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New Vaccine Mandates

In a televised address on Thursday September 9th, President Biden announced that new Occupational Safety and Health Administration (OSHA) rules would be released in coming weeks mandating that employers with 100 or more employees require their employees to complete a COVID-19 vaccination or submit to weekly COVID-19 testing. The president also announced a series of executive orders, that would mandate vaccinations for nearly all federal contractors and new rules from The Centers for Medicare & Medicaid Services (CMS), which would require vaccinations for most medical workers.

The new OSHA Emergency Temporary Standard (ETS) is expected to be released in a few weeks and many questions remain on how the mandate will work and what protections will be afforded to employers who follow it. OSHA does have a history of requiring that certain employers offer vaccinations, but they can typically be refused by employees. The ETS will clearly take a different approach and we advise employers to await that guidance before moving forward.

The move toward mandates has been steadily building across government agencies and private businesses. The Equal Employment Opportunity Commission (EEOC) issued preliminary guidance in 2020 when the vaccines first became available indicating that mandates were permissible by individual businesses. Subsequent updates to that guidance have more explicitly addressed accommodation concerns that may arise under the Americans with Disabilities Act (ADA), Title VII and the Pregnancy Discrimination Act (PDA).

OSHA has also been moving closer to mandates for some time, with guidance issued on August 13, 2021 stating that employers should “consider adopting policies that require workers to get vaccinated or to undergo regular COVID-19 testing – in addition to mask wearing and physical distancing – if they remain unvaccinated.”

Under existing OSHA rules as well as federal and state wage and hour laws, where an employer mandates vaccination and testing, the employer must typically bear the costs, including wages for the time an employee must spend obtaining vaccinations or testing. The preliminary information from the White House does indicate that the OSHA ETS will require employers to compensate employees for time missed for vaccinations, but it is unclear how testing will be handled. While free testing remains broadly available, hours missed from work each week for employees to obtain tests could become costly for employers who allow employees to choose the testing option in lieu of vaccination.

Large employers who fail to implement the OSHA ETS mandating vaccinations may be subject to penalties from OSHA of up to $14,000 per violation

We are also aware of employers that are considering premium surcharges on their health plans for employees who choose not to get vaccinated. This approach to encouraging vaccination has drawn substantial media coverage when it was announced by Delta Airlines. While such an approach may seem less coercive than an outright mandate, it may prove to be more problematic from a compliance standpoint under the Employee Retirement Income Security Act (ERISA), the Affordable Care Act (ACA) and the Health Insurance Portability and Accountability Act (HIPAA). Employers may wish to pause implementing such programs while they await new guidance on the initiatives announced on September 9th.

While small employers may not be subject to the mandates, the regulatory framework created to support the mandates may make it easier for small employers to also mandate vaccinations. Small employers who wish to implement their own vaccine mandates may also find it useful to wait on the OSHA ETS to design their own vaccination programs.

The measures announced on September 9th will likely be subject to legal challenges, but the mechanisms being used, namely the Occupational Safety and Health Act, offer a compelling platform from which to implement a mandate that may be difficult for opponents to defeat.

About the Authors. This update was prepared by HR Pros, LLC, a national HR consulting firm that helps companies reduce operational and employment related risks. Contact Christopher Brown (cbrown@hrpros.biz) or Philip Roach (philipcr@hrpros.biz) for more information.

The information provided in this update is not, is not intended to be, and shall not be construed to be, the provision of tax or legal advice, nor does it necessarily reflect the opinions of HR Pros, LLC or our clients.  The content is intended as a general overview of the subject matter covered.  HR Pros, LLC is not obligated to provide updates on the information presented herein.  Those reading this alert are encouraged to seek direct counsel on tax or legal questions.

© 2021 HR Pros, LLC. All Rights Reserved.

 

Client Alert: DOL Extends Certain Deadlines Under the CAA and Transparency in Coverage Rules

In October 2020, CMS Released its Transparency in Coverage Final Rules (the “TiC Final Rules”) which require non-grandfathered group health plans and carriers offering health insurance in the individual and group markets to: (1) make available to the public three separate machine-readable files (for in-network rates, out-of-network allowed amounts, and prescription drugs) that include detailed pricing information for each available coverage option, and (2) release cost-sharing information to participants, including the underlying negotiated rates, for all covered health care items and services, including prescription drugs, through an internet-based self-service tool and in paper form (upon request).

The TiC Final Rules were intended to be rolled out over a three-year period beginning January 1, 2022; however, in August 2021, the DOL released FAQs that delay implementation until July 2022 or later.

In addition to the deadline extensions for the TiC Final Rules, certain other new transparency requirements authorized under the Consolidated Appropriations Act, 2021 (CAA) that were scheduled to become effective later this year are delayed pursuant to the FAQs. The transparency requirements of the TiC Final Rules and the CAA, along with the deadline extensions, are summarized in more detail below. Additionally, the TiC Final Rules are currently in the process of being litigated in federal district court.  

Transparency in Coverage Final Rules

In October 2020, CMS released the TiC Final Rules, which require group health plans and health insurance carriers (“carriers”) to publicly post standard charge information and negotiated rates for common shoppable items and services in an easy-to-understand, consumer-friendly, and machine-readable format. Regulations were also ordered to be implemented for hospitals to post (and regularly update) standard charge information for services, supplies, or fees billed to patients, or provided by hospital employees.   The hospital requirements were effective beginning January 1, 2021, while the TiC Final Rules are effective for plan years beginning on or after January 1, 2022, except as delayed below.   The TiC Final Rules are summarized below, followed by the extensions.

Machine Readable Files

Under the TiC Final Rules, for plan years beginning on or after January 1, 2022, most non-grandfathered group health plans and insurance carriers offering non-grandfathered health insurance coverage in the individual or group markets are required to make available to the public, including stakeholders such as consumers, researchers, employers, and third-party developers, three separate machine-readable files that include detailed pricing information. The information must be available on an internet website. Specifically, three separate machine-readable files for “each coverage option offered by a group health plan or health insurance issuer” must be created – one for in-network rates, one for out-of-network allowed amounts, and one for prescription drugs. The information required to be included in each machine-readable file for all covered items and services are described in the regulations.

