Benefit Blog

July 26, 2010

On July 22, 2010, the Departments of Labor, Treasury and Health and Human Services (the

“Departments”) issued another round of guidance implementing the Affordable Care Act group health

plan provisions. (Prior guidance and our related Legal Alerts may be accessed from our Emerging Issues

webpage at www.kilpatrickstockton.com.) The interim final rules (the “Rules”) address the provisions of

the Affordable Care Act relating to the internal claims and appeals and external review processes under

Section 2719 of the Public Health Service Act. These requirements apply only to non-grandfathered

health plans as of the first plan year beginning after September 23, 2010 (for calendar year plans, January

1, 2011). This Alert addresses only those provisions in the Rules concerning group health plans and health insurance coverage sponsored by employers. However, it does not address the provisions in the Rules that relate to individual health coverage.

Although group health plans subject to ERISA must already comply with uniform standards for handling claims and appeals for benefits, the Rules provide additional requirements that must be incorporated into these internal claims procedures. One major change for group health plans is that the Rules add a right to appeal decisions to an outside, independent reviewer either pursuant to a State external review process or,

for self-insured plans not subject to those State rules, a federal process.

These procedures will result in greater costs in administering employer health plans and, possibly, an increase in civil actions if there is a failure to follow each additional step required during the claims and review process. Employers with self-funded plans that are not grandfathered plans should review their administrative services agreements to reflect these new procedures and address which party will bear liability for any failure to strictly adhere to these new requirements. Employers currently assessing

whether to take the steps necessary to remain a grandfathered plan, at least for 2011, should take these rules into consideration in making that decision.

Internal Claims and Appeals (PHSA Section 2719)

A non-grandfathered group health plan and a health insurance issuer offering group health insurance coverage must incorporate the standards established by the Secretary of the Labor in its internal claims and appeals processes, as described in the Rules. As a baseline, group health plans and group health

insurance issuers must follow the DOL claims procedure regulations applicable under ERISA that were issued in 2000 (pursuant to 29 CFR 2560.503-1). In addition, the Rules provide six additional rules to follow, plus a maintenance of coverage rule pending an appeal. Thus, plan sponsors will need to work closely with their third-party administrators to make certain that the new claims and appeals rules are

added to non-grandfathered plans for 2011. In addition, because eligibility claims are also subject to the new Rules, plan sponsors may need to revise their internal processes for handling eligibility claims and appeals.

Page 1 of 4 www.KilpatrickStockton.com © 2010 Kilpatrick Stockton LLP

The new internal claims and appeals rules applicable to non-grandfathered plans are as follows –

· Determinations Eligible for Internal Claims and Appeals Processes. Adverse determinations that

are subject to these new claims and appeals processes include a denial, reduction or termination of, or

a failure to provide or make a payment (in whole or in part) for a benefit, including those based on:

§ A determination of eligibility to participate in the plan,

§ A determination that a benefit is not covered,

§ A determination that a benefit is experimental, investigational or not medically necessary or appropriate, or

§ The imposition of a preexisting condition exclusion, source of injury exclusion, network exclusion or other limitation on a covered benefit.

Any rescission of coverage under PHSA Section 2712 is also subject to the new internal claim and appeal rules, even if there is no immediate effect on a particular benefit at the time of the rescission.

· Shorter Period for Providing Notice Regarding Urgent Care Claims. The plan must notify a claimant of a benefit determination (whether adverse or not) with respect to urgent care claims as

soon as possible, but not later than 24 hours after receipt of the claim, unless sufficient information is not provided to determine whether benefits are covered. Currently, the DOL claims procedures

require notification of urgent care claims within 72 hours after receipt of the claim. Interestingly, the preamble notes that technology has improved since the original DOL claims procedures were issued

in 2000, thereby allowing for electronic notice. Unfortunately, the DOL has not updated its regulations on notifying individuals electronically, and due to the arcane nature of the regulations many plans do not choose electronic notification.

