Telehealth Relief Included in End-Of-Year Omnibus Bill

By: Jessica Waltman, Principal, Forward Health Consulting

On December 23, 2022, the Consolidated Appropriations Act, 2023 (CAA23) was signed into law.  While this legislation does not include as many health provisions as the CAA of 2021, it does include the anticipated relief on telehealth coverage offered through qualified High Deductible Health Plans (HDHPs) that pair with Health Savings Accounts (HSAs).

Typically, HSA-qualified HDHPs cannot pay for covered services, except for specified preventive care, until the participant meets the plan’s deductible.  The CAA23 extends a protection that originated with the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act) which allows people who have coverage through a HDHP to receive telehealth care at no cost, regardless of the plan’s annual deductible, without impacting their eligibility to contribute to an HSA.  This protection was set to expire on December 31, 2022.  However, the CAA23 creates a safe harbor for first-dollar telehealth coverage offered through an HDHP for plan years beginning after December 31, 2022, through December 31, 2024.

The wording of this extension creates a small gap in relief for non-calendar year plans.  The old relief will expire on December 31, 2022, and plan sponsors can only begin taking advantage of this new relief once their plan renews after that date.  This means that groups with plans renewing on January 1, 2023 can offer the relief immediately, whereas groups with plans that renew in a different month of the year will need to wait until the start of their 2023 plan year to begin offering it.  For example, a group plan year that begins on April 1, 2023 cannot offer this relief until that date.  Similarly, groups with non-calendar year plans that have already been offering the relief available under previous legislation will have to cease allowing participant access to telehealth on a first-dollar basis from January 1, 2023 until the start of their 2023 plan year.

This relief is optional for plan sponsors.  Group plan sponsors are not required to offer their participants access to telehealth coverage at all, nor do they have to offer it on a first-dollar basis for any type of plan offering, including HDHPs.  If a group decides to adopt this relief, they also need to make sure their plan documents are amended accordingly.  Specifically, the definition of care that can be accessed pre-deductible for purposes of HDHPs should reflect this latest relief offered by the CAA23.

Administration Extends RxDC Reporting Deadline and Provides Other Limited Reporting Relief

By: Jessica Waltman, Principal, Forward Health Consulting

Late in the afternoon on December 23, 2022, the Administration issued Affordable Care Act FAQ #56, and in doing so gave a little holiday gift to all group health plans nationwide.  The guidance establishes limited deadline and enforcement relief for the 2020 and 2021 Prescription Drug Data Collection (RxDC) submissions that were due by December 27, 2022.  There will be a compliance safe harbor for all group health plans and health insurance issuers that use a good faith, reasonable interpretation of the regulations and reporting instructions when making data submissions.  There will also be a submission grace period through January 31, 2023, meaning the federal government will not consider a plan or issuer to be out of compliance with these requirements provided that a good faith submission of 2020 and 2021 data is made on or before that date.   

The guidance also includes the following relief for 2020 and 2021 data submissions to make the reporting process easier:

