Executive Summary

 The Patient Protection and Affordable Care Act (PPACA) requires the establishment of a temporary high-risk health insurance pool program to provide affordable health insurance coverage to uninsured individuals with pre-existing conditions. To avoid confusion with state high-risk pool programs, which will continue to operate, the federal program is referred to as the Pre-existing Condition Insurance Plan Program (PCIP program).

• The program will continue until January 1, 2014, when individuals will be able to purchase coverage through health benefits exchanges.
• On July 30, 2010, HHS issued an interim final rule implementing the requirements related to the PCIP program. The regulations are effective on July 30, 2010. Comments on the interim final rule are being accepted until September 28, 2010.
• Employers should take note that the interim final rule includes penalties for employers or insurers that encourage plan participants to drop, or not enroll in, plan coverage to try to become covered under the PCIP program.

 This Legislative Brief highlights the main portions of the interim final rule. Please read below for more information. A copy of the rule is available at www.federalregister.gov/a/2010-18691.

 PCIP Program Interim Final Rule

 Background

High-risk pools are designed to provide coverage of last resort for people whom, because of their health, are denied coverage by private insurers or are unable to purchase affordable coverage in the individual market, and are not eligible for public coverage through programs like Medicare and Medicaid.

 Most states that permit insurers to deny coverage for health reasons have established high-risk pools as an alternative coverage option in their individual market. First established in 1976, 35 state high-risk pools currently provide coverage to approximately 200,000 individuals, or about one percent of the individual market nationwide. The federal PCIP program will provide coverage for uninsured individuals with pre-existing conditions until additional federal reforms take effect in 2014.

 PCIP Program Administration

 HHS may establish the PCIP program either directly or through contracts with states and nonprofit entities. The state or nonprofit entity must submit a proposal to carry out a PCIP to HHS. The interim final rule contains requirements for the proposal process. It specifies that the proposals must demonstrate the capability to perform all functions necessary for the design and operation of a PCIP and that the proposal complies with the interim final rule.

 Eligibility and Enrollment

 An individual is eligible to enroll in a PCIP if he or she:

1. Is U.S. citizen or national, or is lawfully present in the U.S., as defined under the regulations;
2. Has not been covered under creditable coverage during the 6-month period prior to the date he or she applies for PCIP coverage;
3. Has a pre-existing condition; and
4. Is a resident of a state that is within the service area of a PCIP.

Creditable Coverage Requirement

For purposes of the PCIP program, creditable coverage is defined as coverage under a group health plan, health insurance coverage, Medicare Part A or B, Medicaid, the Children’s Health Insurance Program (CHIP), the TRICARE program, a medical care program of the Indian Health Service or a tribal organization, an existing state high-risk pool, the Federal Employee Health Benefits Plan (FEHBP), a public health plan (such as coverage through the Veterans Administration) or a health plan offered under the Peace Corps Act.

HHS plans to issue guidance on how to address coverage for infants who are less than 6 months old. Factors to be considered include whether coverage in the hospital under the mothers’ plan at birth counts, current practices regarding insurers’ coverage of newborns and the anti-dumping rules designed to prevent disenrollment of individuals from existing insurance due to their health status. See below for additional discussion of the anti-dumping rules.

Pre-existing Condition Requirement

A PCIP may determine that an individual has a pre-existing condition for purposes of PCIP eligibility based on satisfying any one or more of the criteria listed below, or other criteria approved by HHS. The criteria are that the individual must provide documented evidence that:

1. An insurer has refused, or has provided clear indication that it would refuse, to issue individual coverage on grounds related to the individual’s health;
2. He or she has been offered individual coverage but only with a rider that excludes coverage of benefits associated with a pre-existing condition; or
3. He or she has a medical or health condition specified by the state and approved by HHS.

 In some cases, individuals are unable to obtain outright written coverage denials, but instead are told that carriers will not accept their applications. The interim final rules permit PCIPs to be flexible in determining exactly what type of communication constitutes a refusal to issue coverage.