· Advance Information and Opportunity to Respond Prior to Final Decision. In addition to the requirements imposed under the DOL’s claims procedures, the plan must provide the claimant, at no

cost, any new evidence that is considered, relied upon, or generated by the plan in connection with the claim. This information must be proved as soon as possible and sufficiently in advance of the date on which the notice of a decision is required so that the individual has an opportunity to respond prior to that date. Further, before a final internal adverse decision is rendered, the claimant must be provided, free of charge, with the rationale for the decision so that the individual has an opportunity to respond

prior to that date.

· Avoiding Conflicts of Interest. Claims and appeals must be adjudicated in a manner that ensures the independence and impartiality of the individuals making the decision. This means that decisions regarding hiring, compensation, termination, or similar matters cannot be made based on the

likelihood that the individual will support the denial of benefits. For example, a plan or issuer cannot

hire a medical expert based on that expert’s reputation for outcomes in contested cases and cannot provide bonuses based on the number of denials of claims.

· Additional Disclosures and Content of Notice. In addition to the information required to be provided under the DOL’s claims procedures, notice of an adverse decision must include the date of service,

health care provider, claim amount, diagnosis code, treatment code and the meanings of these codes. The reasons for the adverse decision must also include the denial code (such as the Claim Adjustment

Reason Code or Remittance Advice Remark Code) and an explanation of the code. Further, the notice must include a discussion of any plan standard used in the determination (e.g., medical necessity), a discussion of the claim and appeal procedures, and the contact information for any applicable consumer assistance office established under the PHSA Section 2793 to assist enrollees with these procedures. Although model notices will be issued in the near future, it is clear that the

EOBs used by most third party administrators today will need to be substantially revised, and given

the lead time that such revisions entail, it is likely that many plans cannot wait for model notices.

· Effect of Failure to Comply. Failure to strictly comply with all the requirements results in the claimant being deemed to have exhausted the claims and appeals procedures which allows the

Page 2 of 4 www.KilpatrickStockton.com © 2010 Kilpatrick Stockton LLP

individual to initiate an external review and pursue other applicable remedies, such as bringing legal action. Note that the standard is quite high: substantially complying with the rules or de minimis

errors still trigger the deemed exhaustion of the internal procedures. This rule substantially raises the

stakes for plans and, to the extent applicable, sponsors should make certain that their third party administrators are complying with the new rules and determine whether their TPAs are or should be contractually liable for any related failures.

· Coverage Pending Appeal. The Rules require a plan to continue coverage pending appeal. For this purpose, the Rules require the plan to follow the ongoing course of treatment provisions in the DOL claims procedures. It is unclear whether the intent is to limit continued coverage to adverse benefit decisions that relate to an ongoing course of treatment or if this requirement will have a broader application. The blanket statement in the Rules that coverage must be continued pending an appeal implies a broad application, but the reference to the current DOL claims procedures and a statement

in the preamble that this provision should not have a significant cost impact on plans subject to ERISA indicate otherwise. A broad application of this requirement would be quite troubling, particularly given the fact that eligibility claims and rescissions are subject to the Rules.

External Review (PHSA Section 2719)

In addition to the internal claim and appeal provisions above, plans must also comply with either a State external review process or the Federal external review process.

· State Standards for External Review. If a State external review process satisfies the minimum requirements set forth in the Rules, and the State external review process applies to and is binding on

the health insurance issuer of a fully-insured group health plan, the group health plan itself (and the employer maintaining that plan) is required to comply with the State process.

Typically, fully-insured plans will be required to comply with the State process, provided that process includes, at a minimum, the consumer protections provided in the Rules. To allow States time to

amend their laws, the Rules provide for a transition period for plan years beginning before July 1,

2011, where existing State external review processes are deemed to meet these minimum standards.

As a result, for plan years beginning before July 1, 2011 (the 2011 plan year for calendar year plans), health insurers subject to an existing State external review process must comply with that process and

not the Federal process. An open issue for which comments are sought is how to handle health

insurers in a State that does not apply its external review process to all issuers (such as when a State applies its external process only to HMOs). Future guidance addressing this issue is expected.

