DOL and the Treasury Release a Final Rule on the Extension of Certain Timeframes Due to COVID-19

The DOL and the Treasury released a final rule that extends certain timeframes under the ERISA and IRC for group health plans, disability, and other welfare plans, pension plans, and participants and beneficiaries of these plans during the COVID-19 national emergency. The timing extensions are issued to help alleviate problems faced by health plans to comply with strict ERISA and IRC timeframes and problems faced by participants and beneficiaries in exercising their rights under health plans during the COVID-19 national emergency. The final rule takes effect May 4, 2020.

Read more about the final rule.

DOL Issues Disaster Relief Notice 2020-01

The DOL recognizes that the COVID-19 outbreak may impede efforts to comply with various requirements and deadlines under ERISA. As a result, the DOL’s Employee Benefits Security Administration (EBSA) issued Notice 2020-01 (Notice) that applies to employee benefit plans, employers, labor organizations, and other plan sponsors, plan fiduciaries, participants and beneficiaries, and service providers subject to ERISA. The Notice was issued in addition to the timeframe extensions final rule noted above. The Notice provides an extension on deadlines for furnishing other required notices or disclosures to plan participants, beneficiaries, and other persons so that plan fiduciaries and plan sponsors have additional time to meet their obligations under Title I of ERISA during the COVID-19 outbreak.

Read more about the Notice.

 

DOL Releases Temporary Regulations on the Families First Coronavirus Response Act

The DOL released temporary regulations implementing the Emergency Family Medical Leave Expansion Act (EFMLEA) and the Emergency Paid Sick Leave Act (EPSLA) provisions under the FFCRA. The regulations are effective April 1, 2020, through December 31, 2020, which corresponds to the effective and sunset dates for the FFCRA. The temporary regulations were issued by the DOL to provide immediate guidance prior to the publication of the FFCRA final regulations, and have the force of law.

 

Following the temporary regulations, the DOL released a correction to the temporary regulations that contained mainly non-substantive corrections to the temporary regulations, such as section numbering and referencing issues. However, the correction also clarified whether an employer can require an employee to use provided or accrued leave, such as vacation time or paid time off, concurrently with expanded Family and Medical Leave Act (FMLA) leave. The correction notice clarifies that an employee may elect to use, or an employer may require an employee to use provided or accrued paid leave concurrently with the paid portion of expanded FMLA leave.

Read more about the temporary regulations.

SBA Releases Interim Final Regulations and FAQs on the Paycheck Protection Program

The SBA released interim final regulations on the PPP. The interim final regulations were released in Q&A format providing guidance on key questions such as how to determine if an organization is eligible for the loan, how to determine the amount that can be borrowed, how to submit an application for the loan, and how the loan can be used.

The SBA and the Treasury also released FAQs on the PPP. The FAQs address various topics such as whether businesses with more than 500 employees can be eligible for a PPP loan, payroll substantiation requirements, the definition of payroll costs, and the payroll calculation time period.

Read more about the PPP in our UBA Advisors “The Coronavirus Aid, Relief, and Economic Security Act Paycheck Protection Program” and “The Coronavirus Aid, Relief, and Economic Security Act Paycheck Protection Program Update.”

DOL, HHS, and the Treasury Issue FAQs on Health Plan Coverage under the FFCRA

The DOL, Department of Health and Human Services (HHS), and the Treasury have issued FAQs regarding group health plan coverage requirements under the FFCRA and the CARES Act. The FAQs clarify which health plans are subject to the coverage requirements for COVID-19 testing. Additionally, the FAQs provide relief from the timing requirements for providing plan participants with advance notification of modifications to a plan’s summary of benefits and coverage (SBC) when the modifications are made to add benefits or reduce cost sharing for coverage related to the diagnosis or treatment of COVID-19. The FAQs provide additional guidance on topics such as coverage for in vitro diagnostic tests and excepted benefits providing coverage for COVID-19 testing.

Read more about the FAQs.

IRS Issues Notice Extending Tax Deadlines for Individuals and Business

Last month the Internal Revenue Service (IRS) issued IRS Notice 2020-18 which delayed the April 15, 2020, federal income tax filing and payment deadline for calendar year 2019 until July 15, 2020. The IRS recently released IRS Notice 2020-23 that expands this relief to additional returns, tax payments and other actions. As a result, the extensions generally now apply to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020. Individuals, trusts, estates, corporations and other non-corporate tax filers qualify for the extra time.

Notably, IRS Notice 2020-23 has extended the Form 5500 filing deadline until July 15, 2020, for filings otherwise required to be made between April 1, 2020, and July 14, 2020, including those filings with deadlines falling within those dates due to a plan administrator’s request for a filing extension on IRS Form 5558, Application of Extension of Time to File Certain Employee Plan Returns.

Read more about IRS Notice 2020-23.

IRS Releases Form 7200 and Instructions

The IRS released Form 7200 along with completion Instructions. Form 7200 may be used by an employer to request an advance payment of tax credits for paid leave under the FFCRA and under the CARES Act employee retention tax credit (ERTC) provisions. The Instructions to Form 7200 are straightforward and provide line-by-line completion guidance.

The IRS also released frequently asked questions regarding the leave tax credits and ERTC.

