Compliance Recap February 2024

Compliance Recap February 2024

In early February, a federal class action lawsuit was filed against Johnson & Johnson (JNJ) and its plan fiduciaries, alleging overpayment for prescription drugs within its prescription drug plan. The complaint alleges that under the Employee Retirement Income Security Act of 1974 (ERISA), JNJ’s plan fiduciaries are obligated to diligently compare service providers, seek cost-effective options, and monitor expenses. It is claimed that the plan fiduciaries failed to act prudently by agreeing to terms with a pharmacy benefit manager (PBM) that resulted in excessive costs for numerous drugs compared to other market options.

The lawsuit highlights the importance of transparency in facilitating comparisons between prescription drug prices across different plans or pharmacies and underscored significant risks faced by health and welfare plan fiduciaries. Publicly available information on drug prices enables individuals – including class action plaintiff attorneys – to scrutinize plan expenses, further emphasizing the need for prudent fiduciary actions.

EMPLOYER CONSIDERATIONS

Given the evolving landscape and heightened litigation risks, health plan fiduciaries should take proactive steps to mitigate litigation exposure and safeguard the interests of plan participants:

  • Establish a fiduciary committee dedicated to health and welfare benefits and delegate responsibilities accordingly.
  • Engage qualified consultants to assess PBMs and prescription drug arrangements, ensuring impartiality.
  • Review and negotiate terms of PBM agreements, fee structures, and formularies to ensure reasonability.
  • Collect and analyze benchmark information from various sources to evaluate vendor agreements.
  • Scrutinize compensation arrangements for reasonability and conflicts of interest.
  • Periodically solicit proposals from PBMs and vendors to reassess market competitiveness.
  • Document all policies, procedures, and decisions regarding vendor selection and performance monitoring to demonstrate procedural prudence.
UNITEDHEALTHCARE CYBERATTACK IMPACTS MILLIONS

Change Healthcare, a division of UnitedHealthcare’s Optum, was the target of a cyberattack resulting in significant disruptions to prescription orders at thousands of pharmacies nationwide. The impact in the U.S. has been profound, as parent company Optum provides services to more than 60,000 pharmacies and care for more than 100 million consumers.

While it works to recover, the company has isolated services related to billing, claims management, payment, and data exchanges, forcing some healthcare organizations and systems to revert to manual procedures. Full restoration of services remains pending. The American Hospital Association recommended that companies using Optum services temporarily disconnect from them.

Change Healthcare processes approximately 15 billion transactions annually, impacting a significant portion of U.S. patient records, including prescriptions, dental, clinical, and other medical needs. The disruption has led to difficulties in verifying patients’ insurance coverage for prescriptions, forcing some individuals to pay in cash. While larger pharmacy chains like Walgreens have reported limited effects, smaller pharmacies heavily reliant on Change Healthcare for insurance verification and billing services are facing significant challenges.

The attack highlights the vulnerability of healthcare data, especially patients’ private medical records, in the face of cyber threats. Federal officials are closely monitoring the situation, emphasizing the need to strengthen cybersecurity resilience across the healthcare ecosystem.

EMPLOYER CONSIDERATIONS

Given the ongoing disruptions and potential risks to data security, affected employers should:

  • Remain vigilant and communicate any updates or developments to enrollees.
  • Encourage employees to exercise caution regarding any unusual communications or activities related to prescription orders or insurance verification.
  • Stay informed about further updates from Change Healthcare and UnitedHealth Group regarding the restoration of services and any measures to enhance cybersecurity.
UPDATED INSTRUCTIONS RELEASED FOR JUNE 1 RXDC REPORTING

The No Surprises Act, as part of the Consolidated Appropriations Act, 2021 (CAA), requires employer-sponsored health plans to comply with annual prescription drug data collection (RxDC) reporting to provide transparency in prescription drug and health care spending. Data is reported to the U.S. Department of Labor (DOL), the Department of the Treasury (Treasury), and the Department of Health and Human Services (HHS) to monitor spending trends and facilitate regulatory control measures.

The reporting deadline for the 2023 reference year data is June 1, 2024. The Centers for Medicare & Medicaid Services (CMS) has issued revised instructions and templates for RxDC reporting. The instructions are mostly consistent with prior years; however, one significant change is the new enforcement of the “aggregation restriction” beginning with the 2023 reference year. The restrictions will limit the ability of plan sponsors to have their vendors report certain data on their behalf.

Additional changes in the instructions for the 2023 reference year reporting include prescription exclusions and simplified calculations.

Failure to comply with RxDC reporting requirements may result in penalties under Internal Revenue Code Section 4980D of $100 per day.