· Federal External Review Process. Self-insured plans and other plans that do not satisfy the State external review process must comply with the Federal process. These Rules describe the scope of claims eligible for this process but not the process itself (further guidance will be issued on this process). Adverse determinations relating to an individual’s failure to meet the requirements for eligibility under the plan are not subject to this external review process. However, the Rules do provide that the additional standards and guidance that will be issued will provide the following –

§ The standards will describe how a claimant will initiate an external review, procedures for determining whether a claim is eligible for an external review, minimum qualifications for independent review organizations (IROs), a process for random assignment of reviews to the approved IRO and rules for providing notice of the final external review decision.

§ An expedited external review process will be available if there is serious jeopardy to the life

or health of the claimant or if the internal adverse decision concerns an admission, continued stay or health care service for which the individual received emergency services and has not been discharged from the facility.

Page 3 of 4 www.KilpatrickStockton.com © 2010 Kilpatrick Stockton LLP

§ Additional consumer protections will be provided to ensure that adequate clinical and scientific experience and protocols are taken into account with respect to claims involving experimental or investigational treatments.

§ The external review process will be binding, except to the extent other remedies are available under State or Federal law.

§ Additional notice requirements will be provided to inform participants of these external review procedures.

Notices in Languages Other than English

Notices relating to claim and appeal determinations (e.g., EOBs), plus the Federal external appeal notices, must be provided in a non-English language if certain thresholds that relate to the number of people

literate in the same non-English language are met.

· Thresholds for Group Plans. For plans that cover fewer than 100 participants at the beginning of the plan year, the threshold is 25% being literate only in the same non-English language. For plans with

100 or more participants at the beginning of a plan year, the threshold is the lesser of 500 participants

or 10% of all participants being literate in only the same non-English language. Given these

thresholds it is likely that some plans may be required to provide notices in more than one non- English language.

· Required Notice. If this threshold is met, (1) notice must be provided upon request in that non-

English language, and (2) the English version of the notice must include a prominent statement in the non-English language offering the additional notice in that other language. Once a participant

requests a notice in that language, all future notices must be provided to that individual in such other

language.

· Customer Assistance in a Non-English Language. In addition to the non-English language notice, telephone hotlines or other customer assistance regarding claims and appeals must also be provided in that other language (apparently only upon request if the applicable threshold is satisfied).

By Larry Grudzien, JD

The Departments of Health and Human Services (HHS), Labor, and Treasury issued interim final regulations on July 14, 2010 requiring new plans and issuers to cover certain preventive services without any cost-sharing for the enrollee when delivered by in-network providers.  The interim final regulations do not apply to grandfathered plans and issuers.   This website provides links to the items and services that must be covered under this interim final regulation.  It is organized by the recommending body.

Unless noted otherwise below, the recommended services must be provided without cost-sharing when delivered by an in-network provider in the plan years (in the individual market, policy years) that begin on or after September 23, 2010. For recommendations that have been in effect for less than one year, plans and issuers will have one year from the effective date to comply.

For any recommendation that went into effect after September 23, 2009, additional information and relevant dates are provided below. 

Recommendations of the United States Preventive Services Task Force (USPSTF)

Recommendations of the USPSTF appear in a chart, which includes a description of the topic, the text of the USPSTF recommendation, the grade the recommendation received (A or B), and the date that the recommendation went into effect.

Complete List of USPSTF Grade A and B Recommendations

The following recommendations went into effect in whole or in part at some point after September 23, 2009:

· Screening and counseling for obesity: children (in effect January 31, 2010)

The recommendation on screening and counseling for obesity in children went into effect on January 31, 2010.  For this service, plans and issuers are required to provide coverage without cost-sharing in the first plan year (in the individual market, policy year) that begins on or after January 31, 2011.

Learn more about the USPSTF, the process it uses to make recommendation, or the evidence reviews for a specific recommended service.

