New Rule On Excepted Benefits, Short-Term Coverage; Mental Health And Substance Use FAQs

On October 28, the Departments of Health and Human Services, Labor, and Treasury released a final rule governing excepted benefits coverage, lifetime and annual limits, and short-term limited duration coverage. The regulations finalize in part proposed regulations issued by the departments in June.

The Final Rule

The final rule adopts essentially unchanged the portions of the proposed rule it covers. However, two of the topics addressed by the proposed rule—group fixed dollar indemnity coverage and expatriate plans—are not being finalized at this time. The final regulations also do not address specified disease policies (such as cancer policies), a topic on which the departments had requested comment in the notice of proposed rulemaking.

Excepted Benefits

Most of the Affordable Care Act’s insurance reforms apply to non-grandfathered individual and group insurance coverage and self-insured group coverage. They do not apply, however, to a category of insurance coverage called excepted benefits. This category was created by the Health Insurance Portability and Accountability Act (HIPAA), an insurance reform statute from the late 1990s. Excepted benefits are a diverse assortment of insurance coverage, including

• insurance that only incidentally provides health benefits (like auto liability or worker’s compensation coverage);
• limited scope health coverage (such as dental, vision, and long-term care coverage);
• “noncoordinated” excepted benefits coverage, which is not coordinated with group health coverage and pays benefits regardless of whether such benefits are provided (such as specified disease or indemnity coverage); and
• coverage that is supplemental to some other form of coverage (like Medicare or Tricare supplemental coverage or coverage supplemental to a group health plan.)

Excepted benefit coverage is not minimum essential coverage under the ACA, so individuals who have only excepted benefit coverage must still pay the individual responsibility coverage tax and large employers that offer only excepted benefit coverage to their full-time employees will have to pay the employer responsibility penalty if it otherwise applies. There is concern that individuals who purchase excepted benefits may not be aware how limited the coverage is and that they may not know that they will have to pay the penalty. There is also concern that individuals who purchase excepted benefit coverage rather than ACA-compliant coverage may be healthier than average purchasers of ACA-compliant coverage; thus, their absence from the individual insurance market may be a factor contributing to destabilization of the individual market risk pool.

Short-Term Coverage

Short-term, limited duration coverage is not excepted benefit coverage under HIPAA and the ACA. Rather, it is sui generis—it can only be sold in the individual market but is not individual market coverage subject to the ACA. Short-term coverage was intended to be transitional coverage, for example for individuals between jobs.

There is evidence, however, that insurers have been selling short-term coverage for terms of up to a year and extending the coverage indefinitely so that it effectively substitutes for ACA-compliant coverage. The preface to the regulation notes that short-term coverage grew from 1 to 1.5 million member months from 2013 to 2015. It is quite possible that some purchasers did not realize how limited their coverage was, that it was not guaranteed renewable, and that it did not free them from having to pay the individual responsibility penalty.

Neither HIPAA nor the ACA defined how short “short-term” is, but prior regulations required the term of coverage to be less than 12 months. The October 28 final regulations provide that short-term coverage must be for a period less than three months. This accords with the time period that individuals may remain without coverage without having to pay the individual responsibility penalty. The policy contract and all application materials connected with enrollment must also prominently display a warning stating:

THIS IS NOT QUALIFYING HEALTH COVERAGE (“MINIMUM ESSENTIAL COVERAGE”) THAT SATISFIES THE HEALTH COVERAGE REQUIREMENT OF THE AFFORDABLE CARE ACT. IF YOU DON’T HAVE MINIMUM ESSENTIAL COVERAGE, YOU MAY OWE AN ADDITIONAL PAYMENT WITH YOUR TAXES.

The regulation also provides that the less-than-three-month limit applies to any extensions “that may be elected with or without the issuer’s consent.” This provision is intended to keep insurers from indefinitely extending short-term coverage. The Departments, however, rejected the suggestion from commenters that individuals not be allowed to purchase short-term coverage if they had previously been covered under a short-term policy, deeming such a policy to be too difficult to enforce. Insurers are not therefore, actually prohibited from renewing short-term policies as long as they do not guarantee renewability.

Similar Supplemental Coverage

“Similar supplemental coverage” that supplements and fills gaps in group health coverage is excepted benefit coverage. The final rule clarifies that supplemental coverage must either

1. cover benefits that are not covered by the primary coverage and are not essential health benefits in the state where the coverage (including expatriate coverage) is issued;
2. cover cost-sharing for primary benefits; or
3. both provide supplemental benefits and cover cost-sharing.

