Regulation of Private Health Insurance Under The Patient Protection and Affordable Care Act

With the enactment of the Patient Protection and Affordable Care Act on March 23, 2010 (the “Act”), Pub. L. No. 111-148 (hereinafter cited as the “PPACA”), President Obama and the Congress have ushered in what will be, barring major amendment or repeal, a new era for the regulation of private health insurance coverage in the U.S.

A few states, most notably Massachusetts, have adopted insurance reforms that are either similar to the reforms embodied by the Act or mirror portions of them. Yet the U.S. market as a whole has never seen regulatory changes as sweeping as those effected by the Act.

In this article, we summarize the major aspects of the Act regulating private health insurance coverage. The first section of the article focuses on provisions of the Act regulating the manner in which health insurers are required to do business. The second section reviews aspects of the Act that are designed to increase access to coverage, including mandates requiring insurers to include certain types of coverage in all major medical plans. Finally, the article briefly examines the outlook for implementation of the Act.

The discussion below refers to group and individual “plans.” By this, we mean major medical insurance plans. The requirements discussed in this article do not apply to “excepted benefits,” as defined by the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). Pub. L. No. 104-191. See PHSA ' 2791(c) (42 U.S.C. ' 300gg-91(c) (defining excepted benefits)). The effective dates discussed below generally refer to plan years beginning on or after the relevant date.

Regulation of Private Insurance

The Act contains a number of provisions directly regulating the way group and individual plans may be offered by insurers. The major requirements of the Act in this respect are discussed below.

Minimum Loss Ratios

The Act provides that each insurer offering group or individual plans must submit to the Secretary of Health and Human Services (the “Secretary”) an annual report concerning the percentage of total premium revenue that the insurer expends: 1) “on reimbursement for clinical services provided to enrollees”; 2) “for activities that improve health care quality”; and 3) “on all other non-claims costs, including an explanation of the nature of such costs, and excluding Federal and State taxes and licensing or regulatory fees.” PPACA ' 10101 (adding new Public Health Service Act
' 2718). Hereinafter, the Public Health Service Act is cited as “PHSA.”

Insurers must, with respect to each plan year, provide an annual rebate to each enrollee on a pro rata basis in an amount equal to the amount by which premium revenue expended by the insurer on non-claims costs described in category (3) above exceeds 15% of total premium revenue for the plan in the case of a large group plan, or 20% of total premium revenue for the plan in the case of a small group or individual plan. State regulators may increase the minimum required loss ratios. The Secretary, however, may lower the loss ratio for individual plans in any state if the statutory minimum loss ratio is determined to be destabilizing the individual market in that state. Id.

The National Association of Insurance Commissioners (the “NAIC”) is charged with establishing uniform definitions of the types of expenditures that fall under each of the expense categories. The definitions are required to take into account the special circumstances of smaller plans, different types of plans, and newer plans. The new loss ratio standards are effective not later than Jan. 1, 2011, for all insured plans, including grandfathered plans. PPACA ” 1004, 10101 (adding new PHSA ' 2718).

Modified Community Rating

The Act prohibits the use of health status or claims experience in setting premium rates for small group and individual plans. Instead, the Act establishes a modified community rating structure with a limited number of rating factors. Effective Jan. 1, 2014, for small group and individual plans, insurers may only use the following rating factors: benefit design, individual vs. family coverage, rating or geographical area, age of the insured and tobacco usage. A rate band of 3 to 1 is permitted for age, and a rate band of 1.5 to 1 is allowed for tobacco use. All other rating factors are prohibited. Insurers must submit, and in some cases states must review and approve, new rating manuals within the next few months in order to meet the effective date for the new rating rules. At least in theory, insurers will be unable to develop new premium rates until after the states develop rating areas and the Secretary develops permissible age bands. See PPACA '.1201 (adding new PHSA ' 2701(a)(2)(A) and (3)). Beginning in 2017, the Act's community rating provisions will be extended to large group plans, except for grandfathered plans, in states that allow insurers to offer large group plans through the state insurance exchange. PPACA ” 1201 (adding new PHSA ' 2701), 1253. Exchanges are discussed below.

