Category: News

On January 7, 2021, the Equal Employment Opportunity Commission (“EEOC”) released two notices of proposed rulemaking (“Proposed Rules”) on wellness programs under the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”). Briefly, if finalized in their current form, the Proposed Rules:

• generally align ADA rules to existing rules applicable to “health contingent” wellness programs under the Health Insurance Portability and Accountability Act (“HIPAA”).
• restrict incentives tied to “participatory” wellness programs, such as those that provide incentives for individuals to disclose health information through health risk assessments or biometric screenings, to “de minimis” amounts. Examples of de minimis amounts are “a water bottle or gift card of modest value.”
• under the GINA rules, apply restrictions to incentives related to a spouse’s participation in health risk assessments.

Background

There are three sets of laws governing wellness programs and incentive limits currently in effect: HIPAA rules, ADA rules and GINA rules.

HIPAA

The HIPAA rules contain five requirements health contingent programs must satisfy, one of which involves incentives. When rewards are used in a group health plan to promote involvement in an activity (e.g., walking, diet, or exercise program) or to attain a certain outcome (e.g., not smoking or achieving certain results on biometric screenings), incentives cannot exceed 30% of the total cost of coverage under the group health plan (or up to 50% when the program is tobacco-related).

ADA

A wellness program involving a medical test or disability-related inquiries of an employee must be “voluntary.” EEOC regulations issued in 2016 had generally provided that incentives could not exceed 30% of the total cost of self-only coverage in the lowest cost plan option offered to an employee in order for the program to be considered voluntary. However, the incentive portion of the 2016 regulations was vacated by court order, effective January 1, 2019.

GINA

As with the ADA rules, a wellness program involving a medical test or disability-related inquiries of a spouse must be “voluntary.” GINA regulations had generally provided that incentives could not exceed 30% of the total cost of self-only coverage in the lowest cost plan option offered to an employee in order for the program to be considered voluntary. Those too were partially vacated by court order, effective January 1, 2019.

Proposed Rules

Health contingent programs continue viability under HIPAA requirements

For health contingent wellness programs (activity based or outcomes based), the Proposed Rules will permit incentives that align with the rules under HIPAA (currently 30% of the total cost of coverage or 50% to the extent the wellness program is designed to prevent or reduce tobacco use), as long as the program is part of, or qualifies as, a group health plan and complies with the HIPAA five factor requirements for such plans.

For this purpose, the Proposed Rules set forth four factors that are helpful in determining when a wellness program is part of the group health plan:

• The program is offered only to employees who are enrolled in an employer-sponsored group health plan;
• Any incentives offered are tied to cost-sharing or premium reductions (or increases) under the group health plan;
• The program is offered by a vendor that has contracted with the group health plan or insurer; and,
• The program is a term of coverage under the terms of a group health plan.

Participatory programs would be subject to severe limitations

For participatory programs, the Proposed Rules would sharply reduce the value of incentives many employers have historically utilized, such as a reduction in employee health insurance premiums for meeting wellness criteria. A participatory program is typically a wellness program that simply collects employee health information through health risk assessments or biometric screenings without tracking results and requiring employees to achieve certain health goals in order to earn an award or avoid a penalty. Under the ADA Proposed Rule, those programs are subject to a “de minimis” incentive standard. To be considered voluntary, a wellness program may offer no more than a de minimis incentive (such as a water bottle or gift card of modest value) in exchange for the employee participating in the wellness program.

According to the Proposed Rules, charging an employee $50 per month more for health insurance (or a total of $600 per year) for not completing a health risk assessment as part of a participatory wellness program would not be a de minimis incentive and would violate the ADA because the employee would be treated less favorably with respect to the cost of health insurance than employees who chose to provide their health information. This is much more stringent than the 2016 ADA regulations which would have allowed participatory programs that included medical exams or disability related inquiries to offer up to a 30% incentive based on the cost of self-only coverage in the lowest plan option. 

GINA rules would subject participatory programs for spouses to severe limitations

Under the original rule, there was an exception to the general prohibition on providing incentives in return for genetic information that allowed limited incentives (up to 30%) to spouses who provide information (via risk assessment) about their manifestation of a disease or disorder to a wellness program. Under the Proposed Rule, wellness programs would be limited to de minimis incentives to all family members (not just spouses) in exchange for family members providing information about their manifestation a disease or disorder (which is considered the employee’s genetic information). As described above, de minimis means very low value incentives such as a water bottle or gift card of modest value.

ADA Notice Not Required

The Proposed Rule would remove the unique ADA notice requirement that currently exists under the 2016 regulations.

