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The Department of Labor recently issued clarifying guidance on how to apply the eligibility rules under the Family and Medical Leave Act (FMLA) when employees telework or work away from an employer’s facility.
 

Existing Law

General Benefits: Employers subject to the FMLA must provide up to 12 weeks of unpaid leave during a 12-month period to eligible employees for certain specified events. Those events include personal illness, caring for a seriously ill family member, childbirth, adoption or placement of a child, military caregiver leave, and military exigency leave. The FMLA requires job protection during the leave.

Employee Eligibility: Generally, employees are eligible for FMLA leave if they meet the following three criteria:

1. Have worked for their employer for at least 12 months,
2. Have worked 1,250 hours over the past 12 months; and
3. Work at a location where the employer employs 50 or more employees within a 75-mile radius.

Benefits Continuation: Employers must maintain any group health plan coverage and other welfare benefit plan coverage for employees on FMLA-protected leave under the same conditions that would apply if the employee had not taken leave. This typically means that employers must continue benefits. However, they may require that employees continue to pay their required contributions.

Job Restoration: Upon conclusion of the FMLA leave period, the employer is required to restore the employee to the same or an equivalent position. This includes equivalent employment benefits, pay, and other terms and conditions of employment.
 

Counting Methodology Applies to Teleworkers

The new guidance outlines that all hours worked are counted for purposes of determining an employee’s FMLA eligibility, including hours when an employee teleworks from home or works at other locations.

When an employee works from home or other locations, the employee’s worksite, for FMLA eligibility purposes, is the office to which he reports or from which his assignments are made. This is particularly important in applying the 75-mile rule.

The DOL specifically explained that if 50 employees are employed within 75 miles of the employer’s worksite (the location to which the employee reports or from which assignments are made), the employee meets that FMLA eligibility requirement. The count of employees within 75 miles of a worksite includes all employees whose worksite is within that area, including employees who telework and report to or receive assignments from that particular worksite.
 

Resources

This guidance was provided in DOL Field Assistance Bulletin No. 2023-1, issued in February 2023. It can be accessed here.


 

During the COVID-19 Public Health Emergency (PHE) and National Emergency (NE) periods, the government issued various forms of temporary relief to employers and plan participants. They also required employers to make certain health plan design changes during these emergency periods, such as covering COVID-19 testing and extending many health plan-related deadlines.

• Public Health Emergency: The Health and Human Services (HHS) first established the Public Health Emergency for COVID-19 (PHE) in January 2020. This PHE has been extended multiple times in 90-day increments.
• National Emergency: On March 13, 2020, the COVID-19 National Emergency was declared by former President Trump and was subsequently continued by both President Trump and President Biden. A National Emergency declaration is in effect until it is terminated by the President, through a joint resolution of Congress, or is not continued by the President.

The Biden administration announced earlier in 2023 that it planned to end both emergencies on May 11, 2023. However, Congress acted to pass a joint resolution to terminate the National Emergency sooner (on April 10, 2023). It was signed into law by President Biden, formally ending the National Emergency. Note that the Public Health Emergency is still slated to end on May 11, 2023.

In the interim, the DOL, HHS, and the Treasury collectively issued guidance in the form of FAQs, which provide important information to assist plan sponsors in unwinding the requirements of the emergency declarations. (Link to FAQs here.)

With the end of the emergency periods fast approaching, employers should begin evaluating decisions and action items that are required pursuant to this change. This article provides an overview of each issue as well as a summary of Action Items for employers.
 

Important Interim Update

On April 14, 2023, the Department of Labor provided informal comments that the tolling period for benefit plan deadlines will still end on July 10, 2023. While the legislation that was signed ending the National Emergency on April 10, 2023, would have moved the deadline a month earlier, the DOL is considering changing a rule so that it will still end on July 10 as previously scheduled. The final deadline tolling date will be confirmed upon the information being confirmed and formalized by the DOL.
 

COVID-19 Testing

• During the PHE: Under the FFCRA and the CARES Act, health plans are currently required to cover COVID-19 tests and testing-related services without cost-sharing, prior authorization, or other medical management techniques. Health plans are also required to cover up to eight OTC tests per person per month without cost-sharing.
• After the PHE Ends: After the end of the PHE, health plans will no longer be required to cover COVID-19 tests and testing-related services for free, and health plans may impose cost-sharing, prior authorization, or other medical management requirements for such services.

Decision Point: It should be noted that the joint Departments encourage plan sponsors to retain coverage for COVID-19 testing. That said, Plan Sponsors need to decide whether to amend their health plans to:

1. Stop providing any coverage for COVID-19 tests at the end of the PHE
2. Continue offering coverage for COVID-19 testing but impose requirements on this testing (such as cost-sharing)
3. Continue offering coverage for a certain period of time, for example, through the end of the plan year, and then eliminate coverage.

COVID-19 Vaccines

• During the PHE: The CARES Act required plans to cover COVID-19 vaccines and boosters without cost-sharing. This CARES Act requirement will end as of May 11, 2023.
• After the PHE Ends: Plans will no longer be required to cover vaccines and boosters without cost sharing. However, note that non-grandfathered health plans (most plans) will still be required to cover in-network COVID-19 vaccines without cost-sharing as part of the ACA preventive services mandate that applies indefinitely for certain in-network immunizations.

