FAQs About the Affordable Care Act Implementation

Set out below are Frequently Asked Questions (FAQs) prepared jointly by the Departments of Health and Human Services, Labor and the Treasury. These FAQs answer questions from stakeholders with a view to helping people understand the new law and benefit from it, as intended.

The Departments anticipate issuing further responses to questions and other guidance under the Affordable Care Act in the future. We hope these publications will be helpful by providing additional clarity and assistance.

Part I

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Compliance

Q1: Under the Affordable Care Act, there are various provisions that apply to group health plans and health insurance issuers and various protections and benefits for consumers that are beginning to take effect or that will become effective very soon. What is the Departments’ basic approach to implementation?

The Departments are working together with employers, issuers, States, providers and other stakeholders to help them come into compliance with the new law and are working with families and individuals to help them understand the new law and benefit from it, as intended. Compliance assistance is a high priority for the Departments. Our approach to implementation is and will continue to be marked by an emphasis on assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law. This approach includes, where appropriate, transition provisions, grace periods, safe harbors, and other policies to ensure that the new provisions take effect smoothly, minimizing any disruption to existing plans and practices.

Grandfathered Health Plans

Q2: After the interim final regulations on grandfathered health plans were issued, some issuers commented that they 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. (Generally, the interim final regulations provide that a group health plan or health insurance coverage will cease to be a grandfathered health plan if the employer decreases its contribution rate based on cost of coverage towards the cost of coverage by more than 5 percentage points below the contribution rate on March 23, 2010.)

For purposes of determining whether an insured group health plan is a grandfathered health plan, what steps should issuers and employer plan sponsors take to communicate regarding changes to the plan sponsor's contribution rate?

The Departments have determined that, until the issuance of final regulations, they will not treat an insured group health plan that is a grandfathered plan as having ceased to be a grandfathered health plan immediately based on a change in the employer contribution rate if the employer plan sponsor and issuer take the following steps:

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); and
The issuer's policies, certificates, or contracts of insurance 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.

For policies renewed prior to January 1, 2011, issuers should take these steps no later than January 1, 2011. If these steps are taken, an insured group health plan that is a grandfathered health plan will continue to be considered a grandfathered health plan.

The relief in this Q&A2 will no longer apply as of the earlier of the first date on which the issuer knows 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.

Moreover, nothing in the Affordable Care Act or the interim final regulations prevents a policy, certificate, or contract of insurance from requiring a plan sponsor to notify an issuer in advance (e.g., 30 or 60 days in advance) of a change in the contribution rate.

Q3: Similarly, multiemployer plans do not always know whether (or when) a contributing employer changes its contribution rate as a percentage of the cost of coverage. What steps should multiemployer plans take to communicate with contributing employers regarding employer contributions towards coverage?

If multiemployer plans and contributing employers follow steps similar to those outlined in Q&A2, above, the same relief will apply to the multiemployer plan unless or until the multiemployer plan knows that the contribution rate has changed.

Q4: Also with respect to multiemployer plan coverage, some multiemployer plans have stated that it is common for such plans to have either a fixed-dollar employee contribution or no employee contribution towards the cost of coverage. In such cases, is it relevant if a contributing employer's contribution rate changes (for example, after making up a funding deficit in the prior year or to reflect a surplus), 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?

In this circumstance, if there is no increase in the employee contribution towards coverage and any changes in the coverage terms would not otherwise cause the plan to cease to be grandfathered, a change in a contributing employer's contribution rate will not, in and of itself, cause a plan that is otherwise a grandfathered health plan to cease to be a grandfathered health plan.

Q5: Are the Departments receiving other comments and questions regarding the grandfather regulations? Is more guidance expected?

The Departments invited comments on their interim final grandfather regulations, as well as on the appeals regulations and other provisions whose applicability is affected by status as a grandfathered health plan. The Departments have issued some sub-regulatory guidance on the appeals regulations and will continue to review and evaluate comments on these and other regulations, and might issue further sub-regulatory guidance on selected issues as comments are evaluated. Final regulations on the various interim final regulations recently issued under the Affordable Care Act are expected to be published beginning next year.

Q6: Will the Departments change the current rules so that a grandfathered group health plan that changes carriers does not relinquish its status as a grandfathered health plan?

The Departments anticipate that they will shortly address the circumstances under which grandfathered group health plans may change carriers without relinquishing their status as grandfathered health plans.

Claims, Internal Appeals, and External Review

Q7: My plan already provided an external review process before the Affordable Care Act was enacted. Can my already-existing external review process be deemed to comply with Public Health Service Act (PHS Act) section 2719(b)?

If your plan existed prior to enactment of the Affordable Care Act, you should first check to see if your plan is a grandfathered health plan. If it is, the new external review provisions of PHS Act section 2719(b) do not apply to your plan.

If your plan is not a grandfathered health plan and it is insured, the Departments have provided transitional relief under which plans can use existing State external processes, in one of the States in which they operate, to comply with the new Federal requirements. This transitional relief applies regardless of whether the plan already existed on March 23, 2010 or is a new plan.

If your plan is not a grandfathered health plan and it is self-insured, relief is also provided. On August 23, 2010, the Department of Labor issued Technical Release 2010-01, which sets forth an enforcement safe harbor. If the plan complies with one of the methods set forth in the release, the Department of Labor and the IRS will not take any enforcement action with respect to PHS Act section 2719(b) during the transition period. See also Q&A8, below.

Q8: What if a self-insured plan's external review process does not satisfy the safe harbor in the DOL technical release?

The technical release provides a safe harbor from enforcement by the Departments. For plans that do not strictly comply with all the standards set forth in the technical release, compliance will be determined on a case-by-case basis under a facts and circumstances analysis. Thus, a plan that does not satisfy all of the standards of the technical release's safe harbor may in some circumstances nonetheless be considered to be in compliance with PHS Act section 2719(b).

For example, one of the standards set forth in the technical release requires self-insured plans to contract with at least three independent review organizations (IROs) and to rotate claims assignments among them (or to incorporate other independent, unbiased methods for selection of IROs, such as random selection). However, a self-insured group health plan's failure to contract with at least three IROs does not mean that the plan has automatically violated PHS Act section 2719(b). Instead, a plan may demonstrate other steps taken to ensure that its external review process is independent and without bias.

Q9: Similarly, what if a self-insured plan does not contract directly with any independent review organization (IRO), but contracts with a third-party administrator (TPA) that, in turn, contracts with an IRO?

The technical release does not require a plan to contract directly with any IRO. Where a self-insured plan contracts with a TPA 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. Of course, such a contract does not automatically relieve the plan from responsibility if there is a failure to provide an individual with external review. Moreover, fiduciaries of plans that are subject to ERISA have a duty to monitor the service providers to the plan.

Q10: What if there is no IRO in my plan's State?

The IRO is not required to be in the same State as the plan. Plans may contract with an IRO even if it is located in another State.

Q11: The Departments' regulations make changes to shorten the times for making initial determinations with respect to urgent care claims, but did not make any changes to the times for making internal appeals decisions. The Departments' model notice of adverse benefit determination issued on August 23, 2010, was unclear as to which times have been shortened. What is the rule?

Only the times for making the initial benefit determination were changed. The Departments have revised the model notice to eliminate confusion. The revised notice includes a header that reads, "Revised as of September 20, 2010".

Q12: I anticipate that my plan will no longer be a grandfathered plan and will have a hard time making systems changes in time to comply with some of the new standards for claims and internal appeals. Is there any relief?

Yes, on September 20, 2010 the Department of Labor issued Technical Release 2010-02 at www.dol.gov/ebsa/newsroom/tr10-02.html providing an enforcement grace period until July 1, 2011 to give plans and issuers necessary time to make certain procedural and computer system changes to comply with the new requirements.

Q13: The September 20, 2010 technical release, among other things, gives plans and issuers additional time (as an enforcement grace period until July 1, 2011) before they have to provide new content (such as coding information) on notices of adverse benefit determination and notices of final adverse benefit determination. Does this mean that notices are not required during the grace period?

No. The Technical Release 2010-02 provides that the standards of the Department of Labor's claims procedure regulation issued on November 21, 2000 (29 CFR 2560.503-1) apply. A grace period is given only for the new content required under paragraph (b)(2)(ii)(E) of the Departments' July 23, 2010 interim final claims and appeals regulations. In addition, under existing regulations, claimants may obtain coding and other information relevant to the claimant's claim for benefits free of charge upon request. See 29 CFR 2560.503-1(h)(2)(iii).

Dependent Coverage of Children

Q14: Will a group health plan or issuer fail to satisfy section 2714 of the Public Health Service Act (PHS Act) and its implementing interim final regulations 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 Internal Revenue Code (Code)? (That section of the Code defines children to include only sons, daughters, stepchildren, adopted children (including children place for adoption), and foster children.)

No. 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. 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.

Out-Of-Network Emergency Services

Q15: Public Health Service Act (PHS Act) section 2719A generally provides, among other things, that if a group health plan or health insurance coverage provides any benefits for emergency services in an emergency department of a hospital, the plan or issuer must cover emergency services without regard to whether a particular health care provider is an in-network provider with respect to the services, and generally cannot impose any copayment or coinsurance that is greater than what would be imposed if services were provided in network. At the same time, the statute does not require plans or issuers to cover amounts that out-of-network providers may "balance bill". Accordingly, the interim final regulations under section 2719A set forth minimum payment standards in paragraph (b)(3) to ensure that a plan or issuer does not pay an unreasonably low amount to an out-of-network emergency service provider who, in turn, could simply balance bill the patient.

Are the minimum payment standards in paragraph (b)(3) of the regulations intended to apply in circumstances where State law prohibits balance billing? (Similarly, what if a plan or issuer is contractually obligated to bear the cost of any amounts balance billed, so that the patient is held harmless from those costs?)

No. As stated in the preamble to the interim final regulations under section 2719A, the minimum payment standards set forth in paragraph (b)(3) of the regulations were developed to protect patients from being financially penalized for obtaining emergency services on an out-of-network basis. If a State law prohibits balance billing, plans and issuers are not required to satisfy the payment minimums set forth in the regulations. Similarly, if a plan or issuer is contractually responsible for any amounts balance billed by an out-of-network emergency services provider, the plan or issuer is not required to satisfy the payment minimums. In both situations, however, patients must be provided with adequate and prominent notice of their lack of financial responsibility with respect to such amounts, to prevent inadvertent payment by the patient. Nonetheless, even if State law prohibits balance billing, or if the plan or issuer is contractually responsible for amounts balance billed, the plan or issuer may not impose any copayment or coinsurance requirement that is higher than the copayment or coinsurance requirement that would apply if the services were provided in network.

Highly Compensated Employees

Q16: Are the Departments planning to issue any 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)?

Yes, on September 20, 2010 the Internal Revenue Service released Notice 2010-63, to be published in Internal Revenue Bulletin 2010-41, October 12, 2010. This bulletin provides background information on the statutory provisions of PHS Act section 2716 that has been reviewed and approved by the three Departments. In addition, it invites comments to be considered in the development of future guidance.

Part II

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Set out below are a number of Frequently Asked Questions (FAQs) regarding implementation of the market reform provisions of the Affordable Care Act. They have been prepared jointly by the Departments of Health and Human Services, Labor and the Treasury. Like the FAQs the Departments issued on September 20, 2010, these FAQs answer questions from stakeholders with a view to helping people understand the new law and benefit from it, as intended.

The ongoing guidance the Departments are providing reflects our approach to implementation, which emphasizes assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the Affordable Care Act, as well as our commitment to work with families and individuals to make it as easy as possible for them to obtain the protections and benefits of the new law.

