© 2011 National Association of Insurance Commissioners Updated: 5/12/2011 1

Patient Protection and Affordable Care Act Section-by-Section Analysis

Including Health Care and Education Reconciliation Act Amendments and Regulatory Guidance

Provision Notes Standards Development Applicability

Effective Date

PPACA Section

Statutory Section

Immediate Health Insurance Reforms

Annual and Lifetime Limits

Plans may not establish lifetime limits on the dollar value of essential benefits. Plans may only establish restricted limits prior to January 1, 2014 on essential benefits as determined by the Secretary of HHS.

Lifetime limits: All plans Annual limits: All plans except grandfathered individual market plans

6 months after enactment

1001 PHSA 2711

Regulations: HHS released an interim final rule on June 28. Plans may not establish lifetime limits. Individuals who lost coverage under a plan because they reached the lifetime maximum must be given notice that lifetime limits no longer apply and be given a special enrollment period for enrollment under the same terms and conditions as a similarly situated individual who did not lose coverage because they exhausted a lifetime limit. Annual limits on essential benefits are limited to:

$750,000 for plan years beginning 9/23/2010-9/23/2011

$1.25 million for plan years beginning 9/23/2011-9/23/2012

$2 million for plan years beginning 9/23/2012-12/31/2013 In determining whether an individual has reached the annual limit benefits, a plan may only take into account essential benefits. A plan may petition HHS for relaxation of the limits on annual limits if they would cause significant decrease in access to benefits or premium increases. Plans may still impose annual and lifetime limits on specific covered benefits that are not essential benefits, which have not yet been defined in regulation. In the interim, “the Departments will take into account good faith efforts to comply with a reasonable interpretation of the term.” These restrictions do not apply to health flexible spending arrangements

© 2011 National Association of Insurance Commissioners Updated: 5/12/2011 2

Provision Notes Standards Development Applicability

Effective Date

PPACA Section

Statutory Section

Rescissions Coverage may be rescinded only for fraud or intentional misrepresentation of material fact as prohibited by the terms of the coverage. Prior notification must be made to policyholders prior to cancellation.

All plans 6 months after enactment

1001 PHSA 2712

HHS released an interim final rule on June 28. Rescissions are defined as any retroactive cancellations of coverage, except for those attributable to failure to pay premiums or contributions. These rules do not apply to prospective cancellations. A plan must provide at least 30 days advance written notice to each participant who would be affected prior to rescinding coverage.

Coverage of preventive health services

Plans must provide coverage without cost-sharing for:

Services recommended by the US Preventive Services Task Force

Immunizations recommended by the Advisory Committee on Immunization Practices of the CDC

Preventive care and screenings for infants, children and adolescents supported by the Health Resources and Services Administration

Preventive care and screenings for women supported by the Health Resources and Services Administration

Current recommendations from the US Preventive Services Task force for breast cancer screenings will not be considered. The Secretary will determine an interval of not less than 1 year after which new recommendations will be incorporated.

Secretary of HHS All non- grandfathered plans

6 months after enactment

1001 PHSA 2713

Regulations: HHS released interim final rules on July 19. Plans that have a network of providers may impose cost sharing for preventive items and services delivered by out-of-network providers. Plans may use reasonable medical management techniques for coverage of preventive items and services to determine the frequency, timing, method, treatment or setting of services to the extent that they are not specified in the relevant recommendation or guideline. If a preventive service is billed separately from an office visit, the plan may impose cost sharing on the office visit. If it is not billed separately from the office visit, then the plan may not impose cost-sharing on the visit if the primary purpose of the visit is to receive the preventive item or service. A plan may impose cost-sharing for a treatment not described in the regulations,

© 2011 National Association of Insurance Commissioners Updated: 5/12/2011 3

Provision Notes Standards Development Applicability

Effective Date

PPACA Section

Statutory Section

even if that treatment results from an item or service that is. This regulation expires on July 12, 2013, or such earlier date specified in final regulations.

Extension of adult dependent coverage

Plans that provide dependent coverage must extend coverage to adult children up to age 26. Carriers are not required to cover children of adult dependents. The Secretary will define which adult children coverage must be extended. For plan years beginning before 2014, group health plans will be required to cover adult children only if the adult child is not eligible for employer-sponsored coverage.