Plan Deadline Extensions

• Before the NE: At the outset of the National Emergency period, the government recognized that employers and employees might have difficulty meeting certain plan deadlines due to the pandemic.
• During the NE: The Departments issued guidance extending certain ERISA plan deadlines. Plans were required to disregard the period beginning March 1, 2020, and ending 60 days after the National Emergency period terminates (the “Outbreak Period”) in determining deadlines for:

1. HIPAA special enrollment
2. COBRA 60-day election period
3. COBRA premium payment 
4. COBRA notification to the plan by an individual of a qualifying event or determination of disability
5. Filing a claim for benefits
6. Filing an appeal of a claim denial 
7. External review request for a final claim denial by a health plan
8. External review filing of information to perfect an external review request

• After the NE Ends: All deadlines will revert to the standard statutory deadlines.

Mental Health Parity

• During the PHE: Group health plans were able to disregard benefits for COVID-19 diagnostic testing and related services, required to be covered at no cost sharing for purposes of parity under the Mental Health Parity and Addiction Equity Act (MHPAEA).
• After the PHE Ends: This relief was not extended after the end of the PHE. Therefore, plans must now ensure that coverage of COVID-19 diagnostic testing and related services complies with MHPAEA.

Special Enrollment Period for Loss of Medicaid or CHIP Coverage

• During the NE: Since the beginning of the NE, many state Medicaid agencies have not terminated enrollment of Medicaid beneficiaries who enrolled on or after March 18, 2020, through March 31, 2023 (referred to as the “Continuous Enrollment Condition”).
• After the NE Ends: Many individuals will lose Medicaid and CHIP coverage as state agencies resume their regular eligibility and enrollment practices. Accordingly, these individuals will need to transition to other coverage, including employer-sponsored group health plan coverage. To help facilitate this transition, if an employee loses eligibility for Medicaid or CHIP coverage, they will have a HIPAA special enrollment period to enroll in employer-sponsored coverage mid-year. The election window must be at least 60 days long (running through the end of the deadline tolling period).

HDHP/HSA - COVID-19 Treatment, Testing, and Telehealth Still Permitted

• Before the PHE: Standard IRS HSA rules require that individuals must be covered under an HDHP to be HSA-eligible. Generally, the HDHP must not provide reimbursement for any expenses until after the statutory deductible has been met, with the exception of preventive care.
• During the PHE: The IRS announced that HDHPs could provide COVID-19 testing and treatment for HDHP participants who had not met their deductible without impacting the individual’s HSA eligibility. In addition, to promote the use of telehealth services dur­ing the pandemic, the government passed legislation allowing HDHPs to offer telehealth coverage on a first-dollar basis (without compromising an individual’s ability to contribute to an HSA).
• After the PHE Ends: At the beginning of the pandemic, the IRS issued Notice 2020-15, which permits an HDHP to provide first-dollar coverage for COVID testing and treatment without causing a participant to be ineligible to contribute to an HSA. Although this notice was issued due to the PHE, it applies until further guidance. Therefore, this relief will continue past the end of the PHE. For telehealth services, the relief applies for the 2023 and 2024 plan years and is not impacted by the end of the emergency periods.

Participant Communication

It is always best practice to notify participants of any plan changes. The joint Departments strongly encourage plan sponsors to notify plan participants of changes to COVID-19 coverage pursuant to the end of the NE. However, special rules apply such that Summaries of Benefits and Coverage (SBCs) need not be amended mid-year.

Following is an overview of potential participant communications:

• COVID-19 Testing: If coverage is eliminated from the health plan, plan sponsors should notify plan participants. In addition, plan sponsors may choose to remind participants that COVID-19 tests purchased by an individual may be reimbursed through an FSA, HRA, or HSA.
• COVID-19 Vaccines: If copays are added for COVID vaccines, plan sponsors should communicate the change to plan participants.
• Plan Deadline Extensions: Participants and COBRA Qualified Beneficiaries should be sent communications to clarify that applicable deadlines have reverted to “normal” and that any personal 12-month “tolling periods” will end 60 days after the National Emergency Ends.
• Special OE for Medicaid/CHIP: Employers should reach out to employees who have waived group health plan coverage in favor of Medicaid or CHIP to encourage these employees to update their contact information with the state Medicaid or CHIP agency and to respond promptly to any communication from the state. The Department of Labor has provided a flyer that employers may use when communicating to their employees about their healthcare options upon losing Medicaid or CHIP coverage. (Link to flyer here)
• HDHP/HSA Coverage Provisions: If continued, confirmation for plan participants that HSA contributions will not be adversely affected by continued coverage of COVID testing, COVID treatment, or telehealth services would be welcome for plan participants. If not continued, notification should be provided to clarify the coverage change.

Action Items for Employers

Employers should consider how the end of the emergency periods will impact their plans and take stock of necessary action items.

1. Plan Decisions: Employers should evaluate whether to keep their plan designs in place through the end of the plan year (or longer) or amend their plans for the end of the emergency periods (as outlined above).
2. Plan Amendments: To the extent changes in plan coverage will affect plan language, plan contracts, and certificates will need to be amended.
3. Update SPDs, SMMs, and SBCs: To the extent the plan is amended, updated SPDs will need to be issued. In addition, if the changes affect the content on the SBCs, revised SBCs must be issued.
4. Coordinate with Insurance Carriers: Employers will need to coordinate any new plan design changes with insurance carriers and TPAs.
5. Coordinate with COBRA Administrator: Employers will want to coordinate communication with Qualified Beneficiaries for notification of end-of-deadline extensions.
6. Participant Communication: Employers should provide notice to participants regarding any coverage changes. To the extent coverage changes could be but are not made, it may be useful to provide proactive communication to affirm the COVID-related plan provisions that will remain. (See the summary of potential communication items above.) Communications should be distributed reasonably in advance of any plan design changes.

