Blogs August 2022

In the wake of COVID, both the Department of Labor (DOL) and the Health and Human Services (HHS) declared states of emergency and relaxed certain employee benefit deadlines. These states of emergency declarations, the extensions themselves, and the accompanying plan requirements can be confusing. This article outlines the two different COVID emergency declarations and the current states of the various extensions.
 

How do National Emergency extensions work?

Numerous employee benefit plan deadlines were extended by the DOL when the National Emergency due to COVID was declared on March 1, 2020. A National Emergency declaration continues until:
 

• The emergency is not continued by the president (after the default one-year period)
• The president terminates it
• A joint resolution of Congress terminates it.

The COVID National Emergency was most recently continued by the President on March 1, 2022. This means that absent a further continuation or early termination, the current COVID National Emergency will end on February 28, 2023.
 

DOL Deadline Extensions

The following DOL deadlines were extended pursuant to the National Emergency declarations:
 

• The COBRA 60-day election period, COBRA payment due dates, and COBRA deadlines to notify the plan of a qualifying event or new disability.
• The 30-day or 60-day window to submit a HIPAA special enrollment request.
• The deadline to file, appeal or request an external review of a claim.

The above extensions will end at the end of the defined “Outbreak Period” and runs until the earlier of:
 

• 60 days after the announced end of the COVID National Emergency
• One year from the date an individual is first eligible for deadline relief

Employer Action Items: Plan sponsors must ensure these deadline extensions are followed for all participants and COBRA beneficiaries. In addition, eligible individuals will need to be tracked to ensure their personalized one-year deadline is followed. Lastly, participant communications should be reviewed and updated to reflect the reversion to regular deadlines.
 

How do Public Health Emergency extensions work?

In addition to the president’s declaration of a National Emergency, the HHS also declared a Public Health Emergency due to COVID in January 2020. Unlike the National Emergency, a Public Health Emergency may only exist in 90-day increments before it must be extended.
 
The current COVID Public Health Emergency was extended by the HHS on July 15, 2022. This would mean, absent a further extension, the COVID Public Health Emergency will expire on October 13, 2022. However, HHS has announced it will provide at least 60 days advance notice prior to the end of the Public Health Emergency in order for plan sponsors to prepare.
 

HHS Deadline Extensions

The HHS Public Health Emergency required plans to:
 

• Cover COVID-19 diagnostic testing and related services without cost sharing, prior authorization, or other medical management requirements
• Cover COVID-19 vaccines and boosters (including from out-of-network providers) without cost sharing, prior authorization, or other medical management requirements

Employer Action Item: The CARES Act provisions will continue to require plans to cover COVID vaccines from in-network providers at no cost as a preventive measure. However, in looking ahead to when these provisions will end, plan sponsors should address the following:

1. Consider whether to continue covering COVID testing and out-of-network vaccines without cost sharing with participants.
2. Review/update plan documents and participant communications
3. Send communications to participants about any changes in benefits.
    

CARES Act TeleHealth Provisions

While not connected to either of the above emergency declarations, the CARES Act temporarily permitted telehealth services for individuals covered under HDHP plans prior to reaching the statutory deductible. This enabled first-dollar coverage of these services without jeopardizing HSA eligibility for plan years beginning on or before December 31, 2021.

Effective April 1, 2022, Congress extended this first-dollar coverage relief through December 31, 2022.

While many hope that this relief will become permanent, such a change would require legislative action. As such, employers should plan for this provision to sunset at the end of the year.

Employer Action Item: Participants covered under HDHP policies likely have gotten used to this first-dollar telehealth coverage being provided under their plan. A review/update of plan documents and communication to plan participants that this provision will expire at the end of this year will be important.

President Biden signed the Inflation Reduction Act into law this week. The bill’s primary focus is climate change and economic issues. However, there are important healthcare issues included, and pundits across the board characterize the healthcare provisions of the bill as the most significant changes in healthcare policy since the passage of the Affordable Care Act. Following is a short rundown on the healthcare provisions of the bill.
 