Rate Review and Justification

Under the Act, the Secretary, acting in conjunction with state officials, is charged with establishing a process for the annual review of “unreasonable” increases in premiums for health insurance coverage. Under this process, insurers will be required to provide the Secretary and the states with a justification for any premium increase deemed to be unreasonable. Insurers also must post the justification on the insurer's Web site, prior to implementing the rate increase. PPACA ” 1003 (adding new PHSA ' 2794), 1004, 10101. The Act is silent as to what constitutes an unreasonable premium increase.

Limitations on Policy Rescissions

Insurers offering group or individual plans are prohibited from rescinding coverage for any reason except fraud or an intentional misrepresentation of material fact as prohibited by the terms of the plan. Notice must be provided to the covered individual before rescinding coverage. This provision is effective Sept. 23, 2010 for all plans, including those that are grandfathered. PPACA ” 1001, (adding new PHSA ' 2712).

Ban on Preexisting Condition Exclusions

The Act addresses preexisting condition exclusions in three different manners. First, the Secretary is directed to establish, not later than 90 days after the date of enactment, a temporary high risk health insurance pool program to provide health insurance coverage for eligible individuals with preexisting conditions. Eligible individuals are U.S. citizens or nationals with preexisting conditions who have not been covered under creditable coverage during the six-month period prior to the date on which such individual is applying for coverage through the high risk pool. These individuals will be provided coverage without a preexisting condition exclusion. PPACA ” 1101. Next, group and individual plans are prohibited from imposing preexisting condition exclusions on individuals under 19 years of age. This requirement is effective Sept. 23, 2010. PPACA ” 1201 (adding new PHSA ' 2704), 1253, 10103(e). Finally, effective Jan. 1, 2014, plans will be prohibited from imposing any form of preexisting condition exclusion. PPACA ” 1201 (adding new PHSA ' 2704), 1253.

Prohibition Against Discrimination Based on Health Status

The Act extends to individual plans HIPAA's existing standards for group plans prohibiting discrimination against plan participants and beneficiaries with respect to premium rates or eligibility on the basis of health status. The Act also incorporates existing regulatory standards for wellness programs sponsored by employers, except that such programs are permitted to provide greater financial incentives for achieving health-related goals than is currently the case. Under existing rules, a wellness program may offer incentives for attaining a health-related goal with a total value of up to 20% of the cost of coverage. The Act will allow such awards to reach 30% of the cost of coverage and gives the Secretary discretion to increase this amount to as much as 50%. These provisions are effective Jan. 1, 2014 for all plans, except grandfathered plans. PPACA ” 1201 (adding new PHSA ' 2705), 1253. See also PPACA ' 10101 (adding new PHSA ' 2716).

Guaranteed Issue

The Act requires insurers offering individual or group plans to accept every individual and employer that applies for coverage, subject to certain exceptions for network plans and limitations on an insurer's financial capacity. Under current federal law, similar “guaranteed issue” rules apply only to plans offered to small employers, although a few states also now require guaranteed issue in the individual market. Plans will be permitted to limit enrollment to open enrollment periods and special enrollment periods following a qualifying event. What constitutes a qualifying event will be determined by the Secretary. Qualifying events will likely include events such as loss of group coverage following termination of employment. This provision is effective Jan. 1, 2014 for all plans, except grandfathered plans. PPACA ” 1201 (adding new PHSA ' 2702), 1253, 1562.

Guaranteed Renewal

The Act requires insurers offering individual or group plans to renew the coverage at the option of the plan sponsor or individual, subject to certain exceptions. This provision is similar to the guaranteed renewal requirements under existing federal law and is effective Jan. 1, 2014. PPACA ” 1201 (adding new PHSA
' 2703), 1562.

Appeals Process

The Act requires all plans to implement an “effective appeals process” for coverage determinations and claims review. The appeals process must include procedures for both internal review and external review. With respect to internal review, group plans may comply by complying with the ERISA claims rule, and individual plans will be able to comply by following applicable state law and any new standards issued by the Secretary. With respect to external review, plans may comply by complying with applicable state law if the law establishes standards at least as stringent as the NAIC Uniform External Review Model Act. If state law is not sufficiently stringent or if the plan is self-insured and therefore not subject to state law, the plan must comply with standards for external review issued by the Secretary. This provision is effective Sept. 23, 2010 for all plans, except grandfathered plans. PPACA ” 1253, 10101 (adding new PHSA ' 2719).

