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FAQs provide guidance to group health plans on determining maximum out-of-pocket expenses

The Employee Benefits Security Administration (EBSA), in a new set of frequently asked questions (FAQs) prepared jointly with IRS and the Department of Health and Human Services (HHS) (collectively, the Departments), has provided guidance to group health plans on meeting plan obligations under Public Health Service Act (PHSA) §2707(b), with respect to the applications of maximum out-of-pocket requirements to various provider network benefit designs.

Background.PHSA §2707(b), as added by the Affordable Care Act (ACA) and incorporated under Code Sec. 9815(a)(1) and ERISA § 715(a)(1) , provides that a group health plan must ensure that any cost-sharing requirements under the plan not exceed the limitations provided for by ACA Sec. 1302(c)(1) (limiting annual out-of-pocket maximums) and ACA Sec. 1302(c)(2)ACA Sec. 1302(c)(2) (relating to annual limitations on deductibles).

Prior FAQs addressed various issues concerning maximum out-of-pocket requirements.Among other things, the previous FAQs clarified that if a plan includes a network of providers, the plan may, but is not required to, count an individual’s out-of-pocket spending for out-of-network items and services toward the annual limitation on cost sharing.In addition, the FAQs addressed reference-based pricing, under which the plan pays a fixed amount for a particular procedure (for example, a knee replacement), which the Departments understood could encourage plans to negotiate treatments with high-quality providers at reduced costs, but which could also be a subterfuge for the imposition of otherwise prohibited limitations on coverage, without ensuring access to quality care and an adequate network of providers.

The Departments also solicited comments on the application of the maximum out-of-pocket requirements to various benefit designs, indicating a particular interest in standards that plans or issuers using reference-based pricing should be required to meet to ensure that individuals have meaningful access to medically appropriate quality care.

Use of reference pricing.In response to the comments, and pending issuance of future guidance, the Departments have stated that, for purposes of enforcing the requirements in PHSA §2707(b), the Departments will consider all the facts and circumstances when evaluating whether a plan’s reference-based pricing design (or similar network design), which treats providers that accept the reference-based price as the only in-network providers, and excludes or limits cost-sharing for services rendered by other providers is using a reasonable method to ensure adequate access to quality providers at the reference price.

While the Departments will continue to monitor the use of reference-based pricing and may provide additional guidance in the future, including guidance relating to requirements other than those under PHSA §2707(b), that is applicable to non-grandfathered health plans in the individual and small group markets that must provide coverage of the essential health benefit package under ACA Sec. 1302(a), the following standards described in the FAQ apply only to non-grandfathered, group health plans:

Type of service.Plans must have standards to ensure that the network is designed to enable the plan to offer benefits for services from high-quality providers at reduced costs, and does not function as a subterfuge for otherwise prohibited limitations on coverage.

Generally, reference-based pricing which treats providers that accept the reference amount as the only in-network providers, must apply only to those services for which the period between identification of the need for care and provision of the care is long enough for consumers to make an informed choice of provider.Limiting or excluding cost-sharing from counting toward the maximum out-of-pocket with respect to providers who do not accept the reference-based price would not be considered reasonable with respect to emergency services.

Reasonable access.Plans must have procedures to ensure that an adequate number of providers that accept the reference price are available to participants and beneficiaries.For this purpose, plans are encouraged to consider network adequacy approaches developed by states, as well as reasonable geographic distance measures, and whether patient wait times are reasonable.

Quality standards.Plans must have procedures to ensure that an adequate number of providers accepting the reference price meets reasonable quality standards.

Exceptions process.Plans must have an easily accessible exceptions process, i.e., one that allows services rendered by providers that do not accept the reference price to be treated as if the services were provided by a provider that accepts the reference price if:

1. access to a provider that accepts the reference price is unavailable (for example, the service cannot be obtained within a reasonable wait time or travel distance); and
2. the quality of services with respect to a particular individual could be compromised with the reference price provider (for example, if co-morbidities present complications or patient safety issues).

Disclosure.Plans must provide disclosures regarding reference-based pricing (or similar network design) to plan participants free of charge.

Plans mustautomaticallyprovide participants with information regarding the pricing structure, including a list of services to which the pricing structure applies and the exceptions process.The Departments emphasize that this information must be provided automatically, without the need for the participant to request the information, for example, through the plan’s summary plan description or similar document.

In addition,upon request,plans must provide participants with:

i. a list of providers that will accept the reference price for each service;
ii. a list of providers that will accept a negotiated price above the reference price for each service; and
iii. information on the process and underlying data used to ensure that an adequate number of providers accepting the reference price meets reasonable quality standards.
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