Final Rules for Grandfathered Plans, Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions, Dependent Coverage, Appeals, and Patient Protections Under the Affordable Care Act, 72191-72294 [2015-29294]
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Vol. 80
Wednesday,
No. 222
November 18, 2015
Part III
Department of the Treasury
Internal Revenue Service
26 CFR Part 54
Department of Labor
Employee Benefits Security Administration
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29 CFR Part 2590
Department of Health and Human Services
45 CFR Parts 144, 146 and 147
Final Rules for Grandfathered Plans, Preexisting Condition Exclusions,
Lifetime and Annual Limits, Rescissions, Dependent Coverage, Appeals,
and Patient Protections Under the Affordable Care Act; Final Rules
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FOR FURTHER INFORMATION CONTACT:
DEPARTMENT OF THE TREASURY
Elizabeth Schumacher or Amber Rivers,
Employee Benefits Security
Administration, Department of Labor, at
(202) 693–8335; Karen Levin, Internal
Revenue Service, Department of the
Treasury, at (202) 927–9639; Cam
Clemmons, Centers for Medicare &
Medicaid Services, Department of
Health and Human Services, at (410)
786–1565.
Customer Service Information:
Individuals interested in obtaining
information from the Department of
Labor concerning employment-based
health coverage laws may call the EBSA
Toll-Free Hotline at 1–866–444–EBSA
(3272) or visit the Department of Labor’s
Web site (www.dol.gov/ebsa).
Information from HHS on private health
insurance coverage can be found on
CMS’s Web site (www.cms.gov/cciio),
and information on health care reform
can be found at www.HealthCare.gov.
SUPPLEMENTARY INFORMATION:
Internal Revenue Service
26 CFR Part 54
[TD 9744]
RIN 1545–BJ45, 1545–BJ50, 1545–BJ62,
1545–BJ57
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2590
RIN 1210–AB72
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
45 CFR Parts 144, 146 and 147
[CMS–9993–F]
RIN 0938–AS56
Final Rules for Grandfathered Plans,
Preexisting Condition Exclusions,
Lifetime and Annual Limits,
Rescissions, Dependent Coverage,
Appeals, and Patient Protections
Under the Affordable Care Act
Internal Revenue Service,
Department of the Treasury; Employee
Benefits Security Administration,
Department of Labor; Centers for
Medicare & Medicaid Services,
Department of Health and Human
Services.
ACTION: Final rules.
AGENCY:
This document contains final
regulations regarding grandfathered
health plans, preexisting condition
exclusions, lifetime and annual dollar
limits on benefits, rescissions, coverage
of dependent children to age 26,
internal claims and appeal and external
review processes, and patient
protections under the Affordable Care
Act. It finalizes changes to the proposed
and interim final rules based on
comments and incorporates
subregulatory guidance issued since
publication of the proposed and interim
final rules.
DATES:
Effective date. These final regulations
are effective on January 19, 2016.
Applicability date. These final
regulations apply to group health plans
and health insurance issuers beginning
on the first day of the first plan year (or,
in the individual market, the first day of
the first policy year) beginning on or
after January 1, 2017. For information
on requirements applicable prior to this
date, see section II.I. of this preamble.
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SUMMARY:
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I. Background
The Patient Protection and Affordable
Care Act, Public Law 111–148, was
enacted on March 23, 2010; the Health
Care and Education Reconciliation Act
(the Reconciliation Act), Public Law
111–152, was enacted on March 30,
2010 (these are collectively known as
the ‘‘Affordable Care Act’’). The
Affordable Care Act reorganizes,
amends, and adds to the provisions of
part A of title XXVII of the Public
Health Service Act (PHS Act) relating to
group health plans and health insurance
issuers in the group and individual
markets. The term ‘‘group health plan’’
includes both insured and self-insured
group health plans.1 The Affordable
Care Act adds section 715(a)(1) to the
Employee Retirement Income Security
Act (ERISA) and section 9815(a)(1) to
the Internal Revenue Code (the Code) to
incorporate the provisions of part A of
title XXVII of the PHS Act into ERISA
and the Code, and make them
applicable to group health plans, and
health insurance issuers providing
health insurance coverage in connection
with group health plans. The PHS Act
sections incorporated into the Code and
ERISA are sections 2701 through 2728.
The Departments of Labor (DOL),
Health and Human Services (HHS) and
the Treasury (collectively, the
Departments) have issued regulations
implementing the revised PHS Act
sections 2701 through 2719A in several
1 The term ‘‘group health plan’’ is used in title
XXVII of the PHS Act, part 7 of ERISA, and chapter
100 of the Code, and is distinct from the term
‘‘health plan,’’ as used in other provisions of title
I of the Affordable Care Act. The term ‘‘health plan’’
does not include self-insured group health plans.
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phases.2 Throughout 2010, the
Departments issued interim final
regulations (or temporary and proposed
regulations),3 with requests for
comment, implementing Affordable
Care Act section 1251 (preservation of
right to maintain existing coverage), and
PHS Act sections 2704 (prohibition of
preexisting condition exclusions), 2711
(prohibition on lifetime or annual
limits), 2712 (prohibition on
rescissions), 2714 (extension of
dependent coverage), 2719 (internal
claims and appeals and external review
process), and 2719A (patient
protections) (collectively, the 2010
interim final regulations). As discussed
in more detail below, after consideration
of comments 4 in response to the 2010
interim final regulations, the
Departments are issuing these final
regulations.
II. Overview of the Final Regulations
A. Section 1251 of the Affordable Care
Act, Preservation of Right To Maintain
Existing Coverage (26 CFR 54.9815–
1251, 29 CFR 2590.715–1251, and 45
CFR 147.140)
Section 1251 of the Affordable Care
Act provides that certain group health
plans and health insurance coverage
existing as of March 23, 2010 (the date
of enactment of the Affordable Care Act)
(grandfathered health plans) are only
subject to certain provisions of the
Affordable Care Act (for as long as they
maintain that status as grandfathered
health plans under the applicable
regulations).5 On June 17, 2010, the
Departments issued interim final
regulations implementing section 1251
and requesting comment.6 On
2 Note, however, that in sections under headings
listing only two of the three Departments, the term
‘‘Departments’’ generally refers only to the two
Departments listed in the heading.
3 The Departments of Labor and HHS published
their rules as interim final rules and are finalizing
their interim final rules. The Department of the
Treasury/Internal Revenue Service published
temporary regulations and proposed regulations
with the text of the temporary regulations serving
as the text of the proposed regulations. The
Department of the Treasury/Internal Revenue
Service is finalizing its proposed rules.
4 In response to the 2010 interim final regulations,
the Departments received many comments that
relate to early implementation issues, many of
which were addressed through subregulatory
guidance (addressed more fully below). While the
Departments acknowledge and have reviewed the
comments provided in response to the 2010 interim
final regulations, to the extent the issues presented
are now moot, such comments are not explicitly
addressed below.
5 For a list of the market reform provisions under
title XXVII of the PHS Act, as added or amended
by the Affordable Care Act and incorporated into
ERISA and the Code, applicable to grandfathered
health plans, visit https://www.dol.gov/ebsa/pdf/
grandfatherregtable.pdf.
6 75 FR 34538.
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November 17, 2010, the Departments
issued an amendment to the interim
final regulations to permit certain
changes in policies, certificates, or
contracts of insurance without loss of
grandfathered status.7 Also in 2010, the
Departments released Affordable Care
Act Implementation Frequently Asked
Questions (FAQs) Parts I, II, IV, V, and
VI to answer questions related to
maintaining a plan’s status as a
grandfathered health plan.8 After
consideration of the comments and
feedback received from stakeholders,
the Departments are publishing these
final regulations. As discussed in more
detail below, these final regulations
finalize the 2010 interim final
regulations and amendment to the
interim final regulations without
substantial change and incorporate the
clarifications issued thus far in
subregulatory guidance.
1. Definition of Grandfathered Health
Plan Coverage
Under the Affordable Care Act and
paragraph (a)(1) of the interim final
regulations implementing section 1251
of the Affordable Care Act, a group
health plan or group or individual
health insurance coverage is a
grandfathered health plan with respect
to individuals enrolled on March 23,
2010 (for as long as it maintains that
status under the applicable regulations).
The interim final regulations provided
that a group health plan or coverage
does not relinquish its grandfather
status merely because one or more (or
even all) individuals enrolled on March
23, 2010 cease to be covered, provided
that the plan or group health insurance
coverage has continuously covered at
least one person (although not
necessarily the same person) at all times
since March 23, 2010. The interim final
regulations also provided that the
determination of grandfather status
7 75
FR 70114.
Affordable Care Act Implementation FAQs
Part I, available at https://www.dol.gov/ebsa/faqs/
faq-aca.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs.html, Affordable Care Act
Implementation FAQs Part II available at https://
www.dol.gov/ebsa/faqs/faq-aca2.html and https://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs2.html, Affordable
Care Act Implementation FAQs Part IV, available at
https://www.dol.gov/ebsa/faqs/faq-aca4.html and
https://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/aca_implementation_faqs4.html and
Affordable Care Act Implementation FAQs Part V,
available at https://www.dol.gov/ebsa/faqs/faqaca5.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs5.html and Affordable Care
Act Implementation FAQs Part VI, available at
https://www.dol.gov/ebsa/faqs/faq-aca6.html and
https://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/aca_implementation_faqs6.html.
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8 See
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under the rules is made separately with
respect to each benefit package made
available under a group health plan or
health insurance coverage.
Some commenters requested
clarification with respect to the meaning
of the term ‘‘benefit package’’ including
requesting further guidance regarding
what coverage option features constitute
separate benefit packages. In response to
the comments, the Departments issued
Affordable Care Act Implementation
FAQs Part II Q2 to further clarify the
application of the rules on a benefitpackage-by-benefit-package basis.9
These final regulations continue to
provide that the determination of
grandfather status applies separately
with respect to each benefit package and
incorporate the clarifications issued in
the FAQs. Therefore, as demonstrated
by the example provided in the FAQs,
if a group health plan offers three
benefit package options—a PPO
(preferred provider organization), a POS
(point of service) arrangement, and an
HMO (health maintenance
organization)—the PPO, POS
arrangement, and HMO are treated as
separate benefit packages. Similarly,
under these final regulations, if any
benefit package ceases grandfather
status, it will not affect the grandfather
status of the other benefit packages.
2. Disclosure of Grandfather Status
Paragraph (a)(2) of the interim final
regulations implementing section 1251
of the Affordable Care Act provided that
to maintain status as a grandfathered
health plan, a plan or health insurance
coverage (1) must include a statement,
in any plan materials provided to
participants or beneficiaries (in the
individual market, primary subscribers)
describing the benefits provided under
the plan or health insurance coverage,
that the plan or health insurance
coverage believes that it is a
grandfathered health plan within the
meaning of section 1251 of the
Affordable Care Act and (2) must
provide contact information for
questions and complaints. The interim
final regulations provided model
language that can be used to satisfy this
disclosure requirement.10
The Departments received several
comments asking the Departments to
require enhanced disclosure to
participants that includes a more
comprehensive explanation of
9 See Affordable Care Act Implementation FAQs
Part II, available at https://www.dol.gov/ebsa/faqs/
faq-aca2.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs2.html.
10 29 CFR 2590.715–1251(a)(2)(ii); 45 CFR
147.140(a)(2)(ii).
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grandfathered health plan status,
information on the triggers that can
result in a cessation of such status, a
complete listing of the specific market
reforms that are inapplicable to the plan
by virtue of its status, and access to a
formal process for obtaining a
determination on a plan’s status from
the appropriate government agency.
Other commenters stated that including
this disclosure requirement in consumer
materials may be confusing to
participants, may not have the intended
benefit, and that it may be more
appropriate to include the applicable
consumer protections in the employer
plan documents or insurance coverage
documents. Additional commenters
stated this requirement is unnecessary
because ERISA’s disclosure
requirements are already sufficient to
explain to participants the information
they need about their plan (including
which benefits are included or
excluded), and that including
information about what benefits they
could have had if their employers chose
to relinquish their grandfathered plan
status is unnecessary.
In response to these comments the
Departments issued Affordable Care Act
Implementation FAQs Part IV Q1, in
which the Departments clarified that a
grandfathered health plan is not
required to provide the disclosure
statement every time it sends out a
communication, such as an explanation
of benefits (EOB), to a participant or
beneficiary. Instead, a grandfathered
health plan will comply with this
disclosure requirement if it includes the
model disclosure language provided in
the Departments’ interim final
grandfather regulations (or a similar
statement) whenever a summary of the
benefits under the plan is provided to
participants and beneficiaries. For
example, many plans distribute
summary plan descriptions upon initial
eligibility to receive benefits under the
plan or coverage, during an open
enrollment period, or upon other
opportunities to enroll in, renew, or
change coverage. The FAQs also
provided that, while it is not necessary
to include the disclosure statement with
each plan or issuer communication to
participants and beneficiaries (such as
an EOB), the Departments encourage
plan sponsors and issuers to identify
other communications in which
disclosure of grandfather status would
be appropriate and consistent with the
goal of providing participants and
beneficiaries information necessary to
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understand and make informed choices
regarding health coverage.11
After consideration of the comments
and feedback from stakeholders, the
Departments retain the approach in the
interim final regulations and subsequent
subregulatory guidance because that
approach provides consumers with
information about the status of their
plan or health insurance coverage,
which assists them in identifying and
enforcing their rights, without undue
burden on plans and issuers. Therefore,
these final regulations clarify that, to
maintain status as a grandfathered
health plan, a group health plan, or
health insurance coverage, must include
a statement that the plan or health
insurance coverage believes it is a
grandfathered health plan in any
summary of benefits provided under the
plan. It must also provide contact
information for questions and
complaints. These final regulations also
retain the model disclosure language.
Plans and issuers may (but are not
required to) utilize the model disclosure
language to satisfy this disclosure
requirement. The Departments also note
that the disclosure language is a model,
and, thus, plans and issuers are
permitted to include additional
disclosure elements, such as the entire
list of the market reform provisions that
do not apply to grandfathered health
plans.
plan that is transferring employees
would relinquish its grandfather status
if, comparing the terms of the transferee
plan with those of the transferor plan (as
in effect on March 23, 2010) and treating
the transferee plan as if it were an
amendment of the transferor plan, such
amendment would cause a loss of
grandfather status and there was no
bona fide employment-based reason to
transfer the employees into the
transferee plan. The second anti-abuse
rule was designed to prevent a plan or
issuer from circumventing the limits on
changes that cause a plan or health
insurance coverage to cease to be a
grandfathered health plan. This rule was
intended to address situations in which
employees who previously were
covered by a grandfathered health plan
are transferred to another grandfathered
health plan without any bona fide
employment-based reason.
3. Anti-Abuse Rules
The interim final regulations provided
that a group health plan that provided
coverage on March 23, 2010 generally is
a grandfathered health plan with respect
to new employees (whether newly hired
or newly enrolled) and their families
who enroll in the grandfathered health
plan after March 23, 2010. The interim
final regulations also provided two antiabuse rules to curtail attempts to retain
grandfather status by indirectly making
changes that would otherwise result in
a loss of grandfather status.
The first anti-abuse rule provided that
if the principal purpose of a merger,
acquisition, or similar business
restructuring is to cover new
individuals under a grandfathered
health plan, the plan ceases to be a
grandfathered health plan. Under the
second anti-abuse rule, the interim final
regulations set forth specific criteria
that, if met, would cause a plan that is
transferring employees to relinquish its
grandfather status. Specifically, the
interim final regulations provided that a
a. Bona Fide Employment-Based
Reasons
The Departments received several
comments regarding the anti-abuse
provisions. Stakeholders requested that
the Departments clarify what constitutes
a bona fide employment-based reason
that would prevent a plan that is
transferring employees from
relinquishing its grandfather status. In
response, the Departments issued
Affordable Care Act Implementation
FAQs Part VI Q1, which provided
several examples of the variety of
circumstances that would constitute a
bona fide employment-based reason to
transfer employees. Examples of a bona
fide employment-based reason include:
When a benefit package is being
eliminated because the issuer is exiting
the market; when a benefit package is
being eliminated because the issuer no
longer offers the product to the
employer; when low or declining
participation by plan participants in the
benefit package makes it impractical for
the plan sponsor to continue to offer the
benefit package; when a benefit package
is eliminated from a multiemployer plan
as agreed upon as part of the collective
bargaining process; or when a benefit
package is eliminated for any reason
and multiple benefit packages covering
a significant portion of other employees
remain available to the employees being
transferred.12
These final regulations include those
examples of bona fide employmentbased reasons. The Departments
continue to interpret the term ‘‘bona
11 See Affordable Care Act Implementation FAQs
Part IV, available at https://www.dol.gov/ebsa/faqs/
faq-aca4.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs4.html.
12 See Affordable Care Act Implementation FAQs
Part VI, available at https://www.dol.gov/ebsa/faqs/
faq-aca6.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs6.html.
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fide employment-based reason’’ to
embrace a variety of circumstances, and
plans and issuers should evaluate all
facts and circumstances carefully to
determine whether a bona fide
employment-based reason exists when
considering transferring employees from
one grandfathered health plan to
another. The Departments may issue
additional guidance if further questions
regarding what constitutes a bona fide
employment-based reason arise.
b. Clarification Regarding
Multiemployer Plans
Section 1251 of the Affordable Care
Act, as well as the 2010 interim final
regulations, permit a grandfathered
group health plan to cover new
employees without any effect on its
status as a grandfathered plan. Several
commenters requested that the
Departments clarify in the final
regulations whether a multiemployer
plan may add new contributing
employers to the plan without triggering
a loss of grandfather status. These final
regulations clarify that the addition of a
new contributing employer or new
group of employees of an existing
contributing employer to a
grandfathered multiemployer health
plan will not affect the plan’s
grandfathered status, provided that the
multiemployer plan has not made any
other changes that would cause the plan
to relinquish its grandfathered status.
4. Maintenance of Grandfather Status
The interim final regulations set forth
rules for determining when changes to
the terms of a plan or health insurance
coverage cause the plan or coverage to
cease to be a grandfathered health plan.
Specifically, the interim final
regulations outlined six changes to
benefits, cost-sharing mechanisms, and
contribution rates that will cause a plan
or health insurance coverage to
relinquish its grandfather status.13 Since
13 The six changes (measured from March 23,
2010) outlined in paragraph (g)(1) of the interim
final regulations that are considered to change a
health plan so significantly that they will cause a
group health plan or health insurance coverage to
relinquish grandfather status include the following:
(1) The elimination of all or substantially all
benefits to diagnose or treat a particular condition,
(2) any increase in percentage cost-sharing
requirements, (3) an increase in a deductible or outof-pocket maximum by an amount that exceeds
medical inflation plus 15 percentage points, (4) an
increase in a copayment by an amount that exceeds
medical inflation plus 15 percentage points (or, if
greater, $5 plus medical inflation), (5) a decrease in
an employer’s contribution rate towards the cost of
coverage by more than 5 percentage points, or (6)
the imposition of annual dollar limits below the
restricted annual dollar limits that were in effect
prior to 2014 (note that for plan years (or policy
years in the individual market) beginning on and
after January 1, 2014, annual dollar limits on
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the promulgation of the interim final
regulations, questions have been
brought to the Departments’ attention
regarding other specific changes to a
plan’s design and the impact of such
changes on a plan’s grandfather status.
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a. Elimination of All or Substantially All
Benefits
The 2010 interim final regulations
and these final regulations provide that
the elimination of all or substantially all
benefits to diagnose or treat a particular
condition will cause a group health plan
or health insurance coverage to
relinquish its grandfathered status. One
commenter requested that the
Departments clarify what constitutes
eliminating ‘‘substantially all benefits’’
to diagnose or treat a particular
condition. As the interim final
regulations stated, and these final
regulations continue to provide, the
elimination of benefits for any necessary
element to diagnose or treat a condition
is considered the elimination of all or
substantially all benefits to diagnose or
treat a particular condition. The
Departments decline to establish a
bright-line test establishing what
constitutes ‘‘substantially all benefits’’
for purposes of these final regulations.
Whether or not a plan has eliminated
substantially all benefits to diagnose or
treat a particular condition must be
determined based on all the facts and
circumstances, taking into account the
items and services covered for a
particular condition under the plan on
March 23, 2010, as compared to the
items and services covered at the time
the plan makes the benefit change
effective. The preamble to the 2010
interim final regulations provided two
examples. First, if a plan or health
insurance coverage eliminates all
benefits for cystic fibrosis, the plan or
coverage will lose its grandfathered
status. Second, if a plan or insurance
coverage provides benefits for a
particular mental health condition, the
treatment for which is a combination of
counseling and prescription drugs, and
subsequently eliminates benefits for
counseling, the plan is treated as having
eliminated all or substantially all
benefits for that mental health condition
and will as a result lose its
grandfathered status. These final
regulations continue to provide that the
elimination of all or substantially all
benefits to diagnose or treat a particular
condition will cause a group health plan
or health insurance coverage to
essential health benefits are prohibited, except for
grandfathered individual health insurance
coverage). See 26 CFR 54.9815–1251(g), 29 CFR
2590.715–1251(g), and 45 CFR 147.140(g).
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relinquish its grandfathered status and
contain an example.
b. Increase in Fixed-Amount
Copayments
The interim final regulations provided
standards for when increases in fixedamount copayments would cause a plan
or coverage to relinquish its grandfather
status. Under the interim final
regulations, a plan or coverage ceases to
be a grandfathered health plan if there
is an increase since March 23, 2010 in
a copayment that exceeds the greater of
the maximum percentage increase 14 or
five dollars increased by medical
inflation.15
With respect to grandfathered health
plans that utilize multiple levels of
copayments for different benefits under
the plan, stakeholders sought
clarification on what degree of change
would cause a plan to relinquish its
grandfather status. Specifically,
stakeholders wanted to know whether
raising the copayment level for a
category of services by an amount that
would otherwise trigger a loss of
grandfather status would cause a loss of
grandfather status if the plan retained
the level of copayment on other
categories of services. The Departments
clarified in Affordable Care Act
Implementation FAQs Part II Q4 that a
change to a copayment level for a
category of services that exceeds the
standards set forth in the interim final
regulations will cause a plan to
relinquish its grandfather status, even if
a plan retains the level of copayment for
other categories of services.16 These
final regulations retain this clarification,
and continue to provide that each
change in cost sharing must be
separately evaluated under the
standards set forth in the regulations. A
plan or issuer may not exceed the
standards set forth in these final
regulations with respect to one level of
copayment for a category of services,
and retain its grandfather status by
retaining the level of copayments for
other categories of services.
14 The interim final regulations defined the
maximum percentage increase as medical inflation
(from March 23, 2010) plus 15 percentage points.
Medical inflation is defined in the interim final
regulations by reference to the overall medical care
component of the Consumer Price Index for All
Urban Consumers, unadjusted (CPI), published by
the Department of Labor. See 26 CFR 54.9815–
1251(g)(3), 29 CFR 2590.715–1251(g)(3), and 45 CFR
147.140(g)(3).
15 75 FR 35538, 34543 (June 17, 2010).
16 See Affordable Care Act Implementation FAQs
Part II, available at https://www.dol.gov/ebsa/faqs/
faq-aca2.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs2.html.
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c. Decrease in Contribution Rate by
Employers and Employee Organization
The interim final regulations provided
that a decrease in the employer
contribution rate for coverage under a
group health plan or group health
insurance coverage beyond the
permitted percentage would result in
cessation of grandfather status. There
are two rules related to decreases in
employer contributions: One for a
contribution based on the cost of
coverage and one for a contribution
based on a formula.
First, if the contribution rate is based
on the cost of coverage, a group health
plan or group health insurance coverage
ceases to be a grandfathered health plan
if the employer or employee
organization decreases its contribution
rate towards the cost of any tier of
coverage for any class of similarly
situated individuals 17 by more than 5
percentage points below the
contribution rate on March 23, 2010. For
this purpose, contribution rate is
defined as the amount of contributions
made by an employer or employee
organization compared to the total cost
of coverage, expressed as a percentage.
The interim final regulations also
provided that the total cost of coverage
is determined in the same manner as the
applicable premium is calculated under
the Consolidated Omnibus Budget
Reconciliation Act of 1986 (COBRA)
continuation provisions of section 604
of ERISA, section 4980B(f)(4) of the
Code, and section 2204 of the PHS Act.
In the case of a self-insured group health
plan, contributions by an employer or
employee organization are calculated by
subtracting the employee contributions
towards the total cost of coverage from
the total cost of coverage.
Second, if the contribution rate is
based on a formula, such as hours
worked or tons of coal mined, a group
health plan or group health insurance
coverage ceases to be a grandfathered
health plan if the employer or employee
organization decreases its contribution
rate towards the cost of any tier of
coverage for any class of similarly
situated individuals by more than 5
percentage points below the
contribution rate on March 23, 2010.
These final regulations finalize these
provisions without change but
incorporate the additional clarifications
issued in subregulatory guidance as
discussed below.
The Departments received several
comments relating to the employer
17 Similarly situated individuals are described in
the HIPAA nondiscrimination regulations at 26 CFR
54.9802–1(d), 29 CFR 2590.702(d), and 45 CFR
146.121(d).
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contribution limitations. Some
commenters stated that issuers do not
always have the information needed to
know whether (or when) an employer
plan sponsor changes its rate of
contribution towards the cost of group
health plan coverage. In response to this
issue, the Departments issued
Affordable Care Act Implementation
FAQs Part I Q2 and Q3 providing relief
if issuers and employer plan sponsors or
contributing employers and
multiemployer plans take certain steps
to communicate regarding changes to
the contribution rate for purposes of
determining grandfather status.18 These
final regulations also provide relief to
issuers, plan sponsors, employers, and
plans that take certain steps to
communicate changes in contribution
rates. Specifically, these final
regulations provide that an insured
group health plan that is a
grandfathered health plan will not
relinquish its grandfather status
immediately based on a change in the
employer contribution rate if, upon
renewal, an issuer requires a plan
sponsor to make a representation
regarding its contribution rate for the
plan year covered by the renewal, as
well as its contribution rate on March
23, 2010 (if the issuer does not already
have it). Additionally, the issuer’s
policies, certificates, or contracts of
insurance must disclose in a prominent
and effective manner that plan sponsors
are required to notify the issuer if the
contribution rate changes at any point
during the plan year. An insured
grandfathered group health plan with a
decrease in employer contributions
relinquishes its grandfather status as of
the earlier of the first date on which the
issuer knows or reasonably should
know that there has been at least a
5-percentage-point reduction or the first
date on which the plan no longer
qualifies for grandfathered status
without regard to the 5-percentage-point
reduction. Similarly, if multiemployer
plans and contributing employers
follow these steps, the plan will not
relinquish its grandfather status unless
or until the multiemployer plan knows
or reasonably should know that the
contribution rate has changed by at least
the applicable 5-percentage point
reduction or until the date the plan no
longer qualifies for grandfathered status
without regard to the 5-percentage point
reduction. Moreover, nothing in the
Affordable Care Act or these regulations
18 See Affordable Care Act Implementation FAQs
Part I, available at https://www.dol.gov/ebsa/faqs/
faq-aca.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs.html.
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prevents a policy, certificate, or contract
of insurance from requiring a plan
sponsor to notify an issuer in advance
(for example, 30 or 60 days in advance)
of a change in their contribution rate.
The Departments also received
comments on the application of this
provision to multiemployer plans with
unique contribution structures. It is
common for multiemployer plans to
have either a fixed-dollar employee
contribution or no employee
contribution towards the cost of
coverage. In such cases, a contributing
employer’s contribution rate may
change (for example, after making up a
funding deficit in the prior year or to
reflect a surplus) but the employee
contribution amount is not affected. The
Departments issued Affordable Care Act
Implementation FAQs Part I Q4
clarifying that in this case, provided any
changes in the coverage terms would
not otherwise cause the plan to cease to
be grandfathered and there continues to
be no employee contribution or no
increase in the fixed-dollar employee
contribution towards the cost of
coverage, the plan would not relinquish
its grandfather status.19 These final
regulations incorporate this clarification
and apply the relief to all grandfathered
group health plans. Therefore, under
these final regulations a group health
plan that requires either fixed-dollar
employee contributions or no employee
contributions will not cease to be a
grandfathered health plan if the
employer contribution rate changes so
long as there continues to be no
employee contributions or no increase
in the fixed-dollar employee
contributions towards the cost of
coverage and there are no corresponding
changes in coverage terms that would
otherwise cause the plan to cease to be
a grandfathered plan.
The Departments also received
comments requesting clarification on
the application of the rules where a
group health plan includes multiple
tiers of coverage. In response, the
Departments issued Affordable Care Act
Implementation FAQs Part II Q3,
explaining that the standards for
employer contributions found in
paragraph (g)(1)(v) of the interim final
regulations on grandfathered health
plans apply on a tier-by-tier basis.20
19 See Affordable Care Act Implementation FAQs
Part I, available at https://www.dol.gov/ebsa/faqs/
faq-aca.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs.html.
20 See Affordable Care Act Implementation FAQs
Part II, available at https://www.dol.gov/ebsa/faqs/
faq-aca2.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs2.html.
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These final regulations incorporate this
guidance. Therefore, if a group health
plan modifies the tiers of coverage it
had on March 23, 2010 (for example,
from self-only and family to a multitiered structure of self-only, self-plusone, self-plus-two, and self-plus-threeor-more), the employer contribution for
any new tier would be tested by
comparison to the contribution rate for
the corresponding tier on March 23,
2010. For example, if the employer
contribution rate for family coverage
was 50 percent on March 23, 2010, the
employer contribution rate for any new
tier of coverage other than self-only (i.e.,
self-plus-one, self-plus-two, self-plusthree or more) must be within 5
percentage points of 50 percent (i.e., at
least 45 percent). If, however, the plan
adds one or more new coverage tiers
without eliminating or modifying any
previous tiers and those new coverage
tiers cover classes of individuals that
were not covered previously under the
plan, the new tiers would not be
analyzed under the standards for
changes in employer contributions. For
example, if a plan with self-only as the
sole coverage tier added a family
coverage tier, the level of employer
contributions toward the family
coverage could not cause the plan to
lose grandfather status.
The Departments also received
comments asking for clarification on
when a decrease in the employer
contribution rate for coverage under a
group health plan or group health
insurance beyond the permitted
percentage would result in cessation of
grandfather status for a contribution
based on a formula. In response, the
Departments issued Affordable Care Act
Implementation FAQs Part VI Q6.21 The
FAQ provided an example under which
a plan covers both retirees and active
employees and the employer that
sponsors the plan contributes $300 per
year multiplied by the individual’s
years of service for the employer,
capped at $10,000 per year. In the
example, the employer makes
contributions based on a formula, and
accordingly, the plan will cease to be a
grandfathered health plan if the
employer decreases its contribution rate
towards the cost of coverage by more
than five percent below the contribution
rate on March 23, 2010. If the formula
does not change, the employer is not
considered to have reduced its
contribution rate, regardless of any
21 See Affordable Care Act Implementation FAQs
Part VI, available at https://www.dol.gov/ebsa/faqs/
faq-aca6.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs6.html.
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increase in the total cost of coverage.
However, if the dollar amount that is
multiplied by years of service decreases
by more than five percent (or if the
$10,000 maximum employer
contribution cap decreases by more than
five percent), the plan will cease to be
a grandfathered health plan. Although
this example has not been added to the
text of the final regulations, this
guidance continues to apply.
d. Changes in Annual Limits
PHS Act section 2711, as added by the
Affordable Care Act, generally prohibits
lifetime and annual limits on the dollar
amount of essential health benefits, as
defined in section 1302(b) of the
Affordable Care Act. Under PHS Act
section 2711 and its implementing
regulations, plans and issuers were
generally prohibited from imposing
lifetime limits on the dollar value of
essential health benefits for plan years
(in the individual market, policy years)
beginning on or after September 23,
2010.
With respect to annual dollar limits,
for plan or policy years beginning before
January 1, 2014, plans and issuers were
permitted to impose restricted annual
dollar limits in accordance with the
guidance set forth in the interim final
regulations. For plans years beginning
on or after January 1, 2014, plans and
issuers generally are prohibited from
imposing annual dollar limits on
essential health benefits. However,
grandfathered individual health
insurance plans are not subject to the
annual dollar limit prohibition.
Accordingly, the final regulations retain
the rules regarding loss of grandfathered
status based on imposition of annual
dollar limits to allow issuers of
grandfathered individual health
insurance coverage to analyze
grandfathered status.
These final regulations, like the
interim final regulations, address three
different limit-related situations that
would cause a plan or health insurance
coverage to relinquish its grandfather
status: (1) A plan or health insurance
coverage that, on March 23, 2010, did
not impose an overall annual or lifetime
limit on the dollar value of all benefits
ceases to be a grandfathered health plan
if the plan or health insurance coverage
imposes an overall annual limit on the
dollar value of benefits; (2) A plan or
health insurance coverage, that, on
March 23, 2010, imposed an overall
lifetime limit on the dollar value of all
benefits but no overall annual limit on
the dollar value of all benefits ceases to
be a grandfathered health plan if the
plan or health insurance coverage
adopts an overall annual limit at a
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dollar value that is lower than the dollar
value of the lifetime limit on March 23,
2010; and (3) A plan or health insurance
coverage that, on March 23, 2010,
imposed an overall annual limit on the
dollar value of all benefits ceases to be
a grandfathered health plan if the plan
or health insurance coverage decreases
the dollar value of the annual limit
(regardless of whether the plan or health
insurance coverage also imposed an
overall lifetime limit on March 23, 2010
on the dollar value of all benefits).
e. Changes to Fixed Amount CostSharing Based on a Formula
On December 22, 2010, the
Departments issued Affordable Care Act
Implementation FAQs Part V Q7 to
provide clarification on the application
of the thresholds under paragraph (g)(1)
of the interim final regulations when a
plan’s terms include out-of-pocket
spending limits that are based on a
formula.22 The Departments continue to
interpret paragraph (g)(1) as clarified in
the FAQ. Therefore, under these final
regulations, if a plan or coverage has a
fixed-amount cost-sharing requirement
other than a copayment (for example, a
deductible or out-of-pocket limit) that is
based on a percentage-of-compensation
formula, that cost-sharing arrangement
will not cause the plan or coverage to
cease to be a grandfathered health plan
as long as the formula remains the same
as that which was in effect on March 23,
2010. Accordingly, if the percentage-ofcompensation formula for determining
an out-of-pocket limit is unchanged and
an employee’s compensation increases,
then the employee could face a higher
out-of-pocket limit, but that change
would not cause the plan to relinquish
grandfather status.
f. Grandfather Status and Wellness
Programs
Under PHS Act section 2705, ERISA
section 702, and Code section 9802 and
the Departments’ implementing
regulations, group health plans and
health insurance issuers in the group
and individual market are prohibited
from discriminating against
participants, beneficiaries, and
individuals in eligibility, benefits, or
premiums based on a health factor.23
22 See Affordable Care Act Implementation FAQs
Part V and Mental Health Parity Implementation,
available at https://www.dol.gov/ebsa/faqs/faqaca5.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs5.html.
23 The statute and its implementing regulations
set forth eight health status-related factors, which
the final regulations on Nondiscrimination and
Wellness Programs in Health Coverage in the Group
Market refer to as ‘‘health factors’’ for simplicity. 71
FR 75014, 75016 (Dec. 13, 2006) Under the statute
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72197
For group health plans and group health
insurance coverage, an exception to this
general prohibition allows premium
discounts, rebates, or modification of
otherwise applicable cost sharing
(including copayments, deductibles, or
coinsurance) in return for adherence to
certain programs of health promotion
and disease prevention, commonly
referred to as wellness programs.
Many stakeholders requested
clarification with respect to how
changes to contribution rates and costsharing mechanisms in the context of a
wellness program would impact a plan’s
grandfather status. In light of these
questions, the Departments issued
Affordable Care Act Implementation
FAQs Part II Q5, which stated that while
group health plans may continue to
provide incentives for wellness by
providing premium discounts or
additional benefits to reward healthy
behaviors by participants and
beneficiaries, penalties (such as costsharing surcharges) may implicate the
standards outlined in paragraph (g)(1) of
the grandfather interim final regulations
and should be examined carefully.24 If
additional questions arise regarding the
interaction of wellness programs and
these requirements, the Departments
may issue additional subregulatory
guidance.
g. Changes to Multi-Tiered Prescription
Drug Formularies
In Affordable Care Act
Implementation FAQs Part VI Q2, the
Departments addressed questions
related to certain changes to the level of
cost sharing for brand-name
prescription drugs. Stakeholders
requested that the Departments clarify
whether changes to cost sharing for
brand-name prescription drugs would
cause a plan to relinquish its
grandfather status in instances where a
plan classifies and determines cost
sharing for prescription drugs based on
the availability of a generic alternative,
and a generic drug becomes available
and is added to the formulary. The
Departments stated that if a drug was
classified in a tier as a brand name drug
and the regulations, the eight health factors are
health status, medical condition (including both
physical and mental illnesses), claims experience,
receipt of health care, medical history, genetic
information, evidence of insurability (including
conditions arising out of acts of domestic violence),
and disability. Id. In the Departments’ view,
‘‘[t]hese terms are largely overlapping and, in
combination, include any factor related to an
individual’s health.’’ 66 FR 1378, 1379 (Jan. 8,
2001).
24 See Affordable Care Act Implementation FAQs
Part II, available at https://www.dol.gov/ebsa/faqs/
faq-aca2.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs2.html.
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with no generic available, and a generic
alternative for the drug becomes
available and is added to the formulary,
moving the brand-name drug to a higher
tier would not cause the plan or
coverage to relinquish grandfather
status.25 These final regulations adopt
this rule that such changes will not
result in a loss of grandfather status.
h. Grandfather Status and Certain
Changes in Individual Policies
Some individual health insurance
policies in place on March 23, 2010
included a feature that allowed a
policyholder to elect an option under
which the individual would pay a
reduced premium in exchange for
higher cost sharing. The Departments
received comments asking whether
individuals enrolled in these policies as
of March 23, 2010 could make such an
election after March 23, 2010 without
affecting the policy’s grandfather status,
even if the increase in cost sharing
would exceed the limits set forth under
the interim final regulations. In
response, the Departments issued
Affordable Care Act Implementation
FAQs Part IV Q2, which stated that, as
long as the policyholder had such
option under the insurance policy that
was in place on March 23, 2010, he or
she could exercise the option after
March 23, 2010 without affecting
grandfather status, even if as a result of
electing this option the individual’s cost
sharing would increase by an amount
that exceeds the limits established
under the interim final regulations.26
The Departments maintain this
approach in these final regulations.
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i. Clarifications on Timing of the Loss of
Grandfather Status
Since the promulgation of the 2010
interim final regulations, questions have
arisen regarding whether or not a plan
ceases to be a grandfathered health plan
immediately after making a change that
triggers a loss of grandfathered status,
and whether or not there is an
opportunity to cure a loss of grandfather
status following a change made
inadvertently or otherwise that triggers
a loss of grandfather status. Several
commenters have requested clarification
on when the plan or coverage ceases to
be a grandfathered health plan if it
makes an amendment to plan terms that
25 Affordable Care Act Implementation FAQs Part
VI, available at https://www.dol.gov/ebsa/faqs/faqaca6.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs6.html.
26 See Affordable Care Act Implementation FAQs
Part IV, available at https://www.dol.gov/ebsa/faqs/
faq-aca4.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs4.html.
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trigger loss of grandfather status in the
middle of the plan year. The
Departments issued Affordable Care Act
Implementation FAQs Part VI Q4 and
Q5 addressing timing of the loss of
grandfather status with respect to midyear plan amendments that exceed the
thresholds described in the interim final
regulations.27 These final regulations
adopt the clarification outlined in the
FAQs that a plan or coverage will cease
to be a grandfathered health plan when
an amendment to plan terms that
exceeds the thresholds described in
paragraph (g)(1) of these final
regulations becomes effective—
regardless of when the amendment is
adopted. Once grandfather status is lost
there is no opportunity to cure the loss
of grandfather status. A reversal after the
effective date will not allow the plan or
coverage to regain grandfather status. If
a plan sponsor wishes to avoid
relinquishing grandfathered status in
the middle of a plan year, any changes
that will cause a plan or coverage to
relinquish grandfather status should not
be effective before the first day of a plan
year that begins after the change is
adopted.
B. PHS Act Section 2704, Prohibition of
Preexisting Condition Exclusions (26
CFR 54.9815–2704, 29 CFR 2590.715–
2704, 45 CFR 147.108)
PHS Act section 2704, added by the
Affordable Care Act, amends the
HIPAA 28 rules relating to preexisting
condition exclusions to provide that a
group health plan and a health
insurance issuer offering group or
individual health insurance coverage
generally may not impose any
preexisting condition exclusions.29
HIPAA, as well as PHS Act section 2704
and its implementing regulations, define
a preexisting condition exclusion as a
limitation or exclusion of benefits
relating to a condition based on the fact
that the condition was present before
the date of enrollment for the coverage,
27 See Affordable Care Act Implementation FAQs
Part VI, available at https://www.dol.gov/ebsa/faqs/
faq-aca6.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs6.html.
28 HIPAA is the Health Insurance Portability and
Accountability Act of 1996 (Pub. L. 104–191).
29 The HIPAA rules (that were in effect prior to
the effective date of these amendments) applied
only to group health plans and group health
insurance coverage, and permitted limited
exclusions of coverage based on a preexisting
condition under certain circumstances. Section
2704 prohibits any preexisting condition exclusion
from being imposed by group health plans or group
health insurance coverage and extends this
protection to non-grandfathered individual health
insurance coverage but this prohibition does not
apply to grandfathered individual health insurance
coverage.
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regardless of whether any medical
advice, diagnosis, care, or treatment was
recommended or received before that
date. PHS Act section 2704,30 which
became effective for enrollees who are
under 19 years of age for plan years (in
the individual market, policy years)
beginning on or after September 23,
2010, and effective for adults for plan
years (in the individual market, policy
years) beginning on or after January 1,
2014, prohibits preexisting condition
exclusions for both group health plans
and group or individual health
insurance coverage (except for
grandfathered individual health
insurance). On June 28, 2010, the
Departments issued interim final
regulations implementing PHS Act
section 2704 and requesting comment.31
After issuance of regulations in 2010,
the Departments also released
Affordable Care Act Implementation
FAQs Part V, Q6 32 to provide additional
clarification on the prohibition of
preexisting condition exclusions. These
final regulations finalize the 2010
interim final regulations without
substantial change and incorporate the
clarifications issued to date in
subregulatory guidance.
1. Allowable Exclusion of Benefits
Prior to implementation of PHS Act
section 2704, HIPAA rules limiting
preexisting condition exclusions
provided that a plan’s or issuer’s
exclusion of benefits for a condition
regardless of when the condition arose
relative to the effective date of coverage
is not a preexisting condition exclusion.
With respect to such exclusions, the
2010 interim final regulations did not
change this approach under HIPAA.33
Several commenters requested that
the final regulations reiterate this rule.
Other commenters requested that all
exclusions of specific conditions be
prohibited regardless of whether the
exclusion relates to when the condition
arose. Another commenter wrote that
restrictions on benefits concerning
30 Before the amendments made by the Affordable
Care Act, PHS Act section 2701(b)(1) was the
applicable provision concerning preexisting
condition exclusions; after the amendments made
by the Affordable Care Act, PHS Act section
2704(b)(1) is the applicable provision. See also
ERISA section 701(b)(1) and Code section
9801(b)(1).
31 75 FR 37188 (June 28, 2010).
32 See Affordable Care Act Implementation FAQs
Part V, available at https://www.dol.gov/ebsa/faqs/
faq-aca5.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs5.html.
33 The rule is illustrated with examples in the
HIPAA regulations on preexisting condition
exclusions. See Examples 6, 7, and 8 in 26 CFR
54.9801–3(a)(2), 29 CFR 2590.701–3(a)(2), 45 CFR
146.111(a)(2).
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rehabilitation services and devices
should be considered a form of
preexisting condition exclusion and not
be allowed.
Similar to the interim final
regulations, these final regulations
retain the approach set forth under
HIPAA relating to exclusions for a
specific benefit. More specifically, these
final regulations continue to provide
that a plan’s or issuer’s exclusion of
benefits for a condition from the plan or
policy regardless of when the condition
arose relative to the effective date of
coverage is not a preexisting condition
exclusion. Other requirements of
Federal or State law, however, may
prohibit certain benefit exclusions,
including the essential health benefits
requirements applicable in the
individual and small group health
insurance markets at 45 CFR 156.110 et
seq.
2. Enrollment Period
The 2010 interim final regulations did
not impose any requirement on plans to
provide for an open enrollment period.
One commenter requested that the
regulations clarify that issuers in the
individual market may restrict
enrollment of children under age 19 to
specified open enrollment periods,
consistent with guidance issued by
HHS.34 Another commenter requested
that the regulations specify that after the
initial enrollment period, health
insurance issuers must make open
enrollment periods available to families
at least once a year during a
standardized time period for at least 90
days and that insurers should fully
advertise the availability. Another
commenter stated that having at least
one issuer that offers open enrollment at
any time during the year, without a
penalty for deferral, will be an economic
incentive to defer the purchase of
insurance which may encourage adverse
selection and subsequently, higher
claim costs. Additional commenters
requested continuous open enrollment
for children with preexisting conditions,
clarification of whether guaranteed
issue will be available only during open
enrollment or all 12 months of the year,
and that families be given the
opportunity to enroll their children
when certain life events occur. These
final regulations do not adopt these
suggestions. The provisions of the
Affordable Care Act related to
guaranteed availability of coverage,
34 Center for Consumer Information & Insurance
Oversight, Questions and Answers on Enrollment of
Children Under 19 Under the New Policy That
Prohibits Pre-Existing Condition Exclusions,
available at https://www.cms.gov/CCIIO/Resources/
Files/factsheet.html.
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including open and special enrollment
periods, are implemented in regulations
issued by HHS under section 2702 of
the PHS Act and are outside the scope
of this rulemaking. Additionally, while
HIPAA generally permits plans and
issuers to treat participants and
beneficiaries with adverse health factors
more favorably, such as providing a
longer open enrollment period, nothing
in these regulations requires plans and
issuers to do so.
3. Premiums
Commenters raised concerns about
increasing premiums related to the
prohibition on preexisting condition
exclusions. Effective for plan years (or,
in the individual market, policy years)
beginning on or after January 1, 2014,
section 2701 of the PHS Act and section
1312(c) of the Affordable Care Act
govern the premium rates charged by an
issuer for non-grandfathered health
insurance coverage in the individual
and small group markets, and section
2794 of the PHS Act provides for the
annual review of unreasonable increases
in premiums for health insurance
coverage in the individual and small
group markets. These provisions are
implemented in regulations issued by
HHS 35 and are outside the scope of this
rulemaking. However, the rating rules
under PHS Act section 2701 prohibit
variations in premiums based on a
child’s health status.
4. Allowable Screenings To Determine
Eligibility for Alternative Coverage in
the Individual Market
Subsequent to the promulgation of the
interim final regulations, questions
arose regarding whether it would be
permissible under the rules
implementing PHS Act section 2704 for
issuers in the individual market to
screen certain applicants for eligibility
for alternative coverage before issuing a
child-only policy. Specifically, States
expressed an interest in permitting such
screenings. In response to these
concerns, the Departments issued
Affordable Care Act Implementation
FAQs Part V, Q6, which provided that
under certain circumstances, States can
permit issuers in the individual market
to screen applicants for eligibility for
alternative coverage options before
offering a child-only policy if (1) the
practice is permitted under State law;
(2) the screening applies to all childonly applicants, regardless of health
status; and (3) the alternative coverage
options include options for which
healthy children would potentially be
35 See 45 CFR 147.102, 154.101 et seq., and
156.80.
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eligible, such as the Children’s Health
Insurance Program (CHIP) and group
health insurance.36 Screenings may not
be limited to programs targeted to
individuals with a preexisting
condition, such as a State high risk pool.
Note that Medicaid policy, under 42
U.S.C. 1396a (25)(G), prohibits
participating States from allowing
health insurance issuers to consider
whether an individual is eligible for, or
is provided medical assistance under,
Medicaid in making enrollment
decisions. Furthermore, issuers may not
implement a screening process that by
its operation significantly delays
enrollment or artificially engineers
eligibility of a child for a program
targeted to individuals with a
preexisting condition. Additionally, the
screening process may not be applied to
offers of dependent coverage for
children. The FAQ provided that States
are encouraged to require issuers that
screen for other coverage to enroll and
provide coverage to the applicant
effective on the first date that the childonly policy would have been effective
had the applicant not been screened for
an alternative coverage option. It also
provided that States are encouraged to
impose a reasonable time limit, such as
30 days, at which time the issuer would
have to enroll the child regardless of
pending applications for other coverage.
Subsequent to the issuance of the FAQ,
the guaranteed availability requirements
in section 2702 of the PHS Act took
effect, similarly precluding an issuer
from denying coverage. This screening,
as permitted under State law, will
continue to be allowed under these final
regulations, consistent with both section
2704 and guaranteed availability
obligations under section 2702.
C. PHS Act Section 2711, Prohibition on
Lifetime and Annual Limits (26 CFR
54.9815–2711, 29 CFR 2590.715–2711,
45 CFR 147.126)
PHS Act section 2711, as added by the
Affordable Care Act, generally prohibits
annual and lifetime dollar limits on
essential health benefits, as defined in
section 1302(b) of the Affordable Care
Act. With respect to annual dollar
limits, PHS Act section 2711(a)(2)
provided that for plan years beginning
before January 1, 2014, restricted annual
dollar limits were allowed. On June 28,
2010, the Departments issued interim
final regulations implementing PHS Act
36 See Affordable Care Act Implementation FAQs
Part V, available at https://www.dol.gov/ebsa/faqs/
faq-aca5.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs5.html.
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section 2711 and requested comment.37
After issuance of the 2010 interim final
regulations, the Departments also
released Affordable Care Act
Implementation FAQs Parts IV, XI, XV,
XXII, as well as Technical Release
2013–03, to address various requests for
clarifications under PHS Act section
2711.38 These final regulations adopt
the 2010 interim final regulations
without substantial change and
incorporate certain pertinent
clarifications issued thus far in
subregulatory guidance.
1. Definition of Essential Health Benefits
On February 25, 2013, HHS issued
final regulations addressing essential
health benefits (EHB) under Affordable
Care Act section 1302.39 Among other
things, HHS regulations defined EHB
based on a State-specific benchmark
plan and required each State to select a
benchmark plan from among several
options.40 While self-insured, large
group market, and grandfathered health
plans are not required to offer EHB, PHS
Act section 2711 prohibits such plans
from imposing annual and lifetime
dollar limits on covered benefits that
fall within the definition of EHB. In the
interim final regulations, the
Departments said that ‘‘[f]or plan years
(in the individual market, policy years)
beginning before the issuance of
regulations defining ‘essential health
benefits,’ for purposes of enforcement,
the Departments will take into account
good faith efforts to comply with a
37 75
FR 37188 (June 28, 2010).
Care Act Implementation FAQs
Parts IV, XI, XV, XXII, available at https://
www.dol.gov/ebsa/faqs/faq-aca4.html, https://
www.dol.gov/ebsa/faqs/faq-aca11.html, https://
www.dol.gov/ebsa/faqs/faq-aca15.html, and https://
www.dol.gov/ebsa/faqs/faq-aca22.html, or https://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs4.html, https://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs11.html, https://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs15.html and
https://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/Downloads/FAQs-Part-XXII-FINAL.pdf;
Technical Release 2013–03, available at https://
www.dol.gov/ebsa/newsroom/tr13-03.html. See
footnote 51 for a list of additional items of guidance
under PHS Act section 2711.
39 78 FR 12834.
40 The benchmark plans from which a State could
choose are: (1) The largest plan by enrollment in
any of the three largest products in the State’s small
group market; (2) any of the largest three State
employee health benefit plans options by
enrollment; (3) any of the largest three national
Federal Employees Health Benefits Program
(FEHBP) plan options by enrollment; or (4) the
largest insured commercial HMO in the State. 45
CFR 156.100. The EHB-benchmark plan serves as a
reference plan, reflecting both the scope of services
and limits offered by a typical employer plan in
each State. The term ‘‘base-benchmark plan’’ in 45
CFR 156.100 is distinct from the term ‘‘EHBbenchmark plan’’ as defined in 45 CFR 156.20.
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reasonable interpretation of the term
‘essential health benefits.’ ’’
In a 2012 FAQ, HHS stated that the
Departments would consider a selfinsured group health plan, a large group
market health plan, or a grandfathered
group health plan to have used a
permissible definition of EHB under
section 1302(b) of the Affordable Care
Act if the definition was one of the
potential EHB base-benchmark plans
that, at the time, States could have
chosen from as the standard for EHB in
their State.41 At the time, this list of
potential EHB-benchmark plans
included over 510 EHB base-benchmark
plans that were authorized by the
Secretary for a State or the District of
Columbia 42 to select, as each State and
the District of Columbia has a choice of
ten possible benchmark plans. All of
these potential plans were ‘‘authorized’’
in the sense that they were potential
EHB benchmark plans that could be
selected by a State or the District of
Columbia under the EHB regulations.
This approach was intended to provide
plans and issuers not subject to the EHB
rules with flexibility to define what
constitutes EHB under their respective
plan for purposes of the limits in PHS
Act section 2711. Since that time, each
State and the District of Columbia has
selected or defaulted to a single EHBbenchmark option, and that is the only
benchmark plan ‘‘authorized’’ to be
used for defining EHB in that State or
the District of Columbia.
Given the enforcement challenges for
Federal and State regulators and
difficulties for participants,
beneficiaries, and enrollees in
ascertaining what benefits under their
respective plans constitute EHB posed
by a choice of over 500 plans, the
Departments are codifying their
interpretation that a ‘‘reasonable
interpretation of the term ‘essential
health benefits’’’ includes only those
EHB base-benchmarks that, in fact, have
been selected, whether by active State
selection or by default to be the EHB
base-benchmark plan for a State, rather
than all plans that are potentially
authorized.
41 See Q10 of Frequently Asked Questions on
Essential Health Benefits Bulletin, available at
https://www.cms.gov/CCIIO/Resources/Files/
Downloads/ehb-faq-508.pdf.
42 Initially, issuers in the territories were subject
to the EHB requirement and also had potential
benchmarks to choose from under the EHB
regulations. A change in the interpretation of the
statute resulted in issuers in the territories being
exempt from the EHB rules. See Letter to Gary R.
Francis, Commissioner, Office of Lieutenant
Governor, Virgin Islands, dated July 16, 2014,
available at https://www.cms.gov/CCIIO/Resources/
Letters/Downloads/letter-to-Francis.pdf.
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In addition to the foregoing basebenchmark plans, there are three basebenchmark plan options not currently
among those a State or the District of
Columbia has either selected or had
assigned by default that the
Departments believe should also
continue to be made available for plans
and issuers not subject to EHB
requirements. These three plan options
are the current base-benchmark plan
options under the Federal Employees
Health Benefit Program (FEHBP)
specified at 45 CFR 156.100(a)(3) (the
three largest FEHBP plans available to
all Federal employees nationally). These
base-benchmark plan options are unique
among base-benchmark plans in that
they are available nationally, and thus
can be utilized to determine what
benefits would be categorized as EHBs
for those employers who provide health
coverage to employees throughout the
United States and are not situated only
in a single State.
Thus, under these final regulations,
group health plans (and health
insurance coverage offered in
connection with such plans) and
grandfathered individual market
coverage that are not required to provide
EHB may select among any of the 51
EHB base-benchmark plans identified
under 45 CFR 156.100 and selected by
a State or the District of Columbia and
the FEHBP base-benchmark plan, as
applicable for plan years beginning on
or after January 1, 2017, for purposes of
determining which benefits cannot be
subject to annual and lifetime dollar
limits. The current list of the 51
proposed EHB base-benchmark plans
selected by the States for 2017 can be
found at https://www.cms.gov/CCIIO/
Resources/Data-Resources/ehb.html.
HHS anticipates publishing the final list
later this month.
2. Out-of-Network Benefits
The Departments have been asked
whether the scope of the prohibition on
lifetime and annual dollar limits in PHS
Act section 2711 applies only to innetwork benefits as opposed to both innetwork and out-of-network benefits.
The statute and interim final regulations
made no distinction between in-network
or out-of-network benefits. Therefore,
lifetime and annual dollar limits on
essential health benefits are generally
prohibited, regardless of whether such
benefits are provided on an in-network
or out-of-network basis. These final
regulations incorporate this
clarification.
3. End of Waiver Program
Under PHS Act section 2711, for plan
years beginning before January 1, 2014,
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the Departments were given authority to
define restricted annual dollar limits to
ensure that access to needed services
was made available with minimal
impact on premiums. As noted in the
preamble to the 2010 interim final
regulations, in order to mitigate the
potential for premium increases for all
plans and policies, while at the same
time ensuring access to EHB, the interim
final regulations adopted a three-year
phased approach for restricted annual
dollar limits, with the dollar limit
increasing for each year of the three year
period. Annual dollar limits, including
restricted annual dollar limits, are not
allowed for plan years (in the individual
market, policy years) beginning on or
after January 1, 2014, except for
grandfathered individual health
insurance coverage.
Some previously widely available
low-cost coverage was designed with
low maximum benefits and did not meet
the phased in restricted annual dollar
limits, such as stand-alone health
reimbursement arrangements (HRAs) 43
and so-called ‘‘mini med’’ plans. In
order to ensure that individuals with
such limited coverage would not be
denied access to needed services or
experience more than a minimal impact
on premiums, the interim final
regulations also provided for HHS to
establish a program under which the
restricted annual dollar limit
requirements would be waived if
compliance with the limits would result
in a significant decrease in access to
benefits or a significant increase in
premiums.44 However, this waiver
program was only available for the
period during which the statute
authorized restricted annual dollar
limits, that is, plan years (in the
individual market, policy years)
beginning before January 1, 2014.
Consequently such waivers are no
longer available and the waiver program
43 An HRA is an arrangement that is funded solely
by an employer and that reimburses an employee
for medical care expenses (as defined under Code
section 213(d)) incurred by the employee, or his
spouse, dependents, and any children who, as of
the end of the taxable year, have not attained age
27, up to a maximum dollar amount for a coverage
period. IRS Notice 2002–45, 2002–02 CB 93;
Revenue Ruling 2002–41, 2002–2 CB 75. This
reimbursement is excludable from the employee’s
income. Amounts that remain at the end of the year
generally can be used to reimburse expenses
incurred in later years. HRAs generally are
considered to be group health plans within the
meaning of Code section 9832(a), section 733(a) of
ERISA, and section 2791(a) of the PHS Act and are
subject to the rules applicable to group health
plans.
44 Guidance regarding the annual dollar limit
waiver program was issued at https://www.cms.gov/
cciio/resources/Regulations-and-Guidance/
index.html#Annual Limits.
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rules are not incorporated in these final
regulations.
4. HRAs and Other Account Based Plans
In general, HRAs and other accountbased group health plans are subject to
the annual dollar limit prohibition
under PHS Act section 2711 (annual
dollar limit prohibition) 45 and will fail
to comply with this prohibition because
these arrangements impose an annual
limit on the amount of expenses the
arrangement will reimburse. However,
special rules apply to certain types of
account-based plans under which the
HRA or other account-based health plan
either is not subject to the annual dollar
limit prohibition, or is considered to
comply with the annual dollar limit
prohibition if it is ‘‘integrated’’ with
another group health plan that complies
with the annual dollar limit prohibition.
The preamble to the interim final
regulations noted that the annual dollar
limit prohibition applies differently to
certain account-based plans that are
subject to other rules that limit the
benefits available under those plans.46
In particular, under the 2010 interim
final regulations and these final
regulations, certain health Flexible
Spending Arrangements (health
FSAs) 47 are not subject to the PHS Act
section 2711 annual dollar limit
prohibition because health FSAs are
subject to specific limits under section
9005 of the Affordable Care Act. In
addition, as noted in the preamble to the
2010 interim final regulations, the
annual dollar limit prohibition does not
apply to Archer Medical Savings
Accounts (Archer MSAs) under section
220 of the Code and Health Savings
Accounts (HSAs) under section 223 of
the Code, because both types of plans
45 In accordance with Code section 9831(a)(2) and
ERISA section 732(a), the market reforms, including
PHS Act section 2711, do not apply to a group
health plan that has fewer than two participants
who are current employees on the first day of the
plan year, and, in accordance with Code section
9831(b), ERISA section 732(b), and PHS Act
sections 2722(b) and 2763, the market reforms,
including PHS Act section 2711, also do not apply
to a group health plan in relation to its provision
of excepted benefits described in Code section
9832(c), ERISA section 733(c) and PHS Act section
2791(c).
46 See 75 FR 37188, 37190 (June 28, 2010).
47 In general, a health FSA is a benefit designed
to reimburse employees for medical care expenses
(as defined in Code section 213(d), other than
premiums) incurred by the employee, or the
employee’s spouse, dependents, and any children
who, as of the end of the taxable year, have not
attained age 27. See Employee Benefits—Cafeteria
Plans, 72 FR 43938, 43957 (August 6, 2007)
(proposed regulations; to be codified, in part, once
final, at 26 CFR 1.125–5); Code section 105(b) and
106(c). Contributions to a health FSA offered
through a cafeteria plan satisfying the requirements
of Code section 125 do not result in gross income
to the employee. Code section 125(a).
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are subject to specific statutory
provisions that require that the
contributions be limited.
These final regulations contain a
clarification regarding the application of
the annual dollar limit prohibition to
health FSAs. Question and Answer 8 of
DOL Technical Release 2013–03 48 and
IRS Notice 2013–54 49 clarified that the
annual dollar limit prohibition applies
to a health FSA that is not offered
through a Code section 125 plan. That
is because the exemption for health
FSAs from the annual dollar limit
prohibition is intended to apply only to
health FSAs that are subject to the
separate annual limitation under Code
section 125(i), and health FSAs that are
not offered through a Code section 125
plan are not subject to that separate
statutory limit. The prior guidance
provided that this clarification was
intended to apply beginning September
13, 2013 and the guidance noted that
the Departments intended to amend the
annual dollar limit prohibition
regulations to conform to the Q&A.
These final regulations include this
amendment.
Other types of account-based plans,
such as HRAs and employer payment
plans,50 are not exempt from the annual
dollar limit prohibition. However, the
preamble to the interim final regulations
and subsequently issued subregulatory
guidance 51 interpreting these rules
included a number of rules regarding
the application of the annual dollar
limit prohibition to these types of
arrangements. In particular, this
guidance provides that if an HRA is
‘‘integrated’’ with other group health
48 Technical Release 2013–03, available at
www.dol.gov/ebsa/pdf/tr13-03.pdf.
49 2013–40 IRB 287.
50 An employer payment plan is a group health
plan under which an employer reimburses an
employee for some or all of the premium expenses
incurred for an individual health insurance policy,
such as a reimbursement arrangement described in
Revenue Ruling 61–146, 1961–2 CB 25, or
arrangements under which the employer uses its
funds to directly pay the premium for an individual
health insurance policy covering the employee.
51 Five items of guidance have been issued on this
topic: (1) Affordable Care Act Implementation FAQs
Part XI, available at (https://www.dol.gov/ebsa/faqs/
faq-aca11.html) or https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs11.html; (2) IRS Notice 2013–
54 and DOL Technical Release 2013–03, issued on
September 13, 2013; (3) IRS FAQ on Employer
Healthcare Arrangements available at https://
www.irs.gov/Affordable-Care-Act/Employer-HealthCare-Arrangements; (4) Affordable Care Act
Implementation FAQs Part XXII, available at
https://www.dol.gov/ebsa/faqs/faq-aca22.html or
https://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/Downloads/FAQs-Part-XXII-FINAL.pdf;
and (5) IRS Notice 2015–17, issued on February 18,
2015. See also 75 FR 37188 (June 28, 2010). This
guidance, much of which is not directly addressed
in these final regulations, continues to be in effect.
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plan coverage, and the other group
health plan coverage complies with the
requirements of PHS Act section 2711,
the combined arrangement satisfies the
requirements even though the HRA
imposes a dollar limit.52 The basic
principles for when an HRA is
considered integrated with other group
health plan coverage have been set forth
in various forms of subregulatory
guidance and have been included in
these final regulations.
These final regulations clarify the
scope of arrangements, in addition to
HRAs, that can be integrated with other
group health plan coverage by defining
and referring to ‘‘account-based plans.’’
Account-based plans are employerprovided group health plans that
provide reimbursements of medical
expenses other than individual market
policy premiums, with the
reimbursement subject to a maximum
fixed dollar amount for a period.
Examples of account-based plans
include health FSAs and medical
reimbursement plans that are not HRAs,
in addition to HRAs. Account-based
plans that do not qualify as excepted
benefits 53 generally are subject to the
market reforms (except that health FSAs
offered through a Code section 125 plan
are not subject to the annual dollar limit
prohibition), including the preventive
services requirements under PHS Act
section 2713. If the other group health
plan coverage with which an accountbased plan is integrated complies with
the requirements under PHS Act
52 Issues also arise for account-based group health
plans under PHS Act section 2713, which requires
non-grandfathered group health plans (or health
insurance issuers offering group health insurance
plans) to provide certain preventive services
without imposing any cost-sharing requirements for
these services. The Departments have issued
guidance providing that, similar to the analysis of
the annual dollar limit prohibition, an HRA that is
integrated with a group health plan will comply
with the preventive services requirements if the
group health plan with which the HRA is integrated
complies with the preventive services requirements.
Also, a group health plan, including an HRA, used
to purchase coverage on the individual market is
not integrated with that individual market coverage
for purposes of the preventive services
requirements and therefore will fail to comply with
the preventive services requirements because an
HRA or similar arrangement does not provide
preventive services without cost-sharing in all
instances. See DOL Technical Release 2013–03 and
IRS Notice 2013–54.
53 Health FSAs will be considered to provide only
excepted benefits if the employer also makes
available group health plan coverage that is not
limited to excepted benefits and the health FSA is
structured so that the maximum benefit payable to
any participant cannot exceed two times the
participant’s salary reduction election for the health
FSA for the year (or, if greater, cannot exceed $500
plus the amount of the participant’s salary
reduction election). See 26 CFR 54.9831–1(c)(3)(v),
29 CFR 2590.732(c)(3)(v), and 45 CFR
146.145(c)(3)(v).
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sections 2711 and 2713, the accountbased plan also complies with those
requirements because, in that case, the
combined benefit satisfies those
requirements.54
The Departments’ prior guidance
regarding when an HRA is considered
integrated with another group health
plan provides two methods for
integration, each of which has been
added to the final regulations and
extended to other account-based plans.
In addition to various other
requirements, each integration method
requires that under the terms of the
HRA or other account-based plan, (1) an
employee (or former employee) must be
permitted to permanently opt out of and
waive future reimbursements from the
account-based plan at least annually,
and (2) upon termination of
employment either remaining funds are
forfeited or the employee is allowed to
opt out of and waive future
reimbursements under the accountbased plan.
Stakeholders have requested
clarification regarding whether for this
purpose a forfeiture of amounts or a
waiver of reimbursements under an
HRA includes an otherwise permanent
forfeiture or waiver, if the amounts will
be reinstated or the waiver will be
discontinued upon a fixed date or death.
The Departments interpret the prior
guidance to provide, and the final
regulations clarify, that forfeiture or
waiver occurs even if the forfeited
amounts or waived reimbursements may
be reinstated upon a fixed date, a
participant’s death, or the earlier of the
two events (the reinstatement event).
For this purpose, an HRA is considered
forfeited or waived prior to a
reinstatement event only if the
participant’s election to forfeit or waive
is irrevocable, meaning that, beginning
on the effective date of the election, the
participant and the participant’s
beneficiaries have no access to amounts
credited to the HRA until the
reinstatement event.55 This means that
the HRA may not be used to reimburse
or pay medical expenses incurred
54 See Affordable Care Act Implementation FAQs
Part XIX, available at https://www.dol.gov/ebsa/faqs/
faq-aca19.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs19.html.
55 During a period in which an HRA has been
forfeited or waived prior to a reinstatement event,
the participant is considered not covered by the
HRA. For a former employee (such as a retiree), an
individual’s right to have a forfeited or waived HRA
reinstated upon a reinstatement event will not
prevent the individual from receiving the premium
tax credit under § 36B during the period after
forfeiture or waiver and prior to reinstatement, if
the individual is otherwise eligible for a premium
tax credit. See 26 CFR 1.36B–2(c)(3)(i), proposed
§ 1.36B–2(c)(3)(iv).
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during the period after the forfeiture or
waiver and prior to reinstatement. An
HRA need not provide for reinstatement
of forfeited amounts or waived
reimbursements to be integrated with a
non-HRA group health plan. The final
regulations reflect this clarification, and
this clarification applies for integration
of HRAs as well as other account-based
plans, as defined in the regulations.
The Departments’ prior guidance
regarding integration of an HRA or other
account-based plan with another group
health plan further provides that
integration requires, among other
requirements, that the plan sponsor
offering the HRA or other account-based
plan also offer to the employee another
group health plan (other than the HRA
or other account-based plan). On
February 18, 2015, Treasury and IRS
issued Notice 2015–17, which, in Q&A3,
provided for integration of a premium
reimbursement arrangement for an
employee’s Medicare part B or D
premiums for purposes of the annual
dollar limit prohibition and the
preventive services requirements under
PHS Act section 2713 if the arrangement
meets certain conditions and the
employer offers the employee another
group health plan.56 However, Notice
2015–17 provided that the premium
reimbursement arrangement for an
employee’s Medicare part B or D
premiums could not be integrated with
Medicare coverage to satisfy the market
reforms because Medicare coverage is
not a group health plan. In response to
this prior guidance, stakeholders have
indicated that employers with fewer
than 20 employees are unable to meet
the integration test set out in Notice
2015–17 for Medicare part B or D
premium reimbursement arrangements.
That is because these employers that
offer group health plan coverage are not
required by the applicable Medicare
secondary payer rules to offer group
health plan coverage to their employees
who are eligible for Medicare coverage,
and some issuers of insurance for group
health plans do not allow these smaller
employers to offer group health plan
coverage to their employees who are
eligible for Medicare coverage. In
response to these concerns, these
regulations now provide a special rule
for employers with fewer than 20
employees that are not required to offer
their group health plan coverage to
employees who are eligible for Medicare
56 Notice 2015–17 provides special rules for
integration of Medicare Part B and D premium
reimbursement arrangements and TRICARE-related
HRAs with other group health plans, along with
various other related pieces of guidance. That
guidance continues to apply but is not repeated in
these final regulations.
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coverage, and that offer group health
plan coverage to their employees who
are not eligible for Medicare, but not to
their employees who are eligible for
Medicare coverage. For these employers,
a premium reimbursement arrangement
for Medicare part B or D premiums may
be integrated with Medicare (and
deemed to satisfy) the annual dollar
limit prohibition and the preventive
services requirements under PHS Act
section 2713 if the employees who are
not offered the other group health plan
coverage would be eligible for that
group health plan but for their eligibility
for Medicare. These employers may use
either of the non-Medicare specific
integration tests, as applicable, for
account-based plans for employees who
are not eligible for Medicare.
Although in certain circumstances
HRAs and other account-based plans
may be integrated with another group
health plan to satisfy the annual dollar
limit prohibition, these final regulations
incorporate the general rule set forth in
prior subregulatory guidance clarifying
that an HRA and other account-based
plans may not be integrated with
individual market coverage, and
therefore an HRA or other accountbased plan used to reimburse premiums
for the individual market coverage fails
to comply with PHS Act section 2711.
These final regulations, however, do
not incorporate all of the other
subregulatory guidance concerning the
application of the Affordable Care Act to
HRAs and other account-based plans. It
has come to the Departments’ attention
that there are a wide variety of accountbased products being marketed, often
with subtle but insubstantial
differences, in an attempt to circumvent
the guidance set forth by the
Departments on the application of the
annual dollar limit prohibition and the
preventive services requirements to
account-based plans. The Departments
intend to continue to address these
specific instances of noncompliance.
The subregulatory guidance not
specifically addressed in these final
regulations continues to apply and the
Departments will continue to address
additional situations as necessary.
D. PHS Act Section 2712, Prohibition on
Rescissions (26 CFR 54.9815–2712, 29
CFR 2590.715–2712, 45 CFR 147.128)
PHS Act section 2712, as added by the
Affordable Care Act, provides that a
group health plan or health insurance
issuer offering group or individual
health insurance coverage must not
rescind coverage unless a covered
individual commits fraud or makes an
intentional misrepresentation of
material fact. This standard applies to
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all rescissions, whether in the group or
individual insurance market, or selfinsured coverage. These rules also apply
regardless of any contestability period of
the plan or issuer. On June 28, 2010, the
Departments issued interim final
regulations implementing PHS Act
section 2712.57 The interim final
regulations included several
clarifications regarding the standards for
rescission, including that the rules of
PHS Act section 2712 apply whether the
coverage is rescinded for an individual
or a group. The Departments also issued
Affordable Care Act Implementation
FAQs Part II Q7, which clarified when
retroactive terminations in the ‘normal
course of business’ would not be
considered rescissions.58 These final
regulations finalize the 2010 interim
final regulations without substantial
change and incorporate the
clarifications issued thus far in
subregulatory guidance.
1. Definition of Rescission
Under the interim final regulations
and these final regulations, a rescission
is a cancellation or discontinuance of
coverage that has retroactive effect. For
example, a cancellation that treats an
insurance policy as void from the time
of an individual’s or group’s enrollment
is a rescission, whether the cancellation
is a result of the issuer subsequently
determining that a valid insurance
contract does not exist or the insurance
contract was entered into despite its
noncompliance with applicable law. As
another example, a cancellation that
voids benefits paid up to a year before
the cancellation is also a rescission.
However, a cancellation or
discontinuance of coverage is not a
rescission if it has only prospective
effect or to the extent it is attributable
to a failure to timely pay required
premiums or contributions towards the
cost of coverage. Other provisions of
Federal and State law limit the grounds
for prospective cancellations of
coverage, including PHS Act section
2703 regarding guaranteed renewability
of coverage and PHS Act section 2705
regarding non-discrimination in rules
for eligibility (or continued eligibility)
based on health status.
Under PHS Act section 2712,
rescission is not prohibited if a covered
individual commits fraud or makes an
intentional misrepresentation of
material fact. Some commenters
recommended that the Departments
57 75
FR 37188 (June 28, 2010).
Care Act Implementation FAQs Part
II, available at https://www.dol.gov/ebsa/faqs/faqaca2.html or https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs2.html.
58 Affordable
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define the term ‘‘material fact.’’ These
final regulations decline this suggestion.
However, the Departments have
addressed whether providing false or
inaccurate information concerning
tobacco use is considered a
misrepresentation of material fact for
this purpose. HHS published final
regulations under PHS Act section 2701
(regarding fair health insurance
premiums) on February 13, 2013.59 In
the preamble to those regulations, HHS
stated that, with respect to an individual
who is found to have reported false or
inaccurate information about their
tobacco use, the individual may be
charged the appropriate premium that
should have been paid retroactive to the
beginning of the plan year. However, as
stated in the preamble, the ‘‘remedy of
recoupment renders any
misrepresentation with regard to
tobacco use no longer a ‘material’ fact
for purposes of rescission under PHS
Act section 2712 and its implementing
regulations,’’ and therefore, coverage
cannot be rescinded on such basis. The
Departments may provide further
guidance regarding the definition of a
‘‘material fact’’ for purposes of
rescission under PHS Act section 2712
if additional questions arise.
2. Scope and Application
The statutory prohibition related to
rescissions is not limited to rescissions
based on prior medical history, rather it
precludes plans and issuers from
rescinding coverage under any
circumstances except as provided in the
statute and regulations. For example,
coverage cannot be rescinded because
an individual makes a mistake on an
insurance application or enrollment
form. An example in both the interim
final regulations and in these final
regulations clarifies that some plan
errors (such as mistakenly covering a
part-time employee for a period of time
under a plan that only covers full-time
employees) may be cancelled
prospectively once identified, but not
retroactively rescinded unless there was
fraud or intentional misrepresentation
of a material fact by the employee.
The Departments received comments
on the interim final regulations stating
that some employers’ human resource
departments may reconcile lists of
eligible individuals with their plan or
issuer via data feed only once per
month, and that routine enrollment
adjustments in the normal course of
business should not be considered a
rescission.
In response to these comments, the
Departments issued an FAQ concerning
59 78
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FR 13406, 13414 (February 13, 2013).
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rescissions on October 8, 2010.60 The
FAQ stated that if a plan covers only
active employees (subject to the COBRA
continuation of coverage provisions)
and an employee pays no premiums for
coverage after termination of
employment, the Departments do not
consider the retroactive elimination of
coverage back to the date of termination
of employment, due to delay in
administrative record-keeping, to be a
rescission. Similarly, if a plan does not
cover ex-spouses and the plan is not
notified of a divorce (subject to the
COBRA continuation coverage
provisions), and the full COBRA
premium is not paid by the employee or
ex-spouse for coverage, the Departments
do not consider a plan’s termination of
coverage retroactive to the divorce to be
a rescission.61
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3. Termination of Coverage Initiated by
Participant, Beneficiary, or Enrollee
The Departments have been asked
whether the rescission rules prohibit a
plan or issuer from retroactively
terminating coverage at the request of a
participant, beneficiary, or enrollee. In
the Departments’ view, the statutory
provision was enacted by Congress to
protect individuals against potential
abuses by group health plans and health
insurance issuers; it was not intended to
prevent individuals from exercising
their rights and privileges under the
terms of the plan or coverage in
accordance with applicable State law,
where they are acting voluntarily and
without coercion by the plan or issuer.
Moreover, HHS regulations at 45 CFR
155.430, which govern termination of
enrollment in the Exchange, permit
enrollees and the Exchange to initiate a
retroactive termination of enrollment in
a QHP through the Exchange, including
instances where the enrollee has the
right to terminate coverage under
applicable State law (such as State ‘‘free
look’’ cancellations laws).62 For these
reasons, the Departments clarify in these
final regulations that a retroactive
cancellation or discontinuance of
coverage is not a rescission if (1) it is
initiated by the individual (or by the
individual’s authorized representative)
and the employer, sponsor, plan, or
issuer does not, directly or indirectly,
60 Affordable Care Act Implementation FAQs Part
II, Q7 at https://www.dol.gov/ebsa/pdf/faq-aca2.pdf
and https://www.cms.gov/CCIIO/Resources/FactSheets-and-FAQs/aca_implementation_faqs2.html.
61 In such situations, COBRA may require
coverage to be offered for up to 36 months if the
COBRA applicable premium is paid by the qualified
beneficiary.
62 State ‘‘free look’’ cancellation laws are laws
permitting an individual to cancel coverage within
a certain time period, even following the
effectuation of the enrollment.
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take action to influence the individual’s
decision to cancel or discontinue
coverage retroactively, or otherwise take
any adverse action or retaliate against,
interfere with, coerce, intimidate, or
threaten the individual; or (2) it is
initiated by the Exchange pursuant to 45
CFR 155.430 (other than under
paragraph (b)(2)(iii)). The Departments
may issue additional subregulatory
guidance if abusive situations or
questions arise.
4. Interaction With Internal Appeals and
External Review
Commenters requested that these final
regulations provide that individuals
have the right to appeal a rescission to
an independent third party. PHS Act
section 2719 and its implementing
regulations address internal claims and
appeals and external review of adverse
benefit determinations. Under the
Department of Labor’s claims procedure
regulation at 29 CFR 2560.503–1 (the
DOL claims procedure regulation),
adverse benefit determinations eligible
for internal claims and appeals
processes generally include denial,
reduction, termination of, or a failure to
provide or make a payment (in whole or
in part) for a benefit, including a denial,
reduction, termination, or failure to
make a payment based on the
imposition of a preexisting condition
exclusion, a source of injury exclusion,
or other limitation on covered benefits.
The Departments’ regulations under
PHS Act section 2719 broaden the
definition of ‘‘adverse benefit
determination’’ to include rescissions of
coverage. Therefore, rescissions of
coverage are also eligible for internal
claims and appeals and external review
for non-grandfathered health plans,
whether or not the rescission has an
adverse effect on any particular benefit
at the time of an appeal. The regulations
under PHS Act section 2719 also
contain provisions requiring coverage to
remain effective pending the outcome of
an internal appeal.
5. Interaction With COBRA
Continuation Coverage
COBRA provides for a temporary
continuation of group health coverage
that would otherwise be lost due to
certain life events. COBRA requires
group health plans to offer continuation
coverage to covered employees, former
employees, spouses, former spouses,
and dependent children when group
health coverage would be terminated
due to the following: The death of a
covered employee; termination or
reduction in the hours of a covered
employee’s employment for reasons
other than gross misconduct; a covered
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employee’s becoming entitled to
Medicare; divorce or legal separation of
a covered employee and spouse; and a
child’s loss of dependent status (and
therefore coverage) under the plan.
COBRA sets forth rules for how and
when continuation coverage must be
offered and provided, how employees
and their families may elect
continuation coverage, and what
circumstances justify terminating
continuation coverage. COBRA allows
plans to continue coverage during an
initial 60-day election period and allows
plans to continue providing coverage
during the 30-day grace periods for each
premium payment. If a qualified
beneficiary fails to pay for coverage
during the initial election period, or
fails to pay in full before the end of a
grace period, continuation coverage may
be terminated retroactively under
COBRA.
Several commenters sought
clarification about the interaction of the
COBRA continuation provisions with
the prohibition against rescissions. The
Departments clarify that the regulatory
exception to the prohibition on
rescission for failure to timely pay
required premiums or contributions
toward the cost of coverage also
includes failure to timely pay required
premiums towards the cost of COBRA
continuation coverage. Accordingly, if a
group health plan requires the payment
of a COBRA premium to continue
coverage after a qualifying event and
that premium is not paid by the
applicable deadline, the prohibition on
rescission is not violated if the plan
retroactively terminates coverage due to
a failure to elect and pay for COBRA
continuation coverage.
6. Notice of Rescission
Consistent with PHS Act section
2712, under the interim final regulations
and these final regulations, a plan or
issuer must provide at least 30 calendar
days advance written notice to each
participant (in the individual market,
primary subscriber) who would be
affected before coverage may be
rescinded (where permitted). This
provides individuals time to appeal the
decision or enroll into new coverage.
This notice is required regardless of
whether it is a rescission of group or
individual coverage; or whether, in the
case of group coverage, the coverage is
insured or self-insured, or the rescission
applies to an entire group or only to an
individual within the group.
Some commenters recommended the
30-day notice of rescission be
coordinated with the rules for providing
notices of adverse benefit
determinations under the Departments’
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internal appeals and external review
regulations under PHS Act section 2719.
Other commenters made specific
suggestions regarding the content of the
notice, such as that the notice indicate
the basis for the rescission and include
an explanation of the remedies available
to the individual.
Under PHS Act section 2719, the
interim final regulations, and these final
regulations, a plan or issuer must
provide notice to individuals, in a
culturally and linguistically appropriate
manner, of the reason or reasons for an
adverse benefit determination or final
internal adverse benefit determination
(including a rescission of coverage) and
a description of available internal
appeals and external review processes,
including information on how to initiate
an appeal. The Departments encourage
plans and issuers to coordinate notices
related to rescissions and appeal
procedures to the extent possible.
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E. PHS Act Section 2714, Coverage of
Dependents to Age 26 (26 CFR 54.9815–
2714, 29 CFR 2590.715–2714, 45 CFR
147.120)
PHS Act section 2714, as added by the
Affordable Care Act, provides that a
group health plan or a health insurance
issuer offering group or individual
health insurance coverage that makes
available dependent coverage 63 of
children must make such coverage
available for children until attainment
of 26 years of age.64 On May 13, 2010,
the Departments issued interim final
regulations implementing PHS Act
section 2714 and requesting comment.65
After issuance of the 2010 interim final
regulations, the Departments released
Affordable Care Act Implementation
FAQs Parts I and V to address various
requests for clarifications under PHS
Act section 2714.66 These final
63 For purposes of these final regulations,
dependent coverage means coverage of any
individual under the terms of a group health plan,
or group or individual health insurance coverage,
because of the relationship to a participant (in the
individual market, primary subscriber).
64 Under section 1004(d) of the Reconciliation Act
and IRS Notice 2010–38, 2010–20 IRB 682, released
on April 27, 2010, employers may exclude from the
employee’s income the value of any employerprovided health coverage for an employee’s child
for the entire taxable year the child turns 26 if the
coverage continues until the end of that taxable
year. This means that if a child turns 26 in March,
but stays on the plan past December 31st (the end
of most individual’s taxable year), the health
benefits up to December 31st can be excluded from
the employee’s income.
65 See 75 FR 27122 (May 13, 2010).
66 Affordable Care Act Implementation FAQs Part
I, Q&A–14, available at https://www.dol.gov/ebsa/
faqs/faq-aca.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs.html and Affordable Care Act
Implementation FAQs Part 5 and Mental Health
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regulations adopt the 2010 interim final
regulations without substantial change
and incorporate the clarifications issued
thus far in subregulatory guidance.
1. Restrictions on Plan Definition of
Dependent
a. Definition of Dependent—Based on
Relationship Between Child and
Participant
PHS Act section 2714 provides that
the ‘‘Secretary shall promulgate
regulations to define the dependents to
which coverage shall be made
available’’ under the dependent
coverage provision. The 2010 interim
final regulations provided that with
respect to a child who has not attained
age 26, a plan or issuer may not define
dependent for purposes of eligibility for
dependent coverage of children other
than in terms of a relationship between
a child and the participant. For
example, a plan or issuer may not deny
or restrict coverage for a child who has
not attained age 26 based on the child’s
financial dependency (upon the
participant or any other person),
residency with the participant or with
any other person, student status,
employment, or any combination of
those factors. Additional examples of
factors that cannot be used for defining
dependent for purposes of eligibility (or
continued eligibility) include eligibility
for other coverage 67 and marital status
of a dependent child.68 Because the
statute does not distinguish between
coverage for minor children and
coverage for adult children under age
26, these factors also may not be used
to determine eligibility for dependent
coverage of minor children.
It has come to the Departments’
attention that certain plans that utilize
an HMO design impose restrictions on
eligibility that require participants and
beneficiaries to work, live or reside in
the HMO service area. While these
Parity Implementation, Q&A 5, available at https://
www.dol.gov/ebsa/faqs/faq-aca5.html and https://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs5.html. https://
www.dol.gov/ebsa/faqs/faq-aca5.html.
67 See section II.H.1. of this preamble, entitled
‘‘Special Rule Relating to Dependent Coverage of
Children to Age 26 for Grandfathered Group Health
Plans,’’ for discussion of an out-of-date special rule
for grandfathered plans regarding adult children
eligible for other coverage.
68 The Affordable Care Act, as originally enacted,
required plans and issuers to make dependent
coverage available only to a child ‘‘who is not
married.’’ This language was struck by section
2301(b) of the Reconciliation Act. Accordingly,
under the interim final regulations and these final
regulations, plans and issuers may not limit
dependent coverage of children based on whether
a child is married (however, a plan or issuer is not
required under the final regulations to cover the
spouse of an eligible child).
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72205
provisions on their face appear to be
generally applicable, the overwhelming
impact of such provisions affects
dependent children, who would
otherwise be required to be covered
pursuant to PHS Act section 2714. For
example, a plan that utilizes an HMO
design that requires participants and
beneficiaries to work, live or reside in
the service area would not permit a
dependent child covered under the
parent’s plan to continue to be eligible
for the plan if the dependent child
moves out of the HMO’s service area to
attend college. Under the same plan,
however, most employees and their
spouses would work, live or reside in
the service area.
These final regulations provide that,
to the extent such restrictions are
applicable to dependent children up to
age 26, eligibility restrictions under a
plan or coverage that require
individuals to work, live or reside in a
service area violate PHS Act section
2714. (This rule does not relate to the
extent to which a plan must cover
participants or provide services outside
of its service area). While eligibility
provisions of general applicability are
usually outside the scope of PHS Act
section 2714, due to the
disproportionate effect on dependent
children, these final regulations do not
permit eligibility provisions under a
plan or coverage based on service area,
to the extent such restrictions are
applicable to dependent children up to
age 26, even if such restrictions are
intended to apply generally to all
participants and beneficiaries under the
plan.
b. Definition of Child
PHS Act section 2714 does not require
a plan to provide dependent coverage of
children but instead provides that if a
plan does provide dependent coverage
of children it must continue to make
such coverage available until the child
turns age 26.69 Neither PHS Act section
69 In general, under section 4980H of the Code,
certain employers (applicable large employers)
must either offer health coverage to their full-time
employees (and their dependents) or potentially
pay an assessable payment if at least one full-time
employee receives a premium tax credit for
purchasing individual coverage on an Affordable
Insurance Exchange. For purposes of section 4980H,
the term dependent means ‘‘a child (as defined in
section 152(f)(1) of the Code but excluding a
stepson, stepdaughter or an eligible foster child
(and excluding any individual who is excluded
from the definition of dependent under section 152
of the Code by operation of section 152(b)(3) of the
Code)) of an employee who has not attained age 26.
A child attains age 26 on the 26th anniversary of
the date the child was born. A child is a dependent
for purposes of section 4980H for the entire
calendar month during which he or she attains age
26. Absent knowledge to the contrary, applicable
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2714 nor the interim final regulations
defined the term child for purpose of
the dependent coverage provision.70
In response to comments requesting
guidance on the definition of the term
child and questions from stakeholders,
the Departments released an FAQ 71
stating that a group health plan or issuer
will not fail to satisfy the dependent
coverage provision merely because it
conditions health coverage on support,
residency, or other dependency factors
for individuals under age 26 who are
not described in section 152(f)(1) of the
Code. For an individual not described in
section 152(f)(1), such as a grandchild or
niece, a plan may impose additional
conditions on eligibility for health
coverage, such as a condition that the
individual be a dependent for income
tax purposes. The FAQ also provided
that a plan or issuer does not fail to
satisfy the requirements of PHS Act
section 2714 or its implementing
regulations because the plan limits
health coverage for children until the
child turns 26 to only those children
who are described in section 152(f)(1) of
the Code. These final regulations
incorporate the clarifications provided
in the FAQ.
Some commenters requested that the
Departments interpret PHS Act section
2714 to apply to grandchildren. The
statute and the 2010 interim final
regulations provided that nothing in
PHS Act section 2714 requires a plan or
issuer to make available coverage for a
child of a child receiving dependent
coverage. Because the statute
specifically provides that plans and
issuers are not required to make
coverage available to grandchildren,
these final regulations do not adopt this
suggestion.
2. Uniformity Irrespective of Age
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The 2010 interim final regulations
provided that the terms of the plan or
health insurance coverage providing
dependent coverage of children cannot
large employer members may rely on an employee’s
representation about that employee’s children and
the ages of those children. The term dependent does
not include the spouse of an employee.’’ See 26
CFR 54.4980H–1(a)(12). Under section 152(f)(1) of
the Code a child means an individual who is (i) a
son, daughter, stepson, or stepdaughter of the
taxpayer (including a legally adopted child or an
individual lawfully placed for adoption with the
taxpayer) or (ii) an eligible foster child of the
taxpayer.
70 Under section 1004(d) of the Reconciliation Act
and IRS Notice 2010–38, child means child as
defined in section 152(f)(1) of the Code.
71 Affordable Care Act Implementation FAQs Part
I, Q&A 14 (released on September 20, 2010),
available at https://www.dol.gov/ebsa/faqs/faqaca.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs.html.
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vary based on the age of a child, except
for children age 26 or older. The 2010
interim final regulations contained
examples illustrating that age-based
surcharges violate the uniformity
requirement but that cost of coverage
increases for tiers with more covered
individuals do not violate this
requirement because such an increase
applies without regard to the age of any
child. The 2010 interim final regulations
also contained an example
demonstrating that a plan that limits the
benefit packages offered based on the
age of dependent children violates the
uniformity requirement. These final
regulations retain these examples.
Following the 2010 interim final
regulations, the Departments issued an
FAQ 72 that addressed an arrangement
under which a group health plan
charges a copayment for physician visits
that do not constitute preventive
services to individuals age 19 and over,
including employees, spouses, and
dependent children, but waives the
copayment for children under age 19.
The FAQ clarifies that the Departments
do not consider such an arrangement to
violate the dependent coverage
provision. This arrangement is
permissible under the dependent
coverage provision because, while the
dependent coverage provision prohibits
distinctions based upon age in
dependent coverage of children under
age 26, it does not prohibit distinctions
based upon age that apply to all
coverage under the plan, including
coverage for employees and spouses as
well as dependent children. In this
situation, the copayments charged to
dependent children are the same as
those charged to employees and
spouses. (However, with respect to
individual and small group plans
required to provide essential health
benefits, distinctions based on age may
be considered discriminatory under
HHS regulations regarding essential
health benefits.73) The final regulations
reflect the clarification contained in this
FAQ.
F. PHS Act Section 2719, Internal
Claims and Appeals and External
Review (26 CFR 54.9815–2719, 29 CFR
2590.715–2719, 45 CFR 147.136)
PHS Act section 2719, as added by the
Affordable Care Act, applies to group
health plans that are not grandfathered
health plans and health insurance
72 Affordable Care Act Implementation Part V and
Mental Health Parity Implementation FAQs, Q&A 5
(released on December 22, 2010), available at https://
www.dol.gov/ebsa/faqs/faq-aca5.html and https://
www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/aca_implementation_faqs5.html.
73 See 45 CFR 156.125.
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issuers offering non-grandfathered
coverage in the group and individual
markets, and sets forth standards for
plans and issuers regarding both
internal claims and appeals and external
review. With respect to internal claims
and appeals processes for group health
plans and health insurance issuers
offering group health insurance
coverage, PHS Act section 2719
provides that a non-grandfathered group
health plan or health insurance issuer
offering non-grandfathered group
coverage must initially incorporate the
internal claims and appeals processes
set forth in regulations promulgated by
the Department of Labor (DOL) at 29
CFR 2560.503–1 (the DOL claims
procedure regulation) and update such
processes in accordance with standards
established by the Secretary of Labor.
Similarly, with respect to internal
claims and appeals processes for
individual health insurance coverage,
issuers must initially incorporate the
internal claims and appeals processes
set forth in applicable State law and
update such processes in accordance
with standards established by the
Secretary of HHS. With respect to
external review, PHS Act section 2719
provides for either a State external
review process or a Federal external
review process.
The following list identifies certain
regulations and subregulatory guidance
that the Departments have issued to
implement these requirements:
• Interim final regulations on July 23,
2010, at 75 FR 43329, implementing the
internal claims and appeals and external
review process requirements of PHS Act
section 2719;
• Technical Release 2010–01, on
August 23, 2010, setting forth interim
procedures for Federal External Review;
• Technical Guidance, on August 26,
2010, setting forth interim procedures
for Federal External Review for health
insurance issuers in the group and
individual markets under the Patient
Protection and Affordable Care Act;
• Affordable Care Act
Implementation FAQs part I, on
September 20, 2010, providing guidance
on outstanding questions regarding the
internal claims and appeals and external
review process requirements of PHS Act
section 2719;
• Technical Release 2010–02, on
September 20, 2010, establishing an
enforcement grace period with respect
to some of the internal claims and
appeals standards set forth in the
interim final regulations;
• Technical Release 2011–01, on
March 18, 2011, extending the
enforcement grace period set forth in
Technical Release 2010–02;
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• Technical Release 2011–02, on June
22, 2011, setting forth interim standards
for a State-administered external review
process authorized under section
2719(b)(2) of the PHS Act and paragraph
(d) of the interim final regulations;
• Amendments to the interim final
regulations on June 24, 2011, at 76 FR
37207, with respect to the internal
claims and appeals and external review
provisions of PHS Act section 2719 in
response to comments received
regarding the interim final regulations;
and
• Technical Release 2013–01, on
March 15, 2013, extending the interim
standards for a State-administered
external review process authorized
under section 2719(b)(2) of the PHS Act
and paragraph (d) of the interim final
regulations set forth in Technical
Release 2011–02.
After consideration of the comments
and feedback received from
stakeholders, the Departments are
publishing these final regulations. These
final regulations adopt the interim final
regulations, as previously amended,
without substantial change. These final
regulations also codify some of the
enforcement safe harbors, transition
relief, and clarifications set forth
through subregulatory guidance.
Contemporaneous with the issuance of
these final regulations, the Department
of Labor is issuing a proposed regulation
to amend the DOL claims procedure
regulations under 29 CFR 2560.503–1,
as applied to plans providing disability
benefits. The amendment would revise
and strengthen the current DOL claims
procedure regulations regarding claims
and appeals applicable to plans
providing disability benefits primarily
by adopting the protections and
standards for internal claims and
appeals applicable to group health plans
under PHS Act section 2719 and these
final regulations.
1. Internal Claims and Appeals
In addition to the requirement in PHS
Act section 2719(a) that plans and
issuers must initially incorporate the
internal claims and appeals processes
set forth in the DOL claims procedure
regulation, the interim final regulations,
as amended, provide further standards
for compliance with the internal claims
and appeals requirements of PHS Act
2719.74 Specifically, under these
74 The statute requires the Secretary of Health and
Human Services to set forth processes for internal
claims and appeals in the individual market. Under
the interim final regulations, the Secretary of Health
and Human Services has determined that a health
insurance issuer offering individual health
insurance coverage must generally comply with all
the requirements for the internal claims and appeals
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requirements, in addition to complying
with the internal claims and appeals
processes set forth in the DOL claims
procedure regulation, plans and issuers
are required to comply with the
following standards: (1) The scope of
adverse benefit determinations eligible
for internal claims and appeals includes
a rescission of coverage (whether or not
the rescission has an adverse effect on
any particular benefit at the time); (2) A
plan or issuer must notify a claimant of
a benefit determination (whether
adverse or not) with respect to a claim
involving urgent care as soon as
possible, taking into account the
medical exigencies, but not later than 72
hours after the receipt of the claim by
the plan or issuer; (3) Clarifications with
respect to full and fair review, such that
plans and issuers are clearly required to
provide the claimant (free of charge)
with new or additional evidence
considered, relied upon, or generated by
(or at the direction of) the plan or issuer
in connection with the claim, as well as
any new or additional rationale for a
denial at the internal appeals stage, and
a reasonable opportunity for the
claimant to respond to such new
evidence or rationale; (4) Clarifications
regarding conflicts of interest, such that
decisions regarding hiring,
compensation, termination, promotion,
or other similar matters with respect to
an individual, such as a claims
adjudicator or medical expert, must not
be based upon the likelihood that the
individual will support the denial of
benefits; (5) Notices must be provided in
a culturally and linguistically
appropriate manner, as required by the
statute, and as set forth in paragraph (e)
of the interim final regulations, as
amended; (6) Notices to claimants must
provide additional content, including
that any notice of adverse benefit
determination or final internal adverse
benefit determination must include
information sufficient to identify the
claim involved, including the date of
the service, the health care provider, the
claim amount (if applicable), and a
statement describing the availability,
upon request, of the diagnosis code and
its corresponding meaning, and the
treatment code and its corresponding
meaning; and (7) With the exception of
de minimis violations under specified
circumstances, if a plan or issuer fails to
adhere to all the requirements of the
interim final regulations, as amended,
the claimant is deemed to have
exhausted the plan’s or issuer’s internal
claims and appeals process, and the
process that apply to group health coverage. Also,
see 45 CFR 147.136 for additional requirements for
coverage in the individual market.
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72207
claimant may initiate any available
external review process or remedies
available under ERISA or under State
law.
To address certain relevant
differences in the group and individual
markets the interim final regulations, as
amended, provided that health
insurance issuers offering individual
coverage must comply with three
additional requirements for internal
claims and appeals processes. First,
initial eligibility determinations in the
individual market must be included
within the scope of claims eligible for
internal appeals. Second, health
insurance issuers offering individual
coverage are only permitted to have one
level of internal appeal. Third, health
insurance issuers offering individual
coverage must maintain records of all
claims and notices associated with the
internal claims and appeals process for
six years. The issuer must make such
records available for examination by the
claimant or State, or Federal oversight
agency upon request.
These final regulations generally
incorporate the standards of the interim
final regulations, as amended, and the
Departments’ associated guidance,
without major change.
a. Full and Fair Review
The interim final regulations provided
that plans and issuers must provide the
claimant (free of charge) with new or
additional evidence considered, relied
upon, or generated by (or at the
direction of) the plan or issuer in
connection with the claim, as well as
any new or additional rationale as soon
as possible and sufficiently in advance
of the date on which the notice of the
final adverse benefit determination is
required to be provided under the DOL
claims procedure regulations. Since the
issuance of the interim final regulations
and subsequent subregulatory guidance,
stakeholders have requested additional
clarification regarding how to provide a
full and fair review in accordance with
the requirements set forth in the
regulations.
Commenters requested additional
guidance related to the timing and
amount of information required to be
provided in order to satisfy this
requirement. Specifically, individuals
asked whether such information
actually must be provided automatically
to participants and whether or not it
would be sufficient to send participants
a notice informing them of the
availability of new or additional
evidence or rationale. The Departments
retain the requirement that plans and
issuers provide the new or additional
evidence or rationale automatically. In
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the Departments’ view, fundamental
fairness requires that participants and
beneficiaries have an opportunity to
rebut or respond to any new or
additional evidence upon which a plan
or issuer may rely. Therefore, plans and
issuers that wish to rely on any new or
additional evidence or rationale in
making a benefit determination must
send such new or additional evidence or
rationale to participants as soon as it
becomes available to the plan or issuer.
In order to comply with this
requirement, a plan or issuer must send
the new or additional evidence or
rationale to the participant. Merely
sending a notice informing participants
of the availability of such information
fails to satisfy this requirement. To
address the narrow circumstance raised
by some comments that the new or
additional information could be first
received so late that it would be
impossible to provide it, these final
regulations provide that if the new or
additional evidence is received so late
that it would be impossible to provide
it to the claimant in time for the
claimant to have a reasonable
opportunity to respond, the period for
providing a notice of final internal
adverse benefit determination is tolled
until such time as the claimant has a
reasonable opportunity to respond.
After the claimant responds, or has a
reasonable opportunity to respond but
fails to do so, the plan or issuer must
notify the claimant of the benefit
determination as soon as a plan or
issuer acting in a reasonable and prompt
fashion can provide the notice, taking
into account the medical exigencies.
2. Culturally and Linguistically
Appropriate Standard (CLAS)
PHS Act section 2719 requires group
health plans and health insurance
issuers to provide relevant notices in a
culturally and linguistically appropriate
manner. The interim final regulations,
as amended, set forth a requirement to
provide notices in a non-English
language if at least a specified
percentage of residents in a county are
literate only in the same non-English
language. Specifically, with respect to
group health plans and health insurance
issuers offering group or individual
health insurance coverage, the interim
final regulations established that the
threshold percentage of people who are
literate only in the same non-English
language is set at ten percent or more of
the population residing in the
claimant’s county, as determined in
guidance based on American
Community Survey data published by
the United States Census Bureau.
Furthermore, the interim final
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regulations, as amended, required that
each notice sent by a plan or issuer to
an address in a county that meets this
threshold include a one-sentence
statement in the relevant non-English
language about the availability of
language services. In addition, under the
interim final regulations, as amended,
plans and issuers must provide a
customer assistance process (such as a
telephone hotline) with oral language
services in the non-English language
and provide written notices in the nonEnglish language upon request.
In response to the culturally and
linguistically appropriate standards
(CLAS) set forth in the amendments to
the interim final regulations described
in the prior paragraph, the Departments
received many comments from various
stakeholders. Some commenters
requested that the Departments
incorporate the prior proposed CLAS
(rather than the amended CLAS) into
these final regulations, citing that the
prior standard was less costly for plans
and issuers than was stated in the
proposed regulations. Other
commenters requested that the
threshold percentage that triggers the
CLAS requirements be reduced to a
lower percentage to capture a greater
number of counties. Other stakeholders
supported the CLAS requirements as set
forth in the amendments to the interim
final regulations. Stakeholders that
support the amended CLAS reiterated
prior comments that the Departments
received that opposed the ‘‘tagging and
tracking’’ requirement.75
In light of all the comments received,
these final regulations retain the CLAS
requirements as set forth in the
amendment to the interim final
regulations. The Departments believe
that the CLAS requirements
appropriately balance the objective of
protecting consumers by providing
understandable notices to individuals
who speak primary languages other than
English with the goal of imposing
reasonable language access
requirements on plans and issuers.
Furthermore, the Departments note that
nothing in these regulations should be
construed as limiting an individual’s
rights under Federal or State civil rights
statutes, such as section 1557 of the
Affordable Care Act and Title VI of the
Civil Rights Act of 1964 (Title VI) which
prohibits covered entities, including
issuers participating in Medicare
75 Under the interim final regulations, the CLAS
standard included a ‘‘tagging and tracking
requirement’’ which required plans and issuers, to
the extent individuals request a document in a nonEnglish language, to ‘‘tag’’ and ‘‘track’’ such request
so that any future notices would be provided
automatically in the non-English language.
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Advantage, from discriminating on the
basis of race, color, or national origin.
To ensure non-discrimination on the
basis of national origin under Title VI,
recipients are required to take
reasonable steps to ensure meaningful
access to their programs and activities
by limited English proficient persons.
(For more information, see, ‘‘Guidance
to Federal Financial Assistance
Recipients Regarding Title VI
Prohibition Against National Origin
Discrimination Affecting Limited
English Proficient Persons,’’ available at
https://www.hhs.gov/ocr/civilrights/
resources/laws/revisedlep.html.)
3. Extension of the Transition Period for
State External Review Processes
PHS Act section 2719(b) requires that
a non-grandfathered group health plan
that is not a self-insured plan that is not
subject to State insurance regulations
and a health insurance issuer offering
non-grandfathered group or individual
health insurance coverage comply with
an applicable State external review
process if that process includes, at a
minimum, the consumer protections set
forth in the Uniform Health Carrier
External Review Model Act issued by
the National Association of Insurance
Commissioners (the NAIC Uniform
Model Act). Paragraph (c)(2) of the 2010
interim final regulations under PHS Act
section 2719, as amended, sets forth the
minimum consumer protection
standards that a State external review
process must include to qualify as an
applicable State external review process
under PHS Act section 2719(b)(1)
(NAIC-parallel external review process).
Under PHS Act section 2719(b)(2), if
a State’s external review process does
not meet the minimum consumer
protection standards set forth in the
NAIC Uniform Model Act (or if a plan
is self-insured and not subject to State
insurance regulation), group health
plans and health insurance issuers in
the group and individual markets in that
State are required to implement an
effective external review process that
meets minimum standards established
by the Secretary of HHS through
guidance. These standards must be
similar to the standards established
under PHS Act section 2719(b)(1) and
must meet the requirements set forth in
paragraph (d) of the 2010 interim final
regulations, as amended.
In June 2011, the Departments
amended the July 2010 interim final
regulations and announced that plans
and issuers could continue to
participate in a State external review
process that met Federal standards that
were NAIC-similar for a limited time
(the NAIC-similar external review
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process), in anticipation that such an
allowance would reduce market
disruption during a transition period.
Contemporaneous with the June 2011
amendment, the Departments issued
guidance which, among other things,
established the NAIC-similar external
review process.
The Departments recognize that many
States have done considerable work to
bring their external review laws and
processes into compliance with the
NAIC Uniform Model Act and, because
of those efforts, the Departments have
extended the transition periods to allow
States more time to meet the NAICparallel external review process
standards. States continue to make
changes to their laws through what have
often proven to be complex and time
consuming processes, often involving
legislative changes; and it is apparent
that more time is needed for some States
to achieve NAIC-parallel external
review processes. Therefore, the
Departments are extending the NAICsimilar external review process
transition period so that the last day of
the transition period is December 31,
2017. Through December 31, 2017, an
applicable State external review process
applicable to a health insurance issuer
or group health plan may be considered
to meet the minimum standards of
paragraph (c)(2), if it meets the
temporary standards established by the
Secretary in guidance for a process
similar to the NAIC Uniform Model Act.
During this transition period, the NAICsimilar external review process will
continue to apply 76 for nongrandfathered group health plans and
issuers of non-grandfathered group or
individual coverage in the State.77 This
modification seeks to minimize cost and
confusion for participants and enrollees,
issuers, and plans alike. Furthermore,
the extension will provide States that
are currently in the process of making
changes to external review laws time to
implement NAIC-parallel external
review processes. The Departments will
continue to work with health insurance
issuers, States, and other stakeholders to
assist them in coming into compliance
76 If a State enacts an NAIC-parallel law prior to
January 1, 2018, coverage subject to that State law
will be required to comply with the provisions of
that State law, in accordance with ERISA section
731 and PHS Act section 2719 and 2724.
77 See Technical Release 2011–02, Guidance on
External Review for Group Health Plans and Health
Insurance Issuers Offering Group and Individual
Health Coverage, and Guidance for States on State
External Review Processes, June 22, 2011. The
temporary standards were extended in March 15,
2013 in Technical Release 2013–01, Extension of
the Transition Period for the Temporary NAICSimilar State External Review Process under the
Affordable Care Act.
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with the law. Once this transition
period has ended, plans and issuers in
a State that has not implemented the
NAIC-parallel external review process
will be required to comply with a
Federal external review process.
4. Federal External Review
PHS Act section 2719(b)(2) provides
that plans and issuers in States without
an external review process that meets
the requirements of PHS Act section
2719(b)(1) or that are self-insured plans
not subject to State insurance regulation
shall implement an effective external
review process that meets minimum
standards established by the Secretary
of HHS through guidance and that is
similar to a State external review
process described in PHS Act section
2719(b)(1). The interim final regulations
reiterated this statutory requirement,
and also provided additional standards,
including that the Federal external
review process, like the State external
review process, will provide for
expedited external review and
additional consumer protections with
respect to external review for claims
involving experimental or
investigational treatment. The interim
final regulations also set forth the scope
of claims eligible for review under the
Federal external review process. The
interim final regulations also
established the procedural standards
that apply to claimants, plans, and
issuers under this Federal external
review process, as well as the
substantive standards under this
process. These final regulations
incorporate both the procedural and
substantive standards established in the
interim final regulations and subsequent
subregulatory guidance without
substantial change and with minor
clarifications.
a. Scope of Federal External Review
Process
The 2010 interim final regulations set
forth the original scope of claims
eligible for external review under the
Federal external review process.
Specifically, any adverse benefit
determination (including final internal
adverse benefit determination) could be
reviewed unless it related to a
participant’s or beneficiary’s failure to
meet the requirements for eligibility
under the terms of a group health plan
(for example, worker classification and
similar issues were not within the scope
of the Federal external review process).
After considering comments received in
response to the 2010 interim final
regulations, the Departments suspended
the original rule and temporarily
narrowed its scope. The amended scope
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72209
limited the Federal external review
process to claims that involve (1)
medical judgment (including, but not
limited to, those based on the plan’s or
issuer’s requirements for medical
necessity, appropriateness, health care
setting, level of care, or effectiveness of
a covered benefit, or its determination
that a treatment is experimental or
investigational), as determined by the
external reviewer; and (2) a rescission of
coverage (whether or not the rescission
has any effect on any particular benefit
at the time). The amendments also
provided two examples of claims
involving medical judgment.
The Departments received mixed
comments in response to the revised
scope of Federal external review in the
2011 amendment to the July 2010
interim final regulations. Generally,
comments supported narrowing the
scope to decisions based on medical
judgment and suggested permanently
adopting the standards in the 2011
amendment. However, there were also
commenters that objected to limiting the
scope and favored the original scope as
stated in the July 2010 interim final
regulations. Some of these commenters
stated that the description of medical
judgment was ambiguous and that it
was unclear how to determine whether
a claim involved ‘‘medical judgment.’’
Other commenters disagreed with the
description of medical judgment,
finding either the explanation was too
vague or that certain information in the
examples did not fall within what was
normally considered medical judgment.
Additionally, the Departments
received comments requesting more
clarity around the treatment of coding
issues under the amended scope of
Federal external review. The
Departments recognize that there may
be instances when a patient may have
a procedure performed that is similar to
another and a coding issue impacts
whether coverage is provided. For
example, a patient may need a stoma
revision, and recent significant weight
loss necessitates a procedure to remove
the patient’s excess skin and tissue prior
to addressing the stoma. However, the
skin removal procedure may be coded
as a cosmetic surgery, such as an
abdominoplasty or ‘‘tummy tuck’’,
instead of as a panniculectomy, and is
therefore not covered. In this case both
procedures involve the removal of skin
from the abdomen, but one procedure is
an excluded cosmetic surgery while the
other is covered so long as certain
medical criteria are met. This dispute
would likely be resolved via an internal
appeal, but in the event that the initial
decision to deny coverage was affirmed
on an internal appeal, the claimant
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could have the claim reviewed in a
Federal external review process.
Medical judgment is necessary to
determine whether the correct code was
used in the patient’s case. To the extent
that a coding error such as this one
involves medical judgment, the claim is
within the scope of Federal external
review under the July 2010 interim final
regulations, as amended.
After consideration of comments,
these final regulations make permanent
the scope for Federal external review as
set out in the 2011 amendments to the
July 2010 interim final regulations, to
include only an adverse benefit
determination that involves medical
judgment as determined by the external
reviewer, or a rescission of coverage.
The interim final regulations included a
non-exhaustive list of adverse benefit
determinations that involve medical
judgment. The final regulations add two
items to the list of adverse benefit
determinations that involve medical
judgment: (1) A plan’s or issuer’s
determination of whether a participant
or beneficiary is entitled to a reasonable
alternative standard for a reward under
a wellness program, and (2) a plan’s or
issuer’s determination of whether a plan
is complying with the nonquantitative
treatment limitation provisions of the
Mental Health Parity and Addiction
Equity Act and its implementing
regulations, which generally require,
among other things, parity in the
application of medical management
techniques. Both of these clarifications
were included in preambles to
regulations issued previously by the
Departments.78
b. Federal External Review Process for
Self-Insured Group Health Plans
The preamble to the 2010 interim
final regulations stated that the
Departments will address in subregulatory guidance how nongrandfathered self-insured group health
plans may comply with the
requirements of the new Federal
external review process. The
Department of Labor issued Technical
Releases 2010–01 and 2011–02
regarding procedures for Federal
external review.79 The technical
releases set forth these procedures for
non-grandfathered self-insured group
health plans not subject to a State
external review process. Technical
Release 2011–02 also provided non78 See
78 FR 33158, 33164 (June 3, 2013); see also
78 FR 68240, 68247–8 (November 13, 2013).
79 See Technical Release 2010–01, available at:
https://www.dol.gov/ebsa/pdf/
ACATechnicalRelease2010-01.pdf and Technical
Release 2011–02, available at: https://www.dol.gov/
ebsa/pdf/tr11-02.pdf.
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grandfathered health insurance issuers
subject to a Federally-administered
external review process 80 and all nongrandfathered self-insured, non-Federal
governmental plans with the option of
using the external review process set out
in Technical Release 2010–01.
In general, under these procedures, a
group health plan must first allow a
claimant to file a request for Federal
external review with the plan. The
group health plan must then complete a
preliminary review of the request within
five business days following the date of
receipt of the external review request.
Within one business day after
completion of the preliminary review,
the plan must issue a notification in
writing to the claimant. If the request is
complete but not eligible for external
review, such notification must include
the reasons for its ineligibility and
current contact information, including
the phone number for the Employee
Benefits Security Administration (toll
free number 866–444–EBSA (3272)).
Upon its determination that a request is
eligible for external review, the group
health plan must then assign an
independent review organization (IRO),
accredited by URAC or by a similar
nationally-recognized accrediting
organization, to conduct the external
review. The IRO must timely notify the
claimant in writing of the external
review and provide the claimant 10
business days to submit additional
information that the IRO must consider.
The group health plan must provide the
IRO with any documents and
information used in making the original
determination within five business days
after the date of the assignment and the
IRO must forward any information
submitted by the claimant to the group
health plan within one business day
after receipt of the information. The IRO
must review all information and
documents timely received and must
provide written notice of the final
external review decision to the claimant
and the group health plan within 45
days after the request for the external
review. After the final external review
decision, the IRO must maintain records
of all associated claims and notices for
six years. If the IRO has decided to
reverse the original determination, then,
upon receipt of the IRO’s notice of this
decision, the group health plan must
80 Where a State’s external review process does
not meet the Federal consumer protection
standards, issuers and self-insured non-Federal
governmental plans may choose to utilize either the
Federal IRO external review process or an HHS
-administered Federal external review process in
which a designated Federal contractor will perform
all functions of the external review.
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immediately provide coverage or
payment for the claim.
The technical releases also provided
that a group health plan must allow a
claimant to make a request for expedited
external review for benefit
determinations involving a medical
condition for which the timeframe for
completion of an expedited internal
appeal or standard external review
under the interim final regulations
would seriously jeopardize the life or
health of the claimant or would
jeopardize the claimant’s ability to
regain maximum function. The IRO
must provide a notice of the final
external review decision as
expeditiously as the claimant’s medical
condition or circumstances require, but
in no event more than 72 hours after the
IRO receives the request for expedited
review. If the notice is not in writing,
within 48 hours after the date of
providing that notice, the assigned IRO
must provide written confirmation of
the decision to the claimant and the
plan.
These final regulations incorporate
the guidance in Technical Releases
2010–01 and 2011–02 without
substantial change. These final
regulations also continue to permit nongrandfathered self-insured plans to
comply with the external review process
outlined in these final regulations or a
State external review process if the State
chooses to expand access to their State
external review process to plans that are
not subject to the applicable State laws.
Furthermore, these final regulations
continue to provide issuers subject to a
Federally-administered external review
process and all self-insured, nonFederal governmental plans with the
option of electing the private accredited
IRO process for external review
described in these final regulations or
the Federally-administered external
review process, which is administered
by HHS (also referred to as the HHSadministered external review process).
Similar to the technical releases, these
final regulations continue to provide
that group health plans must assign an
IRO that is accredited by URAC or by
similar nationally-recognized
accrediting organization to conduct the
external review. Moreover, the plan
must take action to protect against bias
and to ensure independence.
Accordingly, plans must contract with
at least three IROs for assignments
under the plan and rotate claims
assignments among them (or incorporate
other independent, unbiased methods
for selection of IROs, such as random
selection). In addition, the IRO may not
be eligible for any financial incentives
based on the likelihood that the IRO
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will support the denial of benefits. (Of
course, plans also may not terminate an
IRO’s contract in retaliation for granting
claims.) For issuers and all self-insured,
non-Federal governmental plans
participating in the HHS-administered
external review process, the
requirement to take action to protect
against bias and to ensure independence
is satisfied without contracting with
three IROs for assignment and rotating
the claims assignments among them.
Under the HHS-administered external
review process, there are other unique
factors that ensure independence and
the absence of bias such as HHS
oversight and lack of privity of contract
between the issuer or self-insured nonFederal governmental plan and the IRO.
After issuance of the interim final
regulations and technical releases, the
Departments received questions relating
to self-insured group health plans
contracting directly with IROs. While
such a group health plan must designate
an IRO to conduct any external review,
neither the interim final regulations nor
the technical releases require a plan to
contract directly with any IRO. As
clarified in the FAQs about the
Affordable Care Act implementation,
issued on September 20, 2010, where a
self-insured plan contracts with a third
party administrator that, in turn,
contracts with an IRO, the standards of
the technical release can be satisfied in
the same manner as if the plan had
contracted directly. Such a contract
does not automatically relieve the plan
from responsibility if there is a failure
to provide an individual with external
review and fiduciaries of plans that are
subject to ERISA have a duty to monitor
the service providers to the plan.
Furthermore, plans may contract with
an IRO in another State, as these final
regulations do not require the plan to be
located in the same State as the IRO. If
additional questions arise regarding the
IRO external review process, the
Departments may issue additional
subregulatory guidance.
c. Filing Fees for External Review
The Departments also received
comments related to the standard
allowing consumers to be charged a
filing fee when requesting external
review. While the original 2004 NAIC
model upon which the 2010 interim
final regulations was based expressly
permitted imposition of a nominal filing
fee for a claimant requesting an external
review, and a small number of States
have adopted this approach, the 2010
NAIC model did not address this topic.
Commenters on the 2010 interim final
regulations indicated that the ability to
charge a filing fee should be prohibited
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because such fees may dissuade
consumers from filing an appeal, even
in cases where the fee is not a financial
hardship for the consumer.
The Departments find the change in
the NAIC model to be important and are
concerned that any fee may impose a
financial hardship on some claimants or
discourage them from seeking external
review. Therefore, these final
regulations generally prohibit the
imposition of filing fees for external
review on claimants. However, the
Departments recognize that several
States’ external review processes
currently applicable to group and
individual coverage permit nominal
filing fees. Therefore, in determining
whether a State external review process
provides the claimants with minimum
consumer protections, these final
regulations do not invalidate existing
State external review processes because
they permit a nominal filing fee,
consistent with the 2004 NAIC model.81
Therefore, plans and coverage subject to
such laws may continue to impose
nominal fees for as long as such laws
continue to apply. For this purpose,
consistent with the interim final
regulations, to be considered nominal,
the filing fee must not exceed $25, must
be refunded to the claimant if the
adverse benefit determination (or final
internal adverse benefit determination)
is reversed through external review,
must be waived if payment of the fee
would impose an undue financial
hardship, and the annual limit on filing
fees for any claimant within a single
plan year must not exceed $75. All other
plans and coverage must pay the full
cost of the IRO for conducting the
external review, without imposing any
nominal filing fee.
G. PHS Act Section 2719A, Patient
Protections (26 CFR 54.9815–2719A, 29
CFR 2590.715–2719A, 45 CFR 147.138)
PHS Act section 2719A, as added by
the Affordable Care Act provides, with
respect to a non-grandfathered group
health plan or health insurance issuer
offering non-grandfathered group or
individual health insurance coverage,
rules regarding the designation of
primary care providers, if a plan or
issuer requires or provides for
designation by a participant,
beneficiary, or enrollee of a
participating primary care provider. In
addition, the statute provides
requirements relating to benefits for
emergency services. On June 28, 2010,
the Departments issued interim final
regulations implementing PHS Act
section 2719A.82 The Departments also
released Affordable Care Act
Implementation FAQs Part I Q15 to
address an issue with respect to
emergency services.83 These regulations
adopt the 2010 interim final regulations
without substantial change and
incorporate the clarification issued in
subregulatory guidance.
1. Choice of Healthcare Professional
The interim final regulations and
these final regulations state that if a plan
or issuer requires or provides for
designation by a participant,
beneficiary, or enrollee of a
participating primary care provider,
then the plan or issuer must permit each
participant, beneficiary, and enrollee to
designate any primary care provider
who is available to accept the
participant, beneficiary, or enrollee and
who participates in the network of the
plan or issuer.
Commenters recommended clarifying
that in instances where a participant,
beneficiary, or enrollee is incapacitated,
a family member may select the primary
care provider on their behalf. Under
existing State and Federal law,
including ERISA, a duly authorized
representative is permitted to act on
behalf of a participant or beneficiary for
all purposes, including the designation
of a primary care provider as provided
under these final regulations. The final
regulations regarding the designation of
a primary care provider do not include
any new text to address cases of
incapacity. However, as with all of the
market reform provisions, a duly
authorized representative may act on
behalf of a participant or beneficiary to
the extent permitted under other
applicable Federal and State law.
Commenters recommended that
participants, beneficiaries, and enrollees
be allowed to designate a provider of
any specialty or licensure as their
primary care provider to improve access
to care. For example, commenters
recommended that enrollees have the
option of designating a nurse
practitioner as their primary care
provider. The Departments do not
define primary care provider for
purposes of these final regulations. The
classification of who is considered a
primary care provider is determined
under the terms of the plan or coverage
82 75
81 Twelve
States expressly authorize nominal
fees: Connecticut, Hawaii, Kentucky,
Massachusetts, Minnesota, New Jersey, New York,
North Dakota, Rhode Island, South Dakota,
Vermont, and Wyoming.
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FR 37188 (June 28, 2010).
Care Act Implementation FAQs Part
I, Q&A–15, available at https://www.dol.gov/ebsa/
faqs/faq-aca.html and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs.html.
83 Affordable
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and in accordance with applicable State
law.
If a plan or issuer requires or provides
for the designation of a participating
primary care provider for a child by a
participant, beneficiary, or enrollee, the
plan or issuer must permit the
designation of a physician (allopathic or
osteopathic) who specializes in
pediatrics as the child’s primary care
provider if the provider participates in
the network of the plan or issuer and is
available to accept the child. The
general terms of the plan or health
insurance coverage regarding pediatric
care otherwise are unaffected, including
any exclusion with respect to coverage
of pediatric care.
Some commenters recommended that
participants, beneficiaries, or enrollees
have the option to designate physicians
of various pediatric sub-specialties as
the child’s primary care provider to
improve access to specialty care without
prior authorization from a primary care
coordinator. For example, commenters
suggested that a pediatric cancer patient
with a serious chronic condition should
have the option of designating a
pediatric oncologist that can provide
cancer treatment as well as other routine
treatment as the child’s primary care
provider. The Departments interpret this
provision to mean that if a plan or issuer
requires or provides for the designation
of a participating primary care provider
for a child by a participant, beneficiary,
or enrollee, the plan or issuer must
permit the designation of any physician
(allopathic or osteopathic) who
specializes in pediatrics, including
pediatric subspecialties, based on the
scope of that provider’s license under
applicable State law. The designated
provider must also participate in the
plan network and be available to accept
the child. These final regulations
incorporate this clarification.
The interim final regulations also
established requirements for a plan or
issuer that provides coverage for
obstetrical or gynecological care and
requires the designation of an innetwork primary care provider.
Specifically, the plan or issuer may not
require authorization or referral by the
plan, issuer, or any person (including a
primary care provider) for a female
participant, beneficiary, or enrollee who
seeks obstetrical or gynecological care
provided by an in-network health care
professional who specializes in
obstetrics or gynecology. Plans and
issuers must also treat the provision of
obstetrical and gynecological care, and
the ordering of related obstetrical and
gynecological items and services, by the
professional who specializes in
obstetrics or gynecology as the
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authorization of the primary care
provider. For this purpose, a health care
professional specializing in obstetrics or
gynecology is any individual who is
authorized under applicable State law to
provide obstetrical or gynecological
care, and is not limited to a physician.
Commenters sought clarification that
women of all ages may receive
obstetrical and gynecological care
without prior authorization or referral
by the plan, issuer, or any person
(including a primary care provider),
noting that the statutory provision
contains no restrictions based on the age
of a participant, beneficiary or enrollee.
The Departments agree that all women
regardless of age are ensured direct
access to obstetrical and gynecological
care under this provision.
Since the promulgation of the interim
final regulations, it has come to the
Departments’ attention that some plans
and issuers utilize plan designs where
the delivery of care is coordinated
through medical groups within the
network based on the geographic
location of the participant and the
provider. Specifically, the Departments
have encountered plan provisions in
insured group health plan coverage that
require participants to designate a
primary care provider but restrict a
participant’s choice of provider based
on the distance that the participant lives
or works from the provider.
Stakeholders requested that the
Departments clarify in the final
regulations that the choice of healthcare
professional provision does not prohibit
the application of such geographical
limitations with respect to the selection
of primary care providers. Stakeholders
highlighted that prohibiting such
geographical limitations would
fundamentally disrupt these plan
designs, as well as the underlying
negotiated capitation arrangements
(where payment is rendered on a per
person rather than per service basis).
Stakeholders also noted that the
underlying provider contracts do not
permit providers to accept participants
that are not within the specified
geographic limit, and, accordingly, such
limitations should not violate these
provisions of the regulations, as the
providers are not available to accept
such participants, based on the terms of
the plan, and as required by the
regulations.
The Departments recognize the
importance of allowing plans and
issuers the flexibility to deliver care in
a cost-effective and efficient manner.
Accordingly, these final regulations
include a codification of the
Departments’ interpretation that plans
and issuers are not prohibited under
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PHS Act section 2719A from applying
reasonable and appropriate geographic
limitations with respect to which
participating primary care providers are
considered available for purposes of
selection as primary care providers, in
accordance with the terms of the plan,
the underlying provider contracts, and
applicable State law. The Departments
may provide additional guidance if
questions persist or if the Departments
become aware of geographic limitations
that unduly restrict a participant’s
choice of provider.
2. Emergency Services
a. Additional Administrative
Requirements
Under the interim final regulations
and these final regulations, if a group
health plan or issuer provides any
benefits with respect to services in the
emergency department of a hospital,
then the plan or issuer must provide
coverage for emergency services without
the individual or the health care
provider having to obtain prior
authorization (even if the emergency
services are provided out of network).
For a plan or health insurance coverage
with a network of providers that provide
benefits for emergency services, the plan
or issuer may not impose any
administrative requirement or limitation
on benefits for out-of-network
emergency services that is more
restrictive than the requirements or
limitations that apply to in-network
emergency services.
b. Out-of-Network Cost-Sharing
Requirements
Cost-sharing requirements expressed
as a copayment amount or coinsurance
rate imposed for out-of-network
emergency services cannot exceed the
cost-sharing requirements that would be
imposed if the services were provided
in-network. The preamble to the interim
final regulations explained that out-ofnetwork providers may bill patients for
the difference between the providers’
billed charges and the amount collected
from the plan or issuer and the amount
collected from the patient in the form of
a copayment or coinsurance amount
(referred to as balance billing 84).
Section 1302(c)(3)(B) of the Affordable
Care Act excludes such balance billing
amounts from the definition of cost
sharing, and the requirement in section
2719A(b)(1)(C)(ii)(II) that cost sharing
for out-of-network services be limited to
that imposed in network only applies to
84 See Uniform Glossary of Health Coverage and
Medical Terms at https://www.dol.gov/ebsa/pdf/
sbcuniformglossaryproposed.pdf and https://
www.cms.gov/apps/glossary.
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cost sharing expressed as a copayment
amount or coinsurance rate. Because the
statute neither requires plans or issuers
to cover balance billing amounts, nor
prohibits balance billing, even where
the protections in the statute apply,
patients may still be subject to balance
billing. In the preamble to the interim
final regulations under PHS Act section
2719A, the Departments explained that
it would defeat the purpose of the
protections in the statute if a plan or
issuer paid an unreasonably low amount
to a provider, even while limiting the
coinsurance or copayment associated
with that amount to in-network
amounts.85
To avoid the circumvention of the
protections of PHS Act section 2719A,
the Departments determined it
necessary that a reasonable amount be
paid before a patient becomes
responsible for a balance billing
amount. Therefore, as provided in the
interim final regulations and these final
regulations, a plan or issuer must pay a
reasonable amount for emergency
services by some objective standard.
Specifically, a plan or issuer satisfies
the copayment or coinsurance
limitations in the statute if it provides
benefits for out-of-network emergency
services (prior to imposing in-network
cost sharing) in an amount at least equal
the greatest of: (1) The median amount
negotiated with in-network providers
for the emergency service; (2) the
amount for the emergency service
calculated using the same method the
plan generally uses to determine
payments for out-of-network services
(such as the usual, customary, and
reasonable amount); or (3) the amount
that would be paid under Medicare for
the emergency service (minimum
payment standards). The interim final
regulations under PHS Act section 2719
clarified that the cost-sharing
requirements create a minimum
payment requirement. The cost-sharing
requirements do not prohibit a group
health plan or health insurance from
providing benefits with respect to an
emergency service that are greater than
the amounts specified in the
regulations.
Some commenters expressed concern
about the level of payment for out-ofnetwork emergency services and urged
the Departments to require plans and
issuers to use a transparent database to
determine out-of-network amounts. The
Departments believe that this concern is
addressed by our requirement that the
amount be the greatest of the three
amounts specified in paragraphs
(b)(3)(i)(A), (b)(3)(i)(B), and (b)(3)(i)(C)
85 75
FR 37188, 37194 (June 28, 2010).
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of this section (which are adjusted for
in-network cost-sharing requirements).
c. Clarifications Regarding Balance
Billing
Some commenters sought clarification
about the interaction of the minimum
payment standards under the interim
final regulations and State laws that
prohibit balance billing for emergency
services. Balance billing generally is the
practice of billing by a provider that is
not a preferred provider for the
difference between the charge of a
provider that is not a preferred provider
and the allowed amount under the plan
or coverage. Some stakeholders
expressed their opposition to the use of
balance billing because it creates a
substantial financial burden and may
discourage a participant, beneficiary, or
enrollee from obtaining the care needed
in an emergency situation. Other
stakeholders suggested that plans and
issuers should be required to negotiate
contracts with hospitals and
facility-based providers that avoid
balance billing. However, the statute
does not require plans or issuers to
cover balance billed amounts, nor does
it prohibit balance billing. Even where
the protections in the statute apply, a
participant, beneficiary, or enrollee may
be subject to balance billing. In the
future, the Departments will consider
ways to prevent providers from billing
a participant, beneficiary, or enrollee for
emergency services from out-of-network
providers at in-network hospitals and
facilities. States may also consider ways
to prevent balance billing in these
circumstances.
The minimum payment standards are
designed to reduce potential amounts of
balance billing to patients. Stakeholders
commented that in circumstances where
patients will not be balance billed
(because balance billing is prohibited or
because the issuer, rather than the
patient, is required to cover the balance
bill), the minimum payment standards
are not necessary. In response to these
comments, the Departments issued an
FAQ 86 stating that the minimum
payment standards set forth in the
interim final regulations were
developed to protect patients from being
financially penalized for obtaining
emergency services on an out-ofnetwork basis. If State law prohibits
balance billing, plans and issuers are
not required to satisfy the payment
minimum set forth in the regulations.
Similarly, if a plan or issuer is
86 See Affordable Care Act Implementation FAQ
Part I Q15 at https://www.dol.gov/ebsa/faqs/faqaca.html and.https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_
implementation_faqs.html.
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72213
contractually responsible for any
amounts balanced billed by an out-ofnetwork emergency services provider,
the plan or issuer is not required to
satisfy the payment minimum. In both
situations, however, a plan or issuer
may not impose any copayment or
coinsurance requirement for out-ofnetwork emergency services that is
higher than the copayment or
coinsurance requirement that would
apply if the services were provided innetwork. In addition, a plan or issuer
must provide an enrollee or beneficiary
adequate and prominent notice of their
lack of financial responsibility with
respect to amounts balance billed in
order to prevent inadvertent payment by
an enrollee or beneficiary. These final
regulations incorporate this
clarification. The regulations do not
preempt existing State consumer
protection laws and do not prohibit
States from enacting new laws with
respect to balance billing that would
provide consumer protections at least as
strong as the Federal statute.
In response to the interim final
regulations, commenters also requested
that the Departments require plans and
issuers to inform a participant,
beneficiary, or enrollee using clear and
understandable language of the
consequences of using out-of-network
emergency services, including the
possibility of balance billing. Another
commenter stated that the summary
plan description (SPD) provides
sufficient information to meet the notice
requirements. The Departments agree
that plans and issuers must disclose the
terms of the coverage as part of plan
documents and are not adding a new
notice requirement at this time.
d. Definition of Emergency Services
In applying the rules relating to
emergency services, the terms
emergency medical condition,
emergency services, and stabilize have
the meaning given to those terms under
the Emergency Medical Treatment and
Labor Act (EMTALA), section 1867 of
the Social Security Act. Under
EMTALA, the term emergency services
includes (1) ‘‘an appropriate medical
screening examination that is within the
capability of the emergency department
of a hospital, including ancillary
services routinely available to the
emergency department, to determine
whether an emergency medical
condition exists’’; and (2) ‘‘such further
medical examination and such
treatment as may be required to stabilize
the medical condition.’’ 87
87 42
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Some commenters recommended that
the Departments define ‘‘emergency
services’’ such that an enrollee or
beneficiary may only receive emergency
benefits if an enrollee or beneficiary
seeks treatment within 24 hours of the
onset of an emergency. These final
regulations decline to adopt this
comment. The term ‘‘emergency
services’’ as defined by the interim final
regulations and these final regulations is
based on the statutory definition, which
does not specify parameters with
respect to time. Accordingly, a plan or
issuer cannot set a time limit within
which to seek emergency services and
must provide coverage for any
emergency services that meet the
definition of emergency services under
EMTALA.
Some commenters requested
clarification as to whether air
ambulance transport and other
emergency transportation is within the
scope of the term ‘‘emergency services.’’
The Departments decline to provide a
rule addressing this issue. These final
regulations continue to provide that the
terms emergency medical condition,
emergency services, and stabilize have
the meaning given to those terms under
EMTALA, section 1867 of the Social
Security Act.88
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H. Provisions No Longer Applicable
1. Special Rule Relating to Dependent
Coverage of Children to Age 26 for
Grandfathered Group Health Plans
The dependent coverage provision of
PHS Act section 2714 applies to all
group health plans and health insurance
issuers offering group or individual
health insurance coverage for plan years
(in the individual market, policy years)
beginning on or after September 23,
2010, whether or not the plan or health
insurance coverage qualifies as a
grandfathered health plan. However,
consistent with section 2714 of the PHS
Act, for plan years beginning before
January 1, 2014, the 2010 interim final
regulations provided that a
grandfathered health plan that is a
group health plan that makes available
dependent coverage of children may
exclude from coverage an adult child
who has not attained age 26 if the child
is eligible to enroll in an employersponsored health plan (as defined in
section 5000A(f)(2) of the Code) other
than a group health plan of a parent.
Because this special rule for
88 For a more detailed discussion of definitions
and requirements under EMTALA, see CMS State
Operations Manual, Appendix V, pg. 33–41,
available at https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/downloads/
som107ap_v_emerg.pdf.
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grandfathered group health plans no
longer applies, it is not incorporated
into these final regulations.
2. Transitional Rules for Individuals
Whose Coverage Ended by Reason of
Reaching a Dependent Eligibility
Threshold
The 2010 interim final regulations
implementing PHS Act section 2714
provided transitional relief for a child
whose coverage ended, or who was
denied coverage (or was not eligible for
coverage) under a group health plan or
health insurance coverage because,
under the terms of the plan or coverage,
the availability of dependent coverage of
children ended before the attainment of
age 26. The 2010 interim final
regulations also required a plan or
issuer to give such a child a special
enrollment opportunity, which was
required to be provided (including
written notice) not later than the first
day of the first plan year (in the
individual market, policy year)
beginning on or after September 23,
2010. Because the transitional rule no
longer applies, it is not incorporated
into these final regulations.
3. Restricted Annual Limits and
Transitional Rules for Individuals
Whose Coverage or Benefits Ended by
Reason of Reaching a Lifetime Dollar
Limit
PHS Act section 2711 and its
implementing interim final regulations
generally prohibited lifetime or annual
limits on the dollar value of EHBs (as
defined in section 1302(b) of the
Affordable Care Act). With respect to
annual dollar limits, the statute and the
interim final regulations allowed the
imposition of ‘‘restricted annual limits’’
with respect to EHBs for plan years (in
the individual market, policy years)
beginning before January 1, 2014. The
interim final regulations adopted a
three-year phased approach to restricted
annual limits. As set forth in the interim
final regulations, the restricted annual
limits on the dollar value of EHBs could
not be lower than:
• For plan or policy years beginning
on or after September 23, 2010 but
before September 23, 2011, $750,000;
• For plan or policy years beginning
on or after September 23, 2011 but
before September 23, 2012, $1.25
million; and
• For plan or policy years beginning
on or after September 23, 2012 but
before January 1, 2014, $2 million.
With respect to plan or policy years
beginning on or after January 1, 2014, no
annual dollar limits are permitted on
essential health benefits except in the
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case of grandfathered individual market
coverage.
The interim final regulations also
provided transitional rules for
individuals who reached a lifetime
dollar limit under a group health plan
or health insurance coverage prior to the
applicability date of the interim final
regulations. The regulations required a
plan or issuer to provide an individual
whose coverage ended due to reaching
a lifetime dollar limit with an
enrollment opportunity (including
written notice) that continues for at least
30 days. The notice and enrollment
opportunity was required to be provided
not later than the first day of the first
plan year (in the individual market,
policy year) beginning on or after
September 23, 2010. Because the
provisions regarding restricted annual
dollar limits and the transitional rules
regarding lifetime dollar limits no
longer apply, they are not incorporated
into these final regulations.
I. Applicability
1. General Applicability
These final regulations apply to group
health plans and health insurance
issuers beginning on the first day of the
first plan year (or, in the individual
market, the first day of the first policy
year) beginning on or after January 1,
2017. Until these final regulations
become applicable, plans and issuers
are required to continue to comply with
the corresponding interim final
regulations at 29 CFR part 2590,
contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015,
and 45 CFR parts 144, 146, and 147,
contained in the 45 CFR, parts 1 to 199,
edition revised as of October 1, 2015. In
accordance with section 7805(e)(2) of
the Code, the corresponding temporary
regulations promulgated by the
Department of the Treasury are
inapplicable. Under section 104 of the
Health Insurance Portability and
Accountability Act (HIPAA), enacted on
August 21, 1996, and subsequent
amendments, the Departments must
coordinate policies with respect to
parallel provisions of ERISA, the PHS
Act, and the Code (shared provisions).
The Departments operate under a
Memorandum of Understanding 89
implementing HIPAA section 104 which
provides that the shared provisions
must be administered so as to have the
same effect at all times and the
Departments must coordinate policies
relating to enforcing the shared
provisions in order to avoid duplication
of enforcement efforts and to assign
89 See
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priorities in enforcement. Therefore,
until these final regulations
promulgated by the Department of the
Treasury become applicable,
compliance with corresponding interim
final regulations at 29 CFR part 2590,
contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015
shall satisfy corresponding requirements
of the Code.
Section 1251 of the Affordable Care
Act provides that grandfathered health
plans are subject to only certain
provisions of the Affordable Care Act.
The final regulations under PHS Act
section 2719, Internal Claims and
Appeals and External Review (26 CFR
54.9815–2719, 29 CFR 2590.715–2719,
45 CFR 147.136) and PHS Act Section
2719A, Patient Protections (26 CFR
54.9815–2719A, 29 CFR 2590.715–
2719A, 45 CFR 147.138) do not apply to
grandfathered health plans. Final
regulations under PHS Act section 2704,
Prohibition of Preexisting Condition
Exclusions (26 CFR 54.9815–2704, 29
CFR 2590.715–2704, 45 CFR 147.108);
PHS Act section 2711, Prohibition on
Lifetime and Annual Limits (26 CFR
54.9815–2711, 29 CFR 2590.715–2711,
45 CFR 147.126); PHS Act section 2712,
Prohibition on Rescissions (26 CFR
54.9815–2712, 29 CFR 2590.715–2712,
45 CFR 147.128); and PHS Act section
2714, Coverage of Dependents to Age 26
(26 CFR 54.9815–2714, 29 CFR
2590.715–2714, 45 CFR 147.120) apply
to grandfathered health plans, except
the prohibition of preexisting condition
exclusions and prohibition on annual
dollar limits do not apply to
grandfathered health plans that are
individual health insurance coverage.
For a list of the market reform
provisions under title XXVII of the PHS
Act, as added or amended by the
Affordable Care Act and incorporated
into ERISA and the Code, applicable to
grandfathered health plans, visit https://
www.dol.gov/ebsa/pdf/
grandfatherregtable.pdf.
health plans, expatriate health
insurance issuers with respect to
expatriate health plans, and employers
in their capacity as plan sponsors of
expatriate health plans. However, the
plans, coverage, sponsors and issuers
must still satisfy provisions of the PHS
Act, ERISA and the Code that would
otherwise apply if not for the enactment
of the Affordable Care Act. The EHCCA
exception from the market reform
requirements applies to expatriate
health plans that are issued or renewed
on or after July 1, 2015.
Treasury and IRS issued Notice 2015–
43, 2015–29 I.R.B. 73, to provide interim
guidance on the EHCCA. The notice
provides that until the issuance of
further guidance and except as
otherwise provided in the notice,
issuers, employers, and plan sponsors
generally may apply the requirements of
EHCCA using a reasonable good faith
interpretation of the statute. The notice
also provides that until further guidance
is issued, using the definition of
expatriate health plan provided in
Affordable Care Act Implementation
FAQs 90 is treated as a reasonable good
faith interpretation of the statute. As
explained in the notice, the
Departments intend to publish proposed
regulations implementing and providing
guidance on the EHCAA. Consequently,
these final regulations do not address
the application to expatriate health
plans of the Affordable Care Act
provisions under which these final
regulations are promulgated.
III. Economic Impact Analysis—
Departments of Labor and Health and
Human Services
2. Expatriate Plans
On December 16, 2014, Congress
enacted the Expatriate Health Coverage
Clarification Act of 2014 (EHCCA) as
part of the Consolidated and Further
Continuing Appropriations Act, 2015,
Division M, Public Law 113–235. The
EHCCA provides that the market reform
requirements of the Affordable Care Act
generally do not apply to expatriate
Executive Orders 12866 and 13563
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects; distributive impacts; and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility.
Under Executive Order 12866 (58 FR
51735), ‘‘significant’’ regulatory actions
are subject to review by the Office of
Management and Budget (OMB).
90 See FAQs about Affordable Care Act
Implementation (Part XIII), Q&A–1, available at
https://www.dol.gov/ebsa/pdf/faq-aca13.pdf and
https://www.cms.gov/CCIIO/Resources/Fact-Sheets-
and-FAQs/ACA_implementation_faqs13.html. See
also FAQs about Affordable Care Act
Implementation (Part XVIII), Q&A–6 and Q&A–7,
available at https://www.dol.gov/ebsa/pdf/faq-
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72215
Section 3(f) of the Executive Order
defines a ‘‘significant regulatory action’’
as an action that is likely to result in a
rule (1) having an annual effect on the
economy of $100 million or more in any
one year, or adversely and materially
affecting a sector of the economy,
productivity, competition, jobs, the
environment, public health or safety, or
State, local or tribal governments or
communities (also referred to as
‘‘economically significant’’); (2) creating
a serious inconsistency or otherwise
interfering with an action taken or
planned by another agency; (3)
materially altering the budgetary
impacts of entitlement grants, user fees,
or loan programs or the rights and
obligations of recipients thereof; or (4)
raising novel legal or policy issues
arising out of legal mandates, the
President’s priorities, or the principles
set forth in the Executive Order. These
final regulations have been designated
‘‘significant regulatory actions’’ under
section 3(f) of Executive Order 12866.
Accordingly, the regulations have been
reviewed by the Office of Management
and Budget.
A regulatory impact analysis must be
prepared for major rules with
economically significant effects ($100
million or more in any one year). The
Departments have concluded that these
final regulations would have economic
impacts of $100 million or more in at
least one year, thus meeting the
definition of an ‘‘economically
significant rule’’ under Executive Order
12866. Therefore, consistent with
Executive Orders 12866 and 13563, the
Departments have provided an
assessment of the potential benefits and
the costs associated with these final
regulations.
The Departments expect these final
regulations, when compared with the
interim final regulations, to have
marginal benefits and costs. This is
because they primarily provide
clarifications of the previous interim
final regulations issued in 2010 and
2011 and incorporate subregulatory
guidance, including frequently asked
questions and safe harbors issued by the
Departments. The Departments do not
have sufficient data to quantify these
costs and benefits, but they are
qualitatively discussed throughout the
remainder of this section and
summarized in the Accounting Table.
aca18.pdf and https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/ACA_
implementation_faqs18.html.
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TABLE 1—ACCOUNTING TABLE
Category
Estimate
Year dollar
Discount rate
Period covered
Benefits—Qualitative: These final regulations help ensure the protections and benefits intended by Congress. Many of these benefits have a
distributional component, and promote equity, in the sense that they will benefit those who are especially vulnerable as a result of health
problems and financial status. Other benefits include increased access to care and to information needed to protect consumer’s rights. These
final regulations also lead to improved health outcomes for patients and increase certainty for issuers, plans and consumers by providing
clarifications and guidance.
Costs:
Annualized Monetized ........
($millions/year) ...................
$169.9 .............................
$169.9 .............................
2015 ................................
2015 ................................
7% ...................................
3% ...................................
2016–2025
2016–2025
Qualitative: The Departments have quantified where possible the costs associated with these final regulations. These costs include burden that
will be incurred to prepare and distribute required disclosures and notices, and to bring plan and issuers’ policies and procedures into compliance with the new requirements. The Departments have not been able to quantify cost related to increased access to care. To the extent
these patient protections increase access to health care services, increased health care utilization and costs could result.
Transfers:
Annualized Monetized ........
($millions/year) ...................
$53.5 ...............................
$53.5 ...............................
2015 ................................
2015 ................................
7% ...................................
3% ...................................
2016–2025
2016–2025
Qualitative: Due to the risk pooling nature of health insurance these patient protections and other requirements create a transfer from those
paying premiums to those individuals and families now obtaining increased protections, coverage and services.
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1. Need for Regulatory Action
a. Preservation of Right To Maintain
Existing Coverage
Section 1251 of the Affordable Care
Act provides that grandfathered health
plans are subject only to certain
provisions of the Affordable Care Act.
The statute, however, is silent regarding
changes plan sponsors and issuers can
make to plans and health insurance
coverage while retaining grandfather
status.
These final regulations are necessary
in order to provide rules that group
health plans and health insurance
issuers can use to determine which
changes they can make to the terms of
the plan or health insurance coverage
while retaining their grandfather status,
thus exempting them from certain
provisions of the Affordable Care Act
and fulfilling a goal of the legislation,
which is to allow those that like their
coverage to keep it. These final
regulations are designed to allow
individuals to keep the coverage they
had on March 23, 2010 (the date of
enactment of the Affordable Care Act) to
reduce short term disruptions in the
market, and to ease the transition
required by the market reforms.
In drafting this rule, the Departments
attempted to balance a number of
competing interests. For example, the
Departments sought to provide adequate
flexibility to group health plans and
issuers to ease transition and mitigate
potential premium increases while
avoiding excessive flexibility that would
unduly delay implementation of critical
consumer protections in the Affordable
Care Act. In addition, the Departments
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recognized that many group health
plans and issuers make changes to the
terms of plans or health insurance
coverage on an annual basis: Premiums
fluctuate, provider networks and drug
formularies change, employer and
employee contributions and costsharing change, and covered items and
services may vary. Without some ability
to make some adjustments while
retaining grandfather status, the ability
of individuals to maintain their current
coverage would be frustrated, because
most plans or health insurance coverage
would quickly cease to be regarded as
the same group health plan or health
insurance coverage in existence on
March 23, 2010. At the same time,
allowing unfettered changes while
retaining grandfather status would also
be inconsistent with Congress’s intent to
provide a transition to the Affordable
Care Act market reforms.
These final regulations regarding
grandfather health plans are designed,
among other things, to take into account
reasonable changes routinely made by
plan sponsors or issuers without the
plan or health insurance coverage
relinquishing its grandfather status.
Thus, for example, these final
regulations generally permit plans and
issuers to make voluntary changes to
increase benefits, to conform to required
legal changes, and to voluntarily adopt
other consumer protections in the
Affordable Care Act without
relinquishing grandfather status.
b. Prohibition of Preexisting Condition
Exclusions
Section 2704 of the PHS Act, as added
by the Affordable Care Act, generally
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prohibits group health plans and health
insurance issuers offering group or
individual health insurance coverage
from imposing any preexisting
condition exclusion.
Studies estimate that preexisting
conditions affect approximately 129
million Americans 91 which includes a
broad range of conditions, from heart
disease—affecting an estimated 85.6
million American adults (with more
than 1 in 3 having one or more types of
cardiovascular disease 92)—to cancer—
which in 2012 affected an estimated 14
million Americans and will affect an
estimated 1.7 million additional people
in 2015 93—to relatively minor
conditions like hay fever, asthma, or
previous sports injuries.94 Denials of
benefits or coverage based on a
preexisting condition previously made
adequate health insurance unavailable
to millions of Americans. Before
enactment of the Affordable Care Act, in
45 States, health insurance issuers in
the individual market could deny
coverage, charge higher premiums, and/
91 ASPE. At Risk: Pre-Existing Conditions Could
Affect 1 in 2 Americans: 129 Million People Could
Be Denied Affordable Coverage Without Health
Reform, 2011.
92 Mozzafarian, D., et al. Heart Disease and Stroke
Statistics—2015 Update: A Report From the
American Heart Association. Circulation. 2015;
131(4):e29–322.
93 National Cancer Institute: Surveillance,
Epidemiology, and End Results Program (SEER) Stat
Fact Sheet: All Cancer Types. https://
seer.cancer.gov/statfacts/html/all.html.
94 Pollitz, K., et al. How Accessible is Individual
Health Insurance for Consumers in Less than
Perfect Health? Kaiser Family Foundation, June
2001.
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or deny benefits for a preexisting
condition.95
These regulations finalize interim
final regulations which were necessary
to implement this statutory provision
which Congress enacted to help ensure
that quality health coverage is available
to more Americans without the
imposition of a preexisting condition
exclusion.
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c. Lifetime and Annual Limits
Section 2711 of the PHS Act, as added
to the Affordable Care Act, generally
prohibits group health plans and health
insurance issuers offering group or
individual health insurance coverage
from imposing annual and lifetime
limits on the dollar value of essential
health benefits.
These protections ensure that patients
are not confronted with devastating
healthcare costs because they have
exhausted their health coverage when
faced with a serious medical condition.
These regulations finalize interim
final regulations that were necessary to
implement the statutory provisions with
respect to annual and lifetime limits
that Congress enacted to help ensure
that more Americans with chronic, longterm, and/or expensive illnesses have
access to quality health coverage.
d. Prohibition on Rescissions
Section 2712 of the PHS Act, as added
by the Affordable Care Act, prohibits
group health plans and health insurance
issuers offering group or individual
health insurance coverage from
rescinding coverage except in the case
of fraud or intentional
misrepresentation of material fact.
Prior to the Affordable Care Act,
thousands of Americans lost health
coverage each year due to rescission.
When a coverage rescission occurs, an
individual’s health coverage is
retroactively cancelled, which means
that the insurance company is no longer
responsible for medical care claims that
had previously been accepted and paid.
Rescissions can result in significant
financial hardship for affected
individuals, because, in most cases, the
individuals have accumulated
significant medical expenses.
These final regulations implement the
statutory provision enacted by Congress
to protect the most vulnerable
Americans, those that incur substantial
medical expenses due to a serious
medical condition, from financial
devastation by ensuring that such
individuals do not unjustly lose health
coverage by rescission.
95 Levitt, L., et al. How Buying Insurance Will
Change Under Obamacare. Kaiser Family
Foundation, September 2013.
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e. Coverage of Dependents to Age 26
PHS Act section 2714, as added by the
Affordable Care Act, requires group
health plans and health insurance
issuers offering group or individual
health insurance coverage that make
dependent coverage available for
children to continue to make coverage
available to such children until the
attainment of age 26. With respect to a
child receiving dependent coverage,
coverage does not have to be extended
to a child or children of the child or a
spouse of the child. Furthermore these
final regulations clarify that for an
individual not described in Code
section 152(f)(1), such as a grandchild or
niece, a plan may impose additional
conditions on eligibility for health
coverage, such as a condition that the
individual be a dependent for income
tax purposes, and the final regulations
also clarify that distinctions based upon
age that apply generally to all
individuals covered under the plan
(employees, spouses, dependent
children) are not prohibited. These
regulations finalize the interim final
regulations, which were necessary to
implement the statute.
f. Internal Claims and Appeals and
External Review
Before the enactment of the
Affordable Care Act, health plan
sponsors and issuers were not uniformly
required to implement claims and
appeals processes. For example, ERISAcovered group health plan sponsors
were required to implement internal
claims and appeal processes that
complied with the DOL claims
procedure regulation,96 while group
health plans that were not covered by
ERISA, such as plans sponsored by State
and local governments were not. Health
insurance issuers offering coverage in
the individual insurance market were
required to comply with various
applicable State internal appeals laws
but were not required to comply with
the DOL claims procedure regulation.