On March 30, 2023, a Texas federal court released a ruling that challenges the constitutionality of the ACA’s requirement for health plans to cover certain preventive care with no cost sharing. Judge Reed O’Connor’s decision invalidates certain provisions of the Affordable Care Act’s preventive care mandate (indicating those provisions were unconstitutional). The ruling prevents the government from enforcing the ACA requirement that insurers cover certain preventive care services on a zero-cost basis.

The preventive care provision of the ACA is arguably one of the most popular provisions of the ACA. It is also long-heralded as one of the best and most cost-effective investments in American health.
 

Background

The lawsuit stems from the desire to curb payment for certain preventive care services, not a general dislike of the concept of paying for preventive care services in general. However, in order to make the legal argument work, the lawsuit had to use a broad brush and challenge the requirement to all preventive care services.

The lawsuit was filed in Texas by Dr. Steven Hotze, who owns a wellness center that employs about 70 people. Dr. Hotze is a Christian and, because of his religious beliefs, is opposed to the ACA requirement that the insurance that he offers to his employees cover preventive care services, specifically pre-exposure prophylaxis (PrEP) drugs that prevent transmission of HIV. In his view, the drugs “facilitate behaviors such as homosexual sodomy, prostitution, and intravenous drug use.” Because this conflicts with his religious beliefs, it is a violation of the Religious Freedom Restoration Act.

Following is a summary of some interesting facts about the case and the circumstances surrounding it:

• Judge O’Connor is the same judge who previously issued the ruling that the ACA was unconstitutional on the grounds that the then-zeroed-out individual mandate penalty was not a tax. That ruling was later overturned by the Supreme Court.
• Hotze’s lawyer is Jonathan Mitchell. Mitchell is the legal mastermind behind S.B. 8, the Texas law that effectively banned abortion in Texas even before the U.S. Supreme Court overruled Roe v. Wade.
• Hotze filed suit before Judge O’Connor in the name of the management company, Braidwood, that employs his workers. Thus, the case name is Braidwood v. U.S. Department of Health and Human Services.
• PrEP is a daily pill that has proven effective in helping to prevent HIV. The annual cost runs between $13,000–$20,000 per person. The U.S. Preventive Services Task Force (USPSTF) has given it a grade of “A.” This means it is “Strongly Recommended” as a preventive care measure and that health plans must cover it without any cost share under the ACA.

What is the legal argument?

Braidwood’s main legal claim rests on an obscure but significant provision of the U.S. Constitution called the Appointments Clause. In simple terms, the Appointments Clause says that legally significant government decisions must be made by federal officers who are appointed by the president or by a department head. This legal challenge argues that the members of the U.S. Preventive Services Task Force aren’t appointed and therefore are not federal officers. As such, the decisions they make on which treatments qualify as preventive care under the ACA aren’t valid.

Effectively, the judge found the members of the USPSTF were unlawfully appointed, which then voided any of their recommendations over the past 10+ years.

Following are some additional facts that are interesting:

• The U.S. Preventive Services Task Force is the entity that “grades” medical treatments. A grade of A or B determines that the service must be covered by insurance companies under the no-cost preventive care services under the ACA.
• It is true that the members of the U.S. Preventive Services Task Force are not federal officers appointed by the president or a department head.
• In September, Judge O’Connor sided with Braidwood, holding that it was unconstitutional for the Task Force to make legally significant choices about free preventive services.
• However, he held off on issuing a final ruling until he could get a further briefing on the proper scope of relief.

This happened in Texas. Why does it matter to me?

In the final ruling, Judge O’Connor held that the decision reaches across the entire country. It should not be limited just to Braidwood and not just to Texas.

This determination is effective immediately and retroactive to March 23, 2010.
 

What about mammograms and well-baby exams?

The ruling was limited to only preventive care recommendations made by the U.S. Preventive Services Task Force, which dates back to March 23, 2010. Any care deemed preventive prior to the Task Force making decisions would not be impacted. While the vast majority of preventive care items have been added since 2010, age-old preventive care services such as mammograms, contraception, immunizations, and well-baby/child exams were adopted prior to 2010 and, therefore, would not be negatively impacted.
 

Why are people concerned about contraception?

Pundits have pondered that the lawsuit may be expanded to threaten a related part of the ACA that requires coverage of preventive services for women, including contraception. In an earlier ruling, Judge O’Connor held that the contraception mandate passed constitutional muster because a properly appointed federal officer (Secretary of Health and Human Services Xavier Becerra) approved it.

However, that argument is not airtight, and the Fifth Circuit, the very conservative appeals court that covers Texas, could go further and challenge that element of the mandate, as well.
 

What does the future hold?

This is a significant lawsuit and an important challenge to the ACA. The ultimate outcome of this decision remains to be seen. In the meantime, it will certainly create some confusion for employers sponsoring group health plans. Following is a short summary of some potential actions we may see:

Future Appeal: The ruling will most certainly be appealed by the HHS.

Interim Request for Stay to Judge: The HHS will appeal and request that Judge O’Connor enter a stay while the case is on appeal. If the judge denies the stay, a request can be made directly to the Fifth Circuit Court.

Interim Request for Stay to Fifth Circuit Court: The Biden administration has already filed a Notice of Appeal and will presumably seek a stay of this decision from the Fifth Circuit Court. A stay would prevent the decision from going into effect until a decision on the case’s merits is issued by the Fifth Circuit or potentially the U.S. Supreme Court.

