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Guidance Issued on MHPAEA Comparative Analysis Requirement - Downloadable PDF

As previously reported, the Consolidated Appropriations Act, 2021 (“CAA”) amends the Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”) to require group health plans and health insurers to conduct a comparative analysis of non-quantitative treatment limitations (“NQTLs”) imposed on mental health/substance use disorder (“MH/SUD”) benefits as compared to medical and surgical benefits. NQTLs are limits on the scope or duration of treatment that are not expressed numerically.

On April 2, 2021, the Departments of Labor, the Treasury and Health and Human Services (collectively, “the Departments”) issued FAQ 45, providing the first guidance on this new requirement.

Briefly, the FAQ:

  • Clarifies that plans and carriers should now be prepared to make a comparative analysis available upon request.
  • Includes a list of elements that should be included in a comparative analysis to meet the Department’s requirements and describes the types of documents that plans should be prepared to make available in support of the analysis.
  • Describes circumstances where a comparative analysis will not be sufficient, including when it:
    • consists of conclusory or generalized statements without specific supporting evidence and detailed explanations; or
    • is a mere production of a large volume of documents without a clear explanation of how and why each document is relevant.
  • Outlines the correction and enforcement action the Departments may take in the event the plan has not provided sufficient information to review the comparative analysis or where the Departments determine the plan is not in compliance with MHPAEA.
  • Allows participants, beneficiaries and their authorized representatives in an ERISA-covered plan to receive a copy of the comparative analysis upon request.
  • Highlights that near-term enforcement efforts will be focused on the following NQTLs:
    • Prior authorization requirements for inpatient services;
    • Concurrent review for inpatient and outpatient services;
    • Standards for provider admission to participate in-network, including reimbursement rates; and
    • Out-of-network reimbursement rates (plan methods for determining customary and reasonable (“UCR”) charges.

Below you will find additional details on the guidance.

Background

Mental Health Parity and Addition Act of 2008

The Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”) applies to:

  • employers with at least 51 employees offering a group health plans that provides for any MH/SUD benefits, and
  • fully insured group health plans in the small market, generally employers with 50 or fewer employees (small market in California and New York are employers with fewer than 100 employees) , that are required to provide all essential health benefits, including MH/SUD benefits.

The MHPAEA:

  • Provides that financial requirements (such as coinsurance and copays) and treatment limitations (such as visit limits) imposed on MH/SUD benefits cannot be more restrictive than the predominant financial requirements and treatment limitations that apply to substantially all medical/ surgical benefits in a classification.
  • Prohibits separate treatment limitations that apply only to MH/SUD benefits.
  • Provides that NQTLs may not be imposed on MH/SUD benefits in any classification unless, the processes, strategies, evidentiary standards, and other factors are comparable and applied no more stringently for MH/ SUD benefits than for medical/surgical benefits under the terms of the plan (or health insurance coverage) as written and in operation.
  •  Imposes certain disclosure requirements.

With respect to NQTLs, the focus is not on whether the final result is the same for MH/SUD benefits as for medical/surgical benefits, but rather on whether the underlying processes, strategies, evidentiary standards, and other factors are in parity.

The Consolidated Appropriations Act, 2021

The CAA amends MHPAEA to expressly require a group health plan that imposes NQTLs on MH/SUD benefits
to perform and document a comparative analysis of the design and application of NQTLs. Beginning February 10, 2021, plans (and health insurance carriers) must make a comparative analysis available to the Departments or applicable state authorities upon request.

What’s New?

When Must the NQTL Comparative Analysis Be Available?

As the requirement applies beginning February 10, 2021, plan and issuers should now be prepared to make their comparative analysis available upon request.

Note the CAA expressly requires that plans and carriers conduct and document the comparative analysis of the design and application of NQTLs. It is no longer a best practice. The carrier is responsible for compliance for fully insured plans subject to the MHPAEA. For self-funded plans subject to MHPAEA, the employer is ultimately responsible for compliance. Employers should coordinate with third- party administrators (“TPAs”) or other vendors to assist in performing this analysis.

What Documentation Must Be Made Available?

The FAQ provides additional clarification, including minimum requirements for a comparative analysis to be sufficient under the law. The analysis must contain a detailed, written, and reasoned explanation of the specific plan terms and practices at issue and include the bases for the plan’s or carrier’s conclusion that the NQTLs comply with MHPAEA. The report developed by the plan must include comparative analysis specific to each NQTL imposed on a MH/SUD benefit.

At a minimum, sufficient analyses must include a robust discussion of all of the elements listed below.

  1. A clear description of the specific NQTL, plan terms, and policies at issue.
  2. Identification of the specific MH/SUD and medical/ surgical benefits to which the NQTL applies within each benefit classification, and a clear statement as to which benefits identified are treated as MH/SUD and which are treated as medical/surgical.
  3. Identification of any factors, evidentiary standards or sources, or strategies or processes considered in the design or application of the NQTL and in determining which benefits are subject to the NQTL. Analyses should explain whether any factors were given more weight than others and the reason(s) for doing so, including an evaluation of any specific data used in the determination.
  4. To the extent the plan or issuer defines any of the factors, evidentiary standards, strategies, or processes in a quantitative manner, it must include the precise definitions used and any supporting sources.
  5. The analyses, as documented, should explain whether there is any variation in the application of a guideline or standard used by the plan or issuer between MH/SUD and medical/surgical benefits and, if so, describe the process and factors used for establishing that variation.
  6. If the application of the NQTL turns on specific decisions in administration of the benefits, the plan or issuer should identify the nature of the decisions, the decision maker(s), the timing of the decisions, and the qualifications of the decision maker(s).
  7. If the plan’s analyses rely upon any experts, the analyses, as documented, should include an assessment of each expert’s qualifications and the extent to which the plan or issuer ultimately relied upon each expert’s evaluations in setting recommendations regarding both MH/SUD and medical/surgical benefits.
  8. A reasoned discussion of the plan’s conclusions as to the comparability of the processes, strategies, and factors, within each affected classification, and their relative restrictiveness, both as applied and as written. This discussion should include citations to any specific evidence considered and any results of analyses indicating that the plan or coverage is or is not in compliance with MHPAEA.
  9. The date of the analyses and the name, title, and position of the person or persons who performed or participated in the comparative analyses.

