Compensation and Employment

In follow-up to our prior blog post, Concierge Medicine – Is it for you?, we recognize that while a concierge or direct-pay practice might be a good choice for a physician or physician practice group, patients do not necessarily feel the same way.  When patients hear that a medical practice is a “concierge” or “direct-pay” practice, they often think of prohibitively high out of pocket costs.  One way for a concierge or direct-pay practice to be more enticing to patients is to structure its billing methods so patients may be able to obtain reimbursement from their health savings account (HSA) or flexible spending account (FSA) for some of the associated costs.  Generally, access fees will not be reimbursable through either a HSA or FSA.  But costs incurred for qualified medical services actually rendered to the patient may be.  Here are some quick rules of thumb for when HSA and/or FSA reimbursement may be applicable to cover such costs:

 

Fees for Qualified Medical Services:  Any fees charged for qualified medical care (generally defined under the Internal Revenue Code to include the diagnosis, cure, mitigation, treatment or prevention of disease) are generally reimbursable under a HSA or FSA, to the extent not reimbursed by the patient’s insurance.

 

Access Fees or Subscription Fees:  Fees related solely to having access to a physician will not be reimbursable under either a HSA or FSA.  This is because they are not fees for qualified medical services, but rather are more akin to insurance premiums (which are also not reimbursable under a HSA or FSA).  Such non-reimbursable fees would include fees for admission as a patient, monthly retainer fees, fees for a reduced wait time, fees for 24 hour access to a physician, or any other fees not directly related to the rendering of medical services.

 

Prepaid Fees for Qualified Medical Services:  If an access fee or subscription fee includes a prepaid fee for a qualified medical service (for example, the annual fee includes the cost of a comprehensive physical examination), any costs attributable to that medical service that are not reimbursed by insurance may be reimbursable under a HSA or FSA, but not until such time as the service is actually rendered to the patient.

 

In order for patients to be able to take advantage of reimbursement from their HSA or FSA, they must have appropriate supporting documentation for the qualified medical service.  Documentation should include the patient’s name, the date of service, the type of service, and the fair market value charge attributable to just the medical service portion of the patient’s bill.

 

In sum, concierge and direct-pay practices can work for physicians on account of the upfront fees paid by patients.  However, if such fees include prepayment for medical services, it will not only encourage patients to take advantage of preventative care but may also enable them to recoup part of their upfront costs from their HSA or FSA once such services have been rendered.

 

Next week, look for the release of Medical Marijuana 102, a follow-up blog post to Veronique Urban’s Medical Marijuana 101:  The State of the Law in NY.  This will be the second blog post in a series of articles discussing the current state of the law in New York regarding medical marijuana.

According to the 2016 Kaiser/HERT Employer Health Benefits Survey, the average annual premium for employer-sponsored family health insurance coverage in 2016 was $18,142 – representing a 20% increase since 2011 and a 58% increase since 2006.  As the cost of healthcare coverage has continued to rise dramatically, patients are seeing a reduced level of personal care.  The average wait to schedule an appointment with a doctor in the United States is 24 days – up 30% since 2014.  Meanwhile, physicians report that they spend, on average, only 13 to 24 minutes with a patient and of that time, approximately 37% of it is spent on EHR and other administrative tasks.

 

In 2010, the Affordable Care Act imposed a requirement that most Americans have insurance coverage.  But it also identified direct primary care as an acceptable option.  Whereas concierge and direct-pay medicine had once been limited to a very wealthy consumer base, it was suddenly poised to hit the mainstream.  And it can be a win-win for both physicians and consumers – physicians have the potential to devote more time to each patient and less time to paperwork, and consumers can pay for faster, more personalized attention from a physician instead of paying the pricey premiums now charged in the market for traditional insurance coverage.

 

But is concierge medicine right for every physician?