With respect to external appeal
processes, before the enactment of the
Affordable Care Act, sponsors of fully
insured ERISA-covered group health
plans, fully-insured State and local
governmental plans, and fully-insured
church plans were required to comply
with State external review laws, while
self-insured ERISA-covered group
health plans were not subject to such
laws due to ERISA preemption. In the
individual health insurance market,
issuers in States with external review
laws were required to comply with such
96 29
PO 00000
CFR 2560.503–1.
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72217
laws. However, uniform external review
standards did not apply, because State
external review laws vary from State-toState. Moreover, at least six States did
not have external review laws when the
Affordable Care Act was enacted;
therefore, prior to the Affordable Care
Act, issuers in those States were not
required to implement an external
review process.
Under this regulatory system,
inconsistent claims and appeals
processes applied to plan sponsors and
issuers and a patchwork of consumer
protections were provided to
participants, beneficiaries, and
enrollees. The applicable processes and
protections depended on several factors
including whether (1) plans were
subject to ERISA, (2) benefits were selffunded or financed by the purchase of
an insurance policy, (3) issuers were
subject to State internal claims and
appeals laws, and (4) issuers were
subject to State external review laws,
and if so, the scope of such laws (such
as, whether the laws only apply to one
segment of the health insurance market,
e.g., managed care or HMO coverage).
These uneven protections created an
appearance of unfairness, increased cost
for issuers and plans operating in
multiple States, and may have led to
confusion among consumers about their
rights.
Congress enacted PHS Act section
2719 to ensure that plans and issuers
implemented more uniform internal and
external claims and appeals processes
and to set a minimum standard of
consumer protections that are available
to participants, beneficiaries, and
enrollees. These final regulations are
necessary to provide rules that plan
sponsors and issuers can use to
implement effective internal and
external claims and appeals processes
that meet the requirements of PHS Act
section 2719.
These changes do not add any
incremental costs to those associated
with the 2010 interim final rules,
because they simply incorporate subregulatory guidance that was already
issued.
g. Patient Protections
Section 2719A of the PHS Act, as
added by the Affordable Care Act,
requires group health plans and health
insurance issuers offering group or
individual health insurance coverage to
ensure choice of healthcare
professionals (including pediatricians,
obstetricians, and gynecologists) and
greater access to benefits for emergency
services. Provider choice is a strong
predictor of patient trust in a provider,
and patient-provider trust can increase
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health promotion and therapeutic
effects.97 Studies have found that
patients tend to experience better
quality healthcare if they have long-term
relationships with their healthcare
provider.98
The emergency care provisions of
PHS Act section 2719A require (1) nongrandfathered group health plans and
health insurance issuers that cover
emergency services to cover such
services without prior authorization and
without regard to whether the health
care provider furnishing the services is
a participating network provider, and
(2) copayments and coinsurance for outof-network emergency care do not
exceed the cost-sharing requirements
that would have been imposed if the
services were provided in-network.
These provisions will help to ensure
that patients receive covered emergency
care when they need it, especially in
situations where prior authorization
cannot be obtained due to exigent
circumstances or an in-network
provider is not available to provide the
services. They also will protect patients
from the substantial financial burden
that can be imposed when differing
copayment or coinsurance arrangements
apply to in-network and out-of-network
emergency care.
These regulations finalize the interim
final regulations that were necessary to
implement the statutory provision
enacted by Congress to provide these
essential patient protections.
A. Section 1251 of the Affordable Care
Act, Preservation of Right To Maintain
Existing Coverage (26 CFR 54.9815–
1251, 29 CFR 2590.715–1251, 45 CFR
147.140)
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1. Affected Entities and Individuals
The Departments estimate that there
are 2.3 million ERISA-covered plans
with an estimated 66 million policy
holders and 130.2 million participants
and beneficiaries in those plans.99
Similarly, the Departments estimate that
there are 128,400 State and local
governmental health plans 100 with an
97 Piette, John, et al., ‘‘The Role of PatientPhysician Trust in Moderating Medication
Nonadherence Due to Cost Pressures.’’ Archives of
Internal Medicine 165, August (2005) and Roberts,
Kathleen J., ‘‘Physician-Patient Relationships,
Patient Satisfaction, and Antiretroviral Medication
Adherence Among HIV-Infected Adults Attending a
Public Health Clinic.’’ AIDS Patient Care and STDs
16.1 (2002).
98 Blewett, Lynn, et al., ‘‘When a Usual Source of
Care and Usual Provider Matter: Adult Prevention
and Screening Services.’’ Journal of General
Internal Medicine 23.9 (2008).
99 EBSA estimates based on the 2014 Medical
Expenditure Survey—Insurance Component.
100 The estimate of the total number of State and
local governmental plans is based on the 2012
Census of Government.
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estimated 21.1 million policy holders
and 41.1 million participants and
beneficiaries in those plans.101
The 2014 Employer Health Benefits
Survey reports that 37 percent of firms
offer health benefits that have at least
one health plan that is a grandfathered
plan, and 26 percent of employees are
enrolled in grandfathered plans.102
Using the above estimates, there are
851,000 (2.3 million ERISA-covered
plans* 0.37) ERISA-covered plans with
17.2 million policy holders (66 million
policy holders *0.26) and 33.9 million
participants and beneficiaries (130.2
million participants and beneficiaries *
0.26). There are approximately 47,500
grandfathered State and local
governmental health plans
(0.37*128,400 plans 103) with
approximately 5.5 million policyholders
(21.1 million policy holders *0.26) and
10.7 million participants and
beneficiaries (41.1 million participants
and beneficiaries * 0.26).
There were an estimated 1.4 million
policies with grandfathered coverage
during 2013 with 2.2 million
enrollees.104
2. Discussion of Economic Impacts of
Retaining or Relinquishing Grandfather
Status
The economic effects of these final
regulations will depend on decisions by
plan sponsors and issuers, as well as by
those covered under these plans and
health insurance coverage.
For a plan sponsor or issuer, the
potential economic impact of the
application of the provisions in the
Affordable Care Act may be one
consideration in making its decisions.
To determine the value of retaining a
health plan’s grandfather status, each
plan sponsor or issuer must determine
whether the rules applicable to
grandfathered health plans are more or
less favorable than the rules applicable
to non-grandfathered health plans. This
determination will depend on such
factors as the respective prices of
grandfathered and non-grandfathered
health plans, as well as the preferences
of grandfathered health plans’ covered
populations and their willingness to pay
101 Health Insurance Coverage Bulletin: Abstract
of Auxiliary Data for the March 2014 Annual Social
and Economic Supplement to the Current
Population Survey, Table 3C https://www.dol.gov/
ebsa/pdf/coveragebulletin2014.pdf.
102 Kaiser Family Foundation, ‘‘2014 Employer
Health Benefits Survey.’’ https://kff.org/health-costs/
report/2014-employer-health-benefits-survey/.
103 The estimate of the total number of State and
local governmental plans is based on the 2012
Census of Government.
104 Based on data from the McKinsey Center for
U.S. Health System Reform and Medical Loss Ratio
submissions for 2013 reporting year.
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for benefits and patient protections
available under non-grandfathered
health plans. In making its decision
whether to maintain grandfather status,
a plan sponsor or issuer is also likely to
consider the market segment (because
different rules apply to the large and
small group market segments), and the
utilization pattern of its covered
population. Those costs and benefits of
the various provisions of the Affordable
Care Act and their interaction with the
coverages’ grandfathered status have
been discussed in the impact analysis of
those individual requirements and are
not repeated here.
3. Impacts on the Individual Market
The market for individual insurance
is significantly different than that for
group coverage. As discussed in
previous interim final regulations issued
in 2010 and 2011, for many, the market
is transitional, providing a bridge
between other types of coverage. One
study found a high percentage of
individual insurance policies began and
ended with employer-sponsored
coverage.105 More importantly, coverage
on particular policies tends to be for
short periods of time. As such, high
turnover rates are likely the chief source
of changes in grandfather status.
Reliable data are scant, so there is no
ability to update estimates as to how
many people in the individual market
are in non-grandfathered plans today.
1. Disclosure of Grandfather Status and
Document Retention
To maintain grandfathered health
plan status under these final
regulations, a plan or issuer must
maintain records that document the
plan or policy terms in connection with
the coverage in effect on March 23,
2010, and any other documents
necessary to verify, explain or clarify its
status as a grandfathered health plan,
disclose its status as a grandfathered
health plan, and if switching issuers and
intending to maintain its status as a
grandfathered plan, it must provide to
the new health insurance issuer with
documentation of plan terms under the
prior health coverage sufficient for it to
determine whether a change causing a
cessation of grandfathered health plan
status has occurred.
The Departments estimate that the
total cost for these requirements will be
$1.8 million annually. For a detailed
discussion of the grandfathered health
plan document retention and disclosure
requirements, see the Paperwork
105 Adele M. Kirk. The Individual Insurance
Market: A Building Block for Health Care Reform?
Health Care Financing Organization Research
Synthesis. May 2008.
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Reduction Act section later in this
preamble.
1. Affected Entities and Individuals
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In the individual market, those
applying for insurance will no longer
face exclusions or denials of coverage
based on a preexisting condition while
those covered by non-grandfathered
individual coverage with a rider or
exclusion period will gain coverage for
any preexisting condition otherwise
covered by the plan. In the group
market, participants and beneficiaries
that have experienced a lapse in
coverage will no longer face up to a
twelve-month exclusion for preexisting
conditions.
There are two main categories of
people who have most likely been
directly affected by this provision: First,
those who had a preexisting condition
and who were uninsured; second, those
who were covered by grandfathered
individual policies containing riders
excluding coverage for a preexisting
condition or have an exclusion period.
It is difficult to estimate precisely how
many uninsured individuals had a
preexisting condition as of when this
provision went into effect, as
information on whether individuals
have a preexisting condition for the
purpose of obtaining health insurance is
not collected in any major population
based survey and can include
conditions from hay fever to HIV/AIDS,
all which could result in a denial of
coverage.106 The Departments find it
difficult to estimate the number of
individuals that will be uniquely
affected by these final regulations due to
the interactions with other provisions of
the Affordable Care Act; however,
estimates indicate that 50–129 million
non-elderly individuals with a
preexisting condition, 25 million
uninsured individuals—including the
3.7 million adults that fall into the
‘‘coverage gap’’ in States without
Medicaid expansion, and the estimated
66.6–82 million with ESI with
preexisting conditions could benefit
from these final regulations.107
106 Levitt, L., et al. How Buying Insurance Will
Change Under Obamacare. Kaiser Family
Foundation, September 2013.
107 ASPE. At Risk: Pre-Existing Conditions Could
Affect 1 in 2 Americans: 129 Million People Could
Be Denied Affordable Coverage Without Health
Reform, 2011 and Artiga, S. et al. The Impact of the
Coverage Gap in States not Expanding Medicaid by
Race and Ethnicity. The Kaiser Family Foundation,
April 2015.
20:00 Nov 17, 2015
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the next eight years 111—by providing
them a means to obtain or keep health
These final regulations will expand
coverage. Without the protections of
and improve coverage for those
these final regulations, many more
Americans with preexisting conditions;
Americans could be faced with the fear
those currently diagnosed, undiagnosed, and anxiety of trying to obtain health
or who will develop conditions as they
coverage or faced with insufficient
age. This will likely increase access to
coverage due to preexisting conditions.
health care, improve health outcomes,
As discussed previously, those with
and reduce family financial strain and
preexisting condition exclusions or
‘‘job lock.’’
those that were uninsured could have
For many years insurance providers/
found themselves being charged 2.5
issuers maintained risk pools that are
times more prior to the Affordable Care
equal to that of the general population,
112 The higher cost faced by those
using various methodologies; 108 often to Act.
with preexisting conditions, whether
the detriment of those most in need.
uninsured or containing riders, could
Passage of the Affordable Care Act on
have led families to encounter financial
March 23, 2010, provided millions of
hardships, crisis, and emotional stress.
Americans with a way to obtain, reReports show that those lacking
obtain, or keep their affordable health
coverage are more likely to have trouble
coverage without the fear of losing or
not having it when they are at their most paying bills while being more likely to
take on additional credit card debt and
vulnerable.
spend down family assets and savings,
Prior to enactment of the Affordable
often resulting in the loss of their homes
Care Act, an estimated 50–52 million
and personal bankruptcy: In 1981 the
non-elderly people lacked insurance
foreclosure rate reported to be
and 50–129 million were diagnosed
associated with medical issues was only
with a preexisting condition.109
8 percent; by 2007 this rate had
Numerous studies show that uninsured
increased to 62.1 percent of all personal
adults and children are 3 to 6 times
bankruptcies, and 49 percent of
more likely to go without or postpone
foreclosures.113 These higher rates can
receiving needed care, experience
in turn lead to many health care
higher delays and incidences of unmet
organizations providing uncompensated
needs, have higher incidences in
care: In 2008, the uninsured received
avoidable hospital stays, and have a
$116 billion worth of hospital care—the
higher risk of death after an accident or
primary source of which was federal
when hospitalized.110 This provision
funding.114 In addition to their
benefits and protects the millions of
non-elderly persons who currently have advantages with regard to access to care,
health, and well-being these final
a preexisting condition and those that
regulations are likely to lower families’
will develop some condition as they
out-of-pocket health care spending and
age—in one study of those reporting
the level of uncompensated care; thus
good or excellent health, 15–30 percent
benefiting State and Federal
will develop a preexisting condition in
2. Benefits
B. PHS Act Section 2704, Prohibition of
Preexisting Condition Exclusions (26
CFR 54.9815–2704, 29 CFR 2590.715–
2704, 45 CFR 147.108)
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108 Claxton, G. and Lundy, J. How Health Care
Coverage Works: A Primer 2008 Update. The Kaiser
Family Foundation, April 2008.
109 ASPE. At Risk: Pre-Existing Conditions Could
Affect 1 in 2 Americans: 129 Million People Could
Be Denied Affordable Coverage Without Health
Reform, 2011; Collins, S., et al. Help is on the
Horizon: How the Recession Has Left Millions of
Workers Without Health Insurance, and How
Health Reform Will Bring Relief—Findings from
The Commonwealth Fund Biennial Health
Insurance Survey of 2010. The Commonwealth
Fund. 2011. Studies utilized 2008 MEPS data and
The Commonwealth Biennial Health Insurance
Survey of 2010 and prior years to estimate the
numbers of individuals with preexisting conditions.
110 Collins, S., et al. Help is on the Horizon: How
the Recession Has Left Millions of Workers Without
Health Insurance, and How Health Reform Will
Bring Relief—Findings from The Commonwealth
Fund Biennial Health Insurance Survey of 2010.
The Commonwealth Fund. 2011; Callahan, S., et al.
Access to Health Care for Young Adults With
Disabling Chronic Conditions. Arch Pediatr Adolesc
Med. 2006;160:178–182; and Bernstein, J., et al.
Issue Brief: How Does Insurance Coverage Improve
Health Outcomes? Mathematica Policy Research,
Inc. 2010:1.
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111 Bailey, K. Worry No More: Americans with
Pre-Existing Conditions Are Protected by the Health
Care Law, Families USA; 2012 and ASPE. At Risk:
Pre-Existing Conditions Could Affect 1 in 2
Americans: 129 Million People Could Be Denied
Affordable Coverage Without Health Reform, 2011.
112 Bailey, K. Worry No More: Americans with
Pre-Existing Conditions Are Protected by the Health
Care Law, Families USA; 2012 and Anderson, G.
From ‘Soak The Rich’ To ‘Soak The Poor’: Recent
Trends In Hospital Pricing. Health Affairs,2007;
26(3), pp. 780–789.
113 Himmelstein, D. et al. Medical Bankruptcy in
the United States, 2007: Results of a National Study.
Am Jour of Med. 2009; 122(8), pp. 741–746;
Robertson, T., et al. ‘‘Get sick, get out: The medical
causes of home mortgage foreclosures.’’ Health
Matrix: Journal of Law-Medicine. 2008; 18(65), pp
65–105; Fact Sheet. Key Facts about the Uninsured
Population. The Kaiser Family Foundation. October
2014; see also https://www.medicare.gov/yourmedicare-costs/help-paying-costs/medicaid/
medicaid.html.
114 Stoll, K. and Bailey, K. Hidden Health Tax:
Americans Pay a Premium. Families USA, 2009 and
Coughlin, T. et al. Uncompensated Care for
Uninsured in 2013: A detailed Examination. The
Kaiser Family Foundation, 2014.
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asabaliauskas on DSK5VPTVN1PROD with RULES
governments and, by extension,
taxpayers.
Finally, these final regulations may
reduce instances of ‘‘job lock’’situations in which workers are unable
to change jobs due to concerns regarding
health insurance coverage for them and/
or their dependents. Due to the
limitations and exclusions in individual
health coverage, many people were
forced into a position where they chose
to remain in a job out of fear of losing
their existing coverage or chose a job
with sponsored coverage over a higher
wage position.115 Job lock leads to a
number of labor market distortions
resulting in workers in jobs that are a
‘‘poor fit,’’ with reduced satisfaction or
skills that are not properly utilized,
affecting their ability to start new
businesses, retire, or reduce their work
load.116 One study indicates that 35
percent of those surveyed worried they
will have to forego job opportunities or
forego retirement to maintain
coverage.117
Under the Affordable Care Act, the
interim final regulations, and these final
regulations, someone currently insured
through the group market with less than
18 months of continuous coverage may
be more willing to leave their job and
become a self-employed entrepreneur if
they or their dependents have a
preexisting condition—resulting in
potentially 2–4 million more selfemployed individuals.118 Similarly,
even a worker with more than 18
months of continuous coverage who is
already protected by HIPAA may be
more likely to consider switching firms
and changing policies because they will
not have to worry that a preexisting
condition could be excluded for up to
12 months.119 While the total reduction
in job-lock may be small, the impact on
those families with members that have
preexisting conditions may be
significant.
Executive Order 12866 requires
agencies to take account of ‘‘distributive
115 GAO, Private Health Insurance: Estimates of
Individuals with Preexisting Conditions Range from
36 million to 122 million, GAO–12–439, 2012.
116 Baker, D. Job Lock and Employer—Provided
Health Insurance: Evidence from the Literature.
Public Policy Institute. 2015;I–35; ASPE. At Risk:
Pre-Existing Conditions Could Affect 1 in 2
Americans: 129 Million People Could Be Denied
Affordable Coverage Without Health Reform, 2011;
Fact Sheet. Key Facts about the Uninsured
Population. The Kaiser Family Foundation. October
2014.
117 Altman, D. Pre-X Redux. The Kaiser Family
Foundation, June 2013.
118 Baker, D. Job Lock and Employer—Provided
Health Insurance: Evidence from the Literature.
Public Policy Institute. 2015;I–35.
119 Foronstin, P. Health Insurance Portability and
Job Lock: Findings from the 1998 Health
Confidence Survey. Employee Benefit Research
Institute Notes. 1998: 19(8), pp. 4–6.
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impacts’’ and ‘‘equity.’’ Requiring health
plans and issuers to provide coverage to
adults and children with preexisting
conditions will result in a small
increase in premium for relatively
healthy adults and children, and a large
increase in health and financial security
for individuals with preexisting
conditions. This transfer is a meaningful
increase in equity, and is a benefit of
this final regulation.
3. Costs and Transfers
C. PHS Act Section 2711, Prohibition on
Lifetime and Annual Limits (26 CFR
54.9815–2711, 29 CFR 2590.715–2711,
45 CFR 147.126)
1. Affected Entities and Individuals
Prior to the passage of the Affordable
Care Act, both the incidence and
amount of lifetime limits varied by
market and plan type (e.g., HMO, PPO,
POS). In the RIA for the interim final
regulations, it was estimated that only 8
percent of large employers, 14 percent
of small employers and 19 percent of
individual market policies imposed an
annual limit at that time and thus would
have been directly impacted by the
interim final regulations, which were
phased in.
Fear and anxiety about reaching
annual or lifetime limits on coverage
was a major concern among Americans
who have health insurance, although
while such limits were relatively
common in health insurance, the
numbers of people expected to exceed
either an annual or lifetime limit was
quite low.
Although those that have preexisting
condition exclusions have higher health
care costs than healthier individuals,
among individuals with preexisting
conditions, those who are uninsured
have expenditures that are somewhat
lower than the average insured
individual.120 It is expected that when
those individuals who are uninsured or
have policies with preexisting condition
exclusions gain coverage, there will be
additional demand for and utilization of
services, leading to a transfer from outof-pocket spending to spending covered
by insurance, which will partially be
mitigated by a reduction in cost-shifting
of uncompensated care to the insured
population as coverage expands.
In evaluating the impact of this
provision, it is important to remember
that the full net effects of this provision
cannot be estimated because of its
interactions with other provisions in the
Affordable Care Act. For example, under
the current guaranteed availability and
renewability protections in the
individual market, children and young
adults with a preexisting condition are
now generally able to obtain and
maintain coverage on a parental plan,
where he or she can potentially stay on
that plan until age 26. As another
example, the Affordable Care Act
requires that non-grandfathered health
plans provide recommended preventive
services at no cost-sharing. This will
amplify the benefits of coverage for
newly insured individuals with
preexisting conditions. Moreover, the
expansion of the preexisting condition
exclusion policy occurred at the same
time as other policies were
implemented, such as the individual
responsibility and premium tax credit
provisions. Therefore, the Departments
cannot provide a more precise
estimation of either the benefits or the
costs and transfers of this provision.
2. Benefits
As discussed in the RIA for the
interim final regulations, annual and
lifetime limits function as caps on how
much a group health plan or insurance
company will spend on medical care for
a given insured individual over the
course of a year, or the individual’s
lifetime. Once a person reaches this
limit or cap, the person is essentially
uninsured: He or she must pay the
remaining cost of medical care out-ofpocket. These limits particularly affect
people with high-cost conditions,121
which typically are very serious and can
lead to financial hardship. Prohibiting
lifetime limits and annual limits will
benefit families and individuals
experiencing financial burdens due to
exceeding the benefit limits of their
insurance policy. By ensuring and
continuing coverage, the regulations
also reduce uncompensated care, which
would otherwise increase premiums of
the insured population through costshifting.
These provisions will also improve
access to care. Reaching a limit could
interrupt or cause the termination of
needed treatment, leading to worsening
of medical conditions. The removal and
restriction of benefit limits helps ensure
continuity of care and the elimination of
the extra costs that arise when an
120 Coughlin, T. et al. Uncompensated Care for
Uninsured in 2013: A Detailed Examination. The
Kaiser Family Foundation, 2014; GAO, Private
Health Insurance: Estimates of Individuals with
Preexisting Conditions Range from 36 million to
122 million, GAO–12–439, 2012.
121 A December 2014 study by Milliman ‘‘2014
U.S. organ and tissue transplant cost estimates and
discussion’’ found that the average 2014 billed
charges related to a heart transplant is $1,242,200,
a liver transplant averaged $739,100, while a heartlung transplant averaged $2,313,600.
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untreated or undertreated condition
leads to the need for even more costly
treatment, that could have been
prevented if no loss of coverage had
occurred. By ensuring continuation of
coverage, the regulations benefit the
health and the economic well-being of
participants, beneficiaries, and
enrollees.
Executive Order 12866 explicitly
requires agencies to take account of
‘‘distributive impacts’’ and ‘‘equity,’’
and these considerations help to
motivate the relevant statutory
provisions and the interim final
regulations and these regulations.
Prohibiting lifetime and annual limits
assures that insurance will perform the
function for which it was designed—
namely, protecting health and financial
wellbeing for those most in need of care.
This represents a meaningful
improvement in equity, which is a
benefit associated with the regulations.
3. Costs and Transfers
As discussed in the regulatory impact
analysis for the interim final
regulations, extending health insurance
coverage for individuals who would
otherwise hit a lifetime or annual limit
will increase the demand for and
utilization of health care services,
thereby generating additional costs to
the system. The three year phase-in of
the elimination of annual limits and the
immediate elimination of lifetime limits
increased the actuarial value of the
insurance coverage for affected plans
and policies if no other changes were
made to the plan or policy. Issuers and
plans in the group market may have
chosen to make changes to the plan or
policy to maintain the pre-regulation
actuarial value of the plan or policy,
such as changing their provider
networks or copayments in some
manner. To the extent that higher
premiums (or other plan or policy
changes) are passed on to all employees,
there is an explicit transfer from
workers who would not incur high
medical costs to those who do incur
high medical costs. If, instead, the
employers do not pass on the higher
costs of insurance coverage to their
workers, this can result in lower profits
or higher prices for the employer’s
goods or services. In the individual
market, when policies were individually
underwritten with no rating bands in
the majority of States, the Departments
expected the added premium cost or
other benefit changes to be largely borne
by the individual policyholder. With the
market reforms in place, along with
single risk pool requirements, issuers
can spread the increased costs across
the entire individual market, leading to
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a transfer from those who do not incur
high medical costs to those who do
incur such costs. However, as with the
group market, such a transfer was
expected to be modest, given the small
numbers of people who were expected
to exceed their benefit limits. The
Departments previously estimated that
the transfer would be three-quarters of
a percent or less for lifetime limits and
one-tenth of a percent or less for annual
limits, under a situation of pure
community rating where all the costs get
spread across the insured population.
This impact does not apply to
grandfathered individual market plans.
It is worth noting that these transfers
are expected to have been significantly
mitigated by the associated expansion of
coverage created by the interim final
regulations and other regulations
implementing the Affordable Care Act.
The Departments expect that, as a result
of the gradual elimination of annual
limits and the immediate elimination of
lifetime limits, fewer people have been
left without protection against high
medical costs. This results in fewer
individuals spending down resources
and enrolling in Medicaid or receiving
other State and locally funded medical
support. Such an effect will likely be
amplified due to the high-cost nature of
people who exceed benefit limits.
D. PHS Act Section 2712, Prohibition on
Rescissions (26 CFR 54.9815–2712, 29
CFR 2590.715–2712, 45 CFR 147.128)
1. Affected Entities and Individuals
PHS Act Section 2712 and these final
regulations create a statutory Federal
standard and enforcement power in the
group and individual markets where it
did not exist. Prior to this provision
taking effect, varying Federal common
laws existed for ERISA plans. State rules
pertaining to rescission have been found
to be preempted by ERISA by five
circuit courts (5th, 6th, 7th, 9th and
11th as of 2008).
The Affordable Care Act and its
implementing regulations should have a
large effect on reducing the number of
rescissions for two reasons. First, the
Affordable Care Act raised the standard
governing when coverage may be
rescinded. Group health plans and
health insurance issuers may now only
rescind coverage based on fraud or
intentional misrepresentation of a
material fact which is a higher standard
than most State laws required
previously. Second, the interaction of
these regulations with PHS Act sections
2704, prohibition of preexisting
condition exclusions, and sections 2705,
prohibiting discrimination against
individual participants and
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72221
beneficiaries based on health status,
could significantly reduce the number
of policies rescinded. Previously, the
issues surrounding the reporting of preexisting conditions to issuers and an
individual’s health status were primary
causes of rescissions. With the main
source of rescissions removed there
would be a significant drop in
rescissions even without these
regulations.
The Departments assume that these
final regulations will have their largest
impact on the individual insurance
market, because group health coverage
rarely is rescinded.122 By creating a new
Federal standard governing when
policies can be rescinded, the
Departments expect these final
regulations to potentially affect the
approximately 6.7 million non-elderly
individual health insurance policies
covering 10.9 million policy holders
and their dependents in the individual
health insurance market.123 In addition,
approximately 430 health insurance
issuers offering coverage in the
individual health insurance market who
currently could rescind health
insurance coverage are expected to be
affected.124 That said, the actual
incidence of individuals who are subject
to rescissions each year is likely to be
small. The NAIC Regulatory Framework
Task Force collected data on 52
companies covering the period 2004–
2008, and found that rescissions
averaged 1.46 per thousand policies in
force.125 These pre-Affordable Care Act
estimates are believed to be a significant
over-statement of rescissions occurring
now, however no new data is available.
Using this estimate implies that when
combined with the current numbers of
policy holders in the individual market
there could be approximately 9,900
rescissions per year.
2. Benefits
Because there is little pre-Affordable
Care Act data available and no publicly
available post-Affordable Care Act data,
the Departments find it difficult to
estimate the benefits associated with
this provision. However, the
Departments believe that the benefits of
this provision would accrue to those
individuals who without these
regulations would have their policies
rescinded.
122 This statement is based on the Departments’
conversations with industry experts.
123 2013 filings of the Medical Loss Ratio Report
found at https://www.cms.gov/CCIIO/Programsand-Initiatives/Health-Insurance-Market-Reforms/
Medical-Loss-Ratio.html.
124 2013 filings of the Medical Loss Ratio Report.
125 NAIC Rescission Data Call, December 17,
2009, p.1.
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As noted, Executive Order 12866
requires consideration of ‘‘distributive
impacts’’ and ‘‘equity.’’ To the extent
that rescissions are arbitrary, or targeted
at those most ill, and revoke the
insurance that enrollees paid for and
expected to cover the cost of expensive
illnesses and conditions, preventing
rescissions would prevent inequity and
greatly increase health and economic
well-being. Consumers would have
greater confidence that purchasing
insurance would be worthwhile, and
policies would represent better value for
money.
Individuals who otherwise would
have had their policies rescinded are
now able to retain their coverage; the
maintenance of such coverage through
severe illness helps to prevent financial
hardship for the enrollee and their
family, creating a substantial financial
benefit.126
As discussed previously, uninsured
individuals are less likely to receive
needed care when they become ill,
resulting in the worsening of their
condition. The lack of insurance can
lead to lost workplace productivity and
additional mortality and morbidity.
Additionally, this provision protects
those individuals currently receiving
treatment for a condition by eliminating
the potential interruptions or
terminations in care resulting from
rescissions, resulting in higher losses in
productivity.127 Thus, this rule would
contribute to increased worker
productivity by reducing the burden
associated with the loss of insurance
coverage, and the concomitant financial
and emotional stress.
3. Costs and Transfers
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As with the benefits, the costs and
transfers of these regulations are similar
to those of the interim final regulations.
The prohibition of rescissions except in
cases of fraud or intentional
misrepresentation of material fact could
lead insurers to spend more resources
checking applications before issuing
policies than they did before the
Affordable Care Act, which would
increase administrative costs. However,
under the final regulations, these costs
could be partially offset by decreased
costs associated with reduced postclaims underwriting.
126 Girion, Lisa ‘‘Health Net Ordered to Pay $9
million after Canceling Cancer Patient’s Policy,’’
Los Angeles Times (2008), available at: https://
www.latimes.com/business/la-fiinsure23feb23,1,5039339.story.
127 Collins et al. ‘‘Gaps in Health Insurance: An
All American Problem’’ Commonwealth Fund
(2006), available https://
www.commonwealthfund.org/usr_doc/Collins_
gapshltins_920.pdf.
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To the extent that continuing coverage
for these generally high-cost
populations leads to additional demand
for and utilization of health care
services, there will be additional costs
generated in the health care system.
However, given the relatively low rate of
rescissions (approximately 0.15 percent
of individual policies in force) and the
relative nature of those individuals who
generally have policies rescinded (who
would have difficulty going without
treatment), the Departments estimate
that these additional costs would be
small.
For those policies or plans that are
rescinded, the requirement for an
advance notice prior to such a rescission
imposes a total hour burden of
approximately 250 hours and a cost
burden of approximate $3,900. These
costs are discussed in more detail in the
Paperwork Reduction Act section later
in this preamble.
A transfer likely will occur within the
individual health insurance market from
policyholders whose policies would not
have been rescinded before the
Affordable Care Act to some of those
whose policies that would have been
rescinded before the Affordable Care
Act, depending on the market and the
rules which apply to it. This transfer
could result from higher overall
premiums insurers will charge to recoup
the costs associated with the health care
costs of those individuals with chronic
or serious conditions whose policies
could previously be rescinded (the
precise change in premiums depending
on the competitive conditions in
specific insurance markets). This
transfer across the market would benefit
those individuals with substantially
higher medical costs, due to chronic or
severe conditions, and would be
attributable to insurers covering those
costs associated with such individuals.
E. PHS Act Section 2714, Coverage of
Dependents to Age 26 (26 CFR 54.9815–
2714, 29 CFR 2590.715–2714, 45 CFR
147.120)
1. Affected Entities and Individuals
Prior to implementation of the
Affordable Care Act there were an
estimated 6.6 million uninsured young
adults age 19–26; with an estimated 3.3
million having parents with ESI and an
additional 2.7 million with individual
coverage, all of whom could potentially
have been affected.128 Implementation
of this provision allowed 13.7 million
young adults to either stay on or join
their parents’ health plans (from
128 Collins, S. and Nicholson, J. Rite of Passage:
Young Adults and the Affordable Care Act of 2010.
The Commonwealth Fund. May 2010.
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November 2010 until November
2011).129 There was a rapid response to
changes in the regulations leading to
large number of employers enrolling
young adults ,130 with thirteen percent
of small firms and 70 percent of large
firms enrolling at least one young
adult—small employers on average
enrolled two young adults while large
employers enrolled on average 492
young adults.131
Studies have shown that 2.3 million
young adults were able to gain coverage
since implementation of the Affordable
Care Act and this provision in 2010
through the start of the open enrollment
period in October 2013.132 The number
of affected young adults has continued
to increase as more employers began
covering young adult dependents and
those on individual grandfathered plans
began changing policies to include
dependents up to age 26. This has
resulted in an additional 3.4 million
young adults gaining coverage since
October 2013, resulting in a total of an
estimated 5.7 million gaining coverage
from 2010 through March 2015.133
2. Benefits
The benefits of these final regulations
are expected to outweigh the costs to the
regulated community. As of March
2015, an estimated 5.7 million
additional young adults are now
covered by their parents’ health plans
due to the implementation of this
provision.134 Expanding coverage
options for the 19–26 year old
population has resulted in a decline in
the number of uninsured young adults,
declining to an uninsured rate of 26.7
percent in the third quarter of 2013
(before the start of the October 2013
open enrollment period).135
Uninsured young adults are less likely
to have access to care and thus delay
seeking needed care,136 leading to
129 Collins, S. et al. Young, Uninsured and in
Debt: Why Young Adults Lack Health Insurance
and How the Affordable Care Act is Helping. The
Commonwealth Fund. June 2012.
130 Cantor, J. et al. Early Impact of the Affordable
Care Act on Health Insurance Coverage of Young
Adults. Health Services Research, 47:5 (2012):pp.
1773–1790.
131 Claxton, G. et al. Employer Health Benefits:
2011 Annual Survey. Kaiser Family Foundation and
Health Research & Education Trust. 2011
132 ASPE Data Point, Health Insurance Coverage
and the Affordable Care Act, September 2015.
133 ASPE. Health Insurance Coverage and the
Affordable Care Act. May 2015 at https://
aspe.hhs.gov/sites/default/files/pdf/83966/ib_
uninsured_change.pdf.
134 Id.
135 Ibid and Sommers, B. Number of Young
Adults Gaining Insurance Due to the Affordable
Care Act Now Tops 3 Million. ASPE Issue Brief,
June 2012.
136 Newacheck, P. et al. Health Insurance and
Access to Primary Care for Children. N Engl J Med.
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higher costs when care is received.
Further, expanded coverage provides
young adults with security and
protection from the financial
consequences of serious medical
emergencies. Recent studies have found
that due to the implementation of this
provision there has been a decline in the
number of young adults facing higher
out–of-pocket expenses (greater than
$1,500); 137 benefiting them when many
young adults are currently facing
elevated debt burdens and low
wages.138
Additionally, expanding coverage to
those aged 19–26 should decrease the
cost-shifting of uncompensated care
onto those with coverage (including
$147 million from emergency
department care),139 increase the receipt
of preventive health care and provide
more timely access to high quality care,
resulting in a healthier population. In
particular, children with chronic
conditions or other serious health issues
will be able to continue coverage
through a parent’s plan until age 26.
Extending dependent coverage of
children to age 26 will also permit
greater job mobility for this population
as their health coverage will no longer
be tied to their jobs, thus reducing the
potential of ‘‘job lock’’,140 or student
status.
3. Costs and Transfers
asabaliauskas on DSK5VPTVN1PROD with RULES
Estimates for the incremental annual
premium costs for the newly covered
individuals were developed in the
interim final regulations; estimating that
for those enrolling in their parents’ ESI,
the expected annual premium cost
would lead to an expected increase of
0.7 percent in 2011, 1.0 percent in 2012,
and 1.0 percent in 2013. A recent study
carried out by Depew and Bailey found
that the requirement dependent
coverage provision led to a 2.5–2.8
percent increase in premiums for plans
that cover children, and that employers
338:8 (1998) and Sommers, B. et al. The Affordable
Care Act Has Led To Significant Gains in Health
Insurance and Access to Care for Young Adults.
Health Affairs, 32:1 (2013):pp. 165–174.
137 Busch, S. et al. ACA Dependent Coverage
Provision Reduced High Out-Of-Pocket Health Care
Spending For Young Adults. Health Affairs, 33:8
(2014): pp. 1361–1366 and Mulcahy, A. et al.
Insurance Coverage of Emergency Care for Young
Adults under Health Reform. N Engl J Med. 368:22
(2013).
138 Chua, K-P. and Sommers, B. Changes in
Health and Medical Spending Among Young Adults
Under Health Reform. JAMA, 311:23 (2014).
139 Mulcahy, A. et al. Insurance Coverage of
Emergency Care for Young Adults under Health
Reform. N Engl J Med. 368:22 (2013).
140 Sommers, B. et al. The Affordable Care Act
Has Led To Significant Gains in Health Insurance
and Access to Care for Young Adults. Health
Affairs, 32:1 (2013):pp. 165–174.
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did not pass on the entire premium
increase to employees in the form of
higher required plan contributions.141
To the extent that some of these
increases are passed on to workers in
the form of higher premiums for all
workers purchasing family policies or in
the form of lower wages for all workers,
there will be a transfer from workers
who do not have newly covered
dependents to those who do. To the
extent that these higher premiums result
in lower profits or higher prices for the
employer’s product, the higher
premiums will result in a transfer either
from stockholders or consumers to
workers who have newly covered
dependents.
In addition, to the extent these final
regulations result in a decrease in the
number of uninsured, the Departments
expect a reduction in uncompensated
care, and a reduction in liability for
those who fund uncompensated care,
including public programs (primarily
Medicaid and State and local general
revenue support for public hospitals), as
well as the portion of uncompensated
care that is paid for by shifting costs
from private payers. Such effects would
lead to lower premiums for the insured
population, both with or without newly
covered children.
For the number of young adults
enrolling in their parents’ non-group
(individual) insurance policy, the
Departments estimated that, to a large
extent, premiums in the individual
market will be borne by the parents who
are purchasing the coverage. If, instead,
these costs are distributed over the
entire individual market (as would be
the case in a pure community rated
market), the Departments estimated in
the interim final regulations that the
individual premiums would rise 0.7
percent in 2011, 1.0 percent in 2012,
and 1.2 percent in 2013. However, the
Departments expected the actual
increase across the entire individual
market, if any, to be much smaller than
these estimates, because they expected
the costs to be largely borne by the
subscribers who are directly affected
rather than distributed across the entire
individual market.
141 Depew, B. and Bailey, J. Did the Affordable
Care Act’s dependent coverage mandate increase
premiums? Journal of Health Economics, 41
(2015):pp. 1–14
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F. PHS Act Section 2719, Internal
Claims and Appeals and External
Review (26 CFR 54.9815–2719, 29 CFR
2590.715–2719, 45 CFR 147.136)
1. Estimated Number of Affected
Entities
These provisions are applicable to
non-grandfathered health plans and
coverage. Using the estimates from the
discussion of affected entities for the
grandfathering provisions discussed in
paragraph III.C, there are 96.3 million
individuals covered by nongrandfathered ERISA-covered health
plans, 30.4 million individuals covered
by non-grandfathered State and local
health plans, and 8.7 million
individuals in non-grandfathered health
coverage in the individual market.
Not all potentially affected
individuals will be affected equally by
these final regulations. Sponsors of
ERISA-covered group health plans were
required to implement an internal
appeals process that complied with the
DOL claims procedure regulation before
the Affordable Care Act’s enactment,
and the Departments also understand
that many non-Federal governmental
plans and church plans that are not
subject to ERISA had implemented
internal claims and appeals processes
that comply with the DOL claims
procedure regulation. Therefore,
participants and beneficiaries covered
by such plans only will be affected by
the internal claims and appeals
standards that are provided by the
Secretary of Labor in paragraph (b)(2)(ii)
of these final regulations under PHS Act
section 2719.
These final regulations will have the
largest impact on individuals covered in
the individual health insurance market,
because with the issuance of the interim
final regulation, these issuers were
required to comply with the DOL claims
procedure regulation for internal claims
and appeals as well as the additional
standards added by the Secretary of the
Department of Health and Human
Services in paragraph (b)(3) of these
final regulations that are in some cases
more protective than the ERISA
standard.
On the external appeals side, before
the enactment of the Affordable Care
Act, issuers offering coverage in the
group and individual health insurance
market were already required to comply
with State external review laws. At that
time, all States except Alabama,
Mississippi, Nebraska, North Dakota,
South Dakota, and Wyoming had
external review laws, and thirteen States
had external review laws that apply
only to certain market segments (for
example, managed care or HMOs).
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Currently, all States except, Alabama,
Alaska, Florida, Georgia, Pennsylvania,
and Wisconsin have State external
review laws that satisfy the requirement
to provide a NAIC-similar or NAICparallel external review process. These
six States that do not meet the
requirements, must use the HHSadministered process or must contract
with accredited independent review
organizations to review external appeals
on their behalf until they meet the
requirements.142
Individuals participating in ERISAcovered self-insured group health plans
will be among those most affected by
the external review requirements
contained in these final regulations,
because the preemption provisions of
ERISA prevent a State’s external review
process from applying directly to an
ERISA-covered self-insured plan. These
plans will now be required to comply
with the Federal external review process
set forth under paragraph (d) of these
final regulations.
In summary, the number of affected
individuals depends on several factors,
including whether (i) a health plan
retains its grandfather status, (ii) the
plan is subject to ERISA, (iii) benefits
provided under the plan are self-funded
or financed by the purchase of an
insurance policy, (iii) the applicable
State has enacted an internal claims and
appeals law, and (iv) the applicable
State has enacted an external review
law, and if so the scope of such law, and
(v) the number of new plans and
enrollees in such plans.
The following, is a summary of the
benefits and costs as discussed in the
interim final regulations and that are
still applicable to these final
regulations.
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2. Benefits
Because of data limitations and a lack
of effective measures, the Departments
did not attempt to quantify the expected
benefits. Nonetheless, the Departments
were able to identify several of the
interim final regulation’s major
economic benefits.
The interim final regulations and
these final regulations will help
transform the current, highly variable
health claims and appeals process into
a more uniform and structured process.
This will:
• Improve the extent to which
employee benefit plans provide benefits
consistent with the established terms of
the plan;
142 Affordable Care Act: Working with States to
Protect Consumers, available at https://
www.cms.gov/CCIIO/Resources/Files/external_
appeals.html.
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• ensure greater certainty and
consistency in the handling of benefit
claims and appeals and improved access
to information about the manner in
which claims and appeals are
adjudicated;
• increase efficiency in the operation
of employee benefit plans and health
care delivery as well as health insurance
and labor markets;
• increase efficiency of health plans
by enhancing their transparency and
fostering participants’ confidence in the
plan’s fairness;
• reduce delays and inappropriate
denials;
• reduce the levels of error in the
system and improve health outcomes;
• improve health care, health plan
quality, and insurance market efficiency
by serving as a communication channel,
providing feedback from participants,
beneficiaries, and providers to plans
about quality issues; and
• enhance some insurers’ and group
health plans’ abilities to effectively
control costs by limiting access to
inappropriate care.
3. Costs and Transfers
The Departments have quantified the
primary source of costs associated with
these final regulations that will be
incurred to (i) administer and conduct
the internal and external review
process, and (ii) prepare and distribute
required disclosures and notices. These
costs and the methodology used to
estimate them are discussed under the
Paperwork Reduction Act section. The
total cost related to the information
collections is $160.1 million annually.
a. Additional Requirements for Group
Health Plans
Paragraph (b)(2)(i) of these final
regulations imposes additional
requirements to the DOL claims
procedure regulation that must be
satisfied by group health plans and
issuers offering group and individual
coverage in the individual and group
health insurance markets. The
Departments believe that the additional
requirements have modest costs
associated with them, because they
merely clarify provisions of the DOL
claims procedure regulation.
As discussed in the impact analysis
for the interim final regulations the
Departments were not able to estimate
the costs for some of the requirements,
namely for: the definition of adverse
determination, expedited notification of
benefit determination involving urgent
care, eliminating conflicts of interest,
and deemed exhaustion of internal
process. The Departments were able to
quantify the costs for Full and fair
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review and Enhanced notice with
culturally and linguistically appropriate
notices. These costs are included in the
Paperwork Reduction Act Section.
b. Additional Requirements for Issuers
in the Individual Insurance Market
To address certain relevant
differences in the group and individual
markets, health insurance issuers
offering individual health insurance
coverage must comply with three
additional requirements. First, these
final regulations expand the scope of the
group health coverage internal claims
and appeals process to cover initial
eligibility determinations.
This protection is important since
eligibility determinations in the
individual market are frequently based
on the health status of the applicant,
including preexisting conditions. The
Departments do not have sufficient data
to quantify the costs associated with this
requirement.
Second, although the DOL claims
procedure regulation permits group
health plans to have a second level of
internal appeals, these final regulations
require health insurance issuers offering
individual health insurance coverage to
have only one level of internal appeals.
This allows the claimant to seek either
external review or judicial review
immediately after an adverse
determination is upheld in the first level
of internal appeals. The Departments
have factored this cost into their
estimate of the cost for issuers offering
coverage in the individual market to
comply with this requirement.
Finally, these final regulations require
health insurance issuers offering
individual health insurance coverage to
maintain records of all claims and
notices associated with their internal
claims and appeals processes. An issuer
must make such records available for
examination upon request. Accordingly,
a claimant or State or Federal agency
official generally would be able to
request and receive such documents free
of charge. The Departments believe that
minimal costs are associated with this
requirement, because most issuers retain
the required information in the normal
course of their business operations.
c. External Appeals
The analysis of the cost associated
with implementing an external review
process under the interim final
regulations and these final regulations
focuses on the cost incurred by the
following three groups that were not
required to implement an external
review process before the enactment of
the Affordable Care Act: Plans and
participants in ERISA-covered self-
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insured plans; plans and participants in
States with no external review laws; and
plans and participants in States that
have State laws only covering specific
market segment (usually HMOs or
managed care coverage).
The Departments estimate that there
are approximately 78.7 million
participants in self-insured ERISAcovered plans and approximately 15.5
million participants in self-insured State
and local governmental plans. In the
States which currently have no external
review laws or whose laws do not meet
the federal minimum requirements 143
there are an estimated 13.8 million
participants (8.1 million participants in
ERISA-covered plans, 3.7 million
participants in governmental plans and
2 million individual covered by policies
in the individual market). These
estimates lead to a total of 108 million
participants, however, only the 80.0
million participants in nongrandfathered plans will be required to
be covered by the external review
requirement.
The Departments assume that there
are an estimated 1.3 external appeals for
every 10,000 participants 144, and that
there will be approximately 10,400
external appeals annually. As required
by these final regulations or applicable
State law, plans or issuers are required
to pay for most of the cost of the
external review while claimants may be
charged a nominal filing fee in States
that authorized such fees as of
November 18, 2015. One study found
that the average cost of a review was
approximately $665.145 The average cost
per appeal in the HHS-administered
External Review Program is
approximately $625 for a standard case
and $825 for an expedited case.146
The actual cost per review will vary
by State and type of review (standard or
expedited). Lacking data on the percent
of appeals that are expedited, but with
the majority of appeals being standard
appeals, the higher cost per appeal of
$665 for a standard appeal is used as an
estimate for all appeals. These estimates
lead to an estimated cost of the external
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143 These
states are Alabama, Alaska, Florida,
Georgia, Pennsylvania, and Wisconsin. See
Affordable Care Act: Working with States to Protect
Consumers, available at https://www.cms.gov/
CCIIO/Resources/Files/external_appeals.html
144 AHIP Center for Policy and Research, ‘‘An
Update on State External Review Programs, 2006,’’
July 2008.
145 North Carolina Department of Insurance
‘‘Healthcare Review Program: Annual Report,’’ 2013
Table 4. https://www.ncdoi.com/smart/Documents/
ExternalReviewReport16.pdf
146 The HHS-administered External Review
Program is approximately $625 for a standard case
and $825 for an expedited case.
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review of $6.9 million (10,400 reviews
* $665) annually.
On average, about 40 percent of
denials are reversed on external
appeal.147 An estimate of the dollar
amount per claim reversed is
$12,500.148 This leads to $53.5 million
in additional claims being reversed by
the external review process annually.
While this amount is a cost to plans, it
represents a payment of benefits that
should have previously been paid to
participants, but was denied. Part of this
amount is a transfer from plans and
issuers to those now receiving payment
for denied benefits. Part of the amount
could also be a cost if the reversal leads
to services and hence resources being
utilized now that had been denied
previously. The Departments are not
able to distinguish between the two
types but believe that most reversals are
associated with a transfer.
These final regulations also require
claimants to receive a notice informing
them of the outcome of an appeal and/
or external review. The independent
review organization that conducts the
external review is required to prepare
the notice; therefore, the cost of
preparing and delivering this notice is
included in the fee paid them by the
insurer to conduct the review.
4. Summary
These final rules extend the
protections of the DOL claims procedure
regulation to non-Federal governmental
plans, and the market for individual
coverage. Additional protections are
added that cover these two markets and
in addition to the market for ERISAcovered plans. These final regulations
also extend the requirement to provide
an independent external review. The
Departments estimate that the total costs
for these final regulations is $169.9
million annually with a transfer from
the plan and its participants to those
whose claims are reversed of $53.5
million annually.
G. PHS Act Section 2719A, Patient
Protections (26 CFR 54.9815–2719A, 29
CFR 2590.715–2719A, 45 CFR 147.138)
1. Designation of Primary Care Provider
The statute, the interim final
regulations and these final regulations
provide that if a group health plan, or
a health insurance issuer offering group
or individual health insurance coverage,
147 Of the 105 cases fully reviewed in the HHSadministered external review process so far, 28
have been overturned and 25 have been partially
overturned.
148 North Carolina Department of Insurance
‘‘Healthcare Review Program: Annual Report,’’
2013. https://www.ncdoi.com/smart/Documents/
ExternalReviewReport16.pdf
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72225
requires or provides for designation by
a participant, beneficiary, or enrollee of
a participating primary care provider,
then the plan or issuer must permit each
participant, beneficiary, and enrollee to
designate any participating primary care
provider who is available to accept the
participant, beneficiary, or enrollee
based on his or her geographic location.
a. Affected Entities and Individuals
Choice or assignment of a primary
care provider is typically required by
Health Maintenance Organizations
(HMOs) and Point of Service plans
(POS). Recent data suggest that there are
316,000 HMOs in the United States,
accounting for more than 11.3 million
enrollees with ESI. There are also
558,000 POS plans accounting for
almost 7 million enrollees with ESI. The
individual market includes 130,700
HMO policies.149 Similar data do not
exist for POS policies in the individual
market.
This provision only applies to nongrandfathered health plans. However,
due to the lack of data on HMO and POS
enrollees by type of market, and the
inability to predict new plans that may
enter those markets, the Departments
are unable to predict the number
enrollees and plans that would be
affected by this provision. Moreover,
there is no data on the number of plans
that auto-assigned patients to primary
care physicians and did not already
allow patients to make the final
provider choice, as this would be the
population to benefit maximally from
the interim final rules and these
regulations. From conversations with
industry experts the Departments
expect, however, that this number
would be very small, and therefore the
benefits and costs of this provision
would be small as well.
b. Benefits, Costs, and Transfers
As discussed in the RIA for the
interim final regulations, provider
choice allows patients to take into
account factors they may value when
choosing their provider, such as
provider credentials, office hours and
location, advice from professionals, and
information on the experience of other
patients. Provider choice is a strong
predictor of patient trust in their
provider, which could lead to decreased
149 Data for the group market (plan and
participant counts) were calculated using the 2012
MEPS, 2012 Census of Government, 2014 Current
Population Survey, and 2014 Kaiser/HRET Survey
of Employer Sponsored Health Benefits. Data for the
individual market were calculated using AHIP
‘‘Individual Health Insurance 2009: A
Comprehensive Survey of Premiums, Availability
and Benefits,’’ Table 10 and Medical Loss Ratio
submissions for 2013 reporting year.
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likelihood of malpractice claims,
improved medication adherence and
also improves health outcomes.
Although difficult to estimate given
the data limitations described, the costs
for this provision are likely to be
minimal. As noted in the RIA for the
interim final regulations, when
enrollees like their providers, they are
more likely to maintain appointments
and comply with treatment, both of
which could induce demand for
services, but these services could then
in turn reduce costs associated with
treating more advanced conditions.
However, the number of affected entities
from this provision is very small,
leading to small additional costs. There
will likely be negligible transfers due to
this provision given no changes in
coverage or cost-sharing.
2. Designation of Pediatrician as
Primary Care Provider
If a plan or issuer requires or provides
for the designation of a participating
primary care provider for a child by a
participant, beneficiary, or enrollee, the
plan or issuer must permit the
designation of a physician (allopathic or
osteopathic) who specializes in
pediatrics, including pediatric
subspecialties (based on the scope of
that provider’s license under applicable
State law), as the child’s primary care
provider if the provider participates in
the network of the plan or issuer and is
available to accept the child. The
general terms of the plan or health
insurance coverage regarding pediatric
care otherwise are unaffected, including
any exclusions with respect to coverage
of pediatric care.
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a. Affected Entities and Individuals
Due to lack of data on enrollment in
managed care organizations by age, as
well as lack of data on HMO and POS
enrollees by type of market, and the
inability to predict new plans that may
enter those markets, the Departments
are unable to predict the number of
enrollees and plans that would be
affected by these provisions. As a
reference, there are an estimated 5.6
million individuals under age 19 with
ESI who are in an HMO plan.150
b. Benefits, Costs, and Transfers
By expanding participating primary
care provider options for children to
include pediatricians, this provision
benefits individuals who are making
decisions about care for their children.
As discussed in the previous section,
150 Estimate based on data from the 2012 MEPS,
2012 Census of Government, 2014 Current
Population Survey, and 2014 Kaiser/HRET Survey
of Employer Sponsored Health Benefits.
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research indicates that when doctors
and patients have a strong, trusting
relationship, patients often have
improved medication adherence, health
promotion, and other beneficial health
outcomes.
In addition, allowing enrollees to
select a physician specializing in
pediatrics as their children’s primary
care provider has removed any referral
related delays for individuals in plans
that required referrals to pediatricians
and did not allow physicians
specializing in pediatrics to serve as
primary care providers. The American
Academy of Pediatrics (AAP) strongly
supports the idea that the choice of
primary care clinicians for children
should include pediatricians.151 Regular
pediatric care, including care by
physicians specializing in pediatrics,
can improve child health outcomes and
avert preventable health care costs.
Giving enrollees in covered plans
(that require the designation of a
primary care provider) the ability to
select a participating pediatrician as the
child’s primary care provider benefits
those individuals who would not
otherwise have been given this choice.
Again, the extent of these benefits will
depend on the number of enrollees with
children that are covered by plans that
do not allow the selection of a
pediatrician as the primary care
provider, which industry experts
suggest would be small.
Although difficult to estimate given
the data limitations described, the costs
for this provision are likely to be small.
Giving enrollees a greater choice of
primary care providers by allowing
them to select participating physicians
who specialize in pediatrics as their
child’s primary care provider could lead
to increased health care costs by
increasing the take-up of primary care
services, assuming they would not have
utilized appropriate services as
frequently if they had not been given
this choice.
Any transfers associated with the
interim final regulations and these final
regulations are expected to be minimal.
To the extent that pediatricians acting as
primary care providers would receive
higher payment rates for services
provided than would other primary care
physicians, there may be some transfer
of wealth from policy holders of nongrandfathered group plans to those
enrollees that choose the former
providers. However, the Departments do
151 See AAP Policy Statement, ‘‘Guiding
Principles for Managed Care Arrangements for the
Health Care of Newborns, Infants, Children,
Adolescents, and Young Adults’’, available at:
https://pediatrics.aappublications.org/content/132/
5/e1452.full.pdf+html.
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not believe that this is likely given the
similarity in income for primary care
providers that care for children.
3. Patient Access to Obstetrical and
Gynecological Care
The statute, the interim final
regulations and these final regulations
also provide rules for a group health
plan, or a health insurance issuer
offering group or individual health
insurance coverage, that provides
coverage for obstetrical or gynecological
care and requires the designation of an
in-network primary care provider.
Specifically, the plan or issuer may not
require authorization or referral by the
plan, issuer, or any person (including a
primary care provider) for a female
participant, beneficiary, or enrollee who
seeks obstetrical or gynecological care
provided by an in-network health care
professional who specializes in
obstetrics or gynecology (OB/GYN).
These plans and issuers must also treat
the provision of obstetrical and
gynecological care, and the ordering of
related obstetrical and gynecological
items and services, by the OB/GYN as
the authorization of the primary care
provider. For this purpose, an OB/GYN
is any individual who is authorized
under applicable State law to provide
obstetrical or gynecological care, and is
not limited to a physician.
a. Affected Entities and Individuals
Requiring referrals or authorizations
to OB/GYNs is typically required by
HMOs and POS plans.
This provision applies to nongrandfathered health plans. However,
due to the lack of data on HMO and POS
enrollees by type of market, and the
inability to predict new plans that may
enter those markets, the Departments
are unable to predict the number
enrollees and plans that would be
affected by this provision. As a
reference, there are an estimated 7.3
million females between ages 21 to 65
with ESI who are in HMO plans.152
b. Benefits, Costs, and Transfers
This provision gives women in
covered plans easier access to their OB/
GYNs, where they can receive
preventive services such as pelvic and
breast exams, without the added time,
expense, and inconvenience of needing
permission first from their primary care
providers. Moreover, this provision may
also save time and reduce
administrative burden since
participating OB/GYNs do not need to
152 Estimate based on data from the 2012 MEPS,
2012 Census of Government, 2014 Current
Population Survey, and 2014 Kaiser/HRET Survey
of Employer Sponsored Health Benefits.
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get an authorization from a primary care
provider to provide care and order
obstetrical and gynecological items and
services. To the extent that primary care
providers spend less time seeing women
who need a referral to an OB/GYN,
access to primary care providers will be
improved. To the extent that the items
and services are critical and would have
been delayed while getting an
authorization from the primary care
provider, this provision will improve
the treatment and health outcomes of
female patients. Access to such care can
have substantial benefits in women’s
lives.
To the extent that direct access to OB/
GYN services results in increased
utilization of recommended and
appropriate care, this provision may
result in benefits associated with
improved health status for the women
affected. Potential cost savings also exist
since women in affected plans will not
need to visit their primary care provider
in order to get a referral for routine
obstetrical and gynecological care,
items, and services, thereby reducing
unnecessary time and administrative
burden, and decreasing the number of
office visits paid by her and by her
health plan.
One potential area of additional costs
associated with this provision would be
induced demand, as women who no
longer need a referral to see an OB/GYN
may be more likely to receive preventive
screenings and other care. Data is
limited to provide an estimate of this
induced demand, but the Departments
believe it to be small.
To the extent this provision results in
a shift in services to higher cost
providers, it will result in a transfer of
wealth from enrollees in nongrandfathered group plans to those
individuals using the services affected.
However, such an effect is expected to
be small.
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4. Emergency Services
PHS Act section 2719A, the interim
final regulations, and these final
regulations provide that a group health
plan and a health insurance issuer
covering emergency services must do so
without the individual or the health
care provider having to obtain prior
authorization (even if the emergency
services are provided out-of-network).
For a plan or health insurance coverage
with a network of providers that provide
benefits for emergency services, the plan
or issuer may not impose any
administrative requirement or limitation
on benefits for out-of-network
emergency services that is more
restrictive than the requirements or
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limitations that apply to in-network
emergency services.
Finally, the interim final regulations
and these final regulations provide that
cost-sharing requirements expressed as
a copayment amount or coinsurance rate
imposed for out-of-network emergency
services cannot exceed the cost-sharing
requirements that would be imposed if
the services were provided in-network.
The regulations also provide that a plan
or health insurance issuer provide
benefits for out-of-network emergency
services (prior to imposing in-network
cost sharing) in an amount at least equal
the greatest of: (1) The median amount
negotiated with in-network providers
for the emergency service; (2) the
amount for the emergency service
calculated using the same method the
plan generally uses to determine
payments for out-of-network services
(such as the usual, customary, and
reasonable amount); or (3) the amount
that would be paid under Medicare for
the emergency service. In applying the
rules relating to emergency services, the
statute and the regulations define the
terms emergency medical condition,
emergency services, and stabilize. These
terms are defined generally in
accordance with their meaning under
Emergency Medical Treatment and
Labor Act (EMTALA), section 1867 of
the Social Security Act.
The statute and the regulations
relating to emergency services do not
apply to grandfathered health plans;
however, other Federal or State laws
related to emergency services may apply
regardless of grandfather status.
a. Affected Entities and Individuals
The interim final regulations and
these regulations directly affect out-ofpocket expenditures for individuals
enrolled in non-grandfathered private
health plans (group or individual)
whose copayment or coinsurance
arrangements for emergency services
differ between in-network and out-ofnetwork providers. These regulations
may also require some health plans to
change the amount they pay to out-ofnetwork providers compared to their
pre-Affordable Care Act contractual
arrangements. There are no available
data, however, that allow for national
estimates of the number of plans (or
number of enrollees in plans) that have
different payment arrangements for outof-network than in-network providers,
or differences between in- and out-ofnetwork copayment and coinsurance
arrangements, in order to more precisely
estimate the number of enrollees
affected.
Prior to the issuance of the interim
final regulations, the Departments
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conducted an informal survey of
benefits plans for large insurers in order
to assess the landscape with regard to
copayment and coinsurance for
emergency department services, but
found that a variety of arrangements
existed in the marketplace prior to the
issuance of the interim final regulations.
Many of the large insurers maintained
identical copayment and/or coinsurance
arrangements between in- and out-ofnetwork providers. Others had differing
arrangements based on copayments,
coinsurance rates, or a combination of
the two. While useful for examining the
types of arrangement that exist in the
market place, these data do not contain
enrollment information and therefore
cannot be used to make impact
estimates.
It was estimated in the interim final
regulations that a maximum of 2.1 to 4.2
million individuals would be
potentially affected by differing out-ofpocket requirements. Based on an
informal survey, some proportion,
possibly a large portion, of these
individuals were covered by plans that
had identical in- and out-of-network
requirements. Therefore, the number of
individuals affected by this regulatory
provision was expected to be smaller.
b. Benefits, Costs, and Transfers
Insurers maintained differing
copayment and coinsurance
arrangements between in- and out-ofnetwork providers as a cost containment
mechanism. Implementing reduced cost
sharing for the use of in-network
providers provides financial incentive
for enrollees to use these providers,
with whom plans often have lower-cost
contractual arrangements. In emergency
situations, however, the choice of an innetwork provider may not be
available—for example, when a patient
is some distance from his or her local
provider networks or when an
ambulance transports a patient to the
nearest hospital which may not have
contractual arrangements with the
person’s insurer. In these situations, the
differing copayment or coinsurance
arrangements could place a substantial
financial burden on the patient. This
provision eliminates this disparity in
out-of-pocket burden for enrollees,
leading to potentially substantial
financial benefit.
The regulations also provide for
potentially higher payments to out-ofnetwork providers, if usual customary
rates or Medicare rates are higher than
median in-network rates. This can have
a direct economic benefit to providers
and patients, as the remaining
differential between provider charge
and plan payment will be smaller,
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leading to a smaller balance-bill for
patients.
To the extent that expectations about
such financial burden with out-ofnetwork emergency department usage
would cause individuals to delay or
avoid seeking necessary medical
treatment when they cannot access a
network provider, this provision may
result in more timely use of necessary
medical care. It may therefore result in
health and economic benefits associated
with improved health status; and fewer
complications and hospitalizations due
to delayed and possibly reduced
mortality. The Departments expect that
this effect would be small, however,
because insured individuals are less
likely to delay care in emergency
situations.
The economic costs associated with
the emergency services provisions are
likely to be minimal. These costs will
occur to the extent that any lower costsharing will induce new utilization of
out-of-network emergency services.
Given the nature of these services as
emergency services, this effect is likely
to be small for insured individuals. In
addition, the demand for emergency
services in truly emergency situations
can result in health care cost savings
and population health improvements
due to the timely treatment of
conditions that could otherwise rapidly
worsen.
As discussed in the RIA for the
interim final regulations, the emergency
services provisions are likely to result in
some transfers from the general
membership of non-grandfathered group
health plans that have differing
copayment and coinsurance
arrangements to those policy holders
that use the out-of-network emergency
services. The precise amount of the
transfer which would occur through an
increase in premiums is impossible to
quantify due to lack of data, but only
applies to non-grandfathered health
plans.
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5. Application to Grandfathered Plans
The provisions relating to certain
patient protections do not apply to
grandfathered health plans. However,
other Federal or State laws related to
these patient protections may apply
regardless of grandfather status.
6. Patient Protection Disclosure
Requirement
When applicable, it is important that
individuals enrolled in a plan or health
insurance coverage know of their rights
to (1) choose a primary care provider or
a pediatrician when a plan or issuer
requires participants or subscribers to
designate a primary care physician; or
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(2) obtain obstetrical or gynecological
care without prior authorization.
Accordingly, as was provided in the
interim final regulations, these final
regulations require such plans and
issuers to provide a notice to
participants (in the individual market,
primary subscribers) of these rights
when applicable. Model language is
provided in these regulations. The
notice must be provided whenever the
plan or issuer provides a participant
with a summary plan description or
other similar description of benefits
under the plan or health insurance
coverage, or in the individual market,
provides a primary subscriber with a
policy, certificate, or contract of health
insurance.
The Departments estimate that the
cost to plans and insurance issuers to
prepare and distribute the disclosure is
$940,000 in 2015. For a discussion of
the Patient Protection Disclosure
Requirement, see the Paperwork
Reduction Act section later in this
preamble.
IV. Paperwork Reduction Act
A. Departments of Labor and the
Treasury
These final regulations contain a
notice of grandfather status and third
party disclosure, rescissions notice, and
patient protection disclosures
requirement for issuers and notice
requirements related to internal claims
and appeals and external review that are
information collection requests (ICRs)
subject to the Paperwork Reduction Act
of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)).
In accordance with the requirements
of the Paperwork Reduction Act of 1995
(PRA) (44 U.S.C. 3506(c)(2)), the
Departments submitted an ICR to OMB
in accordance with 44 U.S.C. 3507(d),
contemporaneously with the
publication of the interim final
regulations, for OMB’s review under the
emergency PRA Procedures.153 OMB
subsequently approved the ICRs.
Contemporaneously with the
publications of the emergency ICRs, the
Departments published a separate
Federal Register notice informing the
public that it intended to request OMB
to extend the approval for three years
and soliciting comments on the ICRs.
OMB approved the ICR extensions.
No public comments were received in
response to the ICRs contained in the
interim final regulations that
specifically addressed the paperwork
burden analysis of the information
collections. The comments that were
submitted contained information
153 5
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relevant to the costs and administrative
burdens attendant to the proposals. The
Departments took into account the
public comments when analyzing the
economic impact of the proposals, and
developing the revised paperwork
burden analysis, which is summarized
in the following sections.
A copy of the ICRs may be obtained
by contacting the following PRA
addressee or at https://www.RegInfo.gov.
PRA ADDRESSEE: G. Christopher
Cosby, Office of Policy and Research,
U.S. Department of Labor, Employee
Benefits Security Administration, 200
Constitution Avenue NW., Room N–
5718, Washington, DC 20210.
Telephone: (202) 693–8410; Fax: (202)
219–4745. These are not toll-free
numbers. Email: ebsa.opr@dol.gov.
1. ICR Regarding Affordable Care Act
Notice of Grandfather Status and Third
Party Disclosure
As discussed earlier in this preamble,
to maintain grandfathered health plan
status under these final regulations, a
plan or issuer must maintain records
that document the plan or policy terms
in connection with the coverage in
effect on March 23, 2010, and any other
documents necessary to verify, explain,
or clarify its status as a grandfathered
health plan, disclose its status as a
grandfathered health plan, and if
switching issuers and intending to
maintain its status as a grandfathered
plan it must provide to the new health
insurance issuer documentation of plan
terms under the prior health coverage
sufficient for it to determine whether a
change causing a cessation of
grandfathered health plan status has
occurred.
a. Grandfathered Health Plan Disclosure
The final regulations provide that the
plan or issuer of a grandfathered plan
must disclose to participants and
beneficiaries its status as a
grandfathered health plan. Model
language is provided by the
Departments. Using data from the 2014
Employer Health Benefits Survey it is
estimated that 37 percent of plans are
grandfathered plans and 26 percent of
employees in ERISA-covered plans are
in a grandfathered plans.154
The Departments estimate that there
are 850,700 (2.3 million ERISA-covered
plans * 0.37) ERISA-covered plans 155—
with an estimated 17.2 million policy
holders (66 million policy holders
*0.26)—that will need to include the
154 Kaiser Family Foundation, ‘‘2014 Employer
Health Benefits Survey.’’ https://kff.org/health-costs/
report/2014-employer-health-benefits-survey/.
155 EBSA estimates based on the 2014 Medical
Expenditure Survey—Insurance Component.
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notice in plan documents.156 After plans
satisfied the grandfathered health plan
disclosure requirement in 2011, any
additional burden should be de minimis
if a plan wants to maintain its
grandfathered status in future years. The
Departments also expect the cost of
removing the notice from plan
documents as plans relinquish their
grandfathered status to be de minimis
and therefore it is not estimated. Based
on the foregoing, the Departments
estimate that plans will incur no
additional burden to maintain or
remove the notice from plan documents.
The Departments estimate that the
notice will require one-half of a page
and five cents per page printing and
material cost will be incurred, and 38
percent of the notices will be delivered
electronically. This results in a total cost
burden of approximately $266,000
($0.05 per page*1/2 pages per notice *
17.2 million notices*0.62).
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b. Record Keeping Requirement
Plans were required to maintain
records documenting the terms of the
plan or health insurance coverage in
connection with the coverage in effect
on March 23, 2010.
The Departments assume that most of
the documents required to be retained to
satisfy the recordkeeping requirement of
these final regulations are already
retained by plans for tax purposes, to
satisfy ERISA’s record retention and
statute of limitations requirements, and
for other business reasons. The
Departments estimated this as a onetime cost incurred in 2011, because after
the first year, the Departments
anticipate that any future costs to retain
the records will be de minimis.
c. Documentation of Plan Terms
These final regulations contain a
disclosure requirement that requires
that a group health plan that is changing
health insurance coverage to provide to
the succeeding health insurance issuer
(and the succeeding health insurance
issuer must require) documentation of
plan terms (including benefits, cost
sharing, employer contributions, and
annual limits) under the prior health
insurance coverage sufficient to make a
determination whether the standards of
paragraph (g)(1) under the Affordable
Care Act section 1251 regulations are
exceeded. The number of plans that
might be effected (133,200) is estimated
by multiplying the number of
grandfathered plans (850,700) by the
percent of plans shopping for a new
156 Health Insurance Coverage Bulletin: Abstract
of Auxiliary Data for the March 2014 Annual Social
and Economic Supplement to the Current
Population Survey, Table 3C.
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carrier (58 percent) and the number of
plans shopping for a new carrier that
switched (27 percent). Each of these
plans would need to transmit to the
carrier documentation of plan terms
(including benefits, cost sharing,
employer contributions, and annual
limits) under the prior health insurance
coverage sufficient to make a
determination whether the standards of
paragraph (g)(1) of the final regulations
under Affordable Care Act section 1251
are exceeded. It is estimated that the
electronic transmission of the already
retained documents would require 2
minutes of a clerical staff’s time with a
labor rate of $30.42 per hour.157 These
estimate result in an hour burden of
4,440 hours (133,200*2/60) with an
equivalent cost of $135,100 (133,200*2/
60*$30.42). Each of these plans would
need to transmit to the carrier
documentation of plan terms. If half of
the plans transmit the required
documents electronically then 66,600
plans will be sent via mail resulting in
a materials and postage costs of
$467,600 ((66,600*(90 pages *5 cents
per page + $2.52 postage)).
The Departments note that persons
are not required to respond to, and
generally are not subject to any penalty
for failing to comply with an ICR unless
the ICR has a valid OMB control
number.
The paperwork burden estimates are
summarized as follows:
Type of Review: Revision.
Agency: Employee Benefit Security
Administration, Department of Labor;
Internal Revenue Service, U.S.
Department of the Treasury.
Title: Disclosure and Recordkeeping
Requirements for Grandfathered Plans
under the Affordable Care Act.
OMB Control Number: 1210–0140;
1545–2178.
Affected Public: Business or other forprofit; not-for-profit institutions.
Total Respondents: 850,700.
157 The Department’s estimated 2015 hourly labor
rates include wages, other benefits, and overhead
are calculated as follows: mean wage from the 2013
National Occupational Employment Survey (April
2014, Bureau of Labor Statistics https://www.bls.gov/
news.release/pdf/ocwage.pdf); wages as a percent of
total compensation from the Employer Cost for
Employee Compensation (June 2014, Bureau of
Labor Statistics https://www.bls.gov/news.release/
ecec.t02.htm); overhead as a multiple of
compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of
compensation for clerical, and 35 percent of
compensation for professional; annual inflation
assumed to be 2.3 percent annual growth of total
labor cost since 2013 (Employment Costs Index data
for private industry, September 2014 https://
www.bls.gov/news.release/eci.nr0.htm). Secretaries,
Except Legal, Medical, and Executive (43–6014):
$16.35(2013 BLS Wage rate)/0.675(ECEC ratio)
*1.2(Overhead Load Factor) *1.023(Inflation rate)
¥2(Inflated 2 years from base year) = $30.42.
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72229
Total Responses: 18,143,923.
Frequency of Response: Occasionally.
Estimated Total Annual Burden
Hours (three year average): 2,200
(Employee Benefits Security
Administration); 2,200 (Internal
Revenue Service).
Estimated Total Annual Cost Burden
(three year average): $366,800
(Employee Benefits Security
Administration); $366,800 (Internal
Revenue Service).
2. ICR Regarding Affordable Care Act
Notice Relating to Rescissions
As discussed earlier in this preamble,
PHS Act Section 2712 and these final
regulations provide rules regarding
rescissions for group health plans and
health insurance issuers that offer group
or individual health insurance coverage.
A plan or issuer must not rescind
coverage under the plan, policy,
certificate, or contract of insurance
except in the case of fraud or intentional
misrepresentation of a material fact.
These final regulations provide that a
group health plan or a health insurance
issuer offering group health insurance
coverage must provide at least 30
calendar days advance notice to an
individual before coverage may be
rescinded. This rescission notice
requirement is an information collection
request (ICR) subject to the Paperwork
Reduction Act of 1995 (PRA) (44 U.S.C.
3506(c)(2)(A)).
The Departments assume that
rescissions are rare in the group market
and that small group health plans are
affected by rescissions. The
Departments are not aware of a data
source on the number of group plans
whose policy is rescinded; therefore, the
Departments assume that 100 small
group health plan policies are rescinded
in a year. The Departments estimate that
there is an average of 15.33 participants
in small, insured plans.158 Based on
these numbers the Departments estimate
that approximately 100 policies are
rescinded during a year, which would
result in 1,533 notices being sent to
affected participants with 38 percent
transmitted electronically and 62
percent mailed. The Departments
estimate that 15 minutes of legal
professional time at $129.94 per hour
would be required by the insurers of the
100 plans to prepare the notice and one
minute per notice of clerical
professional time at $30.42 per hour
would be required to distribute the
paper notices. The Departments believe
158 U.S. Department of Labor, EBSA calculations
using the March 2014 Current Population Survey
Annual Social and Economic Supplement and the
2012 Medical Expenditure Panel Survey.
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the costs of electronic transmission
would be de minimis. This results in an
hour burden of approximately 41 hours
with an equivalent cost of
approximately $3,700.159
The Departments estimate that the
cost burden associated with distributing
the paper notices via mail will be
approximately $500. This results from
distributing 950 paper notices at a cost
of $0.54 per notice.160
These paperwork burden estimates
are summarized as follows:
Type of Review: Revision of existing
collection.
Agencies: Employee Benefits Security
Administration, Department of Labor;
Internal Revenue Service, U.S.
Department of the Treasury.
Title: Required Notice of Rescission of
Coverage under the Patient Protection
and Affordable Care Act Disclosures.
OMB Number: 1210–0141; 1545–
2180.
Affected Public: Business or other forprofit; not-for-profit institutions.
Total Respondents: 100.
Total Responses: 1,533.
Frequency of Response: Occasionally.
Estimated Total Annual Burden
Hours: 20.5 hours (Employee Benefits
Security Administration); 20.5 hours
(Internal Revenue Service).
Estimated Total Annual Burden Cost:
$250 (Employee Benefits Security
Administration); $250 (Internal Revenue
Service).
3. ICR Regarding Affordable Care Act
Patient Protection Disclosure
Requirement
a. Patient Protection Disclosure
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As discussed earlier in this preamble,
PHS Act section 2719A imposes, with
respect to a group health plan, or group
or individual health insurance coverage,
a set of three requirements relating to
the choice of health care professionals.
When applicable, it is important that
individuals enrolled in a plan or health
159 The Department’s estimated 2015 hourly labor
rates include wages, other benefits, and overhead
are calculated as follows: mean wage from the 2013
National Occupational Employment Survey (April
2014, Bureau of Labor Statistics https://www.bls.gov/
news.release/pdf/ocwage.pdf); wages as a percent of
total compensation from the Employer Cost for
Employee Compensation (June 2014, Bureau of
Labor Statistics https://www.bls.gov/news.release/
ecec.t02.htm); overhead as a multiple of
compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of
compensation for clerical, and 35 percent of
compensation for professional; annual inflation
assumed to be 2.3 percent annual growth of total
labor cost since 2013 (Employment Costs Index data
for private industry, September 2014 https://
www.bls.gov/news.release/eci.nr0.htm).
160 This estimate is based on an average document
size of one page, $.05 cents per page material and
printing costs, and $0.49 postage costs.
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insurance coverage know of their rights
to (1) Choose a primary care provider or
a pediatrician when a plan or issuer
requires participants or subscribers to
designate a primary care physician; (2)
obtain obstetrical or gynecological care
without prior authorization; or (3)
coverage of emergency services.
Accordingly, these final regulations
require such plans and issuers to
provide a notice to participants (in the
individual market, primary subscriber)
of these rights when applicable. Model
language is provided in these final
regulations. The notice must be
provided whenever the plan or issuer
provides a participant with a summary
plan description or other similar
description of benefits under the plan or
health insurance coverage, or in the
individual market, provides a primary
subscriber with a policy, certificate, or
contract of health insurance. The
Affordable Care Act patient protection
disclosure requirement is an ICR subject
to the PRA.
In order to satisfy these final
regulations’ patient protection
disclosure requirement, the
Departments estimate that 41,000
ERISA-covered plans will need to notify
an estimated 693,000 policy holders
annually of their plans policy in regards
to designating a primary care physician
and for obstetrical or gynecological
visits.161 The Departments believe that
plans would only incur costs associated
with this notice during the first year
after relinquishing grandfather status. In
subsequent years, this notice would
remain unchanged and its costs are
factored into the burden estimates
associated with the Summary Plan
Description information collection
request (OMB Control Number 1210–
0039).
The following estimates are based on
the assumption that five percent of
group health plans will relinquish
grandfathered health plan status
annually. Because the final regulations
provide model language for this
purpose, the Departments estimate that
five minutes of clerical time (with a
labor rate of $30.42/hour) will be
required to incorporate the required
161 The Departments’ estimate of the number of
ERISA-covered health plans was obtained from the
2014 Medical Expenditure Survey—Insurance
Component and the number of policy holders was
obtained from the Health Insurance Coverage
Bulletin: Abstract of Auxiliary Data for the March
2014 Annual Social and Economic Supplement to
the Current Population Survey, Table 3C https://
www.dol.gov/ebsa/pdf/coveragebulletin2014.pdf.
Information on HMO and POS plans and
enrollment in such plans was obtained from the
Kaiser/HRET Survey of Employer Sponsored Health
Benefits, 2014. The Department assumes that five
percent of group health plans will relinquish
grandfathered health plan status annually.
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language into the plan document and
ten minutes of a human resource
professional’s time (with a labor rate of
$110.30/hour) will be required to review
the modified language. Therefore, the
Departments estimate that plans
relinquishing grandfathered health plan
status will incur an annual hour burden
of 10,000 hours with an equivalent cost
of $866,000.162
The Departments assume that only
printing and material costs are
associated with the disclosure
requirement, because the final
regulations provide model language that
can be incorporated into existing plan
documents, such as an SPD. The
Departments estimate that the notice
will require one-half of a page, five
cents per page printing and material
cost will be incurred, and 38 percent of
the notices will be delivered
electronically at de minimis cost. This
results in a cost burden of $11,000.163
b. Out-of-Network Emergency Services
Disclosure
The final regulations require that a
plan or issuer may not impose any
copayment or coinsurance requirement
for out-of-network emergency services
that is more restrictive than the
copayment or coinsurance requirement
that would apply if the services were
provided in network. If State law
prohibits balance billing, or a plan or
issuer is contractually responsible for
any amounts balanced billed by an outof-network emergency services provider,
the plan or issuer must provide an
enrollee or beneficiary adequate and
prominent notice of their lack of
financial responsibility with respect to
amounts balanced billed in order to
prevent inadvertent payment by an
enrollee or beneficiary. This information
should already be routinely included in
the Explanation of Benefit documents
162 The Department’s estimated 2015 hourly labor
rates include wages, other benefits, and overhead
are calculated as follows: mean wage from the 2013
National Occupational Employment Survey (April
2014, Bureau of Labor Statistics https://www.bls.gov/
news.release/pdf/ocwage.pdf); wages as a percent of
total compensation from the Employer Cost for
Employee Compensation (June 2014, Bureau of
Labor Statistics https://www.bls.gov/news.release/
ecec.t02.htm); overhead as a multiple of
compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of
compensation for clerical, and 35 percent of
compensation for professional; annual inflation
assumed to be 2.3 percent annual growth of total
labor cost since 2013 (Employment Costs Index data
for private industry, September 2014 https://
www.bls.gov/news.release/eci.nr0.htm).
163 This estimate is based on an average document
size of 1⁄2 page, $.05 cents per page material and
printing costs, and $0.49 postage costs for paper
notices and de minimis costs for electronically
distributed notices. The Departments assume 62
percent of notices will be on paper and 38 percent
will be distributed electronically.
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sent by plans and issuers to enrollees
and beneficiaries. Therefore, in
accordance with the implementing
regulations of the PRA at 5 CFR
1320.3(b)(2), we believe this is a usual
and customary business practice. Plans
and issues routinely provide enrollees
and beneficiaries with the Explanation
of Benefit documents.
The Departments note that persons
are not required to respond to, and
generally are not subject to any penalty
for failing to comply with, an ICR unless
the ICR has a valid OMB control
number. These paperwork burden
estimates are summarized as follows:
Type of Review: Revision of an
existing collection.
Agencies: Employee Benefits Security
Administration, Department of Labor;
Internal Revenue Service, U.S.
Department of Treasury.
Title: Disclosure Requirement for
Patient Protections under the Affordable
Care Act.
OMB Number: 1210–0142; 1545–
2181.
Affected Public: Business or other for
profit; not-for-profit institutions.
Total Respondents: 41,000.
Total Responses: 693,000.
Frequency of Response: One time.
Estimated Total Annual Burden
Hours: 5,000 (Employee Benefits
Security Administration); 5,000
(Internal Revenue Service).
Estimated Total Annual Burden Cost:
$5,500 (Employee Benefits Security
Administration); $5,500 (Internal
Revenue Service).
4. ICR Regarding Affordable Care Act
Internal Claims and Appeals and
External Review
PHS Act section 2719 and these final
regulations, require that group health
plans and health insurance issuers
offering group health insurance
coverage must comply with the internal
claims and appeals processes set forth
in 29 CFR 2560.503–1 (the DOL claims
procedure regulation) and update such
processes in accordance with standards
established by the Secretary of Labor in
paragraph (b)(2)(ii) of the regulations
under PHS Act section 2719.
The burden to comply with the DOL
claims procedure regulations is
accounted for under OMB control
number 1210–0053, therefore it is not
included here.
Paragraph (b)(2)(ii)(C) of the final
regulations under PHS Act section 2719
adds an additional requirement that
non-grandfathered ERISA-covered group
health plans provide to the claimant,
free of charge, any new or additional
evidence considered to be relied upon,
or generated by the plan or issuer in
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connection with the claim. The related
hour burden is 1,100 hours and the
related cost burden is $1.1 million.
The June 2011 amendment to the
interim final regulations required that
plans and issuers must provide
participants and beneficiaries who
reside in a county where ten percent or
more of the population residing in the
county is literate only in the same nonEnglish language with a one-sentence
statement in all notices written in the
applicable non-English language about
the availability of language services. In
addition to including the statement,
plans and issuers are required to
provide a customer assistance process
(such as a telephone hotline) with oral
language services in the non-English
language and provide written notices in
the non-English language upon request.
Providing notice of the services and the
translation services is estimated to have
a cost burden of $1 million annually.
Also, PHS Act section 2719 and these
final regulations provide that group
health plans and issuers offering group
health insurance coverage must comply
either with a State external review
process or a Federal review process.
Plans and issuers must provide to those
conducting the external reviews
required documents. There is an
estimated 8,400 external appeals
conducted annually. The related hour
burden is 3,500 hours with an
equivalent cost of $193,700 and a cost
burden of $80,000 annually.
In total, the hour burden associated
with claims, appeals, and external
review is approximately 4,500 hours at
an equivalent cost of $244,800 annually.
Because the burden is shared equally
between the Department of Labor and
the Department of the Treasury, each
Department’s share is 2,300 hours at an
equivalent cost of $122,400 annually.
In total, the cost burden is
approximately $2.2 million annually.
Because the burden is shared equally
between the Department of Labor and
the Department of the Treasury, each
Department’s share is $1.1 million
annually.
The Departments note that persons
are not required to respond to, and
generally are not subject to any penalty
for failing to comply with, an ICR unless
the ICR has a valid OMB control
number.
The paperwork burden estimates are
summarized as follows:
Type of Review: Revision.
Agency: Employee Benefit Security
Administration, Department of Labor;
Internal Revenue Service, U.S.
Department of the Treasury.
Title: Affordable Care Act Internal
Claims and Appeals and External
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Review Disclosures for NonGrandfathered Plans.
OMB Control Number: 1210–0144;
1545–2182.
Affected Public: Business or other forprofit; not-for-profit institutions.
Total Respondents: 1,769,264.
Total Responses: 275,430.
Frequency of Response: Occasionally.
Estimated Total Annual Burden
Hours (three year average): 2,300
(Employee Benefits Security
Administration); 2,300 (Internal
Revenue Service).
Estimated Total Annual Cost Burden
(three year average): $1,143,000
(Employee Benefits Security
Administration); $1,143,000 (Internal
Revenue Service).
B. Department of Health and Human
Services
Under the Paperwork Reduction Act
of 1995, we are required to provide 60day notice in the Federal Register and
solicit public comment before a
collection of information requirement is
submitted to the Office of Management
and Budget (OMB) for review and
approval. These final regulations
contain ICRs that are subject to review
by OMB. A description of these
provisions is given in the following
paragraphs with an estimate of the
annual burden, summarized below in
the Table below. In order to fairly
evaluate whether an information
collection should be approved by OMB,
section 3506(c)(2)(A) of the Paperwork
Reduction Act of 1995 requires that we
solicit comment on the following issues:
• The need for the information
collection and its usefulness in carrying
out the proper functions of our agency.
• The accuracy of our estimate of the
information collection burden.
• The quality, utility, and clarity of
the information to be collected.
• Recommendations to minimize the
information collection burden on the
affected public, including automated
collection techniques.
As discussed above in the Department
of Labor and Department of the Treasury
PRA section, these final regulations
contain a notice of grandfather status,
rescissions notice, and patient
protection disclosures requirement for
issuers, and notice requirements related
to internal claims and appeals and
external review. These requirements are
ICRs under the Paperwork Reduction
Act. Each of these requirements is
discussed in detail in the following
sections. Estimated hourly labor rates
are calculated using data from the 2013
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National Occupational Employment
Survey.164
1. ICRs Regarding Affordable Care Act
Notice of Grandfather Status
(§§ 147.140(a)(2), 147.140(a)(3)(i),
147.140(a)(3)(ii))
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a. Grandfathered Health Plan Disclosure
The final regulations provide model
language for the grandfathered health
plan disclosure that can be incorporated
into existing plan documents. After
plans first satisfied the grandfathered
health plan disclosure requirement in
2011, any additional burden is expected
to be negligible if a plan wants to
maintain its grandfathered status in
future years. It is also expected that the
cost of removing the notice from plan
documents as plans relinquish their
grandfathered status would be minimal
and therefore it is not estimated.
Issuers and multi-employer plans
must also add a prominent disclosure in
their group policies, certificates, or
contracts of insurance that plan
sponsors are required to notify the
issuer if the contribution rate changes at
any point during the plan year. This
only affects issuers of fully insured
group health plans and multi-employer
plans and after this requirement is first
satisfied, any additional burden in
future years is expected to be negligible
and is therefore not estimated.
Grandfathered plans will incur
printing and material costs associated
with the disclosure requirements. It is
estimated that there will be
approximately 47,500 grandfathered
State and local governmental health
plans with approximately 5.5 million
policyholders 165 and approximately 1.4
million policyholders in the individual
market with grandfathered coverage 166
issued by 430 issuers during 2015.
Therefore, grandfathered plans and
issuers in the individual markets will
need to send approximately 6.9 million
disclosures notifying plan participants
and beneficiaries of their plans’ status as
a grandfathered health plan. We
anticipate that the notice will require
one-half of a page and five cents per
page printing and material cost will be
164 2013 National Occupational Employment
Survey, April 2014, Bureau of Labor Statistics,
https://www.bls.gov/news.release/pdf/ocwage.pdf.
165 The Department lacks data on the number of
State and local plans that are grandfathered plans.
The Kaiser ‘‘Employer Health Benefits Survey’’ has
estimates for private employer plans. Those
estimates are used here as a proxy. They report that
37 percent of plans are grandfather plans and 26
percent of covered employees are in those plans.
https://kff.org/health-costs/report/2014-employerhealth-benefits-survey/.
166 Estimate based on data from the McKinsey
Center for US Health System Reform and Medical
Loss Ratio submissions for 2013 reporting year.
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incurred. We also assume that 38
percent of the notices will be delivered
electronically. This results in a total
annual cost burden of approximately
$106,000. The number of notices and
cost burden are likely to be lower in
subsequent years as more plans
relinquish their grandfathered status. In
the absence of data regarding how many
plans will retain grandfathered status in
subsequent years, we consider this
estimate to be the upper limit for the
number of notices and cost burden in
future years.
b. Recordkeeping Requirement
It is assumed that most of the
documents required to be retained to
satisfy the recordkeeping requirement of
these final regulations are already
retained by plans for tax purposes, to
satisfy ERISA’s record retention and
statute of limitations requirements, and
for other business reasons. It was
previously estimated that after the onetime cost related to record keeping
requirement was incurred in 2011, costs
in subsequent years will be negligible
and, therefore, not estimated.
c. Grandfathered Plan Change in Carrier
Disclosure
A group health plan that is changing
health insurance issuers must provide to
the succeeding health insurance issuer
(and the succeeding health insurance
issuer must require) documentation of
plan terms (including benefits, cost
sharing, employer contributions, and
annual limits) under the prior health
insurance coverage sufficient to make a
determination whether the standards of
§ 147.140(g)(1) are exceeded.
The number of plans that might
change carriers and thus be affected
(7,400) is estimated by multiplying the
estimated number of grandfathered
plans (47,500) by the percent of plans
shopping for a new carrier (58 percent)
and the number of plans shopping for a
new carrier that switched (27
percent).167
Each employer will require about 2
minutes of clerical labor (at an hourly
cost of approximately $30) to send the
information required for the disclosure
(which is already retained under the
recordkeeping requirement)
electronically to the succeeding issuer.
The total annual labor burden for all
employers is estimated to be
approximately 248 hours with an
equivalent annual cost of approximately
$7,500. The cost of transmitting the
information electronically to the
succeeding issuer is negligible and,
167 See Section 14.https://kff.org/health-costs/
report/2014-employer-health-benefits-survey/.
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therefore, not estimated. The number of
disclosures and cost burden may be
lower in subsequent years as more plans
relinquish their grandfathered status. In
the absence of data regarding how many
plans will retain grandfathered status in
subsequent years, we consider this
estimate to be the upper limit for the
burden in future years.
2. ICR Regarding Affordable Care Act
Notice Relating to Rescissions
(§ 147.128(a)(1))
This analysis assumes that rescissions
only occur in the individual health
insurance market, because rescissions in
the group market are rare. It is estimated
that there are approximately 430 issuers
issuing 6.77 million policies in the
individual market during a year. A
report on rescissions found that 0.15
percent of policies were rescinded
during the 2004 to 2008 time period.
Based on these numbers, it is estimated
that approximately 10,200 policies are
rescinded during a year, which would
result in approximately 10,200 notices
being sent to affected policyholders,
with 38 percent transmitted
electronically and 62 percent mailed. It
is estimated that each issuer will require
15 minutes of legal professional time (at
approximately $129.94 per hour) to
prepare the notice and one minute per
notice of clerical professional time (at
approximately $30.42 per hour) to
distribute the notice to each
policyholder. Assuming that the cost of
electronic distribution is minimal, this
results in an annual hour burden of
approximately 212 hours with an
equivalent annual cost of approximately
$17,160.
Issuers will incur cost to print and
send the notices. We assume that the
notice will require one page printing
and material cost will be $0.05 per page,
mailing cost will be $0.49 per notice,
and 38 percent of the notices will be
delivered electronically at minimal cost.
Therefore, it is estimated that the cost
burden associated with mailing the
notices to approximately 6,300 affected
policy holders will be approximately
$3,400.
3. ICR Regarding Affordable Care Act
Patient Protection Disclosure
Requirement (§ 147.138(a)(4))
b. Patient Protection Disclosure
In order to satisfy the patient
protection disclosure requirement, State
and local government plans and issuers
in individual markets will need to
notify policy holders of their plans
policy in regards to designating a
primary care physician and for
obstetrical or gynecological visits and
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Federal Register / Vol. 80, No. 222 / Wednesday, November 18, 2015 / Rules and Regulations
will incur a one-time burden and cost to
incorporate the notice into plan
documents. State and local government
plans that are currently not
grandfathered and issuers in the
individual market have already incurred
the one-time cost to prepare and
incorporate this notice in their existing
plan documents. Only State and local
government plans and individual
market plans that relinquish their
grandfathered status in subsequent years
will become subject to this notice
requirement and incur the one-time
costs to prepare the notice.
There are an estimated 128,400 nonfederal governmental plans and 430
health insurance issuers in the
individual market. We estimate that five
percent of non-federal governmental
plans will relinquish their
grandfathered status annually over the
next three years and will therefore incur
one-time costs to prepare the notice.
Health insurance issuers in the
individual market will also have five
percent of their policies relinquish
grandfathered status annually over the
next three years. Data obtained from the
2014 Kaiser/HRET Survey of Employer
Sponsored Health Benefits finds that 13
percent of plans have an HMO option
and that 23 percent of plans offer a POS
option. Thus, approximately 2,740 plans
and issuers will produce notices each
year.168 While not all HMO and POS
options require the designation of a
primary care physician or a prior
authorization or referral before a woman
can visit an OB/GYN, the Department is
unable to estimate this number.
Therefore, this estimate should be
considered an overestimate of the
number of affected entities.
Each of these 2,740 plans and issuers
will require a compensation and
benefits manager to spend 10 minutes
individualizing the model notice to fit
the plan’s specifications at an hourly
rate of $110.30. This results in
approximately 457 hours of burden at
an equivalent cost of $50,400. Each plan
will also require clerical staff to spend
5 minutes adding the notice to the
plan’s documents at an hourly rate of
$30.42. This results in approximately
228 hours of burden at an equivalent
cost of $7,000. The total annual burden
associated with this requirement is 685
hours at an equivalent cost of $57,000.
The Department assumes that only
printing and material costs are
associated with the disclosure
requirement, because the final
regulations provide model language that
can be incorporated into existing plan
documents. The Department estimates
that the notice will require one-half of
a page, five cents per page printing and
material cost will be incurred, and 38
percent of the notices will be delivered
electronically.
It is estimated that there are 27.9
million non-federal government plan
policyholders and individual
policyholders. As stated in the previous
section, it is estimated that 5 percent of
plans will relinquish their
grandfathered status annually in the
next three years. Data obtained from the
2014 Kaiser/HRET Survey of Employer
Sponsored Health Benefits finds that 13
percent of covered workers in
Government plans have an HMO option
and that 8 percent of covered workers
have a POS option. Data obtained from
AHIP in 2009 finds that 1.93 percent of
individual policyholders have an HMO
options. Thus, it is estimated that plans
will produce 228,000 notices each year,
38 percent of which will be sent
electronically.169 This results in a cost
burden of approximately $3,500.170
168 128,400 Governmental plans × 5% newly nongrandfathered plans × (13% HMOs + 23% POSs) +
430 issuers = approximately 2,700 affected plans
and issuers.
169 [21.1 million Government policyholders × 5%
newly non-grandfathered plans × (13% in HMOs +
8% in POSs)] + [6.77 million individual policy
holders × 5% newly non-grandfathered plans ×
1.93% in HMOs] = approximately 228,000 notices.
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c. Out-of-Network Emergency Services
Disclosure
The final regulations require that a
plan or issuer may not impose any
copayment or coinsurance requirement
for out-of-network emergency services
that is more restrictive than the
copayment or coinsurance requirement
that would apply if the services were
provided in network. If State law
prohibits balance billing, or a plan or
issuer is contractually responsible for
any amounts balanced billed by an outof-network emergency services provider,
the a plan or issuer must provide an
enrollee or beneficiary adequate and
prominent notice of their lack of
financial responsibility with respect to
amounts balanced billed in order to
prevent inadvertent payment by an
enrollee or beneficiary. This information
should already be routinely included in
the Explanation of Benefit documents
sent by plans and issuers to enrollees
and beneficiaries. Therefore, in
accordance with the implementing
regulations of the PRA at 5 CFR
1320.3(b)(2), we believe this is a usual
and customary business practice. Plans
and issues routinely provide enrollees
and beneficiaries with the Explanation
of Benefit documents.
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72233
4. ICRs Regarding Affordable Care Act
Internal Claims and Appeals and
External Review (§§ 14.136 (b)(2)(ii),
147.136 (b)(2)(ii)(C), 147.136 (b)(3)(ii),
147.136 (b)(3)(ii)(C))
Paragraph (b)(2)(ii)(C) of the final
regulations implementing PHS Act
section 2719 provides that nongrandfathered ERISA-covered group
health plans provide to the claimant,
free of charge, any new or additional
evidence considered relied upon, or
generated by the plan or issuer in
connection with the claim. The related
hour burden is 773,800 hours and the
related cost burden is $115.2 million.
The June 2011 amendment to the
interim final regulations under PHS Act
section 2719 required that plans and
issuers must provide participants and
beneficiaries who reside in a county
where ten percent or more of the
population residing in the county is
literate only in the same non-English
language with a one-sentence statement
in all notices written in the applicable
non-English language, about the
availability of language services. In
addition to including the statement,
plans and issuers are required to
provide a customer assistance process
(such as a telephone hotline) with oral
language services in the non-English
language and provide written notices in
the non-English language upon request.
Providing notice of the services and the
translation services is estimated to have
a cost burden of $633,000 annually.
Also, PHS Act section 2719 and the
final regulations provide that group
health plans and issuers offering group
health insurance coverage must comply
either with a State external review
process or a Federal review process.
Plans and issuers must provide to those
conducting the external reviews
required documents. There is an
estimated 2,100 external appeals
conducted annually. The related hour
burden is 150 hours with an equivalent
cost of $4,600 and a cost burden of
$5,400 annually.
In total, the burden associated with
claims, appeals, and external review is
approximately 774,000 hours at an
equivalent cost of $41,601,000 annually.
The cost burden associated with claims,
appeals, language translation, and
external review is approximately $115.8
million annually.
170 $0.05 per page * 1/2 pages per notice *
228,000 notices * 62% = approximately $3,500.
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TABLE 2—ANNUAL REPORTING, RECORDKEEPING AND DISCLOSURE BURDEN (HHS)
OMB Control
No.
Grandfathered
Plans
Disclosure
(§ 147.140(a)(2)) ........................................
Grandfathered Plans Change in Carrier Disclosure (§ 147.140(a)(3)(i)) ........................
Rescissions Notice (§ 147.128(a)(1)) ............
Patient Protection Disclosures (§ 147.138(a)
(4)) .............................................................
Claims and Appeals External Review
((§§ 147.136
(b)(2)(ii),
147.136
(b)(2)(ii)(C), 147.136 (b)(3)(ii), 147.136
(b)(3)(ii)(C)) ................................................
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Total .......................................................
20:00 Nov 17, 2015
Total labor
cost of
reporting
($)
Total annual
burden
(hours)
Responses
Total capital/
maintenance
costs
($)
Total costs
($)
0938–1093
47,932
6,850,695
0
$0
$106,186
$106,186
0938–1093
0938–1094
7,440
430
7,440
10,200
248
212
$7,544
$17,160
$0
$3,400
$7,544
$20,560
0938–1094
2,741
228,086
685
$57,341
$3,535
$60,876
0938–1098
95,500
399,151,000
773,996
$41,601,000
$115,827,000
$157,428,000
........................
154,043
406,247,421
775,141
........................
........................
$157,623,166
V. Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to
Federal rules that are subject to the
notice and comment requirements of
section 553(b) of the Administrative
Procedure Act (5 U.S.C. 551 et seq.) and
which are likely to have a significant
economic impact on a substantial
number of small entities.
The RFA generally defines a ‘‘small
entity’’ as (1) a proprietary firm meeting
the size standards of the Small Business
Administration (SBA) (13 CFR 121.201)
pursuant to the Small Business Act (15
U.S.C. 631 et seq.), (2) a nonprofit
organization that is not dominant in its
field, or (3) a small government
jurisdiction with a population of less
than 50,000. (States and individuals are
not included in the definition of ‘‘small
entity.’’) The Departments use as their
measure of significant economic impact
on a substantial number of small entities
a change in revenues of more than 3 to
5 percent.
As discussed in detail in the ‘‘Need
for Regulatory Action’’ section of this
Regulatory Impact Analysis, these
regulations are necessary to implement
the following provisions: Affordable
Care Act section 1251 (preservation of
right to maintain existing coverage), and
PHS Act sections 2704 (prohibition of
preexisting condition exclusions), 2711
(no lifetime or annual limits), 2712
(prohibition on certain rescissions),
2714 (extension of dependent coverage),
2719 (internal appeals and external
review process), and 2719A (patient
protections). In response to the 2010
interim final regulations, the
Departments received many comments
that relate to early implementation
issues and addressed many of these
issues through sub-regulatory guidance.
The Departments also held meetings
with stakeholders, including small
entities affected by the rules. After
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Number of
respondents
Jkt 238001
consideration of comments and
stakeholder input received in response
to the interim final regulations, the
Departments are issuing these final
regulations.
The Regulatory Flexibility Act
requires agencies to assess and consider
the direct economic impacts that
regulations impose on small entities.
The primary economic effects of these
final regulations are indirect, because
they result in transfers between
individuals covered by health
insurance. While these transfers could
be significant, they do not impose direct
effects on the regulated small entities for
purposes of the RFA.
Most of the direct effects of the final
regulations are associated with their
disclosure requirements. As discussed
below and in the Paperwork Reduction
Act section above, these disclosure
requirements do not have a significant
economic impact. Therefore, pursuant
to section 605(b) of the RFA, the
Departments hereby certify that these
final regulations are not likely to have
a significant economic impact on a
substantial number of small entities.
The Departments’ basis for this
determination and their estimate of
small entities affected by these final
regulations is discussed below.
A. Affected Small Entities
There are several different types of
small entities affected by these final
regulations. For issuers and third party
administrators, a small business is one
that has total premium revenue of $38.5
million or less. The Departments
continue to consider a small plan to be
an employee benefit plan with fewer
than 100 participants.171 Further, while
some large employers may have small
171 The basis for this definition is found in section
104(a)(2) of ERISA, which permits the Secretary of
Labor to prescribe simplified annual reports for
pension plans that cover fewer than 100
participants.
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plans, in general small employers
maintain most small plans. Thus, the
Departments believe that assessing the
impact of this final rule on small plans
is an appropriate substitute for
evaluating the effect on small entities.
The definition of small entity
considered appropriate for this purpose
differs, however, from a definition of
small business that is based on size
standards promulgated by the Small
Business Administration (SBA) (13 CFR
121.201) pursuant to the Small Business
Act (15 U.S.C. 631 et seq.).
Based on data from MLR annual
report submissions for the 2013 MLR
reporting year, approximately 141 out of
500 issuers of health insurance coverage
nationwide had total premium revenue
of $38.5 million or less.172 This estimate
may overstate the actual number of
small health insurance companies that
may be affected, since 77 percent of
these small companies belong to larger
holding groups, and many if not all of
these small companies are likely to have
non-health lines of business that would
result in their revenues exceeding $38.5
million.
As discussed previously in the RIA,
there are an estimated 2.3 million
ERISA-covered plans and 128,400 State
and local governmental health plans
that may have experienced an increase
in costs related to the provisions of
these final rules. Ninety-seven percent
of these plans are provided by small
entities and have incurred costs related
to the provisions of these final
regulations.
172 U. S. Small Business Administration, ‘‘Table
of Small Business Size Standards Matched to North
American Industry Classification System Codes’’,
July 14, 2014.
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1. PHS Act Section 2704, Prohibition of
Preexisting Condition Exclusions (26
CFR 54.9815–2704, 29 CFR 2590.715–
2704, 45 CFR 147.108)
B. Direct Impacts of Final Rules on
Small Entities
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1. Affordable Care Act Section 1251,
Preservation of Right To Maintain
Existing Coverage (26 CFR 54.9815–
1251, 29 CFR 2590.715–1251, 45 CFR
147.140)
The direct impacts of this provision
on affected small entities are primarily
associated with notices requirements.
Specifically, the final regulations
require affected plans to maintain
records documenting the terms of the
plan in effect on March 23, 2010, and
any other documents that are necessary
to verify, explain or clarify status as a
grandfathered health plan (the
‘‘recordkeeping requirement’’). The plan
must make such records available for
examination upon request by
participants, beneficiaries, individual
policy subscribers, or a State or Federal
agency official. The Departments believe
this requirement imposes a minimal
burden on small entities, because they
should maintain such records in the
usual and customary course of their
business operations following standard
business procedures.
To maintain status as a grandfathered
health plan, a plan or health insurance
coverage must include a statement that
the plan or coverage believes it is a
grandfathered health plan within the
meaning of section 1251 of the Patient
Protection and Affordable Care Act and
must provide contact information for
questions and complaints, in any
summary of benefits provided under the
plan to consumers. The Departments
believe the costs associated with this
disclosure are minimal, because a model
statement is provided in the final rule
and that statement can be provided in
any summary of benefits that already is
being provided to consumers.
Finally, if a grandfathered group
health plan switches issuers and intends
to maintain its status as a grandfathered
plan, it must provide to the new health
insurance issuer with documentation of
plan terms under the prior health
coverage sufficient for it to determine
whether a change causing a cessation of
grandfathered health plan status has
occurred. This requirement also
imposes a minimal burden on affected
small entities, because the documents
should be maintain in the ordinary
course of the plan’s business operations,
and the only additional cost would be
incurred to prepare the documentation
for mailing and associated material and
printing cost, which are estimated to
total approximately $8.
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The direct impacts of this rule on the
regulated small entities is limited as the
removal of preexisting condition
exclusions primarily operates through
the pricing of insurance products,
which are paid by plan participants.
Small businesses will be impacted when
they pay for part of the health insurance
premium. The Departments have not
been able to estimate this effect
separately from the effect on premiums
brought about by the other the
Affordable Care Act changes.
2. PHS Act Section 2711, Prohibition on
Lifetime and Annual Limits (26 CFR
54.9815–2711, 29 CFR 2590.715–2711,
45 CFR 147.126)
The direct impacts of this rule on the
regulated small entities were primarily
limited to an initial notice sent shortly
after the issuance of the interim final
regulations requiring plans to notify
participants that had lost coverage due
to reaching the lifetime limit of the new
coverage option. This notice
requirement is no longer in effect as the
statute now bans all annual and life
time limits, so there are no individuals
losing coverage that need to be notified.
To the extent premiums increase and
employers contribute part of the
premiums, or plans are self-insured
with payments from the employers
general assets there could be direct
effects on employers, but for most
employers those effects are small.
3. PHS Act Section 2712, Prohibition on
Rescissions (26 CFR 54.9815–2712, 29
CFR 2590.715–2712, 45 CFR 147.128)
PHS Act Section 2712 and the final
regulations prohibit group health plans
and health insurance issuers that offer
group or individual health insurance
coverage generally from rescinding
coverage under the plan, policy,
certificate, or contract of insurance from
the individual covered under the plan
or coverage unless the individual (or a
person seeking coverage on behalf of the
individual) performs an act, practice, or
omission that constitutes fraud, or
unless the individual makes an
intentional misrepresentation of
material fact, as prohibited by the terms
of the plan or coverage. The final
regulations provide that a group health
plan or a health insurance issuer
offering group health insurance
coverage must provide at least 30 days
advance notice to an individual before
coverage may be rescinded. The
Departments believe that rescissions are
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72235
rare in the group market and that small
group health plans are affected by
rescissions more than large group health
plans.
The Departments estimate 173 that 15
minutes of legal professional time at
$129.94 per hour 174 would be required
by the insurers of the policies to prepare
the notice, and one minute per notice of
clerical professional time at $30.42 per
hour 175 would be required to distribute
the paper notices. The Departments
believe the costs of electronic
transmission would be de minimis. This
leads to an estimate of less than $40 per
rescission notice, which the
Departments do not believe is
significant.
4. PHS Act Section 2714, Coverage of
Dependents to Age 26 (26 CFR 54.9815–
2714, 29 CFR 2590.715–2714, 45 CFR
147.120)
The direct impacts of this rule on the
regulated small entities were primarily
limited to an initial notice sent shortly
after the issuance of the interim final
regulations requiring plans to notify
participants of the new coverage option.
To the extent premiums increase and
employers contribute part of the
premiums, or plans are self-insured
with payments from the employers
general assets there could be direct
effects on employers, but for most
employers those effects are small.
5. PHS Act Section 2719, Internal
Claims and Appeals and External
Review (26 CFR 54.9815–2719, 29 CFR
2590.715–2719, 45 CFR 147.136)
Not all potentially affected
individuals will be affected equally by
these final regulations. Sponsors of
ERISA-covered group health plans were
required to implement an internal
173 The Department’s estimated 2015 hourly labor
rates include wages, other benefits, and overhead
are calculated as follows: Mean wage from the 2013
National Occupational Employment Survey (April
2014, Bureau of Labor Statistics https://www.bls.gov/
news.release/pdf/ocwage.pdf); wages as a percent of
total compensation from the Employer Cost for
Employee Compensation (June 2014, Bureau of
Labor Statistics https://www.bls.gov/news.release/
ecec.t02.htm); overhead as a multiple of
compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of
compensation for clerical, and 35 percent of
compensation for professional; annual inflation
assumed to be 2.3 percent annual growth of total
labor cost since 2013 (Employment Costs Index data
for private industry, September 2014 https://
www.bls.gov/news.release/eci.nr0.htm).
174 Legal Professional (23–1011): $63.46 (2013
BLS Wage rate)/0.69 (ECEC ratio) *1.35 (Overhead
Load Factor) *1.023 (Inflation rate) ∧2 (Inflated 2
years from base year) = $129.94.
175 Secretaries, Except Legal, Medical, and
Executive (43–6014): $16.35 (2013 BLS Wage rate)/
0.675 (ECEC ratio) *1.2 (Overhead Load Factor)
*1.023 (Inflation rate) ∧2 (Inflated 2 years from base
year) = $30.42
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Federal Register / Vol. 80, No. 222 / Wednesday, November 18, 2015 / Rules and Regulations
appeals process that complied with the
DOL claims procedure regulation before
the Affordable Care Act’s enactment,
and the Departments also understand
that many non-Federal governmental
plans and church plans that are not
subject to ERISA implement internal
claims and appeals processes that
comply with the DOL claims procedure
regulation.
These final regulations will have the
largest impact on individuals covered in
the individual health insurance market,
because with the issuance of the final
regulation, these issuers were required
to comply with the DOL claims
procedure regulation for internal claims
and appeals as well as the additional
standards added by the Secretary of the
Department of Health and Human
Services in paragraph (b)(3) of the final
regulations under PHS Act section 2719
that are in some cases more protective
than the ERISA standard.
Using estimates calculated for the
Paperwork Reduction Act it is estimated
that there will be an average costs of 40
cents per notice that is required to be
sent related to the internal claims and
appeals.
On the external appeals side, before
the enactment of the Affordable Care
Act, issuers offering coverage in the
group and individual health insurance
market were already required to comply
with State external review laws. At that
time, all States except Alabama,
Mississippi, Nebraska, North Dakota,
South Dakota, and Wyoming had
external review laws, and thirteen States
had external review laws that apply
only to certain market segments (for
example, managed care or HMOs).
Currently, all States except, Alabama,
Alaska, Florida, Georgia, Pennsylvania,
and Wisconsin have State external
review laws that satisfy these
requirements. These six states that do
not meet the requirements, must use the
HHS administered process or must
contract with accredited independent
review organizations to review external
appeals on their behalf.176
Individuals participating in ERISAcovered self-insured group health plans
will be among those most affected by
the external review requirements
contained in these final regulations,
because the preemption provisions of
ERISA prevent a State’s external review
process from applying directly to an
ERISA-covered self-insured plan. These
plans will now be required to comply
with the Federal external review process
set forth in these final regulations.
176 https://www.cms.gov/CCIIO/Resources/Files/
external_appeals.html.
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As discussed in the Regulatory Impact
Section above an estimate for the
average cost for an external appeal is
$665. This cost would be incurred by
plans or issuers. It is also estimated
above that there is on average only 1.3
external appeals per 10,000 covered
lives. The Departments believe such
costs are minimal for purpose of the
RFA, because most small entities will
have no external appeals in a given year.
6. PHS Act Section 2719A, Patient
Protections (26 CFR 54.9815–2719A, 29
CFR 2590.715–2719A, 45 CFR 147.138)
PHS Act section 2719A imposes, with
respect to a group health plan, or group
or individual health insurance coverage,
a set of three requirements relating to
the choice of health care professionals.
When applicable, it is important that
individuals enrolled in a plan or health
insurance coverage know of their rights
to (1) choose a primary care provider or
a pediatrician when a plan or issuer
requires participants or subscribers to
designate a primary care physician; (2)
obtain obstetrical or gynecological care
without prior authorization; or (3)
coverage of emergency services.
Accordingly, these final regulations
require such plans and issuers to
provide a notice to participants (in the
individual market, primary subscriber)
of these rights when applicable. Model
language is provided in these final
regulations. The notice must be
provided whenever the plan or issuer
provides a participant with a summary
plan description or other similar
description of benefits under the plan or
health insurance coverage, or in the
individual market, provides a primary
subscriber with a policy, certificate, or
contract of health insurance.
The Departments assume that this
provision will primarily affect Health
Maintenance Organizations and Pointof-Service type arrangements. The
Department believes that insignificant
costs are associated with this notice,
because a model notice is provided in
the final rule, and it can be distributed
with existing plan documents,
The Departments estimate that each
plan or issuer would require a
compensation and benefits manager 177
177 The Department’s estimated 2015 hourly labor
rates include wages, other benefits, and overhead
are calculated as follows: Mean wage from the 2013
National Occupational Employment Survey (April
2014, Bureau of Labor Statistics https://www.bls.gov/
news.release/pdf/ocwage.pdf); wages as a percent of
total compensation from the Employer Cost for
Employee Compensation (June 2014, Bureau of
Labor Statistics https://www.bls.gov/news.release/
ecec.t02.htm); overhead as a multiple of
compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of
compensation for clerical, and 35 percent of
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Frm 00046
Fmt 4701
Sfmt 4700
to spend 10 minutes individualizing the
model notice provided by the
Departments to fit the plan’s
specifications at an hourly rate of
$110.30.178 This results in a cost of
approximately $21 in the first year. The
cost per participant to receive the notice
would be less than five cents per paper
notice as the notice would be included
in existing documents.
VI. Unfunded Mandates Reform Act—
Department of Labor and Department of
Health and Human Services
Section 202 of the Unfunded
Mandates Reform Act (UMRA) of 1995
requires that agencies assess anticipated
costs and benefits before issuing any
final rule that includes a Federal
mandate that could result in
expenditure in any one year by State,
local or Tribal governments, in the
aggregate, or by the private sector, of
$100 million in 1995 dollars updated
annually for inflation. In 2015, that
threshold level is approximately $144
million. These final regulations include
a Federal mandate that may result in
expenditures by State, local, or Tribal
governments. Specifically, these final
regulations include requirements
regarding minimum consumer
protection standards that a State
external review process must include to
qualify as an applicable State external
review process under PHS Act section
2719(b)(1). However, we conclude that
these costs would not exceed the $144
million threshold. Thus, the
Departments of Labor and HHS
conclude that these final regulations
would not impose an unfunded
mandate on State, local or Tribal
governments or the private sector.
Regardless, consistent with the policy
embodied in UMRA, the final
requirements described in this notice of
final rulemaking has been designed to
be the least burdensome alternative for
State, Local and Tribal governments,
and the private sector while achieving
the objectives of the Affordable Care
Act.
VII. Federalism Statement—
Department of Labor and Department of
Health and Human Services
Executive Order 13132 outlines
fundamental principles of federalism,
and requires the adherence to specific
compensation for professional; annual inflation
assumed to be 2.3 percent annual growth of total
labor cost since 2013 (Employment Costs Index data
for private industry, September 2014 https://
www.bls.gov/news.release/eci.nr0.htm).
178 Compensation and Benefits Manager (11–
3041): $53.87 (2013 BLS Wage rate)/0.69 (ECEC
ratio) *1.35 (Overhead Load Factor) *1.023
(Inflation rate) ∧2 (Inflated 2 years from base year)
= $110.30.
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Federal Register / Vol. 80, No. 222 / Wednesday, November 18, 2015 / Rules and Regulations
criteria by Federal agencies in the
process of their formulation and
implementation of policies that have
‘‘substantial direct effects’’ on the
States, the relationship between the
national government and States, or on
the distribution of power and
responsibilities among the various
levels of government. Federal agencies
promulgating regulations that have
federalism implications must consult
with State and local officials and
describe the extent of their consultation
and the nature of the concerns of State
and local officials in the preamble to the
regulation.
In the Departments of Labor’s and
HHS’ view, these final regulations have
federalism implications because they
would have direct effects on the States,
the relationship between the national
government and the States, or on the
distribution of power and
responsibilities among various levels of
government. Under these final
regulations, group health plans and
health insurance issuers offering group
or individual health insurance coverage,
including non-federal governmental
plans as defined in section 2791 of the
PHS Act, would be required to follow
the Federal standards developed under
Affordable Care Act section 1251 and
PHS Act sections 2704, 2711, 2712,
2714, 2719 and 2719A, as added by the
Affordable Care Act. However, in the
Departments’ view, the federalism
implications of these final regulations
are substantially mitigated because,
with respect to health insurance issuers,
the Departments expect that the
majority of States will enact laws or take
other appropriate action resulting in
their meeting or exceeding the Federal
standards.
In general, through section 514,
ERISA supersedes State laws to the
extent that they relate to any covered
employee benefit plan, and preserves
State laws that regulate insurance,
banking, or securities. While ERISA
prohibits States from regulating a plan
as an insurance or investment company
or bank, the preemption provisions of
section 731 of ERISA and section 2724
of the PHS Act (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a))
apply so that the requirements in title
XXVII of the PHS Act (including those
added by the Affordable Care Act) are
not to be construed to supersede any
provision of State law which
establishes, implements, or continues in
effect any standard or requirement
solely relating to health insurance
issuers in connection with individual or
group health insurance coverage except
to the extent that such standard or
requirement prevents the application of
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20:00 Nov 17, 2015
Jkt 238001
a requirement of a Federal standard. The
conference report accompanying HIPAA
indicates that this is intended to be the
‘‘narrowest’’ preemption of State laws
(See House Conf. Rep. No. 104–736, at
205, reprinted in 1996 U.S. Code Cong.
& Admin. News 2018).
States may continue to apply State
law requirements except to the extent
that such requirements prevent the
application of the Affordable Care Act
requirements that are the subject of this
rulemaking. Accordingly, States have
significant latitude to impose
requirements on health insurance
issuers that are more restrictive than the
Federal law.
In compliance with the requirement
of Executive Order 13132 that agencies
examine closely any policies that may
have federalism implications or limit
the policy making discretion of the
States, the Departments of Labor and
HHS have engaged in efforts to consult
with and work cooperatively with
affected States, including consulting
with, and attending conferences of, the
National Association of Insurance
Commissioners and consulting with
State insurance officials on an
individual basis. It is expected that the
Departments of Labor and HHS will act
in a similar fashion in enforcing the
Affordable Care Act.
Throughout the process of developing
these final regulations, to the extent
feasible within the applicable
preemption provisions, the Departments
of Labor and HHS have attempted to
balance the States’ interests in
regulating health insurance issuers, and
Congress’ intent to provide uniform
minimum protections to consumers in
every State. By doing so, it is the
Departments of Labor’s and HHS’ view
that they have complied with the
requirements of Executive Order 13132.
Pursuant to the requirements set forth
in section 8(a) of Executive Order
13132, and by the signatures affixed to
this final rule, the Departments certify
that the Employee Benefits Security
Administration and the Centers for
Medicare & Medicaid Services have
complied with the requirements of
Executive Order 13132 for the attached
final rules in a meaningful and timely
manner.
VIII. Special Analyses—Department of
the Treasury
Certain IRS regulations, including this
one, are exempt from the requirements
of Executive Order 12866, as
supplemented and reaffirmed by
Executive Order 13563. Therefore, a
regulatory assessment is not required. It
has also been determined that section
553(b) of the Administrative Procedure
PO 00000
Frm 00047
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72237
Act (5 U.S.C. chapter 5) does not apply
to these final regulations. For a
discussion of the impact of this final
rule on small entities, please see section
V.B. of this preamble. Pursuant to
section 7805(f) of the Code, this notice
of final rulemaking has been submitted
to the Small Business Administration
for comment on its impact on small
business.
IX. Congressional Review Act
These final regulations are subject to
the Congressional Review Act
provisions of the Small Business
Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.), which
specifies that before a rule can take
effect, the Federal agency promulgating
the rule shall submit to each House of
the Congress and to the Comptroller
General a report containing a copy of
the rule along with other specified
information, and has been transmitted
to Congress and the Comptroller General
for review.
X. Statutory Authority
The Department of the Treasury final
regulations are adopted pursuant to the
authority contained in sections 7805
and 9833 of the Code.
The Department of Labor final
regulations are adopted pursuant to the
authority contained in 29 U.S.C. 1135,
and 1191c; Secretary of Labor’s Order 1–
2011, 77 FR 1088 (Jan. 9, 2012).
The Department of Health and Human
Services final regulations are adopted
pursuant to the authority contained in
sections 2701 through 2763, 2791, and
2792 of the PHS Act (42 U.S.C. 300gg
through 300gg–63, 300gg–91, and
300gg–92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health
insurance, Pensions, Reporting and
recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure,
Employee benefit plans, Group health
plans, Health care, Health insurance,
Medical child support, Reporting and
recordkeeping requirements.
45 CFR Parts 144 and 146
Health care, Health insurance,
Reporting and recordkeeping
requirements.
45 CFR Part 147
Health care, Health insurance,
Reporting and recordkeeping
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Federal Register / Vol. 80, No. 222 / Wednesday, November 18, 2015 / Rules and Regulations
requirements, and State regulation of
health insurance.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement, Internal Revenue Service.
Approved: October 27, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
Signed this 6 day of November 2015.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits
Security Administration, Department of
Labor.
Dated: October 15, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare
& Medicaid Services.
Approved: October 22, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human
Services.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Chapter I
For the reasons stated in the
preamble, the Internal Revenue Service
amends Part 54 as set forth below:
PART 54—PENSION EXCISE TAXES
Paragraph 1. The authority citation
for part 54 is amended by adding entries
for §§ 54.9815–1251, 54.9815–2704,
54.9815–2711, 54.9815–2712, 54.9815–
2714, 54.9815–2719, and 54.9815–
2719A in numerical order to read in part
as follows:
■
Authority: 26 U.S.C. 7805. * * *
Section 54.9815–1251 also issued under 26
U.S.C. 9833.
*
*
*
*
*
Section 54.9815–2704 also issued under 26
U.S.C. 9833.
*
*
*
*
*
Section 54.9815–2711 also issued under 26
U.S.C. 9833.
*
*
*
*
*
Section 54.9815–2712 also issued under 26
U.S.C. 9833.
*
*
*
*
*
Section 54.9815–2714 also issued under 26
U.S.C. 9833.
asabaliauskas on DSK5VPTVN1PROD with RULES
*
*
*
*
*
Section 54.9815–2719 also issued under 26
U.S.C. 9833.
Section 54.9815–2719A also issued under
26 U.S.C. 9833.
Par. 2. Section 54.9801–2 is amended
by revising the introductory text and the
definition of ‘‘preexisting condition
exclusion’’ to read as follows:
■
§ 54.9801–2
Definitions.
Unless otherwise provided, the
definitions in this section govern in
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20:00 Nov 17, 2015
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applying the provisions of sections 9801
through 9815 and 9831 through 9833.
*
*
*
*
*
Preexisting condition exclusion means
a limitation or exclusion of benefits
(including a denial of coverage) based
on the fact that the condition was
present before the effective date of
coverage (or if coverage is denied, the
date of the denial) under a group health
plan or group or individual health
insurance coverage (or other coverage
provided to Federally eligible
individuals pursuant to 45 CFR part
148), whether or not any medical
advice, diagnosis, care, or treatment was
recommended or received before that
day. A preexisting condition exclusion
includes any limitation or exclusion of
benefits (including a denial of coverage)
applicable to an individual as a result of
information relating to an individual’s
health status before the individual’s
effective date of coverage (or if coverage
is denied, the date of the denial) under
a group health plan, or group or
individual health insurance coverage (or
other coverage provided to Federally
eligible individuals pursuant to 45 CFR
part 148), such as a condition identified
as a result of a pre-enrollment
questionnaire or physical examination
given to the individual, or review of
medical records relating to the preenrollment period.
*
*
*
*
*
■ Par. 3. Section 54.9801–3 is amended
by revising the section heading and
paragraph (a)(1) to read as follows:
§ 54.9801–3 Limitations on preexisting
condition exclusion period.
(a) Preexisting condition exclusion
defined—(1) A preexisting condition
exclusion means a preexisting condition
exclusion within the meaning of
§ 54.9801–2.
*
*
*
*
*
■ Par. 4. Section 54.9815–1251 is added
to read as follows:
§ 54.9815–1251 Preservation of right to
maintain existing coverage.
(a) Definition of grandfathered health
plan coverage—(1) In general—(i)
Grandfathered health plan coverage
means coverage provided by a group
health plan, or a health insurance
issuer, in which an individual was
enrolled on March 23, 2010 (for as long
as it maintains that status under the
rules of this section). A group health
plan or group health insurance coverage
does not cease to be grandfathered
health plan coverage merely because
one or more (or even all) individuals
enrolled on March 23, 2010 cease to be
covered, provided that the plan or group
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Fmt 4701
Sfmt 4700
health insurance coverage has
continuously covered someone since
March 23, 2010 (not necessarily the
same person, but at all times at least one
person). In addition, subject to the
limitation set forth in paragraph
(a)(1)(ii) of this section, a group health
plan (and any health insurance coverage
offered in connection with the group
health plan) does not cease to be a
grandfathered health plan merely
because the plan (or its sponsor) enters
into a new policy, certificate, or contract
of insurance after March 23, 2010 (for
example, a plan enters into a contract
with a new issuer or a new policy is
issued with an existing issuer). For
purposes of this section, a plan or health
insurance coverage that provides
grandfathered health plan coverage is
referred to as a grandfathered health
plan. The rules of this section apply
separately to each benefit package made
available under a group health plan or
health insurance coverage. Accordingly,
if any benefit package relinquishes
grandfather status, it will not affect the
grandfather status of the other benefit
packages.
(ii) Changes in group health insurance
coverage. Subject to paragraphs (f) and
(g)(2) of this section, if a group health
plan (including a group health plan that
was self-insured on March 23, 2010) or
its sponsor enters into a new policy,
certificate, or contract of insurance after
March 23, 2010 that is effective before
November 15, 2010, then the plan
ceases to be a grandfathered health plan.
(2) Disclosure of grandfather status—
(i) To maintain status as a grandfathered
health plan, a plan or health insurance
coverage must include a statement that
the plan or coverage believes it is a
grandfathered health plan within the
meaning of section 1251 of the Patient
Protection and Affordable Care Act, and
must provide contact information for
questions and complaints, in any
summary of benefits provided under the
plan.
(ii) The following model language can
be used to satisfy this disclosure
requirement:
This [group health plan or health insurance
issuer] believes this [plan or coverage] is a
‘‘grandfathered health plan’’ under the
Patient Protection and Affordable Care Act
(the Affordable Care Act). As permitted by
the Affordable Care Act, a grandfathered
health plan can preserve certain basic health
coverage that was already in effect when that
law was enacted. Being a grandfathered
health plan means that your [plan or policy]
may not include certain consumer
protections of the Affordable Care Act that
apply to other plans, for example, the
requirement for the provision of preventive
health services without any cost sharing.
However, grandfathered health plans must
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comply with certain other consumer
protections in the Affordable Care Act, for
example, the elimination of lifetime dollar
limits on benefits.
Questions regarding which protections
apply and which protections do not apply to
a grandfathered health plan and what might
cause a plan to change from grandfathered
health plan status can be directed to the plan
administrator at [insert contact information].
[For ERISA plans, insert: You may also
contact the Employee Benefits Security
Administration, U.S. Department of Labor at
1–866–444–3272 or www.dol.gov/ebsa/
healthreform. This Web site has a table
summarizing which protections do and do
not apply to grandfathered health plans.] [For
individual market policies and nonfederal
governmental plans, insert: You may also
contact the U.S. Department of Health and
Human Services at www.healthcare.gov.]
(3)(i) Documentation of plan or policy
terms on March 23, 2010. To maintain
status as a grandfathered health plan, a
group health plan, or group health
insurance coverage, must, for as long as
the plan or health insurance coverage
takes the position that it is a
grandfathered health plan—
(A) Maintain records documenting the
terms of the plan or health insurance
coverage in connection with the
coverage in effect on March 23, 2010,
and any other documents necessary to
verify, explain, or clarify its status as a
grandfathered health plan; and
(B) Make such records available for
examination upon request.
(ii) Change in group health insurance
coverage. To maintain status as a
grandfathered health plan, a group
health plan that enters into a new
policy, certificate, or contract of
insurance must provide to the new
health insurance issuer (and the new
health insurance issuer must require)
documentation of plan terms (including
benefits, cost sharing, employer
contributions, and annual dollar limits)
under the prior health coverage
sufficient to determine whether a
change causing a cessation of
grandfathered health plan status under
paragraph (g)(1) of this section has
occurred.
(4) Family members enrolling after
March 23, 2010. With respect to an
individual who is enrolled in a group
health plan or health insurance coverage
on March 23, 2010, grandfathered health
plan coverage includes coverage of
family members of the individual who
enroll after March 23, 2010 in the
grandfathered health plan coverage of
the individual.
(b) Allowance for new employees to
join current plan— (1) In general.
Subject to paragraph (b)(2) of this
section, a group health plan (including
health insurance coverage provided in
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connection with the group health plan)
that provided coverage on March 23,
2010 and has retained its status as a
grandfathered health plan (consistent
with the rules of this section, including
paragraph (g) of this section) is
grandfathered health plan coverage for
new employees (whether newly hired or
newly enrolled) and their families
enrolling in the plan after March 23,
2010. Further, the addition of a new
contributing employer or new group of
employees of an existing contributing
employer to a grandfathered
multiemployer health plan will not
affect the plan’s grandfather status.
(2) Anti-abuse rules— (i) Mergers and
acquisitions. If the principal purpose of
a merger, acquisition, or similar
business restructuring is to cover new
individuals under a grandfathered
health plan, the plan ceases to be a
grandfathered health plan.
(ii) Change in plan eligibility. A group
health plan or health insurance coverage
(including a benefit package under a
group health plan) ceases to be a
grandfathered health plan if—
(A) Employees are transferred into the
plan or health insurance coverage (the
transferee plan) from a plan or health
insurance coverage under which the
employees were covered on March 23,
2010 (the transferor plan);
(B) Comparing the terms of the
transferee plan with those of the
transferor plan (as in effect on March 23,
2010) and treating the transferee plan as
if it were an amendment of the
transferor plan would cause a loss of
grandfather status under the provisions
of paragraph (g)(1) of this section; and
(C) There was no bona fide
employment-based reason to transfer the
employees into the transferee plan. For
this purpose, changing the terms or cost
of coverage is not a bona fide
employment-based reason.
(iii) Illustrative list of bona fide
employment-based reasons. For
purposes of paragraph (b)(2)(ii)(C) of
this section, bona fide employmentbased reasons include—
(A) When a benefit package is being
eliminated because the issuer is exiting
the market;
(B) When a benefit package is being
eliminated because the issuer no longer
offers the product to the employer;
(C) When low or declining
participation by plan participants in the
benefit package makes it impractical for
the plan sponsor to continue to offer the
benefit package;
(D) When a benefit package is
eliminated from a multiemployer plan
as agreed upon as part of the collective
bargaining process; or
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(E) When a benefit package is
eliminated for any reason and multiple
benefit packages covering a significant
portion of other employees remain
available to the employees being
transferred.
(3) Examples. The rules of this
paragraph (b) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan
offers two benefit packages on March 23,
2010, Options F and G. During a subsequent
open enrollment period, some of the
employees enrolled in Option F on March 23,
2010 switch to Option G.
(ii) Conclusion. In this Example 1, the
group health coverage provided under
Option G remains a grandfathered health
plan under the rules of paragraph (b)(1) of
this section because employees previously
enrolled in Option F are allowed to enroll in
Option G as new employees.
Example 2. (i) Facts. A group health plan
offers two benefit packages on March 23,
2010, Options H and I. On March 23, 2010,
Option H provides coverage only for
employees in one manufacturing plant.
Subsequently, the plant is closed, and some
employees in the closed plant are moved to
another plant. The employer eliminates
Option H and the employees that are moved
are transferred to Option I. If instead of
transferring employees from Option H to
Option I, Option H was amended to match
the terms of Option I, then Option H would
cease to be a grandfathered health plan.
(ii) Conclusion. In this Example 2, the plan
has a bona fide employment-based reason to
transfer employees from Option H to Option
I. Therefore, Option I does not cease to be a
grandfathered health plan.
(c) General grandfathering rule—(1)
Except as provided in paragraphs (d)
and (e) of this section, subtitles A and
C of title I of the Patient Protection and
Affordable Care Act (and the
amendments made by those subtitles,
and the incorporation of those
amendments into ERISA section 715
and Internal Revenue Code section
9815) do not apply to grandfathered
health plan coverage. Accordingly, the
provisions of PHS Act sections 2701,
2702, 2703, 2705, 2706, 2707, 2709
(relating to coverage for individuals
participating in approved clinical trials,
as added by section 10103 of the Patient
Protection and Affordable Care Act),
2713, 2715A, 2716, 2717, 2719, and
2719A, as added or amended by the
Patient Protection and Affordable Care
Act, do not apply to grandfathered
health plans. (In addition, see 45 CFR
147.140(c), which provides that the
provisions of PHS Act section 2704, and
PHS Act section 2711 insofar as it
relates to annual dollar limits, do not
apply to grandfathered health plans that
are individual health insurance
coverage.)
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(2) To the extent not inconsistent with
the rules applicable to a grandfathered
health plan, a grandfathered health plan
must comply with the requirements of
the PHS Act, ERISA, and the Internal
Revenue Code applicable prior to the
changes enacted by the Patient
Protection and Affordable Care Act.
(d) Provisions applicable to all
grandfathered health plans. The
provisions of PHS Act section 2711
insofar as it relates to lifetime dollar
limits, and the provisions of PHS Act
sections 2712, 2714, 2715, and 2718,
apply to grandfathered health plans for
plan years beginning on or after
September 23, 2010. The provisions of
PHS Act section 2708 apply to
grandfathered health plans for plan
years beginning on or after January 1,
2014.
(e) Applicability of PHS Act sections
2704, 2711, and 2714 to grandfathered
group health plans and group health
insurance coverage—(1) The provisions
of PHS Act section 2704 as it applies
with respect to enrollees who are under
19 years of age, and the provisions of
PHS Act section 2711 insofar as it
relates to annual dollar limits, apply to
grandfathered health plans that are
group health plans (including group
health insurance coverage) for plan
years beginning on or after September
23, 2010. The provisions of PHS Act
section 2704 apply generally to
grandfathered health plans that are
group health plans (including group
health insurance coverage) for plan
years beginning on or after January 1,
2014.
(2) For plan years beginning before
January 1, 2014, the provisions of PHS
Act section 2714 apply in the case of an
adult child with respect to a
grandfathered health plan that is a
group health plan only if the adult child
is not eligible to enroll in an eligible
employer-sponsored health plan (as
defined in section 5000A(f)(2) of the
Internal Revenue Code) other than a
grandfathered health plan of a parent.
For plan years beginning on or after
January 1, 2014, the provisions of PHS
Act section 2714 apply with respect to
a grandfathered health plan that is a
group health plan without regard to
whether an adult child is eligible to
enroll in any other coverage.
(f) Effect on collectively bargained
plans—In general. In the case of health
insurance coverage maintained pursuant
to one or more collective bargaining
agreements between employee
representatives and one or more
employers that was ratified before
March 23, 2010, the coverage is
grandfathered health plan coverage at
least until the date on which the last of
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the collective bargaining agreements
relating to the coverage that was in
effect on March 23, 2010 terminates.
Any coverage amendment made
pursuant to a collective bargaining
agreement relating to the coverage that
amends the coverage solely to conform
to any requirement added by subtitles A
and C of title I of the Patient Protection
and Affordable Care Act (and the
amendments made by those subtitles,
and the incorporation of those
amendments into ERISA section 715
and Internal Revenue Code section
9815) is not treated as a termination of
the collective bargaining agreement.
After the date on which the last of the
collective bargaining agreements
relating to the coverage that was in
effect on March 23, 2010 terminates, the
determination of whether health
insurance coverage maintained pursuant
to a collective bargaining agreement is
grandfathered health plan coverage is
made under the rules of this section
other than this paragraph (f) (comparing
the terms of the health insurance
coverage after the date the last collective
bargaining agreement terminates with
the terms of the health insurance
coverage that were in effect on March
23, 2010).
(g) Maintenance of grandfather
status—(1) Changes causing cessation of
grandfather status. Subject to paragraph
(g)(2) of this section, the rules of this
paragraph (g)(1) describe situations in
which a group health plan or health
insurance coverage ceases to be a
grandfathered health plan. A plan or
coverage will cease to be a
grandfathered health plan when an
amendment to plan terms that results in
a change described in this paragraph
(g)(1) becomes effective, regardless of
when the amendment was adopted.
Once grandfather status is lost, it cannot
be regained.
(i) Elimination of benefits. The
elimination of all or substantially all
benefits to diagnose or treat a particular
condition causes a group health plan or
health insurance coverage to cease to be
a grandfathered health plan. For this
purpose, the elimination of benefits for
any necessary element to diagnose or
treat a condition is considered the
elimination of all or substantially all
benefits to diagnose or treat a particular
condition. Whether or not a plan or
coverage has eliminated substantially all
benefits to diagnose or treat a particular
condition must be determined based on
all the facts and circumstances, taking
into account the items and services
provided for a particular condition
under the plan on March 23, 2010, as
compared to the benefits offered at the
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time the plan or coverage makes the
benefit change effective.
(ii) Increase in percentage costsharing requirement. Any increase,
measured from March 23, 2010, in a
percentage cost-sharing requirement
(such as an individual’s coinsurance
requirement) causes a group health plan
or health insurance coverage to cease to
be a grandfathered health plan.
(iii) Increase in a fixed-amount costsharing requirement other than a
copayment. Any increase in a fixedamount cost-sharing requirement other
than a copayment (for example,
deductible or out-of-pocket limit),
determined as of the effective date of the
increase, causes a group health plan or
health insurance coverage to cease to be
a grandfathered health plan, if the total
percentage increase in the cost-sharing
requirement measured from March 23,
2010 exceeds the maximum percentage
increase (as defined in paragraph
(g)(3)(ii) of this section).
(iv) Increase in a fixed-amount
copayment. Any increase in a fixedamount copayment, determined as of
the effective date of the increase, and
determined for each copayment level if
a plan has different copayment levels
for different categories of services,
causes a group health plan or health
insurance coverage to cease to be a
grandfathered health plan, if the total
increase in the copayment measured
from March 23, 2010 exceeds the greater
of:
(A) An amount equal to $5 increased
by medical inflation, as defined in
paragraph (g)(3)(i) of this section (that
is, $5 times medical inflation, plus $5),
or
(B) The maximum percentage increase
(as defined in paragraph (g)(3)(ii) of this
section), determined by expressing the
total increase in the copayment as a
percentage.
(v) Decrease in contribution rate by
employers and employee
organizations—(A) Contribution rate
based on cost of coverage. A group
health plan or group health insurance
coverage ceases to be a grandfathered
health plan if the employer or employee
organization decreases its contribution
rate based on cost of coverage (as
defined in paragraph (g)(3)(iii)(A) of this
section) towards the cost of any tier of
coverage for any class of similarly
situated individuals (as described in
§ 54.9802(d)) by more than 5 percentage
points below the contribution rate for
the coverage period that includes March
23, 2010.
(B) Contribution rate based on a
formula. A group health plan or group
health insurance coverage ceases to be
a grandfathered health plan if the
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employer or employee organization
decreases its contribution rate based on
a formula (as defined in paragraph
(g)(3)(iii)(B) of this section) towards the
cost of any tier of coverage for any class
of similarly situated individuals (as
described in § 54.9802(d)) by more than
5 percent below the contribution rate for
the coverage period that includes March
23, 2010.
(C) Special rules regarding decreases
in contribution rates. An insured group
health plan (or a multiemployer plan)
that is a grandfathered health plan will
not cease to be a grandfathered health
plan based on a change in the employer
contribution rate unless the issuer (or
multiemployer plan) knows, or should
know, of the change, provided:
(1) Upon renewal (or, in the case of a
multiemployer plan, before the start of
a new plan year), the issuer (or
multiemployer plan) requires relevant
employers, employee organizations, or
plan sponsors, as applicable, to make a
representation regarding its contribution
rate for the plan year covered by the
renewal, as well as its contribution rate
on March 23, 2010 (if the issuer, or
multiemployer plan, does not already
have it); and
(2) The relevant policies, certificates,
contracts of insurance, or plan
documents disclose in a prominent and
effective manner that employers,
employee organizations, or plan
sponsors, as applicable, are required to
notify the issuer (or multiemployer
plan) if the contribution rate changes at
any point during the plan year.
(D) Application to plans with multitiered coverage structures. The
standards for employer contributions in
this paragraph (g)(1)(v) apply on a tierby-tier basis. Therefore, if a group health
plan modifies the tiers of coverage it
had on March 23, 2010 (for example,
from self-only and family to a multitiered structure of self-only, self-plusone, self-plus-two, and self-plus-threeor-more), the employer contribution for
any new tier would be tested by
comparison to the contribution rate for
the corresponding tier on March 23,
2010. For example, if the employer
contribution rate for family coverage
was 50 percent on March 23, 2010, the
employer contribution rate for any new
tier of coverage other than self-only (i.e.,
self-plus-one, self-plus-two, self-plusthree or more) must be within 5
percentage points of 50 percent (i.e., at
least 45 percent). If, however, the plan
adds one or more new coverage tiers
without eliminating or modifying any
previous tiers and those new coverage
tiers cover classes of individuals that
were not covered previously under the
plan, the new tiers would not be
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analyzed under the standards for
changes in employer contributions. For
example, if a plan with self-only as the
sole coverage tier added a family
coverage tier, the level of employer
contributions toward the family
coverage would not cause the plan to
lose grandfather status.
(E) Group health plans with fixeddollar employee contributions or no
employee contributions. A group health
plan that requires either fixed-dollar
employee contributions or no employee
contributions will not cease to be a
grandfathered health plan solely
because the employer contribution rate
changes so long as there continues to be
no employee contributions or no
increase in the fixed-dollar employee
contributions towards the cost of
coverage.
(vi) Changes in annual limits—(A)
Addition of an annual limit. A group
health plan, or group health insurance
coverage, that, on March 23, 2010, did
not impose an overall annual or lifetime
limit on the dollar value of all benefits
ceases to be a grandfathered health plan
if the plan or health insurance coverage
imposes an overall annual limit on the
dollar value of benefits. (But see
§ 54.9815–2711, which prohibits all
annual dollar limits on essential health
benefits for plan years beginning on or
after January 1, 2014).
(B) Decrease in limit for a plan or
coverage with only a lifetime limit. A
group health plan, or group health
insurance coverage, that, on March 23,
2010, imposed an overall lifetime limit
on the dollar value of all benefits but no
overall annual limit on the dollar value
of all benefits ceases to be a
grandfathered health plan if the plan or
health insurance coverage adopts an
overall annual limit at a dollar value
that is lower than the dollar value of the
lifetime limit on March 23, 2010. (But
see § 54.9815–2711, which prohibits all
annual dollar limits on essential health
benefits for plan years beginning on or
after January 1, 2014).
(C) Decrease in limit for a plan or
coverage with an annual limit. A group
health plan, or group health insurance
coverage, that, on March 23, 2010,
imposed an overall annual limit on the
dollar value of all benefits ceases to be
a grandfathered health plan if the plan
or health insurance coverage decreases
the dollar value of the annual limit
(regardless of whether the plan or health
insurance coverage also imposed an
overall lifetime limit on March 23, 2010
on the dollar value of all benefits). (But
see § 54.9815–2711, which prohibits all
annual dollar limits on essential health
benefits for plan years beginning on or
after January 1, 2014).
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(2) Transitional rules—(i) Changes
made prior to March 23, 2010. If a group
health plan or health insurance issuer
makes the following changes to the
terms of the plan or health insurance
coverage, the changes are considered
part of the terms of the plan or health
insurance coverage on March 23, 2010
even though they were not effective at
that time and such changes do not cause
a plan or health insurance coverage to
cease to be a grandfathered health plan:
(A) Changes effective after March 23,
2010 pursuant to a legally binding
contract entered into on or before March
23, 2010;
(B) Changes effective after March 23,
2010 pursuant to a filing on or before
March 23, 2010 with a State insurance
department; or
(C) Changes effective after March 23,
2010 pursuant to written amendments
to a plan that were adopted on or before
March 23, 2010.
(ii) Changes made after March 23,
2010 and adopted prior to issuance of
regulations. If, after March 23, 2010, a
group health plan or health insurance
issuer makes changes to the terms of the
plan or health insurance coverage and
the changes are adopted prior to June
14, 2010, the changes will not cause the
plan or health insurance coverage to
cease to be a grandfathered health plan
if the changes are revoked or modified
effective as of the first day of the first
plan year (in the individual market,
policy year) beginning on or after
September 23, 2010, and the terms of
the plan or health insurance coverage on
that date, as modified, would not cause
the plan or coverage to cease to be a
grandfathered health plan under the
rules of this section, including
paragraph (g)(1) of this section. For this
purpose, changes will be considered to
have been adopted prior to June 14,
2010 if:
(A) The changes are effective before
that date;
(B) The changes are effective on or
after that date pursuant to a legally
binding contract entered into before that
date;
(C) The changes are effective on or
after that date pursuant to a filing before
that date with a State insurance
department; or
(D) The changes are effective on or
after that date pursuant to written
amendments to a plan that were
adopted before that date.
(3) Definitions—(i) Medical inflation
defined. For purposes of this paragraph
(g), the term medical inflation means the
increase since March 2010 in the overall
medical care component of the
Consumer Price Index for All Urban
Consumers (CPI–U) (unadjusted)
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published by the Department of Labor
using the 1982–1984 base of 100. For
this purpose, the increase in the overall
medical care component is computed by
subtracting 387.142 (the overall medical
care component of the CPI–U
(unadjusted) published by the
Department of Labor for March 2010,
using the 1982–1984 base of 100) from
the index amount for any month in the
12 months before the new change is to
take effect and then dividing that
amount by 387.142.
(ii) Maximum percentage increase
defined. For purposes of this paragraph
(g), the term maximum percentage
increase means medical inflation (as
defined in paragraph (g)(3)(i) of this
section), expressed as a percentage, plus
15 percentage points.
(iii) Contribution rate defined. For
purposes of paragraph (g)(1)(v) of this
section:
(A) Contribution rate based on cost of
coverage. The term contribution rate
based on cost of coverage means the
amount of contributions made by an
employer or employee organization
compared to the total cost of coverage,
expressed as a percentage. The total cost
of coverage is determined in the same
manner as the applicable premium is
calculated under the COBRA
continuation provisions of section 604
of ERISA, section 4980B(f)(4) of the
Internal Revenue Code, and section
2204 of the PHS Act. In the case of a
self-insured plan, contributions by an
employer or employee organization are
equal to the total cost of coverage minus
the employee contributions towards the
total cost of coverage.
(B) Contribution rate based on a
formula. The term contribution rate
based on a formula means, for plans
that, on March 23, 2010, made
contributions based on a formula (such
as hours worked or tons of coal mined),
the formula.
(4) Examples. The rules of this
paragraph (g) are illustrated by the
following examples:
(ii) Conclusion. In this Example 2, the plan
ceases to be a grandfathered health plan
because counseling is an element that is
necessary to treat the condition. Thus the
plan is considered to have eliminated
substantially all benefits for the treatment of
the condition.
Example 3. (i) Facts. On March 23, 2010,
a grandfathered health plan has a copayment
requirement of $30 per office visit for
specialists. The plan is subsequently
amended to increase the copayment
requirement to $40. Within the 12-month
period before the $40 copayment takes effect,
the greatest value of the overall medical care
component of the CPI–U (unadjusted) is 475.
(ii) Conclusion. In this Example 3, the
increase in the copayment from $30 to $40,
expressed as a percentage, is 33.33% (40 ¥
30 = 10; 10 ÷ 30 = 0.3333; 0.3333 = 33.33%).
Medical inflation (as defined in paragraph
(g)(3)(i) of this section) from March 2010 is
0.2269 (475 ¥ 387.142 = 87.858; 87.858 ÷
387.142 = 0.2269). The maximum percentage
increase permitted is 37.69% (0.2269 =
22.69%; 22.69% + 15% = 37.69%). Because
33.33% does not exceed 37.69%, the change
in the copayment requirement at that time
does not cause the plan to cease to be a
grandfathered health plan.
Example 4. (i) Facts. Same facts as
Example 3, except the grandfathered health
plan subsequently increases the $40
copayment requirement to $45 for a later
plan year. Within the 12-month period before
the $45 copayment takes effect, the greatest
value of the overall medical care component
of the CPI–U (unadjusted) is 485.
(ii) Conclusion. In this Example 4, the
increase in the copayment from $30 (the
copayment that was in effect on March 23,
2010) to $45, expressed as a percentage, is
50% (45 ¥ 30 = 15; 15 ÷30 = 0.5; 0.5 = 50%).
Medical inflation (as defined in paragraph
(g)(3)(i) of this section) from March 2010 is
0.2527 (485 ¥ 387.142 = 97.858; 97.858 ÷
387.142 = 0.2527). The increase that would
cause a plan to cease to be a grandfathered
health plan under paragraph (g)(1)(iv) of this
section is the greater of the maximum
percentage increase of 40.27% (0.2527 =
25.27%; 25.27% + 15% = 40.27%), or $6.26
($5 × 0.2527 = $1.26; $1.26 + $5 = $6.26).
Example 1. (i) Facts. On March 23, 2010,
a grandfathered health plan has a
coinsurance requirement of 20% for inpatient
surgery. The plan is subsequently amended
to increase the coinsurance requirement to
25%.
(ii) Conclusion. In this Example 1, the
increase in the coinsurance requirement from
20% to 25% causes the plan to cease to be
a grandfathered health plan.
Example 2. (i) Facts. Before March 23,
2010, the terms of a group health plan
provide benefits for a particular mental
health condition, the treatment for which is
a combination of counseling and prescription
drugs. Subsequently, the plan eliminates
benefits for counseling.
Example 5. (i) Facts. On March 23, 2010,
a grandfathered health plan has a copayment
of $10 per office visit for primary care
providers. The plan is subsequently amended
to increase the copayment requirement to
$15. Within the 12-month period before the
$15 copayment takes effect, the greatest value
of the overall medical care component of the
CPI–U (unadjusted) is 415.
(ii) Conclusion. In this Example 5, the
increase in the copayment, expressed as a
percentage, is 50% (15 ¥ 10 = 5; 5 ÷ 10 =
0.5; 0.5 = 50%). Medical inflation (as defined
in paragraph (g)(3) of this section) from
March 2010 is 0.0720 (415.0 ¥ 387.142 =
27.–858; 27.858 ÷ 387.142 = 0.0720). The
increase that would cause a plan to cease to
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Because 50% exceeds 40.27% and
$15 exceeds $6.26, the change in the
copayment requirement at that time
causes the plan to cease to be a
grandfathered health plan.
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be a grandfathered health plan under
paragraph (g)(1)(iv) of this section is the
greater of the maximum percentage increase
of 22.20% (0.0720 = 7.20%; 7.20% + 15% =
22.20), or $5.36 ($5 × 0.0720 = $0.36; $0.36
+ $5 = $5.36). The $5 increase in copayment
in this Example 5 would not cause the plan
to cease to be a grandfathered health plan
pursuant to paragraph (g)(1)(iv)this section,
which would permit an increase in the
copayment of up to $5.36.
Example 6. (i) Facts. The same facts as
Example 5, except on March 23, 2010, the
grandfathered health plan has no copayment
($0) for office visits for primary care
providers. The plan is subsequently amended
to increase the copayment requirement to $5.
