Compliance Corner Archives
Healthcare Reform 2023 Archive
On November 15, 2023, CMS released the proposed Notice of Benefit and Payment Parameters Rule for 2025. This notice is issued annually preceding the applicable benefit year and, once final, adopts certain changes. Additionally, CMS issued Premium Adjustment Percentage and related guidance to inform the payment parameters for the 2025 benefit year. While the proposed rule primarily impacts the individual market and the Exchange, CMS’s Premium Adjustment Percentage and related guidance addresses certain ACA provisions and related topics that impact employer-sponsored group health plans. Below are the highlights.
Annual Cost-Sharing Limits. The ACA requires non-grandfathered group health plans to comply with an out-of-pocket maximum on expenses for essential health benefits. CMS proposes that this maximum annual limitation on cost-sharing for 2025 will be $9,200 for self-only coverage and $18,400 for family coverage (a decrease from $9,450 and $18,900 for self-only/family coverage respectively in 2024).
Premium Adjustment Percentage and Payment Parameters. CMS announced the premium adjustment percentage for the 2025 benefit year as 1.4519093322 ($7,110/$4,897), which indicates an increase in employer-sponsored insurance premiums of approximately 45.2% over the period from 2013 to 2024. This premium adjustment percentage will also be used to index the Employer Mandate provision’s penalty amounts for the 2025 benefit year.
The proposed Notice of Benefit and Payment Parameters Rule proposes updates to marketplace requirements, and includes provisions to address network adequacy, improve access to healthcare items and services, such as prescription drugs and adult dental benefits, and promote fair marketing standards. For further details of the specific proposed rule, please refer to the CMS Notice.
Once the regulations are finalized, employers should review them and implement any changes needed for the 2025 plan year.
Proposed Rule »
Fact Sheet »
2025 PAPI Parameters Guidance »
On October 18, 2023, the IRS released Notice 2023-70, which announces that the adjusted applicable dollar amount for PCOR fees for plan and policy years ending on or after October 1, 2023, and before October 1, 2024, is $3.22. This is a $0.22 increase from the $3.00 amount in effect for plan and policy years ending on or after October 1, 2022, but before October 1, 2023.
PCOR fees are payable by insurers and sponsors of self-insured plans (including level-funded plans, HRAs, and many point solution programs). The fee does not apply to excepted benefits such as stand-alone dental and vision plans or most health FSAs. The fee, however, is required for retiree-only plans. The fee is calculated by multiplying the applicable dollar amount for the year by the average number of lives and is reported and paid on IRS Form 720. The PCOR fee is generally due by July 31 of the calendar year following the close of the plan year.
The PCOR fee requirement was reinstated through the Further Consolidated Appropriations Act, 2020 and will be in place until the plan years ending after September 30, 2029.
For more information, please ask your advisor for a copy of our ACA: A Quick Reference Guide to the PCOR Fee publication.
The IRS recently released both the final forms and instructions for Forms 1094-B/C and 1095-B/C for the 2023 reporting year. Forms 1094-C and 1095-C are filed by applicable large employers (ALEs) to provide information that the IRS needs to administer the employer mandate penalties and eligibility for premium tax credits, as required by the ACA under Section 6056. Form 1094-B and 1095-B are filed by minimum essential coverage providers (e.g., insurers and self-insuring employers) to report coverage information in accordance with Section 6055.
Overall, most of the formats and rules remain the same as those in the previous year. No new codes or lines were added, so the forms should be very familiar to employers with reporting obligations in prior years. As a reminder, employers can rely on the permanent extension for distribution of forms to covered individuals, which is now March 2 of each year.
Major Change for Small Employers
The major change for reporting beginning in 2024 (for the 2023 reporting year) is the new requirement that filers may only file via paper if they are filing fewer than 10 forms. Filers with 10 or more forms must file electronically, which is a significant change for smaller employers who may have relied on paper filings in the past. Employers may request a hardship waiver from the required electronic filing by submitting Form 8508. Employers who are required to file electronically but fail to do so without reasonable cause (and do not have an approved waiver) may be subject to a penalty of up to $310 per return. Additional information on the new electronic filing requirement can be found in our
February 28, 2023 Compliance Corner article
and in the respective form instructions below.