Grandfathered Health Plans

Q1: Our company sponsors a group health plan for our employees that has been in effect since March 23, 2010. We and the issuer of the policy under the plan are considering whether we could make various changes to the plan without losing grandfathered status. If we avoid making any of the six specific changes described in paragraph (g)(1) of the interim final regulations relating to grandfathered health plans, are there other changes to our existing plan/policy that we need to be concerned could cause it to relinquish grandfathered status?⁽²⁾

No. Paragraph (g)(1) of the Departments' interim final grandfather regulations provides that any of six changes (measured from March 23, 2010) 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. Briefly stated, these six changes are:

Elimination of all or substantially all benefits to diagnose or treat a particular condition.
Increase in a percentage cost-sharing requirement (e.g., raising an individual's coinsurance requirement from 20% to 25%).
Increase in a deductible or out-of-pocket maximum by an amount that exceeds medical inflation plus 15 percentage points.
Increase in a copayment by an amount that exceeds medical inflation plus 15 percentage points (or, if greater, $5 plus medical inflation).
Decrease in an employer's contribution rate towards the cost of coverage by more than 5 percentage points.
Imposition of annual limits on the dollar value of all benefits below specified amounts

For a plan that is continuing the same policy, these six changes are the only changes that would cause a cessation of grandfather status under the interim final regulations. (As noted, the Departments are separately considering under what circumstances otherwise grandfathered plans may change issuers without relinquishing their status as grandfathered health plans.)

Q2: My plan offers three benefit package options – a PPO, a POS arrangement, and an HMO. If the HMO relinquishes grandfather status, does that mean that the PPO and POS arrangement must also relinquish grandfather status?

No. The grandfather analysis applies on a benefit-package-by-benefit-package basis. In this situation, it is permissible to treat the PPO, POS arrangement, and HMO as separate benefit packages. Accordingly, if any benefit package ceases grandfather status, it does not affect the grandfather status of the other benefit packages.

Q3: How do the Departments' interim final grandfather rules regarding changes in employer contributions apply where an employer restructures its tiers of coverage?

The interim final grandfather regulations provide that the standards of paragraph (g)(1)(v) for employer contributions (listed above as item (5) in Q&A-1) apply on a tier-by-tier basis. As a result, 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. In this 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% (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 of paragraph (g)(1). Therefore, for example, if a plan with only a self-only coverage tier added a family coverage tier, the level of employer contribution toward the family coverage would not cause the plan to lose grandfather status.

Q4: If an employer plan sponsor raises the copayment level for a category of services (such as outpatient or primary care) by an amount that exceeds the standards set forth in paragraph (g)(1) of the interim final regulations, but retains the copayment level for other categories of services (such as inpatient care or specialty care), will that cause the plan to relinquish grandfather status?

Yes. Each change in cost sharing is separately tested against the paragraph (g)(1) standards of the Departments' interim final grandfather regulations.

Q5: How do the Departments' interim final grandfather regulations affect wellness programs sponsored by group health plans?

Group health plans may continue to provide incentives for wellness by providing premium discounts or additional benefits to reward healthy behaviors by participants or beneficiaries, by rewarding high quality providers, and by incorporating evidence-based treatments into benefit plans.⁽²⁾ However, penalties (such as cost-sharing surcharges) may implicate the paragraph (g)(1) standards listed above in Q&A-1 and should be examined carefully. In addition, plans should take steps to ensure compliance with applicable nondiscrimination rules (such as the HIPAA⁽³⁾ nondiscrimination rules for group health plans and group health insurance coverage with respect to an individual based on a health status related factor) and any other applicable Federal or State law.

Dental and Vision Benefits

Q6: What if my dental (or vision) benefits are structured as excepted benefits under HIPAA? Does that exemption except my dental (or vision) plan from the Affordable Care Act's market reforms?

Yes. If benefits constitute excepted benefits under HIPAA, the requirements of the Affordable Care Act's market reforms do not apply. Under HIPAA, dental (and vision) benefits generally constitute excepted benefits if they:

Are offered under a separate policy, certificate, or contract of insurance; or
Are not an integral part of the plan. For dental (or vision) benefits to be considered not an integral part of the plan (whether insured or self-insured), participants must have a right not to receive the coverage and, if they do elect to receive the coverage, must pay an additional premium.

Accordingly, if a plan provides its dental (or vision) benefits pursuant to a separate election by a participant and the plan charges even a nominal employee contribution towards the coverage, the dental (or vision) benefits would constitute excepted benefits, and the market reform provisions would not apply to that coverage.

Rescissions

Q7: The Affordable Care Act (through Public Health Service Act section 2712) generally provides that plans and issuers must not rescind coverage unless there is fraud or an individual makes an intentional misrepresentation of material fact. A rescission is defined as it is commonly understood under the law – a cancellation or discontinuance of coverage that has a retroactive effect, except to the extent attributable to a failure to pay timely premiums towards coverage.

Is the exception to the statutory ban on rescission limited to fraudulent or intentional misrepresentations about prior medical history? What about retroactive terminations of coverage in the "normal course of business"?

The statutory prohibition related to rescissions is not limited to rescissions based on fraudulent or intentional misrepresentations about prior medical history. An example in the Departments' interim final regulations on rescissions clarifies that some plan errors (such as mistakenly covering a part-time employee and providing coverage upon which the employee relies for some time) may be cancelled prospectively once identified, but not retroactively rescinded unless there was some fraud or intentional misrepresentation by the employee.

On the other hand, some plans and issuers have commented that some employers' human resource departments may reconcile lists of eligible individuals with their plan or issuer via data feed only once per month. If a plan covers only active employees (subject to the COBRA continuation 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 (subject to the COBRA continuation coverage provisions) and the plan is not notified of a divorce 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 of coverage. (Of course, 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.)

Preventive Health Services

Q8: Some of the recommendations and guidelines of the United States Preventive Services Task Force (USPTF), the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention (Advisory Committee) and the Health Resources and Services Administration (HRSA) do not definitively state the scope, setting, or frequency of the items or services to be covered. What should my plan do if an individual requests, for example, daily counseling for diet?

The interim final regulations regarding preventive health services provide that if a recommendation or guideline for a recommended preventive health service does not specify the frequency, method, treatment, or setting for the provision of that service, the plan or issuer can use reasonable medical management techniques (which generally limit or exclude benefits based on medical necessity or medical appropriateness using prior authorization requirements, concurrent review, or similar practices) to determine any coverage limitations under the plan. Thus, to the extent not specified in a recommendation or guideline, a plan or issuer may rely on the relevant evidence base and these established techniques to determine the frequency, method, treatment, or setting for the provision of a recommended preventive health service.

Clarification Relating to Policy Year and Effective Date of the Affordable Care Act for Individual Health Insurance Policies

Q9: Some States and issuers have interpreted the definition of a policy year in the interim final regulation on dependent coverage of children to age 26⁽⁴⁾ to mean that if an issuer establishes a policy year for the insured under an individual policy on a basis other than the effective date of coverage (such as a calendar year beginning January 1, 2012), then the provisions of the Affordable Care Act do not apply to those policies before the start of the policy year. Can compliance with the Affordable Care Act requirements for policies in the individual market sold on or after September 23, 2010 be effective on a date other than the date that coverage begins?

No. We understand that carriers in the health insurance individual market may designate a fixed policy year, but continue to issue policies throughout the year. For example, a carrier may designate a policy year of January 1 through December 31 for an individual policy under which coverage begins on October 1.

However, the statute and regulations contemplate implementation of the Affordable Care Act requirements at the beginning of the first new period of coverage that begins on or after September 23, 2010, whether this new coverage period is a full or shortened period of coverage. If a policy begins to cover an individual effective on a date that is on or after September 23, 2010, the initial policy year for that individual, for purposes of determining the effective date of the Affordable Care Act requirements, begins on the first date on which the coverage is effective. This initial period of coverage might be an abbreviated policy year. For example, it may run from October 1, 2010 through December 31, 2010, with a new calendar-based policy year beginning on January 1, 2011 (assuming the individual renews the policy), or from December 1, 2010 through June 30, 2011, with a new policy year beginning each July 1 (again, assuming the policy is renewed). It would be a "policy year" for purposes of the Affordable Care Act effective date if it is a new period of coverage, regardless of when (or whether) the first subsequent 12 month policy year begins.

If issuers, however, have relied in good faith on guidance or instructions from a state insurance regulator indicating that the provisions of the Affordable Care Act are not applicable until the beginning of the first full policy year of the individual coverage, then carriers will be afforded a reasonable period of time after the issuance of this guidance to come into compliance with the law. Nonetheless, subsequent to the issuance of this guidance, issuers may not rely in good faith on any contrary guidance or instruction issued by a state insurance regulator.

Footnotes

These FAQs do not address the change in issuer question that the Departments stated is under consideration in Q&A-6 of the FAQs issued on September 20, 2010.
The Departments intend to take additional steps in the future to promote wellness. Specifically, the Departments' interim final regulations for preventive care invited comments related to the development of guidelines and value-based insurance designs that foster higher-value choices on the part of consumers, while ensuring access to critical, evidence-based preventive services. Moreover, the Affordable Care Act (through Public Health Service Act section 2705) will give plans and issuers additional flexibility to reward participants and beneficiaries in group health plans for meeting standards related to a health factor.
HIPAA is the Health Insurance Portability and Accountability Act of 1996.
See 75 FR 27122, published May 13, 2010.

Part III

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Set out below are two Frequently Asked Questions (FAQs) regarding implementation of the market reform provisions of the Affordable Care Act. They have been prepared jointly by the Departments of Health and Human Services, Labor and the Treasury. Like the FAQs the Departments issued on September 20, 2010 and on October 8, 2010, these FAQs answer questions from stakeholders with a view to helping people understand the new law and benefit from it, as intended.

Exemption for Group Health Plans with Less than Two Current Employees

Q1: Do the HIPAA statutory exemptions in effect since 1997 for group health plans with "less than two participants who are current employees" apply to the Affordable Care Act's group market reforms?

Yes. The preamble to the interim final regulations on grandfathered plans¹ noted that statutory provisions in effect since 1997 exempting group health plans with "less than two participants who are current employees" from HIPAA also exempt such plans from the group market reform requirements of the Affordable Care Act. Accordingly, under the terms of these statutory provisions, group health plans that do not cover at least two employees who are current employees (such as plans in which only retirees participate) are exempt from the Affordable Care Act's market reform requirements.

Q2: I am an employer who sponsors a number of plans including one for both my retirees and individuals on long-term disability. Before the Affordable Care Act, we treated our plan covering retirees and those on long-term disability as exempt under HIPAA. Can we continue to treat that plan as exempt?

The Departments have not issued guidance on this specific issue. In order to fully analyze the issue, and balance the goal of ensuring that the Affordable Care Act’s market reforms and patient protections are provided to eligible enrollees of group health plans with the goal of preventing disruption of existing coverage, the Departments will be issuing a request for information (RFI) very soon. The RFI will solicit comments from employers and other stakeholders to inform future guidance. After reviewing the comments submitted, the Departments intend to publish guidance on this issue in 2011.

Until guidance is issued, the Departments will treat plans described above as satisfying the exemption from HIPAA and the Affordable Care Act’s group market reforms for plans with less than two participants who are current employees. To the extent future guidance on this issue is more restrictive with respect to the availability of the exemption than this interim relief, the guidance will be prospective, applying to plan years that begin some time after its issuance.

Pending such further guidance, a plan may adopt any or all of the HIPAA and Affordable Care Act market reform requirements without prejudice to its exemption. The Departments encourage such voluntary compliance.

Footnotes

See 75 FR 34539-34540, published June 17, 2010.

Part IV

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Set out below are three Frequently Asked Questions (FAQs) regarding implementation of the market reform provisions of the Affordable Care Act. They have been prepared jointly by the Departments of Health and Human Services, Labor and the Treasury (the Departments). Like the FAQs the Departments issued on September 20, 2010, October 8, 2010, and October 12, 2010, these FAQs answer questions from stakeholders with a view to helping people understand the new law and benefit from it, as intended.

Q1: The Departments' interim final grandfather regulations provide that, to maintain status as a grandfathered health plan, a group health plan or health insurance coverage must include a statement, in any plan materials provided to a participant or beneficiary describing the benefits provided under the plan or health insurance coverage, that the plan or coverage believes it is a grandfathered health plan. Must a grandfathered health plan provide the disclosure statement every time it sends out a communication, such as an EOB (explanation of benefits), to a participant or beneficiary? If not, how does a grandfathered health plan comply with this disclosure requirement?