A general statement of compliance, coupled with a conclusory reference to broadly stated processes, strategies, evidentiary standards, or other factors will not be sufficient to meet this statutory requirement.

The guidance suggests that plans should utilize the DOL’s own self-compliance tool to determine their compliance with MHPAEA. The tool can be accessed at https://www.dol.gov/ sites/dolgov/files/EBSA/laws-and-regulations/laws/mental- health-parity/self-compliance-tool.pdf.

Plans should be prepared to make available all documents that support the analysis and conclusions of their comparative analysis. The FAQ and the DOL’s self-compliance tool include a list of the types of documents that should be available to support a NQTL analysis.

Examples of Insufficient Documentation

The guidance provides examples of practices and procedures plans should avoid in responding to a request for comparative analysis as they are insufficient, including:

• Production of a large volume of documents without a clear explanation of how and why each document is relevant to the comparative analysis.

• Conclusory or generalized statements, including mere recitations of the legal standard, without specific supporting evidence and detailed explanation.

• Identification of factors, evidentiary standards, and strategies without a clear explanation of how they were defined and applied in practice.

• An analysis that is outdated due to time, change in plan structure or other reason.

Requests From State Regulating Agencies and Participants and Beneficiaries

In addition to the Departments, state regulators, participants, beneficiaries and/or enrollees (or their authorized beneficiary) can also request a NQTL analysis. As with other requests, plans must be prepared to make this information available upon request. The guidance also makes clear that any NQTL analysis must also be provided, free of charge, upon request as part of an adverse determination appeal under a non- grandfathered group health plan.

Near-Term Enforcement Priorities

The Departments will focus their enforcement efforts on any NQTL that is brought to their attention through a complaint or violation. In the absence of such a complaint, the Departments will focus their enforcement efforts on the following NQTLs:

  • Prior authorization requirements for in-network and out- of-network inpatient services;
  • Concurrent review for in-network and out-of-network inpatient and outpatient services;
  • Standards for provider admission to participate in a network, including reimbursement rates; and
  • Out-of-network reimbursement rates (plan methods for determining usual, customary, and reasonable charges).

If a request for a comparative analysis references a specific NQTL, plans should also be prepared to make available a list of all other NQTLs that they have performed a comparative analysis on. It is possible that plans may be required to submit analyses for these additional NQTLs.

Penalties

If the Departments conclude, after review of the analyses, that the plan has provided insufficient information, the Departments can specify the information necessary for the plan to comply with the request. If the Departments conclude that the plan is not in compliance with MHPAEA, the plan will be required to specify what actions they will take to bring the plan into compliance. The Act imposes a 45-day corrective action period where the plan will be required to submit new analyses showing that they have now come into compliance with MHPAEA. If the plan is still noncompliant after the corrective action period, the plan, within 7 days of receipt of the Departments’ determination of noncompliance, must notify all individuals enrolled in the plan or coverage that the coverage has been determined to be out of compliance with MHPAEA.

Employer Action

Carriers of fully insured plans should be responsible for compliance with this new requirement. Self-funded plans should coordinate with their third-party administrators or carrier partners to determine if they are able to conduct the analysis for the plan. Plans should be prepared to apply pressure on their TPAs or carrier partners if they initially refuse to conduct the analyses. The carriers and TPAs are in the best position to complete these NQTL analyses. However, if after repeated requests these vendors are still unwilling to provides the analyses, plans must be prepared to complete the analyses themselves.


COVID-19 vaccine bottles in a row

Update on COVID-19 Vaccine and Vaccine Administration Cost - Downloadable PDF

Medicare has increased and simplified its payment rate for administration of the COVID-19 vaccine to $40 per dose. This change may impact group health plans with respect to their payment rate to providers.

Background

Non-grandfathered group health plans are required to cover, without cost sharing, the COVID-19 vaccine. This obligation extended to coverage associated with administering the vaccine. The federal government continues to pay for the vaccine itself through funding authorized by the CARES Act.

For vaccines administered in-network, plans will pay the rate negotiated with in-network providers, and that continues to be true. For vaccines administered out-of-network, however, group health plans must reimburse providers an amount that is reasonable, determined in comparison to prevailing market rates for such service. Guidance provides that the amount that would be paid under Medicare is considered reasonable.

Initially, Medicare established a Medicare payment rate for a single-dose vaccine or for the final dose in a series, at $28.39. For a COVID-19 vaccine requiring a series of two or more doses, the payment rate was $16.94 for the initial dose(s) in the series and $28.39 for the final dose in the series.

Medicare allowed for the rates to be geographically adjusted. It appears many fully insured plan carriers, and many self- insured plans had been reimbursing at these Medicare rates for both in-network and out-of-network providers, regardless of whether the cost was treated as a pharmacy benefit or a medical benefit.