EMPLOYER CONSIDERATIONS
  • Ensure timely completion of the RxDC reporting for calendar year 2023 by June 1, 2024.
  • Confirm filing status with insurance carriers for fully insured plans or follow up with third party administrators (TPAs), pharmacy benefit managers (PBMs), or administrative services only providers (ASOs) for self-insured plans.
  • Provide necessary information requested by relevant parties for reporting.
  • Determine whether data should be reported on a plan level or aggregated basis.
  • Consider requesting pharmacy data reporting on a plan level basis to access detailed pharmacy benefit spend information.
2025 EMPLOYER SHARED RESPONSIBILITY PENALTIES

The IRS has released the 2025 employer shared responsibility payments under the Affordable Care Act (ACA). Applicable large employers (ALEs) may face penalties for failing to provide minimum essential coverage to 95% of full-time employees, or for offering coverage that is not affordable or does not meet minimum value. The adjusted penalty amounts for 2025 will be $2,900 per full-time employee for Penalty “A” (a $70 decrease from 2024) and $4,350 per full-time employee for Penalty “B” (a $110 decrease from 2024).

EMPLOYER CONSIDERATIONS

To avoid penalties, ALEs should consistently ensure full-time employees receive minimum essential coverage that meets affordability and minimum value standards. The IRS uses Letter 226-J to notify ALEs of potential penalties, with a response form included for ALEs to address proposed penalties. Employers and advisors should remain vigilant for this letter to promptly review and respond accordingly.

 

QUESTION OF THE MONTH

Q: What are the time and dollar limits for flexible spending arrangements (FSA) and FSA carryovers?

A: For 2024, the most that can be deferred to an FSA is $3,200 (a $150 increase from 2023). The amount of a 2024 FSA balance that can be carried over into 2025 is $640 (up from $610 in 2023). A carryover is only available if the FSA does not offer a grace period. The carryover amount can be used all year.

A grace period, on the other hand, is the amount of time in a new year that an employee can incur and be reimbursed for claims from the prior year’s balance. A grace period can be as long as 2 ½ months after the close of the plan year (usually the calendar year). So, if an employee has $1,000 left in the 2023 FSA, that employee could incur $1,000 of reimbursable expense prior to March 15, 2024, and spend that $1,000 if the FSA uses a grace period. An FSA cannot have both a grace period and a carryover.

And finally, most FSAs offer a run-out period. This is a period after the close of the plan year when employees can submit claims incurred in the prior year. There is no maximum run-out period set by the IRS, but most employers (or FSA administrators) will set a limit of 60 to 90 days. The run-out period only allows people to submit claims incurred in the prior year, unlike the grace period, which allows new claims incurred prior to March 15 to be reimbursed.

This information is general in nature and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.

©2023 United Benefit Advisors

Health Insurance Basics: Part 2

Health Insurance Basics: Part 2

Does a Health Plan Typically Pay for Services from Any Doctor?

Not always. Some types of plans encourage or require consumers to get care from a specific set of doctors, hospitals, pharmacies, and other medical service providers who have entered into contracts with the plan to provide items and services at a negotiated rate. The providers in this designated set or network of providers are called “in-network” providers.

  • In-Network Provider: A provider who has a contract with a plan to provide health care items and services at a negotiated (or discounted) rate to consumers enrolled in the plan. Consumers will generally pay less if they see a provider in the network. These providers may also be called “preferred providers” or “participating providers.”
  • Out-of-Network Provider: A provider who doesn’t have a contract with a plan to provide health care items and services. If a plan covers outof-network services, the consumer usually pays more to see an out-of-network provider than an in-network provider. If a plan does not cover out-of-network services, then the consumer may, in most non-emergency instances, be responsible for paying the full amount charged by the out-of-network provider. Out-of-network providers may also be called “non-preferred” or “non-participating” providers.
Some examples of plan types that use provider networks include the following:
  • Health Maintenance Organization (HMO): A type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO. It generally won’t cover out-of-network care except in an emergency, or when a prior authorization to obtain care outside the network has been approved, or as otherwise required by law. An HMO may require a consumer to live or work in its service area to be eligible for coverage. HMOs often provide integrated care and focus on prevention and wellness. An HMO may require enrollees to obtain a referral from a primary care doctor to access other specialists.
  • Exclusive Provider Organization (EPO): A type of health plan where services are generally covered only if the consumer uses in-network doctors, specialists, or hospitals (except in an emergency). In general, EPOs do not require a referral from a primary care doctor to see other specialists, and in general there is very limited, if any, out-of-network coverage.
  • Point of Service (POS): A type of plan where a consumer pays less if they use in-network doctors, hospitals, and other health care providers. POS plans may require consumers to get a referral from their primary care doctor in order to see a specialist.
  • Preferred Provider Organization (PPO): A type of health plan where consumers pay less if they use in-network providers. They can use out-of-network doctors, hospitals, and providers without a referral for an additional cost.

