PPE is Now A Qualified Medical Expense

Jessica Waltman – Principal, Forward Health Consulting

According to new guidance from the Internal Revenue Service (IRS), the personal protective equipment (PPE) people use to help stop the spread of COVID-19 is now a deductible medical expense under IRC Section 213(d). Common items that we all need to buy like masks, hand sanitizer, and sanitizing wipes, could now be part of someone’s medical expense deduction on their personal income tax return. These items could also count as reimbursable expenses under certain account-based health coverage options.

Employers that offer employees access to health flexible spending arrangements (health FSAs), health reimbursement arrangements (HRAs), Archer medical savings accounts (Archer MSAs), and/or qualified high deductible health plans (HDHPs) that pair with health savings accounts (HSAs), need to take note of this change. Now, plan participants may be able to use funds from those accounts to pay for PPE.

Another consideration for group plan sponsors is if coverage offerings include either an HRA, a health FSA, or both, then a plan amendment could be necessary to make PPE a reimbursable expense. Employees with HSAs and Archer MSAs will automatically be able to use their HSA or MSA monies to pay for PPE, but health FSA and HRA participants will need their employer to decide if PPE is on the reimbursable expense list.

Employers that need to make a plan amendment will also have to decide if they want to make a retroactive change or if they want it to apply the change to expenses moving forward. Those that opt for retroactive eligibility have until December 31, 2022 (at the latest) to amend their plan documents. They can make PPE a reimbursable expense dating all the way back to January 1, 2020 or decide to make PPE a reimbursable cost through a health FSA or HRA at any time moving forward.

If a plan amendment is required, the IRS gives group sponsors up to two years to make the change, as long as they operate the plan consistently between the effective date of the change through the date the amendment is adopted. The guidance states that amendments must be adopted by the last day of the first calendar year that begins after the end of the plan year in which the amendment is effective.  

Here are some examples of how this will work in practice:

  1. A group with a January 1 plan year decides to make PPE a reimbursable expense for health FSA participants. They want to make the change retroactive back to March 1, 2020, when the pandemic really hit the United States. In this case, they need to finalize their Section 125 plan amendment by December 31, 2021.
  2. A business offers employees PPO coverage paired with an HRA, and their new plan year starts on June 1. Upon hearing of this guidance, the group decides to let participants get HRA reimbursement for PPE starting with the new plan year. That group would need to complete their plan amendments by December 31, 2022.

If an employer that offers employees access to an HRA or health FSA doesn’t want to include PPE on the list of reimbursable expenses, then they do not have to do so.  For example, an employer that uses an HRA to offset each employee’s plan deductible might not want to amend their plan to include PPE as a reimbursable expense. That choice is completely permissible. If a group offers access to account-based coverage options that may be affected by this guidance, best practice would be to reach out to the entity used to administer reimbursements to make sure that they will be processed correctly. Communicating the change to employees will also be key.

President Biden’s Executive Order Marks New Era for ACA

Jennifer Berman JD, MBA – CEO of MZQ Consulting

On January 20, 2017, the date of his inauguration, former President Trump issued an the first of several executive orders directing the federal government to “minimize the economic burden” of the Patient Protection and Affordable Care Act (ACA).  Last week, on Thursday January 28, 2021, President Biden signed his own executive order intended to strengthen the ACA. 

This new order included directing the federal agencies to review all existing guidance relating to Medicaid and the ACA to identify and change:

  • Any policies and practices that may undermine protections for individuals with pre-existing conditions (including COVID-19);
  • Any demonstrations or waivers (or policies regarding such demonstrations or waivers) that may reduce coverage under Medicaid or the ACA;
  • Any policies or practices that may undermine health insurance market (include the individual, small and large group markets);
  • Any policies or practices that may present unnecessary barrier to individuals and families attempting to access health coverage, including for  mid-year enrollment; and
  • Any policies of practices that may reduce the affordability of coverage or financial assistance for coverage, including for dependents.

This Executive Order highlights the changes we can expect to the rules and enforcement surrounding the ACA over the next four years.  The order also has the impact of repealing the executive orders issued by President Trump that restricted the applicability of the ACA.  Several of the rules adopted under President Trump’s executive orders are now likely to change.  These include:

  • The creation of individual coverage health reimbursement arrangements (ICHRAs);
  • The expansion of short-term limited duration health insurance plans;
  • The “new” association health plan rules (which are still being challenged in federal courts); and
  • The IRS safe harbor that loosened the distribution requirements for IRS Form 1095-Bs.

While many of the actual changes that will result from Biden’s Executive Order will take months to materialize, one big change is taking place quickly.  In response to the Executive Order, CMS immediately announced that the federal health insurance marketplace will have a new open enrollment period from February 15, 2021 – May 15, 2021.  This new open enrollment period is intended to make it easier for people to enroll in coverage in light of the pandemic.  The change only applies to the federal exchange; however, CMS is strongly encouraging that states maintaining their own health exchanges allow for such a mid-year open enrollment period as well.