What’s New?

Medicare recognized updated information about the costs involved in administering the COVID-19 vaccine for different types of providers and suppliers, and the additional resources necessary to ensure the vaccine is administered safely

and appropriately. Thus, for vaccine administration services provided on or after March 15, 2021, Medicare’s payment rate increased to approximately $40 per dose, regardless of whether a single dose or a dose in a series of doses. That rate is subject to geographic adjustment.

This change in the Medicare vaccine administration
payment rate is expected to be adopted by most providers administering the COVID-19 vaccine, increasing the full cost for double-dose vaccine administration by approximately $35, or about 78%, and for single-dose vaccine administration by approximately $23, or about 81%.

Employer Action

Employers may be notified by carriers, third party administrators (“TPAs”), and/or pharmacy benefit managers (“PBMs”) regarding this development, or they may simply notice higher claims costs related to the vaccine administration. A self-insured plan may be given a choice to opt-out of the higher payment by their TPA or PBM, but the employer would have to find another solution for providing vaccine administration at no cost. For this reason, opting out is likely to be impractical.


female medical professional wearing PPE

COVID-19 PPE Now a Qualified Medical Expense - Downloadable PDF

On March 26, 2021, the IRS issued IRS Announcement 2021-7, which clarifies that amounts paid for certain personal protective equipment (“COVID-19 PPE”) used to prevent the spread of COVID-19, including masks, hand sanitizer and sanitizing wipes can be treated as amounts paid for medical care under § 213(d) of the Internal Revenue Code.

Accordingly, because these amounts are expenses for medical care under § 213(d) of the Internal Revenue Code, these amounts can also be eligible expenses under a health flexible spending account (health FSA), health savings accounts (HSAs), health reimbursement arrangements (HRAs) and Archer medical savings accounts (Archer MSAs). Note, that if the amount is paid or reimbursed under one of these accounts, it is not deductible under § 213.

The IRS announcement also provides relief for group health plans, including health FSAs and HRAs, to amend their plans pursuant to provide for reimbursements of expenses for COVID-19 PPE incurred for any period on or after January 1, 2020.

Consistent with prior guidance, group health plans may amend their plans by the last day of the first calendar
year beginning after the end of the plan year in which the amendment is effective. No amendment with retroactive affect can be adopted after December 31, 2022. Further, the plan must operate consistently with the terms of the amendment, including during the period beginning on the effective date of the amendment through the date in which the amendment is adopted.

Employer Action

Employers should review their plan documents. For plans that use a broad definition under 213(d) for eligible medical expenses, an amendment is not necessary. However, for plans with a narrower definition of 213(d), the definition of eligible medical expenses may need to be amended.


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New COBRA Subsidy - Downloadable PDF

Congress passed the American Rescue Plan Act of 2021 (“the Act”) on March 10, 2021 and it was signed into law on March 11, 2020. The Act includes a 100% COBRA subsidy available to certain COBRA qualified beneficiaries who lose group health plan coverage as the result of an involuntary termination or reduction in hours. This is different from the original House legislation, which included an 85% subsidy (with the COBRA beneficiary responsible for 15% of the COBRA premiums). Employers will be able to claim a credit against payroll taxes to reimburse the cost of the subsidy.

The COBRA subsidy begins April 1, 2021 (the first day of the month following enactment) and last through September 30, 2021.

While this subsidy provides welcome relief for many COBRA qualified beneficiaries, it will be administratively challenging for employers, especially given other relief afforded to COBRA elections and premiums payments under the Outbreak Period guidance.

The following FAQs explain the Act’s COBRA subsidy in more detail.

Who Qualifies for a Subsidy?

An assistance eligible individual (“AEI”) qualifies for the subsidy.

An AEI is, for the period of April 1, 2021 – September 30, 2021, an individual who is eligible for COBRA due to an involuntary termination of employment or a reduction in hours and who elects COBRA continuation of coverage. Individuals who voluntarily terminate from employment are not AEIs.

AEIs include:

  • New COBRA qualified beneficiaries. Individuals who become COBRA qualified beneficiaries due to involuntary termination of employment or reduction in hours on or after April 1, 2021 but before September 30, 2021.
  • Existing COBRA qualified beneficiaries. COBRA qualified beneficiaries due to an involuntary termination of employment or reduction in hours who currently have COBRA coverage and continue COBRA between April 1, 2021 – September 30, 2021.
  • Second chance COBRA qualified beneficiaries. Individuals who were COBRA qualified beneficiaries due to an involuntary termination of employment or reduction in hours but, either (1) did not elect COBRA or (2) elected then dropped COBRA. Had they elected COBRA (or not dropped the coverage), they would have had COBRA coverage between April 1, 2021 – September 30, 2021.

How Much is the Subsidy?

The COBRA subsidy is 100%. This means AEIs will not pay any portion of their COBRA premium during the subsidy period (April 1, 2021 – September 30, 2021) so long as they remain subsidy eligible.

Employers are allowed a credit against Medicare payroll taxes to be reimbursed for the subsidy.

Is There a “Second Chance” to Elect COBRA?

Yes. There is a second chance for an individual who otherwise would be an AEI except the individual:

  • Does not have a COBRA election in effect on April 1, 2021; or
  • Elected COBRA coverage and later dropped the coverage.