Recommendations of the Advisory Committee On Immunization Practices (ACIP) That Have Been Adopted by the Director of the Centers for Disease Control and Prevention

Recommendations of the ACIP appear in four immunization schedules for 2010.  The schedules contain graphics that provide information about the recommended age for vaccination, number of doses needed, interval between the doses, and (for adults) recommendations associated with particular health conditions.  In addition to the graphics, the schedules contain detailed footnotes that provide further information on immunizations in the schedule.

Recommended Immunization Schedule for Persons Aged 0 Through 6 Years

Recommended Immunization Schedule for Persons Aged 7 Through 18 Years

Catch-up Immunization Schedule for Persons Aged 4 Months Through 18

Years Who Start Late or Who Are More Than 1 Month Behind

Recommended Adult Immunization Schedule

The following recommendations went into effect in whole or in part at some point after September 23, 2009:

· Meningococcal vaccine (in effect September 25, 2009)

An expanded recommendation on meningococcal vaccine went into effect on September 25, 2009.  The new recommendation only differs with respect to revaccination of individuals at increased risk.  The prior recommendation had addressed revaccination for certain individuals who had previously received meningococcal polysaccharide vaccine; the new recommendation extends this to certain individuals who had previously received meningococcal conjugate vaccine.  Therefore, plans and issuers with plan years (in the individual market, policy years) that begin on or after September 23, 2010 but before September 25, 2010 are required to provide coverage without cost-sharing for this service as described in the 2010 schedules, except that they are not required to provide coverage without cost-sharing for revaccination of certain individuals who had previously received meningococcal conjugate vaccine.  Plans and issuers are required to provide coverage without cost-sharing for this service exactly as described in the 2010 schedules in the first plan year (in the individual market, policy year) that begins on or after September 25, 2010.

· HPV (in effect January 8, 2010)

An expanded recommendation on HPV vaccine went into effect on January 8, 2010.  The new recommendation addresses vaccination with the bivalent (as opposed to quadrivalent) HPV vaccine for the first time; prior to January 8, 2010, the Advisory Committee did not make any recommendation on the bivalent vaccine.  The new recommendation also addresses vaccination of males for the first time; prior to January 8, 2010, the ACIP did not make any recommendation on the vaccination of males. Therefore, plans and issuers with plan years (in the individual market, policy years) that begin on or after September 23, 2010 but before January 8, 2011 are required to provide coverage without cost-sharing for this service as described in the 2010 schedules, except that they are not required to provide coverage without cost-sharing for vaccination with the bivalent vaccine or for vaccination of males.  Plans and issuers are required to provide coverage without cost-sharing for this service exactly as described in the 2010 schedules in the first plan year (in the individual market, policy year) that begins on or after January 8, 2011.

· Influenza (in effect March 2, 2010)

An expanded recommendation on influenza vaccine went into effect on March 2, 2010.  Plans and issuers will be required to provide coverage without cost-sharing for this service as described in the recommendation and in the 2011 schedules in the first plan year  (in the individual market, policy year) that begins on or after March 2, 2011.  Read the full text of the recommendation.

· Pneumococcal vaccine (in effect March 12, 2010)

An expanded recommendation on pneumococcal vaccine went into effect on March 12, 2010.  Plans and issuers will be required to provide coverage without cost- sharing for this service as described in the recommendation and in the 2011 schedules in the first plan year  (in the individual market, policy year) that begins on or after March 12, 2011.  Read the full text of the recommendation.

NOTE: Infection with Streptococcus pneumoniae bacteria can make children very sick. It causes blood infections, pneumonia, and meningitis, mostly in young children. Although pneumococal meningitis is relatively rare (less than 1 case per 100,000 people each year), it is fatal in about 1 of 10 cases in children.  Before routine use of pneumococcal conjugate vaccine, pneumococcal infections caused: over 700 cases of meningitis, 13,000 blood infections, about 5 million ear infections, and about 200 deaths annually in the United States in children under five.  There are more than 90 types of pneumococcal bacteria. The new pneumococcal conjugate vaccine (PCV13) protects against 13 of them. These bacteria types are responsible for most severe pneumococcal infections among children. PCV13 replaces a previous conjugate vaccine (PCV7), which protected against 7 pneumococcal types and has been in use since 2000. During that time severe pneumococcal disease dropped by nearly 80% among children under 5.

