New Guidance on the Federal Surprise Billing Process

By: Lee Susan Spiegel

The new federal prohibition on surprise billing first went into effect on January 1, 2022 (and applies to plan years beginning on or after that date).  The new rules prohibit providers from charging “out-of-network” rates for emergency care, air ambulance services, and all care by an “out-of-network” provider in an “in-network” facility.  Any differences between what a provider charges in these circumstances and what a plan is willing to pay must be resolved between the provider and the health plan.  If payment details cannot be settled on within 30 days of billing, either party may start the independent dispute resolution (IDR) process that utilizes a web-based portal maintained by the federal government.  A new FAQ  published last week by the Departments of Health and Human Services, Labor, and Treasury details how that process will work. Included below are several key points from the FAQs.

  • Plans and issuers seeking to use the federal IDR process to resolve a surprise bill are required to start a 30-day open negotiation period before initiating the IDR through the federal portal.
  • The federal portal for IDR requests was launched on January 1, 2022.  As of this writing, it is available for uninsured (or self-pay) individuals.  Over the next few weeks, the system will go “live” for plans, issuers, providers, facilities, and air ambulance services. Certified IDR entities will also be able to use the portal at that time.
  • Model notices are now available for both payers and providers to use during the fee negotiation process.  Almost all actions by the IDR entity and parties need to be completed through the federal IDR portal.
  • The initial list of certified IDR entities is currently available online.  The list will be updated on an ongoing basis, and newly certified entities will be added as approved.
  • The initiating party selects a certified IDR entity from the list on the federal IDR portal.  The non-initiating party may then accept or reject the proposed certified IDR entity.  Federal officials will randomly select a certified IDR entity when the parties cannot agree.
  • There are two fee types related to the IDR process.  An administrative fee of $50 (for 2022) that each participating party must pay, and the IDR entity’s arbitration fee (which must be paid by the losing party).  An IDR entity is permitted to charge between $200 to $500 for a single case, and can charge between $268 to $670 for batched determinations.  Federal approval is needed if an IDR entity wants to charge more for a particular case. 
  • Multiple claims can be batched together, but each included claim must meet the criteria for claims batching.  Importantly, claims from different plans may not be batched together.  Thus, for example, a TPA may not include claims related to different self-funded medical plans in a “batch” of claims.
  • Each party must pay the IDR entity fees upfront.  The fee will be refunded to the prevailing party within 30 business days after the settling of the dispute.  When determinations are batched, the party with the lowest number of findings in its favor is determined to be the non-prevailing party.  The certified IDR entity fee will be split evenly if each party prevails in an equal number of determinations within a batched case.
  • If a settlement is reached by the parties after a certified IDR entity has been selected and started its review, each party must pay half of the IDR entity’s fee (unless the parties agree otherwise).  The administrative fee paid by the parties will not be refunded.
  • The federal IDR process is a document-based review.  Both parties will submit all required information and supporting documents to their IDR entity, and the arbitrator will make their determination based on those materials alone.
  • The information that must be submitted to the IDR entity includes the final offer of payment expressed as both a dollar amount and a percentage of the qualifying payment amount (QPA).  The QPA for the applicable year for the same/similar items or services must also be submitted.  Providers or facilities need to include the size of their practice or facility, their specialty, and their coverage area.  Plans and issuers must include the coverage area of the plan or issuer, the relevant geographic region for purposes of the QPA, and whether the coverage is fully insured or self-funded.
  • Certified IDR entities have 30 business days after selection to settle the dispute.  The external review process for coverage disputes between individuals and plans or issuers remains in place.  The federal IDR process involves disputes regarding payment amounts between providers, facilities, or providers of air ambulance services and plans or issuers.  No coverage determinations are made by IDR entities.

Fully insured groups will generally rely on their health insurance carrier to handle surprise billing issues. It is important to review all contracts to ensure this division of responsibility is reflected. Self-funded group plans should develop parameters with their third-party administrators regarding the negotiation process, a strategy for proposed fee payments, and how an IDR claim is to be handled. Groups with January 1 plan years are beginning to see affected claims. These details should be resolved soon and likely need to be reflected in an amendment to the group’s administrative services agreement.

Additional Guidance Issued on OTC COVID-19 Test Mandate

By: Jessica Waltman, Principal, Forward Health Consulting

On February 4, 2022, additional guidance was issued on the federal mandate requiring health plans to provide over-the-counter (OTC) COVID-19 tests at no cost to participants.

