Connector Issues Proposed Regulation Establishing "Minimum Creditable Coverage" Under Massachusetts Health Care Reform Act.

Under the individual mandate of the Massachusetts health care reform act--Chapter 58 of the Acts of 2006, An Act Providing Access to Affordable, Quality, Accountable Health Care (the "Act"),1--Massachusetts residents must obtain health insurance or be subject to a tax penalty beginning July 1, 2007. On March 20, 2007, the Massachusetts Health Insurance Connector Authority (the "Connector")--the quasi-governmental agency established under the Act--issued a proposed rule (956 CMR 5.00) intended to define what constitutes "minimum creditable coverage" for purposes of the Act's individual mandate. Among other things, the proposed rule simplifies compliance prior to January 1, 2009 by significantly relaxing the minimum creditable coverage standards prior to that date. This advisory explains the Connector's proposal for what constitutes "minimum creditable" coverage.

Background

Under the Act's individual mandate, Massachusetts residents are generally required to "obtain and maintain creditable coverage" [emphasis added]. The Act defines the term "creditable coverage to mean and include any of the following health plans:

(a) an individual or group health plan which meets the definition of "minimum creditable coverage" as established by the board of the connector;

(b) a health plan including, but not limited to, a health plan issued, renewed or delivered within or without the commonwealth to an individual who is enrolled in a qualifying student health insurance program (under M.G.L. c. 15A, s. 18) or a qualifying student health program of another state;

(c) Medicare Part A or Part B;

(d) Medicaid;

(e) TRICARE;

(f) a medical care program of the Indian Health Service or of a tribal organization;

(g) a state health benefits risk pool;

(h) the federal employee's health plan offered;

(i) certain public health plans;

(j) a health benefit plan under the Peace Corps Act;

(k) coverage for "young adults" under the Act; and

(l) "any other qualifying coverage required by the Health Insurance Portability and Accountability Act of 1996, as amended, or by regulations promulgated under that act."

The definition of creditable coverage then follows with a list of plans that do not constitute creditable coverage. These include a laundry list of limited scope and disease-specific plans as well as plans that provide no health coverage or do so only tangentially (e.g., a motor vehicle accident policy that may also cover some medical costs). Workers' compensation, long-term care and disability policies and plans are similarly excluded.

Minimum Creditable Coverage

July 1, 2007 to December 31, 2008

Beginning July 1, 2007, coverage under any "Health Benefit Plan" will be treated as "minimum creditable coverage" for purposes of complying with the Act's individual mandate. The term "Health Benefit Plan" is defined in the proposed regulation as follows:

Any individual, general, blanket or group policy of health, accident and sickness insurance issued by an insurer licensed under MGL c. 175; a group hospital service plan issued by a non-profit hospital service corporation under MGL c. 176A; a group medical service plan issued by a non-profit medical service corporation under MGL c. 176B; a group health maintenance contract issued by a health maintenance organization under MGL c. 176G; coverage for young adults health insurance plan under section 10 of MGL c. 176J; and any self-funded health plan, including a self-funded health plan which is an ERISA "employee welfare benefit plan" providing medical, surgical or hospital benefits, as that term is defined in 29 U.S.C. section 1002. Thus, fully insured plans are automatically deemed to be Health Benefit Plans, as are self-funded plans that provide "medical, surgical or hospital benefits" (e.g., a self-funded mini-med plan).

From and After January 1, 2009

Beginning January 1, 2009, only those "Health Benefit Plans" that meet certain requirements will constitute "minimum creditable coverage." These requirements include:

A "broad range of medical benefits, including but not limited to, preventive and primary care, emergency services, hospitalization, ambulatory patient services, prescription drugs, and mental health services" (but the plan may impose reasonable exclusions and limitations, including different benefit levels for in-network and out-of-network providers).

Varied levels of co-payments, deductibles and co-insurance are permitted within limits, i.e., the plan must disclose to covered persons the deductible, co-payment and co-insurance amounts applicable to in-network and out-of-network covered services; any deductible for in-network covered services must not exceed $2,000 for an individual and $4,000 for a family; and any separate deductible imposed for prescription drug coverage may not exceed $250 for an individual and $500 for a family.

If the plan includes deductibles or co-insurance, the plan must set out-of-pocket maximums for in-network covered services that do not exceed $5,000 for an individual and $10,000 for a family (this requirement does not apply to a plan that includes co-insurance only for a limited number of select covered services).

A plan's calculation of any out-of-pocket maximum must include all the following payments for covered services made by the individual or family: co-payments over $100, coinsurance and deductibles (provided, however, that amounts paid for prescription drugs, whether through deductibles, co-insurance or co-payments, need not be considered in calculating the out-of-pocket maximum).

A plan may not impose an annual maximum benefit or a per-illness annual maximum benefit for covered services, nor may it impose a fee schedule of indemnity benefits for covered services.

A plan that imposes a deductible must cover the following on an annual basis before imposing a deductible: for an individual, at least three preventive care visits to a physician or other health care provider; and for a family, at least a total of six preventive-care visits to a physician or other health care provider.

Any preventive-care visits covered before the imposition of a deductible may be subject to co-payments or co-insurance, but co-payments or co-insurance may not exceed the co-payment or co-insurance applied by the plan to primary care or routine physician office visits.

A plan must either include prescription drugs as a covered medical benefit, after a deductible ranging from $0 to $250 for individual coverage and ranging from $0 to $500 for family coverage; or (as approved by the Connector) provide alternative plan designs that would allow for coverage of preventive prescription drugs without any deductible, in addition to coverage of other prescription drugs with a deductible, co-payment or co-insurance, for a projected average increase of no more than 5% in the price of premiums.

The proposed regulation also sets out a list of items that do not rise to the level of minimum creditable coverage. This list includes accident-only, credit-only or limited-scope vision or dental benefits; hospital indemnity insurance policies if offered as independent, non-coordinated benefits (e.g., policies which provide an in-patient hospitalization benefit not to exceed $500 per day); disability income insurance; supplemental liability insurance; specified disease insurance; insurance arising out of a workers' compensation law or similar law; and automobile medical payment insurance, among others.

In addition to the above, any plan that meets the Act's other creditable coverage requirements (see the definition set out above) is deemed to constitute "minimum creditable coverage."

The Self-Funded Plan Conundrum

Prior to the issuance of the Connector's proposed minimum creditable coverage rule, there was some debate over whether minimum creditable coverage should include prescription drug coverage (the Connector ultimately decided that it did from and after January 1, 2009). This debate raised another potentially more daunting issue: does the Connector's definition of minimum creditable coverage have the effect of imposing a mandate--albeit indirectly--on self-funded plans in violation of ERISA? Since the mandate is on individuals and not plans, ERISA would not appear to be implicated. But plan sponsors will be under a great deal of pressure to change plan design to ensure that their employees satisfy the Act's individual mandate. The issue is whether the individual mandate constitutes an indirect requirement that "relates to" an ERISA plan.

Conclusion

The proposed regulation does not have the force of law, and the comment process should shed light on the issues discussed in this advisory among others. The provisions of the proposed rule that lighten the compliance burden before 2009 are especially welcome. This will give both the regulators and the regulated community time to thoroughly consider the issues and arrive at solutions that balance the Act's desire to expand coverage with its goal to make affordable coverage widely available.

Footnotes

1 As amended by Chapter 324 of the Acts of 2006, An Act Relative to Health Care Access, and Chapter 450 of the Acts of 2006, An Act Further Regulating Health Care Access.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mr Mintz Levin Employee Benefits And Executive Compensation Group

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

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