The Biden administration recently announced a new framework for the budget reconciliation package, known as the Build Back Better Act (H.R. 5376). The legislation is still being negotiated, and the timing for when a vote is expected is uncertain. If the proposed legislation is enacted into law in its current form, several provisions would have notable impacts on employer-sponsored health and welfare benefit programs.
Recently, the Internal Revenue Service (“IRS”), in coordination with the Departments of Labor and Health and Human Services (collectively, “the Departments”), issued Notice 2021-58 which clarifies the deadlines for making COBRA elections and premium payments under the Outbreak Period rules.
Briefly, in response to the COVID-19 pandemic, the Departments issued Emergency Relief Notices that established a disregarded period with respect to the following COBRA deadlines:
The disregarded period began on March 1, 2020, is measured on a participant-by-participant basis, and ends the earlier of:
There has been a lot of confusion around the Outbreak Period relief and applicable deadlines related to COBRA. IRS Notice 2021-58 provides some welcome clarification.
The guidance clarifies that the disregarded period for electing COBRA and the disregarded period for making the initial or subsequent COBRA premium payments generally run concurrently. This means an individual who delays electing COBRA will have up to one year of total disregarded time to make the COBRA election and to make the initial COBRA payment (unless transition relief applies).
This guidance is helpful, as there was concern that an individual could have an additional year after electing COBRA to make the initial COBRA premium payment. This guidance confirms that the maximum one-year timeframes for the COBRA election and the initial COBRA premium payment run at the same time.
Therefore, individuals must make the initial COBRA election by the earlier of:
If an individual elected COBRA continuation coverage outside of the initial 60-day COBRA election timeframe, that individual generally will have one year and 105 days after the date the COBRA notice was provided to make the initial COBRA premium payment (60 days to make the initial COBRA election plus 45 days to make the initial COBRA premium payment = 105 days.)
If an individual elected COBRA continuation coverage within the initial 60-day COBRA election timeframe, that individual will have one year and 45 days after the date of the COBRA election to make the initial COBRA premium payment.
For each subsequent COBRA premium payment, the maximum time an individual has to make a payment while the Outbreak Period continues is one year from the date the payment originally would have been due, including the mandatory 30-day grace period.
The guidance provides that an individual will not be required to make the initial premium payment before November 1, 2021, even if November 1, 2021 is more than one year and 105 days after the date the election notice was received, provided that the individual makes the initial premium payment within one year and 45 days after the date of the COBRA election.
This transition relief is available because there was some confusion as to whether the disregarded period for making the initial premium payment begins on the date of the COBRA election and individuals who made elections more than 60 days after receipt of the election notice may have less time than they anticipated to make the initial premium payment.
As a reminder, the disregarded periods under the Emergency Relief Notices do not apply to the periods for providing required notices of the American Rescue Plan Act (“ARP”) COBRA subsidy or electing subsidized COBRA coverage (the subsidy was available from April 1, 2021 through September 30, 2021).
However, the disregarded periods continue to apply to payments of COBRA premiums after the end of the subsidy period to the extent the individual is still eligible for COBRA and the Outbreak Period has not ended.
The guidance provides 10 examples to better illustrate how the relief applies. A few of these examples are summarized below. The examples assume the Outbreak Period has not ended during the specified periods.
Example 1: COBRA election made more than 60 days after receipt of COBRA election notice.
Joe has a qualifying event triggering COBRA on August 1, 2020 and receives the COBRA election notice that same day. Joe elects COBRA on February 1, 2021, retroactive to August 1, 2020.
Assume Joe makes his November 2020 payment timely (by December 1, 2021). However, Joe does not make a payment for December 2020 by December 31, 2021. What happens?
Example 2: COBRA election made within 60 days after receipt of COBRA election notice.
Mary has a qualifying event triggering COBRA on October 1, 2020 and receives her COBRA election notice that same day. Mary timely elects COBRA on October 15, 2020 (retroactive to October 1, 2020).
Example 3. Timeframe for electing COBRA.