The machine-readable files must be updated monthly (and clearly indicate the date the file was last updated) and must be available in a form and manner specified in any guidance issued by the IRS, DOL, or CMS. Further they must be publicly available and accessible to any person free of charge and without conditions, such as establishment of a user account, password, or other credentials, or submission of personally identifiable information to access the file.

An aggregated allowed amount for more than one plan or insurance policy or contract is permitted for out-of-network (“OON”) allowed amounts where the group health plan or carrier contracts with a carrier, service provider, or other party to provide the information. This may be hosted on a third-party website or posted by a third party; however, the group health plan or carrier must provide a link to the site hosting or post the information on its own website.

Release of Cost-Sharing Information to Participants and Beneficiaries

Additionally, for plan or policy years beginning on or after January 1, 2023, upon request, a plan is required to provide to participants and beneficiaries enrolled in the group health plan, cost sharing information for the 500 covered items and services identified in Table 1 of the TiC Final Rules (all other covered items and services must be provided for plan or policy years beginning on or after January 1, 2024) in a format described in the regulation.

Plans and carriers must provide the required information on an internet-based self-service tool that meets certain requirements, or via hardcopy/paper format upon request. There can be no cost for the information, and the information must be provided in plain language. The plan or issuer may limit the number of providers to no fewer than 20 providers per request and meet certain timing, content, and delivery requirements.

Fully insured group health plans can contract (in writing) with the carrier to provide any of the above-described information (machine-readable files, paper files, or internet information to participants or beneficiaries) on behalf of the plan. In those circumstances the issuer, not the group health plan, is responsible for compliance and any compliance failures. Self-funded plans can contract with a third-party administrator or other party to assist the plan with compliance; however, the self-funded group health plan ultimately remains responsible for compliance and any compliance failures on the part of the TPA or other party. Additionally, group health plans and health insurance carriers are required to comply with any state or federal privacy laws when complying with any of the above-described disclosure requirements.

Deadline Delays for Transparency in Coverage Rules

With many of the deadlines under the TiC Final Rules as well as other transparency requirements under the CAA fast approaching, the DOL released FAQ #49, extending certain deadlines.

Machine Readable Files

The deadline for machine readable files for in-network rates and OON allowed amounts and billed charges for covered items and services is extended from January 1, 2022 to July 1, 2022. The agencies intend to release more guidance prior to the deadline.

Further, the deadline to provide machine readable files for prescription drugs is delayed indefinitely. This requirement has clear overlap with transparency requirements under the Consolidated Appropriations Act, 2021. Accordingly, the DOL intends to consider whether prescription drug machine-readable file requirements are appropriate and will address this through notice-and-comment rulemaking.

States are required to enforce the machine-readable file requirements for carriers, so the DOL encourages states to take a similar approach and delay enforcement of the machine-readable file requirements for in-network rates, OON allowed amounts, and prescription drugs using the same timeframes.

Release of Cost-Sharing Information to Beneficiaries and Participants

The CAA, 2021, which was passed after the TiC Final Rules, includes largely duplicative requirements for group health plans and insurance carriers to provide cost-sharing information to participant and beneficiaries, and further requires price information to be provided via telephone upon request (in addition to online or paper requirements). To address the duplicative nature of these requirements, the agencies intend to propose rulemaking to require the same pricing information available through the online tool (or by paper upon request) be provided by telephone (upon request) as well.   Further, the agencies will defer enforcement of any CAA requirements under the CAA until plan years beginning on or after January 1, 2023 (which is consistent with the first compliance deadline under the TiC Final Rules).

States are required to enforce these requirements for carriers, so the DOL encourages states to take a similar approach and delay enforcement of these requirements until plan years beginning on or after January 1, 2023.

Other Transparency-Related Deadlines Extended

Pharmacy Benefits and Drug Costs Reporting Under the CAA

The CAA requires group health plans or carriers to begin reporting detailed information regarding the plan and its coverage of certain prescription drugs (the 50 brand prescription drugs most frequently dispensed and the 50 prescription drugs with the greatest increase in plan expenditures over the plan year) as well as other plan information beginning on December 27, 2021, and each June 1st thereafter. The DOL recognizes the significant operational challenges plans and carriers may encounter complying with these reporting requirements by the applicable statutory deadline and, therefore, the DOL has deferred enforcement of the first and second reporting deadlines by one year. Therefore, plans will be required to file their first report on December 27, 2022, and each June 1st thereafter. The agencies encourage plans and carriers to amend contracts and put processes and procedures in place to ensure they can meet the initial December 27, 2022 deadline.

Advanced Explanation of Benefits (Advanced EOBs)

Effective for plan years beginning on or after January 1, 2022, upon receiving a good faith estimate regarding certain items or services, the CAA requires group health plans and carriers to send (via mail or electronically) a participant, beneficiary, or enrollee an Advanced EOB in clear and understandable language that includes certain specified information, including (1) the network status of the provider or facility, (2) the contracted rate (for participating providers or facilities) or a description of how a participant can obtain information about participating providers or facilities, (3) good faith estimate received from the provider or facility, (4) a good faith estimate of the participant’s cost-sharing and the plan’s responsibility for paying for the items or services, and (5) information regarding any medical management techniques that apply to the items or services.   The Advanced EOB must clearly state it is only an estimate based on the items or services reasonably expected to be provided at the time of scheduling/requesting the item or service and is subject to change based on the items or services actually provided.

Due to the complexity of these requirements, the technological requirements involved, and the lack of agency guidance on these requirements, the DOL intends to engage in notice-and-comment rulemaking in the future to implement these requirements, including establishing appropriate data transfer standards. Accordingly, the DOL will defer enforcement, but did not specify a specific compliance date.

