The Health Care Reform dilemma continues

The Health Care Reform dilemma
continues: What is now known to be
applicable to Puerto Rico employers
What we know today...
As discussed in earlier Newsletters we know that Title XXVII of the Public Health Service Act (PHSA), as
amended by the Title I of the Affordable Care Act (ACA), includes the territories in the definition of
“State”. Making all consumer protection amendments applicable to Puerto Rico.
The Individual Mandate does not apply to a territory that has its own distinct tax code, because there is
an explicit exemption for residents of the territories provided by operation of section 5000 A(f)(4)(B).
(4) Individuals residing outside United States or residents of Territories – Any applicable
individual shall be treated as having minimum essential coverage for any month
(B) if such individual is bona fide resident of any possession of the United States (as determined
under 937(a)) for such month.”
Thus, the Individual Mandate is not applicable to Puerto Rico, and the local government decided against
adopting similar methods for the local version.
The Employer Mandate, it is now understood based on regulatory interpretation and legal opinions, that
this is inapplicable to Puerto Rico employers for several reasons.
1. Under the statute, all residents of the territories are automatically deemed to have “minimum
essential coverage.”
2. PR local government decided against electing establishing an exchange, or mirroring premium tax
credit provisions and
3. Statutory language categorically states that only insurance plans offered in the 50 states and the
District of Columbia may qualify as “eligible employer-sponsored plans” and
What we need not forget... local regulations
In August 29, 2011 our local government enacted Act No. 194, also known as the Health Insurance Code.
Art.2.050, of the Act clearly states, that any provision of the Code that is found in conflict with a Federal
law or provision, which is applicable to Puerto Rico, in matters related to health and health insurance,
will be deemed amended to ensure it harmonizes with the federal law or provision. It is relevant to note
that we must take these local regulations into account, since in some instances these may provide for
enhanced or additional benefits than those provided under the federal statutes.
On March 1, 2013 the Insurance Commissioner Office for PR, issued a notice to disclose the standards
and rules with regards to Essential Health Benefits (EHB) that will enable harmonizing ACA standards for
implementation in our local health insurance market. These standards become effective in January,
2014 whereas all insurance providers that cater to the individual and small group market (2-50), and
which are not grandfathered, are obliged to include at a minimum these “essential health benefits”
standards. Health Plans that are considered self-funded or large group (100+) are exempted from this
This has a direct impact on the eligibility provisions of benefits covered under ERISA. It is relevant to
note that “the place where the marriage was celebrated” and not “the place of residence” set the
standard for the new rule and definition.
So what are the implications and relevance of PR Government Health Reform initiatives? And the
early renewals that are currently being offered?
All along we have been advising that once the local authorities made and announced a final decision on
how the order aspects of ACA (besides consumer protection) would be implemented, additional
information and next steps would be forthcoming.
Puerto Rico’s governor, Garcia Padilla announced the final determination on not sponsoring a
government run exchange, for Puerto Rico. Nonetheless, an open enrollment season under the “Mi
Salud Plan” is under way during the last quarter of 2013, for enrollment commencing as of January, 1,
It is also relevant to note that as part of the efforts to implement ACA provisions and under the guidance
of our Insurance Commissioner Office, health insurance organizations and insurers subscribing health
plans in Puerto Rico are required (See Normative Letter, CN-2013-158-AS, dated October 7th, 2013) and
obliged to market products and premiums that have been previously approved by its office and enable
the implementation of ACA provisions and must be made available as of January 1st 2014. If further
notes that compliance with local normative & circular letters guidance, to abide with the local Health
Insurance Code is mandatory, such as that which pertains to products, rates and guaranteed
The rules and guidelines that will construe our local marketplace with respect to characteristics and plan
design and many other administrative matters have been issued by the Insurance Commissioner. (See
normative letter CN-2013-156-AS dated September 30, 2013, which amends previous letter CN-2013155-AS, issued in July 29, 2013).
From the above reference guideline, we may highlight several areas that will help each of us understand
the new changes as they are more directly related to the consumer or insured, and that insurers and
insurance health organizations must comply with:
Establishing rates for the individual and small group segment. Rates may only vary in consideration to
the following criteria:
1. If individual or Family Coverage (based on the different groupings available for family coverage).
2. Age, as per established ranges. Premiums will now take into account an actuarial value based on age.
Family coverage premium within a group or individual health insurance contract will vary based
on total number of family members covered.
Family coverage will consider up to 3 eldest children when establishing family premium rates.