 

  1. Do you want to continue to participate in Medicare? If so, you will still be required to bill Medicare for your concierge patients and will not be able to charge Medicare patients extra for Medicare covered services.  Nor can you charge a membership fee (aka an access fee) that includes extra charges for services Medicare usually covers.  (The exception is if you do not accept assignment, in which case you can charge up to 15% more than the Medicare-approved amount for a Medicare covered services.)  If Medicare usually covers a service but will not pay for it, you must still provide the patient with an ABN.  And even if you do choose to opt out of Medicare, give extreme care to following the proper procedures or you could be subjected to substantial penalties.

 

  1. You still need to price services at fair market value. Even if you opt out of Medicare, providing “free” services because they are included in the access fee could run afoul of state anti-kickback laws.  Obtain advice regarding your state laws before setting your contract, and set a fair market value at which you provide each service.

 

  1. Check with your state to make your concierge/direct-pay contract is in compliance. Some states – including New York and New Jersey – have questioned whether these arrangements are deemed to be the practice of insurance but even where they are not, certain provisions of state insurance law could apply to your contract.

 

  1. Termination of existing patients. You can expect attrition by many, if not most, of your existing patients when transitioning from a traditional practice to a concierge or direct-pay model.  You will need to comply with state laws and ethical rules with regard to finding alternate care.

 

  1. Compliance with HIPAA. To the extent you are not participating in insurance or Medicare, you might not be a “covered entity” under HIPAA; however, there are many state privacy and confidentiality laws that you will still be required to comply with.

 

In some instances, transitioning to a concierge or direct-pay business model could be a win-win for both doctors and patients.  However, there are many legal issues that require careful consideration as you set up your practice.  There are many consulting firms that specialize in planning this transition, and a good attorney can help you avoid any pitfalls and ensure compliance with all applicable laws and regulations.


A recent article in the New York Times examined the growth of noncompete agreements, noting “Noncompete clauses are now appearing in far-ranging fields beyond the worlds of technology, sales and corporations with tightly held secrets, where the curbs have traditionally been used. From event planners to chefs to investment fund managers to yoga instructors, employees are increasingly required to sign agreements that prohibit them from working for a company’s rivals.”

Health professionals, and especially physicians, have for countless years been required to execute noncompetes and other restrictive covenants as part of their partnership agreements or employment agreements with professional practices, healthcare facilities and institutional providers.  While nothing new, noncompetes and restrictive covenants continue to be an important consideration in any professional partnership or employment situation.

There are certain key points which the parties must carefully consider regardless of which side of the transaction they are on.  New York courts will consider the following when determining the enforceability of a noncompete or restrictive covenant:  (a) the practice/employer’s need to protect legitimate business interests (such as patient lists, payor contracts and payment rates, and the terms of its business arrangements), (b) the individual/employee’s need to earn a living, (c) the public’s need to access the services of physicians and other health professionals, and (d) the reasonability of the time, scope and geographic areas restricted by the agreement. 

Common restrictions include non-solicitation of a practice’s patients and employees for a period of time following separation; prohibition on the practice of medicine (or the individual’s specialty) within a certain mile radius of the office or practice site(s) (or within certain zip codes) for a period of time.  Moonlighting during the term of employment or affiliation may also be restricted.  Parties to these agreements may consider ways to make the restrictions less burdensome, which could include severance payments or full or partial release from the restrictions if the individual is terminated without cause or his/her employment agreement is not renewed.  Commonly, a practice or employer may be entitled to injunctive relief (court order) and liquidated (monetary) damages for violations of the restrictions. 

Employers and employees should recognize that reasonable restrictions are enforceable, but also that litigation over enforceability can be expensive and time-consuming.  The parties to an employment agreement for a cardiologist might recognize that a restriction on practicing cardiology for 6 months within 5 miles from the practice’s offices in Uniondale may be considered reasonable and likely to be enforced, while a restriction on the practice of all medicine for 5 years in the counties of Nassau, Suffolk and Queens may not be considered reasonable; they can negotiate the restrictions accordingly.

