is not required to enroll any other
dependent unless that dependent satisfies the criteria of this paragraph
(a)(2)(ii), or the employee satisfies the criteria of paragraph
(a)(2)(i) of this section.
(iii) Examples. The rules of this paragraph (a)(2) are illustrated
by the following examples:
Example 1. (i) Facts. Individual A works for Employer X. A, A's
spouse, and A's dependent children are eligible but not enrolled for
coverage under X's group health plan. A's spouse works for Employer Y
and at the time coverage was offered under X's plan, A was enrolled in
coverage under Y's plan. Then, A loses eligibility for coverage under
Y's plan.
(ii) Conclusion. In this Example 1, because A satisfies the
conditions for special enrollment under paragraph (a)(2)(i) of this
section, A, A's spouse, and A's dependent children are eligible for
special enrollment under X's plan.
Example 2. (i) Facts. Individual A and A's spouse are eligible but
not enrolled for coverage under Group Health Plan P maintained by A's
employer. When A was first presented with an opportunity to enroll A and
A's spouse, they did not have other coverage. Later, A and A's spouse
enroll in Group Health Plan Q maintained by the employer of A's spouse.
During a subsequent open enrollment period in P, A and A's spouse did
not enroll because of their coverage under Q. They then lose eligibility
for coverage under Q.
(ii) Conclusion. In this Example 2, because A and A's spouse were
covered under Q when they did not enroll in P during open enrollment,
they satisfy the conditions for special enrollment under paragraphs
(a)(2)(i) and (ii) of this section. Consequently, A and A's spouse are
eligible for special enrollment under P.
Example 3. (i) Facts. Individual B works for Employer X. B and B's
spouse are eligible but not enrolled for coverage under X's group health
plan. B's spouse works for Employer Y and at the time coverage was
offered under X's plan, B's spouse was enrolled in self-only coverage
under Y's group health plan. Then, B's spouse loses eligibility for
coverage under Y's plan.
(ii) Conclusion. In this Example 3, because B's spouse satisfies the
conditions for special enrollment under paragraph (a)(2)(ii) of this
section, both B and B's spouse are eligible for special enrollment under
X's plan.
Example 4. (i) Facts. Individual A works for Employer X. X maintains
a group health plan with two benefit packages--an HMO option and an
indemnity option. Self-only and family coverage are available under both
options. A enrolls for self-only coverage in the HMO option. A's spouse
works for Employer Y and was enrolled for self-only coverage under Y's
plan at the time coverage was offered under X's plan. Then, A's spouse
loses coverage under Y's plan. A requests special enrollment for A and
A's spouse under the plan's indemnity option.
(ii) Conclusion. In this Example 4, because A's spouse satisfies the
conditions for special enrollment under paragraph (a)(2)(ii) of this
section, both A and A's spouse can enroll in either benefit package
under X's plan. Therefore, if A requests enrollment in accordance with
the requirements of this section, the plan must allow A and A's spouse
to enroll in the indemnity option.
(3) Conditions for special enrollment--(i) Loss of eligibility for
coverage. In the case of an employee or dependent who has coverage that
is not COBRA continuation coverage, the conditions of this paragraph
(a)(3)(i) are satisfied at the time the coverage is terminated as a
result of loss of eligibility (regardless of whether the individual is
eligible for or elects COBRA continuation coverage). Loss of eligibility
under this paragraph (a)(3)(i) does not include a loss due to the
failure of the employee or dependent to pay premiums on a timely basis
or termination of coverage for cause (such as making a fraudulent claim
or an intentional misrepresentation of a material fact in connection
with the plan). Loss of eligibility for coverage under this paragraph
(a)(3)(i) includes (but is not limited to)--
(A) Loss of eligibility for coverage as a result of legal
separation, divorce, cessation of dependent status (such as attaining
the maximum age to be eligible as a dependent child under the plan),
death of an employee, termination of employment, reduction in the number
of hours of employment, and any loss of eligibility for coverage after a
period that is measured by reference to any of the foregoing;
[[Page 19]]
(B) In the case of coverage offered through an HMO, or other
arrangement, in the individual market that does not provide benefits to
individuals who no longer reside, live, or work in a service area, loss
of coverage because an individual no longer resides, lives, or works in
the service area (whether or not within the choice of the individual);
(C) In the case of coverage offered through an HMO, or other
arrangement, in the group market that does not provide benefits to
individuals who no longer reside, live, or work in a service area, loss
of coverage because an individual no longer resides, lives, or works in
the service area (whether or not within the choice of the individual),
and no other benefit package is available to the individual; and
(D) A situation in which a plan no longer offers any benefits to the
class of similarly situated individuals (as described in Sec.
146.121(d)) that includes the individual.
(ii) Termination of employer contributions. In the case of an
employee or dependent who has coverage that is not COBRA continuation
coverage, the conditions of this paragraph (a)(3)(ii) are satisfied at
the time employer contributions towards the employee's or dependent's
coverage terminate. Employer contributions include contributions by any
current or former employer that was contributing to coverage for the
employee or dependent.
(iii) Exhaustion of COBRA continuation coverage. In the case of an
employee or dependent who has coverage that is COBRA continuation
coverage, the conditions of this paragraph (a)(3)(iii) are satisfied at
the time the COBRA continuation coverage is exhausted. For purposes of
this paragraph (a)(3)(iii), an individual who satisfies the conditions
for special enrollment of paragraph (a)(3)(i) of this section, does not
enroll, and instead elects and exhausts COBRA continuation coverage
satisfies the conditions of this paragraph (a)(3)(iii). (Exhaustion of
COBRA continuation coverage is defined in Sec. 144.103 of this
chapter.)
(iv) Written statement. A plan may require an employee declining
coverage (for the employee or any dependent of the employee) to state in
writing whether the coverage is being declined due to other health
coverage only if, at or before the time the employee declines coverage,
the employee is provided with notice of the requirement to provide the
statement (and the consequences of the employee's failure to provide the
statement). If a plan requires such a statement, and an employee does
not provide it, the plan is not required to provide special enrollment
to the employee or any dependent of the employee under this paragraph
(a)(3). A plan must treat an employee as having satisfied the plan
requirement permitted under this paragraph (a)(3)(iv) if the employee
provides a written statement that coverage was being declined because
the employee or dependent had other coverage; a plan cannot require
anything more for the employee to satisfy the plan's requirement to
provide a written statement. (For example, the plan cannot require that
the statement be notarized.)
(v) The rules of this paragraph (a)(3) are illustrated by the
following examples:
Example 1. (i) Facts. Individual D enrolls in a group health plan
maintained by Employer Y. At the time D enrolls, Y pays 70 percent of
the cost of employee coverage and D pays the rest. Y announces that
beginning January 1, Y will no longer make employer contributions
towards the coverage. Employees may maintain coverage, however, if they
pay the total cost of the coverage.
(ii) Conclusion. In this Example 1, employer contributions towards
D's coverage ceased on January 1 and the conditions of paragraph
(a)(3)(ii) of this section are satisfied on this date (regardless of
whether D elects to pay the total cost and continue coverage under Y's
plan).
Example 2. (i) Facts. A group health plan provides coverage through
two options--Option 1 and Option 2. Employees can enroll in either
option only within 30 days of hire or on January 1 of each year.
Employee A is eligible for both options and enrolls in Option 1.
Effective July 1 the plan terminates coverage under Option 1 and the
plan does not create an immediate open enrollment opportunity into
Option 2.
(ii) Conclusion. In this Example 2, A has experienced a loss of
eligibility for coverage that satisfies paragraph (a)(3)(i) of this
section, and has satisfied the other conditions for special enrollment
under paragraph (a)(2)(i) of this section. Therefore, if A satisfies the
other conditions of this paragraph (a), the plan must permit A to enroll
in Option 2 as a special enrollee. (A may also be
[[Page 20]]
eligible to enroll in another group health plan, such as a plan
maintained by the employer of A's spouse, as a special enrollee.) The
outcome would be the same if Option 1 was terminated by an issuer and
the plan made no other coverage available to A.
Example 3. (i) Facts. Individual C is covered under a group health
plan maintained by Employer X. While covered under X's plan, C was
eligible for but did not enroll in a plan maintained by Employer Z, the
employer of C's spouse. C terminates employment with X and loses
eligibility for coverage under X's plan. C has a special enrollment
right to enroll in Z's plan, but C instead elects COBRA continuation
coverage under X's plan. C exhausts COBRA continuation coverage under
X's plan and requests special enrollment in Z's plan.
(ii) Conclusion. In this Example 3, C has satisfied the conditions
for special enrollment under paragraph (a)(3)(iii) of this section, and
has satisfied the other conditions for special enrollment under
paragraph (a)(2)(i) of this section. The special enrollment right that C
had into Z's plan immediately after the loss of eligibility for coverage
under X's plan was an offer of coverage under Z's plan. When C later
exhausts COBRA coverage under X's plan, C has a second special
enrollment right in Z's plan.
(4) Applying for special enrollment and effective date of coverage--
(i) A plan or issuer must allow an employee a period of at least 30 days
after an event described in paragraph (a)(3) of this section to request
enrollment (for the employee or the employee's dependent).
(ii) Coverage must begin no later than the first day of the first
calendar month beginning after the date the plan or issuer receives the
request for special enrollment.
(b) Special enrollment with respect to certain dependent
beneficiaries--(1) General. A group health plan, and a health insurance
issuer offering health insurance coverage in connection with a group
health plan, that makes coverage available with respect to dependents is
required to permit individuals described in paragraph (b)(2) of this
section to be enrolled for coverage in a benefit package under the terms
of the plan. Paragraph (b)(3) of this section describes the required
special enrollment period and the date by which coverage must begin. The
special enrollment rights under this paragraph (b) apply without regard
to the dates on which an individual would otherwise be able to enroll
under the plan.
(2) Individuals eligible for special enrollment. An individual is
described in this paragraph (b)(2) if the individual is otherwise
eligible for coverage in a benefit package under the plan and if the
individual is described in paragraph (b)(2)(i), (ii), (iii), (iv), (v),
or (vi) of this section.
(i) Current employee only. A current employee is described in this
paragraph (b)(2)(i) if a person becomes a dependent of the individual
through marriage, birth, adoption, or placement for adoption.
(ii) Spouse of a participant only. An individual is described in
this paragraph (b)(2)(ii) if either--
(A) The individual becomes the spouse of a participant; or
(B) The individual is a spouse of a participant and a child becomes
a dependent of the participant through birth, adoption, or placement for
adoption.
(iii) Current employee and spouse. A current employee and an
individual who is or becomes a spouse of such an employee, are described
in this paragraph (b)(2)(iii) if either--
(A) The employee and the spouse become married; or
(B) The employee and spouse are married and a child becomes a
dependent of the employee through birth, adoption, or placement for
adoption.
(iv) Dependent of a participant only. An individual is described in
this paragraph (b)(2)(iv) if the individual is a dependent (as defined
in Sec. 144.103 of this chapter) of a participant and the individual
has become a dependent of the participant through marriage, birth,
adoption, or placement for adoption.
(v) Current employee and a new dependent. A current employee and an
individual who is a dependent of the employee, are described in this
paragraph (b)(2)(v) if the individual becomes a dependent of the
employee through marriage, birth, adoption, or placement for adoption.
(vi) Current employee, spouse, and a new dependent. A current
employee, the employee's spouse, and the employee's dependent are
described in this paragraph (b)(2)(vi) if the dependent becomes a
dependent of the employee through marriage, birth, adoption, or
placement for adoption.
[[Page 21]]
(3) Applying for special enrollment and effective date of coverage--
(i) Request. A plan or issuer must allow an individual a period of at
least 30 days after the date of the marriage, birth, adoption, or
placement for adoption (or, if dependent coverage is not generally made
available at the time of the marriage, birth, adoption, or placement for
adoption, a period of at least 30 days after the date the plan makes
dependent coverage generally available) to request enrollment (for the
individual or the individual's dependent).
(ii) Reasonable procedures for special enrollment. [Reserved]
(iii) Date coverage must begin--(A) Marriage. In the case of
marriage, coverage must begin no later than the first day of the first
calendar month beginning after the date the plan or issuer receives the
request for special enrollment.
(B) Birth, adoption, or placement for adoption. Coverage must begin
in the case of a dependent's birth on the date of birth and in the case
of a dependent's adoption or placement for adoption no later than the
date of such adoption or placement for adoption (or, if dependent
coverage is not made generally available at the time of the birth,
adoption, or placement for adoption, the date the plan makes dependent
coverage available).
(4) Examples. The rules of this paragraph (b) are illustrated by the
following examples:
Example 1. (i) Facts. An employer maintains a group health plan that
offers all employees employee-only coverage, employee-plus-spouse
coverage, or family coverage. Under the terms of the plan, any employee
may elect to enroll when first hired (with coverage beginning on the
date of hire) or during an annual open enrollment period held each
December (with coverage beginning the following January 1). Employee A
is hired on September 3. A is married to B, and they have no children.
On March 15 in the following year a child C is born to A and B. Before
that date, A and B have not been enrolled in the plan.
(ii) Conclusion. In this Example 1, the conditions for special
enrollment of an employee with a spouse and new dependent under
paragraph (b)(2)(vi) of this section are satisfied. If A satisfies the
conditions of paragraph (b)(3) of this section for requesting enrollment
timely, the plan will satisfy this paragraph (b) if it allows A to
enroll either with employee-only coverage, with employee-plus-spouse
coverage (for A and B), or with family coverage (for A, B, and C). The
plan must allow whatever coverage is chosen to begin on March 15, the
date of C's birth.
Example 2. (i) Facts. Individual D works for Employer X. X maintains
a group health plan with two benefit packages--an HMO option and an
indemnity option. Self-only and family coverage are available under both
options. D enrolls for self-only coverage in the HMO option. Then, a
child, E, is placed for adoption with D. Within 30 days of the placement
of E for adoption, D requests enrollment for D and E under the plan's
indemnity option.
(ii) Conclusion. In this Example 2, D and E satisfy the conditions
for special enrollment under paragraphs (b)(2)(v) and (b)(3) of this
section. Therefore, the plan must allow D and E to enroll in the
indemnity coverage, effective as of the date of the placement for
adoption.
(c) Notice of special enrollment. At or before the time an employee
is initially offered the opportunity to enroll in a group health plan,
the plan must furnish the employee with a notice of special enrollment
that complies with the requirements of this paragraph (c).
(1) Description of special enrollment rights. The notice of special
enrollment must include a description of special enrollment rights. The
following model language may be used to satisfy this requirement:
If you are declining enrollment for yourself or your dependents
(including your spouse) because of other health insurance or group
health plan coverage, you may be able to enroll yourself and your
dependents in this plan if you or your dependents lose eligibility for
that other coverage (or if the employer stops contributing towards your
or your dependents' other coverage). However, you must request
enrollment within [insert ``30 days'' or any longer period that applies
under the plan] after your or your dependents' other coverage ends (or
after the employer stops contributing toward the other coverage).
In addition, if you have a new dependent as a result of marriage,
birth, adoption, or placement for adoption, you may be able to enroll
yourself and your dependents. However, you must request enrollment
within [insert ``30 days'' or any longer period that applies under the
plan] after the marriage, birth, adoption, or placement for adoption.
To request special enrollment or obtain more information, contact
[insert the name, title, telephone number, and any additional contact
information of the appropriate plan representative].
[[Page 22]]
(2) Additional information that may be required. The notice of
special enrollment must also include, if applicable, the notice
described in paragraph (a)(3)(iv) of this section (the notice required
to be furnished to an individual declining coverage if the plan requires
the reason for declining coverage to be in writing).
(d) Treatment of special enrollees--(1) If an individual requests
enrollment while the individual is entitled to special enrollment under
either paragraph (a) or (b) of this section, the individual is a special
enrollee, even if the request for enrollment coincides with a late
enrollment opportunity under the plan. Therefore, the individual cannot
be treated as a late enrollee.
(2) Special enrollees must be offered all the benefit packages
available to similarly situated individuals who enroll when first
eligible. For this purpose, any difference in benefits or cost-sharing
requirements for different individuals constitutes a different benefit
package. In addition, a special enrollee cannot be required to pay more
for coverage than a similarly situated individual who enrolls in the
same coverage when first eligible.
(3) The rules of this section are illustrated by the following
example:
Example. (i) Facts. Employer Y maintains a group health plan that
has an enrollment period for late enrollees every November 1 through
November 30 with coverage effective the following January 1. On October
18, Individual B loses coverage under another group health plan and
satisfies the requirements of paragraphs (a)(2), (3), and (4) of this
section. B submits a completed application for coverage on November 2.
(ii) Conclusion. In this Example, B is a special enrollee.
Therefore, even though B's request for enrollment coincides with an open
enrollment period, B's coverage is required to be made effective no
later than December 1 (rather than the plan's January 1 effective date
for late enrollees).
[69 FR 78794, Dec. 30, 2004, as amended at 79 FR 10314, Feb. 24, 2014]
Sec. 146.119 HMO affiliation period as an alternative to a
preexisting condition exclusion.
The rules for HMO affiliation periods have been superseded by the
prohibition on preexisting condition exclusions. See Sec. 147.108 of
this subchapter for rules prohibiting the imposition of a preexisting
condition exclusion.
[79 FR 10314, Feb. 24, 2014]
Sec. 146.120 Interaction with the Family and Medical Leave Act.
[Reserved]
Sec. 146.121 Prohibiting discrimination against participants and
beneficiaries based on a health factor.
(a) Health factors. (1) The term health factor means, in relation to
an individual, any of the following health status-related factors:
(i) Health status;
(ii) Medical condition (including both physical and mental
illnesses), as defined in Sec. 144.103 of this chapter;
(iii) Claims experience;
(iv) Receipt of health care;
(v) Medical history;
(vi) Genetic information, as defined in Sec. 146.122(a) of this
subchapter;
(vii) Evidence of insurability; or
(viii) Disability.
(2) Evidence of insurability includes--
(i) Conditions arising out of acts of domestic violence; and
(ii) Participation in activities such as motorcycling, snowmobiling,
all-terrain vehicle riding, horseback riding, skiing, and other similar
activities.
(3) The decision whether health coverage is elected for an
individual (including the time chosen to enroll, such as under special
enrollment or late enrollment) is not, itself, within the scope of any
health factor. (However, under Sec. 146.117, a plan or issuer must
treat special enrollees the same as similarly situated individuals who
are enrolled when first eligible.)
(b) Prohibited discrimination in rules for eligibility--(1) In
general--42V3(4839):
As used in this part, unless the context indicates otherwise--(i) A
group health plan, and a health insurance issuer offering health
insurance coverage in connection with a group health plan, may not
establish any rule for eligibility (including continued eligibility) of
any individual to enroll for benefits under the terms of the plan or
group health insurance coverage that discriminates based on any health
factor that relates to that individual or a dependent of that
individual. This rule
[[Page 23]]
is subject to the provisions of paragraph (b)(2) of this section
(explaining how this rule applies to benefits), paragraph (d) of this
section (containing rules for establishing groups of similarly situated
individuals), paragraph (e) of this section (relating to nonconfinement,
actively-at-work, and other service requirements), paragraph (f) of this
section (relating to wellness programs), and paragraph (g) of this
section (permitting favorable treatment of individuals with adverse
health factors).
(ii) For purposes of this section, rules for eligibility include,
but are not limited to, rules relating to--
(A) Enrollment;
(B) The effective date of coverage;
(C) Waiting (or affiliation) periods;
(D) Late and special enrollment;
(E) Eligibility for benefit packages (including rules for
individuals to change their selection among benefit packages);
(F) Benefits (including rules relating to covered benefits, benefit
restrictions, and cost-sharing mechanisms such as coinsurance,
copayments, and deductibles), as described in paragraphs (b)(2) and
(b)(3) of this section;
(G) Continued eligibility; and
(H) Terminating coverage (including disenrollment) of any individual
under the plan.
(iii) The rules of this paragraph (b)(1) are illustrated by the
following examples:
Example 1. (i) Facts. An employer sponsors a group health plan that
is available to all employees who enroll within the first 30 days of
their employment. However, employees who do not enroll within the first
30 days cannot enroll later unless they pass a physical examination.
(ii) Conclusion. In this Example 1, the requirement to pass a
physical examination in order to enroll in the plan is a rule for
eligibility that discriminates based on one or more health factors and
thus violates this paragraph (b)(1).
Example 2. (i) Facts. Under an employer's group health plan,
employees who enroll during the first 30 days of employment (and during
special enrollment periods) may choose between two benefit packages: an
indemnity option and an HMO option. However, employees who enroll during
late enrollment are permitted to enroll only in the HMO option and only
if they provide evidence of good health.
(ii) Conclusion. In this Example 2, the requirement to provide
evidence of good health in order to be eligible for late enrollment in
the HMO option is a rule for eligibility that discriminates based on one
or more health factors and thus violates this paragraph (b)(1). However,
if the plan did not require evidence of good health but limited late
enrollees to the HMO option, the plan's rules for eligibility would not
discriminate based on any health factor, and thus would not violate this
paragraph (b)(1), because the time an individual chooses to enroll is
not, itself, within the scope of any health factor.
Example 3. (i) Facts. Under an employer's group health plan, all
employees generally may enroll within the first 30 days of employment.
However, individuals who participate in certain recreational activities,
including motorcycling, are excluded from coverage.
(ii) Conclusion. In this Example 3, excluding from the plan
individuals who participate in recreational activities, such as
motorcycling, is a rule for eligibility that discriminates based on one
or more health factors and thus violates this paragraph (b)(1).
Example 4. (i) Facts. A group health plan applies for a group health
policy offered by an issuer. As part of the application, the issuer
receives health information about individuals to be covered under the
plan. Individual A is an employee of the employer maintaining the plan.
A and A's dependents have a history of high health claims. Based on the
information about A and A's dependents, the issuer excludes A and A's
dependents from the group policy it offers to the employer.
(ii) Conclusion. In this Example 4, the issuer's exclusion of A and
A's dependents from coverage is a rule for eligibility that
discriminates based on one or more health factors, and thus violates
this paragraph (b)(1). (If the employer is a small employer under 45 CFR
144.103 (generally, an employer with 50 or fewer employees), the issuer
also may violate 45 CFR 146.150, which requires issuers to offer all the
policies they sell in the small group market on a guaranteed available
basis to all small employers and to accept every eligible individual in
every small employer group.) If the plan provides coverage through this
policy and does not provide equivalent coverage for A and A's dependents
through other means, the plan will also violate this paragraph (b)(1).
(2) Application to benefits--(i) General rule--(A) Under this
section, a group health plan or group health insurance issuer is not
required to provide coverage for any particular benefit to any group of
similarly situated individuals.
[[Page 24]]
(B) However, benefits provided under a plan must be uniformly
available to all similarly situated individuals (as described in
paragraph (d) of this section). Likewise, any restriction on a benefit
or benefits must apply uniformly to all similarly situated individuals
and must not be directed at individual participants or beneficiaries
based on any health factor of the participants or beneficiaries
(determined based on all the relevant facts and circumstances). Thus,
for example, a plan may limit or exclude benefits in relation to a
specific disease or condition, limit or exclude benefits for certain
types of treatments or drugs, or limit or exclude benefits based on a
determination of whether the benefits are experimental or not medically
necessary, but only if the benefit limitation or exclusion applies
uniformly to all similarly situated individuals and is not directed at
individual participants or beneficiaries based on any health factor of
the participants or beneficiaries. In addition, a plan or issuer may
require the satisfaction of a deductible, copayment, coinsurance, or
other cost-sharing requirement in order to obtain a benefit if the limit
or cost-sharing requirement applies uniformly to all similarly situated
individuals and is not directed at individual participants or
beneficiaries based on any health factor of the participants or
beneficiaries. In the case of a cost-sharing requirement, see also
paragraph (b)(2)(ii) of this section, which permits variances in the
application of a cost-sharing mechanism made available under a wellness
program. (Whether any plan provision or practice with respect to
benefits complies with this paragraph (b)(2)(i) does not affect whether
the provision or practice is permitted under ERISA, the Affordable Care
Act (including the requirements related to essential health benefits),
the Americans with Disabilities Act, or any other law, whether State or
Federal.)
(C) For purposes of this paragraph (b)(2)(i), a plan amendment
applicable to all individuals in one or more groups of similarly
situated individuals under the plan and made effective no earlier than
the first day of the first plan year after the amendment is adopted is
not considered to be directed at any individual participants or
beneficiaries.
(D) The rules of this paragraph (b)(2)(i) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan applies a $10,000 annual
limit on a specific covered benefit that is not an essential health
benefit to each participant or beneficiary covered under the plan. The
limit is not directed at individual participants or beneficiaries.
(ii) Conclusion. In this Example 1, the limit does not violate this
paragraph (b)(2)(i) because coverage of the specific, non-essential
health benefit up to $10,000 is available uniformly to each participant
and beneficiary under the plan and because the limit is applied
uniformly to all participants and beneficiaries and is not directed at
individual participants or beneficiaries.
Example 2. (i) Facts. A group health plan has a $500 deductible on
all benefits for participants covered under the plan. Participant B
files a claim for the treatment of AIDS. At the next corporate board
meeting of the plan sponsor, the claim is discussed. Shortly thereafter,
the plan is modified to impose a $2,000 deductible on benefits for the
treatment of AIDS, effective before the beginning of the next plan year.
(ii) Conclusion. The facts of this Example 2 strongly suggest that
the plan modification is directed at B based on B's claim. Absent
outweighing evidence to the contrary, the plan violates this paragraph
(b)(2)(i).
Example 3. (i) A group health plan applies for a group health policy
offered by an issuer. Individual C is covered under the plan and has an
adverse health condition. As part of the application, the issuer
receives health information about the individuals to be covered,
including information about C's adverse health condition. The policy
form offered by the issuer generally provides benefits for the adverse
health condition that C has, but in this case the issuer offers the plan
a policy modified by a rider that excludes benefits for C for that
condition. The exclusionary rider is made effective the first day of the
next plan year.
(ii) Conclusion. In this Example 3, the issuer violates this
paragraph (b)(2)(i) because benefits for C's condition are available to
other individuals in the group of similarly situated individuals that
includes C but are not available to C. Thus, the benefits are not
uniformly available to all similarly situated individuals. Even though
the exclusionary rider is made effective the first day of the next plan
year, because the rider does not apply to all similarly situated
individuals, the issuer violates this paragraph (b)(2)(i).
Example 4. (i) Facts. A group health plan has a $2,000 lifetime
limit for the treatment of temporomandibular joint syndrome
[[Page 25]]
(TMJ). The limit is applied uniformly to all similarly situated
individuals and is not directed at individual participants or
beneficiaries.
(ii) Conclusion. In this Example 4, the limit does not violate this
paragraph (b)(2)(i) because $2,000 of benefits for the treatment of TMJ
are available uniformly to all similarly situated individuals and a plan
may limit benefits covered in relation to a specific disease or
condition if the limit applies uniformly to all similarly situated
individuals and is not directed at individual participants or
beneficiaries. (However, applying a lifetime limit on TMJ may violate
Sec. 147.126 of this subchapter, if TMJ coverage is an essential health
benefit, depending on the essential health benefits benchmark plan as
defined in Sec. 156.20 of this subchapter. This example does not
address whether the plan provision is permissible under any other
applicable law, including PHS Act section 2711 or the Americans with
Disabilities Act.)
Example 5. (i) Facts. A group health plan applies a $2 million
lifetime limit on all benefits. However, the $2 million lifetime limit
is reduced to $10,000 for any participant or beneficiary covered under
the plan who has a congenital heart defect.
(ii) Conclusion. In this Example 5, the lower lifetime limit for
participants and beneficiaries with a congenital heart defect violates
this paragraph (b)(2)(i) because benefits under the plan are not
uniformly available to all similarly situated individuals and the plan's
lifetime limit on benefits does not apply uniformly to all similarly
situated individuals. Additionally, this plan provision is prohibited
under Sec. 147.126 of this subchapter because it imposes a lifetime
limit on essential health benefits.
Example 6. (i) Facts. A group health plan limits benefits for
prescription drugs to those listed on a drug formulary. The limit is
applied uniformly to all similarly situated individuals and is not
directed at individual participants or beneficiaries.
(ii) Conclusion. In this Example 6, the exclusion from coverage of
drugs not listed on the drug formulary does not violate this paragraph
(b)(2)(i) because benefits for prescription drugs listed on the
formulary are uniformly available to all similarly situated individuals
and because the exclusion of drugs not listed on the formulary applies
uniformly to all similarly situated individuals and is not directed at
individual participants or beneficiaries.
Example 7. (i) Facts. Under a group health plan, doctor visits are
generally subject to a $250 annual deductible and 20 percent coinsurance
requirement. However, prenatal doctor visits are not subject to any
deductible or coinsurance requirement. These rules are applied uniformly
to all similarly situated individuals and are not directed at individual
participants or beneficiaries.
(ii) Conclusion. In this Example 7, imposing different deductible
and coinsurance requirements for prenatal doctor visits and other visits
does not violate this paragraph (b)(2)(i) because a plan may establish
different deductibles or coinsurance requirements for different services
if the deductible or coinsurance requirement is applied uniformly to all
similarly situated individuals and is not directed at individual
participants or beneficiaries.
(ii) Exception for wellness programs. A group health plan or group
health insurance issuer may vary benefits, including cost-sharing
mechanisms (such as a deductible, copayment, or coinsurance), based on
whether an individual has met the standards of a wellness program that
satisfies the requirements of paragraph (f) of this section.
(iii) Specific rule relating to source-of-injury exclusions--(A) If
a group health plan or group health insurance coverage generally
provides benefits for a type of injury, the plan or issuer may not deny
benefits otherwise provided for treatment of the injury if the injury
results from an act of domestic violence or a medical condition
(including both physical and mental health conditions). This rule
applies in the case of an injury resulting from a medical condition even
if the condition is not diagnosed before the injury.
(B) The rules of this paragraph (b)(2)(iii) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan generally provides
medical/surgical benefits, including benefits for hospital stays, that
are medically necessary. However, the plan excludes benefits for self-
inflicted injuries or injuries sustained in connection with attempted
suicide. Because of depression, Individual D attempts suicide. As a
result, D sustains injuries and is hospitalized for treatment of the
injuries. Under the exclusion, the plan denies D benefits for treatment
of the injuries.
(ii) Conclusion. In this Example 1, the suicide attempt is the
result of a medical condition (depression). Accordingly, the denial of
benefits for the treatments of D's injuries violates the requirements of
this paragraph (b)(2)(iii) because the plan provision excludes benefits
for treatment of an injury resulting from a medical condition.
Example 2. (i) Facts. A group health plan provides benefits for head
injuries generally. The plan also has a general exclusion for any injury
sustained while participating in any
[[Page 26]]
of a number of recreational activities, including bungee jumping.
However, this exclusion does not apply to any injury that results from a
medical condition (nor from domestic violence). Participant E sustains a
head injury while bungee jumping. The injury did not result from a
medical condition (nor from domestic violence). Accordingly, the plan
denies benefits for E's head injury.
(ii) Conclusion. In this Example 2, the plan provision that denies
benefits based on the source of an injury does not restrict benefits
based on an act of domestic violence or any medical condition.
Therefore, the provision is permissible under this paragraph (b)(2)(iii)
and does not violate this section. (However, if the plan did not allow E
to enroll in the plan (or applied different rules for eligibility to E)
because E frequently participates in bungee jumping, the plan would
violate paragraph (b)(1) of this section.)
(c) Prohibited discrimination in premiums or contributions--(1) In
general--(i) A group health plan, and a health insurance issuer offering
health insurance coverage in connection with a group health plan, may
not require an individual, as a condition of enrollment or continued
enrollment under the plan or group health insurance coverage, to pay a
premium or contribution that is greater than the premium or contribution
for a similarly situated individual (described in paragraph (d) of this
section) enrolled in the plan or group health insurance coverage based
on any health factor that relates to the individual or a dependent of
the individual.
(ii) Discounts, rebates, payments in kind, and any other premium
differential mechanisms are taken into account in determining an
individual's premium or contribution rate. (For rules relating to cost-
sharing mechanisms, see paragraph (b)(2) of this section (addressing
benefits).)
(2) Rules relating to premium rates--(i) Group rating based on
health factors not restricted under this section. Nothing in this
section restricts the aggregate amount that an employer may be charged
for coverage under a group health plan. But see Sec. 146.122(b) of this
part, which prohibits adjustments in group premium or contribution rates
based on genetic information.
(ii) List billing based on a health factor prohibited. However, a
group health insurance issuer, or a group health plan, may not quote or
charge an employer (or an individual) a different premium for an
individual in a group of similarly situated individuals based on a
health factor. (But see paragraph (g) of this section permitting
favorable treatment of individuals with adverse health factors.)
(iii) Examples. The rules of this paragraph (c)(2) are illustrated
by the following examples:
Example 1. (i) Facts. An employer sponsors a group health plan and
purchases coverage from a health insurance issuer. In order to determine
the premium rate for the upcoming plan year, the issuer reviews the
claims experience of individuals covered under the plan. The issuer
finds that Individual F had significantly higher claims experience than
similarly situated individuals in the plan. The issuer quotes the plan a
higher per-participant rate because of F's claims experience.
(ii) Conclusion. In this Example 1, the issuer does not violate the
provisions of this paragraph (c)(2) because the issuer blends the rate
so that the employer is not quoted a higher rate for F than for a
similarly situated individual based on F's claims experience. (However,
if the issuer used genetic information in computing the group rate, it
would violate Sec. 146.122(b) of this part.)
Example 2. (i) Facts. Same facts as Example 1, except that the
issuer quotes the employer a higher premium rate for F, because of F's
claims experience, than for a similarly situated individual.
(ii) Conclusion. In this Example 2, the issuer violates this
paragraph (c)(2). Moreover, even if the plan purchased the policy based
on the quote but did not require a higher participant contribution for F
than for a similarly situated individual, the issuer would still violate
this paragraph (c)(2) (but in such a case the plan would not violate
this paragraph (c)(2)).
(3) Exception for wellness programs. Notwithstanding paragraphs
(c)(1) and (c)(2) of this section, a plan or issuer may vary the amount
of premium or contribution it requires similarly situated individuals to
pay based on whether an individual has met the standards of a wellness
program that satisfies the requirements of paragraph (f) of this
section.
(d) Similarly situated individuals. The requirements of this section
apply only within a group of individuals who are
[[Page 27]]
treated as similarly situated individuals. A plan or issuer may treat
participants as a group of similarly situated individuals separate from
beneficiaries. In addition, participants may be treated as two or more
distinct groups of similarly situated individuals and beneficiaries may
be treated as two or more distinct groups of similarly situated
individuals in accordance with the rules of this paragraph (d).
Moreover, if individuals have a choice of two or more benefit packages,
individuals choosing one benefit package may be treated as one or more
groups of similarly situated individuals distinct from individuals
choosing another benefit package.
(1) Participants. Subject to paragraph (d)(3) of this section, a
plan or issuer may treat participants as two or more distinct groups of
similarly situated individuals if the distinction between or among the
groups of participants is based on a bona fide employment-based
classification consistent with the employer's usual business practice.
Whether an employment-based classification is bona fide is determined on
the basis of all the relevant facts and circumstances. Relevant facts
and circumstances include whether the employer uses the classification
for purposes independent of qualification for health coverage (for
example, determining eligibility for other employee benefits or
determining other terms of employment). Subject to paragraph (d)(3) of
this section, examples of classifications that, based on all the
relevant facts and circumstances, may be bona fide include full-time
versus part-time status, different geographic location, membership in a
collective bargaining unit, date of hire, length of service, current
employee versus former employee status, and different occupations.
However, a classification based on any health factor is not a bona fide
employment-based classification, unless the requirements of paragraph
(g) of this section are satisfied (permitting favorable treatment of
individuals with adverse health factors).
(2) Beneficiaries--(i) Subject to paragraph (d)(3) of this section,
a plan or issuer may treat beneficiaries as two or more distinct groups
of similarly situated individuals if the distinction between or among
the groups of beneficiaries is based on any of the following factors:
(A) A bona fide employment-based classification of the participant
through whom the beneficiary is receiving coverage;
(B) Relationship to the participant (for example, as a spouse or as
a dependent child);
(C) Marital status;
(D) With respect to children of a participant, age or student
status; or
(E) Any other factor if the factor is not a health factor.
(ii) Paragraph (d)(2)(i) of this section does not prevent more
favorable treatment of individuals with adverse health factors in
accordance with paragraph (g) of this section.
(3) Discrimination directed at individuals. Notwithstanding
paragraphs (d)(1) and (d)(2) of this section, if the creation or
modification of an employment or coverage classification is directed at
individual participants or beneficiaries based on any health factor of
the participants or beneficiaries, the classification is not permitted
under this paragraph (d), unless it is permitted under paragraph (g) of
this section (permitting favorable treatment of individuals with adverse
health factors). Thus, if an employer modified an employment-based
classification to single out, based on a health factor, individual
participants and beneficiaries and deny them health coverage, the new
classification would not be permitted under this section.
(4) Examples. The rules of this paragraph (d) are illustrated by the
following examples:
Example 1. (i) Facts. An employer sponsors a group health plan for
full-time employees only. Under the plan (consistent with the employer's
usual business practice), employees who normally work at least 30 hours
per week are considered to be working full-time. Other employees are
considered to be working part-time. There is no evidence to suggest that
the classification is directed at individual participants or
beneficiaries.
(ii) Conclusion. In this Example 1, treating the full-time and part-
time employees as two separate groups of similarly situated individuals
is permitted under this paragraph (d) because the classification is bona
fide and is not directed at individual participants or beneficiaries.
[[Page 28]]
Example 2. (i) Facts. Under a group health plan, coverage is made
available to employees, their spouses, and their children. However,
coverage is made available to a child only if the child is under age 26
(or under age 29 if the child is continuously enrolled full-time in an
institution of higher learning (full-time students)). There is no
evidence to suggest that these classifications are directed at
individual participants or beneficiaries.
(ii) Conclusion. In this Example 2, treating spouses and children
differently by imposing an age limitation on children, but not on
spouses, is permitted under this paragraph (d). Specifically, the
distinction between spouses and children is permitted under paragraph
(d)(2) of this section and is not prohibited under paragraph (d)(3) of
this section because it is not directed at individual participants or
beneficiaries. It is also permissible to treat children who are under
age 26 (or full-time students under age 29) as a group of similarly
situated individuals separate from those who are age 26 or older (or age
29 or older if they are not full-time students) because the
classification is permitted under paragraph (d)(2) of this section and
is not directed at individual participants or beneficiaries.
Example 3. (i) Facts. A university sponsors a group health plan that
provides one health benefit package to faculty and another health
benefit package to other staff. Faculty and staff are treated
differently with respect to other employee benefits such as retirement
benefits and leaves of absence. There is no evidence to suggest that the
distinction is directed at individual participants or beneficiaries.
(ii) Conclusion. In this Example 3, the classification is permitted
under this paragraph (d) because there is a distinction based on a bona
fide employment-based classification consistent with the employer's
usual business practice and the distinction is not directed at
individual participants and beneficiaries.
Example 4. (i) Facts. An employer sponsors a group health plan that
is available to all current employees. Former employees may also be
eligible, but only if they complete a specified number of years of
service, are enrolled under the plan at the time of termination of
employment, and are continuously enrolled from that date. There is no
evidence to suggest that these distinctions are directed at individual
participants or beneficiaries.
(ii) Conclusion. In this Example 4, imposing additional eligibility
requirements on former employees is permitted because a classification
that distinguishes between current and former employees is a bona fide
employment-based classification that is permitted under this paragraph
(d), provided that it is not directed at individual participants or
beneficiaries. In addition, it is permissible to distinguish between
former employees who satisfy the service requirement and those who do
not, provided that the distinction is not directed at individual
participants or beneficiaries. (However, former employees who do not
satisfy the eligibility criteria may, nonetheless, be eligible for
continued coverage pursuant to a COBRA continuation provision or similar
State law.)
Example 5. (i) Facts. An employer sponsors a group health plan that
provides the same benefit package to all seven employees of the
employer. Six of the seven employees have the same job title and
responsibilities, but Employee G has a different job title and different
responsibilities. After G files an expensive claim for benefits under
the plan, coverage under the plan is modified so that employees with G's
job title receive a different benefit package that includes a higher
deductible than in the benefit package made available to the other six
employees.
(ii) Conclusion. Under the facts of this Example 5, changing the
coverage classification for G based on the existing employment
classification for G is not permitted under this paragraph (d) because
the creation of the new coverage classification for G is directed at G
based on one or more health factors.
(e) Nonconfinement and actively-at-work provisions--(1)
Nonconfinement provisions--(i) General rule. Under the rules of
paragraphs (b) and (c) of this section, a plan or issuer may not
establish a rule for eligibility (as described in paragraph (b)(1)(ii)
of this section) or set any individual's premium or contribution rate
based on whether an individual is confined to a hospital or other health
care institution. In addition, under the rules of paragraphs (b) and (c)
of this section, a plan or issuer may not establish a rule for
eligibility or set any individual's premium or contribution rate based
on an individual's ability to engage in normal life activities, except
to the extent permitted under paragraphs (e)(2)(ii) and (e)(3) of this
section (permitting plans and issuers, under certain circumstances, to
distinguish among employees based on the performance of services).
(ii) Examples. The rules of this paragraph (e)(1) are illustrated by
the following examples:
Example 1. (i) Facts. Under a group health plan, coverage for
employees and their dependents generally becomes effective on the first
day of employment. However, coverage for a dependent who is confined to
a hospital
[[Page 29]]
or other health care institution does not become effective until the
confinement ends.
(ii) Conclusion. In this Example 1, the plan violates this paragraph
(e)(1) because the plan delays the effective date of coverage for
dependents based on confinement to a hospital or other health care
institution.
Example 2. (i) Facts. In previous years, a group health plan has
provided coverage through a group health insurance policy offered by
Issuer M. However, for the current year, the plan provides coverage
through a group health insurance policy offered by Issuer N. Under
Issuer N's policy, items and services provided in connection with the
confinement of a dependent to a hospital or other health care
institution are not covered if the confinement is covered under an
extension of benefits clause from a previous health insurance issuer.
(ii) Conclusion. In this Example 2, Issuer N violates this paragraph
(e)(1) because the group health insurance coverage restricts benefits (a
rule for eligibility under paragraph (b)(1)) based on whether a
dependent is confined to a hospital or other health care institution
that is covered under an extension of benefits clause from a previous
issuer. State law cannot change the obligation of Issuer N under this
section. However, under State law Issuer M may also be responsible for
providing benefits to such a dependent. In a case in which Issuer N has
an obligation under this section to provide benefits and Issuer M has an
obligation under State law to provide benefits, any State laws designed
to prevent more than 100% reimbursement, such as State coordination-of-
benefits laws, continue to apply.
(2) Actively-at-work and continuous service provisions--(i) General
rule--(A) Under the rules of paragraphs (b) and (c) of this section and
subject to the exception for the first day of work described in
paragraph (e)(2)(ii) of this section, a plan or issuer may not establish
a rule for eligibility (as described in paragraph (b)(1)(ii) of this
section) or set any individual's premium or contribution rate based on
whether an individual is actively at work (including whether an
individual is continuously employed), unless absence from work due to
any health factor (such as being absent from work on sick leave) is
treated, for purposes of the plan or health insurance coverage, as being
actively at work.
(B) The rules of this paragraph (e)(2)(i) are illustrated by the
following examples:
Example 1. (i) Facts. Under a group health plan, an employee
generally becomes eligible to enroll 30 days after the first day of
employment. However, if the employee is not actively at work on the
first day after the end of the 30-day period, then eligibility for
enrollment is delayed until the first day the employee is actively at
work.
(ii) Conclusion. In this Example 1, the plan violates this paragraph
(e)(2) (and thus also violates paragraph (b) of this section). However,
the plan would not violate paragraph (e)(2) or (b) of this section if,
under the plan, an absence due to any health factor is considered being
actively at work.
Example 2. (i) Facts. Under a group health plan, coverage for an
employee becomes effective after 90 days of continuous service; that is,
if an employee is absent from work (for any reason) before completing 90
days of service, the beginning of the 90-day period is measured from the
day the employee returns to work (without any credit for service before
the absence).
(ii) Conclusion. In this Example 2, the plan violates this paragraph
(e)(2) (and thus also paragraph (b) of this section) because the 90-day
continuous service requirement is a rule for eligibility based on
whether an individual is actively at work. However, the plan would not
violate this paragraph (e)(2) or paragraph (b) of this section if, under
the plan, an absence due to any health factor is not considered an
absence for purposes of measuring 90 days of continuous service. (In
addition, any eligibility provision that is time-based must comply with
the requirements of PHS Act section 2708 and its implementing
regulations.)
(ii) Exception for the first day of work--(A) Notwithstanding the
general rule in paragraph (e)(2)(i) of this section, a plan or issuer
may establish a rule for eligibility that requires an individual to
begin work for the employer sponsoring the plan (or, in the case of a
multiemployer plan, to begin a job in covered employment) before
coverage becomes effective, provided that such a rule for eligibility
applies regardless of the reason for the absence.
(B) The rules of this paragraph (e)(2)(ii) are illustrated by the
following examples:
Example 1. (i) Facts. Under the eligibility provision of a group
health plan, coverage for new employees becomes effective on the first
day that the employee reports to work. Individual H is scheduled to
begin work on August 3. However, H is unable to begin work on that day
because of illness. H begins working on August 4, and H's coverage is
effective on August 4.
[[Page 30]]
(ii) Conclusion. In this Example 1, the plan provision does not
violate this section. However, if coverage for individuals who do not
report to work on the first day they were scheduled to work for a reason
unrelated to a health factor (such as vacation or bereavement) becomes
effective on the first day they were scheduled to work, then the plan
would violate this section.
Example 2. (i) Facts. Under a group health plan, coverage for new
employees becomes effective on the first day of the month following the
employee's first day of work, regardless of whether the employee is
actively at work on the first day of the month. Individual J is
scheduled to begin work on March 24. However, J is unable to begin work
on March 24 because of illness. J begins working on April 7 and J's
coverage is effective May 1.
(ii) Conclusion. In this Example 2, the plan provision does not
violate this section. However, as in Example 1, if coverage for
individuals absent from work for reasons unrelated to a health factor
became effective despite their absence, then the plan would violate this
section.
(3) Relationship to plan provisions defining similarly situated
individuals--(i) Notwithstanding the rules of paragraphs (e)(1) and
(e)(2) of this section, a plan or issuer may establish rules for
eligibility or set any individual's premium or contribution rate in
accordance with the rules relating to similarly situated individuals in
paragraph (d) of this section. Accordingly, a plan or issuer may
distinguish in rules for eligibility under the plan between full-time
and part-time employees, between permanent and temporary or seasonal
employees, between current and former employees, and between employees
currently performing services and employees no longer performing
services for the employer, subject to paragraph (d) of this section.
However, other Federal or State laws (including the COBRA continuation
provisions and the Family and Medical Leave Act of 1993) may require an
employee or the employee's dependents to be offered coverage and set
limits on the premium or contribution rate even though the employee is
not performing services.
(ii) The rules of this paragraph (e)(3) are illustrated by the
following examples:
Example 1. (i) Facts. Under a group health plan, employees are
eligible for coverage if they perform services for the employer for 30
or more hours per week or if they are on paid leave (such as vacation,
sick, or bereavement leave). Employees on unpaid leave are treated as a
separate group of similarly situated individuals in accordance with the
rules of paragraph (d) of this section.
(ii) Conclusion. In this Example 1, the plan provisions do not
violate this section. However, if the plan treated individuals
performing services for the employer for 30 or more hours per week,
individuals on vacation leave, and individuals on bereavement leave as a
group of similarly situated individuals separate from individuals on
sick leave, the plan would violate this paragraph (e) (and thus also
would violate paragraph (b) of this section) because groups of similarly
situated individuals cannot be established based on a health factor
(including the taking of sick leave) under paragraph (d) of this
section.
Example 2. (i) Facts. To be eligible for coverage under a bona fide
collectively bargained group health plan in the current calendar
quarter, the plan requires an individual to have worked 250 hours in
covered employment during the three-month period that ends one month
before the beginning of the current calendar quarter. The distinction
between employees working at least 250 hours and those working less than
250 hours in the earlier three-month period is not directed at
individual participants or beneficiaries based on any health factor of
the participants or beneficiaries.
(ii) Conclusion. In this Example 2, the plan provision does not
violate this section because, under the rules for similarly situated
individuals allowing full-time employees to be treated differently than
part-time employees, employees who work at least 250 hours in a three-
month period can be treated differently than employees who fail to work
250 hours in that period. The result would be the same if the plan
permitted individuals to apply excess hours from previous periods to
satisfy the requirement for the current quarter.
Example 3. (i) Facts. Under a group health plan, coverage of an
employee is terminated when the individual's employment is terminated,
in accordance with the rules of paragraph (d) of this section. Employee
B has been covered under the plan. B experiences a disabling illness
that prevents B from working. B takes a leave of absence under the
Family and Medical Leave Act of 1993. At the end of such leave, B
terminates employment and consequently loses coverage under the plan.
(This termination of coverage is without regard to whatever rights the
employee (or members of the employee's family) may have for COBRA
continuation coverage.)
(ii) Conclusion. In this Example 3, the plan provision terminating
B's coverage upon B's termination of employment does not violate this
section.
[[Page 31]]
Example 4. (i) Facts. Under a group health plan, coverage of an
employee is terminated when the employee ceases to perform services for
the employer sponsoring the plan, in accordance with the rules of
paragraph (d) of this section. Employee C is laid off for three months.
When the layoff begins, C's coverage under the plan is terminated. (This
termination of coverage is without regard to whatever rights the
employee (or members of the employee's family) may have for COBRA
continuation coverage.)
(ii) Conclusion. In this Example 4, the plan provision terminating
C's coverage upon the cessation of C's performance of services does not
violate this section.
(f) Nondiscriminatory wellness programs--in general. A wellness
program is a program of health promotion or disease prevention.
Paragraphs (b)(2)(ii) and (c)(3) of this section provide exceptions to
the general prohibitions against discrimination based on a health factor
for plan provisions that vary benefits (including cost-sharing
mechanisms) or the premium or contribution for similarly situated
individuals in connection with a wellness program that satisfies the
requirements of this paragraph (f).
(1) Definitions. The definitions in this paragraph (f)(1) govern in
applying the provisions of this paragraph (f).
(i) Reward. Except where expressly provided otherwise, references in
this section to an individual obtaining a reward include both obtaining
a reward (such as a discount or rebate of a premium or contribution, a
waiver of all or part of a cost-sharing mechanism, an additional
benefit, or any financial or other incentive) and avoiding a penalty
(such as the absence of a premium surcharge or other financial or
nonfinancial disincentive). References in this section to a plan
providing a reward include both providing a reward (such as a discount
or rebate of a premium or contribution, a waiver of all or part of a
cost-sharing mechanism, an additional benefit, or any financial or other
incentive) and imposing a penalty (such as a surcharge or other
financial or nonfinancial disincentive).
(ii) Participatory wellness programs. If none of the conditions for
obtaining a reward under a wellness program is based on an individual
satisfying a standard that is related to a health factor (or if a
wellness program does not provide a reward), the wellness program is a
participatory wellness program. Examples of participatory wellness
programs are:
(A) A program that reimburses employees for all or part of the cost
for membership in a fitness center.
(B) A diagnostic testing program that provides a reward for
participation in that program and does not base any part of the reward
on outcomes.
(C) A program that encourages preventive care through the waiver of
the copayment or deductible requirement under a group health plan for
the costs of, for example, prenatal care or well-baby visits. (Note
that, with respect to non-grandfathered plans, Sec. 147.130 of this
subchapter requires benefits for certain preventive health services
without the imposition of cost sharing.)
(D) A program that reimburses employees for the costs of
participating, or that otherwise provides a reward for participating, in
a smoking cessation program without regard to whether the employee quits
smoking.
(E) A program that provides a reward to employees for attending a
monthly, no-cost health education seminar.
(F) A program that provides a reward to employees who complete a
health risk assessment regarding current health status, without any
further action (educational or otherwise) required by the employee with
regard to the health issues identified as part of the assessment. (See
also Sec. 146.122 for rules prohibiting collection of genetic
information.)
(iii) Health-contingent wellness programs. A health-contingent
wellness program is a program that requires an individual to satisfy a
standard related to a health factor to obtain a reward (or requires an
individual to undertake more than a similarly situated individual based
on a health factor in order to obtain the same reward). A health-
contingent wellness program may be an activity-only wellness program or
an outcome-based wellness program.
(iv) Activity-only wellness programs. An activity-only wellness
program is a type of health-contingent wellness program that requires an
individual to perform or complete an activity related to a health factor
in order to obtain a reward but does not require the
[[Page 32]]
individual to attain or maintain a specific health outcome. Examples
include walking, diet, or exercise programs, which some individuals may
be unable to participate in or complete (or have difficulty
participating in or completing) due to a health factor, such as severe
asthma, pregnancy, or a recent surgery. See paragraph (f)(3) of this
section for requirements applicable to activity-only wellness programs.
(v) Outcome-based wellness programs. An outcome-based wellness
program is a type of health-contingent wellness program that requires an
individual to attain or maintain a specific health outcome (such as not
smoking or attaining certain results on biometric screenings) in order
to obtain a reward. To comply with the rules of this paragraph (f), an
outcome-based wellness program typically has two tiers. That is, for
individuals who do not attain or maintain the specific health outcome,
compliance with an educational program or an activity may be offered as
an alternative to achieve the same reward. This alternative pathway,
however, does not mean that the overall program, which has an outcome-
based component, is not an outcome-based wellness program. That is, if a
measurement, test, or screening is used as part of an initial standard
and individuals who meet the standard are granted the reward, the
program is considered an outcome-based wellness program. For example, if
a wellness program tests individuals for specified medical conditions or
risk factors (including biometric screening such as testing for high
cholesterol, high blood pressure, abnormal body mass index, or high
glucose level) and provides a reward to individuals identified as within
a normal or healthy range for these medical conditions or risk factors,
while requiring individuals who are identified as outside the normal or
healthy range (or at risk) to take additional steps (such as meeting
with a health coach, taking a health or fitness course, adhering to a
health improvement action plan, complying with a walking or exercise
program, or complying with a health care provider's plan of care) to
obtain the same reward, the program is an outcome-based wellness
program. See paragraph (f)(4) of this section for requirements
applicable to outcome-based wellness programs.
(2) Requirement for participatory wellness programs. A participatory
wellness program, as described in paragraph (f)(1)(ii) of this section,
does not violate the provisions of this section only if participation in
the program is made available to all similarly situated individuals,
regardless of health status.
(3) Requirements for activity-only wellness programs. A health-
contingent wellness program that is an activity-only wellness program,
as described in paragraph (f)(1)(iv) of this section, does not violate
the provisions of this section only if all of the following requirements
are satisfied:
(i) Frequency of opportunity to qualify. The program must give
individuals eligible for the program the opportunity to qualify for the
reward under the program at least once per year.
(ii) Size of reward. The reward for the activity-only wellness
program, together with the reward for other health-contingent wellness
programs with respect to the plan, must not exceed the applicable
percentage (as defined in paragraph (f)(5) of this section) of the total
cost of employee-only coverage under the plan. However, if, in addition
to employees, any class of dependents (such as spouses, or spouses and
dependent children) may participate in the wellness program, the reward
must not exceed the applicable percentage of the total cost of the
coverage in which an employee and any dependents are enrolled. For
purposes of this paragraph (f)(3)(ii), the cost of coverage is
determined based on the total amount of employer and employee
contributions towards the cost of coverage for the benefit package under
which the employee is (or the employee and any dependents are) receiving
coverage.
(iii) Reasonable design. The program must be reasonably designed to
promote health or prevent disease. A program satisfies this standard if
it has a reasonable chance of improving the health of, or preventing
disease in, participating individuals, and it is not overly burdensome,
is not a subterfuge for discriminating based on a health
[[Page 33]]
factor, and is not highly suspect in the method chosen to promote health
or prevent disease. This determination is based on all the relevant
facts and circumstances.
(iv) Uniform availability and reasonable alternative standards. The
full reward under the activity-only wellness program must be available
to all similarly situated individuals.
(A) Under this paragraph (f)(3)(iv), a reward under an activity-only
wellness program is not available to all similarly situated individuals
for a period unless the program meets both of the following
requirements:
(1) The program allows a reasonable alternative standard (or waiver
of the otherwise applicable standard) for obtaining the reward for any
individual for whom, for that period, it is unreasonably difficult due
to a medical condition to satisfy the otherwise applicable standard; and
(2) The program allows a reasonable alternative standard (or waiver
of the otherwise applicable standard) for obtaining the reward for any
individual for whom, for that period, it is medically inadvisable to
attempt to satisfy the otherwise applicable standard.
(B) While plans and issuers are not required to determine a
particular reasonable alternative standard in advance of an individual's
request for one, if an individual is described in either paragraph
(f)(3)(iv)(A)(1) or (2) of this section, a reasonable alternative
standard must be furnished by the plan or issuer upon the individual's
request or the condition for obtaining the reward must be waived.
(C) All the facts and circumstances are taken into account in
determining whether a plan or issuer has furnished a reasonable
alternative standard, including but not limited to the following:
(1) If the reasonable alternative standard is completion of an
educational program, the plan or issuer must make the educational
program available or assist the employee in finding such a program
(instead of requiring an individual to find such a program unassisted),
and may not require an individual to pay for the cost of the program.
(2) The time commitment required must be reasonable (for example,
requiring attendance nightly at a one-hour class would be unreasonable).
(3) If the reasonable alternative standard is a diet program, the
plan or issuer is not required to pay for the cost of food but must pay
any membership or participation fee.
(4) If an individual's personal physician states that a plan
standard (including, if applicable, the recommendations of the plan's
medical professional) is not medically appropriate for that individual,
the plan or issuer must provide a reasonable alternative standard that
accommodates the recommendations of the individual's personal physician
with regard to medical appropriateness. Plans and issuers may impose
standard cost sharing under the plan or coverage for medical items and
services furnished pursuant to the physician's recommendations.
(D) To the extent that a reasonable alternative standard under an
activity-only wellness program is, itself, an activity-only wellness
program, it must comply with the requirements of this paragraph (f)(3)
in the same manner as if it were an initial program standard. (Thus, for
example, if a plan or issuer provides a walking program as a reasonable
alternative standard to a running program, individuals for whom it is
unreasonably difficult due to a medical condition to complete the
walking program (or for whom it is medically inadvisable to attempt to
complete the walking program) must be provided a reasonable alternative
standard to the walking program.) To the extent that a reasonable
alternative standard under an activity-only wellness program is, itself,
an outcome-based wellness program, it must comply with the requirements
of paragraph (f)(4) of this section, including paragraph (f)(4)(iv)(D).
(E) If reasonable under the circumstances, a plan or issuer may seek
verification, such as a statement from an individual's personal
physician, that a health factor makes it unreasonably difficult for the
individual to satisfy, or medically inadvisable for the individual to
attempt to satisfy, the otherwise applicable standard of an activity-
only wellness program. Plans and
[[Page 34]]
issuers may seek verification with respect to requests for a reasonable
alternative standard for which it is reasonable to determine that
medical judgment is required to evaluate the validity of the request.
(v) Notice of availability of reasonable alternative standard. The
plan or issuer must disclose in all plan materials describing the terms
of an activity-only wellness program the availability of a reasonable
alternative standard to qualify for the reward (and, if applicable, the
possibility of waiver of the otherwise applicable standard), including
contact information for obtaining a reasonable alternative standard and
a statement that recommendations of an individual's personal physician
will be accommodated. If plan materials merely mention that such a
program is available, without describing its terms, this disclosure is
not required. Sample language is provided in paragraph (f)(6) of this
section, as well as in certain examples of this section.
(vi) Example. The provisions of this paragraph (f)(3) are
illustrated by the following example:
Example. (i) Facts. A group health plan provides a reward to
individuals who participate in a reasonable specified walking program.
If it is unreasonably difficult due to a medical condition for an
individual to participate (or if it is medically inadvisable for an
individual to attempt to participate), the plan will waive the walking
program requirement and provide the reward. All materials describing the
terms of the walking program disclose the availability of the waiver.
(ii) Conclusion. In this Example, the program satisfies the
requirements of paragraph (f)(3)(iii) of this section because the
walking program is reasonably designed to promote health and prevent
disease. The program satisfies the requirements of paragraph (f)(3)(iv)
of this section because the reward under the program is available to all
similarly situated individuals. It accommodates individuals for whom it
is unreasonably difficult to participate in the walking program due to a
medical condition (or for whom it would be medically inadvisable to
attempt to participate) by providing them with the reward even if they
do not participate in the walking program (that is, by waiving the
condition). The plan also complies with the disclosure requirement of
paragraph (f)(3)(v) of this section. Thus, the plan satisfies paragraphs
(f)(3)(iii), (iv), and (v) of this section.
(4) Requirements for outcome-based wellness programs. A health-
contingent wellness program that is an outcome-based wellness program,
as described in paragraph (f)(1)(v) of this section, does not violate
the provisions of this section only if all of the following requirements
are satisfied:
(i) Frequency of opportunity to qualify. The program must give
individuals eligible for the program the opportunity to qualify for the
reward under the program at least once per year.
(ii) Size of reward. The reward for the outcome-based wellness
program, together with the reward for other health-contingent wellness
programs with respect to the plan, must not exceed the applicable
percentage (as defined in paragraph (f)(5) of this section) of the total
cost of employee-only coverage under the plan. However, if, in addition
to employees, any class of dependents (such as spouses, or spouses and
dependent children) may participate in the wellness program, the reward
must not exceed the applicable percentage of the total cost of the
coverage in which an employee and any dependents are enrolled. For
purposes of this paragraph (f)(4)(ii), the cost of coverage is
determined based on the total amount of employer and employee
contributions towards the cost of coverage for the benefit package under
which the employee is (or the employee and any dependents are) receiving
coverage.
(iii) Reasonable design. The program must be reasonably designed to
promote health or prevent disease. A program satisfies this standard if
it has a reasonable chance of improving the health of, or preventing
disease in, participating individuals, and it is not overly burdensome,
is not a subterfuge for discriminating based on a health factor, and is
not highly suspect in the method chosen to promote health or prevent
disease. This determination is based on all the relevant facts and
circumstances. To ensure that an outcome-based wellness program is
reasonably designed to improve health and does not act as a subterfuge
for underwriting or reducing benefits based on a health factor, a
reasonable alternative standard to qualify for the reward must be
provided to any individual who does not meet the initial standard based
on a measurement, test, or
[[Page 35]]
screening that is related to a health factor, as explained in paragraph
(f)(4)(iv) of this section.
(iv) Uniform availability and reasonable alternative standards. The
full reward under the outcome-based wellness program must be available
to all similarly situated individuals.
(A) Under this paragraph (f)(4)(iv), a reward under an outcome-based
wellness program is not available to all similarly situated individuals
for a period unless the program allows a reasonable alternative standard
(or waiver of the otherwise applicable standard) for obtaining the
reward for any individual who does not meet the initial standard based
on the measurement, test, or screening, as described in this paragraph
(f)(4)(iv).
(B) While plans and issuers are not required to determine a
particular reasonable alternative standard in advance of an individual's
request for one, if an individual is described in paragraph
(f)(4)(iv)(A) of this section, a reasonable alternative standard must be
furnished by the plan or issuer upon the individual's request or the
condition for obtaining the reward must be waived.
(C) All the facts and circumstances are taken into account in
determining whether a plan or issuer has furnished a reasonable
alternative standard, including but not limited to the following:
(1) If the reasonable alternative standard is completion of an
educational program, the plan or issuer must make the educational
program available or assist the employee in finding such a program
(instead of requiring an individual to find such a program unassisted),
and may not require an individual to pay for the cost of the program.
(2) The time commitment required must be reasonable (for example,
requiring attendance nightly at a one-hour class would be unreasonable).
(3) If the reasonable alternative standard is a diet program, the
plan or issuer is not required to pay for the cost of food but must pay
any membership or participation fee.
(4) If an individual's personal physician states that a plan
standard (including, if applicable, the recommendations of the plan's
medical professional) is not medically appropriate for that individual,
the plan or issuer must provide a reasonable alternative standard that
accommodates the recommendations of the individual's personal physician
with regard to medical appropriateness. Plans and issuers may impose
standard cost sharing under the plan or coverage for medical items and
services furnished pursuant to the physician's recommendations.
(D) To the extent that a reasonable alternative standard under an
outcome-based wellness program is, itself, an activity-only wellness
program, it must comply with the requirements of paragraph (f)(3) of
this section in the same manner as if it were an initial program
standard. To the extent that a reasonable alternative standard under an
outcome-based wellness program is, itself, another outcome-based
wellness program, it must comply with the requirements of this paragraph
(f)(4), subject to the following special rules:
(1) The reasonable alternative standard cannot be a requirement to
meet a different level of the same standard without additional time to
comply that takes into account the individual's circumstances. For
example, if the initial standard is to achieve a BMI less than 30, the
reasonable alternative standard cannot be to achieve a BMI less than 31
on that same date. However, if the initial standard is to achieve a BMI
less than 30, a reasonable alternative standard for the individual could
be to reduce the individual's BMI by a small amount or small percentage,
over a realistic period of time, such as within a year.
(2) An individual must be given the opportunity to comply with the
recommendations of the individual's personal physician as a second
reasonable alternative standard to meeting the reasonable alternative
standard defined by the plan or issuer, but only if the physician joins
in the request. The individual can make a request to involve a personal
physician's recommendations at any time and the personal physician can
adjust the physician's recommendations at any time, consistent with
medical appropriateness.
[[Page 36]]
(E) It is not reasonable to seek verification, such as a statement
from an individual's personal physician, under an outcome-based wellness
program that a health factor makes it unreasonably difficult for the
individual to satisfy, or medically inadvisable for the individual to
attempt to satisfy, the otherwise applicable standard as a condition of
providing a reasonable alternative to the initial standard. However, if
a plan or issuer provides an alternative standard to the otherwise
applicable measurement, test, or screening that involves an activity
that is related to a health factor, then the rules of paragraph (f)(3)
of this section for activity-only wellness programs apply to that
component of the wellness program and the plan or issuer may, if
reasonable under the circumstances, seek verification that it is
unreasonably difficult due to a medical condition for an individual to
perform or complete the activity (or it is medically inadvisable to
attempt to perform or complete the activity). (For example, if an
outcome-based wellness program requires participants to maintain a
certain healthy weight and provides a diet and exercise program for
individuals who do not meet the targeted weight, a plan or issuer may
seek verification, as described in paragraph (f)(3)(iv)(D) of this
section, if reasonable under the circumstances, that a second reasonable
alternative standard is needed for certain individuals because, for
those individuals, it would be unreasonably difficult due to a medical
condition to comply, or medically inadvisable to attempt to comply, with
the diet and exercise program, due to a medical condition.)
(v) Notice of availability of reasonable alternative standard. The
plan or issuer must disclose in all plan materials describing the terms
of an outcome-based wellness program, and in any disclosure that an
individual did not satisfy an initial outcome-based standard, the
availability of a reasonable alternative standard to qualify for the
reward (and, if applicable, the possibility of waiver of the otherwise
applicable standard), including contact information for obtaining a
reasonable alternative standard and a statement that recommendations of
an individual's personal physician will be accommodated. If plan
materials merely mention that such a program is available, without
describing its terms, this disclosure is not required. Sample language
is provided in paragraph (f)(6) of this section, as well as in certain
examples of this section.
(vi) Examples. The provisions of this paragraph (f)(4) are
illustrated by the following examples:
Example 1--Cholesterol screening with reasonable alternative
standard to work with personal physician. (i) Facts. A group health plan
offers a reward to participants who achieve a count under 200 on a total
cholesterol test. If a participant does not achieve the targeted
cholesterol count, the plan allows the participant to develop an
alternative cholesterol action plan in conjunction with the
participant's personal physician that may include recommendations for
medication and additional screening. The plan allows the physician to
modify the standards, as medically necessary, over the year. (For
example, if a participant develops asthma or depression, requires
surgery and convalescence, or some other medical condition or
consideration makes completion of the original action plan inadvisable
or unreasonably difficult, the physician may modify the original action
plan.) All plan materials describing the terms of the program include
the following statement: ``Your health plan wants to help you take
charge of your health. Rewards are available to all employees who
participate in our Cholesterol Awareness Wellness Program. If your total
cholesterol count is under 200, you will receive the reward. If not, you
will still have an opportunity to qualify for the reward. We will work
with you and your doctor to find a Health Smart program that is right
for you.'' In addition, when any individual participant receives
notification that his or her cholesterol count is 200 or higher, the
notification includes the following statement: ``Your plan offers a
Health Smart program under which we will work with you and your doctor
to try to lower your cholesterol. If you complete this program, you will
qualify for a reward. Please contact us at [contact information] to get
started.''
(ii) Conclusion. In this Example 1, the program is an outcome-based
wellness program because the initial standard requires an individual to
attain or maintain a specific health outcome (a certain cholesterol
level) to obtain a reward. The program satisfies the requirements of
paragraph (f)(4)(iii) of this section because the cholesterol program is
reasonably designed to promote health and prevent disease. The program
satisfies the requirements of paragraph (f)(4)(iv) of this section
because it makes available to all participants who do not meet the
cholesterol
[[Page 37]]
standard a reasonable alternative standard to qualify for the reward.
Lastly, the plan also discloses in all materials describing the terms of
the program and in any disclosure that an individual did not satisfy the
initial outcome-based standard the availability of a reasonable
alternative standard (including contact information and the individual's
ability to involve his or her personal physician), as required by
paragraph (f)(4)(v) of this section. Thus, the program satisfies the
requirements of paragraphs (f)(4)(iii), (iv), and (v) of this section.
Example 2--Cholesterol screening with plan alternative and no
opportunity for personal physician involvement. (i) Facts. Same facts as
Example 1, except that the wellness program's physician or nurse
practitioner (rather than the individual's personal physician)
determines the alternative cholesterol action plan. The plan does not
provide an opportunity for a participant's personal physician to modify
the action plan if it is not medically appropriate for that individual.
(ii) Conclusion. In this Example 2, the wellness program does not
satisfy the requirements of paragraph (f)(4)(iii) of this section
because the program does not accommodate the recommendations of the
participant's personal physician with regard to medical appropriateness,
as required under paragraph (f)(4)(iv)(C)(3) of this section. Thus, the
program is not reasonably designed under paragraph (f)(4)(iii) of this
section and is not available to all similarly situated individuals under
paragraph (f)(4)(iv) of this section. The notice also does not provide
all the content required under paragraph (f)(4)(v) of this section.
Example 3--Cholesterol screening with plan alternative that can be
modified by personal physician. (i) Facts. Same facts as Example 2,
except that if a participant's personal physician disagrees with any
part of the action plan, the personal physician may modify the action
plan at any time, and the plan discloses this to participants.
(ii) Conclusion. In this Example 3, the wellness program satisfies
the requirements of paragraph (f)(4)(iii) of this section because the
participant's personal physician may modify the action plan determined
by the wellness program's physician or nurse practitioner at any time if
the physician states that the recommendations are not medically
appropriate, as required under paragraph (f)(4)(iv)(C)(3) of this
section. Thus, the program is reasonably designed under paragraph
(f)(4)(iii) of this section and is available to all similarly situated
individuals under paragraph (f)(4)(iv) of this section. The notice,
which includes a statement that recommendations of an individual's
personal physician will be accommodated, also complies with paragraph
(f)(4)(v) of this section.
Example 4--BMI screening with walking program alternative. (i)
Facts. A group health plan will provide a reward to participants who
have a body mass index (BMI) that is 26 or lower, determined shortly
before the beginning of the year. Any participant who does not meet the
target BMI is given the same discount if the participant complies with
an exercise program that consists of walking 150 minutes a week. Any
participant for whom it is unreasonably difficult due to a medical
condition to comply with this walking program (and any participant for
whom it is medically inadvisable to attempt to comply with the walking
program) during the year is given the same discount if the participant
satisfies an alternative standard that is reasonable taking into
consideration the participant's medical situation, is not unreasonably
burdensome or impractical to comply with, and is otherwise reasonably
designed based on all the relevant facts and circumstances. All plan
materials describing the terms of the wellness program include the
following statement: ``Fitness is Easy! Start Walking! Your health plan
cares about your health. If you are considered overweight because you
have a BMI of over 26, our Start Walking program will help you lose
weight and feel better. We will help you enroll. (**If your doctor says
that walking isn't right for you, that's okay too. We will work with you
(and, if you wish, your own doctor) to develop a wellness program that
is.)'' Participant E is unable to achieve a BMI that is 26 or lower
within the plan's timeframe and receives notification that complies with
paragraph (f)(4)(v) of this section. Nevertheless, it is unreasonably
difficult due to a medical condition for E to comply with the walking
program. E proposes a program based on the recommendations of E's
physician. The plan agrees to make the same discount available to E that
is available to other participants in the BMI program or the alternative
walking program, but only if E actually follows the physician's
recommendations.
(ii) Conclusion. In this Example 4, the program is an outcome-based
wellness program because the initial standard requires an individual to
attain or maintain a specific health outcome (a certain BMI level) to
obtain a reward. The program satisfies the requirements of paragraph
(f)(4)(iii) of this section because it is reasonably designed to promote
health and prevent disease. The program also satisfies the requirements
of paragraph (f)(4)(iv) of this section because it makes available to
all individuals who do not satisfy the BMI standard a reasonable
alternative standard to qualify for the reward (in this case, a walking
program that is not unreasonably burdensome or impractical for
individuals to comply with and that is otherwise reasonably designed
based on all the relevant facts and circumstances). In addition, the
walking program is, itself, an activity-only standard and the plan
complies with
[[Page 38]]
the requirements of paragraph (f)(3) of this section (including the
requirement of paragraph (f)(3)(iv) that, if there are individuals for
whom it is unreasonably difficult due to a medical condition to comply,
or for whom it is medically inadvisable to attempt to comply, with the
walking program, the plan provide a reasonable alternative to those
individuals). Moreover, the plan satisfies the requirements of paragraph
(f)(4)(v) of this section because it discloses, in all materials
describing the terms of the program and in any disclosure that an
individual did not satisfy the initial outcome-based standard, the
availability of a reasonable alternative standard (including contact
information and the individual's option to involve his or her personal
physician) to qualify for the reward or the possibility of waiver of the
otherwise applicable standard. Thus, the program satisfies the
requirements of paragraphs (f)(4)(iii), (iv), and (v) of this section.
Example 5--BMI screening with alternatives available to either lower
BMI or meet personal physician's recommendations. (i) Facts. Same facts
as Example 4 except that, with respect to any participant who does not
meet the target BMI, instead of a walking program, the participant is
expected to reduce BMI by one point. At any point during the year upon
request, any individual can obtain a second reasonable alternative
standard, which is compliance with the recommendations of the
participant's personal physician regarding weight, diet, and exercise as
set forth in a treatment plan that the physician recommends or to which
the physician agrees. The participant's personal physician is permitted
to change or adjust the treatment plan at any time and the option of
following the participant's personal physician's recommendations is
clearly disclosed.
(ii) Conclusion. In this Example 5, the reasonable alternative
standard to qualify for the reward (the alternative BMI standard
requiring a one-point reduction) does not make the program unreasonable
under paragraph (f)(4)(iii) or (iv) of this section because the program
complies with paragraph (f)(4)(iv)(C)(4) of this section by allowing a
second reasonable alternative standard to qualify for the reward
(compliance with the recommendations of the participant's personal
physician, which can be changed or adjusted at any time). Accordingly,
the program continues to satisfy the applicable requirements of
paragraph (f) of this section.
Example 6--Tobacco use surcharge with smoking cessation program
alternative. (i) Facts. In conjunction with an annual open enrollment
period, a group health plan provides a premium differential based on
tobacco use, determined using a health risk assessment. The following
statement is included in all plan materials describing the tobacco
premium differential: ``Stop smoking today! We can help! If you are a
smoker, we offer a smoking cessation program. If you complete the
program, you can avoid this surcharge.'' The plan accommodates
participants who smoke by facilitating their enrollment in a smoking
cessation program that requires participation at a time and place that
are not unreasonably burdensome or impractical for participants, and
that is otherwise reasonably designed based on all the relevant facts
and circumstances, and discloses contact information and the
individual's option to involve his or her personal physician. The plan
pays for the cost of participation in the smoking cessation program. Any
participant can avoid the surcharge for the plan year by participating
in the program, regardless of whether the participant stops smoking, but
the plan can require a participant who wants to avoid the surcharge in a
subsequent year to complete the smoking cessation program again.
(ii) Conclusion. In this Example 6, the premium differential
satisfies the requirements of paragraphs (f)(4)(iii), (iv), and (v). The
program is an outcome-based wellness program because the initial
standard for obtaining a reward is dependent on the results of a health
risk assessment (a measurement, test, or screening). The program is
reasonably designed under paragraph (f)(4)(iii) because the plan
provides a reasonable alternative standard (as required under paragraph
(f)(4)(iv) of this section) to qualify for the reward to all tobacco
users (a smoking cessation program). The plan discloses, in all
materials describing the terms of the program, the availability of the
reasonable alternative standard (including contact information and the
individual's option to involve his or her personal physician). Thus, the
program satisfies the requirements of paragraphs (f)(4)(iii), (iv), and
(v) of this section.
Example 7--Tobacco use surcharge with alternative program requiring
actual cessation. (i) Facts. Same facts as Example 6, except the plan
does not provide participant F with the reward in subsequent years
unless F actually stops smoking after participating in the tobacco
cessation program.
(ii) Conclusion. In this Example 7, the program is not reasonably
designed under paragraph (f)(4)(iii) of this section and does not
provide a reasonable alternative standard as required under paragraph
(f)(4)(iv) of this section. The plan cannot cease to provide a
reasonable alternative standard merely because the participant did not
stop smoking after participating in a smoking cessation program. The
plan must continue to offer a reasonable alternative standard whether it
is the same or different (such as a new recommendation from F's personal
physician or a new nicotine replacement therapy).
Example 8--Tobacco use surcharge with smoking cessation program
alternative that is not reasonable. (i) Facts. Same facts as Example 6,
[[Page 39]]
except the plan does not facilitate participant F's enrollment in a
smoking cessation program. Instead the plan advises F to find a program,
pay for it, and provide a certificate of completion to the plan.
(ii) Conclusion. In this Example 8, the requirement for F to find
and pay for F's own smoking cessation program means that the alternative
program is not reasonable. Accordingly, the plan has not offered a
reasonable alternative standard that complies with paragraphs
(f)(4)(iii) and (iv) of this section and the program fails to satisfy
the requirements of paragraph (f) of this section.
(5) Applicable percentage--(i) For purposes of this paragraph (f),
the applicable percentage is 30 percent, except that the applicable
percentage is increased by an additional 20 percentage points (to 50
percent) to the extent that the additional percentage is in connection
with a program designed to prevent or reduce tobacco use.
(ii) The rules of this paragraph (f)(5) are illustrated by the
following examples:
Example 1. (i) Facts. An employer sponsors a group health plan. The
annual premium for employee-only coverage is $6,000 (of which the
employer pays $4,500 per year and the employee pays $1,500 per year).
The plan offers employees a health-contingent wellness program with
several components, focused on exercise, blood sugar, weight,
cholesterol, and blood pressure. The reward for compliance is an annual
premium rebate of $600.
(ii) Conclusion. In this Example 1, the reward for the wellness
program, $600, does not exceed the applicable percentage of 30 percent
of the total annual cost of employee-only coverage, $1,800. ($6,000 x
30% = $1,800.)
Example 2. (i) Facts. Same facts as Example 1, except the wellness
program is exclusively a tobacco prevention program. Employees who have
used tobacco in the last 12 months and who are not enrolled in the
plan's tobacco cessation program are charged a $1,000 premium surcharge
(in addition to their employee contribution towards the coverage).
(Those who participate in the plan's tobacco cessation program are not
assessed the $1,000 surcharge.)
(ii) Conclusion. In this Example 2, the reward for the wellness
program (absence of a $1,000 surcharge), does not exceed the applicable
percentage of 50 percent of the total annual cost of employee-only
coverage, $3,000. ($6,000 x 50% = $3,000.)
Example 3. (i) Facts. Same facts as Example 1, except that, in
addition to the $600 reward for compliance with the health-contingent
wellness program, the plan also imposes an additional $2,000 tobacco
premium surcharge on employees who have used tobacco in the last 12
months and who are not enrolled in the plan's tobacco cessation program.
(Those who participate in the plan's tobacco cessation program are not
assessed the $2,000 surcharge.)
(ii) Conclusion. In this Example 3, the total of all rewards
(including absence of a surcharge for participating in the tobacco
program) is $2,600 ($600 + $2,000 = $2,600), which does not exceed the
applicable percentage of 50 percent of the total annual cost of
employee-only coverage ($3,000); and, tested separately, the $600 reward
for the wellness program unrelated to tobacco use does not exceed the
applicable percentage of 30 percent of the total annual cost of
employee-only coverage ($1,800).
Example 4. (i) Facts. An employer sponsors a group health plan. The
total annual premium for employee-only coverage (including both employer
and employee contributions towards the coverage) is $5,000. The plan
provides a $250 reward to employees who complete a health risk
assessment, without regard to the health issues identified as part of
the assessment. The plan also offers a Healthy Heart program, which is a
health-contingent wellness program, with an opportunity to earn a $1,500
reward.
(ii) Conclusion. In this Example 4, even though the total reward for
all wellness programs under the plan is $1,750 ($250 + $1,500 = $1,750,
which exceeds the applicable percentage of 30 percent of the cost of the
annual premium for employee-only coverage ($5,000 x 30% = $1,500)), only
the reward offered for compliance with the health-contingent wellness
program ($1,500) is taken into account in determining whether the rules
of this paragraph (f)(5) are met. (The $250 reward is offered in
connection with a participatory wellness program and therefore is not
taken into account.) Accordingly, the health-contingent wellness program
offers a reward that does not exceed the applicable percentage of 30
percent of the total annual cost of employee-only coverage.
(6) Sample language. The following language, or substantially
similar language, can be used to satisfy the notice requirement of
paragraphs (f)(3)(v) or (f)(4)(v) of this section: ``Your health plan is
committed to helping you achieve your best health. Rewards for
participating in a wellness program are available to all employees. If
you think you might be unable to meet a standard for a reward under this
wellness program, you might qualify for an opportunity to earn the same
reward by different means. Contact us at [insert contact information]
and we will work with you (and, if you wish, with your doctor) to find a
wellness program with
[[Page 40]]
the same reward that is right for you in light of your health status.''
(g) More favorable treatment of individuals with adverse health
factors permitted--(1) In rules for eligibility--(i) Nothing in this
section prevents a group health plan or group health insurance issuer
from establishing more favorable rules for eligibility (described in
paragraph (b)(1) of this section) for individuals with an adverse health
factor, such as disability, than for individuals without the adverse
health factor. Moreover, nothing in this section prevents a plan or
issuer from charging a higher premium or contribution with respect to
individuals with an adverse health factor if they would not be eligible
for the coverage were it not for the adverse health factor. (However,
other laws, including State insurance laws, may set or limit premium
rates; these laws are not affected by this section.)
(ii) The rules of this paragraph (g)(1) are illustrated by the
following examples:
Example 1. (i) Facts. An employer sponsors a group health plan that
generally is available to employees, spouses of employees, and dependent
children until age 26. However, dependent children who are disabled are
eligible for coverage beyond age 26.
(ii) Conclusion. In this Example 1, the plan provision allowing
coverage for disabled dependent children beyond age 26 satisfies this
paragraph (g)(1) (and thus does not violate this section).
Example 2. (i) Facts. An employer sponsors a group health plan,
which is generally available to employees (and members of the employee's
family) until the last day of the month in which the employee ceases to
perform services for the employer. The plan generally charges employees
$50 per month for employee-only coverage and $125 per month for family
coverage. However, an employee who ceases to perform services for the
employer by reason of disability may remain covered under the plan until
the last day of the month that is 12 months after the month in which the
employee ceased to perform services for the employer. During this
extended period of coverage, the plan charges the employee $100 per
month for employee-only coverage and $250 per month for family coverage.
(This extended period of coverage is without regard to whatever rights
the employee (or members of the employee's family) may have for COBRA
continuation coverage.)
(ii) Conclusion. In this Example 2, the plan provision allowing
extended coverage for disabled employees and their families satisfies
this paragraph (g)(1) (and thus does not violate this section). In
addition, the plan is permitted, under this paragraph (g)(1), to charge
the disabled employees a higher premium during the extended period of
coverage.
Example 3. (i) Facts. To comply with the requirements of a COBRA
continuation provision, a group health plan generally makes COBRA
continuation coverage available for a maximum period of 18 months in
connection with a termination of employment but makes the coverage
available for a maximum period of 29 months to certain disabled
individuals and certain members of the disabled individual's family.
Although the plan generally requires payment of 102 percent of the
applicable premium for the first 18 months of COBRA continuation
coverage, the plan requires payment of 150 percent of the applicable
premium for the disabled individual's COBRA continuation coverage during
the disability extension if the disabled individual would not be
entitled to COBRA continuation coverage but for the disability.
(ii) Conclusion. In this Example 3, the plan provision allowing
extended COBRA continuation coverage for disabled individuals satisfies
this paragraph (g)(1) (and thus does not violate this section). In
addition, the plan is permitted, under this paragraph (g)(1), to charge
the disabled individuals a higher premium for the extended coverage if
the individuals would not be eligible for COBRA continuation coverage
were it not for the disability. (Similarly, if the plan provided an
extended period of coverage for disabled individuals pursuant to State
law or plan provision rather than pursuant to a COBRA continuation
coverage provision, the plan could likewise charge the disabled
individuals a higher premium for the extended coverage.)
(2) In premiums or contributions--(i) Nothing in this section
prevents a group health plan or group health insurance issuer from
charging individuals a premium or contribution that is less than the
premium (or contribution) for similarly situated individuals if the
lower charge is based on an adverse health factor, such as disability.
(ii) The rules of this paragraph (g)(2) are illustrated by the
following example:
Example. (i) Facts. Under a group health plan, employees are
generally required to pay $50 per month for employee-only coverage and
$125 per month for family coverage under the plan. However, employees
who are disabled receive coverage (whether employee-only or family
coverage) under the plan free of charge.
[[Page 41]]
(ii) Conclusion. In this Example, the plan provision waiving premium
payment for disabled employees is permitted under this paragraph (g)(2)
(and thus does not violate this section).
(h) No effect on other laws. Compliance with this section is not
determinative of compliance with any other provision of the PHS Act
(including the COBRA continuation provisions) or any other State or
Federal law, such as the Americans with Disabilities Act. Therefore,
although the rules of this section would not prohibit a plan or issuer
from treating one group of similarly situated individuals differently
from another (such as providing different benefit packages to current
and former employees), other Federal or State laws may require that two
separate groups of similarly situated individuals be treated the same
for certain purposes (such as making the same benefit package available
to COBRA qualified beneficiaries as is made available to active
employees). In addition, although this section generally does not impose
new disclosure obligations on plans and issuers, this section does not
affect any other laws, including those that require accurate disclosures
and prohibit intentional misrepresentation.
(i) Applicability dates--(1) Generally. This section applies for
plan years beginning on or after July 1, 2007.
(2) Special rule for self-funded nonfederal governmental plans
exempted under 45 CFR 146.180--(i) If coverage has been denied to any
individual because the sponsor of a self-funded nonfederal governmental
plan has elected under Sec. 146.180 to exempt the plan from the
requirements of this section, and the plan sponsor subsequently chooses
to bring the plan into compliance with the requirements of this section,
the plan--
(A) Must notify the individual that the plan will be coming into
compliance with the requirements of this section, specify the effective
date of compliance, and inform the individual regarding any enrollment
restrictions that may apply under the terms of the plan once the plan is
in compliance with this section (as a matter of administrative
convenience, the notice may be disseminated to all employees);
(B) Must give the individual an opportunity to enroll that continues
for at least 30 days;
(C) Must permit coverage to be effective as of the first day of plan
coverage for which an exemption election under Sec. 146.180 of this
part (with regard to this section) is no longer in effect; and
(D) May not treat the individual as a late enrollee or a special
enrollee.
(ii) For purposes of this paragraph (i)(2), an individual is
considered to have been denied coverage if the individual failed to
apply for coverage because, given an exemption election under Sec.
146.180 of this part, it was reasonable to believe that an application
for coverage would have been denied based on a health factor.
(iii) The rules of this paragraph (i)(2) are illustrated by the
following examples:
Example 1. (i) Facts. Individual D was hired by a nonfederal
governmental employer in June 1999. The employer maintains a self-funded
group health plan with a plan year beginning on October 1. The plan
sponsor elected under Sec. 146.180 of this part to exempt the plan from
the requirements of this section for the plan year beginning October 1,
2005, and renewed the exemption election for the plan year beginning
October 1, 2006. Under the terms of the plan while the exemption was in
effect, employees and their dependents were allowed to enroll when the
employee was first hired without regard to any health factor. If an
individual declines to enroll when first eligible, the individual could
enroll effective October 1 of any plan year if the individual could pass
a physical examination. The evidence-of-good-health requirement for late
enrollees, absent an exemption election under Sec. 146.180 of this
part, would have been in violation of this section. D chose not to
enroll for coverage when first hired. In February of 2006, D was treated
for skin cancer but did not apply for coverage under the plan for the
plan year beginning October 1, 2006, because D assumed D could not meet
the evidence-of-good-health requirement. With the plan year beginning
October 1, 2007 the plan sponsor chose not to renew its exemption
election and brought the plan into compliance with this section. The
plan notifies individual D (and all other employees) that it will be
coming into compliance with the requirements of this section. The notice
specifies that the effective date of compliance will be October 1, 2007,
explains the applicable enrollment restrictions that will apply under
the plan, states that individuals will have at least 30 days to enroll,
and explains that coverage for those
[[Page 42]]
who choose to enroll will be effective as of October 1, 2007. Individual
D timely requests enrollment in the plan, and coverage commences under
the plan on October 1, 2007.
(ii) Conclusion. In this Example 1, the plan complies with this
paragraph (i)(2).
