Blogs March 2022

In March 2022, Congress passed, and the President signed, a $1.5 trillion omnibus spending bill (the Consolidated Appropriations Act, 2022). This law includes a temporary extension of the ability for HDHP plans to provide telehealth and other remote care services without being subject to the deductible. Importantly, this avoids the problem of having that no-deductible coverage disqualify contributions to health savings accounts (HSA). This provision restores employers’ option to adopt pre-deductible telehealth visits in their HDHP plans (but it does not mandate it).

Since the early days of the COVID-19 pandemic, telehealth has been an important way to obtain necessary medical care while maintaining recommended social distancing. Because of this, most employers adopted these provisions to enhance access to COVID-safe office visits for participants in HDHP plans.
 

Background

By way of background, tax-advantaged contributions generally cannot be made to an HSA unless the account holder is covered by a qualifying high-deductible health plan (HDHP) and does not have disqualifying non-HDHP coverage. The CARES Act (signed in March 2020) created exceptions to those rules to facilitate the use of telehealth during the COVID-19 pandemic, however, those exceptions applied only to plan years beginning on or before December 31, 2021. The new legislation restores these exceptions for the last nine months of 2022.

The vast majority of employer-sponsored HDHPs with HSAs elected to cover telehealth services on a pre-deductible basis. Specifically, 83% of fully insured plans and 81% of self-insured plans, according to a study from the trade group America's Health Insurance Plans (AHIP). As a reminder, the HDHP minimum statutory deductible for 2022 is $1,400 for single coverage and $2,800 for family coverage.
 

Two Key Provisions

The new legislation amends two key provisions for HSAs:
 

1. Telehealth and other remote care services will be considered disregarded coverage; therefore, such pre-deductible coverage will not cause a loss of HSA eligibility. This new provision applies from April 1, 2022 through December 31, 2022.
    
2. Plans may provide coverage for telehealth and other remote care services before the HDHP minimum deductible is satisfied without losing their HDHP status during that nine-month period.

Both amendments apply only to the nine-month period from April 1, 2022 through December 31, 2022, without regard to the HDHP’s plan year. Importantly, the relief does not apply for the first three months of 2022, therefore some plans (specifically, calendar-year plans) must still apply the minimum deductible to telehealth and other remote care services during those months to remain compliant.
 

Not Retroactive - A Few Wrinkles

Permissive, Not Mandatory: The legislation offers permission for plans to adopt these changes, but the changes are not mandatory. Thus, HDHPs are not required to waive their minimum deductible for telehealth and other remote services during the additional relief period. As a result, some plan sponsors may conclude that a midyear change to take advantage of the restored exception is too difficult to communicate and administer, and not worth the effort.

Pre-Deductible Coverage Gap: The legislation also is expressly not retroactive, and this leaves an unfortunate gap in first-dollar coverage for participants. HDHP participants in plans that previously adopted this provision have enjoyed telehealth services not being subject to the deductible in 2021 and may do so for nine additional months (April 1, 2022 through December 31, 2022), but this leaves a 3-month gap in first-dollar coverage for these services. This could create confusion for plan participants and certainly would require careful communication.

Not Retroactive: Plan sponsors, who expected that Congress would extend the CARES Act relief without a gap and thus continued providing telehealth services during the first three months of 2022 without applying the minimum deductible, have a unique problem. Specifically, determining whether their plans can and should apply the minimum deductible to telehealth and other remote services retroactively to the gap period. Some covered individuals may be able to avoid the adverse HSA-eligibility consequences of their plan’s failure to satisfy the minimum deductible requirement during the first three months of 2022 by using the full contribution rule, which allows a full year’s worth of HSA contributions to be made by someone who is HSA-eligible for only a portion of the year. However, that rule may not be available to all plan participants because some may not remain HSA-eligible through December 1, 2022, and some may not remain HSA-eligible throughout the 13-month testing period beginning on that date. If an employer wanted to take corrective action, participants could be billed for any telehealth visits between January 1, 2022 and March 31, 2022. Those billed charges would then apply to the deductible. This solution would require re-adjudicating telehealth claims incurred during those interim months.

The San Francisco Health Care Security Ordinance (SF HCSO) requires covered employers to make a minimum health care expenditure on behalf of their covered employees. SF HCSO rules were first issued in January 2008. While it has been in place for many years, many employers are still out-of-compliance or unsure how the rules apply. Additionally, the reporting was waived for the past two years due to COVID Public Health Emergency. That reporting requirement is again required for the 2021 plan year.

Below is a brief overview of the HCSO. For more details, visit the San Francisco Office of Labor Standards Enforcement (OLSE) page on HCSO, which includes training slides, new rules, an administrative guide and FAQ, as well as links to the required HCSO poster and waiver form. The OLSE page contains a link and instructions for the online Annual Reporting Form due April 30. The reporting form is available now.


Covered Employers: Have 20+ employees (50+ for non-profits), with 1 or more working in the geographic boundary of San Francisco, and required to obtain a San Francisco business registration certificate. Small employers 0-19 (0-49 non-profit) 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 counts!


