Proposed Rules Issued on Guaranteed Coverage, Essential Benefits and Wellness Incentives

By Stephen Miller, CEBS Nov 26, 2012

The Obama administration issued three new proposed rules to implement provisions in the Patient Protection and Affordable Care Act (PPACA or ACA).

The rules, released on Nov. 20, 2012, and published in the Federal Register on Nov. 26, pertain to guaranteed issuance of coverage regardless of pre-existing conditions; essential health benefits that nongrandfathered, fully insured plans in the individual and small group markets will be required to cover; and an increase in maximum allowable wellness program incentives.

The PPACA defines a small employer as an employer 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.

The three proposed rules had been anticipated. Their key points are described below:

Under the rule, insurance companies would be allowed to vary premiums, within limits, only based on age, tobacco use, family size and geography. Health insurance companies would be prohibited from denying coverage to any American because of a pre-existing condition or from charging higher premiums to certain enrollees because of their current or past health problems, gender, occupation, and small employer size or industry.

The proposed rule also would implement the PPACA's policies related to fair health insurance premiums, risk pools and nongroup market catastrophic plans.

Regarding catastrophic plans, the PPACA limits deductibles for nongrandfathered plans in the small group market at $2,000 for individuals and $4,000 for families, effective Jan. 1, 2014. However, insurers are permitted to sell nongroup catastrophic plans with higher deductibles to those who are under the age of 30 or for whom coverage would otherwise be unaffordable.

Comments on this rule are being accepted by the U.S. Department of Health and Human Services (HHS) through Dec. 26, 2012.

Essential health benefits (EHBs) are a core set of benefits intended to give consumers a consistent way to compare health plans in the individual and small group markets. Beginning in 2014, all nongrandfathered health insurance coverage in the individual and small group markets will be required to cover EHBs, which include items and services in 10 statutory benefit categories, such as hospitalization, prescription drugs, and maternity and newborn care, and are equal in scope to a typical employer health plan. In addition to offering EHBs, these health plans will be required to meet specific actuarial values.

This proposed rule also outlines health exchange and issuer standards related to coverage of EHBs and actuarial value, and proposes a timeline for qualified health plans to be accredited in federally facilitated exchanges.

Comments on this rule are being accepted by HHS through Dec. 26, 2012.

This rule would increase the maximum permissible reward under a health-contingent wellness program offered in connection with a group health plan (and any related health insurance coverage) from 20 percent to 30 percent of the cost of coverage. It would further increase the maximum permissible reward to 50 percent for wellness programs designed to prevent or reduce tobacco use.

The eventual increase in allowable employee wellness incentives was viewed as the most beneficial element of the PPACA in a 2011 survey of U.S. employers.

The rule includes other proposed clarifications regarding the reasonable design of health-contingent wellness programs and the reasonable alternatives they must offer in order to avoid prohibited discrimination. For instance, a "reasonable alternative standard" for obtaining the reward must be provided for any individual for whom it is either unreasonably difficult due to a medical condition to meet the applicable standard, or for whom it is medically inadvisable to attempt to satisfy the applicable standard.

The proposed rule would not require establishing a particular alternative standard in advance of an individual's specific request for one. Also, it would be permissible to seek verification, such as a statement from the individual's personal physician, that a health factor makes it unreasonably difficult for the individual to satisfy, or medically inadvisable for the individual to attempt to satisfy, the otherwise applicable standard.

Comments on this rule are being accepted by the U.S. Department of Labor through Jan. 25, 2013.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Related SHRM Articles:

HHS Issues FAQ Guidance on Essential Health Benefits, SHRM Online Benefits, February 2012

HHS to Give States More Flexibility to Set Essential Health Benefits, SHRM Online Benefits, January 2012

Groups Issue Guidance for Outcomes-Based Wellness Incentives, SHRM Online Benefits, July 2012

Companies Increase Wellness Incentive Dollars, SHRM Online Benefits Discipline, March 2012

Employers: Higher Wellness Incentive Is Reform's 'Most Beneficial' Element, SHRM Online Benefits, July 2011

Quick Links:

SHRM Online Benefits page

SHRM Online Health Care Reform Resource Page

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