HHS intends to explore whether interim solutions are feasible for insured consumers and encourages states to delay enforcement of these requirements for applicable plans.

Other Transparency-Related Guidance Addressed in the FAQs

In other instances, the DOLs FAQs do not extend the deadline to comply with certain transparency requirements under the CAA; they provide certain enforcement guidance or clarification. This information is summarized below:

Insurance ID Cards

Effective for plan years beginning on or after January 1, 2022, the CAA requires plans and carriers to include on any physical or electronic plan or insurance identification card issued to participants, beneficiaries, or enrollees any applicable deductibles, out-of-pocket maximum limitations, and a telephone number and website address for consumers seeking consumer assistance. The information is required to be provided in clear writing.

The agencies do not intend to issue rules related to this requirement before January 1, 2022, and, therefore, plans and carriers must begin to comply with these requirements by that date. Plans and carriers are expected to determine how to represent plan and coverage designs in a compliant way on the ID cards using a good faith, reasonable interpretation of the law. Reasonable methods may be varied, and agencies will consider whether the approach used by the plan or issuer is reasonably designed and implemented to provide the required information to all participants, beneficiaries, and enrollees. Agencies will consider whether the specific data elements are included or, if not, whether it is made available through other information that is provided on the ID card and the mode by which any information absent from the card is made available, when required information is made available. Per the agencies, a compliant ID card could include the applicable major medical deductible and applicable out-of-pocket maximum, as well as a telephone number and website address for individuals to seek consumer assistance and access additional applicable deductibles and maximum out-of-pocket limits, the card could include a QR code or link (if the card is digital) to access additional deductible out-of-pocket maximum limits for the plan.

Gag Clauses

Pursuant to the CAA, since December 27, 2020, providers, networks or associations of providers, TPAs, or other service providers have been prohibited from either directly or indirectly restricting (by agreement) plans or carriers from (1) providing provider-specific cost or quality of care information or data to referring providers, the plan sponsor, participants, beneficiaries, or enrollees, or individuals eligible to become participants, beneficiaries, or enrollees of the plan or coverage; (2) electronically accessing de-identified claims and encounter data for each participant, beneficiary, or enrollee; and (3) sharing such information (in compliance with any privacy regulations). Further, plans and carriers are required to submit an annual report to the DOL, HHS, or IRS confirming compliance with these requirements.

The DOL believes these requirements are self-implementing and does not expect to issue any regulations on these requirements, though they will release guidance regarding how to submit attestations of compliance beginning in 2022.   Therefore, unless and until any guidance is released, plans and carriers must comply with these requirements using a good faith, reasonable interpretation of the statute.

Provider Directory

The CAA established provider directory standards, which require plans or carriers to establish a process for updating and verifying the accuracy of information in their provider directories, and establish a protocol for responding to telephone calls and electronic communications from participants, beneficiaries, or enrollees about a provider’s network participation status, and must honor any incorrect or inaccurate information provided to the participant, beneficiary, or enrollee about the provider’s network participation status.

While the DOL intends to initiate rulemaking on these requirements sometime in 2022, the deadline for compliance is not extended. Plans and carriers must comply with these requirements, and will not be considered to be out of compliance if, (1) beginning on or after January 1, 2022, in situations where a participant, beneficiary, or enrollee receives items and services from a non-participating provider and the individual was provided inaccurate information by the plan or issuer via the provider directory or response protocol indicating the provider was participating, and (2) the plan or issuer imposes only a cost-sharing amount that is not greater than the cost-sharing amount that would be imposed for items and services furnished by a participating provider, and counts those cost-sharing amounts toward any deductible or out-of-pocket maximum.   Once implemented, the final rules will have a prospective effective date.

Balance Billing Disclosure Requirements

The balance billing disclosure requirements of the No Surprises Act are effective for plan years beginning on or after January 1, 2022. In the preamble to its interim final rules addressing balance billing, the DOL indicated that it intends to address balance billing disclosure requirements in more detail in the future; however, that may not occur before January 1, 2022. Accordingly, plans and carriers must comply with these requirements using a good faith, reasonable interpretation of the statute for plan years beginning on or after January 1, 2022. Once implemented, the final rules will have a prospective effective date. In the meantime, the DOL issued a model disclosure notice that may be used to satisfy the disclosure requirements regarding the balance billing protections.

Continuity of Care Requirements

The CAA requires group health plans or carriers to establish certain continuity of care protections when there are changes in provider or facility networks under the plan effective for plan years beginning on or after January 1, 2022.   While the DOL intends to initiate rulemaking on these requirements sometime in 2022, the deadline for compliance is not extended. Plans and carriers must comply with these requirements using a good faith, reasonable interpretation of the statute for plan years beginning on or after January 1, 2022. Once implemented, the final rules will have a prospective effective date.

What’s Next for Employers?

While employers have been given an extension for complying with many of the provisions of the Transparency in Coverage regulations and transparency-related provisions of the CAA, plans should follow the DOL’s suggestion and ensure they update any contractual provisions with their TPAs or carriers and identify which parties are responsible for preparing any machine-readable files or other deliverables under these new statutory and regulatory requirements.   Group health plan sponsors, including sponsors of grandfathered health plans with regard to the No Surprises Act and other applicable requirements, should continue to monitor additional rulemaking or guidance issued by the agencies related to any transparency provisions.

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About the Authors. This alert was prepared for [Insert Agency Name] by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on ERISA-governed and non-ERISA-governed retirement and welfare plans, executive compensation, and employment law. Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers, or our clients.   This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information.   Rather, the content is intended as a general overview of the subject matter covered. This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein.   Those reading this alert are encouraged to seek direct counsel on legal questions.

© 2021 Marathas Barrow Weatherhead Lent LLP.   All Rights Reserved.

Client Alert: Summary of Mental Health Parity and Transparency Provisions Under the Consolidated Appropriations Act, 2021

The Consolidated Appropriations Act, 2021 (the “CAA”), which was signed into law on December 27, 2020, included several provisions impacting group health plans and health insurance issuers. Below is a summary of the provisions focused on mental health parity and health plan transparency (specifically, broker/consultant commissions and pharmacy benefits and drug costs).

