New Guidance for Employers and Insurers on the Implementation of Health Care Reform

The government released three proposed rules last week providing additional guidance on health care reform. The rules address (1) preexisting condition limitations and insurance pricing, (2) standards for essential health benefits and actuarial value, and (3) employer wellness programs.

Preexisting Condition Limitations

The Centers for Medicare and Medicaid Services issued a proposed rule tightening the preexisting condition limitations under health care reform. The rule prohibits health insurance companies from discriminating against individuals because of a preexisting or chronic condition.

Guaranteed Coverage. Starting in 2014, insurance companies cannot deny coverage based on a preexisting condition or any other factor. The rule provides that individuals generally have to enroll in coverage during open enrollment periods, but new special enrollment opportunities will be made available in the individual market upon certain losses of other health coverage.

Fair Insurance Premiums. Insurance companies will be prohibited from charging higher insurance premiums in the individual and small group market based on based on health problems, claim status, gender, occupation, employer size, or industry. Insurance companies can still base premiums on age, tobacco use, family size and geography. The rule also provides standards for how health insurance issuers can price products.

Single Risk Pool. Insurers will have to keep a single statewide risk pool for the individual and small group markets, unless the state elects to combine the individual and small group pools. Premium and annual rate changes would have to be based on the risks in the entire pool.

Guaranteed Renewability. The rule confirms that the prohibition on preexisting condition limitations and pricing applies to both initial enrollment and to renewals.

Catastrophic Plans. The rule provides for enrollment in catastrophic plans with lower premiums, protection against high out-of-pocket costs, and coverage for recommended preventive services without cost sharing. The rules ensures that people who have had difficulty getting coverage and young people will have access to catastrophic coverage in the individual market.

Essential Health Benefits and Actuarial Value

The Department of Health and Human Services issued a proposed rule that is intended to help consumers shop for and compare health insurance options. The rule provides insurance company standards for the coverage of essential health benefits and the determination of actuarial value (for employer plans). The rule also sets forth a timeline for when insurance companies offering coverage through an Exchange have to become accredited, along with information on the accreditation process.

Essential Health Benefits. Health care reform requires health plans to provide certain coverage known as essential health benefits. To satisfy the essential health benefit requirements, coverage must be offered in the following 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
  • Pediatric services, including oral and vision care

Essential health benefits must be equal to the benefits offered by a typical employer plan. The rule sets the definition of essential health benefits by state, based on a state-specific benchmark plan. This rule allows states to select the benchmark plan from certain identified plan options within the state. The benchmark plan options include: (1) the largest plan by enrollment in any of the three largest products in the state’s small group market; (2) any of the largest three state employee health benefit plans options by enrollment; (3) any of the largest three national Federal Employees Health Benefits Program (FEHBP) plan options by enrollment; or (4) the largest insured commercial HMO in the state. If the state does not select a benchmark plan, HHS will make the selection as the largest small group product in the state.

The proposed rule also provides standards intended to protect individuals against discrimination by (1) prohibiting certain benefit plan designs that might be discriminatory, (2) setting standards for benefits not generally covered by individual and small group policies, and (3) setting standards for prescription drug coverage.

Actuarial Value. Actuarial Value is the percentage of total average costs for covered benefits that a plan will cover. Beginning in 2014, health plans in the individual and small group markets must meet certain actuarial value levels, referred to as bronze, silver, gold and platinum. When plans are designated as one of the metal levels, consumers can compare different plans offering similar coverage. HHS provided an actuarial value calculator, and the proposed rule provides that HHS will accept certain identified data if states use alternative data for the calculations. It also provides that the government will recognize a spread of two percentage points of actuarial value for each standard.

Accreditation Standards. The rule describes accreditation requirements for Exchanges and the Exchange-based qualified health plan certification process.

Employer-Based Wellness Programs

Health care reform encourages the use of employer based wellness program. The Department of Health and Human Services, the Department of Labor and the Department of Treasury jointly released proposed rules on wellness programs effective for plan years starting on or after January 1, 2014.

Workplace Wellness Programs. The rule supports the use of workplace wellness programs which are available without regard to an individual's health status. These types of programs include things such as fitness membership reimbursement, rewards for health risk assessment completion and participation in health seminars.

Health-Based Wellness Programs. The proposed rules set forth new standards for nondiscriminatory health contingent wellness programs which require individuals to meet specific standards related to their health to obtain a reward. These programs must

1. Be reasonably designed to promote health or prevent disease. The program must offer a different, reasonable means of qualifying for the reward to anyone who cannot meet the standard based on the screening. The program must not be overly burdensome; and

2. Be reasonably designed to be available to all similarly situated individuals. Alternative means of qualifying for the reward have to be offered to individuals whose medical conditions make it difficult or inadvisable to meet the health-releated standard.

The rule requires a notice to be distributed describing the opportunity to qualify for the reward through alternative means. It also follows changes set forth in the Affordable Care Act that increase the maximum award from 20% to 30% of the cost of health coverage and further increase the reward to as much as 50% for wellness programs related to reducing tobacco use.

These new proposed rules provide new, specific guidance for employers and insurance companies as the implementation of health care reform moves forward.

Comments (0)