Editor’s Note: Earlier posts by Timothy Jost provide analyses of regulations implementing provisions of the new health reform legislation governing a patient bill of rights, grandfathered plans, tax exempt hospitalsthe small employer tax creditthe Web portal, reinsurance for early retirees, and young adult coverage

On July 14, 2010, the Departments of Treasury, Labor, and Health and Human Services issued an interim final rule implementing section 2713 of the Public Health Services Act, (added by section 1001 of the Affordable Care Act), which requires group health plans and health insurers to cover specific preventive care services and to do so without patient cost-sharing obligations (coinsurance, copayments, or deductible). 

Prevention is a major theme of the Affordable Care Act.  An entire title of the Act deals with prevention and public health.  Title IV establishes a National Public Prevention, Health Promotion, and Public Health Council and a Preventive Services Task Force and calls for a national outreach and educational campaign on the benefits of preventive services.  Title IV of the Act also introduces a new Medicare benefit for a free “annual wellness visit providing a personal prevention plan” (section 4103), eliminates Medicare coinsurance for certain preventive services (section 4104), and expands Medicaid coverage of preventive services and marginally increases federal funding for states that eliminate Medicaid cost sharing for preventive services (section 4106).  Proposed regulations implementing the Medicare preventive services expansions were published on July 13, 2010. 

Prevention is popular.  It is generally believed that proper use of preventive services will save lives and save money (although the latter proposition is debatable.)  Prevention and wellness initiatives are consistent with a conservative philosophy of personal responsibility as well as with a progressive concern for public health, and both the Republican and Democratic 2008 platforms endorsed increasing access to preventive services.  Even health insurers have expressed support for preventive services.

Why do we need a law mandating coverage of preventive services? If preventive services are so popular, and are believed to save money as well as improve health, why do we need a law requiring the coverage of preventive services without cost sharing?  The regulatory preamble offers three reasons. First, because of the high turnover in the insurance market, insurers are reluctant to invest in preventive services because it often takes time for prevention to bear fruit and it is likely that some other insurer will reap the ultimate benefit.  Second, individuals often forgo seeking preventive services for which they must pay copayments or coinsurance because the costs are immediate but the benefits may not accrue for some time.  Third, some of the benefits of preventive services (such as vaccinations for contagious diseases) accrue to society as a whole while the immediate costs are borne by insurers or individuals.  The Affordable Care Act, therefore, requires insurers to cover specific preventive services without cost sharing, thus making the services more accessible and increasing the likelihood that individuals will take them up.

What does the law say? Section 2713 is one of the more straightforward provisions of the Affordable Care Act and the interim rule implementing it is the shortest of the interim rules to date.  Section 2713 requires group health plans and health insurance issuers in the individual and group market to cover, without cost sharing:

(1) evidence-based items or services that have in effect a rating of ‘A’ or ‘B’ in the current recommendations of the United States Preventive Services Task Force;

(2) immunizations that have in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved; and

(3) with respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration.

(4) with respect to women, such additional preventive care and screenings not described in paragraph (1) as provided for in comprehensive guidelines supported by the Health Resources and Services Administration for purposes of this paragraph.

The provision applies to self-insured as well as insured plans, but does not apply to grandfathered plans.  Grandfathered plans may, however, voluntarily comply with this rule without losing their grandfathered status.  The rule goes into effect for plan years that begin after September 23, 2010, the six month anniversary of the enactment of the Affordable Care Act. 

What services have to be covered? The lists of preventive services that must be covered under the rule are accessible through the healthcare.gov Web site.  Most are screenings, laboratory tests, and vaccinations, although counseling for some conditions and a handful of medications are covered (such as aspirin for certain men ages 45-79 and women ages 55-79).

