The U.S. Department of Health and Human Services (HHS) has recently announced adjustments to civil penalties related to violations of the Health Insurance Portability and Accountability Act (HIPAA), the Affordable Care Act (ACA), and the Medicare Secondary Payer (MSP) rules. These penalty adjustments take into account inflation and are applicable to violations that occurred on or after November 2, 2015, and for which penalties are assessed on or after October 6, 2023.
HIPAA, which focuses on privacy and security rules, categorizes penalties based on the level of intention behind the violation.
The maximum penalty for failing to provide an SBC to eligible individuals before enrollment (or re-enrollment) in a group health plan has increased from $1,264 to $1,362.
The Medicare Secondary Payer (MSP) rules prevent employers from providing incentives to Medicare beneficiaries to waive or terminate primary group health plan coverage. The maximum penalty for not complying with MSP rules has increased to $11,162 from $10,360. Furthermore, the maximum penalty for failing to inform HHS when a group health plan is or was primary to Medicare has risen to $1,428 from $1,325.
EMPLOYER CONSIDERATIONS
To avoid these penalties, employers should carefully review their plan documents and operations to ensure compliance with the HHS-related requirements.
2023 LIMITS ANNOUNCED FOR HDHPS, HSAS, FSAS
The Internal Revenue Service (IRS) announced the new limits for high-deductible health plans (HDHPs), health savings accounts (HSAs), and Dependent Care Assistance Plans (DCAPs), and health flexible spending arrangements (FSAs). The new limits take effect beginning January 1, 2024.
MINNESOTA PAID SICK AND SAFE LEAVE LAW
Minnesota has recently passed a statewide paid sick and safe time leave law set to take effect on January 1, 2024. This law mirrors similar laws already in place in four Minnesota cities—Minneapolis, St. Paul, Duluth, and Bloomington. The key feature of the state law is the “front loading method,” which allows employers to provide employees with 48 hours of earned sick and safe time (ESST) in the first year of employment. Employers can pay out the value of unused hours at the end of the year and avoid carrying over unused hours into the next year.
EMPLOYER CONSIDERATIONS
This option provides flexibility for employers in managing employee leaves of absence. Local ordinances are not preempted by the state law, and employers must follow the most protective provisions of the state or local ordinances. The determination of which is more protective depends on whether more leave or monetary benefits are considered more beneficial for employees. See the FAQs for more information.
CALIFORNIA EXPANDS PAID SICK LEAVE
On October 4, 2023, Governor Gavin Newsom signed Senate Bill No. 616 into law, amending California’s paid sick leave regulations. The key changes introduced by SB 616 are:
Starting January 1, 2024, California employers must provide employees with five days or 40 hours of paid sick leave, an increase from the previous requirement of three days or 24 hours.
Employers can continue to provide paid sick leave at a rate of one hour for every 30 hours worked. If they use a different accrual rate, employees must accrue a minimum of 40 hours by their 200th day of employment and at least 24 hours by the 120th day of employment. Employers can also front load the entire paid sick leave amount.
Employers may still limit the annual use of paid sick leave, but SB 616 increases the annual usage cap from 24 hours to 40 hours. The bill allows employers to cap paid sick leave accrual at 80 hours or 10 days, up from the previous limit of 48 hours or six days.
While SB 616 continues to exempt certain collective bargaining agreement employees from the accrual requirement, it extends some provisions of California’s paid sick leave law to non-construction industry collective bargaining agreement employees. These employees may use paid sick leave for specific reasons, such as health-related issues or domestic violence, without facing retaliation. Employers cannot require these employees to find replacement workers when using sick days.
EMPLOYER CONSIDERATIONS
To comply with SB 616, employers are advised to review and update their paid sick leave policies to align with the new requirements and usage caps. Human resources and managers should also ensure proper implementation and adherence to the law.
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.
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.
