Complying With Health Care Reform:
Immediate Action Required

Certain provisions of the Patient Protection and Affordable Care Act ("PPACA") are effective for plan years beginning on and after September 23, 2010 (i.e., January 1, 2011 for calendar year plans). With this landmark plan year fast approaching, group health plans are faced with a multitude of challenges that must be addressed in a relatively short period of time.

First and foremost, employers who sponsor group health plans must determine the extent to which PPACA applies to their plans.¹ This determination is based, in part, on whether their plans are "grandfathered" (i.e., in existence on March 23, 2010 and no changes thereafter that jeopardize grandfathered status). Because grandfathered health plans are exempt from many of PPACA's health insurance reform provisions for as long as grandfathered status is maintained, PPACA compliance may be less arduous for grandfathered health plans, as compared to non-grandfathered health plans. (For additional detail regarding PPACA provisions from which grandfathered health plans are exempt, see our Health Care Reform Client Update Number Four.)

Once grandfathered (or non-grandfathered) status is determined, compliance efforts may begin. The following lists of action items (i.e., one for grandfathered health plans and one for non-grandfathered health plans) may assist you with these efforts.

The following actions should be taken with respect to grandfathered health plans:

• Include grandfathered status disclosure statement in all plan materials describing plan benefits.
• Extend coverage to adult children up to age 26 (including written notice and enrollment opportunity of at least 30 days); provided, however, that grandfathered health plans generally may exclude adult children who are eligible to enroll in another group health plan until 2014.
• Eliminate preexisting condition exclusions on enrollees under age 19.
• Eliminate lifetime dollar limits on "essential health benefits" and provide special notice and enrollment opportunity of at least 30 days.
• Restrict annual dollar limits on "essential health benefits."
• Preclude rescissions of coverage, except in cases of fraud or intentional misrepresentation of material fact.
• Eliminate reimbursement for over-the-counter drugs and medicines (other than insulin) purchased without a prescription (e.g., cold medicine and aspirin) under health FSAs, HRAs, HSAs and Archer MSAs.

In addition to the above items, the following actions should be taken with respect to non-grandfathered health plans:

• For fully-insured plans, satisfy Code Section 105(h)(2) non-discrimination requirements.
• Provide first-dollar coverage for preventative care.
• For plans that require or allow designation of primary care providers ("PCP"), permit designation of any available PCP and provide written notice of such right.
• For plans that require or allow designation of a PCP for a child, permit designation of a pediatrician and provide written notice of such right.
• Eliminate authorization or referral requirements to access an obstetrician or gynecologist.
• Eliminate prior authorization requirements for emergency services and provide coverage for those services at in-network rates.
• Revise internal claims and appeals procedures and adopt external review processes.

Because PPACA's application and impact will likely vary based on plan type and terms, these lists may need to be tailored (and in some cases, expanded) to achieve complete and timely compliance and to avoid possible penalties.

With in-depth knowledge of PPACA and related guidance issued by the Internal Revenue Service and the U.S. Departments of Labor and Health and Human Services, as well as their practical implications, we can assist you as you prepare for the upcoming plan year and the effects of health care reform. Please contact you Schiff Hardin LLP attorney or any of the individual attorneys listed in this update to discuss compliance steps and strategies for the 2011 plan year.

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