Implementing Health Reform (November 25 update). On November 25, 2015, the Centers for Medicare and Medicaid Services (CMS) released its marketplace enrollment snapshot for the third week of the 2016 open enrollment period, covering November 15 to 21. The number of plan selections—567,822—is up a little from the first two weeks and brings the total to 1,645,698. The number of applications submitted, however — 858,692, is down a little. The percentage of new enrollees is essentially unchanged at 36 percent. Over two months remain in the open enrollment period, which ends on January 31, 2016, and two and a half weeks remain until the December 15 deadline by which individuals must enroll to ensure January 1, 2016 coverage. The total number of enrollees is likely to increase dramatically at the end of December as auto-reenrollments are added to the total.

November 19 update. On November 18, 2015, CMS released its enrollment snapshot for the federally facilitate marketplace for the second week of the 2016 open enrollment period. The number of plan selections was 534,788—almost identical to the first week—resulting in a total number of plan selections to date of 1,077,876.

The mix of new consumers and consumers renewing coverage was also almost the same as the first week — one third new consumers and two thirds returning consumers. Almost 900,000 consumers submitted applications, a little down from the first week, but call center volume, users, and calls with Spanish-speaking representatives were almost the same as week one. CMS will release a snapshot every week during the open enrollment period. The number of enrollees should rise significantly in December as the December 15 deadline for January 1 effective coverage nears and the marketplace begins automatically re-enrolling 2015 enrollees.

November 17 update on deductibles. There has been a good deal of coverage recently of the high and ever-growing level of health insurance deductibles; this was the subject of a major article in The New York Times and even of a question at the November 14, 2015, Democratic candidates debate. A November 17, 2015 post by Kevin Counihan, CEO of, at the CMS Blog adds some perspective to this issue.

First, it is important to remember that for individuals and families with incomes below 250 percent of the federal poverty level (FPL) ($50,225 for a family of three), cost sharing, including deductibles, is reduced by the cost-sharing reduction payments. Cost sharing is reduced significantly for individuals and families with incomes below 200 percent of poverty ($40,180 for a family of three). According to a Kaiser Family Foundation analysis, the average 2015 silver plan deductible of $2,559 is cut to $737 for enrollees with incomes below 200 percent of FPL and $229 for enrollees with incomes below 150 percent of FPL. About 5.9 million individuals, 57 percent of total effectuated enrollees, received cost-sharing reductions for 2015.

Second, it must be remembered that preventive services, such as cancer screenings, immunizations, well-child visits, and FDA-approved contraceptives are covered before any deductible applies, indeed without any cost sharing.

Counihan makes a third point, however, that has received less attention. Many marketplace health plans cover some health care services beyond preventive services before their deductible applies. Indeed, more than eight in 10 marketplace consumers in 2015 selected a plan with some pre-deductible service coverage. This included 88 percent of silver plan consumers, 93 percent of gold plan consumers, 99 percent of platinum plan consumers; even 53 percent of bronze plan consumers.

Focusing on silver plans, which accounted for 68 percent of marketplace effectuated enrollees in 2015:

  • 80 percent of consumers selected a plan that covered one or more primary care visits before the deductible, while 73 percent of consumers selected a plan that covered at least one specialty care visit;
  • 82 percent selected a plan with generic drug coverage before the deductible, and 56 percent a plan that covered some brand name drugs pre-deductible;
  • 59 percent selected a plan with mental health and substance abuse disorder services covered pre-deductible

On average, nearly seven services beyond preventive care were covered below the deductible in silver plans consumers selected in 2015. Of course, copayments or coinsurance were charged for many of these services.

Deductibles do create a barrier to care for many in marketplace plans, but it is important to not overestimate how impenetrable that barrier is.

Implementing Health Reform (November 17 update). CMS has finished beta testing its provider lookup tool, which is now available to all visitors to CMS has also begun beta testing its formulary lookup tool, which will allow consumers to determine the availability of drugs from marketplace plans directly from the marketplace website. It is now available to about one quarter of marketplace visitors.

Implementing Health Reform (original post). The Affordable Care Act, adopted in March of 2010, contained a number of insurance reforms that were to be effective six months after the date of its enactment. During May, June, and July of 2010, the departments that share responsibilities to oversee the group health plans and insurers subject to the reforms—Labor, Health and Human Services, and Treasury—issued interim final (Labor and HHS) or temporary and proposed (Treasury) rules to implement the six months reform. These interim rules governed

These interim final rules have now been in effect for over half a decade.