Supreme Court Appeal: It is very likely that this case will be appealed and make its way all the way to the Supreme Court.

Potential Congressional Action: Congress could act and pass legislation to ensure access to preventive care services. The legislation would be relatively straightforward and redirect final authority for preventive care services to HHS Secretary Becerra. This solution would require a bipartisan effort.

From a timing perspective, an appeal is likely to take at least a year. If the case moves to the Supreme Court, it will likely be two years before an ultimate decision is made. In the interim, we can expect uncertainty and unrest while the issue plays out in the courts.
 

Action Items

Many Employers Won’t Make Changes: Many, if not most, employers will not implement changes to how preventive care is covered under their health plans, regardless of the ruling that indicates it is no longer required to be covered at 100%.

HDHP Coverage: Employers sponsoring HDHP plans will want to consider the impact of maintaining no cost-sharing coverage for the USPSTF-mandated preventive care benefits. The concern here is that if previously covered preventive care services continue to be covered at 100%, this could potentially compromise participants’ ability to contribute to their HSAs. Recall that a requirement of HDHP plans is that “only” preventive care can be covered on a first-dollar basis, and the ruling now brings into question what constitutes federally approved preventive care. For reference, the IRS has previously interpreted the definition of preventive care for HSA purposes to include any preventive health services mandated by the ACA. This ruling obviously changes what is included under that definition.

The San Francisco Health Care Security Ordinance (SF HCSO) requires covered employers to make a minimum healthcare expenditure on a quarterly basis on behalf of all covered employees. While the ordinance has been in place for many years (since 2008), it has taken on a new dynamic due to the increased popularity of remote work. The annual reporting requirement is due next month (May 1 since April 30 falls on a Sunday), so now is a good time to be reminded of the requirements under the SF HCSO.
 

Covered Employers

Generally, employers are subject if they have 20+ employees with one or more working in the geographic boundary of San Francisco. In addition, employers are required to obtain a San Francisco business registration certificate. The threshold for non-profits is 50+ employees. Small employers with 0-19 employees (0-49 for non-profits) are exempt.

Tip: The headcount for determining your company size under HCSO – both for determining applicability and expenditure rate – includes ALL employees, regardless of status, classification, or contract status. That means even temp or contract employees that are 1099 or through an agency still count!
 

Covered Employees

Employees working an average of eight (8) or more hours per week within the San Francisco city limits and entitled to be paid minimum wage. There is a waiting period of 90 days.

Tip: Look at the exemption criteria closely. The manager/supervisor exemption is coupled with the salary exemption amount, meaning the two are not separate. An employee needs to make more than the salary exemption (2023: $114,141 annually) AND be considered a manager/supervisor/confidential employee per HCSO.

Reminder: Remember that the definition of a covered employee under HCSO hinges on where work is performed. Given the move to remote work, you will need to count and confirm expenditures for employees who live/work in San Francisco.
 

Calculating Expenditure Rate (Updated for 2022-2023)

Rates are based on employer size and are calculated based on the per hour rate payable to covered employees.

Medium Employer

• Size Threshold: 20-99 (50-99 for non-profits)
• 2022 HCSO Rate: $2.20 per hour
• 2023 HCSO Rate: $2.27 per hour

Large Employer

• Size Threshold: 100+
• 2022 HCSO Rate: $3.30 per hour
• 2023 HCSO Rate: $3.40 per hour

The reporting due on May 1 is for the 2022 plan year.

Tip: Hours worked include both paid hours and entitled hours. Specifically, PTO hours that an employee is entitled to must be included in the hours worked calculation. Maximum hours for the calculation are capped at 172 per month.
 

Making Expenditures

For full-time, benefit-eligible employees, average costs for medical, dental, and vision can be used in determining the employer's contribution to health care. Most employers will easily reach the minimum expenditure for employees who are provided health insurance benefits. A large employer would need to spend approximately $568 per month in 2022 or $585 per month in 2023 for an exempt or 40-hour non-exempt employee. Most medical, dental, and vision premiums, when combined, exceed that amount. Remember that employee contributions cannot be included in the calculation (only the employer contribution may be counted).

For non-benefit-eligible employees, the expenditure must be made quarterly. The simplest method for making an expenditure is via the San Francisco City Option, and most employers use this option for non-benefited employees.

Tip: Being benefit eligible does not immediately mean that HCSO requirements are met, and expenditures do not need to be made. If a benefit-eligible employee waives the employer-sponsored health plan, the employer is still required to make a minimum expenditure on behalf of that employee. That means employers must pay into the City Option for employees that have waived (similar to non-benefit eligible employees) UNLESS the employee voluntarily signs an HCSO Waiver Form. Employers are prohibited from coercing employees to sign the form and the form language dissuades individuals from signing it. Due diligence would mean sending the Waiver Form to any employees who waived coverage, and. if the employee chooses not to sign, make the required quarterly expenditure.
 

Due Dates - Regular

Quarterly expenditures are due 30 days following the end of the quarter. First-quarter expenditures are due April 30^th. Annual Reporting to HCSO of covered employees and expenditures made are also due April 30^th. Submission is completed online. The online form will be posted to the OLSE HCSO website no later than April 1.
 

Penalties

There are no insignificant penalties for non-compliance. The penalties are up to $100 per employee per quarter for failure to make expenditures and up to $500 per quarter if the annual reporting is not submitted. There are also other penalties as well for retaliation, failure to provide records to OLSE, and failure to post the required notice. However, while there is no guarantee, the OLSE generally does not fine an employer that has been out-of-compliance that now comes into compliance. The bigger risk is if an employee complains, as that is generally when the OLSE would act and penalize an employer for non-compliance.

