Patient Protections Under PPACA

This is one of a continuing series of updates on recent developments in the law affecting labor rights and employee benefit plans.

GOVERNMENT RELEASES HEALTHCARE REFORM REGULATIONS ON LIMITS, PREEXISTING CONDITIONS, PATIENT CHOICE AND EMERGENCY CARE

As the agencies responsible for administering the newly-passed healthcare reform laws gear up for its implementation, they continue to release regulations explaining its provisions. In their latest joint effort, the Departments of Health and Human Services, Treasury and Labor have released a two hundred page opus explaining the reform laws’ prohibitions on annual and lifetime limitations, rescissions, preexisting illness exclusions and more.

These regulations incorporate a concept of “essential medical benefits,” which have yet to be fully defined. Thus, the regulations provide that, effective for the first plan year beginning on or after September 23, 2010, plans may no longer impose lifetime limitations on essential medical benefits. The rule also requires that participants who have lost coverage as the result of a now-banned lifetime limitation be provided notice of their right to reenroll.

The restriction on annual benefit limitations, which also applies only to essential medical benefits, is phased in over time, as follows:

Recognizing that, in some cases, particularly for so-called “mini-med” plans, raising the caps on annual limitations will result in the elimination of coverage entirely, the regulations authorize HHS to permit plans to retain lower annual limits for years beginning prior to 2014 if compliance “would result in a significant decrease in access to benefits under the plan . . . or would significantly increase premiums . . . .” Guidance on this temporary waiver program is promised “in the near future.”

The prohibition against rescissions is also explained. The regulations clarify that to be a rescission, a cancellation of coverage must have retroactive effect. A prospective termination of coverage is not considered a rescission (although it may be barred by other provisions of the law). Furthermore, even a retroactive termination of coverage for failure to pay a required premium is not considered a rescission. Otherwise, rescissions are prohibited except for “fraud” or “an intentional misrepresentation of material fact, as prohibited by the terms of the plan . . . .” Where rescission is permitted (i.e., in cases of fraud or misrepresentation), a plan must give at least thirty days advance written notice to the affected participant.

One of the common anecdotes that contributed to the passage of the health reform laws was insurance companies' propensity to rescind health insurance policies for an individual's failure to disclose a trivial preexisting condition. Because, once the new law is fully effective, coverage cannot be denied based upon the existence of a preexisting condition, failure to disclose such a condition could neither be "fraud" nor "material," so that rescission would be prohibited.

Closely related to the prohibition against rescissions is the bar against preexisting illness exclusions. The regulations build on the narrower restrictions on preexisting illness exclusions included under the Health Insurance Portability and Accountability Act (“HIPAA”), which were limited in their application to group health plans and policies. Thus, consistent with HIPAA, a preexisting condition exclusion is broadly defined to include any plan limitation or exclusion, including a denial of coverage, based upon the individual’s health status prior to the date coverage began (or, if benefits are denied, prior to the denial). As with HIPAA, failure to cover treatment for certain conditions without regard to when they were incurred is not considered a preexisting illness exclusion. Unlike HIPAA, however, the regulations do

not extend their protections to “health factors” that are not “medical conditions,” such as genetic information and participation in dangerous activities such as sky diving and horseback riding. For dependents age 19 and younger, the prohibition against preexisting illness exclusions is effective for plan years beginning on or after September 23, 2010. For everyone else, the restrictions are effective for plan years beginning in 2014.

The regulations flesh out the new requirement granting individuals a limited right to select their service providers. For plans that require the designation of a primary care provider, the regulations require plans to permit covered individuals to select their own from among any participating primary care provider willing to take the individual on. Furthermore, if the individual is a child, the plan must permit the selection of a pediatrician as the primary care provider.

The regulations also require that women be permitted to visit a participating specialist in obstetrics or gynecology without seeking a referral or preauthorization. This requirement does not, however, prohibit plans from requiring that the gynecologist either notify the plan or seek authorization prior to instituting a course of treatment. Nor does it prevent a plan from imposing limitations on gynecological or obstetric treatment.

Furthermore, plans must notify participants and beneficiaries of their rights to make these choices. Model language is included. The requirements relating to choice do not, however, apply to grandfathered plans.

Although these regulations do not require a plan to cover emergency room treatment, they do include several restrictions that apply if such coverage is provided. Plans are prohibited from requiring advance authorization for emergency room treatment. Plans are, however, permitted to require notice. Plans are also prohibited from imposing procedural restrictions on out-of-network emergency room treatment not also applicable to in-network treatment. Furthermore, although the regulations clarify that plans are not required to protect participants from “balance billing” by non-network emergency providers, they do contain minimum requirements on the rates payable by plans to those providers. A plan is in compliance with the regulations if it pays a non-network emergency provider the greater of:

· The amount determined by using the methodology normally used to determine the rates payable to out-of-network providers (e.g., “reasonable and customary”), but substituting in-network copayments in place of the greater copayments and penalties normally applicable to out-of-network providers; or

Where a plan pays multiple rates to its network emergency providers, the “negotiated rate” is considered to be its median rate. Furthermore, plans are permitted to apply deductibles for out-of-network emergency services that are generally applicable to out-of-network services.

Emergency conditions are defined, consistent with existing regulations, to include conditions manifesting themselves with acute symptoms of sufficient severity that a prudent layperson with “an average knowledge of health and medicine” could reasonably expect would result in serious jeopardy to the health of the individual (or unborn child, in the case of a pregnant woman) or serious impairment to bodily function or to the function of an organ, absent immediate medical treatment. The protections, however, only extend to the care necessary to evaluate and stabilize the condition. As with the “choice” protections described in the regulations, these do not apply to grandfathered plans.

These regulations were published on June 28, 2010. Although designated as interim-final regulations, they are open for comment for a 60-day period. As we get closer to the effective date for the healthcare reform laws, the responsible agencies will continue to release new guidance. We will keep you advised as matters continue to develop. Please contact us if you have questions.

For Plan Years Beginning On or After:	Minimum Permitted Annual Benefit Limitation
September 23, 2010	$750,000
September 23, 2011	$1,250,000
September 23, 2012	$2,000,000
September 23, 2013	Prohibited Entirely

Mooney, Green, Baker & Saindon, P.C.