Mental Health Parity

The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), prohibits a group health plan from applying financial requirements (e.g., deductibles, co-payments, coinsurance, and out-of-pocket maximums), quantitative treatment limitations (e.g., number of treatments, visits, or days of coverage), or non-quantitative treatment limitations (such as restrictions based on facility type) to its mental health and substance use disorder benefits that are more restrictive than those applied to the plan’s medical and surgical benefits.

MHPAEA compliance has been a focus in DOL audits in recent years. As part of the action plan for enhanced enforcement in 2018, the DOL, HHS and IRS released a self-compliance tool plans and issuers can use to evaluate their plan. However, Section 203 of the CAA took this a step further, requiring more active engagement by group health plans.

Beginning on February 10, 2021, group health plans were required to perform and document comparative analyses of the design and application of non-quantitative treatment limitations (NQTLs). Specifically, the NQTL analyses must include certain information specified in the CAA, such as, among other things, specific plan terms or other relevant terms regarding NQTLs and the specific substance abuse, mental health, medical and surgical benefits to which they apply, and the factors used to determine that NQTLs will apply to mental health or substance use disorder benefits and medical or surgical benefits.

Per the CAA, the DOL, IRS (Treasury) and HHS are required to request no fewer than 20 group health plan analyses per year, and group health plans must provide them to the agencies upon such request. In the last several months, the DOL began requesting the NQTL comparative analyses from plans that are currently undergoing DOL audits for other reasons, as well as from plans not currently under investigation. In addition, plan participants and authorized representatives such as out-of-network providers may request these analyses. Therefore, all plans should be prepared to provide their NQTL comparative analyses at any time.

If the agencies determine the group health plan is not in compliance, then the plan must respond to the agencies within 45 days by specifying any actions it will take to come into compliance and providing further comparative analyses demonstrating the plan’s compliance. If still not in compliance, the agencies will notify all individuals enrolled in the plan of the plan’s noncompliance. This could lead to significant exposure for non-compliant plans, as it basically opens a clear pathway to litigation.

On April 2 2021, the DOL released FAQs regarding these CAA provisions. The FAQs clarify the following:

  • Because the requirement to make the comparative analyses available to federal or applicable state authorities was effective February 10, 2021, all plans and issuers should be ready to make their analyses available upon request.
  • General, broad, and conclusory statements will not suffice for the analyses. Any analyses should be sufficiently specific, detailed, and reasoned to demonstrate the processes, strategies, evidentiary standards, or other factors used to develop and apply a NQTL for mental health/substance use disorder benefits are comparable to, and apply no more stringently than, those for medical/surgical benefits. The DOL’s MHPAEA Self-Compliance Tool includes a 4-step roadmap for generating a comparative analysis.   Therefore, plans and issuers that carefully follow the most recent (2020) MHPAEA Self-Compliance Tool when developing their analyses may be able to identify and mitigate potential issues.  
  • Specifically, at a minimum, the analyses must contain:
    • A clear description of the specific NQTL, plan terms, and policies at issue;
    • Identification of the specific mental health/substance use disorder (“MH/SUD”) and medical/surgical benefits to which the NQTL applies within each benefit classification, and a clear statement as to which benefits identified are treated as MH/SUD and which are treated as medical/surgical;
    • Identification of any factors, evidentiary standards or sources, or strategies or processes considered in the design or application of the NQTL and in determining which benefits, including both MH/SUD benefits and medical/surgical benefits, are subject to the NQTL, including whether any factors were given more weight than others and why (including an evaluation of any specific data used in the determination);
    • To the extent the plan or issuer defines any of the factors, evidentiary standards, strategies, or processes in a quantitative manner, it must include the precise definitions used and any supporting sources;
    • Whether there is any variation in the application of a guideline or standard used by the plan or issuer between MH/SUD and medical/surgical benefits and, if so, describe the process and factors used for establishing that variation;
    • If the application of the NQTL turns on specific decisions in administration of the benefits, the nature of the decisions, the decision maker(s), the timing of the decisions, and the qualifications of the decision maker(s) should be identified;
    • An assessment of the qualifications of each expert used, if any, and the extent to which the plan or issuer ultimately relied upon each expert’s evaluations in setting recommendations regarding both MH/SUD and medical/surgical benefits;
    • A reasoned discussion of the plan’s or issuer’s findings and conclusions as to the comparability of the processes, strategies, evidentiary standards, factors, and sources (including citations) identified above within each affected classification, and their relative stringency, both as applied and as written, including the results of analyses indicating that the plan or coverage is or is not in compliance with MHPAEA; and
    • The date of the analyses and the name, title, and position of the person or persons who performed or participated in the comparative analyses.
  • Any of the below practices (which the DOL has observed in the past), may result in an unsuccessful comparative analysis:
    • Production of a large volume of documents without a clear explanation of how and why each document is relevant to the comparative analysis;
    • Conclusory or generalized statements, including mere recitations of the legal standard, without specific supporting evidence and detailed explanations;
    • Identification of processes, strategies, sources, and factors without the required or clear and detailed comparative analysis;
    • Identification of factors, evidentiary standards, and strategies without a clear explanation of how they were defined and applied in practice;
    • Reference to factors and evidentiary standards that were defined or applied in a quantitative manner, without the precise definitions, data, and information necessary to assess their development or application; or
    • Analyses that are outdated due to the passage of time, a change in plan structure, or for any other reason.

This means plans should take the necessary time to ensure thoughtful, thorough analyses are conducted now and at any time applicable provisions of the plan change.