Rx Pricing Negotiation

The bill empowers the Centers for Medicare Services (CMS) to negotiate drug prices under Medicare. CMS will be able to negotiate prices for ten high-cost drugs starting in 2026 (15 in 2027 and 20 in 2029 and beyond). While considered a modest start, this approach will allow time to see whether price negotiation negatively affects drug development and stifles new drugs coming to the market (the major criticisms from the pharmaceutical industry).
 

$35 Cap on Insulin

The out-of-pocket cost of insulin will be capped at $35 for individuals under Medicare. The bill initially included a cap on the out-of-pocket cost of insulin for all Americans. However, expanding the cap to a greater commercial marketplace was stripped out of the bill by the Senate parliamentarian. In order to pass the bill by a simple majority, all provisions must relate directly to the federal budget, and it was determined the expanded cap did meet that standard, so it could not be part of a reconciliation-eligible (filibuster-proof) bill.
 

$2,000 Hard Cap on Medicare Part D

Redesigning Medicare Part D benefits to cap out-of-pocket costs has received wide support. The cap in the bill contains a $2,000 “hard” cap on out-of-pocket costs for prescription drugs under Medicare Part D. This provision becomes effective in 2025, and the cap will be indexed in future years.
 

Extension of ACA Premium Subsidies

Supplemental ACA premium subsidies for low-income individuals, which were implemented as part of the 2021 American Rescue Plan Act, were set to expire at the end of 2022. This would have increased out-of-pocket premium payments across the board for virtually all 13 million subsidized enrollees. The bill extended the enhanced premium subsidies for three years.
 

Impact on Employer Plans – Higher Costs

The healthcare provisions of the Inflation Reduction Act prompt a key question for employers: How will employer plan costs be impacted?

In short, the cost savings for Medicare and for individuals covered under Medicare will likely be borne by employer health plans (and individual health plans). As Medicare negotiates “savings” in drug costs for Medicare recipients and for the federal government, we can expect a cost shift where that savings will be to be shifted to employer plans, self-funded plans, and individual plans. Drug manufacturers will receive lower revenue on the Medicare side (due to the CMS negotiation power), so we can expect that higher prices will be charged to commercial plans to compensate for the lost revenue.

The San Francisco Family Friendly Workplace Ordinance (FFWO) has recently been amended and expanded. The new law gives certain employees the right to request flexible or predictable work arrangements to assist with caregiving responsibilities.
 

Covered Employers

Employers with 20 or more employees (anywhere in the world) are covered by the law. The business location must be within the geographic boundaries of the City of San Francisco and County of San Francisco. A business location is defined as any physical space used for the business to run its operations.
 

Covered Employees

Employees are covered by the law if they are:

• Employed in San Francisco
• Have been employed for six (6) months or more by the current employer, and
• Work at least eight (8) hours per week on a regular basis within the geographic boundaries of San Francisco

 

What about teleworking?

An employee is covered if they are assigned to a San Francisco business location at the time the request is made regardless of where they are physically working. An employee is not covered if they were never assigned to the San Francisco office.

Example #1: The employer has offices in San Francisco, Burlingame, and Hayward. An employee works from their home in San Mateo. If they were to work “onsite,” they would be assigned to work in the Burlingame office. The employee is not covered by the FFWO even though they work for an Employer who has an office in San Francisco. 

Example #2: In 2019, Employee A works at the San Francisco office. In 2020, Employee A begins to telework from Oregon and is assigned to the SF office. Employee A is covered under FFWO. In 2021, Employee B lives in Nebraska and was hired into a telework position assigned to the New York Office. The employer has a business location in SF. Employee B is not covered under FFWO.
 

How is caregiving defined? 

Covered employees may request a flexible or predictable working arrangement to assist with care for any of the following:

• A child or children for whom the employee has assumed parental responsibility
• A person or persons with a serious health condition in a family relationship with the employee
• A person who is age 65 or older in a family relationship with the employee.