At the time of the promulgation of the interim rules, the departments requested comments regarding them. Over the following months and years the departments have issued numerous frequently asked questions and other guidance documents interpreting and clarifying these rules. They have also in a few instances issued amendments to the interim rules.

On November 13, 2015, the three departments finalized the interim rules. The final rules make no major changes in the interim rules. Indeed, they make virtually no changes in the interim rules as interpreted by current guidance.

What the final rules do in many instances, however, is to incorporate existing guidance into final rule form. As guidance is not as legally authoritative as are regulations, this clarifies the legal status of existing interpretations of the rules. The finalization of these rules also makes it more difficult for a future administration to change them as the Obama administration nears its final year.

The final rule will go into effect on January 1, 2017, at which time the interim rules will no longer remain in effect.

Grandfathered Plans

The first topic addressed by the final rules is the preservation of the right to maintain existing coverage—grandfathered plans. The true — though often badly misunderstood — promise of the ACA was that if you (or your employer) had a plan in effect in March of 2010 when the law was adopted, you (or your employer) could keep it. The departments estimate that as of 2014, about 37 percent of firms offering health benefits and 26 percent of employees were covered by grandfathered plans—a total of about 45 million participants and beneficiaries. In addition about 2.2 million individuals were covered by grandfathered individual plans.

The conundrum presented by grandfathering, however, was determining how much a plan could change and retain grandfathered status. Obviously health insurance plans change over time, and some flexibility was needed if the promise was to have any meaning. But just as obviously, if a plan changes too much it ceases to be the same plan, and grandfathering no longer is appropriate. The interim rules, therefore, adopted a series of rules defining how much a plan could change and still be the same plan. These rules were in turn elaborated by guidance as questions arose as to their application.

One of the provisions of the interim rule was that grandfathered status would be determined separately as to each “benefit package” made available under a group health plan. The final rule continues to provide that grandfathering applies to benefit packages. If, for example, a group health plan offers PPO, POS, and HMO options, grandfathering would be determined independently for each. The rule also clarifies that plan sponsors and insurers must include a statement that they believe their plan or coverage to be grandfathered and contact information for questions and complaints in any benefit summaries provided by the plan, but not in other communications. A model disclosure provided in the rule may, but need not, be used for this purpose.

The interim grandfathered plan rule included an “anti-abuse” rule. Under this rule, a plan into which employees are transferred loses its grandfathered status if the terms of the transferee plan, when compared to the terms of the plan from which the employees were transferred, would have caused the transferor plan to lose grandfathered status if they were simply adopted as amendments to the transferor plan. This rule does not apply if there is an employment-based bona fide reason for the transfer. The final rule includes examples of bona-fide justifications, such as a plan being eliminated because the insurer is exiting the market or no longer offering the plan. The rule also clarifies that new contributing employers or employee groups can be added to a multiemployer plan without it losing its grandfathered status.

The interim final rule described several changes to a plan that would cause it to lose grandfathered status. One was a change that would eliminate “substantially all benefits” needed to diagnose or treat a particular condition. The departments declined requests from commenters to lay down a bright line rule for interpreting this requirement, rather continuing to require a determination based on the facts and circumstances of particular cases. Another change that could cause loss of grandfathered status is an increase in copayments above a certain level. The final rule clarifies that excessive increases with respect to copayments for any category of services covered by a plan will cause it to lose grandfathered status, even if copayments for other services are not raised excessively.

Coverage can lose grandfathered status if the employer or employee organization contribution rates toward the cost of coverage are reduced by more than five percentage points from the contribution rate in effect in March of 2010 for any tier of coverage for similarly situated employees. The final rule answers several questions that have arisen as to the application of this rule. First, it clarifies under what circumstances an insurer or multiemployer plan may rely on representations by an employer or its own knowledge as to whether an employer has reduced contributions. It also provides that in a situation where an employee makes no contribution or a fixed contribution to the cost of coverage, the plan will not lose grandfathered status as long as the employee’s contribution does not increase, even if the employer’s contribution decreases more than five percentage points.

If an employer plan offers multiple tiers of coverage (individual, family) and changes to add new tiers (individual plus one, individual plus two), the plan does not lose grandfathered coverage as long as the contribution rate for the new coverage tiers is not below the previous non-self-only tier by more than five percent. Also, if an employer adds new tiers without eliminating previous tiers (such as family coverage to a prior self-only coverage), the level of employer contributions will not cause a loss of coverage. Finally, if an employer offers contributions based on a formula, such as $300 for every year of service, the plan will not lose grandfathered status as long as the formula contributions are not decreased more than five percent, even though increases in health care costs cause the value of the contribution to decrease more than that amount.