· Combination Measles, Mumps, Rubella, and Varicella Vaccine (in effect May 7, 2010)

A new recommendation related to combination measles, mumps, rubella, and varicella vaccine went into effect on May 7, 2010.  Plans and issuers will be required to provide coverage without cost sharing for this service as described in the recommendation and in the 2011 schedules in the first plan year (in the individual market, policy year) that begins on or after May 7, 2011.  Read the full text of the recommendation.

Learn more about the ACIP, the process it uses to make recommendation, or information associated with particular immunizations.

Comprehensive Guidelines Supported by the Health Resources and Services Administration (HRSA)

Comprehensive guidelines for infants, children, and adolescents supported by HRSA appear in two charts: the Periodicity Schedule of the Bright Futures Recommendations for Pediatric Preventive Health Care, and the Uniform Panel of the Secretary’s Advisory Committee on Heritable Disorders in Newborns and Children.

Bright Futures Recommendations for Pediatric Preventive Health Care

The comprehensive guidelines that are illustrated in the Periodicity Schedule of the Bright Futures Recommendations for Pediatric Preventive Health Care went into effect before September 23, 2009; therefore, plans and issuers are required to provide coverage without cost sharing for these services in the first plan year (in the individual market, policy year) that begins on or after September 23, 2010.

Learn more about the Bright Futures project or find more information about their recommended preventive services

Recommendations of the Secretary’s Advisory Committee on Heritable Disorders in Newborns and Children

The comprehensive guidelines that are illustrated in the Uniform Panel of the Secretary’s Advisory Committee on Heritable Disorders in Newborns and Children went into effect May 21, 2010.  Plans and issuers are required to provide coverage without cost-sharing for these services in the first plan year (in the individual market, policy year) that begins on or after May 21, 2011.

Learn more about the Secretary’s Advisory Committee and view its reports

HealthCare.gov fact sheet on recommended preventive services:

http://www.healthcare.gov/center/regulations/prevention/recommendations.html

HealthCare.gov webpage with preventive services resources:

http://www.healthcare.gov/center/regulations/prevention.html

If you have any comments or questions regarding any of above information, please do not hesitate to call (708) 717-9638 or e-mail larry@larrygrudzien.com

By Jerry Geisel

Business Insurance

WASHINGTON-Health care reform regulations issued Wednesday by the Obama administration make clear that employers will be able to continue to impose cost-sharing requirements on preventive services employees receive from out-of-network providers.

Under the new law, beginning Jan. 1, 2011, employers with calendar-year plans will have to fully cover preventive services, such as screenings and immunizations, with no employee cost-sharing requirements. Grandfathered plans-those plans that do not, for example, ever increase coinsurance requirements or boost employee premium contributions by more than five percentage points-are exempt from the mandate to provide full coverage for preventive services.

But the law is unclear about whether the full-coverage mandate applies for preventive services delivered out of network. The new regulations end that uncertainty.

“This is very welcome news,” said Mike Thompson, a principal with PricewaterhouseCoopers L.L.P. in New York.

“This will help employers effectively comply with the new requirement,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.

The regulations issued by the Departments of Labor, Treasury and Health and Human Services also make clear that regular cost-sharing requirements can be imposed on an office visit when a recommended preventive service is billed as a separate charge.

In addition, treatment resulting from a preventive service can be subject to cost-sharing requirements if the treatment is not itself a recommended preventive service.

Regulators estimate that the new requirements will increase group health care plans’ costs by an average of 1.5% a year.

PwC’s Mr. Thompson said, though, the cost impact will be much lower for employers that already provide coverage for many preventive services.

Down the road, the full-coverage mandate could lower costs if medical problems are spotted during preventive tests and screenings before they mushroom into expensive-to-treat conditions.