Discussion of noncompetes and restrictive covenants should be part of an overall discussion with competent legal counsel regarding potential employment and partnership agreements.  The restrictions should be carefully reviewed and understood before executing agreements, as their impact may be felt by the parties for years after execution of the agreement.

          In March 2013, the Second Circuit certified to the New York Court of Appeals the issue of whether a medical corporation may be liable for the unauthorized disclosure of medical information, when the employee responsible for the breach was not a physician and was acting outside the scope of her employment (see post).  In Doe v. Guthrie, decided last week, the New York Court of Appeals answered that question in the negative.

The plaintiff in Doe v. Guthrie went to a healthcare clinic to be treated for a sexually transmitted disease.  A nurse at the clinic was the sister-in-law of the plaintiff’s girlfriend, and sent six text messages to her about plaintiff’s medical condition.  The plaintiff learned of the messages and complained to the clinic, which fired the nurse.  The clinic advised plaintiff that his confidential information had been improperly disclosed, and that disciplinary action had been taken.

Plaintiff sued, alleging among other claims the common law breach of fiduciary duty to maintain the confidentiality of personal health information.  The Second Circuit, which determined that the nurse’s actions were neither foreseeable to defendants not within the scope of her employment, certified the question whether there was a cause of action for breach of fiduciary duty of confidentiality without respondeat superior liability.

The New York Court of Appeals stated that a medical corporation is generally not liable for an employee’s tort outside the scope of employment, and refused to impose absolute liability on a medical corporation for an employee’s dissemination of a patient’s confidential medical information.  “A medical corporation’s duty of safekeeping a patient’s confidential medical information is limited to those risks that are reasonably foreseeable and to actions within the scope of employment.”

The Court counseled, however, that a medical corporation can still be liable for its own conduct, including negligent hiring or supervision, failing to establish adequate policies and procedures, and failing to properly train employees in safeguarding confidential information.  This potential liability incentivizes medical corporations to properly safeguard medical information.

The dissent would have recognized a claim against a medical corporation for acts of employees outside the scope of employment.  This view would have unfairly expanded the liability of medical providers, imposing absolute liability for any release of medical information.  The Court’s holding recognizes an appropriate balance, declining to find liability against a provider for employee acts outside the scope of employment, while at the same time recognizing that a provider can be liable for acts within the scope of employment as well as for the provider’s own negligence in maintaining confidential information.

While the medical provider in Doe v. Guthrie was not liable, the decision highlights the need for medical providers to have stringent standards governing the confidentiality of medical information, and to ensure that these standards are clearly communicated to all employees.

On October 2, 2013, New York City Mayor Michael Bloomberg signed into law the Pregnant Workers Fairness Act (the “Act”). The Act, which amends New York City’s Human Rights Law, prohibits employers from discriminating against workers who are pregnant or have a medical condition related to pregnancy or childbirth, and requires employers to provide a reasonable accommodation to such workers if such accommodation is requested. Under New York City law, a reasonable accommodation is any accommodation that can be made that does not cause an employer an undue hardship.

New Protections for Women

The Act supplements existing laws preventing discrimination against pregnant women in the workplace.  The Federal Pregnancy Discrimination Act, passed by Congress in 1978, prohibits employers with 15 or more employees from discriminating against persons on the basis of pregnancy, child-birth or related medical conditions, but does not speak to the provision of reasonable accommodations to such workers. In addition, although some parties have tried to use the Americans with Disabilities Act (“ADA”) to require employers to provide such accommodations, such attempts have been largely unsuccessful because in general the ADA does not apply to pregnant women unless they have a pregnancy-related disability.

The Act is scheduled to take effect 120 days after its enactment. The Act will apply to all employers with four or more employees, which is consistent with other anti-discrimination provisions found in the Human Rights Law.  An individual who believes that he or she has been unlawfully discriminated against on the basis of pregnancy, childbirth, or a related medical condition may bring an action in court for damages, injunctive relief and other appropriate remedies, or make a complaint to the NYC Commission on Human Rights. Remedies that can be instituted upon a finding that an employer has engaged in an unlawful discriminatory practice, include, among others (i) the issuance of an order to the employer to “cease and desist” the unlawful discriminatory practice; (ii) awarding back pay and front pay, or paying compensatory damages; and (iii) the imposition of civil penalties up to $250,000.

