• 2023 SF HCSO Annual Report Due May 3, 2024

    The San Francisco Health Care Security Ordinance (HCSO) requires that employers submit the employer Annual Report Form by May 3, 2024. The report must be submitted to the Office of Labor Standards Enforcement (OLSE), the organization with oversight over the HCSO ordinance.

    The purpose of the Annual Report Form is to provide OLSE with a snapshot of each employer’s compliance with this ordinance. The penalty for failing to submit the form by the deadline is $500 per quarter.
     

    Reporting Details

    The reporting requirement includes basic business data as well as data to clarify Covered Employer status. In addition, the following data points are requested:

    • Number of individuals employed in each quarter of 2023
    • Number of employees covered by HCSO in each quarter
    • Employer’s total spending on healthcare
    • Types of healthcare coverage the employer offered to employees.

    The Annual Report Form (ARF) must be completed online. OLSE provides robust assistance material online, including instructions for completing the ARF, form previews, and a video guide to completing the ARF: ARF Instructions.

    The deadline for filing the 2023 form is May 3, 2024.

     

    HCSO Primer

    For those that might want a Refresher!


    Covered Employers

    An employer need not be physically located in San Francisco to be a covered employer. HCSO applies to the following employers:

    • Private Employers: Private employers who employ 20+ employees where any single employee works at least 8 hours per week in San Francisco

    • Non-Profit Employers: Non-profit employers who employ 50+ employees where any single employee works at least 8 hours in San Francisco.  

    Employer size counts are based on the average number of employees per week who perform work for compensation during an applicable quarter (not just those employees working in San Francisco).
     

    Covered Employees

    A covered employee is any person who meets the following four criteria:

    1. Works for a covered employer

    2. Is entitled to be paid minimum wage

    3. Has been employed by the employer for at least 90 days

    4. Performs at least eight hours of work per week in San Francisco.

    The definition of employee under the ordinance includes all employees, even if they are temporary, part-time, commissioned or contracted.

    Work performed by an employee who lives in San Francisco and works from home is considered work performed within San Francisco.

    Employees who travel through San Francisco while carrying out their job duties are not considered to have performed work in San Francisco; however, if an employee's job requires him or her to make stops in San Francisco (e.g., deliveries), the employee is considered to have performed work in San Francisco. For these employees, hours worked include travel within the geographic boundaries of San Francisco.
     

    Employee Waivers

    Employers may ask employees who have other employer-provided coverage to waive the expenditure. However, such employees are not required to waive the expenditure (and in many circumstances, it does not behoove them to do so).

    If an employee elects to waive, they must do so using the authorized HCSO voluntary waiver form. The waiver form must be signed each year, cannot be retroactive, and is revocable at any time.

    If an employee with other coverage does not sign the voluntary waiver, the employer must still make the required health care expenditure on their behalf and may be liable for noncompliance penalties if expenditures are not made.
     

    Expenditure Requirements

    The ordinance requires covered employers to spend a minimum amount set by law on healthcare for each employee who works 8+ hours each week in San Francisco. Following are the required expenditure rates:
     

    2023 Expenditure Rates 

    Expenditure Rate 

    Monthly Maximum* 

    100+ Employees 

    $3.40 per hour  

    $584.80 

    20 to 99 Employees (For Profit) 
    50-99 Employees (Nonprofit) 

    $2.27 per hour 

    $390.44 

    0 to 19 Employees (For Profit) 
    0-49 Employees (Nonprofit) 

    Exempt 

    N/A 


    * Total hours for which a healthcare expenditure is required are capped at 172 per employee per month. 

    There is an exemption for certain managerial, supervisory, and confidential employees who earn more than $114,141 per year (or $54.88 per hour) in 2023. These employees are exempt and the HCSO expenditure requirements do not apply to them.
     

    Resources

    Administrative Guidance for SF HCSO

    San Francisco Business Registration Certificate

    HCSO Voluntary Waiver Form

    2024 HCSO Poster

    SF City Option Program

    HCSO Annual Report Form Resource Guide

    HCSO Self-Funded Premium Calculations

  • [Press Release] Vita to Provide Free Student Loan Benefit to Non-Profits

    Vita announced a new partnership with Summer, a leading end-to-end workplace student loan solution. This partnership honors the work of Vita’s non-profit clients by providing their employees free student loan support and navigation services, specifically with the government’s Public Service Loan Forgiveness (PSLF) program.

    “Vita’s partnership with Summer helps our amazing non-profit clients deliver impactful student debt relief to their employees so they can continue doing important work in our communities,” says Erik Hansen, President at Vita. “By subsidizing this benefit for non-profits, we can help reduce benefits costs so employer benefit dollars can remain mission focused.”

    “Vita’s non-profit clients are in a unique position to help their employees by leveraging PSLF,” says Dan Macklin, President at Summer. “Summer guides these employees through the complicated PSLF process, resulting in a 95% application acceptance rate and saving users an average of $40,000, equivalent to an average of a six percent salary raise.”

    This partnership will have the following impact:

    • Help non-profits attract and retain top talent with 20% improved attrition.

    • Support employers’ Diversity, Equity, Inclusion, and Belonging (DEIB) efforts by assisting those who need it the most. More than two-thirds of student loan borrowers are women and BIPOC.

    • Capitalize on government funding, helping 50-80% of employees save on their monthly student loan payments. 


    About Vita: Vita is a leading employee benefits brokerage and consulting company based in California. Founded in 1979, Vita creates innovative solutions that help clients meet the ever-changing needs in employee engagement and risk management. From healthcare plans to retirement solutions, Vita partners with employers to develop and deliver the solutions needed to help companies attract and retain talent while maintaining compliance.

    About Summer: Summer is the only end-to-end student loan solution that saves employees an average of $40,000 and is proven to reduce turnover by 20 percent. Summer partners with employers to deliver tailored benefits that empower employees to save for education, better manage their student loans, find forgiveness options, and lower monthly payments. As a Certified B Corporation, Summer has partnered with leading employers, financial institutions, unions, and government leaders to generate over $1.5 billion in savings for borrowers.

  • Understanding The Student Loan Landscape

    Employer interest in student loan support as an employee benefit has waxed and waned over the last several years as employee demand, political forecasts, and competing budget priorities have shifted. Several important events occurred in 2023 that set the stage for a change in the landscape:

    • The US Supreme Court struck down the Biden Administration’s student loan forgiveness program 

    • Pandemic-era forbearance ended 

    • Secure 2.0 codified retirement plan matching against student loan repayments

    As a result, interest in student loan support as an employee benefit has once again risen and is more likely to remain at an all-time high.
     

    Why is support needed?

    According to a top student loan support vendor, Summer, 50% of American households have a member with student loan debt and 70% of those borrowers would be eligible for an existing government repayment program. Due to the complexities of navigating the various programs and exceptionally high rejection rate, only 15% of those individuals apply for a repayment program. 