As we have previously shared, plans are allowed to limit the total amount reimbursable to participants for out-of-network tests to $12/test—but, only if the plans meet the requirements of the “direct coverage program” safe harbor.  This new guidance clarifies/adds the following with respect to that safe harbor:

  • The determination of whether a plan provides “adequate access” to tests through its direct coverage program is determined based on facts and circumstances.  In any case, meeting this standard requires that a plan must have a way to procure tests in-person and at least one method to receive tests by mail.

Examples of permissible distribution outlets include: (1) a plan’s pharmacy network, (2) non-pharmacy retailers (including through the distribution of coupons that can be used to pay for tests at the point of sale), and/or (3) alternative distribution sites (such as a drive-through or walk-up site).

The mail order direct coverage option can allow for orders to be placed online and/or via telephone.  For this option, plans may not charge participants for shipping and handling—however, if the safe harbor is met, plans do not have to reimburse costs for shipping and handling when a participant purchases a test on their own and seeks reimbursement.

  • The plan must notify participants that the direct coverage is available.  This notice should include key information and instructions on how to get the tests without making any upfront payments.
  • Plans are not required to make all brands of OTC COVID-19 tests available through the direct coverage program.  However, plans are still required to reimburse participants for any approved OTC COVID-19 test if a participant elects to use the reimbursement option instead of the direct coverage program.
  • A plan will not be out of compliance with the safe harbor if tests are temporarily unavailable through their direct coverage program due to a supply shortage.

The new guidance also clarifies that:

  • To help combat fraud and abuse, plans may disallow reimbursement of tests that were purchased: (1) from a private individual via an in-person or online sale, or (2) from a seller that uses an online auction or resale marketplace.  If a plan elects to put such restrictions in place, it must notify participants of the types of purchases that are not reimbursable and what type of documentation will be required for reimbursement.  Reasonable documentation could include proof of purchase that identifies the seller, such as a UPC code or other serial number, an original receipt, etc.  However, plans may not require multiple documents or implement numerous steps in a manner that unduly delays access to reimbursement.
  • The OTC COVID-19 test rules do not apply to tests that use a self-collected sample but require processing by a laboratory or other health care provider to return results.  However, under preexisting rules, these tests must be covered without cost-sharing and medical management requirements if ordered by an attending health care provider.
  • OTC COVID-19 tests are considered medical expenses and therefore, if not otherwise paid for by a health plan, would generally be reimbursable through a health flexible spending account, health reimbursement account, or health savings account.  The guidance suggests that plan sponsors may wish to remind participants not to seek reimbursement from one of these account-based plans for tests paid for or reimbursed through their medical plan, and not to use a debit card for one of these accounts to purchase tests they wish to have paid for by their medical plan.  If a test is mistakenly paid for “twice” in this way, the participant should contact the health FSA or HRA administrator regarding correction procedures.  If HSA funds are involved, the individual must include the distribution in gross income or repay the distribution to the HSA.

Overall, this new guidance provides helpful clarification to plan sponsors and their service providers as they work quickly to fully implement the new rules.  Our team will continue to monitor for any additional developments.

OSHA Vaccine Mandate for Large Employers is Not Dead Yet

by: Jessica Waltman, Principal, Forward Health Consulting

On January 25, 2022, the Occupational Safety and Health Administration (OHSA) announced that they are withdrawing the Vaccination and Testing Emergency Temporary Standard (ETS) that was adopted in November 2021, effective immediately. However, OSHA specifically notes that they are exclusively withdrawing the policy as an “enforceable emergency temporary standard;” they are not withdrawing it as a proposed rule. This means that OSHA is still trying to make the vaccination and testing mandate into law, they are just using a more formal process that, while slower, is more likely to survive legal scrutiny.

This announcement does not have any direct practical impact currently because the Supreme Court blocked enforcement of the ETS on January 13, 2022.

The OSHA withdrawal also has no impact on the federal government’s vaccine mandate for employees at certain health care facilities that receive federal funding. As a reminder, the Supreme Court voted to allow the healthcare worker vaccination requirement to continue while ongoing legal challenges work their way through the lower federal courts.

DOL FAQs Address Coverage for Colonoscopies and Birth Control

By: Jessica Waltman, Principal, Forward Health Consulting

The ACA requires non-grandfathered health plans to pay for “preventive care” on a first-dollar basis, meaning that no copays, coinsurance, or deductibles can be charged for certain services defined as “preventive” under these rules.  In the same recent FAQs requiring health plans to pay for the cost of over-the-counter COVID-19 testing, the DOL also provided additional guidance on this rule as it relates to colorectal cancer screening and contraceptive coverage.