Employers are advised to review and update their policies and procedures to comply with the new requirements.  This would also be a good time to review existing policies related to the ADA and reasonable accommodations.

(This post was authored by Heather Harrison, an associate in the Labor & Employment practice at Farrell Fritz)

Although key provisions of the Patient Protection and Affordable Care Act (ACA) have been delayed until 2015, one important notice requirement is just around the corner. By October 1, 2013, virtually all employers must provide written notice to their employees about the federal and state Health Insurance Marketplaces (commonly referred to as the “exchanges”).  Open enrollment for the exchanges begins on October 1, 2013.

The notice must provide the following information:

  • an explanation of the Marketplaces;
  • a reference to www.healthcare.gov for employees to find information about the programs available to them;
  • information about premium subsidies that may be available to employees if they purchase a qualified health insurance plan through a Marketplace; and
  • notification that employees may lose their employer contribution to the health plan if it is obtained through a Marketplace.

The notice must be given to all employees, regardless of status (e.g., eligibility for employer-sponsored health insurance, part-time, full-time, exempt or non-exempt). For employees hired after October 1, 2013, employers must provide the notice within two weeks of their start date.

Employers must distribute the notice in a manner designed to actually reach each individual employee.  This can include direct in-hand distribution to employees (e.g., attached to employee paychecks), first class mail, or electronic delivery (if certain requirements are met).

The U.S. Department of Labor (DOL) has published model notices, which are available for download.

Please contact any of the attorneys in the Farrell Fritz Employment or Healthcare practices with questions about the ACA, notice requirements, or the DOL’s model language.

On May 29, 2013, the US Departments of Health and Human Services, Labor, and Treasury issued final regulations regarding wellness programs under the Patient Protection and Affordable Care Act (the “ACA”).  Wellness programs are programs offered by employers, or directly by insurance companies to their enrollees, to improve health and promote fitness. The ACA, in conjunction with the Health Insurance Portability and Accountability Act of 1996, prohibits discrimination against individuals regarding plan eligibility, benefits or premiums, but makes an exception for wellness programs. Wellness programs such as weight loss programs or smoking cessation programs allow employers to offer certain rewards in return for the employee’s adherence to health promotion and disease prevention.

Participatory Programs

There are two types of wellness programs under the ACA: participatory wellness programs and health-contingent programs.  Participatory wellness programs, which constitute the majority of wellness programs, are those that either do not provide a reward or do not include any conditions for obtaining a reward other than participation in the program. Participatory wellness programs include programs that reimburse employees for all or part of their gym memberships, offer rewards for participating in diagnostic testing programs, and provide a reward to employees for attending monthly, free health education seminars. Participatory wellness programs must be offered to all similar situated individuals, regardless of health status.

Health-contingent Programs

Health-contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward. Health-contingent wellness programs are divided into two sub-types: activity-only and outcome-based.

Under activity-only wellness programs, an individual is required to perform or complete an activity related to a health factor in order to obtain a reward but isn’t required to attain or maintain a specific health outcome. Examples of activity-only wellness programs include walking, diet or exercise programs. The final regulations implement safeguards so that individuals that are unable to participate in or complete the program’s prescribed activity due to a health factor such as recent surgery or pregnancy are given a reasonable opportunity to qualify for the reward.

In contrast, outcome-based wellness programs require an individual to attain or maintain a specific health outcome in order to obtain a reward. For example, an outcome-based wellness program may offer a reward to an employee that stops smoking or that attains certain results on cholesterol or blood pressure readings. Outcome-based wellness programs generally have a measurement test or screening as part of an initial standard, and individuals who do not meet the initial standard may be offered an educational program or other activity to achieve the same reward.