The final rule retains unchanged provisions in the interim final rule addressing situations when changes in annual limits on a plan might change grandfathered status. The ACA’s prohibition on annual limits does not apply to individual grandfathered plans. Under the final rule, a plan will not lose grandfathered status if it has a fixed-dollar cost-sharing requirement (other than a copayment, such as a deductible or out-of-pocket limit) determined on a percentage of compensation formula (such that the requirement increases as compensation increases) as long as the formula is not changed. The preface to the final regulation notes that the imposition of wellness programs, and in particular penalties imposed by wellness programs, may threaten grandfathered status, but the rule itself does not address this issue.

Grandfathered status is not threatened if a plan moves a brand-name version of a drug that has become generic to a higher cost-sharing tier. If an individual plan had an option as of March of 2010 allowing the policy holder to accept higher cost-sharing in exchange for a lower premium, the policy holder can exercise that option after that date without the coverage losing grandfathered status. Finally, if a change is made in a plan that would cause it to lose grandfathered status, the change can be reversed and grandfathered status protected as long as the reversal is accomplished before the change became effective, but not afterwards.

Preexisting Conditions

The 2010 reforms prohibit the imposition of preexisting condition exclusions on enrollees under 19 years of age, except in grandfathered individual plans. In 2014 this prohibition was extended to all enrollees. The final regulation clarifies that the prohibition does not bar a plan or insurer from excluding all benefits for a condition if it does so regardless of when the condition arose, although other provisions of the ACA like the essential health benefits requirements may preclude such an exclusion.

The interim rule did not impose any requirement as to offering open enrollment periods to individuals with preexisting conditions, and neither does the final rule, although the guaranteed issue rules now require open and special enrollment periods. The final rule allows insurers to screen children who apply for child-only coverage for eligibility for programs available to all children regardless of preexisting conditions (such as CHIP, but not Medicaid, as its rules prohibit such screening), but screening cannot be used for dependent children and should not delay coverage.

Lifetime And Annual Coverage Limits

The 2010 reforms prohibited plans and insurers from imposing lifetime limits on coverage and restricted them from imposing annual limits below certain escalating amounts on coverage for essential health benefits (EHBs). In 2014 annual limits on EHB coverage were completely prohibited. The lifetime limit prohibitions apply to all group health plans, including grandfathered plans, although the annual limit prohibition does not apply to individual grandfathered plans.

Large group, self-insured, and grandfathered plans are not required to cover EHBs, leaving open the question of to which benefits annual limits may not apply. The final rule allows plans and insurers not subject to EHB requirements to pick among any of the EHB benchmarks that apply in any of the 50 states or the District of Columbia or the three largest Federal Employee Health Benefit Program plans available nationally. The prohibition on annual limits for EHB coverage applies to out-of-network as well as in-network benefits.

The application of the annual limit prohibition to account-based plans, such as health reimbursement arrangements (HRAs), has resulted in ever-increasing complexity — and ever more sophisticated attempts at evasion. Flexible spending arrangements (FSAs) offered through Internal Revenue Code section 125 plans and health savings accounts (HSAs) are subject to their own regulatory limits and are not subject to the annual dollar limit prohibition. HRAs, non-section 125 FSAs, and employer payment plans are, however, subject to the rule.

HRAs are only permitted if “integrated” with a group health plan that otherwise complies with ACA requirements, including the dollar limit prohibition. The final rule further clarifies the rules for integrating HRAs and other account-based plans with group health plans, reiterates that these plans cannot be used to purchase individual plan premiums, and lays down rules as to when they can be used to pay Medicare premiums. The departments admit, however, that they cannot address in the rule all of the issues raised by the various account-based products being marketed, and state that they will have to continue to deal with these through subregulatory guidance.


The 2010 reforms prohibited rescissions—cancellation or discontinuance of coverage with retroactive effect in the absence of fraud of intentional misrepresentation of material fact. This reform was aimed at the insurer practice of accepting enrollees with minimal verification of statements made on an application, but then rescinding enrollment when the enrollee submitted substantial claims. The final rule does not define “material fact,” although prior regulations provide that an enrollment cannot be rescinded for misrepresentations about tobacco use, which must instead result in a retroactive charge for the additional tobacco surcharge. As rescissions were often based on misrepresentations of health status by applicants, the prohibition on health status underwriting has eliminated many of the grounds for rescission formerly claimed.

The rescission prohibition does not apply to retroactive cancellation of coverage where an error or delay in record keeping, for example, when there is a delay in determining that an employee has terminated employment or a spouse has divorced an enrollee. The prohibition also does not apply where an individual voluntarily requests retroactive cancellation of a plan or an exchange requests cancellation. Retroactive cancellation is also permitted where a plan continues coverage during a COBRA election or payment grace period if the COBRA-qualified beneficiary fails to elect or pay for COBRA coverage.