  1. E-mail Submissions Allowed for Certain Types of Data –Originally, all group data submissions needed to be through the Centers for Medicare and Medicaid Services’ Health Insurance Oversight System (HIOS) and getting a HIOS ID to be able to submit can take up to two weeks. Now, if a group health plan or its reporting entity is submitting only the plan list, premium and life-years data, and a narrative response and is not submitting any other data, it may submit the file by email to RxDCsubmissions@cms.hhs.gov.  The emailed submission must include the plan list file, premium and life-years data (data file D1), and a narrative response.  The name of each file should include the reference year of the submission, the plan list or data file type (e.g., P2, D1), and the name of the group health plan sponsor.
  2. Reporting Entities May Make Multiple Submissions—When the submission rules were first released, they indicated that entities helping plans with RxDC reporting were only allowed to make one submission in HIOS.  That submission could include data for many health plans aggregated together, but each reporting entity was limited to one submission per HIOS account per applicable reporting or reference year (2020 or 2021).  However, the new guidance clarifies that when a reporting entity submits on behalf of more than one plan or issuer for a reference year, the reporting entity may create more than one submission for that reference year.
  3. Multiple Entities May Submit Reports for the Same Group Plan—If a group plan has multiple vendors preparing data for submission on their behalf, instead of making all reporting entities work together to consolidate the plan’s or issuer’s data into a single data file for each type of data, now the data can be reported by each entity separately.
  4. Less Aggregation Required—Initially, the reporting guidance specified that if health insurance issuers, PBMs, third-party administrators, or other service providers reported on behalf of one or more plans or issuers in a state and market segment, the data submitted by each of these reporting entities needed to be aggregated to at least the aggregation level used by the reporting entity that submits data on the total annual spending on health care services on behalf of those plans or issuers.  For 2020 and 2021 data only, a reporting entity submitting the required data may, within each state and market segment, aggregate at a less granular level than that used by the reporting entity that is submitting the total annual spending data.
  5. Optional Vaccine Reporting—Entities need to report pharmaceutical data using the CMS drug name and therapeutic class crosswalk.  This crosswalk was updated on October 3, 2022, to include National Drug Codes (NDCs) for vaccines.  Reporting entities may, but are not required to, incorporate these vaccine NDCs in their data files.
  6. Amounts Not Subject to the Deductible or Out-of-Pocket Maximum—Entities do not have to report the amount of any Rx spending that was not applied to a deductible or out-of-pocket maximum.  There are columns for this spending on the D2 and D6 data file templates.  Plans that do not include this data should leave the data fields in these columns blank.

This deadline and enforcement relief is transitional and only applies to the 2020 and 2021 calendar year submissions that were originally due on December 27, 2022.  All group health plans of all sizes and funding structures still need to complete RxDC reporting.  Put another way, this guidance does not exempt any entity from ultimately completing their reports, and all affected entities are expected to continue to work in good faith toward full compliance with these requirements.  This guidance does not apply to the 2022 calendar year RxDC reporting, which must be completed on or before June 1, 2023.  The Administration indicated it will monitor stakeholder efforts to comply with the 2020 and 2021 reporting requirements and issue additional guidance as needed in advance of the next reporting deadline.

2024 Out-of-Pocket Limits Released

By: Megan Diehl, Manager, Compliance Consulting, MZQ Consulting

The Department of Health and Human Services has announced the new out-of-pocket (OOP) limits that will apply to group and individual health plans during the 2024 plan year.  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 2024 limits are listed below in comparison to the 2023 limits:

Out-of-Pocket Limits
Coverage Type20232024
Self-Only Coverage$9,100$9,450
Family Coverage$18,200$18,900

Under the ACA, the OOP 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) preventive and wellness services, including chronic disease management, and (10) pediatric services, including oral and vision care.

Of note, the IRS has not yet released the 2024 out-of-pocket limits for HSA-qualified high deductible health plans.  We will share these limits as soon as they become available.

End-of-Year Compliance Deadlines and Reminders

By: Megan Diehl, Manager, Compliance Consulting, MZQ Consulting

The end of the 2022 calendar year is fast approaching, and with it come numerous deadlines that can directly or indirectly impact employer group health plans.  Below is an overview of several items that plan sponsors should be mindful of this season.

The Affordable Care Act’s Employer Mandate

  • The IRS recently formalized the automatic 30-day extension for employers to furnish Forms 1095-B/C to recipients that the department first introduced in 2021.  With this extension, employers need to make sure that 2022 forms are distributed to employees by March 2, 2023.
  • 2022 Forms 1095-B/C and Form 1094-B/C must be successfully e-Filed with the IRS by March 31, 2023.  The good faith transition relief that formerly shielded employers from penalties for incorrect and/or incomplete ACA filings is no longer available.  Employers must successfully e-File complete, accurate ACA filings by this deadline or risk exposure to information return penalties and employer mandate penalties.
  • As a reminder, the affordability percentage as adjusted for inflation has decreased significantly from 9.61% in 2022 to 9.12% in 2023.  This means that, effective the first day of the 2023 plan year, the lowest cost, employee-only plan option providing minimum value cannot exceed 9.12% of a full-time employee’s income to be considered affordable.  Applicable large employers should carefully analyze affordability for their 2023 plan year in advance of open enrollment.

