[Federal Register Volume 80, Number 222 (Wednesday, November 18, 2015)]
[Rules and Regulations]
[Pages 72192-72294]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29294]
[[Page 72191]]
Vol. 80
Wednesday,
No. 222
November 18, 2015
Part III
Department of the Treasury
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Internal Revenue Service
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26 CFR Part 54
Department of Labor
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Employee Benefits Security Administration
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29 CFR Part 2590
Department of Health and Human Services
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45 CFR Parts 144, 146 and 147
Final Rules for Grandfathered Plans, Preexisting Condition Exclusions,
Lifetime and Annual Limits, Rescissions, Dependent Coverage, Appeals,
and Patient Protections Under the Affordable Care Act; Final Rules
Federal Register / Vol. 80 , No. 222 / Wednesday, November 18, 2015 /
Rules and Regulations
[[Page 72192]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[TD 9744]
RIN 1545-BJ45, 1545-BJ50, 1545-BJ62, 1545-BJ57
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AB72
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 144, 146 and 147
[CMS-9993-F]
RIN 0938-AS56
Final Rules for Grandfathered Plans, Preexisting Condition
Exclusions, Lifetime and Annual Limits, Rescissions, Dependent
Coverage, Appeals, and Patient Protections Under the Affordable Care
Act
AGENCY: Internal Revenue Service, Department of the Treasury; Employee
Benefits Security Administration, Department of Labor; Centers for
Medicare & Medicaid Services, Department of Health and Human Services.
ACTION: Final rules.
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SUMMARY: This document contains final regulations regarding
grandfathered health plans, preexisting condition exclusions, lifetime
and annual dollar limits on benefits, rescissions, coverage of
dependent children to age 26, internal claims and appeal and external
review processes, and patient protections under the Affordable Care
Act. It finalizes changes to the proposed and interim final rules based
on comments and incorporates subregulatory guidance issued since
publication of the proposed and interim final rules.
DATES:
Effective date. These final regulations are effective on January
19, 2016.
Applicability date. These final regulations apply to group health
plans and health insurance issuers beginning on the first day of the
first plan year (or, in the individual market, the first day of the
first policy year) beginning on or after January 1, 2017. For
information on requirements applicable prior to this date, see section
II.I. of this preamble.
FOR FURTHER INFORMATION CONTACT: Elizabeth Schumacher or Amber Rivers,
Employee Benefits Security Administration, Department of Labor, at
(202) 693-8335; Karen Levin, Internal Revenue Service, Department of
the Treasury, at (202) 927-9639; Cam Clemmons, Centers for Medicare &
Medicaid Services, Department of Health and Human Services, at (410)
786-1565.
Customer Service Information: Individuals interested in obtaining
information from the Department of Labor concerning employment-based
health coverage laws may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (www.dol.gov/ebsa). Information from HHS on private health insurance coverage can be
found on CMS's Web site (www.cms.gov/cciio), and information on health
care reform can be found at www.HealthCare.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The Patient Protection and Affordable Care Act, Public Law 111-148,
was enacted on March 23, 2010; the Health Care and Education
Reconciliation Act (the Reconciliation Act), Public Law 111-152, was
enacted on March 30, 2010 (these are collectively known as the
``Affordable Care Act''). The Affordable Care Act reorganizes, amends,
and adds to the provisions of part A of title XXVII of the Public
Health Service Act (PHS Act) relating to group health plans and health
insurance issuers in the group and individual markets. The term ``group
health plan'' includes both insured and self-insured group health
plans.\1\ The Affordable Care Act adds section 715(a)(1) to the
Employee Retirement Income Security Act (ERISA) and section 9815(a)(1)
to the Internal Revenue Code (the Code) to incorporate the provisions
of part A of title XXVII of the PHS Act into ERISA and the Code, and
make them applicable to group health plans, and health insurance
issuers providing health insurance coverage in connection with group
health plans. The PHS Act sections incorporated into the Code and ERISA
are sections 2701 through 2728.
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\1\ The term ``group health plan'' is used in title XXVII of the
PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is
distinct from the term ``health plan,'' as used in other provisions
of title I of the Affordable Care Act. The term ``health plan'' does
not include self-insured group health plans.
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The Departments of Labor (DOL), Health and Human Services (HHS) and
the Treasury (collectively, the Departments) have issued regulations
implementing the revised PHS Act sections 2701 through 2719A in several
phases.\2\ Throughout 2010, the Departments issued interim final
regulations (or temporary and proposed regulations),\3\ with requests
for comment, implementing Affordable Care Act section 1251
(preservation of right to maintain existing coverage), and PHS Act
sections 2704 (prohibition of preexisting condition exclusions), 2711
(prohibition on lifetime or annual limits), 2712 (prohibition on
rescissions), 2714 (extension of dependent coverage), 2719 (internal
claims and appeals and external review process), and 2719A (patient
protections) (collectively, the 2010 interim final regulations). As
discussed in more detail below, after consideration of comments \4\ in
response to the 2010 interim final regulations, the Departments are
issuing these final regulations.
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\2\ Note, however, that in sections under headings listing only
two of the three Departments, the term ``Departments'' generally
refers only to the two Departments listed in the heading.
\3\ The Departments of Labor and HHS published their rules as
interim final rules and are finalizing their interim final rules.
The Department of the Treasury/Internal Revenue Service published
temporary regulations and proposed regulations with the text of the
temporary regulations serving as the text of the proposed
regulations. The Department of the Treasury/Internal Revenue Service
is finalizing its proposed rules.
\4\ In response to the 2010 interim final regulations, the
Departments received many comments that relate to early
implementation issues, many of which were addressed through
subregulatory guidance (addressed more fully below). While the
Departments acknowledge and have reviewed the comments provided in
response to the 2010 interim final regulations, to the extent the
issues presented are now moot, such comments are not explicitly
addressed below.
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II. Overview of the Final Regulations
A. Section 1251 of the Affordable Care Act, Preservation of Right To
Maintain Existing Coverage (26 CFR 54.9815-1251, 29 CFR 2590.715-1251,
and 45 CFR 147.140)
Section 1251 of the Affordable Care Act provides that certain group
health plans and health insurance coverage existing as of March 23,
2010 (the date of enactment of the Affordable Care Act) (grandfathered
health plans) are only subject to certain provisions of the Affordable
Care Act (for as long as they maintain that status as grandfathered
health plans under the applicable regulations).\5\ On June 17, 2010,
the Departments issued interim final regulations implementing section
1251 and requesting comment.\6\ On
[[Page 72193]]
November 17, 2010, the Departments issued an amendment to the interim
final regulations to permit certain changes in policies, certificates,
or contracts of insurance without loss of grandfathered status.\7\ Also
in 2010, the Departments released Affordable Care Act Implementation
Frequently Asked Questions (FAQs) Parts I, II, IV, V, and VI to answer
questions related to maintaining a plan's status as a grandfathered
health plan.\8\ After consideration of the comments and feedback
received from stakeholders, the Departments are publishing these final
regulations. As discussed in more detail below, these final regulations
finalize the 2010 interim final regulations and amendment to the
interim final regulations without substantial change and incorporate
the clarifications issued thus far in subregulatory guidance.
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\5\ For a list of the market reform provisions under title XXVII
of the PHS Act, as added or amended by the Affordable Care Act and
incorporated into ERISA and the Code, applicable to grandfathered
health plans, visit http://www.dol.gov/ebsa/pdf/grandfatherregtable.pdf.
\6\ 75 FR 34538.
\7\ 75 FR 70114.
\8\ See Affordable Care Act Implementation FAQs Part I,
available at http://www.dol.gov/ebsa/faqs/faq-aca.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html, Affordable Care Act Implementation
FAQs Part II available at http://www.dol.gov/ebsa/faqs/faq-aca2.html
and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html, Affordable Care Act Implementation
FAQs Part IV, available at http://www.dol.gov/ebsa/faqs/faq-aca4.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs4.html and Affordable Care Act
Implementation FAQs Part V, available at http://www.dol.gov/ebsa/faqs/faq-aca5.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html and Affordable Care
Act Implementation FAQs Part VI, available at http://www.dol.gov/ebsa/faqs/faq-aca6.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs6.html.
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1. Definition of Grandfathered Health Plan Coverage
Under the Affordable Care Act and paragraph (a)(1) of the interim
final regulations implementing section 1251 of the Affordable Care Act,
a group health plan or group or individual health insurance coverage is
a grandfathered health plan with respect to individuals enrolled on
March 23, 2010 (for as long as it maintains that status under the
applicable regulations). The interim final regulations provided that a
group health plan or coverage does not relinquish its grandfather
status 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 at least one person
(although not necessarily the same person) at all times since March 23,
2010. The interim final regulations also provided that the
determination of grandfather status under the rules is made separately
with respect to each benefit package made available under a group
health plan or health insurance coverage.
Some commenters requested clarification with respect to the meaning
of the term ``benefit package'' including requesting further guidance
regarding what coverage option features constitute separate benefit
packages. In response to the comments, the Departments issued
Affordable Care Act Implementation FAQs Part II Q2 to further clarify
the application of the rules on a benefit-package-by-benefit-package
basis.\9\ These final regulations continue to provide that the
determination of grandfather status applies separately with respect to
each benefit package and incorporate the clarifications issued in the
FAQs. Therefore, as demonstrated by the example provided in the FAQs,
if a group health plan offers three benefit package options--a PPO
(preferred provider organization), a POS (point of service)
arrangement, and an HMO (health maintenance organization)--the PPO, POS
arrangement, and HMO are treated as separate benefit packages.
Similarly, under these final regulations, if any benefit package ceases
grandfather status, it will not affect the grandfather status of the
other benefit packages.
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\9\ See Affordable Care Act Implementation FAQs Part II,
available at http://www.dol.gov/ebsa/faqs/faq-aca2.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html.
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2. Disclosure of Grandfather Status
Paragraph (a)(2) of the interim final regulations implementing
section 1251 of the Affordable Care Act provided that to maintain
status as a grandfathered health plan, a plan or health insurance
coverage (1) must include a statement, in any plan materials provided
to participants or beneficiaries (in the individual market, primary
subscribers) describing the benefits provided under the plan or health
insurance coverage, that the plan or health insurance coverage believes
that it is a grandfathered health plan within the meaning of section
1251 of the Affordable Care Act and (2) must provide contact
information for questions and complaints. The interim final regulations
provided model language that can be used to satisfy this disclosure
requirement.\10\
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\10\ 29 CFR 2590.715-1251(a)(2)(ii); 45 CFR 147.140(a)(2)(ii).
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The Departments received several comments asking the Departments to
require enhanced disclosure to participants that includes a more
comprehensive explanation of grandfathered health plan status,
information on the triggers that can result in a cessation of such
status, a complete listing of the specific market reforms that are
inapplicable to the plan by virtue of its status, and access to a
formal process for obtaining a determination on a plan's status from
the appropriate government agency. Other commenters stated that
including this disclosure requirement in consumer materials may be
confusing to participants, may not have the intended benefit, and that
it may be more appropriate to include the applicable consumer
protections in the employer plan documents or insurance coverage
documents. Additional commenters stated this requirement is unnecessary
because ERISA's disclosure requirements are already sufficient to
explain to participants the information they need about their plan
(including which benefits are included or excluded), and that including
information about what benefits they could have had if their employers
chose to relinquish their grandfathered plan status is unnecessary.
In response to these comments the Departments issued Affordable
Care Act Implementation FAQs Part IV Q1, in which the Departments
clarified that a grandfathered health plan is not required to provide
the disclosure statement every time it sends out a communication, such
as an explanation of benefits (EOB), to a participant or beneficiary.
Instead, a grandfathered health plan will comply with this disclosure
requirement if it includes the model disclosure language provided in
the Departments' interim final grandfather regulations (or a similar
statement) whenever a summary of the benefits under the plan is
provided to participants and beneficiaries. For example, many plans
distribute summary plan descriptions upon initial eligibility to
receive benefits under the plan or coverage, during an open enrollment
period, or upon other opportunities to enroll in, renew, or change
coverage. The FAQs also provided that, while it is not necessary to
include the disclosure statement with each plan or issuer communication
to participants and beneficiaries (such as an EOB), the Departments
encourage plan sponsors and issuers to identify other communications in
which disclosure of grandfather status would be appropriate and
consistent with the goal of providing participants and beneficiaries
information necessary to
[[Page 72194]]
understand and make informed choices regarding health coverage.\11\
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\11\ See Affordable Care Act Implementation FAQs Part IV,
available at http://www.dol.gov/ebsa/faqs/faq-aca4.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs4.html.
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After consideration of the comments and feedback from stakeholders,
the Departments retain the approach in the interim final regulations
and subsequent subregulatory guidance because that approach provides
consumers with information about the status of their plan or health
insurance coverage, which assists them in identifying and enforcing
their rights, without undue burden on plans and issuers. Therefore,
these final regulations clarify that, to maintain status as a
grandfathered health plan, a group health plan, or health insurance
coverage, must include a statement that the plan or health insurance
coverage believes it is a grandfathered health plan in any summary of
benefits provided under the plan. It must also provide contact
information for questions and complaints. These final regulations also
retain the model disclosure language. Plans and issuers may (but are
not required to) utilize the model disclosure language to satisfy this
disclosure requirement. The Departments also note that the disclosure
language is a model, and, thus, plans and issuers are permitted to
include additional disclosure elements, such as the entire list of the
market reform provisions that do not apply to grandfathered health
plans.
3. Anti-Abuse Rules
The interim final regulations provided that a group health plan
that provided coverage on March 23, 2010 generally is a grandfathered
health plan with respect to new employees (whether newly hired or newly
enrolled) and their families who enroll in the grandfathered health
plan after March 23, 2010. The interim final regulations also provided
two anti-abuse rules to curtail attempts to retain grandfather status
by indirectly making changes that would otherwise result in a loss of
grandfather status.
The first anti-abuse rule provided that if the principal purpose of
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. Under the second anti-abuse rule, the
interim final regulations set forth specific criteria that, if met,
would cause a plan that is transferring employees to relinquish its
grandfather status. Specifically, the interim final regulations
provided that a plan that is transferring employees would relinquish
its grandfather status if, 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, such amendment would cause a loss of grandfather
status and there was no bona fide employment-based reason to transfer
the employees into the transferee plan. The second anti-abuse rule was
designed to prevent a plan or issuer from circumventing the limits on
changes that cause a plan or health insurance coverage to cease to be a
grandfathered health plan. This rule was intended to address situations
in which employees who previously were covered by a grandfathered
health plan are transferred to another grandfathered health plan
without any bona fide employment-based reason.
a. Bona Fide Employment-Based Reasons
The Departments received several comments regarding the anti-abuse
provisions. Stakeholders requested that the Departments clarify what
constitutes a bona fide employment-based reason that would prevent a
plan that is transferring employees from relinquishing its grandfather
status. In response, the Departments issued Affordable Care Act
Implementation FAQs Part VI Q1, which provided several examples of the
variety of circumstances that would constitute a bona fide employment-
based reason to transfer employees. Examples of a bona fide employment-
based reason include: When a benefit package is being eliminated
because the issuer is exiting the market; when a benefit package is
being eliminated because the issuer no longer offers the product to the
employer; 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; when a benefit package is
eliminated from a multiemployer plan as agreed upon as part of the
collective bargaining process; or 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.\12\
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\12\ See Affordable Care Act Implementation FAQs Part VI,
available at http://www.dol.gov/ebsa/faqs/faq-aca6.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs6.html.
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These final regulations include those examples of bona fide
employment-based reasons. The Departments continue to interpret the
term ``bona fide employment-based reason'' to embrace a variety of
circumstances, and plans and issuers should evaluate all facts and
circumstances carefully to determine whether a bona fide employment-
based reason exists when considering transferring employees from one
grandfathered health plan to another. The Departments may issue
additional guidance if further questions regarding what constitutes a
bona fide employment-based reason arise.
b. Clarification Regarding Multiemployer Plans
Section 1251 of the Affordable Care Act, as well as the 2010
interim final regulations, permit a grandfathered group health plan to
cover new employees without any effect on its status as a grandfathered
plan. Several commenters requested that the Departments clarify in the
final regulations whether a multiemployer plan may add new contributing
employers to the plan without triggering a loss of grandfather status.
These final regulations clarify that 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
grandfathered status, provided that the multiemployer plan has not made
any other changes that would cause the plan to relinquish its
grandfathered status.
4. Maintenance of Grandfather Status
The interim final regulations set forth rules for determining when
changes to the terms of a plan or health insurance coverage cause the
plan or coverage to cease to be a grandfathered health plan.
Specifically, the interim final regulations outlined six changes to
benefits, cost-sharing mechanisms, and contribution rates that will
cause a plan or health insurance coverage to relinquish its grandfather
status.\13\ Since
[[Page 72195]]
the promulgation of the interim final regulations, questions have been
brought to the Departments' attention regarding other specific changes
to a plan's design and the impact of such changes on a plan's
grandfather status.
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\13\ The six changes (measured from March 23, 2010) outlined in
paragraph (g)(1) of the interim final regulations that are
considered to change a health plan so significantly that they will
cause a group health plan or health insurance coverage to relinquish
grandfather status include the following: (1) The elimination of all
or substantially all benefits to diagnose or treat a particular
condition, (2) any increase in percentage cost-sharing requirements,
(3) an increase in a deductible or out-of-pocket maximum by an
amount that exceeds medical inflation plus 15 percentage points, (4)
an increase in a copayment by an amount that exceeds medical
inflation plus 15 percentage points (or, if greater, $5 plus medical
inflation), (5) a decrease in an employer's contribution rate
towards the cost of coverage by more than 5 percentage points, or
(6) the imposition of annual dollar limits below the restricted
annual dollar limits that were in effect prior to 2014 (note that
for plan years (or policy years in the individual market) beginning
on and after January 1, 2014, annual dollar limits on essential
health benefits are prohibited, except for grandfathered individual
health insurance coverage). See 26 CFR 54.9815-1251(g), 29 CFR
2590.715-1251(g), and 45 CFR 147.140(g).
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a. Elimination of All or Substantially All Benefits
The 2010 interim final regulations and these final regulations
provide that the elimination of all or substantially all benefits to
diagnose or treat a particular condition will cause a group health plan
or health insurance coverage to relinquish its grandfathered status.
One commenter requested that the Departments clarify what constitutes
eliminating ``substantially all benefits'' to diagnose or treat a
particular condition. As the interim final regulations stated, and
these final regulations continue to provide, 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. The Departments decline to
establish a bright-line test establishing what constitutes
``substantially all benefits'' for purposes of these final regulations.
Whether or not a plan 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 covered for a particular condition under the plan on March 23,
2010, as compared to the items and services covered at the time the
plan makes the benefit change effective. The preamble to the 2010
interim final regulations provided two examples. First, if a plan or
health insurance coverage eliminates all benefits for cystic fibrosis,
the plan or coverage will lose its grandfathered status. Second, if a
plan or insurance coverage provides benefits for a particular mental
health condition, the treatment for which is a combination of
counseling and prescription drugs, and subsequently eliminates benefits
for counseling, the plan is treated as having eliminated all or
substantially all benefits for that mental health condition and will as
a result lose its grandfathered status. These final regulations
continue to provide that the elimination of all or substantially all
benefits to diagnose or treat a particular condition will cause a group
health plan or health insurance coverage to relinquish its
grandfathered status and contain an example.
b. Increase in Fixed-Amount Copayments
The interim final regulations provided standards for when increases
in fixed-amount copayments would cause a plan or coverage to relinquish
its grandfather status. Under the interim final regulations, a plan or
coverage ceases to be a grandfathered health plan if there is an
increase since March 23, 2010 in a copayment that exceeds the greater
of the maximum percentage increase \14\ or five dollars increased by
medical inflation.\15\
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\14\ The interim final regulations defined the maximum
percentage increase as medical inflation (from March 23, 2010) plus
15 percentage points. Medical inflation is defined in the interim
final regulations by reference to the overall medical care component
of the Consumer Price Index for All Urban Consumers, unadjusted
(CPI), published by the Department of Labor. See 26 CFR 54.9815-
1251(g)(3), 29 CFR 2590.715-1251(g)(3), and 45 CFR 147.140(g)(3).
\15\ 75 FR 35538, 34543 (June 17, 2010).
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With respect to grandfathered health plans that utilize multiple
levels of copayments for different benefits under the plan,
stakeholders sought clarification on what degree of change would cause
a plan to relinquish its grandfather status. Specifically, stakeholders
wanted to know whether raising the copayment level for a category of
services by an amount that would otherwise trigger a loss of
grandfather status would cause a loss of grandfather status if the plan
retained the level of copayment on other categories of services. The
Departments clarified in Affordable Care Act Implementation FAQs Part
II Q4 that a change to a copayment level for a category of services
that exceeds the standards set forth in the interim final regulations
will cause a plan to relinquish its grandfather status, even if a plan
retains the level of copayment for other categories of services.\16\
These final regulations retain this clarification, and continue to
provide that each change in cost sharing must be separately evaluated
under the standards set forth in the regulations. A plan or issuer may
not exceed the standards set forth in these final regulations with
respect to one level of copayment for a category of services, and
retain its grandfather status by retaining the level of copayments for
other categories of services.
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\16\ See Affordable Care Act Implementation FAQs Part II,
available at http://www.dol.gov/ebsa/faqs/faq-aca2.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html.
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c. Decrease in Contribution Rate by Employers and Employee Organization
The interim final regulations provided that a decrease in the
employer contribution rate for coverage under a group health plan or
group health insurance coverage beyond the permitted percentage would
result in cessation of grandfather status. There are two rules related
to decreases in employer contributions: One for a contribution based on
the cost of coverage and one for a contribution based on a formula.
First, if the contribution rate is based on the 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 towards the cost of any tier of
coverage for any class of similarly situated individuals \17\ by more
than 5 percentage points below the contribution rate on March 23, 2010.
For this purpose, contribution rate is defined as the amount of
contributions made by an employer or employee organization compared to
the total cost of coverage, expressed as a percentage. The interim
final regulations also provided that the total cost of coverage is
determined in the same manner as the applicable premium is calculated
under the Consolidated Omnibus Budget Reconciliation Act of 1986
(COBRA) continuation provisions of section 604 of ERISA, section
4980B(f)(4) of the Code, and section 2204 of the PHS Act. In the case
of a self-insured group health plan, contributions by an employer or
employee organization are calculated by subtracting the employee
contributions towards the total cost of coverage from the total cost of
coverage.
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\17\ Similarly situated individuals are described in the HIPAA
nondiscrimination regulations at 26 CFR 54.9802-1(d), 29 CFR
2590.702(d), and 45 CFR 146.121(d).
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Second, if the contribution rate is based on a formula, such as
hours worked or tons of coal mined, 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
towards the cost of any tier of coverage for any class of similarly
situated individuals by more than 5 percentage points below the
contribution rate on March 23, 2010. These final regulations finalize
these provisions without change but incorporate the additional
clarifications issued in subregulatory guidance as discussed below.
The Departments received several comments relating to the employer
[[Page 72196]]
contribution limitations. Some commenters stated that issuers do not
always have the information needed to know whether (or when) an
employer plan sponsor changes its rate of contribution towards the cost
of group health plan coverage. In response to this issue, the
Departments issued Affordable Care Act Implementation FAQs Part I Q2
and Q3 providing relief if issuers and employer plan sponsors or
contributing employers and multiemployer plans take certain steps to
communicate regarding changes to the contribution rate for purposes of
determining grandfather status.\18\ These final regulations also
provide relief to issuers, plan sponsors, employers, and plans that
take certain steps to communicate changes in contribution rates.
Specifically, these final regulations provide that an insured group
health plan that is a grandfathered health plan will not relinquish its
grandfather status immediately based on a change in the employer
contribution rate if, upon renewal, an issuer requires a plan sponsor
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 does not already have it). Additionally, the
issuer's policies, certificates, or contracts of insurance must
disclose in a prominent and effective manner that plan sponsors are
required to notify the issuer if the contribution rate changes at any
point during the plan year. An insured grandfathered group health plan
with a decrease in employer contributions relinquishes its grandfather
status as of the earlier of the first date on which the issuer knows or
reasonably should know that there has been at least a 5-percentage-
point reduction or the first date on which the plan no longer qualifies
for grandfathered status without regard to the 5-percentage-point
reduction. Similarly, if multiemployer plans and contributing employers
follow these steps, the plan will not relinquish its grandfather status
unless or until the multiemployer plan knows or reasonably should know
that the contribution rate has changed by at least the applicable 5-
percentage point reduction or until the date the plan no longer
qualifies for grandfathered status without regard to the 5-percentage
point reduction. Moreover, nothing in the Affordable Care Act or these
regulations prevents a policy, certificate, or contract of insurance
from requiring a plan sponsor to notify an issuer in advance (for
example, 30 or 60 days in advance) of a change in their contribution
rate.
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\18\ See Affordable Care Act Implementation FAQs Part I,
available at http://www.dol.gov/ebsa/faqs/faq-aca.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html.
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The Departments also received comments on the application of this
provision to multiemployer plans with unique contribution structures.
It is common for multiemployer plans to have either a fixed-dollar
employee contribution or no employee contribution towards the cost of
coverage. In such cases, a contributing employer's contribution rate
may change (for example, after making up a funding deficit in the prior
year or to reflect a surplus) but the employee contribution amount is
not affected. The Departments issued Affordable Care Act Implementation
FAQs Part I Q4 clarifying that in this case, provided any changes in
the coverage terms would not otherwise cause the plan to cease to be
grandfathered and there continues to be no employee contribution or no
increase in the fixed-dollar employee contribution towards the cost of
coverage, the plan would not relinquish its grandfather status.\19\
These final regulations incorporate this clarification and apply the
relief to all grandfathered group health plans. Therefore, under these
final regulations a group health plan that requires either fixed-dollar
employee contributions or no employee contributions will not cease to
be a grandfathered health plan if 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 and there are no corresponding changes in coverage terms
that would otherwise cause the plan to cease to be a grandfathered
plan.
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\19\ See Affordable Care Act Implementation FAQs Part I,
available at http://www.dol.gov/ebsa/faqs/faq-aca.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html.
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The Departments also received comments requesting clarification on
the application of the rules where a group health plan includes
multiple tiers of coverage. In response, the Departments issued
Affordable Care Act Implementation FAQs Part II Q3, explaining that the
standards for employer contributions found in paragraph (g)(1)(v) of
the interim final regulations on grandfathered health plans apply on a
tier-by-tier basis.\20\ These final regulations incorporate this
guidance. 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
could not cause the plan to lose grandfather status.
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\20\ See Affordable Care Act Implementation FAQs Part II,
available at http://www.dol.gov/ebsa/faqs/faq-aca2.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html.
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The Departments also received comments asking for clarification on
when a decrease in the employer contribution rate for coverage under a
group health plan or group health insurance beyond the permitted
percentage would result in cessation of grandfather status for a
contribution based on a formula. In response, the Departments issued
Affordable Care Act Implementation FAQs Part VI Q6.\21\ The FAQ
provided an example under which a plan covers both retirees and active
employees and the employer that sponsors the plan contributes $300 per
year multiplied by the individual's years of service for the employer,
capped at $10,000 per year. In the example, the employer makes
contributions based on a formula, and accordingly, the plan will cease
to be a grandfathered health plan if the employer decreases its
contribution rate towards the cost of coverage by more than five
percent below the contribution rate on March 23, 2010. If the formula
does not change, the employer is not considered to have reduced its
contribution rate, regardless of any
[[Page 72197]]
increase in the total cost of coverage. However, if the dollar amount
that is multiplied by years of service decreases by more than five
percent (or if the $10,000 maximum employer contribution cap decreases
by more than five percent), the plan will cease to be a grandfathered
health plan. Although this example has not been added to the text of
the final regulations, this guidance continues to apply.
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\21\ See Affordable Care Act Implementation FAQs Part VI,
available at http://www.dol.gov/ebsa/faqs/faq-aca6.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs6.html.
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d. Changes in Annual Limits
PHS Act section 2711, as added by the Affordable Care Act,
generally prohibits lifetime and annual limits on the dollar amount of
essential health benefits, as defined in section 1302(b) of the
Affordable Care Act. Under PHS Act section 2711 and its implementing
regulations, plans and issuers were generally prohibited from imposing
lifetime limits on the dollar value of essential health benefits for
plan years (in the individual market, policy years) beginning on or
after September 23, 2010.
With respect to annual dollar limits, for plan or policy years
beginning before January 1, 2014, plans and issuers were permitted to
impose restricted annual dollar limits in accordance with the guidance
set forth in the interim final regulations. For plans years beginning
on or after January 1, 2014, plans and issuers generally are prohibited
from imposing annual dollar limits on essential health benefits.
However, grandfathered individual health insurance plans are not
subject to the annual dollar limit prohibition. Accordingly, the final
regulations retain the rules regarding loss of grandfathered status
based on imposition of annual dollar limits to allow issuers of
grandfathered individual health insurance coverage to analyze
grandfathered status.
These final regulations, like the interim final regulations,
address three different limit-related situations that would cause a
plan or health insurance coverage to relinquish its grandfather status:
(1) A plan or 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; (2) A plan or 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; and (3) A plan or 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).
e. Changes to Fixed Amount Cost-Sharing Based on a Formula
On December 22, 2010, the Departments issued Affordable Care Act
Implementation FAQs Part V Q7 to provide clarification on the
application of the thresholds under paragraph (g)(1) of the interim
final regulations when a plan's terms include out-of-pocket spending
limits that are based on a formula.\22\ The Departments continue to
interpret paragraph (g)(1) as clarified in the FAQ. Therefore, under
these final regulations, if a plan or coverage has a fixed-amount cost-
sharing requirement other than a copayment (for example, a deductible
or out-of-pocket limit) that is based on a percentage-of-compensation
formula, that cost-sharing arrangement will not cause the plan or
coverage to cease to be a grandfathered health plan as long as the
formula remains the same as that which was in effect on March 23, 2010.
Accordingly, if the percentage-of-compensation formula for determining
an out-of-pocket limit is unchanged and an employee's compensation
increases, then the employee could face a higher out-of-pocket limit,
but that change would not cause the plan to relinquish grandfather
status.
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\22\ See Affordable Care Act Implementation FAQs Part V and
Mental Health Parity Implementation, available at http://www.dol.gov/ebsa/faqs/faq-aca5.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html.
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f. Grandfather Status and Wellness Programs
Under PHS Act section 2705, ERISA section 702, and Code section
9802 and the Departments' implementing regulations, group health plans
and health insurance issuers in the group and individual market are
prohibited from discriminating against participants, beneficiaries, and
individuals in eligibility, benefits, or premiums based on a health
factor.\23\ For group health plans and group health insurance coverage,
an exception to this general prohibition allows premium discounts,
rebates, or modification of otherwise applicable cost sharing
(including copayments, deductibles, or coinsurance) in return for
adherence to certain programs of health promotion and disease
prevention, commonly referred to as wellness programs.
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\23\ The statute and its implementing regulations set forth
eight health status-related factors, which the final regulations on
Nondiscrimination and Wellness Programs in Health Coverage in the
Group Market refer to as ``health factors'' for simplicity. 71 FR
75014, 75016 (Dec. 13, 2006) Under the statute and the regulations,
the eight health factors are health status, medical condition
(including both physical and mental illnesses), claims experience,
receipt of health care, medical history, genetic information,
evidence of insurability (including conditions arising out of acts
of domestic violence), and disability. Id. In the Departments' view,
``[t]hese terms are largely overlapping and, in combination, include
any factor related to an individual's health.'' 66 FR 1378, 1379
(Jan. 8, 2001).
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Many stakeholders requested clarification with respect to how
changes to contribution rates and cost-sharing mechanisms in the
context of a wellness program would impact a plan's grandfather status.
In light of these questions, the Departments issued Affordable Care Act
Implementation FAQs Part II Q5, which stated that while group health
plans may continue to provide incentives for wellness by providing
premium discounts or additional benefits to reward healthy behaviors by
participants and beneficiaries, penalties (such as cost-sharing
surcharges) may implicate the standards outlined in paragraph (g)(1) of
the grandfather interim final regulations and should be examined
carefully.\24\ If additional questions arise regarding the interaction
of wellness programs and these requirements, the Departments may issue
additional subregulatory guidance.
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\24\ See Affordable Care Act Implementation FAQs Part II,
available at http://www.dol.gov/ebsa/faqs/faq-aca2.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html.
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g. Changes to Multi-Tiered Prescription Drug Formularies
In Affordable Care Act Implementation FAQs Part VI Q2, the
Departments addressed questions related to certain changes to the level
of cost sharing for brand-name prescription drugs. Stakeholders
requested that the Departments clarify whether changes to cost sharing
for brand-name prescription drugs would cause a plan to relinquish its
grandfather status in instances where a plan classifies and determines
cost sharing for prescription drugs based on the availability of a
generic alternative, and a generic drug becomes available and is added
to the formulary. The Departments stated that if a drug was classified
in a tier as a brand name drug
[[Page 72198]]
with no generic available, and a generic alternative for the drug
becomes available and is added to the formulary, moving the brand-name
drug to a higher tier would not cause the plan or coverage to
relinquish grandfather status.\25\ These final regulations adopt this
rule that such changes will not result in a loss of grandfather status.
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\25\ Affordable Care Act Implementation FAQs Part VI, available
at http://www.dol.gov/ebsa/faqs/faq-aca6.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs6.html.
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h. Grandfather Status and Certain Changes in Individual Policies
Some individual health insurance policies in place on March 23,
2010 included a feature that allowed a policyholder to elect an option
under which the individual would pay a reduced premium in exchange for
higher cost sharing. The Departments received comments asking whether
individuals enrolled in these policies as of March 23, 2010 could make
such an election after March 23, 2010 without affecting the policy's
grandfather status, even if the increase in cost sharing would exceed
the limits set forth under the interim final regulations. In response,
the Departments issued Affordable Care Act Implementation FAQs Part IV
Q2, which stated that, as long as the policyholder had such option
under the insurance policy that was in place on March 23, 2010, he or
she could exercise the option after March 23, 2010 without affecting
grandfather status, even if as a result of electing this option the
individual's cost sharing would increase by an amount that exceeds the
limits established under the interim final regulations.\26\ The
Departments maintain this approach in these final regulations.
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\26\ See Affordable Care Act Implementation FAQs Part IV,
available at http://www.dol.gov/ebsa/faqs/faq-aca4.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs4.html.
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i. Clarifications on Timing of the Loss of Grandfather Status
Since the promulgation of the 2010 interim final regulations,
questions have arisen regarding whether or not a plan ceases to be a
grandfathered health plan immediately after making a change that
triggers a loss of grandfathered status, and whether or not there is an
opportunity to cure a loss of grandfather status following a change
made inadvertently or otherwise that triggers a loss of grandfather
status. Several commenters have requested clarification on when the
plan or coverage ceases to be a grandfathered health plan if it makes
an amendment to plan terms that trigger loss of grandfather status in
the middle of the plan year. The Departments issued Affordable Care Act
Implementation FAQs Part VI Q4 and Q5 addressing timing of the loss of
grandfather status with respect to mid-year plan amendments that exceed
the thresholds described in the interim final regulations.\27\ These
final regulations adopt the clarification outlined in the FAQs that a
plan or coverage will cease to be a grandfathered health plan when an
amendment to plan terms that exceeds the thresholds described in
paragraph (g)(1) of these final regulations becomes effective--
regardless of when the amendment is adopted. Once grandfather status is
lost there is no opportunity to cure the loss of grandfather status. A
reversal after the effective date will not allow the plan or coverage
to regain grandfather status. If a plan sponsor wishes to avoid
relinquishing grandfathered status in the middle of a plan year, any
changes that will cause a plan or coverage to relinquish grandfather
status should not be effective before the first day of a plan year that
begins after the change is adopted.
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\27\ See Affordable Care Act Implementation FAQs Part VI,
available at http://www.dol.gov/ebsa/faqs/faq-aca6.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs6.html.
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B. PHS Act Section 2704, Prohibition of Preexisting Condition
Exclusions (26 CFR 54.9815-2704, 29 CFR 2590.715-2704, 45 CFR 147.108)
PHS Act section 2704, added by the Affordable Care Act, amends the
HIPAA \28\ rules relating to preexisting condition exclusions to
provide that a group health plan and a health insurance issuer offering
group or individual health insurance coverage generally may not impose
any preexisting condition exclusions.\29\ HIPAA, as well as PHS Act
section 2704 and its implementing regulations, define a preexisting
condition exclusion as a limitation or exclusion of benefits relating
to a condition based on the fact that the condition was present before
the date of enrollment for the coverage, regardless of whether any
medical advice, diagnosis, care, or treatment was recommended or
received before that date. PHS Act section 2704,\30\ which became
effective for enrollees who are under 19 years of age for plan years
(in the individual market, policy years) beginning on or after
September 23, 2010, and effective for adults for plan years (in the
individual market, policy years) beginning on or after January 1, 2014,
prohibits preexisting condition exclusions for both group health plans
and group or individual health insurance coverage (except for
grandfathered individual health insurance). On June 28, 2010, the
Departments issued interim final regulations implementing PHS Act
section 2704 and requesting comment.\31\ After issuance of regulations
in 2010, the Departments also released Affordable Care Act
Implementation FAQs Part V, Q6 \32\ to provide additional clarification
on the prohibition of preexisting condition exclusions. These final
regulations finalize the 2010 interim final regulations without
substantial change and incorporate the clarifications issued to date in
subregulatory guidance.