The IRS has announced a reduction in the Affordable Care Act (ACA) affordability percentage for plan years starting in 2024, lowering it from 9.12% in 2023 to 8.39%. This affordability percentage determines the maximum portion of an employee’s household income that can be spent on self-only coverage while still complying with the ACA’s affordability requirement. For applicable large employers (ALEs) with 50 or more full-time or full-time equivalent employees, this change means they must offer at least one health plan that does not exceed 8.39% of an employee’s household income for self-only coverage starting in 2024. This could necessitate adjustments to both employer and employee contributions to meet the new affordability standard. Employers have three safe harbors to determine if their health coverage is affordable under the ACA: Federal Poverty Level, Rate of Pay, or W-2 Wages. These safe harbors provide different methods for assessing affordability based on employees’ income, and employers can choose the one that best suits their situation. Non-compliance with ACA affordability requirements may lead to penalties for ALEs. Penalty A applies if an employer fails to offer minimum essential coverage to at least 95% of its full-time employees, while Penalty B applies when affordable, minimum value coverage is not offered to all full-time employees, and at least one employee receives a subsidy when enrolling in Marketplace coverage. The penalties for 2024 have been set, with Penalty A at $247.50 per month and Penalty B at $371.67 per month.
EMPLOYER CONSIDERATIONS
Employers should proactively work with their health plan broker or consultant to adapt to these changes in the 2024 ACA affordability percentage and avoid potential penalties while ensuring their employees have access to affordable health coverage.
UPDATED CHIP MODEL NOTICE RELEASED
The Department of Labor (DOL) has recently issued an updated model Employer CHIP Notice, through its Employee Benefits Security Administration (EBSA). This notice serves as a reminder of the annual notice requirement set forth by the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA). Employers who maintain group health plans in states offering premium assistance subsidies under Medicaid or Children’s Health Insurance Plans (CHIP) are obligated to provide this notice. Employers have the flexibility to deliver this notice independently or in conjunction with other materials, such as those related to health plan eligibility, open enrollment processes, or the summary plan description (SPD). The annual notice requirement applies to employers whose group health plans cover participants residing in states with premium assistance subsidies, regardless of the employer’s location. The DOL’s model notice, which employers can use for compliance, is periodically updated to align with changes in states offering premium assistance subsidies.
EMPLOYER CONSIDERATIONS
While employers have the option to create their own notices or customize the model notice, it is crucial to ensure that any notice provided includes at least the minimum state-specific contact information relevant to employees residing in states with premium assistance programs. Compliance with this requirement is essential for employers to inform their employees about the availability of these subsidies under CHIPRA.
PREPARING FOR MEDICAL LOSS RATIO REBATES
Employers with fully insured group health plans may receive a check from their insurance provider, known as a medical loss ratio (MLR) rebate. These rebates are aimed to ensure that a significant portion of the premiums paid by plan participants goes toward covering healthcare expenses and quality improvements, rather than the insurer’s administrative costs and profits. These rebates must be distributed by insurers annually, typically by September 30.
YOU CAN PREPARE NOW
While the checks are still forthcoming, employers can prepare now for the actions they will need to consider. The way employers can use the MLR rebate depends on how health coverage premiums are paid. If the employer covers 100% of the premiums for employees and their dependents, any rebate belongs to the employer to use as the employer sees fit. However, if participants contribute to the premiums, a portion of the rebate is considered “plan assets,” which must be used exclusively for the benefit of plan participants. Calculating the plan asset portion of the MLR rebate involves determining the percentage of total plan premiums assigned to employee contributions. This can be challenging, especially when employers offer various premium payment strategies. Nevertheless, it is crucial to accurately calculate and allocate the plan asset portion to remain compliant with regulations. Employers have a couple of options for using rebates considered plan assets: they can improve plan benefits or return the appropriate amount to plan participants. Improving benefits can be tricky due to the rebate’s often modest amount and uncertainty about future rebates. The more popular option is returning the rebate to participants, either as a cash payment or a temporary reduction in premium contributions. Tax considerations come into play depending on whether contributions were made on a pre-tax or after-tax basis. ERISA regulations require timely distribution of employee portions of the MLR rebate, typically within 90 days of receiving the rebate from the insurer. Decisions on how to allocate these rebates among participants are subject to fiduciary standards, ensuring that participants’ interests are served fairly and impartially. DOL guidance generally advises against distributing rebates to former plan participants due to administrative costs outweighing the rebate’s value.