Similar supplemental group coverage does not include coverage that becomes secondary or supplemental only under a coordination of benefit provision. The regulation does not explicitly supersede earlier guidance that provided that supplemental coverage could not cost more than 15 percent of the cost of the primary coverage and could not differential among individuals in eligibility.

Travel Insurance

The final rule also recognizes travel insurance as a new category of excepted benefits. It defines travel insurance as insurance coverage for the personal risks of planned travel, such as trip interruption or cancellation, loss of baggage, damages to accommodations or rental vehicles, and sickness, accident, disability, or death during travel, as long as health benefits are not offered on a standalone basis and are incidental to other coverage. Travel insurance does not include comprehensive medical protection for travelers with trips lasting six months or longer, such as expatriates or deployed military personnel.

Essential Health Benefit Definition For The Purposes Of Annual And Lifetime Dollar Limits

Finally, the final rule defines essential health benefits (EHB) for purposes of the ACA’s annual and lifetime dollar limits. Non-grandfathered health plans subject to the ACA cannot impose annual or lifetime dollar limits on EHB. This prohibition applies to large group plans, but large group plans are not required to cover the EHB, which must be covered by individual or small group plans.

The final rule defines EHBs for plans that are not required to cover EHB as any EHBs covered by an EHB-benchmark plan in any state (including state-mandated benefits that qualify as EHB) or benefits under one of the three largest Federal Employees Health Benefit Program plans (including any benefits added to meet EHB regulatory requirements).

Group Fixed Dollar Indemnity Plans

As noted at the outset, the final rule does not include proposed provisions governing group fixed dollar indemnity plans. These proposed rules would have required group fixed indemnity plans to be offered on a per-time-period rather than per-service basis and would have required a warning in application, enrollment, and reenrollment materials that fixed-dollar indemnity coverage is not minimum essential coverage and cannot be relied to meet the individual responsibility requirement. A similar notice requirement already applies to individual fixed indemnity coverage. A further requirement for individual fixed indemnity coverage—that the coverage be sold only to individuals who attest that they have ACA-compliant primary coverage—was invalidated by a federal court earlier this year, but was not part of the proposed rule for group fixed indemnity coverage.

The final rule takes effect for coverage for policy and plan years beginning after January 1, 2017. The Departments will not enforce the requirement that short-term coverage be less than three months, however, for products sold before April 1, 2017, as long as the coverage ends on or before December 31, 2017. States may also elect not to enforce the time limit for coverage sold before April 1.

Mental Health And Substance Use Disorder Parity Report And FAQs

On October 27, the President’s task force on Mental Health and Substance Use Disorder Parity released its final report. The report was accompanied with a blog post, fact sheet, disclosure guide for making the most of mental health and substance use disorder benefits, and a set of frequently asked questions (FAQs) issued jointly by the Departments of Labor, Health and Human Services, and Treasury. HHS is also unveiling a beta version website designed to help consumers find the appropriate federal or state agency to help them with mental health and substance use disorder parity complaints, appeals, or other actions.

This post will not review the Task Force report itself, but rather focuses on the FAQs, which implement certain recommendations of the report. These FAQs supplement and clarify a number of FAQs and other guidance issued by the Departments in the past on MHSUD parity.

Tobacco Cessation Services

The first FAQ is really a request for information. The Affordable Care Act requires health plans and insurers to cover preventive services given an “A” recommendation by the United States Preventive Services Task Force (USPSTF). On September 22, 2015, the USPSTF updated its tobacco cessation “A” recommendation; the group recommended that “clinicians ask all adults about tobacco use, advise them to stop using tobacco, and provide both behavioral interventions and FDA-approved pharmacotherapy for cessation to adults who use tobacco.” The USPSTF further recommended that “[b]oth intervention types (pharmacotherapy and behavioral interventions) are effective and recommended; combinations of interventions are most effective, and all should be offered.” The USPTSTF recommendation identifies seven FDA-approved over-the-counter and prescription drugs that are effective for tobacco cessation; it also indentifies effective individual, group, and telephonic behavioral interventions.

Health plans and insurers must cover tobacco cessation services consistent with this recommendation without cost sharing for plan years beginning a year after the recommendation was made—that is, September 22, 2016. Even though the date for compliance has passed, the Departments request comments on whether plans and issuers may use reasonable medical management techniques to limit pharmaceutical tobacco cessation interventions available without cost-sharing, individually or in combination; the number of quit attempts that should be allowed per year or the duration of interventions; or the behavioral interventions available without cost sharing.

