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PPACA Statute - The "Patient Protection and Affordable Care Act" (PPACA) prohibits group health plans and a health insurance issuer offering group or individual coverage from establishing lifetime limits and annual limits on the dollar value of "essential health benefits." For plan years beginning prior to January 1, 2014, group health plans and health insurance issuers may establish a "restricted annual limit" on the dollar value of "essential health benefits" for any participant. In defining "restricted annual limit," the law directs the Secretary of HHS to ensure that access to needed services is made available with a minimal impact on premiums.
The Interim Final Rule
The interim final rules on annual and lifetime limits adopt a three-year phase-in approach for "restricted annual limits." Since the minimum annual limits for the three-year phase-in (explained below) must be applied on a per-person basis, the phase-in does not offer plans any relief.
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Waiver Program
The waiver offers plans an opportunity to be exempt from the annual limit requirements until plan years beginning in 2014. To qualify for the waiver, a plan must demonstrate that compliance with the annual limit rules will result in one of two outcomes:
1) A significant decrease in access to benefits under the plan; OR
2) A significant increase in the plan's premiums.
The rule offers no details on how the waiver program will operate, other than to say that waivers will be granted for such periods as are specified by the Secretary of HHS. The preamble for the rule says that guidance on the waiver program is expected to be issued in the near future.
What are "essential health benefits"?
The interim final rules failed to shed additional light on the definition of "essential health benefits." We are left with the definition in the statute, along with a promise from the agencies that they will take into account a good faith effort to comply with a reasonable interpretation. Section 1302(b) of PPACA defines "essential health benefits" to include at least the following general categories and the items and services covered within the categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. Note: Oral and vision care is ONLY for pediatric services.
What other types of limitations are allowed?
The rules clarify that plans are not prevented from excluding all benefits for a condition, but if any benefits are provided for a condition, then the annual and lifetime prohibitions apply.
Plans may impose Day, visit and frequency limits.
Plans are allowed to require that medical services and treatments meet the Plan's medical necessity guidelines.
Three-Year Phase-In of Annual Limits
As noted above, the three-year phase-in of the annual limits apply on a per person basis (in other words, the phased in annual limits apply to each individual person of a family covered under the Plan).
Annual limits on the dollar value of benefits that are essential health benefits may not be less than the following amounts for plan years beginning before January 1, 2014:
For plan or policy years beginning on or after September 23, 2010 but before September 23, 2011, $750,000;
For plan or policy years beginning on or after September 23, 2011 but before September 23, 2012, $1.25 million; and
For plan or policy years beginning on or after September 23, 2012 but before January 1, 2014, $2 million.
For plans issued or renewed beginning January 1, 2014, all annual dollar limits on coverage of "essential health benefits" will be prohibited.
What happens to individuals who previously reached a life time limit?
Individuals who reached a lifetime limit under a plan prior to the effective date of these rules, dropped coverage, and are otherwise still eligible under the plan must be provided with a notice that the lifetime limit no longer applies, as well as an enrollment opportunity (a reinstatement for the individual market, provided the policy is renewed). These notices and enrollment opportunities must be provided beginning no later than the first day of the first plan year beginning on or after September 23, 2010. The enrollment opportunity must last for at least 30 days.
Effective date of coverage - For those enrolling under this transition rule, coverage must take effect no later than the first day of the first plan year beginning on or after September 23, 2010.
Anyone eligible for an enrollment opportunity must be treated as a special enrollee and given the right to enroll in all of the benefit packages available to similarly situated individuals upon initial enrollment. Any difference in benefits or cost-sharing requirements constitutes a different benefit package. These individuals cannot be required to pay more for coverage than similarly situated individuals who did not lose coverage by reason of reaching a lifetime limit.
For those individuals who are still enrolled in the plan and whose coverage ended by reason of reaching a lifetime limit, a notice must be provided stating that the lifetime limit on the dollar value of all benefits no longer applies and that the individual is once again eligible for benefits under the plan. Presumably, the effective date of these benefits is the first day of the first plan year beginning on or after September 23, 2010.
These notices may be provided to an employee on behalf of the employee's dependent.
The following model notice may be used:
The lifetime limit on the dollar value of benefits under [Insert name of group health plan or health insurance issuer] no longer applies. Individuals whose coverage ended by reason of reaching a lifetime limit under the plan are eligible to enroll in the plan. Individuals have 30 days from the date of this notice to request enrollment. For more information contact the [insert plan administrator or issuer] at [insert contact information].
HRA's
HRA's that are integrated with other coverage (and the other coverage alone complies with the lifetime and annual limit requirements) are considered in compliance with the prohibition on lifetime and annual limits.
Retiree-only HRA's
Retiree-only HRA's are not subject to the prohibitions on lifetime and annual limits. Note: Presumably a retiree-only plan must have a separate plan document and file a separate 5500 Form.
Impact on FSA's, MSA's & HSA's
As anticipated, the interim final rules provide that the restrictions on annual limits do not apply to health flexible spending accounts or medical savings accounts, or health savings accounts. The rule notes that specific statutory limitations apply to these account-based plans. For example, beginning with taxable years in 2013, health FSA's are subject to an annual limit of $2,500 (indexed for inflation).
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