Age Range
Premium Rate Factor
Variable by age (1.0 thru 2.952
1. Tobacco use warrants for an additional adjustment on premium rating
2. Puerto Rico is considered one sole geographical area, thus no regionalization of premiums is
3. Grandfathered Plans are exempted from these premium rate guidelines.
Essential Health Benefits (EHB's):
Individual and Small Group coverage must provide “aggregate” essential health benefits to be
considered a health plan under ACA. In Puerto Rico the approved benchmark plan is the plan that
equates to SSS Optimo Plus plan. [1]Pediatric Dental and Vision coverage must equal the Federal
Employees Dental and Vision programs.
The guidelines extend a firm prohibition on discrimination when providing or offering essential health
benefits coverage. Thus, insurers and health organizations cannot consider age, longevity, current or
expected impairment or disability, medical dependency, quality of life or other health conditions when
designing benefits and insurance products, if these are to be deemed as essential health benefits.
Cost sharing provisions
The local Insurance Commissioner has issued guidelines to this regard, (See, CN-2013-156-AS and CN2013-159-AS) with respect to what is considered preventive health, for children, women and men, as
established by federal guidelines, which we have covered in previous newsletters; rules that prevent
imposing cost sharing charges even when services are rendered out of network: only if the office visit
primary purpose was for preventive care , or when services are rendered under emergency coverage. As
it is the case in other areas, grandfathered plans are exempted.
Furthermore, the maximum out of pocket an insured must assume as cost sharing for essential health
benefits is capped at $6,350.00 for individual coverage and $12,700.00 for family coverage. This is the
maximum amount per contract year and includes deductibles, copays and coinsurance amounts related
to essential health benefits. If the service is not considered and EHB’s, then the amount paid, is not
considered for purposes of this cap. The applicable maximum cap is bound to be revised annually by the
Insurance Commissioner.
Puerto Rico's enrollment period under the Health Reform
As announced by the government and disclosed in the Normative letter issued by the Office of the
Insurance Commissioner, (CN-2013-156-AS) insurers and health insurance organizations are required to
provide available individual market products and insure all individuals that apply and requests insurance
coverage, without regard to insurability considerations, waiting periods or pre-existing conditions. This
guaranteed enrollment is available only during annual open (‘fixed”) enrollment periods. Our Initial
Annual Open Enrollment Period that is underway began in October 1st 2013 and will run until March 31,
2014. Only this first time around will coverage enrollment received on or before December 31st is
processed for an effective date of January 1st 2014.
As of October 1, 2014 and thereafter the open enrollment season will terminate on December 31st of
each year. Special rules with respect to effective date of coverage apply, enabling individuals that enroll
on or before the 15th day of the month to be covered as of the 1st day of the following month. On the
other hand, if the enrollment is completed after the 15th day of the month, coverage is available as of
the 1st day of the second month after enrollment is completed. Other existing standards and rules for
Open and/or Special Enrollment periods prevail. Plans that commenced during 2013 are not required to
change their renewal schedule. If that is the case, as per ACA, insured’s have a special 60 day enrollment
period to renew plans whose coverage expires throughout 2014, as a transition rule since this will be the
1st year the guaranteed subscription is implemented.
How about the early renewals that are currently being offered?
In order to expedite the launch of ACA and local provisions that become effective as of January 1st, 2014
and in consideration to the reality for needed efforts in attaining a coherent convergence of local and
federal requirements, PR’s Insurance Commissioner disclosed the procedures that need to be followed
by insurers and health insurance organization, when enabling early renewals, during this transition into
2014. In order to expedite early renewal these entities must warrant that:
- The early renewal is not intended to avoid compliance with local and federal health reform regulations,
nor to affect insured’s rights, and
- Insured’s will be required to voluntarily provide a written informed consent, to renew the health
insurance plan at an earlier date and prior to its expiration date. Individuals must be advised as to the
consequences of early renewal with regards to other ACA provisions, as well as to the fact that the early
renewed plans may not include all the essential health benefits scheduled for January 1, 2014
- The renewed plan must be identical to existing plan, and no changes to limits, conditions or exclusions
are permissible.
- Early renewal must be completed on or before December 31st, 2013 and may only be effective until
December 30, 2014. As of January 1, 2015 all plans must be in full compliance with local and federal
(CSSPR &ACA) health reform provisions.
- Early renewal notices must be issued on or before 60 days prior to the scheduled early renewal
By: Michelle Benitez, Consultant DBA/ Right Track
Información Cortesía de: Carrión, Laffitte & Casellas, Inc. / HUB INTERNATIONAL/CLC
Insurance Services Tel 787.641.2738 / Fax 787.641.2679