Week 6 Discussion Question Impact of the ACA Provisions – Part 2 Scenario: Read You are a Compliance Officer in a healthcare organization in the U.S. You h

Impact of the ACA Provisions – Part 2

Scenario: Read

You are a Compliance Officer in a healthcare organization in the U.S. You have been asked to research the impact of one provision from the Affordable Care Act (ACA) law on your organization. You may use the organization where you currently work, if applicable. If you do not work in healthcare in the U.S., you may use the Cleveland Clinic, which has ample publicly reported data.

Choose Only ONE of the ACA healthcare provisions from the list below:

  • Ensuring Quality of Care
  • Patient Protections
  • Ensuring that Consumers Receive Value for their Dollars
  • Administrative Simplification Requirements
  • Employer Responsibilities

Use the document in this week’s materials, PPACA Section by Section Overview, to read a summary of your chosen regulation. 

Then research the topic in relation to your organization and respond to the prompts below:

  • Name and briefly describe the healthcare organization you are using for this DQ
  • Describe the provision you chose and explain how it impacts the activities of your organization
  • How does your organization comply with this provision?
  • What recommendations do you have for improvement?

© 2011 National Association of Insurance Commissioners
Updated: 5/12/2011 1

Patient Protection and Affordable Care Act
Section-by-Section Analysis

Including Health Care and Education Reconciliation Act Amendments and Regulatory Guidance

Provision Notes
Standards
Development Applicability

Effective
Date

PPACA
Section

Statutory
Section

Immediate Health Insurance Reforms

Annual and
Lifetime Limits

Plans may not establish lifetime limits on the dollar value of essential benefits.
Plans may only establish restricted limits prior to January 1, 2014 on essential
benefits as determined by the Secretary of HHS.

Lifetime limits:
All plans

Annual limits:
All plans except
grandfathered
individual
market plans

6 months
after
enactment

1001 PHSA 2711

Regulations:
HHS released an interim final rule on June 28.

Plans may not establish lifetime limits.
Individuals who lost coverage under a plan because they reached the lifetime
maximum must be given notice that lifetime limits no longer apply and be given a
special enrollment period for enrollment under the same terms and conditions as
a similarly situated individual who did not lose coverage because they exhausted a
lifetime limit.

Annual limits on essential benefits are limited to:

$750,000 for plan years beginning 9/23/2010-9/23/2011

$1.25 million for plan years beginning 9/23/2011-9/23/2012

$2 million for plan years beginning 9/23/2012-12/31/2013
In determining whether an individual has reached the annual limit benefits, a plan
may only take into account essential benefits. A plan may petition HHS for
relaxation of the limits on annual limits if they would cause significant decrease
in access to benefits or premium increases.

Plans may still impose annual and lifetime limits on specific covered benefits that
are not essential benefits, which have not yet been defined in regulation. In the
interim, “the Departments will take into account good faith efforts to comply
with a reasonable interpretation of the term.”

These restrictions do not apply to health flexible spending arrangements

© 2011 National Association of Insurance Commissioners
Updated: 5/12/2011 2

Provision Notes
Standards
Development Applicability

Effective
Date

PPACA
Section

Statutory
Section

Rescissions Coverage may be rescinded only for fraud or intentional misrepresentation of
material fact as prohibited by the terms of the coverage. Prior notification must
be made to policyholders prior to cancellation.

All plans 6 months
after
enactment

1001 PHSA 2712

HHS released an interim final rule on June 28.

Rescissions are defined as any retroactive cancellations of coverage, except for
those attributable to failure to pay premiums or contributions. These rules do
not apply to prospective cancellations.

A plan must provide at least 30 days advance written notice to each participant
who would be affected prior to rescinding coverage.

Coverage of
preventive health
services

Plans must provide coverage without cost-sharing for:

Services recommended by the US Preventive Services Task Force

Immunizations recommended by the Advisory Committee on
Immunization Practices of the CDC

Preventive care and screenings for infants, children and adolescents
supported by the Health Resources and Services Administration

Preventive care and screenings for women supported by the Health
Resources and Services Administration

Current recommendations from the US Preventive Services Task force for breast
cancer screenings will not be considered.

The Secretary will determine an interval of not less than 1 year after which new
recommendations will be incorporated.

Secretary of HHS All non-
grandfathered
plans

6 months
after
enactment

1001 PHSA 2713

Regulations:
HHS released interim final rules on July 19.

