The Affordable Care Act (ACA), a landmark piece of legislation, has brought about significant changes in the healthcare landscape. For healthcare providers, insurance issuers, and employers, understanding the nuances of the ACA is crucial for compliance and effective operation. This document addresses frequently asked questions regarding the implementation of the market reform provisions of the Affordable Care Act, providing clarity and guidance to stakeholders navigating these regulations.
Table of Contents
Compliance
Grandfathered Health Plans
Claims, Internal Appeals, and External Review
Dependent Coverage of Children
Out-Of-Network Emergency Services
Highly Compensated Employees
Compliance
Q1. The Affordable Care Act introduces various requirements for group health plans and health insurance issuers, alongside new protections and benefits for consumers. These provisions are being implemented in phases. What is the overarching approach of the relevant Departments to ensure smooth implementation?
A1. The Departments of Health and Human Services, Labor, and the Treasury are committed to facilitating a smooth transition to ACA compliance. Our primary focus is on assisting, rather than penalizing, plans, issuers, and other entities that are demonstrably working in good faith to understand and adhere to the new law. We recognize that navigating these changes can be complex, and our approach emphasizes support and guidance to minimize disruptions to existing healthcare plans and practices. This includes offering transition provisions, grace periods, and safe harbors where appropriate, to ensure a measured and effective implementation of the Affordable Care Act’s provisions. This supportive approach is designed to help everyone benefit from the intended improvements to the healthcare system.
Grandfathered Health Plans
Q2. Following the issuance of interim final regulations concerning grandfathered health plans, concerns have been raised by issuers. They often lack consistent access to information about changes in employer plan sponsors’ contribution rates towards group health plan coverage costs. Specifically, regulations state that a plan loses grandfathered status if the employer reduces its contribution rate by more than 5 percentage points from the rate on March 23, 2010.
For determining grandfathered status for insured group health plans, what communication protocols should issuers and employer plan sponsors establish regarding modifications to the sponsor’s contribution rate?
A2. To address this information gap and ensure the stability of grandfathered health plan status during this interim period before final regulations, the Departments have outlined a practical approach. Until final regulations are issued, an insured group health plan, currently considered grandfathered, will not immediately lose this status solely due to changes in employer contribution rates, provided both the employer plan sponsor and the issuer adhere to the following steps:
- Issuer Requirement at Renewal: Upon policy renewal, the issuer must formally require the plan sponsor to declare their contribution rate for the upcoming plan year. Furthermore, if not already on record with the issuer, the plan sponsor must also state their contribution rate as of March 23, 2010. This establishes a baseline for comparison and compliance monitoring.
- Disclosure in Policy Documents: The issuer is obligated to include a clear and prominent disclosure in their policies, certificates, or insurance contracts. This disclosure must explicitly state the plan sponsors’ ongoing responsibility to notify the issuer of any changes to their contribution rate throughout the plan year. This ensures continuous communication and timely updates.
For policies that were renewed before January 1, 2011, issuers were required to implement these procedures no later than January 1, 2011. Adherence to these steps allows an insured group health plan, initially deemed grandfathered, to maintain its grandfathered status.
It is important to note that the relief provided by this guidance is conditional. It ceases to apply on the earliest of two dates: first, the date the issuer becomes aware of a contribution rate reduction of 5 percentage points or more; or second, the date the plan would no longer qualify as grandfathered for reasons unrelated to this 5-percentage-point reduction.
Furthermore, neither the Affordable Care Act nor the interim final regulations restrict the ability of an insurance policy, certificate, or contract to mandate that plan sponsors provide advance notification (e.g., 30 or 60 days) to the issuer regarding any planned changes in their contribution rate. This proactive communication is encouraged to facilitate smoother administration and compliance.
Q3. Similarly, multiemployer plans often face challenges in tracking changes to contributing employers’ contribution rates as a percentage of coverage cost. What communication steps should multiemployer plans take with contributing employers regarding these contributions?
