On Feb. 25, 2013, the U.S. Department of Health and Human Services (HHS) published in the Federal Register the much anticipated essential health benefits (EHB) final rule for non-grandfathered group health plans and health insurance coverage in the individual and small group markets.
HHS remains consistent with its previously articulated positions on these topics, including prior bulletins and the Nov. 26, 2012, proposed rule, despite receiving more than 15,000 public comments on the issues.
The following are a select group of key issues addressed in the EHB final rule.
Prescription drug coverage. HHS finalized its proposal requiring coverage of “at least the greater of” one drug in every United States Pharmacopeia (USP) category and class or the same number of prescription drugs in each category and class as the EHB-benchmark plan, including its interpretation that drugs would count toward these requirements if chemically distinct (two dosage forms or strengths of the same drug would not meet this requirement).
EHB substitution. HHS maintains its position that an issuer may substitute actuarially equivalent benefits within any given category of EHB, but not between EHB categories, although states may adopt more stringent standards further limiting or prohibiting benefit substitutions.
Use of medical management techniques. HHS promulgates new regulatory language to clarify that the prohibition on discrimination (an issuer’s benefit design or implementation thereof may not discriminate based on an individual’s age, expected length of life, present or predicted disability, degree of medical dependency, quality of life or other health conditions) shall not be construed to prevent an issuer from using “reasonable medical management techniques” to control costs.
Additionally, HHS removed proposed language in the Qualified Health Plan (QHP) cost-sharing regulation that had stated that the structure of cost-sharing under the plan must conform to the nondiscrimination requirements. This deletion was in response to comments expressing concern about the ability of issuers to control costs through use of reasonable medical management.
Section 2707 cost-sharing. HHS offers further clarification—although still no regulatory language—on its interpretation of the cost-sharing limitations imposed on group health plans under new Section 2707(b) of the Public Health Service Act. Section 2707(b) states that a group health plan’s cost-sharing requirements may not exceed the limitations that are a part of the essential health benefits package under Section 1302(c) of the Patient Protection and Affordable Care Act (PPACA). Section 1302(c)(1) sets out a limitation on annual cost-sharing, and subsection (c)(2) imposes an annual limitation on deductibles for health insurance coverage in the small group market.
In the preamble to the EHB final rule, HHS offers two alternative interpretations of Section 2707(b), both of which “give strong textual support” for the agency’s interpretation that Section 2707(b) is subject to the same limitations set forth in Section 1302(c)(2). The limitation on the scope of Section 1302(c), which applies the annual deductible limits only to health insurance coverage in the small group market, also applies to Section 2707(b); accordingly, this annual deductible limitation does not apply to group health plans that are self-insured group health plans or group health plans purchasing health insurance coverage in the large group market. (The annual limitation on cost-sharing set out in Section 1301(c)(1) would apply to all non-grandfathered group health plans, including self-insured plans and group health plans purchasing coverage in the large group market.)
Employer contributions to HSAs and HRAs. The PPACA directed promulgation of regulations addressing which employer contributions to a health savings account (HSA) and to a health reimbursement arrangement (HRA) may be taken into account in determining the level of coverage for an employer-provided plan under the actuarial value calculation. The EHB final rule provides that plans, other than those in the individual market, that at the time of purchase are offered in conjunction with an HSA or with an HRA integrated with a group health plan may take into account the annual employer contribution to the HSA and amounts newly made available under the HRA for the current year, when calculating the actuarial value of the health plan.
HHS anticipates issuing future guidance on several topics—including an enforcement safe harbor for health insurance coverage in the large group market and self-funded group health plans regarding the Section 2707(b) cost-sharing issues—to address operational and timing concerns regarding annual limits on cost sharing, to address the Exchanges’ responsibility to monitor and oversee QHP quality (other than accreditation), and to address how the accreditation requirements will be operationalized as part of the QHP certification process in the federally facilitated Exchanges.
Amy Gordon, Anne Hance and Susan Nash are partners in the law firm McDermott Will & Emery LLP. Numbering more than 1,000 lawyers McDermott Will & Emery LLP is an international law firm with a diversified business practice. © 2013 McDermott Will & Emery LLP. All Rights Reserved. Reposted with permission. This article should not be construed as legal advice.
Small Group Plans and Essential Health Benefits
The Affordable Care Act defines a small employer as having at least one but no more than 100 employees. However, it provides states the option of defining small employers as having at least one but not more than 50 employees in plan years beginning before Jan. 1, 2016.
Generally, if you have fewer than 100 employees (using the definition for full-time equivalents) you will be purchasing coverage in the small group market.
Starting Jan. 1, 2014, nongrandfathered, fully insured plans in the individual and small group markets and those in the exchanges were required to provide coverage of benefits or services in 10 separate categories that reflect the scope of benefits covered by a typical employer plan.
Self-insured small group plans, large group plans, and grandfathered plans are not required to offer essential health benefits.
-- SHRM Online editors
Final Rule on Essential Health Benefits, Plan Value, SHRM Online Benefits, February 2013
Regs Limit Use of HRAs for Exchange-Purchased Coverage, SHRM Online Benefits, January 2013
SHRM Online Benefits page
SHRM Online Health Care Reform Resource Page