COBRA During the Pandemic: COBRA Election Opportunity Not Over For Most

The Compliance NOW! team would like to thank this post’s guest writer Michelle Turner, MBA, CEBS.  Michelle is a talented compliance professional and a good friend of the blog.  Her post below highlights an important issue that is still highly relevant for employer plans, even in the midst of the “tornado” of new rules and regulations we’ve been digesting as of late.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) affords employees and their covered dependents (i.e. qualified beneficiaries) the option to elect continuation coverage when eligibility to the group health plan is lost due to certain qualifying events (QE). For example, employees whose employment was terminated due to a layoff, or hours reduced due to furlough.  

COBRA specifies a qualified beneficiary (QB) must be given at least 60 days to elect COBRA and 45 days to make the first premium payment, for a total of potentially 105 days after the later of: the QE, the date coverage was lost or when they received the election notice, before the initial payment is due. Subsequent COBRA premium payments are then due on a monthly basis with a 30-day grace period and under the regulations, COBRA continuation coverage may be terminated if premiums are not paid timely.

COVID-19 Twist to COBRA rules

Relief was issued (Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak) that requires group health plans to “pause” the clock for counting the days for these COBRA election and payment requirements from March 1, 2020, until 60 days after the announced end of the National Emergency or such other date announced by the Agencies in a future notification (known as the “Outbreak Period”), which remains in effect as of this writing.

The Outbreak Period is connected to the President’s National Emergency Declaration and unlike the Public Health Emergency declared by HHS, the National Emergency has no set end date. However, the statutory duration for the Outbreak Period under ERISA §518 and IRC §7508A is usually a maximum of 1 year. Therefore, unless there is additional congressional or executive action changing this statutory duration, the latest the Outbreak Period should last is February 28, 2021.

Impact on COBRA QBs Deadlines

QBs who experienced a qualifying event early during the pandemic, may have over a year from the date they lost coverage to elect coverage. 

              Example: Assume the Outbreak Period ends on February 28, 2021.

Kelsey was laid off on March 2, 2020 from Jam Master Sounds. Kelsey received a COBRA notice from the plan administrator on March 31, 2020. Under regular COBRA rules, Kelsey would have until May 30, 2020 to elect COBRA and July 14, 2020 to make her first initial payment.

However, due to the COVID-19 relief, Kelsey has until April 29, 2021 (60 days after the end of the Outbreak Period) to elect COBRA coverage, and until June 13, 2021 to pay premiums.

Similarly, QBs who experienced a qualifying event prior to the National Emergency was declared and Outbreak Period established, may also still have a right to elect and pay for COBRA.

              Example: Assume the Outbreak Period ends on February 28, 2021.

Mat was terminated from employment on January 15, 2020 from Ay Bee Cee Co. and received a COBRA election notice from the plan administrator on February 1, 2020. Under regular COBRA rules, Mat would have until April 1, 2020 to elect COBRA and May 16, 2020 to make his first initial payment.

However, due to the COVID-19 relief, Mat has until March 30, 2021 (31 days after the end of the Outbreak Period, the number of days remaining in his election period before March 1, 2020) to elect COBRA coverage, and until May 14, 2021 to pay premiums.

COBRA generally requires the initial premium to cover the premium due retroactive to the date coverage was lost for coverage to be reinstated. (i.e. the QB must pay for each month back to the loss of coverage date through the current month.) If a QB waits until the end of the Outbreak Period before electing and paying, they may owe more than a year’s worth of premiums, which may be unaffordable. If the QB pays only a portion of the premium due within the extended time period, they may have coverage for the number of months for which the premium was paid, retroactive to the date coverage was first lost.  However, they will not be eligible for additional coverage beyond the last month payment is made.

              Example: If Kelsey from the above example elects COBRA on April 1, 2021 and submits payment totaling 5 months of premiums on May 1, 2021. Kelsey’s coverage would be effective from the time she lost coverage (March 2, 2020) through the next 5 months (August 2, 2020) and all provider claims submitted during this time would be eligible to be processed according to the terms of the plan. As the rules stand today, Kelsey would not have nor is she eligible for continuation coverage beyond August 2, 2020.

Plan Administration Considerations

The COVID-19 twist to COBRA rules providing QBs an unusually long window to elect and pay for COBRA has also complicated the situation for plan administrators. However, the temporary extension relief was not intended to usurp the COBRA regulations for administering COBRA.  In non-COVID times:

  1. Coverage is provided during the election period and then retroactively revoked to the date when it otherwise would have been lost if the COBRA election is not made.
  2. Coverage during the election period is cancelled and retroactively reinstated upon timely election/payment. (If a provider asks for information regarding the COBRA beneficiary’s coverage during this election/payment period, the plan sponsor should explain that the individual is within the election/payment period and how coverage is handled during that period.)

Therefore, during the Outbreak Period whichever approach COBRA is usually administered, is acceptable during the “Outbreak Period” too.

Looking Ahead: Hopefully the DOL or IRS will provide additional guidance on handling COBRA when the Outbreak Period is over. However, until we get further guidance from the regulatory authorities, plan administrators need to consider the suspended COBRA election and payment timeframes and administer COBRA accordingly.