Colorectal Cancer Screening    

The United States Preventive Service Task Force (“USPSTF”) recommendations have historically encouraged colorectal cancer screening for adults ages 50-75.  That recommendation was shifted by five years to cover ages 45-75 in May 2021.  Therefore, effective for plan years beginning on or after May 31, 2022, colorectal cancer screening needs to be provided regularly for adults ages 45-75.

Under these rules, if a colonoscopy is performed for screening purposes, plan participants cannot be billed for items and services that are integral to the procedure, including:

  • Required specialist consultation prior to the screening procedure;
  • Bowel preparation medications prescribed for the screening procedure;
  • Anesthesia services performed in connection with a preventive colonoscopy;
  • Polyp removal performed during the screening procedure; and
  • Any pathology exam on a polyp biopsy performed as part of the screening procedure.

The FAQs also make clear that it is still “preventive” care if a participant receives a colonoscopy following a positive, non-invasive, stool-based screening test or a direct visualization test (e.g., sigmoidoscopy or CT colonography).  Thus, these colonoscopies and the associated services must also be provided at no cost to the participant.


FDA-approved female-controlled contraceptive methods are also defined as “preventive care” for purposes of these rules.  Prior guidance on this rule stated that plans must cover, without cost sharing, at least one form of contraception in each method that is identified by the FDA in its Birth Control Guide.  Later guidance provided that while “reasonable medical management” is permitted relative to birth control, plans are required to develop and utilize an easily accessible, transparent, and reasonably fast method for handling provider appeals when a provider feels a particular form of birth control is medically necessary.

The new FAQs expressly provide that certain common plan practices violate these rules.  These practices include:

  • Denying coverage for all or particular brand name contraceptives, even after the individual’s attending provider determines and communicates the brand is medically necessary;
  • Requiring individuals to fail first using numerous other services within the same method of contraception before approving the contraceptive product that is medically appropriate for the individual, as determined by the individual’s attending health care provider;
  • Requiring individuals to fail first using other services in other contraceptive methods before the plan or will approve coverage for a service or contraceptive product in the contraceptive method that is medically appropriate for the individual, as determined by the individual’s attending health care provider; and
  • Failing to provide an easily accessible, transparent, and sufficiently expedient exception process for appeals.

These FAQs serve as a warning to plans with these types of practices that they should change them as soon as possible.  This will require significant updates related to the use of formularies in determining coverage levels for birth control moving forward.  This is one more important item for plan sponsors to add to their 2022 agendas. 

Supreme Court Strikes Down Vaccine or Testing Mandate for Large Employers, Upholds Requirement for Healthcare Workplaces

By: Jessica Waltman, Forward, Principal Health Consulting

On January 13, 2022, the Supreme Court of the United States (SCOTUS) voted to block the continued enforcement of the federal Occupational Safety and Health Administration’s Emergency Temporary Standard (ETS) requiring large employers to either require all employees to obtain their COVID–19 vaccinations or submit to weekly virus testing.  In the 6-3 decision in National Federation of Independent Business v. Department of Labor, the majority of justices noted that the ongoing challenge to the ETS working its way through the federal court system is likely to succeed, since the legislation that the Biden Administration is using to justify the measure only “empowers the Secretary to set workplace safety standards, not broad public health measures… Permitting OSHA to regulate the hazards of daily life—simply because most Americans have jobs and face those same risks while on the clock—would significantly expand OSHA’s regulatory authority without clear congressional authorization.” 

Based on the ruling, businesses with more than 100 employees do not need to continue enforcing the ETS requirements at the present time.  Instead, according to SCOTUS, enforcement of the ETS will remain on hold until the resolution of the ongoing federal litigation.  However, it is important to note there is nothing in this ruling preventing employers of any size from establishing a voluntary vaccination and/or testing requirement.  If any business decides to continue to move ahead with vaccination or testing requirements, they just need to abide by existing federal privacy and non-discrimination rules.  OSHA has many FAQs available to help provide compliance guidance.