In this case, the AEI may elect COBRA coverage (and the subsidy) beginning April 1, 2021. The maximum COBRA coverage period will be measured from their original qualifying event date had they elected COBRA (or not dropped the coverage).

As described later, a special notice will need to be provided and, upon receipt, these “second chance” individuals will have 60 days to elect COBRA continuation of coverage (retroactive to April 1, 2021).

This is likely to get very complicated with delayed election relief for the Outbreak Period which permits retroactive enrollment back to the original qualifying event date. Note, however, that subsidized premiums are only available beginning April 1, 2021. An individual who is eligible for both types of relief would be permitted to enroll in the subsidized coverage April 1, 2021 going forward. That said, more guidance on the interaction of the Outbreak period and COBRA subsidy would be helpful.

When Does the Subsidy End?

The subsidy naturally expires September 30, 2021. After that date, the full COBRA premium will be owed to continue COBRA coverage or to elect new COBRA coverage. Employers must provide notice within a specific window prior to expiration of the subsidy.

Additionally, if an AEI becomes eligible for other group health plan coverage or Medicare, the subsidy is no longer available. Mere eligibility (versus enrollment) is all that is required.

An AEI must notify the group health plan when the AEI is no longer eligible for the subsidy due to other coverage. Regulations will provide guidance as to the time and manner of this notification. A penalty of $250 applies for failure to notify. There is an exception when the failure is due to reasonable cause and not willful neglect. Note that It is possible for Congress to extend the subsidy beyond September 30, 2021 through future legislation.

How Far Back Will We Have to Look for AEIs?

COBRA coverage due to a termination of employment or reduction in hours runs 18 months. Thus, individuals who experienced an involuntary termination of employment or reduction in hours and were in their COBRA election window beginning in November 2019 (or later) may be eligible for the subsidy relief.

What Coverage Does the COBRA Subsidy Apply to?

The statute defines group health plan coverage broadly to include an employee welfare benefit plan providing medical care. While further guidance is likely to clarify this, we expect a subsidy to be available with respect to the following coverage:

  • Major medical
  • Dental
  • Vision

This includes fully insured and self-funded group health plans.

Can AEIs Change Their COBRA Coverage?

An employer may, but is not required to, allow an AEI to enroll in a different, lower cost plan option than the coverage the individual was enrolled in at the time the qualifying event occurred. The different plan option must be offered to similarly situated active employees of the employer at the time the election to change the plan is made. The different plan option cannot be excepted benefits (e.g., dental coverage), a qualified small employer health reimbursement arrangement (QSEHRA) or a health flexible spending account (health FSA).

An AEI has 90 days after the date of notice of this plan enrollment option to elect to enroll in the different coverage option.

Employers considering allowing enrollment in a lower cost plan option should obtain carrier (including stop loss carrier) approval. Not all carriers may allow for this flexibility.

Are There Notice Requirements?

There are multiple notice requirements associated with the subsidy.

Election Notice

COBRA election notices for AEIs who become entitled to COBRA coverage between April 1, 2021 – September 30, 2021 must be updated to include information on the availability of premium assistance and, if applicable the ability to enroll in a lower cost plan option. Employers may use a separate document that includes the required information.

In addition, notice must be provided to AEIs who have a “second chance” to elect COBRA and obtain the subsidy. This notice must provide by May 31, 2021 (60 days from April 1, 2021 – first of the month following enactment). Failure to provide such notice will be treated as a failure to meet the notice requirements under COBRA.

Briefly, the notice must include:

• forms necessary to establish eligibility for the subsidy;

• contact information for the employer or other entity maintaining information in connection with the subsidy;

• a description of the:

  • extended election period;
  • obligation of qualified beneficiaries to notify theplan when no longer eligible for the subsidy and thepenalty for failure to notify;
  • qualified beneficiaries’ right to a subsidized premiumand any conditions on entitlement to the subsidy(displayed prominently); and
  • option (if available) for the qualified beneficiary to enroll in a different coverage option.

A model notice will be available within 30 days after the date of enactment. It is possible the Departments will require additional notifications as part of their guidance.

Notice of Option to Change COBRA Coverage

If an employer allows AEIs to change to a different, lower cost plan option notice must be provided to inform the AEI of this option.

Notice of the Expiration Period for Premium Assistance

A notice must be provided to an AEI about the upcoming expiration of the available subsidy except in cases where the subsidy is no longer available due to eligibility for other group health plan coverage or Medicare.

The notice must be provided beginning on the date that is 45 days before the subsidy ends and ending on a day that is 15 days before the expiration and must be written in clear and understandable language. It must be provided to the AEI and indicate that the AEI’s subsidy will expire soon and include the date of the expiration in a prominent manner.

A model notice will be available 45 days after enactment.

Who May Claim the Tax Credit?

The “person to whom premiums are payable” may claim the tax credit. In the case of a group health plan that is subject to COBRA, this is the employer maintaining the plan.

Employers may apply to credit against Medicare payroll taxes to reimburse the cost for the COBRA subsidy.

What Should Employers Do Now?

• Connect with your COBRA vendor to discuss administration for this new COBRA subsidy. This will include:

• issuing notices to the “second chance” AEIs by May 31, 2021;
• updating election notices to reflect the subsidy for COBRA events between April 1, 2021 and September 20, 2021; and
• issuing notice to AEIs when their individual subsidy is set to expire in accordance with required timeframes.

• Identify all individuals who may qualify as AEIs. This will include individuals who may not have elected COBRA (or dropped COBRA) but are still within the 18-month maximum COBRA period. Employers may need to look back to individuals who experienced an involuntary termination of employment or reduction and were otherwise eligible for COBRA beginning in November 2019.

