Frequently Asked Questions (FAQs) Part XIX were issued May 2, 2014 by the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (the Departments). These FAQs address the following topics:
- The new DOL model COBRA general notice and election notice are available at www.dol.gov/ebsa/cobra.html , and they have both been updated to include information about the availability of (possibly lower cost) health coverage in the Marketplace/ Exchange.
- How the annual out-of-pocket maximum applies to enrollees’ payments for:
- Balance billing amounts for out-of-network services
- Reference-based pricing and provider charges in excess of such prices
- Brand name prescription drugs, when generics were available and medically appropriate
- “Preventive services” – for which plans and issuers must provide first-dollar coverage –include at least two tobacco cessation attempts per year, including all FDA-approved tobacco cessation medication (both prescription and over-the-counter) for a 90-day treatment regimen when prescribed by a health care provider without prior authorization.
- A permissible carry over at the end of a health FSA plan year should not be taken into account when determining if the health FSA meets the definition of an “excepted” benefit.
- Until further guidance is issued, plans and issuers can continue to use the templates for Summaries of Benefits and Coverage (SBCs) that were issued in April 2013. Previously– issued transition guidance also continues to apply, and the Departments will continue to emphasize assisting compliance—rather than imposing penalties—on plans and issuers who make a good-faith effort to comply.
These and previously issued FAQs are available at http://www.dol.gov/ebsa/healthreform/ and http://www.cms.gov/cciio/resources/fact-sheets-andfaqs/index.html.
The following provides additional detail on the five topics listed above.
New Model COBRA and CHIPRA Notices
The new DOL model COBRA general notice and election notice are available at www.dol.gov/ebsa/cobra.html , and they have both been updated to include information about the availability of health coverage in the Marketplace/ Exchange as an alternative to COBRA continuation coverage. They also note that such coverage may be less costly than COBRA. Additionally, a newest model CHIPRA notice (dated January 31, 2014) is available at http://www.dol.gov/ebsa/compliance_assistance.html
Annual Out-of-Pocket Maximum
The Affordable Care Act (ACA, section 1302(c)(1)) sets an annual limit on the maximum out-of-pocket costs a participant can be required to pay under an individual or small or large group health plan. For 2014 the annual limit is $6,350 for self-only coverage and $12,700 for coverage other than self-only. For 2015 it will be $6,600 and $13,200.
Prior FAQs and other guidance have addressed what costs a plan can or must count toward the out-of-pocket amount. This is an important issue for both participant and plans, since the plan must pay 100% of eligible expenses once the out-of-pocket maximum is reached. Generally, amounts that must be counted include deductibles, co-pays and coinsurance for services provided in-network. Numerous questions have arisen (and remain) about whether and how certain out-of-network expenses must or may be counted toward the out-of-pocket maximum. This FAQ addresses several such circumstances.
Balance Billing: Prior guidance (FAQs Part XVIII Q4) clarified that if a plan includes a network of providers, and a participant receives services from an out-of-network provider who charges more than the plan’s allowed amount, (a practice typically called “balance billing”), the plan may, but is not required to, count the participant’s out-of-pocket costs toward the plan’s annual out-of-pocket maximum.
Question 2 of FAQs Part XIX clarifies that such a plan may use “any reasonable method” in determining the amount of participant spending it will count towards the out-of-pocket maximum. For example, Question 2 provides that “if the plan covers 75% of the usual, customary, and reasonable amount (UCR) charged for services provided out-of-network and the participant pays the remaining 25% of UCR plus any amount charged by the out-of-network provider in excess of UCR,” the plan can count toward the out-of-pocket maximum all or part of the 25% of UCR the participant paid, and is not required to count any amount the participant paid that exceeded the UCR.
Purchase of Brand Name Drugs When Generics are also Medically Appropriate: Question 3 of the FAQs clarifies that if a participant purchases a brand name prescription drug, when a generic was available and medically appropriate (according to the participant’s doctor), a large group insured plan or a self-insured plan may provide that the annual out-of-pocket maximum does not include all or some of the amount paid by the participant or beneficiary (e.g., the difference between the cost of the brand name drug and the cost of the generic drug). Question 3 specifically requires, however, that “for ERISA plans, the SPD must explain which covered benefits will not count towards an individual’s out-of-pocket maximum.”
The reason this applies for self-insured and large group insured plans (but not for small insured plans) is because they have discretion to define “essential health benefits” (EHBs) under ACA section 1302(a), but (non-grandfathered) individual and small group insured plans must provide coverage of the EHB package. Thus, for example, self-insured and large group plans could include in the definition of EHBs only generic drugs, if medically appropriate and available. Participants could still purchase brand name drugs at a higher cost sharing amount, but some or all of the cost in excess of that of the generic drug would not count toward the annual out-of-pocket limit.
Reference-Based Pricing: Until guidance is issued and effective, a large group market plan or self-insured group health plan that uses a reference-based pricing program may treat providers that accept the reference amount as the only in-network providers, provided the plan uses a reasonable method to ensure that it provides adequate access to quality providers.