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\28\ HIPAA is the Health Insurance Portability and
Accountability Act of 1996 (Pub. L. 104-191).
\29\ The HIPAA rules (that were in effect prior to the effective
date of these amendments) applied only to group health plans and
group health insurance coverage, and permitted limited exclusions of
coverage based on a preexisting condition under certain
circumstances. Section 2704 prohibits any preexisting condition
exclusion from being imposed by group health plans or group health
insurance coverage and extends this protection to non-grandfathered
individual health insurance coverage but this prohibition does not
apply to grandfathered individual health insurance coverage.
\30\ Before the amendments made by the Affordable Care Act, PHS
Act section 2701(b)(1) was the applicable provision concerning
preexisting condition exclusions; after the amendments made by the
Affordable Care Act, PHS Act section 2704(b)(1) is the applicable
provision. See also ERISA section 701(b)(1) and Code section
9801(b)(1).
\31\ 75 FR 37188 (June 28, 2010).
\32\ See Affordable Care Act Implementation FAQs Part V,
available at http://www.dol.gov/ebsa/faqs/faq-aca5.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html.
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1. Allowable Exclusion of Benefits
Prior to implementation of PHS Act section 2704, HIPAA rules
limiting preexisting condition exclusions provided that a plan's or
issuer's exclusion of benefits for a condition regardless of when the
condition arose relative to the effective date of coverage is not a
preexisting condition exclusion. With respect to such exclusions, the
2010 interim final regulations did not change this approach under
HIPAA.\33\
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\33\ The rule is illustrated with examples in the HIPAA
regulations on preexisting condition exclusions. See Examples 6, 7,
and 8 in 26 CFR 54.9801-3(a)(2), 29 CFR 2590.701-3(a)(2), 45 CFR
146.111(a)(2).
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Several commenters requested that the final regulations reiterate
this rule. Other commenters requested that all exclusions of specific
conditions be prohibited regardless of whether the exclusion relates to
when the condition arose. Another commenter wrote that restrictions on
benefits concerning
[[Page 72199]]
rehabilitation services and devices should be considered a form of
preexisting condition exclusion and not be allowed.
Similar to the interim final regulations, these final regulations
retain the approach set forth under HIPAA relating to exclusions for a
specific benefit. More specifically, these final regulations continue
to provide that a plan's or issuer's exclusion of benefits for a
condition from the plan or policy regardless of when the condition
arose relative to the effective date of coverage is not a preexisting
condition exclusion. Other requirements of Federal or State law,
however, may prohibit certain benefit exclusions, including the
essential health benefits requirements applicable in the individual and
small group health insurance markets at 45 CFR 156.110 et seq.
2. Enrollment Period
The 2010 interim final regulations did not impose any requirement
on plans to provide for an open enrollment period. One commenter
requested that the regulations clarify that issuers in the individual
market may restrict enrollment of children under age 19 to specified
open enrollment periods, consistent with guidance issued by HHS.\34\
Another commenter requested that the regulations specify that after the
initial enrollment period, health insurance issuers must make open
enrollment periods available to families at least once a year during a
standardized time period for at least 90 days and that insurers should
fully advertise the availability. Another commenter stated that having
at least one issuer that offers open enrollment at any time during the
year, without a penalty for deferral, will be an economic incentive to
defer the purchase of insurance which may encourage adverse selection
and subsequently, higher claim costs. Additional commenters requested
continuous open enrollment for children with preexisting conditions,
clarification of whether guaranteed issue will be available only during
open enrollment or all 12 months of the year, and that families be
given the opportunity to enroll their children when certain life events
occur. These final regulations do not adopt these suggestions. The
provisions of the Affordable Care Act related to guaranteed
availability of coverage, including open and special enrollment
periods, are implemented in regulations issued by HHS under section
2702 of the PHS Act and are outside the scope of this rulemaking.
Additionally, while HIPAA generally permits plans and issuers to treat
participants and beneficiaries with adverse health factors more
favorably, such as providing a longer open enrollment period, nothing
in these regulations requires plans and issuers to do so.
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\34\ Center for Consumer Information & Insurance Oversight,
Questions and Answers on Enrollment of Children Under 19 Under the
New Policy That Prohibits Pre-Existing Condition Exclusions,
available at https://www.cms.gov/CCIIO/Resources/Files/factsheet.html.
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3. Premiums
Commenters raised concerns about increasing premiums related to the
prohibition on preexisting condition exclusions. Effective for plan
years (or, in the individual market, policy years) beginning on or
after January 1, 2014, section 2701 of the PHS Act and section 1312(c)
of the Affordable Care Act govern the premium rates charged by an
issuer for non-grandfathered health insurance coverage in the
individual and small group markets, and section 2794 of the PHS Act
provides for the annual review of unreasonable increases in premiums
for health insurance coverage in the individual and small group
markets. These provisions are implemented in regulations issued by HHS
\35\ and are outside the scope of this rulemaking. However, the rating
rules under PHS Act section 2701 prohibit variations in premiums based
on a child's health status.
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\35\ See 45 CFR 147.102, 154.101 et seq., and 156.80.
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4. Allowable Screenings To Determine Eligibility for Alternative
Coverage in the Individual Market
Subsequent to the promulgation of the interim final regulations,
questions arose regarding whether it would be permissible under the
rules implementing PHS Act section 2704 for issuers in the individual
market to screen certain applicants for eligibility for alternative
coverage before issuing a child-only policy. Specifically, States
expressed an interest in permitting such screenings. In response to
these concerns, the Departments issued Affordable Care Act
Implementation FAQs Part V, Q6, which provided that under certain
circumstances, States can permit issuers in the individual market to
screen applicants for eligibility for alternative coverage options
before offering a child-only policy if (1) the practice is permitted
under State law; (2) the screening applies to all child-only
applicants, regardless of health status; and (3) the alternative
coverage options include options for which healthy children would
potentially be eligible, such as the Children's Health Insurance
Program (CHIP) and group health insurance.\36\ Screenings may not be
limited to programs targeted to individuals with a preexisting
condition, such as a State high risk pool. Note that Medicaid policy,
under 42 U.S.C. 1396a (25)(G), prohibits participating States from
allowing health insurance issuers to consider whether an individual is
eligible for, or is provided medical assistance under, Medicaid in
making enrollment decisions. Furthermore, issuers may not implement a
screening process that by its operation significantly delays enrollment
or artificially engineers eligibility of a child for a program targeted
to individuals with a preexisting condition. Additionally, the
screening process may not be applied to offers of dependent coverage
for children. The FAQ provided that States are encouraged to require
issuers that screen for other coverage to enroll and provide coverage
to the applicant effective on the first date that the child-only policy
would have been effective had the applicant not been screened for an
alternative coverage option. It also provided that States are
encouraged to impose a reasonable time limit, such as 30 days, at which
time the issuer would have to enroll the child regardless of pending
applications for other coverage. Subsequent to the issuance of the FAQ,
the guaranteed availability requirements in section 2702 of the PHS Act
took effect, similarly precluding an issuer from denying coverage. This
screening, as permitted under State law, will continue to be allowed
under these final regulations, consistent with both section 2704 and
guaranteed availability obligations under section 2702.
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\36\ See Affordable Care Act Implementation FAQs Part V,
available at http://www.dol.gov/ebsa/faqs/faq-aca5.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html.
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C. PHS Act Section 2711, Prohibition on Lifetime and Annual Limits (26
CFR 54.9815-2711, 29 CFR 2590.715-2711, 45 CFR 147.126)
PHS Act section 2711, as added by the Affordable Care Act,
generally prohibits annual and lifetime dollar limits on essential
health benefits, as defined in section 1302(b) of the Affordable Care
Act. With respect to annual dollar limits, PHS Act section 2711(a)(2)
provided that for plan years beginning before January 1, 2014,
restricted annual dollar limits were allowed. On June 28, 2010, the
Departments issued interim final regulations implementing PHS Act
[[Page 72200]]
section 2711 and requested comment.\37\ After issuance of the 2010
interim final regulations, the Departments also released Affordable
Care Act Implementation FAQs Parts IV, XI, XV, XXII, as well as
Technical Release 2013-03, to address various requests for
clarifications under PHS Act section 2711.\38\ These final regulations
adopt the 2010 interim final regulations without substantial change and
incorporate certain pertinent clarifications issued thus far in
subregulatory guidance.
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\37\ 75 FR 37188 (June 28, 2010).
\38\ Affordable Care Act Implementation FAQs Parts IV, XI, XV,
XXII, available at http://www.dol.gov/ebsa/faqs/faq-aca4.html,
http://www.dol.gov/ebsa/faqs/faq-aca11.html, http://www.dol.gov/ebsa/faqs/faq-aca15.html, and http://www.dol.gov/ebsa/faqs/faq-aca22.html, or https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs4.html, https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs11.html,
https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs15.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-XXII-FINAL.pdf;
Technical Release 2013-03, available at http://www.dol.gov/ebsa/newsroom/tr13-03.html. See footnote 51 for a list of additional
items of guidance under PHS Act section 2711.
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1. Definition of Essential Health Benefits
On February 25, 2013, HHS issued final regulations addressing
essential health benefits (EHB) under Affordable Care Act section
1302.\39\ Among other things, HHS regulations defined EHB based on a
State-specific benchmark plan and required each State to select a
benchmark plan from among several options.\40\ While self-insured,
large group market, and grandfathered health plans are not required to
offer EHB, PHS Act section 2711 prohibits such plans from imposing
annual and lifetime dollar limits on covered benefits that fall within
the definition of EHB. In the interim final regulations, the
Departments said that ``[f]or plan years (in the individual market,
policy years) beginning before the issuance of regulations defining
`essential health benefits,' for purposes of enforcement, the
Departments will take into account good faith efforts to comply with a
reasonable interpretation of the term `essential health benefits.' ''
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\39\ 78 FR 12834.
\40\ The benchmark plans from which a State could choose are:
(1) The largest plan by enrollment in any of the three largest
products in the State's small group market; (2) any of the largest
three State employee health benefit plans options by enrollment; (3)
any of the largest three national Federal Employees Health Benefits
Program (FEHBP) plan options by enrollment; or (4) the largest
insured commercial HMO in the State. 45 CFR 156.100. The EHB-
benchmark plan serves as a reference plan, reflecting both the scope
of services and limits offered by a typical employer plan in each
State. The term ``base-benchmark plan'' in 45 CFR 156.100 is
distinct from the term ``EHB-benchmark plan'' as defined in 45 CFR
156.20.
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In a 2012 FAQ, HHS stated that the Departments would consider a
self-insured group health plan, a large group market health plan, or a
grandfathered group health plan to have used a permissible definition
of EHB under section 1302(b) of the Affordable Care Act if the
definition was one of the potential EHB base-benchmark plans that, at
the time, States could have chosen from as the standard for EHB in
their State.\41\ At the time, this list of potential EHB-benchmark
plans included over 510 EHB base-benchmark plans that were authorized
by the Secretary for a State or the District of Columbia \42\ to
select, as each State and the District of Columbia has a choice of ten
possible benchmark plans. All of these potential plans were
``authorized'' in the sense that they were potential EHB benchmark
plans that could be selected by a State or the District of Columbia
under the EHB regulations. This approach was intended to provide plans
and issuers not subject to the EHB rules with flexibility to define
what constitutes EHB under their respective plan for purposes of the
limits in PHS Act section 2711. Since that time, each State and the
District of Columbia has selected or defaulted to a single EHB-
benchmark option, and that is the only benchmark plan ``authorized'' to
be used for defining EHB in that State or the District of Columbia.
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\41\ See Q10 of Frequently Asked Questions on Essential Health
Benefits Bulletin, available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/ehb-faq-508.pdf.
\42\ Initially, issuers in the territories were subject to the
EHB requirement and also had potential benchmarks to choose from
under the EHB regulations. A change in the interpretation of the
statute resulted in issuers in the territories being exempt from the
EHB rules. See Letter to Gary R. Francis, Commissioner, Office of
Lieutenant Governor, Virgin Islands, dated July 16, 2014, available
at https://www.cms.gov/CCIIO/Resources/Letters/Downloads/letter-to-Francis.pdf.
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Given the enforcement challenges for Federal and State regulators
and difficulties for participants, beneficiaries, and enrollees in
ascertaining what benefits under their respective plans constitute EHB
posed by a choice of over 500 plans, the Departments are codifying
their interpretation that a ``reasonable interpretation of the term
`essential health benefits''' includes only those EHB base-benchmarks
that, in fact, have been selected, whether by active State selection or
by default to be the EHB base-benchmark plan for a State, rather than
all plans that are potentially authorized.
In addition to the foregoing base-benchmark plans, there are three
base-benchmark plan options not currently among those a State or the
District of Columbia has either selected or had assigned by default
that the Departments believe should also continue to be made available
for plans and issuers not subject to EHB requirements. These three plan
options are the current base-benchmark plan options under the Federal
Employees Health Benefit Program (FEHBP) specified at 45 CFR
156.100(a)(3) (the three largest FEHBP plans available to all Federal
employees nationally). These base-benchmark plan options are unique
among base-benchmark plans in that they are available nationally, and
thus can be utilized to determine what benefits would be categorized as
EHBs for those employers who provide health coverage to employees
throughout the United States and are not situated only in a single
State.
Thus, under these final regulations, group health plans (and health
insurance coverage offered in connection with such plans) and
grandfathered individual market coverage that are not required to
provide EHB may select among any of the 51 EHB base-benchmark plans
identified under 45 CFR 156.100 and selected by a State or the District
of Columbia and the FEHBP base-benchmark plan, as applicable for plan
years beginning on or after January 1, 2017, for purposes of
determining which benefits cannot be subject to annual and lifetime
dollar limits. The current list of the 51 proposed EHB base-benchmark
plans selected by the States for 2017 can be found at https://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html. HHS anticipates
publishing the final list later this month.
2. Out-of-Network Benefits
The Departments have been asked whether the scope of the
prohibition on lifetime and annual dollar limits in PHS Act section
2711 applies only to in-network benefits as opposed to both in-network
and out-of-network benefits. The statute and interim final regulations
made no distinction between in-network or out-of-network benefits.
Therefore, lifetime and annual dollar limits on essential health
benefits are generally prohibited, regardless of whether such benefits
are provided on an in-network or out-of-network basis. These final
regulations incorporate this clarification.
3. End of Waiver Program
Under PHS Act section 2711, for plan years beginning before January
1, 2014,
[[Page 72201]]
the Departments were given authority to define restricted annual dollar
limits to ensure that access to needed services was made available with
minimal impact on premiums. As noted in the preamble to the 2010
interim final regulations, in order to mitigate the potential for
premium increases for all plans and policies, while at the same time
ensuring access to EHB, the interim final regulations adopted a three-
year phased approach for restricted annual dollar limits, with the
dollar limit increasing for each year of the three year period. Annual
dollar limits, including restricted annual dollar limits, are not
allowed for plan years (in the individual market, policy years)
beginning on or after January 1, 2014, except for grandfathered
individual health insurance coverage.
Some previously widely available low-cost coverage was designed
with low maximum benefits and did not meet the phased in restricted
annual dollar limits, such as stand-alone health reimbursement
arrangements (HRAs) \43\ and so-called ``mini med'' plans. In order to
ensure that individuals with such limited coverage would not be denied
access to needed services or experience more than a minimal impact on
premiums, the interim final regulations also provided for HHS to
establish a program under which the restricted annual dollar limit
requirements would be waived if compliance with the limits would result
in a significant decrease in access to benefits or a significant
increase in premiums.\44\ However, this waiver program was only
available for the period during which the statute authorized restricted
annual dollar limits, that is, plan years (in the individual market,
policy years) beginning before January 1, 2014. Consequently such
waivers are no longer available and the waiver program rules are not
incorporated in these final regulations.
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\43\ An HRA is an arrangement that is funded solely by an
employer and that reimburses an employee for medical care expenses
(as defined under Code section 213(d)) incurred by the employee, or
his spouse, dependents, and any children who, as of the end of the
taxable year, have not attained age 27, up to a maximum dollar
amount for a coverage period. IRS Notice 2002-45, 2002-02 CB 93;
Revenue Ruling 2002-41, 2002-2 CB 75. This reimbursement is
excludable from the employee's income. Amounts that remain at the
end of the year generally can be used to reimburse expenses incurred
in later years. HRAs generally are considered to be group health
plans within the meaning of Code section 9832(a), section 733(a) of
ERISA, and section 2791(a) of the PHS Act and are subject to the
rules applicable to group health plans.
\44\ Guidance regarding the annual dollar limit waiver program
was issued at https://www.cms.gov/cciio/resources/Regulations-and-Guidance/index.html#Annual Limits.
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4. HRAs and Other Account Based Plans
In general, HRAs and other account-based group health plans are
subject to the annual dollar limit prohibition under PHS Act section
2711 (annual dollar limit prohibition) \45\ and will fail to comply
with this prohibition because these arrangements impose an annual limit
on the amount of expenses the arrangement will reimburse. However,
special rules apply to certain types of account-based plans under which
the HRA or other account-based health plan either is not subject to the
annual dollar limit prohibition, or is considered to comply with the
annual dollar limit prohibition if it is ``integrated'' with another
group health plan that complies with the annual dollar limit
prohibition.
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\45\ In accordance with Code section 9831(a)(2) and ERISA
section 732(a), the market reforms, including PHS Act section 2711,
do not apply to a group health plan that has fewer than two
participants who are current employees on the first day of the plan
year, and, in accordance with Code section 9831(b), ERISA section
732(b), and PHS Act sections 2722(b) and 2763, the market reforms,
including PHS Act section 2711, also do not apply to a group health
plan in relation to its provision of excepted benefits described in
Code section 9832(c), ERISA section 733(c) and PHS Act section
2791(c).
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The preamble to the interim final regulations noted that the annual
dollar limit prohibition applies differently to certain account-based
plans that are subject to other rules that limit the benefits available
under those plans.\46\ In particular, under the 2010 interim final
regulations and these final regulations, certain health Flexible
Spending Arrangements (health FSAs) \47\ are not subject to the PHS Act
section 2711 annual dollar limit prohibition because health FSAs are
subject to specific limits under section 9005 of the Affordable Care
Act. In addition, as noted in the preamble to the 2010 interim final
regulations, the annual dollar limit prohibition does not apply to
Archer Medical Savings Accounts (Archer MSAs) under section 220 of the
Code and Health Savings Accounts (HSAs) under section 223 of the Code,
because both types of plans are subject to specific statutory
provisions that require that the contributions be limited.
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\46\ See 75 FR 37188, 37190 (June 28, 2010).
\47\ In general, a health FSA is a benefit designed to reimburse
employees for medical care expenses (as defined in Code section
213(d), other than premiums) incurred by the employee, or the
employee's spouse, dependents, and any children who, as of the end
of the taxable year, have not attained age 27. See Employee
Benefits--Cafeteria Plans, 72 FR 43938, 43957 (August 6, 2007)
(proposed regulations; to be codified, in part, once final, at 26
CFR 1.125-5); Code section 105(b) and 106(c). Contributions to a
health FSA offered through a cafeteria plan satisfying the
requirements of Code section 125 do not result in gross income to
the employee. Code section 125(a).
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These final regulations contain a clarification regarding the
application of the annual dollar limit prohibition to health FSAs.
Question and Answer 8 of DOL Technical Release 2013-03 \48\ and IRS
Notice 2013-54 \49\ clarified that the annual dollar limit prohibition
applies to a health FSA that is not offered through a Code section 125
plan. That is because the exemption for health FSAs from the annual
dollar limit prohibition is intended to apply only to health FSAs that
are subject to the separate annual limitation under Code section
125(i), and health FSAs that are not offered through a Code section 125
plan are not subject to that separate statutory limit. The prior
guidance provided that this clarification was intended to apply
beginning September 13, 2013 and the guidance noted that the
Departments intended to amend the annual dollar limit prohibition
regulations to conform to the Q&A. These final regulations include this
amendment.
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\48\ Technical Release 2013-03, available at www.dol.gov/ebsa/pdf/tr13-03.pdf.
\49\ 2013-40 IRB 287.
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Other types of account-based plans, such as HRAs and employer
payment plans,\50\ are not exempt from the annual dollar limit
prohibition. However, the preamble to the interim final regulations and
subsequently issued subregulatory guidance \51\ interpreting these
rules included a number of rules regarding the application of the
annual dollar limit prohibition to these types of arrangements. In
particular, this guidance provides that if an HRA is ``integrated''
with other group health
[[Page 72202]]
plan coverage, and the other group health plan coverage complies with
the requirements of PHS Act section 2711, the combined arrangement
satisfies the requirements even though the HRA imposes a dollar
limit.\52\ The basic principles for when an HRA is considered
integrated with other group health plan coverage have been set forth in
various forms of subregulatory guidance and have been included in these
final regulations.
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\50\ An employer payment plan is a group health plan under which
an employer reimburses an employee for some or all of the premium
expenses incurred for an individual health insurance policy, such as
a reimbursement arrangement described in Revenue Ruling 61-146,
1961-2 CB 25, or arrangements under which the employer uses its
funds to directly pay the premium for an individual health insurance
policy covering the employee.
\51\ Five items of guidance have been issued on this topic: (1)
Affordable Care Act Implementation FAQs Part XI, available at
(http://www.dol.gov/ebsa/faqs/faq-aca11.html) or http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs11.html;
(2) IRS Notice 2013-54 and DOL Technical Release 2013-03, issued on
September 13, 2013; (3) IRS FAQ on Employer Healthcare Arrangements
available at http://www.irs.gov/Affordable-Care-Act/Employer-Health-Care-Arrangements; (4) Affordable Care Act Implementation FAQs Part
XXII, available at http://www.dol.gov/ebsa/faqs/faq-aca22.html or
http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-XXII-FINAL.pdf; and (5) IRS Notice 2015-17, issued on
February 18, 2015. See also 75 FR 37188 (June 28, 2010). This
guidance, much of which is not directly addressed in these final
regulations, continues to be in effect.
\52\ Issues also arise for account-based group health plans
under PHS Act section 2713, which requires non-grandfathered group
health plans (or health insurance issuers offering group health
insurance plans) to provide certain preventive services without
imposing any cost-sharing requirements for these services. The
Departments have issued guidance providing that, similar to the
analysis of the annual dollar limit prohibition, an HRA that is
integrated with a group health plan will comply with the preventive
services requirements if the group health plan with which the HRA is
integrated complies with the preventive services requirements. Also,
a group health plan, including an HRA, used to purchase coverage on
the individual market is not integrated with that individual market
coverage for purposes of the preventive services requirements and
therefore will fail to comply with the preventive services
requirements because an HRA or similar arrangement does not provide
preventive services without cost-sharing in all instances. See DOL
Technical Release 2013-03 and IRS Notice 2013-54.
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These final regulations clarify the scope of arrangements, in
addition to HRAs, that can be integrated with other group health plan
coverage by defining and referring to ``account-based plans.'' Account-
based plans are employer-provided group health plans that provide
reimbursements of medical expenses other than individual market policy
premiums, with the reimbursement subject to a maximum fixed dollar
amount for a period. Examples of account-based plans include health
FSAs and medical reimbursement plans that are not HRAs, in addition to
HRAs. Account-based plans that do not qualify as excepted benefits \53\
generally are subject to the market reforms (except that health FSAs
offered through a Code section 125 plan are not subject to the annual
dollar limit prohibition), including the preventive services
requirements under PHS Act section 2713. If the other group health plan
coverage with which an account-based plan is integrated complies with
the requirements under PHS Act sections 2711 and 2713, the account-
based plan also complies with those requirements because, in that case,
the combined benefit satisfies those requirements.\54\
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\53\ Health FSAs will be considered to provide only excepted
benefits if the employer also makes available group health plan
coverage that is not limited to excepted benefits and the health FSA
is structured so that the maximum benefit payable to any participant
cannot exceed two times the participant's salary reduction election
for the health FSA for the year (or, if greater, cannot exceed $500
plus the amount of the participant's salary reduction election). See
26 CFR 54.9831-1(c)(3)(v), 29 CFR 2590.732(c)(3)(v), and 45 CFR
146.145(c)(3)(v).
\54\ See Affordable Care Act Implementation FAQs Part XIX,
available at http://www.dol.gov/ebsa/faqs/faq-aca19.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs19.html.
---------------------------------------------------------------------------
The Departments' prior guidance regarding when an HRA is considered
integrated with another group health plan provides two methods for
integration, each of which has been added to the final regulations and
extended to other account-based plans. In addition to various other
requirements, each integration method requires that under the terms of
the HRA or other account-based plan, (1) an employee (or former
employee) must be permitted to permanently opt out of and waive future
reimbursements from the account-based plan at least annually, and (2)
upon termination of employment either remaining funds are forfeited or
the employee is allowed to opt out of and waive future reimbursements
under the account-based plan.
Stakeholders have requested clarification regarding whether for
this purpose a forfeiture of amounts or a waiver of reimbursements
under an HRA includes an otherwise permanent forfeiture or waiver, if
the amounts will be reinstated or the waiver will be discontinued upon
a fixed date or death. The Departments interpret the prior guidance to
provide, and the final regulations clarify, that forfeiture or waiver
occurs even if the forfeited amounts or waived reimbursements may be
reinstated upon a fixed date, a participant's death, or the earlier of
the two events (the reinstatement event). For this purpose, an HRA 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, the participant
and the participant's beneficiaries have no access to amounts credited
to the HRA until the reinstatement event.\55\ This means that the HRA
may not be used to reimburse or pay medical expenses incurred during
the period after the forfeiture or waiver and prior to reinstatement.
An HRA need not provide for reinstatement of forfeited amounts or
waived reimbursements to be integrated with a non-HRA group health
plan. The final regulations reflect this clarification, and this
clarification applies for integration of HRAs as well as other account-
based plans, as defined in the regulations.
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\55\ During a period in which an HRA has been forfeited or
waived prior to a reinstatement event, the participant is considered
not covered by the HRA. For a former employee (such as a retiree),
an individual's right to have a forfeited or waived HRA reinstated
upon a reinstatement event will not prevent the individual from
receiving the premium tax credit under Sec. 36B during the period
after forfeiture or waiver and prior to reinstatement, if the
individual is otherwise eligible for a premium tax credit. See 26
CFR 1.36B-2(c)(3)(i), proposed Sec. 1.36B-2(c)(3)(iv).
---------------------------------------------------------------------------
The Departments' prior guidance regarding integration of an HRA or
other account-based plan with another group health plan further
provides that integration requires, among other requirements, that the
plan sponsor offering the HRA or other account-based plan also offer to
the employee another group health plan (other than the HRA or other
account-based plan). On February 18, 2015, Treasury and IRS issued
Notice 2015-17, which, in Q&A3, provided for integration of a premium
reimbursement arrangement for an employee's Medicare part B or D
premiums for purposes of the annual dollar limit prohibition and the
preventive services requirements under PHS Act section 2713 if the
arrangement meets certain conditions and the employer offers the
employee another group health plan.\56\ However, Notice 2015-17
provided that the premium reimbursement arrangement for an employee's
Medicare part B or D premiums could not be integrated with Medicare
coverage to satisfy the market reforms because Medicare coverage is not
a group health plan. In response to this prior guidance, stakeholders
have indicated that employers with fewer than 20 employees are unable
to meet the integration test set out in Notice 2015-17 for Medicare
part B or D premium reimbursement arrangements. That is because these
employers that offer group health plan coverage are not required by the
applicable Medicare secondary payer rules to offer group health plan
coverage to their employees who are eligible for Medicare coverage, and
some issuers of insurance for group health plans do not allow these
smaller employers to offer group health plan coverage to their
employees who are eligible for Medicare coverage. In response to these
concerns, these regulations now provide a special rule for employers
with fewer than 20 employees that are not required to offer their group
health plan coverage to employees who are eligible for Medicare
[[Page 72203]]
coverage, and that offer group health plan coverage to their employees
who are not eligible for Medicare, but not to their employees who are
eligible for Medicare coverage. For these employers, a premium
reimbursement arrangement for Medicare part B or D premiums may be
integrated with Medicare (and deemed to satisfy) the annual dollar
limit prohibition and the preventive services requirements under PHS
Act section 2713 if the employees who are not offered the other group
health plan coverage would be eligible for that group health plan but
for their eligibility for Medicare. These employers may use either of
the non-Medicare specific integration tests, as applicable, for
account-based plans for employees who are not eligible for Medicare.
---------------------------------------------------------------------------
\56\ Notice 2015-17 provides special rules for integration of
Medicare Part B and D premium reimbursement arrangements and
TRICARE-related HRAs with other group health plans, along with
various other related pieces of guidance. That guidance continues to
apply but is not repeated in these final regulations.
---------------------------------------------------------------------------
Although in certain circumstances HRAs and other account-based
plans may be integrated with another group health plan to satisfy the
annual dollar limit prohibition, these final regulations incorporate
the general rule set forth in prior subregulatory guidance clarifying
that an HRA and other account-based plans may not be integrated with
individual market coverage, and therefore an HRA or other account-based
plan used to reimburse premiums for the individual market coverage
fails to comply with PHS Act section 2711.
These final regulations, however, do not incorporate all of the
other subregulatory guidance concerning the application of the
Affordable Care Act to HRAs and other account-based plans. It has come
to the Departments' attention that there are a wide variety of account-
based products being marketed, often with subtle but insubstantial
differences, in an attempt to circumvent the guidance set forth by the
Departments on the application of the annual dollar limit prohibition
and the preventive services requirements to account-based plans. The
Departments intend to continue to address these specific instances of
noncompliance. The subregulatory guidance not specifically addressed in
these final regulations continues to apply and the Departments will
continue to address additional situations as necessary.
D. PHS Act Section 2712, Prohibition on Rescissions (26 CFR 54.9815-
2712, 29 CFR 2590.715-2712, 45 CFR 147.128)
PHS Act section 2712, as added by the Affordable Care Act, provides
that a group health plan or health insurance issuer offering group or
individual health insurance coverage must not rescind coverage unless a
covered individual commits fraud or makes an intentional
misrepresentation of material fact. This standard applies to all
rescissions, whether in the group or individual insurance market, or
self-insured coverage. These rules also apply regardless of any
contestability period of the plan or issuer. On June 28, 2010, the
Departments issued interim final regulations implementing PHS Act
section 2712.\57\ The interim final regulations included several
clarifications regarding the standards for rescission, including that
the rules of PHS Act section 2712 apply whether the coverage is
rescinded for an individual or a group. The Departments also issued
Affordable Care Act Implementation FAQs Part II Q7, which clarified
when retroactive terminations in the `normal course of business' would
not be considered rescissions.\58\ These final regulations finalize the
2010 interim final regulations without substantial change and
incorporate the clarifications issued thus far in subregulatory
guidance.
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\57\ 75 FR 37188 (June 28, 2010).
\58\ Affordable Care Act Implementation FAQs Part II, available
at http://www.dol.gov/ebsa/faqs/faq-aca2.html or https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html.
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1. Definition of Rescission
Under the interim final regulations and these final regulations, a
rescission is a cancellation or discontinuance of coverage that has
retroactive effect. For example, a cancellation that treats an
insurance policy as void from the time of an individual's or group's
enrollment is a rescission, whether the cancellation is a result of the
issuer subsequently determining that a valid insurance contract does
not exist or the insurance contract was entered into despite its
noncompliance with applicable law. As another example, a cancellation
that voids benefits paid up to a year before the cancellation is also a
rescission. However, a cancellation or discontinuance of coverage is
not a rescission if it has only prospective effect or to the extent it
is attributable to a failure to timely pay required premiums or
contributions towards the cost of coverage. Other provisions of Federal
and State law limit the grounds for prospective cancellations of
coverage, including PHS Act section 2703 regarding guaranteed
renewability of coverage and PHS Act section 2705 regarding non-
discrimination in rules for eligibility (or continued eligibility)
based on health status.
Under PHS Act section 2712, rescission is not prohibited if a
covered individual commits fraud or makes an intentional
misrepresentation of material fact. Some commenters recommended that
the Departments define the term ``material fact.'' These final
regulations decline this suggestion. However, the Departments have
addressed whether providing false or inaccurate information concerning
tobacco use is considered a misrepresentation of material fact for this
purpose. HHS published final regulations under PHS Act section 2701
(regarding fair health insurance premiums) on February 13, 2013.\59\ In
the preamble to those regulations, HHS stated that, with respect to an
individual who is found to have reported false or inaccurate
information about their tobacco use, the individual may be charged the
appropriate premium that should have been paid retroactive to the
beginning of the plan year. However, as stated in the preamble, the
``remedy of recoupment renders any misrepresentation with regard to
tobacco use no longer a `material' fact for purposes of rescission
under PHS Act section 2712 and its implementing regulations,'' and
therefore, coverage cannot be rescinded on such basis. The Departments
may provide further guidance regarding the definition of a ``material
fact'' for purposes of rescission under PHS Act section 2712 if
additional questions arise.
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\59\ 78 FR 13406, 13414 (February 13, 2013).
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2. Scope and Application
The statutory prohibition related to rescissions is not limited to
rescissions based on prior medical history, rather it precludes plans
and issuers from rescinding coverage under any circumstances except as
provided in the statute and regulations. For example, coverage cannot
be rescinded because an individual makes a mistake on an insurance
application or enrollment form. An example in both the interim final
regulations and in these final regulations clarifies that some plan
errors (such as mistakenly covering a part-time employee for a period
of time under a plan that only covers full-time employees) may be
cancelled prospectively once identified, but not retroactively
rescinded unless there was fraud or intentional misrepresentation of a
material fact by the employee.
The Departments received comments on the interim final regulations
stating that some employers' human resource departments may reconcile
lists of eligible individuals with their plan or issuer via data feed
only once per month, and that routine enrollment adjustments in the
normal course of business should not be considered a rescission.
In response to these comments, the Departments issued an FAQ
concerning
[[Page 72204]]
rescissions on October 8, 2010.\60\ The FAQ stated that if a plan
covers only active employees (subject to the COBRA continuation of
coverage provisions) and an employee pays no premiums for coverage
after termination of employment, the Departments do not consider the
retroactive elimination of coverage back to the date of termination of
employment, due to delay in administrative record-keeping, to be a
rescission. Similarly, if a plan does not cover ex-spouses and the plan
is not notified of a divorce (subject to the COBRA continuation
coverage provisions), and the full COBRA premium is not paid by the
employee or ex-spouse for coverage, the Departments do not consider a
plan's termination of coverage retroactive to the divorce to be a
rescission.\61\
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\60\ Affordable Care Act Implementation FAQs Part II, Q7 at
http://www.dol.gov/ebsa/pdf/faq-aca2.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html.
\61\ In such situations, COBRA may require coverage to be
offered for up to 36 months if the COBRA applicable premium is paid
by the qualified beneficiary.
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3. Termination of Coverage Initiated by Participant, Beneficiary, or
Enrollee
The Departments have been asked whether the rescission rules
prohibit a plan or issuer from retroactively terminating coverage at
the request of a participant, beneficiary, or enrollee. In the
Departments' view, the statutory provision was enacted by Congress to
protect individuals against potential abuses by group health plans and
health insurance issuers; it was not intended to prevent individuals
from exercising their rights and privileges under the terms of the plan
or coverage in accordance with applicable State law, where they are
acting voluntarily and without coercion by the plan or issuer.
Moreover, HHS regulations at 45 CFR 155.430, which govern termination
of enrollment in the Exchange, permit enrollees and the Exchange to
initiate a retroactive termination of enrollment in a QHP through the
Exchange, including instances where the enrollee has the right to
terminate coverage under applicable State law (such as State ``free
look'' cancellations laws).\62\ For these reasons, the Departments
clarify in these final regulations that a retroactive cancellation or
discontinuance of coverage is not a rescission if (1) it is initiated
by the individual (or by the individual's authorized representative)
and the employer, sponsor, 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 (2) it is initiated by the
Exchange pursuant to 45 CFR 155.430 (other than under paragraph
(b)(2)(iii)). The Departments may issue additional subregulatory
guidance if abusive situations or questions arise.
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\62\ State ``free look'' cancellation laws are laws permitting
an individual to cancel coverage within a certain time period, even
following the effectuation of the enrollment.
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4. Interaction With Internal Appeals and External Review
Commenters requested that these final regulations provide that
individuals have the right to appeal a rescission to an independent
third party. PHS Act section 2719 and its implementing regulations
address internal claims and appeals and external review of adverse
benefit determinations. Under the Department of Labor's claims
procedure regulation at 29 CFR 2560.503-1 (the DOL claims procedure
regulation), adverse benefit determinations eligible for internal
claims and appeals processes generally include denial, reduction,
termination of, or a failure to provide or make a payment (in whole or
in part) for a benefit, including a denial, reduction, termination, or
failure to make a payment based on the imposition of a preexisting
condition exclusion, a source of injury exclusion, or other limitation
on covered benefits. The Departments' regulations under PHS Act section
2719 broaden the definition of ``adverse benefit determination'' to
include rescissions of coverage. Therefore, rescissions of coverage are
also eligible for internal claims and appeals and external review for
non-grandfathered health plans, whether or not the rescission has an
adverse effect on any particular benefit at the time of an appeal. The
regulations under PHS Act section 2719 also contain provisions
requiring coverage to remain effective pending the outcome of an
internal appeal.