Plans that have a network of providers may impose cost sharing for preventive
items and services delivered by out-of-network providers. Plans may use
reasonable medical management techniques for coverage of preventive items and
services to determine the frequency, timing, method, treatment or setting of
services to the extent that they are not specified in the relevant recommendation
or guideline.

If a preventive service is billed separately from an office visit, the plan may
impose cost sharing on the office visit. If it is not billed separately from the
office visit, then the plan may not impose cost-sharing on the visit if the primary
purpose of the visit is to receive the preventive item or service.

A plan may impose cost-sharing for a treatment not described in the regulations,

© 2011 National Association of Insurance Commissioners
Updated: 5/12/2011 3

Provision Notes
Standards
Development Applicability

Effective
Date

PPACA
Section

Statutory
Section

even if that treatment results from an item or service that is.

This regulation expires on July 12, 2013, or such earlier date specified in final
regulations.

Extension of
adult dependent
coverage

Plans that provide dependent coverage must extend coverage to adult children up
to age 26. Carriers are not required to cover children of adult dependents.
The Secretary will define which adult children coverage must be extended.

For plan years beginning before 2014, group health plans will be required to
cover adult children only if the adult child is not eligible for employer-sponsored
coverage.

Secretary of HHS All plans 6 months
after
enactment

1001

HR 4872
§2301

PHSA 2714

Regulatory Guidance:
HHS released an interim final rule on May 13, 2010.

The rule clarifies that, with respect to children who have not attained age 26, a
plan or issuer may not define dependent for purposes of eligibility for dependent
coverage of children other than in terms of the relationship between the child
and the participant (in the individual market, the primary subscriber). Examples
of factors that cannot be used for defining dependent for purposes of eligibility
(or continued eligibility) include financial dependency on the participant or
primary subscriber (or any other person), residency with the participant or
primary subscriber (or any other person), student status, employment, eligibility
for other coverage, or any combination of these. Surcharges for coverage of
children under age 26 are not allowed except where the surcharges apply
regardless of the age of the child (up to age 26), and that, for children under age
26, the plan cannot vary benefits based on the age of the child.

The rule requires a plan or issuer to give a child whose coverage ended, or who
was denied coverage (or was not eligible for coverage) an opportunity to enroll
that continues for at least 30 days regardless of whether the plan or coverage
offers an open enrollment period and regardless of when any open enrollment
might otherwise occur. This enrollment period must be provided not later than
the first day of the first plan year (in the individual market, policy year) beginning
on or after September 23, 2010, even if the request for enrollment is made after
the first day of the plan year. In subsequent years, dependent coverage may be
elected for an eligible child in connection with normal enrollment opportunities
under the plan or coverage. Any child enrolling in group health plan coverage
pursuant to this enrollment right must be treated as a special enrollee, as provided
under the regulations interpreting the HIPAA portability provisions.

© 2011 National Association of Insurance Commissioners
Updated: 5/12/2011 4

Provision Notes
Standards
Development Applicability

Effective
Date

PPACA
Section

Statutory
Section

Accordingly, the child must be offered all the benefit packages available to
similarly situated individuals who did not lose coverage by reason of cessation of
dependent status and cannot be required to pay more.

Preexisting
condition
exclusions

A plan may not impose any preexisting condition exclusions. All plans except
grandfathered
individual
market plans

6 months
after
enactment for
under 19.

1201 &
10103(e)

PHSA 2704

Regulations:
HHS released an interim final rule on June 21.
Plans may not impose any exclusion of benefits (including a denial of coverage)
limit coverage based upon a preexisting condition, for an individual under age 19.

Uniform
explanation of
coverage
documents and
standardized
definitions

The Secretary must develop standards for a summary of benefits and coverage
explanation to be provided to all potential policyholders and enrollees. The
summary must contain:

Uniform definitions of insurance and medical terms

A description of coverage and cost sharing for each category of
essential benefits and other benefits

Exceptions, reductions and limitations in coverage

Renewability and continuation of coverage provisions

A “coverage facts label” that illustrates coverage under common
benefits scenarios

A statement of whether it provides minimum essential coverage with an
actuarial value of at least 60% that meets the requirements of the
individual mandate

A statement that the outline is a summary and that the actual policy
language should be consulted

A contact number for the consumer to call with additional questions
and the web address of where the actual policy language can be found.

The Secretary must consult with the NAIC, as well as a working group of
insurers, providers, patient advocates, and those representing individuals with
limited English proficiency.

Secretary of HHS,
in consultation
with the NAIC
and a working
group of
consumer
advocacy
organizations,
insurers, health
care professionals,
patient advocates,
and other
qualified
individuals.