In addition to releasing their decision on the large employer mandate, SCOTUS ruled on a challenge to the federal government’s mandate that employees at health care facilities that receive federal funding (such as Medicare or Medicaid) receive their COVID–19 vaccinations unless they have a valid religious or medical exemption.  The Court voted 5-4 in the case of Biden v. Missouri to allow the healthcare worker vaccination requirement to continue while ongoing legal challenges work their way through the lower federal courts.  In the ruling, the majority notes, “Congress has authorized the Secretary to impose conditions on the receipt of Medicaid and Medicare funds that ‘the Secretary finds necessary in the interest of the health and safety of individuals who are furnished services.’ COVID–19 is a highly contagious, dangerous, and—especially for Medicare and Medicaid patients—deadly disease.  The Secretary of Health and Human Services determined that a COVID–19 vaccine mandate will substantially reduce the likelihood that healthcare workers will contract the virus and transmit it to their patients…The rule thus fits neatly within the language of the statute.”

While the short-term future for business owners and federally funded healthcare worksites is now clear regarding federal vaccination requirements, SCOTUS’ most recent actions are not the final word on either regulation.  The legal challenges to both requirements will continue in the lower courts, and depending on how they are ultimately resolved, the status of current federal vaccination requirements may change again.  We will continue to monitor developments regarding federal COVID–19 vaccination requirements and bring any additional information to you as it becomes available.

Biden Administration Announces 2023 Out-of-Pocket Limits and PCORI Fee for the Upcoming Year

By: Jennifer Berman, CEO, MZQ Consulting

The Biden Administration recently announced the new out-of-pocket (OOP) limits that will apply to group and individual health plans during the 2023 plan year, as well as the Patient-Centered Outcomes Research Institute (PCORI) Fee for plan or policy years ending on or after October 1, 2021, and before October 1, 2022.  

To comply with the ACA, non-grandfathered health plans cannot require a participant to pay more out-of-pocket during the plan year than the amounts listed below. The limits apply to cost-sharing items like copayments, deductibles, and coinsurance expenditures. Premiums and spending for non-covered services do not count towards the out-of-pocket limits. The limits for 2023, as announced by the Centers for Medicare and Medicaid Services, are listed below in comparison to the 2022 limits:

Out-of-Pocket Limits
Coverage Type20222023
Self-Only Coverage$8,700$9,100
Family Coverage$17,400$18,200

Under the ACA, the out-of-pocket limitation requirement directly applies to essential health benefits. As a reminder, essential health benefits as defined by the ACA fall within ten categories: (1) ambulatory patient services, (2) emergency services, (3) hospitalization, (4) pregnancy, maternity, and newborn care, (5) mental health and substance use disorder services, (6) prescription drugs, (7) rehabilitative and habilitative services and devices, (8) laboratory services, (9) preventative and wellness services, and (10) pediatric services, including oral and vision care.

In addition to announcing the 2023 out-of-pocket limits, the Internal Revenue Service announced through Notice 2022-04 that the PCORI fee for plan and policy years ending on or after October 1, 2021, and before October 1, 2022, will be $2.79. This is a $.13 increase from last year’s rate of $2.66, which still applies to groups with plan years ending on or after October 1, 2020, and before October 1, 2021.

The PCORI Fee was created by the ACA to fund federal clinical care effectiveness research. All health insurance issuers must pay the monthly assessment amount on a per-covered-life basis. Fully insured plans include the PCORI fee in their premiums, but all self-funded group health plans (including heath reimbursement arrangements and level-funded plans) must calculate and pay their PCORI fees directly. If a group health plan needs to report and pay their fee themselves, then they must do so by July 31st of each year using IRS Form 720.

Health Plans Must Pay 100 Percent of the Cost for Over-the-Counter COVID Testing

By: Jennifer Berman, CEO, MZQ Consulting

On January 10, the Department of Labor issued FAQs establishing new requirements for health plans to pay for over-the-counter (OTC) COVID-19 tests as preventive care. The new guidance, which applies to both fully insured and self-funded health plans, will go into effect for tests purchased on or after January 15, 2022.

The FAQs specifically require that plans cover OTC COVID-19 tests without imposing any cost-sharing, prior authorization, or other medical management requirements.  The guidance also expressly provides that these tests must be made available without an order or individualized assessment by a public health provider.  Notably, the FAQs do address several ways that plans can help limit their overall expenditures.

Reimbursement Programs

The FAQs expressly state that plans are not required to directly reimburse sellers of OTC COVID-19 tests.  Instead, a plan may require participants to submit claims for reimbursement using existing procedures.  However, the DOL “strongly encourage[s]” plans to create direct coverage programs with test retailers, so that plan participants do not need to pay upfront and seek reimbursement later.  It is important to note that plans are not permitted to limit their coverage to only tests purchased through preferred pharmacies or other specific retailers unless it meets the conditions of the Direct-to-Consumer Program safe harbor described below.  So, it may take plans a while to establish means of paying retailers for OTC tests directly, particularly with retailers that are not already part of their pharmacy network.