There are various types of reference-based pricing structures, and the FAQ (Question 4) addresses only one type. It is not clear whether a plan that uses a different reference-based pricing structure could also treat as in-network providers only those who accept the reference amount. The reference-based pricing structure in Question 4 is one under which the plan pays a fixed amount for a particular procedure (for example, a knee replacement), which certain providers will accept as payment in full. Another increasingly-common reference-based pricing structure is one under which a plan pays a particular multiple of the Medicare reimbursement rate (e.g., 125% or 150%) and treats as in-network only those providers who accept that reference amount. When a participant uses a provider that does not accept that amount, the participant’s additional costs (which are often significant) do not count toward the out-of-pocket maximum.
The FAQ requests comments on how the out-of-pocket limit should be applied to reference based pricing. The Departments recognize that reference pricing is intended to encourage plans to negotiate cost effective treatments with high quality providers at reduced costs, but they also express concern that some plans or issuers may use such a pricing structure as a subterfuge to impose otherwise-prohibited limits on coverage, without ensuring access to quality care and an adequate network of providers. Comments are due by August 1, 2014 and can be sent to E-OHPSCA-FAQ.email@example.com.
Coverage of Preventive Services
Plans and issuers must pay for specified preventive services on a first-dollar basis – before the deductible has been met. One category of preventive service is tobacco cessation programs. Question 5 of the FAQs details what plans and issuers must provide as preventive coverage for tobacco cessation interventions.
Prior guidance allows plans to use reasonable medical management techniques to determine the frequency, method, treatment, or setting for a recommended preventive service, to the extent not specified in the recommendation or guideline regarding that preventive service.
Question 5 specifies that a group health plan or health insurance issuer will be considered in compliance with the preventive coverage requirements if it covers the following tobacco use counseling and interventions without cost-sharing:
- Screening for tobacco use, and
- At least two tobacco cessation attempts per year (for participants who use tobacco products). Covering a cessation attempt is defined to include coverage for:
- Four tobacco cessation counseling sessions of at least 10 minutes each (including telephone counseling, group counseling and individual counseling) without prior authorization, and
- All Food and Drug Administration (FDA)-approved tobacco cessation medications (including both prescription and over-the-counter medications) for a 90-day treatment regimen when prescribed by a health care provider without prior authorization.
This guidance is based on the Public Health Service-sponsored Clinical Practice Guideline, Treating Tobacco Use and Dependence: 2008 Update, available at: http://www.ahrq.gov/professionals/clinicians-providers/guidelinesrecommendations/tobacco/index.html#Clinic
Health FSA Carryover and Excepted Benefits
Question 6 clarifies that a permissible carry over at the end of a health FSA plan year should not be taken into account when determining if the health FSA meets the definition of an “excepted” benefit.
Prior regulations defined excepted benefits and subsequent IRS guidance (October 31, 2013) allowed health FSAs to permit a carry over from one plan year to the next of up to $500 of unused amounts. This FAQ (Question 6) clarifies that a health FSA will not cease to be an excepted benefit merely because it permits such a carry over.
A quick recap of the prior guidance on excepted benefits and health FSA carry over:
- Excepted benefits provided under a group health plan or health insurance coverage generally are exempt from the Health Insurance Portability and Accountability Act (HIPAA) and ACA market reform requirements of ERISA, the PHS Act, and the Internal Revenue Code. Previous regulations (the HIPAA excepted benefits regulations) define excepted benefits to include health FSAs that meet specified criteria, one of which is that the maximum benefit payable to any employee participant cannot exceed specified amounts.
- Health FSA carry over. On October 31, 2013, the IRS issued Notice 2013-71, modifying the “use-or-lose” rule for health FSAs to allow up to $500 of unused amounts remaining at the end of a plan year in a health FSA to be paid or reimbursed to plan participants for qualified medical expenses incurred during the following plan year, provided that the plan does not also incorporate a grace period.
Summary of Benefits and Coverage
Until further guidance is issued, plans and issuers can continue to use the templates for Summaries of Benefits and Coverage (SBCs) that were issued in April 2013. These are available at http://cciio.cms.gov and http://www.dol.gov/ebsa/healthreform . Additionally, there are no changes to the uniform glossary, the “Why This Matters” language for the SBC, or the Instructions for Completing the SBC.
Question 7 specifies that the following special rule continues to apply: “to the extent a plan’s terms that are required to be described in the SBC template cannot reasonably be described in a manner consistent with the template and instructions, the plan or issuer must accurately describe the relevant plan terms while using its best efforts to do so in a manner that is still as consistent with the instructions and template format as reasonably possible.”
Question 8 provides that previously–issued enforcement and transition relief guidance also continues to apply, and the Departments will continue to emphasize assisting compliance—rather than imposing penalties—on plans and issuers who make a good-faith effort to comply. Some of the other transition relief specifically listed includes:
- Use of carve-out arrangements
- Circumstances in which an SBC may be provided electronically
- Penalties for failure to provide the SBC or uniform glossary
- Coverage examples calculator
- An issuer’s obligation to provide an SBC for benefits it does not insure