5. Interaction With COBRA Continuation Coverage
COBRA provides for a temporary continuation of group health
coverage that would otherwise be lost due to certain life events. COBRA
requires group health plans to offer continuation coverage to covered
employees, former employees, spouses, former spouses, and dependent
children when group health coverage would be terminated due to the
following: The death of a covered employee; termination or reduction in
the hours of a covered employee's employment for reasons other than
gross misconduct; a covered employee's becoming entitled to Medicare;
divorce or legal separation of a covered employee and spouse; and a
child's loss of dependent status (and therefore coverage) under the
plan.
COBRA sets forth rules for how and when continuation coverage must
be offered and provided, how employees and their families may elect
continuation coverage, and what circumstances justify terminating
continuation coverage. COBRA allows plans to continue coverage during
an initial 60-day election period and allows plans to continue
providing coverage during the 30-day grace periods for each premium
payment. If a qualified beneficiary fails to pay for coverage during
the initial election period, or fails to pay in full before the end of
a grace period, continuation coverage may be terminated retroactively
under COBRA.
Several commenters sought clarification about the interaction of
the COBRA continuation provisions with the prohibition against
rescissions. The Departments clarify that the regulatory exception to
the prohibition on rescission for failure to timely pay required
premiums or contributions toward the cost of coverage also includes
failure to timely pay required premiums towards the cost of COBRA
continuation coverage. Accordingly, if a group health plan requires the
payment of a COBRA premium to continue coverage after a qualifying
event and that premium is not paid by the applicable deadline, the
prohibition on rescission is not violated if the plan retroactively
terminates coverage due to a failure to elect and pay for COBRA
continuation coverage.
6. Notice of Rescission
Consistent with PHS Act section 2712, under the interim final
regulations and these final regulations, a plan or issuer must provide
at least 30 calendar days advance written notice to each participant
(in the individual market, primary subscriber) who would be affected
before coverage may be rescinded (where permitted). This provides
individuals time to appeal the decision or enroll into new coverage.
This notice is required regardless of whether it is a rescission of
group or individual coverage; or whether, in the case of group
coverage, the coverage is insured or self-insured, or the rescission
applies to an entire group or only to an individual within the group.
Some commenters recommended the 30-day notice of rescission be
coordinated with the rules for providing notices of adverse benefit
determinations under the Departments'
[[Page 72205]]
internal appeals and external review regulations under PHS Act section
2719. Other commenters made specific suggestions regarding the content
of the notice, such as that the notice indicate the basis for the
rescission and include an explanation of the remedies available to the
individual.
Under PHS Act section 2719, the interim final regulations, and
these final regulations, a plan or issuer must provide notice to
individuals, in a culturally and linguistically appropriate manner, of
the reason or reasons for an adverse benefit determination or final
internal adverse benefit determination (including a rescission of
coverage) and a description of available internal appeals and external
review processes, including information on how to initiate an appeal.
The Departments encourage plans and issuers to coordinate notices
related to rescissions and appeal procedures to the extent possible.
E. PHS Act Section 2714, Coverage of Dependents to Age 26 (26 CFR
54.9815-2714, 29 CFR 2590.715-2714, 45 CFR 147.120)
PHS Act section 2714, as added by the Affordable Care Act, provides
that a group health plan or a health insurance issuer offering group or
individual health insurance coverage that makes available dependent
coverage \63\ of children must make such coverage available for
children until attainment of 26 years of age.\64\ On May 13, 2010, the
Departments issued interim final regulations implementing PHS Act
section 2714 and requesting comment.\65\ After issuance of the 2010
interim final regulations, the Departments released Affordable Care Act
Implementation FAQs Parts I and V to address various requests for
clarifications under PHS Act section 2714.\66\ These final regulations
adopt the 2010 interim final regulations without substantial change and
incorporate the clarifications issued thus far in subregulatory
guidance.
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\63\ For purposes of these final regulations, dependent coverage
means coverage of any individual under the terms of a group health
plan, or group or individual health insurance coverage, because of
the relationship to a participant (in the individual market, primary
subscriber).
\64\ Under section 1004(d) of the Reconciliation Act and IRS
Notice 2010-38, 2010-20 IRB 682, released on April 27, 2010,
employers may exclude from the employee's income the value of any
employer-provided health coverage for an employee's child for the
entire taxable year the child turns 26 if the coverage continues
until the end of that taxable year. This means that if a child turns
26 in March, but stays on the plan past December 31st (the end of
most individual's taxable year), the health benefits up to December
31st can be excluded from the employee's income.
\65\ See 75 FR 27122 (May 13, 2010).
\66\ Affordable Care Act Implementation FAQs Part I, Q&A-14,
available at http://www.dol.gov/ebsa/faqs/faq-aca.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html and Affordable Care Act Implementation
FAQs Part 5 and Mental Health Parity Implementation, Q&A 5,
available at http://www.dol.gov/ebsa/faqs/faq-aca5.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html. http://www.dol.gov/ebsa/faqs/faq-aca5.html.
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1. Restrictions on Plan Definition of Dependent
a. Definition of Dependent--Based on Relationship Between Child and
Participant
PHS Act section 2714 provides that the ``Secretary shall promulgate
regulations to define the dependents to which coverage shall be made
available'' under the dependent coverage provision. The 2010 interim
final regulations provided that 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. For example, a
plan or issuer may not deny or restrict coverage for a child who has
not attained age 26 based on the child's financial dependency (upon the
participant or any other person), residency with the participant or
with any other person, student status, employment, or any combination
of those factors. Additional examples of factors that cannot be used
for defining dependent for purposes of eligibility (or continued
eligibility) include eligibility for other coverage \67\ and marital
status of a dependent child.\68\ Because the statute does not
distinguish between coverage for minor children and coverage for adult
children under age 26, these factors also may not be used to determine
eligibility for dependent coverage of minor children.
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\67\ See section II.H.1. of this preamble, entitled ``Special
Rule Relating to Dependent Coverage of Children to Age 26 for
Grandfathered Group Health Plans,'' for discussion of an out-of-date
special rule for grandfathered plans regarding adult children
eligible for other coverage.
\68\ The Affordable Care Act, as originally enacted, required
plans and issuers to make dependent coverage available only to a
child ``who is not married.'' This language was struck by section
2301(b) of the Reconciliation Act. Accordingly, under the interim
final regulations and these final regulations, plans and issuers may
not limit dependent coverage of children based on whether a child is
married (however, a plan or issuer is not required under the final
regulations to cover the spouse of an eligible child).
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It has come to the Departments' attention that certain plans that
utilize an HMO design impose restrictions on eligibility that require
participants and beneficiaries to work, live or reside in the HMO
service area. While these provisions on their face appear to be
generally applicable, the overwhelming impact of such provisions
affects dependent children, who would otherwise be required to be
covered pursuant to PHS Act section 2714. For example, a plan that
utilizes an HMO design that requires participants and beneficiaries to
work, live or reside in the service area would not permit a dependent
child covered under the parent's plan to continue to be eligible for
the plan if the dependent child moves out of the HMO's service area to
attend college. Under the same plan, however, most employees and their
spouses would work, live or reside in the service area.
These final regulations provide that, to the extent such
restrictions are applicable to dependent children up to age 26,
eligibility restrictions under a plan or coverage that require
individuals to work, live or reside in a service area violate PHS Act
section 2714. (This rule does not relate to the extent to which a plan
must cover participants or provide services outside of its service
area). While eligibility provisions of general applicability are
usually outside the scope of PHS Act section 2714, due to the
disproportionate effect on dependent children, these final regulations
do not permit eligibility provisions under a plan or coverage based on
service area, to the extent such restrictions are applicable to
dependent children up to age 26, even if such restrictions are intended
to apply generally to all participants and beneficiaries under the
plan.
b. Definition of Child
PHS Act section 2714 does not require a plan to provide dependent
coverage of children but instead provides that if a plan does provide
dependent coverage of children it must continue to make such coverage
available until the child turns age 26.\69\ Neither PHS Act section
[[Page 72206]]
2714 nor the interim final regulations defined the term child for
purpose of the dependent coverage provision.\70\
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\69\ In general, under section 4980H of the Code, certain
employers (applicable large employers) must either offer health
coverage to their full-time employees (and their dependents) or
potentially pay an assessable payment if at least one full-time
employee receives a premium tax credit for purchasing individual
coverage on an Affordable Insurance Exchange. For purposes of
section 4980H, the term dependent means ``a child (as defined in
section 152(f)(1) of the Code but excluding a stepson, stepdaughter
or an eligible foster child (and excluding any individual who is
excluded from the definition of dependent under section 152 of the
Code by operation of section 152(b)(3) of the Code)) of an employee
who has not attained age 26. A child attains age 26 on the 26th
anniversary of the date the child was born. A child is a dependent
for purposes of section 4980H for the entire calendar month during
which he or she attains age 26. Absent knowledge to the contrary,
applicable large employer members may rely on an employee's
representation about that employee's children and the ages of those
children. The term dependent does not include the spouse of an
employee.'' See 26 CFR 54.4980H-1(a)(12). Under section 152(f)(1) of
the Code a child means an individual who is (i) a son, daughter,
stepson, or stepdaughter of the taxpayer (including a legally
adopted child or an individual lawfully placed for adoption with the
taxpayer) or (ii) an eligible foster child of the taxpayer.
\70\ Under section 1004(d) of the Reconciliation Act and IRS
Notice 2010-38, child means child as defined in section 152(f)(1) of
the Code.
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In response to comments requesting guidance on the definition of
the term child and questions from stakeholders, the Departments
released an FAQ \71\ stating that a group health plan or issuer will
not fail to satisfy the dependent coverage provision merely because it
conditions health coverage on support, residency, or other dependency
factors for individuals under age 26 who are not described in section
152(f)(1) of the Code. For an individual not described in section
152(f)(1), such as a grandchild or niece, a plan may impose additional
conditions on eligibility for health coverage, such as a condition that
the individual be a dependent for income tax purposes. The FAQ also
provided that a plan or issuer does not fail to satisfy the
requirements of PHS Act section 2714 or its implementing regulations
because the plan limits health coverage for children until the child
turns 26 to only those children who are described in section 152(f)(1)
of the Code. These final regulations incorporate the clarifications
provided in the FAQ.
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\71\ Affordable Care Act Implementation FAQs Part I, Q&A 14
(released on September 20, 2010), available at http://www.dol.gov/ebsa/faqs/faq-aca.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html.
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Some commenters requested that the Departments interpret PHS Act
section 2714 to apply to grandchildren. The statute and the 2010
interim final regulations provided that nothing in PHS Act section 2714
requires a plan or issuer to make available coverage for a child of a
child receiving dependent coverage. Because the statute specifically
provides that plans and issuers are not required to make coverage
available to grandchildren, these final regulations do not adopt this
suggestion.
2. Uniformity Irrespective of Age
The 2010 interim final regulations provided that the terms of the
plan or health insurance coverage providing dependent coverage of
children cannot vary based on the age of a child, except for children
age 26 or older. The 2010 interim final regulations contained examples
illustrating that age-based surcharges violate the uniformity
requirement but that cost of coverage increases for tiers with more
covered individuals do not violate this requirement because such an
increase applies without regard to the age of any child. The 2010
interim final regulations also contained an example demonstrating that
a plan that limits the benefit packages offered based on the age of
dependent children violates the uniformity requirement. These final
regulations retain these examples.
Following the 2010 interim final regulations, the Departments
issued an FAQ \72\ that addressed an arrangement under which a group
health plan charges a copayment for physician visits that do not
constitute preventive services to individuals age 19 and over,
including employees, spouses, and dependent children, but waives the
copayment for children under age 19. The FAQ clarifies that the
Departments do not consider such an arrangement to violate the
dependent coverage provision. This arrangement is permissible under the
dependent coverage provision because, while the dependent coverage
provision prohibits distinctions based upon age in dependent coverage
of children under age 26, 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 situation,
the copayments charged to dependent children are the same as those
charged to employees and spouses. (However, with respect to individual
and small group plans required to provide essential health benefits,
distinctions based on age may be considered discriminatory under HHS
regulations regarding essential health benefits.\73\) The final
regulations reflect the clarification contained in this FAQ.
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\72\ Affordable Care Act Implementation Part V and Mental Health
Parity Implementation FAQs, Q&A 5 (released on December 22, 2010),
available at http://www.dol.gov/ebsa/faqs/faq-aca5.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html.
\73\ See 45 CFR 156.125.
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F. PHS Act Section 2719, Internal Claims and Appeals and External
Review (26 CFR 54.9815-2719, 29 CFR 2590.715-2719, 45 CFR 147.136)
PHS Act section 2719, as added by the Affordable Care Act, applies
to group health plans that are not grandfathered health plans and
health insurance issuers offering non-grandfathered coverage in the
group and individual markets, and sets forth standards for plans and
issuers regarding both internal claims and appeals and external review.
With respect to internal claims and appeals processes for group health
plans and health insurance issuers offering group health insurance
coverage, PHS Act section 2719 provides that a non-grandfathered group
health plan or health insurance issuer offering non-grandfathered group
coverage must initially incorporate the internal claims and appeals
processes set forth in regulations promulgated by the Department of
Labor (DOL) at 29 CFR 2560.503-1 (the DOL claims procedure regulation)
and update such processes in accordance with standards established by
the Secretary of Labor. Similarly, with respect to internal claims and
appeals processes for individual health insurance coverage, issuers
must initially incorporate the internal claims and appeals processes
set forth in applicable State law and update such processes in
accordance with standards established by the Secretary of HHS. With
respect to external review, PHS Act section 2719 provides for either a
State external review process or a Federal external review process.
The following list identifies certain regulations and subregulatory
guidance that the Departments have issued to implement these
requirements:
Interim final regulations on July 23, 2010, at 75 FR
43329, implementing the internal claims and appeals and external review
process requirements of PHS Act section 2719;
Technical Release 2010-01, on August 23, 2010, setting
forth interim procedures for Federal External Review;
Technical Guidance, on August 26, 2010, setting forth
interim procedures for Federal External Review for health insurance
issuers in the group and individual markets under the Patient
Protection and Affordable Care Act;
Affordable Care Act Implementation FAQs part I, on
September 20, 2010, providing guidance on outstanding questions
regarding the internal claims and appeals and external review process
requirements of PHS Act section 2719;
Technical Release 2010-02, on September 20, 2010,
establishing an enforcement grace period with respect to some of the
internal claims and appeals standards set forth in the interim final
regulations;
Technical Release 2011-01, on March 18, 2011, extending
the enforcement grace period set forth in Technical Release 2010-02;
[[Page 72207]]
Technical Release 2011-02, on June 22, 2011, setting forth
interim standards for a State-administered external review process
authorized under section 2719(b)(2) of the PHS Act and paragraph (d) of
the interim final regulations;
Amendments to the interim final regulations on June 24,
2011, at 76 FR 37207, with respect to the internal claims and appeals
and external review provisions of PHS Act section 2719 in response to
comments received regarding the interim final regulations; and
Technical Release 2013-01, on March 15, 2013, extending
the interim standards for a State-administered external review process
authorized under section 2719(b)(2) of the PHS Act and paragraph (d) of
the interim final regulations set forth in Technical Release 2011-02.
After consideration of the comments and feedback received from
stakeholders, the Departments are publishing these final regulations.
These final regulations adopt the interim final regulations, as
previously amended, without substantial change. These final regulations
also codify some of the enforcement safe harbors, transition relief,
and clarifications set forth through subregulatory guidance.
Contemporaneous with the issuance of these final regulations, the
Department of Labor is issuing a proposed regulation to amend the DOL
claims procedure regulations under 29 CFR 2560.503-1, as applied to
plans providing disability benefits. The amendment would revise and
strengthen the current DOL claims procedure regulations regarding
claims and appeals applicable to plans providing disability benefits
primarily by adopting the protections and standards for internal claims
and appeals applicable to group health plans under PHS Act section 2719
and these final regulations.
1. Internal Claims and Appeals
In addition to the requirement in PHS Act section 2719(a) that
plans and issuers must initially incorporate the internal claims and
appeals processes set forth in the DOL claims procedure regulation, the
interim final regulations, as amended, provide further standards for
compliance with the internal claims and appeals requirements of PHS Act
2719.\74\ Specifically, under these requirements, in addition to
complying with the internal claims and appeals processes set forth in
the DOL claims procedure regulation, plans and issuers are required to
comply with the following standards: (1) The scope of adverse benefit
determinations eligible for internal claims and appeals includes a
rescission of coverage (whether or not the rescission has an adverse
effect on any particular benefit at the time); (2) A plan or issuer
must notify a claimant of a benefit determination (whether adverse or
not) with respect to a claim involving urgent care as soon as possible,
taking into account the medical exigencies, but not later than 72 hours
after the receipt of the claim by the plan or issuer; (3)
Clarifications with respect to full and fair review, such that plans
and issuers are clearly required to provide the claimant (free of
charge) with new or additional evidence considered, relied upon, or
generated by (or at the direction of) the plan or issuer in connection
with the claim, as well as any new or additional rationale for a denial
at the internal appeals stage, and a reasonable opportunity for the
claimant to respond to such new evidence or rationale; (4)
Clarifications regarding conflicts of interest, such that decisions
regarding hiring, compensation, termination, promotion, or other
similar matters with respect to an individual, such as a claims
adjudicator or medical expert, must not be based upon the likelihood
that the individual will support the denial of benefits; (5) Notices
must be provided in a culturally and linguistically appropriate manner,
as required by the statute, and as set forth in paragraph (e) of the
interim final regulations, as amended; (6) Notices to claimants must
provide additional content, including that any notice of adverse
benefit determination or final internal adverse benefit determination
must include information sufficient to identify the claim involved,
including the date of the 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, and
the treatment code and its corresponding meaning; and (7) With the
exception of de minimis violations under specified circumstances, if a
plan or issuer fails to adhere to all the requirements of the interim
final regulations, as amended, the claimant is deemed to have exhausted
the plan's or issuer's internal claims and appeals process, and the
claimant may initiate any available external review process or remedies
available under ERISA or under State law.
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\74\ The statute requires the Secretary of Health and Human
Services to set forth processes for internal claims and appeals in
the individual market. Under the interim final regulations, the
Secretary of Health and Human Services has determined that a health
insurance issuer offering individual health insurance coverage must
generally comply with all the requirements for the internal claims
and appeals process that apply to group health coverage. Also, see
45 CFR 147.136 for additional requirements for coverage in the
individual market.
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To address certain relevant differences in the group and individual
markets the interim final regulations, as amended, provided that health
insurance issuers offering individual coverage must comply with three
additional requirements for internal claims and appeals processes.
First, initial eligibility determinations in the individual market must
be included within the scope of claims eligible for internal appeals.
Second, health insurance issuers offering individual coverage are only
permitted to have one level of internal appeal. Third, health insurance
issuers offering individual coverage must maintain records of all
claims and notices associated with the internal claims and appeals
process for six years. The issuer must make such records available for
examination by the claimant or State, or Federal oversight agency upon
request.
These final regulations generally incorporate the standards of the
interim final regulations, as amended, and the Departments' associated
guidance, without major change.
a. Full and Fair Review
The interim final regulations provided that plans and issuers must
provide the claimant (free of charge) with new or additional evidence
considered, relied upon, or generated by (or at the direction of) the
plan or issuer in connection with the claim, as well as any new or
additional rationale as soon as possible and sufficiently in advance of
the date on which the notice of the final adverse benefit determination
is required to be provided under the DOL claims procedure regulations.
Since the issuance of the interim final regulations and subsequent
subregulatory guidance, stakeholders have requested additional
clarification regarding how to provide a full and fair review in
accordance with the requirements set forth in the regulations.
Commenters requested additional guidance related to the timing and
amount of information required to be provided in order to satisfy this
requirement. Specifically, individuals asked whether such information
actually must be provided automatically to participants and whether or
not it would be sufficient to send participants a notice informing them
of the availability of new or additional evidence or rationale. The
Departments retain the requirement that plans and issuers provide the
new or additional evidence or rationale automatically. In
[[Page 72208]]
the Departments' view, fundamental fairness requires that participants
and beneficiaries have an opportunity to rebut or respond to any new or
additional evidence upon which a plan or issuer may rely. Therefore,
plans and issuers that wish to rely on any new or additional evidence
or rationale in making a benefit determination must send such new or
additional evidence or rationale to participants as soon as it becomes
available to the plan or issuer.
In order to comply with this requirement, a plan or issuer must
send the new or additional evidence or rationale to the participant.
Merely sending a notice informing participants of the availability of
such information fails to satisfy this requirement. To address the
narrow circumstance raised by some comments that the new or additional
information could be first received so late that it would be impossible
to provide it, these final regulations provide that 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 or issuer must notify the claimant of the benefit
determination as soon as a plan or issuer acting in a reasonable and
prompt fashion can provide the notice, taking into account the medical
exigencies.
2. Culturally and Linguistically Appropriate Standard (CLAS)
PHS Act section 2719 requires group health plans and health
insurance issuers to provide relevant notices in a culturally and
linguistically appropriate manner. The interim final regulations, as
amended, set forth a requirement to provide notices in a non-English
language if at least a specified percentage of residents in a county
are literate only in the same non-English language. Specifically, with
respect to group health plans and health insurance issuers offering
group or individual health insurance coverage, the interim final
regulations established that the threshold percentage of people who are
literate only in the same non-English language is set at ten percent or
more of the population residing in the claimant's county, as determined
in guidance based on American Community Survey data published by the
United States Census Bureau. Furthermore, the interim final
regulations, as amended, required that each notice sent by a plan or
issuer to an address in a county that meets this threshold include a
one-sentence statement in the relevant non-English language about the
availability of language services. In addition, under the interim final
regulations, as amended, plans and issuers must provide a customer
assistance process (such as a telephone hotline) with oral language
services in the non-English language and provide written notices in the
non-English language upon request.
In response to the culturally and linguistically appropriate
standards (CLAS) set forth in the amendments to the interim final
regulations described in the prior paragraph, the Departments received
many comments from various stakeholders. Some commenters requested that
the Departments incorporate the prior proposed CLAS (rather than the
amended CLAS) into these final regulations, citing that the prior
standard was less costly for plans and issuers than was stated in the
proposed regulations. Other commenters requested that the threshold
percentage that triggers the CLAS requirements be reduced to a lower
percentage to capture a greater number of counties. Other stakeholders
supported the CLAS requirements as set forth in the amendments to the
interim final regulations. Stakeholders that support the amended CLAS
reiterated prior comments that the Departments received that opposed
the ``tagging and tracking'' requirement.\75\
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\75\ Under the interim final regulations, the CLAS standard
included a ``tagging and tracking requirement'' which required plans
and issuers, to the extent individuals request a document in a non-
English language, to ``tag'' and ``track'' such request so that any
future notices would be provided automatically in the non-English
language.
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In light of all the comments received, these final regulations
retain the CLAS requirements as set forth in the amendment to the
interim final regulations. The Departments believe that the CLAS
requirements appropriately balance the objective of protecting
consumers by providing understandable notices to individuals who speak
primary languages other than English with the goal of imposing
reasonable language access requirements on plans and issuers.
Furthermore, the Departments note that nothing in these regulations
should be construed as limiting an individual's rights under Federal or
State civil rights statutes, such as section 1557 of the Affordable
Care Act and Title VI of the Civil Rights Act of 1964 (Title VI) which
prohibits covered entities, including issuers participating in Medicare
Advantage, from discriminating on the basis of race, color, or national
origin. To ensure non-discrimination on the basis of national origin
under Title VI, recipients are required to take reasonable steps to
ensure meaningful access to their programs and activities by limited
English proficient persons. (For more information, see, ``Guidance to
Federal Financial Assistance Recipients Regarding Title VI Prohibition
Against National Origin Discrimination Affecting Limited English
Proficient Persons,'' available at http://www.hhs.gov/ocr/civilrights/resources/laws/revisedlep.html.)
3. Extension of the Transition Period for State External Review
Processes
PHS Act section 2719(b) requires that a non-grandfathered group
health plan that is not a self-insured plan that is not subject to
State insurance regulations and a health insurance issuer offering non-
grandfathered group or individual health insurance coverage comply with
an applicable State external review process if that process includes,
at a minimum, the consumer protections set forth in the Uniform Health
Carrier External Review Model Act issued by the National Association of
Insurance Commissioners (the NAIC Uniform Model Act). Paragraph (c)(2)
of the 2010 interim final regulations under PHS Act section 2719, as
amended, sets forth the minimum consumer protection standards that a
State external review process must include to qualify as an applicable
State external review process under PHS Act section 2719(b)(1) (NAIC-
parallel external review process).
Under PHS Act section 2719(b)(2), if a State's external review
process does not meet the minimum consumer protection standards set
forth in the NAIC Uniform Model Act (or if a plan is self-insured and
not subject to State insurance regulation), group health plans and
health insurance issuers in the group and individual markets in that
State are required to implement an effective external review process
that meets minimum standards established by the Secretary of HHS
through guidance. These standards must be similar to the standards
established under PHS Act section 2719(b)(1) and must meet the
requirements set forth in paragraph (d) of the 2010 interim final
regulations, as amended.
In June 2011, the Departments amended the July 2010 interim final
regulations and announced that plans and issuers could continue to
participate in a State external review process that met Federal
standards that were NAIC-similar for a limited time (the NAIC-similar
external review
[[Page 72209]]
process), in anticipation that such an allowance would reduce market
disruption during a transition period. Contemporaneous with the June
2011 amendment, the Departments issued guidance which, among other
things, established the NAIC-similar external review process.
The Departments recognize that many States have done considerable
work to bring their external review laws and processes into compliance
with the NAIC Uniform Model Act and, because of those efforts, the
Departments have extended the transition periods to allow States more
time to meet the NAIC-parallel external review process standards.
States continue to make changes to their laws through what have often
proven to be complex and time consuming processes, often involving
legislative changes; and it is apparent that more time is needed for
some States to achieve NAIC-parallel external review processes.
Therefore, the Departments are extending the NAIC-similar external
review process transition period so that the last day of the transition
period is December 31, 2017. Through December 31, 2017, an applicable
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), if it meets the temporary standards established by
the Secretary in guidance for a process similar to the NAIC Uniform
Model Act. During this transition period, the NAIC-similar external
review process will continue to apply \76\ for non-grandfathered group
health plans and issuers of non-grandfathered group or individual
coverage in the State.\77\ This modification seeks to minimize cost and
confusion for participants and enrollees, issuers, and plans alike.
Furthermore, the extension will provide States that are currently in
the process of making changes to external review laws time to implement
NAIC-parallel external review processes. The Departments will continue
to work with health insurance issuers, States, and other stakeholders
to assist them in coming into compliance with the law. Once this
transition period has ended, plans and issuers in a State that has not
implemented the NAIC-parallel external review process will be required
to comply with a Federal external review process.
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\76\ If a State enacts an NAIC-parallel law prior to January 1,
2018, coverage subject to that State law will be required to comply
with the provisions of that State law, in accordance with ERISA
section 731 and PHS Act section 2719 and 2724.
\77\ See Technical Release 2011-02, Guidance on External Review
for Group Health Plans and Health Insurance Issuers Offering Group
and Individual Health Coverage, and Guidance for States on State
External Review Processes, June 22, 2011. The temporary standards
were extended in March 15, 2013 in Technical Release 2013-01,
Extension of the Transition Period for the Temporary NAIC-Similar
State External Review Process under the Affordable Care Act.
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4. Federal External Review
PHS Act section 2719(b)(2) provides that plans and issuers in
States without an external review process that meets the requirements
of PHS Act section 2719(b)(1) or that are self-insured plans not
subject to State insurance regulation shall implement an effective
external review process that meets minimum standards established by the
Secretary of HHS through guidance and that is similar to a State
external review process described in PHS Act section 2719(b)(1). The
interim final regulations reiterated this statutory requirement, and
also provided additional standards, including that the Federal external
review process, like the State external review process, will provide
for expedited external review and additional consumer protections with
respect to external review for claims involving experimental or
investigational treatment. The interim final regulations also set forth
the scope of claims eligible for review under the Federal external
review process. The interim final regulations also established the
procedural standards that apply to claimants, plans, and issuers under
this Federal external review process, as well as the substantive
standards under this process. These final regulations incorporate both
the procedural and substantive standards established in the interim
final regulations and subsequent subregulatory guidance without
substantial change and with minor clarifications.
a. Scope of Federal External Review Process
The 2010 interim final regulations set forth the original scope of
claims eligible for external review under the Federal external review
process. Specifically, any adverse benefit determination (including
final internal adverse benefit determination) could be reviewed unless
it related to a participant's or beneficiary's failure to meet the
requirements for eligibility under the terms of a group health plan
(for example, worker classification and similar issues were not within
the scope of the Federal external review process). After considering
comments received in response to the 2010 interim final regulations,
the Departments suspended the original rule and temporarily narrowed
its scope. The amended scope limited the Federal external review
process to claims that involve (1) 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, or its determination that a
treatment is experimental or investigational), as determined by the
external reviewer; and (2) a rescission of coverage (whether or not the
rescission has any effect on any particular benefit at the time). The
amendments also provided two examples of claims involving medical
judgment.
The Departments received mixed comments in response to the revised
scope of Federal external review in the 2011 amendment to the July 2010
interim final regulations. Generally, comments supported narrowing the
scope to decisions based on medical judgment and suggested permanently
adopting the standards in the 2011 amendment. However, there were also
commenters that objected to limiting the scope and favored the original
scope as stated in the July 2010 interim final regulations. Some of
these commenters stated that the description of medical judgment was
ambiguous and that it was unclear how to determine whether a claim
involved ``medical judgment.'' Other commenters disagreed with the
description of medical judgment, finding either the explanation was too
vague or that certain information in the examples did not fall within
what was normally considered medical judgment.
Additionally, the Departments received comments requesting more
clarity around the treatment of coding issues under the amended scope
of Federal external review. The Departments recognize that there may be
instances when a patient may have a procedure performed that is similar
to another and a coding issue impacts whether coverage is provided. For
example, a patient may need a stoma revision, and recent significant
weight loss necessitates a procedure to remove the patient's excess
skin and tissue prior to addressing the stoma. However, the skin
removal procedure may be coded as a cosmetic surgery, such as an
abdominoplasty or ``tummy tuck'', instead of as a panniculectomy, and
is therefore not covered. In this case both procedures involve the
removal of skin from the abdomen, but one procedure is an excluded
cosmetic surgery while the other is covered so long as certain medical
criteria are met. This dispute would likely be resolved via an internal
appeal, but in the event that the initial decision to deny coverage was
affirmed on an internal appeal, the claimant
[[Page 72210]]
could have the claim reviewed in a Federal external review process.
Medical judgment is necessary to determine whether the correct code was
used in the patient's case. To the extent that a coding error such as
this one involves medical judgment, the claim is within the scope of
Federal external review under the July 2010 interim final regulations,
as amended.
After consideration of comments, these final regulations make
permanent the scope for Federal external review as set out in the 2011
amendments to the July 2010 interim final regulations, to include only
an adverse benefit determination that involves medical judgment as
determined by the external reviewer, or a rescission of coverage. The
interim final regulations included a non-exhaustive list of adverse
benefit determinations that involve medical judgment. The final
regulations add two items to the list of adverse benefit determinations
that involve medical judgment: (1) A plan's or issuer's determination
of whether a participant or beneficiary is entitled to a reasonable
alternative standard for a reward under a wellness program, and (2) a
plan's or issuer's determination of whether a plan is complying with
the nonquantitative treatment limitation provisions of the Mental
Health Parity and Addiction Equity Act and its implementing
regulations, which generally require, among other things, parity in the
application of medical management techniques. Both of these
clarifications were included in preambles to regulations issued
previously by the Departments.\78\
---------------------------------------------------------------------------
\78\ See 78 FR 33158, 33164 (June 3, 2013); see also 78 FR
68240, 68247-8 (November 13, 2013).
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b. Federal External Review Process for Self-Insured Group Health Plans
The preamble to the 2010 interim final regulations stated that the
Departments will address in sub-regulatory guidance how non-
grandfathered self-insured group health plans may comply with the
requirements of the new Federal external review process. The Department
of Labor issued Technical Releases 2010-01 and 2011-02 regarding
procedures for Federal external review.\79\ The technical releases set
forth these procedures for non-grandfathered self-insured group health
plans not subject to a State external review process. Technical Release
2011-02 also provided non-grandfathered health insurance issuers
subject to a Federally-administered external review process \80\ and
all non-grandfathered self-insured, non-Federal governmental plans with
the option of using the external review process set out in Technical
Release 2010-01.
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\79\ See Technical Release 2010-01, available at: http://www.dol.gov/ebsa/pdf/ACATechnicalRelease2010-01.pdf and Technical
Release 2011-02, available at: http://www.dol.gov/ebsa/pdf/tr11-02.pdf.
\80\ Where a State's external review process does not meet the
Federal consumer protection standards, issuers and self-insured non-
Federal governmental plans may choose to utilize either the Federal
IRO external review process or an HHS -administered Federal external
review process in which a designated Federal contractor will perform
all functions of the external review.
---------------------------------------------------------------------------
In general, under these procedures, a group health plan must first
allow a claimant to file a request for Federal external review with the
plan. The group health plan must then complete a preliminary review of
the request within five business days following the date of receipt of
the external review request. Within one business day after completion
of the preliminary review, the plan must issue a notification in
writing to the claimant. If 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 (toll free
number 866-444-EBSA (3272)). Upon its determination that a request is
eligible for external review, the group health plan must then assign an
independent review organization (IRO), accredited by URAC or by a
similar nationally-recognized accrediting organization, to conduct the
external review. The IRO must timely notify the claimant in writing of
the external review and provide the claimant 10 business days to submit
additional information that the IRO must consider. The group health
plan must provide the IRO with any documents and information used in
making the original determination within five business days after the
date of the assignment and the IRO must forward any information
submitted by the claimant to the group health plan within one business
day after receipt of the information. The IRO must review all
information and documents timely received and must provide written
notice of the final external review decision to the claimant and the
group health plan within 45 days after the request for the external
review. After the final external review decision, the IRO must maintain
records of all associated claims and notices for six years. If the IRO
has decided to reverse the original determination, then, upon receipt
of the IRO's notice of this decision, the group health plan must
immediately provide coverage or payment for the claim.
The technical releases also provided that a group health plan must
allow a claimant to make a request for expedited external review for
benefit determinations involving a medical condition for which the
timeframe for completion of an expedited internal appeal or standard
external review under the interim final regulations would seriously
jeopardize the life or health of the claimant or would jeopardize the
claimant's ability to regain maximum function. The IRO must provide a
notice of the final external review decision 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 expedited
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.
These final regulations incorporate the guidance in Technical
Releases 2010-01 and 2011-02 without substantial change. These final
regulations also continue to permit non-grandfathered self-insured
plans to comply with the external review process outlined in these
final regulations or a State external review process if the State
chooses to expand access to their State external review process to
plans that are not subject to the applicable State laws.
Furthermore, these final regulations continue to provide issuers
subject to a Federally-administered external review process and all
self-insured, non-Federal governmental plans with the option of
electing the private accredited IRO process for external review
described in these final regulations or the Federally-administered
external review process, which is administered by HHS (also referred to
as the HHS-administered external review process).
Similar to the technical releases, these final regulations continue
to provide that group health plans must assign an IRO that is
accredited by URAC or by similar nationally-recognized accrediting
organization to conduct the external review. Moreover, the plan must
take action to protect against bias and to ensure independence.
Accordingly, plans must contract with at least three IROs for
assignments under the plan and rotate claims assignments among them (or
incorporate other independent, unbiased methods for selection of IROs,
such as random selection). In addition, the IRO may not be eligible for
any financial incentives based on the likelihood that the IRO
[[Page 72211]]
will support the denial of benefits. (Of course, plans also may not
terminate an IRO's contract in retaliation for granting claims.) For
issuers and all self-insured, non-Federal governmental plans
participating in the HHS-administered external review process, the
requirement to take action to protect against bias and to ensure
independence is satisfied without contracting with three IROs for
assignment and rotating the claims assignments among them. Under the
HHS-administered external review process, there are other unique
factors that ensure independence and the absence of bias such as HHS
oversight and lack of privity of contract between the issuer or self-
insured non-Federal governmental plan and the IRO.