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. 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 understand and make informed choices regarding health coverage.

Q2: If an individual health insurance policy that was in place on March 23, 2010 included a feature that allowed a policy holder to elect an option under which he or she would pay a reduced premium in exchange for higher cost sharing, could such an election be made after March 23 without affecting the policy's grandfather status even if the increase in cost sharing for the individual would exceed the limits under the grandfather rule on increases in cost sharing?

Yes. The cost-sharing level that would apply under this option would be grandfathered as part of the policy in place on March 23, 2010 even if it did not apply for the particular individual at that time. As long as the policy holder had that option available on March 23 under the policy, he or she could exercise the option after March 23 without affecting grandfather status, even if the result would be that the particular individual's cost-sharing would increase as a result of electing this option by an amount in excess of the grandfather rule limits.

Q3: An employer has maintained a plan since before enactment of the Affordable Care Act that reimburses expenses for special treatment and therapy of eligible employees' children with physical, mental, or developmental disabilities. The treatment or therapy is not covered by the employer's primary medical plan or plans. Reimbursable expenses may include expenses for special treatment or therapy from licensed clinics or practitioners, day or residential special care facilities, special education facilities for learning-disabled children, or camps offering medically oriented programs that are part of a child's continued treatment, or for special devices. The plan is operated separately from the employer's primary medical plans; employees who are otherwise eligible may participate in the plan without participating in those primary medical plans. The plan limits the total benefits for any eligible child to a specified lifetime dollar limit.

Would it be a reasonable good faith interpretation of the Affordable Care Act and the regulations thereunder for the plan sponsor to take the position that the plan does not violate the prohibition, under section 2711 of the Public Health Service Act (PHS Act) and the related interim final regulations, on imposing a lifetime dollar limit on "essential health benefits," as defined in section 1302(b) of the Affordable Care Act (the lifetime limit prohibition)?

Yes. In accordance with the preamble to the Departments' interim final regulations implementing PHS Act section 2711, for plan years beginning before the issuance of final 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." (Of course, the regulations may differ in their definition of "essential health benefits" from reasonable interpretations used before the regulations are issued.) Accordingly, in the case of plans described above, for such plan years: (i) the Departments will treat as a reasonable good faith interpretation of section 2711 of the PHS Act and the regulations thereunder the position that the imposition of the per-child lifetime dollar limit on benefits provided under such plans does not violate the lifetime limit prohibition, and (ii) the imposition by such plans of such a limit will not result in an enforcement action by the Departments against such plans under PHS Act section 2711.

Part V

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Set out below are additional Frequently Asked Questions (FAQs) regarding implementation of the market reform provisions of the Affordable Care Act, as well as FAQs regarding implementation of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). These FAQs have been prepared jointly by the Departments of Health and Human Services (HHS), Labor and the Treasury (the Departments). Like previously issued FAQs on September 20, 2010, October 8, 2010, October 12, 2010, and October 29, 2010, these FAQs answer questions from stakeholders to help people understand the new law and benefit from it, as intended.

The Departments anticipate issuing further responses to questions and issuing other guidance under the Affordable Care Act in the future. We hope these publications will be helpful by providing additional clarity and assistance.

Value-Based Insurance Design in Connection with Preventive Care Benefits

Section 2713 of the Public Health Service Act (PHS Act) generally requires group health plans and group and individual health insurance issuers that are not grandfathered health plans to provide coverage for recommended preventive services without cost sharing. A complete list of the current recommended preventive services is available at www.healthcare.gov/center/regulations/prevention.html.

The Departments will also develop guidelines to permit a group health plan or group or individual health insurance issuer to utilize value-based insurance designs. Generally speaking, value-based insurance designs (VBID) are health plan designs that provide incentives for enrollees to utilize higher-value and/or higher-quality services or venues of care. On or about the date of issuance of these FAQs, the Departments will be issuing a Request for Information on ways the Departments can encourage VBID in the context of preventive care services.

Q1: My group health plan does not impose a copayment for colorectal cancer preventive services when performed in an in-network ambulatory surgery center. In contrast, the same preventive service provided at an in-network outpatient hospital setting would generally require a $250 copayment. Is this permissible under PHS Act section 2713?

Yes, this plan design is permissible. PHS Act section 2713 and its implementing regulations allow plans to use reasonable medical management techniques to control costs. The regulations the Departments issued to implement the preventive health benefits in the Affordable Care Act recognized the important role that VBID can play in promoting the use of appropriate, high value preventive services and providers. Plans may use reasonable medical management techniques to steer patients towards a particular high-value setting such as an ambulatory care setting for providing preventive care services, provided the plan accommodates any individuals for whom it would be medically inappropriate to have the preventive service provided in the ambulatory setting (as determined by the attending provider) by having a mechanism for waiving the otherwise applicable copayment for the preventive services provided in a hospital.

Automatic Enrollment in Health Plans

Q2: The Affordable Care Act amended the Fair Labor Standards Act (FLSA) by adding a new section 18A, requiring employers with more than 200 full-time employees to automatically enroll new full-time employees in the employer's health benefits plans and continue enrollment of current employees. What Agency is responsible for guidance under this new FLSA provision?

The Secretary of Labor has delegated responsibility for FLSA section 18A rulemaking, and for regulations under new section 18B of the FLSA, Notice to Employees of Coverage Options, to the Employee Benefits Security Administration (EBSA) within the Department of Labor. EBSA and the Department of the Treasury will coordinate to develop the rules that will apply in determining full-time employee status for purposes of the amendments to the FLSA and the rulemaking by the Treasury Department under the Internal Revenue Code to develop the rules that will apply in determining full-time employee status for purposes of the amendments made by the Affordable Care Act to the Internal Revenue Code.

Q3: When do employers have to comply with the new automatic enrollment requirements in section 18A of the FLSA?

Section 18A provides that employer compliance with the automatic enrollment provisions of that section shall be carried out "[i]n accordance with regulations promulgated by the Secretary [of Labor]." Accordingly, it is the view of the Department of Labor that, until such regulations are issued, employers are not required to comply with section 18A. The Department of Labor expects to work with stakeholders to ensure that it has the necessary information and data it needs to develop regulations in this area that take into account the practices employers currently use for auto-enrollment and to solicit the views and practices of a broad range of stakeholders, including employers, workers, and their families. The Department of Labor intends to complete this rulemaking by 2014.

Disclosure under PHS Act section 2715(d)(4)

Q4: When are group health plans and health insurance issuers required to comply with the notice requirement in PHS Act section 2715 (d)(4), which generally requires a 60-day prior notice for material modifications to the plan or coverage?

PHS Act section 2715 as added by the Affordable Care Act generally provides, among other things, that not later than 12 months after the date of enactment of the Affordable Care Act, the Departments must develop standards for use by group health plans and health insurance issuers in compiling and providing a summary of benefits and coverage explanation that accurately describes the benefits and coverage under the applicable plan or coverage and, not later than 24 months after the date of enactment, plans and issuers must begin to provide the summary pursuant to the standards.

PHS Act section 2715(d)(4) generally provides that if a group health plan or health insurance issuer makes any material modification in any of the terms of the plan or coverage involved (as defined for purposes of section 102 of the Employee Retirement Income Security Act (ERISA)) that is not reflected in the most recently provided summary of benefits and coverage, the plan or issuer must provide notice of such modification to enrollees not later than 60 days prior to the date on which such modification will become effective.

Accordingly, it is the view of the Departments that group health plans and health insurance issuers are not required to comply with the 60-day prior notice requirement for material modifications in PHS Act section 2715 (d)(4) until plans and issuers are required to provide the summary of benefits and coverage explanation pursuant to the standards issued by the Departments.⁽¹⁾ The Departments have not yet issued the standards.

Dependent Coverage of Children to Age 26

Q5: My group health plan 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. Is this permissible?

Yes. The Departments' regulations implementing PHS Act section 2714 provide that the terms of a group health plan or health insurance coverage providing dependent coverage of children cannot vary based on age (except for children who are age 26 or older). While this 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 case, the copayments charged to dependent children are the same as those charged to employees and spouses. Accordingly, the Departments will not consider the arrangement described in this question (including waiver, for individuals under age 19, of the generally applicable copayment) to violate PHS Act section 2714 or its implementing regulations.

Preexisting Condition Exclusions for Children in the Individual Market

Q6: Some States have expressed an interest in permitting issuers to screen applicants for eligibility for alternative coverage options before offering a child-only policy. Is this allowed?

Yes, under certain circumstances, issuers may screen applicants for eligibility for alternative coverage options before offering a child-only policy, provided this practice is permitted under State law. Screening is limited to circumstances in which all child-only applicants, regardless of health status, undergo the same screening process, and 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.

Screening may not be limited to programs targeted to individuals with a pre-existing condition, such as the state high risk pool or Pre-existing Condition Insurance Plan (PCIP). Note that Medicaid policy, under 42 U.S.C.A. § 1396a (25)(G), prohibits participating States from allowing health 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 pre-existing condition. Additionally, the screening process may not be applied to offers of dependent coverage for children given the new Affordable Care Act requirement of offering coverage to dependents up to age 26.

States are encouraged, subject to State law, 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. States are also 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.

Finally, nothing in this FAQ should be construed to relieve the issuer of its obligation to enroll a child applicant in coverage.

Grandfathered Health Plans

Q7: My plan terms include out-of-pocket spending limits that are based on a formula (a fixed percentage of an employee's prior year compensation). If the formula stays the same, but a change in earnings results in a change to the out-of-pocket limits such that the change exceeds the thresholds allowed under paragraph (g)(1) of the interim final regulations relating to grandfathered health plans, will my plan relinquish grandfather status?

No. The Departments have determined that 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.

The Mental Health Parity and Addiction Equity Act of 2008

The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) supplemented the Mental Health Parity Act of 1996 (MHPA). Generally, MHPAEA requires that the financial requirements and treatment limitations imposed on mental health and substance use disorder benefits cannot be more restrictive than the predominant financial requirements and treatment limitations that apply to substantially all medical and surgical benefits.⁽²⁾ For group health plans, MHPAEA is effective for plan years beginning after October 3, 2009. On February 2, 2010, the Departments published interim final rules on MHPAEA, which apply for plan years beginning on or after July 1, 2010.⁽³⁾

Q8: After the amendments made by the Affordable Care Act, are small employers still exempt from the MHPAEA requirements? How is "small employer" defined?

Yes, small employers are still exempt. Although there were changes to the definition of "small employer" for other purposes under the Affordable Care Act, ERISA and the Code continue to define a small employer as one that has 50 or fewer employees. Accordingly, for group health plans and health insurance issuers subject to ERISA and the Code, the Departments will continue to treat group health plans of employers with 50 or fewer employees as exempt from the MHPAEA requirements under the small employer exemption, regardless of any State insurance law definition of small employer. For nonfederal governmental plans, the PHS Act was amended by the Affordable Care Act to define a small employer as one that has 100 or fewer employees.

Q9: I am an in-network health care provider and one of my patients is having trouble getting benefits paid for a mental health condition or substance use disorder. Am I entitled to receive a copy of the criteria for medical necessity determinations made by the patient's plan or health insurance coverage?

Yes. MHPAEA and its implementing regulations state that the criteria for medical necessity determinations made under a plan or health insurance coverage with respect to mental health or substance use disorder benefits must be made available by the plan administrator or health insurance issuer to any current or potential participant, beneficiary, or contracting provider upon request.

Q10: I was denied benefits for mental health treatment by my plan because the plan determined that the treatment was not medically necessary. I requested and received a copy of the criteria for medical necessity determinations for mental health and substance use disorder treatment, and the reason for denial. I think my plan is applying medical necessity standards more strictly to benefits for mental health and substance use disorder treatment than for medical/surgical benefits. How can I obtain information on the medical necessity criteria used for medical/surgical benefits?

