BAN Blog

Sponsors of self-funded ERISA plans have fiduciary obligations to plan participants, which includes the obligation to provide a full and fair review of claims and effectively and meaningfully communicate or engage with plan participants regarding claims denials. One district court recently clarified that this obligation may include the need for the plan administrator, which is usually the plan sponsor, to engage in a dialogue with health care providers who are providing health care services to plan participants when there is a dispute over denied claims.

In K.D. v. Anthem Blue Cross and Blue Shield, Group Health Plan of United Technologies Corporation, the plaintiff sued the plan administrator and Blue Cross and Blue Shield, the group health plan’s third party administrator (“TPA”), in the United States District Court for the District of Utah due to the plan’s denial of continued inpatient mental health treatment and transitional care for alleged lack of medical necessity. Plaintiff further alleged a violation of the Mental Health Parity and Addiction Act of 2008 (“MHPAEA”). This alert will focus on the ERISA claims review and appeals process and not the MHPAEA claims in the lawsuit.

As described in the District Court opinion, the terms of the plan sponsor’s medical plan generally required a medical necessity determination for continued inpatient/residential mental health treatment for plan participants, and provided that medically necessary services are those that are necessary for the participant and that are “rendered in the least intensive setting that is appropriate for the delivery of health care.” Once residential treatment is determined to be medically necessary, then there is a predetermined length of stay, and such benefits are then subject to concurrent review which may result in approval for additional care above and beyond those originally approved by the plan.

The District Court Magistrate reviewed the TPA’s own internal clinical guidelines and policies and procedures, which provide that mental health residential treatment is appropriate when the patient’s behavioral health condition is such that the patient demonstrates they are a danger to themselves or others, or it “causes a serious dysfunction in daily living.” If such conditions are present, then the guidelines provide that continued residential care should be approved if the condition is likely to deteriorate without continued treatment at the same level of care or if continued care at the current level is necessary. The clinical guidelines also provide that treatment should be available when “necessary, appropriate, and not feasible at a lower level of care.” If a claim is denied, then there are two levels of appeal that the plan participant must undergo before filing a lawsuit.

As set forth in the District Court’s opinion, the plan participant had a history of mental illness and the TPA initially determined that residential treatment was medically necessary. The participant underwent residential treatment in a program that could last from 9 – 12 months, though not all of it was intended to be residential, as the participant would step down from residential into transitional living. Ultimately, the participant’s discharge from treatment was contingent upon, and determined by, their progress on goals, participation, and clinical recommendations. The participant was initially approved for seven (7) days of residential treatment and then an additional nine (9) days. At that time, the TPA requested additional information from the provider via a peer-to-peer discussion, which the provider did not attend. Thus, the TPA independently reviewed the medical information and denied the claim for additional residential treatment based on a lack of medical necessity. Transitional living treatment claims were also denied for failing to obtain precertification.

After appealing the determinations, the participant sued for violation of ERISA and the MHPAEA. In asserting their claim for ERISA violations, the plaintiff alleged that the plan’s denial of their claims was arbitrary. The defendants alleged that while they were obligated to consider the letters and other records submitted as part of the claims appeal process, there was no obligation to “affirmatively respond” to them. The District Court magistrate disagreed and applied other, contrary caselaw that requires a plan administrator to “engage with and address” the opinions of the treating providers. As such, the District Court found that the TPA or plan administrator should have provided an explanation for rejecting health care provider opinions. As an example, the court suggested the claims administrator (the TPA) should have addressed why they did not find the treating providers’ opinions to be persuasive and provided factual support. The court reasoned that the plan and TPA had a fiduciary duty to plan beneficiaries to communicate the bases for their decisions, which includes addressing the provider opinions and communicate “effectively and meaningfully” with participants regarding the factual bases for denying coverage.

Ultimately the case was remanded back to the plan administrator for a new determination and the plaintiffs could seek recovery of their attorneys’ fees.

This case serves as a cautionary tale for plan sponsors to ensure they, or their claims administrators, are actively engaging with plan participants and/or their providers and meaningfully responding to their concerns when claims are denied. While it is unclear whether the participant will ultimately be entitled to the benefits sought under the plan, addressing why the claims administrator denied the claims and providing factual support for their rationale could have saved the claims administrator and/or plan administrator costs and legal fees.

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About the Author. This alert was prepared for [Agency Name] by Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers, or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency and Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions.

© 2024 Barrow Weatherhead Lent LLP. All Rights Reserved.

On July 25, 2023, the agencies released an extensive proposed rule related to the Mental Health Parity and Addiction Equity Act (the “Proposed Rule”) as well as a Technical Release requesting comments on certain proposed data requirements for nonquantitative treatment limitations (“NQTLs”) and the potential for an enforcement safe harbor if certain data requirements are met. The Proposed Rule clarifies and solidifies requirements for group health plans and health insurance issuers (“plans and issuers”) to perform comparative analyses of the NQTLs imposed under their plans. To do this, plans and issuers must collect and evaluate data to reasonably assess the impact of NQTLs on access to mental health and substance use disorder (“MH/SUD”) benefits and medical/surgical (“Med/Surg”) benefits and demonstrate compliance with the MHPAEA as written and in operation. The Proposed Rule focuses on the following, which will directly impact plan design and analyses of those designs:

• Applying the “substantially all” standard to NQTLs
• Revising comparative analysis requirements
• Enhancing definitions to better assist plans
• Solidifying compliance deadlines

Applying the “substantially all” standard to NQTLS

The first significant change under the Proposed Rule is the application of the “substantially all” standard to NQTLS. Previously, this standard applied only to quantitative treatment limitations (QTLs). Specifically, group health plans that provide both Med/Surg and MH/SUD benefits may not apply any treatment limitation to MH/SUD benefits in any classification that is more restrictive (as written or in operation) than the predominant treatment limitation that applies to substantially all Med/Surg benefits in the same classification. The standard or test is determined separately for each type of treatment limitation.  As a reminder, the six permitted classifications under the MHPAEA are: (1) inpatient, in-network; (2) inpatient, out-of-network; (3) outpatient, in-network; (4) outpatient, out-of-network; (5) emergency care; and (6) prescription drugs. Additionally, there is a special rule for outpatient sub-classifications. For purposes of determining parity for outpatient benefits (in-network and out-of-network), a plan or issuer may divide its benefits furnished on an outpatient basis into two sub-classifications: (1) office visits; and (2) all other outpatient items and services. Accordingly, separate sub-classifications for generalists and specialists are not permitted.

Thus, any NQTL that imposes conditions, terms, or requirements that limit access to benefits under the terms of the plan or coverage is considered restrictive, and an NQTL that applies to MH/SUD benefits can be no more restrictive than those that apply to Med/Surg benefits. The Proposed Rule provides an illustrative, non-exhaustive list of NQTLs, which includes medical management standards such as medical necessity or prior authorization, formulary design for prescription drugs (including multi-tier networks), network composition and standards, preferred provider networks, methodology for determining out-of-network rates, fail first or step-therapy requirements, and geographic location or provider type restrictions.

Moreover, an NQTL is considered to apply to substantially all Med/Surg benefits in a classification of benefits if it applies to at least two-thirds of all Med/Surg benefits in that classification (determined without regard to whether the nonquantitative treatment limitation was triggered based on a particular factor or evidentiary standard).  If the NQTL does not apply to at least two-thirds of all Med/Surg benefits in a classification, then that type of NQTL cannot be applied to MH/SUD benefits in that classification. 

When MH/SUD benefits are offered in any classification of benefits for that MH/SUD condition must be provided in every classification in which Med/Surg benefits are provided.  Such benefits must be meaningful benefits for treatment of the condition or disorder in each such classification, as determined in comparison to the benefits provided for Med/Surg conditions in the classification.  If the plan provides benefits in a classification and imposes any separate financial requirement or treatment limitation (or separate level of a financial requirement or treatment limitation) for benefits in the classification, then the rules apply separately with respect to the classification for all treatment limitations (or financial requirements).

Revising Comparative Analyses Requirements

The devil is in the details, and the Proposed Rule enhances the content requirements for the comparative analyses required under the CAA, 2021 and existing DOL guidance.  Comparative analyses must include a high level of detail to demonstrate a plan’s compliance with the MHPAEA (as written and in operation).  Some exceptions apply to independent professional medical or clinical standards and standards to prevent and prove fraud, waste, and abuse.

Generally, plans are required to:

• describe NQTLs applicable to MH/SUD and Med/Surg benefits with regard to the benefits in each classification;
• identify the factors used and evidentiary standards relied upon to design the NQTLs (including the source from which each evidentiary standard is derived);
• describe how the factors are used in the design and application of the NQTL;
• demonstrate comparability and stringency as written and in operation; and
• address the findings and conclusions as to the comparability of the processes, strategies, evidentiary standards, and other factors used in designing and applying the NQTL to MH/SUD benefits and Med/Surg benefits within each classification, and the relative stringency of their application, both as written and in operation.

The Proposed Rule expands upon each of the above categories to describe the information the DOL expects to see demonstrated in the comparative analyses. Further, the Proposed Rule requires the use of outcomes data when NQTLs are designed so that plans can establish that relevant data was used in a manner reasonably designed to assess the impact of any NQTL on access to MH/SUD benefits and Med/Surg benefits and to determine whether the plan complies in operation. This includes analyses of claims denials, in-network and out-of-network utilization rates (including provider claim submissions), network adequacy (time and distance data, information on providers accepting new patients), and provider reimbursement rates relevant to any NQTLs. As the Proposed Rule suggests, any material difference in this data for Med/Surg and MH/SUD benefits would be a strong indicator of noncompliance and, therefore, plans would be required to both take reasonable action to address the material differences in access and document any such action that has been taken to mitigate these material differences in access to MH/SUD benefits.

Accordingly, the comparative analyses must:

• Identify the relevant data collected and evaluated;
• Evaluate the outcomes that resulted from the application of the NQTL to MH/SUD benefits and Med/Surg benefits, including the relevant data set forth in the Proposed Rule
• Provide a detailed explanation of material differences in those outcomes that are not attributable to differences in the comparability or relative stringency of the NQTL as applied to MH/SUD benefits and Med/Surg benefits and the bases for such a conclusion; and
• Discuss any measures that have been or are being implemented by the plan or issuer to mitigate any material differences in access to MH/SUD benefits as compared to Med/Surg benefits, including the actions the plan or issuer is taking to address material differences in access to ensure compliance with MHPAEA.

The Technical Release addresses the requirements for completing comparative analyses but seeks feedback on, among other things, the required data elements, the difficulty in providing data elements, information technology needed to collect the data elements (including cost), and whether plans have access to these data elements.  Moreover, the Technical Release addresses the potential for an enforcement safe harbor if specific standards and data elements are met or exceeded by plans.

Enhancing Definitions to Better Assist Plans

To better facilitate complete, clear comparative analyses and compliance generally, the Proposed Rule aims to define terms previously not defined under the law and regulations.  Specifically, Proposed Rule newly defines certain terms to help guide plans and carriers to ensure parity in aggregate lifetime and annual dollar limits, financial requirements, and quantitative and nonquantitative treatment limitations between mental health and substance use disorder benefits and medical/surgical benefits.  This includes definitions for “DSM”, “ICD”, “evidentiary standards,” “processes”, “strategies, and “factors” and modifies the definitions of other terms for clarity, including “mental health,” “medical/surgical benefits”, treatment limitations, and “substance use disorder benefits.”

Solidifying Compliance Deadlines

The Proposed Rule solidifies the compliance deadlines for providing the comparative analyses to the DOL upon request.  Specifically, they must be provided:

• Within 10 business days of receipt of a request (unless an additional period of time is specified by the DOL)
• If additional information is required after the comparative analyses are deemed insufficient, then the DOL will specify additional information that must be submitted, and it must be submitted so within 10 business days (unless an additional period of time is specified by the DOL)
• If the plan is determined to be out of compliance, the plan must respond to the DOL and specify the actions the plan will take to bring the plan into compliance and provide additional comparative analyses meeting the requirements within 45 calendar days after initial determination of noncompliance.
• If the DOL makes a final determination of noncompliance, within 7 calendar days of the receipt of the final determination, the plan must notify all participants and beneficiaries enrolled in the plan or coverage that the plan has been determined to be out of compliance with the MHPAEA.  The plan must also provide the DOL, and any service provider involved in the claims process, with a copy of the notice provided to participants.  Content requirements for the notice are included in the Proposed Rule.

The Proposed Rule specifies that copies of the comparative analyses may be requested (and must be provided to) participants and beneficiaries (or their provider or authorized representatives) who have received an adverse benefit determination related to MH/SUD benefits and any state authorities. 

Conclusion

Once finalized, these requirements will apply to plan years beginning on or after January 1, 2025. Until then, the proposed rules require plans to continue to comply with existing MHPAEA laws and regulations, including completing their comparative analyses.

At this point, it is not a question of “if” the agencies will finalize the Proposed Rule, it is “when” it will be finalized.  While the Proposed Rule and Technical Guidance go a long way to advise plans, third party administrators (TPAs) and pharmacy benefit managers (PBMs) of the goals of the agency, the Proposed Rules is unlikely to resolve many of the frustrations self-funded plan sponsors have dealt with since 2021 in either obtaining draft comparative analyses from their TPAs or PBMs or ensuring the comparative analyses meet the DOL’s expectations.

TPAs and PBMs hold virtually all of the information necessary to complete the analyses, but much of the details are kept as closely guarded secrets until the DOL requests the information.  Accordingly, self-funded plan sponsors must be more assertive with their TPAs and PBMs to ensure (1) the analyses are completed, (2) the analyses are made available as required, and (3) that the analyses include all of the required detail, data, and elements in the CAA, 2021 and the Proposed Rule.  One way to do this is by negotiating the plan’s ability to access or request all necessary data and documentation from the TPA or PBM during the contract negotiation process.  Finally, as we wait release of the MHPAEA final rule plans are encouraged to ensure current MHPAEA comparative analyses are updated to meet the Proposed Rule requirements (even before it’s finalized) as it brings the plan one step closer to meeting the expectations of the DOL

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About the Author. This alert was prepared by Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers, or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency and Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions. © 2023 Barrow Weatherhead Lent LLP. All Rights Reserved.

After several failed attempts by pharmacy benefit managers (“PBM”) to challenge state laws regulating PBMs, the 10^th Circuit Court of Appeals (in Pharmaceutical Care Management Association v. Mulready) handed down a big win for PBMs and, by extension, self-funded ERISA plans, when it held that provisions under an Oklahoma insurance law that established strict network adequacy standards and over-broad “any willing provider” requirements for PBMs were preempted by ERISA.  Certain provisions of the law were also successfully challenged as being preempted by Medicare Part D; however, the scope of this alert is limited to the portions of the 10^th Circuit’s opinion related to ERISA preemption.

The Oklahoma PBM law at issue in the case, (1) sets forth stringent geographic parameters for making brick-and-mortar pharmacies available to plan participants, (2) limits the use of mail-order pharmacies as a replacement for brick-and-mortar pharmacies, (3) bars PBMs from promoting in-network pharmacies by offering financial incentives such as copay or cost sharing reductions, (4) requires PBMs to admit any provider willing to accept the PBM’s preferred network terms and conditions, and (5) prohibits PBMs from refusing to allow pharmacies with pharmacists on probation with the state regulatory agency from being in the PBMs’ network. 

When challenged at the district court level, the lower court determined that none of these provisions impacted plan design or choices for plan administrators and upheld the law.  However, on appeal, the 10^th Circuit wholeheartedly disagreed, finding that these restrictions, among other things, infringe upon central matters of plan administration.  The court recognized that the Oklahoma PBM law network restrictions, “home in on PBM pharmacy networks – the structures through which plan beneficiaries access their drug benefits.  And they impede PBMs from offering plans some of the most fundamental network designs, such as preferred pharmacies, mail order pharmacies, and specialty pharmacies.”  Further, the court recognized that restricting PBMs from denying, limiting, or terminating a plan’s pharmacy contract because of licensure issues (i.e., allowing them to limit the network when a pharmacy has a pharmacist who is on probation with the state licensure agency) essentially forces the PBM to consider all pharmacies over any safety concerns the plan may choose to impose.

Thus, while the Oklahoma law does not directly regulate ERISA plans, but rather PBMs, the court recognized that ERISA plans are virtually compelled to use PBMs to administer their prescription drug benefits and, therefore, held that the Oklahoma law is preempted by ERISA as it impermissibly impacts and/or relates to ERISA plans by interfering with plan administrators’ ability to administer their plans uniformly.

Conclusion

PMBs have been a target of state regulation for some time, and we don’t anticipate that this decision will discourage them further, particularly in states outside the purview of the 10^th Circuit.  In the meantime, it’s possible the case could ultimately be appealed to the U.S. Supreme Court.  We will continue to monitor state PBM laws and the progress of this case.

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About the Author. This alert was prepared by Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers, or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency and Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions. © 2023 Barrow Weatherhead Lent LLP. All Rights Reserved.

On July 12, 2023, the IRS, DOL and HHS (collectively, “the Agencies”) released proposed regulations that modify the conditions for hospital indemnity and other fixed indemnity insurance to be considered an “excepted benefit.” Maintaining “excepted benefit” status is important for fixed indemnity plans, as it exempts them from having to comply with the ACA’s insurance mandates and market reforms, which is not feasible for these types of arrangements.

The proposed regulations also modify the definition of short-term limited-duration insurance (“STLDI”) and clarify the tax treatment of certain benefit payments in fixed amounts received under employer-provided accident and health plans. Lastly, the Agencies solicit comments regarding specified disease or illness coverage and level-funded plan arrangements.

The Agencies released the proposed regulations in response to multiple executive orders released by the President to, among other things, protect and strengthen the ACA, improve the comprehensiveness of coverage, protect consumers from low-quality coverage, and help reduce the burden of medical debt on households.

While these regulations are merely proposed at this time, once finalized they may significantly impact coverage offerings available to employers, particularly those who do not offer comprehensive medical coverage. Moreover, they signal that the Agencies have level-funded plans on their radar and may soon seek to define and regulate them differently than traditional self-funded plans.
The proposed changes are described in more detail below.

Fixed-Indemnity Insurance
Under current law and regulations, the ACA’s market reforms do not apply to individual or group health plan coverage that is an excepted benefit. For purposes of fixed indemnity and hospital indemnity coverage, to be an excepted benefit in the group market, the following requirements must be met: (1) the benefits are provided under a separate policy, certificate, or contract of insurance; (2) there is no coordination between these benefits and those under the employer’s group health plan (including any exclusions under the plan); (3) the individual can access the benefits under the plan regardless of whether they obtain coverage under any of the employer’s other group health plans (or by a policy issued by the same issuer for individual coverage); and (4) the plan must pay a fixed dollar amount per day (or other period) of hospitalization or illness and/or per service, regardless of the amount of expenses incurred. Different requirements apply in the individual market.