 

Family Relationship means a relationship in which a caregiver is related by blood, legal custody, marriage, or domestic partnership to another person as a spouse, domestic partner, child parent, sibling, grandchild, or grandparent.
 

Verification Rules

An employee’s attestation of caregiving duties may suffice, but employers can request verification within limits. Employers may ask the employee to provide a note confirming the obligation (e.g. medical appointment is on Tuesdays at 3:00 p.m.). Employers may not ask for confirmation about the reason for the appointment or extraneous verification, such as from the employee’s family members that they are unavailable to assist, when there is no basis to believe that the employee’s attestation is invalid.
 

Regular Schedule Request vs. FFWO Request

Example #3: An employee receives their schedule every two weeks and is required to make a scheduling request on the Friday before the schedule is posted. On the first of the month, the employee requests not to be scheduled for the night shift on the twelfth of the month. The manager hears from a co-worker that the employee’s request is to attend his son’s dance recital. Is this a valid FFWO request? Or is this a regular scheduling request?

The employee’s request is not considered a notice of need for a flexible or predictable working arrangement under the FFWO since he did not expressly disclose that his need is due to his ongoing caregiving responsibilities and rather it relates to a singular occasion. Also, the request was not made in a timely manner (i.e. it did not afford the employer 21 calendar days to respond). This request should be regarded and addressed as a regular scheduling request.
 

Effective Date

The changes to the ordinance are effective as of July 12, 2022. 

The IRS issued Revenue Procedure 2022-34 which announces the 2023 indexing adjustment percentage for determining the affordability threshold for employer-sponsored health insurance coverage under the ACA.

The percentage is adjusted annually for inflation, and the 2023 threshold decreased substantially from 9.61% to 9.12%. The new percentage applies for plan years beginning in 2023.
 

Impact on Employers

Recall that under the ACA provisions, employer-sponsored coverage will only be considered affordable if an employee’s required contribution of the lowest-cost self-only coverage does not exceed 9.12% of the employee’s household income for the tax year. The reduction in percentage will require higher employer contributions in order to keep plans affordable at the lower 9.12% rate. Neglecting to offer affordable, minimum value coverage to full-time employees could result in penalties under the Pay or Play provisions of the ACA.
 

How Does the Math Work?

There are two different safe harbor calculation methods that employers can use:

Federal Poverty Line Affordability Safe Harbor: Under the FPL method, the employee contribution for the lowest cost plan (for full-time employees) cannot exceed $103.28 per month. This reflects 9.12% of the Federal Poverty Level which is $13,590 in 2023 for one person. Using the FPL Affordability Safe Harbor automatically deems coverage affordable for all full-time employees and permits the employer to use the qualifying offer method for streamlined ACA reporting.

Rate of Pay Affordability Safe Harbor: Under the Rate of Pay method, employers must do the math to confirm that the employee contribution for lowest cost plan (for full-time employees) cannot exceed 9.12% of the lowest hourly rate of pay (x 30 hours per week) and the lowest monthly salary. States with higher minimum wage requirements will benefit from using the Rate of Pay method. For example, the California minimum wage of $15.00 creates a maximum contribution of $177.84 per month ($15/hour x 30 hours per week x 52 weeks x 9.12% ¸ 12).
 

Contribution Strategy

While the FPL method yields a lower required employee contribution, the calculation process is much simpler. The Rate of Pay method will often allow for a higher employee contribution (for the lowest cost plan). However, the calculations must be customized to actual employee rates of pay within each organization and within each region if different plans are made available to different populations. 

2023 Contribution Strategy Considerations: Consider the ACA affordability safe harbor requirements when designing 2023 employee contribution levels to avoid potential employer mandate “B Penalty” liability. Where possible within budgetary constraints, employers should prepare to offer at least one medical plan option to full-time employees in all regions with an employee share of the premium not exceeding $103.28/month for employee-only coverage to simplify affordability compliance under the federal poverty line safe harbor.