Employer Action

At this time the above rules are simply proposed and employers are not required to rely on them or to comply with them. There will be a 60-day notice and comment period before the Proposed Rules are finalized and the finalized version may be different from what is included in the Proposed Rules. Typically, new regulations will apply prospectively starting at a future date (e.g., plan years starting in 2022). Further, the change to a new administration under President Biden may also have an impact. It is also possible that the rules may be challenged by others, such as the AARP, since they are so aggressive towards incentives. Additionally, the EEOC is seeking comments on the regulations. Employers should review their existing wellness programs in light of the EEOC’s guidance. We will keep you apprised on new developments.

On the last day of 2020, the Wage and Hour Division of the Department of Labor (“DOL”) issued two additional FAQs (#104 and #105) related to the Families First Coronavirus Response Act (“FFCRA”), addressing the three-month voluntary extension of FFCRA leave into 2021, and clarifying payment of leave taken during 2020.

The FFCRA required most employers with less than 500 employees to provide paid sick leave and paid family leave to employees who are unable to work or telework due to COVID-19 specific reasons. In addition, the FCRA provided refundable tax credits that reimburse employers, dollar for dollar (up to a prescribed limit), for the cost of providing sick and family leave wages to their eligible employees for leave related to COVID-19.

The paid leave provisions of the FFCRA expired on December 31, 2020. The Consolidated Appropriations Act, 2021 (“the Act”), signed into law on December 27, 2020, provides that eligible employers may voluntarily extend FFCRA paid leaves through March 31, 2021, and receive associated tax credits. Notably, the Act does not require the extension of paid FFCRA leave beyond December 31, 2020.

FAQ #104 makes clear that applicable employers are not required to extend FFCRA leave to employees after December 31, 2020. However, it reiterates that employers may decide to provide such paid leave on a voluntary basis and are eligible for the tax credits associated therefrom through March 31, 2021.

FAQ #105 clarifies that all qualified FFCRA leave taken on or before December 31, 2020 must be paid to the employee, even if such payments are made in 2021. The DOL also reiterated that the statute of limitations for bringing a claim of a violation of FFCRA is two years (or three years in the case of a willful violation) and that employees may potentially bring a private right of action for alleged violations.

The Departments of Labor, Health and Human Services, and the Treasury (collectively, “the Departments”) announced a final rule that amends the requirements for grandfathered group health plans and grandfathered group health insurance coverage to preserve their grandfathered status. The final rules amend current rules to:

• provide greater flexibility for certain grandfathered group health plans to make changes to fixed-amount cost-sharing requirements without causing a loss of grandfather status.
• ensure that high deductible health plans (“HDHPs”) are able to comply with minimum cost-sharing requirements so enrolled individuals are eligible to contribute to health savings accounts (“HSAs”).

The Departments note that there is no authority for non-grandfathered plans to become grandfathered, and therefore the final rule does not provide any opportunity for a plan or coverage that has lost its grandfather status to regain that status.

Background

In general, section 1251 of the Affordable Care Act (“ACA”) provides that certain group health plans and health insurance coverage existing as of March 23, 2010, the date of enactment of the ACA, (referred to collectively in the statute as grandfathered health plans) are not subject to all of the ACA’s mandated provisions. In November 2015, the Departments issued final regulations that identified certain types of changes that, if made to a grandfathered plan or coverage, would result in a loss of grandfather status. These types of changes generally include an increase in fixed-amount cost-sharing above certain thresholds, decrease in employer contributions, and elimination of substantially all benefits to diagnose or treat a condition0.

In response to a 2017 Executive Order, the Departments issued a request for information regarding grandfathered group health plans and grandfathered group health insurance coverage (“2019 RFI”). The proposed regulations were based on the feedback received from stakeholders who submitted comments in response to the 2019 RFI. The Departments issued these final rules that adopt the proposed amendments without substantive change.

Final Regulations

Alternative Inflation Adjustment

The final regulations amend the 2015 final regulations to provide that group health plans and group insurance coverage would lose grandfather status if there is any increase in:

• Fixed-amount cost-sharing requirement other than a copayment (e.g., deductible or out-of-pocket limit), determined as of the effective date of the increase, if the total percentage increase in the cost-sharing requirement measured from March 23, 2010 exceeds the “maximum percentage increase.” For this purpose, the “maximum percentage increase” means medical inflation, expressed as a percentage, plus 15%.
• Fixed-amount copayments (when measured from March 23, 2010) above the greater of $5 plus medical inflation or the “maximum percentage increase.”

