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Agencies Finalize Assortment of Regulations Implementing Health Care Reform

Final Rules for Grandfathered Plans, Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions, Dependent Coverage, Appeals, and Patient Protections under the Affordable Care Act, 26 CFR Part 54, 29 CFR Part 2590, 45 CFR Parts 144, 146, and 147, 80 Fed. Reg. 72191 (Nov. 18, 2015)

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Visit the Health Care Reform Community on Checkpoint to join the discussion on this development (for Checkpoint subscribers to EBIA’s Health Care Reform manual).

The IRS, DOL, and HHS have jointly issued final regulations covering a variety of health care reform topics: grandfathered plans, preexisting condition exclusions, lifetime and annual limits, rescissions, dependent coverage, appeals, and patient protections. Effective for plan years beginning on or after January 1, 2017, they finalize a mixture of proposed and interim final regulations dating back to 2010 (see, e.g., our article), and incorporate intervening agency guidance. Here are highlights:

  • Grandfathered Plans. Despite initial confusion over the terminology (see our article), the final regulations maintain the rule that grandfathered status is determined separately as to each “benefit package” under a group health plan. They also adopt existing “anti-abuse rules” that curtail attempts to retain grandfather status through indirect plan changes, and add new clarifying examples. Considerable effort is also devoted to describing changes that would cause a plan to lose grandfathered status— addressing, for instance, decreases in employer contribution rates and changes in copayments for limited categories of services. [EBIA Comment: Highlighting the continuing relevance of these issues, the agencies estimate that more than 40 million participants and beneficiaries are covered by grandfathered group health plans.]
  • Preexisting Condition Exclusions. While adopting previous guidance on preexisting condition exclusions, the final regulations also clarify that these rules do not prohibit plans or insurers from excluding all benefits for a condition if they do so regardless of when the condition arose relative to the effective date of coverage. They note, nevertheless, that other rules and laws (such as the essential health benefit (EHB) requirements) may preclude such exclusions.
  • Lifetime and Annual Limits. Group health plans (including self-insured plans) that are not required to cover EHB are nonetheless barred from imposing annual or lifetime dollar limits on EHB they do offer. Under the regulations, these plans may define EHB by reference to any of the 51 benchmark plans identified by the states or the District of Columbia or one of the three largest Federal Employees Health Benefit Program (FEHBP) plans. Finalizing some, but not all, existing guidance for HRAs and other account-based plans that are permitted only if “integrated” with a group health plan that complies with health care reform requirements (including the prohibition on lifetime and annual dollar limits), the regulations attempt further clarifications and offer new guidance. For instance, they explain that employers with fewer than 20 employees may be unable to meet the integration test for Medicare Part B and Part D premium reimbursement arrangements (PRAs) provided in previous guidance because some insurers will not allow offers of coverage to employees who are eligible for Medicare (see our article). The final regulations allow such PRAs to be integrated with Medicare if employees not offered other group health plan coverage would be eligible for that coverage but for their eligibility for Medicare. They also clarify that a forfeiture of amounts or waiver of reimbursements under an HRA will comply with the integration requirements even if amounts may be reinstated on a future date, upon death, or the earlier of the two dates. [EBIA Comment: During periods when the HRA is considered forfeited or waived, the individual (e.g., a retiree) is treated as not covered by the HRA, which may allow the individual to qualify for premium tax credits for Exchange coverage.]
  • Rescissions. Although they don’t break new ground, the final regulations remind employers that a rescission (i.e., retroactive cancellation or discontinuation of coverage) is considered an adverse benefit determination subject to internal and external appeals procedures and that coverage must remain effective until an internal appeal is completed. They also finalize previous guidance providing that the prohibition on rescissions is not violated if a plan retroactively terminates coverage due to a failure to pay required contributions (including COBRA premiums).
  • Dependent Coverage. With regard to the age 26 mandate, the final regulations clarify that adult children under age 26 must be offered coverage even if they do not live in a particular service area, but this requirement does not affect the extent to which plans and insurers are required to cover out-of-network services for adult children. Examples illustrate the requirement that coverage of children under age 26 cannot vary based on age.
  • Claims and Appeals. The regulations finalize “without substantial change” extensive rules on claims and appeal processes issued in interim (see our article) and amended interim final regulations (see our article), and incorporate a long list of clarifying technical guidance. Under the full and fair review rules, a plan that relies on new or additional evidence or a new rationale in making a benefit determination must automatically provide the evidence or rationale to the claimant and give the claimant a reasonable opportunity to respond. The final regulations also extend the transitional period for using state “NAIC-similar” external review processes through 2017 (see our article). Plans and insurers in a state without a NAIC compliant external review process, and self-insured plans, must follow an HHS process established through previous guidance and finalized in these regulations. In addition, the temporary rule applying the external review process to claims that involve medical judgment and rescissions is made permanent, and two new items are added to the list of what is considered a medical judgment.
  • Patient Protections. New clarifications allow health plans to require participants and beneficiaries to select in-network providers within specified geographic limits when designating a primary care provider. They also clarify when and how balance billing (i.e., billing patients for the excess of the providers’ billed charges over benefits paid by the plan and other patient payments, such as copayments or coinsurance) is permitted for out-of-network emergency care, and provide that emergency care does not have to be sought within a specific timeframe (e.g., within 24 hours of onset).

EBIA Comment: This compilation of final regulations has both breadth and depth. Fortunately, they largely incorporate prior guidance and aren’t effective until 2017. Simultaneously released proposed regulations would apply similar internal claims and appeals provisions to disability plans (see our article). For more information, see EBIA’s Health Care Reform manual at Sections VI (“Grandfathered Health Plans”), IX.A (“Lifetime and Annual Dollar Limits”), X.B (“Prohibition on Preexisting Condition Exclusions”), X.D (“Prohibition on Rescissions”), XI.B (“Requirement to Extend Coverage to Children Under Age 26”), XII.B (“Patient Protections”), and XV (“Appeals Process and External Review Requirements”). See also EBIA’s Group Health Plan Mandates manual at Sections VII.B (“Required Coverage for Children Under Age 26”), XIII.B (“Patient Protections”), and XXIV.G (“MSP Requirement: Offering Certain Incentives Prohibited”); EBIA’s Consumer-Driven Health Care manual at Section XXI.B (“HRA Legal Requirements”); EBIA’s Cafeteria Plans manual at Section X.B (“Qualified Nontaxable Benefits Can Be Offered”); EBIA’s ERISA Compliance manual at Section XXXIV (“Claims Procedures for Group Health Plans”; and EBIA’s COBRA manual at Section XXVI.D (“Prohibition Against Rescission”).

Contributing Editors: EBIA Staff.

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