The Top 10 Health Plan
Compliance Issues for 2015
Ashley Gillihan, Esq.
ashley.gillihan@alston.com
© 2015, Alston & Bird, LLP
Top 10 Compliance Issues
1. Can a health plan with no networks exclude balance billing from
the out of network maximum?
2. Are health plans that do not provide substantial hospitalization
or physician services “illegal” in light of notice 2014-69 and the
recent/pending regulations?
3. What is an essential health benefit?
4. Are health plans required to cover same sex spouses?
5. How does the Mental Health Parity and Addiction Equity Act
impact a plan’s coverage (or lack thereof) of residential
treatment facilities and/or other specialty providers?
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Top 10 Compliance Issues
6. Will a plan lose grandfather plan status if it imposes a smoker’s
surcharge?
7. Can employer’s give employees a choice between higher pay/no
benefits and lower pay/benefits?
8. What happens when a non-variable employee employed by an
applicable large employer switches to a part-time position?
9. How are the affordability standards applied to someone on an
unpaid leave of absence?
10. Must employers who receive notice from one of the Exchanges
that an employee has received a subsidy appeal?
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#1: Can a plan with no network exclude balance billing from the out
of pocket maximum?
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All non-grandfathered plans are subject to a maximum on the annual amount paid by covered
individuals for covered essential health benefits (i.e. cost share)?
– $6,600 for self-only coverage (2015)
– $13,200 for other than self-only coverage (2015)
Expenses that must count towards the OOP maximum:
– Deductibles, coinsurance, copayments or similar charges on covered essential health benefits
– “any other expenditure required of an individual which is a [Code Section 213(d)
expense other than premiums] with respect to the EHB covered under the plan”
Expenses that are excluded from OOP maximum:
– Out of network expenses (if the plan has a “network”)
• Expenses treated as out of network under RBP guidelines
– Non-covered expenses
– Non-essential health benefits
– Premiums
– “balance billing amounts for non-network providers” (see Q/A 5 from FAQ XVIII)
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#1: Can a plan with no network exclude balance billing
from the out of pocket maximum?
• Arguments for excluding from OOP max:
– Q/A 5 from FAQ XVIII
• Arguments against excluding:
– Exclusion is an end around the OOP maximum rules
– Informal comments from agency officials
• Do RBP guidelines apply?
• What about hospitals that provide better benefits for
services from hospital’s providers?
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#2: Are health plans that do not provide substantial hospitalization or
physician services “illegal” in light of notice 2014-69 and the
recent/pending regulations?
•
•
•
NO!!!!!!!
Notice 2014-69 indicates that such plans cannot provide minimum value
– “Pre 11/4/14” plans that satisfied calculator have until end of plan year that begins on or
before date final regulations are issued
– 11/4/14 plans will cease to be treated as providing MV as of the date final regulations are
issued
Such plans will still be considered as providing MEC
– MEC is nothing more than a group health plan that provides other than excepted benefits
– The presumption is that such plans qualify as MEC only if they satisfy the health insurance
reforms added to Section 27 of the PHSA
– Health insurance reforms do not require self-insured plans to provide ANY essential health
benefits except “recommended preventive care” services.
– Mental health parity rules do not require self insured plans to provide any mental
health/substance abuse benefits
• If an MH/SA condition is covered under one of the 6 categories, then that condition must
be covered under each of the 6 categories in which medical/surgical benefits exist
(coverage of a recommended preventive service that is mh/sa will not trigger coverage in
other categories)
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#2: Are health plans that do not provide substantial hospitalization or
physician services “illegal” in light of notice 2014-69 and the
recent/pending regulations?
• Net result of 2014-69/regulations:
– ALEs:
• Non-hospital/physician services plans can help satisfy
substantially all test for sledgehammer purposes;
• Will not avoid tackhammer taxes with respect to full-time
employees who forgo such coverage to enroll in subsidized
Exchange coverage;
– Individuals/all employers
• Will help satisfy individual mandate
• Eligibility will not disqualify individual from subsidy in
exchange as long as they don’t enroll in the coverage
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#3: What is an essential health
benefit?