 Enrollment and Disenrollment Process

 PCIPs must establish a process approved by HHS for enrolling and disenrolling individuals. The intent of HHS is to permit the use of established policies and procedures in place under existing state high-risk pools. PCIPs must allow an individual to remain enrolled, unless he or she is disenrolled under specified circumstances (such as moving out of the service area or obtaining other creditable coverage).

Individuals may also be disenrolled from a PCIP if they do not pay premiums on a timely basis. The enrollee must be given sufficient notice and a reasonable grace period for payment before disenrollment (not to exceed 61 days). The consequence of failing to pay premiums and being disenrolled is that an individual loses access to coverage and may not be able to re-enroll for six months.

 A PCIP must disenroll an individual in cases of death, where an individual obtains creditable coverage or no longer resides in the PCIP’s service area, and in other exceptional circumstances as established by HHS. Such circumstances could include fraud or intentional material misrepresentation. HHS intends to work with PCIPs to develop policies in these areas. HHS has noted that, if an individual is disenrolled because he or she moves outside of the PCIPs service area, an additional six-month period without creditable coverage is not necessary before applying to enroll in a PCIP in the new state of residence.

 PCIPs must establish rules regarding dates for enrollment and disenrollment. Specifically, a PCIP must identify the deadline for receiving an enrollment application that would take effect on the first of the following month. In general, an eligible individual who submits a complete enrollment request by the 15^th day of a month could access coverage by the 1^st day of the following month. Any exceptions to this rule would be subject to HHS approval.

 HHS recognizes that PCIPs need to be flexible in managing costs and enrollment because of their limited funding. Therefore, a PCIP may manage enrollment by establishing enrollment capacity limits, phased-in or delayed enrollment, premium and benefit adjustments that indirectly affect enrollment and other measures approved by HHS.

 Benefits

 Required Benefits

 The benefits required under the PCIP programs are based on essential health benefits, as that term is used in PPACA. Guidance regarding a comprehensive definition of the term has yet to be issued. The preliminary list of benefits is consistent with the most commonly covered services offered in existing state high-risk pools and is parallel to the benefits offered by the FHEBP.

 Excluded Benefits

 The interim final rule includes a list of services that may not be covered by a PCIP. These excluded services are also parallel to the services excluded by the FHEBP. PCIP programs may not cover abortion services, except in the case of rape or incest, or where the life of the woman would be endangered.

 Pre-existing Condition Exclusions

 A PCIP may not impose any pre-existing condition exclusions with respect to covered services. Under the interim final rule, the term pre-existing condition exclusion means a denial of coverage, or limitation or exclusion of benefits, based on the fact that the individual had a health condition that was present before the date of enrollment for the coverage (or denial of enrollment), whether or not any medical advice, diagnosis, care, or treatment was recommended or received before that date. This would include exclusions stemming from a condition identified via a pre-enrollment questionnaire or physical examination, or a review of medical records during the pre-enrollment period.

 Similarly, PCIPs cannot impose any type of coverage waiting period upon eligible individuals. A waiting period is a period immediately following the effective date of enrollment in which some or all benefits in the coverage are not provided. Once an individual is enrolled in a PCIP, full coverage must be provided starting with the effective date of enrollment.

 Premiums and Cost-Sharing

 Premiums for coverage must be established at a standard rate for a standard population. This rate refers to the premium rates offered in the individual market in a given state. PCIP rates cannot exceed 100 percent of the standard individual market rate in the PCIP service area. The rates may be calculated using reasonable actuarial techniques that reflect anticipated experience and expenses. Premium rates in a PCIP can vary on the basis of age by a factor no greater than 4 to 1. Specific age band rating will be established through the PCIP contracting process.

PPACA sets limits on enrollee costs in the PCIP program. The issuer’s share of the total allowed cost of benefits has to be at least 65 percent of the costs. Coverage provided under a PCIP may not have an out-of-pocket limit greater than that for high-deductible health plans associated with health savings accounts (HSAs). The limit is $5,950 for 2010.

