Background

States and the federal government regulate health plans under a number of complex laws.  The Department of Labor regulates self-funded health plans, as well as fully and partially insured employer-sponsored plans, under the Employee Retirement Income Security Act (ERISA).  Self-funded plans are those under which the plan’s sponsor (e.g. an employer, other type of group such as a union or association) chooses to bear the risk for employee or group member health care costs rather than purchasing private insurance to cover all or part of the group’s losses.  Health plans that are fully or partially insured are generally regulated under state law.  Plans must also meet certain federal standards enacted as part of the Health Insurance Portability and Accountability Act (HIPAA) of 1996.

Under HIPAA, the federal government prohibits pre-existing condition exclusions and requires guarantee issue and guaranteed renewal for certain individuals in the non-group (i.e., individual) and small group insurance markets.  Protected individuals are primarily those who had employer-sponsored coverage but who lost it because they lost their jobs or changed jobs, and sought to re-establish coverage within a certain time frame.  While HIPAA requires plans to offer coverage to this limited population, prior to passage of the health reform law, there were no federal rules that limited how much could be charged, what minimum benefits must be covered, or extended these protections to individuals who did not previously have employer-sponsored coverage.  Under HIPAA, states still retain the ability to license insurers offering coverage in their states and may enact more stringent rules, such as expanding HIPAA requirements to other individuals, setting minimum benefit requirements, and limiting the variation in health insurance premiums based on age, sex, or health status, and prohibiting plans from rescinding or dropping coverage when an individual incurs high health care costs.

While some states have adopted regulations that go beyond the minimum federal requirements under HIPAA, many have not, resulting in tremendous state variation in the availability of affordable private health insurance.  In most states, insurers seeking to avoid adverse selection (the enrollment in health insurance only at the point of health care need) were permitted to employ both restrictions on who could gain access to coverage, as well as restrictions on the level of coverage itself.  Further, in many cases, even if plans offer coverage, for those with pre-existing conditions or at high-risk of health insurance costs, high premiums make coverage unaffordable.

Changes Made by the Health Reform Law
Pub. L. 111-148 §§1001 and 10101; Pub. L. 111-152 §2301

Although most changes in health insurance access rules are not effective until 2014, a number of reforms are designed to go into effect more quickly.  These changes apply to health insurance issuers in the group and individual insurance markets as well as to self-funded group health plans and multiple employer welfare arrangements (MEWAs). In certain cases these standards apply to “grandfathered” insured plans in both the individual and group health markets, as well as to self-funded plans.  Whether the changes apply to grandfathered health insurance — and if so, which ones — is noted for each change below.  Unless otherwise noted, the changes apply to plan years beginning on or before 6 months after the date of enactment of the law (March 23, 2010).

The health reform law:

• Prohibits health insurance issuers that offer group or individual coverage, as well as group health plans (including self-funded plans and MEWAs), from imposing lifetime limits on the “dollar value” of benefits for any participant or beneficiary.^[1] Applies to grandfathered plans.^[2]
• Prohibits health insurance issuers that offer group or individual coverage, as well as group health plans (including self-funded plans and MEWAs), from imposing annual limits other than “restricted” annual limits on the dollar value of benefits that are considered “essential health benefits” under the health reform law.^[3] Provides that the term “annual limits” is to be interpreted such that “access to needed services is made available with a minimal impact on premiums.”^[4] Per beneficiary annual dollar limits would be permitted for benefits not considered “essential.”  Applies to grandfathered group plans.^[5]
• Requires insurers and group health plans to provide additional information under Pub. L. 111-148 §1311(c)(3) regarding benefits and coverage and plan coverage value.^[6] Does not apply to grandfathered plans.^[7]
• Requires insured group health plans to meet the same nondiscrimination rules as self-funded plans by prohibiting fully-insured plans from providing more generous eligibility and benefits to highly compensated employees.^[8] Does not apply to insured grandfathered group plans.^[9]
• Requires insurers offering group or individual coverage to provide a report on the ratio of incurred losses or incurred claims to premiums.  This report is required to include a clear accounting of costs, including percentage of total premiums spent on clinical treatments and activities to improve health care quality, as well as “all other non claims costs,” excluding federal and state taxes and licensing or regulatory fees.  The law further requires that the information be submitted to the Secretary and made public through an HHS website,^[10] and beginning in 2011 it requires rebates if spending on health care after accounting for taxes, fees (and after January 1, 2014 for risk adjustment, risk corridor payments, and reinsurance payments) is less than 85% in the case of large group market and 80% in the case of insured plans in the individual and small group markets.  Applies to grandfathered plans.^[11]
• Requires insurers and group health plans to cover: certain preventive screening services recommended by the federal government and immunizations recommended by the CDC; “evidence-informed preventive care and screenings” for infants, children and adolescents recommended in guidance issued by the Health Resources and Services Administration (HRSA); “additional preventive care and screenings” for women as recommended by HRSA.  Also requires insurers and group health plans to maintain current standards for breast cancer screening (as opposed to revised recommendations issued in 2009).^[12] Does not apply to grandfathered plans.^[13]
• Prohibits insurers and group health plans from infringing on Second Amendment gun rights in wellness and prevention programs and in data collection.^[14] Does not apply to grandfathered plans.^[15]
• Requires health insurance issuers that offer group or individual coverage, as well as group health plans (including self-funded plans and MEWAs) that provide coverage to dependents, to provide coverage for dependent children (married or otherwise) who are under age 26.^[16] Beginning in 2014, dependent children are not eligible for coverage in grandfathered group plans if they have an offer of employer coverage.  Applies to grandfathered plans.^[17]
• Prohibits group health plans (including self-funded plans and MEWAs) and health insurance issuers offering group or individual coverage from imposing pre-existing condition exclusions on children under the age of 19.^[18] Applies to grandfathered plans that are group health plans.^[19]
• Prohibits rescissions unless an individual “has performed an act or practice that constitutes fraud or makes an intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage.”^[20] Applies to grandfathered plans.^[21]
• Requires insurers and group health plans to provide additional safeguards as part of their internal appeals processes and to allow claimants access to external appeals.^[22] Does not apply to grandfathered plans.
• Requires insurers and group health plans to adhere to certain patient protections.  If a plan requires or allows an enrollee to designate a primary care provider, the plan is required to permit the enrollee to choose any participating primary care provider that is available to accept the individual.  In addition, plans and issuers are required to cover “emergency services” offered by hospital emergency departments without “the need for any prior authorization determination,” and if the services are provided out of network, the cost sharing cannot be higher than for an in-network provider.  Plans must also provide access to participating network health professionals who “specialize in pediatrics” in the case of children, and direct access without prior authorization to covered obstetrical and gynecological care.^[23] Does not apply to grandfathered plans.
• Beginning in the 2010 plan year, requires the HHS Secretary, in conjunction with the states, to have a process for annual review of premium rate increases for insurers offering group or individual coverage, in order to identify “unreasonable increases in premiums for health insurance coverage;” also requires the disclosure of information related to rate increases along with justifications, with posting of information at insurers’ Internet websites.^[24] Does not apply to grandfathered or self-funded plans.

