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ACA Nondiscrimination Provision: "A Trap for the Unwary"

ACA Nondiscrimination Provision: "A Trap for the Unwary"

Health Care Law Note
(April 4, 2016)

In September, The U.S. Department of Health and Human Services ("HHS") issued the proposed rule to implement the nondiscrimination provision for the Affordable Care Act ("ACA"). There is no set date for release of the final rule. However, recent comments by a U.S. Department of Labor ("DOL") official indicate that employers, providers, and health plans should pay close attention to the proposed rule and anticipate the coming regulation.

At a conference session last month, Phyllis C. Borzi, Assistant Secretary for Employee Benefits Security for the DOL, described the proposed rule as a "trap for the unwary" due to confusion over the breadth of its applicability. According to Ms. Borzi, the new rule will apply to any health plan receiving federal funds—even a self-funded plan that uses a claims administrator that receives federal funds. Initially, many practitioners assumed that the new rule on nondiscrimination would not apply to self-funded plans. However, the proposed rule plainly applies to insurers receiving federal funds, which includes subsidies received by insurers operating in the federal health insurance marketplaces. Ms. Borzi's comments signal the government's position that the insurer is required to apply the rule not only to their own insured products, but also to any plan for which they administer claims.

Most self-funded plans contract with insurers to administer the plans. Therefore, based on Ms. Borzi's comments, most self-funded plans will need to comply with the new rule implementing the ACA's nondiscrimination provision. Click here to read more about the proposed rule.

Dorothy H. Cornwell
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