Covered Employees: Works an average of 8 or more hours per week in San Francisco 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 (2021: $107,991 annually) AND be considered a manager/supervisor/confidential employee per HCSO.


Calculating Expenditure Rate: Rates are based on employer size and are calculated per hour payable to covered employees. For 2021, a medium size employer is 20-99 employees (50-99 non-profit) with a rate of $2.12 per hour, while a large employer is 100+ employees with a rate of $3.18 per hour. Keep in mind the new expenditure for 2022 is $2.20 per hour for the medium sized employers outlined above and $3.30 per hour for large employers.

Tip: Hours worked include both paid and entitled, like PTO. Maximum hours for the calculation is capped at 172 a month.


Making Expenditures: For your full-time, benefit eligible employees, average costs for medical, dental, and vision can be used. For most employers, the minimum expenditure is easily reached. For 2021, a large employer would need to spend approximately $547 a month on an exempt or 40-hour non-exempt employee (that number increases to approximately $568 for 2022). Most medical, dental, and vision premiums, when combined, would exceed that amount. Just be sure to factor out employee contribution amounts. For non-benefit eligible employees, the expenditure would be made quarterly. The simplest method for making an expenditure is via the San Francisco City Option.

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’s company sponsored health plan, the employer is still required to make a minimum expenditure on behalf of that employee. That means paying into the City Option, similar to non-benefit eligible employees. The exception is if the employee voluntarily signs the HCSO Waiver Form. You may NOT coerce an employee to sign the form and the form language dissuades one from signing it! Due diligence would mean sending the form to a waived employee and if the employee chooses not to sign, be sure to make the quarterly expenditure.


Due Dates: Quarterly expenditures are due 30 days following the end of the quarter. First quarter 2022 will be due April 30. Annual Reporting to HCSO of covered employees and expenditures made for the 2021 plan year are also due April 30 and is completed online. The online reporting form is available now. 


Risk: There are penalties for non-compliance – 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 other penalties as well for retaliation, failure to provide records to OLSE, and failure to post the required notice. However, while there’s 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 take action and penalize for non-compliance.

 

More Information 

SF HCSO Resources including training slides, rules, and administrative guide and FAQs. This site also contains instruction links.  

 

In 2018, CA passed SB 1008 which requires fully insured dental plans in California to provide a dental Summary of Benefits Coverage. This requirement mirrors the health plan Summary of Benefits Coverage introduced by the Affordable Care Act, only this law applies to dental plans.

The intention behind the ACA provision was to make it easier for employees to compare their medical plan options (in an apples-to-apples format). Now, California has added an equivalent disclosure for dental plans.
 

Fully Insured Dental Plans Only

This applies to fully insured dental plans only, as self-funded plans are exempt from state legislative authority. Only plans written in California are subject to this disclosure law.
 

Required Format

The law prescribes that the Summary of Dental Benefits Coverage (SDBC) follow a very specific format. The law outlines the “uniform benefits and disclosure matrix” down to the requirement to use an Arial 12-point font. This matrix has been dubbed the dental SBC or SDBC.
 

Who Must Create the SDBC?

Insurance carriers are responsible for creating and providing the dental SBC to employers.
 

Distribution Requirements

Employers must distribute the dental SBCs to all eligible employees. The dental SBC must be distributed at the following times:

1. Upon being newly eligible

2. At open enrollment

3. At Special Enrollment

The method of distribution must be in one of three formats:

1. Paper form free of charge to the individual’s mailing address

2. Electronically by email

3. Electronically by directing the participant to the insurer’s website for a copy of the dental SBC.

In the case of either electronic distribution option, notice must be provided that a paper copy is available free of charge.
 

Effective Date

The effective date for this law is January 1, 2022, so dental carriers are now required to provide dental SBCs to employer groups.
 

How Does ERISA Fit In?

Generally, ERISA preempts state laws that “relate to” employee benefit plans. This typically relegates state legislators to governing (or mandating) insurers, not employers sponsoring employee benefit plans. In this case, legislators have done a bit of an end-run around by including specific “Group Policyholders Obligations” in the law. Most pundits would say that the inclusion of Group Policy Holder Obligations regulates something that “relates to” an employee benefit plan (in this case a dental plan) by specifically requiring employers to provide the dental SBC matrix disclosures to plan participants.

While the insurer provisions are not controversial, the employer disclosure requirements will likely be challenged at some point. That said, in the meantime, employers would be wise to include the dental SBCs with their health plan SBC disclosure materials.
 

What are Dental Carriers Doing?

At this point, we are seeing dental carriers, well, scrambling. Despite the long runway on this law, as a rule, carriers are not prepared to distribute the customized dental SBC to employers. We are seeing carriers send out “generic” dental SBCs (along with directions to pair it with the plan certificate) despite the law’s very detailed customization instructions. It is our sense that carriers have been expecting the law to be challenged, and thus have been lulled into non-action. But with 2022 here, the carriers are now scrambling to get something out to comply with the law.