Secretary of HHS All plans 6 months after enactment

1001 HR 4872 §2301

PHSA 2714

Regulatory Guidance: HHS released an interim final rule on May 13, 2010. The rule clarifies that, with respect to children who have not attained age 26, a plan or issuer may not define dependent for purposes of eligibility for dependent coverage of children other than in terms of the relationship between the child and the participant (in the individual market, the primary subscriber). Examples of factors that cannot be used for defining dependent for purposes of eligibility (or continued eligibility) include financial dependency on the participant or primary subscriber (or any other person), residency with the participant or primary subscriber (or any other person), student status, employment, eligibility for other coverage, or any combination of these. Surcharges for coverage of children under age 26 are not allowed except where the surcharges apply regardless of the age of the child (up to age 26), and that, for children under age 26, the plan cannot vary benefits based on the age of the child. The rule requires a plan or issuer to give a child whose coverage ended, or who was denied coverage (or was not eligible for coverage) an opportunity to enroll that continues for at least 30 days regardless of whether the plan or coverage offers an open enrollment period and regardless of when any open enrollment might otherwise occur. This enrollment period must be provided not later than the first day of the first plan year (in the individual market, policy year) beginning on or after September 23, 2010, even if the request for enrollment is made after the first day of the plan year. In subsequent years, dependent coverage may be elected for an eligible child in connection with normal enrollment opportunities under the plan or coverage. Any child enrolling in group health plan coverage pursuant to this enrollment right must be treated as a special enrollee, as provided under the regulations interpreting the HIPAA portability provisions.

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Provision Notes Standards Development Applicability

Effective Date

PPACA Section

Statutory Section

Accordingly, the child must be offered all the benefit packages available to similarly situated individuals who did not lose coverage by reason of cessation of dependent status and cannot be required to pay more.

Preexisting condition exclusions

A plan may not impose any preexisting condition exclusions. All plans except grandfathered individual market plans

6 months after enactment for under 19.

1201 & 10103(e)

PHSA 2704

Regulations: HHS released an interim final rule on June 21. Plans may not impose any exclusion of benefits (including a denial of coverage) limit coverage based upon a preexisting condition, for an individual under age 19.

Uniform explanation of coverage documents and standardized definitions

The Secretary must develop standards for a summary of benefits and coverage explanation to be provided to all potential policyholders and enrollees. The summary must contain:

Uniform definitions of insurance and medical terms

A description of coverage and cost sharing for each category of essential benefits and other benefits

Exceptions, reductions and limitations in coverage

Renewability and continuation of coverage provisions

A “coverage facts label” that illustrates coverage under common benefits scenarios

A statement of whether it provides minimum essential coverage with an actuarial value of at least 60% that meets the requirements of the individual mandate

A statement that the outline is a summary and that the actual policy language should be consulted

A contact number for the consumer to call with additional questions and the web address of where the actual policy language can be found.

The Secretary must consult with the NAIC, as well as a working group of insurers, providers, patient advocates, and those representing individuals with limited English proficiency.

Secretary of HHS, in consultation with the NAIC and a working group of consumer advocacy organizations, insurers, health care professionals, patient advocates, and other qualified individuals.

All plans Standards developed within 12 months. Uniform documents implemented within 24 months

1001 PHSA 2715

Provision of additional information

All plans must submit to the Secretary and State insurance commissioner and make available to the public the following information in plain language:

Claims payment policies and practices

Periodic financial disclosures

Data on enrollment

Data on disenrollment

Data on the number of claims that are denied

All non- grandfathered plans

6 months after enactment

1001 PHSA 2715A

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Provision Notes Standards Development Applicability

Effective Date

PPACA Section

Statutory Section

Data on rating practices

Information on cost-sharing and payments with respect to out-of- network coverage

Other information as determined appropriate by the Secretary

Prohibition on discrimination based on salary

Extends current law provisions prohibiting discrimination in favor of highly compensated employees in self-insured group plans to fully-insured group plans. The Secretary of HHS will develop rules.