Originally posted on CMS.gov

Benefits 101: Personal Leave

Benefits 101: Personal Leave

A better work/life balance is at the top of the list for many employees.  However, with the absence of nationwide paid leave regulations for American workers, employers typically determine the extent of paid time off for their employees.  In an increased effort to remain competitive and improve employee attraction and retention, a new survey found that a majority (84%) of U.S. employers plan to add to their leave programs within the next two years to enhance their employees’ experience.

Due to changes in how and where people work in recent years, employers are contemplating updating their paid time off (PTO) and leave programs to meet the needs of their employees.

Specifically, these are the areas that are being revamped:

Caregiver Leave – Paid caregiving leave is time off with partial wage replacement to care for a family member with a serious illness.  It is different than parental leave (leave to care for a newborn or newly adopted child) and from medical leave (leave to care for one’s own serious illness.

Many companies are realizing that with the aging of the baby-boom generation, millions of working families are part of a growing “sandwich generation” as they juggle to care for young children as well as aging parents.  Paid caregiver leave is gaining popularity; 25% of companies have a policy in place and another 22% are planning to offer it in the next two years.

Bereavement Leave – Bereavement leave is offered by some employers to provide time off to an employee following the loss of a loved one.

Many companies are realizing that since grief can have an impact on employees  well- being, both physically and emotionally. Complications from unresolved grief may include anger, fatigue and depression and can plague employees for months or even years.  Offering paid leave to employees dealing with grief isn’t just the right thing to do – it’s a smart move for companies.  Employees that feel valued and cared for at work are more likely to stick around, reducing turnover costs.

Parental Leave – The purpose of paid parental leave is to enable the employee to care for and bond with a newborn, newly adopted or newly placed child.  In fact, one-fifth of companies that offer parental leave plan on increasing the length of their programs in the next few years.

General Paid Time Off – PTO is a benefit where an employee has access to paid time off that may be used for personal reasons, vacation, or sickness.  23% of employers plan on increasing the number of days off provided.

Your workplace may be a “good” place to work but the truth is, your key employees might just be one LinkedIn message away from being recruited to another company.  Having competitive leave policies in place to create the best employee experience is critical.

Retention and turnover affect everyone in the company, not to mention the company’s bottom line.  After all, employee turnover is very costly.    It never hurts to review your leave policies to ensure you are doing what you can to remain competitive while keeping your team happy and healthy.

Compliance Recap

Compliance Recap

QUESTION OF THE MONTH

Q: My wife and I work in the same small company. Is having her on my plan as spouse allowed? Can we both contribute separately from our own paychecks into our own Health Savings Account (HSA)? Or does it need to be my deduction only since I am the policy holder?

A: Yes, each spouse can have an HSA. The family limit, however, is divided between the two spouses, meaning the contributions to both HSAs combined cannot exceed the family HSA contribution limit.

This information is general in nature and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.
©2024 United Benefit Advisors
Compliance Recap February 2024

Compliance Recap January 2024

NEW EMPLOYEE CLASSIFICATION RULE

In January, the Department of Labor (DOL) Wage and Hour Division introduced a rule that changes the way workers are classified under the Fair Labor Standards Act (FLSA). This Final Rule, effective March 11, 2024, offers a more comprehensive test to determine a worker’s status, potentially making it more challenging to classify workers as independent contractors for FLSA purposes. The rule is limited to FLSA wage and hour requirements and does not impact rules related to retirement or health and welfare benefits, which are typically governed by ERISA and the Internal Revenue Code. However, this change could lead to confusion and possibly claims for benefits. Under the federal FLSA, employees are entitled to minimum wage, overtime pay and other benefits. Independent contractors are not entitled to such benefits, but generally have more flexibility.

The rule establishes a test examining six key factors:

  1. Opportunity for profit or loss
  2. Investments by the worker and employer
  3. Permanence of the work relationship
  4. Degree of control
  5. Extent to which work is integral to the employer’s business
  6. Worker’s skill and initiative

These factors guide the assessment but are not exhaustive and none carry greater weight. This broadened definition under the FLSA could lead to more independent contractors being classified as employees for FLSA purposes. The DOL has provided Fact Sheet 13 to assist in the proper classification of workers.

The reclassification of workers as employees under the FLSA could have significant implications, particularly regarding employee benefits. For retirement benefits, this could mean an increase in eligible retirement plan participants, affecting employer obligations under plans like 401(k). Changes in FLSA classification may also influence health benefits, potentially increasing employers’ obligations under the employer mandate rules. This highlights the importance of careful planning and potential adjustments to existing plans and policies. Moreover, the new rule might trigger additional reporting requirements for employers, especially if they surpass certain thresholds.