2023 Form 1094-C »
2023 Form 1095-C »
2023 Form 1094-B »
2023 Form 1095-B »
2023 Instructions for Forms 1094-C and 1095-C »
2023 Instructions for Forms 1094-B and 1095-B »
On October 3, 2023, the DOL, HHS, and IRS (the departments) issued a request for information (RFI) regarding the application of preventive services requirements under the ACA to over-the-counter (OTC) preventive items and services available without a prescription.
The RFI focuses on four key areas of information:
- Gathering input from the public regarding the costs and benefits of requiring non-grandfathered group health plans to cover OTC preventive items and services without a prescription and without cost-sharing.
- Seeking comment on any potential challenges associated with providing such coverage.
- Understanding how providing such coverage may benefit consumers.
- Assessing any potential burdens plans or health insurance issuers may face if required to provide such coverage.
While the ACA already requires non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual health insurance coverage to cover preventive items and services, most of these preventive services require a healthcare provider to either provide a prescription or directly furnish the service. However, some preventive products are available to consumers OTC, which do not need a prescription from a provider. Examples include some tobacco cessation products, prenatal and breastfeeding supplies, and some oral contraceptives. Most health plans currently do not cover these OTC preventive products without a prescription.
Therefore, the departments have requested comments to better understand how requiring coverage of OTC preventive products may affect health plans and participants. Comments can be submitted no later than 5:00 p.m. ET on December 4, 2023.
Federal Register: Request for Information; Coverage of Over-the-Counter Preventive Services »
On September 29, 2023, the United States District Court for the District of Columbia set aside a 2021 regulation from HHS and CMS (together, “the agencies”) that permitted rather than required plans and insurers to count drug manufacturer assistance toward cost-sharing limits.
Generally, “manufacturer assistance” is any financial support for patients to pay for specific prescription drugs. Subsidies like these are common, but they also give rise to the question of how they should count toward plan cost-sharing limits.
For instance, a patient may have a $20 manufacturer coupon for a drug for which the patient is usually responsible for a $50 copayment under their plan. If the patient then presents the coupon at a pharmacy, they can purchase that drug for just $30 since the pharmacy will bill the drug manufacturer for the $20 difference.
Assume the patient in the above example was covered by a self-only plan with a cost-sharing limit of $9,100, which would be the maximum allowable under the ACA for 2023. Should that patient be credited $50 toward that limit with that drug purchase since that was their copayment, or just $30 since that was the amount they actually paid?
In its Notice of Benefit and Payment Parameters for 2020, the agencies determined that health plans were not required to count drug manufacturer coupons toward the annual limit on cost-sharing when a medically appropriate generic equivalent was otherwise available. The agencies removed the generic equivalent condition in 2021, however, to address concerns that the 2020 rule conflicted with IRS HDHP rules, under which only amounts actually paid by the individual may be taken into account when determining whether the HDHP deductible is satisfied.
Using the above example, the 2020 rules would not have required the patient’s plan to credit the entire $50 (the $30 the patient paid plus the manufacturer’s $20 coupon) toward the patient’s cost-share so long as an appropriate generic equivalent was otherwise available to the patient. In contrast, under the 2021 rule, the plan could credit the patient with either $30 or $50 at its discretion, regardless of whether a generic equivalent was otherwise available.
The court determined that this broad discretion rendered the 2021 rule arbitrary and capricious. Accordingly, the court vacated the rule and directed the agencies to provide an interpretation of the statutory definition of cost-sharing rather than delegating that task to the parties the agencies were supposed to be regulating.
The ruling has renewed the conflict between the ACA’s cost-sharing rules and the IRS HDHP rules that the agencies’ 2021 rule had sought to resolve. The agencies must now follow the court’s directive to provide a single interpretation of the ACA’s cost-sharing provisions as applied to drug manufacturer assistance to patients. Employers that sponsor prescription drug plans should be aware of this ruling and monitor for further developments.
On September 12, 2023, the Congressional Research Service issued report LSB11040 describing the Braidwood case and suggesting a possible action that Congress could take to address the issues raised by it.