Example 2. (i) Facts. Individual E was hired by a nonfederal
governmental employer in February 1999. The employer maintains a self-
funded group health plan with a plan year beginning on September 1. The
plan sponsor elected under Sec. 146.180 of this part to exempt the plan
from the requirements of this section and ``Sec. 146.111 (limitations
on preexisting condition exclusion periods) for the plan year beginning
September 1, 2002, and renews the exemption election for the plan years
beginning September 1, 2003, September 1, 2004, September 1, 2005, and
September 1, 2006. Under the terms of the plan while the exemption was
in effect, employees and their dependents were allowed to enroll when
the employee was first hired without regard to any health factor. If an
individual declined to enroll when first eligible, the individual could
enroll effective September 1 of any plan year if the individual could
pass a physical examination. Also under the terms of the plan, all
enrollees were subject to a 12-month preexisting condition exclusion
period, regardless of whether they had creditable coverage. E chose not
to enroll for coverage when first hired. In June of 2006, E is diagnosed
as having multiple sclerosis (MS). With the plan year beginning
September 1, 2007, the plan sponsor chooses to bring the plan into
compliance with this section, but renews its exemption election with
regard to limitations on preexisting condition exclusion periods. The
plan notifies E of her opportunity to enroll, without a physical
examination, effective September 1, 2007. The plan gives E 30 days to
enroll. E is subject to a 12-month preexisting condition exclusion
period with respect to any treatment E receives that is related to E's
MS, without regard to any prior creditable coverage E may have.
Beginning September 1, 2008, the plan will cover treatment of E's MS.
(ii) Conclusion. In this Example 2, the plan complies with the
requirements of this section. (The plan is not required to comply with
the requirements of Sec. 146.111 because the plan continues to be
exempted from those requirements in accordance with the plan sponsor's
election under Sec. 146.180.)
[71 FR 75046, Dec. 13, 2006, as amended at 74 FR 51688, Oct. 7, 2009; 78
FR 33187, June 3, 2013; 79 FR 10314, Feb. 24, 2014]
Sec. 146.122 Additional requirements prohibiting discrimination based
on genetic information.
(a) Definitions. Unless otherwise provided, the definitions in this
paragraph (a) govern in applying the provisions of this section.
(1) Collect means, with respect to information, to request, require,
or purchase such information.
(2) Family member means, with respect to an individual--
(i) A dependent (as defined in Sec. 144.103 of this part) of the
individual; or
(ii) Any other person who is a first-degree, second-degree, third-
degree, or fourth-degree relative of the individual or of a dependent of
the individual. Relatives by affinity (such as by marriage or adoption)
are treated the same as relatives by consanguinity (that is, relatives
who share a common biological ancestor). In determining the degree of
the relationship, relatives by less than full consanguinity (such as
half-siblings, who share only one parent) are treated the same as
relatives by full consanguinity (such as siblings who share both
parents).
(A) First-degree relatives include parents, spouses, siblings, and
children.
(B) Second-degree relatives include grandparents, grandchildren,
aunts, uncles, nephews, and nieces.
(C) Third-degree relatives include great-grandparents, great-
grandchildren, great aunts, great uncles, and first cousins.
(D) Fourth-degree relatives include great-great grandparents, great-
great grandchildren, and children of first cousins.
(3) Genetic information means--
(i) Subject to paragraphs (a)(3)(ii) and (iii) of this section, with
respect to an individual, information about--
(A) The individual's genetic tests (as defined in paragraph (a)(5)
of this section);
(B) The genetic tests of family members of the individual;
(C) The manifestation (as defined in paragraph (a)(6) of this
section) of a disease or disorder in family members of the individual;
or
(D) Any request for, or receipt of, genetic services (as defined in
paragraph (a)(4) of this section), or participation in clinical research
which includes genetic services, by the individual or any family member
of the individual.
(ii) The term genetic information does not include information about
the sex or age of any individual.
[[Page 43]]
(iii) The term genetic information includes--
(A) With respect to a pregnant woman (or a family member of the
pregnant woman), genetic information of any fetus carried by the
pregnant woman; and
(B) With respect to an individual (or a family member of the
individual) who is utilizing an assisted reproductive technology,
genetic information of any embryo legally held by the individual or
family member.
(4) Genetic services means --
(i) A genetic test, as defined in paragraph (a)(5) of this section;
(ii) Genetic counseling (including obtaining, interpreting, or
assessing genetic information); or
(iii) Genetic education.
(5)(i) Genetic test means an analysis of human DNA, RNA,
chromosomes, proteins, or metabolites, if the analysis detects
genotypes, mutations, or chromosomal changes. However, a genetic test
does not include an analysis of proteins or metabolites that is directly
related to a manifested disease, disorder, or pathological condition.
Accordingly, a test to determine whether an individual has a BRCA1 or
BRCA2 variant is a genetic test. Similarly, a test to determine whether
an individual has a genetic variant associated with hereditary
nonpolyposis colorectal cancer is a genetic test. However, an HIV test,
complete blood count, cholesterol test, liver function test, or test for
the presence of alcohol or drugs is not a genetic test.
(ii) The rules of this paragraph (a)(5) are illustrated by the
following example:
Example. (i) Facts. Individual A is a newborn covered under a group
health plan. A undergoes a phenylketonuria (PKU) screening, which
measures the concentration of a metabolite, phenylalanine, in A's blood.
In PKU, a mutation occurs in the phenylalanine hydroxylase (PAH) gene
which contains instructions for making the enzyme needed to break down
the amino acid phenylalanine. Individuals with the mutation, who have a
deficiency in the enzyme to break down phenylalanine, have high
concentrations of phenylalanine.
(ii) Conclusion. In this Example, the PKU screening is a genetic
test with respect to A because the screening is an analysis of
metabolites that detects a genetic mutation.
(6)(i) Manifestation or manifested means, with respect to a disease,
disorder, or pathological condition, that an individual has been or
could reasonably be diagnosed with the disease, disorder, or
pathological condition by a health care professional with appropriate
training and expertise in the field of medicine involved. For purposes
of this section, a disease, disorder, or pathological condition is not
manifested if a diagnosis is based principally on genetic information.
(ii) The rules of this paragraph (a)(6) are illustrated by the
following examples:
Example 1. (i) Facts. Individual A has a family medical history of
diabetes. A begins to experience excessive sweating, thirst, and
fatigue. A's physician examines A and orders blood glucose testing
(which is not a genetic test). Based on the physician's examination, A's
symptoms, and test results that show elevated levels of blood glucose,
A's physician diagnoses A as having adult onset diabetes mellitus (Type
2 diabetes).
(ii) Conclusion. In this Example 1, A has been diagnosed by a health
care professional with appropriate training and expertise in the field
of medicine involved. The diagnosis is not based principally on genetic
information. Thus, Type 2 diabetes is manifested with respect to A.
Example 2. (i) Facts. Individual B has several family members with
colon cancer. One of them underwent genetic testing which detected a
mutation in the MSH2 gene associated with hereditary nonpolyposis
colorectal cancer (HNPCC). B's physician, a health care professional
with appropriate training and expertise in the field of medicine
involved, recommends that B undergo a targeted genetic test to look for
the specific mutation found in B 's relative to determine if B has an
elevated risk for cancer. The genetic test with respect to B showed that
B also carries the mutation and is at increased risk to develop
colorectal and other cancers associated with HNPCC. B has a colonoscopy
which indicates no signs of disease, and B has no symptoms.
(ii) Conclusion. In this Example 2, because B has no signs or
symptoms of colorectal cancer, B has not been and could not reasonably
be diagnosed with HNPCC. Thus, HNPCC is not manifested with respect to
B.
Example 3. (i) Facts. Same facts as Example 2, except that B's
colonoscopy and subsequent tests indicate the presence of HNPCC. Based
on the colonoscopy and subsequent test results, B's physician makes a
diagnosis of HNPCC.
(ii) Conclusion. In this Example 3, HNPCC is manifested with respect
to B because a
[[Page 44]]
health care professional with appropriate training and expertise in the
field of medicine involved has made a diagnosis that is not based
principally on genetic information.
Example 4. (i) Facts. Individual C has a family member that has been
diagnosed with Huntington's Disease. A genetic test indicates that C has
the Huntington's Disease gene variant. At age 42, C begins suffering
from occasional moodiness and disorientation, symptoms which are
associated with Huntington's Disease. C is examined by a neurologist (a
physician with appropriate training and expertise for diagnosing
Huntington's Disease). The examination includes a clinical neurological
exam. The results of the examination do not support a diagnosis of
Huntington's Disease.
(ii) Conclusion. In this Example 4, C is not and could not
reasonably be diagnosed with Huntington's Disease by a health care
professional with appropriate training and expertise. Therefore,
Huntington's Disease is not manifested with respect to C.
Example 5. (i) Facts. Same facts as Example 4, except that C
exhibits additional neurological and behavioral symptoms, and the
results of the examination support a diagnosis of Huntington's Disease
with respect to C.
(ii) Conclusion. In this Example 5, C could reasonably be diagnosed
with Huntington's Disease by a health care professional with appropriate
training and expertise. Therefore, Huntington's Disease is manifested
with respect to C.
(7) Underwriting purposes has the meaning given in paragraph (d)(1)
of this section.
(b) No group-based discrimination based on genetic information--(1)
In general. For purposes of this section, a group health plan, and a
health insurance issuer offering health insurance coverage in connection
with a group health plan, must not adjust premium or contribution
amounts for the plan, or any group of similarly situated individuals
under the plan, on the basis of genetic information. For this purpose,
``similarly situated individuals'' are those described in Sec.
146.121(d) of this part.
(2) Rule of construction. Nothing in paragraph (b)(1) of this
section (or in paragraph (d)(1) or (d)(2) of this section) limits the
ability of a health insurance issuer offering health insurance coverage
in connection with a group health plan to increase the premium for a
group health plan or a group of similarly situated individuals under the
plan based on the manifestation of a disease or disorder of an
individual who is enrolled in the plan. In such a case, however, the
manifestation of a disease or disorder in one individual cannot also be
used as genetic information about other group members to further
increase the premium for a group health plan or a group of similarly
situated individuals under the plan.
(3) Examples. The rules of this paragraph (b) are illustrated by the
following examples:
Example 1. (i) Facts. An employer sponsors a group health plan that
provides coverage through a health insurance issuer. In order to
determine the premium rate for the upcoming plan year, the issuer
reviews the claims experience of individuals covered under the plan and
other health status information of the individuals, including genetic
information. The issuer finds that three individuals covered under the
plan had unusually high claims experience. In addition, the issuer finds
that the genetic information of two other individuals indicates the
individuals have a higher probability of developing certain illnesses
although the illnesses are not manifested at this time. The issuer
quotes the plan a higher per-participant rate because of both the
genetic information and the higher claims experience.
(ii) Conclusion. In this Example 1, the issuer violates the
provisions of this paragraph (b) because the issuer adjusts the premium
based on genetic information. However, if the adjustment related solely
to claims experience, the adjustment would not violate the requirements
of this section (nor would it violate the requirements of paragraph (c)
of Sec. 146.121 of this part, which prohibits discrimination in
individual premiums or contributions based on a health factor but
permits increases in the group rate based on a health factor).
Example 2. (i) Facts. An employer sponsors a group health plan that
provides coverage through a health insurance issuer. In order to
determine the premium rate for the upcoming plan year, the issuer
reviews the claims experience of individuals covered under the plan and
other health status information of the individuals, including genetic
information. The issuer finds that Employee A has made claims for
treatment of polycystic kidney disease. A also has two dependent
children covered under the plan. The issuer quotes the plan a higher
per-participant rate because of both A's claims experience and the
family medical history of A's children (that is, the fact that A has the
disease).
(ii) Conclusion. In this Example 2, the issuer violates the
provisions of this paragraph (b)
[[Page 45]]
because, by taking the likelihood that A's children may develop
polycystic kidney disease into account in computing the rate for the
plan, the issuer adjusts the premium based on genetic information
relating to a condition that has not been manifested in A's children.
However, it is permissible for the issuer to increase the premium based
on A's claims experience.
(c) Limitation on requesting or requiring genetic testing--(1)
General rule. Except as otherwise provided in this paragraph (c), a
group health plan, and a health insurance issuer offering health
insurance coverage in connection with a group health plan, must not
request or require an individual or a family member of the individual to
undergo a genetic test.
(2) Health care professional may recommend a genetic test. Nothing
in paragraph (c)(1) of this section limits the authority of a health
care professional who is providing health care services to an individual
to request that the individual undergo a genetic test.
(3) Examples. The rules of paragraphs (c)(1) and (2) of this section
are illustrated by the following examples:
Example 1. (i) Facts. Individual A goes to a physician for a routine
physical examination. The physician reviews A's family medical history
and A informs the physician that A's mother has been diagnosed with
Huntington's Disease. The physician advises A that Huntington's Disease
is hereditary and recommends that A undergo a genetic test.
(ii) Conclusion. In this Example 1, the physician is a health care
professional who is providing health care services to A. Therefore, the
physician's recommendation that A undergo the genetic test does not
violate this paragraph (c).
Example 2. (i) Facts. Individual B is covered by a health
maintenance organization (HMO). B is a child being treated for leukemia.
B's physician, who is employed by the HMO, is considering a treatment
plan that includes six-mercaptopurine, a drug for treating leukemia in
most children. However, the drug could be fatal if taken by a small
percentage of children with a particular gene variant. B's physician
recommends that B undergo a genetic test to detect this variant before
proceeding with this course of treatment.
(ii) Conclusion. In this Example 2, even though the physician is
employed by the HMO, the physician is nonetheless a health care
professional who is providing health care services to B. Therefore, the
physician's recommendation that B undergo the genetic test does not
violate this paragraph (c).
(4) Determination regarding payment--(i) In general. As provided in
this paragraph (c)(4), nothing in paragraph (c)(1) of this section
precludes a plan or issuer from obtaining and using the results of a
genetic test in making a determination regarding payment. For this
purpose, ``payment'' has the meaning given such term in Sec. 164.501 of
the privacy regulations issued under the Health Insurance Portability
and Accountability Act. Thus, if a plan or issuer conditions payment for
an item or service based on its medical appropriateness and the medical
appropriateness of the item or service depends on the genetic makeup of
a patient, then the plan or issuer is permitted to condition payment for
the item or service on the outcome of a genetic test. The plan or issuer
may also refuse payment if the patient does not undergo the genetic
test.
(ii) Limitation. A plan or issuer is permitted to request only the
minimum amount of information necessary to make a determination
regarding payment. The minimum amount of information necessary is
determined in accordance with the minimum necessary standard in Sec.
164.502(b) of the privacy regulations issued under the Health Insurance
Portability and Accountability Act.
(iii) Examples. See paragraph (e) of this section for examples
illustrating the rules of this paragraph (c)(4), as well as other
provisions of this section.
(5) Research exception. Notwithstanding paragraph (c)(1) of this
section, a plan or issuer may request, but not require, that a
participant or beneficiary undergo a genetic test if all of the
conditions of this paragraph (c)(5) are met:
(i) Research in accordance with Federal regulations and applicable
State or local law or regulations. The plan or issuer makes the request
pursuant to research, as defined in Sec. 46.102(d) of this subtitle,
that complies with part 46 of this subtitle or equivalent Federal
regulations, and any applicable State or local law or regulations for
the protection of human subjects in research.
(ii) Written request for participation in research. The plan or
issuer makes the request in writing, and the request clearly indicates
to each participant or
[[Page 46]]
beneficiary (or, in the case of a minor child, to the legal guardian of
the beneficiary) that--
(A) Compliance with the request is voluntary; and
(B) Noncompliance will have no effect on eligibility for benefits
(as described in Sec. 146.121(b)(1) of this part) or premium or
contribution amounts.
(iii) Prohibition on underwriting. No genetic information collected
or acquired under this paragraph (c)(5) can be used for underwriting
purposes (as described in paragraph (d)(1) of this section).
(iv) Notice to Federal agencies. The plan or issuer completes a copy
of the ``Notice of Research Exception under the Genetic Information
Nondiscrimination Act'' authorized by the Secretary and provides the
notice to the address specified in the instructions thereto.
(d) Prohibitions on collection of genetic information--(1) For
underwriting purposes--(i) General rule. A group health plan, and a
health insurance issuer offering health insurance coverage in connection
with a group health plan, must not collect (as defined in paragraph
(a)(1) of this section) genetic information for underwriting purposes.
See paragraph (e) of this section for examples illustrating the rules of
this paragraph (d)(1), as well as other provisions of this section.
(ii) Underwriting purposes defined. Subject to paragraph (d)(1)(iii)
of this section, underwriting purposes means, with respect to any group
health plan, or health insurance coverage offered in connection with a
group health plan--
(A) Rules for, or determination of, eligibility (including
enrollment and continued eligibility) for benefits under the plan or
coverage as described in Sec. 146.121(b)(1)(ii) of this part (including
changes in deductibles or other cost-sharing mechanisms in return for
activities such as completing a health risk assessment or participating
in a wellness program);
(B) The computation of premium or contribution amounts under the
plan or coverage (including discounts, rebates, payments in kind, or
other premium differential mechanisms in return for activities such as
completing a health risk assessment or participating in a wellness
program);
(C) The application of any preexisting condition exclusion under the
plan or coverage; and
(D) Other activities related to the creation, renewal, or
replacement of a contract of health insurance or health benefits.
(iii) Medical appropriateness. If an individual seeks a benefit
under a group health plan or health insurance coverage, the plan or
coverage may limit or exclude the benefit based on whether the benefit
is medically appropriate, and the determination of whether the benefit
is medically appropriate is not within the meaning of underwriting
purposes. Accordingly, if an individual seeks a benefit under the plan
and the plan or issuer conditions the benefit based on its medical
appropriateness and the medical appropriateness of the benefit depends
on genetic information of the individual, then the plan or issuer is
permitted to condition the benefit on the genetic information. A plan or
issuer is permitted to request only the minimum amount of genetic
information necessary to determine medical appropriateness. The plan or
issuer may deny the benefit if the patient does not provide the genetic
information required to determine medical appropriateness. If an
individual is not seeking a benefit, the medical appropriateness
exception of this paragraph (d)(1)(iii) to the definition of
underwriting purposes does not apply. See paragraph (e) of this section
for examples illustrating the medical appropriateness provisions of this
paragraph (d)(1)(iii), as well as other provisions of this section.
(2) Prior to or in connection with enrollment--(i) In general. A
group health plan, and a health insurance issuer offering health
insurance coverage in connection with a group health plan, must not
collect genetic information with respect to any individual prior to that
individual's effective date of coverage under that plan or coverage, nor
in connection with the rules for eligibility (as defined in Sec.
146.121(b)(1)(ii) of this part) that apply to that individual.
[[Page 47]]
Whether or not an individual's information is collected prior to that
individual's effective date of coverage is determined at the time of
collection.
(ii) Incidental collection exception--(A) In general. If a group
health plan, or a health insurance issuer offering health insurance
coverage in connection with a group health plan, obtains genetic
information incidental to the collection of other information concerning
any individual, the collection is not a violation of this paragraph
(d)(2), as long as the collection is not for underwriting purposes in
violation of paragraph (d)(1) of this section.
(B) Limitation. The incidental collection exception of this
paragraph (d)(2)(ii) does not apply in connection with any collection
where it is reasonable to anticipate that health information will be
received, unless the collection explicitly states that genetic
information should not be provided.
(3) Examples. The rules of this paragraph (d) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan provides a premium
reduction to enrollees who complete a health risk assessment. The health
risk assessment is requested to be completed after enrollment. Whether
or not it is completed or what responses are given on it has no effect
on an individual's enrollment status, or on the enrollment status of
members of the individual's family. The health risk assessment includes
questions about the individual's family medical history.
(ii) Conclusion. In this Example 1, the health risk assessment
includes a request for genetic information (that is, the individual's
family medical history). Because completing the health risk assessment
results in a premium reduction, the request for genetic information is
for underwriting purposes. Consequently, the request violates the
prohibition on the collection of genetic information in paragraph (d)(1)
of this section.
Example 2. (i) Facts. The same facts as Example 1, except there is
no premium reduction or any other reward for completing the health risk
assessment.
(ii) Conclusion. In this Example 2, the request is not for
underwriting purposes, nor is it prior to or in connection with
enrollment. Therefore, it does not violate the prohibition on the
collection of genetic information in this paragraph (d).
Example 3. (i) Facts. A group health plan requests that enrollees
complete a health risk assessment prior to enrollment, and includes
questions about the individual's family medical history. There is no
reward or penalty for completing the health risk assessment.
(ii) Conclusion. In this Example 3, because the health risk
assessment includes a request for genetic information (that is, the
individual's family medical history), and requests the information prior
to enrollment, the request violates the prohibition on the collection of
genetic information in paragraph (d)(2) of this section. Moreover,
because it is a request for genetic information, it is not an incidental
collection under paragraph (d)(2)(ii) of this section.
Example 4. (i) Facts. The facts are the same as in Example 1, except
there is no premium reduction or any other reward given for completion
of the health risk assessment. However, certain people completing the
health risk assessment may become eligible for additional benefits under
the plan by being enrolled in a disease management program based on
their answers to questions about family medical history. Other people
may become eligible for the disease management program based solely on
their answers to questions about their individual medical history.
(ii) Conclusion. In this Example 4, the request for information
about an individual's family medical history could result in the
individual being eligible for benefits for which the individual would
not otherwise be eligible. Therefore, the questions about family medical
history on the health risk assessment are a request for genetic
information for underwriting purposes and are prohibited under this
paragraph (d). Although the plan conditions eligibility for the disease
management program based on determinations of medical appropriateness,
the exception for determinations of medical appropriateness does not
apply because the individual is not seeking benefits.
Example 5. (i) Facts. A group health plan requests enrollees to
complete two distinct health risk assessments (HRAs) after and unrelated
to enrollment. The first HRA instructs the individual to answer only for
the individual and not for the individual's family. The first HRA does
not ask about any genetic tests the individual has undergone or any
genetic services the individual has received. The plan offers a reward
for completing the first HRA. The second HRA asks about family medical
history and the results of genetic tests the individual has undergone.
The plan offers no reward for completing the second HRA and the
instructions make clear that completion of the second HRA is wholly
voluntary and will not affect the reward given for completion of the
first HRA.
(ii) Conclusion. In this Example 5, no genetic information is
collected in connection with the first HRA, which offers a reward, and
no benefits or other rewards are conditioned on the request for genetic
information
[[Page 48]]
in the second HRA. Consequently, the request for genetic information in
the second HRA is not for underwriting purposes, and the two HRAs do not
violate the prohibition on the collection of genetic information in this
paragraph (d).
Example 6. (i) Facts. A group health plan waives its annual
deductible for enrollees who complete an HRA. The HRA is requested to be
completed after enrollment. Whether or not the HRA is completed or what
responses are given on it has no effect on an individual's enrollment
status, or on the enrollment status of members of the individual's
family. The HRA does not include any direct questions about the
individual's genetic information (including family medical history).
However, the last question reads, ``Is there anything else relevant to
your health that you would like us to know or discuss with you?''
(ii) Conclusion. In this Example 6, the plan's request for medical
information does not explicitly state that genetic information should
not be provided. Therefore, any genetic information collected in
response to the question is not within the incidental collection
exception and is prohibited under this paragraph (d).
Example 7. (i) Facts. Same facts as Example 6, except that the last
question goes on to state, ``In answering this question, you should not
include any genetic information. That is, please do not include any
family medical history or any information related to genetic testing,
genetic services, genetic counseling, or genetic diseases for which you
believe you may be at risk.''
(ii) Conclusion. In this Example 7, the plan's request for medical
information explicitly states that genetic information should not be
provided. Therefore, any genetic information collected in response to
the question is within the incidental collection exception. However, the
plan may not use any genetic information it obtains incidentally for
underwriting purposes.
Example 8. (i) Facts. Issuer M acquires Issuer N. M requests N's
records, stating that N should not provide genetic information and
should review the records to excise any genetic information. N assembles
the data requested by M and, although N reviews it to delete genetic
information, the data from a specific region included some individuals'
family medical history. Consequently, M receives genetic information
about some of N's covered individuals.
(ii) Conclusion. In this Example 8, M's request for health
information explicitly stated that genetic information should not be
provided. Therefore, the collection of genetic information was within
the incidental collection exception. However, M may not use the genetic
information it obtained incidentally for underwriting purposes.
(e) Examples regarding determinations of medical appropriateness.
The application of the rules of paragraphs (c) and (d) of this section
to plan or issuer determinations of medical appropriateness is
illustrated by the following examples:
Example 1. (i) Facts. Individual A group health plan covers genetic
testing for celiac disease for individuals who have family members with
this condition. After A's son is diagnosed with celiac disease, A
undergoes a genetic test and promptly submits a claim for the test to
A's issuer for reimbursement. The issuer asks A to provide the results
of the genetic test before the claim is paid.
(ii) Conclusion. In this Example 1, under the rules of paragraph
(c)(4) of this section the issuer is permitted to request only the
minimum amount of information necessary to make a decision regarding
payment. Because the results of the test are not necessary for the
issuer to make a decision regarding the payment of A's claim, the
issuer's request for the results of the genetic test violates paragraph
(c) of this section.
Example 2. (i) Facts. Individual B's group health plan covers a
yearly mammogram for participants and beneficiaries starting at age 40,
or at age 30 for those with increased risk for breast cancer, including
individuals with BRCA1 or BRCA2 gene mutations. B is 33 years old and
has the BRCA2 mutation. B undergoes a mammogram and promptly submits a
claim to B's plan for reimbursement. Following an established policy,
the plan asks B for evidence of increased risk of breast cancer, such as
the results of a genetic test or a family history of breast cancer,
before the claim for the mammogram is paid. This policy is applied
uniformly to all similarly situated individuals and is not directed at
individuals based on any genetic information.
(ii) Conclusion. In this Example 2, the plan does not violate
paragraphs (c) or (d) of this section. Under paragraph (c), the plan is
permitted to request and use the results of a genetic test to make a
determination regarding payment, provided the plan requests only the
minimum amount of information necessary. Because the medical
appropriateness of the mammogram depends on the genetic makeup of the
patient, the minimum amount of information necessary includes the
results of the genetic test. Similarly, the plan does not violate
paragraph (d) of this section because the plan is permitted to request
genetic information in making a determination regarding the medical
appropriateness of a claim if the genetic information is necessary to
make the determination (and if the genetic information is not used for
underwriting purposes).
[[Page 49]]
Example 3. (i) Facts. Individual C was previously diagnosed with and
treated for breast cancer, which is currently in remission. In
accordance with the recommendation of C's physician, C has been taking a
regular dose of tamoxifen to help prevent a recurrence. C's group health
plan adopts a new policy requiring patients taking tamoxifen to undergo
a genetic test to ensure that tamoxifen is medically appropriate for
their genetic makeup. In accordance with, at the time, the latest
scientific research, tamoxifen is not helpful in up to 7 percent of
breast cancer patients, those with certain variations of the gene for
making the CYP2D6 enzyme. If a patient has a gene variant
making tamoxifen not medically appropriate, the plan does not pay for
the tamoxifen prescription.
(ii) Conclusion. In this Example 3, the plan does not violate
paragraph (c) of this section if it conditions future payments for the
tamoxifen prescription on C's undergoing a genetic test to determine
what genetic markers C has for making the CYP2D6 enzyme. Nor
does the plan violate paragraph (c) of this section if the plan refuses
future payment if the results of the genetic test indicate that
tamoxifen is not medically appropriate for C.
Example 4. (i) Facts. A group health plan offers a diabetes disease
management program to all similarly situated individuals for whom it is
medically appropriate based on whether the individuals have or are at
risk for diabetes. The program provides enhanced benefits related only
to diabetes for individuals who qualify for the program. The plan sends
out a notice to all participants that describes the diabetes disease
management program and explains the terms for eligibility. Individuals
interested in enrolling in the program are advised to contact the plan
to demonstrate that they have diabetes or that they are at risk for
diabetes. For individuals who do not currently have diabetes, genetic
information may be used to demonstrate that an individual is at risk.
(ii) Conclusion. In this Example 4, the plan may condition benefits
under the disease management program upon a showing by an individual
that the individual is at risk for diabetes, even if such showing may
involve genetic information, provided that the plan requests genetic
information only when necessary to make a determination regarding
whether the disease management program is medically appropriate for the
individual and only requests the minimum amount of information necessary
to make that determination.
Example 5. (i) Facts. Same facts as Example 4, except that the plan
includes a questionnaire that asks about the occurrence of diabetes in
members of the individual's family as part of the notice describing the
disease management program.
(ii) Conclusion. In this Example 5, the plan violates the
requirements of paragraph (d)(1) of this section because the requests
for genetic information are not limited to those situations in which it
is necessary to make a determination regarding whether the disease
management program is medically appropriate for the individuals.
Example 6. (i) Facts. Same facts as Example 4, except the disease
management program provides an enhanced benefit in the form of a lower
annual deductible to individuals under the program; the lower deductible
applies with respect to all medical expenses incurred by the individual.
Thus, whether or not a claim relates to diabetes, the individual is
provided with a lower deductible based on the individual providing the
plan with genetic information.
(ii) Conclusion. In this Example 6, because the enhanced benefits
include benefits not related to the determination of medical
appropriateness, making available the enhanced benefits is within the
meaning of underwriting purposes. Accordingly, the plan may not request
or require genetic information (including family history information) in
determining eligibility for enhanced benefits under the program because
such a request would be for underwriting purposes and would violate
paragraph (d)(1) of this section.
(f) Applicability date. This section applies for plan years
beginning on or after December 7, 2009.
[74 FR 51688, Oct. 7, 2009]
Sec. 146.123 Special rule allowing integration of Health
Reimbursement Arrangements (HRAs) and other account-based group
health plans with individual health insurance coverage and Medicare
and prohibiting discrimination in HRAs and other account-based
group health plans.
(a) Scope. This section applies to health reimbursement arrangements
(HRAs) and other account-based group health plans, as defined in Sec.
147.126(d)(6)(i) of this subchapter. For ease of reference, the term
``HRA'' is used in this section to include other account-based group
health plans. For related regulations, see 26 CFR 1.36B-2(c)(3)(i) and
(c)(5), 29 CFR 2510.3-1(l), and 45 CFR 155.420.
(b) Purpose. This section provides the conditions that an HRA must
satisfy in order to be integrated with individual health insurance
coverage for purposes of Public Health Service Act (PHS Act) sections
2711 and 2713 and Sec. 147.126(d)(4)
[[Page 50]]
of this subchapter (referred to as an individual coverage HRA). This
section also allows an individual coverage HRA to be integrated with
Medicare for purposes of PHS Act sections 2711 and 2713 and Sec.
147.126(d)(4) of this subchapter, subject to the conditions provided in
this section (see paragraph (e) of this section). Some of the conditions
set forth in this section specifically relate to compliance with PHS Act
sections 2711 and 2713 and some relate to the effect of having or being
offered an individual coverage HRA on eligibility for the premium tax
credit under section 36B of the Internal Revenue Code (Code). In
addition, this section provides conditions that an individual coverage
HRA must satisfy in order to comply with the nondiscrimination
provisions in PHS Act section 2705 and that are consistent with the
provisions of the Patient Protection and Affordable Care Act, Public Law
111-148 (124 Stat. 119 (2010)), and the Health Care and Education
Reconciliation Act of 2010, Public Law 111-152 (124 Stat. 1029 (2010)),
each as amended, that are designed to create a competitive individual
market. These conditions are intended to prevent an HRA plan sponsor
from intentionally or unintentionally, directly or indirectly, steering
any participants or dependents with adverse health factors away from its
traditional group health plan, if any, and toward individual health
insurance coverage.
(c) General rule. An HRA will be considered to be integrated with
individual health insurance coverage for purposes of PHS Act sections
2711 and 2713 and Sec. 147.126(d)(4) of this subchapter and will not be
considered to discriminate in violation of PHS Act section 2705 solely
because it is integrated with individual health insurance coverage,
provided that the conditions of this paragraph (c) are satisfied. See
paragraph (e) of this section for how these conditions apply to an
individual coverage HRA integrated with Medicare. For purposes of this
section, medical care expenses means medical care expenses as defined in
Sec. 147.126(d)(6)(ii) of this subchapter and Exchange means Exchange
as defined in Sec. 155.20 of this subchapter.
(1) Enrollment in individual health insurance coverage--(i) In
general. The HRA must require that the participant and any dependent(s)
are enrolled in individual health insurance coverage that is subject to
and complies with the requirements in PHS Act sections 2711 (and Sec.
147.126(a)(2) of this subchapter) and PHS Act section 2713 (and Sec.
147.130(a)(1) of this subchapter), for each month that the individual(s)
are covered by the HRA. For purposes of this paragraph (c), all
individual health insurance coverage, except for individual health
insurance coverage that consists solely of excepted benefits, is treated
as being subject to and complying with PHS Act sections 2711 and 2713.
References to individual health insurance coverage in this paragraph (c)
do not include individual health insurance coverage that consists solely
of excepted benefits.
(ii) Forfeiture. The HRA must provide that if any individual covered
by the HRA ceases to be covered by individual health insurance coverage,
the HRA will not reimburse medical care expenses that are incurred by
that individual after the individual health insurance coverage ceases.
In addition, if the participant and all dependents covered by the
participant's HRA cease to be covered by individual health insurance
coverage, the participant must forfeit the HRA. In either case, the HRA
must reimburse medical care expenses incurred by the individual prior to
the cessation of individual health insurance coverage to the extent the
medical care expenses are otherwise covered by the HRA, but the HRA may
limit the period to submit medical care expenses for reimbursement to a
reasonable specified time period. If a participant or dependent loses
coverage under the HRA for a reason other than cessation of individual
health insurance coverage, COBRA and other continuation coverage
requirements may apply.
(iii) Grace periods and retroactive termination of individual health
insurance coverage. In the event an individual is initially enrolled in
individual health insurance coverage and subsequently timely fails to
pay premiums for the
[[Page 51]]
coverage, with the result that the individual is in a grace period, the
individual is considered to be enrolled in individual health insurance
coverage for purposes of this paragraph (c)(1) and the individual
coverage HRA must reimburse medical care expenses incurred by the
individual during that time period to the extent the medical care
expenses are otherwise covered by the HRA. If the individual fails to
pay the applicable premium(s) by the end of the grace period and the
coverage is cancelled or terminated, including retroactively, or if the
individual health insurance coverage is cancelled or terminated
retroactively for some other reason (for example, a rescission), an
individual coverage HRA must require that a participant notify the HRA
that coverage has been cancelled or terminated and the date on which the
cancellation or termination is effective. After the individual coverage
HRA has received the notice of cancellation or termination, the HRA may
not reimburse medical care expenses incurred on and after the date the
individual health insurance coverage was cancelled or terminated, which
is considered to be the date of termination of coverage under the HRA.
(2) No traditional group health plan may be offered to same
participants. To the extent a plan sponsor offers any class of employees
(as defined in paragraph (d) of this section) an individual coverage
HRA, the plan sponsor may not also offer a traditional group health plan
to the same class of employees, except as provided in paragraph (d)(5)
of this section. For purposes of this section, a traditional group
health plan is any group health plan other than either an account-based
group health plan or a group health plan that consists solely of
excepted benefits. Therefore, a plan sponsor may not offer a choice
between an individual coverage HRA or a traditional group health plan to
any participant or dependent.
(3) Same terms requirement--(i) In general. If a plan sponsor offers
an individual coverage HRA to a class of employees described in
paragraph (d) of this section, the HRA must be offered on the same terms
to all participants within the class, except as provided in paragraphs
(c)(3)(ii) through (vi) and (d)(5) of this section.
(ii) Carryover amounts, salary reduction arrangements, and transfer
amounts. Amounts that are not used to reimburse medical care expenses
for any plan year that are made available to participants in later plan
years are disregarded for purposes of determining whether an HRA is
offered on the same terms, provided that the method for determining
whether participants have access to unused amounts in future years, and
the methodology and formula for determining the amounts of unused funds
which they may access in future years, is the same for all participants
in a class of employees. In addition, the ability to pay the portion of
the premium for individual health insurance coverage that is not covered
by the HRA, if any, by using a salary reduction arrangement under
section 125 of the Code is considered to be a term of the HRA for
purposes of this paragraph (c)(3). Therefore, an HRA is not provided on
the same terms unless the salary reduction arrangement, if made
available to any participant in a class of employees, is made available
on the same terms to all participants (other than former employees, as
defined in paragraph (c)(3)(iv) of this section) in the class of
employees. Further, to the extent that a participant in an individual
coverage HRA was previously covered by another HRA and the current
individual coverage HRA makes available amounts that were not used to
reimburse medical care expenses under the prior HRA (transferred
amounts), the transferred amounts are disregarded for purposes of
determining whether the HRA is offered on the same terms, provided that
if the HRA makes available transferred amounts, it does so on the same
terms for all participants in the class of employees.
(iii) Permitted variation. An HRA does not fail to be provided on
the same terms solely because the maximum dollar amount made available
to participants in a class of employees to reimburse medical care
expenses for any plan year increases in accordance with paragraph
(c)(3)(iii)(A) or (B) of this section.
[[Page 52]]
(A) Variation due to number of dependents. An HRA does not fail to
be provided on the same terms to participants in a class of employees
solely because the maximum dollar amount made available to those
participants to reimburse medical care expenses for any plan year
increases as the number of the participant's dependents who are covered
under the HRA increases, so long as the same maximum dollar amount
attributable to the increase in family size is made available to all
participants in that class of employees with the same number of
dependents covered by the HRA.
(B) Variation due to age. An HRA does not fail to be provided on the
same terms to participants in a class of employees solely because the
maximum dollar amount made available under the terms of the HRA to those
participants to reimburse medical care expenses for any plan year
increases as the age of the participant increases, so long as the
requirements in paragraphs (c)(3)(iii)(B)(1) and (2) of this section are
satisfied. For the purpose of this paragraph (c)(3)(iii)(B), the plan
sponsor may determine the age of the participant using any reasonable
method for a plan year, so long as the plan sponsor determines each
participant's age for the purpose of this paragraph (c)(3)(iii)(B) using
the same method for all participants in the class of employees for the
plan year and the method is determined prior to the plan year.
(1) The same maximum dollar amount attributable to the increase in
age is made available to all participants who are the same age.
(2) The maximum dollar amount made available to the oldest
participant(s) is not more than three times the maximum dollar amount
made available to the youngest participant(s).
(iv) Former employees. An HRA does not fail to be treated as
provided on the same terms if the plan sponsor offers the HRA to some,
but not all, former employees within a class of employees. However, if a
plan sponsor offers the HRA to one or more former employees within a
class of employees, the HRA must be offered to the former employee(s) on
the same terms as to all other employees within the class, except as
provided in paragraph (c)(3)(ii) of this section. For purposes of this
section, a former employee is an employee who is no longer performing
services for the employer.
(v) New employees or new dependents. For a participant whose
coverage under the HRA becomes effective later than the first day of the
plan year, the HRA does not fail to be treated as being provided on the
same terms to the participant if the maximum dollar amount made
available to the participant either is the same as the maximum dollar
amount made available to participants in the participant's class of
employees whose coverage became effective as of the first day of the
plan year, or is pro-rated consistent with the portion of the plan year
in which the participant is covered by the HRA. Similarly, if the HRA
provides for variation in the maximum amount made available to
participants in a class of employees based on the number of a
participant's dependents covered by the HRA, and the number of a
participant's dependents covered by the HRA changes during a plan year
(either increasing or decreasing), the HRA does not fail to be treated
as being provided on the same terms to the participant if the maximum
dollar amount made available to the participant either is the same as
the maximum dollar amount made available to participants in the
participant's class of employees who had the same number of dependents
covered by the HRA on the first day of the plan year or is pro-rated for
the remainder of the plan year after the change in the number of the
participant's dependents covered by the HRA consistent with the portion
of the plan year in which that number of dependents are covered by the
HRA. The method the HRA uses to determine amounts made available for
participants whose coverage under the HRA is effective later than the
first day of the plan year or who have changes in the number of
dependents covered by the HRA during a plan year must be the same for
all participants in the class of employees and the method must be
determined prior to the beginning of the plan year.
(vi) HSA-compatible HRAs. An HRA does not fail to be treated as
provided
[[Page 53]]
on the same terms if the plan sponsor offers participants in a class of
employees a choice between an HSA-compatible individual coverage HRA and
an individual coverage HRA that is not HSA compatible, provided both
types of HRAs are offered to all participants in the class of employees
on the same terms. For the purpose of this paragraph (c)(3)(vi), an HSA-
compatible individual coverage HRA is an individual coverage HRA that is
limited in accordance with applicable guidance under section 223 of the
Code such that an individual covered by such an HRA is not disqualified
from being an eligible individual under section 223 of the Code.
(vii) Examples. The following examples illustrate the provisions of
this paragraph (c)(3), without taking into account the provisions of
paragraph (d) of this section. In each example, the HRA is an individual
coverage HRA that has a calendar year plan year and may reimburse any
medical care expenses, including premiums for individual health
insurance coverage (except as provided in paragraph (c)(3)(vii)(E) of
this section (Example 5)). Further, in each example, assume the HRA is
offered on the same terms, except as otherwise specified in the example
and that no participants or dependents are Medicare beneficiaries.
(A) Example 1: Carryover amounts permitted--(1) Facts. For 2020 and
again for 2021, Plan Sponsor A offers all employees $7,000 each in an
HRA, and the HRA provides that amounts that are unused at the end of a
plan year may be carried over to the next plan year, with no
restrictions on the use of the carryover amounts compared to the use of
newly available amounts. At the end of 2020, some employees have used
all of the funds in their HRAs, while other employees have balances
remaining that range from $500 to $1,750 that are carried over to 2021
for those employees.
(2) Conclusion. The same terms requirement of this paragraph (c)(3)
is satisfied in this paragraph (c)(3)(vii)(A) (Example 1) for 2020
because Plan Sponsor A offers all employees the same amount, $7,000, in
an HRA for that year. The same terms requirement is also satisfied for
2021 because Plan Sponsor A again offers all employees the same amount
for that year, and the carryover amounts that some employees have are
disregarded in applying the same terms requirement because the amount of
the carryover for each employee (that employee's balance) and each
employee's access to the carryover amounts is based on the same terms.
(B) Example 2: Employees hired after the first day of the plan
year--(1) Facts. For 2020, Plan Sponsor B offers all employees employed
on January 1, 2020, $7,000 each in an HRA for the plan year. Employees
hired after January 1, 2020, are eligible to enroll in the HRA with an
effective date of the first day of the month following their date of
hire, as long as they have enrolled in individual health insurance
coverage effective on or before that date, and the amount offered to
these employees is pro-rated based on the number of months remaining in
the plan year, including the month which includes their coverage
effective date.
(2) Conclusion. The same terms requirement of this paragraph (c)(3)
is satisfied in this paragraph (c)(3)(vii)(B) (Example 2) for 2020
because Plan Sponsor B offers all employees employed on the first day of
the plan year the same amount, $7,000, in an HRA for that plan year and
all employees hired after January 1, 2020, a pro-rata amount based on
the portion of the plan year during which they are enrolled in the HRA.
(C) Example 3: HRA amounts offered vary based on number of
dependents--(1) Facts. For 2020, Plan Sponsor C offers its employees the
following amounts in an HRA: $1,500, if the employee is the only
individual covered by the HRA; $3,500, if the employee and one dependent
are covered by the HRA; and $5,000, if the employee and more than one
dependent are covered by the HRA.
(2) Conclusion. The same terms requirement of this paragraph (c)(3)
is satisfied in this paragraph (c)(3)(vii)(C) (Example 3) because
paragraph (c)(3)(iii)(A) of this section allows the maximum dollar
amount made available in an HRA to increase as the number of the
participant's dependents covered by the HRA increases and Plan Sponsor C
makes the same amount available to each employee with the same number of
dependents covered by the HRA.
(D) Example 4: HRA amounts offered vary based on increases in
employees' ages--(1) Facts. For 2020, Plan Sponsor D offers its
employees the following amounts in an HRA: $1,000 each for employees age
25 to 35; $2,000 each for employees age 36 to 45; $2,500 each for
employees age 46 to 55; and $4,000 each for employees over age 55.
(2) Conclusion. The same terms requirement of this paragraph (c)(3)
is not satisfied in this paragraph (c)(3)(vii)(D) (Example 4) because
the terms of the HRA provide the oldest participants (those over age 55)
with more than three times the amount made available to the youngest
participants (those ages 25 to 35), in violation of paragraph
(c)(3)(iii)(B)(2) of this section.
(E) Example 5: Application of same terms requirement to premium only
HRA--(1) Facts. For 2020, Plan Sponsor E offers its employees an
[[Page 54]]
HRA that reimburses only premiums for individual health insurance
coverage, up to $10,000 for the year. Employee A enrolls in individual
health insurance coverage with a $5,000 premium for the year and is
reimbursed $5,000 from the HRA. Employee B enrolls in individual health
insurance coverage with an $8,000 premium for the year and is reimbursed
$8,000 from the HRA.
(2) [Reserved]
Conclusion. The same terms requirement of this paragraph (c)(3) is
satisfied in this paragraph (c)(3)(vii)(E) (Example 5) because Plan
Sponsor E offers the HRA on the same terms to all employees,
notwithstanding that some employees receive a greater amount of
reimbursement than others based on the cost of the individual health
insurance coverage selected by the employee.
(4) Opt out. Under the terms of the HRA, a participant who is
otherwise eligible for coverage must be permitted to opt out of and
waive future reimbursements on behalf of the participant and all
dependents eligible for the HRA from the HRA once, and only once, with
respect to each plan year. The HRA may establish timeframes for
enrollment in (and opting out of) the HRA but, in general, the
opportunity to opt out must be provided in advance of the first day of
the plan year. For participants who become eligible to participate in
the HRA on a date other than the first day of the plan year (or who
become eligible fewer than 90 days prior to the plan year or for whom
the notice under paragraph (c)(6) of this section is required to be
provided as set forth in paragraph (c)(6)(i)(C) of this section), or for
a dependent who newly becomes eligible during the plan year, this
opportunity must be provided during the applicable HRA enrollment
period(s) established by the HRA for these individuals. Further, under
the terms of the HRA, upon termination of employment, for a participant
who is covered by the HRA, either the remaining amounts in the HRA must
be forfeited or the participant must be permitted to permanently opt out
of and waive future reimbursements from the HRA on behalf of the
participant and all dependents covered by the HRA.
(5) Reasonable procedures for coverage substantiation--(i)
Substantiation of individual health insurance coverage for the plan
year. The HRA must implement, and comply with, reasonable procedures to
substantiate that participants and each dependent covered by the HRA
are, or will be, enrolled in individual health insurance coverage for
the plan year (or for the portion of the plan year the individual is
covered by the HRA, if applicable). The HRA may establish the date by
which this substantiation must be provided, but, in general, the date
may be no later than the first day of the plan year. However, for a
participant who is not eligible to participate in the HRA on the first
day of the plan year (or who becomes eligible fewer than 90 days prior
to the plan year or for whom the notice under paragraph (c)(6) of this
section is required to be provided as set forth in paragraph
(c)(6)(i)(C) of this section), the HRA may establish the date by which
this substantiation must be provided, but that date may be no later than
the date the HRA coverage begins. Similarly, for a participant who adds
a new dependent during the plan year, the HRA may establish the date by
which this substantiation must be provided, but the date may be no later
than the date the HRA coverage for the new dependent begins; however, to
the extent the dependent's coverage under the HRA is effective
retroactively, the HRA may establish a reasonable time by which this
substantiation is required, but must require it be provided before the
HRA will reimburse any medical care expense for the newly added
dependent. The reasonable procedures an HRA may use to implement the
substantiation requirement set forth in this paragraph (c)(5)(i) may
include a requirement that a participant substantiate enrollment by
providing either:
(A) A document from a third party (for example, the issuer or an
Exchange) showing that the participant and any dependents covered by the
HRA are, or will be, enrolled in individual health insurance coverage
(for example, an insurance card or an explanation of benefits document
pertaining to the relevant time period or documentation from the
Exchange showing that the individual has completed the application and
plan selection); or
(B) An attestation by the participant stating that the participant
and dependent(s) covered by the HRA are, or will be, enrolled in
individual health
[[Page 55]]
insurance coverage, the date coverage began or will begin, and the name
of the provider of the coverage.
(ii) Coverage substantiation with each request for reimbursement of
medical care expenses. Following the initial substantiation of coverage,
with each new request for reimbursement of an incurred medical care
expense for the same plan year, the HRA may not reimburse a participant
for any medical care expenses unless, prior to each reimbursement, the
participant substantiates that the individual on whose behalf medical
care expenses are requested to be reimbursed continues to be enrolled in
individual health insurance coverage for the month during which the
medical care expenses were incurred. The HRA must implement, and comply
with, reasonable procedures to satisfy this requirement. This
substantiation may be in the form of a written attestation by the
participant, which may be part of the form used to request
reimbursement, or a document from a third party (for example, a health
insurance issuer) showing that the participant or the dependent, if
applicable, are or were enrolled in individual health insurance coverage
for the applicable month.
(iii) Reliance on substantiation. For purposes of this paragraph
(c)(5), an HRA may rely on the participant's documentation or
attestation unless the HRA, its plan sponsor, or any other entity acting
in an official capacity on behalf of the HRA has actual knowledge that
any individual covered by the HRA is not, or will not be, enrolled in
individual health insurance coverage for the plan year (or applicable
portion of the plan year) or the month, as applicable.
(6) Notice requirement--(i) Timing. The HRA must provide a written
notice to each participant:
(A) At least 90 calendar days before the beginning of each plan year
for any participant who is not described in either paragraph
(c)(6)(i)(B) or (C) of this section;
(B) No later than the date on which the HRA may first take effect
for the participant, for any participant who is not eligible to
participate at the beginning of the plan year (or is not eligible to
participate at the time the notice is provided at least 90 calendar days
before the beginning of the plan year pursuant to paragraph (c)(6)(i)(A)
of this section); or
(C) No later than the date on which the HRA may first take effect
for the participant, for any participant who is employed by an employer
that is first established less than 120 days before the beginning of the
first plan year of the HRA; this paragraph (c)(6)(i)(C) applies only
with respect to the first plan year of the HRA.
(ii) Content. The notice must include all the information described
in this paragraph (c)(6)(ii) (and may include any additional information
that does not conflict with that information). To the extent that the
Departments of the Treasury, Labor and Health and Human Services provide
model notice language for certain elements of this required notice, HRAs
are permitted, but not required, to use the model language.
(A) A description of the terms of the HRA, including the maximum
dollar amount available for each participant (including the self-only
HRA amount available for the plan year (or the maximum dollar amount
available for the plan year if the HRA provides for reimbursements up to
a single dollar amount regardless of whether a participant has self-only
or other than self-only coverage)), any rules regarding the proration of
the maximum dollar amount applicable to any participant (or dependent,
if applicable) who is not eligible to participate in the HRA for the
entire plan year, whether (and which of) the participant's dependents
are eligible for the HRA, a statement that there are different kinds of
HRAs (including a qualified small employer health reimbursement
arrangement) and the HRA being offered is an individual coverage HRA, a
statement that the HRA requires the participant and any covered
dependents to be enrolled in individual health insurance coverage (or
Medicare Part A and B or Medicare Part C, if applicable), a statement
that the coverage in which the participant and any covered dependents
must be enrolled cannot be short-term, limited-duration insurance or
consist solely of excepted benefits, if the HRA is subject to the
Employee Retirement Income
[[Page 56]]
Security Act (ERISA), a statement that individual health insurance
coverage in which the participant and any covered dependents are
enrolled is not subject to ERISA, if the conditions under 29 CFR 2510.3-
1(l) are satisfied, the date as of which coverage under the HRA may
first become effective (both for participants whose coverage will become
effective on the first day of the plan year and for participants whose
HRA coverage may become effective at a later date), the dates on which
the HRA plan year begins and ends, and the dates on which the amounts
newly made available under the HRA will be made available.
(B) A statement of the right of the participant to opt out of and
waive future reimbursements from the HRA, as set forth under paragraph
(c)(4) of this section.
(C) A description of the potential availability of the premium tax
credit if the participant opts out of and waives future reimbursements
from the HRA and the HRA is not affordable for one or more months under
26 CFR 1.36B-2(c)(5), a statement that even if the participant opts out
of and waives future reimbursements from an HRA, the offer will prohibit
the participant (and, potentially, the participant's dependents) from
receiving a premium tax credit for the participant's coverage (or the
dependent's coverage, if applicable) on an Exchange for any month that
the HRA is affordable under 26 CFR 1.36B-2(c)(5), a statement describing
how the participant may find assistance with determining affordability,
a statement that, if the participant is a former employee, the offer of
the HRA does not render the participant (or the participant's
dependents, if applicable) ineligible for the premium tax credit
regardless of whether it is affordable under 26 CFR 1.36B-2(c)(5), and a
statement that if the participant or dependent is enrolled in Medicare,
he or she is ineligible for the premium tax credit without regard to the
offer or acceptance of the HRA;
(D) A statement that if the participant accepts the HRA, the
participant may not claim a premium tax credit for the participant's
Exchange coverage for any month the HRA may be used to reimburse medical
care expenses of the participant, and a premium tax credit may not be
claimed for the Exchange coverage of the participant's dependents for
any month the HRA may be used to reimburse medical care expenses of the
dependents.
(E) A statement that the participant must inform any Exchange to
which the participant applies for advance payments of the premium tax
credit of the availability of the HRA; the self-only HRA amount
available for the HRA plan year (or the maximum dollar amount available
for the plan year if the HRA provides for reimbursements up to a single
dollar amount regardless of whether a participant has self-only or other
than self-only coverage) as set forth in the written notice in
accordance with paragraph (c)(6)(ii)(A) of this section; whether the HRA
is also available to the participant's dependents and if so, which ones;
the date as of which coverage under the HRA may first become effective;
the date on which the plan year begins and the date on which it ends;
and whether the participant is a current employee or former employee.
(F) A statement that the participant should retain the written
notice because it may be needed to determine whether the participant is
allowed a premium tax credit on the participant's individual income tax
return.
(G) A statement that the HRA may not reimburse any medical care
expense unless the substantiation requirement set forth in paragraph
(c)(5)(ii) of this section is satisfied and a statement that the
participant must also provide the substantiation required by paragraph
(c)(5)(i) of this section.
(H) A statement that if the individual health insurance coverage (or
coverage under Medicare Part A and B or Medicare Part C) of a
participant or dependent ceases, the HRA will not reimburse any medical
care expenses that are incurred by the participant or dependent, as
applicable, after the coverage ceases, and a statement that the
participant must inform the HRA if the participant's or dependent's
individual health insurance coverage (or coverage
[[Page 57]]
under Medicare Part A and B or Medicare Part C) is cancelled or
terminated retroactively and the date on which the cancellation or
termination is effective.
(I) The contact information (including a phone number) for an
individual or a group of individuals who participants may contact in
order to receive additional information regarding the HRA. The plan
sponsor may determine which individual or group of individuals is best
suited to be the specified contact.
(J) A statement of availability of a special enrollment period to
enroll in or change individual health insurance coverage, through or
outside of an Exchange, for the participant and any dependents who newly
gain access to the HRA and are not already covered by the HRA.
(d) Classes of employees--(1) In general. This paragraph (d) sets
forth the rules for determining classes of employees. Paragraph (d)(2)
of this section sets forth the specific classes of employees; paragraph
(d)(3) of this section sets forth a minimum class size requirement that
applies in certain circumstances; paragraph (d)(4) of this section sets
forth rules regarding the definition of ``full-time employees,'' ``part-
time employees,'' and ``seasonal employees''; paragraph (d)(5) of this
section sets forth a special rule for new hires; and paragraph (d)(6) of
this section addresses student premium reduction arrangements. For
purposes of this section, including determining classes under this
paragraph (d), the employer is the common law employer and is determined
without regard to the rules under sections 414(b), (c), (m), and (o) of
the Code that would treat the common law employer as a single employer
with certain other entities.
(2) List of classes. Participants may be treated as belonging to a
class of employees based on whether they are, or are not, included in
the classes described in this paragraph (d)(2). If the individual
coverage HRA is offered to former employees, former employees are
considered to be in the same class in which they were included
immediately before separation from service. Before each plan year, a
plan sponsor must determine for the plan year which classes of employees
it intends to treat separately and the definition of the relevant
class(es) it will apply, to the extent these regulations permit a
choice. After the classes and the definitions of the classes are
established for a plan year, a plan sponsor may not make changes to the
classes of employees or the definitions of those relevant classes with
respect to that plan year.
(i) Full-time employees, defined at the election of the plan sponsor
to mean either full-time employees under section 4980H of the Code (and
26 CFR 54.4980H-1(a)(21)) or employees who are not part-time employees
(as described in 26 CFR 1.105-11(c)(2)(iii)(C));
(ii) Part-time employees, defined at the election of the plan
sponsor to mean either employees who are not full-time employees under
section 4980H of the Code (and under 26 CFR 54.4980H-1(a)(21) (which
defines full-time employee)) or employees who are part-time employees as
described in 26 CFR 1.105-11(c)(2)(iii)(C);
(iii) Employees who are paid on a salary basis;
(iv) Non-salaried employees (such as, for example, hourly
employees);
(v) Employees whose primary site of employment is in the same rating
area as defined in Sec. 147.102(b) of this subchapter;
(vi) Seasonal employees, defined at the election of the plan sponsor
to mean seasonal employees as described in either 26 CFR 54.4980H-
1(a)(38) or 26 CFR 1.105-11(c)(2)(iii)(C);
(vii) Employees included in a unit of employees covered by a
particular collective bargaining agreement (or an appropriate related
participation agreement) in which the plan sponsor participates (as
described in 26 CFR 1.105-11(c)(2)(iii)(D));
(viii) Employees who have not satisfied a waiting period for
coverage (if the waiting period complies with Sec. 147.116 of this
subchapter);
(ix) Non-resident aliens with no U.S.-based income (as described in
26 CFR 1.105-11(c)(2)(iii)(E));
(x) Employees who, under all the facts and circumstances, are
employees of an entity that hired the employees for temporary placement
at an entity that is not the common law employer
[[Page 58]]
of the employees and that is not treated as a single employer with the
entity that hired the employees for temporary placement under section
414(b), (c), (m), or (o) of the Code; or
(xi) A group of participants described as a combination of two or
more of the classes of employees set forth in paragraphs (d)(2)(i)
through (x) of this section.
(3) Minimum class size requirement--(i) In general. If a class of
employees is subject to the minimum class size requirement as set forth
in this paragraph (d)(3), the class must consist of at least a minimum
number of employees (as described in paragraphs (d)(3)(iii) and (iv) of
this section), otherwise, the plan sponsor may not treat that class as a
separate class of employees. Paragraph (d)(3)(ii) of this section sets
forth the circumstances in which the minimum class size requirement
applies to a class of employees, paragraph (d)(3)(iii) of this section
sets forth the rules for determining the applicable class size minimum,
and paragraph (d)(3)(iv) of this section sets forth the rules for a plan
sponsor to determine if it satisfies the minimum class size requirement
with respect to a class of employees.
(ii) Circumstances in which minimum class size requirement applies.
(A) The minimum class size requirement applies only if a plan sponsor
offers a traditional group health plan to one or more classes of
employees and offers an individual coverage HRA to one or more other
classes of employees.
(B) The minimum class size requirement does not apply to a class of
employees offered a traditional group health plan or a class of
employees offered no coverage.
(C) The minimum class size requirement applies to a class of
employees offered an individual coverage HRA if the class is full-time
employees, part-time employees, salaried employees, non-salaried
employees, or employees whose primary site of employment is in the same
rating area (described in paragraph (d)(2)(i), (ii), (iii), (iv), or (v)
of this section, respectively, and referred to collectively as the
applicable classes or individually as an applicable class), except that:
(1) In the case of the class of employees whose primary site of
employment is in the same rating area (as described in paragraph
(d)(2)(v) of this section), the minimum class size requirement does not
apply if the geographic area defining the class is a State or a
combination of two or more entire States; and
(2) In the case of the classes of employees that are full-time
employees and part-time employees (as described in paragraphs (d)(2)(i)
and (ii) of this section, respectively), the minimum class size
requirement applies only to those classes (and the classes are only
applicable classes) if the employees in one such class are offered a
traditional group health plan while the employees in the other such
class are offered an individual coverage HRA. In such a case, the
minimum class size requirement applies only to the class offered an
individual coverage HRA.
(D) A class of employees offered an individual coverage HRA is also
subject to the minimum class size requirement if the class is a class of
employees created by combining at least one of the applicable classes
(as defined in paragraph (d)(3)(ii)(C) of this section) with any other
class, except that the minimum class size requirement shall not apply to
a class that is the result of a combination of one of the applicable
classes and a class of employees who have not satisfied a waiting period
(as described in paragraph (d)(2)(viii) of this section).
(iii) Determination of the applicable class size minimum--(A) In
general. The minimum number of employees that must be in a class of
employees that is subject to the minimum class size requirement (the
applicable class size minimum) is determined prior to the beginning of
the plan year for each plan year of the individual coverage HRA and is:
(1) 10, for an employer with fewer than 100 employees;
(2) A number, rounded down to a whole number, equal to 10 percent of
the total number of employees, for an employer with 100 to 200
employees; and
(3) 20, for an employer with more than 200 employees.
[[Page 59]]
(B) Determining employer size. For purposes of this paragraph
(d)(3), the number of employees of an employer is determined in advance
of the plan year of the HRA based on the number of employees that the
employer reasonably expects to employ on the first day of the plan year.
(iv) Determining if a class satisfies the applicable class size
minimum. For purposes of this paragraph (d)(3), whether a class of
employees satisfies the applicable class size minimum for a plan year of
the individual coverage HRA is based on the number of employees in the
class offered the individual coverage HRA as of the first day of the
plan year. Therefore, this determination is not based on the number of
employees that actually enroll in the individual coverage HRA, and this
determination is not affected by changes in the number of employees in
the class during the plan year.
(4) Consistency requirement. For any plan year, a plan sponsor may
define ``full-time employee,'' ``part-time employee,'' and ``seasonal
employee'' in accordance with the relevant provisions of sections 105(h)
or 4980H of the Code, as set forth in paragraphs (d)(2)(i), (ii), and
(vi) of this section, if:
(i) To the extent applicable under the HRA for the plan year, each
of the three classes of employees are defined in accordance with section
105(h) of the Code or each of the three classes of employees are defined
in accordance with section 4980H of the Code for the plan year; and
(ii) The HRA plan document sets forth the applicable definitions
prior to the beginning of the plan year to which the definitions will
apply.
(5) Special rule for new hires--(i) In general. Notwithstanding
paragraphs (c)(2) and (3) of this section, a plan sponsor that offers a
traditional group health plan to a class of employees may prospectively
offer the employees in that class of employees who are hired on or after
a certain future date (the new hire date) an individual coverage HRA
(with this group of employees referred to as the new hire subclass),
while continuing to offer employees in that class of employees who are
hired before the new hire date a traditional group health plan (with the
rule set forth in this sentence referred to as the special rule for new
hires). For the new hire subclass, the individual coverage HRA must be
offered on the same terms to all participants within the subclass, in
accordance with paragraph (c)(3) of this section. In accordance with
paragraph (c)(2) of this section, a plan sponsor may not offer a choice
between an individual coverage HRA or a traditional group health plan to
any employee in the new hire subclass or to any employee in the class
who is not a member of the new hire subclass.
(ii) New hire date. A plan sponsor may set the new hire date for a
class of employees prospectively as any date on or after January 1,
2020. A plan sponsor may set different new hire dates prospectively for
separate classes of employees.
(iii) Discontinuation of use of special rule for new hires and
multiple applications of the special rule for new hires. A plan sponsor
may discontinue use of the special rule for new hires at any time for
any class of employees. In that case, the new hire subclass is no longer
treated as a separate subclass of employees. In the event a plan sponsor
applies the special rule for new hires to a class of employees and later
discontinues use of the rule to the class of employees, the plan sponsor
may later apply the rule if the application of the rule would be
permitted under the rules for initial application of the special rule
for new hires. If a plan sponsor, in accordance with the requirements
for the special rule for new hires, applies the rule to a class of
employees subsequent to any prior application and discontinuance of the
rule to that class, the new hire date must be prospective.
(iv) Application of the minimum class size requirement under the
special rule for new hires. The minimum class size requirement set forth
in paragraph (d)(3) of this section does not apply to the new hire
subclass. However, if a plan sponsor subdivides the new hire subclass
subsequent to creating the new hire subclass, the minimum class size
requirement set forth in paragraph (d)(3) of this section applies to any
class of employees created by subdividing the new hire subclass, if the
[[Page 60]]
minimum class size requirement otherwise applies.
(6) Student employees offered student premium reduction
arrangements. For purposes of this section, if an institution of higher
education (as defined in the Higher Education Act of 1965) offers a
student employee a student premium reduction arrangement, the employee
is not considered to be part of the class of employees to which the
employee would otherwise belong. For the purpose of this paragraph
(d)(6) and paragraph (f)(1) of this section, a student premium reduction
arrangement is defined as any program offered by an institution of
higher education under which the cost of insured or self-insured student
health coverage is reduced for certain students through a credit,
offset, reimbursement, stipend or similar arrangement. A student
employee offered a student premium reduction arrangement is also not
counted for purposes of determining the applicable class size minimum
under paragraph (d)(3)(iii) of this section. If a student employee is
not offered a student premium reduction arrangement (including if the
student employee is offered an individual coverage HRA instead), the
student employee is considered to be part of the class of employees to
which the employee otherwise belongs and is counted for purposes of
determining the applicable class size minimum under paragraph
(d)(3)(iii) of this section.
(e) Integration of Individual Coverage HRAs with Medicare--(1)
General rule. An individual coverage HRA will be considered to be
integrated with Medicare (and deemed to comply with PHS Act sections
2711 and 2713 and Sec. 147.126(d)(4) of this subchapter), provided that
the conditions of paragraph (c) of this section are satisfied, subject
to paragraph (e)(2) of this section. Nothing in this section requires
that a participant and his or her dependents all have the same type of
coverage; therefore, an individual coverage HRA may be integrated with
Medicare for some individuals and with individual health insurance
coverage for others, including, for example, a participant enrolled in
Medicare Part A and B or Part C and his or her dependents enrolled in
individual health insurance coverage.
(2) Application of conditions in paragraph (c) of this section--(i)
In general. Except as provided in paragraph (e)(2)(ii) of this section,
in applying the conditions of paragraph (c) of this section with respect
to integration with Medicare, a reference to ``individual health
insurance coverage'' is deemed to refer to coverage under Medicare Part
A and B or Part C. References in this section to integration of an HRA
with Medicare refer to integration of an individual coverage HRA with
Medicare Part A and B or Part C.
(ii) Exceptions. For purposes of the statement regarding ERISA under
the notice content element under paragraph (c)(6)(ii)(A) of this section
and the statement regarding the availability of a special enrollment
period under the notice content element under paragraph (c)(6)(ii)(J) of
this section, the term individual health insurance coverage means only
individual health insurance coverage and does not also mean coverage
under Medicare Part A and B or Part C.
(f) Examples--(1) Examples regarding classes and the minimum class
size requirement. The following examples illustrate the provisions of
paragraph (c)(3) of this section, taking into account the provisions of
paragraphs (d)(1) through (4) and (d)(6) of this section. In each
example, the HRA is an individual coverage HRA that may reimburse any
medical care expenses, including premiums for individual health
insurance coverage and it is assumed that no participants or dependents
are Medicare beneficiaries.
(i) Example 1: Collectively bargained employees offered traditional
group health plan; non-collectively bargained employees offered HRA--(A)
Facts. For 2020, Plan Sponsor A offers its employees covered by a
collective bargaining agreement a traditional group health plan (as
required by the collective bargaining agreement) and all other employees
(non-collectively bargained employees) each an HRA on the same terms.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(1)(i) (Example 1)
because collectively bargained and non-collectively bargained employees
may be treated as different classes of employees, one of which may be
offered a traditional group health plan and the other of which may be
[[Page 61]]
offered an individual coverage HRA, and Plan Sponsor A offers the HRA on
the same terms to all participants who are non-collectively bargained
employees. The minimum class size requirement does not apply to this
paragraph (f)(1)(i) (Example 1) even though Plan Sponsor A offers one
class a traditional group health plan and one class the HRA because
collectively bargained and non-collectively bargained employees are not
applicable classes that are subject to the minimum class size
requirement.
(ii) Example 2: Collectively bargained employees in one unit offered
traditional group health plan and in another unit offered HRA--(A)
Facts. For 2020, Plan Sponsor B offers its employees covered by a
collective bargaining agreement with Local 100 a traditional group
health plan (as required by the collective bargaining agreement), and
its employees covered by a collective bargaining agreement with Local
200 each an HRA on the same terms (as required by the collective
bargaining agreement).
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(1)(ii) (Example 2)
because the employees covered by the collective bargaining agreements
with the two separate bargaining units (Local 100 and Local 200) may be
treated as two different classes of employees and Plan Sponsor B offers
an HRA on the same terms to the participants covered by the agreement
with Local 200. The minimum class size requirement does not apply to
this paragraph (f)(1)(ii) (Example 2) even though Plan Sponsor B offers
the Local 100 employees a traditional group health plan and the Local
200 employees an HRA because collectively bargained employees are not
applicable classes that are subject to the minimum class size
requirement.
(iii) Example 3: Employees in a waiting period offered no coverage;
other employees offered an HRA--(A) Facts. For 2020, Plan Sponsor C
offers its employees who have completed a waiting period that complies
with the requirements for waiting periods in Sec. 147.116 of this
subchapter each an HRA on the same terms and does not offer coverage to
its employees who have not completed the waiting period.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(1)(iii) (Example 3)
because employees who have completed a waiting period and employees who
have not completed a waiting period may be treated as different classes
and Plan Sponsor C offers the HRA on the same terms to all participants
who have completed the waiting period. The minimum class size
requirement does not apply to this paragraph (f)(1)(iii) (Example 3)
because Plan Sponsor C does not offer at least one class of employees a
traditional group health plan and because the class of employees who
have not completed a waiting period and the class of employees who have
completed a waiting period are not applicable classes that are subject
to the minimum class size requirement.
(iv) Example 4: Employees in a waiting period offered an HRA; other
employees offered a traditional group health plan--(A) Facts. For 2020,
Plan Sponsor D offers its employees who have completed a waiting period
that complies with the requirements for waiting periods in Sec. 147.116
of this subchapter a traditional group health plan and offers its
employees who have not completed the waiting period each an HRA on the
same terms.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(1)(iv) (Example 4)
because employees who have completed a waiting period and employees who
have not completed a waiting period may be treated as different classes
and Plan Sponsor D offers an HRA on the same terms to all participants
who have not completed the waiting period. The minimum class size
requirement does not apply to this paragraph (f)(1)(iv) (Example 4) even
though Plan Sponsor D offers employees who have completed a waiting
period a traditional group health plan and employees who have not
completed a waiting period an HRA because the class of employees who
have not completed a waiting period is not an applicable class that is
subject to the minimum class size requirement (nor is the class made up
of employees who have completed the waiting period).
(v) Example 5: Staffing firm employees temporarily placed with
customers offered an HRA; other employees offered a traditional group
health plan--(A) Facts. Plan Sponsor E is a staffing firm that places
certain of its employees on temporary assignments with customers that
are not the common law employers of Plan Sponsor E's employees or
treated as a single employer with Plan Sponsor E under section 414(b),
(c), (m), or (o) of the Code (unrelated entities); other employees work
in Plan Sponsor E's office managing the staffing business (non-temporary
employees). For 2020, Plan Sponsor E offers its employees who are on
temporary assignments with customers each an HRA on the same terms. All
other employees are offered a traditional group health plan.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(1)(v) (Example 5)
because the employees who are hired for temporary placement at an
unrelated entity and non-temporary employees of Plan Sponsor E may be
treated as different classes of employees and Plan Sponsor E offers an
HRA on the same terms to all participants temporarily placed with
customers. The minimum class size requirement does not apply to this
paragraph (f)(1)(v) (Example 5) even though Plan Sponsor E offers one
class a traditional
[[Page 62]]
group health plan and one class the HRA because the class of employees
hired for temporary placement is not an applicable class that is subject
to the minimum class size requirement (nor is the class made up of non-
temporary employees).
(vi) Example 6: Staffing firm employees temporarily placed with
customers in rating area 1 offered an HRA; other employees offered a
traditional group health plan--(A) Facts. The facts are the same as in
paragraph (f)(1)(v) of this section (Example 5), except that Plan
Sponsor E has work sites in rating area 1 and rating area 2, and it
offers its 10 employees on temporary assignments with a work site in
rating area 1 an HRA on the same terms. Plan Sponsor E has 200 other
employees in rating areas 1 and 2, including its non-temporary employees
in rating areas 1 and 2 and its employees on temporary assignments with
a work site in rating area 2, all of whom are offered a traditional
group health plan.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is not satisfied in this paragraph (f)(1)(vi) (Example 6)
because, even though the employees who are temporarily placed with
customers generally may be treated as employees of a different class,
because Plan Sponsor E is also using a rating area to identify the class
offered the HRA (which is an applicable class for the minimum class size
requirement) and is offering one class the HRA and another class the
traditional group health plan, the minimum class size requirement
applies to the class offered the HRA, and the class offered the HRA
fails to satisfy the minimum class size requirement. Because Plan
Sponsor E employs 210 employees, the applicable class size minimum is
20, and the HRA is offered to only 10 employees.
(vii) Example 7: Employees in State 1 offered traditional group
health plan; employees in State 2 offered HRA--(A) Facts. Plan Sponsor F
employs 45 employees whose work site is in State 1 and 7 employees whose
primary site of employment is in State 2. For 2020, Plan Sponsor F
offers its 45 employees in State 1 a traditional group health plan, and
each of its 7 employees in State 2 an HRA on the same terms.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(1)(vii) (Example 7)
because Plan Sponsor F offers the HRA on the same terms to all employees
with a work site in State 2 and that class is a permissible class under
paragraph (d) of this section. This is because employees whose work
sites are in different rating areas may be considered different classes
and a plan sponsor may create a class of employees by combining classes
of employees, including by combining employees whose work site is in one
rating area with employees whose work site is in a different rating
area, or by combining all employees whose work site is in a state. The
minimum class size requirement does not apply to this paragraph
(f)(1)(vii) (Example 7) because the minimum class size requirement does
not apply if the geographic area defining a class of employees is a
state or a combination of two or more entire states.
(viii) Example 8: Full-time seasonal employees offered HRA; all
other full-time employees offered traditional group health plan; part-
time employees offered no coverage--(A) Facts. Plan Sponsor G employs 6
full-time seasonal employees, 75 full-time employees who are not
seasonal employees, and 5 part-time employees. For 2020, Plan Sponsor G
offers each of its 6 full-time seasonal employees an HRA on the same
terms, its 75 full-time employees who are not seasonal employees a
traditional group health plan, and offers no coverage to its 5 part-time
employees.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(1)(viii) (Example 8)
because full-time seasonal employees and full-time employees who are not
seasonal employees may be considered different classes and Plan Sponsor
G offers the HRA on the same terms to all full-time seasonal employees.
The minimum class size requirement does not apply to the class offered
the HRA in this paragraph (f)(1)(viii) (Example 8) because part-time
employees are not offered coverage and full-time employees are not an
applicable class subject to the minimum class size requirement if part-
time employees are not offered coverage.
(ix) Example 9: Full-time employees in rating area 1 offered
traditional group health plan; full-time employees in rating area 2
offered HRA; part-time employees offered no coverage--(A) Facts. Plan
Sponsor H employs 17 full-time employees and 10 part-time employees
whose work site is in rating area 1 and 552 full-time employees whose
work site is in rating area 2. For 2020, Plan Sponsor H offers its 17
full-time employees in rating area 1 a traditional group health plan and
each of its 552 full-time employees in rating area 2 an HRA on the same
terms. Plan Sponsor H offers no coverage to its 10 part-time employees
in rating area 1. Plan Sponsor H reasonably expects to employ 569
employees on the first day of the HRA plan year.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(1)(ix) (Example 9)
because employees whose work sites are in different rating areas may be
considered different classes and Plan Sponsor H offers the HRA on the
same terms to all full-time employees in rating area 2. The minimum
class size requirement applies to the class offered the HRA in this
paragraph (f)(1)(ix) (Example 9) because the minimum class size
requirement applies to a class based on a geographic area unless the
geographic area is a state or a combination of two or more entire
states.
[[Page 63]]
However, the minimum class size requirement applies only to the class
offered the HRA, and Plan Sponsor H offers the HRA to the 552 full-time
employees in rating area 2 on the first day of the plan year, satisfying
the minimum class size requirement (because the applicable class size
minimum for Plan Sponsor H is 20).
(x) Example 10: Employees in rating area 1 offered HRA; employees in
rating area 2 offered traditional group health plan--(A) Facts. The
facts are the same as in paragraph (f)(1)(ix) of this section (Example
9) except that Plan Sponsor H offers its 17 full-time employees in
rating area 1 the HRA and offers its 552 full-time employees in rating
area 2 the traditional group health plan.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is not satisfied in this paragraph (f)(1)(x) (Example 10)
because, even though employees whose work sites are in different rating
areas generally may be considered different classes and Plan Sponsor H
offers the HRA on the same terms to all participants in rating area 1,
the HRA fails to satisfy the minimum class size requirement.
Specifically, the minimum class size requirement applies to this
paragraph (f)(1)(x) (Example 10) because the minimum class size
requirement applies to a class based on a geographic area unless the
geographic area is a state or a combination of two or more entire
states. Further, the applicable class size minimum for Plan Sponsor H is
20 employees, and the HRA is only offered to the 17 full-time employees
in rating area 1 on the first day of the HRA plan year.
(xi) Example 11: Employees in State 1 and rating area 1 of State 2
offered HRA; employees in all other rating areas of State 2 offered
traditional group health plan--(A) Facts. For 2020, Plan Sponsor I
offers an HRA on the same terms to a total of 200 employees it employs
with work sites in State 1 and in rating area 1 of State 2. Plan Sponsor
I offers a traditional group health plan to its 150 employees with work
sites in other rating areas in State 2. Plan Sponsor I reasonably
expects to employ 350 employees on the first day of the HRA plan year.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(1)(xi) (Example 11).
Plan Sponsor I may treat all of the employees with a work site in State
1 and rating area 1 of State 2 as a class of employees because employees
whose work sites are in different rating areas may be considered
different classes and a plan sponsor may create a class of employees by
combining classes of employees, including by combining employees whose
work site is in one rating area with a class of employees whose work
site is in a different rating area. The minimum class size requirement
applies to the class of employees offered the HRA (made up of employees
in State 1 and in rating area 1 of State 2) because the minimum class
size requirement applies to a class based on a geographic area unless
the geographic area is a state or a combination of two or more entire
states. In this case, the class is made up of a state plus a rating area
which is not the entire state. However, this class satisfies the minimum
class size requirement because the applicable class size minimum for
Plan Sponsor I is 20, and Plan Sponsor I offered the HRA to 200
employees on the first day of the plan year.
(xii) Example 12: Salaried employees offered a traditional group
health plan; hourly employees offered an HRA--(A) Facts. Plan Sponsor J
has 163 salaried employees and 14 hourly employees. For 2020, Plan
Sponsor J offers its 163 salaried employees a traditional group health
plan and each of its 14 hourly employees an HRA on the same terms. Plan
Sponsor J reasonably expects to employ 177 employees on the first day of
the HRA plan year.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is not satisfied in this paragraph (f)(1)(xii) (Example 12)
because, even though salaried and hourly employees generally may be
considered different classes and Plan Sponsor J offers the HRA on the
same terms to all hourly employees, the HRA fails to satisfy the minimum
class size requirement. Specifically, the minimum class size requirement
applies in this paragraph (f)(1)(xii) (Example 12) because employees who
are paid on a salaried basis and employees who are not paid on a
salaried basis are applicable classes subject to the minimum class size
requirement. Because Plan Sponsor J reasonably expects to employ between
100 and 200 employees on the first day of the plan year, the applicable
class size minimum is 10 percent, rounded down to a whole number. Ten
percent of 177 total employees, rounded down to a whole number is 17,
and the HRA is offered to only 14 hourly employees.
(xiii) Example 13: Part-time employees and full-time employees
offered different HRAs; no traditional group health plan offered--(A)
Facts. Plan Sponsor K has 50 full-time employees and 7 part-time
employees. For 2020, Plan Sponsor K offers its 50 full-time employees
$2,000 each in an HRA otherwise provided on the same terms and each of
its 7 part-time employees $500 in an HRA otherwise provided on the same
terms. Plan Sponsor K reasonably expects to employ 57 employees on the
first day of the HRA plan year.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(1)(xiii) (Example 13)
because full-time employees and part-time employees may be treated as
different classes and Plan Sponsor K offers an HRA on the same terms to
all the participants in each class. The minimum class size
[[Page 64]]
requirement does not apply to either the full-time class or the part-
time class because (although in certain circumstances the minimum class
size requirement applies to a class of full-time employees and a class
of part-time employees) Plan Sponsor K does not offer any class of
employees a traditional group health plan, and the minimum class size
requirement applies only when, among other things, at least one class of
employees is offered a traditional group health plan while another class
is offered an HRA.
(xiv) Example 14: No employees offered an HRA--(A) Facts. The facts
are the same facts as in paragraph (f)(1)(xiii) of this section (Example
13), except that Plan Sponsor K offers its full-time employees a
traditional group health plan and does not offer any group health plan
(either a traditional group health plan or an HRA) to its part-time
employees.
(B) Conclusion. The regulations set forth under this section do not
apply to Plan Sponsor K because Plan Sponsor K does not offer an
individual coverage HRA to any employee.
(xv) Example 15: Full-time employees offered traditional group
health plan; part-time employees offered HRA--(A) Facts. The facts are
the same as in paragraph (f)(1)(xiii) of this section (Example 13),
except that Plan Sponsor K offers its full-time employees a traditional
group health plan and offers each of its part-time employees $500 in an
HRA and otherwise on the same terms.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is not satisfied in this paragraph (f)(1)(xv) (Example 15)
because, even though the full-time employees and the part-time employees
generally may be treated as different classes, in this paragraph
(f)(1)(xv) (Example 15), the minimum class size requirement applies to
the part-time employees, and it is not satisfied. Specifically, the
minimum class size requirement applies to the part-time employees
because that requirement applies to an applicable class offered an HRA
when one class is offered a traditional group health plan while another
class is offered an HRA, and to the part-time and full-time employee
classes when one of those classes is offered a traditional group health
plan while the other is offered an HRA. Because Plan Sponsor K
reasonably expects to employ fewer than 100 employees on the first day
of the HRA plan year, the applicable class size minimum for Plan Sponsor
K is 10 employees, but Plan Sponsor K offered the HRA only to its 7
part-time employees.
(xvi) Example 16: Satisfying minimum class size requirement based on
employees offered HRA--(A) Facts. Plan Sponsor L employs 78 full-time
employees and 12 part-time employees. For 2020, Plan Sponsor L offers
its 78 full-time employees a traditional group health plan and each of
its 12 part-times employees an HRA on the same terms. Only 6 part-time
employees enroll in the HRA. Plan Sponsor L reasonably expects to employ
fewer than 100 employees on the first day of the HRA plan year.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(1)(xvi) (Example 16)
because full-time employees and part-time employees may be treated as
different classes, Plan Sponsor L offers an HRA on the same terms to all
the participants in the part-time class, and the minimum class size
requirement is satisfied. Specifically, whether a class of employees
satisfies the applicable class size minimum is determined as of the
first day of the plan year based on the number of employees in a class
that is offered an HRA, not on the number of employees who enroll in the
HRA. The applicable class size minimum for Plan Sponsor L is 10
employees, and Plan Sponsor L offered the HRA to its 12 part-time
employees.
(xvii) Example 17: Student employees offered student premium
reduction arrangements and same terms requirement--(A) Facts. Plan
Sponsor M is an institution of higher education that offers each of its
part-time employees an HRA on the same terms, except that it offers its
part-time employees who are student employees a student premium
reduction arrangement, and the student premium reduction arrangement
provides different amounts to different part-time student employees.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(1)(xvii) (Example 17)
because Plan Sponsor M offers the HRA on the same terms to its part-time
employees who are not students and because the part-time student
employees offered a student premium reduction arrangement (and their
varying HRAs) are not taken into account as part-time employees for
purposes of determining whether a class of employees is offered an HRA
on the same terms.
(xiii) Example 18: Student employees offered student premium
reduction arrangements and minimum class size requirement--(A) Facts.
Plan Sponsor N is an institution of higher education with 25 hourly
employees. Plan Sponsor N offers 15 of its hourly employees, who are
student employees, a student premium reduction arrangement and it wants
to offer its other 10 hourly employees an HRA for 2022. Plan Sponsor N
offers its salaried employees a traditional group health plan. Plan
Sponsor N reasonably expects to have 250 employees on the first day of
the 2022 HRA plan year, 15 of which will have offers of student premium
reduction arrangements.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is not satisfied in this paragraph (f)(1)(xviii) (Example
18). The minimum class size requirement will apply to the class of
hourly employees to which Plan Sponsor N wants to
[[Page 65]]
offer the HRA because Plan Sponsor N offers a class of employees a
traditional group health plan and another class the HRA, and the minimum
class size requirement generally applies to a class of hourly employees
offered an HRA. Plan Sponsor N's applicable class size minimum is 20
because Plan Sponsor N reasonably expects to employ 235 employees on the
first day of the plan year (250 employees minus 15 employees receiving a
student premium reduction arrangement). Plan Sponsor N may not offer the
HRA to its hourly employees because the 10 employees offered the HRA as
of the first day of the plan year does not satisfy the applicable class
size minimum.
(2) Examples regarding special rule for new hires. The following
examples illustrate the provisions of paragraph (c)(3) of this section,
taking into account the provisions of paragraph (d) of this section, in
particular the special rule for new hires under paragraph (d)(5) of this
section. In each example, the HRA is an individual coverage HRA that has
a calendar year plan year and may reimburse any medical care expenses,
including premiums for individual health insurance coverage. The
examples also assume that no participants or dependents are Medicare
beneficiaries.
(i) Example 1: Application of special rule for new hires to all
employees--(A) Facts. For 2021, Plan Sponsor A offers all employees a
traditional group health plan. For 2022, Plan Sponsor A offers all
employees hired on or after January 1, 2022, an HRA on the same terms
and continues to offer the traditional group health plan to employees
hired before that date. On the first day of the 2022 plan year, Plan
Sponsor A has 2 new hires who are offered the HRA.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(2)(i) (Example 1)
because, under the special rule for new hires in paragraph (d)(5) of
this section, the employees newly hired on and after January 1, 2022,
may be treated as a new hire subclass, Plan Sponsor A offers the HRA on
the same terms to all participants in the new hire subclass, and the
minimum class size requirement does not apply to the new hire subclass.
(ii) Example 2: Application of special rule for new hires to full-
time employees--(A) Facts. For 2021, Plan Sponsor B offers a traditional
group health plan to its full-time employees and does not offer any
coverage to its part-time employees. For 2022, Plan Sponsor B offers
full-time employees hired on or after January 1, 2022, an HRA on the
same terms, continues to offer its full-time employees hired before that
date a traditional group health plan, and continues to offer no coverage
to its part-time employees. On the first day of the 2022 plan year, Plan
Sponsor B has 2 new hire, full-time employees who are offered the HRA.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(2)(ii) (Example 2)
because, under the special rule for new hires in paragraph (d)(5) of
this section, the full-time employees newly hired on and after January
1, 2022, may be treated as a new hire subclass and Plan Sponsor B offers
the HRA on the same terms to all participants in the new hire subclass.
The minimum class size requirement does not apply to the new hire
subclass.
(iii) Example 3: Special rule for new hires impermissibly applied
retroactively--(A) Facts. For 2025, Plan Sponsor C offers a traditional
group health plan to its full-time employees. For 2026, Plan Sponsor C
wants to offer an HRA to its full-time employees hired on and after
January 1, 2023, while continuing to offer a traditional group health
plan to its full-time employees hired before January 1, 2023.
(B) Conclusion. The special rule for new hires under paragraph
(d)(5) of this section does not apply in this paragraph (f)(2)(iii)
(Example 3) because the rule must be applied prospectively. That is,
Plan Sponsor C may not, in 2026, choose to apply the special rule for
new hires retroactive to 2023. If Plan Sponsor C were to offer an HRA in
this way, it would fail to satisfy the conditions under paragraphs
(c)(2) and (3) of this section because the new hire subclass would not
be treated as a subclass for purposes of applying those rules and,
therefore, all full-time employees would be treated as one class to
which either a traditional group health plan or an HRA could be offered,
but not both.
(iv) Example 4: Permissible second application of the special rule
for new hires to the same class of employees--(A) Facts. For 2021, Plan
Sponsor D offers all of its full-time employees a traditional group
health plan. For 2022, Plan Sponsor D applies the special rule for new
hires and offers an HRA on the same terms to all employees hired on and
after January 1, 2022, and continues to offer a traditional group health
plan to full-time employees hired before that date. For 2025, Plan
Sponsor D discontinues use of the special rule for new hires, and again
offers all full-time employees a traditional group health plan. In 2030,
Plan Sponsor D decides to apply the special rule for new hires to the
full-time employee class again, offering an HRA to all full-time
employees hired on and after January 1, 2030, on the same terms, while
continuing to offer employees hired before that date a traditional group
health plan.
(B) Conclusion. Plan Sponsor D has permissibly applied the special
rule for new hires
[[Page 66]]
and is in compliance with the requirements of paragraphs (c)(2) and (3)
of this section.
(v) Example 5: Impermissible second application of the special rule
for new hires to the same class of employees--(A) Facts. The facts are
the same as in paragraph (f)(2)(iv) of this section (Example 4), except
that for 2025, Plan Sponsor D discontinues use of the special rule for
new hires by offering all full-time employees an HRA on the same terms.
Further, for 2030, Plan Sponsor D wants to continue to offer an HRA on
the same terms to all full-time employees hired before January 1, 2030,
and to offer all full-time employees hired on or after January 1, 2030,
an HRA in a different amount.
(B) Conclusion. Plan Sponsor D may not apply the special rule for
new hires for 2030 to the class of full-time employees being offered an
HRA because the special rule for new hires may only be applied to a
class that is being offered a traditional group health plan.
(vi) Example 6: New full-time employees offered different HRAs in
different rating areas--(A) Facts. Plan Sponsor E has work sites in
rating area 1, rating area 2, and rating area 3. For 2021, Plan Sponsor
E offers its full-time employees a traditional group health plan. For
2022, Plan Sponsor E offers its full-time employees hired on or after
January 1, 2022, in rating area 1 an HRA of $3,000, its full-time
employees hired on or after January 1, 2022, in rating area 2 an HRA of
$5,000, and its full-time employees hired on or after January 1, 2022,
in rating area 3 an HRA of $7,000. Within each class offered an HRA,
Plan Sponsor E offers the HRA on the same terms. Plan Sponsor E offers
its full-time employees hired prior to January 1, 2022, in each of those
classes a traditional group health plan. On the first day of the 2022
plan year, there is one new hire, full-time employee in rating area 1,
three new hire, full-time employees in rating area 2, and 10 new hire-
full-time employees in rating area 3.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(2)(vi) (Example 6)
because, under the special rule for new hires in paragraph (d)(5) of
this section, the full-time employees in each of the three rating areas
newly hired on and after January 1, 2022, may be treated as three new
hire subclasses and Plan Sponsor E offers the HRA on the same terms to
all participants in the new hire subclasses. Further, the minimum class
size requirement does not apply to the new hire subclasses.