Direct-to-Consumer Programs Allow Plans to Limit Reimbursable Amount

If a plan creates “direct-to-consumer” programs with its pharmacy network and a direct-to-consumer shipping program that meets certain DOL requirements, then they are permitted to limit the overall amount they will pay for OTC tests from other retailers.  Specifically, if the rules outlined below are followed, a plan may limit the amount it reimburses a participant after the fact for an at-home test purchased outside of its preferred network to $12 (or the cost of the test, if lower).

For a plan’s direct-to-consumer program to legally limit reimbursement amounts for tests purchased elsewhere, the program must:

  • Not require participants to seek reimbursement post-purchase;
  • Have the systems and technology in place to process payments directly with no upfront out-of-pocket costs; and
  • Be available through an adequate number of retail locations (including both in-person and online locations).

If a plan elects to rely on this safe harbor but is unable to meet the requirements for a period of time (i.e., because of shipping delays), then the plan cannot limit the amount it reimburses participants who choose to purchase tests elsewhere during such a period.

Limits on the Number or Frequency of Tests

No limits can be placed on traditional COVID testing ordered by a health care provider.  However, plans may limit the total number of OTC COVID-19 tests available without cost-sharing to no less than eight tests per month (or 30-day period).  This limit applies separately to each participant in the plan.  So, if four family members are covered under “family coverage,” that family could be reimbursed for 32 tests per month.  Plans cannot limit tests to a smaller number over a shorter period.  For example, it would be impermissible to limit a participant to four tests over a 15-day period.

Avoiding Fraud

Plans are permitted to take reasonable steps to avoid fraud as long as they do not “create significant barriers.”  Plans are specifically prohibited from requiring individuals to submit multiple documents or go through numerous steps to receive their tests.  That said, they may require participants to certify tests are being purchased for their personal use, not for employment purposes or resale.  It is also fine for a plan to require proof of purchase (such as a UPC code or receipt) when a participant is seeking direct reimbursement.

Educational Programs

Plans may create educational programs on the effective use of COVID-19 tests, so long as these materials make it clear that the plan will pay for tests as required.

 Educational materials may include:

  • Guidance on how to access and use OTC tests and the differences between OTC tests and other available tests;
  • Quality information on OTC tests, including information about their efficacy;
  • Information on how to obtain tests directly from the plan, through designated lower-cost sellers, or through direct-to-consumer programs; and
  • Instructions on how to submit a claim for reimbursement.

Next Steps

As noted above, the new OTC COVID-19 coverage rules go into effect January 15.  Carriers and third-party administrators will be scrambling in the coming days to deploy programs that facilitate compliance with these rules.  As such, we highly recommend being on the lookout for announcements about how your specific service provider intends to meet these requirements.  We will continue to monitor this program and provide additional updates if they become available.

Good Faith Compliance Standard Announced for Broker Compensation Disclosure Requirements

By: Jennifer Berman, CEO, MZQ Consulting

Among its many new requirements for employee benefit plans, the Consolidated Appropriations Act, 2021 (CAA) created new compensation disclosure requirements related to group health plans. Specifically, the new rules require brokers and consultants anticipated to earn $1,000 or more in direct or indirect compensation related to group health plans to disclose that compensation to the plan sponsor reasonably in advance of entering into an agreement to provide that service. This requirement is designed to facilitate the plan sponsor’s compliance as a fiduciary to ensure that compensation is reasonable and that no conflicts of interest exist for plan service providers.

As explained in more detail below, the requirement is effective for contracts or arrangements entered into, extended, or renewed on or after December 27, 2021. However, before last week, the Department of Labor had not issued any guidance to assist plan service providers or plan sponsors with complying with these rules. As a result, the law went into effect with many unanswered questions from service providers and plan sponsors alike on how to comply. Acknowledging these open questions and that no regulations are forthcoming, the DOL issued Field Assistance Bulletin No. 2021-03 on December 30, 2021, announcing a new temporary enforcement policy related to these requirements. 