The Agencies expressed concern over whether the marketing for these benefits misleads individuals into believing they have comprehensive coverage and whether these plans are being used as a substitute for comprehensive coverage without individuals fully understanding the limitations of these plans.

To address these concerns, the proposed rules modify the basis under which hospital indemnity or other fixed indemnity insurance will be considered excepted benefits. Essentially, these benefits will not be excepted unless they pay benefits in a fixed dollar amount per day (or per other time period) of hospitalization or illness (for example, $100/day) regardless of the actual or estimated amount of expenses incurred, services or items received, severity of illness or injury experienced by a covered participant or beneficiary, or other characteristics particular to a course of treatment received by a covered participant or beneficiary, and not on any other basis (such as on a per item or per-service basis).

Further, the proposed regulations clarify in the examples how current regulations in the group market, which prohibit fixed indemnity insurance from coordinating between the provision of benefits and any exclusion of benefits under any other health coverage maintained by the same plan sponsor, may negate the ability of fixed indemnity coverage to maintain excepted benefit status. For example, coordination between fixed indemnity coverage and other coverage sometimes offered by employers, such as minimum essential coverage (MEC) plans ( i.e., a plan that only covers ACA-recommended preventive care) will cause fixed indemnity coverage to lose its excepted benefit status as it would be considered to coordinate with the exclusions under the MEC plan, regardless of whether there is a formal coordination of benefits arrangement between the fixed indemnity insurance and the other coverage.
New notices have also been proposed for current and future plans or policies issued, though the content and form of the notice is not yet finalized.

Once the final rules are issued, these excepted benefits requirements will be effective at different times depending on the effective date of the policies. If the policy was sold prior to 75 days after the publication of the final rule, the new requirements will not apply until coverage periods beginning on or after January 1, 2027. If the policy is sold on or after 75 days after the date of publication of the final rule, it will apply at the time the policy is effective. Regardless of when the policy is sold, the notice requirements will be effective for any plan years beginning on or after the effective date of the final rule.

Taxation of Hospital Indemnity and Fixed Indemnity Insurance
The proposed rule clarifies that benefits paid from employer-provided hospital indemnity or other fixed indemnity benefits are not excluded from an employee’s gross income if they are payable regardless of whether the covered individual incurs medical expenses or regardless of whether the plan has substantiated that the individual incurred qualified medical care expenses.

This will generally result in benefits under fixed indemnity policies being taxable to employees when premiums are paid pre-tax or the plan does not substantiate that the benefits are paid only for qualified medical expenses actually incurred.

These requirements will be effective on the later of: (a) the date the final rules are published, or (b) January 1, 2024.

Level-Funded Plans
In the preamble to the proposed rules, the Agencies recognize that many employers are utilizing level-funded plan arrangements. While “level-funded” is currently not a defined term under ERISA or other applicable federal law, the preamble describes these benefits as arrangements where the plan sponsor makes set monthly payments to a service provider to cover estimated claims costs, administrative costs, and premiums for stop-loss insurance for claims that surpass a maximum dollar amount beyond which the plan sponsor is no longer responsible for paying claims. The Agencies believe that a number of employers with level-funded plans utilize stop-loss insurance to limit the plan sponsor’s financial responsibility.

The proposed regulations do not make any changes regarding level-funded plans but pose a number of questions about level-funded plans for which they are seeking comments or information, some of which question how sponsors of level-funded plans are complying with applicable laws and regulations, including ACA filing requirements, consumer protection requirements under the ACA through stop-loss insurance, how refunds from stop loss providers are determined and distributed (to participants and/or the plan sponsor), and why these arrangements are becoming increasingly popular.

The goal appears primarily focused on information gathering so that the government may determine how and when to begin regulating these plans in the future.

STLDI
STLDI is a type of health insurance coverage primarily designed to fill a gap in coverage that occurs when someone transitions from one plan or coverage to another. It is typically not employer sponsored. STLDI has been the subject of prior regulations, including HIPAA portability regulations finalized in 2016 (which limited the duration of STLDI to a maximum coverage period of three months, which could be extended by participants, and required employers and issuers to provide certain notices to members, participants, and beneficiaries). In 2018 regulations, the maximum STLDI duration was extended to less than twelve months after the original date of the contract and allowed individual participants to elect to extend coverage for up to 36 months.

The new proposed regulations reduce the maximum duration of STLDI coverage from 12 months back to a contract term of no more than 3 months, and taking into account any renewals or extensions, a maximum duration of no more than 4 months. Moreover, only one policy can be issued by a carrier within the same 12-month period, which is intended to prevent “stacking” of multiple policies to avoid the duration limit.

Once finalized, the rule will not impact STLDI policies, certificates, or contracts of insurance sold or issued before the effective date of the final rule and will apply to all new STLDI policies sold on or after the effective date of the final rule, which will be 75 days after the date the final rule is publicized.

Both new and existing policies will have new notice requirements to inform participants that STLDI is not comprehensive coverage and is intended to be for a limited duration. The content of the revised notices will be released with the final rules, though a template proposed notice and potential, alternative notice were included in the proposed regulations.

Conclusion
At this time, employers are not required to take any action. Comments to the proposed rules are due on or before September 10, 2023; however, the final rules will not be released until sometime after that date. Once regulations are finalized, employers with employer sponsored fixed indemnity plans should review their programs to confirm their status as an “excepted benefit.”

The tax changes for hospital indemnity and other fixed indemnity benefits may be effective sooner, as they apply on the effective date of the final rules (or January 1, 2024 if the final rules are released before then).

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About the Author. This alert was prepared for [Agency Name] by Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act. Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

_{The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers, or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency and Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions.
© 2023 Barrow Weatherhead Lent LLP. All Rights Reserved.}

In Rev. Proc. 2023-23, the IRS released the inflation-adjusted amounts for 2024 relevant to Health Savings Accounts (HSAs) and high deductible health plans (HDHPs). The table below summarizes those adjustments and other applicable limits.

	2024	2023	Change
Annual HSA Contribution Limit (employer and employee)	Self-only: $4,150 Family: $8,300	Self-only: $3,850 Family: $7,750	Self-only: +$300 Family: +$550
HSA catch-up contributions (age 55 or older)	$1,000	$1,000	No change
Minimum Annual HDHP Deductible	Self-only: $1,600 Family: $3,200	Self-only: $1,500 Family: $3,000	Self-only: +$100 Family: +$200
Maximum Out-of-Pocket for HDHP (deductibles, co-payment & other amounts except premiums)	Self-only: $8,050 Family: $16,100	Self-only: $7,500 Family: $15,000	Self-only: +$550 Family: +$1,100

Out-of-Pocket Limits Applicable to Non-Grandfathered Plans

The ACA’s out-of-pocket limits for in-network essential health benefits have also been announced and have increased for 2024. 

	2024	2023	Change
ACA Maximum Out-of-Pocket	Self-only: $9,450 Family: $18,900	Self-only: $9,100 Family: $18,200	Self-only: +$350 Family: +$700

Note that all non-grandfathered group health plans must contain an embedded individual out-of-pocket limit within family coverage if the family out-of-pocket limit is above $9,450 (2024 plan years) or $9,100 (2023 plan years). Exceptions to the ACA’s out-of-pocket limit rule have been available for certain non-grandfathered small group plans eligible for transition relief (referred to as “Grandmothered” plans) since policy years renewed on or after January 1, 2014.  Each year, CMS has extended this transition relief for any Grandmothered plans that have been continually renewed since on or after January 1, 2014.  However, in its March 23, 2022 Insurance Standards Bulletin, CMS announced that the limited nonenforcement policy will remain in effect until CMS announces that such coverage must come into compliance with relevant requirements.   Thus, we will no longer see annual transition relief announced.

Next Steps for Employers

As employers prepare for the 2024 plan year, they should keep in mind the following rules and ensure that any plan materials and participant communications reflect the new limits: 

All non-grandfathered plans (whether HDHP or non-HDHP) must cap out-of-pocket spending at $9,450 for any covered person. A family plan with an out-of-pocket maximum in excess of $9,450 can satisfy this rule by embedding an individual out-of-pocket maximum in the plan that is no higher than $9,450. This means that for the 2024 plan year, an HDHP subject to the ACA out-of-pocket limit rules may have a $8,050 (self-only) / $18,900 (family) out-of-pocket limit (and be HSA-compliant) so long as there is an embedded individual out-of-pocket limit in the family tier no greater than $9,450 (so that it is also ACA-compliant).

On April 10, 2023, the President signed H.J.Res. 7, which ended the COVID-19 national emergency on April 10, 2023, approximately one month earlier than anticipated.  However, prior to the passage of H.J. Res. 7, the DOL and other federal agencies issued guidance in the form of FAQs that indicate an end date of May 11, 2023 for the national emergency and public health emergency.  Based on informal statements by officials at the DOL and other agencies, the agencies intend to stand by the May 11 end date for the national emergency and the corresponding July 10, 2023 end date for the outbreak period.  It is not clear whether the agencies will issue any additional formal written guidance.  This means that despite the President ending the national emergency on April 10, the DOL and other agencies will rely on the previously communicated May 11 end date as described in their FAQs to determine the end of the national emergency and public health emergency.

As a reminder, the national emergency relief disregards the following deadlines until the earlier of one year from the date the individual was first eligible for the relief, or until 60 days after the end of the national emergency:

• The 30-day period (or 60-day period, if applicable) to request a special enrollment;
• The 60-day election period for COBRA continuation coverage;
• The deadline for making COBRA premium payments;
• The deadline for individuals to notify the plan of a qualifying event or determination of disability;
• The deadline within which employees can file a benefit claim, or a claimant can appeal an adverse benefit determination, under a group health plan’s or disability plan’s claims procedures;
• The deadline for claimants to file a request for an external review after receipt of an adverse benefit determination or final internal adverse benefit determination; and
• The deadline for a claimant to file information to perfect a request for external review upon finding that the request was not complete.

Conclusion

Plans sponsors taking a cautious approach will administer their plans in accordance with the May 11 end date specified in the FAQs and continue to disregard the normal deadlines until after July 10, 2023.  Participant communications should be reviewed to ensure that the correct deadlines are communicated.

On March 3, 2023, federal agencies released revised Prescription Drug Data Collection (RxDC) Reporting Instructions applicable to the 2022 reference year.  RxDC reporting for the 2022 reference year is due on or before June 1, 2023.   

Background

The Consolidated Appropriations Act, 2021 (“CAA, 2021”) includes a provision that requires group health plans and health insurance issuers (collectively “plans and issuers”) to report certain specified data related to prescription drug and other health care spending, including, but not limited to: (1) general information regarding the plan or coverage; (2) the 50 most frequently dispensed brand prescription drugs; (3) the 50 most costly prescription drugs by total annual spending; (4) the 50 prescription drugs with the greatest increase in plan expenditures over the preceding plan year; (5) total spending by the plan or coverage broken down by the type of costs; (6) the average monthly premiums paid by participants, beneficiaries, and enrollees and paid by employers; and (7) the impact of premiums on rebates, fees, and other remuneration paid by drug manufacturers to the plan or coverage or its administrators or service providers, including the amount paid with respect to each therapeutic class of drugs and for each of the 25 drugs that yielded the highest amount of rebates and other remuneration under the plan or coverage from drug manufacturers during the plan year. 

While the deadline for reporting 2020 and 2021 reference years was extended to January 31, 2023, the deadline for reference year 2022 reporting is June 1, 2023.

2022 Reference Year Reporting Changes

In anticipation of the June 1, 2023 deadline for reference year 2022 reporting, the agencies took into consideration some of the complexities from the 2020-2021 reference year reporting and made some changes to the filing requirements.  These changes are summarized below:

• Multiple vendors may now submit the same data file on behalf of the same plan, issuer, or carrier.  For example, a plan’s medical benefit issuer could submit the same file as the plan’s behavioral health benefit issuer, though each entity would need indicate to which data the file relates (ex. medical or behavioral health benefits).
• While discouraged, reporting entities that must create multiple HIOS submissions in the same reference year will be able to do so if the content is mutually exclusive, meaning each plan in the plan lists and data files will only be included in one submission.  Multiple submissions with overlapping content are not permitted, and the reporting entity would be required to edit and delete the submissions.
• A new column has been added to the plan list P2 to collect information about, and briefly describe, benefit carve-outs (i.e., benefits administered, offered, or insured by an entity that is different than the entity that administers, offers, or insures the majority of the plan’s other benefits) when multiple reporting entities are reporting on information about the same plan (this column replaces the previous column for the Plan ID).  This column is optional for reference year 2022.
• Plan list instructions have been rearranged to separately address P1, P2, and P3.
• For clarity purposes only, certain columns are renamed, specifically:
  • Columns A and B in the data files (D1 – D8) are renamed from “Issuer or TPA Name” and “Issuer or TPA EIN” to “Company Name” and “Company EIN” so that it is clear that data at the plan sponsor, carrier, reporting entity, or other company level can be aggregated at this level, rather than only the issuer or TPA level.
  • Column C in the data files (D1 – D8) is renamed “Aggregation State” (rather than “State”) to more clearly differentiate from the column labeled “States in which the plan is offered” in plan lists P2 and P3.
  • Column J in D1 is renamed as “Admin Fees Paid” (rather than “ASO/TPA Fees Paid”) to reflect that self-funded plans pay administrative fees to other types of companies, such as PBMs.
• As with reporting for prior reference years, due to the difficulties of having multiple reporting entities for a plan in certain instances, reporting entities may aggregate, within a state and market segment, at a less granular level than the reporting entity that submitted D2. For example, within a state and market segment, a PBM submitting D3 – D8 may aggregate to the issuer or TPA level even if an entity submitting D2 aggregates at the plan sponsor level.
• For purposes of determining premium equivalents in D1, the instructions clarify the following, among others, should be subtracted from the premium equivalent:
  • Prescription drug rebates, regardless of whether the rebate received in the reference year is retrospective or prospective.
  • Stop-loss reimbursements (Note, however, that the stop loss premium paid by the plan to the stop loss carrier should be included).
• For purposes of determining and reporting total spending in D2, the instructions clarify that stop loss reimbursements, among others, should NOT be subtracted from total spending; however, prescription drug rebates expected but not yet received should be subtracted (for prescription drugs covered either under a medical or pharmacy benefit).

Additionally, the new guidance clarifies that RxDC reporting does not apply to retiree-only plans; however, it does apply for plans located in U.S. Territories (in addition to all 50 states and D.C.).  Note for self-funded plans: When calculating premium equivalents, a self-funded plan may use the same types of costs that are used to develop COBRA premiums; however, it should report the total dollar amount actually paid for the reference year, rather than the amounts used to set the COBRA rate.

Conclusion In our experience, carriers, TPAs, PBMs, and other vendors have varying requirements and expectations of what they need from plan sponsors to successfully complete the reporting, and some may even be delegating some of the reporting responsibility to the plan sponsor.  For example, if your insurance company, TPA, or PBM sent you a survey or questionnaire to collect information about plan numbers, premium, or funding types, it is likely that they are reporting the P2 and D1 files on your behalf.  Therefore, it is important to respond to any requests for information you may receive from the carrier, TPA, PBM, or other vendor and to coordinate with them to understand their expectations to ensure all reporting is completed in full on behalf of the plan.  If your vendor sent you a letter telling you to create a HIOS account or stating that they will not submit P2 and D1 on your behalf, that means you must submit P2 and D1 directly to CMS (or engage a third party to submit them for you).

On February 21, 2023, the IRS released Final Rules amending the existing requirements related to mandatory e-filing of information returns, including Forms 1094-C and 1095-C, among others.  The final rules are effective for all applicable returns due on or after January 1, 2024.  While the final rule requires electronic filing for a number of different information returns, such as Forms W-2 and 1099, which were previously allowed to be paper filed by employers of a certain size, this alert addresses the changes applicable to Forms 1094 and 1095, which must be filed by applicable large employers (ALEs) as well as non-ALEs who sponsor self-funded health plans.

Under the final rules, employers filing 10 or more returns must file Forms 1094 and 1095 (and their other applicable returns) electronically.  The 10-form threshold is determined based on the total number of forms the employer must file with the IRS, including Forms 1094 and 1095, as well as other information returns, such as Forms W–2 and Forms 1099, income tax returns, excise tax returns, and employment tax returns, including those that are not required to be e-filed, such as forms 940 and 941.  Previously, employers who filed less than 250 of the same ACA reporting forms were allowed to choose whether to file their applicable Forms 1094 and 1095 (either the B or C forms, as applicable) by paper or electronically.

The final rules allow employers to seek a waiver in cases of undue hardship.  Per the final rules, a key factor in determining whether hardship exists is whether the cost for filing the returns electronically exceeds the cost of filing the return on paper.  Entities seeking a waiver must specify the type of filing to which the waiver applies, the period to which it applies, and the entity must follow any applicable procedures, publications, forms, instructions, or other guidance, including postings to the IRS.gov website, when requesting the waiver. Further, the final rules allow the IRS to grant exemptions from the requirements in certain instances.

Conclusion

All ALEs and many non-ALEs (who report due to sponsoring a self-funded health plan) will be impacted by these changes and will be required to file their tax year 2023 Forms 1094 and 1095 electronically unless they seek and are granted a hardship exception by the IRS.  Impacted entities should take the time between now and next year to engage a filing vendor that can assist them with their electronic filing obligations.

CAA, 2023 Eliminates MHPAEA Exemption for Self-Funded Non-Federal Governmental Health Plans

On December 29, 2022, the President signed the Consolidated Appropriations Act, 2023  (“CAA, 2023”), into law.  The CAA 2023, which is largely a bipartisan spending bill, sunsets provisions of the Public Health Service Act which permitted large, self-funded, non-federal governmental plans (i.e., self-funded state and local governmental plans) to opt out of the Mental Health Parity and Addiction Equity Act (“MHPAEA”). Essentially, this means any self-funded state and local governmental plans that have not previously elected to opt out of the MHPAEA will no longer be able to submit an election to opt out.  Further, any self-funded state and local governmental plans that previously elected to opt out of the MHPAEA will be unable to renew their election once it expires.

There is an exception for certain collectively bargained, non-federal governmental plans with existing opt outs that are subject to multiple collective bargaining agreements (“CBA”) with varying lengths. These plans may extend their opt out elections until the date on which the term of the last CBA expires.