Program Compliance

To comply with the final regulations, health-contingent wellness programs must: (1) give individuals eligible for the programs the opportunity to qualify for the reward at least once per year; (2) provide rewards that do not exceed, together with the reward for other health-contingent wellness programs with respect to the plan, 30% of the total cost of employee-only coverage under the plan, or 50% to the extent the program is designed to prevent or reduce tobacco use; (3) be reasonably designed to promote health or prevent disease; (4) be uniformly available to all similarly situated individuals and provide a different, reasonable means of qualifying for the reward to those individuals who are unable to participate due to a medical condition; and (5) disclose the availability of a reasonable alternative standard to qualify for the reward in all plan materials describing the terms of a health-contingent wellness program.

The final regulations apply to group health plans with plan years beginning on and after January 1, 2014.  The three Departments anticipate issuing guidance in the future, and may propose modifications to the final regulations as necessary.

Over fifty cases across the country have challenged regulations promulgated under the Patient Protection and Affordable Care Act (“PPACA” or “Obamacare”) that require employer group health insurance plans to provide coverage for contraception, sterilization and related counseling (the “HHS Mandate”).  Suits have been filed by religiously-affiliated organizations as well as private business owners, asserting that the HHS Mandate will require them to provide health insurance plans that violate their deeply-held religious beliefs.  Claims have been brought under the Establishment, Free Exercise and Free Speech clauses of the First Amendment of the US Constitution, as well as the Religious Freedom Restoration Act and the Administrative Procedure Act.  Two of these cases have been filed in the Eastern District of New York and have now reached contrary conclusions on whether the suits are ripe for adjudication.

The United States has argued that challenges to the HHS Mandate are not ripe because the government is in the process of amending it to address religious objections.  A notice of proposed rulemaking suggesting amendments was issued in February 2013.  In addition, for certain non-profit organizations, a “safe harbor” applies, which extends the deadline for complying with the HHS mandate to August 1, 2013.

Judge Block decides “Not ripe”; Judge Cogan says “Yes it is”

In April, in Priests for Life v. Sebelius (decision),  EDNY Judge Frederic Block held that a challenge to the HHS Mandate was not ripe for judicial decision.  Although the HHS Mandate regulations have been published, Judge Block noted that the government had indicated an intent to amend them and had issued a notice of proposed rulemaking, and he cited to the presumption that government agencies are acting in good faith.  The Court found that the HHS Mandate is “not truly final” and that adjudicating the current regulations would be “a waste of judicial resources.”  Judge Block also noted that his holding was consistent with the overwhelming majority of courts to address the issue.

One case reaching a contrary result is also in the EDNY, Roman Catholic Archdiocese of New York v. Sebelius (decision).  In December 2012, Judge Brian M. Cogan held in that case that certain plaintiffs had standing to sue, and that challenges to the HHS Mandate were ripe and should go forward.  Judge Cogan recognized the government’s stated intent to amend the regulations, but observed that the HHS Mandate is “the currently-operative law,” and that failure to comply could result in substantial penalties.  The Court observed that a notice of proposed rulemaking would not prevent the HHS Mandate from going into effect, and found that the HHS Mandate “is not a non-final policy; it is a final rule.”  In language applicable to both his standing and ripeness analysis, Judge Cogan discounted the government’s argument that its intent to amend the regulations required dismissal, stating that: “There is no ‘Trust us, changes are coming’ clause in the Constitution.”

Issues concerning the HHS Mandate and any amendment will continue to work their way through the courts.  In the Archdiocese of New York case, the government recently filed declarations stating that it would never enforce the current regulations against the plaintiffs. The Court stayed proceedings and discovery, and indicated it would consider the newly-filed representations in the context of the government’s motion for reconsideration or an interlocutory appeal.  Courts outside of New York have split on whether injunctions against current enforcement of the HHS Mandate should issue in cases brought by for-profit plaintiffs not covered by the safe harbor.  The more than fifty cases at various stages throughout the country can be tracked on the website of the Becket Fund, which is representing plaintiffs in several of the cases.  Regardless of whether or how the HHS Mandate is amended, the issue of whether it conflicts with the religious liberty rights of organizations, businesses and individuals is likely to find its way to the Supreme Court.