 Premium Tax Credits and Cafeteria Plan Changes

  • Beginning January 1, 2023, dependents can start qualifying for government subsidized health insurance if they are not offered affordable coverage through an employer-sponsored plan, even if the coverage offered to their parent or spouse (who is the employee) is affordable for that employee.  This does not mean that employers are required to offer affordable family-level coverage; rather, the measure seeks to expand access to subsidized coverage from the dependent’s perspective without changing any requirements under the ACA’s employer mandate.  Employers may see decreased enrollment in their group plans as qualifying individuals switch to Marketplace coverage.
  • In conjunction with this change, the IRS revised the Section 125 cafeteria plan rules so that any employer, if they so choose, can begin allowing employees to drop family-level medical coverage midyear in order to enroll in exchange-based coverage.

The Consolidated Appropriations Act (CAA) & COVID-19 Relief

  • RxDC reports for both the 2020 and 2021 calendar years are due to CMS by December 27, 2022 (2022 reports are due by June 1, 2023).  Employers must report to the federal government information about medical care spending and premiums, overall spending on prescription drugs, prescription drugs that account for the most spending, the most frequently prescribed drugs, and drug manufacturer rebates.  In most cases, carriers will be submitting these reports on behalf of fully insured groups.  Employers with self-insured or level-funded plans will need to work in conjunction with their vendors to complete these reports, as they will not be able to collect all the data required without assistance.
  • Carriers and group health plan sponsors are required to publish an internet-based, self-service price comparison tool that will allow individuals to estimate their cost-sharing responsibility from different providers for a list of 500 items and services that CMS has identified.  This tool must be available when a plan either takes effect or renews in 2023; the information must also be made available in paper form upon request.  This tool is designed to allow participants to obtain cost sharing amounts by service and provider prior to receiving care.  Groups should coordinate with their vendors to ensure that this tool will be available for their participants as required.
  • Early COVID-19 legislation included provisions allowing sponsors of high deductible health plans to offer telemedicine services at no cost to participants, regardless of the plan’s annual deductible, without impacting HSA eligibility.  After initially expiring at the end of 2021, this relief was reinstated effective April 1, 2022.  The relief is currently scheduled to expire once again on December 31, 2022, pending any last-minute congressional action.
  • Employers with calendar year plans that first took advantage of various cafeteria plan changes permitted under COVID-19 relief (eased midyear election change rules, enhanced FSA carryovers, etc.) during their 2021 plan year must amend their Plans no later than December 31, 2022.  MZQ Consulting, LLC has already taken care of these amendments on behalf of our Compass and Compass Plus groups.

2022-2023 PCORI Fee Released

By: Megan Diehl, Manager, Compliance Consulting, MZQ Consulting

The Patient-Centered Outcomes Research Institute (PCORI) fee established by the Affordable Care Act helps fund research to evaluate and compare health outcomes, clinical effectiveness, risks, and benefits of medical treatment and services.  The fee is currently in place through 2029.  In Notice 2022-59, the IRS announced that the PCORI fee for plan years ending between October 1, 2022 and September 30, 2023 is $3.00.  This is an increase from the $2.79 payment for policy or plan years that ended between October 1, 2021 and September 30, 2022.  Employers and plan sponsors with self-funded plans are typically responsible for submitting IRS Form 720 and paying the PCORI fee by July 31 of the calendar year immediately following the last day of the plan year, meaning that payments for plan years that end in 2022 will be due in July of 2023.