(vii) Example 7: New full-time employee class subdivided based on
rating area--(A) Facts. Plan Sponsor F offers its full-time employees
hired on or after January 1, 2022, an HRA on the same terms and it
continues to offer its full-time employees hired before that date a
traditional group health plan. Plan Sponsor F offers no coverage to its
part-time employees. For the 2025 plan year, Plan Sponsor F wants to
subdivide the full-time new hire subclass so that those whose work site
is in rating area 1 will be offered the traditional group health plan
and those whose work site is in rating area 2 will continue to receive
the HRA. Plan Sponsor F reasonably expects to employ 219 employees on
January 1, 2025. As of January 1, 2025, Plan Sponsor F has 15 full-time
employees whose work site in in rating area 2 and who were hired between
January 1, 2022, and January 1, 2025.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is not satisfied in this paragraph (f)(2)(vii) (Example 7)
because the new hire subclass has been subdivided in a manner that is
subject to the minimum class size requirement, and the class offered the
HRA fails to satisfy the minimum class size requirement. Specifically,
once the new hire subclass is subdivided the general rules for applying
the minimum class size requirement apply to the employees offered the
HRA in the new hire subclass. In this case, because the subdivision of
the new hire full-time subclass is based on rating areas; a class based
on rating areas is an applicable class subject to the minimum class size
requirement; and the employees in one rating area are to be offered the
HRA, while the employees in the other rating area are offered the
traditional group health plan, the minimum class size requirement would
apply on and after the date of the subdivision. Further, the minimum
class size requirement would not be satisfied, because the applicable
class size minimum for Plan Sponsor F would be 20, and only 15 employees
in rating area 2 would be offered the HRA.
(viii) Example 8: New full-time employee class subdivided based on
state--(A) Facts. The facts are the same as in paragraph (f)(2)(vii) of
this section (Example 7), except that for the 2025 plan year, Plan
Sponsor F intends to subdivide the new hire, full-time class so that
those in State 1 will be offered the traditional group health plan and
those in State 2 will each be offered an HRA on the same terms.
(B) Conclusion. The same terms requirement of paragraph (c)(3) of
this section is satisfied in this paragraph (f)(2)(viii) (Example 8)
because even though the new hire subclass has been subdivided, it has
been subdivided in a manner that is not subject to the minimum class
size requirement as the subdivision is based on the entire state.
(ix) Example 9: New full-time employees and part-time employees
offered HRA--(A) Facts. In 2021, Plan Sponsor G offers its full-time
employees a traditional group health plan and does not offer coverage to
its part-time employees. For the 2022 plan year, Plan Sponsor G offers
its full-time employees hired on or after January 1, 2022, and all of
its part-time
[[Page 67]]
employees, including those hired before January 1, 2022, and those hired
on and after January 1, 2022, an HRA on the same terms, and it continues
to offer its full-time employees hired before January 1, 2022, a
traditional group health plan.
(B) Conclusion. The minimum class size requirement applies to the
part-time employees offered the HRA in 2022 because the class is being
offered an HRA; the special rule for new hires does not apply (because
this class was not previously offered a traditional group health plan)
and so it is not a new hire subclass exempt from the minimum class size
requirement; another class of employees (that is, full-time hired before
January 1, 2022) are being offered a traditional group health plan; and
the part-time employee class is generally an applicable classes that is
subject to the minimum class size requirement. However, because the
full-time, new hire subclass is based on the special rule for new hires,
the minimum class size requirement does not apply to full-time new hires
offered an HRA in 2022.
(g) Applicability date. This section applies to plan years beginning
on or after January 1, 2020.
[84 FR 29014, June 20, 2019]
Sec. 146.125 Applicability dates.
Section 144.103, Sec. Sec. 146.111 through 146.119, 146.143, and
146.145 are applicable for plan years beginning on or after July 1,
2005. Until the applicability date for this regulation, plans and
issuers are required to continue to comply with the corresponding
sections of 45 CFR parts 144 and 146, contained in the 45 CFR, parts 1
to 199, edition revised as of October 1, 2004. Notwithstanding the
previous sentence, the definition of ``short-term, limited-duration
insurance'' in Sec. 144.103 of this subchapter applies October 2, 2018.
[69 FR 78797, Dec. 30, 2004; 70 FR 21147, Apr. 25, 2005, as amended at
81 FR 75326, Oct. 31, 2016; 83 FR 38243, Aug. 3, 2018]
Subpart C_Requirements Related to Benefits
Sec. 146.130 Standards relating to benefits for mothers and newborns.
(a) Hospital length of stay--(1) General rule. Except as provided in
paragraph (a)(5) of this section, a group health plan, or a health
insurance issuer offering group health insurance coverage, that provides
benefits for a hospital length of stay in connection with childbirth for
a mother or her newborn may not restrict benefits for the stay to less
than--
(i) 48 hours following a vaginal delivery; or
(ii) 96 hours following a delivery by cesarean section.
(2) When stay begins--(i) Delivery in a hospital. If delivery occurs
in a hospital, the hospital length of stay for the mother or newborn
child begins at the time of delivery (or in the case of multiple births,
at the time of the last delivery).
(ii) Delivery outside a hospital. If delivery occurs outside a
hospital, the hospital length of stay begins at the time the mother or
newborn is admitted as a hospital inpatient in connection with
childbirth. The determination of whether an admission is in connection
with childbirth is a medical decision to be made by the attending
provider.
(3) Examples. The rules of paragraphs (a)(1) and (2) of this section
are illustrated by the following examples. In each example, the group
health plan provides benefits for hospital lengths of stay in connection
with childbirth and is subject to the requirements of this section, as
follows:
Example 1. (i) Facts. A pregnant woman covered under a group health
plan goes into labor and is admitted to the hospital at 10 p.m. on June
11. She gives birth by vaginal delivery at 6 a.m. on June 12.
(ii) Conclusion. In this Example 1, the 48-hour period described in
paragraph (a)(1)(i) of this section ends at 6 a.m. on June 14.
Example 2. (i) Facts. A woman covered under a group health plan
gives birth at home by vaginal delivery. After the delivery, the woman
begins bleeding excessively in connection with the childbirth and is
admitted to the hospital for treatment of the excessive bleeding at 7
p.m. on October 1.
(ii) Conclusion. In this Example 2, the 48-hour period described in
paragraph (a)(1)(i) of this section ends at 7 p.m. on October 3.
Example 3. (i) Facts. A woman covered under a group health plan
gives birth by vaginal delivery at home. The child later develops
pneumonia and is admitted to the hospital. The attending provider
determines that the admission is not in connection with childbirth.
(ii) Conclusion. In this Example 3, the hospital length-of-stay
requirements of this section do not apply to the child's admission to
the hospital because the admission is not in connection with childbirth.
[[Page 68]]
(4) Authorization not required--(i) In general. A plan or issuer is
prohibited from requiring that a physician or other health care provider
obtain authorization from the plan or issuer for prescribing the
hospital length of stay specified in paragraph (a)(1) of this section.
(See also paragraphs (b)(2) and (c)(3) of this section for rules and
examples regarding other authorization and certain notice requirements.)
(ii) Example. The rule of this paragraph (a)(4) is illustrated by
the following example:
Example. (i) Facts. In the case of a delivery by cesarean section, a
group health plan subject to the requirements of this section
automatically provides benefits for any hospital length of stay of up to
72 hours. For any longer stay, the plan requires an attending provider
to complete a certificate of medical necessity. The plan then makes a
determination, based on the certificate of medical necessity, whether a
longer stay is medically necessary.
(ii) Conclusion. In this Example, the requirement that an attending
provider complete a certificate of medical necessity to obtain
authorization for the period between 72 hours and 96 hours following a
delivery by cesarean section is prohibited by this paragraph (a)(4).
(5) Exceptions--(i) Discharge of mother. If a decision to discharge
a mother earlier than the period specified in paragraph (a)(1) of this
section is made by an attending provider, in consultation with the
mother, the requirements of paragraph (a)(1) of this section do not
apply for any period after the discharge.
(ii) Discharge of newborn. If a decision to discharge a newborn
child earlier than the period specified in paragraph (a)(1) of this
section is made by an attending provider, in consultation with the
mother (or the newborn's authorized representative), the requirements of
paragraph (a)(1) of this section do not apply for any period after the
discharge.
(iii) Attending provider defined. For purposes of this section,
attending provider means an individual who is licensed under applicable
state law to provide maternity or pediatric care and who is directly
responsible for providing maternity or pediatric care to a mother or
newborn child. Therefore, a plan, hospital, managed care organization,
or other issuer is not an attending provider.
(iv) Example. The rules of this paragraph (a)(5) are illustrated by
the following example:
Example. (i) Facts. A pregnant woman covered under a group health
plan subject to the requirements of this section goes into labor and is
admitted to a hospital. She gives birth by cesarean section. On the
third day after the delivery, the attending provider for the mother
consults with the mother, and the attending provider for the newborn
consults with the mother regarding the newborn. The attending providers
authorize the early discharge of both the mother and the newborn. Both
are discharged approximately 72 hours after the delivery. The plan pays
for the 72-hour hospital stays.
(ii) Conclusion. In this Example, the requirements of this paragraph
(a) have been satisfied with respect to the mother and the newborn. If
either is readmitted, the hospital stay for the readmission is not
subject to this section.
(b) Prohibitions--(1) With respect to mothers--(i) In general. A
group health plan, and a health insurance issuer offering group health
insurance coverage, may not--
(A) Deny a mother or her newborn child eligibility or continued
eligibility to enroll or renew coverage under the terms of the plan
solely to avoid the requirements of this section; or
(B) Provide payments (including payments-in-kind) or rebates to a
mother to encourage her to accept less than the minimum protections
available under this section.
(ii) Examples. The rules of this paragraph (b)(1) are illustrated by
the following examples. In each example, the group health plan is
subject to the requirements of this section, as follows:
Example 1. (i) Facts. A group health plan provides benefits for at
least a 48-hour hospital length of stay following a vaginal delivery. If
a mother and newborn covered under the plan are discharged within 24
hours after the delivery, the plan will waive the copayment and
deductible.
(ii) Conclusion. In this Example 1, because waiver of the copayment
and deductible is in the nature of a rebate that the mother would not
receive if she and her newborn remained in the hospital, it is
prohibited by this paragraph (b)(1). (In addition, the plan violates
paragraph (b)(2) of this section because, in effect, no copayment or
deductible is required for the first portion of the stay and a
[[Page 69]]
double copayment and a deductible are required for the second portion of
the stay.)
Example 2. (i) Facts. A group health plan provides benefits for at
least a 48-hour hospital length of stay following a vaginal delivery. In
the event that a mother and her newborn are discharged earlier than 48
hours and the discharges occur after consultation with the mother in
accordance with the requirements of paragraph (a)(5) of this section,
the plan provides for a follow-up visit by a nurse within 48 hours after
the discharges to provide certain services that the mother and her
newborn would otherwise receive in the hospital.
(ii) Conclusion. In this Example 2, because the follow-up visit does
not provide any services beyond what the mother and her newborn would
receive in the hospital, coverage for the follow-up visit is not
prohibited by this paragraph (b)(1).
(2) With respect to benefit restrictions--(i) In general. Subject to
paragraph (c)(3) of this section, a group health plan, and a health
insurance issuer offering group health insurance coverage, may not
restrict the benefits for any portion of a hospital length of stay
specified in paragraph (a) of this section in a manner that is less
favorable than the benefits provided for any preceding portion of the
stay.
(ii) Example. The rules of this paragraph (b)(2) are illustrated by
the following example:
Example. (i) Facts. A group health plan subject to the requirements
of this section provides benefits for hospital lengths of stay in
connection with childbirth. In the case of a delivery by cesarean
section, the plan automatically pays for the first 48 hours. With
respect to each succeeding 24-hour period, the participant or
beneficiary must call the plan to obtain precertification from a
utilization reviewer, who determines if an additional 24-hour period is
medically necessary. If this approval is not obtained, the plan will not
provide benefits for any succeeding 24-hour period.
(ii) Conclusion. In this Example, the requirement to obtain
precertification for the two 24-hour periods immediately following the
initial 48-hour stay is prohibited by this paragraph (b)(2) because
benefits for the latter part of the stay are restricted in a manner that
is less favorable than benefits for a preceding portion of the stay.
(However, this section does not prohibit a plan from requiring
precertification for any period after the first 96 hours.) In addition,
the requirement to obtain precertification from the plan based on
medical necessity for a hospital length of stay within the 96-hour
period would also violate paragraph (a) of this section.
(3) With respect to attending providers. A group health plan, and a
health insurance issuer offering group health insurance coverage, may
not directly or indirectly--
(i) Penalize (for example, take disciplinary action against or
retaliate against), or otherwise reduce or limit the compensation of, an
attending provider because the provider furnished care to a participant
or beneficiary in accordance with this section; or
(ii) Provide monetary or other incentives to an attending provider
to induce the provider to furnish care to a participant or beneficiary
in a manner inconsistent with this section, including providing any
incentive that could induce an attending provider to discharge a mother
or newborn earlier than 48 hours (or 96 hours) after delivery.
(c) Construction. With respect to this section, the following rules
of construction apply:
(1) Hospital stays not mandatory. This section does not require a
mother to--
(i) Give birth in a hospital; or
(ii) Stay in the hospital for a fixed period of time following the
birth of her child.
(2) Hospital stay benefits not mandated. This section does not apply
to any group health plan, or any group health insurance coverage, that
does not provide benefits for hospital lengths of stay in connection
with childbirth for a mother or her newborn child.
(3) Cost-sharing rules--(i) In general. This section does not
prevent a group health plan or a health insurance issuer offering group
health insurance coverage from imposing deductibles, coinsurance, or
other cost-sharing in relation to benefits for hospital lengths of stay
in connection with childbirth for a mother or a newborn under the plan
or coverage, except that the coinsurance or other cost-sharing for any
portion of the hospital length of stay specified in paragraph (a) of
this section may not be greater than that for any preceding portion of
the stay.
(ii) Examples. The rules of this paragraph (c)(3) are illustrated by
the following examples. In each example, the
[[Page 70]]
group health plan is subject to the requirements of this section, as
follows:
Example 1. (i) Facts. A group health plan provides benefits for at
least a 48-hour hospital length of stay in connection with vaginal
deliveries. The plan covers 80 percent of the cost of the stay for the
first 24-hour period and 50 percent of the cost of the stay for the
second 24-hour period. Thus, the coinsurance paid by the patient
increases from 20 percent to 50 percent after 24 hours.
(ii) Conclusion. In this Example 1, the plan violates the rules of
this paragraph (c)(3) because coinsurance for the second 24-hour period
of the 48-hour stay is greater than that for the preceding portion of
the stay. (In addition, the plan also violates the similar rule in
paragraph (b)(2) of this section.)
Example 2. (i) Facts. A group health plan generally covers 70
percent of the cost of a hospital length of stay in connection with
childbirth. However, the plan will cover 80 percent of the cost of the
stay if the participant or beneficiary notifies the plan of the
pregnancy in advance of admission and uses whatever hospital the plan
may designate.
(ii) Conclusion. In this Example 2, the plan does not violate the
rules of this paragraph (c)(3) because the level of benefits provided
(70 percent or 80 percent) is consistent throughout the 48-hour (or 96-
hour) hospital length of stay required under paragraph (a) of this
section. (In addition, the plan does not violate the rules in paragraph
(a)(4) or (b)(2) of this section.)
(4) Compensation of attending provider. This section does not
prevent a group health plan or a health insurance issuer offering group
health insurance coverage from negotiating with an attending provider
the level and type of compensation for care furnished in accordance with
this section (including paragraph (b) of this section).
(d) Notice requirement. Except as provided in paragraph (d)(4) of
this section, a group health plan that provides benefits for hospital
lengths of stay in connection with childbirth must meet the following
requirements:
(1) Required statement. The plan document that provides a
description of plan benefits to participants and beneficiaries, or that
notifies participants and beneficiaries of plan benefit changes, must
disclose information that notifies participants and beneficiaries of
their rights under this section.
(2) Disclosure notice. To meet the disclosure requirement set forth
in paragraph (d)(1) of this section, the following disclosure notice
must be used:
Statement of Rights Under the Newborns' and Mothers' Health Protection
Act
Under federal law, group health plans and health insurance issuers
offering group health insurance coverage generally may not restrict
benefits for any hospital length of stay in connection with childbirth
for the mother or newborn child to less than 48 hours following a
vaginal delivery, or less than 96 hours following a delivery by cesarean
section. However, the plan or issuer may pay for a shorter stay if the
attending provider (e.g., your physician, nurse midwife, or physician
assistant), after consultation with the mother, discharges the mother or
newborn earlier.
Also, under federal law, plans and issuers may not set the level of
benefits or out-of-pocket costs so that any later portion of the 48-hour
(or 96-hour) stay is treated in a manner less favorable to the mother or
newborn than any earlier portion of the stay.
In addition, a plan or issuer may not, under federal law, require
that a physician or other health care provider obtain authorization for
prescribing a length of stay of up to 48 hours (or 96 hours). However,
to use certain providers or facilities, or to reduce your out-of-pocket
costs, you may be required to obtain precertification. For information
on precertification, contact your plan administrator.
(3) Timing of disclosure. The disclosure notice in paragraph (d)(2)
of this section shall be furnished to each participant covered under a
group health plan, and each beneficiary receiving benefits under a group
health plan, not later than 60 days after the first day of the first
plan year beginning on or after January 1, 2009. Each time a plan
distributes one or both of the documents described in paragraph (d)(1)
to participants and beneficiaries after providing this initial notice,
the disclosure notice in paragraph (d)(2) must appear in at least one of
those documents.
(4) Exceptions. The requirements of this paragraph (d) do not apply
in the following situations.
(i) Self-insured plans that have already provided notice. If
benefits for hospital lengths of stay in connection with childbirth are
not provided through health insurance coverage, and the group health
plan has already provided an initial notice that complies with
[[Page 71]]
paragraphs (d)(1) and (d)(2) of this section, the group health plan is
not automatically required to provide another such notice to
participants and beneficiaries who have been provided with the initial
notice. However, following the effective date of these regulations,
whenever such a plan provides one or both of the documents described in
paragraph (d)(1) of this section to participants and beneficiaries, the
disclosure notice in paragraph (d)(2) of this section must appear in at
least one of those documents.
(ii) Self-insured plans that have elected exemption from this
section. If benefits for hospital lengths of stay in connection with
childbirth are not provided through health insurance coverage, and the
group health plan has made the election described in Sec. 146.180 to be
exempted from the requirements of this section, the group health plan is
not subject to this paragraph (d).
(iii) Insured plans. If benefits for hospital lengths of stay in
connection with childbirth are provided through health insurance
coverage, and the coverage is regulated under a State law described in
paragraph (e) of this section, the group health plan is not subject to
this paragraph (d).
(e) Applicability in certain states--(1) Health insurance coverage.
The requirements of section 2725 of the PHS Act and this section do not
apply with respect to health insurance coverage offered in connection
with a group health plan if there is a state law regulating the coverage
that meets any of the following criteria:
(i) The state law requires the coverage to provide for at least a
48-hour hospital length of stay following a vaginal delivery and at
least a 96-hour hospital length of stay following a delivery by cesarean
section.
(ii) The state law requires the coverage to provide for maternity
and pediatric care in accordance with guidelines that relate to care
following childbirth established by the American College of
Obstetricians and Gynecologists, the American Academy of Pediatrics, or
any other established professional medical association.
(iii) The state law requires, in connection with the coverage for
maternity care, that the hospital length of stay for such care is left
to the decision of (or is required to be made by) the attending provider
in consultation with the mother. State laws that require the decision to
be made by the attending provider with the consent of the mother satisfy
the criterion of this paragraph (e)(1)(iii).
(2) Group health plans--(i) Fully-insured plans. For a group health
plan that provides benefits solely through health insurance coverage, if
the state law regulating the health insurance coverage meets any of the
criteria in paragraph (e)(1) of this section, then the requirements of
section 2725 of the PHS Act and this section do not apply.
(ii) Self-insured plans. For a group health plan that provides all
benefits for hospital lengths of stay in connection with childbirth
other than through health insurance coverage, the requirements of
section 2725 of the PHS Act and this section apply.
(iii) Partially-insured plans. For a group health plan that provides
some benefits through health insurance coverage, if the state law
regulating the health insurance coverage meets any of the criteria in
paragraph (e)(1) of this section, then the requirements of section 2725
of the PHS Act and this section apply only to the extent the plan
provides benefits for hospital lengths of stay in connection with
childbirth other than through health insurance coverage.
(3) Relation to section 2724 (a) of the PHS Act. The preemption
provisions contained in section 2724 (a)(1) of the PHS Act and Sec.
146.143(a) do not supersede a state law described in paragraph (e)(1) of
this section.
(4) Examples. The rules of this paragraph (e) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan buys group health
insurance coverage in a state that requires that the coverage provide
for at least a 48-hour hospital length of stay following a vaginal
delivery and at least a 96-hour hospital length of stay following a
delivery by cesarean section.
(ii) Conclusion. In this Example 1, the coverage is subject to state
law, and the requirements of section 2725 of the PHS Act and this
section do not apply.
Example 2. (i) Facts. A self-insured group health plan covers
hospital lengths of stay in
[[Page 72]]
connection with childbirth in a state that requires health insurance
coverage to provide for maternity and pediatric care in accordance with
guidelines that relate to care following childbirth established by the
American College of Obstetricians and Gynecologists and the American
Academy of Pediatrics.
(ii) Conclusion. In this Example 2, even though the state law
satisfies the criterion of paragraph (e)(1)(ii) of this section, because
the plan provides benefits for hospital lengths of stay in connection
with childbirth other than through health insurance coverage, the plan
is subject to the requirements of section 2725 of the PHS Act and this
section.
(f) Applicability date. Section 2725 of the PHS Act applies to group
health plans, and health insurance issuers offering group health
insurance coverage, for plan years beginning on or after January 1,
1998. This section applies to group health plans, and health insurance
issuers offering group health insurance coverage, for plan years
beginning on or after January 1, 2009.
[73 FR 62424, Oct. 20, 2008, as amended at 75 FR 27138, May 13, 2010]
Sec. 146.136 Parity in mental health and substance use disorder benefits.
(a) Meaning of terms. For purposes of this section, except where the
context clearly indicates otherwise, the following terms have the
meanings indicated:
Aggregate lifetime dollar limit means a dollar limitation on the
total amount of specified benefits that may be paid under a group health
plan (or health insurance coverage offered in connection with such a
plan) for any coverage unit.
Annual dollar limit means a dollar limitation on the total amount of
specified benefits that may be paid in a 12-month period under a group
health plan (or health insurance coverage offered in connection with
such a plan) for any coverage unit.
Coverage unit means coverage unit as described in paragraph
(c)(1)(iv) of this section.
Cumulative financial requirements are financial requirements that
determine whether or to what extent benefits are provided based on
accumulated amounts and include deductibles and out-of-pocket maximums.
(However, cumulative financial requirements do not include aggregate
lifetime or annual dollar limits because these two terms are excluded
from the meaning of financial requirements.)
Cumulative quantitative treatment limitations are treatment
limitations that determine whether or to what extent benefits are
provided based on accumulated amounts, such as annual or lifetime day or
visit limits.
Financial requirements include deductibles, copayments, coinsurance,
or out-of-pocket maximums. Financial requirements do not include
aggregate lifetime or annual dollar limits.
Medical/surgical benefits means benefits with respect to items or
services for medical conditions or surgical procedures, as defined under
the terms of the plan or health insurance coverage and in accordance
with applicable Federal and State law, but does not include mental
health or substance use disorder benefits. Any condition defined by the
plan or coverage as being or as not being a medical/surgical condition
must be defined to be consistent with generally recognized independent
standards of current medical practice (for example, the most current
version of the International Classification of Diseases (ICD) or State
guidelines).
Mental health benefits means benefits with respect to items or
services for mental health conditions, as defined under the terms of the
plan or health insurance coverage and in accordance with applicable
Federal and State law. Any condition defined by the plan or coverage as
being or as not being a mental health condition must be defined to be
consistent with generally recognized independent standards of current
medical practice (for example, the most current version of the
Diagnostic and Statistical Manual of Mental Disorders (DSM), the most
current version of the ICD, or State guidelines).
Substance use disorder benefits means benefits with respect to items
or services for substance use disorders, as defined under the terms of
the plan or health insurance coverage and in accordance with applicable
Federal and State law. Any disorder defined by the plan as being or as
not being a substance use disorder must be defined to
[[Page 73]]
be consistent with generally recognized independent standards of current
medical practice (for example, the most current version of the DSM, the
most current version of the ICD, or State guidelines).
Treatment limitations include limits on benefits based on the
frequency of treatment, number of visits, days of coverage, days in a
waiting period, or other similar limits on the scope or duration of
treatment. Treatment limitations include both quantitative treatment
limitations, which are expressed numerically (such as 50 outpatient
visits per year), and nonquantitative treatment limitations, which
otherwise limit the scope or duration of benefits for treatment under a
plan or coverage. (See paragraph (c)(4)(ii) of this section for an
illustrative list of nonquantitative treatment limitations.) A permanent
exclusion of all benefits for a particular condition or disorder,
however, is not a treatment limitation for purposes of this definition.
(b) Parity requirements with respect to aggregate lifetime and
annual dollar limits. This paragraph (b) details the application of the
parity requirements with respect to aggregate lifetime and annual dollar
limits. This paragraph (b) does not address the provisions of PHS Act
section 2711, which prohibit imposing lifetime and annual limits on the
dollar value of essential health benefits. For more information, see
Sec. 147.126 of this subchapter.
(1) General--(i) General parity requirement. A group health plan (or
health insurance coverage offered by an issuer in connection with a
group health plan) that provides both medical/surgical benefits and
mental health or substance use disorder benefits must comply with
paragraph (b)(2), (b)(3), or (b)(5) of this section.
(ii) Exception. The rule in paragraph (b)(1)(i) of this section does
not apply if a plan (or health insurance coverage) satisfies the
requirements of paragraph (f) or (g) of this section (relating to
exemptions for small employers and for increased cost).
(2) Plan with no limit or limits on less than one-third of all
medical/surgical benefits. If a plan (or health insurance coverage) does
not include an aggregate lifetime or annual dollar limit on any medical/
surgical benefits or includes an aggregate lifetime or annual dollar
limit that applies to less than one-third of all medical/surgical
benefits, it may not impose an aggregate lifetime or annual dollar
limit, respectively, on mental health or substance use disorder
benefits.
(3) Plan with a limit on at least two-thirds of all medical/surgical
benefits. If a plan (or health insurance coverage) includes an aggregate
lifetime or annual dollar limit on at least two-thirds of all medical/
surgical benefits, it must either--
(i) Apply the aggregate lifetime or annual dollar limit both to the
medical/surgical benefits to which the limit would otherwise apply and
to mental health or substance use disorder benefits in a manner that
does not distinguish between the medical/surgical benefits and mental
health or substance use disorder benefits; or
(ii) Not include an aggregate lifetime or annual dollar limit on
mental health or substance use disorder benefits that is less than the
aggregate lifetime or annual dollar limit, respectively, on medical/
surgical benefits. (For cumulative limits other than aggregate lifetime
or annual dollar limits, see paragraph (c)(3)(v) of this section
prohibiting separately accumulating cumulative financial requirements or
cumulative quantitative treatment limitations.)
(4) Determining one-third and two-thirds of all medical/surgical
benefits. For purposes of this paragraph (b), the determination of
whether the portion of medical/surgical benefits subject to an aggregate
lifetime or annual dollar limit represents one-third or two-thirds of
all medical/surgical benefits is based on the dollar amount of all plan
payments for medical/surgical benefits expected to be paid under the
plan for the plan year (or for the portion of the plan year after a
change in plan benefits that affects the applicability of the aggregate
lifetime or annual dollar limits). Any reasonable method may be used to
determine whether the dollar amount expected to be paid under the plan
will constitute one-third or two-thirds of the dollar amount of all plan
payments for medical/surgical benefits.
[[Page 74]]
(5) Plan not described in paragraph (b)(2) or (b)(3) of this
section--(i) In general. A group health plan (or health insurance
coverage) that is not described in paragraph (b)(2) or (b)(3) of this
section with respect to aggregate lifetime or annual dollar limits on
medical/surgical benefits, must either--
(A) Impose no aggregate lifetime or annual dollar limit, as
appropriate, on mental health or substance use disorder benefits; or
(B) Impose an aggregate lifetime or annual dollar limit on mental
health or substance use disorder benefits that is no less than an
average limit calculated for medical/surgical benefits in the following
manner. The average limit is calculated by taking into account the
weighted average of the aggregate lifetime or annual dollar limits, as
appropriate, that are applicable to the categories of medical/surgical
benefits. Limits based on delivery systems, such as inpatient/outpatient
treatment or normal treatment of common, low-cost conditions (such as
treatment of normal births), do not constitute categories for purposes
of this paragraph (b)(5)(i)(B). In addition, for purposes of determining
weighted averages, any benefits that are not within a category that is
subject to a separately-designated dollar limit under the plan are taken
into account as a single separate category by using an estimate of the
upper limit on the dollar amount that a plan may reasonably be expected
to incur with respect to such benefits, taking into account any other
applicable restrictions under the plan.
(ii) Weighting. For purposes of this paragraph (b)(5), the weighting
applicable to any category of medical/surgical benefits is determined in
the manner set forth in paragraph (b)(4) of this section for determining
one-third or two-thirds of all medical/surgical benefits.
(c) Parity requirements with respect to financial requirements and
treatment limitations--(1) Clarification of terms--(i) Classification of
benefits. When reference is made in this paragraph (c) to a
classification of benefits, the term ``classification'' means a
classification as described in paragraph (c)(2)(ii) of this section.
(ii) Type of financial requirement or treatment limitation. When
reference is made in this paragraph (c) to a type of financial
requirement or treatment limitation, the reference to type means its
nature. Different types of financial requirements include deductibles,
copayments, coinsurance, and out-of-pocket maximums. Different types of
quantitative treatment limitations include annual, episode, and lifetime
day and visit limits. See paragraph (c)(4)(ii) of this section for an
illustrative list of nonquantitative treatment limitations.
(iii) Level of a type of financial requirement or treatment
limitation. When reference is made in this paragraph (c) to a level of a
type of financial requirement or treatment limitation, level refers to
the magnitude of the type of financial requirement or treatment
limitation. For example, different levels of coinsurance include 20
percent and 30 percent; different levels of a copayment include $15 and
$20; different levels of a deductible include $250 and $500; and
different levels of an episode limit include 21 inpatient days per
episode and 30 inpatient days per episode.
(iv) Coverage unit. When reference is made in this paragraph (c) to
a coverage unit, coverage unit refers to the way in which a plan (or
health insurance coverage) groups individuals for purposes of
determining benefits, or premiums or contributions. For example,
different coverage units include self-only, family, and employee-plus-
spouse.
(2) General parity requirement--(i) General rule. A group health
plan (or health insurance coverage offered by an issuer in connection
with a group health plan) that provides both medical/surgical benefits
and mental health or substance use disorder benefits may not apply any
financial requirement or treatment limitation to mental health or
substance use disorder benefits in any classification that is more
restrictive than the predominant financial requirement or treatment
limitation of that type applied to substantially all medical/surgical
benefits in the same classification. Whether a financial requirement or
treatment limitation is a predominant financial requirement or treatment
limitation that applies to
[[Page 75]]
substantially all medical/surgical benefits in a classification is
determined separately for each type of financial requirement or
treatment limitation. The application of the rules of this paragraph
(c)(2) to financial requirements and quantitative treatment limitations
is addressed in paragraph (c)(3) of this section; the application of the
rules of this paragraph (c)(2) to nonquantitative treatment limitations
is addressed in paragraph (c)(4) of this section.
(ii) Classifications of benefits used for applying rules--(A) In
general. If a plan (or health insurance coverage) provides mental health
or substance use disorder benefits in any classification of benefits
described in this paragraph (c)(2)(ii), mental health or substance use
disorder benefits must be provided in every classification in which
medical/surgical benefits are provided. In determining the
classification in which a particular benefit belongs, a plan (or health
insurance issuer) must apply the same standards to medical/surgical
benefits and to mental health or substance use disorder benefits. To the
extent that a plan (or health insurance coverage) provides benefits in a
classification and imposes any separate financial requirement or
treatment limitation (or separate level of a financial requirement or
treatment limitation) for benefits in the classification, the rules of
this paragraph (c) apply separately with respect to that classification
for all financial requirements or treatment limitations (illustrated in
examples in paragraph (c)(2)(ii)(C) of this section). The following
classifications of benefits are the only classifications used in
applying the rules of this paragraph (c):
(1) Inpatient, in-network. Benefits furnished on an inpatient basis
and within a network of providers established or recognized under a plan
or health insurance coverage. See special rules for plans with multiple
network tiers in paragraph (c)(3)(iii) of this section.
(2) Inpatient, out-of-network. Benefits furnished on an inpatient
basis and outside any network of providers established or recognized
under a plan or health insurance coverage. This classification includes
inpatient benefits under a plan (or health insurance coverage) that has
no network of providers.
(3) Outpatient, in-network. Benefits furnished on an outpatient
basis and within a network of providers established or recognized under
a plan or health insurance coverage. See special rules for office visits
and plans with multiple network tiers in paragraph (c)(3)(iii) of this
section.
(4) Outpatient, out-of-network. Benefits furnished on an outpatient
basis and outside any network of providers established or recognized
under a plan or health insurance coverage. This classification includes
outpatient benefits under a plan (or health insurance coverage) that has
no network of providers. See special rules for office visits in
paragraph (c)(3)(iii) of this section.
(5) Emergency care. Benefits for emergency care.
(6) Prescription drugs. Benefits for prescription drugs. See special
rules for multi-tiered prescription drug benefits in paragraph
(c)(3)(iii) of this section.
(B) Application to out-of-network providers. See paragraph
(c)(2)(ii)(A) of this section, under which a plan (or health insurance
coverage) that provides mental health or substance use disorder benefits
in any classification of benefits must provide mental health or
substance use disorder benefits in every classification in which
medical/surgical benefits are provided, including out-of-network
classifications.
(C) Examples. The rules of this paragraph (c)(2)(ii) are illustrated
by the following examples. In each example, the group health plan is
subject to the requirements of this section and provides both medical/
surgical benefits and mental health and substance use disorder benefits.
Example 1. (i) Facts. A group health plan offers inpatient and
outpatient benefits and does not contract with a network of providers.
The plan imposes a $500 deductible on all benefits. For inpatient
medical/surgical benefits, the plan imposes a coinsurance requirement.
For outpatient medical/surgical benefits, the plan imposes copayments.
The plan imposes no other financial requirements or treatment
limitations.
(ii) Conclusion. In this Example 1, because the plan has no network
of providers, all
[[Page 76]]
benefits provided are out-of-network. Because inpatient, out-of-network
medical/surgical benefits are subject to separate financial requirements
from outpatient, out-of-network medical/surgical benefits, the rules of
this paragraph (c) apply separately with respect to any financial
requirements and treatment limitations, including the deductible, in
each classification.
Example 2. (i) Facts. A plan imposes a $500 deductible on all
benefits. The plan has no network of providers. The plan generally
imposes a 20 percent coinsurance requirement with respect to all
benefits, without distinguishing among inpatient, outpatient, emergency
care, or prescription drug benefits. The plan imposes no other financial
requirements or treatment limitations.
(ii) Conclusion. In this Example 2, because the plan does not impose
separate financial requirements (or treatment limitations) based on
classification, the rules of this paragraph (c) apply with respect to
the deductible and the coinsurance across all benefits.
Example 3. (i) Facts. Same facts as Example 2, except the plan
exempts emergency care benefits from the 20 percent coinsurance
requirement. The plan imposes no other financial requirements or
treatment limitations.
(ii) Conclusion. In this Example 3, because the plan imposes
separate financial requirements based on classifications, the rules of
this paragraph (c) apply with respect to the deductible and the
coinsurance separately for--
(A) Benefits in the emergency care classification; and
(B) All other benefits.
Example 4. (i) Facts. Same facts as Example 2, except the plan also
imposes a preauthorization requirement for all inpatient treatment in
order for benefits to be paid. No such requirement applies to outpatient
treatment.
(ii) Conclusion. In this Example 4, because the plan has no network
of providers, all benefits provided are out-of-network. Because the plan
imposes a separate treatment limitation based on classifications, the
rules of this paragraph (c) apply with respect to the deductible and
coinsurance separately for--
(A) Inpatient, out-of-network benefits; and
(B) All other benefits.
(3) Financial requirements and quantitative treatment limitations--
(i) Determining ``substantially all'' and ``predominant''--(A)
Substantially all. For purposes of this paragraph (c), a type of
financial requirement or quantitative treatment limitation is considered
to apply to substantially all medical/surgical benefits in a
classification of benefits if it applies to at least two-thirds of all
medical/surgical benefits in that classification. (For this purpose,
benefits expressed as subject to a zero level of a type of financial
requirement are treated as benefits not subject to that type of
financial requirement, and benefits expressed as subject to a
quantitative treatment limitation that is unlimited are treated as
benefits not subject to that type of quantitative treatment limitation.)
If a type of financial requirement or quantitative treatment limitation
does not apply to at least two-thirds of all medical/surgical benefits
in a classification, then that type cannot be applied to mental health
or substance use disorder benefits in that classification.
(B) Predominant--(1) If a type of financial requirement or
quantitative treatment limitation applies to at least two-thirds of all
medical/surgical benefits in a classification as determined under
paragraph (c)(3)(i)(A) of this section, the level of the financial
requirement or quantitative treatment limitation that is considered the
predominant level of that type in a classification of benefits is the
level that applies to more than one-half of medical/surgical benefits in
that classification subject to the financial requirement or quantitative
treatment limitation.
(2) If, with respect to a type of financial requirement or
quantitative treatment limitation that applies to at least two-thirds of
all medical/surgical benefits in a classification, there is no single
level that applies to more than one-half of medical/surgical benefits in
the classification subject to the financial requirement or quantitative
treatment limitation, the plan (or health insurance issuer) may combine
levels until the combination of levels applies to more than one-half of
medical/surgical benefits subject to the financial requirement or
quantitative treatment limitation in the classification. The least
restrictive level within the combination is considered the predominant
level of that type in the classification. (For this purpose, a plan may
combine the most restrictive levels first, with each less restrictive
level added to the combination until the combination applies to more
than one-half of the benefits subject to the financial requirement or
treatment limitation.)
[[Page 77]]
(C) Portion based on plan payments. For purposes of this paragraph
(c), the determination of the portion of medical/surgical benefits in a
classification of benefits subject to a financial requirement or
quantitative treatment limitation (or subject to any level of a
financial requirement or quantitative treatment limitation) is based on
the dollar amount of all plan payments for medical/surgical benefits in
the classification expected to be paid under the plan for the plan year
(or for the portion of the plan year after a change in plan benefits
that affects the applicability of the financial requirement or
quantitative treatment limitation).
(D) Clarifications for certain threshold requirements. For any
deductible, the dollar amount of plan payments includes all plan
payments with respect to claims that would be subject to the deductible
if it had not been satisfied. For any out-of-pocket maximum, the dollar
amount of plan payments includes all plan payments associated with out-
of-pocket payments that are taken into account towards the out-of-pocket
maximum as well as all plan payments associated with out-of-pocket
payments that would have been made towards the out-of-pocket maximum if
it had not been satisfied. Similar rules apply for any other thresholds
at which the rate of plan payment changes. (See also PHS Act section
2707(b) and Affordable Care Act section 1302(c), which establish
limitations on annual deductibles for non-grandfathered health plans in
the small group market and annual limitations on out-of-pocket maximums
for all non-grandfathered health plans.)
(E) Determining the dollar amount of plan payments. Subject to
paragraph (c)(3)(i)(D) of this section, any reasonable method may be
used to determine the dollar amount expected to be paid under a plan for
medical/surgical benefits subject to a financial requirement or
quantitative treatment limitation (or subject to any level of a
financial requirement or quantitative treatment limitation).
(ii) Application to different coverage units. If a plan (or health
insurance coverage) applies different levels of a financial requirement
or quantitative treatment limitation to different coverage units in a
classification of medical/surgical benefits, the predominant level that
applies to substantially all medical/surgical benefits in the
classification is determined separately for each coverage unit.
(iii) Special rules--(A) Multi-tiered prescription drug benefits. If
a plan (or health insurance coverage) applies different levels of
financial requirements to different tiers of prescription drug benefits
based on reasonable factors determined in accordance with the rules in
paragraph (c)(4)(i) of this section (relating to requirements for
nonquantitative treatment limitations) and without regard to whether a
drug is generally prescribed with respect to medical/surgical benefits
or with respect to mental health or substance use disorder benefits, the
plan (or health insurance coverage) satisfies the parity requirements of
this paragraph (c) with respect to prescription drug benefits.
Reasonable factors include cost, efficacy, generic versus brand name,
and mail order versus pharmacy pick-up.
(B) Multiple network tiers. If a plan (or health insurance coverage)
provides benefits through multiple tiers of in-network providers (such
as an in-network tier of preferred providers with more generous cost-
sharing to participants than a separate in-network tier of participating
providers), the plan may divide its benefits furnished on an in-network
basis into sub-classifications that reflect network tiers, if the
tiering is based on reasonable factors determined in accordance with the
rules in paragraph (c)(4)(i) of this section (such as quality,
performance, and market standards) and without regard to whether a
provider provides services with respect to medical/surgical benefits or
mental health or substance use disorder benefits. After the sub-
classifications are established, the plan or issuer may not impose any
financial requirement or treatment limitation on mental health or
substance use disorder benefits in any sub-classification that is more
restrictive than the predominant financial requirement or treatment
limitation that applies to substantially all medical/surgical benefits
in the sub-classification using the
[[Page 78]]
methodology set forth in paragraph (c)(3)(i) of this section.
(C) Sub-classifications permitted for office visits, separate from
other outpatient services. For purposes of applying the financial
requirement and treatment limitation rules of this paragraph (c), a plan
or issuer may divide its benefits furnished on an outpatient basis into
the two sub-classifications described in this paragraph (c)(3)(iii)(C).
After the sub-classifications are established, the plan or issuer may
not impose any financial requirement or quantitative treatment
limitation on mental health or substance use disorder benefits in any
sub-classification that is more restrictive than the predominant
financial requirement or quantitative treatment limitation that applies
to substantially all medical/surgical benefits in the sub-classification
using the methodology set forth in paragraph (c)(3)(i) of this section.
Sub-classifications other than these special rules, such as separate
sub-classifications for generalists and specialists, are not permitted.
The two sub-classifications permitted under this paragraph
(c)(3)(iii)(C) are:
(1) Office visits (such as physician visits), and
(2) All other outpatient items and services (such as outpatient
surgery, facility charges for day treatment centers, laboratory charges,
or other medical items).
(iv) Examples. The rules of paragraphs (c)(3)(i), (c)(3)(ii), and
(c)(3)(iii) of this section are illustrated by the following examples.
In each example, the group health plan is subject to the requirements of
this section and provides both medical/surgical benefits and mental
health and substance use disorder benefits.
Example 1. (i) Facts. For inpatient, out-of-network medical/surgical
benefits, a group health plan imposes five levels of coinsurance. Using
a reasonable method, the plan projects its payments for the upcoming
year as follows:
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Coinsurance rate................ 0% 10% 15% 20% 30% Total.
Projected payments.............. $200x $100x $450x $100x $150x $1,000x.
Percent of total plan costs..... 20% 10% 45% 10% 15%
Percent subject to coinsurance N/A 12.5% 56.25% 12.5% 18.75%
level. (100x/800x) (450x/800x) (100x/800x) (150x/800x)
----------------------------------------------------------------------------------------------------------------
The plan projects plan costs of $800x to be subject to coinsurance
($100x + $450x + $100x + $150x = $800x). Thus, 80 percent ($800x/
$1,000x) of the benefits are projected to be subject to coinsurance, and
56.25 percent of the benefits subject to coinsurance are projected to be
subject to the 15 percent coinsurance level.
(ii) Conclusion. In this Example 1, the two-thirds threshold of the
substantially all standard is met for coinsurance because 80 percent of
all inpatient, out-of-network medical/surgical benefits are subject to
coinsurance. Moreover, the 15 percent coinsurance is the predominant
level because it is applicable to more than one-half of inpatient, out-
of-network medical/surgical benefits subject to the coinsurance
requirement. The plan may not impose any level of coinsurance with
respect to inpatient, out-of-network mental health or substance use
disorder benefits that is more restrictive than the 15 percent level of
coinsurance.
Example 2. (i) Facts. For outpatient, in-network medical/surgical
benefits, a plan imposes five different copayment levels. Using a
reasonable method, the plan projects payments for the upcoming year as
follows:
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Copayment amount................ $0 $10 $15 $20 $50 Total.
Projected payments.............. $200x $200x $200x $300x $100x $1,000x.
Percent of total plan costs..... 20% 20% 20% 30% 10%
Percent subject to copayments... N/A 25% 25% 37.5% 12.5%
(200x/800x) (200x/800x) (300x/800x) (100x/800x)
----------------------------------------------------------------------------------------------------------------
The plan projects plan costs of $800x to be subject to copayments ($200x
+ $200x + $300x + $100x = $800x). Thus, 80 percent ($800x/$1,000x) of
the benefits are projected to be subject to a copayment.
(ii) Conclusion. In this Example 2, the two-thirds threshold of the
substantially all standard is met for copayments because 80 percent of
all outpatient, in-network medical/surgical benefits are subject to a
copayment. Moreover, there is no single level that applies to more than
one-half of medical/surgical benefits in the classification subject to a
copayment (for the $10 copayment, 25%; for
[[Page 79]]
the $15 copayment, 25%; for the $20 copayment, 37.5%; and for the $50
copayment, 12.5%). The plan can combine any levels of copayment,
including the highest levels, to determine the predominant level that
can be applied to mental health or substance use disorder benefits. If
the plan combines the highest levels of copayment, the combined
projected payments for the two highest copayment levels, the $50
copayment and the $20 copayment, are not more than one-half of the
outpatient, in-network medical/surgical benefits subject to a copayment
because they are exactly one-half ($300x + $100x = $400x; $400x/$800x =
50%). The combined projected payments for the three highest copayment
levels--the $50 copayment, the $20 copayment, and the $15 copayment--are
more than one-half of the outpatient, in-network medical/surgical
benefits subject to the copayments ($100x + $300x + $200x = $600x;
$600x/$800x = 75%). Thus, the plan may not impose any copayment on
outpatient, in-network mental health or substance use disorder benefits
that is more restrictive than the least restrictive copayment in the
combination, the $15 copayment.
Example 3. (i) Facts. A plan imposes a $250 deductible on all
medical/surgical benefits for self-only coverage and a $500 deductible
on all medical/surgical benefits for family coverage. The plan has no
network of providers. For all medical/surgical benefits, the plan
imposes a coinsurance requirement. The plan imposes no other financial
requirements or treatment limitations.
(ii) Conclusion. In this Example 3, because the plan has no network
of providers, all benefits are provided out-of-network. Because self-
only and family coverage are subject to different deductibles, whether
the deductible applies to substantially all medical/surgical benefits is
determined separately for self-only medical/surgical benefits and family
medical/surgical benefits. Because the coinsurance is applied without
regard to coverage units, the predominant coinsurance that applies to
substantially all medical/surgical benefits is determined without regard
to coverage units.
Example 4. (i) Facts. A plan applies the following financial
requirements for prescription drug benefits. The requirements are
applied without regard to whether a drug is generally prescribed with
respect to medical/surgical benefits or with respect to mental health or
substance use disorder benefits. Moreover, the process for certifying a
particular drug as ``generic'', ``preferred brand name'', ``non-
preferred brand name'', or ``specialty'' complies with the rules of
paragraph (c)(4)(i) of this section (relating to requirements for
nonquantitative treatment limitations).
----------------------------------------------------------------------------------------------------------------
Tier 1 Tier 2 Tier 3 Tier 4
----------------------------------------------------------------------------------------------------------------
Non-preferred
brand name
Preferred brand drugs (which
Tier description Generic drugs name drugs may have Tier 1 Specialty drugs
or Tier 2
alternatives)
----------------------------------------------------------------------------------------------------------------
Percent paid by plan........................ 90% 80% 60% 50%
----------------------------------------------------------------------------------------------------------------
(ii) Conclusion. In this Example 4, the financial requirements that
apply to prescription drug benefits are applied without regard to
whether a drug is generally prescribed with respect to medical/surgical
benefits or with respect to mental health or substance use disorder
benefits; the process for certifying drugs in different tiers complies
with paragraph (c)(4) of this section; and the bases for establishing
different levels or types of financial requirements are reasonable. The
financial requirements applied to prescription drug benefits do not
violate the parity requirements of this paragraph (c)(3).
Example 5. (i) Facts. A plan has two-tiers of network of providers:
A preferred provider tier and a participating provider tier. Providers
are placed in either the preferred tier or participating tier based on
reasonable factors determined in accordance with the rules in paragraph
(c)(4)(i) of this section, such as accreditation, quality and
performance measures (including customer feedback), and relative
reimbursement rates. Furthermore, provider tier placement is determined
without regard to whether a provider specializes in the treatment of
mental health conditions or substance use disorders, or medical/surgical
conditions. The plan divides the in-network classifications into two
sub-classifications (in-network/preferred and in-network/participating).
The plan does not impose any financial requirement or treatment
limitation on mental health or substance use disorder benefits in either
of these sub-classifications that is more restrictive than the
predominant financial requirement or treatment limitation that applies
to substantially all medical/surgical benefits in each sub-
classification.
(ii) Conclusion. In this Example 5, the division of in-network
benefits into sub-classifications that reflect the preferred and
participating provider tiers does not violate the parity requirements of
this paragraph (c)(3).
[[Page 80]]
Example 6. (i) Facts. With respect to outpatient, in-network
benefits, a plan imposes a $25 copayment for office visits and a 20
percent coinsurance requirement for outpatient surgery. The plan divides
the outpatient, in-network classification into two sub-classifications
(in-network office visits and all other outpatient, in-network items and
services). The plan or issuer does not impose any financial requirement
or quantitative treatment limitation on mental health or substance use
disorder benefits in either of these sub-classifications that is more
restrictive than the predominant financial requirement or quantitative
treatment limitation that applies to substantially all medical/surgical
benefits in each sub-classification.
(ii) Conclusion. In this Example 6, the division of outpatient, in-
network benefits into sub-classifications for office visits and all
other outpatient, in-network items and services does not violate the
parity requirements of this paragraph (c)(3).
Example 7. (i) Facts. Same facts as Example 6, but for purposes of
determining parity, the plan divides the outpatient, in-network
classification into outpatient, in-network generalists and outpatient,
in-network specialists.
(ii) Conclusion. In this Example 7, the division of outpatient, in-
network benefits into any sub-classifications other than office visits
and all other outpatient items and services violates the requirements of
paragraph (c)(3)(iii)(C) of this section.
(v) No separate cumulative financial requirements or cumulative
quantitative treatment limitations--(A) A group health plan (or health
insurance coverage offered in connection with a group health plan) may
not apply any cumulative financial requirement or cumulative
quantitative treatment limitation for mental health or substance use
disorder benefits in a classification that accumulates separately from
any established for medical/surgical benefits in the same
classification.
(B) The rules of this paragraph (c)(3)(v) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan imposes a combined annual
$500 deductible on all medical/surgical, mental health, and substance
use disorder benefits.
(ii) Conclusion. In this Example 1, the combined annual deductible
complies with the requirements of this paragraph (c)(3)(v).
Example 2. (i) Facts. A plan imposes an annual $250 deductible on
all medical/surgical benefits and a separate annual $250 deductible on
all mental health and substance use disorder benefits.
(ii) Conclusion. In this Example 2, the separate annual deductible
on mental health and substance use disorder benefits violates the
requirements of this paragraph (c)(3)(v).
Example 3. (i) Facts. A plan imposes an annual $300 deductible on
all medical/surgical benefits and a separate annual $100 deductible on
all mental health or substance use disorder benefits.
(ii) Conclusion. In this Example 3, the separate annual deductible
on mental health and substance use disorder benefits violates the
requirements of this paragraph (c)(3)(v).
Example 4. (i) Facts. A plan generally imposes a combined annual
$500 deductible on all benefits (both medical/surgical benefits and
mental health and substance use disorder benefits) except prescription
drugs. Certain benefits, such as preventive care, are provided without
regard to the deductible. The imposition of other types of financial
requirements or treatment limitations varies with each classification.
Using reasonable methods, the plan projects its payments for medical/
surgical benefits in each classification for the upcoming year as
follows:
----------------------------------------------------------------------------------------------------------------
Benefits Percent
Classification subject to Total benefits subject to
deductible deductible
----------------------------------------------------------------------------------------------------------------
Inpatient, in-network........................................... $1,800x $2,000x 90
Inpatient, out-of-network....................................... 1,000x 1,000x 100
Outpatient, in-network.......................................... 1,400x 2,000x 70
Outpatient, out-of-network...................................... 1,880x 2,000x 94
Emergency care.................................................. 300x 500x 60
----------------------------------------------------------------------------------------------------------------
(ii) Conclusion. In this Example 4, the two-thirds threshold of the
substantially all standard is met with respect to each classification
except emergency care because in each of those other classifications at
least two-thirds of medical/surgical benefits are subject to the $500
deductible. Moreover, the $500 deductible is the predominant level in
each of those other classifications because it is the only level.
However, emergency care mental health and substance use disorder
benefits cannot be subject to the $500 deductible because it does not
apply to substantially all emergency care medical/surgical benefits.
[[Page 81]]
(4) Nonquantitative treatment limitations--(i) General rule. A group
health plan (or health insurance coverage) may not impose a
nonquantitative treatment limitation with respect to mental health or
substance use disorder benefits in any classification unless, under the
terms of the plan (or health insurance coverage) as written and in
operation, any processes, strategies, evidentiary standards, or other
factors used in applying the nonquantitative treatment limitation to
mental health or substance use disorder benefits in the classification
are comparable to, and are applied no more stringently than, the
processes, strategies, evidentiary standards, or other factors used in
applying the limitation with respect to medical/surgical benefits in the
classification.
(ii) Illustrative list of nonquantitative treatment limitations.
Nonquantitative treatment limitations include--
(A) Medical management standards limiting or excluding benefits
based on medical necessity or medical appropriateness, or based on
whether the treatment is experimental or investigative;
(B) Formulary design for prescription drugs;
(C) For plans with multiple network tiers (such as preferred
providers and participating providers), network tier design;
(D) Standards for provider admission to participate in a network,
including reimbursement rates;
(E) Plan methods for determining usual, customary, and reasonable
charges;
(F) Refusal to pay for higher-cost therapies until it can be shown
that a lower-cost therapy is not effective (also known as fail-first
policies or step therapy protocols);
(G) Exclusions based on failure to complete a course of treatment;
and
(H) Restrictions based on geographic location, facility type,
provider specialty, and other criteria that limit the scope or duration
of benefits for services provided under the plan or coverage.
(iii) Examples. The rules of this paragraph (c)(4) are illustrated
by the following examples. In each example, the group health plan is
subject to the requirements of this section and provides both medical/
surgical benefits and mental health and substance use disorder benefits.
Example 1. (i) Facts. A plan requires prior authorization from the
plan's utilization reviewer that a treatment is medically necessary for
all inpatient medical/surgical benefits and for all inpatient mental
health and substance use disorder benefits. In practice, inpatient
benefits for medical/surgical conditions are routinely approved for
seven days, after which a treatment plan must be submitted by the
patient's attending provider and approved by the plan. On the other
hand, for inpatient mental health and substance use disorder benefits,
routine approval is given only for one day, after which a treatment plan
must be submitted by the patient's attending provider and approved by
the plan.
(ii) Conclusion. In this Example 1, the plan violates the rules of
this paragraph (c)(4) because it is applying a stricter nonquantitative
treatment limitation in practice to mental health and substance use
disorder benefits than is applied to medical/surgical benefits.
Example 2. (i) Facts. A plan applies concurrent review to inpatient
care where there are high levels of variation in length of stay (as
measured by a coefficient of variation exceeding 0.8). In practice, the
application of this standard affects 60 percent of mental health
conditions and substance use disorders, but only 30 percent of medical/
surgical conditions.
(ii) Conclusion. In this Example 2, the plan complies with the rules
of this paragraph (c)(4) because the evidentiary standard used by the
plan is applied no more stringently for mental health and substance use
disorder benefits than for medical/surgical benefits, even though it
results in an overall difference in the application of concurrent review
for mental health conditions or substance use disorders than for
medical/surgical conditions.
Example 3. (i) Facts. A plan requires prior approval that a course
of treatment is medically necessary for outpatient, in-network medical/
surgical, mental health, and substance use disorder benefits and uses
comparable criteria in determining whether a course of treatment is
medically necessary. For mental health and substance use disorder
treatments that do not have prior approval, no benefits will be paid;
for medical/surgical treatments that do not have prior approval, there
will only be a 25 percent reduction in the benefits the plan would
otherwise pay.
(ii) Conclusion. In this Example 3, the plan violates the rules of
this paragraph (c)(4). Although the same nonquantitative treatment
limitation--medical necessity--is applied
[[Page 82]]
both to mental health and substance use disorder benefits and to
medical/surgical benefits for outpatient, in-network services, it is not
applied in a comparable way. The penalty for failure to obtain prior
approval for mental health and substance use disorder benefits is not
comparable to the penalty for failure to obtain prior approval for
medical/surgical benefits.
Example 4. (i) Facts. A plan generally covers medically appropriate
treatments. For both medical/surgical benefits and mental health and
substance use disorder benefits, evidentiary standards used in
determining whether a treatment is medically appropriate (such as the
number of visits or days of coverage) are based on recommendations made
by panels of experts with appropriate training and experience in the
fields of medicine involved. The evidentiary standards are applied in a
manner that is based on clinically appropriate standards of care for a
condition.
(ii) Conclusion. In this Example 4, the plan complies with the rules
of this paragraph (c)(4) because the processes for developing the
evidentiary standards used to determine medical appropriateness and the
application of these standards to mental health and substance use
disorder benefits are comparable to and are applied no more stringently
than for medical/surgical benefits. This is the result even if the
application of the evidentiary standards does not result in similar
numbers of visits, days of coverage, or other benefits utilized for
mental health conditions or substance use disorders as it does for any
particular medical/surgical condition.
Example 5. (i) Facts. A plan generally covers medically appropriate
treatments. In determining whether prescription drugs are medically
appropriate, the plan automatically excludes coverage for antidepressant
drugs that are given a black box warning label by the Food and Drug
Administration (indicating the drug carries a significant risk of
serious adverse effects). For other drugs with a black box warning
(including those prescribed for other mental health conditions and
substance use disorders, as well as for medical/surgical conditions),
the plan will provide coverage if the prescribing physician obtains
authorization from the plan that the drug is medically appropriate for
the individual, based on clinically appropriate standards of care.
(ii) Conclusion. In this Example 5, the plan violates the rules of
this paragraph (c)(4). Although the standard for applying a
nonquantitative treatment limitation is the same for both mental health
and substance use disorder benefits and medical/surgical benefits--
whether a drug has a black box warning--it is not applied in a
comparable manner. The plan's unconditional exclusion of antidepressant
drugs given a black box warning is not comparable to the conditional
exclusion for other drugs with a black box warning.
Example 6. (i) Facts. An employer maintains both a major medical
plan and an employee assistance program (EAP). The EAP provides, among
other benefits, a limited number of mental health or substance use
disorder counseling sessions. Participants are eligible for mental
health or substance use disorder benefits under the major medical plan
only after exhausting the counseling sessions provided by the EAP. No
similar exhaustion requirement applies with respect to medical/surgical
benefits provided under the major medical plan.
(ii) Conclusion. In this Example 6, limiting eligibility for mental
health and substance use disorder benefits only after EAP benefits are
exhausted is a nonquantitative treatment limitation subject to the
parity requirements of this paragraph (c). Because no comparable
requirement applies to medical/surgical benefits, the requirement may
not be applied to mental health or substance use disorder benefits.
Example 7. (i) Facts. Training and State licensing requirements
often vary among types of providers. A plan applies a general standard
that any provider must meet the highest licensing requirement related to
supervised clinical experience under applicable State law in order to
participate in the plan's provider network. Therefore, the plan requires
master's-level mental health therapists to have post-degree, supervised
clinical experience but does not impose this requirement on master's-
level general medical providers because the scope of their licensure
under applicable State law does require clinical experience. In
addition, the plan does not require post-degree, supervised clinical
experience for psychiatrists or Ph.D. level psychologists since their
licensing already requires supervised training.
(ii) Conclusion. In this Example 7, the plan complies with the rules
of this paragraph (c)(4). The requirement that master's-level mental
health therapists must have supervised clinical experience to join the
network is permissible, as long as the plan consistently applies the
same standard to all providers even though it may have a disparate
impact on certain mental health providers.
Example 8. (i) Facts. A plan considers a wide array of factors in
designing medical management techniques for both mental health and
substance use disorder benefits and medical/surgical benefits, such as
cost of treatment; high cost growth; variability in cost and quality;
elasticity of demand; provider discretion in determining diagnosis, or
type or length of treatment; clinical efficacy of any proposed treatment
or service; licensing and accreditation of providers; and claim types
with a high percentage of fraud. Based
[[Page 83]]
on application of these factors in a comparable fashion, prior
authorization is required for some (but not all) mental health and
substance use disorder benefits, as well as for some medical/surgical
benefits, but not for others. For example, the plan requires prior
authorization for: Outpatient surgery; speech, occupational, physical,
cognitive and behavioral therapy extending for more than six months;
durable medical equipment; diagnostic imaging; skilled nursing visits;
home infusion therapy; coordinated home care; pain management; high-risk
prenatal care; delivery by cesarean section; mastectomy; prostate cancer
treatment; narcotics prescribed for more than seven days; and all
inpatient services beyond 30 days. The evidence considered in developing
its medical management techniques includes consideration of a wide array
of recognized medical literature and professional standards and
protocols (including comparative effectiveness studies and clinical
trials). This evidence and how it was used to develop these medical
management techniques is also well documented by the plan.
(ii) Conclusion. In this Example 8, the plan complies with the rules
of this paragraph (c)(4). Under the terms of the plan as written and in
operation, the processes, strategies, evidentiary standards, and other
factors considered by the plan in implementing its prior authorization
requirement with respect to mental health and substance use disorder
benefits are comparable to, and applied no more stringently than, those
applied with respect to medical/surgical benefits.
Example 9. (i) Facts. A plan generally covers medically appropriate
treatments. The plan automatically excludes coverage for inpatient
substance use disorder treatment in any setting outside of a hospital
(such as a freestanding or residential treatment center). For inpatient
treatment outside of a hospital for other conditions (including
freestanding or residential treatment centers prescribed for mental
health conditions, as well as for medical/surgical conditions), the plan
will provide coverage if the prescribing physician obtains authorization
from the plan that the inpatient treatment is medically appropriate for
the individual, based on clinically appropriate standards of care.
(ii) Conclusion. In this Example 9, the plan violates the rules of
this paragraph (c)(4). Although the same nonquantitative treatment
limitation--medical appropriateness--is applied to both mental health
and substance use disorder benefits and medical/surgical benefits, the
plan's unconditional exclusion of substance use disorder treatment in
any setting outside of a hospital is not comparable to the conditional
exclusion of inpatient treatment outside of a hospital for other
conditions.
Example 10. (i) Facts. A plan generally provides coverage for
medically appropriate medical/surgical benefits as well as mental health
and substance use disorder benefits. The plan excludes coverage for
inpatient, out-of-network treatment of chemical dependency when obtained
outside of the State where the policy is written. There is no similar
exclusion for medical/surgical benefits within the same classification.
(ii) Conclusion. In this Example 10, the plan violates the rules of
this paragraph (c)(4). The plan is imposing a nonquantitative treatment
limitation that restricts benefits based on geographic location. Because
there is no comparable exclusion that applies to medical/surgical
benefits, this exclusion may not be applied to mental health or
substance use disorder benefits.
Example 11. (i) Facts. A plan requires prior authorization for all
outpatient mental health and substance use disorder services after the
ninth visit and will only approve up to five additional visits per
authorization. With respect to outpatient medical/surgical benefits, the
plan allows an initial visit without prior authorization. After the
initial visit, the plan pre-approves benefits based on the individual
treatment plan recommended by the attending provider based on that
individual's specific medical condition. There is no explicit,
predetermined cap on the amount of additional visits approved per
authorization.
(ii) Conclusion. In this Example 11, the plan violates the rules of
this paragraph (c)(4). Although the same nonquantitative treatment
limitation--prior authorization to determine medical appropriateness--is
applied to both mental health and substance use disorder benefits and
medical/surgical benefits for outpatient services, it is not applied in
a comparable way. While the plan is more generous with respect to the
number of visits initially provided without pre-authorization for mental
health benefits, treating all mental health conditions and substance use
disorders in the same manner, while providing for individualized
treatment of medical conditions, is not a comparable application of this
nonquantitative treatment limitation.
(5) Exemptions. The rules of this paragraph (c) do not apply if a
group health plan (or health insurance coverage) satisfies the
requirements of paragraph (f) or (g) of this section (relating to
exemptions for small employers and for increased cost).
(d) Availability of plan information--(1) Criteria for medical
necessity determinations. The criteria for medical necessity
determinations made under a group health plan with respect to mental
health or substance use disorder benefits (or health insurance coverage
offered in connection with the plan
[[Page 84]]
with respect to such benefits) must be made available by the plan
administrator (or the health insurance issuer offering such coverage) to
any current or potential participant, beneficiary, or contracting
provider upon request.
(2) Reason for any denial. The reason for any denial under a group
health plan (or health insurance coverage offered in connection with
such plan) of reimbursement or payment for services with respect to
mental health or substance use disorder benefits in the case of any
participant or beneficiary must be made available by the plan
administrator (or the health insurance issuer offering such coverage) to
the participant or beneficiary. For this purpose, a non-Federal
governmental plan (or health insurance coverage offered in connection
with such plan) that provides the reason for the claim denial in a form
and manner consistent with the requirements of 29 CFR 2560.503-1 for
group health plans complies with the requirements of this paragraph
(d)(2).
(3) Provisions of other law. Compliance with the disclosure
requirements in paragraphs (d)(1) and (d)(2) of this section is not
determinative of compliance with any other provision of applicable
Federal or State law. In particular, in addition to those disclosure
requirements, provisions of other applicable law require disclosure of
information relevant to medical/surgical, mental health, and substance
use disorder benefits. For example, Sec. 147.136 of this subchapter
sets forth rules regarding claims and appeals, including the right of
claimants (or their authorized representative) upon appeal of an adverse
benefit determination (or a final internal adverse benefit
determination) to be provided upon request and free of charge,
reasonable access to and copies of all documents, records, and other
information relevant to the claimant's claim for benefits. This includes
documents with information on medical necessity criteria for both
medical/surgical benefits and mental health and substance use disorder
benefits, as well as the processes, strategies, evidentiary standards,
and other factors used to apply a nonquantitative treatment limitation
with respect to medical/surgical benefits and mental health or substance
use disorder benefits under the plan.
(e) Applicability--(1) Group health plans. The requirements of this
section apply to a group health plan offering medical/surgical benefits
and mental health or substance use disorder benefits. If, under an
arrangement or arrangements to provide medical care benefits by an
employer or employee organization (including for this purpose a joint
board of trustees of a multiemployer trust affiliated with one or more
multiemployer plans), any participant (or beneficiary) can
simultaneously receive coverage for medical/surgical benefits and
coverage for mental health or substance use disorder benefits, then the
requirements of this section (including the exemption provisions in
paragraph (g) of this section) apply separately with respect to each
combination of medical/surgical benefits and of mental health or
substance use disorder benefits that any participant (or beneficiary)
can simultaneously receive from that employer's or employee
organization's arrangement or arrangements to provide medical care
benefits, and all such combinations are considered for purposes of this
section to be a single group health plan.
(2) Health insurance issuers. The requirements of this section apply
to a health insurance issuer offering health insurance coverage for
mental health or substance use disorder benefits in connection with a
group health plan subject to paragraph (e)(1) of this section.
(3) Scope. This section does not--
(i) Require a group health plan (or health insurance issuer offering
coverage in connection with a group health plan) to provide any mental
health benefits or substance use disorder benefits, and the provision of
benefits by a plan (or health insurance coverage) for one or more mental
health conditions or substance use disorders does not require the plan
or health insurance coverage under this section to provide benefits for
any other mental health condition or substance use disorder;
(ii) Require a group health plan (or health insurance issuer
offering coverage in connection with a group
[[Page 85]]
health plan) that provides coverage for mental health or substance use
disorder benefits only to the extent required under PHS Act section 2713
to provide additional mental health or substance use disorder benefits
in any classification in accordance with this section; or
(iii) Affect the terms and conditions relating to the amount,
duration, or scope of mental health or substance use disorder benefits
under the plan (or health insurance coverage) except as specifically
provided in paragraphs (b) and (c) of this section.
(4) Coordination with EHB requirements. Nothing in paragraph (f) or
(g) of this section changes the requirements of Sec. Sec. 147.150 and
156.115 of this subchapter, providing that a health insurance issuer
offering non-grandfathered health insurance coverage in the individual
or small group market providing mental health and substance use disorder
services, including behavioral health treatment services, as part of
essential health benefits required under Sec. Sec. 156.110(a)(5) and
156.115(a) of this subchapter, must comply with the provisions of this
section to satisfy the requirement to provide essential health benefits.
(f) Small employer exemption--(1) In general. The requirements of
this section do not apply to a group health plan (or health insurance
issuer offering coverage in connection with a group health plan) for a
plan year of a small employer (as defined in section 2791 of the PHS
Act).
(2) Rules in determining employer size. For purposes of paragraph
(f)(1) of this section--
(i) All persons treated as a single employer under subsections (b),
(c), (m), and (o) of section 414 of the Internal Revenue Code are
treated as one employer;
(ii) If an employer was not in existence throughout the preceding
calendar year, whether it is a small employer is determined based on the
average number of employees the employer reasonably expects to employ on
business days during the current calendar year; and
(iii) Any reference to an employer for purposes of the small
employer exemption includes a reference to a predecessor of the
employer.
(g) Increased cost exemption--(1) In general. If the application of
this section to a group health plan (or health insurance coverage
offered in connection with such plans) results in an increase for the
plan year involved of the actual total cost of coverage with respect to
medical/surgical benefits and mental health and substance use disorder
benefits as determined and certified under paragraph (g)(3) of this
section by an amount that exceeds the applicable percentage described in
paragraph (g)(2) of this section of the actual total plan costs, the
provisions of this section shall not apply to such plan (or coverage)
during the following plan year, and such exemption shall apply to the
plan (or coverage) for one plan year. An employer or issuer may elect to
continue to provide mental health and substance use disorder benefits in
compliance with this section with respect to the plan or coverage
involved regardless of any increase in total costs.
(2) Applicable percentage. With respect to a plan or coverage, the
applicable percentage described in this paragraph (g) is--
(i) 2 percent in the case of the first plan year in which this
section is applied to the plan or coverage; and
(ii) 1 percent in the case of each subsequent plan year.
(3) Determinations by actuaries--(i) Determinations as to increases
in actual costs under a plan or coverage that are attributable to
implementation of the requirements of this section shall be made and
certified by a qualified and licensed actuary who is a member in good
standing of the American Academy of Actuaries. All such determinations
must be based on the formula specified in paragraph (g)(4) of this
section and shall be in a written report prepared by the actuary.
(ii) The written report described in paragraph (g)(3)(i) of this
section shall be maintained by the group health plan or health insurance
issuer, along with all supporting documentation relied upon by the
actuary, for a period of six years following the notification made under
paragraph (g)(6) of this section.
[[Page 86]]
(4) Formula. The formula to be used to make the determination under
paragraph (g)(3)(i) of this section is expressed mathematically as
follows:
[(E1 - E0) / T0] -D k
(i) E1 is the actual total cost of coverage with respect
to mental health and substance use disorder benefits for the base
period, including claims paid by the plan or issuer with respect to
mental health and substance use disorder benefits and administrative
costs (amortized over time) attributable to providing these benefits
consistent with the requirements of this section.
(ii) E0 is the actual total cost of coverage with respect
to mental health and substance use disorder benefits for the length of
time immediately before the base period (and that is equal in length to
the base period), including claims paid by the plan or issuer with
respect to mental health and substance use disorder benefits and
administrative costs (amortized over time) attributable to providing
these benefits.
(iii) T0 is the actual total cost of coverage with
respect to all benefits during the base period.
(iv) k is the applicable percentage of increased cost specified in
paragraph (g)(2) of this section that will be expressed as a fraction
for purposes of this formula.
(v) D is the average change in spending that is calculated by
applying the formula (E1-E0)/T0 to mental health and substance use
disorder spending in each of the five prior years and then calculating
the average change in spending.
(5) Six month determination. If a group health plan or health
insurance issuer seeks an exemption under this paragraph (g),
determinations under paragraph (g)(3) of this section shall be made
after such plan or coverage has complied with this section for at least
the first 6 months of the plan year involved.
(6) Notification. A group health plan or health insurance issuer
that, based on the certification described under paragraph (g)(3) of
this section, qualifies for an exemption under this paragraph (g), and
elects to implement the exemption, must notify participants and
beneficiaries covered under the plan, the Secretary, and the appropriate
State agencies of such election.
(i) Participants and beneficiaries--(A) Content of notice. The
notice to participants and beneficiaries must include the following
information:
(1) A statement that the plan or issuer is exempt from the
requirements of this section and a description of the basis for the
exemption.
(2) The name and telephone number of the individual to contact for
further information.
(3) The plan or issuer name and plan number (PN).
(4) The plan administrator's name, address, and telephone number.
(5) For single-employer plans, the plan sponsor's name, address, and
telephone number (if different from paragraph (g)(6)(i)(A)(3) of this
section) and the plan sponsor's employer identification number (EIN).
(6) The effective date of such exemption.
(7) A statement regarding the ability of participants and
beneficiaries to contact the plan administrator or health insurance
issuer to see how benefits may be affected as a result of the plan's or
issuer's election of the exemption.
(8) A statement regarding the availability, upon request and free of
charge, of a summary of the information on which the exemption is based
(as required under paragraph (g)(6)(i)(D) of this section).
(B) Use of summary of material reductions in covered services or
benefits. A plan or issuer may satisfy the requirements of paragraph
(g)(6)(i)(A) of this section by providing participants and beneficiaries
(in accordance with paragraph (g)(6)(i)(C) of this section) with a
summary of material reductions in covered services or benefits
consistent with 29 CFR 2520.104b-3(d) that also includes the information
specified in paragraph (g)(6)(i)(A) of this section. However, in all
cases, the exemption is not effective until 30 days after notice has
been sent.
(C) Delivery. The notice described in this paragraph (g)(6)(i) is
required to be provided to all participants and beneficiaries. The
notice may be furnished by any method of delivery that satisfies the
requirements of section
[[Page 87]]
104(b)(1) of ERISA (29 U.S.C. 1024(b)(1)) and its implementing
regulations (for example, first-class mail). If the notice is provided
to the participant and any beneficiaries at the participant's last known
address, then the requirements of this paragraph (g)(6)(i) are satisfied
with respect to the participant and all beneficiaries residing at that
address. If a beneficiary's last known address is different from the
participant's last known address, a separate notice is required to be
provided to the beneficiary at the beneficiary's last known address.
(D) Availability of documentation. The plan or issuer must make
available to participants and beneficiaries (or their representatives),
on request and at no charge, a summary of the information on which the
exemption was based. (For purposes of this paragraph (g), an individual
who is not a participant or beneficiary and who presents a notice
described in paragraph (g)(6)(i) of this section is considered to be a
representative. A representative may request the summary of information
by providing the plan a copy of the notice provided to the participant
under paragraph (g)(6)(i) of this section with any personally
identifiable information redacted.) The summary of information must
include the incurred expenditures, the base period, the dollar amount of
claims incurred during the base period that would have been denied under
the terms of the plan or coverage absent amendments required to comply
with paragraphs (b) and (c) of this section, the administrative costs
related to those claims, and other administrative costs attributable to
complying with the requirements of this section. In no event should the
summary of information include any personally identifiable information.
(ii) Federal agencies--(A) Content of notice. The notice to the
Secretary must include the following information:
(1) A description of the number of covered lives under the plan (or
coverage) involved at the time of the notification, and as applicable,
at the time of any prior election of the cost exemption under this
paragraph (g) by such plan (or coverage);
(2) For both the plan year upon which a cost exemption is sought and
the year prior, a description of the actual total costs of coverage with
respect to medical/surgical benefits and mental health and substance use
disorder benefits; and
(3) For both the plan year upon which a cost exemption is sought and
the year prior, the actual total costs of coverage with respect to
mental health and substance use disorder benefits under the plan.
(B) Reporting by health insurance coverage offered in connection
with a church plan. See 26 CFR 54.9812(g)(6)(ii)(B) for delivery with
respect to church plans.
(C) Reporting by health insurance coverage offered in connection
with a group health plans subject to Part 7 of Subtitle B of Title I of
ERISA. See 29 CFR 2590.712(g)(6)(ii) for delivery with respect to group
health plans subject to ERISA.
(D) Reporting with respect to non-Federal governmental plans and
health insurance issuers in the individual market. A group health plan
that is a non-Federal governmental plan, or a health insurance issuer
offering health insurance coverage in the individual market, claiming
the exemption of this paragraph (g) for any benefit package must provide
notice to the Department of Health and Human Services. This requirement
is satisfied if the plan or issuer sends a copy, to the address
designated by the Secretary in generally applicable guidance, of the
notice described in paragraph (g)(6)(ii)(A) of this section identifying
the benefit package to which the exemption applies.
(iii) Confidentiality. A notification to the Secretary under this
paragraph (g)(6) shall be confidential. The Secretary shall make
available, upon request and not more than on an annual basis, an
anonymous itemization of each notification that includes--
(A) A breakdown of States by the size and type of employers
submitting such notification; and
(B) A summary of the data received under paragraph (g)(6)(ii) of
this section.
(iv) Audits. The Secretary may audit the books and records of a
group health
[[Page 88]]
plan or a health insurance issuer relating to an exemption, including
any actuarial reports, during the 6 year period following notification
of such exemption under paragraph (g)(6) of this section. A State agency
receiving a notification under paragraph (g)(6) of this section may also
conduct such an audit with respect to an exemption covered by such
notification.
(h) Sale of nonparity health insurance coverage. A health insurance
issuer may not sell a policy, certificate, or contract of insurance that
fails to comply with paragraph (b) or (c) of this section, except to a
plan for a year for which the plan is exempt from the requirements of
this section because the plan meets the requirements of paragraph (f) or
(g) of this section.
(i) Applicability dates--(1) In general. Except as provided in
paragraph (i)(2) of this section, this section applies to group health
plans and health insurance issuers offering group health insurance
coverage on the first day of the first plan year beginning on or after
July 1, 2014. Until the applicability date, plans and issuers are
required to continue to comply with the corresponding sections of Sec.
146.136 contained in the 45 CFR, parts 1 to 199, edition revised as of
October 1, 2013.
(2) Special effective date for certain collectively-bargained plans.
For a group health plan maintained pursuant to one or more collective
bargaining agreements ratified before October 3, 2008, the requirements
of this section do not apply to the plan (or health insurance coverage
offered in connection with the plan) for plan years beginning before the
date on which the last of the collective bargaining agreements
terminates (determined without regard to any extension agreed to after
October 3, 2008).
[78 FR 68286, Nov. 13, 2013]
Subpart D_Preemption and Special Rules
Sec. 146.143 Preemption; State flexibility; construction.
(a) Continued applicability of State law with respect to health
insurance issuers. Subject to paragraph (b) of this section and except
as provided in paragraph (c) of this section, part A of title XXVII of
the PHS Act is not to be construed to supersede any provision of State
law which establishes, implements, or continues in effect any standard
or requirement solely relating to health insurance issuers in connection
with group health insurance coverage except to the extent that such
standard or requirement prevents the application of a requirement of
this part.
(b) Continued preemption with respect to group health plans. Nothing
in part A of title XXVII of the PHS Act affects or modifies the
provisions of section 514 of ERISA with respect to group health plans.
(c) Special rules--(1) In general. Subject to paragraph (c)(2) of
this section, the provisions of part A of title XXVII of the PHS Act
relating to health insurance coverage offered by a health insurance
issuer supersede any provision of State law which establishes,
implements, or continues in effect a standard or requirement applicable
to imposition of a preexisting condition exclusion specifically governed
by section 2701 of the PHS Act which differs from the standards or
requirements specified in section 2701 of the PHS Act.
(2) Exceptions. Only in relation to health insurance coverage
offered by a health insurance issuer, the provisions of this part do not
supersede any provision of State law to the extent that such provision
requires special enrollment periods in addition to those required under
section 2702 of the Act.
(d) Definitions--(1) State law. For purposes of this section the
term State law includes all laws, decisions, rules, regulations, or
other State action having the effect of law, of any State. A law of the
United States applicable only to the District of Columbia is treated as
a State law rather than a law of the United States.
(2) State. For purposes of this section the term State includes a
State (as defined in Sec. 144.103), any political subdivisions of a
State, or any agency or instrumentality of either.
[69 FR 78797, Dec. 30, 2004; 70 FR 21147, Apr. 25, 2005; 79 FR 10315,
Feb. 24, 2014]
[[Page 89]]
Sec. 146.145 Special rules relating to group health plans.
(a) Group health plan--(1) Definition. A group health plan means an
employee welfare benefit plan to the extent that the plan provides
medical care (including items and services paid for as medical care) to
employees (including both current and former employees) or their
dependents (as defined under the terms of the plan) directly or through
insurance, reimbursement, or otherwise.
(2) Determination of number of plans. [Reserved]
(b) Excepted benefits--(1) In general. The requirements of subparts
B and C of this part do not apply to any group health plan (or any group
health insurance coverage) in relation to its provision of the benefits
described in paragraph (b) (2), (3), (4), or (5) of this section (or any
combination of these benefits).
(2) Benefits excepted in all circumstances. The following benefits
are excepted in all circumstances--
(i) Coverage only for accident (including accidental death and
dismemberment);
(ii) Disability income coverage;
(iii) Liability insurance, including general liability insurance and
automobile liability insurance;
(iv) Coverage issued as a supplement to liability insurance;
(v) Workers' compensation or similar coverage;
(vi) Automobile medical payment insurance;
(vii) Credit-only insurance (for example, mortgage insurance); and
(viii) Coverage for on-site medical clinics.
(ix) Travel insurance, within the meaning of Sec. 144.103 of this
subchapter.
(3) Limited excepted benefits--(i) In general. Limited-scope dental
benefits, limited-scope vision benefits, or long-term care benefits are
excepted if they are provided under a separate policy, certificate, or
contract of insurance, or are otherwise not an integral part of a group
health plan as described in paragraph (b)(3)(ii) of this section. In
addition, benefits provided under a health flexible spending arrangement
(health FSA) are excepted benefits if they satisfy the requirements of
paragraph (b)(3)(v) of this section; benefits provided under an employee
assistance program are excepted benefits if they satisfy the
requirements of paragraph (b)(3)(vi) of this section; benefits provided
under limited wraparound coverage are excepted benefits if they satisfy
the requirements of paragraph (b)(3)(vii) of this section; and benefits
provided under a health reimbursement arrangement or other account-based
group health plan, other than a health FSA, are excepted benefits if
they satisfy the requirements of paragraph (b)(3)(viii) of this section.
(ii) Not an integral part of a group health plan. For purposes of
this paragraph (b)(3), benefits are not an integral part of a group
health plan (whether the benefits are provided through the same plan, a
separate plan, or as the only plan offered to participants) if either
paragraph (b)(3)(ii)(A) or (B) are satisfied.
(A) Participants may decline coverage. For example, a participant
may decline coverage if the participant can opt out of the coverage upon
request, whether or not there is a participant contribution required for
the coverage.
(B) Claims for the benefits are administered under a contract
separate from claims administration for any other benefits under the
plan.
(iii) Limited scope--(A) Dental benefits. Limited scope dental
benefits are benefits substantially all of which are for treatment of
the mouth (including any organ or structure within the mouth).
(B) Vision benefits. Limited scope vision benefits are benefits
substantially all of which are for treatment of the eye.
(iv) Long-term care. Long-term care benefits are benefits that are
either--
(A) Subject to State long-term care insurance laws;
(B) For qualified long-term care services, as defined in section
7702B(c)(1) of the Internal Revenue Code, or provided under a qualified
long-term care insurance contract, as defined in section 7702B(b) of the
Internal Revenue Code; or
(C) Based on cognitive impairment or a loss of functional capacity
that is expected to be chronic.
(v) Health flexible spending arrangements. Benefits provided under a
health
[[Page 90]]
flexible spending arrangement (as defined in section 106(c)(2) of the
Internal Revenue Code) are excepted for a class of participants only if
they satisfy the following two requirements--
(A) Other group health plan coverage, not limited to excepted
benefits, is made available for the year to the class of participants by
reason of their employment; and
(B) The arrangement is structured so that the maximum benefit
payable to any participant in the class for a year cannot exceed two
times the participant's salary reduction election under the arrangement
for the year (or, if greater, cannot exceed $500 plus the amount of the
participant's salary reduction election). For this purpose, any amount
that an employee can elect to receive as taxable income but elects to
apply to the health flexible spending arrangement is considered a salary
reduction election (regardless of whether the amount is characterized as
salary or as a credit under the arrangement).
(vi) Employee assistance programs. Benefits provided under employee
assistance programs are excepted if they satisfy all of the requirements
of this paragraph (b)(3)(vi).
(A) The program does not provide significant benefits in the nature
of medical care. For this purpose, the amount, scope and duration of
covered services are taken into account.
(B) The benefits under the employee assistance program are not
coordinated with benefits under another group health plan, as follows:
(1) Participants in the other group health plan must not be required
to use and exhaust benefits under the employee assistance program
(making the employee assistance program a gatekeeper) before an
individual is eligible for benefits under the other group health plan;
and
(2) Participant eligibility for benefits under the employee
assistance program must not be dependent on participation in another
group health plan.
(C) No employee premiums or contributions are required as a
condition of participation in the employee assistance program.
(D) There is no cost sharing under the employee assistance program.
(vii) Limited wraparound coverage. Limited benefits provided through
a group health plan that wrap around eligible individual health
insurance (or Basic Health Plan coverage described in section 1331 of
the Patient Protection and Affordable Care Act); or that wrap around
coverage under a Multi-State Plan described in section 1334 of the
Patient Protection and Affordable Care Act, collectively referred to as
``limited wraparound coverage,'' are excepted benefits if all of the
following conditions are satisfied. For this purpose, eligible
individual health insurance is individual health insurance coverage that
is not a grandfathered health plan (as described in section 1251 of the
Patient Protection and Affordable Care Act and Sec. 147.140 of this
subchapter), not a transitional individual health insurance plan (as
described in the March 5, 2014 Insurance Standards Bulletin Series--
Extension of Transitional Policy through October 1, 2016), and does not
consist solely of excepted benefits (as defined in paragraph (b) of this
section).
(A) Covers additional benefits. The limited wraparound coverage
provides meaningful benefits beyond coverage of cost sharing under
either the eligible individual health insurance, Basic Health Program
coverage, or Multi-State Plan coverage. The limited wraparound coverage
must not provide benefits only under a coordination-of-benefits
provision and must not consist of an account-based reimbursement
arrangement.
(B) Limited in amount. The annual cost of coverage per employee (and
any covered dependents, as defined in Sec. 144.103 of this subchapter)
under the limited wraparound coverage does not exceed the greater of the
amount determined under either paragraph (b)(3)(vii)(B)(1) or (2) of
this section. Making a determination regarding the annual cost of
coverage per employee must occur on an aggregate basis relying on sound
actuarial principles.
(1) The maximum permitted annual salary reduction contribution
toward health flexible spending arrangements, indexed in the manner
prescribed under section 125(i)(2) of the Internal Revenue
[[Page 91]]
Code. For this purpose, the cost of coverage under the limited
wraparound includes both employer and employee contributions towards
coverage and is determined in the same manner as the applicable premium
is calculated under a COBRA continuation provision.
(2) Fifteen percent of the cost of coverage under the primary plan.
For this purpose, the cost of coverage under the primary plan and under
the limited wraparound coverage includes both employer and employee
contributions towards the coverage and each is determined in the same
manner as the applicable premium is calculated under a COBRA
continuation provision.
(C) Nondiscrimination. All of the conditions of this paragraph
(b)(3)(vii)(C) are satisfied.
(1) No preexisting condition exclusion. The limited wraparound
coverage does not impose any preexisting condition exclusion, consistent
with the requirements of section 2704 of the PHS Act and Sec. 147.108
of this subchapter.
(2) No discrimination based on health status. The limited wraparound
coverage does not discriminate against individuals in eligibility,
benefits, or premiums based on any health factor of an individual (or
any dependent of the individual, as defined in Sec. 144.103 of this
subchapter), consistent with the requirements of section 2705 of the PHS
Act.
(3) No discrimination in favor of highly compensated individuals.
Neither the limited wraparound coverage, nor any other group health plan
coverage offered by the plan sponsor, fails to comply with section 2716
of the PHS Act or fails to be excludible from income for any individual
due to the application of section 105(h) of the Internal Revenue Code
(as applicable).
(D) Plan eligibility requirements. Individuals eligible for the
wraparound coverage are not enrolled in excepted benefit coverage under
paragraph (b)(3)(v) of this section (relating to health FSAs). In
addition, the conditions set forth in either paragraph (b)(3)(vii)(D)(1)
or (2) of this section are met.
(1) Limited wraparound coverage that wraps around eligible
individual insurance for persons who are not full-time employees.
Coverage that wraps around eligible individual health insurance (or that
wraps around Basic Health Plan coverage) must satisfy all of the
conditions of this paragraph (b)(3)(vii)(D)(1).
