American Benefits Council
Benefits Byte


October 10, 2014

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

Click here to read past issues on the Benefits Byte Archive page.

Follow us on Twitter at @BenefitsCouncil

New FAQ Provides Updated Guidance on Reference-Based Pricing Under PPACA

A new “frequently asked question” (FAQ) document was released jointly by the U.S. Departments of Labor (DOL), Health and Human Services (HHS) and Treasury on October 10, updating prior guidance on the application of Patient Protection and Affordable Care Act (PPACA) cost-sharing limitations for plans using “reference-based pricing.”

The new FAQ sets out specific factors that the departments will consider when evaluating whether a plan that uses reference-based pricing (or a similar network design) is using a “reasonable method” to ensure that it provides adequate access to quality providers at the reference base price.

Generally, reference-based pricing is a system under which the plan pays a fixed amount for a particular drug, procedure or other service (for example, a knee replacement), which certain providers will accept as payment in full. If an individual uses a provider that does not accept the reference price, the individual pays the difference between the reference price and the actual price of the service.

Under Section 2707(b) of the Public Health Service Act (PHSA), as added by PPACA, any annual cost-sharing imposed under a non-grandfathered group health plan must not exceed certain limitations on out-of-pocket costs. For plan or policy years beginning in 2015, these limits are $6,600 for self-only coverage and $13,200 for other coverage, with future limits increased by a statutorily-defined percentage.

On May 2, FAQ Part XIX (as described in the Council’s May 5 Benefits Byte story) explained, among other things, that the Departments would not consider a large group market plan or self-insured group health plan that utilizes a reference-based pricing design plan as failing to comply with the out-of-pocket limitations of Section 2707(b) because the plan or issuer treats providers that accept the reference amount as the only in-network providers.  This would be the case as long as the plan or issuer uses “any reasonable method” to ensure that it offers adequate access to quality providers.

In the May 2 FAQ, the Departments explained that while reference-based pricing is designed to encourage plans to negotiate treatments with high-quality providers at reduced costs, there was also concern that such a pricing structure could be a “subterfuge” for imposing otherwise prohibited limits on coverage without ensuring access to quality or an adequate network. As a result, the May 2 FAQ solicited comments on the application of maximum out-of-pocket requirements to such benefit designs, indicating a particular interest in standards that plans or issuers using reference-based pricing should be required to meet to ensure that individuals have meaningful access to medically appropriate, quality care. The Council provided comments on July 29 urging the Departments to take an approach to guidance that would promote price and quality transparency and flexibility in plan designs.


The October 10 FAQs about Affordable Care Act Implementation (Part XXI), consists of a single question and answer. It states that pending issuance of future guidance, for purposes of enforcing the requirements of Section 2707(b), the Departments will consider “all the facts and circumstances” when evaluating whether a plan’s reference-based pricing design (or similar network design) that treats providers that accept the reference-based price as the only in-network providers and excludes or limits cost-sharing for services rendered by other providers as using a “reasonable method” to ensure adequate access to quality providers at the reference price. The guidance specifies the following factors to be considered:

  • Type of services provided: The guidance clarifies that limiting or excluding cost sharing from counting toward the out-of-pocket limitation with respect to providers who do not accept the reference-based price would not be considered reasonable with respect to emergency services.
  • Reasonable access to an adequate number of providers: Plans should have procedures to ensure that an adequate number of providers that accept the reference price are in the network and are encouraged to look to state standards for adequacy, as well as reasonable geographic distance measures and wait times.
  • Reasonable quality standards: Plans should have procedures to ensure that an adequate number of providers that accept the reference price meet “reasonable quality standards.
  • An “easily accessible” exceptions process: The guidance indicates that such a process should be offered if access to a provider that accepts the reference price is unavailable (for example, the service cannot be obtained within a reasonable wait time) or the quality of the service with respect to a particular individual could be compromised with the reference price provider (for example, if co-morbidities present complications or safety issues).
  • Disclosure to plan participants: Plans should automatically provide information regarding the pricing structure, including a list of services it applies to and the exceptions process, for example through the plan’s Summary Plan Document or similar document. Disclosures to be made upon request by plan participants include: a list of providers that accept the reference price for each service, a list of providers that will accept a negotiated price above the reference price and information on the underlying data used to ensure adequacy of providers who will accept the reference price and quality standards.

The FAQ indicates that the Departments will “continue to monitor” the use of reference-based pricing and may provide additional guidance in the future. For more information, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

AQA 'Passes Baton' with Final Meeting on Health Care Measurement and Reporting

The AQA alliance, a multi-stakeholder coalition of clinicians, consumers, purchasers, health plans, and others, with the mission to improve health quality through performance measurement and reporting, is formally disbanding with the release of its final workgroup reports. The Council served on the AQA Steering Committee, representing employer purchasers, for six years.

The AQA (formerly known as the Ambulatory Care Quality Alliance) was created in September 2004 to lead an expedited campaign to improve performance measurement, data aggregation and reporting in the ambulatory care setting. The organization eventually evolved into a multi-stakeholder national coalition of more than 135 organizations.

As part of the AQA alliance’s October 3 meeting, the Steering Group released a historical document describing the organization’s accomplishments and suggestions for successor groups. The document notes that since the AQA was formed, the measurement and reporting landscape has matured significantly with the launch of the Physician Quality Reporting System (PQRS) and the National Quality Forum to prioritize, review and endorse performance measures. Given this more matured environment in 2014, “the AQA is passing the baton to successor organizations,” the document explained.

To guide future efforts, AQA workgroups released final reports based on activity and research over the past year:

In addition to the participation in the AQA, the Council has participated in the Stand for Quality coalition (a group of employers, health care providers, consumers and insurers, working to ensure that quality measures in PPACA reflect multi-stakeholder perspectives) andthe Consumer-Purchaser Disclosure Project (CPDP) (a group of leading employer, consumer, and labor organizations working toward the common goal of nationwide access to publicly reported health care performance information).

For more information on the Council’s health care quality efforts, contact Katy Spangler, senior vice president, health policy, or Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

Planned Outage for IRS FIRE Filing System Used for Forms 5500, 9855-SSA

On October 10, the Internal Revenue Service (IRS) announced that its Filing Information Returns Electronically (FIRE) filing system will not be operational from 3:00 p.m. Eastern Time on Saturday, October 11 until approximately 6:00 a.m. Eastern Time on Tuesday, October 14, due to a scheduled annual power outage. 

The FIRE filing system is the electronic system that plan sponsors use to file the Form 5500 and 9855-SSA. This outage is only temporary and the system will be back online on Tuesday.

For more information, contact Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.

The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.

Notice: the information contained herein is general in nature. It is not, and should not be construed as, accounting, consulting, legal or tax advice or opinion provided by the American Benefits Council or any of its employees. As required by the IRS, we inform you that any information contained herein was not intended or written to be used or referred to, and cannot be used or referred to (i) for the purpose of avoiding penalties under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party any transaction or matter addressed herein (and any attachment).