• Discuss the COBRA subsidy with payroll departments and await further guidance for clarification on claiming the tax credit.

• Await further guidance and model notices. Hopefully, any guidance or notices will address the COBRA deadlines impacted by the Outbreak Period and how this intersects with the COBRA subsidy and applicable notices.


2021 Guidance Issued on Outbreak Period - Downloadable PDF

Summary:

On February 26, 2021, the Departments of Labor and the Treasury (“the Departments”) issued guidance addressing the COVID-19 Outbreak Period – specifically, the associated period of “up to one year” that may be disregarded for certain benefit plan deadlines. Unexpectedly, they have taken the interpretation that these benefit plan deadline extensions generally apply on an individual-by-individual basis. Individuals with timeframes that are subject to the extensions will have until the following deadlines to make benefit elections, payments, file a claim or benefit appeal as follows:

  • one (1) year from the date they were first eligible for relief, or
  • 60 days after the announced end of the National Emergency (the end of the Outbreak Period).

This is a different approach to what most practitioners thought, which would have had the clock start running on the disregarded timelines after February 28, 2021. Note, under this latest guidance, employers must notify affected individuals as to the end of the relief period. You will find further details follow.

Background

In May of 2020, the Departments issued a final rule that required all group health plans, disability plans, and other employee welfare benefit plans to disregard the period (“the Outbreak Period”) from March 1, 2020 until 60 days after the announced end of the National Emergency relating to the coronavirus pandemic with respect to the following periods and dates…

To read more, click the guide below:


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Reminders for Medicare CMS Notice and 1094-1095 Filing - Downloadable PDF

Medicare Part D – CMS Notification Reminder

Employers sponsoring a group health plan (whether insured or self-insured) need to report information on the creditable (or non-creditable) status of the plan’s prescription drug coverage to the Centers for Medicare and Medicaid Services (CMS). In order to provide this information, employers must access CMS’s online reporting system at: https://www.cms.gov/Medicare/ Prescription-Drug-Coverage/CreditableCoverage/CCDisclosureForm.html.

As a reminder, notice must be provided by the following deadlines:

  • Within 60 days after the beginning date of each plan year;
  • Within 30 days after the termination of the prescription drug plan; and
  • Within 30 days after any change in the creditable coverage status of the prescription drug plan.

For example, an employer with a calendar year plan (January 1 – December 31, 2021) must complete this reporting no later than Monday, March 1, 2021.

Additional guidance on completing the form is available at: https://www.cms.gov/Medicare/Prescription-Drug-Coverage/ CreditableCoverage/CCDisclosure.html.

Reminder: Final 2020 Forms 1094-C and 1095-C Issued

The IRS released final 2020 Forms 1094-C, 1095-C, and applicable instructions. Applicable large employers (“ALEs”) must furnish Form 1095-C to full-time employees and file Form 1094-C and all 1095-Cs with the IRS. ALEs offering a self-insured group health plan must also furnish Forms 1095-C to covered employees or other primary insured individuals in the self- funded health plan (e.g., COBRA qualified beneficiaries).

Due to the COVID-19 pandemic and challenges to business operations, ALEs may have variations to their reporting for 2020 due to furloughs and/or layoffs. ALEs, in coordination with their payroll or other reporting vendors, should have records to determine each employee’s status as an ACA FTE or not an ACA FTE for each month during 2020 in preparation to complete, furnish and file these forms for 2020.

As a reminder, IRS Notice 2020-76 provided the following extended relief related to 2020 reporting:

• Extension of due date to furnish Form 1095-C. 2020 Forms 1095-C are due to employees by March 2, 2021 (instead of January 31, 2021).

• Filing the 2020 Form 1094-C and all Forms 1095-C with the IRS has not been extended and is due March 31, 2021 (for filing electronically) or March 1, 2021 (for paper filing, as permitted).

• Extension of good faith relief for reporting and furnishing. The IRS will not impose a penalty for incorrect or incomplete information on Form 1095-C, if there is a good faith effort to comply

What’s New?

For 2020, there are some notable changes to the Forms, specifically addressing individual coverage health reimbursement arrangements (“ICHRAs”). For employers that do not sponsor an ICHRA, much of the reporting remains the same.

  • On Form 1095-C, Part II the “Plan Year Start Month” is a required field. An ALE must enter a two-digit number to reflect the plan year start month (e.g., for January 2020, use “01”, for June 2020, use “06”). In previous years, this was optional.
  • To accommodate reporting associated with ICHRAs:
    •  In Part II, there is a new reference to the “Employee’s Age on January 1” and “Line 17 Zip Code”.
    • If an ICHRA is not offered, do not complete these fields.
  • In Part II, there are new Codes (used in Line 14) used to report offers of ICHRAs. The new Codes are 1L, 1M, 1N, 1O, 1P, 1Q, 1R, 1S, 1T, and 1U.
    • If an ICHRA is not offered, these new codes should not be used.
  • There is also information in the instructions on how to calculate the amount reported on Form 1095-C, Line 15 for an ICHRA offer of coverage.
  • Part III must be completed with respect to coverage through an ICHRA.

