Updated rules for Massachusetts' groundbreaking health care reform law could require extra work for self-insured employers and grandfathered plans that are exempt from certain similar requirements in the federal health care reform law.
Like previous rules, the new state rules that go into effect Jan. 1, 2014, require residents to be enrolled in plans in which the maximum annual deductible for in-network services can't exceed $2,000 for single coverage and $4,000 for family coverage. Otherwise, the residents are subject to financial penalties.
In a change, though, prescription drug expenses will be included in those overall deductibles. Currently, plans can have separate deductibles of $250 for single coverage and $500 for family coverage for prescription drug expenses under the state law passed in 2006.
In addition, the state's maximum annual out-of-pocket limits will be the same as those under federal rules for insurance plans linked to health savings accounts.
Like the rules already in effect, high-deductible health plans that are linked to HSAs automatically will comply with the state's “minimum creditable coverage” rules.
In addition, the state rules still bar deductibles for preventive services.
These requirements differ from those in the Patient Protection and Affordable Care Act. The federal law exempts self-insured and large group plans from deductible maximums. In addition, the federal law exempts grandfathered health care plans from providing full coverage of preventive services and exempts grandfathered plans from the cap on annual out-of-pocket expenses for in-network services.
In theory, employers' health care plans that meet federal requirements could flunk Massachusetts coverage requirements, exposing their employees to financial penalties that now exceed $1,200 a year.
But under another Massachusetts rule, health care plans that don't strictly meet the minimum creditable coverage standards — such as a deductible that is too high — still will be considered in compliance with the rules, if their relative value is equivalent to what are known as bronze-level plans sold through the state's health insurance exchange.
“To address these types of issues, as well as other issues around large employers with employees in several states,” Massachusetts will continue to operate a process in which an employer or insurer can show that a plan it offers may not meet the technical letter of the law, but in the aggregate its coverage is equal to value of a connector bronze plan, said Kaitlyn Kenney, director of policy and research at the Massachusetts Health Connector in Boston.
That process “has historically proved successful in addressing those issues where a plan provides comprehensive coverage that aligns with the spirit of the regulations but fails the state standard due to a technical issue,” Ms. Kenney said.
Still, that certification process, while vital, is not always smooth, experts say.
“The problem with that approach, though is that it can take several months for (Connector Authority officials) to review a plan, which complicates employer planning,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.
In some cases, employers will offer at least one plan that meets the state's coverage requirements to avoid compliance issues, consultants say.
In theory, some experts say the state requirements could be challenged on grounds that they violate the Employee Retirement Income Security Act, which pre-empts state and local rules that relate to employee benefit plans.
But even though the Massachusetts' requirements have been in place since 2009, no such challenge has been filed.
“I think ERISA pre-emption has always been available as a possible defense for self-insured employers in Massachusetts, “ said J.D. Piro, a senior vice president at Aon Hewitt in Norwalk, Conn. But such a challenge wasn't launched because the effect of the Massachusetts law was negligible on plan design, he said.
“As we begin to look at the impact of ACA implementation, this issue suggests that the Massachusetts requirement might have a more substantial impact with respect to the plan design. So an ERISA pre-emption (challenge) might be an alternative for self-insured employers,” Mr. Piro said.
But Massachusetts regulators say ERISA pre-emption is not relevant in this case.
“In terms of the Massachusetts benefit rules, it is important to note that these rules are imposed on individuals, not employers. An individual must have a health insurance plan” that satisfies the state's coverage requirements, Ms. Kenney said.
Regulations that define coverage standards “are not directly imposed on employers or insurers. To that end, there is not an ERISA violation,” Ms. Kenney said.
“If no one has challenged the requirements so far, I don't see why they would in the future,” Mr. Stover said.