A3. Multiemployer plans can adopt a similar communication strategy to that outlined for insured group health plans in Q&A2 to manage the uncertainty around employer contribution rate changes. If multiemployer plans and their contributing employers implement steps mirroring those described previously, the same transitional relief will be applicable to the multiemployer plan. This relief remains in effect unless or until the multiemployer plan becomes aware that a change in the contribution rate has occurred. This approach ensures parity in the application of relief measures across different types of health plans and promotes consistent communication practices within the healthcare system.
Q4. Regarding multiemployer plan coverage, it’s been noted that many such plans commonly feature either a fixed-dollar employee contribution or no employee contribution at all toward the cost of coverage. In these scenarios, is a change in a contributing employer’s contribution rate (e.g., due to resolving a prior year’s funding deficit or reflecting a surplus) relevant to the grandfathered status, assuming that any modifications to coverage terms would not independently cause the plan to lose its grandfathered status, and the employee contribution structure (no contribution or fixed-dollar contribution) remains unchanged?
A4. In situations where a multiemployer plan maintains a consistent employee contribution structure—either no employee contribution or a fixed-dollar contribution that does not increase—and any changes to the terms of coverage would not otherwise jeopardize its grandfathered status, then a change in a contributing employer’s contribution rate alone will not cause an otherwise grandfathered health plan to lose its grandfathered designation. This clarification is important for multiemployer plans, as it provides assurance that financial adjustments at the employer level, which do not impact employee contributions or fundamentally alter coverage terms, will not inadvertently trigger a loss of grandfathered status under the Affordable Care Act. This ensures stability and predictability for these types of plans.
Q5. Are the Departments receiving ongoing feedback and inquiries concerning the grandfather regulations? Should stakeholders expect further guidance on this topic?
A5. Yes, the Departments actively solicited and continue to receive comments and questions regarding the interim final grandfather regulations. This feedback is invaluable for refining our understanding and approach. We are diligently reviewing and assessing the comments received on these regulations, as well as those pertaining to appeals processes and other provisions where grandfathered status is a determining factor. In response to the ongoing dialogue, the Departments have already issued some sub-regulatory guidance on appeals regulations. We anticipate that further sub-regulatory guidance may be released to address specific issues as we continue to evaluate the feedback. Looking ahead, the issuance of final regulations addressing the various interim final rules established under the Affordable Care Act is projected to commence next year. This phased approach to guidance and rulemaking reflects our commitment to responsive and adaptive implementation of the ACA.
Q6. Will the Departments consider modifying the current rules to allow grandfathered group health plans to change insurance carriers without automatically losing their grandfathered status? This is a significant concern for plan administrators seeking to maintain continuity while potentially needing to switch carriers for various reasons.
A6. Yes, the Departments recognize the importance of flexibility for grandfathered group health plans, particularly when considering changes in insurance carriers. We anticipate addressing the specific circumstances under which grandfathered group health plans can transition to new carriers without forfeiting their grandfathered status in forthcoming guidance. This issue is a priority, and we are working to develop clear guidelines that will provide plans with the necessary options to adapt to changing market conditions and plan needs while preserving their grandfathered benefits.
Claims, Internal Appeals, and External Review
Q7. My health plan had an external review process in place before the Affordable Care Act was enacted. Can this pre-existing external review process be considered compliant with Public Health Service Act (PHS Act) section 2719(b), or are specific modifications required to meet the new standards?
A7. To determine if your pre-existing external review process aligns with the new requirements under PHS Act section 2719(b), the first step is to ascertain whether your plan is classified as a grandfathered health plan. If your plan holds grandfathered status, it is important to note that the external review provisions of PHS Act section 2719(b) do not apply to it. These new requirements are specifically targeted at non-grandfathered plans to enhance patient protection and appeal rights.