The new policy provides that the DOL will not exercise enforcement action against plan service providers or fiduciaries that comply with the new rules using a “good faith, reasonable interpretation of ERISA.”  In announcing this policy, the DOL expressly acknowledges that disclosures will look different for different types of compensation arrangements. However, the DOL emphasizes that disclosure must include information about indirect compensation, stating that “the Department is of the view that a significant goal of the new disclosure requirements is to enhance fee transparency, especially for service arrangements that involve payment of indirect compensation.”  The guidance also addresses the following open questions about the disclosure requirements:

Q1:    Can covered service providers “look to” the DOL’s guidance on the compensation disclosure rules for retirement plans in determining how to comply with the new rules?

           Yes, while group health plan compensation arrangements differ from retirement plan compensation arrangements, many concepts overlap. As such, the DOL’s explanations of the disclosure requirements “may be useful” in interpreting the disclosure requirements for group health plans.[1]

Q2:    Do the new disclosure requirements cover both fully insured and self-funded group health plans?

           Yes. The rules apply to all group health plans. This would include any plan subject to COBRA.

Q3:    Do the new disclosure requirements apply to “excepted benefit” plans such as limited scope dental and vision plans?

           Yes. See above.

Q4:    “Covered service providers” are defined in the statute to include providers of brokerage services and consulting services, but the law does not define these terms. Is this definition limited to service providers who are licensed as, or who market themselves as, “brokers” or “consultants”?

           No, the determination if a service provider meets the definition of a “covered service provider” depends on the facts of the situation.  A covered service provider must provide brokerage or consulting services. The statute lists examples of circumstances in which such services may be provided[2] but does not actually define the terms. The DOL will allow service providers to make their own determination as to whether they are a covered service provider so long as they determine their status reasonably and in good faith. In making this determination, service providers should keep in mind that the DOL “is of the view that a significant goal of the new disclosure requirements is to enhance fee transparency, especially for service arrangements that involve the receipt of indirect compensation.” The DOL further warns that it will question any service provider that receives indirect compensation “from third parties in connection with advice, recommendations, or referrals regarding any of the listed sub-services” but determines it is not a covered service provider. Such service providers should be prepared to explain that their conclusion is consistent with a reasonable, good faith interpretation of the statute.

Q5:    How should compensation that cannot be determined in advance be disclosed before a contract or arrangement is entered into with a group health plan?

           Covered service providers must determine a reasonable method for describing this potential compensation in advance. The statute provides that the required description of compensation or cost:

“may be expressed as a monetary amount, formula, or a per capita charge for each enrollee or, if the compensation or cost cannot reasonably be expressed in such terms, by any other reasonable method, including a disclosure that additional compensation may be earned but may not be calculated at the time of contract if such a disclosure includes a description of the circumstances under which the additional compensation may be earned and a reasonable and good faith estimate if the covered service provider cannot otherwise readily describe compensation or cost and explains the methodology and assumptions used to prepare such estimate.”

           Further, if compensation falls within a projected range based on the occurrence of a future event or other features of a service arrangement, disclosing that range may be sufficient. However, the DOL notes that its retirement plan guidance specifically provides that “such ranges must be reasonable under the circumstances surrounding the service and compensation arrangement at issue. To ensure that covered service providers communicate meaningful and understandable compensation information to responsible plan fiduciaries whenever possible, the Department cautions that more specific, rather than less specific, compensation information is preferred whenever it can be furnished without undue burden.”[3]

           Ultimately, the adequacy of any disclosure will be determined based on the facts and circumstances of the service contract or arrangement. In deciding if a disclosure is adequate, the principal objective of the statute—providing the plan fiduciary with sufficient information to determine if compensation is reasonable and the severity of any potential conflict of interest—should be considered.

Q6:    The new rules state that beginning December 27, 2021, “[n]o contract or arrangement for services between a covered plan and a covered service provider, and no extension or renewal of such a contract or arrangement, is reasonable” unless the compensation disclosure requirements are met. How does this rule apply to service contracts or arrangements entered into before December 27, 2021?

           If there is a written contract or arrangement between the broker/consultant and the plan, the date the contract is “executed” will be the date it is considered “entered into” for this purpose. For example, suppose the parties sign a services agreement for services effective January 1, 2022, on December 15, 2021. In that case, the compensation disclosure rule does not apply because the contract was “entered into” on December 15, 2021, before the effective date of December 27, 2021.

           Suppose a “broker of record” letter is used to appoint a covered service provider. In that case, the arrangement is considered “entered into” as of the earlier of (1) the date on which the BOR is submitted to the insurance carrier, or (2) the date on which a group application is signed for insurance coverage for the following plan year.  These events must occur in the ordinary course of business and not avoid the disclosure obligations for these rules to apply.[4]

Q7:    Does the law apply to both large and small group health plans?