  • The DOL’s MHPAEA Self-Compliance Tool provides an example of the types of documents and information that would need to be available to support the comparative analyses, such as samples of claims, any process documents, guidelines or other claims processing policies and procedures, or documentation of standards, instructions to providers where management is delegated to an outside service provider, etc. Furthermore, if the comparative analyses reference any type of study, tests, data, reports, meeting minutes/decisions, or other considerations, documentation should be available to support those references.
  • State regulators, participants, beneficiaries, or enrollees (or their authorized representatives) may all request, and the plan or issuer is required to provide, the comparative analyses.
  • Where applicable, non-grandfathered plans would be required to provide any participants who are appealing an adverse benefit determination with copies of the comparative analyses (and supporting documentation) when providing all other documents the plan relied upon to support the denial of a claim.
  • The DOL clarified that it may request discrete comparative analyses specific to a particular area of concern (such as where a complaint was received) but may request them in other instances where it is deemed appropriate by the agency. Currently, it intends to focus on the following NQTLs in its enforcement efforts:
    • Prior authorization requirements for in-network and out-of-network inpatient services;
    • Concurrent review for in-network and out-of-network inpatient and outpatient services;
    • Standards for provider admission to participate in a network, including reimbursement rates; and
    • Out-of-network reimbursement rates (plan methods for determining usual, customary, and reasonable charges).

However, the DOL expects that even when comparative analysis is requested in a discrete area or areas, the plan or issuer must provide a list of all other NQTLs for which they have completed a comparative analysis and a general description of any supporting documentation. The DOL’s initial request can broaden at any time, so having all comparative analyses completed, rather than only completing those listed above is essential for plans and issuers. Additionally, while insurance companies have fiduciary responsibility and must prepare the analysis for fully insured plans, third party administrators (TPAs) for self-insured plans typically do not have the same fiduciary responsibility that would require them to prepare the analysis. Sponsors of self-insured plans (including level-funded plans) should inquire with their TPA whether they have completed an analysis specific to their plan or the TPA’s products in general, and whether they are prepared to assist in the event of a request. They may want to introduce language into the administrative services agreement upon renewal to clarify the extent to which the TPA will assist. In most cases, the TPA will be in the best position to perform the analysis – i.e., they will have established the NQTLs and will be able to identify them; they will have all the data and other information necessary for the analysis.

Transparency Requirements

Broker and Consultant Transparency

Section 202 of the CAA amends §408(b)(2) of ERISA and creates new transparency requirements that impact group health plans and their brokers or consultants.   Specifically, group health plans must receive the following disclosures from brokers or consultants (or their affiliates or subcontractors) who reasonably expect to receive $1,000 or more (indexed for inflation) in direct or indirect compensation in connection with providing certain designated insurance-related services for the group health plan:

  • A description of the services provided under the contract with the plan;
  • Whether the broker, consultant, or their affiliate or subcontractor’s services provided are, or reasonably expected to be in the capacity of a fiduciary;
  • A description of all direct compensation, either in the aggregate or by service that the broker or consultant reasonably expects to receive in connection with the services;
  • A description of all indirect compensation the service provider, or their affiliate or subcontractor, reasonably expects to receive in connection with the services;
  • A description of any compensation that will be paid among the broker, consultant, their affiliate or subcontractor for commissions, finder’s fees, or other similar incentive compensation based on business placed or retained. This must include identification of payers and recipients, regardless of whether it is disclosed as direct or indirect compensation; and
  • A description of any compensation the broker or consultant reasonably expects to receive in connection with termination of the contract or arrangement, and how any prepaid amounts will be calculated and refunded.

Failure to comply puts the arrangement with the broker or consultant at risk of being considered not “reasonable.” Timeframes for providing the information to the group health plan and updating the plan of any changes to information previously provided pursuant to these requirements, as well as good faith compliance and other considerations for non-compliance are discussed in more detail in the CAA. These requirements are effective for contracts for covered services executed or renewed on or after December 27, 2021 (one year from enactment of the CAA).   We expect more guidance from the DOL prior to the deadline.

 

Pharmacy Benefits and Drug Costs

Section 204 of the CAA requires group health plans or issuers to begin reporting the following information regarding health plan coverage to the IRS, HHS, and DOL:

  • The plan year start and end dates;
  • The number of enrollees;
  • Each state in which the plan is offered;
  • The 50 brand prescription drugs most frequently dispensed by pharmacies for claims paid by the plan, and the total number of claims for each such drug;
  • The 50 prescription drugs with the greatest increase in plan expenditures over the plan year before the plan year in which the report pertains, including the amounts expended by the plan for each drug during such plan year;
  • Total spending on health care serviced by the plan, broken down by hospital costs, health care provider and clinical service costs for both primary care and specialty care prescription drug costs, other medical costs (including wellness services), and spending on prescription drugs by the health plan and enrollees;
  • The average monthly premium broken down by employer share and employee share;
  • Any impact on premiums by rebates, fees, and drug manufacturer remunerations for prescription drugs, including the amount paid for each therapeutic class and the amount paid for each of the 25 drugs that yielded the highest amount of rebates and other remuneration from drug manufacturers; and
  • Any reduction in premiums and out-of-pocket (OOP) costs associated with rebates, fees, or other drug manufacturer remuneration.

The information reported pertains to the health plan or coverage offered during the previous plan year. The first report is due on December 27, 2021 (one year after enactment of the CAA), while each subsequent annual report is due by June 1st. In June 2021, the agencies released a request for information regarding the impact of the legislation on impacted health plans. Thus, they are in the early stages of implementing regulations, and have not yet indicated how the information will be reported to/received by the agencies.

What’s Next for Employers?

While we expect more guidance on the transparency requirements for brokers and consultants, in the meantime, they should review their existing contracts and disclosures in light of these requirements and begin implementing any necessary changes. Further, group health plans are encouraged to review their coverage of mental health and substance use disorder benefits and carefully follow the DOL’s most recently updated (2020) MHPAEA Self-Compliance Tool when developing their MHPAEA comparative analyses. Finally, later in the year, group health plan sponsors should prepare to comply with pharmacy benefit and drug cost disclosure requirements.