For plans that are not grandfathered and are insured, transitional relief has been provided. These plans are permitted to utilize existing state external review processes, in any state where they operate, to meet the federal requirements. This transitional provision is applicable regardless of whether the plan was in existence prior to March 23, 2010, or is a newly established plan. This offers flexibility and leverages existing state infrastructures to facilitate compliance.
For self-insured plans that are not grandfathered, similar relief measures are in place. On August 23, 2010, the Department of Labor issued Technical Release 2010-01, which outlines an enforcement safe harbor. Self-insured plans that comply with one of the methods detailed in this release will not face enforcement actions from the Department of Labor and the IRS concerning PHS Act section 2719(b) during the specified transition period. Further details are available in Q&A8 below, which elaborates on scenarios where full compliance with the safe harbor might not be achieved. This tiered approach to compliance recognizes the diverse structures of health plans and aims to ensure broad adherence to the new standards while minimizing disruption.
Q8. What if a self-insured plan’s external review process does not fully meet the safe harbor criteria outlined in the DOL technical release? Does this automatically mean the plan is non-compliant, or are there other considerations?
A8. The technical release serves as a safe harbor, offering a guaranteed pathway to compliance and protection from departmental enforcement actions. However, if a self-insured plan’s external review process does not strictly adhere to all standards specified within the technical release, it does not automatically equate to a violation of PHS Act section 2719(b). In such cases, compliance will be assessed on a case-by-case basis, employing a thorough facts and circumstances analysis. This more flexible approach acknowledges that plans may implement alternative mechanisms to achieve the goals of independent and fair external review.
For instance, one criterion within the technical release mandates that self-insured plans contract with a minimum of three independent review organizations (IROs) and systematically rotate claim assignments among them. Alternatively, plans can adopt other impartial and unbiased methods for selecting IROs, such as random selection. However, if a self-insured group health plan does not contract with at least three IROs, it is not automatically deemed to be in violation of PHS Act section 2719(b). Instead, the plan retains the opportunity to demonstrate through other means that its external review process is indeed independent and free from bias. This might include showcasing rigorous protocols for IRO selection, oversight mechanisms to ensure impartiality, and documented evidence of fair review outcomes. The emphasis is on demonstrating a commitment to unbiased external review, even if the precise safe harbor specifications are not met in every detail.
Q9. What if a self-insured plan does not directly contract with an independent review organization (IRO), but instead contracts with a third-party administrator (TPA) who, in turn, contracts with an IRO? Is this arrangement permissible under the regulations, or must the plan have a direct contractual relationship with the IRO?
A9. The technical release does not stipulate that a plan must directly contract with an IRO. The structure where a self-insured plan contracts with a TPA, which then contracts with an IRO, is fully acceptable and can satisfy the standards outlined in the technical release. This indirect contractual relationship is considered equivalent to a direct contract for compliance purposes. The focus is on ensuring that an independent and qualified IRO is performing the external reviews, regardless of the specific contractual path.
However, it is crucial to recognize that such a contractual arrangement does not automatically absolve the plan of responsibility. The plan remains ultimately accountable for ensuring that individuals are indeed provided with access to external review when required. Furthermore, for plans governed by ERISA, plan fiduciaries have a clear duty to diligently monitor their service providers, including TPAs and IROs. This oversight is essential to verify that all aspects of the external review process are being conducted properly, ethically, and in compliance with regulations. Effective monitoring ensures that the intended protections for plan participants are fully realized.
Q10. What recourse is available if there is no IRO physically located within my plan’s state? Does this lack of local IRO availability pose a compliance challenge?
A10. The regulations do not mandate that an IRO must be located within the same state as the health plan. Plans have the flexibility to contract with an IRO even if it is based in another state. Geographic location is not a limiting factor when selecting an IRO. The primary concern is the IRO’s qualifications, independence, and capacity to conduct impartial reviews, not its physical proximity to the plan. This broadens the pool of available IROs and ensures that all plans, regardless of their location, can access qualified external review services to meet the requirements of the Affordable Care Act.