The Consolidated Appropriations Act, 2021 (CAA) adds a new annual reporting requirement that requires group health plans and health insurance issuers to submit an informational report on prescription drug and health care spending to the HHS, the Secretary of Labor, and the Secretary of the Treasury.

The reporting requirements are extensive, and the lift will be significant for health plans, insurers, and TPAs. Ultimately, the reported information will be aggregated by the departments and published on the internet, with the intention of offering plan sponsors and individuals insight into where their healthcare dollars are spent.
 

Which Plans are Subject?

Essentially all health plans (group and individual) are subject to the new reporting requirements. This includes small and large plans, self-funded and fully insured plans, and both grandfathered and non-grandfathered plans. The reporting requirement does not apply to health reimbursement accounts (HRAs) other account-based group health plans or coverage consisting solely of excepted benefits such as dental or vision plans.
 

What Data Must Be Included in the Reports?

Data required to be included in the reports fall into two categories: data that is unique to each plan and thus cannot be aggregated and data that can be aggregated between plans. The required data elements are as follows:
 

Non-Aggregated Data

• General plan and reporting entity identifying information,
• Beginning and end dates of the plan’s plan year,
• Number of participants on the last day of the reference year, and
• Each state in which the plan is offered.

Aggregated Data

• 50 Most Frequently Dispensed Rx: The 50 brand prescription drugs most frequently dispensed by pharmacies for claims paid by the plan or coverage and the total number of paid claims for each such drug.
• 50 Most Costly Rx: The 50 most costly prescription drugs with respect to the plan or coverage by total annual spending and the annual amount spent by the plan for each such drug.
• 50 Rx with Greatest Cost Increase: The 50 prescription drugs with the greatest increase in plan expenditures over the plan year preceding the plan year that is the subject of the report and, for each such drug, the change in amounts expended by the plan or coverage in each such plan year.
• Total Plan Spending: Total spending on healthcare services by the plan, broken down by the types of costs, including hospital, primary provider/clinic, specialty provider/clinic, drugs covered by pharmacy benefit, drugs covered by medical benefit, and other costs (such as wellness services).
• Rx Spend by Spender: Spending on prescription drugs is broken down by the health plan spend and the participant spend (copays and coinsurance).
• Premium Information: Average monthly premium, including total premium amount, amount paid by plan sponsor, and amount paid by participants. This category applies to total plan premiums, not just the Rx portion.
• Rebate Information: Prescription drug rebates, fees, and other compensation paid by drug manufacturers to the plan or its administrators or service providers, including the amounts paid for each therapeutic class of drugs, the amounts paid for each of the 25 drugs that yielded the highest amount of rebates, and any reduction in premiums and out-of-pocket costs associated with rebates, fees, or other compensation.

 

Deadlines for Annual Reports

Reporting runs on a calendar year basis with a reporting year referred to as a “reference year” (prior calendar year). Annual reports are due on June 1st following the reference year.

The initial deadline has been delayed such that reference years 2020 and 2021 are due by Dec. 27, 2022. The deadline for reference year 2022 will be due June 1, 2023.
 

Who is Responsible?

The plan or issuer is responsible for complying with the reporting requirements. Practically, this means that fully insured plans will rely on their insurance carrier for the reporting and self-funded plans will rely on their TPAs and PBM. However, such reliance must be accompanied by a written agreement to report the data on their behalf.
 

Employer Action

As a rule, employers will not be directly responsible for reporting the required data. However, as plan sponsors, employers will want to work with their insurance carriers, TPAs, and PBMs to assure that a written agreement is in place to formally acknowledge the transfer of reporting responsibility to their health plan administration partners. If you are a Vita Benefits client, your account management team will reach out to your insurance carriers/TPAs/PBMs, try to obtain this written agreement, and provide confirmation of the process for you.