During the Public Health Emergency, the Drug Enforcement Agency (DEA) and Health and Human Services (HHS) adopted policies to waive the in-person exam requirement for prescribing controlled substances as required by the Ryan Haight Act. This enabled registered DEA practitioners to prescribe Schedule II-V controlled substances to patients without in-person interaction. This action was taken in order to ensure that patients (both established and new) were able to receive medically necessary prescriptions via telemedicine.

At the conclusion of the COVID-19 Public Health Emergency, this flexibility will expire, and the Ryan Haight Act provisions that require an in-person visit for prescribing controlled substances will, once again, be the rule.
 

Potential Action to Extend

There have been efforts to amend the Ryan Haight Act, and HHS has announced that the DEA is planning to establish rules so that the ability to prescribe controlled substances via telemedicine in certain circumstances would be retained. To do so, the DEA will need to activate a telemedicine special registration rule. Many are hoping this can be achieved prior to the expiration of the Public Health Emergency, slated to end on May 11, 2023. However, to date, pending legislation to amend the Ryan Haight Act has not passed, and the DEA has not activated the telemedicine special registration rule.
 

Current Status

As matters currently stand, when the Public Health Emergency expires on May 11th, without further action on the part of the legislature or the DEA, the in-person requirement will revert to being the rule.

This means that, after May 11^th, providers will be prohibited from prescribing any controlled substance for any patients for whom only telehealth visits have occurred because the special COVID provisions will have expired. Patients requiring controlled substance prescriptions will need to be seen by an in-person provider.
 

Point of Awareness for Employers

If DEA action is not formalized to extend the telehealth flexibility rule, participants who are prescribed controlled substances will experience a significant change in the process when filling their prescriptions. Health plan and pharmacy benefits managers will revert to the prior rules, and participants may be caught off-guard by this change in the process. Employers should be aware of this possibility, watch for further updates, and be prepared to communicate to plan participants should the emergency rule not be extended.

As of February 21, 2023, it has been confirmed that group health plans and health insurance issuers will not be required to submit required reports on air ambulance services by March 31, 2023. CMS has informally confirmed that since final regulations have not yet been issued, no reporting is required in 2023.

The proposed regulations had indicated that the initial reporting deadline would be March 31, 2023 (for 2022 calendar-year reporting). However, that deadline assumed final regulations would be issued before the end of the calendar year 2021. As it stands, final regulations have not yet been issued.

If the final regulations are issued in 2023, the first report would be due 90 days after the end of 2024 (March 31, 2025) for the 2024 calendar year.

The originally published article has been updated to reflect this change. (See below.)
 

Overview

Proposed regulatory guidance for the No Surprises Act requires health plans, issuers, and providers to report certain air ambulance data for calendar years 2022 and 2023. Reporting for these plan years assumed that regulations would be finalized in 2021. Given that they were not, the first reporting year will now be 2024.

The data will be used by the HHS and the Department of Transportation to produce a comprehensive public report on air ambulance services. The goal is to help increase transparency on the cost for these services.
 

Employer Responsibility

Technically, employers hold joint responsibility for reporting the data. In practice, employers/plan sponsors don’t hold or have access to the data that is required for reporting purposes. As such, the responsibility will fall to insurers (for fully insured plans) and ASO providers (for self-funded plans).
 

Fully Insured Employers

Employers with fully insured plans are exempt from reporting, but only to the extent that they have a written agreement with their insurer to report the information.

Employer Action Item: Execute a written agreement with the insurer confirming that all reporting obligations are transferred to the insurer and that filings will be made by the insurer on behalf of the employer.
 

Self-Funded Employers

Employers with self-funded plans may utilize a third-party administrator (TPA) to assist with reporting, but employers would remain legally responsible for any reporting failures. While executing an agreement to transfer reporting obligations is likely to be the norm, self-funded plans will remain legally responsible for any noncompliance regardless of whether their TPA agrees to complete the reporting. Of course, parties are free to negotiate indemnification contractually, but the legal obligation will remain with the self-funded employer.

Employer Action Item: Execute a written agreement with TPA confirming that reporting obligations will be completed by the TPA and that filings will be made by the TPA on behalf of the employer.
 

Timing

The regulations have not yet been finalized, and HHS has yet to establish a method for submitting the reports. Nonetheless, health insurance issuers and TPAs should be looking forward and preparing systems to enable reporting in the future. Reports must be submitted to the HHS by the dates indicated below:

• Reports for the 2024 calendar year are due by March 30, 2025.
• Reports for the 2025 calendar year are due by March 30, 2026.

Required Data to Report

The regulatory guidance requires group health plans and issuers to report the following data elements for each claim for air ambulance services. Reporting must reflect claims received or paid for each of the two calendar years required.

1. Identifying information for the group health plan, plan sponsor, or issuer, and any entity reporting on behalf of the plan or issuer
2. Market type for the plan or coverage (fully insured, self-funded, individual, large group, small group, etc.)
3. Date of service
4. Billing National Provider Identifier (NPI) information
5. Current Procedural Terminology (CPT) code or Healthcare Common Procedure Coding System (HCPCS) code information
6. Transport information, including the type of aircraft, loaded miles, pick-up, and drop-off zip codes, whether the transport was emergent or non-emergent, whether the transport was an inter-facility transport, and, if applicable, the service delivery model of the provider (e.g., government-sponsored, public-private partnership, hospital-sponsored, etc.)
7. Whether the provider had a contract with the plan or issuer
8. Claim adjudication information, including whether the claim was paid, denied or appealed, the denial reason, and appeal outcome
9. Claim payment information, including submitted charges, amounts paid by each payor, and cost-sharing amounts.