Karen has a qualifying event triggering COBRA on August 1, 2020 and receives her COBRA election notice that same day.
Example 4. Applying transition relief to COBRA premium payments due before November 1, 2021.
Avery has a qualifying event triggering COBRA on April 1, 2020 and receives the COBRA election notice that same day. Avery elects COBRA on October 1, 2020 retroactive to April 1, 2020. As of July 15, 2021, Avery has not made the initial COBRA premium payment.
Example 5. Deadline to elect retroactive COBRA under the Emergency Relief Notices and not electing the COBRA subsidy.
Morgan had a qualifying event because he was involuntarily terminated from employment on August 1, 2020 and received a COBRA election notice that same day. As of September 1, 2021, he has not elected COBRA. Morgan also is an assistance eligible individual under ARP and received the required election notice on May 31, 2021. Morgan did not elect COBRA with premium assistance.
Employers should:
For a copy of Notice 2021-58, visithttps://www.irs.gov/pub/irs-drop/n-21-58.pdf.
The Department of Health and Human Services (“HHS”) issued guidance in the form of questions and answers addressing how the HIPAA Privacy Rule applies in regard to COVID-19 vaccinations. The guidance makes clear that HIPAA’s privacy rules are not an obstacle to an employer that would like to establish a vaccination requirement for its employees and customers.
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) is a federal law that establishes national standards to protect sensitive patient health information, commonly referred to as “protected health information” or “PHI,” from being disclosed without the patient’s consent or knowledge. HIPAA has three main components:
Many employers questioned whether the HIPAA Privacy Rule would limit the ability of an employer to have a mandatory COVID-19 vaccination policy with respect to its employees. The guidance makes clear that HIPAA’s Privacy Rule does not prevent an employer from putting forth such a policy.
The guidance restates an established HIPAA principle – that the Privacy Rule only applies to covered entities, including health plans, certain healthcare providers, healthcare clearinghouses and their business associates. While self-funded health plans generally operate through sponsoring employers, the guidance reiterates that the Privacy Rule does not apply to employers acting in their capacity as employers or employment records.
The HIPAA Privacy Rule does not prohibit any person (e.g., an individual or an entity such as a business), including HIPAA covered entities and business associates (which are functioning at such time in their role as an employer), from asking whether an individual has received a particular vaccine, including the COVID-19 vaccines.
HHS also explained that because HIPAA regulates the use and disclosure of PHI and not the ability to request information, the HIPAA Privacy Rule does not prohibit a covered entity from receiving COVID-19 vaccination information. However, after receipt of such information, an employer would likely have a duty to safeguard that information and keep it confidential.
The guidance also provides that an employer may require employees to disclose whether they have received a COVID-19 vaccine to the employer, clients or other parties. HHS observed that federal anti-discrimination laws do not prevent an employer from choosing to require that all employees physically entering the workplace be vaccinated against COVID-19 and provide documentation or other confirmation that they have met this requirement, subject to reasonable accommodation provisions, other equal employment opportunity considerations and conflicting state laws, as applicable. As stated before, once this information is collected, however, it must be kept confidential and stored separately from an employee’s personnel file.
The HIPAA rules generally do not regulate what information can be requested from employees as part of the terms and conditions of employment. The following examples from HHS make clear that HIPAA does not prohibit a covered entity or business associate from requiring or requesting each workforce member to:
Finally, HHS provided that the HIPAA Privacy Rule generally does prohibit health care providers from disclosing an individual’s PHI, including whether they have received a COVID-19 vaccine, to the individual’s employer without consent from the individual, unless an exception applies. Exceptions could include disclosures made for treatment, payment or other health care operations.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020. Among other things, the CARES Act offered temporary relief related to telehealth and other remote care services when offered with a qualified high deductible health plan (“HDHP”) and health savings account (“HSA”).
Specifically, for plan years beginning on or before December 31, 2021, telehealth and other remote care services may be offered before satisfaction of the deductible without jeopardizing an individual’s eligibility to contribute to an HSA.