(ii) Conclusion. In this Example 6, medical
inflation (as defined in paragraph (g)(3)(i) of
this section) from March 2010 is 0.0720
(415.0 ¥ 387.142 = 27.858; 27.858 ÷ 387.142
= 0.0720). The increase that would cause a
plan to cease to be a grandfathered health
plan under paragraph (g)(1)(iv)(A) of this
section is $5.36 ($5 × 0.0720 = $0.36; $0.36
+ $5 = $5.36). The $5 increase in copayment
in this Example 6 is less than the amount
calculated pursuant to paragraph (g)(1)(iv)(A)
of this section of $5.36. Thus, the $5 increase
in copayment does not cause the plan to
cease to be a grandfathered health plan.
Example 7. (i) Facts. On March 23, 2010,
a self-insured group health plan provides two
tiers of coverage—self-only and family. The
employer contributes 80% of the total cost of
coverage for self-only and 60% of the total
cost of coverage for family. Subsequently, the
employer reduces the contribution to 50% for
family coverage, but keeps the same
contribution rate for self-only coverage.
(ii) Conclusion. In this Example 7, the
decrease of 10 percentage points for family
coverage in the contribution rate based on
cost of coverage causes the plan to cease to
be a grandfathered health plan. The fact that
the contribution rate for self-only coverage
remains the same does not change the result.
Example 8. (i) Facts. On March 23, 2010,
a self-insured grandfathered health plan has
a COBRA premium for the 2010 plan year of
$5000 for self-only coverage and $12,000 for
family coverage. The required employee
contribution for the coverage is $1000 for
self-only coverage and $4000 for family
coverage. Thus, the contribution rate based
on cost of coverage for 2010 is 80% ((5000
¥ 1000)/5000) for self-only coverage and
67% ((12,000 ¥ 4000)/12,000) for family
coverage. For a subsequent plan year, the
COBRA premium is $6000 for self-only
coverage and $15,000 for family coverage.
The employee contributions for that plan
year are $1200 for self-only coverage and
$5000 for family coverage. Thus, the
contribution rate based on cost of coverage is
80% ((6000 ¥ 1200)/6000) for self-only
coverage and 67% ((15,000 ¥ 5000)/15,000)
for family coverage.
(ii) Conclusion. In this Example 8, because
there is no change in the contribution rate
based on cost of coverage, the plan retains its
status as a grandfathered health plan. The
result would be the same if all or part of the
employee contribution was made pre-tax
through a cafeteria plan under section 125 of
the Internal Revenue Code.
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Example 9. (i) Facts. A group health plan
not maintained pursuant to a collective
bargaining agreement offers three benefit
packages on March 23, 2010. Option F is a
self-insured option. Options G and H are
insured options. Beginning July 1, 2013, the
plan increases coinsurance under Option H
from 10% to 15%.
(ii) Conclusion. In this Example 9, the
coverage under Option H is not
grandfathered health plan coverage as of July
1, 2013, consistent with the (rule in
paragraph (g)(1)(ii) of this section. Whether
the coverage under Options F and G is
grandfathered health plan coverage is
determined separately under the rules of this
paragraph (g).
§ 54.9815–1251T
[Removed]
Par. 5. Section 54.9815–1251T is
removed.
■ Par. 6. Section 54.9815–2704 is added
to read as follows:
■
§ 54.9815–2704 Prohibition of preexisting
condition exclusions.
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(a) No preexisting condition
exclusions. A group health plan, or a
health insurance issuer offering group
health insurance coverage, may not
impose any preexisting condition
exclusion (as defined in § 54.9801–2).
(b) Examples. The rules of paragraph
(a) of this section are illustrated by the
following examples (for additional
examples illustrating the definition of a
preexisting condition exclusion, see
§ 54.9801–3(a)(2)):
Example 1. (i) Facts. A group health plan
provides benefits solely through an insurance
policy offered by Issuer P. At the expiration
of the policy, the plan switches coverage to
a policy offered by Issuer N. N’s policy
excludes benefits for oral surgery required as
a result of a traumatic injury if the injury
occurred before the effective date of coverage
under the policy.
(ii) Conclusion. In this Example 1, the
exclusion of benefits for oral surgery required
as a result of a traumatic injury if the injury
occurred before the effective date of coverage
is a preexisting condition exclusion because
it operates to exclude benefits for a condition
based on the fact that the condition was
present before the effective date of coverage
under the policy. Therefore, such an
exclusion is prohibited.
Example 2. (i) Facts. Individual C applies
for individual health insurance coverage with
Issuer M. M denies C’s application for
coverage because a pre-enrollment physical
revealed that C has type 2 diabetes.
(ii) Conclusion. See Example 2 in 45 CFR
147.108(a)(2) for a conclusion that M’s denial
of C’s application for coverage is a
preexisting condition exclusion because a
denial of an application for coverage based
on the fact that a condition was present
before the date of denial is an exclusion of
benefits based on a preexisting condition.
Therefore, such an exclusion is prohibited.
(c) Applicability date. The provisions
of this section are applicable to group
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health plans and health insurance
issuers for plan years beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the interim
final regulations promulgated by the
Department of Labor at 29 CFR part
2590, contained in the 29 CFR, parts
1927 to end, edition revised as of July
1, 2015.
§ 54.9815–2704T
[Removed]
Par. 7. Section 54.9815–2704T is
removed.
■ Par. 8 Section 54.9815–2711 is added
to read as follows:
■
§ 54.9815–2711
limits.
No lifetime or annual
(a) Prohibition—(1) Lifetime limits.
Except as provided in paragraph (b) of
this section, a group health plan, or a
health insurance issuer offering group
health insurance coverage, may not
establish any lifetime limit on the dollar
amount of essential health benefits for
any individual, whether provided innetwork or out-of-network.
(2) Annual limits—(i) General rule.
Except as provided in paragraphs
(a)(2)(ii) and (b) of this section, a group
health plan, or a health insurance issuer
offering group health insurance
coverage, may not establish any annual
limit on the dollar amount of essential
health benefits for any individual,
whether provided in-network or out-ofnetwork.
(ii) Exception for health flexible
spending arrangements. A health
flexible spending arrangement (as
defined in section 106(c)(2) of the
Internal Revenue Code) offered through
a cafeteria plan pursuant to section 125
of the Internal Revenue Code is not
subject to the requirement in paragraph
(a)(2)(i) of this section.
(b) Construction—(1) Permissible
limits on specific covered benefits. The
rules of this section do not prevent a
group health plan, or a health insurance
issuer offering group health insurance
coverage, from placing annual or
lifetime dollar limits with respect to any
individual on specific covered benefits
that are not essential health benefits to
the extent that such limits are otherwise
permitted under applicable Federal or
State law. (The scope of essential health
benefits is addressed in paragraph (c) of
this section).
(2) Condition-based exclusions. The
rules of this section do not prevent a
group health plan, or a health insurance
issuer offering group health insurance
coverage, from excluding all benefits for
a condition. However, if any benefits are
provided for a condition, then the
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72243
requirements of this section apply.
Other requirements of Federal or State
law may require coverage of certain
benefits.
(c) Definition of essential health
benefits. The term ‘‘essential health
benefits’’ means essential health
benefits under section 1302(b) of the
Patient Protection and Affordable Care
Act and applicable regulations. For this
purpose, a group health plan or a health
insurance issuer that is not required to
provide essential health benefits under
section 1302(b) must define ‘‘essential
health benefits’’ in a manner consistent
with one of the three Federal Employees
Health Benefit Program (FEHBP) options
as defined by 45 CFR 156.100(a)(3) or
one of the base-benchmark plans
selected by a State or applied by default
pursuant to 45 CFR 156.100.
(d) Special rule for health
reimbursement arrangements (HRAs)
and other account-based plans—(1) In
general. If an HRA or other accountbased plan is integrated with other
coverage under a group health plan and
the other group health plan coverage
alone satisfies the requirements in
paragraph (a)(2) of this section, the fact
that the benefits under the HRA or other
account-based plan are limited does not
mean that the HRA or other accountbased plan fails to meet the
requirements of paragraph (a)(2) of this
section. Similarly, if an HRA or other
account-based plan is integrated with
other coverage under a group health
plan and the other group health plan
coverage alone satisfies the
requirements in PHS Act section 2713
and section 54.9815–2713(a)(1), the
HRA or other account-based plan will
not fail to meet the requirements of PHS
Act section 2713 and § 54.9815–
2713(a)(1).
(2) Integration requirements. An HRA
or other account-based plan is
integrated with a group health plan for
purposes of paragraph (a)(2) of this
section if it meets the requirements
under either the integration method set
forth in paragraph (d)(2)(i) of this
section or the integration method set
forth in paragraph (d)(2)(ii) of this
section. Integration does not require that
the HRA (or other account-based plan)
and the group health plan with which
it is integrated share the same plan
sponsor, the same plan document, or
governing instruments, or file a single
Form 5500, if applicable. The term
‘‘excepted benefits’’ is used throughout
the integration methods; for a definition
of the term ‘‘excepted benefits’’ see
Code section 9832(c), ERISA section
733(c), and PHS Act section 2791(c).
(i) Integration Method: Minimum
value not required. An HRA or other
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account-based plan is integrated with
another group health plan for purposes
of this paragraph if:
(A) The plan sponsor offers a group
health plan (other than the HRA or other
account-based plan) to the employee
that does not consist solely of excepted
benefits;
(B) The employee receiving the HRA
or other account-based plan is actually
enrolled in a group health plan (other
than the HRA or other account-based
plan) that does not consist solely of
excepted benefits, regardless of whether
the plan is offered by the same plan
sponsor (referred to as non-HRA group
coverage);
(C) The HRA or other account-based
plan is available only to employees who
are enrolled in non-HRA group
coverage, regardless of whether the nonHRA group coverage is offered by the
plan sponsor of the HRA or other
account-based plan (for example, the
HRA may be offered only to employees
who do not enroll in an employer’s
group health plan but are enrolled in
other non-HRA group coverage, such as
a group health plan maintained by the
employer of the employee’s spouse);
(D) The benefits under the HRA or
other account-based plan are limited to
reimbursement of one or more of the
following—co-payments, co-insurance,
deductibles, and premiums under the
non-HRA group coverage, as well as
medical care (as defined under section
213(d) of the Code) that does not
constitute essential health benefits as
defined in paragraph (c) of this section;
and
(E) Under the terms of the HRA or
other account-based plan, an employee
(or former employee) is permitted to
permanently opt out of and waive future
reimbursements from the HRA or other
account-based plan at least annually
and, upon termination of employment,
either the remaining amounts in the
HRA or other account-based plan are
forfeited or the employee is permitted to
permanently opt out of and waive future
reimbursements from the HRA or other
account-based plan.
(ii) Integration Method: Minimum
value required. An HRA or other
account-based plan is integrated with
another group health plan for purposes
of this paragraph if:
(A) The plan sponsor offers a group
health plan (other than the HRA or other
account-based plan) to the employee
that provides minimum value pursuant
to Code section 36B(c)(2)(C)(ii) (and its
implementing regulations and
applicable guidance);
(B) The employee receiving the HRA
or other account-based plan is actually
enrolled in a group health plan that
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provides minimum value pursuant to
section 36B(c)(2)(C)(ii) of the Code (and
applicable guidance), regardless of
whether the plan is offered by the plan
sponsor of the HRA or other accountbased plan (referred to as non-HRA MV
group coverage);
(C) The HRA or other account-based
plan is available only to employees who
are actually enrolled in non-HRA MV
group coverage, regardless of whether
the non-HRA MV group coverage is
offered by the plan sponsor of the HRA
or other account-based plan (for
example, the HRA may be offered only
to employees who do not enroll in an
employer’s group health plan but are
enrolled in other non-HRA MV group
coverage, such as a group health plan
maintained by an employer of the
employee’s spouse); and
(D) Under the terms of the HRA or
other account-based plan, an employee
(or former employee) is permitted to
permanently opt out of and waive future
reimbursements from the HRA or other
account-based plan at least annually,
and, upon termination of employment,
either the remaining amounts in the
HRA or other account-based plan are
forfeited or the employee is permitted to
permanently opt out of and waive future
reimbursements from the HRA or other
account-based plan.
(3) Forfeiture. For purpose of
integration under paragraphs (d)(2)(i)(E)
and (d)(2)(ii)(D) of this section,
forfeiture or waiver occurs even if the
forfeited or waived amounts may be
reinstated upon a fixed date, a
participant’s death, or the earlier of the
two events (the reinstatement event).
For this purpose coverage under an
HRA or other account-based plan is
considered forfeited or waived prior to
a reinstatement event only if the
participant’s election to forfeit or waive
is irrevocable, meaning that, beginning
on the effective date of the election and
through the date of the reinstatement
event, the participant and the
participant’s beneficiaries have no
access to amounts credited to the HRA
or other account-based plan. This means
that upon and after reinstatement, the
reinstated amounts under the HRA or
other account-based plan may not be
used to reimburse or pay medical
expenses incurred during the period
after forfeiture and prior to
reinstatement.
(4) No integration with individual
market coverage. A group health plan,
including an HRA or other accountbased plan, used to purchase coverage
on the individual market is not
integrated with that individual market
coverage for purposes of paragraph
(a)(2) of this section (or for purposes of
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the requirements of PHS Act section
2713).
(5) Integration with Medicare parts B
and D. For employers that are not
required to offer their non-HRA group
health plan coverage to employees who
are Medicare beneficiaries, an HRA or
other account-based plan that may be
used to reimburse premiums under
Medicare part B or D may be integrated
with Medicare (and deemed to comply
with PHS Act sections 2711 and 2713)
if the following requirements are
satisfied with respect to employees who
would be eligible for the employer’s
non-HRA group health plan but for their
eligibility for Medicare (and the
integration rules under paragraphs
(d)(2)(i) and (ii) of this section continue
to apply to employees who are not
eligible for Medicare):
(i) The plan sponsor offers a group
health plan (other than the HRA or other
account-based plan and that does not
consist solely of excepted benefits) to
employees who are not eligible for
Medicare;
(ii) The employee receiving the HRA
or other account-based plan is actually
enrolled Medicare part B or D;
(iii) The HRA or other account-based
plan is available only to employees who
are enrolled in Medicare part B or D;
and
(iv) The HRA or other account-based
plan complies with paragraphs
(d)(2)(i)(E) and (d)(2)(ii)(D) of this
section.
(6) Account-based plan. An accountbased plan for purposes of this section
is an employer-provided group health
plan that provides reimbursements of
medical expenses other than individual
market policy premiums with the
reimbursement subject to a maximum
fixed dollar amount for a period. An
HRA is a type of account-based plan.
(e) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the interim
final regulations promulgated by the
Department of Labor at 29 CFR part
2590, contained in the 29 CFR, parts
1927 to end, edition revised as of July
1, 2015.
§ 54.9815–2711T
[Removed]
Par. 9. Section 54.9815–2711T is
removed.
■
Par. 10. Section 54.9815–2712 is
added to read as follows:
■
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§ 54.9815–2712
rescissions.
Rules regarding
(a) Prohibition on rescissions—(1) A
group health plan, or a health insurance
issuer offering group health insurance
coverage, must not rescind coverage
under the plan, or under the policy,
certificate, or contract of insurance, with
respect to an individual (including a
group to which the individual belongs
or family coverage in which the
individual is included) once the
individual is covered under the plan or
coverage, unless the individual (or a
person seeking coverage on behalf of the
individual) performs an act, practice, or
omission that constitutes fraud, or
makes an intentional misrepresentation
of material fact, as prohibited by the
terms of the plan or coverage. A group
health plan, or a health insurance issuer
offering group health insurance
coverage, must provide at least 30 days
advance written notice to each
participant who would be affected
before coverage may be rescinded under
this paragraph (a)(1), regardless of
whether the coverage is insured or selfinsured, or whether the rescission
applies to an entire group or only to an
individual within the group. (The rules
of this paragraph (a)(1) apply regardless
of any contestability period that may
otherwise apply.)
(2) For purposes of this section, a
rescission is a cancellation or
discontinuance of coverage that has
retroactive effect. For example, a
cancellation that treats a policy as void
from the time of the individual’s or
group’s enrollment is a rescission. As
another example, a cancellation that
voids benefits paid up to a year before
the cancellation is also a rescission for
this purpose. A cancellation or
discontinuance of coverage is not a
rescission if—
(i) The cancellation or discontinuance
of coverage has only a prospective
effect;
(ii) The cancellation or
discontinuance of coverage is effective
retroactively to the extent it is
attributable to a failure to timely pay
required premiums or contributions
(including COBRA premiums) towards
the cost of coverage;
(iii) The cancellation or
discontinuance of coverage is initiated
by the individual (or by the individual’s
authorized representative) and the
sponsor, employer, plan, or issuer does
not, directly or indirectly, take action to
influence the individual’s decision to
cancel or discontinue coverage
retroactively or otherwise take any
adverse action or retaliate against,
interfere with, coerce, intimidate, or
threaten the individual; or
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(iv) The cancellation or
discontinuance of coverage is initiated
by the Exchange pursuant to 45 CFR
155.430 (other than under paragraph
(b)(2)(iii)).
(3) The rules of this paragraph (a) are
illustrated by the following examples:
Example 1. (i) Facts. Individual A seeks
enrollment in an insured group health plan.
The plan terms permit rescission of coverage
with respect to an individual if the
individual engages in fraud or makes an
intentional misrepresentation of a material
fact. The plan requires A to complete a
questionnaire regarding A’s prior medical
history, which affects setting the group rate
by the health insurance issuer. The
questionnaire complies with the other
requirements of this part. The questionnaire
includes the following question: ‘‘Is there
anything else relevant to your health that we
should know?’’ A inadvertently fails to list
that A visited a psychologist on two
occasions, six years previously. A is later
diagnosed with breast cancer and seeks
benefits under the plan. On or around the
same time, the issuer receives information
about A’s visits to the psychologist, which
was not disclosed in the questionnaire.
(ii) Conclusion. In this Example 1, the plan
cannot rescind A’s coverage because A’s
failure to disclose the visits to the
psychologist was inadvertent. Therefore, it
was not fraudulent or an intentional
misrepresentation of material fact.
Example 2. (i) Facts. An employer sponsors
a group health plan that provides coverage
for employees who work at least 30 hours per
week. Individual B has coverage under the
plan as a full-time employee. The employer
reassigns B to a part-time position. Under the
terms of the plan, B is no longer eligible for
coverage. The plan mistakenly continues to
provide health coverage, collecting premiums
from B and paying claims submitted by B.
After a routine audit, the plan discovers that
B no longer works at least 30 hours per week.
The plan rescinds B’s coverage effective as of
the date that B changed from a full-time
employee to a part-time employee.
(ii) Conclusion. In this Example 2, the plan
cannot rescind B’s coverage because there
was no fraud or an intentional
misrepresentation of material fact. The plan
may cancel coverage for B prospectively,
subject to other applicable Federal and State
laws.
(b) Compliance with other
requirements. Other requirements of
Federal or State law may apply in
connection with a rescission of
coverage.
(c) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the interim
final regulations promulgated by the
Department of Labor at 29 CFR part
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72245
2590, contained in the 29 CFR, parts
1927 to end, edition revised as of July
1, 2015.
§ 54.9815–2712T
[Removed]
Par. 11. Section 54.9815–2712T is
removed.
■ Par. 12. Section 54.9815–2714 is
added to read as follows:
■
§ 54.9815–2714
at least age 26.
Eligibility of children until
(a) In general—(1) A group health
plan, or a health insurance issuer
offering group health insurance
coverage, that makes available
dependent coverage of children must
make such coverage available for
children until attainment of 26 years of
age.
(2) The rule of this paragraph (a) is
illustrated by the following example:
Example. (i) Facts. For the plan year
beginning January 1, 2011, a group health
plan provides health coverage for employees,
employees’ spouses, and employees’ children
until the child turns 26. On the birthday of
a child of an employee, July 17, 2011, the
child turns 26. The last day the plan covers
the child is July 16, 2011.
(ii) Conclusion. In this Example, the plan
satisfies the requirement of this paragraph (a)
with respect to the child.
(b) Restrictions on plan definition of
dependent—(1) In general. With respect
to a child who has not attained age 26,
a plan or issuer may not define
dependent for purposes of eligibility for
dependent coverage of children other
than in terms of a relationship between
a child and the participant. Thus, for
example, a plan or issuer may not deny
or restrict dependent coverage for a
child who has not attained age 26 based
on the presence or absence of the child’s
financial dependency (upon the
participant or any other person);
residency with the participant or with
any other person; whether the child
lives, works, or resides in an HMO’s
service area or other network service
area; marital status; student status;
employment; eligibility for other
coverage; or any combination of those
factors. (Other requirements of Federal
or State law, including section 609 of
ERISA or section 1908 of the Social
Security Act, may require coverage of
certain children.)
(2) Construction. A plan or issuer will
not fail to satisfy the requirements of
this section if the plan or issuer limits
dependent child coverage to children
under age 26 who are described in
section 152(f)(1) . For an individual not
described in section 152(f)(1), such as a
grandchild or niece, a plan may impose
additional conditions on eligibility for
dependent child health coverage, such
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as a condition that the individual be a
dependent for income tax purposes.
(c) Coverage of grandchildren not
required. Nothing in this section
requires a plan or issuer to make
coverage available for the child of a
child receiving dependent coverage.
(d) Uniformity irrespective of age. The
terms of the plan or health insurance
coverage providing dependent coverage
of children cannot vary based on age
(except for children who are age 26 or
older).
(e) Examples. The rules of paragraph
(d) of this section are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan
offers a choice of self-only or family health
coverage. Dependent coverage is provided
under family health coverage for children of
participants who have not attained age 26.
The plan imposes an additional premium
surcharge for children who are older than age
18.
(ii) Conclusion. In this Example 1, the plan
violates the requirement of paragraph (d) of
this section because the plan varies the terms
for dependent coverage of children based on
age.
Example 2. (i) Facts. A group health plan
offers a choice among the following tiers of
health coverage: Self-only, self-plus-one, selfplus-two, and self-plus-three-or-more. The
cost of coverage increases based on the
number of covered individuals. The plan
provides dependent coverage of children
who have not attained age 26.
(ii) Conclusion. In this Example 2, the plan
does not violate the requirement of paragraph
(d) of this section that the terms of dependent
coverage for children not vary based on age.
Although the cost of coverage increases for
tiers with more covered individuals, the
increase applies without regard to the age of
any child.
Example 3. (i) Facts. A group health plan
offers two benefit packages—an HMO option
and an indemnity option. Dependent
coverage is provided for children of
participants who have not attained age 26.
The plan limits children who are older than
age 18 to the HMO option.
(ii) Conclusion. In this Example 3, the plan
violates the requirement of paragraph (d) of
this section because the plan, by limiting
children who are older than age 18 to the
HMO option, varies the terms for dependent
coverage of children based on age.
Example 4. (i) Facts. A group health plan
sponsored by a large employer normally
charges a copayment for physician visits that
do not constitute preventive services. The
plan charges this copayment to individuals
age 19 and over, including employees,
spouses, and dependent children, but waives
it for those under age 19.
(ii) Conclusion. In this Example 4, the plan
does not violate the requirement of paragraph
(d) of this section that the terms of dependent
coverage for children not vary based on age.
While the requirement of paragraph (d) of
this section generally prohibits distinctions
based upon age in dependent coverage of
children, it does not prohibit distinctions
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based upon age that apply to all coverage
under the plan, including coverage for
employees and spouses as well as dependent
children. In this Example 4, the copayments
charged to dependent children are the same
as those charged to employees and spouses.
Accordingly, the arrangement described in
this Example 4 (including waiver, for
individuals under age 19, of the generally
applicable copayment) does not violate the
requirement of paragraph (d) of this section.
(f) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the interim
final regulations promulgated by the
Department of Labor at 29 CFR part
2590, contained in the 29 CFR, parts
1927 to end, edition revised as of July
1, 2015.
§ 54.9815–2714T
[Removed]
Par. 13. Section 54.9815–2714T is
removed.
■ Par. 14. Section 54.9815–2719 is
added to read as follows:
■
§ 54.9815–2719 Internal claims and
appeals and external review processes.
(a) Scope and definitions–(1) Scope.
This section sets forth requirements
with respect to internal claims and
appeals and external review processes
for group health plans and health
insurance issuers that are not
grandfathered health plans under
§ 54.9815–1251. Paragraph (b) of this
section provides requirements for
internal claims and appeals processes.
Paragraph (c) of this section sets forth
rules governing the applicability of State
external review processes. Paragraph (d)
of this section sets forth a Federal
external review process for plans and
issuers not subject to an applicable State
external review process. Paragraph (e) of
this section prescribes requirements for
ensuring that notices required to be
provided under this section are
provided in a culturally and
linguistically appropriate manner.
Paragraph (f) of this section describes
the authority of the Secretary to deem
certain external review processes in
existence on March 23, 2010 as in
compliance with paragraph (c) or (d) of
this section.
(2) Definitions. For purposes of this
section, the following definitions
apply—
(i) Adverse benefit determination. An
adverse benefit determination means an
adverse benefit determination as
defined in 29 CFR 2560.503–1, as well
as any rescission of coverage, as
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described in § 54.9815–2712(a)(2)
(whether or not, in connection with the
rescission, there is an adverse effect on
any particular benefit at that time).
(ii) Appeal (or internal appeal). An
appeal or internal appeal means review
by a plan or issuer of an adverse benefit
determination, as required in paragraph
(b) of this section.
(iii) Claimant. Claimant means an
individual who makes a claim under
this section. For purposes of this
section, references to claimant include a
claimant’s authorized representative.
(iv) External review. External review
means a review of an adverse benefit
determination (including a final internal
adverse benefit determination)
conducted pursuant to an applicable
State external review process described
in paragraph (c) of this section or the
Federal external review process of
paragraph (d) of this section.
(v) Final internal adverse benefit
determination. A final internal adverse
benefit determination means an adverse
benefit determination that has been
upheld by a plan or issuer at the
completion of the internal appeals
process applicable under paragraph (b)
of this section (or an adverse benefit
determination with respect to which the
internal appeals process has been
exhausted under the deemed exhaustion
rules of paragraph (b)(2)(ii)(F) of this
section).
(vi) Final external review decision. A
final external review decision means a
determination by an independent
review organization at the conclusion of
an external review.
(vii) Independent review organization
(or IRO). An independent review
organization (or IRO) means an entity
that conducts independent external
reviews of adverse benefit
determinations and final internal
adverse benefit determinations pursuant
to paragraph (c) or (d) of this section.
(viii) NAIC Uniform Model Act. The
NAIC Uniform Model Act means the
Uniform Health Carrier External Review
Model Act promulgated by the National
Association of Insurance Commissioners
in place on July 23, 2010.
(b) Internal claims and appeals
process—(1) In general. A group health
plan and a health insurance issuer
offering group health insurance
coverage must implement an effective
internal claims and appeals process, as
described in this paragraph (b).
(2) Requirements for group health
plans and group health insurance
issuers. A group health plan and a
health insurance issuer offering group
health insurance coverage must comply
with all the requirements of this
paragraph (b)(2). In the case of health
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insurance coverage offered in
connection with a group health plan, if
either the plan or the issuer complies
with the internal claims and appeals
process of this paragraph (b)(2), then the
obligation to comply with this
paragraph (b)(2) is satisfied for both the
plan and the issuer with respect to the
health insurance coverage.
(i) Minimum internal claims and
appeals standards. A group health plan
and a health insurance issuer offering
group health insurance coverage must
comply with all the requirements
applicable to group health plans under
29 CFR 2560.503–1, except to the extent
those requirements are modified by
paragraph (b)(2)(ii) of this section.
Accordingly, under this paragraph (b),
with respect to health insurance
coverage offered in connection with a
group health plan, the group health
insurance issuer is subject to the
requirements in 29 CFR 2560.503–1 to
the same extent as the group health
plan.
(ii) Additional standards. In addition
to the requirements in paragraph
(b)(2)(i) of this section, the internal
claims and appeals processes of a group
health plan and a health insurance
issuer offering group health insurance
coverage must meet the requirements of
this paragraph (b)(2)(ii).
(A) Clarification of meaning of
adverse benefit determination. For
purposes of this paragraph (b)(2), an
‘‘adverse benefit determination’’
includes an adverse benefit
determination as defined in paragraph
(a)(2)(i) of this section. Accordingly, in
complying with 29 CFR 2560.503–1, as
well as the other provisions of this
paragraph (b)(2), a plan or issuer must
treat a rescission of coverage (whether
or not the rescission has an adverse
effect on any particular benefit at that
time) as an adverse benefit
determination. (Rescissions of coverage
are subject to the requirements of
§ 54.9815–2712.)
(B) Expedited notification of benefit
determinations involving urgent care.
The requirements of 29 CFR 2560.503–
1(f)(2)(i) (which generally provide,
among other things, in the case of urgent
care claims for notification of the plan’s
benefit determination (whether adverse
or not) as soon as possible, taking into
account the medical exigencies, but not
later than 72 hours after the receipt of
the claim) continue to apply to the plan
and issuer. For purposes of this
paragraph (b)(2)(ii)(B), a claim involving
urgent care has the meaning given in 29
CFR 2560.503–1(m)(1), as determined
by the attending provider, and the plan
or issuer shall defer to such
determination of the attending provider.
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(C) Full and fair review. A plan and
issuer must allow a claimant to review
the claim file and to present evidence
and testimony as part of the internal
claims and appeals process.
Specifically, in addition to complying
with the requirements of 29 CFR
2560.503–1(h)(2)—
(1) The plan or issuer must provide
the claimant, free of charge, with any
new or additional evidence considered,
relied upon, or generated by the plan or
issuer (or at the direction of the plan or
issuer) in connection with the claim;
such evidence must be provided as soon
as possible and sufficiently in advance
of the date on which the notice of final
internal adverse benefit determination is
required to be provided under 29 CFR
2560.503–1(i) to give the claimant a
reasonable opportunity to respond prior
to that date; and
(2) Before the plan or issuer can issue
a final internal adverse benefit
determination based on a new or
additional rationale, the claimant must
be provided, free of charge, with the
rationale; the rationale must be
provided as soon as possible and
sufficiently in advance of the date on
which the notice of final internal
adverse benefit determination is
required to be provided under 29 CFR
2560.503–1(i) to give the claimant a
reasonable opportunity to respond prior
to that date. Notwithstanding the rules
of 29 CFR 2560.503–1(i), if the new or
additional evidence is received so late
that it would be impossible to provide
it to the claimant in time for the
claimant to have a reasonable
opportunity to respond, the period for
providing a notice of final internal
adverse benefit determination is tolled
until such time as the claimant has a
reasonable opportunity to respond.
After the claimant responds, or has a
reasonable opportunity to respond but
fails to do so, the plan administrator
shall notify the claimant of the plan’s
benefit determination as soon as a plan
acting in a reasonable and prompt
fashion can provide the notice, taking
into account the medical exigencies.
(D) Avoiding conflicts of interest. In
addition to the requirements of 29 CFR
2560.503–1(b) and (h) regarding full and
fair review, the plan and issuer must
ensure that all claims and appeals are
adjudicated in a manner designed to
ensure the independence and
impartiality of the persons involved in
making the decision. Accordingly,
decisions regarding hiring,
compensation, termination, promotion,
or other similar matters with respect to
any individual (such as a claims
adjudicator or medical expert) must not
be made based upon the likelihood that
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72247
the individual will support the denial of
benefits.
(E) Notice. A plan and issuer must
provide notice to individuals, in a
culturally and linguistically appropriate
manner (as described in paragraph (e) of
this section) that complies with the
requirements of 29 CFR 2560.503–1(g)
and (j). The plan and issuer must also
comply with the additional
requirements of this paragraph
(b)(2)(ii)(E).
(1) The plan and issuer must ensure
that any notice of adverse benefit
determination or final internal adverse
benefit determination includes
information sufficient to identify the
claim involved (including the date of
service, the health care provider, the
claim amount (if applicable), and a
statement describing the availability,
upon request, of the diagnosis code and
its corresponding meaning, and the
treatment code and its corresponding
meaning).
(2) The plan and issuer must provide
to participants and beneficiaries, as
soon as practicable, upon request, the
diagnosis code and its corresponding
meaning, and the treatment code and its
corresponding meaning, associated with
any adverse benefit determination or
final internal adverse benefit
determination. The plan or issuer must
not consider a request for such
diagnosis and treatment information, in
itself, to be a request for an internal
appeal under this paragraph (b) or an
external review under paragraphs (c)
and (d) of this section.
(3) The plan and issuer must ensure
that the reason or reasons for the
adverse benefit determination or final
internal adverse benefit determination
includes the denial code and its
corresponding meaning, as well as a
description of the plan’s or issuer’s
standard, if any, that was used in
denying the claim. In the case of a
notice of final internal adverse benefit
determination, this description must
include a discussion of the decision.
(4) The plan and issuer must provide
a description of available internal
appeals and external review processes,
including information regarding how to
initiate an appeal.
(5) The plan and issuer must disclose
the availability of, and contact
information for, any applicable office of
health insurance consumer assistance or
ombudsman established under PHS Act
section 2793 to assist individuals with
the internal claims and appeals and
external review processes.
(F) Deemed exhaustion of internal
claims and appeals processes—(1) In
the case of a plan or issuer that fails to
strictly adhere to all the requirements of
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this paragraph (b)(2) with respect to a
claim, the claimant is deemed to have
exhausted the internal claims and
appeals process of this paragraph (b),
except as provided in paragraph
(b)(2)(ii)(F)(2) of this section.
Accordingly the claimant may initiate
an external review under paragraph (c)
or (d) of this section, as applicable. The
claimant is also entitled to pursue any
available remedies under section 502(a)
of ERISA or under State law, as
applicable, on the basis that the plan or
issuer has failed to provide a reasonable
internal claims and appeals process that
would yield a decision on the merits of
the claim. If a claimant chooses to
pursue remedies under section 502(a) of
ERISA under such circumstances, the
claim or appeal is deemed denied on
review without the exercise of
discretion by an appropriate fiduciary.
(2) Notwithstanding paragraph
(b)(2)(ii)(F)(1) of this section, the
internal claims and appeals process of
this paragraph (b) will not be deemed
exhausted based on de minimis
violations that do not cause, and are not
likely to cause, prejudice or harm to the
claimant so long as the plan or issuer
demonstrates that the violation was for
good cause or due to matters beyond the
control of the plan or issuer and that the
violation occurred in the context of an
ongoing, good faith exchange of
information between the plan and the
claimant. This exception is not available
if the violation is part of a pattern or
practice of violations by the plan or
issuer. The claimant may request a
written explanation of the violation
from the plan or issuer, and the plan or
issuer must provide such explanation
within 10 days, including a specific
description of its bases, if any, for
asserting that the violation should not
cause the internal claims and appeals
process of this paragraph (b) to be
deemed exhausted. If an external
reviewer or a court rejects the claimant’s
request for immediate review under
paragraph (b)(2)(ii)(F)(1) of this section
on the basis that the plan met the
standards for the exception under this
paragraph (b)(2)(ii)(F)(2), the claimant
has the right to resubmit and pursue the
internal appeal of the claim. In such a
case, within a reasonable time after the
external reviewer or court rejects the
claim for immediate review (not to
exceed 10 days), the plan shall provide
the claimant with notice of the
opportunity to resubmit and pursue the
internal appeal of the claim. Time
periods for re-filing the claim shall
begin to run upon claimant’s receipt of
such notice.
(iii) Requirement to provide continued
coverage pending the outcome of an
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appeal. A plan and issuer subject to the
requirements of this paragraph (b)(2) are
required to provide continued coverage
pending the outcome of an appeal. For
this purpose, the plan and issuer must
comply with the requirements of 29 CFR
2560.503–1(f)(2)(ii), which generally
provides that benefits for an ongoing
course of treatment cannot be reduced
or terminated without providing
advance notice and an opportunity for
advance review.
(c) State standards for external
review—(1) In general. (i) If a State
external review process that applies to
and is binding on a health insurance
issuer offering group health insurance
coverage includes at a minimum the
consumer protections in the NAIC
Uniform Model Act, then the issuer
must comply with the applicable State
external review process and is not
required to comply with the Federal
external review process of paragraph (d)
of this section. In such a case, to the
extent that benefits under a group health
plan are provided through health
insurance coverage, the group health
plan is not required to comply with
either this paragraph (c) or the Federal
external review process of paragraph (d)
of this section.
(ii) To the extent that a group health
plan provides benefits other than
through health insurance coverage (that
is, the plan is self-insured) and is
subject to a State external review
process that applies to and is binding on
the plan (for example, is not preempted
by ERISA) and the State external review
process includes at a minimum the
consumer protections in the NAIC
Uniform Model Act, then the plan must
comply with the applicable State
external review process and is not
required to comply with the Federal
external review process of paragraph (d)
of this section. Where a self-insured
plan is not subject to an applicable State
external review process, but the State
has chosen to expand access to its
process for plans that are not subject to
the applicable State laws, the plan may
choose to comply with either the
applicable State external review process
or the Federal external review process of
paragraph (d) of this section.
(iii) If a plan or issuer is not required
under paragraph (c)(1)(i) or (c)(1)(ii) of
this section to comply with the
requirements of this paragraph (c), then
the plan or issuer must comply with the
Federal external review process of
paragraph (d) of this section, except to
the extent, in the case of a plan, the plan
is not required under paragraph (c)(1)(i)
of this section to comply with paragraph
(d) of this section.
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(2) Minimum standards for State
external review processes. An applicable
State external review process must meet
all the minimum consumer protections
in this paragraph (c)(2). The Department
of Health and Human Services will
determine whether State external review
processes meet these requirements.
(i) The State process must provide for
the external review of adverse benefit
determinations (including final internal
adverse benefit determinations) by
issuers (or, if applicable, plans) that are
based on the issuer’s (or plan’s)
requirements for medical necessity,
appropriateness, health care setting,
level of care, or effectiveness of a
covered benefit.
(ii) The State process must require
issuers (or, if applicable, plans) to
provide effective written notice to
claimants of their rights in connection
with an external review for an adverse
benefit determination.
(iii) To the extent the State process
requires exhaustion of an internal
claims and appeals process, exhaustion
must be unnecessary where the issuer
(or, if applicable, the plan) has waived
the requirement; the issuer (or the plan)
is considered to have exhausted the
internal claims and appeals process
under applicable law (including by
failing to comply with any of the
requirements for the internal appeal
process, as outlined in paragraph (b)(2)
of this section); or the claimant has
applied for expedited external review at
the same time as applying for an
expedited internal appeal.
(iv) The State process provides that
the issuer (or, if applicable, the plan)
against which a request for external
review is filed must pay the cost of the
IRO for conducting the external review.
Notwithstanding this requirement, a
State external review process that
expressly authorizes, as of November
18, 2015, a nominal filing fee may
continue to permit such fees. For this
purpose, to be considered nominal, a
filing fee must not exceed $25; it must
be refunded to the claimant if the
adverse benefit determination (or final
internal adverse benefit determination)
is reversed through external review; it
must be waived if payment of the fee
would impose an undue financial
hardship; and the annual limit on filing
fees for any claimant within a single
plan year must not exceed $75.
(v) The State process may not impose
a restriction on the minimum dollar
amount of a claim for it to be eligible for
external review. Thus, the process may
not impose, for example, a $500
minimum claims threshold.
(vi) The State process must allow at
least four months after the receipt of a
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notice of an adverse benefit
determination or final internal adverse
benefit determination for a request for
an external review to be filed.
(vii) The State process must provide
that IROs will be assigned on a random
basis or another method of assignment
that assures the independence and
impartiality of the assignment process
(such as rotational assignment) by a
State or independent entity, and in no
event selected by the issuer, plan, or the
individual.
(viii) The State process must provide
for maintenance of a list of approved
IROs qualified to conduct the external
review based on the nature of the health
care service that is the subject of the
review. The State process must provide
for approval only of IROs that are
accredited by a nationally recognized
private accrediting organization.
(ix) The State process must provide
that any approved IRO has no conflicts
of interest that will influence its
independence. Thus, the IRO may not
own or control, or be owned or
controlled by a health insurance issuer,
a group health plan, the sponsor of a
group health plan, a trade association of
plans or issuers, or a trade association
of health care providers. The State
process must further provide that the
IRO and the clinical reviewer assigned
to conduct an external review may not
have a material professional, familial, or
financial conflict of interest with the
issuer or plan that is the subject of the
external review; the claimant (and any
related parties to the claimant) whose
treatment is the subject of the external
review; any officer, director, or
management employee of the issuer; the
plan administrator, plan fiduciaries, or
plan employees; the health care
provider, the health care provider’s
group, or practice association
recommending the treatment that is
subject to the external review; the
facility at which the recommended
treatment would be provided; or the
developer or manufacturer of the
principal drug, device, procedure, or
other therapy being recommended.
(x) The State process allows the
claimant at least five business days to
submit to the IRO in writing additional
information that the IRO must consider
when conducting the external review,
and it requires that the claimant is
notified of the right to do so. The
process must also require that any
additional information submitted by the
claimant to the IRO must be forwarded
to the issuer (or, if applicable, the plan)
within one business day of receipt by
the IRO.
(xi) The State process must provide
that the decision is binding on the plan
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or issuer, as well as the claimant except
to the extent the other remedies are
available under State or Federal law,
and except that the requirement that the
decision be binding shall not preclude
the plan or issuer from making payment
on the claim or otherwise providing
benefits at any time, including after a
final external review decision that
denies the claim or otherwise fails to
require such payment or benefits. For
this purpose, the plan or issuer must
provide benefits (including by making
payment on the claim) pursuant to the
final external review decision without
delay, regardless of whether the plan or
issuer intends to seek judicial review of
the external review decision and unless
or until there is a judicial decision
otherwise.
(xii) The State process must require,
for standard external review, that the
IRO provide written notice to the issuer
(or, if applicable, the plan) and the
claimant of its decision to uphold or
reverse the adverse benefit
determination (or final internal adverse
benefit determination) within no more
than 45 days after the receipt of the
request for external review by the IRO.
(xiii) The State process must provide
for an expedited external review if the
adverse benefit determination (or final
internal adverse benefit determination)
concerns an admission, availability of
care, continued stay, or health care
service for which the claimant received
emergency services, but has not been
discharged from a facility; or involves a
medical condition for which the
standard external review time frame
would seriously jeopardize the life or
health of the claimant or jeopardize the
claimant’s ability to regain maximum
function. As expeditiously as possible
but within no more than 72 hours after
the receipt of the request for expedited
external review by the IRO, the IRO
must make its decision to uphold or
reverse the adverse benefit
determination (or final internal adverse
benefit determination) and notify the
claimant and the issuer (or, if
applicable, the plan) of the
determination. If the notice is not in
writing, the IRO must provide written
confirmation of the decision within 48
hours after the date of the notice of the
decision.
(xiv) The State process must require
that issuers (or, if applicable, plans)
include a description of the external
review process in or attached to the
summary plan description, policy,
certificate, membership booklet, outline
of coverage, or other evidence of
coverage it provides to participants,
beneficiaries, or enrollees, substantially
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72249
similar to what is set forth in section 17
of the NAIC Uniform Model Act.
(xv) The State process must require
that IROs maintain written records and
make them available upon request to the
State, substantially similar to what is set
forth in section 15 of the NAIC Uniform
Model Act.
(xvi) The State process follows
procedures for external review of
adverse benefit determinations (or final
internal adverse benefit determinations)
involving experimental or
investigational treatment, substantially
similar to what is set forth in section 10
of the NAIC Uniform Model Act.
(3) Transition period for external
review processes—(i) Through
December 31, 2017, an applicable State
external review process applicable to a
health insurance issuer or group health
plan is considered to meet the
requirements of PHS Act section
2719(b). Accordingly, through December
31, 2017, an applicable State external
review process will be considered
binding on the issuer or plan (in lieu of
the requirements of the Federal external
review process). If there is no applicable
State external review process, the issuer
or plan is required to comply with the
requirements of the Federal external
review process in paragraph (d) of this
section.
(ii) An applicable State external
review process must apply for final
internal adverse benefit determinations
(or, in the case of simultaneous internal
appeal and external review, adverse
benefit determinations) provided on or
after January 1, 2018. The Federal
external review process will apply to
such internal adverse benefit
determinations unless the Department
of Health and Human Services
determines that a State law meets all the
minimum standards of paragraph (c)(2)
of this section. Through December 31,
2017, a State external review process
applicable to a health insurance issuer
or group health plan may be considered
to meet the minimum standards of
paragraph (c)(2) of this section, if it
meets the temporary standards
established by the Secretary in guidance
for a process similar to the NAIC
Uniform Model Act.
(d) Federal external review process. A
plan or issuer not subject to an
applicable State external review process
under paragraph (c) of this section must
provide an effective Federal external
review process in accordance with this
paragraph (d) (except to the extent, in
the case of a plan, the plan is described
in paragraph (c)(1)(i) of this section as
not having to comply with this
paragraph (d)). In the case of health
insurance coverage offered in
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connection with a group health plan, if
either the plan or the issuer complies
with the Federal external review process
of this paragraph (d), then the obligation
to comply with this paragraph (d) is
satisfied for both the plan and the issuer
with respect to the health insurance
coverage. A Multi State Plan or MSP, as
defined by 45 CFR 800.20, must provide
an effective Federal external review
process in accordance with this
paragraph (d). In such circumstances,
the requirement to provide external
review under this paragraph (d) is
satisfied when a Multi State Plan or
MSP complies with standards
established by the Office of Personnel
Management.
(1) Scope—(i) In general. The Federal
external review process established
pursuant to this paragraph (d) applies to
the following:
(A) An adverse benefit determination
(including a final internal adverse
benefit determination) by a plan or
issuer that involves medical judgment
(including, but not limited to, those
based on the plan’s or issuer’s
requirements for medical necessity,
appropriateness, health care setting,
level of care, or effectiveness of a
covered benefit; its determination that a
treatment is experimental or
investigational; its determination
whether a participant or beneficiary is
entitled to a reasonable alternative
standard for a reward under a wellness
program; or its determination whether a
plan or issuer is complying with the
nonquantitative treatment limitation
provisions of Code section 9812 and
§ 54.9812, which generally require,
among other things, parity in the
application of medical management
techniques), as determined by the
external reviewer. (A denial, reduction,
termination, or a failure to provide
payment for a benefit based on a
determination that a participant or
beneficiary fails to meet the
requirements for eligibility under the
terms of a group health plan or health
insurance coverage is not eligible for the
Federal external review process under
this paragraph (d)); and
(B) A rescission of coverage (whether
or not the rescission has any effect on
any particular benefit at that time).
(ii) Examples. The rules of paragraph
(d)(1)(i) of this section are illustrated by
the following examples:
Example 1. (i) Facts. A group health plan
provides coverage for 30 physical therapy
visits generally. After the 30th visit, coverage
is provided only if the service is
preauthorized pursuant to an approved
treatment plan that takes into account
medical necessity using the plan’s definition
of the term. Individual A seeks coverage for
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a 31st physical therapy visit. A’s health care
provider submits a treatment plan for
approval, but it is not approved by the plan,
so coverage for the 31st visit is not
preauthorized. With respect to the 31st visit,
A receives a notice of final internal adverse
benefit determination stating that the
maximum visit limit is exceeded.
(ii) Conclusion. In this Example 1, the
plan’s denial of benefits is based on medical
necessity and involves medical judgment.
Accordingly, the claim is eligible for external
review under paragraph (d)(1)(i) of this
section. Moreover, the plan’s notification of
final internal adverse benefit determination
is inadequate under paragraphs (b)(2)(i) and
(b)(2)(ii)(E)(3) of this section because it fails
to make clear that the plan will pay for more
than 30 visits if the service is preauthorized
pursuant to an approved treatment plan that
takes into account medical necessity using
the plan’s definition of the term.
Accordingly, the notice of final internal
adverse benefit determination should refer to
the plan provision governing the 31st visit
and should describe the plan’s standard for
medical necessity, as well as how the
treatment fails to meet the plan’s standard.
Example 2. (i) Facts. A group health plan
does not provide coverage for services
provided out of network, unless the service
cannot effectively be provided in network.
Individual B seeks coverage for a specialized
medical procedure from an out-of-network
provider because B believes that the
procedure cannot be effectively provided in
network. B receives a notice of final internal
adverse benefit determination stating that the
claim is denied because the provider is outof-network.
(ii) Conclusion. In this Example 2, the
plan’s denial of benefits is based on whether
a service can effectively be provided in
network and, therefore, involves medical
judgment. Accordingly, the claim is eligible
for external review under paragraph (d)(1)(i)
of this section. Moreover, the plan’s notice of
final internal adverse benefit determination
is inadequate under paragraphs (b)(2)(i) and
(b)(2)(ii)(E)(3) of this section because the plan
does provide benefits for services on an outof-network basis if the services cannot
effectively be provided in network.
Accordingly, the notice of final internal
adverse benefit determination is required to
refer to the exception to the out-of-network
exclusion and should describe the plan’s
standards for determining effectiveness of
services, as well as how services available to
the claimant within the plan’s network meet
the plan’s standard for effectiveness of
services.
(2) External review process standards.
The Federal external review process
established pursuant to this paragraph
(d) is considered similar to the process
set forth in the NAIC Uniform Model
Act and, therefore satisfies the
requirements of paragraph (d)(2), if such
process provides the following.
(i) Request for external review. A
group health plan or health insurance
issuer must allow a claimant to file a
request for an external review with the
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plan or issuer if the request is filed
within four months after the date of
receipt of a notice of an adverse benefit
determination or final internal adverse
benefit determination. If there is no
corresponding date four months after
the date of receipt of such a notice, then
the request must be filed by the first day
of the fifth month following the receipt
of the notice. For example, if the date of
receipt of the notice is October 30,
because there is no February 30, the
request must be filed by March 1. If the
last filing date would fall on a Saturday,
Sunday, or Federal holiday, the last
filing date is extended to the next day
that is not a Saturday, Sunday, or
Federal holiday.
(ii) Preliminary review—(A) In
general. Within five business days
following the date of receipt of the
external review request, the group
health plan or health insurance issuer
must complete a preliminary review of
the request to determine whether:
(1) The claimant is or was covered
under the plan or coverage at the time
the health care item or service was
requested or, in the case of a
retrospective review, was covered under
the plan or coverage at the time the
health care item or service was
provided;
(2) The adverse benefit determination
or the final adverse benefit
determination does not relate to the
claimant’s failure to meet the
requirements for eligibility under the
terms of the group health plan or health
insurance coverage (e.g., worker
classification or similar determination);
(3) The claimant has exhausted the
plan’s or issuer’s internal appeal process
unless the claimant is not required to
exhaust the internal appeals process
under paragraph (b)(1) of this section;
and
(4) The claimant has provided all the
information and forms required to
process an external review.
(B) Within one business day after
completion of the preliminary review,
the plan or issuer must issue a
notification in writing to the claimant.
If the request is complete but not
eligible for external review, such
notification must include the reasons for
its ineligibility and current contact
information, including the phone
number, for the Employee Benefits
Security Administration. If the request
is not complete, such notification must
describe the information or materials
needed to make the request complete,
and the plan or issuer must allow a
claimant to perfect the request for
external review within the four-month
filing period or within the 48 hour
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period following the receipt of the
notification, whichever is later.
(iii) Referral to Independent Review
Organization—(A) In general. The group
health plan or health insurance issuer
must assign an IRO that is accredited by
URAC or by similar nationallyrecognized accrediting organization to
conduct the external review. The IRO
referral process must provide for the
following:
(1) The plan or issuer must ensure
that the IRO process is not biased and
ensures independence;
(2) The plan or issuer must contract
with at least three (3) IROs for
assignments under the plan or coverage
and rotate claims assignments among
them (or incorporate other independent,
unbiased methods for selection of IROs,
such as random selection); and
(3) The IRO may not be eligible for
any financial incentives based on the
likelihood that the IRO will support the
denial of benefits.
(4) The IRO process may not impose
any costs, including filing fees, on the
claimant requesting the external review.
(B) IRO contracts. A group health plan
or health insurance issuer must include
the following standards in the contract
between the plan or issuer and the IRO:
(1) The assigned IRO will utilize legal
experts where appropriate to make
coverage determinations under the plan
or coverage.
(2) The assigned IRO will timely
notify a claimant in writing whether the
request is eligible for external review.
This notice will include a statement that
the claimant may submit in writing to
the assigned IRO, within ten business
days following the date of receipt of the
notice, additional information. This
additional information must be
considered by the IRO when conducting
the external review. The IRO is not
required to, but may, accept and
consider additional information
submitted after ten business days.
(3) Within five business days after the
date of assignment of the IRO, the plan
or issuer must provide to the assigned
IRO the documents and any information
considered in making the adverse
benefit determination or final internal
adverse benefit determination. Failure
by the plan or issuer to timely provide
the documents and information must
not delay the conduct of the external
review. If the plan or issuer fails to
timely provide the documents and
information, the assigned IRO may
terminate the external review and make
a decision to reverse the adverse benefit
determination or final internal adverse
benefit determination. Within one
business day after making the decision,
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the IRO must notify the claimant and
the plan.
(4) Upon receipt of any information
submitted by the claimant, the assigned
IRO must within one business day
forward the information to the plan or
issuer. Upon receipt of any such
information, the plan or issuer may
reconsider its adverse benefit
determination or final internal adverse
benefit determination that is the subject
of the external review. Reconsideration
by the plan or issuer must not delay the
external review. The external review
may be terminated as a result of the
reconsideration only if the plan decides,
upon completion of its reconsideration,
to reverse its adverse benefit
determination or final internal adverse
benefit determination and provide
coverage or payment. Within one
business day after making such a
decision, the plan must provide written
notice of its decision to the claimant
and the assigned IRO. The assigned IRO
must terminate the external review
upon receipt of the notice from the plan
or issuer.
(5) The IRO will review all of the
information and documents timely
received. In reaching a decision, the
assigned IRO will review the claim de
novo and not be bound by any decisions
or conclusions reached during the
plan’s or issuer’s internal claims and
appeals process applicable under
paragraph (b). In addition to the
documents and information provided,
the assigned IRO, to the extent the
information or documents are available
and the IRO considers them appropriate,
will consider the following in reaching
a decision:
(i) The claimant’s medical records;
(ii) The attending health care
professional’s recommendation;
(iii) Reports from appropriate health
care professionals and other documents
submitted by the plan or issuer,
claimant, or the claimant’s treating
provider;
(iv) The terms of the claimant’s plan
or coverage to ensure that the IRO’s
decision is not contrary to the terms of
the plan or coverage, unless the terms
are inconsistent with applicable law;
(v) Appropriate practice guidelines,
which must include applicable
evidence-based standards and may
include any other practice guidelines
developed by the Federal government,
national or professional medical
societies, boards, and associations;
(vi) Any applicable clinical review
criteria developed and used by the plan
or issuer, unless the criteria are
inconsistent with the terms of the plan
or coverage or with applicable law; and
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72251
(vii) To the extent the final IRO
decision maker is different from the
IRO’s clinical reviewer, the opinion of
such clinical reviewer, after considering
information described in this notice, to
the extent the information or documents
are available and the clinical reviewer
or reviewers consider such information
or documents appropriate.
(6) The assigned IRO must provide
written notice of the final external
review decision within 45 days after the
IRO receives the request for the external
review. The IRO must deliver the notice
of the final external review decision to
the claimant and the plan or issuer.
(7) The assigned IRO’s written notice
of the final external review decision
must contain the following:
(i) A general description of the reason
for the request for external review,
including information sufficient to
identify the claim (including the date or
dates of service, the health care
provider, the claim amount (if
applicable), and a statement describing
the availability, upon request, of the
diagnosis code and its corresponding
meaning, the treatment code and its
corresponding meaning, and the reason
for the plan’s or issuer’s denial);
(ii) The date the IRO received the
assignment to conduct the external
review and the date of the IRO decision;
(iii) References to the evidence or
documentation, including the specific
coverage provisions and evidence-based
standards, considered in reaching its
decision;
(iv) A discussion of the principal
reason or reasons for its decision,
including the rationale for its decision
and any evidence-based standards that
were relied on in making its decision;
(v) A statement that the IRO’s
determination is binding except to the
extent that other remedies may be
available under State or Federal law to
either the group health plan or health
insurance issuer or to the claimant, or
to the extent the health plan or health
insurance issuer voluntarily makes
payment on the claim or otherwise
provides benefits at any time, including
after a final external review decision
that denies the claim or otherwise fails
to require such payment or benefits;
(vi) A statement that judicial review
may be available to the claimant; and
(vii) Current contact information,
including phone number, for any
applicable office of health insurance
consumer assistance or ombudsman
established under PHS Act section 2793.
(viii) After a final external review
decision, the IRO must maintain records
of all claims and notices associated with
the external review process for six years.
An IRO must make such records
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available for examination by the
claimant, plan, issuer, or State or
Federal oversight agency upon request,
except where such disclosure would
violate State or Federal privacy laws.
(iv) Reversal of plan’s or issuer’s
decision. Upon receipt of a notice of a
final external review decision reversing
the adverse benefit determination or
final adverse benefit determination, the
plan or issuer immediately must
provide coverage or payment (including
immediately authorizing care or
immediately paying benefits) for the
claim.
(3) Expedited external review. A
group health plan or health insurance
issuer must comply with the following
standards with respect to an expedited
external review:
(i) Request for external review. A
group health plan or health insurance
issuer must allow a claimant to make a
request for an expedited external review
with the plan or issuer at the time the
claimant receives:
(A) An adverse benefit determination
if the adverse benefit determination
involves a medical condition of the
claimant for which the timeframe for
completion of an expedited internal
appeal under paragraph (b) of this
section would seriously jeopardize the
life or health of the claimant or would
jeopardize the claimant’s ability to
regain maximum function and the
claimant has filed a request for an
expedited internal appeal; or
(B) A final internal adverse benefit
determination, if the claimant has a
medical condition where the timeframe
for completion of a standard external
review would seriously jeopardize the
life or health of the claimant or would
jeopardize the claimant’s ability to
regain maximum function, or if the final
internal adverse benefit determination
concerns an admission, availability of
care, continued stay, or health care item
or service for which the claimant
received emergency services, but has
not been discharged from the facility.
(ii) Preliminary review. Immediately
upon receipt of the request for
expedited external review, the plan or
issuer must determine whether the
request meets the reviewability
requirements set forth in paragraph
(d)(2)(ii) of this section for standard
external review. The plan or issuer must
immediately send a notice that meets
the requirements set forth in paragraph
(d)(2)(ii)(B) for standard review to the
claimant of its eligibility determination.
(iii) Referral to independent review
organization. (A) Upon a determination
that a request is eligible for expedited
external review following the
preliminary review, the plan or issuer
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will assign an IRO pursuant to the
requirements set forth in paragraph
(d)(2)(iii) of this section for standard
review. The plan or issuer must provide
or transmit all necessary documents and
information considered in making the
adverse benefit determination or final
internal adverse benefit determination
to the assigned IRO electronically or by
telephone or facsimile or any other
available expeditious method.
(B) The assigned IRO, to the extent the
information or documents are available
and the IRO considers them appropriate,
must consider the information or
documents described above under the
procedures for standard review. In
reaching a decision, the assigned IRO
must review the claim de novo and is
not bound by any decisions or
conclusions reached during the plan’s
or issuer’s internal claims and appeals
process.
(iv) Notice of final external review
decision. The plan’s or issuer’s contract
with the assigned IRO must require the
IRO to provide notice of the final
external review decision, in accordance
with the requirements set forth in
paragraph (d)(2)(iii)(B) of this section, as
expeditiously as the claimant’s medical
condition or circumstances require, but
in no event more than 72 hours after the
IRO receives the request for an
expedited external review. If the notice
is not in writing, within 48 hours after
the date of providing that notice, the
assigned IRO must provide written
confirmation of the decision to the
claimant and the plan or issuer.
(4) Alternative, Federallyadministered external review process.
Insured coverage not subject to an
applicable State external review process
under paragraph (c) of this section may
elect to use either the Federal external
review process, as set forth under
paragraph (d) of this section or the
Federally-administered external review
process, as set forth by HHS in
guidance. In such circumstances, the
requirement to provide external review
under this paragraph (d) is satisfied.
(e) Form and manner of notice—(1) In
general. For purposes of this section, a
group health plan and a health
insurance issuer offering group health
insurance coverage are considered to
provide relevant notices in a culturally
and linguistically appropriate manner if
the plan or issuer meets all the
requirements of paragraph (e)(2) of this
section with respect to the applicable
non-English languages described in
paragraph (e)(3) of this section.
(2) Requirements. (i) The plan or
issuer must provide oral language
services (such as a telephone customer
assistance hotline) that includes
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answering questions in any applicable
non-English language and providing
assistance with filing claims and
appeals (including external review) in
any applicable non-English language;
(ii) The plan or issuer must provide,
upon request, a notice in any applicable
non-English language; and
(iii) The plan or issuer must include
in the English versions of all notices, a
statement prominently displayed in any
applicable non-English language clearly
indicating how to access the language
services provided by the plan or issuer.
(3) Applicable non-English language.
With respect to an address in any
United States county to which a notice
is sent, a non-English language is an
applicable non-English language if ten
percent or more of the population
residing in the county is literate only in
the same non-English language, as
determined in guidance published by
the Secretary.
(f) Secretarial authority. The Secretary
may determine that the external review
process of a group health plan or health
insurance issuer, in operation as of
March 23, 2010, is considered in
compliance with the applicable process
established under paragraph (c) or (d) of
this section if it substantially meets the
requirements of paragraph (c) or (d) of
this section, as applicable.
(g) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the interim
final regulations promulgated by the
Department of Labor at 29 CFR part
2590, contained in the 29 CFR, parts
1927 to end, edition revised as of July
1, 2015.
■ Par. 15. Section 54.9815–2719A is
added to read as follows:
§ 54.9815–2719A
Patient protections.
(a) Choice of health care
professional—(1) Designation of
primary care provider—(i) In general. If
a group health plan, or a health
insurance issuer offering group health
insurance coverage, requires or provides
for designation by a participant or
beneficiary of a participating primary
care provider, then the plan or issuer
must permit each participant or
beneficiary to designate any
participating primary care provider who
is available to accept the participant or
beneficiary. In such a case, the plan or
issuer must comply with the rules of
paragraph (a)(4) of this section by
informing each participant of the terms
of the plan or health insurance coverage
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regarding designation of a primary care
provider.
(ii) Construction. Nothing in
paragraph (a)(1)(i) of this section is to be
construed to prohibit the application of
reasonable and appropriate geographic
limitations with respect to the selection
of primary care providers, in accordance
with the terms of the plan or coverage,
the underlying provider contracts, and
applicable State law.
(iii) Example. The rules of this
paragraph (a)(1) are illustrated by the
following example:
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Example. (i) Facts. A group health plan
requires individuals covered under the plan
to designate a primary care provider. The
plan permits each individual to designate
any primary care provider participating in
the plan’s network who is available to accept
the individual as the individual’s primary
care provider. If an individual has not
designated a primary care provider, the plan
designates one until one has been designated
by the individual. The plan provides a notice
that satisfies the requirements of paragraph
(a)(4) of this section regarding the ability to
designate a primary care provider.
(ii) Conclusion. In this Example, the plan
has satisfied the requirements of paragraph
(a) of this section.
(2) Designation of pediatrician as
primary care provider—(i) In general. If
a group health plan, or a health
insurance issuer offering group health
insurance coverage, requires or provides
for the designation of a participating
primary care provider for a child by a
participant or beneficiary, the plan or
issuer must permit the participant or
beneficiary to designate a physician
(allopathic or osteopathic) who
specializes in pediatrics (including
pediatric subspecialties, based on the
scope of that provider’s license under
applicable State law) as the child’s
primary care provider if the provider
participates in the network of the plan
or issuer and is available to accept the
child. In such a case, the plan or issuer
must comply with the rules of
paragraph (a)(4) of this section by
informing each participant of the terms
of the plan or health insurance coverage
regarding designation of a pediatrician
as the child’s primary care provider.
(ii) Construction. Nothing in
paragraph (a)(2)(i) of this section is to be
construed to waive any exclusions of
coverage under the terms and
conditions of the plan or health
insurance coverage with respect to
coverage of pediatric care.
(iii) Examples. The rules of this
paragraph (a)(2) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan’s
HMO designates for each participant a
physician who specializes in internal
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medicine to serve as the primary care
provider for the participant and any
beneficiaries. Participant A requests that
Pediatrician B be designated as the primary
care provider for A’s child. B is a
participating provider in the HMO’s network
and is available to accept the child.
(ii) Conclusion. In this Example 1, the
HMO must permit A’s designation of B as the
primary care provider for A’s child in order
to comply with the requirements of this
paragraph (a)(2).
Example 2. (i) Facts. Same facts as
Example 1, except that A takes A’s child to
B for treatment of the child’s severe shellfish
allergies. B wishes to refer A’s child to an
allergist for treatment. The HMO, however,
does not provide coverage for treatment of
food allergies, nor does it have an allergist
participating in its network, and it therefore
refuses to authorize the referral.
(ii) Conclusion. In this Example 2, the
HMO has not violated the requirements of
this paragraph (a)(2) because the exclusion of
treatment for food allergies is in accordance
with the terms of A’s coverage.
(3) Patient access to obstetrical and
gynecological care—(i) General rights—
(A) Direct access. A group health plan,
or a health insurance issuer offering
group health insurance coverage,
described in paragraph (a)(3)(ii) of this
section may not require authorization or
referral by the plan, issuer, or any
person (including a primary care
provider) in the case of a female
participant or beneficiary who seeks
coverage for obstetrical or gynecological
care provided by a participating health
care professional who specializes in
obstetrics or gynecology. In such a case,
the plan or issuer must comply with the
rules of paragraph (a)(4) of this section
by informing each participant that the
plan may not require authorization or
referral for obstetrical or gynecological
care by a participating health care
professional who specializes in
obstetrics or gynecology. The plan or
issuer may require such a professional
to agree to otherwise adhere to the
plan’s or issuer’s policies and
procedures, including procedures
regarding referrals and obtaining prior
authorization and providing services
pursuant to a treatment plan (if any)
approved by the plan or issuer. For
purposes of this paragraph (a)(3), a
health care professional who specializes
in obstetrics or gynecology is any
individual (including a person other
than a physician) who is authorized
under applicable State law to provide
obstetrical or gynecological care.
(B) Obstetrical and gynecological
care. A group health plan or health
insurance issuer described in paragraph
(a)(3)(ii) of this section must treat the
provision of obstetrical and
gynecological care, and the ordering of
related obstetrical and gynecological
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72253
items and services, pursuant to the
direct access described under paragraph
(a)(3)(i)(A) of this section, by a
participating health care professional
who specializes in obstetrics or
gynecology as the authorization of the
primary care provider.
(ii) Application of paragraph. A group
health plan, or a health insurance issuer
offering group health insurance
coverage, is described in this paragraph
(a)(3) if the plan or issuer—
(A) Provides coverage for obstetrical
or gynecological care; and
(B) Requires the designation by a
participant or beneficiary of a
participating primary care provider.
(iii) Construction. Nothing in
paragraph (a)(3)(i) of this section is to be
construed to—
(A) Waive any exclusions of coverage
under the terms and conditions of the
plan or health insurance coverage with
respect to coverage of obstetrical or
gynecological care; or
(B) Preclude the group health plan or
health insurance issuer involved from
requiring that the obstetrical or
gynecological provider notify the
primary care health care professional or
the plan or issuer of treatment
decisions.
(iv) Examples. The rules of this
paragraph (a)(3) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan
requires each participant to designate a
physician to serve as the primary care
provider for the participant and the
participant’s family. Participant A, a female,
requests a gynecological exam with Physician
B, an in-network physician specializing in
gynecological care. The group health plan
requires prior authorization from A’s
designated primary care provider for the
gynecological exam.
(ii) Conclusion. In this Example 1, the
group health plan has violated the
requirements of this paragraph (a)(3) because
the plan requires prior authorization from A’s
primary care provider prior to obtaining
gynecological services.
Example 2. (i) Facts. Same facts as
Example 1 except that A seeks gynecological
services from C, an out-of-network provider.
(ii) Conclusion. In this Example 2, the
group health plan has not violated the
requirements of this paragraph (a)(3) by
requiring prior authorization because C is not
a participating health care provider.
Example 3. (i) Facts. Same facts as
Example 1 except that the group health plan
only requires B to inform A’s designated
primary care physician of treatment
decisions.
(ii) Conclusion. In this Example 3, the
group health plan has not violated the
requirements of this paragraph (a)(3) because
A has direct access to B without prior
authorization. The fact that the group health
plan requires notification of treatment
decisions to the designated primary care
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one for you.] For information on how to
select a primary care provider, and for a list
of the participating primary care providers,
contact the [plan administrator or issuer] at
[insert contact information].
(4) Notice of right to designate a
primary care provider—(i) In general. If
a group health plan or health insurance
issuer requires the designation by a
participant or beneficiary of a primary
care provider, the plan or issuer must
provide a notice informing each
participant of the terms of the plan or
health insurance coverage regarding
designation of a primary care provider
and of the rights—
(A) Under paragraph (a)(1)(i) of this
section, that any participating primary
care provider who is available to accept
the participant or beneficiary can be
designated;
(B) Under paragraph (a)(2)(i) of this
section, with respect to a child, that any
participating physician who specializes
in pediatrics can be designated as the
primary care provider; and
(C) Under paragraph (a)(3)(i) of this
section, that the plan may not require
authorization or referral for obstetrical
or gynecological care by a participating
health care professional who specializes
in obstetrics or gynecology.
(ii) Timing. The notice described in
paragraph (a)(4)(i) of this section must
be included whenever the plan or issuer
provides a participant with a summary
plan description or other similar
description of benefits under the plan or
health insurance coverage.
(iii) Model language. The following
model language can be used to satisfy
the notice requirement described in
paragraph (a)(4)(i) of this section:
(A) For plans and issuers that require
or allow for the designation of primary
care providers by participants or
beneficiaries, insert:
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physician does not violate this paragraph
(a)(3).
Example 4. (i) Facts. A group health plan
requires each participant to designate a
physician to serve as the primary care
provider for the participant and the
participant’s family. The group health plan
requires prior authorization before providing
benefits for uterine fibroid embolization.
(ii) Conclusion. In this Example 4, the plan
requirement for prior authorization before
providing benefits for uterine fibroid
embolization does not violate the
requirements of this paragraph (a)(3) because,
though the prior authorization requirement
applies to obstetrical services, it does not
restrict access to any providers specializing
in obstetrics or gynecology.
You do not need prior authorization from
[name of group health plan or issuer] or from
any other person (including a primary care
provider) in order to obtain access to
obstetrical or gynecological care from a
health care professional in our network who
specializes in obstetrics or gynecology. The
health care professional, however, may be
required to comply with certain procedures,
including obtaining prior authorization for
certain services, following a pre-approved
treatment plan, or procedures for making
referrals. For a list of participating health
care professionals who specialize in
obstetrics or gynecology, contact the [plan
administrator or issuer] at [insert contact
information].
[Name of group health plan or health
insurance issuer] generally [requires/allows]
the designation of a primary care provider.
You have the right to designate any primary
care provider who participates in our
network and who is available to accept you
or your family members. [If the plan or health
insurance coverage designates a primary care
provider automatically, insert: Until you
make this designation, [name of group health
plan or health insurance issuer] designates
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(B) For plans and issuers that require
or allow for the designation of a primary
care provider for a child, add:
For children, you may designate a
pediatrician as the primary care
provider.
(C) For plans and issuers that provide
coverage for obstetric or gynecological
care and require the designation by a
participant or beneficiary of a primary
care provider, add:
(b) Coverage of emergency services—
(1) Scope. If a group health plan, or a
health insurance issuer offering group
health insurance coverage, provides any
benefits with respect to services in an
emergency department of a hospital, the
plan or issuer must cover emergency
services (as defined in paragraph
(b)(4)(ii) of this section) consistent with
the rules of this paragraph (b).
(2) General rules. A plan or issuer
subject to the requirements of this
paragraph (b) must provide coverage for
emergency services in the following
manner—
(i) Without the need for any prior
authorization determination, even if the
emergency services are provided on an
out-of-network basis;
(ii) Without regard to whether the
health care provider furnishing the
emergency services is a participating
network provider with respect to the
services;
(iii) If the emergency services are
provided out of network, without
imposing any administrative
requirement or limitation on coverage
that is more restrictive than the
requirements or limitations that apply to
emergency services received from innetwork providers;
(iv) If the emergency services are
provided out of network, by complying
with the cost-sharing requirements of
paragraph (b)(3) of this section; and
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(v) Without regard to any other term
or condition of the coverage, other
than—
(A) The exclusion of or coordination
of benefits;
(B) An affiliation or waiting period
permitted under part 7 of ERISA, part A
of title XXVII of the PHS Act, or chapter
100 of the Internal Revenue Code; or
(C) Applicable cost sharing.
(3) Cost-sharing requirements—(i)
Copayments and coinsurance. Any costsharing requirement expressed as a
copayment amount or coinsurance rate
imposed with respect to a participant or
beneficiary for out-of-network
emergency services cannot exceed the
cost-sharing requirement imposed with
respect to a participant or beneficiary if
the services were provided in-network.
However, a participant or beneficiary
may be required to pay, in addition to
the in-network cost sharing, the excess
of the amount the out-of-network
provider charges over the amount the
plan or issuer is required to pay under
this paragraph (b)(3)(i). A group health
plan or health insurance issuer complies
with the requirements of this paragraph
(b)(3) if it provides benefits with respect
to an emergency service in an amount
at least equal to the greatest of the three
amounts specified in paragraphs
(b)(3)(i)(A), (B), and (C) of this section
(which are adjusted for in-network costsharing requirements).
(A) The amount negotiated with innetwork providers for the emergency
service furnished, excluding any innetwork copayment or coinsurance
imposed with respect to the participant
or beneficiary. If there is more than one
amount negotiated with in-network
providers for the emergency service, the
amount described under this paragraph
(b)(3)(i)(A) is the median of these
amounts, excluding any in-network
copayment or coinsurance imposed
with respect to the participant or
beneficiary. In determining the median
described in the preceding sentence, the
amount negotiated with each in-network
provider is treated as a separate amount
(even if the same amount is paid to
more than one provider). If there is no
per-service amount negotiated with innetwork providers (such as under a
capitation or other similar payment
arrangement), the amount under this
paragraph (b)(3)(i)(A) is disregarded.
(B) The amount for the emergency
service calculated using the same
method the plan generally uses to
determine payments for out-of-network
services (such as the usual, customary,
and reasonable amount), excluding any
in-network copayment or coinsurance
imposed with respect to the participant
or beneficiary. The amount in this
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paragraph (b)(3)(i)(B) is determined
without reduction for out-of-network
cost sharing that generally applies under
the plan or health insurance coverage
with respect to out-of-network services.
Thus, for example, if a plan generally
pays 70 percent of the usual, customary,
and reasonable amount for out-ofnetwork services, the amount in this
paragraph (b)(3)(i)(B) for an emergency
service is the total (that is, 100 percent)
of the usual, customary, and reasonable
amount for the service, not reduced by
the 30 percent coinsurance that would
generally apply to out-of-network
services (but reduced by the in-network
copayment or coinsurance that the
individual would be responsible for if
the emergency service had been
provided in-network).
(C) The amount that would be paid
under Medicare (part A or part B of title
XVIII of the Social Security Act, 42
U.S.C. 1395 et seq.) for the emergency
service, excluding any in-network
copayment or coinsurance imposed
with respect to the participant or
beneficiary.
(ii) Other cost sharing. Any costsharing requirement other than a
copayment or coinsurance requirement
(such as a deductible or out-of-pocket
maximum) may be imposed with
respect to emergency services provided
out of network if the cost-sharing
requirement generally applies to out-ofnetwork benefits. A deductible may be
imposed with respect to out-of-network
emergency services only as part of a
deductible that generally applies to outof-network benefits. If an out-of-pocket
maximum generally applies to out-ofnetwork benefits, that out-of-pocket
maximum must apply to out-of-network
emergency services.
(iii) Special rules regarding out-ofnetwork minimum payment standards—
(A) The minimum payment standards
set forth under paragraph (b)(3) of this
section do not apply in cases where
State law prohibits a participant or
beneficiary from being required to pay,
in addition to the in-network cost
sharing, the excess of the amount the
out-of-network provider charges over
the amount the plan or issuer provides
in benefits, or where a group health plan
or health insurance issuer is
contractually responsible for such
amounts. Nonetheless, in such cases, a
plan or issuer may not impose any
copayment or coinsurance requirement
for out-of-network emergency services
that is higher than the copayment or
coinsurance requirement that would
apply if the services were provided in
network.
(B) A group health plan and health
insurance issuer must provide a
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participant or beneficiary adequate and
prominent notice of their lack of
financial responsibility with respect to
the amounts described under this
paragraph (b)(3)(iii), to prevent
inadvertent payment by the participant
or beneficiary.
(iv) Examples. The rules of this
paragraph (b)(3) are illustrated by the
following examples. In all of these
examples, the group health plan covers
benefits with respect to emergency
services.
Example 1. (i) Facts. A group health plan
imposes a 25% coinsurance responsibility on
individuals who are furnished emergency
services, whether provided in network or out
of network. If a covered individual notifies
the plan within two business days after the
day an individual receives treatment in an
emergency department, the plan reduces the
coinsurance rate to 15%.
(ii) Conclusion. In this Example 1, the
requirement to notify the plan in order to
receive a reduction in the coinsurance rate
does not violate the requirement that the plan
cover emergency services without the need
for any prior authorization determination.
This is the result even if the plan required
that it be notified before or at the time of
receiving services at the emergency
department in order to receive a reduction in
the coinsurance rate.
Example 2. (i) Facts. A group health plan
imposes a $60 copayment on emergency
services without preauthorization, whether
provided in network or out of network. If
emergency services are preauthorized, the
plan waives the copayment, even if it later
determines the medical condition was not an
emergency medical condition.
(ii) Conclusion. In this Example 2, by
requiring an individual to pay more for
emergency services if the individual does not
obtain prior authorization, the plan violates
the requirement that the plan cover
emergency services without the need for any
prior authorization determination. (By
contrast, if, to have the copayment waived,
the plan merely required that it be notified
rather than a prior authorization, then the
plan would not violate the requirement that
the plan cover emergency services without
the need for any prior authorization
determination.)
Example 3. (i) Facts. A group health plan
covers individuals who receive emergency
services with respect to an emergency
medical condition from an out-of-network
provider. The plan has agreements with innetwork providers with respect to a certain
emergency service. Each provider has agreed
to provide the service for a certain amount.
Among all the providers for the service: One
has agreed to accept $85, two have agreed to
accept $100, two have agreed to accept $110,
three have agreed to accept $120, and one has
agreed to accept $150. Under the agreement,
the plan agrees to pay the providers 80% of
the agreed amount, with the individual
receiving the service responsible for the
remaining 20%.
(ii) Conclusion. In this Example 3, the
values taken into account in determining the
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72255
median are $85, $100, $100, $110, $110,
$120, $120, $120, and $150. Therefore, the
median amount among those agreed to for the
emergency service is $110, and the amount
under paragraph (b)(3)(i)(A) of this section is
80% of $110 ($88).
Example 4. (i) Facts. Same facts as
Example 3. Subsequently, the plan adds
another provider to its network, who has
agreed to accept $150 for the emergency
service.
(ii) Conclusion. In this Example 4, the
median amount among those agreed to for the
emergency service is $115. (Because there is
no one middle amount, the median is the
average of the two middle amounts, $110 and
$120.) Accordingly, the amount under
paragraph (b)(3)(i)(A) of this section is 80%
of $115 ($92).
Example 5. (i) Facts. Same facts as
Example 4. An individual covered by the
plan receives the emergency service from an
out-of-network provider, who charges $125
for the service. With respect to services
provided by out-of-network providers
generally, the plan reimburses covered
individuals 50% of the reasonable amount
charged by the provider for medical services.
For this purpose, the reasonable amount for
any service is based on information on
charges by all providers collected by a third
party, on a zip code by zip code basis, with
the plan treating charges at a specified
percentile as reasonable. For the emergency
service received by the individual, the
reasonable amount calculated using this
method is $116. The amount that would be
paid under Medicare for the emergency
service, excluding any copayment or
coinsurance for the service, is $80.
(ii) Conclusion. In this Example 5, the plan
is responsible for paying $92.80, 80% of
$116. The median amount among those
agreed to for the emergency service is $115
and the amount the plan would pay is $92
(80% of $115); the amount calculated using
the same method the plan uses to determine
payments for out-of-network services—
$116—excluding the in-network 20%
coinsurance, is $92.80; and the Medicare
payment is $80. Thus, the greatest amount is
$92.80. The individual is responsible for the
remaining $32.20 charged by the out-ofnetwork provider.
Example 6. (i) Facts. Same facts as
Example 5. The group health plan generally
imposes a $250 deductible for in-network
health care. With respect to all health care
provided by out-of-network providers, the
plan imposes a $500 deductible. (Covered innetwork claims are credited against the
deductible.) The individual has incurred and
submitted $260 of covered claims prior to
receiving the emergency service out of
network.
(ii) Conclusion. In this Example 6, the plan
is not responsible for paying anything with
respect to the emergency service furnished by
the out-of-network provider because the
covered individual has not satisfied the
higher deductible that applies generally to all
health care provided out of network.
However, the amount the individual is
required to pay is credited against the
deductible.
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Federal Register / Vol. 80, No. 222 / Wednesday, November 18, 2015 / Rules and Regulations
(4) Definitions. The definitions in this
paragraph (b)(4) govern in applying the
provisions of this paragraph (b).
(i) Emergency medical condition. The
term emergency medical condition
means a medical condition manifesting
itself by acute symptoms of sufficient
severity (including severe pain) so that
a prudent layperson, who possesses an
average knowledge of health and
medicine, could reasonably expect the
absence of immediate medical attention
to result in a condition described in
clause (i), (ii), or (iii) of section
1867(e)(1)(A) of the Social Security Act
(42 U.S.C. 1395dd(e)(1)(A)). (In that
provision of the Social Security Act,
clause (i) refers to placing the health of
the individual (or, with respect to a
pregnant woman, the health of the
woman or her unborn child) in serious
jeopardy; clause (ii) refers to serious
impairment to bodily functions; and
clause (iii) refers to serious dysfunction
of any bodily organ or part.)
(ii) Emergency services. The term
emergency services means, with respect
to an emergency medical condition—
(A) A medical screening examination
(as required under section 1867 of the
Social Security Act, 42 U.S.C. 1395dd)
that is within the capability of the
emergency department of a hospital,
including ancillary services routinely
available to the emergency department
to evaluate such emergency medical
condition, and
(B) Such further medical examination
and treatment, to the extent they are
within the capabilities of the staff and
facilities available at the hospital, as are
required under section 1867 of the
Social Security Act (42 U.S.C. 1395dd)
to stabilize the patient.
(iii) Stabilize. The term to stabilize,
with respect to an emergency medical
condition (as defined in paragraph
(b)(4)(i) of this section) has the meaning
given in section 1867(e)(3) of the Social
Security Act (42 U.S.C. 1395dd(e)(3)).
(c) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the interim
final regulations promulgated by the
Department of Labor at 29 CFR part
2590, contained in the 29 CFR, parts
1927 to end, edition revised as of July
1, 2015.
§ 54.9815–2719AT
[Removed]
Par. 16. Section 54.9815–2719AT is
removed.
■
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§ 54.9815–2719T
[Removed]
Par. 17. Section 54.9815–2719T is
removed.
■
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Chapter XXV
For the reasons stated in the
preamble, the Employee Benefits
Security Administration adopts as final
the interim final rules amending 29 CFR
part 2590, which were published in the
Federal Register on May 13, 2010 (75
FR 27122), June 17, 2010 (75 FR 34538),
June 28, 2010 (75 FR 37188), and
November 17, 2010 (75 FR 70114) with
the following changes as set forth below:
PART 2590—RULES AND
REGULATIONS FOR GROUP HEALTH
PLANS
18. The authority citation for Part
2590 continues to read as follows:
■
Authority: 29 U.S.C. 1027, 1059, 1135,
1161–1168, 1169, 1181–1183, 1181 note,
1185, 1185a, 1185b, 1191, 1191a, 1191b, and
1191c; sec. 101(g), Public Law 104–191, 110
Stat. 1936; sec. 401(b), Public Law 105–200,
112 Stat. 645 (42 U.S.C. 651 note); sec.
512(d), Public Law 110–343, 122 Stat. 3881;
sec. 1001, 1201, and 1562(e), Public Law
111–148, 124 Stat. 119, as amended by Public
Law 111–152, 124 Stat. 1029; Secretary of
Labor’s Order 1–2011, 77 FR 1088 (Jan. 9,
2012).
19. Section 2590.701–2 is amended by
revising the definition of ‘‘preexisting
condition exclusion’’ to read as follows:
■
§ 2590.701–2
Definitions.
*
*
*
*
*
Preexisting condition exclusion means
a limitation or exclusion of benefits
(including a denial of coverage) based
on the fact that the condition was
present before the effective date of
coverage (or if coverage is denied, the
date of the denial) under a group health
plan or group or individual health
insurance coverage (or other coverage
provided to Federally eligible
individuals pursuant to 45 CFR part
148), whether or not any medical
advice, diagnosis, care, or treatment was
recommended or received before that
day. A preexisting condition exclusion
includes any limitation or exclusion of
benefits (including a denial of coverage)
applicable to an individual as a result of
information relating to an individual’s
health status before the individual’s
effective date of coverage (or if coverage
is denied, the date of the denial) under
a group health plan, or group or
individual health insurance coverage (or
other coverage provided to Federally
eligible individuals pursuant to 45 CFR
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part 148), such as a condition identified
as a result of a pre-enrollment
questionnaire or physical examination
given to the individual, or review of
medical records relating to the preenrollment period.
*
*
*
*
*
■ 20. Section 2590.701–3 is amended by
revising paragraph (a)(1) to read as
follows:
§ 2590.701–3 Limitations on preexisting
condition exclusion period.
(a) Preexisting condition exclusion
defined—(1) A preexisting condition
exclusion means a preexisting condition
exclusion within the meaning of
§ 2590.701–2.
*
*
*
*
*
■ 21. Section 2590.715–1251 revised to
read as follows:
§ 2590.715–1251 Preservation of right to
maintain existing coverage.
(a) Definition of grandfathered health
plan coverage—(1) In general—(i)
Grandfathered health plan coverage
means coverage provided by a group
health plan, or a health insurance
issuer, in which an individual was
enrolled on March 23, 2010 (for as long
as it maintains that status under the
rules of this section). A group health
plan or group health insurance coverage
does not cease to be grandfathered
health plan coverage merely because
one or more (or even all) individuals
enrolled on March 23, 2010 cease to be
covered, provided that the plan or group
health insurance coverage has
continuously covered someone since
March 23, 2010 (not necessarily the
same person, but at all times at least one
person). In addition, subject to the
limitation set forth in paragraph
(a)(1)(ii) of this section, a group health
plan (and any health insurance coverage
offered in connection with the group
health plan) does not cease to be a
grandfathered health plan merely
because the plan (or its sponsor) enters
into a new policy, certificate, or contract
of insurance after March 23, 2010 (for
example, a plan enters into a contract
with a new issuer or a new policy is
issued with an existing issuer). For
purposes of this section, a plan or health
insurance coverage that provides
grandfathered health plan coverage is
referred to as a grandfathered health
plan. The rules of this section apply
separately to each benefit package made
available under a group health plan or
health insurance coverage. Accordingly,
if any benefit package relinquishes
grandfather status, it will not affect the
grandfather status of the other benefit
packages.
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(ii) Changes in group health insurance
coverage. Subject to paragraphs (f) and
(g)(2) of this section, if a group health
plan (including a group health plan that
was self-insured on March 23, 2010) or
its sponsor enters into a new policy,
certificate, or contract of insurance after
March 23, 2010 that is effective before
November 15, 2010, then the plan
ceases to be a grandfathered health plan.
(2) Disclosure of grandfather status—
(i) To maintain status as a grandfathered
health plan, a plan or health insurance
coverage must include a statement that
the plan or coverage believes it is a
grandfathered health plan within the
meaning of section 1251 of the Patient
Protection and Affordable Care Act, and
must provide contact information for
questions and complaints, in any
summary of benefits provided under the
plan.
(ii) The following model language can
be used to satisfy this disclosure
requirement:
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This [group health plan or health insurance
issuer] believes this [plan or coverage] is a
‘‘grandfathered health plan’’ under the
Patient Protection and Affordable Care Act
(the Affordable Care Act). As permitted by
the Affordable Care Act, a grandfathered
health plan can preserve certain basic health
coverage that was already in effect when that
law was enacted. Being a grandfathered
health plan means that your [plan or policy]
may not include certain consumer
protections of the Affordable Care Act that
apply to other plans, for example, the
requirement for the provision of preventive
health services without any cost sharing.
However, grandfathered health plans must
comply with certain other consumer
protections in the Affordable Care Act, for
example, the elimination of lifetime dollar
limits on benefits.
Questions regarding which protections
apply and which protections do not apply to
a grandfathered health plan and what might
cause a plan to change from grandfathered
health plan status can be directed to the plan
administrator at [insert contact information].
[For ERISA plans, insert: You may also
contact the Employee Benefits Security
Administration, U.S. Department of Labor at
1–866–444–3272 or www.dol.gov/ebsa/
healthreform. This Web site has a table
summarizing which protections do and do
not apply to grandfathered health plans.] [For
individual market policies and nonfederal
governmental plans, insert: You may also
contact the U.S. Department of Health and
Human Services at www.healthcare.gov.]
(3)(i) Documentation of plan or policy
terms on March 23, 2010. To maintain
status as a grandfathered health plan, a
group health plan, or group health
insurance coverage, must, for as long as
the plan or health insurance coverage
takes the position that it is a
grandfathered health plan—
(A) Maintain records documenting the
terms of the plan or health insurance
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coverage in connection with the
coverage in effect on March 23, 2010,
and any other documents necessary to
verify, explain, or clarify its status as a
grandfathered health plan; and
(B) Make such records available for
examination upon request.
(ii) Change in group health insurance
coverage. To maintain status as a
grandfathered health plan, a group
health plan that enters into a new
policy, certificate, or contract of
insurance must provide to the new
health insurance issuer (and the new
health insurance issuer must require)
documentation of plan terms (including
benefits, cost sharing, employer
contributions, and annual dollar limits)
under the prior health coverage
sufficient to determine whether a
change causing a cessation of
grandfathered health plan status under
paragraph (g)(1) of this section has
occurred.
(4) Family members enrolling after
March 23, 2010. With respect to an
individual who is enrolled in a group
health plan or health insurance coverage
on March 23, 2010, grandfathered health
plan coverage includes coverage of
family members of the individual who
enroll after March 23, 2010 in the
grandfathered health plan coverage of
the individual.
(b) Allowance for new employees to
join current plan—(1) In general.
Subject to paragraph (b)(2) of this
section, a group health plan (including
health insurance coverage provided in
connection with the group health plan)
that provided coverage on March 23,
2010 and has retained its status as a
grandfathered health plan (consistent
with the rules of this section, including
paragraph (g) of this section) is
grandfathered health plan coverage for
new employees (whether newly hired or
newly enrolled) and their families
enrolling in the plan after March 23,
2010. Further, the addition of a new
contributing employer or new group of
employees of an existing contributing
employer to a grandfathered
multiemployer health plan will not
affect the plan’s grandfather status.
(2) Anti-abuse rules—(i) Mergers and
acquisitions. If the principal purpose of
a merger, acquisition, or similar
business restructuring is to cover new
individuals under a grandfathered
health plan, the plan ceases to be a
grandfathered health plan.
(ii) Change in plan eligibility. A group
health plan or health insurance coverage
(including a benefit package under a
group health plan) ceases to be a
grandfathered health plan if—
(A) Employees are transferred into the
plan or health insurance coverage (the
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transferee plan) from a plan or health
insurance coverage under which the
employees were covered on March 23,
2010 (the transferor plan);
(B) Comparing the terms of the
transferee plan with those of the
transferor plan (as in effect on March 23,
2010) and treating the transferee plan as
if it were an amendment of the
transferor plan would cause a loss of
grandfather status under the provisions
of paragraph (g)(1) of this section; and
(C) There was no bona fide
employment-based reason to transfer the
employees into the transferee plan. For
this purpose, changing the terms or cost
of coverage is not a bona fide
employment-based reason.
(iii) Illustrative list of bona fide
employment-based reasons. For
purposes of this paragraph (b)(2)(ii)(C),
bona fide employment-based reasons
include—
(A) When a benefit package is being
eliminated because the issuer is exiting
the market;
(B) When a benefit package is being
eliminated because the issuer no longer
offers the product to the employer;
(C) When low or declining
participation by plan participants in the
benefit package makes it impractical for
the plan sponsor to continue to offer the
benefit package;
(D) When a benefit package is
eliminated from a multiemployer plan
as agreed upon as part of the collective
bargaining process; or
(E) When a benefit package is
eliminated for any reason and multiple
benefit packages covering a significant
portion of other employees remain
available to the employees being
transferred.
(3) Examples. The rules of this
paragraph (b) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan
offers two benefit packages on March 23,
2010, Options F and G. During a subsequent
open enrollment period, some of the
employees enrolled in Option F on March 23,
2010 switch to Option G.
(ii) Conclusion. In this Example 1, the
group health coverage provided under
Option G remains a grandfathered health
plan under the rules of paragraph (b)(1) of
this section because employees previously
enrolled in Option F are allowed to enroll in
Option G as new employees.
Example 2. (i) Facts. A group health plan
offers two benefit packages on March 23,
2010, Options H and I. On March 23, 2010,
Option H provides coverage only for
employees in one manufacturing plant.
Subsequently, the plant is closed, and some
employees in the closed plant are moved to
another plant. The employer eliminates
Option H and the employees that are moved
are transferred to Option I. If instead of
transferring employees from Option H to
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Option I, Option H was amended to match
the terms of Option I, then Option H would
cease to be a grandfathered health plan.
(ii) Conclusion. In this Example 2, the plan
has a bona fide employment-based reason to
transfer employees from Option H to Option
I. Therefore, Option I does not cease to be a
grandfathered health plan.
(c) General grandfathering rule—(1)
Except as provided in paragraphs (d)
and (e) of this section, subtitles A and
C of title I of the Patient Protection and
Affordable Care Act (and the
amendments made by those subtitles,
and the incorporation of those
amendments into ERISA section 715
and Internal Revenue Code section
9815) do not apply to grandfathered
health plan coverage. Accordingly, the
provisions of PHS Act sections 2701,
2702, 2703, 2705, 2706, 2707, 2709
(relating to coverage for individuals
participating in approved clinical trials,
as added by section 10103 of the Patient
Protection and Affordable Care Act),
2713, 2715A, 2716, 2717, 2719, and
2719A, as added or amended by the
Patient Protection and Affordable Care
Act, do not apply to grandfathered
health plans. (In addition, see 45 CFR
147.140(c), which provides that the
provisions of PHS Act section 2704, and
PHS Act section 2711 insofar as it
relates to annual dollar limits, do not
apply to grandfathered health plans that
are individual health insurance
coverage.)
(2) To the extent not inconsistent with
the rules applicable to a grandfathered
health plan, a grandfathered health plan
must comply with the requirements of
the PHS Act, ERISA, and the Internal
Revenue Code applicable prior to the
changes enacted by the Patient
Protection and Affordable Care Act.
(d) Provisions applicable to all
grandfathered health plans. The
provisions of PHS Act section 2711
insofar as it relates to lifetime dollar
limits, and the provisions of PHS Act
sections 2712, 2714, 2715, and 2718,
apply to grandfathered health plans for
plan years beginning on or after
September 23, 2010. The provisions of
PHS Act section 2708 apply to
grandfathered health plans for plan
years beginning on or after January 1,
2014.
(e) Applicability of PHS Act sections
2704, 2711, and 2714 to grandfathered
group health plans and group health
insurance coverage—(1) The provisions
of PHS Act section 2704 as it applies
with respect to enrollees who are under
19 years of age, and the provisions of
PHS Act section 2711 insofar as it
relates to annual dollar limits, apply to
grandfathered health plans that are
group health plans (including group
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health insurance coverage) for plan
years beginning on or after September
23, 2010. The provisions of PHS Act
section 2704 apply generally to
grandfathered health plans that are
group health plans (including group
health insurance coverage) for plan
years beginning on or after January 1,
2014.
(2) For plan years beginning before
January 1, 2014, the provisions of PHS
Act section 2714 apply in the case of an
adult child with respect to a
grandfathered health plan that is a
group health plan only if the adult child
is not eligible to enroll in an eligible
employer-sponsored health plan (as
defined in section 5000A(f)(2) of the
Internal Revenue Code) other than a
grandfathered health plan of a parent.
For plan years beginning on or after
January 1, 2014, the provisions of PHS
Act section 2714 apply with respect to
a grandfathered health plan that is a
group health plan without regard to
whether an adult child is eligible to
enroll in any other coverage.
(f) Effect on collectively bargained
plans—In general. In the case of health
insurance coverage maintained pursuant
to one or more collective bargaining
agreements between employee
representatives and one or more
employers that was ratified before
March 23, 2010, the coverage is
grandfathered health plan coverage at
least until the date on which the last of
the collective bargaining agreements
relating to the coverage that was in
effect on March 23, 2010 terminates.
Any coverage amendment made
pursuant to a collective bargaining
agreement relating to the coverage that
amends the coverage solely to conform
to any requirement added by subtitles A
and C of title I of the Patient Protection
and Affordable Care Act (and the
amendments made by those subtitles,
and the incorporation of those
amendments into ERISA section 715
and Internal Revenue Code section
9815) is not treated as a termination of
the collective bargaining agreement.
After the date on which the last of the
collective bargaining agreements
relating to the coverage that was in
effect on March 23, 2010 terminates, the
determination of whether health
insurance coverage maintained pursuant
to a collective bargaining agreement is
grandfathered health plan coverage is
made under the rules of this section
other than this paragraph (f) (comparing
the terms of the health insurance
coverage after the date the last collective
bargaining agreement terminates with
the terms of the health insurance
coverage that were in effect on March
23, 2010).
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(g) Maintenance of grandfather
status—(1) Changes causing cessation of
grandfather status. Subject to paragraph
(g)(2) of this section, the rules of this
paragraph (g)(1) describe situations in
which a group health plan or health
insurance coverage ceases to be a
grandfathered health plan. A plan or
coverage will cease to be a
grandfathered health plan when an
amendment to plan terms that results in
a change described in this paragraph
(g)(1) becomes effective, regardless of
when the amendment was adopted.
Once grandfather status is lost, it cannot
be regained.
(i) Elimination of benefits. The
elimination of all or substantially all
benefits to diagnose or treat a particular
condition causes a group health plan or
health insurance coverage to cease to be
a grandfathered health plan. For this
purpose, the elimination of benefits for
any necessary element to diagnose or
treat a condition is considered the
elimination of all or substantially all
benefits to diagnose or treat a particular
condition. Whether or not a plan or
coverage has eliminated substantially all
benefits to diagnose or treat a particular
condition must be determined based on
all the facts and circumstances, taking
into account the items and services
provided for a particular condition
under the plan on March 23, 2010, as
compared to the benefits offered at the
time the plan or coverage makes the
benefit change effective.
(ii) Increase in percentage costsharing requirement. Any increase,
measured from March 23, 2010, in a
percentage cost-sharing requirement
(such as an individual’s coinsurance
requirement) causes a group health plan
or health insurance coverage to cease to
be a grandfathered health plan.
(iii) Increase in a fixed-amount costsharing requirement other than a
copayment. Any increase in a fixedamount cost-sharing requirement other
than a copayment (for example,
deductible or out-of-pocket limit),
determined as of the effective date of the
increase, causes a group health plan or
health insurance coverage to cease to be
a grandfathered health plan, if the total
percentage increase in the cost-sharing
requirement measured from March 23,
2010 exceeds the maximum percentage
increase (as defined in paragraph
(g)(3)(ii) of this section).
(iv) Increase in a fixed-amount
copayment. Any increase in a fixedamount copayment, determined as of
the effective date of the increase, and
determined for each copayment level if
a plan has different copayment levels
for different categories of services,
causes a group health plan or health
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insurance coverage to cease to be a
grandfathered health plan, if the total
increase in the copayment measured
from March 23, 2010 exceeds the greater
of:
(A) An amount equal to $5 increased
by medical inflation, as defined in
paragraph (g)(3)(i) of this section (that
is, $5 times medical inflation, plus $5),
or
(B) The maximum percentage increase
(as defined in paragraph (g)(3)(ii) of this
section), determined by expressing the
total increase in the copayment as a
percentage.
(v) Decrease in contribution rate by
employers and employee
organizations—(A) Contribution rate
based on cost of coverage. A group
health plan or group health insurance
coverage ceases to be a grandfathered
health plan if the employer or employee
organization decreases its contribution
rate based on cost of coverage (as
defined in paragraph (g)(3)(iii)(A) of this
section) towards the cost of any tier of
coverage for any class of similarly
situated individuals (as described in
§ 2590.702(d)) by more than 5
percentage points below the
contribution rate for the coverage period
that includes March 23, 2010.
(B) Contribution rate based on a
formula. A group health plan or group
health insurance coverage ceases to be
a grandfathered health plan if the
employer or employee organization
decreases its contribution rate based on
a formula (as defined in paragraph
(g)(3)(iii)(B) of this section) towards the
cost of any tier of coverage for any class
of similarly situated individuals (as
described in § 2590.702(d)) by more
than 5 percent below the contribution
rate for the coverage period that
includes March 23, 2010.
(C) Special rules regarding decreases
in contribution rates. An insured group
health plan (or a multiemployer plan)
that is a grandfathered health plan will
not cease to be a grandfathered health
plan based on a change in the employer
contribution rate unless the issuer (or
multiemployer plan) knows, or should
know, of the change, provided:
(1) Upon renewal (or, in the case of a
multiemployer plan, before the start of
a new plan year), the issuer (or
multiemployer plan) requires relevant
employers, employee organizations, or
plan sponsors, as applicable, to make a
representation regarding its contribution
rate for the plan year covered by the
renewal, as well as its contribution rate
on March 23, 2010 (if the issuer, or
multiemployer plan, does not already
have it); and
(2) The relevant policies, certificates,
contracts of insurance, or plan
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documents disclose in a prominent and
effective manner that employers,
employee organizations, or plan
sponsors, as applicable, are required to
notify the issuer (or multiemployer
plan) if the contribution rate changes at
any point during the plan year.
(D) Application to plans with multitiered coverage structures. The
standards for employer contributions in
this paragraph (g)(1)(v) apply on a tierby-tier basis. Therefore, if a group health
plan modifies the tiers of coverage it
had on March 23, 2010 (for example,
from self-only and family to a multitiered structure of self-only, self-plusone, self-plus-two, and self-plus-threeor-more), the employer contribution for
any new tier would be tested by
comparison to the contribution rate for
the corresponding tier on March 23,
2010. For example, if the employer
contribution rate for family coverage
was 50 percent on March 23, 2010, the
employer contribution rate for any new
tier of coverage other than self-only (i.e.,
self-plus-one, self-plus-two, self-plusthree or more) must be within 5
percentage points of 50 percent (i.e., at
least 45 percent). If, however, the plan
adds one or more new coverage tiers
without eliminating or modifying any
previous tiers and those new coverage
tiers cover classes of individuals that
were not covered previously under the
plan, the new tiers would not be
analyzed under the standards for
changes in employer contributions. For
example, if a plan with self-only as the
sole coverage tier added a family
coverage tier, the level of employer
contributions toward the family
coverage would not cause the plan to
lose grandfather status.
(E) Group health plans with fixeddollar employee contributions or no
employee contributions. A group health
plan that requires either fixed-dollar
employee contributions or no employee
contributions will not cease to be a
grandfathered health plan solely
because the employer contribution rate
changes so long as there continues to be
no employee contributions or no
increase in the fixed-dollar employee
contributions towards the cost of
coverage.
(vi) Changes in annual limits—(A)
Addition of an annual limit. A group
health plan, or group health insurance
coverage, that, on March 23, 2010, did
not impose an overall annual or lifetime
limit on the dollar value of all benefits
ceases to be a grandfathered health plan
if the plan or health insurance coverage
imposes an overall annual limit on the
dollar value of benefits. (But see
§ 2590.715–2711, which prohibits all
annual dollar limits on essential health
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72259
benefits for plan years beginning on or
after January 1, 2014).
(B) Decrease in limit for a plan or
coverage with only a lifetime limit. A
group health plan, or group health
insurance coverage, that, on March 23,
2010, imposed an overall lifetime limit
on the dollar value of all benefits but no
overall annual limit on the dollar value
of all benefits ceases to be a
grandfathered health plan if the plan or
health insurance coverage adopts an
overall annual limit at a dollar value
that is lower than the dollar value of the
lifetime limit on March 23, 2010. (But
see § 2590.715–2711, which prohibits
all annual dollar limits on essential
health benefits for plan years beginning
on or after January 1, 2014).
(C) Decrease in limit for a plan or
coverage with an annual limit. A group
health plan, or group health insurance
coverage, that, on March 23, 2010,
imposed an overall annual limit on the
dollar value of all benefits ceases to be
a grandfathered health plan if the plan
or health insurance coverage decreases
the dollar value of the annual limit
(regardless of whether the plan or health
insurance coverage also imposed an
overall lifetime limit on March 23, 2010
on the dollar value of all benefits). (But
see § 2590.715–2711, which prohibits
all annual dollar limits on essential
health benefits for plan years beginning
on or after January 1, 2014).
(2) Transitional rules—(i) Changes
made prior to March 23, 2010. If a group
health plan or health insurance issuer
makes the following changes to the
terms of the plan or health insurance
coverage, the changes are considered
part of the terms of the plan or health
insurance coverage on March 23, 2010
even though they were not effective at
that time and such changes do not cause
a plan or health insurance coverage to
cease to be a grandfathered health plan:
(A) Changes effective after March 23,
2010 pursuant to a legally binding
contract entered into on or before March
23, 2010;
(B) Changes effective after March 23,
2010 pursuant to a filing on or before
March 23, 2010 with a State insurance
department; or
(C) Changes effective after March 23,
2010 pursuant to written amendments
to a plan that were adopted on or before
March 23, 2010.
(ii) Changes made after March 23,
2010 and adopted prior to issuance of
regulations. If, after March 23, 2010, a
group health plan or health insurance
issuer makes changes to the terms of the
plan or health insurance coverage and
the changes are adopted prior to June
14, 2010, the changes will not cause the
plan or health insurance coverage to
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cease to be a grandfathered health plan
if the changes are revoked or modified
effective as of the first day of the first
plan year (in the individual market,
policy year) beginning on or after
September 23, 2010, and the terms of
the plan or health insurance coverage on
that date, as modified, would not cause
the plan or coverage to cease to be a
grandfathered health plan under the
rules of this section, including
paragraph (g)(1) of this section. For this
purpose, changes will be considered to
have been adopted prior to June 14,
2010 if:
(A) The changes are effective before
that date;
(B) The changes are effective on or
after that date pursuant to a legally
binding contract entered into before that
date;
(C) The changes are effective on or
after that date pursuant to a filing before
that date with a State insurance
department; or
(D) The changes are effective on or
after that date pursuant to written
amendments to a plan that were
adopted before that date.
(3) Definitions—(i) Medical inflation
defined. For purposes of this paragraph
(g), the term medical inflation means the
increase since March 2010 in the overall
medical care component of the
Consumer Price Index for All Urban
Consumers (CPI–U) (unadjusted)
published by the Department of Labor
using the 1982–1984 base of 100. For
this purpose, the increase in the overall
medical care component is computed by
subtracting 387.142 (the overall medical
care component of the CPI–U
(unadjusted) published by the
Department of Labor for March 2010,
using the 1982–1984 base of 100) from
the index amount for any month in the
12 months before the new change is to
take effect and then dividing that
amount by 387.142.
(ii) Maximum percentage increase
defined. For purposes of this paragraph
(g), the term maximum percentage
increase means medical inflation (as
defined in paragraph (g)(3)(i) of this
section), expressed as a percentage, plus
15 percentage points.
(iii) Contribution rate defined. For
purposes of paragraph (g)(1)(v) of this
section:
(A) Contribution rate based on cost of
coverage. The term contribution rate
based on cost of coverage means the
amount of contributions made by an
employer or employee organization
compared to the total cost of coverage,
expressed as a percentage. The total cost
of coverage is determined in the same
manner as the applicable premium is
calculated under the COBRA
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continuation provisions of section 604
of ERISA, section 4980B(f)(4) of the
Internal Revenue Code, and section
2204 of the PHS Act. In the case of a
self-insured plan, contributions by an
employer or employee organization are
equal to the total cost of coverage minus
the employee contributions towards the
total cost of coverage.
(B) Contribution rate based on a
formula. The term contribution rate
based on a formula means, for plans
that, on March 23, 2010, made
contributions based on a formula (such
as hours worked or tons of coal mined),
the formula.
(4) Examples. The rules of this
paragraph (g) are illustrated by the
following examples:
Example 1. (i) Facts. On March 23, 2010,
a grandfathered health plan has a
coinsurance requirement of 20% for inpatient
surgery. The plan is subsequently amended
to increase the coinsurance requirement to
25%.
(ii) Conclusion. In this Example 1, the
increase in the coinsurance requirement from
20% to 25% causes the plan to cease to be
a grandfathered health plan.
Example 2. (i) Facts. Before March 23,
2010, the terms of a group health plan
provide benefits for a particular mental
health condition, the treatment for which is
a combination of counseling and prescription
drugs. Subsequently, the plan eliminates
benefits for counseling.
(ii) Conclusion. In this Example 2, the plan
ceases to be a grandfathered health plan
because counseling is an element that is
necessary to treat the condition. Thus the
plan is considered to have eliminated
substantially all benefits for the treatment of
the condition.
Example 3. (i) Facts. On March 23, 2010,
a grandfathered health plan has a copayment
requirement of $30 per office visit for
specialists. The plan is subsequently
amended to increase the copayment
requirement to $40. Within the 12-month
period before the $40 copayment takes effect,
the greatest value of the overall medical care
component of the CPI–U (unadjusted) is 475.
(ii) Conclusion. In this Example 3, the
increase in the copayment from $30 to $40,
expressed as a percentage, is 33.33% (40¥30
= 10; 10 ÷ 30 = 0.3333; 0.3333 = 33.33%).
Medical inflation (as defined in paragraph
(g)(3)(i) of this section) from March 2010 is
0.2269 (475¥387.142 = 87.858; 87.858 ÷
387.142 = 0.2269). The maximum percentage
increase permitted is 37.69% (0.2269 =
22.69%; 22.69% + 15% = 37.69%). Because
33.33% does not exceed 37.69%, the change
in the copayment requirement at that time
does not cause the plan to cease to be a
grandfathered health plan.
Example 4. (i) Facts. Same facts as
Example 3, except the grandfathered health
plan subsequently increases the $40
copayment requirement to $45 for a later
plan year. Within the 12-month period before
the $45 copayment takes effect, the greatest
value of the overall medical care component
of the CPI–U (unadjusted) is 485.
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(ii) Conclusion. In this Example 4, the
increase in the copayment from $30 (the
copayment that was in effect on March 23,
2010) to $45, expressed as a percentage, is
50% (45¥30 = 15; 15 ÷ 30 = 0.5; 0.5 = 50%).
Medical inflation (as defined in paragraph
(g)(3)(i) of this section) from March 2010 is
0.2527 (485¥387.142 = 97.858; 97.858 ÷
387.142 = 0.2527). The increase that would
cause a plan to cease to be a grandfathered
health plan under paragraph (g)(1)(iv) of this
section is the greater of the maximum
percentage increase of 40.27% (0.2527 =
25.27%; 25.27% + 15% = 40.27%), or $6.26
($5 × 0.2527 = $1.26; $1.26 + $5 = $6.26).
Because 50% exceeds 40.27% and $15
exceeds $6.26, the change in the copayment
requirement at that time causes the plan to
cease to be a grandfathered health plan.
Example 5. (i) Facts. On March 23, 2010,
a grandfathered health plan has a copayment
of $10 per office visit for primary care
providers. The plan is subsequently amended
to increase the copayment requirement to
$15. Within the 12-month period before the
$15 copayment takes effect, the greatest value
of the overall medical care component of the
CPI–U (unadjusted) is 415.
(ii) Conclusion. In this Example 5, the
increase in the copayment, expressed as a
percentage, is 50% (15¥10 = 5; 5 ÷ 10 = 0.5;
0.5 = 50%). Medical inflation (as defined in
paragraph (g)(3) of this section) from March
2010 is 0.0720 (415.0¥387.142 = 27.858;
27.858 ÷ 387.142 = 0.0720). The increase that
would cause a plan to cease to be a
grandfathered health plan under paragraph
(g)(1)(iv) of this section is the greater of the
maximum percentage increase of 22.20%
(0.0720 = 7.20%; 7.20% + 15% = 22.20), or
$5.36 ($5 × 0.0720 = $0.36; $0.36 + $5 =
$5.36). The $5 increase in copayment in this
Example 5 would not cause the plan to cease
to be a grandfathered health plan pursuant to
paragraph (g)(1)(iv)this section, which would
permit an increase in the copayment of up to
$5.36.
Example 6. (i) Facts. The same facts as
Example 5, except on March 23, 2010, the
grandfathered health plan has no copayment
($0) for office visits for primary care
providers. The plan is subsequently amended
to increase the copayment requirement to $5.
(ii) Conclusion. In this Example 6, medical
inflation (as defined in paragraph (g)(3)(i) of
this section) from March 2010 is 0.0720
(415.0¥387.142 = 27.858; 27.858 ÷ 387.142
= 0.0720). The increase that would cause a
plan to cease to be a grandfathered health
plan under paragraph (g)(1)(iv)(A) of this
section is $5.36 ($5 × 0.0720 = $0.36; $0.36
+ $5 = $5.36). The $5 increase in copayment
in this Example 6 is less than the amount
calculated pursuant to paragraph (g)(1)(iv)(A)
of this section of $5.36. Thus, the $5 increase
in copayment does not cause the plan to
cease to be a grandfathered health plan.
Example 7. (i) Facts. On March 23, 2010,
a self-insured group health plan provides two
tiers of coverage—self-only and family. The
employer contributes 80% of the total cost of
coverage for self-only and 60% of the total
cost of coverage for family. Subsequently, the
employer reduces the contribution to 50% for
family coverage, but keeps the same
contribution rate for self-only coverage.
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(ii) Conclusion. In this Example 7, the
decrease of 10 percentage points for family
coverage in the contribution rate based on
cost of coverage causes the plan to cease to
be a grandfathered health plan. The fact that
the contribution rate for self-only coverage
remains the same does not change the result.
Example 8. (i) Facts. On March 23, 2010,
a self-insured grandfathered health plan has
a COBRA premium for the 2010 plan year of
$5,000 for self-only coverage and $12,000 for
family coverage. The required employee
contribution for the coverage is $1,000 for
self-only coverage and $4,000 for family
coverage. Thus, the contribution rate based
on cost of coverage for 2010 is 80%
((5,000¥1,000)/5,000) for self-only coverage
and 67% ((12,000¥4,000)/12,000) for family
coverage. For a subsequent plan year, the
COBRA premium is $6,000 for self-only
coverage and $15,000 for family coverage.
The employee contributions for that plan
year are $1,200 for self-only coverage and
$5,000 for family coverage. Thus, the
contribution rate based on cost of coverage is
80% ((6,000¥1,200)/6,000) for self-only
coverage and 67% ((15,000¥5,000)/15,000)
for family coverage.
(ii) Conclusion. In this Example 8, because
there is no change in the contribution rate
based on cost of coverage, the plan retains its
status as a grandfathered health plan. The
result would be the same if all or part of the
employee contribution was made pre-tax
through a cafeteria plan under section 125 of
the Internal Revenue Code.
Example 9. (i) Facts. A group health plan
not maintained pursuant to a collective
bargaining agreement offers three benefit
packages on March 23, 2010. Option F is a
self-insured option. Options G and H are
insured options. Beginning July 1, 2013, the
plan increases coinsurance under Option H
from 10% to 15%.
(ii) Conclusion. In this Example 9, the
coverage under Option H is not
grandfathered health plan coverage as of July
1, 2013, consistent with the (rule in
paragraph (g)(1)(ii) of this section. Whether
the coverage under Options F and G is
grandfathered health plan coverage is
determined separately under the rules of this
paragraph (g).
22. Section 2590.715–2704 is revised
to read as follows:
■
asabaliauskas on DSK5VPTVN1PROD with RULES
§ 2590.715–2704 Prohibition of preexisting
condition exclusions.
(a) No preexisting condition
exclusions. A group health plan, or a
health insurance issuer offering group
health insurance coverage, may not
impose any preexisting condition
exclusion (as defined in § 2590.701–2).
(b) Examples. The rules of paragraph
(a) of this section are illustrated by the
following examples (for additional
examples illustrating the definition of a
preexisting condition exclusion, see
§ 2590.701–3(a)(2)):
Example 1. (i) Facts. A group health plan
provides benefits solely through an insurance
policy offered by Issuer P. At the expiration
of the policy, the plan switches coverage to
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a policy offered by Issuer N. N’s policy
excludes benefits for oral surgery required as
a result of a traumatic injury if the injury
occurred before the effective date of coverage
under the policy.
(ii) Conclusion. In this Example 1, the
exclusion of benefits for oral surgery required
as a result of a traumatic injury if the injury
occurred before the effective date of coverage
is a preexisting condition exclusion because
it operates to exclude benefits for a condition
based on the fact that the condition was
present before the effective date of coverage
under the policy. Therefore, such an
exclusion is prohibited.
Example 2. (i) Facts. Individual C applies
for individual health insurance coverage with
Issuer M. M denies C’s application for
coverage because a pre-enrollment physical
revealed that C has type 2 diabetes.
(ii) Conclusion. See Example 2 in 45 CFR
147.108(a)(2) for a conclusion that M’s denial
of C’s application for coverage is a
preexisting condition exclusion because a
denial of an application for coverage based
on the fact that a condition was present
before the date of denial is an exclusion of
benefits based on a preexisting condition.
Therefore, such an exclusion is prohibited.
(c) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the
corresponding sections of 29 CFR part
2590, contained in the 29 CFR, parts
1927 to end, edition revised as of July
1, 2015.
■ 23. Section 2590.715–2711 is revised
to read as follows:
§ 2590.715–2711
limits.
No lifetime or annual
(a) Prohibition—(1) Lifetime limits.
Except as provided in paragraph (b) of
this section, a group health plan, or a
health insurance issuer offering group
health insurance coverage, may not
establish any lifetime limit on the dollar
amount of essential health benefits for
any individual, whether provided innetwork or out-of-network.
(2) Annual limits—(i) General rule.
Except as provided in paragraphs
(a)(2)(ii) and (b) of this section, a group
health plan, or a health insurance issuer
offering group health insurance
coverage, may not establish any annual
limit on the dollar amount of essential
health benefits for any individual,
whether provided in-network or out-ofnetwork.
(ii) Exception for health flexible
spending arrangements. A health
flexible spending arrangement (as
defined in section 106(c)(2) of the
Internal Revenue Code) offered through
a cafeteria plan pursuant to section 125
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72261
of the Internal Revenue Code is not
subject to the requirement in paragraph
(a)(2)(i) of this section.
(b) Construction—(1) Permissible
limits on specific covered benefits. The
rules of this section do not prevent a
group health plan, or a health insurance
issuer offering group health insurance
coverage, from placing annual or
lifetime dollar limits with respect to any
individual on specific covered benefits
that are not essential health benefits to
the extent that such limits are otherwise
permitted under applicable Federal or
State law. (The scope of essential health
benefits is addressed in paragraph (c) of
this section).
(2) Condition-based exclusions. The
rules of this section do not prevent a
group health plan, or a health insurance
issuer offering group health insurance
coverage, from excluding all benefits for
a condition. However, if any benefits are
provided for a condition, then the
requirements of this section apply.
Other requirements of Federal or State
law may require coverage of certain
benefits.
(c) Definition of essential health
benefits. The term ‘‘essential health
benefits’’ means essential health
benefits under section 1302(b) of the
Patient Protection and Affordable Care
Act and applicable regulations. For this
purpose, a group health plan or a health
insurance issuer that is not required to
provide essential health benefits under
section 1302(b) must define ‘‘essential
health benefits’’ in a manner consistent
with one of the three Federal Employees
Health Benefit Program (FEHBP) options
as defined by 45 CFR 156.100(a)(3) or
one of the base-benchmark plans
selected by a State or applied by default
pursuant to 45 CFR 156.100.
(d) Special rule for health
reimbursement arrangements (HRAs)
and other account-based plans—(1) In
general. If an HRA or other accountbased plan is integrated with other
coverage under a group health plan and
the other group health plan coverage
alone satisfies the requirements in
paragraph (a)(2) of this section, the fact
that the benefits under the HRA or other
account-based plan are limited does not
mean that the HRA or other accountbased plan fails to meet the
requirements of paragraph (a)(2) of this
section. Similarly, if an HRA or other
account-based plan is integrated with
other coverage under a group health
plan and the other group health plan
coverage alone satisfies the
requirements in PHS Act section 2713
and § 2590.715–2713(a)(1), the HRA or
other account-based plan will not fail to
meet the requirements of PHS Act
section 2713 and § 2590.715–2713(a)(1).
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(2) Integration requirements. An HRA
or other account-based plan is
integrated with a group health plan for
purposes of paragraph (a)(2) of this
section if it meets the requirements
under either the integration method set
forth in paragraph (d)(2)(i) of this
section or the integration method set
forth in paragraph (d)(2)(ii) of this
section. Integration does not require that
the HRA (or other account-based plan)
and the group health plan with which
it is integrated share the same plan
sponsor, the same plan document, or
governing instruments, or file a single
Form 5500, if applicable. The term
‘‘excepted benefits’’ is used throughout
the integration methods; for a definition
of the term ‘‘excepted benefits’’ see
Internal Revenue Code section 9832(c),
ERISA section 733(c), and PHS Act
section 2791(c).
(i) Integration Method: Minimum
value not required. An HRA or other
account-based plan is integrated with
another group health plan for purposes
of this paragraph if:
(A) The plan sponsor offers a group
health plan (other than the HRA or other
account-based plan) to the employee
that does not consist solely of excepted
benefits;
(B) The employee receiving the HRA
or other account-based plan is actually
enrolled in a group health plan (other
than the HRA or other account-based
plan) that does not consist solely of
excepted benefits, regardless of whether
the plan is offered by the same plan
sponsor (referred to as non-HRA group
coverage);
(C) The HRA or other account-based
plan is available only to employees who
are enrolled in non-HRA group
coverage, regardless of whether the nonHRA group coverage is offered by the
plan sponsor of the HRA or other
account-based plan (for example, the
HRA may be offered only to employees
who do not enroll in an employer’s
group health plan but are enrolled in
other non-HRA group coverage, such as
a group health plan maintained by the
employer of the employee’s spouse);
(D) The benefits under the HRA or
other account-based plan are limited to
reimbursement of one or more of the
following—co-payments, co-insurance,
deductibles, and premiums under the
non-HRA group coverage, as well as
medical care (as defined under section
213(d) of the Internal Revenue Code)
that does not constitute essential health
benefits as defined in paragraph (c) of
this section; and
(E) Under the terms of the HRA or
other account-based plan, an employee
(or former employee) is permitted to
permanently opt out of and waive future
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reimbursements from the HRA or other
account-based plan at least annually
and, upon termination of employment,
either the remaining amounts in the
HRA or other account-based plan are
forfeited or the employee is permitted to
permanently opt out of and waive future
reimbursements from the HRA or other
account-based plan.
(ii) Integration Method: Minimum
value required. An HRA or other
account-based plan is integrated with
another group health plan for purposes
of this paragraph if:
(A) The plan sponsor offers a group
health plan (other than the HRA or other
account-based plan) to the employee
that provides minimum value pursuant
to Code section 36B(c)(2)(C)(ii) (and its
implementing regulations and
applicable guidance);
(B) The employee receiving the HRA
or other account-based plan is actually
enrolled in a group health plan that
provides minimum value pursuant to
section 36B(c)(2)(C)(ii) of the Internal
Revenue Code (and applicable
guidance), regardless of whether the
plan is offered by the plan sponsor of
the HRA or other account-based plan
(referred to as non-HRA MV group
coverage);
(C) The HRA or other account-based
plan is available only to employees who
are actually enrolled in non-HRA MV
group coverage, regardless of whether
the non-HRA MV group coverage is
offered by the plan sponsor of the HRA
or other account-based plan (for
example, the HRA may be offered only
to employees who do not enroll in an
employer’s group health plan but are
enrolled in other non-HRA MV group
coverage, such as a group health plan
maintained by an employer of the
employee’s spouse); and
(D) Under the terms of the HRA or
other account-based plan, an employee
(or former employee) is permitted to
permanently opt out of and waive future
reimbursements from the HRA or other
account-based plan at least annually,
and, upon termination of employment,
either the remaining amounts in the
HRA or other account-based plan are
forfeited or the employee is permitted to
permanently opt out of and waive future
reimbursements from the HRA or other
account-based plan.
(3) Forfeiture. For purpose of
integration under paragraphs (d)(2)(i)(E)
and (d)(2)(ii)(D) of this section,
forfeiture or waiver occurs even if the
forfeited or waived amounts may be
reinstated upon a fixed date, a
participant’s death, or the earlier of the
two events (the reinstatement event).
For this purpose coverage under an
HRA or other account-based plan is
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considered forfeited or waived prior to
a reinstatement event only if the
participant’s election to forfeit or waive
is irrevocable, meaning that, beginning
on the effective date of the election and
through the date of the reinstatement
event, the participant and the
participant’s beneficiaries have no
access to amounts credited to the HRA
or other account-based plan. This means
that upon and after reinstatement, the
reinstated amounts under the HRA or
other account-based plan may not be
used to reimburse or pay medical
expenses incurred during the period
after forfeiture and prior to
reinstatement.
(4) No integration with individual
market coverage. A group health plan,
including an HRA or other accountbased plan, used to purchase coverage
on the individual market is not
integrated with that individual market
coverage for purposes of paragraph
(a)(2) of this section (or for purposes of
the requirements of PHS Act section
2713).
(5) Integration with Medicare parts B
and D. For employers that are not
required to offer their non-HRA group
health plan coverage to employees who
are Medicare beneficiaries, an HRA or
other account-based plan that may be
used to reimburse premiums under
Medicare part B or D may be integrated
with Medicare (and deemed to comply
with PHS Act sections 2711 and 2713)
if the following requirements are
satisfied with respect to employees who
would be eligible for the employer’s
non-HRA group health plan but for their
eligibility for Medicare (and the
integration rules under paragraphs
(d)(2)(i) and (d)(2)(ii) of this section
continue to apply to employees who are
not eligible for Medicare):
(i) The plan sponsor offers a group
health plan (other than the HRA or other
account-based plan and that does not
consist solely of excepted benefits) to
employees who are not eligible for
Medicare;
(ii) The employee receiving the HRA
or other account-based plan is actually
enrolled Medicare part B or D;
(iii) The HRA or other account-based
plan is available only to employees who
are enrolled in Medicare part B or D;
and
(iv) The HRA or other account-based
plan complies with paragraphs
(d)(2)(i)(E) and (d)(2)(ii)(D) of this
section.
(6) Account-based plan. An accountbased plan for purposes of this section
is an employer-provided group health
plan that provides reimbursements of
medical expenses other than individual
market policy premiums with the
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reimbursement subject to a maximum
fixed dollar amount for a period. An
HRA is a type of account-based plan.
(e) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the
corresponding sections of 29 CFR part
2590, contained in the 29 CFR, parts
1927 to end, edition revised as of July
1, 2015.
24. Section 2590.715–2712 is revised
to read as follows:
asabaliauskas on DSK5VPTVN1PROD with RULES
§ 2590.715–2712
rescissions.
Rules regarding
(a) Prohibition on rescissions—(1) A
group health plan, or a health insurance
issuer offering group health insurance
coverage, must not rescind coverage
under the plan, or under the policy,
certificate, or contract of insurance, with
respect to an individual (including a
group to which the individual belongs
or family coverage in which the
individual is included) once the
individual is covered under the plan or
coverage, unless the individual (or a
person seeking coverage on behalf of the
individual) performs an act, practice, or
omission that constitutes fraud, or
makes an intentional misrepresentation
of material fact, as prohibited by the
terms of the plan or coverage. A group
health plan, or a health insurance issuer
offering group health insurance
coverage, must provide at least 30 days
advance written notice to each
participant who would be affected
before coverage may be rescinded under
this paragraph (a)(1), regardless of
whether the coverage is insured or selfinsured, or whether the rescission
applies to an entire group or only to an
individual within the group. (The rules
of this paragraph (a)(1) apply regardless
of any contestability period that may
otherwise apply.)
(2) For purposes of this section, a
rescission is a cancellation or
discontinuance of coverage that has
retroactive effect. For example, a
cancellation that treats a policy as void
from the time of the individual’s or
group’s enrollment is a rescission. As
another example, a cancellation that
voids benefits paid up to a year before
the cancellation is also a rescission for
this purpose. A cancellation or
discontinuance of coverage is not a
rescission if—
(i) The cancellation or discontinuance
of coverage has only a prospective
effect;
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(ii) The cancellation or
discontinuance of coverage is effective
retroactively to the extent it is
attributable to a failure to timely pay
required premiums or contributions
(including COBRA premiums) towards
the cost of coverage;
(iii) The cancellation or
discontinuance of coverage is initiated
by the individual (or by the individual’s
authorized representative) and the
sponsor, employer, plan, or issuer does
not, directly or indirectly, take action to
influence the individual’s decision to
cancel or discontinue coverage
retroactively or otherwise take any
adverse action or retaliate against,
interfere with, coerce, intimidate, or
threaten the individual; or
(iv) The cancellation or
discontinuance of coverage is initiated
by the Exchange pursuant to 45 CFR
155.430 (other than under paragraph
(b)(2)(iii)).
(3) The rules of this paragraph (a) are
illustrated by the following examples:
Example 1. (i) Facts. Individual A seeks
enrollment in an insured group health plan.
The plan terms permit rescission of coverage
with respect to an individual if the
individual engages in fraud or makes an
intentional misrepresentation of a material
fact. The plan requires A to complete a
questionnaire regarding A’s prior medical
history, which affects setting the group rate
by the health insurance issuer. The
questionnaire complies with the other
requirements of this part. The questionnaire
includes the following question: ‘‘Is there
anything else relevant to your health that we
should know?’’ A inadvertently fails to list
that A visited a psychologist on two
occasions, six years previously. A is later
diagnosed with breast cancer and seeks
benefits under the plan. On or around the
same time, the issuer receives information
about A’s visits to the psychologist, which
was not disclosed in the questionnaire.
(ii) Conclusion. In this Example 1, the plan
cannot rescind A’s coverage because A’s
failure to disclose the visits to the
psychologist was inadvertent. Therefore, it
was not fraudulent or an intentional
misrepresentation of material fact.
Example 2. (i) Facts. An employer
sponsors a group health plan that provides
coverage for employees who work at least 30
hours per week. Individual B has coverage
under the plan as a full-time employee. The
employer reassigns B to a part-time position.
Under the terms of the plan, B is no longer
eligible for coverage. The plan mistakenly
continues to provide health coverage,
collecting premiums from B and paying
claims submitted by B. After a routine audit,
the plan discovers that B no longer works at
least 30 hours per week. The plan rescinds
B’s coverage effective as of the date that B
changed from a full-time employee to a parttime employee.
(ii) Conclusion. In this Example 2, the plan
cannot rescind B’s coverage because there
was no fraud or an intentional
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72263
misrepresentation of material fact. The plan
may cancel coverage for B prospectively,
subject to other applicable Federal and State
laws.
(b) Compliance with other
requirements. Other requirements of
Federal or State law may apply in
connection with a rescission of
coverage.
(c) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the
corresponding sections of 29 CFR part
2590, contained in the 29 CFR, parts
1927 to end, edition revised as of July
1, 2015.
■ 25. Section 2590.715–2714 is revised
to read as follows:
§ 2590.715–2714
at least age 26.
Eligibility of children until
(a) In general—(1) A group health
plan, or a health insurance issuer
offering group health insurance
coverage, that makes available
dependent coverage of children must
make such coverage available for
children until attainment of 26 years of
age.
(2) The rule of this paragraph (a) is
illustrated by the following example:
Example. (i) Facts. For the plan year
beginning January 1, 2011, a group health
plan provides health coverage for employees,
employees’ spouses, and employees’ children
until the child turns 26. On the birthday of
a child of an employee, July 17, 2011, the
child turns 26. The last day the plan covers
the child is July 16, 2011.
(ii) Conclusion. In this Example, the plan
satisfies the requirement of this paragraph (a)
with respect to the child.
(b) Restrictions on plan definition of
dependent—(1) In general. With respect
to a child who has not attained age 26,
a plan or issuer may not define
dependent for purposes of eligibility for
dependent coverage of children other
than in terms of a relationship between
a child and the participant. Thus, for
example, a plan or issuer may not deny
or restrict dependent coverage for a
child who has not attained age 26 based
on the presence or absence of the child’s
financial dependency (upon the
participant or any other person);
residency with the participant or with
any other person; whether the child
lives, works, or resides in an HMO’s
service area or other network service
area; marital status; student status;
employment; eligibility for other
coverage; or any combination of those
factors. (Other requirements of Federal
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or State law, including section 609 of
ERISA or section 1908 of the Social
Security Act, may require coverage of
certain children.)
(2) Construction. A plan or issuer will
not fail to satisfy the requirements of
this section if the plan or issuer limits
dependent child coverage to children
under age 26 who are described in
section 152(f)(1) of the Code. For an
individual not described in Code
section 152(f)(1), such as a grandchild or
niece, a plan may impose additional
conditions on eligibility for dependent
child health coverage, such as a
condition that the individual be a
dependent for income tax purposes.
(c) Coverage of grandchildren not
required. Nothing in this section
requires a plan or issuer to make
coverage available for the child of a
child receiving dependent coverage.
(d) Uniformity irrespective of age. The
terms of the plan or health insurance
coverage providing dependent coverage
of children cannot vary based on age
(except for children who are age 26 or
older).
(e) Examples. The rules of paragraph
(d) of this section are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan
offers a choice of self-only or family health
coverage. Dependent coverage is provided
under family health coverage for children of
participants who have not attained age 26.
The plan imposes an additional premium
surcharge for children who are older than age
18.
(ii) Conclusion. In this Example 1, the plan
violates the requirement of paragraph (d) of
this section because the plan varies the terms
for dependent coverage of children based on
age.
Example 2. (i) Facts. A group health plan
offers a choice among the following tiers of
health coverage: Self-only, self-plus-one, selfplus-two, and self-plus-three-or-more. The
cost of coverage increases based on the
number of covered individuals. The plan
provides dependent coverage of children
who have not attained age 26.
(ii) Conclusion. In this Example 2, the plan
does not violate the requirement of paragraph
(d) of this section that the terms of dependent
coverage for children not vary based on age.
Although the cost of coverage increases for
tiers with more covered individuals, the
increase applies without regard to the age of
any child.
Example 3. (i) Facts. A group health plan
offers two benefit packages—an HMO option
and an indemnity option. Dependent
coverage is provided for children of
participants who have not attained age 26.
The plan limits children who are older than
age 18 to the HMO option.
(ii) Conclusion. In this Example 3, the plan
violates the requirement of paragraph (d) of
this section because the plan, by limiting
children who are older than age 18 to the
HMO option, varies the terms for dependent
coverage of children based on age.
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Example 4. (i) Facts. A group health plan
sponsored by a large employer normally
charges a copayment for physician visits that
do not constitute preventive services. The
plan charges this copayment to individuals
age 19 and over, including employees,
spouses, and dependent children, but waives
it for those under age 19.
(ii) Conclusion. In this Example 4, the plan
does not violate the requirement of paragraph
(d) of this section that the terms of dependent
coverage for children not vary based on age.
While the requirement of paragraph (d) of
this section generally prohibits distinctions
based upon age in dependent coverage of
children, it does not prohibit distinctions
based upon age that apply to all coverage
under the plan, including coverage for
employees and spouses as well as dependent
children. In this Example 4, the copayments
charged to dependent children are the same
as those charged to employees and spouses.
Accordingly, the arrangement described in
this Example 4 (including waiver, for
individuals under age 19, of the generally
applicable copayment) does not violate the
requirement of paragraph (d) of this section.
(f) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the
corresponding sections of 29 CFR part
2590, contained in the 29 CFR, parts
1927 to end, edition revised as of July
1, 2015.
26. Section 2590.715–2719 is revised
to read as follows:
■
§ 2590.715–2719 Internal claims and
appeals and external review processes.
(a) Scope and definitions–(1) Scope.
This section sets forth requirements
with respect to internal claims and
appeals and external review processes
for group health plans and health
insurance issuers that are not
grandfathered health plans under
§ 2590.715–1251. Paragraph (b) of this
section provides requirements for
internal claims and appeals processes.
Paragraph (c) of this section sets forth
rules governing the applicability of State
external review processes. Paragraph (d)
of this section sets forth a Federal
external review process for plans and
issuers not subject to an applicable State
external review process. Paragraph (e) of
this section prescribes requirements for
ensuring that notices required to be
provided under this section are
provided in a culturally and
linguistically appropriate manner.
Paragraph (f) of this section describes
the authority of the Secretary to deem
certain external review processes in
existence on March 23, 2010 as in
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compliance with paragraph (c) or (d) of
this section.
(2) Definitions. For purposes of this
section, the following definitions
apply—
(i) Adverse benefit determination. An
adverse benefit determination means an
adverse benefit determination as
defined in 29 CFR 2560.503–1, as well
as any rescission of coverage, as
described in § 2590.715–2712(a)(2)
(whether or not, in connection with the
rescission, there is an adverse effect on
any particular benefit at that time).
(ii) Appeal (or internal appeal). An
appeal or internal appeal means review
by a plan or issuer of an adverse benefit
determination, as required in paragraph
(b) of this section.
(iii) Claimant. Claimant means an
individual who makes a claim under
this section. For purposes of this
section, references to claimant include a
claimant’s authorized representative.
(iv) External review. External review
means a review of an adverse benefit
determination (including a final internal
adverse benefit determination)
conducted pursuant to an applicable
State external review process described
in paragraph (c) of this section or the
Federal external review process of
paragraph (d) of this section.
(v) Final internal adverse benefit
determination. A final internal adverse
benefit determination means an adverse
benefit determination that has been
upheld by a plan or issuer at the
completion of the internal appeals
process applicable under paragraph (b)
of this section (or an adverse benefit
determination with respect to which the
internal appeals process has been
exhausted under the deemed exhaustion
rules of paragraph (b)(2)(ii)(F) of this
section).
(vi) Final external review decision. A
final external review decision means a
determination by an independent
review organization at the conclusion of
an external review.
(vii) Independent review organization
(or IRO). An independent review
organization (or IRO) means an entity
that conducts independent external
reviews of adverse benefit
determinations and final internal
adverse benefit determinations pursuant
to paragraph (c) or (d) of this section.
(viii) NAIC Uniform Model Act. The
NAIC Uniform Model Act means the
Uniform Health Carrier External Review
Model Act promulgated by the National
Association of Insurance Commissioners
in place on July 23, 2010.
(b) Internal claims and appeals
process—(1) In general. A group health
plan and a health insurance issuer
offering group health insurance
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coverage must implement an effective
internal claims and appeals process, as
described in this paragraph (b).
(2) Requirements for group health
plans and group health insurance
issuers. A group health plan and a
health insurance issuer offering group
health insurance coverage must comply
with all the requirements of this
paragraph (b)(2). In the case of health
insurance coverage offered in
connection with a group health plan, if
either the plan or the issuer complies
with the internal claims and appeals
process of this paragraph (b)(2), then the
obligation to comply with this
paragraph (b)(2) is satisfied for both the
plan and the issuer with respect to the
health insurance coverage.
(i) Minimum internal claims and
appeals standards. A group health plan
and a health insurance issuer offering
group health insurance coverage must
comply with all the requirements
applicable to group health plans under
29 CFR 2560.503–1, except to the extent
those requirements are modified by
paragraph (b)(2)(ii) of this section.
Accordingly, under this paragraph (b),
with respect to health insurance
coverage offered in connection with a
group health plan, the group health
insurance issuer is subject to the
requirements in 29 CFR 2560.503–1 to
the same extent as the group health
plan.
(ii) Additional standards. In addition
to the requirements in paragraph
(b)(2)(i) of this section, the internal
claims and appeals processes of a group
health plan and a health insurance
issuer offering group health insurance
coverage must meet the requirements of
this paragraph (b)(2)(ii).
(A) Clarification of meaning of
adverse benefit determination. For
purposes of this paragraph (b)(2), an
‘‘adverse benefit determination’’
includes an adverse benefit
determination as defined in paragraph
(a)(2)(i) of this section. Accordingly, in
complying with 29 CFR 2560.503–1, as
well as the other provisions of this
paragraph (b)(2), a plan or issuer must
treat a rescission of coverage (whether
or not the rescission has an adverse
effect on any particular benefit at that
time) as an adverse benefit
determination. (Rescissions of coverage
are subject to the requirements of
§ 2590.715–2712.)
(B) Expedited notification of benefit
determinations involving urgent care.
The requirements of 29 CFR 2560.503–
1(f)(2)(i) (which generally provide,
among other things, in the case of urgent
care claims for notification of the plan’s
benefit determination (whether adverse
or not) as soon as possible, taking into
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account the medical exigencies, but not
later than 72 hours after the receipt of
the claim) continue to apply to the plan
and issuer. For purposes of this
paragraph (b)(2)(ii)(B), a claim involving
urgent care has the meaning given in 29
CFR 2560.503–1(m)(1), as determined
by the attending provider, and the plan
or issuer shall defer to such
determination of the attending provider.
(C) Full and fair review. A plan and
issuer must allow a claimant to review
the claim file and to present evidence
and testimony as part of the internal
claims and appeals process.
Specifically, in addition to complying
with the requirements of 29 CFR
2560.503–1(h)(2)—
(1) The plan or issuer must provide
the claimant, free of charge, with any
new or additional evidence considered,
relied upon, or generated by the plan or
issuer (or at the direction of the plan or
issuer) in connection with the claim;
such evidence must be provided as soon
as possible and sufficiently in advance
of the date on which the notice of final
internal adverse benefit determination is
required to be provided under 29 CFR
2560.503–1(i) to give the claimant a
reasonable opportunity to respond prior
to that date; and
(2) Before the plan or issuer can issue
a final internal adverse benefit
determination based on a new or
additional rationale, the claimant must
be provided, free of charge, with the
rationale; the rationale must be
provided as soon as possible and
sufficiently in advance of the date on
which the notice of final internal
adverse benefit determination is
required to be provided under 29 CFR
2560.503–1(i) to give the claimant a
reasonable opportunity to respond prior
to that date. Notwithstanding the rules
of 29 CFR 2560.503–1(i), if the new or
additional evidence is received so late
that it would be impossible to provide
it to the claimant in time for the
claimant to have a reasonable
opportunity to respond, the period for
providing a notice of final internal
adverse benefit determination is tolled
until such time as the claimant has a
reasonable opportunity to respond.
After the claimant responds, or has a
reasonable opportunity to respond but
fails to do so, the plan administrator
shall notify the claimant of the plan’s
benefit determination as soon as a plan
acting in a reasonable and prompt
fashion can provide the notice, taking
into account the medical exigencies.
(D) Avoiding conflicts of interest. In
addition to the requirements of 29 CFR
2560.503–1(b) and (h) regarding full and
fair review, the plan and issuer must
ensure that all claims and appeals are
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72265
adjudicated in a manner designed to
ensure the independence and
impartiality of the persons involved in
making the decision. Accordingly,
decisions regarding hiring,
compensation, termination, promotion,
or other similar matters with respect to
any individual (such as a claims
adjudicator or medical expert) must not
be made based upon the likelihood that
the individual will support the denial of
benefits.
(E) Notice. A plan and issuer must
provide notice to individuals, in a
culturally and linguistically appropriate
manner (as described in paragraph (e) of
this section) that complies with the
requirements of 29 CFR 2560.503–1(g)
and (j). The plan and issuer must also
comply with the additional
requirements of this paragraph
(b)(2)(ii)(E).
(1) The plan and issuer must ensure
that any notice of adverse benefit
determination or final internal adverse
benefit determination includes
information sufficient to identify the
claim involved (including the date of
service, the health care provider, the
claim amount (if applicable), and a
statement describing the availability,
upon request, of the diagnosis code and
its corresponding meaning, and the
treatment code and its corresponding
meaning).
(2) The plan and issuer must provide
to participants and beneficiaries, as
soon as practicable, upon request, the
diagnosis code and its corresponding
meaning, and the treatment code and its
corresponding meaning, associated with
any adverse benefit determination or
final internal adverse benefit
determination. The plan or issuer must
not consider a request for such
diagnosis and treatment information, in
itself, to be a request for an internal
appeal under this paragraph (b) or an
external review under paragraphs (c)
and (d) of this section.
(3) The plan and issuer must ensure
that the reason or reasons for the
adverse benefit determination or final
internal adverse benefit determination
includes the denial code and its
corresponding meaning, as well as a
description of the plan’s or issuer’s
standard, if any, that was used in
denying the claim. In the case of a
notice of final internal adverse benefit
determination, this description must
include a discussion of the decision.
(4) The plan and issuer must provide
a description of available internal
appeals and external review processes,
including information regarding how to
initiate an appeal.
(5) The plan and issuer must disclose
the availability of, and contact
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information for, any applicable office of
health insurance consumer assistance or
ombudsman established under PHS Act
section 2793 to assist individuals with
the internal claims and appeals and
external review processes.
(F) Deemed exhaustion of internal
claims and appeals processes—(1) In
the case of a plan or issuer that fails to
strictly adhere to all the requirements of
this paragraph (b)(2) with respect to a
claim, the claimant is deemed to have
exhausted the internal claims and
appeals process of this paragraph (b),
except as provided in paragraph
(b)(2)(ii)(F)(2) of this section.
Accordingly the claimant may initiate
an external review under paragraph (c)
or (d) of this section, as applicable. The
claimant is also entitled to pursue any
available remedies under section 502(a)
of ERISA or under State law, as
applicable, on the basis that the plan or
issuer has failed to provide a reasonable
internal claims and appeals process that
would yield a decision on the merits of
the claim. If a claimant chooses to
pursue remedies under section 502(a) of
ERISA under such circumstances, the
claim or appeal is deemed denied on
review without the exercise of
discretion by an appropriate fiduciary.
(2) Notwithstanding paragraph
(b)(2)(ii)(F)(1) of this section, the
internal claims and appeals process of
this paragraph (b) will not be deemed
exhausted based on de minimis
violations that do not cause, and are not
likely to cause, prejudice or harm to the
claimant so long as the plan or issuer
demonstrates that the violation was for
good cause or due to matters beyond the
control of the plan or issuer and that the
violation occurred in the context of an
ongoing, good faith exchange of
information between the plan and the
claimant. This exception is not available
if the violation is part of a pattern or
practice of violations by the plan or
issuer. The claimant may request a
written explanation of the violation
from the plan or issuer, and the plan or
issuer must provide such explanation
within 10 days, including a specific
description of its bases, if any, for
asserting that the violation should not
cause the internal claims and appeals
process of this paragraph (b) to be
deemed exhausted. If an external
reviewer or a court rejects the claimant’s
request for immediate review under
paragraph (b)(2)(ii)(F)(1) of this section
on the basis that the plan met the
standards for the exception under this
paragraph (b)(2)(ii)(F)(2), the claimant
has the right to resubmit and pursue the
internal appeal of the claim. In such a
case, within a reasonable time after the
external reviewer or court rejects the
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Jkt 238001
claim for immediate review (not to
exceed 10 days), the plan shall provide
the claimant with notice of the
opportunity to resubmit and pursue the
internal appeal of the claim. Time
periods for re-filing the claim shall
begin to run upon claimant’s receipt of
such notice.
(iii) Requirement to provide continued
coverage pending the outcome of an
appeal. A plan and issuer subject to the
requirements of this paragraph (b)(2) are
required to provide continued coverage
pending the outcome of an appeal. For
this purpose, the plan and issuer must
comply with the requirements of 29 CFR
2560.503–1(f)(2)(ii), which generally
provides that benefits for an ongoing
course of treatment cannot be reduced
or terminated without providing
advance notice and an opportunity for
advance review.
(c) State standards for external
review—(1) In general. (i) If a State
external review process that applies to
and is binding on a health insurance
issuer offering group health insurance
coverage includes at a minimum the
consumer protections in the NAIC
Uniform Model Act, then the issuer
must comply with the applicable State
external review process and is not
required to comply with the Federal
external review process of paragraph (d)
of this section. In such a case, to the
extent that benefits under a group health
plan are provided through health
insurance coverage, the group health
plan is not required to comply with
either this paragraph (c) or the Federal
external review process of paragraph (d)
of this section.
(ii) To the extent that a group health
plan provides benefits other than
through health insurance coverage (that
is, the plan is self-insured) and is
subject to a State external review
process that applies to and is binding on
the plan (for example, is not preempted
by ERISA) and the State external review
process includes at a minimum the
consumer protections in the NAIC
Uniform Model Act, then the plan must
comply with the applicable State
external review process and is not
required to comply with the Federal
external review process of paragraph (d)
of this section. Where a self-insured
plan is not subject to an applicable State
external review process, but the State
has chosen to expand access to its
process for plans that are not subject to
the applicable State laws, the plan may
choose to comply with either the
applicable State external review process
or the Federal external review process of
paragraph (d) of this section.
(iii) If a plan or issuer is not required
under paragraph (c)(1)(i) or (c)(1)(ii) of
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this section to comply with the
requirements of this paragraph (c), then
the plan or issuer must comply with the
Federal external review process of
paragraph (d) of this section, except to
the extent, in the case of a plan, the plan
is not required under paragraph (c)(1)(i)
of this section to comply with paragraph
(d) of this section.
(2) Minimum standards for State
external review processes. An applicable
State external review process must meet
all the minimum consumer protections
in this paragraph (c)(2). The Department
of Health and Human Services will
determine whether State external review
processes meet these requirements.
(i) The State process must provide for
the external review of adverse benefit
determinations (including final internal
adverse benefit determinations) by
issuers (or, if applicable, plans) that are
based on the issuer’s (or plan’s)
requirements for medical necessity,
appropriateness, health care setting,
level of care, or effectiveness of a
covered benefit.
(ii) The State process must require
issuers (or, if applicable, plans) to
provide effective written notice to
claimants of their rights in connection
with an external review for an adverse
benefit determination.
(iii) To the extent the State process
requires exhaustion of an internal
claims and appeals process, exhaustion
must be unnecessary where the issuer
(or, if applicable, the plan) has waived
the requirement; the issuer (or the plan)
is considered to have exhausted the
internal claims and appeals process
under applicable law (including by
failing to comply with any of the
requirements for the internal appeal
process, as outlined in paragraph (b)(2)
of this section), or the claimant has
applied for expedited external review at
the same time as applying for an
expedited internal appeal.
(iv) The State process provides that
the issuer (or, if applicable, the plan)
against which a request for external
review is filed must pay the cost of the
IRO for conducting the external review.
Notwithstanding this requirement, a
State external review process that
expressly authorizes, as of November
18, 2015, a nominal filing fee may
continue to permit such fees. For this
purpose, to be considered nominal, a
filing fee must not exceed $25; it must
be refunded to the claimant if the
adverse benefit determination (or final
internal adverse benefit determination)
is reversed through external review; it
must be waived if payment of the fee
would impose an undue financial
hardship; and the annual limit on filing
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fees for any claimant within a single
plan year must not exceed $75.
(v) The State process may not impose
a restriction on the minimum dollar
amount of a claim for it to be eligible for
external review. Thus, the process may
not impose, for example, a $500
minimum claims threshold.
(vi) The State process must allow at
least four months after the receipt of a
notice of an adverse benefit
determination or final internal adverse
benefit determination for a request for
an external review to be filed.
(vii) The State process must provide
that IROs will be assigned on a random
basis or another method of assignment
that assures the independence and
impartiality of the assignment process
(such as rotational assignment) by a
State or independent entity, and in no
event selected by the issuer, plan, or the
individual.
(viii) The State process must provide
for maintenance of a list of approved
IROs qualified to conduct the external
review based on the nature of the health
care service that is the subject of the
review. The State process must provide
for approval only of IROs that are
accredited by a nationally recognized
private accrediting organization.
(ix) The State process must provide
that any approved IRO has no conflicts
of interest that will influence its
independence. Thus, the IRO may not
own or control, or be owned or
controlled by a health insurance issuer,
a group health plan, the sponsor of a
group health plan, a trade association of
plans or issuers, or a trade association
of health care providers. The State
process must further provide that the
IRO and the clinical reviewer assigned
to conduct an external review may not
have a material professional, familial, or
financial conflict of interest with the
issuer or plan that is the subject of the
external review; the claimant (and any
related parties to the claimant) whose
treatment is the subject of the external
review; any officer, director, or
management employee of the issuer; the
plan administrator, plan fiduciaries, or
plan employees; the health care
provider, the health care provider’s
group, or practice association
recommending the treatment that is
subject to the external review; the
facility at which the recommended
treatment would be provided; or the
developer or manufacturer of the
principal drug, device, procedure, or
other therapy being recommended.
(x) The State process allows the
claimant at least five business days to
submit to the IRO in writing additional
information that the IRO must consider
when conducting the external review,
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and it requires that the claimant is
notified of the right to do so. The
process must also require that any
additional information submitted by the
claimant to the IRO must be forwarded
to the issuer (or, if applicable, the plan)
within one business day of receipt by
the IRO.
(xi) The State process must provide
that the decision is binding on the plan
or issuer, as well as the claimant except
to the extent the other remedies are
available under State or Federal law,
and except that the requirement that the
decision be binding shall not preclude
the plan or issuer from making payment
on the claim or otherwise providing
benefits at any time, including after a
final external review decision that
denies the claim or otherwise fails to
require such payment or benefits. For
this purpose, the plan or issuer must
provide benefits (including by making
payment on the claim) pursuant to the
final external review decision without
delay, regardless of whether the plan or
issuer intends to seek judicial review of
the external review decision and unless
or until there is a judicial decision
otherwise.
(xii) The State process must require,
for standard external review, that the
IRO provide written notice to the issuer
(or, if applicable, the plan) and the
claimant of its decision to uphold or
reverse the adverse benefit
determination (or final internal adverse
benefit determination) within no more
than 45 days after the receipt of the
request for external review by the IRO.
(xiii) The State process must provide
for an expedited external review if the
adverse benefit determination (or final
internal adverse benefit determination)
concerns an admission, availability of
care, continued stay, or health care
service for which the claimant received
emergency services, but has not been
discharged from a facility; or involves a
medical condition for which the
standard external review time frame
would seriously jeopardize the life or
health of the claimant or jeopardize the
claimant’s ability to regain maximum
function. As expeditiously as possible
but within no more than 72 hours after
the receipt of the request for expedited
external review by the IRO, the IRO
must make its decision to uphold or
reverse the adverse benefit
determination (or final internal adverse
benefit determination) and notify the
claimant and the issuer (or, if
applicable, the plan) of the
determination. If the notice is not in
writing, the IRO must provide written
confirmation of the decision within 48
hours after the date of the notice of the
decision.
