The federal government has issued regulations under the recent health care reform legislation, the Patient Protection and Affordable Care Act. Here is a brief overview of the interim final regulations and their impact on health care policies and plans.

Preexisting Conditions Prohibited

Before the new health care reform law, federal law allowed a group health insurance plan to exclude from coverage certain individuals based on preexisting health conditions, under limited circumstances. The health care reform law will prohibit any preexisting condition exclusion under either an individual or group health plan.

Under the regulations, group health insurance plans that qualify as “grandfathered” plans (basically, those in existence at the time of the health care reform law’s enactment) will be similarly prohibited from imposing any preexisting condition limitations. However, an individual policy that qualifies as grandfathered coverage will not be required to comply with the preexisting condition coverage prohibition.

 The new rule generally does not go into effect until 2014. However, for individuals under age 19 who have individual plans or enroll in a group plan, the prohibition on preexisting condition exclusions goes into effect for individual policy years or plan years beginning on or after September 23, 2010.

No Lifetime or Annual Limits

The health care reform law will also generally prohibit health care providers from imposing per individual lifetime or annual limits on the dollar value of health insurance benefits. However, certain account-based plans, such as health Flexible Spending Accounts, may still limit plan benefits.

The regulations allow “restricted annual limits” relating to essential health benefits for individual policy or health plan years beginning before 2014. In addition, a plan or issuer may impose annual or lifetime dollar limits relating to specific covered benefits that are not essential health benefits.

Plans issued or renewed as of September 23, 2010, may set restricted annual limits for essential health benefits of no less than $750,000. Beginning September 23, 2011, this limit is scheduled to rise to $1.25 million and to $2 million beginning September 23, 2012. For plans issued or renewed beginning in 2014, annual dollar limits on coverage relating to essential health benefits will be prohibited. The limits also apply to individual policies that are not grandfathered policies.

For individuals who are still eligible for the coverage but have reached a lifetime plan limit prior to the first day of the policy year or plan year beginning on or after September 23, 2010, the regulations require the policy issuer or plan to send them a notice that the lifetime limit no longer applies and offering a reenrollment opportunity for those who terminated coverage.

Rescissions Prohibited

The new regulations provide that, effective for policy or plan years beginning on or after September 23, 2010, a group health plan, or a health insurance issuer offering individual or group health insurance coverage, will generally be prohibited from rescinding coverage (i.e., cancelling or discontinuing health coverage retroactively). However,
rescissions will be permitted under circumstances in which an intentional misrepresentation of a material fact exists, or in the event of fraud. The new rule also will apply to self-insured coverage and regardless of any contestability period that may otherwise exist under the policy.

Summary

The Patient Protection and Affordable Care Act is a complex law and leaves much of the interpretation of how the law applies to government agency regulations. Thus, it is important for employers offering health care benefits and participants in those plans to stay informed about these regulations.