Background

The MHPAEA prohibits a group health plan from applying financial requirements (e.g., deductibles, co-payments, coinsurance, and out-of-pocket maximums), quantitative treatment limitations (e.g., number of treatments, visits, or days of coverage), or non-quantitative treatment limitations (such as restrictions based on facility type) to its mental health and substance use disorder benefits that are more restrictive than those applied to the plan’s medical and surgical benefits. 

With limited exceptions, the MHPAEA applies to both self-funded, fully insured, grandfathered and non-grandfathered group health plans offering medical/surgical benefits and mental health and substance use disorder benefits. Certain plans may be exempt from the MHPAEA requirements, including: (1) self-insured plans sponsored by employers with 50 or fewer employees, (2) group health plans and group or individual health insurance coverage consisting only of excepted benefits, (3) retiree-only group health plans, and (4) group health plans and health insurance issuers who are exempt due to an increased cost.  Note, small employer plans that are fully insured are indirectly required to comply with the MHPAEA by meeting the essential health benefit requirements of the Affordable Care Act.

Large, self-funded non-federal governmental employers were previously also able to opt out of MHPAEA compliance by filing a HIPAA Exemption Election with CMS prior to the beginning of each plan year, issuing a notice of opt-out to their enrollees at the time they first enrolled and annually thereafter, and filing an opt-out notice or certification of that the opt out notice has been provided to participants with CMS.

CAA, 2023 Sunset

The CAA, 2023, sunsets the HIPAA Exemption Election opt out from MHPAEA requirements for large, self-funded non-governmental employers by eliminating the ability for plans that have not previously sought an exemption from applying for a new exemption after December 29, 2022, and by eliminating the ability of large, self-funded non-federal governmental employers who have a current exemption from renewing that exemption once such exemption election expires (i.e., for exemption elections that expire 180 days from the date the CAA, 2023 is enacted). 

A limited exception applies for non-federal governmental plans subject to multiple CBAs with varying lengths. These plans may seek to have their exemption elections renewed until the date on which the term of the last CBA expires. Essentially, this means non-federal governmental employers will be able to honor their CBA commitments for the remainder their current CBA terms.

Conclusion

Any large, self-funded state or local governmental plan sponsors who have a current exemption election from the MHPAEA requirements should coordinate with their broker and third-party administrators to understand how these changes may be implemented and any potential resulting impact to their plan terms and costs.

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About the Authors.  This alert was prepared by Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

This email is a service to our clients and friends.  It is designed only to give general information on the developments actually covered.  It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Benefit Advisors Network and its members are not attorneys and are not responsible for any legal advice.  To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

© Copyright 2023 Benefit Advisors Network. All rights reserved.

On October 18, 2022, the Internal Revenue Service (IRS) released Revenue Procedure 2022-38, which increases the health flexible spending account (FSA) salary reduction contribution limit to $3,050 for plan years beginning in 2023, an increase of $200 from 2022.  Thus, for health FSAs with a carryover feature, the maximum carryover amount is $610 (20% of the $3,050 salary reduction limit) for plan years beginning in 2023.

The Revenue Procedure also contains the cost-of-living adjustments that apply to dollar limitations in certain other sections of the Internal Revenue Code. 

Qualified Commuter Parking and Mass Transit Pass Monthly Limit

For 2023, the monthly limits for qualified parking and mass transit are increased to $300 each, an increase of $20 from 2022.

Adoption Assistance Tax Credit Increase

For 2023, the credit allowed for adoption of a child is $15,950 (up $1,060 from 2022). The credit begins to phase out for taxpayers with modified adjusted gross income in excess of $239,230 (up $15,820 from 2022) and is completely phased out for taxpayers with modified adjusted gross income of $279,230 or more (up $15,820 from 2022).

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) Increase

For 2022, reimbursements under a QSEHRA cannot exceed $5,850 (single) / $11,800 (family), an increase of $400 (single) / $750 (family) from 2022.

Reminder: 2023 HSA Contribution Limits and HDHP Deductible and Out-of-Pocket Limits

Earlier this year, in Rev. Proc. 2022-24, the IRS announced the inflation-adjusted amounts for HSAs and high deductible health plans (HDHPs).

The ACA’s out-of-pocket limits for in-network essential health benefits have also been announced and have increased for 2023.  Note that all non-grandfathered group health plans must contain an embedded individual out-of-pocket limit if the family out-of-pocket limit is above $9,100 (2023 plan years). Exceptions to the ACA’s out-of-pocket limit rule are available for certain small group plans eligible for transition relief (referred to as “Grandmothered” plans). While historically CMS has renewed the transition relief for Grandmothered plans each year, it announced in March that the transition relief will remain in effect until it announces that all such coverage must come into compliance with the specified requirements.

A Reporting Penalties (Forms 1094-B, 1095-B, 1094-C, 1095-C)

The table below describes late filing penalties for ACA reporting.  The 2024 penalty is for returns filed in 2024 for the calendar year 2023, and the 2023 penalty is for returns filed in 2023 for the calendar year 2022.  Note that failure to issue a Form 1095-C when required may result in two penalties, as the IRS and the employee are each entitled to receive a copy.

_______________________________

About the Authors.  This alert was prepared for [insert agency name] by Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

This email is a service to our clients and friends.  It is designed only to give general information on the developments actually covered.  It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Benefit Advisors Network and its members are not attorneys and are not responsible for any legal advice.  To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

^{© Copyright 2022 Benefit Advisors Network. All rights reserved.}

On October 13, 2022, the IRS finalized regulations (the “Final Rule”) intended to revise the method of determining affordability under the Affordable Care Act (ACA) for an employee’s family members by considering whether the coverage offered by the employer to the employee and their family members is affordable. The final regulations are effective on December 12, 2022. 

In addition, the IRS released Notice 2022-41 (the “Notice”), which is effective for cafeteria plan elections effective on or after January 1, 2023, and facilitates the changes under the Final Rule by permitting plans to update their change in status rules to allow employees to prospectively revoke their election under a group health plan (excluding health FSAs) for their family members who have enrolled or intend to enroll in Marketplace coverage. Most notably, for applicable large employers, the requirement to offer “affordable” coverage to full-time employees remains tied to the cost of employee-only coverage.  The rule does not require employers to make family coverage “affordable.”

The details of the Final Rule and Notice are discussed in more detail below.

Background

The ACA provides for a premium tax credit (PTC) for coverage purchased in the Marketplace if individuals do not have affordable, minimum value coverage available to them under an employer-sponsored group health plan.  After the ACA was enacted, the IRS interpreted the law to require affordability to be determined based on the lowest cost, self-only coverage offered to the employee by the employer.  In other words, an employer’s offer of family coverage was “affordable” if the employee’s cost for self-only coverage did not exceed 9.5% (as indexed) of the employee’s income.  Therefore, if self-only coverage offered to the employee was affordable, the employee’s family members would not be eligible for a PTC if they purchased coverage in the Marketplace even if the cost of family coverage was not affordable.

Over the years, this caused significant hardship to many families as the cost of family coverage offered by employers is often significantly higher than that of self-only coverage, and many family members were denied access to PTCs if the employee declined the employer’s offer of coverage for his or her family members because the coverage was cost prohibitive.  Advocacy groups routinely reached out to the Executive Branch regarding their concerns about the interpretation of the law. 

On January 28, 2021, President Biden issued Executive Order 14009 which directed the IRS to, among other things, review existing regulations and agency actions to determine whether the regulations or actions were inconsistent with “the policy to protect and strengthen the ACA” and to examine policies or practices that may reduce the affordability of coverage or financial assistance for coverage, including for dependents. Accordingly, the IRS began to reevaluate the prior interpretation of the law, and, in April 2022, the IRS released proposed regulations intending to address affordability of coverage for family members.  Based on a renewed interpretation of the law, the proposed regulations provided that, for purposes of determining eligibility for PTCs, affordability of employer coverage for family members (referred to as “individuals eligible to enroll in the coverage because of their relationship to an employee of the employer” or “related individuals”) would be determined based on the cost of covering the employee and those family members.  Therefore, the portion of the annual premium the employee must pay for coverage of the employee and eligible family members would be used to determine whether the employee’s family members would be eligible for a PTC.

After the ACA was enacted, the IRS released Notice 2014-55 which was intended to address, among other things, the ability of employees to prospectively revoke their election in an employer’s group health plan to enroll in Marketplace plans during the Marketplace’s open enrollment or the employee is eligible for a special enrollment in the Marketplace. In this situation, if the employee was not eligible for Marketplace coverage, they could not revoke coverage for their family members to enroll in the Marketplace and would have to wait until the employer’s next open enrollment period.

IRS Releases Final Rule to Fix ACA’s Family “Glitch”

On October 13, 2022, the IRS finalized regulations (the “Final Rule”) intended to revise the method of determining affordability under the Affordable Care Act (ACA) for an employee’s family members by considering whether the coverage offered by the employer to the employee and their family members is affordable. The final regulations are effective on December 12, 2022. 

In addition, the IRS released Notice 2022-41 (the “Notice”), which is effective for cafeteria plan elections effective on or after January 1, 2023, and facilitates the changes under the Final Rule by permitting plans to update their change in status rules to allow employees to prospectively revoke their election under a group health plan (excluding health FSAs) for their family members who have enrolled or intend to enroll in Marketplace coverage. Most notably, for applicable large employers, the requirement to offer “affordable” coverage to full-time employees remains tied to the cost of employee-only coverage.  The rule does not require employers to make family coverage “affordable.”

The details of the Final Rule and Notice are discussed in more detail below.

Background

The ACA provides for a premium tax credit (PTC) for coverage purchased in the Marketplace if individuals do not have affordable, minimum value coverage available to them under an employer-sponsored group health plan.  After the ACA was enacted, the IRS interpreted the law to require affordability to be determined based on the lowest cost, self-only coverage offered to the employee by the employer.  In other words, an employer’s offer of family coverage was “affordable” if the employee’s cost for self-only coverage did not exceed 9.5% (as indexed) of the employee’s income.  Therefore, if self-only coverage offered to the employee was affordable, the employee’s family members would not be eligible for a PTC if they purchased coverage in the Marketplace even if the cost of family coverage was not affordable.

Over the years, this caused significant hardship to many families as the cost of family coverage offered by employers is often significantly higher than that of self-only coverage, and many family members were denied access to PTCs if the employee declined the employer’s offer of coverage for his or her family members because the coverage was cost prohibitive.  Advocacy groups routinely reached out to the Executive Branch regarding their concerns about the interpretation of the law. 

On January 28, 2021, President Biden issued Executive Order 14009 which directed the IRS to, among other things, review existing regulations and agency actions to determine whether the regulations or actions were inconsistent with “the policy to protect and strengthen the ACA” and to examine policies or practices that may reduce the affordability of coverage or financial assistance for coverage, including for dependents. Accordingly, the IRS began to reevaluate the prior interpretation of the law, and, in April 2022, the IRS released proposed regulations intending to address affordability of coverage for family members.  Based on a renewed interpretation of the law, the proposed regulations provided that, for purposes of determining eligibility for PTCs, affordability of employer coverage for family members (referred to as “individuals eligible to enroll in the coverage because of their relationship to an employee of the employer” or “related individuals”) would be determined based on the cost of covering the employee and those family members.  Therefore, the portion of the annual premium the employee must pay for coverage of the employee and eligible family members would be used to determine whether the employee’s family members would be eligible for a PTC.

After the ACA was enacted, the IRS released Notice 2014-55 which was intended to address, among other things, the ability of employees to prospectively revoke their election in an employer’s group health plan to enroll in Marketplace plans during the Marketplace’s open enrollment or the employee is eligible for a special enrollment in the Marketplace. In this situation, if the employee was not eligible for Marketplace coverage, they could not revoke coverage for their family members to enroll in the Marketplace and would have to wait until the employer’s next open enrollment period.

Final Rule and Notice 2022-41

Final Rule Related to Affordability and Eligibility for Premium Tax Credits

Under the final rule, for purposes of determining eligibility for a PTC, affordability of employer coverage for eligible family members is determined based on the employee’s share of the cost of covering the employee and those family members. In the preamble to the rule, the IRS explains that they believe the new reading represents a better reading of the relevant statutes and is consistent with Congress’s overall goal of expanding access to affordable health care coverage when enacting the ACA.

Additionally, the final regulations include, among other things, amendments to the rules relating to the determination of whether employer coverage provides minimum value.

Notice 2022-41

Consistent with the changes in determining affordability for family members’ coverage, effective for plan years beginning in 2023, Notice 2022-41 expands current election change rules by allowing for elections for family members’ coverage under an employer’s non-calendar year cafeteria plan, to be prospectively revoked if the following conditions are met:

• One or more related individuals are eligible for a special enrollment period to enroll in Marketplace coverage pursuant to guidance issued by HHS and any other applicable guidance during the Marketplace’s annual open enrollment period; and
• The revocation of the election of coverage under the group health plan corresponds to the intended enrollment of the related individual or related individuals in new Marketplace coverage that is effective immediately following termination of coverage under the group plan.

If adopted by the employer’s cafeteria plan, this new permitted election change does not apply to employee-only coverage.  Employees would still have to meet the eligibility specified in IRS Notice 2014-55 to revoke their own election under the employer’s plan, which requires the employee to be eligible for Marketplace open enrollment or special enrollment.   If the employee’s family members qualify for a special enrollment period under the Marketplace (or enroll in Marketplace coverage during the Marketplace open enrollment), the employee would be permitted to revoke their coverage and either enroll in self-only coverage offered by the employer or Marketplace coverage, if enrolling during a Marketplace open enrollment or special enrollment period. 

The employer can rely on the reasonable representation of the employee that the employee’s family members have enrolled or intend to enroll in Marketplace coverage for new coverage that is effective immediately following termination of group health plan coverage.

If an employer intends to adopt this new permitted election change, then the employer must amend their cafeteria plan to permit these changes and adopt this amendment no later than the last day of the plan year that begins in 2024.  The amendment can be retroactive/effective as of the first day of the 2023 plan year as long as the cafeteria plan operated in accordance with the changes within the 2023 plan year and notified employees of the changes for the 2023 plan year; however, the plan cannot be operated in a manner to allow revocation of coverage retroactively.

Next Steps for Employers

Employers do not need to make any changes to the way they determine affordability of coverage offered to employees, as affordability for purposes of the ACA’s employer shared responsibility provision (ESRP) has not changed.  Whether coverage offered by the employer is “affordable” for ESRP purposes will still be determined using the lowest cost, self-only coverage offered by the employer.  Employers are not penalized for failing to offer coverage that is affordable for an employee’s spouses or dependents.  

Additionally, if for the 2023 plan year, the employer intends to allow mid-year election changes pursuant to IRS Notice 2022-41, employers must communicate the change to employees effective not later than the beginning of the 2023 plan year and operate the plan in accordance with this change.  Further, the employer must adopt an amendment to the plan no later than the last day of the plan year that begins in 2024.

__________________________________

About the Authors.  This alert was prepared by Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

This email is a service to our clients and friends.  It is designed only to give general information on the developments actually covered.  It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Benefit Advisors Network and its members are not attorneys and are not responsible for any legal advice.  To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

© Copyright 2022 Benefit Advisors Network. All rights reserved.

On July 28, 2022, the DOL, HHS, and the IRS (collectively, the “Agencies”) released FAQs About Affordable Care Act Implementation Part 54, which, according to the Agencies, is intended to make it clear that, despite the Supreme Court’s ruling in Dobbs, the ACA’s preventive care mandate requires non-grandfathered group health plans and health insurance issuers to cover birth control/contraception, including emergency contraception, and family planning counseling without any cost sharing.

Background

The ACA requires non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual health insurance coverage to cover (without the imposition of any cost-sharing requirements) certain items or services, including evidence-based items and services having a rating of “A” or “B” by the United States Preventive Services Task Force (USPSTF). For women, infants, children, and adolescents, non-grandfathered plans must also cover evidence-informed preventive care and screenings provided for in comprehensive guidelines supported by the Health Resources and Services Administration (HRSA).  Items and services required to be provided without cost-sharing include any items or services “integral to the furnishing of the recommended preventive services” as well.

The HRSA-supported Women’s Preventive Services Guidelines (2019 HRSA-Supported Guidelines), recommend that adolescent and adult women have access to the full range of female-controlled FDA-approved contraceptive methods, effective family planning practices, and sterilization procedures to prevent unintended pregnancy and improve birth outcomes.  As set forth in the guidelines, contraceptive care should include contraceptive counseling, initiation of contraceptive use, and follow-up care, and that instruction in fertility awareness-based methods, including the lactation amenorrhea method, should be provided for women desiring an alternative method.

On December 30, 2021, the HRSA-Supported Guidelines were updated with regard to a number of items, including breastfeeding services and supplies, well-woman preventive care visits, access to contraceptives and contraceptive counseling, screening for human immunodeficiency virus, and counseling for sexually transmitted infections, and expand the 2019 recommendation to encompass contraceptives that are not female-controlled, such as male condoms.

Per the ACA, non-grandfathered health plans must implement any new HRSA recommendations for plans years that begin on or after 1 year from the date the recommendation or guideline is issued.  For calendar year plans, this means January 1, 2023.

Guidelines Addressed in the FAQs

The recently issued FAQs provide the following:

(1) Anesthesia services integral to the furnishing of recommended preventive services must be covered without cost sharing.  For example, anesthesia provided in conjunction with a tubal ligation procedure.

(2)  Pursuant to the HRSA guidelines, contraceptive care for adolescent and adult women must include access to the full range of female-controlled FDA-approved contraceptive methods (as well as FDA-approved contraceptives that are not female-controlled for in plan years beginning in 2023), effective family planning practices, and sterilization procedures, which includes, among many other items, birth control methods such as IUDs, oral contraceptives, contraceptive patches, rings, and sponges, female condoms, and emergency contraception.  Note:  As explained in number 10 below, at least one form of contraception in the various categories must be covered by a plan or issuer.

(3) Any contraceptive services and FDA-approved, cleared, or granted contraceptive products that an individual and their attending provider have determined to be medically appropriate for the individual, even if not listed specifically in the HRSA guidelines, such as newly FDA cleared contraceptive products, must also be covered without cost-sharing; however, reasonable medical management techniques may be employed by the plan or issuer if multiple, substantially similar services or products that are not included in a category described in the Guidelines are available and are medically appropriate for the individual (though at least one such service or product must be provided without cost sharing).  The agencies clarify that the plan or issuer must defer to the determination of the attending provider, and make available an easily accessible, transparent, and sufficiently expedient exceptions process that is not unduly burdensome so the individual or their provider can obtain coverage for the medically necessary service or product without cost sharing.

(4)  Instruction in fertility-awareness-based methods, including lactation amenorrhea must also be covered without cost sharing, as they are forms of “counseling and education.”