On September 7, 2022, the US District Court for the Northern District of Texas issued a ruling in Braidwood Management Inc. v. Becerra, in which the court ruled that certain ACA preventive care mandates violated the Constitution as well as the Religious Freedom Restoration Act (RFRA). In particular, the court determined that the ACA preventive-care mandates violate the Constitution's Appointments Clause because the appointment process for members of the US Preventive Services Task Force (PSTF), the body that reviewed preventive services in order to determine whether they are subject to the ACA mandate, did not satisfy the constitutional method for appointing officers of the United States. The court agreed with the plaintiffs in the case that the actions of the PSTF, whose decisions bind those subject to the ACA mandate (such as insurers and employers in self-insured plans), are actions that must be done by persons appointed using the process under the Constitution (or actions that must be ratified by someone who was so appointed). Since the members of the PSTF are not appropriately appointed and their actions are not ratified by someone so appointed, their involvement in the ACA preventive care mandate was unconstitutional.
Noting this and other issues in the case, the report suggests that Congress could amend the preventive services requirement to indicate further that all preventive services, or at least those recommended by PSTF, must be approved by the HHS secretary or another official that has been nominated by the president and confirmed by the Senate.
The report does not directly affect the administration of either fully insured or self-insured plans. However, it serves as a reminder that the issues concerning the ACA preventive care mandate are still controversial, so employers should keep an eye on developments.
On August 23, 2023, the IRS published Revenue Procedure 2023-29, which provides the employer contribution percentage requirements applicable for plan years beginning in calendar year 2024 and the 2024 premium tax credit (PTC) table.
The ACA’s employer-shared responsibility rules (also known as the “employer mandate”) require an employer to provide affordable, minimum-value coverage to its full-time employees. The IRS’ required contribution percentage is used to determine whether an employer-sponsored health plan offers an individual affordable coverage, and the affordability percentage is adjusted for inflation each year. In addition, the ACA also provides a refundable PTC, based on household income, to help individuals and families afford health insurance through insurance exchanges. The IRS provides the PTC percentage table for individuals to calculate their PTC.
In 2024, the ACA's affordability percentage will decrease significantly to 8.39% (down from 9.12% in 2023). For the employer mandate and affordability, this means that an employee’s required premium contribution toward single-only coverage under an employer-sponsored group health plan can be no more than 8.39% of the federal poverty line or of an employee’s W-2 income or rate of pay (depending on which of the three affordability safe harbors the employer is relying upon).
The 2024 PTC table used to determine an individual’s eligibility for PTCs is provided below:
| Household Income % of Federal Poverty Line | Initial Percentage | Final Percentage |
|---|---|---|
| Less than 150% | 0.00% | 0.00% |
| At least 150% but less than 200% | 0.00% | 2.00% |
| At least 200% but less than 250% | 2.00% | 4.00% |
| At least 250% but less than 300% | 4.00% | 6.00% |
| At least 300% but less than 400% | 6.00% | 8.50% |
| At least 400% and higher | 8.50% | 8.50% |
The revenue procedure is effective for plan years beginning in calendar year 2024.
Employers should be mindful of the upcoming 2024 affordability percentages and make sure that the premium offerings for 2024 remain affordable for full-time employees to avoid any employer-shared responsibility penalties.
For further information, please ask your consultant for a copy of our NFP publications , ACA: Employer Mandate Penalties and Affordability and Cost-Share Contribution Models: A Guide for Employers.
On July 7, 2023, the DOL, HHS and IRS (the departments) issued a proposed rule (with an accompanying fact sheet) to amend certain requirements regarding limited duration insurance and excepted benefits coverage. The proposed rule also clarifies the tax treatment of fixed amounts received from accident and health coverage. Additionally, the departments are requesting comments regarding specific disease policies and level-funded plans.
The proposed rule follows several Biden Administration Executive Orders, which directed the departments to review policies for consistency with the goals of strengthening ACA protections and providing access to affordable, comprehensive healthcare. The Biden Administration also sought to ensure individuals understand their coverage options so they do not unknowingly purchase low-quality coverage (referred to as “junk insurance”) that may result in burdensome household medical debts. Accordingly, the proposed rule imposes new restrictions on coverage not fully subject to the ACA mandates.
First, the proposed rule requires short-term limited duration insurance (STLDI) to be truly short-term. STLDI is health insurance primarily designed to fill temporary gaps in coverage when an individual is transitioning from one plan or coverage to another, such as a waiting period for a new employer’s plan. Under the ACA, STLDI is not health insurance, so it is not subject to certain ACA requirements (e.g., prohibitions on exclusions for pre-existing conditions and discrimination based on health status).
