DOL Guidelines Address ACA Cost-sharing Limits

Practical Law Legal Update 5-584-2927 (Approx. 5 pages)

DOL Guidelines Address ACA Cost-sharing Limits

by Practical Law Employee Benefits & Executive Compensation

Cost-Sharing Under the ACA

Beginning in 2014, the ACA imposes limits on annual cost-sharing requirements for group health plans. Cost-sharing refers to:

Deductibles, coinsurance, copayments or similar charges.
Other required expenditures that are qualified medical expenses (under 26 U.S.C. § 223(d)(2)) regarding essential health benefits (EHBs) covered under the plan.

The ACA's cost-sharing requirements consist of:

A general limit on cost-sharing.
An annual limit on deductibles for employer-sponsored plans.

The ACA's cost-sharing restrictions include certain maximum out-of-pocket (MOOP) costs for individuals. Under reference-based pricing, a plan pays a fixed amount for a given procedure, which certain providers accept as payment in full. In FAQ guidance from earlier this year, the Departments addressed reference-based pricing in the context of large group market or self-insured group health plans (see Legal Update, FAQs Address Updated COBRA Notices, Cost-Sharing Limits, SBCs, and More). The Departments indicated that they generally would not view a plan or insurer that uses reference-based pricing as noncompliant with the ACA's MOOP requirements because the plan or insurer treats providers that accept the reference amount as the only in-network providers. However, the plan or insurer needed to use a reasonable method for ensuring that it offered adequate access to quality providers. At that time, the Departments requested comments on the interaction of MOOP requirements and various provider network benefit designs.

Reference-based Pricing

In light of comments received, the Departments' new FAQ explains that, pending issuance of future guidance, they will generally apply a facts and circumstances test in evaluating whether a plan's reference-based pricing design provides adequate access to providers at the reference price. The FAQ applies to plans that:

Treat providers who accept the reference-based price as the only in-network providers.
Exclude or limit cost-sharing for services performed by other providers.
Are not grandfathered under the ACA (see Practice Note, Grandfathered Health Plans Under the ACA).

Additional requirements apply for non-grandfathered plans in the individual and small group markets that must cover EHBs.

The Departments' facts and circumstances review will consider the following factors:

Type of service. A plan should implement standards that result in a network of quality providers offering benefits at reduced costs. The plan's reference-based pricing design cannot function as a "subterfuge" for otherwise prohibited coverage limits. For this purpose:
- a reference-based pricing method should give individuals enough time, between identifying the need for care and provision of that care, to make an informed choice of provider; and
- regarding emergency services, it is unreasonable to limit or exclude cost-sharing from counting toward the MOOP as to providers who do not accept the reference-based price.
Reasonable access. A plan's procedures should ensure that a sufficient number of providers accepting the reference price are available to participants and beneficiaries. In this context, plans should consider:
- network adequacy approaches developed by the states;
- reasonable measures of geographic distance; and
- whether patient wait times are reasonable.
Insured coverage must also comply with requirements under state insurance law.
Quality standards. Plans should have procedures to ensure that an adequate number of providers accepting the reference price meet "reasonable quality standards" (though the guidance does not specify what these quality standards are).
Exceptions process. Plans should have an easily accessible "exceptions process" under which services rendered by providers who do not accept the reference price can be treated as if they were offered by a provider that does. An exceptions process would come into play, for example, if access to a provider that accepts the plan's reference guide is unavailable.

Disclosure Standards May Impact SPDs

As a final factor of the Departments' facts and circumstances test, plans should make certain disclosures regarding reference-based pricing designs to participants, free of charge. According to the Departments, plans should provide a first category of information regarding pricing structure to participants automatically (that is, without a participant having to request the information). This information, which could be provided through a plan's summary plan description or similar document (see SPD Compliance Chart for ERISA Plans), includes:

A list of services to which the pricing structure applies.
The plan's exception process.

In addition, a second category of information should be provided upon request, including:

A list of providers that will accept the reference price for each service.
A list of providers that will accept a negotiated price above the reference price for each service.
Information on the process and data used to ensure that an adequate number of providers accepting the reference price meet applicable quality standards.

Practical Impact

This latest FAQ, which, according to the Departments, is in response to numerous questions received on reference-based pricing concerns, reflects a trade-off between the benefits of using a referenced-based pricing design and the additional compliance burden (including new procedures and disclosure obligations) reflected in the guidance. The FAQ notes that the Departments:

Will continue to monitor use of reference-based pricing.
May provide additional guidance in the future, including guidance applicable to non-grandfathered health plans in the individual and small group markets.

DOL Guidelines Address ACA Cost-sharing Limits | Practical Law