A 2011 Plan Amendment Checklist

A few weeks ago, we included a checklist of what PPACA plan notices must be provided in 2011 (see What Notices Are Required by PPACA).  This week we discuss what plan amendments plans must consider.  Each of these possible plan amendments can be very complicated and fact-specific, so you likely will need to review the details of each rule as they apply to your particular plan.

Plan Amendments That Apply to Both Grandfathered & Non-Grandfathered Plans

• Annual & Lifetime Limits – Plans may no longer impose a lifetime limit on “essential” health benefits.  Plans may continue to impose an annual limit on these benefits, but that annual limit must be at least $750,000 (which will increase to $1.25 million in 2012).  Since they have not yet issued guidance on what benefits are “essential,” the agencies in charge of enforcing the rules have said that plans must make a good faith reasonable interpretation of what is “essential.”
• Rescission – To the extent a plan retroactively terminates coverage, it may need to either change this practice or amend the plan to set out the circumstances when it may rescind coverage, such as due to fraud or intentional misrepresentation of a material fact.
• Adult Children – Plans generally must cover dependent children to age 26 without imposing additional conditions, such as marital status, student status, residency, or tax dependency.  Grandfathered plans are not required to cover children who are eligible for coverage through another employer plan (other than through the child’s parents).  Note that the agencies recently issued guidance revising this rule, so plans are permitted to impose conditions on some children.  The new guidance can be found at http://www.dol.gov/ebsa/faqs/faq-aca.html (Q&A #14).
• Pre-Existing Condition Exclusions (PCEs) – Plans may not impose a PCE to enrollees under age 19.
• Over-the-Counter Drugs – FSAs, HRAs, and HSAs may no longer reimburse OTC drugs without a prescription.

Plan Amendments That Apply Only to Non-Grandfathered Plans (Grandfathered Plans Exempt)

• Preventive Care – Plans must cover certain recommended preventive care services without cost sharing.
• Choice of Providers – Plans that require designation of a primary care provider must allow participants to choose their provider and, for children, to choose a pediatrician.  Women are permitted to see a health care professional specializing in obstetrics/gynecology without a prior authorization or referral.
• Emergency Services – Plans must cover emergency services without prior authorization and must cover emergency services at an out-of-network facility the same as in-network.
• Appeals & External Review – Plan must review and update their internal claims procedures (which, in most cases, they adopted following the DOL claims procedure rules).  Changes include the timeframe for urgent claims determination, the process for appeals, and the content of denial notices.  Plans also must establish a new external review program, either through their state insurance authority (for insured arrangements) or through independent review organizations with which the plan has contracted (for self-funded arrangements).
• Nondiscrimination Rules Related to Highly Compensated Individuals – Plan or employers that offer different (more generous) medical benefits to highly paid individuals should review their programs for new nondiscrimination requirements (and in particular, review whether they may wish to remain grandfathered).  The existing nondiscrimination rules under IRC § 105(h), which only applied to self-funded plans, now is extended to insured plans as well.

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You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html  

Contributors:

Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.

PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.