Cost-Sharing (Reductions), Employee Benefits Compliance, Mental Health Parity & Addiction Equity Act, Preventive Services, Wellness Programs

NEW FAQs on Preventive Services, Cost-Sharing Limits, Wellness Programs, Fixed Indemnity Benefits, & MHPAEA

On January 9, 2014, the DOL, HHS and IRS issued FAQs Part XVIII (18), which includes 12 questions and answers on various ACA implementation areas as well as on the Mental Health Parity and Addiction Equity Act (MHPAEA). The six areas addressed by the 12 FAQs are:

  • Preventive Services
  • Limits on Cost-Sharing under the ACA
  • Expatriate Health Plans
  • Wellness Programs
  • Fixed Indemnity Insurance
  • Mental Health Parity and Addiction Equity Act

Following are summaries of selected questions and answers we thought would be of most interest to our clients.

Coverage of Preventive Services:  New Breast Cancer Medications

Bottom Line (Q-A1):   Plans that must cover preventive services must, as of the first plan or policy year beginning on or after September 24, 2014, cover prescribed risk-reducing medication for breast cancer for women who are at increased risk for breast cancer and at low risk for adverse medication effects, as determined by their medical providers.

Background & Details:  Non-grandfathered group health plans and health insurance offered for individuals or groups must provide benefits for specified “preventive services” and cannot impose cost-sharing requirements for such coverage. (PHSA section 2713) Preventive services are specified by the U.S. Preventive Services Task Force (USPSTF). Cost-sharing includes deductibles, co-insurance and co-payments for in-network services.

On September 24, 2013, the USPSTF issued new recommendations with respect to breast cancer. The recommendation says in part:

For women who are at increased risk for breast cancer and at low risk for adverse medication effects, clinicians should offer to prescribe risk-reducing medications, such as tamoxifen or raloxifene.

To comply with this new recommendation, plans must cover prescribed risk-reducing medications for applicable women with no cost charing and subject to reasonable medical management.  Plans must comply as of the first plan or policy year beginning on or after September 24, 2014; for calendar year plans, this will be as of January 1, 2015.

Separate Out-of-Pocket Maximums on Different Categories of EHB are OK, but Total Amount Cannot Exceed Annual Limit 

Bottom Line (Q-As 2 & 3):  For plan years beginning on or after January 1, 2015, group health plans can still have separate out-of-pocket maximums on different categories of essential health benefits (EHB) that are administered by different service providers (such as separate out-of-pocket maximums for prescription drugs and for other medical benefits), but the combined dollar amounts cannot exceed the statutory maximum for that year.

Background & Details:  The ACA imposes annual dollar limits on the maximum out-of-pocket amount that participants in non-grandfathered group health plans must pay for essential health benefits (EHB).  This applies as of the 2014 plan year to large and small group health plans, whether insured or self-funded.  For 2014 the annual out-of-pocket maximum is $6,350 for self-only coverage and $12,700  for all other coverage.  A previous FAQ (Part XII, Q2) provided an exception solely for the 2014 plan year:   plans that used more than one service provider to administer different types of EHBs could have a separate annual maximum for each category of EHB.  An example would be a self-insured health plan that has a separate prescription drug program.  The new FAQ clarifies that, as of the 2015 plan year, the annual out-of-pocket maximum applies to all categories of EHBs under the plan.  Plans can still have two separate annual limits for different categories of EHBs, but the total of the two separate maximums cannot exceed the specified amount for that year. For 2015, the annual out-of-pocket limit is $6,750 for self-only coverage and $13,500 for all other coverage. (per HHS guidance issued November 24, 2014: )

Annual Maximum Out-of-Pocket Limit Need Not Include Costs for Out-of-Network or Non-Covered Services

Bottom Line (Q-A 4):  A plan that includes a network of providers is not required (but is permitted) to count an individual’s out-of-pocket expenses for out-of-network items and services toward the plan’s annual maximum out-of-pocket limit.

Bottom Line (Q-A 5):  A plan is not required (but is permitted) to count an individual’s out-of-pocket expenses for non-covered services toward the plan’s annual maximum out-of-pocket limit.

