The DOL’s Employee Benefits Security Administration has released a fifth set of frequently asked questions (FAQs) addressing various issues related to the implementation of the new health care law, including its impact on the Mental Health Parity and Addiction Equity Act. The guidance responds to questions related to the following areas: value-based insurance design in connection with preventive care benefits; automatic enrollment in health plans; disclosure under the Public Health Service (PHS) Act section 2715(d)(4); dependent coverage of children to age 26; preexisting condition exclusions for children in the individual market; grandfathered health plans; the Mental Health Parity and Addiction Equity Act of 2008; and nondiscrimination based on a health factor and wellness programs. Highlights of the new guidance include the following:

Wellness Programs

The guidance explains that the Affordable Care Act added a new section to the PHS Act regarding nondiscrimination and wellness that largely incorporates regulations promulgated in 2006 under the Health Insurance Portability and Accountability Act (HIPAA). Those regulations divided wellness programs into two categories. The first includes wellness programs that do not require an individual to meet a standard related to a health factor in order to obtain a reward. These types of wellness programs are not deemed discriminatory. The second category of wellness programs requires participants to meet certain standards related to a health factor in order to obtain a reward. Such health-contingent wellness programs are permissible only if they meet the following conditions:

• The total reward for participation in the wellness program is limited to 20 percent of the total cost of employee-only coverage under employer’s healthcare plan. (However, if any class of dependents can participate in the program, the limit on the reward is modified so that the 20 percent is calculated with respect to the total cost of coverage in which the employee and any dependents are enrolled.)
• The program must be reasonably designed to promote health or prevent disease. For this purpose, it must: have a reasonable chance of improving health or preventing disease, not be overly burdensome, not be a subterfuge for discrimination based on a health factor, and not be highly suspect in method.
• The program must give eligible individuals an opportunity to qualify for the reward at least once per year.
• The reward must be available to all similarly situated individuals. For this purpose, a reasonable alternative standard (or waiver of the original standard) must be made available to individuals for whom it is unreasonably difficult due to a medical condition to satisfy the original standard during that period (or for whom a health factor makes it unreasonably difficult or medically inadvisable to try to satisfy the original standard).
• In all materials describing the terms of the program, the availability of a reasonable alternative standard (or waiver of the original standard) must be disclosed.

The guidance explains that the Affordable Care Act changes the maximum reward that can be provided under a health-contingent wellness program from 20 percent to 30 percent, which will become effective in 2014. The FAQs also note that the EBSA and HHS plan to issue proposed regulations to raise the percentage for the maximum reward that can be provided under a health-contingent wellness program to 30 percent before the year 2014.

The FAQs also clarify that the HIPAA nondiscrimination rules apply to an employer’s wellness program “only if it is, or is part of, a group health plan. If an employer operates a wellness program as an employment policy separate from its group health plan(s), the program may be covered by other Federal or State nondiscrimination laws, but it is not subject to the HIPAA nondiscrimination regulations.”

The percent limitation also applies only if the wellness program is contingent upon certain results. Therefore, it is not unlawful for an employer to offer a premium discount larger than the current 20 percent limit if the wellness program at issue merely requires the employee’s attendance at a monthly health seminar, for example, since the benefit is not contingent on specific results.

Mental Health Parity

The Mental Health Parity and Addiction Equity Act (MHPAEA) requires that the financial requirements and treatment limitations imposed on mental health and substance use disorder benefits must be on par with those applicable to substantially all medical and surgical benefits. The new guidance clarifies that despite changes to the definition of “small employer” under the Affordable Care Act, agencies will continue to treat group health plans of employers with 50 or fewer employees as exempt from the MHPAEA requirements under the small employer exemption contained in that Act.

The guidance also lays out how a health plan can claim the MHPAEA increased cost exemption that is available for plans that make changes to comply with that law and incur an increased cost of at least two percent in the first year that MHPAEA applies to the plan or at least one percent in any subsequent plan year (generally, plan years beginning after October 3, 2010).

Grandfathered Health Plans

A health plan will not lose its grandfathered status if the plan or coverage has a fixed-amount cost-sharing requirement other than a co-payment (such as a deductible or out-of-pocket limit) that is based on a percentage-of-compensation formula so long as the formula remains the same as that which was in effect on March 23, 2010, even if employees face higher out-of-pocket limits if their compensation increases.

Dependent Coverage to Age 26

In response to a question asking whether it is lawful for a group health plan to charge a co-payment for all individuals ages 19 and older for physician visits that do not constitute preventive services, but waive them for those under 19, the guidance explains that this is permissible, as the Affordable Care Act does not prohibit distinctions based upon age that apply to all coverage under the plan. In the example given, the co-payments charged to dependent children were the same as those charged to employees and spouses, and therefore allowable.

Automatic Enrollment

The Affordable Care Act amended the Fair Labor Standards Act (FLSA) by adding a new section 18A, which will require employers with more than 200 full-time employees to automatically enroll new full-time employees in the employer’s health benefits plans and continue enrollment of current employees. The FAQs explain that until the EBSA developments regulations on this new section, employers are not required to comply with the automatic enrollment requirement. EBSA intends to complete this rulemaking by 2014.

This entry was written by Ilyse Schuman.

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