On November 20, 2012, the Obama Administration issued three proposed rules to implement certain provisions of the Patient Protection and Affordable Care Act (aka “Health Care Reform”). The major provisions of the proposed rules are summarized below:

(1) Guaranteed Availability of Coverage: Beginning in 2014, health insurance insurers can no longer discriminate against individuals on the basis of a preexisting or chronic condition. According to the proposed rule, premiums can only be varied, within prescribed limits, on the basis of age, tobacco use, family size and geography. No other factor – such as preexisting conditions, health status, claims history, duration of coverage, gender, occupation, and small employer size and industry – can be the basis of increased premiums or the denial of health insurance coverage. In addition, the proposed rule requires health insurance providers to maintain a single statewide risk pool for each of their individual and small employer markets, unless a state chooses to merge the individual and small group pools into one. Premiums and annual rate changes must be based on the health risk of the entire pool. Lastly, the proposed rule permits insurers to sell individual catastrophic plans with higher deductibles to those under the age of 30 or for whom coverage would otherwise be unaffordable.

(2) Coverage for Essential Health Benefits: This proposed rule requires all non-grandfathered plans in the individual and small group markets and certain other plans to offer a minimum set of essential health benefits (“EHBs”), and to reflect certain cost-sharing limitations and actuarial value requirements beginning in 2014. EHBs should be equal to the scope of the health care benefits provided under a typical employer plan and must include coverage for items and services in at least 10 specific categories, including hospitalization, prescription drugs, and maternity and newborn care. EHB-related health exchange and issuer standards are also proposed in the rule.

(3) Employment-Based Wellness Programs: According to this proposed rule, the maximum permissible award under a wellness program that requires an individual to satisfy a standard based on a health factor in order to obtain a reward is increased from 20% to 30% of the cost of coverage (and to 50% for programs designed to prevent or reduce tobacco use). The proposed rule also clarifies the manner in which such programs can avoid prohibited discrimination, including reasonable design and reasonable alternatives that must be offered for individuals to obtain the reward.

If you need assistance in complying with the requirements of Health Care Reform, contact Davenport Evans today at 605-336-2880. DISCLAIMER: This material is intended to be information and does not constitute legal advice regarding any specific situation.

Article submitted by Jennifer L. Keating.

Davenport, Evans, Hurwitz & Smith, LLP, located in Sioux Falls, South Dakota, is one of the state’s largest law firms. The firm’s attorneys provide business and litigation counsel to individuals and corporate clients in a variety of practice areas. For more information about Davenport Evans, visit www.dehs.com.