Obama Administration Allows States to Define Health Benefits in 2014

The Obama administration said Friday that it would not define a single uniform set of “essential health benefits” that must be provided by insurers for tens of millions of Americans.

Instead, it will allow each state to specify the benefits within broad categories. The new law lists 10 categories of “essential health benefits” that must be provided by insurance offered in the individual and small-group markets, starting in January 2014. These include preventive care, emergency services, maternity care, hospital and doctors’ services, and prescription drugs.

NY Times article, December 16, 2011


The Affordable Care Act (ACA) requires each employer group health plan to provide a 4-page summary of its benefits to all individuals who are eligible for coverage.  This requirement takes effect on March 23, 2012 (two years after the enactment of the ACA).  The three agencies charged with implementing many of the ACA’s requirements have just issued proposed regulations, along with templates of proposed formats, under which a plan may furnish this new “summary of benefits and coverage” (SBC).

Under the proposed rules, employers or plan administrators (for self-funded plans) and insurers (for insured plans) must provide participants and beneficiaries with SBCs detailing, in a “culturally and linguistically appropriate manner,” simple and consistent information about health plan benefits and coverage.  Conceding that this cannot be done in only four pages, the agencies propose to read the statutory reference to “four pages” as four double-sided pages (i.e., eight pages).  Plans also must provide a separate glossary with uniform definitions of specific medical and coverage-related terms.

Each SBC must include the following:

  • Uniform definitions of standard insurance terms and medical terms;
  • A description of the coverage, including cost sharing, for certain benefit categories;
  • Exceptions, reductions, and limitations on coverage;
  • Cost-sharing provisions of the coverage, including deductible, coinsurance, and copayment obligations;
  • Renewability and continuation of coverage provisions;
  • Coverage examples illustrating three common benefit scenarios;
  • Beginning January 1, 2014, a statement as to whether the plan provides “minimum essential coverage” (a determination that will be important under the “Exchanges” that are to be established as of that date);
  • A statement that the SBC is only a summary and that the plan document, policy, or certificate of insurance should be consulted to determine the governing contractual provisions of the coverage;
  • A contact number to call with questions and an Internet address where a copy of the actual individual coverage policy or group certificate of coverage can be reviewed and obtained;
  • An Internet address or directions for obtaining a list of network providers, if applicable;
  • An Internet address or directions for obtaining information about the prescription drug formulary, if applicable;
  • An Internet address to access and review the uniform glossary; and
  • Premium information (or the cost of coverage under self-insured plans).

The SBC templates were prepared by the National Association of Insurance Commissioners (NAIC), and even the NAIC concedes that they will need some tweaking before they can be used by a self-funded plan.  They include not only a blank template, but also detailed instructions for completing the template and a sample of an SBC with the blanks completed.

The templates also include the glossary of uniform definitions, which would have to be used without modification.  Both the templates and the uniform definitions are designed to allow individuals (and employers looking to purchase a health insurance policy) to more easily compare the provisions of multiple plans or policies on an apples-to-apples basis.

Group health plans must provide SBCs as a part of their written enrollment materials (or if none, upon eligibility for enrollment); upon a change in information included in the SBC; upon a special enrollment event; and within seven days of a request.  SBCs need only be provided with respect to benefit packages in which a participant or beneficiary is enrolled, unless an individual requests an SBC for another option as to which he or she is eligible.

SBCs may be furnished in paper form or electronically.  For ERISA plans, SBCs may be delivered electronically so long as the Department of Labor’s electronic disclosure safe-harbor requirements are satisfied.  Group health plan sponsors should note that the obligation to provide SBCs is in addition to any current duty to furnish ERISA summary plan descriptions, summaries of material modifications, or other disclosures.

The proposed rules also require plans to give covered individuals at least 60 days’ advance notice of any mid-year material modifications that affect SBC content.  For this purpose, a “modification” includes not only a benefit reduction, but also a benefit improvement.  A plan (or its administrator) that willfully fails to provide an SBC may be fined up to $1,000 for each affected individual.

Comments on the proposed rules are due by October 21, 2011.  The agencies specifically request input on special considerations for self-funded plans and the feasibility of meeting the March 23, 2012, deadline to begin providing SBCs.  It appears likely that changes will be made to the proposed rules; therefore, group health plans should pay close attention to any changes in the final guidance, which should be issued within the next several months.


IRS Issues Rule Change on Using Debit Cards for OTC Drugs

Effective January 1, 2011, the Affordable Care Act requires that individuals obtain a prescription for over-the-counter (OTC) medicines and drugs (other than insulin) in order to receive reimbursement for the cost of the medicine from a health plan. The Internal Revenue Service (IRS) issued Notice 2010-59 in November 2010, which prohibited plans from allowing a health Flexible Spending Arrangement (FSA) or Health Reimbursement Arrangement (HRA) debit card to pay for OTC medicines and drugs, even if the individual has obtained a prescription for the drug. The IRS allowed for a two-week transition period (from January 1-15, 2011) during which debit cards could be used to purchase OTC drugs, in order to allow debit-card systems to be re-programmed.