The PCORI Fee Is Going Up Again! Here’s Why and How Your Clients Need to Pay It

Jessica Waltman – Principal of Forward Health Consulting

The Internal Revenue Service recently announced that the Patient-Centered Outcomes Research Institute fee (PCORI fee) will rise to $2.66 per covered life for policy years and plan years that end on or after October 1, 2020.  For group health plans with policy years and plan years that ended before October 1, the rate is $2.54 per covered life.

Knowing what the fee amount will be for the coming year is essential information for any benefits broker to have filed away.  However, it’s always to know the why and how behind the requirements.  For example…

What is the PCORI Fee for Anyway?

As it turns out, the PCORI fee funds some pretty critical research that helps Americans access better quality medical care. The Patient-Centered Outcomes Research Institute (PCORI) is an independent nonprofit, nongovernmental organization in Washington, D.C.  The Affordable Care Act created it. Its mission is to improve the quality and relevance of medical evidence available to help patients, caregivers, clinicians, employers, insurers, and policymakers make better-informed health decisions. So, pretty important stuff!  The organization funds both comparative clinical effectiveness research studies and studies to create more clinical effectiveness research methods.  However, they need money to accomplish all of that.  Rather than relying on an annual federal appropriation, the ACA established funding for the PCORI through a small federal assessment on private health plans, AKA the PCORI fee.

In addition to understanding why the PCORI fee exists, there are three other critical things most brokers need to know about the PCORI fee.

  1. How to tell which group clients need to pay it directly and which do not need to worry about it;
  2. How to figure out how much the fee will be for each affected employer plan each year;
  3. How and when to pay the fee.

Who Pays?

The answer to number one is pretty straightforward.  Health insurance carriers are responsible for making payments on behalf of all fully-insured health plan participants, and self-funded plans pay the fee themselves. Clients who only offer fully-insured coverage do not need to worry about payment, other than knowing that the cost is part of their premium rate. 

All employers operating self-insured medical plans must pay the PCORI fee directly. Of course, there are a few nuances involved.  The IRS takes the term “self-funded plan” very literally, and so some group coverage offerings that an employer might not think of as “self-funded” really are for PCORI fee purposes. Plans that must pay their fee directly include:

  • Traditional self-funded major medical plans
  • Level-funded plans
  • Health Flexible Spending Accounts (FSAs) that do not qualify as an excepted benefit plans, level-funded plans
  • Health Reimbursement Arrangements (unless they only reimburse for excepted benefit coverage not integrated with the group health plan).  If an HRA integrates with a fully-insured major medical plan, the employer must still pay the HRA’s fee.

How Much?

The second thing brokers need to know about the PCORI fee is how to figure out how much it will be for each affected employer plan each year.  A simple multiplication problem using the total number of people covered by each group plan, not just the number of covered employees, determines the tax amount.  But how do you count the number of people covered by the group plan?  As it turns out, the federal government has four different counting methods available for affected employer plans. Group plan sponsors can pick the one that works best for them.  The choices are:

  1. Actual Count Method: A plan sponsor may determine the average number of lives covered under a plan for a plan year by adding the totals of lives covered for each day of the plan year and dividing that total by the total number of days in the plan year.
  • Snapshot Method: A plan sponsor may determine the average number of lives covered for a plan year based on the total number of lives covered on one date (or more dates if an equal number of dates is used in each quarter) during the first, second or third month of each quarter, and dividing that total by the number of dates on which the employer bases the count.
  • Snapshot Factor Method: The snapshot factor count method is very similar to the snapshot formula. However, instead of looking at the exact number of people covered by the plan on specific dates of the year, the plan sponsor reviews how many people chose self-only coverage versus other coverage on the selected dates. Then they use a factor of 2.35 to multiply for each employee who has selected anything other than single coverage.
  • Form 5500 Method: An eligible plan sponsor may determine the average number of lives covered under a plan for a plan year based on the number of participants reported on the Form 5500, Annual Return/Report of Employee Benefit Plan, or the Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan.

How and when do you pay? Finally, knowing how actually to pay the @#$! fee is pretty critical! Applicable employer plan sponsors must document their calculation and pay their fee using IRS Form 720 by July 31, 2021.  For self-funded plans, paying the tax is the employer’s direct responsibility, rather than a task completed by a third-party administrator.  Form 720 is the IRS’s general quarterly excise tax filing form, so if an affected business doesn’t need to pay other excise taxes, it will file Form 720 in the second quarter for PCORI fee purposes only.  Brokers and employers with detailed questions about the PCORI fee will likely find the IRS’s PCORI fee frequently asked questions (FAQ) page very helpful.  You also can always reach out to us at engage@mzqconsulting.com if you need any help or want to run something by us!

What Can We Expect in Terms of Federal Regulations Now That Election Season is Almost Over?

Jessica Waltman – Principal of Forward Health Consulting

Since nothing is normal in 2020, Election Day decided to stretch itself out over two seasons this year. We won’t know which political party will control the United States Senate until January. Still, as states move to certify their election results, it is clear that former Vice President Joseph R. Biden is the President-Elect of the United States, and that Senator Kamala Harris is the Vice President-Elect.  