           Yes, this disclosure requirement applies regardless of plan size. In this way, it is different than the Form 5500 reporting requirements, which generally only apply to groups with more than 100 participants.

Q8:    Does the DOL intend to issue regulations on the compensation disclosure rules?

           The DOL is not required to issue regulations on these requirements, which borrow heavily from and mirror longstanding retirement plan compensation disclosure rules. Accordingly, the DOL does not believe comprehensive regulations are needed. However, the DOL will continue to monitor the situation and seek feedback on what additional guidance may be helpful.

Considering the size and scope of the new disclosure requirements, we anticipate that the DOL will certainly receive additional requests for guidance in the months and years to come. In the meantime, the rules are now effective for both new covered service provider contracts or arrangements and upon renewal or extension of existing arrangements. Therefore, it is incumbent upon covered service providers and plan sponsors to ensure appropriate disclosures are made. We will continue to carefully monitor developments related to these rules and be in touch with any additional guidance when it becomes available.  

[1]  29 CFR § 2550.408b-2(c); 77 FR 5632 (Feb. 3, 2012), Reasonable Contract or Arrangement Under Section 408(b)(2)—Fee Disclosure (Final Rule),; and 75 FR 41600 (July 16, 2010), Reasonable Contract or Arrangement Under Section 408(b)(2)—Fee Disclosure (Interim Final Rule),

[2] A service provider may be considered a “covered service provider” if it provides: (1) brokerage services “to a covered plan with respect to selection of insurance products (including vision and dental), recordkeeping services, medical management vendor, benefits administration (including vision and dental), stop-loss insurance, pharmacy benefit management services, wellness services, transparency tools and vendors, group purchasing organization preferred vendor panels, disease management vendors and products, compliance services, employee assistance programs, or third party administration services,” or (2) consulting services “related to the development or implementation of plan design, insurance or insurance product selection (including vision and dental), recordkeeping, medical management, benefits administration selection (including vision and dental), stop-loss insurance, pharmacy benefit management services, wellness design and management services, transparency tools, group purchasing organization agreements and services, participation in and services from preferred vendor panels, disease management, compliance services, employee assistance programs, or third party administration services.”

[3] 77 FR 5632, at 5645.

[4] Read literally, this answer would seem to suggest that the compensation disclosure requirements would never apply to a relationship with a broker appointed via BOR prior to December 27, 2021 because that appointment letter would always have been submitted earlier than an application for coverage for any forthcoming plan year.  However, we believe that a more appropriate good faith interpretation of this language might consider it to be only a transition rule.  Under such an interpretation, for existing BOR arrangements, a disclosure would be required annually reasonably in advance of the date the group insurance application is signed for insurance coverage for the following plan year.

Enforcement of OSHA COVID-19 Mandate Set to Begin January 10

By: Jennifer Berman, CEO, MZQ Consulting

On Friday, December 17, 2021, the Sixth Circuit Court of Appeals issued a decision allowing OSHA to enforce its COVID-19 vaccination mandate for employers with 100 or more employees.  This decision reverses an earlier ruling from the Fifth Circuit Court of Appeals which created a nationwide stay on the enforcement of the mandate.  The Sixth Circuit found that OSHA has “demonstrated the pervasive danger that COVID-19 poses to workers—unvaccinated workers in particular—in their workplaces.”  Prior to issuing its decision, the Sixth Circuit was awarded jurisdiction over all the cases challenging the mandate nationwide—this means the next stop for those attempting to stop the implementation of the mandate will be the United States Supreme Court.

The Department of Labor quickly responded to this decision announcing that it will begin enforcement imminently.  Specifically, OSHA will begin enforcing the following requirements for applicable employers on January 10th:

  • Establish an official vaccination policy. This policy needs to be in writing and include specified data elements.  OSHA has issued a model policy to aid employers.
  • Determine vaccination status of each employee, obtain acceptable proof of vaccination, and maintain records and a roster of employee vaccination status.
  • Provide employees with four hours of paid leave to get their first and/or second vaccine doses.
  • Require employees to promptly provide notice of positive COVID-19 test or COVID-19 diagnosis to the employer.
  • Remove any employee who receives a positive COVID-19 test or COVID-19 diagnosis from the physical workplace (employees who test positive may continue to work remotely).
  • Ensure employees who are not fully vaccinated wear face coverings when indoors or when occupying a vehicle with another person for work purposes.
  • Report work-related COVID-19 fatalities to OSHA within 8 hours and work-related COVID-19 in-patient hospitalizations within 24 hours.
  • Make certain vaccination-related records and policies available to employees, their representatives, and OSHA upon request.