The final regulations also amend the 2015 final regulations to include a revised definition of “maximum percentage increase” to provide an alternative method of measuring “maximum percentage increase” based on the premium adjustment percentage (rather than medical inflation) which is used to calculate other ACA inflation adjusted variables such as the annual employer mandate penalties under IRC Section 4980H and the maximum annual limit on cost-sharing. This alternative standard would not supplant the current standard; rather, it would be available to the extent it yields a greater result than the current standard, and it would apply only with respect to increases in fixed amount cost-sharing requirements that are made effective on or after the effective date of the final rule.

Under the final rule, the maximum percentage increase means the greater of:

• medical inflation, expressed as a percentage, plus 15 percentage points; or
• the portion of the premium adjustment percentage, that reflects the relative change between 2013 and the calendar year prior to the effective date of the increase (that is, the premium adjustment percentage minus 1), expressed as a percentage, plus 15 percentage points.

HDHPs

The final regulations clarify that grandfathered group health coverage that is an HDHP may increase fixed-amount cost-sharing requirements, such as deductibles, to the extent necessary to maintain their status as an HDHP without losing grandfather status. This change ensures that participants and beneficiaries enrolled in that coverage remain eligible to contribute to an HSA. The final rule notes the annual cost-of-living adjustment to the required minimum deductible for an HDHP has not yet exceeded the maximum percentage increase that would otherwise cause an HDHP to lose grandfather status.

Employer Action

The final regulations apply to grandfathered group health plans and grandfathered group health insurance coverage beginning on June 15, 2021.

On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law and provides for relief related to the COVID-19 pandemic, as well as government funding. The legislation is tremendous and totals more than 5,000 pages. There are many different issues addressed, but this article focuses on the following components of the law that affect health and welfare programs:

• Relief for Health FSAs and DCAPs
• No Surprise Billing
• Increased Transparency: Broker compensation, pharmacy cost and consumer transparency.
• Comparative Analysis Requirement of the nonquantitative treatment limitations (“NQTLs”) used for medical and surgical benefits as compared to mental health and substance use disorder benefits to show compliance with the Mental Health Parity and Addiction Equity Act (“MHPAEA”).
• Voluntary Extension of Families First Coronavirus Response Act (“FFCRA”) Leave.

Below you will find additional detail on the above as well as other relevant aspects of the legislation.

Relief for Health FSAs and DCAPs

This relief comes very late in the year, which may pose significant administrative challenges. Employers will want to decide whether to allow any or all permissible changes and reach out to their FSA vendors.

Employers may, but are not required to, amend their cafeteria plan for any of the following:

• For a health FSA or DCAP:
  • Carryover and grace period. Participants (even in a DCAP) may carry over unlimited unused amounts (rather than up to $550) from the 2020 plan year to the 2021 plan year (and from the 2021 plan year to the 2022 plan year). Alternatively, employers may allow for a grace period for a plan year ending in 2020 or 2021 of up to 12 months after the end of such plan year (rather than 2½ months following the end of the plan year). Health savings account (“HSA”) eligibility should be considered, if applicable. See note below.
  • Mid-year election changes. For plan years that end in 2021, participants may make prospective election modifications without regard to any change in status.
• For a health FSA:
  • An employee who ceases participation in the plan during calendar year 2020 or 2021 may continue to receive reimbursements from unused amounts through the end of that plan year (including any grace period, taking into account any modification of a grace period permitted above).
• For a DCAP:
  • If a dependent child aged out during the pandemic, a participant can continue to receive reimbursements for such child’s dependent care expenses for (1) the remainder of the plan year (if the enrollment period ended before January 31, 2020) and, to the extent a balance remains at the end of the plan year, (2) the following plan year until the child turns age 14 (but only with respect to the unused amount).

The plan must be amended no later than the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective. For a January 1, 2020 to December 31, 2020 plan year, this means an amendment must be adopted no later than December 31, 2021. In addition, the plan must be operated in a manner consistent with the terms of such amendment during the period beginning on the effective date of the amendment and ending on the date the amendment is adopted.

Employers with qualified high deductible health plans (“HDHPs”) tied to HSAs will need to work closely with their vendors to preserve HSA eligibility if adopting the carryover or grace period changes to the health FSA. If adopting a carryover, the rules permit a carryover from a traditional health FSA to an HSA-compatible health FSA for those electing the HDHP option in the subsequent year. However, similar treatment does not apply with respect to a grace period. Employers wishing to provide an HSA-compatible health FSA grace period will need to do so for all participants, not just those with HDHP coverage.