Whether the Democratic party controls Congress, or if we continue to have a divided government, will be a crucial consideration for the incoming Biden Administration. It will help drive the legislative agenda over the next two years. However, as I’ve said before, one of the executive branch’s most significant powers is crafting, implementing, and enforcing regulations. Federal rules are where the details live – you know, the little things that make all the difference in health insurance benefits compliance. So, as the Trump Administration begins the process of wrapping up its work, and the Biden Administration starts its transition, it’s a good idea to review the regulatory agenda.

Items That Could Be Finalized by The Trump Administration

Every President rushes to get as many pieces of regulatory guidance out the door as possible before they pack up and leave 1600 Pennsylvania Avenue. President Trump is no exception.  A few weeks ago, he finalized health plan transparency rules that will have an enormous impact on our industry for years to come.  Some additional regulations waiting for release are new requirements for grandfathered health plans and two rules to create safe harbors for employer-sponsored wellness programs.  Another measure that could be finalized, and would be very significant for NAHU members and their clients, is a proposed rule to add direct primary care and health care sharing ministry membership as IRC 213(d) qualified medical expenses. If the Trump Administration acts on any of these measures over the next few weeks, they will have the force of law right away. For each one finalized, there will be many compliance details to consider for the year ahead.

President Trump also seems geared to release significant new health care regulatory proposals over the next few weeks.  One would tie Medicare Part B prescription drug prices to the international drug price index. The other two are the most significant annual catch-all rules outlining requirements for Medicare and all private health insurance plans for the 2022 plan year.  If any of these measures are published soon, then the Trump Administration will need to allow for a public comment period. Comment periods are generally at least 30 days long, and anything shorter needs legal justification. After that, they need to review all comments received and publish a final revised measure in the Federal Register.  It would be a tough job to turn any one of these significant regulations around in the next 60 days, let alone all three. Still, it could be a way for President Trump to leave his final mark on our country’s health care policy.  

A valid question about regulations issued by any outgoing administration is how easily can a new President undo the work of the old?  It’s possible, but it’s not like the Chief Justice gives the new President a magic eraser during the inauguration. Any President can act to revise or rescind existing regulations, but they have to go through formal regulatory channels first.  The process includes conducting and legal research to justify the need for changing current rules, proposing a new measure, exposing it for public comment and possibly public hearing, reviewing those comments, and finally releasing a final rule.  This process typically takes months, if not a year or more to complete. 

Another way to strike down a rule is through legislative action. Congressional Review Act gives Congress the power to nullify a regulation once finalized, provided they act within legislative 60 days of its release.  If Congress completes less than 60 days of work before adjourning, the regulation’s time clock resets, and the new Congress gets 60 more business days to review and vote.  Since the CRA only allows Congress to strike a rule entirely and not revise it, they rarely use this power. There is no reason to believe that the 117th Congress will act differently from its predecessors when it comes to axing federal regulations.

Regulatory Priorities of The Biden Administration

President-elect Biden’s team has intimated that he, like his predecessor, plans to issue many Executive Orders on his first day of office.  The list seems to include a few health care issues, particularly those related to COVID-19 and public health response and resources.  It’s essential to keep in mind that executive orders do not generally have the force of law.  Instead, they operate as a to-do list of sorts for the federal agencies under the President’s control.  They typically instruct an agency or department to take action on a particular topic by a specific deadline, either through the formal regulatory process (which does result in requirements with the force of law) or through the development of sub-regulatory guidance, programs, or resources.

Expect the Biden Administration to take quick and direct regulatory action to change the Trump Administration’s regulations regarding the Section 1557 nondiscrimination requirements of the Affordable Care Act (ACA).  These rules were affected by the Supreme Court of the United States’ decision in Bostock v. Clayton County, and several federal court orders are currently blocking their full implementation.  Also, Trump Administration rules requiring separate billing for the portion of individual market premiums attributable to coverage of abortion services, which is causing an administrative nightmare for many carriers and enrollees are likely to go by the wayside.  Other potential targets include the Trump Administration rules on short-term limited duration health insurance and association health plans.  Biden Administration will also probably take steps to improve the promotion of the ACA health insurance marketplace-based coverage, perhaps by restoring funding for marketing efforts and lengthening or changing the open enrollment window. Another priority will be prescription drug price reduction measures, mainly through Medicare.

The Biden Administration will probably keep up the Trump Administration’s efforts to promote value-based care and access to telehealth services.  Both Administrations also oppose the practice of surprise balance billing.  While the Trump Administration’s recent regulations related to health plan and hospital pricing transparency may see some tweaks and implementation delays, it’s unlikely they will go away for good. The next few months promise to be exciting from a health policy and compliance perspective.  As soon as any of these measures are finalized, check back to this space for details and analysis.

Major New COVID-19 and Transparency Regulations Issued Days Before the Election

Jennifer Spiegel Berman, JD, MBA – CEO of MZQ Consulting

Jessica Waltman – Principal of Forward Health Consulting

Two substantial new sets of final regulations were released on October 30, 2020, just days before the election.  The first clarifies and refines certain federal policies in response to COVID-19.  The second is the long-awaited transparency rules for health plans

COVID-19 Testing Coverage and Transparency Requirements

Last Spring’s COVID-relief legislation requires all health plans to provide COVID-19 diagnostic testing without imposing any cost-sharing requirements for the duration of the current public health emergency.  Under these rules, plans may not charge deductibles, copayments or coinsurance for such testing or related services.  Plans are also prohibited from imposing prior authorization or other medical management requirements on testing and related services.  For this purpose, “related services” include those provided during urgent care center visits, in-person and telehealth office visits, and emergency room visits that result in COVID-19 testing being ordered.