(5)  Coverage for FDA-approved emergency contraceptives without cost-sharing includes coverage for over-the-counter (OTC) emergency contraceptives.  The plan or issuer must cover any OTC emergency contraceptives that are prescribed and are encouraged to cover any OTC emergency contraceptives purchased without a prescription.

(6)  HRAs, health FSAs, and HSAs can also reimburse FDA-approved OTC emergency contraceptives, but only to the extent they are not paid or reimbursed by another plan or coverage (such as the employer’s medical plan).  If the plan sponsor does not want to reimburse OTC emergency contraceptives that are not prescribed by a physician, then they must indicate such in the plan materials.

(7) Plans and issuers may reimburse up to a 12-month supply of contraceptives at one time, though they are not required to do so.

(8) These requirements under the ACA preempt any contrary state law.  Accordingly, if state law bans a particular contraceptive method, the ACA would preempt that contrary state law.

(9) Unless HRSA guidelines specify a frequency, method, treatment or setting within a specified category of contraception, plans may use reasonable medical management techniques within that specified category. The reasonableness of the medical management technique will be determined based on the relevant facts and circumstances.

(10) Plans and issuers must cover, without cost sharing, at least one form of contraception in each category that is described in the HRSA-Supported Guidelines or, for contraceptive categories not described in the HRSA-Supported Guidelines, at least one form of contraception in a group of substantially similar services or products.

(11) Plans must have an exceptions process; however, it must not be unduly burdensome for participants, beneficiaries, or enrollees.  Requiring participants, beneficiaries, or enrollees to appeal adverse benefit determinations using the plan or issuer’s internal claims and appeals process to seek an exception is not a reasonable medical management technique.  Moreover, the process the plan uses for exceptions, including the type of information required to be provided when seeking an exception, should be transparent to participants and beneficiaries.  The FAQs provide that plans can satisfy this requirement by, at a minimum, prominently displaying the exceptions process in plan documents and SPDs as well as in any other plan materials that describe how the plan covers contraceptive items and services, such as a prescription drug formulary.  

Next Steps for Employers

Employers, particularly those with self-funded plans, should be mindful of these guidelines when working with their TPAs and when making plan design choices.  For employers who sponsor HRAs and health FSAs, if the employer’s plan covers all Code Section 213(d) expenses, employers should not need to make any changes to the plan. If the employer wishes to exclude OTC emergency contraception that is not prescribed by a medical doctor, then the employer should specify this as an exclusion in the plan materials.

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About the Authors.  This alert was prepared by Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

This email is a service to our clients and friends.  It is designed only to give general information on the developments actually covered.  It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Benefit Advisors Network and its members are not attorneys and are not responsible for any legal advice.  To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

© Copyright 2022 Benefit Advisors Network. All rights reserved.

In Rev. Proc. 2022-24, the IRS released the inflation-adjusted amounts for 2023 relevant to Health Savings Accounts (HSAs) and high deductible health plans (HDHPs). The table below summarizes those adjustments and other applicable limits.

	2023	2022	Change
Annual HSA Contribution Limit (employer and employee)	Self-only: $3,850 Family: $7,750	Self-only: $3,650 Family: $7,300	Self-only: +$200 Family: +$450
HSA catch-up contributions (age 55 or older)	$1,000	$1,000	No change
Minimum Annual HDHP Deductible	Self-only: $1,500 Family: $3,000	Self-only: $1,400 Family: $2,800	Self-only: +$100 Family: $200
Maximum Out-of-Pocket for HDHP (deductibles, co-payment & other amounts except premiums)	Self-only: $7,500 Family: $15,000	Self-only: $7,050 Family: $14,100	Self-only: +$450 Family: +$900

Out-of-Pocket Limits Applicable to Non-Grandfathered Plans

The ACA’s out-of-pocket limits for in-network essential health benefits have also been announced and have increased for 2023. 

	2023	2022	Change
ACA Maximum Out-of-Pocket	Self-only: $9,100 Family: $18,200	Self-only: $8,700 Family: $17,400	Self-only: +$400 Family: +$800

Note that all non-grandfathered group health plans must contain an embedded individual out-of-pocket limit within family coverage if the family out-of-pocket limit is above $9,100 (2023 plan years) or $8,700 (2022 plan years). Exceptions to the ACA’s out-of-pocket limit rule are available for certain small group plans eligible for transition relief (referred to as “Grandmothered” plans). While historically CMS has renewed the transition relief for Grandmothered plans each year, it announced in March that the transition relief will remain in effect until it announces that all such coverage must come into compliance with the specified requirements.

Next Steps for Employers

As employers prepare for the 2023 plan year, they should keep in mind the following rules and ensure that any plan materials and participant communications reflect the new limits: 

• HSA-qualified family HDHPs cannot have an embedded individual deductible that is lower than the minimum family deductible of $3,000.
• The out-of-pocket maximum for family coverage for an HSA-qualified HDHP cannot be higher than $15,000.
• All non-grandfathered plans (whether HDHP or non-HDHP) must cap out-of-pocket spending at $9,100 for any covered person. A family plan with an out-of-pocket maximum in excess of $9,100 can satisfy this rule by embedding an individual out-of-pocket maximum in the plan that is no higher than $9,100. This means that for the 2023 plan year, an HDHP subject to the ACA out-of-pocket limit rules may have a $7,500 (self-only)/$15,000 (family) out-of-pocket limit (and be HSA-compliant) so long as there is an embedded individual out-of-pocket limit in the family tier no greater than $9,100 (so that it is also ACA-compliant).

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About the Authors.  This alert was prepared by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

This information is a service to our clients and friends.  It is designed only to give general information on the developments actually covered.  It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Benefit Advisors Network and its members are not attorneys and are not responsible for any legal advice.  To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

© Copyright 2022 Benefit Advisors Network. All rights reserved.

On March 15, 2022, the President signed the Consolidated Appropriations Act, 2022 (H.R. 2471) into law (“CAA 2022”).  The CAA 2022 is largely a spending bill but also includes, among other things, a much-anticipated new telemedicine safe harbor similar to that which was created under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).  The safe harbor allows high deductible health plans (HDHPs) to cover medical and behavioral health treatment before participants meet their deductibles (i.e., without cost-sharing).  The safe harbor applies from April 1, 2022, through December 31, 2022, regardless of the plan year.

Background on Telehealth Safe Harbor under the CARES Act

On March 27, 2020, the CARES Act became law. While the CARES Act was largely an economic package intended to stabilize individuals and employers during COVID-19-related shutdowns, it also included several measures directly related to employee benefits. One specific provision was the safe harbor under which HDHPs could cover telehealth and other remote care without cost-sharing. As a result, no-cost telehealth could be provided to plan participants for any reason–not just COVID-19 related issues–without disrupting HSA eligibility.

The CARES Act safe harbor was a temporary measure, applying only to plan years beginning on or before December 31, 2021, which means, for calendar year plans, the safe harbor expired on December 31, 2021.  Without the safe harbor, telehealth programs that provide “significant benefits” in the nature of medical care or treatment generally disrupt HSA eligibility.  Whether benefits are “significant” is a facts and circumstances determination.  That said, in cases where a telehealth program provides robust benefits, such as medical advice and diagnosis for a broad range of non-emergency, common medical illnesses, general referrals to other provider types (including the emergency room), and certain prescription drugs for common medical illnesses, it may be difficult to support an argument that it does not provide “significant” benefits, in the absence of specific IRS guidance. 

New Telemedicine Safe Harbor

The safe harbor under the CARES Act was well-received, and as the December 31, 2021, deadline approached, there was a strong effort among stakeholders to encourage lawmakers to either extend the safe harbor or make it a permanent measure.

Accordingly, on March 10, 2022, Congress passed the CAA, 2022, which was subsequently signed into law on March 15, 2022.  The new safe harbor under the CAA, 2022 is identical to the CARES Act safe harbor, except that it applies for the period of April 1, 2022, through December 31, 2022, only (i.e., it is tied to the calendar year, not a plan year). 

Many carriers and other administrators assumed that, if passed, the measure would have a retroactive effect (back to January 1, 2022); however, for calendar year plans or plans with plan years ending prior to March 2022, there is a gap from January 1, 2022, through March 31, 2022, in which HDHPs may not be treated as an HDHP if covering certain medical or behavioral health telemedicine services without cost-sharing, which impacts HSA eligibility for individuals.

Conclusion

Depending on the applicable plan year, the following applies for employers:

• For 2022 plan years that began before April 1, 2022 (e.g., calendar year plans), there is a gap period for which HDHPs were not authorized to maintain their status as an HDHP if covering telehealth services without a participant first meeting the applicable deductible (assuming the telehealth services are “significant benefits” for HSA purposes).  Therefore, from January 1, 2022, through March 31, 2022, if a HDHP covered participant’s virtual medical or behavioral health care without cost sharing, the plan may not be treated as a qualified high deductible health plan. Beginning April 1, 2022; however, this changes, and telemedicine service can be covered without cost-sharing through the end of the calendar year, unless the safe harbor is further extended.  An extension would require another change in law by Congress.
• For non-calendar year plans which began on or after April 1, 2021, the safe harbor under the CARES Act will be extended by the CAA, 2022 beyond the end of the plan’s applicable plan year and apply through the end of the calendar year (December 31, 2022). 

Employers are encouraged to discuss this optional relief with their insurance broker, medical plan carrier, or third-party administrator to ensure proper administration.

_____________________________

About the Authors.  This alert was prepared by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

This is a service to our clients and friends.  It is designed only to give general information on the developments actually covered.  It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Benefit Advisors Network and its members are not attorneys and are not responsible for any legal advice.  To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

© Copyright 2022 Benefit Advisors Network. All rights reserved.

On January 13, 2022, the United States Supreme Court released its much anticipated opinions in the ongoing challenges to OSHA’s November 5, 2021 Emergency Temporary Standard (ETS) requiring private employers with 100 or more employees to either mandate employees be vaccinated or submit to weekly testing and mask mandates, and CMS’ November 5, 2021 Interim Final Rule requiring health care workers working at facilities that receive funding from Medicare or Medicaid to be vaccinated unless they are eligible for a medical or religious exemption.

OSHA ETS

In a 6 to 3 majority, with only Justices Kagan, Breyer, and Sotomayor dissenting, the Supreme Court held that the petitioners (various states and private businesses) were likely to succeed on the merits of their claims that OSHA’s ETS exceeds OSHA’s statutory authority and is otherwise unlawful. 

Among other things, the majority recognized that OSHAs statutory authority is limited to occupational hazards, and a global pandemic extends well beyond the workplace, such as creating risks in schools, at home, in churches, and in recreational facilities.  Therefore, OSHA has no statutory authority to regulate workplaces with a public health mandate using such a broad stroke; however, the Court recognized OSHA may have the authority to address COVID-19 risks in the workplace for specific, targeted industries, such as workplaces where research on COVID-19 is being conducted. 

Accordingly, the OSHA ETS is stayed for private employers with 100+ employees while the issue is fully reviewed and briefed in the 6^th Circuit and any resulting petitions for writ of certiorari to the U.S. Supreme Court, if any, are resolved.  Therefore, OSHA cannot enforce its ETS at this time, and may not be able to do so for months, if at all. 

CMS Interim Final Rule

On the other hand, the Court upheld the Centers for Medicare and Medicaid Services (CMS) Interim Final Rule, which added a new requirement to existing conditions of participation in Medicare and Medicaid, that requires facilities to ensure that their staff who work on site are vaccinated against COVID–19 unless a staff member is exempt for religious or medical reasons.  This requirement was successfully challenged by two groups of states in two separate federal courts; however, the United States Supreme Court held that CMS has the statutory authority to, among other things, impose conditions on entities that receive funding from Medicaid and Medicare that “the Secretary finds necessary in the interest of the health and safety of individuals who are furnished services.”  Further, vaccine mandates for health care workers are not a new concept and many health care workers are already required to receive a number of other vaccines, subject to the same medical and religious exemptions applicable to the COVID-19 vaccine mandate. 

Accordingly, the Court lifted the stay for the remainder of the appeals pending in the 5^th Circuit Court of Appeal and the 8^th Circuit Court of Appeal, as well as any resulting challenge upon writ of certiorari presented to the United States Supreme Court.  Therefore, health care facilities/employers subject to the CMS Interim Final Rule may require employees to be vaccinated unless a medical or religious exemption applies.

What Does This Mean for Employers?

Employers with 100+ employees who are not subject to the Health Care rule are not required to move forward with developing a plan to implement a vaccine mandate or weekly testing and mask mandate for their employees at this time.  This would only change if OSHA is successful on the underlying merits of the case pending before the 6^th Circuit, which may take months to conclude, and the U.S. Supreme Court upholds that decision.  In essence, OSHA has a very steep uphill battle ahead of it should it wish to continue pursuing the ETS.  For employers/facilities subject to the CMS Interim Final Rule, they must comply with the vaccine mandate for employees who are not eligible for an exemption for religious or medical reasons.

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About the Authors.  This alert was prepared by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

This notice is a service to our clients and friends.  It is designed only to give general information on the developments actually covered.  It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Benefit Advisors Network and its members are not attorneys and are not responsible for any legal advice.  To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

© Copyright 2022 Benefit Advisors Network. All rights reserved

On December 2, 2021, President Biden announced that federal agencies would soon issue guidance regarding the availability of coverage/reimbursement from group health plans and health insurance carriers for individuals who purchase over the counter, at-home COVID-19 diagnostic tests (“OTC COVID-19 tests”).  Accordingly, on January 10, 2022, the agencies released “FAQs About Affordable Care Act Implementation Part 51, Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Implementation” which, among other things, requires group health plans and health insurance carriers to reimburse participants, beneficiaries, or enrollees (“Individuals”) for no less than eight (8) OTC COVID-19 tests per calendar month beginning on January 15, 2022 (i.e., for tests purchased on or after January 15, 2022).

Background

During the COVID-19 public health emergency, the FFCRA requires group health plans (self-funded, fully-insured, grandfathered, and non-grandfathered plans, but not excepted benefits such as dental or vision) and health insurance issuers (“Plans and Carriers”) to cover testing or certain other items or services intended to diagnose COVID-19 without cost sharing (deductibles, copays, or coinsurance), prior authorization, or other medical management requirements.  It also permits the agencies to implement the FFCRA through sub-regulatory guidance, program instruction, or otherwise.  The CARES Act expanded the FFCRA to, among other things, include a broader range of reimbursable COVID-19 diagnostic items and services that must be covered without cost-sharing, prior authorization, or medical management during the public health emergency. 

In 2020, the agencies implemented several FAQs intended to serve as statements of policy to implement the above-referenced requirements under the FFCRA and CARES Act.  Since that time, the FDA has authorized at-home OTC COVID-19 diagnostic tests that individuals can self-administer and self-read to diagnose COVID-19.  Accordingly, per the agencies, the FAQs issued on January 10, 2022 are intended to address both the FDAs approval of at-home OTC COVID-19 tests and the President’s request for additional guidance on group health plan coverage for these tests to address the ongoing COVID-19 public health emergency.

FAQ Guidance

Pursuant to the FAQs, Plans and Carriers must cover OTC COVID-19 tests that meet the criteria specified under the FFCRA even if they are not ordered by a health care professional, and must cover such tests without imposing cost-sharing, prior authorization, or medical management requirements.  This is so even if there is no order from a health professional for an Individual.

Coverage by the plan may be accomplished by directly reimbursing Individuals for their purchase upon submission of a claim by the Individual, or by reimbursing the entity who sold the OTC COVID-19 test directly, though the agencies strongly encourage plans to adopt the latter approach.

Note, however, there is no requirement for Plans or Carriers to provide coverage of OTC COVID-19 tests that are intended for employment testing, such as weekly testing an unvaccinated Individual is required to undergo pursuant to the OSHA Emergency Temporary Standard (“ETS”) or an employer’s own mandated testing program.

Plans and Carriers are required to reimburse OTC COVID-19 tests purchased from any retailer or pharmacy if the test meets the FFCRA statutory criteria, but if the test is administered without a health care provider’s assessment or order for testing and purchased from out-of-network pharmacies or retailers, then the Plan or Carrier may limit reimbursement to the lower of the actual price or $12 per test if the Plan or Carrier arranges for direct coverage (meaning the Individual who purchases the OTC COVID-19 test is not required to seek reimbursement post-purchase or make any up-front out-of-pocket expenditures) of OTC COVID-19 tests that meet the FFCRA criteria through both its pharmacy network and a direct-to-consumer shipping program.  Per the agencies, the direct-to-consumer shipping program may be provided through one or more in-network provider(s) or another entity designated by the Plan or Carrier.

In order to limit reimbursements for tests purchased from non-preferred providers, Plans and Carriers must ensure there are an adequate number of retail locations (in-person and online) with access to OTC COVID-19 tests and communicate necessary information about the direct coverage program, including when it is available and which retail pharmacies are available.

Per the agencies, whether access is adequate is determined based on all relevant facts and circumstances, including where Individuals are located and current utilization of the Plans’ or Carrier’s pharmacy network by Individuals.  Further, if there are significant delays for individuals to receive the OTC COVID-19 tests, such as through the shipping program, the Plan or Carrier must allow Individuals to purchase (and be reimbursed for) their OTC COVID-19 tests from any retailer.

The agencies also recognize the important need for adequate testing to be available to health care providers who are diagnosing and treating COVID-19, and that everyone has reasonable access to OTC COVID-19 tests.  Thus, to prevent stockpiling and provide adequate safeguards, the agencies permit Plans and Carriers to limit OTC COVID-19 tests purchased by Individuals without a health care provider’s involvement or assessment, the agency provides a safe harbor from agency enforcement action for Plans or Carriers that limit the number of OTC COVID-19 tests eligible for reimbursement per Individual to no less than eight (8) tests per 30-day period or per calendar month.  Plans and Carriers are not permitted to limit Individuals to a smaller number of tests over a short period of time (such as limiting Individuals to four (4) tests per 15-day period).  Plans can choose to be more generous by reimbursing a larger number of OTC COVID-19 tests (i.e., more than 8) per calendar month if they prefer.

Testing for Employment Purposes

Plans and Carriers are permitted to address suspected fraud and abuse, such as taking reasonable steps to ensure OTC COVID-19 tests are purchased for an Individual’s (or their covered family member’s) own personal use as long as the steps do not create significant access barriers.  This may include requiring attestations that the OTC COVID-19 test was purchased by the Individual for personal, non-employment related use, will not be reimbursed by another source, and will not be made available for resale as long as the attestation process is reasonable and does not result in undue delay of reimbursement.  Plans and Carriers may also require reasonable documentation as proof of purchase, such as the UPC code from the OTC COVID-19 test, when claims are submitted.