Mental Health Parity and Addiction Equity Act

The remainder of the FAQs deal with the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). The MHPAEA provides that group health plans and insurers that offer mental health or substance use disorder (MH/SUD) service benefits may not impose financial requirements and quantitative and non-quantitative treatment limitations (NQTLs) that are more restrictive than the predominant financial requirements and treatment limitations that they apply to substantially all medical and surgical benefits. The FAQs address in detail what these requirements mean.

Disclosure Of MH/SUD Medical Necessity Determinations And Reasons For Claims Denials

The requirements of the MHPAEA can only be enforced if the financial requirements and treatment limitations imposed by an insurer are health plan are known. The MHPAEA requires, therefore, the health plans and insurers disclose their criteria for MH/SUD medical necessity determinations and reasons for claim denials to consumers, providers, and regulators. Information on standards applied for medical benefits may also be necessary to perform parity analysis. The FAQs ask whether model forms for requesting disclosures would be helpful to consumers, providers, and regulators, and whether additional steps would be helpful to ensure compliance with disclosure requirements. The FAQs specifically cite the portal mentioned above which consumers can use to identify the federal or state agency that can help with disclosure requirements and appeals.

The financial parity requirements of the MHPAEAA prohibit group health plans or insurers from imposing financial requirements (such as copayments or coinsurances) or quantitative treatment limitations (such as day or visit limits) on MH/SUD benefits in a classification (such as inpatient or outpatient treatment or prescription drugs) that are more restrictive than the predominant levels that apply to substantially all medical and surgical benefits in the classification of services. A requirement is considered to apply to substantially all medical/surgical benefits in a classification if it applies to at least two-thirds of all medical/surgical benefits in the classification. If it does not apply to at least two-thirds of medical/surgical benefits, it cannot be applied to MH/SUD benefits in that classification.

Financial Requirements And Quantitative Treatment Limitations

If a financial requirement or quantitative limitation does apply to at least two-thirds of medical/surgical benefits in a classification, the level that may be applied to MH/SUD benefits in the classification may not be more restrictive than the predominant level that applies to medical/surgical benefits (defined as the level that applies to more than one half of medical/surgical benefits subject to the limitation in the classification). The determination of the portion of medical/surgical benefits subject to the quantitative limit is based on the dollar amount of all plan payments for medical/surgical benefits in the classification expected to be paid under the plan for the plan year. The MHPAEA regulations provide that “any reasonable method” may be used to determine the dollar amount of all plan payments.

The FAQs discuss at length how these determinations are to be made for small plans that lack sufficient claims volume to provide credible projections for the predominant levels that apply to substantially all claims. In these situations, the plan should not rely on data from its insurer or third party administrator’s larger book of business, but should rather have a qualified actuary use a reasonable method for making projections, using data from similar plans with similar demographics and documenting assumptions used for the projections.

Non-Quantitative Treatment Limits

The remaining FAQs deal with non-quantitative limits. A plan or insurer cannot impose a NQTL with respect to MH/SUD benefits in a classification unless under the terms of the plan as written and in operation, any processes, strategies, evidentiary standards, or other factors used in applying the NQTL to MH/SUD benefits in the classification are comparable to, and are applied no more stringently than, those applied to medical/surgical benefits in the classification. Several of the FAQs address drugs that are used for treating opioid addiction.

The FAQs clarify that:

• A plan or insurer may not require an enrollee to be examined in person by a representative of the plan prior to a MH/SUD inpatient admission if enrollees can be admitted for medical/surgical services with only a telephone interview;
• A plan or insurer may not require an enrollee to participate in an intensive outpatient treatment program for MH/SUD before an inpatient admission, even though the same requirement is applied for medical/surgical services, if no such program is available for MH/SUD treatment in the enrollee’s area;
• A plan or insurer may not impose prior authorization or “fail-first” requirements for drugs used for treating opioid addiction if these requirements are not imposed on drugs used for treatment of medical/surgical conditions that have similar risks or indications;
• A plan or insurer may not impose prior-approval for 30 day refills of opioid addiction treatment drugs, a requirement not consistent with nationally recognized treatment guidelines, if it follows nationally recognized treatment guidelines for requiring prior authorizations for medical/surgical drugs; and
• Plans and insurers may not exclude coverage for court-ordered SUD treatment if they do not exclude coverage for court ordered medical/surgical treatment, but may require that court-ordered treatment be medically necessary.

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