Specifically, the proposed rule would change the maximum duration of STLDI policies to four months (a three-month initial term with a one-month extension or renewal permitted within a year of the original effective date). This proposed duration is much shorter than the current 36-month maximum permitted under a 2018 Trump Administration rule. Additionally, the proposed rule updates STLDI notice requirements to highlight coverage limitations.
Second, the proposed rule changes the requirements for hospital and fixed indemnity plans to qualify as excepted benefits, which are not subject to certain ACA mandates (e.g., preventive care requirements or annual and lifetime limit prohibitions). Generally, to qualify as an excepted benefit, fixed indemnity coverage must pay a fixed amount per day or period under specified conditions (e.g., hospitalization or illness), be provided under a separate insurance policy, and not be coordinated with other employer group health coverage (e.g., with respect to exclusions or benefit payments). The proposed rule explains that fixed indemnity insurance is designed to provide income replacement in the event of a hospitalization or illness but notes that policies sold today often include certain features resembling comprehensive coverage (e.g., benefits paid based on receipt of a medical service or directly to a healthcare provider).
Therefore, the proposed rule reaffirms that fixed indemnity policies must pay benefits only on a per-period basis (without regard to medical services received, expenses incurred, illness severity or other treatment characteristics) to qualify as excepted benefits. That is, coverage that pays benefits on a per medical item or service basis would not be considered an excepted benefit. Additionally, the departments propose to require that a disclosure notice be provided to employees in relation to group market fixed indemnity excepted benefits coverage.
Third, the proposed rule clarifies the tax treatment of fixed amounts received through certain employment-based accident or health insurance, including hospital indemnity and specified disease coverage, which are paid without regard to the amount of medical expenses incurred. Specifically, if the premiums for the coverage are paid on a pre-tax basis through a cafeteria plan, such fixed amounts are not excludable from income and are subject to payroll taxes.
Fourth, the departments request comments regarding specified disease excepted benefits coverage, including benefit design features, data on policies sold and whether additional protections are needed to distinguish it from comprehensive coverage.
Finally, the departments request comments and data on level-funded plan arrangements to better understand their key features and characteristics and whether guidance is needed to clarify plan sponsors’ obligations regarding level-funded plan coverage.
Employers should be aware of the proposed regulations and consult with their advisors regarding any potential future impact on their coverage offerings. Comments can be submitted to the departments through September 11, 2023. Generally, the changes are proposed to apply to coverage sold or issued after the final rule’s effective date (with respect to plan years that begin on or after such date). However, later effective dates are proposed to apply to coverage sold prior to the final rule’s effective date. Employers should check Compliance Corner for additional updates regarding the proposed changes and final rule issuance.
Federal Register: Short-Term, Limited-Duration Insurance; Independent, Noncoordinated Excepted Benefits Coverage; Level-Funded Plan Arrangements; and Tax Treatment of Certain Accident and Health Insurance »
Fact Sheet »
On May 15, 2023, the US Court of Appeals for the Fifth Circuit (the Fifth Circuit) issued an administrative stay (i.e., a pause) of the lower court's remedy in Braidwood Management Inc. v. Becerra. As a result of the stay, all ACA preventive care mandates remain in effect until the Fifth Circuit rules on the substance of the case.
As explained in our prior article , on March 30, 2023, the US District Court for the Northern District of Texas invalidated and prevented enforcement of certain ACA preventive care mandates by the DOL, HHS and IRS (the departments) on a nationwide basis. Specifically, the court struck down preventive care requirements recommended by the US Preventive Services Task Force (PSTF) with an "A" or "B" rating after determining the PSTF members were not properly appointed under the US Constitution. The departments appealed the decision to the Fifth Circuit and requested a stay of the court's remedy pending the outcome of the litigation.
Employers should be aware of the Fifth Circuit's grant of the stay and ensure their group health plans continue to provide coverage of the PSTF-recommended preventive services without cost-sharing until a final decision is issued on the merits of the case.
US Court of Appeals for the Fifth Circuit Stay: Braidwood v. Becerra »
On April 27, 2023, CMS published the 2024 Notice of Final Benefit and Payment Parameters and an accompanying fact sheet. The final rule is primarily directed at health insurers and the ACA marketplace but includes information that may indirectly impact group health plans.