Increasing Access

A major goal of the Act, of course, is to increase access to health insurance coverage. To this end, the Act provides for the establishment of state insurance “exchanges” designed to make it easier for consumers and businesses to shop for health coverage. In addition, the Act establishes a number of mandates requiring plans to cover certain benefits or make benefits available under certain terms. These aspects of the Act are discussed below.

Insurance Exchanges

The Act appropriates funds for the states to establish insurance exchanges to service the individual (“American Health Benefit Exchanges) and small group (Small Business Option Program Exchange) markets. If a state opts not to establish an exchange, the exchange can be established by either the federal government or by a non-profit selected by the Secretary The exchanges are designed to facilitate the purchase of qualified health care plans and will offer four levels of benefit packages, plus a catastrophic plan for young adults. PPACA ' 1311(b). The states are given the authority to allow large employer groups to participate in the exchange, and it also appears that states have the authority to combine the exchanges for the group and individual markets.

The exchanges are designed to serve several functions. They will certify that the plans offered through the exchange are qualified. They will develop standardized formats for plan descriptions and documentation to make it easier to compare and shop for plans. Exchanges will also develop calculators to assist purchasers in determining the cost of the insurance and the subsidies that are available for eligible individuals. In addition, they will develop “navigator” programs to fund programs by entities to assist individuals in obtaining coverage through an exchange. Exchanges are further charged with certifying that individuals have purchased qualified coverage and fulfilled the requirements under the individual responsibility provisions of the Act. PPACA ' 1311(d)(4).

The Secretary will establish certain rules for the exchanges including regulations regarding plan certification, standards to award grants under the navigator program and rules regarding market-based incentives and enrollment periods. The Secretary also is charged with developing standards for a system to rate plans offered through the exchange. Needless to say, a system that rates the plans could drive business from one plan to another so this system is likely to generate a fair amount of attention. Presumably, each individual exchange will also be able to develop rules regarding participation in the individual exchange. PPACA ' 1311(c)(g) & (i).

No Lifetime or Annual Limits

The Act provides that plans may not impose lifetime limits on the dollar value of “essential benefits” for any participant or beneficiary. This requirement is effective as of Sept. 23, 2010 for all plans, including all grandfathered plans. The Act further provides that plans may not impose annual limits on the dollar value of “essential benefits” for any participant or beneficiary. This requirement is effective as of Sept. 23, 2010 for all new plans and all grandfathered group plans, except that group plans may impose “restricted annual limits” until Jan. 1, 2014. The Secretary will define what constitutes “restricted annual limits.” Essential benefits are any benefits that are part of the essential benefit package that all qualified plans offered through a state exchange must provide. PPACA ” 1004, 10101 (adding new PHSA ' 2711); Reconciliation Act ' 2301

Extension of Dependent Coverage

The Act requires plans that provide dependent coverage of children to make such coverage available for an adult child until the individual turns 26 years of age. This provision is effective Sept. 23, 2010 for all plans, including all grandfathered plans. PPACA ' 1001 (adding new PHSA ' 2714); Reconciliation Act ' 2301. In addition, the Act requires individual plans to comply with an existing federal law that prohibits group health plans from terminating coverage for a dependent child who would otherwise qualify for coverage as a student except that the child is on a medically necessary leave of absence from school. This provision is effective Sept. 23, 2010 for all plans, except for grandfathered plans. PPACA ” 1004, 1562.

Coverage of Preventive Services

Plans must provide coverage for preventive services that have an “A” or “B” rating in the current recommendations of the U.S. Preventive Services Task Force, immunizations recommended by the Advisory Committee for Immunization Practices of the Centers for Disease Control, and preventive care and screenings for women and children recommended by Health Resources and Services Administration. Plans may not impose cost-sharing for any such services. This provision is effective Sept. 23, 2010 for all plans, except grandfathered plans.

Access to Primary Care Providers, Emergency Care and Specialists For Women and Children

If a plan requires or provides for designation of a primary care provider, it must allow a covered individual to designate any participating primary care provider who is available to accept the individual. If the covered individual is a child, the plan must allow designation of a participating physician specializing in pediatrics as the child's primary care provider. The Act further provides that if a plan covers hospital emergency services, it must cover emergency services without the need for prior authorization and regardless of whether the provider furnishing the services is in-network or out-of-network. Finally, the Act provides that plans may not require authorization or referral for women to access a provider specializing in gynecological or obstetrical care. These provisions are effective Sept. 23, 2010 for all plans, except for grandfathered plans. PPACA ” 1201, 10101 (adding new PHSA ' 2719A

Comprehensive Coverage

All plans must provide, at minimum, the “essential benefits package” that all qualified plans offered through a state exchange must provide. This requirement is effective Jan. 1, 2014 for all plans, except grandfathered plans. PPACA
” 1201 (adding new PHSA ' 2707), 1253.