PCORI fees for self-funded plans are assessed on all covered lives, not just on employees.  Plan sponsors are permitted to use one of three methods to calculate the average number of covered lives for the fee: the actual count method, the snapshot method, and the Form 5500 method.  The fee for employers with fully insured plans is assessed per employee, as opposed to per covered life.  Many employers that are fully insured do not need to take any action, as the insurer will submit the payment on their behalf.  Keep in mind, however, that fully insured employers with self-funded HRAs are required to pay the fee on each employee covered under the account.

2022 PCORI Filing Fee Calendar
Plan or Policy YearPCORI Filing Fee
February 2021 – January 2022$2.79
March 2021 – February 2022$2.79
April 2021 – March 2022$2.79
May 2021 – April 2022$2.79
June 2021 – May 2022$2.79
July 2021 – June 2022$2.79
August 2021 – July 2022$2.79
September 2021 – August 2022$2.79
October 2021 – September 2022$2.79
November 2021 – October 2022$3.00
December 2021 – November 2022$3.00
January 2022 – December 2022$3.00

2023 Health FSA Inflation Adjustments

By Jessica Waltman, Principal, Forward Health Consulting

On October 18, 2022, the Internal Revenue Service issued Revenue Procedure 2022-38 that sets forth various 2023 tax-related limits that have been adjusted for inflation.  The table below identifies updates to the 2023 health and fringe benefit plan limits addressed in the notice.

Benefit20222023
Maximum Annual Employee Contribution to a Health Flexible Spending Account (Health FSA)$2,850$3,050
Health FSA Carryover Limit$570$610
Adoption Assistance Programs$14,890$15,950
Maximum Annual Employer Contribution to Qualified Small Employer HRA (QSEHRA)$5,450 (self-only coverage) $11,050 (family coverage)$5,850 (self-only coverage) $11,800 (family coverage)
Maximum Monthly Benefit for Qualified Transit Passes, Van Pool Services, and Qualified Parking$280$300

Biden Administration Issues Final Rule to End the “Family Glitch”

By Jessica Waltman

The Biden Administration issued a final regulation and a new IRS notice on October 11, 2022, which eliminate the Affordable Care Act’s (ACA) “family glitch” beginning on January 1, 2023.  The “glitch” refers to the fact that the ACA’s current affordability standard is based on what a single person pays for employer-sponsored coverage in all circumstances.  This results in many people with employer-sponsored group health insurance paying far more for family coverage than the ACA’s coverage affordability threshold (9.5% of their household income, as adjusted annually for inflation).

Under this final regulation, if the employee’s cost for dependent coverage exceeds the ACA’s affordability threshold, then the affected dependents may be eligible for subsidized coverage through an exchange.  The accompanying IRS notice allows employers to amend their Section 125 Cafeteria Plans to permit eligible dependents to drop their group coverage midyear in favor of subsidized individual exchange coverage.

Importantly, the final rule makes it clear that this change will not affect the coverage affordability requirements for applicable large employers (ALEs) subject to the ACA’s employer shared responsibility provisions (i.e., the employer mandate).  The general rule that ALEs offer their full-time employees affordable coverage and the associated affordability safe-harbors remain in place.  ALEs will NOT be required to offer affordable coverage to dependents. 

The preamble to the final rule also explicitly states that the policy change will not impact ACA reporting for either ALEs or health insurance issuers.  It remains unclear how the IRS and the health insurance exchanges will verify the cost of employer-sponsored dependent coverage or if an employee has an affordable offer of employer-sponsored coverage based on their family income.

The regulation does explain that the Biden Administration intends to:

  • Revise the Exchange application on HealthCare.gov in advance of Open Enrollment for the 2023 plan year to include new questions about employer-sponsored coverage for family members;
  • Revise the list of information consumers need to gather from an employer about the coverage being offered;
  • Provide resources and technical assistance to State Exchanges that will need to make similar changes on their websites and Exchange application experiences;
  • Provide training on the new rules to agents, brokers, and others who assist applicants so applicants will better understand their options before enrolling, including the trade-offs if applicants are considering splitting their family between exchange-based and employer-sponsored coverage; and
  • Consider direct outreach to specific consumers who previously applied for subsidized coverage, were denied, but might benefit from the new rules.