Generally, the annual parameters update the ACA requirements and uniform standards for marketplace coverage. Among other items, the 2024 changes are designed to improve network adequacy (e.g., by requiring provider networks for marketplace coverage), encourage enrollment in plans with reduced cost-sharing for lower-income individuals and simplify the enrollment process.
Beginning in 2024, the final rule will allow federally facilitated exchanges to apply a special enrollment rule for individuals losing Medicaid or Children's Health Insurance Program (CHIP) coverage due to eligibility redeterminations. Under the special rule, these individuals can choose an exchange plan 60 days before or 90 days after their loss of coverage. (Under current rules, the coverage loss must be reported within 60 days.) State-based exchanges can allow additional enrollment time and can implement the rule in 2023. To avoid potential gaps in coverage, exchanges may offer earlier coverage effective dates for those who attest in advance to a future loss of minimum essential coverage.
These marketplace special enrollment flexibilities may assist individuals who lose Medicaid or CHIP coverage in the coming months as the COVID-19 continuous enrollment policy ends and states return to normal eligibility requirements. Those losing coverage who are eligible for employer-sponsored group health coverage may also seek to exercise their HIPAA special enrollment right to enroll in the group health plan. Employers should be aware of the potential increase in employees losing Medicaid or CHIP coverage who may be seeking to enroll in the employer-sponsored group health plan or marketplace coverage.
Additionally, for federally facilitated exchange coverage, the final rule formalizes the policy of allowing children to stay on their parent's coverage until the end of the year when they turn 26. (The ACA technically only requires such coverage until age 26, but the rule now prohibits mid-year terminations of the child's coverage.) However, this policy is optional for state-based exchange coverage.
As a result of a policy change in 2023, the benefit and payment parameters no longer announce the permitted ACA plan annual cost-sharing limits. As a reminder, the 2024 limits, as specified in a prior CMS memo, are $9,450 for self-only coverage and $18,900 for family coverage. (The 2023 limits are $9,100 and $18,200.) These limits are distinct from the IRS out-of-pocket maximums applicable to HSA-compatible high deductible health plans. Employers should be aware of the release of the final rule, which is effective June 18, 2023.
Patient Protection and Affordable Care Act, HHS Notice of Benefit and Payment Parameters for 2024 Final Rule
CMS.gov, HHS Notice of Benefit and Payment Parameters for 2024
On April 13, 2023, the DOL, HHS and IRS (the 'agencies') jointly issued FAQs (Part 59) to provide initial guidance on how the recent court decision in Braidwood Management Inc. v. Becerra affects the requirement to cover preventive services without cost-sharing under the ACA. According to the FAQs, the agencies anticipate issuing additional guidance in the future to further address plans' and issuers' obligations in light of the Braidwood decision.
As background, under the ACA, non-grandfathered group health plans must cover certain preventive services without cost-sharing when they are delivered by an in-network provider. The covered requirements have historically included services given an 'A' or 'B' rating from the US Preventive Services Task Force (USPSTF), vaccines recommended by the Advisory Committee on Immunization Practices (ACIP), and preventive care and screenings for children and women recommended by the Health Resources and Services Administration (HRSA). On March 30, 2023, the US District Court for the Northern District of Texas (the 'court') issued a final judgment in Braidwood Management Inc. v. Becerra, which invalidates and prohibits the agencies from enforcing all USPSTF-recommended preventive care mandates issued since the ACA's March 23, 2010, enactment, on a nationwide basis. Additionally, the final judgment prevents the agencies from enforcing the PrEP coverage requirements as to the plaintiffs with religious objections. For additional background information, please see our April 11, 2023, article .
Below is the key summary of the FAQs:
Preventive Service Coverage Requirements Affected by the Decision
The FAQs emphasize that the court ruling only removes the ACA coverage requirements and cost-sharing prohibitions for preventive care based on the USPSTF recommendations (e.g., lung cancer screening and pre-exposure prophylaxis (PrEP) drugs to prevent HIV infection). Preventive care recommendations by ACIP (e.g., vaccines and immunizations) and HRSA for women's health services, including contraceptive coverage requirements, would not be affected and, therefore, could not be subject to the cost-sharing requirement.
