Five Hot Topics in the Health Plan World
Employee Benefits Law Alert 10/23/14 John L. Barlament
For many employers, 2015 health plan open enrollment is underway. While many of you have already tackled or are in the midst of tackling looming compliance deadlines, there seem to be a number of issues that are catching employers by surprise, or at least sneaking up on them. To help you cover your bases, this Alert focuses on four issues that may require your immediate attention -- Mental Health Parity Rules, HPID Requirements, First Reinsurance Fee Payments and, Treatment of Temporary Employees under Pay or Play Rules -- along with hot off the presses guidance on Reference-Based Pricing and MOOP Limits.
Mental Health Parity Rules Require Immediate Attention
In November 2013, three federal agencies issued final regulations under the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 ("MHPAEA"). These stringent new rules start applying to calendar-year plans on January 1, 2015.
Self-Funded Health Plans Most Affected. Employers with self-funded major medical plans should be the employers who are most concerned about these rules. It appears that insurers will address the rules for fully-insured major medical plans, although this is not completely clear.
Quantitative Treatment Limitations. MHPAEA is challenging because it requires an employer to conduct two different analyses on its plan. First, the employer must predict what next year's claims will be -- information an employer may not necessarily have. The employer then tries to identify whether the plan contains various "quantitative treatment limitations", such as deductibles, copayments and coinsurance. Most plans have these, of course.
If the plan does have such quantitative treatment limitations, the employer then engages in a mathematical determination of whether the quantitative treatment limitations apply to "substantially all" the medical / surgical benefits and, if so, what is the "predominant" limitation. If the plan has multiple tiers of copayments and coinsurance the analysis is often somewhat time-consuming. The analysis is easier if the plan only has a single level of copayments and coinsurance.
Nonquantitative Treatment Limitations. Once an employer has finished that analysis, it should then review whether the plan contains any "nonquantitative treatment limitations", such as standards for provider admission and medical management techniques (such as excluding benefits based on whether they are "medically necessary"). Most plans also have these, of course.
If the plan does have these "nonquantitative treatment limitations", the employer then verifies whether the limitations apply more "stringently" to mental health / substance use disorder benefits than medical / surgical benefits. "Stringent" for these purposes is not a mathematical test -- it is more of a subjective test. While subjectivity can be helpful, it also can create confusion and uncertainty.
Employers have a little less than two weeks left before the November 5, 2014 deadline to obtain a health plan identifier ("HPID") for each of their large self-funded health plans (including stand-alone dental, vision, and any other "controlling health plans" that provide or pay the cost of medical care). Employers with small controlling health plans (those with annual "receipts" of $5 million or less) have until November 5, 2015 to obtain a HPID. "Receipts" generally refers to claims paid.
Beginning in 2016, health plans will identify themselves using HPIDs when performing covered "standard transactions" under the HIPAA privacy and security rules. However, all controlling health plans must obtain an HPID, even if they do not actually perform any standard transactions. Insurance companies will apply for HPIDs on behalf of fully-insured health plans. A sub-health plan (a health plan whose business activities, actions, or policies are directed by a "controlling health plan") does not need to obtain a HPID. FSAs and HSAs also do not need to obtain a HPID, while certain HRAs may need to obtain one.
One area of confusion has been how these rules apply to self-funded plans where an employer "wraps" its medical, dental and/or vision benefits into one plan for ERISA compliance. Most employers seem to be obtaining only one HPID for each distinct "controlling health plan" (e.g., one HPID per health plan that has its own 5500 filing) as opposed to an HPID for the controlling health plan and each underlying program, and current guidance permits that approach.
Employers must obtain a HPID from the Department of Health and Human Services ("HHS"), which has posted a helpful "Quick Reference Guide" and FAQs regarding the HPID application process (found here and here). HHS recently revised the HPID application to remove the "Authorizing Official" approval requirement and to allow employers to obtain multiple controlling health plan HPIDs. First-time users of the CMS Enterprise Portal need to complete several registrations that require HHS approval. HHS will e-mail a user with its approval, causing this process to take a few days in some cases. Remember to check your "spam folder" for any filtered HHS e-mails during the application process.
Whose Employees Are They? Temporary Workers and the Employer Shared Responsibility
The employer shared responsibility mandate (aka the "Pay or Play Rule") generally requires large employers to offer a minimum level of health insurance coverage to their full-time "employees" or pay non-deductible excise taxes to the federal government. A company that engages one or more temporary workers through a staffing agency faces the question of whether the temporary workers are the "employees" of the company or the staffing agency.