Unless further extended by legislation or regulation, this relief expires for plan years that begin on or after January 1, 2022. Employers that took advantage of this relief should now plan to charge a fair market value for telehealth or other remote care services for participants to retain HSA eligibility.
While there is support for further extending or making permanent this relief, to date there has been no legislative or regulatory action.
Employers with HDHPs that offered free (or reduced cost) telehealth or remote care services prior to satisfaction of the deductible should prepare to adjust their plan offerings and charge a fair market value for these services effective with the first plan year that begins on or after January 1, 2022.
We will continue to monitor developments in this area.
On October 4, 2021, the Departments of Labor, Health and Human Services, and the Treasury (together, the “Departments”) issued FAQ Part 50 addressing several important issues concerning group health plans.
Notably, the guidance:
Below you will find details on the guidance.
The FAQs confirm much of what we thought to be true as it relates to the use of incentives in a group health plan to encourage COVID-19 vaccinations.
A wellness program that conditions a premium discount on an individual obtaining a COVID-19 vaccine is considered an activity-only wellness program, a type of health-contingent program, which must meet the following five requirements:
While the example specifically speaks to a “premium discount,” a reward in this context may also include a penalty. Therefore, premium surcharges or change in cost-sharing (such as an increased deductible for unvaccinated employees) remain viable options so long as the plan otherwise meets the five HIPAA criteria for activity-only programs.
In addition:
Finally, compliance with the HIPAA wellness rules is not determinative of compliance with any other law, including GINA, ADA, and state law. Importantly, these FAQs do not address incentives offered by employers as part of workplace policies and unrelated to their group health plan.
According to the FAQs, effective as of January 5, 2021, non-grandfathered group health plans must cover COVID-19 vaccines and their administration, without cost sharing, immediately once the particular vaccine becomes authorized under an EUA or approved under a BLA and according to the scope of the applicable approval. This includes any EUA or BLA amendment, such as to allow for the administration of an additional dose to certain individuals, administration of booster doses, or the expansion of the age demographic for whom the vaccine is authorized or approved.
This is a change from the earlier rule which provided a 15-business day period after the approval of the Advisory Committee on Immunization Practices (“ACIP”) before implementation. The Departments note in the FAQ that they are aware plans and carriers may not have understood this change and will only enforce the timing and coverage requirement prospectively, consistent with the scope of the particular EUA or BLA, to the extent additional coverage beyond what was articulated in previous guidance is required.
If considering COVID-19-related incentives in a group health plan, employers should carefully review this guidance and prepare to comply with the five criteria for health-contingent, activity-only wellness programs.
Employers should not deny eligibility for coverage or otherwise limit/restrict coverage for certain COVID-19 related items and services to unvaccinated participants and dependents.
Attached to this Update is an appendix to highlight additional FAQs and considerations when implementing a COVID-19 vaccination program as part of a wellness program.
On September 13, 2021, proposed regulations were issued that would implement certain provisions of the No Surprises Act, requiring group health plans to submit information related to air ambulance claims to the Department of Health and Human Services (“HHS”) for 2022 and 2023.
Major medical health plans (insured and self-insured, grandfathered and non-grandfathered) are subject to this requirement.Data
The report must include the following data elements with respect to air ambulance services provided under a group health plan:
As the requested information is claims-level data as opposed to aggregate data, HHS proposes to collect only that claims-level data that would be sufficient for producing the comprehensive report required by the No Surprises Act. HHS also intends to collect and maintain the information using information technology systems that are designed to meet all of the security standards protocols established under federal law or by HHS.
Plans must submit data regarding air ambulance services on a calendar year (“CY”) basis for 2022 and 2023 within 90 days of the end of the calendar year.
An employer with an insured plan satisfies the reporting requirements if it requires the health insurance issuer offering the coverage to report the required information pursuant to a written agreement. In this case, the issuer and not the plan is liable for any failure to file.
