A health plan is more than a product or service; it’s a relationship. All productive and healthy relationships—especially in the benefits space—rely on trust. When an employer extends trust in a broker or insurance carrier to purchase something as critical as healthcare—for people as critical as their workers and families—we’re obligated to raise all factors that affect that purchase.
Assisting employers with benefits compliance requires understanding key benefits laws to effectively engage, educate, and be a better partner to employer clients. The six compliance obligations listed below are just as important to check on when talking with clients about their organizational health.
1. Employee Retirement Income Safety Act (ERISA)
Dating back nearly a half century, ERISA is essentially the heart of benefits law—setting the standards of protection for employees and their families when they enroll in employer-sponsored benefit plans. Meeting those standards can cause a compliance migraine for employers—particularly when it comes to creating, updating, and distributing Summary Plan Descriptions (SPDs).
Compounding the pain, employers might think their SPD will be created by their insurance carrier or broker, but this isn’t typically the case. It’s important that employers understand their responsibility to know which benefits are subject to ERISA rules, to have these documents created through a reputable vendor or an attorney, and to adhere to ERISA’s distribution requirements.
2. Affordable Care Act (ACA)
Upheld after a contentious congressional approval and multiple Supreme Court challenges, this 2010 law changed the landscape of health insurance in many ways, not least of which was creating new compliance obligations for employers. ACA requires employers to distribute a Summary of Benefits and Coverage (SBC) to participants and beneficiaries—including enrolled, nonactive employees—plus additional requirements for ALEs (applicable large employers), those with 50 or more full-time and full-time equivalent employees.
ACA’s hidden health hazard for employers is that the law requires commonly or jointly owned businesses to count all employees together. An HR professional for one business may not know that their employer owns multiple businesses (since commonly owned businesses may not share resources like HR and benefits departments). So, asking about ALE status is an important question brokers and carriers can ask clients as a way to open the conversation about overall ACA compliance obligations.
3. Transparency in Coverage
Signed into law in 2021, the No Surprises Act builds on ACA transparency rules by requiring group health plans to:
Post in-network negotiated rates, and out-of-network allowed amounts on a public-facing website.
Provide a web-based price comparison tool that allows individuals to estimate their cost-sharing responsibility for a specific item/service from a particular provider.
Annually report detailed information related to prescription drug costs, including most frequently dispersed brand-name drugs and most costly drugs.
Although fully insured plans will rely heavily on insurance carriers to make the information available, self-funded groups will bear the compliance obligations. It is critical for plan sponsors to work with carriers and third-party administrators to outline and clearly document who is responsible for each requirement.
4. Family and Medical Leave Act (FMLA)
FMLA, specifically designed to protect employees and their jobs when taking leave to care for themselves or a family member, exposes employers to compliance risk—especially as it pertains to maintaining employee health benefits.
The law requires employers to maintain an employee’s coverage, including employee contributions, as if they had not taken leave, and prohibits benefits termination while on leave except in limited circumstances.
To keep a compliance cold from turning into a full FMLA flu, broker partners must help employer clients understand their FMLA obligations, including: which benefits fall under the group health category, how to collect employee premiums while on FMLA leave, and how to provide mandatory information and notices while an employee is on FMLA leave.
5. COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA), passed in 1985, applies to most employers with 20 or more employees that sponsor group health plans. The law is relatively straightforward, a rarity in benefits regulations.
Still, it is imperative to know help clients understand COBRA’s key provisions to effectively support them in meeting compliance obligations, including the rules for removing an ineligible dependent if an employee neglects to notify their employer for six months after a divorce is final.
6. Medicare
As employees stay in the workforce longer, employers must understand Medicare rules related to:
Prescriptions—in particular, calculating whether their plan offers creditable coverage (compared to the standard Part D plan) and notifying Medicare-eligible employees about the creditable/non-creditable coverage calculation.
Disclosures—specifically, preparing and submitting to CMS (Centers for Medicare and Medicaid Services) disclosure about whether the plan provides creditable coverage.