In  last week’s decision in Doe v. Guthrie Clinic, Ltd. the Second Circuit Court of Appeals certified to the New York Court of Appeals the issue of whether a medical corporation may be liable for the unauthorized disclosure of medical information, when the employee responsible for the breach was not a physician and was acting outside the scope of her employment.

The plaintiff in Doe went to a health clinic to be treated for a sexually transmitted disease.  A nurse at the clinic was the sister-in-law of the plaintiff’s girlfriend, and sent six text messages to her about plaintiff’s medical condition.  The plaintiff learned of the messages and complained to the clinic, which fired the nurse.  The clinic advised plaintiff that his confidential information had been improperly disclosed, and that disciplinary action had been taken.

Plaintiff sued, alleging among other claims the common law breach of fiduciary duty to maintain the confidentiality of personal health information.  On appeal from the dismissal of the claim by the district court, the Second Circuit first recognized that a common law action against a physician who improperly discloses confidential medical information is well established in New York.  However, the Court also noted that corporate liability is not implicated by the ultra vires acts of employees.  The issue presented, therefore, was whether the common law claim can lie against the corporation when the responsible employee was acting outside the scope of her employment.

Scant Case Law

The Second Circuit found very little New York case law on the issue.  A Third Department case found an expanded corporate tort liability in such a situation, but without citation to statutory authority or case law and over a dissent by two justices.  A subsequent New York Court of Appeals case did not impose liability on a medical corporation for a sexual assault by a physician, but that case did not involve an alleged breach of fiduciary duty for unauthorized disclosure of medical information.

The Second Circuit found the issue proper for certification to New York’s highest court. In addition to the sparse state case law, the Court noted that the issue implicates significant New York state interests in the confidentiality of medical information and in the liability of New York-based medical providers.

Compliance Concerns

Regardless of how the New York Court of Appeals decides this issue, the Doe case again highlights the need for medical providers to have good policies governing the confidentiality of medical information, and to ensure that these policies are clearly communicated to all employees.  Providers may wish to review HIPAA, HITECH and State requirements with their legal counsel in order to comply with the often complex provisions of the laws and regulations.

The U.S. Department of Health and Human Services (HHS) has issued a final rule stating the future health insurance exchange (“Exchange”) and insurance issuer standards related to coverage of essential health benefits (EHB) and actuarial value. The final rule further establishes a timeline for when qualified health plans (QHPs) should be accredited in federally facilitated Exchanges.

Beginning January 1, 2014, non-grandfathered insurance plans in the individual and small group market and those in the Exchanges will be required to provide coverage of benefits or services in ten (10) separate categories that reflect the extent of benefits covered by a typical employer plan. A QHP is one that provides a benefits package that covers EHB, includes cost-sharing limits, and meets minimum value requirements.

Essential Benefits

Regarding scope of EHB, each state will be permitted to identify a single EHB-benchmark plan. This is defined as the standardized set of essential health benefits that must be met by a QHP from the following four choices:

  1. Small group health plan, defined as the largest health plan by enrollment in any of the three largest small group insurance products by enrollment in the state’s small group market;
  2. State employee health plan, which is any of the largest three employee health benefit plan options by enrollment offered and generally available to state employees;
  3. Any of the largest three national Federal Employees Health Benefits Program (FEHBP) plan options by aggregate enrollment that is offered to all health benefits eligible federal employees; or
  4. A non-Medicaid coverage plan with the largest insured commercial enrollment offered by a health maintenance organization (HMO) operating in the state.

The default base-benchmark plan will be the first option discussed above in the event a State does not make an election. A benchmark plan must include coverage in each of the 10 categories (ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care).