EMPLOYER CONSIDERATIONS
Employers are not required to provide a specific notice about the MLR rebate to employees; instead, insurers are responsible for notifying plan participants. Employers may choose to communicate with participants to manage expectations regarding rebate amounts, as these are often relatively small on a per-participant basis. This communication can help avoid potential misunderstandings among employees.
PRESIDENT BIDEN ESTABLISHES OVERDOSE AWARENESS WEEK
A Proclamation released by President Biden addressed the nationwide crisis of drug overdose and barriers to treatment. The declaration addresses the impact untreated addiction has on millions of Americans, creating an urgent need for decisive action to combat the epidemic. “My Administration has worked hard to ensure that substance use disorder is treated like any other disease, funding the expansion of prevention, treatment, harm reduction, and recovery support services.” – President Biden The administration has implemented a National Drug Control Strategy targeting recovery support, along with making it easier for doctors to prescribe effective treatments, providing critical assistance to millions of Americans.
SICK LEAVE EXPANDS IN COLORADO
Colorado recently expanded the rights of employees to take paid time off. This expands the Colorado Healthy Families and Workplace Act (HFWA), which was originally created during the COVID-19 pandemic to ensure all employees in the state have access to paid sick leave, regardless of their job or employer size. Previously, the HFWA permitted employees to use paid sick leave for:
The employee’s inability to work due to a mental or physical illness, injury, or health condition.
The employee’s need to obtain preventive medical care or medical diagnosis, care, or treatment.
The employee’s needs due to domestic abuse, sexual assault, or criminal harassment, including medical attention, mental health care or other counseling, legal or other victim services, or relocation.
To care for a family member who needs the sort of care listed above.
The employee’s need for leave during a public health emergency when a public official closed the employee’s workplace or the school or place of care of the employee’s child.
Effective Aug. 7, 2023, Colorado employees may take paid leave for the following additional uses:
Bereavement or to handle the financial and legal needs arising after a death of a family member.
When an employee must evacuate their residence or care for a family member whose school or place of care was closed due to inclement weather, power/heat/water loss, or other unexpected event.
The HFWA requires that paid sick leave accrues over time, with at least one hour earned for every 30 hours worked, up to a minimum of 48 hours per year. Any unused hours can carry over to the next year. Employees must be paid their regular hourly rate when they take sick leave, and employers can ask for documentation only if an employee is absent for four or more consecutive workdays.
EMPLOYER CONSIDERATIONS
Employers must update their policies to include these new reasons for paid sick leave and inform their employees about their rights. Failure to do so may result in fines or liability for unpaid wages.
LEAVE LAWS EXPANDED IN ILLINOIS
The Illinois Victims’ Economic Security and Safety Act (VESSA) has recently undergone significant amendments aimed at expanding the leave provisions available to employees dealing with the aftermath of a family member’s death resulting from a crime of violence. VESSA is applicable to all employers in Illinois and mandates that they provide unpaid leave to employees who are victims of domestic, sexual, or gender violence, as well as those affected by crimes of violence, including their family or household members. Prior to these changes, VESSA allowed employees to take leave for various reasons related to violence, such as seeking medical attention, counseling, victim services, legal assistance, and safety planning. The new amendments to VESSA introduce three additional reasons for leave. Employees can now take time off to:
Attend the funeral or alternative service of a family or household member who was killed in a crime of violence.
Make necessary arrangements following the death.
Grieve the loss of a loved one due to a violent crime.
To substantiate their need for leave, employees can provide documentation such as a death certificate, obituary, or written verification from relevant authorities. The amount of VESSA leave an employee is entitled to varies based on the size of the employer. For the new, amended purposes related to deaths involving crimes of violence, employees are entitled to two workweeks (10 workdays) of unpaid leave, to be taken within 60 days after receiving notice of the victim’s death. This additional leave does not affect an employee’s entitlement to other qualifying VESSA leave during the same 12-month period.
EMPLOYER CONSIDERATIONS
VESSA overlaps with the Illinois Family Bereavement Leave Act (FBLA), which provides bereavement leave for eligible employees following the death of a covered family member. However, VESSA covers all Illinois employees, while FBLA is limited to those eligible for federal Family and Medical Leave Act (FMLA) leave.