Implementation

Agency and Timeline

Three federal agencies – the Departments of Health and Human Services, Treasury, and Labor – are tasked with implementation of the reforms.  Although the HHS Secretary is required to promulgate regulations to define dependent coverage, no deadline is provided in the statute.  The HHS Secretary is also required to develop standards for use by plans relating to uniform explanation of coverage documents and standardized definitions within 12 months of enactment, and to promulgate regulations related premium reviews and medical loss ratios, although no deadline is given.  The National Association of Insurance Commissioners (NAIC) is directed to define, with Secretarial certification, standardized methodologies for calculating medical loss ratios by December 31, 2010.

Process

The agencies are expected to issue proposed regulations.

Key Implementation Issues

The market reform provisions raise numerous implementation questions, including:

• Grandfathered plans: What is the meaning of a grandfathered health plan (the health reform law does not define the term)?  When do the terms of coverage for a plan bought in either the individual or group insurance market or self insured plans so materially change that a plan offered by an employer or by an insurer in the individual market no longer can be considered to qualify for a grandfather exemption?
• Terms and definitions: How will key terms and definitions be addressed and refined?  For example, when will a restriction on annual dollar limits on coverage be considered to have more than a “minimal impact” on premiums? How will “dollar value” be calculated and what expenditures will count toward annual or lifetime coverage limits?  What additional services for children and women beyond those identified by the Preventive Health Services Task Force will be identified by HRSA?  In terms of annual limits, which benefits will be considered to be subject to the prohibition because they are considered to be an “essential” health benefit within the meaning of the law?  Who will make these determinations and who will enforce the new requirements?
• Notice: What process and standards will be used to advise insurers and group health plans which products will be affected in relation to grandfathering, and to the scope of the obligations in the case of non-grandfathered plans and products?
• Rate reviews: How will the Secretary of HHS collaborate with state insurance commissioners to conduct rate reviews?
• Provision of information: What standards will be developed governing the provision of information on medical loss ratios by insurers and group health plans, and how will information on the value of coverage be made available?
• Appeals and patient protections: How will beneficiaries and participants be given access to external appeals systems, particularly in states that do not offer an external review?   How will patient protections be enforced?

Recent Agency Action

The Departments of Health and Human Services, Labor, and Treasury have published a request for information on issues related to the calculation of minimum loss ratios.  The agencies request submission of comments by May 14, 2010. In addition, the Department of Health and Human Services published a notice to announce the creation of the Office of Consumer Information and Insurance Oversight.^[26] The Secretary has also sent letters to Wellpoint related to rescissions for patients with breast cancer and a letter to insurers clarifying provisions related to coverage of young adults under age 26.^[27]

On June 28, the Obama Administration published interim final rules that included a prohibition on new group health plans and health insurance issuers from imposing pre-existing condition exclusions on children under 19 for the first plan year beginning on or after September 23, 2010 in both the group and individual markets. On July 27, they issued question and answers clarifying the new policy.

Authorized Funding Levels

No separate authorization is necessary for implementation of these provisions.