Today the U.S. Department of Health and Human Services (“HHS”) released three proposed rules implementing key insurance-related components of the Affordable Care Act (“ACA”).  The proposed rules outline guidance on: (1) market-reforms, including a ban on discrimination based upon pre-existing conditions; (2) essential health benefits provided to individuals through state health insurance exchanges; and (3) employer-based wellness programs.  The Centers for Medicare and Medicaid Services (“CMS”) also released a State Medicaid Director Letter (“SMD Letter”) today outlining its application of the essential health benefits guidance to Medicaid.

A few highlights from the proposed rule are outlined below.

Market Reforms

Beginning January 1, 2014, insurers are prohibited from discriminating against people who have pre-existing conditions.  Under the proposed rule, insurers offering most insurance products may generally vary premiums based upon age, tobacco use, family size, and geography. All other rating factors are prohibited, including, but not limited to, pre-existing conditions, health status, gender, occupation, and duration of coverage.  Insurance products subject to these requirements include non-grandfathered individual and small group coverage offered starting in 2014 and large group coverage offered to individuals through health insurance exchanges starting in 2017.

The proposed rule also requires that, with limited exceptions, insurers offering non-grandfathered health insurance coverage must accept every individual or employer who applies for coverage.  The exceptions allow insurers to limit enrollment: (1) to certain open and special enrollment periods; (2) to an employer’s eligible individuals who live, work, or reside in the service area of a network plan; and (3) in certain situations involving network and financial capacity.

Essential Health Benefits

HHS’s proposed rule on essential health benefits (“EHBs”) requires that beginning January 1, 2014, all non-grandfathered coverage in the individual and small group markets, including products offered through or separate from exchanges, include a core set of services.  These EHBs must include items and services in 10 specific benefit categories:  (1) ambulatory patient services; (2) emergency services; (3) hospitalization; (4) maternity and newborn care; (5) mental health and substance use disorder services, including behavioral health treatment; (6) prescription drugs; (7) rehabilitative and habilitative services and devices; (8) laboratory services; (9) preventive and wellness services and chronic disease management; and (10) pediatric services, including oral and vision care, up to age 19.

Employer-Based Wellness Programs

The proposed rule implements and expands upon requirements for employment-based wellness programs for plan years starting on or after January 1, 2014.  The proposed rule increases the maximum reward available under a health-contingent wellness program offered in connection with a group health plan from 20% to 30% of the cost of coverage.  The maximum reward is further increased to 50% for wellness programs designed to prevent or reduce tobacco use.

In addition, the proposed rule provides guidance regarding the design of health-contingent wellness programs and reasonable alternatives that must be offered in order to avoid prohibited discrimination.  The proposed rule requires health-contingent wellness programs to follow certain rules, including, but not limited to: (1) the program must be reasonably designed to promote health or prevent disease; (2) the program must be reasonably designed to be available to all similarly situated individuals; and (3) individuals must be given notice of the opportunity to qualify for the same reward through other means.

State Medicaid Director Letter

In the SMD letter released today (SMDL #12-003), CMS proposed that EHBs as outlined in the proposed rule generally apply to Medicaid. However, because of the role of states in defining Medicaid benefits and existing Title XIX statutory provisions, CMS noted that it will be issuing further regulation with modifications that will apply when providing EHBs to Medicaid beneficiaries.