QUESTION OF THE MONTH
Q: We have a group in Canada with both U.S. and Canadian employees. For COBRA eligibility purposes, do we count the Canadian employees with the U.S. employees? A: Yes, you must count the foreign employees with the U.S. employees of the same company for purposes of determining whether the employer is subject to COBRA.
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PROPOSED CHANGES TO SHORT-TERM, LIMITED-DURATION INSURANCE
On July 7, 2023, the U.S. Department of Health and Human Services (HHS), the Department of Labor (DOL), and the Department of the Treasury proposed changes to modify the definition of short-term, limited-duration insurance (STLDI) and the conditions for fixed indemnity insurance to be considered an excepted benefit. The proposal also asks for comments on specified disease plans and level-funded plans. The proposal looks to clarify the tax treatment of certain benefit payments under group health plans.
Short-term, limited-duration insurance is meant to fill temporary gaps in coverage during transitions. The proposal suggests limiting the initial contract period to no more than three months and the maximum coverage period to no more than four months, including renewals. This change aims to differentiate STLDI from comprehensive coverage and reduce financial risk for individuals using it as a long-term alternative.
The proposal also forbids the same issuer from issuing multiple STLDI policies to the same policyholder within a year (known as “stacking”). STLDI sales mainly occur through group trusts or associations, and the proposal clarifies that such sales are not group coverage for federal law purposes.
Fixed indemnity plans provide income replacement rather than full medical coverage. The proposed regulations look to clarify that this coverage should not pay benefits on a per-service basis, to avoid mimicking comprehensive coverage without providing the same consumer protections. The proposal also includes payment standards for fixed indemnity plans and clarifies that such coverage must be offered independently without coordination with other health plans.
Consumer notices would provide clearer information on the differences between STLDI, fixed indemnity excepted benefits coverage, and comprehensive coverage.
PCORI FEE PAYMENT
Plan sponsors of self-funded medical plans, including health reimbursement arrangements (HRAs), were required to report and pay fees to the Patient-Centered Outcomes Research Institute (PCORI) by July 31. This fee on group health plans was created through the 2010 Patient Protection and Affordable Care Act (ACA).
Research funded by PCORI concentrates on healthcare challenges faced by families every day, including cancer, diabetes, maternal mortality, opioid addiction, mental health, and equitable access to care, among many others.
If you believe you should have paid this fee, contact your broker for information, and access additional information including Form 720 for to submit the fee.
GROUP HEALTH PLANS ENCOURAGED TO EXPAND ENROLLMENT PERIOD FOR INDIVIDUALS LOSING MEDICAID AND CHIP
In a letter dated July 20, 2023, from the Center for Medicare and Medicaid Services (CMS) to employers, plan sponsors, and issuers, the Biden Administration encouraged these entities to offer additional enrollment opportunities in group health plans for employees and their dependents who are losing coverage under Medicaid.
The U.S. is experiencing a health coverage transition due to the COVID-19 pandemic. The pause on Medicaid coverage verifications and terminations ended on March 31, 2023, and state Medicaid agencies are now resuming regular eligibility and enrollment operations, which include renewing coverage for eligible individuals and terminating coverage for those no longer eligible.
According to a Department of Health & Human Services report, about 3.8 million individuals who lose Medicaid eligibility could be eligible for employment-based coverage. The Administration believes that many people may need more than the typical 60-day window after losing Medicaid or Children’s Health Insurance Program (CHIP) coverage to apply for and enroll in other coverage, especially considering the unique circumstances surrounding the resumption of Medicaid and CHIP renewals.
To address this concern, CMS has announced a temporary special enrollment period on HealthCare.gov. Marketplace-eligible individuals who lose Medicaid or CHIP coverage and come to HealthCare.gov between March 31, 2023, and July 31, 2024, will be able to enroll. Employers are encouraged to follow suit by expanding special enrollment periods for individuals losing Medicaid or CHIP coverage. These changes would require a plan amendment and approval from the insurance carrier.
Employers interested in sharing this with employees should provide information about Medicaid and CHIP renewals to employees and encourage them to update their contact information with their state agency, using CMS resources available at www.medicaid.gov/unwinding. Employers can voluntarily open enrollment in their employment-based plan for those losing Medicaid or CHIP coverage.