Plan limits for cost-shifting when Medicare-eligible employees have dual coverage. The rules differ for employers with fewer than 20 employees, 20 to 99 employees, and 100 or more employees. For employers with 20 or more employees, Medicare rules limit employer plans as the primary payer from shifting an individual’s healthcare costs onto Medicare. Employers need to understand the interaction between their plan and Medicare to meet their compliance obligations.
It’s important for all parties involved to have a baseline understanding of benefits compliance obligations so they can effectively support employer clients in finding a benefits administration platform, a broker to assist with enrollment meetings, a carrier to find an in-network provider for a specialty service, and other scenarios. Compliance rules and regulations are complex. Partnering with other industry professionals, such as Mineral, is an excellent way to ensure that employer groups are educated, supported, and compliant.
The Affordable Care Act (ACA) Implementation FAQ Part 63, issued by the U.S. Departments of Labor, Health and Human Services, and the Treasury focuses on the Public Health Service Act, which mandates that non-grandfathered group health plans and health insurance issuers provide culturally and linguistically appropriate summaries of benefits and coverage (SBC) and claims and appeals notices.
The regulations stipulate accommodations for notices in counties where more than 10 percent of the population is literate only in a specific non-English language, as determined by American Community Survey (ACS) data. Plans and issuers must offer oral language services, provide notices in the relevant non-English language upon request, and include a statement in English notices indicating how to access language services (referred to as taglines).
Non-grandfathered group health plans and issuers must adhere to the guidance for plan or policy years beginning on or after January 1, 2025. This guidance ensures that the provision of SBC and claims and appeals notices aligns with cultural and linguistic competence standards.
Employer Considerations
Employers should be prepared to point out to applicable employees the tagline to access language services found in English language SBCs and notices.
REDUCED INSULIN PRICES FOR SOME
UnitedHealth’s pharmacy benefit manager unit, Optum Rx, announced the inclusion of eight insulin products in its reimbursement list, limiting out-of-pocket expenses to $35 or less for enrollees. These products, including short- and rapid-acting insulin from Eli Lilly, Novo Nordisk, and Sanofi will be moved to tier one, the preferred status with the lowest prices, effective January 1, 2024. The move is part of an effort by these major insulin manufacturers, who collectively control 90 percent of the U.S. insulin market, to reduce list prices by 70 to 78 percent this year or in 2024. The Biden administration and lawmakers have been urging insulin makers and pharmacy benefit managers to address the high prices of this crucial medication.
Employer Considerations
Employers should check their insurers’ Rx formulary as more carriers may follow suit to lower insulin prices. Self-funded plans may consider making this change to remain competitive with fully funded plans.
BLUECROSS BLUESHIELD MOVES INTO DIRECT CARE DELIVERY
In 2023, various BlueCross BlueShield (BCBS) plans underwent reorganization, engaging in corporate restructuring, mergers and acquisitions, or establishing subsidiaries focused on healthcare delivery to enhance competitiveness with larger insurers.
BCBS plans have been expanding their presence in healthcare delivery by opening medical clinics exclusively serving their members. In Washington, Premera Blue Cross collaborated with Kinwell Medical Group in 2022 to establish primary care clinics for its members. BCBS Arizona took a similar approach in 2023, launching Prosano Health Solutions, a new primary care subsidiary, with plans to address specific geographic areas in Arizona to improve access to care.
BCBS North Carolina recently announced its intention to acquire 55 North Carolina locations of FastMed, a national chain offering preventive, telehealth, occupational health, primary care, and urgent care services. This move is aimed at enhancing healthcare services, particularly in rural areas with limited access to resources.
Employer ConsiderationsEmployers covered by BCBS should ask their insurance broker whether the carrier provides a direct care option near them.
