Guidance clarifies health care reforms

WASHINGTON—The latest health care reform law regulatory guidance gives employers more time to comply with certain provisions, clears up uncertainty on other requirements and suggests that some rules will be relaxed.

The most significant changes in last week's Labor Department guidance involve Patient Protection and Affordable Care Act provisions affecting coverage decisions and review procedures. For example, the law requires that health plan enrollees be notified of an urgent care coverage decision within 24 hours of a request. A decade-old Labor Department rule had required that such decisions be made within 72 hours.

In rules issued in July, regulators said the notification requirement would go into effect on Jan. 1, 2011. But in technical guidance released last week, the Labor Department said it was establishing an “enforcement grace period” through July 1, 2011. No action will be taken against employers sponsoring self-funded plans that are working in good faith to comply with the new standard by that deadline, the federal agency said.

The same grace period extension applies to other new mandates, including one requiring that notices of internal and external claims appeals processes and review be provided in a “culturally and linguistically appropriate manner,” and another that requires plans to step up the amount of information provided to enrollees when coverage is denied.

Benefit lobbying organizations welcomed the grace periods as necessary to give employers the time needed to comply with the requirements.

“The new guidance will help ensure that employers and health plans have much-needed additional time to make complex changes in the procedures they use to make accurate and efficient determinations on hundreds of millions of health care claims each year,” James Klein, president of the Washington-based American Benefits Council, said in a statement.

In separate guidance, the Labor Department clarified a requirement that health plans must use independent review organizations when employees request an external review after their request for coverage is denied through internal reviews conducted by employers and plan administrators.

In the clarification, the Labor Department said employers with self-funded plans do not have to contract directly with independent review organizations, but could leave the contracting to their third-party claims administrators.

“Employers did not want to do that work. It would have required a lot of work and effort. This is a very important clarification,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.

The Labor Department also clarified a health care reform law provision that requires group plans to extend coverage to employees' adult children up to age 26 generally as of Jan. 1, 2011. Many plans now extend coverage only to age 18 or 19, or 22 or 23, if the child is a full-time college student.

Consultants say many employers also voluntarily extend coverage to employees' grandchildren, nieces and nephews if certain conditions, such as financial dependency and residency, are met.

Ending months of uncertainty on the issue, the Labor Department last week said such eligibility restrictions can continue to be imposed on employees' relatives who are not sons, daughters, stepchildren, adopted children or foster children.

The Labor Department also said it will “shortly address situations” in which grandfathered plans may change insurers without losing that status. Previous rules said a change of insurers automatically would result in loss of grandfathered status.

The Labor Department “is signaling that it will make a change in this area,” said Sharon Cohen, an attorney with Towers Watson & Co. in Arlington, Va.

Grandfathered plans are shielded from certain health care reform law requirements, such as providing full coverage of preventive benefits.