Category: Compliance and Legal Department

On August 26, 2019, the Departments of Labor (DOL), Health and Human Services (HHS), and Treasury released an FAQ that provides guidance to employers, plan sponsors and health insurance issuers regarding a recent HHS regulation that could be read to require group health plans to treat prescription drug manufacturers’ coupons as employee cost-sharing for purposes of the ACA’s out-of-pocket limits, for plan years beginning in 2020. Currently, the ACA’s out-of-pocket limits for plan years beginning in 2019 are $7,900 individual / $15,800 family. The guidance in the FAQ is effective immediately, and provides that the Departments will not initiate enforcement action against a group health plan or issuer if the plan excludes the value of drug manufacturers’ coupons from the ACA’s annual limitation on cost-sharing, even in circumstances in which there is no medically appropriate generic equivalent available.

The Departments have determined that HHS will address the interplay between manufacturers’ coupons and out-of-pocket limits in future guidance.

Overview

In its 2020 Notice of Benefit and Payment Parameters (2020 NBPP), HHS stated that drug manufacturers’ support to plan participants—in the form of discounts or coupons—“[is] not required to be counted” toward the cost-sharing limit of participants when a generic version is not available. Due to the strong negative inference in the rule (i.e., that coupons should count toward the participant’s out-of-pocket limit if a generic version is not available), the Departments received requests for clarification on whether group health plans and insurers are required to count the coupon or discount toward the annual cost-sharing with plan participants if a generic equivalent is not available.

If read to require a manufacturer’s coupon to count toward the out-of-pocket limit, the most significant complication with the HHS rule is that it could disrupt Health Savings Account (HSA) eligibility for individuals who participate in a High Deductible Health Plan (HDHP). If the drug discounts were to apply before the individual satisfies his or her deductible, it could impact eligibility to contribute to an HSA. In fact, under Q/A-9 of IRS Notice 2004-50, discounts for drugs or coupons from manufacturers or providers should not be counted when determining if an individual has met their minimum annual deductible requirements under an HDHP.

The issue arises due to the possible conflict between the 2020 NBPP and IRS Notice 2004-50. If a group health plan is required to count drug coupons or discounts towards out-of-pocket limits, the plan would no longer be HSA-qualified because it would not comply with the requirement under Notice 2004-50 to disregard drug discounts and other manufacturers’ and providers’ discounts in determining if the minimum deductible for an HDHP has been satisfied and only allow amounts actually paid by the individual to be taken into account for that purpose.

Non-Enforcement Policy

Due to the potential impact on HSA eligibility and conflict between NBPP 2020 and the IRS Notice, the Departments have concluded that further rulemaking surrounding this issue must occur before enforcement can begin. HHS has decided to undertake the rulemaking in the NBPP for 2021 that will be released next year. Until this rulemaking occurs, the Departments will not initiate enforcement action against group health plans or issuers who exclude the value of drug coupons or discounts from the out-of-pocket limit, including in circumstances in which there is no medically appropriate generic equivalent available.

Impact on Employers

Until further guidance is issued, employers, plan sponsors and health insurance issuers may continue to exclude the value of prescription drug manufacturer coupons from participant cost-sharing under the ACA’s out-of-pocket limit rules, regardless of whether a medically appropriate generic equivalent is available. In 2019, HHS released the proposed 2020 NBPP in January and the final 2020 NBPP in April. A similar schedule is likely to be followed in 2020 for the 2021 NBPP.

About the Author. This alert was prepared for [INSERT AGENCY NAME] by Stacy Barrow. Mr. Barrow is a nationally recognized expert on the Affordable Care Act. His firm, Marathas Barrow Weatherhead Lent LLP, is a premier employee benefits, executive compensation and employment law firm. He can be reached at sbarrow@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.
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On July 17, 2019, the Internal Revenue Service (IRS) released Notice 2019-45, which expands the definition of preventive care benefits that can be provided by a high deductible health plan (HDHP) to include certain chronic conditions.  The guidance in the Notice may be relied upon immediately.  In general, most HDHP participants may establish and contribute to a health savings account (HSA), unless there is disqualifying coverage—such as having other medical benefits available besides preventive care before the minimum annual deductible is satisfied.

Overview

Under Section 223(c) of the Internal Revenue Code (Code), an HSA-qualified HDHP is not required to impose a deductible for certain preventive care services. This preventive care safe harbor includes services such as annual physicals, well-childcare, and immunizations. Notably, prior to the Notice, preventive care did not include any service to treat existing illnesses, injuries, or conditions. Likewise, drugs or medications were treated as preventive care only when taken by a person who has developed risk factors for a disease that has not yet manifested itself or has not yet become clinically apparent (i.e., the individual is asymptomatic) or when the drugs are taken to prevent the recurrence of a disease from which a person has recovered.

Ultimately, the goal of the preventive care safe harbor is to encourage HDHP participants to receive routine care with a lower cost barrier, which should lead to better health outcomes. By expanding the list of medical services that can be classified as preventive care, the IRS recognizes that cost barriers for care have resulted in some individuals with certain chronic conditions failing to seek care that would prevent exacerbation of their condition, which can lead to consequences such as amputation, blindness, heart attacks, and strokes that require considerably more extensive medical intervention.