OSHA’s statement further provides that it will not issue citations for non-compliance with the weekly testing requirements until February 9th, “so long as an employer is exercising reasonable, good faith efforts to come into compliance with the standard.”  The rules require covered employers to:

  • Ensure employees who are not fully vaccinated are tested for COVID-19 at least weekly (if in the workplace at least once a week) or within 7 days before returning to work (if away from the workplace for a week or longer).
  • Record each COVID-19 test result that each employee provides and keep the results of tests they have conducted.

As a reminder, OSHA has significant penalty authority. The penalty for an OSHA violation is $13,653 for each violation, and the penalty for a willful or repeated violation is $136,532 per violation.  We will continue to carefully monitor developments related to this mandate and update you as additional information becomes available.

ACA Reporting Deadline Extended and the End of “Good Faith” Compliance

By: Jennifer Berman, CEO, MZQ Consulting

On November 22, 2021, the Internal Revenue Service (IRS) published proposed regulations that introduce significant changes to the Affordable Care Act (ACA) reporting process for both large and small employers.  These changes specifically impact the Form 1095-B & Form 1095-C distribution deadline and good faith transition relief.

Automatic Extension to the Distribution Deadline

Section 6055 and 6056 of the ACA reporting regulations require that employers furnish Forms 1095-B and/or Forms 1095-C to employees no later than January 31st of the year following the applicable calendar year.  In other words, under the formal rules, forms for the 2021 calendar year need to be distributed by January 31st, 2022.  However, since 2015, the IRS has consistently extended this deadline, typically by 30 days.  In 2020, the IRS requested comments about this extension while also indicating that they would not continue to offer such relief for future filings.

In response to various concerns commenters submitted about the reporting requirements, and contrary to the warning they issued in 2020, the IRS issued an automatic 30-day extension to the January 31 filing deadline in the proposed regulations.  This rule will apply to reporting for the 2021 calendar year and is likely to be made permanent thereafter when the regulations are finalized.

Under these rules, forms will be considered timely as long as employers furnish them to employees no later than 30 days after January 31st.  In cases where the 30th day following the standard deadline falls on a weekend or legal holiday, employers must distribute forms to employees no later than the next business day.  This automatic extension indicates that forms furnished after the 30-day grace period will be considered late (and subject to corresponding penalties), and that employers will not be able to request additional time past the 30 days to furnish forms to employees.

While this automatic extension offers considerable relief to employers, groups must keep in mind that individual state reporting requirements may conflict with this change.  Specifically, the State of California currently requires employers to distribute forms to California residents no later than January 31st, regardless of any Federal extension.  Thus, despite the proposed extension, pending any changes to California rules, employers that have applicable employees who reside in California should strive to furnish these forms by the original deadline.  It is also notable that the proposed regulations do not extend the March 31st deadline for e-Filing forms with the IRS.

Good Faith Transition Relief Eliminated

Since 2015, the IRS has also provided good faith transition relief to ACA reporting.  This relief has shielded employers from penalties for incorrect and/or incomplete ACA filings, provided that the employers have made a “good faith effort” (tried their best) to comply with the requirements.

The proposed regulations confirm the IRS’s indication that they would not extend this transition relief past 2020: good faith transition relief will not be available for the 2021 ACA filing, nor for any subsequent filing year.  This change will make it much harder in the future for employers to avoid ACA penalties based on incorrect filings.

How Do these Regulations Impact Employers?

It is more important now than ever that employers strive to ensure their initial submissions to the IRS are accurate and complete.  This means employers not only need to file, they also need to “get it right”—from minute details such as employee name and SSN to critical information about employee eligibility and lowest-cost contributions.

Employers who submit erroneous filings now face a much higher risk related to inaccurate/incomplete information return penalties, up to $280 per form for 2021, which is typically doubled to account for the error that was both furnished to the employee and e-Filed with the IRS.  These penalties are in addition to, not in lieu of, the ACA’s employer mandate penalties that are often triggered by erroneous filings.  The IRS does accept corrections filings that rectify ACA submissions; however, for any such filing submitted for 2021 or beyond, this could lead to an automatic information return penalty.

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