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About the Authors. This alert was prepared for [Insert Agency Name] by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on ERISA-governed and non-ERISA-governed retirement and welfare plans, executive compensation, and employment law. Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers, or our clients.   This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information.   Rather, the content is intended as a general overview of the subject matter covered. This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein.   Those reading this alert are encouraged to seek direct counsel on legal questions.

© 2021 Marathas Barrow Weatherhead Lent LLP.   All Rights Reserved.

Client Alert: Agencies Release First Rule on the No Surprises Act

On July 13, 2021, the DOL, HHS, and IRS released a joint Interim Final Rule implementing specified provisions of the No Surprises Act, a new law included within the Consolidated Appropriations Act, 2021. The No Surprises Act addresses, among other things, a prohibition on surprise billing, which impacts emergency room parity rules previously implemented under the Affordable Care Act (“ACA”) and ACA provisions related to provider choice.

The Interim Final Rules will be finalized on September 13, 2021 and apply for plan years beginning on or after January 1, 2022.

Background

ACA Provider Choice and Emergency Services Requirements

Under §2719A of the ACA, most group health plans that require designation of a participating primary care provider must permit the participant or beneficiary to designate an available, participating primary care provider of their choice, and must inform participants of their ability to make a designation or, if they don’t, a primary care provider will be designated for them. A participant can designate a pediatric primary care provider for children, and the notice must inform participants and beneficiaries that they do not need prior authorization from the plan to access participating Ob-Gyn providers, though prior authorization may be required for certain services and providers may have to comply with any referral processes. The ACA did not extend these requirements to “excepted benefits” such as stand-alone dental or vision plans, and grandfathered health plans were exempt from complying.

Additionally, §2719A of the PHSA requires emergency services to be provided:

  • Without prior authorization (whether they are provided by an in-network or out-of-network provider);
  • Without regard to whether the health care provider furnishing the emergency services is a participating network provider with respect to the services; and
  • Without imposing administrative requirements or limitations on the coverage that are more restrictive than those that apply to in-network providers when emergency services are provided out-of-network.

The ACA also required compliance with certain cost-sharing requirements for out-of-network emergency services, though providers could still balance bill (after the plan made a reasonable payment meeting certain minimum payment standards). Like the provider choice provision, the emergency services requirements also did not apply to grandfathered health plans.

The No Surprises Act

Among other things, the No Surprises Act sunsets §2719A of the ACA effective January 1, 2022 and replaces it with new emergency services requirements for group health plans (under §2799A-1 and 2799A-2 of the PHSA), and recodifies the provider choice provisions (under §2799A-7 of the PHSA). Further, the No Surprises Act extends the recodified provider choice requirements and the new emergency care provisions to all group health plans, among other plans, except those plans consisting of excepted benefits.   Thus, all non-excepted group health plans – fully-insured, self-funded, grandfathered, and non-grandfathered must comply with these requirements.

The new emergency services requirements protect individuals from surprise medical bills by requiring all non-excepted group health plans and issuers that cover hospital emergency room services or emergency services provided in a freestanding, independent emergency department, to cover services without imposing any prior authorization or limitation on coverage regardless of whether the provider is a participating provider or emergency facility.

Essentially, all emergency services must be covered in the same manner regardless of whether they are provided by an in-network or out-of-network provider or facility. Further, any participant cost sharing requirements for out-of-network emergency services providers or facilities must be the same as cost-sharing requirements for in-network emergency services providers or facilities and must be counted towards any applicable in-network deductible or OOP maximums under the plan.

Similarly, the No Surprises Act requires group health plans and issuers to cover non-emergency services provided by out-of-network providers working at in-network facilities, as well as air ambulance services provided by out-of-network providers, using the same general approach as emergency services described above.

As described above, balance billing is prohibited in many situations, such as for emergency services and certain ancillary services connected to non-emergency care at in-network facilities, such as anesthesiology services or radiology services provided by out-of-network providers contracted by the in-network facility.

In other non-emergency situations balance billing may be permitted if the non-participating facility or provider meets certain, stringent advance notice and consent requirements under §2799A-2(d) of the PHSA. For the notice, the provider must provide participants, beneficiaries, or enrollees a written or electronic notice at least 72 hours before the appointment (or the date the appointment is made if it is less than 72 hours before the appointment), containing the following information:

  • That the provider or facility is non-participating/OON under the plan;
  • A good faith estimate of charges for the items or services needed/involved, including that the estimate or consent does not constitute a contract with respect to the charges estimated for the items or services provided;
  • If the facility is in-network, but the provider providing services at the facility is not, then a list of any participating providers at the facility who are able to furnish the necessary items or services, and that the participant can be referred, at their option, to a participating provider; and
  • Whether prior authorization or other care management limits are required before a participant can receive items or services from the non-participating provider.

The notice must clearly state that consent to receive items or services from a non-participating provider is optional, and that the participant can seek treatment or care from a participating provider or facility instead that would have more favorable cost sharing. The notice must be available in the 15 most common languages in the geographic region of the applicable facility or provider.

The consent must be written in clear, understandable language, and indicate that the participant, beneficiary or enrollee has been:

  • Provided with the above written notice in the form selected by the participant (written or electronic).
  • Informed that payments made towards the service or item may not accrue towards meeting any cost sharing limitations under their medical coverage, including that it may not apply towards the in-network deductible under the plan, if any.

The consent form must include the date the participant, enrollee, or beneficiary received the notice, and the date they signed the consent. A signed copy of the consent must be provided to the participant, beneficiary, or enrollee.

The No Surprises Act instructed the DOL, IRS, and HHS to develop rules by July 1, 2021, that include the methodology the group health plan can use to determine the qualifying payment amount, information the group health plan must share with the nonparticipating provider or facility, geographic regions, and a process to receive complaints of violations. The Interim Final Rule fulfills that requirement.