PROPOSED RULES MAY IMPACT MHPAEA AND NQTL DATA COLLECTION
On July 25, 2023, the U.S. Departments of Treasury, Labor, and Health and Human Services (the “Departments”) issued a comprehensive set of guidelines to help employers comply with the requirements of the Mental Health Parity and Addiction Equity Act (MHPAEA). The guidelines, including definitions and examples, emphasize the importance of access to mental health and substance abuse treatment, and data collection for the production of analysis reports.
A new rule focuses on networks having an adequate number of appropriate providers. Low reimbursement rates for behavioral health care providers compared to primary care providers negatively impact access to care. Plans must collect and analyze network adequacy data and provider reimbursement rates to address this issue.
The guidelines also establish specific content and delivery requirements for the non-quantitative treatment limitations (NQTL) comparative analysis and set minimum data collection standards. The Departments expressed dissatisfaction with the current state of plans compliance with the NQTL analysis requirements and aim to bridge the gap with the proposed regulations.
These regulations are still in the proposal stage, and incoming comments may lead to modifications. Employers should review the guidelines with their brokers, paying particular attention to their network providers, as access to mental health and substance abuse disorder care is a top priority.
QUESTION OF THE MONTH
Q: My staff count has been fluctuating around 50 for some time. How do I know if or when I need to offer health insurance to my employees?
A: Whether an employer is an applicable large employer (ALE) is determined each calendar year, and generally depends on the average size of an employer’s workforce during the prior year.
If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year and therefore not subject to the employer shared responsibility provisions or the reporting provisions for the current year.
If an employer has at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is an ALE for the current calendar year, and is therefore subject to the employer shared responsibility provisions and the reporting provisions.
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.
Employers offering self-funded medical plans, including health reimbursement arrangements (HRAs) must report and pay fees to the Patient-Centered Outcomes Research Institute (PCORI) by July 31. If the plan was fully insured, employers can rely on their insurance carriers to handle the fee payment.
The current annual fees are:
For plan years that end on or after Oct. 1, 2021, and before Oct. 1, 2022, the indexed fee is $2.79.
For plan years that end on or after Oct. 1, 2022, and before Oct. 1, 2023, the indexed fee is $3.00.
Self-funded plans have three options to determine the average number of covered individuals for reporting and paying the PCORI fee: (i) actual count method, (ii) snapshot method, or (iii) Form 5500 method. There are special rules for counting if employers offer multiple self-funded plans or have an HRA integrated with a fully insured plan. Additional information and payment instructions are available.
MHPAEA OPT-OUT EXPIRES
The Centers for Medicare & Medicaid Services (CMS) has issued guidelines regarding changes to the Mental Health Parity and Addiction Equity Act (MHPAEA) for self-insured non-federal governmental health plans.
The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) requires group health plans and health insurance issuers to ensure that financial requirements (such as co-pays, deductibles) and treatment limitations (such as visit limits) applicable to mental health or substance use disorder (MH/SUD) benefits are no more restrictive than the predominant requirements or limitations applied to substantially all medical/surgical benefits.
The new guidelines state that these health plans cannot choose to opt out of complying with the MHPAEA if they have not already done so by December 29, 2022. Additionally, any existing opt-out elections that expire 180 or more days after that date cannot be renewed.
However, there is a special rule for certain health plans that are collectively bargained. If a self-insured, non-federal governmental plan is subject to multiple collective bargaining agreements (CBAs) of different lengths and had an MHPAEA opt-out election in effect on December 29, 2022, which expires on or after June 27, 2023, the plan can extend the election until the last CBA expires. To do so, the plan needs to follow a specific process, including providing documentation of the effective date and duration of existing CBAs to CMS, obtaining CMS approval, and submitting a renewal opt-out election to extend the plan’s existing election.
The guidelines also emphasize that CMS has the authority to take enforcement action, such as imposing civil money penalties, against non-federal governmental health plans that do not comply with the MHPAEA requirements.