All plans Standards
developed
within 12
months.

Uniform
documents
implemented
within 24
months

1001 PHSA 2715

Provision of
additional
information

All plans must submit to the Secretary and State insurance commissioner and
make available to the public the following information in plain language:

Claims payment policies and practices

Periodic financial disclosures

Data on enrollment

Data on disenrollment

Data on the number of claims that are denied

All non-
grandfathered
plans

6 months
after
enactment

1001 PHSA
2715A

© 2011 National Association of Insurance Commissioners
Updated: 5/12/2011 5

Provision Notes
Standards
Development Applicability

Effective
Date

PPACA
Section

Statutory
Section

Data on rating practices

Information on cost-sharing and payments with respect to out-of-
network coverage

Other information as determined appropriate by the Secretary

Prohibition on
discrimination
based on salary

Extends current law provisions prohibiting discrimination in favor of highly
compensated employees in self-insured group plans to fully-insured group plans.
The Secretary of HHS will develop rules.

Fully insured
non-
grandfathered
group health
plans

6 months
after
enactment

1001 PHSA 2716

Ensuring quality
of care

Plans must submit annual reports to the Secretary of HHS on whether the
benefits under the plan:

Improve health outcomes through activities such as quality reporting,
case management, care coordination, chronic disease management

Implement activities to prevent hospital readmission

Implement activities to improve patient safety and reduce medical errors

Implement wellness and health promotion activities

Secretary of HHS,
in consultation with
experts in health
care quality and
stakeholders

All non-
grandfathered
plans

2 years after
enactment

1001 PHSA 2717

Bringing down
the cost of health
care

Carriers must report to the Secretary of HHS the ratio of incurred losses
(incurred claims) plus loss adjustment expense (change in contract reserves) to
earned premiums. The report must include the percentage of total premium
revenue, after accounting for risk adjustment, premium corridors, and payments
of reinsurance that is expended on:

Reimbursement for clinical services

Activities that improve health care quality

All other non-claims expenses, including the nature of the costs,
excluding Federal and State taxes and licensing or regulatory fees

Insurers must provide a rebate to consumers if the percentage of premiums
expended for clinical services and activities that improve health care quality is less
than 85% in the large group market and 80% in the small group and individual
markets.

All hospitals must establish and make public a list of its standard charges for
items and services, including for diagnosis-related groups.

The NAIC shall
establish, by
December 31,
2010, uniform
definitions of the
categories of
expenses and
standardized
methodologies for
calculating
measures of them.

All fully insured
plans, including
grandfathered
plans

01/01/11 1001 PHSA 2718

Regulatory Guidance:
On November 22, HHS issued an interim final rule on November 22 and
technical corrections on December 30.

The regulations are based largely upon the NAIC’s Patient Protection and
Affordable Care Act Medical Loss Ratio Regulation.

© 2011 National Association of Insurance Commissioners
Updated: 5/12/2011 6

Provision Notes
Standards
Development Applicability

Effective
Date

PPACA
Section

Statutory
Section

 “Plan Year” is defined as the calendar year, which means the Medical Loss
ratio will be calculated based on premiums received (minus taxes and fees)
and claims and quality improvement activities expenses beginning January 1
and ending December 31. The MLR report will be completed and any
required rebates will be paid in the following year.

 “Small Group” is defined as coverage issued to employers with 1-100
employees, unless, until 2016, state law specifies that the upper limit is 50.

 “Federal and State taxes and licensing and regulatory fees” are defined
as adopted by the NAIC in the Supplemental Blank. Taxes include all taxes
except federal income taxes on investment income.

 “Expenses to improve health care quality” are defined as adopted by the
NAIC in the Supplemental Blank. In essence, such activities include those
that: 1) improve health outcomes, including increasing the likelihood of
desired outcomes compared to baseline and reducing health disparities
among specified populations; 2) prevent hospital readmissions; 3) improve
safety and reduce medical errors, lower infection and mortality rates; 4)
increase wellness and promote health activities; or 5) enhance the use of
health care data to improve quality, transparency, and outcomes. The interim
final rule outlines some specific items that are included and not included in
these activities.

 Experience is aggregated by state, by market (individual, small group, large
group), and by licensed entity. In the case of an employer with employees in
more than one state, the experience of the employer would be aggregated in
the state where the contract was issued.