Employer Action Item

Execute an agreement or an amendment to a current service agreement to transfer responsibility for required air ambulance data filings to the insurance carrier or TPA.

With the extension of the deadline, employers will have additional time to ensure that written agreements are in place with carriers and TPAs. That said, we recommend that employers keep the momentum of getting written agreements in place at this time. This will create smoother sailing once the new deadline approaches in a few years.

Which States Have Requirements?

Four states currently have separate state ACA reporting requirements in addition to the federal Form 1095-C. These states are:

• California
• Massachusetts
• New Jersey
• Rhode Island
• District of Columbia

Employer Action

For fully insured plans, these obligations are generally fulfilled by the insurer. 

For self-funded plans, the employer bears the responsibility to satisfy the state reporting obligations. 
 

Deadlines to Furnish Notice to Individuals

The timing of the requirements to provide notices to individuals also vary for some states (compared to the current ACA deadlines).

• CA and MA: Must be provided by January 31, 2023
• DC, NJ, and RI: Must be provided by March 02, 2023

If an employer missed the dates to furnish the California or Massachusetts notices, the recommendation action is to promptly furnish the requisite notices to individuals and then complete the necessary filing with the states in a timely manner. 
 

Deadlines to File Notices with State

The four states (California, Massachusetts, New Jersey, and Rhode Island) have a filing deadline of March 31, 2023, which is in line with the ACA filing deadline with the IRS.

The filing deadline for the District of Columbia is 30 days after the federal filing date. For 2023, it is May 1^st as a result of April 30, 2023, falling on a Sunday.
 

Overview of State Requirements

The state requirements largely follow the federal Form 1094-1095 reporting requirements. Following is an overview of the specifics for each state: 

• California: Self-funded employers must report all employees and dependents who had health coverage at any point during the year. The penalty for failure to report timely is $50 per covered individual who was provided health coverage.
• Massachusetts: State filings do not need to contain employee-level details as is required under the ACA filings to the IRS and are generally completed by insurance carriers on behalf of individual employers. Employers must also issue Form 1099-HC to their employees and report information to the state Department of Revenue. The filing deadline for the 1099-HC is January 31, 2023. Organizations that fail to comply with 1099-HC requirements could be subject to a penalty of $50 per employee, up to a maximum of $50,000.
• New Jersey: ALEs use the same IRS form 1094-C/1095-C to report health insurance information to the state. No additional or "special" forms are required.
• Rhode Island: Rhode Island maintains an individual penalty for residents not maintaining health insurance. Furnishing federal Form 1095s to employees satisfies the requirement to furnish notice to employees. However, employers must also submit these returns to the state’s Division of Taxation (DOT) to fully meet the notice requirements.
• District of Columbia: Applicable entities must submit an information return regarding MEC coverage provided to the Office of Tax and Revenue (OTR). Information regarding the individuals’ type of coverage must also be submitted. While similar, it should be noted that these filing requirements are not the same as ACA requirements.

Potential Future State Reporting

A number of additional state legislatures are either in the process of passing or have already passed ACA reporting requirements. This includes Connecticut, Hawaii, Maryland, Minnesota, and Washington. Employers in these states should anticipate additional responsibilities with regard to state reporting and watch for details on required forms and filing procedures.
 

Conclusion

In addition to federal reporting, a patchwork of state-level ACA reporting has developed over recent years. This creates a myriad of complexities for employers, especially for employers with operations in multiple states.

As a final reminder, enforcement efforts at the federal level are ramping up, and employers can no longer rely on the comfort of “good faith effort” in their federal 1095 reporting.

Employers have long struggled with the issue of not having SSNs for certain dependents on their health plans and/or getting bounce backs on 1095-C filings due to incorrect dependent SSNs.

In the early years of 1095 filings, employers were protected by regulatory guidance, providing that if a “good faith effort” could be shown, penalties for non-compliance would not be applied. However, seven years have passed since the first filings were required, and the IRS now presumes that enough grace was provided to “work out the kinks”. Therefore, the IRS has expressly removed the “good faith effort” protection for filing 1095s beginning with filings for the 2022 plan year that have just been completed.

While the good faith protection is gone, issues with missing or incorrect SSNs still remain. This leaves employers with the reality that they must properly document their outreach efforts to obtain SSNs or face potential penalties for these errors.
 

What are the penalties?

Information reporting penalties are outlined in the IRS document Instructions for Forms 1094-C and 1095-C.

Applicable Large Employers are subject to the employer-shared responsibility penalty payments of the ACA. These penalties are both well-established and well-known. However, they are not the only penalties that may be levied. Employers that fail to comply with the information reporting requirements may also be subject to reporting penalties for failure to file correct information returns and failure to furnish correct payee statements (1095-Cs).

For the 2022 tax year, the following penalties apply for failing to file/provide correct information returns:

• Failure to File: This means failure to file a return or failure to file a correct return (meaning filing an incorrect return). This applies to Form 1094-C and the accompanying Form 1095-Cs. The penalty is $290 for each return for which the failure occurs. The total penalty for a calendar year is capped at $3,532,500.
• Failure to Provide: This means failing to provide a return to plan participants or failure to provide a correct return (meaning providing an incorrect return). This applies to the Form 1095-Cs that must be provided to plan participants. The penalty for failure to provide a correct payee statement is $290 for each statement for which the failure occurs. The total penalty for a calendar year is capped at $3,532,500.
• Intentional Disregard: Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to file the returns and furnish the required statements.

