American Benefits Council
Benefits Byte


May 5, 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.

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DOL Proposes Changes to COBRA Health Care Continuation Coverage Notices; CMS Provides Special Enrollment Period

The U.S. Department of Labor (DOL) Employee Benefits Security Administration (EBSA) issued proposed regulations on May 2, seeking to amend the notice requirements of the health care continuation coverage (COBRA) provisions of ERISA. The changes are intended “to better align the provision of guidance under the COBRA notice requirements with the [Patient Protection and Affordable Care Act (PPACA)] provisions already in effect, as well as any provisions of federal law that will become applicable in the future.”

Also today, the U.S. Department of Health and Human Services (HHS) Centers for Medicare and Medicaid Services’ (CMS) Center for Consumer Information and Insurance Oversight issued a corresponding guidance document providing a limited special enrollment period for individuals enrolled in or eligible for COBRA coverage.

Under the COBRA continuation coverage provisions (and described in final COBRA regulations issued in 2004), an individual who was covered by a group health plan on the day before a qualifying event occurred may be able to elect COBRA continuation coverage upon a qualifying event (such as termination of employment or reduction in hours that causes loss of coverage under the plan). A group health plan must provide such “qualified beneficiaries” with an election notice, which describes their rights to continuation coverage and how to make an election. On May 8, 2013, DOL issued Technical Release 2013-02 (along with a series of model COBRA notices), noting that some qualified beneficiaries (1) may want to consider and compare health coverage alternatives to COBRA continuation coverage that are available through the PPACA exchanges and (2) may also be eligible for a premium tax credit to help pay for the cost of coverage (see the Council’s May 8, 2013, Benefits Byte).

Currently, the COBRA model general notice and model election notice (collectively, the model notices) are provided as appendices to the COBRA regulations themselves. The proposed regulations eliminate the current versions of the model notices and delete them as appendices to the regulations as a procedural matter that will permit DOL to amend the model notices as necessary and provide the most current versions of the model notices on the DOL website. Once available, updated versions of the model notices will be posted at the following links:

Until rulemaking is finalized and effective, DOL will consider appropriately completed use of the model notices that are available on its website to constitute good faith compliance with the notice content requirements of COBRA. Use of the model notices is not required; the model notices are provided solely for the purpose of facilitating compliance with the applicable notice requirements.

The corresponding guidance issued by HHS is explicitly intended to address the concern that the prior COBRA model election notices did not adequately address the exchange options for persons eligible for COBRA and COBRA beneficiaries. HHS is therefore “providing an additional special enrollment period based on exceptional circumstances so that persons eligible for COBRA and COBRA beneficiaries are able to select [qualified health plans (QHPs)] in the [federally facilitated marketplaces].” Affected individuals have through July 1, 2014, to activate the special enrollment period by contacting the Marketplace call center.

The Obama Administration also released a Frequently Asked Questions (FAQ) document on May 2 (see related Benefits Byte story) with additional discussion of this topic.

EBSA is soliciting comments on the proposed regulations through July 6 [Note: this is a Sunday]. For more information, or to provide input for a possible Council comment letter, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

New FAQ Guidance Addresses Range of PPACA Topics

On May 2, the U.S. departments of Treasury, Labor (DOL) and Health and Human Services (HHS) released Frequently Asked Questions (FAQ) Part XIX regarding implementation of the Patient Protection and Affordable Care Act (PPACA).

FAQ Part XIX addresses COBRA model notices (see the related Benefits Byte story), limitations on cost-sharing under PPACA, coverage of preventive services, the carryover of funds from health flexible spending accounts (FSAs) and excepted benefits, and Summary of Benefits and Coverage (SBC) notice requirements.

Limitations on Cost-Sharing and Out-of-Pocket Limits
Public Health Service Act (PHSA) Section 2707(b) (as added by PPACA) provides that any annual cost-sharing imposed under a non-grandfathered group health plan must not exceed certain limitations on out-of-pocket (OOP) costs. For plan or policy years beginning in 2014, these limits are $6,350 for self-only coverage and $12,700 for coverage other than self-only coverage, with future limits increased by a statutorily-defined percentage. HHS has proposed 2015 limits of $6,600 for self-only coverage and $13,200 for other coverage.

