Reform Law Rules Raise Questions
Future revisions expected to clarify several issues
By Jerry Geisel of Business Insurance, www.businessinsurance.com
WASHINGTON—Regulations to implement sweeping health care reform legislation that Congress passed and the president signed into law in March have been issued at a torrid pace.
“Regulators have really worked at warp speed to get rules out prior to the effective date of provisions. Even regulators would probably admit that the speed has been unusual,” said Michael Thompson, a principal at PricewaterhouseCoopers L.L.P. in New York.
“They have worked around the clock. They have been extraordinarily diligent,” concurred Frank McArdle, a consultant in the Washington office of Hewitt Associates Inc.
While the Departments of Labor, Health and Human Services and Internal Revenue Service have issued rules to implement the Patient Protection and Affordable Care Act at a speedy pace, the rules (see timeline, page 12) fall short of answering all compliance-related questions.
“There are some things that are not so clear,” Mr. Thompson said.
In some cases, that lack of clarity involves basic provisions. For example, the law requires employers to extend group coverage to employees’ adult children up to age 26 for plan years that begin on or after Sept. 23. Previously, employers typically covered employees’ dependent children up to age 18 or 19 or, if a full-time college student, until age 23 or 24.
However, regulations issued in May do not definitively define a child. For example, it isn’t clear if covering children up to age 26 would apply in situations where employer plans allow coverage of employees’ grandchildren who reside in the same household as the employee.
“Who is considered a child is not directly addressed,” said Amy Bergner, a partner in the Washington office of Mercer L.L.C.
Other adult child coverage-related issues also need clarification, experts say. For example, the regulations are not clear on whether the extension of coverage applies to retiree-only health care plans, Hewitt Associates Inc. said in a letter to the Labor Department.
Yet another issue involves the relationship of the adult child coverage requirement to a provision that exempts grandfathered plans from complying with all of the law’s coverage requirements. To be grandfathered, a health care plan can’t increase employee cost-sharing requirements beyond certain set amounts.
On the adult child coverage extension, grandfathered plans are exempt until Jan. 1, 2014, in situations where the adult child has coverage through his or her own employer.
Not clear, said Hewitt Associates, is whether a grandfathered plan covering the adult child’s parent would have to extend coverage to the child if the child were laid off and became eligible for COBRA through his or her employer.
“The rules do not address the situation where an adult child under age 26 is eligible for COBRA through his/her own former employer,” Hewitt said in its letter to the Labor Department.
Yet another issue in need of clarification involves provisions affecting plans with annual and lifetime dollar limits. Under the law, health care plans cannot impose lifetime dollar limits generally as of Jan. 1, 2011, while annual limits will be phased out over the next three years under previous regulations.
The ban on dollar limits applies only to “essential benefits,” a term that the regulations define very broadly. It isn’t clear whether the ban applies to certain health care services, such as infertility treatments, for which employers often have imposed separate dollar limits.
In addition, the regulations aren’t clear if the dollar limits still can be imposed on coverage delivered by out-of network providers. Such limits should be explicitly allowed, consultants argue.
“Prohibiting employers from imposing limits on out-of-network coverage would constrain the ability of group health plans and health insurance issuers to contain costs, would result in higher premiums, and could reduce provider incentive to participate in insurer networks, thereby decreasing participant access,” Hewitt said in its letter to the Department of Labor.
Experts say it isn’t surprising that the regulatory agencies have not clearly addressed every issue.
“These are not issues that are easy to address in such a short time frame,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.
“In many cases, regulators have had to interpret legislative language that was not well-drafted,” Mr. McArdle said.
Undoubtedly, though, there will be clarification of these and other issues in the coming months. The regulations have been issued as “final interim rules.” While that means employers are expected to comply, it also gives the agencies flexibility to revamp the rules in the future.
“The agencies will accept comments and they could change the regulations. In the meantime, you have to act in good faith” to avoid any potential penalties, Mr. Thompson said.
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