Finally, Plans and Carriers may assist Individuals by providing education and information resources to support Individuals seeking OTC COVID-19 testing as long as the materials clearly indicate the Plan or Carrier is required to cover all OTC COVID-19 tests that meet FFCRA criteria (subject to the safe harbors referenced previously).  The FAQs provide some examples of potential education and information resources Plans and Carriers may use.

What Does This Mean for Employers?

Employers are encouraged to work with their carriers or third-party administrators and stop-loss carriers to ensure these new requirements are implemented and to determine whether the plan will implement any of the permitted safe harbors so that this can be effectively communicated to employees and their family members.

The agencies clarified that they will not take enforcement action against Plans or Carriers for modifying health insurance coverage mid-year to meet these requirements or for failing to meet the 60-day advance notice requirements (for changes made to information required to be included in SBCs) if notice of these changes is provided as soon as reasonably practicable.

Finally, employers should clearly articulate to employees that the employer’s testing policy adopted pursuant to the OSHA ETS, if any, is not subject to this requirement and, employees are expected to pay out of pocket for weekly COVID-19 tests without seeking reimbursement from the employer’s group health plan if the employer does not pay for the applicable testing.  Further, pursuant to the OSHA ETS, while the employer may allow an OTC COVID-19 test to be used for purposes of applicable employment testing, the test may not be both self-administered and self-read unless observed by the employer or an authorized telehealth proctor.

______________________________________________________

About the Authors.  This alert was prepared by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

This notice is a service to our clients and friends.  It is designed only to give general information on the developments actually covered.  It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Benefit Advisors Network and its members are not attorneys and are not responsible for any legal advice.  To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

© Copyright 2022 Benefit Advisors Network. All rights reserved

On November 22, 2021, the IRS filed a Notice of Proposed Rulemaking (“Proposed Rule”) that among other things, provides for an automatic 30-day extension of the deadline for applicable large employers (“ALEs”) to furnish annual Forms 1095-C to individuals for calendar years beginning after December 31, 2021.  Further, the Proposed Rule allows ALEs to voluntarily adopt this extension for calendar years beginning after December 31, 2020, which means this would apply to the calendar year 2021 Forms 1095-C, which are due in 2022.

Generally, the deadline is January 31 each year, and current regulations allow the IRS to grant an extension of time of up to 30 days to furnish Forms 1095-B and 1095-C to individuals for good cause shown; however, recognizing the current January 31 deadline is difficult to meet, the Proposed Rule eliminates the good cause shown standard and simply allows for an automatic 30-day extension to March 2, 2022.  In years where the deadline falls on a weekend or holiday, the forms are due the next business day.  

The deadline to file the Forms 1094-B or C and 1095-B or C with the IRS are not extended and will remain February 28 for paper filings and March 31 if filed electronically, though pursuant to current regulations, companies may receive an automatic 30-day extension of time to file the forms with the IRS by submitting Form 8809, Application for Extension of Time to File Information Returns, on or before the due date for filing the forms.

Additionally, because the penalty for the individual mandate is currently $0, for any calendar year in which it remains $0, the Proposed Rule provides relief (consistent with relief provided for tax years 2019 and 2020) from furnishing Forms 1095-B to individuals, if the responsible reporting entity:

1. Posts a clear and conspicuous notice in location on its website that is reasonably accessible to individuals stating that individuals may receive a copy of their 1095-B upon request, accompanied by an email address, phone number and a physical address the request can be sent;
2. Furnish an individual with a Form 1095-B within 30 days of a request; and
3. Retain the notice in the same location of its website until October 15 – or the first business day following October 15 if October 15 falls on a weekend or holiday – of the next calendar year. This would be October 15, 2023 for the tax year 2021 Form 1095-B.

The website notice must be written in plain, non-technical terms and with letters of a font size large enough, including any visual clues or graphical figures, to call a viewer’s attention that the information pertains to tax statements reporting that individuals had health coverage.  Per the IRS a statement or link on the company’s main page reading “Tax Information”, which takes users to a secondary page that includes a statement in capital letters such as “IMPORTANT HEALTH COVERAGE TAX DOCUMENTS”, would meet this requirement.  This relief from providing the B-series forms typically applies to insurance companies (who are required to file and furnish Forms 1095-B to participants in their fully insured plans), non-ALEs with self-insured plans, and ALEs who provide coverage under a self-insured plan to individuals who were not full-time employees during any part of the year (e.g., part-time employees, or retirees or COBRA participants in the year following retirement or termination of employment).

ALEs are still required to furnish Form 1095-C to their full-time employees. They must also complete Part III if the employee is enrolled in self-insured coverage. Further, the relief from furnishing Form 1095-B does not extend to IRS reporting.  Forms 1095-B must still be submitted to the IRS, as applicable. 

Finally, consistent with Notice 2020-76, per the Proposed Rule, the IRS intends to eliminate the good faith effort to comply relief that was in effect from tax years 2015-2020.  The good-faith effort to comply provided reporting entities relief from accuracy-related penalties if they could show a good faith effort to comply. However, for the calendar year 2021 reporting and beyond, reporting entities will no longer have this relief available and must ensure accurate information is reported. Employers who are penalized for accuracy-related errors may have an opportunity to appeal under the “reasonable cause” standard, which is stricter than the good faith standard.

Conclusion

Based on the Proposed Rule, ALEs have until March 2, 2022, to furnish Forms 1095-C to individuals, but still must meet the February 28 (paper filing) or March 31, 2022 (electronic filing) deadlines to file Forms 1095-C with the IRS.  Moreover, as long as the individual mandate penalty remains $0, insurance carriers, non-ALEs with self-funded plans, and ALEs with self-funded plans who provide coverage to part-time employees or non-employees, are not required to furnish Forms 1095-B to individuals if they meet the requirements for posting information regarding how individuals may receive copies of their Form 1095-B.

Further, because there is no longer good-faith relief from reporting errors, it is important for employers to review the Forms 1094-B or C or 1095-C before they are filed with the IRS to ensure information is accurate and correct any inaccurate information as soon as possible after discovery of the error.

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About the Authors.  This alert was prepared by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on ERISA-governed and non-ERISA-governed retirement and welfare plans, executive compensation, and employment law.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers, or our clients.  This is not legal advice.  No client-lawyer relationship between you and our lawyers is or may be created by your use of this information.  Rather, the content is intended as a general overview of the subject matter covered.  This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein.  Those reading this alert are encouraged to seek direct counsel on legal questions.

© 2021 Marathas Barrow Weatherhead Lent LLP.  All Rights Reserved.

On September 9, 2021, President Biden announced that he ordered OSHA to develop an emergency temporary standard (ETS) that would require private employers with 100 or more employees to mandate that employees either receive one of the three available COVID-19 vaccines or submit to weekly COVID-19 testing.  On November 4, 2021, OSHA released an unpublished version of the COVID-19 Vaccination and Testing Emergency Temporary Standard.  The published version is set to be released on November 5, 2021.  A summary, fact sheet, and FAQs are also available.

Background

On August 23, 2021, the U.S. Food and Drug Administration (FDA) approved the Pfizer-BioNTech COVID-19 vaccine, one of the three COVID-19 vaccines approved for emergency use in the United States.  Due to this approval and the rampant spread of the COVID-19 Delta variant, on September 9, 2021, President Biden announced that OSHA will issue an ETS mandating employers with 100 or more employees to either be vaccinated or submit to weekly testing.  At that time, there were many unanswered questions about how the ETS would apply – how the headcount is determined, who pays for the testing, what type of documentation would be permitted to show proof of the vaccine, etc.  

On November 4, 2021, OSHA released its COVID-19 Vaccination and Testing ETS which is described more fully below.  We expect the ETS will be challenged, particularly in states where state law prohibits employers from mandating vaccines; however, the ETS is intended to preempt inconsistent state and local requirements relating to these issues, including requirements that ban or limit employers’ authority to require vaccination, face-covering, or testing, regardless of the number of employees.  In the meantime, employers should familiarize themselves with the ETS, begin developing their written policies, and communicate the requirements and expectations to employees.

Below summarizes the specific requirements of the ETS.

COVID-19 Vaccination and Testing ETS

With certain limited exceptions, the ETS requires employers with 100 or more employees to develop, implement, and enforce a mandatory, written COVID-19 vaccination policy, or a written policy requiring employees to either be vaccinated or elect to undergo regular COVID-19 testing and wear a face covering at work in lieu of vaccination.

If employers have employees who request a reasonable accommodation because they cannot be vaccinated and/or wear a face-covering due to a disability, as defined by the ADA, or if vaccination, and/or testing for COVID-19, and/or wearing a face-covering conflicts with an employee’s sincerely held religious belief, practice, or observance the employee may be entitled to reasonable accommodation.

Employers must begin complying with the requirements of the ETS within 30 days from the date of publication, which means employers will need to, among other things, develop their written policies by that time.  The deadline for employers to begin testing employees who are not vaccinated is 60 days from the date the ETS is posted in the Federal Register, which is January 4, 2022.

Essentially, this means employees must be fully vaccinated by January 4, 2022.  Fully vaccinated means the individual received the second dose (of a two-dose vaccine or combination of two doses of a vaccine) or the first dose (of a single-dose vaccine) 2 weeks prior to January 4, 2022.  For two-dose vaccines (Moderna or Pfizer), the doses must have been provided within at least the minimum recommended interval between doses, in accordance with the approval, authorization, or listing by the FDA or WHO, or administered as part of a clinical trial at a U.S. site (if the recipient is documented to have primary vaccination with the “active” (not placebo) COVID-19 vaccine).

The ETS requires employers to provide employees with time off for obtaining their vaccinations.  Specifically, the ETS requires employers to provide employees with a reasonable amount of paid time (up to 4 hours at their regular rate of pay) to travel to and receive their COVID-19 vaccine doses (first and second doses, as applicable).  To be clear, it is four (4) hours total that must be paid for a two-dose shot.  Further, employers are required to provide reasonable time and paid sick leave to employees who need the time to recover from the side effects of either dose, as applicable, of the vaccine.  

The ETS sets minimum standards within the workplace, though employers are permitted to implement additional measures (subject to collective bargaining for union employees).

Note the ETS does not apply to federal contractors (who must comply with the President’s Executive Order and the Safer Federal Workforce Task Force COVID19 Workplace Safety: Guidance for Federal Contractors and Subcontractors) or employees providing healthcare services or healthcare support services who are subject to the Healthcare ETS while the Healthcare ETS is in effect.

Exemptions from Vaccinations

Employers are not required to mandate employees receive the vaccine if:

• It is medically contraindicated;
• Medical necessity requires a delay in vaccination; or
• They are legally entitled to a reasonable accommodation under federal civil rights laws because they have a disability or sincerely held religious beliefs, practices, or observances that conflict with the vaccination requirement.

Covered Employers

The ETS applies to employers who have a total of 100 or more employees at “any time the ETS is in effect” regardless of where the employees report to work and applies for the duration of the ETS even if the employer’s headcount subsequently falls below 100 employees. For purposes of reaching the headcount, employees include part-time employees, remote employees, employees who do not report to the worksite, and employees working exclusively outdoors. 

Even if an employer does not have 100 employees as of the effective date of the ETS, if the employer reaches the 100-employee threshold while the ETS is in effect, it must comply for the remainder of the ETS even if the count later drops below 100. Further, the count applies to different corporate structures and settings as follows:

• For a single corporate entity with multiple locations, all employees at all locations are counted.
• In a traditional franchisor-franchisee relationship in which each franchise location is independently owned and operated, the franchisor and franchisees would be separate entities.  In such case, the franchisor would only count “corporate” employees, and each franchisee would only count employees of that individual franchise.  Therefore, if the franchisor has 100 employees, but none of the franchisees do, then only the franchisor must comply.
• Two or more related entities that handle safety matters as one company may be regarded as a single employer, in which case the employees of all entities making up the integrated single employer must be counted.
• Where employees of a staffing agency are placed at a host employer location, only the staffing agency would count these jointly employed workers.
• For a typical multi-employer worksite such as a construction site, each company represented – the host employer, the general contractor, and each subcontractor – would only need to count its own employees; however, each employer must count the total number of workers it employs regardless of where they report for work on a particular day. The ETS provides the following example:
  • If a general contractor has more than 100 employees spread out over multiple construction sites, that employer is covered under this ETS even if it does not have 100 or more employees present at any one worksite.

Workplace Definition

A workplace is defined as a physical location (fixed or mobile) where the employer’s work or operations are performed. It does not include an employee’s own home.

State or Local Government Employers

The ETS does not apply to state and local government employers in states without State Plans, because state or local government employers and employees are exempt from OSHA coverage under the OSH Act.  In states with OSHA-approved State Plans, however, the State Plans must adopt requirements that are at least as effective as the requirements in OSHA’s ETS.  Therefore, state and local government employers with 100 or more employees in states with State Plans will be required to comply with those state occupational safety and health requirements. 

Exclusion for Remote Employees and Employees Working Outdoors

While remote employees, employees working exclusively outdoors, and employees who do not report to a workplace where other coworkers or customers are present must be counted for determining the employer’s headcount, such employees are not required to be vaccinated.  This is different from the standards applicable to federal contractors and many employers with remote employees may find relief with this decision.  A list of occupations with workers who work outdoors is included in Table IV.B.1 of the ETS.

Obtaining Proof of Vaccination

Employers are required to determine the vaccination status of all employees.  Accordingly, the ETS provides that employers must require each vaccinated employee to provide acceptable proof of vaccination status, including whether they are fully or partially vaccinated. Acceptable proof of vaccination status include:

• The record of immunization from a health care provider or pharmacy;
  • A copy of the COVID-19 Vaccination Record Card;
  • A copy of medical records documenting the vaccination
  • A copy of immunization records from a public health, state, or tribal immunization information system; or
  • A copy of any other official documentation that contains the type of vaccine administered, date(s) of administration, and the name of the health care professional(s) or clinic site(s) administering the vaccine(s)

Note, employers should be cautious about using the approach in the third and final bullets, as this could result in the employer having access to medical diagnoses or genetic information protected by the ADA or GINA. If employers allow these approaches, at the very least, they should ask employees to redact any additional medical information included in the record before providing it to the employer.

If an employee is unable to provide acceptable proof of vaccination, then they must be required to submit a signed statement that includes an attestation:

• Of their vaccination status (fully vaccinated or partially vaccinated); and
• That they have lost and are otherwise unable to produce proof required by this section.

The signed statement must include this statement: “I declare (or certify, verify, or state) that this statement about my vaccination status is true and accurate. I understand that knowingly providing false information regarding my vaccination status on this form may subject me to criminal penalties.”

Further, the employee should, to the best of their recollection, include the following in their attestation:

• The type of vaccine administered;
• Date(s) of administration; and
• The name of the health care professional(s) or clinic site(s) administering the vaccine(s).

If an employee does not provide acceptable proof of receipt of the vaccine (or the signed statement meeting the above requirements), then they must be treated as not fully vaccinated.

How Does Paid Time Off Work

The ETS provides that the four hours of paid time off to receive the COVID-19 vaccine must be paid at the employees’ regular rate of pay and cannot be offset by any other leave the employee has accrued (i.e., other PTO, sick leave, or vacation time offered by the employer).  If more than four hours are needed, then the time is not required to be paid but is protected leave.

On the other hand, if an employee needs time off to recover from the COVID-19 vaccine side effects, then they may be required to use their accrued and unused sick leave (or PTO if the employer does not distinguish between sick leave and vacation time).  If they do not have sick leave or PTO time available, then the employer must provide the time and pay for it. Employers cannot require employees to accrue negative paid sick leave or borrow against future paid sick leave to recover from vaccination side effects.  The ETS does not provide a specific amount of time that must be provided to recover from the effects of the COVID-19 vaccine, though the employer must provide a “reasonable” amount of time.  OSHA suggests two (2) days of paid sick time is “reasonable.”

Paid time off is not required for employees who must be removed from the workplace for failure to be vaccinated or failure to submit to the required testing.  Paid time off is also not required by the ETS if an employee is removed from the workplace due to a positive COVID-19 diagnosis or test result, though employers would have to comply with any other applicable law, ordinance, regulation, or collective bargaining agreement that requires such time be paid.

Employers are not, however, required to retroactively provide PTO for the time used to receive the vaccine or recover from the side effects of the vaccine to employees who received the vaccine prior to the ETS.  Moreover, employers are not required to reimburse employees for transportation costs (e.g., gas money, train/bus fare, etc.) incurred to receive the vaccination, including the costs of travel to an off-site vaccination location (e.g., a pharmacy) or travel from an alternate work location (e.g., telework) to the workplace to receive a vaccination dose.

If an employee chooses to receive the vaccine outside of work hours, employers are not required to grant paid time to the employee for the time spent receiving the vaccine during non-work hours; however, the employee must still be provided reasonable time and paid sick leave to recover from side effects that they experience during scheduled work time.

How Must Testing be Administered

If an employer opts to allow employees to be tested in lieu of vaccination, then the testing applies to any employee who reports at least once every 7 days to a workplace where other individuals such as coworkers or customers are present.  In such cases, the employee:

• Must be tested for COVID-19 at least once every 7 days; and
• Must provide documentation of the most recent COVID-19 test result to the employer no later than the 7th day following the date on which the employee last provided a test result.

The following applies for employees who do not report during a period of 7 or more days to a workplace where other individuals such as coworkers or customers are present (e.g., teleworking for two weeks prior to reporting to a workplace with others):

• The employee must be tested for COVID-19 within 7 days prior to returning to the workplace; and
• The employee must provide documentation of that test result to the employer upon return to the workplace.

If an employee does not provide documentation of a COVID-19 test result, the employer must keep that employee removed from the workplace until the employee provides a test result.  The employer is not required to pay employees for this time.

If an employee is diagnosed with COVID-19 or receives a positive COVID-19 test, then they are not required to submit to weekly testing for 90 days following the positive test result of the diagnosis.

What Tests Can be Used

If the employer will allow employees to be tested in lieu of vaccination, the employer’s written policies must specify how testing will be conducted (e.g., testing provided by the employer at the workplace, employees independently scheduling tests at point-of-care locations, etc.), how employees should provide their COVID-19 test results to the employer, and what tests are permitted. 

Tests authorized by the employer must be, (1) cleared, approved, or authorized, including in an Emergency Use Authorization (EUA), by the FDA to detect current infection with the SARS-CoV-2 virus (e.g., a viral test, (2) administered in accordance with the authorized instructions; and (3) not both self-administered and self-read unless observed by the employer or an authorized telehealth proctor.