 Issuers who have blocks of business less than a given size can make a
credibility adjustment to their MLR calculation.

o Blocks with less than 1,000 life years are considered non-
credible and will not be required to pay rebates in most cases.

o Blocks greater than 1,000 but less than 75,000 life years may
add a credibility adjustment to the calculated MLR.

o The credibility adjustment is the product of a base factor that
varies by life years and a plan cost-sharing factor that varies by
deductible.

o Blocks greater than 75,000 life years are considered fully
credible and can’t use a credibility adjustment.

The factors for the credibility adjustment are as follows

© 2011 National Association of Insurance Commissioners
Updated: 5/12/2011 7

Provision Notes
Standards
Development Applicability

Effective
Date

PPACA
Section

Statutory
Section

Table 1
Base Credibiilty Additive Adjustment Factors

Life Years Additive Adjustment

<1,000 No Credibility

1,000 8.3%

2,500 5.2%

5,000 3.7%

10,000 2.6%

25,000 1.6%

50,000 1.2%

75,000 0.0%

Table 2
Plan Cost-Sharing Adjustment Factors by Deductible

Range

<$2,500 1.00

$2,500 1.164

$5,000 1.402

>=$10,000 1.736

 Payment of Rebates. Rebates must be paid to the individual or entity that
paid the premium no later than August 1 of the year following the end of
the MLR reporting year. Issuers may provide rebates in the form of a
premium credit or lump-sum reimbursement. If the total rebate for a group
or individual policy is less than $5, insurers may instead aggregate them and
increase the rebates due policyholders whose rebates are above the $5
threshold. In the group market, insurers may enter into arrangements to
provide all rebates due a to a group to the policyholder for pro-rated
distribution to enrollees.

 Application to Expatriate and Limited Benefit Plans. Expatriate plans,
issued to U.S. nationals employed abroad are exempted from the MLR
requirement due to their higher intrinsic administrative costs and the fact
that these plans compete against plans issued by foreign insurers not subject
to U.S. law, but must aggregate and report data to HHS. Plans that have
received waivers from the restrictions on annual limits will be exempted
from the MLR requirement for a period of one year while HHS determines
what the future treatment of these plans will be. They will, however, be
required to submit MLR data to HHS on a quarterly basis.

 Adjustments. Insurance Commissioners may request an adjustment of the
minimum MLR for the individual market in their states. The interim final
rule specifies the procedure for requesting an adjustment and for

© 2011 National Association of Insurance Commissioners
Updated: 5/12/2011 8

Provision Notes
Standards
Development Applicability

Effective
Date

PPACA
Section

Statutory
Section

consideration of requests by HHS.

Appeals process Internal claims appeal process:

Group plans must incorporate the Department of Labor’s claims and
appeals procedures and update them to reflect standards established by
the Secretary of Labor.

Individual plans must incorporate applicable law requirements and
update them to reflect standards established by the Secretary of HHS.

External review:

All plans must comply with applicable state external review processes
that, at a minimum, include consumer protections in the NAIC
Uniform External Review Model Act (Model 76) or with minimum
standards established by the Secretary of HHS that is similar to the
NAIC model.

Secretaries of Labor
and HHS

All non-
grandfathered
plans

6 months
after
enactment

1001 PHSA 2719

Regulatory Guidance:
HHS released an interim final rule on July 23.

The regulations expand the definition of “adverse benefit determination” to
include rescissions of coverage whether or not there is an adverse effect upon
any particular benefit.

Internal Appeals
Plans must comply with the DOL Claims regulations, as published in the Federal
Register on Nov. 21, 2000, as currently modified. These modifications require
plans to:

Treat a rescission of coverage as an adverse benefit

Notify a claimant of a benefit determination involving urgent care as soon as
possible, taking into account the medical exigencies, but not later than 24
hours after the receipt of the claim, unless the claimant fails to provide
sufficient information

Allow a claimant to review the claim file and present evidence and testimony

Provide a claimant, free of charge, with any new or additional evidence or
rationales in connection with the claim as soon as possible

Ensure that all claims and appeals are adjudicated in a way designed to
ensure the independence and impartiality of the persons involved

Ensure that any notice of adverse benefit includes information sufficient to
identify the claim involved,

Ensure that the reason or reasons for the adverse benefit determination or
final internal adverse benefit determination includes the denial code and its
corresponding meaning, as well as a description of the plan’s or issuer’s

© 2011 National Association of Insurance Commissioners
Updated: 5/12/2011 9

Provision Notes
Standards
Development Applicability

Effective
Date

PPACA
Section

Statutory
Section

standard, if any, that was used in denying the claim. In the case of a final
internal adverse benefit determination, this description must also include a
discussion of the decision.

Provide a description of available internal appeals and external review
processes, including information on how to initiate an appeal.