Under ERISA, documents with information on the medical necessity criteria for both medical/surgical benefits and mental health/substance use disorder benefits are plan documents, and copies of plan documents must be furnished within 30 days of your request. See ERISA regulations at 29 CFR 2520.104b-1. Additionally, if a provider or other individual is acting as a patient's authorized representative in accordance with the Department of Labor's claims procedure regulations at 29 CFR 2560.503-1, the provider or other authorized representative may request these documents. If your plan is not subject to ERISA (for example, a plan maintained by a State or local government), you should check with your plan administrator.

Q11: MHPAEA contains an increased cost exemption. How does a plan claim this exemption?

MHPAEA contains an increased cost exemption that is available for plans that make changes to comply with the law and incur an increased cost of at least two percent in the first year that MHPAEA applies to the plan (the first plan year beginning after October 3, 2009) or at least one percent in any subsequent plan year (generally, plan years beginning after October 3, 2010). If such a cost is incurred, the plan is exempt for the plan year following the year the cost was incurred. Thus, the exemption lasts one year. After that, the plan is required to comply again; however, if the plan incurs an increased cost of at least one percent in that plan year, the plan could claim the exemption for the following plan year.

The Departments' interim final regulations implementing MHPAEA did not provide guidance for implementing the increased cost exemption. Accordingly, during an interim enforcement safe harbor until future regulatory guidance is effective, a plan that has incurred an increased cost of two percent during its first year of compliance can obtain an exemption for the second plan year by following the exemption procedures described in the Departments' 1997 MHPA regulations (62 FR 66932, December 22, 1997)⁽⁴⁾, except that, as required under MHPAEA, for the first year of compliance the applicable percentage of increased cost is two percent and the exemption lasts only one year. Calculations of increased costs due to MHPAEA should include increases in a plan's share of cost sharing. Moreover, any non-recurring administrative costs (such as adjustments to computer software) attributable to complying with MHPAEA must be appropriately amortized. Plans applying for an exemption must demonstrate that increases in cost are attributable directly to implementation of MHPAEA and not otherwise to occurring trends in utilization and prices, a random claims experience that is unlikely to persist, or seasonal variation typically experienced in claims submission and payment patterns.

Nondiscrimination Based on a Health Factor and Wellness Programs

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) amended ERISA, the Code, and the PHS Act to add, among other things, provisions prohibiting discrimination in eligibility, benefits, or premiums based on a health factor. An exception to the general rule is provided for certain wellness programs that discriminate in benefits and/or premiums based on a health factor. In 2006, the Departments published final regulations implementing these nondiscrimination and wellness provisions (HIPAA nondiscrimination regulations).⁽⁵⁾

The final regulations generally divide wellness programs into two categories. First, programs that do not require an individual to meet a standard related to a health factor in order to obtain a reward are not considered to discriminate under the HIPAA nondiscrimination regulations and therefore, are permissible without conditions under such rules ("participatory wellness programs"). Examples in the regulations include a fitness center reimbursement program, a diagnostic testing program that does not base rewards on test outcomes, a program that waives cost-sharing for prenatal or well-baby visits, a program that reimburses employees for the cost of smoking cessation aids regardless of whether the employee quits smoking, and a program that provides rewards for attending health education seminars.

The second category of wellness programs under the final rules consists of programs that require individuals to satisfy a standard related to a health factor in order to obtain a reward ("health-contingent wellness programs"). Examples include a program that requires an individual to obtain or maintain a certain health outcome in order to obtain a reward (such as being a non-smoker, attaining certain results on biometric screenings, or exercising a certain amount). Although such a premium or benefit reward may discriminate based on a health factor, an exception outlined in paragraph (f)(2) of the final rules permits such programs if the program provides the following safeguards:

The total reward for such wellness programs offered by a plan sponsor is limited to 20 percent of the total cost of employee-only coverage under the plan. (However, if any class of dependents can participate in the program, the limit on the reward is modified so that the 20 percent is calculated with respect to the total cost of coverage in which the employee and any dependents are enrolled.)
The program must be reasonably designed to promote health or prevent disease. For this purpose, it must: have a reasonable chance of improving health or preventing disease, not be overly burdensome, not be a subterfuge for discriminating based on a health factor, and not be highly suspect in method.
The program must give eligible individuals an opportunity to qualify for the reward at least once per year.
The reward must be available to all similarly situated individuals. For this purpose, a reasonable alternative standard (or waiver of the original standard) must be made available to individuals for whom it is unreasonably difficult due to a medical condition to satisfy the original standard during that period (or for whom a health factor makes it unreasonably difficult or medically inadvisable to try to satisfy the original standard).
In all plan materials describing the terms of the program, the availability of a reasonable alternative standard (or waiver of the original standard) is disclosed.

The Affordable Care Act added a new section 2705 to the PHS Act regarding nondiscrimination and wellness. Section 715(a)(1) of ERISA and section 9815(a)(1) of the Code incorporate section 2705 of the PHS Act by reference. PHS Act section 2705 largely incorporates the provisions of the Departments' joint final regulations with a few clarifications and changes the maximum reward that can be provided under a health-contingent wellness program from 20 percent to 30 percent. This change is effective in 2014.

The Departments intend to propose regulations that use existing regulatory authority under HIPAA to raise the percentage for the maximum reward that can be provided under a health-contingent wellness program to 30 percent before the year 2014. The Departments are also considering what accompanying consumer protections may be needed to prevent the program from being used as a subterfuge for discrimination based on health status. Additionally, the following FAQs provide answers to frequently-asked questions regarding wellness programs.

Q12: Are all employment-based wellness programs required to check for compliance with the HIPAA nondiscrimination provisions?

No. Many employers offer a wide range of programs to promote health and prevent disease. For example, some employers may choose to provide or subsidize healthier food choices in the employee cafeteria, provide pedometers to encourage employee walking and exercise, pay for gym memberships, or ban smoking on employer facilities and campuses. A wellness program is subject to the HIPAA nondiscrimination rules only if it is, or is part of, a group health plan. If an employer operates a wellness program as an employment policy separate from its group health plan(s), the program may be covered by other Federal or State nondiscrimination laws, but it is not subject to the HIPAA nondiscrimination regulations.

Q13: My group health plan gives an annual premium discount of 50 percent of the cost of employee-only coverage to participants who adhere to a wellness program which consists of attending a monthly health seminar. Does this reward violate the HIPAA nondiscrimination regulations?

No. This wellness program is not based on an individual satisfying a standard that is related to a health factor, so it does not have to satisfy the five criteria (set forth above) in the HIPAA nondiscrimination regulations. (The rule limiting the amount of the reward for health-contingent wellness programs to 20 percent of the cost of coverage applies only to programs that require satisfaction of a standard related to a health factor in order to qualify for the reward.)

Q14: My group health plan gives an annual premium discount of 20 percent of the cost of employee-only coverage to participants who adhere to a wellness program. The wellness program consists of giving an annual cholesterol exam to participants; participants who achieve a cholesterol count of 200 or lower receive the annual premium discount. The plan also provides that if it is unreasonably difficult or medically inadvisable to achieve the targeted cholesterol count within a 60-day period, the plan will make available a reasonable alternative standard that takes the relevant medical condition into account. Does this wellness program violate the HIPAA nondiscrimination regulations?

No. The wellness program is based on a health factor (achieving a cholesterol count of 200 or lower) and is subject to the HIPAA nondiscrimination regulations, including the five criteria described in paragraph (f)(2) of the regulations. In general, among other things, a wellness program subject to the HIPAA nondiscrimination regulations must be available to all similarly situated individuals, provide a reasonable alternative standard, and the reward must be limited to no more than 20 percent of the total cost of coverage. The wellness program described above satisfies the requirement of being available to all similarly situated individuals because the plan provides a reasonable alternative standard and the premium discount is limited to 20 percent of the cost of employee-only coverage.

Q15: My group health plan offers two different wellness programs, both of which are offered to all full-time employees enrolled in the plan. The first program requires participants to take a cholesterol test and provides a 20 percent premium discount for every individual with cholesterol counts under 200. The second program reimburses participants or the cost of a monthly membership to a fitness center. If I participate in both wellness programs and receive both rewards (the 20 percent premium discount and the reimbursement for the cost of a fitness center membership), is my plan violating the HIPAA nondiscrimination regulations?

No. In this scenario, the first program is subject to the requirements of the HIPAA nondiscrimination regulations because the premium discount reward is based on an individual satisfying a standard that is related to a health factor (having a cholesterol count under 200). Therefore, the first program must meet the five criteria in the regulations, including the 20 percent limit on the amount of the reward. The second program is not based on an individual satisfying a standard that is related to a health factor, so it does not have to satisfy the five criteria in the regulations.

Furthermore, it is permissible to offer both programs at the same time because the rule limiting the amount of the reward for health-contingent wellness programs to 20 percent of the cost of coverage only applies to programs that require satisfaction of a standard related to a health factor.

As previously noted, the Departments intend to propose regulations that use existing regulatory authority under HIPAA to raise the percentage for the maximum reward that can be provided under a health-contingent wellness program to 30 percent before the year 2014 and are also considering what accompanying consumer protections may be needed to prevent the program from being used as a subterfuge for discrimination based on health status. More guidance is expected early next year.

Footnotes

An ERISA-covered plan's responsibility to provide a summary of material modification or a summary of material reduction in covered services or benefits under ERISA § 104(b) and 29 CFR 2520.104b-3 remains unaffected.
MHPAEA does not mandate plans to cover mental health and substance use disorder benefits. It applies only if a plan chooses to provide those benefits.
75 FR 5410.
Among other things, the 1997 regulations require a plan or issuer to report to the Federal government and give notice to participants and beneficiaries that the plan or issuer is claiming the exemption.
See 71 FR 75014, December 13, 2006.

Part VI

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Set out below are additional Frequently Asked Questions (FAQs) regarding implementation of the market reform provisions of the Affordable Care Act. These FAQs have been prepared jointly by the Departments of Health and Human Services (HHS), Labor and the Treasury (the Departments). Like previously issued FAQs (available at http://www.dol.gov/ebsa/healthreform/), these FAQs answer questions from stakeholders to help people understand the new law and benefit from it, as intended.

Grandfathered Health Plans

Q1: What is the scope of the anti-abuse rule in paragraph (b)(2) of the interim final regulations relating to grandfather status? In particular, what is a "bona fide employment-based reason" for employees enrolled in a benefit package that is being eliminated to be transferred into another benefit package?

The interim final regulations relating to status as a grandfathered health plan generally state that transferring employees from one grandfathered plan or benefit package (transferor plan) to another (transferee plan) will cause the transferee plan to relinquish grandfather status if amending the transferor plan to replicate the terms of the transferee plan would have caused the transferor plan to relinquish grandfather status. However, the interim final regulations also provide that this rule applies only if there was no bona fide employment-based reason to transfer the employees.

For purposes of paragraph (b)(2) of the interim final regulations relating to status as a grandfathered health plan, the Departments interpret the term "bona fide employment-based reason" to embrace a variety of circumstances. These circumstances (under which a transfer would not cause cessation of grandfather status) include, but are not limited to, any of the following:

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 (for example, because the employer no longer satisfies the issuer's minimum participation requirement);
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.

The foregoing is not intended to be an exhaustive list of circumstances that will be deemed to satisfy the bona fide employment-based reason condition. There may be many other circumstances in which a benefit package is considered to be eliminated for a bona fide employment-based reason.

Q2: My plan bases the level of cost sharing for brand-name prescription drugs on the classification of the drugs under the plan as having or not having generic alternatives. The classification of a drug that had no generic alternative changes because a generic alternative becomes available and is added to the formulary, with a resulting increase in the cost-sharing level for the brand-name drug. Does that increase cause my plan to relinquish its grandfather status?

No. For example, if, on March 23, 2010, the terms of the plan included prescription drug benefits with different cost sharing divided into tiers as follows:

Tier 1 includes generic drugs only;
Tier 2 includes brand name drugs with no generic available;
Tier 3 includes brand name drugs with a generic available in Tier 1; and
Tier 4 includes IV chemotherapy drugs.