Examples of tests that satisfy this requirement include tests with specimens that are processed by a laboratory (including home or on-site collected specimens which are processed either individually or as pooled specimens), proctored over-the-counter tests, point of care tests, and tests where specimen collection and processing is either done or observed by an employer.  Therefore, the employer cannot accept an at-home test administered by the employee or his or her family member. 

Who Pays for the Testing

The ETS provides that the employer is not required to cover any costs associated with the testing, though employers may have to comply with other laws, ordinances, regulations, or collective bargaining agreements that mandate the employer pay for testing. Thus, depending on the facts, the employer may require employees to pay for their testing.  Note, testing that is not due to an employee having recent, known exposure to COVID-19, ordered by a health care provider, or due to an employee experiencing symptoms of COVID-19 would not be covered by the employer’s health plan.  If an employer chooses to pay for the testing, it would be at the employer’s own expense and not paid through the health plan.

Records Retention

Employers are required to maintain a roster of vaccinated employees, maintain a record of each employee’s vaccination status, and preserve the acceptable proof of vaccination for each fully or partially vaccinated employee.  Further, employers who offer testing in lieu of vaccination option must maintain a record of each test result provided by each employee or obtained by the employer’s own testing.  All of these records are considered medical records and, therefore, would need to be maintained separately from an employee’s personnel file and are not subject to further disclosure by the employer except as otherwise required under the ETS or other applicable federal law.  Records are only required to be preserved while the ETS is in effect.

Face Coverings/Face Masks

If the employer chooses to allow testing in lieu of vaccination, they must ensure that all non-fully vaccinated employees wear a face covering when indoors and when occupying a vehicle with another person for work purposes, unless the following apply:

• The employee is alone in a room with floor to ceiling walls and a closed door.
• The employee is eating or drinking (for a limited period of time) at the workplace or for identification purposes in compliance with safety and security requirements.
• The employee is wearing a respirator or facemask.
• The employer can show that the use of face coverings is infeasible or creates a greater hazard that would excuse compliance with this paragraph (e.g., when it is important to see the employee’s mouth for reasons related to their job duties, when the work requires the use of the employee’s uncovered mouth, or when the use of a face covering presents a risk of serious injury or death to the employee).

Face coverings must completely cover an employee’s nose and mouth and must be:

• Made with two or more layers of a breathable fabric that is tightly woven (i.e., fabrics that do not let light pass through when held up to a light source);
• Secured to the head with ties, ear loops, or elastic bands that go behind the head. If gaiters are worn, they should have two layers of fabric or be folded to make two layers;
• Fitted snugly over the nose, mouth, and chin with no large gaps on the outside of the face; and
• A solid piece of material without slits, exhalation valves, visible holes, punctures, or other openings.

Per the ETS, face coverings also include clear face coverings or cloth face coverings with a clear plastic panel that, despite the non-cloth material allowing light to pass through, and which may be used to facilitate communication with people who are deaf or hard-of-hearing or others who need to see a speaker’s mouth or facial expressions to understand speech or sign language respectively.

Face coverings must be worn by the employee to fully cover the employee’s nose and mouth and must be replaced when wet, soiled, or damaged (e.g., is ripped, has holes, or has broken ear loops). Face shields may be worn in addition to face coverings.

Employers are prohibited from preventing any employee from voluntarily wearing a face covering or facemask unless the employer can demonstrate that doing so would create a hazard of serious injury or death, such as interfering with the safe operation of equipment. Further, employers must permit employees to wear a respirator instead of a face covering whether required or not. In addition, the employer may provide respirators to the employee, even if not required. In such circumstances, the employer must also comply with applicable law. Finally, employers cannot prohibit customers or visitors from wearing face coverings.

Employers are not required to pay for the face coverings unless required by other applicable laws or regulations or collective bargaining agreements.

Written Policy Requirements

Employers’ written policies should address all of the applicable requirements in the ETS, including: (1) whether the employer will require the vaccine or whether there will be a testing/face covering option and any applicable exclusions that may apply for an employee due to medical contraindications, medical necessity requiring a delay in vaccination, or applicable reasonable accommodations; (2) information on how the employer will determine an employee’s vaccination status and how this information will be collected; (3) paid time off and sick leave for vaccination purposes; (4) notification of positive COVID-19 tests and removal of COVID-19 positive employees from the workplace; (5) how the employer will make required information available to as described in the next section, and (6) disciplinary action for employees who do not abide by the policy.

The written policy should also include all relevant information regarding the policy’s effective date, which employees are required to comply, deadlines for being vaccinated or submitting vaccination information, testing requirements and deadlines (if applicable), and procedures for compliance and enforcement.

Informing Employees

Employers must inform each employee, in a language and at a literacy level the employee understands, about (1) the requirements of the ETS as well as any employer policies and procedures established to implement this section, (2) COVID-19 vaccine efficacy, safety, and the benefits of being vaccinated, (3) protections against retaliation and discrimination, and (4) laws that provide for criminal penalties for knowingly supplying false statements or documentation.  The following document must be provided with their policy:   “Key Things to Know About COVID-19 Vaccines,” available at https://www.cdc.gov/coronavirus/2019- ncov/vaccines/keythingstoknow.html.

Records Disclosure

Employers must provide a copy of its written policy to OSHA as well as the aggregate number of fully vaccinated employees at the workplace and the total number of employees at the workplace within 4 hours of a request and must provide OSHA all other records required to be maintained by the end of the next business day.

Further, they must make available for inspection and copying any individual COVID-19 documentation and test results by the end of the next business day after receiving a request. The employee or anyone having written authorized consent may request this information.  Additionally, an employee or employee representative may request the aggregate number of fully vaccinated employees at the workplace and the total number of employees at the workplace, which the employer must provide by the end of the next business day after the request is made. 

Conclusion In conclusion, employers subject to the ETS must determine whether they will take a vaccine-only or combined vaccine and testing/face covering approach to compliance and must develop the required written policies and communicate those policies to employees, so they have ample time to receive their COVID-19 vaccines.  Employers should work with legal counsel to develop their written policies and to address any reasonable accommodation requests received by employees.

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About the Authors.  This alert was prepared by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

This notice is a service to our clients and friends.  It is designed only to give general information on the developments actually covered.  It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Benefit Advisors Network and its members are not attorneys and are not responsible for any legal advice.  To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

© Copyright 2021 Benefit Advisors Network. All rights reserved.

The Internal Revenue Service (IRS) has released Rev. Proc. 2021-36, which contains the inflation-adjusted amounts for 2022 used to determine whether employer-sponsored coverage is “affordable” for purposes of the Affordable Care Act’s (ACA) employer shared responsibility provisions and premium tax credit program. As shown in the table below, for plan years beginning in 2022, the affordability percentage for employer mandate purposes is indexed to 9.61%.  Employer shared responsibility payments are also indexed.

*Section 4980H(a) and (b) penalties 2022 are projected.

**No employer shared responsibility penalties were assessed for 2014.

Under the ACA, applicable large employers (ALEs) must offer affordable health insurance coverage to full-time employees. If the ALE does not offer affordable coverage, it may be subject to an employer shared responsibility payment. An ALE is an employer that employed 50 or more full-time equivalent employees on average in the prior calendar year. Coverage is considered affordable if the employee’s required contribution for self-only coverage on the employer’s lowest-cost, minimum value plan does not exceed 9.61% of the employee’s household income in 2022 (prior years shown above). An ALE may rely on one or more safe harbors in determining if coverage is affordable: W-2, Rate of Pay, and Federal Poverty Level. 

If the employer’s coverage is not affordable under one of the safe harbors and a full-time employee is approved for a premium tax credit for Marketplace coverage, the employer may be subject to an employer shared responsibility payment.

Note that as of January 1, 2019, the individual mandate penalty imposed on individual taxpayers for failure to have qualifying health coverage was reduced to $0 under the Tax Cuts and Jobs Act, effectively repealing the federal individual mandate. A previous lawsuit challenging the constitutionality of the ACA due to this change to the individual mandate penalty was unsuccessful. The employer mandate has not been repealed and the IRS continues to enforce it through Letter 226J. The IRS is currently enforcing employer shared responsibility payments for tax year 2018, with enforcement of 2019 expected to begin this fall.

Next Steps for Employers

Applicable large employers should be aware of the updated, reduced affordability percentage for plan years beginning in 2022, and should consider it along with all other relevant factors when setting contributions.

On September 9, 2021, President Biden announced that he ordered OSHA to develop emergency temporary standards (ETSs) that would require employers with 100 or more employees to mandate that employees either receive one of the three available COVID-19 vaccines or submit to at least weekly COVID-19 testing.  Employers who do not comply with these requirements could be fined approximately $13,650 per employee.  The President also announced the OSHA ETSs will require employers to offer paid time off to employees to receive the vaccine, as well as any time necessary to recover from a reaction to the vaccine.

The President also issued executive orders requiring federal executive branch employees to be fully vaccinated (i.e., no weekly testing option) and federal contractor employees under new or newly extended/newly optioned contracts to comply with vaccine safety protocols.  He also announced (1) health care workers at certain facilities that receive Medicaid or Medicare funding must be fully vaccinated, (2) that the Department of Transportation will double its fines for individuals who refuse to wear masks on public transportation, and (3) increased testing availability for individuals either at home (through certain, chosen retailers who will sell the kits at cost) ^[1] and at pharmacies.

The pending OSHA ETSs, and approaches large employers (i.e., 100 or more employees) and small employer (i.e., fewer than 100 employees) can take to incentivize vaccines are the focus of this alert.

Background

On August 23, 2021, the U.S. Food and Drug Administration (FDA) approved the Pfizer-BioNTech COVID-19 vaccine, one of the three COVID-19 vaccines approved for emergency use in the United States.  Due to this approval and the rampant spread of the COVID-19 Delta variant, employers recently began implementing different approaches to encourage individuals to receive the COVID-19 vaccine.  Some implemented incentives for employees who are vaccinated, while others took a more aggressive approach by penalizing those not vaccinated with higher health insurance contributions or outright mandating the vaccine as a condition of employment. 

In the meantime, on September 9, 2021, President Biden announced that OSHA will issue ETSs mandating employers with 100 or more employees require employees to either be vaccinated or submit to weekly testing.  At this time, these rules have not been implemented, so there are no details about how “employees” are defined, how employer size will be determined, whether there will be exceptions for employees who work remotely, when the mandate is effective, how employers are required to implement testing, whether traditional reasonable accommodation requirements apply  for individuals with disabilities or sincerely held religious beliefs against vaccinations, and whether testing can be paid for through the employer’s group health plan or whether it must be paid directly by the employer.  We expect the OSHA ETSs will address these issues.

While the OSHA ETSs will likely provide significant cover for employers who mandate vaccines for employees, some large employers may still choose to incentivize employees to receive the vaccine in lieu of pursuing or implementing a potentially burdensome weekly testing requirement.  Moreover, employers with fewer than 100 employees may still consider mandating vaccines for their workforce, or incentivizing employees to get vaccinated.

As discussed below, any of the above approaches may implicate one or more federal laws and may also implicate state or local laws and regulations.

Until guidance from OSHA is released, employers can rely on recent guidance from the U.S. Equal Employment Opportunity Commission (EEOC) – What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws – related to the COVID-19 vaccine. 

Mandating the COVID-19 Vaccine as a Condition of Employment

Employers with fewer than 100 employees may choose to mandate that all employees receive the vaccine, while large employers will have to consider how they will implement the mandate.  There are a few different approaches employers can take.  They can: (1) contract with a provider to administer the vaccine onsite, (2) contract with a designated provider to administer the vaccine offsite, or (3) instruct employees to get the vaccine from a provider of their choice and provide proof of vaccination status to the employer.

Providing Vaccines Onsite or Through a Provider Contracted by the Employer

One key issue when administering a vaccine onsite or through an employer-contracted provider is whether the receipt of the vaccine itself amounts to a medical examination.  According to the EEOC, it does not; however, the analysis does not end there.  To administer the COVID-19 vaccine, a health care provider would need to familiarize themselves with employees’ medical history through a series of prescreening questions to ensure the vaccine is medically appropriate. These pre-screening questions could elicit information about a disability, which would implicate the ADA’s provisions regarding disability-related inquiries and could violate Title II of GINA, which prohibits employers from using, acquiring, or disclosing an employee’s or family member’s genetic information, to the extent the screening questions ask about/require the employee (or family members) to provide any genetic information.  

As such, to satisfy the ADA, the employer would need to establish the vaccine is both “job-related and consistent with business necessity.”  In other words, the employer would need to reasonably believe, based on objective evidence, that failing to receive the vaccine would pose a direct threat to the health or safety of other employees or individuals. Given the contagiousness of the Delta variant, this may not be difficult for employers to establish.

Vaccines Administered by the Employee’s Health Care Provider

If employees may choose the provider who administers the vaccine, such as their neighborhood pharmacy or own medical care provider, then the ADA’s provisions regarding disability related inquiries is not implicated.  Further, GINA is not implicated with this approach if the employer merely requires employees to provide proof of vaccination, because administration of an mRNA vaccine in and of itself does not involve the use of genetic information.

In this case, the employer could require an employee to show proof of receiving the vaccine by an independent pharmacist or medical provider, such as by providing a copy of their vaccine card or executing an affidavit confirming they received the vaccine^[2], and this would not amount to a disability-related inquiry.

Note, however, similar to FMLA and ADA records, vaccine records are subject to general privacy protections, and must be stored separately from an employee’s personnel records.  Further, employees should be told not to provide any medical, disability, or genetic information in their documentation evidencing receipt of the vaccine, as receipt of that information may implicate the ADA or GINA. 

Termination Decisions for Employees Who Refuse the Vaccine

While the employer may satisfy the ADA and/or GINA using one of the above approaches, additional analysis is required before making the decision to terminate an employee who does not receive the vaccine pursuant to the employer’s mandate.  These other considerations are discussed in detail below:

ADA Qualification Standards and Reasonable Accommodation

If an employee is unable to receive a COVID-19 vaccine due to a disability, then the employer would need to have a qualification standard to ensure an employee does not pose a direct threat to the health or safety of the workplace. In essence, the employer would need to show the individual’s failure to vaccinate/be able to receive a vaccination due to such disability is a direct threat to other individuals because of a “significant risk of substantial harm to the health or safety of the individual or others that cannot be reduced or eliminated without reasonable accommodation.”  Therefore, before an employer could take any action, the employer would need to establish there is a direct threat by demonstrating:

• the duration of any risk;
• the nature and severity of potential harm;
• the likelihood that a potential harm will occur; and
• the imminence of the potential harm.

Even if a direct threat is found, the employer would still be required to determine whether a reasonable accommodation is possible, without undue hardship, which could eliminate or reduce the risk to the workplace.

It is possible an employer can exclude an unvaccinated employee from the workplace if there is a direct threat; however, this does not necessarily mean the employer can terminate the employee. Employees may have other rights under applicable EEO laws or other federal, state, or local laws. Further, when assessing the risk, employers need to consider the amount of their workforce that is unvaccinated, and the frequency or type of contact between vaccinated and unvaccinated employees or unvaccinated employees and customers or clients.

Outright termination without considering any reasonable accommodation could result in an ADA violation. Reasonable accommodation could include a telecommuting option for employees.  This would likely need to be a consideration if the employee was previously telecommuting prior to or during COVID-19 shutdowns.  If the employee’s job is such that it can be performed remotely, employers may need to consider this option depending on the other facts and circumstances. Further, employers must consider CDC guidance when assessing whether an effective accommodation that would not pose an undue hardship is available.

Ultimately, if a reasonable accommodation cannot be made without undue hardship, then termination may be permissible.  These determinations should be made on an individualized employee basis taking all facts and circumstances into consideration.

Sincerely Held Religious Beliefs Under Title VII

Employers also must consider whether religious accommodations may be necessary for employees who are not vaccinated.  Under Title VII, an employer must reasonably accommodate an employee’s sincerely held religious belief absent an undue hardship.  Without an objective basis for questioning whether the employee’s beliefs are religious in nature or sincerely held, the employer should not request supporting information or documentation regarding a sincerely held religious belief; however, even if the employee provides supporting information or documentation, the employer is not required to allow the employee in the workplace if a reasonable accommodation is not available or if accommodating the employee would cause an undue hardship to the employer. Specifically, an undue burden in this context means the burden is “more than a de minimis cost or burden.”

Again, this is facts and circumstances specific, and an employer should not automatically terminate an unvaccinated employee without considering whether an accommodation is possible or necessary. Per the EEOC, if an employee cannot receive the COVID-19 vaccine because of a sincerely held religious belief, practice, or observance, then the employee may be excluded from the workplace if there is no available or possible reasonable accommodation.

Mandating COVID Vaccine as Condition of Health Coverage Eligibility

While there have been no reports of companies taking this approach, some companies have inquired whether this would be a possibility.  This option is the most easily analyzed of the options, as it clearly is addressed by HIPAA nondiscrimination rules.  Specifically, under HIPAA nondiscrimination requirements, benefits must be available on a uniform basis for all “similarly situated individuals” and benefits cannot be limited or excluded based on a participant’s health factor, which includes “receipt of health care.”  Thus, an employee’s status as COVID-19 vaccinated or not vaccinated is a health factor.  Accordingly, an employer cannot exclude an employee from participating in the health plan because he or she did not receive the COVID-19 vaccine. 

Excluding Claims Incurred by Unvaccinated Participants

Some employers have questioned whether a group health plan could exclude COVID-19-related claims for an unvaccinated participant.  This approach is generally prohibited under HIPAA’s rules prohibiting restrictions based on the source of the injury.  Under HIPAA, if a group health plan provides benefits for a type of injury, the plan may not deny benefits otherwise provided for treatment of the injury if the injury results from a medical condition (including both physical and mental health conditions).  For example, a plan that otherwise covers hospitalization may exclude benefits for self-inflicted injuries or injuries sustained in connection with attempted suicide; however, if the self-inflicted injury was the result of a medical condition (depression), then the plan must cover the injury.  A plan may also deny hospital coverage if the participant engaged in certain dangerous recreational activities (e.g., bungee jumping); however, given that receipt of the COVID-19 vaccine is a health factor under HIPAA, excluding COVID-19-related hospitalization benefits for an unvaccinated participant on the basis that not receiving the vaccine is an inherently dangerous activity is not supportable based on existing guidance.  It may also violate the ACA’s prohibition on preexisting conditions. 

Employer-Provided COVID-19 Incentives

Despite the mandate, some large employers may still consider incentivizing employees to receive the vaccine to minimize the burden and cost of weekly testing requirements.  Further, some small employers may choose to incentivize vaccines for the safety of their workforce and customers/clients.