Interim Final Rules

Among other things, the Interim Final Rule defines “emergency medical condition” and “emergency services” similar to how those terms are defined under the Emergency Medical Treatment and Labor Act (“EMTALA”); however, the definition of “emergency services” includes pre-stabilization services provided after a patient is moved out of the emergency department and admitted to a hospital such that these services are protected under the No Surprises Act. “Emergency services” also include certain post-stabilization services. Further, according to the preamble to the regulations, defining “emergency medical condition” consistent with EMTALA ensures that group health plans or issuers must cover emergency services without limiting what constitutes an emergency medical condition solely based on diagnosis codes.

The Interim Final Rules specify the methodologies that group health plans can use to determine cost-sharing amounts for (1) out-of-network emergency facilities, (2) out-of-network emergency providers, and (3) certain non-emergency services furnished by out-of-network providers at certain in-network facilities. Specifically, the Interim final Rules require that cost sharing amount be calculated by using:

  • An amount determined by an applicable All-Payer Model Agreement under §1115A of the Social Security Act.
  • If there is no such applicable All-Payer Model Agreement, an amount determined under a specified state law.
  • If neither of the above apply, the lesser amount of either the billed charge or the qualifying payment amount, which is generally the plan’s or issuer’s median contracted rate.

The regulations provide guidance for determining the median contracted rate.

Cost sharing amounts for out-of-network air ambulance services must be calculated using the lesser of the billed charge or the plan’s or issuer’s qualifying payment amount, and the requirement must be the same as if services were provided by an in-network air ambulance provider.

Rates for out-of-network providers (including any cost sharing) must be based on:

  • An amount determined by an applicable All-Payer Model Agreement under §1115A of the Social Security Act.
  • If there is no such applicable All-Payer Model Agreement, an amount determined by a specified state law.
  • If there is no such applicable All-Payer Model Agreement or specified state law, an amount agreed upon by the plan or issuer and the provider or facility.
  • If none of the three conditions above apply, an amount determined by an independent dispute resolution entity.

Regulations related to the independent dispute resolution process and entities have not been issued; however, the agencies indicated that they intend to release the regulations soon.

Additionally, certain health care providers and facilities, as well as health plans and health issuers are required to make a notice publicly available, post on a website (for health plans, that would be a website of the plan), and provide individuals a notice about:

  • the restrictions on balance billing in certain circumstances,
  • any applicable state law protections against balance billing, and
  • information on contacting appropriate state and federal agencies in the case that an individual believes that a provider or facility has violated the restrictions against balance billing

Health plans and issuers are also required include the above information on each EOB containing an item or service for which the No Surprises Act applies. The agencies released a model notice for health plans and issuers.

What Does This Mean for Employers?

Employers sponsoring non-excepted group health plans should work with their carriers or third party administrators to ensure their plan is prepared to comply with the No Surprises Act beginning with their 2022 plan year, including any disclosure requirements on EOBs, and to ensure any plan materials and SPDs are updated, as necessary. Further, employers should prepare to comply with the applicable notice requirements by either using or tailoring, as applicable, the Model Notice provided by the agencies.   Finally, employers with grandfathered health plans should ensure they comply with the ACA’s provider choice requirements beginning in 2022 and update their SPDs and/or wrap documents to include the required provider choice notice.

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About the Author. This alert was prepared for [Insert Agency Name] by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on ERISA-governed and non-ERISA-governed retirement and welfare plans, executive compensation, and employment law. Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers, or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions.

© 2021 Marathas Barrow Weatherhead Lent LLP.   All Rights Reserved.

Client Alert: IRS Provides Additional Guidance on COVID-19-Related DCAP Relief

On May 10, 2021, the IRS released Notice 2021-26, which provides additional guidance on relief authorized under in the Consolidated Appropriations Act , 2021 (CAA), the American Rescue Plan Act (ARPA), and previous IRS guidance issued in Notice 2021-15. Specifically, IRS Notice 2021-26 clarifies the maximum amount that can be excluded from an individual’s gross income for dependent care expense reimbursements in 2021 and 2022 under a dependent care FSA / dependent care assistance program (DCAP) when the plan is using the extended grace period or carryover pursuant to the CAA. The new guidance permits individuals to take full advantage of both: (a) any extended carryover or grace period relief under the CAA; and (b) the increased maximum limit under Section 129 of the Code (from $5,000 to $10,500, or $2,500 to $5,250 for married couples filing separately) authorized under ARPA for 2021, if permitted under the employer’s plan. As a result, individuals may receive up to $15,500 in non-taxable reimbursements under a DCAP in 2021, if it meets all applicable nondiscrimination requirements.

The guidance is discussed in more detail below.

Background

As we previously reported, the CAA authorizes employers to amend their cafeteria plans to allow DCAPs to either carry over all unused funds from a plan year ending in 2020 to a plan year ending in 2021 and from a plan year ending in 2021 to a plan year ending in 2022 or extend its grace period for a plan year ending in 2020 or 2021 to 12 months after the end of the plan year (versus the normal 2.5 months). Notice 2021-15 provided that if an employer adopted either the extended grace period or carryover relief, then the annual limits in §129 of the Code apply to amounts contributed to a DCAP for a particular year, and not to amounts reimbursed or otherwise available for reimbursement from DCAP in a particular plan or calendar year.

Per the IRS, this meant any unused amounts carried over from prior years or available during an extended grace period are excluded when determining the annual limit applicable for the following year. Thereafter, Congress passed ARPA, which amended §129 of the Code to increase the exclusion for qualified dependent care expenses to $10,500 ($5,250 for married couples filing separately) for calendar year 2021. Employers who choose to adopt the temporary $10,500 exclusion limit must amend their plans before the last day of the plan year for which the amendment is effective, which would be December 31, 2021 for calendar year plans.

The IRS’ New Guidance

Calendar Year Plans

Notice 2021-26 clarifies that if an employer adopts the extended carryover or grace period under the CAA and allows individuals to exclude up to $10,500 ($5,250 for married couples filing separately) in 2021 per ARPA, then:

  • Any DCAP expenses eligible for exclusion from a participant’s gross income are disregarded for purposes of application of the limits for the subsequent taxable years of the employee when they are carried over from the 2020 plan year or permitted to be used pursuant to an extended grace period, and
  • Individual employees may exclude from income up to $15,500 in qualified dependent care reimbursements for the plan year (which is comprised of $5,000 from a grace period or carry-over from 2020 plus $10,500 contributed in 2021).