Specifically, the ruling prevents the agencies from implementing and enforcing preventive items and services given an 'A' or 'B' recommendation by the USPSTF on or after March 23, 2010. However, the agencies encourage plans to continue coverage without cost-sharing. Furthermore, plans and issuers must continue to cover, without cost-sharing, items and services recommended by ACIP or HRSA that overlap with stricken USPSTF recommendations.
Impact of State Laws and Midyear Coverage Changes
The court ruling does not impact state insurance law requirements to cover preventive care with an "A" or "B" rating by the USPSTF on or after March 23, 2010. Therefore, the agencies encourage issuers to continue to comply with any applicable state laws. Further, any midyear changes would need to comply with applicable state and federal laws, contractual provisions, and, if applicable, collective bargaining agreements.
Notice Requirements
Plans must comply with applicable notice requirements. If SBC content is affected, notice must be 60 days in advance of the change. Additionally, ERISA requires a summary of material reduction in covered services or benefits within 60 days following the change.
Qualified HDHP status
Until further notice, an HDHP can continue to provide benefits without cost-sharing for items and services recommended with an "A" or "B" rating by the USPSTF on or after March 23, 2010, before the minimum annual deductible is met.
Employers should be aware of the FAQ guidance and monitor future developments. The court's decision has been appealed to the Fifth Circuit Court of Appeals, and the final outcome is not yet known. Employers considering any changes because of the court ruling should consult with counsel for guidance.
FAQs About ACA and Coronavirus Aid, Relief, and Economic Security Act Implementation »
On March 30, 2023, the US District Court for the Northern District of Texas (the 'court') issued a final judgment in Braidwood Management Inc. v. Becerra, which invalidates and prohibits enforcement of certain ACA preventive care requirements on a nationwide basis. As explained below, the final judgment follows the court's September 7, 2022, ruling in a case challenging the legality of the preventive care mandates.
Under the ACA, non-grandfathered group health plans must cover certain preventive services without cost-sharing when they are delivered by an in-network provider. The covered requirements have historically included services given an 'A' or 'B' rating from the US Preventive Services Task Force (PSTF), vaccines recommended by the Advisory Committee on Immunization Practices (ACIP), and preventive care and screenings for children and women recommended by the Health Resources and Services Administration (HRSA).
In this case, the plaintiffs included two businesses and six individuals who sought health insurance that excluded or limited coverage required by the ACA preventive care mandates. Among other claims, the plaintiffs argued that the ACA preventive care mandates violate the US Constitution because the appointment process for members of the PSTF, ACIP and HRSA did not satisfy the constitutional method for appointing US 'officers.' A person is a US 'officer' if that person occupies a continuing position established by federal law and exercises significant authority under that law.
On September 7, 2022, the court ruled that the appointment of ACIP and HRSA officers satisfied the constitutional requirements, since they are supervised and directed by the HHS Secretary. In contrast, PSTF members are independent experts that provide evidence-based recommendations related to preventive care services. The court found that the appointments of PSTF experts violated the US Constitution because they exercise officer-level authority but are not supervised or directed by an administrative agency. The plaintiffs had also asserted that the PSTF-recommended requirement to cover pre-exposure prophylaxis (PrEP) drugs to prevent HIV infection violated their religious rights under the Religious Freedom Restoration Act. On this issue, the court ruled in favor of the plaintiffs. Please see our previous article summarizing the court's prior ruling.
The court reserved ruling on the appropriate remedies in their September 7, 2022, opinion. Accordingly, the March 30, 2023, judgment invalidates and prohibits the DOL, IRS and HHS (the 'departments') from enforcing all PSTF-recommended preventive care mandates issued since the ACA's March 23, 2010, enactment, on a nationwide basis. Additionally, the final judgment prevents the departments from enforcing the PrEP coverage requirements as to the plaintiffs with religious objections.
Braidwood Management Inc. v. Becerra Second Memorandum Opinion and Order on Remedies »
Group Health Plan Considerations
First, it's important to recognize that the court ruling only removes the ACA coverage requirements and cost-sharing prohibitions for preventive care based on the PSTF recommendations. Preventive care recommendations by ACIP (e.g., vaccines and immunizations) and HRSA for women's health services (including contraceptive coverage requirements) would not be affected and therefore, could not be subject to cost-sharing requirements. Employers may want to consult with their carriers or TPAs for further details on which preventive care coverage requirements (e.g., specific screenings for various types of cancer) are affected.