 PCIPs may specify a network of providers from whom enrollees may obtain services, as long as there is a sufficient number and range of providers to ensure that all covered services are reasonably available and accessible. Emergency services must be covered, even if out of network and out of area if (1) the enrollee had a reasonable concern that failure to obtain immediate treatment could present a serious risk to his or her life or health; and (2) the services were required to assess whether a condition requiring immediate treatment exists, or to provide such immediate treatment where warranted.

Oversight

 Appeals Procedures

 PCIPs must have an appeals process to enable individuals to appeal determinations under the PCIP program. This rule applies to both determinations on benefit coverage and eligibility for the program, including whether an individual is a U.S. citizen or national or is lawfully present in the United States.

 The interim final rule establishes minimum requirements that all PCIPs must meet. A PCIP must provide for a timely redetermination of an eligibility or coverage determination. For coverage determinations, an enrollee has the right to a timely second-level appeal, or “reconsideration,” by an independent entity.

 Fraud, Waste and Abuse

 PCIPs must also develop, implement and execute operating procedures to prevent, detect, recover payments (when applicable or allowable), and promptly report to HHS incidences of waste, fraud and abuse. These procedures must include identifying situations in which enrollees, potential enrollees or their family members had access to employer-based coverage, and may have been discouraged from enrolling in that coverage. If HHS becomes aware of fraud, waste or abuse within a PCIP’s operation, HHS will take appropriate action within the terms of the contract or as allowed by law.

 The PCIP must cooperate with federal law enforcement and oversight authorities in cases involving waste, fraud and abuse and must report cases in which an individual may have been discouraged from enrolling in other coverage to appropriate authorities. For example, if the coverage was an employer group health plan subject to ERISA, which prohibits discrimination based on health status, the matter should be reported to the Department of Labor for investigation and possible enforcement action.

 Anti-Dumping Rules

There may be a temptation for employers and issuers to single out high-risk, high-cost individuals and offer them incentives to disenroll from their coverage to obtain coverage through a PCIP, if they are uninsured for at least six months. In order to discourage this type of activity, HHS has established criteria for determining whether health insurance issuers and employment-based health plans have discouraged individuals from remaining enrolled in prior coverage based on health status.

PCIPs must establish procedures to identify and report to HHS any of the following circumstances:

~   Situations where an enrollee or potential enrollee had prior coverage obtained through a group health plan or issuer, and the individual was provided financial consideration or other rewards for disenrolling from their coverage, or disincentives for remaining enrolled.

~   Situations where enrollees or potential enrollees had prior coverage obtained directly from an issuer or a group health plan and either of the following occurred:

1. The premium for the prior coverage was increased to an amount that exceeded the premium required by the PCIP (adjusted based on the age factors applied to the prior coverage) and this increase was not otherwise explained; or
2. The health plan, issuer or employer otherwise provided money or other financial consideration to disenroll from coverage, or disincentive to remain enrolled in such coverage. Such considerations include payment of the PCIP premium for an enrollee or potential enrollee.

 If it is found that dumping has occurred, HHS may bill the issuer or group health plan for any medical expenses incurred by the PCIP for the enrollee. The issuer or plan will also be referred to appropriate federal and state authorities for other warranted enforcement action.

 Funding

 PPACA provides $5 billion in funding to pay for claims and administrative costs of the PCIP program that exceed the premiums collected. All funds awarded under the PCIP program must be used exclusively to pay the allowable claims and administrative costs of the PCIP. These costs include those incurred in the development and operation of the PCIP program. PCIP program funds are not available for any other uses, such as to pay expenses or defray premiums of existing state high-risk pools. A PCIP may not spend more than 10 percent of its total allotted funds on administrative expenses.

 In order to enter into an agreement to administer a PCIP, a state must agree not to reduce the annual amount it spent on the operation of an existing state high-risk pool in the year before the PCIP begins. The intent of this rule is to prevent the shifting of costs of existing state high-risk pools to the federal government.

 Transition to Exchanges in 2014

 Enrollee coverage under the PCIP program will end on January 1, 2014, because affordable coverage will be available under the state health benefits exchanges and insurance plans will no longer be able to exclude coverage for pre-existing conditions. Coverage of claims will extend only to the costs of covered services provided through December 31, 2013. HHS will develop procedures to transition PCIP enrollees to the exchanges, in order to avoid lapses in coverage for individuals enrolled in the PCIP program.