Fully insured non- grandfathered group health plans

6 months after enactment

1001 PHSA 2716

Ensuring quality of care

Plans must submit annual reports to the Secretary of HHS on whether the benefits under the plan:

Improve health outcomes through activities such as quality reporting, case management, care coordination, chronic disease management

Implement activities to prevent hospital readmission

Implement activities to improve patient safety and reduce medical errors

Implement wellness and health promotion activities

Secretary of HHS, in consultation with experts in health care quality and stakeholders

All non- grandfathered plans

2 years after enactment

1001 PHSA 2717

Bringing down the cost of health care

Carriers must report to the Secretary of HHS the ratio of incurred losses (incurred claims) plus loss adjustment expense (change in contract reserves) to earned premiums. The report must include the percentage of total premium revenue, after accounting for risk adjustment, premium corridors, and payments of reinsurance that is expended on:

Reimbursement for clinical services

Activities that improve health care quality

All other non-claims expenses, including the nature of the costs, excluding Federal and State taxes and licensing or regulatory fees

Insurers must provide a rebate to consumers if the percentage of premiums expended for clinical services and activities that improve health care quality is less than 85% in the large group market and 80% in the small group and individual markets. All hospitals must establish and make public a list of its standard charges for items and services, including for diagnosis-related groups.

The NAIC shall establish, by December 31, 2010, uniform definitions of the categories of expenses and standardized methodologies for calculating measures of them.

All fully insured plans, including grandfathered plans

01/01/11 1001 PHSA 2718

Regulatory Guidance: On November 22, HHS issued an interim final rule on November 22 and technical corrections on December 30. The regulations are based largely upon the NAIC’s Patient Protection and Affordable Care Act Medical Loss Ratio Regulation.

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Provision Notes Standards Development Applicability

Effective Date

PPACA Section

Statutory Section

 “Plan Year” is defined as the calendar year, which means the Medical Loss ratio will be calculated based on premiums received (minus taxes and fees) and claims and quality improvement activities expenses beginning January 1 and ending December 31. The MLR report will be completed and any required rebates will be paid in the following year.

 “Small Group” is defined as coverage issued to employers with 1-100 employees, unless, until 2016, state law specifies that the upper limit is 50.

 “Federal and State taxes and licensing and regulatory fees” are defined as adopted by the NAIC in the Supplemental Blank. Taxes include all taxes except federal income taxes on investment income.

 “Expenses to improve health care quality” are defined as adopted by the NAIC in the Supplemental Blank. In essence, such activities include those that: 1) improve health outcomes, including increasing the likelihood of desired outcomes compared to baseline and reducing health disparities among specified populations; 2) prevent hospital readmissions; 3) improve safety and reduce medical errors, lower infection and mortality rates; 4) increase wellness and promote health activities; or 5) enhance the use of health care data to improve quality, transparency, and outcomes. The interim final rule outlines some specific items that are included and not included in these activities.

 Experience is aggregated by state, by market (individual, small group, large group), and by licensed entity. In the case of an employer with employees in more than one state, the experience of the employer would be aggregated in the state where the contract was issued.

 Issuers who have blocks of business less than a given size can make a credibility adjustment to their MLR calculation.

o Blocks with less than 1,000 life years are considered non- credible and will not be required to pay rebates in most cases.

o Blocks greater than 1,000 but less than 75,000 life years may add a credibility adjustment to the calculated MLR.

o The credibility adjustment is the product of a base factor that varies by life years and a plan cost-sharing factor that varies by deductible.

o Blocks greater than 75,000 life years are considered fully credible and can’t use a credibility adjustment.

The factors for the credibility adjustment are as follows

© 2011 National Association of Insurance Commissioners Updated: 5/12/2011 7

Provision Notes Standards Development Applicability

Effective Date

PPACA Section

Statutory Section

Table 1 Base Credibiilty Additive Adjustment Factors

Life Years Additive Adjustment

<1,000 No Credibility

1,000 8.3%

2,500 5.2%

5,000 3.7%

10,000 2.6%

25,000 1.6%

50,000 1.2%

75,000 0.0%

Table 2 Plan Cost-Sharing Adjustment Factors by Deductible

Range

<$2,500 1.00

$2,500 1.164

$5,000 1.402

>=$10,000 1.736

 Payment of Rebates. Rebates must be paid to the individual or entity that paid the premium no later than August 1 of the year following the end of the MLR reporting year. Issuers may provide rebates in the form of a premium credit or lump-sum reimbursement. If the total rebate for a group or individual policy is less than $5, insurers may instead aggregate them and increase the rebates due policyholders whose rebates are above the $5 threshold. In the group market, insurers may enter into arrangements to provide all rebates due a to a group to the policyholder for pro-rated distribution to enrollees.