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72267
(xiv) The State process must require
that issuers (or, if applicable, plans)
include a description of the external
review process in or attached to the
summary plan description, policy,
certificate, membership booklet, outline
of coverage, or other evidence of
coverage it provides to participants,
beneficiaries, or enrollees, substantially
similar to what is set forth in section 17
of the NAIC Uniform Model Act.
(xv) The State process must require
that IROs maintain written records and
make them available upon request to the
State, substantially similar to what is set
forth in section 15 of the NAIC Uniform
Model Act.
(xvi) The State process follows
procedures for external review of
adverse benefit determinations (or final
internal adverse benefit determinations)
involving experimental or
investigational treatment, substantially
similar to what is set forth in section 10
of the NAIC Uniform Model Act.
(3) Transition period for external
review processes—(i) Through
December 31, 2017, an applicable State
external review process applicable to a
health insurance issuer or group health
plan is considered to meet the
requirements of PHS Act section
2719(b). Accordingly, through December
31, 2017, an applicable State external
review process will be considered
binding on the issuer or plan (in lieu of
the requirements of the Federal external
review process). If there is no applicable
State external review process, the issuer
or plan is required to comply with the
requirements of the Federal external
review process in paragraph (d) of this
section.
(ii) An applicable State external
review process must apply for final
internal adverse benefit determinations
(or, in the case of simultaneous internal
appeal and external review, adverse
benefit determinations) provided on or
after January 1, 2018. The Federal
external review process will apply to
such internal adverse benefit
determinations unless the Department
of Health and Human Services
determines that a State law meets all the
minimum standards of paragraph (c)(2)
of this section. Through December 31,
2017, a State external review process
applicable to a health insurance issuer
or group health plan may be considered
to meet the minimum standards of
paragraph (c)(2) of this section, if it
meets the temporary standards
established by the Secretary in guidance
for a process similar to the NAIC
Uniform Model Act.
(d) Federal external review process. A
plan or issuer not subject to an
applicable State external review process
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under paragraph (c) of this section must
provide an effective Federal external
review process in accordance with this
paragraph (d) (except to the extent, in
the case of a plan, the plan is described
in paragraph (c)(1)(i) of this section as
not having to comply with this
paragraph (d)). In the case of health
insurance coverage offered in
connection with a group health plan, if
either the plan or the issuer complies
with the Federal external review process
of this paragraph (d), then the obligation
to comply with this paragraph (d) is
satisfied for both the plan and the issuer
with respect to the health insurance
coverage. A Multi State Plan or MSP, as
defined by 45 CFR 800.20, must provide
an effective Federal external review
process in accordance with this
paragraph (d). In such circumstances,
the requirement to provide external
review under this paragraph (d) is
satisfied when a Multi State Plan or
MSP complies with standards
established by the Office of Personnel
Management.
(1) Scope—(i) In general. The Federal
external review process established
pursuant to this paragraph (d) applies to
the following:
(A) An adverse benefit determination
(including a final internal adverse
benefit determination) by a plan or
issuer that involves medical judgment
(including, but not limited to, those
based on the plan’s or issuer’s
requirements for medical necessity,
appropriateness, health care setting,
level of care, or effectiveness of a
covered benefit; its determination that a
treatment is experimental or
investigational; its determination
whether a participant or beneficiary is
entitled to a reasonable alternative
standard for a reward under a wellness
program; or its determination whether a
plan or issuer is complying with the
nonquantitative treatment limitation
provisions of Code section 9812 and
§ 54.9812, which generally require,
among other things, parity in the
application of medical management
techniques), as determined by the
external reviewer. (A denial, reduction,
termination, or a failure to provide
payment for a benefit based on a
determination that a participant or
beneficiary fails to meet the
requirements for eligibility under the
terms of a group health plan or health
insurance coverage is not eligible for the
Federal external review process under
this paragraph (d)); and
(B) A rescission of coverage (whether
or not the rescission has any effect on
any particular benefit at that time).
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(ii) Examples. The rules of paragraph
(d)(1)(i) of this section are illustrated by
the following examples:
Example 1. (i) Facts. A group health plan
provides coverage for 30 physical therapy
visits generally. After the 30th visit, coverage
is provided only if the service is
preauthorized pursuant to an approved
treatment plan that takes into account
medical necessity using the plan’s definition
of the term. Individual A seeks coverage for
a 31st physical therapy visit. A’s health care
provider submits a treatment plan for
approval, but it is not approved by the plan,
so coverage for the 31st visit is not
preauthorized. With respect to the 31st visit,
A receives a notice of final internal adverse
benefit determination stating that the
maximum visit limit is exceeded.
(ii) Conclusion. In this Example 1, the
plan’s denial of benefits is based on medical
necessity and involves medical judgment.
Accordingly, the claim is eligible for external
review under paragraph (d)(1)(i) of this
section. Moreover, the plan’s notification of
final internal adverse benefit determination
is inadequate under paragraphs (b)(2)(i) and
(b)(2)(ii)(E)(3) of this section because it fails
to make clear that the plan will pay for more
than 30 visits if the service is preauthorized
pursuant to an approved treatment plan that
takes into account medical necessity using
the plan’s definition of the term.
Accordingly, the notice of final internal
adverse benefit determination should refer to
the plan provision governing the 31st visit
and should describe the plan’s standard for
medical necessity, as well as how the
treatment fails to meet the plan’s standard.
Example 2. (i) Facts. A group health plan
does not provide coverage for services
provided out of network, unless the service
cannot effectively be provided in network.
Individual B seeks coverage for a specialized
medical procedure from an out-of-network
provider because B believes that the
procedure cannot be effectively provided in
network. B receives a notice of final internal
adverse benefit determination stating that the
claim is denied because the provider is outof-network.
(ii) Conclusion. In this Example 2, the
plan’s denial of benefits is based on whether
a service can effectively be provided in
network and, therefore, involves medical
judgment. Accordingly, the claim is eligible
for external review under paragraph (d)(1)(i)
of this section. Moreover, the plan’s notice of
final internal adverse benefit determination
is inadequate under paragraphs (b)(2)(i) and
(b)(2)(ii)(E)(3) of this section because the plan
does provide benefits for services on an outof-network basis if the services cannot
effectively be provided in network.
Accordingly, the notice of final internal
adverse benefit determination is required to
refer to the exception to the out-of-network
exclusion and should describe the plan’s
standards for determining effectiveness of
services, as well as how services available to
the claimant within the plan’s network meet
the plan’s standard for effectiveness of
services.
(2) External review process standards.
The Federal external review process
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established pursuant to this paragraph
(d) is considered similar to the process
set forth in the NAIC Uniform Model
Act and, therefore satisfies the
requirements of paragraph (d)(2)) if such
process provides the following.
(i) Request for external review. A
group health plan or health insurance
issuer must allow a claimant to file a
request for an external review with the
plan or issuer if the request is filed
within four months after the date of
receipt of a notice of an adverse benefit
determination or final internal adverse
benefit determination. If there is no
corresponding date four months after
the date of receipt of such a notice, then
the request must be filed by the first day
of the fifth month following the receipt
of the notice. For example, if the date of
receipt of the notice is October 30,
because there is no February 30, the
request must be filed by March 1. If the
last filing date would fall on a Saturday,
Sunday, or Federal holiday, the last
filing date is extended to the next day
that is not a Saturday, Sunday, or
Federal holiday.
(ii) Preliminary review—(A) In
general. Within five business days
following the date of receipt of the
external review request, the group
health plan or health insurance issuer
must complete a preliminary review of
the request to determine whether:
(1) The claimant is or was covered
under the plan or coverage at the time
the health care item or service was
requested or, in the case of a
retrospective review, was covered under
the plan or coverage at the time the
health care item or service was
provided;
(2) The adverse benefit determination
or the final adverse benefit
determination does not relate to the
claimant’s failure to meet the
requirements for eligibility under the
terms of the group health plan or health
insurance coverage (e.g., worker
classification or similar determination);
(3) The claimant has exhausted the
plan’s or issuer’s internal appeal process
unless the claimant is not required to
exhaust the internal appeals process
under paragraph (b)(1) of this section;
and
(4) The claimant has provided all the
information and forms required to
process an external review.
(B) Within one business day after
completion of the preliminary review,
the plan or issuer must issue a
notification in writing to the claimant.
If the request is complete but not
eligible for external review, such
notification must include the reasons for
its ineligibility and current contact
information, including the phone
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number, for the Employee Benefits
Security Administration. If the request
is not complete, such notification must
describe the information or materials
needed to make the request complete,
and the plan or issuer must allow a
claimant to perfect the request for
external review within the four-month
filing period or within the 48 hour
period following the receipt of the
notification, whichever is later.
(iii) Referral to Independent Review
Organization. (A) In general. The group
health plan or health insurance issuer
must assign an IRO that is accredited by
URAC or by similar nationallyrecognized accrediting organization to
conduct the external review. The IRO
referral process must provide for the
following:
(1) The plan or issuer must ensure
that the IRO process is not biased and
ensures independence;
(2) The plan or issuer must contract
with at least three (3) IROs for
assignments under the plan or coverage
and rotate claims assignments among
them (or incorporate other independent,
unbiased methods for selection of IROs,
such as random selection); and
(3) The IRO may not be eligible for
any financial incentives based on the
likelihood that the IRO will support the
denial of benefits.
(4) The IRO process may not impose
any costs, including filing fees, on the
claimant requesting the external review.
(B) IRO contracts. A group health plan
or health insurance issuer must include
the following standards in the contract
between the plan or issuer and the IRO:
(1) The assigned IRO will utilize legal
experts where appropriate to make
coverage determinations under the plan
or coverage.
(2) The assigned IRO will timely
notify a claimant in writing whether the
request is eligible for external review.
This notice will include a statement that
the claimant may submit in writing to
the assigned IRO, within ten business
days following the date of receipt of the
notice, additional information. This
additional information must be
considered by the IRO when conducting
the external review. The IRO is not
required to, but may, accept and
consider additional information
submitted after ten business days.
(3) Within five business days after the
date of assignment of the IRO, the plan
or issuer must provide to the assigned
IRO the documents and any information
considered in making the adverse
benefit determination or final internal
adverse benefit determination. Failure
by the plan or issuer to timely provide
the documents and information must
not delay the conduct of the external
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review. If the plan or issuer fails to
timely provide the documents and
information, the assigned IRO may
terminate the external review and make
a decision to reverse the adverse benefit
determination or final internal adverse
benefit determination. Within one
business day after making the decision,
the IRO must notify the claimant and
the plan.
(4) Upon receipt of any information
submitted by the claimant, the assigned
IRO must within one business day
forward the information to the plan or
issuer. Upon receipt of any such
information, the plan or issuer may
reconsider its adverse benefit
determination or final internal adverse
benefit determination that is the subject
of the external review. Reconsideration
by the plan or issuer must not delay the
external review. The external review
may be terminated as a result of the
reconsideration only if the plan decides,
upon completion of its reconsideration,
to reverse its adverse benefit
determination or final internal adverse
benefit determination and provide
coverage or payment. Within one
business day after making such a
decision, the plan must provide written
notice of its decision to the claimant
and the assigned IRO. The assigned IRO
must terminate the external review
upon receipt of the notice from the plan
or issuer.
(5) The IRO will review all of the
information and documents timely
received. In reaching a decision, the
assigned IRO will review the claim de
novo and not be bound by any decisions
or conclusions reached during the
plan’s or issuer’s internal claims and
appeals process applicable under
paragraph (b). In addition to the
documents and information provided,
the assigned IRO, to the extent the
information or documents are available
and the IRO considers them appropriate,
will consider the following in reaching
a decision:
(i) The claimant’s medical records;
(ii) The attending health care
professional’s recommendation;
(iii) Reports from appropriate health
care professionals and other documents
submitted by the plan or issuer,
claimant, or the claimant’s treating
provider;
(iv) The terms of the claimant’s plan
or coverage to ensure that the IRO’s
decision is not contrary to the terms of
the plan or coverage, unless the terms
are inconsistent with applicable law;
(v) Appropriate practice guidelines,
which must include applicable
evidence-based standards and may
include any other practice guidelines
developed by the Federal government,
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72269
national or professional medical
societies, boards, and associations;
(vi) Any applicable clinical review
criteria developed and used by the plan
or issuer, unless the criteria are
inconsistent with the terms of the plan
or coverage or with applicable law; and
(vii) To the extent the final IRO
decision maker is different from the
IRO’s clinical reviewer, the opinion of
such clinical reviewer, after considering
information described in this notice, to
the extent the information or documents
are available and the clinical reviewer
or reviewers consider such information
or documents appropriate.
(6) The assigned IRO must provide
written notice of the final external
review decision within 45 days after the
IRO receives the request for the external
review. The IRO must deliver the notice
of the final external review decision to
the claimant and the plan or issuer.
(7) The assigned IRO’s written notice
of the final external review decision
must contain the following:
(i) A general description of the reason
for the request for external review,
including information sufficient to
identify the claim (including the date or
dates of service, the health care
provider, the claim amount (if
applicable), and a statement describing
the availability, upon request, of the
diagnosis code and its corresponding
meaning, the treatment code and its
corresponding meaning, and the reason
for the plan’s or issuer’s denial);
(ii) The date the IRO received the
assignment to conduct the external
review and the date of the IRO decision;
(iii) References to the evidence or
documentation, including the specific
coverage provisions and evidence-based
standards, considered in reaching its
decision;
(iv) A discussion of the principal
reason or reasons for its decision,
including the rationale for its decision
and any evidence-based standards that
were relied on in making its decision;
(v) A statement that the IRO’s
determination is binding except to the
extent that other remedies may be
available under State or Federal law to
either the group health plan or health
insurance issuer or to the claimant, or
to the extent the health plan or health
insurance issuer voluntarily makes
payment on the claim or otherwise
provides benefits at any time, including
after a final external review decision
that denies the claim or otherwise fails
to require such payment or benefits;
(vi) A statement that judicial review
may be available to the claimant; and
(vii) Current contact information,
including phone number, for any
applicable office of health insurance
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consumer assistance or ombudsman
established under PHS Act section 2793.
(viii) After a final external review
decision, the IRO must maintain records
of all claims and notices associated with
the external review process for six years.
An IRO must make such records
available for examination by the
claimant, plan, issuer, or State or
Federal oversight agency upon request,
except where such disclosure would
violate State or Federal privacy laws.
(iv) Reversal of plan’s or issuer’s
decision. Upon receipt of a notice of a
final external review decision reversing
the adverse benefit determination or
final adverse benefit determination, the
plan or issuer immediately must
provide coverage or payment (including
immediately authorizing care or
immediately paying benefits) for the
claim.
(3) Expedited external review. A
group health plan or health insurance
issuer must comply with the following
standards with respect to an expedited
external review:
(i) Request for external review. A
group health plan or health insurance
issuer must allow a claimant to make a
request for an expedited external review
with the plan or issuer at the time the
claimant receives:
(A) An adverse benefit determination
if the adverse benefit determination
involves a medical condition of the
claimant for which the timeframe for
completion of an expedited internal
appeal under paragraph (b) of this
section would seriously jeopardize the
life or health of the claimant or would
jeopardize the claimant’s ability to
regain maximum function and the
claimant has filed a request for an
expedited internal appeal; or
(B) A final internal adverse benefit
determination, if the claimant has a
medical condition where the timeframe
for completion of a standard external
review would seriously jeopardize the
life or health of the claimant or would
jeopardize the claimant’s ability to
regain maximum function, or if the final
internal adverse benefit determination
concerns an admission, availability of
care, continued stay, or health care item
or service for which the claimant
received emergency services, but has
not been discharged from the facility.
(ii) Preliminary review. Immediately
upon receipt of the request for
expedited external review, the plan or
issuer must determine whether the
request meets the reviewability
requirements set forth in paragraph
(d)(2)(ii) of this section for standard
external review. The plan or issuer must
immediately send a notice that meets
the requirements set forth in paragraph
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Jkt 238001
(d)(2)(ii)(B) for standard review to the
claimant of its eligibility determination.
(iii) Referral to independent review
organization. (A) Upon a determination
that a request is eligible for expedited
external review following the
preliminary review, the plan or issuer
will assign an IRO pursuant to the
requirements set forth in paragraph
(d)(2)(iii) of this section for standard
review. The plan or issuer must provide
or transmit all necessary documents and
information considered in making the
adverse benefit determination or final
internal adverse benefit determination
to the assigned IRO electronically or by
telephone or facsimile or any other
available expeditious method.
(B) The assigned IRO, to the extent the
information or documents are available
and the IRO considers them appropriate,
must consider the information or
documents described above under the
procedures for standard review. In
reaching a decision, the assigned IRO
must review the claim de novo and is
not bound by any decisions or
conclusions reached during the plan’s
or issuer’s internal claims and appeals
process.
(iv) Notice of final external review
decision. The plan’s or issuer’s contract
with the assigned IRO must require the
IRO to provide notice of the final
external review decision, in accordance
with the requirements set forth in
paragraph (d)(2)(iii)(B) of this section, as
expeditiously as the claimant’s medical
condition or circumstances require, but
in no event more than 72 hours after the
IRO receives the request for an
expedited external review. If the notice
is not in writing, within 48 hours after
the date of providing that notice, the
assigned IRO must provide written
confirmation of the decision to the
claimant and the plan or issuer.
(4) Alternative, Federallyadministered external review process.
Insured coverage not subject to an
applicable State external review process
under paragraph (c) of this section may
elect to use either the Federal external
review process, as set forth under
paragraph (d) of this section or the
Federally-administered external review
process, as set forth by HHS in
guidance. In such circumstances, the
requirement to provide external review
under this paragraph (d) is satisfied.
(e) Form and manner of notice—(1) In
general. For purposes of this section, a
group health plan and a health
insurance issuer offering group health
insurance coverage are considered to
provide relevant notices in a culturally
and linguistically appropriate manner if
the plan or issuer meets all the
requirements of paragraph (e)(2) of this
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section with respect to the applicable
non-English languages described in
paragraph (e)(3) of this section.
(2) Requirements—(i) The plan or
issuer must provide oral language
services (such as a telephone customer
assistance hotline) that includes
answering questions in any applicable
non-English language and providing
assistance with filing claims and
appeals (including external review) in
any applicable non-English language;
(ii) The plan or issuer must provide,
upon request, a notice in any applicable
non-English language; and
(iii) The plan or issuer must include
in the English versions of all notices, a
statement prominently displayed in any
applicable non-English language clearly
indicating how to access the language
services provided by the plan or issuer.
(3) Applicable non-English language.
With respect to an address in any
United States county to which a notice
is sent, a non-English language is an
applicable non-English language if ten
percent or more of the population
residing in the county is literate only in
the same non-English language, as
determined in guidance published by
the Secretary.
(f) Secretarial authority. The Secretary
may determine that the external review
process of a group health plan or health
insurance issuer, in operation as of
March 23, 2010, is considered in
compliance with the applicable process
established under paragraph (c) or (d) of
this section if it substantially meets the
requirements of paragraph (c) or (d) of
this section, as applicable.
(g) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the
corresponding sections of 29 CFR part
2590, contained in the 29 CFR, parts
1927 to end, edition revised as of July
1, 2015.
■ 27. Section 2590.715–2719A is
revised to read as follows:
§ 2590.715–2719A
Patient protections.
(a) Choice of health care
professional—(1) Designation of
primary care provider—(i) In general. If
a group health plan, or a health
insurance issuer offering group health
insurance coverage, requires or provides
for designation by a participant or
beneficiary of a participating primary
care provider, then the plan or issuer
must permit each participant or
beneficiary to designate any
participating primary care provider who
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is available to accept the participant or
beneficiary. In such a case, the plan or
issuer must comply with the rules of
paragraph (a)(4) of this section by
informing each participant of the terms
of the plan or health insurance coverage
regarding designation of a primary care
provider.
(ii) Construction. Nothing in
paragraph (a)(1)(i) of this section is to be
construed to prohibit the application of
reasonable and appropriate geographic
limitations with respect to the selection
of primary care providers, in accordance
with the terms of the plan or coverage,
the underlying provider contracts, and
applicable State law.
(iii) Example. The rules of this
paragraph (a)(1) are illustrated by the
following example:
asabaliauskas on DSK5VPTVN1PROD with RULES
Example. (i) Facts. A group health plan
requires individuals covered under the plan
to designate a primary care provider. The
plan permits each individual to designate
any primary care provider participating in
the plan’s network who is available to accept
the individual as the individual’s primary
care provider. If an individual has not
designated a primary care provider, the plan
designates one until one has been designated
by the individual. The plan provides a notice
that satisfies the requirements of paragraph
(a)(4) of this section regarding the ability to
designate a primary care provider.
(ii) Conclusion. In this Example, the plan
has satisfied the requirements of paragraph
(a) of this section.
(2) Designation of pediatrician as
primary care provider—(i) In general. If
a group health plan, or a health
insurance issuer offering group health
insurance coverage, requires or provides
for the designation of a participating
primary care provider for a child by a
participant or beneficiary, the plan or
issuer must permit the participant or
beneficiary to designate a physician
(allopathic or osteopathic) who
specializes in pediatrics (including
pediatric subspecialties, based on the
scope of that provider’s license under
applicable State law) as the child’s
primary care provider if the provider
participates in the network of the plan
or issuer and is available to accept the
child. In such a case, the plan or issuer
must comply with the rules of
paragraph (a)(4) of this section by
informing each participant of the terms
of the plan or health insurance coverage
regarding designation of a pediatrician
as the child’s primary care provider.
(ii) Construction. Nothing in
paragraph (a)(2)(i) of this section is to be
construed to waive any exclusions of
coverage under the terms and
conditions of the plan or health
insurance coverage with respect to
coverage of pediatric care.
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(iii) Examples. The rules of this
paragraph (a)(2) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan’s
HMO designates for each participant a
physician who specializes in internal
medicine to serve as the primary care
provider for the participant and any
beneficiaries. Participant A requests that
Pediatrician B be designated as the primary
care provider for A’s child. B is a
participating provider in the HMO’s network
and is available to accept the child.
(ii) Conclusion. In this Example 1, the
HMO must permit A’s designation of B as the
primary care provider for A’s child in order
to comply with the requirements of this
paragraph (a)(2).
Example 2. (i) Facts. Same facts as
Example 1, except that A takes A’s child to
B for treatment of the child’s severe shellfish
allergies. B wishes to refer A’s child to an
allergist for treatment. The HMO, however,
does not provide coverage for treatment of
food allergies, nor does it have an allergist
participating in its network, and it therefore
refuses to authorize the referral.
(ii) Conclusion. In this Example 2, the
HMO has not violated the requirements of
this paragraph (a)(2) because the exclusion of
treatment for food allergies is in accordance
with the terms of A’s coverage.
(3) Patient access to obstetrical and
gynecological care—(i) General rights—
(A) Direct access. A group health plan,
or a health insurance issuer offering
group health insurance coverage,
described in paragraph (a)(3)(ii) of this
section may not require authorization or
referral by the plan, issuer, or any
person (including a primary care
provider) in the case of a female
participant or beneficiary who seeks
coverage for obstetrical or gynecological
care provided by a participating health
care professional who specializes in
obstetrics or gynecology. In such a case,
the plan or issuer must comply with the
rules of paragraph (a)(4) of this section
by informing each participant that the
plan may not require authorization or
referral for obstetrical or gynecological
care by a participating health care
professional who specializes in
obstetrics or gynecology. The plan or
issuer may require such a professional
to agree to otherwise adhere to the
plan’s or issuer’s policies and
procedures, including procedures
regarding referrals and obtaining prior
authorization and providing services
pursuant to a treatment plan (if any)
approved by the plan or issuer. For
purposes of this paragraph (a)(3), a
health care professional who specializes
in obstetrics or gynecology is any
individual (including a person other
than a physician) who is authorized
under applicable State law to provide
obstetrical or gynecological care.
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72271
(B) Obstetrical and gynecological
care. A group health plan or health
insurance issuer described in paragraph
(a)(3)(ii) of this section must treat the
provision of obstetrical and
gynecological care, and the ordering of
related obstetrical and gynecological
items and services, pursuant to the
direct access described under paragraph
(a)(3)(i)(A) of this section, by a
participating health care professional
who specializes in obstetrics or
gynecology as the authorization of the
primary care provider.
(ii) Application of paragraph. A group
health plan, or a health insurance issuer
offering group health insurance
coverage, is described in this paragraph
(a)(3) if the plan or issuer—
(A) Provides coverage for obstetrical
or gynecological care; and
(B) Requires the designation by a
participant or beneficiary of a
participating primary care provider.
(iii) Construction. Nothing in
paragraph (a)(3)(i) of this section is to be
construed to—
(A) Waive any exclusions of coverage
under the terms and conditions of the
plan or health insurance coverage with
respect to coverage of obstetrical or
gynecological care; or
(B) Preclude the group health plan or
health insurance issuer involved from
requiring that the obstetrical or
gynecological provider notify the
primary care health care professional or
the plan or issuer of treatment
decisions.
(iv) Examples. The rules of this
paragraph (a)(3) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan
requires each participant to designate a
physician to serve as the primary care
provider for the participant and the
participant’s family. Participant A, a female,
requests a gynecological exam with Physician
B, an in-network physician specializing in
gynecological care. The group health plan
requires prior authorization from A’s
designated primary care provider for the
gynecological exam.
(ii) Conclusion. In this Example 1, the
group health plan has violated the
requirements of this paragraph (a)(3) because
the plan requires prior authorization from A’s
primary care provider prior to obtaining
gynecological services.
Example 2. (i) Facts. Same facts as
Example 1 except that A seeks gynecological
services from C, an out-of-network provider.
(ii) Conclusion. In this Example 2, the
group health plan has not violated the
requirements of this paragraph (a)(3) by
requiring prior authorization because C is not
a participating health care provider.
Example 3. (i) Facts. Same facts as
Example 1 except that the group health plan
only requires B to inform A’s designated
primary care physician of treatment
decisions.
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(ii) Conclusion. In this Example 3, the
group health plan has not violated the
requirements of this paragraph (a)(3) because
A has direct access to B without prior
authorization. The fact that the group health
plan requires notification of treatment
decisions to the designated primary care
physician does not violate this paragraph
(a)(3).
Example 4. (i) Facts. A group health plan
requires each participant to designate a
physician to serve as the primary care
provider for the participant and the
participant’s family. The group health plan
requires prior authorization before providing
benefits for uterine fibroid embolization.
(ii) Conclusion. In this Example 4, the plan
requirement for prior authorization before
providing benefits for uterine fibroid
embolization does not violate the
requirements of this paragraph (a)(3) because,
though the prior authorization requirement
applies to obstetrical services, it does not
restrict access to any providers specializing
in obstetrics or gynecology.
care provider who participates in our
network and who is available to accept you
or your family members. [If the plan or health
insurance coverage designates a primary care
provider automatically, insert: Until you
make this designation, [name of group health
plan or health insurance issuer] designates
one for you.] For information on how to
select a primary care provider, and for a list
of the participating primary care providers,
contact the [plan administrator or issuer] at
[insert contact information].
(4) Notice of right to designate a
primary care provider—(i) In general. If
a group health plan or health insurance
issuer requires the designation by a
participant or beneficiary of a primary
care provider, the plan or issuer must
provide a notice informing each
participant of the terms of the plan or
health insurance coverage regarding
designation of a primary care provider
and of the rights—
(A) Under paragraph (a)(1)(i) of this
section, that any participating primary
care provider who is available to accept
the participant or beneficiary can be
designated;
(B) Under paragraph (a)(2)(i) of this
section, with respect to a child, that any
participating physician who specializes
in pediatrics can be designated as the
primary care provider; and
(C) Under paragraph (a)(3)(i) of this
section, that the plan may not require
authorization or referral for obstetrical
or gynecological care by a participating
health care professional who specializes
in obstetrics or gynecology.
(ii) Timing. The notice described in
paragraph (a)(4)(i) of this section must
be included whenever the plan or issuer
provides a participant with a summary
plan description or other similar
description of benefits under the plan or
health insurance coverage.
(iii) Model language. The following
model language can be used to satisfy
the notice requirement described in
paragraph (a)(4)(i) of this section:
(A) For plans and issuers that require
or allow for the designation of primary
care providers by participants or
beneficiaries, insert:
You do not need prior authorization from
[name of group health plan or issuer] or from
any other person (including a primary care
provider) in order to obtain access to
obstetrical or gynecological care from a
health care professional in our network who
specializes in obstetrics or gynecology. The
health care professional, however, may be
required to comply with certain procedures,
including obtaining prior authorization for
certain services, following a pre-approved
treatment plan, or procedures for making
referrals. For a list of participating health
care professionals who specialize in
obstetrics or gynecology, contact the [plan
administrator or issuer] at [insert contact
information].
[Name of group health plan or health
insurance issuer] generally [requires/allows]
the designation of a primary care provider.
You have the right to designate any primary
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Jkt 238001
(B) For plans and issuers that require
or allow for the designation of a primary
care provider for a child, add:
For children, you may designate a
pediatrician as the primary care
provider.
(C) For plans and issuers that provide
coverage for obstetric or gynecological
care and require the designation by a
participant or beneficiary of a primary
care provider, add:
(b) Coverage of emergency services—
(1) Scope. If a group health plan, or a
health insurance issuer offering group
health insurance coverage, provides any
benefits with respect to services in an
emergency department of a hospital, the
plan or issuer must cover emergency
services (as defined in paragraph
(b)(4)(ii) of this section) consistent with
the rules of this paragraph (b).
(2) General rules. A plan or issuer
subject to the requirements of this
paragraph (b) must provide coverage for
emergency services in the following
manner—
(i) Without the need for any prior
authorization determination, even if the
emergency services are provided on an
out-of-network basis;
(ii) Without regard to whether the
health care provider furnishing the
emergency services is a participating
network provider with respect to the
services;
(iii) If the emergency services are
provided out of network, without
imposing any administrative
requirement or limitation on coverage
that is more restrictive than the
requirements or limitations that apply to
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emergency services received from innetwork providers;
(iv) If the emergency services are
provided out of network, by complying
with the cost-sharing requirements of
paragraph (b)(3) of this section; and
(v) Without regard to any other term
or condition of the coverage, other
than—
(A) The exclusion of or coordination
of benefits;
(B) An affiliation or waiting period
permitted under part 7 of ERISA, part A
of title XXVII of the PHS Act, or chapter
100 of the Internal Revenue Code; or
(C) Applicable cost sharing.
(3) Cost-sharing requirements—(i)
Copayments and coinsurance. Any costsharing requirement expressed as a
copayment amount or coinsurance rate
imposed with respect to a participant or
beneficiary for out-of-network
emergency services cannot exceed the
cost-sharing requirement imposed with
respect to a participant or beneficiary if
the services were provided in-network.
However, a participant or beneficiary
may be required to pay, in addition to
the in-network cost sharing, the excess
of the amount the out-of-network
provider charges over the amount the
plan or issuer is required to pay under
this paragraph (b)(3)(i). A group health
plan or health insurance issuer complies
with the requirements of this paragraph
(b)(3) if it provides benefits with respect
to an emergency service in an amount
at least equal to the greatest of the three
amounts specified in paragraphs
(b)(3)(i)(A), (B), and (C) of this section
(which are adjusted for in-network costsharing requirements).
(A) The amount negotiated with innetwork providers for the emergency
service furnished, excluding any innetwork copayment or coinsurance
imposed with respect to the participant
or beneficiary. If there is more than one
amount negotiated with in-network
providers for the emergency service, the
amount described under this paragraph
(b)(3)(i)(A) is the median of these
amounts, excluding any in-network
copayment or coinsurance imposed
with respect to the participant or
beneficiary. In determining the median
described in the preceding sentence, the
amount negotiated with each in-network
provider is treated as a separate amount
(even if the same amount is paid to
more than one provider). If there is no
per-service amount negotiated with innetwork providers (such as under a
capitation or other similar payment
arrangement), the amount under this
paragraph (b)(3)(i)(A) is disregarded.
(B) The amount for the emergency
service calculated using the same
method the plan generally uses to
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Federal Register / Vol. 80, No. 222 / Wednesday, November 18, 2015 / Rules and Regulations
determine payments for out-of-network
services (such as the usual, customary,
and reasonable amount), excluding any
in-network copayment or coinsurance
imposed with respect to the participant
or beneficiary. The amount in this
paragraph (b)(3)(i)(B) is determined
without reduction for out-of-network
cost sharing that generally applies under
the plan or health insurance coverage
with respect to out-of-network services.
Thus, for example, if a plan generally
pays 70 percent of the usual, customary,
and reasonable amount for out-ofnetwork services, the amount in this
paragraph (b)(3)(i)(B) for an emergency
service is the total (that is, 100 percent)
of the usual, customary, and reasonable
amount for the service, not reduced by
the 30 percent coinsurance that would
generally apply to out-of-network
services (but reduced by the in-network
copayment or coinsurance that the
individual would be responsible for if
the emergency service had been
provided in-network).
(C) The amount that would be paid
under Medicare (part A or part B of title
XVIII of the Social Security Act, 42
U.S.C. 1395 et seq.) for the emergency
service, excluding any in-network
copayment or coinsurance imposed
with respect to the participant or
beneficiary.
(ii) Other cost sharing. Any costsharing requirement other than a
copayment or coinsurance requirement
(such as a deductible or out-of-pocket
maximum) may be imposed with
respect to emergency services provided
out of network if the cost-sharing
requirement generally applies to out-ofnetwork benefits. A deductible may be
imposed with respect to out-of-network
emergency services only as part of a
deductible that generally applies to outof-network benefits. If an out-of-pocket
maximum generally applies to out-ofnetwork benefits, that out-of-pocket
maximum must apply to out-of-network
emergency services.
(iii) Special rules regarding out-ofnetwork minimum payment standards—
(A) The minimum payment standards
set forth under paragraph (b)(3) of this
section do not apply in cases where
State law prohibits a participant or
beneficiary from being required to pay,
in addition to the in-network cost
sharing, the excess of the amount the
out-of-network provider charges over
the amount the plan or issuer provides
in benefits, or where a group health plan
or health insurance issuer is
contractually responsible for such
amounts. Nonetheless, in such cases, a
plan or issuer may not impose any
copayment or coinsurance requirement
for out-of-network emergency services
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Jkt 238001
that is higher than the copayment or
coinsurance requirement that would
apply if the services were provided in
network.
(B) A group health plan and health
insurance issuer must provide a
participant or beneficiary adequate and
prominent notice of their lack of
financial responsibility with respect to
the amounts described under this
paragraph (b)(3)(iii), to prevent
inadvertent payment by the participant
or beneficiary.
(iv) Examples. The rules of this
paragraph (b)(3) are illustrated by the
following examples. In all of these
examples, the group health plan covers
benefits with respect to emergency
services.
Example 1. (i) Facts. A group health plan
imposes a 25% coinsurance responsibility on
individuals who are furnished emergency
services, whether provided in network or out
of network. If a covered individual notifies
the plan within two business days after the
day an individual receives treatment in an
emergency department, the plan reduces the
coinsurance rate to 15%.
(ii) Conclusion. In this Example 1, the
requirement to notify the plan in order to
receive a reduction in the coinsurance rate
does not violate the requirement that the plan
cover emergency services without the need
for any prior authorization determination.
This is the result even if the plan required
that it be notified before or at the time of
receiving services at the emergency
department in order to receive a reduction in
the coinsurance rate.
Example 2. (i) Facts. A group health plan
imposes a $60 copayment on emergency
services without preauthorization, whether
provided in network or out of network. If
emergency services are preauthorized, the
plan waives the copayment, even if it later
determines the medical condition was not an
emergency medical condition.
(ii) Conclusion. In this Example 2, by
requiring an individual to pay more for
emergency services if the individual does not
obtain prior authorization, the plan violates
the requirement that the plan cover
emergency services without the need for any
prior authorization determination. (By
contrast, if, to have the copayment waived,
the plan merely required that it be notified
rather than a prior authorization, then the
plan would not violate the requirement that
the plan cover emergency services without
the need for any prior authorization
determination.)
Example 3. (i) Facts. A group health plan
covers individuals who receive emergency
services with respect to an emergency
medical condition from an out-of-network
provider. The plan has agreements with innetwork providers with respect to a certain
emergency service. Each provider has agreed
to provide the service for a certain amount.
Among all the providers for the service: One
has agreed to accept $85, two have agreed to
accept $100, two have agreed to accept $110,
three have agreed to accept $120, and one has
agreed to accept $150. Under the agreement,
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72273
the plan agrees to pay the providers 80% of
the agreed amount, with the individual
receiving the service responsible for the
remaining 20%.
(ii) Conclusion. In this Example 3, the
values taken into account in determining the
median are $85, $100, $100, $110, $110,
$120, $120, $120, and $150. Therefore, the
median amount among those agreed to for the
emergency service is $110, and the amount
under paragraph (b)(3)(i)(A) of this section is
80% of $110 ($88).
Example 4. (i) Facts. Same facts as
Example 3. Subsequently, the plan adds
another provider to its network, who has
agreed to accept $150 for the emergency
service.
(ii) Conclusion. In this Example 4, the
median amount among those agreed to for the
emergency service is $115. (Because there is
no one middle amount, the median is the
average of the two middle amounts, $110 and
$120.) Accordingly, the amount under
paragraph (b)(3)(i)(A) of this section is 80%
of $115 ($92).
Example 5. (i) Facts. Same facts as
Example 4. An individual covered by the
plan receives the emergency service from an
out-of-network provider, who charges $125
for the service. With respect to services
provided by out-of-network providers
generally, the plan reimburses covered
individuals 50% of the reasonable amount
charged by the provider for medical services.
For this purpose, the reasonable amount for
any service is based on information on
charges by all providers collected by a third
party, on a zip code by zip code basis, with
the plan treating charges at a specified
percentile as reasonable. For the emergency
service received by the individual, the
reasonable amount calculated using this
method is $116. The amount that would be
paid under Medicare for the emergency
service, excluding any copayment or
coinsurance for the service, is $80.
(ii) Conclusion. In this Example 5, the plan
is responsible for paying $92.80, 80% of
$116. The median amount among those
agreed to for the emergency service is $115
and the amount the plan would pay is $92
(80% of $115); the amount calculated using
the same method the plan uses to determine
payments for out-of-network services—
$116—excluding the in-network 20%
coinsurance, is $92.80; and the Medicare
payment is $80. Thus, the greatest amount is
$92.80. The individual is responsible for the
remaining $32.20 charged by the out-ofnetwork provider.
Example 6. (i) Facts. Same facts as
Example 5. The group health plan generally
imposes a $250 deductible for in-network
health care. With respect to all health care
provided by out-of-network providers, the
plan imposes a $500 deductible. (Covered innetwork claims are credited against the
deductible.) The individual has incurred and
submitted $260 of covered claims prior to
receiving the emergency service out of
network.
(ii) Conclusion. In this Example 6, the plan
is not responsible for paying anything with
respect to the emergency service furnished by
the out-of-network provider because the
covered individual has not satisfied the
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higher deductible that applies generally to all
health care provided out of network.
However, the amount the individual is
required to pay is credited against the
deductible.
(4) Definitions. The definitions in this
paragraph (b)(4) govern in applying the
provisions of this paragraph (b).
(i) Emergency medical condition. The
term emergency medical condition
means a medical condition manifesting
itself by acute symptoms of sufficient
severity (including severe pain) so that
a prudent layperson, who possesses an
average knowledge of health and
medicine, could reasonably expect the
absence of immediate medical attention
to result in a condition described in
clause (i), (ii), or (iii) of section
1867(e)(1)(A) of the Social Security Act
(42 U.S.C. 1395dd(e)(1)(A)). (In that
provision of the Social Security Act,
clause (i) refers to placing the health of
the individual (or, with respect to a
pregnant woman, the health of the
woman or her unborn child) in serious
jeopardy; clause (ii) refers to serious
impairment to bodily functions; and
clause (iii) refers to serious dysfunction
of any bodily organ or part.)
(ii) Emergency services. The term
emergency services means, with respect
to an emergency medical condition—
(A) A medical screening examination
(as required under section 1867 of the
Social Security Act, 42 U.S.C. 1395dd)
that is within the capability of the
emergency department of a hospital,
including ancillary services routinely
available to the emergency department
to evaluate such emergency medical
condition, and
(B) Such further medical examination
and treatment, to the extent they are
within the capabilities of the staff and
facilities available at the hospital, as are
required under section 1867 of the
Social Security Act (42 U.S.C. 1395dd)
to stabilize the patient.
(iii) Stabilize. The term to stabilize,
with respect to an emergency medical
condition (as defined in paragraph
(b)(4)(i) of this section) has the meaning
given in section 1867(e)(3) of the Social
Security Act (42 U.S.C. 1395dd(e)(3)).
(c) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the
corresponding sections of 29 CFR part
2590, contained in the 29 CFR, parts
1927 to end, edition revised as of July
1, 2015.
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Jkt 238001
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
45 CFR Chapter I
For the reasons stated in the
preamble, the Department of Health and
Human Services adopts as final the
interim final rules amending 45 CFR
parts 144, 146 and 147, which were
published in the Federal Register on
May 13, 2010 (75 FR 27122), June 17,
2010 (75 FR 34538), June 28, 2010 (75
FR 37188), and November 17, 2010 (75
FR 70114) with the following changes as
set forth below:
PART 144—REQUIREMENTS
RELATED TO HEALTH INSURANCE
28. The authority citation for part 144
continues to read as follows:
■
Authority: Secs. 2701 through 2763, 2791,
and 2792 of the Public Health Service Act,
42 U.S.C. 300gg through 300gg–63, 300gg–91,
and 300gg–92.
29. Section 144.103 is amended by
revising the definition of ‘‘preexisting
condition exclusion’’ to read as follows:
■
§ 144.103
Definitions.
*
*
*
*
*
Preexisting condition exclusion means
a limitation or exclusion of benefits
(including a denial of coverage) based
on the fact that the condition was
present before the effective date of
coverage (or if coverage is denied, the
date of the denial) under a group health
plan or group or individual health
insurance coverage (or other coverage
provided to Federally eligible
individuals pursuant to 45 CFR part
148), whether or not any medical
advice, diagnosis, care, or treatment was
recommended or received before that
day. A preexisting condition exclusion
includes any limitation or exclusion of
benefits (including a denial of coverage)
applicable to an individual as a result of
information relating to an individual’s
health status before the individual’s
effective date of coverage (or if coverage
is denied, the date of the denial) under
a group health plan, or group or
individual health insurance coverage (or
other coverage provided to Federally
eligible individuals pursuant to 45 CFR
part 148), such as a condition identified
as a result of a pre-enrollment
questionnaire or physical examination
given to the individual, or review of
medical records relating to the preenrollment period.
*
*
*
*
*
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PART 146—REQUIREMENTS FOR THE
GROUP HEALTH INSURANCE
MARKET
30. The authority citation for part 146
continues to read as follows:
■
Authority: Secs. 2702 through 2705, 2711
through 2723, 2791, and 2792 of the PHS Act
(42 U.S.C. 300gg–1 through 300gg–5, 300gg–
11 through 300gg–23, 300gg–91, and 300gg–
92).
31. Section 146.111(a)(1) is revised to
read as follows:
■
§ 146.111 Preexisting condition
exclusions.
(a) Preexisting condition exclusion
defined—(1) A preexisting condition
exclusion means a preexisting condition
exclusion within the meaning of
§ 144.103 of this subchapter.
*
*
*
*
*
PART 147—HEALTH INSURANCE
REFORM REQUIREMENTS FOR THE
GROUP AND INDIVIDUAL HEALTH
INSURANCE MARKETS
32. The authority citation for part 147
continues to read as follows:
■
Authority: Secs. 2701 through 2763, 2791
and 2792 of the Public Health Service Act (42
U.S.C. 300gg through 300gg–63, 300gg–91,
and 300gg–92), as amended.
33. Section 147.108 is revised to read
as follows:
■
§ 147.108 Prohibition of preexisting
condition exclusions.
(a) In general. A group health plan, or
a health insurance issuer offering group
or individual health insurance coverage,
may not impose any preexisting
condition exclusion (as defined in
§ 144.103 of this subchapter).
(b) Examples. The rules of paragraph
(a) of this section are illustrated by the
following examples (for additional
examples illustrating the definition of a
preexisting condition exclusion, see
§ 146.111(a)(2) of this subchapter):
Example 1. (i) Facts. A group health plan
provides benefits solely through an insurance
policy offered by Issuer P. At the expiration
of the policy, the plan switches coverage to
a policy offered by Issuer N. N’s policy
excludes benefits for oral surgery required as
a result of a traumatic injury if the injury
occurred before the effective date of coverage
under the policy.
(ii) Conclusion. In this Example 1, the
exclusion of benefits for oral surgery required
as a result of a traumatic injury if the injury
occurred before the effective date of coverage
is a preexisting condition exclusion because
it operates to exclude benefits for a condition
based on the fact that the condition was
present before the effective date of coverage
under the policy. Therefore, such an
exclusion is prohibited.
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Example 2. (i) Facts. Individual C applies
for individual health insurance coverage with
Issuer M. M denies C’s application for
coverage because a pre-enrollment physical
revealed that C has type 2 diabetes.
(ii) Conclusion. See Example 2 in
§ 146.111(a)(2) of this subchapter for a
conclusion that M’s denial of C’s application
for coverage is a preexisting condition
exclusion because a denial of an application
for coverage based on the fact that a
condition was present before the date of
denial is an exclusion of benefits based on a
preexisting condition.
(c) Allowable screenings to determine
eligibility for alternative coverage in the
individual market—(1) In general. (i) A
health insurance issuer offering
individual health insurance coverage
may screen applicants for eligibility for
alternative coverage options before
offering a child-only policy if—
(A) The practice is permitted under
State law;
(B) The screening applies to all childonly applicants, regardless of health
status; and
(C) The alternative coverage options
include options for which healthy
children would potentially be eligible
(e.g., Children’s Health Insurance
Program (CHIP) or group health
insurance).
(ii) An issuer must provide such
coverage to an applicant effective on the
first date that a child-only policy would
have been effective had the applicant
not been screened for an alternative
coverage option, as provided by State
law. A State may impose a reasonable
time limit by when an issuer would
have to enroll a child regardless of
pending applications for other coverage.
(2) Restrictions. A health insurance
issuer offering individual health
insurance coverage may screen
applicants for eligibility for alternative
coverage provided that:
(i) The screening process does not by
its operation significantly delay
enrollment or artificially engineer
eligibility of a child for a program
targeted to individuals with a preexisting condition;
(ii) The screening process is not
applied to offers of dependent coverage
for children; or
(ii) The issuer does not consider
whether an applicant is eligible for, or
is provided medical assistance under,
Medicaid in making enrollment
decisions, as provided under 42 U.S.C.
1396a (25)(G).
(d) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years (in the individual
market, policy years) beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
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Jkt 238001
plans and issuers are required to
continue to comply with the
corresponding sections of 45 CFR parts
144, 146 and 147, contained in the 45
CFR, parts 1 to 199, edition revised as
of October 1, 2015.
■ 34. Section 147.120 is revised to read
as follows:
§ 147.120 Eligibility of children until at
least age 26.
(a) In general—(1) A group health
plan, or a health insurance issuer
offering group or individual health
insurance coverage, that makes available
dependent coverage of children must
make such coverage available for
children until attainment of 26 years of
age.
(2) The rule of this paragraph (a) is
illustrated by the following example:
Example. (i) Facts. For the plan year
beginning January 1, 2011, a group health
plan provides health coverage for employees,
employees’ spouses, and employees’ children
until the child turns 26. On the birthday of
a child of an employee, July 17, 2011, the
child turns 26. The last day the plan covers
the child is July 16, 2011.
(ii) Conclusion. In this Example, the plan
satisfies the requirement of this paragraph (a)
with respect to the child.
(b) Restrictions on plan definition of
dependent—(1) In general. With respect
to a child who has not attained age 26,
a plan or issuer may not define
dependent for purposes of eligibility for
dependent coverage of children other
than in terms of a relationship between
a child and the participant (in the
individual market, the primary
subscriber). Thus, for example, a plan or
issuer may not deny or restrict
dependent coverage for a child who has
not attained age 26 based on the
presence or absence of the child’s
financial dependency (upon the
participant or primary subscriber, or any
other person); residency with the
participant (in the individual market,
the primary subscriber) or with any
other person; whether the child lives,
works, or resides in an HMO’s service
area or other network service area;
marital status; student status;
employment; eligibility for other
coverage; or any combination of those
factors. (Other requirements of Federal
or State law, including section 609 of
ERISA or section 1908 of the Social
Security Act, may require coverage of
certain children.)
(2) Construction. A plan or issuer will
not fail to satisfy the requirements of
this section if the plan or issuer limits
dependent child coverage to children
under age 26 who are described in
section 152(f)(1) of the Code. For an
individual not described in Code
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72275
section 152(f)(1), such as a grandchild or
niece, a plan may impose additional
conditions on eligibility for dependent
child health coverage, such as a
condition that the individual be a
dependent for income tax purposes.
(c) Coverage of grandchildren not
required. Nothing in this section
requires a plan or issuer to make
coverage available for the child of a
child receiving dependent coverage.
(d) Uniformity irrespective of age. The
terms of the plan or health insurance
coverage providing dependent coverage
of children cannot vary based on age
(except for children who are age 26 or
older).
(e) Examples. The rules of paragraph
(d) of this section are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan
offers a choice of self-only or family health
coverage. Dependent coverage is provided
under family health coverage for children of
participants who have not attained age 26.
The plan imposes an additional premium
surcharge for children who are older than age
18.
(ii) Conclusion. In this Example 1, the plan
violates the requirement of paragraph (d) of
this section because the plan varies the terms
for dependent coverage of children based on
age.
Example 2. (i) Facts. A group health plan
offers a choice among the following tiers of
health coverage: self-only, self-plus-one, selfplus-two, and self-plus-three-or-more. The
cost of coverage increases based on the
number of covered individuals. The plan
provides dependent coverage of children
who have not attained age 26.
(ii) Conclusion. In this Example 2, the plan
does not violate the requirement of paragraph
(d) of this section that the terms of dependent
coverage for children not vary based on age.
Although the cost of coverage increases for
tiers with more covered individuals, the
increase applies without regard to the age of
any child.
Example 3. (i) Facts. A group health plan
offers two benefit packages—an HMO option
and an indemnity option. Dependent
coverage is provided for children of
participants who have not attained age 26.
The plan limits children who are older than
age 18 to the HMO option.
(ii) Conclusion. In this Example 3, the plan
violates the requirement of paragraph (d) of
this section because the plan, by limiting
children who are older than age 18 to the
HMO option, varies the terms for dependent
coverage of children based on age.
Example 4. (i) Facts. A group health plan
sponsored by a large employer normally
charges a copayment for physician visits that
do not constitute preventive services. The
plan charges this copayment to individuals
age 19 and over, including employees,
spouses, and dependent children, but waives
it for those under age 19.
(ii) Conclusion. In this Example 4, the plan
does not violate the requirement of paragraph
(d) of this section that the terms of dependent
coverage for children not vary based on age.
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While the requirement of paragraph (d) of
this section generally prohibits distinctions
based upon age in dependent coverage of
children, it does not prohibit distinctions
based upon age that apply to all coverage
under the plan, including coverage for
employees and spouses as well as dependent
children. In this Example 4, the copayments
charged to dependent children are the same
as those charged to employees and spouses.
Accordingly, the arrangement described in
this Example 4 (including waiver, for
individuals under age 19, of the generally
applicable copayment) does not violate the
requirement of paragraph (d) of this section.
(f) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years (in the individual
market, policy years) beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the
corresponding sections of 45 CFR parts
144, 146 and 147, contained in the 45
CFR, parts 1 to 199, edition revised as
of October 1, 2015.
■ 35. Section 147.126 is revised to read
as follows:
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§ 147.126
No lifetime or annual limits.
(a) Prohibition—(1) Lifetime limits.
Except as provided in paragraph (b) of
this section, a group health plan, or a
health insurance issuer offering group or
individual health insurance coverage,
may not establish any lifetime limit on
the dollar amount of essential health
benefits for any individual, whether
provided in-network or out-of-network.
(2) Annual limits—(i) General rule.
Except as provided in paragraphs
(a)(2)(ii) and (b) of this section, a group
health plan, or a health insurance issuer
offering group or individual health
insurance coverage, may not establish
any annual limit on the dollar amount
of essential health benefits for any
individual, whether provided innetwork or out-of-network.
(ii) Exception for health flexible
spending arrangements. A health
flexible spending arrangement (as
defined in section 106(c)(2) of the
Internal Revenue Code) offered through
a cafeteria plan pursuant to section 125
of the Internal Revenue Code is not
subject to the requirement in paragraph
(a)(2)(i) of this section.
(b) Construction—(1) Permissible
limits on specific covered benefits. The
rules of this section do not prevent a
group health plan, or a health insurance
issuer offering group or individual
health insurance coverage, from placing
annual or lifetime dollar limits with
respect to any individual on specific
covered benefits that are not essential
health benefits to the extent that such
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limits are otherwise permitted under
applicable Federal or State law. (The
scope of essential health benefits is
addressed in paragraph (c) of this
section).
(2) Condition-based exclusions. The
rules of this section do not prevent a
group health plan, or a health insurance
issuer offering group or individual
health insurance coverage, from
excluding all benefits for a condition.
However, if any benefits are provided
for a condition, then the requirements of
this section apply. Other requirements
of Federal or State law may require
coverage of certain benefits.
(c) Definition of essential health
benefits. The term ‘‘essential health
benefits’’ means essential health
benefits under section 1302(b) of the
Patient Protection and Affordable Care
Act and applicable regulations. For this
purpose, a group health plan or a health
insurance issuer that is not required to
provide essential health benefits under
section 1302(b) must define ‘‘essential
health benefits’’ in a manner consistent
with one of the three Federal Employees
Health Benefit Program (FEHBP) options
as defined by 45 CFR 156.100(a)(3)or
one of the base-benchmark plans
selected by a State or applied by default
pursuant to 45 CFR 156.100.
(d) Special rule for health
reimbursement arrangements (HRAs)
and other account-based plans—(1) In
general. If an HRA or other accountbased plan is integrated with other
coverage under a group health plan and
the other group health plan coverage
alone satisfies the requirements in
paragraph (a)(2) of this section, the fact
that the benefits under the HRA or other
account-based plan are limited does not
mean that the HRA or other accountbased plan fails to meet the
requirements of paragraph (a)(2) of this
section. Similarly, if an HRA or other
account-based plan is integrated with
other coverage under a group health
plan and the other group health plan
coverage alone satisfies the
requirements in PHS Act section 2713
and § 147.130(a)(1), the HRA or other
account-based plan will not fail to meet
the requirements of PHS Act 2713 and
§ 147.130(a)(1).
(2) Integration requirements. An HRA
or other account-based plan is
integrated with a group health plan for
purposes of paragraph (a)(2) of this
section if it meets the requirements
under either the integration method set
forth in paragraph (d)(2)(i) of this
section or the integration method set
forth in paragraph (d)(2)(ii) of this
section. Integration does not require that
the HRA (or other account-based plan)
and the group health plan with which
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it is integrated share the same plan
sponsor, the same plan document, or
governing instruments, or file a single
Form 5500, if applicable. The term
‘‘excepted benefits’’ is used throughout
the integration methods; for a definition
of the term ‘‘excepted benefits’’ see
Internal Revenue Code section 9832(c),
ERISA section 733(c), and PHS Act
section 2791(c).
(i) Integration Method: Minimum
value not required. An HRA or other
account-based plan is integrated with
another group health plan for purposes
of this paragraph if:
(A) The plan sponsor offers a group
health plan (other than the HRA or other
account-based plan) to the employee
that does not consist solely of excepted
benefits;
(B) The employee receiving the HRA
or other account-based plan is actually
enrolled in a group health plan (other
than the HRA or other account-based
plan) that does not consist solely of
excepted benefits, regardless of whether
the plan is offered by the same plan
sponsor (referred to as non-HRA group
coverage);
(C) The HRA or other account-based
plan is available only to employees who
are enrolled in non-HRA group
coverage, regardless of whether the nonHRA group coverage is offered by the
plan sponsor of the HRA or other
account-based plan (for example, the
HRA may be offered only to employees
who do not enroll in an employer’s
group health plan but are enrolled in
other non-HRA group coverage, such as
a group health plan maintained by the
employer of the employee’s spouse);
(D) The benefits under the HRA or
other account-based plan are limited to
reimbursement of one or more of the
following—co-payments, co-insurance,
deductibles, and premiums under the
non-HRA group coverage, as well as
medical care (as defined under section
213(d) of the Internal Revenue Code)
that does not constitute essential health
benefits as defined in paragraph (c) of
this section; and
(E) Under the terms of the HRA or
other account-based plan, an employee
(or former employee) is permitted to
permanently opt out of and waive future
reimbursements from the HRA or other
account-based plan at least annually
and, upon termination of employment,
either the remaining amounts in the
HRA or other account-based plan are
forfeited or the employee is permitted to
permanently opt out of and waive future
reimbursements from the HRA or other
account-based plan.
(ii) Integration Method: Minimum
value required. An HRA or other
account-based plan is integrated with
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another group health plan for purposes
of this paragraph if:
(A) The plan sponsor offers a group
health plan (other than the HRA or other
account-based plan) to the employee
that provides minimum value pursuant
to Code section 36B(c)(2)(C)(ii) (and its
implementing regulations and
applicable guidance);
(B) The employee receiving the HRA
or other account-based plan is actually
enrolled in a group health plan that
provides minimum value pursuant to
section 36B(c)(2)(C)(ii) of the Internal
Revenue Code (and applicable
guidance), regardless of whether the
plan is offered by the plan sponsor of
the HRA or other account-based plan
(referred to as non-HRA MV group
coverage);
(C) The HRA or other account-based
plan is available only to employees who
are actually enrolled in non-HRA MV
group coverage, regardless of whether
the non-HRA MV group coverage is
offered by the plan sponsor of the HRA
or other account-based plan (for
example, the HRA may be offered only
to employees who do not enroll in an
employer’s group health plan but are
enrolled in other non-HRA MV group
coverage, such as a group health plan
maintained by an employer of the
employee’s spouse); and
(D) Under the terms of the HRA or
other account-based plan, an employee
(or former employee) is permitted to
permanently opt out of and waive future
reimbursements from the HRA or other
account-based plan at least annually,
and, upon termination of employment,
either the remaining amounts in the
HRA or other account-based plan are
forfeited or the employee is permitted to
permanently opt out of and waive future
reimbursements from the HRA or other
account-based plan.
(3) Forfeiture. For purpose of
integration under paragraphs (d)(2)(i)(E)
and (d)(2)(ii)(D) of this section,
forfeiture or waiver occurs even if the
forfeited or waived amounts may be
reinstated upon a fixed date, a
participant’s death, or the earlier of the
two events (the reinstatement event).
For this purpose coverage under an
HRA or other account-based plan is
considered forfeited or waived prior to
a reinstatement event only if the
participant’s election to forfeit or waive
is irrevocable, meaning that, beginning
on the effective date of the election and
through the date of the reinstatement
event, the participant and the
participant’s beneficiaries have no
access to amounts credited to the HRA
or other account-based plan. This means
that upon and after reinstatement, the
reinstated amounts under the HRA or
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other account-based plan may not be
used to reimburse or pay medical
expenses incurred during the period
after forfeiture and prior to
reinstatement.
(4) No integration with individual
market coverage. A group health plan,
including an HRA or other accountbased plan, used to purchase coverage
on the individual market is not
integrated with that individual market
coverage for purposes of paragraph
(a)(2) of this section (or for purposes of
the requirements of PHS Act section
2713).
(5) Integration with Medicare parts B
and D. For employers that are not
required to offer their non-HRA group
health plan coverage to employees who
are Medicare beneficiaries, an HRA or
other account-based plan that may be
used to reimburse premiums under
Medicare part B or D may be integrated
with Medicare (and deemed to comply
with PHS Act sections 2711 and 2713)
if the following requirements are
satisfied with respect to employees who
would be eligible for the employer’s
non-HRA group health plan but for their
eligibility for Medicare (and the
integration rules under paragraphs
(d)(2)(i) and (ii) of this section continue
to apply to employees who are not
eligible for Medicare):
(i) The plan sponsor offers a group
health plan (other than the HRA or other
account-based plan and that does not
consist solely of excepted benefits) to
employees who are not eligible for
Medicare;
(ii) The employee receiving the HRA
or other account-based plan is actually
enrolled Medicare part B or D;
(iii) The HRA or other account-based
plan is available only to employees who
are enrolled in Medicare part B or D;
and
(iv) The HRA or other account-based
plan complies with paragraphs
(d)(2)(i)(E) and (d)(2)(ii)(D) of this
section.
(6) Account-based plan. An accountbased plan for purposes of this section
is an employer-provided group health
plan that provides reimbursements of
medical expenses other than individual
market policy premiums with the
reimbursement subject to a maximum
fixed dollar amount for a period. An
HRA is a type of account-based plan.
(e) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years (in the individual
market, policy years) beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the
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72277
corresponding sections of 45 CFR parts
144, 146 and 147, contained in the 45
CFR, parts 1 to 199, edition revised as
of October 1, 2015.
■ 36. Section 147.128 is revised to read
as follows:
§ 147.128
Rules regarding rescissions.
(a) Prohibition on rescissions—(1) A
group health plan, or a health insurance
issuer offering group or individual
health insurance coverage, must not
rescind coverage under the plan, or
under the policy, certificate, or contract
of insurance, with respect to an
individual (including a group to which
the individual belongs or family
coverage in which the individual is
included) once the individual is covered
under the plan or coverage, unless the
individual (or a person seeking coverage
on behalf of the individual) performs an
act, practice, or omission that
constitutes fraud, or makes an
intentional misrepresentation of
material fact, as prohibited by the terms
of the plan or coverage. A group health
plan, or a health insurance issuer
offering group or individual health
insurance coverage, must provide at
least 30 days advance written notice to
each participant (in the individual
market, primary subscriber) who would
be affected before coverage may be
rescinded under this paragraph (a)(1),
regardless of, in the case of group
coverage, whether the coverage is
insured or self-insured, or whether the
rescission applies to an entire group or
only to an individual within the group.
(The rules of this paragraph (a)(1) apply
regardless of any contestability period
that may otherwise apply.)
(2) For purposes of this section, a
rescission is a cancellation or
discontinuance of coverage that has
retroactive effect. For example, a
cancellation that treats a policy as void
from the time of the individual’s or
group’s enrollment is a rescission. As
another example, a cancellation that
voids benefits paid up to a year before
the cancellation is also a rescission for
this purpose. A cancellation or
discontinuance of coverage is not a
rescission if —
(i) The cancellation or discontinuance
of coverage has only a prospective
effect;
(ii) The cancellation or
discontinuance of coverage is effective
retroactively, to the extent it is
attributable to a failure to timely pay
required premiums or contributions
(including COBRA premiums) towards
the cost of coverage;
(iii) The cancellation or
discontinuance of coverage is initiated
by the individual (or by the individual’s
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authorized representative) and the
sponsor, employer, plan, or issuer does
not, directly or indirectly, take action to
influence the individual’s decision to
cancel or discontinue coverage
retroactively or otherwise take any
adverse action or retaliate against,
interfere with, coerce, intimidate, or
threaten the individual; or
(iv) The cancellation or
discontinuance of coverage is initiated
by the Exchange pursuant to § 155.430
of this subchapter (other than under
paragraph (b)(2)(iii) of this section).
(3) The rules of this paragraph (a) are
illustrated by the following examples:
(c) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years (in the individual
market, policy years) beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the
corresponding sections of 45 CFR parts
144, 146 and 147, contained in the 45
CFR, parts 1 to 199, edition revised as
of October 1, 2015.
■ 37. Section 147.136 is revised to read
as follows:
Example 1. (i) Facts. Individual A seeks
enrollment in an insured group health plan.
The plan terms permit rescission of coverage
with respect to an individual if the
individual engages in fraud or makes an
intentional misrepresentation of a material
fact. The plan requires A to complete a
questionnaire regarding A’s prior medical
history, which affects setting the group rate
by the health insurance issuer. The
questionnaire complies with the other
requirements of this part and part 146 of this
subchapter. The questionnaire includes the
following question: ‘‘Is there anything else
relevant to your health that we should
know?’’ A inadvertently fails to list that A
visited a psychologist on two occasions, six
years previously. A is later diagnosed with
breast cancer and seeks benefits under the
plan. On or around the same time, the issuer
receives information about A’s visits to the
psychologist, which was not disclosed in the
questionnaire.
(ii) Conclusion. In this Example 1, the plan
cannot rescind A’s coverage because A’s
failure to disclose the visits to the
psychologist was inadvertent. Therefore, it
was not fraudulent or an intentional
misrepresentation of material fact.
Example 2. (i) Facts. An employer
sponsors a group health plan that provides
coverage for employees who work at least 30
hours per week. Individual B has coverage
under the plan as a full-time employee. The
employer reassigns B to a part-time position.
Under the terms of the plan, B is no longer
eligible for coverage. The plan mistakenly
continues to provide health coverage,
collecting premiums from B and paying
claims submitted by B. After a routine audit,
the plan discovers that B no longer works at
least 30 hours per week. The plan rescinds
B’s coverage effective as of the date that B
changed from a full-time employee to a parttime employee.
(ii) Conclusion. In this Example 2, the plan
cannot rescind B’s coverage because there
was no fraud or an intentional
misrepresentation of material fact. The plan
may cancel coverage for B prospectively,
subject to other applicable Federal and State
laws.
§ 147.136 Internal claims and appeals and
external review processes.
(b) Compliance with other
requirements. Other requirements of
Federal or State law may apply in
connection with a rescission of
coverage.
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(a) Scope and definitions–(1) Scope.
This section sets forth requirements
with respect to internal claims and
appeals and external review processes
for group health plans and health
insurance issuers that are not
grandfathered health plans under
§ 147.140. Paragraph (b) of this section
provides requirements for internal
claims and appeals processes. Paragraph
(c) of this section sets forth rules
governing the applicability of State
external review processes. Paragraph (d)
of this section sets forth a Federal
external review process for plans and
issuers not subject to an applicable State
external review process. Paragraph (e) of
this section prescribes requirements for
ensuring that notices required to be
provided under this section are
provided in a culturally and
linguistically appropriate manner.
Paragraph (f) of this section describes
the authority of the Secretary to deem
certain external review processes in
existence on March 23, 2010 as in
compliance with paragraph (c) or (d) of
this section.
(2) Definitions. For purposes of this
section, the following definitions
apply—
(i) Adverse benefit determination. An
adverse benefit determination means an
adverse benefit determination as
defined in 29 CFR 2560.503–1, as well
as any rescission of coverage, as
described in § 147.128 (whether or not,
in connection with the rescission, there
is an adverse effect on any particular
benefit at that time).
(ii) Appeal (or internal appeal). An
appeal or internal appeal means review
by a plan or issuer of an adverse benefit
determination, as required in paragraph
(b) of this section.
(iii) Claimant. Claimant means an
individual who makes a claim under
this section. For purposes of this
section, references to claimant include a
claimant’s authorized representative.
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(iv) External review. External review
means a review of an adverse benefit
determination (including a final internal
adverse benefit determination)
conducted pursuant to an applicable
State external review process described
in paragraph (c) of this section or the
Federal external review process of
paragraph (d) of this section.
(v) Final internal adverse benefit
determination. A final internal adverse
benefit determination means an adverse
benefit determination that has been
upheld by a plan or issuer at the
completion of the internal appeals
process applicable under paragraph (b)
of this section (or an adverse benefit
determination with respect to which the
internal appeals process has been
exhausted under the deemed exhaustion
rules of paragraph (b)(2)(ii)(F) of this
section).
(vi) Final external review decision. A
final external review decision means a
determination by an independent
review organization at the conclusion of
an external review.
(vii) Independent review organization
(or IRO). An independent review
organization (or IRO) means an entity
that conducts independent external
reviews of adverse benefit
determinations and final internal
adverse benefit determinations pursuant
to paragraph (c) or (d) of this section.
(viii) NAIC Uniform Model Act. The
NAIC Uniform Model Act means the
Uniform Health Carrier External Review
Model Act promulgated by the National
Association of Insurance Commissioners
in place on July 23, 2010.
(b) Internal claims and appeals
process—(1) In general. A group health
plan and a health insurance issuer
offering group or individual health
insurance coverage must implement an
effective internal claims and appeals
process, as described in this paragraph
(b).
(2) Requirements for group health
plans and group health insurance
issuers. A group health plan and a
health insurance issuer offering group
health insurance coverage must comply
with all the requirements of this
paragraph (b)(2). In the case of health
insurance coverage offered in
connection with a group health plan, if
either the plan or the issuer complies
with the internal claims and appeals
process of this paragraph (b)(2), then the
obligation to comply with this
paragraph (b)(2) is satisfied for both the
plan and the issuer with respect to the
health insurance coverage.
(i) Minimum internal claims and
appeals standards. A group health plan
and a health insurance issuer offering
group health insurance coverage must
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comply with all the requirements
applicable to group health plans under
29 CFR 2560.503–1, except to the extent
those requirements are modified by
paragraph (b)(2)(ii) of this section.
Accordingly, under this paragraph (b),
with respect to health insurance
coverage offered in connection with a
group health plan, the group health
insurance issuer is subject to the
requirements in 29 CFR 2560.503–1 to
the same extent as the group health
plan.
(ii) Additional standards. In addition
to the requirements in paragraph
(b)(2)(i) of this section, the internal
claims and appeals processes of a group
health plan and a health insurance
issuer offering group health insurance
coverage must meet the requirements of
this paragraph (b)(2)(ii).
(A) Clarification of meaning of
adverse benefit determination. For
purposes of this paragraph (b)(2), an
‘‘adverse benefit determination’’
includes an adverse benefit
determination as defined in paragraph
(a)(2)(i) of this section. Accordingly, in
complying with 29 CFR 2560.503–1, as
well as the other provisions of this
paragraph (b)(2), a plan or issuer must
treat a rescission of coverage (whether
or not the rescission has an adverse
effect on any particular benefit at that
time) as an adverse benefit
determination. (Rescissions of coverage
are subject to the requirements of
§ 147.128.)
(B) Expedited notification of benefit
determinations involving urgent care.
The requirements of 29 CFR 2560.503–
1(f)(2)(i) (which generally provide,
among other things, in the case of urgent
care claims for notification of the plan’s
benefit determination (whether adverse
or not) as soon as possible, taking into
account the medical exigencies, but not
later than 72 hours after the receipt of
the claim) continue to apply to the plan
and issuer. For purposes of this
paragraph (b)(2)(ii)(B), a claim involving
urgent care has the meaning given in 29
CFR 2560.503–1(m)(1), as determined
by the attending provider, and the plan
or issuer shall defer to such
determination of the attending provider.
(C) Full and fair review. A plan and
issuer must allow a claimant to review
the claim file and to present evidence
and testimony as part of the internal
claims and appeals process.
Specifically, in addition to complying
with the requirements of 29 CFR
2560.503–1(h)(2)—
(1) The plan or issuer must provide
the claimant, free of charge, with any
new or additional evidence considered,
relied upon, or generated by the plan or
issuer (or at the direction of the plan or
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Jkt 238001
issuer) in connection with the claim;
such evidence must be provided as soon
as possible and sufficiently in advance
of the date on which the notice of final
internal adverse benefit determination is
required to be provided under 29 CFR
2560.503–1(i) to give the claimant a
reasonable opportunity to respond prior
to that date; and
(2) Before the plan or issuer can issue
a final internal adverse benefit
determination based on a new or
additional rationale, the claimant must
be provided, free of charge, with the
rationale; the rationale must be
provided as soon as possible and
sufficiently in advance of the date on
which the notice of final internal
adverse benefit determination is
required to be provided under 29 CFR
2560.503–1(i) to give the claimant a
reasonable opportunity to respond prior
to that date. Notwithstanding the rules
of 29 CFR 2560.503–1(i), if the new or
additional evidence is received so late
that it would be impossible to provide
it to the claimant in time for the
claimant to have a reasonable
opportunity to respond, the period for
providing a notice of final internal
adverse benefit determination is tolled
until such time as the claimant has a
reasonable opportunity to respond.
After the claimant responds, or has a
reasonable opportunity to respond but
fails to do so, the plan administrator
shall notify the claimant of the plan’s
benefit determination as soon as a plan
acting in a reasonable and prompt
fashion can provide the notice, taking
into account the medical exigencies.
(D) Avoiding conflicts of interest. In
addition to the requirements of 29 CFR
2560.503–1(b) and (h) regarding full and
fair review, the plan and issuer must
ensure that all claims and appeals are
adjudicated in a manner designed to
ensure the independence and
impartiality of the persons involved in
making the decision. Accordingly,
decisions regarding hiring,
compensation, termination, promotion,
or other similar matters with respect to
any individual (such as a claims
adjudicator or medical expert) must not
be made based upon the likelihood that
the individual will support the denial of
benefits.
(E) Notice. A plan and issuer must
provide notice to individuals, in a
culturally and linguistically appropriate
manner (as described in paragraph (e) of
this section) that complies with the
requirements of 29 CFR 2560.503–1(g)
and (j). The plan and issuer must also
comply with the additional
requirements of this paragraph
(b)(2)(ii)(E).
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(1) The plan and issuer must ensure
that any notice of adverse benefit
determination or final internal adverse
benefit determination includes
information sufficient to identify the
claim involved (including the date of
service, the health care provider, the
claim amount (if applicable), and a
statement describing the availability,
upon request, of the diagnosis code and
its corresponding meaning, and the
treatment code and its corresponding
meaning).
(2) The plan and issuer must provide
to participants, beneficiaries and
enrollees, as soon as practicable, upon
request, the diagnosis code and its
corresponding meaning, and the
treatment code and its corresponding
meaning, associated with any adverse
benefit determination or final internal
adverse benefit determination. The plan
or issuer must not consider a request for
such diagnosis and treatment
information, in itself, to be a request for
an internal appeal under this paragraph
(b) or an external review under
paragraphs (c) and (d) of this section.
(3) The plan and issuer must ensure
that the reason or reasons for the
adverse benefit determination or final
internal adverse benefit determination
includes the denial code and its
corresponding meaning, as well as a
description of the plan’s or issuer’s
standard, if any, that was used in
denying the claim. In the case of a
notice of final internal adverse benefit
determination, this description must
include a discussion of the decision.
(4) The plan and issuer must provide
a description of available internal
appeals and external review processes,
including information regarding how to
initiate an appeal.
(5) The plan and issuer must disclose
the availability of, and contact
information for, any applicable office of
health insurance consumer assistance or
ombudsman established under PHS Act
section 2793 to assist individuals with
the internal claims and appeals and
external review processes.
(F) Deemed exhaustion of internal
claims and appeals processes—(1) In
the case of a plan or issuer that fails to
strictly adhere to all the requirements of
this paragraph (b)(2) with respect to a
claim, the claimant is deemed to have
exhausted the internal claims and
appeals process of this paragraph (b),
except as provided in paragraph
(b)(2)(ii)(F)(2) of this section.
Accordingly the claimant may initiate
an external review under paragraph (c)
or (d) of this section, as applicable. The
claimant is also entitled to pursue any
available remedies under section 502(a)
of ERISA or under State law, as
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applicable, on the basis that the plan or
issuer has failed to provide a reasonable
internal claims and appeals process that
would yield a decision on the merits of
the claim. If a claimant chooses to
pursue remedies under section 502(a) of
ERISA under such circumstances, the
claim or appeal is deemed denied on
review without the exercise of
discretion by an appropriate fiduciary.
(2) Notwithstanding paragraph
(b)(2)(ii)(F)(1) of this section, the
internal claims and appeals process of
this paragraph (b) will not be deemed
exhausted based on de minimis
violations that do not cause, and are not
likely to cause, prejudice or harm to the
claimant so long as the plan or issuer
demonstrates that the violation was for
good cause or due to matters beyond the
control of the plan or issuer and that the
violation occurred in the context of an
ongoing, good faith exchange of
information between the plan and the
claimant. This exception is not available
if the violation is part of a pattern or
practice of violations by the plan or
issuer. The claimant may request a
written explanation of the violation
from the plan or issuer, and the plan or
issuer must provide such explanation
within 10 days, including a specific
description of its bases, if any, for
asserting that the violation should not
cause the internal claims and appeals
process of this paragraph (b) to be
deemed exhausted. If an external
reviewer or a court rejects the claimant’s
request for immediate review under
paragraph (b)(2)(ii)(F)(1) of this section
on the basis that the plan met the
standards for the exception under this
paragraph (b)(2)(ii)(F)(2), the claimant
has the right to resubmit and pursue the
internal appeal of the claim. In such a
case, within a reasonable time after the
external reviewer or court rejects the
claim for immediate review (not to
exceed 10 days), the plan shall provide
the claimant with notice of the
opportunity to resubmit and pursue the
internal appeal of the claim. Time
periods for re-filing the claim shall
begin to run upon claimant’s receipt of
such notice.
(iii) Requirement to provide continued
coverage pending the outcome of an
appeal. A plan and issuer subject to the
requirements of this paragraph (b)(2) are
required to provide continued coverage
pending the outcome of an appeal. For
this purpose, the plan and issuer must
comply with the requirements of 29 CFR
2560.503–1(f)(2)(ii), which generally
provides that benefits for an ongoing
course of treatment cannot be reduced
or terminated without providing
advance notice and an opportunity for
advance review.
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(3) Requirements for individual health
insurance issuers. A health insurance
issuer offering individual health
insurance coverage must comply with
all the requirements of this paragraph
(b)(3).
(i) Minimum internal claims and
appeals standards. A health insurance
issuer offering individual health
insurance coverage must comply with
all the requirements of the ERISA
internal claims and appeals procedures
applicable to group health plans under
29 CFR 2560.503–1 except for the
requirements with respect to
multiemployer plans, and except to the
extent those requirements are modified
by paragraph (b)(3)(ii) of this section.
Accordingly, under this paragraph (b),
with respect to individual health
insurance coverage, the issuer is subject
to the requirements in 29 CFR
2560.503–1 as if the issuer were a group
health plan.
(ii) Additional standards. In addition
to the requirements in paragraph
(b)(3)(i) of this section, the internal
claims and appeals processes of a health
insurance issuer offering individual
health insurance coverage must meet
the requirements of this paragraph
(b)(3)(ii).
(A) Clarification of meaning of
adverse benefit determination. For
purposes of this paragraph (b)(3), an
adverse benefit determination includes
an adverse benefit determination as
defined in paragraph (a)(2)(i) of this
section. Accordingly, in complying with
29 CFR 2560.503–1, as well as other
provisions of this paragraph (b)(3), an
issuer must treat a rescission of coverage
(whether or not the rescission has an
adverse effect on any particular benefit
at that time) and any decision to deny
coverage in an initial eligibility
determination as an adverse benefit
determination. (Rescissions of coverage
are subject to the requirements of
§ 147.128.)
(B) Expedited notification of benefit
determinations involving urgent care.
The requirements of 29 CFR 2560.503–
1(f)(2)(i) (which generally provide,
among other things, in the case of urgent
care claims for notification of the
issuer’s benefit determination (whether
adverse or not) as soon as possible,
taking into account the medical
exigencies, but not later than 72 hours
after receipt of the claim) continue to
apply to the issuer. For purposes of this
paragraph (b)(3)(ii)(B), a claim involving
urgent care has the meaning given in 29
CFR 2560.503–1(m)(1), as determined
by the attending provider, and the issuer
shall defer to such determination of the
attending provider.
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(C) Full and fair review. An issuer
must allow a claimant to review the
claim file and to present evidence and
testimony as part of the internal claims
and appeals process. Specifically, in
addition to complying with the
requirements of 29 CFR 2560.503–
1(h)(2)—
(1) The issuer must provide the
claimant, free of charge, with any new
or additional evidence considered,
relied upon, or generated by the issuer
(or at the direction of the issuer) in
connection with the claim; such
evidence must be provided as soon as
possible and sufficiently in advance of
the date on which the notice of final
internal adverse benefit determination is
required to be provided under 29 CFR
2560.503–1(i) to give the claimant a
reasonable opportunity to respond prior
to that date; and
(2) Before the issuer can issue a final
internal adverse benefit determination
based on a new or additional rationale,
the claimant must be provided, free of
charge, with the rationale; the rationale
must be provided as soon as possible
and sufficiently in advance of the date
on which the notice of final internal
adverse benefit determination is
required to be provided under 29 CFR
2560.503–1(i) to give the claimant a
reasonable opportunity to respond prior
to that date. Notwithstanding the rules
of 29 CFR 2560.503–1(i), if the new or
additional evidence is received so late
that it would be impossible to provide
it to the claimant in time for the
claimant to have a reasonable
opportunity to respond, the period for
providing a notice of final internal
adverse benefit determination is tolled
until such time as the claimant has a
reasonable opportunity to respond.
After the claimant responds, or has a
reasonable opportunity to respond but
fails to do so, the issuer shall notify the
claimant of the issuer’s determination as
soon as an issuer acting in a reasonable
and prompt fashion can provide the
notice, taking into account the medical
exigencies.
(D) Avoiding conflicts of interest. In
addition to the requirements of 29 CFR
2560.503–1(b) and (h) regarding full and
fair review, the issuer must ensure that
all claims and appeals are adjudicated
in a manner designed to ensure the
independence and impartiality of the
persons involved in making the
decision. Accordingly, decisions
regarding hiring, compensation,
termination, promotion, or other similar
matters with respect to any individual
(such as a claims adjudicator or medical
expert) must not be made based upon
the likelihood that the individual will
support the denial of benefits.
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(E) Notice. An issuer must provide
notice to individuals, in a culturally and
linguistically appropriate manner (as
described in paragraph (e) of this
section) that complies with the
requirements of 29 CFR 2560.503–1(g)
and (j). The issuer must also comply
with the additional requirements of this
paragraph (b)(3)(ii)(E).
(1) The issuer must ensure that any
notice of adverse benefit determination
or final internal adverse benefit
determination includes information
sufficient to identify the claim involved
(including the date of service, the name
of the health care provider, the claim
amount (if applicable), and a statement
describing the availability, upon
request, of the diagnosis code and its
corresponding meaning, and the
treatment code and its corresponding
meaning).
(2) The issuer must provide to
participants and beneficiaries, as soon
as practicable, upon request, the
diagnosis code and its corresponding
meaning, and the treatment code and its
corresponding meaning, associated with
any adverse benefit determination or
final internal adverse benefit
determination. The issuer must not
consider a request for such diagnosis
and treatment information, in itself, to
be a request for an internal appeal under
this paragraph (b) or an external review
under paragraphs (c) and (d) of this
section.
(3) The issuer must ensure that the
reason or reasons for the adverse benefit
determination or final internal adverse
benefit determination includes the
denial code and its corresponding
meaning, as well as a description of the
issuer’s standard, if any, that was used
in denying the claim. In the case of a
notice of final internal adverse benefit
determination, this description must
include a discussion of the decision.
(4) The issuer must provide a
description of available internal appeals
and external review processes,
including information regarding how to
initiate an appeal.
(5) The issuer must disclose the
availability of, and contact information
for, any applicable office of health
insurance consumer assistance or
ombudsman established under PHS Act
section 2793 to assist individuals with
the internal claims and appeals and
external review processes.
(F) Deemed exhaustion of internal
claims and appeals processes. (1) In the
case of an issuer that fails to adhere to
all the requirements of this paragraph
(b)(3) with respect to a claim, the
claimant is deemed to have exhausted
the internal claims and appeals process
of this paragraph (b), except as provided
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Jkt 238001
in paragraph (b)(3)(ii)(F)(2) of this
section. Accordingly, the claimant may
initiate an external review under
paragraph (c) or (d) of this section, as
applicable. The claimant is also entitled
to pursue any available remedies under
State law, as applicable, on the basis
that the issuer has failed to provide a
reasonable internal claims and appeals
process that would yield a decision on
the merits of the claim.
(2) Notwithstanding paragraph
(b)(3)(ii)(F)(1) of this section, the
internal claims and appeals process of
this paragraph (b) will not be deemed
exhausted based on de minimis
violations that do not cause, and are not
likely to cause, prejudice or harm to the
claimant so long as the issuer
demonstrates that the violation was for
good cause or due to matters beyond the
control of the issuer and that the
violation occurred in the context of an
ongoing, good faith exchange of
information between the issuer and the
claimant. This exception is not available
if the violation is part of a pattern or
practice of violations by the issuer. The
claimant may request a written
explanation of the violation from the
issuer, and the issuer must provide such
explanation within 10 days, including a
specific description of its bases, if any,
for asserting that the violation should
not cause the internal claims and
appeals process of this paragraph (b) to
be deemed exhausted. If an external
reviewer or a court rejects the claimant’s
request for immediate review under
paragraph (b)(3)(ii)(F)(1) of this section
on the basis that the issuer met the
standards for the exception under this
paragraph (b)(3)(ii)(F)(2), the claimant
has the right to resubmit and pursue the
internal appeal of the claim. In such a
case, within a reasonable time after the
external reviewer or court rejects the
claim for immediate review (not to
exceed 10 days), the issuer shall provide
the claimant with notice of the
opportunity to resubmit and pursue the
internal appeal of the claim. Time
periods for re-filing the claim shall
begin to run upon claimant’s receipt of
such notice.
(G) One level of internal appeal.
Notwithstanding the requirements in 29
CFR 2560.503–1(c)(3), a health
insurance issuer offering individual
health insurance coverage must provide
for only one level of internal appeal
before issuing a final determination.
(H) Recordkeeping requirements. A
health insurance issuer offering
individual health insurance coverage
must maintain for six years records of
all claims and notices associated with
the internal claims and appeals process,
including the information detailed in
PO 00000
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72281
paragraph (b)(3)(ii)(E) of this section and
any other information specified by the
Secretary. An issuer must make such
records available for examination by the
claimant or State or Federal oversight
agency upon request.
(iii) Requirement to provide continued
coverage pending the outcome of an
appeal. An issuer subject to the
requirements of this paragraph (b)(3) is
required to provide continued coverage
pending the outcome of an appeal. For
this purpose, the issuer must comply
with the requirements of 29 CFR
2560.503–1(f)(2)(ii) as if the issuer were
a group health plan, so that the issuer
cannot reduce or terminate an ongoing
course of treatment without providing
advance notice and an opportunity for
advance review.
(c) State standards for external
review—(1) In general. (i) If a State
external review process that applies to
and is binding on a health insurance
issuer offering group or individual
health insurance coverage includes at a
minimum the consumer protections in
the NAIC Uniform Model Act, then the
issuer must comply with the applicable
State external review process and is not
required to comply with the Federal
external review process of paragraph (d)
of this section. In such a case, to the
extent that benefits under a group health
plan are provided through health
insurance coverage, the group health
plan is not required to comply with
either this paragraph (c) or the Federal
external review process of paragraph (d)
of this section.
(ii) To the extent that a group health
plan provides benefits other than
through health insurance coverage (that
is, the plan is self-insured) and is
subject to a State external review
process that applies to and is binding on
the plan (for example, is not preempted
by ERISA) and the State external review
process includes at a minimum the
consumer protections in the NAIC
Uniform Model Act, then the plan must
comply with the applicable State
external review process and is not
required to comply with the Federal
external review process of paragraph (d)
of this section. Where a self-insured
plan is not subject to an applicable State
external review process, but the State
has chosen to expand access to its
process for plans that are not subject to
the applicable State laws, the plan may
choose to comply with either the
applicable State external review process
or the Federal external review process of
paragraph (d) of this section.
(iii) If a plan or issuer is not required
under paragraph (c)(1)(i) or (c)(1)(ii) of
this section to comply with the
requirements of this paragraph (c), then
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the plan or issuer must comply with the
Federal external review process of
paragraph (d) of this section, except to
the extent, in the case of a plan, the plan
is not required under paragraph (c)(1)(i)
of this section to comply with paragraph
(d) of this section.
(2) Minimum standards for State
external review processes. An applicable
State external review process must meet
all the minimum consumer protections
in this paragraph (c)(2). The Department
of Health and Human Services will
determine whether State external review
processes meet these requirements.
(i) The State process must provide for
the external review of adverse benefit
determinations (including final internal
adverse benefit determinations) by
issuers (or, if applicable, plans) that are
based on the issuer’s (or plan’s)
requirements for medical necessity,
appropriateness, health care setting,
level of care, or effectiveness of a
covered benefit.
(ii) The State process must require
issuers (or, if applicable, plans) to
provide effective written notice to
claimants of their rights in connection
with an external review for an adverse
benefit determination.
(iii) To the extent the State process
requires exhaustion of an internal
claims and appeals process, exhaustion
must be unnecessary where the issuer
(or, if applicable, the plan) has waived
the requirement; the issuer (or the plan)
is considered to have exhausted the
internal claims and appeals process
under applicable law (including by
failing to comply with any of the
requirements for the internal appeal
process, as outlined in paragraph (b)(2)
of this section); or the claimant has
applied for expedited external review at
the same time as applying for an
expedited internal appeal.
(iv) The State process provides that
the issuer (or, if applicable, the plan)
against which a request for external
review is filed must pay the cost of the
IRO for conducting the external review.
Notwithstanding this requirement, a
State external review process that
expressly authorizes, as of November
18, 2015, a nominal filing fee may
continue to permit such fees. For this
purpose, to be considered nominal, a
filing fee must not exceed $25, it must
be refunded to the claimant if the
adverse benefit determination (or final
internal adverse benefit determination)
is reversed through external review, it
must be waived if payment of the fee
would impose an undue financial
hardship, and the annual limit on filing
fees for any claimant within a single
plan year must not exceed $75.
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Jkt 238001
(v) The State process may not impose
a restriction on the minimum dollar
amount of a claim for it to be eligible for
external review. Thus, the process may
not impose, for example, a $500
minimum claims threshold.
(vi) The State process must allow at
least four months after the receipt of a
notice of an adverse benefit
determination or final internal adverse
benefit determination for a request for
an external review to be filed.
(vii) The State process must provide
that IROs will be assigned on a random
basis or another method of assignment
that assures the independence and
impartiality of the assignment process
(such as rotational assignment) by a
State or independent entity, and in no
event selected by the issuer, plan, or the
individual.
(viii) The State process must provide
for maintenance of a list of approved
IROs qualified to conduct the external
review based on the nature of the health
care service that is the subject of the
review. The State process must provide
for approval only of IROs that are
accredited by a nationally recognized
private accrediting organization.
(ix) The State process must provide
that any approved IRO has no conflicts
of interest that will influence its
independence. Thus, the IRO may not
own or control, or be owned or
controlled by a health insurance issuer,
a group health plan, the sponsor of a
group health plan, a trade association of
plans or issuers, or a trade association
of health care providers. The State
process must further provide that the
IRO and the clinical reviewer assigned
to conduct an external review may not
have a material professional, familial, or
financial conflict of interest with the
issuer or plan that is the subject of the
external review; the claimant (and any
related parties to the claimant) whose
treatment is the subject of the external
review; any officer, director, or
management employee of the issuer; the
plan administrator, plan fiduciaries, or
plan employees; the health care
provider, the health care provider’s
group, or practice association
recommending the treatment that is
subject to the external review; the
facility at which the recommended
treatment would be provided; or the
developer or manufacturer of the
principal drug, device, procedure, or
other therapy being recommended.
(x) The State process allows the
claimant at least five business days to
submit to the IRO in writing additional
information that the IRO must consider
when conducting the external review,
and it requires that the claimant is
notified of the right to do so. The
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process must also require that any
additional information submitted by the
claimant to the IRO must be forwarded
to the issuer (or, if applicable, the plan)
within one business day of receipt by
the IRO.
(xi) The State process must provide
that the decision is binding on the plan
or issuer, as well as the claimant except
to the extent the other remedies are
available under State or Federal law,
and except that the requirement that the
decision be binding shall not preclude
the plan or issuer from making payment
on the claim or otherwise providing
benefits at any time, including after a
final external review decision that
denies the claim or otherwise fails to
require such payment or benefits. For
this purpose, the plan or issuer must
provide benefits (including by making
payment on the claim) pursuant to the
final external review decision without
delay, regardless of whether the plan or
issuer intends to seek judicial review of
the external review decision and unless
or until there is a judicial decision
otherwise.
(xii) The State process must require,
for standard external review, that the
IRO provide written notice to the issuer
(or, if applicable, the plan) and the
claimant of its decision to uphold or
reverse the adverse benefit
determination (or final internal adverse
benefit determination) within no more
than 45 days after the receipt of the
request for external review by the IRO.
(xiii) The State process must provide
for an expedited external review if the
adverse benefit determination (or final
internal adverse benefit determination)
concerns an admission, availability of
care, continued stay, or health care
service for which the claimant received
emergency services, but has not been
discharged from a facility; or involves a
medical condition for which the
standard external review time frame
would seriously jeopardize the life or
health of the claimant or jeopardize the
claimant’s ability to regain maximum
function. As expeditiously as possible
but within no more than 72 hours after
the receipt of the request for expedited
external review by the IRO, the IRO
must make its decision to uphold or
reverse the adverse benefit
determination (or final internal adverse
benefit determination) and notify the
claimant and the issuer (or, if
applicable, the plan) of the
determination. If the notice is not in
writing, the IRO must provide written
confirmation of the decision within 48
hours after the date of the notice of the
decision.
(xiv) The State process must require
that issuers (or, if applicable, plans)
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include a description of the external
review process in or attached to the
summary plan description, policy,
certificate, membership booklet, outline
of coverage, or other evidence of
coverage it provides to participants,
beneficiaries, or enrollees, substantially
similar to what is set forth in section 17
of the NAIC Uniform Model Act.
(xv) The State process must require
that IROs maintain written records and
make them available upon request to the
State, substantially similar to what is set
forth in section 15 of the NAIC Uniform
Model Act.
(xvi) The State process follows
procedures for external review of
adverse benefit determinations (or final
internal adverse benefit determinations)
involving experimental or
investigational treatment, substantially
similar to what is set forth in section 10
of the NAIC Uniform Model Act.
(3) Transition period for external
review processes—(i) Through
December 31, 2017, an applicable State
external review process applicable to a
health insurance issuer or group health
plan is considered to meet the
requirements of PHS Act section
2719(b). Accordingly, through December
31, 2017, an applicable State external
review process will be considered
binding on the issuer or plan (in lieu of
the requirements of the Federal external
review process). If there is no applicable
State external review process, the issuer
or plan is required to comply with the
requirements of the Federal external
review process in paragraph (d) of this
section.
(ii) An applicable State external
review process must apply for final
internal adverse benefit determinations
(or, in the case of simultaneous internal
appeal and external review, adverse
benefit determinations) provided on or
after January 1, 2018. The Federal
external review process will apply to
such internal adverse benefit
determinations unless the Department
of Health and Human Services
determines that a State law meets all the
minimum standards of paragraph (c)(2)
of this section. Through December 31,
2017, a State external review process
applicable to a health insurance issuer
or group health plan may be considered
to meet the minimum standards of
paragraph (c)(2) of this section, if it
meets the temporary standards
established by the Secretary in guidance
for a process similar to the NAIC
Uniform Model Act.
(d) Federal external review process. A
plan or issuer not subject to an
applicable State external review process
under paragraph (c) of this section must
provide an effective Federal external
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Jkt 238001
review process in accordance with this
paragraph (d) (except to the extent, in
the case of a plan, the plan is described
in paragraph (c)(1)(i) of this section as
not having to comply with this
paragraph (d)). In the case of health
insurance coverage offered in
connection with a group health plan, if
either the plan or the issuer complies
with the Federal external review process
of this paragraph (d), then the obligation
to comply with this paragraph (d) is
satisfied for both the plan and the issuer
with respect to the health insurance
coverage. A Multi State Plan or MSP, as
defined by 45 CFR 800.20, must provide
an effective Federal external review
process in accordance with this
paragraph (d). In such circumstances,
the requirement to provide external
review under this paragraph (d) is
satisfied when a Multi State Plan or
MSP complies with standards
established by the Office of Personnel
Management.
(1) Scope—(i) In general. The Federal
external review process established
pursuant to this paragraph (d) applies to
the following:
(A) An adverse benefit determination
(including a final internal adverse
benefit determination) by a plan or
issuer that involves medical judgment
(including, but not limited to, those
based on the plan’s or issuer’s
requirements for medical necessity,
appropriateness, health care setting,
level of care, or effectiveness of a
covered benefit; its determination that a
treatment is experimental or
investigational; its determination
whether a participant or beneficiary is
entitled to a reasonable alternative
standard for a reward under a wellness
program; or its determination whether a
plan or issuer is complying with the
nonquantitative treatment limitation
provisions of Code section 9812 and
§ 54.9812, which generally require,
among other things, parity in the
application of medical management
techniques), as determined by the
external reviewer. (A denial, reduction,
termination, or a failure to provide
payment for a benefit based on a
determination that a participant or
beneficiary fails to meet the
requirements for eligibility under the
terms of a group health plan or health
insurance coverage is not eligible for the
Federal external review process under
this paragraph (d)); and
(B) A rescission of coverage (whether
or not the rescission has any effect on
any particular benefit at that time).
(ii) Examples. The rules of paragraph
(d)(1)(i) of this section are illustrated by
the following examples:
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72283
Example 1. (i) Facts. A group health plan
provides coverage for 30 physical therapy
visits generally. After the 30th visit, coverage
is provided only if the service is
preauthorized pursuant to an approved
treatment plan that takes into account
medical necessity using the plan’s definition
of the term. Individual A seeks coverage for
a 31st physical therapy visit. A’s health care
provider submits a treatment plan for
approval, but it is not approved by the plan,
so coverage for the 31st visit is not
preauthorized. With respect to the 31st visit,
A receives a notice of final internal adverse
benefit determination stating that the
maximum visit limit is exceeded.
(ii) Conclusion. In this Example 1, the
plan’s denial of benefits is based on medical
necessity and involves medical judgment.
Accordingly, the claim is eligible for external
review under paragraph (d)(1)(i) of this
section. Moreover, the plan’s notification of
final internal adverse benefit determination
is inadequate under paragraphs (b)(2)(i) and
(b)(2)(ii)(E)(3) of this section because it fails
to make clear that the plan will pay for more
than 30 visits if the service is preauthorized
pursuant to an approved treatment plan that
takes into account medical necessity using
the plan’s definition of the term.
Accordingly, the notice of final internal
adverse benefit determination should refer to
the plan provision governing the 31st visit
and should describe the plan’s standard for
medical necessity, as well as how the
treatment fails to meet the plan’s standard.
Example 2. (i) Facts. A group health plan
does not provide coverage for services
provided out of network, unless the service
cannot effectively be provided in network.
Individual B seeks coverage for a specialized
medical procedure from an out-of-network
provider because B believes that the
procedure cannot be effectively provided in
network. B receives a notice of final internal
adverse benefit determination stating that the
claim is denied because the provider is outof-network.
(ii) Conclusion. In this Example 2, the
plan’s denial of benefits is based on whether
a service can effectively be provided in
network and, therefore, involves medical
judgment. Accordingly, the claim is eligible
for external review under paragraph (d)(1)(i)
of this section. Moreover, the plan’s notice of
final internal adverse benefit determination
is inadequate under paragraphs (b)(2)(i) and
(b)(2)(ii)(E)(3) of this section because the plan
does provide benefits for services on an outof-network basis if the services cannot
effectively be provided in network.
Accordingly, the notice of final internal
adverse benefit determination is required to
refer to the exception to the out-of-network
exclusion and should describe the plan’s
standards for determining effectiveness of
services, as well as how services available to
the claimant within the plan’s network meet
the plan’s standard for effectiveness of
services.
(2) External review process standards.
The Federal external review process
established pursuant to this paragraph
(d) is considered similar to the process
set forth in the NAIC Uniform Model
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Act and, therefore satisfies the
requirements of paragraph (d)(2)) if such
process provides the following.
(i) Request for external review. A
group health plan or health insurance
issuer must allow a claimant to file a
request for an external review with the
plan or issuer if the request is filed
within four months after the date of
receipt of a notice of an adverse benefit
determination or final internal adverse
benefit determination. If there is no
corresponding date four months after
the date of receipt of such a notice, then
the request must be filed by the first day
of the fifth month following the receipt
of the notice. For example, if the date of
receipt of the notice is October 30,
because there is no February 30, the
request must be filed by March 1. If the
last filing date would fall on a Saturday,
Sunday, or Federal holiday, the last
filing date is extended to the next day
that is not a Saturday, Sunday, or
Federal holiday.
(ii) Preliminary review—(A) In
general. Within five business days
following the date of receipt of the
external review request, the group
health plan or health insurance issuer
must complete a preliminary review of
the request to determine whether:
(1) The claimant is or was covered
under the plan or coverage at the time
the health care item or service was
requested or, in the case of a
retrospective review, was covered under
the plan or coverage at the time the
health care item or service was
provided;
(2) The adverse benefit determination
or the final adverse benefit
determination does not relate to the
claimant’s failure to meet the
requirements for eligibility under the
terms of the group health plan or health
insurance coverage (e.g., worker
classification or similar determination);
(3) The claimant has exhausted the
plan’s or issuer’s internal appeal process
unless the claimant is not required to
exhaust the internal appeals process
under paragraph (b)(1) of this section;
and
(4) The claimant has provided all the
information and forms required to
process an external review.
(B) Within one business day after
completion of the preliminary review,
the plan or issuer must issue a
notification in writing to the claimant.
If the request is complete but not
eligible for external review, such
notification must include the reasons for
its ineligibility and current contact
information, including the phone
number, for the Employee Benefits
Security Administration. If the request
is not complete, such notification must
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describe the information or materials
needed to make the request complete
and the plan or issuer must allow a
claimant to perfect the request for
external review within the four-month
filing period or within the 48 hour
period following the receipt of the
notification, whichever is later.
(iii) Referral to Independent Review
Organization. (A) In general. The group
health plan or health insurance issuer
must assign an IRO that is accredited by
URAC or by similar nationallyrecognized accrediting organization to
conduct the external review. The IRO
referral process must provide for the
following:
(1) The plan or issuer must ensure
that the IRO process is not biased and
ensures independence;
(2) The plan or issuer must contract
with at least three (3) IROs for
assignments under the plan or coverage
and rotate claims assignments among
them (or incorporate other independent,
unbiased methods for selection of IROs,
such as random selection); and
(3) The IRO may not be eligible for
any financial incentives based on the
likelihood that the IRO will support the
denial of benefits.
(4) The IRO process may not impose
any costs, including filing fees, on the
claimant requesting the external review.
(B) IRO contracts. A group health plan
or health insurance issuer must include
the following standards in the contract
between the plan or issuer and the IRO:
(1) The assigned IRO will utilize legal
experts where appropriate to make
coverage determinations under the plan
or coverage.
(2) The assigned IRO will timely
notify a claimant in writing whether the
request is eligible for external review.
This notice will include a statement that
the claimant may submit in writing to
the assigned IRO, within ten business
days following the date of receipt of the
notice, additional information. This
additional information must be
considered by the IRO when conducting
the external review. The IRO is not
required to, but may, accept and
consider additional information
submitted after ten business days.
(3) Within five business days after the
date of assignment of the IRO, the plan
or issuer must provide to the assigned
IRO the documents and any information
considered in making the adverse
benefit determination or final internal
adverse benefit determination. Failure
by the plan or issuer to timely provide
the documents and information must
not delay the conduct of the external
review. If the plan or issuer fails to
timely provide the documents and
information, the assigned IRO may
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terminate the external review and make
a decision to reverse the adverse benefit
determination or final internal adverse
benefit determination. Within one
business day after making the decision,
the IRO must notify the claimant and
the plan.
(4) Upon receipt of any information
submitted by the claimant, the assigned
IRO must within one business day
forward the information to the plan or
issuer. Upon receipt of any such
information, the plan or issuer may
reconsider its adverse benefit
determination or final internal adverse
benefit determination that is the subject
of the external review. Reconsideration
by the plan or issuer must not delay the
external review. The external review
may be terminated as a result of the
reconsideration only if the plan decides,
upon completion of its reconsideration,
to reverse its adverse benefit
determination or final internal adverse
benefit determination and provide
coverage or payment. Within one
business day after making such a
decision, the plan must provide written
notice of its decision to the claimant
and the assigned IRO. The assigned IRO
must terminate the external review
upon receipt of the notice from the plan
or issuer.
(5) The IRO will review all of the
information and documents timely
received. In reaching a decision, the
assigned IRO will review the claim de
novo and not be bound by any decisions
or conclusions reached during the
plan’s or issuer’s internal claims and
appeals process applicable under
paragraph (b). In addition to the
documents and information provided,
the assigned IRO, to the extent the
information or documents are available
and the IRO considers them appropriate,
will consider the following in reaching
a decision:
(i) The claimant’s medical records;
(ii) The attending health care
professional’s recommendation;
(iii) Reports from appropriate health
care professionals and other documents
submitted by the plan or issuer,
claimant, or the claimant’s treating
provider;
(iv) The terms of the claimant’s plan
or coverage to ensure that the IRO’s
decision is not contrary to the terms of
the plan or coverage, unless the terms
are inconsistent with applicable law;
(v) Appropriate practice guidelines,
which must include applicable
evidence-based standards and may
include any other practice guidelines
developed by the Federal government,
national or professional medical
societies, boards, and associations;
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(vi) Any applicable clinical review
criteria developed and used by the plan
or issuer, unless the criteria are
inconsistent with the terms of the plan
or coverage or with applicable law; and
(vii) To the extent the final IRO
decision maker is different from the
IRO’s clinical reviewer, the opinion of
such clinical reviewer, after considering
information described in this notice, to
the extent the information or documents
are available and the clinical reviewer
or reviewers consider such information
or documents appropriate.
(6) The assigned IRO must provide
written notice of the final external
review decision within 45 days after the
IRO receives the request for the external
review. The IRO must deliver the notice
of the final external review decision to
the claimant and the plan or issuer.
(7) The assigned IRO’s written notice
of the final external review decision
must contain the following:
(i) A general description of the reason
for the request for external review,
including information sufficient to
identify the claim (including the date or
dates of service, the health care
provider, the claim amount (if
applicable), and a statement describing
the availability, upon request, of the
diagnosis code and its corresponding
meaning, the treatment code and its
corresponding meaning, and the reason
for the plan’s or issuer’s denial);
(ii) The date the IRO received the
assignment to conduct the external
review and the date of the IRO decision;
(iii) References to the evidence or
documentation, including the specific
coverage provisions and evidence-based
standards, considered in reaching its
decision;
(iv) A discussion of the principal
reason or reasons for its decision,
including the rationale for its decision
and any evidence-based standards that
were relied on in making its decision;
(v) A statement that the IRO’s
determination is binding except to the
extent that other remedies may be
available under State or Federal law to
either the group health plan or health
insurance issuer or to the claimant, or
to the extent the health plan or health
insurance issuer voluntarily makes
payment on the claim or otherwise
provides benefits at any time, including
after a final external review decision
that denies the claim or otherwise fails
to require such payment or benefits;
(vi) A statement that judicial review
may be available to the claimant; and
(vii) Current contact information,
including phone number, for any
applicable office of health insurance
consumer assistance or ombudsman
established under PHS Act section 2793.
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(viii) After a final external review
decision, the IRO must maintain records
of all claims and notices associated with
the external review process for six years.
An IRO must make such records
available for examination by the
claimant, plan, issuer, or State or
Federal oversight agency upon request,
except where such disclosure would
violate State or Federal privacy laws.
(iv) Reversal of plan’s or issuer’s
decision. Upon receipt of a notice of a
final external review decision reversing
the adverse benefit determination or
final adverse benefit determination, the
plan or issuer immediately must
provide coverage or payment (including
immediately authorizing care or
immediately paying benefits) for the
claim.
(3) Expedited external review. A
group health plan or health insurance
issuer must comply with the following
standards with respect to an expedited
external review:
(i) Request for external review. A
group health plan or health insurance
issuer must allow a claimant to make a
request for an expedited external review
with the plan or issuer at the time the
claimant receives:
(A) An adverse benefit determination
if the adverse benefit determination
involves a medical condition of the
claimant for which the timeframe for
completion of an expedited internal
appeal under paragraph (b) of this
section would seriously jeopardize the
life or health of the claimant or would
jeopardize the claimant’s ability to
regain maximum function and the
claimant has filed a request for an
expedited internal appeal; or
(B) A final internal adverse benefit
determination, if the claimant has a
medical condition where the timeframe
for completion of a standard external
review would seriously jeopardize the
life or health of the claimant or would
jeopardize the claimant’s ability to
regain maximum function, or if the final
internal adverse benefit determination
concerns an admission, availability of
care, continued stay, or health care item
or service for which the claimant
received emergency services, but has
not been discharged from the facility.
(ii) Preliminary review. Immediately
upon receipt of the request for
expedited external review, the plan or
issuer must determine whether the
request meets the reviewability
requirements set forth in paragraph
(d)(2)(ii) of this section for standard
external review. The plan or issuer must
immediately send a notice that meets
the requirements set forth in paragraph
(d)(2)(ii)(B) for standard review to the
claimant of its eligibility determination.
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72285
(iii) Referral to independent review
organization. (A) Upon a determination
that a request is eligible for expedited
external review following the
preliminary review, the plan or issuer
will assign an IRO pursuant to the
requirements set forth in paragraph
(d)(2)(iii) of this section for standard
review. The plan or issuer must provide
or transmit all necessary documents and
information considered in making the
adverse benefit determination or final
internal adverse benefit determination
to the assigned IRO electronically or by
telephone or facsimile or any other
available expeditious method.
(B) The assigned IRO, to the extent the
information or documents are available
and the IRO considers them appropriate,
must consider the information or
documents described above under the
procedures for standard review. In
reaching a decision, the assigned IRO
must review the claim de novo and is
not bound by any decisions or
conclusions reached during the plan’s
or issuer’s internal claims and appeals
process.
(iv) Notice of final external review
decision. The plan’s or issuer’s contract
with the assigned IRO must require the
IRO to provide notice of the final
external review decision, in accordance
with the requirements set forth in
paragraph (d)(2)(iii)(B) of this section, as
expeditiously as the claimant’s medical
condition or circumstances require, but
in no event more than 72 hours after the
IRO receives the request for an
expedited external review. If the notice
is not in writing, within 48 hours after
the date of providing that notice, the
assigned IRO must provide written
confirmation of the decision to the
claimant and the plan or issuer.
(4) Alternative, Federallyadministered external review process.
Insured coverage not subject to an
applicable State external review process
under paragraph (c) of this section and
a self-insured nonfederal governmental
plan may elect to use either the Federal
external review process, as set forth
under paragraph (d) of this section or
the Federally-administered external
review process, as set forth by HHS in
guidance. In such circumstances, the
requirement to provide external review
under this paragraph (d) is satisfied.
(e) Form and manner of notice—(1) In
general. For purposes of this section, a
group health plan and a health
insurance issuer offering group or
individual health insurance coverage
are considered to provide relevant
notices in a culturally and linguistically
appropriate manner if the plan or issuer
meets all the requirements of paragraph
(e)(2) of this section with respect to the
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applicable non-English languages
described in paragraph (e)(3) of this
section.
(2) Requirements—(i) The plan or
issuer must provide oral language
services (such as a telephone customer
assistance hotline) that includes
answering questions in any applicable
non-English language and providing
assistance with filing claims and
appeals (including external review) in
any applicable non-English language;
(ii) The plan or issuer must provide,
upon request, a notice in any applicable
non-English language; and
(iii) The plan or issuer must include
in the English versions of all notices, a
statement prominently displayed in any
applicable non-English language clearly
indicating how to access the language
services provided by the plan or issuer.
(3) Applicable non-English language.
With respect to an address in any
United States county to which a notice
is sent, a non-English language is an
applicable non-English language if ten
percent or more of the population
residing in the county is literate only in
the same non-English language, as
determined in guidance published by
the Secretary.
(f) Secretarial authority. The Secretary
may determine that the external review
process of a group health plan or health
insurance issuer, in operation as of
March 23, 2010, is considered in
compliance with the applicable process
established under paragraph (c) or (d) of
this section if it substantially meets the
requirements of paragraph (c) or (d) of
this section, as applicable.
(g) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years (in the individual
market, policy years) beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the
corresponding sections of 45 CFR parts
144, 146 and 147, contained in the 45
CFR, parts 1 to 199, edition revised as
of October 1, 2015.
■ 38. Section 147.138 is revised to read
as follows:
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§ 147.138
Patient protections.
(a) Choice of health care
professional—(1) Designation of
primary care provider—(i) In general. If
a group health plan, or a health
insurance issuer offering group or
individual health insurance coverage,
requires or provides for designation by
a participant, beneficiary, or enrollee of
a participating primary care provider,
then the plan or issuer must permit each
participant, beneficiary, or enrollee to
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designate any participating primary care
provider who is available to accept the
participant, beneficiary, or enrollee. In
such a case, the plan or issuer must
comply with the rules of paragraph
(a)(4) of this section by informing each
participant (in the individual market,
primary subscriber) of the terms of the
plan or health insurance coverage
regarding designation of a primary care
provider.
(ii) Construction. Nothing in
paragraph (a)(1)(i) of this section is to be
construed to prohibit the application of
reasonable and appropriate geographic
limitations with respect to the selection
of primary care providers, in accordance
with the terms of the plan or coverage,
the underlying provider contracts, and
applicable State law.
(iii) Example. The rules of this
paragraph (a)(1) are illustrated by the
following example:
Example. (i) Facts. A group health plan
requires individuals covered under the plan
to designate a primary care provider. The
plan permits each individual to designate
any primary care provider participating in
the plan’s network who is available to accept
the individual as the individual’s primary
care provider. If an individual has not
designated a primary care provider, the plan
designates one until one has been designated
by the individual. The plan provides a notice
that satisfies the requirements of paragraph
(a)(4) of this section regarding the ability to
designate a primary care provider.
(ii) Conclusion. In this Example, the plan
has satisfied the requirements of paragraph
(a) of this section.
(2) Designation of pediatrician as
primary care provider—(i) In general. If
a group health plan, or a health
insurance issuer offering group or
individual health insurance coverage,
requires or provides for the designation
of a participating primary care provider
for a child by a participant, beneficiary,
or enrollee, the plan or issuer must
permit the participant, beneficiary, or
enrollee to designate a physician
(allopathic or osteopathic) who
specializes in pediatrics (including
pediatric subspecialties, based on the
scope of that provider’s license under
applicable State law) as the child’s
primary care provider if the provider
participates in the network of the plan
or issuer and is available to accept the
child. In such a case, the plan or issuer
must comply with the rules of
paragraph (a)(4) of this section by
informing each participant (in the
individual market, primary subscriber)
of the terms of the plan or health
insurance coverage regarding
designation of a pediatrician as the
child’s primary care provider.
(ii) Construction. Nothing in
paragraph (a)(2)(i) of this section is to be
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construed to waive any exclusions of
coverage under the terms and
conditions of the plan or health
insurance coverage with respect to
coverage of pediatric care.
(iii) Examples. The rules of this
paragraph (a)(2) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan’s
HMO designates for each participant a
physician who specializes in internal
medicine to serve as the primary care
provider for the participant and any
beneficiaries. Participant A requests that
Pediatrician B be designated as the primary
care provider for A’s child. B is a
participating provider in the HMO’s network
and is available to accept the child.
(ii) Conclusion. In this Example 1, the
HMO must permit A’s designation of B as the
primary care provider for A’s child in order
to comply with the requirements of this
paragraph (a)(2).
Example 2. (i) Facts. Same facts as
Example 1, except that A takes A’s child to
B for treatment of the child’s severe shellfish
allergies. B wishes to refer A’s child to an
allergist for treatment. The HMO, however,
does not provide coverage for treatment of
food allergies, nor does it have an allergist
participating in its network, and it therefore
refuses to authorize the referral.
(ii) Conclusion. In this Example 2, the
HMO has not violated the requirements of
this paragraph (a)(2) because the exclusion of
treatment for food allergies is in accordance
with the terms of A’s coverage.
(3) Patient access to obstetrical and
gynecological care—(i) General rights—
(A) Direct access. A group health plan,
or a health insurance issuer offering
group or individual health insurance
coverage, described in paragraph
(a)(3)(ii) of this section may not require
authorization or referral by the plan,
issuer, or any person (including a
primary care provider) in the case of a
female participant, beneficiary, or
enrollee who seeks coverage for
obstetrical or gynecological care
provided by a participating health care
professional who specializes in
obstetrics or gynecology. In such a case,
the plan or issuer must comply with the
rules of paragraph (a)(4) of this section
by informing each participant (in the
individual market, primary subscriber)
that the plan may not require
authorization or referral for obstetrical
or gynecological care by a participating
health care professional who specializes
in obstetrics or gynecology. The plan or
issuer may require such a professional
to agree to otherwise adhere to the
plan’s or issuer’s policies and
procedures, including procedures
regarding referrals and obtaining prior
authorization and providing services
pursuant to a treatment plan (if any)
approved by the plan or issuer. For
purposes of this paragraph (a)(3), a
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health care professional who specializes
in obstetrics or gynecology is any
individual (including a person other
than a physician) who is authorized
under applicable State law to provide
obstetrical or gynecological care.
(B) Obstetrical and gynecological
care. A group health plan or health
insurance issuer described in paragraph
(a)(3)(ii) of this section must treat the
provision of obstetrical and
gynecological care, and the ordering of
related obstetrical and gynecological
items and services, pursuant to the
direct access described under paragraph
(a)(3)(i)(A) of this section, by a
participating health care professional
who specializes in obstetrics or
gynecology as the authorization of the
primary care provider.
(ii) Application of paragraph. A group
health plan, or a health insurance issuer
offering group or individual health
insurance coverage, is described in this
paragraph (a)(3) if the plan or issuer—
(A) Provides coverage for obstetrical
or gynecological care; and
(B) Requires the designation by a
participant, beneficiary, or enrollee of a
participating primary care provider.
(iii) Construction. Nothing in
paragraph (a)(3)(i) of this section is to be
construed to—
(A) Waive any exclusions of coverage
under the terms and conditions of the
plan or health insurance coverage with
respect to coverage of obstetrical or
gynecological care; or
(B) Preclude the group health plan or
health insurance issuer involved from
requiring that the obstetrical or
gynecological provider notify the
primary care health care professional or
the plan or issuer of treatment
decisions.
(iv) Examples. The rules of this
paragraph (a)(3) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan
requires each participant to designate a
physician to serve as the primary care
provider for the participant and the
participant’s family. Participant A, a female,
requests a gynecological exam with Physician
B, an in-network physician specializing in
gynecological care. The group health plan
requires prior authorization from A’s
designated primary care provider for the
gynecological exam.
(ii) Conclusion. In this Example 1, the
group health plan has violated the
requirements of this paragraph (a)(3) because
the plan requires prior authorization from A’s
primary care provider prior to obtaining
gynecological services.
Example 2. (i) Facts. Same facts as
Example 1 except that A seeks gynecological
services from C, an out-of-network provider.
(ii) Conclusion. In this Example 2, the
group health plan has not violated the
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requirements of this paragraph (a)(3) by
requiring prior authorization because C is not
a participating health care provider.
Example 3. (i) Facts. Same facts as
Example 1 except that the group health plan
only requires B to inform A’s designated
primary care physician of treatment
decisions.
(ii) Conclusion. In this Example 3, the
group health plan has not violated the
requirements of this paragraph (a)(3) because
A has direct access to B without prior
authorization. The fact that the group health
plan requires notification of treatment
decisions to the designated primary care
physician does not violate this paragraph
(a)(3).
Example 4. (i) Facts. A group health plan
requires each participant to designate a
physician to serve as the primary care
provider for the participant and the
participant’s family. The group health plan
requires prior authorization before providing
benefits for uterine fibroid embolization.
(ii) Conclusion. In this Example 4, the plan
requirement for prior authorization before
providing benefits for uterine fibroid
embolization does not violate the
requirements of this paragraph (a)(3) because,
though the prior authorization requirement
applies to obstetrical services, it does not
restrict access to any providers specializing
in obstetrics or gynecology.
(4) Notice of right to designate a
primary care provider—(i) In general. If
a group health plan or health insurance
issuer requires the designation by a
participant, beneficiary, or enrollee of a
primary care provider, the plan or issuer
must provide a notice informing each
participant (in the individual market,
primary subscriber) of the terms of the
plan or health insurance coverage
regarding designation of a primary care
provider and of the rights—
(A) Under paragraph (a)(1)(i) of this
section, that any participating primary
care provider who is available to accept
the participant, beneficiary, or enrollee
can be designated;
(B) Under paragraph (a)(2)(i) of this
section, with respect to a child, that any
participating physician who specializes
in pediatrics can be designated as the
primary care provider; and
(C) Under paragraph (a)(3)(i) of this
section, that the plan may not require
authorization or referral for obstetrical
or gynecological care by a participating
health care professional who specializes
in obstetrics or gynecology.
(ii) Timing. In the case of a group
health plan or group health insurance
coverage, the notice described in
paragraph (a)(4)(i) of this section must
be included whenever the plan or issuer
provides a participant with a summary
plan description or other similar
description of benefits under the plan or
health insurance coverage. In the case of
individual health insurance coverage,
the notice described in paragraph
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(a)(4)(i) of this section must be included
whenever the issuer provides a primary
subscriber with a policy, certificate, or
contract of health insurance.
(iii) Model language. The following
model language can be used to satisfy
the notice requirement described in
paragraph (a)(4)(i) of this section:
(A) For plans and issuers that require
or allow for the designation of primary
care providers by participants,
beneficiaries, or enrollees, insert:
[Name of group health plan or health
insurance issuer] generally [requires/allows]
the designation of a primary care provider.
You have the right to designate any primary
care provider who participates in our
network and who is available to accept you
or your family members. [If the plan or health
insurance coverage designates a primary care
provider automatically, insert: Until you
make this designation, [name of group health
plan or health insurance issuer] designates
one for you.] For information on how to
select a primary care provider, and for a list
of the participating primary care providers,
contact the [plan administrator or issuer] at
[insert contact information].
(B) For plans and issuers that require
or allow for the designation of a primary
care provider for a child, add:
For children, you may designate a
pediatrician as the primary care
provider.
(C) For plans and issuers that provide
coverage for obstetric or gynecological
care and require the designation by a
participant, beneficiary, or enrollee of a
primary care provider, add:
You do not need prior authorization from
[name of group health plan or issuer] or from
any other person (including a primary care
provider) in order to obtain access to
obstetrical or gynecological care from a
health care professional in our network who
specializes in obstetrics or gynecology. The
health care professional, however, may be
required to comply with certain procedures,
including obtaining prior authorization for
certain services, following a pre-approved
treatment plan, or procedures for making
referrals. For a list of participating health
care professionals who specialize in
obstetrics or gynecology, contact the [plan
administrator or issuer] at [insert contact
information].
(b) Coverage of emergency services—
(1) Scope. If a group health plan, or a
health insurance issuer offering group or
individual health insurance coverage,
provides any benefits with respect to
services in an emergency department of
a hospital, the plan or issuer must cover
emergency services (as defined in
paragraph (b)(4)(ii) of this section)
consistent with the rules of this
paragraph (b).
(2) General rules. A plan or issuer
subject to the requirements of this
paragraph (b) must provide coverage for
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emergency services in the following
manner—
(i) Without the need for any prior
authorization determination, even if the
emergency services are provided on an
out-of-network basis;
(ii) Without regard to whether the
health care provider furnishing the
emergency services is a participating
network provider with respect to the
services;
(iii) If the emergency services are
provided out of network, without
imposing any administrative
requirement or limitation on coverage
that is more restrictive than the
requirements or limitations that apply to
emergency services received from innetwork providers;
(iv) If the emergency services are
provided out of network, by complying
with the cost-sharing requirements of
paragraph (b)(3) of this section; and
(v) Without regard to any other term
or condition of the coverage, other
than—
(A) The exclusion of or coordination
of benefits;
(B) An affiliation or waiting period
permitted under part 7 of ERISA, part A
of title XXVII of the PHS Act, or chapter
100 of the Internal Revenue Code; or
(C) Applicable cost sharing.
(3) Cost-sharing requirements—(i)
Copayments and coinsurance. Any costsharing requirement expressed as a
copayment amount or coinsurance rate
imposed with respect to a participant,
beneficiary, or enrollee for out-ofnetwork emergency services cannot
exceed the cost-sharing requirement
imposed with respect to a participant,
beneficiary, or enrollee if the services
were provided in-network. However, a
participant, beneficiary, or enrollee may
be required to pay, in addition to the innetwork cost-sharing, the excess of the
amount the out-of-network provider
charges over the amount the plan or
issuer is required to pay under this
paragraph (b)(3)(i). A group health plan
or health insurance issuer complies
with the requirements of this paragraph
(b)(3) if it provides benefits with respect
to an emergency service in an amount
at least equal to the greatest of the three
amounts specified in paragraphs
(b)(3)(i)(A),(B), and (C) of this section
(which are adjusted for in-network costsharing requirements).
(A) The amount negotiated with innetwork providers for the emergency
service furnished, excluding any innetwork copayment or coinsurance
imposed with respect to the participant,
beneficiary, or enrollee. If there is more
than one amount negotiated with innetwork providers for the emergency
service, the amount described under
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this paragraph (b)(3)(i)(A) is the median
of these amounts, excluding any innetwork copayment or coinsurance
imposed with respect to the participant,
beneficiary, or enrollee. In determining
the median described in the preceding
sentence, the amount negotiated with
each in-network provider is treated as a
separate amount (even if the same
amount is paid to more than one
provider). If there is no per-service
amount negotiated with in-network
providers (such as under a capitation or
other similar payment arrangement), the
amount under this paragraph (b)(3)(i)(A)
is disregarded.
(B) The amount for the emergency
service calculated using the same
method the plan generally uses to
determine payments for out-of-network
services (such as the usual, customary,
and reasonable amount), excluding any
in-network copayment or coinsurance
imposed with respect to the participant,
beneficiary, or enrollee. The amount in
this paragraph (b)(3)(i)(B) is determined
without reduction for out-of-network
cost sharing that generally applies under
the plan or health insurance coverage
with respect to out-of-network services.
Thus, for example, if a plan generally
pays 70 percent of the usual, customary,
and reasonable amount for out-ofnetwork services, the amount in this
paragraph (b)(3)(i)(B) for an emergency
service is the total (that is, 100 percent)
of the usual, customary, and reasonable
amount for the service, not reduced by
the 30 percent coinsurance that would
generally apply to out-of-network
services (but reduced by the in-network
copayment or coinsurance that the
individual would be responsible for if
the emergency service had been
provided in-network).
(C) The amount that would be paid
under Medicare (part A or part B of title
XVIII of the Social Security Act, 42
U.S.C. 1395 et seq.) for the emergency
service, excluding any in-network
copayment or coinsurance imposed
with respect to the participant,
beneficiary, or enrollee.
(ii) Other cost sharing. Any costsharing requirement other than a
copayment or coinsurance requirement
(such as a deductible or out-of-pocket
maximum) may be imposed with
respect to emergency services provided
out of network if the cost-sharing
requirement generally applies to out-ofnetwork benefits. A deductible may be
imposed with respect to out-of-network
emergency services only as part of a
deductible that generally applies to outof-network benefits. If an out-of-pocket
maximum generally applies to out-ofnetwork benefits, that out-of-pocket
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maximum must apply to out-of-network
emergency services.
(iii) Special rules regarding out-ofnetwork minimum payment standards—
(A) The minimum payment standards
set forth under paragraph (b)(3) of this
section do not apply in cases where
State law prohibits a participant,
beneficiary, or enrollee from being
required to pay, in addition to the innetwork cost sharing, the excess of the
amount the out-of-network provider
charges over the amount the plan or
issuer provides in benefits, or where a
group health plan or health insurance
issuer is contractually responsible for
such amounts. Nonetheless, in such
cases, a plan or issuer may not impose
any copayment or coinsurance
requirement for out-of-network
emergency services that is higher than
the copayment or coinsurance
requirement that would apply if the
services were provided in network.
(B) A group health plan and health
insurance issuer must provide a
participant, beneficiary, or enrollee
adequate and prominent notice of their
lack of financial responsibility with
respect to the amounts described under
this paragraph (b)(3)(iii), to prevent
inadvertent payment by the participant,
beneficiary, or enrollee.
(iv) Examples. The rules of this
paragraph (b)(3) are illustrated by the
following examples. In all of these
examples, the group health plan covers
benefits with respect to emergency
services.
Example 1. (i) Facts. A group health plan
imposes a 25% coinsurance responsibility on
individuals who are furnished emergency
services, whether provided in network or out
of network. If a covered individual notifies
the plan within two business days after the
day an individual receives treatment in an
emergency department, the plan reduces the
coinsurance rate to 15%.
(ii) Conclusion. In this Example 1, the
requirement to notify the plan in order to
receive a reduction in the coinsurance rate
does not violate the requirement that the plan
cover emergency services without the need
for any prior authorization determination.
This is the result even if the plan required
that it be notified before or at the time of
receiving services at the emergency
department in order to receive a reduction in
the coinsurance rate.
Example 2. (i) Facts. A group health plan
imposes a $60 copayment on emergency
services without preauthorization, whether
provided in network or out of network. If
emergency services are preauthorized, the
plan waives the copayment, even if it later
determines the medical condition was not an
emergency medical condition.
(ii) Conclusion. In this Example 2, by
requiring an individual to pay more for
emergency services if the individual does not
obtain prior authorization, the plan violates
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the requirement that the plan cover
emergency services without the need for any
prior authorization determination. (By
contrast, if, to have the copayment waived,
the plan merely required that it be notified
rather than a prior authorization, then the
plan would not violate the requirement that
the plan cover emergency services without
the need for any prior authorization
determination.)
Example 3. (i) Facts. A group health plan
covers individuals who receive emergency
services with respect to an emergency
medical condition from an out-of-network
provider. The plan has agreements with innetwork providers with respect to a certain
emergency service. Each provider has agreed
to provide the service for a certain amount.
Among all the providers for the service: One
has agreed to accept $85, two have agreed to
accept $100, two have agreed to accept $110,
three have agreed to accept $120, and one has
agreed to accept $150. Under the agreement,
the plan agrees to pay the providers 80% of
the agreed amount, with the individual
receiving the service responsible for the
remaining 20%.
(ii) Conclusion. In this Example 3, the
values taken into account in determining the
median are $85, $100, $100, $110, $110,
$120, $120, $120, and $150. Therefore, the
median amount among those agreed to for the
emergency service is $110, and the amount
under paragraph (b)(3)(i)(A) of this section is
80% of $110 ($88).
Example 4. (i) Facts. Same facts as
Example 3. Subsequently, the plan adds
another provider to its network, who has
agreed to accept $150 for the emergency
service.
(ii) Conclusion. In this Example 4, the
median amount among those agreed to for the
emergency service is $115. (Because there is
no one middle amount, the median is the
average of the two middle amounts, $110 and
$120.) Accordingly, the amount under
paragraph (b)(3)(i)(A) of this section is 80%
of $115 ($92).
Example 5. (i) Facts. Same facts as
Example 4. An individual covered by the
plan receives the emergency service from an
out-of-network provider, who charges $125
for the service. With respect to services
provided by out-of-network providers
generally, the plan reimburses covered
individuals 50% of the reasonable amount
charged by the provider for medical services.
For this purpose, the reasonable amount for
any service is based on information on
charges by all providers collected by a third
party, on a zip code by zip code basis, with
the plan treating charges at a specified
percentile as reasonable. For the emergency
service received by the individual, the
reasonable amount calculated using this
method is $116. The amount that would be
paid under Medicare for the emergency
service, excluding any copayment or
coinsurance for the service, is $80.
(ii) Conclusion. In this Example 5, the plan
is responsible for paying $92.80, 80% of
$116. The median amount among those
agreed to for the emergency service is $115
and the amount the plan would pay is $92
(80% of $115); the amount calculated using
the same method the plan uses to determine
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72289
payments for out-of-network services—
$116—excluding the in-network 20%
coinsurance, is $92.80; and the Medicare
payment is $80. Thus, the greatest amount is
$92.80. The individual is responsible for the
remaining $32.20 charged by the out-ofnetwork provider.
Example 6. (i) Facts. Same facts as
Example 5. The group health plan generally
imposes a $250 deductible for in-network
health care. With respect to all health care
provided by out-of-network providers, the
plan imposes a $500 deductible. (Covered innetwork claims are credited against the
deductible.) The individual has incurred and
submitted $260 of covered claims prior to
receiving the emergency service out of
network.
(ii) Conclusion. In this Example 6, the plan
is not responsible for paying anything with
respect to the emergency service furnished by
the out-of-network provider because the
covered individual has not satisfied the
higher deductible that applies generally to all
health care provided out of network.
However, the amount the individual is
required to pay is credited against the
deductible.
Social Security Act (42 U.S.C. 1395dd)
to stabilize the patient.
(iii) Stabilize. The term to stabilize,
with respect to an emergency medical
condition (as defined in paragraph
(b)(4)(i) of this section) has the meaning
given in section 1867(e)(3) of the Social
Security Act (42 U.S.C. 1395dd(e)(3)).
(c) Applicability date. The provisions
of this section are applicable to group
health plans and health insurance
issuers for plan years (in the individual
market, policy years) beginning on or
after January 1, 2017. Until the
applicability date for this regulation,
plans and issuers are required to
continue to comply with the
corresponding sections of 45 CFR parts
144, 146 and 147, contained in the 45
CFR, parts 1 to 199, edition revised as
of October 1, 2015.
■ 39. Section 147.140 is revised to read
as follows:
(4) Definitions. The definitions in this
paragraph (b)(4) govern in applying the
provisions of this paragraph (b).
(i) Emergency medical condition. The
term emergency medical condition
means a medical condition manifesting
itself by acute symptoms of sufficient
severity (including severe pain) so that
a prudent layperson, who possesses an
average knowledge of health and
medicine, could reasonably expect the
absence of immediate medical attention
to result in a condition described in
clause (i), (ii), or (iii) of section
1867(e)(1)(A) of the Social Security Act
(42 U.S.C. 1395dd(e)(1)(A)). (In that
provision of the Social Security Act,
clause (i) refers to placing the health of
the individual (or, with respect to a
pregnant woman, the health of the
woman or her unborn child) in serious
jeopardy; clause (ii) refers to serious
impairment to bodily functions; and
clause (iii) refers to serious dysfunction
of any bodily organ or part.)
(ii) Emergency services. The term
emergency services means, with respect
to an emergency medical condition—
(A) A medical screening examination
(as required under section 1867 of the
Social Security Act, 42 U.S.C. 1395dd)
that is within the capability of the
emergency department of a hospital,
including ancillary services routinely
available to the emergency department
to evaluate such emergency medical
condition, and
(B) Such further medical examination
and treatment, to the extent they are
within the capabilities of the staff and
facilities available at the hospital, as are
required under section 1867 of the
(a) Definition of grandfathered health
plan coverage—(1) In general—(i)
Grandfathered health plan coverage
means coverage provided by a group
health plan, or a group or individual
health insurance issuer, in which an
individual was enrolled on March 23,
2010 (for as long as it maintains that
status under the rules of this section). A
group health plan or group health
insurance coverage does not cease to be
grandfathered health plan coverage
merely because one or more (or even all)
individuals enrolled on March 23, 2010
cease to be covered, provided that the
plan or group health insurance coverage
has continuously covered someone
since March 23, 2010 (not necessarily
the same person, but at all times at least
one person). In addition, subject to the
limitation set forth in paragraph
(a)(1)(ii) of this section, a group health
plan (and any health insurance coverage
offered in connection with the group
health plan) does not cease to be a
grandfathered health plan merely
because the plan (or its sponsor) enters
into a new policy, certificate, or contract
of insurance after March 23, 2010 (for
example, a plan enters into a contract
with a new issuer or a new policy is
issued with an existing issuer). For
purposes of this section, a plan or health
insurance coverage that provides
grandfathered health plan coverage is
referred to as a grandfathered health
plan. The rules of this section apply
separately to each benefit package made
available under a group health plan or
health insurance coverage. Accordingly,
if any benefit package relinquishes
grandfather status, it will not affect the
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§ 147.140 Preservation of right to maintain
existing coverage.
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grandfather status of the other benefit
packages.
(ii) Changes in group health insurance
coverage. Subject to paragraphs (f) and
(g)(2) of this section, if a group health
plan (including a group health plan that
was self-insured on March 23, 2010) or
its sponsor enters into a new policy,
certificate, or contract of insurance after
March 23, 2010 that is effective before
November 15, 2010, then the plan
ceases to be a grandfathered health plan.
(2) Disclosure of grandfather status—
(i) To maintain status as a grandfathered
health plan, a plan or health insurance
coverage must include a statement that
the plan or coverage believes it is a
grandfathered health plan within the
meaning of section 1251 of the Patient
Protection and Affordable Care Act, and
must provide contact information for
questions and complaints, in any
summary of benefits provided under the
plan.
(ii) The following model language can
be used to satisfy this disclosure
requirement:
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This [group health plan or health insurance
issuer] believes this [plan or coverage] is a
‘‘grandfathered health plan’’ under the
Patient Protection and Affordable Care Act
(the Affordable Care Act). As permitted by
the Affordable Care Act, a grandfathered
health plan can preserve certain basic health
coverage that was already in effect when that
law was enacted. Being a grandfathered
health plan means that your [plan or policy]
may not include certain consumer
protections of the Affordable Care Act that
apply to other plans, for example, the
requirement for the provision of preventive
health services without any cost sharing.
However, grandfathered health plans must
comply with certain other consumer
protections in the Affordable Care Act, for
example, the elimination of lifetime dollar
limits on benefits.
Questions regarding which protections
apply and which protections do not apply to
a grandfathered health plan and what might
cause a plan to change from grandfathered
health plan status can be directed to the plan
administrator at [insert contact information].
[For ERISA plans, insert: You may also
contact the Employee Benefits Security
Administration, U.S. Department of Labor at
1–866–444–3272 or www.dol.gov/ebsa/
healthreform. This Web site has a table
summarizing which protections do and do
not apply to grandfathered health plans.] [For
individual market policies and nonfederal
governmental plans, insert: You may also
contact the U.S. Department of Health and
Human Services at www.healthcare.gov.]
(3)(i) Documentation of plan or policy
terms on March 23, 2010. To maintain
status as a grandfathered health plan, a
group health plan, or group or
individual health insurance coverage,
must, for as long as the plan or health
insurance coverage takes the position
that it is a grandfathered health plan—
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(A) Maintain records documenting the
terms of the plan or health insurance
coverage in connection with the
coverage in effect on March 23, 2010,
and any other documents necessary to
verify, explain, or clarify its status as a
grandfathered health plan; and
(B) Make such records available for
examination upon request.
(ii) Change in group health insurance
coverage. To maintain status as a
grandfathered health plan, a group
health plan that enters into a new
policy, certificate, or contract of
insurance must provide to the new
health insurance issuer (and the new
health insurance issuer must require)
documentation of plan terms (including
benefits, cost sharing, employer
contributions, and annual dollar limits)
under the prior health coverage
sufficient to determine whether a
change causing a cessation of
grandfathered health plan status under
paragraph (g)(1) of this section has
occurred.
(4) Family members enrolling after
March 23, 2010. With respect to an
individual who is enrolled in a group
health plan or health insurance coverage
on March 23, 2010, grandfathered health
plan coverage includes coverage of
family members of the individual who
enroll after March 23, 2010 in the
grandfathered health plan coverage of
the individual.
(b) Allowance for new employees to
join current plan—(1) In general.
Subject to paragraph (b)(2) of this
section, a group health plan (including
health insurance coverage provided in
connection with the group health plan)
that provided coverage on March 23,
2010 and has retained its status as a
grandfathered health plan (consistent
with the rules of this section, including
paragraph (g) of this section) is
grandfathered health plan coverage for
new employees (whether newly hired or
newly enrolled) and their families
enrolling in the plan after March 23,
2010. Further, the addition of a new
contributing employer or new group of
employees of an existing contributing
employer to a grandfathered
multiemployer health plan will not
affect the plan’s grandfather status.
(2) Anti-abuse rules—(i) Mergers and
acquisitions. If the principal purpose of
a merger, acquisition, or similar
business restructuring is to cover new
individuals under a grandfathered
health plan, the plan ceases to be a
grandfathered health plan.
(ii) Change in plan eligibility. A group
health plan or health insurance coverage
(including a benefit package under a
group health plan) ceases to be a
grandfathered health plan if—
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(A) Employees are transferred into the
plan or health insurance coverage (the
transferee plan) from a plan or health
insurance coverage under which the
employees were covered on March 23,
2010 (the transferor plan);
(B) Comparing the terms of the
transferee plan with those of the
transferor plan (as in effect on March 23,
2010) and treating the transferee plan as
if it were an amendment of the
transferor plan would cause a loss of
grandfather status under the provisions
of paragraph (g)(1) of this section; and
(C) There was no bona fide
employment-based reason to transfer the
employees into the transferee plan. For
this purpose, changing the terms or cost
of coverage is not a bona fide
employment-based reason.
(iii) Illustrative list of bona fide
employment-based reasons. For
purposes of this paragraph (b)(2)(ii)(C),
bona fide employment-based reasons
include—
(A) When a benefit package is being
eliminated because the issuer is exiting
the market;
(B) When a benefit package is being
eliminated because the issuer no longer
offers the product to the employer;
(C) When low or declining
participation by plan participants in the
benefit package makes it impractical for
the plan sponsor to continue to offer the
benefit package;
(D) When a benefit package is
eliminated from a multiemployer plan
as agreed upon as part of the collective
bargaining process; or
(E) When a benefit package is
eliminated for any reason and multiple
benefit packages covering a significant
portion of other employees remain
available to the employees being
transferred.
(3) Examples. The rules of this
paragraph (b) are illustrated by the
following examples:
Example 1. (i) Facts. A group health plan
offers two benefit packages on March 23,
2010, Options F and G. During a subsequent
open enrollment period, some of the
employees enrolled in Option F on March 23,
2010 switch to Option G.
(ii) Conclusion. In this Example 1, the
group health coverage provided under
Option G remains a grandfathered health
plan under the rules of paragraph (b)(1) of
this section because employees previously
enrolled in Option F are allowed to enroll in
Option G as new employees.
Example 2. (i) Facts. A group health plan
offers two benefit packages on March 23,
2010, Options H and I. On March 23, 2010,
Option H provides coverage only for
employees in one manufacturing plant.
Subsequently, the plant is closed, and some
employees in the closed plant are moved to
another plant. The employer eliminates
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Option H and the employees that are moved
are transferred to Option I. If instead of
transferring employees from Option H to
Option I, Option H was amended to match
the terms of Option I, then Option H would
cease to be a grandfathered health plan.
(ii) Conclusion. In this Example 2, the plan
has a bona fide employment-based reason to
transfer employees from Option H to Option
I. Therefore, Option I does not cease to be a
grandfathered health plan.
(c) General grandfathering rule—(1)
Except as provided in paragraphs (d)
and (e) of this section, subtitles A and
C of title I of the Patient Protection and
Affordable Care Act (and the
amendments made by those subtitles,
and the incorporation of those
amendments into ERISA section 715
and Internal Revenue Code section
9815) do not apply to grandfathered
health plan coverage. Accordingly, the
provisions of PHS Act sections 2701,
2702, 2703, 2705, 2706, 2707, 2709
(relating to coverage for individuals
participating in approved clinical trials,
as added by section 10103 of the Patient
Protection and Affordable Care Act),
2713, 2715A, 2716, 2717, 2719, and
2719A, as added or amended by the
Patient Protection and Affordable Care
Act, do not apply to grandfathered
health plans. In addition, the provisions
of PHS Act section 2704, and PHS Act
section 2711 insofar as it relates to
annual dollar limits, do not apply to
grandfathered health plans that are
individual health insurance coverage.
(2) To the extent not inconsistent with
the rules applicable to a grandfathered
health plan, a grandfathered health plan
must comply with the requirements of
the PHS Act, ERISA, and the Internal
Revenue Code applicable prior to the
changes enacted by the Patient
Protection and Affordable Care Act.
(d) Provisions applicable to all
grandfathered health plans. The
provisions of PHS Act section 2711
insofar as it relates to lifetime dollar
limits, and the provisions of PHS Act
sections 2712, 2714, 2715, and 2718,
apply to grandfathered health plans for
plan years (in the individual market,
policy years) beginning on or after
September 23, 2010. The provisions of
PHS Act section 2708 apply to
grandfathered health plans for plan
years (in the individual market, policy
years) beginning on or after January 1,
2014.
(e) Applicability of PHS Act sections
2704, 2711, and 2714 to grandfathered
group health plans and group health
insurance coverage—(1) The provisions
of PHS Act section 2704 as it applies
with respect to enrollees who are under
19 years of age, and the provisions of
PHS Act section 2711 insofar as it
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relates to annual dollar limits, apply to
grandfathered health plans that are
group health plans (including group
health insurance coverage) for plan
years beginning on or after September
23, 2010. The provisions of PHS Act
section 2704 apply generally to
grandfathered health plans that are
group health plans (including group
health insurance coverage) for plan
years beginning on or after January 1,
2014.
(2) For plan years beginning before
January 1, 2014, the provisions of PHS
Act section 2714 apply in the case of an
adult child with respect to a
grandfathered health plan that is a
group health plan only if the adult child
is not eligible to enroll in an eligible
employer-sponsored health plan (as
defined in section 5000A(f)(2) of the
Internal Revenue Code) other than a
grandfathered health plan of a parent.
For plan years beginning on or after
January 1, 2014, the provisions of PHS
Act section 2714 apply with respect to
a grandfathered health plan that is a
group health plan without regard to
whether an adult child is eligible to
enroll in any other coverage.
(f) Effect on collectively bargained
plans—In general. In the case of health
insurance coverage maintained pursuant
to one or more collective bargaining
agreements between employee
representatives and one or more
employers that was ratified before
March 23, 2010, the coverage is
grandfathered health plan coverage at
least until the date on which the last of
the collective bargaining agreements
relating to the coverage that was in
effect on March 23, 2010 terminates.
Any coverage amendment made
pursuant to a collective bargaining
agreement relating to the coverage that
amends the coverage solely to conform
to any requirement added by subtitles A
and C of title I of the Patient Protection
and Affordable Care Act (and the
amendments made by those subtitles,
and the incorporation of those
amendments into ERISA section 715
and Internal Revenue Code section
9815) is not treated as a termination of
the collective bargaining agreement.
After the date on which the last of the
collective bargaining agreements
relating to the coverage that was in
effect on March 23, 2010 terminates, the
determination of whether health
insurance coverage maintained pursuant
to a collective bargaining agreement is
grandfathered health plan coverage is
made under the rules of this section
other than this paragraph (f) (comparing
the terms of the health insurance
coverage after the date the last collective
bargaining agreement terminates with
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72291
the terms of the health insurance
coverage that were in effect on March
23, 2010).
(g) Maintenance of grandfather
status—(1) Changes causing cessation of
grandfather status. Subject to paragraph
(g)(2) of this section, the rules of this
paragraph (g)(1) describe situations in
which a group health plan or health
insurance coverage ceases to be a
grandfathered health plan. A plan or
coverage will cease to be a
grandfathered health plan when an
amendment to plan terms that results in
a change described in this paragraph
(g)(1) becomes effective, regardless of
when the amendment was adopted.
Once grandfather status is lost, it cannot
be regained.
(i) Elimination of benefits. The
elimination of all or substantially all
benefits to diagnose or treat a particular
condition causes a group health plan or
health insurance coverage to cease to be
a grandfathered health plan. For this
purpose, the elimination of benefits for
any necessary element to diagnose or
treat a condition is considered the
elimination of all or substantially all
benefits to diagnose or treat a particular
condition. Whether or not a plan or
coverage has eliminated substantially all
benefits to diagnose or treat a particular
condition must be determined based on
all the facts and circumstances, taking
into account the items and services
provided for a particular condition
under the plan on March 23, 2010, as
compared to the benefits offered at the
time the plan or coverage makes the
benefit change effective.
(ii) Increase in percentage costsharing requirement. Any increase,
measured from March 23, 2010, in a
percentage cost-sharing requirement
(such as an individual’s coinsurance
requirement) causes a group health plan
or health insurance coverage to cease to
be a grandfathered health plan.
(iii) Increase in a fixed-amount costsharing requirement other than a
copayment. Any increase in a fixedamount cost-sharing requirement other
than a copayment (for example,
deductible or out-of-pocket limit),
determined as of the effective date of the
increase, causes a group health plan or
health insurance coverage to cease to be
a grandfathered health plan, if the total
percentage increase in the cost-sharing
requirement measured from March 23,
2010 exceeds the maximum percentage
increase (as defined in paragraph
(g)(3)(ii) of this section).
(iv) Increase in a fixed-amount
copayment. Any increase in a fixedamount copayment, determined as of
the effective date of the increase, and
determined for each copayment level if
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a plan has different copayment levels
for different categories of services,
causes a group health plan or health
insurance coverage to cease to be a
grandfathered health plan, if the total
increase in the copayment measured
from March 23, 2010 exceeds the greater
of:
(A) An amount equal to $5 increased
by medical inflation, as defined in
paragraph (g)(3)(i) of this section (that
is, $5 times medical inflation, plus $5),
or
(B) The maximum percentage increase
(as defined in paragraph (g)(3)(ii) of this
section), determined by expressing the
total increase in the copayment as a
percentage.
(v) Decrease in contribution rate by
employers and employee
organizations—(A) Contribution rate
based on cost of coverage. A group
health plan or group health insurance
coverage ceases to be a grandfathered
health plan if the employer or employee
organization decreases its contribution
rate based on cost of coverage (as
defined in paragraph (g)(3)(iii)(A) of this
section) towards the cost of any tier of
coverage for any class of similarly
situated individuals (as described in
§ 146.121(d) of this subchapter) by more
than 5 percentage points below the
contribution rate for the coverage period
that includes March 23, 2010.
(B) Contribution rate based on a
formula. A group health plan or group
health insurance coverage ceases to be
a grandfathered health plan if the
employer or employee organization
decreases its contribution rate based on
a formula (as defined in paragraph
(g)(3)(iii)(B) of this section) towards the
cost of any tier of coverage for any class
of similarly situated individuals (as
described in § 146.121(d) of this
subchapter) by more than 5 percent
below the contribution rate for the
coverage period that includes March 23,
2010.
(C) Special rules regarding decreases
in contribution rates. An insured group
health plan (or a multiemployer plan)
that is a grandfathered health plan will
not cease to be a grandfathered health
plan based on a change in the employer
contribution rate unless the issuer (or
multiemployer plan) knows, or should
know, of the change, provided:
(1) Upon renewal (or, in the case of a
multiemployer plan, before the start of
a new plan year), the issuer (or
multiemployer plan) requires relevant
employers, employee organizations, or
plan sponsors, as applicable, to make a
representation regarding its contribution
rate for the plan year covered by the
renewal, as well as its contribution rate
on March 23, 2010 (if the issuer, or
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multiemployer plan, does not already
have it); and
(2) The relevant policies, certificates,
contracts of insurance, or plan
documents disclose in a prominent and
effective manner that employers,
employee organizations, or plan
sponsors, as applicable, are required to
notify the issuer (or multiemployer
plan) if the contribution rate changes at
any point during the plan year.
(D) Application to plans with multitiered coverage structures. The
standards for employer contributions in
this paragraph (g)(1)(v) apply on a tierby-tier basis. Therefore, if a group health
plan modifies the tiers of coverage it
had on March 23, 2010 (for example,
from self-only and family to a multitiered structure of self-only, self-plusone, self-plus-two, and self-plus-threeor-more), the employer contribution for
any new tier would be tested by
comparison to the contribution rate for
the corresponding tier on March 23,
2010. For example, if the employer
contribution rate for family coverage
was 50 percent on March 23, 2010, the
employer contribution rate for any new
tier of coverage other than self-only (i.e.,
self-plus-one, self-plus-two, self-plusthree or more) must be within 5
percentage points of 50 percent (i.e., at
least 45 percent). If, however, the plan
adds one or more new coverage tiers
without eliminating or modifying any
previous tiers and those new coverage
tiers cover classes of individuals that
were not covered previously under the
plan, the new tiers would not be
analyzed under the standards for
changes in employer contributions. For
example, if a plan with self-only as the
sole coverage tier added a family
coverage tier, the level of employer
contributions toward the family
coverage would not cause the plan to
lose grandfather status.
(E) Group health plans with fixeddollar employee contributions or no
employee contributions. A group health
plan that requires either fixed-dollar
employee contributions or no employee
contributions will not cease to be a
grandfathered health plan solely
because the employer contribution rate
changes so long as there continues to be
no employee contributions or no
increase in the fixed-dollar employee
contributions towards the cost of
coverage.
(vi) Changes in annual limits—(A)
Addition of an annual limit. A group
health plan, or group or individual
health insurance coverage that, on
March 23, 2010, did not impose an
overall annual or lifetime limit on the
dollar value of all benefits ceases to be
a grandfathered health plan if the plan
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or health insurance coverage imposes an
overall annual limit on the dollar value
of benefits. (But see § 147.126, which
generally prohibits all annual dollar
limits on essential health benefits for
plan years (in the individual market,
policy years) beginning on or after
January 1, 2014).
(B) Decrease in limit for a plan or
coverage with only a lifetime limit.
Grandfathered individual health
insurance coverage, that, on March 23,
2010, imposed an overall lifetime limit
on the dollar value of all benefits but no
overall annual limit on the dollar value
of all benefits ceases to be a
grandfathered health plan if the plan or
health insurance coverage adopts an
overall annual limit at a dollar value
that is lower than the dollar value of the
lifetime limit on March 23, 2010. (But
see § 147.126, which generally prohibits
all annual dollar limits on essential
health benefits for plan years (in the
individual market, policy years)
beginning on or after January 1, 2014).
(C) Decrease in limit for a plan or
coverage with an annual limit. A group
health plan, or group or individual
health insurance coverage, that, on
March 23, 2010, imposed an overall
annual limit on the dollar value of all
benefits ceases to be a grandfathered
health plan if the plan or health
insurance coverage decreases the dollar
value of the annual limit (regardless of
whether the plan or health insurance
coverage also imposed an overall
lifetime limit on March 23, 2010 on the
dollar value of all benefits). (But see
§ 147.126, which generally prohibits all
annual dollar limits on essential health
benefits for plan years (in the individual
market, policy years) beginning on or
after January 1, 2014).
(2) Transitional rules—(i) Changes
made prior to March 23, 2010. If a group
health plan or health insurance issuer
makes the following changes to the
terms of the plan or health insurance
coverage, the changes are considered
part of the terms of the plan or health
insurance coverage on March 23, 2010
even though they were not effective at
that time and such changes do not cause
a plan or health insurance coverage to
cease to be a grandfathered health plan:
(A) Changes effective after March 23,
2010 pursuant to a legally binding
contract entered into on or before March
23, 2010;
(B) Changes effective after March 23,
2010 pursuant to a filing on or before
March 23, 2010 with a State insurance
department; or
(C) Changes effective after March 23,
2010 pursuant to written amendments
to a plan that were adopted on or before
March 23, 2010.