EXECUTIVE SUMMARY

Under the Patient Protection and Affordable Care Act, a non-grandfathered group health plan must adopt an improved internal claims and appeal process and follow minimum requirements for external review. On July 23, 2010, interim final regulations were issued implementing these requirements (the Interim Final Rule). The appeals process rules are effective for plan years beginning on or after September 23, 2010. Comments on the Interim Final Rule are being accepted until September 21, 2010.

Key provisions of the Interim Final Rule include information on:

1. How to comply with updated internal claims and appeals processes;
2. Determining whether a state or federal external review process applies for appeals, along with guidance for each process; and
3. Requirements for notices in connection with the appeals process.   

This Benefit Logic Legislative Brief summarizes the new Interim Final Rule. Please read below for more detailed information. For a copy of the regulations, see www.federalregister.gov/a/2010-18043. 

SUMMARY OF THE INTERIM FINAL RULE

Internal Claims and Appeals Process for Group Health Plans

Health care reform requires group health plans to implement an effective internal claims and appeals process. These plans, as well as health insurance issuers providing their health insurance coverage, must follow the Department of Labor’s claims procedure rules for group health plans.[1]

In addition to the existing DOL claims procedure regulations, group health plans must follow a number of new requirements:

1. New Definition of “Adverse Benefit Determination.” The definition of the term adverse benefit determination is found in the claims procedure regulations. It includes a denial, reduction, termination of, or failure to pay for (in whole or in part), a benefit under the plan. It includes decisions based on an individual’s eligibility to participate in the plan, a benefit not being a covered benefit, imposition of an exclusion, or a benefit being experimental or not medically necessary. Denials can include both pre- and post-service claims.        The Interim Final Rule adds rescissions of coverage to the definition of the term adverse benefit determination. A rescission is a cancellation or discontinuation of coverage that has a retroactive effect. A cancellation because of a failure to timely pay premiums for coverage is not considered a rescission.
2. Expedited Notice for Urgent Care Claims. Under the Interim Final Rule, group health plans must notify claimants of a benefit determination involving an urgent care claim more quickly. The new deadline is as soon as possible, taking into account the medical circumstances, but not later than 24 hours after the plan gets the claim. There is an exception to the deadline if the claimant does not provide enough information to the plan. The prior rule required the notice to be given within 72 hours. The change is attributable to faster decision-making capabilities, due to electronic communication.
3. Full and Fair Review. In addition to complying with the claims procedure regulations’ existing requirements, group health plans must follow additional rules to make sure claimants receive a full and fair review. Specifically, the plan must give the claimant any new evidence related to the claim or new rationale for a decision, free of charge. It must be provided as soon as possible and early enough before the appeal deadline to let the claimant respond. 
4. Avoiding Conflicts of Interest. Group health plans must make sure that all claims and appeals are decided in a way that avoids conflicts of interest. The decision method must be designed to ensure the independence and impartiality of the decision-makers. The decision to hire a person involved in deciding claims or appeals must not be made based on the likelihood that they will support a denial of benefits. For example, a plan cannot provide bonuses based on the number of denials made by a claims adjudicator. Also, a plan cannot hire a medical expert based on his or her reputation for outcomes in contested cases, rather than his or her professional qualifications.
5. Notice. The Interim Final Rule provides new standards regarding notice to enrollees. Group health plans must provide notices required by the claims procedure regulations in a culturally and linguistically appropriate manner. See the section entitled “Required Notices” below for a discussion of the culturally and linguistically appropriate standards. The notices must also include the following additional content:

~ Information sufficient to identify the claim involved, including the date of service, the health care provider, the claim amount, the diagnosis code and its meaning, and the treatment code and its meaning;

~ The reason for the denial must include the denial code and its meaning, as well as any standard used in denying the claim;

~ A description of available internal appeals and external review processes, including information about how to initiate an appeal; and

~ Contact information for any applicable office of health insurance consumer assistance to assist individuals with the internal claims and appeal and external review processes.