Two different sets of recommendations for infants, children, and adolescents are available from the Health Resources and Services Administration (HRSA): the Periodicity Schedule of the Bright Futures Recommendations for Pediatric Preventive Health Care and the Uniform Panel of the Secretary’s Advisory Committee on Heritable Disorders in Newborns and Children.  HRSA recommendations for preventive care for women will not be available until next year, but a controversy is already brewing as to whether contraceptives will be covered.Indeed, with the introduction of the mandate, the Preventive Services Task Force and other entities that issue guidelines are likely to be subject to intensive lobbying to include items and services that are important to various disease groups or providers. 

Items and services are rated by the Preventive Services Task Force only with respect to individuals who fit into certain categories determined by age, gender, or medical conditions or risks, and the rule only requires that services be provided to individuals in those categories. Plans are only required to cover services for plan years that begin on or after one year from the date a guidance or recommendation is issued with respect to the service.  Plans are not required to cover a service if a recommendation or guidance is dropped unless otherwise required to do so by federal or state law.  Plans may cover additional preventive services if they choose to do so. Plans may also use “reasonable medical management techniques to determine the frequency, method, treatment, or setting for an item or service” if consistent with the recommendation or guideline.   The controversial breast cancer screening recommendations of the Preventive Services Task Force issued in 2009 are specifically not considered to be current. 

Establishing rules governing cost-sharing for office visits including preventive services. The most important issue addressed by the interim regulation is when cost sharing can be imposed for an office visit during which a preventive service is provided.  The regulation provides three rules to answer this question:

  • If an item or service covered by the regulation is billed separately (or tracked as individual encounter data separately) from an office visit, cost sharing may be imposed with respect to the visit.
  • If an office visit is not billed separately from a preventive item or service (or is not tracked as individual encounter data separately) and the primary purpose of the visit is the provision of the preventive care item or service, cost sharing may not be imposed for the visit.
  • If an office visit is not billed separately from a preventive item or service (or is not tracked as individual encounter data separately) and the primary purpose of the visit is not the provision of the preventive care item or service, cost sharing may be imposed.

Plans are not obligated to cover preventive services covered by out-of-network providers or to waive cost sharing for preventive care provided out-of-network.  Plans may also impose cost sharing for treatments that are not covered by preventive care recommendations or guidelines but that result from preventive screenings.  Although the statute authorizes HHS to issue guidelines for value-based insurance designs, the rule does not address this beyond allowing cost sharing for out-of-network providers and leaves the issue for future guidance.

Costs And Benefits

The preamble addresses at some length the costs and benefits of the rule.  Both will be limited at the outset because most plans will initially be grandfathered, some benefits (particularly vaccinations and breast cancer screenings) are already mandated under the laws of many states, and many plans (particularly group plans) already cover preventive benefits.  Over time, however, plans will lose grandfathered status and the benefits and costs will rise.

The preface identifies four benefits of increased preventive care:

  • Improved health from reduced transmission, prevention or delayed onset, and earlier treatment of disease;
  • Increased productivity and fewer absences from work and school;
  • Some savings due to lower health care costs; and
  • A more equitable distribution of the cost of preventive services.

The preface attempts to quantify these benefits, but recognizes that doing so is very difficult. The potential for health improvement from increases prevention is huge (a potential saving of 150,000 lives if the rate of utilization of 8 recommended services increased to 90 percent), but in fact increased usage is likely to be modest, on the order of 5 to 10 percent.  The use of some services may also save costs:  increased use of obesity counseling, for example, could reduce insurance premiums by 0.05 to 0.1 percent.

Increased coverage of preventive services without cost-sharing will also increase premiums, particularly in the individual market where these services are presently less available (and where plans will lose grandfathered status much more quickly due to high turnover).  The three federal departments estimate that premiums will increase on average about 1.5 percent, with some of the increase resulting from a transfer of costs to insurers from individuals who will face reduced cost-sharing, and some due to increased demand attributable to the absence of cost-sharing.  As is true with all of the new Affordable Care Act protections, increased benefits will be accompanied by increased costs, but neither will be dramatic and an accurate understanding of which will be greater is simply not possible.