“We know that the best way to keep our families healthy and cut health care costs is to keep people from getting sick in the first place,” First Lady Michelle Obama said in remarks prepared for the release of the regulations.

From the KS Health and Welfare Team:

This morning the agencies released the preventive care regulations under the Affordable Care Act.  Beginning January 1, 2011 for calendar year plans, these regulations require non-grandfathered plans to cover certain preventive care services (such as office visits, lab tests/screenings and immunizations) with no cost sharing requirements.  We will be providing a detailed Legal Alert on these regulations in the next few days.

Mark L. Stember
Kilpatrick Stockton LLP
Suite 900 | 607 14th Street, NW | Washington, DC  20005-2018  
office 202 508 5802 | cell 202 714 5019 | fax 202 585 0018 
mstember@kilpatrickstockton.com | My Profile

By Ric Joyner, MBA, CEBS, GBA, CFCI

This morning HHS announced that applications are now being accepted for the early retiree reinsurance program.  The draft application released on June 7th appears to be the final application and is available from the website at the following address:  www.hhs.gov/ociio

A press release regarding the opening of the program is at the following address:  http://www.hhs.gov/news/press/2010pres/06/20100629a.html

Remember, first come, first served.

Thanks,

Mark

Mark  L. Stember
Kilpatrick Stockton LLP
Suite 900
607 14th Street, NW 
Washington, DC 20005
t 202 508 5802
f 202 585 0018

Dear Ric Joyner,

On Tuesday, June 22, the Wage and Hour Division of the U.S. Department of Labor issued an interpretation letter (No. 2010-3) clarifying the definition of "son or daughter" under the Family and Medical Leave Act (FMLA), as it relates to "a child of a person standing in loco parentis."  Administrative interpretation and opinion letters do not require the agency to go through the notice and comment process, as long as the letters merely clarify the interpretation of existing rules and definitions.

In the preamble of the letter, DOL indicated that the agency has received several requests for interpretation of whether leave may be taken by employees lacking a biological or legal relationship to a child.

The new guidance, a copy of which is available by clicking HERE, provides that a person may be eligible for unpaid FMLA leave for the birth or placement of a child, or to care for a son or daughter with a serious health condition, even if that person has no biological or legal relationship with the child. 

In determining whether an employee is eligible for FMLA leave, the interpretation states that "the employer may require the employee to provide reasonable documentation or statement of a family relationship. A simple statement asserting that the requisite family relationship exists is all that is needed in situations such as in loco parentis where there is no legal or biological relationship." However, the letter also states, "It is the Administrator’s interpretation that the regulations do not require an employee who intends to assume the responsibilities of a parent to establish that he or she provides both day-to-day care and financial support in order to be found to stand in loco parentis to a child."

The letter specifically mentions its application to unmarried partners and same-sex partners.  The fact that the child has a biological parent at home or has both a mother and a father does not prevent a finding that an employee with a non-biological relationship is eligible for FMLA leave.  The letter clearly states that, "Neither the statute nor the regulations restrict the number of parents a child may have under the FMLA."

Note: Nothing in this interpretation is intended to change the existing size limitations (50 or more employees) for the application of the FMLA’s requirements, and this clarification is intended to cover both public and private employers.

(From SHRM Notes) Join SHRM at: https://ecom.shrm.org/TimssSolutionSite2004_tpro/EBusinessDefault.aspx

The Department of Labor’s Employee Benefits Security Administration has posted the following related to preexisting condition exclusions, lifetime and annual limits, rescissions and patient protections under the Affordable Care Act:

Interim Final Regulation, available at http://www.federalregister.gov/OFRUpload/OFRData/2010-15278_PI.pdf

Fact Sheet, available at http://www.healthreform.gov/newsroom/new_patients_bill_of_rights.html

HPM legal notes June 15, 2010

For HealthPlanMarkets Subscribers (used with permission)

HMOs Are The Most Affected By New HHS Deductible Ceilings

New HHS rules released yesterday allow bigger than expected changes in grandfathered health plans before they lose their grandfather status. HHS appears to have gone far to make the rules less burdensome on industry.