After issuance of the interim final regulations and technical
releases, the Departments received questions relating to self-insured
group health plans contracting directly with IROs. While such a group
health plan must designate an IRO to conduct any external review,
neither the interim final regulations nor the technical releases
require a plan to contract directly with any IRO. As clarified in the
FAQs about the Affordable Care Act implementation, issued on September
20, 2010, where a self-insured plan contracts with a third party
administrator that, in turn, contracts with an IRO, the standards of
the technical release can be satisfied in the same manner as if the
plan had contracted directly. Such a contract does not automatically
relieve the plan from responsibility if there is a failure to provide
an individual with external review and fiduciaries of plans that are
subject to ERISA have a duty to monitor the service providers to the
plan. Furthermore, plans may contract with an IRO in another State, as
these final regulations do not require the plan to be located in the
same State as the IRO. If additional questions arise regarding the IRO
external review process, the Departments may issue additional
subregulatory guidance.
c. Filing Fees for External Review
The Departments also received comments related to the standard
allowing consumers to be charged a filing fee when requesting external
review. While the original 2004 NAIC model upon which the 2010 interim
final regulations was based expressly permitted imposition of a nominal
filing fee for a claimant requesting an external review, and a small
number of States have adopted this approach, the 2010 NAIC model did
not address this topic. Commenters on the 2010 interim final
regulations indicated that the ability to charge a filing fee should be
prohibited because such fees may dissuade consumers from filing an
appeal, even in cases where the fee is not a financial hardship for the
consumer.
The Departments find the change in the NAIC model to be important
and are concerned that any fee may impose a financial hardship on some
claimants or discourage them from seeking external review. Therefore,
these final regulations generally prohibit the imposition of filing
fees for external review on claimants. However, the Departments
recognize that several States' external review processes currently
applicable to group and individual coverage permit nominal filing fees.
Therefore, in determining whether a State external review process
provides the claimants with minimum consumer protections, these final
regulations do not invalidate existing State external review processes
because they permit a nominal filing fee, consistent with the 2004 NAIC
model.\81\ Therefore, plans and coverage subject to such laws may
continue to impose nominal fees for as long as such laws continue to
apply. For this purpose, consistent with the interim final regulations,
to be considered nominal, the filing fee must not exceed $25, must be
refunded to the claimant if the adverse benefit determination (or final
internal adverse benefit determination) is reversed through external
review, 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. All other plans
and coverage must pay the full cost of the IRO for conducting the
external review, without imposing any nominal filing fee.
---------------------------------------------------------------------------
\81\ Twelve States expressly authorize nominal fees:
Connecticut, Hawaii, Kentucky, Massachusetts, Minnesota, New Jersey,
New York, North Dakota, Rhode Island, South Dakota, Vermont, and
Wyoming.
---------------------------------------------------------------------------
G. PHS Act Section 2719A, Patient Protections (26 CFR 54.9815-2719A, 29
CFR 2590.715-2719A, 45 CFR 147.138)
PHS Act section 2719A, as added by the Affordable Care Act
provides, with respect to a non-grandfathered group health plan or
health insurance issuer offering non-grandfathered group or individual
health insurance coverage, rules regarding the designation of primary
care providers, if a plan or issuer requires or provides for
designation by a participant, beneficiary, or enrollee of a
participating primary care provider. In addition, the statute provides
requirements relating to benefits for emergency services. On June 28,
2010, the Departments issued interim final regulations implementing PHS
Act section 2719A.\82\ The Departments also released Affordable Care
Act Implementation FAQs Part I Q15 to address an issue with respect to
emergency services.\83\ These regulations adopt the 2010 interim final
regulations without substantial change and incorporate the
clarification issued in subregulatory guidance.
---------------------------------------------------------------------------
\82\ 75 FR 37188 (June 28, 2010).
\83\ Affordable Care Act Implementation FAQs Part I, Q&A-15,
available at http://www.dol.gov/ebsa/faqs/faq-aca.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html.
---------------------------------------------------------------------------
1. Choice of Healthcare Professional
The interim final regulations and these final regulations state
that if a plan or issuer 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, and enrollee to designate any primary care provider who is
available to accept the participant, beneficiary, or enrollee and who
participates in the network of the plan or issuer.
Commenters recommended clarifying that in instances where a
participant, beneficiary, or enrollee is incapacitated, a family member
may select the primary care provider on their behalf. Under existing
State and Federal law, including ERISA, a duly authorized
representative is permitted to act on behalf of a participant or
beneficiary for all purposes, including the designation of a primary
care provider as provided under these final regulations. The final
regulations regarding the designation of a primary care provider do not
include any new text to address cases of incapacity. However, as with
all of the market reform provisions, a duly authorized representative
may act on behalf of a participant or beneficiary to the extent
permitted under other applicable Federal and State law.
Commenters recommended that participants, beneficiaries, and
enrollees be allowed to designate a provider of any specialty or
licensure as their primary care provider to improve access to care. For
example, commenters recommended that enrollees have the option of
designating a nurse practitioner as their primary care provider. The
Departments do not define primary care provider for purposes of these
final regulations. The classification of who is considered a primary
care provider is determined under the terms of the plan or coverage
[[Page 72212]]
and in accordance with applicable State law.
If a plan or issuer requires or provides for the designation of a
participating primary care provider for a child by a participant,
beneficiary, or enrollee, the plan or issuer must permit the
designation of a physician (allopathic or osteopathic) who specializes
in pediatrics 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. The general terms of the plan or health insurance
coverage regarding pediatric care otherwise are unaffected, including
any exclusion with respect to coverage of pediatric care.
Some commenters recommended that participants, beneficiaries, or
enrollees have the option to designate physicians of various pediatric
sub-specialties as the child's primary care provider to improve access
to specialty care without prior authorization from a primary care
coordinator. For example, commenters suggested that a pediatric cancer
patient with a serious chronic condition should have the option of
designating a pediatric oncologist that can provide cancer treatment as
well as other routine treatment as the child's primary care provider.
The Departments interpret this provision to mean that if a plan or
issuer requires or provides for the designation of a participating
primary care provider for a child by a participant, beneficiary, or
enrollee, the plan or issuer must permit the designation of any
physician (allopathic or osteopathic) who specializes in pediatrics,
including pediatric subspecialties, based on the scope of that
provider's license under applicable State law. The designated provider
must also participate in the plan network and be available to accept
the child. These final regulations incorporate this clarification.
The interim final regulations also established requirements for a
plan or issuer that provides coverage for obstetrical or gynecological
care and requires the designation of an in-network primary care
provider. Specifically, the plan or issuer may not require
authorization or referral by the plan, issuer, or any person (including
a primary care provider) for a female participant, beneficiary, or
enrollee who seeks obstetrical or gynecological care provided by an in-
network health care professional who specializes in obstetrics or
gynecology. Plans and issuers must also treat the provision of
obstetrical and gynecological care, and the ordering of related
obstetrical and gynecological items and services, by the professional
who specializes in obstetrics or gynecology as the authorization of the
primary care provider. For this purpose, a health care professional
specializing in obstetrics or gynecology is any individual who is
authorized under applicable State law to provide obstetrical or
gynecological care, and is not limited to a physician.
Commenters sought clarification that women of all ages may receive
obstetrical and gynecological care without prior authorization or
referral by the plan, issuer, or any person (including a primary care
provider), noting that the statutory provision contains no restrictions
based on the age of a participant, beneficiary or enrollee. The
Departments agree that all women regardless of age are ensured direct
access to obstetrical and gynecological care under this provision.
Since the promulgation of the interim final regulations, it has
come to the Departments' attention that some plans and issuers utilize
plan designs where the delivery of care is coordinated through medical
groups within the network based on the geographic location of the
participant and the provider. Specifically, the Departments have
encountered plan provisions in insured group health plan coverage that
require participants to designate a primary care provider but restrict
a participant's choice of provider based on the distance that the
participant lives or works from the provider. Stakeholders requested
that the Departments clarify in the final regulations that the choice
of healthcare professional provision does not prohibit the application
of such geographical limitations with respect to the selection of
primary care providers. Stakeholders highlighted that prohibiting such
geographical limitations would fundamentally disrupt these plan
designs, as well as the underlying negotiated capitation arrangements
(where payment is rendered on a per person rather than per service
basis). Stakeholders also noted that the underlying provider contracts
do not permit providers to accept participants that are not within the
specified geographic limit, and, accordingly, such limitations should
not violate these provisions of the regulations, as the providers are
not available to accept such participants, based on the terms of the
plan, and as required by the regulations.
The Departments recognize the importance of allowing plans and
issuers the flexibility to deliver care in a cost-effective and
efficient manner. Accordingly, these final regulations include a
codification of the Departments' interpretation that plans and issuers
are not prohibited under PHS Act section 2719A from applying reasonable
and appropriate geographic limitations with respect to which
participating primary care providers are considered available for
purposes of selection as primary care providers, in accordance with the
terms of the plan, the underlying provider contracts, and applicable
State law. The Departments may provide additional guidance if questions
persist or if the Departments become aware of geographic limitations
that unduly restrict a participant's choice of provider.
2. Emergency Services
a. Additional Administrative Requirements
Under the interim final regulations and these final regulations, if
a group health plan or issuer provides any benefits with respect to
services in the emergency department of a hospital, then the plan or
issuer must provide coverage for emergency services without the
individual or the health care provider having to obtain prior
authorization (even if the emergency services are provided out of
network). For a plan or health insurance coverage with a network of
providers that provide benefits for emergency services, the plan or
issuer may not impose any administrative requirement or limitation on
benefits for out-of-network emergency services that is more restrictive
than the requirements or limitations that apply to in-network emergency
services.
b. Out-of-Network Cost-Sharing Requirements
Cost-sharing requirements expressed as a copayment amount or
coinsurance rate imposed for out-of-network emergency services cannot
exceed the cost-sharing requirements that would be imposed if the
services were provided in-network. The preamble to the interim final
regulations explained that out-of-network providers may bill patients
for the difference between the providers' billed charges and the amount
collected from the plan or issuer and the amount collected from the
patient in the form of a copayment or coinsurance amount (referred to
as balance billing \84\). Section 1302(c)(3)(B) of the Affordable Care
Act excludes such balance billing amounts from the definition of cost
sharing, and the requirement in section 2719A(b)(1)(C)(ii)(II) that
cost sharing for out-of-network services be limited to that imposed in
network only applies to
[[Page 72213]]
cost sharing expressed as a copayment amount or coinsurance rate.
Because the statute neither requires plans or issuers to cover balance
billing amounts, nor prohibits balance billing, even where the
protections in the statute apply, patients may still be subject to
balance billing. In the preamble to the interim final regulations under
PHS Act section 2719A, the Departments explained that it would defeat
the purpose of the protections in the statute if a plan or issuer paid
an unreasonably low amount to a provider, even while limiting the
coinsurance or copayment associated with that amount to in-network
amounts.\85\
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\84\ See Uniform Glossary of Health Coverage and Medical Terms
at http://www.dol.gov/ebsa/pdf/sbcuniformglossaryproposed.pdf and
https://www.cms.gov/apps/glossary.
\85\ 75 FR 37188, 37194 (June 28, 2010).
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To avoid the circumvention of the protections of PHS Act section
2719A, the Departments determined it necessary that a reasonable amount
be paid before a patient becomes responsible for a balance billing
amount. Therefore, as provided in the interim final regulations and
these final regulations, a plan or issuer must pay a reasonable amount
for emergency services by some objective standard. Specifically, a plan
or issuer satisfies the copayment or coinsurance limitations in the
statute if it provides benefits for out-of-network emergency services
(prior to imposing in-network cost sharing) in an amount at least equal
the greatest of: (1) The median amount negotiated with in-network
providers for the emergency service; (2) 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); or (3) the amount that would be paid
under Medicare for the emergency service (minimum payment standards).
The interim final regulations under PHS Act section 2719 clarified that
the cost-sharing requirements create a minimum payment requirement. The
cost-sharing requirements do not prohibit a group health plan or health
insurance from providing benefits with respect to an emergency service
that are greater than the amounts specified in the regulations.
Some commenters expressed concern about the level of payment for
out-of-network emergency services and urged the Departments to require
plans and issuers to use a transparent database to determine out-of-
network amounts. The Departments believe that this concern is addressed
by our requirement that the amount be the greatest of the three amounts
specified in paragraphs (b)(3)(i)(A), (b)(3)(i)(B), and (b)(3)(i)(C) of
this section (which are adjusted for in-network cost-sharing
requirements).
c. Clarifications Regarding Balance Billing
Some commenters sought clarification about the interaction of the
minimum payment standards under the interim final regulations and State
laws that prohibit balance billing for emergency services. Balance
billing generally is the practice of billing by a provider that is not
a preferred provider for the difference between the charge of a
provider that is not a preferred provider and the allowed amount under
the plan or coverage. Some stakeholders expressed their opposition to
the use of balance billing because it creates a substantial financial
burden and may discourage a participant, beneficiary, or enrollee from
obtaining the care needed in an emergency situation. Other stakeholders
suggested that plans and issuers should be required to negotiate
contracts with hospitals and facility[hyphen]based providers that avoid
balance billing. However, the statute does not require plans or issuers
to cover balance billed amounts, nor does it prohibit balance billing.
Even where the protections in the statute apply, a participant,
beneficiary, or enrollee may be subject to balance billing. In the
future, the Departments will consider ways to prevent providers from
billing a participant, beneficiary, or enrollee for emergency services
from out-of-network providers at in-network hospitals and facilities.
States may also consider ways to prevent balance billing in these
circumstances.
The minimum payment standards are designed to reduce potential
amounts of balance billing to patients. Stakeholders commented that in
circumstances where patients will not be balance billed (because
balance billing is prohibited or because the issuer, rather than the
patient, is required to cover the balance bill), the minimum payment
standards are not necessary. In response to these comments, the
Departments issued an FAQ \86\ stating that the minimum payment
standards set forth in the interim final regulations were developed to
protect patients from being financially penalized for obtaining
emergency services on an out-of-network basis. If State law prohibits
balance billing, plans and issuers are not required to satisfy the
payment minimum set forth in the regulations. Similarly, if a plan or
issuer is contractually responsible for any amounts balanced billed by
an out-of-network emergency services provider, the plan or issuer is
not required to satisfy the payment minimum. In both situations,
however, 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. In addition, a plan or issuer must
provide an enrollee or beneficiary adequate and prominent notice of
their lack of financial responsibility with respect to amounts balance
billed in order to prevent inadvertent payment by an enrollee or
beneficiary. These final regulations incorporate this clarification.
The regulations do not preempt existing State consumer protection laws
and do not prohibit States from enacting new laws with respect to
balance billing that would provide consumer protections at least as
strong as the Federal statute.
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\86\ See Affordable Care Act Implementation FAQ Part I Q15 at
http://www.dol.gov/ebsa/faqs/faq-aca.html and.https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html.
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In response to the interim final regulations, commenters also
requested that the Departments require plans and issuers to inform a
participant, beneficiary, or enrollee using clear and understandable
language of the consequences of using out-of-network emergency
services, including the possibility of balance billing. Another
commenter stated that the summary plan description (SPD) provides
sufficient information to meet the notice requirements. The Departments
agree that plans and issuers must disclose the terms of the coverage as
part of plan documents and are not adding a new notice requirement at
this time.
d. Definition of Emergency Services
In applying the rules relating to emergency services, the terms
emergency medical condition, emergency services, and stabilize have the
meaning given to those terms under the Emergency Medical Treatment and
Labor Act (EMTALA), section 1867 of the Social Security Act. Under
EMTALA, the term emergency services includes (1) ``an appropriate
medical screening examination that is within the capability of the
emergency department of a hospital, including ancillary services
routinely available to the emergency department, to determine whether
an emergency medical condition exists''; and (2) ``such further medical
examination and such treatment as may be required to stabilize the
medical condition.'' \87\
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\87\ 42 U.S.C. 1395dd(a)-(b).
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[[Page 72214]]
Some commenters recommended that the Departments define ``emergency
services'' such that an enrollee or beneficiary may only receive
emergency benefits if an enrollee or beneficiary seeks treatment within
24 hours of the onset of an emergency. These final regulations decline
to adopt this comment. The term ``emergency services'' as defined by
the interim final regulations and these final regulations is based on
the statutory definition, which does not specify parameters with
respect to time. Accordingly, a plan or issuer cannot set a time limit
within which to seek emergency services and must provide coverage for
any emergency services that meet the definition of emergency services
under EMTALA.
Some commenters requested clarification as to whether air ambulance
transport and other emergency transportation is within the scope of the
term ``emergency services.'' The Departments decline to provide a rule
addressing this issue. These final regulations continue to provide that
the terms emergency medical condition, emergency services, and
stabilize have the meaning given to those terms under EMTALA, section
1867 of the Social Security Act.\88\
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\88\ For a more detailed discussion of definitions and
requirements under EMTALA, see CMS State Operations Manual, Appendix
V, pg. 33-41, available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/som107ap_v_emerg.pdf.
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H. Provisions No Longer Applicable
1. Special Rule Relating to Dependent Coverage of Children to Age 26
for Grandfathered Group Health Plans
The dependent coverage provision of PHS Act section 2714 applies to
all 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 September 23, 2010, whether
or not the plan or health insurance coverage qualifies as a
grandfathered health plan. However, consistent with section 2714 of the
PHS Act, for plan years beginning before January 1, 2014, the 2010
interim final regulations provided that a grandfathered health plan
that is a group health plan that makes available dependent coverage of
children may exclude from coverage an adult child who has not attained
age 26 if the child is eligible to enroll in an employer-sponsored
health plan (as defined in section 5000A(f)(2) of the Code) other than
a group health plan of a parent. Because this special rule for
grandfathered group health plans no longer applies, it is not
incorporated into these final regulations.
2. Transitional Rules for Individuals Whose Coverage Ended by Reason of
Reaching a Dependent Eligibility Threshold
The 2010 interim final regulations implementing PHS Act section
2714 provided transitional relief for a child whose coverage ended, or
who was denied coverage (or was not eligible for coverage) under a
group health plan or health insurance coverage because, under the terms
of the plan or coverage, the availability of dependent coverage of
children ended before the attainment of age 26. The 2010 interim final
regulations also required a plan or issuer to give such a child a
special enrollment opportunity, which was required to be provided
(including written notice) not later than the first day of the first
plan year (in the individual market, policy year) beginning on or after
September 23, 2010. Because the transitional rule no longer applies, it
is not incorporated into these final regulations.
3. Restricted Annual Limits and Transitional Rules for Individuals
Whose Coverage or Benefits Ended by Reason of Reaching a Lifetime
Dollar Limit
PHS Act section 2711 and its implementing interim final regulations
generally prohibited lifetime or annual limits on the dollar value of
EHBs (as defined in section 1302(b) of the Affordable Care Act). With
respect to annual dollar limits, the statute and the interim final
regulations allowed the imposition of ``restricted annual limits'' with
respect to EHBs for plan years (in the individual market, policy years)
beginning before January 1, 2014. The interim final regulations adopted
a three-year phased approach to restricted annual limits. As set forth
in the interim final regulations, the restricted annual limits on the
dollar value of EHBs could not be lower than:
For plan or policy years beginning on or after September
23, 2010 but before September 23, 2011, $750,000;
For plan or policy years beginning on or after September
23, 2011 but before September 23, 2012, $1.25 million; and
For plan or policy years beginning on or after September
23, 2012 but before January 1, 2014, $2 million.
With respect to plan or policy years beginning on or after January
1, 2014, no annual dollar limits are permitted on essential health
benefits except in the case of grandfathered individual market
coverage.
The interim final regulations also provided transitional rules for
individuals who reached a lifetime dollar limit under a group health
plan or health insurance coverage prior to the applicability date of
the interim final regulations. The regulations required a plan or
issuer to provide an individual whose coverage ended due to reaching a
lifetime dollar limit with an enrollment opportunity (including written
notice) that continues for at least 30 days. The notice and enrollment
opportunity was required to be provided not later than the first day of
the first plan year (in the individual market, policy year) beginning
on or after September 23, 2010. Because the provisions regarding
restricted annual dollar limits and the transitional rules regarding
lifetime dollar limits no longer apply, they are not incorporated into
these final regulations.
I. Applicability
1. General Applicability
These final regulations apply to group health plans and health
insurance issuers beginning on the first day of the first plan year
(or, in the individual market, the first day of the first policy year)
beginning on or after January 1, 2017. Until these final regulations
become applicable, plans and issuers are required to continue to comply
with the corresponding interim final regulations at 29 CFR part 2590,
contained in the 29 CFR, parts 1927 to end, edition revised as of July
1, 2015, and 45 CFR parts 144, 146, and 147, contained in the 45 CFR,
parts 1 to 199, edition revised as of October 1, 2015. In accordance
with section 7805(e)(2) of the Code, the corresponding temporary
regulations promulgated by the Department of the Treasury are
inapplicable. Under section 104 of the Health Insurance Portability and
Accountability Act (HIPAA), enacted on August 21, 1996, and subsequent
amendments, the Departments must coordinate policies with respect to
parallel provisions of ERISA, the PHS Act, and the Code (shared
provisions). The Departments operate under a Memorandum of
Understanding \89\ implementing HIPAA section 104 which provides that
the shared provisions must be administered so as to have the same
effect at all times and the Departments must coordinate policies
relating to enforcing the shared provisions in order to avoid
duplication of enforcement efforts and to assign
[[Page 72215]]
priorities in enforcement. Therefore, until these final regulations
promulgated by the Department of the Treasury become applicable,
compliance with corresponding interim final regulations at 29 CFR part
2590, contained in the 29 CFR, parts 1927 to end, edition revised as of
July 1, 2015 shall satisfy corresponding requirements of the Code.
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\89\ See 64 FR 70164 (December 15, 1999).
---------------------------------------------------------------------------
Section 1251 of the Affordable Care Act provides that grandfathered
health plans are subject to only certain provisions of the Affordable
Care Act. The final regulations under PHS Act section 2719, Internal
Claims and Appeals and External Review (26 CFR 54.9815-2719, 29 CFR
2590.715-2719, 45 CFR 147.136) and PHS Act Section 2719A, Patient
Protections (26 CFR 54.9815-2719A, 29 CFR 2590.715-2719A, 45 CFR
147.138) do not apply to grandfathered health plans. Final regulations
under PHS Act section 2704, Prohibition of Preexisting Condition
Exclusions (26 CFR 54.9815-2704, 29 CFR 2590.715-2704, 45 CFR 147.108);
PHS Act section 2711, Prohibition on Lifetime and Annual Limits (26 CFR
54.9815-2711, 29 CFR 2590.715-2711, 45 CFR 147.126); PHS Act section
2712, Prohibition on Rescissions (26 CFR 54.9815-2712, 29 CFR 2590.715-
2712, 45 CFR 147.128); and PHS Act section 2714, Coverage of Dependents
to Age 26 (26 CFR 54.9815-2714, 29 CFR 2590.715-2714, 45 CFR 147.120)
apply to grandfathered health plans, except the prohibition of
preexisting condition exclusions and prohibition on annual dollar
limits do not apply to grandfathered health plans that are individual
health insurance coverage. For a list of the market reform provisions
under title XXVII of the PHS Act, as added or amended by the Affordable
Care Act and incorporated into ERISA and the Code, applicable to
grandfathered health plans, visit http://www.dol.gov/ebsa/pdf/grandfatherregtable.pdf.
2. Expatriate Plans
On December 16, 2014, Congress enacted the Expatriate Health
Coverage Clarification Act of 2014 (EHCCA) as part of the Consolidated
and Further Continuing Appropriations Act, 2015, Division M, Public Law
113-235. The EHCCA provides that the market reform requirements of the
Affordable Care Act generally do not apply to expatriate health plans,
expatriate health insurance issuers with respect to expatriate health
plans, and employers in their capacity as plan sponsors of expatriate
health plans. However, the plans, coverage, sponsors and issuers must
still satisfy provisions of the PHS Act, ERISA and the Code that would
otherwise apply if not for the enactment of the Affordable Care Act.
The EHCCA exception from the market reform requirements applies to
expatriate health plans that are issued or renewed on or after July 1,
2015.
Treasury and IRS issued Notice 2015-43, 2015-29 I.R.B. 73, to
provide interim guidance on the EHCCA. The notice provides that until
the issuance of further guidance and except as otherwise provided in
the notice, issuers, employers, and plan sponsors generally may apply
the requirements of EHCCA using a reasonable good faith interpretation
of the statute. The notice also provides that until further guidance is
issued, using the definition of expatriate health plan provided in
Affordable Care Act Implementation FAQs \90\ is treated as a reasonable
good faith interpretation of the statute. As explained in the notice,
the Departments intend to publish proposed regulations implementing and
providing guidance on the EHCAA. Consequently, these final regulations
do not address the application to expatriate health plans of the
Affordable Care Act provisions under which these final regulations are
promulgated.
---------------------------------------------------------------------------
\90\ See FAQs about Affordable Care Act Implementation (Part
XIII), Q&A-1, available at http://www.dol.gov/ebsa/pdf/faq-aca13.pdf
and http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/ACA_implementation_faqs13.html. See also FAQs about Affordable Care
Act Implementation (Part XVIII), Q&A-6 and Q&A-7, available at
http://www.dol.gov/ebsa/pdf/faq-aca18.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/ACA_implementation_faqs18.html.
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III. Economic Impact Analysis--Departments of Labor and Health and
Human Services
Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects; distributive impacts; and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility.
Under Executive Order 12866 (58 FR 51735), ``significant''
regulatory actions are subject to review by the Office of Management
and Budget (OMB). Section 3(f) of the Executive Order defines a
``significant regulatory action'' as an action that is likely to result
in a rule (1) having an annual effect on the economy of $100 million or
more in any one year, or adversely and materially affecting a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating a
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order. These
final regulations have been designated ``significant regulatory
actions'' under section 3(f) of Executive Order 12866. Accordingly, the
regulations have been reviewed by the Office of Management and Budget.
A regulatory impact analysis must be prepared for major rules with
economically significant effects ($100 million or more in any one
year). The Departments have concluded that these final regulations
would have economic impacts of $100 million or more in at least one
year, thus meeting the definition of an ``economically significant
rule'' under Executive Order 12866. Therefore, consistent with
Executive Orders 12866 and 13563, the Departments have provided an
assessment of the potential benefits and the costs associated with
these final regulations.
The Departments expect these final regulations, when compared with
the interim final regulations, to have marginal benefits and costs.
This is because they primarily provide clarifications of the previous
interim final regulations issued in 2010 and 2011 and incorporate
subregulatory guidance, including frequently asked questions and safe
harbors issued by the Departments. The Departments do not have
sufficient data to quantify these costs and benefits, but they are
qualitatively discussed throughout the remainder of this section and
summarized in the Accounting Table.
[[Page 72216]]
Table 1--Accounting Table
----------------------------------------------------------------------------------------------------------------
Category Estimate Year dollar Discount rate Period covered
----------------------------------------------------------------------------------------------------------------
Benefits--Qualitative: These final regulations help ensure the protections and benefits intended by Congress.
Many of these benefits have a distributional component, and promote equity, in the sense that they will benefit
those who are especially vulnerable as a result of health problems and financial status. Other benefits include
increased access to care and to information needed to protect consumer's rights. These final regulations also
lead to improved health outcomes for patients and increase certainty for issuers, plans and consumers by
providing clarifications and guidance.
----------------------------------------------------------------------------------------------------------------
Costs:
Annualized Monetized........ $169.9............ 2015.............. 7%................ 2016-2025
($millions/year)............ $169.9............ 2015.............. 3%................ 2016-2025
----------------------------------------------------------------------------------------------------------------
Qualitative: The Departments have quantified where possible the costs associated with these final regulations.
These costs include burden that will be incurred to prepare and distribute required disclosures and notices,
and to bring plan and issuers' policies and procedures into compliance with the new requirements. The
Departments have not been able to quantify cost related to increased access to care. To the extent these
patient protections increase access to health care services, increased health care utilization and costs could
result.
----------------------------------------------------------------------------------------------------------------
Transfers:
Annualized Monetized........ $53.5............. 2015.............. 7%................ 2016-2025
($millions/year)............ $53.5............. 2015.............. 3%................ 2016-2025
----------------------------------------------------------------------------------------------------------------
Qualitative: Due to the risk pooling nature of health insurance these patient protections and other requirements
create a transfer from those paying premiums to those individuals and families now obtaining increased
protections, coverage and services.
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
1. Need for Regulatory Action
a. Preservation of Right To Maintain Existing Coverage
Section 1251 of the Affordable Care Act provides that grandfathered
health plans are subject only to certain provisions of the Affordable
Care Act. The statute, however, is silent regarding changes plan
sponsors and issuers can make to plans and health insurance coverage
while retaining grandfather status.
These final regulations are necessary in order to provide rules
that group health plans and health insurance issuers can use to
determine which changes they can make to the terms of the plan or
health insurance coverage while retaining their grandfather status,
thus exempting them from certain provisions of the Affordable Care Act
and fulfilling a goal of the legislation, which is to allow those that
like their coverage to keep it. These final regulations are designed to
allow individuals to keep the coverage they had on March 23, 2010 (the
date of enactment of the Affordable Care Act) to reduce short term
disruptions in the market, and to ease the transition required by the
market reforms.
In drafting this rule, the Departments attempted to balance a
number of competing interests. For example, the Departments sought to
provide adequate flexibility to group health plans and issuers to ease
transition and mitigate potential premium increases while avoiding
excessive flexibility that would unduly delay implementation of
critical consumer protections in the Affordable Care Act. In addition,
the Departments recognized that many group health plans and issuers
make changes to the terms of plans or health insurance coverage on an
annual basis: Premiums fluctuate, provider networks and drug
formularies change, employer and employee contributions and cost-
sharing change, and covered items and services may vary. Without some
ability to make some adjustments while retaining grandfather status,
the ability of individuals to maintain their current coverage would be
frustrated, because most plans or health insurance coverage would
quickly cease to be regarded as the same group health plan or health
insurance coverage in existence on March 23, 2010. At the same time,
allowing unfettered changes while retaining grandfather status would
also be inconsistent with Congress's intent to provide a transition to
the Affordable Care Act market reforms.
These final regulations regarding grandfather health plans are
designed, among other things, to take into account reasonable changes
routinely made by plan sponsors or issuers without the plan or health
insurance coverage relinquishing its grandfather status. Thus, for
example, these final regulations generally permit plans and issuers to
make voluntary changes to increase benefits, to conform to required
legal changes, and to voluntarily adopt other consumer protections in
the Affordable Care Act without relinquishing grandfather status.
b. Prohibition of Preexisting Condition Exclusions
Section 2704 of the PHS Act, as added by the Affordable Care Act,
generally prohibits group health plans and health insurance issuers
offering group or individual health insurance coverage from imposing
any preexisting condition exclusion.
Studies estimate that preexisting conditions affect approximately
129 million Americans \91\ which includes a broad range of conditions,
from heart disease--affecting an estimated 85.6 million American adults
(with more than 1 in 3 having one or more types of cardiovascular
disease \92\)--to cancer--which in 2012 affected an estimated 14
million Americans and will affect an estimated 1.7 million additional
people in 2015 \93\--to relatively minor conditions like hay fever,
asthma, or previous sports injuries.\94\ Denials of benefits or
coverage based on a preexisting condition previously made adequate
health insurance unavailable to millions of Americans. Before enactment
of the Affordable Care Act, in 45 States, health insurance issuers in
the individual market could deny coverage, charge higher premiums, and/
[[Page 72217]]
or deny benefits for a preexisting condition.\95\
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\91\ ASPE. At Risk: Pre-Existing Conditions Could Affect 1 in 2
Americans: 129 Million People Could Be Denied Affordable Coverage
Without Health Reform, 2011.
\92\ Mozzafarian, D., et al. Heart Disease and Stroke
Statistics--2015 Update: A Report From the American Heart
Association. Circulation. 2015; 131(4):e29-322.
\93\ National Cancer Institute: Surveillance, Epidemiology, and
End Results Program (SEER) Stat Fact Sheet: All Cancer Types. http://seer.cancer.gov/statfacts/html/all.html.
\94\ Pollitz, K., et al. How Accessible is Individual Health
Insurance for Consumers in Less than Perfect Health? Kaiser Family
Foundation, June 2001.
\95\ Levitt, L., et al. How Buying Insurance Will Change Under
Obamacare. Kaiser Family Foundation, September 2013.
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These regulations finalize interim final regulations which were
necessary to implement this statutory provision which Congress enacted
to help ensure that quality health coverage is available to more
Americans without the imposition of a preexisting condition exclusion.
c. Lifetime and Annual Limits
Section 2711 of the PHS Act, as added to the Affordable Care Act,
generally prohibits group health plans and health insurance issuers
offering group or individual health insurance coverage from imposing
annual and lifetime limits on the dollar value of essential health
benefits.
These protections ensure that patients are not confronted with
devastating healthcare costs because they have exhausted their health
coverage when faced with a serious medical condition.
These regulations finalize interim final regulations that were
necessary to implement the statutory provisions with respect to annual
and lifetime limits that Congress enacted to help ensure that more
Americans with chronic, long-term, and/or expensive illnesses have
access to quality health coverage.
d. Prohibition on Rescissions
Section 2712 of the PHS Act, as added by the Affordable Care Act,
prohibits group health plans and health insurance issuers offering
group or individual health insurance coverage from rescinding coverage
except in the case of fraud or intentional misrepresentation of
material fact.
Prior to the Affordable Care Act, thousands of Americans lost
health coverage each year due to rescission. When a coverage rescission
occurs, an individual's health coverage is retroactively cancelled,
which means that the insurance company is no longer responsible for
medical care claims that had previously been accepted and paid.
Rescissions can result in significant financial hardship for affected
individuals, because, in most cases, the individuals have accumulated
significant medical expenses.
These final regulations implement the statutory provision enacted
by Congress to protect the most vulnerable Americans, those that incur
substantial medical expenses due to a serious medical condition, from
financial devastation by ensuring that such individuals do not unjustly
lose health coverage by rescission.
e. Coverage of Dependents to Age 26
PHS Act section 2714, as added by the Affordable Care Act, requires
group health plans and health insurance issuers offering group or
individual health insurance coverage that make dependent coverage
available for children to continue to make coverage available to such
children until the attainment of age 26. With respect to a child
receiving dependent coverage, coverage does not have to be extended to
a child or children of the child or a spouse of the child. Furthermore
these final regulations clarify that 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 health coverage, such
as a condition that the individual be a dependent for income tax
purposes, and the final regulations also clarify that distinctions
based upon age that apply generally to all individuals covered under
the plan (employees, spouses, dependent children) are not prohibited.
These regulations finalize the interim final regulations, which were
necessary to implement the statute.
f. Internal Claims and Appeals and External Review
Before the enactment of the Affordable Care Act, health plan
sponsors and issuers were not uniformly required to implement claims
and appeals processes. For example, ERISA-covered group health plan
sponsors were required to implement internal claims and appeal
processes that complied with the DOL claims procedure regulation,\96\
while group health plans that were not covered by ERISA, such as plans
sponsored by State and local governments were not. Health insurance
issuers offering coverage in the individual insurance market were
required to comply with various applicable State internal appeals laws
but were not required to comply with the DOL claims procedure
regulation.
---------------------------------------------------------------------------
\96\ 29 CFR 2560.503-1.
---------------------------------------------------------------------------
With respect to external appeal processes, before the enactment of
the Affordable Care Act, sponsors of fully insured ERISA-covered group
health plans, fully-insured State and local governmental plans, and
fully-insured church plans were required to comply with State external
review laws, while self-insured ERISA-covered group health plans were
not subject to such laws due to ERISA preemption. In the individual
health insurance market, issuers in States with external review laws
were required to comply with such laws. However, uniform external
review standards did not apply, because State external review laws vary
from State-to-State. Moreover, at least six States did not have
external review laws when the Affordable Care Act was enacted;
therefore, prior to the Affordable Care Act, issuers in those States
were not required to implement an external review process.
Under this regulatory system, inconsistent claims and appeals
processes applied to plan sponsors and issuers and a patchwork of
consumer protections were provided to participants, beneficiaries, and
enrollees. The applicable processes and protections depended on several
factors including whether (1) plans were subject to ERISA, (2) benefits
were self-funded or financed by the purchase of an insurance policy,
(3) issuers were subject to State internal claims and appeals laws, and
(4) issuers were subject to State external review laws, and if so, the
scope of such laws (such as, whether the laws only apply to one segment
of the health insurance market, e.g., managed care or HMO coverage).
These uneven protections created an appearance of unfairness, increased
cost for issuers and plans operating in multiple States, and may have
led to confusion among consumers about their rights.
Congress enacted PHS Act section 2719 to ensure that plans and
issuers implemented more uniform internal and external claims and
appeals processes and to set a minimum standard of consumer protections
that are available to participants, beneficiaries, and enrollees. These
final regulations are necessary to provide rules that plan sponsors and
issuers can use to implement effective internal and external claims and
appeals processes that meet the requirements of PHS Act section 2719.
These changes do not add any incremental costs to those associated
with the 2010 interim final rules, because they simply incorporate sub-
regulatory guidance that was already issued.
g. Patient Protections
Section 2719A of the PHS Act, as added by the Affordable Care Act,
requires group health plans and health insurance issuers offering group
or individual health insurance coverage to ensure choice of healthcare
professionals (including pediatricians, obstetricians, and
gynecologists) and greater access to benefits for emergency services.