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(ii) Changes made after March 23,
2010 and adopted prior to issuance of
regulations. If, after March 23, 2010, a
group health plan or health insurance
issuer makes changes to the terms of the
plan or health insurance coverage and
the changes are adopted prior to June
14, 2010, the changes will not cause the
plan or health insurance coverage to
cease to be a grandfathered health plan
if the changes are revoked or modified
effective as of the first day of the first
plan year (in the individual market,
policy year) beginning on or after
September 23, 2010, and the terms of
the plan or health insurance coverage on
that date, as modified, would not cause
the plan or coverage to cease to be a
grandfathered health plan under the
rules of this section, including
paragraph (g)(1) of this section. For this
purpose, changes will be considered to
have been adopted prior to June 14,
2010 if:
(A) The changes are effective before
that date;
(B) The changes are effective on or
after that date pursuant to a legally
binding contract entered into before that
date;
(C) The changes are effective on or
after that date pursuant to a filing before
that date with a State insurance
department; or
(D) The changes are effective on or
after that date pursuant to written
amendments to a plan that were
adopted before that date.
(3) Definitions—(i) Medical inflation
defined. For purposes of this paragraph
(g), the term medical inflation means the
increase since March 2010 in the overall
medical care component of the
Consumer Price Index for All Urban
Consumers (CPI–U) (unadjusted)
published by the Department of Labor
using the 1982–1984 base of 100. For
this purpose, the increase in the overall
medical care component is computed by
subtracting 387.142 (the overall medical
care component of the CPI–U
(unadjusted) published by the
Department of Labor for March 2010,
using the 1982–1984 base of 100) from
the index amount for any month in the
12 months before the new change is to
take effect and then dividing that
amount by 387.142.
(ii) Maximum percentage increase
defined. For purposes of this paragraph
(g), the term maximum percentage
increase means medical inflation (as
defined in paragraph (g)(3)(i) of this
section), expressed as a percentage, plus
15 percentage points.
(iii) Contribution rate defined. For
purposes of paragraph (g)(1)(v) of this
section:
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(A) Contribution rate based on cost of
coverage. The term contribution rate
based on cost of coverage means the
amount of contributions made by an
employer or employee organization
compared to the total cost of coverage,
expressed as a percentage. The total cost
of coverage is determined in the same
manner as the applicable premium is
calculated under the COBRA
continuation provisions of section 604
of ERISA, section 4980B(f)(4) of the
Internal Revenue Code, and section
2204 of the PHS Act. In the case of a
self-insured plan, contributions by an
employer or employee organization are
equal to the total cost of coverage minus
the employee contributions towards the
total cost of coverage.
(B) Contribution rate based on a
formula. The term contribution rate
based on a formula means, for plans
that, on March 23, 2010, made
contributions based on a formula (such
as hours worked or tons of coal mined),
the formula.
(4) Examples. The rules of this
paragraph (g) are illustrated by the
following examples:
Example 1. (i) Facts. On March 23, 2010,
a grandfathered health plan has a
coinsurance requirement of 20% for inpatient
surgery. The plan is subsequently amended
to increase the coinsurance requirement to
25%.
(ii) Conclusion. In this Example 1, the
increase in the coinsurance requirement from
20% to 25% causes the plan to cease to be
a grandfathered health plan.
Example 2. (i) Facts. Before March 23,
2010, the terms of a group health plan
provide benefits for a particular mental
health condition, the treatment for which is
a combination of counseling and prescription
drugs. Subsequently, the plan eliminates
benefits for counseling.
(ii) Conclusion. In this Example 2, the plan
ceases to be a grandfathered health plan
because counseling is an element that is
necessary to treat the condition. Thus the
plan is considered to have eliminated
substantially all benefits for the treatment of
the condition.
Example 3. (i) Facts. On March 23, 2010,
a grandfathered health plan has a copayment
requirement of $30 per office visit for
specialists. The plan is subsequently
amended to increase the copayment
requirement to $40. Within the 12-month
period before the $40 copayment takes effect,
the greatest value of the overall medical care
component of the CPI–U (unadjusted) is 475.
(ii) Conclusion. In this Example 3, the
increase in the copayment from $30 to $40,
expressed as a percentage, is 33.33% (40¥30
= 10; 10 ÷ 30 = 0.3333; 0.3333 = 33.33%).
Medical inflation (as defined in paragraph
(g)(3)(i) of this section) from March 2010 is
0.2269 (475¥387.142 = 87.858; 87.858 ÷
387.142 = 0.2269). The maximum percentage
increase permitted is 37.69% (0.2269 =
22.69%; 22.69% + 15% = 37.69%). Because
33.33% does not exceed 37.69%, the change
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72293
in the copayment requirement at that time
does not cause the plan to cease to be a
grandfathered health plan.
Example 4. (i) Facts. Same facts as
Example 3, except the grandfathered health
plan subsequently increases the $40
copayment requirement to $45 for a later
plan year. Within the 12-month period before
the $45 copayment takes effect, the greatest
value of the overall medical care component
of the CPI–U (unadjusted) is 485.
(ii) Conclusion. In this Example 4, the
increase in the copayment from $30 (the
copayment that was in effect on March 23,
2010) to $45, expressed as a percentage, is
50% (45¥30 = 15; 15 ÷ 30 = 0.5; 0.5 = 50%).
Medical inflation (as defined in paragraph
(g)(3)(i) of this section) from March 2010 is
0.2527 (485¥387.142 = 97.858; 97.858 ÷
387.142 = 0.2527). The increase that would
cause a plan to cease to be a grandfathered
health plan under paragraph (g)(1)(iv) of this
section is the greater of the maximum
percentage increase of 40.27% (0.2527 =
25.27%; 25.27% + 15% = 40.27%), or $6.26
($5 × 0.2527 = $1.26; $1.26 + $5 = $6.26).
Because 50% exceeds 40.27% and $15
exceeds $6.26, the change in the copayment
requirement at that time causes the plan to
cease to be a grandfathered health plan.
Example 5. (i) Facts. On March 23, 2010,
a grandfathered health plan has a copayment
of $10 per office visit for primary care
providers. The plan is subsequently amended
to increase the copayment requirement to
$15. Within the 12-month period before the
$15 copayment takes effect, the greatest value
of the overall medical care component of the
CPI–U (unadjusted) is 415.
(ii) Conclusion. In this Example 5, the
increase in the copayment, expressed as a
percentage, is 50% (15¥10 = 5; 5 ÷ 10 = 0.5;
0.5 = 50%). Medical inflation (as defined in
paragraph (g)(3) of this section) from March
2010 is 0.0720 (415.0¥387.142 = 27.858;
27.858 ÷ 387.142 = 0.0720). The increase that
would cause a plan to cease to be a
grandfathered health plan under paragraph
(g)(1)(iv) of this section is the greater of the
maximum percentage increase of 22.20%
(0.0720 = 7.20%; 7.20% + 15% = 22.20), or
$5.36 ($5 × 0.0720 = $0.36; $0.36 + $5 =
$5.36). The $5 increase in copayment in this
Example 5 would not cause the plan to cease
to be a grandfathered health plan pursuant to
paragraph (g)(1)(iv)this section, which would
permit an increase in the copayment of up to
$5.36.
Example 6. (i) Facts. The same facts as
Example 5, except on March 23, 2010, the
grandfathered health plan has no copayment
($0) for office visits for primary care
providers. The plan is subsequently amended
to increase the copayment requirement to $5.
(ii) Conclusion. In this Example 6, medical
inflation (as defined in paragraph (g)(3)(i) of
this section) from March 2010 is 0.0720
(415.0¥387.142 = 27.858; 27.858 ÷ 387.142
= 0.0720). The increase that would cause a
plan to cease to be a grandfathered health
plan under paragraph (g)(1)(iv)(A) of this
section is $5.36 ($5 x 0.0720 = $0.36; $0.36
+ $5 = $5.36). The $5 increase in copayment
in this Example 6 is less than the amount
calculated pursuant to paragraph (g)(1)(iv)(A)
of this section of $5.36. Thus, the $5 increase
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in copayment does not cause the plan to
cease to be a grandfathered health plan.
Example 7. (i) Facts. On March 23, 2010,
a self-insured group health plan provides two
tiers of coverage—self-only and family. The
employer contributes 80% of the total cost of
coverage for self-only and 60% of the total
cost of coverage for family. Subsequently, the
employer reduces the contribution to 50% for
family coverage, but keeps the same
contribution rate for self-only coverage.
(ii) Conclusion. In this Example 7, the
decrease of 10 percentage points for family
coverage in the contribution rate based on
cost of coverage causes the plan to cease to
be a grandfathered health plan. The fact that
the contribution rate for self-only coverage
remains the same does not change the result.
Example 8. (i) Facts. On March 23, 2010,
a self-insured grandfathered health plan has
a COBRA premium for the 2010 plan year of
$5000 for self-only coverage and $12,000 for
family coverage. The required employee
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contribution for the coverage is $1000 for
self-only coverage and $4000 for family
coverage. Thus, the contribution rate based
on cost of coverage for 2010 is 80%
((5000¥1000)/5000) for self-only coverage
and 67% ((12,000¥4000)/12,000) for family
coverage. For a subsequent plan year, the
COBRA premium is $6000 for self-only
coverage and $15,000 for family coverage.
The employee contributions for that plan
year are $1200 for self-only coverage and
$5000 for family coverage. Thus, the
contribution rate based on cost of coverage is
80% ((6000¥1200)/6000) for self-only
coverage and 67% ((15,000¥5000)/15,000)
for family coverage.
(ii) Conclusion. In this Example 8, because
there is no change in the contribution rate
based on cost of coverage, the plan retains its
status as a grandfathered health plan. The
result would be the same if all or part of the
employee contribution was made pre-tax
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through a cafeteria plan under section 125 of
the Internal Revenue Code.
Example 9. (i) Facts. A group health plan
not maintained pursuant to a collective
bargaining agreement offers three benefit
packages on March 23, 2010. Option F is a
self-insured option. Options G and H are
insured options. Beginning July 1, 2013, the
plan increases coinsurance under Option H
from 10% to 15%.
(ii) Conclusion. In this Example 9, the
coverage under Option H is not
grandfathered health plan coverage as of July
1, 2013, consistent with the (rule in
paragraph (g)(1)(ii) of this section. Whether
the coverage under Options F and G is
grandfathered health plan coverage is
determined separately under the rules of this
paragraph (g).
[FR Doc. 2015–29294 Filed 11–13–15; 4:15 pm]
BILLING CODE 4150–28–P; 4830–01–P; 4120–01–P;
6325–64–P
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Agencies
[Federal Register Volume 80, Number 222 (Wednesday, November 18, 2015)]
[Rules and Regulations]
[Pages 72191-72294]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29294]
[[Page 72191]]
Vol. 80
Wednesday,
No. 222
November 18, 2015
Part III
Department of the Treasury
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Internal Revenue Service
-----------------------------------------------------------------------
26 CFR Part 54
Department of Labor
-----------------------------------------------------------------------
Employee Benefits Security Administration
-----------------------------------------------------------------------
29 CFR Part 2590
Department of Health and Human Services
-----------------------------------------------------------------------
45 CFR Parts 144, 146 and 147
Final Rules for Grandfathered Plans, Preexisting Condition Exclusions,
Lifetime and Annual Limits, Rescissions, Dependent Coverage, Appeals,
and Patient Protections Under the Affordable Care Act; Final Rules
Federal Register / Vol. 80 , No. 222 / Wednesday, November 18, 2015 /
Rules and Regulations
[[Page 72192]]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[TD 9744]
RIN 1545-BJ45, 1545-BJ50, 1545-BJ62, 1545-BJ57
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AB72
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 144, 146 and 147
[CMS-9993-F]
RIN 0938-AS56
Final Rules for Grandfathered Plans, Preexisting Condition
Exclusions, Lifetime and Annual Limits, Rescissions, Dependent
Coverage, Appeals, and Patient Protections Under the Affordable Care
Act
AGENCY: Internal Revenue Service, Department of the Treasury; Employee
Benefits Security Administration, Department of Labor; Centers for
Medicare & Medicaid Services, Department of Health and Human Services.
ACTION: Final rules.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations regarding
grandfathered health plans, preexisting condition exclusions, lifetime
and annual dollar limits on benefits, rescissions, coverage of
dependent children to age 26, internal claims and appeal and external
review processes, and patient protections under the Affordable Care
Act. It finalizes changes to the proposed and interim final rules based
on comments and incorporates subregulatory guidance issued since
publication of the proposed and interim final rules.
DATES:
Effective date. These final regulations are effective on January
19, 2016.
Applicability date. These final regulations apply to group health
plans and health insurance issuers beginning on the first day of the
first plan year (or, in the individual market, the first day of the
first policy year) beginning on or after January 1, 2017. For
information on requirements applicable prior to this date, see section
II.I. of this preamble.
FOR FURTHER INFORMATION CONTACT: Elizabeth Schumacher or Amber Rivers,
Employee Benefits Security Administration, Department of Labor, at
(202) 693-8335; Karen Levin, Internal Revenue Service, Department of
the Treasury, at (202) 927-9639; Cam Clemmons, Centers for Medicare &
Medicaid Services, Department of Health and Human Services, at (410)
786-1565.
Customer Service Information: Individuals interested in obtaining
information from the Department of Labor concerning employment-based
health coverage laws may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (www.dol.gov/ebsa). Information from HHS on private health insurance coverage can be
found on CMS's Web site (www.cms.gov/cciio), and information on health
care reform can be found at www.HealthCare.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The Patient Protection and Affordable Care Act, Public Law 111-148,
was enacted on March 23, 2010; the Health Care and Education
Reconciliation Act (the Reconciliation Act), Public Law 111-152, was
enacted on March 30, 2010 (these are collectively known as the
``Affordable Care Act''). The Affordable Care Act reorganizes, amends,
and adds to the provisions of part A of title XXVII of the Public
Health Service Act (PHS Act) relating to group health plans and health
insurance issuers in the group and individual markets. The term ``group
health plan'' includes both insured and self-insured group health
plans.\1\ The Affordable Care Act adds section 715(a)(1) to the
Employee Retirement Income Security Act (ERISA) and section 9815(a)(1)
to the Internal Revenue Code (the Code) to incorporate the provisions
of part A of title XXVII of the PHS Act into ERISA and the Code, and
make them applicable to group health plans, and health insurance
issuers providing health insurance coverage in connection with group
health plans. The PHS Act sections incorporated into the Code and ERISA
are sections 2701 through 2728.
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\1\ The term ``group health plan'' is used in title XXVII of the
PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is
distinct from the term ``health plan,'' as used in other provisions
of title I of the Affordable Care Act. The term ``health plan'' does
not include self-insured group health plans.
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The Departments of Labor (DOL), Health and Human Services (HHS) and
the Treasury (collectively, the Departments) have issued regulations
implementing the revised PHS Act sections 2701 through 2719A in several
phases.\2\ Throughout 2010, the Departments issued interim final
regulations (or temporary and proposed regulations),\3\ with requests
for comment, implementing Affordable Care Act section 1251
(preservation of right to maintain existing coverage), and PHS Act
sections 2704 (prohibition of preexisting condition exclusions), 2711
(prohibition on lifetime or annual limits), 2712 (prohibition on
rescissions), 2714 (extension of dependent coverage), 2719 (internal
claims and appeals and external review process), and 2719A (patient
protections) (collectively, the 2010 interim final regulations). As
discussed in more detail below, after consideration of comments \4\ in
response to the 2010 interim final regulations, the Departments are
issuing these final regulations.
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\2\ Note, however, that in sections under headings listing only
two of the three Departments, the term ``Departments'' generally
refers only to the two Departments listed in the heading.
\3\ The Departments of Labor and HHS published their rules as
interim final rules and are finalizing their interim final rules.
The Department of the Treasury/Internal Revenue Service published
temporary regulations and proposed regulations with the text of the
temporary regulations serving as the text of the proposed
regulations. The Department of the Treasury/Internal Revenue Service
is finalizing its proposed rules.
\4\ In response to the 2010 interim final regulations, the
Departments received many comments that relate to early
implementation issues, many of which were addressed through
subregulatory guidance (addressed more fully below). While the
Departments acknowledge and have reviewed the comments provided in
response to the 2010 interim final regulations, to the extent the
issues presented are now moot, such comments are not explicitly
addressed below.
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II. Overview of the Final Regulations
A. Section 1251 of the Affordable Care Act, Preservation of Right To
Maintain Existing Coverage (26 CFR 54.9815-1251, 29 CFR 2590.715-1251,
and 45 CFR 147.140)
Section 1251 of the Affordable Care Act provides that certain group
health plans and health insurance coverage existing as of March 23,
2010 (the date of enactment of the Affordable Care Act) (grandfathered
health plans) are only subject to certain provisions of the Affordable
Care Act (for as long as they maintain that status as grandfathered
health plans under the applicable regulations).\5\ On June 17, 2010,
the Departments issued interim final regulations implementing section
1251 and requesting comment.\6\ On
[[Page 72193]]
November 17, 2010, the Departments issued an amendment to the interim
final regulations to permit certain changes in policies, certificates,
or contracts of insurance without loss of grandfathered status.\7\ Also
in 2010, the Departments released Affordable Care Act Implementation
Frequently Asked Questions (FAQs) Parts I, II, IV, V, and VI to answer
questions related to maintaining a plan's status as a grandfathered
health plan.\8\ After consideration of the comments and feedback
received from stakeholders, the Departments are publishing these final
regulations. As discussed in more detail below, these final regulations
finalize the 2010 interim final regulations and amendment to the
interim final regulations without substantial change and incorporate
the clarifications issued thus far in subregulatory guidance.
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\5\ For a list of the market reform provisions under title XXVII
of the PHS Act, as added or amended by the Affordable Care Act and
incorporated into ERISA and the Code, applicable to grandfathered
health plans, visit https://www.dol.gov/ebsa/pdf/grandfatherregtable.pdf.
\6\ 75 FR 34538.
\7\ 75 FR 70114.
\8\ See Affordable Care Act Implementation FAQs Part I,
available at https://www.dol.gov/ebsa/faqs/faq-aca.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html, Affordable Care Act Implementation
FAQs Part II available at https://www.dol.gov/ebsa/faqs/faq-aca2.html
and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html, Affordable Care Act Implementation
FAQs Part IV, available at https://www.dol.gov/ebsa/faqs/faq-aca4.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs4.html and Affordable Care Act
Implementation FAQs Part V, available at https://www.dol.gov/ebsa/faqs/faq-aca5.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html and Affordable Care
Act Implementation FAQs Part VI, available at https://www.dol.gov/ebsa/faqs/faq-aca6.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs6.html.
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1. Definition of Grandfathered Health Plan Coverage
Under the Affordable Care Act and paragraph (a)(1) of the interim
final regulations implementing section 1251 of the Affordable Care Act,
a group health plan or group or individual health insurance coverage is
a grandfathered health plan with respect to individuals enrolled on
March 23, 2010 (for as long as it maintains that status under the
applicable regulations). The interim final regulations provided that a
group health plan or coverage does not relinquish its grandfather
status merely because one or more (or even all) individuals enrolled on
March 23, 2010 cease to be covered, provided that the plan or group
health insurance coverage has continuously covered at least one person
(although not necessarily the same person) at all times since March 23,
2010. The interim final regulations also provided that the
determination of grandfather status under the rules is made separately
with respect to each benefit package made available under a group
health plan or health insurance coverage.
Some commenters requested clarification with respect to the meaning
of the term ``benefit package'' including requesting further guidance
regarding what coverage option features constitute separate benefit
packages. In response to the comments, the Departments issued
Affordable Care Act Implementation FAQs Part II Q2 to further clarify
the application of the rules on a benefit-package-by-benefit-package
basis.\9\ These final regulations continue to provide that the
determination of grandfather status applies separately with respect to
each benefit package and incorporate the clarifications issued in the
FAQs. Therefore, as demonstrated by the example provided in the FAQs,
if a group health plan offers three benefit package options--a PPO
(preferred provider organization), a POS (point of service)
arrangement, and an HMO (health maintenance organization)--the PPO, POS
arrangement, and HMO are treated as separate benefit packages.
Similarly, under these final regulations, if any benefit package ceases
grandfather status, it will not affect the grandfather status of the
other benefit packages.
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\9\ See Affordable Care Act Implementation FAQs Part II,
available at https://www.dol.gov/ebsa/faqs/faq-aca2.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html.
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2. Disclosure of Grandfather Status
Paragraph (a)(2) of the interim final regulations implementing
section 1251 of the Affordable Care Act provided that to maintain
status as a grandfathered health plan, a plan or health insurance
coverage (1) must include a statement, in any plan materials provided
to participants or beneficiaries (in the individual market, primary
subscribers) describing the benefits provided under the plan or health
insurance coverage, that the plan or health insurance coverage believes
that it is a grandfathered health plan within the meaning of section
1251 of the Affordable Care Act and (2) must provide contact
information for questions and complaints. The interim final regulations
provided model language that can be used to satisfy this disclosure
requirement.\10\
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\10\ 29 CFR 2590.715-1251(a)(2)(ii); 45 CFR 147.140(a)(2)(ii).
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The Departments received several comments asking the Departments to
require enhanced disclosure to participants that includes a more
comprehensive explanation of grandfathered health plan status,
information on the triggers that can result in a cessation of such
status, a complete listing of the specific market reforms that are
inapplicable to the plan by virtue of its status, and access to a
formal process for obtaining a determination on a plan's status from
the appropriate government agency. Other commenters stated that
including this disclosure requirement in consumer materials may be
confusing to participants, may not have the intended benefit, and that
it may be more appropriate to include the applicable consumer
protections in the employer plan documents or insurance coverage
documents. Additional commenters stated this requirement is unnecessary
because ERISA's disclosure requirements are already sufficient to
explain to participants the information they need about their plan
(including which benefits are included or excluded), and that including
information about what benefits they could have had if their employers
chose to relinquish their grandfathered plan status is unnecessary.
In response to these comments the Departments issued Affordable
Care Act Implementation FAQs Part IV Q1, in which the Departments
clarified that a grandfathered health plan is not required to provide
the disclosure statement every time it sends out a communication, such
as an explanation of benefits (EOB), to a participant or beneficiary.
Instead, a grandfathered health plan will comply with this disclosure
requirement if it includes the model disclosure language provided in
the Departments' interim final grandfather regulations (or a similar
statement) whenever a summary of the benefits under the plan is
provided to participants and beneficiaries. For example, many plans
distribute summary plan descriptions upon initial eligibility to
receive benefits under the plan or coverage, during an open enrollment
period, or upon other opportunities to enroll in, renew, or change
coverage. The FAQs also provided that, while it is not necessary to
include the disclosure statement with each plan or issuer communication
to participants and beneficiaries (such as an EOB), the Departments
encourage plan sponsors and issuers to identify other communications in
which disclosure of grandfather status would be appropriate and
consistent with the goal of providing participants and beneficiaries
information necessary to
[[Page 72194]]
understand and make informed choices regarding health coverage.\11\
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\11\ See Affordable Care Act Implementation FAQs Part IV,
available at https://www.dol.gov/ebsa/faqs/faq-aca4.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs4.html.
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After consideration of the comments and feedback from stakeholders,
the Departments retain the approach in the interim final regulations
and subsequent subregulatory guidance because that approach provides
consumers with information about the status of their plan or health
insurance coverage, which assists them in identifying and enforcing
their rights, without undue burden on plans and issuers. Therefore,
these final regulations clarify that, to maintain status as a
grandfathered health plan, a group health plan, or health insurance
coverage, must include a statement that the plan or health insurance
coverage believes it is a grandfathered health plan in any summary of
benefits provided under the plan. It must also provide contact
information for questions and complaints. These final regulations also
retain the model disclosure language. Plans and issuers may (but are
not required to) utilize the model disclosure language to satisfy this
disclosure requirement. The Departments also note that the disclosure
language is a model, and, thus, plans and issuers are permitted to
include additional disclosure elements, such as the entire list of the
market reform provisions that do not apply to grandfathered health
plans.
3. Anti-Abuse Rules
The interim final regulations provided that a group health plan
that provided coverage on March 23, 2010 generally is a grandfathered
health plan with respect to new employees (whether newly hired or newly
enrolled) and their families who enroll in the grandfathered health
plan after March 23, 2010. The interim final regulations also provided
two anti-abuse rules to curtail attempts to retain grandfather status
by indirectly making changes that would otherwise result in a loss of
grandfather status.
The first anti-abuse rule provided that if the principal purpose of
a merger, acquisition, or similar business restructuring is to cover
new individuals under a grandfathered health plan, the plan ceases to
be a grandfathered health plan. Under the second anti-abuse rule, the
interim final regulations set forth specific criteria that, if met,
would cause a plan that is transferring employees to relinquish its
grandfather status. Specifically, the interim final regulations
provided that a plan that is transferring employees would relinquish
its grandfather status if, comparing the terms of the transferee plan
with those of the transferor plan (as in effect on March 23, 2010) and
treating the transferee plan as if it were an amendment of the
transferor plan, such amendment would cause a loss of grandfather
status and there was no bona fide employment-based reason to transfer
the employees into the transferee plan. The second anti-abuse rule was
designed to prevent a plan or issuer from circumventing the limits on
changes that cause a plan or health insurance coverage to cease to be a
grandfathered health plan. This rule was intended to address situations
in which employees who previously were covered by a grandfathered
health plan are transferred to another grandfathered health plan
without any bona fide employment-based reason.
a. Bona Fide Employment-Based Reasons
The Departments received several comments regarding the anti-abuse
provisions. Stakeholders requested that the Departments clarify what
constitutes a bona fide employment-based reason that would prevent a
plan that is transferring employees from relinquishing its grandfather
status. In response, the Departments issued Affordable Care Act
Implementation FAQs Part VI Q1, which provided several examples of the
variety of circumstances that would constitute a bona fide employment-
based reason to transfer employees. Examples of a bona fide employment-
based reason include: When a benefit package is being eliminated
because the issuer is exiting the market; when a benefit package is
being eliminated because the issuer no longer offers the product to the
employer; when low or declining participation by plan participants in
the benefit package makes it impractical for the plan sponsor to
continue to offer the benefit package; when a benefit package is
eliminated from a multiemployer plan as agreed upon as part of the
collective bargaining process; or when a benefit package is eliminated
for any reason and multiple benefit packages covering a significant
portion of other employees remain available to the employees being
transferred.\12\
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\12\ See Affordable Care Act Implementation FAQs Part VI,
available at https://www.dol.gov/ebsa/faqs/faq-aca6.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs6.html.
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These final regulations include those examples of bona fide
employment-based reasons. The Departments continue to interpret the
term ``bona fide employment-based reason'' to embrace a variety of
circumstances, and plans and issuers should evaluate all facts and
circumstances carefully to determine whether a bona fide employment-
based reason exists when considering transferring employees from one
grandfathered health plan to another. The Departments may issue
additional guidance if further questions regarding what constitutes a
bona fide employment-based reason arise.
b. Clarification Regarding Multiemployer Plans
Section 1251 of the Affordable Care Act, as well as the 2010
interim final regulations, permit a grandfathered group health plan to
cover new employees without any effect on its status as a grandfathered
plan. Several commenters requested that the Departments clarify in the
final regulations whether a multiemployer plan may add new contributing
employers to the plan without triggering a loss of grandfather status.
These final regulations clarify that the addition of a new contributing
employer or new group of employees of an existing contributing employer
to a grandfathered multiemployer health plan will not affect the plan's
grandfathered status, provided that the multiemployer plan has not made
any other changes that would cause the plan to relinquish its
grandfathered status.
4. Maintenance of Grandfather Status
The interim final regulations set forth rules for determining when
changes to the terms of a plan or health insurance coverage cause the
plan or coverage to cease to be a grandfathered health plan.
Specifically, the interim final regulations outlined six changes to
benefits, cost-sharing mechanisms, and contribution rates that will
cause a plan or health insurance coverage to relinquish its grandfather
status.\13\ Since
[[Page 72195]]
the promulgation of the interim final regulations, questions have been
brought to the Departments' attention regarding other specific changes
to a plan's design and the impact of such changes on a plan's
grandfather status.
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\13\ The six changes (measured from March 23, 2010) outlined in
paragraph (g)(1) of the interim final regulations that are
considered to change a health plan so significantly that they will
cause a group health plan or health insurance coverage to relinquish
grandfather status include the following: (1) The elimination of all
or substantially all benefits to diagnose or treat a particular
condition, (2) any increase in percentage cost-sharing requirements,
(3) an increase in a deductible or out-of-pocket maximum by an
amount that exceeds medical inflation plus 15 percentage points, (4)
an increase in a copayment by an amount that exceeds medical
inflation plus 15 percentage points (or, if greater, $5 plus medical
inflation), (5) a decrease in an employer's contribution rate
towards the cost of coverage by more than 5 percentage points, or
(6) the imposition of annual dollar limits below the restricted
annual dollar limits that were in effect prior to 2014 (note that
for plan years (or policy years in the individual market) beginning
on and after January 1, 2014, annual dollar limits on essential
health benefits are prohibited, except for grandfathered individual
health insurance coverage). See 26 CFR 54.9815-1251(g), 29 CFR
2590.715-1251(g), and 45 CFR 147.140(g).
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a. Elimination of All or Substantially All Benefits
The 2010 interim final regulations and these final regulations
provide that the elimination of all or substantially all benefits to
diagnose or treat a particular condition will cause a group health plan
or health insurance coverage to relinquish its grandfathered status.
One commenter requested that the Departments clarify what constitutes
eliminating ``substantially all benefits'' to diagnose or treat a
particular condition. As the interim final regulations stated, and
these final regulations continue to provide, the elimination of
benefits for any necessary element to diagnose or treat a condition is
considered the elimination of all or substantially all benefits to
diagnose or treat a particular condition. The Departments decline to
establish a bright-line test establishing what constitutes
``substantially all benefits'' for purposes of these final regulations.
Whether or not a plan has eliminated substantially all benefits to
diagnose or treat a particular condition must be determined based on
all the facts and circumstances, taking into account the items and
services covered for a particular condition under the plan on March 23,
2010, as compared to the items and services covered at the time the
plan makes the benefit change effective. The preamble to the 2010
interim final regulations provided two examples. First, if a plan or
health insurance coverage eliminates all benefits for cystic fibrosis,
the plan or coverage will lose its grandfathered status. Second, if a
plan or insurance coverage provides benefits for a particular mental
health condition, the treatment for which is a combination of
counseling and prescription drugs, and subsequently eliminates benefits
for counseling, the plan is treated as having eliminated all or
substantially all benefits for that mental health condition and will as
a result lose its grandfathered status. These final regulations
continue to provide that the elimination of all or substantially all
benefits to diagnose or treat a particular condition will cause a group
health plan or health insurance coverage to relinquish its
grandfathered status and contain an example.
b. Increase in Fixed-Amount Copayments
The interim final regulations provided standards for when increases
in fixed-amount copayments would cause a plan or coverage to relinquish
its grandfather status. Under the interim final regulations, a plan or
coverage ceases to be a grandfathered health plan if there is an
increase since March 23, 2010 in a copayment that exceeds the greater
of the maximum percentage increase \14\ or five dollars increased by
medical inflation.\15\
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\14\ The interim final regulations defined the maximum
percentage increase as medical inflation (from March 23, 2010) plus
15 percentage points. Medical inflation is defined in the interim
final regulations by reference to the overall medical care component
of the Consumer Price Index for All Urban Consumers, unadjusted
(CPI), published by the Department of Labor. See 26 CFR 54.9815-
1251(g)(3), 29 CFR 2590.715-1251(g)(3), and 45 CFR 147.140(g)(3).
\15\ 75 FR 35538, 34543 (June 17, 2010).
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With respect to grandfathered health plans that utilize multiple
levels of copayments for different benefits under the plan,
stakeholders sought clarification on what degree of change would cause
a plan to relinquish its grandfather status. Specifically, stakeholders
wanted to know whether raising the copayment level for a category of
services by an amount that would otherwise trigger a loss of
grandfather status would cause a loss of grandfather status if the plan
retained the level of copayment on other categories of services. The
Departments clarified in Affordable Care Act Implementation FAQs Part
II Q4 that a change to a copayment level for a category of services
that exceeds the standards set forth in the interim final regulations
will cause a plan to relinquish its grandfather status, even if a plan
retains the level of copayment for other categories of services.\16\
These final regulations retain this clarification, and continue to
provide that each change in cost sharing must be separately evaluated
under the standards set forth in the regulations. A plan or issuer may
not exceed the standards set forth in these final regulations with
respect to one level of copayment for a category of services, and
retain its grandfather status by retaining the level of copayments for
other categories of services.
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\16\ See Affordable Care Act Implementation FAQs Part II,
available at https://www.dol.gov/ebsa/faqs/faq-aca2.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html.
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c. Decrease in Contribution Rate by Employers and Employee Organization
The interim final regulations provided that a decrease in the
employer contribution rate for coverage under a group health plan or
group health insurance coverage beyond the permitted percentage would
result in cessation of grandfather status. There are two rules related
to decreases in employer contributions: One for a contribution based on
the cost of coverage and one for a contribution based on a formula.
First, if the contribution rate is based on the cost of coverage, a
group health plan or group health insurance coverage ceases to be a
grandfathered health plan if the employer or employee organization
decreases its contribution rate towards the cost of any tier of
coverage for any class of similarly situated individuals \17\ by more
than 5 percentage points below the contribution rate on March 23, 2010.
For this purpose, contribution rate is defined as the amount of
contributions made by an employer or employee organization compared to
the total cost of coverage, expressed as a percentage. The interim
final regulations also provided that the total cost of coverage is
determined in the same manner as the applicable premium is calculated
under the Consolidated Omnibus Budget Reconciliation Act of 1986
(COBRA) continuation provisions of section 604 of ERISA, section
4980B(f)(4) of the Code, and section 2204 of the PHS Act. In the case
of a self-insured group health plan, contributions by an employer or
employee organization are calculated by subtracting the employee
contributions towards the total cost of coverage from the total cost of
coverage.
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\17\ Similarly situated individuals are described in the HIPAA
nondiscrimination regulations at 26 CFR 54.9802-1(d), 29 CFR
2590.702(d), and 45 CFR 146.121(d).
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Second, if the contribution rate is based on a formula, such as
hours worked or tons of coal mined, a group health plan or group health
insurance coverage ceases to be a grandfathered health plan if the
employer or employee organization decreases its contribution rate
towards the cost of any tier of coverage for any class of similarly
situated individuals by more than 5 percentage points below the
contribution rate on March 23, 2010. These final regulations finalize
these provisions without change but incorporate the additional
clarifications issued in subregulatory guidance as discussed below.
The Departments received several comments relating to the employer
[[Page 72196]]
contribution limitations. Some commenters stated that issuers do not
always have the information needed to know whether (or when) an
employer plan sponsor changes its rate of contribution towards the cost
of group health plan coverage. In response to this issue, the
Departments issued Affordable Care Act Implementation FAQs Part I Q2
and Q3 providing relief if issuers and employer plan sponsors or
contributing employers and multiemployer plans take certain steps to
communicate regarding changes to the contribution rate for purposes of
determining grandfather status.\18\ These final regulations also
provide relief to issuers, plan sponsors, employers, and plans that
take certain steps to communicate changes in contribution rates.
Specifically, these final regulations provide that an insured group
health plan that is a grandfathered health plan will not relinquish its
grandfather status immediately based on a change in the employer
contribution rate if, upon renewal, an issuer requires a plan sponsor
to make a representation regarding its contribution rate for the plan
year covered by the renewal, as well as its contribution rate on March
23, 2010 (if the issuer does not already have it). Additionally, the
issuer's policies, certificates, or contracts of insurance must
disclose in a prominent and effective manner that plan sponsors are
required to notify the issuer if the contribution rate changes at any
point during the plan year. An insured grandfathered group health plan
with a decrease in employer contributions relinquishes its grandfather
status as of the earlier of the first date on which the issuer knows or
reasonably should know that there has been at least a 5-percentage-
point reduction or the first date on which the plan no longer qualifies
for grandfathered status without regard to the 5-percentage-point
reduction. Similarly, if multiemployer plans and contributing employers
follow these steps, the plan will not relinquish its grandfather status
unless or until the multiemployer plan knows or reasonably should know
that the contribution rate has changed by at least the applicable 5-
percentage point reduction or until the date the plan no longer
qualifies for grandfathered status without regard to the 5-percentage
point reduction. Moreover, nothing in the Affordable Care Act or these
regulations prevents a policy, certificate, or contract of insurance
from requiring a plan sponsor to notify an issuer in advance (for
example, 30 or 60 days in advance) of a change in their contribution
rate.
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\18\ See Affordable Care Act Implementation FAQs Part I,
available at https://www.dol.gov/ebsa/faqs/faq-aca.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html.
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The Departments also received comments on the application of this
provision to multiemployer plans with unique contribution structures.
It is common for multiemployer plans to have either a fixed-dollar
employee contribution or no employee contribution towards the cost of
coverage. In such cases, a contributing employer's contribution rate
may change (for example, after making up a funding deficit in the prior
year or to reflect a surplus) but the employee contribution amount is
not affected. The Departments issued Affordable Care Act Implementation
FAQs Part I Q4 clarifying that in this case, provided any changes in
the coverage terms would not otherwise cause the plan to cease to be
grandfathered and there continues to be no employee contribution or no
increase in the fixed-dollar employee contribution towards the cost of
coverage, the plan would not relinquish its grandfather status.\19\
These final regulations incorporate this clarification and apply the
relief to all grandfathered group health plans. Therefore, under these
final regulations a group health plan that requires either fixed-dollar
employee contributions or no employee contributions will not cease to
be a grandfathered health plan if the employer contribution rate
changes so long as there continues to be no employee contributions or
no increase in the fixed-dollar employee contributions towards the cost
of coverage and there are no corresponding changes in coverage terms
that would otherwise cause the plan to cease to be a grandfathered
plan.
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\19\ See Affordable Care Act Implementation FAQs Part I,
available at https://www.dol.gov/ebsa/faqs/faq-aca.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html.
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The Departments also received comments requesting clarification on
the application of the rules where a group health plan includes
multiple tiers of coverage. In response, the Departments issued
Affordable Care Act Implementation FAQs Part II Q3, explaining that the
standards for employer contributions found in paragraph (g)(1)(v) of
the interim final regulations on grandfathered health plans apply on a
tier-by-tier basis.\20\ These final regulations incorporate this
guidance. Therefore, if a group health plan modifies the tiers of
coverage it had on March 23, 2010 (for example, from self-only and
family to a multi-tiered structure of self-only, self-plus-one, self-
plus-two, and self-plus-three-or-more), the employer contribution for
any new tier would be tested by comparison to the contribution rate for
the corresponding tier on March 23, 2010. For example, if the employer
contribution rate for family coverage was 50 percent on March 23, 2010,
the employer contribution rate for any new tier of coverage other than
self-only (i.e., self-plus-one, self-plus-two, self-plus-three or more)
must be within 5 percentage points of 50 percent (i.e., at least 45
percent). If, however, the plan adds one or more new coverage tiers
without eliminating or modifying any previous tiers and those new
coverage tiers cover classes of individuals that were not covered
previously under the plan, the new tiers would not be analyzed under
the standards for changes in employer contributions. For example, if a
plan with self-only as the sole coverage tier added a family coverage
tier, the level of employer contributions toward the family coverage
could not cause the plan to lose grandfather status.
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\20\ See Affordable Care Act Implementation FAQs Part II,
available at https://www.dol.gov/ebsa/faqs/faq-aca2.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html.
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The Departments also received comments asking for clarification on
when a decrease in the employer contribution rate for coverage under a
group health plan or group health insurance beyond the permitted
percentage would result in cessation of grandfather status for a
contribution based on a formula. In response, the Departments issued
Affordable Care Act Implementation FAQs Part VI Q6.\21\ The FAQ
provided an example under which a plan covers both retirees and active
employees and the employer that sponsors the plan contributes $300 per
year multiplied by the individual's years of service for the employer,
capped at $10,000 per year. In the example, the employer makes
contributions based on a formula, and accordingly, the plan will cease
to be a grandfathered health plan if the employer decreases its
contribution rate towards the cost of coverage by more than five
percent below the contribution rate on March 23, 2010. If the formula
does not change, the employer is not considered to have reduced its
contribution rate, regardless of any
[[Page 72197]]
increase in the total cost of coverage. However, if the dollar amount
that is multiplied by years of service decreases by more than five
percent (or if the $10,000 maximum employer contribution cap decreases
by more than five percent), the plan will cease to be a grandfathered
health plan. Although this example has not been added to the text of
the final regulations, this guidance continues to apply.
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\21\ See Affordable Care Act Implementation FAQs Part VI,
available at https://www.dol.gov/ebsa/faqs/faq-aca6.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs6.html.
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d. Changes in Annual Limits
PHS Act section 2711, as added by the Affordable Care Act,
generally prohibits lifetime and annual limits on the dollar amount of
essential health benefits, as defined in section 1302(b) of the
Affordable Care Act. Under PHS Act section 2711 and its implementing
regulations, plans and issuers were generally prohibited from imposing
lifetime limits on the dollar value of essential health benefits for
plan years (in the individual market, policy years) beginning on or
after September 23, 2010.
With respect to annual dollar limits, for plan or policy years
beginning before January 1, 2014, plans and issuers were permitted to
impose restricted annual dollar limits in accordance with the guidance
set forth in the interim final regulations. For plans years beginning
on or after January 1, 2014, plans and issuers generally are prohibited
from imposing annual dollar limits on essential health benefits.
However, grandfathered individual health insurance plans are not
subject to the annual dollar limit prohibition. Accordingly, the final
regulations retain the rules regarding loss of grandfathered status
based on imposition of annual dollar limits to allow issuers of
grandfathered individual health insurance coverage to analyze
grandfathered status.
These final regulations, like the interim final regulations,
address three different limit-related situations that would cause a
plan or health insurance coverage to relinquish its grandfather status:
(1) A plan or health insurance coverage that, on March 23, 2010, did
not impose an overall annual or lifetime limit on the dollar value of
all benefits ceases to be a grandfathered health plan if the plan or
health insurance coverage imposes an overall annual limit on the dollar
value of benefits; (2) A plan or health insurance coverage, that, on
March 23, 2010, imposed an overall lifetime limit on the dollar value
of all benefits but no overall annual limit on the dollar value of all
benefits ceases to be a grandfathered health plan if the plan or health
insurance coverage adopts an overall annual limit at a dollar value
that is lower than the dollar value of the lifetime limit on March 23,
2010; and (3) A plan or health insurance coverage that, on March 23,
2010, imposed an overall annual limit on the dollar value of all
benefits ceases to be a grandfathered health plan if the plan or health
insurance coverage decreases the dollar value of the annual limit
(regardless of whether the plan or health insurance coverage also
imposed an overall lifetime limit on March 23, 2010 on the dollar value
of all benefits).
e. Changes to Fixed Amount Cost-Sharing Based on a Formula
On December 22, 2010, the Departments issued Affordable Care Act
Implementation FAQs Part V Q7 to provide clarification on the
application of the thresholds under paragraph (g)(1) of the interim
final regulations when a plan's terms include out-of-pocket spending
limits that are based on a formula.\22\ The Departments continue to
interpret paragraph (g)(1) as clarified in the FAQ. Therefore, under
these final regulations, if a plan or coverage has a fixed-amount cost-
sharing requirement other than a copayment (for example, a deductible
or out-of-pocket limit) that is based on a percentage-of-compensation
formula, that cost-sharing arrangement will not cause the plan or
coverage to cease to be a grandfathered health plan as long as the
formula remains the same as that which was in effect on March 23, 2010.
Accordingly, if the percentage-of-compensation formula for determining
an out-of-pocket limit is unchanged and an employee's compensation
increases, then the employee could face a higher out-of-pocket limit,
but that change would not cause the plan to relinquish grandfather
status.
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\22\ See Affordable Care Act Implementation FAQs Part V and
Mental Health Parity Implementation, available at https://www.dol.gov/ebsa/faqs/faq-aca5.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html.
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f. Grandfather Status and Wellness Programs
Under PHS Act section 2705, ERISA section 702, and Code section
9802 and the Departments' implementing regulations, group health plans
and health insurance issuers in the group and individual market are
prohibited from discriminating against participants, beneficiaries, and
individuals in eligibility, benefits, or premiums based on a health
factor.\23\ For group health plans and group health insurance coverage,
an exception to this general prohibition allows premium discounts,
rebates, or modification of otherwise applicable cost sharing
(including copayments, deductibles, or coinsurance) in return for
adherence to certain programs of health promotion and disease
prevention, commonly referred to as wellness programs.
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\23\ The statute and its implementing regulations set forth
eight health status-related factors, which the final regulations on
Nondiscrimination and Wellness Programs in Health Coverage in the
Group Market refer to as ``health factors'' for simplicity. 71 FR
75014, 75016 (Dec. 13, 2006) Under the statute and the regulations,
the eight health factors are health status, medical condition
(including both physical and mental illnesses), claims experience,
receipt of health care, medical history, genetic information,
evidence of insurability (including conditions arising out of acts
of domestic violence), and disability. Id. In the Departments' view,
``[t]hese terms are largely overlapping and, in combination, include
any factor related to an individual's health.'' 66 FR 1378, 1379
(Jan. 8, 2001).
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Many stakeholders requested clarification with respect to how
changes to contribution rates and cost-sharing mechanisms in the
context of a wellness program would impact a plan's grandfather status.
In light of these questions, the Departments issued Affordable Care Act
Implementation FAQs Part II Q5, which stated that while group health
plans may continue to provide incentives for wellness by providing
premium discounts or additional benefits to reward healthy behaviors by
participants and beneficiaries, penalties (such as cost-sharing
surcharges) may implicate the standards outlined in paragraph (g)(1) of
the grandfather interim final regulations and should be examined
carefully.\24\ If additional questions arise regarding the interaction
of wellness programs and these requirements, the Departments may issue
additional subregulatory guidance.
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\24\ See Affordable Care Act Implementation FAQs Part II,
available at https://www.dol.gov/ebsa/faqs/faq-aca2.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html.
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g. Changes to Multi-Tiered Prescription Drug Formularies
In Affordable Care Act Implementation FAQs Part VI Q2, the
Departments addressed questions related to certain changes to the level
of cost sharing for brand-name prescription drugs. Stakeholders
requested that the Departments clarify whether changes to cost sharing
for brand-name prescription drugs would cause a plan to relinquish its
grandfather status in instances where a plan classifies and determines
cost sharing for prescription drugs based on the availability of a
generic alternative, and a generic drug becomes available and is added
to the formulary. The Departments stated that if a drug was classified
in a tier as a brand name drug
[[Page 72198]]
with no generic available, and a generic alternative for the drug
becomes available and is added to the formulary, moving the brand-name
drug to a higher tier would not cause the plan or coverage to
relinquish grandfather status.\25\ These final regulations adopt this
rule that such changes will not result in a loss of grandfather status.
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\25\ Affordable Care Act Implementation FAQs Part VI, available
at https://www.dol.gov/ebsa/faqs/faq-aca6.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs6.html.
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h. Grandfather Status and Certain Changes in Individual Policies
Some individual health insurance policies in place on March 23,
2010 included a feature that allowed a policyholder to elect an option
under which the individual would pay a reduced premium in exchange for
higher cost sharing. The Departments received comments asking whether
individuals enrolled in these policies as of March 23, 2010 could make
such an election after March 23, 2010 without affecting the policy's
grandfather status, even if the increase in cost sharing would exceed
the limits set forth under the interim final regulations. In response,
the Departments issued Affordable Care Act Implementation FAQs Part IV
Q2, which stated that, as long as the policyholder had such option
under the insurance policy that was in place on March 23, 2010, he or
she could exercise the option after March 23, 2010 without affecting
grandfather status, even if as a result of electing this option the
individual's cost sharing would increase by an amount that exceeds the
limits established under the interim final regulations.\26\ The
Departments maintain this approach in these final regulations.
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\26\ See Affordable Care Act Implementation FAQs Part IV,
available at https://www.dol.gov/ebsa/faqs/faq-aca4.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs4.html.
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i. Clarifications on Timing of the Loss of Grandfather Status
Since the promulgation of the 2010 interim final regulations,
questions have arisen regarding whether or not a plan ceases to be a
grandfathered health plan immediately after making a change that
triggers a loss of grandfathered status, and whether or not there is an
opportunity to cure a loss of grandfather status following a change
made inadvertently or otherwise that triggers a loss of grandfather
status. Several commenters have requested clarification on when the
plan or coverage ceases to be a grandfathered health plan if it makes
an amendment to plan terms that trigger loss of grandfather status in
the middle of the plan year. The Departments issued Affordable Care Act
Implementation FAQs Part VI Q4 and Q5 addressing timing of the loss of
grandfather status with respect to mid-year plan amendments that exceed
the thresholds described in the interim final regulations.\27\ These
final regulations adopt the clarification outlined in the FAQs that a
plan or coverage will cease to be a grandfathered health plan when an
amendment to plan terms that exceeds the thresholds described in
paragraph (g)(1) of these final regulations becomes effective--
regardless of when the amendment is adopted. Once grandfather status is
lost there is no opportunity to cure the loss of grandfather status. A
reversal after the effective date will not allow the plan or coverage
to regain grandfather status. If a plan sponsor wishes to avoid
relinquishing grandfathered status in the middle of a plan year, any
changes that will cause a plan or coverage to relinquish grandfather
status should not be effective before the first day of a plan year that
begins after the change is adopted.
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\27\ See Affordable Care Act Implementation FAQs Part VI,
available at https://www.dol.gov/ebsa/faqs/faq-aca6.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs6.html.
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B. PHS Act Section 2704, Prohibition of Preexisting Condition
Exclusions (26 CFR 54.9815-2704, 29 CFR 2590.715-2704, 45 CFR 147.108)
PHS Act section 2704, added by the Affordable Care Act, amends the
HIPAA \28\ rules relating to preexisting condition exclusions to
provide that a group health plan and a health insurance issuer offering
group or individual health insurance coverage generally may not impose
any preexisting condition exclusions.\29\ HIPAA, as well as PHS Act
section 2704 and its implementing regulations, define a preexisting
condition exclusion as a limitation or exclusion of benefits relating
to a condition based on the fact that the condition was present before
the date of enrollment for the coverage, regardless of whether any
medical advice, diagnosis, care, or treatment was recommended or
received before that date. PHS Act section 2704,\30\ which became
effective for enrollees who are under 19 years of age for plan years
(in the individual market, policy years) beginning on or after
September 23, 2010, and effective for adults for plan years (in the
individual market, policy years) beginning on or after January 1, 2014,
prohibits preexisting condition exclusions for both group health plans
and group or individual health insurance coverage (except for
grandfathered individual health insurance). On June 28, 2010, the
Departments issued interim final regulations implementing PHS Act
section 2704 and requesting comment.\31\ After issuance of regulations
in 2010, the Departments also released Affordable Care Act
Implementation FAQs Part V, Q6 \32\ to provide additional clarification
on the prohibition of preexisting condition exclusions. These final
regulations finalize the 2010 interim final regulations without
substantial change and incorporate the clarifications issued to date in
subregulatory guidance.
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\28\ HIPAA is the Health Insurance Portability and
Accountability Act of 1996 (Pub. L. 104-191).
\29\ The HIPAA rules (that were in effect prior to the effective
date of these amendments) applied only to group health plans and
group health insurance coverage, and permitted limited exclusions of
coverage based on a preexisting condition under certain
circumstances. Section 2704 prohibits any preexisting condition
exclusion from being imposed by group health plans or group health
insurance coverage and extends this protection to non-grandfathered
individual health insurance coverage but this prohibition does not
apply to grandfathered individual health insurance coverage.
\30\ Before the amendments made by the Affordable Care Act, PHS
Act section 2701(b)(1) was the applicable provision concerning
preexisting condition exclusions; after the amendments made by the
Affordable Care Act, PHS Act section 2704(b)(1) is the applicable
provision. See also ERISA section 701(b)(1) and Code section
9801(b)(1).
\31\ 75 FR 37188 (June 28, 2010).
\32\ See Affordable Care Act Implementation FAQs Part V,
available at https://www.dol.gov/ebsa/faqs/faq-aca5.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html.
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1. Allowable Exclusion of Benefits
Prior to implementation of PHS Act section 2704, HIPAA rules
limiting preexisting condition exclusions provided that a plan's or
issuer's exclusion of benefits for a condition regardless of when the
condition arose relative to the effective date of coverage is not a
preexisting condition exclusion. With respect to such exclusions, the
2010 interim final regulations did not change this approach under
HIPAA.\33\
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\33\ The rule is illustrated with examples in the HIPAA
regulations on preexisting condition exclusions. See Examples 6, 7,
and 8 in 26 CFR 54.9801-3(a)(2), 29 CFR 2590.701-3(a)(2), 45 CFR
146.111(a)(2).
---------------------------------------------------------------------------
Several commenters requested that the final regulations reiterate
this rule. Other commenters requested that all exclusions of specific
conditions be prohibited regardless of whether the exclusion relates to
when the condition arose. Another commenter wrote that restrictions on
benefits concerning
[[Page 72199]]
rehabilitation services and devices should be considered a form of
preexisting condition exclusion and not be allowed.
Similar to the interim final regulations, these final regulations
retain the approach set forth under HIPAA relating to exclusions for a
specific benefit. More specifically, these final regulations continue
to provide that a plan's or issuer's exclusion of benefits for a
condition from the plan or policy regardless of when the condition
arose relative to the effective date of coverage is not a preexisting
condition exclusion. Other requirements of Federal or State law,
however, may prohibit certain benefit exclusions, including the
essential health benefits requirements applicable in the individual and
small group health insurance markets at 45 CFR 156.110 et seq.
2. Enrollment Period
The 2010 interim final regulations did not impose any requirement
on plans to provide for an open enrollment period. One commenter
requested that the regulations clarify that issuers in the individual
market may restrict enrollment of children under age 19 to specified
open enrollment periods, consistent with guidance issued by HHS.\34\
Another commenter requested that the regulations specify that after the
initial enrollment period, health insurance issuers must make open
enrollment periods available to families at least once a year during a
standardized time period for at least 90 days and that insurers should
fully advertise the availability. Another commenter stated that having
at least one issuer that offers open enrollment at any time during the
year, without a penalty for deferral, will be an economic incentive to
defer the purchase of insurance which may encourage adverse selection
and subsequently, higher claim costs. Additional commenters requested
continuous open enrollment for children with preexisting conditions,
clarification of whether guaranteed issue will be available only during
open enrollment or all 12 months of the year, and that families be
given the opportunity to enroll their children when certain life events
occur. These final regulations do not adopt these suggestions. The
provisions of the Affordable Care Act related to guaranteed
availability of coverage, including open and special enrollment
periods, are implemented in regulations issued by HHS under section
2702 of the PHS Act and are outside the scope of this rulemaking.
Additionally, while HIPAA generally permits plans and issuers to treat
participants and beneficiaries with adverse health factors more
favorably, such as providing a longer open enrollment period, nothing
in these regulations requires plans and issuers to do so.
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\34\ Center for Consumer Information & Insurance Oversight,
Questions and Answers on Enrollment of Children Under 19 Under the
New Policy That Prohibits Pre-Existing Condition Exclusions,
available at https://www.cms.gov/CCIIO/Resources/Files/factsheet.html.
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3. Premiums
Commenters raised concerns about increasing premiums related to the
prohibition on preexisting condition exclusions. Effective for plan
years (or, in the individual market, policy years) beginning on or
after January 1, 2014, section 2701 of the PHS Act and section 1312(c)
of the Affordable Care Act govern the premium rates charged by an
issuer for non-grandfathered health insurance coverage in the
individual and small group markets, and section 2794 of the PHS Act
provides for the annual review of unreasonable increases in premiums
for health insurance coverage in the individual and small group
markets. These provisions are implemented in regulations issued by HHS
\35\ and are outside the scope of this rulemaking. However, the rating
rules under PHS Act section 2701 prohibit variations in premiums based
on a child's health status.
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\35\ See 45 CFR 147.102, 154.101 et seq., and 156.80.
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4. Allowable Screenings To Determine Eligibility for Alternative
Coverage in the Individual Market
Subsequent to the promulgation of the interim final regulations,
questions arose regarding whether it would be permissible under the
rules implementing PHS Act section 2704 for issuers in the individual
market to screen certain applicants for eligibility for alternative
coverage before issuing a child-only policy. Specifically, States
expressed an interest in permitting such screenings. In response to
these concerns, the Departments issued Affordable Care Act
Implementation FAQs Part V, Q6, which provided that under certain
circumstances, States can permit issuers in the individual market to
screen applicants for eligibility for alternative coverage options
before offering a child-only policy if (1) the practice is permitted
under State law; (2) the screening applies to all child-only
applicants, regardless of health status; and (3) the alternative
coverage options include options for which healthy children would
potentially be eligible, such as the Children's Health Insurance
Program (CHIP) and group health insurance.\36\ Screenings may not be
limited to programs targeted to individuals with a preexisting
condition, such as a State high risk pool. Note that Medicaid policy,
under 42 U.S.C. 1396a (25)(G), prohibits participating States from
allowing health insurance issuers to consider whether an individual is
eligible for, or is provided medical assistance under, Medicaid in
making enrollment decisions. Furthermore, issuers may not implement a
screening process that by its operation significantly delays enrollment
or artificially engineers eligibility of a child for a program targeted
to individuals with a preexisting condition. Additionally, the
screening process may not be applied to offers of dependent coverage
for children. The FAQ provided that States are encouraged to require
issuers that screen for other coverage to enroll and provide coverage
to the applicant effective on the first date that the child-only policy
would have been effective had the applicant not been screened for an
alternative coverage option. It also provided that States are
encouraged to impose a reasonable time limit, such as 30 days, at which
time the issuer would have to enroll the child regardless of pending
applications for other coverage. Subsequent to the issuance of the FAQ,
the guaranteed availability requirements in section 2702 of the PHS Act
took effect, similarly precluding an issuer from denying coverage. This
screening, as permitted under State law, will continue to be allowed
under these final regulations, consistent with both section 2704 and
guaranteed availability obligations under section 2702.
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\36\ See Affordable Care Act Implementation FAQs Part V,
available at https://www.dol.gov/ebsa/faqs/faq-aca5.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html.
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C. PHS Act Section 2711, Prohibition on Lifetime and Annual Limits (26
CFR 54.9815-2711, 29 CFR 2590.715-2711, 45 CFR 147.126)
PHS Act section 2711, as added by the Affordable Care Act,
generally prohibits annual and lifetime dollar limits on essential
health benefits, as defined in section 1302(b) of the Affordable Care
Act. With respect to annual dollar limits, PHS Act section 2711(a)(2)
provided that for plan years beginning before January 1, 2014,
restricted annual dollar limits were allowed. On June 28, 2010, the
Departments issued interim final regulations implementing PHS Act
[[Page 72200]]
section 2711 and requested comment.\37\ After issuance of the 2010
interim final regulations, the Departments also released Affordable
Care Act Implementation FAQs Parts IV, XI, XV, XXII, as well as
Technical Release 2013-03, to address various requests for
clarifications under PHS Act section 2711.\38\ These final regulations
adopt the 2010 interim final regulations without substantial change and
incorporate certain pertinent clarifications issued thus far in
subregulatory guidance.
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\37\ 75 FR 37188 (June 28, 2010).
\38\ Affordable Care Act Implementation FAQs Parts IV, XI, XV,
XXII, available at https://www.dol.gov/ebsa/faqs/faq-aca4.html,
https://www.dol.gov/ebsa/faqs/faq-aca11.html, https://www.dol.gov/ebsa/faqs/faq-aca15.html, and https://www.dol.gov/ebsa/faqs/faq-aca22.html, or https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs4.html, https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs11.html,
https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs15.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-XXII-FINAL.pdf;
Technical Release 2013-03, available at https://www.dol.gov/ebsa/newsroom/tr13-03.html. See footnote 51 for a list of additional
items of guidance under PHS Act section 2711.
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1. Definition of Essential Health Benefits
On February 25, 2013, HHS issued final regulations addressing
essential health benefits (EHB) under Affordable Care Act section
1302.\39\ Among other things, HHS regulations defined EHB based on a
State-specific benchmark plan and required each State to select a
benchmark plan from among several options.\40\ While self-insured,
large group market, and grandfathered health plans are not required to
offer EHB, PHS Act section 2711 prohibits such plans from imposing
annual and lifetime dollar limits on covered benefits that fall within
the definition of EHB. In the interim final regulations, the
Departments said that ``[f]or plan years (in the individual market,
policy years) beginning before the issuance of regulations defining
`essential health benefits,' for purposes of enforcement, the
Departments will take into account good faith efforts to comply with a
reasonable interpretation of the term `essential health benefits.' ''
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\39\ 78 FR 12834.
\40\ The benchmark plans from which a State could choose are:
(1) The largest plan by enrollment in any of the three largest
products in the State's small group market; (2) any of the largest
three State employee health benefit plans options by enrollment; (3)
any of the largest three national Federal Employees Health Benefits
Program (FEHBP) plan options by enrollment; or (4) the largest
insured commercial HMO in the State. 45 CFR 156.100. The EHB-
benchmark plan serves as a reference plan, reflecting both the scope
of services and limits offered by a typical employer plan in each
State. The term ``base-benchmark plan'' in 45 CFR 156.100 is
distinct from the term ``EHB-benchmark plan'' as defined in 45 CFR
156.20.
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In a 2012 FAQ, HHS stated that the Departments would consider a
self-insured group health plan, a large group market health plan, or a
grandfathered group health plan to have used a permissible definition
of EHB under section 1302(b) of the Affordable Care Act if the
definition was one of the potential EHB base-benchmark plans that, at
the time, States could have chosen from as the standard for EHB in
their State.\41\ At the time, this list of potential EHB-benchmark
plans included over 510 EHB base-benchmark plans that were authorized
by the Secretary for a State or the District of Columbia \42\ to
select, as each State and the District of Columbia has a choice of ten
possible benchmark plans. All of these potential plans were
``authorized'' in the sense that they were potential EHB benchmark
plans that could be selected by a State or the District of Columbia
under the EHB regulations. This approach was intended to provide plans
and issuers not subject to the EHB rules with flexibility to define
what constitutes EHB under their respective plan for purposes of the
limits in PHS Act section 2711. Since that time, each State and the
District of Columbia has selected or defaulted to a single EHB-
benchmark option, and that is the only benchmark plan ``authorized'' to
be used for defining EHB in that State or the District of Columbia.
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\41\ See Q10 of Frequently Asked Questions on Essential Health
Benefits Bulletin, available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/ehb-faq-508.pdf.
\42\ Initially, issuers in the territories were subject to the
EHB requirement and also had potential benchmarks to choose from
under the EHB regulations. A change in the interpretation of the
statute resulted in issuers in the territories being exempt from the
EHB rules. See Letter to Gary R. Francis, Commissioner, Office of
Lieutenant Governor, Virgin Islands, dated July 16, 2014, available
at https://www.cms.gov/CCIIO/Resources/Letters/Downloads/letter-to-Francis.pdf.
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Given the enforcement challenges for Federal and State regulators
and difficulties for participants, beneficiaries, and enrollees in
ascertaining what benefits under their respective plans constitute EHB
posed by a choice of over 500 plans, the Departments are codifying
their interpretation that a ``reasonable interpretation of the term
`essential health benefits''' includes only those EHB base-benchmarks
that, in fact, have been selected, whether by active State selection or
by default to be the EHB base-benchmark plan for a State, rather than
all plans that are potentially authorized.
In addition to the foregoing base-benchmark plans, there are three
base-benchmark plan options not currently among those a State or the
District of Columbia has either selected or had assigned by default
that the Departments believe should also continue to be made available
for plans and issuers not subject to EHB requirements. These three plan
options are the current base-benchmark plan options under the Federal
Employees Health Benefit Program (FEHBP) specified at 45 CFR
156.100(a)(3) (the three largest FEHBP plans available to all Federal
employees nationally). These base-benchmark plan options are unique
among base-benchmark plans in that they are available nationally, and
thus can be utilized to determine what benefits would be categorized as
EHBs for those employers who provide health coverage to employees
throughout the United States and are not situated only in a single
State.
Thus, under these final regulations, group health plans (and health
insurance coverage offered in connection with such plans) and
grandfathered individual market coverage that are not required to
provide EHB may select among any of the 51 EHB base-benchmark plans
identified under 45 CFR 156.100 and selected by a State or the District
of Columbia and the FEHBP base-benchmark plan, as applicable for plan
years beginning on or after January 1, 2017, for purposes of
determining which benefits cannot be subject to annual and lifetime
dollar limits. The current list of the 51 proposed EHB base-benchmark
plans selected by the States for 2017 can be found at https://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html. HHS anticipates
publishing the final list later this month.
2. Out-of-Network Benefits
The Departments have been asked whether the scope of the
prohibition on lifetime and annual dollar limits in PHS Act section
2711 applies only to in-network benefits as opposed to both in-network
and out-of-network benefits. The statute and interim final regulations
made no distinction between in-network or out-of-network benefits.
Therefore, lifetime and annual dollar limits on essential health
benefits are generally prohibited, regardless of whether such benefits
are provided on an in-network or out-of-network basis. These final
regulations incorporate this clarification.
3. End of Waiver Program
Under PHS Act section 2711, for plan years beginning before January
1, 2014,
[[Page 72201]]
the Departments were given authority to define restricted annual dollar
limits to ensure that access to needed services was made available with
minimal impact on premiums. As noted in the preamble to the 2010
interim final regulations, in order to mitigate the potential for
premium increases for all plans and policies, while at the same time
ensuring access to EHB, the interim final regulations adopted a three-
year phased approach for restricted annual dollar limits, with the
dollar limit increasing for each year of the three year period. Annual
dollar limits, including restricted annual dollar limits, are not
allowed for plan years (in the individual market, policy years)
beginning on or after January 1, 2014, except for grandfathered
individual health insurance coverage.
Some previously widely available low-cost coverage was designed
with low maximum benefits and did not meet the phased in restricted
annual dollar limits, such as stand-alone health reimbursement
arrangements (HRAs) \43\ and so-called ``mini med'' plans. In order to
ensure that individuals with such limited coverage would not be denied
access to needed services or experience more than a minimal impact on
premiums, the interim final regulations also provided for HHS to
establish a program under which the restricted annual dollar limit
requirements would be waived if compliance with the limits would result
in a significant decrease in access to benefits or a significant
increase in premiums.\44\ However, this waiver program was only
available for the period during which the statute authorized restricted
annual dollar limits, that is, plan years (in the individual market,
policy years) beginning before January 1, 2014. Consequently such
waivers are no longer available and the waiver program rules are not
incorporated in these final regulations.
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\43\ An HRA is an arrangement that is funded solely by an
employer and that reimburses an employee for medical care expenses
(as defined under Code section 213(d)) incurred by the employee, or
his spouse, dependents, and any children who, as of the end of the
taxable year, have not attained age 27, up to a maximum dollar
amount for a coverage period. IRS Notice 2002-45, 2002-02 CB 93;
Revenue Ruling 2002-41, 2002-2 CB 75. This reimbursement is
excludable from the employee's income. Amounts that remain at the
end of the year generally can be used to reimburse expenses incurred
in later years. HRAs generally are considered to be group health
plans within the meaning of Code section 9832(a), section 733(a) of
ERISA, and section 2791(a) of the PHS Act and are subject to the
rules applicable to group health plans.
\44\ Guidance regarding the annual dollar limit waiver program
was issued at https://www.cms.gov/cciio/resources/Regulations-and-Guidance/#Annual Limits.
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4. HRAs and Other Account Based Plans
In general, HRAs and other account-based group health plans are
subject to the annual dollar limit prohibition under PHS Act section
2711 (annual dollar limit prohibition) \45\ and will fail to comply
with this prohibition because these arrangements impose an annual limit
on the amount of expenses the arrangement will reimburse. However,
special rules apply to certain types of account-based plans under which
the HRA or other account-based health plan either is not subject to the
annual dollar limit prohibition, or is considered to comply with the
annual dollar limit prohibition if it is ``integrated'' with another
group health plan that complies with the annual dollar limit
prohibition.
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\45\ In accordance with Code section 9831(a)(2) and ERISA
section 732(a), the market reforms, including PHS Act section 2711,
do not apply to a group health plan that has fewer than two
participants who are current employees on the first day of the plan
year, and, in accordance with Code section 9831(b), ERISA section
732(b), and PHS Act sections 2722(b) and 2763, the market reforms,
including PHS Act section 2711, also do not apply to a group health
plan in relation to its provision of excepted benefits described in
Code section 9832(c), ERISA section 733(c) and PHS Act section
2791(c).
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The preamble to the interim final regulations noted that the annual
dollar limit prohibition applies differently to certain account-based
plans that are subject to other rules that limit the benefits available
under those plans.\46\ In particular, under the 2010 interim final
regulations and these final regulations, certain health Flexible
Spending Arrangements (health FSAs) \47\ are not subject to the PHS Act
section 2711 annual dollar limit prohibition because health FSAs are
subject to specific limits under section 9005 of the Affordable Care
Act. In addition, as noted in the preamble to the 2010 interim final
regulations, the annual dollar limit prohibition does not apply to
Archer Medical Savings Accounts (Archer MSAs) under section 220 of the
Code and Health Savings Accounts (HSAs) under section 223 of the Code,
because both types of plans are subject to specific statutory
provisions that require that the contributions be limited.
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\46\ See 75 FR 37188, 37190 (June 28, 2010).
\47\ In general, a health FSA is a benefit designed to reimburse
employees for medical care expenses (as defined in Code section
213(d), other than premiums) incurred by the employee, or the
employee's spouse, dependents, and any children who, as of the end
of the taxable year, have not attained age 27. See Employee
Benefits--Cafeteria Plans, 72 FR 43938, 43957 (August 6, 2007)
(proposed regulations; to be codified, in part, once final, at 26
CFR 1.125-5); Code section 105(b) and 106(c). Contributions to a
health FSA offered through a cafeteria plan satisfying the
requirements of Code section 125 do not result in gross income to
the employee. Code section 125(a).
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These final regulations contain a clarification regarding the
application of the annual dollar limit prohibition to health FSAs.
Question and Answer 8 of DOL Technical Release 2013-03 \48\ and IRS
Notice 2013-54 \49\ clarified that the annual dollar limit prohibition
applies to a health FSA that is not offered through a Code section 125
plan. That is because the exemption for health FSAs from the annual
dollar limit prohibition is intended to apply only to health FSAs that
are subject to the separate annual limitation under Code section
125(i), and health FSAs that are not offered through a Code section 125
plan are not subject to that separate statutory limit. The prior
guidance provided that this clarification was intended to apply
beginning September 13, 2013 and the guidance noted that the
Departments intended to amend the annual dollar limit prohibition
regulations to conform to the Q&A. These final regulations include this
amendment.
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\48\ Technical Release 2013-03, available at www.dol.gov/ebsa/pdf/tr13-03.pdf.
\49\ 2013-40 IRB 287.
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Other types of account-based plans, such as HRAs and employer
payment plans,\50\ are not exempt from the annual dollar limit
prohibition. However, the preamble to the interim final regulations and
subsequently issued subregulatory guidance \51\ interpreting these
rules included a number of rules regarding the application of the
annual dollar limit prohibition to these types of arrangements. In
particular, this guidance provides that if an HRA is ``integrated''
with other group health
[[Page 72202]]
plan coverage, and the other group health plan coverage complies with
the requirements of PHS Act section 2711, the combined arrangement
satisfies the requirements even though the HRA imposes a dollar
limit.\52\ The basic principles for when an HRA is considered
integrated with other group health plan coverage have been set forth in
various forms of subregulatory guidance and have been included in these
final regulations.
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\50\ An employer payment plan is a group health plan under which
an employer reimburses an employee for some or all of the premium
expenses incurred for an individual health insurance policy, such as
a reimbursement arrangement described in Revenue Ruling 61-146,
1961-2 CB 25, or arrangements under which the employer uses its
funds to directly pay the premium for an individual health insurance
policy covering the employee.
\51\ Five items of guidance have been issued on this topic: (1)
Affordable Care Act Implementation FAQs Part XI, available at
(https://www.dol.gov/ebsa/faqs/faq-aca11.html) or https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs11.html;
(2) IRS Notice 2013-54 and DOL Technical Release 2013-03, issued on
September 13, 2013; (3) IRS FAQ on Employer Healthcare Arrangements
available at https://www.irs.gov/Affordable-Care-Act/Employer-Health-Care-Arrangements; (4) Affordable Care Act Implementation FAQs Part
XXII, available at https://www.dol.gov/ebsa/faqs/faq-aca22.html or
https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-XXII-FINAL.pdf; and (5) IRS Notice 2015-17, issued on
February 18, 2015. See also 75 FR 37188 (June 28, 2010). This
guidance, much of which is not directly addressed in these final
regulations, continues to be in effect.
\52\ Issues also arise for account-based group health plans
under PHS Act section 2713, which requires non-grandfathered group
health plans (or health insurance issuers offering group health
insurance plans) to provide certain preventive services without
imposing any cost-sharing requirements for these services. The
Departments have issued guidance providing that, similar to the
analysis of the annual dollar limit prohibition, an HRA that is
integrated with a group health plan will comply with the preventive
services requirements if the group health plan with which the HRA is
integrated complies with the preventive services requirements. Also,
a group health plan, including an HRA, used to purchase coverage on
the individual market is not integrated with that individual market
coverage for purposes of the preventive services requirements and
therefore will fail to comply with the preventive services
requirements because an HRA or similar arrangement does not provide
preventive services without cost-sharing in all instances. See DOL
Technical Release 2013-03 and IRS Notice 2013-54.
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These final regulations clarify the scope of arrangements, in
addition to HRAs, that can be integrated with other group health plan
coverage by defining and referring to ``account-based plans.'' Account-
based plans are employer-provided group health plans that provide
reimbursements of medical expenses other than individual market policy
premiums, with the reimbursement subject to a maximum fixed dollar
amount for a period. Examples of account-based plans include health
FSAs and medical reimbursement plans that are not HRAs, in addition to
HRAs. Account-based plans that do not qualify as excepted benefits \53\
generally are subject to the market reforms (except that health FSAs
offered through a Code section 125 plan are not subject to the annual
dollar limit prohibition), including the preventive services
requirements under PHS Act section 2713. If the other group health plan
coverage with which an account-based plan is integrated complies with
the requirements under PHS Act sections 2711 and 2713, the account-
based plan also complies with those requirements because, in that case,
the combined benefit satisfies those requirements.\54\
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\53\ Health FSAs will be considered to provide only excepted
benefits if the employer also makes available group health plan
coverage that is not limited to excepted benefits and the health FSA
is structured so that the maximum benefit payable to any participant
cannot exceed two times the participant's salary reduction election
for the health FSA for the year (or, if greater, cannot exceed $500
plus the amount of the participant's salary reduction election). See
26 CFR 54.9831-1(c)(3)(v), 29 CFR 2590.732(c)(3)(v), and 45 CFR
146.145(c)(3)(v).
\54\ See Affordable Care Act Implementation FAQs Part XIX,
available at https://www.dol.gov/ebsa/faqs/faq-aca19.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs19.html.
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The Departments' prior guidance regarding when an HRA is considered
integrated with another group health plan provides two methods for
integration, each of which has been added to the final regulations and
extended to other account-based plans. In addition to various other
requirements, each integration method requires that under the terms of
the HRA or other account-based plan, (1) an employee (or former
employee) must be permitted to permanently opt out of and waive future
reimbursements from the account-based plan at least annually, and (2)
upon termination of employment either remaining funds are forfeited or
the employee is allowed to opt out of and waive future reimbursements
under the account-based plan.
Stakeholders have requested clarification regarding whether for
this purpose a forfeiture of amounts or a waiver of reimbursements
under an HRA includes an otherwise permanent forfeiture or waiver, if
the amounts will be reinstated or the waiver will be discontinued upon
a fixed date or death. The Departments interpret the prior guidance to
provide, and the final regulations clarify, that forfeiture or waiver
occurs even if the forfeited amounts or waived reimbursements may be
reinstated upon a fixed date, a participant's death, or the earlier of
the two events (the reinstatement event). For this purpose, an HRA is
considered forfeited or waived prior to a reinstatement event only if
the participant's election to forfeit or waive is irrevocable, meaning
that, beginning on the effective date of the election, the participant
and the participant's beneficiaries have no access to amounts credited
to the HRA until the reinstatement event.\55\ This means that the HRA
may not be used to reimburse or pay medical expenses incurred during
the period after the forfeiture or waiver and prior to reinstatement.
An HRA need not provide for reinstatement of forfeited amounts or
waived reimbursements to be integrated with a non-HRA group health
plan. The final regulations reflect this clarification, and this
clarification applies for integration of HRAs as well as other account-
based plans, as defined in the regulations.
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\55\ During a period in which an HRA has been forfeited or
waived prior to a reinstatement event, the participant is considered
not covered by the HRA. For a former employee (such as a retiree),
an individual's right to have a forfeited or waived HRA reinstated
upon a reinstatement event will not prevent the individual from
receiving the premium tax credit under Sec. 36B during the period
after forfeiture or waiver and prior to reinstatement, if the
individual is otherwise eligible for a premium tax credit. See 26
CFR 1.36B-2(c)(3)(i), proposed Sec. 1.36B-2(c)(3)(iv).
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The Departments' prior guidance regarding integration of an HRA or
other account-based plan with another group health plan further
provides that integration requires, among other requirements, that the
plan sponsor offering the HRA or other account-based plan also offer to
the employee another group health plan (other than the HRA or other
account-based plan). On February 18, 2015, Treasury and IRS issued
Notice 2015-17, which, in Q&A3, provided for integration of a premium
reimbursement arrangement for an employee's Medicare part B or D
premiums for purposes of the annual dollar limit prohibition and the
preventive services requirements under PHS Act section 2713 if the
arrangement meets certain conditions and the employer offers the
employee another group health plan.\56\ However, Notice 2015-17
provided that the premium reimbursement arrangement for an employee's
Medicare part B or D premiums could not be integrated with Medicare
coverage to satisfy the market reforms because Medicare coverage is not
a group health plan. In response to this prior guidance, stakeholders
have indicated that employers with fewer than 20 employees are unable
to meet the integration test set out in Notice 2015-17 for Medicare
part B or D premium reimbursement arrangements. That is because these
employers that offer group health plan coverage are not required by the
applicable Medicare secondary payer rules to offer group health plan
coverage to their employees who are eligible for Medicare coverage, and
some issuers of insurance for group health plans do not allow these
smaller employers to offer group health plan coverage to their
employees who are eligible for Medicare coverage. In response to these
concerns, these regulations now provide a special rule for employers
with fewer than 20 employees that are not required to offer their group
health plan coverage to employees who are eligible for Medicare
[[Page 72203]]
coverage, and that offer group health plan coverage to their employees
who are not eligible for Medicare, but not to their employees who are
eligible for Medicare coverage. For these employers, a premium
reimbursement arrangement for Medicare part B or D premiums may be
integrated with Medicare (and deemed to satisfy) the annual dollar
limit prohibition and the preventive services requirements under PHS
Act section 2713 if the employees who are not offered the other group
health plan coverage would be eligible for that group health plan but
for their eligibility for Medicare. These employers may use either of
the non-Medicare specific integration tests, as applicable, for
account-based plans for employees who are not eligible for Medicare.
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\56\ Notice 2015-17 provides special rules for integration of
Medicare Part B and D premium reimbursement arrangements and
TRICARE-related HRAs with other group health plans, along with
various other related pieces of guidance. That guidance continues to
apply but is not repeated in these final regulations.
---------------------------------------------------------------------------
Although in certain circumstances HRAs and other account-based
plans may be integrated with another group health plan to satisfy the
annual dollar limit prohibition, these final regulations incorporate
the general rule set forth in prior subregulatory guidance clarifying
that an HRA and other account-based plans may not be integrated with
individual market coverage, and therefore an HRA or other account-based
plan used to reimburse premiums for the individual market coverage
fails to comply with PHS Act section 2711.
These final regulations, however, do not incorporate all of the
other subregulatory guidance concerning the application of the
Affordable Care Act to HRAs and other account-based plans. It has come
to the Departments' attention that there are a wide variety of account-
based products being marketed, often with subtle but insubstantial
differences, in an attempt to circumvent the guidance set forth by the
Departments on the application of the annual dollar limit prohibition
and the preventive services requirements to account-based plans. The
Departments intend to continue to address these specific instances of
noncompliance. The subregulatory guidance not specifically addressed in
these final regulations continues to apply and the Departments will
continue to address additional situations as necessary.
D. PHS Act Section 2712, Prohibition on Rescissions (26 CFR 54.9815-
2712, 29 CFR 2590.715-2712, 45 CFR 147.128)
PHS Act section 2712, as added by the Affordable Care Act, provides
that a group health plan or health insurance issuer offering group or
individual health insurance coverage must not rescind coverage unless a
covered individual commits fraud or makes an intentional
misrepresentation of material fact. This standard applies to all
rescissions, whether in the group or individual insurance market, or
self-insured coverage. These rules also apply regardless of any
contestability period of the plan or issuer. On June 28, 2010, the
Departments issued interim final regulations implementing PHS Act
section 2712.\57\ The interim final regulations included several
clarifications regarding the standards for rescission, including that
the rules of PHS Act section 2712 apply whether the coverage is
rescinded for an individual or a group. The Departments also issued
Affordable Care Act Implementation FAQs Part II Q7, which clarified
when retroactive terminations in the `normal course of business' would
not be considered rescissions.\58\ These final regulations finalize the
2010 interim final regulations without substantial change and
incorporate the clarifications issued thus far in subregulatory
guidance.
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\57\ 75 FR 37188 (June 28, 2010).
\58\ Affordable Care Act Implementation FAQs Part II, available
at https://www.dol.gov/ebsa/faqs/faq-aca2.html or https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html.
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1. Definition of Rescission
Under the interim final regulations and these final regulations, a
rescission is a cancellation or discontinuance of coverage that has
retroactive effect. For example, a cancellation that treats an
insurance policy as void from the time of an individual's or group's
enrollment is a rescission, whether the cancellation is a result of the
issuer subsequently determining that a valid insurance contract does
not exist or the insurance contract was entered into despite its
noncompliance with applicable law. As another example, a cancellation
that voids benefits paid up to a year before the cancellation is also a
rescission. However, a cancellation or discontinuance of coverage is
not a rescission if it has only prospective effect or to the extent it
is attributable to a failure to timely pay required premiums or
contributions towards the cost of coverage. Other provisions of Federal
and State law limit the grounds for prospective cancellations of
coverage, including PHS Act section 2703 regarding guaranteed
renewability of coverage and PHS Act section 2705 regarding non-
discrimination in rules for eligibility (or continued eligibility)
based on health status.
Under PHS Act section 2712, rescission is not prohibited if a
covered individual commits fraud or makes an intentional
misrepresentation of material fact. Some commenters recommended that
the Departments define the term ``material fact.'' These final
regulations decline this suggestion. However, the Departments have
addressed whether providing false or inaccurate information concerning
tobacco use is considered a misrepresentation of material fact for this
purpose. HHS published final regulations under PHS Act section 2701
(regarding fair health insurance premiums) on February 13, 2013.\59\ In
the preamble to those regulations, HHS stated that, with respect to an
individual who is found to have reported false or inaccurate
information about their tobacco use, the individual may be charged the
appropriate premium that should have been paid retroactive to the
beginning of the plan year. However, as stated in the preamble, the
``remedy of recoupment renders any misrepresentation with regard to
tobacco use no longer a `material' fact for purposes of rescission
under PHS Act section 2712 and its implementing regulations,'' and
therefore, coverage cannot be rescinded on such basis. The Departments
may provide further guidance regarding the definition of a ``material
fact'' for purposes of rescission under PHS Act section 2712 if
additional questions arise.
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\59\ 78 FR 13406, 13414 (February 13, 2013).
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2. Scope and Application
The statutory prohibition related to rescissions is not limited to
rescissions based on prior medical history, rather it precludes plans
and issuers from rescinding coverage under any circumstances except as
provided in the statute and regulations. For example, coverage cannot
be rescinded because an individual makes a mistake on an insurance
application or enrollment form. An example in both the interim final
regulations and in these final regulations clarifies that some plan
errors (such as mistakenly covering a part-time employee for a period
of time under a plan that only covers full-time employees) may be
cancelled prospectively once identified, but not retroactively
rescinded unless there was fraud or intentional misrepresentation of a
material fact by the employee.
The Departments received comments on the interim final regulations
stating that some employers' human resource departments may reconcile
lists of eligible individuals with their plan or issuer via data feed
only once per month, and that routine enrollment adjustments in the
normal course of business should not be considered a rescission.
In response to these comments, the Departments issued an FAQ
concerning
[[Page 72204]]
rescissions on October 8, 2010.\60\ The FAQ stated that if a plan
covers only active employees (subject to the COBRA continuation of
coverage provisions) and an employee pays no premiums for coverage
after termination of employment, the Departments do not consider the
retroactive elimination of coverage back to the date of termination of
employment, due to delay in administrative record-keeping, to be a
rescission. Similarly, if a plan does not cover ex-spouses and the plan
is not notified of a divorce (subject to the COBRA continuation
coverage provisions), and the full COBRA premium is not paid by the
employee or ex-spouse for coverage, the Departments do not consider a
plan's termination of coverage retroactive to the divorce to be a
rescission.\61\
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\60\ Affordable Care Act Implementation FAQs Part II, Q7 at
https://www.dol.gov/ebsa/pdf/faq-aca2.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs2.html.
\61\ In such situations, COBRA may require coverage to be
offered for up to 36 months if the COBRA applicable premium is paid
by the qualified beneficiary.
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3. Termination of Coverage Initiated by Participant, Beneficiary, or
Enrollee
The Departments have been asked whether the rescission rules
prohibit a plan or issuer from retroactively terminating coverage at
the request of a participant, beneficiary, or enrollee. In the
Departments' view, the statutory provision was enacted by Congress to
protect individuals against potential abuses by group health plans and
health insurance issuers; it was not intended to prevent individuals
from exercising their rights and privileges under the terms of the plan
or coverage in accordance with applicable State law, where they are
acting voluntarily and without coercion by the plan or issuer.
Moreover, HHS regulations at 45 CFR 155.430, which govern termination
of enrollment in the Exchange, permit enrollees and the Exchange to
initiate a retroactive termination of enrollment in a QHP through the
Exchange, including instances where the enrollee has the right to
terminate coverage under applicable State law (such as State ``free
look'' cancellations laws).\62\ For these reasons, the Departments
clarify in these final regulations that a retroactive cancellation or
discontinuance of coverage is not a rescission if (1) it is initiated
by the individual (or by the individual's authorized representative)
and the employer, sponsor, plan, or issuer does not, directly or
indirectly, take action to influence the individual's decision to
cancel or discontinue coverage retroactively, or otherwise take any
adverse action or retaliate against, interfere with, coerce,
intimidate, or threaten the individual; or (2) it is initiated by the
Exchange pursuant to 45 CFR 155.430 (other than under paragraph
(b)(2)(iii)). The Departments may issue additional subregulatory
guidance if abusive situations or questions arise.
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\62\ State ``free look'' cancellation laws are laws permitting
an individual to cancel coverage within a certain time period, even
following the effectuation of the enrollment.
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4. Interaction With Internal Appeals and External Review
Commenters requested that these final regulations provide that
individuals have the right to appeal a rescission to an independent
third party. PHS Act section 2719 and its implementing regulations
address internal claims and appeals and external review of adverse
benefit determinations. Under the Department of Labor's claims
procedure regulation at 29 CFR 2560.503-1 (the DOL claims procedure
regulation), adverse benefit determinations eligible for internal
claims and appeals processes generally include denial, reduction,
termination of, or a failure to provide or make a payment (in whole or
in part) for a benefit, including a denial, reduction, termination, or
failure to make a payment based on the imposition of a preexisting
condition exclusion, a source of injury exclusion, or other limitation
on covered benefits. The Departments' regulations under PHS Act section
2719 broaden the definition of ``adverse benefit determination'' to
include rescissions of coverage. Therefore, rescissions of coverage are
also eligible for internal claims and appeals and external review for
non-grandfathered health plans, whether or not the rescission has an
adverse effect on any particular benefit at the time of an appeal. The
regulations under PHS Act section 2719 also contain provisions
requiring coverage to remain effective pending the outcome of an
internal appeal.
5. Interaction With COBRA Continuation Coverage
COBRA provides for a temporary continuation of group health
coverage that would otherwise be lost due to certain life events. COBRA
requires group health plans to offer continuation coverage to covered
employees, former employees, spouses, former spouses, and dependent
children when group health coverage would be terminated due to the
following: The death of a covered employee; termination or reduction in
the hours of a covered employee's employment for reasons other than
gross misconduct; a covered employee's becoming entitled to Medicare;
divorce or legal separation of a covered employee and spouse; and a
child's loss of dependent status (and therefore coverage) under the
plan.
COBRA sets forth rules for how and when continuation coverage must
be offered and provided, how employees and their families may elect
continuation coverage, and what circumstances justify terminating
continuation coverage. COBRA allows plans to continue coverage during
an initial 60-day election period and allows plans to continue
providing coverage during the 30-day grace periods for each premium
payment. If a qualified beneficiary fails to pay for coverage during
the initial election period, or fails to pay in full before the end of
a grace period, continuation coverage may be terminated retroactively
under COBRA.
Several commenters sought clarification about the interaction of
the COBRA continuation provisions with the prohibition against
rescissions. The Departments clarify that the regulatory exception to
the prohibition on rescission for failure to timely pay required
premiums or contributions toward the cost of coverage also includes
failure to timely pay required premiums towards the cost of COBRA
continuation coverage. Accordingly, if a group health plan requires the
payment of a COBRA premium to continue coverage after a qualifying
event and that premium is not paid by the applicable deadline, the
prohibition on rescission is not violated if the plan retroactively
terminates coverage due to a failure to elect and pay for COBRA
continuation coverage.
6. Notice of Rescission
Consistent with PHS Act section 2712, under the interim final
regulations and these final regulations, a plan or issuer must provide
at least 30 calendar days advance written notice to each participant
(in the individual market, primary subscriber) who would be affected
before coverage may be rescinded (where permitted). This provides
individuals time to appeal the decision or enroll into new coverage.
This notice is required regardless of whether it is a rescission of
group or individual coverage; or whether, in the case of group
coverage, the coverage is insured or self-insured, or the rescission
applies to an entire group or only to an individual within the group.
Some commenters recommended the 30-day notice of rescission be
coordinated with the rules for providing notices of adverse benefit
determinations under the Departments'
[[Page 72205]]
internal appeals and external review regulations under PHS Act section
2719. Other commenters made specific suggestions regarding the content
of the notice, such as that the notice indicate the basis for the
rescission and include an explanation of the remedies available to the
individual.
Under PHS Act section 2719, the interim final regulations, and
these final regulations, a plan or issuer must provide notice to
individuals, in a culturally and linguistically appropriate manner, of
the reason or reasons for an adverse benefit determination or final
internal adverse benefit determination (including a rescission of
coverage) and a description of available internal appeals and external
review processes, including information on how to initiate an appeal.
The Departments encourage plans and issuers to coordinate notices
related to rescissions and appeal procedures to the extent possible.
E. PHS Act Section 2714, Coverage of Dependents to Age 26 (26 CFR
54.9815-2714, 29 CFR 2590.715-2714, 45 CFR 147.120)
PHS Act section 2714, as added by the Affordable Care Act, provides
that a group health plan or a health insurance issuer offering group or
individual health insurance coverage that makes available dependent
coverage \63\ of children must make such coverage available for
children until attainment of 26 years of age.\64\ On May 13, 2010, the
Departments issued interim final regulations implementing PHS Act
section 2714 and requesting comment.\65\ After issuance of the 2010
interim final regulations, the Departments released Affordable Care Act
Implementation FAQs Parts I and V to address various requests for
clarifications under PHS Act section 2714.\66\ These final regulations
adopt the 2010 interim final regulations without substantial change and
incorporate the clarifications issued thus far in subregulatory
guidance.
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\63\ For purposes of these final regulations, dependent coverage
means coverage of any individual under the terms of a group health
plan, or group or individual health insurance coverage, because of
the relationship to a participant (in the individual market, primary
subscriber).
\64\ Under section 1004(d) of the Reconciliation Act and IRS
Notice 2010-38, 2010-20 IRB 682, released on April 27, 2010,
employers may exclude from the employee's income the value of any
employer-provided health coverage for an employee's child for the
entire taxable year the child turns 26 if the coverage continues
until the end of that taxable year. This means that if a child turns
26 in March, but stays on the plan past December 31st (the end of
most individual's taxable year), the health benefits up to December
31st can be excluded from the employee's income.
\65\ See 75 FR 27122 (May 13, 2010).
\66\ Affordable Care Act Implementation FAQs Part I, Q&A-14,
available at https://www.dol.gov/ebsa/faqs/faq-aca.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html and Affordable Care Act Implementation
FAQs Part 5 and Mental Health Parity Implementation, Q&A 5,
available at https://www.dol.gov/ebsa/faqs/faq-aca5.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html. https://www.dol.gov/ebsa/faqs/faq-aca5.html.
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1. Restrictions on Plan Definition of Dependent
a. Definition of Dependent--Based on Relationship Between Child and
Participant
PHS Act section 2714 provides that the ``Secretary shall promulgate
regulations to define the dependents to which coverage shall be made
available'' under the dependent coverage provision. The 2010 interim
final regulations provided that with respect to a child who has not
attained age 26, a plan or issuer may not define dependent for purposes
of eligibility for dependent coverage of children other than in terms
of a relationship between a child and the participant. For example, a
plan or issuer may not deny or restrict coverage for a child who has
not attained age 26 based on the child's financial dependency (upon the
participant or any other person), residency with the participant or
with any other person, student status, employment, or any combination
of those factors. Additional examples of factors that cannot be used
for defining dependent for purposes of eligibility (or continued
eligibility) include eligibility for other coverage \67\ and marital
status of a dependent child.\68\ Because the statute does not
distinguish between coverage for minor children and coverage for adult
children under age 26, these factors also may not be used to determine
eligibility for dependent coverage of minor children.
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\67\ See section II.H.1. of this preamble, entitled ``Special
Rule Relating to Dependent Coverage of Children to Age 26 for
Grandfathered Group Health Plans,'' for discussion of an out-of-date
special rule for grandfathered plans regarding adult children
eligible for other coverage.
\68\ The Affordable Care Act, as originally enacted, required
plans and issuers to make dependent coverage available only to a
child ``who is not married.'' This language was struck by section
2301(b) of the Reconciliation Act. Accordingly, under the interim
final regulations and these final regulations, plans and issuers may
not limit dependent coverage of children based on whether a child is
married (however, a plan or issuer is not required under the final
regulations to cover the spouse of an eligible child).
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It has come to the Departments' attention that certain plans that
utilize an HMO design impose restrictions on eligibility that require
participants and beneficiaries to work, live or reside in the HMO
service area. While these provisions on their face appear to be
generally applicable, the overwhelming impact of such provisions
affects dependent children, who would otherwise be required to be
covered pursuant to PHS Act section 2714. For example, a plan that
utilizes an HMO design that requires participants and beneficiaries to
work, live or reside in the service area would not permit a dependent
child covered under the parent's plan to continue to be eligible for
the plan if the dependent child moves out of the HMO's service area to
attend college. Under the same plan, however, most employees and their
spouses would work, live or reside in the service area.
These final regulations provide that, to the extent such
restrictions are applicable to dependent children up to age 26,
eligibility restrictions under a plan or coverage that require
individuals to work, live or reside in a service area violate PHS Act
section 2714. (This rule does not relate to the extent to which a plan
must cover participants or provide services outside of its service
area). While eligibility provisions of general applicability are
usually outside the scope of PHS Act section 2714, due to the
disproportionate effect on dependent children, these final regulations
do not permit eligibility provisions under a plan or coverage based on
service area, to the extent such restrictions are applicable to
dependent children up to age 26, even if such restrictions are intended
to apply generally to all participants and beneficiaries under the
plan.
b. Definition of Child
PHS Act section 2714 does not require a plan to provide dependent
coverage of children but instead provides that if a plan does provide
dependent coverage of children it must continue to make such coverage
available until the child turns age 26.\69\ Neither PHS Act section
[[Page 72206]]
2714 nor the interim final regulations defined the term child for
purpose of the dependent coverage provision.\70\
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\69\ In general, under section 4980H of the Code, certain
employers (applicable large employers) must either offer health
coverage to their full-time employees (and their dependents) or
potentially pay an assessable payment if at least one full-time
employee receives a premium tax credit for purchasing individual
coverage on an Affordable Insurance Exchange. For purposes of
section 4980H, the term dependent means ``a child (as defined in
section 152(f)(1) of the Code but excluding a stepson, stepdaughter
or an eligible foster child (and excluding any individual who is
excluded from the definition of dependent under section 152 of the
Code by operation of section 152(b)(3) of the Code)) of an employee
who has not attained age 26. A child attains age 26 on the 26th
anniversary of the date the child was born. A child is a dependent
for purposes of section 4980H for the entire calendar month during
which he or she attains age 26. Absent knowledge to the contrary,
applicable large employer members may rely on an employee's
representation about that employee's children and the ages of those
children. The term dependent does not include the spouse of an
employee.'' See 26 CFR 54.4980H-1(a)(12). Under section 152(f)(1) of
the Code a child means an individual who is (i) a son, daughter,
stepson, or stepdaughter of the taxpayer (including a legally
adopted child or an individual lawfully placed for adoption with the
taxpayer) or (ii) an eligible foster child of the taxpayer.
\70\ Under section 1004(d) of the Reconciliation Act and IRS
Notice 2010-38, child means child as defined in section 152(f)(1) of
the Code.
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In response to comments requesting guidance on the definition of
the term child and questions from stakeholders, the Departments
released an FAQ \71\ stating that a group health plan or issuer will
not fail to satisfy the dependent coverage provision merely because it
conditions health coverage on support, residency, or other dependency
factors for individuals under age 26 who are not described in section
152(f)(1) of the Code. For an individual not described in section
152(f)(1), such as a grandchild or niece, a plan may impose additional
conditions on eligibility for health coverage, such as a condition that
the individual be a dependent for income tax purposes. The FAQ also
provided that a plan or issuer does not fail to satisfy the
requirements of PHS Act section 2714 or its implementing regulations
because the plan limits health coverage for children until the child
turns 26 to only those children who are described in section 152(f)(1)
of the Code. These final regulations incorporate the clarifications
provided in the FAQ.
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\71\ Affordable Care Act Implementation FAQs Part I, Q&A 14
(released on September 20, 2010), available at https://www.dol.gov/ebsa/faqs/faq-aca.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html.
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Some commenters requested that the Departments interpret PHS Act
section 2714 to apply to grandchildren. The statute and the 2010
interim final regulations provided that nothing in PHS Act section 2714
requires a plan or issuer to make available coverage for a child of a
child receiving dependent coverage. Because the statute specifically
provides that plans and issuers are not required to make coverage
available to grandchildren, these final regulations do not adopt this
suggestion.
2. Uniformity Irrespective of Age
The 2010 interim final regulations provided that the terms of the
plan or health insurance coverage providing dependent coverage of
children cannot vary based on the age of a child, except for children
age 26 or older. The 2010 interim final regulations contained examples
illustrating that age-based surcharges violate the uniformity
requirement but that cost of coverage increases for tiers with more
covered individuals do not violate this requirement because such an
increase applies without regard to the age of any child. The 2010
interim final regulations also contained an example demonstrating that
a plan that limits the benefit packages offered based on the age of
dependent children violates the uniformity requirement. These final
regulations retain these examples.
Following the 2010 interim final regulations, the Departments
issued an FAQ \72\ that addressed an arrangement under which a group
health plan charges a copayment for physician visits that do not
constitute preventive services to individuals age 19 and over,
including employees, spouses, and dependent children, but waives the
copayment for children under age 19. The FAQ clarifies that the
Departments do not consider such an arrangement to violate the
dependent coverage provision. This arrangement is permissible under the
dependent coverage provision because, while the dependent coverage
provision prohibits distinctions based upon age in dependent coverage
of children under age 26, it does not prohibit distinctions based upon
age that apply to all coverage under the plan, including coverage for
employees and spouses as well as dependent children. In this situation,
the copayments charged to dependent children are the same as those
charged to employees and spouses. (However, with respect to individual
and small group plans required to provide essential health benefits,
distinctions based on age may be considered discriminatory under HHS
regulations regarding essential health benefits.\73\) The final
regulations reflect the clarification contained in this FAQ.
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\72\ Affordable Care Act Implementation Part V and Mental Health
Parity Implementation FAQs, Q&A 5 (released on December 22, 2010),
available at https://www.dol.gov/ebsa/faqs/faq-aca5.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs5.html.
\73\ See 45 CFR 156.125.
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F. PHS Act Section 2719, Internal Claims and Appeals and External
Review (26 CFR 54.9815-2719, 29 CFR 2590.715-2719, 45 CFR 147.136)
PHS Act section 2719, as added by the Affordable Care Act, applies
to group health plans that are not grandfathered health plans and
health insurance issuers offering non-grandfathered coverage in the
group and individual markets, and sets forth standards for plans and
issuers regarding both internal claims and appeals and external review.
With respect to internal claims and appeals processes for group health
plans and health insurance issuers offering group health insurance
coverage, PHS Act section 2719 provides that a non-grandfathered group
health plan or health insurance issuer offering non-grandfathered group
coverage must initially incorporate the internal claims and appeals
processes set forth in regulations promulgated by the Department of
Labor (DOL) at 29 CFR 2560.503-1 (the DOL claims procedure regulation)
and update such processes in accordance with standards established by
the Secretary of Labor. Similarly, with respect to internal claims and
appeals processes for individual health insurance coverage, issuers
must initially incorporate the internal claims and appeals processes
set forth in applicable State law and update such processes in
accordance with standards established by the Secretary of HHS. With
respect to external review, PHS Act section 2719 provides for either a
State external review process or a Federal external review process.
The following list identifies certain regulations and subregulatory
guidance that the Departments have issued to implement these
requirements:
Interim final regulations on July 23, 2010, at 75 FR
43329, implementing the internal claims and appeals and external review
process requirements of PHS Act section 2719;
Technical Release 2010-01, on August 23, 2010, setting
forth interim procedures for Federal External Review;
Technical Guidance, on August 26, 2010, setting forth
interim procedures for Federal External Review for health insurance
issuers in the group and individual markets under the Patient
Protection and Affordable Care Act;
Affordable Care Act Implementation FAQs part I, on
September 20, 2010, providing guidance on outstanding questions
regarding the internal claims and appeals and external review process
requirements of PHS Act section 2719;
Technical Release 2010-02, on September 20, 2010,
establishing an enforcement grace period with respect to some of the
internal claims and appeals standards set forth in the interim final
regulations;
Technical Release 2011-01, on March 18, 2011, extending
the enforcement grace period set forth in Technical Release 2010-02;
[[Page 72207]]
Technical Release 2011-02, on June 22, 2011, setting forth
interim standards for a State-administered external review process
authorized under section 2719(b)(2) of the PHS Act and paragraph (d) of
the interim final regulations;
Amendments to the interim final regulations on June 24,
2011, at 76 FR 37207, with respect to the internal claims and appeals
and external review provisions of PHS Act section 2719 in response to
comments received regarding the interim final regulations; and
Technical Release 2013-01, on March 15, 2013, extending
the interim standards for a State-administered external review process
authorized under section 2719(b)(2) of the PHS Act and paragraph (d) of
the interim final regulations set forth in Technical Release 2011-02.
After consideration of the comments and feedback received from
stakeholders, the Departments are publishing these final regulations.
These final regulations adopt the interim final regulations, as
previously amended, without substantial change. These final regulations
also codify some of the enforcement safe harbors, transition relief,
and clarifications set forth through subregulatory guidance.
Contemporaneous with the issuance of these final regulations, the
Department of Labor is issuing a proposed regulation to amend the DOL
claims procedure regulations under 29 CFR 2560.503-1, as applied to
plans providing disability benefits. The amendment would revise and
strengthen the current DOL claims procedure regulations regarding
claims and appeals applicable to plans providing disability benefits
primarily by adopting the protections and standards for internal claims
and appeals applicable to group health plans under PHS Act section 2719
and these final regulations.
1. Internal Claims and Appeals
In addition to the requirement in PHS Act section 2719(a) that
plans and issuers must initially incorporate the internal claims and
appeals processes set forth in the DOL claims procedure regulation, the
interim final regulations, as amended, provide further standards for
compliance with the internal claims and appeals requirements of PHS Act
2719.\74\ Specifically, under these requirements, in addition to
complying with the internal claims and appeals processes set forth in
the DOL claims procedure regulation, plans and issuers are required to
comply with the following standards: (1) The scope of adverse benefit
determinations eligible for internal claims and appeals includes a
rescission of coverage (whether or not the rescission has an adverse
effect on any particular benefit at the time); (2) A plan or issuer
must notify a claimant of a benefit determination (whether adverse or
not) with respect to a claim involving urgent care as soon as possible,
taking into account the medical exigencies, but not later than 72 hours
after the receipt of the claim by the plan or issuer; (3)
Clarifications with respect to full and fair review, such that plans
and issuers are clearly required to provide the claimant (free of
charge) with new or additional evidence considered, relied upon, or
generated by (or at the direction of) the plan or issuer in connection
with the claim, as well as any new or additional rationale for a denial
at the internal appeals stage, and a reasonable opportunity for the
claimant to respond to such new evidence or rationale; (4)
Clarifications regarding conflicts of interest, such that decisions
regarding hiring, compensation, termination, promotion, or other
similar matters with respect to an individual, such as a claims
adjudicator or medical expert, must not be based upon the likelihood
that the individual will support the denial of benefits; (5) Notices
must be provided in a culturally and linguistically appropriate manner,
as required by the statute, and as set forth in paragraph (e) of the
interim final regulations, as amended; (6) Notices to claimants must
provide additional content, including that any notice of adverse
benefit determination or final internal adverse benefit determination
must include information sufficient to identify the claim involved,
including the date of the service, the health care provider, the claim
amount (if applicable), and a statement describing the availability,
upon request, of the diagnosis code and its corresponding meaning, and
the treatment code and its corresponding meaning; and (7) With the
exception of de minimis violations under specified circumstances, if a
plan or issuer fails to adhere to all the requirements of the interim
final regulations, as amended, the claimant is deemed to have exhausted
the plan's or issuer's internal claims and appeals process, and the
claimant may initiate any available external review process or remedies
available under ERISA or under State law.
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\74\ The statute requires the Secretary of Health and Human
Services to set forth processes for internal claims and appeals in
the individual market. Under the interim final regulations, the
Secretary of Health and Human Services has determined that a health
insurance issuer offering individual health insurance coverage must
generally comply with all the requirements for the internal claims
and appeals process that apply to group health coverage. Also, see
45 CFR 147.136 for additional requirements for coverage in the
individual market.
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To address certain relevant differences in the group and individual
markets the interim final regulations, as amended, provided that health
insurance issuers offering individual coverage must comply with three
additional requirements for internal claims and appeals processes.
First, initial eligibility determinations in the individual market must
be included within the scope of claims eligible for internal appeals.
Second, health insurance issuers offering individual coverage are only
permitted to have one level of internal appeal. Third, health insurance
issuers offering individual coverage must maintain records of all
claims and notices associated with the internal claims and appeals
process for six years. The issuer must make such records available for
examination by the claimant or State, or Federal oversight agency upon
request.
These final regulations generally incorporate the standards of the
interim final regulations, as amended, and the Departments' associated
guidance, without major change.
a. Full and Fair Review
The interim final regulations provided that plans and issuers must
provide the claimant (free of charge) with new or additional evidence
considered, relied upon, or generated by (or at the direction of) the
plan or issuer in connection with the claim, as well as any new or
additional rationale as soon as possible and sufficiently in advance of
the date on which the notice of the final adverse benefit determination
is required to be provided under the DOL claims procedure regulations.
Since the issuance of the interim final regulations and subsequent
subregulatory guidance, stakeholders have requested additional
clarification regarding how to provide a full and fair review in
accordance with the requirements set forth in the regulations.
Commenters requested additional guidance related to the timing and
amount of information required to be provided in order to satisfy this
requirement. Specifically, individuals asked whether such information
actually must be provided automatically to participants and whether or
not it would be sufficient to send participants a notice informing them
of the availability of new or additional evidence or rationale. The
Departments retain the requirement that plans and issuers provide the
new or additional evidence or rationale automatically. In
[[Page 72208]]
the Departments' view, fundamental fairness requires that participants
and beneficiaries have an opportunity to rebut or respond to any new or
additional evidence upon which a plan or issuer may rely. Therefore,
plans and issuers that wish to rely on any new or additional evidence
or rationale in making a benefit determination must send such new or
additional evidence or rationale to participants as soon as it becomes
available to the plan or issuer.
In order to comply with this requirement, a plan or issuer must
send the new or additional evidence or rationale to the participant.
Merely sending a notice informing participants of the availability of
such information fails to satisfy this requirement. To address the
narrow circumstance raised by some comments that the new or additional
information could be first received so late that it would be impossible
to provide it, these final regulations provide that if the new or
additional evidence is received so late that it would be impossible to
provide it to the claimant in time for the claimant to have a
reasonable opportunity to respond, the period for providing a notice of
final internal adverse benefit determination is tolled until such time
as the claimant has a reasonable opportunity to respond. After the
claimant responds, or has a reasonable opportunity to respond but fails
to do so, the plan or issuer must notify the claimant of the benefit
determination as soon as a plan or issuer acting in a reasonable and
prompt fashion can provide the notice, taking into account the medical
exigencies.
2. Culturally and Linguistically Appropriate Standard (CLAS)
PHS Act section 2719 requires group health plans and health
insurance issuers to provide relevant notices in a culturally and
linguistically appropriate manner. The interim final regulations, as
amended, set forth a requirement to provide notices in a non-English
language if at least a specified percentage of residents in a county
are literate only in the same non-English language. Specifically, with
respect to group health plans and health insurance issuers offering
group or individual health insurance coverage, the interim final
regulations established that the threshold percentage of people who are
literate only in the same non-English language is set at ten percent or
more of the population residing in the claimant's county, as determined
in guidance based on American Community Survey data published by the
United States Census Bureau. Furthermore, the interim final
regulations, as amended, required that each notice sent by a plan or
issuer to an address in a county that meets this threshold include a
one-sentence statement in the relevant non-English language about the
availability of language services. In addition, under the interim final
regulations, as amended, plans and issuers must provide a customer
assistance process (such as a telephone hotline) with oral language
services in the non-English language and provide written notices in the
non-English language upon request.
In response to the culturally and linguistically appropriate
standards (CLAS) set forth in the amendments to the interim final
regulations described in the prior paragraph, the Departments received
many comments from various stakeholders. Some commenters requested that
the Departments incorporate the prior proposed CLAS (rather than the
amended CLAS) into these final regulations, citing that the prior
standard was less costly for plans and issuers than was stated in the
proposed regulations. Other commenters requested that the threshold
percentage that triggers the CLAS requirements be reduced to a lower
percentage to capture a greater number of counties. Other stakeholders
supported the CLAS requirements as set forth in the amendments to the
interim final regulations. Stakeholders that support the amended CLAS
reiterated prior comments that the Departments received that opposed
the ``tagging and tracking'' requirement.\75\
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\75\ Under the interim final regulations, the CLAS standard
included a ``tagging and tracking requirement'' which required plans
and issuers, to the extent individuals request a document in a non-
English language, to ``tag'' and ``track'' such request so that any
future notices would be provided automatically in the non-English
language.
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In light of all the comments received, these final regulations
retain the CLAS requirements as set forth in the amendment to the
interim final regulations. The Departments believe that the CLAS
requirements appropriately balance the objective of protecting
consumers by providing understandable notices to individuals who speak
primary languages other than English with the goal of imposing
reasonable language access requirements on plans and issuers.
Furthermore, the Departments note that nothing in these regulations
should be construed as limiting an individual's rights under Federal or
State civil rights statutes, such as section 1557 of the Affordable
Care Act and Title VI of the Civil Rights Act of 1964 (Title VI) which
prohibits covered entities, including issuers participating in Medicare
Advantage, from discriminating on the basis of race, color, or national
origin. To ensure non-discrimination on the basis of national origin
under Title VI, recipients are required to take reasonable steps to
ensure meaningful access to their programs and activities by limited
English proficient persons. (For more information, see, ``Guidance to
Federal Financial Assistance Recipients Regarding Title VI Prohibition
Against National Origin Discrimination Affecting Limited English
Proficient Persons,'' available at https://www.hhs.gov/ocr/civilrights/resources/laws/revisedlep.html.)
3. Extension of the Transition Period for State External Review
Processes
PHS Act section 2719(b) requires that a non-grandfathered group
health plan that is not a self-insured plan that is not subject to
State insurance regulations and a health insurance issuer offering non-
grandfathered group or individual health insurance coverage comply with
an applicable State external review process if that process includes,
at a minimum, the consumer protections set forth in the Uniform Health
Carrier External Review Model Act issued by the National Association of
Insurance Commissioners (the NAIC Uniform Model Act). Paragraph (c)(2)
of the 2010 interim final regulations under PHS Act section 2719, as
amended, sets forth the minimum consumer protection standards that a
State external review process must include to qualify as an applicable
State external review process under PHS Act section 2719(b)(1) (NAIC-
parallel external review process).
Under PHS Act section 2719(b)(2), if a State's external review
process does not meet the minimum consumer protection standards set
forth in the NAIC Uniform Model Act (or if a plan is self-insured and
not subject to State insurance regulation), group health plans and
health insurance issuers in the group and individual markets in that
State are required to implement an effective external review process
that meets minimum standards established by the Secretary of HHS
through guidance. These standards must be similar to the standards
established under PHS Act section 2719(b)(1) and must meet the
requirements set forth in paragraph (d) of the 2010 interim final
regulations, as amended.
In June 2011, the Departments amended the July 2010 interim final
regulations and announced that plans and issuers could continue to
participate in a State external review process that met Federal
standards that were NAIC-similar for a limited time (the NAIC-similar
external review
[[Page 72209]]
process), in anticipation that such an allowance would reduce market
disruption during a transition period. Contemporaneous with the June
2011 amendment, the Departments issued guidance which, among other
things, established the NAIC-similar external review process.
The Departments recognize that many States have done considerable
work to bring their external review laws and processes into compliance
with the NAIC Uniform Model Act and, because of those efforts, the
Departments have extended the transition periods to allow States more
time to meet the NAIC-parallel external review process standards.
States continue to make changes to their laws through what have often
proven to be complex and time consuming processes, often involving
legislative changes; and it is apparent that more time is needed for
some States to achieve NAIC-parallel external review processes.
Therefore, the Departments are extending the NAIC-similar external
review process transition period so that the last day of the transition
period is December 31, 2017. Through December 31, 2017, an applicable
State external review process applicable to a health insurance issuer
or group health plan may be considered to meet the minimum standards of
paragraph (c)(2), if it meets the temporary standards established by
the Secretary in guidance for a process similar to the NAIC Uniform
Model Act. During this transition period, the NAIC-similar external
review process will continue to apply \76\ for non-grandfathered group
health plans and issuers of non-grandfathered group or individual
coverage in the State.\77\ This modification seeks to minimize cost and
confusion for participants and enrollees, issuers, and plans alike.
Furthermore, the extension will provide States that are currently in
the process of making changes to external review laws time to implement
NAIC-parallel external review processes. The Departments will continue
to work with health insurance issuers, States, and other stakeholders
to assist them in coming into compliance with the law. Once this
transition period has ended, plans and issuers in a State that has not
implemented the NAIC-parallel external review process will be required
to comply with a Federal external review process.
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\76\ If a State enacts an NAIC-parallel law prior to January 1,
2018, coverage subject to that State law will be required to comply
with the provisions of that State law, in accordance with ERISA
section 731 and PHS Act section 2719 and 2724.
\77\ See Technical Release 2011-02, Guidance on External Review
for Group Health Plans and Health Insurance Issuers Offering Group
and Individual Health Coverage, and Guidance for States on State
External Review Processes, June 22, 2011. The temporary standards
were extended in March 15, 2013 in Technical Release 2013-01,
Extension of the Transition Period for the Temporary NAIC-Similar
State External Review Process under the Affordable Care Act.
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4. Federal External Review
PHS Act section 2719(b)(2) provides that plans and issuers in
States without an external review process that meets the requirements
of PHS Act section 2719(b)(1) or that are self-insured plans not
subject to State insurance regulation shall implement an effective
external review process that meets minimum standards established by the
Secretary of HHS through guidance and that is similar to a State
external review process described in PHS Act section 2719(b)(1). The
interim final regulations reiterated this statutory requirement, and
also provided additional standards, including that the Federal external
review process, like the State external review process, will provide
for expedited external review and additional consumer protections with
respect to external review for claims involving experimental or
investigational treatment. The interim final regulations also set forth
the scope of claims eligible for review under the Federal external
review process. The interim final regulations also established the
procedural standards that apply to claimants, plans, and issuers under
this Federal external review process, as well as the substantive
standards under this process. These final regulations incorporate both
the procedural and substantive standards established in the interim
final regulations and subsequent subregulatory guidance without
substantial change and with minor clarifications.
a. Scope of Federal External Review Process
The 2010 interim final regulations set forth the original scope of
claims eligible for external review under the Federal external review
process. Specifically, any adverse benefit determination (including
final internal adverse benefit determination) could be reviewed unless
it related to a participant's or beneficiary's failure to meet the
requirements for eligibility under the terms of a group health plan
(for example, worker classification and similar issues were not within
the scope of the Federal external review process). After considering
comments received in response to the 2010 interim final regulations,
the Departments suspended the original rule and temporarily narrowed
its scope. The amended scope limited the Federal external review
process to claims that involve (1) medical judgment (including, but not
limited to, those based on the plan's or issuer's requirements for
medical necessity, appropriateness, health care setting, level of care,
or effectiveness of a covered benefit, or its determination that a
treatment is experimental or investigational), as determined by the
external reviewer; and (2) a rescission of coverage (whether or not the
rescission has any effect on any particular benefit at the time). The
amendments also provided two examples of claims involving medical
judgment.
The Departments received mixed comments in response to the revised
scope of Federal external review in the 2011 amendment to the July 2010
interim final regulations. Generally, comments supported narrowing the
scope to decisions based on medical judgment and suggested permanently
adopting the standards in the 2011 amendment. However, there were also
commenters that objected to limiting the scope and favored the original
scope as stated in the July 2010 interim final regulations. Some of
these commenters stated that the description of medical judgment was
ambiguous and that it was unclear how to determine whether a claim
involved ``medical judgment.'' Other commenters disagreed with the
description of medical judgment, finding either the explanation was too
vague or that certain information in the examples did not fall within
what was normally considered medical judgment.
Additionally, the Departments received comments requesting more
clarity around the treatment of coding issues under the amended scope
of Federal external review. The Departments recognize that there may be
instances when a patient may have a procedure performed that is similar
to another and a coding issue impacts whether coverage is provided. For
example, a patient may need a stoma revision, and recent significant
weight loss necessitates a procedure to remove the patient's excess
skin and tissue prior to addressing the stoma. However, the skin
removal procedure may be coded as a cosmetic surgery, such as an
abdominoplasty or ``tummy tuck'', instead of as a panniculectomy, and
is therefore not covered. In this case both procedures involve the
removal of skin from the abdomen, but one procedure is an excluded
cosmetic surgery while the other is covered so long as certain medical
criteria are met. This dispute would likely be resolved via an internal
appeal, but in the event that the initial decision to deny coverage was
affirmed on an internal appeal, the claimant
[[Page 72210]]
could have the claim reviewed in a Federal external review process.
Medical judgment is necessary to determine whether the correct code was
used in the patient's case. To the extent that a coding error such as
this one involves medical judgment, the claim is within the scope of
Federal external review under the July 2010 interim final regulations,
as amended.
After consideration of comments, these final regulations make
permanent the scope for Federal external review as set out in the 2011
amendments to the July 2010 interim final regulations, to include only
an adverse benefit determination that involves medical judgment as
determined by the external reviewer, or a rescission of coverage. The
interim final regulations included a non-exhaustive list of adverse
benefit determinations that involve medical judgment. The final
regulations add two items to the list of adverse benefit determinations
that involve medical judgment: (1) A plan's or issuer's determination
of whether a participant or beneficiary is entitled to a reasonable
alternative standard for a reward under a wellness program, and (2) a
plan's or issuer's determination of whether a plan is complying with
the nonquantitative treatment limitation provisions of the Mental
Health Parity and Addiction Equity Act and its implementing
regulations, which generally require, among other things, parity in the
application of medical management techniques. Both of these
clarifications were included in preambles to regulations issued
previously by the Departments.\78\
---------------------------------------------------------------------------
\78\ See 78 FR 33158, 33164 (June 3, 2013); see also 78 FR
68240, 68247-8 (November 13, 2013).
---------------------------------------------------------------------------
b. Federal External Review Process for Self-Insured Group Health Plans
The preamble to the 2010 interim final regulations stated that the
Departments will address in sub-regulatory guidance how non-
grandfathered self-insured group health plans may comply with the
requirements of the new Federal external review process. The Department
of Labor issued Technical Releases 2010-01 and 2011-02 regarding
procedures for Federal external review.\79\ The technical releases set
forth these procedures for non-grandfathered self-insured group health
plans not subject to a State external review process. Technical Release
2011-02 also provided non-grandfathered health insurance issuers
subject to a Federally-administered external review process \80\ and
all non-grandfathered self-insured, non-Federal governmental plans with
the option of using the external review process set out in Technical
Release 2010-01.
---------------------------------------------------------------------------
\79\ See Technical Release 2010-01, available at: https://www.dol.gov/ebsa/pdf/ACATechnicalRelease2010-01.pdf and Technical
Release 2011-02, available at: https://www.dol.gov/ebsa/pdf/tr11-02.pdf.
\80\ Where a State's external review process does not meet the
Federal consumer protection standards, issuers and self-insured non-
Federal governmental plans may choose to utilize either the Federal
IRO external review process or an HHS -administered Federal external
review process in which a designated Federal contractor will perform
all functions of the external review.
---------------------------------------------------------------------------
In general, under these procedures, a group health plan must first
allow a claimant to file a request for Federal external review with the
plan. The group health plan must then complete a preliminary review of
the request within five business days following the date of receipt of
the external review request. Within one business day after completion
of the preliminary review, the plan must issue a notification in
writing to the claimant. If the request is complete but not eligible
for external review, such notification must include the reasons for its
ineligibility and current contact information, including the phone
number for the Employee Benefits Security Administration (toll free
number 866-444-EBSA (3272)). Upon its determination that a request is
eligible for external review, the group health plan must then assign an
independent review organization (IRO), accredited by URAC or by a
similar nationally-recognized accrediting organization, to conduct the
external review. The IRO must timely notify the claimant in writing of
the external review and provide the claimant 10 business days to submit
additional information that the IRO must consider. The group health
plan must provide the IRO with any documents and information used in
making the original determination within five business days after the
date of the assignment and the IRO must forward any information
submitted by the claimant to the group health plan within one business
day after receipt of the information. The IRO must review all
information and documents timely received and must provide written
notice of the final external review decision to the claimant and the
group health plan within 45 days after the request for the external
review. After the final external review decision, the IRO must maintain
records of all associated claims and notices for six years. If the IRO
has decided to reverse the original determination, then, upon receipt
of the IRO's notice of this decision, the group health plan must
immediately provide coverage or payment for the claim.
The technical releases also provided that a group health plan must
allow a claimant to make a request for expedited external review for
benefit determinations involving a medical condition for which the
timeframe for completion of an expedited internal appeal or standard
external review under the interim final regulations would seriously
jeopardize the life or health of the claimant or would jeopardize the
claimant's ability to regain maximum function. The IRO must provide a
notice of the final external review decision as expeditiously as the
claimant's medical condition or circumstances require, but in no event
more than 72 hours after the IRO receives the request for expedited
review. If the notice is not in writing, within 48 hours after the date
of providing that notice, the assigned IRO must provide written
confirmation of the decision to the claimant and the plan.
These final regulations incorporate the guidance in Technical
Releases 2010-01 and 2011-02 without substantial change. These final
regulations also continue to permit non-grandfathered self-insured
plans to comply with the external review process outlined in these
final regulations or a State external review process if the State
chooses to expand access to their State external review process to
plans that are not subject to the applicable State laws.
Furthermore, these final regulations continue to provide issuers
subject to a Federally-administered external review process and all
self-insured, non-Federal governmental plans with the option of
electing the private accredited IRO process for external review
described in these final regulations or the Federally-administered
external review process, which is administered by HHS (also referred to
as the HHS-administered external review process).
Similar to the technical releases, these final regulations continue
to provide that group health plans must assign an IRO that is
accredited by URAC or by similar nationally-recognized accrediting
organization to conduct the external review. Moreover, the plan must
take action to protect against bias and to ensure independence.
Accordingly, plans must contract with at least three IROs for
assignments under the plan and rotate claims assignments among them (or
incorporate other independent, unbiased methods for selection of IROs,
such as random selection). In addition, the IRO may not be eligible for
any financial incentives based on the likelihood that the IRO
[[Page 72211]]
will support the denial of benefits. (Of course, plans also may not
terminate an IRO's contract in retaliation for granting claims.) For
issuers and all self-insured, non-Federal governmental plans
participating in the HHS-administered external review process, the
requirement to take action to protect against bias and to ensure
independence is satisfied without contracting with three IROs for
assignment and rotating the claims assignments among them. Under the
HHS-administered external review process, there are other unique
factors that ensure independence and the absence of bias such as HHS
oversight and lack of privity of contract between the issuer or self-
insured non-Federal governmental plan and the IRO.
After issuance of the interim final regulations and technical
releases, the Departments received questions relating to self-insured
group health plans contracting directly with IROs. While such a group
health plan must designate an IRO to conduct any external review,
neither the interim final regulations nor the technical releases
require a plan to contract directly with any IRO. As clarified in the
FAQs about the Affordable Care Act implementation, issued on September
20, 2010, where a self-insured plan contracts with a third party
administrator that, in turn, contracts with an IRO, the standards of
the technical release can be satisfied in the same manner as if the
plan had contracted directly. Such a contract does not automatically
relieve the plan from responsibility if there is a failure to provide
an individual with external review and fiduciaries of plans that are
subject to ERISA have a duty to monitor the service providers to the
plan. Furthermore, plans may contract with an IRO in another State, as
these final regulations do not require the plan to be located in the
same State as the IRO. If additional questions arise regarding the IRO
external review process, the Departments may issue additional
subregulatory guidance.
c. Filing Fees for External Review
The Departments also received comments related to the standard
allowing consumers to be charged a filing fee when requesting external
review. While the original 2004 NAIC model upon which the 2010 interim
final regulations was based expressly permitted imposition of a nominal
filing fee for a claimant requesting an external review, and a small
number of States have adopted this approach, the 2010 NAIC model did
not address this topic. Commenters on the 2010 interim final
regulations indicated that the ability to charge a filing fee should be
prohibited because such fees may dissuade consumers from filing an
appeal, even in cases where the fee is not a financial hardship for the
consumer.
The Departments find the change in the NAIC model to be important
and are concerned that any fee may impose a financial hardship on some
claimants or discourage them from seeking external review. Therefore,
these final regulations generally prohibit the imposition of filing
fees for external review on claimants. However, the Departments
recognize that several States' external review processes currently
applicable to group and individual coverage permit nominal filing fees.
Therefore, in determining whether a State external review process
provides the claimants with minimum consumer protections, these final
regulations do not invalidate existing State external review processes
because they permit a nominal filing fee, consistent with the 2004 NAIC
model.\81\ Therefore, plans and coverage subject to such laws may
continue to impose nominal fees for as long as such laws continue to
apply. For this purpose, consistent with the interim final regulations,
to be considered nominal, the filing fee must not exceed $25, must be
refunded to the claimant if the adverse benefit determination (or final
internal adverse benefit determination) is reversed through external
review, must be waived if payment of the fee would impose an undue
financial hardship, and the annual limit on filing fees for any
claimant within a single plan year must not exceed $75. All other plans
and coverage must pay the full cost of the IRO for conducting the
external review, without imposing any nominal filing fee.
---------------------------------------------------------------------------
\81\ Twelve States expressly authorize nominal fees:
Connecticut, Hawaii, Kentucky, Massachusetts, Minnesota, New Jersey,
New York, North Dakota, Rhode Island, South Dakota, Vermont, and
Wyoming.
---------------------------------------------------------------------------
G. PHS Act Section 2719A, Patient Protections (26 CFR 54.9815-2719A, 29
CFR 2590.715-2719A, 45 CFR 147.138)
PHS Act section 2719A, as added by the Affordable Care Act
provides, with respect to a non-grandfathered group health plan or
health insurance issuer offering non-grandfathered group or individual
health insurance coverage, rules regarding the designation of primary
care providers, if a plan or issuer requires or provides for
designation by a participant, beneficiary, or enrollee of a
participating primary care provider. In addition, the statute provides
requirements relating to benefits for emergency services. On June 28,
2010, the Departments issued interim final regulations implementing PHS
Act section 2719A.\82\ The Departments also released Affordable Care
Act Implementation FAQs Part I Q15 to address an issue with respect to
emergency services.\83\ These regulations adopt the 2010 interim final
regulations without substantial change and incorporate the
clarification issued in subregulatory guidance.
---------------------------------------------------------------------------
\82\ 75 FR 37188 (June 28, 2010).
\83\ Affordable Care Act Implementation FAQs Part I, Q&A-15,
available at https://www.dol.gov/ebsa/faqs/faq-aca.html and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html.
---------------------------------------------------------------------------
1. Choice of Healthcare Professional
The interim final regulations and these final regulations state
that if a plan or issuer requires or provides for designation by a
participant, beneficiary, or enrollee of a participating primary care
provider, then the plan or issuer must permit each participant,
beneficiary, and enrollee to designate any primary care provider who is
available to accept the participant, beneficiary, or enrollee and who
participates in the network of the plan or issuer.
Commenters recommended clarifying that in instances where a
participant, beneficiary, or enrollee is incapacitated, a family member
may select the primary care provider on their behalf. Under existing
State and Federal law, including ERISA, a duly authorized
representative is permitted to act on behalf of a participant or
beneficiary for all purposes, including the designation of a primary
care provider as provided under these final regulations. The final
regulations regarding the designation of a primary care provider do not
include any new text to address cases of incapacity. However, as with
all of the market reform provisions, a duly authorized representative
may act on behalf of a participant or beneficiary to the extent
permitted under other applicable Federal and State law.
Commenters recommended that participants, beneficiaries, and
enrollees be allowed to designate a provider of any specialty or
licensure as their primary care provider to improve access to care. For
example, commenters recommended that enrollees have the option of
designating a nurse practitioner as their primary care provider. The
Departments do not define primary care provider for purposes of these
final regulations. The classification of who is considered a primary
care provider is determined under the terms of the plan or coverage
[[Page 72212]]
and in accordance with applicable State law.
If a plan or issuer requires or provides for the designation of a
participating primary care provider for a child by a participant,
beneficiary, or enrollee, the plan or issuer must permit the
designation of a physician (allopathic or osteopathic) who specializes
in pediatrics as the child's primary care provider if the provider
participates in the network of the plan or issuer and is available to
accept the child. The general terms of the plan or health insurance
coverage regarding pediatric care otherwise are unaffected, including
any exclusion with respect to coverage of pediatric care.
Some commenters recommended that participants, beneficiaries, or
enrollees have the option to designate physicians of various pediatric
sub-specialties as the child's primary care provider to improve access
to specialty care without prior authorization from a primary care
coordinator. For example, commenters suggested that a pediatric cancer
patient with a serious chronic condition should have the option of
designating a pediatric oncologist that can provide cancer treatment as
well as other routine treatment as the child's primary care provider.
The Departments interpret this provision to mean that if a plan or
issuer requires or provides for the designation of a participating
primary care provider for a child by a participant, beneficiary, or
enrollee, the plan or issuer must permit the designation of any
physician (allopathic or osteopathic) who specializes in pediatrics,
including pediatric subspecialties, based on the scope of that
provider's license under applicable State law. The designated provider
must also participate in the plan network and be available to accept
the child. These final regulations incorporate this clarification.
The interim final regulations also established requirements for a
plan or issuer that provides coverage for obstetrical or gynecological
care and requires the designation of an in-network primary care
provider. Specifically, the plan or issuer may not require
authorization or referral by the plan, issuer, or any person (including
a primary care provider) for a female participant, beneficiary, or
enrollee who seeks obstetrical or gynecological care provided by an in-
network health care professional who specializes in obstetrics or
gynecology. Plans and issuers must also treat the provision of
obstetrical and gynecological care, and the ordering of related
obstetrical and gynecological items and services, by the professional
who specializes in obstetrics or gynecology as the authorization of the
primary care provider. For this purpose, a health care professional
specializing in obstetrics or gynecology is any individual who is
authorized under applicable State law to provide obstetrical or
gynecological care, and is not limited to a physician.
Commenters sought clarification that women of all ages may receive
obstetrical and gynecological care without prior authorization or
referral by the plan, issuer, or any person (including a primary care
provider), noting that the statutory provision contains no restrictions
based on the age of a participant, beneficiary or enrollee. The
Departments agree that all women regardless of age are ensured direct
access to obstetrical and gynecological care under this provision.
Since the promulgation of the interim final regulations, it has
come to the Departments' attention that some plans and issuers utilize
plan designs where the delivery of care is coordinated through medical
groups within the network based on the geographic location of the
participant and the provider. Specifically, the Departments have
encountered plan provisions in insured group health plan coverage that
require participants to designate a primary care provider but restrict
a participant's choice of provider based on the distance that the
participant lives or works from the provider. Stakeholders requested
that the Departments clarify in the final regulations that the choice
of healthcare professional provision does not prohibit the application
of such geographical limitations with respect to the selection of
primary care providers. Stakeholders highlighted that prohibiting such
geographical limitations would fundamentally disrupt these plan
designs, as well as the underlying negotiated capitation arrangements
(where payment is rendered on a per person rather than per service
basis). Stakeholders also noted that the underlying provider contracts
do not permit providers to accept participants that are not within the
specified geographic limit, and, accordingly, such limitations should
not violate these provisions of the regulations, as the providers are
not available to accept such participants, based on the terms of the
plan, and as required by the regulations.
The Departments recognize the importance of allowing plans and
issuers the flexibility to deliver care in a cost-effective and
efficient manner. Accordingly, these final regulations include a
codification of the Departments' interpretation that plans and issuers
are not prohibited under PHS Act section 2719A from applying reasonable
and appropriate geographic limitations with respect to which
participating primary care providers are considered available for
purposes of selection as primary care providers, in accordance with the
terms of the plan, the underlying provider contracts, and applicable
State law. The Departments may provide additional guidance if questions
persist or if the Departments become aware of geographic limitations
that unduly restrict a participant's choice of provider.
2. Emergency Services
a. Additional Administrative Requirements
Under the interim final regulations and these final regulations, if
a group health plan or issuer provides any benefits with respect to
services in the emergency department of a hospital, then the plan or
issuer must provide coverage for emergency services without the
individual or the health care provider having to obtain prior
authorization (even if the emergency services are provided out of
network). For a plan or health insurance coverage with a network of
providers that provide benefits for emergency services, the plan or
issuer may not impose any administrative requirement or limitation on
benefits for out-of-network emergency services that is more restrictive
than the requirements or limitations that apply to in-network emergency
services.
b. Out-of-Network Cost-Sharing Requirements
Cost-sharing requirements expressed as a copayment amount or
coinsurance rate imposed for out-of-network emergency services cannot
exceed the cost-sharing requirements that would be imposed if the
services were provided in-network. The preamble to the interim final
regulations explained that out-of-network providers may bill patients
for the difference between the providers' billed charges and the amount
collected from the plan or issuer and the amount collected from the
patient in the form of a copayment or coinsurance amount (referred to
as balance billing \84\). Section 1302(c)(3)(B) of the Affordable Care
Act excludes such balance billing amounts from the definition of cost
sharing, and the requirement in section 2719A(b)(1)(C)(ii)(II) that
cost sharing for out-of-network services be limited to that imposed in
network only applies to
[[Page 72213]]
cost sharing expressed as a copayment amount or coinsurance rate.
Because the statute neither requires plans or issuers to cover balance
billing amounts, nor prohibits balance billing, even where the
protections in the statute apply, patients may still be subject to
balance billing. In the preamble to the interim final regulations under
PHS Act section 2719A, the Departments explained that it would defeat
the purpose of the protections in the statute if a plan or issuer paid
an unreasonably low amount to a provider, even while limiting the
coinsurance or copayment associated with that amount to in-network
amounts.\85\
---------------------------------------------------------------------------
\84\ See Uniform Glossary of Health Coverage and Medical Terms
at https://www.dol.gov/ebsa/pdf/sbcuniformglossaryproposed.pdf and
https://www.cms.gov/apps/glossary.
\85\ 75 FR 37188, 37194 (June 28, 2010).
---------------------------------------------------------------------------
To avoid the circumvention of the protections of PHS Act section
2719A, the Departments determined it necessary that a reasonable amount
be paid before a patient becomes responsible for a balance billing
amount. Therefore, as provided in the interim final regulations and
these final regulations, a plan or issuer must pay a reasonable amount
for emergency services by some objective standard. Specifically, a plan
or issuer satisfies the copayment or coinsurance limitations in the
statute if it provides benefits for out-of-network emergency services
(prior to imposing in-network cost sharing) in an amount at least equal
the greatest of: (1) The median amount negotiated with in-network
providers for the emergency service; (2) the amount for the emergency
service calculated using the same method the plan generally uses to
determine payments for out-of-network services (such as the usual,
customary, and reasonable amount); or (3) the amount that would be paid
under Medicare for the emergency service (minimum payment standards).
The interim final regulations under PHS Act section 2719 clarified that
the cost-sharing requirements create a minimum payment requirement. The
cost-sharing requirements do not prohibit a group health plan or health
insurance from providing benefits with respect to an emergency service
that are greater than the amounts specified in the regulations.
Some commenters expressed concern about the level of payment for
out-of-network emergency services and urged the Departments to require
plans and issuers to use a transparent database to determine out-of-
network amounts. The Departments believe that this concern is addressed
by our requirement that the amount be the greatest of the three amounts
specified in paragraphs (b)(3)(i)(A), (b)(3)(i)(B), and (b)(3)(i)(C) of
this section (which are adjusted for in-network cost-sharing
requirements).
c. Clarifications Regarding Balance Billing
Some commenters sought clarification about the interaction of the
minimum payment standards under the interim final regulations and State
laws that prohibit balance billing for emergency services. Balance
billing generally is the practice of billing by a provider that is not
a preferred provider for the difference between the charge of a
provider that is not a preferred provider and the allowed amount under
the plan or coverage. Some stakeholders expressed their opposition to
the use of balance billing because it creates a substantial financial
burden and may discourage a participant, beneficiary, or enrollee from
obtaining the care needed in an emergency situation. Other stakeholders
suggested that plans and issuers should be required to negotiate
contracts with hospitals and facility[hyphen]based providers that avoid
balance billing. However, the statute does not require plans or issuers
to cover balance billed amounts, nor does it prohibit balance billing.
Even where the protections in the statute apply, a participant,
beneficiary, or enrollee may be subject to balance billing. In the
future, the Departments will consider ways to prevent providers from
billing a participant, beneficiary, or enrollee for emergency services
from out-of-network providers at in-network hospitals and facilities.
States may also consider ways to prevent balance billing in these
circumstances.
The minimum payment standards are designed to reduce potential
amounts of balance billing to patients. Stakeholders commented that in
circumstances where patients will not be balance billed (because
balance billing is prohibited or because the issuer, rather than the
patient, is required to cover the balance bill), the minimum payment
standards are not necessary. In response to these comments, the
Departments issued an FAQ \86\ stating that the minimum payment
standards set forth in the interim final regulations were developed to
protect patients from being financially penalized for obtaining
emergency services on an out-of-network basis. If State law prohibits
balance billing, plans and issuers are not required to satisfy the
payment minimum set forth in the regulations. Similarly, if a plan or
issuer is contractually responsible for any amounts balanced billed by
an out-of-network emergency services provider, the plan or issuer is
not required to satisfy the payment minimum. In both situations,
however, a plan or issuer may not impose any copayment or coinsurance
requirement for out-of-network emergency services that is higher than
the copayment or coinsurance requirement that would apply if the
services were provided in-network. In addition, a plan or issuer must
provide an enrollee or beneficiary adequate and prominent notice of
their lack of financial responsibility with respect to amounts balance
billed in order to prevent inadvertent payment by an enrollee or
beneficiary. These final regulations incorporate this clarification.
The regulations do not preempt existing State consumer protection laws
and do not prohibit States from enacting new laws with respect to
balance billing that would provide consumer protections at least as
strong as the Federal statute.
---------------------------------------------------------------------------
\86\ See Affordable Care Act Implementation FAQ Part I Q15 at
https://www.dol.gov/ebsa/faqs/faq-aca.html and.https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs.html.
---------------------------------------------------------------------------
In response to the interim final regulations, commenters also
requested that the Departments require plans and issuers to inform a
participant, beneficiary, or enrollee using clear and understandable
language of the consequences of using out-of-network emergency
services, including the possibility of balance billing. Another
commenter stated that the summary plan description (SPD) provides
sufficient information to meet the notice requirements. The Departments
agree that plans and issuers must disclose the terms of the coverage as
part of plan documents and are not adding a new notice requirement at
this time.
d. Definition of Emergency Services
In applying the rules relating to emergency services, the terms
emergency medical condition, emergency services, and stabilize have the
meaning given to those terms under the Emergency Medical Treatment and
Labor Act (EMTALA), section 1867 of the Social Security Act. Under
EMTALA, the term emergency services includes (1) ``an appropriate
medical screening examination that is within the capability of the
emergency department of a hospital, including ancillary services
routinely available to the emergency department, to determine whether
an emergency medical condition exists''; and (2) ``such further medical
examination and such treatment as may be required to stabilize the
medical condition.'' \87\
---------------------------------------------------------------------------
\87\ 42 U.S.C. 1395dd(a)-(b).
---------------------------------------------------------------------------
[[Page 72214]]
Some commenters recommended that the Departments define ``emergency
services'' such that an enrollee or beneficiary may only receive
emergency benefits if an enrollee or beneficiary seeks treatment within
24 hours of the onset of an emergency. These final regulations decline
to adopt this comment. The term ``emergency services'' as defined by
the interim final regulations and these final regulations is based on
the statutory definition, which does not specify parameters with
respect to time. Accordingly, a plan or issuer cannot set a time limit
within which to seek emergency services and must provide coverage for
any emergency services that meet the definition of emergency services
under EMTALA.
Some commenters requested clarification as to whether air ambulance
transport and other emergency transportation is within the scope of the
term ``emergency services.'' The Departments decline to provide a rule
addressing this issue. These final regulations continue to provide that
the terms emergency medical condition, emergency services, and
stabilize have the meaning given to those terms under EMTALA, section
1867 of the Social Security Act.\88\
---------------------------------------------------------------------------
\88\ For a more detailed discussion of definitions and
requirements under EMTALA, see CMS State Operations Manual, Appendix
V, pg. 33-41, available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/som107ap_v_emerg.pdf.
---------------------------------------------------------------------------
H. Provisions No Longer Applicable
1. Special Rule Relating to Dependent Coverage of Children to Age 26
for Grandfathered Group Health Plans
The dependent coverage provision of PHS Act section 2714 applies to
all group health plans and health insurance issuers offering group or
individual health insurance coverage for plan years (in the individual
market, policy years) beginning on or after September 23, 2010, whether
or not the plan or health insurance coverage qualifies as a
grandfathered health plan. However, consistent with section 2714 of the
PHS Act, for plan years beginning before January 1, 2014, the 2010
interim final regulations provided that a grandfathered health plan
that is a group health plan that makes available dependent coverage of
children may exclude from coverage an adult child who has not attained
age 26 if the child is eligible to enroll in an employer-sponsored
health plan (as defined in section 5000A(f)(2) of the Code) other than
a group health plan of a parent. Because this special rule for
grandfathered group health plans no longer applies, it is not
incorporated into these final regulations.
2. Transitional Rules for Individuals Whose Coverage Ended by Reason of
Reaching a Dependent Eligibility Threshold
The 2010 interim final regulations implementing PHS Act section
2714 provided transitional relief for a child whose coverage ended, or
who was denied coverage (or was not eligible for coverage) under a
group health plan or health insurance coverage because, under the terms
of the plan or coverage, the availability of dependent coverage of
children ended before the attainment of age 26. The 2010 interim final
regulations also required a plan or issuer to give such a child a
special enrollment opportunity, which was required to be provided
(including written notice) not later than the first day of the first
plan year (in the individual market, policy year) beginning on or after
September 23, 2010. Because the transitional rule no longer applies, it
is not incorporated into these final regulations.
3. Restricted Annual Limits and Transitional Rules for Individuals
Whose Coverage or Benefits Ended by Reason of Reaching a Lifetime
Dollar Limit
PHS Act section 2711 and its implementing interim final regulations
generally prohibited lifetime or annual limits on the dollar value of
EHBs (as defined in section 1302(b) of the Affordable Care Act). With
respect to annual dollar limits, the statute and the interim final
regulations allowed the imposition of ``restricted annual limits'' with
respect to EHBs for plan years (in the individual market, policy years)
beginning before January 1, 2014. The interim final regulations adopted
a three-year phased approach to restricted annual limits. As set forth
in the interim final regulations, the restricted annual limits on the
dollar value of EHBs could not be lower than:
For plan or policy years beginning on or after September
23, 2010 but before September 23, 2011, $750,000;
For plan or policy years beginning on or after September
23, 2011 but before September 23, 2012, $1.25 million; and
For plan or policy years beginning on or after September
23, 2012 but before January 1, 2014, $2 million.
With respect to plan or policy years beginning on or after January
1, 2014, no annual dollar limits are permitted on essential health
benefits except in the case of grandfathered individual market
coverage.
The interim final regulations also provided transitional rules for
individuals who reached a lifetime dollar limit under a group health
plan or health insurance coverage prior to the applicability date of
the interim final regulations. The regulations required a plan or
issuer to provide an individual whose coverage ended due to reaching a
lifetime dollar limit with an enrollment opportunity (including written
notice) that continues for at least 30 days. The notice and enrollment
opportunity was required to be provided not later than the first day of
the first plan year (in the individual market, policy year) beginning
on or after September 23, 2010. Because the provisions regarding
restricted annual dollar limits and the transitional rules regarding
lifetime dollar limits no longer apply, they are not incorporated into
these final regulations.
I. Applicability
1. General Applicability
These final regulations apply to group health plans and health
insurance issuers beginning on the first day of the first plan year
(or, in the individual market, the first day of the first policy year)
beginning on or after January 1, 2017. Until these final regulations
become applicable, plans and issuers are required to continue to comply
with the corresponding interim final regulations at 29 CFR part 2590,
contained in the 29 CFR, parts 1927 to end, edition revised as of July
1, 2015, and 45 CFR parts 144, 146, and 147, contained in the 45 CFR,
parts 1 to 199, edition revised as of October 1, 2015. In accordance
with section 7805(e)(2) of the Code, the corresponding temporary
regulations promulgated by the Department of the Treasury are
inapplicable. Under section 104 of the Health Insurance Portability and
Accountability Act (HIPAA), enacted on August 21, 1996, and subsequent
amendments, the Departments must coordinate policies with respect to
parallel provisions of ERISA, the PHS Act, and the Code (shared
provisions). The Departments operate under a Memorandum of
Understanding \89\ implementing HIPAA section 104 which provides that
the shared provisions must be administered so as to have the same
effect at all times and the Departments must coordinate policies
relating to enforcing the shared provisions in order to avoid
duplication of enforcement efforts and to assign
[[Page 72215]]
priorities in enforcement. Therefore, until these final regulations
promulgated by the Department of the Treasury become applicable,
compliance with corresponding interim final regulations at 29 CFR part
2590, contained in the 29 CFR, parts 1927 to end, edition revised as of
July 1, 2015 shall satisfy corresponding requirements of the Code.
---------------------------------------------------------------------------
\89\ See 64 FR 70164 (December 15, 1999).
---------------------------------------------------------------------------
Section 1251 of the Affordable Care Act provides that grandfathered
health plans are subject to only certain provisions of the Affordable
Care Act. The final regulations under PHS Act section 2719, Internal
Claims and Appeals and External Review (26 CFR 54.9815-2719, 29 CFR
2590.715-2719, 45 CFR 147.136) and PHS Act Section 2719A, Patient
Protections (26 CFR 54.9815-2719A, 29 CFR 2590.715-2719A, 45 CFR
147.138) do not apply to grandfathered health plans. Final regulations
under PHS Act section 2704, Prohibition of Preexisting Condition
Exclusions (26 CFR 54.9815-2704, 29 CFR 2590.715-2704, 45 CFR 147.108);
PHS Act section 2711, Prohibition on Lifetime and Annual Limits (26 CFR
54.9815-2711, 29 CFR 2590.715-2711, 45 CFR 147.126); PHS Act section
2712, Prohibition on Rescissions (26 CFR 54.9815-2712, 29 CFR 2590.715-
2712, 45 CFR 147.128); and PHS Act section 2714, Coverage of Dependents
to Age 26 (26 CFR 54.9815-2714, 29 CFR 2590.715-2714, 45 CFR 147.120)
apply to grandfathered health plans, except the prohibition of
preexisting condition exclusions and prohibition on annual dollar
limits do not apply to grandfathered health plans that are individual
health insurance coverage. For a list of the market reform provisions
under title XXVII of the PHS Act, as added or amended by the Affordable
Care Act and incorporated into ERISA and the Code, applicable to
grandfathered health plans, visit https://www.dol.gov/ebsa/pdf/grandfatherregtable.pdf.
2. Expatriate Plans
On December 16, 2014, Congress enacted the Expatriate Health
Coverage Clarification Act of 2014 (EHCCA) as part of the Consolidated
and Further Continuing Appropriations Act, 2015, Division M, Public Law
113-235. The EHCCA provides that the market reform requirements of the
Affordable Care Act generally do not apply to expatriate health plans,
expatriate health insurance issuers with respect to expatriate health
plans, and employers in their capacity as plan sponsors of expatriate
health plans. However, the plans, coverage, sponsors and issuers must
still satisfy provisions of the PHS Act, ERISA and the Code that would
otherwise apply if not for the enactment of the Affordable Care Act.
The EHCCA exception from the market reform requirements applies to
expatriate health plans that are issued or renewed on or after July 1,
2015.
Treasury and IRS issued Notice 2015-43, 2015-29 I.R.B. 73, to
provide interim guidance on the EHCCA. The notice provides that until
the issuance of further guidance and except as otherwise provided in
the notice, issuers, employers, and plan sponsors generally may apply
the requirements of EHCCA using a reasonable good faith interpretation
of the statute. The notice also provides that until further guidance is
issued, using the definition of expatriate health plan provided in
Affordable Care Act Implementation FAQs \90\ is treated as a reasonable
good faith interpretation of the statute. As explained in the notice,
the Departments intend to publish proposed regulations implementing and
providing guidance on the EHCAA. Consequently, these final regulations
do not address the application to expatriate health plans of the
Affordable Care Act provisions under which these final regulations are
promulgated.
---------------------------------------------------------------------------
\90\ See FAQs about Affordable Care Act Implementation (Part
XIII), Q&A-1, available at https://www.dol.gov/ebsa/pdf/faq-aca13.pdf
and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/ACA_implementation_faqs13.html. See also FAQs about Affordable Care
Act Implementation (Part XVIII), Q&A-6 and Q&A-7, available at
https://www.dol.gov/ebsa/pdf/faq-aca18.pdf and https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/ACA_implementation_faqs18.html.
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III. Economic Impact Analysis--Departments of Labor and Health and
Human Services
Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects; distributive impacts; and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility.
Under Executive Order 12866 (58 FR 51735), ``significant''
regulatory actions are subject to review by the Office of Management
and Budget (OMB). Section 3(f) of the Executive Order defines a
``significant regulatory action'' as an action that is likely to result
in a rule (1) having an annual effect on the economy of $100 million or
more in any one year, or adversely and materially affecting a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating a
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order. These
final regulations have been designated ``significant regulatory
actions'' under section 3(f) of Executive Order 12866. Accordingly, the
regulations have been reviewed by the Office of Management and Budget.
A regulatory impact analysis must be prepared for major rules with
economically significant effects ($100 million or more in any one
year). The Departments have concluded that these final regulations
would have economic impacts of $100 million or more in at least one
year, thus meeting the definition of an ``economically significant
rule'' under Executive Order 12866. Therefore, consistent with
Executive Orders 12866 and 13563, the Departments have provided an
assessment of the potential benefits and the costs associated with
these final regulations.
The Departments expect these final regulations, when compared with
the interim final regulations, to have marginal benefits and costs.
This is because they primarily provide clarifications of the previous
interim final regulations issued in 2010 and 2011 and incorporate
subregulatory guidance, including frequently asked questions and safe
harbors issued by the Departments. The Departments do not have
sufficient data to quantify these costs and benefits, but they are
qualitatively discussed throughout the remainder of this section and
summarized in the Accounting Table.
[[Page 72216]]
Table 1--Accounting Table
----------------------------------------------------------------------------------------------------------------
Category Estimate Year dollar Discount rate Period covered
----------------------------------------------------------------------------------------------------------------
Benefits--Qualitative: These final regulations help ensure the protections and benefits intended by Congress.
Many of these benefits have a distributional component, and promote equity, in the sense that they will benefit
those who are especially vulnerable as a result of health problems and financial status. Other benefits include
increased access to care and to information needed to protect consumer's rights. These final regulations also
lead to improved health outcomes for patients and increase certainty for issuers, plans and consumers by
providing clarifications and guidance.
----------------------------------------------------------------------------------------------------------------
Costs:
Annualized Monetized........ $169.9............ 2015.............. 7%................ 2016-2025
($millions/year)............ $169.9............ 2015.............. 3%................ 2016-2025
----------------------------------------------------------------------------------------------------------------
Qualitative: The Departments have quantified where possible the costs associated with these final regulations.
These costs include burden that will be incurred to prepare and distribute required disclosures and notices,
and to bring plan and issuers' policies and procedures into compliance with the new requirements. The
Departments have not been able to quantify cost related to increased access to care. To the extent these
patient protections increase access to health care services, increased health care utilization and costs could
result.
----------------------------------------------------------------------------------------------------------------
Transfers:
Annualized Monetized........ $53.5............. 2015.............. 7%................ 2016-2025
($millions/year)............ $53.5............. 2015.............. 3%................ 2016-2025
----------------------------------------------------------------------------------------------------------------
Qualitative: Due to the risk pooling nature of health insurance these patient protections and other requirements
create a transfer from those paying premiums to those individuals and families now obtaining increased
protections, coverage and services.
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
1. Need for Regulatory Action
a. Preservation of Right To Maintain Existing Coverage
Section 1251 of the Affordable Care Act provides that grandfathered
health plans are subject only to certain provisions of the Affordable
Care Act. The statute, however, is silent regarding changes plan
sponsors and issuers can make to plans and health insurance coverage
while retaining grandfather status.
These final regulations are necessary in order to provide rules
that group health plans and health insurance issuers can use to
determine which changes they can make to the terms of the plan or
health insurance coverage while retaining their grandfather status,
thus exempting them from certain provisions of the Affordable Care Act
and fulfilling a goal of the legislation, which is to allow those that
like their coverage to keep it. These final regulations are designed to
allow individuals to keep the coverage they had on March 23, 2010 (the
date of enactment of the Affordable Care Act) to reduce short term
disruptions in the market, and to ease the transition required by the
market reforms.