Coverage for Clinical Trials

Plans are prohibited from denying coverage for participation in approved clinical trials by qualified individuals. Under this provision, plans generally may not deny, limit or impose additional conditions on coverage of routine patient costs incurred in connection with such clinical trials and may not discriminate against individuals who participate in such trials. This provision is effective Jan. 1, 2014 for all plans, except grandfathered plans. PPACA ” 1253, 10103 (adding new PHSA ' 2709).

Nondiscrimination Against Providers

Plans are prohibited from discriminating with respect to participation under the plan or coverage against any health care provider who is acting within the scope of the provider's license. The Act specifies that this requirement does not require a plan to contract with “any willing provider.” This provision is effective Jan. 1, 2014 for all plans, except grandfathered plans. PPACA ” 1201 (adding new PHSA ' 2706), 1253.

Next Steps

Implementing the Act will require significant regulatory action at the federal and state level. In addition, certain aspects of the Act will require legislative action by the states. As with any significant legislation, many important aspects of the Act's reforms will only take shape once the regulatory process is complete. The NAIC will play an important role in the regulatory process, as many provisions of the Act require the Secretary to consult with the NAIC in developing regulatory standards.

The Act also faces uncertainties of a larger nature. Not surprisingly, the new law already is the subject of several lawsuits challenging its validity on a number of grounds. Time will tell whether any of these challenges have merit. The most serious of them attacks the Act's individual mandate as exceeding Congress's authority to regulate inter-state commerce. In addition, the Act may become subject to legislative efforts to repeal or substantially amend its provisions. It is unlikely that any such efforts will go very far prior to the 2010 elections. Over the longer term, however, the Act's ability to withstand legislative challenge is an open question.

With the enactment of the Patient Protection and Affordable Care Act on March 23, 2010 (the “Act”), Pub. L. No. 111-148 (hereinafter cited as the “PPACA”), President Obama and the Congress have ushered in what will be, barring major amendment or repeal, a new era for the regulation of private health insurance coverage in the U.S.

A few states, most notably Massachusetts, have adopted insurance reforms that are either similar to the reforms embodied by the Act or mirror portions of them. Yet the U.S. market as a whole has never seen regulatory changes as sweeping as those effected by the Act.

In this article, we summarize the major aspects of the Act regulating private health insurance coverage. The first section of the article focuses on provisions of the Act regulating the manner in which health insurers are required to do business. The second section reviews aspects of the Act that are designed to increase access to coverage, including mandates requiring insurers to include certain types of coverage in all major medical plans. Finally, the article briefly examines the outlook for implementation of the Act.

The discussion below refers to group and individual “plans.” By this, we mean major medical insurance plans. The requirements discussed in this article do not apply to “excepted benefits,” as defined by the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). Pub. L. No. 104-191. See PHSA ' 2791(c) (42 U.S.C. ' 300gg-91(c) (defining excepted benefits)). The effective dates discussed below generally refer to plan years beginning on or after the relevant date.

Regulation of Private Insurance

The Act contains a number of provisions directly regulating the way group and individual plans may be offered by insurers. The major requirements of the Act in this respect are discussed below.

Minimum Loss Ratios

The Act provides that each insurer offering group or individual plans must submit to the Secretary of Health and Human Services (the “Secretary”) an annual report concerning the percentage of total premium revenue that the insurer expends: 1) “on reimbursement for clinical services provided to enrollees”; 2) “for activities that improve health care quality”; and 3) “on all other non-claims costs, including an explanation of the nature of such costs, and excluding Federal and State taxes and licensing or regulatory fees.” PPACA ' 10101 (adding new Public Health Service Act
' 2718). Hereinafter, the Public Health Service Act is cited as “PHSA.”