Provider choice is a strong predictor of patient trust in a provider,
and patient-provider trust can increase
[[Page 72218]]
health promotion and therapeutic effects.\97\ Studies have found that
patients tend to experience better quality healthcare if they have
long-term relationships with their healthcare provider.\98\
---------------------------------------------------------------------------
\97\ Piette, John, et al., ``The Role of Patient-Physician Trust
in Moderating Medication Nonadherence Due to Cost Pressures.''
Archives of Internal Medicine 165, August (2005) and Roberts,
Kathleen J., ``Physician-Patient Relationships, Patient
Satisfaction, and Antiretroviral Medication Adherence Among HIV-
Infected Adults Attending a Public Health Clinic.'' AIDS Patient
Care and STDs 16.1 (2002).
\98\ Blewett, Lynn, et al., ``When a Usual Source of Care and
Usual Provider Matter: Adult Prevention and Screening Services.''
Journal of General Internal Medicine 23.9 (2008).
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The emergency care provisions of PHS Act section 2719A require (1)
non-grandfathered group health plans and health insurance issuers that
cover emergency services to cover such services without prior
authorization and without regard to whether the health care provider
furnishing the services is a participating network provider, and (2)
copayments and coinsurance for out-of-network emergency care do not
exceed the cost-sharing requirements that would have been imposed if
the services were provided in-network. These provisions will help to
ensure that patients receive covered emergency care when they need it,
especially in situations where prior authorization cannot be obtained
due to exigent circumstances or an in-network provider is not available
to provide the services. They also will protect patients from the
substantial financial burden that can be imposed when differing
copayment or coinsurance arrangements apply to in-network and out-of-
network emergency care.
These regulations finalize the interim final regulations that were
necessary to implement the statutory provision enacted by Congress to
provide these essential patient protections.
A. Section 1251 of the Affordable Care Act, Preservation of Right To
Maintain Existing Coverage (26 CFR 54.9815-1251, 29 CFR 2590.715-1251,
45 CFR 147.140)
1. Affected Entities and Individuals
The Departments estimate that there are 2.3 million ERISA-covered
plans with an estimated 66 million policy holders and 130.2 million
participants and beneficiaries in those plans.\99\ Similarly, the
Departments estimate that there are 128,400 State and local
governmental health plans \100\ with an estimated 21.1 million policy
holders and 41.1 million participants and beneficiaries in those
plans.\101\
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\99\ EBSA estimates based on the 2014 Medical Expenditure
Survey--Insurance Component.
\100\ The estimate of the total number of State and local
governmental plans is based on the 2012 Census of Government.
\101\ Health Insurance Coverage Bulletin: Abstract of Auxiliary
Data for the March 2014 Annual Social and Economic Supplement to the
Current Population Survey, Table 3C http://www.dol.gov/ebsa/pdf/coveragebulletin2014.pdf.
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The 2014 Employer Health Benefits Survey reports that 37 percent of
firms offer health benefits that have at least one health plan that is
a grandfathered plan, and 26 percent of employees are enrolled in
grandfathered plans.\102\ Using the above estimates, there are 851,000
(2.3 million ERISA-covered plans* 0.37) ERISA-covered plans with 17.2
million policy holders (66 million policy holders *0.26) and 33.9
million participants and beneficiaries (130.2 million participants and
beneficiaries * 0.26). There are approximately 47,500 grandfathered
State and local governmental health plans (0.37*128,400 plans \103\)
with approximately 5.5 million policyholders (21.1 million policy
holders *0.26) and 10.7 million participants and beneficiaries (41.1
million participants and beneficiaries * 0.26).
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\102\ Kaiser Family Foundation, ``2014 Employer Health Benefits
Survey.'' http://kff.org/health-costs/report/2014-employer-health-benefits-survey/.
\103\ The estimate of the total number of State and local
governmental plans is based on the 2012 Census of Government.
---------------------------------------------------------------------------
There were an estimated 1.4 million policies with grandfathered
coverage during 2013 with 2.2 million enrollees.\104\
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\104\ Based on data from the McKinsey Center for U.S. Health
System Reform and Medical Loss Ratio submissions for 2013 reporting
year.
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2. Discussion of Economic Impacts of Retaining or Relinquishing
Grandfather Status
The economic effects of these final regulations will depend on
decisions by plan sponsors and issuers, as well as by those covered
under these plans and health insurance coverage.
For a plan sponsor or issuer, the potential economic impact of the
application of the provisions in the Affordable Care Act may be one
consideration in making its decisions. To determine the value of
retaining a health plan's grandfather status, each plan sponsor or
issuer must determine whether the rules applicable to grandfathered
health plans are more or less favorable than the rules applicable to
non-grandfathered health plans. This determination will depend on such
factors as the respective prices of grandfathered and non-grandfathered
health plans, as well as the preferences of grandfathered health plans'
covered populations and their willingness to pay for benefits and
patient protections available under non-grandfathered health plans. In
making its decision whether to maintain grandfather status, a plan
sponsor or issuer is also likely to consider the market segment
(because different rules apply to the large and small group market
segments), and the utilization pattern of its covered population. Those
costs and benefits of the various provisions of the Affordable Care Act
and their interaction with the coverages' grandfathered status have
been discussed in the impact analysis of those individual requirements
and are not repeated here.
3. Impacts on the Individual Market
The market for individual insurance is significantly different than
that for group coverage. As discussed in previous interim final
regulations issued in 2010 and 2011, for many, the market is
transitional, providing a bridge between other types of coverage. One
study found a high percentage of individual insurance policies began
and ended with employer-sponsored coverage.\105\ More importantly,
coverage on particular policies tends to be for short periods of time.
As such, high turnover rates are likely the chief source of changes in
grandfather status. Reliable data are scant, so there is no ability to
update estimates as to how many people in the individual market are in
non-grandfathered plans today.
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\105\ Adele M. Kirk. The Individual Insurance Market: A Building
Block for Health Care Reform? Health Care Financing Organization
Research Synthesis. May 2008.
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1. Disclosure of Grandfather Status and Document Retention
To maintain grandfathered health plan status under these final
regulations, a plan or issuer must maintain records that document the
plan or policy terms 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, disclose its status
as a grandfathered health plan, and if switching issuers and intending
to maintain its status as a grandfathered plan, it must provide to the
new health insurance issuer with documentation of plan terms under the
prior health coverage sufficient for it to determine whether a change
causing a cessation of grandfathered health plan status has occurred.
The Departments estimate that the total cost for these requirements
will be $1.8 million annually. For a detailed discussion of the
grandfathered health plan document retention and disclosure
requirements, see the Paperwork
[[Page 72219]]
Reduction Act section later in this preamble.
B. PHS Act Section 2704, Prohibition of Preexisting Condition
Exclusions (26 CFR 54.9815-2704, 29 CFR 2590.715-2704, 45 CFR 147.108)
1. Affected Entities and Individuals
In the individual market, those applying for insurance will no
longer face exclusions or denials of coverage based on a preexisting
condition while those covered by non-grandfathered individual coverage
with a rider or exclusion period will gain coverage for any preexisting
condition otherwise covered by the plan. In the group market,
participants and beneficiaries that have experienced a lapse in
coverage will no longer face up to a twelve-month exclusion for
preexisting conditions.
There are two main categories of people who have most likely been
directly affected by this provision: First, those who had a preexisting
condition and who were uninsured; second, those who were covered by
grandfathered individual policies containing riders excluding coverage
for a preexisting condition or have an exclusion period. It is
difficult to estimate precisely how many uninsured individuals had a
preexisting condition as of when this provision went into effect, as
information on whether individuals have a preexisting condition for the
purpose of obtaining health insurance is not collected in any major
population based survey and can include conditions from hay fever to
HIV/AIDS, all which could result in a denial of coverage.\106\ The
Departments find it difficult to estimate the number of individuals
that will be uniquely affected by these final regulations due to the
interactions with other provisions of the Affordable Care Act; however,
estimates indicate that 50-129 million non-elderly individuals with a
preexisting condition, 25 million uninsured individuals--including the
3.7 million adults that fall into the ``coverage gap'' in States
without Medicaid expansion, and the estimated 66.6-82 million with ESI
with preexisting conditions could benefit from these final
regulations.\107\
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\106\ Levitt, L., et al. How Buying Insurance Will Change Under
Obamacare. Kaiser Family Foundation, September 2013.
\107\ ASPE. At Risk: Pre-Existing Conditions Could Affect 1 in 2
Americans: 129 Million People Could Be Denied Affordable Coverage
Without Health Reform, 2011 and Artiga, S. et al. The Impact of the
Coverage Gap in States not Expanding Medicaid by Race and Ethnicity.
The Kaiser Family Foundation, April 2015.
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2. Benefits
These final regulations will expand and improve coverage for those
Americans with preexisting conditions; those currently diagnosed,
undiagnosed, or who will develop conditions as they age. This will
likely increase access to health care, improve health outcomes, and
reduce family financial strain and ``job lock.''
For many years insurance providers/issuers maintained risk pools
that are equal to that of the general population, using various
methodologies; \108\ often to the detriment of those most in need.
Passage of the Affordable Care Act on March 23, 2010, provided millions
of Americans with a way to obtain, re-obtain, or keep their affordable
health coverage without the fear of losing or not having it when they
are at their most vulnerable.
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\108\ Claxton, G. and Lundy, J. How Health Care Coverage Works:
A Primer 2008 Update. The Kaiser Family Foundation, April 2008.
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Prior to enactment of the Affordable Care Act, an estimated 50-52
million non-elderly people lacked insurance and 50-129 million were
diagnosed with a preexisting condition.\109\ Numerous studies show that
uninsured adults and children are 3 to 6 times more likely to go
without or postpone receiving needed care, experience higher delays and
incidences of unmet needs, have higher incidences in avoidable hospital
stays, and have a higher risk of death after an accident or when
hospitalized.\110\ This provision benefits and protects the millions of
non-elderly persons who currently have a preexisting condition and
those that will develop some condition as they age--in one study of
those reporting good or excellent health, 15-30 percent will develop a
preexisting condition in the next eight years \111\--by providing them
a means to obtain or keep health coverage. Without the protections of
these final regulations, many more Americans could be faced with the
fear and anxiety of trying to obtain health coverage or faced with
insufficient coverage due to preexisting conditions.
---------------------------------------------------------------------------
\109\ ASPE. At Risk: Pre-Existing Conditions Could Affect 1 in 2
Americans: 129 Million People Could Be Denied Affordable Coverage
Without Health Reform, 2011; Collins, S., et al. Help is on the
Horizon: How the Recession Has Left Millions of Workers Without
Health Insurance, and How Health Reform Will Bring Relief--Findings
from The Commonwealth Fund Biennial Health Insurance Survey of 2010.
The Commonwealth Fund. 2011. Studies utilized 2008 MEPS data and The
Commonwealth Biennial Health Insurance Survey of 2010 and prior
years to estimate the numbers of individuals with preexisting
conditions.
\110\ Collins, S., et al. Help is on the Horizon: How the
Recession Has Left Millions of Workers Without Health Insurance, and
How Health Reform Will Bring Relief--Findings from The Commonwealth
Fund Biennial Health Insurance Survey of 2010. The Commonwealth
Fund. 2011; Callahan, S., et al. Access to Health Care for Young
Adults With Disabling Chronic Conditions. Arch Pediatr Adolesc Med.
2006;160:178-182; and Bernstein, J., et al. Issue Brief: How Does
Insurance Coverage Improve Health Outcomes? Mathematica Policy
Research, Inc. 2010:1.
\111\ Bailey, K. Worry No More: Americans with Pre-Existing
Conditions Are Protected by the Health Care Law, Families USA; 2012
and ASPE. At Risk: Pre-Existing Conditions Could Affect 1 in 2
Americans: 129 Million People Could Be Denied Affordable Coverage
Without Health Reform, 2011.
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As discussed previously, those with preexisting condition
exclusions or those that were uninsured could have found themselves
being charged 2.5 times more prior to the Affordable Care Act.\112\ The
higher cost faced by those with preexisting conditions, whether
uninsured or containing riders, could have led families to encounter
financial hardships, crisis, and emotional stress.
---------------------------------------------------------------------------
\112\ Bailey, K. Worry No More: Americans with Pre-Existing
Conditions Are Protected by the Health Care Law, Families USA; 2012
and Anderson, G. From `Soak The Rich' To `Soak The Poor': Recent
Trends In Hospital Pricing. Health Affairs,2007; 26(3), pp. 780-789.
---------------------------------------------------------------------------
Reports show that those lacking coverage are more likely to have
trouble paying bills while being more likely to take on additional
credit card debt and spend down family assets and savings, often
resulting in the loss of their homes and personal bankruptcy: In 1981
the foreclosure rate reported to be associated with medical issues was
only 8 percent; by 2007 this rate had increased to 62.1 percent of all
personal bankruptcies, and 49 percent of foreclosures.\113\ These
higher rates can in turn lead to many health care organizations
providing uncompensated care: In 2008, the uninsured received $116
billion worth of hospital care--the primary source of which was federal
funding.\114\ In addition to their advantages with regard to access to
care, health, and well-being these final regulations are likely to
lower families' out-of-pocket health care spending and the level of
uncompensated care; thus benefiting State and Federal
[[Page 72220]]
governments and, by extension, taxpayers.
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\113\ Himmelstein, D. et al. Medical Bankruptcy in the United
States, 2007: Results of a National Study. Am Jour of Med. 2009;
122(8), pp. 741-746; Robertson, T., et al. ``Get sick, get out: The
medical causes of home mortgage foreclosures.'' Health Matrix:
Journal of Law-Medicine. 2008; 18(65), pp 65-105; Fact Sheet. Key
Facts about the Uninsured Population. The Kaiser Family Foundation.
October 2014; see also https://www.medicare.gov/your-medicare-costs/help-paying-costs/medicaid/medicaid.html.
\114\ Stoll, K. and Bailey, K. Hidden Health Tax: Americans Pay
a Premium. Families USA, 2009 and Coughlin, T. et al. Uncompensated
Care for Uninsured in 2013: A detailed Examination. The Kaiser
Family Foundation, 2014.
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Finally, these final regulations may reduce instances of ``job
lock''- situations in which workers are unable to change jobs due to
concerns regarding health insurance coverage for them and/or their
dependents. Due to the limitations and exclusions in individual health
coverage, many people were forced into a position where they chose to
remain in a job out of fear of losing their existing coverage or chose
a job with sponsored coverage over a higher wage position.\115\ Job
lock leads to a number of labor market distortions resulting in workers
in jobs that are a ``poor fit,'' with reduced satisfaction or skills
that are not properly utilized, affecting their ability to start new
businesses, retire, or reduce their work load.\116\ One study indicates
that 35 percent of those surveyed worried they will have to forego job
opportunities or forego retirement to maintain coverage.\117\
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\115\ GAO, Private Health Insurance: Estimates of Individuals
with Preexisting Conditions Range from 36 million to 122 million,
GAO-12-439, 2012.
\116\ Baker, D. Job Lock and Employer--Provided Health
Insurance: Evidence from the Literature. Public Policy Institute.
2015;I-35; ASPE. At Risk: Pre-Existing Conditions Could Affect 1 in
2 Americans: 129 Million People Could Be Denied Affordable Coverage
Without Health Reform, 2011; Fact Sheet. Key Facts about the
Uninsured Population. The Kaiser Family Foundation. October 2014.
\117\ Altman, D. Pre-X Redux. The Kaiser Family Foundation, June
2013.
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Under the Affordable Care Act, the interim final regulations, and
these final regulations, someone currently insured through the group
market with less than 18 months of continuous coverage may be more
willing to leave their job and become a self-employed entrepreneur if
they or their dependents have a preexisting condition--resulting in
potentially 2-4 million more self-employed individuals.\118\ Similarly,
even a worker with more than 18 months of continuous coverage who is
already protected by HIPAA may be more likely to consider switching
firms and changing policies because they will not have to worry that a
preexisting condition could be excluded for up to 12 months.\119\ While
the total reduction in job-lock may be small, the impact on those
families with members that have preexisting conditions may be
significant.
---------------------------------------------------------------------------
\118\ Baker, D. Job Lock and Employer--Provided Health
Insurance: Evidence from the Literature. Public Policy Institute.
2015;I-35.
\119\ Foronstin, P. Health Insurance Portability and Job Lock:
Findings from the 1998 Health Confidence Survey. Employee Benefit
Research Institute Notes. 1998: 19(8), pp. 4-6.
---------------------------------------------------------------------------
Executive Order 12866 requires agencies to take account of
``distributive impacts'' and ``equity.'' Requiring health plans and
issuers to provide coverage to adults and children with preexisting
conditions will result in a small increase in premium for relatively
healthy adults and children, and a large increase in health and
financial security for individuals with preexisting conditions. This
transfer is a meaningful increase in equity, and is a benefit of this
final regulation.
3. Costs and Transfers
Although those that have preexisting condition exclusions have
higher health care costs than healthier individuals, among individuals
with preexisting conditions, those who are uninsured have expenditures
that are somewhat lower than the average insured individual.\120\ It is
expected that when those individuals who are uninsured or have policies
with preexisting condition exclusions gain coverage, there will be
additional demand for and utilization of services, leading to a
transfer from out-of-pocket spending to spending covered by insurance,
which will partially be mitigated by a reduction in cost-shifting of
uncompensated care to the insured population as coverage expands.
---------------------------------------------------------------------------
\120\ Coughlin, T. et al. Uncompensated Care for Uninsured in
2013: A Detailed Examination. The Kaiser Family Foundation, 2014;
GAO, Private Health Insurance: Estimates of Individuals with
Preexisting Conditions Range from 36 million to 122 million, GAO-12-
439, 2012.
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In evaluating the impact of this provision, it is important to
remember that the full net effects of this provision cannot be
estimated because of its interactions with other provisions in the
Affordable Care Act. For example, under the current guaranteed
availability and renewability protections in the individual market,
children and young adults with a preexisting condition are now
generally able to obtain and maintain coverage on a parental plan,
where he or she can potentially stay on that plan until age 26. As
another example, the Affordable Care Act requires that non-
grandfathered health plans provide recommended preventive services at
no cost-sharing. This will amplify the benefits of coverage for newly
insured individuals with preexisting conditions. Moreover, the
expansion of the preexisting condition exclusion policy occurred at the
same time as other policies were implemented, such as the individual
responsibility and premium tax credit provisions. Therefore, the
Departments cannot provide a more precise estimation of either the
benefits or the costs and transfers of this provision.
C. PHS Act Section 2711, Prohibition on Lifetime and Annual Limits (26
CFR 54.9815-2711, 29 CFR 2590.715-2711, 45 CFR 147.126)
1. Affected Entities and Individuals
Prior to the passage of the Affordable Care Act, both the incidence
and amount of lifetime limits varied by market and plan type (e.g.,
HMO, PPO, POS). In the RIA for the interim final regulations, it was
estimated that only 8 percent of large employers, 14 percent of small
employers and 19 percent of individual market policies imposed an
annual limit at that time and thus would have been directly impacted by
the interim final regulations, which were phased in.
Fear and anxiety about reaching annual or lifetime limits on
coverage was a major concern among Americans who have health insurance,
although while such limits were relatively common in health insurance,
the numbers of people expected to exceed either an annual or lifetime
limit was quite low.
2. Benefits
As discussed in the RIA for the interim final regulations, annual
and lifetime limits function as caps on how much a group health plan or
insurance company will spend on medical care for a given insured
individual over the course of a year, or the individual's lifetime.
Once a person reaches this limit or cap, the person is essentially
uninsured: He or she must pay the remaining cost of medical care out-
of-pocket. These limits particularly affect people with high-cost
conditions,\121\ which typically are very serious and can lead to
financial hardship. Prohibiting lifetime limits and annual limits will
benefit families and individuals experiencing financial burdens due to
exceeding the benefit limits of their insurance policy. By ensuring and
continuing coverage, the regulations also reduce uncompensated care,
which would otherwise increase premiums of the insured population
through cost-shifting.
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\121\ A December 2014 study by Milliman ``2014 U.S. organ and
tissue transplant cost estimates and discussion'' found that the
average 2014 billed charges related to a heart transplant is
$1,242,200, a liver transplant averaged $739,100, while a heart-lung
transplant averaged $2,313,600.
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These provisions will also improve access to care. Reaching a limit
could interrupt or cause the termination of needed treatment, leading
to worsening of medical conditions. The removal and restriction of
benefit limits helps ensure continuity of care and the elimination of
the extra costs that arise when an
[[Page 72221]]
untreated or undertreated condition leads to the need for even more
costly treatment, that could have been prevented if no loss of coverage
had occurred. By ensuring continuation of coverage, the regulations
benefit the health and the economic well-being of participants,
beneficiaries, and enrollees.
Executive Order 12866 explicitly requires agencies to take account
of ``distributive impacts'' and ``equity,'' and these considerations
help to motivate the relevant statutory provisions and the interim
final regulations and these regulations. Prohibiting lifetime and
annual limits assures that insurance will perform the function for
which it was designed--namely, protecting health and financial
wellbeing for those most in need of care. This represents a meaningful
improvement in equity, which is a benefit associated with the
regulations.
3. Costs and Transfers
As discussed in the regulatory impact analysis for the interim
final regulations, extending health insurance coverage for individuals
who would otherwise hit a lifetime or annual limit will increase the
demand for and utilization of health care services, thereby generating
additional costs to the system. The three year phase-in of the
elimination of annual limits and the immediate elimination of lifetime
limits increased the actuarial value of the insurance coverage for
affected plans and policies if no other changes were made to the plan
or policy. Issuers and plans in the group market may have chosen to
make changes to the plan or policy to maintain the pre-regulation
actuarial value of the plan or policy, such as changing their provider
networks or copayments in some manner. To the extent that higher
premiums (or other plan or policy changes) are passed on to all
employees, there is an explicit transfer from workers who would not
incur high medical costs to those who do incur high medical costs. If,
instead, the employers do not pass on the higher costs of insurance
coverage to their workers, this can result in lower profits or higher
prices for the employer's goods or services. In the individual market,
when policies were individually underwritten with no rating bands in
the majority of States, the Departments expected the added premium cost
or other benefit changes to be largely borne by the individual
policyholder. With the market reforms in place, along with single risk
pool requirements, issuers can spread the increased costs across the
entire individual market, leading to a transfer from those who do not
incur high medical costs to those who do incur such costs. However, as
with the group market, such a transfer was expected to be modest, given
the small numbers of people who were expected to exceed their benefit
limits. The Departments previously estimated that the transfer would be
three-quarters of a percent or less for lifetime limits and one-tenth
of a percent or less for annual limits, under a situation of pure
community rating where all the costs get spread across the insured
population. This impact does not apply to grandfathered individual
market plans.
It is worth noting that these transfers are expected to have been
significantly mitigated by the associated expansion of coverage created
by the interim final regulations and other regulations implementing the
Affordable Care Act. The Departments expect that, as a result of the
gradual elimination of annual limits and the immediate elimination of
lifetime limits, fewer people have been left without protection against
high medical costs. This results in fewer individuals spending down
resources and enrolling in Medicaid or receiving other State and
locally funded medical support. Such an effect will likely be amplified
due to the high-cost nature of people who exceed benefit limits.
D. PHS Act Section 2712, Prohibition on Rescissions (26 CFR 54.9815-
2712, 29 CFR 2590.715-2712, 45 CFR 147.128)
1. Affected Entities and Individuals
PHS Act Section 2712 and these final regulations create a statutory
Federal standard and enforcement power in the group and individual
markets where it did not exist. Prior to this provision taking effect,
varying Federal common laws existed for ERISA plans. State rules
pertaining to rescission have been found to be preempted by ERISA by
five circuit courts (5th, 6th, 7th, 9th and 11th as of 2008).
The Affordable Care Act and its implementing regulations should
have a large effect on reducing the number of rescissions for two
reasons. First, the Affordable Care Act raised the standard governing
when coverage may be rescinded. Group health plans and health insurance
issuers may now only rescind coverage based on fraud or intentional
misrepresentation of a material fact which is a higher standard than
most State laws required previously. Second, the interaction of these
regulations with PHS Act sections 2704, prohibition of preexisting
condition exclusions, and sections 2705, prohibiting discrimination
against individual participants and beneficiaries based on health
status, could significantly reduce the number of policies rescinded.
Previously, the issues surrounding the reporting of pre-existing
conditions to issuers and an individual's health status were primary
causes of rescissions. With the main source of rescissions removed
there would be a significant drop in rescissions even without these
regulations.
The Departments assume that these final regulations will have their
largest impact on the individual insurance market, because group health
coverage rarely is rescinded.\122\ By creating a new Federal standard
governing when policies can be rescinded, the Departments expect these
final regulations to potentially affect the approximately 6.7 million
non-elderly individual health insurance policies covering 10.9 million
policy holders and their dependents in the individual health insurance
market.\123\ In addition, approximately 430 health insurance issuers
offering coverage in the individual health insurance market who
currently could rescind health insurance coverage are expected to be
affected.\124\ That said, the actual incidence of individuals who are
subject to rescissions each year is likely to be small. The NAIC
Regulatory Framework Task Force collected data on 52 companies covering
the period 2004-2008, and found that rescissions averaged 1.46 per
thousand policies in force.\125\ These pre-Affordable Care Act
estimates are believed to be a significant over-statement of
rescissions occurring now, however no new data is available. Using this
estimate implies that when combined with the current numbers of policy
holders in the individual market there could be approximately 9,900
rescissions per year.
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\122\ This statement is based on the Departments' conversations
with industry experts.
\123\ 2013 filings of the Medical Loss Ratio Report found at
https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Medical-Loss-Ratio.html.
\124\ 2013 filings of the Medical Loss Ratio Report.
\125\ NAIC Rescission Data Call, December 17, 2009, p.1.
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2. Benefits
Because there is little pre-Affordable Care Act data available and
no publicly available post-Affordable Care Act data, the Departments
find it difficult to estimate the benefits associated with this
provision. However, the Departments believe that the benefits of this
provision would accrue to those individuals who without these
regulations would have their policies rescinded.
[[Page 72222]]
As noted, Executive Order 12866 requires consideration of
``distributive impacts'' and ``equity.'' To the extent that rescissions
are arbitrary, or targeted at those most ill, and revoke the insurance
that enrollees paid for and expected to cover the cost of expensive
illnesses and conditions, preventing rescissions would prevent inequity
and greatly increase health and economic well-being. Consumers would
have greater confidence that purchasing insurance would be worthwhile,
and policies would represent better value for money.
Individuals who otherwise would have had their policies rescinded
are now able to retain their coverage; the maintenance of such coverage
through severe illness helps to prevent financial hardship for the
enrollee and their family, creating a substantial financial
benefit.\126\
---------------------------------------------------------------------------
\126\ Girion, Lisa ``Health Net Ordered to Pay $9 million after
Canceling Cancer Patient's Policy,'' Los Angeles Times (2008),
available at: http://www.latimes.com/business/la-fi-insure23feb23,1,5039339.story.
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As discussed previously, uninsured individuals are less likely to
receive needed care when they become ill, resulting in the worsening of
their condition. The lack of insurance can lead to lost workplace
productivity and additional mortality and morbidity. Additionally, this
provision protects those individuals currently receiving treatment for
a condition by eliminating the potential interruptions or terminations
in care resulting from rescissions, resulting in higher losses in
productivity.\127\ Thus, this rule would contribute to increased worker
productivity by reducing the burden associated with the loss of
insurance coverage, and the concomitant financial and emotional stress.
---------------------------------------------------------------------------
\127\ Collins et al. ``Gaps in Health Insurance: An All American
Problem'' Commonwealth Fund (2006), available http://www.commonwealthfund.org/usr_doc/Collins_gapshltins_920.pdf.
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3. Costs and Transfers
As with the benefits, the costs and transfers of these regulations
are similar to those of the interim final regulations. The prohibition
of rescissions except in cases of fraud or intentional
misrepresentation of material fact could lead insurers to spend more
resources checking applications before issuing policies than they did
before the Affordable Care Act, which would increase administrative
costs. However, under the final regulations, these costs could be
partially offset by decreased costs associated with reduced post-claims
underwriting.
To the extent that continuing coverage for these generally high-
cost populations leads to additional demand for and utilization of
health care services, there will be additional costs generated in the
health care system. However, given the relatively low rate of
rescissions (approximately 0.15 percent of individual policies in
force) and the relative nature of those individuals who generally have
policies rescinded (who would have difficulty going without treatment),
the Departments estimate that these additional costs would be small.
For those policies or plans that are rescinded, the requirement for
an advance notice prior to such a rescission imposes a total hour
burden of approximately 250 hours and a cost burden of approximate
$3,900. These costs are discussed in more detail in the Paperwork
Reduction Act section later in this preamble.
A transfer likely will occur within the individual health insurance
market from policyholders whose policies would not have been rescinded
before the Affordable Care Act to some of those whose policies that
would have been rescinded before the Affordable Care Act, depending on
the market and the rules which apply to it. This transfer could result
from higher overall premiums insurers will charge to recoup the costs
associated with the health care costs of those individuals with chronic
or serious conditions whose policies could previously be rescinded (the
precise change in premiums depending on the competitive conditions in
specific insurance markets). This transfer across the market would
benefit those individuals with substantially higher medical costs, due
to chronic or severe conditions, and would be attributable to insurers
covering those costs associated with such individuals.
E. PHS Act Section 2714, Coverage of Dependents to Age 26 (26 CFR
54.9815-2714, 29 CFR 2590.715-2714, 45 CFR 147.120)
1. Affected Entities and Individuals
Prior to implementation of the Affordable Care Act there were an
estimated 6.6 million uninsured young adults age 19-26; with an
estimated 3.3 million having parents with ESI and an additional 2.7
million with individual coverage, all of whom could potentially have
been affected.\128\ Implementation of this provision allowed 13.7
million young adults to either stay on or join their parents' health
plans (from November 2010 until November 2011).\129\ There was a rapid
response to changes in the regulations leading to large number of
employers enrolling young adults ,\130\ with thirteen percent of small
firms and 70 percent of large firms enrolling at least one young
adult--small employers on average enrolled two young adults while large
employers enrolled on average 492 young adults.\131\
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\128\ Collins, S. and Nicholson, J. Rite of Passage: Young
Adults and the Affordable Care Act of 2010. The Commonwealth Fund.
May 2010.
\129\ Collins, S. et al. Young, Uninsured and in Debt: Why Young
Adults Lack Health Insurance and How the Affordable Care Act is
Helping. The Commonwealth Fund. June 2012.
\130\ Cantor, J. et al. Early Impact of the Affordable Care Act
on Health Insurance Coverage of Young Adults. Health Services
Research, 47:5 (2012):pp. 1773-1790.
\131\ Claxton, G. et al. Employer Health Benefits: 2011 Annual
Survey. Kaiser Family Foundation and Health Research & Education
Trust. 2011
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Studies have shown that 2.3 million young adults were able to gain
coverage since implementation of the Affordable Care Act and this
provision in 2010 through the start of the open enrollment period in
October 2013.\132\ The number of affected young adults has continued to
increase as more employers began covering young adult dependents and
those on individual grandfathered plans began changing policies to
include dependents up to age 26. This has resulted in an additional 3.4
million young adults gaining coverage since October 2013, resulting in
a total of an estimated 5.7 million gaining coverage from 2010 through
March 2015.\133\
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\132\ ASPE Data Point, Health Insurance Coverage and the
Affordable Care Act, September 2015.
\133\ ASPE. Health Insurance Coverage and the Affordable Care
Act. May 2015 at http://aspe.hhs.gov/sites/default/files/pdf/83966/ib_uninsured_change.pdf.
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2. Benefits
The benefits of these final regulations are expected to outweigh
the costs to the regulated community. As of March 2015, an estimated
5.7 million additional young adults are now covered by their parents'
health plans due to the implementation of this provision.\134\
Expanding coverage options for the 19-26 year old population has
resulted in a decline in the number of uninsured young adults,
declining to an uninsured rate of 26.7 percent in the third quarter of
2013 (before the start of the October 2013 open enrollment
period).\135\
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\134\ Id.
\135\ Ibid and Sommers, B. Number of Young Adults Gaining
Insurance Due to the Affordable Care Act Now Tops 3 Million. ASPE
Issue Brief, June 2012.
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Uninsured young adults are less likely to have access to care and
thus delay seeking needed care,\136\ leading to
[[Page 72223]]
higher costs when care is received. Further, expanded coverage provides
young adults with security and protection from the financial
consequences of serious medical emergencies. Recent studies have found
that due to the implementation of this provision there has been a
decline in the number of young adults facing higher out-of-pocket
expenses (greater than $1,500); \137\ benefiting them when many young
adults are currently facing elevated debt burdens and low wages.\138\
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\136\ Newacheck, P. et al. Health Insurance and Access to
Primary Care for Children. N Engl J Med. 338:8 (1998) and Sommers,
B. et al. The Affordable Care Act Has Led To Significant Gains in
Health Insurance and Access to Care for Young Adults. Health
Affairs, 32:1 (2013):pp. 165-174.
\137\ Busch, S. et al. ACA Dependent Coverage Provision Reduced
High Out-Of-Pocket Health Care Spending For Young Adults. Health
Affairs, 33:8 (2014): pp. 1361-1366 and Mulcahy, A. et al. Insurance
Coverage of Emergency Care for Young Adults under Health Reform. N
Engl J Med. 368:22 (2013).
\138\ Chua, K-P. and Sommers, B. Changes in Health and Medical
Spending Among Young Adults Under Health Reform. JAMA, 311:23
(2014).
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Additionally, expanding coverage to those aged 19-26 should
decrease the cost-shifting of uncompensated care onto those with
coverage (including $147 million from emergency department care),\139\
increase the receipt of preventive health care and provide more timely
access to high quality care, resulting in a healthier population. In
particular, children with chronic conditions or other serious health
issues will be able to continue coverage through a parent's plan until
age 26.
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\139\ Mulcahy, A. et al. Insurance Coverage of Emergency Care
for Young Adults under Health Reform. N Engl J Med. 368:22 (2013).
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Extending dependent coverage of children to age 26 will also permit
greater job mobility for this population as their health coverage will
no longer be tied to their jobs, thus reducing the potential of ``job
lock'',\140\ or student status.
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\140\ Sommers, B. et al. The Affordable Care Act Has Led To
Significant Gains in Health Insurance and Access to Care for Young
Adults. Health Affairs, 32:1 (2013):pp. 165-174.
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3. Costs and Transfers
Estimates for the incremental annual premium costs for the newly
covered individuals were developed in the interim final regulations;
estimating that for those enrolling in their parents' ESI, the expected
annual premium cost would lead to an expected increase of 0.7 percent
in 2011, 1.0 percent in 2012, and 1.0 percent in 2013. A recent study
carried out by Depew and Bailey found that the requirement dependent
coverage provision led to a 2.5-2.8 percent increase in premiums for
plans that cover children, and that employers did not pass on the
entire premium increase to employees in the form of higher required
plan contributions.\141\ To the extent that some of these increases are
passed on to workers in the form of higher premiums for all workers
purchasing family policies or in the form of lower wages for all
workers, there will be a transfer from workers who do not have newly
covered dependents to those who do. To the extent that these higher
premiums result in lower profits or higher prices for the employer's
product, the higher premiums will result in a transfer either from
stockholders or consumers to workers who have newly covered dependents.
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\141\ Depew, B. and Bailey, J. Did the Affordable Care Act's
dependent coverage mandate increase premiums? Journal of Health
Economics, 41 (2015):pp. 1-14
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In addition, to the extent these final regulations result in a
decrease in the number of uninsured, the Departments expect a reduction
in uncompensated care, and a reduction in liability for those who fund
uncompensated care, including public programs (primarily Medicaid and
State and local general revenue support for public hospitals), as well
as the portion of uncompensated care that is paid for by shifting costs
from private payers. Such effects would lead to lower premiums for the
insured population, both with or without newly covered children.
For the number of young adults enrolling in their parents' non-
group (individual) insurance policy, the Departments estimated that, to
a large extent, premiums in the individual market will be borne by the
parents who are purchasing the coverage. If, instead, these costs are
distributed over the entire individual market (as would be the case in
a pure community rated market), the Departments estimated in the
interim final regulations that the individual premiums would rise 0.7
percent in 2011, 1.0 percent in 2012, and 1.2 percent in 2013. However,
the Departments expected the actual increase across the entire
individual market, if any, to be much smaller than these estimates,
because they expected the costs to be largely borne by the subscribers
who are directly affected rather than distributed across the entire
individual market.
F. PHS Act Section 2719, Internal Claims and Appeals and External
Review (26 CFR 54.9815-2719, 29 CFR 2590.715-2719, 45 CFR 147.136)
1. Estimated Number of Affected Entities
These provisions are applicable to non-grandfathered health plans
and coverage. Using the estimates from the discussion of affected
entities for the grandfathering provisions discussed in paragraph
III.C, there are 96.3 million individuals covered by non-grandfathered
ERISA-covered health plans, 30.4 million individuals covered by non-
grandfathered State and local health plans, and 8.7 million individuals
in non-grandfathered health coverage in the individual market.