There are generally two approaches employers take with vaccine incentives: (1) providing monetary or other incentives to employees who show proof of receiving the vaccine, such as $100 bonuses, $50 gift cards, additional paid time off, or other items of value, or (2) increasing premium cost of coverage for employees who are not vaccinated.  For example, news sources reported that Delta Airlines intends to impose a $200 surcharge on health insurance premiums for employees who are not vaccinated. Under either approach, employers must consider implications under ERISA and regulations governing wellness plans (HIPAA, ADA, and GINA). 

HIPAA Nondiscrimination Considerations

As discussed above, HIPAA nondiscrimination rules prohibit employers from limiting or excluding benefits based on a participant’s health factor. Thus, employers cannot deny coverage to individuals based on whether they receive the vaccine, but they can incentive employees to receive the vaccine or charge a different premium amount to vaccinated employees if offered via a bona fide wellness program.  A bona fide wellness program must be reasonably designed to promote health or prevent disease. 

Under applicable DOL wellness program regulations, there are two types of wellness programs, participatory and health contingent.  A participatory wellness program does not condition receipt of a reward on achievement of a health standard.  Health-contingent wellness programs condition receipt of an award on an individual’s satisfaction of a standard related to a health factor or attaining or maintaining a specific health outcome. Health-contingent wellness programs are divided into two categories, activity-based (i.e., individuals are required to perform or complete an activity that is related to a health factor before the individual can obtain a reward) and outcome-based (i.e., individuals must attain or maintain a specific health outcome to obtain a reward).  

In addition to meeting other requirements^[3], health contingent wellness programs must offer a reasonable alternative standard for employees to satisfy the requirements under the program for all outcome-based programs, and for individuals for whom it is unreasonably difficult to satisfy the original standard due to a medical condition or for whom it is medically inadvisable to try to satisfy the original standard for activity-based programs.

ADA Wellness Program Considerations for COVID-19 Vaccines

Wellness programs that are subject to the ADA (i.e., those that include a medical exam or disability related inquiry) must, in addition to offering a reasonable alternative standard, where applicable, be “voluntary.”  This means, the reward for participating in a wellness program must not be so great as to compel someone to participate.  Further, for a health-contingent wellness program, the reward cannot exceed 30% of the cost of employee-only coverage (if 30% of the cost of the family coverage if spouses and dependents can participate).  Rewards include financial rewards (e.g., premium discounts, rebates, or modifications of otherwise applicable cost-sharing amounts such as copays, deductibles, or coinsurance) and non-cash rewards (e.g., gift cards, electronic devices, etc.).  If tobacco use prevention is part of the program, the reward may be as high as 50% of the cost of coverage.  (Note that the reward for the non-tobacco use portion of the program cannot exceed 30% of the cost of coverage.)

For purposes of the COVID-19 vaccine, some employees are not eligible to receive the vaccine because they have certain health risks or other health factors.  In such case, the employer must offer a reasonable alternative standard for employees to meet.  Furthermore, if the employer intends to ask employees why they are not receiving the vaccine, this would be a disability related inquiry and the program must be “voluntary” for employees.  Whether a program is “voluntary” is a facts and circumstances determination and should be made in on an individualized basis.  Moreover, if the employer intends to apply a premium differential for employees who are not vaccinated, the program will have to comply with the 30% cap (or 50% if the program also includes tobacco cessation). 

Other Considerations

In addition to the above, GINA wellness program regulations may also be implicated if an employer receives too much information when substantiating that an employee received the vaccine, or employees must explain that they are not eligible to receive a vaccine due to health or risk factors.  Like under the ADA wellness program rules, wellness program participation must be “voluntary,” under GINA, which means the employer’s incentives for receiving the vaccine must not be so great as to make the employee feel compelled to participate. 

Unfortunately, at this point, it is unclear what amount of incentive would make participation involuntary given the EEOC’s recent withdrawal of the proposed wellness regulations, which limited incentives for certain wellness programs to a de minimis amount.  Until new regulations are implemented, if the ADA and/or GINA are implicated, employers should take a reasonable approach in evaluating their program to ensure the program is truly voluntary for employees.

Additionally, religious exemptions under Title VII may also apply if an employee must explain why they are declining the vaccine. 

For applicable large employers (ALEs), for purposes of the Affordable Care Act (“ACA”) a wellness incentive or surcharge may impact affordability, as wellness incentives (other than solely related to tobacco use) are treated as unearned for purposes of determining whether coverage is “affordable” under the Affordable Care Act, and employees are treated as having to pay the surcharge for “affordability” purposes.​

Finally, employers should consider any state or local privacy or other laws that may prohibit, limit, or impact any vaccine mandate or incentive program offered by the employer.

Conclusion

Large employers should be on the lookout for the OSHA ETSs and, in the meantime, discuss how they intend to implement the mandate once effective – whether the employer will offer a vaccine and testing blended approach to accommodate employee preference, or whether the employer will outright mandate the vaccine for all employees (taking into consideration any necessary, reasonable accommodations). Small employers may continue to evaluate the approach they intend to take, if any. 

If large or small employers intend to implement incentives, they should consider the EEOC’s guidance, applicable federal, state, and local laws, and any potential employee relations issues they may face as they evaluate their options. 

For purposes of a mandate, employers should be mindful of the ADA, Title VII, GINA, and applicable state or local laws, and should engage in an individualized analysis of the facts and circumstances of each unvaccinated employee with counsel. Further, small employers should ensure any vaccine requirements serves some business purpose.  For example, if an employer has a mostly remote workforce and remote employees do not engage in business travel or directly engage with clients, requiring the vaccine would not likely serve a business purpose.

If employers choose to incentivize receipt of the vaccine, either with cash or other gifts or by creating premium differentials for individuals who show proof of receiving the vaccine, they should ensure the program, or any incentives offered for receiving the vaccine, complies with all applicable laws and regulations and are offered through a bona fide wellness program meeting all wellness program regulations. We recommend employers work directly with counsel when designing or implementing wellness programs or making employment termination decisions (for those implementing a mandate).

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[1] COVID-19 at-home testing kits are used to “diagnose” COVID-19 and, therefore, are qualified medical expenses under §213(d) of the Code.  Thus, they can be paid for or reimbursed under a health FSA, HRA, HSA, or Archer MSA.

[2] Requesting a copy of the vaccine card would lessen the likelihood of fraud.

[3] Health-contingent wellness programs must meet several different requirements; however, this memorandum is not intended to fully address all compliance requirements for wellness programs.  If an employer has concerns about the design of a wellness program, they should work with counsel to ensure it is properly designed.

In October 2020, CMS Released its Transparency in Coverage Final Rules (the “TiC Final Rules”) which require non-grandfathered group health plans and carriers offering health insurance in the individual and group markets to: (1) make available to the public three separate machine-readable files (for in-network rates, out-of-network allowed amounts and prescription drugs) that include detailed pricing information for each available coverage option, and (2) release cost-sharing information to participants, including the underlying negotiated rates, for all covered health care items and services, including prescription drugs, through an internet-based self-service tool and in paper form (upon request).

The TiC Final Rules were intended to be rolled out over a three-year period beginning January 1, 2022; however, in August 2021, the DOL released FAQs that delay implementation until July 2022 or later. 

In addition to the deadline extensions for the TiC Final Rules, certain other new transparency requirements authorized under the Consolidated Appropriations Act, 2021 (CAA) that were scheduled to become effective later this year are delayed pursuant to the FAQs.  The transparency requirements of the TiC Final Rules and the CAA, along with the deadline extensions, are summarized in more detail below. Additionally, the TiC Final Rules are currently in the process of being litigated in federal district court.  

Transparency in Coverage Final Rules

In October 2020, CMS released the TiC Final Rules, which require group health plans and health insurance carriers (“carriers”) to publicly post standard charge information and negotiated rates for common shoppable items and services in an easy-to-understand, consumer-friendly, and machine-readable format.  Regulations were also ordered to be implemented for hospitals to post (and regularly update) standard charge information for services, supplies, or fees billed to patients or provided by hospital employees.  The hospital requirements were effective beginning January 1, 2021, while the TiC Final Rules are effective for plan years beginning on or after January 1, 2022, except as delayed below.  The TiC Final Rules are summarized below, followed by the extensions.

Machine Readable Files

Under the TiC Final Rules, for plan years beginning on or after January 1, 2022, most non-grandfathered group health plans and insurance carriers offering non-grandfathered health insurance coverage in the individual or group markets are required to make available to the public, including stakeholders such as consumers, researchers, employers, and third-party developers, three separate machine-readable files that include detailed pricing information.  The information must be available on an internet website.  Specifically, three separate machine-readable files for “each coverage option offered by a group health plan or health insurance issuer” must be created – one for in-network rates, one for out-of-network allowed amounts, and one for prescription drugs.  The information required to be included in each machine-readable file for all covered items and services is described in the regulations.

The machine-readable files must be updated monthly (and clearly indicate the date the file was last updated) and must be available in a form and manner specified in any guidance issued by the IRS, DOL, or CMS.  Further, they must be publicly available and accessible to any person free of charge and without conditions, such as the establishment of a user account, password, or other credentials, or submission of personally identifiable information to access the file.

An aggregated allowed amount for more than one plan or insurance policy or contract is permitted for out-of-network (“OON”) allowed amounts where the group health plan or carrier contracts with a carrier, service provider, or other party to provide the information.  This may be hosted on a third-party website or posted by a third party; however, the group health plan or carrier must provide a link to the site hosting or post the information on its own website.

Release of Cost-Sharing Information to Participants and Beneficiaries

Additionally, for plan or policy years beginning on or after January 1, 2023, upon request, a plan is required to provide to participants and beneficiaries enrolled in the group health plan, cost-sharing information for the 500 covered items and services identified in Table 1 of the TiC Final Rules (all other covered items and services must be provided for plan or policy years beginning on or after January 1, 2024) in a format described in the regulation.

Plans and carriers must provide the required information on an internet-based self-service tool that meets certain requirements, or via hardcopy/paper format upon request.  There can be no cost for the information, and the information must be provided in plain language.  The plan or issuer may limit the number of providers to no fewer than 20 providers per request and meet certain timing, content, and delivery requirements.

Fully insured group health plans can contract (in writing) with the carrier to provide any of the above-described information (machine-readable files, paper files, or internet information to participants or beneficiaries) on behalf of the plan.  In those circumstances, the issuer, not the group health plan, is responsible for compliance and any compliance failures. Self-funded plans can contract with a third-party administrator or other party to assist the plan with compliance; however, the self-funded group health plan ultimately remains responsible for compliance and any compliance failures on the part of the TPA or other party. Additionally, group health plans and health insurance carriers are required to comply with any state or federal privacy laws when complying with any of the above-described disclosure requirements. 

Deadline Delays for Transparency in Coverage Rules

With many of the deadlines under the TiC Final Rules, as well as other transparency requirements under the CAA, fast approaching, the DOL released FAQ #49, extending certain deadlines. 

Machine Readable Files

The deadline for machine-readable files for in-network rates and OON allowed amounts and billed charges for covered items and services is extended from January 1, 2022, to July 1, 2022.  The agencies intend to release more guidance prior to the deadline.

Further, the deadline to provide machine-readable files for prescription drugs is delayed indefinitely.  This requirement has clear overlap with transparency requirements under the Consolidated Appropriations Act, 2021.  Accordingly, the DOL intends to consider whether prescription drug machine-readable file requirements are appropriate and will address this through notice-and-comment rulemaking. 

States are required to enforce the machine-readable file requirements for carriers, so the DOL encourages states to take a similar approach and delay enforcement of the machine-readable file requirements for in-network rates, OON allowed amounts, and prescription drugs using the same timeframes.

Release of Cost-Sharing Information to Beneficiaries and Participants

The CAA, 2021, which was passed after the TiC Final Rules, includes largely duplicative requirements for group health plans and insurance carriers to provide cost-sharing information to participants and beneficiaries and further requires price information to be provided via telephone upon request (in addition to online or paper requirements).  To address the duplicative nature of these requirements, the agencies intend to propose rulemaking to require the same pricing information available through the online tool (or by paper upon request) be provided by telephone (upon request) as well.  Further, the agencies will defer enforcement of any CAA requirements under the CAA until plan years beginning on or after January 1, 2023 (which is consistent with the first compliance deadline under the TiC Final Rules). 

States are required to enforce these requirements for carriers, so the DOL encourages states to take a similar approach and delay enforcement of these requirements until plan years beginning on or after January 1, 2023.

Other Transparency-Related Deadlines Extended

Pharmacy Benefits and Drug Costs Reporting Under the CAA

The CAA requires group health plans or carriers to begin reporting detailed information regarding the plan and its coverage of certain prescription drugs (the 50 brand prescription drugs most frequently dispensed and the 50 prescription drugs with the greatest increase in plan expenditures over the plan year) as well as other plan information beginning on December 27, 2021, and each June 1^st thereafter.  The DOL recognizes the significant operational challenges plans and carriers may encounter complying with these reporting requirements by the applicable statutory deadline and, therefore, the DOL has deferred enforcement of the first and second reporting deadlines by one year.  Therefore, plans will be required to file their first report on December 27, 2022, and each June 1^st thereafter.  The agencies encourage plans and carriers to amend contracts and put processes and procedures in place to ensure they can meet the initial December 27, 2022 deadline.

Advanced Explanation of Benefits (Advanced EOBs)

Effective for plan years beginning on or after January 1, 2022, upon receiving a good faith estimate regarding certain items or services, the CAA requires group health plans and carriers to send (via mail or electronically) a participant, beneficiary, or enrollee an Advanced EOB in clear and understandable language that includes certain specified information, including (1) the network status of the provider or facility, (2) the contracted rate (for participating providers or facilities) or a description of how a participant can obtain information about participating providers or facilities, (3) good faith estimate received from the provider or facility, (4) a good faith estimate of the participant’s cost-sharing and the plan’s responsibility for paying for the items or services, and (5) information regarding any medical management techniques that apply to the items or services.  The Advanced EOB must clearly state it is only an estimate based on the items or services reasonably expected to be provided at the time of scheduling/requesting the item or service and is subject to change based on the items or services actually provided.

Due to the complexity of these requirements, the technological requirements involved, and the lack of agency guidance on these requirements, the DOL intends to engage in notice-and-comment rulemaking in the future to implement these requirements, including establishing appropriate data transfer standards.  Accordingly, the DOL will defer enforcement but did not specify a specific compliance date. 

HHS intends to explore whether interim solutions are feasible for insured consumers and encourages states to delay enforcement of these requirements for applicable plans.

Other Transparency-Related Guidance Addressed in the FAQs

In other instances, the DOLs FAQs do not extend the deadline to comply with certain transparency requirements under the CAA; they provide certain enforcement guidance or clarification.  This information is summarized below:

Insurance ID Cards

Effective for plan years beginning on or after January 1, 2022, the CAA requires plans and carriers to include on any physical or electronic plan or insurance identification card issued to participants, beneficiaries, or enrollees any applicable deductibles, out-of-pocket maximum limitations, and a telephone number and website address for consumers seeking consumer assistance.  The information is required to be provided in clear writing.

The agencies do not intend to issue rules related to this requirement before January 1, 2022, and, therefore, plans and carriers must begin to comply with these requirements by that date.   Plans and carriers are expected to determine how to represent plan and coverage designs in a compliant way on the ID cards using a good faith, reasonable interpretation of the law.  Reasonable methods may be varied, and agencies will consider whether the approach used by the plan or issuer is reasonably designed and implemented to provide the required information to all participants, beneficiaries, and enrollees.  Agencies will consider whether the specific data elements are included or, if not, whether it is made available through other information that is provided on the ID card and the mode by which any information absent from the card is made available when required information is made available.  Per the agencies, a compliant ID card could include the applicable major medical deductible and applicable out-of-pocket maximum, as well as a telephone number and website address for individuals to seek consumer assistance and access additional applicable deductibles and maximum out-of-pocket limits, the card could include a QR code or link (if the card is digital) to access additional deductible out-of-pocket maximum limits for the plan.

Gag Clauses

Pursuant to the CAA, since December 27, 2020, providers, networks, or associations of providers, TPAs, or other service providers have been prohibited from either directly or indirectly restricting (by agreement) plans or carriers from (1) providing provider-specific cost or quality of care information or data to referring providers, the plan sponsor, participants, beneficiaries, or enrollees, or individuals eligible to become participants, beneficiaries, or enrollees of the plan or coverage; (2) electronically accessing de-identified claims and encounter data for each participant, beneficiary, or enrollee; and (3) sharing such information (in compliance with any privacy regulations).  Further, plans and carriers are required to submit an annual report to the DOL, HHS, or IRS confirming compliance with these requirements. 

The DOL believes these requirements are self-implementing and does not expect to issue any regulations on these requirements, though they will release guidance regarding how to submit attestations of compliance beginning in 2022.  Therefore, unless and until any guidance is released, plans and carriers must comply with these requirements using a good faith, reasonable interpretation of the statute.

Provider Directory

The CAA established provider directory standards, which require plans or carriers to establish a process for updating and verifying the accuracy of the information in their provider directories, and establish a protocol for responding to telephone calls and electronic communications from participants, beneficiaries, or enrollees about a provider’s network participation status, and must honor any incorrect or inaccurate information provided to the participant, beneficiary, or enrollee about the provider’s network participation status.

While the DOL intends to initiate rulemaking on these requirements sometime in 2022, the deadline for compliance is not extended.  Plans and carriers must comply with these requirements, and will not be considered to be out of compliance if, (1) beginning on or after January 1, 2022, in situations where a participant, beneficiary, or enrollee receives items and services from a non-participating provider and the individual was provided inaccurate information by the plan or issuer via the provider directory or response protocol indicating the provider was participating, and (2) the plan or issuer imposes only a cost-sharing amount that is not greater than the cost-sharing amount that would be imposed for items and services furnished by a participating provider and counts those cost-sharing amounts toward any deductible or out-of-pocket maximum.  Once implemented, the final rules will have a prospective effective date. 

Balance Billing Disclosure Requirements

The balance billing disclosure requirements of the No Surprises Act are effective for plan years beginning on or after January 1, 2022.  In the preamble to its interim final rules addressing balance billing, the DOL indicated that it intends to address balance billing disclosure requirements in more detail in the future; however, that may not occur before January 1, 2022.  Accordingly, plans and carriers must comply with these requirements using a good faith, reasonable interpretation of the statute for plan years beginning on or after January 1, 2022.  Once implemented, the final rules will have a prospective effective date.  In the meantime, the DOL issued a model disclosure notice that may be used to satisfy the disclosure requirements regarding the balance billing protections.