    Additionally, student loan support programs fit well in corporate Diversity, Equity, and Inclusion strategy:

     

    Defining a Student Loan Support Program

    Student loan support as an employee benefit can be distilled down to three options: 

    1. Support and Navigation Services: Help employees navigate existing government repayment programs, including Income-Driven Repayment (IDR), Save on A Valuable Education (SAVE), Pay As You Earn (PAYE), Public Service Loan Forgiveness (PSLF), and more. 

      Though any individual can apply for these programs on their own, data suggest a high rejection rate. As an example, the PSLF program has a rejection rate of over 90%, and rejections are typically due to minor administrative or formatting issues. Additionally, navigating and choosing the optimal program for individual circumstances can be particularly difficult without expert guidance or intuitive modeling.
       

    2. Employer Contributions: Contribute directly to employee student loan debt through tax-free employer contributions up to $5,250 per year. This tax-free option was initially introduced in response to the COVID-19 pandemic in 2020. The exclusion has been extended for payments made before January 1, 2025.
       

    3. Retirement Matching: Help employees save for retirement using an existing retirement plan match program while they focus on paying down student debt. This idea was popularized through an IRS Private Letter Ruling several years ago, but now has been formally extended to all employers. Through this program, employers can consider student loan repayments “equivalent to” employees making contributions to the retirement plan. As such, employers can deposit matching contributions to the employee’s retirement plan for student loan debt repayments. 


    For example, if an employer has a $1:$1 retirement plan match and an employee makes a $200 student loan repayment (and $0 retirement plan contribution), the employer can deposit the $200 matching contribution to the employee’s retirement plan as if the student debt repayment was a retirement plan contribution. 

    The first option above can be positioned as a solid foundation which could be combined with either the Employer Contribution or the Retirement Matching option where financial sponsorship is added.
     

    Avoiding Pitfalls to Ensure Success

    The student loan support landscape has changed dramatically within the last decade. Today, leading student loan support programs can include the following features to maximize return on investment: 

    • Minimize employer administrative burden: Ease of enrollment, linking existing student loans, and coordination with retirement recordkeeper are key elements to consider when vetting vendor solutions.  

    • Reporting to measure ROI: Although the need for support is well-documented, actual utilization is important to measure to ensure a program’s effectiveness. Market leaders will also be willing to share book-of-business ROI statistics, including average savings, average utilization, and even reduced turnover impacts.  

    • Expanding access: Many employers value broad-range impactful benefits when selecting how to allocate benefits dollars. Many student loan support vendors have expanded scope of services to include college savings planning and even extending access to family members (thus expanding household reach.) 

    • Aligned incentives: When selecting a student loan support vendor, Vita believes that highest-quality vendors will refuse kick-backs from private refinancing, which would disqualify individuals from Federal programs for which they may be eligible. Though private refinancing may occasionally make long-term financial sense, evaluating government repayment programs for Federal loans is a crucial first step for the majority of borrowers.

     

    Vita’s Strategy

    Vita is thrilled to announce a new partnership with Summer to bring student loan Support and Navigation Services to the nonprofit clients of our health and welfare benefits consulting team. Vita has focused on our non-profit segment to honor the amazing work done by our nonprofit clients and to maximize ROI through Summer’s support of PSLF program navigation.
      

    About Summer (in Summer’s Words)

    Summer is the only end-to-end student loan solution that saves employees an average of $40k and is proven to reduce turnover by 20%. Summer partners with employers to deliver tailored benefits that empower employees to save for education, better manage their student loans, find forgiveness options, and lower monthly payments. As a Certified B Corporation, Summer has partnered with leading employers, financial institutions, unions, and government leaders to generate over $1.5B in savings for borrowers.

     

  • The Latest on Rx Data Collection (RxDC)

    The Consolidated Appropriations Act, 2021 (CAA) added a new annual reporting requirement for group health plans and health insurance issuers. The new rules require plans 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 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.

    The CMS recently issued detailed reporting instructions that clarify important information about the reporting process for employers.
     

    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. Essentially, no plans escape this requirement. 

    Fortunately, the lion’s share of reporting requirements falls on the shoulders of carriers, PBMs, and ASO providers. That said, all employers will be required to file some basic plan data elements. 
     

    Which plans are not subject?

    The reporting requirement does not apply to health reimbursement accounts (HRAs) and other account-based group health plans (such as FSAs or HRAs). In addition, coverage consisting solely of excepted benefits, such as dental or vision plans, is also exempted.
     

    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/employer

    • Data that can be aggregated between all plans by a carrier, ASO provider or TPA.

     

    Employer-Specific Data (Non-Aggregated Data)

    • General plan and reporting entity identifying information

    • Market segment (large group, small group, etc.)

    • Average number of members covered

    • State in which the plan is offered

    • Average contributions paid by member

    • Average premium paid by employer

    • Total annual premium (or equivalent for self-funded plans)

    Plan specific information, such as average contribution, payments by employer, and total premium can be reported by plan or combined for all plans. We believe most employers will find it easier to report the information by health plan. 
     

    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.
       

      Required Data Elements and Structure

    A full report consists of three different elements:

    • 1 Plan File: There are 3 types of Plan files, P1, P2, and P3. The P2 file applies to group health plans. The others don’t apply to employers.

    • 8 Data Files: There are 8 required Data files D1, D2, etc. A description of the details for each is outlined below.

    • 1 Narrative Response: The Narrative Response must be a pdf or Word file. There are six required elements to address. This will generally be handled by carriers, PBMs, and ASO providers. 

    The following diagram illustrates what we expect to be a typical division of reporting between employers and plan partners.


    Required Rx Data Element Structures


     

    Costs for RxDC Reporting

    Carriers, TPAs, and PBMs are adopting differing strategies for the RxDC reporting. These entities have and will incur substantial data gathering and reporting costs to comply with the RxDC requirements. As a rule, fully insured carriers have included the cost in overall administration costs and are not charging a direct fee to employers. Some ASO providers, TPAs, and PBMs are passing through a direct fee to employers.
     

    Deadlines for Annual Reports

    Reporting runs on a calendar year basis. This law introduced a new term, the “reference year.” The Reference Year is the prior calendar year for which the report is submitted.

    Annual reports are due on June 1st following the reference year. June 1, 2024 marks the deadline for the 2023 calendar year.
     

    Employer Action

    Employers should keep an eye out for information requests from carriers and other plan partners. Fully insured employers will want to attend to information requests and note the deadline for providing necessary data. Most carriers have set deadlines between March 15th and April 10th

    If you are a Vita Benefits client, your account management team will reach out to you to assist with understanding carrier-imposed deadlines and submission of required information.


     

  • GLP-1 Drugs for Weight Loss: What Employers Need to Know

    Note: This comprehensive article is a long read, but we think it is worth it!

    The latest generation of prescription drugs developed to help people manage Type 2 diabetes has been causing quite a stir for patients, health professionals, and benefit plans alike. In addition to their intended use in treating Type 2 diabetes, several GLP-1 drugs are also FDA-approved for weight loss, while others are being used for weight loss on an off-label basis.

    As generally happens with innovative therapies, both health plan sponsors and insurance carriers face challenges in creating guidelines for coverage of the drugs. The majority of employers and insurance carrier plans currently exclude weight loss drugs from coverage; however, a small but increasing number of employers are jumping on board to offer coverage for this new class of medications.