An employer with a self-funded plan may satisfy the reporting requirements by entering into a written agreement with the third-party administrator (“TPA”). The plan generally remains liable. However, nothing prevents a self-insured group health plan from including a clause in the written agreement for the TPA indemnifying the plan in the event the TPA fails to submit a complete or timely report.
Employers will not have the required data necessary to report. Therefore, employers should begin reaching out to carriers and TPAs handling their health programs during the calendar year 2022 and enter into written agreements with them, requiring issuers and TPAs to handle reporting. Employers with self-funded plans should consider adding indemnification provisions to their agreements in the event the TPA is not compliant.
As a reminder, insurance carriers are required to satisfy certain medical loss ratio (“MLR”) thresholds. This generally means that for every dollar of premium a carrier collects with respect to a major medical plan; it should spend 85 cents in the large group market (80 cents in the small group market) on medical care and activities to improve health care quality. If these thresholds are not satisfied, rebates are available to employers in the form of a premium credit or check.
If a rebate is available, carriers were required to distribute MLR checks to employers by September 30, 2021.
Importantly, employers must distribute any amounts attributed to employee contributions to employees and handle the tax consequences (if any).
This does not apply to self-funded plans.
Insurance carriers are required to satisfy certain medical loss ratio (“MLR”) thresholds. This generally means that for every dollar of premium a carrier collects with respect to a major medical plan; it should spend 85 cents in the large group market (80 cents in the small group market) on medical care and activities to improve health care quality. If these thresholds are not satisfied, rebates are available to enrollees.
This does not apply to self-funded plans.
The rules around rebates are complex and require careful review with ERISA counsel. Among other things, an employer receiving a rebate as a policy holder will need to determine:
The following questions and answers are designed to provide information as to what employer action may be necessary.
Carriers determine MLR on a state basis by market segment (individual, small group, or large group). Carriers do not disaggregate by type of plan within these markets (e.g., PPO v. HMO v. HDHP) or by policyholder so the carrier will have to let you know the amount.
A carrier is not required to provide a rebate to an enrollee if the total rebate owed is less than $20 per subscriber ($5.00 when a carrier pays the rebate directly to each subscriber). This rule regarding de minimis amounts only applies to the carrier, not to employers refunding amounts to participants.
Yes.
For each MLR reporting year, at the time any rebate of premium is provided, a carrier must provide the policyholder and each current enrollee who was also enrolled in the MLR reporting year in a form prescribed by HHS.
Employers do not have to notify employees, but they may want to address the notices being distributed by the carriers. Language similar to the following provides a starting point for such a notice:
Employees should have received a notice of rebate from [carrier]. In short, [Employer] received a rebate check in the amount of $_____. Amounts attributable to participant contributions will be used to [reduce premium amounts] for [currently enrolled employees] in accordance with legal requirements. These amounts will be reflected in the [August ___] paychecks.
Carriers may issue rebates in the form of either a premium credit (i.e., reduction in a premium owed), a lump-sum payment, a lump-sum reimbursement to the account used to pay the premium if an enrollee paid the premium using a credit card or direct debit, or a “premium holiday,” if this is permissible under state law.
Rebates must be paid by September 30 each year. A carrier that fails to timely pay any rebate must additionally pay the enrollee interest at the current Federal Reserve Board lending rate or 10% annually, whichever is higher, on the total amount of the rebate, accruing from the date payment was due.
Yes, unless they paid 100% for all tiers of coverage.
Carriers will generally send rebate checks to employers and employers must mete out any amounts attributed to employee contributions to employees and handle the tax consequences.
There is no one formula for employers to use, but guidance has been provided to aid employers.
To the extent that rebates are attributable to participant contributions, they constitute plan assets. Plan assets must be handled in accordance with the fiduciary responsibility provisions of Title I of ERISA.
If the employer is the policyholder, determining the plan’s portion, if any, may depend on provisions in the plan or the policy or on the manner in which the plan sponsor and the plan participants have shared in the cost of the policy. If the plan or its trust is the policyholder, in the absence of specific plan or policy language to the contrary, the entire rebate would constitute plan assets, and the policyholder would be required to comply with ERISA’s fiduciary provisions in the handling of rebates that it receives.