A drug was previously classified in Tier 2 as a brand name drug with no generic available. However, a generic alternative for the drug has just been released and is added to the formulary. Since the generic is now available, the plan moves the brand name drug into Tier 3 and adds the generic to Tier 1. This movement of the brand name drug into a higher cost-sharing tier does not cause the plan to relinquish grandfather status.

Q3: A previous FAQ addressed the interaction of value-based insurance design (VBID) and the no cost-sharing preventive care services requirements. See http://www.dol.gov/ebsa/faqs/faq-aca5.html . In that example, a group health plan did not impose a copayment for colorectal cancer preventive services when performed in an in-network ambulatory surgery center. In contrast, the same preventive service provided at an in-network outpatient hospital setting generally required a $250 copayment, although the copayment was waived for individuals for whom it would be medically inappropriate to have the preventive service provided in the ambulatory setting. The FAQ indicated that this VBID did not cause the plan to fail to comply with the no cost-sharing preventive care requirements.

A question about a different situation has been raised. Under a group health plan, similar preventive services are available both at an in-network ambulatory surgery center and at an in-network outpatient hospital setting, but currently no copayment is imposed for these services in either setting. This has been the case since March 23, 2010. If this plan wished to adopt the VBID approach described in the example above by imposing a $250 copayment for these preventive services only when performed in the in-network outpatient hospital setting (i.e., not when performed in an in-network ambulatory surgery center), and with the same waiver of the copayment for any individuals for whom it would be medically inappropriate to have these preventive services provided in the ambulatory setting, would implementation of that new design now cause the plan to relinquish grandfather status?

No. This increase in the copayment for these preventive services solely in the in-network outpatient hospital setting (subject to the waiver arrangement described above) without any change in the copayment in the in-network ambulatory surgery center setting would not be considered to exceed the thresholds described in paragraph (g)(1) of the interim final regulations on grandfather status and thus would not cause the plan to relinquish grandfather status.

The Departments are seeking further information on VBID and wellness programs and are planning to address issues relating to those designs and programs in future regulations. Comments from plan sponsors have expressed an interest in being able to retain grandfather status notwithstanding certain changes in plan terms that are intended to implement VBID and wellness programs. As the regulatory process progresses, the Departments will be giving close attention to these comments, and further guidance may be issued addressing other circumstances in which plan changes implementing those designs and programs may be made without relinquishing grandfather status.

Q4: A plan operating on a calendar plan year is considering an amendment to plan terms that will exceed the thresholds described in paragraph (g)(1) of the interim final regulations and cause it to relinquish grandfather status. If the plan sponsor decides to adopt this amendment on July 1, 2011, and the change becomes effective for the plan year beginning on January 1, 2012, at what point in time does the plan relinquish grandfather status?

A plan or coverage will cease to be a grandfathered health plan when an amendment to plan terms, which exceeds the thresholds described in paragraph (g)(1) of the interim final regulations, becomes effective – regardless of when the amendment is adopted. Therefore, in this example, the plan would cease to be a grandfathered health plan on January 1, 2012, the first day of the first plan year for which the change is effective.

Q5: A plan operating on a calendar plan year is considering an amendment to plan terms that will cause it to relinquish grandfather status, but wants the amendment to become effective before the first day of the next plan year. If the plan sponsor decides to make this amendment effective on July 1, 2011, does the plan relinquish grandfather status in the middle of the plan year?

Yes. A plan or coverage will cease to be a grandfathered health plan when a plan amendment becomes effective. Therefore, if a plan sponsor chooses to make an amendment to plan terms effective in the middle of a plan year, the plan will cease to be a grandfathered health plan at that time.

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 be made effective the first day of a plan year that begins after the change is adopted.

Q6: A plan covers both retirees and active employees and is subject to the market reform requirements of the Affordable Care Act. For retirees, 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. As the cost of coverage increases over time, how is it determined whether the employer's contribution rate has decreased for purposes of maintaining grandfather status?

In this example, the employer makes contributions based on a formula. 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 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.

Part VII

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Set out below are additional Frequently Asked Questions (FAQs) regarding implementation of the market reform provisions of the Affordable Care Act, as well as FAQs regarding implementation of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). These FAQs have been prepared jointly by the Departments of Health and Human Services (HHS), Labor and the Treasury (the Departments). Like previously issued FAQs (available at www.dol.gov/ebsa/healthreform/), these FAQs answer questions from stakeholders to help people understand the new law and benefit from it, as intended.

The Departments anticipate issuing further responses to questions and issuing other guidance in the future. We hope these publications will provide additional clarity and assistance.

Summary of Benefits and Coverage

Q1: On August 22, 2011, the Departments issued proposed regulations and proposed templates in connection with implementation of the Summary of Benefits and Coverage and Uniform Glossary requirements of PHS Act § 2715. An applicability date “beginning March 23, 2012” was proposed. At the same time, the Departments invited comments generally, as well as on a range of discrete issues, including the timing of the application of the SBC requirement.

My plan anticipates that preparation of the summary of benefits and coverage will take several months and require significant resources. In light of the March 23, 2012 proposed applicability date, we are considering moving forward with implementation of the Summary of Benefits and Coverage requirements, using the proposed rules and templates, but are concerned that the final rules and templates will differ from the proposed rules and templates, which would prompt additional implementation costs. What is the timeline for the issuance of future guidance on the summary of benefits and coverage? What actions should my plan be taking now, if any?

The Departments received many comments on the proposed regulations and templates and intend to issue, as soon as possible, final regulations that take into account these comments and other stakeholder feedback.

PHS Act section 2715 provides that group health plans and health insurance issuers shall provide the Summary of Benefits and Coverage and Uniform Glossary pursuant to standards developed by the Departments. Accordingly, until final regulations are issued and applicable, plans and issuers are not required to comply with PHS Act section 2715.

It is anticipated that the Departments’ final regulations, once issued, will include an applicability date that gives group health plans and health insurance issuers sufficient time to comply.

The Mental Health Parity and Addiction Equity Act of 2008

The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) supplemented the Mental Health Parity Act of 1996 (MHPA). Generally, MHPAEA specifies that the financial requirements and treatment limitations imposed on mental health and substance use disorder benefits cannot be more restrictive than the predominant financial requirements and treatment limitations that apply to substantially all medical and surgical benefits.⁽¹⁾ MHPAEA also prohibits separate financial requirements or treatment limitations that are applicable only to mental health or substance use disorder benefits. On February 2, 2010, the Departments published interim final rules implementing MHPAEA.⁽²⁾ Previously-issued FAQ guidance was jointly prepared by the Departments of Health and Human Services (HHS), Labor and the Treasury (the Departments) and published on June 30, 2010 and December 22, 2010.

Under MHPAEA and the Departments’ interim final rules, a group health plan or group health insurance issuer generally cannot impose a financial requirement (such as a copayment or coinsurance) or a quantitative treatment limitation (such as a limit on the number of outpatient visits or inpatient days covered) on mental health or substance use disorder benefits in any of 6 classifications⁽³⁾ that is more restrictive than the financial requirements or quantitative treatment limitations that apply to at least 2/3 of medical/surgical benefits in the same classification. Thus, if a plan generally applies a $25 copayment to at least 2/3 of outpatient, in-network, medical/surgical benefits, a higher copayment could not be imposed on outpatient, in-network mental health or substance use disorder benefits.

In addition to financial requirements and quantitative treatment limitations, plans and issuers often impose nonquantitative treatment limitations, such as:

Medical management standards limiting or excluding benefits based on medical necessity or medical appropriateness, or based on whether a treatment is experimental or investigative;
Formulary design for prescription drugs;
Standards for provider admission to participate in a network, including reimbursement rates;
Plan methods used to determine usual, customary, and reasonable fee charges;
Refusal to pay for higher-cost therapies until it can be shown that a lower-cost therapy is not effective (also known as fail-first policies or step therapy protocols); and
Exclusions based on failure to complete a course of treatment.

The parity standard for nonquantitative treatment limitations does not require applying a simple arithmetic test to compare the treatment of mental health or substance use disorder benefits to the treatment of medical/surgical benefits. The Departments’ interim final rules provide that, under the terms of the plan as written and in practice, any processes, strategies, evidentiary standards, or other factors used in applying the nonquantitative treatment limitation with respect to mental health or substance use disorder benefits must be comparable to, and applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in applying the limitation with respect to medical/surgical benefits, except to the extent that recognized clinically appropriate standards of care may permit a difference.

The following FAQs answer questions from stakeholders regarding nonquantitative treatment limitations, and one other common question, to help people understand the law and benefit from it, as intended. In addition to publishing these clarifying FAQs, the Departments will continue to investigate complaints by providers, consumers, and others and will take enforcement action for violations to ensure compliance with current law.

Q2: For all mental health and substance use disorder benefits, my group health plan requires prior authorization from the plan’s utilization reviewer that a treatment is medically necessary, but the plan does not require such prior authorization for any medical/surgical benefits. Is this permissible?

No. The plan is applying a nonquantitative treatment limitation to mental health and substance use disorder benefits that is not applied to medical/surgical benefits. This violates MHPAEA’s prohibition on separate treatment limitations that are applicable only to mental health or substance use disorder benefits.

Q3: My group health plan requires prior authorization from the plan’s utilization reviewer that a treatment is medically necessary for all inpatient medical/surgical benefits and for all inpatient mental health and substance use disorder benefits. In practice, inpatient benefits for medical/surgical conditions are routinely approved for seven days, after which a treatment plan must be submitted by the patient’s attending provider and approved by the plan. On the other hand, for inpatient mental health and substance use disorder benefits, routine approval is given for only one day, after which a treatment plan must be submitted by the patient’s attending provider and approved by the plan. Is this permissible?

No. The plan is applying a stricter nonquantitative treatment limitation in practice to mental health and substance use disorder benefits than is applied to medical/surgical benefits. While some differences in prior authorization practices with respect to individual conditions or treatments might be permissible based on recognized clinically appropriate standards of care, the interim final regulations do not permit a plan to apply stricter nonquantitative treatment limitations to all benefits for mental health or substance use disorders than those applied to all medical/surgical benefits. The application of nonquantitative treatment limitations -- both with respect to the plan’s benefits and its care management practices -- must comply with the nonquantitative treatment limitation rules.

Q4: My group health plan considers a wide array of factors in designing medical management techniques for both mental health/substance use disorder benefits and medical/surgical benefits, such as cost of treatment; high cost growth; variability in cost and quality; elasticity of demand; provider discretion in determining diagnosis, or type or length of treatment; clinical efficacy of any proposed treatment or service; licensing and accreditation of providers; and claim types with a high percentage of fraud. Based on application of these factors in a comparable fashion, prior authorization is required for some (but not all) mental health and substance use disorder benefits, as well as for some medical/surgical benefits, but not for others.

For example, under my plan, prior authorization is required for: outpatient surgery; speech, occupational, physical, cognitive and behavioral therapy extending for more than six months; durable medical equipment; diagnostic imaging; skilled nursing visits; home infusion therapy; coordinated home care; pain management; high-risk prenatal care; delivery by cesarean section; mastectomy; prostate cancer treatment; narcotics prescribed for more than seven days; and all inpatient services beyond 30 days. The evidence considered in developing its medical management techniques includes consideration of a wide array of recognized medical literature and professional standards and protocols (including comparative effectiveness studies and clinical trials). This evidence and how it was used to develop these medical management techniques is also well documented.

Has my plan complied with the nonquantitative treatment limitation rules?

Yes. It appears that, under the terms of the plan as written and in practice, the processes, strategies, evidentiary standards, and other factors considered by the plan in implementing its prior authorization requirement with respect to mental health and substance use disorder benefits are comparable to, and applied no more stringently than, those applied with respect to medical/surgical benefits.

Q5: I am an employer considering several health insurance policy options. One health insurance policy requires prior authorization for all outpatient mental health benefits but only a few types of outpatient medical/surgical benefits (outpatient surgery; speech, occupational and physical therapy; and skilled home nursing visits.) Is this permissible?