CALIFORNIA TAKES A STEP TOWARD SINGLE-PAYER SYSTEM
Governor Gavin Newsom signed Senate Bill 770, a significant step toward universal healthcare in California. The legislation directs the state’s Health and Human Services Agency to collaborate with the federal government to create a unified health financing system for all Californians. This move could pave the way for a single-payer system, covering every resident and funded by state and federal resources, including Medicaid and Medicare funds.
Senate Bill 770 aims to establish a uniform standard of healthcare accessible to all individuals, irrespective of factors such as age, income status, employment status, immigration status, and other variables. As California undergoes modifications in its Medi-Cal system, Michael Lighty, president of Healthy California Now, emphasizes that certain persisting issues can only be effectively addressed through comprehensive reforms across the entire healthcare system.
The law requires California’s health secretary to provide recommendations on crafting a federal waiver by June 1, 2024, potentially allowing the state to access federal financing for a universal healthcare system.
While the legislation faced opposition, including criticism from both the left and the right, it suggests an incremental approach to healthcare reform in California. The move aligns with Governor Newsom’s 2018 campaign promise of supporting a single-payer system. Despite the diverse opinions, the signing of SB 770 underscores California’s commitment to exploring avenues for achieving universal healthcare.
On November 9, 2023, Chicago replaced its existing paid sick leave ordinance with the Chicago Paid Leave and Paid Sick and Safe Leave ordinance, effective December 31, 2023. The new ordinance modifies the accrual system, allowing employees to earn one hour of paid sick leave plus one hour of paid leave for every 35 hours worked, with a yearly maximum of 40 hours of each. Employees can carry over 16 hours of accrued paid leave and 80 hours of accrued sick leave to the next benefit year. Alternatively, employers can front-load 40 hours of each at the start of each benefit year.
Unlike the prior ordinance, the new law mandates that accrued, unused leave be paid to employees upon termination or when no longer covered by the ordinance, subject to a phased approach based on employer size. Any excess leave beyond annual carryover limits is forfeited. New employees become eligible for paid sick leave after 30 days and paid leave after 90 days of employment. Paid leave can be used for any purpose, and employers cannot compel employees to disclose the reason.
Employer Considerations
Employers must comply with various notice and posting requirements, including providing written notice of the paid-time-off policy at the start of employment and before any changes. A 14-day notice of policy changes affecting final compensation must be given, and information about leave accrual and usage must be provided with each wage payment. Employers with Chicago-based employees should carefully review and adjust their sick leave and paid leave policies to align with the new ordinance, considering its differences from the previous paid sick leave ordinance and the upcoming statewide Paid Leave for All Workers Act.
QUESTION OF THE MONTH
Q: Can former employees who are on COBRA and paying monthly premiums to a TPA for COBRA deduct those premium amounts on their taxes? For example, if a person is on COBRA for three months in 2023, can they deduct COBRA premium payments from taxable income on their 2023 federal tax return?
A: Yes, COBRA premiums can be deducted on an individual’s federal income taxes provided they itemize their taxes and the person’s medical expenses (including COBRA premiums) exceed 7.5% of their adjusted gross income.
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.
When the COVID-19 public health emergency and national emergency were declared in 2020, no one anticipated they would still be in place in 2023.
On January 30, 2023, the President announced the intent to end the emergencies on May 11, 2023. The impact of the emergencies on employer-sponsored benefits affected certain coverages, reimbursements, and timelines. Multiple laws and regulations passed after 2020 created temporary rules tied to the end of the emergencies. As a result, employers will face significant tasks and obligations to unwind the changes from the last three years.
There are two areas of significance for employers: free coverages that will end, and required deadlines that will begin. Here’s what you need to keep in mind for each:
1. Free coverages that will end
The Families First Coronavirus Response Act (FFCRA) required health plans to cover the cost of COVID-19 testing and related services with no cost-sharing. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) expanded the FFCRA by adding over-the-counter tests and vaccinations by out-of-network providers.