The HHS regulations and related DOL guidance for ERISA plans leave to the policyholder the decision as to how to use the portion of a rebate that constitutes plan assets, subject to ERISA’s general standards of fiduciary conduct. The DOL notes that, in choosing an allocation method, “the plan fiduciary may properly weigh the costs to the plan and the ultimate plan benefit as well as the competing interests of participants or classes of participants provided such method is reasonable, fair and objective.” An allocation does not necessarily have to exactly reflect the premium activity of policy subscribers. A plan fiduciary may instead weigh the costs to the plan and the competing interests of participants or classes of participants when fashioning an allocation method, provided the method ultimately proves reasonable, fair, and objective. If the fiduciary finds that the cost of passing through the rebate to former participants would exhaust most of those rebates, the proceeds can likely be allocated to current participants.
Guidance does not address how to handle an MLR rebate where the amount is inconsequential (e.g., a dollar per participant). Taking a cue from DOL Field Assistance Bulletin No. 2006-01, a fiduciary may be able to conclude, after analyzing the relative costs, that no allocation is necessary, when the administrative costs of making correction far exceed the amount of the allocation.
If a plan provides benefits under multiple policies, the fiduciary is instructed to allocate or apply the plan’s portion of a rebate for the benefit of participants and beneficiaries who are covered by the policy to which the rebate relates provided doing so would be prudent and solely in the interests of the plan according to the above analysis. But, according to the DOL, “the use of a rebate generated by one plan to benefit the participants of another plan would be a breach of the duty of loyalty to a plan’s participants.”
With respect to policyholders that have a group health plan but not a governmental plan or a plan subject to ERISA, carriers must obtain written assurance from the policyholder that rebates will be used for the benefit of current subscribers or otherwise must pay the rebates directly to subscribers.
The final rule issued on February 27, 2015 provides that subscribers of non-federal governmental or other group health plans not subject to ERISA must receive the benefit of MLR rebates within three (3) months of receipt of the rebate by their group policyholder, just as subscribers of group health plans subject to ERISA do.
As soon as possible following receipt and, in all cases, within 3 months of receipt.
There is no one way to determine this, but guidance has been provided to aid employers.
Reductions in future premiums for current participants is probably the best method.
If proceeds are to be paid to participants in cash, the DOL is likely to require that payments go to those who participated in the plan at the time the proceeds were “generated,” which may include former employees. An option that may be easier to administer is to keep the proceeds in the plan and provide a “premium holiday” (suspension of required premiums) or a reduction in the amount of employee-paid premiums.
The interim final regulations for non-ERISA governmental plans require that rebates be used to reduce premiums for all health plan options for subscribers covered when the rebate is received, to reduce premiums for current subscribers to the option receiving the rebate, or as a cash refund to current subscribers in the option receiving the rebate. In each case, the regulations allow the rebate to be allocated evenly or in proportion to actual contributions to premiums. Note that the rebate is to be used to reduce premiums for (or pay refunds to) employees enrolled during the year in which the rebate is actually paid (rather than the MLR reporting year on which the rebate was calculated).
To recap, here are some options to consider:
The employer could also consider, with counsel, whether providing benefit enhancements or payment of reasonable plan expenses would be considered permissible.
When employees pay their portion of the premiums for employer-sponsored health coverage on a pre-tax basis under a cafeteria plan, MLR rebates will be subject to federal income tax and wages. Briefly:
The result is the same regardless of whether the MLR rebates are provided only to employees participating in the plan both in the year employees paid the premiums being rebated and the year in which the MLR rebates are paid, or to all employees participating in the plan during the year the MLR rebates are paid (even if some employees did not participate in the plan during the year to which the rebate applies.)
When employees pay their portion of the premiums on an after-tax basis, MLR rebates generally are not subject to federal income tax or employment taxes. This applies when the rebate is provided as a reduction in premiums or as a cash. The result is the same regardless of whether the MLR rebates are provided only to employees participating in the plan both in the year employees paid the premiums being rebated and the year in which the MLR rebates are paid, or to all employees participating in the plan during the year the MLR rebates are paid (even if some employees did not participate in the plan during the year to which the rebate applies.)