(i) For each year for which limited wraparound coverage is offered,
the employer that is the sponsor of the plan offering limited wraparound
coverage, or the employer participating in a plan offering limited
wraparound coverage, offers to its full-time employees coverage that is
substantially similar to coverage that the employer would need to offer
to its full-time employees in order not to be subject to a potential
assessable payment under the employer shared responsibility provisions
of section 4980H(a) of the Internal Revenue Code, if such provisions
were applicable; provides minimum value (as defined in section
36B(c)(2)(C)(ii) of the Internal Revenue Code); and is reasonably
expected to be affordable (applying the safe harbor rules for
determining affordability set forth in 26 CFR 54.4980H-5(e)(2)). If a
plan or issuer providing limited wraparound coverage takes reasonable
steps to ensure that employers disclose to the plan or issuer necessary
information regarding their coverage offered and affordability
information, the plan or issuer is permitted to rely on reasonable
representations by employers regarding this information, unless the plan
or issuer has specific knowledge to the contrary. In the event that the
employer that is the sponsor of the plan offering wraparound coverage,
or the employer participating in a plan offering wraparound coverage,
has no full-time employees for any plan year limited wraparound coverage
is offered, the requirement of this paragraph (b)(3)(vii)(D)(1)(i) is
considered satisfied.
(ii) Eligibility for the limited wraparound coverage is limited to
employees who are reasonably determined at the time of enrollment to not
be full-time employees (and their dependents, as defined in Sec.
144.103 of this subchapter), or who are retirees (and their dependents,
as defined in Sec. 144.103 of this subchapter). For this purpose, full-
time employees are employees who are reasonably expected to work at
least an average of 30 hours per week.
[[Page 92]]
(iii) Other group health plan coverage, not limited to excepted
benefits, is offered to the individuals eligible for the limited
wraparound coverage. Only individuals eligible for the other group
health plan coverage are eligible for the limited wraparound coverage.
(2) Limited coverage that wraps around Multi-State Plan coverage.
Coverage that wraps around Multi-State Plan coverage must satisfy all of
the conditions of this paragraph (b)(3)(vii)(D)(2). For this purpose,
the term ``full-time employee'' means a ``full-time employee'' as
defined in 26 CFR 54.4980H-1(a)(21) who is not in a limited non-
assessment period for certain employees (as defined in 26 CFR 54.4980H-
1(a)(26)). Moreover, if a plan or issuer providing limited wraparound
coverage takes reasonable steps to ensure that employers disclose to the
plan or issuer necessary information regarding their coverage offered
and contribution levels for 2013 or 2014 (as applicable), and for any
year in which limited wraparound coverage is offered, the plan or issuer
is permitted to rely on reasonable representations by employers
regarding this information, unless the plan or issuer has specific
knowledge to the contrary. Consistent with the reporting and evaluation
criteria of paragraph (b)(3)(vii)(E) of this section, the Office of
Personnel Management may verify that plans and issuers have reasonable
mechanisms in place to ensure that contributing employers meet these
standards.
(i) The limited wraparound coverage is reviewed and approved by the
Office of Personnel Management, consistent with the reporting and
evaluation criteria of paragraph (b)(3)(vii)(E) of this section, to
provide benefits in conjunction with coverage under a Multi-State Plan
authorized under section 1334 of the Patient Protection and Affordable
Care Act. The Office of Personnel Management may revoke approval if it
determines that continued approval is inconsistent with the reporting
and evaluation criteria of paragraph (b)(3)(vii)(E) of this section.
(ii) The employer offered coverage in the plan year that began in
either 2013 or 2014 that is substantially similar to coverage that the
employer would need to have offered to its full-time employees in order
to not be subject to an assessable payment under the employer shared
responsibility provisions of section 4980H(a) of the Internal Revenue
Code, if such provisions had been applicable. In the event that a plan
that offered coverage in 2013 or 2014 has no full-time employees for any
plan year limited wraparound coverage is offered, the requirement of
this paragraph (b)(3)(vii)(D)(2)(ii) is considered satisfied.
(iii) In the plan year that began in either 2013 or 2014, the
employer offered coverage to a substantial portion of full-time
employees that provided minimum value (as defined in section
36B(c)(2)(C)(ii) of the Internal Revenue Code) and was affordable
(applying the safe harbor rules for determining affordability set forth
in 26 CFR 54.4980H-5(e)(2)). In the event that the plan that offered
coverage in 2013 or 2014 has no full-time employees for any plan year
limited wraparound coverage is offered, the requirement of this
paragraph (b)(3)(vii)(D)(2)(iii) is considered satisfied.
(iv) For the duration of the pilot program, as described in
paragraph (b)(3)(vii)(F) of this section, the employer's annual
aggregate contributions for both primary and limited wraparound coverage
are substantially the same as the employer's total contributions for
coverage offered to full-time employees in 2013 or 2014.
(E) Reporting--(1) Reporting by group health plans and group health
insurance issuers. A self-insured group health plan, or a health
insurance issuer, offering or proposing to offer limited wraparound
coverage in connection with Multi-State Plan coverage pursuant to
paragraph (b)(3)(vii)(D)(2) of this section reports to the Office of
Personnel Management (OPM), in a form and manner specified in guidance,
information OPM reasonably requires to determine whether the plan or
issuer qualifies to offer such coverage or complies with the applicable
requirements of this section.
(2) Reporting by group health plan sponsors. The plan sponsor of a
group health plan offering limited wraparound coverage under paragraph
(b)(3)(vii) of this section, must report to the Department of Health and
[[Page 93]]
Human Services (HHS), in a form and manner specified in guidance,
information HHS reasonably requires.
(F) Pilot program with sunset--The provisions of paragraph
(b)(3)(vii) of this section apply to limited wraparound coverage that is
first offered no earlier than January 1, 2016 and no later than December
31, 2018 and that ends no later than on the later of:
(1) The date that is three years after the date limited wraparound
coverage is first offered; or
(2) The date on which the last collective bargaining agreement
relating to the plan terminates after the date limited wraparound
coverage is first offered (determined without regard to any extension
agreed to after the date limited wraparound coverage is first offered).
(viii) Health reimbursement arrangements (HRAs) and other account-
based group health plans. Benefits provided under an HRA or other
account-based group health plan, other than a health FSA, are excepted
if they satisfy all of the requirements of this paragraph (b)(3)(viii).
See paragraph (b)(3)(v) of this section for the circumstances in which
benefits provided under a health FSA are excepted benefits. For purposes
of this paragraph (b)(3)(viii), the term ``HRA or other account-based
group health plan'' has the same meaning as ``account-based group health
plan'' set forth in Sec. 147.126(d)(6)(i) of this subchapter, except
that the term does not include health FSAs. For ease of reference, an
HRA or other account-based group health plan that satisfies the
requirements of this paragraph (b)(3)(viii) is referred to as an
excepted benefit HRA.
(A) Otherwise not an integral part of the plan. Other group health
plan coverage that is not limited to excepted benefits and that is not
an HRA or other account-based group health plan must be made available
by the same plan sponsor for the plan year to the participant.
(B) Benefits are limited in amount--(1) Limit on annual amounts made
available. The amounts newly made available for each plan year under the
HRA or other account-based group health plan do not exceed $1,800. In
the case of any plan year beginning after December 31, 2020, the dollar
amount in the preceding sentence shall be increased by an amount equal
to such dollar amount multiplied by the cost-of-living adjustment. The
cost of living adjustment is the percentage (if any) by which the C-CPI-
U for the preceding calendar year exceeds the C-CPI-U for calendar year
2019. The term ``C-CPI-U'' means the Chained Consumer Price Index for
All Urban Consumers as published by the Bureau of Labor Statistics of
the Department of Labor. The C-CPI-U for any calendar year is the
average of the C-CPI-U as of the close of the 12-month period ending on
March 31 of such calendar year. The values of the C-CPI-U used for any
calendar year shall be the latest values so published as of the date on
which the Bureau publishes the initial value of the C-CPI-U for the
month of March for the preceding calendar year. Any such increase that
is not a multiple of $50 shall be rounded down to the next lowest
multiple of $50. The Department of the Treasury and the Internal Revenue
Service will publish the adjusted amount for plan years beginning in any
calendar year no later than June 1 of the preceding calendar year.
(2) Carryover amounts. If the terms of the HRA or other account-
based group health plan allow unused amounts to be made available to
participants and dependents in later plan years, such carryover amounts
are disregarded for purposes of determining whether benefits are limited
in amount.
(3) Multiple HRAs or other account-based group health plans. If the
plan sponsor provides more than one HRA or other account-based group
health plan to the participant for the same time period, the amounts
made available under all such plans are aggregated to determine whether
the benefits are limited in amount, except that HRAs or other account-
based group health plans that reimburse only excepted benefits are not
included in determining whether the benefits are limited in amount.
(C) Prohibition on reimbursement of certain health insurance
premiums. The HRA or other account-based group health plan must not
reimburse premiums for individual health insurance coverage, group
health plan coverage
[[Page 94]]
(other than COBRA continuation coverage or other continuation coverage),
or Medicare Part A, B, C, or D, except that the HRA or other account-
based group health plan may reimburse premiums for such coverage that
consists solely of excepted benefits. See also, paragraph
(b)(3)(viii)(F) of this section.
(D) Uniform availability. The HRA or other account-based group
health plan is made available under the same terms to all similarly
situated individuals, as defined in Sec. 146.121(d), regardless of any
health factor (as described in Sec. 146.121(a)).
(E) [Reserved]
(F) Special rule. The HRA or other account-based group health plan
must not reimburse premiums for short-term, limited-duration insurance
(as defined in Sec. 144.103 of this subchapter) if the conditions of
this paragraph (b)(3)(viii)(F) are satisfied.
(1) The HRA or other account-based group health plan is offered by a
small employer (as defined in PHS Act section 2791(e)(4)).
(2) The other group health plan coverage offered by the employer
pursuant to paragraph (b)(3)(viii)(A) of this section is either fully-
insured or partially-insured.
(3) The Secretary makes a finding, in consultation with the
Secretaries of Labor and the Treasury, that the reimbursement of
premiums for short-term, limited-duration insurance by excepted benefit
HRAs has caused significant harm to the small group market in the state
that is the principal place of business of the small employer.
(4) The finding by the Secretary is made after submission of a
written recommendation by the applicable state authority of such state,
in a form and manner specified by HHS. The written recommendation must
include evidence that the reimbursement of premiums for short-term,
limited-duration insurance by excepted benefit HRAs established by
insured or partially-insured small employers in the state has caused
significant harm to the state's small group market, including with
respect to premiums.
(5) The restriction shall be imposed or discontinued by publication
by the Secretary of a notice in the Federal Register and shall apply
only prospectively and with a reasonable time for plan sponsors to
comply.
(4) Noncoordinated benefits--(i) Excepted benefits that are not
coordinated. Coverage for only a specified disease or illness (for
example, cancer-only policies) or hospital indemnity or other fixed
indemnity insurance is excepted only if it meets each of the conditions
specified in paragraph (b)(4)(ii) of this section. To be hospital
indemnity or other fixed indemnity insurance, the insurance must pay a
fixed dollar amount per day (or per other period) of hospitalization or
illness (for example, $100/day) regardless of the amount of expenses
incurred.
(ii) Conditions. Benefits are described in paragraph (b)(4)(i) of
this section only if--
(A) The benefits are provided under a separate policy, certificate,
or contract of insurance;
(B) There is no coordination between the provision of the benefits
and an exclusion of benefits under any group health plan maintained by
the same plan sponsor; and
(C) The benefits are paid with respect to an event without regard to
whether benefits are provided with respect to the event under any group
health plan maintained by the same plan sponsor.
(iii) Example. The rules of this paragraph (b)(4) are illustrated by
the following example:
Example. (i) Facts. An employer sponsors a group health plan that
provides coverage through an insurance policy. The policy provides
benefits only for hospital stays at a fixed percentage of hospital
expenses up to a maximum of $100 a day.
(ii) Conclusion. In this Example, even though the benefits under the
policy satisfy the conditions in paragraph (b)(4)(ii) of this section,
because the policy pays a percentage of expenses incurred rather than a
fixed dollar amount, the benefits under the policy are not excepted
benefits under this paragraph (b)(4). This is the result even if, in
practice, the policy pays the maximum of $100 for every day of
hospitalization.
(5) Supplemental benefits. (i) The following benefits are excepted
only if they are provided under a separate policy, certificate, or
contract of insurance--
(A) Medicare supplemental health insurance (as defined under section
1882(g)(1) of the Social Security Act;
[[Page 95]]
also known as Medigap or MedSupp insurance);
(B) Coverage supplemental to the coverage provided under Chapter 55,
Title 10 of the United States Code (also known as TRICARE supplemental
programs); and
(C) Similar supplemental coverage provided to coverage under a group
health plan. To be similar supplemental coverage, the coverage must be
specifically designed to fill gaps in the primary coverage. The
preceding sentence is satisfied if the coverage is designed to fill gaps
in cost sharing in the primary coverage, such as coinsurance or
deductibles, or the coverage is designed to provide benefits for items
and services not covered by the primary coverage and that are not
essential health benefits (as defined under section 1302(b) of the
Patient Protection and Affordable Care Act) in the State where the
coverage is issued, or the coverage is designed to both fill such gaps
in cost sharing under, and cover such benefits not covered by, the
primary coverage. Similar supplemental coverage does not include
coverage that becomes secondary or supplemental only under a
coordination-of-benefits provision.
(ii) The rules of this paragraph (b)(5) are illustrated by the
following example:
Example. (i) Facts. An employer sponsors a group health plan that
provides coverage for both active employees and retirees. The coverage
for retirees supplements benefits provided by Medicare, but does not
meet the requirements for a supplemental policy under section 1882(g)(1)
of the Social Security Act.
(ii) Conclusion. In this Example, the coverage provided to retirees
does not meet the definition of supplemental excepted benefits under
this paragraph (b)(5) because the coverage is not Medicare supplemental
insurance as defined under section 1882(g)(1) of the Social Security
Act, is not a TRICARE supplemental program, and is not supplemental to
coverage provided under a group health plan.
(c) Treatment of partnerships. For purposes of this part:
(1) Treatment as a group health plan. Any plan, fund, or program
that would not be (but for this paragraph (c)) an employee welfare
benefit plan and that is established or maintained by a partnership, to
the extent that the plan, fund, or program provides medical care
(including items and services paid for as medical care) to present or
former partners in the partnership or to their dependents (as defined
under the terms of the plan, fund, or program), directly or through
insurance, reimbursement, or otherwise, is treated (subject to paragraph
(c)(2) of this section) as an employee welfare benefit plan that is a
group health plan.
(2) Employment relationship. In the case of a group health plan, the
term employer also includes the partnership in relation to any bona fide
partner. In addition, the term employee also includes any bona fide
partner. Whether or not an individual is a bona fide partner is
determined based on all the relevant facts and circumstances, including
whether the individual performs services on behalf of the partnership.
(3) Participants of group health plans. In the case of a group
health plan, the term participant also includes any individual described
in paragraph (c)(3)(i) or (ii) of this section if the individual is, or
may become, eligible to receive a benefit under the plan or the
individual's beneficiaries may be eligible to receive any such benefit.
(i) In connection with a group health plan maintained by a
partnership, the individual is a partner in relation to the partnership.
(ii) In connection with a group health plan maintained by a self-
employed individual (under which one or more employees are
participants), the individual is the self-employed individual.
(d) Determining the average number of employees. [Reserved]
[69 FR 78798, Dec. 30, 2004, as amended at 74 FR 51692, Oct. 7, 2009; 78
FR 65092, Oct. 30, 2013; 79 FR 59136, Oct. 1, 2014; 80 FR 14007, Mar.
18, 2015; 81 FR 75326, Oct. 31, 2016; 84 FR 29024, June 20, 2019]
Subpart E_Provisions Applicable to Only Health Insurance Issuers
Sec. 146.150 Guaranteed availability of coverage for employers in
the small group market.
(a) Issuance of coverage in the small group market. Subject to
paragraphs (c) through (f) of this section, each health
[[Page 96]]
insurance issuer that offers health insurance coverage in the small
group market in a State must--
(1) Offer, to any small employer in the State, all products that are
approved for sale in the small group market and that the issuer is
actively marketing, and must accept any employer that applies for any of
those products; and
(2) Accept for enrollment under the coverage every eligible
individual (as defined in paragraph (b) of this section) who applies for
enrollment during the period in which the individual first becomes
eligible to enroll under the terms of the group health plan, or during a
special enrollment period, and may not impose any restriction on an
eligible individual's being a participant or beneficiary, which is
inconsistent with the nondiscrimination provisions of Sec. 146.121.
(b) Eligible individual defined. For purposes of this section, the
term ``eligible individual'' means an individual who is eligible--
(1) To enroll in group health insurance coverage offered to a group
health plan maintained by a small employer, in accordance with the terms
of the group health plan;
(2) For coverage under the rules of the health insurance issuer
which are uniformly applicable in the State to small employers in the
small group market; and
(3) For coverage in accordance with all applicable State laws
governing the issuer and the small group market.
(c) Special rules for network plans. (1) In the case of a health
insurance issuer that offers health insurance coverage in the small
group market through a network plan, the issuer may--
(i) Limit the employers that may apply for the coverage to those
with eligible individuals who live, work, or reside in the service area
for the network plan; and
(ii) Within the service area of the plan, deny coverage to employers
if the issuer has demonstrated to the applicable State authority (if
required by the State authority) that--
(A) It will not have the capacity to deliver services adequately to
enrollees of any additional groups because of its obligations to
existing group contract holders and enrollees; and
(B) It is applying this paragraph (c)(1) uniformly to all employers
without regard to the claims experience of those employers and their
employees (and their dependents) or any health status-related factor
relating to those employees and dependents.
(2) An issuer that denies health insurance coverage to an employer
in any service area, in accordance with paragraph (c)(1)(ii) of this
section, may not offer coverage in the small group market within the
service area to any employer for a period of 180 days after the date the
coverage is denied. This paragraph (c)(2) does not limit the issuer's
ability to renew coverage already in force or relieve the issuer of the
responsibility to renew that coverage.
(3) Coverage offered within a service area after the 180-day period
specified in paragraph (c)(2) of this section is subject to the
requirements of this section.
(d) Application of financial capacity limits. (1) A health insurance
issuer may deny health insurance coverage in the small group market if
the issuer has demonstrated to the applicable State authority (if
required by the State authority) that it--
(i) Does not have the financial reserves necessary to underwrite
additional coverage; and
(ii) Is applying this paragraph (d)(1) uniformly to all employers in
the small group market in the State consistent with applicable State law
and without regard to the claims experience of those employers and their
employees (and their dependents) or any health status-related factor
relating to those employees and dependents.
(2) An issuer that denies group health insurance coverage to any
small employer in a State under paragraph (d)(1) of this section may not
offer coverage in connection with group health plans in the small group
market in the State before the later of the following dates:
(i) The 181st day after the date the issuer denies coverage.
(ii) The date the issuer demonstrates to the applicable State
authority, if required under applicable State law, that
[[Page 97]]
the issuer has sufficient financial reserves to underwrite additional
coverage.
(3) Paragraph (d)(2) of this section does not limit the issuer's
ability to renew coverage already in force or relieve the issuer of the
responsibility to renew that coverage.
(4) Coverage offered after the 180-day period specified in paragraph
(d)(2) of this section is subject to the requirements of this section.
(5) An applicable State authority may provide for the application of
this paragraph (d) on a service-area-specific basis.
(e) Exception to requirement for failure to meet certain minimum
participation or contribution rules. (1) Paragraph (a) of this section
does not preclude a health insurance issuer from establishing employer
contribution rules or group participation rules for the offering of
health insurance coverage in connection with a group health plan in the
small group market, as allowed under applicable State law.
(2) For purposes of paragraph (e)(1) of this section--
(i) The term ``employer contribution rule'' means a requirement
relating to the minimum level or amount of employer contribution toward
the premium for enrollment of participants and beneficiaries; and
(ii) The term ``group participation rule'' means a requirement
relating to the minimum number of participants or beneficiaries that
must be enrolled in relation to a specified percentage or number of
eligible individuals or employees of an employer.
(f) Exception for coverage offered only to bona fide association
members. Paragraph (a) of this section does not apply to health
insurance coverage offered by a health insurance issuer if that coverage
is made available in the small group market only through one or more
bona fide associations (as defined in 45 CFR 144.103).
(Approved by the Office of Management and Budget under control number
0938-0702)
[62 FR 16958, Apr. 8, 1997; 62 FR 31694, June 10, 1997, as amended at 62
FR 35906, July 2, 1997; 67 FR 48811, July 26, 2002]
Sec. 146.152 Guaranteed renewability of coverage for employers in
the group market.
(a) General rule. Subject to paragraphs (b) through (f) of this
section, a health insurance issuer offering health insurance coverage in
the small or large group market is required to renew or continue in
force the coverage at the option of the plan sponsor or the individual,
as applicable.
(b) Exceptions. An issuer may nonrenew or discontinue group health
insurance coverage offered in the small or large group market based only
on one or more of the following:
(1) Nonpayment of premiums. The plan sponsor has failed to pay
premiums or contributions in accordance with the terms of the health
insurance coverage, including any timeliness requirements.
(2) Fraud. The plan sponsor has performed an act or practice that
constitutes fraud or made an intentional misrepresentation of material
fact in connection with the coverage.
(3) Violation of participation or contribution rules. The plan
sponsor has failed to comply with a material plan provision relating to
any employer contribution or group participation rules permitted under
Sec. 146.150(e) in the case of the small group market or under
applicable State law in the case of the large group market.
(4) Termination of product. The issuer is ceasing to offer coverage
in the market in accordance with paragraph (c) or (d) of this section
and applicable State law.
(5) Enrollees' movement outside service area. For network plans,
there is no longer any enrollee under the group health plan who lives,
resides, or works in the service area of the issuer (or in the area for
which the issuer is authorized to do business); and in the case of the
small group market, the issuer applies the same criteria it would apply
in denying enrollment in the plan under Sec. 146.150(c); provided the
issuer provides notice in accordance with the requirements of paragraph
(c)(1) of this section.
(6) Association membership ceases. For coverage made available in
the small or large group market only through one or more bona fide
associations, if
[[Page 98]]
the employer's membership in the association ceases, but only if the
coverage is terminated uniformly without regard to any health status-
related factor relating to any covered individual.
(c) Discontinuing a particular product. In any case in which an
issuer decides to discontinue offering a particular product offered in
the small or large group market, that product may be discontinued by the
issuer in accordance with applicable State law in the particular market
only if--
(1) The issuer provides notice in writing, in a form and manner
specified by the Secretary, to each plan sponsor provided that
particular product in that market (and to all participants and
beneficiaries covered under such coverage) of the discontinuation at
least 90 days before the date the coverage will be discontinued;
(2) The issuer offers to each plan sponsor provided that particular
product the option, on a guaranteed issue basis, to purchase all (or, in
the case of the large group market, any) other health insurance coverage
currently being offered by the issuer to a group health plan in that
market; and
(3) In exercising the option to discontinue that product and in
offering the option of coverage under paragraph (c)(2) of this section,
the issuer acts uniformly without regard to the claims experience of
those sponsors or any health status-related factor relating to any
participants or beneficiaries covered or new participants or
beneficiaries who may become eligible for such coverage.
(d) Discontinuing all coverage. An issuer may elect to discontinue
offering all health insurance coverage in the small or large group
market or both markets in a State in accordance with applicable State
law only if--
(1) The issuer provides notice in writing to the applicable State
authority and to each plan sponsor (and all participants and
beneficiaries covered under the coverage) of the discontinuation at
least 180 days prior to the date the coverage will be discontinued; and
(2) All health insurance policies issued or delivered for issuance
in the State in the market (or markets) are discontinued and not
renewed.
(3) For purposes of this paragraph (d), subject to applicable State
law, an issuer will not be considered to have discontinued offering all
health insurance coverage in a market in a State if--
(i) The issuer (in this paragraph referred to as the initial issuer)
or, if the issuer is a member of a controlled group, any other issuer
that is a member of such controlled group, offers and makes available in
the applicable market in the State at least one product that is
considered in accordance with Sec. 144.103 of this subchapter to be the
same product as a product the initial issuer had been offering in such
market in such State; or
(ii) The issuer--
(A) Offers and makes available at least one product (in paragraphs
(d)(3)(ii)(A) through (C) of this section referred to as the new
product) in the applicable market in the State, even if such product is
not considered in accordance with Sec. 144.103 of this subchapter to be
the same product as a product the issuer had been offering in the
applicable market in the State (in paragraphs (d)(3)(ii)(A) through (C)
of this section referred to as the discontinued product);
(B) Subjects such new product or products to the applicable process
and requirements established under part 154 of this title as if such
process and requirements applied with respect to that product or
products, to the extent such process and requirements are otherwise
applicable to coverage of the same type and in the same market; and
(C) Reasonably identifies the discontinued product or products that
correspond to the new product or products for purposes of the process
and requirements applied pursuant to paragraph (d)(3)(ii)(B) of this
section.
(4) For purposes of this section, the term controlled group means a
group of two or more persons that is treated as a single employer under
sections 52(a), 52(b), 414(m), or 414(o) of the Internal Revenue Code of
1986, as amended, or a narrower group as may be provided by applicable
State law.
(e) Prohibition on market reentry. An issuer who elects to
discontinue offering all health insurance coverage in a
[[Page 99]]
market (or markets) in a State as described in paragraph (d) of this
section may not issue coverage in the market (or markets) and State
involved during the 5-year period beginning on the date of
discontinuation of the last coverage not renewed.
(f) Exception for uniform modification of coverage. (1) Only at the
time of coverage renewal may issuers modify the health insurance
coverage for a product offered to a group health plan in the following--
(i) Large group market; and
(ii) Small group market if, for coverage available in this market
(other than only through one or more bona fide associations), the
modification is consistent with State law and is effective uniformly
among group health plans with that product.
(2) For purposes of paragraph (f)(1)(ii) of this section,
modifications made uniformly and solely pursuant to applicable Federal
or State requirements are considered a uniform modification of coverage
if:
(i) The modification is made within a reasonable time period after
the imposition or modification of the Federal or State requirement; and
(ii) The modification is directly related to the imposition or
modification of the Federal or State requirement.
(3) For purposes of paragraph (f)(1)(ii) of this section, other
types of modifications made uniformly are considered a uniform
modification of coverage if the health insurance coverage for the
product in the small group market meets all of the following criteria:
(i) The product is offered by the same health insurance issuer
(within the meaning of section 2791(b)(2) of the PHS Act), or if the
issuer is a member of a controlled group (as described in paragraph
(d)(4) of this section), any other health insurance issuer that is a
member of such controlled group;
(ii) The product is offered as the same product network type (for
example, health maintenance organization, preferred provider
organization, exclusive provider organization, point of service, or
indemnity);
(iii) The product continues to cover at least a majority of the same
service area;
(iv) Within the product, each plan has the same cost-sharing
structure as before the modification, except for any variation in cost
sharing solely related to changes in cost and utilization of medical
care, or to maintain the same metal tier level described in sections
1302(d) and (e) of the Affordable Care Act; and
(v) The product provides the same covered benefits, except for any
changes in benefits that cumulatively impact the rate for any plan
within the product within an allowable variation of 2 percentage points (not including changes pursuant to
applicable Federal or State requirements).
(4) A State may only broaden the standards in paragraphs (f)(3)(iii)
and (iv) of this section.
(g) Application to coverage offered only through associations. In
the case of health insurance coverage that is made available by a health
insurance issuer in the small or large group market to employers only
through one or more associations, the reference to ``plan sponsor'' is
deemed, with respect to coverage provided to an employer member of the
association, to include a reference to such employer.
(h) Notice of renewal of coverage. If an issuer in the small group
market is renewing grandfathered coverage as described in paragraph (a)
of this section, or uniformly modifying grandfathered coverage as
described in paragraph (f) of this section, the issuer must provide to
each plan sponsor written notice of the renewal at least 60 calendar
days before the date the coverage will be renewed in a form and manner
specified by the Secretary.
(Approved by the Office of Management and Budget under control number
0938-0702)
[62 FR 16958, Apr. 8, 1997; 62 FR 31670, June 10, 1997, as amended at 62
FR 35906, July 2, 1997; 79 FR 30335, May 27, 2014; 79 FR 53004, Sept. 5,
2014; 81 FR 94172, Dec. 22, 2016; 84 FR 17561, Apr. 25, 2019]
Sec. 146.160 Disclosure of information.
(a) General rule. In connection with the offering of any health
insurance coverage to a small employer, a health insurance issuer is
required to--
(1) Make a reasonable disclosure to the employer, as part of its
solicitation and sales materials, of the availability
[[Page 100]]
of information described in paragraph (b) of this section; and
(2) Upon request of the employer, provide that information to the
employer.
(b) Information described. Subject to paragraph (d) of this section,
information that must be provided under paragraph (a)(2) of this section
is information concerning the following:
(1) Provisions of coverage relating to the following:
(i) The issuer's right to change premium rates and the factors that
may affect changes in premium rates.
(ii) Renewability of coverage.
(iii) Any preexisting condition exclusion, including use of the
alternative method of counting creditable coverage.
(iv) Any affiliation periods applied by HMOs.
(v) The geographic areas served by HMOs.
(2) The benefits and premiums available under all health insurance
coverage for which the employer is qualified, under applicable State
law. See Sec. 146.150(b) through (f) for allowable limitations on
product availability.
(c) Form of information. The information must be described in
language that is understandable by the average small employer, with a
level of detail that is sufficient to reasonably inform small employers
of their rights and obligations under the health insurance coverage.
This requirement is satisfied if the issuer provides each of the
following with respect to each product offered:
(1) An outline of coverage. For purposes of this section, outline of
coverage means a description of benefits in summary form.
(2) The rate or rating schedule that applies to the product (with
and without the preexisting condition exclusion or affiliation period).
(3) The minimum employer contribution and group participation rules
that apply to any particular type of coverage.
(4) In the case of a network plan, a map or listing of counties
served.
(5) Any other information required by the State.
(d) Exception. An issuer is not required to disclose any information
that is proprietary and trade secret information under applicable law.
(Approved by the Office of Management and Budget under control number
0938-0702)
[62 FR 16958, Apr. 8, 1997, as amended at 62 FR 35906, July 2, 1997]
Subpart F_Exclusion of Plans and Enforcement
Sec. 146.180 Treatment of non-Federal governmental plans.
(a) Opt-out election for self-funded non-Federal governmental
plans--(1) Requirements subject to exemption. The PHS Act requirements
described in this paragraph are the following:
(i) Limitations on preexisting condition exclusion periods in
accordance with section 2701 of the PHS Act as codified before enactment
of the Affordable Care Act.
(ii) Special enrollment periods for individuals and dependents
described under section 2704(f) of the PHS Act.
(iii) Prohibitions against discriminating against individual
participants and beneficiaries based on health status under section 2705
of the PHS Act, except that the sponsor of a self-funded non-Federal
governmental plan cannot elect to exempt its plan from requirements
under section 2705(a)(6) and 2705(c) through (f) that prohibit
discrimination with respect to genetic information.
(iv) Standards relating to benefits for mothers and newborns under
section 2725 of the PHS Act.
(v) Parity in mental health and substance use disorder benefits
under section 2726 of the PHS Act.
(vi) Required coverage for reconstructive surgery following
mastectomies under section 2727 of the PHS Act.
(vii) Coverage of dependent students on a medically necessary leave
of absence under section 2728 of the PHS Act.
(2) General rule. For plan years beginning on or after September 23,
2010, a sponsor of a non-Federal governmental plan may elect to exempt
its plan, to the extent the plan is not provided through health
insurance coverage (that is, it is self-funded), from one or more of the
requirements described in
[[Page 101]]
paragraphs (a)(1)(iv) through (vii) of this section.
(3) Special rule for certain collectively bargained plans. In the
case of a plan that is maintained pursuant to a collective bargaining
agreement that was ratified before March 23, 2010, and whose sponsor
made an election to exempt its plan from any of the requirements
described in paragraphs (a)(1)(i) through (iii) of this section, the
provisions of paragraph (a)(2) of this section apply for plan years
beginning after the expiration of the term of the agreement.
(4) Examples--(i) Example 1. A non-Federal governmental employer has
elected to exempt its self-funded group health plan from all of the
requirements described in paragraph (a)(1) of this section. The plan
year commences September 1 of each year. The plan is not subject to the
provisions of paragraph (a)(2) of this section until the plan year that
commences on September 1, 2011. Accordingly, for that plan year and any
subsequent plan years, the plan sponsor may elect to exempt its plan
only from the requirements described in paragraphs (a)(1)(iv) through
(vii) of this section.
(ii) Example 2. A non-Federal governmental employer has elected to
exempt its collectively bargained self-funded plan from all of the
requirements described in paragraph (a)(1) of this section. The
collective bargaining agreement applies to five plan years, October 1,
2009 through September 30, 2014. For the plan year that begins on
October 1, 2014, the plan sponsor is no longer permitted to elect to
exempt its plan from the requirements described in paragraph (a)(1) of
this section. Accordingly, for that plan year and any subsequent plan
years, the plan sponsor may elect to exempt its plan only from the
requirements described in paragraphs (a)(1)(iv) through (vii) of this
section.
(5) Limitations. (i) An election under this section cannot
circumvent a requirement of the PHS Act to the extent the requirement
applied to the plan before the effective date of the election.
(A) Example 1. A plan is subject to requirements of section 2727 of
the PHS Act, under which a plan that covers medical and surgical
benefits with respect to a mastectomy must cover reconstructive surgery
and certain other services following a mastectomy. An enrollee who has
had a mastectomy receives reconstructive surgery on August 24. Claims
with respect to the surgery are submitted to and processed by the plan
in September. The group health plan commences a new plan year each
September 1. Effective September 1, the plan sponsor elects to exempt
its plan from section 2727 of the PHS Act. The plan cannot, on the basis
of its exemption election, decline to pay for the claims incurred on
August 24.
(B) [Reserved]
(ii) If a group health plan is co-sponsored by two or more
employers, then only plan enrollees of the non-Federal governmental
employer(s) with a valid election under this section are affected by the
election.
(6) Stop-loss or excess risk coverage. For purposes of this
section--
(i) Subject to paragraph (a)(6)(ii) of this section, the purchase of
stop-loss or excess risk coverage by a self-funded non-Federal
governmental plan does not prevent an election under this section.
(ii) Regardless of whether coverage offered by an issuer is
designated as ``stop-loss'' coverage or ``excess risk'' coverage, if it
is regulated as group health insurance under an applicable State law,
then for purposes of this section, a non-Federal governmental plan that
purchases the coverage is considered to be fully insured. In that event,
a plan may not be exempted under this section from the requirements
described in paragraph (a)(1) of this section.
(7) Construction. Nothing in this part should be construed as
imposing collective bargaining obligations on any party to the
collective bargaining process.
(b) Form and manner of election--(1) Election requirements. The
election must meet the following requirements:
(i) Be made in an electronic format in a form and manner as
described by the Secretary in guidance.
(ii) Be made in conformance with all of the plan sponsor's rules,
including any public hearing requirements.
[[Page 102]]
(iii) Specify the beginning and ending dates of the period to which
the election is to apply. This period can be either of the following
periods:
(A) A single specified plan year, as defined in Sec. 144.103 of
this subchapter.
(B) The ``term of the agreement,'' as specified in paragraph (b)(2)
of this section, in the case of a plan governed by collective
bargaining.
(iv) Specify the name of the plan and the name and address of the
plan administrator, and include the name and telephone number of a
person CMS may contact regarding the election.
(v) State that the plan does not include health insurance coverage,
or identify which portion of the plan is not funded through health
insurance coverage.
(vi) Specify each requirement described in paragraph (a)(1) of this
section from which the plan sponsor elects to exempt the plan.
(vii) Certify that the person signing the election document,
including (if applicable) a third party plan administrator, is legally
authorized to do so by the plan sponsor.
(viii) Include, as an attachment, a copy of the notice described in
paragraph (f) of this section.
(ix) In the case of a plan sponsor submitting one opt-out election
for all group health plans subject to the same collective bargaining
agreement, include a list of plans subject to the agreement.
(x) In the case of a plan sponsor submitting opt-out elections for
more than one group health plan that is not subject to a collective
bargaining agreement, submit a separate election document for each such
plan.
(2) ``Term of the agreement'' defined. Except as provided in
paragraphs (b)(2)(i) and (ii) of this section, for purposes of this
section ``term of the agreement'' means all group health plan years
governed by a single collective bargaining agreement.
(i) In the case of a group health plan for which the last plan year
governed by a prior collective bargaining agreement expires during the
bargaining process for a new agreement, the term of the prior agreement
includes all plan years governed by the agreement plus the period of
time that precedes the latest of the following dates, as applicable,
with respect to the new agreement:
(A) The date of an agreement between the governmental employer and
union officials.
(B) The date of ratification of an agreement between the
governmental employer and the union.
(C) The date impasse resolution, arbitration or other closure of the
collective bargaining process is finalized when agreement is not
reached.
(ii) In the case of a group health plan governed by a collective
bargaining agreement for which closure is not reached before the last
plan year under the immediately preceding agreement expires, the term of
the new agreement includes all plan years governed by the agreement
excluding the period that precedes the latest applicable date specified
in paragraph (b)(2)(i) of this section.
(3) Construction--(i) Dispute resolution. Nothing in paragraph
(b)(1)(ii) of this section should be construed to mean that CMS
arbitrates disputes between plan sponsors, participants, beneficiaries,
or their representatives regarding whether an election complies with all
of a plan sponsor's rules.
(ii) Future elections not preempted. If a plan must comply with one
or more requirements described in paragraph (a)(1) of this section for a
given plan year or period of plan coverage, nothing in this section
should be construed as preventing a plan sponsor from submitting an
election in accordance with this section for a subsequent plan year or
period of plan coverage.
(c) Filing a timely election--(1) Plan not governed by collective
bargaining. Subject to paragraph (c)(4) of this section, if a plan is
not governed by a collective bargaining agreement, a plan sponsor or
entity acting on behalf of a plan sponsor must file an election with CMS
before the first day of the plan year.
(2) Plan governed by a collective bargaining agreement. Subject to
paragraph (d)(4) of this section, if a plan is governed by a collective
bargaining agreement that was ratified before March 23, 2010, a plan
sponsor or entity acting on behalf of a plan sponsor must file an
election with CMS before the first day
[[Page 103]]
of the first plan year governed by a collective bargaining agreement, or
by the 45th day after the latest applicable date specified in paragraph
(b)(2)(i) of this section, if the 45th day falls on or after the first
day of the plan year.
(3) Special rule for timely filing. If the latest filing date
specified under paragraphs (c)(1) or (c)(2) of this section falls on a
Saturday, Sunday, or a State or Federal holiday, CMS accepts filings
submitted on the next business day.
(4) Filing extension based on good cause. CMS may extend the
deadlines specified in paragraphs (c)(1) and (2) of this section for
good cause if the plan substantially complies with the requirements of
paragraph (e) of this section.
(5) Failure to file a timely election. Absent an extension under
paragraph (c)(4) of this section, a plan sponsor's failure to file a
timely election under paragraph (c)(1) or (2) of this section makes the
plan subject to all requirements of this part for the entire plan year
to which the election would have applied, or, in the case of a plan
governed by a collective bargaining agreement, for any plan years under
the agreement for which the election is not timely filed.
(d) Additional information required--(1) Written notification. If an
election is timely filed, but CMS determines that the election document
(or the notice to plan enrollees) does not meet all of the requirements
of this section, CMS may notify the plan sponsor, or other entity that
filed the election, that it must submit any additional information that
CMS has determined is necessary to meet those requirements. The
additional information must be filed with CMS by the later of the
following dates:
(i) The last day of the plan year.
(ii) The 45th day after the date of CMS's written notification
requesting additional information.
(2) Timely response. For submissions via hard copy via U.S. Mail,
CMS uses the postmark on the envelope in which the additional
information is submitted to determine that the information is timely
filed as specified under paragraph (d)(1) of this section. If the latest
filing date falls on a Saturday, Sunday, or a State or Federal holiday,
CMS accepts a postmark on the next business day.
(3) Failure to respond timely. CMS may invalidate an election if the
plan sponsor, or other entity that filed the election, fails to timely
submit the additional information as specified under paragraph (d)(1) of
this section.
(e) Notice to enrollees--(1) Mandatory notification. (i) A plan that
makes the election described in this section must notify each affected
enrollee of the election, and explain the consequences of the election.
For purposes of paragraph (e) of this section, if the dependent(s) of a
participant reside(s) with the participant, a plan need only provide
notice to the participant.
(ii) The notice must be in writing and, except as provided in
paragraph (e)(2) of this section with regard to initial notices, must be
provided to each enrollee at the time of enrollment under the plan, and
on an annual basis no later than the last day of each plan year (as
defined in Sec. 144.103 of this subchapter) for which there is an
election.
(iii) A plan may meet the notification requirements of paragraph (e)
of this section by prominently printing the notice in a summary plan
description, or equivalent description, that it provides to each
enrollee at the time of enrollment, and annually. Also, when a plan
provides a notice to an enrollee at the time of enrollment, that notice
may serve as the initial annual notice for that enrollee.
(2) Initial notices. (i) If a plan is not governed by a collective
bargaining agreement, with regard to the initial plan year to which an
election under this section applies, the plan must provide the initial
annual notice of the election to all enrollees before the first day of
that plan year, and notice at the time of enrollment to all individuals
who enroll during that plan year.
(ii) In the case of a collectively bargained plan, with regard to
the initial plan year to which an election under this section applies,
the plan must provide the initial annual notice of the election to all
enrollees before the first day of the plan year, or within 30 days after
the latest applicable date specified in paragraph (b)(2)(i) of this
section if the 30th day falls on or after the first day of the plan
year. Also, the
[[Page 104]]
plan must provide a notice at the time of enrollment to individuals
who--
(A) Enroll on or after the first day of the plan year, when closure
of the collective bargaining process is reached before the plan year
begins; or
(B) Enroll on or after the latest applicable date specified in
paragraph (b)(2)(i) of this section if that date falls on or after the
first day of the plan year.
(3) Notice content. The notice must include at least the following
information:
(i) The specific requirements described in paragraph (a)(1) of this
section from which the plan sponsor is electing to exempt the plan, and
a statement that, in general, Federal law imposes these requirements
upon group health plans.
(ii) A statement that Federal law gives the plan sponsor of a self-
funded non-Federal governmental plan the right to exempt the plan in
whole, or in part, from the listed requirements, and that the plan
sponsor has elected to do so.
(iii) A statement identifying which parts of the plan are subject to
the election.
(iv) A statement identifying which of the listed requirements, if
any, apply under the terms of the plan, or as required by State law,
without regard to an exemption under this section.
(f) Subsequent elections--(1) Election renewal. A plan sponsor may
renew an election under this section through subsequent elections. The
timeliness standards described in paragraph (c) of this section apply to
election renewals under paragraph (f) of this section.
(2) Form and manner of renewal. Except for the requirement to
forward to CMS a copy of the notice to enrollees under paragraph
(b)(1)(viii) of this section, the plan sponsor must comply with the
election requirements of paragraph (b)(1) of this section. In lieu of
providing a copy of the notice under paragraph (b)(1)(viii) of this
section, the plan sponsor may include a statement that the notice has
been, or will be, provided to enrollees as specified under paragraph (e)
of this section.
(3) Election renewal includes provisions from which plan not
previously exempted. If an election renewal includes a requirement
described in paragraph (a)(1) of this section from which the plan
sponsor did not elect to exempt the plan for the preceding plan year,
the advance notification requirements of paragraph (e)(2) of this
section apply with respect to the additional requirement(s) of paragraph
(a) of this section from which the plan sponsor is electing to exempt
the plan.
(4) Special rules regarding renewal of an election under a
collective bargaining agreement. (i) If protracted negotiations with
respect to a new agreement result in an extension of the term of the
prior agreement (as provided under paragraph (b)(2)(i) of this section)
under which an election under this section was in effect, the plan must
comply with the enrollee notification requirements of paragraph (e)(1)
of this section, and, following closure of the collective bargaining
process, must file an election renewal with CMS as provided under
paragraph (c)(2) of this section.
(ii) If a single plan applies to more than one bargaining unit, and
the plan is governed by collective bargaining agreements of varying
lengths, paragraph (c)(2) of this section, with respect to an election
renewal, applies to the plan as governed by the agreement that results
in the earliest filing date.
(g) Requirements not subject to exemption--(1) Genetic information.
Without regard to an election under this section that exempts a non-
Federal governmental plan from any or all of the provisions of
Sec. Sec. 146.111 and 146.121, the exemption election must not be
construed to exempt the plan from any provisions of this part that
pertain to genetic information.
(2) Enforcement. CMS enforces these requirements as provided under
paragraph (j) of this section.
(h) Effect of failure to comply with certification and notification
requirements--(1) Substantial failure--(i) General rule. Except as
provided in paragraph (h)(1)(iii) of this section, a substantial failure
to comply with paragraph (e) or (g)(1) of this section results in the
invalidation of an election under this section with respect to all plan
enrollees for the entire plan year. That is, the plan is subject to all
requirements of this part for the entire plan year to
[[Page 105]]
which the election otherwise would have applied.
(ii) Determination of substantial failure. CMS determines whether a
plan has substantially failed to comply with a requirement of paragraph
(e) or (g)(1) of this section based on all relevant facts and
circumstances, including previous record of compliance, gravity of the
violation and whether a plan corrects the failure, as warranted, within
30 days of learning of the violation. However, in general, a plan's
failure to provide a notice of the fact and consequences of an election
under this section to an individual at the time of enrollment, or on an
annual basis before a given plan year expires, constitutes a substantial
failure.
(iii) Exceptions--(A) Multiple employers. If the plan is sponsored
by multiple employers, and only certain employers substantially fail to
comply with the requirements of paragraph (e) or (g)(1) of this section,
then the election is invalidated with respect to those employers only,
and not with respect to other employers that complied with those
requirements, unless the plan chooses to cancel its election entirely.
(B) Limited failure to provide notice. If a substantial failure to
notify enrollees of the fact and consequences of an election is limited
to certain individuals, the election under this section is valid only
if, for the plan year with respect to which the failure has occurred,
the plan agrees not to apply the election with respect to the
individuals who were not notified and so informs those individuals in
writing.
(2) Examples--(i) Example 1. A self-funded, non-Federal group health
plan is co-sponsored by 10 school districts. Nine of the school
districts have fully complied with the requirements of paragraph (e) of
this section, including providing notice to new employees at the time of
their enrollment in the plan, regarding the group health plan's
exemption under this section from requirements of this part. One school
district, which hired 10 new teachers during the summer for the upcoming
school year, neglected to notify three of the new hires about the group
health plan's exemption election at the time they enrolled in the plan.
The school district has substantially failed to comply with a
requirement of paragraph (e) of this section with respect to these
individuals. The school district learned of the oversight six weeks into
the school year, and promptly (within 30 days of learning of the
oversight) provided notice to the three teachers regarding the plan's
exemption under this section and that the exemption does not apply to
them, or their dependents, during the plan year of their enrollment
because of the plan's failure to timely notify them of its exemption.
The plan complies with the requirements of this part for these
individuals for the plan year of their enrollment. CMS would not require
the plan to come into compliance with the requirements of this part for
other enrollees.
(ii) Example 2. Two non-Federal governmental employers cosponsor a
self-funded group health plan. One employer substantially fails to
comply with the requirements of paragraph (e) of this section. While the
plan may limit the invalidation of the election to enrollees of the plan
sponsor that is responsible for the substantial failure, the plan
sponsors determine that administering the plan in that manner would be
too burdensome. Accordingly, in this example, the plan sponsors choose
to cancel the election entirely. Both plan sponsors come into compliance
with the requirements of this part with respect to all enrollees for the
plan year for which the substantial failure has occurred.
(i) Election invalidated. If CMS finds cause to invalidate an
election under this section, the following rules apply:
(1) CMS notifies the plan sponsor (and the plan administrator if
other than the plan sponsor and the administrator's address is known to
CMS) in writing that CMS has made a preliminary determination that an
election is invalid, and States the basis for that determination.
(2) CMS's notice informs the plan sponsor that it has 45 days after
the date of CMS's notice to explain in writing why it believes its
election is valid. The plan sponsor should provide applicable statutory
and regulatory citations to support its position.
[[Page 106]]
(3) CMS verifies that the plan sponsor's response is timely filed as
provided under paragraph (c)(3) of this section. CMS will not consider a
response that is not timely filed.
(4) If CMS's preliminary determination that an election is invalid
remains unchanged after CMS considers the plan sponsor's timely response
(or in the event that the plan sponsor fails to respond timely), CMS
provides written notice to the plan sponsor (and the plan administrator
if other than the plan sponsor and the administrator's address is known
to CMS) of CMS's final determination that the election is invalid. Also,
CMS informs the plan sponsor that, within 45 days of the date of the
notice of final determination, the plan, subject to paragraph
(i)(1)(iii) of this section, must comply with all requirements of this
part for the specified period for which CMS has determined the election
to be invalid.
(j) Enforcement. To the extent that an election under this section
has not been filed or a non-Federal governmental plan otherwise is
subject to one or more requirements of this part, CMS enforces those
requirements under part 150 of this subchapter. This may include
imposing a civil money penalty against the plan or plan sponsor, as
determined under subpart C of part 150.
(k) Construction. Nothing in this section should be construed to
prevent a State from taking the following actions:
(1) Establishing, and enforcing compliance with, the requirements of
State law (as defined in Sec. 146.143(d)(1)), including requirements
that parallel provisions of title XXVII of the PHS Act, that apply to
non-Federal governmental plans or sponsors.
(2) Prohibiting a sponsor of a non-Federal governmental plan within
the State from making an election under this section.
[79 FR 30336, May 27, 2014]
PART 147_HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS--Table of Contents
Sec.
147.100 Basis and scope.
147.102 Fair health insurance premiums.
147.103 State reporting.
147.104 Guaranteed availability of coverage.
147.106 Guaranteed renewability of coverage.
147.108 Prohibition of preexisting condition exclusions.
147.110 Prohibiting discrimination against participants, beneficiaries,
and individuals based on a health factor.
147.116 Prohibition on waiting periods that exceed 90 days.
147.120 Eligibility of children until at least age 26.
147.126 No lifetime or annual limits.
147.128 Rules regarding rescissions.
147.130 Coverage of preventive health services.
147.131 Accommodations in connection with coverage of certain preventive
health services.
147.132 Religious exemptions in connection with coverage of certain
preventive health services.
147.133 Moral exemptions in connection with coverage of certain
preventive health services.
147.136 Internal claims and appeals and external review processes.
147.138 Patient protections.
147.140 Preservation of right to maintain existing coverage.
147.145 Student health insurance coverage.
147.150 Coverage of essential health benefits.
147.160 Parity in mental health and substance use disorder benefits.
147.200 Summary of benefits and coverage and uniform glossary.
Authority: 42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-92,
as amended.
Source: 75 FR 27138, May 13, 2010, unless otherwise noted.
Sec. 147.100 Basis and scope.
Part 147 of this subchapter implements the requirements of the
Patient Protection and Affordable Care Act that apply to group health
plans and health insurance issuers in the Group and Individual markets.
Sec. 147.102 Fair health insurance premiums.
(a) In general. With respect to the premium rate charged by a health
insurance issuer in accordance with Sec. 156.80 of this subchapter for
health insurance coverage offered in the individual or small group
market--
[[Page 107]]
(1) The rate may vary with respect to the particular plan or
coverage involved only by determining the following:
(i) Whether the plan or coverage covers an individual or family.
(ii) Rating area, as established in accordance with paragraph (b) of
this section. For purposes of this paragraph (a), rating area is
determined--
(A) In the individual market, using the primary policyholder's
address.
(B) In the small group market, using the group policyholder's
principal business address. For purposes of this paragraph
(a)(1)(ii)(B), principal business address means the principal business
address registered with the State or, if a principal business address is
not registered with the State, or is registered solely for purposes of
service of process and is not a substantial worksite for the
policyholder's business, the business address within the State where the
greatest number of employees of such policyholder works. If, for a
network plan, the group policyholder's principal business address is not
within the service area of such plan, and the policyholder has employees
who live, reside, or work within the service area, the principal
business address for purposes of the network plan is the business
address within the plan's service area where the greatest number of
employees work as of the beginning of the plan year. If there is no such
business address, the rating area for purposes of the network plan is
the rating area that reflects where the greatest number of employees
within the plan's service area live or reside as of the beginning of the
plan year.
(iii) Age, except that the rate may not vary by more than 3:1 for
like individuals of different age who are age 21 and older and that the
variation in rate must be actuarially justified for individuals under
age 21, consistent with the uniform age rating curve under paragraph (e)
of this section. For purposes of identifying the appropriate age
adjustment under this paragraph and the age band under paragraph (d) of
this section applicable to a specific enrollee, the enrollee's age as of
the date of policy issuance or renewal must be used.
(iv) Subject to section 2705 of the Public Health Service Act and
its implementing regulations (related to prohibiting discrimination
based on health status and programs of health promotion or disease
prevention) as applicable, tobacco use, except that such rate may not
vary by more than 1.5:1 and may only be applied with respect to
individuals who may legally use tobacco under federal and state law. For
purposes of this section, tobacco use means use of tobacco on average
four or more times per week within no longer than the past 6 months.
This includes all tobacco products, except that tobacco use does not
include religious or ceremonial use of tobacco. Further, tobacco use
must be defined in terms of when a tobacco product was last used.
(2) The rate must not vary with respect to the particular plan or
coverage involved by any other factor not described in paragraph (a)(1)
of this section.
(b) Rating area. (1) A state may establish one or more rating areas
within that state, as provided in paragraphs (b)(3) and (b)(4) of this
section, for purposes of applying this section and the requirements of
title XXVII the Public Health Service Act and title I of the Patient
Protection and Affordable Care Act.
(2) If a state does not establish rating areas as provided in
paragraphs (b)(3) and (b)(4) of this section or provide information on
such rating areas in accordance with Sec. 147.103, or CMS determines in
accordance with paragraph (b)(5) of this section that a state's rating
areas under paragraph (b)(4) of this section are not adequate, the
default will be one rating area for each metropolitan statistical area
in the state and one rating area comprising all non-metropolitan
statistical areas in the state, as defined by the Office of Management
and Budget.
(3) A state's rating areas must be based on the following geographic
boundaries: Counties, three-digit zip codes, or metropolitan statistical
areas and non-metropolitan statistical areas, as defined by the Office
of Management and Budget, and will be presumed adequate if either of the
following conditions are satisfied:
[[Page 108]]
(i) The state established by law, rule, regulation, bulletin, or
other executive action uniform rating areas for the entire state as of
January 1, 2013.
(ii) The state establishes by law, rule, regulation, bulletin, or
other executive action after January 1, 2013 uniform rating areas for
the entire state that are no greater in number than the number of
metropolitan statistical areas in the state plus one.
(4) Notwithstanding paragraph (b)(3) of this section, a state may
propose to CMS for approval a number of rating areas that is greater
than the number described in paragraph (b)(3)(ii) of this section,
provided such rating areas are based on the geographic boundaries
specified in paragraph (b)(3) of this section.
(5) In determining whether the rating areas established by each
state under paragraph (b)(4) of this section are adequate, CMS will
consider whether the state's rating areas are actuarially justified, are
not unfairly discriminatory, reflect significant differences in health
care unit costs, lead to stability in rates over time, apply uniformly
to all issuers in a market, and are based on the geographic boundaries
of counties, three-digit zip codes, or metropolitan statistical areas
and non-metropolitan statistical areas.
(c) Application of variations based on age or tobacco use. With
respect to family coverage under health insurance coverage, the rating
variations permitted under paragraphs (a)(1)(iii) and (a)(1)(iv) of this
section must be applied based on the portion of the premium attributable
to each family member covered under the coverage.
(1) Per-member rating. The total premium for family coverage must be
determined by summing the premiums for each individual family member.
With respect to family members under the age of 21, the premiums for no
more than the three oldest covered children must be taken into account
in determining the total family premium.
(2) Family tiers under community rating. If a state does not permit
any rating variation for the factors described in paragraphs (a)(1)(iii)
and (a)(1)(iv) of this section, the state may require that premiums for
family coverage be determined by using uniform family tiers and the
corresponding multipliers established by the state. If a state does not
establish uniform family tiers and the corresponding multipliers, the
per-member-rating methodology under paragraph (c)(1) of this section
will apply in that state.
(3) Application to small group market--(i) In the case of the small
group market, the total premium charged to a group health plan is
determined by summing the premiums of covered participants and
beneficiaries in accordance with paragraph (c)(1) or (2) of this
section, as applicable.
(ii) Subject to paragraph (c)(3)(iii) of this section, nothing in
this section prevents a state from requiring issuers to offer to a group
health plan, or an issuer from voluntarily offering to a group health
plan, premiums that are based on average enrollee premium amounts,
provided that the total group premium established at the time of
applicable enrollment at the beginning of the plan year is the same
total amount derived in accordance with paragraph (c)(1) or (2) of this
section, as applicable.
(iii) Effective for plan years beginning on or after January 1,
2015, an issuer that, in connection with a group health plan in the
small group market, offers premiums that are based on average enrollee
premium amounts under paragraph (c)(3)(ii) of this section must--
(A) Ensure an average enrollee premium amount calculated based on
applicable enrollment of participants and beneficiaries at the beginning
of the plan year does not vary during the plan year.
(B) Unless a state establishes and CMS approves an alternate rating
methodology, calculate an average enrollee premium amount for covered
individuals age 21 and older, and calculate an average enrollee premium
amount for covered individuals under age 21. The premium for a given
family composition is determined by summing the average enrollee premium
amount applicable to each family member covered under the plan, taking
into account no more than three covered children under age 21.
[[Page 109]]
(C) Pursuant to applicable state law, ensure that the average
enrollee premium amount calculated for any individual covered under the
plan does not include any rating variation for tobacco use permitted
under paragraph (a)(1)(iv) of this section. The rating variation for
tobacco use permitted under paragraph (a)(1)(iv) of this section is
determined based on the premium rate that would be applied on a per-
member basis with respect to an individual who uses tobacco and then
included in the premium charged for that individual.
(D) To the extent permitted by applicable State law and, in the case
of coverage offered through a SHOP, as permitted by the SHOP, apply this
paragraph (c)(3)(iii) uniformly among group health plans enrolling in
that product, giving those group health plans the option to pay premiums
based on average enrollee premium amounts.
(d) Uniform age bands. The following uniform age bands apply for
rating purposes under paragraph (a)(1)(iii) of this section:
(1) Child age bands. (i) For plan years or policy years beginning
before January 1, 2018, a single age band for individuals age 0 through
20.
(ii) For plan years or policy years beginning on or after January 1,
2018:
(A) A single age band for individuals age 0 through 14.
(B) One-year age bands for individuals age 15 through 20.
(2) Adult age bands. One-year age bands for individuals age 21
through 63.
(3) Older adult age bands. A single age band for individuals age 64
and older.
(e) Uniform age rating curves. Each State may establish a uniform
age rating curve in the individual or small group market, or both
markets, for rating purposes under paragraph (a)(1)(iii) of this
section. If a State does not establish a uniform age rating curve or
provide information on such age curve in accordance with Sec. 147.103,
a default uniform age rating curve specified in guidance by the
Secretary to reflect market patterns in the individual and small group
markets will apply in that State that takes into account the rating
variation permitted for age under State law.
(f) Special rule for large group market. If a state permits health
insurance issuers that offer coverage in the large group market in the
state to offer such coverage through an Exchange starting in 2017, the
provisions of this section applicable to coverage in the small group
market apply to all coverage offered in the large group market in the
state.
(g) Applicability date. The provisions of this section apply for
plan years (in the individual market, policy years) beginning on or
after January 1, 2014.
(h) Grandfathered health plans. This section does not apply to
grandfathered health plans in accordance with Sec. 147.140.
[78 FR 13436, Feb. 27, 2013, as amended at 78 FR 54133, Aug. 30, 2013;
79 FR 13834, Mar. 11, 2014; 81 FR 12334, Mar. 8, 2016; 81 FR 94173, Dec.
22, 2016; 83 FR 17058, Apr. 17, 2018]
Sec. 147.103 State reporting.
(a) 2014. If a state has adopted or intends to adopt for the 2014
plan or policy year a standard or requirement described in this
paragraph, the state must submit to CMS information about such standard
or requirement in a form and manner specified in guidance by the
Secretary no later than March 29, 2013. A state standard or requirement
is described in this paragraph if it includes any of the following:
(1) A ratio narrower than 3:1 in connection with establishing rates
for individuals who are age 21 and older, pursuant to Sec.
147.102(a)(1)(iii).
(2) A ratio narrower than 1.5:1 in connection with establishing
rates for individuals who use tobacco legally, pursuant to Sec.
147.102(a)(1)(iv).
(3) Geographic rating areas, pursuant to Sec. 147.102(b).
(4) In states that do not permit rating based on age or tobacco use,
uniform family tiers and corresponding multipliers, pursuant to Sec.
147.102(c)(2).
(5) A requirement that that issuers in the small group market offer
to a group premiums that are based on average enrollee amounts, pursuant
to paragraph Sec. 147.102(c)(3).
(6) A uniform age rating curve, pursuant to Sec. 147.102(e).
(b) Updates. If a state adopts a standard or requirement described
in paragraph (a) of this section for any plan or
[[Page 110]]
policy year beginning after the 2014 plan or policy year (or updates a
standard or requirement that applies for the 2014 plan or policy year),
the state must submit to CMS information about such standard in a form
and manner specified in guidance by the Secretary.
(c) Applicability date. The provisions of this section apply on
March 29, 2013.
[78 FR 13437, Feb. 27, 2013]
Sec. 147.104 Guaranteed availability of coverage.
(a) Guaranteed availability of coverage in the individual and group
market. Subject to paragraphs (b) through (d) of this section, a health
insurance issuer that offers health insurance coverage in the
individual, small group, or large group market in a State must offer to
any individual or employer in the State all products that are approved
for sale in the applicable market, and must accept any individual or
employer that applies for any of those products.
(b) Enrollment periods. A health insurance issuer may restrict
enrollment in health insurance coverage to open or special enrollment
periods.
(1) Open enrollment periods--(i) Group market. (A) Subject to
paragraph (b)(1)(i)(B) of this section, a health insurance issuer in the
group market must allow an employer to purchase health insurance
coverage for a group health plan at any point during the year.
(B) In the case of a group health plan in the small group market
that cannot comply with employer contribution or group participation
rules for the offering of health insurance coverage, as allowed under
applicable State law, and in the case of a QHP offered in the SHOP, as
permitted by Sec. 156.285(e) or Sec. 156.286(e) of this subchapter, a
health insurance issuer may restrict the availability of coverage to an
annual enrollment period that begins November 15 and extends through
December 15 of each calendar year.
(C) With respect to coverage in the small group market, and in the
large group market if such coverage is offered through a SHOP in a
State, for a group enrollment received on the first through the
fifteenth day of any month, the coverage effective date must be no later
than the first day of the following month. For a group enrollment
received on the 16th through last day of any month, the coverage
effective date must be no later than the first day of the second
following month. In either such case, a small employer may instead opt
for a later effective date within a quarter for which small group market
rates are available.
(ii) Individual market. A health insurance issuer in the individual
market must allow an individual to purchase health insurance coverage
during the initial and annual open enrollment periods described in Sec.
155.410(b) and (e) of this subchapter. Coverage must become effective
consistent with the dates described in Sec. 155.410(c) and (f) of this
subchapter.
(2) Limited open enrollment periods. (i) A health insurance issuer
in the individual market must provide a limited open enrollment period
for the triggering events described in Sec. 155.420(d) of this
subchapter, excluding, with respect to coverage offered outside of an
Exchange, the following:
(A) Section 155.420(d)(3) of this subchapter (concerning Exchange
eligibility standards);
(B) Section 155.420(d)(6) of this subchapter (to the extent
concerning eligibility for advance payments of the premium tax credit or
change in eligibility for cost-sharing reductions other than
ineligibility);
(C) Section 155.420(d)(8) of this subchapter (concerning Indians);
(D) Section 155.420(d)(9) of this subchapter (concerning exceptional
circumstances);
(E) Section 155.420(d)(12) of this subchapter (concerning plan and
benefit display errors); and
(F) Section 155.420(d)(13) of this subchapter (concerning
eligibility for insurance affordability programs or enrollment in the
Exchange).
(ii) In applying this paragraph (b)(2), a reference in Sec. 155.420
(other than in Sec. 155.420(a)(5)) of this subchapter to a ``QHP'' is
deemed to refer to a plan, a reference to ``the Exchange'' is deemed to
refer to the applicable State authority, and a reference to a
``qualified individual'' is deemed to refer to an individual in the
individual market.
[[Page 111]]
(iii) Notwithstanding anything to the contrary in Sec. 155.420(d)
of this subchapter, Sec. 155.420(a)(4) of this subchapter does not
apply to limited open enrollment periods under paragraph (b)(2) of this
section.
(3) Special enrollment periods. A health insurance issuer in the
group and individual market must establish special enrollment periods
for qualifying events as defined under section 603 of the Employee
Retirement Income Security Act of 1974, as amended. These special
enrollment periods are in addition to any other special enrollment
periods that are required under federal and state law.
(4) Length of enrollment periods. (i) In the group market, enrollees
must be provided 30 calendar days after the date of the qualifying event
described in paragraph (b)(3) of this section to elect coverage.
(ii) In the individual market, enrollees must be provided 60
calendar days after the date of an event described in paragraph (b)(2)
and (3) of this section to elect coverage, as well as 60 calendar days
before certain triggering events as provided for in Sec. 155.420(c)(2)
of this subchapter.
(5) Effective date of coverage for limited open and special
enrollment periods. With respect to an election made under paragraph
(b)(2) or (b)(3) of this section, coverage must become effective
consistent with the dates described in Sec. 155.420(b) of this
subchapter.
(c) Special rules for network plans. (1) In the case of a health
insurance issuer that offers health insurance coverage in the group and
individual market through a network plan, the issuer may do the
following:
(i) Limit the employers that may apply for the coverage to those
with eligible individuals in the group market who live, work, or reside
in the service area for the network plan, and limit the individuals who
may apply for the coverage in the individual market to those who live or
reside in the service area for the network plan.
(ii) Within the service area of the plan, deny coverage to employers
and individuals if the issuer has demonstrated to the applicable state
authority (if required by the state authority) the following:
(A) It will not have the capacity to deliver services adequately to
enrollees of any additional groups or any additional individuals because
of its obligations to existing group contract holders and enrollees.
(B) It is applying paragraph (c)(1) of this section uniformly to all
employers and individuals without regard to the claims experience of
those individuals, employers and their employees (and their dependents)
or any health status-related factor relating to such individuals,
employees, and dependents.
(2) An issuer that denies health insurance coverage to an individual
or an employer in any service area, in accordance with paragraph
(c)(1)(ii) of this section, may not offer coverage in the individual,
small group, or large group market, as applicable, for a period of 180
calendar days after the date the coverage is denied. This paragraph
(c)(2) does not limit the issuer's ability to renew coverage already in
force or relieve the issuer of the responsibility to renew that
coverage.
(3) Coverage offered within a service area after the 180-day period
specified in paragraph (c)(2) of this section is subject to the
requirements of this section.
(d) Application of financial capacity limits. (1) A health insurance
issuer may deny health insurance coverage in the group or individual
market if the issuer has demonstrated to the applicable state authority
(if required by the state authority) the following:
(i) It does not have the financial reserves necessary to offer
additional coverage.
(ii) It is applying this paragraph (d)(1) uniformly to all employers
or individual in the large group, small group, or individual market, as
applicable, in the State consistent with applicable State law and
without regard to the claims experience of those individuals, employers
and their employees (and their dependents) or any health status-related
factor relating to such individuals, employees, and dependents.
(2) An issuer that denies health insurance coverage to any employer
or individual in a state under paragraph (d)(1) of this section may not
offer coverage in the large group, small group,
[[Page 112]]
or individual market, as applicable, in the State before the later of
either of the following dates:
(i) The 181st day after the date the issuer denies coverage.
(ii) The date the issuer demonstrates to the applicable state
authority, if required under applicable state law, that the issuer has
sufficient financial reserves to underwrite additional coverage.
(3) Paragraph (d)(2) of this section does not limit the issuer's
ability to renew coverage already in force or relieve the issuer of the
responsibility to renew that coverage.
(4) Coverage offered after the 180-day period specified in paragraph
(d)(2) of this section is subject to the requirements of this section.
(5) An applicable state authority may provide for the application of
this paragraph (d) on a service-area-specific basis.
(e) Marketing. A health insurance issuer and its officials,
employees, agents and representatives must comply with any applicable
state laws and regulations regarding marketing by health insurance
issuers and cannot employ marketing practices or benefit designs that
will have the effect of discouraging the enrollment of individuals with
significant health needs in health insurance coverage or discriminate
based on an individual's race, color, national origin, present or
predicted disability, age, sex, gender identity, sexual orientation,
expected length of life, degree of medical dependency, quality of life,
or other health conditions.
(f) Calendar year plans. An issuer that offers coverage in the
individual market, or in a merged market in a State that has elected to
merge the individual market and small group market risk pools in
accordance with section 1312(c)(3) of the Affordable Care Act, must
ensure that such coverage is offered on a calendar year basis with a
policy year ending on December 31 of each calendar year.
(g) Applicability date. The provisions of this section apply for
plan years (in the individual market, policy years) beginning on or
after January 1, 2014.
(h) Grandfathered health plans. This section does not apply to
grandfathered health plans in accordance with Sec. 147.140.
(i) Construction. Nothing in this section should be construed to
require an issuer to offer coverage otherwise prohibited under
applicable Federal law.
[78 FR 13437, Feb. 27, 2013, as amended at 78 FR 65092, Oct. 30, 2013;
78 FR 76217, Dec. 17, 2013; 79 FR 30339, May 27, 2014; 79 FR 59138, Oct.
1, 2014; 80 FR 10862, Feb. 27, 2015; 81 FR 94173, Dec. 22, 2016; 82 FR
18381, Apr. 18, 2017; 83 FR 17058, Apr. 17, 2018]
Sec. 147.106 Guaranteed renewability of coverage.
(a) General rule. Subject to paragraphs (b) through (e) of this
section, a health insurance issuer offering health insurance coverage in
the individual, small group, or large group market is required to renew
or continue in force the coverage at the option of the plan sponsor or
the individual, as applicable.
(b) Exceptions. An issuer may nonrenew or discontinue health
insurance coverage offered in the group or individual market based only
on one or more of the following:
(1) Nonpayment of premiums. The plan sponsor or individual, as
applicable, has failed to pay premiums or contributions in accordance
with the terms of the health insurance coverage, including any
timeliness requirements.
(2) Fraud. The plan sponsor or individual, as applicable, has
performed an act or practice that constitutes fraud or made an
intentional misrepresentation of material fact in connection with the
coverage.
(3) Violation of participation or contribution rules. In the case of
group health insurance coverage, the plan sponsor has failed to comply
with a material plan provision relating to employer contribution or
group participation rules, pursuant to applicable state law. For
purposes of this paragraph the following apply:
(i) The term ``employer contribution rule'' means a requirement
relating to the minimum level or amount of employer contribution toward
the premium for enrollment of participants and beneficiaries.
(ii) The term ``group participation rule'' means a requirement
relating to the minimum number of participants
[[Page 113]]
or beneficiaries that must be enrolled in relation to a specified
percentage or number of eligible individuals or employees of an
employer.
(4) Termination of product. The issuer is ceasing to offer coverage
in the market in accordance with paragraph (c) or (d) of this section
and applicable State law.
(5) Enrollees' movement outside service area. For network plans,
there is no longer any enrollee under the plan who lives, resides, or
works in the service area of the issuer (or in the area for which the
issuer is authorized to do business); and in the case of the small group
market, the issuer applies the same criteria it would apply in denying
enrollment in the plan under Sec. 147.104(c)(1)(i); provided the issuer
provides notice in accordance with the requirements of paragraph (c)(1)
of this section.
(6) Association membership ceases. For coverage made available in
the small or large group market only through one or more bona fide
associations, if the employer's membership in the bona fide association
ceases, but only if the coverage is terminated uniformly without regard
to any health status-related factor relating to any covered individual.
(c) Discontinuing a particular product. In any case in which an
issuer decides to discontinue offering a particular product offered in
the group or individual market, that product may be discontinued by the
issuer in accordance with applicable state law in the applicable market
only if the following occurs:
(1) The issuer provides notice in writing, in a form and manner
specified by the Secretary, to each plan sponsor or individual, as
applicable, provided that particular product in that market (and to all
participants and beneficiaries covered under such coverage) of the
discontinuation at least 90 calendar days before the date the coverage
will be discontinued.
(2) The issuer offers to each plan sponsor or individual, as
applicable, provided that particular product the option, on a guaranteed
availability basis, to purchase all (or, in the case of the large group
market, any) other health insurance coverage currently being offered by
the issuer to a group health plan or individual health insurance
coverage in that market.
(3) In exercising the option to discontinue that product and in
offering the option of coverage under paragraph (c)(2) of this section,
the issuer acts uniformly without regard to the claims experience of
those sponsors or individuals, as applicable, or any health status-
related factor relating to any participants or beneficiaries covered or
new participants or beneficiaries who may become eligible for such
coverage.
(d) Discontinuing all coverage. (1) An issuer may elect to
discontinue offering all health insurance coverage in the individual,
small group, or large group market, or all markets, in a State in
accordance with applicable State law only if--
(i) The issuer provides notice in writing to the applicable state
authority and to each plan sponsor or individual, as applicable, (and
all participants and beneficiaries covered under the coverage) of the
discontinuation at least 180 calendar days prior to the date the
coverage will be discontinued; and
(ii) All health insurance policies issued or delivered for issuance
in the state in the applicable market (or markets) are discontinued and
not renewed.
(2) An issuer that elects to discontinue offering all health
insurance coverage in a market (or markets) in a state as described in
this paragraph (d) may not issue coverage in the applicable market (or
markets) and state involved during the 5-year period beginning on the
date of discontinuation of the last coverage not renewed.
(3) For purposes of this paragraph (d), subject to applicable State
law, an issuer will not be considered to have discontinued offering all
health insurance coverage in a market in a State if--
(i) The issuer (in this paragraph referred to as the initial issuer)
or, if the issuer is a member of a controlled group, any other issuer
that is a member of such controlled group, offers and makes available in
the applicable market in the State at least one product that is
considered in accordance with Sec. 144.103 of this subchapter to be the
same product as a product the initial
[[Page 114]]
issuer had been offering in such market in such State; or
(ii) The issuer--
(A) Offers and makes available at least one product (in paragraphs
(d)(3)(ii)(A) through (C) of this section referred to as the new
product) in the applicable market in the State, even if such product is
not considered in accordance with Sec. 144.103 of this subchapter to be
the same product as a product the issuer had been offering in the
applicable market in the State (in paragraphs (d)(3)(ii)(A) through (C)
of this section referred to as the discontinued product);
(B) Subjects such new product or products to the applicable process
and requirements established under part 154 of this title as if such
process and requirements applied with respect to that product or
products, to the extent such process and requirements are otherwise
applicable to coverage of the same type and in the same market; and
(C) Reasonably identifies the discontinued product or products that
correspond to the new product or products for purposes of the process
and requirements applied pursuant to paragraph (d)(3)(ii)(B) of this
section.
(4) For purposes of this section, the term controlled group means a
group of two or more persons that is treated as a single employer under
sections 52(a), 52(b), 414(m), or 414(o) of the Internal Revenue Code of
1986, as amended, or a narrower group as may be provided by applicable
State law.
(e) Exception for uniform modification of coverage. (1) Only at the
time of coverage renewal may issuers modify the health insurance
coverage for a product offered to a group health plan or an individual,
as applicable, in the following:
(i) Large group market.
(ii) Small group market if, for coverage available in this market
(other than only through one or more bona fide associations), the
modification is consistent with State law and is effective uniformly
among group health plans with that product.
(iii) Individual market if the modification is consistent with State
law and is effective uniformly for all individuals with that product.
(2) For purposes of paragraphs (e)(1)(ii) and (iii) of this section,
modifications made uniformly and solely pursuant to applicable Federal
or State requirements are considered a uniform modification of coverage
if:
(i) The modification is made within a reasonable time period after
the imposition or modification of the Federal or State requirement; and
(ii) The modification is directly related to the imposition or
modification of the Federal or State requirement.
(3) Other types of modifications made uniformly are considered a
uniform modification of coverage if the health insurance coverage for
the product in the individual or small group market meets all of the
following criteria:
(i) The product is offered by the same health insurance issuer
(within the meaning of section 2791(b)(2) of the PHS Act), or if the
issuer is a member of a controlled group (as described in paragraph
(d)(4) of this section), any other health insurance issuer that is a
member of such controlled group);
(ii) The product is offered as the same product network type (for
example, health maintenance organization, preferred provider
organization, exclusive provider organization, point of service, or
indemnity);
(iii) The product continues to cover at least a majority of the same
service area;
(iv) Within the product, each plan has the same cost-sharing
structure as before the modification, except for any variation in cost
sharing solely related to changes in cost and utilization of medical
care, or to maintain the same metal tier level described in sections
1302(d) and (e) of the Affordable Care Act; and
(v) The product provides the same covered benefits, except for any
changes in benefits that cumulatively impact the plan-adjusted index
rate (as described in Sec. 156.80(d)(2) of this subchapter) for any
plan within the product within an allowable variation of 2 percentage points (not including changes pursuant to
applicable Federal or State requirements).
(4) A State may only broaden the standards in paragraphs (e)(3)(iii)
and (iv) of this section.
[[Page 115]]
(f) Notice of renewal of coverage. (1) If an issuer in the
individual market is renewing non-grandfathered coverage as described in
paragraph (a) of this section, or uniformly modifying non-grandfathered
coverage as described in paragraph (e) of this section, the issuer must
provide to each individual written notice of the renewal before the date
of the first day of the next annual open enrollment period in a form and
manner specified by the Secretary.
(2) If an issuer in the small group market is renewing coverage as
described in paragraph (a) of this section, or uniformly modifying
coverage as described in paragraph (e) of this section, the issuer must
provide to each plan sponsor written notice of the renewal at least 60
calendar days before the date of the coverage will be renewed in a form
and manner specified by the Secretary.
(g) Notification of change of ownership. If an issuer of a QHP, a
plan otherwise subject to risk corridors, a risk adjustment covered
plan, or a reinsurance-eligible plan experiences a change of ownership,
as recognized by the State in which the plan is offered, the issuer must
notify HHS in a manner specified by HHS, by the latest of--
(1) The date the transaction is entered into; or
(2) The 30th day prior to the effective date of the transaction.
(h) Construction. (1) Nothing in this section should be construed to
require an issuer to renew or continue in force coverage for which
continued eligibility would otherwise be prohibited under applicable
Federal law.
(2) Medicare entitlement or enrollment is not a basis to nonrenew an
individual's health insurance coverage in the individual market under
the same policy or contract of insurance.
(i) Application to coverage offered only through associations. In
the case of health insurance coverage that is made available by a health
insurance issuer in the small or large group market to employers only
through one or more associations, the reference to ``plan sponsor'' is
deemed, with respect to coverage provided to an employer member of the
association, to include a reference to the employer.
(j) Applicability date. The provisions of this section apply for
plan years (in the individual market, policy years) beginning on or
after January 1, 2014.
(k) Grandfathered health plans. This section does not apply to
grandfathered health plans in accordance with Sec. 147.140.
[78 FR 13437, Feb. 27, 2013, as amended at 78 FR 65092, Oct. 30, 2013;
79 FR 30339, May 27, 2014; 79 FR 42985, July 24, 2014; 79 FR 53004,
Sept. 5, 2014; 80 FR 10862, Feb. 27, 2015; 81 FR 94173, Dec. 22, 2016;
84 FR 17561, Apr. 25, 2019]
Sec. 147.108 Prohibition of preexisting condition exclusions.
(a) In general. A group health plan, or a health insurance issuer
offering group or individual health insurance coverage, may not impose
any preexisting condition exclusion (as defined in Sec. 144.103 of this
subchapter).
(b) Examples. The rules of paragraph (a) of this section are
illustrated by the following examples (for additional examples
illustrating the definition of a preexisting condition exclusion, see
Sec. 146.111(a)(2) of this subchapter):
Example 1. (i) Facts. A group health plan provides benefits solely
through an insurance policy offered by Issuer P. At the expiration of
the policy, the plan switches coverage to a policy offered by Issuer N.
N's policy excludes benefits for oral surgery required as a result of a
traumatic injury if the injury occurred before the effective date of
coverage under the policy.
(ii) Conclusion. In this Example 1, the exclusion of benefits for
oral surgery required as a result of a traumatic injury if the injury
occurred before the effective date of coverage is a preexisting
condition exclusion because it operates to exclude benefits for a
condition based on the fact that the condition was present before the
effective date of coverage under the policy. Therefore, such an
exclusion is prohibited.
Example 2. (i) Facts. Individual C applies for individual health
insurance coverage with Issuer M. M denies C's application for coverage
because a pre-enrollment physical revealed that C has type 2 diabetes.
(ii) Conclusion. See Example 2 in Sec. 146.111(a)(2) of this
subchapter for a conclusion that M's denial of C's application for
coverage is a preexisting condition exclusion because a denial of an
application for coverage based on the fact that a condition was present
before the date of denial is an exclusion of benefits based on a
preexisting condition.
[[Page 116]]
(c) Allowable screenings to determine eligibility for alternative
coverage in the individual market--(1) In general. (i) A health
insurance issuer offering individual health insurance coverage may
screen applicants for eligibility for alternative coverage options
before offering a child-only policy if--
(A) The practice is permitted under State law;
(B) The screening applies to all child-only applicants, regardless
of health status; and
(C) The alternative coverage options include options for which
healthy children would potentially be eligible (e.g., Children's Health
Insurance Program (CHIP) or group health insurance).
(ii) An issuer must provide such coverage to an applicant effective
on the first date that a child-only policy would have been effective had
the applicant not been screened for an alternative coverage option, as
provided by State law. A State may impose a reasonable time limit by
when an issuer would have to enroll a child regardless of pending
applications for other coverage.
(2) Restrictions. A health insurance issuer offering individual
health insurance coverage may screen applicants for eligibility for
alternative coverage provided that:
(i) The screening process does not by its operation significantly
delay enrollment or artificially engineer eligibility of a child for a
program targeted to individuals with a pre-existing condition;
(ii) The screening process is not applied to offers of dependent
coverage for children; or
(ii) The issuer does not consider whether an applicant is eligible
for, or is provided medical assistance under, Medicaid in making
enrollment decisions, as provided under 42 U.S.C. 1396a (25)(G).
(d) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years (in the individual market, policy years) beginning on or after
January 1, 2017. Until the applicability date for this regulation, plans
and issuers are required to continue to comply with the corresponding
sections of 45 CFR parts 144, 146 and 147, contained in the 45 CFR,
parts 1 to 199, edition revised as of October 1, 2015.
[80 FR 72274, Nov. 18, 2015]
Editorial Note: At 80 FR 72284, Nov. 18, 2015, Sec. 147.108 was
revised to include two paragraphs (c)(2)(ii).
Sec. 147.110 Prohibiting discrimination against participants,
beneficiaries, and individuals based on a health factor.
(a) In general. A group health plan and a health insurance issuer
offering group or individual health insurance coverage must comply with
all the requirements under 45 CFR 146.121 applicable to a group health
plan and a health insurance issuer offering group health insurance
coverage. Accordingly, with respect to an issuer offering health
insurance coverage in the individual market, the issuer is subject to
the requirements of Sec. 146.121 to the same extent as an issuer
offering group health insurance coverage, except the exception contained
in Sec. 146.121(f) (concerning nondiscriminatory wellness programs)
does not apply.
(b) Applicability date. This section is applicable to group health
plans and health insurance issuers offering group or individual health
insurance coverage for plan years (in the individual market, policy
years) beginning on or after January 1, 2014. See Sec. 147.140, which
provides that the rules of this section do not apply to grandfathered
health plans that are individual health insurance coverage.
[78 FR 33192, June 3, 2013]
Sec. 147.116 Prohibition on waiting periods that exceed 90 days.
(a) General rule. A group health plan, and a health insurance issuer
offering group health insurance coverage, must not apply any waiting
period that exceeds 90 days, in accordance with the rules of this
section. If, under the terms of a plan, an individual can elect coverage
that would begin on a date that is not later than the end of the 90-day
waiting period, this paragraph (a) is considered satisfied. Accordingly,
in that case, a plan or issuer will not be considered to have violated
this paragraph (a) solely because individuals
[[Page 117]]
take, or are permitted to take, additional time (beyond the end of the
90-day waiting period) to elect coverage.
(b) Waiting period defined. For purposes of this part, a waiting
period is the period that must pass before coverage for an individual
who is otherwise eligible to enroll under the terms of a group health
plan can become effective. If an individual enrolls as a late enrollee
(as defined under Sec. 144.103 of this subchapter) or special enrollee
(as described in Sec. 146.117 of this subchapter), any period before
such late or special enrollment is not a waiting period.
(c) Relation to a plan's eligibility criteria--(1) In general.
Except as provided in paragraphs (c)(2) and (c)(3) of this section,
being otherwise eligible to enroll under the terms of a group health
plan means having met the plan's substantive eligibility conditions
(such as, for example, being in an eligible job classification,
achieving job-related licensure requirements specified in the plan's
terms, or satisfying a reasonable and bona fide employment-based
orientation period). Moreover, except as provided in paragraphs (c)(2)
and (c)(3) of this section, nothing in this section requires a plan
sponsor to offer coverage to any particular individual or class of
individuals (including, for example, part-time employees). Instead, this
section prohibits requiring otherwise eligible individuals to wait more
than 90 days before coverage is effective. See also section 4980H of the
Code and its implementing regulations for an applicable large employer's
shared responsibility to provide health coverage to full-time employees.
(2) Eligibility conditions based solely on the lapse of time.
Eligibility conditions that are based solely on the lapse of a time
period are permissible for no more than 90 days.
(3) Other conditions for eligibility. Other conditions for
eligibility under the terms of a group health plan are generally
permissible under PHS Act section 2708, unless the condition is designed
to avoid compliance with the 90-day waiting period limitation,
determined in accordance with the rules of this paragraph (c)(3).
(i) Application to variable-hour employees in cases in which a
specified number of hours of service per period is a plan eligibility
condition. If a group health plan conditions eligibility on an employee
regularly having a specified number of hours of service per period (or
working full-time), and it cannot be determined that a newly-hired
employee is reasonably expected to regularly work that number of hours
per period (or work full-time), the plan may take a reasonable period of
time, not to exceed 12 months and beginning on any date between the
employee's start date and the first day of the first calendar month
following the employee's start date, to determine whether the employee
meets the plan's eligibility condition. Except in cases in which a
waiting period that exceeds 90 days is imposed in addition to a
measurement period, the time period for determining whether such an
employee meets the plan's eligibility condition will not be considered
to be designed to avoid compliance with the 90-day waiting period
limitation if coverage is made effective no later than 13 months from
the employee's start date plus, if the employee's start date is not the
first day of a calendar month, the time remaining until the first day of
the next calendar month.
(ii) Cumulative service requirements. If a group health plan or
health insurance issuer conditions eligibility on an employee's having
completed a number of cumulative hours of service, the eligibility
condition is not considered to be designed to avoid compliance with the
90-day waiting period limitation if the cumulative hours-of-service
requirement does not exceed 1,200 hours.
(iii) Limitation on orientation periods. To ensure that an
orientation period is not used as a subterfuge for the passage of time,
or designed to avoid compliance with the 90-day waiting period
limitation, an orientation period is permitted only if it does not
exceed one month. For this purpose, one month is determined by adding
one calendar month and subtracting one calendar day, measured from an
employee's start date in a position that is otherwise eligible for
coverage. For example, if an employee's start date in an otherwise
eligible position is May 3, the last permitted day of the orientation
period is June 2. Similarly, if an employee's
[[Page 118]]
start date in an otherwise eligible position is October 1, the last
permitted day of the orientation period is October 31. If there is not a
corresponding date in the next calendar month upon adding a calendar
month, the last permitted day of the orientation period is the last day
of the next calendar month. For example, if the employee's start date is
January 30, the last permitted day of the orientation period is February
28 (or February 29 in a leap year). Similarly, if the employee's start
date is August 31, the last permitted day of the orientation period is
September 30.
(d) Application to rehires. A plan or issuer may treat an employee
whose employment has terminated and who then is rehired as newly
eligible upon rehire and, therefore, required to meet the plan's
eligibility criteria and waiting period anew, if reasonable under the
circumstances (for example, the termination and rehire cannot be a
subterfuge to avoid compliance with the 90-day waiting period
limitation).
(e) Counting days. Under this section, all calendar days are counted
beginning on the enrollment date (as defined in Sec. 144.103),
including weekends and holidays. A plan or issuer that imposes a 90-day
waiting period may, for administrative convenience, choose to permit
coverage to become effective earlier than the 91st day if the 91st day
is a weekend or holiday.
(f) Examples. The rules of this section are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan provides that full-time
employees are eligible for coverage under the plan. Employee A begins
employment as a full-time employee on January 19.
(ii) Conclusion. In this Example 1, any waiting period for A would
begin on January 19 and may not exceed 90 days. Coverage under the plan
must become effective no later than April 19 (assuming February lasts 28
days).
Example 2. (i) Facts. A group health plan provides that only
employees with job title M are eligible for coverage under the plan.
Employee B begins employment with job title L on January 30.
(ii) Conclusion. In this Example 2, B is not eligible for coverage
under the plan, and the period while B is working with job title L and
therefore not in an eligible class of employees, is not part of a
waiting period under this section.
Example 3. (i) Facts. Same facts as in Example 2, except that B
transfers to a new position with job title M on April 11.
(ii) Conclusion. In this Example 3, B becomes eligible for coverage
on April 11, but for the waiting period. Any waiting period for B begins
on April 11 and may not exceed 90 days; therefore, coverage under the
plan must become effective no later than July 10.
Example 4. (i) Facts. A group health plan provides that only
employees who have completed specified training and achieved specified
certifications are eligible for coverage under the plan. Employee C is
hired on May 3 and meets the plan's eligibility criteria on September
22.
(ii) Conclusion. In this Example 4, C becomes eligible for coverage
on September 22, but for the waiting period. Any waiting period for C
would begin on September 22 and may not exceed 90 days; therefore,
coverage under the plan must become effective no later than December 21.
Example 5. (i) Facts. A group health plan provides that employees
are eligible for coverage after one year of service.
(ii) Conclusion. In this Example 5, the plan's eligibility condition
is based solely on the lapse of time and, therefore, is impermissible
under paragraph (c)(2) of this section because it exceeds 90 days.
Example 6. (i) Facts. Employer V's group health plan provides for
coverage to begin on the first day of the first payroll period on or
after the date an employee is hired and completes the applicable
enrollment forms. Enrollment forms are distributed on an employee's
start date and may be completed within 90 days. Employee D is hired and
starts on October 31, which is the first day of a pay period. D
completes the enrollment forms and submits them on the 90th day after
D's start date, which is January 28. Coverage is made effective 7 days
later, February 4, which is the first day of the next pay period.