In the Notice, the IRS expands the definition of preventive care to include coverages for specific chronic illnesses, in order to encourage necessary care and mitigate the consequences of not receiving care. It is also pursuant to President Trump’s executive order released on June 24, 2019, which instructs the agencies to allow HSAs to cover other low-cost preventive care to help maintain health statuses of participants with chronic illnesses. Such conditions will be considered preventive care only if the care is for one of the conditions listed below, and only when the care occurs for the purpose of preventing exacerbation of the condition or development of a new, secondary condition. Any care, services, or conditions not listed within the Notice (or other IRS guidance) will not be treated as preventive care and will not be permitted under the preventive care safe harbor.

Preventive Care under Code Section 223 now includes the following care and conditions:

Impact on Employers and Plan Participants

Employers and plan sponsors that offer an HSA-qualified HDHP, and their participating employees, should understand which conditions and services are now included under the preventive care definition. While use of the expanded safe harbor is voluntary, we expect that many plans will adopt it. The expanded safe harbor could benefit employers—especially those with self-funded plans—and allow for further cost-savings by covering chronic illnesses before a deductible is met.

This message 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.

About the Author.  This alert was prepared for Benefit Advisors Network by Stacy Barrow.  Mr. Barrow is a nationally recognized expert on the Affordable Care Act.  His firm, Marathas Barrow Weatherhead Lent LLP, is a premier employee benefits, executive compensation and employment law firm.  He can be reached at sbarrow@marbarlaw.com.

On June 24, 2019, President Trump issued an Executive Order intending to develop price and quality transparency initiatives to ensure that healthcare patients can make well-informed decisions about their care. This is part of the consumer-driven healthcare initiative, which has been a focus of government and patient groups alike to have more transparency regarding the cost of services from hospitals and other healthcare providers, as well as expanding the ability to use certain pre-tax health spending arrangements. The goal is to help consumers to make better informed decisions regarding their healthcare. It is also intended to address so-called “surprise billing,” which can expose patients to unexpected medical bills. The Executive Order directs federal agencies to promulgate regulations and issue guidance to meet these objectives.

Transparency in Prices

The Executive Order instructs the Department of Health and Human Services (HHS) to promulgate regulations requiring hospitals to publicly post standard price information for services rendered in an easy-to-read format. The regulations should mandate the disclosure of standard charge information for services, supplies, and any other fees that apply to the hospital and its employees. HHS may also use the Executive Order to create regulations for other providers and self-funded health plans to also post standard costs for services and supplies. The objective of such disclosure is to allow patients to make more informed decisions about the cost of services and goods if the patient goes to a certain healthcare facility. If a patient understands the cost and quality of services, they could avoid unexpected costs. It could also facilitate further analysis regarding the cost differentials between facilities and providers. The standard costs posted must be regularly updated, in order to provide accurate, up-to-date pricing. The Executive Order also requires the agencies to monitor the hospitals, providers, and plans for compliance.

Increased Access to Healthcare Information

The Executive Order directs applicable agencies to increase de-identified claims data to give researchers, providers, and other parties more information and access to taxpayer-funded healthcare programs. Such parties could create better educational materials for consumers by being able to access more aggregated public data.

Enhancing Patient Control over Healthcare

This provision of the Executive Order directs the Secretary of Treasury to propose regulations to help patients who have high deductible health plans (HDHPs). Part of the guidance would allow HDHPs to cover low-cost preventive care, before the deductible, for medical care that helps maintain health status for individuals with chronic conditions. Currently, drugs or medications used to treat other existing illnesses, injuries, or conditions are not considered permitted “preventive care” for Health Savings Account (HSA) purposes.

The directive also includes expanding the definition of eligible medical expenses under the Internal Revenue Code to include expenses related to certain types of arrangements, such as direct primary care and healthcare sharing ministries. Furthermore, the carryover allowance for health flexible spending arrangements would also be increased, from the current $500 limit. This could enable consumers to better reserve pre-tax money to help further fund their own healthcare costs.

Surprise Billing

Building upon the proposals already occurring in federal agencies and Congress, the Executive Order further directs the agencies to report to the President any additional steps that can be taken to help control surprise billing issues. Surprise billing often occurs when an individual goes to a facility that is in-network with his or her plan, but a provider giving certain services is not part of the facility contract. This means that the patient could be charged for out-of-network provider services because it is not covered under their health plan, regardless of the facility being in-network. The patient is then responsible for an unexpected bill. Some of the previously proposed changes for surprise billing include changes to out-of-network reimbursement when a facility is in-network under the health plan, especially for emergency services.

Current Impact on Employers

The Executive Order does not make any changes to existing regulations; it directs agencies to propose and create regulations associated with the Executive Order. Employers, plan sponsors, and administrators should be ready to implement new changes as they occur in the future. Consumers, plan sponsors, and employers alike may benefit from these regulations as the increase of information provides further education to plan participants and help them make more well-informed decisions concerning their healthcare.