In drafting this rule, the Departments attempted to balance a
number of competing interests. For example, the Departments sought to
provide adequate flexibility to group health plans and issuers to ease
transition and mitigate potential premium increases while avoiding
excessive flexibility that would unduly delay implementation of
critical consumer protections in the Affordable Care Act. In addition,
the Departments recognized that many group health plans and issuers
make changes to the terms of plans or health insurance coverage on an
annual basis: Premiums fluctuate, provider networks and drug
formularies change, employer and employee contributions and cost-
sharing change, and covered items and services may vary. Without some
ability to make some adjustments while retaining grandfather status,
the ability of individuals to maintain their current coverage would be
frustrated, because most plans or health insurance coverage would
quickly cease to be regarded as the same group health plan or health
insurance coverage in existence on March 23, 2010. At the same time,
allowing unfettered changes while retaining grandfather status would
also be inconsistent with Congress's intent to provide a transition to
the Affordable Care Act market reforms.
These final regulations regarding grandfather health plans are
designed, among other things, to take into account reasonable changes
routinely made by plan sponsors or issuers without the plan or health
insurance coverage relinquishing its grandfather status. Thus, for
example, these final regulations generally permit plans and issuers to
make voluntary changes to increase benefits, to conform to required
legal changes, and to voluntarily adopt other consumer protections in
the Affordable Care Act without relinquishing grandfather status.
b. Prohibition of Preexisting Condition Exclusions
Section 2704 of the PHS Act, as added by the Affordable Care Act,
generally prohibits group health plans and health insurance issuers
offering group or individual health insurance coverage from imposing
any preexisting condition exclusion.
Studies estimate that preexisting conditions affect approximately
129 million Americans \91\ which includes a broad range of conditions,
from heart disease--affecting an estimated 85.6 million American adults
(with more than 1 in 3 having one or more types of cardiovascular
disease \92\)--to cancer--which in 2012 affected an estimated 14
million Americans and will affect an estimated 1.7 million additional
people in 2015 \93\--to relatively minor conditions like hay fever,
asthma, or previous sports injuries.\94\ Denials of benefits or
coverage based on a preexisting condition previously made adequate
health insurance unavailable to millions of Americans. Before enactment
of the Affordable Care Act, in 45 States, health insurance issuers in
the individual market could deny coverage, charge higher premiums, and/
[[Page 72217]]
or deny benefits for a preexisting condition.\95\
---------------------------------------------------------------------------
\91\ ASPE. At Risk: Pre-Existing Conditions Could Affect 1 in 2
Americans: 129 Million People Could Be Denied Affordable Coverage
Without Health Reform, 2011.
\92\ Mozzafarian, D., et al. Heart Disease and Stroke
Statistics--2015 Update: A Report From the American Heart
Association. Circulation. 2015; 131(4):e29-322.
\93\ National Cancer Institute: Surveillance, Epidemiology, and
End Results Program (SEER) Stat Fact Sheet: All Cancer Types. https://seer.cancer.gov/statfacts/html/all.html.
\94\ Pollitz, K., et al. How Accessible is Individual Health
Insurance for Consumers in Less than Perfect Health? Kaiser Family
Foundation, June 2001.
\95\ Levitt, L., et al. How Buying Insurance Will Change Under
Obamacare. Kaiser Family Foundation, September 2013.
---------------------------------------------------------------------------
These regulations finalize interim final regulations which were
necessary to implement this statutory provision which Congress enacted
to help ensure that quality health coverage is available to more
Americans without the imposition of a preexisting condition exclusion.
c. Lifetime and Annual Limits
Section 2711 of the PHS Act, as added to the Affordable Care Act,
generally prohibits group health plans and health insurance issuers
offering group or individual health insurance coverage from imposing
annual and lifetime limits on the dollar value of essential health
benefits.
These protections ensure that patients are not confronted with
devastating healthcare costs because they have exhausted their health
coverage when faced with a serious medical condition.
These regulations finalize interim final regulations that were
necessary to implement the statutory provisions with respect to annual
and lifetime limits that Congress enacted to help ensure that more
Americans with chronic, long-term, and/or expensive illnesses have
access to quality health coverage.
d. Prohibition on Rescissions
Section 2712 of the PHS Act, as added by the Affordable Care Act,
prohibits group health plans and health insurance issuers offering
group or individual health insurance coverage from rescinding coverage
except in the case of fraud or intentional misrepresentation of
material fact.
Prior to the Affordable Care Act, thousands of Americans lost
health coverage each year due to rescission. When a coverage rescission
occurs, an individual's health coverage is retroactively cancelled,
which means that the insurance company is no longer responsible for
medical care claims that had previously been accepted and paid.
Rescissions can result in significant financial hardship for affected
individuals, because, in most cases, the individuals have accumulated
significant medical expenses.
These final regulations implement the statutory provision enacted
by Congress to protect the most vulnerable Americans, those that incur
substantial medical expenses due to a serious medical condition, from
financial devastation by ensuring that such individuals do not unjustly
lose health coverage by rescission.
e. Coverage of Dependents to Age 26
PHS Act section 2714, as added by the Affordable Care Act, requires
group health plans and health insurance issuers offering group or
individual health insurance coverage that make dependent coverage
available for children to continue to make coverage available to such
children until the attainment of age 26. With respect to a child
receiving dependent coverage, coverage does not have to be extended to
a child or children of the child or a spouse of the child. Furthermore
these final regulations clarify that for an individual not described in
Code section 152(f)(1), such as a grandchild or niece, a plan may
impose additional conditions on eligibility for health coverage, such
as a condition that the individual be a dependent for income tax
purposes, and the final regulations also clarify that distinctions
based upon age that apply generally to all individuals covered under
the plan (employees, spouses, dependent children) are not prohibited.
These regulations finalize the interim final regulations, which were
necessary to implement the statute.
f. Internal Claims and Appeals and External Review
Before the enactment of the Affordable Care Act, health plan
sponsors and issuers were not uniformly required to implement claims
and appeals processes. For example, ERISA-covered group health plan
sponsors were required to implement internal claims and appeal
processes that complied with the DOL claims procedure regulation,\96\
while group health plans that were not covered by ERISA, such as plans
sponsored by State and local governments were not. Health insurance
issuers offering coverage in the individual insurance market were
required to comply with various applicable State internal appeals laws
but were not required to comply with the DOL claims procedure
regulation.
---------------------------------------------------------------------------
\96\ 29 CFR 2560.503-1.
---------------------------------------------------------------------------
With respect to external appeal processes, before the enactment of
the Affordable Care Act, sponsors of fully insured ERISA-covered group
health plans, fully-insured State and local governmental plans, and
fully-insured church plans were required to comply with State external
review laws, while self-insured ERISA-covered group health plans were
not subject to such laws due to ERISA preemption. In the individual
health insurance market, issuers in States with external review laws
were required to comply with such laws. However, uniform external
review standards did not apply, because State external review laws vary
from State-to-State. Moreover, at least six States did not have
external review laws when the Affordable Care Act was enacted;
therefore, prior to the Affordable Care Act, issuers in those States
were not required to implement an external review process.
Under this regulatory system, inconsistent claims and appeals
processes applied to plan sponsors and issuers and a patchwork of
consumer protections were provided to participants, beneficiaries, and
enrollees. The applicable processes and protections depended on several
factors including whether (1) plans were subject to ERISA, (2) benefits
were self-funded or financed by the purchase of an insurance policy,
(3) issuers were subject to State internal claims and appeals laws, and
(4) issuers were subject to State external review laws, and if so, the
scope of such laws (such as, whether the laws only apply to one segment
of the health insurance market, e.g., managed care or HMO coverage).
These uneven protections created an appearance of unfairness, increased
cost for issuers and plans operating in multiple States, and may have
led to confusion among consumers about their rights.
Congress enacted PHS Act section 2719 to ensure that plans and
issuers implemented more uniform internal and external claims and
appeals processes and to set a minimum standard of consumer protections
that are available to participants, beneficiaries, and enrollees. These
final regulations are necessary to provide rules that plan sponsors and
issuers can use to implement effective internal and external claims and
appeals processes that meet the requirements of PHS Act section 2719.
These changes do not add any incremental costs to those associated
with the 2010 interim final rules, because they simply incorporate sub-
regulatory guidance that was already issued.
g. Patient Protections
Section 2719A of the PHS Act, as added by the Affordable Care Act,
requires group health plans and health insurance issuers offering group
or individual health insurance coverage to ensure choice of healthcare
professionals (including pediatricians, obstetricians, and
gynecologists) and greater access to benefits for emergency services.
Provider choice is a strong predictor of patient trust in a provider,
and patient-provider trust can increase
[[Page 72218]]
health promotion and therapeutic effects.\97\ Studies have found that
patients tend to experience better quality healthcare if they have
long-term relationships with their healthcare provider.\98\
---------------------------------------------------------------------------
\97\ Piette, John, et al., ``The Role of Patient-Physician Trust
in Moderating Medication Nonadherence Due to Cost Pressures.''
Archives of Internal Medicine 165, August (2005) and Roberts,
Kathleen J., ``Physician-Patient Relationships, Patient
Satisfaction, and Antiretroviral Medication Adherence Among HIV-
Infected Adults Attending a Public Health Clinic.'' AIDS Patient
Care and STDs 16.1 (2002).
\98\ Blewett, Lynn, et al., ``When a Usual Source of Care and
Usual Provider Matter: Adult Prevention and Screening Services.''
Journal of General Internal Medicine 23.9 (2008).
---------------------------------------------------------------------------
The emergency care provisions of PHS Act section 2719A require (1)
non-grandfathered group health plans and health insurance issuers that
cover emergency services to cover such services without prior
authorization and without regard to whether the health care provider
furnishing the services is a participating network provider, and (2)
copayments and coinsurance for out-of-network emergency care do not
exceed the cost-sharing requirements that would have been imposed if
the services were provided in-network. These provisions will help to
ensure that patients receive covered emergency care when they need it,
especially in situations where prior authorization cannot be obtained
due to exigent circumstances or an in-network provider is not available
to provide the services. They also will protect patients from the
substantial financial burden that can be imposed when differing
copayment or coinsurance arrangements apply to in-network and out-of-
network emergency care.
These regulations finalize the interim final regulations that were
necessary to implement the statutory provision enacted by Congress to
provide these essential patient protections.
A. Section 1251 of the Affordable Care Act, Preservation of Right To
Maintain Existing Coverage (26 CFR 54.9815-1251, 29 CFR 2590.715-1251,
45 CFR 147.140)
1. Affected Entities and Individuals
The Departments estimate that there are 2.3 million ERISA-covered
plans with an estimated 66 million policy holders and 130.2 million
participants and beneficiaries in those plans.\99\ Similarly, the
Departments estimate that there are 128,400 State and local
governmental health plans \100\ with an estimated 21.1 million policy
holders and 41.1 million participants and beneficiaries in those
plans.\101\
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\99\ EBSA estimates based on the 2014 Medical Expenditure
Survey--Insurance Component.
\100\ The estimate of the total number of State and local
governmental plans is based on the 2012 Census of Government.
\101\ Health Insurance Coverage Bulletin: Abstract of Auxiliary
Data for the March 2014 Annual Social and Economic Supplement to the
Current Population Survey, Table 3C https://www.dol.gov/ebsa/pdf/coveragebulletin2014.pdf.
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The 2014 Employer Health Benefits Survey reports that 37 percent of
firms offer health benefits that have at least one health plan that is
a grandfathered plan, and 26 percent of employees are enrolled in
grandfathered plans.\102\ Using the above estimates, there are 851,000
(2.3 million ERISA-covered plans* 0.37) ERISA-covered plans with 17.2
million policy holders (66 million policy holders *0.26) and 33.9
million participants and beneficiaries (130.2 million participants and
beneficiaries * 0.26). There are approximately 47,500 grandfathered
State and local governmental health plans (0.37*128,400 plans \103\)
with approximately 5.5 million policyholders (21.1 million policy
holders *0.26) and 10.7 million participants and beneficiaries (41.1
million participants and beneficiaries * 0.26).
---------------------------------------------------------------------------
\102\ Kaiser Family Foundation, ``2014 Employer Health Benefits
Survey.'' https://kff.org/health-costs/report/2014-employer-health-benefits-survey/.
\103\ The estimate of the total number of State and local
governmental plans is based on the 2012 Census of Government.
---------------------------------------------------------------------------
There were an estimated 1.4 million policies with grandfathered
coverage during 2013 with 2.2 million enrollees.\104\
---------------------------------------------------------------------------
\104\ Based on data from the McKinsey Center for U.S. Health
System Reform and Medical Loss Ratio submissions for 2013 reporting
year.
---------------------------------------------------------------------------
2. Discussion of Economic Impacts of Retaining or Relinquishing
Grandfather Status
The economic effects of these final regulations will depend on
decisions by plan sponsors and issuers, as well as by those covered
under these plans and health insurance coverage.
For a plan sponsor or issuer, the potential economic impact of the
application of the provisions in the Affordable Care Act may be one
consideration in making its decisions. To determine the value of
retaining a health plan's grandfather status, each plan sponsor or
issuer must determine whether the rules applicable to grandfathered
health plans are more or less favorable than the rules applicable to
non-grandfathered health plans. This determination will depend on such
factors as the respective prices of grandfathered and non-grandfathered
health plans, as well as the preferences of grandfathered health plans'
covered populations and their willingness to pay for benefits and
patient protections available under non-grandfathered health plans. In
making its decision whether to maintain grandfather status, a plan
sponsor or issuer is also likely to consider the market segment
(because different rules apply to the large and small group market
segments), and the utilization pattern of its covered population. Those
costs and benefits of the various provisions of the Affordable Care Act
and their interaction with the coverages' grandfathered status have
been discussed in the impact analysis of those individual requirements
and are not repeated here.
3. Impacts on the Individual Market
The market for individual insurance is significantly different than
that for group coverage. As discussed in previous interim final
regulations issued in 2010 and 2011, for many, the market is
transitional, providing a bridge between other types of coverage. One
study found a high percentage of individual insurance policies began
and ended with employer-sponsored coverage.\105\ More importantly,
coverage on particular policies tends to be for short periods of time.
As such, high turnover rates are likely the chief source of changes in
grandfather status. Reliable data are scant, so there is no ability to
update estimates as to how many people in the individual market are in
non-grandfathered plans today.
---------------------------------------------------------------------------
\105\ Adele M. Kirk. The Individual Insurance Market: A Building
Block for Health Care Reform? Health Care Financing Organization
Research Synthesis. May 2008.
---------------------------------------------------------------------------
1. Disclosure of Grandfather Status and Document Retention
To maintain grandfathered health plan status under these final
regulations, a plan or issuer must maintain records that document the
plan or policy terms in connection with the coverage in effect on March
23, 2010, and any other documents necessary to verify, explain or
clarify its status as a grandfathered health plan, disclose its status
as a grandfathered health plan, and if switching issuers and intending
to maintain its status as a grandfathered plan, it must provide to the
new health insurance issuer with documentation of plan terms under the
prior health coverage sufficient for it to determine whether a change
causing a cessation of grandfathered health plan status has occurred.
The Departments estimate that the total cost for these requirements
will be $1.8 million annually. For a detailed discussion of the
grandfathered health plan document retention and disclosure
requirements, see the Paperwork
[[Page 72219]]
Reduction Act section later in this preamble.
B. PHS Act Section 2704, Prohibition of Preexisting Condition
Exclusions (26 CFR 54.9815-2704, 29 CFR 2590.715-2704, 45 CFR 147.108)
1. Affected Entities and Individuals
In the individual market, those applying for insurance will no
longer face exclusions or denials of coverage based on a preexisting
condition while those covered by non-grandfathered individual coverage
with a rider or exclusion period will gain coverage for any preexisting
condition otherwise covered by the plan. In the group market,
participants and beneficiaries that have experienced a lapse in
coverage will no longer face up to a twelve-month exclusion for
preexisting conditions.
There are two main categories of people who have most likely been
directly affected by this provision: First, those who had a preexisting
condition and who were uninsured; second, those who were covered by
grandfathered individual policies containing riders excluding coverage
for a preexisting condition or have an exclusion period. It is
difficult to estimate precisely how many uninsured individuals had a
preexisting condition as of when this provision went into effect, as
information on whether individuals have a preexisting condition for the
purpose of obtaining health insurance is not collected in any major
population based survey and can include conditions from hay fever to
HIV/AIDS, all which could result in a denial of coverage.\106\ The
Departments find it difficult to estimate the number of individuals
that will be uniquely affected by these final regulations due to the
interactions with other provisions of the Affordable Care Act; however,
estimates indicate that 50-129 million non-elderly individuals with a
preexisting condition, 25 million uninsured individuals--including the
3.7 million adults that fall into the ``coverage gap'' in States
without Medicaid expansion, and the estimated 66.6-82 million with ESI
with preexisting conditions could benefit from these final
regulations.\107\
---------------------------------------------------------------------------
\106\ Levitt, L., et al. How Buying Insurance Will Change Under
Obamacare. Kaiser Family Foundation, September 2013.
\107\ ASPE. At Risk: Pre-Existing Conditions Could Affect 1 in 2
Americans: 129 Million People Could Be Denied Affordable Coverage
Without Health Reform, 2011 and Artiga, S. et al. The Impact of the
Coverage Gap in States not Expanding Medicaid by Race and Ethnicity.
The Kaiser Family Foundation, April 2015.
---------------------------------------------------------------------------
2. Benefits
These final regulations will expand and improve coverage for those
Americans with preexisting conditions; those currently diagnosed,
undiagnosed, or who will develop conditions as they age. This will
likely increase access to health care, improve health outcomes, and
reduce family financial strain and ``job lock.''
For many years insurance providers/issuers maintained risk pools
that are equal to that of the general population, using various
methodologies; \108\ often to the detriment of those most in need.
Passage of the Affordable Care Act on March 23, 2010, provided millions
of Americans with a way to obtain, re-obtain, or keep their affordable
health coverage without the fear of losing or not having it when they
are at their most vulnerable.
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\108\ Claxton, G. and Lundy, J. How Health Care Coverage Works:
A Primer 2008 Update. The Kaiser Family Foundation, April 2008.
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Prior to enactment of the Affordable Care Act, an estimated 50-52
million non-elderly people lacked insurance and 50-129 million were
diagnosed with a preexisting condition.\109\ Numerous studies show that
uninsured adults and children are 3 to 6 times more likely to go
without or postpone receiving needed care, experience higher delays and
incidences of unmet needs, have higher incidences in avoidable hospital
stays, and have a higher risk of death after an accident or when
hospitalized.\110\ This provision benefits and protects the millions of
non-elderly persons who currently have a preexisting condition and
those that will develop some condition as they age--in one study of
those reporting good or excellent health, 15-30 percent will develop a
preexisting condition in the next eight years \111\--by providing them
a means to obtain or keep health coverage. Without the protections of
these final regulations, many more Americans could be faced with the
fear and anxiety of trying to obtain health coverage or faced with
insufficient coverage due to preexisting conditions.
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\109\ ASPE. At Risk: Pre-Existing Conditions Could Affect 1 in 2
Americans: 129 Million People Could Be Denied Affordable Coverage
Without Health Reform, 2011; Collins, S., et al. Help is on the
Horizon: How the Recession Has Left Millions of Workers Without
Health Insurance, and How Health Reform Will Bring Relief--Findings
from The Commonwealth Fund Biennial Health Insurance Survey of 2010.
The Commonwealth Fund. 2011. Studies utilized 2008 MEPS data and The
Commonwealth Biennial Health Insurance Survey of 2010 and prior
years to estimate the numbers of individuals with preexisting
conditions.
\110\ Collins, S., et al. Help is on the Horizon: How the
Recession Has Left Millions of Workers Without Health Insurance, and
How Health Reform Will Bring Relief--Findings from The Commonwealth
Fund Biennial Health Insurance Survey of 2010. The Commonwealth
Fund. 2011; Callahan, S., et al. Access to Health Care for Young
Adults With Disabling Chronic Conditions. Arch Pediatr Adolesc Med.
2006;160:178-182; and Bernstein, J., et al. Issue Brief: How Does
Insurance Coverage Improve Health Outcomes? Mathematica Policy
Research, Inc. 2010:1.
\111\ Bailey, K. Worry No More: Americans with Pre-Existing
Conditions Are Protected by the Health Care Law, Families USA; 2012
and ASPE. At Risk: Pre-Existing Conditions Could Affect 1 in 2
Americans: 129 Million People Could Be Denied Affordable Coverage
Without Health Reform, 2011.
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As discussed previously, those with preexisting condition
exclusions or those that were uninsured could have found themselves
being charged 2.5 times more prior to the Affordable Care Act.\112\ The
higher cost faced by those with preexisting conditions, whether
uninsured or containing riders, could have led families to encounter
financial hardships, crisis, and emotional stress.
---------------------------------------------------------------------------
\112\ Bailey, K. Worry No More: Americans with Pre-Existing
Conditions Are Protected by the Health Care Law, Families USA; 2012
and Anderson, G. From `Soak The Rich' To `Soak The Poor': Recent
Trends In Hospital Pricing. Health Affairs,2007; 26(3), pp. 780-789.
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Reports show that those lacking coverage are more likely to have
trouble paying bills while being more likely to take on additional
credit card debt and spend down family assets and savings, often
resulting in the loss of their homes and personal bankruptcy: In 1981
the foreclosure rate reported to be associated with medical issues was
only 8 percent; by 2007 this rate had increased to 62.1 percent of all
personal bankruptcies, and 49 percent of foreclosures.\113\ These
higher rates can in turn lead to many health care organizations
providing uncompensated care: In 2008, the uninsured received $116
billion worth of hospital care--the primary source of which was federal
funding.\114\ In addition to their advantages with regard to access to
care, health, and well-being these final regulations are likely to
lower families' out-of-pocket health care spending and the level of
uncompensated care; thus benefiting State and Federal
[[Page 72220]]
governments and, by extension, taxpayers.
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\113\ Himmelstein, D. et al. Medical Bankruptcy in the United
States, 2007: Results of a National Study. Am Jour of Med. 2009;
122(8), pp. 741-746; Robertson, T., et al. ``Get sick, get out: The
medical causes of home mortgage foreclosures.'' Health Matrix:
Journal of Law-Medicine. 2008; 18(65), pp 65-105; Fact Sheet. Key
Facts about the Uninsured Population. The Kaiser Family Foundation.
October 2014; see also https://www.medicare.gov/your-medicare-costs/help-paying-costs/medicaid/medicaid.html.
\114\ Stoll, K. and Bailey, K. Hidden Health Tax: Americans Pay
a Premium. Families USA, 2009 and Coughlin, T. et al. Uncompensated
Care for Uninsured in 2013: A detailed Examination. The Kaiser
Family Foundation, 2014.
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Finally, these final regulations may reduce instances of ``job
lock''- situations in which workers are unable to change jobs due to
concerns regarding health insurance coverage for them and/or their
dependents. Due to the limitations and exclusions in individual health
coverage, many people were forced into a position where they chose to
remain in a job out of fear of losing their existing coverage or chose
a job with sponsored coverage over a higher wage position.\115\ Job
lock leads to a number of labor market distortions resulting in workers
in jobs that are a ``poor fit,'' with reduced satisfaction or skills
that are not properly utilized, affecting their ability to start new
businesses, retire, or reduce their work load.\116\ One study indicates
that 35 percent of those surveyed worried they will have to forego job
opportunities or forego retirement to maintain coverage.\117\
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\115\ GAO, Private Health Insurance: Estimates of Individuals
with Preexisting Conditions Range from 36 million to 122 million,
GAO-12-439, 2012.
\116\ Baker, D. Job Lock and Employer--Provided Health
Insurance: Evidence from the Literature. Public Policy Institute.
2015;I-35; ASPE. At Risk: Pre-Existing Conditions Could Affect 1 in
2 Americans: 129 Million People Could Be Denied Affordable Coverage
Without Health Reform, 2011; Fact Sheet. Key Facts about the
Uninsured Population. The Kaiser Family Foundation. October 2014.
\117\ Altman, D. Pre-X Redux. The Kaiser Family Foundation, June
2013.
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Under the Affordable Care Act, the interim final regulations, and
these final regulations, someone currently insured through the group
market with less than 18 months of continuous coverage may be more
willing to leave their job and become a self-employed entrepreneur if
they or their dependents have a preexisting condition--resulting in
potentially 2-4 million more self-employed individuals.\118\ Similarly,
even a worker with more than 18 months of continuous coverage who is
already protected by HIPAA may be more likely to consider switching
firms and changing policies because they will not have to worry that a
preexisting condition could be excluded for up to 12 months.\119\ While
the total reduction in job-lock may be small, the impact on those
families with members that have preexisting conditions may be
significant.
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\118\ Baker, D. Job Lock and Employer--Provided Health
Insurance: Evidence from the Literature. Public Policy Institute.
2015;I-35.
\119\ Foronstin, P. Health Insurance Portability and Job Lock:
Findings from the 1998 Health Confidence Survey. Employee Benefit
Research Institute Notes. 1998: 19(8), pp. 4-6.
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Executive Order 12866 requires agencies to take account of
``distributive impacts'' and ``equity.'' Requiring health plans and
issuers to provide coverage to adults and children with preexisting
conditions will result in a small increase in premium for relatively
healthy adults and children, and a large increase in health and
financial security for individuals with preexisting conditions. This
transfer is a meaningful increase in equity, and is a benefit of this
final regulation.
3. Costs and Transfers
Although those that have preexisting condition exclusions have
higher health care costs than healthier individuals, among individuals
with preexisting conditions, those who are uninsured have expenditures
that are somewhat lower than the average insured individual.\120\ It is
expected that when those individuals who are uninsured or have policies
with preexisting condition exclusions gain coverage, there will be
additional demand for and utilization of services, leading to a
transfer from out-of-pocket spending to spending covered by insurance,
which will partially be mitigated by a reduction in cost-shifting of
uncompensated care to the insured population as coverage expands.
---------------------------------------------------------------------------
\120\ Coughlin, T. et al. Uncompensated Care for Uninsured in
2013: A Detailed Examination. The Kaiser Family Foundation, 2014;
GAO, Private Health Insurance: Estimates of Individuals with
Preexisting Conditions Range from 36 million to 122 million, GAO-12-
439, 2012.
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In evaluating the impact of this provision, it is important to
remember that the full net effects of this provision cannot be
estimated because of its interactions with other provisions in the
Affordable Care Act. For example, under the current guaranteed
availability and renewability protections in the individual market,
children and young adults with a preexisting condition are now
generally able to obtain and maintain coverage on a parental plan,
where he or she can potentially stay on that plan until age 26. As
another example, the Affordable Care Act requires that non-
grandfathered health plans provide recommended preventive services at
no cost-sharing. This will amplify the benefits of coverage for newly
insured individuals with preexisting conditions. Moreover, the
expansion of the preexisting condition exclusion policy occurred at the
same time as other policies were implemented, such as the individual
responsibility and premium tax credit provisions. Therefore, the
Departments cannot provide a more precise estimation of either the
benefits or the costs and transfers of this provision.
C. PHS Act Section 2711, Prohibition on Lifetime and Annual Limits (26
CFR 54.9815-2711, 29 CFR 2590.715-2711, 45 CFR 147.126)
1. Affected Entities and Individuals
Prior to the passage of the Affordable Care Act, both the incidence
and amount of lifetime limits varied by market and plan type (e.g.,
HMO, PPO, POS). In the RIA for the interim final regulations, it was
estimated that only 8 percent of large employers, 14 percent of small
employers and 19 percent of individual market policies imposed an
annual limit at that time and thus would have been directly impacted by
the interim final regulations, which were phased in.
Fear and anxiety about reaching annual or lifetime limits on
coverage was a major concern among Americans who have health insurance,
although while such limits were relatively common in health insurance,
the numbers of people expected to exceed either an annual or lifetime
limit was quite low.
2. Benefits
As discussed in the RIA for the interim final regulations, annual
and lifetime limits function as caps on how much a group health plan or
insurance company will spend on medical care for a given insured
individual over the course of a year, or the individual's lifetime.
Once a person reaches this limit or cap, the person is essentially
uninsured: He or she must pay the remaining cost of medical care out-
of-pocket. These limits particularly affect people with high-cost
conditions,\121\ which typically are very serious and can lead to
financial hardship. Prohibiting lifetime limits and annual limits will
benefit families and individuals experiencing financial burdens due to
exceeding the benefit limits of their insurance policy. By ensuring and
continuing coverage, the regulations also reduce uncompensated care,
which would otherwise increase premiums of the insured population
through cost-shifting.
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\121\ A December 2014 study by Milliman ``2014 U.S. organ and
tissue transplant cost estimates and discussion'' found that the
average 2014 billed charges related to a heart transplant is
$1,242,200, a liver transplant averaged $739,100, while a heart-lung
transplant averaged $2,313,600.
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These provisions will also improve access to care. Reaching a limit
could interrupt or cause the termination of needed treatment, leading
to worsening of medical conditions. The removal and restriction of
benefit limits helps ensure continuity of care and the elimination of
the extra costs that arise when an
[[Page 72221]]
untreated or undertreated condition leads to the need for even more
costly treatment, that could have been prevented if no loss of coverage
had occurred. By ensuring continuation of coverage, the regulations
benefit the health and the economic well-being of participants,
beneficiaries, and enrollees.
Executive Order 12866 explicitly requires agencies to take account
of ``distributive impacts'' and ``equity,'' and these considerations
help to motivate the relevant statutory provisions and the interim
final regulations and these regulations. Prohibiting lifetime and
annual limits assures that insurance will perform the function for
which it was designed--namely, protecting health and financial
wellbeing for those most in need of care. This represents a meaningful
improvement in equity, which is a benefit associated with the
regulations.
3. Costs and Transfers
As discussed in the regulatory impact analysis for the interim
final regulations, extending health insurance coverage for individuals
who would otherwise hit a lifetime or annual limit will increase the
demand for and utilization of health care services, thereby generating
additional costs to the system. The three year phase-in of the
elimination of annual limits and the immediate elimination of lifetime
limits increased the actuarial value of the insurance coverage for
affected plans and policies if no other changes were made to the plan
or policy. Issuers and plans in the group market may have chosen to
make changes to the plan or policy to maintain the pre-regulation
actuarial value of the plan or policy, such as changing their provider
networks or copayments in some manner. To the extent that higher
premiums (or other plan or policy changes) are passed on to all
employees, there is an explicit transfer from workers who would not
incur high medical costs to those who do incur high medical costs. If,
instead, the employers do not pass on the higher costs of insurance
coverage to their workers, this can result in lower profits or higher
prices for the employer's goods or services. In the individual market,
when policies were individually underwritten with no rating bands in
the majority of States, the Departments expected the added premium cost
or other benefit changes to be largely borne by the individual
policyholder. With the market reforms in place, along with single risk
pool requirements, issuers can spread the increased costs across the
entire individual market, leading to a transfer from those who do not
incur high medical costs to those who do incur such costs. However, as
with the group market, such a transfer was expected to be modest, given
the small numbers of people who were expected to exceed their benefit
limits. The Departments previously estimated that the transfer would be
three-quarters of a percent or less for lifetime limits and one-tenth
of a percent or less for annual limits, under a situation of pure
community rating where all the costs get spread across the insured
population. This impact does not apply to grandfathered individual
market plans.
It is worth noting that these transfers are expected to have been
significantly mitigated by the associated expansion of coverage created
by the interim final regulations and other regulations implementing the
Affordable Care Act. The Departments expect that, as a result of the
gradual elimination of annual limits and the immediate elimination of
lifetime limits, fewer people have been left without protection against
high medical costs. This results in fewer individuals spending down
resources and enrolling in Medicaid or receiving other State and
locally funded medical support. Such an effect will likely be amplified
due to the high-cost nature of people who exceed benefit limits.
D. PHS Act Section 2712, Prohibition on Rescissions (26 CFR 54.9815-
2712, 29 CFR 2590.715-2712, 45 CFR 147.128)
1. Affected Entities and Individuals
PHS Act Section 2712 and these final regulations create a statutory
Federal standard and enforcement power in the group and individual
markets where it did not exist. Prior to this provision taking effect,
varying Federal common laws existed for ERISA plans. State rules
pertaining to rescission have been found to be preempted by ERISA by
five circuit courts (5th, 6th, 7th, 9th and 11th as of 2008).
The Affordable Care Act and its implementing regulations should
have a large effect on reducing the number of rescissions for two
reasons. First, the Affordable Care Act raised the standard governing
when coverage may be rescinded. Group health plans and health insurance
issuers may now only rescind coverage based on fraud or intentional
misrepresentation of a material fact which is a higher standard than
most State laws required previously. Second, the interaction of these
regulations with PHS Act sections 2704, prohibition of preexisting
condition exclusions, and sections 2705, prohibiting discrimination
against individual participants and beneficiaries based on health
status, could significantly reduce the number of policies rescinded.
Previously, the issues surrounding the reporting of pre-existing
conditions to issuers and an individual's health status were primary
causes of rescissions. With the main source of rescissions removed
there would be a significant drop in rescissions even without these
regulations.
The Departments assume that these final regulations will have their
largest impact on the individual insurance market, because group health
coverage rarely is rescinded.\122\ By creating a new Federal standard
governing when policies can be rescinded, the Departments expect these
final regulations to potentially affect the approximately 6.7 million
non-elderly individual health insurance policies covering 10.9 million
policy holders and their dependents in the individual health insurance
market.\123\ In addition, approximately 430 health insurance issuers
offering coverage in the individual health insurance market who
currently could rescind health insurance coverage are expected to be
affected.\124\ That said, the actual incidence of individuals who are
subject to rescissions each year is likely to be small. The NAIC
Regulatory Framework Task Force collected data on 52 companies covering
the period 2004-2008, and found that rescissions averaged 1.46 per
thousand policies in force.\125\ These pre-Affordable Care Act
estimates are believed to be a significant over-statement of
rescissions occurring now, however no new data is available. Using this
estimate implies that when combined with the current numbers of policy
holders in the individual market there could be approximately 9,900
rescissions per year.
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\122\ This statement is based on the Departments' conversations
with industry experts.
\123\ 2013 filings of the Medical Loss Ratio Report found at
https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/Medical-Loss-Ratio.html.
\124\ 2013 filings of the Medical Loss Ratio Report.
\125\ NAIC Rescission Data Call, December 17, 2009, p.1.
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2. Benefits
Because there is little pre-Affordable Care Act data available and
no publicly available post-Affordable Care Act data, the Departments
find it difficult to estimate the benefits associated with this
provision. However, the Departments believe that the benefits of this
provision would accrue to those individuals who without these
regulations would have their policies rescinded.
[[Page 72222]]
As noted, Executive Order 12866 requires consideration of
``distributive impacts'' and ``equity.'' To the extent that rescissions
are arbitrary, or targeted at those most ill, and revoke the insurance
that enrollees paid for and expected to cover the cost of expensive
illnesses and conditions, preventing rescissions would prevent inequity
and greatly increase health and economic well-being. Consumers would
have greater confidence that purchasing insurance would be worthwhile,
and policies would represent better value for money.
Individuals who otherwise would have had their policies rescinded
are now able to retain their coverage; the maintenance of such coverage
through severe illness helps to prevent financial hardship for the
enrollee and their family, creating a substantial financial
benefit.\126\
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\126\ Girion, Lisa ``Health Net Ordered to Pay $9 million after
Canceling Cancer Patient's Policy,'' Los Angeles Times (2008),
available at: https://www.latimes.com/business/la-fi-insure23feb23,1,5039339.story.
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As discussed previously, uninsured individuals are less likely to
receive needed care when they become ill, resulting in the worsening of
their condition. The lack of insurance can lead to lost workplace
productivity and additional mortality and morbidity. Additionally, this
provision protects those individuals currently receiving treatment for
a condition by eliminating the potential interruptions or terminations
in care resulting from rescissions, resulting in higher losses in
productivity.\127\ Thus, this rule would contribute to increased worker
productivity by reducing the burden associated with the loss of
insurance coverage, and the concomitant financial and emotional stress.
---------------------------------------------------------------------------
\127\ Collins et al. ``Gaps in Health Insurance: An All American
Problem'' Commonwealth Fund (2006), available https://www.commonwealthfund.org/usr_doc/Collins_gapshltins_920.pdf.
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3. Costs and Transfers
As with the benefits, the costs and transfers of these regulations
are similar to those of the interim final regulations. The prohibition
of rescissions except in cases of fraud or intentional
misrepresentation of material fact could lead insurers to spend more
resources checking applications before issuing policies than they did
before the Affordable Care Act, which would increase administrative
costs. However, under the final regulations, these costs could be
partially offset by decreased costs associated with reduced post-claims
underwriting.
To the extent that continuing coverage for these generally high-
cost populations leads to additional demand for and utilization of
health care services, there will be additional costs generated in the
health care system. However, given the relatively low rate of
rescissions (approximately 0.15 percent of individual policies in
force) and the relative nature of those individuals who generally have
policies rescinded (who would have difficulty going without treatment),
the Departments estimate that these additional costs would be small.
For those policies or plans that are rescinded, the requirement for
an advance notice prior to such a rescission imposes a total hour
burden of approximately 250 hours and a cost burden of approximate
$3,900. These costs are discussed in more detail in the Paperwork
Reduction Act section later in this preamble.
A transfer likely will occur within the individual health insurance
market from policyholders whose policies would not have been rescinded
before the Affordable Care Act to some of those whose policies that
would have been rescinded before the Affordable Care Act, depending on
the market and the rules which apply to it. This transfer could result
from higher overall premiums insurers will charge to recoup the costs
associated with the health care costs of those individuals with chronic
or serious conditions whose policies could previously be rescinded (the
precise change in premiums depending on the competitive conditions in
specific insurance markets). This transfer across the market would
benefit those individuals with substantially higher medical costs, due
to chronic or severe conditions, and would be attributable to insurers
covering those costs associated with such individuals.
E. PHS Act Section 2714, Coverage of Dependents to Age 26 (26 CFR
54.9815-2714, 29 CFR 2590.715-2714, 45 CFR 147.120)
1. Affected Entities and Individuals
Prior to implementation of the Affordable Care Act there were an
estimated 6.6 million uninsured young adults age 19-26; with an
estimated 3.3 million having parents with ESI and an additional 2.7
million with individual coverage, all of whom could potentially have
been affected.\128\ Implementation of this provision allowed 13.7
million young adults to either stay on or join their parents' health
plans (from November 2010 until November 2011).\129\ There was a rapid
response to changes in the regulations leading to large number of
employers enrolling young adults ,\130\ with thirteen percent of small
firms and 70 percent of large firms enrolling at least one young
adult--small employers on average enrolled two young adults while large
employers enrolled on average 492 young adults.\131\
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\128\ Collins, S. and Nicholson, J. Rite of Passage: Young
Adults and the Affordable Care Act of 2010. The Commonwealth Fund.
May 2010.
\129\ Collins, S. et al. Young, Uninsured and in Debt: Why Young
Adults Lack Health Insurance and How the Affordable Care Act is
Helping. The Commonwealth Fund. June 2012.
\130\ Cantor, J. et al. Early Impact of the Affordable Care Act
on Health Insurance Coverage of Young Adults. Health Services
Research, 47:5 (2012):pp. 1773-1790.
\131\ Claxton, G. et al. Employer Health Benefits: 2011 Annual
Survey. Kaiser Family Foundation and Health Research & Education
Trust. 2011
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Studies have shown that 2.3 million young adults were able to gain
coverage since implementation of the Affordable Care Act and this
provision in 2010 through the start of the open enrollment period in
October 2013.\132\ The number of affected young adults has continued to
increase as more employers began covering young adult dependents and
those on individual grandfathered plans began changing policies to
include dependents up to age 26. This has resulted in an additional 3.4
million young adults gaining coverage since October 2013, resulting in
a total of an estimated 5.7 million gaining coverage from 2010 through
March 2015.\133\
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\132\ ASPE Data Point, Health Insurance Coverage and the
Affordable Care Act, September 2015.
\133\ ASPE. Health Insurance Coverage and the Affordable Care
Act. May 2015 at https://aspe.hhs.gov/sites/default/files/pdf/83966/ib_uninsured_change.pdf.
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2. Benefits
The benefits of these final regulations are expected to outweigh
the costs to the regulated community. As of March 2015, an estimated
5.7 million additional young adults are now covered by their parents'
health plans due to the implementation of this provision.\134\
Expanding coverage options for the 19-26 year old population has
resulted in a decline in the number of uninsured young adults,
declining to an uninsured rate of 26.7 percent in the third quarter of
2013 (before the start of the October 2013 open enrollment
period).\135\
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\134\ Id.
\135\ Ibid and Sommers, B. Number of Young Adults Gaining
Insurance Due to the Affordable Care Act Now Tops 3 Million. ASPE
Issue Brief, June 2012.
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Uninsured young adults are less likely to have access to care and
thus delay seeking needed care,\136\ leading to
[[Page 72223]]
higher costs when care is received. Further, expanded coverage provides
young adults with security and protection from the financial
consequences of serious medical emergencies. Recent studies have found
that due to the implementation of this provision there has been a
decline in the number of young adults facing higher out-of-pocket
expenses (greater than $1,500); \137\ benefiting them when many young
adults are currently facing elevated debt burdens and low wages.\138\
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\136\ Newacheck, P. et al. Health Insurance and Access to
Primary Care for Children. N Engl J Med. 338:8 (1998) and Sommers,
B. et al. The Affordable Care Act Has Led To Significant Gains in
Health Insurance and Access to Care for Young Adults. Health
Affairs, 32:1 (2013):pp. 165-174.
\137\ Busch, S. et al. ACA Dependent Coverage Provision Reduced
High Out-Of-Pocket Health Care Spending For Young Adults. Health
Affairs, 33:8 (2014): pp. 1361-1366 and Mulcahy, A. et al. Insurance
Coverage of Emergency Care for Young Adults under Health Reform. N
Engl J Med. 368:22 (2013).
\138\ Chua, K-P. and Sommers, B. Changes in Health and Medical
Spending Among Young Adults Under Health Reform. JAMA, 311:23
(2014).
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Additionally, expanding coverage to those aged 19-26 should
decrease the cost-shifting of uncompensated care onto those with
coverage (including $147 million from emergency department care),\139\
increase the receipt of preventive health care and provide more timely
access to high quality care, resulting in a healthier population. In
particular, children with chronic conditions or other serious health
issues will be able to continue coverage through a parent's plan until
age 26.
---------------------------------------------------------------------------
\139\ Mulcahy, A. et al. Insurance Coverage of Emergency Care
for Young Adults under Health Reform. N Engl J Med. 368:22 (2013).
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Extending dependent coverage of children to age 26 will also permit
greater job mobility for this population as their health coverage will
no longer be tied to their jobs, thus reducing the potential of ``job
lock'',\140\ or student status.
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\140\ Sommers, B. et al. The Affordable Care Act Has Led To
Significant Gains in Health Insurance and Access to Care for Young
Adults. Health Affairs, 32:1 (2013):pp. 165-174.
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3. Costs and Transfers
Estimates for the incremental annual premium costs for the newly
covered individuals were developed in the interim final regulations;
estimating that for those enrolling in their parents' ESI, the expected
annual premium cost would lead to an expected increase of 0.7 percent
in 2011, 1.0 percent in 2012, and 1.0 percent in 2013. A recent study
carried out by Depew and Bailey found that the requirement dependent
coverage provision led to a 2.5-2.8 percent increase in premiums for
plans that cover children, and that employers did not pass on the
entire premium increase to employees in the form of higher required
plan contributions.\141\ To the extent that some of these increases are
passed on to workers in the form of higher premiums for all workers
purchasing family policies or in the form of lower wages for all
workers, there will be a transfer from workers who do not have newly
covered dependents to those who do. To the extent that these higher
premiums result in lower profits or higher prices for the employer's
product, the higher premiums will result in a transfer either from
stockholders or consumers to workers who have newly covered dependents.
---------------------------------------------------------------------------
\141\ Depew, B. and Bailey, J. Did the Affordable Care Act's
dependent coverage mandate increase premiums? Journal of Health
Economics, 41 (2015):pp. 1-14
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In addition, to the extent these final regulations result in a
decrease in the number of uninsured, the Departments expect a reduction
in uncompensated care, and a reduction in liability for those who fund
uncompensated care, including public programs (primarily Medicaid and
State and local general revenue support for public hospitals), as well
as the portion of uncompensated care that is paid for by shifting costs
from private payers. Such effects would lead to lower premiums for the
insured population, both with or without newly covered children.
For the number of young adults enrolling in their parents' non-
group (individual) insurance policy, the Departments estimated that, to
a large extent, premiums in the individual market will be borne by the
parents who are purchasing the coverage. If, instead, these costs are
distributed over the entire individual market (as would be the case in
a pure community rated market), the Departments estimated in the
interim final regulations that the individual premiums would rise 0.7
percent in 2011, 1.0 percent in 2012, and 1.2 percent in 2013. However,
the Departments expected the actual increase across the entire
individual market, if any, to be much smaller than these estimates,
because they expected the costs to be largely borne by the subscribers
who are directly affected rather than distributed across the entire
individual market.
F. PHS Act Section 2719, Internal Claims and Appeals and External
Review (26 CFR 54.9815-2719, 29 CFR 2590.715-2719, 45 CFR 147.136)
1. Estimated Number of Affected Entities
These provisions are applicable to non-grandfathered health plans
and coverage. Using the estimates from the discussion of affected
entities for the grandfathering provisions discussed in paragraph
III.C, there are 96.3 million individuals covered by non-grandfathered
ERISA-covered health plans, 30.4 million individuals covered by non-
grandfathered State and local health plans, and 8.7 million individuals
in non-grandfathered health coverage in the individual market.
Not all potentially affected individuals will be affected equally
by these final regulations. Sponsors of ERISA-covered group health
plans were required to implement an internal appeals process that
complied with the DOL claims procedure regulation before the Affordable
Care Act's enactment, and the Departments also understand that many
non-Federal governmental plans and church plans that are not subject to
ERISA had implemented internal claims and appeals processes that comply
with the DOL claims procedure regulation. Therefore, participants and
beneficiaries covered by such plans only will be affected by the
internal claims and appeals standards that are provided by the
Secretary of Labor in paragraph (b)(2)(ii) of these final regulations
under PHS Act section 2719.
These final regulations will have the largest impact on individuals
covered in the individual health insurance market, because with the
issuance of the interim final regulation, these issuers were required
to comply with the DOL claims procedure regulation for internal claims
and appeals as well as the additional standards added by the Secretary
of the Department of Health and Human Services in paragraph (b)(3) of
these final regulations that are in some cases more protective than the
ERISA standard.
On the external appeals side, before the enactment of the
Affordable Care Act, issuers offering coverage in the group and
individual health insurance market were already required to comply with
State external review laws. At that time, all States except Alabama,
Mississippi, Nebraska, North Dakota, South Dakota, and Wyoming had
external review laws, and thirteen States had external review laws that
apply only to certain market segments (for example, managed care or
HMOs).
[[Page 72224]]
Currently, all States except, Alabama, Alaska, Florida, Georgia,
Pennsylvania, and Wisconsin have State external review laws that
satisfy the requirement to provide a NAIC-similar or NAIC-parallel
external review process. These six States that do not meet the
requirements, must use the HHS-administered process or must contract
with accredited independent review organizations to review external
appeals on their behalf until they meet the requirements.\142\
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\142\ Affordable Care Act: Working with States to Protect
Consumers, available at https://www.cms.gov/CCIIO/Resources/Files/external_appeals.html.
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Individuals participating in ERISA-covered self-insured group
health plans will be among those most affected by the external review
requirements contained in these final regulations, because the
preemption provisions of ERISA prevent a State's external review
process from applying directly to an ERISA-covered self-insured plan.
These plans will now be required to comply with the Federal external
review process set forth under paragraph (d) of these final
regulations.
In summary, the number of affected individuals depends on several
factors, including whether (i) a health plan retains its grandfather
status, (ii) the plan is subject to ERISA, (iii) benefits provided
under the plan are self-funded or financed by the purchase of an
insurance policy, (iii) the applicable State has enacted an internal
claims and appeals law, and (iv) the applicable State has enacted an
external review law, and if so the scope of such law, and (v) the
number of new plans and enrollees in such plans.
The following, is a summary of the benefits and costs as discussed
in the interim final regulations and that are still applicable to these
final regulations.
2. Benefits
Because of data limitations and a lack of effective measures, the
Departments did not attempt to quantify the expected benefits.
Nonetheless, the Departments were able to identify several of the
interim final regulation's major economic benefits.
The interim final regulations and these final regulations will help
transform the current, highly variable health claims and appeals
process into a more uniform and structured process. This will:
Improve the extent to which employee benefit plans provide
benefits consistent with the established terms of the plan;
ensure greater certainty and consistency in the handling
of benefit claims and appeals and improved access to information about
the manner in which claims and appeals are adjudicated;
increase efficiency in the operation of employee benefit
plans and health care delivery as well as health insurance and labor
markets;
increase efficiency of health plans by enhancing their
transparency and fostering participants' confidence in the plan's
fairness;
reduce delays and inappropriate denials;
reduce the levels of error in the system and improve
health outcomes;
improve health care, health plan quality, and insurance
market efficiency by serving as a communication channel, providing
feedback from participants, beneficiaries, and providers to plans about
quality issues; and
enhance some insurers' and group health plans' abilities
to effectively control costs by limiting access to inappropriate care.
3. Costs and Transfers
The Departments have quantified the primary source of costs
associated with these final regulations that will be incurred to (i)
administer and conduct the internal and external review process, and
(ii) prepare and distribute required disclosures and notices. These
costs and the methodology used to estimate them are discussed under the
Paperwork Reduction Act section. The total cost related to the
information collections is $160.1 million annually.
a. Additional Requirements for Group Health Plans
Paragraph (b)(2)(i) of these final regulations imposes additional
requirements to the DOL claims procedure regulation that must be
satisfied by group health plans and issuers offering group and
individual coverage in the individual and group health insurance
markets. The Departments believe that the additional requirements have
modest costs associated with them, because they merely clarify
provisions of the DOL claims procedure regulation.
As discussed in the impact analysis for the interim final
regulations the Departments were not able to estimate the costs for
some of the requirements, namely for: the definition of adverse
determination, expedited notification of benefit determination
involving urgent care, eliminating conflicts of interest, and deemed
exhaustion of internal process. The Departments were able to quantify
the costs for Full and fair review and Enhanced notice with culturally
and linguistically appropriate notices. These costs are included in the
Paperwork Reduction Act Section.
b. Additional Requirements for Issuers in the Individual Insurance
Market
To address certain relevant differences in the group and individual
markets, health insurance issuers offering individual health insurance
coverage must comply with three additional requirements. First, these
final regulations expand the scope of the group health coverage
internal claims and appeals process to cover initial eligibility
determinations.
This protection is important since eligibility determinations in
the individual market are frequently based on the health status of the
applicant, including preexisting conditions. The Departments do not
have sufficient data to quantify the costs associated with this
requirement.
Second, although the DOL claims procedure regulation permits group
health plans to have a second level of internal appeals, these final
regulations require health insurance issuers offering individual health
insurance coverage to have only one level of internal appeals. This
allows the claimant to seek either external review or judicial review
immediately after an adverse determination is upheld in the first level
of internal appeals. The Departments have factored this cost into their
estimate of the cost for issuers offering coverage in the individual
market to comply with this requirement.
Finally, these final regulations require health insurance issuers
offering individual health insurance coverage to maintain records of
all claims and notices associated with their internal claims and
appeals processes. An issuer must make such records available for
examination upon request. Accordingly, a claimant or State or Federal
agency official generally would be able to request and receive such
documents free of charge. The Departments believe that minimal costs
are associated with this requirement, because most issuers retain the
required information in the normal course of their business operations.
c. External Appeals
The analysis of the cost associated with implementing an external
review process under the interim final regulations and these final
regulations focuses on the cost incurred by the following three groups
that were not required to implement an external review process before
the enactment of the Affordable Care Act: Plans and participants in
ERISA-covered self-
[[Page 72225]]
insured plans; plans and participants in States with no external review
laws; and plans and participants in States that have State laws only
covering specific market segment (usually HMOs or managed care
coverage).
The Departments estimate that there are approximately 78.7 million
participants in self-insured ERISA-covered plans and approximately 15.5
million participants in self-insured State and local governmental
plans. In the States which currently have no external review laws or
whose laws do not meet the federal minimum requirements \143\ there are
an estimated 13.8 million participants (8.1 million participants in
ERISA-covered plans, 3.7 million participants in governmental plans and
2 million individual covered by policies in the individual market).
These estimates lead to a total of 108 million participants, however,
only the 80.0 million participants in non-grandfathered plans will be
required to be covered by the external review requirement.
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\143\ These states are Alabama, Alaska, Florida, Georgia,
Pennsylvania, and Wisconsin. See Affordable Care Act: Working with
States to Protect Consumers, available at https://www.cms.gov/CCIIO/Resources/Files/external_appeals.html
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The Departments assume that there are an estimated 1.3 external
appeals for every 10,000 participants \144\, and that there will be
approximately 10,400 external appeals annually. As required by these
final regulations or applicable State law, plans or issuers are
required to pay for most of the cost of the external review while
claimants may be charged a nominal filing fee in States that authorized
such fees as of November 18, 2015. One study found that the average
cost of a review was approximately $665.\145\ The average cost per
appeal in the HHS-administered External Review Program is approximately
$625 for a standard case and $825 for an expedited case.\146\
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\144\ AHIP Center for Policy and Research, ``An Update on State
External Review Programs, 2006,'' July 2008.
\145\ North Carolina Department of Insurance ``Healthcare Review
Program: Annual Report,'' 2013 Table 4. https://www.ncdoi.com/smart/Documents/ExternalReviewReport16.pdf
\146\ The HHS-administered External Review Program is
approximately $625 for a standard case and $825 for an expedited
case.
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The actual cost per review will vary by State and type of review
(standard or expedited). Lacking data on the percent of appeals that
are expedited, but with the majority of appeals being standard appeals,
the higher cost per appeal of $665 for a standard appeal is used as an
estimate for all appeals. These estimates lead to an estimated cost of
the external review of $6.9 million (10,400 reviews * $665) annually.
On average, about 40 percent of denials are reversed on external
appeal.\147\ An estimate of the dollar amount per claim reversed is
$12,500.\148\ This leads to $53.5 million in additional claims being
reversed by the external review process annually. While this amount is
a cost to plans, it represents a payment of benefits that should have
previously been paid to participants, but was denied. Part of this
amount is a transfer from plans and issuers to those now receiving
payment for denied benefits. Part of the amount could also be a cost if
the reversal leads to services and hence resources being utilized now
that had been denied previously. The Departments are not able to
distinguish between the two types but believe that most reversals are
associated with a transfer.
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\147\ Of the 105 cases fully reviewed in the HHS-administered
external review process so far, 28 have been overturned and 25 have
been partially overturned.
\148\ North Carolina Department of Insurance ``Healthcare Review
Program: Annual Report,'' 2013. https://www.ncdoi.com/smart/Documents/ExternalReviewReport16.pdf
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These final regulations also require claimants to receive a notice
informing them of the outcome of an appeal and/or external review. The
independent review organization that conducts the external review is
required to prepare the notice; therefore, the cost of preparing and
delivering this notice is included in the fee paid them by the insurer
to conduct the review.
4. Summary
These final rules extend the protections of the DOL claims
procedure regulation to non-Federal governmental plans, and the market
for individual coverage. Additional protections are added that cover
these two markets and in addition to the market for ERISA-covered
plans. These final regulations also extend the requirement to provide
an independent external review. The Departments estimate that the total
costs for these final regulations is $169.9 million annually with a
transfer from the plan and its participants to those whose claims are
reversed of $53.5 million annually.
G. PHS Act Section 2719A, Patient Protections (26 CFR 54.9815-2719A, 29
CFR 2590.715-2719A, 45 CFR 147.138)
1. Designation of Primary Care Provider
The statute, the interim final regulations and these final
regulations provide that if a group health plan, or a health insurance
issuer offering group or individual health insurance coverage, requires
or provides for designation by a participant, beneficiary, or enrollee
of a participating primary care provider, then the plan or issuer must
permit each participant, beneficiary, and enrollee to designate any
participating primary care provider who is available to accept the
participant, beneficiary, or enrollee based on his or her geographic
location.
a. Affected Entities and Individuals
Choice or assignment of a primary care provider is typically
required by Health Maintenance Organizations (HMOs) and Point of
Service plans (POS). Recent data suggest that there are 316,000 HMOs in
the United States, accounting for more than 11.3 million enrollees with
ESI. There are also 558,000 POS plans accounting for almost 7 million
enrollees with ESI. The individual market includes 130,700 HMO
policies.\149\ Similar data do not exist for POS policies in the
individual market.
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\149\ Data for the group market (plan and participant counts)
were calculated using the 2012 MEPS, 2012 Census of Government, 2014
Current Population Survey, and 2014 Kaiser/HRET Survey of Employer
Sponsored Health Benefits. Data for the individual market were
calculated using AHIP ``Individual Health Insurance 2009: A
Comprehensive Survey of Premiums, Availability and Benefits,'' Table
10 and Medical Loss Ratio submissions for 2013 reporting year.
---------------------------------------------------------------------------
This provision only applies to non-grandfathered health plans.
However, due to the lack of data on HMO and POS enrollees by type of
market, and the inability to predict new plans that may enter those
markets, the Departments are unable to predict the number enrollees and
plans that would be affected by this provision. Moreover, there is no
data on the number of plans that auto-assigned patients to primary care
physicians and did not already allow patients to make the final
provider choice, as this would be the population to benefit maximally
from the interim final rules and these regulations. From conversations
with industry experts the Departments expect, however, that this number
would be very small, and therefore the benefits and costs of this
provision would be small as well.
b. Benefits, Costs, and Transfers
As discussed in the RIA for the interim final regulations, provider
choice allows patients to take into account factors they may value when
choosing their provider, such as provider credentials, office hours and
location, advice from professionals, and information on the experience
of other patients. Provider choice is a strong predictor of patient
trust in their provider, which could lead to decreased
[[Page 72226]]
likelihood of malpractice claims, improved medication adherence and
also improves health outcomes.
Although difficult to estimate given the data limitations
described, the costs for this provision are likely to be minimal. As
noted in the RIA for the interim final regulations, when enrollees like
their providers, they are more likely to maintain appointments and
comply with treatment, both of which could induce demand for services,
but these services could then in turn reduce costs associated with
treating more advanced conditions. However, the number of affected
entities from this provision is very small, leading to small additional
costs. There will likely be negligible transfers due to this provision
given no changes in coverage or cost-sharing.
2. Designation of Pediatrician as Primary Care Provider
If a plan or issuer requires or provides for the designation of a
participating primary care provider for a child by a participant,
beneficiary, or enrollee, the plan or issuer must permit the
designation of a physician (allopathic or osteopathic) who specializes
in pediatrics, including pediatric subspecialties (based on the scope
of that provider's license under applicable State law), as the child's
primary care provider if the provider participates in the network of
the plan or issuer and is available to accept the child. The general
terms of the plan or health insurance coverage regarding pediatric care
otherwise are unaffected, including any exclusions with respect to
coverage of pediatric care.
a. Affected Entities and Individuals
Due to lack of data on enrollment in managed care organizations by
age, as well as lack of data on HMO and POS enrollees by type of
market, and the inability to predict new plans that may enter those
markets, the Departments are unable to predict the number of enrollees
and plans that would be affected by these provisions. As a reference,
there are an estimated 5.6 million individuals under age 19 with ESI
who are in an HMO plan.\150\
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\150\ Estimate based on data from the 2012 MEPS, 2012 Census of
Government, 2014 Current Population Survey, and 2014 Kaiser/HRET
Survey of Employer Sponsored Health Benefits.
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b. Benefits, Costs, and Transfers
By expanding participating primary care provider options for
children to include pediatricians, this provision benefits individuals
who are making decisions about care for their children. As discussed in
the previous section, research indicates that when doctors and patients
have a strong, trusting relationship, patients often have improved
medication adherence, health promotion, and other beneficial health
outcomes.
In addition, allowing enrollees to select a physician specializing
in pediatrics as their children's primary care provider has removed any
referral related delays for individuals in plans that required
referrals to pediatricians and did not allow physicians specializing in
pediatrics to serve as primary care providers. The American Academy of
Pediatrics (AAP) strongly supports the idea that the choice of primary
care clinicians for children should include pediatricians.\151\ Regular
pediatric care, including care by physicians specializing in
pediatrics, can improve child health outcomes and avert preventable
health care costs.
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\151\ See AAP Policy Statement, ``Guiding Principles for Managed
Care Arrangements for the Health Care of Newborns, Infants,
Children, Adolescents, and Young Adults'', available at: https://pediatrics.aappublications.org/content/132/5/e1452.full.pdf+html.
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Giving enrollees in covered plans (that require the designation of
a primary care provider) the ability to select a participating
pediatrician as the child's primary care provider benefits those
individuals who would not otherwise have been given this choice. Again,
the extent of these benefits will depend on the number of enrollees
with children that are covered by plans that do not allow the selection
of a pediatrician as the primary care provider, which industry experts
suggest would be small.
Although difficult to estimate given the data limitations
described, the costs for this provision are likely to be small. Giving
enrollees a greater choice of primary care providers by allowing them
to select participating physicians who specialize in pediatrics as
their child's primary care provider could lead to increased health care
costs by increasing the take-up of primary care services, assuming they
would not have utilized appropriate services as frequently if they had
not been given this choice.
Any transfers associated with the interim final regulations and
these final regulations are expected to be minimal. To the extent that
pediatricians acting as primary care providers would receive higher
payment rates for services provided than would other primary care
physicians, there may be some transfer of wealth from policy holders of
non-grandfathered group plans to those enrollees that choose the former
providers. However, the Departments do not believe that this is likely
given the similarity in income for primary care providers that care for
children.
3. Patient Access to Obstetrical and Gynecological Care
The statute, the interim final regulations and these final
regulations also provide rules for a group health plan, or a health
insurance issuer offering group or individual health insurance
coverage, that provides coverage for obstetrical or gynecological care
and requires the designation of an in-network primary care provider.
Specifically, the plan or issuer may not require authorization or
referral by the plan, issuer, or any person (including a primary care
provider) for a female participant, beneficiary, or enrollee who seeks
obstetrical or gynecological care provided by an in-network health care
professional who specializes in obstetrics or gynecology (OB/GYN).
These plans and issuers must also treat the provision of obstetrical
and gynecological care, and the ordering of related obstetrical and
gynecological items and services, by the OB/GYN as the authorization of
the primary care provider. For this purpose, an OB/GYN is any
individual who is authorized under applicable State law to provide
obstetrical or gynecological care, and is not limited to a physician.
a. Affected Entities and Individuals
Requiring referrals or authorizations to OB/GYNs is typically
required by HMOs and POS plans.
This provision applies to non-grandfathered health plans. However,
due to the lack of data on HMO and POS enrollees by type of market, and
the inability to predict new plans that may enter those markets, the
Departments are unable to predict the number enrollees and plans that
would be affected by this provision. As a reference, there are an
estimated 7.3 million females between ages 21 to 65 with ESI who are in
HMO plans.\152\
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\152\ Estimate based on data from the 2012 MEPS, 2012 Census of
Government, 2014 Current Population Survey, and 2014 Kaiser/HRET
Survey of Employer Sponsored Health Benefits.
---------------------------------------------------------------------------
b. Benefits, Costs, and Transfers
This provision gives women in covered plans easier access to their
OB/GYNs, where they can receive preventive services such as pelvic and
breast exams, without the added time, expense, and inconvenience of
needing permission first from their primary care providers. Moreover,
this provision may also save time and reduce administrative burden
since participating OB/GYNs do not need to
[[Page 72227]]
get an authorization from a primary care provider to provide care and
order obstetrical and gynecological items and services. To the extent
that primary care providers spend less time seeing women who need a
referral to an OB/GYN, access to primary care providers will be
improved. To the extent that the items and services are critical and
would have been delayed while getting an authorization from the primary
care provider, this provision will improve the treatment and health
outcomes of female patients. Access to such care can have substantial
benefits in women's lives.
To the extent that direct access to OB/GYN services results in
increased utilization of recommended and appropriate care, this
provision may result in benefits associated with improved health status
for the women affected. Potential cost savings also exist since women
in affected plans will not need to visit their primary care provider in
order to get a referral for routine obstetrical and gynecological care,
items, and services, thereby reducing unnecessary time and
administrative burden, and decreasing the number of office visits paid
by her and by her health plan.
One potential area of additional costs associated with this
provision would be induced demand, as women who no longer need a
referral to see an OB/GYN may be more likely to receive preventive
screenings and other care. Data is limited to provide an estimate of
this induced demand, but the Departments believe it to be small.
To the extent this provision results in a shift in services to
higher cost providers, it will result in a transfer of wealth from
enrollees in non-grandfathered group plans to those individuals using
the services affected. However, such an effect is expected to be small.
4. Emergency Services
PHS Act section 2719A, the interim final regulations, and these
final regulations provide that a group health plan and a health
insurance issuer covering emergency services must do so without the
individual or the health care provider having to obtain prior
authorization (even if the emergency services are provided out-of-
network). For a plan or health insurance coverage with a network of
providers that provide benefits for emergency services, the plan or
issuer may not impose any administrative requirement or limitation on
benefits for out-of-network emergency services that is more restrictive
than the requirements or limitations that apply to in-network emergency
services.
Finally, the interim final regulations and these final regulations
provide that cost-sharing requirements expressed as a copayment amount
or coinsurance rate imposed for out-of-network emergency services
cannot exceed the cost-sharing requirements that would be imposed if
the services were provided in-network. The regulations also provide
that a plan or health insurance issuer provide benefits for out-of-
network emergency services (prior to imposing in-network cost sharing)
in an amount at least equal the greatest of: (1) The median amount
negotiated with in-network providers for the emergency service; (2) the
amount for the emergency service calculated using the same method the
plan generally uses to determine payments for out-of-network services
(such as the usual, customary, and reasonable amount); or (3) the
amount that would be paid under Medicare for the emergency service. In
applying the rules relating to emergency services, the statute and the
regulations define the terms emergency medical condition, emergency
services, and stabilize. These terms are defined generally in
accordance with their meaning under Emergency Medical Treatment and
Labor Act (EMTALA), section 1867 of the Social Security Act.
The statute and the regulations relating to emergency services do
not apply to grandfathered health plans; however, other Federal or
State laws related to emergency services may apply regardless of
grandfather status.
a. Affected Entities and Individuals
The interim final regulations and these regulations directly affect
out-of-pocket expenditures for individuals enrolled in non-
grandfathered private health plans (group or individual) whose
copayment or coinsurance arrangements for emergency services differ
between in-network and out-of-network providers. These regulations may
also require some health plans to change the amount they pay to out-of-
network providers compared to their pre-Affordable Care Act contractual
arrangements. There are no available data, however, that allow for
national estimates of the number of plans (or number of enrollees in
plans) that have different payment arrangements for out-of-network than
in-network providers, or differences between in- and out-of-network
copayment and coinsurance arrangements, in order to more precisely
estimate the number of enrollees affected.
Prior to the issuance of the interim final regulations, the
Departments conducted an informal survey of benefits plans for large
insurers in order to assess the landscape with regard to copayment and
coinsurance for emergency department services, but found that a variety
of arrangements existed in the marketplace prior to the issuance of the
interim final regulations. Many of the large insurers maintained
identical copayment and/or coinsurance arrangements between in- and
out-of-network providers. Others had differing arrangements based on
copayments, coinsurance rates, or a combination of the two. While
useful for examining the types of arrangement that exist in the market
place, these data do not contain enrollment information and therefore
cannot be used to make impact estimates.
It was estimated in the interim final regulations that a maximum of
2.1 to 4.2 million individuals would be potentially affected by
differing out-of-pocket requirements. Based on an informal survey, some
proportion, possibly a large portion, of these individuals were covered
by plans that had identical in- and out-of-network requirements.
Therefore, the number of individuals affected by this regulatory
provision was expected to be smaller.
b. Benefits, Costs, and Transfers
Insurers maintained differing copayment and coinsurance
arrangements between in- and out-of-network providers as a cost
containment mechanism. Implementing reduced cost sharing for the use of
in-network providers provides financial incentive for enrollees to use
these providers, with whom plans often have lower-cost contractual
arrangements. In emergency situations, however, the choice of an in-
network provider may not be available--for example, when a patient is
some distance from his or her local provider networks or when an
ambulance transports a patient to the nearest hospital which may not
have contractual arrangements with the person's insurer. In these
situations, the differing copayment or coinsurance arrangements could
place a substantial financial burden on the patient. This provision
eliminates this disparity in out-of-pocket burden for enrollees,
leading to potentially substantial financial benefit.
The regulations also provide for potentially higher payments to
out-of-network providers, if usual customary rates or Medicare rates
are higher than median in-network rates. This can have a direct
economic benefit to providers and patients, as the remaining
differential between provider charge and plan payment will be smaller,
[[Page 72228]]
leading to a smaller balance-bill for patients.
To the extent that expectations about such financial burden with
out-of-network emergency department usage would cause individuals to
delay or avoid seeking necessary medical treatment when they cannot
access a network provider, this provision may result in more timely use
of necessary medical care. It may therefore result in health and
economic benefits associated with improved health status; and fewer
complications and hospitalizations due to delayed and possibly reduced
mortality. The Departments expect that this effect would be small,
however, because insured individuals are less likely to delay care in
emergency situations.
The economic costs associated with the emergency services
provisions are likely to be minimal. These costs will occur to the
extent that any lower cost-sharing will induce new utilization of out-
of-network emergency services. Given the nature of these services as
emergency services, this effect is likely to be small for insured
individuals. In addition, the demand for emergency services in truly
emergency situations can result in health care cost savings and
population health improvements due to the timely treatment of
conditions that could otherwise rapidly worsen.
As discussed in the RIA for the interim final regulations, the
emergency services provisions are likely to result in some transfers
from the general membership of non-grandfathered group health plans
that have differing copayment and coinsurance arrangements to those
policy holders that use the out-of-network emergency services. The
precise amount of the transfer which would occur through an increase in
premiums is impossible to quantify due to lack of data, but only
applies to non-grandfathered health plans.
5. Application to Grandfathered Plans
The provisions relating to certain patient protections do not apply
to grandfathered health plans. However, other Federal or State laws
related to these patient protections may apply regardless of
grandfather status.
6. Patient Protection Disclosure Requirement
When applicable, it is important that individuals enrolled in a
plan or health insurance coverage know of their rights to (1) choose a
primary care provider or a pediatrician when a plan or issuer requires
participants or subscribers to designate a primary care physician; or
(2) obtain obstetrical or gynecological care without prior
authorization.
Accordingly, as was provided in the interim final regulations,
these final regulations require such plans and issuers to provide a
notice to participants (in the individual market, primary subscribers)
of these rights when applicable. Model language is provided in these
regulations. The notice must be provided whenever the plan or issuer
provides a participant with a summary plan description or other similar
description of benefits under the plan or health insurance coverage, or
in the individual market, provides a primary subscriber with a policy,
certificate, or contract of health insurance.
The Departments estimate that the cost to plans and insurance
issuers to prepare and distribute the disclosure is $940,000 in 2015.
For a discussion of the Patient Protection Disclosure Requirement, see
the Paperwork Reduction Act section later in this preamble.
IV. Paperwork Reduction Act
A. Departments of Labor and the Treasury
These final regulations contain a notice of grandfather status and
third party disclosure, rescissions notice, and patient protection
disclosures requirement for issuers and notice requirements related to
internal claims and appeals and external review that are information
collection requests (ICRs) subject to the Paperwork Reduction Act of
1995 (PRA) (44 U.S.C. 3506(c)(2)(A)).
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (PRA) (44 U.S.C. 3506(c)(2)), the Departments submitted an ICR
to OMB in accordance with 44 U.S.C. 3507(d), contemporaneously with the
publication of the interim final regulations, for OMB's review under
the emergency PRA Procedures.\153\ OMB subsequently approved the ICRs.
Contemporaneously with the publications of the emergency ICRs, the
Departments published a separate Federal Register notice informing the
public that it intended to request OMB to extend the approval for three
years and soliciting comments on the ICRs. OMB approved the ICR
extensions.
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\153\ 5 CFR 1320.13.
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No public comments were received in response to the ICRs contained
in the interim final regulations that specifically addressed the
paperwork burden analysis of the information collections. The comments
that were submitted contained information relevant to the costs and
administrative burdens attendant to the proposals. The Departments took
into account the public comments when analyzing the economic impact of
the proposals, and developing the revised paperwork burden analysis,
which is summarized in the following sections.
A copy of the ICRs may be obtained by contacting the following PRA
addressee or at https://www.RegInfo.gov. PRA ADDRESSEE: G. Christopher
Cosby, Office of Policy and Research, U.S. Department of Labor,
Employee Benefits Security Administration, 200 Constitution Avenue NW.,
Room N-5718, Washington, DC 20210. Telephone: (202) 693-8410; Fax:
(202) 219-4745. These are not toll-free numbers. Email:
ebsa.opr@dol.gov.
1. ICR Regarding Affordable Care Act Notice of Grandfather Status and
Third Party Disclosure
As discussed earlier in this preamble, to maintain grandfathered
health plan status under these final regulations, a plan or issuer must
maintain records that document the plan or policy terms in connection
with the coverage in effect on March 23, 2010, and any other documents
necessary to verify, explain, or clarify its status as a grandfathered
health plan, disclose its status as a grandfathered health plan, and if
switching issuers and intending to maintain its status as a
grandfathered plan it must provide to the new health insurance issuer
documentation of plan terms under the prior health coverage sufficient
for it to determine whether a change causing a cessation of
grandfathered health plan status has occurred.
a. Grandfathered Health Plan Disclosure
The final regulations provide that the plan or issuer of a
grandfathered plan must disclose to participants and beneficiaries its
status as a grandfathered health plan. Model language is provided by
the Departments. Using data from the 2014 Employer Health Benefits
Survey it is estimated that 37 percent of plans are grandfathered plans
and 26 percent of employees in ERISA-covered plans are in a
grandfathered plans.\154\
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\154\ Kaiser Family Foundation, ``2014 Employer Health Benefits
Survey.'' https://kff.org/health-costs/report/2014-employer-health-benefits-survey/.
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The Departments estimate that there are 850,700 (2.3 million ERISA-
covered plans * 0.37) ERISA-covered plans \155\--with an estimated 17.2
million policy holders (66 million policy holders *0.26)--that will
need to include the
[[Page 72229]]
notice in plan documents.\156\ After plans satisfied the grandfathered
health plan disclosure requirement in 2011, any additional burden
should be de minimis if a plan wants to maintain its grandfathered
status in future years. The Departments also expect the cost of
removing the notice from plan documents as plans relinquish their
grandfathered status to be de minimis and therefore it is not
estimated. Based on the foregoing, the Departments estimate that plans
will incur no additional burden to maintain or remove the notice from
plan documents.
The Departments estimate that the notice will require one-half of a
page and five cents per page printing and material cost will be
incurred, and 38 percent of the notices will be delivered
electronically. This results in a total cost burden of approximately
$266,000 ($0.05 per page*1/2 pages per notice * 17.2 million
notices*0.62).
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\155\ EBSA estimates based on the 2014 Medical Expenditure
Survey--Insurance Component.
\156\ Health Insurance Coverage Bulletin: Abstract of Auxiliary
Data for the March 2014 Annual Social and Economic Supplement to the
Current Population Survey, Table 3C.
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b. Record Keeping Requirement
Plans were required to maintain records documenting the terms of
the plan or health insurance coverage in connection with the coverage
in effect on March 23, 2010.
The Departments assume that most of the documents required to be
retained to satisfy the recordkeeping requirement of these final
regulations are already retained by plans for tax purposes, to satisfy
ERISA's record retention and statute of limitations requirements, and
for other business reasons. The Departments estimated this as a one-
time cost incurred in 2011, because after the first year, the
Departments anticipate that any future costs to retain the records will
be de minimis.
c. Documentation of Plan Terms
These final regulations contain a disclosure requirement that
requires that a group health plan that is changing health insurance
coverage to provide to the succeeding health insurance issuer (and the
succeeding health insurance issuer must require) documentation of plan
terms (including benefits, cost sharing, employer contributions, and
annual limits) under the prior health insurance coverage sufficient to
make a determination whether the standards of paragraph (g)(1) under
the Affordable Care Act section 1251 regulations are exceeded. The
number of plans that might be effected (133,200) is estimated by
multiplying the number of grandfathered plans (850,700) by the percent
of plans shopping for a new carrier (58 percent) and the number of
plans shopping for a new carrier that switched (27 percent). Each of
these plans would need to transmit to the carrier documentation of plan
terms (including benefits, cost sharing, employer contributions, and
annual limits) under the prior health insurance coverage sufficient to
make a determination whether the standards of paragraph (g)(1) of the
final regulations under Affordable Care Act section 1251 are exceeded.
It is estimated that the electronic transmission of the already
retained documents would require 2 minutes of a clerical staff's time
with a labor rate of $30.42 per hour.\157\ These estimate result in an
hour burden of 4,440 hours (133,200*2/60) with an equivalent cost of
$135,100 (133,200*2/60*$30.42). Each of these plans would need to
transmit to the carrier documentation of plan terms. If half of the
plans transmit the required documents electronically then 66,600 plans
will be sent via mail resulting in a materials and postage costs of
$467,600 ((66,600*(90 pages *5 cents per page + $2.52 postage)).
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\157\ The Department's estimated 2015 hourly labor rates include
wages, other benefits, and overhead are calculated as follows: mean
wage from the 2013 National Occupational Employment Survey (April
2014, Bureau of Labor Statistics https://www.bls.gov/news.release/pdf/ocwage.pdf); wages as a percent of total compensation from the
Employer Cost for Employee Compensation (June 2014, Bureau of Labor
Statistics https://www.bls.gov/news.release/ecec.t02.htm); overhead
as a multiple of compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of compensation for
clerical, and 35 percent of compensation for professional; annual
inflation assumed to be 2.3 percent annual growth of total labor
cost since 2013 (Employment Costs Index data for private industry,
September 2014 https://www.bls.gov/news.release/eci.nr0.htm).
Secretaries, Except Legal, Medical, and Executive (43-6014):
$16.35(2013 BLS Wage rate)/0.675(ECEC ratio) *1.2(Overhead Load
Factor) *1.023(Inflation rate) -2(Inflated 2 years from base year) =
$30.42.
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The Departments note that persons are not required to respond to,
and generally are not subject to any penalty for failing to comply with
an ICR unless the ICR has a valid OMB control number.
The paperwork burden estimates are summarized as follows:
Type of Review: Revision.
Agency: Employee Benefit Security Administration, Department of
Labor; Internal Revenue Service, U.S. Department of the Treasury.
Title: Disclosure and Recordkeeping Requirements for Grandfathered
Plans under the Affordable Care Act.
OMB Control Number: 1210-0140; 1545-2178.
Affected Public: Business or other for-profit; not-for-profit
institutions.
Total Respondents: 850,700.
Total Responses: 18,143,923.
Frequency of Response: Occasionally.
Estimated Total Annual Burden Hours (three year average): 2,200
(Employee Benefits Security Administration); 2,200 (Internal Revenue
Service).
Estimated Total Annual Cost Burden (three year average): $366,800
(Employee Benefits Security Administration); $366,800 (Internal Revenue
Service).
2. ICR Regarding Affordable Care Act Notice Relating to Rescissions
As discussed earlier in this preamble, PHS Act Section 2712 and
these final regulations provide rules regarding rescissions for group
health plans and health insurance issuers that offer group or
individual health insurance coverage. A plan or issuer must not rescind
coverage under the plan, policy, certificate, or contract of insurance
except in the case of fraud or intentional misrepresentation of a
material fact. These final regulations provide that a group health plan
or a health insurance issuer offering group health insurance coverage
must provide at least 30 calendar days advance notice to an individual
before coverage may be rescinded. This rescission notice requirement is
an information collection request (ICR) subject to the Paperwork
Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)).
The Departments assume that rescissions are rare in the group
market and that small group health plans are affected by rescissions.
The Departments are not aware of a data source on the number of group
plans whose policy is rescinded; therefore, the Departments assume that
100 small group health plan policies are rescinded in a year. The
Departments estimate that there is an average of 15.33 participants in
small, insured plans.\158\ Based on these numbers the Departments
estimate that approximately 100 policies are rescinded during a year,
which would result in 1,533 notices being sent to affected participants
with 38 percent transmitted electronically and 62 percent mailed. The
Departments estimate that 15 minutes of legal professional time at
$129.94 per hour would be required by the insurers of the 100 plans to
prepare the notice and one minute per notice of clerical professional
time at $30.42 per hour would be required to distribute the paper
notices. The Departments believe
[[Page 72230]]
the costs of electronic transmission would be de minimis. This results
in an hour burden of approximately 41 hours with an equivalent cost of
approximately $3,700.\159\
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\158\ U.S. Department of Labor, EBSA calculations using the
March 2014 Current Population Survey Annual Social and Economic
Supplement and the 2012 Medical Expenditure Panel Survey.
\159\ The Department's estimated 2015 hourly labor rates include
wages, other benefits, and overhead are calculated as follows: mean
wage from the 2013 National Occupational Employment Survey (April
2014, Bureau of Labor Statistics https://www.bls.gov/news.release/pdf/ocwage.pdf); wages as a percent of total compensation from the
Employer Cost for Employee Compensation (June 2014, Bureau of Labor
Statistics https://www.bls.gov/news.release/ecec.t02.htm); overhead
as a multiple of compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of compensation for
clerical, and 35 percent of compensation for professional; annual
inflation assumed to be 2.3 percent annual growth of total labor
cost since 2013 (Employment Costs Index data for private industry,
September 2014 https://www.bls.gov/news.release/eci.nr0.htm).
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The Departments estimate that the cost burden associated with
distributing the paper notices via mail will be approximately $500.
This results from distributing 950 paper notices at a cost of $0.54 per
notice.\160\
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\160\ This estimate is based on an average document size of one
page, $.05 cents per page material and printing costs, and $0.49
postage costs.
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These paperwork burden estimates are summarized as follows:
Type of Review: Revision of existing collection.
Agencies: Employee Benefits Security Administration, Department of
Labor; Internal Revenue Service, U.S. Department of the Treasury.
Title: Required Notice of Rescission of Coverage under the Patient
Protection and Affordable Care Act Disclosures.
OMB Number: 1210-0141; 1545-2180.
Affected Public: Business or other for-profit; not-for-profit
institutions.
Total Respondents: 100.
Total Responses: 1,533.
Frequency of Response: Occasionally.
Estimated Total Annual Burden Hours: 20.5 hours (Employee Benefits
Security Administration); 20.5 hours (Internal Revenue Service).
Estimated Total Annual Burden Cost: $250 (Employee Benefits
Security Administration); $250 (Internal Revenue Service).
3. ICR Regarding Affordable Care Act Patient Protection Disclosure
Requirement
a. Patient Protection Disclosure
As discussed earlier in this preamble, PHS Act section 2719A
imposes, with respect to a group health plan, or group or individual
health insurance coverage, a set of three requirements relating to the
choice of health care professionals. When applicable, it is important
that individuals enrolled in a plan or health insurance coverage know
of their rights to (1) Choose a primary care provider or a pediatrician
when a plan or issuer requires participants or subscribers to designate
a primary care physician; (2) obtain obstetrical or gynecological care
without prior authorization; or (3) coverage of emergency services.
Accordingly, these final regulations require such plans and issuers to
provide a notice to participants (in the individual market, primary
subscriber) of these rights when applicable. Model language is provided
in these final regulations. The notice must be provided whenever the
plan or issuer provides a participant with a summary plan description
or other similar description of benefits under the plan or health
insurance coverage, or in the individual market, provides a primary
subscriber with a policy, certificate, or contract of health insurance.
The Affordable Care Act patient protection disclosure requirement is an
ICR subject to the PRA.
In order to satisfy these final regulations' patient protection
disclosure requirement, the Departments estimate that 41,000 ERISA-
covered plans will need to notify an estimated 693,000 policy holders
annually of their plans policy in regards to designating a primary care
physician and for obstetrical or gynecological visits.\161\ The
Departments believe that plans would only incur costs associated with
this notice during the first year after relinquishing grandfather
status. In subsequent years, this notice would remain unchanged and its
costs are factored into the burden estimates associated with the
Summary Plan Description information collection request (OMB Control
Number 1210-0039).
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\161\ The Departments' estimate of the number of ERISA-covered
health plans was obtained from the 2014 Medical Expenditure Survey--
Insurance Component and the number of policy holders was obtained
from the Health Insurance Coverage Bulletin: Abstract of Auxiliary
Data for the March 2014 Annual Social and Economic Supplement to the
Current Population Survey, Table 3C https://www.dol.gov/ebsa/pdf/coveragebulletin2014.pdf. Information on HMO and POS plans and
enrollment in such plans was obtained from the Kaiser/HRET Survey of
Employer Sponsored Health Benefits, 2014. The Department assumes
that five percent of group health plans will relinquish
grandfathered health plan status annually.
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The following estimates are based on the assumption that five
percent of group health plans will relinquish grandfathered health plan
status annually. Because the final regulations provide model language
for this purpose, the Departments estimate that five minutes of
clerical time (with a labor rate of $30.42/hour) will be required to
incorporate the required language into the plan document and ten
minutes of a human resource professional's time (with a labor rate of
$110.30/hour) will be required to review the modified language.
Therefore, the Departments estimate that plans relinquishing
grandfathered health plan status will incur an annual hour burden of
10,000 hours with an equivalent cost of $866,000.\162\
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\162\ The Department's estimated 2015 hourly labor rates include
wages, other benefits, and overhead are calculated as follows: mean
wage from the 2013 National Occupational Employment Survey (April
2014, Bureau of Labor Statistics https://www.bls.gov/news.release/pdf/ocwage.pdf); wages as a percent of total compensation from the
Employer Cost for Employee Compensation (June 2014, Bureau of Labor
Statistics https://www.bls.gov/news.release/ecec.t02.htm); overhead
as a multiple of compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of compensation for
clerical, and 35 percent of compensation for professional; annual
inflation assumed to be 2.3 percent annual growth of total labor
cost since 2013 (Employment Costs Index data for private industry,
September 2014 https://www.bls.gov/news.release/eci.nr0.htm).
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The Departments assume that only printing and material costs are
associated with the disclosure requirement, because the final
regulations provide model language that can be incorporated into
existing plan documents, such as an SPD. The Departments estimate that
the notice will require one-half of a page, five cents per page
printing and material cost will be incurred, and 38 percent of the
notices will be delivered electronically at de minimis cost. This
results in a cost burden of $11,000.\163\
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\163\ This estimate is based on an average document size of \1/
2\ page, $.05 cents per page material and printing costs, and $0.49
postage costs for paper notices and de minimis costs for
electronically distributed notices. The Departments assume 62
percent of notices will be on paper and 38 percent will be
distributed electronically.
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b. Out-of-Network Emergency Services Disclosure
The final regulations require that a plan or issuer may not impose
any copayment or coinsurance requirement for out-of-network emergency
services that is more restrictive than the copayment or coinsurance
requirement that would apply if the services were provided in network.
If State law prohibits balance billing, or a plan or issuer is
contractually responsible for any amounts balanced billed by an out-of-
network emergency services provider, the plan or issuer must provide an
enrollee or beneficiary adequate and prominent notice of their lack of
financial responsibility with respect to amounts balanced billed in
order to prevent inadvertent payment by an enrollee or beneficiary.
This information should already be routinely included in the
Explanation of Benefit documents
[[Page 72231]]
sent by plans and issuers to enrollees and beneficiaries. Therefore, in
accordance with the implementing regulations of the PRA at 5 CFR
1320.3(b)(2), we believe this is a usual and customary business
practice. Plans and issues routinely provide enrollees and
beneficiaries with the Explanation of Benefit documents.
The Departments note that persons are not required to respond to,
and generally are not subject to any penalty for failing to comply
with, an ICR unless the ICR has a valid OMB control number. These
paperwork burden estimates are summarized as follows:
Type of Review: Revision of an existing collection.
Agencies: Employee Benefits Security Administration, Department of
Labor; Internal Revenue Service, U.S. Department of Treasury.
Title: Disclosure Requirement for Patient Protections under the
Affordable Care Act.
OMB Number: 1210-0142; 1545-2181.
Affected Public: Business or other for profit; not-for-profit
institutions.
Total Respondents: 41,000.
Total Responses: 693,000.
Frequency of Response: One time.
Estimated Total Annual Burden Hours: 5,000 (Employee Benefits
Security Administration); 5,000 (Internal Revenue Service).
Estimated Total Annual Burden Cost: $5,500 (Employee Benefits
Security Administration); $5,500 (Internal Revenue Service).
4. ICR Regarding Affordable Care Act Internal Claims and Appeals and
External Review
PHS Act section 2719 and these final regulations, require that
group health plans and health insurance issuers offering group health
insurance coverage must comply with the internal claims and appeals
processes set forth in 29 CFR 2560.503-1 (the DOL claims procedure
regulation) and update such processes in accordance with standards
established by the Secretary of Labor in paragraph (b)(2)(ii) of the
regulations under PHS Act section 2719.
The burden to comply with the DOL claims procedure regulations is
accounted for under OMB control number 1210-0053, therefore it is not
included here.
Paragraph (b)(2)(ii)(C) of the final regulations under PHS Act
section 2719 adds an additional requirement that non-grandfathered
ERISA-covered group health plans provide to the claimant, free of
charge, any new or additional evidence considered to be relied upon, or
generated by the plan or issuer in connection with the claim. The
related hour burden is 1,100 hours and the related cost burden is $1.1
million.
The June 2011 amendment to the interim final regulations required
that plans and issuers must provide participants and beneficiaries who
reside in a county where ten percent or more of the population residing
in the county is literate only in the same non-English language with a
one-sentence statement in all notices written in the applicable non-
English language about the availability of language services. In
addition to including the statement, plans and issuers are required to
provide a customer assistance process (such as a telephone hotline)
with oral language services in the non-English language and provide
written notices in the non-English language upon request. Providing
notice of the services and the translation services is estimated to
have a cost burden of $1 million annually.
Also, PHS Act section 2719 and these final regulations provide that
group health plans and issuers offering group health insurance coverage
must comply either with a State external review process or a Federal
review process. Plans and issuers must provide to those conducting the
external reviews required documents. There is an estimated 8,400
external appeals conducted annually. The related hour burden is 3,500
hours with an equivalent cost of $193,700 and a cost burden of $80,000
annually.
In total, the hour burden associated with claims, appeals, and
external review is approximately 4,500 hours at an equivalent cost of
$244,800 annually. Because the burden is shared equally between the
Department of Labor and the Department of the Treasury, each
Department's share is 2,300 hours at an equivalent cost of $122,400
annually.
In total, the cost burden is approximately $2.2 million annually.
Because the burden is shared equally between the Department of Labor
and the Department of the Treasury, each Department's share is $1.1
million annually.
The Departments note that persons are not required to respond to,
and generally are not subject to any penalty for failing to comply
with, an ICR unless the ICR has a valid OMB control number.
The paperwork burden estimates are summarized as follows:
Type of Review: Revision.
Agency: Employee Benefit Security Administration, Department of
Labor; Internal Revenue Service, U.S. Department of the Treasury.
Title: Affordable Care Act Internal Claims and Appeals and External
Review Disclosures for Non-Grandfathered Plans.
OMB Control Number: 1210-0144; 1545-2182.
Affected Public: Business or other for-profit; not-for-profit
institutions.
Total Respondents: 1,769,264.
Total Responses: 275,430.
Frequency of Response: Occasionally.
Estimated Total Annual Burden Hours (three year average): 2,300
(Employee Benefits Security Administration); 2,300 (Internal Revenue
Service).
Estimated Total Annual Cost Burden (three year average): $1,143,000
(Employee Benefits Security Administration); $1,143,000 (Internal
Revenue Service).
B. Department of Health and Human Services
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval.
These final regulations contain ICRs that are subject to review by OMB.
A description of these provisions is given in the following paragraphs
with an estimate of the annual burden, summarized below in the Table
below. In order to fairly evaluate whether an information collection
should be approved by OMB, section 3506(c)(2)(A) of the Paperwork
Reduction Act of 1995 requires that we solicit comment on the following
issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
As discussed above in the Department of Labor and Department of the
Treasury PRA section, these final regulations contain a notice of
grandfather status, rescissions notice, and patient protection
disclosures requirement for issuers, and notice requirements related to
internal claims and appeals and external review. These requirements are
ICRs under the Paperwork Reduction Act. Each of these requirements is
discussed in detail in the following sections. Estimated hourly labor
rates are calculated using data from the 2013
[[Page 72232]]
National Occupational Employment Survey.\164\
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\164\ 2013 National Occupational Employment Survey, April 2014,
Bureau of Labor Statistics, https://www.bls.gov/news.release/pdf/ocwage.pdf.
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1. ICRs Regarding Affordable Care Act Notice of Grandfather Status
(Sec. Sec. 147.140(a)(2), 147.140(a)(3)(i), 147.140(a)(3)(ii))
a. Grandfathered Health Plan Disclosure
The final regulations provide model language for the grandfathered
health plan disclosure that can be incorporated into existing plan
documents. After plans first satisfied the grandfathered health plan
disclosure requirement in 2011, any additional burden is expected to be
negligible if a plan wants to maintain its grandfathered status in
future years. It is also expected that the cost of removing the notice
from plan documents as plans relinquish their grandfathered status
would be minimal and therefore it is not estimated.
Issuers and multi-employer plans must also add a prominent
disclosure in their group policies, certificates, or contracts of
insurance that plan sponsors are required to notify the issuer if the
contribution rate changes at any point during the plan year. This only
affects issuers of fully insured group health plans and multi-employer
plans and after this requirement is first satisfied, any additional
burden in future years is expected to be negligible and is therefore
not estimated.
Grandfathered plans will incur printing and material costs
associated with the disclosure requirements. It is estimated that there
will be approximately 47,500 grandfathered State and local governmental
health plans with approximately 5.5 million policyholders \165\ and
approximately 1.4 million policyholders in the individual market with
grandfathered coverage \166\ issued by 430 issuers during 2015.
Therefore, grandfathered plans and issuers in the individual markets
will need to send approximately 6.9 million disclosures notifying plan
participants and beneficiaries of their plans' status as a
grandfathered health plan. We anticipate that the notice will require
one-half of a page and five cents per page printing and material cost
will be incurred. We also assume that 38 percent of the notices will be
delivered electronically. This results in a total annual cost burden of
approximately $106,000. The number of notices and cost burden are
likely to be lower in subsequent years as more plans relinquish their
grandfathered status. In the absence of data regarding how many plans
will retain grandfathered status in subsequent years, we consider this
estimate to be the upper limit for the number of notices and cost
burden in future years.
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\165\ The Department lacks data on the number of State and local
plans that are grandfathered plans. The Kaiser ``Employer Health
Benefits Survey'' has estimates for private employer plans. Those
estimates are used here as a proxy. They report that 37 percent of
plans are grandfather plans and 26 percent of covered employees are
in those plans. https://kff.org/health-costs/report/2014-employer-health-benefits-survey/.
\166\ Estimate based on data from the McKinsey Center for US
Health System Reform and Medical Loss Ratio submissions for 2013
reporting year.
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b. Recordkeeping Requirement
It is assumed that most of the documents required to be retained to
satisfy the recordkeeping requirement of these final regulations are
already retained by plans for tax purposes, to satisfy ERISA's record
retention and statute of limitations requirements, and for other
business reasons. It was previously estimated that after the one-time
cost related to record keeping requirement was incurred in 2011, costs
in subsequent years will be negligible and, therefore, not estimated.
c. Grandfathered Plan Change in Carrier Disclosure
A group health plan that is changing health insurance issuers must
provide to the succeeding health insurance issuer (and the succeeding
health insurance issuer must require) documentation of plan terms
(including benefits, cost sharing, employer contributions, and annual
limits) under the prior health insurance coverage sufficient to make a
determination whether the standards of Sec. 147.140(g)(1) are
exceeded.
The number of plans that might change carriers and thus be affected
(7,400) is estimated by multiplying the estimated number of
grandfathered plans (47,500) by the percent of plans shopping for a new
carrier (58 percent) and the number of plans shopping for a new carrier
that switched (27 percent).\167\
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\167\ See Section 14.https://kff.org/health-costs/report/2014-employer-health-benefits-survey/.
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Each employer will require about 2 minutes of clerical labor (at an
hourly cost of approximately $30) to send the information required for
the disclosure (which is already retained under the recordkeeping
requirement) electronically to the succeeding issuer. The total annual
labor burden for all employers is estimated to be approximately 248
hours with an equivalent annual cost of approximately $7,500. The cost
of transmitting the information electronically to the succeeding issuer
is negligible and, therefore, not estimated. The number of disclosures
and cost burden may be lower in subsequent years as more plans
relinquish their grandfathered status. In the absence of data regarding
how many plans will retain grandfathered status in subsequent years, we
consider this estimate to be the upper limit for the burden in future
years.
2. ICR Regarding Affordable Care Act Notice Relating to Rescissions
(Sec. 147.128(a)(1))
This analysis assumes that rescissions only occur in the individual
health insurance market, because rescissions in the group market are
rare. It is estimated that there are approximately 430 issuers issuing
6.77 million policies in the individual market during a year. A report
on rescissions found that 0.15 percent of policies were rescinded
during the 2004 to 2008 time period. Based on these numbers, it is
estimated that approximately 10,200 policies are rescinded during a
year, which would result in approximately 10,200 notices being sent to
affected policyholders, with 38 percent transmitted electronically and
62 percent mailed. It is estimated that each issuer will require 15
minutes of legal professional time (at approximately $129.94 per hour)
to prepare the notice and one minute per notice of clerical
professional time (at approximately $30.42 per hour) to distribute the
notice to each policyholder. Assuming that the cost of electronic
distribution is minimal, this results in an annual hour burden of
approximately 212 hours with an equivalent annual cost of approximately
$17,160.
Issuers will incur cost to print and send the notices. We assume
that the notice will require one page printing and material cost will
be $0.05 per page, mailing cost will be $0.49 per notice, and 38
percent of the notices will be delivered electronically at minimal
cost. Therefore, it is estimated that the cost burden associated with
mailing the notices to approximately 6,300 affected policy holders will
be approximately $3,400.
3. ICR Regarding Affordable Care Act Patient Protection Disclosure
Requirement (Sec. 147.138(a)(4))
b. Patient Protection Disclosure
In order to satisfy the patient protection disclosure requirement,
State and local government plans and issuers in individual markets will
need to notify policy holders of their plans policy in regards to
designating a primary care physician and for obstetrical or
gynecological visits and
[[Page 72233]]
will incur a one-time burden and cost to incorporate the notice into
plan documents. State and local government plans that are currently not
grandfathered and issuers in the individual market have already
incurred the one-time cost to prepare and incorporate this notice in
their existing plan documents. Only State and local government plans
and individual market plans that relinquish their grandfathered status
in subsequent years will become subject to this notice requirement and
incur the one-time costs to prepare the notice.
There are an estimated 128,400 non-federal governmental plans and
430 health insurance issuers in the individual market. We estimate that
five percent of non-federal governmental plans will relinquish their
grandfathered status annually over the next three years and will
therefore incur one-time costs to prepare the notice. Health insurance
issuers in the individual market will also have five percent of their
policies relinquish grandfathered status annually over the next three
years. Data obtained from the 2014 Kaiser/HRET Survey of Employer
Sponsored Health Benefits finds that 13 percent of plans have an HMO
option and that 23 percent of plans offer a POS option. Thus,
approximately 2,740 plans and issuers will produce notices each
year.\168\ While not all HMO and POS options require the designation of
a primary care physician or a prior authorization or referral before a
woman can visit an OB/GYN, the Department is unable to estimate this
number. Therefore, this estimate should be considered an overestimate
of the number of affected entities.
---------------------------------------------------------------------------
\168\ 128,400 Governmental plans x 5% newly non-grandfathered
plans x (13% HMOs + 23% POSs) + 430 issuers = approximately 2,700
affected plans and issuers.
---------------------------------------------------------------------------
Each of these 2,740 plans and issuers will require a compensation
and benefits manager to spend 10 minutes individualizing the model
notice to fit the plan's specifications at an hourly rate of $110.30.
This results in approximately 457 hours of burden at an equivalent cost
of $50,400. Each plan will also require clerical staff to spend 5
minutes adding the notice to the plan's documents at an hourly rate of
$30.42. This results in approximately 228 hours of burden at an
equivalent cost of $7,000. The total annual burden associated with this
requirement is 685 hours at an equivalent cost of $57,000.
The Department assumes that only printing and material costs are
associated with the disclosure requirement, because the final
regulations provide model language that can be incorporated into
existing plan documents. The Department estimates that the notice will
require one-half of a page, five cents per page printing and material
cost will be incurred, and 38 percent of the notices will be delivered
electronically.
It is estimated that there are 27.9 million non-federal government
plan policyholders and individual policyholders. As stated in the
previous section, it is estimated that 5 percent of plans will
relinquish their grandfathered status annually in the next three years.
Data obtained from the 2014 Kaiser/HRET Survey of Employer Sponsored
Health Benefits finds that 13 percent of covered workers in Government
plans have an HMO option and that 8 percent of covered workers have a
POS option. Data obtained from AHIP in 2009 finds that 1.93 percent of
individual policyholders have an HMO options. Thus, it is estimated
that plans will produce 228,000 notices each year, 38 percent of which
will be sent electronically.\169\ This results in a cost burden of
approximately $3,500.\170\
---------------------------------------------------------------------------
\169\ [21.1 million Government policyholders x 5% newly non-
grandfathered plans x (13% in HMOs + 8% in POSs)] + [6.77 million
individual policy holders x 5% newly non-grandfathered plans x 1.93%
in HMOs] = approximately 228,000 notices.
\170\ $0.05 per page * 1/2 pages per notice * 228,000 notices *
62% = approximately $3,500.
---------------------------------------------------------------------------
c. Out-of-Network Emergency Services Disclosure
The final regulations require that a plan or issuer may not impose
any copayment or coinsurance requirement for out-of-network emergency
services that is more restrictive than the copayment or coinsurance
requirement that would apply if the services were provided in network.
If State law prohibits balance billing, or a plan or issuer is
contractually responsible for any amounts balanced billed by an out-of-
network emergency services provider, the a plan or issuer must provide
an enrollee or beneficiary adequate and prominent notice of their lack
of financial responsibility with respect to amounts balanced billed in
order to prevent inadvertent payment by an enrollee or beneficiary.
This information should already be routinely included in the
Explanation of Benefit documents sent by plans and issuers to enrollees
and beneficiaries. Therefore, in accordance with the implementing
regulations of the PRA at 5 CFR 1320.3(b)(2), we believe this is a
usual and customary business practice. Plans and issues routinely
provide enrollees and beneficiaries with the Explanation of Benefit
documents.
4. ICRs Regarding Affordable Care Act Internal Claims and Appeals and
External Review (Sec. Sec. 14.136 (b)(2)(ii), 147.136 (b)(2)(ii)(C),
147.136 (b)(3)(ii), 147.136 (b)(3)(ii)(C))
Paragraph (b)(2)(ii)(C) of the final regulations implementing PHS
Act section 2719 provides that non-grandfathered ERISA-covered group
health plans provide to the claimant, free of charge, any new or
additional evidence considered relied upon, or generated by the plan or
issuer in connection with the claim. The related hour burden is 773,800
hours and the related cost burden is $115.2 million.
The June 2011 amendment to the interim final regulations under PHS
Act section 2719 required that plans and issuers must provide
participants and beneficiaries who reside in a county where ten percent
or more of the population residing in the county is literate only in
the same non-English language with a one-sentence statement in all
notices written in the applicable non-English language, about the
availability of language services. In addition to including the
statement, plans and issuers are required to provide a customer
assistance process (such as a telephone hotline) with oral language
services in the non-English language and provide written notices in the
non-English language upon request. Providing notice of the services and
the translation services is estimated to have a cost burden of $633,000
annually.
Also, PHS Act section 2719 and the final regulations provide that
group health plans and issuers offering group health insurance coverage
must comply either with a State external review process or a Federal
review process. Plans and issuers must provide to those conducting the
external reviews required documents. There is an estimated 2,100
external appeals conducted annually. The related hour burden is 150
hours with an equivalent cost of $4,600 and a cost burden of $5,400
annually.
In total, the burden associated with claims, appeals, and external
review is approximately 774,000 hours at an equivalent cost of
$41,601,000 annually. The cost burden associated with claims, appeals,
language translation, and external review is approximately $115.8
million annually.
[[Page 72234]]
Table 2--Annual Reporting, Recordkeeping and Disclosure Burden (HHS)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total annual Total labor Total capital/
OMB Control Number of Responses burden cost of maintenance Total costs
No. respondents (hours) reporting ($) costs ($) ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Grandfathered Plans Disclosure (Sec. 0938-1093 47,932 6,850,695 0 $0 $106,186 $106,186
147.140(a)(2)).........................
Grandfathered Plans Change in Carrier 0938-1093 7,440 7,440 248 $7,544 $0 $7,544
Disclosure (Sec. 147.140(a)(3)(i))...
Rescissions Notice (Sec. 0938-1094 430 10,200 212 $17,160 $3,400 $20,560
147.128(a)(1)).........................
Patient Protection Disclosures (Sec. 0938-1094 2,741 228,086 685 $57,341 $3,535 $60,876
147.138(a) (4))........................
Claims and Appeals External Review 0938-1098 95,500 399,151,000 773,996 $41,601,000 $115,827,000 $157,428,000
((Sec. Sec. 147.136 (b)(2)(ii),
147.136 (b)(2)(ii)(C), 147.136
(b)(3)(ii), 147.136 (b)(3)(ii)(C)).....
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Total............................... .............. 154,043 406,247,421 775,141 .............. .............. $157,623,166
--------------------------------------------------------------------------------------------------------------------------------------------------------
V. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C. 551 et seq.) and which are
likely to have a significant economic impact on a substantial number of
small entities.
The RFA generally defines a ``small entity'' as (1) a proprietary
firm meeting the size standards of the Small Business Administration
(SBA) (13 CFR 121.201) pursuant to the Small Business Act (15 U.S.C.
631 et seq.), (2) a nonprofit organization that is not dominant in its
field, or (3) a small government jurisdiction with a population of less
than 50,000. (States and individuals are not included in the definition
of ``small entity.'') The Departments use as their measure of
significant economic impact on a substantial number of small entities a
change in revenues of more than 3 to 5 percent.
As discussed in detail in the ``Need for Regulatory Action''
section of this Regulatory Impact Analysis, these regulations are
necessary to implement the following provisions: Affordable Care Act
section 1251 (preservation of right to maintain existing coverage), and
PHS Act sections 2704 (prohibition of preexisting condition
exclusions), 2711 (no lifetime or annual limits), 2712 (prohibition on
certain rescissions), 2714 (extension of dependent coverage), 2719
(internal appeals and external review process), and 2719A (patient
protections). In response to the 2010 interim final regulations, the
Departments received many comments that relate to early implementation
issues and addressed many of these issues through sub-regulatory
guidance. The Departments also held meetings with stakeholders,
including small entities affected by the rules. After consideration of
comments and stakeholder input received in response to the interim
final regulations, the Departments are issuing these final regulations.
The Regulatory Flexibility Act requires agencies to assess and
consider the direct economic impacts that regulations impose on small
entities. The primary economic effects of these final regulations are
indirect, because they result in transfers between individuals covered
by health insurance. While these transfers could be significant, they
do not impose direct effects on the regulated small entities for
purposes of the RFA.
Most of the direct effects of the final regulations are associated
with their disclosure requirements. As discussed below and in the
Paperwork Reduction Act section above, these disclosure requirements do
not have a significant economic impact. Therefore, pursuant to section
605(b) of the RFA, the Departments hereby certify that these final
regulations are not likely to have a significant economic impact on a
substantial number of small entities. The Departments' basis for this
determination and their estimate of small entities affected by these
final regulations is discussed below.
A. Affected Small Entities
There are several different types of small entities affected by
these final regulations. For issuers and third party administrators, a
small business is one that has total premium revenue of $38.5 million
or less. The Departments continue to consider a small plan to be an
employee benefit plan with fewer than 100 participants.\171\ Further,
while some large employers may have small plans, in general small
employers maintain most small plans. Thus, the Departments believe that
assessing the impact of this final rule on small plans is an
appropriate substitute for evaluating the effect on small entities. The
definition of small entity considered appropriate for this purpose
differs, however, from a definition of small business that is based on
size standards promulgated by the Small Business Administration (SBA)
(13 CFR 121.201) pursuant to the Small Business Act (15 U.S.C. 631 et
seq.).
---------------------------------------------------------------------------
\171\ The basis for this definition is found in section
104(a)(2) of ERISA, which permits the Secretary of Labor to
prescribe simplified annual reports for pension plans that cover
fewer than 100 participants.
---------------------------------------------------------------------------
Based on data from MLR annual report submissions for the 2013 MLR
reporting year, approximately 141 out of 500 issuers of health
insurance coverage nationwide had total premium revenue of $38.5
million or less.\172\ This estimate may overstate the actual number of
small health insurance companies that may be affected, since 77 percent
of these small companies belong to larger holding groups, and many if
not all of these small companies are likely to have non-health lines of
business that would result in their revenues exceeding $38.5 million.
---------------------------------------------------------------------------
\172\ U. S. Small Business Administration, ``Table of Small
Business Size Standards Matched to North American Industry
Classification System Codes'', July 14, 2014.
---------------------------------------------------------------------------
As discussed previously in the RIA, there are an estimated 2.3
million ERISA-covered plans and 128,400 State and local governmental
health plans that may have experienced an increase in costs related to
the provisions of these final rules. Ninety-seven percent of these
plans are provided by small entities and have incurred costs related to
the provisions of these final regulations.
[[Page 72235]]
B. Direct Impacts of Final Rules on Small Entities
1. Affordable Care Act Section 1251, Preservation of Right To Maintain
Existing Coverage (26 CFR 54.9815-1251, 29 CFR 2590.715-1251, 45 CFR
147.140)
The direct impacts of this provision on affected small entities are
primarily associated with notices requirements. Specifically, the final
regulations require affected plans to maintain records documenting the
terms of the plan in effect on March 23, 2010, and any other documents
that are necessary to verify, explain or clarify status as a
grandfathered health plan (the ``recordkeeping requirement''). The plan
must make such records available for examination upon request by
participants, beneficiaries, individual policy subscribers, or a State
or Federal agency official. The Departments believe this requirement
imposes a minimal burden on small entities, because they should
maintain such records in the usual and customary course of their
business operations following standard business procedures.
To maintain status as a grandfathered health plan, a plan or health
insurance coverage must include a statement that the plan or coverage
believes it is a grandfathered health plan within the meaning of
section 1251 of the Patient Protection and Affordable Care Act and must
provide contact information for questions and complaints, in any
summary of benefits provided under the plan to consumers. The
Departments believe the costs associated with this disclosure are
minimal, because a model statement is provided in the final rule and
that statement can be provided in any summary of benefits that already
is being provided to consumers.
Finally, if a grandfathered group health plan switches issuers and
intends to maintain its status as a grandfathered plan, it must provide
to the new health insurance issuer with documentation of plan terms
under the prior health coverage sufficient for it to determine whether
a change causing a cessation of grandfathered health plan status has
occurred. This requirement also imposes a minimal burden on affected
small entities, because the documents should be maintain in the
ordinary course of the plan's business operations, and the only
additional cost would be incurred to prepare the documentation for
mailing and associated material and printing cost, which are estimated
to total approximately $8.
1. PHS Act Section 2704, Prohibition of Preexisting Condition
Exclusions (26 CFR 54.9815-2704, 29 CFR 2590.715-2704, 45 CFR 147.108)
The direct impacts of this rule on the regulated small entities is
limited as the removal of preexisting condition exclusions primarily
operates through the pricing of insurance products, which are paid by
plan participants. Small businesses will be impacted when they pay for
part of the health insurance premium. The Departments have not been
able to estimate this effect separately from the effect on premiums
brought about by the other the Affordable Care Act changes.
2. PHS Act Section 2711, Prohibition on Lifetime and Annual Limits (26
CFR 54.9815-2711, 29 CFR 2590.715-2711, 45 CFR 147.126)
The direct impacts of this rule on the regulated small entities
were primarily limited to an initial notice sent shortly after the
issuance of the interim final regulations requiring plans to notify
participants that had lost coverage due to reaching the lifetime limit
of the new coverage option. This notice requirement is no longer in
effect as the statute now bans all annual and life time limits, so
there are no individuals losing coverage that need to be notified. To
the extent premiums increase and employers contribute part of the
premiums, or plans are self-insured with payments from the employers
general assets there could be direct effects on employers, but for most
employers those effects are small.
3. PHS Act Section 2712, Prohibition on Rescissions (26 CFR 54.9815-
2712, 29 CFR 2590.715-2712, 45 CFR 147.128)
PHS Act Section 2712 and the final regulations prohibit group
health plans and health insurance issuers that offer group or
individual health insurance coverage generally from rescinding coverage
under the plan, policy, certificate, or contract of insurance from the
individual covered under the plan or coverage unless the individual (or
a person seeking coverage on behalf of the individual) performs an act,
practice, or omission that constitutes fraud, or unless the individual
makes an intentional misrepresentation of material fact, as prohibited
by the terms of the plan or coverage. The final regulations provide
that a group health plan or a health insurance issuer offering group
health insurance coverage must provide at least 30 days advance notice
to an individual before coverage may be rescinded. The Departments
believe that rescissions are rare in the group market and that small
group health plans are affected by rescissions more than large group
health plans.
The Departments estimate \173\ that 15 minutes of legal
professional time at $129.94 per hour \174\ would be required by the
insurers of the policies to prepare the notice, and one minute per
notice of clerical professional time at $30.42 per hour \175\ would be
required to distribute the paper notices. The Departments believe the
costs of electronic transmission would be de minimis. This leads to an
estimate of less than $40 per rescission notice, which the Departments
do not believe is significant.
---------------------------------------------------------------------------
\173\ The Department's estimated 2015 hourly labor rates include
wages, other benefits, and overhead are calculated as follows: Mean
wage from the 2013 National Occupational Employment Survey (April
2014, Bureau of Labor Statistics https://www.bls.gov/news.release/pdf/ocwage.pdf); wages as a percent of total compensation from the
Employer Cost for Employee Compensation (June 2014, Bureau of Labor
Statistics https://www.bls.gov/news.release/ecec.t02.htm); overhead
as a multiple of compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of compensation for
clerical, and 35 percent of compensation for professional; annual
inflation assumed to be 2.3 percent annual growth of total labor
cost since 2013 (Employment Costs Index data for private industry,
September 2014 https://www.bls.gov/news.release/eci.nr0.htm).
\174\ Legal Professional (23-1011): $63.46 (2013 BLS Wage rate)/
0.69 (ECEC ratio) *1.35 (Overhead Load Factor) *1.023 (Inflation
rate) [supcaret]2 (Inflated 2 years from base year) =
$129.94.
\175\ Secretaries, Except Legal, Medical, and Executive (43-
6014): $16.35 (2013 BLS Wage rate)/0.675 (ECEC ratio) *1.2 (Overhead
Load Factor) *1.023 (Inflation rate) [supcaret]2
(Inflated 2 years from base year) = $30.42
---------------------------------------------------------------------------
4. PHS Act Section 2714, Coverage of Dependents to Age 26 (26 CFR
54.9815-2714, 29 CFR 2590.715-2714, 45 CFR 147.120)
The direct impacts of this rule on the regulated small entities
were primarily limited to an initial notice sent shortly after the
issuance of the interim final regulations requiring plans to notify
participants of the new coverage option. To the extent premiums
increase and employers contribute part of the premiums, or plans are
self-insured with payments from the employers general assets there
could be direct effects on employers, but for most employers those
effects are small.
5. PHS Act Section 2719, Internal Claims and Appeals and External
Review (26 CFR 54.9815-2719, 29 CFR 2590.715-2719, 45 CFR 147.136)
Not all potentially affected individuals will be affected equally
by these final regulations. Sponsors of ERISA-covered group health
plans were required to implement an internal
[[Page 72236]]
appeals process that complied with the DOL claims procedure regulation
before the Affordable Care Act's enactment, and the Departments also
understand that many non-Federal governmental plans and church plans
that are not subject to ERISA implement internal claims and appeals
processes that comply with the DOL claims procedure regulation.
These final regulations will have the largest impact on individuals
covered in the individual health insurance market, because with the
issuance of the final regulation, these issuers were required to comply
with the DOL claims procedure regulation for internal claims and
appeals as well as the additional standards added by the Secretary of
the Department of Health and Human Services in paragraph (b)(3) of the
final regulations under PHS Act section 2719 that are in some cases
more protective than the ERISA standard.
Using estimates calculated for the Paperwork Reduction Act it is
estimated that there will be an average costs of 40 cents per notice
that is required to be sent related to the internal claims and appeals.
On the external appeals side, before the enactment of the
Affordable Care Act, issuers offering coverage in the group and
individual health insurance market were already required to comply with
State external review laws. At that time, all States except Alabama,
Mississippi, Nebraska, North Dakota, South Dakota, and Wyoming had
external review laws, and thirteen States had external review laws that
apply only to certain market segments (for example, managed care or
HMOs). Currently, all States except, Alabama, Alaska, Florida, Georgia,
Pennsylvania, and Wisconsin have State external review laws that
satisfy these requirements. These six states that do not meet the
requirements, must use the HHS administered process or must contract
with accredited independent review organizations to review external
appeals on their behalf.\176\
---------------------------------------------------------------------------
\176\ https://www.cms.gov/CCIIO/Resources/Files/external_appeals.html.
---------------------------------------------------------------------------
Individuals participating in ERISA-covered self-insured group
health plans will be among those most affected by the external review
requirements contained in these final regulations, because the
preemption provisions of ERISA prevent a State's external review
process from applying directly to an ERISA-covered self-insured plan.
These plans will now be required to comply with the Federal external
review process set forth in these final regulations.
As discussed in the Regulatory Impact Section above an estimate for
the average cost for an external appeal is $665. This cost would be
incurred by plans or issuers. It is also estimated above that there is
on average only 1.3 external appeals per 10,000 covered lives. The
Departments believe such costs are minimal for purpose of the RFA,
because most small entities will have no external appeals in a given
year.
6. PHS Act Section 2719A, Patient Protections (26 CFR 54.9815-2719A, 29
CFR 2590.715-2719A, 45 CFR 147.138)
PHS Act section 2719A imposes, with respect to a group health plan,
or group or individual health insurance coverage, a set of three
requirements relating to the choice of health care professionals. When
applicable, it is important that individuals enrolled in a plan or
health insurance coverage know of their rights to (1) choose a primary
care provider or a pediatrician when a plan or issuer requires
participants or subscribers to designate a primary care physician; (2)
obtain obstetrical or gynecological care without prior authorization;
or (3) coverage of emergency services. Accordingly, these final
regulations require such plans and issuers to provide a notice to
participants (in the individual market, primary subscriber) of these
rights when applicable. Model language is provided in these final
regulations. The notice must be provided whenever the plan or issuer
provides a participant with a summary plan description or other similar
description of benefits under the plan or health insurance coverage, or
in the individual market, provides a primary subscriber with a policy,
certificate, or contract of health insurance.
The Departments assume that this provision will primarily affect
Health Maintenance Organizations and Point-of-Service type
arrangements. The Department believes that insignificant costs are
associated with this notice, because a model notice is provided in the
final rule, and it can be distributed with existing plan documents,
The Departments estimate that each plan or issuer would require a
compensation and benefits manager \177\ to spend 10 minutes
individualizing the model notice provided by the Departments to fit the
plan's specifications at an hourly rate of $110.30.\178\ This results
in a cost of approximately $21 in the first year. The cost per
participant to receive the notice would be less than five cents per
paper notice as the notice would be included in existing documents.
---------------------------------------------------------------------------
\177\ The Department's estimated 2015 hourly labor rates include
wages, other benefits, and overhead are calculated as follows: Mean
wage from the 2013 National Occupational Employment Survey (April
2014, Bureau of Labor Statistics https://www.bls.gov/news.release/pdf/ocwage.pdf); wages as a percent of total compensation from the
Employer Cost for Employee Compensation (June 2014, Bureau of Labor
Statistics https://www.bls.gov/news.release/ecec.t02.htm); overhead
as a multiple of compensation is assumed to be 25 percent of total
compensation for paraprofessionals, 20 percent of compensation for
clerical, and 35 percent of compensation for professional; annual
inflation assumed to be 2.3 percent annual growth of total labor
cost since 2013 (Employment Costs Index data for private industry,
September 2014 https://www.bls.gov/news.release/eci.nr0.htm).
\178\ Compensation and Benefits Manager (11-3041): $53.87 (2013
BLS Wage rate)/0.69 (ECEC ratio) *1.35 (Overhead Load Factor) *1.023
(Inflation rate) [supcaret]2 (Inflated 2 years from base
year) = $110.30.
---------------------------------------------------------------------------
VI. Unfunded Mandates Reform Act--Department of Labor and Department of
Health and Human Services
Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995
requires that agencies assess anticipated costs and benefits before
issuing any final rule that includes a Federal mandate that could
result in expenditure in any one year by State, local or Tribal
governments, in the aggregate, or by the private sector, of $100
million in 1995 dollars updated annually for inflation. In 2015, that
threshold level is approximately $144 million. These final regulations
include a Federal mandate that may result in expenditures by State,
local, or Tribal governments. Specifically, these final regulations
include requirements regarding minimum consumer protection standards
that a State external review process must include to qualify as an
applicable State external review process under PHS Act section
2719(b)(1). However, we conclude that these costs would not exceed the
$144 million threshold. Thus, the Departments of Labor and HHS conclude
that these final regulations would not impose an unfunded mandate on
State, local or Tribal governments or the private sector. Regardless,
consistent with the policy embodied in UMRA, the final requirements
described in this notice of final rulemaking has been designed to be
the least burdensome alternative for State, Local and Tribal
governments, and the private sector while achieving the objectives of
the Affordable Care Act.
VII. Federalism Statement--Department of Labor and Department of Health
and Human Services
Executive Order 13132 outlines fundamental principles of
federalism, and requires the adherence to specific
[[Page 72237]]
criteria by Federal agencies in the process of their formulation and
implementation of policies that have ``substantial direct effects'' on
the States, the relationship between the national government and
States, or on the distribution of power and responsibilities among the
various levels of government. Federal agencies promulgating regulations
that have federalism implications must consult with State and local
officials and describe the extent of their consultation and the nature
of the concerns of State and local officials in the preamble to the
regulation.
In the Departments of Labor's and HHS' view, these final
regulations have federalism implications because they would have direct
effects on the States, the relationship between the national government
and the States, or on the distribution of power and responsibilities
among various levels of government. Under these final regulations,
group health plans and health insurance issuers offering group or
individual health insurance coverage, including non-federal
governmental plans as defined in section 2791 of the PHS Act, would be
required to follow the Federal standards developed under Affordable
Care Act section 1251 and PHS Act sections 2704, 2711, 2712, 2714, 2719
and 2719A, as added by the Affordable Care Act. However, in the
Departments' view, the federalism implications of these final
regulations are substantially mitigated because, with respect to health
insurance issuers, the Departments expect that the majority of States
will enact laws or take other appropriate action resulting in their
meeting or exceeding the Federal standards.
In general, through section 514, ERISA supersedes State laws to the
extent that they relate to any covered employee benefit plan, and
preserves State laws that regulate insurance, banking, or securities.
While ERISA prohibits States from regulating a plan as an insurance or
investment company or bank, the preemption provisions of section 731 of
ERISA and section 2724 of the PHS Act (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)) apply so that the requirements in
title XXVII of the PHS Act (including those added by the Affordable
Care Act) are not to be construed to supersede any provision of State
law which establishes, implements, or continues in effect any standard
or requirement solely relating to health insurance issuers in
connection with individual or group health insurance coverage except to
the extent that such standard or requirement prevents the application
of a requirement of a Federal standard. The conference report
accompanying HIPAA indicates that this is intended to be the
``narrowest'' preemption of State laws (See House Conf. Rep. No. 104-
736, at 205, reprinted in 1996 U.S. Code Cong. & Admin. News 2018).
States may continue to apply State law requirements except to the
extent that such requirements prevent the application of the Affordable
Care Act requirements that are the subject of this rulemaking.
Accordingly, States have significant latitude to impose requirements on
health insurance issuers that are more restrictive than the Federal
law.
In compliance with the requirement of Executive Order 13132 that
agencies examine closely any policies that may have federalism
implications or limit the policy making discretion of the States, the
Departments of Labor and HHS have engaged in efforts to consult with
and work cooperatively with affected States, including consulting with,
and attending conferences of, the National Association of Insurance
Commissioners and consulting with State insurance officials on an
individual basis. It is expected that the Departments of Labor and HHS
will act in a similar fashion in enforcing the Affordable Care Act.
Throughout the process of developing these final regulations, to
the extent feasible within the applicable preemption provisions, the
Departments of Labor and HHS have attempted to balance the States'
interests in regulating health insurance issuers, and Congress' intent
to provide uniform minimum protections to consumers in every State. By
doing so, it is the Departments of Labor's and HHS' view that they have
complied with the requirements of Executive Order 13132.
Pursuant to the requirements set forth in section 8(a) of Executive
Order 13132, and by the signatures affixed to this final rule, the
Departments certify that the Employee Benefits Security Administration
and the Centers for Medicare & Medicaid Services have complied with the
requirements of Executive Order 13132 for the attached final rules in a
meaningful and timely manner.
VIII. Special Analyses--Department of the Treasury
Certain IRS regulations, including this one, are exempt from the
requirements of Executive Order 12866, as supplemented and reaffirmed
by Executive Order 13563. Therefore, a regulatory assessment is not
required. It has also been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to
these final regulations. For a discussion of the impact of this final
rule on small entities, please see section V.B. of this preamble.
Pursuant to section 7805(f) of the Code, this notice of final
rulemaking has been submitted to the Small Business Administration for
comment on its impact on small business.
IX. Congressional Review Act
These final regulations are subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.), which specifies that before a rule can
take effect, the Federal agency promulgating the rule shall submit to
each House of the Congress and to the Comptroller General a report
containing a copy of the rule along with other specified information,
and has been transmitted to Congress and the Comptroller General for
review.
X. Statutory Authority
The Department of the Treasury final regulations are adopted
pursuant to the authority contained in sections 7805 and 9833 of the
Code.
The Department of Labor final regulations are adopted pursuant to
the authority contained in 29 U.S.C. 1135, and 1191c; Secretary of
Labor's Order 1-2011, 77 FR 1088 (Jan. 9, 2012).
The Department of Health and Human Services final regulations are
adopted pursuant to the authority contained in sections 2701 through
2763, 2791, and 2792 of the PHS Act (42 U.S.C. 300gg through 300gg-63,
300gg-91, and 300gg-92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health insurance, Pensions, Reporting
and recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.
45 CFR Parts 144 and 146
Health care, Health insurance, Reporting and recordkeeping
requirements.
45 CFR Part 147
Health care, Health insurance, Reporting and recordkeeping
[[Page 72238]]
requirements, and State regulation of health insurance.
John Dalrymple,
Deputy Commissioner for Services and Enforcement, Internal Revenue
Service.
Approved: October 27, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
Signed this 6 day of November 2015.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Dated: October 15, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: October 22, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Chapter I
For the reasons stated in the preamble, the Internal Revenue
Service amends Part 54 as set forth below:
PART 54--PENSION EXCISE TAXES
0
Paragraph 1. The authority citation for part 54 is amended by adding
entries for Sec. Sec. 54.9815-1251, 54.9815-2704, 54.9815-2711,
54.9815-2712, 54.9815-2714, 54.9815-2719, and 54.9815-2719A in
numerical order to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Section 54.9815-1251 also issued under 26 U.S.C. 9833.
* * * * *
Section 54.9815-2704 also issued under 26 U.S.C. 9833.
* * * * *
Section 54.9815-2711 also issued under 26 U.S.C. 9833.
* * * * *
Section 54.9815-2712 also issued under 26 U.S.C. 9833.
* * * * *
Section 54.9815-2714 also issued under 26 U.S.C. 9833.
* * * * *
Section 54.9815-2719 also issued under 26 U.S.C. 9833.
Section 54.9815-2719A also issued under 26 U.S.C. 9833.
0
Par. 2. Section 54.9801-2 is amended by revising the introductory text
and the definition of ``preexisting condition exclusion'' to read as
follows:
Sec. 54.9801-2 Definitions.
Unless otherwise provided, the definitions in this section govern
in applying the provisions of sections 9801 through 9815 and 9831
through 9833.
* * * * *
Preexisting condition exclusion means a limitation or exclusion of
benefits (including a denial of coverage) based on the fact that the
condition was present before the effective date of coverage (or if
coverage is denied, the date of the denial) under a group health plan
or group or individual health insurance coverage (or other coverage
provided to Federally eligible individuals pursuant to 45 CFR part
148), whether or not any medical advice, diagnosis, care, or treatment
was recommended or received before that day. A preexisting condition
exclusion includes any limitation or exclusion of benefits (including a
denial of coverage) applicable to an individual as a result of
information relating to an individual's health status before the
individual's effective date of coverage (or if coverage is denied, the
date of the denial) under a group health plan, or group or individual
health insurance coverage (or other coverage provided to Federally
eligible individuals pursuant to 45 CFR part 148), such as a condition
identified as a result of a pre-enrollment questionnaire or physical
examination given to the individual, or review of medical records
relating to the pre-enrollment period.
* * * * *
0
Par. 3. Section 54.9801-3 is amended by revising the section heading
and paragraph (a)(1) to read as follows:
Sec. 54.9801-3 Limitations on preexisting condition exclusion period.
(a) Preexisting condition exclusion defined--(1) A preexisting
condition exclusion means a preexisting condition exclusion within the
meaning of Sec. 54.9801-2.
* * * * *
0
Par. 4. Section 54.9815-1251 is added to read as follows:
Sec. 54.9815-1251 Preservation of right to maintain existing
coverage.
(a) Definition of grandfathered health plan coverage--(1) In
general--(i) Grandfathered health plan coverage means coverage provided
by a group health plan, or a health insurance issuer, in which an
individual was enrolled on March 23, 2010 (for as long as it maintains
that status under the rules of this section). A group health plan or
group health insurance coverage does not cease to be grandfathered
health plan coverage merely because one or more (or even all)
individuals enrolled on March 23, 2010 cease to be covered, provided
that the plan or group health insurance coverage has continuously
covered someone since March 23, 2010 (not necessarily the same person,
but at all times at least one person). In addition, subject to the
limitation set forth in paragraph (a)(1)(ii) of this section, a group
health plan (and any health insurance coverage offered in connection
with the group health plan) does not cease to be a grandfathered health
plan merely because the plan (or its sponsor) enters into a new policy,
certificate, or contract of insurance after March 23, 2010 (for
example, a plan enters into a contract with a new issuer or a new
policy is issued with an existing issuer). For purposes of this
section, a plan or health insurance coverage that provides
grandfathered health plan coverage is referred to as a grandfathered
health plan. The rules of this section apply separately to each benefit
package made available under a group health plan or health insurance
coverage. Accordingly, if any benefit package relinquishes grandfather
status, it will not affect the grandfather status of the other benefit
packages.
(ii) Changes in group health insurance coverage. Subject to
paragraphs (f) and (g)(2) of this section, if a group health plan
(including a group health plan that was self-insured on March 23, 2010)
or its sponsor enters into a new policy, certificate, or contract of
insurance after March 23, 2010 that is effective before November 15,
2010, then the plan ceases to be a grandfathered health plan.
(2) Disclosure of grandfather status--(i) To maintain status as a
grandfathered health plan, a plan or health insurance coverage must
include a statement that the plan or coverage believes it is a
grandfathered health plan within the meaning of section 1251 of the
Patient Protection and Affordable Care Act, and must provide contact
information for questions and complaints, in any summary of benefits
provided under the plan.
(ii) The following model language can be used to satisfy this
disclosure requirement:
This [group health plan or health insurance issuer] believes
this [plan or coverage] is a ``grandfathered health plan'' under the
Patient Protection and Affordable Care Act (the Affordable Care
Act). As permitted by the Affordable Care Act, a grandfathered
health plan can preserve certain basic health coverage that was
already in effect when that law was enacted. Being a grandfathered
health plan means that your [plan or policy] may not include certain
consumer protections of the Affordable Care Act that apply to other
plans, for example, the requirement for the provision of preventive
health services without any cost sharing. However, grandfathered
health plans must
[[Page 72239]]
comply with certain other consumer protections in the Affordable
Care Act, for example, the elimination of lifetime dollar limits on
benefits.
Questions regarding which protections apply and which
protections do not apply to a grandfathered health plan and what
might cause a plan to change from grandfathered health plan status
can be directed to the plan administrator at [insert contact
information]. [For ERISA plans, insert: You may also contact the
Employee Benefits Security Administration, U.S. Department of Labor
at 1-866-444-3272 or www.dol.gov/ebsa/healthreform. This Web site
has a table summarizing which protections do and do not apply to
grandfathered health plans.] [For individual market policies and
nonfederal governmental plans, insert: You may also contact the U.S.
Department of Health and Human Services at www.healthcare.gov.]
(3)(i) Documentation of plan or policy terms on March 23, 2010. To
maintain status as a grandfathered health plan, a group health plan, or
group health insurance coverage, must, for as long as the plan or
health insurance coverage takes the position that it is a grandfathered
health plan--
(A) Maintain records documenting the terms of the plan or health
insurance coverage in connection with the coverage in effect on March
23, 2010, and any other documents necessary to verify, explain, or
clarify its status as a grandfathered health plan; and
(B) Make such records available for examination upon request.
(ii) Change in group health insurance coverage. To maintain status
as a grandfathered health plan, a group health plan that enters into a
new policy, certificate, or contract of insurance must provide to the
new health insurance issuer (and the new health insurance issuer must
require) documentation of plan terms (including benefits, cost sharing,
employer contributions, and annual dollar limits) under the prior
health coverage sufficient to determine whether a change causing a
cessation of grandfathered health plan status under paragraph (g)(1) of
this section has occurred.
(4) Family members enrolling after March 23, 2010. With respect to
an individual who is enrolled in a group health plan or health
insurance coverage on March 23, 2010, grandfathered health plan
coverage includes coverage of family members of the individual who
enroll after March 23, 2010 in the grandfathered health plan coverage
of the individual.
(b) Allowance for new employees to join current plan-- (1) In
general. Subject to paragraph (b)(2) of this section, a group health
plan (including health insurance coverage provided in connection with
the group health plan) that provided coverage on March 23, 2010 and has
retained its status as a grandfathered health plan (consistent with the
rules of this section, including paragraph (g) of this section) is
grandfathered health plan coverage for new employees (whether newly
hired or newly enrolled) and their families enrolling in the plan after
March 23, 2010. Further, the addition of a new contributing employer or
new group of employees of an existing contributing employer to a
grandfathered multiemployer health plan will not affect the plan's
grandfather status.
(2) Anti-abuse rules-- (i) Mergers and acquisitions. If the
principal purpose of a merger, acquisition, or similar business
restructuring is to cover new individuals under a grandfathered health
plan, the plan ceases to be a grandfathered health plan.
(ii) Change in plan eligibility. A group health plan or health
insurance coverage (including a benefit package under a group health
plan) ceases to be a grandfathered health plan if--
(A) Employees are transferred into the plan or health insurance
coverage (the transferee plan) from a plan or health insurance coverage
under which the employees were covered on March 23, 2010 (the
transferor plan);
(B) Comparing the terms of the transferee plan with those of the
transferor plan (as in effect on March 23, 2010) and treating the
transferee plan as if it were an amendment of the transferor plan would
cause a loss of grandfather status under the provisions of paragraph
(g)(1) of this section; and
(C) There was no bona fide employment-based reason to transfer the
employees into the transferee plan. For this purpose, changing the
terms or cost of coverage is not a bona fide employment-based reason.
(iii) Illustrative list of bona fide employment-based reasons. For
purposes of paragraph (b)(2)(ii)(C) of this section, bona fide
employment-based reasons include--
(A) When a benefit package is being eliminated because the issuer
is exiting the market;
(B) When a benefit package is being eliminated because the issuer
no longer offers the product to the employer;
(C) When low or declining participation by plan participants in the
benefit package makes it impractical for the plan sponsor to continue
to offer the benefit package;
(D) When a benefit package is eliminated from a multiemployer plan
as agreed upon as part of the collective bargaining process; or
(E) When a benefit package is eliminated for any reason and
multiple benefit packages covering a significant portion of other
employees remain available to the employees being transferred.
(3) Examples. The rules of this paragraph (b) are illustrated by
the following examples:
Example 1. (i) Facts. A group health plan offers two benefit
packages on March 23, 2010, Options F and G. During a subsequent
open enrollment period, some of the employees enrolled in Option F
on March 23, 2010 switch to Option G.
(ii) Conclusion. In this Example 1, the group health coverage
provided under Option G remains a grandfathered health plan under
the rules of paragraph (b)(1) of this section because employees
previously enrolled in Option F are allowed to enroll in Option G as
new employees.
Example 2. (i) Facts. A group health plan offers two benefit
packages on March 23, 2010, Options H and I. On March 23, 2010,
Option H provides coverage only for employees in one manufacturing
plant. Subsequently, the plant is closed, and some employees in the
closed plant are moved to another plant. The employer eliminates
Option H and the employees that are moved are transferred to Option
I. If instead of transferring employees from Option H to Option I,
Option H was amended to match the terms of Option I, then Option H
would cease to be a grandfathered health plan.
(ii) Conclusion. In this Example 2, the plan has a bona fide
employment-based reason to transfer employees from Option H to
Option I. Therefore, Option I does not cease to be a grandfathered
health plan.
(c) General grandfathering rule--(1) Except as provided in
paragraphs (d) and (e) of this section, subtitles A and C of title I of
the Patient Protection and Affordable Care Act (and the amendments made
by those subtitles, and the incorporation of those amendments into
ERISA section 715 and Internal Revenue Code section 9815) do not apply
to grandfathered health plan coverage. Accordingly, the provisions of
PHS Act sections 2701, 2702, 2703, 2705, 2706, 2707, 2709 (relating to
coverage for individuals participating in approved clinical trials, as
added by section 10103 of the Patient Protection and Affordable Care
Act), 2713, 2715A, 2716, 2717, 2719, and 2719A, as added or amended by
the Patient Protection and Affordable Care Act, do not apply to
grandfathered health plans. (In addition, see 45 CFR 147.140(c), which
provides that the provisions of PHS Act section 2704, and PHS Act
section 2711 insofar as it relates to annual dollar limits, do not
apply to grandfathered health plans that are individual health
insurance coverage.)
[[Page 72240]]
(2) To the extent not inconsistent with the rules applicable to a
grandfathered health plan, a grandfathered health plan must comply with
the requirements of the PHS Act, ERISA, and the Internal Revenue Code
applicable prior to the changes enacted by the Patient Protection and
Affordable Care Act.
(d) Provisions applicable to all grandfathered health plans. The
provisions of PHS Act section 2711 insofar as it relates to lifetime
dollar limits, and the provisions of PHS Act sections 2712, 2714, 2715,
and 2718, apply to grandfathered health plans for plan years beginning
on or after September 23, 2010. The provisions of PHS Act section 2708
apply to grandfathered health plans for plan years beginning on or
after January 1, 2014.
(e) Applicability of PHS Act sections 2704, 2711, and 2714 to
grandfathered group health plans and group health insurance coverage--
(1) The provisions of PHS Act section 2704 as it applies with respect
to enrollees who are under 19 years of age, and the provisions of PHS
Act section 2711 insofar as it relates to annual dollar limits, apply
to grandfathered health plans that are group health plans (including
group health insurance coverage) for plan years beginning on or after
September 23, 2010. The provisions of PHS Act section 2704 apply
generally to grandfathered health plans that are group health plans
(including group health insurance coverage) for plan years beginning on
or after January 1, 2014.
(2) For plan years beginning before January 1, 2014, the provisions
of PHS Act section 2714 apply in the case of an adult child with
respect to a grandfathered health plan that is a group health plan only
if the adult child is not eligible to enroll in an eligible employer-
sponsored health plan (as defined in section 5000A(f)(2) of the
Internal Revenue Code) other than a grandfathered health plan of a
parent. For plan years beginning on or after January 1, 2014, the
provisions of PHS Act section 2714 apply with respect to a
grandfathered health plan that is a group health plan without regard to
whether an adult child is eligible to enroll in any other coverage.
(f) Effect on collectively bargained plans--In general. In the case
of health insurance coverage maintained pursuant to one or more
collective bargaining agreements between employee representatives and
one or more employers that was ratified before March 23, 2010, the
coverage is grandfathered health plan coverage at least until the date
on which the last of the collective bargaining agreements relating to
the coverage that was in effect on March 23, 2010 terminates. Any
coverage amendment made pursuant to a collective bargaining agreement
relating to the coverage that amends the coverage solely to conform to
any requirement added by subtitles A and C of title I of the Patient
Protection and Affordable Care Act (and the amendments made by those
subtitles, and the incorporation of those amendments into ERISA section
715 and Internal Revenue Code section 9815) is not treated as a
termination of the collective bargaining agreement. After the date on
which the last of the collective bargaining agreements relating to the
coverage that was in effect on March 23, 2010 terminates, the
determination of whether health insurance coverage maintained pursuant
to a collective bargaining agreement is grandfathered health plan
coverage is made under the rules of this section other than this
paragraph (f) (comparing the terms of the health insurance coverage
after the date the last collective bargaining agreement terminates with
the terms of the health insurance coverage that were in effect on March
23, 2010).
(g) Maintenance of grandfather status--(1) Changes causing
cessation of grandfather status. Subject to paragraph (g)(2) of this
section, the rules of this paragraph (g)(1) describe situations in
which a group health plan or health insurance coverage ceases to be a
grandfathered health plan. A plan or coverage will cease to be a
grandfathered health plan when an amendment to plan terms that results
in a change described in this paragraph (g)(1) becomes effective,
regardless of when the amendment was adopted. Once grandfather status
is lost, it cannot be regained.
(i) Elimination of benefits. The elimination of all or
substantially all benefits to diagnose or treat a particular condition
causes a group health plan or health insurance coverage to cease to be
a grandfathered health plan. For this purpose, the elimination of
benefits for any necessary element to diagnose or treat a condition is
considered the elimination of all or substantially all benefits to
diagnose or treat a particular condition. Whether or not a plan or
coverage has eliminated substantially all benefits to diagnose or treat
a particular condition must be determined based on all the facts and
circumstances, taking into account the items and services provided for
a particular condition under the plan on March 23, 2010, as compared to
the benefits offered at the time the plan or coverage makes the benefit
change effective.
(ii) Increase in percentage cost-sharing requirement. Any increase,
measured from March 23, 2010, in a percentage cost-sharing requirement
(such as an individual's coinsurance requirement) causes a group health
plan or health insurance coverage to cease to be a grandfathered health
plan.
(iii) Increase in a fixed-amount cost-sharing requirement other
than a copayment. Any increase in a fixed-amount cost-sharing
requirement other than a copayment (for example, deductible or out-of-
pocket limit), determined as of the effective date of the increase,
causes a group health plan or health insurance coverage to cease to be
a grandfathered health plan, if the total percentage increase in the
cost-sharing requirement measured from March 23, 2010 exceeds the
maximum percentage increase (as defined in paragraph (g)(3)(ii) of this
section).
(iv) Increase in a fixed-amount copayment. Any increase in a fixed-
amount copayment, determined as of the effective date of the increase,
and determined for each copayment level if a plan has different
copayment levels for different categories of services, causes a group
health plan or health insurance coverage to cease to be a grandfathered
health plan, if the total increase in the copayment measured from March
23, 2010 exceeds the greater of:
(A) An amount equal to $5 increased by medical inflation, as
defined in paragraph (g)(3)(i) of this section (that is, $5 times
medical inflation, plus $5), or
(B) The maximum percentage increase (as defined in paragraph
(g)(3)(ii) of this section), determined by expressing the total
increase in the copayment as a percentage.
(v) Decrease in contribution rate by employers and employee
organizations--(A) Contribution rate based on cost of coverage. A group
health plan or group health insurance coverage ceases to be a
grandfathered health plan if the employer or employee organization
decreases its contribution rate based on cost of coverage (as defined
in paragraph (g)(3)(iii)(A) of this section) towards the cost of any
tier of coverage for any class of similarly situated individuals (as
described in Sec. 54.9802(d)) by more than 5 percentage points below
the contribution rate for the coverage period that includes March 23,
2010.
(B) Contribution rate based on a formula. A group health plan or
group health insurance coverage ceases to be a grandfathered health
plan if the
[[Page 72241]]
employer or employee organization decreases its contribution rate based
on a formula (as defined in paragraph (g)(3)(iii)(B) of this section)
towards the cost of any tier of coverage for any class of similarly
situated individuals (as described in Sec. 54.9802(d)) by more than 5
percent below the contribution rate for the coverage period that
includes March 23, 2010.
(C) Special rules regarding decreases in contribution rates. An
insured group health plan (or a multiemployer plan) that is a
grandfathered health plan will not cease to be a grandfathered health
plan based on a change in the employer contribution rate unless the
issuer (or multiemployer plan) knows, or should know, of the change,
provided:
(1) Upon renewal (or, in the case of a multiemployer plan, before
the start of a new plan year), the issuer (or multiemployer plan)
requires relevant employers, employee organizations, or plan sponsors,
as applicable, to make a representation regarding its contribution rate
for the plan year covered by the renewal, as well as its contribution
rate on March 23, 2010 (if the issuer, or multiemployer plan, does not
already have it); and
(2) The relevant policies, certificates, contracts of insurance, or
plan documents disclose in a prominent and effective manner that
employers, employee organizations, or plan sponsors, as applicable, are
required to notify the issuer (or multiemployer plan) if the
contribution rate changes at any point during the plan year.
(D) Application to plans with multi-tiered coverage structures. The
standards for employer contributions in this paragraph (g)(1)(v) apply
on a tier-by-tier basis. Therefore, if a group health plan modifies the
tiers of coverage it had on March 23, 2010 (for example, from self-only
and family to a multi-tiered structure of self-only, self-plus-one,
self-plus-two, and self-plus-three-or-more), the employer contribution
for any new tier would be tested by comparison to the contribution rate
for the corresponding tier on March 23, 2010. For example, if the
employer contribution rate for family coverage was 50 percent on March
23, 2010, the employer contribution rate for any new tier of coverage
other than self-only (i.e., self-plus-one, self-plus-two, self-plus-
three or more) must be within 5 percentage points of 50 percent (i.e.,
at least 45 percent). If, however, the plan adds one or more new
coverage tiers without eliminating or modifying any previous tiers and
those new coverage tiers cover classes of individuals that were not
covered previously under the plan, the new tiers would not be analyzed
under the standards for changes in employer contributions. For example,
if a plan with self-only as the sole coverage tier added a family
coverage tier, the level of employer contributions toward the family
coverage would not cause the plan to lose grandfather status.
(E) Group health plans with fixed-dollar employee contributions or
no employee contributions. A group health plan that requires either
fixed-dollar employee contributions or no employee contributions will
not cease to be a grandfathered health plan solely because the employer
contribution rate changes so long as there continues to be no employee
contributions or no increase in the fixed-dollar employee contributions
towards the cost of coverage.
(vi) Changes in annual limits--(A) Addition of an annual limit. A
group health plan, or group health insurance coverage, that, on March
23, 2010, did not impose an overall annual or lifetime limit on the
dollar value of all benefits ceases to be a grandfathered health plan
if the plan or health insurance coverage imposes an overall annual
limit on the dollar value of benefits. (But see Sec. 54.9815-2711,
which prohibits all annual dollar limits on essential health benefits
for plan years beginning on or after January 1, 2014).
(B) Decrease in limit for a plan or coverage with only a lifetime
limit. A group health plan, or group health insurance coverage, that,
on March 23, 2010, imposed an overall lifetime limit on the dollar
value of all benefits but no overall annual limit on the dollar value
of all benefits ceases to be a grandfathered health plan if the plan or
health insurance coverage adopts an overall annual limit at a dollar
value that is lower than the dollar value of the lifetime limit on
March 23, 2010. (But see Sec. 54.9815-2711, which prohibits all annual
dollar limits on essential health benefits for plan years beginning on
or after January 1, 2014).
(C) Decrease in limit for a plan or coverage with an annual limit.
A group health plan, or group health insurance coverage, that, on March
23, 2010, imposed an overall annual limit on the dollar value of all
benefits ceases to be a grandfathered health plan if the plan or health
insurance coverage decreases the dollar value of the annual limit
(regardless of whether the plan or health insurance coverage also
imposed an overall lifetime limit on March 23, 2010 on the dollar value
of all benefits). (But see Sec. 54.9815-2711, which prohibits all
annual dollar limits on essential health benefits for plan years
beginning on or after January 1, 2014).
(2) Transitional rules--(i) Changes made prior to March 23, 2010.
If a group health plan or health insurance issuer makes the following
changes to the terms of the plan or health insurance coverage, the
changes are considered part of the terms of the plan or health
insurance coverage on March 23, 2010 even though they were not
effective at that time and such changes do not cause a plan or health
insurance coverage to cease to be a grandfathered health plan:
(A) Changes effective after March 23, 2010 pursuant to a legally
binding contract entered into on or before March 23, 2010;
(B) Changes effective after March 23, 2010 pursuant to a filing on
or before March 23, 2010 with a State insurance department; or
(C) Changes effective after March 23, 2010 pursuant to written
amendments to a plan that were adopted on or before March 23, 2010.
(ii) Changes made after March 23, 2010 and adopted prior to
issuance of regulations. If, after March 23, 2010, a group health plan
or health insurance issuer makes changes to the terms of the plan or
health insurance coverage and the changes are adopted prior to June 14,
2010, the changes will not cause the plan or health insurance coverage
to cease to be a grandfathered health plan if the changes are revoked
or modified effective as of the first day of the first plan year (in
the individual market, policy year) beginning on or after September 23,
2010, and the terms of the plan or health insurance coverage on that
date, as modified, would not cause the plan or coverage to cease to be
a grandfathered health plan under the rules of this section, including
paragraph (g)(1) of this section. For this purpose, changes will be
considered to have been adopted prior to June 14, 2010 if:
(A) The changes are effective before that date;
(B) The changes are effective on or after that date pursuant to a
legally binding contract entered into before that date;
(C) The changes are effective on or after that date pursuant to a
filing before that date with a State insurance department; or
(D) The changes are effective on or after that date pursuant to
written amendments to a plan that were adopted before that date.
(3) Definitions--(i) Medical inflation defined. For purposes of
this paragraph (g), the term medical inflation means the increase since
March 2010 in the overall medical care component of the Consumer Price
Index for All Urban Consumers (CPI-U) (unadjusted)
[[Page 72242]]
published by the Department of Labor using the 1982-1984 base of 100.
For this purpose, the increase in the overall medical care component is
computed by subtracting 387.142 (the overall medical care component of
the CPI-U (unadjusted) published by the Department of Labor for March
2010, using the 1982-1984 base of 100) from the index amount for any
month in the 12 months before the new change is to take effect and then
dividing that amount by 387.142.
(ii) Maximum percentage increase defined. For purposes of this
paragraph (g), the term maximum percentage increase means medical
inflation (as defined in paragraph (g)(3)(i) of this section),
expressed as a percentage, plus 15 percentage points.
(iii) Contribution rate defined. For purposes of paragraph
(g)(1)(v) of this section:
(A) Contribution rate based on cost of coverage. The term
contribution rate based on cost of coverage means the amount of
contributions made by an employer or employee organization compared to
the total cost of coverage, expressed as a percentage. The total cost
of coverage is determined in the same manner as the applicable premium
is calculated under the COBRA continuation provisions of section 604 of
ERISA, section 4980B(f)(4) of the Internal Revenue Code, and section
2204 of the PHS Act. In the case of a self-insured plan, contributions
by an employer or employee organization are equal to the total cost of
coverage minus the employee contributions towards the total cost of
coverage.
(B) Contribution rate based on a formula. The term contribution
rate based on a formula means, for plans that, on March 23, 2010, made
contributions based on a formula (such as hours worked or tons of coal
mined), the formula.
(4) Examples. The rules of this paragraph (g) are illustrated by
the following examples:
Example 1. (i) Facts. On March 23, 2010, a grandfathered health
plan has a coinsurance requirement of 20% for inpatient surgery. The
plan is subsequently amended to increase the coinsurance requirement
to 25%.
(ii) Conclusion. In this Example 1, the increase in the
coinsurance requirement from 20% to 25% causes the plan to cease to
be a grandfathered health plan.
Example 2. (i) Facts. Before March 23, 2010, the terms of a
group health plan provide benefits for a particular mental health
condition, the treatment for which is a combination of counseling
and prescription drugs. Subsequently, the plan eliminates benefits
for counseling.
(ii) Conclusion. In this Example 2, the plan ceases to be a
grandfathered health plan because counseling is an element that is
necessary to treat the condition. Thus the plan is considered to
have eliminated substantially all benefits for the treatment of the
condition.
Example 3. (i) Facts. On March 23, 2010, a grandfathered health
plan has a copayment requirement of $30 per office visit for
specialists. The plan is subsequently amended to increase the
copayment requirement to $40. Within the 12-month period before the
$40 copayment takes effect, the greatest value of the overall
medical care component of the CPI-U (unadjusted) is 475.
(ii) Conclusion. In this Example 3, the increase in the
copayment from $30 to $40, expressed as a percentage, is 33.33% (40
- 30 = 10; 10 / 30 = 0.3333; 0.3333 = 33.33%). Medical inflation (as
defined in paragraph (g)(3)(i) of this section) from March 2010 is
0.2269 (475 - 387.142 = 87.858; 87.858 / 387.142 = 0.2269). The
maximum percentage increase permitted is 37.69% (0.2269 = 22.69%;
22.69% + 15% = 37.69%). Because 33.33% does not exceed 37.69%, the
change in the copayment requirement at that time does not cause the
plan to cease to be a grandfathered health plan.
Example 4. (i) Facts. Same facts as Example 3, except the
grandfathered health plan subsequently increases the $40 copayment
requirement to $45 for a later plan year. Within the 12-month period
before the $45 copayment takes effect, the greatest value of the
overall medical care component of the CPI-U (unadjusted) is 485.
(ii) Conclusion. In this Example 4, the increase in the
copayment from $30 (the copayment that was in effect on March 23,
2010) to $45, expressed as a percentage, is 50% (45 - 30 = 15; 15 /
30 = 0.5; 0.5 = 50%). Medical inflation (as defined in paragraph
(g)(3)(i) of this section) from March 2010 is 0.2527 (485 - 387.142
= 97.858; 97.858 / 387.142 = 0.2527). The increase that would cause
a plan to cease to be a grandfathered health plan under paragraph
(g)(1)(iv) of this section is the greater of the maximum percentage
increase of 40.27% (0.2527 = 25.27%; 25.27% + 15% = 40.27%), or
$6.26 ($5 x 0.2527 = $1.26; $1.26 + $5 = $6.26).
Because 50% exceeds 40.27% and $15 exceeds $6.26, the change in the
copayment requirement at that time causes the plan to cease to be a
grandfathered health plan.
Example 5. (i) Facts. On March 23, 2010, a grandfathered health
plan has a copayment of $10 per office visit for primary care
providers. The plan is subsequently amended to increase the
copayment requirement to $15. Within the 12-month period before the
$15 copayment takes effect, the greatest value of the overall
medical care component of the CPI-U (unadjusted) is 415.