    Experts agree that the GLP-1 craze we are witnessing in both the general population and the pharmaceutical industry is not a short-term, acute phenomenon. Rather, it is expected to be a long-term issue that will continue to drive discussion, spark development, and impact health plan costs in the decade ahead.

     

    A Roadmap to Understanding

    Much has been written about GLP-1s and their impact on employer health plans. The intention of this article is to dispel the fog of information and synthesize key concepts employers need to know...essentially, to provide an easy roadmap to understanding this complex topic. In this article, we will address the following issues:
     

    GLP-1s Made Easy

    Marketplace and Drug Pipeline

    Obesity – The Reality of the Need

    Insurance Coverage Realities

    The Wrong Question and the Right Question

    Cost and Healthcare Spending

    Prior Authorization Realities

    Final Thoughts


     

    GLP-1s Made Easy

    What are the Drugs?

    GLP-1 (Glucagon-Like Peptide-1) is a hormone that plays a crucial role in regulating blood sugar levels. As such, the category of drugs that target that hormone are also used to treat Type 2 diabetes. These drugs are known as GLP-1 agonists. That class of medications was the first to be FDA-approved for the treatment of Type 2 diabetes because of their effectiveness in regulating blood sugar in the body.

    When GLP-1s were first developed, manufacturers intended for the drugs to be narrowly prescribed for those with Type 2 diabetes. However, after these medications were introduced, patients started to experience the unexpected side effect of weight loss. At that point, manufacturers dove into the underlying science behind the drugs and recognized the significant potential of these drugs as highly effective stand-alone weight loss medications to treat obesity.
     

    In English . . .what do the drugs do?

    GLP-1 medications increase insulin release, delay digestion, and decrease appetite.

    • For diabetics, they help regulate insulin AND help prevent cardiovascular disease.
    • For obese patients, they can help reduce body weight by an average of 15% (in conjunction with lifestyle changes such as diet and exercise).

    It is important to note that the drugs are effective at weight loss only in the context of other behavioral changes, such as attention to diet and exercise. Without these underlying lifestyle changes, weight loss is unlikely to be permanent in the future.
     

    Research Findings

    Multiple clinical trials have demonstrated weight loss between 15%-20% of body weight compared to a placebo at 3-4%. One of the most extreme clinical trials resulted in an average weight loss of 52 pounds (22.5%). Essentially, all drug manufacturers are engaging in continued clinical trials to confirm the efficacy and unique value of their GLP-1 formulations.   

    Importantly, research has also shown that upon discontinuing the medication, much, if not all, of the weight is regained. This is an important consideration for balancing the health and life benefits of GLP-1 medications with the long-term cost of the treatment. 
     

    What are the drug names?

    Many GLP-1 drug names have already become widely known because of broad direct-to-consumer advertising. There are currently nine GLP-1 medications approved for the treatment of diabetes and/or weight loss. The following chart (courtesy of CVS Health) provides an overview of the most popular brand names and their FDA approval status.
     

    Medication
    FDA Approval Status
    Patients
    Ozempic®
    Type 2 diabetes
    Adults
    Rybelsus®
    Type 2 diabetes
    Adults
    Byetta®
    Type 2 diabetes
    Adults
    Mounjaro®
    Type 2 diabetes
    Adults
    Victoza®
    Type 2 diabetes
    Children (age 12+)
    Trulicity®
    Type 2 diabetes
    Children (age 12+)
    Wegovy®
    Weight management
    Adults and Children (age 12+)
    Saxenda®
    Weight management
    Adults and Children (age 12+)
    Zepbound™
    Weight management
    Adults



     

    Marketplace and Drug Pipeline

    The GLP-1 Pipeline

    Pundits believe that we are at the very beginning of a GLP-1 wave. The exceptionally large potential target population for GLP-1 drugs and the known efficacy of the drug mechanisms, virtually guarantee further investment by pharmaceutical manufacturers. The biggest indicator of this is the current drug development pipeline. Pharmaceutical manufacturers are investing heavily in the development of new and novel indications of GLP-1 drugs, as well as GLPs that apply to more than one receptor.

    Manufacturers are also working to develop new (and more patient-friendly) ways to administer the medications. Currently, all GLP-1s (except Rybelsus®) are administered by injections (once weekly or daily). Needle-phobia is real, and most patients do not like injected drugs. This reality has pharmaceutical manufacturers racing to develop new ways to administer the medications. There are currently a few pipeline products that are monthly injections that would further reduce that administration burden and provide a more convenient treatment option for patients.

    Lastly, drug manufacturers are also studying the use of GLP-1s for the treatment of cardiovascular disease, as well as several other diseases that are often co-morbidities with diabetes (including heart failure, peripheral arterial disease, sleep apnea, and diabetic retinopathy).
     

    Growth By Advertising and Social Media Influencers

    The unique efficacy of the drugs is not the only reason for their rapid growth. Drug manufacturers have poured hundreds of millions of dollars into highly effective ad campaigns. In addition, many high-impact influencers with star-power names have shared their weight-loss “secret.” This has expanded reach and normalized taking GLP-1s for weight loss (absent a diabetes diagnosis). These forces have combined to create an interesting market dynamic with substantial demand for GLP-1 medications for weight loss purposes.
     

    GLP-1 Market Size
    2022
    $22B
    10-Year Prediction (2032)
    $72B



     

    Obesity: The Reality of the Need

    The Unspoken Debate: Chronic Disease vs. Lifestyle Disease

    It is important to recognize the unspoken debate that is unfolding over GLP-1s. Diabetes is an industry-accepted chronic disease that, if left untreated, can result in not only disease progression (which is costly) but additional medical complications and exacerbation of underlying co-morbidities. These, in turn, can be even more costly.

    On the other hand, obesity has historically been labeled as a lifestyle disease. Because of this, many plan sponsors have not and do not cover weight loss drugs under the pharmacy benefit, as the perception was it did not address a medical need. That said, in the wake of the GLP-1 craze, employers are being forced to re-evaluate their coverage for these popular weight loss drugs. The steep price tag of GLP-1s has created a complex web of financial and human consequences for employers to consider. At the center of this reality is the understanding of obesity as a health crisis in the United States.
     

    Obesity as a Health Crisis: Current State

    Neither the prevalence of obesity nor the impact of co-morbidities associated with obesity in our society can be ignored. Following are some current statistics relating to obesity in the United States

    • 42% prevalence of obesity in U.S., 2017-2020 (www.cdc.com)
    • 200+ diseases are associated with obesity (medicaleconomics.com)
    • 73.1% of the population is overweight or obese

    Obesity in the United States


     
    Category
    BMI
    Percentage of Adults
    Normal Weight
    18.5 to 24.9
    26.9%
    Overweight
    25 to 29.9
    30.7%
    Obesity
    30+
    33.2%
    Severe Obesity
    40+
    9.2%
     

    Future Projections of Obesity Prevalence

    Unfortunately, trends are not in our favor for either obesity or diabetes prevalence.