(ii) Conclusion. In this Example 6, under the terms of V's plan,
coverage may become effective as early as October 31, depending on when
D completes the applicable enrollment forms. Under the terms of the
plan, when coverage becomes effective depends solely on the length of
time taken by D to complete the enrollment materials. Therefore, under
the terms of the plan, D may elect coverage that would begin on a date
that does not exceed the 90-day waiting period limitation, and the plan
complies with this section.
Example 7. (i) Facts. Under Employer W's group health plan, only
employees who are full-time (defined under the plan as regularly
averaging 30 hours of service per week) are eligible for coverage.
Employee E begins employment for Employer W on November 26 of Year 1.
E's hours are reasonably expected to vary, with an opportunity to work
between 20 and 45 hours per week, depending on shift availability and
E's availability. Therefore,
[[Page 119]]
it cannot be determined at E's start date that E is reasonably expected
to work full-time. Under the terms of the plan, variable-hour employees,
such as E, are eligible to enroll in the plan if they are determined to
be a full-time employee after a measurement period of 12 months that
begins on the employee's start date. Coverage is made effective no later
than the first day of the first calendar month after the applicable
enrollment forms are received. E's 12-month measurement period ends
November 25 of Year 2. E is determined to be a full-time employee and is
notified of E's plan eligibility. If E then elects coverage, E's first
day of coverage will be January 1 of Year 3.
(ii) Conclusion. In this Example 7, the measurement period is
permissible because it is not considered to be designed to avoid
compliance with the 90-day waiting period limitation. The plan may use a
reasonable period of time to determine whether a variable-hour employee
is a full-time employee, provided that (a) the period of time is no
longer than 12 months; (b) the period of time begins on a date between
the employee's start date and the first day of the next calendar month
(inclusive); (c) coverage is made effective no later than 13 months from
E's start date plus, if the employee's start date is not the first day
of a calendar month, the time remaining until the first day of the next
calendar month; and (d) in addition to the measurement period, no more
than 90 days elapse prior to the employee's eligibility for coverage.
Example 8. (i) Facts. Employee F begins working 25 hours per week
for Employer X on January 6 and is considered a part-time employee for
purposes of X's group health plan. X sponsors a group health plan that
provides coverage to part-time employees after they have completed a
cumulative 1,200 hours of service. F satisfies the plan's cumulative
hours of service condition on December 15.
(ii) Conclusion. In this Example 8, the cumulative hours of service
condition with respect to part-time employees is not considered to be
designed to avoid compliance with the 90-day waiting period limitation.
Accordingly, coverage for F under the plan must begin no later than the
91st day after F completes 1,200 hours. (If the plan's cumulative hours-
of-service requirement was more than 1,200 hours, the requirement would
be considered to be designed to avoid compliance with the 90-day waiting
period limitation.)
Example 9. (i) Facts. A multiemployer plan operating pursuant to an
arms-length collective bargaining agreement has an eligibility provision
that allows employees to become eligible for coverage by working a
specified number of hours of covered employment for multiple
contributing employers. The plan aggregates hours in a calendar quarter
and then, if enough hours are earned, coverage begins the first day of
the next calendar quarter. The plan also permits coverage to extend for
the next full calendar quarter, regardless of whether an employee's
employment has terminated.
(ii) Conclusion. In this Example 9, these eligibility provisions are
designed to accommodate a unique operating structure, and, therefore,
are not considered to be designed to avoid compliance with the 90-day
waiting period limitation, and the plan complies with this section.
Example 10. (i) Facts. Employee G retires at age 55 after 30 years
of employment with Employer Y with no expectation of providing further
services to Employer Y. Three months later, Y recruits G to return to
work as an employee providing advice and transition assistance for G's
replacement under a one-year employment contract. Y's plan imposes a 90-
day waiting period from an employee's start date before coverage becomes
effective.
(ii) Conclusion. In this Example 10, Y's plan may treat G as newly
eligible for coverage under the plan upon rehire and therefore may
impose the 90-day waiting period with respect to G for coverage offered
in connection with G's rehire.
Example 11. (i) Facts. Employee H begins working full time for
Employer Z on October 16. Z sponsors a group health plan, under which
full time employees are eligible for coverage after they have
successfully completed a bona fide one-month orientation period. H
completes the orientation period on November 15.
(ii) Conclusion. In this Example 11, the orientation period is not
considered a subterfuge for the passage of time and is not considered to
be designed to avoid compliance with the 90-day waiting period
limitation. Accordingly, plan coverage for H must begin no later than
February 14, which is the 91st day after H completes the orientation
period. (If the orientation period was longer than one month, it would
be considered to be a subterfuge for the passage of time and designed to
avoid compliance with the 90-day waiting period limitation. Accordingly
it would violate the rules of this section.)
(g) Special rule for health insurance issuers. To the extent
coverage under a group health plan is insured by a health insurance
issuer, the issuer is permitted to rely on the eligibility information
reported to it by the employer (or other plan sponsor) and will not be
considered to violate the requirements of this section with respect to
its administration of any waiting period, if both of the following
conditions are satisfied:
(1) The issuer requires the plan sponsor to make a representation
regarding
[[Page 120]]
the terms of any eligibility conditions or waiting periods imposed by
the plan sponsor before an individual is eligible to become covered
under the terms of the plan (and requires the plan sponsor to update
this representation with any changes), and
(2) The issuer has no specific knowledge of the imposition of a
waiting period that would exceed the permitted 90-day period.
(h) No effect on other laws. Compliance with this section is not
determinative of compliance with any other provision of State or Federal
law (including ERISA, the Code, or other provisions of the Patient
Protection and Affordable Care Act). See e.g., Sec. 146.121 of this
subchapter and Sec. 147.110, which prohibits discrimination in
eligibility for coverage based on a health factor and Code section
4980H, which generally requires applicable large employers to offer
coverage to full-time employees and their dependents or make an
assessable payment.
(i) Applicability date. The provisions of this section apply for
plan years beginning on or after January 1, 2015. See Sec. 147.140
providing that the prohibition on waiting periods exceeding 90 days
applies to all group health plans and group health insurance issuers,
including grandfathered health plans.
[79 FR 10315, Feb. 24, 2014, as amended at 79 FR 35948, June 25, 2014]
Sec. 147.120 Eligibility of children until at least age 26.
(a) In general--(1) A group health plan, or a health insurance
issuer offering group or individual health insurance coverage, that
makes available dependent coverage of children must make such coverage
available for children until attainment of 26 years of age.
(2) The rule of this paragraph (a) is illustrated by the following
example:
Example. (i) Facts. For the plan year beginning January 1, 2011, a
group health plan provides health coverage for employees, employees'
spouses, and employees' children until the child turns 26. On the
birthday of a child of an employee, July 17, 2011, the child turns 26.
The last day the plan covers the child is July 16, 2011.
(ii) Conclusion. In this Example, the plan satisfies the requirement
of this paragraph (a) with respect to the child.
(b) Restrictions on plan definition of dependent--(1) In general.
With respect to a child who has not attained age 26, a plan or issuer
may not define dependent for purposes of eligibility for dependent
coverage of children other than in terms of a relationship between a
child and the participant (in the individual market, the primary
subscriber). Thus, for example, a plan or issuer may not deny or
restrict dependent coverage for a child who has not attained age 26
based on the presence or absence of the child's financial dependency
(upon the participant or primary subscriber, or any other person);
residency with the participant (in the individual market, the primary
subscriber) or with any other person; whether the child lives, works, or
resides in an HMO's service area or other network service area; marital
status; student status; employment; eligibility for other coverage; or
any combination of those factors. (Other requirements of Federal or
State law, including section 609 of ERISA or section 1908 of the Social
Security Act, may require coverage of certain children.)
(2) Construction. A plan or issuer will not fail to satisfy the
requirements of this section if the plan or issuer limits dependent
child coverage to children under age 26 who are described in section
152(f)(1) of the Code. For an individual not described in Code section
152(f)(1), such as a grandchild or niece, a plan may impose additional
conditions on eligibility for dependent child health coverage, such as a
condition that the individual be a dependent for income tax purposes.
(c) Coverage of grandchildren not required. Nothing in this section
requires a plan or issuer to make coverage available for the child of a
child receiving dependent coverage.
(d) Uniformity irrespective of age. The terms of the plan or health
insurance coverage providing dependent coverage of children cannot vary
based on age (except for children who are age 26 or older).
(e) Examples. The rules of paragraph (d) of this section are
illustrated by the following examples:
Example 1. (i) Facts. A group health plan offers a choice of self-
only or family health coverage. Dependent coverage is provided
[[Page 121]]
under family health coverage for children of participants who have not
attained age 26. The plan imposes an additional premium surcharge for
children who are older than age 18.
(ii) Conclusion. In this Example 1, the plan violates the
requirement of paragraph (d) of this section because the plan varies the
terms for dependent coverage of children based on age.
Example 2. (i) Facts. A group health plan offers a choice among the
following tiers of health coverage: self-only, self-plus-one, self-plus-
two, and self-plus-three-or-more. The cost of coverage increases based
on the number of covered individuals. The plan provides dependent
coverage of children who have not attained age 26.
(ii) Conclusion. In this Example 2, the plan does not violate the
requirement of paragraph (d) of this section that the terms of dependent
coverage for children not vary based on age. Although the cost of
coverage increases for tiers with more covered individuals, the increase
applies without regard to the age of any child.
Example 3. (i) Facts. A group health plan offers two benefit
packages--an HMO option and an indemnity option. Dependent coverage is
provided for children of participants who have not attained age 26. The
plan limits children who are older than age 18 to the HMO option.
(ii) Conclusion. In this Example 3, the plan violates the
requirement of paragraph (d) of this section because the plan, by
limiting children who are older than age 18 to the HMO option, varies
the terms for dependent coverage of children based on age.
Example 4. (i) Facts. A group health plan sponsored by a large
employer normally charges a copayment for physician visits that do not
constitute preventive services. The plan charges this copayment to
individuals age 19 and over, including employees, spouses, and dependent
children, but waives it for those under age 19.
(ii) Conclusion. In this Example 4, the plan does not violate the
requirement of paragraph (d) of this section that the terms of dependent
coverage for children not vary based on age. While the requirement of
paragraph (d) of this section generally prohibits distinctions based
upon age in dependent coverage of children, it does not prohibit
distinctions based upon age that apply to all coverage under the plan,
including coverage for employees and spouses as well as dependent
children. In this Example 4, the copayments charged to dependent
children are the same as those charged to employees and spouses.
Accordingly, the arrangement described in this Example 4 (including
waiver, for individuals under age 19, of the generally applicable
copayment) does not violate the requirement of paragraph (d) of this
section.
(f) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years (in the individual market, policy years) beginning on or after
January 1, 2017. Until the applicability date for this regulation, plans
and issuers are required to continue to comply with the corresponding
sections of 45 CFR parts 144, 146 and 147, contained in the 45 CFR,
parts 1 to 199, edition revised as of October 1, 2015.
[80 FR 72275, Nov. 18, 2015]
Sec. 147.126 No lifetime or annual limits.
(a) Prohibition--(1) Lifetime limits. Except as provided in
paragraph (b) of this section, a group health plan, or a health
insurance issuer offering group or individual health insurance coverage,
may not establish any lifetime limit on the dollar amount of essential
health benefits for any individual, whether provided in-network or out-
of-network.
(2) Annual limits--(i) General rule. Except as provided in
paragraphs (a)(2)(ii) and (b) of this section, a group health plan, or a
health insurance issuer offering group or individual health insurance
coverage, may not establish any annual limit on the dollar amount of
essential health benefits for any individual, whether provided in-
network or out-of-network.
(ii) Exception for health flexible spending arrangements. A health
flexible spending arrangement (as defined in section 106(c)(2) of the
Internal Revenue Code) offered through a cafeteria plan pursuant to
section 125 of the Internal Revenue Code is not subject to the
requirement in paragraph (a)(2)(i) of this section.
(b) Construction--(1) Permissible limits on specific covered
benefits. The rules of this section do not prevent a group health plan,
or a health insurance issuer offering group or individual health
insurance coverage, from placing annual or lifetime dollar limits with
respect to any individual on specific covered benefits that are not
essential health benefits to the extent that such limits are otherwise
permitted under applicable Federal or State law. (The scope of essential
health benefits is addressed in paragraph (c) of this section).
[[Page 122]]
(2) Condition-based exclusions. The rules of this section do not
prevent a group health plan, or a health insurance issuer offering group
or individual health insurance coverage, from excluding all benefits for
a condition. However, if any benefits are provided for a condition, then
the requirements of this section apply. Other requirements of Federal or
State law may require coverage of certain benefits.
(c) Definition of essential health benefits. The term ``essential
health benefits'' means essential health benefits under section 1302(b)
of the Patient Protection and Affordable Care Act and applicable
regulations. For the purpose of this section, a group health plan or a
health insurance issuer that is not required to provide essential health
benefits under section 1302(b) must define ``essential health benefits''
in a manner that is consistent with the following:
(1) For plan years beginning before January 1, 2020, one of the EHB-
benchmark plans applicable in a State under Sec. 156.110 of this
subchapter, and including coverage of any additional required benefits
that are considered essential health benefits consistent with Sec.
155.170(a)(2) of this subchapter, or one of the three Federal Employees
Health Benefits Program (FEHBP) plan options as defined by Sec.
156.100(a)(3) of this subchapter, supplemented as necessary, to satisfy
the standards in Sec. 156.110 of this subchapter; or
(2) For plan years beginning on or after January 1, 2020, an EHB-
benchmark plan selected by a State in accordance with the available
options and requirements for EHB-benchmark plan selection at Sec.
156.111 of this subchapter, including an EHB-benchmark plan in a State
that takes no action to change its EHB-benchmark plan and thus retains
the EHB-benchmark plan applicable in that State for the prior year in
accordance with Sec. 156.111(d)(1) of this subchapter, and including
coverage of any additional required benefits that are considered
essential health benefits consistent with Sec. 155.170(a)(2) of this
subchapter.
(d) Health reimbursement arrangements (HRAs) and other account-based
group health plans--(1) In general. If an HRA or other account-based
group health plan is integrated with another group health plan or
individual health insurance coverage and the other group health plan or
individual health insurance coverage, as applicable, separately is
subject to and satisfies the requirements in PHS Act section 2711 and
paragraph (a)(2) of this section, the fact that the benefits under the
HRA or other account-based group health plan are limited does not cause
the HRA or other account-based group health plan to fail to satisfy the
requirements of PHS Act section 2711 and paragraph (a)(2) of this
section. Similarly, if an HRA or other account-based group health plan
is integrated with another group health plan or individual health
insurance coverage and the other group health plan or individual health
insurance coverage, as applicable, separately is subject to and
satisfies the requirements in PHS Act section 2713 and Sec.
147.130(a)(1) of this subchapter, the fact that the benefits under the
HRA or other account-based group health plan are limited does not cause
the HRA or other account-based group health plan to fail to satisfy the
requirements of PHS Act section 2713 and Sec. 147.130(a)(1) of this
subchapter. For the purpose of this paragraph (d), all individual health
insurance coverage, except for coverage that consists solely of excepted
benefits, is treated as being subject to and complying with PHS Act
sections 2711 and 2713.
(2) Requirements for an HRA or other account-based group health plan
to be integrated with another group health plan. An HRA or other
account-based group health plan is integrated with another group health
plan for purposes of PHS Act section 2711 and paragraph (a)(2) of this
section if it satisfies the requirements under one of the integration
methods set forth in paragraph (d)(2)(i) or (ii) of this section. For
purposes of the integration methods under which an HRA or other account-
based group health plan is integrated with another group health plan,
integration does not require that the HRA or other account-based group
health plan and the other group health plan with which it is integrated
share the same plan sponsor, the same plan document or governing
instruments, or file a single Form 5500,
[[Page 123]]
if applicable. An HRA or other account-based group health plan
integrated with another group health plan for purposes of PHS Act
section 2711 and paragraph (a)(2) of this section may not be used to
purchase individual health insurance coverage unless that coverage
consists solely of excepted benefits, as defined in Sec. 148.220 of
this subchapter.
(i) Method for integration with a group health plan: Minimum value
not required. An HRA or other account-based group health plan is
integrated with another group health plan for purposes of this paragraph
(d) if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based group health plan) to the employee that does not
consist solely of excepted benefits;
(B) The employee receiving the HRA or other account-based group
health plan is actually enrolled in a group health plan (other than the
HRA or other account-based group health plan) that does not consist
solely of excepted benefits, regardless of whether the plan is offered
by the same plan sponsor (referred to as non-HRA group coverage);
(C) The HRA or other account-based group health plan is available
only to employees who are enrolled in non-HRA group coverage, regardless
of whether the non-HRA group coverage is offered by the plan sponsor of
the HRA or other account-based group health plan (for example, the HRA
may be offered only to employees who do not enroll in an employer's
group health plan but are enrolled in other non-HRA group coverage, such
as a group health plan maintained by the employer of the employee's
spouse);
(D) The benefits under the HRA or other account-based group health
plan are limited to reimbursement of one or more of the following--co-
payments, co-insurance, deductibles, and premiums under the non-HRA
group coverage, as well as medical care expenses that do not constitute
essential health benefits as defined in paragraph (c) of this section;
and
(E) Under the terms of the HRA or other account-based group health
plan, an employee (or former employee) is permitted to permanently opt
out of and waive future reimbursements from the HRA or other account-
based group health plan at least annually and, upon termination of
employment, either the remaining amounts in the HRA or other account-
based group health plan are forfeited or the employee is permitted to
permanently opt out of and waive future reimbursements from the HRA or
other account-based group health plan (see paragraph (d)(3) of this
section for additional rules regarding forfeiture and waiver).
(ii) Method for integration with another group health plan: Minimum
value required. An HRA or other account-based group health plan is
integrated with another group health plan for purposes of this paragraph
(d) if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based group health plan) to the employee that provides
minimum value pursuant to section 36B(c)(2)(C)(ii) of the Code (and its
implementing regulations and applicable guidance);
(B) The employee receiving the HRA or other account-based group
health plan is actually enrolled in a group health plan (other than the
HRA or other account-based group health plan) that provides minimum
value pursuant to section 36B(c)(2)(C)(ii) of the Code (and applicable
guidance), regardless of whether the plan is offered by the plan sponsor
of the HRA or other account-based group health plan (referred to as non-
HRA MV group coverage);
(C) The HRA or other account-based group health plan is available
only to employees who are actually enrolled in non-HRA MV group
coverage, regardless of whether the non-HRA MV group coverage is offered
by the plan sponsor of the HRA or other account-based group health plan
(for example, the HRA may be offered only to employees who do not enroll
in an employer's group health plan but are enrolled in other non-HRA MV
group coverage, such as a group health plan maintained by an employer of
the employee's spouse); and
(D) Under the terms of the HRA or other account-based group health
plan, an employee (or former employee) is permitted to permanently opt
out of and waive future reimbursements from the HRA or other account-
based group
[[Page 124]]
health plan at least annually, and, upon termination of employment,
either the remaining amounts in the HRA or other account-based group
health plan are forfeited or the employee is permitted to permanently
opt out of and waive future reimbursements from the HRA or other
account-based group health plan (see paragraph (d)(3) of this section
for additional rules regarding forfeiture and waiver).
(3) Forfeiture. For purposes of integration under paragraphs
(d)(2)(i)(E) and (d)(2)(ii)(D) of this section, forfeiture or waiver
occurs even if the forfeited or waived amounts may be reinstated upon a
fixed date, a participant's death, or the earlier of the two events (the
reinstatement event). For the purpose of this paragraph (d)(3), coverage
under an HRA or other account-based group health plan is considered
forfeited or waived prior to a reinstatement event only if the
participant's election to forfeit or waive is irrevocable, meaning that,
beginning on the effective date of the election and through the date of
the reinstatement event, the participant and the participant's
beneficiaries have no access to amounts credited to the HRA or other
account-based group health plan. This means that upon and after
reinstatement, the reinstated amounts under the HRA or other account-
based group health plan may not be used to reimburse or pay medical care
expenses incurred during the period after forfeiture and prior to
reinstatement.
(4) Requirements for an HRA or other account-based group health plan
to be integrated with individual health insurance coverage or Medicare
Part A and B or Medicare Part C. An HRA or other account-based group
health plan is integrated with individual health insurance coverage or
Medicare Part A and B or Medicare Part C (and treated as complying with
PHS Act sections 2711 and 2713) if the HRA or other account-based group
health plan satisfies the requirements of Sec. 146.123(c) of this
subchapter (as modified by Sec. 146.123(e), for HRAs or other account-
based group health plans integrated with Medicare Part A and B or
Medicare Part C).
(5) Integration with Medicare Part B and D. For employers that are
not required to offer their non-HRA group health plan coverage to
employees who are Medicare beneficiaries, an HRA or other account-based
group health plan that may be used to reimburse premiums under Medicare
Part B or D may be integrated with Medicare (and deemed to comply with
PHS Act sections 2711 and 2713) if the following requirements are
satisfied with respect to employees who would be eligible for the
employer's non-HRA group health plan but for their eligibility for
Medicare (and the integration rules under paragraphs (d)(2)(i) and (ii)
of this section continue to apply to employees who are not eligible for
Medicare):
(i) The plan sponsor offers a group health plan (other than the HRA
or other account-based group health plan and that does not consist
solely of excepted benefits) to employees who are not eligible for
Medicare;
(ii) The employee receiving the HRA or other account-based group
health plan is actually enrolled in Medicare Part B or D;
(iii) The HRA or other account-based group health plan is available
only to employees who are enrolled in Medicare Part B or D; and
(iv) The HRA or other account-based group health plan complies with
paragraphs (d)(2)(i)(E) and (d)(2)(ii)(D) of this section.
(6) Definitions. The following definitions apply for purposes of
this section.
(i) Account-based group health plan. An account-based group health
plan is an employer-provided group health plan that provides
reimbursements of medical care expenses with the reimbursement subject
to a maximum fixed dollar amount for a period. An HRA is a type of
account-based group health plan. An account-based group health plan does
not include a qualified small employer health reimbursement arrangement,
as defined in section 9831(d)(2) of the Code.
(ii) Medical care expenses. Medical care expenses means expenses for
medical care as defined under section 213(d) of the Code.
(e) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years beginning on or after January 1, 2020. Until the applicability
date for this section, plans and
[[Page 125]]
issuers are required to continue to comply with the corresponding
sections of this subchapter B, contained in the 45 CFR, subtitle A,
parts 1-199, revised as of October 1, 2018.
[80 FR 72276, Nov. 18, 2015, as amended at 81 FR 75326, Oct. 31, 2016;
84 FR 29025, June 20, 2019]
Sec. 147.128 Rules regarding rescissions.
(a) Prohibition on rescissions--(1) A group health plan, or a health
insurance issuer offering group or individual health insurance coverage,
must not rescind coverage under the plan, or under the policy,
certificate, or contract of insurance, with respect to an individual
(including a group to which the individual belongs or family coverage in
which the individual is included) once the individual is covered under
the plan or coverage, unless the individual (or a person seeking
coverage on behalf of the individual) performs an act, practice, or
omission that constitutes fraud, or makes an intentional
misrepresentation of material fact, as prohibited by the terms of the
plan or coverage. A group health plan, or a health insurance issuer
offering group or individual health insurance coverage, must provide at
least 30 days advance written notice to each participant (in the
individual market, primary subscriber) who would be affected before
coverage may be rescinded under this paragraph (a)(1), regardless of, in
the case of group coverage, whether the coverage is insured or self-
insured, or whether the rescission applies to an entire group or only to
an individual within the group. (The rules of this paragraph (a)(1)
apply regardless of any contestability period that may otherwise apply.)
(2) For purposes of this section, a rescission is a cancellation or
discontinuance of coverage that has retroactive effect. For example, a
cancellation that treats a policy as void from the time of the
individual's or group's enrollment is a rescission. As another example,
a cancellation that voids benefits paid up to a year before the
cancellation is also a rescission for this purpose. A cancellation or
discontinuance of coverage is not a rescission if --
(i) The cancellation or discontinuance of coverage has only a
prospective effect;
(ii) The cancellation or discontinuance of coverage is effective
retroactively, to the extent it is attributable to a failure to timely
pay required premiums or contributions (including COBRA premiums)
towards the cost of coverage;
(iii) The cancellation or discontinuance of coverage is initiated by
the individual (or by the individual's authorized representative) and
the sponsor, employer, plan, or issuer does not, directly or indirectly,
take action to influence the individual's decision to cancel or
discontinue coverage retroactively or otherwise take any adverse action
or retaliate against, interfere with, coerce, intimidate, or threaten
the individual; or
(iv) The cancellation or discontinuance of coverage is initiated by
the Exchange pursuant to Sec. 155.430 of this subchapter (other than
under paragraph (b)(2)(iii) of this section).
(3) The rules of this paragraph (a) are illustrated by the following
examples:
Example 1. (i) Facts. Individual A seeks enrollment in an insured
group health plan. The plan terms permit rescission of coverage with
respect to an individual if the individual engages in fraud or makes an
intentional misrepresentation of a material fact. The plan requires A to
complete a questionnaire regarding A's prior medical history, which
affects setting the group rate by the health insurance issuer. The
questionnaire complies with the other requirements of this part and part
146 of this subchapter. The questionnaire includes the following
question: ``Is there anything else relevant to your health that we
should know?'' A inadvertently fails to list that A visited a
psychologist on two occasions, six years previously. A is later
diagnosed with breast cancer and seeks benefits under the plan. On or
around the same time, the issuer receives information about A's visits
to the psychologist, which was not disclosed in the questionnaire.
(ii) Conclusion. In this Example 1, the plan cannot rescind A's
coverage because A's failure to disclose the visits to the psychologist
was inadvertent. Therefore, it was not fraudulent or an intentional
misrepresentation of material fact.
Example 2. (i) Facts. An employer sponsors a group health plan that
provides coverage for employees who work at least 30 hours per week.
Individual B has coverage under the
[[Page 126]]
plan as a full-time employee. The employer reassigns B to a part-time
position. Under the terms of the plan, B is no longer eligible for
coverage. The plan mistakenly continues to provide health coverage,
collecting premiums from B and paying claims submitted by B. After a
routine audit, the plan discovers that B no longer works at least 30
hours per week. The plan rescinds B's coverage effective as of the date
that B changed from a full-time employee to a part-time employee.
(ii) Conclusion. In this Example 2, the plan cannot rescind B's
coverage because there was no fraud or an intentional misrepresentation
of material fact. The plan may cancel coverage for B prospectively,
subject to other applicable Federal and State laws.
(b) Compliance with other requirements. Other requirements of
Federal or State law may apply in connection with a rescission of
coverage.
(c) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years (in the individual market, policy years) beginning on or after
January 1, 2017. Until the applicability date for this regulation, plans
and issuers are required to continue to comply with the corresponding
sections of 45 CFR parts 144, 146 and 147, contained in the 45 CFR,
parts 1 to 199, edition revised as of October 1, 2015.
[80 FR 72277, Nov. 18, 2015]
Sec. 147.130 Coverage of preventive health services.
(a) Services--(1) In general. Beginning at the time described in
paragraph (b) of this section and subject to Sec. Sec. 147.131,
147.132, and 147.133, a group health plan, or a health insurance issuer
offering group or individual health insurance coverage, must provide
coverage for and must not impose any cost-sharing requirements (such as
a copayment, coinsurance, or a deductible) for--
(i) Evidence-based items or services that have in effect a rating of
A or B in the current recommendations of the United States Preventive
Services Task Force with respect to the individual involved (except as
otherwise provided in paragraph (c) of this section);
(ii) Immunizations for routine use in children, adolescents, and
adults that have in effect a recommendation from the Advisory Committee
on Immunization Practices of the Centers for Disease Control and
Prevention with respect to the individual involved (for this purpose, a
recommendation from the Advisory Committee on Immunization Practices of
the Centers for Disease Control and Prevention is considered in effect
after it has been adopted by the Director of the Centers for Disease
Control and Prevention, and a recommendation is considered to be for
routine use if it is listed on the Immunization Schedules of the Centers
for Disease Control and Prevention);
(iii) With respect to infants, children, and adolescents, evidence-
informed preventive care and screenings provided for in comprehensive
guidelines supported by the Health Resources and Services
Administration; and
(iv) With respect to women, such additional preventive care and
screenings not described in paragraph (a)(1)(i) of this section as
provided for in comprehensive guidelines supported by the Health
Resources and Services Administration for purposes of section 2713(a)(4)
of the Public Health Service Act, subject to Sec. Sec. 147.131,
147.132, and 147.133.
(2) Office visits. (i) If an item or service described in paragraph
(a)(1) of this section is billed separately (or is tracked as individual
encounter data separately) from an office visit, then a plan or issuer
may impose cost-sharing requirements with respect to the office visit.
(ii) If an item or service described in paragraph (a)(1) of this
section is not billed separately (or is not tracked as individual
encounter data separately) from an office visit and the primary purpose
of the office visit is the delivery of such an item or service, then a
plan or issuer may not impose cost-sharing requirements with respect to
the office visit.
(iii) If an item or service described in paragraph (a)(1) of this
section is not billed separately (or is not tracked as individual
encounter data separately) from an office visit and the primary purpose
of the office visit is not the delivery of such an item or service, then
a plan or issuer may impose cost-sharing requirements with respect to
the office visit.
[[Page 127]]
(iv) The rules of this paragraph (a)(2) are illustrated by the
following examples:
Example 1. (i) Facts. An individual covered by a group health plan
visits an in-network health care provider. While visiting the provider,
the individual is screened for cholesterol abnormalities, which has in
effect a rating of A or B in the current recommendations of the United
States Preventive Services Task Force with respect to the individual.
The provider bills the plan for an office visit and for the laboratory
work of the cholesterol screening test.
(ii) Conclusion. In this Example 1, the plan may not impose any
cost-sharing requirements with respect to the separately-billed
laboratory work of the cholesterol screening test. Because the office
visit is billed separately from the cholesterol screening test, the plan
may impose cost-sharing requirements for the office visit.
Example 2. (i) Facts. Same facts as Example 1. As the result of the
screening, the individual is diagnosed with hyperlipidemia and is
prescribed a course of treatment that is not included in the
recommendations under paragraph (a)(1) of this section.
(ii) Conclusion. In this Example 2, because the treatment is not
included in the recommendations under paragraph (a)(1) of this section,
the plan is not prohibited from imposing cost-sharing requirements with
respect to the treatment.
Example 3. (i) Facts. An individual covered by a group health plan
visits an in-network health care provider to discuss recurring abdominal
pain. During the visit, the individual has a blood pressure screening,
which has in effect a rating of A or B in the current recommendations of
the United States Preventive Services Task Force with respect to the
individual. The provider bills the plan for an office visit.
(ii) Conclusion. In this Example 3, the blood pressure screening is
provided as part of an office visit for which the primary purpose was
not to deliver items or services described in paragraph (a)(1) of this
section. Therefore, the plan may impose a cost-sharing requirement for
the office visit charge.
Example 4. (i) Facts. A child covered by a group health plan visits
an in-network pediatrician to receive an annual physical exam described
as part of the comprehensive guidelines supported by the Health
Resources and Services Administration. During the office visit, the
child receives additional items and services that are not described in
the comprehensive guidelines supported by the Health Resources and
Services Administration, nor otherwise described in paragraph (a)(1) of
this section. The provider bills the plan for an office visit.
(ii) Conclusion. In this Example 4, the service was not billed as a
separate charge and was billed as part of an office visit. Moreover, the
primary purpose for the visit was to deliver items and services
described as part of the comprehensive guidelines supported by the
Health Resources and Services Administration. Therefore, the plan may
not impose a cost-sharing requirement for the office visit charge.
(3) Out-of-network providers. (i) Subject to paragraph (a)(3)(ii) of
this section, nothing in this section requires a plan or issuer that has
a network of providers to provide benefits for items or services
described in paragraph (a)(1) of this section that are delivered by an
out-of-network provider. Moreover, nothing in this section precludes a
plan or issuer that has a network of providers from imposing cost-
sharing requirements for items or services described in paragraph (a)(1)
of this section that are delivered by an out-of-network provider.
(ii) If a plan or issuer does not have in its network a provider who
can provide an item or service described in paragraph (a)(1) of this
section, the plan or issuer must cover the item or service when
performed by an out-of-network provider, and may not impose cost sharing
with respect to the item or service.
(4) Reasonable medical management. Nothing prevents a plan or issuer
from using reasonable medical management techniques to determine the
frequency, method, treatment, or setting for an item or service
described in paragraph (a)(1) of this section to the extent not
specified in the relevant recommendation or guideline. To the extent not
specified in a recommendation or guideline, a plan or issuer may rely on
the relevant clinical evidence base and established reasonable medical
management techniques to determine the frequency, method, treatment, or
setting for coverage of a recommended preventive health service.
(5) Services not described. Nothing in this section prohibits a plan
or issuer from providing coverage for items and services in addition to
those recommended by the United States Preventive Services Task Force or
the Advisory Committee on Immunization Practices of the Centers for
Disease Control and Prevention, or provided for by guidelines supported
by the Health
[[Page 128]]
Resources and Services Administration, or from denying coverage for
items and services that are not recommended by that task force or that
advisory committee, or under those guidelines. A plan or issuer may
impose cost-sharing requirements for a treatment not described in
paragraph (a)(1) of this section, even if the treatment results from an
item or service described in paragraph (a)(1) of this section.
(b) Timing--(1) In general. A plan or issuer must provide coverage
pursuant to paragraph (a)(1) of this section for plan years (in the
individual market, policy years) that begin on or after September 23,
2010, or, if later, for plan years (in the individual market, policy
years) that begin on or after the date that is one year after the date
the recommendation or guideline is issued.
(2) Changes in recommendations or guidelines. (i) A plan or issuer
that is required to provide coverage for any items and services
specified in any recommendation or guideline described in paragraph
(a)(1) of this section on the first day of a plan year (in the
individual market, policy year) must provide coverage through the last
day of the plan or policy year, even if the recommendation or guideline
changes or is no longer described in paragraph (a)(1) of this section,
during the plan or policy year.
(ii) Notwithstanding paragraph (b)(2)(i) of this section, to the
extent a recommendation or guideline described in paragraph (a)(1)(i) of
this section that was in effect on the first day of a plan year (in the
individual market, policy year) is downgraded to a ``D'' rating, or any
item or service associated with any recommendation or guideline
specified in paragraph (a)(1) of this section is subject to a safety
recall or is otherwise determined to pose a significant safety concern
by a federal agency authorized to regulate the item or service during a
plan or policy year, there is no requirement under this section to cover
these items and services through the last day of the plan or policy
year.
(c) Recommendations not current. For purposes of paragraph (a)(1)(i)
of this section, and for purposes of any other provision of law,
recommendations of the United States Preventive Services Task Force
regarding breast cancer screening, mammography, and prevention issued in
or around November 2009 are not considered to be current.
(d) Applicability date. The provisions of this section apply for
plan years (in the individual market, for policy years) beginning on or
after September 23, 2010. See Sec. 147.140 of this part for determining
the application of this section to grandfathered health plans (providing
that these rules regarding coverage of preventive health services do not
apply to grandfathered health plans).
[75 FR 41759, July 19, 2010, as amended at 76 FR 46626, Aug. 3, 2011; 78
FR 39896, July 2, 2013; 80 FR 41346, July 14, 2015; 82 FR 47833, 47861,
Oct. 13, 2017]
Sec. 147.131 Accommodations in connection with coverage of certain
preventive health services.
(a)-(b) [Reserved]
(c) Eligible organizations for optional accommodation. An eligible
organization is an organization that meets the criteria of paragraphs
(c)(1) through (3) of this section.
(1) The organization is an objecting entity described in Sec.
147.132(a)(1)(i) or (ii), or 45 CFR 147.133(a)(1)(i) or (ii).
(2) Notwithstanding its exempt status under Sec. 147.132(a) or
Sec. 147.133, the organization voluntarily seeks to be considered an
eligible organization to invoke the optional accommodation under
paragraph (d) of this section; and
(3) The organization self-certifies in the form and manner specified
by the Secretary or provides notice to the Secretary as described in
paragraph (d) of this section. To qualify as an eligible organization,
the organization must make such self-certification or notice available
for examination upon request by the first day of the first plan year to
which the accommodation in paragraph (d) of this section applies. The
self-certification or notice must be executed by a person authorized to
make the certification or provide the notice on behalf of the
organization, and must be maintained in a manner consistent with the
record retention requirements under section 107 of ERISA.
(4) An eligible organization may revoke its use of the accommodation
[[Page 129]]
process, and its issuer must provide participants and beneficiaries
written notice of such revocation, as specified herein.
(i) Transitional rule. If contraceptive coverage is being offered on
January 14, 2019, by an issuer through the accommodation process, an
eligible organization may give 60-days notice pursuant to section
2715(d)(4) of the PHS Act and Sec. 147.200(b), if applicable, to revoke
its use of the accommodation process (to allow for the provision of
notice to plan participants in cases where contraceptive benefits will
no longer be provided). Alternatively, such eligible organization may
revoke its use of the accommodation process effective on the first day
of the first plan year that begins on or after 30 days after the date of
the revocation.
(ii) General rule. In plan years that begin after January 14, 2019,
if contraceptive coverage is being offered by an issuer through the
accommodation process, an eligible organization's revocation of use of
the accommodation process will be effective no sooner than the first day
of the first plan year that begins on or after 30 days after the date of
the revocation.
(d) Optional accommodation--insured group health plans--(1) General
rule. A group health plan established or maintained by an eligible
organization that provides benefits through one or more group health
insurance issuers may voluntarily elect an optional accommodation under
which its health insurance issuer(s) will provide payments for all or a
subset of contraceptive services for one or more plan years. To invoke
the optional accommodation process:
(i) The eligible organization or its plan must contract with one or
more health insurance issuers.
(ii) The eligible organization must provide either a copy of the
self-certification to each issuer providing coverage in connection with
the plan or a notice to the Secretary of the Department of Health and
Human Services that it is an eligible organization and of its objection
as described in Sec. 147.132 or Sec. 147.133 to coverage for all or a
subset of contraceptive services.
(A) When a self-certification is provided directly to an issuer, the
issuer has sole responsibility for providing such coverage in accordance
with Sec. 147.130(a)(iv).
(B) When a notice is provided to the Secretary of the Department of
Health and Human Services, the notice must include the name of the
eligible organization; a statement that it objects as described in Sec.
147.132 or Sec. 147.133 to coverage of some or all contraceptive
services (including an identification of the subset of contraceptive
services to which coverage the eligible organization objects, if
applicable) but that it would like to elect the optional accommodation
process; the plan name and type (that is, whether it is a student health
insurance plan within the meaning of Sec. 147.145(a) or a church plan
within the meaning of section 3(33) of ERISA); and the name and contact
information for any of the plan's health insurance issuers. If there is
a change in any of the information required to be included in the
notice, the eligible organization must provide updated information to
the Secretary of the Department of Health and Human Services for the
optional accommodation to remain in effect. The Department of Health and
Human Services will send a separate notification to each of the plan's
health insurance issuers informing the issuer that the Secretary of the
Deparement of Health and Human Services has received a notice under
paragraph (d)(1)(ii) of this section and describing the obligations of
the issuer under this section.
(2) If an issuer receives a copy of the self-certification from an
eligible organization or the notification from the Department of Health
and Human Services as described in paragraph (d)(1)(ii) of this section
and does not have an objection as described in Sec. 147.132 or Sec.
147.133 to providing the contraceptive services identified in the self-
certification or the notification from the Department of Health and
Human Services, then the issuer will provide payments for contraceptive
services as follows--
(i) The issuer must expressly exclude contraceptive coverage from
the group health insurance coverage provided in connection with the
group health plan and provide separate payments for any contraceptive
services required to be
[[Page 130]]
covered under Sec. 141.130(a)(1)(iv) for plan participants and
beneficiaries for so long as they remain enrolled in the plan.
(ii) With respect to payments for contraceptive services, the issuer
may not impose any cost-sharing requirements (such as a copayment,
coinsurance, or a deductible), premium, fee, or other charge, or any
portion thereof, directly or indirectly, on the eligible organization,
the group health plan, or plan participants or beneficiaries. The issuer
must segregate premium revenue collected from the eligible organization
from the monies used to provide payments for contraceptive services. The
issuer must provide payments for contraceptive services in a manner that
is consistent with the requirements under sections 2706, 2709, 2711,
2713, 2719, and 2719A of the PHS Act. If the group health plan of the
eligible organization provides coverage for some but not all of any
contraceptive services required to be covered under Sec.
147.130(a)(1)(iv), the issuer is required to provide payments only for
those contraceptive services for which the group health plan does not
provide coverage. However, the issuer may provide payments for all
contraceptive services, at the issuer's option.
(3) A health insurance issuer may not require any documentation
other than a copy of the self-certification from the eligible
organization or the notification from the Department of Health and Human
Services described in paragraph (d)(1)(ii) of this section.
(e) Notice of availability of separate payments for contraceptive
services--insured group health plans and student health insurance
coverage. For each plan year to which the optional accommodation in
paragraph (d) of this section is to apply, an issuer required to provide
payments for contraceptive services pursuant to paragraph (d) of this
section must provide to plan participants and beneficiaries written
notice of the availability of separate payments for contraceptive
services contemporaneous with (to the extent possible), but separate
from, any application materials distributed in connection with
enrollment (or re-enrollment) in group health coverage that is effective
beginning on the first day of each applicable plan year. The notice must
specify that the eligible organization does not administer or fund
contraceptive benefits, but that the issuer provides separate payments
for contraceptive services, and must provide contact information for
questions and complaints. The following model language, or substantially
similar language, may be used to satisfy the notice requirement of this
paragraph (e) ``Your [employer/institution of higher education] has
certified that your [group health plan/student health insurance
coverage] qualifies for an accommodation with respect to the Federal
requirement to cover all Food and Drug Administration-approved
contraceptive services for women, as prescribed by a health care
provider, without cost sharing. This means that your [employer/
institution of higher education] will not contract, arrange, pay, or
refer for contraceptive coverage. Instead, [name of health insurance
issuer] will provide separate payments for contraceptive services that
you use, without cost sharing and at no other cost, for so long as you
are enrolled in your [group health plan/student health insurance
coverage]. Your [employer/institution of higher education] will not
administer or fund these payments . If you have any questions about this
notice, contact [contact information for health insurance issuer].''
(f) Reliance. (1) If an issuer relies reasonably and in good faith
on a representation by the eligible organization as to its eligibility
for the accommodation in paragraph (d) of this section, and the
representation is later determined to be incorrect, the issuer is
considered to comply with any applicable requirement under Sec.
147.130(a)(1)(iv) to provide contraceptive coverage if the issuer
complies with the obligations under this section applicable to such
issuer.
(2) A group health plan is considered to comply with any applicable
requirement under Sec. 147.130(a)(1)(iv) to provide contraceptive
coverage if the plan complies with its obligations under paragraph (d)
of this section, without regard to whether the issuer complies with the
obligations under this section applicable to such issuer.
[[Page 131]]
(g) Definition. For the purposes of this section, reference to
``contraceptive'' services, benefits, or coverage includes contraceptive
or sterilization items, procedures, or services, or related patient
education or counseling, to the extent specified for purposes of Sec.
147.130(a)(1)(iv).
(h) Severability. Any provision of this section held to be invalid
or unenforceable by its terms, or as applied to any person or
circumstance, shall be construed so as to continue to give maximum
effect to the provision permitted by law, unless such holding shall be
one of utter invalidity or unenforceability, in which event the
provision shall be severable from this section and shall not affect the
remainder thereof or the application of the provision to persons not
similarly situated or to dissimilar circumstances.
[82 FR 47833, Oct. 13, 2017, as amended at 82 FR 47861, Oct. 13, 2017;
83 FR 57589, Nov. 15, 2018]
Sec. 147.132 Religious exemptions in connection with coverage of
certain preventive health services.
(a) Objecting entities. (1) Guidelines issued under Sec.
147.130(a)(1)(iv) by the Health Resources and Services Administration
must not provide for or support the requirement of coverage or payments
for contraceptive services with respect to a group health plan
established or maintained by an objecting organization, or health
insurance coverage offered or arranged by an objecting organization, to
the extent of the objections specified below. Thus the Health Resources
and Service Administration will exempt from any guidelines' requirements
that relate to the provision of contraceptive services:
(i) A group health plan and health insurance coverage provided in
connection with a group health plan to the extent the non-governmental
plan sponsor objects as specified in paragraph (a)(2) of this section.
Such non-governmental plan sponsors include, but are not limited to, the
following entities--
(A) A church, an integrated auxiliary of a church, a convention or
association of churches, or a religious order.
(B) A nonprofit organization.
(C) A closely held for-profit entity.
(D) A for-profit entity that is not closely held.
(E) Any other non-governmental employer.
(ii) A group health plan, and health insurance coverage provided in
connection with a group health plan, where the plan or coverage is
established or maintained by a church, an integrated auxiliary of a
church, a convention or association of churches, a religious order, a
nonprofit organization, or other non-governmental organization or
association, to the extent the plan sponsor responsible for establishing
and/or maintaining the plan objects as specified in paragraph (a)(2) of
this section. The exemption in this paragraph applies to each employer,
organization, or plan sponsor that adopts the plan;
(iii) An institution of higher education as defined in 20 U.S.C.
1002, which is non-governmental, in its arrangement of student health
insurance coverage, to the extent that institution objects as specified
in paragraph (a)(2) of this section. In the case of student health
insurance coverage, this section is applicable in a manner comparable to
its applicability to group health insurance coverage provided in
connection with a group health plan established or maintained by a plan
sponsor that is an employer, and references to ``plan participants and
beneficiaries'' will be interpreted as references to student enrollees
and their covered dependents; and
(iv) A health insurance issuer offering group or individual
insurance coverage to the extent the issuer objects as specified in
paragraph (a)(2) of this section. Where a health insurance issuer
providing group health insurance coverage is exempt under this
subparagraph (iv), the group health plan established or maintained by
the plan sponsor with which the health insurance issuer contracts
remains subject to any requirement to provide coverage for contraceptive
services under Guidelines issued under Sec. 147.130(a)(1)(iv) unless it
is also exempt from that requirement.
(2) The exemption of this paragraph (a) will apply to the extent
that an entity described in paragraph (a)(1) of
[[Page 132]]
this section objects, based on its sincerely held religious beliefs, to
its establishing, maintaining, providing, offering, or arranging for (as
applicable):
(i) Coverage or payments for some or all contraceptive services; or
(ii) A plan, issuer, or third party administrator that provides or
arranges such coverage or payments.
(b) Objecting individuals. Guidelines issued under Sec.
147.130(a)(1)(iv) by the Health Resources and Services Administration
must not provide for or support the requirement of coverage or payments
for contraceptive services with respect to individuals who object as
specified in this paragraph (b), and nothing in Sec. 147.130(a)(1)(iv),
26 CFR 54.9815-2713(a)(1)(iv), or 29 CFR 2590.715-2713(a)(1)(iv) may be
construed to prevent a willing health insurance issuer offering group or
individual health insurance coverage, and as applicable, a willing plan
sponsor of a group health plan, from offering a separate policy,
certificate or contract of insurance or a separate group health plan or
benefit package option, to any group health plan sponsor (with respect
to an individual) or individual, as applicable, who objects to coverage
or payments for some or all contraceptive services based on sincerely
held religious beliefs. Under this exemption, if an individual objects
to some but not all contraceptive services, but the issuer, and as
applicable, plan sponsor, are willing to provide the plan sponsor or
individual, as applicable, with a separate policy, certificate or
contract of insurance or a separate group health plan or benefit package
option that omits all contraceptives, and the individual agrees, then
the exemption applies as if the individual objects to all contraceptive
services.
(c) Definition. For the purposes of this section, reference to
``contraceptive'' services, benefits, or coverage includes contraceptive
or sterilization items, procedures, or services, or related patient
education or counseling, to the extent specified for purposes of Sec.
147.130(a)(1)(iv).
(d) Severability. Any provision of this section held to be invalid
or unenforceable by its terms, or as applied to any person or
circumstance, shall be construed so as to continue to give maximum
effect to the provision permitted by law, unless such holding shall be
one of utter invalidity or unenforceability, in which event the
provision shall be severable from this section and shall not affect the
remainder thereof or the application of the provision to persons not
similarly situated or to dissimilar circumstances.
[82 FR 47835, Oct. 13, 2017, as amended at 83 FR 57590, Nov. 15, 2018]
Sec. 147.133 Moral exemptions in connection with coverage of
certain preventive health services.
(a) Objecting entities. (1) Guidelines issued under Sec.
147.130(a)(1)(iv) by the Health Resources and Services Administration
must not provide for or support the requirement of coverage or payments
for contraceptive services with respect to a group health plan
established or maintained by an objecting organization, or health
insurance coverage offered or arranged by an objecting organization, to
the extent of the objections specified below. Thus the Health Resources
and Service Administration will exempt from any guidelines' requirements
that relate to the provision of contraceptive services:
(i) A group health plan and health insurance coverage provided in
connection with a group health plan to the extent one of the following
non-governmental plan sponsors object as specified in paragraph (a)(2)
of this section:
(A) A nonprofit organization; or
(B) A for-profit entity that has no publicly traded ownership
interests (for this purpose, a publicly traded ownership interest is any
class of common equity securities required to be registered under
section 12 of the Securities Exchange Act of 1934);
(ii) An institution of higher education as defined in 20 U.S.C.
1002, which is non-governmental, in its arrangement of student health
insurance coverage, to the extent that institution objects as specified
in paragraph (a)(2) of this section. In the case of student health
insurance coverage, this section is applicable in a manner comparable to
its applicability to group health insurance coverage provided in
connection with a group health plan established or maintained by a plan
sponsor that is an employer, and references to
[[Page 133]]
``plan participants and beneficiaries'' will be interpreted as
references to student enrollees and their covered dependents; and
(iii) A health insurance issuer offering group or individual
insurance coverage to the extent the issuer objects as specified in
paragraph (a)(2) of this section. Where a health insurance issuer
providing group health insurance coverage is exempt under paragraph
(a)(1)(iii) of this section, the group health plan established or
maintained by the plan sponsor with which the health insurance issuer
contracts remains subject to any requirement to provide coverage for
contraceptive services under Guidelines issued under Sec.
147.130(a)(1)(iv) unless it is also exempt from that requirement.
(2) The exemption of this paragraph (a) will apply to the extent
that an entity described in paragraph (a)(1) of this section objects,
based on its sincerely held moral convictions, to its establishing,
maintaining, providing, offering, or arranging for (as applicable):
(i) Coverage or payments for some or all contraceptive services; or
(ii) A plan, issuer, or third party administrator that provides or
arranges such coverage or payments.
(b) Objecting individuals. Guidelines issued under Sec.
147.130(a)(1)(iv) by the Health Resources and Services Administration
must not provide for or support the requirement of coverage or payments
for contraceptive services with respect to individuals who object as
specified in this paragraph (b), and nothing in Sec. 147.130(a)(1)(iv),
26 CFR 54.9815-2713(a)(1)(iv), or 29 CFR 2590.715-2713(a)(1)(iv) may be
construed to prevent a willing health insurance issuer offering group or
individual health insurance coverage, and as applicable, a willing plan
sponsor of a group health plan, from offering a separate policy,
certificate or contract of insurance or a separate group health plan or
benefit package option, to any group health plan sponsor (with respect
to an individual) or individual, as applicable, who objects to coverage
or payments for some or all contraceptive services based on sincerely
held moral convictions. Under this exemption, if an individual objects
to some but not all contraceptive services, but the issuer, and as
applicable, plan sponsor, are willing to provide the plan sponsor or
individual, as applicable, with a separate policy, certificate or
contract of insurance or a separate group health plan or benefit package
option that omits all contraceptives, and the individual agrees, then
the exemption applies as if the individual objects to all contraceptive
services.
(c) Definition. For the purposes of this section, reference to
``contraceptive'' services, benefits, or coverage includes contraceptive
or sterilization items, procedures, or services, or related patient
education or counseling, to the extent specified for purposes of Sec.
147.130(a)(1)(iv).
(d) Severability. Any provision of this section held to be invalid
or unenforceable by its terms, or as applied to any person or
circumstance, shall be construed so as to continue to give maximum
effect to the provision permitted by law, unless such holding shall be
one of utter invalidity or unenforceability, in which event the
provision shall be severable from this section and shall not affect the
remainder thereof or the application of the provision to persons not
similarly situated or to dissimilar circumstances.
[82 FR 47861, Oct. 13, 2017, as amended at 83 FR 57630, Nov. 15, 2018]
Sec. 147.136 Internal claims and appeals and external review
processes.
(a) Scope and definitions--(1) Scope. This section sets forth
requirements with respect to internal claims and appeals and external
review processes for group health plans and health insurance issuers
that are not grandfathered health plans under Sec. 147.140. Paragraph
(b) of this section provides requirements for internal claims and
appeals processes. Paragraph (c) of this section sets forth rules
governing the applicability of State external review processes.
Paragraph (d) of this section sets forth a Federal external review
process for plans and issuers not subject to an applicable State
external review process. Paragraph (e) of this section prescribes
requirements for ensuring that notices required to be provided under
this section are provided in a culturally and linguistically appropriate
[[Page 134]]
manner. Paragraph (f) of this section describes the authority of the
Secretary to deem certain external review processes in existence on
March 23, 2010 as in compliance with paragraph (c) or (d) of this
section.
(2) Definitions. For purposes of this section, the following
definitions apply--
(i) Adverse benefit determination. An adverse benefit determination
means an adverse benefit determination as defined in 29 CFR 2560.503-1,
as well as any rescission of coverage, as described in Sec. 147.128
(whether or not, in connection with the rescission, there is an adverse
effect on any particular benefit at that time).
(ii) Appeal (or internal appeal). An appeal or internal appeal means
review by a plan or issuer of an adverse benefit determination, as
required in paragraph (b) of this section.
(iii) Claimant. Claimant means an individual who makes a claim under
this section. For purposes of this section, references to claimant
include a claimant's authorized representative.
(iv) External review. External review means a review of an adverse
benefit determination (including a final internal adverse benefit
determination) conducted pursuant to an applicable State external review
process described in paragraph (c) of this section or the Federal
external review process of paragraph (d) of this section.
(v) Final internal adverse benefit determination. A final internal
adverse benefit determination means an adverse benefit determination
that has been upheld by a plan or issuer at the completion of the
internal appeals process applicable under paragraph (b) of this section
(or an adverse benefit determination with respect to which the internal
appeals process has been exhausted under the deemed exhaustion rules of
paragraph (b)(2)(ii)(F) of this section).
(vi) Final external review decision. A final external review
decision means a determination by an independent review organization at
the conclusion of an external review.
(vii) Independent review organization (or IRO). An independent
review organization (or IRO) means an entity that conducts independent
external reviews of adverse benefit determinations and final internal
adverse benefit determinations pursuant to paragraph (c) or (d) of this
section.
(viii) NAIC Uniform Model Act. The NAIC Uniform Model Act means the
Uniform Health Carrier External Review Model Act promulgated by the
National Association of Insurance Commissioners in place on July 23,
2010.
(b) Internal claims and appeals process--(1) In general. A group
health plan and a health insurance issuer offering group or individual
health insurance coverage must implement an effective internal claims
and appeals process, as described in this paragraph (b).
(2) Requirements for group health plans and group health insurance
issuers. A group health plan and a health insurance issuer offering
group health insurance coverage must comply with all the requirements of
this paragraph (b)(2). In the case of health insurance coverage offered
in connection with a group health plan, if either the plan or the issuer
complies with the internal claims and appeals process of this paragraph
(b)(2), then the obligation to comply with this paragraph (b)(2) is
satisfied for both the plan and the issuer with respect to the health
insurance coverage.
(i) Minimum internal claims and appeals standards. A group health
plan and a health insurance issuer offering group health insurance
coverage must comply with all the requirements applicable to group
health plans under 29 CFR 2560.503-1, except to the extent those
requirements are modified by paragraph (b)(2)(ii) of this section.
Accordingly, under this paragraph (b), with respect to health insurance
coverage offered in connection with a group health plan, the group
health insurance issuer is subject to the requirements in 29 CFR
2560.503-1 to the same extent as the group health plan.
(ii) Additional standards. In addition to the requirements in
paragraph (b)(2)(i) of this section, the internal claims and appeals
processes of a group health plan and a health insurance issuer offering
group health insurance coverage must meet the requirements of this
paragraph (b)(2)(ii).
(A) Clarification of meaning of adverse benefit determination. For
purposes of
[[Page 135]]
this paragraph (b)(2), an ``adverse benefit determination'' includes an
adverse benefit determination as defined in paragraph (a)(2)(i) of this
section. Accordingly, in complying with 29 CFR 2560.503-1, as well as
the other provisions of this paragraph (b)(2), a plan or issuer must
treat a rescission of coverage (whether or not the rescission has an
adverse effect on any particular benefit at that time) as an adverse
benefit determination. (Rescissions of coverage are subject to the
requirements of Sec. 147.128.)
(B) Expedited notification of benefit determinations involving
urgent care. The requirements of 29 CFR 2560.503-1(f)(2)(i) (which
generally provide, among other things, in the case of urgent care claims
for notification of the plan's benefit determination (whether adverse or
not) as soon as possible, taking into account the medical exigencies,
but not later than 72 hours after the receipt of the claim) continue to
apply to the plan and issuer. For purposes of this paragraph
(b)(2)(ii)(B), a claim involving urgent care has the meaning given in 29
CFR 2560.503-1(m)(1), as determined by the attending provider, and the
plan or issuer shall defer to such determination of the attending
provider.
(C) Full and fair review. A plan and issuer must allow a claimant to
review the claim file and to present evidence and testimony as part of
the internal claims and appeals process. Specifically, in addition to
complying with the requirements of 29 CFR 2560.503-1(h)(2)--
(1) The plan or issuer must provide the claimant, free of charge,
with any new or additional evidence considered, relied upon, or
generated by the plan or issuer (or at the direction of the plan or
issuer) in connection with the claim; such evidence must be provided as
soon as possible and sufficiently in advance of the date on which the
notice of final internal adverse benefit determination is required to be
provided under 29 CFR 2560.503-1(i) to give the claimant a reasonable
opportunity to respond prior to that date; and
(2) Before the plan or issuer can issue a final internal adverse
benefit determination based on a new or additional rationale, the
claimant must be provided, free of charge, with the rationale; the
rationale must be provided as soon as possible and sufficiently in
advance of the date on which the notice of final internal adverse
benefit determination is required to be provided under 29 CFR 2560.503-
1(i) to give the claimant a reasonable opportunity to respond prior to
that date. Notwithstanding the rules of 29 CFR 2560.503-1(i), if the new
or additional evidence is received so late that it would be impossible
to provide it to the claimant in time for the claimant to have a
reasonable opportunity to respond, the period for providing a notice of
final internal adverse benefit determination is tolled until such time
as the claimant has a reasonable opportunity to respond. After the
claimant responds, or has a reasonable opportunity to respond but fails
to do so, the plan administrator shall notify the claimant of the plan's
benefit determination as soon as a plan acting in a reasonable and
prompt fashion can provide the notice, taking into account the medical
exigencies.
(D) Avoiding conflicts of interest. In addition to the requirements
of 29 CFR 2560.503-1(b) and (h) regarding full and fair review, the plan
and issuer must ensure that all claims and appeals are adjudicated in a
manner designed to ensure the independence and impartiality of the
persons involved in making the decision. Accordingly, decisions
regarding hiring, compensation, termination, promotion, or other similar
matters with respect to any individual (such as a claims adjudicator or
medical expert) must not be made based upon the likelihood that the
individual will support the denial of benefits.
(E) Notice. A plan and issuer must provide notice to individuals, in
a culturally and linguistically appropriate manner (as described in
paragraph (e) of this section) that complies with the requirements of 29
CFR 2560.503-1(g) and (j). The plan and issuer must also comply with the
additional requirements of this paragraph (b)(2)(ii)(E).
(1) The plan and issuer must ensure that any notice of adverse
benefit determination or final internal adverse benefit determination
includes information sufficient to identify the claim involved
(including the date of service, the health care provider, the claim
[[Page 136]]
amount (if applicable), and a statement describing the availability,
upon request, of the diagnosis code and its corresponding meaning, and
the treatment code and its corresponding meaning).
(2) The plan and issuer must provide to participants, beneficiaries
and enrollees, as soon as practicable, upon request, the diagnosis code
and its corresponding meaning, and the treatment code and its
corresponding meaning, associated with any adverse benefit determination
or final internal adverse benefit determination. The plan or issuer must
not consider a request for such diagnosis and treatment information, in
itself, to be a request for an internal appeal under this paragraph (b)
or an external review under paragraphs (c) and (d) of this section.
(3) The plan and issuer must ensure that the reason or reasons for
the adverse benefit determination or final internal adverse benefit
determination includes the denial code and its corresponding meaning, as
well as a description of the plan's or issuer's standard, if any, that
was used in denying the claim. In the case of a notice of final internal
adverse benefit determination, this description must include a
discussion of the decision.
(4) The plan and issuer must provide a description of available
internal appeals and external review processes, including information
regarding how to initiate an appeal.
(5) The plan and issuer must disclose the availability of, and
contact information for, any applicable office of health insurance
consumer assistance or ombudsman established under PHS Act section 2793
to assist individuals with the internal claims and appeals and external
review processes.
(F) Deemed exhaustion of internal claims and appeals processes--(1)
In the case of a plan or issuer that fails to strictly adhere to all the
requirements of this paragraph (b)(2) with respect to a claim, the
claimant is deemed to have exhausted the internal claims and appeals
process of this paragraph (b), except as provided in paragraph
(b)(2)(ii)(F)(2) of this section. Accordingly the claimant may initiate
an external review under paragraph (c) or (d) of this section, as
applicable. The claimant is also entitled to pursue any available
remedies under section 502(a) of ERISA or under State law, as
applicable, on the basis that the plan or issuer has failed to provide a
reasonable internal claims and appeals process that would yield a
decision on the merits of the claim. If a claimant chooses to pursue
remedies under section 502(a) of ERISA under such circumstances, the
claim or appeal is deemed denied on review without the exercise of
discretion by an appropriate fiduciary.
(2) Notwithstanding paragraph (b)(2)(ii)(F)(1) of this section, the
internal claims and appeals process of this paragraph (b) will not be
deemed exhausted based on de minimis violations that do not cause, and
are not likely to cause, prejudice or harm to the claimant so long as
the plan or issuer demonstrates that the violation was for good cause or
due to matters beyond the control of the plan or issuer and that the
violation occurred in the context of an ongoing, good faith exchange of
information between the plan and the claimant. This exception is not
available if the violation is part of a pattern or practice of
violations by the plan or issuer. The claimant may request a written
explanation of the violation from the plan or issuer, and the plan or
issuer must provide such explanation within 10 days, including a
specific description of its bases, if any, for asserting that the
violation should not cause the internal claims and appeals process of
this paragraph (b) to be deemed exhausted. If an external reviewer or a
court rejects the claimant's request for immediate review under
paragraph (b)(2)(ii)(F)(1) of this section on the basis that the plan
met the standards for the exception under this paragraph
(b)(2)(ii)(F)(2), the claimant has the right to resubmit and pursue the
internal appeal of the claim. In such a case, within a reasonable time
after the external reviewer or court rejects the claim for immediate
review (not to exceed 10 days), the plan shall provide the claimant with
notice of the opportunity to resubmit and pursue the internal appeal of
the claim. Time periods for re-filing the claim shall begin to run upon
claimant's receipt of such notice.
[[Page 137]]
(iii) Requirement to provide continued coverage pending the outcome
of an appeal. A plan and issuer subject to the requirements of this
paragraph (b)(2) are required to provide continued coverage pending the
outcome of an appeal. For this purpose, the plan and issuer must comply
with the requirements of 29 CFR 2560.503-1(f)(2)(ii), which generally
provides that benefits for an ongoing course of treatment cannot be
reduced or terminated without providing advance notice and an
opportunity for advance review.
(3) Requirements for individual health insurance issuers. A health
insurance issuer offering individual health insurance coverage must
comply with all the requirements of this paragraph (b)(3).
(i) Minimum internal claims and appeals standards. A health
insurance issuer offering individual health insurance coverage must
comply with all the requirements of the ERISA internal claims and
appeals procedures applicable to group health plans under 29 CFR
2560.503-1 except for the requirements with respect to multiemployer
plans, and except to the extent those requirements are modified by
paragraph (b)(3)(ii) of this section. Accordingly, under this paragraph
(b), with respect to individual health insurance coverage, the issuer is
subject to the requirements in 29 CFR 2560.503-1 as if the issuer were a
group health plan.
(ii) Additional standards. In addition to the requirements in
paragraph (b)(3)(i) of this section, the internal claims and appeals
processes of a health insurance issuer offering individual health
insurance coverage must meet the requirements of this paragraph
(b)(3)(ii).
(A) Clarification of meaning of adverse benefit determination. For
purposes of this paragraph (b)(3), an adverse benefit determination
includes an adverse benefit determination as defined in paragraph
(a)(2)(i) of this section. Accordingly, in complying with 29 CFR
2560.503-1, as well as other provisions of this paragraph (b)(3), an
issuer must treat a rescission of coverage (whether or not the
rescission has an adverse effect on any particular benefit at that time)
and any decision to deny coverage in an initial eligibility
determination as an adverse benefit determination. (Rescissions of
coverage are subject to the requirements of Sec. 147.128.)
(B) Expedited notification of benefit determinations involving
urgent care. The requirements of 29 CFR 2560.503-1(f)(2)(i) (which
generally provide, among other things, in the case of urgent care claims
for notification of the issuer's benefit determination (whether adverse
or not) as soon as possible, taking into account the medical exigencies,
but not later than 72 hours after receipt of the claim) continue to
apply to the issuer. For purposes of this paragraph (b)(3)(ii)(B), a
claim involving urgent care has the meaning given in 29 CFR 2560.503-
1(m)(1), as determined by the attending provider, and the issuer shall
defer to such determination of the attending provider.
(C) Full and fair review. An issuer must allow a claimant to review
the claim file and to present evidence and testimony as part of the
internal claims and appeals process. Specifically, in addition to
complying with the requirements of 29 CFR 2560.503-1(h)(2)--
(1) The issuer must provide the claimant, free of charge, with any
new or additional evidence considered, relied upon, or generated by the
issuer (or at the direction of the issuer) in connection with the claim;
such evidence must be provided as soon as possible and sufficiently in
advance of the date on which the notice of final internal adverse
benefit determination is required to be provided under 29 CFR 2560.503-
1(i) to give the claimant a reasonable opportunity to respond prior to
that date; and
(2) Before the issuer can issue a final internal adverse benefit
determination based on a new or additional rationale, the claimant must
be provided, free of charge, with the rationale; the rationale must be
provided as soon as possible and sufficiently in advance of the date on
which the notice of final internal adverse benefit determination is
required to be provided under 29 CFR 2560.503-1(i) to give the claimant
a reasonable opportunity to respond prior to that date. Notwithstanding
the rules of 29 CFR 2560.503-1(i), if the new or additional evidence is
received so late that
[[Page 138]]
it would be impossible to provide it to the claimant in time for the
claimant to have a reasonable opportunity to respond, the period for
providing a notice of final internal adverse benefit determination is
tolled until such time as the claimant has a reasonable opportunity to
respond. After the claimant responds, or has a reasonable opportunity to
respond but fails to do so, the issuer shall notify the claimant of the
issuer's determination as soon as an issuer acting in a reasonable and
prompt fashion can provide the notice, taking into account the medical
exigencies.
(D) Avoiding conflicts of interest. In addition to the requirements
of 29 CFR 2560.503-1(b) and (h) regarding full and fair review, the
issuer must ensure that all claims and appeals are adjudicated in a
manner designed to ensure the independence and impartiality of the
persons involved in making the decision. Accordingly, decisions
regarding hiring, compensation, termination, promotion, or other similar
matters with respect to any individual (such as a claims adjudicator or
medical expert) must not be made based upon the likelihood that the
individual will support the denial of benefits.
(E) Notice. An issuer must provide notice to individuals, in a
culturally and linguistically appropriate manner (as described in
paragraph (e) of this section) that complies with the requirements of 29
CFR 2560.503-1(g) and (j). The issuer must also comply with the
additional requirements of this paragraph (b)(3)(ii)(E).
(1) The issuer must ensure that any notice of adverse benefit
determination or final internal adverse benefit determination includes
information sufficient to identify the claim involved (including the
date of service, the name of the health care provider, the claim amount
(if applicable), and a statement describing the availability, upon
request, of the diagnosis code and its corresponding meaning, and the
treatment code and its corresponding meaning).
(2) The issuer must provide to participants and beneficiaries, as
soon as practicable, upon request, the diagnosis code and its
corresponding meaning, and the treatment code and its corresponding
meaning, associated with any adverse benefit determination or final
internal adverse benefit determination. The issuer must not consider a
request for such diagnosis and treatment information, in itself, to be a
request for an internal appeal under this paragraph (b) or an external
review under paragraphs (c) and (d) of this section.
(3) The issuer must ensure that the reason or reasons for the
adverse benefit determination or final internal adverse benefit
determination includes the denial code and its corresponding meaning, as
well as a description of the issuer's standard, if any, that was used in
denying the claim. In the case of a notice of final internal adverse
benefit determination, this description must include a discussion of the
decision.
(4) The issuer must provide a description of available internal
appeals and external review processes, including information regarding
how to initiate an appeal.
(5) The issuer must disclose the availability of, and contact
information for, any applicable office of health insurance consumer
assistance or ombudsman established under PHS Act section 2793 to assist
individuals with the internal claims and appeals and external review
processes.
(F) Deemed exhaustion of internal claims and appeals processes. (1)
In the case of an issuer that fails to adhere to all the requirements of
this paragraph (b)(3) with respect to a claim, the claimant is deemed to
have exhausted the internal claims and appeals process of this paragraph
(b), except as provided in paragraph (b)(3)(ii)(F)(2) of this section.
Accordingly, the claimant may initiate an external review under
paragraph (c) or (d) of this section, as applicable. The claimant is
also entitled to pursue any available remedies under State law, as
applicable, on the basis that the issuer has failed to provide a
reasonable internal claims and appeals process that would yield a
decision on the merits of the claim.
(2) Notwithstanding paragraph (b)(3)(ii)(F)(1) of this section, the
internal claims and appeals process of this paragraph (b) will not be
deemed exhausted based on de minimis violations that do not cause, and
are not likely to
[[Page 139]]
cause, prejudice or harm to the claimant so long as the issuer
demonstrates that the violation was for good cause or due to matters
beyond the control of the issuer and that the violation occurred in the
context of an ongoing, good faith exchange of information between the
issuer and the claimant. This exception is not available if the
violation is part of a pattern or practice of violations by the issuer.
The claimant may request a written explanation of the violation from the
issuer, and the issuer must provide such explanation within 10 days,
including a specific description of its bases, if any, for asserting
that the violation should not cause the internal claims and appeals
process of this paragraph (b) to be deemed exhausted. If an external
reviewer or a court rejects the claimant's request for immediate review
under paragraph (b)(3)(ii)(F)(1) of this section on the basis that the
issuer met the standards for the exception under this paragraph
(b)(3)(ii)(F)(2), the claimant has the right to resubmit and pursue the
internal appeal of the claim. In such a case, within a reasonable time
after the external reviewer or court rejects the claim for immediate
review (not to exceed 10 days), the issuer shall provide the claimant
with notice of the opportunity to resubmit and pursue the internal
appeal of the claim. Time periods for re-filing the claim shall begin to
run upon claimant's receipt of such notice.
(G) One level of internal appeal. Notwithstanding the requirements
in 29 CFR 2560.503-1(c)(3), a health insurance issuer offering
individual health insurance coverage must provide for only one level of
internal appeal before issuing a final determination.
(H) Recordkeeping requirements. A health insurance issuer offering
individual health insurance coverage must maintain for six years records
of all claims and notices associated with the internal claims and
appeals process, including the information detailed in paragraph
(b)(3)(ii)(E) of this section and any other information specified by the
Secretary. An issuer must make such records available for examination by
the claimant or State or Federal oversight agency upon request.
(iii) Requirement to provide continued coverage pending the outcome
of an appeal. An issuer subject to the requirements of this paragraph
(b)(3) is required to provide continued coverage pending the outcome of
an appeal. For this purpose, the issuer must comply with the
requirements of 29 CFR 2560.503-1(f)(2)(ii) as if the issuer were a
group health plan, so that the issuer cannot reduce or terminate an
ongoing course of treatment without providing advance notice and an
opportunity for advance review.
(c) State standards for external review--(1) In general. (i) If a
State external review process that applies to and is binding on a health
insurance issuer offering group or individual health insurance coverage
includes at a minimum the consumer protections in the NAIC Uniform Model
Act, then the issuer must comply with the applicable State external
review process and is not required to comply with the Federal external
review process of paragraph (d) of this section. In such a case, to the
extent that benefits under a group health plan are provided through
health insurance coverage, the group health plan is not required to
comply with either this paragraph (c) or the Federal external review
process of paragraph (d) of this section.
(ii) To the extent that a group health plan provides benefits other
than through health insurance coverage (that is, the plan is self-
insured) and is subject to a State external review process that applies
to and is binding on the plan (for example, is not preempted by ERISA)
and the State external review process includes at a minimum the consumer
protections in the NAIC Uniform Model Act, then the plan must comply
with the applicable State external review process and is not required to
comply with the Federal external review process of paragraph (d) of this
section. Where a self-insured plan is not subject to an applicable State
external review process, but the State has chosen to expand access to
its process for plans that are not subject to the applicable State laws,
the plan may choose to comply with either the applicable State external
review process or the Federal external review process of paragraph (d)
of this section.
[[Page 140]]
(iii) If a plan or issuer is not required under paragraph (c)(1)(i)
or (c)(1)(ii) of this section to comply with the requirements of this
paragraph (c), then the plan or issuer must comply with the Federal
external review process of paragraph (d) of this section, except to the
extent, in the case of a plan, the plan is not required under paragraph
(c)(1)(i) of this section to comply with paragraph (d) of this section.
(2) Minimum standards for State external review processes. An
applicable State external review process must meet all the minimum
consumer protections in this paragraph (c)(2). The Department of Health
and Human Services will determine whether State external review
processes meet these requirements.
(i) The State process must provide for the external review of
adverse benefit determinations (including final internal adverse benefit
determinations) by issuers (or, if applicable, plans) that are based on
the issuer's (or plan's) requirements for medical necessity,
appropriateness, health care setting, level of care, or effectiveness of
a covered benefit.
(ii) The State process must require issuers (or, if applicable,
plans) to provide effective written notice to claimants of their rights
in connection with an external review for an adverse benefit
determination.
(iii) To the extent the State process requires exhaustion of an
internal claims and appeals process, exhaustion must be unnecessary
where the issuer (or, if applicable, the plan) has waived the
requirement; the issuer (or the plan) is considered to have exhausted
the internal claims and appeals process under applicable law (including
by failing to comply with any of the requirements for the internal
appeal process, as outlined in paragraph (b)(2) of this section); or the
claimant has applied for expedited external review at the same time as
applying for an expedited internal appeal.
(iv) The State process provides that the issuer (or, if applicable,
the plan) against which a request for external review is filed must pay
the cost of the IRO for conducting the external review. Notwithstanding
this requirement, a State external review process that expressly
authorizes, as of November 18, 2015, a nominal filing fee may continue
to permit such fees. For this purpose, to be considered nominal, a
filing fee must not exceed $25, it must be refunded to the claimant if
the adverse benefit determination (or final internal adverse benefit
determination) is reversed through external review, it must be waived if
payment of the fee would impose an undue financial hardship, and the
annual limit on filing fees for any claimant within a single plan year
must not exceed $75.
(v) The State process may not impose a restriction on the minimum
dollar amount of a claim for it to be eligible for external review.
Thus, the process may not impose, for example, a $500 minimum claims
threshold.
(vi) The State process must allow at least four months after the
receipt of a notice of an adverse benefit determination or final
internal adverse benefit determination for a request for an external
review to be filed.
(vii) The State process must provide that IROs will be assigned on a
random basis or another method of assignment that assures the
independence and impartiality of the assignment process (such as
rotational assignment) by a State or independent entity, and in no event
selected by the issuer, plan, or the individual.
(viii) The State process must provide for maintenance of a list of
approved IROs qualified to conduct the external review based on the
nature of the health care service that is the subject of the review. The
State process must provide for approval only of IROs that are accredited
by a nationally recognized private accrediting organization.
(ix) The State process must provide that any approved IRO has no
conflicts of interest that will influence its independence. Thus, the
IRO may not own or control, or be owned or controlled by a health
insurance issuer, a group health plan, the sponsor of a group health
plan, a trade association of plans or issuers, or a trade association of
health care providers. The State process must further provide that the
IRO and the clinical reviewer assigned to conduct an external review may
not have a material professional, familial, or financial conflict of
interest with
[[Page 141]]
the issuer or plan that is the subject of the external review; the
claimant (and any related parties to the claimant) whose treatment is
the subject of the external review; any officer, director, or management
employee of the issuer; the plan administrator, plan fiduciaries, or
plan employees; the health care provider, the health care provider's
group, or practice association recommending the treatment that is
subject to the external review; the facility at which the recommended
treatment would be provided; or the developer or manufacturer of the
principal drug, device, procedure, or other therapy being recommended.
(x) The State process allows the claimant at least five business
days to submit to the IRO in writing additional information that the IRO
must consider when conducting the external review, and it requires that
the claimant is notified of the right to do so. The process must also
require that any additional information submitted by the claimant to the
IRO must be forwarded to the issuer (or, if applicable, the plan) within
one business day of receipt by the IRO.
(xi) The State process must provide that the decision is binding on
the plan or issuer, as well as the claimant except to the extent the
other remedies are available under State or Federal law, and except that
the requirement that the decision be binding shall not preclude the plan
or issuer from making payment on the claim or otherwise providing
benefits at any time, including after a final external review decision
that denies the claim or otherwise fails to require such payment or
benefits. For this purpose, the plan or issuer must provide benefits
(including by making payment on the claim) pursuant to the final
external review decision without delay, regardless of whether the plan
or issuer intends to seek judicial review of the external review
decision and unless or until there is a judicial decision otherwise.
(xii) The State process must require, for standard external review,
that the IRO provide written notice to the issuer (or, if applicable,
the plan) and the claimant of its decision to uphold or reverse the
adverse benefit determination (or final internal adverse benefit
determination) within no more than 45 days after the receipt of the
request for external review by the IRO.
(xiii) The State process must provide for an expedited external
review if the adverse benefit determination (or final internal adverse
benefit determination) concerns an admission, availability of care,
continued stay, or health care service for which the claimant received
emergency services, but has not been discharged from a facility; or
involves a medical condition for which the standard external review time
frame would seriously jeopardize the life or health of the claimant or
jeopardize the claimant's ability to regain maximum function. As
expeditiously as possible but within no more than 72 hours after the
receipt of the request for expedited external review by the IRO, the IRO
must make its decision to uphold or reverse the adverse benefit
determination (or final internal adverse benefit determination) and
notify the claimant and the issuer (or, if applicable, the plan) of the
determination. If the notice is not in writing, the IRO must provide
written confirmation of the decision within 48 hours after the date of
the notice of the decision.
(xiv) The State process must require that issuers (or, if
applicable, plans) include a description of the external review process
in or attached to the summary plan description, policy, certificate,
membership booklet, outline of coverage, or other evidence of coverage
it provides to participants, beneficiaries, or enrollees, substantially
similar to what is set forth in section 17 of the NAIC Uniform Model
Act.
(xv) The State process must require that IROs maintain written
records and make them available upon request to the State, substantially
similar to what is set forth in section 15 of the NAIC Uniform Model
Act.
(xvi) The State process follows procedures for external review of
adverse benefit determinations (or final internal adverse benefit
determinations) involving experimental or investigational treatment,
substantially similar to what is set forth in section 10 of the NAIC
Uniform Model Act.
(3) Transition period for external review processes--(i) Through
December 31,
[[Page 142]]
2017, an applicable State external review process applicable to a health
insurance issuer or group health plan is considered to meet the
requirements of PHS Act section 2719(b). Accordingly, through December
31, 2017, an applicable State external review process will be considered
binding on the issuer or plan (in lieu of the requirements of the
Federal external review process). If there is no applicable State
external review process, the issuer or plan is required to comply with
the requirements of the Federal external review process in paragraph (d)
of this section.
(ii) An applicable State external review process must apply for
final internal adverse benefit determinations (or, in the case of
simultaneous internal appeal and external review, adverse benefit
determinations) provided on or after January 1, 2018. The Federal
external review process will apply to such internal adverse benefit
determinations unless the Department of Health and Human Services
determines that a State law meets all the minimum standards of paragraph
(c)(2) of this section. Through December 31, 2017, a State external
review process applicable to a health insurance issuer or group health
plan may be considered to meet the minimum standards of paragraph (c)(2)
of this section, if it meets the temporary standards established by the
Secretary in guidance for a process similar to the NAIC Uniform Model
Act.
(d) Federal external review process. A plan or issuer not subject to
an applicable State external review process under paragraph (c) of this
section must provide an effective Federal external review process in
accordance with this paragraph (d) (except to the extent, in the case of
a plan, the plan is described in paragraph (c)(1)(i) of this section as
not having to comply with this paragraph (d)). In the case of health
insurance coverage offered in connection with a group health plan, if
either the plan or the issuer complies with the Federal external review
process of this paragraph (d), then the obligation to comply with this
paragraph (d) is satisfied for both the plan and the issuer with respect
to the health insurance coverage. A Multi State Plan or MSP, as defined
by 45 CFR 800.20, must provide an effective Federal external review
process in accordance with this paragraph (d). In such circumstances,
the requirement to provide external review under this paragraph (d) is
satisfied when a Multi State Plan or MSP complies with standards
established by the Office of Personnel Management.
(1) Scope--(i) In general. The Federal external review process
established pursuant to this paragraph (d) applies to the following:
(A) An adverse benefit determination (including a final internal
adverse benefit determination) by a plan or issuer that involves medical
judgment (including, but not limited to, those based on the plan's or
issuer's requirements for medical necessity, appropriateness, health
care setting, level of care, or effectiveness of a covered benefit; its
determination that a treatment is experimental or investigational; its
determination whether a participant or beneficiary is entitled to a
reasonable alternative standard for a reward under a wellness program;
or its determination whether a plan or issuer is complying with the
nonquantitative treatment limitation provisions of Code section 9812 and
Sec. 54.9812, which generally require, among other things, parity in
the application of medical management techniques), as determined by the
external reviewer. (A denial, reduction, termination, or a failure to
provide payment for a benefit based on a determination that a
participant or beneficiary fails to meet the requirements for
eligibility under the terms of a group health plan or health insurance
coverage is not eligible for the Federal external review process under
this paragraph (d)); and
(B) A rescission of coverage (whether or not the rescission has any
effect on any particular benefit at that time).
(ii) Examples. The rules of paragraph (d)(1)(i) of this section are
illustrated by the following examples:
Example 1. (i) Facts. A group health plan provides coverage for 30
physical therapy visits generally. After the 30th visit, coverage is
provided only if the service is preauthorized pursuant to an approved
treatment plan that takes into account medical necessity using the
plan's definition of the term. Individual A seeks coverage for a 31st
physical therapy visit. A's health care provider submits a
[[Page 143]]
treatment plan for approval, but it is not approved by the plan, so
coverage for the 31st visit is not preauthorized. With respect to the
31st visit, A receives a notice of final internal adverse benefit
determination stating that the maximum visit limit is exceeded.
(ii) Conclusion. In this Example 1, the plan's denial of benefits is
based on medical necessity and involves medical judgment. Accordingly,
the claim is eligible for external review under paragraph (d)(1)(i) of
this section. Moreover, the plan's notification of final internal
adverse benefit determination is inadequate under paragraphs (b)(2)(i)
and (b)(2)(ii)(E)(3) of this section because it fails to make clear that
the plan will pay for more than 30 visits if the service is
preauthorized pursuant to an approved treatment plan that takes into
account medical necessity using the plan's definition of the term.
Accordingly, the notice of final internal adverse benefit determination
should refer to the plan provision governing the 31st visit and should
describe the plan's standard for medical necessity, as well as how the
treatment fails to meet the plan's standard.
Example 2. (i) Facts. A group health plan does not provide coverage
for services provided out of network, unless the service cannot
effectively be provided in network. Individual B seeks coverage for a
specialized medical procedure from an out-of-network provider because B
believes that the procedure cannot be effectively provided in network. B
receives a notice of final internal adverse benefit determination
stating that the claim is denied because the provider is out-of-network.
(ii) Conclusion. In this Example 2, the plan's denial of benefits is
based on whether a service can effectively be provided in network and,
therefore, involves medical judgment. Accordingly, the claim is eligible
for external review under paragraph (d)(1)(i) of this section. Moreover,
the plan's notice of final internal adverse benefit determination is
inadequate under paragraphs (b)(2)(i) and (b)(2)(ii)(E)(3) of this
section because the plan does provide benefits for services on an out-
of-network basis if the services cannot effectively be provided in
network. Accordingly, the notice of final internal adverse benefit
determination is required to refer to the exception to the out-of-
network exclusion and should describe the plan's standards for
determining effectiveness of services, as well as how services available
to the claimant within the plan's network meet the plan's standard for
effectiveness of services.
(2) External review process standards. The Federal external review
process established pursuant to this paragraph (d) is considered similar
to the process set forth in the NAIC Uniform Model Act and, therefore
satisfies the requirements of paragraph (d)(2)) if such process provides
the following.
(i) Request for external review. A group health plan or health
insurance issuer must allow a claimant to file a request for an external
review with the plan or issuer if the request is filed within four
months after the date of receipt of a notice of an adverse benefit
determination or final internal adverse benefit determination. If there
is no corresponding date four months after the date of receipt of such a
notice, then the request must be filed by the first day of the fifth
month following the receipt of the notice. For example, if the date of
receipt of the notice is October 30, because there is no February 30,
the request must be filed by March 1. If the last filing date would fall
on a Saturday, Sunday, or Federal holiday, the last filing date is
extended to the next day that is not a Saturday, Sunday, or Federal
holiday.
(ii) Preliminary review--(A) In general. Within five business days
following the date of receipt of the external review request, the group
health plan or health insurance issuer must complete a preliminary
review of the request to determine whether:
(1) The claimant is or was covered under the plan or coverage at the
time the health care item or service was requested or, in the case of a
retrospective review, was covered under the plan or coverage at the time
the health care item or service was provided;
(2) The adverse benefit determination or the final adverse benefit
determination does not relate to the claimant's failure to meet the
requirements for eligibility under the terms of the group health plan or
health insurance coverage (e.g., worker classification or similar
determination);
(3) The claimant has exhausted the plan's or issuer's internal
appeal process unless the claimant is not required to exhaust the
internal appeals process under paragraph (b)(1) of this section; and
(4) The claimant has provided all the information and forms required
to process an external review.
(B) Within one business day after completion of the preliminary
review, the plan or issuer must issue a notification in writing to the
claimant. If
[[Page 144]]
the request is complete but not eligible for external review, such
notification must include the reasons for its ineligibility and current
contact information, including the phone number, for the Employee
Benefits Security Administration. If the request is not complete, such
notification must describe the information or materials needed to make
the request complete and the plan or issuer must allow a claimant to
perfect the request for external review within the four-month filing
period or within the 48 hour period following the receipt of the
notification, whichever is later.
(iii) Referral to Independent Review Organization--(A) In general.
The group health plan or health insurance issuer must assign an IRO that
is accredited by URAC or by similar nationally-recognized accrediting
organization to conduct the external review. The IRO referral process
must provide for the following:
(1) The plan or issuer must ensure that the IRO process is not
biased and ensures independence;
(2) The plan or issuer must contract with at least three (3) IROs
for assignments under the plan or coverage and rotate claims assignments
among them (or incorporate other independent, unbiased methods for
selection of IROs, such as random selection); and
(3) The IRO may not be eligible for any financial incentives based
on the likelihood that the IRO will support the denial of benefits.
(4) The IRO process may not impose any costs, including filing fees,
on the claimant requesting the external review.
(B) IRO contracts. A group health plan or health insurance issuer
must include the following standards in the contract between the plan or
issuer and the IRO:
(1) The assigned IRO will utilize legal experts where appropriate to
make coverage determinations under the plan or coverage.
(2) The assigned IRO will timely notify a claimant in writing
whether the request is eligible for external review. This notice will
include a statement that the claimant may submit in writing to the
assigned IRO, within ten business days following the date of receipt of
the notice, additional information. This additional information must be
considered by the IRO when conducting the external review. The IRO is
not required to, but may, accept and consider additional information
submitted after ten business days.
(3) Within five business days after the date of assignment of the
IRO, the plan or issuer must provide to the assigned IRO the documents
and any information considered in making the adverse benefit
determination or final internal adverse benefit determination. Failure
by the plan or issuer to timely provide the documents and information
must not delay the conduct of the external review. If the plan or issuer
fails to timely provide the documents and information, the assigned IRO
may terminate the external review and make a decision to reverse the
adverse benefit determination or final internal adverse benefit
determination. Within one business day after making the decision, the
IRO must notify the claimant and the plan.
(4) Upon receipt of any information submitted by the claimant, the
assigned IRO must within one business day forward the information to the
plan or issuer. Upon receipt of any such information, the plan or issuer
may reconsider its adverse benefit determination or final internal
adverse benefit determination that is the subject of the external
review. Reconsideration by the plan or issuer must not delay the
external review. The external review may be terminated as a result of
the reconsideration only if the plan decides, upon completion of its
reconsideration, to reverse its adverse benefit determination or final
internal adverse benefit determination and provide coverage or payment.
Within one business day after making such a decision, the plan must
provide written notice of its decision to the claimant and the assigned
IRO. The assigned IRO must terminate the external review upon receipt of
the notice from the plan or issuer.
(5) The IRO will review all of the information and documents timely
received. In reaching a decision, the assigned IRO will review the claim
de novo and not be bound by any decisions or conclusions reached during
the plan's or issuer's internal claims and
[[Page 145]]
appeals process applicable under paragraph (b). In addition to the
documents and information provided, the assigned IRO, to the extent the
information or documents are available and the IRO considers them
appropriate, will consider the following in reaching a decision:
(i) The claimant's medical records;
(ii) The attending health care professional's recommendation;
(iii) Reports from appropriate health care professionals and other
documents submitted by the plan or issuer, claimant, or the claimant's
treating provider;
(iv) The terms of the claimant's plan or coverage to ensure that the
IRO's decision is not contrary to the terms of the plan or coverage,
unless the terms are inconsistent with applicable law;
(v) Appropriate practice guidelines, which must include applicable
evidence-based standards and may include any other practice guidelines
developed by the Federal government, national or professional medical
societies, boards, and associations;
(vi) Any applicable clinical review criteria developed and used by
the plan or issuer, unless the criteria are inconsistent with the terms
of the plan or coverage or with applicable law; and
(vii) To the extent the final IRO decision maker is different from
the IRO's clinical reviewer, the opinion of such clinical reviewer,
after considering information described in this notice, to the extent
the information or documents are available and the clinical reviewer or
reviewers consider such information or documents appropriate.