Employers should review the tax implications of a rebate with tax advisors. Generally, amounts used for benefits (e.g., to pay premiums with respect to insured plans) should not be taxable.
Probably not.
If employee contributions are paid on a pre-tax basis and there is a mid-year rate change, the cafeteria plan must determine whether such a change is permitted under the Section 125 rules.
If the plan incorporates the permitted election change rules, the relevant issue is whether this change in cost is permitted under the regulations.
Generally, MLR rebates are expected to be fairly low dollar amounts and may not rise to the level of a significant change. Employers should consider either taking the position that the cost change is insignificant or that the cost change is significant and the “corresponding change” is to simply allow the reduction or increase. The cafeteria plan document should be consistent with the employer’s position.
Employers sponsoring a group health plan with prescription drug benefits are required to notify their Medicare-eligible participants and beneficiaries as to whether the drug coverage provided under the plan is “creditable” or “non-creditable.” This notification must be provided prior to October 15th each year. Also, following the plan’s annual renewal, the employer must notify the Centers for Medicare & Medicaid Services (“CMS”) of the creditable status of the drug plan.
Employers should send these notices no later than October 15, 2021 if they haven’t done so already.
Below you will find information that summarizes these requirements in more detail.
Medicare Part D, the Medicare prescription drug program, imposes a higher premium on beneficiaries who delay enrollment in Part D after initial eligibility unless they have employer-provided coverage that is creditable (meaning equal to or better than coverage provided under Part D).
Employers that provide prescription drug benefits are required to notify Medicare-eligible individuals annually as to whether the employer-provided benefit is creditable or non-creditable so that these individuals can decide whether or not to delay Part D enrollment.
Also, the employer must annually notify CMS as to whether or not the employer plan is creditable.
In order to assist employers in their compliance obligations, CMS has issued participant disclosure model notices for both creditable and non-creditable coverage, which can be found at:https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/Model-Notice-Letters(notices last updated by CMS for use on or after April 1, 2011).
These model notices, when appropriately modified, will serve as a proper notice for purposes of this requirement. Spanish notices are also provided at the above link.
Notice should be sent to all Part D-eligible participants. This includes active employees, COBRA qualified beneficiaries, retirees, spouses, and other dependents of the employee covered by the plan. In many cases, the employer will not know whether an individual is Medicare eligible or not. Therefore, employers may wish to provide the notice to all plan participants (including COBRA qualified beneficiaries) to ensure compliance with the notification requirements.
Participant disclosure notices should be sent at the following times:
If the disclosure notice is provided to all plan participants annually, CMS will consider the first two bullet points satisfied. Many employers provide the notice either during or immediately following the annual group plan enrollment period.
In order to satisfy the third bullet point, employers should also provide the participant notice to new hires and newly eligible individuals under the group health plan.
Entities have flexibility in the form and manner in which they provide notices to participants.
The employer may provide a single disclosure notice to a participant and his or her family members covered under the plan. However, the employer is required to provide a separate disclosure notice if it is known that a spouse or dependent resides at an address different from the address where the participant’s materials were provided.
Mail is the recommended method of delivery, and the method CMS initially had in mind when issuing its guidance.
Electronic Delivery
The employer may provide the notice electronically to plan participants who have the ability to access the employer’s electronic information system on a daily basis as part of their work duties (consistent with the DOL electronic delivery requirements in 29 CFR § 2520.104b-1(c)).
If this electronic method of disclosure is chosen, the plan sponsor must inform the plan participant that the participant is responsible for providing a copy of the electronic disclosure to their Medicare eligible dependents covered under the group health plan.
In addition to having the disclosure notice sent electronically, the notice must be posted on the entity’s website, if applicable, with a link to the creditable coverage disclosure notice.