As a reminder, for these purposes, COVID-19 testing includes all in vitro diagnostic tests—a category that encompasses both “diagnostic” and “antibody” testing and incorporates molecular, antigen, and serological testing.  More information from the FDA on the distinctions between these types of tests is available here.

In adding clarity to these rules, the new regulations require providers to make the “cash price” of their testing services readily available.  This “cash price,” which is meant to be the amount an individual would pay for the services if they paid the provider directly (i.e., not through an insurance plan), must be posted on the providers website.  Further, the cash price must be made available in an easily accessible manner, meaning that it must be free of charge, available without a user account or password, and available without having to provide personally identifiable information.  Access to this information should prove helpful for health plans seeking to ensure they are charged reasonably for such tests.  This rule is also particularly interesting in light of the final regulations on transparency for health plans discussed below.

COVID-19 Vaccines as Preventive Care

Congress also included provisions in the CARES Act requiring plans to pay for qualifying coronavirus preventive services without cost sharing.  This rule expands upon the ACA’s general requirement that preventive care be paid for on a first dollar basis, but with several key distinctions. 

One key distinction is that this coverage must be provided free-of-charge by all plans regardless of whether an in-network provider is used.  In this case, if an out-of-network provider is used the plan must reimburse that provider “in an amount that is reasonable, as determined in comparison to prevailing market rates for such service.”

Another distinction is that, while still relying on the recommendations of the United States Preventive Services Taskforce and the Advisory Committee on Immunization Practices to define “preventive care,” it is not necessary for a COVID-19 vaccination to be classified as appropriate for “routine use” to meet the definition of “qualifying coronavirus preventive services.”  Specifically, a COVID-19 vaccine will be able to qualify as soon as it becomes available to the public even if it is not listed for routine use by the public.

The third key distinction is timing.  Generally, plans are required to cover newly added preventive services by the beginning of the second plan year following the change being announced.  In this case, plans will be required to begin providing first-dollar coverage within 15 business days of a formal recommendation being issued.  This means that carriers and third-party administrators will need to act FAST to update their claims systems.

It is also worth noting the special rules for qualifying coronavirus preventive services only apply during the public health emergency.  However, even after the Secretary of Health and Human Services declares the public health emergency to be over, it is likely that COVID-19 vaccinations will be covered under the ACA’s preventive service rules.  The only change being that the special rules described above will no longer be applicable.  

Final Health Plan Transparency Regulations

Last year, President Trump issued an Executive Order urging his Administration to develop regulations to create greater healthcare price transparency for consumers. First came a price disclosure regulation aimed at hospitals, and then this new final regulation, creates new transparency requirements for health insurance issuers and group health plan sponsors.  The measure requires almost all non-grandfathered health insurance plans, as well as employers that sponsor group health plans, to ensure the disclosure of significant medical care price information.

The requirements can be broken down into three parts by implementation date.

  1. By January 1, 2022, almost all non-grandfathered health insurance plans, as well as employers that sponsor group health plans must publicly disclose in-network provider negotiated rates, historical out-of-network allowed amounts, and drug pricing information through three machine-readable files posted on an internet website.  These data files, which must be kept current, will allow the public to have access to broad medical care price information. The hope is that this data will be used to understand health care pricing and potentially dampen the rise in health care spending.
  2. Beginning with plan or policy years starting on or after January 1, 2023, almost all non-grandfathered health plan issuers and employer plan sponsors will have to make sure that plan participants can access personalized cost estimates for 500 designated shoppable services before they incur a claim.  The hope is that the availability of such information will inspire responsible consumerism.  All information must be made available on an internet website or, if requested, in paper form. The data health insurance issuers and group health plan sponsors must disclose includes:
  3. Estimated cost-sharing liability for specific procedures and conditions;
  4. The amount of cost-sharing liability a participant has incurred to date relative to their maximum out-of-pocket limit and any deductible;
  5. The negotiated rate the carrier or group plan has agreed to pay an in-network provider for the specific covered service the plan participant is considering;
  6. The maximum reimbursement amount that the carrier or group plan would pay to an out-of-network provider for a particular service;
  7. An explanation of any prerequisite for the person’s specific coverage request, such as step therapy or a preauthorization; and
  8. A notice warning about balance-billing to explain that the plan is merely providing personalized estimates, and actual costs may vary.
  9. By the start of plan or policy years beginning on or after January 1, 2024, virtually all non-grandfathered health plan issuers and employer plan sponsors will have to make the information listed above available to plan participants via an Internet-based search tool and on paper if requested for ALL covered items and services.