No Surprise Billing

Providers are generally barred from balance billing participants in a number of situations. Under the “No Surprises Act,” effective for plan years beginning on or after January 1, 2022, participants pay in-network cost-sharing only for:

• Emergency services performed by an OON provider and/or at an OON facility and for post-stabilization care after an emergency if the patient cannot be moved;
• Non-emergency services performed by OON providers at in-network facilities (includes hospitals, ambulatory surgical centers, labs, radiology facilities and imaging centers); and
• Air ambulance services provided by OON providers.

Exception for Certain Non-Emergency Non-Ancillary Services Where Consent is Obtained

There is an exception to the prohibition against balance billing in the case of non-emergency services performed by an OON provider at certain in-network facilities. Balance billing may be permissible when the provider provides the patient with oral and written notification at least 72 hours in advance of the appointment (or, for appointments made within the 72 hour window, on the same day on which the appointment is made) that includes the following:

• Notification of the provider’s OON status;
• A statement that consent to receive services from an OON provider is optional and that the services may be received from a provider that can do so under the in-network cost structure;
• A good faith estimate of the amount the patient will be charged if he or she consents; and
• In the case of an OON facility, a list of any in-network providers at that facility who can provide the same item or service.

The patient must sign the notice in order to consent to the treatment by the OON provider and they must be provided a signed copy.

It is important to note that this exception does not apply to ancillary services provided by an OON provider at an in-network facility. Ancillary services include:

• items and services related to emergency medicine, anesthesiology, pathology, radiology, and neonatology;
• items and services provided by assistant surgeons, hospitalists and intensivists;
• diagnostic services (including radiology and laboratory services), unless exempt by future rulemaking; and
• items and services provided by non-participating providers if there are no participating providers at the same facility who can furnish such items or services.

Payment Amount

The plan must pay the OON provider as follows:

1. If the care is provided in a state that has a law in place that would apply on its own terms to determine the amount the plan would owe to the provider, the state law applies.
2. If the care is provided in a state that participates in the All-Payer Model Agreement, the amount the state approves under that system applies.
3. For care provided in states with no applicable rule and for air ambulance services disputes, the law prescribes a detailed process to determine the appropriate rate.

If the plan or insurer does not initially deny payment, it is required to remit a “qualifying payment amount” which is a median payment amount for the same or similar service the plan or insurer pays in the same insurance market and geographic area. There is a 30-day window for open negotiation.

After this period, if the payment amount is disputed, an Independent Dispute Resolution (“IDR”) process kicks in. The IDR entity is required to pay based on:

• the level of training, experience and quality and outcomes measurements of the provider or facility;
• the provider/facilities market share in the geographic region in which the item or service was provided;
• the acuity of the individual receiving the item or service and the complexity of furnishing it;
• whether the providing facility is a teaching facility; and
• demonstrations by the parties of the extent to which they engaged in good faith efforts to enter into network agreements.

The IDR entity does not consider the amount the provider invoiced (billed charges), the provider’s “usual and customary charges,” or the amount public payors pay for the item or service in the course of making its determination.

The IDR entity’s decision is final and generally may not be appealed. The “losing party” must pay the IDR fees/costs. HHS will assess a fee on both parties to the IDR to cover the agency’s administrative costs.

The Departments are directed to issue regulations by July 1, 2021. States may impose other OON provider obligations that go above and beyond the federal statutory requirements.

Enforcement

States are charged with enforcing these federal requirements and providers are subject to penalties of up to $10,000 per violation unless they opt out, in which case HHS has enforcement authority. The DOL also has enforcement authority if it identifies patterns of balanced billing violations under a group health plan.

Transparency

Broker Compensation Transparency

Effective December 27, 2021, brokers and consultants of ERISA covered group health plans, regardless of size, must enter into a written contract with a responsible plan fiduciary which includes the following information:

• A description of the services to be provided;
• If applicable, a statement that the broker/consultant plans to offer fiduciary services to the plan;
• A description of all direct compensation the broker expects to receive (in the aggregate or by service);
• A description of all expected indirect compensation (including vendor incentive payments, a description of the arrangement under which the compensation is paid, the payer of the compensation, and any services for which the compensation will be received);
• Separately, any transaction-based compensation (e.g., commissions or finder’s fees) for services and the payers and recipients of the compensation; and
• A description of any compensation the broker/consultant expects to receive in connection with the contract’s termination (and how any prepaid amounts will be calculated and refunded upon termination).