When the emergency ends, this required no-cost coverage of testing and related services will sunset. Employers with fully insured plans should speak with their carrier to discuss whether there will be any option to continue the coverage with no cost-sharing. Each state’s Department of Insurance should provide guidance to carriers on when cost-sharing will resume. Self-funded groups may have more flexibility to continue to offer testing and related services with no-cost sharing. Due to the Affordable Care Act’s preventative services requirement, fully approved COVID-19 vaccines will remain covered, without cost, by in-network providers. A reduction in coverage will require a 60-day advance notice to affected employees.
Another specific impact is stand-alone telehealth benefits. Employees who were ineligible for their employer’s health plan were permitted to enroll in stand-alone telehealth benefits. The relief applies for the plan year that begins on or before the end of the emergency. An employer providing stand-alone telehealth will not be able to continue the coverage past the end of the current plan year and should review their policy to modify the language for stand-alone coverage. A reduction in coverage requires sending a notice to affected employees 60 days prior to the plan year end date.
2. Required deadlines that will begin
Many provisions of the last three years are tied to outbreak period rules issued in May 2020. The outbreak period lasts until 60 days after the end of the national emergency. These rules extended several key deadlines related to COBRA, special enrollment periods, claim submission, and appeal processes.
The Employee Benefits Services Administration issued a notice in 2021 providing guidance and clarity for employers, stating that the maximum period a deadline may extend is the earlier of one year from the date an original deadline would begin, or 60 days after the end of the outbreak period. This one-year period is known as tolling.
The challenge for employers will be tracking each individual’s tolling period as the end of the outbreak period nears. For example, an employee traditionally has 60 days to elect COBRA continuation coverage. The 60-day deadline would not begin until one year and 60 days later or 60 days after the outbreak period.
To illustrate this, imagine this scenario:
Employee A’s benefits were terminated on December 31, 2022.
Traditionally, they would have until March 2023 to elect COBRA.
The relief states the 60-day countdown would not begin until the earlier of one year (December 2023) or July 10, 2023 (60 days after the end of the outbreak period).
Since the outbreak period end date is planned for May 11, 2023, which is earlier than the one-year tolling, Employee A must make their COBRA election by September 20, 2023.
The tolling period has been a point of confusion for employers and may be more confusing as the outbreak period now has a planned end date of May 11, 2023.
The Department of Health and Human Services (HHS) provided a roadmap on February 9, 2022, outlining what may and may not be affected by the end of the emergencies. HHS also indicated it will continue “to review the flexibilities and policies implemented during the COVID-19 PHE to determine whether others can and should remain in place, even for a temporary duration, to facilitate jurisdictions’ ability to provide care and resources to Americans.”
Employers and plan sponsors should continue monitoring federal and state government resources. Employers may need to revise plan documents and provide new notifications to employees when coverage is changed or eliminated.
Enrolling in Medicare does not cause COBRA to start. Under the federal rules, COBRA must be offered to persons enrolled in the employer’s health plan only if they lose coverage because of certain specific events. Termination of employment is an example of a COBRA qualifying event. Becoming eligible for Medicare, or enrolling in Medicare, is not a COBRA qualifying event.
On the other hand, if someone is already on COBRA due to a prior event, and then they enroll in Medicare, COBRA will end. Early termination of COBRA due to Medicare enrollment only affects that person. If other family members also are on COBRA, they may continue for the remainder of the COBRA period assuming their premiums are paid when due and they do not enroll in Medicare or another group health plan.
Let’s look at another scenario: An employee enrolls in Medicare while continuing as an active employee covered under the employer’s health plan. Then the employee leaves the company. This will trigger a COBRA offer since loss of coverage due to termination of employment is a COBRA qualifying event. Can the former employee elect COBRA despite being enrolled in Medicare? Yes, because they were already enrolled in Medicare before they elected COBRA. They probably will choose not to elect COBRA due to the cost, and since Medicare will be the primary claims payer, but they have the choice.