 Application to Expatriate and Limited Benefit Plans. Expatriate plans, issued to U.S. nationals employed abroad are exempted from the MLR requirement due to their higher intrinsic administrative costs and the fact that these plans compete against plans issued by foreign insurers not subject to U.S. law, but must aggregate and report data to HHS. Plans that have received waivers from the restrictions on annual limits will be exempted from the MLR requirement for a period of one year while HHS determines what the future treatment of these plans will be. They will, however, be required to submit MLR data to HHS on a quarterly basis.

 Adjustments. Insurance Commissioners may request an adjustment of the minimum MLR for the individual market in their states. The interim final rule specifies the procedure for requesting an adjustment and for

© 2011 National Association of Insurance Commissioners Updated: 5/12/2011 8

Provision Notes Standards Development Applicability

Effective Date

PPACA Section

Statutory Section

consideration of requests by HHS.

Appeals process Internal claims appeal process:

Group plans must incorporate the Department of Labor's claims and appeals procedures and update them to reflect standards established by the Secretary of Labor.

Individual plans must incorporate applicable law requirements and update them to reflect standards established by the Secretary of HHS.

External review:

All plans must comply with applicable state external review processes that, at a minimum, include consumer protections in the NAIC Uniform External Review Model Act (Model 76) or with minimum standards established by the Secretary of HHS that is similar to the NAIC model.

Secretaries of Labor and HHS

All non- grandfathered plans

6 months after enactment

1001 PHSA 2719

Regulatory Guidance: HHS released an interim final rule on July 23. The regulations expand the definition of “adverse benefit determination” to include rescissions of coverage whether or not there is an adverse effect upon any particular benefit. Internal Appeals Plans must comply with the DOL Claims regulations, as published in the Federal Register on Nov. 21, 2000, as currently modified. These modifications require plans to:

Treat a rescission of coverage as an adverse benefit

Notify a claimant of a benefit determination involving urgent care as soon as possible, taking into account the medical exigencies, but not later than 24 hours after the receipt of the claim, unless the claimant fails to provide sufficient information

Allow a claimant to review the claim file and present evidence and testimony

Provide a claimant, free of charge, with any new or additional evidence or rationales in connection with the claim as soon as possible

Ensure that all claims and appeals are adjudicated in a way designed to ensure the independence and impartiality of the persons involved

Ensure that any notice of adverse benefit includes information sufficient to identify the claim involved,

Ensure that the reason or reasons for the adverse benefit determination or final internal adverse benefit determination includes the denial code and its corresponding meaning, as well as a description of the plan’s or issuer’s

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Provision Notes Standards Development Applicability

Effective Date

PPACA Section

Statutory Section

standard, if any, that was used in denying the claim. In the case of a final internal adverse benefit determination, this description must also include a discussion of the decision.

Provide a description of available internal appeals and external review processes, including information on how to initiate an appeal.

Disclose the availability of, and contact information for, any applicable office of health insurance consumer assistance or ombudsman to assist individuals with the internal clams and appeals and external review processes.

All internal appeals processes are deemed to have been exhausted if a plan fails to strictly adhere to all requirements and the claimant may file an external review. Individual market plans must only provide for one level of internal review and must retain records for six years.

External Appeals If a state external review process provides, at a minimum, consumer protections in the NAIC Uniform Health Carrier External Review Model Act (#76), then carriers must meet that standard. Carriers in states whose processes do not meet that standard and plans not subject to state regulation must comply with a new Federal external review process that is similar to the NAIC model.

