PPACA is confusing as it is and staying up with “proposed” and “final” rule clarifications is even harder. We have broken each of the guidelines down further making them easier to understand.

On Nov. 20, 2012, the Department of Health and Human Services issued three sets of proposed rules that provide some of the details on how PPACA will probably unfold. In early December , 2012, they issued two more sets. All rules are still in the “proposed” stage, which means that there may – and likely will – be changes when the final rules are issued.

The proposed rules address:

– Wellness programs under PPACA
– Essential health benefits and determining actuarial value
– Health insurance market reforms
– Benefit and Payment Parameters
– Multi-State Plan Program

Nondiscriminatory Wellness Incentives
The proposed rule largely carries forward the rules that have been in effect since 2006.  There still would not be limits on the incentives that may be provided in a program that simply rewards participation, such as a program that pays for flu shots or reimburses the cost of a tobacco cessation program, regardless whether the employee actually quits smoking.  Programs that are results-based (which will be called “health-contingent wellness programs”) still would need to meet several conditions, including a limit on the size of the available reward or penalty.  Beginning in 2014, the maximum reward/penalty would increase to 50 percent for tobacco nonuse/use and to 30 percent for other health-related standards. 

Essential Health Benefits (EHBs) and Actuarial Value
The proposed rule confirms that non-grandfathered plans in the exchanges and the small group market will be required to cover the 10 essential health benefits and provide a benefit expected to pay 60, 70, 80 or 90 percent of expected allowed claims.  The proposed rule also says that self-funded plans and those in the large employer market would not need to provide the 10 EHBs; instead, they would need to provide a benefit of at least 60 percent of expected allowed claims and provide coverage for certain core benefits.  The proposed rule would consider current year employer contributions to a health savings account (HSA) or a health reimbursement arrangement (HRA) as part of the benefit value calculation.

Market Reforms
The proposed rule confirms that non-grandfathered health insurers (whether operating through or outside of an exchange) would be prohibited from denying coverage to someone because of a pre-existing condition or other health factor.  The proposed rule also provides that premiums for policies in the exchanges and individual and small group markets could only vary based upon age, tobacco use, geographic location, and family size and sets out details on how premiums could be calculated.

The “Benefit and Payment Parameters” proposed rule addresses a number of topics.  Of particular interest to employers are proposed rules regarding:

– The Temporary Reinsurance Program (TRP): intended to provide funding to cover additional costs associated with covering formerly uninsured individuals who may have unmet health needs.  Funding will be provided by assessing all fully insured and self-funded major medical plans.

– Small-business health options program (SHOP) exchanges: The proposed rule provides that, at least through 2016, eligibility for the small-business health option program (SHOP) exchange would be limited to small employers.  An employer would be “small” for exchange purposes if it has 100 or fewer employees, although a state could elect to use 50 employees for the limit in 2014 and 2015.

– A timing change for medical loss ratio (MLR) beginning in 2014: The proposed rule provides that MLR payments will be due Sept. 30, beginning in 2014.  Beginning next year, if an MLR payment is used to reduce premiums, it would need to be applied to the next premium due after the MLR due date.

– A user fee for those using federally facilitated exchanges: HHS has proposed a user fee of three and one-half percent of premium to cover the cost of running a federally facilitated exchange (FFE) for those states that choose not to run their own exchange.

The “Multi-State Plan Program” proposed rule begins to address the complex topic of multi-state health exchanges. PPACA directs the federal Office of Personnel Management (OPM) to enter into contracts with private health insurance issuers to offer at least two Multi-State Plans (MSPs) through the exchanges. Health insurance issuers who wished to provide an MSP would apply to OPM. OPM would determine which issuers are qualified to become MSP issuers, enter into contracts with the issuers and approve the plans to be offered on exchanges.

Important: These rules are still in the “proposed” stage, which means that there may be changes when the final rule is issued.  Employers should view the proposed rules as an indication of how plans will be regulated beginning in 2014, but need to understand that changes are entirely possible.