EBSA Provides Grace Period, Compliance Guidance for Certain Affordable Care Act Provisions

Dept of labor.PNGOn September 20, 2010, the Department of Labor’s Employee Benefits Security Administration (EBSA) issued a technical release document that gives health insurance plans and issuers until July 1, 2011, to make certain procedural and computer system changes to comply with the regulations governing internal claims and appeals procedures under the Patient Protection and Affordable Care Act (“Affordable Care Act”). In July, the EBSA released interim final regulations imposing new requirements on group health plans (both self-insured and insured) that dictate procedures for internal appeals of adverse claims decisions and require an independent external appeal process for denied health plan claims.

As stated in the technical release, the EBSA and the Internal Revenue Service (IRS) will refrain from taking any enforcement action against a group health plan, and the Department of Health and Human Services (HHS) will not take any enforcement action against a self-funded nonfederal governmental health plan, “that is working in good faith to implement such additional standards but does not yet have them in place.” This grace period applies to regulations regarding the following:

  • The requirement that a plan or issuer must notify a claimant of a benefit determination (whether adverse or not) with respect to a claim involving urgent care within 24 hours;
  • The requirement that notices must be provided in a culturally and linguistically appropriate manner;.
  • The requirement that notices to claimants must include additional information, such as a discussion of the benefit determination decision, description of available internal appeals and external review processes, and contact information for an office of health insurance consumer assistance or ombudsman; and
  • The stipulation that if a plan or issuer fails to strictly adhere to all the requirements of the interim final regulations, the claimant is deemed to have exhausted the plan's or issuer's internal claims and appeals process, regardless of whether the plan or issuer asserts that it has substantially complied with the regulations, allowing the claimant to initiate any available external review process or remedies available under the Employee Retirement Income Security Act (ERISA) or state law.

The EBSA has also posted a list of 16 frequently asked questions (FAQs) on the Affordable Care Act’s implementation. Specifically, these FAQs discuss regulations regarding grandfathered health plans; claims, internal appeals, and external review; dependent care coverage; out-of-network emergency services; and highly compensated employees.

For example, the FAQs discussing grandfathered health plans acknowledge that insurance issuers have expressed concern that they do not always know whether employer plan sponsors have changed their premium contribution rates, which could cause the plan to lose its grandfathered status. Therefore, the EBSA sets forth the steps issuers and employer plan sponsors should take to communicate the changes made to the plan sponsor’s contribution rate:

  • Upon renewal, an issuer requires a plan sponsor 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 issuer does not already have it); and
  • The issuer's policies, certificates, or contracts of insurance disclose in a prominent and effective manner that plan sponsors are required to notify the issuer if the contribution rate changes at any point during the plan year.

If the above steps are taken, the EBSA will not deem an insured group health plan as having forfeited its grandfathered status based on a change in the employer contribution rate. However, such steps must be taken before January 1, 2011, for policies renewed by that date, and the grace period will no longer apply as of the earlier of the first date on which the issuer knows that there has been at least a 5-percentage-point reduction in the employer contribution rate or the first date on which the plan no longer qualifies for grandfathered status without regard to the 5-percentage-point reduction.

The FAQs also note that the Internal Revenue Service (IRS) has released Notice 2010-63, which invites comment on requirements prohibiting discrimination in favor of highly compensated individuals in insured group health plans.

Finally, the EBSA has posted on its website a revised model notice of adverse benefit determination.

This entry was written by Ilyse Schuman.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.