Penalties may be waived if the failure was due to reasonable cause and not willful neglect.
 

Getting the Penalties Waived

Notice the last sentence above: “Penalties may be waived if the failure was due to reasonable cause and not willful neglect.”

In a world where missing and incorrect SSNs for dependents remain a reality that many employers struggle with, this sentence is our friend! While compliance will not be nearly as easy as the former “good faith effort” standard, understanding the requirements for avoiding the penalties is an important first step for employers. In short, it all comes down to understanding the definition of Reasonable Cause. If the reasonable cause criteria are met, the authorities have indicated that the penalties will be waived.
 

What is Reasonable Cause?

The IRS has a very specific definition of Reasonable Cause. The IRS regulations outline a complex and layered definition of Reasonable Cause . . . with five different layers. Following are the key elements thinned down for how they apply to these troublesome SSN issues for 1095 filings:

General Rule: The penalty for a failure relating to an information reporting requirement is waived if the failure is due to Reasonable Cause and is not due to willful neglect.

Reasonable Cause: The relevant, reasonable cause elements require that the failure must arise from events beyond the filer's control. Here the IRS presents several possibilities for such impediments, but the relevant section can be paraphrased: Certain Actions of a person providing necessary information with respect to the return or statement.

Certain Actions: The relevant certain action elements require that the person who must provide the information to the employer either does not provide the information or provides incorrect information upon which the filer relied in good faith. To substantiate, the employer, upon request of the IRS, showing that the failure was attributable to the person who was supposed to provide the information. documentary evidence upon request of the IRS showing that the failure was attributable to the person who was supposed to provide the information.

Special Rules for SSNs: There are special rules relating to the availability of a waiver of penalties where the filer's failure relates to an SSN, and the failure is attributable to the actions of the person. Specifically, the employer must act in a Responsible Manner.

Responsible Manner: Employers will be deemed to have acted in a responsible manner only if they satisfy the requirements of the Special Rules for Missing/Incorrect SSNs.

After all these layers are outlined, it comes down to this: If an employee does not provide an SSN or provides an incorrect SSN, the baseline criteria for Reasonable Cause is triggered. However, In order to avoid penalties, employers must also respond by acting in a Responsible Manner. This means following and documenting a 3-Step Process for trying to obtain the requisite SSNs.
 

The 3-Step Process for SSN Outreach

A Reasonable Cause penalty waiver requires the employer to make one initial solicitation and two annual solicitations for the SSN (if the prior solicitations did not yield results).

1. Initial Solicitation. Must occur at the time an employee first elects coverage under the benefit plans or first adds a dependent without an SSN.
2. First Annual Solicitation. Must be made on or before December 31 of the year in which the initial coverage election becomes effective (or by January 31 of the following year for elections in the preceding December).
3. Second Annual Solicitation. Must generally be made by December 31 of the year immediately following the calendar year in which the coverage becomes effective.

Upon Receipt of an SSN

Upon receiving an SSN or a corrected SSN as a result of one of the solicitations, employers must then include that SSN on any information returns filed after the date that the employer receives the SSN.
 

Makeup Solicitations

What if initial and subsequent annual solicitations haven’t been made? An employer who has previously not made any solicitations may rectify this by:

• Making two consecutive annual solicitations in subsequent years (make-up solicitations) AND
• If an SSN is received, include that SSN on any information returns due after the date the employer receives the SSN.

While this action protects employers on a go-forward basis, penalties may still apply for years prior to which the make-up solicitations were made.
 

Method of Solicitation

The regulations specify a detailed process for satisfying solicitation requirements. Following is a summary of the key elements of the solicitation standards set by the IRS.

If solicitation is via mail, the following elements must be included:

• Notification must inform the individual that he or she must provide the required SSN
• Notification must inform the individual that a $50 penalty may be imposed by the IRS if he or she fails to furnish the required SSN
• Notification must include a Form W-9 or an acceptable substitute form on which the payee may provide the SSN
• Notification must include a return envelope for the payee to provide the SSN, which may be, but is not required to be, postage prepaid.

If solicitation is via phone, the procedure must be reasonably designed and carried out in a manner that is conducive to obtaining the SSN.

• Caller must speak to an adult member of the household
• Caller must verbally request the SSN
• Caller must inform the individual that they must provide the required SSN
• Caller must inform the individual that a $50 penalty may be imposed by the IRS if he or she fails to furnish the required SSN.

If solicitation is via email or other electronic means, the following elements must be included:

• Same written requirements as via mail (above)
• Must follow standard IRS electronic notification procedures.

If It Isn’t Documented, It Didn’t Happen

The IRS requires that the employer maintain contemporaneous records showing that the solicitation was properly made. In addition, the employer must be able to provide such records to the IRS upon request.

Employers are urged to keep detailed documentation on solicitation attempts. It is the combination of the actual solicitation AND the documentation of the solicitation that will shield an employer from a potential penalty.
 

What about the dreaded name mismatch?

