Health Care Reform Law: New Guidance

February 26, 2013

The agencies responsible for implementation of the health care reform law have issued some new guidance:

HHS issued 149-page package of final “Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation,” that includes rules for determining whether an employer-sponsored health plan provides minimum value, provides information on applicability of cost-sharing limits and finalizes the definition of essential health benefits (but does not provide rules on how employer plans should apply that definition).

The DOL, in conjunction with HHS and the IRS, issued a set of FAQs that focuses predominantly on coverage of preventive services under the health care reform law, but also includes discussion of cost sharing limitations.

Minimum Value Calculator

HHS and the IRS have made available a long-promised Minimum Value Calculator, accompanied by the Minimum Value Calculator Methodology.

Significance of Minimum Value. An employer-sponsored plan provides minimum value if its actuarial value is at least 60 percent. The minimum value determination is important for purposes of the pay or play excise tax because an employer cannot foreclose the possibility of incurring the tax unless, along with meeting several other conditions, the employer offers minimum value coverage to every one of its full-time employees. Employers have been waiting for the final definition of minimum value so that they can be certain the coverage they offer will be sufficiently valuable to avoid the pay or play excise tax.

Guidance on Minimum Value. Over the past year, the IRS and HHS have indicated that they would provide some alternative methodologies for determining whether employer-sponsored plans provide minimum value and that one option would be a minimum value calculator. As expected, the final regulations note that the minimum value determination may be made using “[t]he MV Calculator to be made available by HHS and the Internal Revenue Service.” The calculator is not part of the final regulations, however, and they provide no clue about its availability or location. Buried deep in the preamble to the regulations, however, HHS mentions that “[t]he MV Calculator with accompanying continuance tables and the MV methodology are now available at”

Three other methods for verifying minimum value are provided in the final regulations: (1) “any safe harbor established by HHS and the IRS” (no such safe harbor is available yet); (2) certification by an actuary, but only for a plan that has non-standard features not suitable to the calculator or safe harbor; and (3) a method available only for small employers that accepts as minimum value any of the so-called “metal levels” of coverage to be offered through the state insurance exchanges. The final regulations also provide that employer contributions to an HSA will be taken into account in determining minimum value. Additions to HRA balances may also be taken into account, but only if the HRA is integrated with a major medical-type plan and the HRA balance may be used only for cost sharing.

The Willis National Legal & Research Group is studying the new regulations regarding minimum value, as well as the minimum value calculator and its methodology, and will provide details in a future publication.

Limits on Annual Deductibles

The preamble to the HHS regulations, together with the agencies’ FAQs, reaffirmed the agencies’ belief that a provision limiting annual deductibles does not apply to group health plans other than non-grandfathered insured plans purchased in the small group market or through an exchange. The provision at issue is effective for plan years starting on or after January 1, 2014 and limits annual deductibles (initially, $2,000 for self-only coverage and $4,000 for other coverage). This means that employer-sponsored plans that are self-insured or are large insured plans need not comply with these limits on deductibles. At the same time, however, there is still no official guidance providing that assurance.

Limits on Out-of-Pocket Maximums

While many had hoped that the agencies would conclude that the limits on out-of-pocket maximums have the same limited applicability as the annual deductible limits, the preamble to the HHS regulations and the agencies’

FAQs stated the opposite conclusion. That is, the agencies have concluded that all non-grandfathered group health plans must comply with the limits on annual out-of-pocket maximums. This provision states that, effective for plan years starting on or after January 1, 2014, a plan’s out-of-pocket maximums can be no higher than those permitted during 2014 for the high-deductible health plan coverage that an individual must have in order to be eligible for tax-favored contributions to a health savings account (for 2013, these limits are $6,250 for self-only coverage and $12,500 for coverage other than self-only). To facilitate implementation during 2014, the agencies are providing an enforcement policy intended to accommodate

operational and timing issues caused by multiple service providers administering benefits that are subject to cost sharing requirements (e.g., a TPA for major medical coverage, a separate pharmacy benefit manager, and a separate managed behavioral health organization). Details of this enforcement policy will be explained in a future publication after the policy is finalized (or it becomes clear that employers must rely on the guidance issued to date).

Lifetime and Annual Dollar Limits on Benefits

As the name of the HHS regulations implies, these are the final rules on the definition of essential health benefits. Unfortunately, the final regulations do not address the issues that make the definition of essential health benefits important to employers.

Employer plans (other than insured plans sold in the small group market or through an exchange) generally are not required to provide essential health benefits, but the definition of essential health benefits is important to employers in complying with the prohibitions of annual and lifetime dollar limits on essential health benefits. That is, plans may have annual and lifetime dollar limits on items that are not essential health benefits, raising questions about whether various items (e.g., infertility treatment) are essential health benefits.

The final regulations continue the state-by-state approach to defining essential health benefits that appeared in earlier HHS proposals. Also like previous proposals, the regulations focus primarily on the processes that states follow in defining essential health benefits and the options available to the states in doing so. The preamble to the regulations includes the only information relevant for employers, reiterating two assurances that previously were provided in an FAQ.

Employer-sponsored plans (other than insured plans sold in the small group market or through an exchange) will be able to choose any state’s definition of essential health benefits for purposes of complying with the annual and lifetime dollar limits provisions.

The enforcing agencies will take into account good faith efforts to apply an authorized definition of essential health benefits.

Agency FAQs on Preventive Services

The FAQs that the DOL issued in conjunction with HHS and the IRS include information on the cost-sharing limitations discussed above. Most of the FAQs focus on coverage of preventive services as required under a coverage reform provision that initially became effective for play years starting on or after September 23, 2010.

That provision requires non-grandfathered health plans to provide certain preventive care services (such as mammograms, colonoscopies and immunizations) without cost-sharing. The FAQs address several specific issues, including:

If a plan does not have an in-network provider who can provide a particular service, then the service must be covered with no cost sharing when provided by an out-of-network provider.

Aspirin and other over-the-counter items and services that are included in required preventive care must be covered without cost-sharing, but only when prescribed by a health care provider.

A plan may not impose cost-sharing with respect to a polyp removal during a colonoscopy performed as a screening procedure.

Genetic counseling and BRCA testing, if appropriate, must be covered preventive services without cost-sharing.

The information in this publication is not intended as legal or tax advice and has been prepared solely for informational purposes. You may wish to consult your attorney or tax adviser regarding issues raised in this publication.