Health Care Reform – Regulations Regarding Coverage of Preventive Services

As we have reported in our earlier Advisories (go to the Employee Benefits Section of our website for links to these Advisories), health care reform laws will require significant changes to group health plans.  The Departments of Treasury, Labor, and Health and Human Services have been very busy issuing regulations regarding the new laws.  This Advisory will focus on the newly-issued interim final regulations regarding the mandated coverage of preventive services.

These new mandates apply to plan years beginning on and after September 23, 2010 (January 1, 2011 for calendar year plans).  They apply only to new plans and other group health plans that have lost grandfathered status (see our advisory from July 1, 2010 for information regarding grandfathered plan status).  Grandfathered plans are exempt from the requirements for covering preventive services.

Under the new law, applicable plans are prohibited from imposing any cost-sharing requirements, including any copayments, coinsurance, or deductibles, with respect to certain preventive health services or items.  Those preventive services or items are:

• Services rated "A" or "B" by the United States Preventive Services Task Force (USPSTF) (with one exception expanding the coverage of breast cancer screenings).
• Immunizations recommended by the Advisory Committee on Immunization Practices for the Centers for Disease Control and Prevention.
• Preventive care and screenings for infants, children and adolescents recommended by the Health Resources and Services Administration (HRSA).
• Preventive care and screenings for women provided in yet-to-be-issued guidelines recommended by the HRSA.

The full list of preventive services covered under this mandate can be found here: http://www.healthcare.gov/center/regulations/prevention.html. 

Group health plans will be required to cover the preventive services that have been recommended on these lists for at least one year before the start of the plan year.  For example, because the recommendation by the USPSTF for screening and counseling for obesity in children became effective on January 31, 2010, plans will be required to provide coverage without cost sharing for this service in the first plan year that begins on or after January 31, 2011 (January 1, 2012 for calendar year plans). 

The regulations do not eliminate all cost sharing when it comes to preventive services.  Cost sharing can be imposed for the following:

• Preventive services and items that are not found on one of the lists.
• Preventive services and items that are provided or delivered by an out-of-network provider if the plan uses a network.
• Preventive services subject to "reasonable medical management" that limits the frequency, method, treatment or setting and that is not otherwise addressed in the recommendations.
• Office visits, if billed separately from a preventive care service or item.
• Office visits, if not billed separately from preventive care services or items, if the primary purpose of the office visit was not the delivery of such item or service (however, if the primary purpose was the delivery of the item or service, no cost sharing can be imposed on the office visit).

For example, assume a participant visits an in-network health care provider to discuss recurring abdominal pain. During the visit, the individual has a blood pressure screening (which is a covered preventive service for this individual). The provider bills the plan for an office visit.  Because the blood pressure screening is provided as part of an office visit for which the primary purpose was not to deliver covered preventive items or services, the plan may impose a cost-sharing requirement for the office visit charge.

• Cost of treatment that is not described in the list, even if the treatment results from a listed item or service.

For example, assume a participant visits an in-network health care provider. While visiting the provider, the individual is screened for cholesterol abnormalities (which is a covered preventive service for this individual).  As the result of the screening, the individual is diagnosed with hyperlipidemia and is prescribed a course of treatment that is not included in the list of recommendations. Because the treatment is not included in the recommendations, the plan is not prohibited from imposing cost-sharing requirements with respect to the treatment.

These regulations provide an important piece of the puzzle that plan sponsors need in order to better understand the costs of maintaining or losing grandfathered plan status. Admitting significant uncertainty, the regulators estimate in the preamble to these regulations that premiums will increase by approximately 1.5% on average for enrollees in nongrandfathered plans as a result of these requirements.  Assuming that these estimates are accurate, the preventive care requirements will be a small part of the cost of health care reform.  As more guidance is issued on other changes, employers should be able to get a better picture of the costs involved in complying with the new requirements. 

If you have any questions about this Client Advisory, please contact any member of our Employee Benefits Team.

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©2010 Sherman & Howard                                                              August 4, 2010