Rescissions are subject to internal and external appeals, and coverage must remain effective until an internal appeal is completed. Plans and insurers must provide 30 days notice prior to rescission to allow enrollees to appeal the decision.

Coverage Of Adult Children

Another provision of the 2010 reforms required group health plans and insurers, including grandfathered plans, to cover adult dependents up to the age of 26. This has been one of the most successful of the reforms, resulting in 5.7 million young adults gaining coverage between 2010 and March, 2015; the provision has dramatically reduced the rate of uninsurance among this age group, which has traditionally had the highest percentage of the uninsured.

The rule clarifies that insurers and plans must cover all children under age 26 regardless of financial dependency or shared residence with the enrollee, student status, employment or marital status. The final rule also adds an important protection: adult children under age 26 must be covered even though they do not live in a plan’s service area. The preamble recognizes that adult children must often leave home for education and employment, so the protection of the rule would be undermined if they had to remain in the same area as their covered parents.

Plans and insurers, however, are not required to cover out of network services for adult children. And only children must be covered—not grandchildren or other relatives.

Coverage for children must be uniform regardless of age. This does not prohibit a plan or insurer, however, from imposing non-discriminatory age limitations on all enrollees, however. Some preventive services, for example, are only covered without cost sharing for minors under the age of 19, and are not available without cost sharing for adults, regardless of whether they are covered plan members, spouses, or children.


The final rules contain lengthy provisions governing internal and external appeals. Before the ACA, group health plans were required to provide internal appeals under the Employee Retirement Income Security Act (ERISA), and the laws of many states required insured plans to provide internal and external appeals, but requirements were not uniform. The ACA provided for internal and external appeal rights in all insurance markets for non-grandfathered plans and the interim final rules implemented these requirements.

The interim final rules were followed, however, by numerous technical releases, technical guidances, FAQs, and an amendment, generally weakening protections for consumers and providing additional safe harbors and transition relief for plans and insurers. The final rules adopt much of this guidance. (The Department of Labor, incidentally, also published on November 13 a proposed regulation to extend the internal and external appeal provisions to disability plans.)

The interim final rule included a number of provisions governing internal appeals, with additional requirements applicable only to individual plans. The final rule finalizes these requirements. In addition, it clarifies that if a plan relies on new or additional evidence or a new rationale in making a final adverse internal decision, the plan or insurer must automatically provide this evidence or rationale to the enrollee without requiring a request, and must give the enrollee a reasonable opportunity to respond.

As did an amended interim final rule, the final rules only require that plans provide appeal notices in a non-English language if at least ten percent of the residents of a county are literate solely in the same non-English language. This rule has meant that in virtually all counties in the United States notices need only be provided in English or English and Spanish. In a handful of counties, notices must be provided in additional languages: in Chinese in San Francisco, Navaho in a few counties, and Tagalog in the Aleutian Islands, where Filipinos came to work in the fish canneries.

The preface also notes that plans and insurers must otherwise comply with the civil rights laws regarding language access, including presumably the section 1157 non-discrimination rules now under consideration by HHS.

Under the ACA, non-grandfathered, non-self-insured group health plans and individual insurers must comply with state external review processes if the state external review process offers the consumer protections offered by the National Association of Insurance Commissioner’s Uniform Health Carrier External Review Model Act. Self-insured plans and plans and insurers in states that do not have external review provisions meeting the NAIC Model Act standards are required to use an external review process that meets HHS standards. Under amended interim rules, however, the departments have allowed plans to use state “NAIC-similar” external review processes that do not meet all of the requirements of the NAIC Model Act for a transitional period. The final regulation once again extends this transitional period to December 31, 2017.

The ACA provides that plans and insurers in states without an NAIC Model Act compliant external review process and self-insured plans must implement an external review process that meets standards established by HHS. This process was established by the interim final regulations. The original interim final rules had permitted the review of any final “adverse benefit determination.” Amendments to the 2010 rules in 2011 “temporarily” narrowed the review process to claims that involve medical judgment and rescission decisions. The final rule makes permanent this narrowing of the scope of review.

The final rule, however, adds two items to the non-exhaustive list of adverse benefit determinations that involve medical judgment: a plan or insurer’s determination of whether a participant or beneficiary is entitled to a reasonable alternative standard for a reward under a wellness program, and its determination as to whether a plan is complying with the nonquantitative treatment limitation parity provisions of the Mental Health Parity and Addiction Equity Act. The preface also notes that coding decisions can involve medical judgment and thus be appealable.