(6) The assigned IRO must provide written notice of the final
external review decision within 45 days after the IRO receives the
request for the external review. The IRO must deliver the notice of the
final external review decision to the claimant and the plan or issuer.
(7) The assigned IRO's written notice of the final external review
decision must contain the following:
(i) A general description of the reason for the request for external
review, including information sufficient to identify the claim
(including the date or dates of service, the health care provider, the
claim amount (if applicable), and a statement describing the
availability, upon request, of the diagnosis code and its corresponding
meaning, the treatment code and its corresponding meaning, and the
reason for the plan's or issuer's denial);
(ii) The date the IRO received the assignment to conduct the
external review and the date of the IRO decision;
(iii) References to the evidence or documentation, including the
specific coverage provisions and evidence-based standards, considered in
reaching its decision;
(iv) A discussion of the principal reason or reasons for its
decision, including the rationale for its decision and any evidence-
based standards that were relied on in making its decision;
(v) A statement that the IRO's determination is binding except to
the extent that other remedies may be available under State or Federal
law to either the group health plan or health insurance issuer or to the
claimant, or to the extent the health plan or health insurance issuer
voluntarily makes payment on the claim or otherwise provides benefits at
any time, including after a final external review decision that denies
the claim or otherwise fails to require such payment or benefits;
(vi) A statement that judicial review may be available to the
claimant; and
(vii) Current contact information, including phone number, for any
applicable office of health insurance consumer assistance or ombudsman
established under PHS Act section 2793.
(viii) After a final external review decision, the IRO must maintain
records of all claims and notices associated with the external review
process for six years. An IRO must make such records available for
examination by the claimant, plan, issuer, or State or Federal oversight
agency upon request, except where such disclosure would violate State or
Federal privacy laws.
(iv) Reversal of plan's or issuer's decision. Upon receipt of a
notice of a final external review decision reversing the adverse benefit
determination or final adverse benefit determination, the plan or issuer
immediately must provide coverage or payment (including immediately
authorizing care or immediately paying benefits) for the claim.
[[Page 146]]
(3) Expedited external review. A group health plan or health
insurance issuer must comply with the following standards with respect
to an expedited external review:
(i) Request for external review. A group health plan or health
insurance issuer must allow a claimant to make a request for an
expedited external review with the plan or issuer at the time the
claimant receives:
(A) An adverse benefit determination if the adverse benefit
determination involves a medical condition of the claimant for which the
timeframe for completion of an expedited internal appeal under paragraph
(b) of this section would seriously jeopardize the life or health of the
claimant or would jeopardize the claimant's ability to regain maximum
function and the claimant has filed a request for an expedited internal
appeal; or
(B) A final internal adverse benefit determination, if the claimant
has a medical condition where the timeframe for completion of a standard
external review would seriously jeopardize the life or health of the
claimant or would jeopardize the claimant's ability to regain maximum
function, or if the final internal adverse benefit determination
concerns an admission, availability of care, continued stay, or health
care item or service for which the claimant received emergency services,
but has not been discharged from the facility.
(ii) Preliminary review. Immediately upon receipt of the request for
expedited external review, the plan or issuer must determine whether the
request meets the reviewability requirements set forth in paragraph
(d)(2)(ii) of this section for standard external review. The plan or
issuer must immediately send a notice that meets the requirements set
forth in paragraph (d)(2)(ii)(B) for standard review to the claimant of
its eligibility determination.
(iii) Referral to independent review organization. (A) Upon a
determination that a request is eligible for expedited external review
following the preliminary review, the plan or issuer will assign an IRO
pursuant to the requirements set forth in paragraph (d)(2)(iii) of this
section for standard review. The plan or issuer must provide or transmit
all necessary documents and information considered in making the adverse
benefit determination or final internal adverse benefit determination to
the assigned IRO electronically or by telephone or facsimile or any
other available expeditious method.
(B) The assigned IRO, to the extent the information or documents are
available and the IRO considers them appropriate, must consider the
information or documents described above under the procedures for
standard review. In reaching a decision, the assigned IRO must review
the claim de novo and is not bound by any decisions or conclusions
reached during the plan's or issuer's internal claims and appeals
process.
(iv) Notice of final external review decision. The plan's or
issuer's contract with the assigned IRO must require the IRO to provide
notice of the final external review decision, in accordance with the
requirements set forth in paragraph (d)(2)(iii)(B) of this section, as
expeditiously as the claimant's medical condition or circumstances
require, but in no event more than 72 hours after the IRO receives the
request for an expedited external review. If the notice is not in
writing, within 48 hours after the date of providing that notice, the
assigned IRO must provide written confirmation of the decision to the
claimant and the plan or issuer.
(4) Alternative, Federally-administered external review process.
Insured coverage not subject to an applicable State external review
process under paragraph (c) of this section and a self-insured
nonfederal governmental plan may elect to use either the Federal
external review process, as set forth under paragraph (d) of this
section or the Federally-administered external review process, as set
forth by HHS in guidance. In such circumstances, the requirement to
provide external review under this paragraph (d) is satisfied.
(e) Form and manner of notice--(1) In general. For purposes of this
section, a group health plan and a health insurance issuer offering
group or individual health insurance coverage are considered to provide
relevant notices in a culturally and linguistically appropriate manner
if the plan or issuer
[[Page 147]]
meets all the requirements of paragraph (e)(2) of this section with
respect to the applicable non-English languages described in paragraph
(e)(3) of this section.
(2) Requirements--(i) The plan or issuer must provide oral language
services (such as a telephone customer assistance hotline) that includes
answering questions in any applicable non-English language and providing
assistance with filing claims and appeals (including external review) in
any applicable non-English language;
(ii) The plan or issuer must provide, upon request, a notice in any
applicable non-English language; and
(iii) The plan or issuer must include in the English versions of all
notices, a statement prominently displayed in any applicable non-English
language clearly indicating how to access the language services provided
by the plan or issuer.
(3) Applicable non-English language. With respect to an address in
any United States county to which a notice is sent, a non-English
language is an applicable non-English language if ten percent or more of
the population residing in the county is literate only in the same non-
English language, as determined in guidance published by the Secretary.
(f) Secretarial authority. The Secretary may determine that the
external review process of a group health plan or health insurance
issuer, in operation as of March 23, 2010, is considered in compliance
with the applicable process established under paragraph (c) or (d) of
this section if it substantially meets the requirements of paragraph (c)
or (d) of this section, as applicable.
(g) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years (in the individual market, policy years) beginning on or after
January 1, 2017. Until the applicability date for this regulation, plans
and issuers are required to continue to comply with the corresponding
sections of 45 CFR parts 144, 146 and 147, contained in the 45 CFR,
parts 1 to 199, edition revised as of October 1, 2015.
[80 FR 72278, Nov. 18, 2015]
Sec. 147.138 Patient protections.
(a) Choice of health care professional--(1) Designation of primary
care provider--(i) In general. If a group health plan, or a health
insurance issuer offering group or individual health insurance coverage,
requires or provides for designation by a participant, beneficiary, or
enrollee of a participating primary care provider, then the plan or
issuer must permit each participant, beneficiary, or enrollee to
designate any participating primary care provider who is available to
accept the participant, beneficiary, or enrollee. In such a case, the
plan or issuer must comply with the rules of paragraph (a)(4) of this
section by informing each participant (in the individual market, primary
subscriber) of the terms of the plan or health insurance coverage
regarding designation of a primary care provider.
(ii) Construction. Nothing in paragraph (a)(1)(i) of this section is
to be construed to prohibit the application of reasonable and
appropriate geographic limitations with respect to the selection of
primary care providers, in accordance with the terms of the plan or
coverage, the underlying provider contracts, and applicable State law.
(iii) Example. The rules of this paragraph (a)(1) are illustrated by
the following example:
Example. (i) Facts. A group health plan requires individuals covered
under the plan to designate a primary care provider. The plan permits
each individual to designate any primary care provider participating in
the plan's network who is available to accept the individual as the
individual's primary care provider. If an individual has not designated
a primary care provider, the plan designates one until one has been
designated by the individual. The plan provides a notice that satisfies
the requirements of paragraph (a)(4) of this section regarding the
ability to designate a primary care provider.
(ii) Conclusion. In this Example, the plan has satisfied the
requirements of paragraph (a) of this section.
(2) Designation of pediatrician as primary care provider--(i) In
general. If a group health plan, or a health insurance issuer offering
group or individual health insurance coverage, requires or provides for
the designation of a participating primary care provider for a child by
a participant, beneficiary, or
[[Page 148]]
enrollee, the plan or issuer must permit the participant, beneficiary,
or enrollee to designate a physician (allopathic or osteopathic) who
specializes in pediatrics (including pediatric subspecialties, based on
the scope of that provider's license under applicable State law) as the
child's primary care provider if the provider participates in the
network of the plan or issuer and is available to accept the child. In
such a case, the plan or issuer must comply with the rules of paragraph
(a)(4) of this section by informing each participant (in the individual
market, primary subscriber) of the terms of the plan or health insurance
coverage regarding designation of a pediatrician as the child's primary
care provider.
(ii) Construction. Nothing in paragraph (a)(2)(i) of this section is
to be construed to waive any exclusions of coverage under the terms and
conditions of the plan or health insurance coverage with respect to
coverage of pediatric care.
(iii) Examples. The rules of this paragraph (a)(2) are illustrated
by the following examples:
Example 1. (i) Facts. A group health plan's HMO designates for each
participant a physician who specializes in internal medicine to serve as
the primary care provider for the participant and any beneficiaries.
Participant A requests that Pediatrician B be designated as the primary
care provider for A's child. B is a participating provider in the HMO's
network and is available to accept the child.
(ii) Conclusion. In this Example 1, the HMO must permit A's
designation of B as the primary care provider for A's child in order to
comply with the requirements of this paragraph (a)(2).
Example 2. (i) Facts. Same facts as Example 1, except that A takes
A's child to B for treatment of the child's severe shellfish allergies.
B wishes to refer A's child to an allergist for treatment. The HMO,
however, does not provide coverage for treatment of food allergies, nor
does it have an allergist participating in its network, and it therefore
refuses to authorize the referral.
(ii) Conclusion. In this Example 2, the HMO has not violated the
requirements of this paragraph (a)(2) because the exclusion of treatment
for food allergies is in accordance with the terms of A's coverage.
(3) Patient access to obstetrical and gynecological care--(i)
General rights--(A) Direct access. A group health plan, or a health
insurance issuer offering group or individual health insurance coverage,
described in paragraph (a)(3)(ii) of this section may not require
authorization or referral by the plan, issuer, or any person (including
a primary care provider) in the case of a female participant,
beneficiary, or enrollee who seeks coverage for obstetrical or
gynecological care provided by a participating health care professional
who specializes in obstetrics or gynecology. In such a case, the plan or
issuer must comply with the rules of paragraph (a)(4) of this section by
informing each participant (in the individual market, primary
subscriber) that the plan may not require authorization or referral for
obstetrical or gynecological care by a participating health care
professional who specializes in obstetrics or gynecology. The plan or
issuer may require such a professional to agree to otherwise adhere to
the plan's or issuer's policies and procedures, including procedures
regarding referrals and obtaining prior authorization and providing
services pursuant to a treatment plan (if any) approved by the plan or
issuer. For purposes of this paragraph (a)(3), a health care
professional who specializes in obstetrics or gynecology is any
individual (including a person other than a physician) who is authorized
under applicable State law to provide obstetrical or gynecological care.
(B) Obstetrical and gynecological care. A group health plan or
health insurance issuer described in paragraph (a)(3)(ii) of this
section must treat the provision of obstetrical and gynecological care,
and the ordering of related obstetrical and gynecological items and
services, pursuant to the direct access described under paragraph
(a)(3)(i)(A) of this section, by a participating health care
professional who specializes in obstetrics or gynecology as the
authorization of the primary care provider.
(ii) Application of paragraph. A group health plan, or a health
insurance issuer offering group or individual health insurance coverage,
is described in this paragraph (a)(3) if the plan or issuer--
(A) Provides coverage for obstetrical or gynecological care; and
[[Page 149]]
(B) Requires the designation by a participant, beneficiary, or
enrollee of a participating primary care provider.
(iii) Construction. Nothing in paragraph (a)(3)(i) of this section
is to be construed to--
(A) Waive any exclusions of coverage under the terms and conditions
of the plan or health insurance coverage with respect to coverage of
obstetrical or gynecological care; or
(B) Preclude the group health plan or health insurance issuer
involved from requiring that the obstetrical or gynecological provider
notify the primary care health care professional or the plan or issuer
of treatment decisions.
(iv) Examples. The rules of this paragraph (a)(3) are illustrated by
the following examples:
Example 1. (i) Facts. A group health plan requires each participant
to designate a physician to serve as the primary care provider for the
participant and the participant's family. Participant A, a female,
requests a gynecological exam with Physician B, an in-network physician
specializing in gynecological care. The group health plan requires prior
authorization from A's designated primary care provider for the
gynecological exam.
(ii) Conclusion. In this Example 1, the group health plan has
violated the requirements of this paragraph (a)(3) because the plan
requires prior authorization from A's primary care provider prior to
obtaining gynecological services.
Example 2. (i) Facts. Same facts as Example 1 except that A seeks
gynecological services from C, an out-of-network provider.
(ii) Conclusion. In this Example 2, the group health plan has not
violated the requirements of this paragraph (a)(3) by requiring prior
authorization because C is not a participating health care provider.
Example 3. (i) Facts. Same facts as Example 1 except that the group
health plan only requires B to inform A's designated primary care
physician of treatment decisions.
(ii) Conclusion. In this Example 3, the group health plan has not
violated the requirements of this paragraph (a)(3) because A has direct
access to B without prior authorization. The fact that the group health
plan requires notification of treatment decisions to the designated
primary care physician does not violate this paragraph (a)(3).
Example 4. (i) Facts. A group health plan requires each participant
to designate a physician to serve as the primary care provider for the
participant and the participant's family. The group health plan requires
prior authorization before providing benefits for uterine fibroid
embolization.
(ii) Conclusion. In this Example 4, the plan requirement for prior
authorization before providing benefits for uterine fibroid embolization
does not violate the requirements of this paragraph (a)(3) because,
though the prior authorization requirement applies to obstetrical
services, it does not restrict access to any providers specializing in
obstetrics or gynecology.
(4) Notice of right to designate a primary care provider--(i) In
general. If a group health plan or health insurance issuer requires the
designation by a participant, beneficiary, or enrollee of a primary care
provider, the plan or issuer must provide a notice informing each
participant (in the individual market, primary subscriber) of the terms
of the plan or health insurance coverage regarding designation of a
primary care provider and of the rights--
(A) Under paragraph (a)(1)(i) of this section, that any
participating primary care provider who is available to accept the
participant, beneficiary, or enrollee can be designated;
(B) Under paragraph (a)(2)(i) of this section, with respect to a
child, that any participating physician who specializes in pediatrics
can be designated as the primary care provider; and
(C) Under paragraph (a)(3)(i) of this section, that the plan may not
require authorization or referral for obstetrical or gynecological care
by a participating health care professional who specializes in
obstetrics or gynecology.
(ii) Timing. In the case of a group health plan or group health
insurance coverage, the notice described in paragraph (a)(4)(i) of this
section must be included whenever the plan or issuer provides a
participant with a summary plan description or other similar description
of benefits under the plan or health insurance coverage. In the case of
individual health insurance coverage, the notice described in paragraph
(a)(4)(i) of this section must be included whenever the issuer provides
a primary subscriber with a policy, certificate, or contract of health
insurance.
(iii) Model language. The following model language can be used to
satisfy the notice requirement described in paragraph (a)(4)(i) of this
section:
(A) For plans and issuers that require or allow for the designation
of primary
[[Page 150]]
care providers by participants, beneficiaries, or enrollees, insert:
[Name of group health plan or health insurance issuer] generally
[requires/allows] the designation of a primary care provider. You have
the right to designate any primary care provider who participates in our
network and who is available to accept you or your family members. [If
the plan or health insurance coverage designates a primary care provider
automatically, insert: Until you make this designation, [name of group
health plan or health insurance issuer] designates one for you.] For
information on how to select a primary care provider, and for a list of
the participating primary care providers, contact the [plan
administrator or issuer] at [insert contact information].
(B) For plans and issuers that require or allow for the designation
of a primary care provider for a child, add:
For children, you may designate a pediatrician as the primary care
provider.
(C) For plans and issuers that provide coverage for obstetric or
gynecological care and require the designation by a participant,
beneficiary, or enrollee of a primary care provider, add:
You do not need prior authorization from [name of group health plan
or issuer] or from any other person (including a primary care provider)
in order to obtain access to obstetrical or gynecological care from a
health care professional in our network who specializes in obstetrics or
gynecology. The health care professional, however, may be required to
comply with certain procedures, including obtaining prior authorization
for certain services, following a pre-approved treatment plan, or
procedures for making referrals. For a list of participating health care
professionals who specialize in obstetrics or gynecology, contact the
[plan administrator or issuer] at [insert contact information].
(b) Coverage of emergency services--(1) Scope. If a group health
plan, or a health insurance issuer offering group or individual health
insurance coverage, provides any benefits with respect to services in an
emergency department of a hospital, the plan or issuer must cover
emergency services (as defined in paragraph (b)(4)(ii) of this section)
consistent with the rules of this paragraph (b).
(2) General rules. A plan or issuer subject to the requirements of
this paragraph (b) must provide coverage for emergency services in the
following manner--
(i) Without the need for any prior authorization determination, even
if the emergency services are provided on an out-of-network basis;
(ii) Without regard to whether the health care provider furnishing
the emergency services is a participating network provider with respect
to the services;
(iii) If the emergency services are provided out of network, without
imposing any administrative requirement or limitation on coverage that
is more restrictive than the requirements or limitations that apply to
emergency services received from in-network providers;
(iv) If the emergency services are provided out of network, by
complying with the cost-sharing requirements of paragraph (b)(3) of this
section; and
(v) Without regard to any other term or condition of the coverage,
other than--
(A) The exclusion of or coordination of benefits;
(B) An affiliation or waiting period permitted under part 7 of
ERISA, part A of title XXVII of the PHS Act, or chapter 100 of the
Internal Revenue Code; or
(C) Applicable cost sharing.
(3) Cost-sharing requirements--(i) Copayments and coinsurance. Any
cost-sharing requirement expressed as a copayment amount or coinsurance
rate imposed with respect to a participant, beneficiary, or enrollee for
out-of-network emergency services cannot exceed the cost-sharing
requirement imposed with respect to a participant, beneficiary, or
enrollee if the services were provided in-network. However, a
participant, beneficiary, or enrollee may be required to pay, in
addition to the in-network cost-sharing, the excess of the amount the
out-of-network provider charges over the amount the plan or issuer is
required to pay under this paragraph (b)(3)(i). A group health plan or
health insurance issuer complies with the requirements of this paragraph
(b)(3) if it provides benefits with respect to an emergency service in
an amount at least equal to the greatest of the three amounts specified
in paragraphs (b)(3)(i)(A),(B), and (C) of this section (which are
adjusted for in-network cost-sharing requirements).
[[Page 151]]
(A) The amount negotiated with in-network providers for the
emergency service furnished, excluding any in-network copayment or
coinsurance imposed with respect to the participant, beneficiary, or
enrollee. If there is more than one amount negotiated with in-network
providers for the emergency service, the amount described under this
paragraph (b)(3)(i)(A) is the median of these amounts, excluding any in-
network copayment or coinsurance imposed with respect to the
participant, beneficiary, or enrollee. In determining the median
described in the preceding sentence, the amount negotiated with each in-
network provider is treated as a separate amount (even if the same
amount is paid to more than one provider). If there is no per-service
amount negotiated with in-network providers (such as under a capitation
or other similar payment arrangement), the amount under this paragraph
(b)(3)(i)(A) is disregarded.
(B) The amount for the emergency service calculated using the same
method the plan generally uses to determine payments for out-of-network
services (such as the usual, customary, and reasonable amount),
excluding any in-network copayment or coinsurance imposed with respect
to the participant, beneficiary, or enrollee. The amount in this
paragraph (b)(3)(i)(B) is determined without reduction for out-of-
network cost sharing that generally applies under the plan or health
insurance coverage with respect to out-of-network services. Thus, for
example, if a plan generally pays 70 percent of the usual, customary,
and reasonable amount for out-of-network services, the amount in this
paragraph (b)(3)(i)(B) for an emergency service is the total (that is,
100 percent) of the usual, customary, and reasonable amount for the
service, not reduced by the 30 percent coinsurance that would generally
apply to out-of-network services (but reduced by the in-network
copayment or coinsurance that the individual would be responsible for if
the emergency service had been provided in-network).
(C) The amount that would be paid under Medicare (part A or part B
of title XVIII of the Social Security Act, 42 U.S.C. 1395 et seq.) for
the emergency service, excluding any in-network copayment or coinsurance
imposed with respect to the participant, beneficiary, or enrollee.
(ii) Other cost sharing. Any cost-sharing requirement other than a
copayment or coinsurance requirement (such as a deductible or out-of-
pocket maximum) may be imposed with respect to emergency services
provided out of network if the cost-sharing requirement generally
applies to out-of-network benefits. A deductible may be imposed with
respect to out-of-network emergency services only as part of a
deductible that generally applies to out-of-network benefits. If an out-
of-pocket maximum generally applies to out-of-network benefits, that
out-of-pocket maximum must apply to out-of-network emergency services.
(iii) Special rules regarding out-of-network minimum payment
standards--(A) The minimum payment standards set forth under paragraph
(b)(3) of this section do not apply in cases where State law prohibits a
participant, beneficiary, or enrollee from being required to pay, in
addition to the in-network cost sharing, the excess of the amount the
out-of-network provider charges over the amount the plan or issuer
provides in benefits, or where a group health plan or health insurance
issuer is contractually responsible for such amounts. Nonetheless, in
such cases, a plan or issuer may not impose any copayment or coinsurance
requirement for out-of-network emergency services that is higher than
the copayment or coinsurance requirement that would apply if the
services were provided in network.
(B) A group health plan and health insurance issuer must provide a
participant, beneficiary, or enrollee adequate and prominent notice of
their lack of financial responsibility with respect to the amounts
described under this paragraph (b)(3)(iii), to prevent inadvertent
payment by the participant, beneficiary, or enrollee.
(iv) Examples. The rules of this paragraph (b)(3) are illustrated by
the following examples. In all of these examples, the group health plan
covers benefits with respect to emergency services.
Example 1. (i) Facts. A group health plan imposes a 25% coinsurance
responsibility on
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individuals who are furnished emergency services, whether provided in
network or out of network. If a covered individual notifies the plan
within two business days after the day an individual receives treatment
in an emergency department, the plan reduces the coinsurance rate to
15%.
(ii) Conclusion. In this Example 1, the requirement to notify the
plan in order to receive a reduction in the coinsurance rate does not
violate the requirement that the plan cover emergency services without
the need for any prior authorization determination. This is the result
even if the plan required that it be notified before or at the time of
receiving services at the emergency department in order to receive a
reduction in the coinsurance rate.
Example 2. (i) Facts. A group health plan imposes a $60 copayment on
emergency services without preauthorization, whether provided in network
or out of network. If emergency services are preauthorized, the plan
waives the copayment, even if it later determines the medical condition
was not an emergency medical condition.
(ii) Conclusion. In this Example 2, by requiring an individual to
pay more for emergency services if the individual does not obtain prior
authorization, the plan violates the requirement that the plan cover
emergency services without the need for any prior authorization
determination. (By contrast, if, to have the copayment waived, the plan
merely required that it be notified rather than a prior authorization,
then the plan would not violate the requirement that the plan cover
emergency services without the need for any prior authorization
determination.)
Example 3. (i) Facts. A group health plan covers individuals who
receive emergency services with respect to an emergency medical
condition from an out-of-network provider. The plan has agreements with
in-network providers with respect to a certain emergency service. Each
provider has agreed to provide the service for a certain amount. Among
all the providers for the service: One has agreed to accept $85, two
have agreed to accept $100, two have agreed to accept $110, three have
agreed to accept $120, and one has agreed to accept $150. Under the
agreement, the plan agrees to pay the providers 80% of the agreed
amount, with the individual receiving the service responsible for the
remaining 20%.
(ii) Conclusion. In this Example 3, the values taken into account in
determining the median are $85, $100, $100, $110, $110, $120, $120,
$120, and $150. Therefore, the median amount among those agreed to for
the emergency service is $110, and the amount under paragraph
(b)(3)(i)(A) of this section is 80% of $110 ($88).
Example 4. (i) Facts. Same facts as Example 3. Subsequently, the
plan adds another provider to its network, who has agreed to accept $150
for the emergency service.
(ii) Conclusion. In this Example 4, the median amount among those
agreed to for the emergency service is $115. (Because there is no one
middle amount, the median is the average of the two middle amounts, $110
and $120.) Accordingly, the amount under paragraph (b)(3)(i)(A) of this
section is 80% of $115 ($92).
Example 5. (i) Facts. Same facts as Example 4. An individual covered
by the plan receives the emergency service from an out-of-network
provider, who charges $125 for the service. With respect to services
provided by out-of-network providers generally, the plan reimburses
covered individuals 50% of the reasonable amount charged by the provider
for medical services. For this purpose, the reasonable amount for any
service is based on information on charges by all providers collected by
a third party, on a zip code by zip code basis, with the plan treating
charges at a specified percentile as reasonable. For the emergency
service received by the individual, the reasonable amount calculated
using this method is $116. The amount that would be paid under Medicare
for the emergency service, excluding any copayment or coinsurance for
the service, is $80.
(ii) Conclusion. In this Example 5, the plan is responsible for
paying $92.80, 80% of $116. The median amount among those agreed to for
the emergency service is $115 and the amount the plan would pay is $92
(80% of $115); the amount calculated using the same method the plan uses
to determine payments for out-of-network services--$116--excluding the
in-network 20% coinsurance, is $92.80; and the Medicare payment is $80.
Thus, the greatest amount is $92.80. The individual is responsible for
the remaining $32.20 charged by the out-of-network provider.
Example 6. (i) Facts. Same facts as Example 5. The group health plan
generally imposes a $250 deductible for in-network health care. With
respect to all health care provided by out-of-network providers, the
plan imposes a $500 deductible. (Covered in-network claims are credited
against the deductible.) The individual has incurred and submitted $260
of covered claims prior to receiving the emergency service out of
network.
(ii) Conclusion. In this Example 6, the plan is not responsible for
paying anything with respect to the emergency service furnished by the
out-of-network provider because the covered individual has not satisfied
the higher deductible that applies generally to all health care provided
out of network. However, the amount the individual is required to pay is
credited against the deductible.
(4) Definitions. The definitions in this paragraph (b)(4) govern in
applying the provisions of this paragraph (b).
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(i) Emergency medical condition. The term emergency medical
condition means a medical condition manifesting itself by acute symptoms
of sufficient severity (including severe pain) so that a prudent
layperson, who possesses an average knowledge of health and medicine,
could reasonably expect the absence of immediate medical attention to
result in a condition described in clause (i), (ii), or (iii) of section
1867(e)(1)(A) of the Social Security Act (42 U.S.C. 1395dd(e)(1)(A)).
(In that provision of the Social Security Act, clause (i) refers to
placing the health of the individual (or, with respect to a pregnant
woman, the health of the woman or her unborn child) in serious jeopardy;
clause (ii) refers to serious impairment to bodily functions; and clause
(iii) refers to serious dysfunction of any bodily organ or part.)
(ii) Emergency services. The term emergency services means, with
respect to an emergency medical condition--
(A) A medical screening examination (as required under section 1867
of the Social Security Act, 42 U.S.C. 1395dd) that is within the
capability of the emergency department of a hospital, including
ancillary services routinely available to the emergency department to
evaluate such emergency medical condition, and
(B) Such further medical examination and treatment, to the extent
they are within the capabilities of the staff and facilities available
at the hospital, as are required under section 1867 of the Social
Security Act (42 U.S.C. 1395dd) to stabilize the patient.
(iii) Stabilize. The term to stabilize, with respect to an emergency
medical condition (as defined in paragraph (b)(4)(i) of this section)
has the meaning given in section 1867(e)(3) of the Social Security Act
(42 U.S.C. 1395dd(e)(3)).
(c) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years (in the individual market, policy years) beginning on or after
January 1, 2017. Until the applicability date for this regulation, plans
and issuers are required to continue to comply with the corresponding
sections of 45 CFR parts 144, 146 and 147, contained in the 45 CFR,
parts 1 to 199, edition revised as of October 1, 2015.
[80 FR 72286, Nov. 18, 2015]
Sec. 147.140 Preservation of right to maintain existing coverage.
(a) Definition of grandfathered health plan coverage--(1) In
general--(i) Grandfathered health plan coverage means coverage provided
by a group health plan, or a group or individual health insurance
issuer, in which an individual was enrolled on March 23, 2010 (for as
long as it maintains that status under the rules of this section). A
group health plan or group health insurance coverage does not cease to
be grandfathered health plan coverage merely because one or more (or
even all) individuals enrolled on March 23, 2010 cease to be covered,
provided that the plan or group health insurance coverage has
continuously covered someone since March 23, 2010 (not necessarily the
same person, but at all times at least one person). In addition, subject
to the limitation set forth in paragraph (a)(1)(ii) of this section, a
group health plan (and any health insurance coverage offered in
connection with the group health plan) does not cease to be a
grandfathered health plan merely because the plan (or its sponsor)
enters into a new policy, certificate, or contract of insurance after
March 23, 2010 (for example, a plan enters into a contract with a new
issuer or a new policy is issued with an existing issuer). For purposes
of this section, a plan or health insurance coverage that provides
grandfathered health plan coverage is referred to as a grandfathered
health plan. The rules of this section apply separately to each benefit
package made available under a group health plan or health insurance
coverage. Accordingly, if any benefit package relinquishes grandfather
status, it will not affect the grandfather status of the other benefit
packages.
(ii) Changes in group health insurance coverage. Subject to
paragraphs (f) and (g)(2) of this section, if a group health plan
(including a group health plan that was self-insured on March 23, 2010)
or its sponsor enters into a new policy, certificate, or contract of
insurance after March 23, 2010 that is effective before November 15,
2010, then the plan
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ceases to be a grandfathered health plan.
(2) Disclosure of grandfather status--(i) To maintain status as a
grandfathered health plan, a plan or health insurance coverage must
include a statement that the plan or coverage believes it is a
grandfathered health plan within the meaning of section 1251 of the
Patient Protection and Affordable Care Act, and must provide contact
information for questions and complaints, in any summary of benefits
provided under the plan.
(ii) The following model language can be used to satisfy this
disclosure requirement:
This [group health plan or health insurance issuer] believes this
[plan or coverage] is a ``grandfathered health plan'' under the Patient
Protection and Affordable Care Act (the Affordable Care Act). As
permitted by the Affordable Care Act, a grandfathered health plan can
preserve certain basic health coverage that was already in effect when
that law was enacted. Being a grandfathered health plan means that your
[plan or policy] may not include certain consumer protections of the
Affordable Care Act that apply to other plans, for example, the
requirement for the provision of preventive health services without any
cost sharing. However, grandfathered health plans must comply with
certain other consumer protections in the Affordable Care Act, for
example, the elimination of lifetime dollar limits on benefits.
Questions regarding which protections apply and which protections do
not apply to a grandfathered health plan and what might cause a plan to
change from grandfathered health plan status can be directed to the plan
administrator at [insert contact information]. [For ERISA plans, insert:
You may also contact the Employee Benefits Security Administration, U.S.
Department of Labor at 1-866-444-3272 or www.dol.gov/ebsa/healthreform.
This Web site has a table summarizing which protections do and do not
apply to grandfathered health plans.] [For individual market policies
and nonfederal governmental plans, insert: You may also contact the U.S.
Department of Health and Human Services at www.healthcare.gov.]
(3)(i) Documentation of plan or policy terms on March 23, 2010. To
maintain status as a grandfathered health plan, a group health plan, or
group or individual health insurance coverage, must, for as long as the
plan or health insurance coverage takes the position that it is a
grandfathered health plan--
(A) Maintain records documenting the terms of the plan or health
insurance coverage in connection with the coverage in effect on March
23, 2010, and any other documents necessary to verify, explain, or
clarify its status as a grandfathered health plan; and
(B) Make such records available for examination upon request.
(ii) Change in group health insurance coverage. To maintain status
as a grandfathered health plan, a group health plan that enters into a
new policy, certificate, or contract of insurance must provide to the
new health insurance issuer (and the new health insurance issuer must
require) documentation of plan terms (including benefits, cost sharing,
employer contributions, and annual dollar limits) under the prior health
coverage sufficient to determine whether a change causing a cessation of
grandfathered health plan status under paragraph (g)(1) of this section
has occurred.
(4) Family members enrolling after March 23, 2010. With respect to
an individual who is enrolled in a group health plan or health insurance
coverage on March 23, 2010, grandfathered health plan coverage includes
coverage of family members of the individual who enroll after March 23,
2010 in the grandfathered health plan coverage of the individual.
(b) Allowance for new employees to join current plan--(1) In
general. Subject to paragraph (b)(2) of this section, a group health
plan (including health insurance coverage provided in connection with
the group health plan) that provided coverage on March 23, 2010 and has
retained its status as a grandfathered health plan (consistent with the
rules of this section, including paragraph (g) of this section) is
grandfathered health plan coverage for new employees (whether newly
hired or newly enrolled) and their families enrolling in the plan after
March 23, 2010. Further, the addition of a new contributing employer or
new group of employees of an existing contributing employer to a
grandfathered multiemployer health plan will not affect the plan's
grandfather status.
(2) Anti-abuse rules--(i) Mergers and acquisitions. If the principal
purpose of
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a merger, acquisition, or similar business restructuring is to cover new
individuals under a grandfathered health plan, the plan ceases to be a
grandfathered health plan.
(ii) Change in plan eligibility. A group health plan or health
insurance coverage (including a benefit package under a group health
plan) ceases to be a grandfathered health plan if--
(A) Employees are transferred into the plan or health insurance
coverage (the transferee plan) from a plan or health insurance coverage
under which the employees were covered on March 23, 2010 (the transferor
plan);
(B) Comparing the terms of the transferee plan with those of the
transferor plan (as in effect on March 23, 2010) and treating the
transferee plan as if it were an amendment of the transferor plan would
cause a loss of grandfather status under the provisions of paragraph
(g)(1) of this section; and
(C) There was no bona fide employment-based reason to transfer the
employees into the transferee plan. For this purpose, changing the terms
or cost of coverage is not a bona fide employment-based reason.
(iii) Illustrative list of bona fide employment-based reasons. For
purposes of this paragraph (b)(2)(ii)(C), bona fide employment-based
reasons include--
(A) When a benefit package is being eliminated because the issuer is
exiting the market;
(B) When a benefit package is being eliminated because the issuer no
longer offers the product to the employer;
(C) When low or declining participation by plan participants in the
benefit package makes it impractical for the plan sponsor to continue to
offer the benefit package;
(D) When a benefit package is eliminated from a multiemployer plan
as agreed upon as part of the collective bargaining process; or
(E) When a benefit package is eliminated for any reason and multiple
benefit packages covering a significant portion of other employees
remain available to the employees being transferred.
(3) Examples. The rules of this paragraph (b) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan offers two benefit
packages on March 23, 2010, Options F and G. During a subsequent open
enrollment period, some of the employees enrolled in Option F on March
23, 2010 switch to Option G.
(ii) Conclusion. In this Example 1, the group health coverage
provided under Option G remains a grandfathered health plan under the
rules of paragraph (b)(1) of this section because employees previously
enrolled in Option F are allowed to enroll in Option G as new employees.
Example 2. (i) Facts. A group health plan offers two benefit
packages on March 23, 2010, Options H and I. On March 23, 2010, Option H
provides coverage only for employees in one manufacturing plant.
Subsequently, the plant is closed, and some employees in the closed
plant are moved to another plant. The employer eliminates Option H and
the employees that are moved are transferred to Option I. If instead of
transferring employees from Option H to Option I, Option H was amended
to match the terms of Option I, then Option H would cease to be a
grandfathered health plan.
(ii) Conclusion. In this Example 2, the plan has a bona fide
employment-based reason to transfer employees from Option H to Option I.
Therefore, Option I does not cease to be a grandfathered health plan.
(c) General grandfathering rule--(1) Except as provided in
paragraphs (d) and (e) of this section, subtitles A and C of title I of
the Patient Protection and Affordable Care Act (and the amendments made
by those subtitles, and the incorporation of those amendments into ERISA
section 715 and Internal Revenue Code section 9815) do not apply to
grandfathered health plan coverage. Accordingly, the provisions of PHS
Act sections 2701, 2702, 2703, 2705, 2706, 2707, 2709 (relating to
coverage for individuals participating in approved clinical trials, as
added by section 10103 of the Patient Protection and Affordable Care
Act), 2713, 2715A, 2716, 2717, 2719, and 2719A, as added or amended by
the Patient Protection and Affordable Care Act, do not apply to
grandfathered health plans. In addition, the provisions of PHS Act
section 2704, and PHS Act section 2711 insofar as it relates to annual
dollar limits, do not apply to grandfathered health plans that are
individual health insurance coverage.
(2) To the extent not inconsistent with the rules applicable to a
grandfathered health plan, a grandfathered
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health plan must comply with the requirements of the PHS Act, ERISA, and
the Internal Revenue Code applicable prior to the changes enacted by the
Patient Protection and Affordable Care Act.
(d) Provisions applicable to all grandfathered health plans. The
provisions of PHS Act section 2711 insofar as it relates to lifetime
dollar limits, and the provisions of PHS Act sections 2712, 2714, 2715,
and 2718, apply to grandfathered health plans for plan years (in the
individual market, policy years) beginning on or after September 23,
2010. The provisions of PHS Act section 2708 apply to grandfathered
health plans for plan years (in the individual market, policy years)
beginning on or after January 1, 2014.
(e) Applicability of PHS Act sections 2704, 2711, and 2714 to
grandfathered group health plans and group health insurance coverage--
(1) The provisions of PHS Act section 2704 as it applies with respect to
enrollees who are under 19 years of age, and the provisions of PHS Act
section 2711 insofar as it relates to annual dollar limits, apply to
grandfathered health plans that are group health plans (including group
health insurance coverage) for plan years beginning on or after
September 23, 2010. The provisions of PHS Act section 2704 apply
generally to grandfathered health plans that are group health plans
(including group health insurance coverage) for plan years beginning on
or after January 1, 2014.
(2) For plan years beginning before January 1, 2014, the provisions
of PHS Act section 2714 apply in the case of an adult child with respect
to a grandfathered health plan that is a group health plan only if the
adult child is not eligible to enroll in an eligible employer-sponsored
health plan (as defined in section 5000A(f)(2) of the Internal Revenue
Code) other than a grandfathered health plan of a parent. For plan years
beginning on or after January 1, 2014, the provisions of PHS Act section
2714 apply with respect to a grandfathered health plan that is a group
health plan without regard to whether an adult child is eligible to
enroll in any other coverage.
(f) Effect on collectively bargained plans--In general. In the case
of health insurance coverage maintained pursuant to one or more
collective bargaining agreements between employee representatives and
one or more employers that was ratified before March 23, 2010, the
coverage is grandfathered health plan coverage at least until the date
on which the last of the collective bargaining agreements relating to
the coverage that was in effect on March 23, 2010 terminates. Any
coverage amendment made pursuant to a collective bargaining agreement
relating to the coverage that amends the coverage solely to conform to
any requirement added by subtitles A and C of title I of the Patient
Protection and Affordable Care Act (and the amendments made by those
subtitles, and the incorporation of those amendments into ERISA section
715 and Internal Revenue Code section 9815) is not treated as a
termination of the collective bargaining agreement. After the date on
which the last of the collective bargaining agreements relating to the
coverage that was in effect on March 23, 2010 terminates, the
determination of whether health insurance coverage maintained pursuant
to a collective bargaining agreement is grandfathered health plan
coverage is made under the rules of this section other than this
paragraph (f) (comparing the terms of the health insurance coverage
after the date the last collective bargaining agreement terminates with
the terms of the health insurance coverage that were in effect on March
23, 2010).
(g) Maintenance of grandfather status--(1) Changes causing cessation
of grandfather status. Subject to paragraph (g)(2) of this section, the
rules of this paragraph (g)(1) describe situations in which a group
health plan or health insurance coverage ceases to be a grandfathered
health plan. A plan or coverage will cease to be a grandfathered health
plan when an amendment to plan terms that results in a change described
in this paragraph (g)(1) becomes effective, regardless of when the
amendment was adopted. Once grandfather status is lost, it cannot be
regained.
(i) Elimination of benefits. The elimination of all or substantially
all benefits to diagnose or treat a particular condition causes a group
health plan or
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health insurance coverage to cease to be a grandfathered health plan.
For this purpose, the elimination of benefits for any necessary element
to diagnose or treat a condition is considered the elimination of all or
substantially all benefits to diagnose or treat a particular condition.
Whether or not a plan or coverage has eliminated substantially all
benefits to diagnose or treat a particular condition must be determined
based on all the facts and circumstances, taking into account the items
and services provided for a particular condition under the plan on March
23, 2010, as compared to the benefits offered at the time the plan or
coverage makes the benefit change effective.
(ii) Increase in percentage cost-sharing requirement. Any increase,
measured from March 23, 2010, in a percentage cost-sharing requirement
(such as an individual's coinsurance requirement) causes a group health
plan or health insurance coverage to cease to be a grandfathered health
plan.
(iii) Increase in a fixed-amount cost-sharing requirement other than
a copayment. Any increase in a fixed-amount cost-sharing requirement
other than a copayment (for example, deductible or out-of-pocket limit),
determined as of the effective date of the increase, causes a group
health plan or health insurance coverage to cease to be a grandfathered
health plan, if the total percentage increase in the cost-sharing
requirement measured from March 23, 2010 exceeds the maximum percentage
increase (as defined in paragraph (g)(3)(ii) of this section).
(iv) Increase in a fixed-amount copayment. Any increase in a fixed-
amount copayment, determined as of the effective date of the increase,
and determined for each copayment level if a plan has different
copayment levels for different categories of services, causes a group
health plan or health insurance coverage to cease to be a grandfathered
health plan, if the total increase in the copayment measured from March
23, 2010 exceeds the greater of:
(A) An amount equal to $5 increased by medical inflation, as defined
in paragraph (g)(3)(i) of this section (that is, $5 times medical
inflation, plus $5), or
(B) The maximum percentage increase (as defined in paragraph
(g)(3)(ii) of this section), determined by expressing the total increase
in the copayment as a percentage.
(v) Decrease in contribution rate by employers and employee
organizations--(A) Contribution rate based on cost of coverage. A group
health plan or group health insurance coverage ceases to be a
grandfathered health plan if the employer or employee organization
decreases its contribution rate based on cost of coverage (as defined in
paragraph (g)(3)(iii)(A) of this section) towards the cost of any tier
of coverage for any class of similarly situated individuals (as
described in Sec. 146.121(d) of this subchapter) by more than 5
percentage points below the contribution rate for the coverage period
that includes March 23, 2010.
(B) Contribution rate based on a formula. A group health plan or
group health insurance coverage ceases to be a grandfathered health plan
if the employer or employee organization decreases its contribution rate
based on a formula (as defined in paragraph (g)(3)(iii)(B) of this
section) towards the cost of any tier of coverage for any class of
similarly situated individuals (as described in Sec. 146.121(d) of this
subchapter) by more than 5 percent below the contribution rate for the
coverage period that includes March 23, 2010.
(C) Special rules regarding decreases in contribution rates. An
insured group health plan (or a multiemployer plan) that is a
grandfathered health plan will not cease to be a grandfathered health
plan based on a change in the employer contribution rate unless the
issuer (or multiemployer plan) knows, or should know, of the change,
provided:
(1) Upon renewal (or, in the case of a multiemployer plan, before
the start of a new plan year), the issuer (or multiemployer plan)
requires relevant employers, employee organizations, or plan sponsors,
as applicable, to make a representation regarding its contribution rate
for the plan year covered by the renewal, as well as its contribution
rate on March 23, 2010 (if the issuer, or multiemployer plan, does not
already have it); and
[[Page 158]]
(2) The relevant policies, certificates, contracts of insurance, or
plan documents disclose in a prominent and effective manner that
employers, employee organizations, or plan sponsors, as applicable, are
required to notify the issuer (or multiemployer plan) if the
contribution rate changes at any point during the plan year.
(D) Application to plans with multi-tiered coverage structures. The
standards for employer contributions in this paragraph (g)(1)(v) apply
on a tier-by-tier basis. Therefore, if a group health plan modifies the
tiers of coverage it had on March 23, 2010 (for example, from self-only
and family to a multi-tiered structure of self-only, self-plus-one,
self-plus-two, and self-plus-three-or-more), the employer contribution
for any new tier would be tested by comparison to the contribution rate
for the corresponding tier on March 23, 2010. For example, if the
employer contribution rate for family coverage was 50 percent on March
23, 2010, the employer contribution rate for any new tier of coverage
other than self-only (i.e., self-plus-one, self-plus-two, self-plus-
three or more) must be within 5 percentage points of 50 percent (i.e.,
at least 45 percent). If, however, the plan adds one or more new
coverage tiers without eliminating or modifying any previous tiers and
those new coverage tiers cover classes of individuals that were not
covered previously under the plan, the new tiers would not be analyzed
under the standards for changes in employer contributions. For example,
if a plan with self-only as the sole coverage tier added a family
coverage tier, the level of employer contributions toward the family
coverage would not cause the plan to lose grandfather status.
(E) Group health plans with fixed-dollar employee contributions or
no employee contributions. A group health plan that requires either
fixed-dollar employee contributions or no employee contributions will
not cease to be a grandfathered health plan solely because the employer
contribution rate changes so long as there continues to be no employee
contributions or no increase in the fixed-dollar employee contributions
towards the cost of coverage.
(vi) Changes in annual limits--(A) Addition of an annual limit. A
group health plan, or group or individual health insurance coverage
that, on March 23, 2010, did not impose an overall annual or lifetime
limit on the dollar value of all benefits ceases to be a grandfathered
health plan if the plan or health insurance coverage imposes an overall
annual limit on the dollar value of benefits. (But see Sec. 147.126,
which generally prohibits all annual dollar limits on essential health
benefits for plan years (in the individual market, policy years)
beginning on or after January 1, 2014).
(B) Decrease in limit for a plan or coverage with only a lifetime
limit. Grandfathered individual health insurance coverage, that, on
March 23, 2010, imposed an overall lifetime limit on the dollar value of
all benefits but no overall annual limit on the dollar value of all
benefits ceases to be a grandfathered health plan if the plan or health
insurance coverage adopts an overall annual limit at a dollar value that
is lower than the dollar value of the lifetime limit on March 23, 2010.
(But see Sec. 147.126, which generally prohibits all annual dollar
limits on essential health benefits for plan years (in the individual
market, policy years) beginning on or after January 1, 2014).
(C) Decrease in limit for a plan or coverage with an annual limit. A
group health plan, or group or individual health insurance coverage,
that, on March 23, 2010, imposed an overall annual limit on the dollar
value of all benefits ceases to be a grandfathered health plan if the
plan or health insurance coverage decreases the dollar value of the
annual limit (regardless of whether the plan or health insurance
coverage also imposed an overall lifetime limit on March 23, 2010 on the
dollar value of all benefits). (But see Sec. 147.126, which generally
prohibits all annual dollar limits on essential health benefits for plan
years (in the individual market, policy years) beginning on or after
January 1, 2014).
(2) Transitional rules--(i) Changes made prior to March 23, 2010. If
a group health plan or health insurance issuer makes the following
changes to the terms of the plan or health insurance coverage, the
changes are considered
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part of the terms of the plan or health insurance coverage on March 23,
2010 even though they were not effective at that time and such changes
do not cause a plan or health insurance coverage to cease to be a
grandfathered health plan:
(A) Changes effective after March 23, 2010 pursuant to a legally
binding contract entered into on or before March 23, 2010;
(B) Changes effective after March 23, 2010 pursuant to a filing on
or before March 23, 2010 with a State insurance department; or
(C) Changes effective after March 23, 2010 pursuant to written
amendments to a plan that were adopted on or before March 23, 2010.
(ii) Changes made after March 23, 2010 and adopted prior to issuance
of regulations. If, after March 23, 2010, a group health plan or health
insurance issuer makes changes to the terms of the plan or health
insurance coverage and the changes are adopted prior to June 14, 2010,
the changes will not cause the plan or health insurance coverage to
cease to be a grandfathered health plan if the changes are revoked or
modified effective as of the first day of the first plan year (in the
individual market, policy year) beginning on or after September 23,
2010, and the terms of the plan or health insurance coverage on that
date, as modified, would not cause the plan or coverage to cease to be a
grandfathered health plan under the rules of this section, including
paragraph (g)(1) of this section. For this purpose, changes will be
considered to have been adopted prior to June 14, 2010 if:
(A) The changes are effective before that date;
(B) The changes are effective on or after that date pursuant to a
legally binding contract entered into before that date;
(C) The changes are effective on or after that date pursuant to a
filing before that date with a State insurance department; or
(D) The changes are effective on or after that date pursuant to
written amendments to a plan that were adopted before that date.
(3) Definitions--(i) Medical inflation defined. For purposes of this
paragraph (g), the term medical inflation means the increase since March
2010 in the overall medical care component of the Consumer Price Index
for All Urban Consumers (CPI-U) (unadjusted) published by the Department
of Labor using the 1982-1984 base of 100. For this purpose, the increase
in the overall medical care component is computed by subtracting 387.142
(the overall medical care component of the CPI-U (unadjusted) published
by the Department of Labor for March 2010, using the 1982-1984 base of
100) from the index amount for any month in the 12 months before the new
change is to take effect and then dividing that amount by 387.142.
(ii) Maximum percentage increase defined. For purposes of this
paragraph (g), the term maximum percentage increase means medical
inflation (as defined in paragraph (g)(3)(i) of this section), expressed
as a percentage, plus 15 percentage points.
(iii) Contribution rate defined. For purposes of paragraph (g)(1)(v)
of this section:
(A) Contribution rate based on cost of coverage. The term
contribution rate based on cost of coverage means the amount of
contributions made by an employer or employee organization compared to
the total cost of coverage, expressed as a percentage. The total cost of
coverage is determined in the same manner as the applicable premium is
calculated under the COBRA continuation provisions of section 604 of
ERISA, section 4980B(f)(4) of the Internal Revenue Code, and section
2204 of the PHS Act. In the case of a self-insured plan, contributions
by an employer or employee organization are equal to the total cost of
coverage minus the employee contributions towards the total cost of
coverage.
(B) Contribution rate based on a formula. The term contribution rate
based on a formula means, for plans that, on March 23, 2010, made
contributions based on a formula (such as hours worked or tons of coal
mined), the formula.
(4) Examples. The rules of this paragraph (g) are illustrated by the
following examples:
Example 1. (i) Facts. On March 23, 2010, a grandfathered health plan
has a coinsurance
[[Page 160]]
requirement of 20% for inpatient surgery. The plan is subsequently
amended to increase the coinsurance requirement to 25%.
(ii) Conclusion. In this Example 1, the increase in the coinsurance
requirement from 20% to 25% causes the plan to cease to be a
grandfathered health plan.
Example 2. (i) Facts. Before March 23, 2010, the terms of a group
health plan provide benefits for a particular mental health condition,
the treatment for which is a combination of counseling and prescription
drugs. Subsequently, the plan eliminates benefits for counseling.
(ii) Conclusion. In this Example 2, the plan ceases to be a
grandfathered health plan because counseling is an element that is
necessary to treat the condition. Thus the plan is considered to have
eliminated substantially all benefits for the treatment of the
condition.
Example 3. (i) Facts. On March 23, 2010, a grandfathered health plan
has a copayment requirement of $30 per office visit for specialists. The
plan is subsequently amended to increase the copayment requirement to
$40. Within the 12-month period before the $40 copayment takes effect,
the greatest value of the overall medical care component of the CPI-U
(unadjusted) is 475.
(ii) Conclusion. In this Example 3, the increase in the copayment
from $30 to $40, expressed as a percentage, is 33.33% (40-30 = 10; 10 /
30 = 0.3333; 0.3333 = 33.33%). Medical inflation (as defined in
paragraph (g)(3)(i) of this section) from March 2010 is 0.2269 (475-
387.142 = 87.858; 87.858 / 387.142 = 0.2269). The maximum percentage
increase permitted is 37.69% (0.2269 = 22.69%; 22.69% + 15% = 37.69%).
Because 33.33% does not exceed 37.69%, the change in the copayment
requirement at that time does not cause the plan to cease to be a
grandfathered health plan.
Example 4. (i) Facts. Same facts as Example 3, except the
grandfathered health plan subsequently increases the $40 copayment
requirement to $45 for a later plan year. Within the 12-month period
before the $45 copayment takes effect, the greatest value of the overall
medical care component of the CPI-U (unadjusted) is 485.
(ii) Conclusion. In this Example 4, the increase in the copayment
from $30 (the copayment that was in effect on March 23, 2010) to $45,
expressed as a percentage, is 50% (45-30 = 15; 15 / 30 = 0.5; 0.5 =
50%). Medical inflation (as defined in paragraph (g)(3)(i) of this
section) from March 2010 is 0.2527 (485-387.142 = 97.858; 97.858 /
387.142 = 0.2527). The increase that would cause a plan to cease to be a
grandfathered health plan under paragraph (g)(1)(iv) of this section is
the greater of the maximum percentage increase of 40.27% (0.2527 =
25.27%; 25.27% + 15% = 40.27%), or $6.26 ($5 x 0.2527 = $1.26; $1.26 +
$5 = $6.26). Because 50% exceeds 40.27% and $15 exceeds $6.26, the
change in the copayment requirement at that time causes the plan to
cease to be a grandfathered health plan.
Example 5. (i) Facts. On March 23, 2010, a grandfathered health plan
has a copayment of $10 per office visit for primary care providers. The
plan is subsequently amended to increase the copayment requirement to
$15. Within the 12-month period before the $15 copayment takes effect,
the greatest value of the overall medical care component of the CPI-U
(unadjusted) is 415.
(ii) Conclusion. In this Example 5, the increase in the copayment,
expressed as a percentage, is 50% (15-10 = 5; 5 / 10 = 0.5; 0.5 = 50%).
Medical inflation (as defined in paragraph (g)(3) of this section) from
March 2010 is 0.0720 (415.0-387.142 = 27.858; 27.858 / 387.142 =
0.0720). The increase that would cause a plan to cease to be a
grandfathered health plan under paragraph (g)(1)(iv) of this section is
the greater of the maximum percentage increase of 22.20% (0.0720 =
7.20%; 7.20% + 15% = 22.20), or $5.36 ($5 x 0.0720 = $0.36; $0.36 + $5 =
$5.36). The $5 increase in copayment in this Example 5 would not cause
the plan to cease to be a grandfathered health plan pursuant to
paragraph (g)(1)(iv)this section, which would permit an increase in the
copayment of up to $5.36.
Example 6. (i) Facts. The same facts as Example 5, except on March
23, 2010, the grandfathered health plan has no copayment ($0) for office
visits for primary care providers. The plan is subsequently amended to
increase the copayment requirement to $5.
(ii) Conclusion. In this Example 6, medical inflation (as defined in
paragraph (g)(3)(i) of this section) from March 2010 is 0.0720 (415.0-
387.142 = 27.858; 27.858 / 387.142 = 0.0720). The increase that would
cause a plan to cease to be a grandfathered health plan under paragraph
(g)(1)(iv)(A) of this section is $5.36 ($5 x 0.0720 = $0.36; $0.36 + $5
= $5.36). The $5 increase in copayment in this Example 6 is less than
the amount calculated pursuant to paragraph (g)(1)(iv)(A) of this
section of $5.36. Thus, the $5 increase in copayment does not cause the
plan to cease to be a grandfathered health plan.
Example 7. (i) Facts. On March 23, 2010, a self-insured group health
plan provides two tiers of coverage--self-only and family. The employer
contributes 80% of the total cost of coverage for self-only and 60% of
the total cost of coverage for family. Subsequently, the employer
reduces the contribution to 50% for family coverage, but keeps the same
contribution rate for self-only coverage.
(ii) Conclusion. In this Example 7, the decrease of 10 percentage
points for family coverage in the contribution rate based on cost of
coverage causes the plan to cease to be a grandfathered health plan. The
fact that the contribution rate for self-only coverage remains the same
does not change the result.
Example 8. (i) Facts. On March 23, 2010, a self-insured
grandfathered health plan has a
[[Page 161]]
COBRA premium for the 2010 plan year of $5000 for self-only coverage and
$12,000 for family coverage. The required employee contribution for the
coverage is $1000 for self-only coverage and $4000 for family coverage.
Thus, the contribution rate based on cost of coverage for 2010 is 80%
((5000-1000)/5000) for self-only coverage and 67% ((12,000-4000)/12,000)
for family coverage. For a subsequent plan year, the COBRA premium is
$6000 for self-only coverage and $15,000 for family coverage. The
employee contributions for that plan year are $1200 for self-only
coverage and $5000 for family coverage. Thus, the contribution rate
based on cost of coverage is 80% ((6000-1200)/6000) for self-only
coverage and 67% ((15,000-5000)/15,000) for family coverage.
(ii) Conclusion. In this Example 8, because there is no change in
the contribution rate based on cost of coverage, the plan retains its
status as a grandfathered health plan. The result would be the same if
all or part of the employee contribution was made pre-tax through a
cafeteria plan under section 125 of the Internal Revenue Code.
Example 9. (i) Facts. A group health plan not maintained pursuant to
a collective bargaining agreement offers three benefit packages on March
23, 2010. Option F is a self-insured option. Options G and H are insured
options. Beginning July 1, 2013, the plan increases coinsurance under
Option H from 10% to 15%.
(ii) Conclusion. In this Example 9, the coverage under Option H is
not grandfathered health plan coverage as of July 1, 2013, consistent
with the (rule in paragraph (g)(1)(ii) of this section. Whether the
coverage under Options F and G is grandfathered health plan coverage is
determined separately under the rules of this paragraph (g).
[80 FR 72289, Nov. 18, 2015]
Sec. 147.145 Student health insurance coverage.
(a) Definition. Student health insurance coverage is a type of
individual health insurance coverage (as defined in Sec. 144.103 of
this subchapter) that is provided pursuant to a written agreement
between an institution of higher education (as defined in the Higher
Education Act of 1965) and a health insurance issuer, and provided to
students enrolled in that institution of higher education and their
dependents, that meets the following conditions:
(1) Does not make health insurance coverage available other than in
connection with enrollment as a student (or as a dependent of a student)
in the institution of higher education.
(2) Does not condition eligibility for the health insurance coverage
on any health status-related factor (as defined in Sec. 146.121(a) of
this subchapter) relating to a student (or a dependent of a student).
(3) Meets any additional requirement that may be imposed under State
law.
(b) Exemptions from the Public Health Service Act and the Affordable
Care Act--(1) Guaranteed availability and guaranteed renewability. (i)
For purposes of sections 2741(e)(1) and 2742(b)(5) of the Public Health
Service Act, student health insurance coverage is deemed to be available
only through a bona fide association.
(ii) For purposes of section 2702 of the Public Health Service Act,
a health insurance issuer that offers student health insurance coverage
is not required to accept individuals who are not students or dependents
of students in such coverage, and, notwithstanding the requirements of
Sec. 147.104(b), is not required to establish open enrollment periods
or coverage effective dates that are based on a calendar policy year or
to offer policies on a calendar year basis.
(iii) For purposes of section 2703(a) of the Public Health Service
Act, a health insurance issuer that offers student health insurance
coverage is not required to renew or continue in force coverage for
individuals who are no longer students or dependents of students.
(2) Levels of coverage. The requirement to provide a specific level
of coverage described in section 1302(d) of the Affordable Care Act does
not apply to student health insurance coverage for policy years
beginning on or after July 1, 2016. However, the benefits provided by
such coverage must provide at least 60 percent actuarial value, as
calculated in accordance with Sec. 156.135 of this subchapter. The
issuer must specify in any plan materials summarizing the terms of the
coverage the actuarial value and level of coverage (or next lowest level
of coverage) the coverage would otherwise satisfy under Sec. 156.140 of
this subchapter.
(3) Single risk pool. Student health insurance coverage is not
subject to the requirements of section 1312(c) of the
[[Page 162]]
Affordable Care Act. A health insurance issuer that offers student
health insurance coverage may establish one or more separate risk pools
for an institution of higher education, if the distinction between or
among groups of students (or dependents of students) who form the risk
pool is based on a bona fide school-related classification and not based
on a health factor (as described in Sec. 146.121 of this subchapter).
However, student health insurance rates must reflect the claims
experience of individuals who comprise the risk pool, and any
adjustments to rates within a risk pool must be actuarially justified.
(c) Student administrative health fees--(1) Definition. A student
administrative health fee is a fee charged by the institution of higher
education on a periodic basis to students of the institution of higher
education to offset the cost of providing health care through health
clinics regardless of whether the students utilize the health clinics or
enroll in student health insurance coverage.
(2) Preventive services. Notwithstanding the requirements under
section 2713 of the Public Health Service Act and its implementing
regulations, student administrative health fees as defined in paragraph
(c)(1) of this section are not considered cost-sharing requirements with
respect to specified recommended preventive services.
[77 FR 16468, Mar. 21, 2012, as amended at 78 FR 13439, Feb. 27, 2013;
79 FR 13834, Mar. 11, 2014; 81 FR 12334, Mar. 8, 2016]
Sec. 147.150 Coverage of essential health benefits.
(a) Requirement to cover the essential health benefits package. A
health insurance issuer offering health insurance coverage in the
individual or small group market must ensure that such coverage includes
the essential health benefits package as defined in section 1302(a) of
the Affordable Care Act effective for plan or policy years beginning on
or after January 1, 2014.
(b) Cost-sharing under group health plans. [Reserved]
(c) Child-only plans. If a health insurance issuer offers health
insurance coverage in any level of coverage specified under section
1302(d)(1) of the Affordable Care Act, the issuer must offer coverage in
that level as a plan in which the only enrollees are individuals who, as
of the beginning of a plan year, have not attained the age of 21.
[78 FR 12865, Feb. 25, 2013]
Sec. 147.160 Parity in mental health and substance use disorder benefits.
(a) In general. The provisions of Sec. 146.136 of this subchapter
apply to health insurance coverage offered by health insurance issuer in
the individual market in the same manner and to the same extent as such
provisions apply to health insurance coverage offered by a health
insurance issuer in connection with a group health plan in the large
group market.
(b) Applicability date. The provisions of this section apply for
policy years beginning on or after the applicability dates set forth in
Sec. 146.136(i) of this subchapter. This section applies to non-
grandfathered and grandfathered health plans as defined in Sec.
147.140.
[78 FR 68296, Nov. 13, 2013]
Sec. 147.200 Summary of benefits and coverage and uniform glossary.
(a) Summary of benefits and coverage--(1) In general. A group health
plan (and its administrator as defined in section 3(16)(A) of ERISA)),
and a health insurance issuer offering group or individual health
insurance coverage, is required to provide a written summary of benefits
and coverage (SBC) for each benefit package without charge to entities
and individuals described in this paragraph (a)(1) in accordance with
the rules of this section.
(i) SBC provided by a group health insurance issuer to a group
health plan--(A) Upon application. A health insurance issuer offering
group health insurance coverage must provide the SBC to a group health
plan (or its sponsor) upon application for health coverage, as soon as
practicable following receipt of the application, but in no event later
than seven business days following receipt of the application. If an SBC
was provided before application pursuant to paragraph (a)(1)(i)(D) of
this section (relating to SBCs upon request), this paragraph
(a)(1)(i)(A) is deemed satisfied, provided there is no change to the
[[Page 163]]
information required to be in the SBC. However, if there has been a
change in the information required, a new SBC that includes the changed
information must be provided upon application pursuant to this paragraph
(a)(1)(i)(A).
(B) By first day of coverage (if there are changes). If there is any
change in the information required to be in the SBC that was provided
upon application and before the first day of coverage, the issuer must
update and provide a current SBC to the plan (or its sponsor) no later
than the first day of coverage.
(C) Upon renewal, reissuance, or reenrollment. If the issuer renews
or reissues a policy, certificate, or contract of insurance for a
succeeding policy year, or automatically re-enrolls the policyholder or
its participants and beneficiaries in coverage, the issuer must provide
a new SBC as follows:
(1) If written application is required (in either paper or
electronic form) for renewal or reissuance, the SBC must be provided no
later than the date the written application materials are distributed.
(2) If renewal, reissuance, or reenrollment is automatic, the SBC
must be provided no later than 30 days prior to the first day of the new
plan or policy year; however, with respect to an insured plan, if the
policy, certificate, or contract of insurance has not been issued or
renewed before such 30-day period, the SBC must be provided as soon as
practicable but in no event later than seven business days after
issuance of the new policy, certificate, or contract of insurance, or
the receipt of written confirmation of intent to renew, whichever is
earlier.
(D) Upon request. If a group health plan (or its sponsor) requests
an SBC or summary information about a health insurance product from a
health insurance issuer offering group health insurance coverage, an SBC
must be provided as soon as practicable, but in no event later than
seven business days following receipt of the request.
(ii) SBC provided by a group health insurance issuer and a group
health plan to participants and beneficiaries--(A) In general. A group
health plan (including its administrator, as defined under section 3(16)
of ERISA), and a health insurance issuer offering group health insurance
coverage, must provide an SBC to a participant or beneficiary (as
defined under sections 3(7) and 3(8) of ERISA), and consistent with the
rules of paragraph (a)(1)(iii) of this section, with respect to each
benefit package offered by the plan or issuer for which the participant
or beneficiary is eligible.
(B) Upon application. The SBC must be provided as part of any
written application materials that are distributed by the plan or issuer
for enrollment. If the plan or issuer does not distribute written
application materials for enrollment, the SBC must be provided no later
than the first date on which the participant is eligible to enroll in
coverage for the participant or any beneficiaries. If an SBC was
provided before application pursuant to paragraph (a)(1)(ii)(F) of this
section (relating to SBCs upon request), this paragraph (a)(1)(ii)(B) is
deemed satisfied, provided there is no change to the information
required to be in the SBC. However, if there has been a change in the
information that is required to be in the SBC, a new SBC that includes
the changed information must be provided upon application pursuant to
this paragraph (a)(1)(ii)(B).
(C) By first day of coverage (if there are changes). (1) If there is
any change to the information required to be in the SBC that was
provided upon application and before the first day of coverage, the plan
or issuer must update and provide a current SBC to a participant or
beneficiary no later than the first day of coverage.
(2) If the plan sponsor is negotiating coverage terms after an
application has been filed and the information required to be in the SBC
changes, the plan or issuer is not required to provide an updated SBC
(unless an updated SBC is requested) until the first day of coverage.
(D) Special enrollees. The plan or issuer must provide the SBC to
special enrollees (as described in Sec. 146.117 of this subchapter) no
later than the date by which a summary plan description is required to
be provided under the timeframe set forth in ERISA section 104(b)(1)(A)
and its implementing regulations, which is 90 days from enrollment.
[[Page 164]]
(E) Upon renewal, reissuance, or reenrollment. If the plan or issuer
requires participants or beneficiaries to renew in order to maintain
coverage (for example, for a succeeding plan year), or automatically re-
enrolls participants and beneficiaries in coverage, the plan or issuer
must provide a new SBC, as follows:
(1) If written application is required for renewal, reissuance, or
reenrollment (in either paper or electronic form), the SBC must be
provided no later than the date on which the written application
materials are distributed.
(2) If renewal, reissuance, or reenrollment is automatic, the SBC
must be provided no later than 30 days prior to the first day of the new
plan or policy year; however, with respect to an insured plan, if the
policy, certificate, or contract of insurance has not been issued or
renewed before such 30-day period, the SBC must be provided as soon as
practicable but in no event later than seven business days after
issuance of the new policy, certificate, or contract of insurance, or
the receipt of written confirmation of intent to renew, whichever is
earlier.
(F) Upon request. A plan or issuer must provide the SBC to
participants or beneficiaries upon request for an SBC or summary
information about the health coverage, as soon as practicable, but in no
event later than seven business days following receipt of the request.
(iii) Special rules to prevent unnecessary duplication with respect
to group health coverage. (A) An entity required to provide an SBC under
this paragraph (a)(1) with respect to an individual satisfies that
requirement if another party provides the SBC, but only to the extent
that the SBC is timely and complete in accordance with the other rules
of this section. Therefore, for example, in the case of a group health
plan funded through an insurance policy, the plan satisfies the
requirement to provide an SBC with respect to an individual if the
issuer provides a timely and complete SBC to the individual. An entity
required to provide an SBC under this paragraph (a)(1) with respect to
an individual that contracts with another party to provide such SBC is
considered to satisfy the requirement to provide such SBC if:
(1) The entity monitors performance under the contract;
(2) If the entity has knowledge that the SBC is not being provided
in a manner that satisfies the requirements of this section and the
entity has all information necessary to correct the noncompliance, the
entity corrects the noncompliance as soon as practicable; and
(3) If the entity has knowledge the SBC is not being provided in a
manner that satisfies the requirements of this section and the entity
does not have all information necessary to correct the noncompliance,
the entity communicates with participants and beneficiaries who are
affected by the noncompliance regarding the noncompliance, and begins
taking significant steps as soon as practicable to avoid future
violations.
(B) If a single SBC is provided to a participant and any
beneficiaries at the participant's last known address, then the
requirement to provide the SBC to the participant and any beneficiaries
is generally satisfied. However, if a beneficiary's last known address
is different than the participant's last known address, a separate SBC
is required to be provided to the beneficiary at the beneficiary's last
known address.
(C) With respect to a group health plan that offers multiple benefit
packages, the plan or issuer is required to provide a new SBC
automatically to participants and beneficiaries upon renewal or
reenrollment only with respect to the benefit package in which a
participant or beneficiary is enrolled (or will be automatically re-
enrolled under the plan); SBCs are not required to be provided
automatically upon renewal or reenrollment with respect to benefit
packages in which the participant or beneficiary is not enrolled (or
will not automatically be enrolled). However, if a participant or
beneficiary requests an SBC with respect to another benefit package (or
more than one other benefit package) for which the participant or
beneficiary is eligible, the SBC (or SBCs, in the case of a request for
SBCs relating to more than one benefit package) must be provided
[[Page 165]]
upon request as soon as practicable, but in no event later than seven
business days following receipt of the request.
(D) Subject to paragraph (a)(2)(ii) of this section, a plan
administrator of a group health plan that uses two or more insurance
products provided by separate health insurance issuers with respect to a
single group health plan may synthesize the information into a single
SBC or provide multiple partial SBCs provided that all the SBC include
the content in paragraph (a)(2)(iii) of this section.
(iv) SBC provided by a health insurance issuer offering individual
health insurance coverage--(A) Upon application. A health insurance
issuer offering individual health insurance coverage must provide an SBC
to an individual covered under the policy (including every dependent)
upon receiving an application for any health insurance policy, as soon
as practicable following receipt of the application, but in no event
later than seven business days following receipt of the application. If
an SBC was provided before application pursuant to paragraph
(a)(1)(iv)(D) of this section (relating to SBCs upon request), this
paragraph (a)(1)(iv)(A) is deemed satisfied, provided there is no change
to the information required to be in the SBC. However, if there has been
a change in the information that is required to be in the SBC, a new SBC
that includes the changed information must be provided upon application
pursuant to this paragraph (a)(1)(iv)(A).
(B) By first day of coverage (if there are changes). If there is any
change in the information required to be in the SBC that was provided
upon application and before the first day of coverage, the issuer must
update and provide a current SBC to the individual no later than the
first day of coverage.
(C) Upon renewal, reissuance, or reenrollment. If the issuer renews
or reissues a policy, certificate, or contract of insurance for a
succeeding policy year, or automatically re-enrolls an individual (or
dependent) covered under a policy, certificate, or contract of insurance
into a policy, certificate, or contract of insurance under a different
plan or product, the issuer must provide an SBC for the coverage in
which the individual (including every dependent) will be enrolled, as
follows:
(1) If written application is required (in either paper or
electronic form) for renewal, reissuance, or reenrollment, the SBC must
be provided no later than the date on which the written application
materials are distributed.
(2) If renewal, reissuance, or reenrollment is automatic, the SBC
must be provided no later than 30 days prior to the first day of the new
policy year; however, if the policy, certificate, or contract of
insurance has not been issued or renewed before such 30 day period, the
SBC must be provided as soon as practicable but in no event later than
seven business days after issuance of the new policy, certificate, or
contract of insurance, or the receipt of written confirmation of intent
to renew, whichever is earlier.
(D) Upon request. A health insurance issuer offering individual
health insurance coverage must provide an SBC to any individual or
dependent upon request for an SBC or summary information about a health
insurance product as soon as practicable, but in no event later than
seven business days following receipt of the request.
(v) Special rule to prevent unnecessary duplication with respect to
individual health insurance coverage--(A) In general. If a single SBC is
provided to an individual and any dependents at the individual's last
known address, then the requirement to provide the SBC to the individual
and any dependents is generally satisfied. However, if a dependent's
last known address is different than the individual's last known
address, a separate SBC is required to be provided to the dependent at
the dependents' last known address.
(B) Student health insurance coverage. With respect to student
health insurance coverage as defined at Sec. 147.145(a), the
requirement to provide an SBC to an individual will be considered
satisfied for an entity if another party provides a timely and complete
SBC to the individual. An entity required to provide an SBC under this
paragraph (a)(1) with respect to an individual that contracts with
another party to provide such SBC is considered to satisfy the
requirement to provide such SBC if:
[[Page 166]]
(1) The entity monitors performance under the contract;
(2) If the entity has knowledge that the SBC is not being provided
in a manner that satisfies the requirements of this section and the
entity has all information necessary to correct the noncompliance, the
entity corrects the noncompliance as soon as practicable; and
(3) If the entity has knowledge the SBC is not being provided in a
manner that satisfies the requirements of this section and the entity
does not have all information necessary to correct the noncompliance,
the entity communicates with covered individuals and dependents who are
affected by the noncompliance regarding the noncompliance, and begins
taking significant steps as soon as practicable to avoid future
violations.
(2) Content--(i) In general. Subject to paragraph (a)(2)(iii) of
this section, the SBC must include the following:
(A) Uniform definitions of standard insurance terms and medical
terms so that consumers may compare health coverage and understand the
terms of (or exceptions to) their coverage, in accordance with guidance
as specified by the Secretary;
(B) A description of the coverage, including cost sharing, for each
category of benefits identified by the Secretary in guidance;
(C) The exceptions, reductions, and limitations of the coverage;
(D) The cost-sharing provisions of the coverage, including
deductible, coinsurance, and copayment obligations;
(E) The renewability and continuation of coverage provisions;
(F) Coverage examples, in accordance with the rules of paragraph
(a)(2)(ii) of this section;
(G) With respect to coverage beginning on or after January 1, 2014,
a statement about whether the plan or coverage provides minimum
essential coverage as defined under section 5000A(f) and whether the
plan's or coverage's share of the total allowed costs of benefits
provided under the plan or coverage meets applicable requirements;
(H) A statement that the SBC is only a summary and that the plan
document, policy, certificate, or contract of insurance should be
consulted to determine the governing contractual provisions of the
coverage;
(I) Contact information for questions;
(J) For issuers, an Internet web address where a copy of the actual
individual coverage policy or group certificate of coverage can be
reviewed and obtained;
(K) For plans and issuers that maintain one or more networks of
providers, an Internet address (or similar contact information) for
obtaining a list of network providers;
(L) For plans and issuers that use a formulary in providing
prescription drug coverage, an Internet address (or similar contact
information) for obtaining information on prescription drug coverage;
(M) An Internet address for obtaining the uniform glossary, as
described in paragraph (c) of this section, as well as a contact phone
number to obtain a paper copy of the uniform glossary, and a disclosure
that paper copies are available; and
(N) For qualified health plans sold through an individual market
Exchange that exclude or provide for coverage of the services described
in Sec. 156.280(d)(1) or (2) of this subchapter, a notice of coverage
or exclusion of such services.
(ii) Coverage examples. The SBC must include coverage examples
specified by the Secretary in guidance that illustrate benefits provided
under the plan or coverage for common benefits scenarios (including
pregnancy and serious or chronic medical conditions) in accordance with
this paragraph (a)(2)(ii).
(A) Number of examples. The Secretary may identify up to six
coverage examples that may be required in an SBC.
(B) Benefits scenarios. For purposes of this paragraph (a)(2)(ii), a
benefits scenario is a hypothetical situation, consisting of a sample
treatment plan for a specified medical condition during a specific
period of time, based on recognized clinical practice guidelines as
defined by the National Guideline Clearinghouse, Agency for Healthcare
Research and Quality. The Secretary will specify, in guidance, the
assumptions,
[[Page 167]]
including the relevant items and services and reimbursement information,
for each claim in the benefits scenario.
(C) Illustration of benefit provided. For purposes of this paragraph
(a)(2)(ii), to illustrate benefits provided under the plan or coverage
for a particular benefits scenario, a plan or issuer simulates claims
processing in accordance with guidance issued by the Secretary to
generate an estimate of what an individual might expect to pay under the
plan, policy, or benefit package. The illustration of benefits provided
will take into account any cost sharing, excluded benefits, and other
limitations on coverage, as specified by the Secretary in guidance.
(iii) Coverage provided outside the United States. In lieu of
summarizing coverage for items and services provided outside the United
States, a plan or issuer may provide an Internet address (or similar
contact information) for obtaining information about benefits and
coverage provided outside the United States. In any case, the plan or
issuer must provide an SBC in accordance with this section that
accurately summarizes benefits and coverage available under the plan or
coverage within the United States.
(3) Appearance. (i) A group health plan and a health insurance
issuer must provide an SBC in the form, and in accordance with the
instructions for completing the SBC, that are specified by the Secretary
in guidance. The SBC must be presented in a uniform format, use
terminology understandable by the average plan enrollee (or, in the case
of individual market coverage, the average individual covered under a
health insurance policy), not exceed four double-sided pages in length,
and not include print smaller than 12-point font. A health insurance
issuer offering individual health insurance coverage must provide the
SBC as a stand-alone document.
(ii) A group health plan that utilizes two or more benefit packages
(such as major medical coverage and a health flexible spending
arrangement) may synthesize the information into a single SBC, or
provide multiple SBCs.
(4) Form. (i) An SBC provided by an issuer offering group health
insurance coverage to a plan (or its sponsor), may be provided in paper
form. Alternatively, the SBC may be provided electronically (such as by
email or an Internet posting) if the following three conditions are
satisfied--
(A) The format is readily accessible by the plan (or its sponsor);
(B) The SBC is provided in paper form free of charge upon request;
and
(C) If the electronic form is an Internet posting, the issuer timely
advises the plan (or its sponsor) in paper form or email that the
documents are available on the Internet and provides the Internet
address.
(ii) An SBC provided by a group health plan or health insurance
issuer to a participant or beneficiary may be provided in paper form.
Alternatively, the SBC may be provided electronically (such as by email
or an Internet posting) if the requirements of this paragraph (a)(4)(ii)
are met.
(A) With respect to participants and beneficiaries covered under the
plan or coverage, the SBC may be provided electronically as described in
this paragraph (a)(4)(ii)(A). However, in all cases, the plan or issuer
must provide the SBC in paper form if paper form is requested.
(1) In accordance with the Department of Labor's disclosure
regulations at 29 CFR 2520.104b-1;
(2) In connection with online enrollment or online renewal of
coverage under the plan; or
(3) In response to an online request made by a participant or
beneficiary for the SBC.
(B) With respect to participants and beneficiaries who are eligible
but not enrolled for coverage, the SBC may be provided electronically
if:
(1) The format is readily accessible;
(2) The SBC is provided in paper form free of charge upon request;
and
(3) In a case in which the electronic form is an Internet posting,
the plan or issuer timely notifies the individual in paper form (such as
a postcard) or email that the documents are available on the Internet,
provides the Internet address, and notifies the individual that the
documents are available in paper form upon request.
[[Page 168]]
(iii) An issuer offering individual health insurance coverage must
provide an SBC in a manner that can reasonably be expected to provide
actual notice in paper or electronic form.
(A) An issuer satisfies the requirements of this paragraph
(a)(4)(iii) if the issuer:
(1) Hand-delivers a printed copy of the SBC to the individual or
dependent;
(2) Mails a printed copy of the SBC to the mailing address provided
to the issuer by the individual or dependent;
(3) Provides the SBC by email after obtaining the individual's or
dependent's agreement to receive the SBC or other electronic disclosures
by email;
(4) Posts the SBC on the Internet and advises the individual or
dependent in paper or electronic form, in a manner compliant with
paragraphs (a)(4)(iii)(A)(1) through (3) of this section, that the SBC
is available on the Internet and includes the applicable Internet
address; or
(5) Provides the SBC by any other method that can reasonably be
expected to provide actual notice.
(B) An SBC may not be provided electronically unless:
(1) The format is readily accessible;
(2) The SBC is placed in a location that is prominent and readily
accessible;
(3) The SBC is provided in an electronic form which can be
electronically retained and printed;
(4) The SBC is consistent with the appearance, content, and language
requirements of this section;
(5) The issuer notifies the individual or dependent that the SBC is
available in paper form without charge upon request and provides it upon
request.
(C) Deemed compliance. A health insurance issuer offering individual
health insurance coverage that provides the content required under
paragraph (a)(2) of this section, as specified in guidance published by
the Secretary, to the federal health reform Web portal described in
Sec. 159.120 of this subchapter will be deemed to satisfy the
requirements of paragraph (a)(1)(iv)(D) of this section with respect to
a request for summary information about a health insurance product made
prior to an application for coverage. However, nothing in this paragraph
should be construed as otherwise limiting such issuer's obligations
under this section.
(iv) An SBC provided by a self-insured non-Federal governmental plan
may be provided in paper form. Alternatively, the SBC may be provided
electronically if the plan conforms to either the substance of the
provisions in paragraph (a)(4)(ii) or (iii) of this section.
(5) Language. A group health plan or health insurance issuer must
provide the SBC in a culturally and linguistically appropriate manner.
For purposes of this paragraph (a)(5), a plan or issuer is considered to
provide the SBC in a culturally and linguistically appropriate manner if
the thresholds and standards of Sec. 147.136(e) are met as applied to
the SBC.
(b) Notice of modification. If a group health plan, or health
insurance issuer offering group or individual health insurance coverage,
makes any material modification (as defined under section 102 of ERISA)
in any of the terms of the plan or coverage that would affect the
content of the SBC, that is not reflected in the most recently provided
SBC, and that occurs other than in connection with a renewal or
reissuance of coverage, the plan or issuer must provide notice of the
modification to enrollees (or, in the case of individual market
coverage, an individual covered under a health insurance policy) not
later than 60 days prior to the date on which the modification will
become effective. The notice of modification must be provided in a form
that is consistent with the rules of paragraph (a)(4) of this section.
(c) Uniform glossary--(1) In general. A group health plan, and a
health insurance issuer offering group health insurance coverage, must
make available to participants and beneficiaries, and a health insurance
issuer offering individual health insurance coverage must make available
to applicants, policyholders, and covered dependents, the uniform
glossary described in paragraph (c)(2) of this section in accordance
with the appearance and form and manner requirements of paragraphs
(c)(3) and (4) of this section.
(2) Health-coverage-related terms and medical terms. The uniform
glossary
[[Page 169]]
must provide uniform definitions, specified by the Secretary in
guidance, of the following health-coverage-related terms and medical
terms:
(i) Allowed amount, appeal, balance billing, co-insurance,
complications of pregnancy, co-payment, deductible, durable medical
equipment, emergency medical condition, emergency medical
transportation, emergency room care, emergency services, excluded
services, grievance, habilitation services, health insurance, home
health care, hospice services, hospitalization, hospital outpatient
care, in-network co-insurance, in-network co-payment, medically
necessary, network, non-preferred provider, out-of-network coinsurance,
out-of-network co-payment, out-of-pocket limit, physician services,
plan, preauthorization, preferred provider, premium, prescription drug
coverage, prescription drugs, primary care physician, primary care
provider, provider, reconstructive surgery, rehabilitation services,
skilled nursing care, specialist, usual customary and reasonable (UCR),
and urgent care; and
(ii) Such other terms as the Secretary determines are important to
define so that individuals and employers may compare and understand the
terms of coverage and medical benefits (including any exceptions to
those benefits), as specified in guidance.
(3) Appearance. A group health plan, and a health insurance issuer,
must provide the uniform glossary with the appearance specified by the
Secretary in guidance to ensure the uniform glossary is presented in a
uniform format and uses terminology understandable by the average plan
enrollee (or, in the case of individual market coverage, an average
individual covered under a health insurance policy).
(4) Form and manner. A plan or issuer must make the uniform glossary
described in this paragraph (c) available upon request, in either paper
or electronic form (as requested), within seven business days after
receipt of the request.
(d) Preemption. For purposes of this section, the provisions of
section 2724 of the PHS Act continue to apply with respect to preemption
of State law. State laws that conflict with this section (including a
state law that requires a health insurance issuer to provide an SBC that
supplies less information than required under paragraph (a) of this
section) are preempted.
(e) Failure to provide. A health insurance issuer or a non-federal
governmental health plan that willfully fails to provide information to
a covered individual required under this section is subject to a fine of
not more than $1,000 as adjusted annually under 45 CFR part 102 for each
such failure. A failure with respect to each covered individual
constitutes a separate offense for purposes of this paragraph (e). HHS
will enforce these provisions in a manner consistent with Sec. Sec.
150.101 through 150.465 of this subchapter.
(f) Applicability to Medicare Advantage benefits. The requirements
of this section do not apply to a group health plan benefit package that
provides Medicare Advantage benefits pursuant to or 42 U.S.C. Chapter 7,
Subchapter XVIII, Part C.
(g) Applicability date. (1) This section is applicable to group
health plans and group health insurance issuers in accordance with this
paragraph (g). (See Sec. 147.140(d), providing that this section
applies to grandfathered health plans.)
(i) For disclosures with respect to participants and beneficiaries
who enroll or re-enroll through an open enrollment period (including re-
enrollees and late enrollees), this section applies beginning on the
first day of the first open enrollment period that begins on or after
September 1, 2015; and
(ii) For disclosures with respect to participants and beneficiaries
who enroll in coverage other than through an open enrollment period
(including individuals who are newly eligible for coverage and special
enrollees), this section applies beginning on the first day of the first
plan year that begins on or after September 1, 2015.
(2) For disclosures with respect to plans, this section is
applicable to health insurance issuers beginning September 1, 2015.
(3) For disclosures with respect individuals and covered dependents
in the individual market, this section is applicable to health insurance
issuers beginning with respect to SBCs issued for
[[Page 170]]
coverage that begins on or after January 1, 2016.
[80 FR 34310, June 16, 2015, as amended at 81 FR 61581, Sept. 6, 2016]
PART 148_REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET-
-Table of Contents
Subpart A_General Provisions
Sec.
148.101 Basis and purpose.
148.102 Scope and applicability date.
Subpart B_Requirements Relating to Access and Renewability of Coverage
148.120 Guaranteed availability of individual health insurance coverage
to certain individuals with prior group coverage.
148.122 Guaranteed renewability of individual health insurance coverage.
148.124 Certification and disclosure of coverage.
148.126 Determination of an eligible individual.
148.128 State flexibility in individual market reforms--alternative
mechanisms.
Subpart C_Requirements Related to Benefits
148.170 Standards relating to benefits for mothers and newborns.
148.180 Prohibition of discrimination based on genetic information.
Subpart D_Preemption; Excepted Benefits
148.210 Preemption.
148.220 Excepted benefits.
Subpart E_Grants to States for Operation of Qualified High Risk Pools
148.306 Basis and scope.
148.308 Definitions.
148.310 Eligibility requirements for a grant.
148.312 Amount of grant payment.
148.314 Periods during which eligible States may apply for a grant.
148.316 Grant application instructions.
148.318 Grant application review.
148.320 Grant awards.
Authority: 42 U.S.C. 300gg through 300gg-63, 300gg-11 300gg-91, and
300-gg92, as amended.
Source: 62 FR 16995, Apr. 8, 1997, unless otherwise noted.
Subpart A_General Provisions
Sec. 148.101 Basis and purpose.
This part implements sections 2741 through 2763 and 2791 and 2792 of
the PHS Act. Its purpose is to guarantee the renewability of all
coverage in the individual market. It also provides certain protections
for mothers and newborns with respect to coverage for hospital stays in
connection with childbirth and protects all individuals and family
members who have, or seek, individual health insurance coverage from
discrimination based on genetic information.
[79 FR 30340, May 27, 2014]
Sec. 148.102 Scope and applicability date.
(a) Scope and applicability. (1) Individual health insurance
coverage includes all health insurance coverage (as defined in Sec.
144.103 of this subchapter) that is neither health insurance coverage
sold in connection with an employment-related group health plan, nor
short-term, limited-duration coverage as defined in Sec. 144.103 of
this subchapter.
(2) The requirements that pertain to guaranteed renewability for all
individuals, to protections for mothers and newborns with respect to
hospital stays in connection with childbirth, and to protections against
discrimination based on genetic information apply to all issuers of
individual health insurance coverage in the State.
(b) Applicability date. Except as provided in Sec. 148.124
(certificate of creditable coverage), Sec. 148.170 (standards relating
to benefits for mothers and newborns), and Sec. 148.180 (prohibition of
health discrimination based on genetic information), the requirements of
this part apply to health insurance coverage offered, sold, issued,
renewed, in effect, or operated in the individual market after June 30,
1997. Notwithstanding the previous sentence, the definition of ``short-
term, limited-duration insurance'' in Sec. 144.103 of this subchapter
is applicable October 2, 2018.
[79 FR 30340, May 27, 2014, as amended at 81 FR 75327, Oct. 31, 2016; 83
FR 38243, Aug. 3, 2018]
[[Page 171]]
Subpart B_Requirements Relating to Access and Renewability of Coverage
Sec. 148.120 Guaranteed availability of individual health insurance
coverage to certain individuals with prior group coverage.
The rules for guaranteeing the availability of individual health
insurance coverage to certain eligible individuals with prior group
coverage have been superseded by the requirements of Sec. 147.104 of
this subchapter, which set forth Federal requirements for guaranteed
availability of coverage in the group and individual markets.
[79 FR 30340, May 27, 2014]
Sec. 148.122 Guaranteed renewability of individual health insurance
coverage.
