[StBernard] HHS proposes regulations for health care reform measures

[Westley Annis]

HHS proposes regulations for health care reform measures

by Edward I. Leeds and Clifford J. Schoner

The U.S. Department of Health and Human Services has proposed two sets of
regulations under the Patient Protection and Affordable Care Act relating to
changes that will take effect in 2014.

Although the new rules focus principally on what states must do to meet
health care reform requirements, health plan sponsors, particularly those in
the small-plan market, will want to pay attention to both the direct and
indirect effects of these regulations. In considering their impact, sponsors
should keep in mind that the rules are only in proposed form and leave much
to be determined in the future.

The first set of regulations establishes rules for states to follow in
establishing health insurance exchanges. These exchanges will make coverage
available in the individual and small-group health plan markets.

Employers with no more than 100 employees will be allowed to purchase
coverage through the exchange for small-group health plans (although, until
2016, a state may limit availability to employers with no more than 50
employees).

In 2017, a state may open its exchange to larger employers. For these
purposes, employers under common ownership and control will generally be
considered a single employer. The rules for the small-employer exchange
address matters such as the standard that health plans must meet to be
offered through an exchange, employer applications to participate in the
exchange, employee enrollment, and billing.

The second set of regulations implements mechanisms that aim to add
stability to the health insurance market. In particular, the mechanisms seek
to offset the effects of adverse selection, where one plan incurs higher
costs because it covers a less healthy population.

Two of these mechanisms-a program for reinsurance and a program of risk
corridors-apply only during a three-year transition period. The third
mechanism-a program of risk adjustments based on risk factors-is permanent.
Significantly, not all of these programs are limited to plans participating
in a state exchange or even to insured plans. The temporary reinsurance
program, in particular, will require a third party administrator of a
self-funded health plan to report certain information and contribute amounts
to fund the risk adjustments.

Both in Ballard Spahr's Philadelphia office, Leeds, counsel, can be reached
at 215-864-8419 or leeds at ballardspahr.com and Schoner, of counsel, can be
reached at 215-864-8626 or schonerc at ballardspahr.com.