Wellness Programs: Tobacco Cessation

Bottom Line (Q-A 8):  If an employer offers a tobacco cessation wellness program and offers group health plan participants a reasonable opportunity, at open enrollment, to participate in the program or pay a tobacco premium surcharge, the employer is not required (but is permitted) to provide another opportunity to avoid the surcharge until renewal or reenrollment for the next plan year. Thus, if a tobacco user initially declines to participate but later in the plan year enrolls in the tobacco cessation program, the employer can continue to charge the individual the tobacco premium surcharge for the remainder of that plan year.

Wellness Programs:  “Reasonable Alternative Standard”

Bottom Line (Q-A 9):  If an employer offers an outcome-based wellness program but an employee’s doctor says that this particular program is medically inappropriate for this individual and recommends an alternate (activity-only) weight-reduction program, the plan/employer does have some discretion as to what alternative program it will offer. The FAQ is not entirely clear as to how much discretion the plan has, but it does say “the plan must provide a reasonable alternative standard that accommodates the recommendations of the individual’s personal physician” and suggests that “a participant should discuss different options with the plan.”

Bottom Line (Q-A 10):  Plans and health insurance issuers that offer health-contingent wellness programs may modify the sample language provided in the final regulations (paragraph (f)(6)) to provide notice of the availability of a “reasonable alternative standard.” The modified language must accurately reflect the details of the wellness program being offered and must include all of the required content in paragraphs (f)(3)(v) or (f)(4)(v) of the final regulations.

Fixed Indemnity Insurance

Bottom Line (Q-A 11):  Insurance labeled as “fixed indemnity” insurance that provides benefits other than on a “per-period” basis may nonetheless qualify as excepted benefits if specified conditions are met, even if it does not qualify as “minimum essential coverage.”

Background & Details:  “Excepted benefits” are generally exempt from various health coverage requirements under ERISA, the Code and the ACA. Fixed indemnity insurance provided under a group health plan qualifies as an “excepted benefit” if it meets certain conditions outlined in existing regulations and guidance. One of the requirements was that the fixed indemnity policy must pay solely on a “per-period” basis (e.g., daily or weekly), and not on a “per-service” basis (e.g., per office visit or X-ray), to be considered an excepted benefit.

The new FAQ says that HHS intends to propose amendments that would allow fixed indemnity coverage sold in the individual health insurance market to be considered to be an excepted benefit if it meets the following conditions:

  • It is sold only to individuals who have other health coverage that is minimum essential coverage (as defined in Tax Code section 5000A(f));
  • There is no coordination between the provision of benefits and an exclusion of benefits under any other health coverage;
  • The benefits are paid in a fixed dollar amount regardless of the amount of expenses incurred or the amount of benefits provided under any other health coverage; and
  • A notice is displayed prominently in the plan materials informing policyholders that the fixed indemnity coverage does not meet the definition of minimum essential coverage and will not satisfy the individual responsibility requirements of Tax Code section 5000A.

Until HHS issues final rules on this, HHS will treat fixed indemnity coverage in the individual market as excepted benefits for enforcement purposes if it meets the conditions above in States where HHS has direct enforcement authority. For States with primary enforcement authority, HHS encourages those States to also treat this coverage as an excepted benefit and will not consider that a State is not substantially enforcing the individual market requirements merely because it does so.

Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA)

Bottom Line (Q-A 12):  All non-grandfathered small group market coverage that is not otherwise subject to the HHS transitional policy must include coverage for mental health and substance use disorder benefits. (The transitional policy allows insurers to continue certain non-ACA compliant small group policies for one year. See Leavitt November 15, 2013 article, at )

Exactly which mental health and substance use disorder requirements apply depends on the plan year:

  • For plan years beginning on or after January 1, 2014 but before July 1, 2014, the coverage must comply with the MHPAEA parity requirements in the interim final regulations issued in February 2010.
  • For plan years beginning on or after July 1, 2014 (which, for calendar year plans, is January 1, 2015), the coverage must comply with the requirements in the final MHPAEA regulations that were issued November 13, 2013.

Grandfathered small group market coverage is not required to comply with either the EHB provisions or MHPAEA.