On December 23, 2010, the IRS issued Notice 2011-5 and accompanying answers to frequently asked questions (FAQs), which reversed its position on the use of debit cards to purchase OTC medicines and drugs for which the individual has a prescription. Effective  January 16, 2011, under certain conditions, health FSA and HRA debit cards may continue to be used to purchase OTC medicines or drugs at the following businesses: pharmacies, drug stores and grocery stores if those stores have pharmacies, and mail-order and Web-based vendors that sell prescription drugs.

Conditions for Using Debit Cards to Purchase OTC Medicines or Drugs

  • The prescription must be presented to the pharmacist at or before the time of purchase,
  • The OTC medicine or drug must be dispensed by a pharmacist under applicable law;
  • A prescription number must be assigned;
  • The pharmacy or other entity must retain records of the prescription number, purchaser, amount, and date of sale;
  • The pharmacy or other entity must make these records available to the employer on request;
  • The debit card system must be designed so that it will not accept a charge for OTC medicines or drugs unless a prescription number is assigned; and
  • Other existing rules for the use of debit cards are satisfied.

When the OTC medicine or drug order is sold by a vendor that uses health-related Merchant Codes, all of the following conditions must be satisfied:

  • The vendor must retain records of the purchaser, amount, and date of sale;
  • The vendor must make these records available to the employer on request; and
  • Other existing rules for the use of debit cards are satisfied.

When the OTC medicine or drug order is sold by a “90% pharmacy,” the following condition must be satisfied:

  • Substantiation (including a copy of the prescription or other documentation that a prescription has been issued) must be properly submitted in accordance with the terms of the plan with other information from an independent third party that satisfies the requirements of the proposed cafeteria plan regulations.

Note: A pharmacy is a “90% pharmacy” if (i) it maintains no inventory information approval system, and (ii) 90% of the store’s gross receipts in its prior taxable year met the definition of medical care expenses under section 213(d) of the Internal Revenue Code.

When the OTC medicine or drug order is filled by a vendor that is not described above:

  • The vendor may not accept FSA and HRA debit cards to pay for OTC medicines and drugs after January 15, 2011.

State Trends in Premiums and Deductibles, 2003–2009: How Building on the Affordable Care Act Will Help Stem the Tide of Rising Costs and Eroding Benefits- A Commonwealth Fund Brief

Rapidly rising health insurance costs have strained U.S. families and employers in recent years. The  Commonwealth Fund issue brief below examines data for all states on changes in private employer premiums and deductibles for 2003 and 2009.

The analysis finds that premiums for businesses and their employees increased 41 percent across states from 2003 to 2009, while per-person deductibles jumped 77 percent in large as well as small firms. If these trends continue at the rate prior to enactment of the Affordable Care Act, the average premium for family coverage will rise 79 percent by 2020, to more than $23,000.

The authors describe how health reform offers the potential to reduce insurance cost growth while improving value and protection. If reforms succeed in slowing premium growth by 1 percentage point annually in all states, by 2020 employers and families together will save $2,323 annually for family coverage, compared with projected trends.

Realizing Health Reform’s Potential

Power Point Premium Increrases by State

HHS Launches New Consumer Focused Health Care Website

The U.S. Department of Health and Human Services today unveiled an innovative new on-line tool that will help consumers take control of their health care by connecting them to new information and resources that will help them access quality, affordable health care coverage.  Called for by the Affordable Care Act, HealthCare.gov is the first website to provide consumers with both public and private health coverage options tailored specifically for their needs in a single, easy-to-use tool. 

HealthCare.gov  is the first central database of health coverage options, combining information about public programs, from Medicare to the new Pre-Existing Conditions Insurance Plan, with information from more than 1,000 private insurance plans.  Consumers can receive information about options specific to their life situation and local community.

In addition, the website will be a one-stop-shop for information about the implementation of the Affordable Care Act as well as other health care resources.  The website will connect consumers to quality rankings for local health care providers as well as preventive services.

The Affordable Care Act’s New Patient’s Bill of Rights

On June 22, 2010 the Departments of Health and Human Services (HHS), Labor, and Treasury issued regulations to implement a new Patient’s Bill of Rights under the Affordable Care Act – which will help children (and eventually all Americans) with pre-existing conditions gain coverage and keep it, protect all Americans’ choice of doctors and end lifetime limits on the care consumers may receive. These new protections apply to nearly all health insurance plans.

For the fact sheet on the acts New Patient’s Bill of Rights go to Healthreform.gov 

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