While some differences in plan requirements for prior authorization might be permissible based on recognized clinically appropriate standards of care, it is unlikely that the processes, strategies, evidentiary standards, and other factors considered by the plan in determining that those three (and only those three) outpatient medical/surgical benefits require prior authorization would also result in all outpatient mental health and substance use disorder outpatient benefits needing prior authorization.

Q6: A plan applies concurrent review to inpatient care where there are high levels of variation in length of stay (as measured by a coefficient of variation exceeding 0.8). In practice, the application of this standard affects 60 percent of mental health conditions and substance use disorder conditions, but only 30 percent of medical/surgical conditions. Is this permissible?

Yes. The evidentiary standard used by the plan is applied no more stringently for mental health and substance use disorder benefits than for medical/surgical benefits, even though it results in an overall difference in the application of concurrent review for mental health conditions or substance use disorders than for medical/surgical conditions.

Q7: Is my group health plan always limited in the amount that it can charge for all mental health/substance use disorder providers to the same rate as medical/surgical generalists?

No. The standard for determining the maximum copayment that can be applied to mental health/substance use disorder benefits is determined by the predominant copayment that applies to substantially all medical/surgical benefits within a classification. If the copayment that meets this standard is the one charged for a medical/surgical specialist, that copayment can be charged for all mental health/substance use disorder benefits within that classification. On the other hand, if the copayment that meets this standard is the one charged for a medical/surgical generalist, then that is the copayment that can be charged to all mental health/substance use disorder benefits within that classification.

Footnotes

MHPAEA does not require plans to cover mental health and substance use disorder benefits. It applies only if a plan chooses to provide those benefits.
75 FR 5410.
The six classifications of benefits defined in the interim final rules are: (1) inpatient, in-network; (2) inpatient, out-of-network; (3) outpatient, in-network; (4) outpatient, out-of-network; (5) emergency care; and (6) prescription drugs.

Part VIII

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Set out below are additional Frequently Asked Questions (FAQs) regarding implementation of the summary of benefits and coverage (SBC) provisions of the Affordable Care Act. These FAQs have been prepared jointly by the Departments of Labor, Health and Human Services (HHS), and the Treasury (the Departments). Like previously issued FAQs (available at http://www.dol.gov/ebsa/healthreform/ and http://cciio.cms.gov/resources/factsheets/), these FAQs answer questions from stakeholders to help people understand the new law and benefit from it, as intended.

Summary of Benefits and Coverage (SBC)

On February 14, 2012, the Departments published the final rules regarding the SBC.⁽¹⁾ These FAQs aim to answer some of the questions that have been raised to date. We intend to release additional FAQs. The Administration is committed to promoting operational efficiencies and clarifying the final regulations to ensure successful implementation.

Q1: When must plans and issuers begin providing the SBC?

For group health plan coverage, the regulations provide that, for disclosures with respect to participants and beneficiaries who enroll or re-enroll through an open enrollment period (including late enrollees and re-enrollees), the SBC must be provided beginning on the first day of the first open enrollment period that begins on or after September 23, 2012. For disclosures with respect to participants and beneficiaries who enroll in coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), the SBC must be provided beginning on the first day of the first plan year that begins on or after September 23, 2012.

For disclosures from issuers to group health plans, and with respect to individual market coverage, the SBC must be provided beginning September 23, 2012.

Q2: What is the Departments' basic approach to implementation of the SBC requirement during the first year of applicability?

The Departments' basic approach to ACA implementation, as stated in a previous FAQ (see http://www.dol.gov/ebsa/faqs/faq-aca.html), is: "[to work] together with employers, issuers, States, providers and other stakeholders to help them come into compliance with the new law and [to work] with families and individuals to help them understand the new law and benefit from it, as intended. Compliance assistance is a high priority for the Departments. Our approach to implementation is and will continue to be marked by an emphasis on assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law. This approach includes, where appropriate, transition provisions, grace periods, safe harbors, and other policies to ensure that the new provisions take effect smoothly, minimizing any disruption to existing plans and practices."

In addition to the general approach to implementation, in the instructions for completing the SBC, we stated: "To the extent a plan's terms do not reasonably correspond to these instructions, the template should be completed in a manner that is as consistent with the instructions as possible, while still accurately reflecting the plan's terms. This may occur, for example, if a plan provides a different structure for provider network tiers or drug tiers than is represented in the SBC template and these instructions, if a plan provides different benefits based on facility type (such as hospital inpatient versus non-hospital inpatient), in a case where a plan is denoting the effects of a related health flexible spending arrangement or a health reimbursement arrangement, or if a plan provides different cost sharing based on participation in a wellness program."

Consistent with this guidance, during this first year of applicability, the Departments will not impose penalties on plans and issuers that are working diligently and in good faith to provide the required SBC content in an appearance that is consistent with the final regulations. The Departments intend to work with stakeholders over time to achieve maximum uniformity for consumers and certainty for the regulated community.

Q3: Are plans and issuers required to provide a separate SBC for each coverage tier (e.g., self-only coverage, employee-plus-one coverage, family coverage) within a benefit package?

No, plans and issuers may combine information for different coverage tiers in one SBC, provided the appearance is understandable. In such circumstances, the coverage examples should be completed using the cost sharing (e.g., deductible and out-of-pocket limits) for the self-only coverage tier (also sometimes referred to as the individual coverage tier). In addition, the coverage examples should note this assumption.

Q4: If the participant is able to select the levels of deductible, copayments, and co-insurance for a particular benefit package, are plans and issuers required to provide a separate SBC for every possible combination that a participant may select under that benefit package?

No, as with the response to Q-3, plans and issuers may combine information for different cost-sharing selections (such as levels of deductibles, copayments, and co-insurance) in one SBC, provided the appearance is understandable. This information can be presented in the form of options, such as deductible options and out-of-pocket maximum options. In these circumstances, the coverage examples should note the assumptions used in creating them. An example of how to note assumptions used in creating coverage examples is provided in the Departments' sample completed SBC.⁽²⁾

Q5: If a group health plan is insured and utilizes "carve-out arrangements" (such as pharmacy benefit managers and managed behavioral health organizations) to help manage certain benefits, who is responsible for providing the SBC with respect to the plan?

The Departments recognize that different combinations of plans, issuers, and their service providers may have different information necessary to provide an SBC, including the coverage examples.

The Departments have determined that, until further guidance is issued, where a group health plan or group health insurance issuer has entered into a binding contractual arrangement under which another party has assumed responsibility (1) to complete the SBC, (2) to provide required information to complete a portion of the SBC, or (3) to deliver an SBC with respect to certain individuals in accordance with the final regulations, the plan or issuer generally will not be subject to any enforcement action by the Departments for failing to provide a timely or complete SBC, provided the following conditions are satisfied:

The plan or issuer monitors performance under the contract,
If a plan or issuer has knowledge of a violation of the final regulations and the plan or issuer has the information to correct it, it is corrected as soon as practicable, and
If a plan or issuer has knowledge of a violation of the final regulations and the plan or issuer does not have the information to correct it, the plan or issuer communicates with participants and beneficiaries regarding the lapse and begins taking significant steps as soon as practicable to avoid future violations.

Q6: If a plan offers participants add-ons to major medical coverage that could affect their cost sharing and other information in the SBC (such as a health flexible spending arrangement (health FSA), health reimbursement arrangement (HRA), health savings account (HSA), or wellness program), is the plan permitted to combine information for all of these add-ons and reflect them in a single SBC?

Yes. As stated in the preamble to the final regulations and the instructions for completing the SBC template,⁽³⁾ plans and issuers are permitted to combine such information in one SBC, provided the appearance is understandable. That is, the effects of such add-ons can be denoted in the appropriate spaces on the SBC for deductibles, copayments, coinsurance, and benefits otherwise not covered by the major medical coverage. In such circumstances, the coverage examples should note the assumptions used in creating them. (The Departments' sample completed SBC⁽⁴⁾ provides an example of how to denote the effects of a diabetes wellness program.)

Q7: The final regulations require the SBC to be provided in certain circumstances within 7 business days. Does that mean the plan or issuer has 7 business days to send the SBC, or that the SBC must be received within 7 business days?

In the context of the final regulations, the term "provided" means sent. Accordingly, the SBC is timely if sent out within 7 business days, even if it is not received until after that period.

Q8: Are plans and issuers required to provide SBCs to individuals who are COBRA qualified beneficiaries?

Yes. While a qualifying event does not, itself, trigger an SBC, during an open enrollment period, any COBRA qualified beneficiary who is receiving COBRA coverage must be given the same rights to elect different coverage as are provided to similarly situated non-COBRA beneficiaries. See 26 CFR 54.4980B-5, Q&A-4(c) (requirement to provide election) and 54.4980B-3, Q&A-3 (definition of similarly situated non-COBRA beneficiary). In this situation, a COBRA qualified beneficiary who has elected coverage has the same rights to receive an SBC as a similarly situated non-COBRA beneficiary. There are also limited situations in which a COBRA qualified beneficiary may need to be offered different coverage at the time of the qualifying event than the coverage he or she was receiving before the qualifying event and this may trigger the right to an SBC. See 26 CFR 54.4980B-5, Q&A-4(b).

Q9: What circumstances will trigger the requirement to provide an SBC to a participant or beneficiary in a group health plan? In particular, how do the terms "application" and "renewal" apply to a self-insured plan?

The final regulations require that the SBC be provided in several instances:

Upon application. If a plan (including a self-insured group health plan) or an issuer distributes written application materials for enrollment, the SBC must be provided as part of those materials. For this purpose, written application materials include any forms or requests for information, in paper form or through a website or email, that must be completed for enrollment. If the plan or issuer does not distribute written application materials for enrollment (in either paper or electronic form), the SBC must be provided no later than the first date on which the participant is eligible to enroll in coverage.
By first day of coverage (if there are any changes). If there is any change in the information required to be in the SBC that was provided upon application and before the first day of coverage, the plan or issuer must update and provide a current SBC no later than the first day of coverage.
Special enrollees. The SBC must be provided to special enrollees no later than the date on which a summary plan description is required to be provided (90 days from enrollment).
Upon renewal. If a plan or issuer requires participants and beneficiaries to actively elect to maintain coverage during an open season, or provides them with the opportunity to change coverage options in an open season, the plan or issuer must provide the SBC at the same time it distributes open season materials. If there is no requirement to renew (sometimes referred to as an "evergreen" election), and no opportunity to change coverage options, renewal is considered to be automatic and the SBC must be provided no later than 30 days prior to the first day of the new plan or policy year.⁽⁵⁾
Upon request. The SBC must be provided upon request for an SBC or summary information about the health coverage as soon as practicable but in no event later than seven business days following receipt of the request.

Q10: What are the circumstances in which an SBC may be provided electronically?

With respect to group health plan coverage, an SBC may be provided electronically: (1) by an issuer to a plan, and (2) by a plan or issuer to participants and beneficiaries who are eligible but not enrolled for coverage, if:

The format is readily accessible (such as in an html, MS Word, or pdf format);
The SBC is provided in paper form free of charge upon request; and
If the SBC is provided via an Internet posting (including on the HHS web portal), the issuer timely advises the plan (or the plan or issuer timely advises the participants and beneficiaries) that the SBC is available on the Internet and provides the Internet address. Plans and issuers may make this disclosure (sometimes referred to as the "e-card" or "postcard" requirement) by email.

An SBC may also be provided electronically by a plan or issuer to a participant or beneficiary who is covered under a plan in accordance with the Department of Labor's disclosure regulations at 29 CFR 2520.104b-1. Those regulations include a safe harbor for disclosure through electronic media to participants who have the ability to effectively access documents furnished in electronic form at any location where the participant is reasonably expected to perform duties as an employee and with respect to whom access to the employer's or plan sponsor's electronic information system is an integral part of those duties. Under the safe harbor, other individuals may also opt into electronic delivery.

With respect to individual market coverage, a health insurance issuer must provide the SBC, in either paper or electronic form, in a manner that can reasonably be expected to provide actual notice. The SBC may not be provided in electronic form unless:

The format is readily accessible;
If the SBC is provided via an Internet posting, it is placed in a location that is prominent and readily accessible;
The SBC is provided in an electronic form which can be retained and printed; and
The issuer notifies the individual that the SBC is available free of charge in paper form upon request.