    • 1 in 2 adults will be obese by 2030 (www.nejm.com)
    • 1 in 4 adults will be severely obese by 2030 (www.nejm.com)
    • Prevalence of diabetes (Type 1 and Type 2) will increase by 54% from 35M people in 2015 to 54M people in 2030 (www.nih.gov)
    • Growth in percentage of population with obesity and severe obesity from 1999-2018:

    Growth in percentage of population with obesity and severe obesity from 1999-2018

     

    On the Positive Side

    The American Medical Association has recognized obesity as a “chronic disease” because it can be the underlying cause of other medical conditions, such as heart disease, diabetes, and even some cancers. Obesity can even shorten life expectancy by up to eight years and cut healthy life by up to 19 years. As a result, there is a growing argument to be made that providing coverage under group health plans to address obesity may be medically necessary and appropriate...and potentially cost-efficient (to the extent that the cost to treat other co-morbidities would be curtailed by the reduction in the underlying co-morbidity/cause of obesity). These factors will likely also play into insurance coverage decisions by employers and insurance carriers.

     

    Insurance Coverage Realities

    Coverage for Diabetes

    As a rule, most health plans have at least one GLP-1 medication on their formulary for the treatment of diabetes. The remainder of this discussion will focus on coverage for GLP-1s for weight loss without a diabetes diagnosis.
     

    Are GLP-1s covered by insurance plans?

    The web of insurance coverage (and non-coverage) for GLP-1 medications for weight loss is complicated. Social sources of coverage are inconsistent (based on state and program) and employer-sponsored insurance plans have inconsistent coverage rules. Some, but not all, employers are in a position to choose whether they elect to cover weight loss medications, including GLP-1s.
     

    Health Plan Type
    Coverage Notes
    Medicaid
    Coverage for drugs prescribed for weight loss varies by state but is limited for GLP-1 drugs.
    Medicare
    No coverage.
    Employer-Based Coverage – Self-Funded Plans
    Employers with self-funded plans can usually choose whether to cover GLP-1s for weight management.
    Employer-Based Coverage – Fully Insured Plans
    Employers with fully insured health plans “inherit” the plan coverage decisions of their insurance carriers . . . and, in some cases, the insurance coverage mandates of their state.
    Individual Policies
    Today, most states combine individual coverage with small employer coverage mandates. Thus, coverage mandates in the fully insured marketplace will typically cascade to individual policies as well.


     

    Medi-Cal Coverage in California

    Historically, California Medicaid (referred to as Medi-Cal) has provided coverage for GLP-1s for the treatment of diabetes. Coverage of medications for obesity has historically been excluded. However, in the latest Medi-Cal Rx Contract Drug List (updated December 1, 2023), Saxenda® and Wegovy® are included as treatments for obesity.
     

    Employer-Sponsored Coverage

    In 2024, there is no mandate to cover GLP-1s for weight loss in California. As a result, employers and participants alike will continue to experience a patchwork of coverage depending on employer or carrier determinations (as outlined above).
     

    California Obesity Treatment Parity Act

    A bill known as the Obesity Treatment Parity Act (SB 839) has been introduced in the California legislature. The bill would mandate comprehensive coverage for the treatment of obesity, including coverage for intensive behavioral therapy, bariatric surgery, and FDA-approved anti-obesity medication (including GLP-1s).

    The bill would require policies to provide coverage in the same manner as any other illness, condition, or disorder relative to deductibles, copayments, coinsurance, and out-of-pocket maximums. The whole of the law uses a mere 189 words to amend the CA Health and Safety Code and the Insurance Code to create full parity for the treatment of obesity with any other medical condition.

    This will be a closely watched bill as it moves through the legislature in the coming session. If some form of the bill becomes law, employers will need to carefully consider and plan for expected health plan cost increases. Remember, however, if the law is passed, as a state law, the coverage mandate would only apply to fully insured plans, not self-funded plans. 
     

    Fully Insured Plans: Employers Don’t Get a Vote

    Here, it is relevant to understand the current marketplace for 2024. Please note some contracts may deviate from the standard provisions, and these contradicting provisions are a moving target. Market segment plays a part in determining potential coverage parameters. 

    • Small Groups (<100 lives): The small group market is the most restrictive, as carriers have a library of pre-defined plans from which employers may choose.
    • Mid-Market Groups (100 to 300 lives): The mid-market segment will typically mirror the small group marketplace with pre-defined plans.
    • Large Groups (300+ lives): The large, fully insured employer marketplace will offer the most flexibility as employers have more say in plan design parameters in this market segment. Carriers are starting to address the actuarial assumptions and rate impact of these offerings. We have seen a wide range of potential rate impacts in the quoting process, from 0.5% to 3.0%.
     

    Self-Funded Plans: To Cover or Not to Cover...That Is the Question

    The decision of whether or not to cover GLP-1s for weight loss is important for plan sponsors, as the significant increase in utilization of GLP-1s for weight loss will place a substantial financial burden on employers. There is also the complex intertwined cost reality that, while there will be an obvious increase in cost when covering GLP-1s, plan sponsors also need to consider the potential longer-term benefits for members’ improved health, such as the avoidance of disease complications related to obesity.

    It is difficult to find reliable information on how many employers cover GLP-1s for weight loss at this time. What we do know is that while the drugs have surged in popularity over the past year, coverage for the drugs has not tracked that popularity. The best survey numbers seem to show that very large employers remain split, with the number providing coverage hovering at less than half (46%). Smaller employer plans are less likely to cover the medications. A significant number of employers indicated they are considering whether to add the coverage in the future, citing cost as the major consideration. Expect continued discussions among self-funded employers about the pros and cons of adding GLP-1 coverage for weight management.
     

    Taking the Temperature of Employers

    The high immediate costs to health plans as well as the potential for sustained increases in healthcare spend over the long term (assuming employees will stay on the drug for longer periods) are cited as reasons for more employers wading slowly into the GLP-1 waters. That said, GLP-1s are not going away, nor will the decisions employers need to make regarding how they balance the high cost with health benefits and employee relations considerations.

     

    The Wrong Question and the Right Question

    A Common Question

    Employers and employees alike are asking the question, “Are GLP-1s covered?” It seems like a reasonable question, however, it’s a question that often begs an incorrect answer . . . or at least not an answer to the specific question that the inquirer truly intended.
     

    The Wrong Question

    “Are GLP-1s covered under our plan?” is the wrong question to ask. It’s the wrong question because most plans will answer, “Yes, but coverage may be only available in limited circumstances.” For example, most plans today do cover GLP-1s when a diabetes diagnosis exists. However, typically when the question is asked today, the intention is to clarify if GLP-1s are covered for weight loss . . . and that is an entirely different question. 
     

    What’s the right question?

    The right question to ask is actually two questions. 

    Question #1: Are GLP-1s covered for weight loss without a diabetes diagnosis? 

    Question #2: What are the criteria for covering GLP-1s for weight loss? 
     

    How do I figure out GLP-1 coverage details?