Employers experience frustration when 1095 bounce back notifications indicate an error in the SSN, but the number actually appears to be correct by all their records. This common problem usually indicates a name mismatch issue. Examples include:

• An employee gets married (or divorced) and changes their name with the Social Security Administration from Susan Archer to Susan Barclay, but Susan hasn’t yet notified you, the employer, of the change.
• Or vice versa, where Susan has notified you, the employer, but the change hasn’t been filed or completed processing with the Social Security Administration.
• An employee’s employment record indicates Harry Houdini. However, the SSN records read Harold Houdini.
• An employee’s payroll records read Carson Polansky, but his SSN record indicates Carson S. Polansky.
• There are three (3) John Smiths in your employ, and the SSNs have somehow gotten mixed up between the employees.

All of these situations will likely result in a 1095 bounce back and will require manual intervention to discover and correct. If any such errors are not corrected for the specific filing year, the standard solicitation rules outlined above should be followed.
 

Is reasonable cause a new thing?

No. The Reasonable Cause and Responsible Action processes have been in place for some time as they apply to the process of securing Tax ID numbers of all sorts from many different types of companies and for many different purposes. For example, banks for people opening accounts, employers needing to secure SSN for payroll purposes, etc.

With the removal of the “good faith effort” compliance rule, the filing and providing of Form 1095 documents simply became subject to the standard process that has been in existence for other information returns and tax filings.
 

Reference

The information filer penalties, Reasonable Cause framework, and solicitation rules are outlined in 26 CFR § 301.6724-1.

On Jan 30, 2023, the HHS and the DOL proposed a new rule to strengthen access to birth control coverage under the Affordable Care Act (ACA). Under the ACA, most plans are required to offer coverage of birth control with no out-of-pocket cost. The goal of the proposed rule is to expand and strengthen access to this coverage, specifically for women whose employers exclude this coverage because of a moral or religious objection. The action is the latest effort by the Biden-Harris Administration to bolster access to birth control at no cost.
 

Current Status

The ACA guarantees coverage of women’s preventive services, including birth control and contraceptive counseling, at no cost for women who are enrolled in group health plans. However, in 2018, final regulations expanded exemptions for religious beliefs and moral convictions allowing private health plans and insurers to exclude coverage of contraceptive services based on moral or religious objection.
 

What is Changing?

The proposed rules would remove the moral exemption and retain the existing religious exemption.

The 2018 rules include an optional accommodation that allows objecting employers to completely remove themselves from providing birth control coverage while ensuring women and covered dependents enrolled in their plans can access contraceptive services at no additional charge. Under the 2018 rules, these women and covered dependents would get this contraceptive access only if their employer, college, or university voluntarily elects the accommodation—leaving many without access to no-cost contraceptives. 

The proposed rules seek to ensure broader access to contraceptive services by creating an independent pathway for individuals enrolled in plans arranged or offered by objecting entities to make their own choice to access contraceptive services directly through a willing contraceptive provider without any cost. This would allow women and covered dependents to navigate their own care and still obtain birth control at no cost in the event their plan or insurer has a religious exemption and, if eligible, has not elected the optional accommodation. The proposed rules leave in place the existing religious exemption for entities and individuals with objections, as well as the optional accommodation for coverage.
 

How Will it Work?

The proposal creates a new “individual contraceptive arrangement” through which individuals enrolled in plans sponsored by employers with religious objections could access no-cost contraceptive services without the involvement of their employer, group health plan, plan sponsor, or insurer. A provider or facility that furnishes contraceptive services in accordance with the individual contraceptive arrangement would be reimbursed through an arrangement with an Exchange insurer, which would request an Exchange user fee adjustment to cover the costs. The practical details of this arrangement will obviously need to be worked out over time.
 

More Information

The U.S. Supreme Court’s decision in Dobbs, overturning Roe v. Wade, has placed a heightened importance on access to contraceptive services nationwide. HHS released a report in August on actions taken to ensure access to reproductive health care, including contraception, following the Supreme Court’s ruling, with further details on future actions and commitments. Following is a link to the report: Reproductive Care Report

Summary: This applies to all employers offering medical plan coverage with a plan renewal date of January 1. The online disclosure must be completed by March 1, 2023 (assuming a calendar year medical plan contract).
 

Overview

Federal law requires that employers provide annual notification of the Medicare Part D Prescription Benefit "creditability" to employees prior to October 15th. However, that same law also requires plan sponsors to report creditability information directly to the Centers for Medicare and Medicaid Services (CMS) within 60 days of the first day of the contract year if coverage is offered to Part D-eligible individuals. Many employers have a January 1 renewal plan year. So, for many employers, the deadline is in a couple of weeks! If your plan renews sometime other than January 1, you have 60 days after the start of your plan year to complete this disclosure.
 

Mandatory Online Creditable Coverage Disclosure 

Virtually all employers are required to complete the online questionnaire at the CMS website, with the only exception being employers who have been approved for the Retiree Drug Subsidy (RDS). This disclosure requirement also applies to individual health insurance, government assistance programs, military coverage, and Medicare supplement plans. There is no alternative method to comply with this requirement! Please remember that you must provide this disclosure annually.

The required Disclosure Notice is made through the completion of the disclosure form on the CMS Creditable Coverage Disclosure web page. Click on the following link: CMS Disclosure Form.

Employers must also update their questionnaire if there has been a change to the creditability status of their prescription drug plan or if they terminate prescription drug benefits altogether.
 

Detailed Instructions and Screenshots are Available

If you would like additional information on completing the online disclosure, a detailed instruction guide is available online. The instructions also include helpful screenshots so that you will know what data to have handy. More info here: CMS Notification Instruction Guide.

Helpful Tip for Vita's Clients

The Medicare Part D creditability status of your medical plans is outlined in the Welfare Summary Plan Description that we provide to all clients. Please refer to this document as you will need this information to complete the online disclosure.