Insurers must, with respect to each plan year, provide an annual rebate to each enrollee on a pro rata basis in an amount equal to the amount by which premium revenue expended by the insurer on non-claims costs described in category (3) above exceeds 15% of total premium revenue for the plan in the case of a large group plan, or 20% of total premium revenue for the plan in the case of a small group or individual plan. State regulators may increase the minimum required loss ratios. The Secretary, however, may lower the loss ratio for individual plans in any state if the statutory minimum loss ratio is determined to be destabilizing the individual market in that state. Id.

The National Association of Insurance Commissioners (the “NAIC”) is charged with establishing uniform definitions of the types of expenditures that fall under each of the expense categories. The definitions are required to take into account the special circumstances of smaller plans, different types of plans, and newer plans. The new loss ratio standards are effective not later than Jan. 1, 2011, for all insured plans, including grandfathered plans. PPACA ” 1004, 10101 (adding new PHSA ' 2718).

Modified Community Rating

The Act prohibits the use of health status or claims experience in setting premium rates for small group and individual plans. Instead, the Act establishes a modified community rating structure with a limited number of rating factors. Effective Jan. 1, 2014, for small group and individual plans, insurers may only use the following rating factors: benefit design, individual vs. family coverage, rating or geographical area, age of the insured and tobacco usage. A rate band of 3 to 1 is permitted for age, and a rate band of 1.5 to 1 is allowed for tobacco use. All other rating factors are prohibited. Insurers must submit, and in some cases states must review and approve, new rating manuals within the next few months in order to meet the effective date for the new rating rules. At least in theory, insurers will be unable to develop new premium rates until after the states develop rating areas and the Secretary develops permissible age bands. See PPACA '.1201 (adding new PHSA ' 2701(a)(2)(A) and (3)). Beginning in 2017, the Act's community rating provisions will be extended to large group plans, except for grandfathered plans, in states that allow insurers to offer large group plans through the state insurance exchange. PPACA ” 1201 (adding new PHSA ' 2701), 1253. Exchanges are discussed below.

Rate Review and Justification

Under the Act, the Secretary, acting in conjunction with state officials, is charged with establishing a process for the annual review of “unreasonable” increases in premiums for health insurance coverage. Under this process, insurers will be required to provide the Secretary and the states with a justification for any premium increase deemed to be unreasonable. Insurers also must post the justification on the insurer's Web site, prior to implementing the rate increase. PPACA ” 1003 (adding new PHSA ' 2794), 1004, 10101. The Act is silent as to what constitutes an unreasonable premium increase.

Limitations on Policy Rescissions

Insurers offering group or individual plans are prohibited from rescinding coverage for any reason except fraud or an intentional misrepresentation of material fact as prohibited by the terms of the plan. Notice must be provided to the covered individual before rescinding coverage. This provision is effective Sept. 23, 2010 for all plans, including those that are grandfathered. PPACA ” 1001, (adding new PHSA ' 2712).

Ban on Preexisting Condition Exclusions

The Act addresses preexisting condition exclusions in three different manners. First, the Secretary is directed to establish, not later than 90 days after the date of enactment, a temporary high risk health insurance pool program to provide health insurance coverage for eligible individuals with preexisting conditions. Eligible individuals are U.S. citizens or nationals with preexisting conditions who have not been covered under creditable coverage during the six-month period prior to the date on which such individual is applying for coverage through the high risk pool. These individuals will be provided coverage without a preexisting condition exclusion. PPACA ” 1101. Next, group and individual plans are prohibited from imposing preexisting condition exclusions on individuals under 19 years of age. This requirement is effective Sept. 23, 2010. PPACA ” 1201 (adding new PHSA ' 2704), 1253, 10103(e). Finally, effective Jan. 1, 2014, plans will be prohibited from imposing any form of preexisting condition exclusion. PPACA ” 1201 (adding new PHSA ' 2704), 1253.

Prohibition Against Discrimination Based on Health Status

The Act extends to individual plans HIPAA's existing standards for group plans prohibiting discrimination against plan participants and beneficiaries with respect to premium rates or eligibility on the basis of health status. The Act also incorporates existing regulatory standards for wellness programs sponsored by employers, except that such programs are permitted to provide greater financial incentives for achieving health-related goals than is currently the case. Under existing rules, a wellness program may offer incentives for attaining a health-related goal with a total value of up to 20% of the cost of coverage. The Act will allow such awards to reach 30% of the cost of coverage and gives the Secretary discretion to increase this amount to as much as 50%. These provisions are effective Jan. 1, 2014 for all plans, except grandfathered plans. PPACA ” 1201 (adding new PHSA ' 2705), 1253. See also PPACA ' 10101 (adding new PHSA ' 2716).