    Vita maintains a Resource Guide for coverage and pre-authorization requirements for the major carriers for fully insured plans. It is important to note that each carrier has established detailed criteria for how they cover GLP-1s for weight loss. In addition, coverage and criteria differ between small-group and large-group plans. Vita has consolidated summary information for easy reference as well. For detailed information on coverage standards through your carrier, complete this form to request a consultation or reach out to your Vita Account Manager.

     

    Cost and Healthcare Spending

    What is the cost?

    The reality is that GLP-1 drugs, as a class, are very expensive. This is partially because of their efficacy and the increasing demand for the medications. However, it is also important to recognize that there are no generics available for GLP-1 medications. It is unlikely that substantial generics will be available until well into the 2030s when initial patent protections expire.

    Much has been written about the cost of GLP-1s and the potential healthcare spending increase for employers and health plans if widespread coverage and utilization were to be adopted. For this article, we will simply outline the raw retail costs and some basic realities about rebates, which can reduce the cost for some plan sponsors.

    Consider the following:

    • The cost for GLP-1 treatment is between $700 - $1,400 per month (retail cost).
    • Expert analyses have projected that weight loss drugs have the potential to increase health costs up to $300 per employee per month, depending on how widely coverage is offered and the overall percentage of overweight and obese participants who elect to seek treatment.

    Following is a summary of the retail and typical pharmacy prices for GLP-1 drugs. For those who have heard they are “expensive” but haven’t seen the real numbers, this is often a “Wow” moment.

    Medication

    Typical Pharmacy Price

    Retail Price

    Gross Annual Cost*

    Ozempic®

    $916

    $1,224

    $11,000

    Rybelsus®

    $890

    $935

    $11,000

    Byetta®

    $784

    $978

    $9,000

    Mounjaro®

    $1,000

    $1,228

    $12,000

    Victoza®

    $1,153

    $1,345

    $14,000

    Trulicity®

    $812

    $1,096

    $10,000

    Wegovy®

    $1,391

    $1,590

    $17,000

    Saxenda®

    $1,280

    $1,279

    $15,000

    Zepbound™

    $1,007

    $1,279

    $12,000


    *Gross annual cost reflects a rounded calculation of 12x the typical pharmacy cost. It does not take into account drug rebates for employers/carriers or discount coupons for participants.
     

    What about rebates?

    Rebates have a large impact and are an important element of the total cost for GLP-1 drugs. While the details of rebate contracts are very closely guarded by Pharmacy Benefit Managers (PBMs), it is generally accepted that rebates for GLP-1 drugs are in the 40%-50% range (based on retail pricing). Notably, this is another area where the experience of self-funded and fully insured employers will differ:

    • Fully Insured Employers: Rebates will be paid to the insurance carrier (employers will not directly participate). While it is said that insurance carriers will use the rebates to offset overall fully insured premiums, the lack of transparency around these rebates is concerning to many employers.

    • Self-Funded Employers: Rebates are typically passed through (at least in some measure) to self-funded employers. Therefore, self-funded plans will have the potential of direct cost impacts due to rebates (albeit delayed as rebates are paid in arrears).
       

    What about drug coupons?

    Essentially, all manufacturers have coupon offers that make the drugs significantly more affordable for plan participants. These coupons effectively waive or limit what would otherwise be high participant cost sharing for these medications. Manufacturers and PBMs arrange to accept a lesser copay or coinsurance amount from plan participants but “make it up” on the plan payment side where drug costs are not discounted. Traditionally, drug coupon programs are means-tested and reserved for those with limited income. However, with the potential dollars on the table for GLP-1 drug manufacturers, it may be that we see fewer such restrictions in the future.

    There has been significant regulatory back and forth about whether the value of drug coupons should be counted toward the deductible and out-of-pocket expenses. Regulatory guidance has recently been clarified that the value of such coupons (which can be substantial) does NOT count toward a participant’s deductible and out-of-pocket expenses. The deductible and out-of-pocket expenses must be met by the participant paying in “real” dollars, not in coupon-equivalent dollars.
     

    Manufacturer Direct-to-Consumer Model

    Due to the tremendous potential market size, Lilly (the manufacturer of Zepbound™) has created a direct-to-consumer channel whereby individuals can obtain GLP-1 drugs while bypassing the traditional insurance plan and pharmacy channel. This new option combines a "convenience play" with a substantial direct discount if insurance is not available. The strategy aims to monetize direct consumer payments as full payment with the goal of lowering the “barrier to entry” and thus increasing sales volume.

    There are also other companies and weight loss centers popping up as “Wellness Companies” that are promoting "compounded" versions of the active ingredients in GLP-1s. These are available at a reduced price, but consumers should beware that compound medications are not approved by the FDA or guaranteed.
     

    Cost is THE Thing

    Employers and insurance carriers everywhere are looking carefully at the issues of cost and efficacy. Essentially all stakeholders are working to understand the complex issues and to create a strategy around the cost of offering GLP-1 coverage for weight loss.

     

    Prior Authorization Realities

    Can everyone get the drug?

    No. There is significant treatment alignment and cost-containment measures applied to GLP-1 medications for weight management. When GLP-1s are covered for obesity, the goal is to ensure that the medication is authorized only for those who meet the specific criteria. This assures both optimal clinical effectiveness for the patient and appropriate cost containment for plans.
     

    Cost Containment Measures

    Pharmacy Benefit Managers can and do apply the standard three cost containment “tools” to GLP-1s. These standard tools have varying degrees of effectiveness in containing costs based on the diagnosis and how the programs are structured.

    Quantity Limits: This typically ensures that the supply prescribed does not exceed the FDA-approved label of the drug. It confirms that prescribers and patients aren’t using the drug at higher dosages than the indication calls for. In general, this isn’t likely to be a big cost-saver for employers. That said, it is reasonable to understand that typical quantity limits for GLP-1 medications range from 16-28 weeks for the initial prescription, with subsequent limits at 6-month intervals.

    Step Therapy: In standard step therapy programs, patients are required to try one or more therapies prior to stepping up to a more expensive therapy. In the case of a diabetic patient, Metformin has been the standard first line of defense medication for decades. Initially, plans required patients to “step through” the less expensive Metformin treatment before taking GLP-1s; however, due to updated diabetes treatment guidelines, GLP-1s are being used earlier in diabetes treatment progression today. With regard to obesity, there are several other weight loss medications that could be used in a step therapy requirement prior to using GLP-1s. However, the other medications have not been shown to provide the level of weight reduction that the GLP-1s have. Thus, whether step therapy programs are required for an obesity diagnosis (providing the plan provides coverage for weight management drugs) is very plan-specific.

    Prior Authorization: This is “the big thing” for GLP-1 therapy management. As such, it is addressed in more detail below.
     

    Prior Authorization: Defining the Hoops to Jump Through

    Plan sponsors, PBMs, and insurance carriers alike require a stringent pre-authorization process to qualify for GLP-1 treatment for weight loss. As an important point of distinction, across the board, pre-authorization (while still required under many plans) is becoming much more streamlined for plan participants with a diabetes diagnosis.