6. Deemed Exhaustion of Internal Claims and Appeals Processes. If a plan fails to comply with these rules, the claimant will be deemed to have exhausted the plan’s internal claims and appeals process, even if the plan claims that it substantially complied with the requirements. That means that the claimant is free to pursue other remedies, such as external review or a lawsuit.   
7. Continued Coverage Pending Outcome of Internal Appeals. Under the new rules, a plan must continue to provide coverage to the claimant until an internal appeal is resolved. Generally, this means that plans may not reduce or terminate an ongoing course of treatment without advance notice and an opportunity for advance review. Also, anyone in an urgent care situation or receiving an ongoing course of treatment may be allowed to proceed with an expedited external review at the same time as the internal appeal.

External Review Standards

Group health plans must comply with either a state external review process or the federal external review process. The Interim Final Rule provides guidance on which process must be followed.

State Standards for External Review

If a state external review process that applies to and is binding on an insurance issuer includes the consumer protections in the NAIC Uniform Model Act in place on July 23, 2010, then the issuer must comply with that state external review process. In that case, where benefits under a group health plan are provided through health insurance coverage, the issuer must provide the external review process and the group health plan itself is not obligated to do so. Some self-insured group health plans may be subject to the state external review process if they are not subject to ERISA preemption. 

Any plan or issuer that is not subject to a state external review process must comply with the federal external review process. A plan or issuer will be subject to the federal process if there is not state external review process or if the state external review process does not meet the minimum requirements of the NAIC Uniform Model Act.

The Department of Health and Human Services will determine whether a state external review process meets the minimum requirements. HHS will also provide a transition period for plan years beginning before July 1, 2011, where existing state external review processes will be treated as meeting the minimum requirements. This transition period will give states the opportunity to review and amend their processes. For plan years beginning on or after July 1, 2011, the federal external review process will apply unless HHS determines that the state process meets the minimum standards.

Federal External Review Process

The health care reform law requires a federal external review process to be established. The Interim Final Rule does not establish that process, but it does describe the standards that will be included. Plans or issuers that are not subject to a state external review process will have to follow the federal process. For an insured group health plan, if either the issuer or the plan complies with the federal process, then the obligation is satisfied for both the plan and the issuer.

The federal external review process will apply to most adverse benefit determinations or final internal adverse benefit determinations, including rescissions. However, it will not apply to denials based on a participant or beneficiary’s ineligibility for the plan.

The standards to be issued for the federal external review process will include procedures for initiating and conducting the review, an expedited external review process for certain claims, additional consumer protections for claims involving experimental or investigational treatment, and additional notices and disclosures to claimants.

Required Notices 

Notices of available internal claims and appeals and external review processes must be provided in a culturally and linguistically appropriate manner. This means providing notices in a non-English language if certain thresholds are met for the number of people who are literate in the same non-English language.

For a group health plan that covers fewer than 100 participants at the beginning of the plan year, the threshold is 25 percent of all plan participants being literate in only the same non-English language. For a plan that covers 100 or more participants, it is the lesser of (a) 500 participants, or (b) 10 percent of all plan participants.

If an applicable threshold is met, the notice must be provided in the non-English language upon request. In addition, the plan or issuer must include a statement in the English version of all notices offering the notice in the non-English language. The statement must be prominently displayed in the non-English language. Once a request has been made by a claimant, all future notices to that claimant must be provided in the non-English language. Also, if the plan or issuer has a customer assistance process that answers questions or gives assistance with filing claims and appeals (such as a telephone hotline), the assistance must be provided in the non-English language.

Executive Summary

The Patient Protection and Affordable Care Act establishes a voluntary, consumer-funded long-term care insurance program known as the Community Living Assistance Services and Supports Program (CLASS Act or program). The goal of the program is to provide additional options for people who are disabled and require assistance to continue living as independently as possible.

Key points of the program include:

1. Voluntary premium contributions by working adults. Individuals can choose to contribute by payroll deductions through their employer or directly to the program.
2. Benefits for disabled individuals. Certain adults who have contributed to the program for at least five years will be eligible for cash benefits if they become disabled due to multiple functional limitations or cognitive impairments, along with advocacy services and advice, and assistance counseling.
3. Flexible benefits for long-term care. The cash benefits available under the program can be used to buy non-medical services and items to help maintain residence in the community, as well as for assisted living or a nursing home.