Guaranteed Issue

The Act requires insurers offering individual or group plans to accept every individual and employer that applies for coverage, subject to certain exceptions for network plans and limitations on an insurer's financial capacity. Under current federal law, similar “guaranteed issue” rules apply only to plans offered to small employers, although a few states also now require guaranteed issue in the individual market. Plans will be permitted to limit enrollment to open enrollment periods and special enrollment periods following a qualifying event. What constitutes a qualifying event will be determined by the Secretary. Qualifying events will likely include events such as loss of group coverage following termination of employment. This provision is effective Jan. 1, 2014 for all plans, except grandfathered plans. PPACA ” 1201 (adding new PHSA ' 2702), 1253, 1562.

Guaranteed Renewal

The Act requires insurers offering individual or group plans to renew the coverage at the option of the plan sponsor or individual, subject to certain exceptions. This provision is similar to the guaranteed renewal requirements under existing federal law and is effective Jan. 1, 2014. PPACA ” 1201 (adding new PHSA
' 2703), 1562.

Appeals Process

The Act requires all plans to implement an “effective appeals process” for coverage determinations and claims review. The appeals process must include procedures for both internal review and external review. With respect to internal review, group plans may comply by complying with the ERISA claims rule, and individual plans will be able to comply by following applicable state law and any new standards issued by the Secretary. With respect to external review, plans may comply by complying with applicable state law if the law establishes standards at least as stringent as the NAIC Uniform External Review Model Act. If state law is not sufficiently stringent or if the plan is self-insured and therefore not subject to state law, the plan must comply with standards for external review issued by the Secretary. This provision is effective Sept. 23, 2010 for all plans, except grandfathered plans. PPACA ” 1253, 10101 (adding new PHSA ' 2719).

Increasing Access

A major goal of the Act, of course, is to increase access to health insurance coverage. To this end, the Act provides for the establishment of state insurance “exchanges” designed to make it easier for consumers and businesses to shop for health coverage. In addition, the Act establishes a number of mandates requiring plans to cover certain benefits or make benefits available under certain terms. These aspects of the Act are discussed below.

Insurance Exchanges

The Act appropriates funds for the states to establish insurance exchanges to service the individual (“American Health Benefit Exchanges) and small group (Small Business Option Program Exchange) markets. If a state opts not to establish an exchange, the exchange can be established by either the federal government or by a non-profit selected by the Secretary The exchanges are designed to facilitate the purchase of qualified health care plans and will offer four levels of benefit packages, plus a catastrophic plan for young adults. PPACA ' 1311(b). The states are given the authority to allow large employer groups to participate in the exchange, and it also appears that states have the authority to combine the exchanges for the group and individual markets.

The exchanges are designed to serve several functions. They will certify that the plans offered through the exchange are qualified. They will develop standardized formats for plan descriptions and documentation to make it easier to compare and shop for plans. Exchanges will also develop calculators to assist purchasers in determining the cost of the insurance and the subsidies that are available for eligible individuals. In addition, they will develop “navigator” programs to fund programs by entities to assist individuals in obtaining coverage through an exchange. Exchanges are further charged with certifying that individuals have purchased qualified coverage and fulfilled the requirements under the individual responsibility provisions of the Act. PPACA ' 1311(d)(4).

The Secretary will establish certain rules for the exchanges including regulations regarding plan certification, standards to award grants under the navigator program and rules regarding market-based incentives and enrollment periods. The Secretary also is charged with developing standards for a system to rate plans offered through the exchange. Needless to say, a system that rates the plans could drive business from one plan to another so this system is likely to generate a fair amount of attention. Presumably, each individual exchange will also be able to develop rules regarding participation in the individual exchange. PPACA ' 1311(c)(g) & (i).