It is important to note that even though companies that offer health insurance coverage to employees generally will not have the ability to implement these transparency requirements independently, the rule does assign them direct liability. Employers that offer fully-insured group coverage can transfer liability to their health insurance issuer, although that transfer of risk will likely impact premiums.  Employers that offer self-funded and level-funded plans may contract with their third-party administrator or other vendor to fulfill their transparency obligations.  These employer groups can ask for indemnification via their vendor contracts, but still retain ultimate compliance responsibility. In addition to the transparency requirements, the rule gives fully-insured group and individual health plans credit in their medical loss ratio calculations for savings they share with enrollees that result from the enrollees shopping for, and receiving care from, lower-cost, higher-value providers.

What I Know on October 28, 2020

Jennifer Spiegel Berman, JD, MBA – CEO of MZQ Consulting

It is my honor to be writing this inaugural post of the newly revamped NAHU blog: Compliance Now!  The blog’s mission is to provide our members with the compliance information they need to know, when they need to know it.

To that end, I’m acutely aware that this post will be released less than a week before Election Day 2020.  This begs the question: What CAN we know at a moment like this?  We know that fear and uncertainty reign—both relative to the coronavirus pandemic that will define our times and the impact that the election results will have on both our daily lives and our industry’s future.  What then can I share with my NAHU community?  What do we all need to know now?

It strikes me that the most valuable answer to that question is to share what we do, in fact, know (or at least have a reasoned and robust basis to believe) about what comes next.  So, without further ado, and in no particular order, here goes:

  • We’ll be hearing much more about surprise billing.  Formerly known as “balance billing,” surprise billing is on both parties’ agendas.  In fact, if asked in December 2019, I would have bet money that 2020 would have been the year we saw federal legislation on the topic.   I also have strong recollections of the same being discussed at CapCon 2020.  Global chaos clearly intervened, but it only delayed action on this issue—it didn’t derail it.

What then you may ask me will surprise billing legislation look like?  In theory, such rules will limit patient-level financial exposure in scenarios when they visit out-of-network providers.  There is clear bipartisan support for this idea, but as always, details matter, and the details here remain far from settled.  What does “effective access” to a network look like?  How are “appropriate prices” set? What about plan designs like reference-based pricing that aren’t based on a network?  I know these are all questions we will be discussing more in the weeks and months to come.  As for the answers—well, unfortunately, I shattered by crystal ball last March in a fit of rage and malcontent—so, your guess is as good as mine.

  • All eyes will be on the Supreme Court next summer.  So much attention has been paid to the Supreme Court in recent weeks that it’s easy to forget that the Court generally makes the news each year in late June.   This is when, as each term ends, the Court issues its decisions on many of the most important issues of our time. 

While Court watchers are focused on the oral arguments taking place on November 10, it’s not until next June when we will almost certainly get a decision from the Court in the case of California v. Texas.  This challenge to the constitutionality of the ACA’s individual mandate, and, more significantly, whether the rest of the ACA can survive if/when the individual mandate falls.  More on what I THINK could happen is available here

As shocking as this may sound, to me, California v. Texas is not the most interesting health benefits case before the Supreme Court this term.  I’m actually much more focused on Rutledge v. Pharmaceutical Care Management Association.  A quick Google search will reveal that the case is about whether the state of Arkansas can regulate pharmacy benefits managers.  Okay, you are thinking—Jen, that’s kind of interesting, but why on earth is it more interesting than the ACA’s future? 

The answer is two-fold: (1) I think reports of the ACA’s forthcoming demise at the hands of the Court are overblown, and (2)to me, Rutledge is about much more than PBM regulation; it is also about the future of the ERISA preemption doctrine.  There is a very real possibility that the Rutledge ruling could change much of what we know to be true about the rules governing self-funded plans.

  • Change will be incremental.  Barring an alien space invasion (which I honestly can’t rule out at this point), on January 20, 2021, either Donald Trump or Joe Biden will be inaugurated President of the United States for a 4-year term.  As powerful as the American presidency is, our presidents can’t accomplish all of their policy goals on their own. 

Readers may recall President Trump’s first executive order, issued on his Inauguration Day, declaring “it is the policy of my Administration to seek the prompt repeal of the Patient Protection and Affordable Care Act.”  It goes on to direct the executive branch to use all its powers to (1) waive, defer, grant exemptions from, and delay fiscal burdens related to the act, (2) provide greater flexibility to the States, and (3) encourage the development of a free and open market in interstate commerce for health insurance.

Almost four years later, incremental changes have been made, but the ACA remains largely intact.  Why?  Short answer:  John McCain.  Longer answer:  the limitations of the American presidency do not vest legislative authority in our executive leadership.  Said differently, presidents can’t act unilaterally.  Our checks and balances system is designed to limit each branch of the federal government’s authority.  We could argue the efficacy of this system—both if it’s the right way to run a nation and if it even works—but that’s not the point I’m seeking to make.  My point is, very little happens very quickly in Washington, DC.

  • Compliance burdens won’t go away.  Plan documents will need to be updated for benefit changes.  Applicable large employers will need to complete their ACA reporting.  Form 5500s will need to be filed.  Annual notices and disclosures will need to be distributed. Etcetera, etcetera, etcetera…

I’m sorry.  I really am.  I know it’s not easy. 