Patient Protections

A plan that provides for designation of a primary care provider must allow the choice of any participating primary care provider who is available to accept them, including pediatricians. If a plan provides coverage for emergency services, the plan must do so without prior authorization, regardless of whether the provider is a participating provider. Services provided by nonparticipating providers must be provided with cost- sharing that is no greater than that which would apply for a participating provider and without regard to any other restriction other than an exclusion or coordination of benefits, an affiliation or waiting period, and cost-sharing. A plan may not require authorization or referral for a female patient to receive obstetric or gynecological care from a participating provider and must treat their authorizations as the authorization of a primary care provider.

All non- grandfathered plans

6 months after enactment

1001 PHSA 2719A

Regulations: HHS released an interim final rule on June 28. Any cost-sharing requirement for emergency services provided out-of-network cannot exceed cost-sharing requirements for in-network emergency services. Enrollees may, however, be required to pay, in addition to the in-network cost- sharing, any excess provider charges beyond the greater of: the following:

The median amount negotiated with in network providers for the

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Provision Notes Standards Development Applicability

Effective Date

PPACA Section

Statutory Section

emergency service negotiated;

The amount for the emergency service calculated using the same method the plan generally uses to determine payments for out-of network services (such as the usual, customary, and reasonable amount), excluding any in-network copayment or coinsurance imposed;

The amount that would be paid by Medicare for the emergency service, excluding any in-network copayment or coinsurance imposed.

Any cost-sharing other than a copayment or coinsurance, such as a deductible, may be applied if that requirement applies to out-of-network benefits. A plan that requires the designation of a primary care provider must provide a notice to each participant of the terms of the plan regarding this designation, and any rights under this section. This notice must be provided with the summary plan description or other description of benefits, or in the case of an individual policy, when the issuer provides a primary subscriber with a policy, certificate, or contract. The regulation provides model language.

Health insurance consumer assistance offices and ombudsmen

The Secretary of HHS shall provide $30 million in grants to states to establish and operate offices of health insurance consumer assistance or health insurance ombudsman programs to:

Assist with the filing of complaints and appeals

Collect, track, and quantify problems and inquiries

Educate consumers on their rights and responsibilities

Assist consumers with enrollment in plans

Resolve problems with obtaining subsidies As a condition of receiving a grant, a state must collect and report data on the types of problems and inquiries encountered by consumers. The data shall be used to identify areas where enforcement action is necessary and shall be shared with state insurance regulators, the Secretary of Labor and the Secretary of Treasury.

Date of enactment

1002 PHSA 2793

Grant Requirements: HHS released a grant announcement on July 22. Applications must be submitted by September 10. Grant awards will be made around October 8. HHS will award grants based upon a state’s population to state agencies, including insurance departments, independent offices of health insurance consumer assistance, attorneys general, and independent state consumer assistance agencies, or to nonprofit organizations contracting with the state. Agencies receiving grants must be able to advocate freely and vigorously on behalf of consumers and be capable of reporting objective data to the Secretary on the responsiveness of agencies that oversee private health insurance and

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Provision Notes Standards Development Applicability

Effective Date

PPACA Section

Statutory Section

group plans and public coverage. Grant funds must be used to support the following activities:

Assist with the filing of complaints and appeals;

Collect, track and quantify problems and inquiries encountered by consumers;

Educate consumers on their rights and responsibilities with respect to group health plans and health insurance coverage;

Assist consumers with enrollment in group health plans or health insurance coverage by providing information, referral, and assistance; and

Resolve problems obtaining premium subsidies/ Entities receiving grants must provide quarterly data to HHS on:

Caseload

Caller demographics

Types of coverage involved

Problem types

Data on referrals and responsiveness

Case resolution

Data on recovered benefits

Data on provider and industry behavior

Ensuring that consumers get value for their dollars

The Secretary, in conjunction with the states, shall develop a process for the annual review of unreasonable premium increases for health insurance coverage. The process shall require insurers to submit to the State and the Secretary a justification for an unreasonable premium increase and post it online. The Secretary shall award $250 million in grants to states over a 5-year period to assist rate review activities, including reviewing rates, providing information and recommendations to the Secretary, and establishing Medical Reimbursement Data Centers to develop database tools that fairly and accurately reflect market rates for medical services.

The Secretary in conjunction with the states.

All non- grandfathered fully-insured

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