There is one other rule about COBRA and Medicare that can be confusing. As we said, the employee who enrolled in Medicare while still working and covered under the employer’s plan later had a COBRA event. When loss of coverage is due to termination of employment, the COBRA continuation period is 18 months. Due to a special provision in the COBRA rules, the maximum COBRA period for the spouse or child (if also enrolled in the employer’s health plan when the COBRA event occurred) might be longer than 18 months. If the employee had first enrolled in Medicare no more than 18 months before the COBRA event, the maximum period for the spouse and children is 36 months counting from the employee’s Medicare enrollment.
For instance, let’s call the active employee Mary and say she enrolled in Medicare in January 2021 and then lost her group coverage when she terminated employment in May 2021. So, she enrolled in Medicare fewer than 18 months before her COBRA event. Her maximum COBRA period will be 18 months counting from May 2021, but COBRA for her spouse and children (if enrolled) could run for up to 36 months counting from January 2021.
Lastly, employers sometimes ask whether they can automatically terminate an employee’s (or spouse’s) group health coverage at age 65. Due to the federal Medicare as Secondary Payer (MSP) rules, employers with 20 or more workers cannot take into account anyone’s potential Medicare status in administering the group health plan. An employer with fewer than 20 workers also may be prohibited from basing health plan eligibility on the employee’s age due to the federal Age Discrimination in Employment Act (ADEA). We recommend employers review these matters with legal counsel.
Recently, the Internal Revenue Service (IRS) issued the instructions for Forms 1094/1095 for the 2017 tax year, announced PCORI fees for 2017-18, and announced cost-of-living adjustments for 2018. The IRS provided additional guidance on leave-based donation programs’ tax treatment and released an information letter on COBRA and Medicare. Here’s a recap of these actions for your reference.IRS Announces Cost-of-Living Adjustments for 2018
The IRS released Revenue Procedures 2017-58 and Notice 2017-64 to announce cost-of-living adjustments for 2018. For example, the dollar limit on voluntary employee salary reductions for contributions to health flexible spending accounts (FSAs) is $2,650, for taxable years beginning with 2018. Request UBA’s 2018 desk reference card with an at-a glance summary of the various limits. IRS Announces PCORI Fee for 2017-18
The IRS announced the Patient-Centered Outcomes Research Institute (PCORI) fee for 2017-18. The fee is $1.00 per covered life in the first year the fee is in effect. The fee is $2.00 per covered life in the second year. In the third through seventh years, the fee is $2.00, adjusted for medical inflation, per covered life.
For plan years that end on or after October 1, 2016, and before October 1, 2017, the indexed fee is $2.26. For plan years that end on or after October 1, 2017, and before October 1, 2018, the indexed fee is $2.39.
For more information, view UBA’s FAQ on the PCORI Fee. IRS Provides Additional Guidance on Leave-Based Donation Programs’ Tax Treatment
Last month, the IRS provided guidance for employers who adopt leave-based donation programs to provide charitable relief for victims of Hurricane and Tropical Storm Irma. This month, the IRS issued Notice 2017-62 which extends the guidance to employers’ programs adopted for the relief of victims of Hurricane and Tropical Storm Maria.
These leave-based donation programs allow employees to forgo vacation, sick, or personal leave in exchange for cash payments that the employer will make to charitable organizations described under Internal Revenue Code Section 170(c).
The employer’s cash payments will not constitute gross income or wages of the employees if paid before January 1, 2019, to the Section 170(c) charitable organizations for the relief of victims of Hurricane or Tropical Storm Maria. Employers do not need to include these payments in Box 1, 3, or 5 of an employee’s Form W-2. IRS Releases Information Letter on COBRA and Medicare The IRS released Information Letter 2017-0022 that explains that a covered employee’s spouse can receive COBRA continuation coverage for up to 36 months if the employee became entitled to Medicare benefits before employment termination. In this case, the spouse’s maximum COBRA continuation period ends the later of: 36 months after the employee’s Medicare entitlement, or 18 months (or 29 months if there is a disability extension) after the employment termination.
By Danielle Capilla
Originally Published By United Benefit Advisors