PREGNANT WORKERS FAIRNESS ACT GOES INTO EFFECT
Part of the Consolidated Appropriations Act, 2022, effective June 27, 2023, the Pregnant Workers Fairness Act (PWFA) requires employers with 15 or more employees to provide reasonable accommodations for job applicants and employees with known limitations related to pregnancy, childbirth and related medical conditions. The PWFA covers only accommodations and does not replace federal, state, or local laws that are more protective of workers. Existing laws enforced by the Equal Employment Opportunity Commission (EEOC) protect workers from discrimination or termination based on these conditions.
Reasonable accommodations must be made unless the accommodation would impose an undue hardship on the employer’s business operations.
Covered employers cannot:
Require an employee to accept an accommodation without a discussion about the accommodation between the worker and the employer
Deny a job or other employment opportunities to a qualified employee or applicant based on the person’s need for a reasonable accommodation
Require an employee to take leave if another reasonable accommodation can be provided that would let the employee keep working
Retaliate against an individual for reporting or opposing unlawful discrimination under the PWFA or participating in a PWFA proceeding (such as an investigation)
Interfere with any individual’s rights under the PWFA
The EEOC will issue proposed regulations for comment before the final regulations take effect.
RXDC REPORT DUE TO CMS FOR 2022
The deadline for group health plans and plan issuers to submit information about prescription drugs and health care spending to the Department of Health and Human Services (HHS), the Department of Labor (DOL), and the Department of the Treasury was June 1, 2023, for the 2022 reporting year. Failure to comply with the reporting requirement may incur penalties of $100/day.
Although the reporting requirement is imposed on the group health plan, plan sponsors will certainly want to contract with the insurance carrier for fully insured plans and third-party entities such as their administrator for self-insured plans to provide the reporting on their behalf. Transferring the responsibility to an insurance carrier shifts the liability to the insurance carrier, but plan sponsors of self-insured plans remain liable for reporting assumed by a third-party entity.
FORM I-9 FLEXIBILITIES COME TO AN END
The COVID-19 flexibilities for employment eligibility verification through Form I-9 will end on July 31, 2023, according to U. S. Immigration and Customs Enforcement (ICE). The temporary flexibilities stated that employees hired on or after April 1, 2021, who worked exclusively in a remote setting due to COVID-19-related precautions were temporarily exempt from the physical inspection requirements of Form I-9 documentation. Employers will have until Aug. 30, 2023, to complete in-person physical document inspections for employees whose documents were inspected remotely. See I-9 Central Questions and Answers for more information.
QUESTION OF THE MONTH
Q: Is there a penalty for failure to file or pay the PCORI fee?
A: Although the PCORI statute and its regulations do not include a specific penalty for failure to report or pay the PCORI fee, the plan sponsor may be subject to penalties for failure to file a tax return because the PCORI fee is an excise tax. The plan sponsor should consult with its attorney about late filing or late payment of the PCORI fee. The PCORI regulations note that the penalties related to late filing of Form 720 or late payment of the fee may be waived or abated if the plan sponsor has reasonable cause and the failure was not due to willful neglect.
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.
CLAIMS SUBSTANTIATION FOR PAYMENT OR REIMBURSEMENT OF MEDICAL AND DEPENDENT CARE EXPENSES
A memorandum released by the IRS Chief Counsel responds to a request for assistance regarding the reimbursement of medical and dependent care expenses. Addressed is whether reimbursements of medical expenses from a health flexible spending arrangement (FSA) provided in a cafeteria plan should be included in an employee’s gross income if the expenses are not properly substantiated. The conclusion is that if any expenses, including those below a certain threshold, are not substantiated, the reimbursements must be included in the employee’s gross income.
The second issue concerns the method of substantiation for expenses. The document examines different scenarios, such as self-certification, sampling of expenses, not requiring substantiation for small amounts, and not requiring substantiation for charges with favored providers. The conclusion is that if a cafeteria plan does not require proper substantiation, it fails to operate in accordance with the regulations and the benefits must be included in the employee’s gross income.
Read the full description of the scenarios, an analysis of the relevant laws and regulations on income tax withholding and the regulations for cafeteria plans and substantiation of expenses.
2024 LIMITS ANNOUNCED FOR HDHPS, HSAS, AND EXCEPTED BENEFIT HRAS
The Internal Revenue Service (IRS) announced the new limits for high-deductible health plans (HDHPs), health savings accounts (HSAs), and excepted benefit health reimbursement arrangements (EBHRAs).