(ii) Conclusion. In this Example 5, the increase in the
copayment, expressed as a percentage, is 50% (15 - 10 = 5; 5 / 10 =
0.5; 0.5 = 50%). Medical inflation (as defined in paragraph (g)(3)
of this section) from March 2010 is 0.0720 (415.0 - 387.142 = 27.-
858; 27.858 / 387.142 = 0.0720). The increase that would cause a
plan to cease to be a grandfathered health plan under paragraph
(g)(1)(iv) of this section is the greater of the maximum percentage
increase of 22.20% (0.0720 = 7.20%; 7.20% + 15% = 22.20), or $5.36
($5 x 0.0720 = $0.36; $0.36 + $5 = $5.36). The $5 increase in
copayment in this Example 5 would not cause the plan to cease to be
a grandfathered health plan pursuant to paragraph (g)(1)(iv)this
section, which would permit an increase in the copayment of up to
$5.36.
Example 6. (i) Facts. The same facts as Example 5, except on
March 23, 2010, the grandfathered health plan has no copayment ($0)
for office visits for primary care providers. The plan is
subsequently amended to increase the copayment requirement to $5.
(ii) Conclusion. In this Example 6, medical inflation (as
defined in paragraph (g)(3)(i) of this section) from March 2010 is
0.0720 (415.0 - 387.142 = 27.858; 27.858 / 387.142 = 0.0720). The
increase that would cause a plan to cease to be a grandfathered
health plan under paragraph (g)(1)(iv)(A) of this section is $5.36
($5 x 0.0720 = $0.36; $0.36 + $5 = $5.36). The $5 increase in
copayment in this Example 6 is less than the amount calculated
pursuant to paragraph (g)(1)(iv)(A) of this section of $5.36. Thus,
the $5 increase in copayment does not cause the plan to cease to be
a grandfathered health plan.
Example 7. (i) Facts. On March 23, 2010, a self-insured group
health plan provides two tiers of coverage--self-only and family.
The employer contributes 80% of the total cost of coverage for self-
only and 60% of the total cost of coverage for family. Subsequently,
the employer reduces the contribution to 50% for family coverage,
but keeps the same contribution rate for self-only coverage.
(ii) Conclusion. In this Example 7, the decrease of 10
percentage points for family coverage in the contribution rate based
on cost of coverage causes the plan to cease to be a grandfathered
health plan. The fact that the contribution rate for self-only
coverage remains the same does not change the result.
Example 8. (i) Facts. On March 23, 2010, a self-insured
grandfathered health plan has a COBRA premium for the 2010 plan year
of $5000 for self-only coverage and $12,000 for family coverage. The
required employee contribution for the coverage is $1000 for self-
only coverage and $4000 for family coverage. Thus, the contribution
rate based on cost of coverage for 2010 is 80% ((5000 - 1000)/5000)
for self-only coverage and 67% ((12,000 - 4000)/12,000) for family
coverage. For a subsequent plan year, the COBRA premium is $6000 for
self-only coverage and $15,000 for family coverage. The employee
contributions for that plan year are $1200 for self-only coverage
and $5000 for family coverage. Thus, the contribution rate based on
cost of coverage is 80% ((6000 - 1200)/6000) for self-only coverage
and 67% ((15,000 - 5000)/15,000) for family coverage.
(ii) Conclusion. In this Example 8, because there is no change
in the contribution rate based on cost of coverage, the plan retains
its status as a grandfathered health plan. The result would be the
same if all or part of the employee contribution was made pre-tax
through a cafeteria plan under section 125 of the Internal Revenue
Code.
[[Page 72243]]
Example 9. (i) Facts. A group health plan not maintained
pursuant to a collective bargaining agreement offers three benefit
packages on March 23, 2010. Option F is a self-insured option.
Options G and H are insured options. Beginning July 1, 2013, the
plan increases coinsurance under Option H from 10% to 15%.
(ii) Conclusion. In this Example 9, the coverage under Option H
is not grandfathered health plan coverage as of July 1, 2013,
consistent with the (rule in paragraph (g)(1)(ii) of this section.
Whether the coverage under Options F and G is grandfathered health
plan coverage is determined separately under the rules of this
paragraph (g).
Sec. 54.9815-1251T [Removed]
0
Par. 5. Section 54.9815-1251T is removed.
0
Par. 6. Section 54.9815-2704 is added to read as follows:
Sec. 54.9815-2704 Prohibition of preexisting condition exclusions.
(a) No preexisting condition exclusions. A group health plan, or a
health insurance issuer offering group health insurance coverage, may
not impose any preexisting condition exclusion (as defined in Sec.
54.9801-2).
(b) Examples. The rules of paragraph (a) of this section are
illustrated by the following examples (for additional examples
illustrating the definition of a preexisting condition exclusion, see
Sec. 54.9801-3(a)(2)):
Example 1. (i) Facts. A group health plan provides benefits
solely through an insurance policy offered by Issuer P. At the
expiration of the policy, the plan switches coverage to a policy
offered by Issuer N. N's policy excludes benefits for oral surgery
required as a result of a traumatic injury if the injury occurred
before the effective date of coverage under the policy.
(ii) Conclusion. In this Example 1, the exclusion of benefits
for oral surgery required as a result of a traumatic injury if the
injury occurred before the effective date of coverage is a
preexisting condition exclusion because it operates to exclude
benefits for a condition based on the fact that the condition was
present before the effective date of coverage under the policy.
Therefore, such an exclusion is prohibited.
Example 2. (i) Facts. Individual C applies for individual health
insurance coverage with Issuer M. M denies C's application for
coverage because a pre-enrollment physical revealed that C has type
2 diabetes.
(ii) Conclusion. See Example 2 in 45 CFR 147.108(a)(2) for a
conclusion that M's denial of C's application for coverage is a
preexisting condition exclusion because a denial of an application
for coverage based on the fact that a condition was present before
the date of denial is an exclusion of benefits based on a
preexisting condition. Therefore, such an exclusion is prohibited.
(c) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years beginning on or after January 1, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the interim final regulations promulgated by the Department
of Labor at 29 CFR part 2590, contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015.
Sec. 54.9815-2704T [Removed]
0
Par. 7. Section 54.9815-2704T is removed.
0
Par. 8 Section 54.9815-2711 is added to read as follows:
Sec. 54.9815-2711 No lifetime or annual limits.
(a) Prohibition--(1) Lifetime limits. Except as provided in
paragraph (b) of this section, a group health plan, or a health
insurance issuer offering group health insurance coverage, may not
establish any lifetime limit on the dollar amount of essential health
benefits for any individual, whether provided in-network or out-of-
network.
(2) Annual limits--(i) General rule. Except as provided in
paragraphs (a)(2)(ii) and (b) of this section, a group health plan, or
a health insurance issuer offering group health insurance coverage, may
not establish any annual limit on the dollar amount of essential health
benefits for any individual, whether provided in-network or out-of-
network.
(ii) Exception for health flexible spending arrangements. A health
flexible spending arrangement (as defined in section 106(c)(2) of the
Internal Revenue Code) offered through a cafeteria plan pursuant to
section 125 of the Internal Revenue Code is not subject to the
requirement in paragraph (a)(2)(i) of this section.
(b) Construction--(1) Permissible limits on specific covered
benefits. The rules of this section do not prevent a group health plan,
or a health insurance issuer offering group health insurance coverage,
from placing annual or lifetime dollar limits with respect to any
individual on specific covered benefits that are not essential health
benefits to the extent that such limits are otherwise permitted under
applicable Federal or State law. (The scope of essential health
benefits is addressed in paragraph (c) of this section).
(2) Condition-based exclusions. The rules of this section do not
prevent a group health plan, or a health insurance issuer offering
group health insurance coverage, from excluding all benefits for a
condition. However, if any benefits are provided for a condition, then
the requirements of this section apply. Other requirements of Federal
or State law may require coverage of certain benefits.
(c) Definition of essential health benefits. The term ``essential
health benefits'' means essential health benefits under section 1302(b)
of the Patient Protection and Affordable Care Act and applicable
regulations. For this purpose, a group health plan or a health
insurance issuer that is not required to provide essential health
benefits under section 1302(b) must define ``essential health
benefits'' in a manner consistent with one of the three Federal
Employees Health Benefit Program (FEHBP) options as defined by 45 CFR
156.100(a)(3) or one of the base-benchmark plans selected by a State or
applied by default pursuant to 45 CFR 156.100.
(d) Special rule for health reimbursement arrangements (HRAs) and
other account-based plans--(1) In general. If an HRA or other account-
based plan is integrated with other coverage under a group health plan
and the other group health plan coverage alone satisfies the
requirements in paragraph (a)(2) of this section, the fact that the
benefits under the HRA or other account-based plan are limited does not
mean that the HRA or other account-based plan fails to meet the
requirements of paragraph (a)(2) of this section. Similarly, if an HRA
or other account-based plan is integrated with other coverage under a
group health plan and the other group health plan coverage alone
satisfies the requirements in PHS Act section 2713 and section 54.9815-
2713(a)(1), the HRA or other account-based plan will not fail to meet
the requirements of PHS Act section 2713 and Sec. 54.9815-2713(a)(1).
(2) Integration requirements. An HRA or other account-based plan is
integrated with a group health plan for purposes of paragraph (a)(2) of
this section if it meets the requirements under either the integration
method set forth in paragraph (d)(2)(i) of this section or the
integration method set forth in paragraph (d)(2)(ii) of this section.
Integration does not require that the HRA (or other account-based plan)
and the group health plan with which it is integrated share the same
plan sponsor, the same plan document, or governing instruments, or file
a single Form 5500, if applicable. The term ``excepted benefits'' is
used throughout the integration methods; for a definition of the term
``excepted benefits'' see Code section 9832(c), ERISA section 733(c),
and PHS Act section 2791(c).
(i) Integration Method: Minimum value not required. An HRA or other
[[Page 72244]]
account-based plan is integrated with another group health plan for
purposes of this paragraph if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan) to the employee that does not consist
solely of excepted benefits;
(B) The employee receiving the HRA or other account-based plan is
actually enrolled in a group health plan (other than the HRA or other
account-based plan) that does not consist solely of excepted benefits,
regardless of whether the plan is offered by the same plan sponsor
(referred to as non-HRA group coverage);
(C) The HRA or other account-based plan is available only to
employees who are enrolled in non-HRA group coverage, regardless of
whether the non-HRA group coverage is offered by the plan sponsor of
the HRA or other account-based plan (for example, the HRA may be
offered only to employees who do not enroll in an employer's group
health plan but are enrolled in other non-HRA group coverage, such as a
group health plan maintained by the employer of the employee's spouse);
(D) The benefits under the HRA or other account-based plan are
limited to reimbursement of one or more of the following--co-payments,
co-insurance, deductibles, and premiums under the non-HRA group
coverage, as well as medical care (as defined under section 213(d) of
the Code) that does not constitute essential health benefits as defined
in paragraph (c) of this section; and
(E) Under the terms of the HRA or other account-based plan, an
employee (or former employee) is permitted to permanently opt out of
and waive future reimbursements from the HRA or other account-based
plan at least annually and, upon termination of employment, either the
remaining amounts in the HRA or other account-based plan are forfeited
or the employee is permitted to permanently opt out of and waive future
reimbursements from the HRA or other account-based plan.
(ii) Integration Method: Minimum value required. An HRA or other
account-based plan is integrated with another group health plan for
purposes of this paragraph if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan) to the employee that provides minimum
value pursuant to Code section 36B(c)(2)(C)(ii) (and its implementing
regulations and applicable guidance);
(B) The employee receiving the HRA or other account-based plan is
actually enrolled in a group health plan that provides minimum value
pursuant to section 36B(c)(2)(C)(ii) of the Code (and applicable
guidance), regardless of whether the plan is offered by the plan
sponsor of the HRA or other account-based plan (referred to as non-HRA
MV group coverage);
(C) The HRA or other account-based plan is available only to
employees who are actually enrolled in non-HRA MV group coverage,
regardless of whether the non-HRA MV group coverage is offered by the
plan sponsor of the HRA or other account-based plan (for example, the
HRA may be offered only to employees who do not enroll in an employer's
group health plan but are enrolled in other non-HRA MV group coverage,
such as a group health plan maintained by an employer of the employee's
spouse); and
(D) Under the terms of the HRA or other account-based plan, an
employee (or former employee) is permitted to permanently opt out of
and waive future reimbursements from the HRA or other account-based
plan at least annually, and, upon termination of employment, either the
remaining amounts in the HRA or other account-based plan are forfeited
or the employee is permitted to permanently opt out of and waive future
reimbursements from the HRA or other account-based plan.
(3) Forfeiture. For purpose of integration under paragraphs
(d)(2)(i)(E) and (d)(2)(ii)(D) of this section, forfeiture or waiver
occurs even if the forfeited or waived amounts may be reinstated upon a
fixed date, a participant's death, or the earlier of the two events
(the reinstatement event). For this purpose coverage under an HRA or
other account-based plan is considered forfeited or waived prior to a
reinstatement event only if the participant's election to forfeit or
waive is irrevocable, meaning that, beginning on the effective date of
the election and through the date of the reinstatement event, the
participant and the participant's beneficiaries have no access to
amounts credited to the HRA or other account-based plan. This means
that upon and after reinstatement, the reinstated amounts under the HRA
or other account-based plan may not be used to reimburse or pay medical
expenses incurred during the period after forfeiture and prior to
reinstatement.
(4) No integration with individual market coverage. A group health
plan, including an HRA or other account-based plan, used to purchase
coverage on the individual market is not integrated with that
individual market coverage for purposes of paragraph (a)(2) of this
section (or for purposes of the requirements of PHS Act section 2713).
(5) Integration with Medicare parts B and D. For employers that are
not required to offer their non-HRA group health plan coverage to
employees who are Medicare beneficiaries, an HRA or other account-based
plan that may be used to reimburse premiums under Medicare part B or D
may be integrated with Medicare (and deemed to comply with PHS Act
sections 2711 and 2713) if the following requirements are satisfied
with respect to employees who would be eligible for the employer's non-
HRA group health plan but for their eligibility for Medicare (and the
integration rules under paragraphs (d)(2)(i) and (ii) of this section
continue to apply to employees who are not eligible for Medicare):
(i) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan and that does not consist solely of
excepted benefits) to employees who are not eligible for Medicare;
(ii) The employee receiving the HRA or other account-based plan is
actually enrolled Medicare part B or D;
(iii) The HRA or other account-based plan is available only to
employees who are enrolled in Medicare part B or D; and
(iv) The HRA or other account-based plan complies with paragraphs
(d)(2)(i)(E) and (d)(2)(ii)(D) of this section.
(6) Account-based plan. An account-based plan for purposes of this
section is an employer-provided group health plan that provides
reimbursements of medical expenses other than individual market policy
premiums with the reimbursement subject to a maximum fixed dollar
amount for a period. An HRA is a type of account-based plan.
(e) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years beginning on or after January 1, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the interim final regulations promulgated by the Department
of Labor at 29 CFR part 2590, contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015.
Sec. 54.9815-2711T [Removed]
0
Par. 9. Section 54.9815-2711T is removed.
0
Par. 10. Section 54.9815-2712 is added to read as follows:
[[Page 72245]]
Sec. 54.9815-2712 Rules regarding rescissions.
(a) Prohibition on rescissions--(1) A group health plan, or a
health insurance issuer offering group health insurance coverage, must
not rescind coverage under the plan, or under the policy, certificate,
or contract of insurance, with respect to an individual (including a
group to which the individual belongs or family coverage in which the
individual is included) once the individual is covered under the plan
or coverage, unless the individual (or a person seeking coverage on
behalf of the individual) performs an act, practice, or omission that
constitutes fraud, or makes an intentional misrepresentation of
material fact, as prohibited by the terms of the plan or coverage. A
group health plan, or a health insurance issuer offering group health
insurance coverage, must provide at least 30 days advance written
notice to each participant who would be affected before coverage may be
rescinded under this paragraph (a)(1), regardless of whether the
coverage is insured or self-insured, or whether the rescission applies
to an entire group or only to an individual within the group. (The
rules of this paragraph (a)(1) apply regardless of any contestability
period that may otherwise apply.)
(2) For purposes of this section, a rescission is a cancellation or
discontinuance of coverage that has retroactive effect. For example, a
cancellation that treats a policy as void from the time of the
individual's or group's enrollment is a rescission. As another example,
a cancellation that voids benefits paid up to a year before the
cancellation is also a rescission for this purpose. A cancellation or
discontinuance of coverage is not a rescission if--
(i) The cancellation or discontinuance of coverage has only a
prospective effect;
(ii) The cancellation or discontinuance of coverage is effective
retroactively to the extent it is attributable to a failure to timely
pay required premiums or contributions (including COBRA premiums)
towards the cost of coverage;
(iii) The cancellation or discontinuance of coverage is initiated
by the individual (or by the individual's authorized representative)
and the sponsor, employer, plan, or issuer does not, directly or
indirectly, take action to influence the individual's decision to
cancel or discontinue coverage retroactively or otherwise take any
adverse action or retaliate against, interfere with, coerce,
intimidate, or threaten the individual; or
(iv) The cancellation or discontinuance of coverage is initiated by
the Exchange pursuant to 45 CFR 155.430 (other than under paragraph
(b)(2)(iii)).
(3) The rules of this paragraph (a) are illustrated by the
following examples:
Example 1. (i) Facts. Individual A seeks enrollment in an
insured group health plan. The plan terms permit rescission of
coverage with respect to an individual if the individual engages in
fraud or makes an intentional misrepresentation of a material fact.
The plan requires A to complete a questionnaire regarding A's prior
medical history, which affects setting the group rate by the health
insurance issuer. The questionnaire complies with the other
requirements of this part. The questionnaire includes the following
question: ``Is there anything else relevant to your health that we
should know?'' A inadvertently fails to list that A visited a
psychologist on two occasions, six years previously. A is later
diagnosed with breast cancer and seeks benefits under the plan. On
or around the same time, the issuer receives information about A's
visits to the psychologist, which was not disclosed in the
questionnaire.
(ii) Conclusion. In this Example 1, the plan cannot rescind A's
coverage because A's failure to disclose the visits to the
psychologist was inadvertent. Therefore, it was not fraudulent or an
intentional misrepresentation of material fact.
Example 2. (i) Facts. An employer sponsors a group health plan
that provides coverage for employees who work at least 30 hours per
week. Individual B has coverage under the plan as a full-time
employee. The employer reassigns B to a part-time position. Under
the terms of the plan, B is no longer eligible for coverage. The
plan mistakenly continues to provide health coverage, collecting
premiums from B and paying claims submitted by B. After a routine
audit, the plan discovers that B no longer works at least 30 hours
per week. The plan rescinds B's coverage effective as of the date
that B changed from a full-time employee to a part-time employee.
(ii) Conclusion. In this Example 2, the plan cannot rescind B's
coverage because there was no fraud or an intentional
misrepresentation of material fact. The plan may cancel coverage for
B prospectively, subject to other applicable Federal and State laws.
(b) Compliance with other requirements. Other requirements of
Federal or State law may apply in connection with a rescission of
coverage.
(c) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years beginning on or after January 1, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the interim final regulations promulgated by the Department
of Labor at 29 CFR part 2590, contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015.
Sec. 54.9815-2712T [Removed]
0
Par. 11. Section 54.9815-2712T is removed.
0
Par. 12. Section 54.9815-2714 is added to read as follows:
Sec. 54.9815-2714 Eligibility of children until at least age 26.
(a) In general--(1) A group health plan, or a health insurance
issuer offering group health insurance coverage, that makes available
dependent coverage of children must make such coverage available for
children until attainment of 26 years of age.
(2) The rule of this paragraph (a) is illustrated by the following
example:
Example. (i) Facts. For the plan year beginning January 1, 2011,
a group health plan provides health coverage for employees,
employees' spouses, and employees' children until the child turns
26. On the birthday of a child of an employee, July 17, 2011, the
child turns 26. The last day the plan covers the child is July 16,
2011.
(ii) Conclusion. In this Example, the plan satisfies the
requirement of this paragraph (a) with respect to the child.
(b) Restrictions on plan definition of dependent--(1) In general.
With respect to a child who has not attained age 26, a plan or issuer
may not define dependent for purposes of eligibility for dependent
coverage of children other than in terms of a relationship between a
child and the participant. Thus, for example, a plan or issuer may not
deny or restrict dependent coverage for a child who has not attained
age 26 based on the presence or absence of the child's financial
dependency (upon the participant or any other person); residency with
the participant or with any other person; whether the child lives,
works, or resides in an HMO's service area or other network service
area; marital status; student status; employment; eligibility for other
coverage; or any combination of those factors. (Other requirements of
Federal or State law, including section 609 of ERISA or section 1908 of
the Social Security Act, may require coverage of certain children.)
(2) Construction. A plan or issuer will not fail to satisfy the
requirements of this section if the plan or issuer limits dependent
child coverage to children under age 26 who are described in section
152(f)(1) . For an individual not described in section 152(f)(1), such
as a grandchild or niece, a plan may impose additional conditions on
eligibility for dependent child health coverage, such
[[Page 72246]]
as a condition that the individual be a dependent for income tax
purposes.
(c) Coverage of grandchildren not required. Nothing in this section
requires a plan or issuer to make coverage available for the child of a
child receiving dependent coverage.
(d) Uniformity irrespective of age. The terms of the plan or health
insurance coverage providing dependent coverage of children cannot vary
based on age (except for children who are age 26 or older).
(e) Examples. The rules of paragraph (d) of this section are
illustrated by the following examples:
Example 1. (i) Facts. A group health plan offers a choice of
self-only or family health coverage. Dependent coverage is provided
under family health coverage for children of participants who have
not attained age 26. The plan imposes an additional premium
surcharge for children who are older than age 18.
(ii) Conclusion. In this Example 1, the plan violates the
requirement of paragraph (d) of this section because the plan varies
the terms for dependent coverage of children based on age.
Example 2. (i) Facts. A group health plan offers a choice among
the following tiers of health coverage: Self-only, self-plus-one,
self-plus-two, and self-plus-three-or-more. The cost of coverage
increases based on the number of covered individuals. The plan
provides dependent coverage of children who have not attained age
26.
(ii) Conclusion. In this Example 2, the plan does not violate
the requirement of paragraph (d) of this section that the terms of
dependent coverage for children not vary based on age. Although the
cost of coverage increases for tiers with more covered individuals,
the increase applies without regard to the age of any child.
Example 3. (i) Facts. A group health plan offers two benefit
packages--an HMO option and an indemnity option. Dependent coverage
is provided for children of participants who have not attained age
26. The plan limits children who are older than age 18 to the HMO
option.
(ii) Conclusion. In this Example 3, the plan violates the
requirement of paragraph (d) of this section because the plan, by
limiting children who are older than age 18 to the HMO option,
varies the terms for dependent coverage of children based on age.
Example 4. (i) Facts. A group health plan sponsored by a large
employer normally charges a copayment for physician visits that do
not constitute preventive services. The plan charges this copayment
to individuals age 19 and over, including employees, spouses, and
dependent children, but waives it for those under age 19.
(ii) Conclusion. In this Example 4, the plan does not violate
the requirement of paragraph (d) of this section that the terms of
dependent coverage for children not vary based on age. While the
requirement of paragraph (d) of this section generally prohibits
distinctions based upon age in dependent coverage of children, it
does not prohibit distinctions based upon age that apply to all
coverage under the plan, including coverage for employees and
spouses as well as dependent children. In this Example 4, the
copayments charged to dependent children are the same as those
charged to employees and spouses. Accordingly, the arrangement
described in this Example 4 (including waiver, for individuals under
age 19, of the generally applicable copayment) does not violate the
requirement of paragraph (d) of this section.
(f) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years beginning on or after January 1, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the interim final regulations promulgated by the Department
of Labor at 29 CFR part 2590, contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015.
Sec. 54.9815-2714T [Removed]
0
Par. 13. Section 54.9815-2714T is removed.
0
Par. 14. Section 54.9815-2719 is added to read as follows:
Sec. 54.9815-2719 Internal claims and appeals and external review
processes.
(a) Scope and definitions-(1) Scope. This section sets forth
requirements with respect to internal claims and appeals and external
review processes for group health plans and health insurance issuers
that are not grandfathered health plans under Sec. 54.9815-1251.
Paragraph (b) of this section provides requirements for internal claims
and appeals processes. Paragraph (c) of this section sets forth rules
governing the applicability of State external review processes.
Paragraph (d) of this section sets forth a Federal external review
process for plans and issuers not subject to an applicable State
external review process. Paragraph (e) of this section prescribes
requirements for ensuring that notices required to be provided under
this section are provided in a culturally and linguistically
appropriate manner. Paragraph (f) of this section describes the
authority of the Secretary to deem certain external review processes in
existence on March 23, 2010 as in compliance with paragraph (c) or (d)
of this section.
(2) Definitions. For purposes of this section, the following
definitions apply--
(i) Adverse benefit determination. An adverse benefit determination
means an adverse benefit determination as defined in 29 CFR 2560.503-1,
as well as any rescission of coverage, as described in Sec. 54.9815-
2712(a)(2) (whether or not, in connection with the rescission, there is
an adverse effect on any particular benefit at that time).
(ii) Appeal (or internal appeal). An appeal or internal appeal
means review by a plan or issuer of an adverse benefit determination,
as required in paragraph (b) of this section.
(iii) Claimant. Claimant means an individual who makes a claim
under this section. For purposes of this section, references to
claimant include a claimant's authorized representative.
(iv) External review. External review means a review of an adverse
benefit determination (including a final internal adverse benefit
determination) conducted pursuant to an applicable State external
review process described in paragraph (c) of this section or the
Federal external review process of paragraph (d) of this section.
(v) Final internal adverse benefit determination. A final internal
adverse benefit determination means an adverse benefit determination
that has been upheld by a plan or issuer at the completion of the
internal appeals process applicable under paragraph (b) of this section
(or an adverse benefit determination with respect to which the internal
appeals process has been exhausted under the deemed exhaustion rules of
paragraph (b)(2)(ii)(F) of this section).
(vi) Final external review decision. A final external review
decision means a determination by an independent review organization at
the conclusion of an external review.
(vii) Independent review organization (or IRO). An independent
review organization (or IRO) means an entity that conducts independent
external reviews of adverse benefit determinations and final internal
adverse benefit determinations pursuant to paragraph (c) or (d) of this
section.
(viii) NAIC Uniform Model Act. The NAIC Uniform Model Act means the
Uniform Health Carrier External Review Model Act promulgated by the
National Association of Insurance Commissioners in place on July 23,
2010.
(b) Internal claims and appeals process--(1) In general. A group
health plan and a health insurance issuer offering group health
insurance coverage must implement an effective internal claims and
appeals process, as described in this paragraph (b).
(2) Requirements for group health plans and group health insurance
issuers. A group health plan and a health insurance issuer offering
group health insurance coverage must comply with all the requirements
of this paragraph (b)(2). In the case of health
[[Page 72247]]
insurance coverage offered in connection with a group health plan, if
either the plan or the issuer complies with the internal claims and
appeals process of this paragraph (b)(2), then the obligation to comply
with this paragraph (b)(2) is satisfied for both the plan and the
issuer with respect to the health insurance coverage.
(i) Minimum internal claims and appeals standards. A group health
plan and a health insurance issuer offering group health insurance
coverage must comply with all the requirements applicable to group
health plans under 29 CFR 2560.503-1, except to the extent those
requirements are modified by paragraph (b)(2)(ii) of this section.
Accordingly, under this paragraph (b), with respect to health insurance
coverage offered in connection with a group health plan, the group
health insurance issuer is subject to the requirements in 29 CFR
2560.503-1 to the same extent as the group health plan.
(ii) Additional standards. In addition to the requirements in
paragraph (b)(2)(i) of this section, the internal claims and appeals
processes of a group health plan and a health insurance issuer offering
group health insurance coverage must meet the requirements of this
paragraph (b)(2)(ii).
(A) Clarification of meaning of adverse benefit determination. For
purposes of this paragraph (b)(2), an ``adverse benefit determination''
includes an adverse benefit determination as defined in paragraph
(a)(2)(i) of this section. Accordingly, in complying with 29 CFR
2560.503-1, as well as the other provisions of this paragraph (b)(2), a
plan or issuer must treat a rescission of coverage (whether or not the
rescission has an adverse effect on any particular benefit at that
time) as an adverse benefit determination. (Rescissions of coverage are
subject to the requirements of Sec. 54.9815-2712.)
(B) Expedited notification of benefit determinations involving
urgent care. The requirements of 29 CFR 2560.503-1(f)(2)(i) (which
generally provide, among other things, in the case of urgent care
claims for notification of the plan's benefit determination (whether
adverse or not) as soon as possible, taking into account the medical
exigencies, but not later than 72 hours after the receipt of the claim)
continue to apply to the plan and issuer. For purposes of this
paragraph (b)(2)(ii)(B), a claim involving urgent care has the meaning
given in 29 CFR 2560.503-1(m)(1), as determined by the attending
provider, and the plan or issuer shall defer to such determination of
the attending provider.
(C) Full and fair review. A plan and issuer must allow a claimant
to review the claim file and to present evidence and testimony as part
of the internal claims and appeals process. Specifically, in addition
to complying with the requirements of 29 CFR 2560.503-1(h)(2)--
(1) The plan or issuer must provide the claimant, free of charge,
with any new or additional evidence considered, relied upon, or
generated by the plan or issuer (or at the direction of the plan or
issuer) in connection with the claim; such evidence must be provided as
soon as possible and sufficiently in advance of the date on which the
notice of final internal adverse benefit determination is required to
be provided under 29 CFR 2560.503-1(i) to give the claimant a
reasonable opportunity to respond prior to that date; and
(2) Before the plan or issuer can issue a final internal adverse
benefit determination based on a new or additional rationale, the
claimant must be provided, free of charge, with the rationale; the
rationale must be provided as soon as possible and sufficiently in
advance of the date on which the notice of final internal adverse
benefit determination is required to be provided under 29 CFR 2560.503-
1(i) to give the claimant a reasonable opportunity to respond prior to
that date. Notwithstanding the rules of 29 CFR 2560.503-1(i), if the
new or additional evidence is received so late that it would be
impossible to provide it to the claimant in time for the claimant to
have a reasonable opportunity to respond, the period for providing a
notice of final internal adverse benefit determination is tolled until
such time as the claimant has a reasonable opportunity to respond.
After the claimant responds, or has a reasonable opportunity to respond
but fails to do so, the plan administrator shall notify the claimant of
the plan's benefit determination as soon as a plan acting in a
reasonable and prompt fashion can provide the notice, taking into
account the medical exigencies.
(D) Avoiding conflicts of interest. In addition to the requirements
of 29 CFR 2560.503-1(b) and (h) regarding full and fair review, the
plan and issuer must ensure that all claims and appeals are adjudicated
in a manner designed to ensure the independence and impartiality of the
persons involved in making the decision. Accordingly, decisions
regarding hiring, compensation, termination, promotion, or other
similar matters with respect to any individual (such as a claims
adjudicator or medical expert) must not be made based upon the
likelihood that the individual will support the denial of benefits.
(E) Notice. A plan and issuer must provide notice to individuals,
in a culturally and linguistically appropriate manner (as described in
paragraph (e) of this section) that complies with the requirements of
29 CFR 2560.503-1(g) and (j). The plan and issuer must also comply with
the additional requirements of this paragraph (b)(2)(ii)(E).
(1) The plan and issuer must ensure that any notice of adverse
benefit determination or final internal adverse benefit determination
includes information sufficient to identify the claim involved
(including the date of service, the health care provider, the claim
amount (if applicable), and a statement describing the availability,
upon request, of the diagnosis code and its corresponding meaning, and
the treatment code and its corresponding meaning).
(2) The plan and issuer must provide to participants and
beneficiaries, as soon as practicable, upon request, the diagnosis code
and its corresponding meaning, and the treatment code and its
corresponding meaning, associated with any adverse benefit
determination or final internal adverse benefit determination. The plan
or issuer must not consider a request for such diagnosis and treatment
information, in itself, to be a request for an internal appeal under
this paragraph (b) or an external review under paragraphs (c) and (d)
of this section.
(3) The plan and issuer must ensure that the reason or reasons for
the adverse benefit determination or final internal adverse benefit
determination includes the denial code and its corresponding meaning,
as well as a description of the plan's or issuer's standard, if any,
that was used in denying the claim. In the case of a notice of final
internal adverse benefit determination, this description must include a
discussion of the decision.
(4) The plan and issuer must provide a description of available
internal appeals and external review processes, including information
regarding how to initiate an appeal.
(5) The plan and issuer must disclose the availability of, and
contact information for, any applicable office of health insurance
consumer assistance or ombudsman established under PHS Act section 2793
to assist individuals with the internal claims and appeals and external
review processes.
(F) Deemed exhaustion of internal claims and appeals processes--(1)
In the case of a plan or issuer that fails to strictly adhere to all
the requirements of
[[Page 72248]]
this paragraph (b)(2) with respect to a claim, the claimant is deemed
to have exhausted the internal claims and appeals process of this
paragraph (b), except as provided in paragraph (b)(2)(ii)(F)(2) of this
section. Accordingly the claimant may initiate an external review under
paragraph (c) or (d) of this section, as applicable. The claimant is
also entitled to pursue any available remedies under section 502(a) of
ERISA or under State law, as applicable, on the basis that the plan or
issuer has failed to provide a reasonable internal claims and appeals
process that would yield a decision on the merits of the claim. If a
claimant chooses to pursue remedies under section 502(a) of ERISA under
such circumstances, the claim or appeal is deemed denied on review
without the exercise of discretion by an appropriate fiduciary.
(2) Notwithstanding paragraph (b)(2)(ii)(F)(1) of this section, the
internal claims and appeals process of this paragraph (b) will not be
deemed exhausted based on de minimis violations that do not cause, and
are not likely to cause, prejudice or harm to the claimant so long as
the plan or issuer demonstrates that the violation was for good cause
or due to matters beyond the control of the plan or issuer and that the
violation occurred in the context of an ongoing, good faith exchange of
information between the plan and the claimant. This exception is not
available if the violation is part of a pattern or practice of
violations by the plan or issuer. The claimant may request a written
explanation of the violation from the plan or issuer, and the plan or
issuer must provide such explanation within 10 days, including a
specific description of its bases, if any, for asserting that the
violation should not cause the internal claims and appeals process of
this paragraph (b) to be deemed exhausted. If an external reviewer or a
court rejects the claimant's request for immediate review under
paragraph (b)(2)(ii)(F)(1) of this section on the basis that the plan
met the standards for the exception under this paragraph
(b)(2)(ii)(F)(2), the claimant has the right to resubmit and pursue the
internal appeal of the claim. In such a case, within a reasonable time
after the external reviewer or court rejects the claim for immediate
review (not to exceed 10 days), the plan shall provide the claimant
with notice of the opportunity to resubmit and pursue the internal
appeal of the claim. Time periods for re-filing the claim shall begin
to run upon claimant's receipt of such notice.
(iii) Requirement to provide continued coverage pending the outcome
of an appeal. A plan and issuer subject to the requirements of this
paragraph (b)(2) are required to provide continued coverage pending the
outcome of an appeal. For this purpose, the plan and issuer must comply
with the requirements of 29 CFR 2560.503-1(f)(2)(ii), which generally
provides that benefits for an ongoing course of treatment cannot be
reduced or terminated without providing advance notice and an
opportunity for advance review.
(c) State standards for external review--(1) In general. (i) If a
State external review process that applies to and is binding on a
health insurance issuer offering group health insurance coverage
includes at a minimum the consumer protections in the NAIC Uniform
Model Act, then the issuer must comply with the applicable State
external review process and is not required to comply with the Federal
external review process of paragraph (d) of this section. In such a
case, to the extent that benefits under a group health plan are
provided through health insurance coverage, the group health plan is
not required to comply with either this paragraph (c) or the Federal
external review process of paragraph (d) of this section.
(ii) To the extent that a group health plan provides benefits other
than through health insurance coverage (that is, the plan is self-
insured) and is subject to a State external review process that applies
to and is binding on the plan (for example, is not preempted by ERISA)
and the State external review process includes at a minimum the
consumer protections in the NAIC Uniform Model Act, then the plan must
comply with the applicable State external review process and is not
required to comply with the Federal external review process of
paragraph (d) of this section. Where a self-insured plan is not subject
to an applicable State external review process, but the State has
chosen to expand access to its process for plans that are not subject
to the applicable State laws, the plan may choose to comply with either
the applicable State external review process or the Federal external
review process of paragraph (d) of this section.
(iii) If a plan or issuer is not required under paragraph (c)(1)(i)
or (c)(1)(ii) of this section to comply with the requirements of this
paragraph (c), then the plan or issuer must comply with the Federal
external review process of paragraph (d) of this section, except to the
extent, in the case of a plan, the plan is not required under paragraph
(c)(1)(i) of this section to comply with paragraph (d) of this section.
(2) Minimum standards for State external review processes. An
applicable State external review process must meet all the minimum
consumer protections in this paragraph (c)(2). The Department of Health
and Human Services will determine whether State external review
processes meet these requirements.
(i) The State process must provide for the external review of
adverse benefit determinations (including final internal adverse
benefit determinations) by issuers (or, if applicable, plans) that are
based on the issuer's (or plan's) requirements for medical necessity,
appropriateness, health care setting, level of care, or effectiveness
of a covered benefit.
(ii) The State process must require issuers (or, if applicable,
plans) to provide effective written notice to claimants of their rights
in connection with an external review for an adverse benefit
determination.
(iii) To the extent the State process requires exhaustion of an
internal claims and appeals process, exhaustion must be unnecessary
where the issuer (or, if applicable, the plan) has waived the
requirement; the issuer (or the plan) is considered to have exhausted
the internal claims and appeals process under applicable law (including
by failing to comply with any of the requirements for the internal
appeal process, as outlined in paragraph (b)(2) of this section); or
the claimant has applied for expedited external review at the same time
as applying for an expedited internal appeal.
(iv) The State process provides that the issuer (or, if applicable,
the plan) against which a request for external review is filed must pay
the cost of the IRO for conducting the external review. Notwithstanding
this requirement, a State external review process that expressly
authorizes, as of November 18, 2015, a nominal filing fee may continue
to permit such fees. For this purpose, to be considered nominal, a
filing fee must not exceed $25; it must be refunded to the claimant if
the adverse benefit determination (or final internal adverse benefit
determination) is reversed through external review; it must be waived
if payment of the fee would impose an undue financial hardship; and the
annual limit on filing fees for any claimant within a single plan year
must not exceed $75.
(v) The State process may not impose a restriction on the minimum
dollar amount of a claim for it to be eligible for external review.
Thus, the process may not impose, for example, a $500 minimum claims
threshold.
(vi) The State process must allow at least four months after the
receipt of a
[[Page 72249]]
notice of an adverse benefit determination or final internal adverse
benefit determination for a request for an external review to be filed.
(vii) The State process must provide that IROs will be assigned on
a random basis or another method of assignment that assures the
independence and impartiality of the assignment process (such as
rotational assignment) by a State or independent entity, and in no
event selected by the issuer, plan, or the individual.
(viii) The State process must provide for maintenance of a list of
approved IROs qualified to conduct the external review based on the
nature of the health care service that is the subject of the review.
The State process must provide for approval only of IROs that are
accredited by a nationally recognized private accrediting organization.
(ix) The State process must provide that any approved IRO has no
conflicts of interest that will influence its independence. Thus, the
IRO may not own or control, or be owned or controlled by a health
insurance issuer, a group health plan, the sponsor of a group health
plan, a trade association of plans or issuers, or a trade association
of health care providers. The State process must further provide that
the IRO and the clinical reviewer assigned to conduct an external
review may not have a material professional, familial, or financial
conflict of interest with the issuer or plan that is the subject of the
external review; the claimant (and any related parties to the claimant)
whose treatment is the subject of the external review; any officer,
director, or management employee of the issuer; the plan administrator,
plan fiduciaries, or plan employees; the health care provider, the
health care provider's group, or practice association recommending the
treatment that is subject to the external review; the facility at which
the recommended treatment would be provided; or the developer or
manufacturer of the principal drug, device, procedure, or other therapy
being recommended.
(x) The State process allows the claimant at least five business
days to submit to the IRO in writing additional information that the
IRO must consider when conducting the external review, and it requires
that the claimant is notified of the right to do so. The process must
also require that any additional information submitted by the claimant
to the IRO must be forwarded to the issuer (or, if applicable, the
plan) within one business day of receipt by the IRO.
(xi) The State process must provide that the decision is binding on
the plan or issuer, as well as the claimant except to the extent the
other remedies are available under State or Federal law, and except
that the requirement that the decision be binding shall not preclude
the plan or issuer from making payment on the claim or otherwise
providing benefits at any time, including after a final external review
decision that denies the claim or otherwise fails to require such
payment or benefits. For this purpose, the plan or issuer must provide
benefits (including by making payment on the claim) pursuant to the
final external review decision without delay, regardless of whether the
plan or issuer intends to seek judicial review of the external review
decision and unless or until there is a judicial decision otherwise.
(xii) The State process must require, for standard external review,
that the IRO provide written notice to the issuer (or, if applicable,
the plan) and the claimant of its decision to uphold or reverse the
adverse benefit determination (or final internal adverse benefit
determination) within no more than 45 days after the receipt of the
request for external review by the IRO.
(xiii) The State process must provide for an expedited external
review if the adverse benefit determination (or final internal adverse
benefit determination) concerns an admission, availability of care,
continued stay, or health care service for which the claimant received
emergency services, but has not been discharged from a facility; or
involves a medical condition for which the standard external review
time frame would seriously jeopardize the life or health of the
claimant or jeopardize the claimant's ability to regain maximum
function. As expeditiously as possible but within no more than 72 hours
after the receipt of the request for expedited external review by the
IRO, the IRO must make its decision to uphold or reverse the adverse
benefit determination (or final internal adverse benefit determination)
and notify the claimant and the issuer (or, if applicable, the plan) of
the determination. If the notice is not in writing, the IRO must
provide written confirmation of the decision within 48 hours after the
date of the notice of the decision.
(xiv) The State process must require that issuers (or, if
applicable, plans) include a description of the external review process
in or attached to the summary plan description, policy, certificate,
membership booklet, outline of coverage, or other evidence of coverage
it provides to participants, beneficiaries, or enrollees, substantially
similar to what is set forth in section 17 of the NAIC Uniform Model
Act.
(xv) The State process must require that IROs maintain written
records and make them available upon request to the State,
substantially similar to what is set forth in section 15 of the NAIC
Uniform Model Act.
(xvi) The State process follows procedures for external review of
adverse benefit determinations (or final internal adverse benefit
determinations) involving experimental or investigational treatment,
substantially similar to what is set forth in section 10 of the NAIC
Uniform Model Act.
(3) Transition period for external review processes--(i) Through
December 31, 2017, an applicable State external review process
applicable to a health insurance issuer or group health plan is
considered to meet the requirements of PHS Act section 2719(b).
Accordingly, through December 31, 2017, an applicable State external
review process will be considered binding on the issuer or plan (in
lieu of the requirements of the Federal external review process). If
there is no applicable State external review process, the issuer or
plan is required to comply with the requirements of the Federal
external review process in paragraph (d) of this section.
(ii) An applicable State external review process must apply for
final internal adverse benefit determinations (or, in the case of
simultaneous internal appeal and external review, adverse benefit
determinations) provided on or after January 1, 2018. The Federal
external review process will apply to such internal adverse benefit
determinations unless the Department of Health and Human Services
determines that a State law meets all the minimum standards of
paragraph (c)(2) of this section. Through December 31, 2017, a State
external review process applicable to a health insurance issuer or
group health plan may be considered to meet the minimum standards of
paragraph (c)(2) of this section, if it meets the temporary standards
established by the Secretary in guidance for a process similar to the
NAIC Uniform Model Act.
(d) Federal external review process. A plan or issuer not subject
to an applicable State external review process under paragraph (c) of
this section must provide an effective Federal external review process
in accordance with this paragraph (d) (except to the extent, in the
case of a plan, the plan is described in paragraph (c)(1)(i) of this
section as not having to comply with this paragraph (d)). In the case
of health insurance coverage offered in
[[Page 72250]]
connection with a group health plan, if either the plan or the issuer
complies with the Federal external review process of this paragraph
(d), then the obligation to comply with this paragraph (d) is satisfied
for both the plan and the issuer with respect to the health insurance
coverage. A Multi State Plan or MSP, as defined by 45 CFR 800.20, must
provide an effective Federal external review process in accordance with
this paragraph (d). In such circumstances, the requirement to provide
external review under this paragraph (d) is satisfied when a Multi
State Plan or MSP complies with standards established by the Office of
Personnel Management.
(1) Scope--(i) In general. The Federal external review process
established pursuant to this paragraph (d) applies to the following:
(A) An adverse benefit determination (including a final internal
adverse benefit determination) by a plan or issuer that involves
medical judgment (including, but not limited to, those based on the
plan's or issuer's requirements for medical necessity, appropriateness,
health care setting, level of care, or effectiveness of a covered
benefit; its determination that a treatment is experimental or
investigational; its determination whether a participant or beneficiary
is entitled to a reasonable alternative standard for a reward under a
wellness program; or its determination whether a plan or issuer is
complying with the nonquantitative treatment limitation provisions of
Code section 9812 and Sec. 54.9812, which generally require, among
other things, parity in the application of medical management
techniques), as determined by the external reviewer. (A denial,
reduction, termination, or a failure to provide payment for a benefit
based on a determination that a participant or beneficiary fails to
meet the requirements for eligibility under the terms of a group health
plan or health insurance coverage is not eligible for the Federal
external review process under this paragraph (d)); and
(B) A rescission of coverage (whether or not the rescission has any
effect on any particular benefit at that time).
(ii) Examples. The rules of paragraph (d)(1)(i) of this section are
illustrated by the following examples:
Example 1. (i) Facts. A group health plan provides coverage for
30 physical therapy visits generally. After the 30th visit, coverage
is provided only if the service is preauthorized pursuant to an
approved treatment plan that takes into account medical necessity
using the plan's definition of the term. Individual A seeks coverage
for a 31st physical therapy visit. A's health care provider submits
a treatment plan for approval, but it is not approved by the plan,
so coverage for the 31st visit is not preauthorized. With respect to
the 31st visit, A receives a notice of final internal adverse
benefit determination stating that the maximum visit limit is
exceeded.
(ii) Conclusion. In this Example 1, the plan's denial of
benefits is based on medical necessity and involves medical
judgment. Accordingly, the claim is eligible for external review
under paragraph (d)(1)(i) of this section. Moreover, the plan's
notification of final internal adverse benefit determination is
inadequate under paragraphs (b)(2)(i) and (b)(2)(ii)(E)(3) of this
section because it fails to make clear that the plan will pay for
more than 30 visits if the service is preauthorized pursuant to an
approved treatment plan that takes into account medical necessity
using the plan's definition of the term. Accordingly, the notice of
final internal adverse benefit determination should refer to the
plan provision governing the 31st visit and should describe the
plan's standard for medical necessity, as well as how the treatment
fails to meet the plan's standard.
Example 2. (i) Facts. A group health plan does not provide
coverage for services provided out of network, unless the service
cannot effectively be provided in network. Individual B seeks
coverage for a specialized medical procedure from an out-of-network
provider because B believes that the procedure cannot be effectively
provided in network. B receives a notice of final internal adverse
benefit determination stating that the claim is denied because the
provider is out-of-network.
(ii) Conclusion. In this Example 2, the plan's denial of
benefits is based on whether a service can effectively be provided
in network and, therefore, involves medical judgment. Accordingly,
the claim is eligible for external review under paragraph (d)(1)(i)
of this section. Moreover, the plan's notice of final internal
adverse benefit determination is inadequate under paragraphs
(b)(2)(i) and (b)(2)(ii)(E)(3) of this section because the plan does
provide benefits for services on an out-of-network basis if the
services cannot effectively be provided in network. Accordingly, the
notice of final internal adverse benefit determination is required
to refer to the exception to the out-of-network exclusion and should
describe the plan's standards for determining effectiveness of
services, as well as how services available to the claimant within
the plan's network meet the plan's standard for effectiveness of
services.
(2) External review process standards. The Federal external review
process established pursuant to this paragraph (d) is considered
similar to the process set forth in the NAIC Uniform Model Act and,
therefore satisfies the requirements of paragraph (d)(2), if such
process provides the following.
(i) Request for external review. A group health plan or health
insurance issuer must allow a claimant to file a request for an
external review with the plan or issuer if the request is filed within
four months after the date of receipt of a notice of an adverse benefit
determination or final internal adverse benefit determination. If there
is no corresponding date four months after the date of receipt of such
a notice, then the request must be filed by the first day of the fifth
month following the receipt of the notice. For example, if the date of
receipt of the notice is October 30, because there is no February 30,
the request must be filed by March 1. If the last filing date would
fall on a Saturday, Sunday, or Federal holiday, the last filing date is
extended to the next day that is not a Saturday, Sunday, or Federal
holiday.
(ii) Preliminary review--(A) In general. Within five business days
following the date of receipt of the external review request, the group
health plan or health insurance issuer must complete a preliminary
review of the request to determine whether:
(1) The claimant is or was covered under the plan or coverage at
the time the health care item or service was requested or, in the case
of a retrospective review, was covered under the plan or coverage at
the time the health care item or service was provided;
(2) The adverse benefit determination or the final adverse benefit
determination does not relate to the claimant's failure to meet the
requirements for eligibility under the terms of the group health plan
or health insurance coverage (e.g., worker classification or similar
determination);
(3) The claimant has exhausted the plan's or issuer's internal
appeal process unless the claimant is not required to exhaust the
internal appeals process under paragraph (b)(1) of this section; and
(4) The claimant has provided all the information and forms
required to process an external review.
(B) Within one business day after completion of the preliminary
review, the plan or issuer must issue a notification in writing to the
claimant. If the request is complete but not eligible for external
review, such notification must include the reasons for its
ineligibility and current contact information, including the phone
number, for the Employee Benefits Security Administration. If the
request is not complete, such notification must describe the
information or materials needed to make the request complete, and the
plan or issuer must allow a claimant to perfect the request for
external review within the four-month filing period or within the 48
hour
[[Page 72251]]
period following the receipt of the notification, whichever is later.
(iii) Referral to Independent Review Organization--(A) In general.
The group health plan or health insurance issuer must assign an IRO
that is accredited by URAC or by similar nationally-recognized
accrediting organization to conduct the external review. The IRO
referral process must provide for the following:
(1) The plan or issuer must ensure that the IRO process is not
biased and ensures independence;
(2) The plan or issuer must contract with at least three (3) IROs
for assignments under the plan or coverage and rotate claims
assignments among them (or incorporate other independent, unbiased
methods for selection of IROs, such as random selection); and
(3) The IRO may not be eligible for any financial incentives based
on the likelihood that the IRO will support the denial of benefits.
(4) The IRO process may not impose any costs, including filing
fees, on the claimant requesting the external review.
(B) IRO contracts. A group health plan or health insurance issuer
must include the following standards in the contract between the plan
or issuer and the IRO:
(1) The assigned IRO will utilize legal experts where appropriate
to make coverage determinations under the plan or coverage.
(2) The assigned IRO will timely notify a claimant in writing
whether the request is eligible for external review. This notice will
include a statement that the claimant may submit in writing to the
assigned IRO, within ten business days following the date of receipt of
the notice, additional information. This additional information must be
considered by the IRO when conducting the external review. The IRO is
not required to, but may, accept and consider additional information
submitted after ten business days.
(3) Within five business days after the date of assignment of the
IRO, the plan or issuer must provide to the assigned IRO the documents
and any information considered in making the adverse benefit
determination or final internal adverse benefit determination. Failure
by the plan or issuer to timely provide the documents and information
must not delay the conduct of the external review. If the plan or
issuer fails to timely provide the documents and information, the
assigned IRO may terminate the external review and make a decision to
reverse the adverse benefit determination or final internal adverse
benefit determination. Within one business day after making the
decision, the IRO must notify the claimant and the plan.
(4) Upon receipt of any information submitted by the claimant, the
assigned IRO must within one business day forward the information to
the plan or issuer. Upon receipt of any such information, the plan or
issuer may reconsider its adverse benefit determination or final
internal adverse benefit determination that is the subject of the
external review. Reconsideration by the plan or issuer must not delay
the external review. The external review may be terminated as a result
of the reconsideration only if the plan decides, upon completion of its
reconsideration, to reverse its adverse benefit determination or final
internal adverse benefit determination and provide coverage or payment.
Within one business day after making such a decision, the plan must
provide written notice of its decision to the claimant and the assigned
IRO. The assigned IRO must terminate the external review upon receipt
of the notice from the plan or issuer.
(5) The IRO will review all of the information and documents timely
received. In reaching a decision, the assigned IRO will review the
claim de novo and not be bound by any decisions or conclusions reached
during the plan's or issuer's internal claims and appeals process
applicable under paragraph (b). In addition to the documents and
information provided, the assigned IRO, to the extent the information
or documents are available and the IRO considers them appropriate, will
consider the following in reaching a decision:
(i) The claimant's medical records;
(ii) The attending health care professional's recommendation;
(iii) Reports from appropriate health care professionals and other
documents submitted by the plan or issuer, claimant, or the claimant's
treating provider;
(iv) The terms of the claimant's plan or coverage to ensure that
the IRO's decision is not contrary to the terms of the plan or
coverage, unless the terms are inconsistent with applicable law;
(v) Appropriate practice guidelines, which must include applicable
evidence-based standards and may include any other practice guidelines
developed by the Federal government, national or professional medical
societies, boards, and associations;
(vi) Any applicable clinical review criteria developed and used by
the plan or issuer, unless the criteria are inconsistent with the terms
of the plan or coverage or with applicable law; and
(vii) To the extent the final IRO decision maker is different from
the IRO's clinical reviewer, the opinion of such clinical reviewer,
after considering information described in this notice, to the extent
the information or documents are available and the clinical reviewer or
reviewers consider such information or documents appropriate.
(6) The assigned IRO must provide written notice of the final
external review decision within 45 days after the IRO receives the
request for the external review. The IRO must deliver the notice of the
final external review decision to the claimant and the plan or issuer.
(7) The assigned IRO's written notice of the final external review
decision must contain the following:
(i) A general description of the reason for the request for
external review, including information sufficient to identify the claim
(including the date or dates of service, the health care provider, the
claim amount (if applicable), and a statement describing the
availability, upon request, of the diagnosis code and its corresponding
meaning, the treatment code and its corresponding meaning, and the
reason for the plan's or issuer's denial);
(ii) The date the IRO received the assignment to conduct the
external review and the date of the IRO decision;
(iii) References to the evidence or documentation, including the
specific coverage provisions and evidence-based standards, considered
in reaching its decision;
(iv) A discussion of the principal reason or reasons for its
decision, including the rationale for its decision and any evidence-
based standards that were relied on in making its decision;
(v) A statement that the IRO's determination is binding except to
the extent that other remedies may be available under State or Federal
law to either the group health plan or health insurance issuer or to
the claimant, or to the extent the health plan or health insurance
issuer voluntarily makes payment on the claim or otherwise provides
benefits at any time, including after a final external review decision
that denies the claim or otherwise fails to require such payment or
benefits;
(vi) A statement that judicial review may be available to the
claimant; and
(vii) Current contact information, including phone number, for any
applicable office of health insurance consumer assistance or ombudsman
established under PHS Act section 2793.
(viii) After a final external review decision, the IRO must
maintain records of all claims and notices associated with the external
review process for six years. An IRO must make such records
[[Page 72252]]
available for examination by the claimant, plan, issuer, or State or
Federal oversight agency upon request, except where such disclosure
would violate State or Federal privacy laws.
(iv) Reversal of plan's or issuer's decision. Upon receipt of a
notice of a final external review decision reversing the adverse
benefit determination or final adverse benefit determination, the plan
or issuer immediately must provide coverage or payment (including
immediately authorizing care or immediately paying benefits) for the
claim.
(3) Expedited external review. A group health plan or health
insurance issuer must comply with the following standards with respect
to an expedited external review:
(i) Request for external review. A group health plan or health
insurance issuer must allow a claimant to make a request for an
expedited external review with the plan or issuer at the time the
claimant receives:
(A) An adverse benefit determination if the adverse benefit
determination involves a medical condition of the claimant for which
the timeframe for completion of an expedited internal appeal under
paragraph (b) of this section would seriously jeopardize the life or
health of the claimant or would jeopardize the claimant's ability to
regain maximum function and the claimant has filed a request for an
expedited internal appeal; or
(B) A final internal adverse benefit determination, if the claimant
has a medical condition where the timeframe for completion of a
standard external review would seriously jeopardize the life or health
of the claimant or would jeopardize the claimant's ability to regain
maximum function, or if the final internal adverse benefit
determination concerns an admission, availability of care, continued
stay, or health care item or service for which the claimant received
emergency services, but has not been discharged from the facility.
(ii) Preliminary review. Immediately upon receipt of the request
for expedited external review, the plan or issuer must determine
whether the request meets the reviewability requirements set forth in
paragraph (d)(2)(ii) of this section for standard external review. The
plan or issuer must immediately send a notice that meets the
requirements set forth in paragraph (d)(2)(ii)(B) for standard review
to the claimant of its eligibility determination.
(iii) Referral to independent review organization. (A) Upon a
determination that a request is eligible for expedited external review
following the preliminary review, the plan or issuer will assign an IRO
pursuant to the requirements set forth in paragraph (d)(2)(iii) of this
section for standard review. The plan or issuer must provide or
transmit all necessary documents and information considered in making
the adverse benefit determination or final internal adverse benefit
determination to the assigned IRO electronically or by telephone or
facsimile or any other available expeditious method.
(B) The assigned IRO, to the extent the information or documents
are available and the IRO considers them appropriate, must consider the
information or documents described above under the procedures for
standard review. In reaching a decision, the assigned IRO must review
the claim de novo and is not bound by any decisions or conclusions
reached during the plan's or issuer's internal claims and appeals
process.
(iv) Notice of final external review decision. The plan's or
issuer's contract with the assigned IRO must require the IRO to provide
notice of the final external review decision, in accordance with the
requirements set forth in paragraph (d)(2)(iii)(B) of this section, as
expeditiously as the claimant's medical condition or circumstances
require, but in no event more than 72 hours after the IRO receives the
request for an expedited external review. If the notice is not in
writing, within 48 hours after the date of providing that notice, the
assigned IRO must provide written confirmation of the decision to the
claimant and the plan or issuer.
(4) Alternative, Federally-administered external review process.
Insured coverage not subject to an applicable State external review
process under paragraph (c) of this section may elect to use either the
Federal external review process, as set forth under paragraph (d) of
this section or the Federally-administered external review process, as
set forth by HHS in guidance. In such circumstances, the requirement to
provide external review under this paragraph (d) is satisfied.
(e) Form and manner of notice--(1) In general. For purposes of this
section, a group health plan and a health insurance issuer offering
group health insurance coverage are considered to provide relevant
notices in a culturally and linguistically appropriate manner if the
plan or issuer meets all the requirements of paragraph (e)(2) of this
section with respect to the applicable non-English languages described
in paragraph (e)(3) of this section.
(2) Requirements. (i) The plan or issuer must provide oral language
services (such as a telephone customer assistance hotline) that
includes answering questions in any applicable non-English language and
providing assistance with filing claims and appeals (including external
review) in any applicable non-English language;
(ii) The plan or issuer must provide, upon request, a notice in any
applicable non-English language; and
(iii) The plan or issuer must include in the English versions of
all notices, a statement prominently displayed in any applicable non-
English language clearly indicating how to access the language services
provided by the plan or issuer.
(3) Applicable non-English language. With respect to an address in
any United States county to which a notice is sent, a non-English
language is an applicable non-English language if ten percent or more
of the population residing in the county is literate only in the same
non-English language, as determined in guidance published by the
Secretary.
(f) Secretarial authority. The Secretary may determine that the
external review process of a group health plan or health insurance
issuer, in operation as of March 23, 2010, is considered in compliance
with the applicable process established under paragraph (c) or (d) of
this section if it substantially meets the requirements of paragraph
(c) or (d) of this section, as applicable.
(g) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years beginning on or after January 1, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the interim final regulations promulgated by the Department
of Labor at 29 CFR part 2590, contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015.
0
Par. 15. Section 54.9815-2719A is added to read as follows:
Sec. 54.9815-2719A Patient protections.
(a) Choice of health care professional--(1) Designation of primary
care provider--(i) In general. If a group health plan, or a health
insurance issuer offering group health insurance coverage, requires or
provides for designation by a participant or beneficiary of a
participating primary care provider, then the plan or issuer must
permit each participant or beneficiary to designate any participating
primary care provider who is available to accept the participant or
beneficiary. In such a case, the plan or issuer must comply with the
rules of paragraph (a)(4) of this section by informing each participant
of the terms of the plan or health insurance coverage
[[Page 72253]]
regarding designation of a primary care provider.
(ii) Construction. Nothing in paragraph (a)(1)(i) of this section
is to be construed to prohibit the application of reasonable and
appropriate geographic limitations with respect to the selection of
primary care providers, in accordance with the terms of the plan or
coverage, the underlying provider contracts, and applicable State law.
(iii) Example. The rules of this paragraph (a)(1) are illustrated
by the following example:
Example. (i) Facts. A group health plan requires individuals
covered under the plan to designate a primary care provider. The
plan permits each individual to designate any primary care provider
participating in the plan's network who is available to accept the
individual as the individual's primary care provider. If an
individual has not designated a primary care provider, the plan
designates one until one has been designated by the individual. The
plan provides a notice that satisfies the requirements of paragraph
(a)(4) of this section regarding the ability to designate a primary
care provider.
(ii) Conclusion. In this Example, the plan has satisfied the
requirements of paragraph (a) of this section.
(2) Designation of pediatrician as primary care provider--(i) In
general. If a group health plan, or a health insurance issuer offering
group health insurance coverage, requires or provides for the
designation of a participating primary care provider for a child by a
participant or beneficiary, the plan or issuer must permit the
participant or beneficiary to designate a physician (allopathic or
osteopathic) who specializes in pediatrics (including pediatric
subspecialties, based on the scope of that provider's license under
applicable State law) as the child's primary care provider if the
provider participates in the network of the plan or issuer and is
available to accept the child. In such a case, the plan or issuer must
comply with the rules of paragraph (a)(4) of this section by informing
each participant of the terms of the plan or health insurance coverage
regarding designation of a pediatrician as the child's primary care
provider.
(ii) Construction. Nothing in paragraph (a)(2)(i) of this section
is to be construed to waive any exclusions of coverage under the terms
and conditions of the plan or health insurance coverage with respect to
coverage of pediatric care.
(iii) Examples. The rules of this paragraph (a)(2) are illustrated
by the following examples:
Example 1. (i) Facts. A group health plan's HMO designates for
each participant a physician who specializes in internal medicine to
serve as the primary care provider for the participant and any
beneficiaries. Participant A requests that Pediatrician B be
designated as the primary care provider for A's child. B is a
participating provider in the HMO's network and is available to
accept the child.
(ii) Conclusion. In this Example 1, the HMO must permit A's
designation of B as the primary care provider for A's child in order
to comply with the requirements of this paragraph (a)(2).
Example 2. (i) Facts. Same facts as Example 1, except that A
takes A's child to B for treatment of the child's severe shellfish
allergies. B wishes to refer A's child to an allergist for
treatment. The HMO, however, does not provide coverage for treatment
of food allergies, nor does it have an allergist participating in
its network, and it therefore refuses to authorize the referral.
(ii) Conclusion. In this Example 2, the HMO has not violated the
requirements of this paragraph (a)(2) because the exclusion of
treatment for food allergies is in accordance with the terms of A's
coverage.
(3) Patient access to obstetrical and gynecological care--(i)
General rights--(A) Direct access. A group health plan, or a health
insurance issuer offering group health insurance coverage, described in
paragraph (a)(3)(ii) of this section may not require authorization or
referral by the plan, issuer, or any person (including a primary care
provider) in the case of a female participant or beneficiary who seeks
coverage for obstetrical or gynecological care provided by a
participating health care professional who specializes in obstetrics or
gynecology. In such a case, the plan or issuer must comply with the
rules of paragraph (a)(4) of this section by informing each participant
that the plan may not require authorization or referral for obstetrical
or gynecological care by a participating health care professional who
specializes in obstetrics or gynecology. The plan or issuer may require
such a professional to agree to otherwise adhere to the plan's or
issuer's policies and procedures, including procedures regarding
referrals and obtaining prior authorization and providing services
pursuant to a treatment plan (if any) approved by the plan or issuer.
For purposes of this paragraph (a)(3), a health care professional who
specializes in obstetrics or gynecology is any individual (including a
person other than a physician) who is authorized under applicable State
law to provide obstetrical or gynecological care.
(B) Obstetrical and gynecological care. A group health plan or
health insurance issuer described in paragraph (a)(3)(ii) of this
section must treat the provision of obstetrical and gynecological care,
and the ordering of related obstetrical and gynecological items and
services, pursuant to the direct access described under paragraph
(a)(3)(i)(A) of this section, by a participating health care
professional who specializes in obstetrics or gynecology as the
authorization of the primary care provider.
(ii) Application of paragraph. A group health plan, or a health
insurance issuer offering group health insurance coverage, is described
in this paragraph (a)(3) if the plan or issuer--
(A) Provides coverage for obstetrical or gynecological care; and
(B) Requires the designation by a participant or beneficiary of a
participating primary care provider.
(iii) Construction. Nothing in paragraph (a)(3)(i) of this section
is to be construed to--
(A) Waive any exclusions of coverage under the terms and conditions
of the plan or health insurance coverage with respect to coverage of
obstetrical or gynecological care; or
(B) Preclude the group health plan or health insurance issuer
involved from requiring that the obstetrical or gynecological provider
notify the primary care health care professional or the plan or issuer
of treatment decisions.
(iv) Examples. The rules of this paragraph (a)(3) are illustrated
by the following examples:
Example 1. (i) Facts. A group health plan requires each
participant to designate a physician to serve as the primary care
provider for the participant and the participant's family.
Participant A, a female, requests a gynecological exam with
Physician B, an in-network physician specializing in gynecological
care. The group health plan requires prior authorization from A's
designated primary care provider for the gynecological exam.
(ii) Conclusion. In this Example 1, the group health plan has
violated the requirements of this paragraph (a)(3) because the plan
requires prior authorization from A's primary care provider prior to
obtaining gynecological services.
Example 2. (i) Facts. Same facts as Example 1 except that A
seeks gynecological services from C, an out-of-network provider.
(ii) Conclusion. In this Example 2, the group health plan has
not violated the requirements of this paragraph (a)(3) by requiring
prior authorization because C is not a participating health care
provider.
Example 3. (i) Facts. Same facts as Example 1 except that the
group health plan only requires B to inform A's designated primary
care physician of treatment decisions.
(ii) Conclusion. In this Example 3, the group health plan has
not violated the requirements of this paragraph (a)(3) because A has
direct access to B without prior authorization. The fact that the
group health plan requires notification of treatment decisions to
the designated primary care
[[Page 72254]]
physician does not violate this paragraph (a)(3).
Example 4. (i) Facts. A group health plan requires each
participant to designate a physician to serve as the primary care
provider for the participant and the participant's family. The group
health plan requires prior authorization before providing benefits
for uterine fibroid embolization.
(ii) Conclusion. In this Example 4, the plan requirement for
prior authorization before providing benefits for uterine fibroid
embolization does not violate the requirements of this paragraph
(a)(3) because, though the prior authorization requirement applies
to obstetrical services, it does not restrict access to any
providers specializing in obstetrics or gynecology.
(4) Notice of right to designate a primary care provider--(i) In
general. If a group health plan or health insurance issuer requires the
designation by a participant or beneficiary of a primary care provider,
the plan or issuer must provide a notice informing each participant of
the terms of the plan or health insurance coverage regarding
designation of a primary care provider and of the rights--
(A) Under paragraph (a)(1)(i) of this section, that any
participating primary care provider who is available to accept the
participant or beneficiary can be designated;
(B) Under paragraph (a)(2)(i) of this section, with respect to a
child, that any participating physician who specializes in pediatrics
can be designated as the primary care provider; and
(C) Under paragraph (a)(3)(i) of this section, that the plan may
not require authorization or referral for obstetrical or gynecological
care by a participating health care professional who specializes in
obstetrics or gynecology.
(ii) Timing. The notice described in paragraph (a)(4)(i) of this
section must be included whenever the plan or issuer provides a
participant with a summary plan description or other similar
description of benefits under the plan or health insurance coverage.
(iii) Model language. The following model language can be used to
satisfy the notice requirement described in paragraph (a)(4)(i) of this
section:
(A) For plans and issuers that require or allow for the designation
of primary care providers by participants or beneficiaries, insert:
[Name of group health plan or health insurance issuer] generally
[requires/allows] the designation of a primary care provider. You
have the right to designate any primary care provider who
participates in our network and who is available to accept you or
your family members. [If the plan or health insurance coverage
designates a primary care provider automatically, insert: Until you
make this designation, [name of group health plan or health
insurance issuer] designates one for you.] For information on how to
select a primary care provider, and for a list of the participating
primary care providers, contact the [plan administrator or issuer]
at [insert contact information].
(B) For plans and issuers that require or allow for the designation
of a primary care provider for a child, add:
For children, you may designate a pediatrician as the primary care
provider.
(C) For plans and issuers that provide coverage for obstetric or
gynecological care and require the designation by a participant or
beneficiary of a primary care provider, add:
You do not need prior authorization from [name of group health
plan or issuer] or from any other person (including a primary care
provider) in order to obtain access to obstetrical or gynecological
care from a health care professional in our network who specializes
in obstetrics or gynecology. The health care professional, however,
may be required to comply with certain procedures, including
obtaining prior authorization for certain services, following a pre-
approved treatment plan, or procedures for making referrals. For a
list of participating health care professionals who specialize in
obstetrics or gynecology, contact the [plan administrator or issuer]
at [insert contact information].
(b) Coverage of emergency services--(1) Scope. If a group health
plan, or a health insurance issuer offering group health insurance
coverage, provides any benefits with respect to services in an
emergency department of a hospital, the plan or issuer must cover
emergency services (as defined in paragraph (b)(4)(ii) of this section)
consistent with the rules of this paragraph (b).
(2) General rules. A plan or issuer subject to the requirements of
this paragraph (b) must provide coverage for emergency services in the
following manner--
(i) Without the need for any prior authorization determination,
even if the emergency services are provided on an out-of-network basis;
(ii) Without regard to whether the health care provider furnishing
the emergency services is a participating network provider with respect
to the services;
(iii) If the emergency services are provided out of network,
without imposing any administrative requirement or limitation on
coverage that is more restrictive than the requirements or limitations
that apply to emergency services received from in-network providers;
(iv) If the emergency services are provided out of network, by
complying with the cost-sharing requirements of paragraph (b)(3) of
this section; and
(v) Without regard to any other term or condition of the coverage,
other than--
(A) The exclusion of or coordination of benefits;
(B) An affiliation or waiting period permitted under part 7 of
ERISA, part A of title XXVII of the PHS Act, or chapter 100 of the
Internal Revenue Code; or
(C) Applicable cost sharing.
(3) Cost-sharing requirements--(i) Copayments and coinsurance. Any
cost-sharing requirement expressed as a copayment amount or coinsurance
rate imposed with respect to a participant or beneficiary for out-of-
network emergency services cannot exceed the cost-sharing requirement
imposed with respect to a participant or beneficiary if the services
were provided in-network. However, a participant or beneficiary may be
required to pay, in addition to the in-network cost sharing, the excess
of the amount the out-of-network provider charges over the amount the
plan or issuer is required to pay under this paragraph (b)(3)(i). A
group health plan or health insurance issuer complies with the
requirements of this paragraph (b)(3) if it provides benefits with
respect to an emergency service in an amount at least equal to the
greatest of the three amounts specified in paragraphs (b)(3)(i)(A),
(B), and (C) of this section (which are adjusted for in-network cost-
sharing requirements).
(A) The amount negotiated with in-network providers for the
emergency service furnished, excluding any in-network copayment or
coinsurance imposed with respect to the participant or beneficiary. If
there is more than one amount negotiated with in-network providers for
the emergency service, the amount described under this paragraph
(b)(3)(i)(A) is the median of these amounts, excluding any in-network
copayment or coinsurance imposed with respect to the participant or
beneficiary. In determining the median described in the preceding
sentence, the amount negotiated with each in-network provider is
treated as a separate amount (even if the same amount is paid to more
than one provider). If there is no per-service amount negotiated with
in-network providers (such as under a capitation or other similar
payment arrangement), the amount under this paragraph (b)(3)(i)(A) is
disregarded.
(B) The amount for the emergency service calculated using the same
method the plan generally uses to determine payments for out-of-network
services (such as the usual, customary, and reasonable amount),
excluding any in-network copayment or coinsurance imposed with respect
to the participant or beneficiary. The amount in this
[[Page 72255]]
paragraph (b)(3)(i)(B) is determined without reduction for out-of-
network cost sharing that generally applies under the plan or health
insurance coverage with respect to out-of-network services. Thus, for
example, if a plan generally pays 70 percent of the usual, customary,
and reasonable amount for out-of-network services, the amount in this
paragraph (b)(3)(i)(B) for an emergency service is the total (that is,
100 percent) of the usual, customary, and reasonable amount for the
service, not reduced by the 30 percent coinsurance that would generally
apply to out-of-network services (but reduced by the in-network
copayment or coinsurance that the individual would be responsible for
if the emergency service had been provided in-network).
(C) The amount that would be paid under Medicare (part A or part B
of title XVIII of the Social Security Act, 42 U.S.C. 1395 et seq.) for
the emergency service, excluding any in-network copayment or
coinsurance imposed with respect to the participant or beneficiary.
(ii) Other cost sharing. Any cost-sharing requirement other than a
copayment or coinsurance requirement (such as a deductible or out-of-
pocket maximum) may be imposed with respect to emergency services
provided out of network if the cost-sharing requirement generally
applies to out-of-network benefits. A deductible may be imposed with
respect to out-of-network emergency services only as part of a
deductible that generally applies to out-of-network benefits. If an
out-of-pocket maximum generally applies to out-of-network benefits,
that out-of-pocket maximum must apply to out-of-network emergency
services.
(iii) Special rules regarding out-of-network minimum payment
standards--(A) The minimum payment standards set forth under paragraph
(b)(3) of this section do not apply in cases where State law prohibits
a participant or beneficiary from being required to pay, in addition to
the in-network cost sharing, the excess of the amount the out-of-
network provider charges over the amount the plan or issuer provides in
benefits, or where a group health plan or health insurance issuer is
contractually responsible for such amounts. Nonetheless, in such cases,
a plan or issuer may not impose any copayment or coinsurance
requirement for out-of-network emergency services that is higher than
the copayment or coinsurance requirement that would apply if the
services were provided in network.
(B) A group health plan and health insurance issuer must provide a
participant or beneficiary adequate and prominent notice of their lack
of financial responsibility with respect to the amounts described under
this paragraph (b)(3)(iii), to prevent inadvertent payment by the
participant or beneficiary.
(iv) Examples. The rules of this paragraph (b)(3) are illustrated
by the following examples. In all of these examples, the group health
plan covers benefits with respect to emergency services.
Example 1. (i) Facts. A group health plan imposes a 25%
coinsurance responsibility on individuals who are furnished
emergency services, whether provided in network or out of network.
If a covered individual notifies the plan within two business days
after the day an individual receives treatment in an emergency
department, the plan reduces the coinsurance rate to 15%.
(ii) Conclusion. In this Example 1, the requirement to notify
the plan in order to receive a reduction in the coinsurance rate
does not violate the requirement that the plan cover emergency
services without the need for any prior authorization determination.
This is the result even if the plan required that it be notified
before or at the time of receiving services at the emergency
department in order to receive a reduction in the coinsurance rate.
Example 2. (i) Facts. A group health plan imposes a $60
copayment on emergency services without preauthorization, whether
provided in network or out of network. If emergency services are
preauthorized, the plan waives the copayment, even if it later
determines the medical condition was not an emergency medical
condition.
(ii) Conclusion. In this Example 2, by requiring an individual
to pay more for emergency services if the individual does not obtain
prior authorization, the plan violates the requirement that the plan
cover emergency services without the need for any prior
authorization determination. (By contrast, if, to have the copayment
waived, the plan merely required that it be notified rather than a
prior authorization, then the plan would not violate the requirement
that the plan cover emergency services without the need for any
prior authorization determination.)
Example 3. (i) Facts. A group health plan covers individuals who
receive emergency services with respect to an emergency medical
condition from an out-of-network provider. The plan has agreements
with in-network providers with respect to a certain emergency
service. Each provider has agreed to provide the service for a
certain amount. Among all the providers for the service: One has
agreed to accept $85, two have agreed to accept $100, two have
agreed to accept $110, three have agreed to accept $120, and one has
agreed to accept $150. Under the agreement, the plan agrees to pay
the providers 80% of the agreed amount, with the individual
receiving the service responsible for the remaining 20%.
(ii) Conclusion. In this Example 3, the values taken into
account in determining the median are $85, $100, $100, $110, $110,
$120, $120, $120, and $150. Therefore, the median amount among those
agreed to for the emergency service is $110, and the amount under
paragraph (b)(3)(i)(A) of this section is 80% of $110 ($88).
Example 4. (i) Facts. Same facts as Example 3. Subsequently, the
plan adds another provider to its network, who has agreed to accept
$150 for the emergency service.
(ii) Conclusion. In this Example 4, the median amount among
those agreed to for the emergency service is $115. (Because there is
no one middle amount, the median is the average of the two middle
amounts, $110 and $120.) Accordingly, the amount under paragraph
(b)(3)(i)(A) of this section is 80% of $115 ($92).
Example 5. (i) Facts. Same facts as Example 4. An individual
covered by the plan receives the emergency service from an out-of-
network provider, who charges $125 for the service. With respect to
services provided by out-of-network providers generally, the plan
reimburses covered individuals 50% of the reasonable amount charged
by the provider for medical services. For this purpose, the
reasonable amount for any service is based on information on charges
by all providers collected by a third party, on a zip code by zip
code basis, with the plan treating charges at a specified percentile
as reasonable. For the emergency service received by the individual,
the reasonable amount calculated using this method is $116. The
amount that would be paid under Medicare for the emergency service,
excluding any copayment or coinsurance for the service, is $80.
(ii) Conclusion. In this Example 5, the plan is responsible for
paying $92.80, 80% of $116. The median amount among those agreed to
for the emergency service is $115 and the amount the plan would pay
is $92 (80% of $115); the amount calculated using the same method
the plan uses to determine payments for out-of-network services--
$116--excluding the in-network 20% coinsurance, is $92.80; and the
Medicare payment is $80. Thus, the greatest amount is $92.80. The
individual is responsible for the remaining $32.20 charged by the
out-of-network provider.
Example 6. (i) Facts. Same facts as Example 5. The group health
plan generally imposes a $250 deductible for in-network health care.
With respect to all health care provided by out-of-network
providers, the plan imposes a $500 deductible. (Covered in-network
claims are credited against the deductible.) The individual has
incurred and submitted $260 of covered claims prior to receiving the
emergency service out of network.
(ii) Conclusion. In this Example 6, the plan is not responsible
for paying anything with respect to the emergency service furnished
by the out-of-network provider because the covered individual has
not satisfied the higher deductible that applies generally to all
health care provided out of network. However, the amount the
individual is required to pay is credited against the deductible.
[[Page 72256]]
(4) Definitions. The definitions in this paragraph (b)(4) govern in
applying the provisions of this paragraph (b).
(i) Emergency medical condition. The term emergency medical
condition means a medical condition manifesting itself by acute
symptoms of sufficient severity (including severe pain) so that a
prudent layperson, who possesses an average knowledge of health and
medicine, could reasonably expect the absence of immediate medical
attention to result in a condition described in clause (i), (ii), or
(iii) of section 1867(e)(1)(A) of the Social Security Act (42 U.S.C.
1395dd(e)(1)(A)). (In that provision of the Social Security Act, clause
(i) refers to placing the health of the individual (or, with respect to
a pregnant woman, the health of the woman or her unborn child) in
serious jeopardy; clause (ii) refers to serious impairment to bodily
functions; and clause (iii) refers to serious dysfunction of any bodily
organ or part.)
(ii) Emergency services. The term emergency services means, with
respect to an emergency medical condition--
(A) A medical screening examination (as required under section 1867
of the Social Security Act, 42 U.S.C. 1395dd) that is within the
capability of the emergency department of a hospital, including
ancillary services routinely available to the emergency department to
evaluate such emergency medical condition, and
(B) Such further medical examination and treatment, to the extent
they are within the capabilities of the staff and facilities available
at the hospital, as are required under section 1867 of the Social
Security Act (42 U.S.C. 1395dd) to stabilize the patient.
(iii) Stabilize. The term to stabilize, with respect to an
emergency medical condition (as defined in paragraph (b)(4)(i) of this
section) has the meaning given in section 1867(e)(3) of the Social
Security Act (42 U.S.C. 1395dd(e)(3)).
(c) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years beginning on or after January 1, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the interim final regulations promulgated by the Department
of Labor at 29 CFR part 2590, contained in the 29 CFR, parts 1927 to
end, edition revised as of July 1, 2015.
Sec. 54.9815-2719AT [Removed]
0
Par. 16. Section 54.9815-2719AT is removed.
Sec. 54.9815-2719T [Removed]
0
Par. 17. Section 54.9815-2719T is removed.
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Chapter XXV
For the reasons stated in the preamble, the Employee Benefits
Security Administration adopts as final the interim final rules
amending 29 CFR part 2590, which were published in the Federal Register
on May 13, 2010 (75 FR 27122), June 17, 2010 (75 FR 34538), June 28,
2010 (75 FR 37188), and November 17, 2010 (75 FR 70114) with the
following changes as set forth below:
PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS
0
18. The authority citation for Part 2590 continues to read as follows:
Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and 1191c;
sec. 101(g), Public Law 104-191, 110 Stat. 1936; sec. 401(b), Public
Law 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d), Public
Law 110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Public
Law 111-148, 124 Stat. 119, as amended by Public Law 111-152, 124
Stat. 1029; Secretary of Labor's Order 1-2011, 77 FR 1088 (Jan. 9,
2012).
0
19. Section 2590.701-2 is amended by revising the definition of
``preexisting condition exclusion'' to read as follows:
Sec. 2590.701-2 Definitions.
* * * * *
Preexisting condition exclusion means a limitation or exclusion of
benefits (including a denial of coverage) based on the fact that the
condition was present before the effective date of coverage (or if
coverage is denied, the date of the denial) under a group health plan
or group or individual health insurance coverage (or other coverage
provided to Federally eligible individuals pursuant to 45 CFR part
148), whether or not any medical advice, diagnosis, care, or treatment
was recommended or received before that day. A preexisting condition
exclusion includes any limitation or exclusion of benefits (including a
denial of coverage) applicable to an individual as a result of
information relating to an individual's health status before the
individual's effective date of coverage (or if coverage is denied, the
date of the denial) under a group health plan, or group or individual
health insurance coverage (or other coverage provided to Federally
eligible individuals pursuant to 45 CFR part 148), such as a condition
identified as a result of a pre-enrollment questionnaire or physical
examination given to the individual, or review of medical records
relating to the pre-enrollment period.
* * * * *
0
20. Section 2590.701-3 is amended by revising paragraph (a)(1) to read
as follows:
Sec. 2590.701-3 Limitations on preexisting condition exclusion
period.
(a) Preexisting condition exclusion defined--(1) A preexisting
condition exclusion means a preexisting condition exclusion within the
meaning of Sec. 2590.701-2.
* * * * *
0
21. Section 2590.715-1251 revised to read as follows:
Sec. 2590.715-1251 Preservation of right to maintain existing
coverage.
(a) Definition of grandfathered health plan coverage--(1) In
general--(i) Grandfathered health plan coverage means coverage provided
by a group health plan, or a health insurance issuer, in which an
individual was enrolled on March 23, 2010 (for as long as it maintains
that status under the rules of this section). A group health plan or
group health insurance coverage does not cease to be grandfathered
health plan coverage merely because one or more (or even all)
individuals enrolled on March 23, 2010 cease to be covered, provided
that the plan or group health insurance coverage has continuously
covered someone since March 23, 2010 (not necessarily the same person,
but at all times at least one person). In addition, subject to the
limitation set forth in paragraph (a)(1)(ii) of this section, a group
health plan (and any health insurance coverage offered in connection
with the group health plan) does not cease to be a grandfathered health
plan merely because the plan (or its sponsor) enters into a new policy,
certificate, or contract of insurance after March 23, 2010 (for
example, a plan enters into a contract with a new issuer or a new
policy is issued with an existing issuer). For purposes of this
section, a plan or health insurance coverage that provides
grandfathered health plan coverage is referred to as a grandfathered
health plan. The rules of this section apply separately to each benefit
package made available under a group health plan or health insurance
coverage. Accordingly, if any benefit package relinquishes grandfather
status, it will not affect the grandfather status of the other benefit
packages.
[[Page 72257]]
(ii) Changes in group health insurance coverage. Subject to
paragraphs (f) and (g)(2) of this section, if a group health plan
(including a group health plan that was self-insured on March 23, 2010)
or its sponsor enters into a new policy, certificate, or contract of
insurance after March 23, 2010 that is effective before November 15,
2010, then the plan ceases to be a grandfathered health plan.
(2) Disclosure of grandfather status--(i) To maintain status as a
grandfathered health plan, a plan or health insurance coverage must
include a statement that the plan or coverage believes it is a
grandfathered health plan within the meaning of section 1251 of the
Patient Protection and Affordable Care Act, and must provide contact
information for questions and complaints, in any summary of benefits
provided under the plan.
(ii) The following model language can be used to satisfy this
disclosure requirement:
This [group health plan or health insurance issuer] believes
this [plan or coverage] is a ``grandfathered health plan'' under the
Patient Protection and Affordable Care Act (the Affordable Care
Act). As permitted by the Affordable Care Act, a grandfathered
health plan can preserve certain basic health coverage that was
already in effect when that law was enacted. Being a grandfathered
health plan means that your [plan or policy] may not include certain
consumer protections of the Affordable Care Act that apply to other
plans, for example, the requirement for the provision of preventive
health services without any cost sharing. However, grandfathered
health plans must comply with certain other consumer protections in
the Affordable Care Act, for example, the elimination of lifetime
dollar limits on benefits.
Questions regarding which protections apply and which
protections do not apply to a grandfathered health plan and what
might cause a plan to change from grandfathered health plan status
can be directed to the plan administrator at [insert contact
information]. [For ERISA plans, insert: You may also contact the
Employee Benefits Security Administration, U.S. Department of Labor
at 1-866-444-3272 or www.dol.gov/ebsa/healthreform. This Web site
has a table summarizing which protections do and do not apply to
grandfathered health plans.] [For individual market policies and
nonfederal governmental plans, insert: You may also contact the U.S.
Department of Health and Human Services at www.healthcare.gov.]
(3)(i) Documentation of plan or policy terms on March 23, 2010. To
maintain status as a grandfathered health plan, a group health plan, or
group health insurance coverage, must, for as long as the plan or
health insurance coverage takes the position that it is a grandfathered
health plan--
(A) Maintain records documenting the terms of the plan or health
insurance coverage in connection with the coverage in effect on March
23, 2010, and any other documents necessary to verify, explain, or
clarify its status as a grandfathered health plan; and
(B) Make such records available for examination upon request.
(ii) Change in group health insurance coverage. To maintain status
as a grandfathered health plan, a group health plan that enters into a
new policy, certificate, or contract of insurance must provide to the
new health insurance issuer (and the new health insurance issuer must
require) documentation of plan terms (including benefits, cost sharing,
employer contributions, and annual dollar limits) under the prior
health coverage sufficient to determine whether a change causing a
cessation of grandfathered health plan status under paragraph (g)(1) of
this section has occurred.
(4) Family members enrolling after March 23, 2010. With respect to
an individual who is enrolled in a group health plan or health
insurance coverage on March 23, 2010, grandfathered health plan
coverage includes coverage of family members of the individual who
enroll after March 23, 2010 in the grandfathered health plan coverage
of the individual.
(b) Allowance for new employees to join current plan--(1) In
general. Subject to paragraph (b)(2) of this section, a group health
plan (including health insurance coverage provided in connection with
the group health plan) that provided coverage on March 23, 2010 and has
retained its status as a grandfathered health plan (consistent with the
rules of this section, including paragraph (g) of this section) is
grandfathered health plan coverage for new employees (whether newly
hired or newly enrolled) and their families enrolling in the plan after
March 23, 2010. Further, the addition of a new contributing employer or
new group of employees of an existing contributing employer to a
grandfathered multiemployer health plan will not affect the plan's
grandfather status.
(2) Anti-abuse rules--(i) Mergers and acquisitions. If the
principal purpose of a merger, acquisition, or similar business
restructuring is to cover new individuals under a grandfathered health
plan, the plan ceases to be a grandfathered health plan.
(ii) Change in plan eligibility. A group health plan or health
insurance coverage (including a benefit package under a group health
plan) ceases to be a grandfathered health plan if--
(A) Employees are transferred into the plan or health insurance
coverage (the transferee plan) from a plan or health insurance coverage
under which the employees were covered on March 23, 2010 (the
transferor plan);
(B) Comparing the terms of the transferee plan with those of the
transferor plan (as in effect on March 23, 2010) and treating the
transferee plan as if it were an amendment of the transferor plan would
cause a loss of grandfather status under the provisions of paragraph
(g)(1) of this section; and
(C) There was no bona fide employment-based reason to transfer the
employees into the transferee plan. For this purpose, changing the
terms or cost of coverage is not a bona fide employment-based reason.
(iii) Illustrative list of bona fide employment-based reasons. For
purposes of this paragraph (b)(2)(ii)(C), bona fide employment-based
reasons include--
(A) When a benefit package is being eliminated because the issuer
is exiting the market;
(B) When a benefit package is being eliminated because the issuer
no longer offers the product to the employer;
(C) When low or declining participation by plan participants in the
benefit package makes it impractical for the plan sponsor to continue
to offer the benefit package;
(D) When a benefit package is eliminated from a multiemployer plan
as agreed upon as part of the collective bargaining process; or
(E) When a benefit package is eliminated for any reason and
multiple benefit packages covering a significant portion of other
employees remain available to the employees being transferred.
(3) Examples. The rules of this paragraph (b) are illustrated by
the following examples:
Example 1. (i) Facts. A group health plan offers two benefit
packages on March 23, 2010, Options F and G. During a subsequent
open enrollment period, some of the employees enrolled in Option F
on March 23, 2010 switch to Option G.
(ii) Conclusion. In this Example 1, the group health coverage
provided under Option G remains a grandfathered health plan under
the rules of paragraph (b)(1) of this section because employees
previously enrolled in Option F are allowed to enroll in Option G as
new employees.
Example 2. (i) Facts. A group health plan offers two benefit
packages on March 23, 2010, Options H and I. On March 23, 2010,
Option H provides coverage only for employees in one manufacturing
plant. Subsequently, the plant is closed, and some employees in the
closed plant are moved to another plant. The employer eliminates
Option H and the employees that are moved are transferred to Option
I. If instead of transferring employees from Option H to
[[Page 72258]]
Option I, Option H was amended to match the terms of Option I, then
Option H would cease to be a grandfathered health plan.
(ii) Conclusion. In this Example 2, the plan has a bona fide
employment-based reason to transfer employees from Option H to
Option I. Therefore, Option I does not cease to be a grandfathered
health plan.
(c) General grandfathering rule--(1) Except as provided in
paragraphs (d) and (e) of this section, subtitles A and C of title I of
the Patient Protection and Affordable Care Act (and the amendments made
by those subtitles, and the incorporation of those amendments into
ERISA section 715 and Internal Revenue Code section 9815) do not apply
to grandfathered health plan coverage. Accordingly, the provisions of
PHS Act sections 2701, 2702, 2703, 2705, 2706, 2707, 2709 (relating to
coverage for individuals participating in approved clinical trials, as
added by section 10103 of the Patient Protection and Affordable Care
Act), 2713, 2715A, 2716, 2717, 2719, and 2719A, as added or amended by
the Patient Protection and Affordable Care Act, do not apply to
grandfathered health plans. (In addition, see 45 CFR 147.140(c), which
provides that the provisions of PHS Act section 2704, and PHS Act
section 2711 insofar as it relates to annual dollar limits, do not
apply to grandfathered health plans that are individual health
insurance coverage.)
(2) To the extent not inconsistent with the rules applicable to a
grandfathered health plan, a grandfathered health plan must comply with
the requirements of the PHS Act, ERISA, and the Internal Revenue Code
applicable prior to the changes enacted by the Patient Protection and
Affordable Care Act.
(d) Provisions applicable to all grandfathered health plans. The
provisions of PHS Act section 2711 insofar as it relates to lifetime
dollar limits, and the provisions of PHS Act sections 2712, 2714, 2715,
and 2718, apply to grandfathered health plans for plan years beginning
on or after September 23, 2010. The provisions of PHS Act section 2708
apply to grandfathered health plans for plan years beginning on or
after January 1, 2014.
(e) Applicability of PHS Act sections 2704, 2711, and 2714 to
grandfathered group health plans and group health insurance coverage--
(1) The provisions of PHS Act section 2704 as it applies with respect
to enrollees who are under 19 years of age, and the provisions of PHS
Act section 2711 insofar as it relates to annual dollar limits, apply
to grandfathered health plans that are group health plans (including
group health insurance coverage) for plan years beginning on or after
September 23, 2010. The provisions of PHS Act section 2704 apply
generally to grandfathered health plans that are group health plans
(including group health insurance coverage) for plan years beginning on
or after January 1, 2014.
(2) For plan years beginning before January 1, 2014, the provisions
of PHS Act section 2714 apply in the case of an adult child with
respect to a grandfathered health plan that is a group health plan only
if the adult child is not eligible to enroll in an eligible employer-
sponsored health plan (as defined in section 5000A(f)(2) of the
Internal Revenue Code) other than a grandfathered health plan of a
parent. For plan years beginning on or after January 1, 2014, the
provisions of PHS Act section 2714 apply with respect to a
grandfathered health plan that is a group health plan without regard to
whether an adult child is eligible to enroll in any other coverage.
(f) Effect on collectively bargained plans--In general. In the case
of health insurance coverage maintained pursuant to one or more
collective bargaining agreements between employee representatives and
one or more employers that was ratified before March 23, 2010, the
coverage is grandfathered health plan coverage at least until the date
on which the last of the collective bargaining agreements relating to
the coverage that was in effect on March 23, 2010 terminates. Any
coverage amendment made pursuant to a collective bargaining agreement
relating to the coverage that amends the coverage solely to conform to
any requirement added by subtitles A and C of title I of the Patient
Protection and Affordable Care Act (and the amendments made by those
subtitles, and the incorporation of those amendments into ERISA section
715 and Internal Revenue Code section 9815) is not treated as a
termination of the collective bargaining agreement. After the date on
which the last of the collective bargaining agreements relating to the
coverage that was in effect on March 23, 2010 terminates, the
determination of whether health insurance coverage maintained pursuant
to a collective bargaining agreement is grandfathered health plan
coverage is made under the rules of this section other than this
paragraph (f) (comparing the terms of the health insurance coverage
after the date the last collective bargaining agreement terminates with
the terms of the health insurance coverage that were in effect on March
23, 2010).
(g) Maintenance of grandfather status--(1) Changes causing
cessation of grandfather status. Subject to paragraph (g)(2) of this
section, the rules of this paragraph (g)(1) describe situations in
which a group health plan or health insurance coverage ceases to be a
grandfathered health plan. A plan or coverage will cease to be a
grandfathered health plan when an amendment to plan terms that results
in a change described in this paragraph (g)(1) becomes effective,
regardless of when the amendment was adopted. Once grandfather status
is lost, it cannot be regained.
(i) Elimination of benefits. The elimination of all or
substantially all benefits to diagnose or treat a particular condition
causes a group health plan or health insurance coverage to cease to be
a grandfathered health plan. For this purpose, the elimination of
benefits for any necessary element to diagnose or treat a condition is
considered the elimination of all or substantially all benefits to
diagnose or treat a particular condition. Whether or not a plan or
coverage has eliminated substantially all benefits to diagnose or treat
a particular condition must be determined based on all the facts and
circumstances, taking into account the items and services provided for
a particular condition under the plan on March 23, 2010, as compared to
the benefits offered at the time the plan or coverage makes the benefit
change effective.
(ii) Increase in percentage cost-sharing requirement. Any increase,
measured from March 23, 2010, in a percentage cost-sharing requirement
(such as an individual's coinsurance requirement) causes a group health
plan or health insurance coverage to cease to be a grandfathered health
plan.
(iii) Increase in a fixed-amount cost-sharing requirement other
than a copayment. Any increase in a fixed-amount cost-sharing
requirement other than a copayment (for example, deductible or out-of-
pocket limit), determined as of the effective date of the increase,
causes a group health plan or health insurance coverage to cease to be
a grandfathered health plan, if the total percentage increase in the
cost-sharing requirement measured from March 23, 2010 exceeds the
maximum percentage increase (as defined in paragraph (g)(3)(ii) of this
section).
(iv) Increase in a fixed-amount copayment. Any increase in a fixed-
amount copayment, determined as of the effective date of the increase,
and determined for each copayment level if a plan has different
copayment levels for different categories of services, causes a group
health plan or health
[[Page 72259]]
insurance coverage to cease to be a grandfathered health plan, if the
total increase in the copayment measured from March 23, 2010 exceeds
the greater of:
(A) An amount equal to $5 increased by medical inflation, as
defined in paragraph (g)(3)(i) of this section (that is, $5 times
medical inflation, plus $5), or
(B) The maximum percentage increase (as defined in paragraph
(g)(3)(ii) of this section), determined by expressing the total
increase in the copayment as a percentage.
(v) Decrease in contribution rate by employers and employee
organizations--(A) Contribution rate based on cost of coverage. A group
health plan or group health insurance coverage ceases to be a
grandfathered health plan if the employer or employee organization
decreases its contribution rate based on cost of coverage (as defined
in paragraph (g)(3)(iii)(A) of this section) towards the cost of any
tier of coverage for any class of similarly situated individuals (as
described in Sec. 2590.702(d)) by more than 5 percentage points below
the contribution rate for the coverage period that includes March 23,
2010.
(B) Contribution rate based on a formula. A group health plan or
group health insurance coverage ceases to be a grandfathered health
plan if the employer or employee organization decreases its
contribution rate based on a formula (as defined in paragraph
(g)(3)(iii)(B) of this section) towards the cost of any tier of
coverage for any class of similarly situated individuals (as described
in Sec. 2590.702(d)) by more than 5 percent below the contribution
rate for the coverage period that includes March 23, 2010.
(C) Special rules regarding decreases in contribution rates. An
insured group health plan (or a multiemployer plan) that is a
grandfathered health plan will not cease to be a grandfathered health
plan based on a change in the employer contribution rate unless the
issuer (or multiemployer plan) knows, or should know, of the change,
provided:
(1) Upon renewal (or, in the case of a multiemployer plan, before
the start of a new plan year), the issuer (or multiemployer plan)
requires relevant employers, employee organizations, or plan sponsors,
as applicable, to make a representation regarding its contribution rate
for the plan year covered by the renewal, as well as its contribution
rate on March 23, 2010 (if the issuer, or multiemployer plan, does not
already have it); and
(2) The relevant policies, certificates, contracts of insurance, or
plan documents disclose in a prominent and effective manner that
employers, employee organizations, or plan sponsors, as applicable, are
required to notify the issuer (or multiemployer plan) if the
contribution rate changes at any point during the plan year.
(D) Application to plans with multi-tiered coverage structures. The
standards for employer contributions in this paragraph (g)(1)(v) apply
on a tier-by-tier basis. Therefore, if a group health plan modifies the
tiers of coverage it had on March 23, 2010 (for example, from self-only
and family to a multi-tiered structure of self-only, self-plus-one,
self-plus-two, and self-plus-three-or-more), the employer contribution
for any new tier would be tested by comparison to the contribution rate
for the corresponding tier on March 23, 2010. For example, if the
employer contribution rate for family coverage was 50 percent on March
23, 2010, the employer contribution rate for any new tier of coverage
other than self-only (i.e., self-plus-one, self-plus-two, self-plus-
three or more) must be within 5 percentage points of 50 percent (i.e.,
at least 45 percent). If, however, the plan adds one or more new
coverage tiers without eliminating or modifying any previous tiers and
those new coverage tiers cover classes of individuals that were not
covered previously under the plan, the new tiers would not be analyzed
under the standards for changes in employer contributions. For example,
if a plan with self-only as the sole coverage tier added a family
coverage tier, the level of employer contributions toward the family
coverage would not cause the plan to lose grandfather status.
(E) Group health plans with fixed-dollar employee contributions or
no employee contributions. A group health plan that requires either
fixed-dollar employee contributions or no employee contributions will
not cease to be a grandfathered health plan solely because the employer
contribution rate changes so long as there continues to be no employee
contributions or no increase in the fixed-dollar employee contributions
towards the cost of coverage.
(vi) Changes in annual limits--(A) Addition of an annual limit. A
group health plan, or group health insurance coverage, that, on March
23, 2010, did not impose an overall annual or lifetime limit on the
dollar value of all benefits ceases to be a grandfathered health plan
if the plan or health insurance coverage imposes an overall annual
limit on the dollar value of benefits. (But see Sec. 2590.715-2711,
which prohibits all annual dollar limits on essential health benefits
for plan years beginning on or after January 1, 2014).
(B) Decrease in limit for a plan or coverage with only a lifetime
limit. A group health plan, or group health insurance coverage, that,
on March 23, 2010, imposed an overall lifetime limit on the dollar
value of all benefits but no overall annual limit on the dollar value
of all benefits ceases to be a grandfathered health plan if the plan or
health insurance coverage adopts an overall annual limit at a dollar
value that is lower than the dollar value of the lifetime limit on
March 23, 2010. (But see Sec. 2590.715-2711, which prohibits all
annual dollar limits on essential health benefits for plan years
beginning on or after January 1, 2014).
(C) Decrease in limit for a plan or coverage with an annual limit.
A group health plan, or group health insurance coverage, that, on March
23, 2010, imposed an overall annual limit on the dollar value of all
benefits ceases to be a grandfathered health plan if the plan or health
insurance coverage decreases the dollar value of the annual limit
(regardless of whether the plan or health insurance coverage also
imposed an overall lifetime limit on March 23, 2010 on the dollar value
of all benefits). (But see Sec. 2590.715-2711, which prohibits all
annual dollar limits on essential health benefits for plan years
beginning on or after January 1, 2014).
(2) Transitional rules--(i) Changes made prior to March 23, 2010.
If a group health plan or health insurance issuer makes the following
changes to the terms of the plan or health insurance coverage, the
changes are considered part of the terms of the plan or health
insurance coverage on March 23, 2010 even though they were not
effective at that time and such changes do not cause a plan or health
insurance coverage to cease to be a grandfathered health plan:
(A) Changes effective after March 23, 2010 pursuant to a legally
binding contract entered into on or before March 23, 2010;
(B) Changes effective after March 23, 2010 pursuant to a filing on
or before March 23, 2010 with a State insurance department; or
(C) Changes effective after March 23, 2010 pursuant to written
amendments to a plan that were adopted on or before March 23, 2010.
(ii) Changes made after March 23, 2010 and adopted prior to
issuance of regulations. If, after March 23, 2010, a group health plan
or health insurance issuer makes changes to the terms of the plan or
health insurance coverage and the changes are adopted prior to June 14,
2010, the changes will not cause the plan or health insurance coverage
to
[[Page 72260]]
cease to be a grandfathered health plan if the changes are revoked or
modified effective as of the first day of the first plan year (in the
individual market, policy year) beginning on or after September 23,
2010, and the terms of the plan or health insurance coverage on that
date, as modified, would not cause the plan or coverage to cease to be
a grandfathered health plan under the rules of this section, including
paragraph (g)(1) of this section. For this purpose, changes will be
considered to have been adopted prior to June 14, 2010 if:
(A) The changes are effective before that date;
(B) The changes are effective on or after that date pursuant to a
legally binding contract entered into before that date;
(C) The changes are effective on or after that date pursuant to a
filing before that date with a State insurance department; or
(D) The changes are effective on or after that date pursuant to
written amendments to a plan that were adopted before that date.
(3) Definitions--(i) Medical inflation defined. For purposes of
this paragraph (g), the term medical inflation means the increase since
March 2010 in the overall medical care component of the Consumer Price
Index for All Urban Consumers (CPI-U) (unadjusted) published by the
Department of Labor using the 1982-1984 base of 100. For this purpose,
the increase in the overall medical care component is computed by
subtracting 387.142 (the overall medical care component of the CPI-U
(unadjusted) published by the Department of Labor for March 2010, using
the 1982-1984 base of 100) from the index amount for any month in the
12 months before the new change is to take effect and then dividing
that amount by 387.142.
(ii) Maximum percentage increase defined. For purposes of this
paragraph (g), the term maximum percentage increase means medical
inflation (as defined in paragraph (g)(3)(i) of this section),
expressed as a percentage, plus 15 percentage points.
(iii) Contribution rate defined. For purposes of paragraph
(g)(1)(v) of this section:
(A) Contribution rate based on cost of coverage. The term
contribution rate based on cost of coverage means the amount of
contributions made by an employer or employee organization compared to
the total cost of coverage, expressed as a percentage. The total cost
of coverage is determined in the same manner as the applicable premium
is calculated under the COBRA continuation provisions of section 604 of
ERISA, section 4980B(f)(4) of the Internal Revenue Code, and section
2204 of the PHS Act. In the case of a self-insured plan, contributions
by an employer or employee organization are equal to the total cost of
coverage minus the employee contributions towards the total cost of
coverage.
(B) Contribution rate based on a formula. The term contribution
rate based on a formula means, for plans that, on March 23, 2010, made
contributions based on a formula (such as hours worked or tons of coal
mined), the formula.
(4) Examples. The rules of this paragraph (g) are illustrated by
the following examples:
Example 1. (i) Facts. On March 23, 2010, a grandfathered health
plan has a coinsurance requirement of 20% for inpatient surgery. The
plan is subsequently amended to increase the coinsurance requirement
to 25%.
(ii) Conclusion. In this Example 1, the increase in the
coinsurance requirement from 20% to 25% causes the plan to cease to
be a grandfathered health plan.
Example 2. (i) Facts. Before March 23, 2010, the terms of a
group health plan provide benefits for a particular mental health
condition, the treatment for which is a combination of counseling
and prescription drugs. Subsequently, the plan eliminates benefits
for counseling.
(ii) Conclusion. In this Example 2, the plan ceases to be a
grandfathered health plan because counseling is an element that is
necessary to treat the condition. Thus the plan is considered to
have eliminated substantially all benefits for the treatment of the
condition.
Example 3. (i) Facts. On March 23, 2010, a grandfathered health
plan has a copayment requirement of $30 per office visit for
specialists. The plan is subsequently amended to increase the
copayment requirement to $40. Within the 12-month period before the
$40 copayment takes effect, the greatest value of the overall
medical care component of the CPI-U (unadjusted) is 475.
(ii) Conclusion. In this Example 3, the increase in the
copayment from $30 to $40, expressed as a percentage, is 33.33% (40-
30 = 10; 10 / 30 = 0.3333; 0.3333 = 33.33%). Medical inflation (as
defined in paragraph (g)(3)(i) of this section) from March 2010 is
0.2269 (475-387.142 = 87.858; 87.858 / 387.142 = 0.2269). The
maximum percentage increase permitted is 37.69% (0.2269 = 22.69%;
22.69% + 15% = 37.69%). Because 33.33% does not exceed 37.69%, the
change in the copayment requirement at that time does not cause the
plan to cease to be a grandfathered health plan.
Example 4. (i) Facts. Same facts as Example 3, except the
grandfathered health plan subsequently increases the $40 copayment
requirement to $45 for a later plan year. Within the 12-month period
before the $45 copayment takes effect, the greatest value of the
overall medical care component of the CPI-U (unadjusted) is 485.
(ii) Conclusion. In this Example 4, the increase in the
copayment from $30 (the copayment that was in effect on March 23,
2010) to $45, expressed as a percentage, is 50% (45-30 = 15; 15 / 30
= 0.5; 0.5 = 50%). Medical inflation (as defined in paragraph
(g)(3)(i) of this section) from March 2010 is 0.2527 (485-387.142 =
97.858; 97.858 / 387.142 = 0.2527). The increase that would cause a
plan to cease to be a grandfathered health plan under paragraph
(g)(1)(iv) of this section is the greater of the maximum percentage
increase of 40.27% (0.2527 = 25.27%; 25.27% + 15% = 40.27%), or
$6.26 ($5 x 0.2527 = $1.26; $1.26 + $5 = $6.26). Because 50% exceeds
40.27% and $15 exceeds $6.26, the change in the copayment
requirement at that time causes the plan to cease to be a
grandfathered health plan.
Example 5. (i) Facts. On March 23, 2010, a grandfathered health
plan has a copayment of $10 per office visit for primary care
providers. The plan is subsequently amended to increase the
copayment requirement to $15. Within the 12-month period before the
$15 copayment takes effect, the greatest value of the overall
medical care component of the CPI-U (unadjusted) is 415.
(ii) Conclusion. In this Example 5, the increase in the
copayment, expressed as a percentage, is 50% (15-10 = 5; 5 / 10 =
0.5; 0.5 = 50%). Medical inflation (as defined in paragraph (g)(3)
of this section) from March 2010 is 0.0720 (415.0-387.142 = 27.858;
27.858 / 387.142 = 0.0720). The increase that would cause a plan to
cease to be a grandfathered health plan under paragraph (g)(1)(iv)
of this section is the greater of the maximum percentage increase of
22.20% (0.0720 = 7.20%; 7.20% + 15% = 22.20), or $5.36 ($5 x 0.0720
= $0.36; $0.36 + $5 = $5.36). The $5 increase in copayment in this
Example 5 would not cause the plan to cease to be a grandfathered
health plan pursuant to paragraph (g)(1)(iv)this section, which
would permit an increase in the copayment of up to $5.36.
Example 6. (i) Facts. The same facts as Example 5, except on
March 23, 2010, the grandfathered health plan has no copayment ($0)
for office visits for primary care providers. The plan is
subsequently amended to increase the copayment requirement to $5.
(ii) Conclusion. In this Example 6, medical inflation (as
defined in paragraph (g)(3)(i) of this section) from March 2010 is
0.0720 (415.0-387.142 = 27.858; 27.858 / 387.142 = 0.0720). The
increase that would cause a plan to cease to be a grandfathered
health plan under paragraph (g)(1)(iv)(A) of this section is $5.36
($5 x 0.0720 = $0.36; $0.36 + $5 = $5.36). The $5 increase in
copayment in this Example 6 is less than the amount calculated
pursuant to paragraph (g)(1)(iv)(A) of this section of $5.36. Thus,
the $5 increase in copayment does not cause the plan to cease to be
a grandfathered health plan.
Example 7. (i) Facts. On March 23, 2010, a self-insured group
health plan provides two tiers of coverage--self-only and family.
The employer contributes 80% of the total cost of coverage for self-
only and 60% of the total cost of coverage for family. Subsequently,
the employer reduces the contribution to 50% for family coverage,
but keeps the same contribution rate for self-only coverage.
[[Page 72261]]
(ii) Conclusion. In this Example 7, the decrease of 10
percentage points for family coverage in the contribution rate based
on cost of coverage causes the plan to cease to be a grandfathered
health plan. The fact that the contribution rate for self-only
coverage remains the same does not change the result.
Example 8. (i) Facts. On March 23, 2010, a self-insured
grandfathered health plan has a COBRA premium for the 2010 plan year
of $5,000 for self-only coverage and $12,000 for family coverage.
The required employee contribution for the coverage is $1,000 for
self-only coverage and $4,000 for family coverage. Thus, the
contribution rate based on cost of coverage for 2010 is 80% ((5,000-
1,000)/5,000) for self-only coverage and 67% ((12,000-4,000)/12,000)
for family coverage. For a subsequent plan year, the COBRA premium
is $6,000 for self-only coverage and $15,000 for family coverage.
The employee contributions for that plan year are $1,200 for self-
only coverage and $5,000 for family coverage. Thus, the contribution
rate based on cost of coverage is 80% ((6,000-1,200)/6,000) for
self-only coverage and 67% ((15,000-5,000)/15,000) for family
coverage.
(ii) Conclusion. In this Example 8, because there is no change
in the contribution rate based on cost of coverage, the plan retains
its status as a grandfathered health plan. The result would be the
same if all or part of the employee contribution was made pre-tax
through a cafeteria plan under section 125 of the Internal Revenue
Code.
Example 9. (i) Facts. A group health plan not maintained
pursuant to a collective bargaining agreement offers three benefit
packages on March 23, 2010. Option F is a self-insured option.
Options G and H are insured options. Beginning July 1, 2013, the
plan increases coinsurance under Option H from 10% to 15%.
(ii) Conclusion. In this Example 9, the coverage under Option H
is not grandfathered health plan coverage as of July 1, 2013,
consistent with the (rule in paragraph (g)(1)(ii) of this section.
Whether the coverage under Options F and G is grandfathered health
plan coverage is determined separately under the rules of this
paragraph (g).
0
22. Section 2590.715-2704 is revised to read as follows:
Sec. 2590.715-2704 Prohibition of preexisting condition exclusions.
(a) No preexisting condition exclusions. A group health plan, or a
health insurance issuer offering group health insurance coverage, may
not impose any preexisting condition exclusion (as defined in Sec.
2590.701-2).
(b) Examples. The rules of paragraph (a) of this section are
illustrated by the following examples (for additional examples
illustrating the definition of a preexisting condition exclusion, see
Sec. 2590.701-3(a)(2)):
Example 1. (i) Facts. A group health plan provides benefits
solely through an insurance policy offered by Issuer P. At the
expiration of the policy, the plan switches coverage to a policy
offered by Issuer N. N's policy excludes benefits for oral surgery
required as a result of a traumatic injury if the injury occurred
before the effective date of coverage under the policy.
(ii) Conclusion. In this Example 1, the exclusion of benefits
for oral surgery required as a result of a traumatic injury if the
injury occurred before the effective date of coverage is a
preexisting condition exclusion because it operates to exclude
benefits for a condition based on the fact that the condition was
present before the effective date of coverage under the policy.
Therefore, such an exclusion is prohibited.
Example 2. (i) Facts. Individual C applies for individual health
insurance coverage with Issuer M. M denies C's application for
coverage because a pre-enrollment physical revealed that C has type
2 diabetes.
(ii) Conclusion. See Example 2 in 45 CFR 147.108(a)(2) for a
conclusion that M's denial of C's application for coverage is a
preexisting condition exclusion because a denial of an application
for coverage based on the fact that a condition was present before
the date of denial is an exclusion of benefits based on a
preexisting condition. Therefore, such an exclusion is prohibited.
(c) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years beginning on or after January 1, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the corresponding sections of 29 CFR part 2590, contained
in the 29 CFR, parts 1927 to end, edition revised as of July 1, 2015.
0
23. Section 2590.715-2711 is revised to read as follows:
Sec. 2590.715-2711 No lifetime or annual limits.
(a) Prohibition--(1) Lifetime limits. Except as provided in
paragraph (b) of this section, a group health plan, or a health
insurance issuer offering group health insurance coverage, may not
establish any lifetime limit on the dollar amount of essential health
benefits for any individual, whether provided in-network or out-of-
network.
(2) Annual limits--(i) General rule. Except as provided in
paragraphs (a)(2)(ii) and (b) of this section, a group health plan, or
a health insurance issuer offering group health insurance coverage, may
not establish any annual limit on the dollar amount of essential health
benefits for any individual, whether provided in-network or out-of-
network.
(ii) Exception for health flexible spending arrangements. A health
flexible spending arrangement (as defined in section 106(c)(2) of the
Internal Revenue Code) offered through a cafeteria plan pursuant to
section 125 of the Internal Revenue Code is not subject to the
requirement in paragraph (a)(2)(i) of this section.
(b) Construction--(1) Permissible limits on specific covered
benefits. The rules of this section do not prevent a group health plan,
or a health insurance issuer offering group health insurance coverage,
from placing annual or lifetime dollar limits with respect to any
individual on specific covered benefits that are not essential health
benefits to the extent that such limits are otherwise permitted under
applicable Federal or State law. (The scope of essential health
benefits is addressed in paragraph (c) of this section).
(2) Condition-based exclusions. The rules of this section do not
prevent a group health plan, or a health insurance issuer offering
group health insurance coverage, from excluding all benefits for a
condition. However, if any benefits are provided for a condition, then
the requirements of this section apply. Other requirements of Federal
or State law may require coverage of certain benefits.
(c) Definition of essential health benefits. The term ``essential
health benefits'' means essential health benefits under section 1302(b)
of the Patient Protection and Affordable Care Act and applicable
regulations. For this purpose, a group health plan or a health
insurance issuer that is not required to provide essential health
benefits under section 1302(b) must define ``essential health
benefits'' in a manner consistent with one of the three Federal
Employees Health Benefit Program (FEHBP) options as defined by 45 CFR
156.100(a)(3) or one of the base-benchmark plans selected by a State or
applied by default pursuant to 45 CFR 156.100.
(d) Special rule for health reimbursement arrangements (HRAs) and
other account-based plans--(1) In general. If an HRA or other account-
based plan is integrated with other coverage under a group health plan
and the other group health plan coverage alone satisfies the
requirements in paragraph (a)(2) of this section, the fact that the
benefits under the HRA or other account-based plan are limited does not
mean that the HRA or other account-based plan fails to meet the
requirements of paragraph (a)(2) of this section. Similarly, if an HRA
or other account-based plan is integrated with other coverage under a
group health plan and the other group health plan coverage alone
satisfies the requirements in PHS Act section 2713 and Sec. 2590.715-
2713(a)(1), the HRA or other account-based plan will not fail to meet
the requirements of PHS Act section 2713 and Sec. 2590.715-2713(a)(1).
[[Page 72262]]
(2) Integration requirements. An HRA or other account-based plan is
integrated with a group health plan for purposes of paragraph (a)(2) of
this section if it meets the requirements under either the integration
method set forth in paragraph (d)(2)(i) of this section or the
integration method set forth in paragraph (d)(2)(ii) of this section.
Integration does not require that the HRA (or other account-based plan)
and the group health plan with which it is integrated share the same
plan sponsor, the same plan document, or governing instruments, or file
a single Form 5500, if applicable. The term ``excepted benefits'' is
used throughout the integration methods; for a definition of the term
``excepted benefits'' see Internal Revenue Code section 9832(c), ERISA
section 733(c), and PHS Act section 2791(c).
(i) Integration Method: Minimum value not required. An HRA or other
account-based plan is integrated with another group health plan for
purposes of this paragraph if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan) to the employee that does not consist
solely of excepted benefits;
(B) The employee receiving the HRA or other account-based plan is
actually enrolled in a group health plan (other than the HRA or other
account-based plan) that does not consist solely of excepted benefits,
regardless of whether the plan is offered by the same plan sponsor
(referred to as non-HRA group coverage);
(C) The HRA or other account-based plan is available only to
employees who are enrolled in non-HRA group coverage, regardless of
whether the non-HRA group coverage is offered by the plan sponsor of
the HRA or other account-based plan (for example, the HRA may be
offered only to employees who do not enroll in an employer's group
health plan but are enrolled in other non-HRA group coverage, such as a
group health plan maintained by the employer of the employee's spouse);
(D) The benefits under the HRA or other account-based plan are
limited to reimbursement of one or more of the following--co-payments,
co-insurance, deductibles, and premiums under the non-HRA group
coverage, as well as medical care (as defined under section 213(d) of
the Internal Revenue Code) that does not constitute essential health
benefits as defined in paragraph (c) of this section; and
(E) Under the terms of the HRA or other account-based plan, an
employee (or former employee) is permitted to permanently opt out of
and waive future reimbursements from the HRA or other account-based
plan at least annually and, upon termination of employment, either the
remaining amounts in the HRA or other account-based plan are forfeited
or the employee is permitted to permanently opt out of and waive future
reimbursements from the HRA or other account-based plan.
(ii) Integration Method: Minimum value required. An HRA or other
account-based plan is integrated with another group health plan for
purposes of this paragraph if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan) to the employee that provides minimum
value pursuant to Code section 36B(c)(2)(C)(ii) (and its implementing
regulations and applicable guidance);
(B) The employee receiving the HRA or other account-based plan is
actually enrolled in a group health plan that provides minimum value
pursuant to section 36B(c)(2)(C)(ii) of the Internal Revenue Code (and
applicable guidance), regardless of whether the plan is offered by the
plan sponsor of the HRA or other account-based plan (referred to as
non-HRA MV group coverage);
(C) The HRA or other account-based plan is available only to
employees who are actually enrolled in non-HRA MV group coverage,
regardless of whether the non-HRA MV group coverage is offered by the
plan sponsor of the HRA or other account-based plan (for example, the
HRA may be offered only to employees who do not enroll in an employer's
group health plan but are enrolled in other non-HRA MV group coverage,
such as a group health plan maintained by an employer of the employee's
spouse); and
(D) Under the terms of the HRA or other account-based plan, an
employee (or former employee) is permitted to permanently opt out of
and waive future reimbursements from the HRA or other account-based
plan at least annually, and, upon termination of employment, either the
remaining amounts in the HRA or other account-based plan are forfeited
or the employee is permitted to permanently opt out of and waive future
reimbursements from the HRA or other account-based plan.
(3) Forfeiture. For purpose of integration under paragraphs
(d)(2)(i)(E) and (d)(2)(ii)(D) of this section, forfeiture or waiver
occurs even if the forfeited or waived amounts may be reinstated upon a
fixed date, a participant's death, or the earlier of the two events
(the reinstatement event). For this purpose coverage under an HRA or
other account-based plan is considered forfeited or waived prior to a
reinstatement event only if the participant's election to forfeit or
waive is irrevocable, meaning that, beginning on the effective date of
the election and through the date of the reinstatement event, the
participant and the participant's beneficiaries have no access to
amounts credited to the HRA or other account-based plan. This means
that upon and after reinstatement, the reinstated amounts under the HRA
or other account-based plan may not be used to reimburse or pay medical
expenses incurred during the period after forfeiture and prior to
reinstatement.
(4) No integration with individual market coverage. A group health
plan, including an HRA or other account-based plan, used to purchase
coverage on the individual market is not integrated with that
individual market coverage for purposes of paragraph (a)(2) of this
section (or for purposes of the requirements of PHS Act section 2713).
(5) Integration with Medicare parts B and D. For employers that are
not required to offer their non-HRA group health plan coverage to
employees who are Medicare beneficiaries, an HRA or other account-based
plan that may be used to reimburse premiums under Medicare part B or D
may be integrated with Medicare (and deemed to comply with PHS Act
sections 2711 and 2713) if the following requirements are satisfied
with respect to employees who would be eligible for the employer's non-
HRA group health plan but for their eligibility for Medicare (and the
integration rules under paragraphs (d)(2)(i) and (d)(2)(ii) of this
section continue to apply to employees who are not eligible for
Medicare):
(i) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan and that does not consist solely of
excepted benefits) to employees who are not eligible for Medicare;
(ii) The employee receiving the HRA or other account-based plan is
actually enrolled Medicare part B or D;
(iii) The HRA or other account-based plan is available only to
employees who are enrolled in Medicare part B or D; and
(iv) The HRA or other account-based plan complies with paragraphs
(d)(2)(i)(E) and (d)(2)(ii)(D) of this section.
(6) Account-based plan. An account-based plan for purposes of this
section is an employer-provided group health plan that provides
reimbursements of medical expenses other than individual market policy
premiums with the
[[Page 72263]]
reimbursement subject to a maximum fixed dollar amount for a period. An
HRA is a type of account-based plan.
(e) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years beginning on or after January 1, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the corresponding sections of 29 CFR part 2590, contained
in the 29 CFR, parts 1927 to end, edition revised as of July 1, 2015.
24. Section 2590.715-2712 is revised to read as follows:
Sec. 2590.715-2712 Rules regarding rescissions.
(a) Prohibition on rescissions--(1) A group health plan, or a
health insurance issuer offering group health insurance coverage, must
not rescind coverage under the plan, or under the policy, certificate,
or contract of insurance, with respect to an individual (including a
group to which the individual belongs or family coverage in which the
individual is included) once the individual is covered under the plan
or coverage, unless the individual (or a person seeking coverage on
behalf of the individual) performs an act, practice, or omission that
constitutes fraud, or makes an intentional misrepresentation of
material fact, as prohibited by the terms of the plan or coverage. A
group health plan, or a health insurance issuer offering group health
insurance coverage, must provide at least 30 days advance written
notice to each participant who would be affected before coverage may be
rescinded under this paragraph (a)(1), regardless of whether the
coverage is insured or self-insured, or whether the rescission applies
to an entire group or only to an individual within the group. (The
rules of this paragraph (a)(1) apply regardless of any contestability
period that may otherwise apply.)
(2) For purposes of this section, a rescission is a cancellation or
discontinuance of coverage that has retroactive effect. For example, a
cancellation that treats a policy as void from the time of the
individual's or group's enrollment is a rescission. As another example,
a cancellation that voids benefits paid up to a year before the
cancellation is also a rescission for this purpose. A cancellation or
discontinuance of coverage is not a rescission if--
(i) The cancellation or discontinuance of coverage has only a
prospective effect;
(ii) The cancellation or discontinuance of coverage is effective
retroactively to the extent it is attributable to a failure to timely
pay required premiums or contributions (including COBRA premiums)
towards the cost of coverage;
(iii) The cancellation or discontinuance of coverage is initiated
by the individual (or by the individual's authorized representative)
and the sponsor, employer, plan, or issuer does not, directly or
indirectly, take action to influence the individual's decision to
cancel or discontinue coverage retroactively or otherwise take any
adverse action or retaliate against, interfere with, coerce,
intimidate, or threaten the individual; or
(iv) The cancellation or discontinuance of coverage is initiated by
the Exchange pursuant to 45 CFR 155.430 (other than under paragraph
(b)(2)(iii)).
(3) The rules of this paragraph (a) are illustrated by the
following examples:
Example 1. (i) Facts. Individual A seeks enrollment in an
insured group health plan. The plan terms permit rescission of
coverage with respect to an individual if the individual engages in
fraud or makes an intentional misrepresentation of a material fact.
The plan requires A to complete a questionnaire regarding A's prior
medical history, which affects setting the group rate by the health
insurance issuer. The questionnaire complies with the other
requirements of this part. The questionnaire includes the following
question: ``Is there anything else relevant to your health that we
should know?'' A inadvertently fails to list that A visited a
psychologist on two occasions, six years previously. A is later
diagnosed with breast cancer and seeks benefits under the plan. On
or around the same time, the issuer receives information about A's
visits to the psychologist, which was not disclosed in the
questionnaire.
(ii) Conclusion. In this Example 1, the plan cannot rescind A's
coverage because A's failure to disclose the visits to the
psychologist was inadvertent. Therefore, it was not fraudulent or an
intentional misrepresentation of material fact.
Example 2. (i) Facts. An employer sponsors a group health plan
that provides coverage for employees who work at least 30 hours per
week. Individual B has coverage under the plan as a full-time
employee. The employer reassigns B to a part-time position. Under
the terms of the plan, B is no longer eligible for coverage. The
plan mistakenly continues to provide health coverage, collecting
premiums from B and paying claims submitted by B. After a routine
audit, the plan discovers that B no longer works at least 30 hours
per week. The plan rescinds B's coverage effective as of the date
that B changed from a full-time employee to a part-time employee.
(ii) Conclusion. In this Example 2, the plan cannot rescind B's
coverage because there was no fraud or an intentional
misrepresentation of material fact. The plan may cancel coverage for
B prospectively, subject to other applicable Federal and State laws.
(b) Compliance with other requirements. Other requirements of
Federal or State law may apply in connection with a rescission of
coverage.
(c) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years beginning on or after January 1, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the corresponding sections of 29 CFR part 2590, contained
in the 29 CFR, parts 1927 to end, edition revised as of July 1, 2015.
0
25. Section 2590.715-2714 is revised to read as follows:
Sec. 2590.715-2714 Eligibility of children until at least age 26.
(a) In general--(1) A group health plan, or a health insurance
issuer offering group health insurance coverage, that makes available
dependent coverage of children must make such coverage available for
children until attainment of 26 years of age.
(2) The rule of this paragraph (a) is illustrated by the following
example:
Example. (i) Facts. For the plan year beginning January 1,
2011, a group health plan provides health coverage for employees,
employees' spouses, and employees' children until the child turns
26. On the birthday of a child of an employee, July 17, 2011, the
child turns 26. The last day the plan covers the child is July 16,
2011.
(ii) Conclusion. In this Example, the plan satisfies the
requirement of this paragraph (a) with respect to the child.
(b) Restrictions on plan definition of dependent--(1) In general.
With respect to a child who has not attained age 26, a plan or issuer
may not define dependent for purposes of eligibility for dependent
coverage of children other than in terms of a relationship between a
child and the participant. Thus, for example, a plan or issuer may not
deny or restrict dependent coverage for a child who has not attained
age 26 based on the presence or absence of the child's financial
dependency (upon the participant or any other person); residency with
the participant or with any other person; whether the child lives,
works, or resides in an HMO's service area or other network service
area; marital status; student status; employment; eligibility for other
coverage; or any combination of those factors. (Other requirements of
Federal
[[Page 72264]]
or State law, including section 609 of ERISA or section 1908 of the
Social Security Act, may require coverage of certain children.)
(2) Construction. A plan or issuer will not fail to satisfy the
requirements of this section if the plan or issuer limits dependent
child coverage to children under age 26 who are described in section
152(f)(1) of the Code. For an individual not described in Code section
152(f)(1), such as a grandchild or niece, a plan may impose additional
conditions on eligibility for dependent child health coverage, such as
a condition that the individual be a dependent for income tax purposes.
(c) Coverage of grandchildren not required. Nothing in this section
requires a plan or issuer to make coverage available for the child of a
child receiving dependent coverage.
(d) Uniformity irrespective of age. The terms of the plan or health
insurance coverage providing dependent coverage of children cannot vary
based on age (except for children who are age 26 or older).
(e) Examples. The rules of paragraph (d) of this section are
illustrated by the following examples:
Example 1. (i) Facts. A group health plan offers a choice of
self-only or family health coverage. Dependent coverage is provided
under family health coverage for children of participants who have
not attained age 26. The plan imposes an additional premium
surcharge for children who are older than age 18.
(ii) Conclusion. In this Example 1, the plan violates the
requirement of paragraph (d) of this section because the plan varies
the terms for dependent coverage of children based on age.
Example 2. (i) Facts. A group health plan offers a choice among
the following tiers of health coverage: Self-only, self-plus-one,
self-plus-two, and self-plus-three-or-more. The cost of coverage
increases based on the number of covered individuals. The plan
provides dependent coverage of children who have not attained age
26.
(ii) Conclusion. In this Example 2, the plan does not violate
the requirement of paragraph (d) of this section that the terms of
dependent coverage for children not vary based on age. Although the
cost of coverage increases for tiers with more covered individuals,
the increase applies without regard to the age of any child.
Example 3. (i) Facts. A group health plan offers two benefit
packages--an HMO option and an indemnity option. Dependent coverage
is provided for children of participants who have not attained age
26. The plan limits children who are older than age 18 to the HMO
option.
(ii) Conclusion. In this Example 3, the plan violates the
requirement of paragraph (d) of this section because the plan, by
limiting children who are older than age 18 to the HMO option,
varies the terms for dependent coverage of children based on age.
Example 4. (i) Facts. A group health plan sponsored by a large
employer normally charges a copayment for physician visits that do
not constitute preventive services. The plan charges this copayment
to individuals age 19 and over, including employees, spouses, and
dependent children, but waives it for those under age 19.
(ii) Conclusion. In this Example 4, the plan does not violate
the requirement of paragraph (d) of this section that the terms of
dependent coverage for children not vary based on age. While the
requirement of paragraph (d) of this section generally prohibits
distinctions based upon age in dependent coverage of children, it
does not prohibit distinctions based upon age that apply to all
coverage under the plan, including coverage for employees and
spouses as well as dependent children. In this Example 4, the
copayments charged to dependent children are the same as those
charged to employees and spouses. Accordingly, the arrangement
described in this Example 4 (including waiver, for individuals under
age 19, of the generally applicable copayment) does not violate the
requirement of paragraph (d) of this section.
(f) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years beginning on or after January 1, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the corresponding sections of 29 CFR part 2590, contained
in the 29 CFR, parts 1927 to end, edition revised as of July 1, 2015.
0
26. Section 2590.715-2719 is revised to read as follows:
Sec. 2590.715-2719 Internal claims and appeals and external review
processes.
(a) Scope and definitions-(1) Scope. This section sets forth
requirements with respect to internal claims and appeals and external
review processes for group health plans and health insurance issuers
that are not grandfathered health plans under Sec. 2590.715-1251.
Paragraph (b) of this section provides requirements for internal claims
and appeals processes. Paragraph (c) of this section sets forth rules
governing the applicability of State external review processes.
Paragraph (d) of this section sets forth a Federal external review
process for plans and issuers not subject to an applicable State
external review process. Paragraph (e) of this section prescribes
requirements for ensuring that notices required to be provided under
this section are provided in a culturally and linguistically
appropriate manner. Paragraph (f) of this section describes the
authority of the Secretary to deem certain external review processes in
existence on March 23, 2010 as in compliance with paragraph (c) or (d)
of this section.
(2) Definitions. For purposes of this section, the following
definitions apply--
(i) Adverse benefit determination. An adverse benefit determination
means an adverse benefit determination as defined in 29 CFR 2560.503-1,
as well as any rescission of coverage, as described in Sec. 2590.715-
2712(a)(2) (whether or not, in connection with the rescission, there is
an adverse effect on any particular benefit at that time).
(ii) Appeal (or internal appeal). An appeal or internal appeal
means review by a plan or issuer of an adverse benefit determination,
as required in paragraph (b) of this section.
(iii) Claimant. Claimant means an individual who makes a claim
under this section. For purposes of this section, references to
claimant include a claimant's authorized representative.
(iv) External review. External review means a review of an adverse
benefit determination (including a final internal adverse benefit
determination) conducted pursuant to an applicable State external
review process described in paragraph (c) of this section or the
Federal external review process of paragraph (d) of this section.
(v) Final internal adverse benefit determination. A final internal
adverse benefit determination means an adverse benefit determination
that has been upheld by a plan or issuer at the completion of the
internal appeals process applicable under paragraph (b) of this section
(or an adverse benefit determination with respect to which the internal
appeals process has been exhausted under the deemed exhaustion rules of
paragraph (b)(2)(ii)(F) of this section).
(vi) Final external review decision. A final external review
decision means a determination by an independent review organization at
the conclusion of an external review.
(vii) Independent review organization (or IRO). An independent
review organization (or IRO) means an entity that conducts independent
external reviews of adverse benefit determinations and final internal
adverse benefit determinations pursuant to paragraph (c) or (d) of this
section.
(viii) NAIC Uniform Model Act. The NAIC Uniform Model Act means the
Uniform Health Carrier External Review Model Act promulgated by the
National Association of Insurance Commissioners in place on July 23,
2010.
(b) Internal claims and appeals process--(1) In general. A group
health plan and a health insurance issuer offering group health
insurance
[[Page 72265]]
coverage must implement an effective internal claims and appeals
process, as described in this paragraph (b).
(2) Requirements for group health plans and group health insurance
issuers. A group health plan and a health insurance issuer offering
group health insurance coverage must comply with all the requirements
of this paragraph (b)(2). In the case of health insurance coverage
offered in connection with a group health plan, if either the plan or
the issuer complies with the internal claims and appeals process of
this paragraph (b)(2), then the obligation to comply with this
paragraph (b)(2) is satisfied for both the plan and the issuer with
respect to the health insurance coverage.
(i) Minimum internal claims and appeals standards. A group health
plan and a health insurance issuer offering group health insurance
coverage must comply with all the requirements applicable to group
health plans under 29 CFR 2560.503-1, except to the extent those
requirements are modified by paragraph (b)(2)(ii) of this section.
Accordingly, under this paragraph (b), with respect to health insurance
coverage offered in connection with a group health plan, the group
health insurance issuer is subject to the requirements in 29 CFR
2560.503-1 to the same extent as the group health plan.
(ii) Additional standards. In addition to the requirements in
paragraph (b)(2)(i) of this section, the internal claims and appeals
processes of a group health plan and a health insurance issuer offering
group health insurance coverage must meet the requirements of this
paragraph (b)(2)(ii).
(A) Clarification of meaning of adverse benefit determination. For
purposes of this paragraph (b)(2), an ``adverse benefit determination''
includes an adverse benefit determination as defined in paragraph
(a)(2)(i) of this section. Accordingly, in complying with 29 CFR
2560.503-1, as well as the other provisions of this paragraph (b)(2), a
plan or issuer must treat a rescission of coverage (whether or not the
rescission has an adverse effect on any particular benefit at that
time) as an adverse benefit determination. (Rescissions of coverage are
subject to the requirements of Sec. 2590.715-2712.)
(B) Expedited notification of benefit determinations involving
urgent care. The requirements of 29 CFR 2560.503-1(f)(2)(i) (which
generally provide, among other things, in the case of urgent care
claims for notification of the plan's benefit determination (whether
adverse or not) as soon as possible, taking into account the medical
exigencies, but not later than 72 hours after the receipt of the claim)
continue to apply to the plan and issuer. For purposes of this
paragraph (b)(2)(ii)(B), a claim involving urgent care has the meaning
given in 29 CFR 2560.503-1(m)(1), as determined by the attending
provider, and the plan or issuer shall defer to such determination of
the attending provider.
(C) Full and fair review. A plan and issuer must allow a claimant
to review the claim file and to present evidence and testimony as part
of the internal claims and appeals process. Specifically, in addition
to complying with the requirements of 29 CFR 2560.503-1(h)(2)--
(1) The plan or issuer must provide the claimant, free of charge,
with any new or additional evidence considered, relied upon, or
generated by the plan or issuer (or at the direction of the plan or
issuer) in connection with the claim; such evidence must be provided as
soon as possible and sufficiently in advance of the date on which the
notice of final internal adverse benefit determination is required to
be provided under 29 CFR 2560.503-1(i) to give the claimant a
reasonable opportunity to respond prior to that date; and
(2) Before the plan or issuer can issue a final internal adverse
benefit determination based on a new or additional rationale, the
claimant must be provided, free of charge, with the rationale; the
rationale must be provided as soon as possible and sufficiently in
advance of the date on which the notice of final internal adverse
benefit determination is required to be provided under 29 CFR 2560.503-
1(i) to give the claimant a reasonable opportunity to respond prior to
that date. Notwithstanding the rules of 29 CFR 2560.503-1(i), if the
new or additional evidence is received so late that it would be
impossible to provide it to the claimant in time for the claimant to
have a reasonable opportunity to respond, the period for providing a
notice of final internal adverse benefit determination is tolled until
such time as the claimant has a reasonable opportunity to respond.
After the claimant responds, or has a reasonable opportunity to respond
but fails to do so, the plan administrator shall notify the claimant of
the plan's benefit determination as soon as a plan acting in a
reasonable and prompt fashion can provide the notice, taking into
account the medical exigencies.
(D) Avoiding conflicts of interest. In addition to the requirements
of 29 CFR 2560.503-1(b) and (h) regarding full and fair review, the
plan and issuer must ensure that all claims and appeals are adjudicated
in a manner designed to ensure the independence and impartiality of the
persons involved in making the decision. Accordingly, decisions
regarding hiring, compensation, termination, promotion, or other
similar matters with respect to any individual (such as a claims
adjudicator or medical expert) must not be made based upon the
likelihood that the individual will support the denial of benefits.
(E) Notice. A plan and issuer must provide notice to individuals,
in a culturally and linguistically appropriate manner (as described in
paragraph (e) of this section) that complies with the requirements of
29 CFR 2560.503-1(g) and (j). The plan and issuer must also comply with
the additional requirements of this paragraph (b)(2)(ii)(E).
(1) The plan and issuer must ensure that any notice of adverse
benefit determination or final internal adverse benefit determination
includes information sufficient to identify the claim involved
(including the date of service, the health care provider, the claim
amount (if applicable), and a statement describing the availability,
upon request, of the diagnosis code and its corresponding meaning, and
the treatment code and its corresponding meaning).
(2) The plan and issuer must provide to participants and
beneficiaries, as soon as practicable, upon request, the diagnosis code
and its corresponding meaning, and the treatment code and its
corresponding meaning, associated with any adverse benefit
determination or final internal adverse benefit determination. The plan
or issuer must not consider a request for such diagnosis and treatment
information, in itself, to be a request for an internal appeal under
this paragraph (b) or an external review under paragraphs (c) and (d)
of this section.
(3) The plan and issuer must ensure that the reason or reasons for
the adverse benefit determination or final internal adverse benefit
determination includes the denial code and its corresponding meaning,
as well as a description of the plan's or issuer's standard, if any,
that was used in denying the claim. In the case of a notice of final
internal adverse benefit determination, this description must include a
discussion of the decision.
(4) The plan and issuer must provide a description of available
internal appeals and external review processes, including information
regarding how to initiate an appeal.
(5) The plan and issuer must disclose the availability of, and
contact
[[Page 72266]]
information for, any applicable office of health insurance consumer
assistance or ombudsman established under PHS Act section 2793 to
assist individuals with the internal claims and appeals and external
review processes.
(F) Deemed exhaustion of internal claims and appeals processes--(1)
In the case of a plan or issuer that fails to strictly adhere to all
the requirements of this paragraph (b)(2) with respect to a claim, the
claimant is deemed to have exhausted the internal claims and appeals
process of this paragraph (b), except as provided in paragraph
(b)(2)(ii)(F)(2) of this section. Accordingly the claimant may initiate
an external review under paragraph (c) or (d) of this section, as
applicable. The claimant is also entitled to pursue any available
remedies under section 502(a) of ERISA or under State law, as
applicable, on the basis that the plan or issuer has failed to provide
a reasonable internal claims and appeals process that would yield a
decision on the merits of the claim. If a claimant chooses to pursue
remedies under section 502(a) of ERISA under such circumstances, the
claim or appeal is deemed denied on review without the exercise of
discretion by an appropriate fiduciary.
(2) Notwithstanding paragraph (b)(2)(ii)(F)(1) of this section, the
internal claims and appeals process of this paragraph (b) will not be
deemed exhausted based on de minimis violations that do not cause, and
are not likely to cause, prejudice or harm to the claimant so long as
the plan or issuer demonstrates that the violation was for good cause
or due to matters beyond the control of the plan or issuer and that the
violation occurred in the context of an ongoing, good faith exchange of
information between the plan and the claimant. This exception is not
available if the violation is part of a pattern or practice of
violations by the plan or issuer. The claimant may request a written
explanation of the violation from the plan or issuer, and the plan or
issuer must provide such explanation within 10 days, including a
specific description of its bases, if any, for asserting that the
violation should not cause the internal claims and appeals process of
this paragraph (b) to be deemed exhausted. If an external reviewer or a
court rejects the claimant's request for immediate review under
paragraph (b)(2)(ii)(F)(1) of this section on the basis that the plan
met the standards for the exception under this paragraph
(b)(2)(ii)(F)(2), the claimant has the right to resubmit and pursue the
internal appeal of the claim. In such a case, within a reasonable time
after the external reviewer or court rejects the claim for immediate
review (not to exceed 10 days), the plan shall provide the claimant
with notice of the opportunity to resubmit and pursue the internal
appeal of the claim. Time periods for re-filing the claim shall begin
to run upon claimant's receipt of such notice.
(iii) Requirement to provide continued coverage pending the outcome
of an appeal. A plan and issuer subject to the requirements of this
paragraph (b)(2) are required to provide continued coverage pending the
outcome of an appeal. For this purpose, the plan and issuer must comply
with the requirements of 29 CFR 2560.503-1(f)(2)(ii), which generally
provides that benefits for an ongoing course of treatment cannot be
reduced or terminated without providing advance notice and an
opportunity for advance review.
(c) State standards for external review--(1) In general. (i) If a
State external review process that applies to and is binding on a
health insurance issuer offering group health insurance coverage
includes at a minimum the consumer protections in the NAIC Uniform
Model Act, then the issuer must comply with the applicable State
external review process and is not required to comply with the Federal
external review process of paragraph (d) of this section. In such a
case, to the extent that benefits under a group health plan are
provided through health insurance coverage, the group health plan is
not required to comply with either this paragraph (c) or the Federal
external review process of paragraph (d) of this section.
(ii) To the extent that a group health plan provides benefits other
than through health insurance coverage (that is, the plan is self-
insured) and is subject to a State external review process that applies
to and is binding on the plan (for example, is not preempted by ERISA)
and the State external review process includes at a minimum the
consumer protections in the NAIC Uniform Model Act, then the plan must
comply with the applicable State external review process and is not
required to comply with the Federal external review process of
paragraph (d) of this section. Where a self-insured plan is not subject
to an applicable State external review process, but the State has
chosen to expand access to its process for plans that are not subject
to the applicable State laws, the plan may choose to comply with either
the applicable State external review process or the Federal external
review process of paragraph (d) of this section.
(iii) If a plan or issuer is not required under paragraph (c)(1)(i)
or (c)(1)(ii) of this section to comply with the requirements of this
paragraph (c), then the plan or issuer must comply with the Federal
external review process of paragraph (d) of this section, except to the
extent, in the case of a plan, the plan is not required under paragraph
(c)(1)(i) of this section to comply with paragraph (d) of this section.
(2) Minimum standards for State external review processes. An
applicable State external review process must meet all the minimum
consumer protections in this paragraph (c)(2). The Department of Health
and Human Services will determine whether State external review
processes meet these requirements.
(i) The State process must provide for the external review of
adverse benefit determinations (including final internal adverse
benefit determinations) by issuers (or, if applicable, plans) that are
based on the issuer's (or plan's) requirements for medical necessity,
appropriateness, health care setting, level of care, or effectiveness
of a covered benefit.
(ii) The State process must require issuers (or, if applicable,
plans) to provide effective written notice to claimants of their rights
in connection with an external review for an adverse benefit
determination.
(iii) To the extent the State process requires exhaustion of an
internal claims and appeals process, exhaustion must be unnecessary
where the issuer (or, if applicable, the plan) has waived the
requirement; the issuer (or the plan) is considered to have exhausted
the internal claims and appeals process under applicable law (including
by failing to comply with any of the requirements for the internal
appeal process, as outlined in paragraph (b)(2) of this section), or
the claimant has applied for expedited external review at the same time
as applying for an expedited internal appeal.
(iv) The State process provides that the issuer (or, if applicable,
the plan) against which a request for external review is filed must pay
the cost of the IRO for conducting the external review. Notwithstanding
this requirement, a State external review process that expressly
authorizes, as of November 18, 2015, a nominal filing fee may continue
to permit such fees. For this purpose, to be considered nominal, a
filing fee must not exceed $25; it must be refunded to the claimant if
the adverse benefit determination (or final internal adverse benefit
determination) is reversed through external review; it must be waived
if payment of the fee would impose an undue financial hardship; and the
annual limit on filing
[[Page 72267]]
fees for any claimant within a single plan year must not exceed $75.
(v) The State process may not impose a restriction on the minimum
dollar amount of a claim for it to be eligible for external review.
Thus, the process may not impose, for example, a $500 minimum claims
threshold.
(vi) The State process must allow at least four months after the
receipt of a notice of an adverse benefit determination or final
internal adverse benefit determination for a request for an external
review to be filed.
(vii) The State process must provide that IROs will be assigned on
a random basis or another method of assignment that assures the
independence and impartiality of the assignment process (such as
rotational assignment) by a State or independent entity, and in no
event selected by the issuer, plan, or the individual.
(viii) The State process must provide for maintenance of a list of
approved IROs qualified to conduct the external review based on the
nature of the health care service that is the subject of the review.
The State process must provide for approval only of IROs that are
accredited by a nationally recognized private accrediting organization.
(ix) The State process must provide that any approved IRO has no
conflicts of interest that will influence its independence. Thus, the
IRO may not own or control, or be owned or controlled by a health
insurance issuer, a group health plan, the sponsor of a group health
plan, a trade association of plans or issuers, or a trade association
of health care providers. The State process must further provide that
the IRO and the clinical reviewer assigned to conduct an external
review may not have a material professional, familial, or financial
conflict of interest with the issuer or plan that is the subject of the
external review; the claimant (and any related parties to the claimant)
whose treatment is the subject of the external review; any officer,
director, or management employee of the issuer; the plan administrator,
plan fiduciaries, or plan employees; the health care provider, the
health care provider's group, or practice association recommending the
treatment that is subject to the external review; the facility at which
the recommended treatment would be provided; or the developer or
manufacturer of the principal drug, device, procedure, or other therapy
being recommended.
(x) The State process allows the claimant at least five business
days to submit to the IRO in writing additional information that the
IRO must consider when conducting the external review, and it requires
that the claimant is notified of the right to do so. The process must
also require that any additional information submitted by the claimant
to the IRO must be forwarded to the issuer (or, if applicable, the
plan) within one business day of receipt by the IRO.
(xi) The State process must provide that the decision is binding on
the plan or issuer, as well as the claimant except to the extent the
other remedies are available under State or Federal law, and except
that the requirement that the decision be binding shall not preclude
the plan or issuer from making payment on the claim or otherwise
providing benefits at any time, including after a final external review
decision that denies the claim or otherwise fails to require such
payment or benefits. For this purpose, the plan or issuer must provide
benefits (including by making payment on the claim) pursuant to the
final external review decision without delay, regardless of whether the
plan or issuer intends to seek judicial review of the external review
decision and unless or until there is a judicial decision otherwise.
(xii) The State process must require, for standard external review,
that the IRO provide written notice to the issuer (or, if applicable,
the plan) and the claimant of its decision to uphold or reverse the
adverse benefit determination (or final internal adverse benefit
determination) within no more than 45 days after the receipt of the
request for external review by the IRO.
(xiii) The State process must provide for an expedited external
review if the adverse benefit determination (or final internal adverse
benefit determination) concerns an admission, availability of care,
continued stay, or health care service for which the claimant received
emergency services, but has not been discharged from a facility; or
involves a medical condition for which the standard external review
time frame would seriously jeopardize the life or health of the
claimant or jeopardize the claimant's ability to regain maximum
function. As expeditiously as possible but within no more than 72 hours
after the receipt of the request for expedited external review by the
IRO, the IRO must make its decision to uphold or reverse the adverse
benefit determination (or final internal adverse benefit determination)
and notify the claimant and the issuer (or, if applicable, the plan) of
the determination. If the notice is not in writing, the IRO must
provide written confirmation of the decision within 48 hours after the
date of the notice of the decision.
(xiv) The State process must require that issuers (or, if
applicable, plans) include a description of the external review process
in or attached to the summary plan description, policy, certificate,
membership booklet, outline of coverage, or other evidence of coverage
it provides to participants, beneficiaries, or enrollees, substantially
similar to what is set forth in section 17 of the NAIC Uniform Model
Act.
(xv) The State process must require that IROs maintain written
records and make them available upon request to the State,
substantially similar to what is set forth in section 15 of the NAIC
Uniform Model Act.
(xvi) The State process follows procedures for external review of
adverse benefit determinations (or final internal adverse benefit
determinations) involving experimental or investigational treatment,
substantially similar to what is set forth in section 10 of the NAIC
Uniform Model Act.
(3) Transition period for external review processes--(i) Through
December 31, 2017, an applicable State external review process
applicable to a health insurance issuer or group health plan is
considered to meet the requirements of PHS Act section 2719(b).
Accordingly, through December 31, 2017, an applicable State external
review process will be considered binding on the issuer or plan (in
lieu of the requirements of the Federal external review process). If
there is no applicable State external review process, the issuer or
plan is required to comply with the requirements of the Federal
external review process in paragraph (d) of this section.
(ii) An applicable State external review process must apply for
final internal adverse benefit determinations (or, in the case of
simultaneous internal appeal and external review, adverse benefit
determinations) provided on or after January 1, 2018. The Federal
external review process will apply to such internal adverse benefit
determinations unless the Department of Health and Human Services
determines that a State law meets all the minimum standards of
paragraph (c)(2) of this section. Through December 31, 2017, a State
external review process applicable to a health insurance issuer or
group health plan may be considered to meet the minimum standards of
paragraph (c)(2) of this section, if it meets the temporary standards
established by the Secretary in guidance for a process similar to the
NAIC Uniform Model Act.
(d) Federal external review process. A plan or issuer not subject
to an applicable State external review process
[[Page 72268]]
under paragraph (c) of this section must provide an effective Federal
external review process in accordance with this paragraph (d) (except
to the extent, in the case of a plan, the plan is described in
paragraph (c)(1)(i) of this section as not having to comply with this
paragraph (d)). In the case of health insurance coverage offered in
connection with a group health plan, if either the plan or the issuer
complies with the Federal external review process of this paragraph
(d), then the obligation to comply with this paragraph (d) is satisfied
for both the plan and the issuer with respect to the health insurance
coverage. A Multi State Plan or MSP, as defined by 45 CFR 800.20, must
provide an effective Federal external review process in accordance with
this paragraph (d). In such circumstances, the requirement to provide
external review under this paragraph (d) is satisfied when a Multi
State Plan or MSP complies with standards established by the Office of
Personnel Management.
(1) Scope--(i) In general. The Federal external review process
established pursuant to this paragraph (d) applies to the following:
(A) An adverse benefit determination (including a final internal
adverse benefit determination) by a plan or issuer that involves
medical judgment (including, but not limited to, those based on the
plan's or issuer's requirements for medical necessity, appropriateness,
health care setting, level of care, or effectiveness of a covered
benefit; its determination that a treatment is experimental or
investigational; its determination whether a participant or beneficiary
is entitled to a reasonable alternative standard for a reward under a
wellness program; or its determination whether a plan or issuer is
complying with the nonquantitative treatment limitation provisions of
Code section 9812 and Sec. 54.9812, which generally require, among
other things, parity in the application of medical management
techniques), as determined by the external reviewer. (A denial,
reduction, termination, or a failure to provide payment for a benefit
based on a determination that a participant or beneficiary fails to
meet the requirements for eligibility under the terms of a group health
plan or health insurance coverage is not eligible for the Federal
external review process under this paragraph (d)); and
(B) A rescission of coverage (whether or not the rescission has any
effect on any particular benefit at that time).
(ii) Examples. The rules of paragraph (d)(1)(i) of this section are
illustrated by the following examples:
Example 1. (i) Facts. A group health plan provides coverage for
30 physical therapy visits generally. After the 30th visit, coverage
is provided only if the service is preauthorized pursuant to an
approved treatment plan that takes into account medical necessity
using the plan's definition of the term. Individual A seeks coverage
for a 31st physical therapy visit. A's health care provider submits
a treatment plan for approval, but it is not approved by the plan,
so coverage for the 31st visit is not preauthorized. With respect to
the 31st visit, A receives a notice of final internal adverse
benefit determination stating that the maximum visit limit is
exceeded.