Who Could Qualify for Subsidized Exchange Coverage?

The regulation provides several examples of who could now qualify for a premium tax credit based on the new formula for assessing affordability of employer-sponsored coverage.  The examples cover multiple complex situations, and we have summarized the most relevant scenarios in the following chart:

Scenario 1: Carrie is married to John, and they file a joint tax return.  John does not have access to employer-sponsored coverage, but Carrie does.  Carrie’s employer offers them coverage as a couple that is unaffordable based on their household income.  However, the coverage would be affordable for Carrie if she joined the plan as a single individual.
Who Has Affordable Coverage?Who Qualifies for Subsidized Individual Coverage?Does the Employer Have Penalty Liability?
Carrie has an offer of affordable employer coverage.John qualifies for subsidized coverage because he does not have an affordable offer from either his or Carrie’s employer.Carrie’s employer does not.  If John’s employer is an ALE, then they are at risk of receiving a penalty for not offering him affordable employee-only coverage.
Scenario 2: The facts of Scenario 1 remain the same, except that John gets a job at a company that offers him affordable coverage based on the single premium rate.
Who Has Affordable Coverage?Who Qualifies for Subsidized Individual Coverage?Does the Employer Have Penalty Liability?
Carrie and John now both have affordable employer offers of employee-only coverage.NobodyNo
Scenario 3: The facts of Scenario 2 remain the same; however, John and Carrie now have three children ages 10, 12, and 14.  The cost to insure their whole family together under either employer plan would be unaffordable based on their family income.
Who Has Affordable Coverage?Who Qualifies for Subsidized Individual Coverage?Does the Employer Have Penalty Liability?
Carrie and John both have affordable employer offers of employee-only coverage.Their three children qualify for subsidized coverage because they do not have affordable employer-sponsored coverage.No
Scenario 4: The facts of Scenario 3 remain the same, but Carrie’s company instead offers affordable family-level coverage.
Who Has Affordable Coverage?Who Qualifies for Subsidized Individual Coverage?Does the Employer Have Penalty Liability?
The whole family now has access to affordable coverage through Carrie’s employer.  John continues to also have an offer of affordable employee-only coverage through his own employer.NobodyNo
Scenario 5: The facts of Scenario 4 remain the same, except John and Carrie no longer claim their oldest child, Catherine, as their tax dependent because she is now 23 and working.  The cost of employer coverage through John’s work remains unaffordable to anyone in the family except for him. The cost to insure John and the two younger children on Carrie’s employer-sponsored plan is affordable.  When they add in the cost of insuring Catherine, though, the coverage becomes unaffordable.
Who Has Affordable Coverage?Who Qualifies for Subsidized Individual Coverage?Does the Employer Have Penalty Liability?
John, Carrie, and the two younger children continue to have access to affordable coverage through Carrie’s work.  John continues to also have an offer of affordable employee-only coverage through his own employer.  The fact that adding Catherine to Carrie’s coverage would make it unaffordable for the whole family is not a consideration, as Catherine is not a tax dependent.Catherine may be eligible for subsidized coverage if she chooses not to enroll in Carrie’s coverage.  If she has an offer of affordable single coverage through her own employer, then she will not qualify for subsidized coverage.Carrie and John’s employers do not.  If Catherine’s employer is an ALE, then they are at risk of receiving a penalty for not offering her affordable coverage.

Additional Provisions of the Rule

The final regulation also makes related changes to the definition of “minimum value” coverage.  As with the affordability rules, these revisions will consider family coverage when determining if a plan provides minimum value for dependents.  The rules also codify long-standing guidance establishing that if a plan does not provide substantial coverage for inpatient hospital care and physician services, then it does not meet the minimum value standard. 

Finally, the preamble to the final rule addresses concerns about how consumers will determine if coverage offered through a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) or through an employer-based Individual Coverage Health Reimbursement Arrangement (ICHRA) is affordable according to the new standards.  The regulation states that because the affordability standard for QSEHRAs is set by federal statute, change here cannot be made without Congressional action.  The IRS does intend to work with HHS on new guidance concerning ICHRA affordability assessments.

