Employee Benefits-EBSA Issues FAQs On The Affordable Care Act

The Employee Benefits Security Administration (the “EBSA”) has put on its website 16 questions and answers, or “FAQs,” pertaining to the recently enacted Affordable Care Act. Here are some of the more interesting points made:

The FAQs state that the governing departments (Department of Labor, Treasury Department and Health and Human Services) (the “Departments”) will not (until regulations are issued which provide otherwise) treat a grandfathered insured group health plan as having lost its grandfathered status, based on a change in the employer contribution rate, if the employer and insurer take the following steps:

• Upon renewal of the underlying insurance policy, the insurer requires the employer to make a representation regarding its contribution rate for the plan year covered by the renewal, as well as its contribution rate on March 23, 2010 (if the insurer does not already have it); and • The insurance policy discloses, in a prominent and effective manner, that the employer is required to notify the insurer if the contribution rate changes at any point during the plan year.

For a policy renewed prior to January 1, 2011, the employer and insurer should take these steps no later than by January 1, 2011. However, this relief will cease as of the first day on which the insurer knows that there has been at least a 5-percentage-point reduction in the employer’s contribution rate. This relief will help to create certainty as to when a change in the employer contribution rate causes a loss of grandfather status.

Technical Release 2010-01 contains an enforcement safe harbor, which a covered (i.e., nongrandfathered) self-insured group health plan may use to comply with the new external claims review requirement during a transitional period . If the plan does not meet this safe harbor, compliance with the external claims review requirement will be determined on a case-by-case basis under a facts and circumstances analysis, and the plan may, in some cases, be considered to be in compliance with the requirement. For example, one element of the safe harbor requires the plan to contract with at least three independent review organizations (“IROs”) to conduct the external review, and to rotate claims assignments among them (or to incorporate other independent, unbiased methods for selection of IROs, such as random selection). However, the plan’s failure to contract with at least three IROs does not mean that the plan has automatically violated the external claims review requirement. The plan may take other steps to ensure that its external review process is independent and without bias.

Further, according to the FAQs, the Technical Release does not require a plan to contract directly with any IRO. If the plan contracts with a TPA that, in turn, contracts with an IRO, the Release’s safe harbor can be met, as if the plan had contracted directly with the IRO itself. The safe harbor does not require the IRO to be in the same State as the plan.

The FAQs clarify that a group health plan will not fail the requirement in the Affordable Care Act that children be offered coverage until age 26, merely because it conditions health coverage on support, residency, or other dependency factors for individuals who are under age 26, and who are not described in section 152(f)(1) of the Internal Revenue Code (the “Code”). That section defines children to include only sons, daughters, stepchildren, adopted children (including children place for adoption), and foster children. Grandchildren and nieces or nephews are not included in that definition, so that, even if under age 26, their coverage by the plan may be subject to one or more dependency conditions.