•
•
•
•
Essential health benefit is typically defined by the applicable state “benchmark plan”
– Any benefit covered by the benchmark plan is an essential health benefit except
• Routine non-pediatric dental/vision
• Long term/custodial nursing home care benefits
• Non-medically necessary orthodontia
• abortion
– Other benefits treated as EHB even if not covered by state benchmark plan
• E.g. habilitative
• Recommended preventive treatment
Self insured plan not required to offer EHBs but if they do, they cannot impose an
annual or lifetime DOLLAR LIMITATION
Self insured plan not subject to state insurance laws
So how does a self insured plan define essential health benefit?
– Any definition authorized by HHS
– Informally, any state benchmark plan without regard to nexus
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#4: Are health plans required to cover same sex
spouses?
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•
•
•
•
Windsor and subsequent related IRS guidance simply requires federal law that
references/defines spouse to include same sex spouse if marriage entered into legally
Windsor did not add a new federal requirement to cover same sex spouses!!!!
– If ERISA or some other federal required a health plan to cover a “spouse”, then the
impact of Windsor would have been that the legal requirement to offer coverage to
a spouse included a requirement to offer coverage to a same sex spouse.
– No such specific requirement exists.
Are there any federal laws that might indirectly require coverage?
– Title VII?
What about state laws?
– E.g. anti-discrimination laws
– Preempted by ERISA?
What impact will a decision by Supremes' to overturn state bans on same sex marriage
have on benefit plan design?
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#5: How does the Mental Health Parity and Addiction Equity Act
impact a plan’s coverage (or lack thereof) of residential treatment
facilities and/or other specialty providers?
• MHPAEA does not require you to offer any particular benefits for
mental health/substance abuse disorders
• BUT non-quantitative limitations (NQTL) on benefits for MH/SA
conditions subject to certain requirements:
– An NQT may not be imposed on MH/SA unless any
processes, strategies, evidentiary standards, or other factors
used in applying the NQTL to MH/SA are comparable to and
applied no more stringently than the processes . . . . applied to
medical/surgical benefits.
• How might this apply to a residential treatment facility limitation
or exclusion?
– See example 9 in 29 C.F.R. 2590.712(c)(4)(iii)
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#6: Will a plan lose grandfather plan status if it imposes a
smoker’s surcharge?
• Grandfather plan status is lost if, among other things, the employer’s
share of the total cost for any level of coverage with respect to similarly
situated beneficiaries, expressed as a percentage, decreases by more than 5
percentage points from the employer’s share of the total cost for any level
of coverage with respect to similarly situated beneficiaries, expressed as a
percentage, on March 23, 2010.
• For example:
– Total cost of employee only coverage for full-time employees on March
23, 2010 was 3,000. Employer contributed $2500 or 83.3%
– Total Cost on January 1, 2015 for full-time employees is $4000 for
which the employer contributes $3200 or 80%.
– Grandfather plan status is NOT lost.
• What happens if employees who smoke pay a higher premium?
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#6: Will a plan lose grandfather plan status if it imposes a
smoker’s surcharge?
• See Q-5 of FAQ II
– Wellness incentives MAY cause a loss of GF status.
• Conservative response is that it will cause of a loss of GF status if employer’s
share decreases too much BUT . . . . . .
• Similarly situated beneficiaries are those employees within the same
employment classification (full-time/part-time) or geographic boundaries
– Smoker/non-smoker generally not a permitted distinction
– Wellness program rules bring smokers into same similarly situated class of
beneficiaries as non-smokers if wellness program rules followed.
• Two other FAQs seem to support this argument
– Q-3 of Part VI
– Q-2 of Part VI
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#7: Can employer’s give employees a choice between higher pay/no
benefits and lower pay/benefits?