EMPLOYER CONSIDERATIONS

Employers and HR professionals should understand and adapt to these changes, particularly in the gig economy, where many workers are currently classified as independent contractors. The rule’s emphasis on a totality-of-the-circumstances analysis for worker classification requires careful consideration of various economic factors. Given the potential for ongoing regulatory developments and challenges to the rule, it’s essential for employers to stay informed and prepare for possible impact on their operations and worker classifications.

GUIDANCE ON COVERAGE FOR CONTRACEPTIVES

The Affordable Care Act (ACA) Implementation FAQs Part 64, issued on January 22, 2024, provide guidance on preventive service coverage. Prepared by the Departments of Labor, Health and Human Services, and the Treasury, they aim to enhance understanding and compliance with the law and specify that non-grandfathered health plans must cover certain preventive services without cost-sharing. These services include recommended immunizations, preventive care for infants to adolescents, and additional preventive care for women. The guidelines allow plans to use reasonable medical management techniques to determine coverage limitations for services not explicitly detailed in recommendations.

The FAQs also detail the coverage of contraceptives and contraceptive care and advocate for comprehensive contraceptive care for adolescent and adult women, including a wide range of FDA-approved contraceptives and family planning practices. Plans and issuers are required to cover contraceptive services and products deemed medically appropriate by a patient’s provider. The guidelines also address the use of reasonable medical management techniques within contraception categories.

Despite these clarifications, the FAQs acknowledge ongoing barriers to accessing contraceptive coverage without cost-sharing. They outline examples of potentially unreasonable medical management techniques, such as excessive step therapy protocols, age-related restrictions, and burdensome administrative requirements in exceptions processes. The Departments emphasize the need for an expedient and transparent exceptions process to ensure coverage of medically necessary contraceptive services and products.

Finally, the FAQs introduce guidance on a therapeutic equivalence approach that plans and issuers may adopt. This approach, combined with an accessible and expedient exceptions process, aims to comply with the requirements regarding contraceptive coverage. This approach would support the coverage of contraceptive drugs and devices, facilitating better access to contraception without cost-sharing.

EMPLOYER CONSIDERATIONS

Individuals who have concerns about their plan’s or issuer’s compliance with the contraceptive coverage requirements may contact the Department of Labor (DOL) via its website or toll free at 1-866-444-3272.

CALIFORNIA SICK LEAVE FAQS

California’s Labor Commissioner updated its FAQs to reflect changes to the Healthy Workplaces Healthy Families Act (HWHFA) that are effective January 1, 2024. These amendments include an increase in the amount of leave employees can accumulate, carry over, or use. The updates also provide guidance on the accrual-based or frontloading methods for compliance and clarify that employers can ask for documentation to substantiate leave but cannot deny leave solely based on a lack of medical certification.

The new amendment impacts employees covered by collective bargaining agreements (CBAs) in specific ways. Beginning January 2024, these workers can use paid leave for similar reasons as others under the HWHFA, without the need to find a replacement worker. They are also protected under the law’s anti-retaliation provisions. However, the FAQs are unclear as to the way the changes align with CBAs’ arbitration provisions.

EMPLOYER CONSIDERATIONS

California employers must review and revise their paid sick and safe leave policies to comply with these changes and are required to display a poster in an area frequented by employees where it may be easily read during the workday.

The workplace posting must state:

  • That an employee is entitled to accrue, request, and use paid sick days
  • The amount of sick days provided for and the terms of use of paid sick days
  • That retaliation or discrimination against an employee who requests paid sick days or uses paid sick days or both is prohibited
  • That an employee has the right under this law to file a complaint with the Labor Commissioner against an employer who retaliates or discriminates against an employee
NEW YORK PROPOSED PAID FAMILY LEAVE EXPANSION

New York Governor Kathy Hochul has proposed an expansion of the state’s paid family leave law to include 40 hours of paid leave for prenatal medical appointments. This initiative, aimed at improving maternal and neonatal health, would make New York the first state to offer such coverage. The proposal is part of a broader effort to address rising maternal mortality rates, particularly among Black women, and to reduce unnecessary cesarean section births. New York already offers four months of paid leave; however those benefits are unavailable until four weeks before birth. The proposed changes reflect a growing recognition of the importance of prenatal care and the need to address disparities in maternal health outcomes.

EMPLOYER CONSIDERATIONS

Until this proposed expansion becomes law, employers in New York can ensure their familiarity with current law and required disclosures.

QUESTION OF THE MONTH

Q: Should veterans be excluded from the full time equivalent (FTE) count for determining if an employer is considered an applicable large employer (ALE)?

A: If the veteran employees have Tricare or receive health insurance through the Department of Veterans Affairs, they do not count for purposes of determining whether an employer is an applicable large employer.

Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.

 

This information is general in nature and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.
©2023 United Benefit Advisors