    Plans can take various approaches to who they define as eligible and, thus, how the pre-authorization process is defined. The following outlines a progression of criteria that might be applied by a plan as part of the prior authorization process, in order from more lax to more strict.

    • No Criteria: The plan contains no specific criteria for a non-diabetic individual to receive a GLP-1. (This option is rarely utilized.)

    • BMI Only: The plan requires medical documentation of a BMI exceeding a specific threshold, typically greater than 30.

    • BMI + Co-Morbidity: The plan requires medical documentation of a BMI exceeding a specific threshold (often greater than 27) AND medical documentation of a co-morbidity that is related to obesity. Examples include high blood pressure, dyslipidemia, heart disease, sleep apnea, cardiovascular disease, etc.

    • BMI + 2 Co-Morbidities: As above, only the plan requires at least two co-morbidities related to obesity.

    • BMI + Co-Morbidities + Lifestyle Modification: As above, only the plan requires proof of a diet plan and exercise regime (sustained for some period of time, typically six months).

    • BMI + Lifestyle Modification Failure: The plan requires medical documentation of a BMI exceeding a specific threshold, typically greater than 30, AND medical documentation that lifestyle modification measures (diet and exercise) have been attempted for at least six months with no measurable results.

    • BMI + Co-Morbidity + Lifestyle Modifications: As above, with a commitment that the participant will pair the drugs with lifestyle modifications.

    • BMI + Co-Morbidity + Structured Weight Management Program: As above, with ongoing participation in an employer-sponsored weight management program. In some cases, employers are working with specialty vendors to provide structured programs that include resources such as behavior coaching, nutrition counseling, and exercise plan development.

    There are usually specific variations of the adult criteria that apply to children (ages 12-18).
     

    Re-Authorization

    Due to the high cost and extended treatment duration for GLP-1 therapies, PBMs are starting to apply a “re-authorization” process. This procedure is intended to confirm that the participant is experiencing a positive impact from the GLP-1 therapy, still meets the pre-authorization criteria, and is still actively pairing the drug treatment with lifestyle modifications as required. The re-authorization process is typically scheduled on a six-month cadence.
     

    Higher BMI Requirement

    Some employers see the benefit of adding coverage for GLP-1s for weight management but are concerned about the reality of the potential plan cost increase. To offer the benefit but better manage the cost, employers may increase the requisite BMI to 35 or higher, thus providing the benefit, but restricting availability (and cost exposure) to those with more severe obesity (and thus greater potential impact).
     

    Lifestyle Coaching Programs as Gatekeepers for GLP-1s

    When used as a treatment for obesity, GLP-1s are designed to be used in conjunction with diet and exercise behavior modifications. Essentially, all pre-authorization programs require at least concurrent commitment to lifestyle modifications, and many require 3-6 months of diet and exercise modification prior to gaining access to the medications.

    Structured Programs: Many employers are considering providing additional support tools and programs for employees with obesity. In most cases, this comes in the form of partnering with an outsourced specialty vendor that provides structured virtual programs that include such resources as behavior coaching, nutrition counseling, and exercise plan development. In some cases, employers use active participation in these programs as a criterion for pre-authorization (thus taking some of the guesswork out of whether an employee is actively participating in the necessary lifestyle changes to support successful GLP-1 treatment).

    The Challenge: The challenge comes in how such efforts are to be measured. Is self-attestation enough? Should they be measured by weight loss results over time? Is an improvement in biometrics relating to a co-morbidity (such as cholesterol or high blood pressure) sufficient? Or is active participation in a formal program of some sort required? Employers and PBMs alike are grappling with the questions of how to gauge satisfactory commitment to behavior modifications and what is considered an acceptable improvement as a result of such efforts in order to gain access or maintain access to GLP-1s.

    A New Trend: Enter a new product in the marketplace. There is a new trend developing where employers are looking toward formal virtual lifestyle coaching or weight management programs to assist in managing access to GLP-1s for weight loss. Formal virtual lifestyle coaching programs are being developed, specifically to fill the role of both supporting employees in their behavior modification efforts and being the gatekeeper to the expensive GLP-1 medications. From the employer’s perspective, it takes some of the guesswork out of the process. An employer would sponsor the program and then plan participants interested in taking GLP-1s for weight loss would engage with the weight management program that involves diet and exercise for six months before they can get a GLP-1.

    Ongoing Gatekeeping: The programs then also manage participants, ensuring they meet ongoing diet and exercise requirements to continue being prescribed the drugs.

    Cost Issues: It is also important to recognize two cost impacts of this strategy. First, when access to GLP-1 medications for weight loss is “pushed off” for six months while behavior modifications are being kicked off, the plan is not incurring the monthly cost for the medications. Second, we must recognize that some participants will not “pass the test” and thus not get access to the expensive medications. This will both save employer claims dollars and focus the expenditures where there is a higher potential for success. Lastly, formal weight management or coaching programs are much less expensive than the cost of the GLP-1 drugs, so such a strategy can be seen as cost-effective.

    The Goal: By using formal lifestyle and weight loss programs, employers are provided more assurance that the cost of the drug would be an investment worth making. Formal monitoring of the concomitant lifestyle modification requirements would provide plan oversight, and participants would have important support in making lifestyle modifications more possible.
     

    Pre-Authorization Criteria Summary

    As a rule, plans that cover GLP-1 medications for weight loss typically require some variation of the following three criteria to be met:

    1. Participants qualify as obese (based on specific BMI measurements)

    2. Participants have at least one additional, related health condition

    3. Participants commit to pairing the drug treatment with the necessary lifestyle/behavior changes as a condition of receiving the medication. In some cases, structured weight management program participation may be required (including behavior management coaching and nutrition counseling).

    As a reminder, the intention of the pre-authorization process is to balance cost and access to the treatment, specifically to reserve the treatment (and cost expenditure) for those who have met the criteria for a potentially positive outcome.

     

    Final Thoughts

    Conclusion

    The landscape of GLP-1s for weight management is evolving rapidly. Employers will be called upon in the years to come to consider their approach to managing obesity, both from a pharmacy benefit perspective and from an overall population wellness perspective.

    Plan design choices for smaller fully insured employers will be constrained by insurance carrier decisions. However, if a state coverage mandate passes, the costs for weight management drugs will be required to be borne by all.

    Plan design decisions for larger, self-funded employers are a current decision point. Careful consideration should be given to projected costs and potential health and wellness benefits for the employee population.

    Overall, employers should keep their ears to the ground on this issue. Tackling the obesity epidemic will not be a short-term endeavor, nor will it happen without significant cost and social change. That said, today’s employers and HR professionals are on the “ground floor” as critical decisions are made in how we address healthcare coverage and costs of treatments for obesity. Stay tuned!
     

    References

    California Obesity Treatment Parity Act

    National Institutes of Health Overweight and Obesity Statistics

    Diabetes 2030: Insights from Yesterday, Today, and Future Trends

    Projected U.S. State-Level Prevalence of Adult Obesity and Severe Obesity



     

  • 401(k) Update: Q1 2024

    Administration

    2023 Year-End Testing Time

    It’s that time again! The beginning of the year is the kickoff for submitting your year-end census data for compliance testing. Sponsors of calendar-year 401(k) plans subject to the Average Deferral Percentage (“ADP”) or Average Contribution Percentage (“ACP”) Tests (i.e., all Non-Safe Harbor Plans) must submit their 2023 census data now to ensure timely results.