I’m also proud to count myself among a legion of NAHU members that have substantial expertise in these areas.  First among them are the members of the Compliance Corner committee and Legislative Council.  You’ll be surprised by just how willing your colleagues are to help.  So, when in doubt—phone a friend!

So, if you just finished reading these excellent points on things that I “know,” you’ve probably noticed a theme.  Even on these points, there is as much or more uncertainty as there is certainty.  As disconcerting as that is, it’s also a bit exciting to me (GEEK ALERT—I know).  It’s more than just my passion for interpreting law at play—it’s also the opportunity in the air.  It is both easy and natural to fear change.  But, that’s where we, as an industry, have the chance to truly shine.  

As brokers and advisors our job is to help our clients traverse the choppy waters of a changing world.  As long as there is change, we can’t become obsolete.[1]  Instead, we are all likely to be busier than usual.  We’ll have a lot to learn and a lot to share.  Rules and strategies will shift.  And as they do, this blog, and our association as a whole, will be here every step of the way, helping to make sure that you know what you need to know when you need to know it.  

DO YOU HAVE SOMETHING TO SHARE?  A key goal for Compliance Now is to highlight the many brilliant voices in our organization.  Do you have something to share with our membership?  A unique take on a compliance issue?  A blistering (but well thought out and cordial) critique of my opinions?  I KNOW many of you don’t share my perspective, and I look forward to a lively and respectful exchange of ideas.  So, we’d LOVE to feature YOU on Compliance Now!  Please fill out the form in the “Contact Us” section of our blog, or send inquiries and/or submissions to compliancenow@nahu.org

[1] If you are now rolling your eyes and thinking—Jen, you are not acknowledging what might happen if the Democrats pass single-payer—you are right.  I’m not.  At least not today.  There are lots of good reasons that I don’t believe this is going to happen.  I promise to share them in a future post.  Key among them is that we, the NAHU community, true experts in this space, will fight this with effective advocacy and truth.  Am I being Pollyannaish?  Maybe.  But, if you’ll indulge me, I promise to be first in line to the fight.

Data, Information, and Healthcare Price Transparency

Submitted by Ed Oleksiak, Senior Vice President of Employee Benefits for Holmes Murphy. Used with permission from Holmes Murphy.

Despite an election year’s numbing impact on regulatory and legislative healthcare change, one issue that could move forward in 2020 is “healthcare price transparency.”

On June 24, 2019, President Trump issued Executive Order 13877 directing federal agencies to increase healthcare price and quality transparency. The order directs federal agencies to require hospital disclosure of negotiated rates in a form “understandable” by patients. The definition of “understandable” could depend on whether you graduated from medical school or are a 19-year-old fresh out of high school.

On November 15, 2019, the Centers for Medicare & Medicaid Services (CMS) issued the Hospital Transparency Final Rule. The final rule requires hospitals to provide patients with clear, accessible information about their “standard charges” through the use of standardized data elements. You could probably have a multi-day debate about what is a “standard charge.”

Finally, in November 2019, the Transparency in Coverage Proposed Rules were released, which will allow consumers to shop and compare costs of health insurance (including providing paper copies within two business days without charging an additional fee). Can you imagine telling Amazon they have to provide purchasers with a paper copy of the sales slip with each transaction? If that was the case, I doubt we would have had $258 billion or 5 percent of all retails sales in 2018 via Amazon.


While the concept of healthcare price transparency is a noble concept (and one I agree with), we have to make sure we provide consumers with information and not just data.

Let me explain. Early in my career as a “mainframe” computer programmer (long before laptops, iPads, and cell phones), my boss at the time taught me a very valuable lesson. Rather than simply taking the manual paper version of a process and automating it with a computer, let’s look at the process, improve it, and make it more usable for the end-user. We accomplished the improvements by asking the end-user what they could use to do their job more accurately and faster.

A great example would be the early versions of street mapping software. The early software simply put MAPSCO online. No value was added other than turning a paper book with maps into an online version you could print out, thus providing data but not really information.

Fast forward to today where we have Waze, which allows drivers to know how long it will take them to get to their location, provides faster alternate routes, and notifies them of accidents and radar traps. That is “information.”


My fear in our rush to healthcare price transparency is that we will provide consumers with data and not information. Technology can (given time and the opportunity to ask the consumer what they want) provide the consumer with information that will help them make informed healthcare purchasing decisions.

Providing data dumps of healthcare prices in the name of transparency will not work and will only delay the development of real consumer tools that provide information. Transparency may be required to lift the veil off of pricing so that app-based tools can be created, or we use tools like SimplePay Health that could transform the healthcare purchasing experience and allow consumers to make educated decisions for themselves and their loved ones. I hope transparency results in consumer information and not just data.

What is Medical Loss Ratio and How Do You Handle MLR Rebates?

Submitted by Annette Bechtold, Senior Vice President of Regulatory Affairs and Reform Initiatives for OneDigital. Used with permission from OneDigital.

The Medical Loss Ratio, or MLR, is the percentage of premium dollars received by a health insurance carrier that is spent on medical claims and quality improvement.