The IRS provides the following example for a calendar year plan:

An employer adopts the carryover relief under the CAA. An employee elected to contribute $5,000 to his DCAP for the 2020 plan year but incurred no dependent care expenses during the plan year and, therefore, carried over $5,000 to the 2021 plan year. The employer amends the plan to allow employees to contribute up to $10,500 for DCAP benefits for the 2021 plan year, and the employee elects the full $10,500. The employee incurs $15,500 in dependent care expenses in 2021 and is reimbursed $15,500 by the DCAP. The $15,500 is excluded from the employee’s gross income and wages because $10,500 is excluded as 2021 benefits and the remaining $5,000 is attributable to a carryover permitted under the CAA.

Non-Calendar Year Plans

While the above is relatively straightforward for calendar year plans, the relief is not as simple for non-calendar year plans. Employees are able to enjoy the full extent of any carryover or extended grace period relief under the CAA; however, if employers intend to amend their plans to allow employees to increase their elections for the plan year beginning in 2021 from $5,000 to $10,500, they are urged to proceed with caution. Because ARPA limits the $10,500 exclusion to calendar year 2021, Notice 2021-26 clarifies that the increased exclusion amount will not apply to reimbursement of expenses incurred during the portion of the plan year falling in 2022.

Ultimately this limits the maximum reimbursement excludable from an employee’s income for calendar year 2022 in one of two ways:

  • If the employer adopted the carryover or extended grace period relief provided under the CAA for the plan year beginning in 2020 and ending in 2021, then during the 2022 calendar year, employees may have the full use of the carryover or grace period for any unused amounts contributed as of the end of the 2020 plan year. They may also exclude up to $5,000 reimbursed during the 2022 calendar year from funds contributed for the plan years beginning in 2021 or 2022. Thus, up to $10,000 in dependent care reimbursements may be excluded from the employee’s income during the 2022 calendar year. See example 2 below for an explanation of how this works.
  • If the employer does not adopt the extended carryover or grace period relief provided under the CAA, then any DCAP reimbursement in excess of $5,000 made during calendar year 2022 would become taxable upon reimbursement. Example 1 below demonstrates how this works.

Example 1: If an employer adopts the $10,500 limit for the plan year beginning July 1, 2021, and an employee elects to contribute to their DCAP for the first time (i.e., there is no carryover from a prior plan year), then if the employee incurs $5,000 in dependent care expenses during the period from July 1, 2021, to December 31, 2021, the employee has $5,500 of DCAP benefits available as of January 1, 2022 (once contributed). $5,000 would be excluded from income for the 2021 tax year and $5,500 would remain eligible for reimbursement from January 1, 2022 through June 30, 2022. For the plan year beginning July 1, 2022, the employee can elect up to $5,000. If the employee incurs $5,500 in dependent care expenses during the period from January 1, 2022, through June 30, 2022, elects to contribute an additional $5,000 for the plan year beginning July 1, 2022, and incurs an additional $2,500 in dependent care expenses between July 1, 2022 and December 31, 2022 (for a total of $8,000 incurred in 2022), then only $5,000 is excluded from the employee’s gross income and wages under § 129 of the Code. Therefore, the remaining $3,000 received by the employee is included in the employee’s tax year 2022 gross income and wages.

Example 2: If, on the other hand, (1) an employer adopts the extended carryover or grace period under the CAA for the 2020 plan year and the $10,500 limit for the 2021 plan year, (2) an employee carries over $5,000 from the 2020 plan year (the plan year ending on June 30, 2021) and elects the full $10,500 for the plan year beginning July 1, 2021, and (3) the employee does not incur any dependent care expenses until January 1, 2022, then the employee could be reimbursed up to $10,000 in calendar year 2022: $5,000 due to any carryover from the plan year ending on June 30, 2021; and $5,000 from any elections made that would be reimbursed in 2022 (such as from the period of January 1, 2022 through June 30, 2022 for the 2021 plan year or July 1, 2022 through December 31, 2022 for the 2022 plan year). However, if the employee incurs $10,500 in dependent care expenses for the 2021 plan year between January 1, 2022 and June 30, 2022, $500 would be included in the employee’s tax year 2022 gross income and wages.   Further, if the employee makes a new election of $5,000 for the 2022 plan year and incurs $2,500 in dependent care expenses between July 1, 2022 and December 31, 2022, then $3,000 would be included in the employee’s tax year 2022 gross income and wages.

Therefore, employers with non-calendar year plans are urged to consider these implications when adopting relief for employees and to ensure employees understand these limitations so they are not surprised at a later date.

What Does This Mean For Employers?

Ultimately, we urge caution for any employer who chooses to adopt the $10,500 limit permitted under the ARPA, as the IRS has been very clear that nondiscrimination rules apply. Nondiscrimination testing for DCAPs is often difficult for plans to pass; however, introducing a limit that is more than double the normal limit will likely only serve to exacerbate this issue, as generally only highly compensated employees would be able to set aside up to $10,500 for dependent care expenses.   Furthermore, as set forth above, if the employer has a non-calendar year plan, the applicability of ARPA, CAA, and Notice 2021-26 relief may result in unintended or unexpected taxable income issues for employees. Employers should evaluate these risks for their plans and work with counsel when adopting any plan amendments.

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About the Author. This alert was prepared for [Insert Agency Name] by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on ERISA-governed and non-ERISA-governed retirement and welfare plans, executive compensation and employment law. Contact Stacy Barrow or Nicole Quinn-Gato at sbarrow@marbarlaw.com or nquinngato@marbarlaw.com.

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions.

© 2021 Marathas Barrow Weatherhead Lent LLP.   All Rights Reserved.