Not all potentially affected individuals will be affected equally
by these final regulations. Sponsors of ERISA-covered group health
plans were required to implement an internal appeals process that
complied with the DOL claims procedure regulation before the Affordable
Care Act's enactment, and the Departments also understand that many
non-Federal governmental plans and church plans that are not subject to
ERISA had implemented internal claims and appeals processes that comply
with the DOL claims procedure regulation. Therefore, participants and
beneficiaries covered by such plans only will be affected by the
internal claims and appeals standards that are provided by the
Secretary of Labor in paragraph (b)(2)(ii) of these final regulations
under PHS Act section 2719.
These final regulations will have the largest impact on individuals
covered in the individual health insurance market, because with the
issuance of the interim final regulation, these issuers were required
to comply with the DOL claims procedure regulation for internal claims
and appeals as well as the additional standards added by the Secretary
of the Department of Health and Human Services in paragraph (b)(3) of
these final regulations that are in some cases more protective than the
ERISA standard.
On the external appeals side, before the enactment of the
Affordable Care Act, issuers offering coverage in the group and
individual health insurance market were already required to comply with
State external review laws. At that time, all States except Alabama,
Mississippi, Nebraska, North Dakota, South Dakota, and Wyoming had
external review laws, and thirteen States had external review laws that
apply only to certain market segments (for example, managed care or
HMOs).
[[Page 72224]]
Currently, all States except, Alabama, Alaska, Florida, Georgia,
Pennsylvania, and Wisconsin have State external review laws that
satisfy the requirement to provide a NAIC-similar or NAIC-parallel
external review process. These six States that do not meet the
requirements, must use the HHS-administered process or must contract
with accredited independent review organizations to review external
appeals on their behalf until they meet the requirements.\142\
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\142\ Affordable Care Act: Working with States to Protect
Consumers, available at https://www.cms.gov/CCIIO/Resources/Files/external_appeals.html.
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Individuals participating in ERISA-covered self-insured group
health plans will be among those most affected by the external review
requirements contained in these final regulations, because the
preemption provisions of ERISA prevent a State's external review
process from applying directly to an ERISA-covered self-insured plan.
These plans will now be required to comply with the Federal external
review process set forth under paragraph (d) of these final
regulations.
In summary, the number of affected individuals depends on several
factors, including whether (i) a health plan retains its grandfather
status, (ii) the plan is subject to ERISA, (iii) benefits provided
under the plan are self-funded or financed by the purchase of an
insurance policy, (iii) the applicable State has enacted an internal
claims and appeals law, and (iv) the applicable State has enacted an
external review law, and if so the scope of such law, and (v) the
number of new plans and enrollees in such plans.
The following, is a summary of the benefits and costs as discussed
in the interim final regulations and that are still applicable to these
final regulations.
2. Benefits
Because of data limitations and a lack of effective measures, the
Departments did not attempt to quantify the expected benefits.
Nonetheless, the Departments were able to identify several of the
interim final regulation's major economic benefits.
The interim final regulations and these final regulations will help
transform the current, highly variable health claims and appeals
process into a more uniform and structured process. This will:
Improve the extent to which employee benefit plans provide
benefits consistent with the established terms of the plan;
ensure greater certainty and consistency in the handling
of benefit claims and appeals and improved access to information about
the manner in which claims and appeals are adjudicated;
increase efficiency in the operation of employee benefit
plans and health care delivery as well as health insurance and labor
markets;
increase efficiency of health plans by enhancing their
transparency and fostering participants' confidence in the plan's
fairness;
reduce delays and inappropriate denials;
reduce the levels of error in the system and improve
health outcomes;
improve health care, health plan quality, and insurance
market efficiency by serving as a communication channel, providing
feedback from participants, beneficiaries, and providers to plans about
quality issues; and
enhance some insurers' and group health plans' abilities
to effectively control costs by limiting access to inappropriate care.
3. Costs and Transfers
The Departments have quantified the primary source of costs
associated with these final regulations that will be incurred to (i)
administer and conduct the internal and external review process, and
(ii) prepare and distribute required disclosures and notices. These
costs and the methodology used to estimate them are discussed under the
Paperwork Reduction Act section. The total cost related to the
information collections is $160.1 million annually.
a. Additional Requirements for Group Health Plans
Paragraph (b)(2)(i) of these final regulations imposes additional
requirements to the DOL claims procedure regulation that must be
satisfied by group health plans and issuers offering group and
individual coverage in the individual and group health insurance
markets. The Departments believe that the additional requirements have
modest costs associated with them, because they merely clarify
provisions of the DOL claims procedure regulation.
As discussed in the impact analysis for the interim final
regulations the Departments were not able to estimate the costs for
some of the requirements, namely for: the definition of adverse
determination, expedited notification of benefit determination
involving urgent care, eliminating conflicts of interest, and deemed
exhaustion of internal process. The Departments were able to quantify
the costs for Full and fair review and Enhanced notice with culturally
and linguistically appropriate notices. These costs are included in the
Paperwork Reduction Act Section.
b. Additional Requirements for Issuers in the Individual Insurance
Market
To address certain relevant differences in the group and individual
markets, health insurance issuers offering individual health insurance
coverage must comply with three additional requirements. First, these
final regulations expand the scope of the group health coverage
internal claims and appeals process to cover initial eligibility
determinations.
This protection is important since eligibility determinations in
the individual market are frequently based on the health status of the
applicant, including preexisting conditions. The Departments do not
have sufficient data to quantify the costs associated with this
requirement.
Second, although the DOL claims procedure regulation permits group
health plans to have a second level of internal appeals, these final
regulations require health insurance issuers offering individual health
insurance coverage to have only one level of internal appeals. This
allows the claimant to seek either external review or judicial review
immediately after an adverse determination is upheld in the first level
of internal appeals. The Departments have factored this cost into their
estimate of the cost for issuers offering coverage in the individual
market to comply with this requirement.
Finally, these final regulations require health insurance issuers
offering individual health insurance coverage to maintain records of
all claims and notices associated with their internal claims and
appeals processes. An issuer must make such records available for
examination upon request. Accordingly, a claimant or State or Federal
agency official generally would be able to request and receive such
documents free of charge. The Departments believe that minimal costs
are associated with this requirement, because most issuers retain the
required information in the normal course of their business operations.
c. External Appeals
The analysis of the cost associated with implementing an external
review process under the interim final regulations and these final
regulations focuses on the cost incurred by the following three groups
that were not required to implement an external review process before
the enactment of the Affordable Care Act: Plans and participants in
ERISA-covered self-
[[Page 72225]]
insured plans; plans and participants in States with no external review
laws; and plans and participants in States that have State laws only
covering specific market segment (usually HMOs or managed care
coverage).
The Departments estimate that there are approximately 78.7 million
participants in self-insured ERISA-covered plans and approximately 15.5
million participants in self-insured State and local governmental
plans. In the States which currently have no external review laws or
whose laws do not meet the federal minimum requirements \143\ there are
an estimated 13.8 million participants (8.1 million participants in
ERISA-covered plans, 3.7 million participants in governmental plans and
2 million individual covered by policies in the individual market).
These estimates lead to a total of 108 million participants, however,
only the 80.0 million participants in non-grandfathered plans will be
required to be covered by the external review requirement.
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\143\ These states are Alabama, Alaska, Florida, Georgia,
Pennsylvania, and Wisconsin. See Affordable Care Act: Working with
States to Protect Consumers, available at https://www.cms.gov/CCIIO/Resources/Files/external_appeals.html
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The Departments assume that there are an estimated 1.3 external
appeals for every 10,000 participants \144\, and that there will be
approximately 10,400 external appeals annually. As required by these
final regulations or applicable State law, plans or issuers are
required to pay for most of the cost of the external review while
claimants may be charged a nominal filing fee in States that authorized
such fees as of November 18, 2015. One study found that the average
cost of a review was approximately $665.\145\ The average cost per
appeal in the HHS-administered External Review Program is approximately
$625 for a standard case and $825 for an expedited case.\146\
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\144\ AHIP Center for Policy and Research, ``An Update on State
External Review Programs, 2006,'' July 2008.
\145\ North Carolina Department of Insurance ``Healthcare Review
Program: Annual Report,'' 2013 Table 4. http://www.ncdoi.com/smart/Documents/ExternalReviewReport16.pdf
\146\ The HHS-administered External Review Program is
approximately $625 for a standard case and $825 for an expedited
case.
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The actual cost per review will vary by State and type of review
(standard or expedited). Lacking data on the percent of appeals that
are expedited, but with the majority of appeals being standard appeals,
the higher cost per appeal of $665 for a standard appeal is used as an
estimate for all appeals. These estimates lead to an estimated cost of
the external review of $6.9 million (10,400 reviews * $665) annually.
On average, about 40 percent of denials are reversed on external
appeal.\147\ An estimate of the dollar amount per claim reversed is
$12,500.\148\ This leads to $53.5 million in additional claims being
reversed by the external review process annually. While this amount is
a cost to plans, it represents a payment of benefits that should have
previously been paid to participants, but was denied. Part of this
amount is a transfer from plans and issuers to those now receiving
payment for denied benefits. Part of the amount could also be a cost if
the reversal leads to services and hence resources being utilized now
that had been denied previously. The Departments are not able to
distinguish between the two types but believe that most reversals are
associated with a transfer.
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\147\ Of the 105 cases fully reviewed in the HHS-administered
external review process so far, 28 have been overturned and 25 have
been partially overturned.
\148\ North Carolina Department of Insurance ``Healthcare Review
Program: Annual Report,'' 2013. http://www.ncdoi.com/smart/Documents/ExternalReviewReport16.pdf
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These final regulations also require claimants to receive a notice
informing them of the outcome of an appeal and/or external review. The
independent review organization that conducts the external review is
required to prepare the notice; therefore, the cost of preparing and
delivering this notice is included in the fee paid them by the insurer
to conduct the review.
4. Summary
These final rules extend the protections of the DOL claims
procedure regulation to non-Federal governmental plans, and the market
for individual coverage. Additional protections are added that cover
these two markets and in addition to the market for ERISA-covered
plans. These final regulations also extend the requirement to provide
an independent external review. The Departments estimate that the total
costs for these final regulations is $169.9 million annually with a
transfer from the plan and its participants to those whose claims are
reversed of $53.5 million annually.
G. PHS Act Section 2719A, Patient Protections (26 CFR 54.9815-2719A, 29
CFR 2590.715-2719A, 45 CFR 147.138)
1. Designation of Primary Care Provider
The statute, the interim final regulations and these final
regulations provide that 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, and enrollee to designate any
participating primary care provider who is available to accept the
participant, beneficiary, or enrollee based on his or her geographic
location.
a. Affected Entities and Individuals
Choice or assignment of a primary care provider is typically
required by Health Maintenance Organizations (HMOs) and Point of
Service plans (POS). Recent data suggest that there are 316,000 HMOs in
the United States, accounting for more than 11.3 million enrollees with
ESI. There are also 558,000 POS plans accounting for almost 7 million
enrollees with ESI. The individual market includes 130,700 HMO
policies.\149\ Similar data do not exist for POS policies in the
individual market.
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\149\ Data for the group market (plan and participant counts)
were calculated using the 2012 MEPS, 2012 Census of Government, 2014
Current Population Survey, and 2014 Kaiser/HRET Survey of Employer
Sponsored Health Benefits. Data for the individual market were
calculated using AHIP ``Individual Health Insurance 2009: A
Comprehensive Survey of Premiums, Availability and Benefits,'' Table
10 and Medical Loss Ratio submissions for 2013 reporting year.
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This provision only applies to non-grandfathered health plans.
However, due to the lack of data on HMO and POS enrollees by type of
market, and the inability to predict new plans that may enter those
markets, the Departments are unable to predict the number enrollees and
plans that would be affected by this provision. Moreover, there is no
data on the number of plans that auto-assigned patients to primary care
physicians and did not already allow patients to make the final
provider choice, as this would be the population to benefit maximally
from the interim final rules and these regulations. From conversations
with industry experts the Departments expect, however, that this number
would be very small, and therefore the benefits and costs of this
provision would be small as well.
b. Benefits, Costs, and Transfers
As discussed in the RIA for the interim final regulations, provider
choice allows patients to take into account factors they may value when
choosing their provider, such as provider credentials, office hours and
location, advice from professionals, and information on the experience
of other patients. Provider choice is a strong predictor of patient
trust in their provider, which could lead to decreased
[[Page 72226]]
likelihood of malpractice claims, improved medication adherence and
also improves health outcomes.
Although difficult to estimate given the data limitations
described, the costs for this provision are likely to be minimal. As
noted in the RIA for the interim final regulations, when enrollees like
their providers, they are more likely to maintain appointments and
comply with treatment, both of which could induce demand for services,
but these services could then in turn reduce costs associated with
treating more advanced conditions. However, the number of affected
entities from this provision is very small, leading to small additional
costs. There will likely be negligible transfers due to this provision
given no changes in coverage or cost-sharing.
2. Designation of Pediatrician as Primary Care Provider
If a plan or issuer requires or provides for the designation of a
participating primary care provider for a child by a participant,
beneficiary, or enrollee, the plan or issuer must permit the
designation of 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. The general
terms of the plan or health insurance coverage regarding pediatric care
otherwise are unaffected, including any exclusions with respect to
coverage of pediatric care.
a. Affected Entities and Individuals
Due to lack of data on enrollment in managed care organizations by
age, as well as lack of data on HMO and POS enrollees by type of
market, and the inability to predict new plans that may enter those
markets, the Departments are unable to predict the number of enrollees
and plans that would be affected by these provisions. As a reference,
there are an estimated 5.6 million individuals under age 19 with ESI
who are in an HMO plan.\150\
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\150\ Estimate based on data from the 2012 MEPS, 2012 Census of
Government, 2014 Current Population Survey, and 2014 Kaiser/HRET
Survey of Employer Sponsored Health Benefits.
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b. Benefits, Costs, and Transfers
By expanding participating primary care provider options for
children to include pediatricians, this provision benefits individuals
who are making decisions about care for their children. As discussed in
the previous section, research indicates that when doctors and patients
have a strong, trusting relationship, patients often have improved
medication adherence, health promotion, and other beneficial health
outcomes.
In addition, allowing enrollees to select a physician specializing
in pediatrics as their children's primary care provider has removed any
referral related delays for individuals in plans that required
referrals to pediatricians and did not allow physicians specializing in
pediatrics to serve as primary care providers. The American Academy of
Pediatrics (AAP) strongly supports the idea that the choice of primary
care clinicians for children should include pediatricians.\151\ Regular
pediatric care, including care by physicians specializing in
pediatrics, can improve child health outcomes and avert preventable
health care costs.
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\151\ See AAP Policy Statement, ``Guiding Principles for Managed
Care Arrangements for the Health Care of Newborns, Infants,
Children, Adolescents, and Young Adults'', available at: http://pediatrics.aappublications.org/content/132/5/e1452.full.pdf+html.
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Giving enrollees in covered plans (that require the designation of
a primary care provider) the ability to select a participating
pediatrician as the child's primary care provider benefits those
individuals who would not otherwise have been given this choice. Again,
the extent of these benefits will depend on the number of enrollees
with children that are covered by plans that do not allow the selection
of a pediatrician as the primary care provider, which industry experts
suggest would be small.
Although difficult to estimate given the data limitations
described, the costs for this provision are likely to be small. Giving
enrollees a greater choice of primary care providers by allowing them
to select participating physicians who specialize in pediatrics as
their child's primary care provider could lead to increased health care
costs by increasing the take-up of primary care services, assuming they
would not have utilized appropriate services as frequently if they had
not been given this choice.
Any transfers associated with the interim final regulations and
these final regulations are expected to be minimal. To the extent that
pediatricians acting as primary care providers would receive higher
payment rates for services provided than would other primary care
physicians, there may be some transfer of wealth from policy holders of
non-grandfathered group plans to those enrollees that choose the former
providers. However, the Departments do not believe that this is likely
given the similarity in income for primary care providers that care for
children.
3. Patient Access to Obstetrical and Gynecological Care
The statute, the interim final regulations and these final
regulations also provide rules for a group health plan, or a health
insurance issuer offering group or individual health insurance
coverage, that provides coverage for obstetrical or gynecological care
and requires the designation of an in-network primary care provider.
Specifically, the plan or issuer may not require authorization or
referral by the plan, issuer, or any person (including a primary care
provider) for a female participant, beneficiary, or enrollee who seeks
obstetrical or gynecological care provided by an in-network health care
professional who specializes in obstetrics or gynecology (OB/GYN).
These plans and issuers must also treat the provision of obstetrical
and gynecological care, and the ordering of related obstetrical and
gynecological items and services, by the OB/GYN as the authorization of
the primary care provider. For this purpose, an OB/GYN is any
individual who is authorized under applicable State law to provide
obstetrical or gynecological care, and is not limited to a physician.
a. Affected Entities and Individuals
Requiring referrals or authorizations to OB/GYNs is typically
required by HMOs and POS plans.
This provision applies to non-grandfathered health plans. However,
due to the lack of data on HMO and POS enrollees by type of market, and
the inability to predict new plans that may enter those markets, the
Departments are unable to predict the number enrollees and plans that
would be affected by this provision. As a reference, there are an
estimated 7.3 million females between ages 21 to 65 with ESI who are in
HMO plans.\152\
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\152\ Estimate based on data from the 2012 MEPS, 2012 Census of
Government, 2014 Current Population Survey, and 2014 Kaiser/HRET
Survey of Employer Sponsored Health Benefits.
---------------------------------------------------------------------------
b. Benefits, Costs, and Transfers
This provision gives women in covered plans easier access to their
OB/GYNs, where they can receive preventive services such as pelvic and
breast exams, without the added time, expense, and inconvenience of
needing permission first from their primary care providers. Moreover,
this provision may also save time and reduce administrative burden
since participating OB/GYNs do not need to
[[Page 72227]]
get an authorization from a primary care provider to provide care and
order obstetrical and gynecological items and services. To the extent
that primary care providers spend less time seeing women who need a
referral to an OB/GYN, access to primary care providers will be
improved. To the extent that the items and services are critical and
would have been delayed while getting an authorization from the primary
care provider, this provision will improve the treatment and health
outcomes of female patients. Access to such care can have substantial
benefits in women's lives.
To the extent that direct access to OB/GYN services results in
increased utilization of recommended and appropriate care, this
provision may result in benefits associated with improved health status
for the women affected. Potential cost savings also exist since women
in affected plans will not need to visit their primary care provider in
order to get a referral for routine obstetrical and gynecological care,
items, and services, thereby reducing unnecessary time and
administrative burden, and decreasing the number of office visits paid
by her and by her health plan.
One potential area of additional costs associated with this
provision would be induced demand, as women who no longer need a
referral to see an OB/GYN may be more likely to receive preventive
screenings and other care. Data is limited to provide an estimate of
this induced demand, but the Departments believe it to be small.
To the extent this provision results in a shift in services to
higher cost providers, it will result in a transfer of wealth from
enrollees in non-grandfathered group plans to those individuals using
the services affected. However, such an effect is expected to be small.
4. Emergency Services
PHS Act section 2719A, the interim final regulations, and these
final regulations provide that a group health plan and a health
insurance issuer covering emergency services must do so without the
individual or the health care provider having to obtain prior
authorization (even if the emergency services are provided out-of-
network). For a plan or health insurance coverage with a network of
providers that provide benefits for emergency services, the plan or
issuer may not impose any administrative requirement or limitation on
benefits for out-of-network emergency services that is more restrictive
than the requirements or limitations that apply to in-network emergency
services.
Finally, the interim final regulations and these final regulations
provide that cost-sharing requirements expressed as a copayment amount
or coinsurance rate imposed for out-of-network emergency services
cannot exceed the cost-sharing requirements that would be imposed if
the services were provided in-network. The regulations also provide
that a plan or health insurance issuer provide benefits for out-of-
network emergency services (prior to imposing in-network cost sharing)
in an amount at least equal the greatest of: (1) The median amount
negotiated with in-network providers for the emergency service; (2) 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); or (3) the
amount that would be paid under Medicare for the emergency service. In
applying the rules relating to emergency services, the statute and the
regulations define the terms emergency medical condition, emergency
services, and stabilize. These terms are defined generally in
accordance with their meaning under Emergency Medical Treatment and
Labor Act (EMTALA), section 1867 of the Social Security Act.
The statute and the regulations relating to emergency services do
not apply to grandfathered health plans; however, other Federal or
State laws related to emergency services may apply regardless of
grandfather status.
a. Affected Entities and Individuals
The interim final regulations and these regulations directly affect
out-of-pocket expenditures for individuals enrolled in non-
grandfathered private health plans (group or individual) whose
copayment or coinsurance arrangements for emergency services differ
between in-network and out-of-network providers. These regulations may
also require some health plans to change the amount they pay to out-of-
network providers compared to their pre-Affordable Care Act contractual
arrangements. There are no available data, however, that allow for
national estimates of the number of plans (or number of enrollees in
plans) that have different payment arrangements for out-of-network than
in-network providers, or differences between in- and out-of-network
copayment and coinsurance arrangements, in order to more precisely
estimate the number of enrollees affected.
Prior to the issuance of the interim final regulations, the
Departments conducted an informal survey of benefits plans for large
insurers in order to assess the landscape with regard to copayment and
coinsurance for emergency department services, but found that a variety
of arrangements existed in the marketplace prior to the issuance of the
interim final regulations. Many of the large insurers maintained
identical copayment and/or coinsurance arrangements between in- and
out-of-network providers. Others had differing arrangements based on
copayments, coinsurance rates, or a combination of the two. While
useful for examining the types of arrangement that exist in the market
place, these data do not contain enrollment information and therefore
cannot be used to make impact estimates.
It was estimated in the interim final regulations that a maximum of
2.1 to 4.2 million individuals would be potentially affected by
differing out-of-pocket requirements. Based on an informal survey, some
proportion, possibly a large portion, of these individuals were covered
by plans that had identical in- and out-of-network requirements.
Therefore, the number of individuals affected by this regulatory
provision was expected to be smaller.
b. Benefits, Costs, and Transfers
Insurers maintained differing copayment and coinsurance
arrangements between in- and out-of-network providers as a cost
containment mechanism. Implementing reduced cost sharing for the use of
in-network providers provides financial incentive for enrollees to use
these providers, with whom plans often have lower-cost contractual
arrangements. In emergency situations, however, the choice of an in-
network provider may not be available--for example, when a patient is
some distance from his or her local provider networks or when an
ambulance transports a patient to the nearest hospital which may not
have contractual arrangements with the person's insurer. In these
situations, the differing copayment or coinsurance arrangements could
place a substantial financial burden on the patient. This provision
eliminates this disparity in out-of-pocket burden for enrollees,
leading to potentially substantial financial benefit.
The regulations also provide for potentially higher payments to
out-of-network providers, if usual customary rates or Medicare rates
are higher than median in-network rates. This can have a direct
economic benefit to providers and patients, as the remaining
differential between provider charge and plan payment will be smaller,
[[Page 72228]]
leading to a smaller balance-bill for patients.
To the extent that expectations about such financial burden with
out-of-network emergency department usage would cause individuals to
delay or avoid seeking necessary medical treatment when they cannot
access a network provider, this provision may result in more timely use
of necessary medical care. It may therefore result in health and
economic benefits associated with improved health status; and fewer
complications and hospitalizations due to delayed and possibly reduced
mortality. The Departments expect that this effect would be small,
however, because insured individuals are less likely to delay care in
emergency situations.
The economic costs associated with the emergency services
provisions are likely to be minimal. These costs will occur to the
extent that any lower cost-sharing will induce new utilization of out-
of-network emergency services. Given the nature of these services as
emergency services, this effect is likely to be small for insured
individuals. In addition, the demand for emergency services in truly
emergency situations can result in health care cost savings and
population health improvements due to the timely treatment of
conditions that could otherwise rapidly worsen.
As discussed in the RIA for the interim final regulations, the
emergency services provisions are likely to result in some transfers
from the general membership of non-grandfathered group health plans
that have differing copayment and coinsurance arrangements to those
policy holders that use the out-of-network emergency services. The
precise amount of the transfer which would occur through an increase in
premiums is impossible to quantify due to lack of data, but only
applies to non-grandfathered health plans.
5. Application to Grandfathered Plans
The provisions relating to certain patient protections do not apply
to grandfathered health plans. However, other Federal or State laws
related to these patient protections may apply regardless of
grandfather status.
6. Patient Protection Disclosure Requirement
When applicable, it is important that individuals enrolled in a
plan or health insurance coverage know of their rights to (1) choose a
primary care provider or a pediatrician when a plan or issuer requires
participants or subscribers to designate a primary care physician; or
(2) obtain obstetrical or gynecological care without prior
authorization.
Accordingly, as was provided in the interim final regulations,
these final regulations require such plans and issuers to provide a
notice to participants (in the individual market, primary subscribers)
of these rights when applicable. Model language is provided in these
regulations. The notice must be provided 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, or
in the individual market, provides a primary subscriber with a policy,
certificate, or contract of health insurance.
The Departments estimate that the cost to plans and insurance
issuers to prepare and distribute the disclosure is $940,000 in 2015.
For a discussion of the Patient Protection Disclosure Requirement, see
the Paperwork Reduction Act section later in this preamble.
IV. Paperwork Reduction Act
A. Departments of Labor and the Treasury
These final regulations contain a notice of grandfather status and
third party disclosure, rescissions notice, and patient protection
disclosures requirement for issuers and notice requirements related to
internal claims and appeals and external review that are information
collection requests (ICRs) subject to the Paperwork Reduction Act of
1995 (PRA) (44 U.S.C. 3506(c)(2)(A)).
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (PRA) (44 U.S.C. 3506(c)(2)), the Departments submitted an ICR
to OMB in accordance with 44 U.S.C. 3507(d), contemporaneously with the
publication of the interim final regulations, for OMB's review under
the emergency PRA Procedures.\153\ OMB subsequently approved the ICRs.
Contemporaneously with the publications of the emergency ICRs, the
Departments published a separate Federal Register notice informing the
public that it intended to request OMB to extend the approval for three
years and soliciting comments on the ICRs. OMB approved the ICR
extensions.
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\153\ 5 CFR 1320.13.
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No public comments were received in response to the ICRs contained
in the interim final regulations that specifically addressed the
paperwork burden analysis of the information collections. The comments
that were submitted contained information relevant to the costs and
administrative burdens attendant to the proposals. The Departments took
into account the public comments when analyzing the economic impact of
the proposals, and developing the revised paperwork burden analysis,
which is summarized in the following sections.
A copy of the ICRs may be obtained by contacting the following PRA
addressee or at http://www.RegInfo.gov. PRA ADDRESSEE: G. Christopher
Cosby, Office of Policy and Research, U.S. Department of Labor,
Employee Benefits Security Administration, 200 Constitution Avenue NW.,
Room N-5718, Washington, DC 20210. Telephone: (202) 693-8410; Fax:
(202) 219-4745. These are not toll-free numbers. Email:
[email protected].
1. ICR Regarding Affordable Care Act Notice of Grandfather Status and
Third Party Disclosure
As discussed earlier in this preamble, to maintain grandfathered
health plan status under these final regulations, a plan or issuer must
maintain records that document the plan or policy terms 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, disclose its status as a grandfathered health plan, and if
switching issuers and intending to maintain its status as a
grandfathered plan it must provide to the new health insurance issuer
documentation of plan terms under the prior health coverage sufficient
for it to determine whether a change causing a cessation of
grandfathered health plan status has occurred.
a. Grandfathered Health Plan Disclosure
The final regulations provide that the plan or issuer of a
grandfathered plan must disclose to participants and beneficiaries its
status as a grandfathered health plan. Model language is provided by
the Departments. Using data from the 2014 Employer Health Benefits
Survey it is estimated that 37 percent of plans are grandfathered plans
and 26 percent of employees in ERISA-covered plans are in a
grandfathered plans.\154\
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\154\ Kaiser Family Foundation, ``2014 Employer Health Benefits
Survey.'' http://kff.org/health-costs/report/2014-employer-health-benefits-survey/.
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The Departments estimate that there are 850,700 (2.3 million ERISA-
covered plans * 0.37) ERISA-covered plans \155\--with an estimated 17.2
million policy holders (66 million policy holders *0.26)--that will
need to include the
[[Page 72229]]
notice in plan documents.\156\ After plans satisfied the grandfathered
health plan disclosure requirement in 2011, any additional burden
should be de minimis if a plan wants to maintain its grandfathered
status in future years. The Departments also expect the cost of
removing the notice from plan documents as plans relinquish their
grandfathered status to be de minimis and therefore it is not
estimated. Based on the foregoing, the Departments estimate that plans
will incur no additional burden to maintain or remove the notice from
plan documents.
The Departments estimate that the notice will require one-half of a
page and five cents per page printing and material cost will be
incurred, and 38 percent of the notices will be delivered
electronically. This results in a total cost burden of approximately
$266,000 ($0.05 per page*1/2 pages per notice * 17.2 million
notices*0.62).
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\155\ EBSA estimates based on the 2014 Medical Expenditure
Survey--Insurance Component.
\156\ Health Insurance Coverage Bulletin: Abstract of Auxiliary
Data for the March 2014 Annual Social and Economic Supplement to the
Current Population Survey, Table 3C.
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b. Record Keeping Requirement
Plans were required to maintain records documenting the terms of
the plan or health insurance coverage in connection with the coverage
in effect on March 23, 2010.
The Departments assume that most of the documents required to be
retained to satisfy the recordkeeping requirement of these final
regulations are already retained by plans for tax purposes, to satisfy
ERISA's record retention and statute of limitations requirements, and
for other business reasons. The Departments estimated this as a one-
time cost incurred in 2011, because after the first year, the
Departments anticipate that any future costs to retain the records will
be de minimis.
c. Documentation of Plan Terms
These final regulations contain a disclosure requirement that
requires that a group health plan that is changing health insurance
coverage to provide to the succeeding health insurance issuer (and the
succeeding health insurance issuer must require) documentation of plan
terms (including benefits, cost sharing, employer contributions, and
annual limits) under the prior health insurance coverage sufficient to
make a determination whether the standards of paragraph (g)(1) under
the Affordable Care Act section 1251 regulations are exceeded. The
number of plans that might be effected (133,200) is estimated by
multiplying the number of grandfathered plans (850,700) by the percent
of plans shopping for a new carrier (58 percent) and the number of
plans shopping for a new carrier that switched (27 percent). Each of
these plans would need to transmit to the carrier documentation of plan
terms (including benefits, cost sharing, employer contributions, and
annual limits) under the prior health insurance coverage sufficient to
make a determination whether the standards of paragraph (g)(1) of the
final regulations under Affordable Care Act section 1251 are exceeded.
It is estimated that the electronic transmission of the already
retained documents would require 2 minutes of a clerical staff's time
with a labor rate of $30.42 per hour.\157\ These estimate result in an
hour burden of 4,440 hours (133,200*2/60) with an equivalent cost of
$135,100 (133,200*2/60*$30.42). Each of these plans would need to
transmit to the carrier documentation of plan terms. If half of the
plans transmit the required documents electronically then 66,600 plans
will be sent via mail resulting in a materials and postage costs of
$467,600 ((66,600*(90 pages *5 cents per page + $2.52 postage)).
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\157\ The Department's estimated 2015 hourly labor rates include
wages, other benefits, and overhead are calculated as follows: mean
wage from the 2013 National Occupational Employment Survey (April
2014, Bureau of Labor Statistics http://www.bls.gov/news.release/pdf/ocwage.pdf); wages as a percent of total compensation from the
Employer Cost for Employee Compensation (June 2014, Bureau of Labor
Statistics http://www.bls.gov/news.release/ecec.t02.htm); overhead
as a multiple of compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of compensation for
clerical, and 35 percent of compensation for professional; annual
inflation assumed to be 2.3 percent annual growth of total labor
cost since 2013 (Employment Costs Index data for private industry,
September 2014 http://www.bls.gov/news.release/eci.nr0.htm).
Secretaries, Except Legal, Medical, and Executive (43-6014):
$16.35(2013 BLS Wage rate)/0.675(ECEC ratio) *1.2(Overhead Load
Factor) *1.023(Inflation rate) -2(Inflated 2 years from base year) =
$30.42.
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The Departments note that persons are not required to respond to,
and generally are not subject to any penalty for failing to comply with
an ICR unless the ICR has a valid OMB control number.
The paperwork burden estimates are summarized as follows:
Type of Review: Revision.
Agency: Employee Benefit Security Administration, Department of
Labor; Internal Revenue Service, U.S. Department of the Treasury.
Title: Disclosure and Recordkeeping Requirements for Grandfathered
Plans under the Affordable Care Act.
OMB Control Number: 1210-0140; 1545-2178.
Affected Public: Business or other for-profit; not-for-profit
institutions.
Total Respondents: 850,700.
Total Responses: 18,143,923.
Frequency of Response: Occasionally.
Estimated Total Annual Burden Hours (three year average): 2,200
(Employee Benefits Security Administration); 2,200 (Internal Revenue
Service).
Estimated Total Annual Cost Burden (three year average): $366,800
(Employee Benefits Security Administration); $366,800 (Internal Revenue
Service).
2. ICR Regarding Affordable Care Act Notice Relating to Rescissions
As discussed earlier in this preamble, PHS Act Section 2712 and
these final regulations provide rules regarding rescissions for group
health plans and health insurance issuers that offer group or
individual health insurance coverage. A plan or issuer must not rescind
coverage under the plan, policy, certificate, or contract of insurance
except in the case of fraud or intentional misrepresentation of a
material fact. These final regulations provide that a group health plan
or a health insurance issuer offering group health insurance coverage
must provide at least 30 calendar days advance notice to an individual
before coverage may be rescinded. This rescission notice requirement is
an information collection request (ICR) subject to the Paperwork
Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)).
The Departments assume that rescissions are rare in the group
market and that small group health plans are affected by rescissions.
The Departments are not aware of a data source on the number of group
plans whose policy is rescinded; therefore, the Departments assume that
100 small group health plan policies are rescinded in a year. The
Departments estimate that there is an average of 15.33 participants in
small, insured plans.\158\ Based on these numbers the Departments
estimate that approximately 100 policies are rescinded during a year,
which would result in 1,533 notices being sent to affected participants
with 38 percent transmitted electronically and 62 percent mailed. The
Departments estimate that 15 minutes of legal professional time at
$129.94 per hour would be required by the insurers of the 100 plans to
prepare the notice and one minute per notice of clerical professional
time at $30.42 per hour would be required to distribute the paper
notices. The Departments believe
[[Page 72230]]
the costs of electronic transmission would be de minimis. This results
in an hour burden of approximately 41 hours with an equivalent cost of
approximately $3,700.\159\
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\158\ U.S. Department of Labor, EBSA calculations using the
March 2014 Current Population Survey Annual Social and Economic
Supplement and the 2012 Medical Expenditure Panel Survey.
\159\ The Department's estimated 2015 hourly labor rates include
wages, other benefits, and overhead are calculated as follows: mean
wage from the 2013 National Occupational Employment Survey (April
2014, Bureau of Labor Statistics http://www.bls.gov/news.release/pdf/ocwage.pdf); wages as a percent of total compensation from the
Employer Cost for Employee Compensation (June 2014, Bureau of Labor
Statistics http://www.bls.gov/news.release/ecec.t02.htm); overhead
as a multiple of compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of compensation for
clerical, and 35 percent of compensation for professional; annual
inflation assumed to be 2.3 percent annual growth of total labor
cost since 2013 (Employment Costs Index data for private industry,
September 2014 http://www.bls.gov/news.release/eci.nr0.htm).
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The Departments estimate that the cost burden associated with
distributing the paper notices via mail will be approximately $500.
This results from distributing 950 paper notices at a cost of $0.54 per
notice.\160\
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\160\ This estimate is based on an average document size of one
page, $.05 cents per page material and printing costs, and $0.49
postage costs.
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These paperwork burden estimates are summarized as follows:
Type of Review: Revision of existing collection.
Agencies: Employee Benefits Security Administration, Department of
Labor; Internal Revenue Service, U.S. Department of the Treasury.
Title: Required Notice of Rescission of Coverage under the Patient
Protection and Affordable Care Act Disclosures.
OMB Number: 1210-0141; 1545-2180.
Affected Public: Business or other for-profit; not-for-profit
institutions.
Total Respondents: 100.
Total Responses: 1,533.
Frequency of Response: Occasionally.
Estimated Total Annual Burden Hours: 20.5 hours (Employee Benefits
Security Administration); 20.5 hours (Internal Revenue Service).
Estimated Total Annual Burden Cost: $250 (Employee Benefits
Security Administration); $250 (Internal Revenue Service).
3. ICR Regarding Affordable Care Act Patient Protection Disclosure
Requirement
a. Patient Protection Disclosure
As discussed earlier in this preamble, PHS Act section 2719A
imposes, with respect to a group health plan, or group or individual
health insurance coverage, a set of three requirements relating to the
choice of health care professionals. When applicable, it is important
that individuals enrolled in a plan or health insurance coverage know
of their rights to (1) Choose a primary care provider or a pediatrician
when a plan or issuer requires participants or subscribers to designate
a primary care physician; (2) obtain obstetrical or gynecological care
without prior authorization; or (3) coverage of emergency services.