The new limits for both HDHPs and HSAs will go into effect for calendar year 2024 while the HRA limits will go into effect for plan years beginning in 2024.
PREVENTIVE HEALTH SERVICES COVERAGE AND THE BRAIDWOOD DECISION
On May 15, 2023, the Fifth Circuit Court of Appeals temporarily halted the enforcement of a district court’s ruling in the Braidwood Management Inc. v. Becerra case. The district court had invalidated a portion of the Affordable Care Act (ACA) that required coverage of certain preventive care services without cost-sharing, citing religious beliefs as the reason for the violation. The Justice Department appealed the decision, and while the appeal is ongoing, the Fifth Circuit issued an administrative stay, effectively reinstating the ACA’s requirement for full coverage of preventive care. A final decision from the Fifth Circuit is expected later this year.
The Braidwood decision concluded that the determination of certain preventive care requirements under the ACA violated the Appointments Clause of the United States Constitution. These requirements are typically based on recommendations from entities such as the United States Preventive Services Task Force (USPSTF) and the Health Resources and Services Administration (HRSA). However, the court’s ruling specifically targeted recommendations made by the USPSTF after March 23, 2010.
The Departments of Labor, Health and Human Services, and the Treasury, responsible for enforcing the preventive service coverage requirements, have appealed the court’s decision. The Departments have issued an FAQ clarifying the impact of the Braidwood ruling, stating that it only applies to services recommended by the USPSTF after March 23, 2010, and does not affect guidance related to immunizations recommended by the Advisory Committee on Immunization Practices (ACIP) or comprehensive guidance supported by the HRSA. State laws may still require coverage of USPSTF-recommended services.
Although the Braidwood decision suspends the enforcement of certain preventive care coverage, it is expected that few employers will make significant changes until the outcome of the case is determined through the appeals process.
QUESTION OF THE MONTH
Q: Throughout the pandemic, our company’s group health plan has covered COVID-19 testing and vaccines at no cost to plan participants. Is this still required now that the public health emergency has ended?
A: During the COVID-19 public health emergency (PHE), group health plans had to cover COVID-19 testing and vaccines without cost-sharing or restrictions. Coverage requirements for diagnostic testing no longer apply after the PHE, but plans are encouraged to continue providing coverage at no cost. However, plans may choose not to cover tests or impose cost-sharing. The requirement to cover COVID-19 vaccines as a preventive service remains in effect for non-grandfathered health plans, but coverage for out-of-network providers is no longer mandatory if there is an in-network option. Plans are encouraged to notify participants of any changes to COVID-related coverage, and modifications must be disclosed at least 60 days in advance, except for changes that revert to pre-PHE conditions.
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 BENEFIT PARAMETERS FOR MEDICARE PART D CREDITABLE COVERAGE DISCLOSURES ANNOUNCED
The Centers for Medicare and Medicaid Services (CMS) released a Fact Sheet announcing the 2024 benefit parameters for Medicare Part D. These factors are used to determine the actuarial value of defined standard Medicare Part D coverage under CMS guidelines.
Each year, Medicare Part D requires that employers offering prescription drug coverage to Part D eligible individuals (including active or disabled employees, retirees, COBRA participants, and beneficiaries) disclose to those individuals and CMS whether the prescription plan coverage offered is creditable or non-creditable. Creditable coverage meets or exceeds the value of defined standard Medicare Part D coverage.
Insurance carriers and providers of the prescription benefit will typically notify the plan sponsor if their prescription plan is creditable or non-creditable. The 2024 parameters for Medicare Part D are:
The Online Disclosure to CMS Form must be submitted to CMS annually, and upon any change that affects whether the drug coverage is creditable:
Within 60 days after the beginning date of the plan year
Within 30 days after the termination of the prescription drug plan
Within 30 days after any change in the creditable coverage status of the prescription drug plan
QUESTION OF THE MONTH
Q: Where can I find the updated RxDC reporting instructions?
To receive an email when the instructions are updated, create a Registration for Technical Assistance Portal (REGTAP) account. Select the checkbox “Please send me updates for the Consolidated Appropriations Act / No Surprises Act” in your account settings.
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.