Continuity of Care Requirements

The CAA requires group health plans or carriers to establish certain continuity of care protections when there are changes in provider or facility networks under the plan effective for plan years beginning on or after January 1, 2022.  While the DOL intends to initiate rulemaking on these requirements sometime in 2022, the deadline for compliance is not extended.  Plans and carriers must comply with these requirements using a good faith, reasonable interpretation of the statute for plan years beginning on or after January 1, 2022.  Once implemented, the final rules will have a prospective effective date. 

What’s Next for Employers?

While employers have been given an extension for complying with many of the provisions of the Transparency in Coverage regulations and transparency-related provisions of the CAA, plans should follow the DOL’s suggestion and ensure they update any contractual provisions with their TPAs or carriers and identify which parties are responsible for preparing any machine-readable files or other deliverables under these new statutory and regulatory requirements.  Group health plan sponsors, including sponsors of grandfathered health plans with regard to the No Surprises Act and other applicable requirements, should continue to monitor additional rulemaking or guidance issued by the agencies related to any transparency provisions.

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About the Authors.  This alert was prepared by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

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The Consolidated Appropriations Act, 2021 (the “CAA”), which was signed into law on December 27, 2020, included several provisions impacting group health plans and health insurance issuers.  Below is a summary of the provisions focused on mental health parity and health plan transparency (specifically, broker/consultant commissions and pharmacy benefits and drug costs).

Mental Health Parity

The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), prohibits a group health plan from applying financial requirements (e.g., deductibles, co-payments, coinsurance, and out-of-pocket maximums), quantitative treatment limitations (e.g., number of treatments, visits, or days of coverage), or non-quantitative treatment limitations (such as restrictions based on facility type) to its mental health and substance use disorder benefits that are more restrictive than those applied to the plan’s medical and surgical benefits. 

MHPAEA compliance has been a focus in DOL audits in recent years.  As part of the action plan for enhanced enforcement in 2018, the DOL, HHS and IRS released a self-compliance tool plans and issuers can use to evaluate their plan.  However, Section 203 of the CAA took this a step further, requiring more active engagement by group health plans. 

Beginning on February 10, 2021, group health plans were required to perform and document comparative analyses of the design and application of non-quantitative treatment limitations (NQTLs).  Specifically, the NQTL analyses must include certain information specified in the CAA, such as, among other things, specific plan terms or other relevant terms regarding NQTLs and the specific substance abuse, mental health, medical and surgical benefits to which they apply, and the factors used to determine that NQTLs will apply to mental health or substance use disorder benefits and medical or surgical benefits. 

Per the CAA, the DOL, IRS (Treasury) and HHS are required to request no fewer than 20 group health plan analyses per year, and group health plans must provide them to the agencies upon such request.  In the last several months, the DOL began requesting the NQTL comparative analyses from plans that are currently undergoing DOL audits for other reasons, as well as from plans not currently under investigation.  In addition, plan participants and authorized representatives such as out-of-network providers may request these analyses. Therefore, all plans should be prepared to provide their NQTL comparative analyses at any time. 

If the agencies determine the group health plan is not in compliance, then the plan must respond to the agencies within 45 days by specifying any actions it will take to come into compliance and providing further comparative analyses demonstrating the plan’s compliance.  If still not in compliance, the agencies will notify all individuals enrolled in the plan of the plan’s noncompliance.  This could lead to significant exposure for non-compliant plans, as it basically opens a clear pathway to litigation.

On April 2 2021, the DOL released FAQs regarding these CAA provisions.  The FAQs clarify the following:

• Because the requirement to make the comparative analyses available to federal or applicable state authorities was effective February 10, 2021, all plans and issuers should be ready to make their analyses available upon request.
• General, broad, and conclusory statements will not suffice for the analyses. Any analyses should be sufficiently specific, detailed, and reasoned to demonstrate the processes, strategies, evidentiary standards, or other factors used to develop and apply a NQTL for mental health/substance use disorder benefits are comparable to, and apply no more stringently than, those for medical/surgical benefits.  The DOL’s MHPAEA Self-Compliance Tool includes a 4-step roadmap for generating a comparative analysis.  Therefore, plans and issuers that carefully follow the most recent (2020) MHPAEA Self-Compliance Tool when developing their analyses may be able to identify and mitigate potential issues. 
• Specifically, at a minimum, the analyses must contain:
  • A clear description of the specific NQTL, plan terms, and policies at issue;
  • Identification of the specific mental health/substance use disorder (“MH/SUD”) and medical/surgical benefits to which the NQTL applies within each benefit classification, and a clear statement as to which benefits identified are treated as MH/SUD and which are treated as medical/surgical;
  • Identification of any factors, evidentiary standards or sources, or strategies or processes considered in the design or application of the NQTL and in determining which benefits, including both MH/SUD benefits and medical/surgical benefits, are subject to the NQTL, including whether any factors were given more weight than others and why (including an evaluation of any specific data used in the determination);
  • To the extent the plan or issuer defines any of the factors, evidentiary standards, strategies, or processes in a quantitative manner, it must include the precise definitions used and any supporting sources;
  • Whether there is any variation in the application of a guideline or standard used by the plan or issuer between MH/SUD and medical/surgical benefits and, if so, describe the process and factors used for establishing that variation;
  • If the application of the NQTL turns on specific decisions in administration of the benefits, the nature of the decisions, the decision maker(s), the timing of the decisions, and the qualifications of the decision maker(s) should be identified;
  • An assessment of the qualifications of each expert used, if any, and the extent to which the plan or issuer ultimately relied upon each expert’s evaluations in setting recommendations regarding both MH/SUD and medical/surgical benefits;
  • A reasoned discussion of the plan’s or issuer’s findings and conclusions as to the comparability of the processes, strategies, evidentiary standards, factors, and sources (including citations) identified above within each affected classification, and their relative stringency, both as applied and as written, including the results of analyses indicating that the plan or coverage is or is not in compliance with MHPAEA; and
  • The date of the analyses and the name, title, and position of the person or persons who performed or participated in the comparative analyses.
• Any of the below practices (which the DOL has observed in the past), may result in an unsuccessful comparative analysis:
  • Production of a large volume of documents without a clear explanation of how and why each document is relevant to the comparative analysis;
  •  Conclusory or generalized statements, including mere recitations of the legal standard, without specific supporting evidence and detailed explanations;
  • Identification of processes, strategies, sources, and factors without the required or clear and detailed comparative analysis;
  • Identification of factors, evidentiary standards, and strategies without a clear explanation of how they were defined and applied in practice;
  •  Reference to factors and evidentiary standards that were defined or applied in a quantitative manner, without the precise definitions, data, and information necessary to assess their development or application; or
  •  Analyses that are outdated due to the passage of time, a change in plan structure, or for any other reason.

This means plans should take the necessary time to ensure thoughtful, thorough analyses are conducted now and at any time applicable provisions of the plan change.

• The DOL’s MHPAEA Self-Compliance Tool provides an example of the types of documents and information that would need to be available to support the comparative analyses, such as samples of claims, any process documents, guidelines or other claims processing policies and procedures, or documentation of standards, instructions to providers where management is delegated to an outside service provider, etc. Furthermore, if the comparative analyses reference any type of study, tests, data, reports, meeting minutes/decisions, or other considerations, documentation should be available to support those references. 
• State regulators, participants, beneficiaries, or enrollees (or their authorized representatives) may all request, and the plan or issuer is required to provide, the comparative analyses. 
• Where applicable, non-grandfathered plans would be required to provide any participants who are appealing an adverse benefit determination with copies of the comparative analyses (and supporting documentation) when providing all other documents the plan relied upon to support the denial of a claim.
• The DOL clarified that it may request discrete comparative analyses specific to a particular area of concern (such as where a complaint was received) but may request them in other instances where it is deemed appropriate by the agency.  Currently, it intends to focus on the following NQTLs in its enforcement efforts:
  • Prior authorization requirements for in-network and out-of-network inpatient services;
  • Concurrent review for in-network and out-of-network inpatient and outpatient services;
  • Standards for provider admission to participate in a network, including reimbursement rates; and
  • Out-of-network reimbursement rates (plan methods for determining usual, customary, and reasonable charges).

However, the DOL expects that even when comparative analysis is requested in a discrete area or areas, the plan or issuer must provide a list of all other NQTLs for which they have completed a comparative analysis and a general description of any supporting documentation.  The DOL’s initial request can broaden at any time, so having all comparative analyses completed, rather than only completing those listed above is essential for plans and issuers.  Additionally, while insurance companies have fiduciary responsibility and must prepare the analysis for fully insured plans, third party administrators (TPAs) for self-insured plans typically do not have the same fiduciary responsibility that would require them to prepare the analysis.  Sponsors of self-insured plans (including level-funded plans) should inquire with their TPA whether they have completed an analysis specific to their plan or the TPA’s products in general and whether they are prepared to assist in the event of a request.  They may want to introduce language into the administrative services agreement upon renewal to clarify the extent to which the TPA will assist.  In most cases, the TPA will be in the best position to perform the analysis – i.e., they will have established the NQTLs and will be able to identify them; they will have all the data and other information necessary for the analysis.

Transparency Requirements

Broker and Consultant Transparency

Section 202 of the CAA amends §408(b)(2) of ERISA and creates new transparency requirements that impact group health plans and their brokers or consultants.  Specifically, group health plans must receive the following disclosures from brokers or consultants (or their affiliates or subcontractors) who reasonably expect to receive $1,000 or more (indexed for inflation) in direct or indirect compensation in connection with providing certain designated insurance-related services for the group health plan: 

• A description of the services provided under the contract with the plan;
• Whether the broker, consultant, or their affiliate or subcontractor’s services provided are, or reasonably expected to be in the capacity of a fiduciary;
• A description of all direct compensation, either in the aggregate or by service that the broker or consultant reasonably expects to receive in connection with the services;
• A description of all indirect compensation the service provider, or their affiliate or subcontractor, reasonably expects to receive in connection with the services;
• A description of any compensation that will be paid among the broker, consultant, their affiliate or subcontractor for commissions, finder’s fees, or other similar incentive compensation based on business placed or retained.  This must include identification of payers and recipients, regardless of whether it is disclosed as direct or indirect compensation; and
• A description of any compensation the broker or consultant reasonably expects to receive in connection with termination of the contract or arrangement, and how any prepaid amounts will be calculated and refunded.

Failure to comply puts the arrangement with the broker or consultant at risk of being considered not “reasonable.” Timeframes for providing the information to the group health plan and updating the plan of any changes to information previously provided pursuant to these requirements, as well as good faith compliance and other considerations for non-compliance are discussed in more detail in the CAA.  These requirements are effective for contracts for covered services executed or renewed on or after December 27, 2021 (one year from the enactment of the CAA).  We expect more guidance from the DOL prior to the deadline.

Pharmacy Benefits and Drug Costs

Section 204 of the CAA requires group health plans or issuers to begin reporting the following information regarding health plan coverage to the IRS, HHS, and DOL:

• The plan year start and end dates;
• The number of enrollees;
• Each state in which the plan is offered;
• The 50 brand prescription drugs most frequently dispensed by pharmacies for claims paid by the plan, and the total number of claims for each such drug;
• The 50 prescription drugs with the greatest increase in plan expenditures over the plan year before the plan year in which the report pertains, including the amounts expended by the plan for each drug during such plan year;
• Total spending on health care serviced by the plan, broken down by hospital costs, health care provider and clinical service costs for both primary care and specialty care prescription drug costs, other medical costs (including wellness services), and spending on prescription drugs by the health plan and enrollees;
• The average monthly premium broken down by employer share and employee share;
• Any impact on premiums by rebates, fees, and drug manufacturer remunerations for prescription drugs, including the amount paid for each therapeutic class and the amount paid for each of the 25 drugs that yielded the highest amount of rebates and other remuneration from drug manufacturers; and
• Any reduction in premiums and out-of-pocket (OOP) costs associated with rebates, fees, or other drug manufacturer remuneration.

The information reported pertains to the health plan or coverage offered during the previous plan year. The first report is due on December 27, 2021 (one year after enactment of the CAA), while each subsequent annual report is due by June 1^st.  In June 2021, the agencies released a request for information regarding the impact of the legislation on impacted health plans.  Thus, they are in the early stages of implementing regulations and have not yet indicated how the information will be reported to/received by the agencies. 

What’s Next for Employers?

While we expect more guidance on the transparency requirements for brokers and consultants, in the meantime, they should review their existing contracts and disclosures in light of these requirements and begin implementing any necessary changes. Further, group health plans are encouraged to review their coverage of mental health and substance use disorder benefits and carefully follow the DOL’s most recently updated (2020) MHPAEA Self-Compliance Tool when developing their MHPAEA comparative analyses.  Finally, later in the year, group health plan sponsors should prepare to comply with pharmacy benefit and drug cost disclosure requirements.

Employers that sponsor self-insured group health plans, including health reimbursement arrangements (HRAs) should keep in mind the upcoming July 31, 2021 deadline for paying fees that fund the Patient-Centered Outcomes Research Institute (PCORI).  As background, the PCORI was established as part of the Affordable Care Act (ACA) to conduct research to evaluate the effectiveness of medical treatments, procedures and strategies that treat, manage, diagnose or prevent illness or injury.  Under the ACA, most employer sponsors and insurers are required to pay PCORI fees until 2029, as it only applies to plan years ending on or before September 30, 2029. 

The amount of PCORI fees due by employer sponsors and insurers is based upon the number of covered lives under each “applicable self-insured health plan” and “specified health insurance policy” (as defined by regulations) and the plan or policy year end date.  This year, employers will pay the fee for plan years ending in 2020.

The fee is due by July 31, 2021 and varies based on the applicable plan year as follows:

• For plan years that ended between January 1, 2020 and September 30, 2020, the fee is $2.54 per covered life.
• For plan years that ended between October 1, 2020 and December 31, 2020, the fee is $2.66 per covered life.

For example, for a plan year that ran from July 1, 2019 through June 30, 2020 the fee is $2.54 per covered life. The fee for calendar year 2020 plans is $2.66 per covered life. The insurance carrier is responsible for paying the PCORI fee on behalf of a fully insured plan.  The employer is responsible for paying the fee on behalf of a self-insured plan, including an HRA.  In general, health FSAs are not subject to the PCORI fee.

Employers that sponsor self-insured group health plans must report and pay PCORI fees using the newly released (Rev. June 2021) IRS Form 720, Quarterly Federal Excise Tax Return.  Employers indicate on Form 720 and Form 720-V (the payment voucher) that the form and payment are for the 2nd quarter of 2021.  If this is an employer’s last PCORI payment and they do not expect to owe excise taxes that are reportable on Form 720 in future quarters (e.g., because the plan is terminating), they may check the “final return” box above Part I of Form 720.

Also note that because the PCORI fee is assessed on the plan sponsor of a self-insured plan, it generally should not be included in the premium equivalent rate that is developed for self-insured plans if the plan includes employee contributions.  However, an employer’s payment of PCORI fees is tax deductible as an ordinary and necessary business expense. 

Historical Information for Prior Years

• For plan years that ended between October 1, 2019 and December 31, 2019, the fee is $2.54 per covered life and was due by July 31, 2020.
• For plan years that ended between January 1, 2019 and September 30, 2019, the fee is $2.45 per covered life and was due by July 31, 2020.
• For plan years that ended between October 1, 2018 and December 31, 2018, the fee is $2.45 per covered life and was due by July 31, 2019.
• For plan years that ended between January 1, 2018 and September 30, 2018, the fee is $2.39 per covered life and was due by July 31, 2019.

Explanation of Counting Methods for Self-Insured Plans

Plan Sponsors may choose from three methods when determining the average number of lives covered by their plans.

Actual Count method.  Plan sponsors may calculate the sum of the lives covered for each day in the plan year and then divide that sum by the number of days in the year.

Snapshot method.  Plan sponsors may calculate the sum of the lives covered on one date in each quarter of the year (or an equal number of dates in each quarter) and then divide that number by the number of days on which a count was made. The number of lives covered on any one day may be determined by counting the actual number of lives covered on that day or by treating those with self-only coverage as one life and those with coverage other than self-only as 2.35 lives (the “Snapshot Factor method”).

Form 5500 method.  Sponsors of plans offering self-only coverage may add the number of employees covered at the beginning of the plan year to the number of employees covered at the end of the plan year, in each case as reported on Form 5500, and divide by 2.  For plans that offer more than self-only coverage, sponsors may simply add the number of employees covered at the beginning of the plan year to the number of employees covered at the end of the plan year, as reported on Form 5500.

Special rules for HRAs. The plan sponsor of an HRA may treat each participant’s HRA as covering a single covered life for counting purposes, and therefore, the plan sponsor is not required to count any spouse, dependent or other beneficiary of the participant. If the plan sponsor maintains another self-insured health plan with the same plan year, participants in the HRA who also participate in the other self-insured health plan only need to be counted once for purposes of determining the fees applicable to the self-insured plans.

In Rev. Proc. 2021-25, the IRS released the inflation adjusted amounts for 2022 relevant to Health Savings Accounts (HSAs) and high deductible health plans (HDHPs). The table below summarizes those adjustments and other applicable limits.

Out-of-Pocket Limits Applicable to Non-Grandfathered Plans

The ACA’s out-of-pocket limits for in-network essential health benefits have also been announced and have increased for 2022. 

Note that all non-grandfathered group health plans must contain an embedded individual out-of-pocket limit within family coverage if the family out-of-pocket limit is above $8,700 (2022 plan years) or $8,550 (2021 plan years). Exceptions to the ACA’s out-of-pocket limit rule are available for certain small group plans eligible for transition relief (referred to as “Grandmothered” plans). A one-year extension of transition relief was announced on January 19, extending the transition relief to policy years beginning on or before October 1, 2022, provided that all policies end by December 31, 2022. (This transition relief has been extended each year since the initial announcement on November 14, 2013.)

Next Steps for Employers

As employers prepare for the 2022 plan year, they should keep in mind the following rules and ensure that any plan materials and participant communications reflect the new limits: 

• HSA-qualified family HDHPs cannot have an embedded individual deductible that is lower than the minimum family deductible of $2,800.
• The out-of-pocket maximum for family coverage for an HSA-qualified HDHP cannot be higher than $14,100.

All non-grandfathered plans (whether HDHP or non-HDHP) must cap out-of-pocket spending at $8,700 for any covered person. A family plan with an out-of-pocket maximum in excess of $8,700 can satisfy this rule by embedding an individual out-of-pocket maximum in the plan that is no higher than $8,700. This means that for the 2022 plan year, an HDHP subject to the ACA out-of-pocket limit rules may have a $7,050 (self-only)/$14,100 (family) out-of-pocket limit (and be HSA-compliant) so long as there is an embedded individual out-of-pocket limit in the family tier no greater than $8,700 (so that it is also ACA-compliant).