Note to Non-ALEs

While small employers (non-ALEs) are not subject to reporting for purposes of the employer mandate, if offering a self-insured group health plan or ICHRA, reporting under Section 6055 to the IRS and to covered employees or other primary insured individuals who have coverage provided through a self-insured group health plan is required. In most cases, a non-ALE will use Forms 1094-B and 1095-B to satisfy this requirement. If a non-ALE is offering an ICHRA, that coverage is considered a self-insured health plan and is subject to this reporting requirement. According to the instructions, a new code “G” must be entered on Form 1095-B, line 8 to identify an ICHRA.

Penalities

Failure to furnish a correct Form 1095-C may result in penalties of $280/form with an annual calendar year maximum of $3,392,000. Failure to file correct Forms 1095-C and 1094-C with the IRS may result in penalties of $280/form with an annual calendar year maximum of $3,392,000.

As announced in Notice 2020-76, there is good faith penalty relief available with respect to incorrect or incomplete information on the applicable Forms.

In addition, penalties may be waived if the failure was due to reasonable cause and not willful neglect.

Forms and Instructions

2020 Form 1094-C, https://www.irs.gov/pub/irs-pdf/f1094c.pdf

2020 Form 1095-C, https://www.irs.gov/pub/irs-pdf/f1095c.pdf

2020 Instructions for Forms 1094-C and 1095-C,

https://www.irs.gov/pub/irs-pdf/i109495c.pdf

To download this article as a PDF, click below:


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DOL Penalties Increase for 2021 - Downloadable PDF

The Department of Labor (DOL) published the annual adjustments for 2021 that increase certain penalties applicable to employee benefit plans.

Annual Penalty Adjustments for 2021

The updated penalties are applicable to health and welfare plans subject to ERISA.

Employer Action

Private employers, including non-profits, should ensure employees receive required notices timely (SBC, CHIP, SPD, etc.) to prevent civil penalty assessments. In addition, employers should ensure Form 5500s are properly and timely filed, if applicable. Finally, employers facing document requests from EBSA should ensure documents are provided timely, as requested.

To download this article as a PDF, which includes all the annual penalty adjustments for 2021, click below:


Exterior view of New Jersey State House

New Jersey Issues 2020 Individual Mandate Reporting Requirements - Downloadable PDF

The State of New Jersey has provided information for employer reporting for the 2020 calendar year under New Jersey’s individual health insurance mandate that went into effect January 1, 2019. All employers (including out-of-state employers) who provided health coverage to New Jersey residents should review their obligations to issue participant statements and file health coverage information with the state. Reporting obligations differ depending on whether the coverage is provided under an insured or self-funded arrangement.

Employers, insurers and other coverage providers must:

  • Transmit 1095 health coverage forms (1095-B, 1095-C or NJ-1095) to the New Jersey Division of Taxation no later than March 31, 2020.
  • Issue a 1095 health coverage form no later than March 2, 2020 to each primary enrollee who was a New Jersey resident and to whom minimum essential coverage was provided during 2020.

Background

Beginning January 1, 2019, the New Jersey Health Insurance Market Preservation Act (the “NJ Act”) requires most New Jersey residents to maintain health insurance. Failure to do so, absent an exemption, will result in an individual penalty imposed by the state when a person files his or her 2020 New Jersey Income Tax return. This New Jersey individual insurance mandate essentially replaces the individual mandate imposed under ACA, which was effectively eliminated beginning January 1, 2019 under the Tax Cuts and Jobs Act.

As with the ACA, the NJ Act requires certain employers and insurance carriers to report to covered individuals and to the state affirming such individuals maintained health coverage during the calendar year.

Required Forms

Forms are required to be issued to all primary enrollees no later than March 2, 2021 and filed with the state no later than March 31, 2021 on behalf of all part-year and full-year New Jersey residents for 2020. A part-year resident is an individual who lives in the state for at least 15 days in any month in 2020.

Certain employers and other providers of minimum essential health insurance coverage such as insurance carriers, multiemployer plans, government entities, etc. must electronically file the forms with the New Jersey Division of Taxation no later than March 31, 2021 as paper forms will not be accepted. Insurers or employers can file 1095 forms in two ways:

  • Registered filers can use the Division of Revenue and Enterprise Services’ (DORES) MFT SecureTransport (Axway) service. MFT (Axway) is the required system for filers of 100 or more forms. Taxpayers who have MFT SecureTransport (Axway) service user credentials use them to submit the required health insurance coverage returns. Those without a current account should request account setup.
  • As an alternative to MFT SecureTransport (Axway), coverage providers with under 100 forms can use Form NJ-1095 to file one form at a time. New Jersey will post a link to the NJ-1095 form for 2020 before the 1095 filing deadline. The NJ-1095 form is valid for federal filers of either 1095-B or 1095-C forms.

Employers should only send Forms 1095-C to the state for individuals subject to New Jersey’s individual mandate. While the state will accept 1095 data files containing records for individuals who are not New Jersey residents, employers should be cognizant that privacy and other laws may limit or prohibit.

Employers With Fully Insured Coverage

The insurance carrier will generally be required to file form 1095-B with the state for each covered member of the plan and furnish Form 1095-B to NJ residents. However; an employer must file if its insurer or multi-employer plan does not file the required 1095 forms on time.

Employers With Self-Insured Coverage

The employer files with the state a fully completed 1095-C, 1095-B or NJ-1095 form for each primary enrollee (employee, COBRA participant, retiree, non-employee member) covered under the plan for at least one month of the calendar year and furnishes a form to NJ residents.

Employers Participating in a Multiemployer Arrangement

The plan sponsor should file Form 1095-B (or 1095-C) for each primary enrolled although an employer must file if the multi-employer plan does not file and furnish the required 1095 forms on time.