No "bright line" test exists. Common law standards will determine whether or not a temporary worker is an employee of the company or a staffing agency by applying the facts and circumstances applicable to the worker. An individual will be the employee of the entity (e.g., company or staffing agency) that has the right to control and direct the worker as to the details and means by which the worker performs work for the company.
In the preamble to the Pay or Play Rule, the IRS writes without explanation that in the "typical case," the client of a staffing firm, and not the staffing firm, is the common law employer. Although this statement is not binding, it could indicate which way the IRS "leans" on the issue.
Since the Pay or Play Rule penalties can be significant, a company that engages temporary workers through a staffing agency would be wise to coordinate efforts with the staffing agency in order to determine which entity is the employer of the temporary workers. A company might take the cautious approach and treat the temporary worker as its common law employee. A staffing agency might take the approach that it is the common law employer and assume all Pay or Play Rule risk with respect to its workers. Note that existing staffing contracts will in many cases need to be revised and sometimes re-negotiated in light of the Pay or Play Rule.
In situations where a company has determined whether a temporary worker is its common law employee, how does the company "offer" the worker coverage in order to comply with the Pay or Play Rule? The company could offer the worker coverage under its own employer-sponsored group health plan. However, it could be administratively difficult to offer temporary workers coverage under the company's plan.
Another option explicitly permitted by the IRS is for a company to "piggyback" on an offer of coverage by the staffing agency. In other words, if the staffing agency offers health coverage to the worker, the company can treat itself as also offering health coverage to the worker. This option is subject to an important caveat: the company must pay the staffing agency an additional fee for those workers enrolled in the staffing agency's health coverage. The IRS does not specify the amount of the additional fee that a company must pay in order to be deemed to offer coverage to temporary workers.
Reinsurance Fee Deadlines Looming
Employers that sponsor self-funded heath plan are required to pay a reinsurance fee for each life covered under the employer's major medical plan for each of years 2014, 2015 and 2016. This fee is intended to help the government stabilize premiums in the individual insurance market, which are expected to increase due to elimination of preexisting condition exclusions and other insurance reforms. The 2014 fee is $63 per covered life and the 2015 fee is $44 per covered life. While the 2014 payment is not due until January 15, 2015, employers with self-funded plans must establish an account through https://pay.gov/public/home and submit their covered life count through that account no later than November 15, 2014.
In addition, the government will only permit employers to pay the reinsurance fee by Automated Clearing House (ACH) payment, which must also be set up through the pay.gov account described above. Many financial institutions block automatic debits from business accounts. If that is the case with your company's financial institution, you will need to work with the financial institution to allow the reinsurance fee payment to process.
Reference-Based Pricing and MOOP Limits
A group health plan that uses reference-based pricing typically pays a fixed amount for one or more specified medical services (e.g., joint replacements and MRIs). Some providers will accept the fixed amount as payment in full for the medical service (referred to herein as a "Reference Price Provider"). Other providers will not accept the fixed amount as payment in full for the medical service and will charge the patient for the difference between the provider's charge for the medical service and the amount paid by the plan (referred to herein as a "Non-Reference Price Provider").
On October 10, 2014, the federal government issued a FAQ addressing whether the difference between a Non-Reference Price Provider's charge for the medical service and the amount paid by the plan must be counted towards the plan's maximum out-of-pocket ("MOOP") limit under the Affordable Care Act. The MOOP requirements place dollar limits on the amount of out-of-pocket expenses that can be incurred by plan participants for in-network essential health benefits.
The government had previously stated that a plan could treat Reference Based Providers as "in-network" and Non-Reference Based Providers as "out-of-network" for purposes of the MOOP limits only if the plan uses a reasonable method to ensure that participants have adequate access to quality providers.
The FAQ lays out a non-exhaustive list of factors that will be considered when determining whether or not participants in a group health plan that uses reference-based pricing have adequate access to quality providers. These factors include the type of service subject to the plan's reference-based pricing rules, adequacy of the number of Reference Price Providers, quality standards, availability of an accessible exceptions process, and disclosures made to participants.
If your company's plan utilizes reference-based pricing, we recommend that you review this guidance and contact your benefits counsel with any questions.
The FAQ can be found here: http://www.dol.gov/ebsa/pdf/faq-aca21.pdf.
For more information, please contact John L. Barlament at (414) 277-5727 / [email protected], Amy A. Ciepluch at (414) 277-5585 / [email protected], Alyssa D. Dowse at (414) 277-5607 / [email protected], Sarah L. Fowles at (414) 277-5287 / [email protected], or your local Quarles & Brady attorney.