Q11. The Departments’ regulations have modified the timeframes for initial determinations on urgent care claims, but the deadlines for internal appeals decisions remain unchanged. The model notice of adverse benefit determination issued on August 23, 2010, was unclear about which timeframes were shortened. What is the definitive rule regarding these timeframes?
A11. It is important to clarify that only the timeframes for making initial benefit determinations have been modified by the recent regulations. The deadlines for making internal appeals decisions have not been altered. To address the ambiguity in the initial model notice of adverse benefit determination issued on August 23, 2010, the Departments have released a revised version. This revised notice, dated September 20, 2010, clearly reflects the updated timeframes for initial determinations and should eliminate any confusion. Healthcare providers and plan administrators should utilize this revised model notice to ensure accurate communication of benefit determination and appeal rights to claimants.
Q12. I anticipate that my plan will soon lose its grandfathered status and may face difficulties in implementing the necessary system changes to comply with some of the new standards for claims and internal appeals within the required timeframe. Is any transitional relief available to facilitate this process?
A12. Yes, recognizing the challenges plans may face in adapting to new requirements, particularly those transitioning away from grandfathered status, the Department of Labor issued Technical Release 2010-02 on September 20, 2010. This release provides an enforcement grace period until July 1, 2011. This grace period is specifically intended to give plans and issuers the necessary time to implement certain procedural and computer system modifications required to fully comply with the new claims and internal appeals regulations. This transitional relief is designed to facilitate a smoother adjustment process, allowing plans to make the required changes without immediate enforcement concerns, provided they are making diligent efforts to achieve compliance within the grace period. The technical release document provides detailed information about the scope and conditions of this grace period.
Q13. Technical Release 2010-02, issued on September 20, 2010, grants plans and issuers additional time—an enforcement grace period until July 1, 2011—before they are required to include new content, such as coding information, on notices of adverse benefit determination and notices of final adverse benefit determination. Does this grace period imply that notices are not required at all during this period?
A13. No, the enforcement grace period provided by Technical Release 2010-02 does not suspend the requirement to issue notices of adverse benefit determination and notices of final adverse benefit determination. These notices remain mandatory throughout the grace period. The relief specifically pertains to the new content requirements mandated under paragraph (b)(2)(ii)(E) of the Departments’ July 23, 2010 interim final claims and appeals regulations. This new content includes items like coding information. The grace period allows plans additional time to adapt their systems and processes to incorporate this new content into their notices.
During the grace period, the content standards of the Department of Labor’s claims procedure regulation issued on November 21, 2000 (29 CFR 2560.503-1) remain in full effect. Furthermore, it’s important to remember that even under existing regulations, claimants have the right to obtain coding and other information relevant to their claim for benefits, free of charge, upon request. This right to access information, as outlined in 29 CFR 2560.503-1(h)(2)(iii), is not affected by the grace period and continues to ensure transparency and access to essential claim details for beneficiaries. Therefore, while the grace period offers temporary relief from new content mandates, the fundamental requirements for issuing notices and providing claim-related information remain unchanged. Accurate medical coding plays a crucial role in the entire claims process, from initial determination to appeals and external review. Understanding coding requirements and ensuring accuracy are essential for compliance and effective claims management under the ACA.
Dependent Coverage of Children
Q14. Will a group health plan or issuer fail to comply with section 2714 of the Public Health Service Act (PHS Act) and its related interim final regulations if it sets conditions for health coverage, such as support, residency, or other dependency factors, for individuals under age 26 who do not meet the definition of “child” in section 152(f)(1) of the Internal Revenue Code (Code)? (Section 152(f)(1) defines children narrowly to include only sons, daughters, stepchildren, adopted children, and foster children.)