Disclose the availability of, and contact information for, any applicable office
of health insurance consumer assistance or ombudsman to assist individuals
with the internal clams and appeals and external review processes.

All internal appeals processes are deemed to have been exhausted if a plan fails
to strictly adhere to all requirements and the claimant may file an external review.
Individual market plans must only provide for one level of internal review and
must retain records for six years.

External Appeals
If a state external review process provides, at a minimum, consumer protections
in the NAIC Uniform Health Carrier External Review Model Act (#76), then
carriers must meet that standard. Carriers in states whose processes do not meet
that standard and plans not subject to state regulation must comply with a new
Federal external review process that is similar to the NAIC model.

Patient
Protections

A plan that provides for designation of a primary care provider must allow the
choice of any participating primary care provider who is available to accept them,
including pediatricians.

If a plan provides coverage for emergency services, the plan must do so without
prior authorization, regardless of whether the provider is a participating provider.
Services provided by nonparticipating providers must be provided with cost-
sharing that is no greater than that which would apply for a participating provider
and without regard to any other restriction other than an exclusion or
coordination of benefits, an affiliation or waiting period, and cost-sharing.

A plan may not require authorization or referral for a female patient to receive
obstetric or gynecological care from a participating provider and must treat their
authorizations as the authorization of a primary care provider.

All non-
grandfathered
plans

6 months
after
enactment

1001 PHSA
2719A

Regulations:
HHS released an interim final rule on June 28.

Any cost-sharing requirement for emergency services provided out-of-network
cannot exceed cost-sharing requirements for in-network emergency services.
Enrollees may, however, be required to pay, in addition to the in-network cost-
sharing, any excess provider charges beyond the greater of: the following:

The median amount negotiated with in network providers for the

© 2011 National Association of Insurance Commissioners
Updated: 5/12/2011 10

Provision Notes
Standards
Development Applicability

Effective
Date

PPACA
Section

Statutory
Section

emergency service negotiated;

The amount for the emergency service calculated using the same
method the plan generally uses to determine payments for out-of
network services (such as the usual, customary, and reasonable amount),
excluding any in-network copayment or coinsurance imposed;

The amount that would be paid by Medicare for the emergency service,
excluding any in-network copayment or coinsurance imposed.

Any cost-sharing other than a copayment or coinsurance, such as a deductible,
may be applied if that requirement applies to out-of-network benefits.

A plan that requires the designation of a primary care provider must provide a
notice to each participant of the terms of the plan regarding this designation,
and any rights under this section. This notice must be provided with the
summary plan description or other description of benefits, or in the case of an
individual policy, when the issuer provides a primary subscriber with a policy,
certificate, or contract. The regulation provides model language.

Health insurance
consumer
assistance offices
and ombudsmen

The Secretary of HHS shall provide $30 million in grants to states to establish
and operate offices of health insurance consumer assistance or health insurance
ombudsman programs to:

Assist with the filing of complaints and appeals

Collect, track, and quantify problems and inquiries

Educate consumers on their rights and responsibilities

Assist consumers with enrollment in plans

Resolve problems with obtaining subsidies
As a condition of receiving a grant, a state must collect and report data on the
types of problems and inquiries encountered by consumers. The data shall be
used to identify areas where enforcement action is necessary and shall be shared
with state insurance regulators, the Secretary of Labor and the Secretary of
Treasury.

Date of
enactment

1002 PHSA 2793

Grant Requirements:
HHS released a grant announcement on July 22.
Applications must be submitted by September 10. Grant awards will be made
around October 8.
HHS will award grants based upon a state’s population to state agencies,
including insurance departments, independent offices of health insurance
consumer assistance, attorneys general, and independent state consumer
assistance agencies, or to nonprofit organizations contracting with the state.
Agencies receiving grants must be able to advocate freely and vigorously on
behalf of consumers and be capable of reporting objective data to the Secretary
on the responsiveness of agencies that oversee private health insurance and

© 2011 National Association of Insurance Commissioners
Updated: 5/12/2011 11

Provision Notes
Standards
Development Applicability

Effective
Date

PPACA
Section

Statutory
Section

group plans and public coverage.

Grant funds must be used to support the following activities:

Assist with the filing of complaints and appeals;

Collect, track and quantify problems and inquiries encountered by
consumers;

Educate consumers on their rights and responsibilities with respect to
group health plans and health insurance coverage;

Assist consumers with enrollment in group health plans or health
insurance coverage by providing information, referral, and assistance;
and

Resolve problems obtaining premium

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