Date:May 3, 2010
To:All Insurers Writing Individual and Group Health Insurance
From:Sean Dilweg, Commissioner of Insurance
Subject:Patient Protection and Affordable Care Act of 2009

This bulletin is the first in a series to provide information to insurers about the Patient Protection and Affordable Care Act of 2009 (PPACA) as modified by the Health Care and Education Reconciliation Act of 2010 (HCERA). Additional bulletins will follow as more information is available. Insurers submitting policy form filings will need to certify compliance with the following requirements in the cover letter or the filing description in SERFF.

The following changes are effective six months after the enactment of the PPACA or September 23, 2010.

Grandfathered Health Plans

A grandfathered health plan is an existing group health plan, including self-insured plans, or individual health insurance coverage that had at least one enrollee as of March 23, 2010. Although grandfathered group and individual health plans may have delayed effective dates on many provisions of the PPACA and HCERA, grandfathered plans will need to comply with the following provisions for plan years beginning on or after September 23, 2010:

  • Prohibition on lifetime limits for essential health benefits
  • Prohibition on rescissions
  • Extension of coverage for dependents if the adult child is not eligible for employment-based health benefits
  • Grandfathered group health plans will also be required to comply with annual limits on essential health benefits and preexisting condition exclusions for children 19 years of age or younger

No Lifetime Limits

Group health and individual health plans may not contain lifetime limits on the dollar value of essential health benefits. Essential benefit categories are provided later in this bulletin.

Restrictions on Annual Limits

Prior to January 1, 2014, group and individual health plans may only contain restricted annual limits on the dollar value of essential benefits; such limits will be determined by the Secretary of HHS through federal regulations.

Essential Benefits

The Secretary of HHS shall define the essential health benefits by federal regulation, except that such benefits shall include at least the following general categories and the items and services covered within the 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
  10. Pediatric services, including oral and vision care

Prohibition on Rescissions

Coverage may be rescinded only for fraud or intentional misrepresentation of material fact as prohibited by the terms of the coverage. Prior notification must be made to policyholders prior to cancellation.

Coverage of Preventive Health Services without Cost-Sharing

Plans must provide coverage without cost-sharing for:

  1. Services recommended by the U.S. Preventive Services Task Force
  2. Immunizations recommended by the Advisory Committee on Immunization Practices of the CDC
  3. Preventive care and screenings for infants, children and adolescents supported by the Health Resources and Services Administration
  4. Preventive care and screenings for women supported by the Health Resources and Services Administration

The above services can be found at PSHA, 42 U.S.C 300gg sec. 2713 and 111 P.L. 148 s. 1001.

Extension of Adult Dependent Coverage

Plans that provide dependent coverage must extend coverage to adult children up to age 26. For plan years beginning before 2014, grandfathered group health plans will be required to cover adult children only if the adult child is not eligible for employer-sponsored coverage. The PPACA does not require carriers to cover children of adult dependents.

The Secretary of HHS will further define which adult children coverage must be extended.

Insurers are reminded that the new federal law does not supersede Wisconsin insurance law, s. 632.885, Wis. Stat., effective January 1, 2010, that requires most health insurance policies and self-funded governmental health plans of the state to provide coverage to certain adult children up to 27 years of age. [See OCI Bulletin to Insurers issued July 24, 2009, for information concerning eligibility requirements.] State law also requires coverage of certain adult children of any age who were under 27 years of age and in school when called to active duty in the National Guard or a reserve component of the U.S. armed services and who then return to school on a full-time basis after active duty. Further rules concerning the coverage of adult children are contained in s. Ins 3.34, Wis. Adm. Code. (See Frequently Asked Questions Regarding Coverage of Dependents under s. 632.885, Wis. Stat., and s. Ins 3.34, Wis. Adm. Code (opens in new window).)

Preexisting Condition Exclusions

A plan may not impose any preexisting condition exclusions for individuals age 19 and under. According to HHS, the term "preexisting condition exclusion" applies to both a child's access to a plan and to his or her benefits once he or she is in the plan. HHS will issue a regulation to further confirm that beginning in September 2010:

  • Children under age 19 with preexisting conditions may not be denied access to their parents' health insurance plan;
  • Insurance companies will no longer be allowed to insure a child but exclude treatments for that child's preexisting condition.

Patient Protections

A plan that provides for designation of a primary care provider must allow the choice of any participating primary care provider who is available to accept them, including pediatricians and obstetrician/gynecologists.

If a plan provides coverage for emergency services, the plan must do so without prior authorization, regardless of whether the provider is a participating provider. Services provided by nonparticipating providers must be provided with cost-sharing that is no greater than that which would apply for a participating provider and without regard to any other restriction other than an exclusion or coordination of benefits, an affiliation or waiting period, and cost-sharing.

A plan may not require authorization or referral for a female patient to receive obstetric or gynecological care from a participating provider and must treat the authorization as the authorization of a primary care provider. Insurers are reminded that the new federal law does not supersede Wisconsin insurance laws, ss. 609.22 and 632.85, Wis. Stat., effective 1999 and 1997, respectively, that requires defined network plans to permit pediatricians to be designated as primary providers, prohibits defined network plans from requiring female enrollees to obtain referrals for obstetric and gynecological services, and restricts prior authorization for emergency treatment. [See the OCI Bulletin of February 28, 2000, regarding defined network plans and ch. Ins 9, Wis. Adm. Code.]

Appeals Process

An insurer offering group or individual health insurance coverage must continue to comply with Wisconsin's internal appeal and external review standards under ss. 632.83 and 632.835, Wis. Stat., and ch. Ins 18, Wis. Adm. Code. Under the PPACA the Secretary of the U.S. Department Health and Human Services and Secretary of the U.S. Department of Labor establish minimum standards for internal appeal and external review processes and will determine whether state standards meet or exceed those federal standards. OCI expects that Wisconsin's standards will meet or exceed the federal standards or will require only minor modification. OCI will notify insurers in advance if any changes are required.

Provision of Additional Information

All plans must submit to the Secretary of HHS and the Commissioner of Insurance and make available to the public the following information in plain language:

  • Claims payment policies and practices
  • Periodic financial disclosures
  • Data on enrollment
  • Data on disenrollment
  • Data on the number of claims that are denied
  • Data on rating practices
  • Information on cost-sharing and payments with respect to out-of-network coverage
  • Other information as determined appropriate by the Secretary of HHS

The NAIC will work with the Secretary of HHS on developing these requirements.

Other Changes

Bringing down the cost of health care.

Effective January 1, 2011, insurers must report to the Secretary of HHS the ratio of incurred losses plus loss adjustment expense to earned premiums. The report must include the percentage of total premium revenue that is expended on:

  • Reimbursement for clinical services
  • Activities that improve health care quality
  • All other non-claims expenses, including the nature of the costs, excluding federal and state taxes and licensing or regulatory fees.

Insurers must provide a rebate to policyholders if the percentage of premiums expended for clinical services and activities that improve health care quality is less than 85% for their large group business and 80% for their small group and individual business.

The NAIC shall establish, by December 31, 2010, uniform definitions of the categories of expenses and standardized methodologies for calculating the above measures.

Questions regarding the information in this bulletin can be addressed to ocicomplaints@wisconsin.gov.