About the Author

This alert was prepared for Benefit Advisors Network by Stacy Barrow. Mr. Barrow is a nationally recognized expert on the Affordable Care Act. His firm, Marathas Barrow Weatherhead Lent LLP, is a premier employee benefits, executive compensation, and employment law firm. He can be reached at sbarrow@marbarlaw.com.

On June 13, 2019 the Department of Labor, the Department of Health and Human Services, and the Treasury Department (the “Departments”) released the final rule concerning health reimbursement arrangements (HRA) for individual market coverage and excepted health benefits. The rule, based on an executive order from President Trump in 2017, is intended to increase choice in plan options, which could lead to greater flexibility in choice and provide more affordable healthcare. The final rule impacts many different entities and individuals, including employers, health plan issuers, employees, plan sponsors, and those who purchase individual health plans. This rule is effective for plan years starting January 1, 2020.

Background

An HRA is an account-based health plan that allows employers to reimburse employees for medical care expenses. It is funded solely by employer contributions. Amounts reimbursable under an HRA are typically limited to a certain amount during a certain period (for example, $500 for expenses incurred during a calendar year). Under prior IRS rules issued as part of Affordable Care Act (ACA) implementation, HRAs offerings were limited to an extent. Under those rules, an employer may offer an HRA to employees only if the HRA is “integrated” with a qualifying group health plan. Under the new final rule, some of the restrictions have been eliminated, and the Departments have determined that other types HRAs can be integrated with individual market coverage and Medicare in a way that meets statutory requirements.

Notably, under the final rule, an employer of any size could offer an Individual Coverage HRA that can be used to pay for Medicare (e.g., Parts B and D) and Medicare Supplement premiums, as well as other medical care expenses, without violating the Medicare Secondary Payer rules. However, if the employer offers the Individual Coverage HRA to full-time employees it cannot offer group health plan coverage to that class of employees.

What the Rule Does

The final rule essentially adds two new types of HRAs: The Individual Coverage HRA and the Excepted Benefits HRA.

Individual Coverage HRA

Overall, an Individual Coverage HRA is funded exclusively by the employer and may reimburse employees for medical care expenses, including individual market health insurance premiums. The difference under the new rule is that the employee must be enrolled in individual health coverage (or Medicare) and not group health plan coverage. This includes plans purchased on the Marketplace Exchange. It does not include plans that only cover certain excepted benefit, such as dental or vision, or short-term limited-duration plans. An Individual Coverage HRA cannot be offered to employees who are also offered a traditional group health plan. An employer may offer this HRA to different classes of employees (e.g., full-time vs. part-time, salaried vs. hourly) within certain prescribed limits.

While the rule is meant to primarily benefit small and mid-sized employees, large employers may also offer an Individual Coverage HRA. This type of HRA will also be considered an offer of coverage under the ACA for employer mandate purposes. An Individual Coverage HRA can impact eligibility for a premium tax credit; therefore, the employee must have the option to waive or opt-out of future reimbursements. To comply with the employer mandate, the employer should make the determination that the Individual Coverage HRA provides enough contributions for certain Marketplace coverage to meet affordability requirements. Additionally, an employer should have processes in place to verify an employee (and family, if applicable) has individual coverage.

Excepted Benefit HRA

An Excepted Benefit HRA means that an HRA can be offered as an “excepted benefit” by an employer. An “excepted benefit” is an insured or self-insured plan that meets certain requirements but is usually not integral to a major medical health plan. An Excepted Benefit HRA can be used to reimburse medical care expenses in addition to other excepted benefits. The HRA itself is considered an excepted benefit because it is neither integral to a health plan nor is it a health plan itself.

Certain requirements must be met to offer this type of HRA, including that it must be offered to employees along with an option to enroll in a non-excepted group health plan, although enrollment in a group or individual health plan is not required to participate in the Excepted Benefit HRA. This is a significant improvement to HRAs under the final rule. These HRAs cannot be used to reimburse health plan premiums, including Medicare and individual coverage, and can only be used for medical care expenses, COBRA coverage, or premiums under an excepted benefit (e.g., dental, vision or short-term limited duration insurance). Finally, the annual HRA contribution cannot exceed $1,800 (adjusted for inflation starting in 2021).

What Employers Should Expect Next

If an employer wants to offer an Individual Coverage or Excepted Benefit HRA, it is suggested to consult with qualified ERISA counsel. There are additional requirements and guidelines an employer will need to meet in order to comply with the final rule. Special enrollment periods may need to be established in order to allow employees and employers to take advantage of the final rule. The Departments and other federal government agencies, including the IRS, will issue further guidance regarding this rule. Such guidance will be necessary in order to correctly implement either type of HRA under the final rule

About the Author

This alert was prepared for Benefit Advisors Network by Stacy Barrow. Mr. Barrow is a nationally recognized expert on the Affordable Care Act. His firm, Marathas Barrow Weatherhead Lent LLP, is a premier employee benefits, executive compensation, and employment law firm. He can be reached at sbarrow@marbarlaw.com.