Related IRS Guidance

If an employer’s open enrollment period aligns with the annual exchange open enrollment period, then it will be simple for qualified individuals to decline group coverage and enroll in subsidized individual coverage through an exchange.  However, the IRS has published Notice 2022-41 to address the complications that could arise under this final rule when an employer’s plan year does not correspond with the exchange’s open enrollment period.

In most cases, individuals who enroll in an employer-sponsored medical plan can only drop their coverage midyear if they have a “qualifying event.”  This is due to the Section 125 Cafeteria Plan regulations that allow employees to pay for medical coverage on a pre-tax basis.  Right now, a spouse and/or dependent children realizing they may be eligible for subsidized exchange coverage is not a qualifying event.  This IRS Notice amends the existing Section 125 rules related to qualifying events so that employers with non-calendar plan years can now include this scenario as a qualifying event within their Section 125 plan documents.  Of note, the existing Section 125 regulations already permit employees to prospectively revoke their election for employer-sponsored coverage midyear in order to enroll in exchange-based coverage during the annual open enrollment or if they become eligible for a special enrollment period.

According to the new guidance, employers with non-calendar year plans can now allow employees to revoke their family-level (non-health FSA) medical coverage as long as:

  1. At least one of their dependents wants to enroll in exchange-based coverage, either during the exchange’s open enrollment period or because the dependent is eligible for a special enrollment period through the exchange.
  2. And, the dependent(s) intend to enroll in exchange-based coverage that starts no later than the day after their coverage under the employer-sponsored plan ends.  If the employee doesn’t also enroll in exchange-based coverage, they cannot revoke their own employer-sponsored coverage midyear.  They, and any other individuals they’re covering who don’t enroll in coverage through an exchange, will need to maintain enrollment in the employer’s plan.

Employers can rely on an employee’s attestation as proof that their relative has enrolled or will enroll in exchange-based coverage.  Employers are not required to allow these election changes.  However, if they wish to permit the changes, they must:

  1. Inform employees of their right to make a change in accordance with the new rule, and
  2. Adopt a formal plan amendment on or before the last day of the plan year in which the election changes are allowed.  This amendment may be made retroactively to the first day of the plan year[1]—meaning that election changes can technically be permitted before an amendment to the Cafeteria Plan document is made.  Plans cannot be amended to allow an actual election of coverage to be revoked on a retroactive basis.

What Employers Need to Do

Moving forward, employers need to be aware of the change to the affordability standard for family coverage, be prepared to communicate with employees about the new rule, and be very clear about the exchange’s open enrollment deadline.

Additionally, it is more imperative than ever that ALEs ensure they are offering affordable, minimum value coverage to their full-time employees.  While the ACA’s affordability requirements under the employer mandate (and associated penalty liability) continue to only apply to the employer’s lowest-cost offer of self-only, minimum value medical coverage, the existence of the new regulation means that more employees will seek exchange-based coverage.  With more employees participating in the exchange, the likelihood that an ALE will receive a penalty when they fail to offer employees affordable coverage increases, too.

Finally, employers with non-calendar plan years should consider adopting the changes to their Section 125 Cafeteria Plan that this new IRS guidance permits.  MZQ will help all our Compass and Compass Plus clients adopt these changes in advance of the regulated deadline.


[1] For plan years beginning in 2023, an extra year is permitted to complete the amendment (e.g., if a plan year begins April 1, 2023, the plan has until March 31, 2025 to complete the amendment).

Medicare Part D Coverage Notices Due Mid-October

By: Lee Spiegel, Director, Compliance, MZQ Consulting

The October 14, 2022 deadline by which plan sponsors that offer prescription drug coverage to provide notices of creditable or non-creditable coverage to Medicare-eligible individuals is fast approaching.  Coverage that is deemed creditable is expected to cover, on average, at least as much as the standard Medicare Part D prescription drug plan, whereas non-creditable coverage falls below this threshold.