The CLASS Program is effective on January 1, 2011. HHS is expected to establish benefits for the CLASS program by October 2012, and enrollment will be available sometime later.

The CLASS Program

The CLASS program is a national program that gives working individuals an option for paying for certain long-term care services. By paying into the program on a monthly basis, individuals that meet employment requirements can be eligible for benefits if they later develop functional or cognitive limitations. These benefits are intended to help pay for items or services that will enable disabled people to maintain as much independence as possible, along with paying for institutional care if necessary.

Participation in the CLASS Program

Individuals who are at least 18 years old, are actively employed (including through self-employment), and are not institutionalized, are eligible to enroll in the CLASS program. People working for an employer that participates in the program will be automatically enrolled, unless they choose to opt out. Alternative enrollment procedures will be developed for workers who are self-employed, have more than one employer, or whose employer does not participate in the automatic enrollment process.

HHS will establish procedures to make sure that an individual is not automatically enrolled in the program by more than one employer. Individuals that do not enroll when first eligible will have to wait until an open enrollment period to join. Disenrollment for reasons other than non-payment of premiums will be allowed only during an annual disenrollment period.

CLASS program participants will pay monthly premiums to participate. The amount of the premiums will be determined by HHS and will be designed to ensure solvency of the program for 75 years. Low-income individuals and full-time students will pay a nominal premium, which will begin at $5 per month. The premium payments will be placed into the “CLASS Independence Fund” which was established by the Affordable Care Act and will be managed by the U.S. Treasury. Premiums may be adjusted in the future, if necessary to maintain solvency of the program.

Eligibility for Benefits

Individuals can be eligible for benefits if they have paid monthly premiums to the program for at least five years and meet employment requirements for three of those years. To obtain benefits, an individual must be certified by a licensed health care practitioner to have a functional limitation for a continuous period of more than 90 days. People with functional limitations are those that are unable to perform at least two activities of daily living (such as eating, bathing, dressing and using the bathroom) or who have a substantial cognitive disability that requires substantial supervision for health and safety purposes. Once an individual becomes ineligible for benefits, the benefits will cease to be paid.

CLASS Program Benefits

Benefits available under the CLASS program include cash benefits, advocacy services, and advice and assistance counseling. HHS will establish procedures for the payment of cash benefits, including payment into a “Life Independence Account” set up for each eligible beneficiary. Funds in these accounts will be able to be accessed with a debit card.

The amount of the cash benefit available under the CLASS program cannot be less than an average of $50 per day. The amount will vary depending on the scale of functional ability. The benefit is paid on either a daily or weekly basis and there is no lifetime or aggregate limit. Benefits can be rolled over from month to month, but not from year to year.

Cash benefits can be used to purchase non-medical services and supports needed to maintain independence at home or in another residential setting in the community. These services and supports include things like home modifications, assistive technology, accessible transportation, homemaker services, respite care, personal assistance services, home care aides, nursing support and compensation for family caregivers. Cash benefits can also be used toward the cost of assisted living facilities or nursing homes, as well as for assistance in choosing or making decisions about care. 

Impact on Medicaid and Other Benefits

Benefits paid under the CLASS program will not affect eligibility for other programs such as Medicaid, Medicare, Social Security benefits, or Supplemental Security Income. The CLASS program benefits will generally supplement other program benefits.

CLASS benefits will offset certain Medicaid benefits. A Medicaid beneficiary who is a patient in a hospital, nursing facility or other institution will be able to keep five percent of their daily or weekly cash benefit. The rest of the benefit will be used to pay for the cost of care. Medicaid will provide secondary coverage for the care. Individuals who receive Medicaid assistance for home and community-based services or Programs of All-Inclusive Care for the Elderly (PACE), will be able to keep 50 percent of the CLASS benefit. The remaining 50 percent will be applied to the state’s cost for providing the assistance and Medicaid will provide secondary coverage for the care.