Employee Benefits-More Interest Points in FAQs VI On The Affordable Care Act

As noted in my blog of April 4, the EBSA has issued FAQs VI on the Affordable Care Act (the “Act”). These FAQs deal with the grandfather rules for group health care plans. Here are a few more interesting points from the new FAQs:

Value-Based Insurance Design. A previous FAQ contained an example which addressed the interaction of value-based insurance design (“VBID”) and the no cost-sharing preventive care services requirements under the Act. In that example, a group health plan did not impose a copayment for colorectal cancer preventive services when performed in an in-network ambulatory surgery center. In contrast, the same preventive service provided at an in-network outpatient hospital setting generally required a $250 copayment, although the copayment was waived for individuals for whom it would be medically inappropriate to have the preventive service provided in the ambulatory setting. The FAQ indicated that this VBID did not cause the plan to fail to comply with the no cost-sharing preventive care requirements.

The example is now varied to be the following. Under the group health plan, similar preventive services are available both at an in-network ambulatory surgery center and at an in-network outpatient hospital setting, but currently no copayment is imposed for these services in either setting. This has been the case since March 23, 2010. This plan now wishes to adopt the VBID approach described in the above example, by imposing a $250 copayment for these preventive services only when performed in the in-network outpatient hospital setting, and with the same waiver of the copayment for any individuals for whom it would be medically inappropriate to have these preventive services provided in the ambulatory setting.

The FAQ states that the imposition of the $250 copayment would not be considered to exceed the thresholds described in the interim final regulations, and would not cause the plan to relinquish its grandfather status.

Retiree Health Coverage. A group health care plan covers both retirees and active employees. For retirees, the employer contributes $300 per year multiplied by the individual’s years of service for the employer, capped at $10,000 per year. In this example, the employer is making contributions based on a formula. Accordingly, the plan will cease to be a grandfathered health plan if the employer decreases its contribution rate towards the cost of coverage by more than five percent below the contribution rate on March 23, 2010. If the formula does not change, the employer is not considered to have reduced its contribution rate, regardless of any increase in the total cost of coverage. However, if the dollar amount that is multiplied by years of service decreases by more than five percent (or if the $10,000 maximum employer contribution cap decreases by more than five percent), the plan will cease to be a grandfathered health care plan.