Sending notices electronically will not always work for COBRA qualified beneficiaries who may not have access to the employer’s electronic information system on a daily basis. Mail is generally the recommended method of delivery in such instances.
If an employer chooses to incorporate the Part D disclosure with other plan participant information, the disclosure must be prominent and conspicuous. This means that the disclosure portion of the document (or a reference to the section in the document being provided to the individual that contains the required statement) must be prominently referenced in at least 14-point font in a separate box, bolded or offset on the first page of the provided information.
CMS provides sample language for referencing the creditable or non-creditable coverage status of the plan per the requirements:
If you (and/or your dependents) have Medicare or will become eligible for Medicare in the next 12 months, a Federal law gives you more choices about your prescription drug coverage.
Please see page xx for more details.
A personalized notice is only provided upon request of the beneficiary. If an individual requests a copy of a disclosure notice, CMS recommends that entities provide a personalized notice reflecting the individual’s information.
For more information on the participant disclosure requirement, visit:http://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/downloads/Updated_Guidance_09_18_09.pdf
Employers will also need to electronically notify CMS as to the creditable status of the group health plan prescription drug coverage. This notice must be provided by the following deadlines:
Notice must be submitted electronically by completion of a form found at:https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/CCDisclosureForm.html
Additional guidance on completing the form, including screen shots, is available at:https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/Downloads/2009-06-29_CCDisclosure2CMSUpdatedGuidance.pdf
Most insurance carriers and TPAs will disclose whether or not the prescription drug coverage under the plan is creditable for purposes of Medicare Part D.
CMS’s guidance provides two ways to make this determination, actuarially or through a simplified determination.
Prescription drug coverage is creditable if the actuarial value of the coverage equals or exceeds the actuarial value of standard Medicare Part D prescription drug coverage. In general, this is determined by measuring whether the expected total of paid claims under the employer’s drug program is at least as much as what is expected under the standard Part D program. This can be determined through an actuarial equivalency test, which generally requires the hiring of an actuary to perform.
Some plans will be permitted to use the simplified determination of creditable coverage status to annually determine whether coverage is creditable or not.
A prescription drug plan is deemed to be creditable if:
An integrated plan is any plan of benefits where the prescription drug benefit is combined with other coverage offered by the entity (i.e., medical, dental, vision, etc.) and the plan has all of the following plan provisions:
On September 9, 2021, President Biden announced a “Path out of the Pandemic,” indicating that he will use regulatory powers and other actions to increase the number of vaccinated Americans. In short, his plan provides the following:
The plan includes a multi-pronged, comprehensive national strategy, discussed below. While the action plan lays out the administration’s next steps, it also raises several questions that will hopefully be addressed in the rulemaking process.
The Department of Labor’s Occupational Safety and Health Administration (OSHA) is developing a rule that will require all employers with 100 or more employees to ensure their workforce is fully vaccinated or require any unvaccinated workers to produce a negative test result on at least a weekly basis before coming to work. OSHA will issue an Emergency Temporary Standard (ETS) to implement this requirement. While penalties for non-compliance are not outlined in the President’s plan, the maximum penalty amount under existing OSHA enforcement protocols is $13,653 per violation. There will likely be challenges to this requirement based on overreach of OSHA’s authority.
We are hopeful that future guidance will answer the numerous unanswered questions we are left with including:
Subsequent to the President’s announcement, the IRS issued a reminder that the cost of home testing for COVID-19 is an eligible medical expense that can be paid or reimbursed under health flexible spending arrangements (health FSAs), health savings accounts (HSAs), or health reimbursement arrangements (HRAs). Additionally, costs of personal protective equipment (PPE) such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of COVID-19 are eligible medical expenses that can be paid or reimbursed through these accounts.
All federal executive branch workers must be vaccinated. The President also signed an Executive Order requiring employees of contractors that do business with the federal government to be vaccinated.