Separate 1095 forms to spouses, dependents, or adult children of primary enrollees are not required.

Employer Action

Employers with fully insured plans (especially employers with insured coverage issued outside of New Jersey) should confirm that the insurer will issue Forms 1095-B to New Jersey primary enrollees by March 2, 2021. It’s important to note that the IRS again has issued guidance relaxing the ACA reporting rules for insurance carriers who are no longer required to automatically issue Forms 1095-B to plan participants, although carriers must still file Forms 1095-B with the IRS.

Employers with fully insured plans (especially employers with insured coverage issued outside of New Jersey) should confirm that the insurer will file the Forms 1095-B with the state no later than March 31, 2021.

Employers with self-insured plans should discuss with their payroll vendor or forms provider to determine if they will file the forms with the state and issue participant statements on the employer’s behalf.

As New Jersey will not require that separate forms be prepared for adult children who were covered under their parents’ group health plan, the state suggests that employees provide a copy of Form 1095-B or 1095-C to their adult children who reside in New Jersey.

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HHS Extends the Public Health Emergency Again - Downloadable PDF

On January 7, 2021, the Secretary of Health and Human Services (“HHS”) announced the administration will renew the COVID-19 pandemic Public Health Emergency, scheduled to expire on January 21, 2021. This will once again extend the period for an additional 90 days and as a result, numerous temporary benefit plan changes will remain in effect.

It should be noted that there is a difference between the emergency period and the outbreak period as follows:

Emergency Period

HHS Secretary issued a Public Health Emergency beginning January 27, 2020. This Emergency Period is now set to expire April 21, 2021 (unless further extended or shortened by HHS).

Outbreak Period

The Outbreak Period runs from March 1, 2020 until 60 days after the announced end of the National Emergency (note that the end of the National Emergency may not be the same date as the end of the Public Health Emergency period). The Departments are expected to announce the end date; at this time, no end date has been announced. According to the regulations, a period of “up to one year” may be disregarded. Therefore, it appears the latest the Outbreak Period may end is February 28, 2021. However, further guidance would be helpful.

While there are other temporary benefit plan provisions and changes that are allowed due to the public health emergency, below you will find a summary of only those provisions directly impacted by the Emergency Period extension.

Benefit Plan Changes in Effect through the End of the EMERGENCY PERIOD

COVID-19 Testing

All group health plans must cover COVID-19 tests and other services resulting in the order for a test without cost-sharing, prior authorization, or medical management and includes both traditional and non-traditional care settings in which a COVID-19 test is ordered or administered.

COVID-19 Vaccines

All non-grandfathered group health plans must cover COVID-19 vaccines (including cost of administering) and related office visit costs without cost-sharing; this applies, to both in-network and out-of-network providers, but a plan can implement cost-sharing after the Emergency Period expires for services provided out-of-network.

Excepted Benefits and COVID-19 Testing

An Employee Assistance Program (“EAP”) will not be considered to provide significant medical benefits solely because it offers benefits for diagnosis and testing for COVID-19 during the Emergency Period and therefore, will be able to maintain status as an excepted benefit.

Expanded Telehealth and Remote Care Services

Large employers (51 or more employees) with plan years that begin before the end of the Emergency Period may offer telehealth or other remote care services to employees (and their dependents) who are not eligible for other group health plan coverage offered by the employer.

Summary of Benefits and Coverage (“SBC”) Changes

Group health plans may notify plan members of changes as soon as practicable and are not held to the 60-day advance notice requirement for changes affecting the SBC during the plan year or for the reversal of COVID-19 changes once the Emergency Period expires, provided the plan members are timely made aware of any increase and/or decrease in plan benefits summarized on the SBC.

Grandfathered Plans

If a grandfathered plan enhanced benefits related to COVID-19 for the duration of the Emergency Period (e.g. added telehealth or reduced or eliminated cost-sharing), the plan will not lose grandfathered status if the changes are later reversed when the Emergency Period expires.

Benefit Plan Changes in Effect Through the End of the OUTBREAK PERIOD

Group health plans, disability, and other employee welfare benefit plans will disregard the period from March 1, 2020 until the end of the Outbreak Period when determining the following:

COBRA

Timeframe for the employer to provide a COBRA election notice; the 60-day election period for a qualified beneficiary to elect COBRA; the COBRA premium payment deadlines (45 days for initial payment, 30-day grace period for ongoing payments); the deadline to notify the plan of qualifying events or disability determinations.

HIPAA Special Enrollment

30 days (60 days for Medicaid/ CHIP events) to request a special enrollment right due to loss of health coverage, marriage, birth adoption, or placement for adoption.

ERISA Claims Deadlines

Timeframe to submit a claim and appeal of an adverse benefit determination. For non- grandfathered medical plans, timeframe to request external review and perfect an incomplete request. This includes claim deadlines for a health FSA or HRA that occur during the Outbreak Period.

Fiduciary Relief of Certain Notification and Disclosure Deadlines for ERISA Plans

A plan will not be in violation of ERISA for a failure to timely furnish a notice, disclosure, or document throughout the duration of the Outbreak Period if the plan and fiduciary operate in good faith and furnish the notice, disclosure, or document as soon as administratively practicable (which may include the use of electronic means such as email and text messages).

Employer Action

Employers should continue to adhere to the national pandemic-related benefit changes and expanded timeframe for providing COVID-19 coverage and other required plan notifications. State and local emergency measures may expire at different times and could impact employee benefit plans (such as insured group health plans) and other state and/or local programs (such as paid leave) differently than the timeframes required under federally regulated program requirements.