    Be sure to submit your annual census data and compliance questionnaires to your recordkeepers by their specific deadlines. Providing your census data timely allows recordkeepers sufficient time to process the compliance tests and deliver results to you before March 15th, which is the deadline for employers to process corrective refunds (for failed ADP tests, if applicable) without paying a 10% excise tax. Please contact Vita Planning Group if you have questions regarding your recordkeeper’s year-end requirements. For other important dates on the horizon, download our online Compliance Calendar.
     

    401(k) News

    2024 Contribution Limits

    The employee contribution limits for 2024 are:

    2024 Elective Deferral Limit: $23,000

    Additional Catch-Up Amount (age 50+): $7,500
     

    Audit Threshold Methodology Change

    As a reminder, last year, the Department of Labor issued a change to the methodology for determining if a retirement plan is considered “large” for the purpose of Form 5500 reporting and the need for an independent audit of a retirement plan.

    The new guidance indicated that the 100-participant threshold for determining large plan status will be based only on the number of participants (actively employed and/or terminated) with balances as of the first day of each year. Previously, this threshold included all eligible employees, even those with no balance. The revised methodology is generally seen as a welcome change for those smaller employers on the cusp of being considered a large plan. This change took effect for plan years beginning on or after January 1, 2023.

    We expect recordkeepers and/or third-party administrators to incorporate this new counting method in their compliance review and determination of audit requirements for plan year 2023.
     

    Market Update1

    Despite numerous predictions of economic and market decline at the beginning of the year, both equity and bond markets rose substantially in 2023. Much of the rise was due to improving inflation figures in the second half of the year and the expectation of central bank easing in 2024 in the US and overseas. The US S&P 500 Index was up 26.6% in 2023, and the Bloomberg US Aggregate Bond Index was up 5.5% after having declined 18% and 13%, respectively, in 2022. These results are all the more remarkable as the S&P 500 fell 10%, and the Aggregate Bond Index declined 7% between July and October 2023. While US economic conditions are generally supportive of asset markets as we enter 2024, the biggest unknown is the US presidential election, which has historically heightened volatility throughout the year.

    The US Bureau of Economic Analysis (“BEA”) announced that the US economy grew at an annual rate of 4.9% in Q3 2023, well in excess of the revised 2.1% growth in Q22. The Philadelphia Federal Reserve Bank’s survey of forecasters' median forecast for Q4 2023 GDP growth is unchanged at 1.2%, while the median forecast for the full year 2024 has crept up to 1.7%.3 The labor market continues to be strong. December 2023 saw non-farm payrolls grow by 216,000, and US unemployment was 3.7%, making this the longest period with unemployment below 4% since the 1960s4. The data would indicate that both American consumers and American businesses have shown great resilience during 2023 in maintaining consistent economic growth and healthy profit margins even with the current high level of interest rates.

    Inflation has fallen from its most recent peak of 9% in June 2022 to 3% in December 2023, and the FED is now forecasting Core PCE inflation to be at 2.4% by the end of 2024. Lower inflation plus continued economic growth will allow the FED more leeway in determining its interest rate policy in 2024. The FED is still wary of the short-term impacts on inflation, such as OPEC production reductions that led to a spike in gasoline prices in the middle of 2023, but has stated its current round of interest rate increases is at an end with the possibility of cuts in interest rates in 2024 should the need arise.

    Asset markets rallied strongly in Q4 2023. As we enter 2024, high equity and bond valuations may make it difficult to maintain the pace of asset market appreciation that we saw in the second half of 2023 into the first half of 2024. In addition to the heightened volatility that comes from a US election year, several market analysts think a mild recession is possible in 20245. For example, Germany (Europe’s largest economy) is experiencing a contraction in economic activity due to a slowdown in the manufacturing sector and a decrease in demand from China6. In the short term, we will look to the consumer to sustain economic growth in the US while keeping an eye on geopolitical developments and their possible impact on markets. Wishing you health and prosperity in the new year. Please reach out to the Vita Planning Group with any questions or concerns.


     

    Sources:

    1. Unless otherwise indicated, data and commentary for the Market Update is sourced from two JPMorgan Asset Management sources: 1) Guide to the Markets – U.S. Economic and Market Update, 1Q 2024, December 31, 2024, and 2) the “1Q 2024 Guide to the Markets Webcast” on January 2, 2024.
    2. https://www.bea.gov/data/gdp/gross-domestic-product
    3. https://www.philadelphiafed.org/surveys-and-data/real-time-data-research/spf-q4-2023
    4. https://www.bls.gov/news.release/pdf/empsit.pdf 5https://www.cnbc.com/2023/12/26/the-us-avoided-a-recession-in-2023-whats-the-outlook-for-2024
    5. https://www.capitalgroup.com/advisor/insights/articles/2024-economic-outlook


     

    Disclosures:

    This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.

    +The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock's weight in the index proportionate to its market value.

    ++ Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices do not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.

    The Bloomberg Barclays US Aggregate Bond Index, or the Agg, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States. Investors frequently use the index as a stand-in for measuring the performance of the US bond market.

    The MSCI All Country World Index ex USA Investable Market Index (IMI) captures large, mid and small cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 23 Emerging Markets (EM) countries*. With 6,062 constituents, the index covers approximately 99% of the global equity opportunity set outside the US.

    The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.

    The MSCI Emerging Markets Index is a float-adjusted market capitalization index that consists of indices in 21 emerging economies: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.

    The FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. Equity REITs. Constituents of the Index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property.

    The Consumer Price Index (CPI) is a measure of inflation compiled by the US Bureau of Labor Studies.


     

  • Employers' Medicare Part D 2024 Creditability Disclosure Due February 29

    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 February 29, 2024 (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. 

  • DOL Penalties Increase for 2024

    The Department of Labor (DOL) has announced the 2024 annual adjustments to civil monetary penalties for a wide range of benefit-related violations. As background, legislation enacted in 2015 requires annual adjustments to certain penalty amounts by January 15th of each year. The increased 2024 penalties are effective after January 15, 2024, and apply to any violations occurring after November 2, 2015.
     