The Centers for Medicare & Medicaid Services (CMS) is taking action to require COVID-19 vaccinations for workers in most health care settings that receive Medicare or Medicaid reimbursement, including but not limited to hospitals, dialysis facilities, ambulatory surgical settings, and home health agencies. This action builds on the vaccination requirement for nursing facilities recently announced by CMS, and will apply to nursing home staff as well as staff in hospitals and other CMS-regulated settings, including clinical staff, individuals providing services under arrangements, volunteers, and staff who are not involved in direct patient, resident, or client care.
OSHA is developing a rule that will require employers with more than 100 employees to provide paid time off for the time it takes for workers to get vaccinated or to recover if they are under the weather post-vaccination. This requirement will be implemented through the ETS.
The Biden Administration is preparing for boosters to start as early as the week of September 20, subject to authorization or approval by the FDA and a recommendation from the Advisory Committee on Immunization Practices. Booster shots will be free and widely available across 80,000 locations – from pharmacies to doctors’ offices to health centers.
Individuals will be able to find a vaccination site at Vaccines.gov, including what vaccines are available at each site and, for many sites, what appointments are open. A toll-free number, 1-800-232-0233, will also be available in over 150 languages. Americans who have already utilized the text code 438829 or WhatsApp to get vaccine information will automatically receive a text with information on boosters, if and when recommended.
The President’s plan calls on entertainment venues like sports arenas, large concert halls, and other venues where large groups of people gather to require that their patrons be vaccinated or show a negative test for entry.
School safety measures include:
Increased prevention and treatment efforts include:
Other reforms include:
Further rulemaking is expected to implement the President’s vaccination mandate in the workplace. Employers should review this new information and prepare for compliance. In the meantime, employers may want to consult with legal counsel and think about crafting a vaccine policy that considers exemptions for employees with qualified disabilities as defined under the Americans with Disabilities Act, as well as employees with sincerely held religious beliefs, as defined under Title VII of the Civil Rights Act.
We will continue to monitor these issues and keep you updated as guidance develops.
The IRS recently announced in Revenue Procedure 2021-36 that the Affordable Care Act (“ACA”) affordability indexed amount under the Employer Shared Responsibility Payment (“ESRP”) requirements will be 9.61% for plan years that begin in 2022. This is a decrease from the 2021 percentage amount (9.83%).
Rev. Proc. 2021-36 establishes the indexed “required contribution percentage” used to determine whether an individual is eligible for “affordable” employer-sponsored health coverage under Section 36B (related to qualification for premium tax credits when buying ACA Marketplace coverage). However, the IRS explained in IRS Notice 2015-87 that a percentage change under Section 36B will correspond to a similar change for affordability under section 4980H ESRP requirements.
An employer will not be subject to a penalty with respect to an ACA full-time employee (“FTE”) if that employee’s required contribution for 2022 for the employer’s lowest cost self-only coverage complies with one of the following safe harbors.
The employee’s monthly contribution amount for the self-only premium of the employer’s lowest cost coverage that provides minimum value is affordable if it is equal to or lower than 9.61% of the employee’s W-2 wages (as reported on Box 1 of Form W-2). Application is determined after the end of the calendar year and on an employee-by-employee basis. Box 1 reflects compensation subject for federal income taxes, which would exclude amounts such as employee contributions to a 401(k) or 403(b) plan, and towards other benefits through a cafeteria plan.
The employee’s monthly contribution amount for the self-only premium of the employer’s lowest cost coverage that provides minimum value is affordable if it is equal to or lower than 9.61% of the employee’s computed monthly wages. For hourly employees, monthly wages are equal to 130 hours multiplied by their rate of pay. For salaried employees, monthly wages are equal to their monthly salary.
Coverage is affordable if it does not exceed 9.61% of the FPL. For a 2022 calendar year plan, coverage is affordable under the FPL safe harbor if the employee monthly cost for self-only coverage in the lowest cost plan that provides minimum value is not more than $103.14 (48 contiguous states), $128.85 (Alaska), or $118.68 (Hawaii).
Employers budgeting and preparing for the 2022 plan year should review these affordability safe harbors when analyzing employee contribution amounts for the coming year.