Second, the departments announced their intention to appeal the decision to the US Court of Appeals for the Fifth Circuit. The departments may also ask for a stay (i.e., delay) of the court's remedy pending the outcome of the final litigation. If a stay is not granted, the US Supreme Court may be asked to review the issue of the stay. The merits of the underlying case could eventually be reviewed by the US Supreme Court, depending upon the outcome of any appeal. We will have to wait and see, but if a stay is granted at either appellate level, the PSTF-recommended services would continue to be required without cost-sharing, as they have been under the ACA.
Third, during the appeal proceedings, it is anticipated many group health plans will continue to cover all preventive services without cost-sharing. Typically, health plan contracts are in place for the plan year, and employers generally do not make coverage or cost changes midyear. Employers that sponsor fully insured plans may be limited in their ability to make midyear plan changes and should always consult with their carriers regarding potential plan changes and the relating timing and disclosures. (The related rules would generally require 60-days advance notice if a change to cost-sharing occurs outside of open enrollment.) Additionally, states may pass insurance laws mandating coverage of the PSTF-recommended services if the federal coverage requirement is not reinstated.
Generally, employers that sponsor self-insured plans have greater plan design flexibility than fully insured plans. However, cost or coverage changes based on the court's ruling may need to be reversed if the ruling is overturned on appeal. Employers may also want to consider whether assessing cost sharing for PSTF-recommended preventive services could deter participants from receiving routine screenings, thus delaying disease detection and hindering long-term cost containment strategies. Employers contemplating plan changes should also be mindful that midyear changes that affect the content of the Summary of Benefits Coverage will generally require at least 60 days' notice to participants in advance of the change effective date. Accordingly, self-insured plan sponsors should always consult with their TPAs, service providers and counsel regarding the implementation of any plan changes and related plan document and disclosure requirements.
Fourth, it's unclear whether HSA eligibility could be negatively impacted for participants who receive the invalidated PSTF-recommended preventive care. It is possible that the IRS will consider these services to be preventive care for this purpose. Hopefully, the IRS will address this concern soon; employers should watch for IRS guidance.
Fifth, plan participants may be confused by the case developments and seek reassurances from employers as plan sponsors that their preventive care coverage has not been adversely impacted. Employers should consult with their carriers and TPAs regarding any related updates or participant communications.
As this case continues through the legal process, employers should be aware of the recent court judgment, consult with their carriers and TPAs and monitor future developments. For specific advice and guidance, employers should always engage their legal counsel.
On March 9, 2023, the IRS released Revenue Procedure 2023-17, which provides, in part, indexing adjustments for penalties under the employer mandate. As a reminder, the ACA requires applicable large employers (ALEs) - those with 50 or more full-time and full-time equivalent employees (FTEs) - to offer affordable minimum value coverage to substantially all FTEs and their dependents or risk a penalty.
For plan years beginning after December 31, 2023, the annual penalties are as follows:
- Penalty A (failure to offer coverage to substantially all FTEs) - $2,970 per FT employee.
- Penalty B (failure to offer affordable coverage that meets minimum value standards) - $4,460 per FT employee receiving a premium tax credit.
Although generally expressed as an annual amount, as listed above, both penalties are calculated and assessed on a monthly basis.
On January 30, 2023, the Department of Health and Human Services, the Department of Labor, and the Department of the Treasury (collectively, the departments), issued proposed rules to amend regulations regarding coverage of certain contraceptive preventive services under the ACA.
Current regulations require non-grandfathered group health plans and non-grandfathered group or individual health insurance coverage to cover certain contraceptive services without cost-sharing unless an exemption exists. Exemptions may be granted to group health plans, student health plans, health insurance issuers, or individuals who purchase individual health insurance with religious or moral objections to coverage of contraceptive services.
The proposed regulations would leave the existing religious exemptions in place and rescind the moral exemption rule, while establishing a new program, called an individual contraceptive arrangement. The new program would allow an individual enrolled in an exempted plan to access contraceptive services at no cost directly from a provider or facility that furnishes contraceptive services. The individual contraceptive arrangement would not require any involvement from the objecting entity; instead, providers would receive reimbursement from issuers on the federally-facilitated exchange or state-based exchange on the federal platform.
Public comments on the proposed rule must be submitted by April 3, 2023. We will continue to report on further developments in Compliance Corner.