Today, the ACA enforcement agencies (DOL, HHS, IRS) jointly published final rules, effective January 1, 2017, on grandfathered plan status, pre-existing condition exclusions, lifetime and annual limits, rescissions, dependent coverage, appeals and patient protections. Interim rules and sub-regulatory guidance issued since June 2010 are merged and finalized. On first reading (104 pages), we see no boat-rocking changes, but here are bits we think deserve review.

Grandfathered Plan Status

Grandfathered status is lost immediately, irrevocably, when a prohibited change is made, even in mid-year. However, since this applies separately to each benefit package within a plan – e.g., a PPO option, and HMO option and a POS arrangement – grandfathered status of the entire plan is not lost when the plan makes changes that forfeit the grandfathered status of one benefit package.

More good news for unions: multiemployer plans get substantial exemption from anti-abuse rules, permitting new employers to join expressly to take advantage of the plans’ grandfathered status.

Dropping coverage of anything needed to diagnose or treat a particular condition will be treated as eliminating substantially all benefits for that condition, forfeiting grandfathered status. For example, if a mental condition requires both drugs and counseling and the plan deletes counseling, grandfathered status is lost.

If employees pay a fixed dollar amount (including $0) that does not increase, a plan remains grandfathered even if the employer contribution rate declines by more than 5%.

A grandfathered plan offering self-only coverage may add family coverage and peg the employee contribution for the new family tier at more than 5% above the self-only rate.

When a generic alternative becomes available, a grandfathered plan may move the brand name drug to a higher cost-sharing tier without forfeiting its status due to increased costs imposed on those who continue to buy the brand name drug.

HRAs and Premium Reimbursement Plans

A stand-alone HRA remains illegal, as does a health FSA not offered through a § 125 plan. But very small employers (under 20), exempt from the duty to offer group health coverage to Medicare-eligible employees, now may integrate premium reimbursement plans with Medicare Part B or D as long as they offer group health coverage to employees not Medicare eligible.

Dependent Coverage

Some HMO plans require covered individuals to live within a stated geographic area. When a child under age 26 is away at college, she loses eligibility. This now will be deemed to violate the adult child coverage mandate. For dependents other than children (e.g., grandchildren), a plan may impose residence, financial dependence or similar coverage requirements.

External Appeals

Plans no longer may condition external review on payment of a filing fee, with one exception. In states with laws expressly permitting nominal filing fees, consistent with the 2004 NAIC model, a plan may charge a fee up to $25 per appeal (limited to $75 annually per claimant) if the plan refunds fees paid for successful appeals and waives fees that would impose a financial hardship.

Emergency Services

The agencies believe that plans have been abusing out-of-network providers, resulting in excess balance billing of patients. Henceforth, plans must pay for out-of network emergency services at least the greatest of – (1) the median amount paid to network providers; (2) the product of the formula that the plan uses generally for out-of-network services (UCR, for example); (3) the Medicare payment amount.

IRS CIRCULAR 230 DISCLOSURE