    Health and Welfare Benefit Plans

    Category

    Updated Penalty

    Failure to file Form 5500

    $2,670 per day that the filing is late

    Summary of Benefits and Coverage (SBC)

    $1,406 per failure (which means per participant not receiving an SBC)

    Failure to provide notice of CHIP availability

    $141 per day per participant


    401(k) Plan Penalties

    Category

    Updated Penalty

    Failure to provide notice for auto-enrollment plans

    $2,112 per day

    Failure to provide blackout notices

    $169 per day

    Failure to comply with recordkeeping and reporting requirements

    $37 per day per employee


    Genetic Information Nondiscrimination Act (GINA)

    Category

    Updated Penalty

    Failure to comply with GINA requirements

    $141 per day of noncompliance

    Minimum penalty for non-de-minimus failure to meet genetic information requirements not corrected before notice from DOL

    $20,641 minimum

    Cap on penalties for unintentional failure to meet genetic information requirements

    $688,012 maximum


    Other Penalties

    Category

    Updated Penalty

    Failure to file annual report for MEWAs (including M-1)

    $1,942 per day

    Failure to provide plan documents to DOL within 30 days of request

    $190 per day late (capped at $1,906 per request)

     

    Penalty Reality

    The reality is that the DOL retains discretion to impose lower penalties, and, in certain circumstances, they do. It is, therefore, true that not all violations will result in maximum penalties being applied. That said, out-of-compliance employers should not bank on leniency in the assessment of penalties without a compelling reason for their non-compliance. While a certain measure of penalty moderation has been seen in the past, we think that the DOL’s enforcement efforts will continue to tighten in the future. 
     

    References

    Federal Civil Penalties Inflation Adjustments




     

  • No Surprise Bills for Ground Ambulances in California

    California AB 716 will end “surprise” billing for ground ambulance services. As a state law, it applies to fully-insured plans written in the state of California. However, because of the ERISA pre-emption, it does not apply to self-funded plans.
     

    Background

    The federal No Surprises Act was passed by Congress in December 2020. In a nutshell, the law prohibits most surprise billing situations. Surprise billing situations can include: a patient who receives out-of-network services during an emergency room visit or while receiving care at an in-network hospital, as well as air ambulance charges. However, the protections in the No Surprises Act (as passed) do not extend to ground ambulance services.
     

    What does the law require?

    Payment Cap of In-Network Amount: The new law limits the amount that a non-network ambulance provider can charge, limiting charges to the amount a patient would pay for an in-network ambulance.

    Must Count Toward Out-of-Pocket Max: The in-network cost-sharing amount paid by the insured must count toward the out-of-pocket maximum and count toward any deductible in an equivalent manner as for other in-network services.

    No Balance Billing: Ambulance providers may not balance bill any portion of fees in excess of the in-network contracted payment amount.

    Uninsured Individual Protections: The law also caps ambulance bills for uninsured individuals. Specifically, providers may not charge more than the Medi-Cal or Medicare rate, whichever is greater.

    Payment Amount for Ambulance Providers: The bill specifies that if an ambulance provider does not have a contract agreement with the patient’s insurer, the health plan will pay the ambulance providers at rates negotiated and set locally through city or regional governments (also known as the Local Emergency Medical Authority or LEMSA rate).

    Collections Restrictions: The law prohibits ambulance providers and debt collectors from reporting patients to a credit rating agency or taking legal action against them for at least 12 months after the initial ambulance bill (and then collection action is limited to the in-network contracted fee amount). In addition, wage garnishments or liens on primary residences may not be used as a means of collecting unpaid ambulance bills.
     

    Is there an arbitration process?

    The federal No Surprises Act included a process by which providers and insurers can enter into binding arbitration when an agreed-upon reimbursement rate cannot be achieved. The No Surprises Act arbitration process has been the subject of much effort, debate, and legal challenge since the inception of the act. Notably, there is NO equivalent clause in California’s AB 716. Rather, the bill simply states the amount insurers are to pay out-of-network ambulance providers.
     

    So, are there no surprise ambulance bills anymore?

    Not quite. The new law is projected to protect approximately 14 million individuals covered by fully insured health plans. Existing laws already protect Medicare and Medi-Cal beneficiaries from surprise ground ambulance bills. However, AB 716 does not apply to the nearly 6 million Californians enrolled in self-funded health plans. Recall that self-funded plans are exempt from state regulation and subject only to federal regulation under ERISA.
     

    Effective Date

    The law becomes effective for health insurance policies issued, amended, or renewed on or after January 1st, 2024.
     

    References

    AB 726 Ground Medical Transportation


     

  • 401(k) Plan Rules for Long-Term Part-Time Employees

    The initial SECURE Act created a new class of plan participants called Long-Term Part-Time Employees or LTPT Employees. Employees in this new class must be given the right to make deferrals to 401(k) plans.

    Certain plans may need to allow LTPT Employees to enroll starting January 1, 2024. The Treasury Department released proposed regulations to implement rules relating to LTPT Employees on November 27, 2023.
     

    Definitions and Requirements

    LTPT Employee: An LTPT employee is an individual who meets the following criteria:

    • Worked three consecutive 12-month periods
    • Worked at least 500 hours of service in each of those three 12-month periods

    Hours/Years of Service: Hours and years of service are generally calculated the same as hours and years of service for other plan eligibility rules.

    Exclusions: The rule does not apply to employees covered under a collective bargaining agreement and non-resident aliens with no U.S.-source earned income. 

    Age 21 Criteria: Plans may also add additional criteria for employees to qualify for LTPT status that requires employees to reach age 21 by the end of the three-consecutive-year period to qualify. 

    Election Rights: Plans are required to give qualifying LTPT Employees the ability to make elective deferrals in retirement plans. 

    Qualification Timing: The initial 12-month period to determine eligibility for LTPT employees must be based on the employee’s date of hire. Subsequent 12-month periods may be determined by the first day of the plan year.

    Entry Dates: Plans may use the same entry date timing for LTPT employees as applied to other eligible employees.

    Employer Matching: Plan sponsors are not required to provide matching or non-elective contributions to LTPT employees. However, plan sponsors may elect to do so. This employer discretion is completely independent of whether the plan sponsor makes such contributions to other employees. A differential in matching contributions (between LTPT employees and other employees) would also not cause a 401(k) plan to fail the nondiscrimination tests.

    Vesting: LTPT employees obtain a year of vesting service for each 12-month period in which they are credited with at least 500 hours of service. LTPT employees incur a one-year break in service when they have not completed at least 500 hours.

    Top Heavy Considerations: Plan sponsors may exclude all LTPT employees from the application of top-heavy testing. However, LTPT employees are not excluded in determining whether the plan is a top-heavy plan.
     

    Three-Year Rule Becomes Two-Year Rule

    The duration requirement for LTPT employee qualification drops from three years to two years based on amendments enacted in the SECURE 2.0 Act.

    Plan Years Before 2025: For plan years beginning before 2025, LTPT employees must meet the 500-hour threshold for three consecutive years. (As enacted in the initial SECURE Act.) 

    Plan Years 2025 and Beyond: For plan years beginning after December 31, 2024, the three-consecutive-year requirement drops to a two-consecutive-year requirement. (Reflecting changes enacted in the SECURE 2.0 Act.)
     

    Employer Action Item

    Plan sponsors should review employment records from 2021 through 2023 to determine whether any LTPT employees should be given the opportunity to make elective deferrals in 2024. Note that 12-month periods starting on or after January 1, 2021, would count in determining if an employee qualifies as an LTPT employee.
     

    References

    Notice of Proposed Rulemaking: Long-Term, Part-Time Employee Rules for Cash or Deferred Arrangements Under Section 401(k), 26 CFR Part 1, 88 Fed. Reg. 82796 (Nov. 27, 2023).