Plan sponsors are required to provide such notices to the following individuals by the October 14 deadline:

  • Retirees and their dependents
  • Active employees who qualify for Medicare and their dependents
  • COBRA participants who qualify for Medicare and their dependents

The Medicare Part D annual enrollment period begins October 15 and runs through December 7 for coverage that will begin on January 1, 2023.  Prior to the enrollment period, plan sponsors must specify whether an individual’s prescription drug coverage is creditable or non-creditable.  The annual deadline to provide coverage notices applies to all plans that offer prescription drug coverage, regardless of plan size, employer size, or grandfathered status.  Plan sponsors can provide the required notice along with annual enrollment materials as long as the notice is “prominent and conspicuous.”  This can be as a separate mailing or provided electronically if the participants have daily access to the plan sponsor’s electronic information system as part of their work duties.

If the notices are mailed to participants, a single notice can be provided to a covered Medicare individual and their dependents, unless it is known that a spouse or dependent resides at a different address than the participant.  CMS has provided model notices on their website; plan sponsors should carefully review and customize these notices to ensure they accurately reflect plan provisions.  In addition to providing Medicare-eligible individuals with annual notices of prescription drug coverage status, all plan sponsors are responsible for disclosing whether such plan is creditable or non-creditable to the Centers for Medicare and Medicaid Services (CMS).  The plan sponsor has 60 days after the beginning of each plan year to complete the Creditable Coverage Disclosure Form on the CMS Creditable Coverage website.

Please note that MZQ Consulting automatically provides the required Medicare D notices to all clients using our Compass or Compass Plus products.

Medical Loss Ratio Rebate Guidelines

Many sponsors of fully insured health plans either already have or will soon receive checks from their insurance carriers, along with a notice informing them that the check is a medical loss ratio (MLR) rebate. Plan sponsors should receive these checks by September 30, 2022. The MLR rules implemented as part of health care reform are designed to ensure that insurance carriers spend no more than a specified percentage of premiums collected on overhead-type expenses. Carriers must issue a rebate check in cases when this percentage is exceeded.

Plan sponsors who receive MLR rebates generally have a fiduciary duty to handle the funds in accordance with certain guidelines. The following section provides a brief overview of the administrative rules plan sponsors should follow when processing these carrier rebates.

Does the employer have a wrap plan in place allocating rebates to employer contributions first?

(The answer to this is YES if they have the MZQ plan.)

If yes, did the employer contribute MORE than the value of the rebate?

If yes, the rebate is payable to the employer’s GENERAL ASSETS. Employers can choose how to handle the rebate, including distribute it to plan participants if that is the group’s preference.

If groups do not have a wrap plan with this specific language…

  • This rebate should be considered a plan asset subject to the exclusive benefit rule, which requires that such assets be used exclusively for the benefit of participants and their beneficiaries.
  • If the plan sponsor, aka the employer, has a wrap plan document in place and it does not have this specific language allocating rebates to employer contributions first, they should follow any rules the document outlines for distributing MLR rebates to employees.
  • If there is no wrap plan in place, or if the document does not address MLR rebate distributions, the employer will need to exercise discretion in accordance with the guidelines detailed below when determining how to allocate the credit and be sure to document their process.
  • Allocation options include:
    • Paying affected employees directly
    • Using the rebate funds for future premium reductions
    • Using the money for benefit enhancements
  • The federal government urges employers to select the first option, which involves providing each participant with a check for his/her share of the credit (this is taxable income). This is often also the simplest approach for processing the rebate.
  • The employer can decide if they would like to distribute the rebate evenly among affected employees or use a weighted average based on the amount each employee paid (i.e., single rate versus family rate).
  • The rebate can go to current plan participants- groups do not need to locate former employees, COBRA participants, etc. to distribute the funds (though they may if they so choose).
  • Plan sponsors have 90 days to distribute rebates to employees.