But HPM has discovered that one of the new rules limiting increases in deductibles in grandfather plans will affect mostly HMOs in 2010. Most PPOs will not lose grandfather status until 2012, and most CDHPs will be exempted, although much of their growth comes from new non-grandfather plans.

To stay a grandfather, plans cannot raise the percentages now used for co-insurance, cannot raise copays in the future by more than $5 or 20%, and cannot raise deductibles by more than 25% over two years (20% in 2011). They also cannot reduce the employer contribution by more than 5 points. They can’t change insurer, but ASO type plans can change administrator.

The new rules contain an accurate chart showing who will be affected. Between 36% and 66% of large employers will still be grandfathers in 2013, and between 20% and 51% of small employers will still be exempted.

The lower percentage is most likely. The main reason: two-thirds of U.S. employers now shop for a new plan each year. That combined with pressure to keep premiums low by raising cost-sharing will in our opinion make being a grandfather much less attractive. For instance, a recent Mercer study shows that 38% of employers are now providing “unaffordable” PPACA coverage.

A grandfathered plan actually is not that much different. It is exempted from the new mandated first dollar prevention coverage, and from a new any-willing-provider mandate for OB-GYNs. But a large percentage of even the grandfather plans will have to carve out employees with a too high a percentage of family income paid to out-of-pocket costs (including premium).

New Deductible Limits Affects HMOs Most, CDH Plans Least

HealthPlanMarkets has compared the new HHS rules on how much a health plan can increase its deductibles with the 2009 Mercer employer survey. We found that from 2008 to 2009 most plan types came in below the 25% ceiling. But HMOs would be hit the hardest because they have been raising deductibles at a much faster rate to catch up with PPOs and CDHPs. In fact, most HMOs in the U.S. have probably already lost any hope of grandfather status:

CDH plans like HSAs and HRAs are the least impacted by the new rules because they already have high deductibles, and are barely increasing them from year to year. Few if any CDH plans even have copays, and co-insurance generally applies to above the deductible for about half of all plans.

Virtually all HRAs in the U.S. probably meet the deductible rule, and a large percentage of HSAs are not increasing deductibles at all. The only caveat is that employers also cannot reduce they HSA/HRA contributions by over 5 points without running afoul of the rule on sudden changes in the employer share. Employers have generally been increasing CDH contributions, though.

PPOs on average will probably not hit the deductible limit until 2012. However, PPO/POS plans have the most enrollees in the market and thus are likely to see the most plans losing grandfather status immediately.

“Plans will lose their ‘grandfather’ status if they choose to significantly cut benefits or increase out-of-pocket spending for consumers,” the new rule states. This will “allow employers to make routine and modest adjustments to co-payments, deductibles and employer contributions to their employees’ premiums without forfeiting grandfather status.”

From the KS Health and Welfare Team:

Today, I had the pleasure of co-chairing the DOL working group that is charged with coordinating employer sponsored health coverage with state premium assistance programs (often referred to as CHIP).  In attendance at the meeting this morning was Ms. Hilda Solis, Secretary of Labor.  She commented that she could only stay briefly because she was heading to the White House to do a press conference on the release of the official grandfather regulations (not the version that was leaked last Friday).  After she left, many in the room were seen sending messages on their Blackberries. 

I am only able to get to my computer now, and I am delighted to report that retiree health plans (and stand alone dental and vision benefits) remain exempt from all of the provisions of the Affordable Care Act.  Obviously good news for employers.  However, it cannot all be good, and unfortunately the grandfather regulations take a narrow view of grandfathered plans, including the kinds of changes that can be made while retaining grandfather status.  We will be following up with a Legal Alert on these issues later this week. 

For now, appended below is a link to the official press release.

http://www.hhs.gov/news/press/2010pres/06/20100614c.html

Mark  L. Stember
Kilpatrick Stockton LLP
Suite 900
607 14th Street, NW 
Washington, DC 20005
t 202 508 5802
f 202 585 0018