(ii) Conclusion. In this Example 1, the plan's denial of
benefits is based on medical necessity and involves medical
judgment. Accordingly, the claim is eligible for external review
under paragraph (d)(1)(i) of this section. Moreover, the plan's
notification of final internal adverse benefit determination is
inadequate under paragraphs (b)(2)(i) and (b)(2)(ii)(E)(3) of this
section because it fails to make clear that the plan will pay for
more than 30 visits if the service is preauthorized pursuant to an
approved treatment plan that takes into account medical necessity
using the plan's definition of the term. Accordingly, the notice of
final internal adverse benefit determination should refer to the
plan provision governing the 31st visit and should describe the
plan's standard for medical necessity, as well as how the treatment
fails to meet the plan's standard.
Example 2. (i) Facts. A group health plan does not provide
coverage for services provided out of network, unless the service
cannot effectively be provided in network. Individual B seeks
coverage for a specialized medical procedure from an out-of-network
provider because B believes that the procedure cannot be effectively
provided in network. B receives a notice of final internal adverse
benefit determination stating that the claim is denied because the
provider is out-of-network.
(ii) Conclusion. In this Example 2, the plan's denial of
benefits is based on whether a service can effectively be provided
in network and, therefore, involves medical judgment. Accordingly,
the claim is eligible for external review under paragraph (d)(1)(i)
of this section. Moreover, the plan's notice of final internal
adverse benefit determination is inadequate under paragraphs
(b)(2)(i) and (b)(2)(ii)(E)(3) of this section because the plan does
provide benefits for services on an out-of-network basis if the
services cannot effectively be provided in network. Accordingly, the
notice of final internal adverse benefit determination is required
to refer to the exception to the out-of-network exclusion and should
describe the plan's standards for determining effectiveness of
services, as well as how services available to the claimant within
the plan's network meet the plan's standard for effectiveness of
services.
(2) External review process standards. The Federal external review
process established pursuant to this paragraph (d) is considered
similar to the process set forth in the NAIC Uniform Model Act and,
therefore satisfies the requirements of paragraph (d)(2)) if such
process provides the following.
(i) Request for external review. A group health plan or health
insurance issuer must allow a claimant to file a request for an
external review with the plan or issuer if the request is filed within
four months after the date of receipt of a notice of an adverse benefit
determination or final internal adverse benefit determination. If there
is no corresponding date four months after the date of receipt of such
a notice, then the request must be filed by the first day of the fifth
month following the receipt of the notice. For example, if the date of
receipt of the notice is October 30, because there is no February 30,
the request must be filed by March 1. If the last filing date would
fall on a Saturday, Sunday, or Federal holiday, the last filing date is
extended to the next day that is not a Saturday, Sunday, or Federal
holiday.
(ii) Preliminary review--(A) In general. Within five business days
following the date of receipt of the external review request, the group
health plan or health insurance issuer must complete a preliminary
review of the request to determine whether:
(1) The claimant is or was covered under the plan or coverage at
the time the health care item or service was requested or, in the case
of a retrospective review, was covered under the plan or coverage at
the time the health care item or service was provided;
(2) The adverse benefit determination or the final adverse benefit
determination does not relate to the claimant's failure to meet the
requirements for eligibility under the terms of the group health plan
or health insurance coverage (e.g., worker classification or similar
determination);
(3) The claimant has exhausted the plan's or issuer's internal
appeal process unless the claimant is not required to exhaust the
internal appeals process under paragraph (b)(1) of this section; and
(4) The claimant has provided all the information and forms
required to process an external review.
(B) Within one business day after completion of the preliminary
review, the plan or issuer must issue a notification in writing to the
claimant. If the request is complete but not eligible for external
review, such notification must include the reasons for its
ineligibility and current contact information, including the phone
[[Page 72269]]
number, for the Employee Benefits Security Administration. If the
request is not complete, such notification must describe the
information or materials needed to make the request complete, and the
plan or issuer must allow a claimant to perfect the request for
external review within the four-month filing period or within the 48
hour period following the receipt of the notification, whichever is
later.
(iii) Referral to Independent Review Organization. (A) In general.
The group health plan or health insurance issuer must assign an IRO
that is accredited by URAC or by similar nationally-recognized
accrediting organization to conduct the external review. The IRO
referral process must provide for the following:
(1) The plan or issuer must ensure that the IRO process is not
biased and ensures independence;
(2) The plan or issuer must contract with at least three (3) IROs
for assignments under the plan or coverage and rotate claims
assignments among them (or incorporate other independent, unbiased
methods for selection of IROs, such as random selection); and
(3) The IRO may not be eligible for any financial incentives based
on the likelihood that the IRO will support the denial of benefits.
(4) The IRO process may not impose any costs, including filing
fees, on the claimant requesting the external review.
(B) IRO contracts. A group health plan or health insurance issuer
must include the following standards in the contract between the plan
or issuer and the IRO:
(1) The assigned IRO will utilize legal experts where appropriate
to make coverage determinations under the plan or coverage.
(2) The assigned IRO will timely notify a claimant in writing
whether the request is eligible for external review. This notice will
include a statement that the claimant may submit in writing to the
assigned IRO, within ten business days following the date of receipt of
the notice, additional information. This additional information must be
considered by the IRO when conducting the external review. The IRO is
not required to, but may, accept and consider additional information
submitted after ten business days.
(3) Within five business days after the date of assignment of the
IRO, the plan or issuer must provide to the assigned IRO the documents
and any information considered in making the adverse benefit
determination or final internal adverse benefit determination. Failure
by the plan or issuer to timely provide the documents and information
must not delay the conduct of the external review. If the plan or
issuer fails to timely provide the documents and information, the
assigned IRO may terminate the external review and make a decision to
reverse the adverse benefit determination or final internal adverse
benefit determination. Within one business day after making the
decision, the IRO must notify the claimant and the plan.
(4) Upon receipt of any information submitted by the claimant, the
assigned IRO must within one business day forward the information to
the plan or issuer. Upon receipt of any such information, the plan or
issuer may reconsider its adverse benefit determination or final
internal adverse benefit determination that is the subject of the
external review. Reconsideration by the plan or issuer must not delay
the external review. The external review may be terminated as a result
of the reconsideration only if the plan decides, upon completion of its
reconsideration, to reverse its adverse benefit determination or final
internal adverse benefit determination and provide coverage or payment.
Within one business day after making such a decision, the plan must
provide written notice of its decision to the claimant and the assigned
IRO. The assigned IRO must terminate the external review upon receipt
of the notice from the plan or issuer.
(5) The IRO will review all of the information and documents timely
received. In reaching a decision, the assigned IRO will review the
claim de novo and not be bound by any decisions or conclusions reached
during the plan's or issuer's internal claims and appeals process
applicable under paragraph (b). In addition to the documents and
information provided, the assigned IRO, to the extent the information
or documents are available and the IRO considers them appropriate, will
consider the following in reaching a decision:
(i) The claimant's medical records;
(ii) The attending health care professional's recommendation;
(iii) Reports from appropriate health care professionals and other
documents submitted by the plan or issuer, claimant, or the claimant's
treating provider;
(iv) The terms of the claimant's plan or coverage to ensure that
the IRO's decision is not contrary to the terms of the plan or
coverage, unless the terms are inconsistent with applicable law;
(v) Appropriate practice guidelines, which must include applicable
evidence-based standards and may include any other practice guidelines
developed by the Federal government, national or professional medical
societies, boards, and associations;
(vi) Any applicable clinical review criteria developed and used by
the plan or issuer, unless the criteria are inconsistent with the terms
of the plan or coverage or with applicable law; and
(vii) To the extent the final IRO decision maker is different from
the IRO's clinical reviewer, the opinion of such clinical reviewer,
after considering information described in this notice, to the extent
the information or documents are available and the clinical reviewer or
reviewers consider such information or documents appropriate.
(6) The assigned IRO must provide written notice of the final
external review decision within 45 days after the IRO receives the
request for the external review. The IRO must deliver the notice of the
final external review decision to the claimant and the plan or issuer.
(7) The assigned IRO's written notice of the final external review
decision must contain the following:
(i) A general description of the reason for the request for
external review, including information sufficient to identify the claim
(including the date or dates of service, the health care provider, the
claim amount (if applicable), and a statement describing the
availability, upon request, of the diagnosis code and its corresponding
meaning, the treatment code and its corresponding meaning, and the
reason for the plan's or issuer's denial);
(ii) The date the IRO received the assignment to conduct the
external review and the date of the IRO decision;
(iii) References to the evidence or documentation, including the
specific coverage provisions and evidence-based standards, considered
in reaching its decision;
(iv) A discussion of the principal reason or reasons for its
decision, including the rationale for its decision and any evidence-
based standards that were relied on in making its decision;
(v) A statement that the IRO's determination is binding except to
the extent that other remedies may be available under State or Federal
law to either the group health plan or health insurance issuer or to
the claimant, or to the extent the health plan or health insurance
issuer voluntarily makes payment on the claim or otherwise provides
benefits at any time, including after a final external review decision
that denies the claim or otherwise fails to require such payment or
benefits;
(vi) A statement that judicial review may be available to the
claimant; and
(vii) Current contact information, including phone number, for any
applicable office of health insurance
[[Page 72270]]
consumer assistance or ombudsman established under PHS Act section
2793.
(viii) After a final external review decision, the IRO must
maintain records of all claims and notices associated with the external
review process for six years. An IRO must make such records available
for examination by the claimant, plan, issuer, or State or Federal
oversight agency upon request, except where such disclosure would
violate State or Federal privacy laws.
(iv) Reversal of plan's or issuer's decision. Upon receipt of a
notice of a final external review decision reversing the adverse
benefit determination or final adverse benefit determination, the plan
or issuer immediately must provide coverage or payment (including
immediately authorizing care or immediately paying benefits) for the
claim.
(3) Expedited external review. A group health plan or health
insurance issuer must comply with the following standards with respect
to an expedited external review:
(i) Request for external review. A group health plan or health
insurance issuer must allow a claimant to make a request for an
expedited external review with the plan or issuer at the time the
claimant receives:
(A) An adverse benefit determination if the adverse benefit
determination involves a medical condition of the claimant for which
the timeframe for completion of an expedited internal appeal under
paragraph (b) of this section would seriously jeopardize the life or
health of the claimant or would jeopardize the claimant's ability to
regain maximum function and the claimant has filed a request for an
expedited internal appeal; or
(B) A final internal adverse benefit determination, if the claimant
has a medical condition where the timeframe for completion of a
standard external review would seriously jeopardize the life or health
of the claimant or would jeopardize the claimant's ability to regain
maximum function, or if the final internal adverse benefit
determination concerns an admission, availability of care, continued
stay, or health care item or service for which the claimant received
emergency services, but has not been discharged from the facility.
(ii) Preliminary review. Immediately upon receipt of the request
for expedited external review, the plan or issuer must determine
whether the request meets the reviewability requirements set forth in
paragraph (d)(2)(ii) of this section for standard external review. The
plan or issuer must immediately send a notice that meets the
requirements set forth in paragraph (d)(2)(ii)(B) for standard review
to the claimant of its eligibility determination.
(iii) Referral to independent review organization. (A) Upon a
determination that a request is eligible for expedited external review
following the preliminary review, the plan or issuer will assign an IRO
pursuant to the requirements set forth in paragraph (d)(2)(iii) of this
section for standard review. The plan or issuer must provide or
transmit all necessary documents and information considered in making
the adverse benefit determination or final internal adverse benefit
determination to the assigned IRO electronically or by telephone or
facsimile or any other available expeditious method.
(B) The assigned IRO, to the extent the information or documents
are available and the IRO considers them appropriate, must consider the
information or documents described above under the procedures for
standard review. In reaching a decision, the assigned IRO must review
the claim de novo and is not bound by any decisions or conclusions
reached during the plan's or issuer's internal claims and appeals
process.
(iv) Notice of final external review decision. The plan's or
issuer's contract with the assigned IRO must require the IRO to provide
notice of the final external review decision, in accordance with the
requirements set forth in paragraph (d)(2)(iii)(B) of this section, as
expeditiously as the claimant's medical condition or circumstances
require, but in no event more than 72 hours after the IRO receives the
request for an expedited external review. If the notice is not in
writing, within 48 hours after the date of providing that notice, the
assigned IRO must provide written confirmation of the decision to the
claimant and the plan or issuer.
(4) Alternative, Federally-administered external review process.
Insured coverage not subject to an applicable State external review
process under paragraph (c) of this section may elect to use either the
Federal external review process, as set forth under paragraph (d) of
this section or the Federally-administered external review process, as
set forth by HHS in guidance. In such circumstances, the requirement to
provide external review under this paragraph (d) is satisfied.
(e) Form and manner of notice--(1) In general. For purposes of this
section, a group health plan and a health insurance issuer offering
group health insurance coverage are considered to provide relevant
notices in a culturally and linguistically appropriate manner if the
plan or issuer meets all the requirements of paragraph (e)(2) of this
section with respect to the applicable non-English languages described
in paragraph (e)(3) of this section.
(2) Requirements--(i) The plan or issuer must provide oral language
services (such as a telephone customer assistance hotline) that
includes answering questions in any applicable non-English language and
providing assistance with filing claims and appeals (including external
review) in any applicable non-English language;
(ii) The plan or issuer must provide, upon request, a notice in any
applicable non-English language; and
(iii) The plan or issuer must include in the English versions of
all notices, a statement prominently displayed in any applicable non-
English language clearly indicating how to access the language services
provided by the plan or issuer.
(3) Applicable non-English language. With respect to an address in
any United States county to which a notice is sent, a non-English
language is an applicable non-English language if ten percent or more
of the population residing in the county is literate only in the same
non-English language, as determined in guidance published by the
Secretary.
(f) Secretarial authority. The Secretary may determine that the
external review process of a group health plan or health insurance
issuer, in operation as of March 23, 2010, is considered in compliance
with the applicable process established under paragraph (c) or (d) of
this section if it substantially meets the requirements of paragraph
(c) or (d) of this section, as applicable.
(g) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years beginning on or after January 1, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the corresponding sections of 29 CFR part 2590, contained
in the 29 CFR, parts 1927 to end, edition revised as of July 1, 2015.
0
27. Section 2590.715-2719A is revised to read as follows:
Sec. 2590.715-2719A Patient protections.
(a) Choice of health care professional--(1) Designation of primary
care provider--(i) In general. If a group health plan, or a health
insurance issuer offering group health insurance coverage, requires or
provides for designation by a participant or beneficiary of a
participating primary care provider, then the plan or issuer must
permit each participant or beneficiary to designate any participating
primary care provider who
[[Page 72271]]
is available to accept the participant or beneficiary. In such a case,
the plan or issuer must comply with the rules of paragraph (a)(4) of
this section by informing each participant of the terms of the plan or
health insurance coverage regarding designation of a primary care
provider.
(ii) Construction. Nothing in paragraph (a)(1)(i) of this section
is to be construed to prohibit the application of reasonable and
appropriate geographic limitations with respect to the selection of
primary care providers, in accordance with the terms of the plan or
coverage, the underlying provider contracts, and applicable State law.
(iii) Example. The rules of this paragraph (a)(1) are illustrated
by the following example:
Example. (i) Facts. A group health plan requires individuals
covered under the plan to designate a primary care provider. The
plan permits each individual to designate any primary care provider
participating in the plan's network who is available to accept the
individual as the individual's primary care provider. If an
individual has not designated a primary care provider, the plan
designates one until one has been designated by the individual. The
plan provides a notice that satisfies the requirements of paragraph
(a)(4) of this section regarding the ability to designate a primary
care provider.
(ii) Conclusion. In this Example, the plan has satisfied the
requirements of paragraph (a) of this section.
(2) Designation of pediatrician as primary care provider--(i) In
general. If a group health plan, or a health insurance issuer offering
group health insurance coverage, requires or provides for the
designation of a participating primary care provider for a child by a
participant or beneficiary, the plan or issuer must permit the
participant or beneficiary to designate a physician (allopathic or
osteopathic) who specializes in pediatrics (including pediatric
subspecialties, based on the scope of that provider's license under
applicable State law) as the child's primary care provider if the
provider participates in the network of the plan or issuer and is
available to accept the child. In such a case, the plan or issuer must
comply with the rules of paragraph (a)(4) of this section by informing
each participant of the terms of the plan or health insurance coverage
regarding designation of a pediatrician as the child's primary care
provider.
(ii) Construction. Nothing in paragraph (a)(2)(i) of this section
is to be construed to waive any exclusions of coverage under the terms
and conditions of the plan or health insurance coverage with respect to
coverage of pediatric care.
(iii) Examples. The rules of this paragraph (a)(2) are illustrated
by the following examples:
Example 1. (i) Facts. A group health plan's HMO designates for
each participant a physician who specializes in internal medicine to
serve as the primary care provider for the participant and any
beneficiaries. Participant A requests that Pediatrician B be
designated as the primary care provider for A's child. B is a
participating provider in the HMO's network and is available to
accept the child.
(ii) Conclusion. In this Example 1, the HMO must permit A's
designation of B as the primary care provider for A's child in order
to comply with the requirements of this paragraph (a)(2).
Example 2. (i) Facts. Same facts as Example 1, except that A
takes A's child to B for treatment of the child's severe shellfish
allergies. B wishes to refer A's child to an allergist for
treatment. The HMO, however, does not provide coverage for treatment
of food allergies, nor does it have an allergist participating in
its network, and it therefore refuses to authorize the referral.
(ii) Conclusion. In this Example 2, the HMO has not violated the
requirements of this paragraph (a)(2) because the exclusion of
treatment for food allergies is in accordance with the terms of A's
coverage.
(3) Patient access to obstetrical and gynecological care--(i)
General rights--(A) Direct access. A group health plan, or a health
insurance issuer offering group health insurance coverage, described in
paragraph (a)(3)(ii) of this section may not require authorization or
referral by the plan, issuer, or any person (including a primary care
provider) in the case of a female participant or beneficiary who seeks
coverage for obstetrical or gynecological care provided by a
participating health care professional who specializes in obstetrics or
gynecology. In such a case, the plan or issuer must comply with the
rules of paragraph (a)(4) of this section by informing each participant
that the plan may not require authorization or referral for obstetrical
or gynecological care by a participating health care professional who
specializes in obstetrics or gynecology. The plan or issuer may require
such a professional to agree to otherwise adhere to the plan's or
issuer's policies and procedures, including procedures regarding
referrals and obtaining prior authorization and providing services
pursuant to a treatment plan (if any) approved by the plan or issuer.
For purposes of this paragraph (a)(3), a health care professional who
specializes in obstetrics or gynecology is any individual (including a
person other than a physician) who is authorized under applicable State
law to provide obstetrical or gynecological care.
(B) Obstetrical and gynecological care. A group health plan or
health insurance issuer described in paragraph (a)(3)(ii) of this
section must treat the provision of obstetrical and gynecological care,
and the ordering of related obstetrical and gynecological items and
services, pursuant to the direct access described under paragraph
(a)(3)(i)(A) of this section, by a participating health care
professional who specializes in obstetrics or gynecology as the
authorization of the primary care provider.
(ii) Application of paragraph. A group health plan, or a health
insurance issuer offering group health insurance coverage, is described
in this paragraph (a)(3) if the plan or issuer--
(A) Provides coverage for obstetrical or gynecological care; and
(B) Requires the designation by a participant or beneficiary of a
participating primary care provider.
(iii) Construction. Nothing in paragraph (a)(3)(i) of this section
is to be construed to--
(A) Waive any exclusions of coverage under the terms and conditions
of the plan or health insurance coverage with respect to coverage of
obstetrical or gynecological care; or
(B) Preclude the group health plan or health insurance issuer
involved from requiring that the obstetrical or gynecological provider
notify the primary care health care professional or the plan or issuer
of treatment decisions.
(iv) Examples. The rules of this paragraph (a)(3) are illustrated
by the following examples:
Example 1. (i) Facts. A group health plan requires each
participant to designate a physician to serve as the primary care
provider for the participant and the participant's family.
Participant A, a female, requests a gynecological exam with
Physician B, an in-network physician specializing in gynecological
care. The group health plan requires prior authorization from A's
designated primary care provider for the gynecological exam.
(ii) Conclusion. In this Example 1, the group health plan has
violated the requirements of this paragraph (a)(3) because the plan
requires prior authorization from A's primary care provider prior to
obtaining gynecological services.
Example 2. (i) Facts. Same facts as Example 1 except that A
seeks gynecological services from C, an out-of-network provider.
(ii) Conclusion. In this Example 2, the group health plan has
not violated the requirements of this paragraph (a)(3) by requiring
prior authorization because C is not a participating health care
provider.
Example 3. (i) Facts. Same facts as Example 1 except that the
group health plan only requires B to inform A's designated primary
care physician of treatment decisions.
[[Page 72272]]
(ii) Conclusion. In this Example 3, the group health plan has
not violated the requirements of this paragraph (a)(3) because A has
direct access to B without prior authorization. The fact that the
group health plan requires notification of treatment decisions to
the designated primary care physician does not violate this
paragraph (a)(3).
Example 4. (i) Facts. A group health plan requires each
participant to designate a physician to serve as the primary care
provider for the participant and the participant's family. The group
health plan requires prior authorization before providing benefits
for uterine fibroid embolization.
(ii) Conclusion. In this Example 4, the plan requirement for
prior authorization before providing benefits for uterine fibroid
embolization does not violate the requirements of this paragraph
(a)(3) because, though the prior authorization requirement applies
to obstetrical services, it does not restrict access to any
providers specializing in obstetrics or gynecology.
(4) Notice of right to designate a primary care provider--(i) In
general. If a group health plan or health insurance issuer requires the
designation by a participant or beneficiary of a primary care provider,
the plan or issuer must provide a notice informing each participant of
the terms of the plan or health insurance coverage regarding
designation of a primary care provider and of the rights--
(A) Under paragraph (a)(1)(i) of this section, that any
participating primary care provider who is available to accept the
participant or beneficiary can be designated;
(B) Under paragraph (a)(2)(i) of this section, with respect to a
child, that any participating physician who specializes in pediatrics
can be designated as the primary care provider; and
(C) Under paragraph (a)(3)(i) of this section, that the plan may
not require authorization or referral for obstetrical or gynecological
care by a participating health care professional who specializes in
obstetrics or gynecology.
(ii) Timing. The notice described in paragraph (a)(4)(i) of this
section must be included whenever the plan or issuer provides a
participant with a summary plan description or other similar
description of benefits under the plan or health insurance coverage.
(iii) Model language. The following model language can be used to
satisfy the notice requirement described in paragraph (a)(4)(i) of this
section:
(A) For plans and issuers that require or allow for the designation
of primary care providers by participants or beneficiaries, insert:
[Name of group health plan or health insurance issuer] generally
[requires/allows] the designation of a primary care provider. You
have the right to designate any primary care provider who
participates in our network and who is available to accept you or
your family members. [If the plan or health insurance coverage
designates a primary care provider automatically, insert: Until you
make this designation, [name of group health plan or health
insurance issuer] designates one for you.] For information on how to
select a primary care provider, and for a list of the participating
primary care providers, contact the [plan administrator or issuer]
at [insert contact information].
(B) For plans and issuers that require or allow for the designation
of a primary care provider for a child, add:
For children, you may designate a pediatrician as the primary care
provider.
(C) For plans and issuers that provide coverage for obstetric or
gynecological care and require the designation by a participant or
beneficiary of a primary care provider, add:
You do not need prior authorization from [name of group health
plan or issuer] or from any other person (including a primary care
provider) in order to obtain access to obstetrical or gynecological
care from a health care professional in our network who specializes
in obstetrics or gynecology. The health care professional, however,
may be required to comply with certain procedures, including
obtaining prior authorization for certain services, following a pre-
approved treatment plan, or procedures for making referrals. For a
list of participating health care professionals who specialize in
obstetrics or gynecology, contact the [plan administrator or issuer]
at [insert contact information].
(b) Coverage of emergency services--(1) Scope. If a group health
plan, or a health insurance issuer offering group health insurance
coverage, provides any benefits with respect to services in an
emergency department of a hospital, the plan or issuer must cover
emergency services (as defined in paragraph (b)(4)(ii) of this section)
consistent with the rules of this paragraph (b).
(2) General rules. A plan or issuer subject to the requirements of
this paragraph (b) must provide coverage for emergency services in the
following manner--
(i) Without the need for any prior authorization determination,
even if the emergency services are provided on an out-of-network basis;
(ii) Without regard to whether the health care provider furnishing
the emergency services is a participating network provider with respect
to the services;
(iii) If the emergency services are provided out of network,
without imposing any administrative requirement or limitation on
coverage that is more restrictive than the requirements or limitations
that apply to emergency services received from in-network providers;
(iv) If the emergency services are provided out of network, by
complying with the cost-sharing requirements of paragraph (b)(3) of
this section; and
(v) Without regard to any other term or condition of the coverage,
other than--
(A) The exclusion of or coordination of benefits;
(B) An affiliation or waiting period permitted under part 7 of
ERISA, part A of title XXVII of the PHS Act, or chapter 100 of the
Internal Revenue Code; or
(C) Applicable cost sharing.
(3) Cost-sharing requirements--(i) Copayments and coinsurance. Any
cost-sharing requirement expressed as a copayment amount or coinsurance
rate imposed with respect to a participant or beneficiary for out-of-
network emergency services cannot exceed the cost-sharing requirement
imposed with respect to a participant or beneficiary if the services
were provided in-network. However, a participant or beneficiary may be
required to pay, in addition to the in-network cost sharing, the excess
of the amount the out-of-network provider charges over the amount the
plan or issuer is required to pay under this paragraph (b)(3)(i). A
group health plan or health insurance issuer complies with the
requirements of this paragraph (b)(3) if it provides benefits with
respect to an emergency service in an amount at least equal to the
greatest of the three amounts specified in paragraphs (b)(3)(i)(A),
(B), and (C) of this section (which are adjusted for in-network cost-
sharing requirements).
(A) The amount negotiated with in-network providers for the
emergency service furnished, excluding any in-network copayment or
coinsurance imposed with respect to the participant or beneficiary. If
there is more than one amount negotiated with in-network providers for
the emergency service, the amount described under this paragraph
(b)(3)(i)(A) is the median of these amounts, excluding any in-network
copayment or coinsurance imposed with respect to the participant or
beneficiary. In determining the median described in the preceding
sentence, the amount negotiated with each in-network provider is
treated as a separate amount (even if the same amount is paid to more
than one provider). If there is no per-service amount negotiated with
in-network providers (such as under a capitation or other similar
payment arrangement), the amount under this paragraph (b)(3)(i)(A) is
disregarded.
(B) The amount for the emergency service calculated using the same
method the plan generally uses to
[[Page 72273]]
determine payments for out-of-network services (such as the usual,
customary, and reasonable amount), excluding any in-network copayment
or coinsurance imposed with respect to the participant or beneficiary.
The amount in this paragraph (b)(3)(i)(B) is determined without
reduction for out-of-network cost sharing that generally applies under
the plan or health insurance coverage with respect to out-of-network
services. Thus, for example, if a plan generally pays 70 percent of the
usual, customary, and reasonable amount for out-of-network services,
the amount in this paragraph (b)(3)(i)(B) for an emergency service is
the total (that is, 100 percent) of the usual, customary, and
reasonable amount for the service, not reduced by the 30 percent
coinsurance that would generally apply to out-of-network services (but
reduced by the in-network copayment or coinsurance that the individual
would be responsible for if the emergency service had been provided in-
network).
(C) The amount that would be paid under Medicare (part A or part B
of title XVIII of the Social Security Act, 42 U.S.C. 1395 et seq.) for
the emergency service, excluding any in-network copayment or
coinsurance imposed with respect to the participant or beneficiary.
(ii) Other cost sharing. Any cost-sharing requirement other than a
copayment or coinsurance requirement (such as a deductible or out-of-
pocket maximum) may be imposed with respect to emergency services
provided out of network if the cost-sharing requirement generally
applies to out-of-network benefits. A deductible may be imposed with
respect to out-of-network emergency services only as part of a
deductible that generally applies to out-of-network benefits. If an
out-of-pocket maximum generally applies to out-of-network benefits,
that out-of-pocket maximum must apply to out-of-network emergency
services.
(iii) Special rules regarding out-of-network minimum payment
standards--(A) The minimum payment standards set forth under paragraph
(b)(3) of this section do not apply in cases where State law prohibits
a participant or beneficiary from being required to pay, in addition to
the in-network cost sharing, the excess of the amount the out-of-
network provider charges over the amount the plan or issuer provides in
benefits, or where a group health plan or health insurance issuer is
contractually responsible for such amounts. Nonetheless, in such cases,
a plan or issuer may not impose any copayment or coinsurance
requirement for out-of-network emergency services that is higher than
the copayment or coinsurance requirement that would apply if the
services were provided in network.
(B) A group health plan and health insurance issuer must provide a
participant or beneficiary adequate and prominent notice of their lack
of financial responsibility with respect to the amounts described under
this paragraph (b)(3)(iii), to prevent inadvertent payment by the
participant or beneficiary.
(iv) Examples. The rules of this paragraph (b)(3) are illustrated
by the following examples. In all of these examples, the group health
plan covers benefits with respect to emergency services.
Example 1. (i) Facts. A group health plan imposes a 25%
coinsurance responsibility on individuals who are furnished
emergency services, whether provided in network or out of network.
If a covered individual notifies the plan within two business days
after the day an individual receives treatment in an emergency
department, the plan reduces the coinsurance rate to 15%.
(ii) Conclusion. In this Example 1, the requirement to notify
the plan in order to receive a reduction in the coinsurance rate
does not violate the requirement that the plan cover emergency
services without the need for any prior authorization determination.
This is the result even if the plan required that it be notified
before or at the time of receiving services at the emergency
department in order to receive a reduction in the coinsurance rate.
Example 2. (i) Facts. A group health plan imposes a $60
copayment on emergency services without preauthorization, whether
provided in network or out of network. If emergency services are
preauthorized, the plan waives the copayment, even if it later
determines the medical condition was not an emergency medical
condition.
(ii) Conclusion. In this Example 2, by requiring an individual
to pay more for emergency services if the individual does not obtain
prior authorization, the plan violates the requirement that the plan
cover emergency services without the need for any prior
authorization determination. (By contrast, if, to have the copayment
waived, the plan merely required that it be notified rather than a
prior authorization, then the plan would not violate the requirement
that the plan cover emergency services without the need for any
prior authorization determination.)
Example 3. (i) Facts. A group health plan covers individuals who
receive emergency services with respect to an emergency medical
condition from an out-of-network provider. The plan has agreements
with in-network providers with respect to a certain emergency
service. Each provider has agreed to provide the service for a
certain amount. Among all the providers for the service: One has
agreed to accept $85, two have agreed to accept $100, two have
agreed to accept $110, three have agreed to accept $120, and one has
agreed to accept $150. Under the agreement, the plan agrees to pay
the providers 80% of the agreed amount, with the individual
receiving the service responsible for the remaining 20%.
(ii) Conclusion. In this Example 3, the values taken into
account in determining the median are $85, $100, $100, $110, $110,
$120, $120, $120, and $150. Therefore, the median amount among those
agreed to for the emergency service is $110, and the amount under
paragraph (b)(3)(i)(A) of this section is 80% of $110 ($88).
Example 4. (i) Facts. Same facts as Example 3. Subsequently, the
plan adds another provider to its network, who has agreed to accept
$150 for the emergency service.
(ii) Conclusion. In this Example 4, the median amount among
those agreed to for the emergency service is $115. (Because there is
no one middle amount, the median is the average of the two middle
amounts, $110 and $120.) Accordingly, the amount under paragraph
(b)(3)(i)(A) of this section is 80% of $115 ($92).
Example 5. (i) Facts. Same facts as Example 4. An individual
covered by the plan receives the emergency service from an out-of-
network provider, who charges $125 for the service. With respect to
services provided by out-of-network providers generally, the plan
reimburses covered individuals 50% of the reasonable amount charged
by the provider for medical services. For this purpose, the
reasonable amount for any service is based on information on charges
by all providers collected by a third party, on a zip code by zip
code basis, with the plan treating charges at a specified percentile
as reasonable. For the emergency service received by the individual,
the reasonable amount calculated using this method is $116. The
amount that would be paid under Medicare for the emergency service,
excluding any copayment or coinsurance for the service, is $80.
(ii) Conclusion. In this Example 5, the plan is responsible for
paying $92.80, 80% of $116. The median amount among those agreed to
for the emergency service is $115 and the amount the plan would pay
is $92 (80% of $115); the amount calculated using the same method
the plan uses to determine payments for out-of-network services--
$116--excluding the in-network 20% coinsurance, is $92.80; and the
Medicare payment is $80. Thus, the greatest amount is $92.80. The
individual is responsible for the remaining $32.20 charged by the
out-of-network provider.
Example 6. (i) Facts. Same facts as Example 5. The group health
plan generally imposes a $250 deductible for in-network health care.
With respect to all health care provided by out-of-network
providers, the plan imposes a $500 deductible. (Covered in-network
claims are credited against the deductible.) The individual has
incurred and submitted $260 of covered claims prior to receiving the
emergency service out of network.
(ii) Conclusion. In this Example 6, the plan is not responsible
for paying anything with respect to the emergency service furnished
by the out-of-network provider because the covered individual has
not satisfied the
[[Page 72274]]
higher deductible that applies generally to all health care provided
out of network. However, the amount the individual is required to
pay is credited against the deductible.
(4) Definitions. The definitions in this paragraph (b)(4) govern in
applying the provisions of this paragraph (b).
(i) Emergency medical condition. The term emergency medical
condition means a medical condition manifesting itself by acute
symptoms of sufficient severity (including severe pain) so that a
prudent layperson, who possesses an average knowledge of health and
medicine, could reasonably expect the absence of immediate medical
attention to result in a condition described in clause (i), (ii), or
(iii) of section 1867(e)(1)(A) of the Social Security Act (42 U.S.C.
1395dd(e)(1)(A)). (In that provision of the Social Security Act, clause
(i) refers to placing the health of the individual (or, with respect to
a pregnant woman, the health of the woman or her unborn child) in
serious jeopardy; clause (ii) refers to serious impairment to bodily
functions; and clause (iii) refers to serious dysfunction of any bodily
organ or part.)
(ii) Emergency services. The term emergency services means, with
respect to an emergency medical condition--
(A) A medical screening examination (as required under section 1867
of the Social Security Act, 42 U.S.C. 1395dd) that is within the
capability of the emergency department of a hospital, including
ancillary services routinely available to the emergency department to
evaluate such emergency medical condition, and
(B) Such further medical examination and treatment, to the extent
they are within the capabilities of the staff and facilities available
at the hospital, as are required under section 1867 of the Social
Security Act (42 U.S.C. 1395dd) to stabilize the patient.
(iii) Stabilize. The term to stabilize, with respect to an
emergency medical condition (as defined in paragraph (b)(4)(i) of this
section) has the meaning given in section 1867(e)(3) of the Social
Security Act (42 U.S.C. 1395dd(e)(3)).
(c) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years beginning on or after January 1, 2017. Until the applicability
date for this regulation, plans and issuers are required to continue to
comply with the corresponding sections of 29 CFR part 2590, contained
in the 29 CFR, parts 1927 to end, edition revised as of July 1, 2015.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Chapter I
For the reasons stated in the preamble, the Department of Health
and Human Services adopts as final the interim final rules amending 45
CFR parts 144, 146 and 147, which were published in the Federal
Register on May 13, 2010 (75 FR 27122), June 17, 2010 (75 FR 34538),
June 28, 2010 (75 FR 37188), and November 17, 2010 (75 FR 70114) with
the following changes as set forth below:
PART 144--REQUIREMENTS RELATED TO HEALTH INSURANCE
0
28. The authority citation for part 144 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public
Health Service Act, 42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92.
0
29. Section 144.103 is amended by revising the definition of
``preexisting condition exclusion'' to read as follows:
Sec. 144.103 Definitions.
* * * * *
Preexisting condition exclusion means a limitation or exclusion of
benefits (including a denial of coverage) based on the fact that the
condition was present before the effective date of coverage (or if
coverage is denied, the date of the denial) under a group health plan
or group or individual health insurance coverage (or other coverage
provided to Federally eligible individuals pursuant to 45 CFR part
148), whether or not any medical advice, diagnosis, care, or treatment
was recommended or received before that day. A preexisting condition
exclusion includes any limitation or exclusion of benefits (including a
denial of coverage) applicable to an individual as a result of
information relating to an individual's health status before the
individual's effective date of coverage (or if coverage is denied, the
date of the denial) under a group health plan, or group or individual
health insurance coverage (or other coverage provided to Federally
eligible individuals pursuant to 45 CFR part 148), such as a condition
identified as a result of a pre-enrollment questionnaire or physical
examination given to the individual, or review of medical records
relating to the pre-enrollment period.
* * * * *
PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET
0
30. The authority citation for part 146 continues to read as follows:
Authority: Secs. 2702 through 2705, 2711 through 2723, 2791, and
2792 of the PHS Act (42 U.S.C. 300gg-1 through 300gg-5, 300gg-11
through 300gg-23, 300gg-91, and 300gg-92).
0
31. Section 146.111(a)(1) is revised to read as follows:
Sec. 146.111 Preexisting condition exclusions.
(a) Preexisting condition exclusion defined--(1) A preexisting
condition exclusion means a preexisting condition exclusion within the
meaning of Sec. 144.103 of this subchapter.
* * * * *
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
32. The authority citation for part 147 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791 and 2792 of the Public
Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92), as amended.
0
33. Section 147.108 is revised to read as follows:
Sec. 147.108 Prohibition of preexisting condition exclusions.
(a) In general. A group health plan, or a health insurance issuer
offering group or individual health insurance coverage, may not impose
any preexisting condition exclusion (as defined in Sec. 144.103 of
this subchapter).
(b) Examples. The rules of paragraph (a) of this section are
illustrated by the following examples (for additional examples
illustrating the definition of a preexisting condition exclusion, see
Sec. 146.111(a)(2) of this subchapter):
-Example 1. (i) Facts. A group health plan provides benefits
solely through an insurance policy offered by Issuer P. At the
expiration of the policy, the plan switches coverage to a policy
offered by Issuer N. N's policy excludes benefits for oral surgery
required as a result of a traumatic injury if the injury occurred
before the effective date of coverage under the policy.
(ii) Conclusion. In this Example 1, the exclusion of benefits
for oral surgery required as a result of a traumatic injury if the
injury occurred before the effective date of coverage is a
preexisting condition exclusion because it operates to exclude
benefits for a condition based on the fact that the condition was
present before the effective date of coverage under the policy.
Therefore, such an exclusion is prohibited.
[[Page 72275]]
Example 2. (i) Facts. Individual C applies for individual
health insurance coverage with Issuer M. M denies C's application
for coverage because a pre-enrollment physical revealed that C has
type 2 diabetes.
(ii) Conclusion. See Example 2 in Sec. 146.111(a)(2) of this
subchapter for a conclusion that M's denial of C's application for
coverage is a preexisting condition exclusion because a denial of an
application for coverage based on the fact that a condition was
present before the date of denial is an exclusion of benefits based
on a preexisting condition.
(c) Allowable screenings to determine eligibility for alternative
coverage in the individual market--(1) In general. (i) A health
insurance issuer offering individual health insurance coverage may
screen applicants for eligibility for alternative coverage options
before offering a child-only policy if--
(A) The practice is permitted under State law;
(B) The screening applies to all child-only applicants, regardless
of health status; and
(C) The alternative coverage options include options for which
healthy children would potentially be eligible (e.g., Children's Health
Insurance Program (CHIP) or group health insurance).
(ii) An issuer must provide such coverage to an applicant effective
on the first date that a child-only policy would have been effective
had the applicant not been screened for an alternative coverage option,
as provided by State law. A State may impose a reasonable time limit by
when an issuer would have to enroll a child regardless of pending
applications for other coverage.
(2) Restrictions. A health insurance issuer offering individual
health insurance coverage may screen applicants for eligibility for
alternative coverage provided that:
(i) The screening process does not by its operation significantly
delay enrollment or artificially engineer eligibility of a child for a
program targeted to individuals with a pre-existing condition;
(ii) The screening process is not applied to offers of dependent
coverage for children; or
(ii) The issuer does not consider whether an applicant is eligible
for, or is provided medical assistance under, Medicaid in making
enrollment decisions, as provided under 42 U.S.C. 1396a (25)(G).
(d) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years (in the individual market, policy years) beginning on or after
January 1, 2017. Until the applicability date for this regulation,
plans and issuers are required to continue to comply with the
corresponding sections of 45 CFR parts 144, 146 and 147, contained in
the 45 CFR, parts 1 to 199, edition revised as of October 1, 2015.
0
34. Section 147.120 is revised to read as follows:
Sec. 147.120 Eligibility of children until at least age 26.
(a) In general--(1) A group health plan, or a health insurance
issuer offering group or individual health insurance coverage, that
makes available dependent coverage of children must make such coverage
available for children until attainment of 26 years of age.
(2) The rule of this paragraph (a) is illustrated by the following
example:
Example. (i) Facts. For the plan year beginning January 1,
2011, a group health plan provides health coverage for employees,
employees' spouses, and employees' children until the child turns
26. On the birthday of a child of an employee, July 17, 2011, the
child turns 26. The last day the plan covers the child is July 16,
2011.
(ii) Conclusion. In this Example, the plan satisfies the
requirement of this paragraph (a) with respect to the child.
(b) Restrictions on plan definition of dependent--(1) In general.
With respect to a child who has not attained age 26, a plan or issuer
may not define dependent for purposes of eligibility for dependent
coverage of children other than in terms of a relationship between a
child and the participant (in the individual market, the primary
subscriber). Thus, for example, a plan or issuer may not deny or
restrict dependent coverage for a child who has not attained age 26
based on the presence or absence of the child's financial dependency
(upon the participant or primary subscriber, or any other person);
residency with the participant (in the individual market, the primary
subscriber) or with any other person; whether the child lives, works,
or resides in an HMO's service area or other network service area;
marital status; student status; employment; eligibility for other
coverage; or any combination of those factors. (Other requirements of
Federal or State law, including section 609 of ERISA or section 1908 of
the Social Security Act, may require coverage of certain children.)
(2) Construction. A plan or issuer will not fail to satisfy the
requirements of this section if the plan or issuer limits dependent
child coverage to children under age 26 who are described in section
152(f)(1) of the Code. For an individual not described in Code section
152(f)(1), such as a grandchild or niece, a plan may impose additional
conditions on eligibility for dependent child health coverage, such as
a condition that the individual be a dependent for income tax purposes.
(c) Coverage of grandchildren not required. Nothing in this section
requires a plan or issuer to make coverage available for the child of a
child receiving dependent coverage.
(d) Uniformity irrespective of age. The terms of the plan or health
insurance coverage providing dependent coverage of children cannot vary
based on age (except for children who are age 26 or older).
(e) Examples. The rules of paragraph (d) of this section are
illustrated by the following examples:
Example 1. (i) Facts. A group health plan offers a choice of
self-only or family health coverage. Dependent coverage is provided
under family health coverage for children of participants who have
not attained age 26. The plan imposes an additional premium
surcharge for children who are older than age 18.
(ii) Conclusion. In this Example 1, the plan violates the
requirement of paragraph (d) of this section because the plan varies
the terms for dependent coverage of children based on age.
Example 2. (i) Facts. A group health plan offers a choice among
the following tiers of health coverage: self-only, self-plus-one,
self-plus-two, and self-plus-three-or-more. The cost of coverage
increases based on the number of covered individuals. The plan
provides dependent coverage of children who have not attained age
26.
(ii) Conclusion. In this Example 2, the plan does not violate
the requirement of paragraph (d) of this section that the terms of
dependent coverage for children not vary based on age. Although the
cost of coverage increases for tiers with more covered individuals,
the increase applies without regard to the age of any child.
Example 3. (i) Facts. A group health plan offers two benefit
packages--an HMO option and an indemnity option. Dependent coverage
is provided for children of participants who have not attained age
26. The plan limits children who are older than age 18 to the HMO
option.
(ii) Conclusion. In this Example 3, the plan violates the
requirement of paragraph (d) of this section because the plan, by
limiting children who are older than age 18 to the HMO option,
varies the terms for dependent coverage of children based on age.
Example 4. (i) Facts. A group health plan sponsored by a large
employer normally charges a copayment for physician visits that do
not constitute preventive services. The plan charges this copayment
to individuals age 19 and over, including employees, spouses, and
dependent children, but waives it for those under age 19.
(ii) Conclusion. In this Example 4, the plan does not violate
the requirement of paragraph (d) of this section that the terms of
dependent coverage for children not vary based on age.
[[Page 72276]]
While the requirement of paragraph (d) of this section generally
prohibits distinctions based upon age in dependent coverage of
children, it does not prohibit distinctions based upon age that
apply to all coverage under the plan, including coverage for
employees and spouses as well as dependent children. In this Example
4, the copayments charged to dependent children are the same as
those charged to employees and spouses. Accordingly, the arrangement
described in this Example 4 (including waiver, for individuals under
age 19, of the generally applicable copayment) does not violate the
requirement of paragraph (d) of this section.
(f) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years (in the individual market, policy years) beginning on or after
January 1, 2017. Until the applicability date for this regulation,
plans and issuers are required to continue to comply with the
corresponding sections of 45 CFR parts 144, 146 and 147, contained in
the 45 CFR, parts 1 to 199, edition revised as of October 1, 2015.
0
35. Section 147.126 is revised to read as follows:
Sec. 147.126 No lifetime or annual limits.
(a) Prohibition--(1) Lifetime limits. Except as provided in
paragraph (b) of this section, a group health plan, or a health
insurance issuer offering group or individual health insurance
coverage, may not establish any lifetime limit on the dollar amount of
essential health benefits for any individual, whether provided in-
network or out-of-network.
(2) Annual limits--(i) General rule. Except as provided in
paragraphs (a)(2)(ii) and (b) of this section, a group health plan, or
a health insurance issuer offering group or individual health insurance
coverage, may not establish any annual limit on the dollar amount of
essential health benefits for any individual, whether provided in-
network or out-of-network.
(ii) Exception for health flexible spending arrangements. A health
flexible spending arrangement (as defined in section 106(c)(2) of the
Internal Revenue Code) offered through a cafeteria plan pursuant to
section 125 of the Internal Revenue Code is not subject to the
requirement in paragraph (a)(2)(i) of this section.
(b) Construction--(1) Permissible limits on specific covered
benefits. The rules of this section do not prevent a group health plan,
or a health insurance issuer offering group or individual health
insurance coverage, from placing annual or lifetime dollar limits with
respect to any individual on specific covered benefits that are not
essential health benefits to the extent that such limits are otherwise
permitted under applicable Federal or State law. (The scope of
essential health benefits is addressed in paragraph (c) of this
section).
(2) Condition-based exclusions. The rules of this section do not
prevent a group health plan, or a health insurance issuer offering
group or individual health insurance coverage, from excluding all
benefits for a condition. However, if any benefits are provided for a
condition, then the requirements of this section apply. Other
requirements of Federal or State law may require coverage of certain
benefits.
(c) Definition of essential health benefits. The term ``essential
health benefits'' means essential health benefits under section 1302(b)
of the Patient Protection and Affordable Care Act and applicable
regulations. For this purpose, a group health plan or a health
insurance issuer that is not required to provide essential health
benefits under section 1302(b) must define ``essential health
benefits'' in a manner consistent with one of the three Federal
Employees Health Benefit Program (FEHBP) options as defined by 45 CFR
156.100(a)(3)or one of the base-benchmark plans selected by a State or
applied by default pursuant to 45 CFR 156.100.
(d) Special rule for health reimbursement arrangements (HRAs) and
other account-based plans--(1) In general. If an HRA or other account-
based plan is integrated with other coverage under a group health plan
and the other group health plan coverage alone satisfies the
requirements in paragraph (a)(2) of this section, the fact that the
benefits under the HRA or other account-based plan are limited does not
mean that the HRA or other account-based plan fails to meet the
requirements of paragraph (a)(2) of this section. Similarly, if an HRA
or other account-based plan is integrated with other coverage under a
group health plan and the other group health plan coverage alone
satisfies the requirements in PHS Act section 2713 and Sec.
147.130(a)(1), the HRA or other account-based plan will not fail to
meet the requirements of PHS Act 2713 and Sec. 147.130(a)(1).
(2) Integration requirements. An HRA or other account-based plan is
integrated with a group health plan for purposes of paragraph (a)(2) of
this section if it meets the requirements under either the integration
method set forth in paragraph (d)(2)(i) of this section or the
integration method set forth in paragraph (d)(2)(ii) of this section.
Integration does not require that the HRA (or other account-based plan)
and the group health plan with which it is integrated share the same
plan sponsor, the same plan document, or governing instruments, or file
a single Form 5500, if applicable. The term ``excepted benefits'' is
used throughout the integration methods; for a definition of the term
``excepted benefits'' see Internal Revenue Code section 9832(c), ERISA
section 733(c), and PHS Act section 2791(c).
(i) Integration Method: Minimum value not required. An HRA or other
account-based plan is integrated with another group health plan for
purposes of this paragraph if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan) to the employee that does not consist
solely of excepted benefits;
(B) The employee receiving the HRA or other account-based plan is
actually enrolled in a group health plan (other than the HRA or other
account-based plan) that does not consist solely of excepted benefits,
regardless of whether the plan is offered by the same plan sponsor
(referred to as non-HRA group coverage);
(C) The HRA or other account-based plan is available only to
employees who are enrolled in non-HRA group coverage, regardless of
whether the non-HRA group coverage is offered by the plan sponsor of
the HRA or other account-based plan (for example, the HRA may be
offered only to employees who do not enroll in an employer's group
health plan but are enrolled in other non-HRA group coverage, such as a
group health plan maintained by the employer of the employee's spouse);
(D) The benefits under the HRA or other account-based plan are
limited to reimbursement of one or more of the following--co-payments,
co-insurance, deductibles, and premiums under the non-HRA group
coverage, as well as medical care (as defined under section 213(d) of
the Internal Revenue Code) that does not constitute essential health
benefits as defined in paragraph (c) of this section; and
(E) Under the terms of the HRA or other account-based plan, an
employee (or former employee) is permitted to permanently opt out of
and waive future reimbursements from the HRA or other account-based
plan at least annually and, upon termination of employment, either the
remaining amounts in the HRA or other account-based plan are forfeited
or the employee is permitted to permanently opt out of and waive future
reimbursements from the HRA or other account-based plan.
(ii) Integration Method: Minimum value required. An HRA or other
account-based plan is integrated with
[[Page 72277]]
another group health plan for purposes of this paragraph if:
(A) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan) to the employee that provides minimum
value pursuant to Code section 36B(c)(2)(C)(ii) (and its implementing
regulations and applicable guidance);
(B) The employee receiving the HRA or other account-based plan is
actually enrolled in a group health plan that provides minimum value
pursuant to section 36B(c)(2)(C)(ii) of the Internal Revenue Code (and
applicable guidance), regardless of whether the plan is offered by the
plan sponsor of the HRA or other account-based plan (referred to as
non-HRA MV group coverage);
(C) The HRA or other account-based plan is available only to
employees who are actually enrolled in non-HRA MV group coverage,
regardless of whether the non-HRA MV group coverage is offered by the
plan sponsor of the HRA or other account-based plan (for example, the
HRA may be offered only to employees who do not enroll in an employer's
group health plan but are enrolled in other non-HRA MV group coverage,
such as a group health plan maintained by an employer of the employee's
spouse); and
(D) Under the terms of the HRA or other account-based plan, an
employee (or former employee) is permitted to permanently opt out of
and waive future reimbursements from the HRA or other account-based
plan at least annually, and, upon termination of employment, either the
remaining amounts in the HRA or other account-based plan are forfeited
or the employee is permitted to permanently opt out of and waive future
reimbursements from the HRA or other account-based plan.
(3) Forfeiture. For purpose of integration under paragraphs
(d)(2)(i)(E) and (d)(2)(ii)(D) of this section, forfeiture or waiver
occurs even if the forfeited or waived amounts may be reinstated upon a
fixed date, a participant's death, or the earlier of the two events
(the reinstatement event). For this purpose coverage under an HRA or
other account-based plan is considered forfeited or waived prior to a
reinstatement event only if the participant's election to forfeit or
waive is irrevocable, meaning that, beginning on the effective date of
the election and through the date of the reinstatement event, the
participant and the participant's beneficiaries have no access to
amounts credited to the HRA or other account-based plan. This means
that upon and after reinstatement, the reinstated amounts under the HRA
or other account-based plan may not be used to reimburse or pay medical
expenses incurred during the period after forfeiture and prior to
reinstatement.
(4) No integration with individual market coverage. A group health
plan, including an HRA or other account-based plan, used to purchase
coverage on the individual market is not integrated with that
individual market coverage for purposes of paragraph (a)(2) of this
section (or for purposes of the requirements of PHS Act section 2713).
(5) Integration with Medicare parts B and D. For employers that are
not required to offer their non-HRA group health plan coverage to
employees who are Medicare beneficiaries, an HRA or other account-based
plan that may be used to reimburse premiums under Medicare part B or D
may be integrated with Medicare (and deemed to comply with PHS Act
sections 2711 and 2713) if the following requirements are satisfied
with respect to employees who would be eligible for the employer's non-
HRA group health plan but for their eligibility for Medicare (and the
integration rules under paragraphs (d)(2)(i) and (ii) of this section
continue to apply to employees who are not eligible for Medicare):
(i) The plan sponsor offers a group health plan (other than the HRA
or other account-based plan and that does not consist solely of
excepted benefits) to employees who are not eligible for Medicare;
(ii) The employee receiving the HRA or other account-based plan is
actually enrolled Medicare part B or D;
(iii) The HRA or other account-based plan is available only to
employees who are enrolled in Medicare part B or D; and
(iv) The HRA or other account-based plan complies with paragraphs
(d)(2)(i)(E) and (d)(2)(ii)(D) of this section.
(6) Account-based plan. An account-based plan for purposes of this
section is an employer-provided group health plan that provides
reimbursements of medical expenses other than individual market policy
premiums with the reimbursement subject to a maximum fixed dollar
amount for a period. An HRA is a type of account-based plan.
(e) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years (in the individual market, policy years) beginning on or after
January 1, 2017. Until the applicability date for this regulation,
plans and issuers are required to continue to comply with the
corresponding sections of 45 CFR parts 144, 146 and 147, contained in
the 45 CFR, parts 1 to 199, edition revised as of October 1, 2015.
0
36. Section 147.128 is revised to read as follows:
Sec. 147.128 Rules regarding rescissions.
(a) Prohibition on rescissions--(1) A group health plan, or a
health insurance issuer offering group or individual health insurance
coverage, must not rescind coverage under the plan, or under the
policy, certificate, or contract of insurance, with respect to an
individual (including a group to which the individual belongs or family
coverage in which the individual is included) once the individual is
covered under the plan or coverage, unless the individual (or a person
seeking coverage on behalf of the individual) performs an act,
practice, or omission that constitutes fraud, or makes an intentional
misrepresentation of material fact, as prohibited by the terms of the
plan or coverage. A group health plan, or a health insurance issuer
offering group or individual health insurance coverage, must provide at
least 30 days advance written notice to each participant (in the
individual market, primary subscriber) who would be affected before
coverage may be rescinded under this paragraph (a)(1), regardless of,
in the case of group coverage, whether the coverage is insured or self-
insured, or whether the rescission applies to an entire group or only
to an individual within the group. (The rules of this paragraph (a)(1)
apply regardless of any contestability period that may otherwise
apply.)
(2) For purposes of this section, a rescission is a cancellation or
discontinuance of coverage that has retroactive effect. For example, a
cancellation that treats a policy as void from the time of the
individual's or group's enrollment is a rescission. As another example,
a cancellation that voids benefits paid up to a year before the
cancellation is also a rescission for this purpose. A cancellation or
discontinuance of coverage is not a rescission if --
(i) The cancellation or discontinuance of coverage has only a
prospective effect;
(ii) The cancellation or discontinuance of coverage is effective
retroactively, to the extent it is attributable to a failure to timely
pay required premiums or contributions (including COBRA premiums)
towards the cost of coverage;
(iii) The cancellation or discontinuance of coverage is initiated
by the individual (or by the individual's
[[Page 72278]]
authorized representative) and the sponsor, employer, plan, or issuer
does not, directly or indirectly, take action to influence the
individual's decision to cancel or discontinue coverage retroactively
or otherwise take any adverse action or retaliate against, interfere
with, coerce, intimidate, or threaten the individual; or
(iv) The cancellation or discontinuance of coverage is initiated by
the Exchange pursuant to Sec. 155.430 of this subchapter (other than
under paragraph (b)(2)(iii) of this section).
(3) The rules of this paragraph (a) are illustrated by the
following examples:
Example 1. (i) Facts. Individual A seeks enrollment in an
insured group health plan. The plan terms permit rescission of
coverage with respect to an individual if the individual engages in
fraud or makes an intentional misrepresentation of a material fact.
The plan requires A to complete a questionnaire regarding A's prior
medical history, which affects setting the group rate by the health
insurance issuer. The questionnaire complies with the other
requirements of this part and part 146 of this subchapter. The
questionnaire includes the following question: ``Is there anything
else relevant to your health that we should know?'' A inadvertently
fails to list that A visited a psychologist on two occasions, six
years previously. A is later diagnosed with breast cancer and seeks
benefits under the plan. On or around the same time, the issuer
receives information about A's visits to the psychologist, which was
not disclosed in the questionnaire.
(ii) Conclusion. In this Example 1, the plan cannot rescind A's
coverage because A's failure to disclose the visits to the
psychologist was inadvertent. Therefore, it was not fraudulent or an
intentional misrepresentation of material fact.
Example 2. (i) Facts. An employer sponsors a group health plan
that provides coverage for employees who work at least 30 hours per
week. Individual B has coverage under the plan as a full-time
employee. The employer reassigns B to a part-time position. Under
the terms of the plan, B is no longer eligible for coverage. The
plan mistakenly continues to provide health coverage, collecting
premiums from B and paying claims submitted by B. After a routine
audit, the plan discovers that B no longer works at least 30 hours
per week. The plan rescinds B's coverage effective as of the date
that B changed from a full-time employee to a part-time employee.
(ii) Conclusion. In this Example 2, the plan cannot rescind B's
coverage because there was no fraud or an intentional
misrepresentation of material fact. The plan may cancel coverage for
B prospectively, subject to other applicable Federal and State laws.
(b) Compliance with other requirements. Other requirements of
Federal or State law may apply in connection with a rescission of
coverage.
(c) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years (in the individual market, policy years) beginning on or after
January 1, 2017. Until the applicability date for this regulation,
plans and issuers are required to continue to comply with the
corresponding sections of 45 CFR parts 144, 146 and 147, contained in
the 45 CFR, parts 1 to 199, edition revised as of October 1, 2015.
0
37. Section 147.136 is revised to read as follows:
Sec. 147.136 Internal claims and appeals and external review
processes.
(a) Scope and definitions-(1) Scope. This section sets forth
requirements with respect to internal claims and appeals and external
review processes for group health plans and health insurance issuers
that are not grandfathered health plans under Sec. 147.140. Paragraph
(b) of this section provides requirements for internal claims and
appeals processes. Paragraph (c) of this section sets forth rules
governing the applicability of State external review processes.
Paragraph (d) of this section sets forth a Federal external review
process for plans and issuers not subject to an applicable State
external review process. Paragraph (e) of this section prescribes
requirements for ensuring that notices required to be provided under
this section are provided in a culturally and linguistically
appropriate manner. Paragraph (f) of this section describes the
authority of the Secretary to deem certain external review processes in
existence on March 23, 2010 as in compliance with paragraph (c) or (d)
of this section.
(2) Definitions. For purposes of this section, the following
definitions apply--
(i) Adverse benefit determination. An adverse benefit determination
means an adverse benefit determination as defined in 29 CFR 2560.503-1,
as well as any rescission of coverage, as described in Sec. 147.128
(whether or not, in connection with the rescission, there is an adverse
effect on any particular benefit at that time).
(ii) Appeal (or internal appeal). An appeal or internal appeal
means review by a plan or issuer of an adverse benefit determination,
as required in paragraph (b) of this section.
(iii) Claimant. Claimant means an individual who makes a claim
under this section. For purposes of this section, references to
claimant include a claimant's authorized representative.
(iv) External review. External review means a review of an adverse
benefit determination (including a final internal adverse benefit
determination) conducted pursuant to an applicable State external
review process described in paragraph (c) of this section or the
Federal external review process of paragraph (d) of this section.
(v) Final internal adverse benefit determination. A final internal
adverse benefit determination means an adverse benefit determination
that has been upheld by a plan or issuer at the completion of the
internal appeals process applicable under paragraph (b) of this section
(or an adverse benefit determination with respect to which the internal
appeals process has been exhausted under the deemed exhaustion rules of
paragraph (b)(2)(ii)(F) of this section).
(vi) Final external review decision. A final external review
decision means a determination by an independent review organization at
the conclusion of an external review.
(vii) Independent review organization (or IRO). An independent
review organization (or IRO) means an entity that conducts independent
external reviews of adverse benefit determinations and final internal
adverse benefit determinations pursuant to paragraph (c) or (d) of this
section.
(viii) NAIC Uniform Model Act. The NAIC Uniform Model Act means the
Uniform Health Carrier External Review Model Act promulgated by the
National Association of Insurance Commissioners in place on July 23,
2010.
(b) Internal claims and appeals process--(1) In general. A group
health plan and a health insurance issuer offering group or individual
health insurance coverage must implement an effective internal claims
and appeals process, as described in this paragraph (b).
(2) Requirements for group health plans and group health insurance
issuers. A group health plan and a health insurance issuer offering
group health insurance coverage must comply with all the requirements
of this paragraph (b)(2). In the case of health insurance coverage
offered in connection with a group health plan, if either the plan or
the issuer complies with the internal claims and appeals process of
this paragraph (b)(2), then the obligation to comply with this
paragraph (b)(2) is satisfied for both the plan and the issuer with
respect to the health insurance coverage.
(i) Minimum internal claims and appeals standards. A group health
plan and a health insurance issuer offering group health insurance
coverage must
[[Page 72279]]
comply with all the requirements applicable to group health plans under
29 CFR 2560.503-1, except to the extent those requirements are modified
by paragraph (b)(2)(ii) of this section. Accordingly, under this
paragraph (b), with respect to health insurance coverage offered in
connection with a group health plan, the group health insurance issuer
is subject to the requirements in 29 CFR 2560.503-1 to the same extent
as the group health plan.
(ii) Additional standards. In addition to the requirements in
paragraph (b)(2)(i) of this section, the internal claims and appeals
processes of a group health plan and a health insurance issuer offering
group health insurance coverage must meet the requirements of this
paragraph (b)(2)(ii).
(A) Clarification of meaning of adverse benefit determination. For
purposes of this paragraph (b)(2), an ``adverse benefit determination''
includes an adverse benefit determination as defined in paragraph
(a)(2)(i) of this section. Accordingly, in complying with 29 CFR
2560.503-1, as well as the other provisions of this paragraph (b)(2), a
plan or issuer must treat a rescission of coverage (whether or not the
rescission has an adverse effect on any particular benefit at that
time) as an adverse benefit determination. (Rescissions of coverage are
subject to the requirements of Sec. 147.128.)
(B) Expedited notification of benefit determinations involving
urgent care. The requirements of 29 CFR 2560.503-1(f)(2)(i) (which
generally provide, among other things, in the case of urgent care
claims for notification of the plan's benefit determination (whether
adverse or not) as soon as possible, taking into account the medical
exigencies, but not later than 72 hours after the receipt of the claim)
continue to apply to the plan and issuer. For purposes of this
paragraph (b)(2)(ii)(B), a claim involving urgent care has the meaning
given in 29 CFR 2560.503-1(m)(1), as determined by the attending
provider, and the plan or issuer shall defer to such determination of
the attending provider.
(C) Full and fair review. A plan and issuer must allow a claimant
to review the claim file and to present evidence and testimony as part
of the internal claims and appeals process. Specifically, in addition
to complying with the requirements of 29 CFR 2560.503-1(h)(2)--
(1) The plan or issuer must provide the claimant, free of charge,
with any new or additional evidence considered, relied upon, or
generated by the plan or issuer (or at the direction of the plan or
issuer) in connection with the claim; such evidence must be provided as
soon as possible and sufficiently in advance of the date on which the
notice of final internal adverse benefit determination is required to
be provided under 29 CFR 2560.503-1(i) to give the claimant a
reasonable opportunity to respond prior to that date; and
(2) Before the plan or issuer can issue a final internal adverse
benefit determination based on a new or additional rationale, the
claimant must be provided, free of charge, with the rationale; the
rationale must be provided as soon as possible and sufficiently in
advance of the date on which the notice of final internal adverse
benefit determination is required to be provided under 29 CFR 2560.503-
1(i) to give the claimant a reasonable opportunity to respond prior to
that date. Notwithstanding the rules of 29 CFR 2560.503-1(i), if the
new or additional evidence is received so late that it would be
impossible to provide it to the claimant in time for the claimant to
have a reasonable opportunity to respond, the period for providing a
notice of final internal adverse benefit determination is tolled until
such time as the claimant has a reasonable opportunity to respond.
After the claimant responds, or has a reasonable opportunity to respond
but fails to do so, the plan administrator shall notify the claimant of
the plan's benefit determination as soon as a plan acting in a
reasonable and prompt fashion can provide the notice, taking into
account the medical exigencies.
(D) Avoiding conflicts of interest. In addition to the requirements
of 29 CFR 2560.503-1(b) and (h) regarding full and fair review, the
plan and issuer must ensure that all claims and appeals are adjudicated
in a manner designed to ensure the independence and impartiality of the
persons involved in making the decision. Accordingly, decisions
regarding hiring, compensation, termination, promotion, or other
similar matters with respect to any individual (such as a claims
adjudicator or medical expert) must not be made based upon the
likelihood that the individual will support the denial of benefits.
(E) Notice. A plan and issuer must provide notice to individuals,
in a culturally and linguistically appropriate manner (as described in
paragraph (e) of this section) that complies with the requirements of
29 CFR 2560.503-1(g) and (j). The plan and issuer must also comply with
the additional requirements of this paragraph (b)(2)(ii)(E).
(1) The plan and issuer must ensure that any notice of adverse
benefit determination or final internal adverse benefit determination
includes information sufficient to identify the claim involved
(including the date of service, the health care provider, the claim
amount (if applicable), and a statement describing the availability,
upon request, of the diagnosis code and its corresponding meaning, and
the treatment code and its corresponding meaning).
(2) The plan and issuer must provide to participants, beneficiaries
and enrollees, as soon as practicable, upon request, the diagnosis code
and its corresponding meaning, and the treatment code and its
corresponding meaning, associated with any adverse benefit
determination or final internal adverse benefit determination. The plan
or issuer must not consider a request for such diagnosis and treatment
information, in itself, to be a request for an internal appeal under
this paragraph (b) or an external review under paragraphs (c) and (d)
of this section.
(3) The plan and issuer must ensure that the reason or reasons for
the adverse benefit determination or final internal adverse benefit
determination includes the denial code and its corresponding meaning,
as well as a description of the plan's or issuer's standard, if any,
that was used in denying the claim. In the case of a notice of final
internal adverse benefit determination, this description must include a
discussion of the decision.
(4) The plan and issuer must provide a description of available
internal appeals and external review processes, including information
regarding how to initiate an appeal.
(5) The plan and issuer must disclose the availability of, and
contact information for, any applicable office of health insurance
consumer assistance or ombudsman established under PHS Act section 2793
to assist individuals with the internal claims and appeals and external
review processes.
(F) Deemed exhaustion of internal claims and appeals processes--(1)
In the case of a plan or issuer that fails to strictly adhere to all
the requirements of this paragraph (b)(2) with respect to a claim, the
claimant is deemed to have exhausted the internal claims and appeals
process of this paragraph (b), except as provided in paragraph
(b)(2)(ii)(F)(2) of this section. Accordingly the claimant may initiate
an external review under paragraph (c) or (d) of this section, as
applicable. The claimant is also entitled to pursue any available
remedies under section 502(a) of ERISA or under State law, as
[[Page 72280]]
applicable, on the basis that the plan or issuer has failed to provide
a reasonable internal claims and appeals process that would yield a
decision on the merits of the claim. If a claimant chooses to pursue
remedies under section 502(a) of ERISA under such circumstances, the
claim or appeal is deemed denied on review without the exercise of
discretion by an appropriate fiduciary.
(2) Notwithstanding paragraph (b)(2)(ii)(F)(1) of this section, the
internal claims and appeals process of this paragraph (b) will not be
deemed exhausted based on de minimis violations that do not cause, and
are not likely to cause, prejudice or harm to the claimant so long as
the plan or issuer demonstrates that the violation was for good cause
or due to matters beyond the control of the plan or issuer and that the
violation occurred in the context of an ongoing, good faith exchange of
information between the plan and the claimant. This exception is not
available if the violation is part of a pattern or practice of
violations by the plan or issuer. The claimant may request a written
explanation of the violation from the plan or issuer, and the plan or
issuer must provide such explanation within 10 days, including a
specific description of its bases, if any, for asserting that the
violation should not cause the internal claims and appeals process of
this paragraph (b) to be deemed exhausted. If an external reviewer or a
court rejects the claimant's request for immediate review under
paragraph (b)(2)(ii)(F)(1) of this section on the basis that the plan
met the standards for the exception under this paragraph
(b)(2)(ii)(F)(2), the claimant has the right to resubmit and pursue the
internal appeal of the claim. In such a case, within a reasonable time
after the external reviewer or court rejects the claim for immediate
review (not to exceed 10 days), the plan shall provide the claimant
with notice of the opportunity to resubmit and pursue the internal
appeal of the claim. Time periods for re-filing the claim shall begin
to run upon claimant's receipt of such notice.
(iii) Requirement to provide continued coverage pending the outcome
of an appeal. A plan and issuer subject to the requirements of this
paragraph (b)(2) are required to provide continued coverage pending the
outcome of an appeal. For this purpose, the plan and issuer must comply
with the requirements of 29 CFR 2560.503-1(f)(2)(ii), which generally
provides that benefits for an ongoing course of treatment cannot be
reduced or terminated without providing advance notice and an
opportunity for advance review.
(3) Requirements for individual health insurance issuers. A health
insurance issuer offering individual health insurance coverage must
comply with all the requirements of this paragraph (b)(3).
(i) Minimum internal claims and appeals standards. A health
insurance issuer offering individual health insurance coverage must
comply with all the requirements of the ERISA internal claims and
appeals procedures applicable to group health plans under 29 CFR
2560.503-1 except for the requirements with respect to multiemployer
plans, and except to the extent those requirements are modified by
paragraph (b)(3)(ii) of this section. Accordingly, under this paragraph
(b), with respect to individual health insurance coverage, the issuer
is subject to the requirements in 29 CFR 2560.503-1 as if the issuer
were a group health plan.
(ii) Additional standards. In addition to the requirements in
paragraph (b)(3)(i) of this section, the internal claims and appeals
processes of a health insurance issuer offering individual health
insurance coverage must meet the requirements of this paragraph
(b)(3)(ii).
(A) Clarification of meaning of adverse benefit determination. For
purposes of this paragraph (b)(3), an adverse benefit determination
includes an adverse benefit determination as defined in paragraph
(a)(2)(i) of this section. Accordingly, in complying with 29 CFR
2560.503-1, as well as other provisions of this paragraph (b)(3), an
issuer must treat a rescission of coverage (whether or not the
rescission has an adverse effect on any particular benefit at that
time) and any decision to deny coverage in an initial eligibility
determination as an adverse benefit determination. (Rescissions of
coverage are subject to the requirements of Sec. 147.128.)
(B) Expedited notification of benefit determinations involving
urgent care. The requirements of 29 CFR 2560.503-1(f)(2)(i) (which
generally provide, among other things, in the case of urgent care
claims for notification of the issuer's benefit determination (whether
adverse or not) as soon as possible, taking into account the medical
exigencies, but not later than 72 hours after receipt of the claim)
continue to apply to the issuer. For purposes of this paragraph
(b)(3)(ii)(B), a claim involving urgent care has the meaning given in
29 CFR 2560.503-1(m)(1), as determined by the attending provider, and
the issuer shall defer to such determination of the attending provider.
(C) Full and fair review. An issuer must allow a claimant to review
the claim file and to present evidence and testimony as part of the
internal claims and appeals process. Specifically, in addition to
complying with the requirements of 29 CFR 2560.503-1(h)(2)--
(1) The issuer must provide the claimant, free of charge, with any
new or additional evidence considered, relied upon, or generated by the
issuer (or at the direction of the issuer) in connection with the
claim; such evidence must be provided as soon as possible and
sufficiently in advance of the date on which the notice of final
internal adverse benefit determination is required to be provided under
29 CFR 2560.503-1(i) to give the claimant a reasonable opportunity to
respond prior to that date; and
(2) Before the issuer can issue a final internal adverse benefit
determination based on a new or additional rationale, the claimant must
be provided, free of charge, with the rationale; the rationale must be
provided as soon as possible and sufficiently in advance of the date on
which the notice of final internal adverse benefit determination is
required to be provided under 29 CFR 2560.503-1(i) to give the claimant
a reasonable opportunity to respond prior to that date. Notwithstanding
the rules of 29 CFR 2560.503-1(i), if the new or additional evidence is
received so late that it would be impossible to provide it to the
claimant in time for the claimant to have a reasonable opportunity to
respond, the period for providing a notice of final internal adverse
benefit determination is tolled until such time as the claimant has a
reasonable opportunity to respond. After the claimant responds, or has
a reasonable opportunity to respond but fails to do so, the issuer
shall notify the claimant of the issuer's determination as soon as an
issuer acting in a reasonable and prompt fashion can provide the
notice, taking into account the medical exigencies.
(D) Avoiding conflicts of interest. In addition to the requirements
of 29 CFR 2560.503-1(b) and (h) regarding full and fair review, the
issuer must ensure that all claims and appeals are adjudicated in a
manner designed to ensure the independence and impartiality of the
persons involved in making the decision. Accordingly, decisions
regarding hiring, compensation, termination, promotion, or other
similar matters with respect to any individual (such as a claims
adjudicator or medical expert) must not be made based upon the
likelihood that the individual will support the denial of benefits.
[[Page 72281]]
(E) Notice. An issuer must provide notice to individuals, in a
culturally and linguistically appropriate manner (as described in
paragraph (e) of this section) that complies with the requirements of
29 CFR 2560.503-1(g) and (j). The issuer must also comply with the
additional requirements of this paragraph (b)(3)(ii)(E).
(1) The issuer must ensure that any notice of adverse benefit
determination or final internal adverse benefit determination includes
information sufficient to identify the claim involved (including the
date of service, the name of the health care provider, the claim amount
(if applicable), and a statement describing the availability, upon
request, of the diagnosis code and its corresponding meaning, and the
treatment code and its corresponding meaning).
(2) The issuer must provide to participants and beneficiaries, as
soon as practicable, upon request, the diagnosis code and its
corresponding meaning, and the treatment code and its corresponding
meaning, associated with any adverse benefit determination or final
internal adverse benefit determination. The issuer must not consider a
request for such diagnosis and treatment information, in itself, to be
a request for an internal appeal under this paragraph (b) or an
external review under paragraphs (c) and (d) of this section.
(3) The issuer must ensure that the reason or reasons for the
adverse benefit determination or final internal adverse benefit
determination includes the denial code and its corresponding meaning,
as well as a description of the issuer's standard, if any, that was
used in denying the claim. In the case of a notice of final internal
adverse benefit determination, this description must include a
discussion of the decision.
(4) The issuer must provide a description of available internal
appeals and external review processes, including information regarding
how to initiate an appeal.
(5) The issuer must disclose the availability of, and contact
information for, any applicable office of health insurance consumer
assistance or ombudsman established under PHS Act section 2793 to
assist individuals with the internal claims and appeals and external
review processes.
(F) Deemed exhaustion of internal claims and appeals processes. (1)
In the case of an issuer that fails to adhere to all the requirements
of this paragraph (b)(3) with respect to a claim, the claimant is
deemed to have exhausted the internal claims and appeals process of
this paragraph (b), except as provided in paragraph (b)(3)(ii)(F)(2) of
this section. Accordingly, the claimant may initiate an external review
under paragraph (c) or (d) of this section, as applicable. The claimant
is also entitled to pursue any available remedies under State law, as
applicable, on the basis that the issuer has failed to provide a
reasonable internal claims and appeals process that would yield a
decision on the merits of the claim.
(2) Notwithstanding paragraph (b)(3)(ii)(F)(1) of this section, the
internal claims and appeals process of this paragraph (b) will not be
deemed exhausted based on de minimis violations that do not cause, and
are not likely to cause, prejudice or harm to the claimant so long as
the issuer demonstrates that the violation was for good cause or due to
matters beyond the control of the issuer and that the violation
occurred in the context of an ongoing, good faith exchange of
information between the issuer and the claimant. This exception is not
available if the violation is part of a pattern or practice of
violations by the issuer. The claimant may request a written
explanation of the violation from the issuer, and the issuer must
provide such explanation within 10 days, including a specific
description of its bases, if any, for asserting that the violation
should not cause the internal claims and appeals process of this
paragraph (b) to be deemed exhausted. If an external reviewer or a
court rejects the claimant's request for immediate review under
paragraph (b)(3)(ii)(F)(1) of this section on the basis that the issuer
met the standards for the exception under this paragraph
(b)(3)(ii)(F)(2), the claimant has the right to resubmit and pursue the
internal appeal of the claim. In such a case, within a reasonable time
after the external reviewer or court rejects the claim for immediate
review (not to exceed 10 days), the issuer shall provide the claimant
with notice of the opportunity to resubmit and pursue the internal
appeal of the claim. Time periods for re-filing the claim shall begin
to run upon claimant's receipt of such notice.
(G) One level of internal appeal. Notwithstanding the requirements
in 29 CFR 2560.503-1(c)(3), a health insurance issuer offering
individual health insurance coverage must provide for only one level of
internal appeal before issuing a final determination.
(H) Recordkeeping requirements. A health insurance issuer offering
individual health insurance coverage must maintain for six years
records of all claims and notices associated with the internal claims
and appeals process, including the information detailed in paragraph
(b)(3)(ii)(E) of this section and any other information specified by
the Secretary. An issuer must make such records available for
examination by the claimant or State or Federal oversight agency upon
request.
(iii) Requirement to provide continued coverage pending the outcome
of an appeal. An issuer subject to the requirements of this paragraph
(b)(3) is required to provide continued coverage pending the outcome of
an appeal. For this purpose, the issuer must comply with the
requirements of 29 CFR 2560.503-1(f)(2)(ii) as if the issuer were a
group health plan, so that the issuer cannot reduce or terminate an
ongoing course of treatment without providing advance notice and an
opportunity for advance review.
(c) State standards for external review--(1) In general. (i) If a
State external review process that applies to and is binding on a
health insurance issuer offering group or individual health insurance
coverage includes at a minimum the consumer protections in the NAIC
Uniform Model Act, then the issuer must comply with the applicable
State external review process and is not required to comply with the
Federal external review process of paragraph (d) of this section. In
such a case, to the extent that benefits under a group health plan are
provided through health insurance coverage, the group health plan is
not required to comply with either this paragraph (c) or the Federal
external review process of paragraph (d) of this section.
(ii) To the extent that a group health plan provides benefits other
than through health insurance coverage (that is, the plan is self-
insured) and is subject to a State external review process that applies
to and is binding on the plan (for example, is not preempted by ERISA)
and the State external review process includes at a minimum the
consumer protections in the NAIC Uniform Model Act, then the plan must
comply with the applicable State external review process and is not
required to comply with the Federal external review process of
paragraph (d) of this section. Where a self-insured plan is not subject
to an applicable State external review process, but the State has
chosen to expand access to its process for plans that are not subject
to the applicable State laws, the plan may choose to comply with either
the applicable State external review process or the Federal external
review process of paragraph (d) of this section.
(iii) If a plan or issuer is not required under paragraph (c)(1)(i)
or (c)(1)(ii) of this section to comply with the requirements of this
paragraph (c), then
[[Page 72282]]
the plan or issuer must comply with the Federal external review process
of paragraph (d) of this section, except to the extent, in the case of
a plan, the plan is not required under paragraph (c)(1)(i) of this
section to comply with paragraph (d) of this section.
(2) Minimum standards for State external review processes. An
applicable State external review process must meet all the minimum
consumer protections in this paragraph (c)(2). The Department of Health
and Human Services will determine whether State external review
processes meet these requirements.
(i) The State process must provide for the external review of
adverse benefit determinations (including final internal adverse
benefit determinations) by issuers (or, if applicable, plans) that are
based on the issuer's (or plan's) requirements for medical necessity,
appropriateness, health care setting, level of care, or effectiveness
of a covered benefit.
(ii) The State process must require issuers (or, if applicable,
plans) to provide effective written notice to claimants of their rights
in connection with an external review for an adverse benefit
determination.
(iii) To the extent the State process requires exhaustion of an
internal claims and appeals process, exhaustion must be unnecessary
where the issuer (or, if applicable, the plan) has waived the
requirement; the issuer (or the plan) is considered to have exhausted
the internal claims and appeals process under applicable law (including
by failing to comply with any of the requirements for the internal
appeal process, as outlined in paragraph (b)(2) of this section); or
the claimant has applied for expedited external review at the same time
as applying for an expedited internal appeal.
(iv) The State process provides that the issuer (or, if applicable,
the plan) against which a request for external review is filed must pay
the cost of the IRO for conducting the external review. Notwithstanding
this requirement, a State external review process that expressly
authorizes, as of November 18, 2015, a nominal filing fee may continue
to permit such fees. For this purpose, to be considered nominal, a
filing fee must not exceed $25, it must be refunded to the claimant if
the adverse benefit determination (or final internal adverse benefit
determination) is reversed through external review, it must be waived
if payment of the fee would impose an undue financial hardship, and the
annual limit on filing fees for any claimant within a single plan year
must not exceed $75.
(v) The State process may not impose a restriction on the minimum
dollar amount of a claim for it to be eligible for external review.
Thus, the process may not impose, for example, a $500 minimum claims
threshold.
(vi) The State process must allow at least four months after the
receipt of a notice of an adverse benefit determination or final
internal adverse benefit determination for a request for an external
review to be filed.
(vii) The State process must provide that IROs will be assigned on
a random basis or another method of assignment that assures the
independence and impartiality of the assignment process (such as
rotational assignment) by a State or independent entity, and in no
event selected by the issuer, plan, or the individual.
(viii) The State process must provide for maintenance of a list of
approved IROs qualified to conduct the external review based on the
nature of the health care service that is the subject of the review.
The State process must provide for approval only of IROs that are
accredited by a nationally recognized private accrediting organization.
(ix) The State process must provide that any approved IRO has no
conflicts of interest that will influence its independence. Thus, the
IRO may not own or control, or be owned or controlled by a health
insurance issuer, a group health plan, the sponsor of a group health
plan, a trade association of plans or issuers, or a trade association
of health care providers. The State process must further provide that
the IRO and the clinical reviewer assigned to conduct an external
review may not have a material professional, familial, or financial
conflict of interest with the issuer or plan that is the subject of the
external review; the claimant (and any related parties to the claimant)
whose treatment is the subject of the external review; any officer,
director, or management employee of the issuer; the plan administrator,
plan fiduciaries, or plan employees; the health care provider, the
health care provider's group, or practice association recommending the
treatment that is subject to the external review; the facility at which
the recommended treatment would be provided; or the developer or
manufacturer of the principal drug, device, procedure, or other therapy
being recommended.
(x) The State process allows the claimant at least five business
days to submit to the IRO in writing additional information that the
IRO must consider when conducting the external review, and it requires
that the claimant is notified of the right to do so. The process must
also require that any additional information submitted by the claimant
to the IRO must be forwarded to the issuer (or, if applicable, the
plan) within one business day of receipt by the IRO.
(xi) The State process must provide that the decision is binding on
the plan or issuer, as well as the claimant except to the extent the
other remedies are available under State or Federal law, and except
that the requirement that the decision be binding shall not preclude
the plan or issuer from making payment on the claim or otherwise
providing benefits at any time, including after a final external review
decision that denies the claim or otherwise fails to require such
payment or benefits. For this purpose, the plan or issuer must provide
benefits (including by making payment on the claim) pursuant to the
final external review decision without delay, regardless of whether the
plan or issuer intends to seek judicial review of the external review
decision and unless or until there is a judicial decision otherwise.
(xii) The State process must require, for standard external review,
that the IRO provide written notice to the issuer (or, if applicable,
the plan) and the claimant of its decision to uphold or reverse the
adverse benefit determination (or final internal adverse benefit
determination) within no more than 45 days after the receipt of the
request for external review by the IRO.
(xiii) The State process must provide for an expedited external
review if the adverse benefit determination (or final internal adverse
benefit determination) concerns an admission, availability of care,
continued stay, or health care service for which the claimant received
emergency services, but has not been discharged from a facility; or
involves a medical condition for which the standard external review
time frame would seriously jeopardize the life or health of the
claimant or jeopardize the claimant's ability to regain maximum
function. As expeditiously as possible but within no more than 72 hours
after the receipt of the request for expedited external review by the
IRO, the IRO must make its decision to uphold or reverse the adverse
benefit determination (or final internal adverse benefit determination)
and notify the claimant and the issuer (or, if applicable, the plan) of
the determination. If the notice is not in writing, the IRO must
provide written confirmation of the decision within 48 hours after the
date of the notice of the decision.
(xiv) The State process must require that issuers (or, if
applicable, plans)
[[Page 72283]]
include a description of the external review process in or attached to
the summary plan description, policy, certificate, membership booklet,
outline of coverage, or other evidence of coverage it provides to
participants, beneficiaries, or enrollees, substantially similar to
what is set forth in section 17 of the NAIC Uniform Model Act.
(xv) The State process must require that IROs maintain written
records and make them available upon request to the State,
substantially similar to what is set forth in section 15 of the NAIC
Uniform Model Act.
(xvi) The State process follows procedures for external review of
adverse benefit determinations (or final internal adverse benefit
determinations) involving experimental or investigational treatment,
substantially similar to what is set forth in section 10 of the NAIC
Uniform Model Act.
(3) Transition period for external review processes--(i) Through
December 31, 2017, an applicable State external review process
applicable to a health insurance issuer or group health plan is
considered to meet the requirements of PHS Act section 2719(b).
Accordingly, through December 31, 2017, an applicable State external
review process will be considered binding on the issuer or plan (in
lieu of the requirements of the Federal external review process). If
there is no applicable State external review process, the issuer or
plan is required to comply with the requirements of the Federal
external review process in paragraph (d) of this section.
(ii) An applicable State external review process must apply for
final internal adverse benefit determinations (or, in the case of
simultaneous internal appeal and external review, adverse benefit
determinations) provided on or after January 1, 2018. The Federal
external review process will apply to such internal adverse benefit
determinations unless the Department of Health and Human Services
determines that a State law meets all the minimum standards of
paragraph (c)(2) of this section. Through December 31, 2017, a State
external review process applicable to a health insurance issuer or
group health plan may be considered to meet the minimum standards of
paragraph (c)(2) of this section, if it meets the temporary standards
established by the Secretary in guidance for a process similar to the
NAIC Uniform Model Act.
(d) Federal external review process. A plan or issuer not subject
to an applicable State external review process under paragraph (c) of
this section must provide an effective Federal external review process
in accordance with this paragraph (d) (except to the extent, in the
case of a plan, the plan is described in paragraph (c)(1)(i) of this
section as not having to comply with this paragraph (d)). In the case
of health insurance coverage offered in connection with a group health
plan, if either the plan or the issuer complies with the Federal
external review process of this paragraph (d), then the obligation to
comply with this paragraph (d) is satisfied for both the plan and the
issuer with respect to the health insurance coverage. A Multi State
Plan or MSP, as defined by 45 CFR 800.20, must provide an effective
Federal external review process in accordance with this paragraph (d).
In such circumstances, the requirement to provide external review under
this paragraph (d) is satisfied when a Multi State Plan or MSP complies
with standards established by the Office of Personnel Management.
(1) Scope--(i) In general. The Federal external review process
established pursuant to this paragraph (d) applies to the following:
(A) An adverse benefit determination (including a final internal
adverse benefit determination) by a plan or issuer that involves
medical judgment (including, but not limited to, those based on the
plan's or issuer's requirements for medical necessity, appropriateness,
health care setting, level of care, or effectiveness of a covered
benefit; its determination that a treatment is experimental or
investigational; its determination whether a participant or beneficiary
is entitled to a reasonable alternative standard for a reward under a
wellness program; or its determination whether a plan or issuer is
complying with the nonquantitative treatment limitation provisions of
Code section 9812 and Sec. 54.9812, which generally require, among
other things, parity in the application of medical management
techniques), as determined by the external reviewer. (A denial,
reduction, termination, or a failure to provide payment for a benefit
based on a determination that a participant or beneficiary fails to
meet the requirements for eligibility under the terms of a group health
plan or health insurance coverage is not eligible for the Federal
external review process under this paragraph (d)); and
(B) A rescission of coverage (whether or not the rescission has any
effect on any particular benefit at that time).
(ii) Examples. The rules of paragraph (d)(1)(i) of this section are
illustrated by the following examples:
Example 1. (i) Facts. A group health plan provides coverage for
30 physical therapy visits generally. After the 30th visit, coverage
is provided only if the service is preauthorized pursuant to an
approved treatment plan that takes into account medical necessity
using the plan's definition of the term. Individual A seeks coverage
for a 31st physical therapy visit. A's health care provider submits
a treatment plan for approval, but it is not approved by the plan,
so coverage for the 31st visit is not preauthorized. With respect to
the 31st visit, A receives a notice of final internal adverse
benefit determination stating that the maximum visit limit is
exceeded.
(ii) Conclusion. In this Example 1, the plan's denial of
benefits is based on medical necessity and involves medical
judgment. Accordingly, the claim is eligible for external review
under paragraph (d)(1)(i) of this section. Moreover, the plan's
notification of final internal adverse benefit determination is
inadequate under paragraphs (b)(2)(i) and (b)(2)(ii)(E)(3) of this
section because it fails to make clear that the plan will pay for
more than 30 visits if the service is preauthorized pursuant to an
approved treatment plan that takes into account medical necessity
using the plan's definition of the term. Accordingly, the notice of
final internal adverse benefit determination should refer to the
plan provision governing the 31st visit and should describe the
plan's standard for medical necessity, as well as how the treatment
fails to meet the plan's standard.
Example 2. (i) Facts. A group health plan does not provide
coverage for services provided out of network, unless the service
cannot effectively be provided in network. Individual B seeks
coverage for a specialized medical procedure from an out-of-network
provider because B believes that the procedure cannot be effectively
provided in network. B receives a notice of final internal adverse
benefit determination stating that the claim is denied because the
provider is out-of-network.
(ii) Conclusion. In this Example 2, the plan's denial of
benefits is based on whether a service can effectively be provided
in network and, therefore, involves medical judgment. Accordingly,
the claim is eligible for external review under paragraph (d)(1)(i)
of this section. Moreover, the plan's notice of final internal
adverse benefit determination is inadequate under paragraphs
(b)(2)(i) and (b)(2)(ii)(E)(3) of this section because the plan does
provide benefits for services on an out-of-network basis if the
services cannot effectively be provided in network. Accordingly, the
notice of final internal adverse benefit determination is required
to refer to the exception to the out-of-network exclusion and should
describe the plan's standards for determining effectiveness of
services, as well as how services available to the claimant within
the plan's network meet the plan's standard for effectiveness of
services.
(2) External review process standards. The Federal external review
process established pursuant to this paragraph (d) is considered
similar to the process set forth in the NAIC Uniform Model
[[Page 72284]]
Act and, therefore satisfies the requirements of paragraph (d)(2)) if
such process provides the following.
(i) Request for external review. A group health plan or health
insurance issuer must allow a claimant to file a request for an
external review with the plan or issuer if the request is filed within
four months after the date of receipt of a notice of an adverse benefit
determination or final internal adverse benefit determination. If there
is no corresponding date four months after the date of receipt of such
a notice, then the request must be filed by the first day of the fifth
month following the receipt of the notice. For example, if the date of
receipt of the notice is October 30, because there is no February 30,
the request must be filed by March 1. If the last filing date would
fall on a Saturday, Sunday, or Federal holiday, the last filing date is
extended to the next day that is not a Saturday, Sunday, or Federal
holiday.
(ii) Preliminary review--(A) In general. Within five business days
following the date of receipt of the external review request, the group
health plan or health insurance issuer must complete a preliminary
review of the request to determine whether:
(1) The claimant is or was covered under the plan or coverage at
the time the health care item or service was requested or, in the case
of a retrospective review, was covered under the plan or coverage at
the time the health care item or service was provided;
(2) The adverse benefit determination or the final adverse benefit
determination does not relate to the claimant's failure to meet the
requirements for eligibility under the terms of the group health plan
or health insurance coverage (e.g., worker classification or similar
determination);
(3) The claimant has exhausted the plan's or issuer's internal
appeal process unless the claimant is not required to exhaust the
internal appeals process under paragraph (b)(1) of this section; and
(4) The claimant has provided all the information and forms
required to process an external review.
(B) Within one business day after completion of the preliminary
review, the plan or issuer must issue a notification in writing to the
claimant. If the request is complete but not eligible for external
review, such notification must include the reasons for its
ineligibility and current contact information, including the phone
number, for the Employee Benefits Security Administration. If the
request is not complete, such notification must describe the
information or materials needed to make the request complete and the
plan or issuer must allow a claimant to perfect the request for
external review within the four-month filing period or within the 48
hour period following the receipt of the notification, whichever is
later.
(iii) Referral to Independent Review Organization. (A) In general.
The group health plan or health insurance issuer must assign an IRO
that is accredited by URAC or by similar nationally-recognized
accrediting organization to conduct the external review. The IRO
referral process must provide for the following:
(1) The plan or issuer must ensure that the IRO process is not
biased and ensures independence;
(2) The plan or issuer must contract with at least three (3) IROs
for assignments under the plan or coverage and rotate claims
assignments among them (or incorporate other independent, unbiased
methods for selection of IROs, such as random selection); and
(3) The IRO may not be eligible for any financial incentives based
on the likelihood that the IRO will support the denial of benefits.
(4) The IRO process may not impose any costs, including filing
fees, on the claimant requesting the external review.
(B) IRO contracts. A group health plan or health insurance issuer
must include the following standards in the contract between the plan
or issuer and the IRO:
(1) The assigned IRO will utilize legal experts where appropriate
to make coverage determinations under the plan or coverage.
(2) The assigned IRO will timely notify a claimant in writing
whether the request is eligible for external review. This notice will
include a statement that the claimant may submit in writing to the
assigned IRO, within ten business days following the date of receipt of
the notice, additional information. This additional information must be
considered by the IRO when conducting the external review. The IRO is
not required to, but may, accept and consider additional information
submitted after ten business days.
(3) Within five business days after the date of assignment of the
IRO, the plan or issuer must provide to the assigned IRO the documents
and any information considered in making the adverse benefit
determination or final internal adverse benefit determination. Failure
by the plan or issuer to timely provide the documents and information
must not delay the conduct of the external review. If the plan or
issuer fails to timely provide the documents and information, the
assigned IRO may terminate the external review and make a decision to
reverse the adverse benefit determination or final internal adverse
benefit determination. Within one business day after making the
decision, the IRO must notify the claimant and the plan.
(4) Upon receipt of any information submitted by the claimant, the
assigned IRO must within one business day forward the information to
the plan or issuer. Upon receipt of any such information, the plan or
issuer may reconsider its adverse benefit determination or final
internal adverse benefit determination that is the subject of the
external review. Reconsideration by the plan or issuer must not delay
the external review. The external review may be terminated as a result
of the reconsideration only if the plan decides, upon completion of its
reconsideration, to reverse its adverse benefit determination or final
internal adverse benefit determination and provide coverage or payment.
Within one business day after making such a decision, the plan must
provide written notice of its decision to the claimant and the assigned
IRO. The assigned IRO must terminate the external review upon receipt
of the notice from the plan or issuer.
(5) The IRO will review all of the information and documents timely
received. In reaching a decision, the assigned IRO will review the
claim de novo and not be bound by any decisions or conclusions reached
during the plan's or issuer's internal claims and appeals process
applicable under paragraph (b). In addition to the documents and
information provided, the assigned IRO, to the extent the information
or documents are available and the IRO considers them appropriate, will
consider the following in reaching a decision:
(i) The claimant's medical records;
(ii) The attending health care professional's recommendation;
(iii) Reports from appropriate health care professionals and other
documents submitted by the plan or issuer, claimant, or the claimant's
treating provider;
(iv) The terms of the claimant's plan or coverage to ensure that
the IRO's decision is not contrary to the terms of the plan or
coverage, unless the terms are inconsistent with applicable law;
(v) Appropriate practice guidelines, which must include applicable
evidence-based standards and may include any other practice guidelines
developed by the Federal government, national or professional medical
societies, boards, and associations;
[[Page 72285]]
(vi) Any applicable clinical review criteria developed and used by
the plan or issuer, unless the criteria are inconsistent with the terms
of the plan or coverage or with applicable law; and
(vii) To the extent the final IRO decision maker is different from
the IRO's clinical reviewer, the opinion of such clinical reviewer,
after considering information described in this notice, to the extent
the information or documents are available and the clinical reviewer or
reviewers consider such information or documents appropriate.
(6) The assigned IRO must provide written notice of the final
external review decision within 45 days after the IRO receives the
request for the external review. The IRO must deliver the notice of the
final external review decision to the claimant and the plan or issuer.
(7) The assigned IRO's written notice of the final external review
decision must contain the following:
(i) A general description of the reason for the request for
external review, including information sufficient to identify the claim
(including the date or dates of service, the health care provider, the
claim amount (if applicable), and a statement describing the
availability, upon request, of the diagnosis code and its corresponding
meaning, the treatment code and its corresponding meaning, and the
reason for the plan's or issuer's denial);
(ii) The date the IRO received the assignment to conduct the
external review and the date of the IRO decision;
(iii) References to the evidence or documentation, including the
specific coverage provisions and evidence-based standards, considered
in reaching its decision;
(iv) A discussion of the principal reason or reasons for its
decision, including the rationale for its decision and any evidence-
based standards that were relied on in making its decision;
(v) A statement that the IRO's determination is binding except to
the extent that other remedies may be available under State or Federal
law to either the group health plan or health insurance issuer or to
the claimant, or to the extent the health plan or health insurance
issuer voluntarily makes payment on the claim or otherwise provides
benefits at any time, including after a final external review decision
that denies the claim or otherwise fails to require such payment or
benefits;
(vi) A statement that judicial review may be available to the
claimant; and
(vii) Current contact information, including phone number, for any
applicable office of health insurance consumer assistance or ombudsman
established under PHS Act section 2793.
(viii) After a final external review decision, the IRO must
maintain records of all claims and notices associated with the external
review process for six years. An IRO must make such records available
for examination by the claimant, plan, issuer, or State or Federal
oversight agency upon request, except where such disclosure would
violate State or Federal privacy laws.
(iv) Reversal of plan's or issuer's decision. Upon receipt of a
notice of a final external review decision reversing the adverse
benefit determination or final adverse benefit determination, the plan
or issuer immediately must provide coverage or payment (including
immediately authorizing care or immediately paying benefits) for the
claim.
(3) Expedited external review. A group health plan or health
insurance issuer must comply with the following standards with respect
to an expedited external review:
(i) Request for external review. A group health plan or health
insurance issuer must allow a claimant to make a request for an
expedited external review with the plan or issuer at the time the
claimant receives:
(A) An adverse benefit determination if the adverse benefit
determination involves a medical condition of the claimant for which
the timeframe for completion of an expedited internal appeal under
paragraph (b) of this section would seriously jeopardize the life or
health of the claimant or would jeopardize the claimant's ability to
regain maximum function and the claimant has filed a request for an
expedited internal appeal; or
(B) A final internal adverse benefit determination, if the claimant
has a medical condition where the timeframe for completion of a
standard external review would seriously jeopardize the life or health
of the claimant or would jeopardize the claimant's ability to regain
maximum function, or if the final internal adverse benefit
determination concerns an admission, availability of care, continued
stay, or health care item or service for which the claimant received
emergency services, but has not been discharged from the facility.
(ii) Preliminary review. Immediately upon receipt of the request
for expedited external review, the plan or issuer must determine
whether the request meets the reviewability requirements set forth in
paragraph (d)(2)(ii) of this section for standard external review. The
plan or issuer must immediately send a notice that meets the
requirements set forth in paragraph (d)(2)(ii)(B) for standard review
to the claimant of its eligibility determination.
(iii) Referral to independent review organization. (A) Upon a
determination that a request is eligible for expedited external review
following the preliminary review, the plan or issuer will assign an IRO
pursuant to the requirements set forth in paragraph (d)(2)(iii) of this
section for standard review. The plan or issuer must provide or
transmit all necessary documents and information considered in making
the adverse benefit determination or final internal adverse benefit
determination to the assigned IRO electronically or by telephone or
facsimile or any other available expeditious method.
(B) The assigned IRO, to the extent the information or documents
are available and the IRO considers them appropriate, must consider the
information or documents described above under the procedures for
standard review. In reaching a decision, the assigned IRO must review
the claim de novo and is not bound by any decisions or conclusions
reached during the plan's or issuer's internal claims and appeals
process.
(iv) Notice of final external review decision. The plan's or
issuer's contract with the assigned IRO must require the IRO to provide
notice of the final external review decision, in accordance with the
requirements set forth in paragraph (d)(2)(iii)(B) of this section, as
expeditiously as the claimant's medical condition or circumstances
require, but in no event more than 72 hours after the IRO receives the
request for an expedited external review. If the notice is not in
writing, within 48 hours after the date of providing that notice, the
assigned IRO must provide written confirmation of the decision to the
claimant and the plan or issuer.
(4) Alternative, Federally-administered external review process.
Insured coverage not subject to an applicable State external review
process under paragraph (c) of this section and a self-insured
nonfederal governmental plan may elect to use either the Federal
external review process, as set forth under paragraph (d) of this
section or the Federally-administered external review process, as set
forth by HHS in guidance. In such circumstances, the requirement to
provide external review under this paragraph (d) is satisfied.
(e) Form and manner of notice--(1) In general. For purposes of this
section, a group health plan and a health insurance issuer offering
group or individual health insurance coverage are considered to provide
relevant notices in a culturally and linguistically appropriate manner
if the plan or issuer meets all the requirements of paragraph (e)(2) of
this section with respect to the
[[Page 72286]]
applicable non-English languages described in paragraph (e)(3) of this
section.
(2) Requirements--(i) The plan or issuer must provide oral language
services (such as a telephone customer assistance hotline) that
includes answering questions in any applicable non-English language and
providing assistance with filing claims and appeals (including external
review) in any applicable non-English language;
(ii) The plan or issuer must provide, upon request, a notice in any
applicable non-English language; and
(iii) The plan or issuer must include in the English versions of
all notices, a statement prominently displayed in any applicable non-
English language clearly indicating how to access the language services
provided by the plan or issuer.
(3) Applicable non-English language. With respect to an address in
any United States county to which a notice is sent, a non-English
language is an applicable non-English language if ten percent or more
of the population residing in the county is literate only in the same
non-English language, as determined in guidance published by the
Secretary.
(f) Secretarial authority. The Secretary may determine that the
external review process of a group health plan or health insurance
issuer, in operation as of March 23, 2010, is considered in compliance
with the applicable process established under paragraph (c) or (d) of
this section if it substantially meets the requirements of paragraph
(c) or (d) of this section, as applicable.
(g) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years (in the individual market, policy years) beginning on or after
January 1, 2017. Until the applicability date for this regulation,
plans and issuers are required to continue to comply with the
corresponding sections of 45 CFR parts 144, 146 and 147, contained in
the 45 CFR, parts 1 to 199, edition revised as of October 1, 2015.
0
38. Section 147.138 is revised to read as follows:
Sec. 147.138 Patient protections.
(a) Choice of health care professional--(1) Designation of primary
care provider--(i) In general. If a group health plan, or a health
insurance issuer offering group or individual health insurance
coverage, requires or provides for designation by a participant,
beneficiary, or enrollee of a participating primary care provider, then
the plan or issuer must permit each participant, beneficiary, or
enrollee to designate any participating primary care provider who is
available to accept the participant, beneficiary, or enrollee. In such
a case, the plan or issuer must comply with the rules of paragraph
(a)(4) of this section by informing each participant (in the individual
market, primary subscriber) of the terms of the plan or health
insurance coverage regarding designation of a primary care provider.
(ii) Construction. Nothing in paragraph (a)(1)(i) of this section
is to be construed to prohibit the application of reasonable and
appropriate geographic limitations with respect to the selection of
primary care providers, in accordance with the terms of the plan or
coverage, the underlying provider contracts, and applicable State law.
(iii) Example. The rules of this paragraph (a)(1) are illustrated
by the following example:
Example. (i) Facts. A group health plan requires individuals
covered under the plan to designate a primary care provider. The
plan permits each individual to designate any primary care provider
participating in the plan's network who is available to accept the
individual as the individual's primary care provider. If an
individual has not designated a primary care provider, the plan
designates one until one has been designated by the individual. The
plan provides a notice that satisfies the requirements of paragraph
(a)(4) of this section regarding the ability to designate a primary
care provider.
(ii) Conclusion. In this Example, the plan has satisfied the
requirements of paragraph (a) of this section.
(2) Designation of pediatrician as primary care provider--(i) In
general. If a group health plan, or a health insurance issuer offering
group or individual health insurance coverage, requires or provides for
the designation of a participating primary care provider for a child by
a participant, beneficiary, or enrollee, the plan or issuer must permit
the participant, beneficiary, or enrollee to designate a physician
(allopathic or osteopathic) who specializes in pediatrics (including
pediatric subspecialties, based on the scope of that provider's license
under applicable State law) as the child's primary care provider if the
provider participates in the network of the plan or issuer and is
available to accept the child. In such a case, the plan or issuer must
comply with the rules of paragraph (a)(4) of this section by informing
each participant (in the individual market, primary subscriber) of the
terms of the plan or health insurance coverage regarding designation of
a pediatrician as the child's primary care provider.
(ii) Construction. Nothing in paragraph (a)(2)(i) of this section
is to be construed to waive any exclusions of coverage under the terms
and conditions of the plan or health insurance coverage with respect to
coverage of pediatric care.
(iii) Examples. The rules of this paragraph (a)(2) are illustrated
by the following examples:
Example 1. (i) Facts. A group health plan's HMO designates for
each participant a physician who specializes in internal medicine to
serve as the primary care provider for the participant and any
beneficiaries. Participant A requests that Pediatrician B be
designated as the primary care provider for A's child. B is a
participating provider in the HMO's network and is available to
accept the child.
(ii) Conclusion. In this Example 1, the HMO must permit A's
designation of B as the primary care provider for A's child in order
to comply with the requirements of this paragraph (a)(2).
Example 2. (i) Facts. Same facts as Example 1, except that A
takes A's child to B for treatment of the child's severe shellfish
allergies. B wishes to refer A's child to an allergist for
treatment. The HMO, however, does not provide coverage for treatment
of food allergies, nor does it have an allergist participating in
its network, and it therefore refuses to authorize the referral.
(ii) Conclusion. In this Example 2, the HMO has not violated the
requirements of this paragraph (a)(2) because the exclusion of
treatment for food allergies is in accordance with the terms of A's
coverage.
(3) Patient access to obstetrical and gynecological care--(i)
General rights--(A) Direct access. A group health plan, or a health
insurance issuer offering group or individual health insurance
coverage, described in paragraph (a)(3)(ii) of this section may not
require authorization or referral by the plan, issuer, or any person
(including a primary care provider) in the case of a female
participant, beneficiary, or enrollee who seeks coverage for
obstetrical or gynecological care provided by a participating health
care professional who specializes in obstetrics or gynecology. In such
a case, the plan or issuer must comply with the rules of paragraph
(a)(4) of this section by informing each participant (in the individual
market, primary subscriber) that the plan may not require authorization
or referral for obstetrical or gynecological care by a participating
health care professional who specializes in obstetrics or gynecology.
The plan or issuer may require such a professional to agree to
otherwise adhere to the plan's or issuer's policies and procedures,
including procedures regarding referrals and obtaining prior
authorization and providing services pursuant to a treatment plan (if
any) approved by the plan or issuer. For purposes of this paragraph
(a)(3), a
[[Page 72287]]
health care professional who specializes in obstetrics or gynecology is
any individual (including a person other than a physician) who is
authorized under applicable State law to provide obstetrical or
gynecological care.
(B) Obstetrical and gynecological care. A group health plan or
health insurance issuer described in paragraph (a)(3)(ii) of this
section must treat the provision of obstetrical and gynecological care,
and the ordering of related obstetrical and gynecological items and
services, pursuant to the direct access described under paragraph
(a)(3)(i)(A) of this section, by a participating health care
professional who specializes in obstetrics or gynecology as the
authorization of the primary care provider.
(ii) Application of paragraph. A group health plan, or a health
insurance issuer offering group or individual health insurance
coverage, is described in this paragraph (a)(3) if the plan or issuer--
(A) Provides coverage for obstetrical or gynecological care; and
(B) Requires the designation by a participant, beneficiary, or
enrollee of a participating primary care provider.
(iii) Construction. Nothing in paragraph (a)(3)(i) of this section
is to be construed to--
(A) Waive any exclusions of coverage under the terms and conditions
of the plan or health insurance coverage with respect to coverage of
obstetrical or gynecological care; or
(B) Preclude the group health plan or health insurance issuer
involved from requiring that the obstetrical or gynecological provider
notify the primary care health care professional or the plan or issuer
of treatment decisions.
(iv) Examples. The rules of this paragraph (a)(3) are illustrated
by the following examples:
Example 1. (i) Facts. A group health plan requires each
participant to designate a physician to serve as the primary care
provider for the participant and the participant's family.
Participant A, a female, requests a gynecological exam with
Physician B, an in-network physician specializing in gynecological
care. The group health plan requires prior authorization from A's
designated primary care provider for the gynecological exam.
(ii) Conclusion. In this Example 1, the group health plan has
violated the requirements of this paragraph (a)(3) because the plan
requires prior authorization from A's primary care provider prior to
obtaining gynecological services.
Example 2. (i) Facts. Same facts as Example 1 except that A
seeks gynecological services from C, an out-of-network provider.
(ii) Conclusion. In this Example 2, the group health plan has
not violated the requirements of this paragraph (a)(3) by requiring
prior authorization because C is not a participating health care
provider.
Example 3. (i) Facts. Same facts as Example 1 except that the
group health plan only requires B to inform A's designated primary
care physician of treatment decisions.
(ii) Conclusion. In this Example 3, the group health plan has
not violated the requirements of this paragraph (a)(3) because A has
direct access to B without prior authorization. The fact that the
group health plan requires notification of treatment decisions to
the designated primary care physician does not violate this
paragraph (a)(3).
Example 4. (i) Facts. A group health plan requires each
participant to designate a physician to serve as the primary care
provider for the participant and the participant's family. The group
health plan requires prior authorization before providing benefits
for uterine fibroid embolization.
(ii) Conclusion. In this Example 4, the plan requirement for
prior authorization before providing benefits for uterine fibroid
embolization does not violate the requirements of this paragraph
(a)(3) because, though the prior authorization requirement applies
to obstetrical services, it does not restrict access to any
providers specializing in obstetrics or gynecology.
(4) Notice of right to designate a primary care provider--(i) In
general. If a group health plan or health insurance issuer requires the
designation by a participant, beneficiary, or enrollee of a primary
care provider, the plan or issuer must provide a notice informing each
participant (in the individual market, primary subscriber) of the terms
of the plan or health insurance coverage regarding designation of a
primary care provider and of the rights--
(A) Under paragraph (a)(1)(i) of this section, that any
participating primary care provider who is available to accept the
participant, beneficiary, or enrollee can be designated;
(B) Under paragraph (a)(2)(i) of this section, with respect to a
child, that any participating physician who specializes in pediatrics
can be designated as the primary care provider; and
(C) Under paragraph (a)(3)(i) of this section, that the plan may
not require authorization or referral for obstetrical or gynecological
care by a participating health care professional who specializes in
obstetrics or gynecology.
(ii) Timing. In the case of a group health plan or group health
insurance coverage, the notice described in paragraph (a)(4)(i) of this
section must be included whenever the plan or issuer provides a
participant with a summary plan description or other similar
description of benefits under the plan or health insurance coverage. In
the case of individual health insurance coverage, the notice described
in paragraph (a)(4)(i) of this section must be included whenever the
issuer provides a primary subscriber with a policy, certificate, or
contract of health insurance.
(iii) Model language. The following model language can be used to
satisfy the notice requirement described in paragraph (a)(4)(i) of this
section:
(A) For plans and issuers that require or allow for the designation
of primary care providers by participants, beneficiaries, or enrollees,
insert:
[Name of group health plan or health insurance issuer] generally
[requires/allows] the designation of a primary care provider. You
have the right to designate any primary care provider who
participates in our network and who is available to accept you or
your family members. [If the plan or health insurance coverage
designates a primary care provider automatically, insert: Until you
make this designation, [name of group health plan or health
insurance issuer] designates one for you.] For information on how to
select a primary care provider, and for a list of the participating
primary care providers, contact the [plan administrator or issuer]
at [insert contact information].
(B) For plans and issuers that require or allow for the designation
of a primary care provider for a child, add:
For children, you may designate a pediatrician as the primary care
provider.
(C) For plans and issuers that provide coverage for obstetric or
gynecological care and require the designation by a participant,
beneficiary, or enrollee of a primary care provider, add:
You do not need prior authorization from [name of group health
plan or issuer] or from any other person (including a primary care
provider) in order to obtain access to obstetrical or gynecological
care from a health care professional in our network who specializes
in obstetrics or gynecology. The health care professional, however,
may be required to comply with certain procedures, including
obtaining prior authorization for certain services, following a pre-
approved treatment plan, or procedures for making referrals. For a
list of participating health care professionals who specialize in
obstetrics or gynecology, contact the [plan administrator or issuer]
at [insert contact information].
(b) Coverage of emergency services--(1) Scope. If a group health
plan, or a health insurance issuer offering group or individual health
insurance coverage, provides any benefits with respect to services in
an emergency department of a hospital, the plan or issuer must cover
emergency services (as defined in paragraph (b)(4)(ii) of this section)
consistent with the rules of this paragraph (b).
(2) General rules. A plan or issuer subject to the requirements of
this paragraph (b) must provide coverage for
[[Page 72288]]
emergency services in the following manner--
(i) Without the need for any prior authorization determination,
even if the emergency services are provided on an out-of-network basis;
(ii) Without regard to whether the health care provider furnishing
the emergency services is a participating network provider with respect
to the services;
(iii) If the emergency services are provided out of network,
without imposing any administrative requirement or limitation on
coverage that is more restrictive than the requirements or limitations
that apply to emergency services received from in-network providers;
(iv) If the emergency services are provided out of network, by
complying with the cost-sharing requirements of paragraph (b)(3) of
this section; and
(v) Without regard to any other term or condition of the coverage,
other than--
(A) The exclusion of or coordination of benefits;
(B) An affiliation or waiting period permitted under part 7 of
ERISA, part A of title XXVII of the PHS Act, or chapter 100 of the
Internal Revenue Code; or
(C) Applicable cost sharing.
(3) Cost-sharing requirements--(i) Copayments and coinsurance. Any
cost-sharing requirement expressed as a copayment amount or coinsurance
rate imposed with respect to a participant, beneficiary, or enrollee
for out-of-network emergency services cannot exceed the cost-sharing
requirement imposed with respect to a participant, beneficiary, or
enrollee if the services were provided in-network. However, a
participant, beneficiary, or enrollee may be required to pay, in
addition to the in-network cost-sharing, the excess of the amount the
out-of-network provider charges over the amount the plan or issuer is
required to pay under this paragraph (b)(3)(i). A group health plan or
health insurance issuer complies with the requirements of this
paragraph (b)(3) if it provides benefits with respect to an emergency
service in an amount at least equal to the greatest of the three
amounts specified in paragraphs (b)(3)(i)(A),(B), and (C) of this
section (which are adjusted for in-network cost-sharing requirements).
(A) The amount negotiated with in-network providers for the
emergency service furnished, excluding any in-network copayment or
coinsurance imposed with respect to the participant, beneficiary, or
enrollee. If there is more than one amount negotiated with in-network
providers for the emergency service, the amount described under this
paragraph (b)(3)(i)(A) is the median of these amounts, excluding any
in-network copayment or coinsurance imposed with respect to the
participant, beneficiary, or enrollee. In determining the median
described in the preceding sentence, the amount negotiated with each
in-network provider is treated as a separate amount (even if the same
amount is paid to more than one provider). If there is no per-service
amount negotiated with in-network providers (such as under a capitation
or other similar payment arrangement), the amount under this paragraph
(b)(3)(i)(A) is disregarded.
(B) The amount for the emergency service calculated using the same
method the plan generally uses to determine payments for out-of-network
services (such as the usual, customary, and reasonable amount),
excluding any in-network copayment or coinsurance imposed with respect
to the participant, beneficiary, or enrollee. The amount in this
paragraph (b)(3)(i)(B) is determined without reduction for out-of-
network cost sharing that generally applies under the plan or health
insurance coverage with respect to out-of-network services. Thus, for
example, if a plan generally pays 70 percent of the usual, customary,
and reasonable amount for out-of-network services, the amount in this
paragraph (b)(3)(i)(B) for an emergency service is the total (that is,
100 percent) of the usual, customary, and reasonable amount for the
service, not reduced by the 30 percent coinsurance that would generally
apply to out-of-network services (but reduced by the in-network
copayment or coinsurance that the individual would be responsible for
if the emergency service had been provided in-network).
(C) The amount that would be paid under Medicare (part A or part B
of title XVIII of the Social Security Act, 42 U.S.C. 1395 et seq.) for
the emergency service, excluding any in-network copayment or
coinsurance imposed with respect to the participant, beneficiary, or
enrollee.
(ii) Other cost sharing. Any cost-sharing requirement other than a
copayment or coinsurance requirement (such as a deductible or out-of-
pocket maximum) may be imposed with respect to emergency services
provided out of network if the cost-sharing requirement generally
applies to out-of-network benefits. A deductible may be imposed with
respect to out-of-network emergency services only as part of a
deductible that generally applies to out-of-network benefits. If an
out-of-pocket maximum generally applies to out-of-network benefits,
that out-of-pocket maximum must apply to out-of-network emergency
services.
(iii) Special rules regarding out-of-network minimum payment
standards--(A) The minimum payment standards set forth under paragraph
(b)(3) of this section do not apply in cases where State law prohibits
a participant, beneficiary, or enrollee from being required to pay, in
addition to the in-network cost sharing, the excess of the amount the
out-of-network provider charges over the amount the plan or issuer
provides in benefits, or where a group health plan or health insurance
issuer is contractually responsible for such amounts. Nonetheless, in
such cases, a plan or issuer may not impose any copayment or
coinsurance requirement for out-of-network emergency services that is
higher than the copayment or coinsurance requirement that would apply
if the services were provided in network.
(B) A group health plan and health insurance issuer must provide a
participant, beneficiary, or enrollee adequate and prominent notice of
their lack of financial responsibility with respect to the amounts
described under this paragraph (b)(3)(iii), to prevent inadvertent
payment by the participant, beneficiary, or enrollee.
(iv) Examples. The rules of this paragraph (b)(3) are illustrated
by the following examples. In all of these examples, the group health
plan covers benefits with respect to emergency services.
Example 1. (i) Facts. A group health plan imposes a 25%
coinsurance responsibility on individuals who are furnished
emergency services, whether provided in network or out of network.
If a covered individual notifies the plan within two business days
after the day an individual receives treatment in an emergency
department, the plan reduces the coinsurance rate to 15%.
(ii) Conclusion. In this Example 1, the requirement to notify
the plan in order to receive a reduction in the coinsurance rate
does not violate the requirement that the plan cover emergency
services without the need for any prior authorization determination.
This is the result even if the plan required that it be notified
before or at the time of receiving services at the emergency
department in order to receive a reduction in the coinsurance rate.
Example 2. (i) Facts. A group health plan imposes a $60
copayment on emergency services without preauthorization, whether
provided in network or out of network. If emergency services are
preauthorized, the plan waives the copayment, even if it later
determines the medical condition was not an emergency medical
condition.
(ii) Conclusion. In this Example 2, by requiring an individual
to pay more for emergency services if the individual does not obtain
prior authorization, the plan violates
[[Page 72289]]
the requirement that the plan cover emergency services without the
need for any prior authorization determination. (By contrast, if, to
have the copayment waived, the plan merely required that it be
notified rather than a prior authorization, then the plan would not
violate the requirement that the plan cover emergency services
without the need for any prior authorization determination.)
Example 3. (i) Facts. A group health plan covers individuals who
receive emergency services with respect to an emergency medical
condition from an out-of-network provider. The plan has agreements
with in-network providers with respect to a certain emergency
service. Each provider has agreed to provide the service for a
certain amount. Among all the providers for the service: One has
agreed to accept $85, two have agreed to accept $100, two have
agreed to accept $110, three have agreed to accept $120, and one has
agreed to accept $150. Under the agreement, the plan agrees to pay
the providers 80% of the agreed amount, with the individual
receiving the service responsible for the remaining 20%.
(ii) Conclusion. In this Example 3, the values taken into
account in determining the median are $85, $100, $100, $110, $110,
$120, $120, $120, and $150. Therefore, the median amount among those
agreed to for the emergency service is $110, and the amount under
paragraph (b)(3)(i)(A) of this section is 80% of $110 ($88).
Example 4. (i) Facts. Same facts as Example 3. Subsequently, the
plan adds another provider to its network, who has agreed to accept
$150 for the emergency service.
(ii) Conclusion. In this Example 4, the median amount among
those agreed to for the emergency service is $115. (Because there is
no one middle amount, the median is the average of the two middle
amounts, $110 and $120.) Accordingly, the amount under paragraph
(b)(3)(i)(A) of this section is 80% of $115 ($92).
Example 5. (i) Facts. Same facts as Example 4. An individual
covered by the plan receives the emergency service from an out-of-
network provider, who charges $125 for the service. With respect to
services provided by out-of-network providers generally, the plan
reimburses covered individuals 50% of the reasonable amount charged
by the provider for medical services. For this purpose, the
reasonable amount for any service is based on information on charges
by all providers collected by a third party, on a zip code by zip
code basis, with the plan treating charges at a specified percentile
as reasonable. For the emergency service received by the individual,
the reasonable amount calculated using this method is $116. The
amount that would be paid under Medicare for the emergency service,
excluding any copayment or coinsurance for the service, is $80.
(ii) Conclusion. In this Example 5, the plan is responsible for
paying $92.80, 80% of $116. The median amount among those agreed to
for the emergency service is $115 and the amount the plan would pay
is $92 (80% of $115); the amount calculated using the same method
the plan uses to determine payments for out-of-network services--
$116--excluding the in-network 20% coinsurance, is $92.80; and the
Medicare payment is $80. Thus, the greatest amount is $92.80. The
individual is responsible for the remaining $32.20 charged by the
out-of-network provider.
Example 6. (i) Facts. Same facts as Example 5. The group health
plan generally imposes a $250 deductible for in-network health care.
With respect to all health care provided by out-of-network
providers, the plan imposes a $500 deductible. (Covered in-network
claims are credited against the deductible.) The individual has
incurred and submitted $260 of covered claims prior to receiving the
emergency service out of network.
(ii) Conclusion. In this Example 6, the plan is not responsible
for paying anything with respect to the emergency service furnished
by the out-of-network provider because the covered individual has
not satisfied the higher deductible that applies generally to all
health care provided out of network. However, the amount the
individual is required to pay is credited against the deductible.
(4) Definitions. The definitions in this paragraph (b)(4) govern in
applying the provisions of this paragraph (b).
(i) Emergency medical condition. The term emergency medical
condition means a medical condition manifesting itself by acute
symptoms of sufficient severity (including severe pain) so that a
prudent layperson, who possesses an average knowledge of health and
medicine, could reasonably expect the absence of immediate medical
attention to result in a condition described in clause (i), (ii), or
(iii) of section 1867(e)(1)(A) of the Social Security Act (42 U.S.C.
1395dd(e)(1)(A)). (In that provision of the Social Security Act, clause
(i) refers to placing the health of the individual (or, with respect to
a pregnant woman, the health of the woman or her unborn child) in
serious jeopardy; clause (ii) refers to serious impairment to bodily
functions; and clause (iii) refers to serious dysfunction of any bodily
organ or part.)
(ii) Emergency services. The term emergency services means, with
respect to an emergency medical condition--
(A) A medical screening examination (as required under section 1867
of the Social Security Act, 42 U.S.C. 1395dd) that is within the
capability of the emergency department of a hospital, including
ancillary services routinely available to the emergency department to
evaluate such emergency medical condition, and
(B) Such further medical examination and treatment, to the extent
they are within the capabilities of the staff and facilities available
at the hospital, as are required under section 1867 of the Social
Security Act (42 U.S.C. 1395dd) to stabilize the patient.
(iii) Stabilize. The term to stabilize, with respect to an
emergency medical condition (as defined in paragraph (b)(4)(i) of this
section) has the meaning given in section 1867(e)(3) of the Social
Security Act (42 U.S.C. 1395dd(e)(3)).
(c) Applicability date. The provisions of this section are
applicable to group health plans and health insurance issuers for plan
years (in the individual market, policy years) beginning on or after
January 1, 2017. Until the applicability date for this regulation,
plans and issuers are required to continue to comply with the
corresponding sections of 45 CFR parts 144, 146 and 147, contained in
the 45 CFR, parts 1 to 199, edition revised as of October 1, 2015.
0
39. Section 147.140 is revised to read as follows:
Sec. 147.140 Preservation of right to maintain existing coverage.
(a) Definition of grandfathered health plan coverage--(1) In
general--(i) Grandfathered health plan coverage means coverage provided
by a group health plan, or a group or individual health insurance
issuer, in which an individual was enrolled on March 23, 2010 (for as
long as it maintains that status under the rules of this section). A
group health plan or group health insurance coverage does not cease to
be grandfathered health plan coverage merely because one or more (or
even all) individuals enrolled on March 23, 2010 cease to be covered,
provided that the plan or group health insurance coverage has
continuously covered someone since March 23, 2010 (not necessarily the
same person, but at all times at least one person). In addition,
subject to the limitation set forth in paragraph (a)(1)(ii) of this
section, a group health plan (and any health insurance coverage offered
in connection with the group health plan) does not cease to be a
grandfathered health plan merely because the plan (or its sponsor)
enters into a new policy, certificate, or contract of insurance after
March 23, 2010 (for example, a plan enters into a contract with a new
issuer or a new policy is issued with an existing issuer). For purposes
of this section, a plan or health insurance coverage that provides
grandfathered health plan coverage is referred to as a grandfathered
health plan. The rules of this section apply separately to each benefit
package made available under a group health plan or health insurance
coverage. Accordingly, if any benefit package relinquishes grandfather
status, it will not affect the
[[Page 72290]]
grandfather status of the other benefit packages.
(ii) Changes in group health insurance coverage. Subject to
paragraphs (f) and (g)(2) of this section, if a group health plan
(including a group health plan that was self-insured on March 23, 2010)
or its sponsor enters into a new policy, certificate, or contract of
insurance after March 23, 2010 that is effective before November 15,
2010, then the plan ceases to be a grandfathered health plan.
(2) Disclosure of grandfather status--(i) To maintain status as a
grandfathered health plan, a plan or health insurance coverage must
include a statement that the plan or coverage believes it is a
grandfathered health plan within the meaning of section 1251 of the
Patient Protection and Affordable Care Act, and must provide contact
information for questions and complaints, in any summary of benefits
provided under the plan.
(ii) The following model language can be used to satisfy this
disclosure requirement:
This [group health plan or health insurance issuer] believes
this [plan or coverage] is a ``grandfathered health plan'' under the
Patient Protection and Affordable Care Act (the Affordable Care
Act). As permitted by the Affordable Care Act, a grandfathered
health plan can preserve certain basic health coverage that was
already in effect when that law was enacted. Being a grandfathered
health plan means that your [plan or policy] may not include certain
consumer protections of the Affordable Care Act that apply to other
plans, for example, the requirement for the provision of preventive
health services without any cost sharing. However, grandfathered
health plans must comply with certain other consumer protections in
the Affordable Care Act, for example, the elimination of lifetime
dollar limits on benefits.
Questions regarding which protections apply and which
protections do not apply to a grandfathered health plan and what
might cause a plan to change from grandfathered health plan status
can be directed to the plan administrator at [insert contact
information]. [For ERISA plans, insert: You may also contact the
Employee Benefits Security Administration, U.S. Department of Labor
at 1-866-444-3272 or www.dol.gov/ebsa/healthreform. This Web site
has a table summarizing which protections do and do not apply to
grandfathered health plans.] [For individual market policies and
nonfederal governmental plans, insert: You may also contact the U.S.
Department of Health and Human Services at www.healthcare.gov.]
(3)(i) Documentation of plan or policy terms on March 23, 2010. To
maintain status as a grandfathered health plan, a group health plan, or
group or individual health insurance coverage, must, for as long as the
plan or health insurance coverage takes the position that it is a
grandfathered health plan--
(A) Maintain records documenting the terms of the plan or health
insurance coverage in connection with the coverage in effect on March
23, 2010, and any other documents necessary to verify, explain, or
clarify its status as a grandfathered health plan; and
(B) Make such records available for examination upon request.
(ii) Change in group health insurance coverage. To maintain status
as a grandfathered health plan, a group health plan that enters into a
new policy, certificate, or contract of insurance must provide to the
new health insurance issuer (and the new health insurance issuer must
require) documentation of plan terms (including benefits, cost sharing,
employer contributions, and annual dollar limits) under the prior
health coverage sufficient to determine whether a change causing a
cessation of grandfathered health plan status under paragraph (g)(1) of
this section has occurred.
(4) Family members enrolling after March 23, 2010. With respect to
an individual who is enrolled in a group health plan or health
insurance coverage on March 23, 2010, grandfathered health plan
coverage includes coverage of family members of the individual who
enroll after March 23, 2010 in the grandfathered health plan coverage
of the individual.
(b) Allowance for new employees to join current plan--(1) In
general. Subject to paragraph (b)(2) of this section, a group health
plan (including health insurance coverage provided in connection with
the group health plan) that provided coverage on March 23, 2010 and has
retained its status as a grandfathered health plan (consistent with the
rules of this section, including paragraph (g) of this section) is
grandfathered health plan coverage for new employees (whether newly
hired or newly enrolled) and their families enrolling in the plan after
March 23, 2010. Further, the addition of a new contributing employer or
new group of employees of an existing contributing employer to a
grandfathered multiemployer health plan will not affect the plan's
grandfather status.
(2) Anti-abuse rules--(i) Mergers and acquisitions. If the
principal purpose of a merger, acquisition, or similar business
restructuring is to cover new individuals under a grandfathered health
plan, the plan ceases to be a grandfathered health plan.
(ii) Change in plan eligibility. A group health plan or health
insurance coverage (including a benefit package under a group health
plan) ceases to be a grandfathered health plan if--
(A) Employees are transferred into the plan or health insurance
coverage (the transferee plan) from a plan or health insurance coverage
under which the employees were covered on March 23, 2010 (the
transferor plan);
(B) Comparing the terms of the transferee plan with those of the
transferor plan (as in effect on March 23, 2010) and treating the
transferee plan as if it were an amendment of the transferor plan would
cause a loss of grandfather status under the provisions of paragraph
(g)(1) of this section; and
(C) There was no bona fide employment-based reason to transfer the
employees into the transferee plan. For this purpose, changing the
terms or cost of coverage is not a bona fide employment-based reason.
(iii) Illustrative list of bona fide employment-based reasons. For
purposes of this paragraph (b)(2)(ii)(C), bona fide employment-based
reasons include--
(A) When a benefit package is being eliminated because the issuer
is exiting the market;
(B) When a benefit package is being eliminated because the issuer
no longer offers the product to the employer;
(C) When low or declining participation by plan participants in the
benefit package makes it impractical for the plan sponsor to continue
to offer the benefit package;
(D) When a benefit package is eliminated from a multiemployer plan
as agreed upon as part of the collective bargaining process; or
(E) When a benefit package is eliminated for any reason and
multiple benefit packages covering a significant portion of other
employees remain available to the employees being transferred.
(3) Examples. The rules of this paragraph (b) are illustrated by
the following examples:
Example 1. (i) Facts. A group health plan offers two benefit
packages on March 23, 2010, Options F and G. During a subsequent
open enrollment period, some of the employees enrolled in Option F
on March 23, 2010 switch to Option G.
(ii) Conclusion. In this Example 1, the group health coverage
provided under Option G remains a grandfathered health plan under
the rules of paragraph (b)(1) of this section because employees
previously enrolled in Option F are allowed to enroll in Option G as
new employees.
Example 2. (i) Facts. A group health plan offers two benefit
packages on March 23, 2010, Options H and I. On March 23, 2010,
Option H provides coverage only for employees in one manufacturing
plant. Subsequently, the plant is closed, and some employees in the
closed plant are moved to another plant. The employer eliminates
[[Page 72291]]
Option H and the employees that are moved are transferred to Option
I. If instead of transferring employees from Option H to Option I,
Option H was amended to match the terms of Option I, then Option H
would cease to be a grandfathered health plan.
(ii) Conclusion. In this Example 2, the plan has a bona fide
employment-based reason to transfer employees from Option H to
Option I. Therefore, Option I does not cease to be a grandfathered
health plan.
(c) General grandfathering rule--(1) Except as provided in
paragraphs (d) and (e) of this section, subtitles A and C of title I of
the Patient Protection and Affordable Care Act (and the amendments made
by those subtitles, and the incorporation of those amendments into
ERISA section 715 and Internal Revenue Code section 9815) do not apply
to grandfathered health plan coverage. Accordingly, the provisions of
PHS Act sections 2701, 2702, 2703, 2705, 2706, 2707, 2709 (relating to
coverage for individuals participating in approved clinical trials, as
added by section 10103 of the Patient Protection and Affordable Care
Act), 2713, 2715A, 2716, 2717, 2719, and 2719A, as added or amended by
the Patient Protection and Affordable Care Act, do not apply to
grandfathered health plans. In addition, the provisions of PHS Act
section 2704, and PHS Act section 2711 insofar as it relates to annual
dollar limits, do not apply to grandfathered health plans that are
individual health insurance coverage.
(2) To the extent not inconsistent with the rules applicable to a
grandfathered health plan, a grandfathered health plan must comply with
the requirements of the PHS Act, ERISA, and the Internal Revenue Code
applicable prior to the changes enacted by the Patient Protection and
Affordable Care Act.
(d) Provisions applicable to all grandfathered health plans. The
provisions of PHS Act section 2711 insofar as it relates to lifetime
dollar limits, and the provisions of PHS Act sections 2712, 2714, 2715,
and 2718, apply to grandfathered health plans for plan years (in the
individual market, policy years) beginning on or after September 23,
2010. The provisions of PHS Act section 2708 apply to grandfathered
health plans for plan years (in the individual market, policy years)
beginning on or after January 1, 2014.
(e) Applicability of PHS Act sections 2704, 2711, and 2714 to
grandfathered group health plans and group health insurance coverage--
(1) The provisions of PHS Act section 2704 as it applies with respect
to enrollees who are under 19 years of age, and the provisions of PHS
Act section 2711 insofar as it relates to annual dollar limits, apply
to grandfathered health plans that are group health plans (including
group health insurance coverage) for plan years beginning on or after
September 23, 2010. The provisions of PHS Act section 2704 apply
generally to grandfathered health plans that are group health plans
(including group health insurance coverage) for plan years beginning on
or after January 1, 2014.
(2) For plan years beginning before January 1, 2014, the provisions
of PHS Act section 2714 apply in the case of an adult child with
respect to a grandfathered health plan that is a group health plan only
if the adult child is not eligible to enroll in an eligible employer-
sponsored health plan (as defined in section 5000A(f)(2) of the
Internal Revenue Code) other than a grandfathered health plan of a
parent. For plan years beginning on or after January 1, 2014, the
provisions of PHS Act section 2714 apply with respect to a
grandfathered health plan that is a group health plan without regard to
whether an adult child is eligible to enroll in any other coverage.
(f) Effect on collectively bargained plans--In general. In the case
of health insurance coverage maintained pursuant to one or more
collective bargaining agreements between employee representatives and
one or more employers that was ratified before March 23, 2010, the
coverage is grandfathered health plan coverage at least until the date
on which the last of the collective bargaining agreements relating to
the coverage that was in effect on March 23, 2010 terminates. Any
coverage amendment made pursuant to a collective bargaining agreement
relating to the coverage that amends the coverage solely to conform to
any requirement added by subtitles A and C of title I of the Patient
Protection and Affordable Care Act (and the amendments made by those
subtitles, and the incorporation of those amendments into ERISA section
715 and Internal Revenue Code section 9815) is not treated as a
termination of the collective bargaining agreement. After the date on
which the last of the collective bargaining agreements relating to the
coverage that was in effect on March 23, 2010 terminates, the
determination of whether health insurance coverage maintained pursuant
to a collective bargaining agreement is grandfathered health plan
coverage is made under the rules of this section other than this
paragraph (f) (comparing the terms of the health insurance coverage
after the date the last collective bargaining agreement terminates with
the terms of the health insurance coverage that were in effect on March
23, 2010).
(g) Maintenance of grandfather status--(1) Changes causing
cessation of grandfather status. Subject to paragraph (g)(2) of this
section, the rules of this paragraph (g)(1) describe situations in
which a group health plan or health insurance coverage ceases to be a
grandfathered health plan. A plan or coverage will cease to be a
grandfathered health plan when an amendment to plan terms that results
in a change described in this paragraph (g)(1) becomes effective,
regardless of when the amendment was adopted. Once grandfather status
is lost, it cannot be regained.
(i) Elimination of benefits. The elimination of all or
substantially all benefits to diagnose or treat a particular condition
causes a group health plan or health insurance coverage to cease to be
a grandfathered health plan. For this purpose, the elimination of
benefits for any necessary element to diagnose or treat a condition is
considered the elimination of all or substantially all benefits to
diagnose or treat a particular condition. Whether or not a plan or
coverage has eliminated substantially all benefits to diagnose or treat
a particular condition must be determined based on all the facts and
circumstances, taking into account the items and services provided for
a particular condition under the plan on March 23, 2010, as compared to
the benefits offered at the time the plan or coverage makes the benefit
change effective.
(ii) Increase in percentage cost-sharing requirement. Any increase,
measured from March 23, 2010, in a percentage cost-sharing requirement
(such as an individual's coinsurance requirement) causes a group health
plan or health insurance coverage to cease to be a grandfathered health
plan.
(iii) Increase in a fixed-amount cost-sharing requirement other
than a copayment. Any increase in a fixed-amount cost-sharing
requirement other than a copayment (for example, deductible or out-of-
pocket limit), determined as of the effective date of the increase,
causes a group health plan or health insurance coverage to cease to be
a grandfathered health plan, if the total percentage increase in the
cost-sharing requirement measured from March 23, 2010 exceeds the
maximum percentage increase (as defined in paragraph (g)(3)(ii) of this
section).
(iv) Increase in a fixed-amount copayment. Any increase in a fixed-
amount copayment, determined as of the effective date of the increase,
and determined for each copayment level if
[[Page 72292]]
a plan has different copayment levels for different categories of
services, causes a group health plan or health insurance coverage to
cease to be a grandfathered health plan, if the total increase in the
copayment measured from March 23, 2010 exceeds the greater of:
(A) An amount equal to $5 increased by medical inflation, as
defined in paragraph (g)(3)(i) of this section (that is, $5 times
medical inflation, plus $5), or
(B) The maximum percentage increase (as defined in paragraph
(g)(3)(ii) of this section), determined by expressing the total
increase in the copayment as a percentage.
(v) Decrease in contribution rate by employers and employee
organizations--(A) Contribution rate based on cost of coverage. A group
health plan or group health insurance coverage ceases to be a
grandfathered health plan if the employer or employee organization
decreases its contribution rate based on cost of coverage (as defined
in paragraph (g)(3)(iii)(A) of this section) towards the cost of any
tier of coverage for any class of similarly situated individuals (as
described in Sec. 146.121(d) of this subchapter) by more than 5
percentage points below the contribution rate for the coverage period
that includes March 23, 2010.
(B) Contribution rate based on a formula. A group health plan or
group health insurance coverage ceases to be a grandfathered health
plan if the employer or employee organization decreases its
contribution rate based on a formula (as defined in paragraph
(g)(3)(iii)(B) of this section) towards the cost of any tier of
coverage for any class of similarly situated individuals (as described
in Sec. 146.121(d) of this subchapter) by more than 5 percent below
the contribution rate for the coverage period that includes March 23,
2010.
(C) Special rules regarding decreases in contribution rates. An
insured group health plan (or a multiemployer plan) that is a
grandfathered health plan will not cease to be a grandfathered health
plan based on a change in the employer contribution rate unless the
issuer (or multiemployer plan) knows, or should know, of the change,
provided:
(1) Upon renewal (or, in the case of a multiemployer plan, before
the start of a new plan year), the issuer (or multiemployer plan)
requires relevant employers, employee organizations, or plan sponsors,
as applicable, to make a representation regarding its contribution rate
for the plan year covered by the renewal, as well as its contribution
rate on March 23, 2010 (if the issuer, or multiemployer plan, does not
already have it); and
(2) The relevant policies, certificates, contracts of insurance, or
plan documents disclose in a prominent and effective manner that
employers, employee organizations, or plan sponsors, as applicable, are
required to notify the issuer (or multiemployer plan) if the
contribution rate changes at any point during the plan year.
(D) Application to plans with multi-tiered coverage structures. The
standards for employer contributions in this paragraph (g)(1)(v) apply
on a tier-by-tier basis. Therefore, if a group health plan modifies the
tiers of coverage it had on March 23, 2010 (for example, from self-only
and family to a multi-tiered structure of self-only, self-plus-one,
self-plus-two, and self-plus-three-or-more), the employer contribution
for any new tier would be tested by comparison to the contribution rate
for the corresponding tier on March 23, 2010. For example, if the
employer contribution rate for family coverage was 50 percent on March
23, 2010, the employer contribution rate for any new tier of coverage
other than self-only (i.e., self-plus-one, self-plus-two, self-plus-
three or more) must be within 5 percentage points of 50 percent (i.e.,
at least 45 percent). If, however, the plan adds one or more new
coverage tiers without eliminating or modifying any previous tiers and
those new coverage tiers cover classes of individuals that were not
covered previously under the plan, the new tiers would not be analyzed
under the standards for changes in employer contributions. For example,
if a plan with self-only as the sole coverage tier added a family
coverage tier, the level of employer contributions toward the family
coverage would not cause the plan to lose grandfather status.
(E) Group health plans with fixed-dollar employee contributions or
no employee contributions. A group health plan that requires either
fixed-dollar employee contributions or no employee contributions will
not cease to be a grandfathered health plan solely because the employer
contribution rate changes so long as there continues to be no employee
contributions or no increase in the fixed-dollar employee contributions
towards the cost of coverage.
(vi) Changes in annual limits--(A) Addition of an annual limit. A
group health plan, or group or individual health insurance coverage
that, on March 23, 2010, did not impose an overall annual or lifetime
limit on the dollar value of all benefits ceases to be a grandfathered
health plan if the plan or health insurance coverage imposes an overall
annual limit on the dollar value of benefits. (But see Sec. 147.126,
which generally prohibits all annual dollar limits on essential health
benefits for plan years (in the individual market, policy years)
beginning on or after January 1, 2014).
(B) Decrease in limit for a plan or coverage with only a lifetime
limit. Grandfathered individual health insurance coverage, that, on
March 23, 2010, imposed an overall lifetime limit on the dollar value
of all benefits but no overall annual limit on the dollar value of all
benefits ceases to be a grandfathered health plan if the plan or health
insurance coverage adopts an overall annual limit at a dollar value
that is lower than the dollar value of the lifetime limit on March 23,
2010. (But see Sec. 147.126, which generally prohibits all annual
dollar limits on essential health benefits for plan years (in the
individual market, policy years) beginning on or after January 1,
2014).
(C) Decrease in limit for a plan or coverage with an annual limit.
A group health plan, or group or individual health insurance coverage,
that, on March 23, 2010, imposed an overall annual limit on the dollar
value of all benefits ceases to be a grandfathered health plan if the
plan or health insurance coverage decreases the dollar value of the
annual limit (regardless of whether the plan or health insurance
coverage also imposed an overall lifetime limit on March 23, 2010 on
the dollar value of all benefits). (But see Sec. 147.126, which
generally prohibits all annual dollar limits on essential health
benefits for plan years (in the individual market, policy years)
beginning on or after January 1, 2014).
(2) Transitional rules--(i) Changes made prior to March 23, 2010.
If a group health plan or health insurance issuer makes the following
changes to the terms of the plan or health insurance coverage, the
changes are considered part of the terms of the plan or health
insurance coverage on March 23, 2010 even though they were not
effective at that time and such changes do not cause a plan or health
insurance coverage to cease to be a grandfathered health plan:
(A) Changes effective after March 23, 2010 pursuant to a legally
binding contract entered into on or before March 23, 2010;
(B) Changes effective after March 23, 2010 pursuant to a filing on
or before March 23, 2010 with a State insurance department; or
(C) Changes effective after March 23, 2010 pursuant to written
amendments to a plan that were adopted on or before March 23, 2010.
[[Page 72293]]
(ii) Changes made after March 23, 2010 and adopted prior to
issuance of regulations. If, after March 23, 2010, a group health plan
or health insurance issuer makes changes to the terms of the plan or
health insurance coverage and the changes are adopted prior to June 14,
2010, the changes will not cause the plan or health insurance coverage
to cease to be a grandfathered health plan if the changes are revoked
or modified effective as of the first day of the first plan year (in
the individual market, policy year) beginning on or after September 23,
2010, and the terms of the plan or health insurance coverage on that
date, as modified, would not cause the plan or coverage to cease to be
a grandfathered health plan under the rules of this section, including
paragraph (g)(1) of this section. For this purpose, changes will be
considered to have been adopted prior to June 14, 2010 if:
(A) The changes are effective before that date;
(B) The changes are effective on or after that date pursuant to a
legally binding contract entered into before that date;
(C) The changes are effective on or after that date pursuant to a
filing before that date with a State insurance department; or
(D) The changes are effective on or after that date pursuant to
written amendments to a plan that were adopted before that date.
(3) Definitions--(i) Medical inflation defined. For purposes of
this paragraph (g), the term medical inflation means the increase since
March 2010 in the overall medical care component of the Consumer Price
Index for All Urban Consumers (CPI-U) (unadjusted) published by the
Department of Labor using the 1982-1984 base of 100. For this purpose,
the increase in the overall medical care component is computed by
subtracting 387.142 (the overall medical care component of the CPI-U
(unadjusted) published by the Department of Labor for March 2010, using
the 1982-1984 base of 100) from the index amount for any month in the
12 months before the new change is to take effect and then dividing
that amount by 387.142.
(ii) Maximum percentage increase defined. For purposes of this
paragraph (g), the term maximum percentage increase means medical
inflation (as defined in paragraph (g)(3)(i) of this section),
expressed as a percentage, plus 15 percentage points.
(iii) Contribution rate defined. For purposes of paragraph
(g)(1)(v) of this section:
(A) Contribution rate based on cost of coverage. The term
contribution rate based on cost of coverage means the amount of
contributions made by an employer or employee organization compared to
the total cost of coverage, expressed as a percentage. The total cost
of coverage is determined in the same manner as the applicable premium
is calculated under the COBRA continuation provisions of section 604 of
ERISA, section 4980B(f)(4) of the Internal Revenue Code, and section
2204 of the PHS Act. In the case of a self-insured plan, contributions
by an employer or employee organization are equal to the total cost of
coverage minus the employee contributions towards the total cost of
coverage.
(B) Contribution rate based on a formula. The term contribution
rate based on a formula means, for plans that, on March 23, 2010, made
contributions based on a formula (such as hours worked or tons of coal
mined), the formula.
(4) Examples. The rules of this paragraph (g) are illustrated by
the following examples:
Example 1. (i) Facts. On March 23, 2010, a grandfathered health
plan has a coinsurance requirement of 20% for inpatient surgery. The
plan is subsequently amended to increase the coinsurance requirement
to 25%.
(ii) Conclusion. In this Example 1, the increase in the
coinsurance requirement from 20% to 25% causes the plan to cease to
be a grandfathered health plan.
Example 2. (i) Facts. Before March 23, 2010, the terms of a
group health plan provide benefits for a particular mental health
condition, the treatment for which is a combination of counseling
and prescription drugs. Subsequently, the plan eliminates benefits
for counseling.
(ii) Conclusion. In this Example 2, the plan ceases to be a
grandfathered health plan because counseling is an element that is
necessary to treat the condition. Thus the plan is considered to
have eliminated substantially all benefits for the treatment of the
condition.
Example 3. (i) Facts. On March 23, 2010, a grandfathered health
plan has a copayment requirement of $30 per office visit for
specialists. The plan is subsequently amended to increase the
copayment requirement to $40. Within the 12-month period before the
$40 copayment takes effect, the greatest value of the overall
medical care component of the CPI-U (unadjusted) is 475.
(ii) Conclusion. In this Example 3, the increase in the
copayment from $30 to $40, expressed as a percentage, is 33.33% (40-
30 = 10; 10 / 30 = 0.3333; 0.3333 = 33.33%). Medical inflation (as
defined in paragraph (g)(3)(i) of this section) from March 2010 is
0.2269 (475-387.142 = 87.858; 87.858 / 387.142 = 0.2269). The
maximum percentage increase permitted is 37.69% (0.2269 = 22.69%;
22.69% + 15% = 37.69%). Because 33.33% does not exceed 37.69%, the
change in the copayment requirement at that time does not cause the
plan to cease to be a grandfathered health plan.
Example 4. (i) Facts. Same facts as Example 3, except the
grandfathered health plan subsequently increases the $40 copayment
requirement to $45 for a later plan year. Within the 12-month period
before the $45 copayment takes effect, the greatest value of the
overall medical care component of the CPI-U (unadjusted) is 485.
(ii) Conclusion. In this Example 4, the increase in the
copayment from $30 (the copayment that was in effect on March 23,
2010) to $45, expressed as a percentage, is 50% (45-30 = 15; 15 / 30
= 0.5; 0.5 = 50%). Medical inflation (as defined in paragraph
(g)(3)(i) of this section) from March 2010 is 0.2527 (485-387.142 =
97.858; 97.858 / 387.142 = 0.2527). The increase that would cause a
plan to cease to be a grandfathered health plan under paragraph
(g)(1)(iv) of this section is the greater of the maximum percentage
increase of 40.27% (0.2527 = 25.27%; 25.27% + 15% = 40.27%), or
$6.26 ($5 x 0.2527 = $1.26; $1.26 + $5 = $6.26). Because 50% exceeds
40.27% and $15 exceeds $6.26, the change in the copayment
requirement at that time causes the plan to cease to be a
grandfathered health plan.
Example 5. (i) Facts. On March 23, 2010, a grandfathered health
plan has a copayment of $10 per office visit for primary care
providers. The plan is subsequently amended to increase the
copayment requirement to $15. Within the 12-month period before the
$15 copayment takes effect, the greatest value of the overall
medical care component of the CPI-U (unadjusted) is 415.
(ii) Conclusion. In this Example 5, the increase in the
copayment, expressed as a percentage, is 50% (15-10 = 5; 5 / 10 =
0.5; 0.5 = 50%). Medical inflation (as defined in paragraph (g)(3)
of this section) from March 2010 is 0.0720 (415.0-387.142 = 27.858;
27.858 / 387.142 = 0.0720). The increase that would cause a plan to
cease to be a grandfathered health plan under paragraph (g)(1)(iv)
of this section is the greater of the maximum percentage increase of
22.20% (0.0720 = 7.20%; 7.20% + 15% = 22.20), or $5.36 ($5 x 0.0720
= $0.36; $0.36 + $5 = $5.36). The $5 increase in copayment in this
Example 5 would not cause the plan to cease to be a grandfathered
health plan pursuant to paragraph (g)(1)(iv)this section, which
would permit an increase in the copayment of up to $5.36.
Example 6. (i) Facts. The same facts as Example 5, except on
March 23, 2010, the grandfathered health plan has no copayment ($0)
for office visits for primary care providers. The plan is
subsequently amended to increase the copayment requirement to $5.
(ii) Conclusion. In this Example 6, medical inflation (as
defined in paragraph (g)(3)(i) of this section) from March 2010 is
0.0720 (415.0-387.142 = 27.858; 27.858 / 387.142 = 0.0720). The
increase that would cause a plan to cease to be a grandfathered
health plan under paragraph (g)(1)(iv)(A) of this section is $5.36
($5 x 0.0720 = $0.36; $0.36 + $5 = $5.36). The $5 increase in
copayment in this Example 6 is less than the amount calculated
pursuant to paragraph (g)(1)(iv)(A) of this section of $5.36. Thus,
the $5 increase
[[Page 72294]]
in copayment does not cause the plan to cease to be a grandfathered
health plan.
Example 7. (i) Facts. On March 23, 2010, a self-insured group
health plan provides two tiers of coverage--self-only and family.
The employer contributes 80% of the total cost of coverage for self-
only and 60% of the total cost of coverage for family. Subsequently,
the employer reduces the contribution to 50% for family coverage,
but keeps the same contribution rate for self-only coverage.
(ii) Conclusion. In this Example 7, the decrease of 10
percentage points for family coverage in the contribution rate based
on cost of coverage causes the plan to cease to be a grandfathered
health plan. The fact that the contribution rate for self-only
coverage remains the same does not change the result.
Example 8. (i) Facts. On March 23, 2010, a self-insured
grandfathered health plan has a COBRA premium for the 2010 plan year
of $5000 for self-only coverage and $12,000 for family coverage. The
required employee contribution for the coverage is $1000 for self-
only coverage and $4000 for family coverage. Thus, the contribution
rate based on cost of coverage for 2010 is 80% ((5000-1000)/5000)
for self-only coverage and 67% ((12,000-4000)/12,000) for family
coverage. For a subsequent plan year, the COBRA premium is $6000 for
self-only coverage and $15,000 for family coverage. The employee
contributions for that plan year are $1200 for self-only coverage
and $5000 for family coverage. Thus, the contribution rate based on
cost of coverage is 80% ((6000-1200)/6000) for self-only coverage
and 67% ((15,000-5000)/15,000) for family coverage.
(ii) Conclusion. In this Example 8, because there is no change
in the contribution rate based on cost of coverage, the plan retains
its status as a grandfathered health plan. The result would be the
same if all or part of the employee contribution was made pre-tax
through a cafeteria plan under section 125 of the Internal Revenue
Code.
Example 9. (i) Facts. A group health plan not maintained
pursuant to a collective bargaining agreement offers three benefit
packages on March 23, 2010. Option F is a self-insured option.
Options G and H are insured options. Beginning July 1, 2013, the
plan increases coinsurance under Option H from 10% to 15%.
(ii) Conclusion. In this Example 9, the coverage under Option H
is not grandfathered health plan coverage as of July 1, 2013,
consistent with the (rule in paragraph (g)(1)(ii) of this section.
Whether the coverage under Options F and G is grandfathered health
plan coverage is determined separately under the rules of this
paragraph (g).
[FR Doc. 2015-29294 Filed 11-13-15; 4:15 pm]
BILLING CODE 4150-28-P; 4830-01-P; 4120-01-P; 6325-64-P