(a) Applicability. This section applies to non-grandfathered and
grandfathered health plans (within the meaning of Sec. 147.140 of this
subchapter) that are individual health insurance coverage. See also
Sec. 147.106 of this subchapter for requirements relating to guaranteed
renewability of coverage with respect to non-grandfathered health plans.
(b) General rules. (1) Except as provided in paragraphs (c) through
(g) of this section, an issuer must renew or continue in force the
coverage at the option of the individual.
(2) Medicare entitlement or enrollment is not a basis to nonrenew an
individual's health insurance coverage in the individual market under
the same policy or contract of insurance.
(c) Exceptions to renewing coverage. An issuer may nonrenew or
discontinue health insurance coverage of an individual in the individual
market based only on one or more of the following:
(1) Nonpayment of premiums. The individual has failed to pay
premiums or contributions in accordance with the terms of the health
insurance coverage, including any timeliness requirements.
(2) Fraud. The individual has performed an act or practice that
constitutes fraud or made an intentional misrepresentation of material
fact under the terms of the coverage.
(3) Termination of product. The issuer is ceasing to offer coverage
in the market in accordance with paragraph (d) or (e) of this section
and applicable State law.
(4) Movement outside the service area. For network plans, the
individual no longer resides, lives, or works in the service area of the
issuer, or area for which the issuer is authorized to do business, but
only if coverage is terminated uniformly without regard to any health
status-related factor of covered individuals; provided the issuer
provides notice in accordance with the requirements of paragraph (d)(1)
of this section.
(5) Association membership ceases. For coverage made available in
the individual market only through one or more bona fide associations,
the individual's membership in the association ceases, but only if the
coverage is terminated uniformly without regard to any health status-
related factor of covered individuals.
(d) Discontinuing a particular type of coverage. An issuer may
discontinue offering a particular type of health insurance coverage
offered in the individual market only if it meets the following
requirements:
(1) Provides notice in writing, in a form and manner specified by
the Secretary, to each individual provided coverage of that type of
health insurance at least 90 calendar days before the date the coverage
will be discontinued.
(2) Offers to each covered individual, on a guaranteed issue basis,
the option to purchase any other individual health insurance coverage
currently being offered by the issuer for individuals in that market.
(3) Acts uniformly without regard to any health status-related
factor of covered individuals or dependents of covered individuals who
may become eligible for coverage.
(e) Discontinuing all coverage. An issuer may discontinue offering
all health insurance coverage in the individual market in a State only
if it meets the following requirements.
(1) Provides notice in writing to the applicable State authority and
to each individual of the discontinuation at least 180 days before the
date the coverage will expire.
(2) Discontinues and does not renew all health insurance policies it
issues
[[Page 172]]
or delivers for issuance in the State in the individual market.
(3) Acts uniformly without regard to any health status-related
factor of covered individuals or dependents of covered individuals who
may become eligible for coverage.
(4) For purposes of this paragraph (e), subject to applicable State
law, an issuer will not be considered to have discontinued offering all
health insurance coverage in a market in a State if--
(i) The issuer (in this paragraph referred to as the initial issuer)
or, if the issuer is a member of a controlled group, any other issuer
that is a member of such controlled group, offers and makes available in
the applicable market in the State at least one product that is
considered in accordance with Sec. 144.103 of this subchapter to be the
same product as a product the initial issuer had been offering in such
market in such State; or
(ii) The issuer--
(A) Offers and makes available at least one product (in paragraphs
(e)(4)(ii)(A) through (C) of this section referred to as the new
product) in the applicable market in the State, even if such product is
not considered in accordance with Sec. 144.103 of this subchapter to be
the same product as a product the issuer had been offering in the
applicable market in the State (in paragraphs (e)(4)(ii)(A) through (C)
of this section referred to as the discontinued product);
(B) Subjects such new product or products to the applicable process
and requirements established under part 154 of this title as if such
process and requirements applied with respect to that product or
products, to the extent such process and requirements are otherwise
applicable to coverage of the same type and in the same market; and
(C) Reasonably identifies the discontinued product or products that
correspond to the new product or products for purposes of the process
and requirements applied pursuant to paragraph (e)(4)(ii)(B) of this
section.
(5) For purposes of this section, the term controlled group means a
group of two or more persons that is treated as a single employer under
sections 52(a), 52(b), 414(m), or 414(o) of the Internal Revenue Code of
1986, as amended, or a narrower group as may be provided by applicable
State law.
(f) Prohibition on market reentry. An issuer who elects to
discontinue offering all health insurance coverage under paragraph (e)
of this section may not issue coverage in the market and State involved
during the 5-year period beginning on the date of discontinuation of the
last coverage not renewed.
(g) Exception for uniform modification of coverage. (1) An issuer
may, only at the time of coverage renewal, modify the health insurance
coverage for a product offered in the individual market if the
modification is consistent with State law and is effective uniformly for
all individuals with that product.
(2) For purposes of paragraph (g) of this section, modifications
made uniformly and solely pursuant to applicable Federal or State
requirements are considered a uniform modification of coverage if:
(i) The modification is made within a reasonable time period after
the imposition or modification of the Federal or State requirement; and
(ii) The modification is directly related to the imposition or
modification of the Federal or State requirement.
(3) For purposes of paragraph (g) of this section, other types of
modifications made uniformly are considered a uniform modification of
coverage if the health insurance coverage for the product meets all of
the following criteria:
(i) The product is offered by the same health insurance issuer
(within the meaning of section 2791(b)(2) of the PHS Act), or if the
issuer that is a member of a controlled group (as described in paragraph
(e)(5) of this section), any other health insurance issuer that is a
member of such controlled group;
(ii) The product is offered as the same product network type (for
example, health maintenance organization, preferred provider
organization, exclusive provider organization, point of service, or
indemnity);
(iii) The product continues to cover at least a majority of the same
service area;
(iv) Within the product, each plan has the same cost-sharing
structure as
[[Page 173]]
before the modification, except for any variation in cost sharing solely
related to changes in cost and utilization of medical care, or to
maintain the same metal tier level described in sections 1302(d) and (e)
of the Affordable Care Act; and
(v) The product provides the same covered benefits, except for any
changes in benefits that cumulatively impact the rate for any plan
within the product within an allowable variation of 2 percentage points (not including changes pursuant to
applicable Federal or State requirements).
(4) A State may only broaden the standards in paragraphs (g)(3)(iii)
and (iv) of this section.
(h) Application to coverage offered only through associations. In
the case of health insurance coverage that is made available by a health
insurance issuer in the individual market only through one or more
associations, any reference in this section to an ``individual'' is
deemed to include a reference to the association of which the individual
is a member.
(i) Notice of renewal of coverage. If an issuer is renewing
grandfathered coverage as described in paragraph (b) of this section, or
uniformly modifying grandfathered coverage as described in paragraph (g)
of this section, the issuer must provide to each individual written
notice of the renewal at least 60 calendar days before the date the
coverage will be renewed in a form and manner specified by the
Secretary.
(Approved by the Office of Management and Budget under control number
0938-0703)
[62 FR 16998, Apr. 8, 1997; 62 FR 31696, June 10, 1997, as amended at 62
FR 35906, July 2, 1997; 79 FR 30340, May 27, 2014; 79 FR 42986, July 24,
2014; 79 FR 53004, Sept. 5, 2014; 81 FR 94174, Dec. 22, 2016; 84 FR
17561, Apr. 25, 2019]
Sec. 148.124 Certification and disclosure of coverage.
(a) General rule. The rules for providing certificates of creditable
coverage and demonstrating creditable coverage have been superseded by
the prohibition on preexisting condition exclusions. See Sec. 147.108
of this subchapter for rules prohibiting the imposition of a preexisting
condition exclusion.
(b) Applicability. The provisions of this section apply beginning
December 31, 2014.
[79 FR 30341, May 27, 2014]
Sec. 148.126 Determination of an eligible individual.
The rules for guaranteeing the availability of individual health
insurance coverage to certain eligible individuals with prior group
coverage have been superseded by the requirements of Sec. 147.104 of
this subchapter, which set forth Federal requirements for guaranteed
availability of coverage in the group and individual markets.
[79 FR 30341, May 27, 2014]
Sec. 148.128 State flexibility in individual market reforms-
-alternative mechanisms.
The rules for a State to implement an acceptable alternative
mechanism for purposes of guaranteeing the availability of individual
health insurance coverage to certain eligible individuals with prior
group coverage have been superseded by the requirements of Sec. 147.104
of this subchapter, which set forth Federal requirements for guaranteed
availability of coverage in the group and individual markets.
[79 FR 30341, May 27, 2014]
Subpart C_Requirements Related to Benefits
Sec. 148.170 Standards relating to benefits for mothers and newborns.
(a) Hospital length of stay--(1) General rule. Except as provided in
paragraph (a)(5) of this section, an issuer offering health insurance
coverage in the individual market that provides benefits for a hospital
length of stay in connection with childbirth for a mother or her newborn
may not restrict benefits for the stay to less than--
(i) 48 hours following a vaginal delivery; or
(ii) 96 hours following a delivery by cesarean section.
(2) When stay begins--(i) Delivery in a hospital. If delivery occurs
in a hospital, the hospital length of stay for the mother or newborn
child begins at the time of delivery (or in the case of
[[Page 174]]
multiple births, at the time of the last delivery).
(ii) Delivery outside a hospital. If delivery occurs outside a
hospital, the hospital length of stay begins at the time the mother or
newborn is admitted as a hospital inpatient in connection with
childbirth. The determination of whether an admission is in connection
with childbirth is a medical decision to be made by the attending
provider.
(3) Examples. The rules of paragraphs (a)(1) and (2) of this section
are illustrated by the following examples. In each example, the issuer
provides benefits for hospital lengths of stay in connection with
childbirth and is subject to the requirements of this section, as
follows:
Example 1. (i) Facts. A pregnant woman covered under a policy issued
in the individual market goes into labor and is admitted to the hospital
at 10 p.m. on June 11. She gives birth by vaginal delivery at 6 a.m. on
June 12.
(ii) Conclusion. In this Example 1, the 48-hour period described in
paragraph (a)(1)(i) of this section ends at 6 a.m. on June 14.
Example 2. (i) Facts. A woman covered under a policy issued in the
individual market gives birth at home by vaginal delivery. After the
delivery, the woman begins bleeding excessively in connection with the
childbirth and is admitted to the hospital for treatment of the
excessive bleeding at 7 p.m. on October 1.
(ii) Conclusion. In this Example 2, the 48-hour period described in
paragraph (a)(1)(i) of this section ends at 7 p.m. on October 3.
Example 3. (i) Facts. A woman covered under a policy issued in the
individual market gives birth by vaginal delivery at home. The child
later develops pneumonia and is admitted to the hospital. The attending
provider determines that the admission is not in connection with
childbirth.
(ii) Conclusion. In this Example 3, the hospital length-of-stay
requirements of this section do not apply to the child's admission to
the hospital because the admission is not in connection with childbirth.
(4) Authorization not required--(i) In general. An issuer is
prohibited from requiring that a physician or other health care provider
obtain authorization from the issuer for prescribing the hospital length
of stay specified in paragraph (a)(1) of this section. (See also
paragraphs (b)(2) and (c)(3) of this section for rules and examples
regarding other authorization and certain notice requirements.)
(ii) Example. The rule of this paragraph (a)(4) is illustrated by
the following example:
Example. (i) Facts. In the case of a delivery by cesarean section,
an issuer subject to the requirements of this section automatically
provides benefits for any hospital length of stay of up to 72 hours. For
any longer stay, the issuer requires an attending provider to complete a
certificate of medical necessity. The issuer then makes a determination,
based on the certificate of medical necessity, whether a longer stay is
medically necessary.
(ii) Conclusion. In this Example, the requirement that an attending
provider complete a certificate of medical necessity to obtain
authorization for the period between 72 hours and 96 hours following a
delivery by cesarean section is prohibited by this paragraph (a)(4).
(5) Exceptions--(i) Discharge of mother. If a decision to discharge
a mother earlier than the period specified in paragraph (a)(1) of this
section is made by an attending provider, in consultation with the
mother, the requirements of paragraph (a)(1) of this section do not
apply for any period after the discharge.
(ii) Discharge of newborn. If a decision to discharge a newborn
child earlier than the period specified in paragraph (a)(1) of this
section is made by an attending provider, in consultation with the
mother (or the newborn's authorized representative), the requirements of
paragraph (a)(1) of this section do not apply for any period after the
discharge.
(iii) Attending provider defined. For purposes of this section,
attending provider means an individual who is licensed under applicable
state law to provide maternity or pediatric care and who is directly
responsible for providing maternity or pediatric care to a mother or
newborn child. Therefore, an issuer, plan, hospital, or managed care
organization is not an attending provider.
(iv) Example. The rules of this paragraph (a)(5) are illustrated by
the following example:
Example. (i) Facts. A pregnant woman covered under a policy offered
by an issuer subject to the requirements of this section goes into labor
and is admitted to a hospital. She gives birth by cesarean section. On
the third
[[Page 175]]
day after the delivery, the attending provider for the mother consults
with the mother, and the attending provider for the newborn consults
with the mother regarding the newborn. The attending providers authorize
the early discharge of both the mother and the newborn. Both are
discharged approximately 72 hours after the delivery. The issuer pays
for the 72-hour hospital stays.
(ii) Conclusion. In this Example, the requirements of this paragraph
(a) have been satisfied with respect to the mother and the newborn. If
either is readmitted, the hospital stay for the readmission is not
subject to this section.
(b) Prohibitions--(1) With respect to mothers--(i) In general. An
issuer subject to the requirements of this section may not--
(A) Deny a mother or her newborn child eligibility or continued
eligibility to enroll in or renew coverage solely to avoid the
requirements of this section; or
(B) Provide payments (including payments-in-kind) or rebates to a
mother to encourage her to accept less than the minimum protections
available under this section.
(ii) Examples. The rules of this paragraph (b)(1) are illustrated by
the following examples. In each example, the issuer is subject to the
requirements of this section, as follows:
Example 1. (i) Facts. An issuer provides benefits for at least a 48-
hour hospital length of stay following a vaginal delivery. If a mother
and newborn covered under a policy issued in the individual market are
discharged within 24 hours after the delivery, the issuer will waive the
copayment and deductible.
(ii) Conclusion. In this Example 1, because waiver of the copayment
and deductible is in the nature of a rebate that the mother would not
receive if she and her newborn remained in the hospital, it is
prohibited by this paragraph (b)(1). (In addition, the issuer violates
paragraph (b)(2) of this section because, in effect, no copayment or
deductible is required for the first portion of the stay and a double
copayment and a deductible are required for the second portion of the
stay.)
Example 2. (i) Facts. An issuer provides benefits for at least a 48-
hour hospital length of stay following a vaginal delivery. In the event
that a mother and her newborn are discharged earlier than 48 hours and
the discharges occur after consultation with the mother in accordance
with the requirements of paragraph (a)(5) of this section, the issuer
provides for a follow-up visit by a nurse within 48 hours after the
discharges to provide certain services that the mother and her newborn
would otherwise receive in the hospital.
(ii) Conclusion. In this Example 2, because the follow-up visit does
not provide any services beyond what the mother and her newborn would
receive in the hospital, coverage for the follow-up visit is not
prohibited by this paragraph (b)(1).
(2) With respect to benefit restrictions--(i) In general. Subject to
paragraph (c)(3) of this section, an issuer may not restrict the
benefits for any portion of a hospital length of stay specified in
paragraph (a) of this section in a manner that is less favorable than
the benefits provided for any preceding portion of the stay.
(ii) Example. The rules of this paragraph (b)(2) are illustrated by
the following example:
Example. (i) Facts. An issuer subject to the requirements of this
section provides benefits for hospital lengths of stay in connection
with childbirth. In the case of a delivery by cesarean section, the
issuer automatically pays for the first 48 hours. With respect to each
succeeding 24-hour period, the covered individual must call the issuer
to obtain precertification from a utilization reviewer, who determines
if an additional 24-hour period is medically necessary. If this approval
is not obtained, the issuer will not provide benefits for any succeeding
24-hour period.
(ii) Conclusion. In this Example, the requirement to obtain
precertification for the two 24-hour periods immediately following the
initial 48-hour stay is prohibited by this paragraph (b)(2) because
benefits for the latter part of the stay are restricted in a manner that
is less favorable than benefits for a preceding portion of the stay.
(However, this section does not prohibit an issuer from requiring
precertification for any period after the first 96 hours.) In addition,
the requirement to obtain precertification from the issuer based on
medical necessity for a hospital length of stay within the 96-hour
period would also violate paragraph (a) of this section.
(3) With respect to attending providers. An issuer may not directly
or indirectly--
(i) Penalize (for example, take disciplinary action against or
retaliate against), or otherwise reduce or limit the compensation of, an
attending provider because the provider furnished care to a covered
individual in accordance with this section; or
(ii) Provide monetary or other incentives to an attending provider
to induce the provider to furnish care to a
[[Page 176]]
covered individual in a manner inconsistent with this section, including
providing any incentive that could induce an attending provider to
discharge a mother or newborn earlier than 48 hours (or 96 hours) after
delivery.
(c) Construction. With respect to this section, the following rules
of construction apply:
(1) Hospital stays not mandatory. This section does not require a
mother to--
(i) Give birth in a hospital; or
(ii) Stay in the hospital for a fixed period of time following the
birth of her child.
(2) Hospital stay benefits not mandated. This section does not apply
to any issuer that does not provide benefits for hospital lengths of
stay in connection with childbirth for a mother or her newborn child.
(3) Cost-sharing rules--(i) In general. This section does not
prevent an issuer from imposing deductibles, coinsurance, or other cost-
sharing in relation to benefits for hospital lengths of stay in
connection with childbirth for a mother or a newborn under the coverage,
except that the coinsurance or other cost-sharing for any portion of the
hospital length of stay specified in paragraph (a) of this section may
not be greater than that for any preceding portion of the stay.
(ii) Examples. The rules of this paragraph (c)(3) are illustrated by
the following examples. In each example, the issuer is subject to the
requirements of this section, as follows:
Example 1. (i) Facts. An issuer provides benefits for at least a 48-
hour hospital length of stay in connection with vaginal deliveries. The
issuer covers 80 percent of the cost of the stay for the first 24-hour
period and 50 percent of the cost of the stay for the second 24-hour
period. Thus, the coinsurance paid by the patient increases from 20
percent to 50 percent after 24 hours.
(ii) Conclusion. In this Example 1, the issuer violates the rules of
this paragraph (c)(3) because coinsurance for the second 24-hour period
of the 48-hour stay is greater than that for the preceding portion of
the stay. (In addition, the issuer also violates the similar rule in
paragraph (b)(2) of this section.)
Example 2. (i) Facts. An issuer generally covers 70 percent of the
cost of a hospital length of stay in connection with childbirth.
However, the issuer will cover 80 percent of the cost of the stay if the
covered individual notifies the issuer of the pregnancy in advance of
admission and uses whatever hospital the issuer may designate.
(ii) Conclusion. In this Example 2, the issuer does not violate the
rules of this paragraph (c)(3) because the level of benefits provided
(70 percent or 80 percent) is consistent throughout the 48-hour (or 96-
hour) hospital length of stay required under paragraph (a) of this
section. (In addition, the issuer does not violate the rules in
paragraph (a)(4) or (b)(2) of this section.)
(4) Compensation of attending provider. This section does not
prevent an issuer from negotiating with an attending provider the level
and type of compensation for care furnished in accordance with this
section (including paragraph (b) of this section).
(5) Applicability. This section applies to all health insurance
coverage issued in the individual market, and is not limited in its
application to coverage that is provided to eligible individuals as
defined in section 2741(b) of the PHS Act.
(d) Notice requirement. Except as provided in paragraph (d)(4) of
this section, an issuer offering health insurance in the individual
market must meet the following requirements with respect to benefits for
hospital lengths of stay in connection with childbirth:
(1) Required statement. The insurance contract must disclose
information that notifies covered individuals of their rights under this
section.
(2) Disclosure notice. To meet the disclosure requirements set forth
in paragraph (d)(1) of this section, the following disclosure notice
must be used:
Statement of Rights Under the Newborns' and Mothers' Health Protection
Act
Under federal law, health insurance issuers generally may not
restrict benefits for any hospital length of stay in connection with
childbirth for the mother or newborn child to less than 48 hours
following a vaginal delivery, or less than 96 hours following a delivery
by cesarean section. However, the issuer may pay for a shorter stay if
the attending provider (e.g. , your physician, nurse midwife, or
physician assistant), after consultation with the mother, discharges the
mother or newborn earlier.
Also, under federal law, issuers may not set the level of benefits
or out-of-pocket costs so that any later portion of the 48-hour (or 96-
hour) stay is treated in a manner less favorable to the mother or
newborn than any earlier portion of the stay.
[[Page 177]]
In addition, an issuer may not, under federal law, require that a
physician or other health care provider obtain authorization for
prescribing a length of stay of up to 48 hours (or 96 hours). However,
to use certain providers or facilities, or to reduce your out-of-pocket
costs, you may be required to obtain precertification. For information
on precertification, contact your issuer.
(3) Timing of disclosure. The disclosure notice in paragraph (d)(2)
of this section shall be furnished to the covered individuals in the
form of a copy of the contract, or a rider (or equivalent amendment to
the contract) no later than December 19, 2008. To the extent an issuer
has already provided the disclosure notice in paragraph (d)(2) of this
section to covered individuals, it need not provide another such notice
by December 19, 2008.
(4) Exception. The requirements of this paragraph (d) do not apply
with respect to coverage regulated under a state law described in
paragraph (e) of this section.
(e) Applicability in certain states--(1) Health insurance coverage.
The requirements of section 2751 of the PHS Act and this section do not
apply with respect to health insurance coverage in the individual market
if there is a state law regulating the coverage that meets any of the
following criteria:
(i) The state law requires the coverage to provide for at least a
48-hour hospital length of stay following a vaginal delivery and at
least a 96-hour hospital length of stay following a delivery by cesarean
section.
(ii) The state law requires the coverage to provide for maternity
and pediatric care in accordance with guidelines that relate to care
following childbirth established by the American College of
Obstetricians and Gynecologists, the American Academy of Pediatrics, or
any other established professional medical association.
(iii) The state law requires, in connection with the coverage for
maternity care, that the hospital length of stay for such care is left
to the decision of (or is required to be made by) the attending provider
in consultation with the mother. State laws that require the decision to
be made by the attending provider with the consent of the mother satisfy
the criterion of this paragraph (e)(1)(iii).
(2) Relation to section 2762(a) of the PHS Act. The preemption
provisions contained in section 2762(a) of the PHS Act and Sec.
148.210(b) do not supersede a state law described in paragraph (e)(1) of
this section.
(f) Applicability date. Section 2751 of the PHS Act applies to
health insurance coverage offered, sold, issued, renewed, in effect, or
operated in the individual market on or after January 1, 1998. This
section applies to health insurance coverage offered, sold, issued,
renewed, in effect, or operated in the individual market on or after
January 1, 2009.
[73 FR 62427, Oct. 20, 2008]
Sec. 148.180 Prohibition of discrimination based on genetic information.
(a) Definitions. For purposes of this section, the following
definitions as set forth in Sec. 146.122 of this subchapter pertain to
health insurance issuers in the individual market to the extent that
those definitions are not inconsistent with respect to health insurance
coverage offered, sold, issued, renewed, in effect or operated in the
individual market:
Collect has the meaning set forth at Sec. 146.122(a).
Family member has the meaning set forth at Sec. 146.122(a).
Genetic information has the meaning set forth at Sec. 146.122(a).
Genetic services has the meaning set forth at Sec. 146.122(a).
Genetic test has the meaning set forth at Sec. 146.122(a).
Manifestation or manifested has the meaning set forth at Sec.
146.122(a).
Preexisting condition exclusion has the meaning set forth at Sec.
144.103.
Underwriting purposes has the meaning set forth at Sec.
148.180(f)(1).
(b) Prohibition on genetic information as a condition of
eligibility--(1) In general. An issuer offering health insurance
coverage in the individual market may not establish rules for the
eligibility (including continued eligibility) of any individual to
enroll in individual health insurance coverage based on genetic
information.
(2) Rule of construction. Nothing in paragraph (b)(1) of this
section precludes an issuer from establishing rules
[[Page 178]]
for eligibility for an individual to enroll in individual health
insurance coverage based on the manifestation of a disease or disorder
in that individual, or in a family member of that individual when the
family member is covered under the policy that covers the individual.
(3) Examples. The rules of this paragraph (b) are illustrated by the
following examples:
Example 1. (i) Facts. A State implements the HIPAA guaranteed
availability requirement in the individual health insurance market in
accordance with Sec. 148.120. Individual A and his spouse S are not
``eligible individuals'' as that term is defined at Sec. 148.103 and,
therefore, they are not entitled to obtain individual health insurance
coverage on a guaranteed available basis. They apply for individual
coverage with Issuer M. As part of the application for coverage, M
receives health information about A and S. Although A has no known
medical conditions, S has high blood pressure. M declines to offer
coverage to S.
(ii) Conclusion. In this Example 1, M permissibly may decline to
offer coverage to S because S has a manifested disorder (high blood
pressure) that makes her ineligible for coverage under the policy's
rules for eligibility.
Example 2. (i) Facts. Same facts as Example 1, except that S does
not have high blood pressure or any other known medical condition. The
only health information relevant to S that M receives in the application
indicates that both of S's parents are overweight and have high blood
pressure. M declines to offer coverage to S.
(ii) Conclusion. In this Example 2, M cannot decline to offer
coverage to S because S does not have a manifested disease or disorder.
The only health information M has that relates to her pertains to a
manifested disease or disorder of family members, which as family
medical history constitutes genetic information with respect to S. If M
denies eligibility to S based on genetic information, the denial will
violate this paragraph (b).
(c) Prohibition on genetic information in setting premium rates--(1)
In general. An issuer offering health insurance coverage in the
individual market must not adjust premium amounts for an individual on
the basis of genetic information regarding the individual or a family
member of the individual.
(2) Rule of construction. (i) Nothing in paragraph (c)(1) of this
section precludes an issuer from adjusting premium amounts for an
individual on the basis of a manifestation of a disease or disorder in
that individual, or on the basis of a manifestation of a disease or
disorder in a family member of that individual when the family member is
covered under the policy that covers the individual.
(ii) The manifestation of a disease or disorder in one individual
cannot also be used as genetic information about other individuals
covered under the policy issued to that individual and to further
increase premium amounts.
(3) Examples. The rules of this paragraph (c) are illustrated by the
following examples:
Example 1. (i) Facts. Individual B is covered under an individual
health insurance policy through Issuer N. Every other policy year,
before renewal, N requires policyholders to submit updated health
information before the policy renewal date for purposes of determining
an appropriate premium, in excess of any increases due to inflation,
based on the policyholders' health status. B complies with that
requirement. During the past year, B's blood glucose levels have
increased significantly. N increases its premium for renewing B's policy
to account for N's increased risk associated with B's elevated blood
glucose levels.
(ii) Conclusion. In this Example 1, N is permitted to increase the
premium for B's policy on the basis of a manifested disorder (elevated
blood glucose) in B.
Example 2. (i) Facts. Same facts as Example 1, except that B's blood
glucose levels have not increased and are well within the normal range.
In providing updated health information to N, B indicates that both his
mother and sister are being treated for adult onset diabetes mellitus
(Type 2 diabetes). B provides this information voluntarily and not in
response to a specific request for family medical history or other
genetic information. N increases B's premium to account for B's genetic
predisposition to develop Type 2 diabetes in the future.
(ii) Conclusion. In this Example 2, N cannot increase B's premium on
the basis of B's family medical history of Type 2 diabetes, which is
genetic information with respect to B. Since there is no manifestation
of the disease in B at this point in time, N cannot increase B's
premium.
(d) Prohibition on genetic information as preexisting condition--(1)
In general. An issuer offering health insurance coverage in the
individual market may not, on the basis of genetic information, impose
any preexisting condition exclusion with respect to that coverage.
[[Page 179]]
(2) Rule of construction. Nothing in paragraph (d)(1) of this
section precludes an issuer from imposing any preexisting condition
exclusion for an individual with respect to health insurance coverage on
the basis of a manifestation of a disease or disorder in that
individual.
(3) Examples: The rules of this paragraph (d) are illustrated by the
following examples:
Example 1. (i) Facts. Individual C has encountered delays in
receiving payment from the issuer of his individual health insurance
policy for covered services. He decides to switch carriers and applies
for an individual health insurance policy through Issuer O. C is
generally in good health, but has arthritis for which he has received
medical treatment. O offers C an individual policy that excludes
coverage for a 12-month period for any services related to C's
arthritis.
(ii) Conclusion. In this Example 1, O is permitted to impose a
preexisting condition exclusion with respect to C because C has a
manifested disease (arthritis).
Example 2. (i) Facts. Individual D applies for individual health
insurance coverage through Issuer P. D has no known medical conditions.
However, in response to P's request for medical information about D, P
receives information from D's physician that indicates that both of D's
parents have adult onset diabetes mellitus (Type 2 diabetes). P offers D
an individual policy with a rider that permanently excludes coverage for
any treatment related to diabetes that D may receive while covered by
the policy, based on the fact that both of D's parents have the disease.
(ii) Conclusion. In this Example 2, the rider violates this
paragraph (d) because the preexisting condition exclusion is based on
genetic information with respect to D (family medical history of Type 2
diabetes).
(e) Limitation on requesting or requiring genetic testing--(1)
General rule. Except as otherwise provided in this paragraph (e), an
issuer offering health insurance coverage in the individual market must
not request or require an individual or a family member of the
individual to undergo a genetic test.
(2) Health care professional may recommend a genetic test. Nothing
in paragraph (e)(1) of this section limits the authority of a health
care professional who is providing health care services to an individual
to request that the individual undergo a genetic test.
(3) Examples. The rules of paragraphs (e)(1) and (e)(2) of this
section are illustrated by the following examples:
Example 1. (i) Facts. Individual E goes to a physician for a routine
physical examination. The physician reviews E's family medical history,
and E informs the physician that E's mother has been diagnosed with
Huntington's Disease. The physician advises E that Huntington's Disease
is hereditary, and recommends that E undergo a genetic test.
(ii) Conclusion. In this Example 1, the physician is a health care
professional who is providing health care services to E. Therefore, the
physician's recommendation that E undergo the genetic test does not
violate this paragraph (e).
Example 2. (i) Facts. Individual F is covered by a health
maintenance organization (HMO). F is a child being treated for leukemia.
F's physician, who is employed by the HMO, is considering a treatment
plan that includes six-mercaptopurine, a drug for treating leukemia in
most children. However, the drug could be fatal if taken by a small
percentage of children with a particular gene variant. F's physician
recommends that F undergo a genetic test to detect this variant before
proceeding with this course of treatment.
(ii) Conclusion. In this Example 2, even though the physician is
employed by the HMO, the physician is nonetheless a health care
professional who is providing health care services to F. Therefore, the
physician's recommendation that F undergo the genetic test does not
violate this paragraph (e).
(4) Determination regarding payment--(i) In general. As provided in
this paragraph (e)(4), nothing in paragraph (e)(1) of this section
precludes an issuer offering health insurance in the individual market
from obtaining and using the results of a genetic test in making a
determination regarding payment. For this purpose, ``payment'' has the
meaning given such term in Sec. 164.501 of this subtitle of the privacy
regulations issued under the Health Insurance Portability and
Accountability Act. Thus, if an issuer conditions payment for an item or
service based on its medical appropriateness and the medical
appropriateness of the item or service depends on a covered individual's
genetic makeup, the issuer is permitted to condition payment on the
outcome of a genetic test, and may refuse payment if the covered
individual does not undergo the genetic test.
[[Page 180]]
(ii) Limitation. An issuer in the individual market is permitted to
request only the minimum amount of information necessary to make a
determination regarding payment. The minimum amount of information
necessary is determined in accordance with the minimum necessary
standard in Sec. 164.502(b) of this subtitle of the privacy regulations
issued under the Health Insurance Portability and Accountability Act.
(iii) Examples. See paragraph (g) of this section for examples
illustrating the rules of this paragraph (e)(4), as well as other
provisions of this section.
(5) Research exception. Notwithstanding paragraph (e)(1) of this
section, an issuer may request, but not require, that an individual or
family member covered under the same policy undergo a genetic test if
all of the conditions of this paragraph (e)(5) are met:
(i) Research in accordance with Federal regulations and applicable
State or local law or regulations. The issuer makes the request pursuant
to research, as defined in Sec. 46.102(d) of this subtitle, that
complies with part 46 of this subtitle or equivalent Federal
regulations, and any applicable State or local law or regulations for
the protection of human subjects in research.
(ii) Written request for participation in research. The issuer makes
the request in writing, and the request clearly indicates to each
individual (or, in the case of a minor child, to the child's legal
guardian) that--
(A) Compliance with the request is voluntary; and
(B) Noncompliance will have no effect on eligibility for benefits
(as described in paragraph (b) of this section) or premium amounts (as
described in paragraph (c) of this section).
(iii) Prohibition on underwriting. No genetic information collected
or acquired under this paragraph (e)(5) can be used for underwriting
purposes (as described in paragraph (f)(1) of this section).
(iv) Notice to Federal agencies. The issuer completes a copy of the
``Notice of Research Exception under the Genetic Information
Nondiscrimination Act'' authorized by the Secretary and provides the
notice to the address specified in the instructions thereto.
(f) Prohibitions on collection of genetic information--(1) For
underwriting purposes--(i) General rule. An issuer offering health
insurance coverage in the individual market must not collect (as defined
in paragraph (a) of this section) genetic information for underwriting
purposes. See paragraph (g) of this section for examples illustrating
the rules of this paragraph (f)(1), as well as other provisions of this
section.
(ii) Underwriting purposes defined. Subject to paragraph (f)(1)(iii)
of this section, underwriting purposes means, with respect to any issuer
offering health insurance coverage in the individual market--
(A) Rules for, or determination of, eligibility (including
enrollment and continued eligibility) for benefits under the coverage;
(B) The computation of premium amounts under the coverage;
(C) The application of any preexisting condition exclusion under the
coverage; and
(D) Other activities related to the creation, renewal, or
replacement of a contract of health insurance.
(iii) Medical appropriateness. An issuer in the individual market
may limit or exclude a benefit based on whether the benefit is medically
appropriate, and the determination of whether the benefit is medically
appropriate is not within the meaning of underwriting purposes.
Accordingly, if an issuer conditions a benefit based on its medical
appropriateness and the medical appropriateness of the benefit depends
on a covered individual's genetic information, the issuer is permitted
to condition the benefit on the genetic information. An issuer is
permitted to request only the minimum amount of genetic information
necessary to determine medical appropriateness, and may deny the benefit
if the covered individual does not provide the genetic information
required to determine medical appropriateness. See paragraph (g) of this
section for examples illustrating the applicability of this paragraph
(f)(1)(iii), as well as other provisions of this section.
(2) Prior to or in connection with enrollment--(i) In general. An
issuer offering health insurance coverage in the individual market must
not collect genetic
[[Page 181]]
information with respect to any individual prior to that individual's
enrollment under the coverage or in connection with that individual's
enrollment. Whether or not an individual's information is collected
prior to that individual's enrollment is determined at the time of
collection.
(ii) Incidental collection exception--(A) In general. If an issuer
offering health insurance coverage in the individual market obtains
genetic information incidental to the collection of other information
concerning any individual, the collection is not a violation of this
paragraph (f)(2), as long as the collection is not for underwriting
purposes in violation of paragraph (f)(1) of this section.
(B) Limitation. The incidental collection exception of this
paragraph (f)(2)(ii) does not apply in connection with any collection
where it is reasonable to anticipate that health information will be
received, unless the collection explicitly provides that genetic
information should not be provided.
(iii) Examples. The rules of this paragraph (f)(2) are illustrated
by the following examples:
Example 1. (i) Facts. Individual G applies for a health insurance
policy through Issuer Q. Q's application materials ask for the
applicant's medical history, but not for family medical history. The
application's instructions state that no genetic information, including
family medical history, should be provided. G answers the questions in
the application completely and truthfully, but volunteers certain health
information about diseases his parents had, believing that Q also needs
this information.
(ii) Conclusion. In this Example 1, G's family medical history is
genetic information with respect to G. However, since Q did not request
this genetic information, and Q's instructions stated that no genetic
information should be provided, Q's collection is an incidental
collection under paragraph (f)(2)(ii). However, Q may not use the
genetic information it obtained incidentally for underwriting purposes.
Example 2. (i) Facts. Individual H applies for a health insurance
policy through Issuer R. R's application materials request that an
applicant provide information on his or her individual medical history,
including the names and contact information of physicians from whom the
applicant sought treatment. The application includes a release which
authorizes the physicians to furnish information to R. R forwards a
request for health information about H, including the signed release, to
his primary care physician. Although the request for information does
not ask for genetic information, including family medical history, it
does not state that no genetic information should be provided. The
physician's office administrator includes part of H's family medical
history in the package to R.
(ii) Conclusion. In this Example 2, R's request was for health
information solely about its applicant, H, which is not genetic
information with respect to H. However, R's materials did not state that
genetic information should not be provided. Therefore, R's collection of
H's family medical history (which is genetic information with respect to
H), violates the rule against collection of genetic information and does
not qualify for the incidental collection exception under paragraph
(f)(2)(ii).
Example 3. (i) Facts. Issuer S acquires Issuer T. S requests T's
records, stating that S should not provide genetic information and
should review the records to excise any genetic information. T assembles
the data requested by S and, although T reviews it to delete genetic
information, the data from a specific region included some individuals'
family medical history. Consequently, S receives genetic information
about some of T's covered individuals.
(ii) Conclusion. In this Example 3, S's request for health
information explicitly stated that genetic information should not be
provided. Therefore, its collection of genetic information was within
the incidental collection exception. However, S may not use the genetic
information it obtained incidentally for underwriting purposes.
(g) Examples regarding determinations of medical appropriateness.
The application of the rules of paragraphs (e) and (f) of this section
to issuer determinations of medical appropriateness is illustrated by
the following examples:
Example 1. (i) Facts. Individual I has an individual health
insurance policy through Issuer U that covers genetic testing for celiac
disease for individuals who have family members with this condition. I's
policy includes dependent coverage. After I's son is diagnosed with
celiac disease, I undergoes a genetic test and promptly submits a claim
for the test to U for reimbursement. U asks I to provide the results of
the genetic test before the claim is paid.
(ii) Conclusion. In this Example 1, under the rules of paragraph
(e)(4) of this section, U is permitted to request only the minimum
amount of information necessary to make a decision regarding payment.
Because the results of the test are not necessary for U to make a
decision regarding the payment of I's
[[Page 182]]
claim, U's request for the results of the genetic test violates
paragraph (e) of this section.
Example 2. (i) Facts. Individual J has an individual health
insurance policy through Issuer V that covers a yearly mammogram for
participants starting at age 40, or at age 30 for those with increased
risk for breast cancer, including individuals with BRCA1 or BRCA2 gene
mutations. J is 33 years old and has the BRCA2 mutation. J undergoes a
mammogram and promptly submits a claim to V for reimbursement. V asks J
for evidence of increased risk of breast cancer, such as the results of
a genetic test, before the claim for the mammogram is paid.
(ii) Conclusion. In this Example 2, V does not violate paragraphs
(e) or (f) of this section. Under paragraph (e), an issuer is permitted
to request and use the results of a genetic test to make a determination
regarding payment, provided the issuer requests only the minimum amount
of information necessary. Because the medical appropriateness of the
mammogram depends on the covered individual's genetic makeup, the
minimum amount of information necessary includes the results of the
genetic test. Similarly, V does not violate paragraph (f) of this
section because an issuer is permitted to request genetic information in
making a determination regarding the medical appropriateness of a claim
if the genetic information is necessary to make the determination (and
the genetic information is not used for underwriting purposes).
Example 3. (i) Facts. Individual K was previously diagnosed with and
treated for breast cancer, which is currently in remission. In
accordance with the recommendation of K's physician, K has been taking a
regular dose of tamoxifen to help prevent a recurrence. K has an
individual health insurance policy through Issuer W which adopts a new
policy requiring patients taking tamoxifen to undergo a genetic test to
ensure that tamoxifen is medically appropriate for their genetic makeup.
In accordance with, at the time, the latest scientific research,
tamoxifen is not helpful in up to 7 percent of breast cancer patients
with certain variations of the gene for making the CYP2D6
enzyme. If a patient has a gene variant making tamoxifen not medically
appropriate, W does not pay for the tamoxifen prescription.
(ii) Conclusion. In this Example 3, W does not violate paragraph (e)
of this section if it conditions future payments for the tamoxifen
prescription on K's undergoing a genetic test to determine the genetic
markers K has for making the CYP2D6 enzyme. W also does not
violate paragraph (e) of this section if it refuses future payment if
the results of the genetic test indicate that tamoxifen is not medically
appropriate for K.
(h) Applicability date. The provisions of this section are effective
with respect to health insurance coverage offered, sold, issued,
renewed, in effect, or operated in the individual market on or after
December 7, 2009.
[74 FR 51693, Oct. 7, 2009]
Subpart D_Preemption; Excepted Benefits
Sec. 148.210 Preemption.
(a) Scope. (1) This section describes the effect of sections 2741
through 2763 and 2791 of the PHS Act on a State's authority to regulate
health insurance issuers in the individual market. This section makes
clear that States remain subject to section 514 of ERISA, which
generally preempts State law that relates to ERISA-covered plans.
(2) Sections 2741 through 2763 and 2791 of the PHS Act cannot be
construed to affect or modify the provisions of section 514 of ERISA.
(b) Regulation of insurance issuers. The individual market rules of
this part do not prevent a State law from establishing, implementing, or
continuing in effect standards or requirements unless the standards or
requirements prevent the application of a requirement of this part.
Sec. 148.220 Excepted benefits.
The requirements of this part and part 147 of this subchapter do not
apply to any individual coverage in relation to its provision of the
benefits described in paragraphs (a) and (b) of this section (or any
combination of the benefits).
(a) Benefits excepted in all circumstances. The following benefits
are excepted in all circumstances:
(1) Coverage only for accident (including accidental death and
dismemberment).
(2) Disability income insurance.
(3) Liability insurance, including general liability insurance and
automobile liability insurance.
(4) Coverage issued as a supplement to liability insurance.
(5) Workers' compensation or similar insurance.
(6) Automobile medical payment insurance.
[[Page 183]]
(7) Credit-only insurance (for example, mortgage insurance).
(8) Coverage for on-site medical clinics.
(9) Travel insurance, within the meaning of Sec. 144.103 of this
subchapter.
(b) Other excepted benefits. The requirements of this part do not
apply to individual health insurance coverage described in paragraphs
(b)(1) through (b)(6) of this section if the benefits are provided under
a separate policy, certificate, or contract of insurance. These benefits
include the following:
(1) Limited scope dental or vision benefits. These benefits are
dental or vision benefits that are limited in scope to a narrow range or
type of benefits that are generally excluded from benefit packages that
combine hospital, medical, and surgical benefits.
(2) Long-term care benefits. These benefits are benefits that are
either--
(i) Subject to State long-term care insurance laws;
(ii) For qualified long-term care insurance services, as defined in
section 7702B(c)(1) of the Code, or provided under a qualified long-term
care insurance contract, as defined in section 7702B(b) of the Code; or
(iii) Based on cognitive impairment or a loss of functional capacity
that is expected to be chronic.
(3) Coverage only for a specified disease or illness (for example,
cancer policies) if the policies meet the requirements of Sec.
146.145(b)(4)(ii)(B) and (C) of this subchapter regarding
noncoordination of benefits.
(4) Hospital indemnity or other fixed indemnity insurance only if--
(i) The benefits are provided only to individuals who attest, in
their fixed indemnity insurance application, that they have other health
coverage that is minimum essential coverage within the meaning of
section 5000A(f) of the Internal Revenue Code, or that they are treated
as having minimum essential coverage due to their status as a bona fide
resident of any possession of the United States pursuant to Code section
5000A(f)(4)(B).
(ii) There is no coordination between the provision of benefits and
an exclusion of benefits under any other health coverage.
(iii) The benefits are paid in a fixed dollar amount per period of
hospitalization or illness and/or per service (for example, $100/day or
$50/visit) regardless of the amount of expenses incurred and without
regard to the amount of benefits provided with respect to the event or
service under any other health coverage.
(iv) A notice is displayed prominently in the application materials
in at least 14 point type that has the following language: ``THIS IS A
SUPPLEMENT TO HEALTH INSURANCE AND IS NOT A SUBSTITUTE FOR MAJOR MEDICAL
COVERAGE. LACK OF MAJOR MEDICAL COVERAGE (OR OTHER MINIMUM ESSENTIAL
COVERAGE) MAY RESULT IN AN ADDITIONAL PAYMENT WITH YOUR TAXES.''
(v) The requirement of paragraph (b)(4)(iv) of this section applies
to all hospital or other fixed indemnity insurance policy years
beginning on or after January 1, 2015, and the requirement of paragraph
(b)(4)(i) of this section applies to hospital or other fixed indemnity
insurance policies issued on or after January 1, 2015, and to hospital
or other fixed indemnity policies issued before that date, upon their
first renewal occurring on or after October 1, 2016.
(5) Medicare supplemental health insurance (as defined under section
1882(g)(1) of the Social Security Act. 42 U.S.C. 1395ss, also known as
Medigap or MedSupp insurance). The requirements of this part 148
(including genetic nondiscrimination requirements), do not apply to
Medicare supplemental health insurance policies. However, Medicare
supplemental health insurance policies are subject to similar genetic
nondiscrimination requirements under section 104 of the Genetic
Information Nondiscrimination Act of 2008 (Pub. L. 110-233), as
incorporated into the NAIC Model Regulation relating to sections
1882(s)(2)(e) and (x) of the Act (The NAIC Model Regulation can be
accessed at http://www.naic.org.).
(6) Coverage supplemental to the coverage provided under Chapter 55,
Title 10 of the United States Code (also known as CHAMPUS supplemental
programs).
[[Page 184]]
(7) Similar supplemental coverage provided to coverage under a group
health plan (as described in Sec. 146.145(b)(5)(i)(C) of this
subchapter).
[62 FR 16995, Apr. 8, 1997; 62 FR 31696, June 10, 1997, as amended at 74
FR 51696, Oct. 7, 2009; 79 FR 30341, May 27, 2014; 81 FR 75327, Oct. 31,
2016]
Subpart E_Grants to States for Operation of Qualified High Risk Pools
Source: 68 FR 23414, May 2, 2003, unless otherwise noted.
Sec. 148.306 Basis and scope.
This subpart implements section 2745 of the Public Health Service
Act (PHS Act). It extends grants to States that have qualified high risk
pools that meet the specific requirements described in Sec. 148.310. It
also provides specific instructions on how to apply for the grants and
outlines the grant review and grant award processes.
[73 FR 22285, Apr. 25, 2008]
Sec. 148.308 Definitions.
For the purposes of this subpart, the following definitions apply:
Bonus grants means funds that the Secretary provides from the
appropriated grant funds to be used to provide supplemental consumer
benefits to enrollees or potential enrollees in qualified high risk
pools.
CMS stands for Centers for Medicare & Medicaid Services.
Loss means the difference between expenses incurred by a qualified
high risk pool, including payment of claims and administrative expenses,
and the premiums collected by the pool.
Qualified high risk pool as defined in sections 2744(c)(2) and
2745(g) of the PHS Act means a risk pool that--
(1) Provides to all eligible individuals health insurance coverage
(or comparable coverage) that does not impose any preexisting condition
exclusion with respect to such coverage for all eligible individuals,
except that it may provide for enrollment of eligible individuals
through an acceptable alternative mechanism (as defined for purposes of
section 2744 of the PHS Act) that includes a high risk pool as a
component; and
(2) Provides for premium rates and covered benefits for such
coverage consistent with standards included in the NAIC Model Health
Plan for Uninsurable Individuals Act that was in effect at the time of
the enactment of the Health Insurance Portability and Accountability Act
of 1996 (August 21, 1996) but only if the model has been revised in
State regulations to meet all of the requirements of this part and title
27 of the PHS Act.
Standard risk rate means a rate developed by a State using
reasonable actuarial techniques and taking into account the premium
rates charged by other insurers offering health insurance coverage to
individuals in the same geographical service area to which the rate
applies. The standard rate may be adjusted based upon age, sex, and
geographical location.
State means any of the 50 States and the District of Columbia and
includes the U.S. Territories of Puerto Rico, the Virgin Islands, Guam,
American Samoa and the Northern Mariana Islands.
State fiscal year, for purposes of this subpart, means the fiscal
year used for accounting purposes by either a State or a risk pool
entity to which a State has delegated the authority to conduct risk pool
operations.
[68 FR 23414, May 2, 2003, as amended at 69 FR 15700, Mar. 26, 2004; 72
FR 41236, July 27, 2007; 73 FR 22285, Apr. 25, 2008]
Sec. 148.310 Eligibility requirements for a grant.
A State must meet all of the following requirements to be eligible
for a grant:
(a) The State has a qualified high risk pool as defined in Sec.
148.308.
(b) The pool restricts premiums charged under the pool to no more
than 200 percent of the premium for applicable standard risk rates for
the State.
(c) The pool offers a choice of two or more coverage options through
the pool.
(d) The pool has in effect a mechanism reasonably designed to ensure
continued funding of losses incurred by the State after the end of each
fiscal year for which the State applies for Federal Funding in fiscal
year (FY)
[[Page 185]]
2005 through FY 2010 in connection with the operation of the pool.
(e) The pool has incurred a loss in a period described in Sec.
148.314.
(f) In the case of a qualified high risk pool in a State that
charges premiums that exceed 150 percent of the premium for applicable
standard risks, the State will use at least 50 percent of the amount of
the grant provided to the State to reduce premiums for enrollees.
(g) In no case will the aggregate amount allotted and made available
to the U.S. Territories for a fiscal year exceed $1,000,000 in total.
(h) Bonus grant funding must be used for one or more of the
following benefits:
(1) Low income premium subsidies;
(2) Reduction in premium trends, actual premium or other cost-
sharing requirements;
(3) An expansion or broadening of the pool of individuals eligible
for coverage, such as through eliminating waiting lists, increasing
enrollment caps, or providing flexibility in enrollment rules;
(4) Less stringent rules or additional waiver authority with respect
to coverage of pre-existing conditions;
(5) Increased benefits; and
(6) The establishment of disease management programs.
[68 FR 23414, May 2, 2003, as amended at 72 FR 41236, July 27, 2007; 73
FR 22285, Apr. 25, 2008]
Sec. 148.312 Amount of grant payment.
(a) An eligible State may receive a grant to fund up to 100 percent
of the losses incurred in the operation of its qualified high risk pool
during the period for which it is applying or a lesser amount based on
the limits of the allotment under the formula.
(b) Funds will be allocated in accordance with this paragraph to
each State that meets the eligibility requirements of Sec. 148.310 and
files an application in accordance with Sec. 148.316. The amount will
be divided among the States that apply and are awarded grants according
to the allotment rules that generally provide that: 40 percent will be
equally divided among those States; 30 percent will be divided among
States and territories based on their number of uninsured residents in
the State during the specified year as compared to all States that
apply; and 30 percent will be divided among States and territories based
on the number of people in State high risk pools during the specified
year as compared to all States that apply.
For purposes of this paragraph:
(1) The number of uninsured individuals is calculated for each
eligible State by taking a 3-year average of the number of uninsured
individuals in that State in the Current Population Survey (CPS) of the
Census Bureau during the period for which it is applying. The 3-year
average will be calculated using numbers available as of March 1 of each
year.
(2) The number of individuals enrolled in health care coverage
through the qualified high risk pool of the State will be determined by
attestation by the State in its grant application and verified for
reasonability by the Secretary through acceptable industry data sources.
(c) The amount awarded to each eligible State will be the lesser of
the 50 percent of losses incurred by its qualified risk pool for the
fiscal year in question or its allotment under the formula.
(d) One-third of the total appropriation will be available for the
bonus grants. In no case will a State for a fiscal year receive bonus
grants that exceed 10 percent of the total allotted funds for bonus
grants.
[68 FR 23414, May 2, 2003, as amended at 69 FR 15700, Mar. 26, 2004; 72
FR 41237, July 27, 2007; 73 FR 22285, Apr. 25, 2008]
Sec. 148.314 Periods during which eligible States may apply for a grant.
(a) General rule. A State that meets the eligibility requirements in
Sec. 148.310 may apply for a grant to fund losses that were incurred
during the State's FYs 2005, 2006, 2007, 2008 and 2009 in connection
with the operation of its qualified high risk pool. Funding for FY 2007
through FY 2010 under the Extension Act requires subsequent enactment of
appropriations authority. States will be unable to apply for grants
unless
[[Page 186]]
and until such funding becomes available. Grants funding is on a
retrospective basis and applies to the States previous fiscal year. If a
State becomes eligible for a grant in the middle of its fiscal year, a
State may apply for losses incurred in a partial fiscal year if a
partial year audit is done. Only losses that are incurred after
eligibility is established will qualify for a grant.
(b) Maximum number of grants. An eligible State may only be awarded
a maximum of five grants, with one grant per fiscal year. A grant for a
partial fiscal year counts as a full grant.
(c) Deadline for submitting grant applications. The deadlines for
submitting grant applications are stated in Sec. 148.316(d).
(d) Distribution of grant funds. States that meet all of the
eligibility requirements in Sec. 148.310 and submit timely requests in
accordance with paragraph (c) of this section will receive an initial
distribution of grant funds using the following methodology: Grant
applications for losses will be on a retrospective basis. For example,
grant applications for 2006 funds are based on the State's FY 2005
incurred losses. Grant funding was appropriated for Federal FY 2006 and
is authorized to be appropriated for Federal FYs 2008 through 2010.
(e) Grant allocations. Grant allocations for each fiscal year will
be determined by taking all grant applications during the period for
which States are applying and allocating the funds in accordance with
Sec. 148.312.
(1) In no case will a State receive funds greater than 100 percent
of their losses.
(2) If any excess funds remain after the initial calculation, these
excess funds will be proportionately redistributed to the States whose
allocations have not exceeded 100 percent of their losses.
[73 FR 22285, Apr. 25, 2008]
Sec. 148.316 Grant application instructions.
Funding for FY 2008, FY 2009, and FY 2010 under the Extension Act
requires the subsequent enactment of appropriations authority. Funding
was appropriated for Federal FY 2006. States will be unable to apply for
FY 2008 through FY 2010 grants unless and until such funding becomes
available.
(a) Application for operational losses. Each State must compile an
application package that documents that it has met the requirements for
a grant. If a risk pool entity applies on behalf of a State, it must
provide documentation that it has been delegated appropriate authority
by the State. At a minimum, the application package must include a
completed standard form application kit (see paragraph (b) of this
section) along with the following information:
(1) History and description of the qualified high risk pool. Provide
a detailed description of the qualified high risk pool that includes the
following:
(i) Brief history, including date of inception.
(ii) Enrollment criteria (including provisions for the admission of
eligible individuals as defined in Sec. 148.103) and number of
enrollees.
(iii) Description of how coverage is provided administratively in
the qualified high risk pool (that is, self-insured, through a private
carrier, etc.).
(iv) Benefits options and packages offered in the qualified high
risk pool to both eligible individual (as defined in Sec. 148.103) and
other applicants.
(v) Outline of plan benefits and coverage offered in the pool.
Provide evidence that the level of plan benefits is consistent with
either Alternative One or Alternative Two in Section 8 of the NAIC Model
Health Plan for Uninsurable Individuals Act. See appendix for the text
of Section 8 of the NAIC Model.
(vi) Premiums charged (in terms of dollars and in percentage of
standard risk rate) and other cost-sharing mechanisms, such as co-pays
and deductibles, imposed on enrollees (both eligible individuals (as
defined in Sec. 148.103) and non-eligible individuals if a distinction
is made).
(vii) How the standard risk rate for the State is calculated and
when it was last calculated.
(viii) Revenue sources for the qualified high risk pool, including
current funding mechanisms and, if different, future funding mechanisms.
Provide current projections of future income.
[[Page 187]]
(ix) Copies of all governing authorities of the pool, including
statutes, regulations and plan of operation.
(2) Accounting of risk pool losses. Provide a detailed accounting of
claims paid, administrative expenses, and premiums collected for the
fiscal year for which the grant is being requested. Indicate the timing
of the fiscal year upon which the accounting is based. Provide the
methodology of projecting losses and expenses, and include current
projections of future operating losses (this information is needed to
judge compliance with the requirements in Sec. 148.310(d)).
(3) Bonus grants for supplemental consumer benefits. Provide
detailed information about the following supplemental consumer benefits
for which the entity is applying:
(i) A narrative description of one or more of the following of the
supplemental consumer benefits to be provided to enrollees and/or
potential enrollees in the high risk pool:
(A) Low income premium subsidies;
(B) Reduction in premium trends, actual premium or other cost-
sharing requirements;
(C) An expansion or broadening of the pool of individuals eligible
for coverage, such as through eliminating waiting lists, increasing
enrollment caps, or providing flexibility in enrollment;
(D) Less stringent rules, or additional waiver authority with
respect to coverage of pre-existing conditions;
(E) Increased benefits; and
(F) The establishment of disease management programs.
(ii) A description of the population or subset population that will
be eligible for the supplemental consumer benefits.
(iii) A projected budget for the use of bonus grant funds using the
SF 424 A.
(4) Contact person. Identify the name, position title, address, e-
mail address, and telephone number of the person to contact for further
information and questions.
(b) Standard form application kit--(1) Forms. (i) The following
standard forms must be completed with an original signature and enclosed
as part of the application package:
SF-424 Application for Federal Assistance.
SF-424A Budget Information.
SF-424B Assurances Non-Construction Programs.
SF-LLL Disclosure of Lobbying Activities Biographical Sketch.
(ii) These forms can be accessed from the following Web site: http:/
/www.grants.gov.
(2) Other narrative. All other narrative in the application must be
submitted on 8\1/2\ x 11 inches white paper.
(c) Application submission. Submission of application package is
through http://www.grants.gov. Submissions by facsimile (fax)
transmissions will not be accepted.
(d) Application deadlines. (1) The deadline for States to submit an
application for losses incurred in a State fiscal year is June 30 of the
next Federal fiscal year that begins after the end of the State fiscal
year. Funding for FY 2008, FY 2009, and FY 2010 under the Extension Act
requires the subsequent enactment of appropriations authority. Funding
was appropriated for Federal FY 2006. States will be unable to apply for
FY 2008 through FY 2010 grants unless and until such funding becomes
available.
(2) Deadline for States to submit an application for losses incurred
in their fiscal year 2005. States had to submit an application to CMS no
later than June 30, 2006.
(3) Deadline for States to submit an application for losses incurred
in their fiscal year 2006. States must submit an application to CMS by
no later than June 30, 2007.
(4) Deadline for States to submit an application for losses incurred
in their fiscal year 2007. States must submit an application to CMS by
no later than June 30, 2008.
(5) Deadline for States to submit an application for losses incurred
in their fiscal year 2008. States must submit an application to CMS by
no later than June 30, 2009.
(6) Deadline for States to submit an application for losses incurred
in their fiscal year 2009. States must submit an application to CMS by
no later than June 30, 2010.
(e) Where to submit an application. Applications must be submitted
to http://
[[Page 188]]
www.grants.gov. Submissions by facsimile (fax) transmissions will not be
accepted.
[68 FR 23414, May 2, 2003, as amended at 69 FR 15701, Mar. 26, 2004; 72
FR 41237, July 27, 2007; 73 FR 22286, Apr. 25, 2008]
Sec. 148.318 Grant application review.
(a) Executive Order 12372. This grant program is not listed by the
Secretary under Sec. 100.3 of this title, and therefore the grant
program is not subject to review by States under part 100 of this title,
which implements Executive Order 12372, ``Intergovernmental Review of
Federal Programs'' (see part 100 of this title).
(b) Review team. A team consisting of staff from CMS and the
Department of Health and Human Services will review all applications.
The team will meet as necessary on an ongoing basis as applications are
received.
(c) Eligibility criteria. To be eligible for a grant, a State must
submit sufficient documentation that its high risk pool meets the
eligibility requirements described in Sec. 148.310. A State must
include sufficient documentation of the losses incurred in the operation
of the qualified high risk pool in the period for when it is applying.
(d) Review criteria. If the review team determines that a State
meets the eligibility requirements described in Sec. 148.310, the
review team will use the following additional criteria in reviewing the
applications:
(1) Documentation of expenses incurred during operation of the
qualified high risk pool. The losses and expenses incurred in the
operation of a State's pool are sufficiently documented.
(2) Funding mechanism. The State has outlined funding sources, such
as assessments and State general revenues, which can cover the projected
costs and are reasonably designed to ensure continued funding of losses
a State incurs in connection with the operation of the qualified high
risk pool after each fiscal year for which it is applying for grant
funds.
[68 FR 23414, May 2, 2003, as amended at 72 FR 41238, July 27, 2007; 73
FR 22286, Apr. 25, 2008]
Sec. 148.320 Grant awards.
(a) Notification and award letter. (1) Each State applicant will be
notified in writing of CMS's decision on its application.
(2) If the State applicant is awarded a grant, the award letter will
contain the following terms and conditions:
(i) All funds awarded to the grantee under this program must be used
exclusively for the operation of a qualified high risk pool that meets
the eligibility requirements for this program.
(ii) The grantee must keep sufficient records of the grant
expenditures for audit purposes (see part 92 of this title).
(iii) The grantee will be required to submit quarterly progress and
financial reports under part 92 of this title and in accordance with
section 2745(f) of the Public Health Service Act, requiring the
Secretary to make an annual report to Congress that includes information
on the use of these grant funds by States.
(b) Grantees letter of acceptance. Grantees must submit a letter of
acceptance to CMS' Acquisition and Grants Group within 30 days of the
date of the award agreeing to the terms and conditions of the award
letter.
[68 FR 23414, May 2, 2003, as amended at 72 FR 41238, July 27, 2007; 73
FR 22286, Apr. 25, 2008]
PART 149_REQUIREMENTS FOR THE EARLY RETIREE REINSURANCE PROGRAM-
-Table of Contents
Subpart A_General Provisions
Sec.
149.1 Purpose and basis.
149.2 Definitions.
Subpart B_Requirements for Eligible Employment-based Plans
149.30 General requirements.
149.35 Requirements to participate.
149.40 Application.
149.41 Consequences of Non-Compliance, Fraud, or Similar Fault
149.45 Funding limitation.
Subpart C_Reinsurance Amounts
149.100 Amount of reimbursement.
149.105 Transition provision.
149.110 Negotiated price concessions.
[[Page 189]]
149.115 Cost threshold and cost limit.
Subpart D_Use of Reimbursements
149.200 Use of reimbursements.
Subpart E_Reimbursement Methods
149.300 General reimbursement rules.
149.310 Timing.
149.315 Reimbursement conditioned upon available funds.
149.320 Universe of claims that must be submitted.
149.325 Requirements for eligibility of claims.
149.330 Content of claims.
149.335 Documentation of costs of actual claims involved.
149.340 Rule for insured plans.
149.345 Use of information provided.
149.350 Maintenance of records.
Subpart F_Appeals
149.500 Appeals.
149.510 Content of request for appeal.
149.520 Review of appeals.
Subpart G_Disclosure of Inaccurate Data
149.600 Sponsor's duty to report data inaccuracies.
149.610 Secretary's authority to reopen and revise reimbursement
determination amounts.
Subpart H_Change of Ownership Requirements
149.700 Change of ownership requirements.
Authority: Section 1102 of the Patient Protection and Affordable
Care Act (Pub. L. 111-148).
Source: 75 FR 24466, May 5, 2010, unless otherwise noted.
Subpart A_General Provisions
Sec. 149.1 Purpose and basis.
This part implements the Early Retiree Reinsurance Program, as
required by section 1102 of the Patient Protection and Affordable Care
Act (Pub. L. 111-148).
Sec. 149.2 Definitions.
For purposes of this part, the following definitions apply:
Authorized representative means an individual with legal authority
to sign and bind a sponsor to the terms of a contract or agreement.
Benefit option means a particular benefit design, category of
benefits, or cost-sharing arrangement offered within an employment-based
plan.
Certified means that the sponsor and its employment-based plan or
plans meet the requirements of this part and the sponsor's application
to participate in the program has been approved by the Secretary.
Chronic and high-cost condition means a condition for which $15,000
or more in health benefit claims are likely to be incurred during a plan
year by one plan participant.
Claim or medical claim means documentation, in a form and manner to
be specified by the Secretary, indicating the health benefit provided,
the provider or supplier, the incurred date, the individual for whom the
health benefit was provided, the date and amount of payment net any
known negotiated price concessions, and the employment-based plan and
benefit option under which the health benefit was provided. The terms
claim or medical claim include medical, surgical, hospital, prescription
drug and other such claims as determined by the Secretary.
Early retiree means a plan participant who is age 55 and older who
is enrolled for health benefits in a certified employment-based plan,
who is not eligible for coverage under title XVIII of the Act, and who
is not an active employee of an employer maintaining, or currently
contributing to, the employment-based plan or of any employer that has
made substantial contributions to fund such plan. In this part, the term
early retiree also includes the enrolled spouse, surviving spouse, and
dependents of such individuals. The determination of whether an
individual is not an active employee is made by the sponsor in
accordance with the rules of its plan. For purposes of this subpart,
however, an individual is presumed to be an active employee if, under
the Medicare Secondary Payer rules in 42 CFR 411.104 and related
guidance published by the Centers for Medicare & Medicaid Services, the
person is considered to be receiving coverage by reason of current
employment status. This presumption applies whether or not the
[[Page 190]]
Medicare Secondary Payer rules actually apply to the sponsor. For this
purpose, a sponsor may also treat a person receiving coverage under its
employment-based plan as a dependent in accordance with the rules of its
plan, regardless of whether that individual is considered a dependent
for Federal or state tax purposes. For purposes of this definition of
early retiree, an employer maintaining, or currently contributing to,
the employment-based plan or any employer that has made substantial
contributions to fund such plan, means a plan sponsor (as defined in
this section).
Employment-based plan means a group health plan as defined in this
section of the regulation.
Good cause means:
(1) New and material evidence exists that was not readily available
at the time the reimbursement determination was made;
(2) A clerical error in the computation of the reimbursement
determination was made by the Secretary; or
(3) The evidence that was considered in making the reimbursement
determination clearly shows on its face that an error was made.
Group health plan means group health plan as defined in 42 CFR
423.882 that provides health benefits to early retirees, but excludes
Federal governmental plans.
Health benefits means medical, surgical, hospital, prescription
drug, and other benefits that may be specified by the Secretary, whether
self-funded or delivered through the purchase of health insurance or
otherwise. Such benefits include benefits for the diagnosis, cure,
mitigation, or prevention of physical or mental disease or condition
with respect to any structure or function of the body. Health benefits
do not include benefits specified at 45 CFR 146.145(c)(2) through (4).
Incurred means the point in time when the sponsor, health insurance
issuer (as defined in 45 CFR 160.103), employment-based plan, plan
participant, or a combination of these or similar stakeholders, become
responsible for payment of the claim.
Negotiated price concession means any direct or indirect
remuneration (including discounts, direct or indirect subsidies, charge
backs or rebates, cash discounts, free goods contingent on a purchase
agreement, up-front payments, coupons, goods in kind, free or reduced-
price services, grants, or other price concessions or similar benefits)
offered to some or all purchasers, which may include a sponsor, a health
insurance issuer, or an employment-based plan) that would serve to
decrease the costs incurred under the employment-based plan.
Plan participant means anyone enrolled in an applicable plan
including an early retiree, as defined in this section, a retiree, a
retiree's spouse and dependent, an active employee and an active
employee's spouse and dependent.
Plan year means the year that is designated as the plan year in the
plan document of an employment-based plan, except that if the plan
document does not designate a plan year, if the plan year is not a 12-
month plan year, or if there is no plan document, the plan year is:
(1) The deductible or limit year used under the plan;
(2) The policy year, if the plan does not impose deductibles or
limits on a 12-month basis;
(3) The sponsor's taxable year, If the plan does not impose
deductibles or limits on a 12-month basis, and either the plan is not
insured or the insurance policy is not renewed on a 12-month basis, or;
(4) The calendar year, in any other case.
Post point-of-sale negotiated price concession means any negotiated
price concession that an employment-based plan or insurer receives with
respect to a given health benefit, after making payment for that health
benefit.
Program means the Early Retiree Reinsurance Program established in
section 1102 of the Patient Protection and Affordable Care Act.
Secretary means the Secretary of the United States Department of
Health & Human Services or the Secretary's designee.
Sponsor means a plan sponsor as defined in section 3(16)(B) of the
Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.
1002(16)(B), except that in the case of a
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plan maintained jointly by one employer and an employee organization and
for which the employer is the primary source of financing, the term
means the employer.
Sponsor agreement means an agreement between the sponsor and the
United States Department of Health & Human Services, or its designee,
which is made to comply with the provisions of this part.
Subpart B_Requirements for Eligible Employment-Based Plans
Sec. 149.30 General requirements.
A sponsor is eligible to participate in the program if it meets the
requirements of section 1102 of the Patient Protection and Affordable
Care Act, this part, and guidance developed by the Secretary.
Sec. 149.35 Requirements to participate.
(a) A sponsor's employment-based plan must--
(1) Be certified by the Secretary.
(2) Include programs and procedures that have generated or have the
potential to generate cost-savings with respect to plan participants
with chronic and high-cost conditions.
(b) A sponsor must--
(1) Make available information, data, documents, and records as
specified in Sec. 149.350.
(2) Have a written agreement with its health insurance issuer (as
defined in 45 CFR 160.103) or employment-based plan (as applicable)
regarding disclosure of information, data, documents, and records, to
the Secretary, and the health insurance issuer or employment-based plan
must disclose to the Secretary, on behalf of the sponsor, at a time and
in a manner specified by the Secretary in guidance, the information,
data, documents and records necessary for the sponsor to comply with the
program, this part, and program guidance.
(3) Ensure that policies and procedures to protect against fraud,
waste and abuse under this program are in place, and must comply timely
with requests from the Secretary to produce the policies and procedures
and any documents or data to substantiate the implementation of the
policies and procedures and their effectiveness.
(4) Submit an application to the Secretary in the manner, and at the
time, required by the Secretary as specified in Sec. 149.40.
Sec. 149.40 Application.
(a) The applicant must submit an application to participate in this
program to the Secretary, which is signed by an authorized
representative of the applicant who certifies that the information
contained in the application is true and accurate to the best of the
authorized representative's knowledge and belief.
(b) Applications will be processed in the order in which they are
received.
(c) An application that fails to meet all the requirements of this
part will be denied and the applicant must submit another application if
it wishes to participate in the program. The new application will be
processed based on when the new submission is received.
(d) An applicant need not submit a separate application for each
plan year but must identify in its application the plan year start and
end date cycle (starting month and day, and ending month and day) for
which it is applying.
(e) An applicant must submit an application for each plan for which
it will submit a reimbursement request.
(f) In connection with each application the applicant must submit
the following:
(1) Applicant's Tax Identification Number.
(2) Applicant's name and address.
(3) Contact name, telephone number and email address.
(4) Plan sponsor agreement signed by an authorized representative,
which includes--
(i) An assurance that the sponsor has a written agreement with its
health insurance issuer (as defined in 45 CFR 160.103) or employment-
based plan, as applicable, regarding disclosure of information to the
Secretary, and the health insurance issuer or employment-based plan must
disclose to the Secretary, on behalf of the sponsor, at a time and in a
manner specified by the Secretary in guidance, information, data,
documents, and records necessary
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for the sponsor to comply with the requirements of the program.
(ii) An acknowledgment that the information in the application is
being provided to obtain Federal funds, and that all subcontractors
acknowledge that information provided in connection with a subcontract
is used for purposes of obtaining Federal funds.
(iii) An attestation that policies and procedures are in place to
detect and reduce fraud, waste, and abuse, and that the sponsor will
produce the policies and procedures, and necessary information, records
and data, upon request by the Secretary, to substantiate existence of
the policies and procedures and their effectiveness.
(iv) Other terms and conditions required by the Secretary.
(5) A summary indicating how the applicant will use any
reimbursement received under the program to meet the requirements of the
program, including:
(i) How the reimbursement will be used to reduce premium
contributions, co-payments, deductibles, coinsurance, or other out-of-
pocket costs for plan participants, to reduce health benefit or health
benefit premium costs for the sponsor, or to reduce any combination of
these costs;
(ii) What procedures or programs the sponsor has in place that have
generated or have the potential to generate cost savings with respect to
plan participants with chronic and high-cost conditions; and
(iii) How the sponsor will use the reimbursement to maintain its
level of contribution to the applicable plan.
(6) Projected amount of reimbursement to be received under the
program for the first two plan year cycles with specific amounts for
each of the two cycles.
(7) A list of all benefit options under the employment-based plan
that any early retiree for whom the sponsor receives program
reimbursement may be claimed.
(8) Any other information the Secretary requires.
(g) An application must be approved, and the plan and the sponsor
certified, by the Secretary before a sponsor may request reimbursement
under the program.
(h) The Secretary may reopen a determination under which an
application had been approved or denied:
(1) Within 1 year of the determination for any reason;
(2) Within 4 years of the determination if the evidence that was
considered in making the determination shows on its face that an error
was made; or
(3) At any time in instances of fraud or similar fault.
Sec. 149.41 Consequences of Non-Compliance, Fraud, or Similar Fault.
Upon failure to comply with the requirements of this part, or if
fraud, waste, and abuse, or similar fault are found, the Secretary may
recoup or withhold funds, terminate or deny a sponsor's application, or
take a combination of these actions.
Sec. 149.45 Funding limitation.
(a) Based on the projected or actual availability of program
funding, the Secretary may deny applications that otherwise meet the
requirements of this part, and if an application is approved, may deny
all or part of a sponsor's reimbursement request.
(b) The Secretary's decision to stop accepting applications or
satisfying reimbursement requests based on the availability of funding
is final and binding, and is not appealable.
Subpart C_Reinsurance Amounts
Sec. 149.100 Amount of reimbursement.
(a) For each early retiree enrolled in a certified plan in a plan
year, the sponsor receives reimbursement in the amount of 80 percent of
the costs for health benefits (net of negotiated price concessions for
health benefits) for claims incurred during the plan year that are
attributed to health benefits costs between the cost threshold and cost
limit, and that are paid by the employment-based plan or by the insurer
(if an insured plan), and by the early retiree.
(b) Costs are considered paid by an early retiree, if paid by that
individual or another person on behalf of the early retiree, and the
early retiree (or
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person paying on behalf of the early retiree) is not reimbursed through
insurance or otherwise, or other third party payment arrangement.
(c) Reimbursement is calculated by first determining the costs for
health benefits net of negotiated price concessions, within the
applicable plan year for each early retiree, and then subtracting
amounts below the cost threshold and above the cost limit within the
applicable plan year for each such individual.
(d) For purposes of determining amounts below the cost threshold and
above the cost limit for any given early retiree, all costs for health
benefits paid by the employment-based plan (or by the insurer, if
applicable), or by or on behalf of, an early retiree, for all benefit
options the early retiree is enrolled in with respect to a given
certified employment-based plan for a given plan year, will be combined.
For each early retiree enrolled in an employment-based plan, there is
only one cost threshold and one cost limit per plan year regardless of
the number of benefit options the early retiree is enrolled in during
that plan year.
Sec. 149.105 Transition provision.
For a certified plan that has a plan year that begins before June 1,
2010 and ends on any date thereafter, the reinsurance amount for the
plan year must be determined as follows:
(a) With respect to claims incurred before June 1, 2010, the amount
of such claims up to $15,000 count toward the cost threshold and the
cost limit. The amount of claims incurred before June 1, 2010 that
exceed $15,000 are not eligible for reimbursement and do not count
toward the cost limit.
(b) The reinsurance amount to be paid is based only on claims
incurred on and after June 1, 2010, that fall between the cost threshold
and cost limit for the plan year.
Sec. 149.110 Negotiated price concessions.
(a) The amount of negotiated price concessions that will be taken
into account in determining the reinsurance amount will reflect
negotiated price concessions that have already been subtracted from the
amount the employment-based plan or insurer paid for the cost of health
benefits and the amount of post-point-of-sale negotiated price
concessions received.
(b) At a time specified by the Secretary, sponsors are required to
disclose the amount of post-point-of-sale price concessions that were
received but not accounted for in their submitted claims.
Sec. 149.115 Cost threshold and cost limit.
The following cost threshold and cost limits apply individually, to
each early retiree as defined in Sec. 149.2:
(a) The cost threshold is equal to $15,000 for plan years that start
on any date before October 1, 2011.
(b) The cost limit is equal to $90,000 for plan years that start on
any date before October 1, 2011.
(c) The cost threshold and cost limit specified in paragraphs (a)
and (b) of this section, for plan years that start on or after October
1, 2011, will be adjusted each fiscal year based on the percentage
increase in the Medical Care Component of the Consumer Price Index for
all urban consumers (rounded to the nearest multiple of $1,000) for the
year involved.
Subpart D_Use of Reimbursements
Sec. 149.200 Use of reimbursements.
(a) A sponsor must use the proceeds under this program:
(1) To reduce the sponsor's health benefit premiums or health
benefit costs,
(2) To reduce health benefit premium contributions, copayments,
deductibles, coinsurance, or other out-of-pocket costs, or any
combination of these costs, for plan participants, or
(3) To reduce any combination of the costs in (a)(1) and (a)(2) of
this section.
(b) Proceeds under this program must not be used as general revenue
for the sponsor.
Subpart E_Reimbursement Methods
Sec. 149.300 General reimbursement rules.
Reimbursement under this program is conditioned on provision of
accurate
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information by the sponsor or its designee. The information must be
submitted, in a form and manner and at the times provided in this
subpart and other guidance specified by the Secretary. A sponsor must
provide the information specified in section Sec. 149.335.
Sec. 149.310 Timing.
(a) An employment-based plan and a sponsor must be certified by the
Secretary before claims can be submitted and a reimbursement request may
be made. Reimbursement will be made with respect to submitted claims for
health benefits at a time and in a manner to be specified by the
Secretary, after the sponsor or its designee submits the claims to the
Secretary. Claims must satisfy the requirements of this subpart in order
to be eligible for reimbursement.
(b) Claims for health benefits may be submitted for a given plan
year only upon the approval of an application that references that plan
year cycle. Claims for an early retiree for a plan year cannot be
submitted until the total paid costs for health benefits for that early
retiree incurred for that plan year exceed the applicable cost
threshold.
(c) For employment-based plans for which a provider in the normal
course of business does not produce a claim, such as a staff-model
health maintenance organization, the information required in a claim
must be produced and provided to the Secretary, as set out in this
regulation and applicable guidance.
Sec. 149.315 Reimbursement conditioned upon available funds.
Notwithstanding a sponsor's compliance with this part, reimbursement
is conditioned upon the availability of program funds.
Sec. 149.320 Universe of claims that must be submitted.
(a) Claims submitted for an early retiree, as defined in Sec.
149.2, must include claims below the applicable cost threshold for the
plan year.
(b) Claims must not be submitted until claims are submitted for
amounts that exceed the applicable cost threshold for the plan year for
the early retiree.
(c) Sponsors must not submit claims for health benefits for an early
retiree to the extent the sponsor has already submitted claims for the
early retiree that total more than the applicable cost limit for the
applicable plan year.
Sec. 149.325 Requirements for eligibility of claims.
A claim may be submitted only if it represents costs for health
benefits for an early retiree, as defined in Sec. 149.2, has been
incurred during the applicable plan year, and has been paid.
Sec. 149.330 Content of claims.
Each claim on its face must include the information specified in,
and meet, the definition of claim or medical claim found at Sec. 149.2.
Sec. 149.335 Documentation of costs of actual claims involved.
(a) A submission of claims consists of a list of early retirees for
whom claims are being submitted, and documentation of the actual costs
of the items and services for claims being submitted, in a form and
manner specified by the Secretary.
(b) In order for a sponsor to receive reimbursement for the portion
of a claim that an early retiree paid, the sponsor must submit prima
facie evidence that the early enrollee paid his or her portion of the
claim.
Sec. 149.340 Rule for insured plans.
With respect to insured plans, the claims and data specified in the
subpart may be submitted directly to the Secretary by the insurer.
Sec. 149.345 Use of information provided.
The Secretary may use data and information collected under this
section only for the purpose of, and to the extent necessary in,
carrying out this part including, but not limited to, determining
reimbursement and reimbursement-related oversight and program integrity
activities, or as otherwise allowed by law. Nothing in this section
limits the Office of the Inspector General's authority to fulfill the
Inspector General's responsibilities in
[[Page 195]]
accordance with applicable Federal law.
Sec. 149.350 Maintenance of records.
(a) The sponsor of the certified plan (or a subcontractor, as
applicable) must maintain and furnish to the Secretary, upon request the
records enumerated in paragraph (b) of this section. The records must be
maintained for 6 years after the expiration of the plan year in which
the costs were incurred, or longer if otherwise required by law.
(b) The records that must be retained are as follows--
(1) All documentation, data, and other information related to this
part.
(2) Any other records specified by the Secretary.
(c) The Secretary may issue additional guidance addressing
recordkeeping requirements, including (but not limited to) the use of
electronic media.
(d) The sponsor must require its health insurance issuer or
employment-based plan, as applicable, to maintain and produce upon
request records to satisfy subparagraph (a) of this regulation.
(e) The sponsor is responsible for ensuring that the records are
maintained and provided according to this subpart.
Subpart F_Appeals
Sec. 149.500 Appeals.
(a) An adverse reimbursement determination is final and binding
unless appealed pursuant to paragraph (e) of this section.
(b) Except as provided in paragraph (c) of this section, a sponsor
may request an appeal of an adverse reimbursement determination.
(c) A sponsor may not appeal an adverse reimbursement determination
if the denial is based on the unavailability of funds.
(d) An adverse reimbursement determination is a determination
constituting a complete or partial denial of a reimbursement request.
(e) If a sponsor appeals an adverse reimbursement determination, the
sponsor must submit the appeal in writing to the Secretary within 15
calendar days of receipt of the determination pursuant to guidance
issued by the Secretary.
Sec. 149.510 Content of request for appeal.
The request for appeal must specify the findings or issues with
which the sponsor disagrees and the reasons for the disagreements. The
request for appeal may include supporting documentary evidence the
sponsor wishes the Secretary to consider.
Sec. 149.520 Review of appeals.
(a) In conducting review of the appeal, the Secretary reviews the
appeal, the evidence and findings upon which the adverse reimbursement
determination was made, and any other written evidence submitted by the
sponsor or the Secretary's designee and will provide a ruling on the
appeal request.
(b) In conducting the review, the Secretary reviews the
determination at issue, the evidence and findings upon which it was
based, any written documents submitted to the Secretary by the sponsor
and the Secretary's designee, and determines whether to uphold, reverse
or modify the Secretary's initial reimbursement determination.
(c) A decision by the Secretary under this provision is final and
binding.
(d) Regardless of the Secretary's decision, additional reimbursement
is contingent upon the availability of funds at the time of the
Secretary's determination.
(e) The Secretary informs the sponsor and the applicable Secretary's
designee of the decision. The Secretary sends a written decision to the
sponsor or the applicable Secretary's designee upon request.
Subpart G_Disclosure of Data Inaccuracies
Sec. 149.600 Sponsor's duty to report data inaccuracies.
A sponsor is required to disclose any data inaccuracies upon which a
reimbursement determination is made, including inaccurate claims data
and negotiated price concessions, in a manner and at a time specified by
the Secretary in guidance.
[[Page 196]]
Sec. 149.610 Secretary's authority to reopen and revise a
reimbursement determination.
(a) The Secretary may reopen and revise a reimbursement
determination upon the Secretary's own motion or upon the request of a
sponsor:
(1) Within 1 year of the reimbursement determination for any reason.
(2) Within 4 years of a reimbursement determination for good cause.
(3) At any time, in instances of fraud or similar fault.
(b) For purposes of this section, the Secretary does not find good
cause if the only reason for the revision is a change of legal
interpretation or administrative ruling upon which the determination to
reimburse was made.
(c) A decision by the Secretary not to revise a reimbursement
determination is final and binding (unless fraud or similar fault is
found) and cannot be appealed.
Subpart H_Change of Ownership Requirements
Sec. 149.700 Change of ownership requirements.
(a) Change of ownership consists of: (1) Partnership. The removal,
addition, or substitution of a partner, unless the partners expressly
agree otherwise as permitted by applicable state law.
(2) Asset sale. Transfer of all or substantially all of the assets
of the sponsor to another party.
(3) Corporation. The merger of the sponsor's corporation into
another corporation or the consolidation of the sponsor's organization
with one or more other corporations, resulting in a new corporate body.
(b) Change of ownership; exception. Transfer of corporate stock or
the merger of another corporation into the sponsor's corporation, with
the sponsor surviving, does not ordinarily constitute change of
ownership.
(c) Advance notice requirement. A sponsor that has a sponsor
agreement in effect under this part and is considering or negotiating a
change in ownership must notify the Secretary at least 60 days before
the anticipated effective date of the change.
(d) Assignment of agreement. When there is a change of ownership as
specified in paragraph (a) of this section, and this results in a
transfer of the liability for health benefits, the existing sponsor
agreement is automatically assigned to the new owner.
(e) Conditions that apply to assigned agreements. The new owner to
whom a sponsor agreement is assigned is subject to all applicable
statutes and regulations and to the terms and conditions of the sponsor
agreement.
(f) Failure to notify the Secretary at least 60 days before the
anticipated effective date of the change may result in the Secretary
recovering funds paid under this program.
PART 150_CMS ENFORCEMENT IN GROUP AND INDIVIDUAL INSURANCE MARKETS-
-Table of Contents
Subpart A_General Provisions
Sec.
150.101 Basis and scope.
150.103 Definitions.
Subpart B_CMS Enforcement Processes for Determining Whether States Are
Failing To Substantially Enforce PHS Act requirements
150.201 State enforcement.
150.203 Circumstances requiring CMS enforcement.
150.205 Sources of information triggering an investigation of State
enforcement.
150.207 Procedure for determining that a State fails to substantially
enforce PHS Act requirements.
150.209 Verification of exhaustion of remedies and contact with State
officials.
150.211 Notice to the State.
150.213 Form and content of notice.
150.215 Extension for good cause.
150.217 Preliminary determination.
150.219 Final determination.
150.221 Transition to State enforcement.
Subpart C_CMS Enforcement With Respect to Issuers and Non-Federal
Governmental Plans_Civil Money Penalties
150.301 General rule regarding the imposition of civil money penalties.
150.303 Basis for initiating an investigation of a potential violation.
150.305 Determination of entity liable for civil money penalty.
150.307 Notice to responsible entities.
150.309 Request for extension.
150.311 Responses to allegations of noncompliance.
150.313 Market conduct examinations.
[[Page 197]]
150.315 Amount of penalty--General.
150.317 Factors CMS uses to determine the amount of penalty.
150.319 Determining the amount of the penalty--mitigating circumstances.
150.321 Determining the amount of penalty--aggravating circumstances.
150.323 Determining the amount of penalty--other matters as justice may
require.
150.325 Settlement authority.
150.341 Limitations on penalties.
150.343 Notice of proposed penalty.
150.345 Appeal of proposed penalty.
150.347 Failure to request a hearing.
Subpart D_Administrative Hearings
150.401 Definitions.
150.403 Scope of ALJ's authority.
150.405 Filing of request for hearing.
150.407 Form and content of request for hearing.
150.409 Amendment of notice of assessment or request for hearing.
150.411 Dismissal of request for hearing.
150.413 Settlement.
150.415 Intervention.
150.417 Issues to be heard and decided by ALJ.
150.419 Forms of hearing.
150.421 Appearance of counsel.
150.423 Communications with the ALJ.
150.425 Motions.
150.427 Form and service of submissions.
150.429 Computation of time and extensions of time.
150.431 Acknowledgment of request for hearing.
150.435 Discovery.
150.437 Submission of briefs and proposed hearing exhibits.
150.439 Effect of submission of proposed hearing exhibits.
150.441 Prehearing conferences.
150.443 Standard of proof.
150.445 Evidence.
150.447 The record.
150.449 Cost of transcripts.
150.451 Posthearing briefs.
150.453 ALJ decision.
150.455 Sanctions.
150.457 Review by Administrator.
150.459 Judicial review.
150.461 Failure to pay assessment.
150.463 Final order not subject to review.
150.465 Collection and use of penalty funds.
Authority: Secs. 2701 through 2763, 2791, and 2792 of the PHS Act
(42 U.S.C. 300gg through 300gg-63, 300gg-91, and 300gg-92).
Source: 64 FR 45795, Aug. 20, 1999, unless otherwise noted.
Subpart A_General Provisions
Sec. 150.101 Basis and scope.
(a) Basis. CMS's enforcement authority under sections 2723 and 2761
of the PHS Act and its rulemaking authority under section 2792 of the
PHS Act provide the basis for issuing regulations under this part 150.
(b) Scope--(1) Enforcement with respect to group heath plans. The
provisions of title XXVII of the PHS Act that apply to group health
plans that are non-Federal governmental plans are enforced by CMS using
the procedures described in Sec. 150.301 et seq.
(2) Enforcement with respect to health insurance issuers. The states
have primary enforcement authority with respect to the requirements of
title XXVII of the PHS Act that apply to health insurance issuers
offering coverage in the group or individual health insurance market. If
CMS determines under subpart B of this part that a state is not
substantially enforcing title XXVII of the PHS Act, including the
implementing regulations in parts 146, 147, and 148 of this subchapter,
CMS enforces them under subpart C of this part.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13439, Feb. 27, 2013]
Sec. 150.103 Definitions.
The definitions that appear in part 144 of this subchapter apply to
this part 150, unless stated otherwise. As used in this part:
Amendment, endorsement, or rider means a document that modifies or
changes the terms or benefits of an individual policy, group policy, or
certificate of insurance.
Application means a signed statement of facts by a potential insured
that an issuer uses as a basis for its decision whether, and on what
basis to insure an individual, or to issue a certificate of insurance,
or that a non-Federal governmental health plan uses as a basis for a
decision whether to enroll an individual under the plan.
Certificate of insurance means the document issued to a person or
entity covered under an insurance policy issued
[[Page 198]]
to a group health plan or an association or trust that summarizes the
benefits and principal provisions of the policy.
Complaint means any expression, written or oral, indicating a
potential denial of any right or protection contained in HIPAA
requirements (whether ultimately justified or not) by an individual, a
personal representative or other entity acting on behalf of an
individual, or any entity that believes such a right is being or has
been denied an individual.
Group health insurance policy or group policy means the legal
document or contract issued by an issuer to a plan sponsor with respect
to a group health plan (including a plan that is a non-Federal
governmental plan) that contains the conditions and terms of the
insurance that covers the group.