In addition, a health insurance issuer offering individual market coverage, that provides HealthCare.gov with all the content required to be provided in the SBC, will be deemed compliant with the requirement to provide an SBC upon request prior to application. However, issuers must provide the SBC in paper form upon request for a paper copy, and at all other times as specified in the regulations.

In addition, as stated in the regulations, unless the plan or issuer has knowledge of a separate address for a beneficiary, the SBC may be provided to the participant on behalf of the beneficiary (including by furnishing the SBC to the participant in electronic form).

Q11: Are issuers who have provided individual market plan information to HealthCare.gov in compliance with PHS Act section 2715 and its implementing regulations already?

The deemed compliance provision in the regulation requires issuers in the individual market to provide all of the data elements that are needed to complete the SBC template to HealthCare.gov. If the issuer fails to provide all of the data elements, it would not be deemed to be in compliance with the regulation. Today, HealthCare.gov does not collect all of the elements of an SBC, such as information necessary to complete the coverage examples. However, HHS will collect this information and display it in the format of the SBC template by September 23, 2012, so that providing information to HealthCare.gov fulfills the deemed compliance provision.

Q12: Can the Departments provide model language to meet the requirement to provide an e-card or postcard in connection with evergreen website postings?

Yes. Plans and issuers have flexibility with respect to the postcard and may choose to tailor it in many ways. One example is:

Availability of Summary Health Information

As an employee, the health benefits available to you represent a significant component of your compensation package. They also provide important protection for you and your family in the case of illness or injury.

Your plan offers a series of health coverage options. Choosing a health coverage option is an important decision. To help you make an informed choice, your plan makes available a Summary of Benefits and Coverage (SBC), which summarizes important information about any health coverage option in a standard format, to help you compare across options.

The SBC is available on the web at: www.website.com/SBC. A paper copy is also available, free of charge, by calling 1-XXX-XXX-XXXX (a toll-free number).

Q13: The regulations state that in order to satisfy the requirement to provide the SBC in a culturally and linguistically appropriate manner, a plan or issuer follows the rules in the claims and appeals regulations under PHS Act section 2719. Does this mean that the SBC must include a sentence on the availability of language assistance services?

Yes, if the notice is sent to an address in a county in which ten percent or more of the population is literate only in a non-English language. The final SBC regulations provide that a plan or issuer is considered to provide the SBC in a culturally and linguistically appropriate manner if the thresholds and standards of the claims and appeals regulations are met.⁽⁶⁾ The claims and appeals regulations outline three requirements that must be satisfied for notices sent to an address in a county in which ten percent or more of the population is literate only in a non-English language. In such cases, the plan or issuer is generally required to provide oral language services in the non-English language, provide notices upon request in the non-English language, and include in all English versions of the notices a statement in the non-English language clearly indicating how to access the language services provided by the plan or issuer.

Accordingly, plans and issuers must include, in the English versions of SBCs sent to an address in a county in which ten percent or more of the population is literate only in a non-English language, a statement prominently displayed in the applicable non-English language clearly indicating how to access the language services provided by the plan or issuer. In this circumstance, the plan or issuer should include this statement on the page of the SBC with the "Your Rights to Continue Coverage" and "Your Grievance and Appeals Rights" sections.

Sample language for this statement is available on the model notice of adverse benefit determination at http://www.dol.gov/ebsa/IABDModelNotice2.doc. Current county-by-county data can be accessed at http://www.cciio.cms.gov/resources/factsheets/clas-data.html.

Even in counties where no non-English language meets the ten percent threshold, a plan or issuer can voluntarily include such a statement in the SBC in any non-English language. Moreover, nothing in the SBC regulations limits an individual's rights to meaningful access protections under other applicable Federal or State law, including Title VI of the Civil Rights Act of 1964.

Q14: Where can plans and issuers find the written translations of the SBC template and the uniform glossary in the non-English languages?

Written translations in Spanish, Chinese, Tagalog and Navajo will be available at http://cciio.cms.gov/programs/consumer/summaryandglossary/index.html.

Q15: Is an SBC permitted to simply substitute a cross-reference to the summary plan description (SPD) or other documents for a content element of the SBC?

No, an SBC is not permitted to substitute a reference to the SPD or other document for any content element of the SBC. However, an SBC may include a reference to the SPD in the SBC footer. (For example, "Questions: Call 1-800-[insert] or visit us at www.[insert].com for more information, including a copy of your plan's summary plan description.") In addition, wherever an SBC provides information that fully satisfies a particular content element of the SBC, it may add to that information a reference to specified pages or portions of the SPD in order to supplement or elaborate on that information.

Q16: Can a plan or issuer add premium information to the SBC form voluntarily?

Yes. If a plan or issuer chooses to add premium information to the SBC, the information should be added at the end of the SBC form.

Q17: Must the header and footer be repeated on every page of the SBC?

No. If a plan or issuer chooses, it may include the header only on the first page of the SBC. In addition, a plan or issuer may include the footer only on the first and last page of the SBC, instead of on every page.

The OMB control numbers (which were displayed on the SBC template and the Departments' sample completed SBC to inform plans and issuers that the Departments had complied with the Paperwork Reduction Act) should not be displayed on SBCs provided by plans or issuers.

Q18: For group health plan coverage, may the coverage period in the SBC header reflect the coverage period for the group plan as a whole, or must the coverage period be the period applicable to each particular individual enrolled in the plan?

The SBC may reflect the coverage period for the group health plan as a whole. Therefore, if a plan is a calendar year plan and an individual enrolls on January 19, the coverage period is permitted to be the calendar year. Plans and issuers are not required to individualize the coverage period for each individual's enrollment.

Q19: Can issuers and plans make minor adjustments to the SBC format, such as changing row and column sizes? What about changes such as rolling over information from one page to another, which was not permitted by the instructions?

Minor adjustments are permitted to the row or column size in order to accommodate the plan's information, as long as the information is understandable. The deletion of columns or rows is not permitted.

Rolling over information from one page to another is permitted.

Q20: Can plan names be generic, such as "Standard Option" or "High Option"?

Yes, generic terms may be used.

Q21: Can the issuer's name and the plan name be interchangeable in order?

Yes.

Q22: Can barcodes or control numbers be added to the SBC for quality control purposes?

Yes, they can be added.

Q23. Is the SBC required to include a statement about whether the plan is a grandfathered health plan?

No, although plans may voluntarily choose to add a statement to the end of the SBC about whether the plan is a grandfathered health plan.

Q24. My plan is moving forward to implement the SBC template for the first year of applicability. Are significant changes anticipated for 2014?

No. The Departments identified in the preamble to the final regulations certain discrete changes that would be necessary for plan years (or, in the individual market, policy years) beginning after the first year of applicability. These changes include the addition of a minimum value statement and a minimum essential coverage statement, changes to be consistent with the Affordable Care Act's requirement to eliminate all annual limits on essential health benefits, and the Departments' intent to add additional coverage examples. The Departments are also considering making some refinements consistent with these FAQs and other requests from plans and issuers for clarification and to promote operational efficiencies. No other changes are planned at this time.

Footnotes

See 26 CFR 54.9815-2715, 29 CFR 2590.715-2715, and 45 CFR 147.200, published February 14, 2012 at 77 FR 8668.
The Departments' sample completed SBC is available at: www.dol.gov/ebsa/pdf/SBCSampleCompleted.pdf or http://cciio.cms.gov/resources/files/Files2/02102012/sample-completed-sbcfinal.pdf.pdf.
See 77 FR 8668, 8670-71 (February 14, 2012) and page 1 of Instruction Guide for Group Coverage at http://www.dol.gov/ebsa/pdf/SBCInstructionsGroup.pdf.
See www.dol.gov/ebsa/pdf/SBCSampleCompleted.pdf or http://cciio.cms.gov/resources/files/Files2/02102012/sample-completed-sbcfinal.pdf.pdf.
The final regulations provide an accommodation for insured coverage if the policy, certificate, or contract of insurance has not been renewed or reissued prior to the date that is 30 days prior to the first day of the new plan or policy year. In such cases, the SBC must be provided as soon as practicable but in no event later than seven business days after issuance of the new policy, certificate, or contract of insurance, or the receipt of written confirmation of intent to renew, whichever is earlier.
See 26 CFR 54.9815-2719T(e), 29 CFR 2590.715-2719(e), and 45 CFR 147.136(e), originally published on July 23, 2010, at 75 FR 43330 and amended on June 24, 2011, at 76 FR 37208.

Part IX

May 11, 2012

Set out below are additional Frequently Asked Questions (FAQs) regarding implementation of the summary of benefits and coverage (SBC) provisions of the Affordable Care Act. These FAQs have been prepared jointly by the Departments of Labor, Health and Human Services (HHS), and the Treasury (the Departments). Like previously issued FAQs (available at www.dol.gov/ebsa/healthreform and cciio.cms.gov/resources/factsheets), these FAQs answer questions from stakeholders to help people understand the new law and benefit from it, as intended.

Q1: A previous FAQ outlined the circumstances in which an SBC may be provided electronically.⁽¹⁾ The FAQ discussed a safe harbor for providing the SBC to participants or beneficiaries covered under the plan who are able to effectively access documents provided in electronic form at the worksite. Are there any additional safe harbors for electronic delivery of SBCs?

Yes. The Departments have adopted the following additional safe harbor. SBCs may be provided electronically to participants and beneficiaries in connection with their online enrollment or online renewal of coverage under the plan. SBCs also may be provided electronically to participants and beneficiaries who request an SBC online. In either case, the individual must have the option to receive a paper copy upon request. (In addition, for individual market issuers that offer online enrollment or renewal, the SBC may be provided electronically, at all issuances, to consumers who enroll or renew online, consistent with the regulations.)

Q2: What are the circumstances that will trigger the requirement for an issuer to provide an SBC to an individual applying for coverage in the individual market, or to a group health plan or its sponsor applying for coverage? In particular, how do the terms “upon application” and “first day of coverage (if there are changes)” apply to an individual (or a plan or its sponsor) shopping for coverage?

The regulations state that a health insurance issuer must provide the SBC upon application for health coverage. For this purpose, a plan or issuer must provide the SBC as soon as practicable, but no later than seven business days after receiving a substantially complete application for a health insurance product.

If an individual, plan, or plan sponsor is negotiating coverage terms after an application has been filed and the information required to be in the SBC changes, an updated SBC is not required to be provided (unless an updated SBC is requested) until the first day of coverage. The updated SBC should reflect the final coverage terms under the contract, certificate, or policy of insurance that was purchased.

Q3: If an individual (or a plan or its sponsor) receives an SBC prior to application for coverage, must an issuer automatically provide another SBC upon application, if the information required to be in the SBC has not changed?

No. A duplicate SBC is generally not required to be provided at the time of application unless requested by the applicant. However, if by the time the application is filed, there is a change in the information required to be in the SBC, the issuer or plan must update and provide a current SBC to the individual (or plan or its sponsor) as soon as practicable following receipt of the application, but in no event later than seven business days following receipt of the application. Similarly, if an SBC is provided upon application, there is no requirement to provide the SBC again on the first day of coverage, unless there is a change to the information that is required to be in SBC or an SBC is requested by the applicant.

Q4: Are issuers required to provide SBCs to group health plans (or their sponsors) who are “shopping” for coverage, but have not yet submitted an application for coverage?

Yes, but only in certain circumstances. The regulations generally provide that an SBC must be provided upon request for an SBC or “summary information about a health insurance product.” The latter phrase is intended to ensure that persons who do not ask exactly for a “summary of benefits and coverage” still receive one when they explicitly ask for a summary document with respect to a specific health product. Other, general questions about coverage options or discussions about health products do not trigger the requirement to provide an SBC. (See also, Q1 regarding electronic delivery options for providing SBCs.)

Q5: A previous FAQ stated that an SBC provided in connection with a group health plan may include a reference to the summary plan description (SPD).⁽²⁾ For SBCs provided in connection with coverage in the individual market, can the SBC refer to other documents associated with the coverage?