The above applies when the broker or consultant expects to receive at least $1,000 in direct or indirect compensation (whether paid to the broker, an affiliate, or subcontractor) and should occur reasonably in advance of each contract date and renewal date. The definition of a broker or consultant for this purpose is broad and includes parties who are not considered traditional brokers/consultants (e.g., pharmacy benefit managers, wellness vendors, and third-party administrators).

Plan fiduciaries must report brokers/consultants to the DOL if they do not comply with these requirements.

Pharmacy Cost Transparency

Group health plans and insurers will be required to annually report to the Departments on their pharmacy benefits and costs multiple data points, including:

• Number of enrollees
• States in which the plan is offered
• 50 most common brand prescription drugs dispensed by pharmacies for claims under the plan and the total claims paid for each drug
• 50 most costly drugs by total annual spending and the annual amount spent for each of the 50 drugs
• 50 drugs with the greatest year-over-year cost increase for the plan and the change in amounts paid by the plan
• Total spending by the plan broken down by:
  • Types of cost (e.g., hospital, primary care, specialty care, provider and clinical service costs, prescription drugs, wellness) and
  • Plan and enrollee spending on prescription drugs
• Average monthly premiums paid by the employer and the enrollees
• Impact on premiums and out-of-pocket costs associated with rebates, fees or other payments by drug manufacturers to the plan or the plan’s administrators, and certain specifics about those rebates/payments.

These new disclosure requirements go into effect December 27, 2021.

Consumer Transparency

The law provides the following additional transparency rules for insurers and plan sponsors of group health plans:

• ID Cards. The amount of the in-network and OON deductibles and the out-of-pocket maximums that apply to the plan and the plan telephone number and website contact information must be disclosed on any physical or electronic plan and on insurance identification cards.
• EOB. A requesting health care provider or facility or a requesting plan participant, beneficiary, or enrollee must be provided an explanation in advance that states whether the provider or facility is in-network for the item or service to be provided, the contracted rate for that item or service, and a description on how an individual may obtain the item or service from an in-network provider.
• Price Comparison Guidance. Price comparison guidance must be offered by telephone and made available on an internet website of the plan or issuer that enables an enrolled individual to compare the amount of cost sharing for which he or she would be responsible for paying with respect to the furnishing of specific items or services by any provider.
• Provider Directories. A process must be established to update and verify provider directory information at least every 90 days; respond within 1 day to enrollee questions about providers’ in-network status; and maintain on a public website a database of all in-network providers and facilities and directory information for each of them. The plan must pay any extra costs that would be incurred by an enrollee that relies on any inaccurate directory information.

Third party payers cannot prohibit sharing of the above information/data with business associates in accordance with HIPAA standards.

These new disclosure requirements apply to plan years beginning on or after January 1, 2022. It is not clear how these transparency rules will overlap and coordinate with the recent transparency regulations finalized by the Departments. Further guidance in this area would be helpful.

Comparative Analysis Requirement

To comply with MHPAEA, a group health plan or issuer must perform and document comparative analyses of the design and application of NQTLs with the following information:

1. The specific plan or coverage terms or other relevant terms regarding the NQTLs and a description of all mental health or substance use disorder and medical or surgical benefits to which each such term applies in each respective benefits classification.
2. The factors used to determine that the NQTLs will apply to mental health or substance use disorder benefits and medical or surgical benefits.
3. The evidentiary standards used for the factors identified in (2), when applicable, provided that every factor must be defined and any other source or evidence relied upon to design and apply the NQTLs to mental health or substance use disorder benefits and medical or surgical benefits.
4. The comparative analyses demonstrating that the processes, strategies, evidentiary standards, and other factors used to apply the NQTLs to mental health or substance use disorder benefits, as written and in operation, are comparable to, and are applied no more stringently than, the processes, strategies, evidentiary standards, and other factors used to apply the NQTLs to medical or surgical benefits in the benefits classification.
5. The specific findings and conclusions reached by the group health plan or issuer with respect to the health insurance coverage, including any results of the analyses described here that indicate that the plan or coverage is or is not in compliance.

Further guidance is expected.

Voluntary Extension of FFCRA Leave

The FFCRA provided new types of leave to employees of employers with less than 500 employees, applicable to leave taken between April 1, 2020, and December 31, 2020.

Under the new law, the FFCRA still sunsets on December 31, 2020. However, employers may voluntarily extend leave through March 31, 2021, and receive associated tax credits. This does not restart the clock on any employee’s leave.

Self-employed individuals have the option to use prior year net earnings in determining average daily self-employment income.