Employer-sponsored group health plans have more work to do in conjunction with the requirements of the Patient Protection and Affordable Care Act (“PPACA”). On May 2, 2014, the government released updated COBRA and CHIPRA model notices, proposed COBRA regulations, and a bulletin related to certain special enrollment periods in the exchanges. The government also issued additional frequently asked questions (“FAQs) related to a variety of topics under the PPACA. A general summary of the newly issued guidance is set forth below. Plan sponsors will need to take action in order to comply with this newly issued guidance.
COBRA: Updated Model Notices and Proposed Regulations
Under COBRA, certain group health plans have long been required to provide: (1) covered employees and their spouses with a written notice of COBRA rights at the time of commencement of coverage (a “general notice”); and (2) qualified beneficiaries with a written notice describing their rights to COBRA coverage and providing information related to how to make a COBRA election (an “election notice”).
The United States Department of Labor (“DOL”) recently issued proposed regulations amending the COBRA notice requirements to account for the fact that coverage is now also available through the exchanges. Specifically, the proposed regulations amend portions of the COBRA regulations related to the use of model general and election notices. The proposed regulations also delete the appendices that previously contained the model notices in an effort to more easily amend the model notices in the future and be able to maintain the most recent version of the notices on the DOL website.
Contemporaneously with the issuance of the newly proposed regulations, the DOL updated versions of the model general notice and model election notice to reflect that coverage is now available through the exchange. Among other changes, the updated general notice references coverage options under the exchanges that may be available to individuals who lose their group health plan coverage and certain special enrollment options. Likewise, highlights of changes to the election notice include language related to (1) the fact that coverage through the exchange may cost less than COBRA coverage, (2) the fact that it may be difficult for an individual to switch to another coverage option once a coverage decision has been made; (3) exchange-based coverage addressing the availability of premium tax credits and cost sharing; and (4) special enrollment rights in the exchange. The updated model notices are available on the DOL’s website. In the preamble to the proposed regulations, the DOL notes that it will consider use of appropriately completed revised notices to be good faith compliance with the notice content requirements of COBRA until the proposed regulations are finalized. However, the DOL also notes that use of the model notices is not required for compliance with the applicable notice requirements.
The updated model notices are also discussed in the FAQs About Affordable Care Act Implementation (Part XIX) available HERE.
Special Enrollment Period in the Exchanges for COBRA Eligible Individuals
The government also recently issued a bulletin relating to new special enrollment periods for individuals seeking to enroll in coverage through the exchanges. Of relevance, the bulletin announces a one-time special enrollment period into the exchanges for COBRA eligible individuals and beneficiaries. Specifically, COBRA eligible individuals and beneficiaries are permitted through July 1, 2014, to drop COBRA coverage and select a qualified health plan in the exchange. The bulletin can be found HERE, and provides instructions related to the COBRA special enrollment period. Plan sponsors may wish to advise their current COBRA beneficiaries of this one-time special enrollment period.
CHIPRA: Updated Model Notice
The Children’s Health Insurance Program Reauthorization Act of 2009 (“CHIPRA”) expanded the Children’s Health Insurance Program (“CHIP”) and Medicaid by permitting states to use Medicaid and CHIP funds to subsidize certain premiums paid for coverage under employer group health plans. Under CHIPRA, an employer that maintains a group health plan in a state that provides premium assistance for the purchase of coverage under a group health plan is required to notify each employee of potential opportunities currently available for premium assistance in the state in which the employee resides. The DOL has issued a revised CHIPRA model notice to update the fact that coverage under the exchanges may be available. The revised model notice is available HERE.
The PPACA imposes certain limits on a group health plan enrollee’s out-of-pocket costs. For example for plan years beginning in 2014, the out-of-pocket maximum for self-only coverage is $6,350, and the maximum for other-than-self is $12,700. HHS has proposed that the annual limitation on out-of-pocket costs for 2015 will be $6,600 for self-only coverage and $13,200 for other-than-self coverage. The government recently released additional guidance, in the form of FAQs, related to calculating out-of-pocket costs for purposes of these maximums. Specifically, the FAQs generally state that the plan may use any reasonable method for counting out-of-pocket spending for out-of-network items or services towards the out-of-pocket maximum when a network-based health plan covers out-of-network items and services. Additionally, the FAQs clarify how large group market coverage and self-insured group health plans should treat an individual’s out-of-pocket costs for a brand name prescription drug under circumstances where a generic drug is available and medically appropriate. Further, the FAQs explain how, in a large group market plan or a self-insured group health plan, the out-of-pocket maximum applies when an individual uses a provider that does not accept a referenced-based pricing structure as payment in full. [See FAQs About Affordable Care Act Implementation (Part XIX) available HERE.]
Coverage of Preventive Services
The PPACA prohibits the imposition of cost-sharing requirements with respect to certain preventive services. The government recently released additional guidance, in the form of FAQs, related to what plans and issuers are expected to provide as preventive coverage for tobacco cessation interventions. Generally, group health plans and health issuers will be in compliance with the requirement to provide tobacco cessation coverage if they cover without cost-sharing (1) screening for tobacco use; and (2) for tobacco-users, at least two tobacco cessation attempts per year (each of which would include coverage for four tobacco cessation counseling sessions of at least 10 minutes each and access to all FDA-approved tobacco cessation medication for a 90-day treatment regimen when prescribed by a health care provider without prior authorization). [See FAQs About Affordable Care Act Implementation (Part XIX) available HERE.]
Health FSA Carryover
Health flexible spending accounts (“FSA”) constitute excepted benefits (which are exempt from certain HIPAA and PPACA requirements) if (1) the employer also makes available group health plan coverage that is not limited to excepted benefits for the year to the class of participants by reason of their employment; and (2) the arrangement is structured so that the maximum benefit payable to any employee participant in the class cannot exceed (a) two times the employee’s salary reduction election for the arrangement for the year, or (b) if greater, cannot exceed $500 plus the amount of the participant’s salary reduction election. Traditionally, flexible spending accounts needed to be offered on a “use-it-or lose-it” basis. However, in 2013, the government modified the “use-it-or-lose-it” rule to allow up to $500 of unused amounts to be carried over to the next year (provided that the plan does not also incorporate a grace period). The FAQs clarify that unused carryover amounts remaining at the end of the plan year in a health FSA that satisfy the modified “use-it-or-lose-it” rule should not be taken into account when determining if the health FSA satisfies the maximum benefit payable limit prong above under the excepted benefits regulations. [See FAQs About Affordable Care Act Implementation (Part XIX) available HERE.]
Summary of Benefits and Coverage
The PPACA requires group health plans and issuers to provide a single, uniform summary of benefits and coverage (“SBC”) that accurately describes the benefits and coverage under the applicable plan or coverage. In April 2013, the government updated the SBC template for the second year of applicability. The FAQs state that until further guidance is issued, plans and issuers are permitted to continue to use the April 2013 template. Additionally, the FAQs extend, until further guidance is provided, certain safe harbors and other enforcement relief which were provided by the government related to the requirements to provide a SBC and a uniform glossary for the first and second years of applicability. [See FAQs About Affordable Care Act Implementation (Part XIX) available HERE.]