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EEOC Provides Proposed Wellness Rules - Downloadable PDF

On January 7, 2021, the Equal Employment Opportunity Commission (“EEOC”) released two notices of proposed rulemaking (“Proposed Rules”) on wellness programs under the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”). Briefly, if finalized in their current form, the Proposed Rules:

  • generally align ADA rules to existing rules applicable to “health contingent” wellness programs under the Health Insurance Portability and Accountability Act (“HIPAA”).
  • restrict incentives tied to “participatory” wellness programs, such as those that provide incentives for individuals to disclose health information through health risk assessments or biometric screenings, to “de minimis” amounts. Examples of de minimis amounts are “a water bottle or gift card of modest value.”
  • under the GINA rules, apply restrictions to incentives related to a spouse’s participation in health risk assessments.

Background

There are three sets of laws governing wellness programs and incentive limits currently in effect: HIPAA rules, ADA rules and GINA rules.

HIPAA

The HIPAA rules contain five requirements health contingent programs must satisfy, one of which involves incentives. When rewards are used in a group health plan to promote involvement in an activity (e.g., walking, diet, or exercise program) or to attain a certain outcome (e.g., not smoking or achieving certain results on biometric screenings), incentives cannot exceed 30% of the total cost of coverage under the group health plan (or up to 50% when the program is tobacco-related).

ADA

A wellness program involving a medical test or disability- related inquiries of an employee must be “voluntary.” EEOC regulations issued in 2016 had generally provided that incentives could not exceed 30% of the total cost of self-
only coverage in the lowest cost plan option offered to an employee in order for the program to be considered voluntary. However, the incentive portion of the 2016 regulations was vacated by court order, effective January 1, 2019.

GINA

As with the ADA rules, a wellness program involving a medical test or disability-related inquiries of a spouse must be “voluntary.” GINA regulations had generally provided that incentives could not exceed 30% of the total cost of self-only coverage in the lowest cost plan option offered to an employee in order for the program to be considered voluntary. Those too were partially vacated by court order, effective January 1, 2019.

Proposed Rules

Health Contingent Programs Continue Viability Under HIPAA Requirements

For health contingent wellness programs (activity based or outcomes based), the Proposed Rules will permit incentives that align with the rules under HIPAA (currently 30% of the total cost of coverage or 50% to the extent the wellness program is designed to prevent or reduce tobacco use), as long as the program is part of, or qualifies as, a group health plan and complies with the HIPAA five factor requirements for such plans.

For this purpose, the Proposed Rules set forth four factors that are helpful in determining when a wellness program is part of the group health plan:

  • The program is offered only to employees who are enrolled in an employer-sponsored group health plan;
  • Any incentives offered are tied to cost-sharing or premium reductions (or increases) under the group health plan;
  • The program is offered by a vendor that has contracted with the group health plan or insurer; and,
  • The program is a term of coverage under the terms of a group health plan.

Participatory Programs Would Be Subject to Severe Limitations

For participatory programs, the Proposed Rules would sharply reduce the value of incentives many employers
have historically utilized, such as a reduction in employee health insurance premiums for meeting wellness criteria. A participatory program is typically a wellness program that simply collects employee health information through health risk assessments or biometric screenings without tracking results and requiring employees to achieve certain health goals in order to earn an award or avoid a penalty. Under
the ADA Proposed Rule, those programs are subject to a
“de minimis” incentive standard. To be considered voluntary, a wellness program may offer no more than a de minimis incentive (such as a water bottle or gift card of modest value) in exchange for the employee participating in the wellness program.

According to the Proposed Rules, charging an employee $50 per month more for health insurance (or a total of $600 per year) for not completing a health risk assessment as part of a participatory wellness program would not be a de minimis incentive and would violate the ADA because the employee would be treated less favorably with respect to the cost of health insurance than employees who chose to provide their health information. This is much more stringent than the 2016 ADA regulations which would have allowed participatory programs that included medical exams or disability related inquiries to offer up to a 30% incentive based on the cost of self-only coverage in the lowest plan option.

GINA Rules Would Subject Participatory Programs for Spouses to Severe Limitations

Under the original rule, there was an exception to the general prohibition on providing incentives in return for genetic information that allowed limited incentives (up to 30%) to spouses who provide information (via risk assessment) about their manifestation of a disease or disorder to a wellness program. Under the Proposed Rule, wellness programs would be limited to de minimis incentives to all family members (not just spouses) in exchange for family members providing information about their manifestation a disease or disorder (which is considered the employee’s genetic information). As described above, de minimis means very low value incentives such as a water bottle or gift card of modest value.

ADA Notice Not Required

The Proposed Rule would remove the unique ADA notice requirement that currently exists under the 2016 regulations.

Employer Action

At this time the above rules are simply proposed and employers are not required to rely on them or to comply with them. There will be a 60-day notice and comment period before the Proposed Rules are finalized and the finalized version may be different from what is included in the Proposed Rules. Typically, new regulations will apply prospectively starting at a future date (e.g., plan years starting in 2022). Further, the change to a new administration under President Biden may also have an impact. It is also possible that the rules may be challenged by others, such as the AARP, since they are so aggressive towards incentives. Additionally, the EEOC is seeking comments on the regulations. Employers should review their existing wellness programs in light of the EEOC’s guidance. We will keep you apprised on new developments.

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