The IRS and the Department of Health and Human Services (HHS) have released a raft of proposed and final regulations that implement the Affordable Care Act health care reform law, which becomes fully operational in nine months. The proposed regs won’t become effective until final regs are issued.
Essential health benefits
Effective with the 2014 plan year, final regs require nongrandfathered insured small-group plans to offer a core group of 10 essential benefits and services, such as preventive services, hospitalization, prescription drugs and maternity and newborn care.
With a few exceptions, deductibles are limited to $2,000 for employee-only coverage and $4,000 for family coverage. The limits don’t take into consideration employees’ health flexible spending accounts. Mental health and substance abuse disorder benefits must meet current parity standards.
Plans must meet certain actuarial values, which, as in the Olympics, are expressed by certain medals: 60% for bronze plans, 70% for silver plans, 80% for gold plans and 90% for platinum plans. An actuarial value calculator will be available at the HHS website. Employer contributions into employees’ health savings accounts or health reimbursement accounts that can be used only for cost sharing and that are linked to group plans at the time of purchase may be counted toward actuarial value.
Under the regs, limitations on employee cost-sharing apply to all nongrandfathered group plans and are tied to the out-of-pocket limit that applies to high-deductible health plans (i.e., in 2013, $6,250 for employee-only plans and $12,500 for family coverage). (78 F.R. 12833, 2-25-13)
Final regs, which apply to nongrandfathered plans, standardize how insurers price group plans for the small group market, beginning with the 2014 plan year, and for large group plans, if coverage is available through an exchange starting in 2017.
The regs allow premiums to vary based on age, tobacco use, family size and geography. Premiums can’t be based on an employee’s pre-existing conditions or gender. In addition, with limited exceptions, all nongrandfathered group plans are guaranteed coverage and renewal.
The regs build on current requirements for special enrollment periods by creating 30-day special enrollment periods in the nongrandfathered group market for employees and beneficiaries in connection with events that trigger COBRA coverage. (78 F.R. 13405, 2-27-13)
Under proposed regs, for calendar years 2014, 2015 and 2016, group plans providing major medical coverage, including grandfathered plans, would pay a reinsurance fee to the HHS.
The fees, which would be collected by self-insured plans and insurers of group plans, are intended to spread risk, stabilize premiums and ensure stability in the group health market.
For 2014 the fee is anticipated to be $5.25 per covered life per month, for a total of $63. The fee would decline in 2015 and 2016. Excluded coverage:
- Limited-scope coverage (e.g., stand-alone dental or vision care, hospital indemnity coverage)
- Plans that don’t provide major medical coverage
- Health reimbursement accounts that are integrated with group health plans
- Health savings accounts
- Health flexible spending accounts
- Employee assistance plans, disease programs and wellness programs, provided they don’t constitute major medical care. (77 F.R. 73117, 12-17-12)
Proposed regs would allow health-contingent wellness programs (i.e., programs that require employees to achieve a certain result before they’re eligible for a reward) to increase the maximum reward to 30% of the total cost of coverage, up from 20%. Incentives to participate in a smoking cessation program could go as high as 50%.
The regs keep intact current requirements for wellness programs, but clarify the five key nondiscrimination requirements that apply to health-contingent programs. These proposed regs would apply to grandfathered and nongrandfathered plans, and to plan years beginning in 2014. (77 F.R. 70619, 11-26-12)
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