The final regulations contain the rules for the federal review process formerly found in guidance. The group health plan must within five days complete a review of an appeal to determine if it is eligible for external review, and then assign the appeal to an accredited independent review organization (IRO). The IRO must notify the claimant, who then has 10 days to provide additional information. The plan must provide the IRO with any documents or information used in making the decision in five days and the IRO must forward the information to the appellant within one day.

The IRO must issue a written decision within 45 days. In situations where life or health is in serious jeopardy, decisions must be made within 72 hours. Non-grandfathered self-insured plans also may use the state external review process if permitted to do so by the state, and all insurers subject to the federally administered external review process as well as non-federal governmental plans can use a review process administered by HHS.

To protect against bias, group health plans (or their third-party administrators) must contract with at least three accredited IROs and use an unbiased means, such as random selection, to assign claims to them. They also may not offer financial incentives for favorable decisions or threaten retaliation for unfavorable decisions. Of course, the IROs look to health plans for ongoing business and their true independence is questionable.

The HHS-administered process is independent and does not require the availability of three IROs. The preface notes that there are about 1.3 appeals per 10,000 participants annually and that the HHS-administered process costs $625 per case and has a 40 percent reversal rate.

The final regulations discourage charging of filing fees to claimants. It does, however, permit states that are required to do so by state law to charge a filing fee, not exceeding $25, which must be refunded to claimants if the plan decision is reversed and which must be waived if payment would be a hardship. The fee cannot be charged if the total filing fee would exceed $75 for a year for a single claimant.

Designating A Primary Care Provider

Finally, the 2010 reforms contained several protections for patients that are binding on non-grandfathered plans and insurers. First, if a plan or insurer requires or provides for the designation of a primary care provider, then it must allow a participant, beneficiary, or enrollee to designate any available in-network primary care provider. The regulations do not define primary care provider, which will be determined under the terms of the plan and state law. If the participant or beneficiary is a child, any physician who specializes in pediatrics, including a subspecialist (such as a pediatric oncologist for a child with cancer) may be designated as a primary care physician.

Females may also seek care from an obstetrician or gynecologist without authorization and obstetricians and gynecologists must be treated as primary care providers for purposes of ordering and authorizing services. Women of all ages have access to obstetric and gynecological care under this provision. The final rule does, however, allow health plans and insurers to require plan participants and beneficiaries to use in-network groups within certain geographic limits when selecting a primary care provision, despite the seemingly broader scope of the law.

Access To Emergency Care

The ACA prohibits non-grandfathered plans and insurers from imposing prior authorization or other administrative requirements to limit access to emergency care and from charging additional copayments or coinsurance for out-of-network emergency care. The law allows out-of-network emergency providers to balance bill and does not require plans or insurers to pay a balance bill received by a patient. The rules, therefore, require plans and insurers to pay a reasonable amount for out-of-network emergency care, defined as at least the largest of 1) the median amount it pays in-network providers, 2) the amount it usually pays out-of-network providers, or 3) the Medicare rate.

The regulation permits balance billing in emergencies, although the departments state that in the future they may prohibit it. If a state law prohibits balance billing or if a plan is contractually responsible for paying any balance billed amounts, the plan or insurer is not required to pay the required minimum amount, but the plan or insurer may still not charge a higher copayment or coinsurance to the enrollee for out-of-network emergency care than would be charged for the use of an in-network provider.

The plan or insurer in this situation must also provide an enrollee adequate and prominent notice when balance billing is not permitted to prevent inadvertent payment by the enrollee. But the final rule does not require plans or insurer to provide notice beyond that provided in the summary plan description that balance billing may otherwise result from the use of out-of-network providers in an emergency.

The final rules do not require an enrollee or beneficiary to seek emergency services within a particular time frame, for example within 24 hours. The final rule does not address coverage of air ambulance services.

Transitional Rules Now Void

Finally, the final rule notes that special transitional rules found in the interim final rule are no longer in effect, including rules that:

  • Allowed grandfathered group health plans to exclude from coverage adult children under age 26 eligible for other group health plan coverage;
  • Provided a special enrollment period for children under age 26 who had previously been excluded from coverage; and
  • Provided for restricted annual limits during the transitional period leading up to 2014 and permitted reenrollment of individuals whose coverage had ended because they had reached lifetime limits.

Under the Expatriate Health Coverage Clarification Act of 2014, the market reform provisions of the ACA do not apply to expatriate plans that are issued or renewed prior to July 1, 2015. The final regulations do not apply to address the application of this statute to the ACA.