Prior FAQ guidance stated that a plan may (but is not required to) count OOP spending for out-of-network items and services toward the plan’s annual out-of-pocket maximum and may use “any reasonable method” for doing so. The new FAQ includes an example of a reasonable method for counting toward the OOP maximum for individual spending for an amount in excess of an allowed amount for out-of-network provider charges (also known as “balance billing”).

The new FAQ also provides that:

  • If a participant or beneficiary selects a brand-name prescription drug in circumstances in which a generic was available and medically appropriate, depending on the plan design, the plan may provide that all or some of the amount paid by the participant or beneficiary (for example, the difference between the cost of the brand name drug and the cost of the generic drug) is not required to be counted toward the annual out-of-pocket maximum.
  • Until new guidance is issued and effective, with respect to a large group market plan or self-insured group health plan that utilizes a reference-based pricing program, the departments will not consider a plan or issuer as failing to comply with the out-of-pocket maximum requirements even though it treats providers that accept the reference amount as the only in-network providers, as long as the plan uses a reasonable method to ensure that it provides adequate access to quality providers. application of the out-of-pocket limitation to the use of reference based pricing. DOL is soliciting comments on standards for plans using reference-based pricing structures by August 1, 2014.

Preventive Care

PHSA Section 2713 (as added by PPACA) and interim final regulations issued in July 2010, non-grandfathered plans are required to provide preventive care services (such as mammograms, colonoscopies and immunizations) without cost-sharing. consistent with published recommendations and guidelines from the United States Preventive Services Task Force (USPSTF), the Centers for Disease Control (CDC) and the Prevention Advisory Committee on Immunization Practices (ACIP) and the Health Resources and Services Administration.

The FAQ affirms that plans may use “reasonable medical management techniques” to determine the frequency, method, treatment, or setting for a recommended preventive service, to the extent not specified in the recommendation or guideline regarding that preventive service. The FAQ states that the departments will consider a group health plan or insurer to be in compliance with the requirement to cover tobacco use counseling and interventions, if, for example, the plan or issuer covers, without cost-sharing:

  1. Screening for tobacco use; and,
  2. For those who use tobacco products, at least two tobacco cessation attempts per year. For this purpose, covering a cessation attempt includes coverage for: (a) four tobacco cessation counseling sessions of at least 10 minutes each (including telephone counseling, group counseling and individual counseling) without prior authorization; and (b) all Food and Drug Administration (FDA)-approved tobacco cessation medications (including both prescription and over-the-counter medications) for a 90-day treatment regimen when prescribed by a health care provider without prior authorization.

Health FSA Carryovers and Excepted Benefits

Excepted benefits provided under a group health plan or health insurance coverage generally are exempt from the Health Insurance Portability and Accountability Act (HIPAA) and PPACA market reform requirements. Under previously issued regulations, health FSAs generally constitute excepted benefits if (1) The employer also makes available group health plan coverage that is not limited to excepted benefits for the year to the class of participants by reason of their employment; and (2) the arrangement is structured so that the maximum benefit payable to any employee participant in the class cannot exceed certain limits.

In October 2013, Treasury and the Internal Revenue Service issued guidance modifying the “use-or-lose” rule for health FSAs to allow up to $500 of unused amounts remaining at the end of a plan year in a health FSA to be paid or reimbursed to plan participants for qualified medical expenses incurred during the following plan year, provided that the plan does not also incorporate a grace period. The guidance provided that the carryover of up to $500 does not affect the maximum amount of salary reduction contributions that the participant is permitted to make under section 125(i) of the Internal Revenue Code ($2,500 adjusted for inflation after 2012).

The FAQ states that unused carry-over amounts remaining at the end of a plan year in a health FSA that satisfy the modified “use-or-lose” rule should not be taken into account when determining if the health FSA satisfies the “maximum benefit payable limit” prong under the excepted benefits regulations.

Summary of Benefits and Coverage

Under PPACA, any group health plan or health insurance issuer offering group or individual health insurance coverage must provide a Summary of Benefits and Coverage (SBC) that “accurately describes the benefits and coverage under the applicable plan or coverage.”

The FAQ notes that an updated SBC template (and sample completed SBC) have been made available at and and will continue to be authorized until further guidance is issued. The FAQ also confirms that previously-issued enforcement and transition relief guidance, including certain specific safe harbors, continues to apply until further guidance is provided. The departments also reiterated that their “approach to implementation is, and will continue to be, marked by an emphasis on assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law.”

For more information, contact Kathryn Wilber, senior counsel, health 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).