Additional Guidance Issued on Surprise Billing Protections

By: Jessica Waltman, Principal, Forward Health Consulting

The Consolidated Appropriations Act of 2021 (CAA) introduced numerous protections against surprise billing for plan participants that impact group health plans, health insurance issuers, and providers.  The federal Departments of Health and Human Services, Labor, and Treasury recently released a document discussing frequently asked questions (FAQs) about these surprise billing protections that provides clarity on a number of topics within the regulations.  The key points from this guidance are outlined below.

Application to Reference Based Pricing Plans

It has been unclear how the surprise billing rules apply to plans without networks, such as reference-based pricing plans.  The new guidance clarifies that:

  • The surprise billing rules apply to plans without networks;
  • Plans without networks need to protect against balance billing for emergency care and air ambulance services; and
  • Plans without networks do not need to comply with the surprise billing rules as they relate to non-emergency out-of-network services provided at in-network facilities.

In other words, participants covered by such plans can still receive balance bills for non-emergency care, but not for emergency care or covered air ambulance services.

In cases where there is no network, the “in-network” rate for this purpose is determined based on the first of the following, as applicable:

  • All-Payer Model Agreement
  • Specific state law
  • The lesser of the billed charge or the qualified payment amount (QPA). 

Plans Without Out-of-Network Coverage

The FAQs affirm and clarify that the surprise billing protections apply to closed network plans, such as HMOs and EPOs, if the plan covers these items generally.  This is the case even if the plan does not typically provide coverage for out-of-network items or services.  As a result, many plans that do not typically offer out-of-network coverage will be required offer such coverage for the items and services subject to the surprise billing protections.

Applicability to Air Ambulance Services

The CAA does not require that plans cover air ambulance services.  However, if a plan does cover air ambulance services, then the surprise billing protections apply when service is rendered by an out-of-network air ambulance provider.  Of note, if the plan onlycovers emergency air ambulance services, the CAA’s protections would not also extend to non-emergent air ambulance services.  When a plan does cover air ambulance services, the surprise balance billing protections apply even when the participant is picked up outside of the United States

Application to Behavioral Health Crisis Facilities

Out-of-network behavioral health facilities that (1) are either part of a hospital’s emergency department or geographically distinct from a hospital, (2) have a state license designating them as capable of providing emergency care services, and (3) provide behavioral health crisis response services are subject to the CAA’s surprise billing protections.  This means that plan participants who receive emergency care from these facilities cannot receive surprise bills.

Notice and Disclosure Requirements

The CAA requires group health plans and insurance carriers to notify plan participants about various balance billing protections available to them.  These notices should be posted on the plan’s website (or the website of a plan vendor pursuant to a written agreement) and included on each explanation of benefits for applicable covered items or services.

Calculating Qualifying Payment Amounts (QPAs)

The FAQs specify that:

  • Plans and issuers can calculate separate QPAs for each provider specialty if the plan’s/issuer’s contracted rates for service codes vary based on provider specialty; and
  • Self-funded groups that offer multiple plan options managed by multiple TPAs can calculate their QPAs separately per plan option.

Nuances of the Independent Dispute Resolution Process

Providers must wait until they receive an initial payment or a notice of denial of payment from the plan/insurer to start the Federal independent dispute resolution process.  This is true even if the plan or insurer fails to comply with their obligation to send the initial payment or a notice of payment denial within 30 calendar days of receiving the bill from the provider.

The FAQs also note that:

  • An initial payment does not need to be the full QPA for an item or service, but it must be an amount that could reasonably be considered full payment;
  • Notices of denials of payment must (1) be in writing and (2) explain why the payment is being denied; and
    • Payment denials differ inherently from benefit denials because payment denials may be disputed through the Federal IDR process, whereas benefit denials due to adverse benefit determinations can be disputed through the plan’s claims and appeals process.

These FAQs indicate that guidance surrounding the CAA’s surprise billing protections may evolve further as parties engage with the Federal IDR process. We will continue to notify you of relevant updates as they become available.

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