A multi-state plan must meet benchmark standards set by the U.S. Office of Personnel Management (OPM). Additional information on EHB benchmark plans can be found here.

The Affordable Care Act creates four tiers of health plans available for purchase through the Exchanges. Each tier is defined by its actuarial value (AV). The HHS has created an AV calculator to assist in determining a plan’s metal level.

  • A bronze health plan is a health plan that has an AV of 60 percent;
  • a silver health plan has an AV of 70 percent;
  • a gold health plan has an AV of 80 percent; and
  • a platinum health plan has as an AV of 90 percent.

The value may vary by plus or minus 2 percent. The purpose of establishing these “metal” levels is to help participants and potential enrollees compare various health plans.

Minimum Value

An employer-sponsored plan is deemed to provide minimum value (MV) if the percentage of the total allowed costs of benefits provided under the plan is no less than 60 percent. In order to determine whether a plan provides minimum value, an employer-sponsored plan may use the MV calculator provided by the HHS and the Internal Revenue Service, or avail itself of “an array of design-based safe-harbors published by HHS and the Internal Revenue Service in the form of checklists to determine whether the plan provides MV.”

The MV Calculator will have similar functionality to the AV Calculator but will be based on claims data that better reflects typical employer-sponsored plans. Alternatively, a group health plan may seek certification by an actuary to determine MV if the plan contains non-standard features that do not lend themselves to either of these determination methods.

Annual Limits

HHS explains that it interprets the health care law as requiring all group health plans to comply with the annual limitation on cost-sharing, while only plans and issuers in the small group market are subject to the Act’s deductible limits.

Deductible Limitations and Cost-Sharing

For 2014, the deductible limit for self-only coverage is set at $2,000; and at $4,000 for coverage other than self-only. Guidance issued by the Department of Labor’s Employee Benefits Security Administration (EBSA) explains that small group market health insurance coverage may exceed the annual deductible limit if it cannot reasonably reach a given level of coverage (metal tier) without exceeding the deductible limit.

With respect to self-insured and large group health plans, the agencies responsible for implementing the ACA plan to issue a rule to implement §2707(b) of the Public Health Service (PHS) Act, which was added by the ACA, providing that a group health plan must ensure that any annual cost-sharing does not exceed the ACA’s limits on out-of-pocket maximums and deductibles for employer-sponsored plans.

Only plans and issuers in the small group market are required to comply with the deductible limit described in section 1302(c)(2) [of the ACA]. A self-insured or large group health plan will be permitted to rely on the agencies’ stated intent to apply the deductible limits only on plans and issuers in the small group market until such regulations are issued.

As for the annual limit on out-of-pocket maximums, all non-grandfathered group health plans (including large group insured plans and self-insured plans) must comply with the annual limitation on out-of-pocket maximums set forth in §1302(c)(1) of the ACA, which ties the annual limitation on cost sharing for plan years beginning in 2014 to the enrollee out-of-pocket limit for high deductible health plans (HDHP).

A plan’s annual limitation on out-of-pocket maximums will be considered satisfied if the plan complies with the requirements with respect to its major medical coverage (excluding certain coverage such as prescription drug and pediatric dental services) and whether the plan or any health insurance coverage includes an out-of-pocket maximum on coverage that does not consist solely of major medical coverage.

Pursuant to the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), however, plans and issuers “are prohibited from imposing an annual out-of-pocket maximum on all medical/surgical benefits and a separate annual out-of-pocket maximum on all mental health and substance use disorder benefits.”

Accreditation

With respect to a timeframe, the rule states that the future Exchanges will be required to establish a uniform period within which a QHP issuer that is not already accredited must become accredited. The OPM will establish the accreditation period for multi-state plans. The rule outlines a multi-year accreditation timeline applicable for federally-facilitated Exchanges.

These regulations are slated to take effect 60 days after publication in the Federal Register, which is scheduled for Monday, February 25, 2013.