• Likely subject to cafeteria plan rules
• Likely impacts affordability under Employer Shared
Responsibility Rules
– Recent FAQ from agencies would imply that such a choice
likely viewed as an increase in the employee contribution (Q-3
of Part XXII)
– Recent IRS guidance regarding impact of non-elective, noncashable employer credits on affordability not directly on
point but may provide enlightenment.
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#8: What happens when a non-variable employee employed by an
applicable large employer switches to a part-time position?
• Employee is variable/non-variable based on facts and
circumstances ON DATE OF HIRE
• Non-variable employee is subject to monthly measurement period
until they complete a standard measurement period/administrative
period.
• Unlike variable, THERE IS NO CHANGE IN STATUS RULE
APPLICABLE TO NON-VARIABLE WHO CHANGES TO A
POSITION THAT HAD THAT EMPLOYEE BEEN HIRED
INTO THAT POSITION WOULD HAVE BEEN VARIABLE.
– I.e. you don’t put a non-variable employee into an initial
measurement period!!!!
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#8: What happens when a non-variable employee employed by an
applicable large employer switches to a part-time position?
• ABC has 12 month initial measurement period that begins on date of hire; 12
month standard measurement period that begins each October 15 and ends the
following October 14.
• Ashley is hired on April 15, 2015 into a non-variable position. Ashley satisfies
a 60 day waiting period and coverage begins, if elected on June 15, 2015.
• On December 1, 2015, Ashley changes to a part-time position. There is no
expectation that Ashley will average 30 hours per week. Coverage is dropped
and Ashley is offered COBRA.
• Ashley remains employed but does not have 130 hours of service again until
July of 2016. No coverage is offered for July 2016 because Ashley was put in
an initial measurement period following his change in status that dated back to
his date of hire.
• Ashley received subsidy for July 2016.
• Does ABC owe an excise tax for Ashley?
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#9: How are the affordability standards applied to someone on an
unpaid leave of absence?
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Employee who qualifies as full-time for a stability period is “full-time” for each month
of the stability period regardless of the hours of service in those months.
– A “break in service” has no impact on this rule UNLESS/UNTIL they return from
the leave
Thus, a qualifying full-time employee on an unpaid leave of absence taken during a
stability period is still “full-time”.
“Knee jerk” reaction is to terminate coverage for someone on unpaid leave and offer
COBRA.
COBRA likely not affordable for the remaining months of the stability period.
Excise taxes may be imposed for months that the employee is not otherwise eligible for
affordable/minimum value coverage from the employer IF the employee is receiving a
subsidy in the Exchange.
– Could an employee previously eligible for affordable coverage qualify for a
subsidy in the Exchange?
– Yes, special enrollment period is triggered if coverage becomes unaffordable.
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#9: How are the affordability standards applied to someone on an
unpaid leave of absence?
• W-2:
– Based on annual W-2 wages paid during period that coverage was offered.
• COBRA following “termination of employment” excluded from this
period
• COBRA following change in employment status is included in this
period.
• Cannot use W-2 unless premium remains the same OR amount paid
remains the same percentage of compensation
• Rate of Pay Safe Harbor:
– Hourly: Should have no impact (presumably hourly rate is still the same
while out on leave even though not getting paid so no adjustment required)
– Salary: Cannot use rate of pay if monthly salary is reduced.
– Is monthly “salary” reduced if on “unpaid leave”?
• Rate of Pay: no problems
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#10: Must employers who receive notice from one of the Exchanges
that an employee has received a subsidy appeal?
• All employers (ALE or not) will receive notices from
Exchanges identifying employees (full-time/part-time)
who have qualified for a subsidy in the Exchange
– Obviously, they have qualified because they have represented
that they are not eligible for affordable, minimum value
coverage from the employer
• Employer’s may appeal this determination by the
Exchange
– NOT REQUIRED TO APPEAL!!!
– But should the employer appeal?
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