Accordingly, these final regulations require such plans and issuers to
provide a notice to participants (in the individual market, primary
subscriber) of these rights when applicable. Model language is provided
in these final regulations. The notice must be provided 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, or in the individual market, provides a primary
subscriber with a policy, certificate, or contract of health insurance.
The Affordable Care Act patient protection disclosure requirement is an
ICR subject to the PRA.
In order to satisfy these final regulations' patient protection
disclosure requirement, the Departments estimate that 41,000 ERISA-
covered plans will need to notify an estimated 693,000 policy holders
annually of their plans policy in regards to designating a primary care
physician and for obstetrical or gynecological visits.\161\ The
Departments believe that plans would only incur costs associated with
this notice during the first year after relinquishing grandfather
status. In subsequent years, this notice would remain unchanged and its
costs are factored into the burden estimates associated with the
Summary Plan Description information collection request (OMB Control
Number 1210-0039).
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\161\ The Departments' estimate of the number of ERISA-covered
health plans was obtained from the 2014 Medical Expenditure Survey--
Insurance Component and the number of policy holders was obtained
from the Health Insurance Coverage Bulletin: Abstract of Auxiliary
Data for the March 2014 Annual Social and Economic Supplement to the
Current Population Survey, Table 3C http://www.dol.gov/ebsa/pdf/coveragebulletin2014.pdf. Information on HMO and POS plans and
enrollment in such plans was obtained from the Kaiser/HRET Survey of
Employer Sponsored Health Benefits, 2014. The Department assumes
that five percent of group health plans will relinquish
grandfathered health plan status annually.
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The following estimates are based on the assumption that five
percent of group health plans will relinquish grandfathered health plan
status annually. Because the final regulations provide model language
for this purpose, the Departments estimate that five minutes of
clerical time (with a labor rate of $30.42/hour) will be required to
incorporate the required language into the plan document and ten
minutes of a human resource professional's time (with a labor rate of
$110.30/hour) will be required to review the modified language.
Therefore, the Departments estimate that plans relinquishing
grandfathered health plan status will incur an annual hour burden of
10,000 hours with an equivalent cost of $866,000.\162\
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\162\ The Department's estimated 2015 hourly labor rates include
wages, other benefits, and overhead are calculated as follows: mean
wage from the 2013 National Occupational Employment Survey (April
2014, Bureau of Labor Statistics http://www.bls.gov/news.release/pdf/ocwage.pdf); wages as a percent of total compensation from the
Employer Cost for Employee Compensation (June 2014, Bureau of Labor
Statistics http://www.bls.gov/news.release/ecec.t02.htm); overhead
as a multiple of compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of compensation for
clerical, and 35 percent of compensation for professional; annual
inflation assumed to be 2.3 percent annual growth of total labor
cost since 2013 (Employment Costs Index data for private industry,
September 2014 http://www.bls.gov/news.release/eci.nr0.htm).
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The Departments assume that only printing and material costs are
associated with the disclosure requirement, because the final
regulations provide model language that can be incorporated into
existing plan documents, such as an SPD. The Departments estimate that
the notice will require one-half of a page, five cents per page
printing and material cost will be incurred, and 38 percent of the
notices will be delivered electronically at de minimis cost. This
results in a cost burden of $11,000.\163\
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\163\ This estimate is based on an average document size of \1/
2\ page, $.05 cents per page material and printing costs, and $0.49
postage costs for paper notices and de minimis costs for
electronically distributed notices. The Departments assume 62
percent of notices will be on paper and 38 percent will be
distributed electronically.
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b. Out-of-Network Emergency Services Disclosure
The final regulations require that a plan or issuer may not impose
any copayment or coinsurance requirement for out-of-network emergency
services that is more restrictive than the copayment or coinsurance
requirement that would apply if the services were provided in network.
If State law prohibits balance billing, or a plan or issuer is
contractually responsible for any amounts balanced billed by an out-of-
network emergency services provider, the plan or issuer must provide an
enrollee or beneficiary adequate and prominent notice of their lack of
financial responsibility with respect to amounts balanced billed in
order to prevent inadvertent payment by an enrollee or beneficiary.
This information should already be routinely included in the
Explanation of Benefit documents
[[Page 72231]]
sent by plans and issuers to enrollees and beneficiaries. Therefore, in
accordance with the implementing regulations of the PRA at 5 CFR
1320.3(b)(2), we believe this is a usual and customary business
practice. Plans and issues routinely provide enrollees and
beneficiaries with the Explanation of Benefit documents.
The Departments note that persons are not required to respond to,
and generally are not subject to any penalty for failing to comply
with, an ICR unless the ICR has a valid OMB control number. These
paperwork burden estimates are summarized as follows:
Type of Review: Revision of an existing collection.
Agencies: Employee Benefits Security Administration, Department of
Labor; Internal Revenue Service, U.S. Department of Treasury.
Title: Disclosure Requirement for Patient Protections under the
Affordable Care Act.
OMB Number: 1210-0142; 1545-2181.
Affected Public: Business or other for profit; not-for-profit
institutions.
Total Respondents: 41,000.
Total Responses: 693,000.
Frequency of Response: One time.
Estimated Total Annual Burden Hours: 5,000 (Employee Benefits
Security Administration); 5,000 (Internal Revenue Service).
Estimated Total Annual Burden Cost: $5,500 (Employee Benefits
Security Administration); $5,500 (Internal Revenue Service).
4. ICR Regarding Affordable Care Act Internal Claims and Appeals and
External Review
PHS Act section 2719 and these final regulations, require that
group health plans and health insurance issuers offering group health
insurance coverage must comply with the internal claims and appeals
processes set forth in 29 CFR 2560.503-1 (the DOL claims procedure
regulation) and update such processes in accordance with standards
established by the Secretary of Labor in paragraph (b)(2)(ii) of the
regulations under PHS Act section 2719.
The burden to comply with the DOL claims procedure regulations is
accounted for under OMB control number 1210-0053, therefore it is not
included here.
Paragraph (b)(2)(ii)(C) of the final regulations under PHS Act
section 2719 adds an additional requirement that non-grandfathered
ERISA-covered group health plans provide to the claimant, free of
charge, any new or additional evidence considered to be relied upon, or
generated by the plan or issuer in connection with the claim. The
related hour burden is 1,100 hours and the related cost burden is $1.1
million.
The June 2011 amendment to the interim final regulations required
that plans and issuers must provide participants and beneficiaries who
reside in a county where ten percent or more of the population residing
in the county is literate only in the same non-English language with a
one-sentence statement in all notices written in the applicable non-
English language about the availability of language services. In
addition to including the statement, plans and issuers are required to
provide a customer assistance process (such as a telephone hotline)
with oral language services in the non-English language and provide
written notices in the non-English language upon request. Providing
notice of the services and the translation services is estimated to
have a cost burden of $1 million annually.
Also, PHS Act section 2719 and these final regulations provide that
group health plans and issuers offering group health insurance coverage
must comply either with a State external review process or a Federal
review process. Plans and issuers must provide to those conducting the
external reviews required documents. There is an estimated 8,400
external appeals conducted annually. The related hour burden is 3,500
hours with an equivalent cost of $193,700 and a cost burden of $80,000
annually.
In total, the hour burden associated with claims, appeals, and
external review is approximately 4,500 hours at an equivalent cost of
$244,800 annually. Because the burden is shared equally between the
Department of Labor and the Department of the Treasury, each
Department's share is 2,300 hours at an equivalent cost of $122,400
annually.
In total, the cost burden is approximately $2.2 million annually.
Because the burden is shared equally between the Department of Labor
and the Department of the Treasury, each Department's share is $1.1
million annually.
The Departments note that persons are not required to respond to,
and generally are not subject to any penalty for failing to comply
with, an ICR unless the ICR has a valid OMB control number.
The paperwork burden estimates are summarized as follows:
Type of Review: Revision.
Agency: Employee Benefit Security Administration, Department of
Labor; Internal Revenue Service, U.S. Department of the Treasury.
Title: Affordable Care Act Internal Claims and Appeals and External
Review Disclosures for Non-Grandfathered Plans.
OMB Control Number: 1210-0144; 1545-2182.
Affected Public: Business or other for-profit; not-for-profit
institutions.
Total Respondents: 1,769,264.
Total Responses: 275,430.
Frequency of Response: Occasionally.
Estimated Total Annual Burden Hours (three year average): 2,300
(Employee Benefits Security Administration); 2,300 (Internal Revenue
Service).
Estimated Total Annual Cost Burden (three year average): $1,143,000
(Employee Benefits Security Administration); $1,143,000 (Internal
Revenue Service).
B. Department of Health and Human Services
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval.
These final regulations contain ICRs that are subject to review by OMB.
A description of these provisions is given in the following paragraphs
with an estimate of the annual burden, summarized below in the Table
below. In order to fairly evaluate whether an information collection
should be approved by OMB, section 3506(c)(2)(A) of the Paperwork
Reduction Act of 1995 requires that we solicit comment on the following
issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
As discussed above in the Department of Labor and Department of the
Treasury PRA section, these final regulations contain a notice of
grandfather status, rescissions notice, and patient protection
disclosures requirement for issuers, and notice requirements related to
internal claims and appeals and external review. These requirements are
ICRs under the Paperwork Reduction Act. Each of these requirements is
discussed in detail in the following sections. Estimated hourly labor
rates are calculated using data from the 2013
[[Page 72232]]
National Occupational Employment Survey.\164\
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\164\ 2013 National Occupational Employment Survey, April 2014,
Bureau of Labor Statistics, http://www.bls.gov/news.release/pdf/ocwage.pdf.
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1. ICRs Regarding Affordable Care Act Notice of Grandfather Status
(Sec. Sec. 147.140(a)(2), 147.140(a)(3)(i), 147.140(a)(3)(ii))
a. Grandfathered Health Plan Disclosure
The final regulations provide model language for the grandfathered
health plan disclosure that can be incorporated into existing plan
documents. After plans first satisfied the grandfathered health plan
disclosure requirement in 2011, any additional burden is expected to be
negligible if a plan wants to maintain its grandfathered status in
future years. It is also expected that the cost of removing the notice
from plan documents as plans relinquish their grandfathered status
would be minimal and therefore it is not estimated.
Issuers and multi-employer plans must also add a prominent
disclosure in their group policies, certificates, or contracts of
insurance that plan sponsors are required to notify the issuer if the
contribution rate changes at any point during the plan year. This only
affects issuers of fully insured group health plans and multi-employer
plans and after this requirement is first satisfied, any additional
burden in future years is expected to be negligible and is therefore
not estimated.
Grandfathered plans will incur printing and material costs
associated with the disclosure requirements. It is estimated that there
will be approximately 47,500 grandfathered State and local governmental
health plans with approximately 5.5 million policyholders \165\ and
approximately 1.4 million policyholders in the individual market with
grandfathered coverage \166\ issued by 430 issuers during 2015.
Therefore, grandfathered plans and issuers in the individual markets
will need to send approximately 6.9 million disclosures notifying plan
participants and beneficiaries of their plans' status as a
grandfathered health plan. We anticipate that the notice will require
one-half of a page and five cents per page printing and material cost
will be incurred. We also assume that 38 percent of the notices will be
delivered electronically. This results in a total annual cost burden of
approximately $106,000. The number of notices and cost burden are
likely to be lower in subsequent years as more plans relinquish their
grandfathered status. In the absence of data regarding how many plans
will retain grandfathered status in subsequent years, we consider this
estimate to be the upper limit for the number of notices and cost
burden in future years.
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\165\ The Department lacks data on the number of State and local
plans that are grandfathered plans. The Kaiser ``Employer Health
Benefits Survey'' has estimates for private employer plans. Those
estimates are used here as a proxy. They report that 37 percent of
plans are grandfather plans and 26 percent of covered employees are
in those plans. http://kff.org/health-costs/report/2014-employer-health-benefits-survey/.
\166\ Estimate based on data from the McKinsey Center for US
Health System Reform and Medical Loss Ratio submissions for 2013
reporting year.
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b. Recordkeeping Requirement
It is assumed that most of the documents required to be retained to
satisfy the recordkeeping requirement of these final regulations are
already retained by plans for tax purposes, to satisfy ERISA's record
retention and statute of limitations requirements, and for other
business reasons. It was previously estimated that after the one-time
cost related to record keeping requirement was incurred in 2011, costs
in subsequent years will be negligible and, therefore, not estimated.
c. Grandfathered Plan Change in Carrier Disclosure
A group health plan that is changing health insurance issuers must
provide to the succeeding health insurance issuer (and the succeeding
health insurance issuer must require) documentation of plan terms
(including benefits, cost sharing, employer contributions, and annual
limits) under the prior health insurance coverage sufficient to make a
determination whether the standards of Sec. 147.140(g)(1) are
exceeded.
The number of plans that might change carriers and thus be affected
(7,400) is estimated by multiplying the estimated number of
grandfathered plans (47,500) by the percent of plans shopping for a new
carrier (58 percent) and the number of plans shopping for a new carrier
that switched (27 percent).\167\
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\167\ See Section 14.http://kff.org/health-costs/report/2014-employer-health-benefits-survey/.
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Each employer will require about 2 minutes of clerical labor (at an
hourly cost of approximately $30) to send the information required for
the disclosure (which is already retained under the recordkeeping
requirement) electronically to the succeeding issuer. The total annual
labor burden for all employers is estimated to be approximately 248
hours with an equivalent annual cost of approximately $7,500. The cost
of transmitting the information electronically to the succeeding issuer
is negligible and, therefore, not estimated. The number of disclosures
and cost burden may be lower in subsequent years as more plans
relinquish their grandfathered status. In the absence of data regarding
how many plans will retain grandfathered status in subsequent years, we
consider this estimate to be the upper limit for the burden in future
years.
2. ICR Regarding Affordable Care Act Notice Relating to Rescissions
(Sec. 147.128(a)(1))
This analysis assumes that rescissions only occur in the individual
health insurance market, because rescissions in the group market are
rare. It is estimated that there are approximately 430 issuers issuing
6.77 million policies in the individual market during a year. A report
on rescissions found that 0.15 percent of policies were rescinded
during the 2004 to 2008 time period. Based on these numbers, it is
estimated that approximately 10,200 policies are rescinded during a
year, which would result in approximately 10,200 notices being sent to
affected policyholders, with 38 percent transmitted electronically and
62 percent mailed. It is estimated that each issuer will require 15
minutes of legal professional time (at approximately $129.94 per hour)
to prepare the notice and one minute per notice of clerical
professional time (at approximately $30.42 per hour) to distribute the
notice to each policyholder. Assuming that the cost of electronic
distribution is minimal, this results in an annual hour burden of
approximately 212 hours with an equivalent annual cost of approximately
$17,160.
Issuers will incur cost to print and send the notices. We assume
that the notice will require one page printing and material cost will
be $0.05 per page, mailing cost will be $0.49 per notice, and 38
percent of the notices will be delivered electronically at minimal
cost. Therefore, it is estimated that the cost burden associated with
mailing the notices to approximately 6,300 affected policy holders will
be approximately $3,400.
3. ICR Regarding Affordable Care Act Patient Protection Disclosure
Requirement (Sec. 147.138(a)(4))
b. Patient Protection Disclosure
In order to satisfy the patient protection disclosure requirement,
State and local government plans and issuers in individual markets will
need to notify policy holders of their plans policy in regards to
designating a primary care physician and for obstetrical or
gynecological visits and
[[Page 72233]]
will incur a one-time burden and cost to incorporate the notice into
plan documents. State and local government plans that are currently not
grandfathered and issuers in the individual market have already
incurred the one-time cost to prepare and incorporate this notice in
their existing plan documents. Only State and local government plans
and individual market plans that relinquish their grandfathered status
in subsequent years will become subject to this notice requirement and
incur the one-time costs to prepare the notice.
There are an estimated 128,400 non-federal governmental plans and
430 health insurance issuers in the individual market. We estimate that
five percent of non-federal governmental plans will relinquish their
grandfathered status annually over the next three years and will
therefore incur one-time costs to prepare the notice. Health insurance
issuers in the individual market will also have five percent of their
policies relinquish grandfathered status annually over the next three
years. Data obtained from the 2014 Kaiser/HRET Survey of Employer
Sponsored Health Benefits finds that 13 percent of plans have an HMO
option and that 23 percent of plans offer a POS option. Thus,
approximately 2,740 plans and issuers will produce notices each
year.\168\ While not all HMO and POS options require the designation of
a primary care physician or a prior authorization or referral before a
woman can visit an OB/GYN, the Department is unable to estimate this
number. Therefore, this estimate should be considered an overestimate
of the number of affected entities.
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\168\ 128,400 Governmental plans x 5% newly non-grandfathered
plans x (13% HMOs + 23% POSs) + 430 issuers = approximately 2,700
affected plans and issuers.
---------------------------------------------------------------------------
Each of these 2,740 plans and issuers will require a compensation
and benefits manager to spend 10 minutes individualizing the model
notice to fit the plan's specifications at an hourly rate of $110.30.
This results in approximately 457 hours of burden at an equivalent cost
of $50,400. Each plan will also require clerical staff to spend 5
minutes adding the notice to the plan's documents at an hourly rate of
$30.42. This results in approximately 228 hours of burden at an
equivalent cost of $7,000. The total annual burden associated with this
requirement is 685 hours at an equivalent cost of $57,000.
The Department assumes that only printing and material costs are
associated with the disclosure requirement, because the final
regulations provide model language that can be incorporated into
existing plan documents. The Department estimates that the notice will
require one-half of a page, five cents per page printing and material
cost will be incurred, and 38 percent of the notices will be delivered
electronically.
It is estimated that there are 27.9 million non-federal government
plan policyholders and individual policyholders. As stated in the
previous section, it is estimated that 5 percent of plans will
relinquish their grandfathered status annually in the next three years.
Data obtained from the 2014 Kaiser/HRET Survey of Employer Sponsored
Health Benefits finds that 13 percent of covered workers in Government
plans have an HMO option and that 8 percent of covered workers have a
POS option. Data obtained from AHIP in 2009 finds that 1.93 percent of
individual policyholders have an HMO options. Thus, it is estimated
that plans will produce 228,000 notices each year, 38 percent of which
will be sent electronically.\169\ This results in a cost burden of
approximately $3,500.\170\
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\169\ [21.1 million Government policyholders x 5% newly non-
grandfathered plans x (13% in HMOs + 8% in POSs)] + [6.77 million
individual policy holders x 5% newly non-grandfathered plans x 1.93%
in HMOs] = approximately 228,000 notices.
\170\ $0.05 per page * 1/2 pages per notice * 228,000 notices *
62% = approximately $3,500.
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c. Out-of-Network Emergency Services Disclosure
The final regulations require that a plan or issuer may not impose
any copayment or coinsurance requirement for out-of-network emergency
services that is more restrictive than the copayment or coinsurance
requirement that would apply if the services were provided in network.
If State law prohibits balance billing, or a plan or issuer is
contractually responsible for any amounts balanced billed by an out-of-
network emergency services provider, the a plan or issuer must provide
an enrollee or beneficiary adequate and prominent notice of their lack
of financial responsibility with respect to amounts balanced billed in
order to prevent inadvertent payment by an enrollee or beneficiary.
This information should already be routinely included in the
Explanation of Benefit documents sent by plans and issuers to enrollees
and beneficiaries. Therefore, in accordance with the implementing
regulations of the PRA at 5 CFR 1320.3(b)(2), we believe this is a
usual and customary business practice. Plans and issues routinely
provide enrollees and beneficiaries with the Explanation of Benefit
documents.
4. ICRs Regarding Affordable Care Act Internal Claims and Appeals and
External Review (Sec. Sec. 14.136 (b)(2)(ii), 147.136 (b)(2)(ii)(C),
147.136 (b)(3)(ii), 147.136 (b)(3)(ii)(C))
Paragraph (b)(2)(ii)(C) of the final regulations implementing PHS
Act section 2719 provides that non-grandfathered ERISA-covered group
health plans provide to the claimant, free of charge, any new or
additional evidence considered relied upon, or generated by the plan or
issuer in connection with the claim. The related hour burden is 773,800
hours and the related cost burden is $115.2 million.
The June 2011 amendment to the interim final regulations under PHS
Act section 2719 required that plans and issuers must provide
participants and beneficiaries who reside in a county where ten percent
or more of the population residing in the county is literate only in
the same non-English language with a one-sentence statement in all
notices written in the applicable non-English language, about the
availability of language services. In addition to including the
statement, plans and issuers are required to provide a customer
assistance process (such as a telephone hotline) with oral language
services in the non-English language and provide written notices in the
non-English language upon request. Providing notice of the services and
the translation services is estimated to have a cost burden of $633,000
annually.
Also, PHS Act section 2719 and the final regulations provide that
group health plans and issuers offering group health insurance coverage
must comply either with a State external review process or a Federal
review process. Plans and issuers must provide to those conducting the
external reviews required documents. There is an estimated 2,100
external appeals conducted annually. The related hour burden is 150
hours with an equivalent cost of $4,600 and a cost burden of $5,400
annually.
In total, the burden associated with claims, appeals, and external
review is approximately 774,000 hours at an equivalent cost of
$41,601,000 annually. The cost burden associated with claims, appeals,
language translation, and external review is approximately $115.8
million annually.
[[Page 72234]]
Table 2--Annual Reporting, Recordkeeping and Disclosure Burden (HHS)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total annual Total labor Total capital/
OMB Control Number of Responses burden cost of maintenance Total costs
No. respondents (hours) reporting ($) costs ($) ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Grandfathered Plans Disclosure (Sec. 0938-1093 47,932 6,850,695 0 $0 $106,186 $106,186
147.140(a)(2)).........................
Grandfathered Plans Change in Carrier 0938-1093 7,440 7,440 248 $7,544 $0 $7,544
Disclosure (Sec. 147.140(a)(3)(i))...
Rescissions Notice (Sec. 0938-1094 430 10,200 212 $17,160 $3,400 $20,560
147.128(a)(1)).........................
Patient Protection Disclosures (Sec. 0938-1094 2,741 228,086 685 $57,341 $3,535 $60,876
147.138(a) (4))........................
Claims and Appeals External Review 0938-1098 95,500 399,151,000 773,996 $41,601,000 $115,827,000 $157,428,000
((Sec. Sec. 147.136 (b)(2)(ii),
147.136 (b)(2)(ii)(C), 147.136
(b)(3)(ii), 147.136 (b)(3)(ii)(C)).....
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Total............................... .............. 154,043 406,247,421 775,141 .............. .............. $157,623,166
--------------------------------------------------------------------------------------------------------------------------------------------------------
V. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and which are
likely to have a significant economic impact on a substantial number of
small entities.
The RFA generally defines a ``small entity'' as (1) a proprietary
firm meeting the size standards of the Small Business Administration
(SBA) (13 CFR 121.201) pursuant to the Small Business Act (15 U.S.C.
631 et seq.), (2) a nonprofit organization that is not dominant in its
field, or (3) a small government jurisdiction with a population of less
than 50,000. (States and individuals are not included in the definition
of ``small entity.'') The Departments use as their measure of
significant economic impact on a substantial number of small entities a
change in revenues of more than 3 to 5 percent.
As discussed in detail in the ``Need for Regulatory Action''
section of this Regulatory Impact Analysis, these regulations are
necessary to implement the following provisions: Affordable Care Act
section 1251 (preservation of right to maintain existing coverage), and
PHS Act sections 2704 (prohibition of preexisting condition
exclusions), 2711 (no lifetime or annual limits), 2712 (prohibition on
certain rescissions), 2714 (extension of dependent coverage), 2719
(internal appeals and external review process), and 2719A (patient
protections). In response to the 2010 interim final regulations, the
Departments received many comments that relate to early implementation
issues and addressed many of these issues through sub-regulatory
guidance. The Departments also held meetings with stakeholders,
including small entities affected by the rules. After consideration of
comments and stakeholder input received in response to the interim
final regulations, the Departments are issuing these final regulations.
The Regulatory Flexibility Act requires agencies to assess and
consider the direct economic impacts that regulations impose on small
entities. The primary economic effects of these final regulations are
indirect, because they result in transfers between individuals covered
by health insurance. While these transfers could be significant, they
do not impose direct effects on the regulated small entities for
purposes of the RFA.
Most of the direct effects of the final regulations are associated
with their disclosure requirements. As discussed below and in the
Paperwork Reduction Act section above, these disclosure requirements do
not have a significant economic impact. Therefore, pursuant to section
605(b) of the RFA, the Departments hereby certify that these final
regulations are not likely to have a significant economic impact on a
substantial number of small entities. The Departments' basis for this
determination and their estimate of small entities affected by these
final regulations is discussed below.
A. Affected Small Entities
There are several different types of small entities affected by
these final regulations. For issuers and third party administrators, a
small business is one that has total premium revenue of $38.5 million
or less. The Departments continue to consider a small plan to be an
employee benefit plan with fewer than 100 participants.\171\ Further,
while some large employers may have small plans, in general small
employers maintain most small plans. Thus, the Departments believe that
assessing the impact of this final rule on small plans is an
appropriate substitute for evaluating the effect on small entities. The
definition of small entity considered appropriate for this purpose
differs, however, from a definition of small business that is based on
size standards promulgated by the Small Business Administration (SBA)
(13 CFR 121.201) pursuant to the Small Business Act (15 U.S.C. 631 et
seq.).
---------------------------------------------------------------------------
\171\ The basis for this definition is found in section
104(a)(2) of ERISA, which permits the Secretary of Labor to
prescribe simplified annual reports for pension plans that cover
fewer than 100 participants.
---------------------------------------------------------------------------
Based on data from MLR annual report submissions for the 2013 MLR
reporting year, approximately 141 out of 500 issuers of health
insurance coverage nationwide had total premium revenue of $38.5
million or less.\172\ This estimate may overstate the actual number of
small health insurance companies that may be affected, since 77 percent
of these small companies belong to larger holding groups, and many if
not all of these small companies are likely to have non-health lines of
business that would result in their revenues exceeding $38.5 million.
---------------------------------------------------------------------------
\172\ U. S. Small Business Administration, ``Table of Small
Business Size Standards Matched to North American Industry
Classification System Codes'', July 14, 2014.
---------------------------------------------------------------------------
As discussed previously in the RIA, there are an estimated 2.3
million ERISA-covered plans and 128,400 State and local governmental
health plans that may have experienced an increase in costs related to
the provisions of these final rules. Ninety-seven percent of these
plans are provided by small entities and have incurred costs related to
the provisions of these final regulations.
[[Page 72235]]
B. Direct Impacts of Final Rules on Small Entities
1. Affordable Care Act Section 1251, Preservation of Right To Maintain
Existing Coverage (26 CFR 54.9815-1251, 29 CFR 2590.715-1251, 45 CFR
147.140)
The direct impacts of this provision on affected small entities are
primarily associated with notices requirements. Specifically, the final
regulations require affected plans to maintain records documenting the
terms of the plan in effect on March 23, 2010, and any other documents
that are necessary to verify, explain or clarify status as a
grandfathered health plan (the ``recordkeeping requirement''). The plan
must make such records available for examination upon request by
participants, beneficiaries, individual policy subscribers, or a State
or Federal agency official. The Departments believe this requirement
imposes a minimal burden on small entities, because they should
maintain such records in the usual and customary course of their
business operations following standard business procedures.
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 to consumers. The
Departments believe the costs associated with this disclosure are
minimal, because a model statement is provided in the final rule and
that statement can be provided in any summary of benefits that already
is being provided to consumers.
Finally, if a grandfathered group health plan switches issuers and
intends to maintain its status as a grandfathered plan, it must provide
to the new health insurance issuer with documentation of plan terms
under the prior health coverage sufficient for it to determine whether
a change causing a cessation of grandfathered health plan status has
occurred. This requirement also imposes a minimal burden on affected
small entities, because the documents should be maintain in the
ordinary course of the plan's business operations, and the only
additional cost would be incurred to prepare the documentation for
mailing and associated material and printing cost, which are estimated
to total approximately $8.
1. PHS Act Section 2704, Prohibition of Preexisting Condition
Exclusions (26 CFR 54.9815-2704, 29 CFR 2590.715-2704, 45 CFR 147.108)
The direct impacts of this rule on the regulated small entities is
limited as the removal of preexisting condition exclusions primarily
operates through the pricing of insurance products, which are paid by
plan participants. Small businesses will be impacted when they pay for
part of the health insurance premium. The Departments have not been
able to estimate this effect separately from the effect on premiums
brought about by the other the Affordable Care Act changes.
2. PHS Act Section 2711, Prohibition on Lifetime and Annual Limits (26
CFR 54.9815-2711, 29 CFR 2590.715-2711, 45 CFR 147.126)
The direct impacts of this rule on the regulated small entities
were primarily limited to an initial notice sent shortly after the
issuance of the interim final regulations requiring plans to notify
participants that had lost coverage due to reaching the lifetime limit
of the new coverage option. This notice requirement is no longer in
effect as the statute now bans all annual and life time limits, so
there are no individuals losing coverage that need to be notified. To
the extent premiums increase and employers contribute part of the
premiums, or plans are self-insured with payments from the employers
general assets there could be direct effects on employers, but for most
employers those effects are small.
3. PHS Act Section 2712, Prohibition on Rescissions (26 CFR 54.9815-
2712, 29 CFR 2590.715-2712, 45 CFR 147.128)
PHS Act Section 2712 and the final regulations prohibit group
health plans and health insurance issuers that offer group or
individual health insurance coverage generally from rescinding coverage
under the plan, policy, certificate, or contract of insurance from the
individual 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 unless the individual
makes an intentional misrepresentation of material fact, as prohibited
by the terms of the plan or coverage. The final regulations provide
that a group health plan or a health insurance issuer offering group
health insurance coverage must provide at least 30 days advance notice
to an individual before coverage may be rescinded. The Departments
believe that rescissions are rare in the group market and that small
group health plans are affected by rescissions more than large group
health plans.
The Departments estimate \173\ that 15 minutes of legal
professional time at $129.94 per hour \174\ would be required by the
insurers of the policies to prepare the notice, and one minute per
notice of clerical professional time at $30.42 per hour \175\ would be
required to distribute the paper notices. The Departments believe the
costs of electronic transmission would be de minimis. This leads to an
estimate of less than $40 per rescission notice, which the Departments
do not believe is significant.
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\173\ The Department's estimated 2015 hourly labor rates include
wages, other benefits, and overhead are calculated as follows: Mean
wage from the 2013 National Occupational Employment Survey (April
2014, Bureau of Labor Statistics http://www.bls.gov/news.release/pdf/ocwage.pdf); wages as a percent of total compensation from the
Employer Cost for Employee Compensation (June 2014, Bureau of Labor
Statistics http://www.bls.gov/news.release/ecec.t02.htm); overhead
as a multiple of compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of compensation for
clerical, and 35 percent of compensation for professional; annual
inflation assumed to be 2.3 percent annual growth of total labor
cost since 2013 (Employment Costs Index data for private industry,
September 2014 http://www.bls.gov/news.release/eci.nr0.htm).
\174\ Legal Professional (23-1011): $63.46 (2013 BLS Wage rate)/
0.69 (ECEC ratio) *1.35 (Overhead Load Factor) *1.023 (Inflation
rate) [supcaret]2 (Inflated 2 years from base year) =
$129.94.
\175\ Secretaries, Except Legal, Medical, and Executive (43-
6014): $16.35 (2013 BLS Wage rate)/0.675 (ECEC ratio) *1.2 (Overhead
Load Factor) *1.023 (Inflation rate) [supcaret]2
(Inflated 2 years from base year) = $30.42
---------------------------------------------------------------------------
4. PHS Act Section 2714, Coverage of Dependents to Age 26 (26 CFR
54.9815-2714, 29 CFR 2590.715-2714, 45 CFR 147.120)
The direct impacts of this rule on the regulated small entities
were primarily limited to an initial notice sent shortly after the
issuance of the interim final regulations requiring plans to notify
participants of the new coverage option. To the extent premiums
increase and employers contribute part of the premiums, or plans are
self-insured with payments from the employers general assets there
could be direct effects on employers, but for most employers those
effects are small.
5. PHS Act Section 2719, Internal Claims and Appeals and External
Review (26 CFR 54.9815-2719, 29 CFR 2590.715-2719, 45 CFR 147.136)
Not all potentially affected individuals will be affected equally
by these final regulations. Sponsors of ERISA-covered group health
plans were required to implement an internal
[[Page 72236]]
appeals process that complied with the DOL claims procedure regulation
before the Affordable Care Act's enactment, and the Departments also
understand that many non-Federal governmental plans and church plans
that are not subject to ERISA implement internal claims and appeals
processes that comply with the DOL claims procedure regulation.
These final regulations will have the largest impact on individuals
covered in the individual health insurance market, because with the
issuance of the final regulation, these issuers were required to comply
with the DOL claims procedure regulation for internal claims and
appeals as well as the additional standards added by the Secretary of
the Department of Health and Human Services in paragraph (b)(3) of the
final regulations under PHS Act section 2719 that are in some cases
more protective than the ERISA standard.
Using estimates calculated for the Paperwork Reduction Act it is
estimated that there will be an average costs of 40 cents per notice
that is required to be sent related to the internal claims and appeals.
On the external appeals side, before the enactment of the
Affordable Care Act, issuers offering coverage in the group and
individual health insurance market were already required to comply with
State external review laws. At that time, all States except Alabama,
Mississippi, Nebraska, North Dakota, South Dakota, and Wyoming had
external review laws, and thirteen States had external review laws that
apply only to certain market segments (for example, managed care or
HMOs). Currently, all States except, Alabama, Alaska, Florida, Georgia,
Pennsylvania, and Wisconsin have State external review laws that
satisfy these requirements. These six states that do not meet the
requirements, must use the HHS administered process or must contract
with accredited independent review organizations to review external
appeals on their behalf.\176\
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\176\ https://www.cms.gov/CCIIO/Resources/Files/external_appeals.html.
---------------------------------------------------------------------------
Individuals participating in ERISA-covered self-insured group
health plans will be among those most affected by the external review
requirements contained in these final regulations, because the
preemption provisions of ERISA prevent a State's external review
process from applying directly to an ERISA-covered self-insured plan.
These plans will now be required to comply with the Federal external
review process set forth in these final regulations.
As discussed in the Regulatory Impact Section above an estimate for
the average cost for an external appeal is $665. This cost would be
incurred by plans or issuers. It is also estimated above that there is
on average only 1.3 external appeals per 10,000 covered lives. The
Departments believe such costs are minimal for purpose of the RFA,
because most small entities will have no external appeals in a given
year.
6. PHS Act Section 2719A, Patient Protections (26 CFR 54.9815-2719A, 29
CFR 2590.715-2719A, 45 CFR 147.138)
PHS Act section 2719A imposes, with respect to a group health plan,
or group or individual health insurance coverage, a set of three
requirements relating to the choice of health care professionals. When
applicable, it is important that individuals enrolled in a plan or
health insurance coverage know of their rights to (1) choose a primary
care provider or a pediatrician when a plan or issuer requires
participants or subscribers to designate a primary care physician; (2)
obtain obstetrical or gynecological care without prior authorization;
or (3) coverage of emergency services. Accordingly, these final
regulations require such plans and issuers to provide a notice to
participants (in the individual market, primary subscriber) of these
rights when applicable. Model language is provided in these final
regulations. The notice must be provided 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, or
in the individual market, provides a primary subscriber with a policy,
certificate, or contract of health insurance.
The Departments assume that this provision will primarily affect
Health Maintenance Organizations and Point-of-Service type
arrangements. The Department believes that insignificant costs are
associated with this notice, because a model notice is provided in the
final rule, and it can be distributed with existing plan documents,
The Departments estimate that each plan or issuer would require a
compensation and benefits manager \177\ to spend 10 minutes
individualizing the model notice provided by the Departments to fit the
plan's specifications at an hourly rate of $110.30.\178\ This results
in a cost of approximately $21 in the first year. The cost per
participant to receive the notice would be less than five cents per
paper notice as the notice would be included in existing documents.
---------------------------------------------------------------------------
\177\ The Department's estimated 2015 hourly labor rates include
wages, other benefits, and overhead are calculated as follows: Mean
wage from the 2013 National Occupational Employment Survey (April
2014, Bureau of Labor Statistics http://www.bls.gov/news.release/pdf/ocwage.pdf); wages as a percent of total compensation from the
Employer Cost for Employee Compensation (June 2014, Bureau of Labor
Statistics http://www.bls.gov/news.release/ecec.t02.htm); overhead
as a multiple of compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of compensation for
clerical, and 35 percent of compensation for professional; annual
inflation assumed to be 2.3 percent annual growth of total labor
cost since 2013 (Employment Costs Index data for private industry,
September 2014 http://www.bls.gov/news.release/eci.nr0.htm).
\178\ Compensation and Benefits Manager (11-3041): $53.87 (2013
BLS Wage rate)/0.69 (ECEC ratio) *1.35 (Overhead Load Factor) *1.023
(Inflation rate) [supcaret]2 (Inflated 2 years from base
year) = $110.30.