Yes. While it is not permitted to substitute a reference to any other document for any content element of the SBC, an SBC may include a reference to another document in the SBC footer. In addition, wherever an SBC provides information that fully satisfies a particular content element of the SBC, it may add to that information a reference to specified pages or portions of other documents in order to supplement or elaborate on that information.

Q6: Are certain electronic features (such as scrolling and expansion of columns) permitted when displaying the SBC electronically?

Yes. Minor adjustments are permitted to accommodate the plan’s or issuer’s information and electronic display method, such as expansion of columns. Additionally, it is permissible to display the SBC electronically on a single webpage, so the viewer can scroll through the information required to be in the SBC without having to advance through pages (as long as a printed version is available that meets the formatting requirements of the SBC). However, the deletion of columns or rows is not permitted when displaying a complete SBC.

(For more on minor adjustments, see FAQs Part VIII at www.dol.gov/ebsa/faqs/faq-aca8.html and cciio.cms.gov/resources/factsheets/aca_implementation_faqs8.html. Specifically, Q3 and Q4 state that “plans and issuers may combine information …provided the appearance is understandable” and Q19 states that “minor adjustments are permitted…as long as the information is understandable.”)

Q7: Some plans or issuers provide web-based or print materials to illustrate the differences between benefit package options (including comparison charts and broker comparison websites). Is it permissible to “combine” SBCs or SBC elements to provide a side-by-side comparison?

Yes. Issuers and plans (and agents and brokers working with such plans) may display SBCs, or parts of SBCs, in a way that facilitates comparisons of different benefit package options by individuals and employers shopping for coverage. For example, on a website, viewers could be allowed to select a comparison of only the deductibles, out-of-pocket limits, or other cost sharing of several benefit package options. This could be achieved by providing the “deductible row” of the SBC for several benefit packages, but without having to repeat the first one or two columns, as appropriate, of the SBC for each of the benefit packages.

However, such a chart, website, or other comparison does not, itself, satisfy the requirements under PHS Act section 2715 and the final regulations to provide the SBC. The full SBC for all the benefit packages included in the comparison view/tool must be made available in accordance with the regulations and other guidance.

Q8: Under what circumstances can penalties be imposed for failure to provide the SBC or the uniform glossary?

PHS Act section 2715(f) states that an entity is subject to a fine if the entity “willfully fails to provide the information required under this section.”

As stated in previous FAQs,⁽³⁾ the Departments’ basic approach to ACA implementation is: “[to work] together with employers, issuers, States, providers and other stakeholders to help them come into compliance with the new law and [to work] with families and individuals to help them understand the new law and benefit from it, as intended. Compliance assistance is a high priority for the Departments. Our approach to implementation is and will continue to be marked by an emphasis on assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law.” Accordingly, consistent with this guidance, during this first year of applicability, the Departments will not impose penalties on plans and issuers that are working diligently and in good faith to comply.

Q9: For the first year of applicability,⁽⁴⁾ can the Departments provide further assistance with regard to the coverage examples, such as a streamlined calculator?

Yes. The Departments are developing a calculator that plans and issuers can use as a safe harbor for the first year of applicability to complete the coverage examples in a streamlined fashion; because this approach will be less accurate, it will be allowed as a transitional tool for the first year of applicability.⁽⁵⁾ The calculator will allow plans and issuers to input a discrete number of elements about the benefit package. Calculator inputs generally are expected to be taken from data fields used to populate the front portion of the SBC template. (See cciio.cms.gov/resources/other/index.html#sbcug for a list of calculator inputs.) The output will be a coverage example that can be added to the corresponding SBC. The Departments will also provide the algorithm that was used to create the calculator. The calculator and algorithm will be posted at cciio.cms.gov/resources/other/index.html#sbcug soon.

Q10: A previous FAQ discussed the utilization of “carve-out arrangements” under which a plan or issuer contracts with a service provider to help manage certain benefits under the plan or policy.⁽⁶⁾ In another type of “carve-out arrangement,” a plan sponsor may purchase an insurance product for certain coverage from a particular issuer and purchase a separate insurance product or self-insure with respect to other coverage (such as outpatient prescription drug coverage). In these circumstances, the first issuer may or may not even know of the existence of other coverage, or whether the plan sponsor has arranged the two benefit packages as a single plan or two separate plans.

What are an issuer’s obligations to provide an SBC with respect to benefits it does not insure?

Unless it contracts otherwise, an issuer has no obligation to provide coverage information for benefits that it does not insure. However, group health plan administrators are responsible for providing complete SBCs with respect to a plan. A plan administrator that uses two or more insurance products provided by separate issuers with respect to a single group health plan may synthesize the information into a single SBC, or may contract with one of its issuers (or other service providers) to perform that function.

Due to the administrative challenges of combining benefit package information from multiple issuers, during the first year of applicability, for enforcement purposes, with respect to a group health plan that uses two or more issuers, the Departments will consider the provision of multiple partial SBCs that, together, provide all the relevant information to meet the SBC content requirements. In such circumstances, the plan administrator should take steps (such as a cover letter or a notation on the SBCs themselves) to indicate that the plan provides coverage using multiple different insurers and that individuals who would like assistance understanding how these products work together may contact the plan administrator for more information (and provide the contact information).⁽⁷⁾

Q11: A previous FAQ provided a link where written translations for the SBC template and the uniform glossary would be available in the future.⁽⁸⁾ Are these translations available?

Written translations in Spanish, Chinese, and Tagalog are now available. Navajo translations will be available shortly. For more information, see CCIIO website at cciio.cms.gov/programs/consumer/summaryandglossary/index.html.

Q12: Are health insurance issuers required to provide SBCs for insurance products that are no longer being offered for purchase?

The Departments understand that most plans and issuers have to develop new databases and technology systems in order to extract information about coverage terms and provide SBCs. The Departments also understand that, with respect to insurance products that are no longer being offered for purchase (sometimes referred to as closed blocks of business), there is a significant volume of data that is not stored in electronic form or is not stored in an information system that that is compatible with the new electronic systems being developed for the SBC. Accordingly, due to the additional administrative complexities with respect to providing SBCs with respect to closed blocks of business, the Departments will not take any enforcement action against a plan or issuer for failing to provide an SBC before September 23, 2013 with respect to an insured product that is no longer being actively marketed for business, provided the SBC is provided no later than September 23, 2013 (at which time, enrollees and small employers will have new opportunities to compare coverage options available through an Exchange).

Q13: Expatriate plans and policies face special circumstances and considerations in complying with the SBC requirements. Can the Departments provide any assistance or relief with respect to expatriate coverage?

Yes. The Departments recognize that expatriate coverage carries additional administrative costs and barriers in filling out SBCs, including benefit and claims systems that are distinct from those for domestic coverage, which makes compliance more difficult. Therefore, for purposes of enforcement, the Departments will not take any enforcement action against a group health plan or group health insurance issuer for failing to provide an SBC with respect to expatriate coverage during the first year of applicability.

Q14: Other than the FAQs, are there any updates to the SBC template and related documents on the Departments’ websites that I need to know about?

Yes. In the diabetes treatment scenario, the version originally posted contained a typographical error, listing the allowed amount for insulin as $11.92, rather than $119.20 – a difference that impacts the total cost of care for diabetes in the coverage example calculations.

To correct this error, the Departments have posted updated versions of the SBC template, the sample completed SBC, and the guide for coverage examples calculations – diabetes scenario. The updated SBC template and sample completed SBC also include sample taglines for obtaining translated documents, to be included if appropriate consistent with paragraph (a)(5) of the regulations, as well as updated Sample Care Costs amounts for the diabetes coverage example, due to more accurate rounding in making these calculations. Finally, the updated versions include some appearance modifications (such as changes in bolding, underlining, shading, capitalization, margin justification, use of hyphens, and row and column sizing) to ensure the document is accessible to individuals with disabilities, consistent with section 508 of the Rehabilitation Act. Plans and issuers may use either version, or may make similar modifications to their own SBCs, without violating the appearance requirements for an SBC.

The updated versions of these documents are labeled “corrected on May 11, 2012” in the lower right corner of the first page and are available at www.dol.gov/ebsa/healthreform and cciio.cms.gov. These three documents replace the prior versions issued contemporaneously with the final regulations in February 2012.

Footnotes

See Q10 of FAQs Part VIII at www.dol.gov/ebsa/faqs/faq-aca8.html and cciio.cms.gov/resources/factsheets/aca_implementation_faqs8.html.
See Q15 of FAQs Part VIII at www.dol.gov/ebsa/faqs/faq-aca8.html and cciio.cms.gov/resources/factsheets/aca_implementation_faqs8.html.
See FAQs Part I Q1 (available at www.dol.gov/ebsa/faqs/faq-aca.html and cciio.cms.gov/resources/factsheets/aca_implementation_faqs.html) and FAQs Part VIII Q2 (available at www.dol.gov/ebsa/faqs/faq-aca8.html and cciio.cms.gov/resources/factsheets/aca_implementation_faqs8.html).
In the Federal Register notice dated February 14, 2012, FAQs Part VIII, and in these FAQs, the term “first year of applicability” refers to SBCs and uniform glossaries provided with respect to coverage beginning before January 1, 2014.
The SBC template makes clear that the coverage examples are not a cost estimator and should not be used to estimate a particular individual’s actual expenses under the plan.
See Q5 of FAQs Part VIII at www.dol.gov/ebsa/faqs/faq-aca8.html and cciio.cms.gov/resources/factsheets/aca_implementation_faqs8.html.
See the sample completed SBC template, as well as Q3, Q4, and Q6 of FAQs Part VIII at www.dol.gov/ebsa/faqs/faq-aca8.html and cciio.cms.gov/resources/factsheets/aca_implementation_faqs8.html for more information on circumstances when it may be helpful to note assumptions or other information in connection with the SBC coverage examples.
See Q14 of FAQs Part VIII at www.dol.gov/ebsa/faqs/faq-aca8.html and cciio.cms.gov/resources/factsheets/aca_implementation_faqs8.html.

Part X

August, 2012

Set out below is an additional Frequently Asked Question (FAQ) regarding implementation of the summary of benefits and coverage (SBC) provisions of the Affordable Care Act. This FAQ has been prepared jointly by the Departments of Labor, Health and Human Services (HHS), and the Treasury (the Departments). Like previously issued FAQs (available at http://www.dol.gov/ebsa/healthreform/ and http://cciio.cms.gov/resources/factsheets/), this FAQ answers a question from stakeholders to help people understand the new law and benefit from it, as intended.

Q1: I am an employer sponsoring a group health plan. One of the benefit packages is a Medicare Advantage plan. Am I required to provide an SBC for the Medicare Advantage package?

No. Medicare Advantage benefits are Medicare benefits (financed by the Medicare Trust fund and equivalent to Medicare A and B benefits, which are set by Congress and regulated by the Centers for Medicare & Medicaid Services (CMS)). They are, therefore, not health insurance coverage and Medicare Advantage organizations are not required to provide an SBC with respect to such benefits. Pending further guidance, the Departments will not take any enforcement action against a group health plan because it does not provide an SBC with respect to a Medicare Advantage benefit package.⁽¹⁾ This enforcement policy does not affect other disclosure requirements administered by CMS that apply to Medicare Advantage organizations. These separately required disclosures will ensure that enrollees in these plans receive the necessary information about their coverage and benefits. Nor does this policy affect the obligation of group health plans that offer Medicare Advantage benefit options to ensure that SBCs are provided with respect to other benefit packages that they offer.

Footnotes

Note: Previously published guidance makes clear that, if the Medicare Advantage coverage is a separate retiree-only plan, it is exempt from the requirement to provide an SBC. For more information on the exemption for retiree-only plans, see Q1 of Affordable Care Act Implementation FAQs Part III (October 12, 2010), available at http://www.dol.gov/ebsa/faqs/faq-aca3.html and http://cciio.cms.gov/resources/factsheets/aca_implementation_faqs3.html.