Individual health insurance policy or individual policy means the
legal document or contract issued by the issuer to an individual that
contains the conditions and terms of the insurance. Any association or
trust arrangement that is not a group health plan as defined in Sec.
144.103 of this subchapter or does not provide coverage in connection
with one or more group health plans is individual coverage subject to
the requirements of parts 147 and 148 of this subchapter. The term
``individual health insurance policy'' includes a policy that is--
(1) Issued to an association that makes coverage available to
individuals other than in connection with one or more group health
plans; or
(2) Administered, or placed in a trust, and is not sold in
connection with a group health plan subject to the provisions of parts
146 and 147 of this subchapter.
PHS Act requirements means the requirements of title XXVII of the
PHS Act and its implementing regulations in parts 146, 147, and 148 of
this subchapter.
Plan document means the legal document that provides the terms of
the plan to individuals covered under a group health plan, such as a
non-Federal governmental health plan.
State law means all laws, decisions, rules, regulations, or other
State action having the effect of law, of any State as defined in Sec.
144.103 of this subchapter. A law of the United States applicable to the
District of Columbia is treated as a State law rather than a law of the
United States.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13439, Feb. 27, 2013]
Subpart B_CMS Enforcement Processes for Determining Whether States Are
Failing To Substantially Enforce PHS Act Requirement
Sec. 150.201 State enforcement.
Except as provided in subpart C of this part, each State enforces
PHS Act requirements with respect to health insurance issuers that
issue, sell, renew, or offer health insurance coverage in the State.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.203 Circumstances requiring CMS enforcement.
CMS enforces PHS Act requirement to the extent warranted (as
determined by CMS) in any of the following circumstances:
(a) Notification by State. A State notifies CMS that it has not
enacted legislation to enforce or that it is not otherwise enforcing PHS
Act requirements.
(b) Determination by CMS. If CMS receives or obtains information
that a State may not be substantially enforcing PHS Act requirements, it
may initiate the process described in this subchapter to determine
whether the State is failing to substantially enforce these
requirements.
(c) Special rule for guaranteed availability in the individual
market. If a State has notified CMS that it is implementing an
acceptable alternative mechanism in accordance with Sec. 148.128 of
this subchapter instead of complying with the guaranteed availability
requirements of Sec. 148.120, CMS's determination focuses on the
following:
(1) Whether the State's mechanism meets the requirements for an
acceptable alternative mechanism.
(2) Whether the State is implementing the acceptable alternative
mechanism.
[[Page 199]]
(d) Consequence of a State not implementing an alternative
mechanism. If a State is not implementing an acceptable alternative
mechanism, CMS determines whether the State is substantially enforcing
the requirements of Sec. Sec. 148.101 through 148.126 and Sec. 148.170
of this subchapter.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.205 Sources of information triggering an investigation
of State enforcement.
Information that may trigger an investigation of State enforcement
includes, but is not limited to, any of the following:
(a) A complaint received by CMS.
(b) Information learned during informal contact between CMS and
State officials.
(c) A report in the news media.
(d) Information from the governors and commissioners of insurance of
the various States regarding the status of their enforcement of PHS Act
requirements.
(e) Information obtained during periodic review of State health care
legislation. CMS may review State health care and insurance legislation
and regulations to determine whether they are:
(1) Consistent with PHS Act requirements.
(2) Not pre-empted as provided in Sec. 146.143 (relating to group
market provisions) and Sec. 148.120 (relating to individual market
requirements) on the basis that they prevent the application of a HIPAA
requirement.
(f) Any other information that indicates a possible failure to
substantially enforce.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.207 Procedure for determining that a State fails to
substantially enforce PHS Act requirements.
Sections 150.209 through 150.219 describe the procedures CMS follows
to determine whether a State is substantially enforcing PHS Act
requirements.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.209 Verification of exhaustion of remedies and contact with
State officials.
If CMS receives a complaint or other information indicating that a
State is failing to enforce PHS Act requirements, CMS assesses whether
the affected individual or entity has made reasonable efforts to exhaust
available State remedies. As part of its assessment, CMS may contact
State officials regarding the questions raised.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.211 Notice to the State.
If CMS is satisfied that there is a reasonable question whether
there has been a failure to substantially enforce PHS Act requirements,
CMS sends, in writing, the notice described in Sec. 150.213 of this
part, to the following State officials:
(a) The governor or chief executive officer of the State.
(b) The insurance commissioner or chief insurance regulatory
official.
(c) If the alleged failure involves HMOs, the official responsible
for regulating HMOs if different from the official listed in paragraph
(b) of this section.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.213 Form and content of notice.
The notice provided to the State is in writing and does the
following:
(a) Identifies the PHS Act requirement or requirements that have
allegedly not been substantially enforced.
(b) Describes the factual basis for the allegation of a failure or
failures to enforce HIPAA requirements.
(c) Explains that the consequence of a State's failure to
substantially enforce PHS Act requirements is that CMS enforces them.
(d) Advises the State that it has 30 days from the date of the
notice to respond, unless the time for response is extended as described
in Sec. 150.215 of this subpart. The State's response should include
any information that the State wishes CMS to consider in making the
[[Page 200]]
preliminary determination described in Sec. 150.217.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.215 Extension for good cause.
CMS may extend, for good cause, the time the State has for
responding to the notice described in Sec. 150.213 of this subpart.
Examples of good cause include an agreement between CMS and the State
that there should be a public hearing on the State's enforcement, or
evidence that the State is undertaking expedited enforcement activities.
Sec. 150.217 Preliminary determination.
If, at the end of the 30-day period (and any extension), the State
has not established to CMS's satisfaction that it is substantially
enforcing the PHS Act requirements described in the notice, CMS takes
the following actions:
(a) Consults with the appropriate State officials identified in
Sec. 150.211 (or their designees).
(b) Notifies the State of CMS's preliminary determination that the
State has failed to substantially enforce the requirements and that the
failure is continuing.
(c) Permits the State a reasonable opportunity to show evidence of
substantial enforcement.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.219 Final determination.
If, after providing notice and a reasonable opportunity for the
State to show that it has corrected any failure to substantially
enforce, CMS finds that the failure to substantially enforce has not
been corrected, it will send the State a written notice of its final
determination. The notice includes the following:
(a) Identification of the PHS Act requirements that CMS is
enforcing.
(b) The effective date of CMS's enforcement.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.221 Transition to State enforcement.
(a) If CMS determines that a State for which it has assumed
enforcement authority has enacted and implemented legislation to enforce
PHS Act requirements and also determines that it is appropriate to
return enforcement authority to the State, CMS will enter into
discussions with State officials to ensure that a transition is effected
with respect to the following:
(1) Consumer complaints and inquiries.
(2) Instructions to issuers.
(3) Any other pertinent aspect of operations.
(b) CMS may also negotiate a process to ensure that, to the extent
practicable, and as permitted by law, its records documenting issuer
compliance and other relevant areas of CMS's enforcement operations are
made available for incorporation into the records of the State
regulatory authority that will assume enforcement responsibility.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Subpart C_CMS Enforcement With Respect to Issuers and Non-Federal
Governmental Plans_Civil Money Penalties
Sec. 150.301 General rule regarding the imposition of civil money
penalties.
If any health insurance issuer that is subject to CMS's enforcement
authority under Sec. 150.101(b)(2), or any non-Federal governmental
plan (or employer that sponsors a non-Federal governmental plan) that is
subject to CMS's enforcement authority under Sec. 150.101(b)(1), fails
to comply with PHS Act requirements, it may be subject to a civil money
penalty as described in this subpart.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.303 Basis for initiating an investigation of a potential
violation.
(a) Information. Any information that indicates that any issuer may
be failing to meet the PHS Act requirements or that any non-Federal
governmental plan that is a group health plan as defined in section
2791(a)(1) of the PHS Act and 45 CFR Sec. 144.103 may be failing to
meet an applicable HIPAA requirement, may warrant an investigation.
[[Page 201]]
CMS may consider, but is not limited to, the following sources or types
of information:
(1) Complaints.
(2) Reports from State insurance departments, the National
Association of Insurance Commissioners, and other Federal and State
agencies.
(3) Any other information that indicates potential noncompliance
with PHS Act requirements.
(b) Who may file a complaint. Any entity or individual, or any
entity or personal representative acting on that individual's behalf,
may file a complaint with CMS if he or she believes that a right to
which the aggrieved person is entitled under PHS Act requirements is
being, or has been, denied or abridged as a result of any action or
failure to act on the part of an issuer or other responsible entity as
defined in Sec. 150.305.
(c) Where a complaint should be directed. A complaint may be
directed to any CMS regional office.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.305 Determination of entity liable for civil money penalty.
If a failure to comply is established under this part, the
responsible entity, as determined under this section, is liable for any
civil money penalty imposed.
(a) Health insurance issuer is responsible entity--(1) Group health
insurance policy. To the extent a group health insurance policy issued,
sold, renewed, or offered to a private plan sponsor or a non-Federal
governmental plan sponsor is subject to applicable PHS Act requirements,
a health insurance issuer is subject to a civil money penalty,
irrespective of whether a civil money penalty is imposed under
paragraphs (b) or (c) of this section, if the policy itself or the
manner in which the policy is marketed or administered fails to comply
with an applicable HIPAA requirement.
(2) Individual health insurance policy. To the extent an individual
health insurance policy is subject to an applicable HIPAA requirement, a
health insurance issuer is subject to a civil money penalty if the
policy itself, or the manner in which the policy is marketed or
administered, violates any applicable HIPAA requirement.
(b) Non-Federal governmental plan is responsible entity--(1) Basic
rule. If a non-Federal governmental plan is sponsored by two or more
employers and fails to comply with an applicable HIPAA requirement, the
plan is subject to a civil money penalty, irrespective of whether a
civil money penalty is imposed under paragraph (a) of this section. The
plan is the responsible entity irrespective of whether the plan is
administered by a health insurance issuer, an employer sponsoring the
plan, or a third-party administrator.
(2) Exception. In the case of a non-Federal governmental plan that
is not provided through health insurance coverage, this paragraph (b)
does not apply to the extent that the non-Federal governmental employers
have elected under Sec. 146.180 to exempt the plan from applicable PHS
Act requirements.
(c) Employer is responsible entity--(1) Basic rule. If a non-Federal
governmental plan is sponsored by a single employer and fails to comply
with an applicable HIPAA requirement, the employer is subject to a civil
money penalty, irrespective of whether a civil money penalty is imposed
under paragraph (a) of this section. The employer is the responsible
entity irrespective of whether the plan is administered by a health
insurance issuer, the employer, or a third-party administrator.
(2) Exception. In the case of a non-Federal governmental plan that
is not provided through health insurance coverage, this paragraph (c)
does not apply to the extent the non-Federal governmental employer has
elected under Sec. 146.180 to exempt the plan from applicable PHS Act
requirements.
(d) Actions or inactions of agent. A principal is liable for
penalties assessed for the actions or inactions of its agent.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.307 Notice to responsible entities.
If an investigation under Sec. 150.303 indicates a potential
violation, CMS provides written notice to the responsible entity or
entities identified under Sec. 150.305. The notice does the following:
[[Page 202]]
(a) Describes the substance of any complaint or other information.
(b) Provides 30 days from the date of the notice for the responsible
entity or entities to respond with additional information, including
documentation of compliance as described in Sec. 150.311.
(c) States that a civil money penalty may be assessed.
[64 FR 45795, Aug. 20, 1999, as amended at 70 FR 71023, Nov. 25, 2005]
Sec. 150.309 Request for extension.
In circumstances in which an entity cannot prepare a response to CMS
within the 30 days provided in the notice, the entity may make a written
request for an extension from CMS detailing the reason for the extension
request and showing good cause. If CMS grants the extension, the
responsible entity must respond to the notice within the time frame
specified in CMS's letter granting the extension of time. Failure to
respond within 30 days, or within the extended time frame, may result in
CMS's imposition of a civil money penalty based upon the complaint or
other information alleging or indicating a violation of PHS Act
requirements.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.311 Responses to allegations of noncompliance.
In determining whether to impose a civil money penalty, CMS reviews
and considers documentation provided in any complaint or other
information, as well as any additional information provided by the
responsible entity to demonstrate that it has complied with PHS Act
requirements. The following are examples of documentation that a
potential responsible entity may submit for CMS's consideration in
determining whether a civil money penalty should be assessed and the
amount of any civil money penalty:
(a) Any individual policy, group policy, certificate of insurance,
application, rider, amendment, endorsement, certificate of creditable
coverage, advertising material, or any other documents if those
documents form the basis of a complaint or allegation of noncompliance,
or the basis for the responsible entity to refute the complaint or
allegation.
(b) Any other evidence that refutes an alleged noncompliance.
(c) Evidence that the entity did not know, and exercising due
diligence could not have known, of the violation.
(d) Documentation that the policies, certificates of insurance, or
non-Federal governmental plan documents have been amended to comply with
PHS Act requirements either by revision of the contracts or by the
development of riders, amendments, or endorsements.
(e) Documentation of the entity's issuance of conforming policies,
certificates of insurance, plan documents, or amendments to
policyholders or certificate holders before the issuance of the notice
to the responsible entity or entities described in Sec. 150.307.
(f) Evidence documenting the development and implementation of
internal policies and procedures by an issuer, or non-Federal
governmental health plan or employer, to ensure compliance with PHS Act
requirements. Those policies and procedures may include or consist of a
voluntary compliance program. Any such program should do the following:
(1) Effectively articulate and demonstrate the fundamental mission
of compliance and the issuer's, or non-Federal governmental health
plan's or employer's, commitment to the compliance process.
(2) Include the name of the individual in the organization
responsible for compliance.
(3) Include an effective monitoring system to identify practices
that do not comply with PHS Act requirements and to provide reasonable
assurance that fraud, abuse, and systemic errors are detected in a
timely manner.
(4) Address procedures to improve internal policies when
noncompliant practices are identified.
(g) Evidence documenting the entity's record of previous compliance
with HIPAA requirements.
[64 FR 45795, Aug. 20, 1999, as amended at 70 FR 71023, Nov. 25, 2005;
78 FR 13440, Feb. 27, 2013]
[[Page 203]]
Sec. 150.313 Market conduct examinations.
(a) Definition. A market conduct examination means the examination
of health insurance operations of an issuer, or the operation of a non-
Federal governmental plan, involving the review of one or more (or a
combination) of a responsible entity's business or operational affairs,
or both, to verify compliance with PHS Act requirements.
(b) General. If, based on the information described in Sec.
150.303, CMS finds evidence that a specific entity may be in violation
of a HIPAA requirement, CMS may initiate a market conduct examination to
determine whether the entity is out of compliance. CMS may conduct the
examinations either at the site of the issuer or other responsible
entity or a site CMS selects. When CMS selects a site, it may direct the
issuer or other responsible entity to forward any documentation CMS
considers relevant for purposes of the examination to that site.
(c) Appointment of examiners. When CMS identifies an issue that
warrants investigation, CMS will appoint one or more examiners to
perform the examination and instruct them as to the scope of the
examination.
(d) Appointment of professionals and specialists. When conducting an
examination under this part, CMS may retain attorneys, independent
actuaries, independent market conduct examiners, or other professionals
and specialists as examiners.
(e) Report of market conduct examination--(1) CMS review. When CMS
receives a report, it will review the report, together with the
examination work papers and any other relevant information, and prepare
a final report. The final examination report will be provided to the
issuer or other responsible entity.
(2) Response from issuer or other responsible entity. With respect
to each examination issue identified in the report, the issuer or other
responsible entity may:
(i) Concur with CMS's position(s) as outlined in the report,
explaining the plan of correction to be implemented.
(ii) Dispute CMS's position(s), clearly outlining the basis for its
dispute and submitting illustrative examples where appropriate.
(3) CMS's reply to a response from an issuer or other responsible
entity. Upon receipt of a response from the issuer or other responsible
entity, CMS will provide a letter containing its reply to each
examination issue. CMS's reply will consist of one of the following:
(i) Concurrence with the issuer's or non-Federal governmental plan's
position.
(ii) Approval of the issuer's or non-Federal governmental plan's
proposed plan of correction.
(iii) Conditional approval of the issuer's or non-Federal
governmental plan's proposed plan of correction, which will include any
modifications CMS requires.
(iv) Notice to the issuer or non-Federal governmental plan that
there exists a potential violation of PHS Act requirements.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.315 Amount of penalty--General.
A civil money penalty for each violation of 42 U.S.C. 300gg et seq.
may not exceed $100 as adjusted annually under 45 CFR part 102 for each
day, for each responsible entity, for each individual affected by the
violation. Penalties imposed under this part are in addition to any
other penalties prescribed or allowed by law.
[64 FR 45795, Aug. 20, 1999, as amended at 81 FR 61581, Sept. 6, 2016]
Sec. 150.317 Factors CMS uses to determine the amount of penalty.
In determining the amount of any penalty, CMS takes into account the
following:
(a) The entity's previous record of compliance. This may include any
of the following:
(1) Any history of prior violations by the responsible entity,
including whether, at any time before determination of the current
violation or violations, CMS or any State found the responsible entity
liable for civil or administrative sanctions in connection with a
violation of PHS Act requirements.
[[Page 204]]
(2) Documentation that the responsible entity has submitted its
policy forms to CMS for compliance review.
(3) Evidence that the responsible entity has never had a complaint
for noncompliance with PHS Act requirements filed with a State or CMS.
(4) Such other factors as justice may require.
(b) The gravity of the violation. This may include any of the
following:
(1) The frequency of the violation, taking into consideration
whether any violation is an isolated occurrence, represents a pattern,
or is widespread.
(2) The level of financial and other impacts on affected
individuals.
(3) Other factors as justice may require.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.319 Determining the amount of the penalty--mitigating
circumstances.
For every violation subject to a civil money penalty, if there are
substantial or several mitigating circumstances, the aggregate amount of
the penalty is set at an amount sufficiently below the maximum permitted
by Sec. 150.315 to reflect that fact. As guidelines for taking into
account the factors listed in Sec. 150.317, CMS considers the
following:
(a) Record of prior compliance. It should be considered a mitigating
circumstance if the responsible entity has done any of the following:
(1) Before receipt of the notice issued under Sec. 150.307,
implemented and followed a compliance plan as described in Sec.
150.311(f).
(2) Had no previous complaints against it for noncompliance.
(b) Gravity of the violation(s). It should be considered a
mitigating circumstance if the responsible entity has done any of the
following:
(1) Made adjustments to its business practices to come into
compliance with PHS Act requirements so that the following occur:
(i) All employers, employees, individuals and non-Federal
governmental entities are identified that are or were issued any policy,
certificate of insurance or plan document, or any form used in
connection therewith that failed to comply.
(ii) All employers, employees, individuals, and non-Federal
governmental plans are identified that were denied coverage or were
denied a right provided under PHS Act requirements.
(iii) Each employer, employee, individual, or non-Federal
governmental plan adversely affected by the violation has been, for
example, offered coverage or provided a certificate of creditable
coverage in a manner that complies with PHS Act requirements that were
violated so that, to the extent practicable, that employer, employee,
individual, or non-Federal governmental entity is in the same position
that he, she, or it would have been in had the violation not occurred.
(iv) The adjustments are completed in a timely manner.
(2) Discovered areas of noncompliance without notice from CMS and
voluntarily reported that noncompliance, provided that the responsible
entity submits the following:
(i) Documentation verifying that the rights and protections of all
individuals adversely affected by the noncompliance have been restored;
and
(ii) A plan of correction to prevent future similar violations.
(3) Demonstrated that the violation is an isolated occurrence.
(4) Demonstrated that the financial and other impacts on affected
individuals is negligible or nonexistent.
(5) Demonstrated that the noncompliance is correctable and that a
high percentage of the violations were corrected.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.321 Determining the amount of penalty--aggravating
circumstances.
For every violation subject to a civil money penalty, if there are
substantial or several aggravating circumstances, CMS sets the aggregate
amount of the penalty at an amount sufficiently close to or at the
maximum permitted by Sec. 150.315 to reflect that fact. CMS considers
the following circumstances to be aggravating circumstances:
(a) The frequency of violation indicates a pattern of widespread
occurrence.
[[Page 205]]
(b) The violation(s) resulted in significant financial and other
impacts on the average affected individual.
(c) The entity does not provide documentation showing that
substantially all of the violations were corrected.
Sec. 150.323 Determining the amount of penalty--other matters as
justice may require.
CMS may take into account other circumstances of an aggravating or
mitigating nature if, in the interests of justice, they require either a
reduction or an increase of the penalty in order to assure the
achievement of the purposes of this part, and if those circumstances
relate to the entity's previous record of compliance or the gravity of
the violation.
Sec. 150.325 Settlement authority.
Nothing in Sec. Sec. 150.315 through 150.323 limits the authority
of CMS to settle any issue or case described in the notice furnished in
accordance with Sec. 150.307 or to compromise on any penalty provided
for in Sec. Sec. 150.315 through 150.323.
Sec. 150.341 Limitations on penalties.
(a) Circumstances under which a civil money penalty is not imposed.
CMS does not impose any civil money penalty on any failure for the
period of time during which none of the responsible entities knew, or
exercising reasonable diligence would have known, of the failure. CMS
also does not impose a civil money penalty for the period of time after
any of the responsible entities knew, or exercising reasonable diligence
would have known of the failure, if the failure was due to reasonable
cause and not due to willful neglect and the failure was corrected
within 30 days of the first day that any of the entities against whom
the penalty would be imposed knew, or exercising reasonable diligence
would have known, that the failure existed.
(b) Burden of establishing knowledge. The burden is on the
responsible entity or entities to establish to CMS's satisfaction that
no responsible entity knew, or exercising reasonable diligence would
have known, that the failure existed.
Sec. 150.343 Notice of proposed penalty.
If CMS proposes to assess a penalty in accordance with this part, it
delivers to the responsible entity, or sends to that entity by certified
mail, return receipt requested, written notice of its intent to assess a
penalty. The notice includes the following:
(a) A description of the PHS Act requirements that CMS has
determined that the responsible entity violated.
(b) A description of any complaint or other information upon which
CMS based its determination, including the basis for determining the
number of affected individuals and the number of days for which the
violations occurred.
(c) The amount of the proposed penalty as of the date of the notice.
(d) Any circumstances described in Sec. Sec. 150.317 through
150.323 that were considered when determining the amount of the proposed
penalty.
(e) A specific statement of the responsible entity's right to a
hearing.
(f) A statement that failure to request a hearing within 30 days
permits the assessment of the proposed penalty without right of appeal
in accordance with Sec. 150.347.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
Sec. 150.345 Appeal of proposed penalty.
Any entity against which CMS has assessed a penalty may appeal that
penalty in accordance with Sec. 150.401 et seq.
Sec. 150.347 Failure to request a hearing.
If the responsible entity does not request a hearing within 30 days
of the issuance of the notice described in Sec. 150.343, CMS may assess
the proposed civil money penalty, a less severe penalty, or a more
severe penalty. CMS notifies the responsible entity in writing of any
penalty that has been assessed and of the means by which the responsible
entity may satisfy the judgment. The responsible entity has no right to
appeal a penalty with respect to which it has not requested a hearing in
accordance with Sec. 150.405 unless the responsible entity can show
good cause, as determined under Sec. 150.405(b), for failing to timely
exercise its right to a hearing.
[[Page 206]]
Subpart D_Administrative Hearings
Sec. 150.401 Definitions.
In this subpart, unless the context indicates otherwise:
ALJ means administrative law judge of the Departmental Appeals Board
of the Department of Health and Human Services.
Filing date means the date postmarked by the U.S. Postal Service,
deposited with a carrier for commercial delivery, or hand delivered.
Hearing includes a hearing on a written record as well as an in-
person or telephone hearing.
Party means CMS or the respondent.
Receipt date means five days after the date of a document, unless
there is a showing that it was in fact received later.
Respondent means an entity that received a notice of proposed
assessment of a civil money penalty issued pursuant to Sec. 150.343.
Sec. 150.403 Scope of ALJ's authority.
(a) The ALJ has the authority, including all of the authority
conferred by the Administrative Procedure Act, to adopt whatever
procedures may be necessary or proper to carry out in an efficient and
effective manner the ALJ's duty to provide a fair and impartial hearing
on the record and to issue an initial decision concerning the imposition
of a civil money penalty.
(b) The ALJ's authority includes the authority to modify, consistent
with the Administrative Procedure Act (5 U.S.C. 552a), any hearing
procedures set out in this subpart.
(c) The ALJ does not have the authority to find invalid or refuse to
follow Federal statutes or regulations.
Sec. 150.405 Filing of request for hearing.
(a) A respondent has a right to a hearing before an ALJ if it files
a request for hearing that complies with Sec. 150.407(a), within 30
days after the date of issuance of either CMS's notice of proposed
assessment under Sec. 150.343 or notice that an alternative dispute
resolution process has terminated. The request for hearing should be
addressed as instructed in the notice of proposed determination. ``Date
of issuance'' is five (5) days after the filing date, unless there is a
showing that the document was received earlier.
(b) The ALJ may extend the time for filing a request for hearing
only if the ALJ finds that the respondent was prevented by events or
circumstances beyond its control from filing its request within the time
specified above. Any request for an extension of time must be made
promptly by written motion.
Sec. 150.407 Form and content of request for hearing.
(a) The request for hearing must do the following:
(1) Identify any factual or legal bases for the assessment with
which the respondent disagrees.
(2) Describe with reasonable specificity the basis for the
disagreement, including any affirmative facts or legal arguments on
which the respondent is relying.
(b) The request for hearing must identify the relevant notice of
assessment by date and attach a copy of the notice.
Sec. 150.409 Amendment of notice of assessment or request for hearing.
The ALJ may permit CMS to amend its notice of assessment, or permit
the respondent to amend a request for hearing that complies with Sec.
150.407(a), if the ALJ finds that no undue prejudice to either party
will result.
Sec. 150.411 Dismissal of request for hearing.
An ALJ will order a request for hearing dismissed if the ALJ
determines that:
(a) The request for hearing was not filed within 30 days as
specified by Sec. 150.405(a) or any extension of time granted by the
ALJ pursuant to Sec. 150.405(b).
(b) The request for hearing fails to meet the requirements of Sec.
150.407.
(c) The entity that filed the request for hearing is not a
respondent under Sec. 150.401.
(d) The respondent has abandoned its request.
(e) The respondent withdraws its request for hearing.
[[Page 207]]
Sec. 150.413 Settlement.
CMS has exclusive authority to settle any issue or any case, without
the consent of the administrative law judge at any time before or after
the administrative law judge's decision.
Sec. 150.415 Intervention.
(a) The ALJ may grant the request of an entity, other than the
respondent, to intervene if all of the following occur:
(1) The entity has a significant interest relating to the subject
matter of the case.
(2) Disposition of the case will, as a practical matter, likely
impair or impede the entity's ability to protect that interest.
(3) The entity's interest is not adequately represented by the
existing parties.
(4) The intervention will not unduly delay or prejudice the
adjudication of the rights of the existing parties.
(b) A request for intervention must specify the grounds for
intervention and the manner in which the entity seeks to participate in
the proceedings. Any participation by an intervenor must be in the
manner and by any deadline set by the ALJ.
(c) The Department of Labor or the IRS may intervene without regard
to paragraphs (a)(1) through (a)(3) of this section.
Sec. 150.417 Issues to be heard and decided by ALJ.
(a) The ALJ has the authority to hear and decide the following
issues:
(1) Whether a basis exists to assess a civil money penalty against
the respondent.
(2) Whether the amount of the assessed civil money penalty is
reasonable.
(b) In deciding whether the amount of a civil money penalty is
reasonable, the ALJ--
(1) Applies the factors that are identified in Sec. 150.317.
(2) May consider evidence of record relating to any factor that CMS
did not apply in making its initial determination, so long as that
factor is identified in this subpart.
(c) If the ALJ finds that a basis exists to assess a civil money
penalty, the ALJ may sustain, reduce, or increase the penalty that CMS
assessed.
Sec. 150.419 Forms of hearing.
(a) All hearings before an ALJ are on the record. The ALJ may
receive argument or testimony in writing, in person, or by telephone.
The ALJ may receive testimony by telephone only if the ALJ determines
that doing so is in the interest of justice and economy and that no
party will be unduly prejudiced. The ALJ may require submission of a
witness' direct testimony in writing only if the witness is available
for cross-examination.
(b) The ALJ may decide a case based solely on the written record
where there is no disputed issue of material fact the resolution of
which requires the receipt of oral testimony.
Sec. 150.421 Appearance of counsel.
Any attorney who is to appear on behalf of a party must promptly
file, with the ALJ, a notice of appearance.
Sec. 150.423 Communications with the ALJ.
No party or person (except employees of the ALJ's office) may
communicate in any way with the ALJ on any matter at issue in a case,
unless on notice and opportunity for both parties to participate. This
provision does not prohibit a party or person from inquiring about the
status of a case or asking routine questions concerning administrative
functions or procedures.
Sec. 150.425 Motions.
(a) Any request to the ALJ for an order or ruling must be by motion,
stating the relief sought, the authority relied upon, and the facts
alleged. All motions must be in writing, with a copy served on the
opposing party, except in either of the following situations:
(1) The motion is presented during an oral proceeding before an ALJ
at which both parties have the opportunity to be present.
(2) An extension of time is being requested by agreement of the
parties or with waiver of objections by the opposing party.
(b) Unless otherwise specified in this subpart, any response or
opposition to
[[Page 208]]
a motion must be filed within 20 days of the party's receipt of the
motion. The ALJ does not rule on a motion before the time for filing a
response to the motion has expired except where the response is filed at
an earlier date, where the opposing party consents to the motion being
granted, or where the ALJ determines that the motion should be denied.
Sec. 150.427 Form and service of submissions.
(a) Every submission filed with the ALJ must be filed in triplicate,
including one original of any signed documents, and include:
(1) A caption on the first page, setting forth the title of the
case, the docket number (if known), and a description of the submission
(such as ``Motion for Discovery'').
(2) The signatory's name, address, and telephone number.
(3) A signed certificate of service, specifying each address to
which a copy of the submission is sent, the date on which it is sent,
and the method of service.
(b) A party filing a submission with the ALJ must, at the time of
filing, serve a copy of such submission on the opposing party. An
intervenor filing a submission with the ALJ must, at the time of filing,
serve a copy of the submission on all parties. Service must be made by
mailing or hand delivering a copy of the submission to the opposing
party. If a party is represented by an attorney, service must be made on
the attorney.
Sec. 150.429 Computation of time and extensions of time.
(a) For purposes of this subpart, in computing any period of time,
the time begins with the day following the act, event, or default and
includes the last day of the period unless it is a Saturday, Sunday, or
legal holiday observed by the Federal government, in which event it
includes the next business day. When the period of time allowed is less
than seven days, intermediate Saturdays, Sundays, and legal holidays
observed by the Federal government are excluded from the computation.
(b) The period of time for filing any responsive pleading or papers
is determined by the date of receipt (as defined in Sec. 150.401) of
the submission to which a response is being made.
(c) The ALJ may grant extensions of the filing deadlines specified
in these regulations or set by the ALJ for good cause shown (except that
requests for extensions of time to file a request for hearing may be
granted only on the grounds specified in section Sec. 150.405(b)).
Sec. 150.431 Acknowledgment of request for hearing.
After receipt of the request for hearing, the ALJ assigned to the
case or someone acting on behalf of the ALJ will send a letter to the
parties that acknowledges receipt of the request for hearing, identifies
the docket number assigned to the case, provides instructions for filing
submissions and other general information concerning procedures, and
sets out the next steps in the case.
Sec. 150.435 Discovery.
(a) The parties must identify any need for discovery from the
opposing party as soon as possible, but no later than the time for the
reply specified in Sec. 150.437(c). Upon request of a party, the ALJ
may stay proceedings for a reasonable period pending completion of
discovery if the ALJ determines that a party would not be able to make
the submissions required by Sec. 150.437 without discovery. The parties
should attempt to resolve any discovery issues informally before seeking
an order from the ALJ.
(b) Discovery devices may include requests for production of
documents, requests for admission, interrogatories, depositions, and
stipulations. The ALJ orders interrogatories or depositions only if
these are the only means to develop the record adequately on an issue
that the ALJ must resolve to decide the case.
(c) Each discovery request must be responded to within 30 days of
receipt, unless that period of time is extended for good cause by the
ALJ.
(d) A party to whom a discovery request is directed may object in
writing for any of the following reasons:
(1) Compliance with the request is unduly burdensome or expensive.
[[Page 209]]
(2) Compliance with the request will unduly delay the proceedings.
(3) The request seeks information that is wholly outside of any
matter in dispute.
(4) The request seeks privileged information. Any party asserting a
claim of privilege must sufficiently describe the information or
document being withheld to show that the privilege applies. If an
asserted privilege applies to only part of a document, a party
withholding the entire document must state why the nonprivileged part is
not segregable.
(e) Any motion to compel discovery must be filed within 10 days
after receipt of objections to the party's discovery request, within 10
days after the time for response to the discovery request has elapsed if
no response is received, or within 10 days after receipt of an
incomplete response to the discovery request. The motion must be
reasonably specific as to the information or document sought and must
state its relevance to the issues in the case.
Sec. 150.437 Submission of briefs and proposed hearing exhibits.
(a) Within 60 days of its receipt of the acknowledgment provided for
in Sec. 150.431, the respondent must file the following with the ALJ:
(1) A statement of its arguments concerning CMS's notice of
assessment (respondent's brief), including citations to the respondent's
hearing exhibits provided in accordance with paragraph (a)(2) of this
section. The brief may not address factual or legal bases for the
assessment that the respondent did not identify as disputed in its
request for hearing or in an amendment to that request permitted by the
ALJ.
(2) All documents (including any affidavits) supporting its
arguments, tabbed and organized chronologically and accompanied by an
indexed list identifying each document (respondent's proposed hearing
exhibits).
(3) A statement regarding whether there is a need for an in-person
hearing and, if so, a list of proposed witnesses and a summary of their
expected testimony that refers to any factual dispute to which the
testimony will relate.
(4) Any stipulations or admissions.
(b) Within 30 days of its receipt of the respondent's submission
required by paragraph (a) of this section, CMS will file the following
with the ALJ:
(1) A statement responding to the respondent's brief, including the
respondent's proposed hearing exhibits, if appropriate. The statement
may include citations to CMS's proposed hearing exhibits submitted in
accordance with paragraph (b)(2) of this section.
(2) Any documents supporting CMS's response not already submitted as
part of the respondent's proposed hearing exhibits, organized and
indexed as indicated in paragraph (a)(2) of this section (CMS's proposed
hearing exhibits).
(3) A statement regarding whether there is a need for an in-person
hearing and, if so, a list of proposed witnesses and a summary of their
expected testimony that refers to any factual dispute to which the
testimony will relate.
(4) Any admissions or stipulations.
(c) Within 15 days of its receipt of CMS's submission required by
paragraph (b) of this section, the respondent may file with the ALJ a
reply to CMS's submission.
Sec. 150.439 Effect of submission of proposed hearing exhibits.
(a) Any proposed hearing exhibit submitted by a party in accordance
with Sec. 150.437 is deemed part of the record unless the opposing
party raises an objection to that exhibit and the ALJ rules to exclude
it from the record. An objection must be raised either in writing prior
to the prehearing conference provided for in Sec. 150.441 or at the
prehearing conference. The ALJ may require a party to submit the
original hearing exhibit on his or her own motion or in response to a
challenge to the authenticity of a proposed hearing exhibit.
(b) A party may introduce a proposed hearing exhibit following the
times for submission specified in Sec. 150.437 only if the party
establishes to the satisfaction of the ALJ that it could not have
produced the exhibit earlier and that the opposing party will not be
prejudiced.
[[Page 210]]
Sec. 150.441 Prehearing conferences.
An ALJ may schedule one or more prehearing conferences (generally
conducted by telephone) on the ALJ's own motion or at the request of
either party for the purpose of any of the following:
(a) Hearing argument on any outstanding discovery request.
(b) Establishing a schedule for any supplements to the submissions
required by Sec. 150.437 because of information obtained through
discovery.
(c) Hearing argument on a motion.
(d) Discussing whether the parties can agree to submission of the
case on a stipulated record.
(e) Establishing a schedule for an in-person hearing, including
setting deadlines for the submission of written direct testimony or for
the written reports of experts.
(f) Discussing whether the issues for a hearing can be simplified or
narrowed.
(g) Discussing potential settlement of the case.
(h) Discussing any other procedural or substantive issues.
Sec. 150.443 Standard of proof.
(a) In all cases before an ALJ--
(1) CMS has the burden of coming forward with evidence sufficient to
establish a prima facie case;
(2) The respondent has the burden of coming forward with evidence in
response, once CMS has established a prima facie case; and
(3) CMS has the burden of persuasion regarding facts material to the
assessment; and
(4) The respondent has the burden of persuasion regarding facts
relating to an affirmative defense.
(b) The preponderance of the evidence standard applies to all cases
before the ALJ.
Sec. 150.445 Evidence.
(a) The ALJ will determine the admissibility of evidence.
(b) Except as provided in this part, the ALJ will not be bound by
the Federal Rules of Evidence. However, the ALJ may apply the Federal
Rules of Evidence where appropriate; for example, to exclude unreliable
evidence.
(c) The ALJ excludes irrelevant or immaterial evidence.
(d) Although relevant, evidence may be excluded if its probative
value is substantially outweighed by the danger of unfair prejudice,
confusion of the issues, or by considerations of undue delay or needless
presentation of cumulative evidence.
(e) Although relevant, evidence is excluded if it is privileged
under Federal law.
(f) Evidence concerning offers of compromise or settlement made in
this action will be inadmissible to the extent provided in the Federal
Rules of Evidence.
(g) Evidence of acts other than those at issue in the instant case
is admissible in determining the amount of any civil money penalty if
those acts are used under Sec. Sec. 150.317 and 150.323 of this part to
consider the entity's prior record of compliance, or to show motive,
opportunity, intent, knowledge, preparation, identity, or lack of
mistake. This evidence is admissible regardless of whether the acts
occurred during the statute of limitations period applicable to the acts
that constitute the basis for liability in the case and regardless of
whether CMS's notice sent in accordance with Sec. Sec. 150.307 and
150.343 referred to them.
(h) The ALJ will permit the parties to introduce rebuttal witnesses
and evidence.
(i) All documents and other evidence offered or taken for the record
will be open to examination by all parties, unless the ALJ orders
otherwise for good cause shown.
(j) The ALJ may not consider evidence regarding the willingness and
ability to enter into and successfully complete a corrective action plan
when that evidence pertains to matters occurring after CMS's notice
under Sec. 150.307.
Sec. 150.447 The record.
(a) Any testimony that is taken in-person or by telephone is
recorded and transcribed. The ALJ may order that other proceedings in a
case, such as a prehearing conference or oral argument of a motion, be
recorded and transcribed.
[[Page 211]]
(b) The transcript of any testimony, exhibits and other evidence
that is admitted, and all pleadings and other documents that are filed
in the case constitute the record for purposes of an ALJ decision.
(c) For good cause, the ALJ may order appropriate redactions made to
the record.
Sec. 150.449 Cost of transcripts.
Generally, each party is responsible for 50 percent of the
transcript cost. Where there is an intervenor, the ALJ determines what
percentage of the transcript cost is to be paid for by the intervenor.
Sec. 150.451 Posthearing briefs.
Each party is entitled to file proposed findings and conclusions,
and supporting reasons, in a posthearing brief. The ALJ will establish
the schedule by which such briefs must be filed. The ALJ may direct the
parties to brief specific questions in a case and may impose page limits
on posthearing briefs. Additionally, the ALJ may allow the parties to
file posthearing reply briefs.
Sec. 150.453 ALJ decision.
The ALJ will issue an initial agency decision based only on the
record and on applicable law; the decision will contain findings of fact
and conclusions of law. The ALJ's decision is final and appealable after
30 days unless it is modified or vacated under Sec. 150.457.
Sec. 150.455 Sanctions.
(a) The ALJ may sanction a party or an attorney for failing to
comply with an order or other directive or with a requirement of a
regulation, for abandonment of a case, or for other actions that
interfere with the speedy, orderly or fair conduct of the hearing. Any
sanction that is imposed will relate reasonably to the severity and
nature of the failure or action.
(b) A sanction may include any of the following actions:
(1) In the case of failure or refusal to provide or permit
discovery, drawing negative fact inferences or treating such failure or
refusal as an admission by deeming the matter, or certain facts, to be
established.
(2) Prohibiting a party from introducing certain evidence or
otherwise advocating a particular claim or defense.
(3) Striking pleadings, in whole or in part.
(4) Staying the case.
(5) Dismissing the case.
(6) Entering a decision by default.
(7) Refusing to consider any motion or other document that is not
filed in a timely manner.
(8) Taking other appropriate action.
Sec. 150.457 Review by Administrator.
(a) The Administrator of CMS (which for purposes of this subsection
may include his or her delegate), at his or her discretion, may review
in whole or in part any initial agency decision issued under Sec.
150.453.
(b) The Administrator may decide to review an initial agency
decision if it appears from a preliminary review of the decision (or
from a preliminary review of the record on which the initial agency
decision was based, if available at the time) that:
(1) The ALJ made an erroneous interpretation of law or regulation.
(2) The initial agency decision is not supported by substantial
evidence.
(3) The ALJ has incorrectly assumed or denied jurisdiction or
extended his or her authority to a degree not provided for by statute or
regulation.
(4) The ALJ decision requires clarification, amplification, or an
alternative legal basis for the decision.
(5) The ALJ decision otherwise requires modification, reversal, or
remand.
(c) Within 30 days of the date of the initial agency decision, the
Administrator will mail a notice advising the respondent of any intent
to review the decision in whole or in part.
(d) Within 30 days of receipt of a notice that the Administrator
intends to review an initial agency decision, the respondent may submit,
in writing, to the Administrator any arguments in support of, or
exceptions to, the initial agency decision.
(e) This submission of the information indicated in paragraph (d) of
this section must be limited to issues the Administrator has identified
in his or her notice of intent to review, if the
[[Page 212]]
Administrator has given notice of an intent to review the initial agency
decision only in part. A copy of this submission must be sent to the
other party.
(f) After receipt of any submissions made pursuant to paragraph (d)
of this section and any additional submissions for which the
Administrator may provide, the Administrator will affirm, reverse,
modify, or remand the initial agency decision. The Administrator will
mail a copy of his or her decision to the respondent.
(g) The Administrator's decision will be based on the record on
which the initial agency decision was based (as forwarded by the ALJ to
the Administrator) and any materials submitted pursuant to paragraphs
(b), (d), and (f) of this section.
(h) The Administrator's decision may rely on decisions of any courts
and other applicable law, whether or not cited in the initial agency
decision.
Sec. 150.459 Judicial review.
(a) Filing of an action for review. Any responsible entity against
whom a final order imposing a civil money penalty is entered may obtain
review in the United States District Court for any district in which the
entity is located or in the United States District Court for the
District of Columbia by doing the following:
(1) Filing a notice of appeal in that court within 30 days from the
date of a final order.
(2) Simultaneously sending a copy of the notice of appeal by
registered mail to CMS.
(b) Certification of administrative record. CMS promptly certifies
and files with the court the record upon which the penalty was assessed.
(c) Standard of review. The findings of CMS and the ALJ may not be
set aside unless they are found to be unsupported by substantial
evidence, as provided by 5 U.S.C. 706(2)(E).
Sec. 150.461 Failure to pay assessment.
If any entity fails to pay an assessment after it becomes a final
order, or after the court has entered final judgment in favor of CMS,
CMS refers the matter to the Attorney General, who brings an action
against the entity in the appropriate United States district court to
recover the amount assessed.
Sec. 150.463 Final order not subject to review.
In an action brought under Sec. 150.461, the validity and
appropriateness of the final order described in Sec. 150.459 is not
subject to review.
Sec. 150.465 Collection and use of penalty funds.
(a) Any funds collected under Sec. 150.461 are paid to CMS.
(b) The funds are available without appropriation until expended.
(c) The funds may be used only for the purpose of enforcing the PHS
Act requirements for which the penalty was assessed.
[64 FR 45795, Aug. 20, 1999, as amended at 78 FR 13440, Feb. 27, 2013]
PART 151 [RESERVED]
PART 152_PRE-EXISTING CONDITION INSURANCE PLAN PROGRAM-
-Table of Contents
Subpart A_General Provisions
Sec.
152.1 Statutory basis.
152.2 Definitions.
Subpart B_PCIP Program Administration
152.6 Program administration.
152.7 PCIP proposal process.
Subpart C_Eligibility and Enrollment
152.14 Eligibility.
152.15 Enrollment and disenrollment process.
Subpart D_Benefits
152.19 Covered benefits.
152.20 Prohibitions on pre-existing condition exclusions and waiting
periods.
152.21 Premiums and cost-sharing.
152.22 Access to services.
Subpart E_Oversight
152.26 Appeals procedures.
152.27 Fraud, waste, and abuse.
152.28 Preventing insurer dumping.
Subpart F_Funding
152.32 Use of funds.
[[Page 213]]
152.33 Initial allocation of funds.
152.34 Reallocation of funds.
152.35 Insufficient funds.
Subpart G_Relationship to Existing Laws and Programs
152.39 Maintenance of effort.
152.40 Relation to State laws.
Subpart H_Transition to Exchanges
152.44 End of PCIP program coverage.
152.45 Transition to the exchanges.
Authority: Sec. 1101 of the Patient Protection and Affordable Care
Act (Pub. L. 111-148).
Source: 75 FR 45029, July 30, 2010, unless otherwise noted.
Subpart A_General Provisions
Sec. 152.1 Statutory basis.
(a) Basis. This part establishes provisions needed to implement
section 1101 of the Patient Protection and Affordable Care Act of 2010
(Affordable Care Act), which requires the Secretary of the Department of
Health and Human Services to establish a temporary high risk health
insurance pool program to provide health insurance coverage for
individuals described in Sec. 152.14 of this part.
(b) Scope. This part establishes standards and sets forth the
requirements, limitations, and procedures for the temporary high risk
health insurance pool program, hereafter referred to as the ``Pre-
Existing Condition Insurance Plan'' (PCIP) program.
Sec. 152.2 Definitions.
For purposes of this part the following definitions apply:
Creditable coverage means coverage of an individual as defined in
section 2701(c)(1) of the Public Health Service Act as of March 23, 2010
and 45 CFR 146.113(a)(1).
Enrollee means an individual receiving coverage from a PCIP
established under this section.
Lawfully present means
(1) A qualified alien as defined in section 431 of the Personal
Responsibility and Work Opportunity Act (PRWORA) (8 U.S.C. 1641);
(2) An alien in nonimmigrant status who has not violated the terms
of the status under which he or she was admitted or to which he or she
has changed after admission;
(3) An alien who has been paroled into the United States pursuant to
section 212(d)(5) of the Immigration and Nationality Act (INA) (8 U.S.C.
1182(d)(5)) for less than 1 year, except for an alien paroled for
prosecution, for deferred inspection or pending removal proceedings;
(4) An alien who belongs to one of the following classes:
(i) Aliens currently in temporary resident status pursuant to
section 210 or 245A of the INA (8 U.S.C. 1160 or 1255a, respectively);
(ii) Aliens currently under Temporary Protected Status (TPS)
pursuant to section 244 of the INA (8 U.S.C. 1254a), and pending
applicants for TPS who have been granted employment authorization;
(iii) Aliens who have been granted employment authorization under 8
CFR 274a.12(c)(9), (10), (16), (18), (20), (22), or (24);
(iv) Family Unity beneficiaries pursuant to section 301 of Public
Law 101-649 as amended;
(v) Aliens currently under Deferred Enforced Departure (DED)
pursuant to a decision made by the President;
(vi) Aliens currently in deferred action status;
(vii) Aliens whose visa petitions have been approved and who have a
pending application for adjustment of status;
(5) A pending applicant for asylum under section 208(a) of the INA
(8 U.S.C. 1158) or for withholding of removal under section 241(b)(3) of
the INA (8 U.S.C. 1231) or under the Convention Against Torture who has
been granted employment authorization, and such an applicant under the
age of 14 who has had an application pending for at least 180 days;
(6) An alien who has been granted withholding of removal under the
Convention Against Torture; or
(7) A child who has a pending application for Special Immigrant
Juvenile status as described in section 101(a)(27)(J) of the INA (8
U.S.C. 1101(a)(27)(J)).
(8) Exception. An individual with deferred action under the
Department of Homeland Security's deferred action
[[Page 214]]
for childhood arrivals process, as described in the Secretary of
Homeland Security's June 15, 2012, memorandum, shall not be considered
to be lawfully present with respect to any of the above categories in
paragraphs (1) through (7) of this definition.
Out-of-pocket costs means the sum of the annual deductible and the
other annual out-of-pocket expenses, other than for premiums, required
to be paid under the program.
Pre-Existing condition exclusion has the meaning given such term in
45 CFR 144.103.
Pre-Existing Condition Insurance Plan (PCIP) means the temporary
high risk health insurance pool plan (sometimes referred to as a
``qualified high risk pool'') that provides coverage in a State, or
combination of States, in accordance with the requirements of section
1101 of the Affordable Care Act and this part. The term ``PCIP program''
is generally used to describe the national program the Secretary is
charged with carrying out, under which States or non-profit entities
operate individual PCIPs.
Resident means an individual who has been legally domiciled in a
State.
Service Area refers to the geographic area encompassing an entire
State or States in which PCIP furnishes benefits.
State refers each of the 50 States and the District of Columbia.
[75 FR 45029, July 30, 2010, as amended at 77 FR 52616, Aug. 30, 2012]
Subpart B_PCIP Program Administration
Sec. 152.6 Program administration.
(a) General rule. Section 1101(b)(1) of the Affordable Care Act
requires that HHS carry out the Pre-Existing Condition Insurance Plan
program directly or through contracts with eligible entities, which are
States or nonprofit private entities.
(b) Administration by State. A State (or its designated non-profit
private entity) may submit a proposal to enter into a contract with HHS
to establish and administer a PCIP in accordance with section 1101 of
the Affordable Care Act and this part.
(1) At the Secretary's discretion, a State may designate a nonprofit
entity or entities to contract with HHS to administer a PCIP.
(2) As part of its administrative approach, a State or designated
entity may subcontract with either a for-profit or nonprofit entity.
(c) Administration by HHS. If a State or its designated entity
notifies HHS that it will not establish or continue to administer a
PCIP, or does not submit an acceptable or timely proposal to do so, HHS
will contract with a nonprofit private entity or entities to administer
a PCIP in that State.
(d) Transition in administration. The Secretary may consider a
request from a State to transition from administration by HHS to
administration by a State or from administration by a State to
administration by HHS. Such transitions shall be approved only if the
Secretary determines that the transition is in the best interests of the
PCIP enrollees and potential PCIP enrollees in that state, consistent
with Sec. 152.7(b) of this part.
Sec. 152.7 PCIP proposal process.
(a) General. A proposal from a State or nonprofit private entity to
contract with HHS shall demonstrate that the eligible entity has the
capacity and technical capability to perform all functions necessary for
the design and operation of a PCIP, and that its proposed PCIP is in
full compliance with all of the requirements of this part.
(b) Special rules for transitions in administration. (1) Transitions
from HHS administration of a PCIP to State administration must take
effect on January 1 of a given year.
(2) A State's proposal to administer a PCIP must meet all the
requirements of this section.
(3) Transitions from State administration to HHS administration must
comply with the termination procedures of the PCIP contract in effect
with the State or its designated entity.
(4) The Secretary may establish other requirements needed to ensure
a seamless transition of coverage for all existing enrollees.
[[Page 215]]
Subpart C_Eligibility and Enrollment
Sec. 152.14 Eligibility.
(a) General rule. An individual is eligible to enroll in a PCIP if
he or she:
(1) Is a citizen or national of the United States or lawfully
present in the United States;
(2) Subject to paragraph (b) of this section, has not been covered
under creditable coverage for a continuous 6-month period of time prior
to the date on which such individual is applying for PCIP;
(3) Has a pre-existing condition as established under paragraph (c)
of this section; and
(4) Is a resident of one of the 50 States or the District of
Columbia which constitutes or is within the service area of the PCIP. A
PCIP may not establish any standards with regard to the duration of
residency in the PCIP service area.
(b) Satisfaction of 6-month creditable coverage requirement when an
enrollee leaves the PCIP service area. An individual who becomes
ineligible for a PCIP on the basis of no longer residing in the PCIP's
service area as described in paragraph (a)(4) of this section is deemed
to have satisfied the requirement in paragraph (a)(2) of this section
for purposes of applying to enroll in a PCIP in the new service area.
(c) Pre-existing condition requirement. For purposes of establishing
a process for determining eligibility, and subject to HHS approval, a
PCIP may elect to apply any one or more of the following criteria in
determining whether an individual has a pre-existing condition for
purposes of this section:
(1) Refusal of coverage. Documented evidence that an insurer has
refused, or a clear indication that the insurer would refuse, to issue
coverage to an individual on grounds related to the individual's health.
(2) Exclusion of coverage. Documented evidence that such individual
has been offered coverage but only with a rider that excludes coverage
of benefits associated with an individuals' identified pre-existing
condition.
(3) Medical or health condition. Documented evidence of the
existence or history of certain medical or health condition, as approved
or specified by the Secretary.
(4) Other. Other criteria, as defined by a PCIP and approved by HHS.
Sec. 152.15 Enrollment and disenrollment process.
(a) Enrollment process. (1) A PCIP must establish a process for
verifying eligibility and enrolling an individual that is approved by
HHS.
(2) A PCIP must allow an individual to remain enrolled in the PCIP
unless:
(i) The individual is disenrolled under paragraph (b) of this
section;
(ii) The individual obtains other creditable coverage;
(iii) The PCIP program terminates, or is terminated; or
(iv) As specified by the PCIP program and approved by HHS.
(3) A PCIP must verify that an individual is a United States citizen
or national or lawfully present in the United States by:
(i) Verifying the individual's citizenship, nationality, or lawful
presence with the Commissioner of Security or Secretary of Homeland
Security as applicable; or
(ii) By requiring the individual to provide documentation which
establishes the individual's citizenship, nationality, or lawful
presence.
(iii) The PCIP must provide an individual who is applying to enroll
in the PCIP with a disclosure specifying if the information will be
shared with the Department of Health and Human Services, Social Security
Administration, and if necessary, Department of Homeland Security for
purposes of establishing eligibility.
(b) Disenrollment process. (1) A PCIP must establish a disenrollment
process that is approved by HHS.
(2) A PCIP may disenroll an individual if the monthly premium is not
paid on a timely basis, following notice and a reasonable grace period,
not to exceed 61 days from when payment is due, as defined by the PCIP
and approved by HHS.
(3) A PCIP must disenroll an individual in any of the following
circumstances:
(i) The individual no longer resides in the PCIP service area.
[[Page 216]]
(ii) The individual obtains other creditable coverage.
(iii) Death of the individual.
(iv) Other exceptional circumstances established by HHS.
(c) Effective dates. A PCIP must establish rules governing the
effective date of enrollment and disenrollment that are approved by HHS.
A complete enrollment request submitted by an eligible individual by the
15th day of a month, where the individual is determined to be eligible
for enrollment, must take effect by the 1st day of the following month,
except in exceptional circumstances that are subject to HHS approval.
(d) Funding limitation. A PCIP may stop taking applications for
enrollment to comply with funding limitations established by the HHS
under section 1101(g) of Public Law 111-148 and Sec. 152.35 of this
part. Accordingly, a PCIP may employ strategies to manage enrollment
over the course of the program that may include enrollment capacity
limits, phased-in (delayed) enrollment, and other measures, as defined
by the PCIP and approved by HHS, including measures specified under
Sec. 152.35(b).
Subpart D_Benefits
Sec. 152.19 Covered benefits.
(a) Required benefits. Each benefit plan offered by a PCIP shall
cover at least the following categories and the items and services:
(1) Hospital inpatient services
(2) Hospital outpatient services
(3) Mental health and substance abuse services
(4) Professional services for the diagnosis or treatment of injury,
illness, or condition
(5) Non-custodial skilled nursing services
(6) Home health services
(7) Durable medical equipment and supplies
(8) Diagnostic x-rays and laboratory tests
(9) Physical therapy services (occupational therapy, physical
therapy, speech therapy)
(10) Hospice
(11) Emergency services, consistent with Sec. 152.22(b), and
ambulance services
(12) Prescription drugs
(13) Preventive care
(14) Maternity care
(b) Excluded services. Benefit plans offered by a PCIP shall not
cover the following services:
(1) Cosmetic surgery or other treatment for cosmetic purposes except
to restore bodily function or correct deformity resulting from disease.
(2) Custodial care except for hospice care associated with the
palliation of terminal illness.
(3) In vitro fertilization, artificial insemination or any other
artificial means used to cause pregnancy.
(4) Abortion services except when the life of the woman would be
endangered or when the pregnancy is the result of an act of rape or
incest.
(5) Experimental care except as part of an FDA-approved clinical
trial.
Sec. 152.20 Prohibitions on pre-existing condition exclusions
and waiting periods.
(a) Pre-existing condition exclusions. A PCIP must provide all
enrollees with health coverage that does not impose any pre-existing
condition exclusions (as defined in Sec. 152.2) with respect to such
coverage.
(b) Waiting periods. A PCIP may not impose a waiting period with
respect to the coverage of services after the effective date of
enrollment.
Sec. 152.21 Premiums and cost-sharing.
(a) Limitation on enrollee premiums. (1) The premiums charged under
the PCIP may not exceed 100 percent of the premium for the applicable
standard risk rate that would apply to the coverage offered in the State
or States. The PCIP shall determine a standard risk rate by considering
the premium rates charged for similar benefits and cost-sharing by other
insurers offering health insurance coverage to individuals in the
applicable State or States. The standard risk rate shall be established
using reasonable actuarial techniques, that are approved by the
Secretary, and that reflect anticipated experience and expenses. A PCIP
may not use other methods of determining the standard rate, except with
the approval of the Secretary.
[[Page 217]]
(2) Premiums charged to enrollees in the PCIP may vary on the basis
of age by a factor not greater than 4 to 1.
(b) Limitation on enrollee costs. (1) The PCIP's average share of
the total allowed costs of the PCIP benefits must be at least 65 percent
of such costs.
(2) The out-of-pocket limit of coverage for cost-sharing for covered
services under the PCIP may not be greater than the applicable amount
described in section 223(c)(2) of the Internal Revenue code of 1986 for
the year involved. If the plan uses a network of providers, this limit
may be applied only for in-network providers, consistent with the terms
of PCIP benefit package.
(c) Prohibition on balance billing in the PCIP administered by HHS.
A facility or provider that accepts payment under Sec. 152.35(c)(2) for
a covered service furnished to an enrollee may not bill the enrollee for
an amount greater than the cost-sharing amount for the covered service
calculated by the PCIP.
[75 FR 45029, July 30, 2010, as amended at 78 FR 30226, May 22, 2013]
Sec. 152.22 Access to services.
(a) General rule. A PCIP may specify the networks of providers from
whom enrollees may obtain plan services. The PCIP must demonstrate to
HHS that it has a sufficient number and range of providers to ensure
that all covered services are reasonably available and accessible to its
enrollees.
(b) Emergency services. In the case of emergency services, such
services must be covered out of network if:
(1) The enrollee had a reasonable concern that failure to obtain
immediate treatment could present a serious risk to his or her life or
health; and
(2) The services were required to assess whether a condition
requiring immediate treatment exists, or to provide such immediate
treatment where warranted.
Subpart E_Oversight
Sec. 152.26 Appeals procedures.
(a) General. A PCIP shall establish and maintain procedures for
individuals to appeal eligibility and coverage determinations.
(b) Minimum requirements. The appeals procedure must, at a minimum,
provide:
(1) A potential enrollee with the right to a timely redetermination
by the PCIP or its designee of a determination regarding PCIP
eligibility, including a determination of whether the individual is a
citizen or national of the United States, or is lawfully present in the
United States.
(2) An enrollee with the right to a timely redetermination by the
PCIP or its designee of a determination regarding the coverage of a
service or the amount paid by the PCIP for a service.
(3) An enrollee with the right to a timely reconsideration of a
redetermination made under paragraph (b)(2) of this section by an entity
independent of the PCIP.
Sec. 152.27 Fraud, waste, and abuse.
(a) Procedures. The PCIP shall develop, implement, and execute
operating procedures to prevent, detect, recover (when applicable or
allowable), and promptly report to HHS incidences of waste, fraud, and
abuse, and to appropriate law enforcement authorities instances of
fraud. Such procedures shall include identifying situations in which
enrollees or potential enrollees (or their family members) are employed,
and may have, or have had, access to other coverage such as group health
coverage, but were discouraged from enrolling.
(b) Cooperation. The PCIP shall cooperate with Federal law
enforcement and oversight authorities in cases involving waste, fraud
and abuse, and shall report to appropriate authorities situations in
which enrollment in other coverage may have been discouraged.
Sec. 152.28 Preventing insurer dumping.
(a) General rule. If it is determined based on the procedures and
criteria set forth in paragraph (b) of this section that a health
insurance issuer or group health plan has discouraged an individual from
remaining enrolled in coverage offered by such issuer or health plan
based on the individual's health status, if the individual subsequently
enrolls in a PCIP under this part, the issuer or health plan will be
responsible for any medical expenses
[[Page 218]]
incurred by the PCIP with respect to the individual.
(b) Procedures and criteria for a determination of dumping. A PCIP
shall establish procedures to identify and report to HHS instances in
which health insurance issuers or employer-based group health plans are
discouraging high-risk individuals from remaining enrolled in their
current coverage in instances in which such individuals subsequently are
eligible to enroll in the qualified high risk pool. Such procedures
shall include methods to identify the following circumstances, either
through the PCIP enrollment application form or other vehicles:
(1) Situations where an enrollee or potential enrollee had prior
coverage obtained through a group health plan or issuer, and the
individual was provided financial consideration or other rewards for
disenrolling from their coverage, or disincentives for remaining
enrolled.
(2) Situations where enrollees or potential enrollees had prior
coverage obtained directly from an issuer or a group health plan and
either of the following occurred:
(i) The premium for the prior coverage was increased to an amount
that exceeded the premium required by the PCIP (adjusted based on the
age factors applied to the prior coverage), and this increase was not
otherwise explained;
(ii) The health plan, issuer or employer otherwise provided money or
other financial consideration to disenroll from coverage, or
disincentive to remain enrolled in such coverage. Such considerations
include payment of the PCIP premium for an enrollee or potential
enrollee.
(c) Remedies. If the Secretary determines, based on the criteria in
paragraph (b) of this section, that the rule in paragraph (a) of this
section applies, an issuer or a group health plan will be billed for the
medical expenses incurred by the PCIP. The issuer or group health plan
also will be referred to appropriate Federal and State authorities for
other enforcement actions that may be warranted based on the behavior at
issue.
(d) Other. Nothing in this section may be construed as constituting
exclusive remedies for violations of this section or as preventing
States from applying or enforcing this section or other provisions of
law with respect to health insurance issuers.
Subpart F_Funding
Sec. 152.32 Use of funds.
(a) Limitation on use of funding. All funds awarded through the
contracts established under this program must be used exclusively to pay
allowable claims and administrative costs incurred in the development
and operation of the PCIP that are in excess of the amounts of premiums
collected from individuals enrolled in the program.
(b) Limitation on administrative expenses. No more than 10 percent
of available funds shall be used for administrative expenses over the
life of the contract with the PCIP, absent approval from HHS.
Sec. 152.33 Initial allocation of funds.
HHS will establish an initial ceiling for the amount of the $5
billion in Federal funds allocated for PCIPs in each State using a
methodology consistent with that used to established allocations under
the Children's Health Insurance Program, as set forth under 42 CFR part
457, subpart F, Payment to States.
Sec. 152.34 Reallocation of funds.
If HHS determines, based on actual and projected enrollment and
claims experience, that the PCIP in a given State will not make use of
the total estimated funding allocated to that State, HHS may reallocate
unused funds to other States, as needed.
Sec. 152.35 Insufficient funds.
(a) Adjustments by a PCIP to eliminate a deficit. In the event that
a PCIP determines, based on actual and projected enrollment and claims
data, that its allocated funds are insufficient to cover projected PCIP
expenses, the PCIP shall report such insufficiency to HHS, and identify
and implement necessary adjustments to eliminate such deficit, subject
to HHS approval.
(b) Adjustment by the Secretary. If the Secretary estimates that
aggregate amounts available for PCIP expenses
[[Page 219]]
will be less than the actual amount of expenses, HHS reserves the right
to make such adjustments as are necessary to eliminate such deficit.
(c) Payment rates for covered services furnished beginning June 15,
2013 to enrollees in the PCIP administered by HHS. (1) Covered services
furnished under the prescription drug, organ/tissue transplant, dialysis
and durable medical equipment benefits will be paid at the payment rates
that are in effect on June 15, 2013.
(2) With respect to all other covered services, the payment rates
will be--
(i) 100 percent of Medicare payment rates; or
(ii) Where Medicare payment rates cannot be implemented by the
federally-administered PCIP, 50 percent of billed charges or a rate
using a relative value scale pricing methodology.
[75 FR 45029, July 30, 2010, as amended at 78 FR 30226, May 22, 2013]
Subpart G_Relationship to Existing Laws and Programs
Sec. 152.39 Maintenance of effort.
(a) General. A State that enters into a contract with HHS under this
part must demonstrate, subject to approval by HHS, that it will continue
to provide funding of any existing high risk pool in the State at a
level that is not reduced from the amount provided for in the year prior
to the year in which the contract is entered.
(b) Failure to maintain efforts. In situations where a State enters
into a contract with HHS under this part, HHS shall take appropriate
action, such as terminating the PCIP contract, against any State that
fails to maintain funding levels for existing State high risk pools as
required, and approved by HHS, under paragraph (a) of this section.
Sec. 152.40 Relation to State laws.
The standards established under this section shall supersede any
State law or regulation, other than State licensing laws or State laws
relating to plan solvency, with respect to PCIPs which are established
in accordance with this section.
Subpart H_Transition to Exchanges
Sec. 152.44 End of PCIP program coverage.
Effective January 1, 2014, coverage under the PCIP program (45 CFR
part 152) will end.
Sec. 152.45 Transition to the exchanges.
Prior to termination of the PCIP program, HHS will develop
procedures to transition PCIP enrollees to the Exchanges, established
under sections 1311 or 1321 of the Affordable Care Act, to ensure that
there are no lapses in health coverage for those individuals.
PART 153_STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND
RISK ADJUSTMENT UNDER THE AFFORDABLE CARE ACT--Table of Contents
Subpart A_General Provisions
Sec.
153.10 Basis and scope.
153.20 Definitions.
Subpart B_State Notice of Benefit and Payment Parameters
153.100 State notice of benefit and payment parameters.
153.110 Standards for the State notice of benefit and payment
parameters.
Subpart C_State Standards Related to the Reinsurance Program
153.200 [Reserved]
153.210 State establishment of a reinsurance program.
153.220 Collection of reinsurance contribution funds.
153.230 Calculation of reinsurance payments made under the national
contribution rate.
153.232 Calculation of reinsurance payments made under a State
additional contribution rate.
153.234 Eligibility under health insurance market rules.
153.235 Allocation and distribution of reinsurance contributions.
153.240 Disbursement of reinsurance payments.
153.250 Coordination with high-risk pools.
153.260 General oversight requirements for State-operated reinsurance
programs.
153.265 Restrictions on use of reinsurance funds for administrative
expenses.
[[Page 220]]
153.270 HHS audits of State-operated reinsurance programs.
Subpart D_State Standards Related to the Risk Adjustment Program
153.300 [Reserved]
153.310 Risk adjustment administration.
153.320 Federally certified risk adjustment methodology.
153.330 State alternate risk adjustment methodology.
153.340 Data collection under risk adjustment.
153.350 Risk adjustment data validation standards.
153.360 Application of risk adjustment to the small group market.
153.365 General oversight requirements for State-operated risk
adjustment programs.
Subpart E_Health Insurance Issuer and Group Health Plan Standards
Related to the Reinsurance Program
153.400 Reinsurance contribution funds.
153.405 Calculation of reinsurance contributions.
153.410 Requests for reinsurance payment.
153.420 Data collection.
Subpart F_Health Insurance Issuer Standards Related to the Risk
Corridors Program
153.500 Definitions.
153.510 Risk corridors establishment and payment methodology.
153.520 Attribution and allocation of revenue and expense items.
153.530 Risk corridors data requirements.
153.540 Compliance with risk corridors standards.
Subpart G_Health Insurance Issuer Standards Related to the Risk
Adjustment Program
153.600 [Reserved]
153.610 Risk adjustment issuer requirements.
153.620 Compliance with risk adjustment standards.
153.630 Data validation requirements when HHS operates risk adjustment.
Subpart H_Distributed Data Collection for HHS-Operated Programs
153.700 Distributed data environment.
153.710 Data requirements.
153.720 Establishment and usage of masked enrollee identification
numbers.
153.730 Deadline for submission of data.
153.740 Failure to comply with HHS-operated risk adjustment and
reinsurance data requirements.
Authority: 42 U.S.C. 18031, 18041, and 18061 through 18063.
Source: 77 FR 17245, Mar. 23, 2012, unless otherwise noted.
Subpart A_General Provisions
Sec. 153.10 Basis and scope.
(a) Basis. This part is based on the following sections of title I
of the Affordable Care Act (Pub. L. 111-148, 24 Stat. 119):
(1) Section 1321. State flexibility in operation and enforcement of
Exchanges and related requirements.
(2) Section 1341. Transitional reinsurance program for individual
market in each State.
(3) Section 1342. Establishment of risk corridors for plans in
individual and small group markets.
(4) Section 1343. Risk adjustment.
(b) Scope. This part establishes standards for the establishment and
operation of a transitional reinsurance program, temporary risk
corridors program, and a permanent risk adjustment program.
Sec. 153.20 Definitions.
The following definitions apply to this part, unless the context
indicates otherwise:
Alternate risk adjustment methodology means a risk adjustment
methodology proposed by a State for use instead of a Federally certified
risk adjustment methodology that has not yet been certified by HHS.
Applicable reinsurance entity means a not-for-profit organization
that is exempt from taxation under Chapter 1 of the Internal Revenue
Code of 1986 that carries out reinsurance functions under this part on
behalf of the State. An entity is not an applicable reinsurance entity
to the extent it is carrying out reinsurance functions under subpart C
of this part on behalf of HHS.
Attachment point means the threshold dollar amount for claims costs
incurred by a health insurance issuer for an enrolled individual's
covered benefits in a benefit year, after which threshold the claims
costs for such benefits are eligible for reinsurance payments.
[[Page 221]]
Benefit year has the meaning given to the term in Sec. 155.20 of
this subchapter.
Calculation of payments and charges means the methodology applied to
plan average actuarial risk to determine risk adjustment payments and
charges for a risk adjustment covered plan.
Calculation of plan average actuarial risk means the specific
procedures used to determine plan average actuarial risk from individual
risk scores for a risk adjustment covered plan, including adjustments
for variable rating and the specification of the risk pool from which
average actuarial risk is to be calculated.
Coinsurance rate means the rate at which the applicable reinsurance
entity will reimburse the health insurance issuer for claims costs
incurred for an enrolled individual's covered benefits in a benefit year
after the attachment point and before the reinsurance cap.
Contributing entity means--
(1) A health insurance issuer; or
(2) For the 2014 benefit year, a self-insured group health plan
(including a group health plan that is partially self-insured and
partially insured, where the health insurance coverage does not
constitute major medical coverage), whether or not it uses a third party
administrator; and for the 2015 and 2016 benefit years, a self-insured
group health plan (including a group health plan that is partially self-
insured and partially insured, where the health insurance coverage does
not constitute major medical coverage) that uses a third party
administrator in connection with claims processing or adjudication
(including the management of internal appeals) or plan enrollment for
services other than for pharmacy benefits or excepted benefits within
the meaning of section 2791(c) of the PHS Act. Notwithstanding the
foregoing, a self-insured group health plan that uses an unrelated third
party to obtain provider network and related claim repricing services,
or uses an unrelated third party for up to 5 percent of claims
processing or adjudication or plan enrollment, will not be deemed to use
a third party administrator, based on either the number of transactions
processed by the third party, or the value of the claims processing and
adjudication and plan enrollment services provided by the third party. A
self-insured group health plan that is a contributing entity is
responsible for the reinsurance contributions, although it may elect to
use a third party administrator or administrative services-only
contractor for transfer of the reinsurance contributions.
Contribution rate means, with respect to a benefit year, the per
capita amount each contributing entity must pay for a reinsurance
program established under this part with respect to each reinsurance
contribution enrollee who resides in that State.
Exchange has the meaning given to the term in Sec. 155.20 of this
subchapter.
Federally certified risk adjustment methodology means a risk
adjustment methodology that either has been developed and promulgated by
HHS, or has been certified by HHS.
Grandfathered health plan has the meaning given to the term in Sec.
147.140(a) of this subchapter.
Group health plan has the meaning given to the term in Sec. 144.103
of this subchapter.
Health insurance coverage has the meaning given to the term in Sec.
144.103 of this subchapter.
Health insurance issuer or issuer has the meaning given to the term
in Sec. 144.103 of this subchapter.
Health plan has the meaning given to the term in section 1301(b)(1)
of the Affordable Care Act.
Individual market has the meaning given to the term in Sec. 144.103
of this subchapter.
Individual risk score means a relative measure of predicted health
care costs for a particular enrollee that is the result of a risk
adjustment model.
Major medical coverage means, for purposes only of the requirements
related to reinsurance contributions under section 1341 of the
Affordable Care Act, a catastrophic plan, an individual or a small group
market plan subject to the actuarial value requirements under Sec.
156.140 of this subchapter, or health coverage for a broad range of
services and treatments provided in various settings that provides
minimum value as defined in Sec. 156.145 of this subchapter.
Qualified employer has the meaning given to the term in Sec. 155.20
of this subchapter.
[[Page 222]]
Qualified individual has the meaning given to the term in Sec.
155.20 of this subchapter.
Reinsurance cap means the threshold dollar amount for claims costs
incurred by a health insurance issuer for an enrolled individual's
covered benefits, after which threshold, the claims costs for such
benefits are no longer eligible for reinsurance payments.
Reinsurance contribution enrollee means an individual covered by a
plan for which reinsurance contributions must be made pursuant to Sec.
153.400.
Reinsurance-eligible plan means, for the purpose of the reinsurance
program, any health insurance coverage offered in the individual market,
except for grandfathered plans and health insurance coverage not
required to submit reinsurance contributions under Sec. 153.400(a).
Risk adjustment covered plan means, for the purpose of the risk
adjustment program, any health insurance coverage offered in the
individual or small group market with the exception of grandfathered
health plans, group health insurance coverage described in Sec.
146.145(b) of this subchapter, individual health insurance coverage
described in Sec. 148.220 of this subchapter, and any plan determined
not to be a risk adjustment covered plan in the applicable Federally
certified risk adjustment methodology.
Risk adjustment data means all data that are used in a risk
adjustment model, the calculation of plan average actuarial risk, or the
calculation of payments and charges, or that are used for validation or
audit of such data.
Risk adjustment data collection approach means the specific
procedures by which risk adjustment data is to be stored, collected,
accessed, transmitted, and validated and the applicable timeframes, data
formats, and privacy and security standards.
Risk adjustment methodology means the risk adjustment model, the
calculation of plan average actuarial risk, the calculation of payments
and charges, the risk adjustment data collection approach, and the
schedule for the risk adjustment program.
Risk adjustment model means an actuarial tool used to predict health
care costs based on the relative actuarial risk of enrollees in risk
adjustment covered plans.
Risk pool means the State-wide population across which risk is
distributed.
Small group market has the meaning given to the term in section
1304(a)(3) of the Affordable Care Act.
State has the meaning given to the term in Sec. 155.20 of this
subchapter.
[77 FR 17245, Mar. 23, 2012, as amended at 78 FR 15525, Mar. 11, 2013;
78 FR 54133, Aug. 30, 2013; 78 FR 65093, Oct. 30, 2013; 79 FR 13834,
Mar. 11, 2014; 79 FR 36432, June 27, 2014; 81 FR 94174, Dec. 22, 2016;
84 FR 17561, Apr. 25, 2019]
Subpart B_State Notice of Benefit and Payment Parameters
Sec. 153.100 State notice of benefit and payment parameters.
(a) General requirement for reinsurance. A State establishing a
reinsurance program must issue an annual notice of benefit and payment
parameters specific to that State if that State elects to:
(1) Modify the data requirements for health insurance issuers to
receive reinsurance payments from those specified in the annual HHS
notice of benefit and payment parameters for the applicable benefit
year;
(2) Collect additional reinsurance contributions under Sec.
153.220(d)(1) or use additional funds for reinsurance payments under
Sec. 153.220(d)(2); or
(3) Use more than one applicable reinsurance entity; or
(b) Risk adjustment requirements. A State operating a risk
adjustment program must issue an annual notice of benefit and payment
parameters specific to that State setting forth the risk adjustment
methodology and data validation standards it will use.
(c) State notice deadlines. If a State is required to publish an
annual State notice of benefit and payment parameters for a particular
benefit year, it must do so by the later of March 1 of the calendar year
prior to the applicable benefit year, or by the 30th day following the
publication of the final HHS notice of benefit and payment parameters
for that benefit year.
(d) State failure to publish notice. Any State establishing a
reinsurance program or operating a risk adjustment program that fails to
publish a State
[[Page 223]]
notice of benefit and payment parameters within the period specified in
paragraph (c) of this section must--
(1) Adhere to the data requirements for health insurance issuers to
receive reinsurance payments that are specified in the annual HHS notice
of benefit and payment parameters for the applicable benefit year;
(2) Forgo the collection of additional reinsurance contributions
under Sec. 153.220(d)(1) and the use of additional funds for
reinsurance payments under Sec. 153.220(d)(2);
(3) Forgo the use of more than one applicable reinsurance entity;
(4) Adhere to the risk adjustment methodology and data validation
standards published in the annual HHS notice of benefit and payment
parameters for use by HHS when operating risk adjustment on behalf of a
State.
[77 FR 17245, Mar. 23, 2012, as amended at 78 FR 15525, Mar. 11, 2013;
80 FR 10862, Feb. 27, 2015]
Sec. 153.110 Standards for the State notice of benefit and payment
parameters.
(a) Data requirements. If a State that establishes a reinsurance
program elects to modify the data requirements for health insurance
issuers to receive reinsurance payments from those specified in the
annual HHS notice of benefit and payment parameters for the applicable
benefit year, the State notice of benefit and payment parameters must
specify those modifications.
(b) Additional collections. If a State that establishes a
reinsurance program elects to collect additional funds under Sec.
153.220(d)(1) or use additional funds for reinsurance payments under
Sec. 153.220(d)(2), the State must publish in the State notice of
benefit and payment parameters the following:
(1) A description of the purpose of the additional collection,
including whether it will be used to cover reinsurance payments made
under Sec. 153.232, administrative costs, or both;
(2) The additional contribution rate at which the funds will be
collected; and
(3) If the purpose of the additional collection includes reinsurance
payments (or if the State is using additional funds for reinsurance
payments under Sec. 153.220(d)(2)), the State supplemental reinsurance
payment parameters required under Sec. 153.232.
(c) Multiple reinsurance entities. If a State plans to use more than
one applicable reinsurance entity, the State must publish in the State
notice of benefit and payment parameters, for each applicable
reinsurance entity--
(1) The geographic boundaries for that entity;
(2) An estimate of the number of enrollees in the individual market
within those boundaries;
(3) An estimate of the amount of reinsurance payments that will be
made to issuers with respect to enrollees within those boundaries.
(d) Risk adjustment content. A State operating a risk adjustment
program must provide the information set forth in Sec. 153.330(a) and
the data validation standards set forth pursuant to Sec. 153.350 in the
State notice of benefit and payment parameters.
[77 FR 17245, Mar. 23, 2012, as amended at 78 FR 15525, Mar. 11, 2013]
Subpart C_State Standards Related to the Reinsurance Program
Sec. 153.200 [Reserved]
Sec. 153.210 State establishment of a reinsurance program.
(a) General requirement. Each State is eligible to establish a
reinsurance program for the years 2014 through 2016.
(1) If a State establishes a reinsurance program, the State must
enter into a contract with one or more applicable reinsurance entities
to carry out the provisions of this subpart.
(2) If a State contracts with or establishes more than one
applicable reinsurance entity, the State must ensure that each
applicable reinsurance entity operates in a distinct geographic area
with no overlap of jurisdiction with any other applicable reinsurance
entity.
(3) A State may permit an applicable reinsurance entity to
subcontract specific administrative functions required under this
subpart and subpart E of this part.
(4) A State must review and approve subcontracting arrangements to
ensure
[[Page 224]]
efficient and appropriate expenditures of administrative funds collected
under this subpart.
(5) A State must ensure that the applicable reinsurance entity
completes all reinsurance-related activities for benefit years 2014
through 2016 and any activities required to be undertaken in subsequent
periods.
(b) Multi-State reinsurance arrangements. Multiple States may
contract with a single entity to serve as an applicable reinsurance
entity for each State. In such a case, the reinsurance programs for
those States must be operated as separate programs.
(c) Non-electing States. HHS will establish a reinsurance program
for each State that does not elect to establish its own reinsurance
program.
(d) Oversight. Each State that establishes a reinsurance program
must ensure that the applicable reinsurance entity complies with all
provisions of this subpart and subpart E of this part throughout the
duration of its contract.
(e) Reporting to HHS. Each State that establishes a reinsurance
program must ensure that each applicable reinsurance entity provides
information regarding requests for reinsurance payments under the
national contribution rate made under Sec. 153.410 for all reinsurance-
eligible plans for each quarter during the applicable benefit year in a
manner and timeframe established by HHS.
[77 FR 17245, Mar. 23, 2012, as amended at 78 FR 15525, Mar. 11, 2013]
Sec. 153.220 Collection of reinsurance contribution funds.
(a) Collections. If a State establishes a reinsurance program, HHS
will collect all reinsurance contributions from all contributing
entities for that State under the national contribution rate.
(b) Contribution funding. Reinsurance contributions collected must
fund the following:
(1) Reinsurance payments that will total, on a national basis, $10
billion in 2014, $6 billion in 2015, and $4 billion in 2016;
(2) U.S. Treasury contributions that will total, on a national
basis, $2 billion in 2014, $2 billion in 2015, and $1 billion in 2016;
and
(3) Administrative expenses of the applicable reinsurance entity or
HHS when performing reinsurance functions under this subpart.
(c) National contribution rate. HHS will set in the annual HHS
notice of benefit and payment parameters for the applicable benefit year
the national contribution rate and the proportion of contributions
collected under the national contribution rate to be allocated to:
(1) Reinsurance payments;
(2) Payments to the U.S. Treasury as described in paragraph (b)(2)
of this section; and
(3) Administrative expenses of the applicable reinsurance entity or
HHS when performing reinsurance functions under this subpart.
(d) Additional State collections. If a State establishes a
reinsurance program:
(1) The State may elect to collect more than the amounts that would
be collected based on the national contribution rate set forth in the
annual HHS notice of benefit and payment parameters for the applicable
benefit year to provide:
(i) Funding for administrative expenses of the applicable
reinsurance entity; or
(ii) Additional funds for reinsurance payments.
(2) A State may use additional funds which were not collected as
additional reinsurance contributions under this part for reinsurance
payments under the State supplemental payment parameters under Sec.
153.232.
[77 FR 17245, Mar. 23, 2012, as amended at 77 FR 29236, May 17, 2012, 78
FR 15525, Mar. 11, 2013; 78 FR 66655, Nov. 6, 2013]
Sec. 153.230 Calculation of reinsurance payments made under the
national contribution rate.
(a) Eligibility for reinsurance payments under the national
reinsurance parameters. A health insurance issuer of a reinsurance-
eligible plan becomes eligible for reinsurance payments from
contributions collected under the national contribution rate when its
claims costs for an individual enrollee's covered benefits in a benefit
year exceed the national attachment point.
[[Page 225]]
(b) National reinsurance payment parameters. The national
reinsurance payment parameters for each benefit year commencing in 2014
and ending in 2016 set forth in the annual HHS notice of benefit and
payment parameters for each applicable benefit year will apply with
respect to reinsurance payments made from contributions received under
the national contribution rate.
(c) National reinsurance payments. Each reinsurance payment made
from contributions received under the national contribution rate will be
calculated as the product of the national coinsurance rate multiplied by
the health insurance issuer's claims costs for an individual enrollee's
covered benefits that the health insurance issuer incurs in the
applicable benefit year between the national attachment point and the
national reinsurance cap.
(d) Uniform adjustment to national reinsurance payments. If HHS
determines that all reinsurance payments requested under the national
payment parameters from all reinsurance-eligible plans in all States for
a benefit year will not be equal to the amount of all reinsurance
contributions collected for reinsurance payments under the national
contribution rate in all States for an applicable benefit year, HHS will
determine a uniform pro rata adjustment to be applied to all such
requests for reinsurance payments for all States. Each applicable
reinsurance entity, or HHS on behalf of a State, must reduce or increase
the reinsurance payment amounts for the applicable benefit year by any
adjustment required under this paragraph (d).
[78 FR 15526, Mar. 11, 2013, as amended at 78 FR 66655, Nov. 6, 2013; 79
FR 13835, Mar. 11, 2014]
Sec. 153.232 Calculation of reinsurance payments made under a State
additional contribution rate.
(a) State supplemental reinsurance payment parameters. (1) If a
State establishes a reinsurance program and elects to collect additional
contributions under Sec. 153.220(d)(1)(ii) or use additional funds for
reinsurance payments under Sec. 153.220(d)(2), the State must set
supplemental reinsurance payment parameters using one or more of the
following methods:
(i) Decreasing the national attachment point;
(ii) Increasing the national reinsurance cap; or
(iii) Increasing the national coinsurance rate.
(2) The State must ensure that additional reinsurance contributions
and funds projected to be received under Sec. 153.220(d)(1)(ii) and
Sec. 153.220(d)(2), as applicable, for any applicable benefit year are
reasonably calculated to cover additional reinsurance payments that are
projected to be made only under the State supplemental reinsurance
payment parameters (that will not be paid under the national payment
parameters) for the given benefit year.
(3) All applicable reinsurance entities in a State collecting
additional reinsurance contributions must apply the State supplemental
reinsurance payment parameters established under paragraph (a)(1) of
this section when calculating reinsurance payments.
(b) General requirement for payments under State supplemental
reinsurance parameters. Contributions collected under Sec.
153.220(d)(1)(ii) or funds under Sec. 153.220(d)(2), as applicable,
must be applied towards requests for reinsurance payments made under the
State supplemental reinsurance payments parameters for each benefit year
commencing in 2014 and ending in 2016.
(c) Eligibility for reinsurance payments under State supplemental
reinsurance parameters. If a State establishes State supplemental
reinsurance payment parameters under Sec. 153.232(a)(1), a reinsurance-
eligible plan becomes eligible for reinsurance payments from
contributions under Sec. 153.220(d)(1)(ii) or funds under Sec.
153.220(d)(2), as applicable, if its incurred claims costs for an
individual enrollee's covered benefits in the applicable benefit year:
(1) Exceed the State supplemental attachment point set forth in the
State notice of benefit and payment parameters for the applicable
benefit year if a State has established such a supplemental attachment
point under Sec. 153.232(a)(1)(i);
(2) Exceed the national reinsurance cap set forth in the annual HHS
notice of benefit and payment parameters for the applicable benefit year
if a State has established a State supplemental
[[Page 226]]
reinsurance cap under Sec. 153.232(a)(1)(ii); or
(3) Exceed the national attachment point set forth in the annual HHS
notice of benefit and payment parameters for the applicable benefit year
if a State has established a supplemental coinsurance rate under Sec.
153.232(a)(1)(iii).
(d) Payments under State supplemental reinsurance parameters. Each
reinsurance payment made from contributions received under Sec.
153.220(d)(1)(ii) or funds under Sec. 153.220(d)(2), as applicable,
will be calculated with respect to an issuer's incurred claims costs for
an individual enrollee's covered benefits in the applicable benefit year
as the sum of the following:
(1) If the State has established a State supplemental attachment
point, to the extent the issuer's incurred claims costs for such
benefits in the applicable benefit year exceed the State supplemental
attachment point but do not exceed the national attachment point, the
product of such claims costs between the State supplemental attachment
point and the national attachment point multiplied by the national
coinsurance rate (or, if the State has established a State supplemental
coinsurance rate, the State supplemental coinsurance rate);
(2) If the State has established a State supplemental reinsurance
cap, to the extent the issuer's incurred claims costs for such benefits
in the applicable benefit year exceed the national reinsurance cap but
do not exceed the State supplemental reinsurance cap, the product of
such claims costs between the national reinsurance cap and the State
supplemental reinsurance cap multiplied by the national coinsurance rate
(or, if the State has established a State supplemental coinsurance rate,
the State supplemental coinsurance rate); and
(3) If the State has established a State supplemental coinsurance
rate, the product of the issuer's incurred claims costs for such
benefits in the applicable benefit year between the national attachment
point and the national reinsurance cap multiplied by the difference
between the State supplemental coinsurance rate and the national
coinsurance rate.
(e) Uniform adjustment to payments under State supplemental
reinsurance payment parameters. If all requested reinsurance payments
under the State supplemental reinsurance parameters calculated in
accordance with paragraph (a)(1) of this section from all reinsurance-
eligible plans in a State for a benefit year will exceed all reinsurance
contributions collected under Sec. 153.220(d)(1)(ii) or funds under
Sec. 153.220(d)(2) for the applicable benefit year, the State must
determine a uniform pro rata adjustment to be applied to all such
requests for reinsurance payments. Each applicable reinsurance entity in
the State must reduce all such requests for reinsurance payments for the
applicable benefit year by that adjustment.
(f) Limitations on payments under State supplemental reinsurance
parameters. A State must ensure that:
(1) The payments made to issuers must not exceed the issuer's total
paid amount for the reinsurance-eligible claim(s); and
(2) Any remaining additional funds for reinsurance payments
collected under Sec. 153.220(d)(1)(ii) must be used for reinsurance
payments under the State supplemental reinsurance payment parameters in
subsequent benefit years.
[78 FR 15526, Mar. 11, 2013]
Sec. 153.234 Eligibility under health insurance market rules.
A reinsurance-eligible plan's covered claims costs for an enrollee
incurred prior to the application of the following provisions do not
count towards either the national reinsurance payment parameters or the
State supplemental reinsurance payment parameters: 45 CFR 147.102,
147.104 (subject to 147.145), 147.106 (subject to 147.145), 156.80, and
subpart B of part 156.
[78 FR 15527, Mar. 11, 2013]