No Lifetime or Annual Limits

The Act provides that plans may not impose lifetime limits on the dollar value of “essential benefits” for any participant or beneficiary. This requirement is effective as of Sept. 23, 2010 for all plans, including all grandfathered plans. The Act further provides that plans may not impose annual limits on the dollar value of “essential benefits” for any participant or beneficiary. This requirement is effective as of Sept. 23, 2010 for all new plans and all grandfathered group plans, except that group plans may impose “restricted annual limits” until Jan. 1, 2014. The Secretary will define what constitutes “restricted annual limits.” Essential benefits are any benefits that are part of the essential benefit package that all qualified plans offered through a state exchange must provide. PPACA ” 1004, 10101 (adding new PHSA ' 2711); Reconciliation Act ' 2301

Extension of Dependent Coverage

The Act requires plans that provide dependent coverage of children to make such coverage available for an adult child until the individual turns 26 years of age. This provision is effective Sept. 23, 2010 for all plans, including all grandfathered plans. PPACA ' 1001 (adding new PHSA ' 2714); Reconciliation Act ' 2301. In addition, the Act requires individual plans to comply with an existing federal law that prohibits group health plans from terminating coverage for a dependent child who would otherwise qualify for coverage as a student except that the child is on a medically necessary leave of absence from school. This provision is effective Sept. 23, 2010 for all plans, except for grandfathered plans. PPACA ” 1004, 1562.

Coverage of Preventive Services

Plans must provide coverage for preventive services that have an “A” or “B” rating in the current recommendations of the U.S. Preventive Services Task Force, immunizations recommended by the Advisory Committee for Immunization Practices of the Centers for Disease Control, and preventive care and screenings for women and children recommended by Health Resources and Services Administration. Plans may not impose cost-sharing for any such services. This provision is effective Sept. 23, 2010 for all plans, except grandfathered plans.

Access to Primary Care Providers, Emergency Care and Specialists For Women and Children

If a plan requires or provides for designation of a primary care provider, it must allow a covered individual to designate any participating primary care provider who is available to accept the individual. If the covered individual is a child, the plan must allow designation of a participating physician specializing in pediatrics as the child's primary care provider. The Act further provides that if a plan covers hospital emergency services, it must cover emergency services without the need for prior authorization and regardless of whether the provider furnishing the services is in-network or out-of-network. Finally, the Act provides that plans may not require authorization or referral for women to access a provider specializing in gynecological or obstetrical care. These provisions are effective Sept. 23, 2010 for all plans, except for grandfathered plans. PPACA ” 1201, 10101 (adding new PHSA ' 2719A

Comprehensive Coverage

All plans must provide, at minimum, the “essential benefits package” that all qualified plans offered through a state exchange must provide. This requirement is effective Jan. 1, 2014 for all plans, except grandfathered plans. PPACA
” 1201 (adding new PHSA ' 2707), 1253.

Coverage for Clinical Trials

Plans are prohibited from denying coverage for participation in approved clinical trials by qualified individuals. Under this provision, plans generally may not deny, limit or impose additional conditions on coverage of routine patient costs incurred in connection with such clinical trials and may not discriminate against individuals who participate in such trials. This provision is effective Jan. 1, 2014 for all plans, except grandfathered plans. PPACA ” 1253, 10103 (adding new PHSA ' 2709).

Nondiscrimination Against Providers

Plans are prohibited from discriminating with respect to participation under the plan or coverage against any health care provider who is acting within the scope of the provider's license. The Act specifies that this requirement does not require a plan to contract with “any willing provider.” This provision is effective Jan. 1, 2014 for all plans, except grandfathered plans. PPACA ” 1201 (adding new PHSA ' 2706), 1253.

Next Steps

Implementing the Act will require significant regulatory action at the federal and state level. In addition, certain aspects of the Act will require legislative action by the states. As with any significant legislation, many important aspects of the Act's reforms will only take shape once the regulatory process is complete. The NAIC will play an important role in the regulatory process, as many provisions of the Act require the Secretary to consult with the NAIC in developing regulatory standards.

The Act also faces uncertainties of a larger nature. Not surprisingly, the new law already is the subject of several lawsuits challenging its validity on a number of grounds. Time will tell whether any of these challenges have merit. The most serious of them attacks the Act's individual mandate as exceeding Congress's authority to regulate inter-state commerce. In addition, the Act may become subject to legislative efforts to repeal or substantially amend its provisions. It is unlikely that any such efforts will go very far prior to the 2010 elections. Over the longer term, however, the Act's ability to withstand legislative challenge is an open question.