---------------------------------------------------------------------------
VI. Unfunded Mandates Reform Act--Department of Labor and Department of
Health and Human Services
Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995
requires that agencies assess anticipated costs and benefits before
issuing any final rule that includes a Federal mandate that could
result in expenditure in any one year by State, local or Tribal
governments, in the aggregate, or by the private sector, of $100
million in 1995 dollars updated annually for inflation. In 2015, that
threshold level is approximately $144 million. These final regulations
include a Federal mandate that may result in expenditures by State,
local, or Tribal governments. Specifically, these final regulations
include requirements regarding minimum consumer protection standards
that a State external review process must include to qualify as an
applicable State external review process under PHS Act section
2719(b)(1). However, we conclude that these costs would not exceed the
$144 million threshold. Thus, the Departments of Labor and HHS conclude
that these final regulations would not impose an unfunded mandate on
State, local or Tribal governments or the private sector. Regardless,
consistent with the policy embodied in UMRA, the final requirements
described in this notice of final rulemaking has been designed to be
the least burdensome alternative for State, Local and Tribal
governments, and the private sector while achieving the objectives of
the Affordable Care Act.
VII. Federalism Statement--Department of Labor and Department of Health
and Human Services
Executive Order 13132 outlines fundamental principles of
federalism, and requires the adherence to specific
[[Page 72237]]
criteria by Federal agencies in the process of their formulation and
implementation of policies that have ``substantial direct effects'' on
the States, the relationship between the national government and
States, or on the distribution of power and responsibilities among the
various levels of government. Federal agencies promulgating regulations
that have federalism implications must consult with State and local
officials and describe the extent of their consultation and the nature
of the concerns of State and local officials in the preamble to the
regulation.
In the Departments of Labor's and HHS' view, these final
regulations have federalism implications because they would have direct
effects on the States, the relationship between the national government
and the States, or on the distribution of power and responsibilities
among various levels of government. Under these final regulations,
group health plans and health insurance issuers offering group or
individual health insurance coverage, including non-federal
governmental plans as defined in section 2791 of the PHS Act, would be
required to follow the Federal standards developed under Affordable
Care Act section 1251 and PHS Act sections 2704, 2711, 2712, 2714, 2719
and 2719A, as added by the Affordable Care Act. However, in the
Departments' view, the federalism implications of these final
regulations are substantially mitigated because, with respect to health
insurance issuers, the Departments expect that the majority of States
will enact laws or take other appropriate action resulting in their
meeting or exceeding the Federal standards.
In general, through section 514, ERISA supersedes State laws to the
extent that they relate to any covered employee benefit plan, and
preserves State laws that regulate insurance, banking, or securities.
While ERISA prohibits States from regulating a plan as an insurance or
investment company or bank, the preemption provisions of section 731 of
ERISA and section 2724 of the PHS Act (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)) apply so that the requirements in
title XXVII of the PHS Act (including those added by the Affordable
Care Act) are 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 individual or group health insurance coverage except to
the extent that such standard or requirement prevents the application
of a requirement of a Federal standard. The conference report
accompanying HIPAA indicates that this is intended to be the
``narrowest'' preemption of State laws (See House Conf. Rep. No. 104-
736, at 205, reprinted in 1996 U.S. Code Cong. & Admin. News 2018).
States may continue to apply State law requirements except to the
extent that such requirements prevent the application of the Affordable
Care Act requirements that are the subject of this rulemaking.
Accordingly, States have significant latitude to impose requirements on
health insurance issuers that are more restrictive than the Federal
law.
In compliance with the requirement of Executive Order 13132 that
agencies examine closely any policies that may have federalism
implications or limit the policy making discretion of the States, the
Departments of Labor and HHS have engaged in efforts to consult with
and work cooperatively with affected States, including consulting with,
and attending conferences of, the National Association of Insurance
Commissioners and consulting with State insurance officials on an
individual basis. It is expected that the Departments of Labor and HHS
will act in a similar fashion in enforcing the Affordable Care Act.
Throughout the process of developing these final regulations, to
the extent feasible within the applicable preemption provisions, the
Departments of Labor and HHS have attempted to balance the States'
interests in regulating health insurance issuers, and Congress' intent
to provide uniform minimum protections to consumers in every State. By
doing so, it is the Departments of Labor's and HHS' view that they have
complied with the requirements of Executive Order 13132.
Pursuant to the requirements set forth in section 8(a) of Executive
Order 13132, and by the signatures affixed to this final rule, the
Departments certify that the Employee Benefits Security Administration
and the Centers for Medicare & Medicaid Services have complied with the
requirements of Executive Order 13132 for the attached final rules in a
meaningful and timely manner.
VIII. Special Analyses--Department of the Treasury
Certain IRS regulations, including this one, are exempt from the
requirements of Executive Order 12866, as supplemented and reaffirmed
by Executive Order 13563. Therefore, a regulatory assessment is not
required. It has also been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to
these final regulations. For a discussion of the impact of this final
rule on small entities, please see section V.B. of this preamble.
Pursuant to section 7805(f) of the Code, this notice of final
rulemaking has been submitted to the Small Business Administration for
comment on its impact on small business.
IX. Congressional Review Act
These final regulations are subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.), which specifies that before a rule can
take effect, the Federal agency promulgating the rule shall submit to
each House of the Congress and to the Comptroller General a report
containing a copy of the rule along with other specified information,
and has been transmitted to Congress and the Comptroller General for
review.
X. Statutory Authority
The Department of the Treasury final regulations are adopted
pursuant to the authority contained in sections 7805 and 9833 of the
Code.
The Department of Labor final regulations are adopted pursuant to
the authority contained in 29 U.S.C. 1135, and 1191c; Secretary of
Labor's Order 1-2011, 77 FR 1088 (Jan. 9, 2012).
The Department of Health and Human Services final regulations are
adopted pursuant to the authority contained in sections 2701 through
2763, 2791, and 2792 of the PHS Act (42 U.S.C. 300gg through 300gg-63,
300gg-91, and 300gg-92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health insurance, Pensions, Reporting
and recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.
45 CFR Parts 144 and 146
Health care, Health insurance, Reporting and recordkeeping
requirements.
45 CFR Part 147
Health care, Health insurance, Reporting and recordkeeping
[[Page 72238]]
requirements, and State regulation of health insurance.
John Dalrymple,
Deputy Commissioner for Services and Enforcement, Internal Revenue
Service.
Approved: October 27, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
Signed this 6 day of November 2015.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Dated: October 15, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: October 22, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Chapter I
For the reasons stated in the preamble, the Internal Revenue
Service amends Part 54 as set forth below:
PART 54--PENSION EXCISE TAXES
0
Paragraph 1. The authority citation for part 54 is amended by adding
entries for Sec. Sec. 54.9815-1251, 54.9815-2704, 54.9815-2711,
54.9815-2712, 54.9815-2714, 54.9815-2719, and 54.9815-2719A in
numerical order to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Section 54.9815-1251 also issued under 26 U.S.C. 9833.
* * * * *
Section 54.9815-2704 also issued under 26 U.S.C. 9833.
* * * * *
Section 54.9815-2711 also issued under 26 U.S.C. 9833.
* * * * *
Section 54.9815-2712 also issued under 26 U.S.C. 9833.
* * * * *
Section 54.9815-2714 also issued under 26 U.S.C. 9833.
* * * * *
Section 54.9815-2719 also issued under 26 U.S.C. 9833.
Section 54.9815-2719A also issued under 26 U.S.C. 9833.
0
Par. 2. Section 54.9801-2 is amended by revising the introductory text
and the definition of ``preexisting condition exclusion'' to read as
follows:
Sec. 54.9801-2 Definitions.
Unless otherwise provided, the definitions in this section govern
in applying the provisions of sections 9801 through 9815 and 9831
through 9833.
* * * * *
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.
* * * * *
0
Par. 3. Section 54.9801-3 is amended by revising the section heading
and paragraph (a)(1) to read as follows:
Sec. 54.9801-3 Limitations on preexisting condition exclusion period.
(a) Preexisting condition exclusion defined--(1) A preexisting
condition exclusion means a preexisting condition exclusion within the
meaning of Sec. 54.9801-2.
* * * * *
0
Par. 4. Section 54.9815-1251 is added to read as follows:
Sec. 54.9815-1251 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 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 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
[[Page 72239]]
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 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 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 paragraph (b)(2)(ii)(C) of this section, 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, see 45 CFR 147.140(c), which
provides that 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.)
[[Page 72240]]
(2) To the extent not inconsistent with the rules applicable to a
grandfathered health plan, a grandfathered 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 beginning
on or after September 23, 2010. The provisions of PHS Act section 2708
apply to grandfathered health plans for plan 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 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. 54.9802(d)) 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
[[Page 72241]]
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. 54.9802(d)) 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
(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 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. 54.9815-2711,
which prohibits all annual dollar limits on essential health benefits
for plan years beginning on or after January 1, 2014).
(B) Decrease in limit for a plan or coverage with only a lifetime
limit. A group health plan, or group 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. 54.9815-2711, which prohibits all annual
dollar limits on essential health benefits for plan 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 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. 54.9815-2711, which prohibits all
annual dollar limits on essential health benefits for plan 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 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)
[[Page 72242]]
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 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 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.
[[Page 72243]]
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).
Sec. 54.9815-1251T [Removed]
0
Par. 5. Section 54.9815-1251T is removed.
0
Par. 6. Section 54.9815-2704 is added to read as follows:
Sec. 54.9815-2704 Prohibition of preexisting condition exclusions.
(a) No preexisting condition exclusions. A group health plan, or a
health insurance issuer offering group health insurance coverage, may
not impose any preexisting condition exclusion (as defined in Sec.
54.9801-2).
(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. 54.9801-3(a)(2)):
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 45 CFR 147.108(a)(2) 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. Therefore, such an exclusion is prohibited.
(c) 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, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the interim final regulations promulgated by the Department
of Labor at 29 CFR part 2590, contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015.
Sec. 54.9815-2704T [Removed]
0
Par. 7. Section 54.9815-2704T is removed.
0
Par. 8 Section 54.9815-2711 is added to read as follows:
Sec. 54.9815-2711 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 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 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 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).
(2) Condition-based exclusions. The rules of this section do not
prevent a group health plan, or a health insurance issuer offering
group 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 this purpose, 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 consistent with one of the three Federal
Employees Health Benefit Program (FEHBP) options as defined by 45 CFR
156.100(a)(3) or one of the base-benchmark plans selected by a State or
applied by default pursuant to 45 CFR 156.100.
(d) Special rule for health reimbursement arrangements (HRAs) and
other account-based plans--(1) In general. If an HRA or other account-
based plan is integrated with other coverage under a group health plan
and the other group health plan coverage alone satisfies the
requirements in paragraph (a)(2) of this section, the fact that the
benefits under the HRA or other account-based plan are limited does not
mean that the HRA or other account-based plan fails to meet the
requirements of paragraph (a)(2) of this section. Similarly, if an HRA
or other account-based plan is integrated with other coverage under a
group health plan and the other group health plan coverage alone
satisfies the requirements in PHS Act section 2713 and section 54.9815-
2713(a)(1), the HRA or other account-based plan will not fail to meet
the requirements of PHS Act section 2713 and Sec. 54.9815-2713(a)(1).
(2) Integration requirements. An HRA or other account-based plan is
integrated with a group health plan for purposes of paragraph (a)(2) of
this section if it meets the requirements under either the integration
method set forth in paragraph (d)(2)(i) of this section or the
integration method set forth in paragraph (d)(2)(ii) of this section.
Integration does not require that the HRA (or other account-based plan)
and the 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, if applicable. The term ``excepted benefits'' is
used throughout the integration methods; for a definition of the term
``excepted benefits'' see Code section 9832(c), ERISA section 733(c),
and PHS Act section 2791(c).
(i) Integration Method: Minimum value not required. An HRA or other
[[Page 72244]]
account-based plan is integrated with another group health plan for
purposes of this paragraph if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan) to the employee that does not consist
solely of excepted benefits;
(B) The employee receiving the HRA or other account-based plan is
actually enrolled in a group health plan (other than the HRA or other
account-based 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 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 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 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 (as defined under section 213(d) of
the Code) that does 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 plan, an
employee (or former employee) is permitted to permanently opt out of
and waive future reimbursements from the HRA or other account-based
plan at least annually and, upon termination of employment, either the
remaining amounts in the HRA or other account-based plan are forfeited
or the employee is permitted to permanently opt out of and waive future
reimbursements from the HRA or other account-based plan.
(ii) Integration Method: Minimum value required. An HRA or other
account-based plan is integrated with another group health plan for
purposes of this paragraph if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan) to the employee that provides minimum
value pursuant to Code section 36B(c)(2)(C)(ii) (and its implementing
regulations and applicable guidance);
(B) The employee receiving the HRA or other account-based plan is
actually enrolled in a 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 plan (referred to as non-HRA
MV group coverage);
(C) The HRA or other account-based 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 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 plan, an
employee (or former employee) is permitted to permanently opt out of
and waive future reimbursements from the HRA or other account-based
plan at least annually, and, upon termination of employment, either the
remaining amounts in the HRA or other account-based plan are forfeited
or the employee is permitted to permanently opt out of and waive future
reimbursements from the HRA or other account-based plan.
(3) Forfeiture. For purpose 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 this purpose coverage under an HRA or
other account-based 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 plan. This means
that upon and after reinstatement, the reinstated amounts under the HRA
or other account-based plan may not be used to reimburse or pay medical
expenses incurred during the period after forfeiture and prior to
reinstatement.
(4) No integration with individual market coverage. A group health
plan, including an HRA or other account-based plan, used to purchase
coverage on the individual market is not integrated with that
individual market coverage for purposes of paragraph (a)(2) of this
section (or for purposes of the requirements of PHS Act section 2713).
(5) Integration with Medicare parts 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
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 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 plan is
actually enrolled Medicare part B or D;
(iii) The HRA or other account-based plan is available only to
employees who are enrolled in Medicare part B or D; and
(iv) The HRA or other account-based plan complies with paragraphs
(d)(2)(i)(E) and (d)(2)(ii)(D) of this section.
(6) Account-based plan. An account-based plan for purposes of this
section is an employer-provided group health plan that provides
reimbursements of medical expenses other than individual market policy
premiums with the reimbursement subject to a maximum fixed dollar
amount for a period. An HRA is a type of account-based plan.
(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, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the interim final regulations promulgated by the Department
of Labor at 29 CFR part 2590, contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015.
Sec. 54.9815-2711T [Removed]
0
Par. 9. Section 54.9815-2711T is removed.
0
Par. 10. Section 54.9815-2712 is added to read as follows:
[[Page 72245]]
Sec. 54.9815-2712 Rules regarding rescissions.
(a) Prohibition on rescissions--(1) A group health plan, or a
health insurance issuer offering group 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 health
insurance coverage, must provide at least 30 days advance written
notice to each participant who would be affected before coverage may be
rescinded under this paragraph (a)(1), regardless of 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 45 CFR 155.430 (other than under paragraph
(b)(2)(iii)).
(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. 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 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 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 interim final regulations promulgated by the Department
of Labor at 29 CFR part 2590, contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015.
Sec. 54.9815-2712T [Removed]
0
Par. 11. Section 54.9815-2712T is removed.
0
Par. 12. Section 54.9815-2714 is added to read as follows:
Sec. 54.9815-2714 Eligibility of children until at least age 26.
(a) In general--(1) A group health plan, or a health insurance
issuer offering group 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. 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 any other person); residency with
the participant 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) . For an individual not described in section 152(f)(1), such
as a grandchild or niece, a plan may impose additional conditions on
eligibility for dependent child health coverage, such
[[Page 72246]]
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
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 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 interim final regulations promulgated by the Department
of Labor at 29 CFR part 2590, contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015.
Sec. 54.9815-2714T [Removed]
0
Par. 13. Section 54.9815-2714T is removed.
0
Par. 14. Section 54.9815-2719 is added to read as follows:
Sec. 54.9815-2719 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. 54.9815-1251.
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 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. 54.9815-
2712(a)(2) (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 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
[[Page 72247]]
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 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. 54.9815-2712.)
(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
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 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 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
[[Page 72248]]
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.
(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.
(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 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.
(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
[[Page 72249]]
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 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, 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
[[Page 72250]]
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 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 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
[[Page 72251]]
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 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
[[Page 72252]]
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.
(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 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 health insurance coverage are considered to provide relevant
notices in a culturally and linguistically appropriate manner if the
plan or issuer 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 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 interim final regulations promulgated by the Department
of Labor at 29 CFR part 2590, contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015.
0
Par. 15. Section 54.9815-2719A is added to read as follows:
Sec. 54.9815-2719A 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 health insurance coverage, requires or
provides for designation by a participant or beneficiary of a
participating primary care provider, then the plan or issuer must
permit each participant or beneficiary to designate any participating
primary care provider who is available to accept the participant or
beneficiary. In such a case, the plan or issuer must comply with the
rules of paragraph (a)(4) of this section by informing each participant
of the terms of the plan or health insurance coverage
[[Page 72253]]
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 health insurance coverage, requires or provides for the
designation of a participating primary care provider for a child by a
participant or beneficiary, the plan or issuer must permit the
participant or beneficiary 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 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 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 or beneficiary 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
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 health insurance coverage, is described
in this paragraph (a)(3) if the plan or issuer--
(A) Provides coverage for obstetrical or gynecological care; and
(B) Requires the designation by a participant or beneficiary 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
[[Page 72254]]
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 or beneficiary of a primary care provider,
the plan or issuer must provide a notice informing each participant 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 or beneficiary 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. 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.
(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 care providers by participants or beneficiaries, 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 or
beneficiary 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 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 or beneficiary for out-of-
network emergency services cannot exceed the cost-sharing requirement
imposed with respect to a participant or beneficiary if the services
were provided in-network. However, a participant or beneficiary 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).
(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 or beneficiary. 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 or
beneficiary. 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 or beneficiary. The amount in this
[[Page 72255]]
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 or beneficiary.
(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 or beneficiary 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 or beneficiary 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 or beneficiary.
(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 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.
[[Page 72256]]
(4) Definitions. The definitions in this paragraph (b)(4) govern in
applying the provisions of this paragraph (b).
(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 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 interim final regulations promulgated by the Department
of Labor at 29 CFR part 2590, contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015.
Sec. 54.9815-2719AT [Removed]
0
Par. 16. Section 54.9815-2719AT is removed.
Sec. 54.9815-2719T [Removed]
0
Par. 17. Section 54.9815-2719T is removed.
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Chapter XXV
For the reasons stated in the preamble, the Employee Benefits
Security Administration adopts as final the interim final rules
amending 29 CFR part 2590, which were published in the Federal Register
on May 13, 2010 (75 FR 27122), June 17, 2010 (75 FR 34538), June 28,
2010 (75 FR 37188), and November 17, 2010 (75 FR 70114) with the
following changes as set forth below:
PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS
0
18. The authority citation for Part 2590 continues to read as follows:
Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and 1191c;
sec. 101(g), Public Law 104-191, 110 Stat. 1936; sec. 401(b), Public
Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d), Public
Law 110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Public
Law 111-148, 124 Stat. 119, as amended by Public Law 111-152, 124
Stat. 1029; Secretary of Labor's Order 1-2011, 77 FR 1088 (Jan. 9,
2012).
0
19. Section 2590.701-2 is amended by revising the definition of
``preexisting condition exclusion'' to read as follows:
Sec. 2590.701-2 Definitions.
* * * * *
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.
* * * * *
0
20. Section 2590.701-3 is amended by revising paragraph (a)(1) to read
as follows:
Sec. 2590.701-3 Limitations on preexisting condition exclusion
period.
(a) Preexisting condition exclusion defined--(1) A preexisting
condition exclusion means a preexisting condition exclusion within the
meaning of Sec. 2590.701-2.
* * * * *
0
21. Section 2590.715-1251 revised to read as follows:
Sec. 2590.715-1251 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 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.
[[Page 72257]]
(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 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 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 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
[[Page 72258]]
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, see 45 CFR 147.140(c), which
provides that 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 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 beginning
on or after September 23, 2010. The provisions of PHS Act section 2708
apply to grandfathered health plans for plan 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 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
[[Page 72259]]
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. 2590.702(d)) 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. 2590.702(d)) 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
(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 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. 2590.715-2711,
which prohibits all annual dollar limits on essential health benefits
for plan years beginning on or after January 1, 2014).
(B) Decrease in limit for a plan or coverage with only a lifetime
limit. A group health plan, or group 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. 2590.715-2711, which prohibits all
annual dollar limits on essential health benefits for plan 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 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. 2590.715-2711, which prohibits all
annual dollar limits on essential health benefits for plan 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 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
[[Page 72260]]
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 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.
[[Page 72261]]
(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 COBRA premium for the 2010 plan year
of $5,000 for self-only coverage and $12,000 for family coverage.
The required employee contribution for the coverage is $1,000 for
self-only coverage and $4,000 for family coverage. Thus, the
contribution rate based on cost of coverage for 2010 is 80% ((5,000-
1,000)/5,000) for self-only coverage and 67% ((12,000-4,000)/12,000)
for family coverage. For a subsequent plan year, the COBRA premium
is $6,000 for self-only coverage and $15,000 for family coverage.
The employee contributions for that plan year are $1,200 for self-
only coverage and $5,000 for family coverage. Thus, the contribution
rate based on cost of coverage is 80% ((6,000-1,200)/6,000) for
self-only coverage and 67% ((15,000-5,000)/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).
0
22. Section 2590.715-2704 is revised to read as follows:
Sec. 2590.715-2704 Prohibition of preexisting condition exclusions.
(a) No preexisting condition exclusions. A group health plan, or a
health insurance issuer offering group health insurance coverage, may
not impose any preexisting condition exclusion (as defined in Sec.
2590.701-2).
(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. 2590.701-3(a)(2)):
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 45 CFR 147.108(a)(2) 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. Therefore, such an exclusion is prohibited.
(c) 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, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the corresponding sections of 29 CFR part 2590, contained
in the 29 CFR, parts 1927 to end, edition revised as of July 1, 2015.
0
23. Section 2590.715-2711 is revised to read as follows:
Sec. 2590.715-2711 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 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 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 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).
(2) Condition-based exclusions. The rules of this section do not
prevent a group health plan, or a health insurance issuer offering
group 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 this purpose, 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 consistent with one of the three Federal
Employees Health Benefit Program (FEHBP) options as defined by 45 CFR
156.100(a)(3) or one of the base-benchmark plans selected by a State or
applied by default pursuant to 45 CFR 156.100.
(d) Special rule for health reimbursement arrangements (HRAs) and
other account-based plans--(1) In general. If an HRA or other account-
based plan is integrated with other coverage under a group health plan
and the other group health plan coverage alone satisfies the
requirements in paragraph (a)(2) of this section, the fact that the
benefits under the HRA or other account-based plan are limited does not
mean that the HRA or other account-based plan fails to meet the
requirements of paragraph (a)(2) of this section. Similarly, if an HRA
or other account-based plan is integrated with other coverage under a
group health plan and the other group health plan coverage alone
satisfies the requirements in PHS Act section 2713 and Sec. 2590.715-
2713(a)(1), the HRA or other account-based plan will not fail to meet
the requirements of PHS Act section 2713 and Sec. 2590.715-2713(a)(1).
[[Page 72262]]
(2) Integration requirements. An HRA or other account-based plan is
integrated with a group health plan for purposes of paragraph (a)(2) of
this section if it meets the requirements under either the integration
method set forth in paragraph (d)(2)(i) of this section or the
integration method set forth in paragraph (d)(2)(ii) of this section.
Integration does not require that the HRA (or other account-based plan)
and the 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, if applicable. The term ``excepted benefits'' is
used throughout the integration methods; for a definition of the term
``excepted benefits'' see Internal Revenue Code section 9832(c), ERISA
section 733(c), and PHS Act section 2791(c).
(i) Integration Method: Minimum value not required. An HRA or other
account-based plan is integrated with another group health plan for
purposes of this paragraph if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan) to the employee that does not consist
solely of excepted benefits;
(B) The employee receiving the HRA or other account-based plan is
actually enrolled in a group health plan (other than the HRA or other
account-based 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 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 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 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 (as defined under section 213(d) of
the Internal Revenue Code) that does 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 plan, an
employee (or former employee) is permitted to permanently opt out of
and waive future reimbursements from the HRA or other account-based
plan at least annually and, upon termination of employment, either the
remaining amounts in the HRA or other account-based plan are forfeited
or the employee is permitted to permanently opt out of and waive future
reimbursements from the HRA or other account-based plan.
(ii) Integration Method: Minimum value required. An HRA or other
account-based plan is integrated with another group health plan for
purposes of this paragraph if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan) to the employee that provides minimum
value pursuant to Code section 36B(c)(2)(C)(ii) (and its implementing
regulations and applicable guidance);
(B) The employee receiving the HRA or other account-based plan is
actually enrolled in a group health plan that provides minimum value
pursuant to section 36B(c)(2)(C)(ii) of the Internal Revenue Code (and
applicable guidance), regardless of whether the plan is offered by the
plan sponsor of the HRA or other account-based plan (referred to as
non-HRA MV group coverage);
(C) The HRA or other account-based 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 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 plan, an
employee (or former employee) is permitted to permanently opt out of
and waive future reimbursements from the HRA or other account-based
plan at least annually, and, upon termination of employment, either the
remaining amounts in the HRA or other account-based plan are forfeited
or the employee is permitted to permanently opt out of and waive future
reimbursements from the HRA or other account-based plan.
(3) Forfeiture. For purpose 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 this purpose coverage under an HRA or
other account-based 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 plan. This means
that upon and after reinstatement, the reinstated amounts under the HRA
or other account-based plan may not be used to reimburse or pay medical
expenses incurred during the period after forfeiture and prior to
reinstatement.
(4) No integration with individual market coverage. A group health
plan, including an HRA or other account-based plan, used to purchase
coverage on the individual market is not integrated with that
individual market coverage for purposes of paragraph (a)(2) of this
section (or for purposes of the requirements of PHS Act section 2713).
(5) Integration with Medicare parts 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
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 (d)(2)(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 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 plan is
actually enrolled Medicare part B or D;
(iii) The HRA or other account-based plan is available only to
employees who are enrolled in Medicare part B or D; and
(iv) The HRA or other account-based plan complies with paragraphs
(d)(2)(i)(E) and (d)(2)(ii)(D) of this section.
(6) Account-based plan. An account-based plan for purposes of this
section is an employer-provided group health plan that provides
reimbursements of medical expenses other than individual market policy
premiums with the
[[Page 72263]]
reimbursement subject to a maximum fixed dollar amount for a period. An
HRA is a type of account-based plan.
(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, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the corresponding sections of 29 CFR part 2590, contained
in the 29 CFR, parts 1927 to end, edition revised as of July 1, 2015.
24. Section 2590.715-2712 is revised to read as follows:
Sec. 2590.715-2712 Rules regarding rescissions.
(a) Prohibition on rescissions--(1) A group health plan, or a
health insurance issuer offering group 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 health
insurance coverage, must provide at least 30 days advance written
notice to each participant who would be affected before coverage may be
rescinded under this paragraph (a)(1), regardless of 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 45 CFR 155.430 (other than under paragraph
(b)(2)(iii)).
(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. 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 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 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 29 CFR part 2590, contained
in the 29 CFR, parts 1927 to end, edition revised as of July 1, 2015.
0
25. Section 2590.715-2714 is revised to read as follows:
Sec. 2590.715-2714 Eligibility of children until at least age 26.
(a) In general--(1) A group health plan, or a health insurance
issuer offering group 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. 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 any other person); residency with
the participant 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
[[Page 72264]]
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
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 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 29 CFR part 2590, contained
in the 29 CFR, parts 1927 to end, edition revised as of July 1, 2015.
0
26. Section 2590.715-2719 is revised to read as follows:
Sec. 2590.715-2719 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. 2590.715-1251.
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 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. 2590.715-
2712(a)(2) (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 health
insurance
[[Page 72265]]
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 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. 2590.715-2712.)
(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
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 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 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
[[Page 72266]]
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.
(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.
(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 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.
(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
[[Page 72267]]
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 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, 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
[[Page 72268]]
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 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 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
[[Page 72269]]
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 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
[[Page 72270]]
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.
(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 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 health insurance coverage are considered to provide relevant
notices in a culturally and linguistically appropriate manner if the
plan or issuer 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 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 29 CFR part 2590, contained
in the 29 CFR, parts 1927 to end, edition revised as of July 1, 2015.
0
27. Section 2590.715-2719A is revised to read as follows:
Sec. 2590.715-2719A 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 health insurance coverage, requires or
provides for designation by a participant or beneficiary of a
participating primary care provider, then the plan or issuer must
permit each participant or beneficiary to designate any participating
primary care provider who
[[Page 72271]]
is available to accept the participant or beneficiary. In such a case,
the plan or issuer must comply with the rules of paragraph (a)(4) of
this section by informing each participant 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 health insurance coverage, requires or provides for the
designation of a participating primary care provider for a child by a
participant or beneficiary, the plan or issuer must permit the
participant or beneficiary 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 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 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 or beneficiary 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
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 health insurance coverage, is described
in this paragraph (a)(3) if the plan or issuer--
(A) Provides coverage for obstetrical or gynecological care; and
(B) Requires the designation by a participant or beneficiary 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.
[[Page 72272]]
(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 or beneficiary of a primary care provider,
the plan or issuer must provide a notice informing each participant 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 or beneficiary 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. 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.
(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 care providers by participants or beneficiaries, 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 or
beneficiary 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 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 or beneficiary for out-of-
network emergency services cannot exceed the cost-sharing requirement
imposed with respect to a participant or beneficiary if the services
were provided in-network. However, a participant or beneficiary 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).
(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 or beneficiary. 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 or
beneficiary. 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
[[Page 72273]]
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 or beneficiary.
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 or beneficiary.
(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 or beneficiary 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 or beneficiary 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 or beneficiary.
(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 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
[[Page 72274]]
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).
(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 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 29 CFR part 2590, contained
in the 29 CFR, parts 1927 to end, edition revised as of July 1, 2015.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Chapter I
For the reasons stated in the preamble, the Department of Health
and Human Services adopts as final the interim final rules amending 45
CFR parts 144, 146 and 147, which were published in the Federal
Register on May 13, 2010 (75 FR 27122), June 17, 2010 (75 FR 34538),
June 28, 2010 (75 FR 37188), and November 17, 2010 (75 FR 70114) with
the following changes as set forth below:
PART 144--REQUIREMENTS RELATED TO HEALTH INSURANCE
0
28. The authority citation for part 144 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public
Health Service Act, 42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92.
0
29. Section 144.103 is amended by revising the definition of
``preexisting condition exclusion'' to read as follows:
Sec. 144.103 Definitions.
* * * * *
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.
* * * * *
PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET
0
30. The authority citation for part 146 continues to read as follows:
Authority: Secs. 2702 through 2705, 2711 through 2723, 2791, and
2792 of the PHS Act (42 U.S.C. 300gg-1 through 300gg-5, 300gg-11
through 300gg-23, 300gg-91, and 300gg-92).
0
31. Section 146.111(a)(1) is revised to read as follows:
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.
* * * * *
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
32. The authority citation for part 147 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791 and 2792 of the Public
Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92), as amended.
0
33. Section 147.108 is revised to read as follows:
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.
[[Page 72275]]
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.
(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.
0
34. Section 147.120 is revised to read as follows:
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
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.
[[Page 72276]]
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.
0
35. Section 147.126 is revised to read as follows:
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).
(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 this purpose, 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 consistent with one of the three Federal
Employees Health Benefit Program (FEHBP) options as defined by 45 CFR
156.100(a)(3)or one of the base-benchmark plans selected by a State or
applied by default pursuant to 45 CFR 156.100.
(d) Special rule for health reimbursement arrangements (HRAs) and
other account-based plans--(1) In general. If an HRA or other account-
based plan is integrated with other coverage under a group health plan
and the other group health plan coverage alone satisfies the
requirements in paragraph (a)(2) of this section, the fact that the
benefits under the HRA or other account-based plan are limited does not
mean that the HRA or other account-based plan fails to meet the
requirements of paragraph (a)(2) of this section. Similarly, if an HRA
or other account-based plan is integrated with other coverage under a
group health plan and the other group health plan coverage alone
satisfies the requirements in PHS Act section 2713 and Sec.
147.130(a)(1), the HRA or other account-based plan will not fail to
meet the requirements of PHS Act 2713 and Sec. 147.130(a)(1).
(2) Integration requirements. An HRA or other account-based plan is
integrated with a group health plan for purposes of paragraph (a)(2) of
this section if it meets the requirements under either the integration
method set forth in paragraph (d)(2)(i) of this section or the
integration method set forth in paragraph (d)(2)(ii) of this section.
Integration does not require that the HRA (or other account-based plan)
and the 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, if applicable. The term ``excepted benefits'' is
used throughout the integration methods; for a definition of the term
``excepted benefits'' see Internal Revenue Code section 9832(c), ERISA
section 733(c), and PHS Act section 2791(c).
(i) Integration Method: Minimum value not required. An HRA or other
account-based plan is integrated with another group health plan for
purposes of this paragraph if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan) to the employee that does not consist
solely of excepted benefits;
(B) The employee receiving the HRA or other account-based plan is
actually enrolled in a group health plan (other than the HRA or other
account-based 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 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 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 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 (as defined under section 213(d) of
the Internal Revenue Code) that does 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 plan, an
employee (or former employee) is permitted to permanently opt out of
and waive future reimbursements from the HRA or other account-based
plan at least annually and, upon termination of employment, either the
remaining amounts in the HRA or other account-based plan are forfeited
or the employee is permitted to permanently opt out of and waive future
reimbursements from the HRA or other account-based plan.
(ii) Integration Method: Minimum value required. An HRA or other
account-based plan is integrated with
[[Page 72277]]
another group health plan for purposes of this paragraph if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan) to the employee that provides minimum
value pursuant to Code section 36B(c)(2)(C)(ii) (and its implementing
regulations and applicable guidance);
(B) The employee receiving the HRA or other account-based plan is
actually enrolled in a group health plan that provides minimum value
pursuant to section 36B(c)(2)(C)(ii) of the Internal Revenue Code (and
applicable guidance), regardless of whether the plan is offered by the
plan sponsor of the HRA or other account-based plan (referred to as
non-HRA MV group coverage);
(C) The HRA or other account-based 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 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 plan, an
employee (or former employee) is permitted to permanently opt out of
and waive future reimbursements from the HRA or other account-based
plan at least annually, and, upon termination of employment, either the
remaining amounts in the HRA or other account-based plan are forfeited
or the employee is permitted to permanently opt out of and waive future
reimbursements from the HRA or other account-based plan.
(3) Forfeiture. For purpose 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 this purpose coverage under an HRA or
other account-based 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 plan. This means
that upon and after reinstatement, the reinstated amounts under the HRA
or other account-based plan may not be used to reimburse or pay medical
expenses incurred during the period after forfeiture and prior to
reinstatement.
(4) No integration with individual market coverage. A group health
plan, including an HRA or other account-based plan, used to purchase
coverage on the individual market is not integrated with that
individual market coverage for purposes of paragraph (a)(2) of this
section (or for purposes of the requirements of PHS Act section 2713).
(5) Integration with Medicare parts 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
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 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 plan is
actually enrolled Medicare part B or D;
(iii) The HRA or other account-based plan is available only to
employees who are enrolled in Medicare part B or D; and
(iv) The HRA or other account-based plan complies with paragraphs
(d)(2)(i)(E) and (d)(2)(ii)(D) of this section.
(6) Account-based plan. An account-based plan for purposes of this
section is an employer-provided group health plan that provides
reimbursements of medical expenses other than individual market policy
premiums with the reimbursement subject to a maximum fixed dollar
amount for a period. An HRA is a type of account-based plan.
(e) 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.
0
36. Section 147.128 is revised to read as follows:
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
[[Page 72278]]
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 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.
0
37. Section 147.136 is revised to read as follows:
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 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
[[Page 72279]]
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 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
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
[[Page 72280]]
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.
(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 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.
[[Page 72281]]
(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 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.
(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
[[Page 72282]]
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 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)
[[Page 72283]]
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, 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 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
[[Page 72284]]
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 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 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;
[[Page 72285]]
(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.
(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 meets all the requirements of paragraph (e)(2) of
this section with respect to the
[[Page 72286]]
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.
0
38. Section 147.138 is revised to read as follows:
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 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
[[Page 72287]]
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
(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 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
[[Page 72288]]
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).
(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 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
[[Page 72289]]
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).
(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.
0
39. Section 147.140 is revised to read as follows:
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
[[Page 72290]]
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 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 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
[[Page 72291]]
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 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 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
[[Page 72292]]
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
(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 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.
[[Page 72293]]
(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 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
[[Page 72294]]
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 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).
[FR Doc. 2015-29294 Filed 11-13-15; 4:15 pm]
BILLING CODE 4150-28-P; 4830-01-P; 4120-01-P; 6325-64-P