The Affordable Care Act (ACA) requires health insurance carriers to submit data to the U.S. Department of Health & Human Services (HHS) each year detailing premiums received and how those premium dollars are spent. The ACA requires carriers to maintain at least an 80% MLR for small group (1-50 employees on average in prior calendar year and at least two employees on first day of plan year, though a few states define small group as 1-100 employees) or 85% MLR for large group. If a carrier maintains a lower MLR, it must issue a premium rebate to policyholders by no later than September 30 each year.

If HHS notifies a carrier that its MLR is too low, the carrier must issue an MLR rebate to whomever holds the insurance policy. In most cases, the employer sponsor of a group health plan is the policyholder, so this InfoBrief will focus on employer plan sponsors and the strict ACA rules regarding what they can do with an MLR rebate.

What does MLR mean for Plan Sponsors?

Plan sponsors first must determine how much, if any, of the rebate amount, is considered “plan assets” under the Employee Retirement Income Security Act of 1974 (ERISA). Typically, the percentage of the MLR rebate, considered to be plan assets, is proportionate to the employee’s percentage of overall premium contributions. Thus, for example, if an employer pays 100% of premium cost, none of the rebate is plan assets, and the employer may retain the full amount. If participants pay all of the premium cost, all of the rebate is plan assets and must be used for the benefit of the participants. If, for example, an employer pays 70% of premiums and employees contribute 30%, 30% of the MLR rebate is plan assets.

What does ERISA require?

Determining how much of a rebate is plan assets is important because ERISA requires plan sponsors to use any MLR rebate amount found to be plan assets for the exclusive benefit of plan participants and beneficiaries within three months of receiving an MLR rebate. Plan sponsors must decide whether they will use these plan assets for the benefit of current participants or current as well as prior year participants (i.e., participants who actually contributed premiums for coverage subject to the MLR rebate but who are no longer employed). U.S. Department of Labor (DOL) Technical Release 2011-04 permits plan sponsors to choose to provide rebated plan assets solely to current participants if the costs of paying former participants is equal to or greater than the rebate amount due to them.

What does the DOL require of MLR rebates?

The DOL states that plan sponsors must use a reasonable and objective method to allocate any MLR rebate amounts they distribute in cash to all affected individuals and provides these three safe harbors:

  • Evenly to all covered participants;
  • Based on each participant’s actual contributions; or
  • In a way that reasonably reflects each participant’s contributions.

Plan sponsors have options aside from making cash payments directly to current and former participants. Plan sponsors may weigh all facts and circumstances, including:

  • Cost of distributing payments;
  • Size of the rebate amounts due (i.e., de minimis* amounts); and/or
  • Negative tax consequences (e.g., amounts are taxable to fully insured plan participants who paid premiums contributions on a pre-tax basis).

If, based on the foregoing factors, an employer decides it will not make cash payments to current or former participants, an employer may use the assets to reduce future premium contributions for current participants, or to provide general benefit enhancements for current plan participants.

How is de minimis determined?

One of the permissible reasons for an employer not to make cash distributions to current and former participants is if the amounts due to each such participant is de minimis. Plan sponsors have leeway to determine whether rebate payments would be de minimis and should consider how much each participant would get after taxes, the costs of producing rebate checks and the costs of mailing rebates. There are no hard and fast rules on what amounts are de minimis, but a fair, objective and reasonable analysis will consider the foregoing factors when making this determination. Additionally, plan sponsors should document any decisions relating to determining de minimis amounts and should be sure to apply these amounts either to offset future premium payments or to add enhanced benefits to the plan.


Prudence suggests that plan sponsors should determine their general strategy for handling MLR rebates and draft it into their group health plan documents and SPDs. The overall strategy should address how plan assets will be calculated, how rebates will be distributed, whether any rebates will go to cover administrative expenses and how the sponsor will determine de minimis amounts and what will be done with those amounts.

Click here to download the MLR InfoBrief prepared by OneDigital.

IRS Expands List of Preventive Care for HSA Participants to Include Certain Care for Chronic Conditions

Today the IRS added care for a range of chronic conditions to the list of preventive care benefits that may be provided by a HSA compatible high deductible health plans (HDHP). Notice 2019-45, lists the new types of medical care that may be treated as preventive care for this purpose.

Individuals covered by an HSA compatible HDHP generally may establish and deduct contributions to a Health Savings Account (HSA) as long as they have no disqualifying health coverage or not enrolled into Medicare. To qualify as a high deductible health plan, an HDHP generally may not provide benefits for any year until the Federal (not health plan) minimum deductible for that year is satisfied.

The IRS together with the Department of Health and Human Services, have determined that certain medical care services received and items purchased, including prescription drugs, for certain chronic conditions should be classified as preventive care.

Notice 2019-45 provides that the following services and items for individuals with the specified chronic conditions listed are treated as preventive care.

Of note is that male contraceptives will continue NOT to be considered preventive. We mention this as some states have taken the stance that they are. See page 2 of the notice which states, “the notice provides that a health plan that provides benefits for male sterilization or male contraceptives before satisfying the minimum deductible for an HDHP under section 223(c)(2)(A) does not constitute an HDHP, regardless of whether the coverage of such benefits is required by state law.”

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