A14. No, a group health plan or issuer will not be deemed non-compliant with PHS Act section 2714 or its implementing regulations simply because it limits health coverage for individuals under 26 to only those who are considered “children” as defined by section 152(f)(1) of the Internal Revenue Code. For individuals under 26 who do not fall within this specific definition of “child”—such as grandchildren or nieces—a plan is permitted to impose additional eligibility criteria for health coverage. These additional conditions can include requirements such as demonstrating that the individual is a dependent for income tax purposes. This provision offers plans flexibility in defining dependent eligibility beyond the core categories of children specified in the tax code, while still adhering to the broader mandate of extending coverage to young adults under age 26.
Out-Of-Network Emergency Services
Q15. Public Health Service Act (PHS Act) section 2719A generally mandates that if a group health plan or health insurance coverage includes benefits for emergency services received in a hospital emergency department, the plan or issuer must cover these services regardless of whether the provider is in-network. Furthermore, any copayment or coinsurance imposed cannot exceed what would be charged for in-network services. However, the statute does not compel plans or issuers to cover amounts that out-of-network providers may “balance bill” patients. Consequently, the interim final regulations for section 2719A establish minimum payment standards in paragraph (b)(3) to prevent plans or issuers from paying unreasonably low amounts to out-of-network emergency service providers, which could lead to patients being balance billed for the remaining charges.
Are these minimum payment standards in paragraph (b)(3) of the regulations intended to apply in situations where state law prohibits balance billing? Similarly, what if a plan or issuer is contractually obligated to cover any balance billed amounts, thus protecting the patient from these costs?
A15. No, the minimum payment standards outlined in paragraph (b)(3) of the regulations are not intended to apply in scenarios where state law already prohibits balance billing. As emphasized in the preamble to the interim final regulations for section 2719A, these minimum payment standards were specifically developed to safeguard patients from financial penalties when they seek emergency services from out-of-network providers. In states where balance billing is legally prohibited, this patient protection is already inherently provided by state law, rendering the federal minimum payment standards unnecessary.
Similarly, if a health plan or issuer is contractually bound to cover any amounts that might be balance billed by an out-of-network emergency services provider—thereby shielding the patient from these potential costs—the minimum payment standards are also not required. In both of these situations (state balance billing bans and contractual protections against balance billing), however, it is crucial that patients receive clear and prominent notice of their financial protection regarding these amounts. This notification is essential to prevent patients from inadvertently making payments for services for which they are not financially responsible.
It is important to reiterate that even when state law prohibits balance billing, or when a plan or issuer contractually covers balance billed amounts, the plan or issuer is still prohibited from imposing any copayment or coinsurance requirements for emergency services that are higher than what would apply if the services were rendered by an in-network provider. This consistent application of in-network cost-sharing limits ensures affordability and predictability for patients needing emergency care, irrespective of network status and billing arrangements.
Highly Compensated Employees
Q16. Are the Departments planning to issue any specific guidance regarding the provisions of Public Health Service Act (PHS Act) section 2716, which prohibits discrimination in favor of highly compensated individuals in insured group health plans? This is a critical area for ensuring fairness and equity in health benefit offerings.
A16. Yes, the Departments are actively working to provide guidance on PHS Act section 2716. On September 20, 2010, the Internal Revenue Service (IRS) released Notice 2010-63, which is scheduled for publication in Internal Revenue Bulletin 2010-41, dated October 12, 2010. This notice, available at http://www.irs.gov/pub/irs-drop/n-10-63.pdf, offers background information on the statutory provisions of PHS Act section 2716. This background information has been carefully reviewed and approved by all three Departments (Health and Human Services, Labor, and Treasury). Furthermore, Notice 2010-63 serves as a formal invitation for public comments. These comments will be thoroughly considered as the Departments develop future, more comprehensive guidance on the non-discrimination provisions of the ACA. This proactive approach to gathering stakeholder input ensures that subsequent guidance is well-informed, practical, and effectively addresses the complexities of implementing section 2716.
