“Acknowledging some ambiguity in the ACA statute, the proposed rule clarifies that these cost-sharing limitations (such as maximum deductibles and out-of-pocket amounts) apply only in the small group market. They do not apply to self-insured plans, nor to health insurance issuers offering coverage in the large group market.”
Right before Thanksgiving, the Department of Health and Human Services (“HHS”) released a set of proposed rules on implementation of the Affordable Care Act (“ACA”), including the requirements relating to essential health benefits (“EHBs”).
The proposed rules outline health insurance issuer standards related to the coverage of EHBs in the individual and small group markets, giving states significant flexibility to shape how EHBs are defined.
Under the ACA, all non-grandfathered plans in the individual and small group markets, whether or not they are offered through the ACA’s statewide exchanges, will be required to cover EHBs during plan or policy years beginning on or after January 1, 2014. Previous guidance specified ten categories of EHBs:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance abuse disorder services
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
The proposed regulations establish a list of permissible benchmark plans that states can use to define the EHB package. If a state does not choose a benchmark plan, the regulations provide default rules for establishing a benchmark. In order to minimize disruption during the first years of the exchanges, each state’s initial EHB benchmark plan will be applicable for both the 2014 and 2015 benefit years.
Despite the general flexibility afforded states in defining EHBs, the proposed regulations do establish a minimum standard for the scope of the required coverage under the tenth category: pediatric services. Prior to the issuance of these proposed rules, there was speculation as to how “pediatric services” would be defined. Some commentators suggested that pediatric services might include any services for dependent children through age 26, thereby matching the ACA mandate that dependent coverage be offered through that age. Others suggested that pediatric services should be limited to services through a child’s age of majority (age 18 in most states). Under the proposed rules, however, the term pediatric services will be interpreted to mean services for individuals under the age of 19, consistent with other ACA provisions such as the prohibition on pre-existing condition limitations for children.
Additionally, the regulations propose a transitional policy for coverage of habilitative services. Because many health insurance plans do not identify habilitative services as a distinct category of services, states would be given the opportunity to define these benefits if they are not otherwise included in the benchmark plan. If a state chooses not to define the habilitative services category, insurers in that state must include habilitative services that either (1) provide benefits similar in scope, amount, and duration to benefits covered for rehabilitative services, or (2) are determined by the health insurance issuer and reported to HHS.
Finally, large employers can now rest easy on the question of whether certain annual cost-sharing limitations imposed by the ACA apply to them. Acknowledging some ambiguity in the ACA statute, the proposed rule clarifies that these cost-sharing limitations (such as maximum deductibles and out-of-pocket amounts) apply only in the small group market. They do not apply to self-insured plans, nor to health insurance issuers offering coverage in the large group market.
Large employers should keep in mind, however, that the ACA also uses the term “essential health benefits” in connection with its prohibition on annual and lifetime dollar limits. For this reason, even self-insured and larger insured employers will want to take note of this recent guidance.