Read more about IRS Form 7200.

CMS Issues FAQs on Issuer Flexibilities for Utilization Management and Prior Authorization Due to COVID-19

The Centers for Medicare and Medicaid Services (CMS) issued FAQs on utilization management and prior authorization under individual, large group, and small group plans offered by health insurance issuers to mitigate the impact of the COVID-19 public health emergency on providers. The FAQs encourage issuers to relax otherwise applicable utilization management processes, as permitted by state law, to ensure that staff at hospitals, clinics, and pharmacies can focus their limited time and resources on care delivery, and to ensure that patients have no delay in receiving needed care. The FAQs also encourage issuers to work with out-of-network providers to agree on a rate to ensure that enrollees are not balanced billed.

Read more about the FAQs.

DOL Issues FAQs on Health Benefits and Retirement Plans for Plan Participants and Beneficiaries

The DOL issued FAQs to help employee benefit plan participants and beneficiaries, as well as plan sponsors, and employers, impacted by the COVID-19 outbreak understand their rights and responsibilities under Title I of ERISA. The FAQs provide general information on health benefit questions and who to contact regarding issues such as whether an individual will continue to be covered by an employer’s health plan if the employer temporarily closes, how to obtain other health coverage if an individual loses employer sponsored coverage, and whether COBRA notification timeframes have been extended.

The FAQs also provide information on retirement benefit questions and who to contact regarding issues such as obtaining retirement benefits and pension payments when an employer has temporarily closed, making changes to 401(k) investments when the plan official or service provider has been adversely affected by COVID-19, and whether an employer can terminate the retirement plan due to COVID-19.

CMS Releases 2021 Parameters for Medicare Part D Prescription Drug Benefit

The CMS released the following parameters for the defined standard Medicare Part D prescription drug benefit for 2021:

 

Deductible	$ 445
Initial coverage limit	$ 4,130
Out-of-pocket threshold	$ 6,550
Total covered Part D spending at the out-of-pocket threshold (for beneficiaries who areineligible for the coverage gap discount program)	$ 9,313.75
Minimum cost-sharing in catastrophic coverage portion of the benefit	$ 3.70 for generic/preferred multi-source drugs $ 9.20 for all other drugs

 

Generally, group health plan sponsors must disclose to Part D eligibility individuals whether the prescription drug coverage offered by the employer is creditable. Coverage is creditable if it, on average, pays out at least as much as coverage available through the defined standard Medicare Part D prescription drug plan.

1. If a health plan is modifying the terms of the plan or coverage to provide greater coverage related to the diagnosis and/or treatment of COVID-19 that affects the content of the summary of benefits and coverage (SBC) that is not reflected in the most recently provided SBC, will the plan be in violation of the timing requirements if it does not provide notice of the modification to enrollees at least 60 days prior to the date on which the modification takes effect?
2. No. The DOL, HHS, and the Treasury will not take enforcement action against a plan or issuer that makes a modification to provide greater coverage related to the diagnosis and/or treatment of COVID-19, without providing at least 60 days advance notice. Plans and issuers must provide notice of the changes as soon as reasonably practicable.

Consistent with an ERISA fiduciary’s duties to act prudently and in the best interest of the plan participants and beneficiaries, the fiduciary has an obligation to protect plan assets and data from access by cybercriminals and have processes in plan to mitigate cybersecurity breaches. The DOL has prepared the following best practices for use by recordkeepers and other service providers responsible for plan-related IT systems and data, and for plan fiduciaries making prudent decisions on the service providers to be considered for engagement. Pursuant to the guidance, plan service providers should:

• Have a formal, well-documented cybersecurity program that identifies and assesses internal and external cybersecurity risks that may threaten the confidentiality, integrity, or availability of stored nonpublic information.
• Conduct prudent annual risk assessments to identify, estimate, and prioritize information system risks.
• Have an independent auditor assess an organization’s security controls and provide a clear, unbiased report of existing risks, vulnerabilities, and weaknesses.
• Clearly define and assign information security roles and responsibilities, which should be managed at the senior executive level and executed by qualified personnel who establish and maintain the vision, strategy, and operation of the cybersecurity program.
• Have strong access control procedures to guarantee that users are properly identified and have the appropriate access to IT systems and data, mainly consisting of authentication and authorization.
• Ensure that any assets or data stored in a cloud or managed by a third-party service provider are subject to appropriate security reviews and independent security assessments.
• Conduct periodic cybersecurity awareness training because employees are often an organization’s weakest link for cybersecurity. A comprehensive cybersecurity security awareness program sets clear cybersecurity expectations for all employees and educates everyone to recognize attack vectors, help prevent cyber-related incidents, and respond to a potential threat.
• Implement and manage a secure system development life cycle (SDLC) program to ensure that security assurance activities such as penetration testing, code review, and architecture analysis addressed.
• Have an effective business resiliency program addressing business continuity, disaster recovery, and incident response.
• Encrypt sensitive data, stored and in transit, which implement current, prudent standards for encryption keys, message authentication and hashing to protect the confidentiality and integrity of the data at rest or in transit.
• Implement strong technical controls in accordance with best security practices. Technical security solutions are primarily implemented and executed by the information system through mechanisms contained in the hardware, software, or firmware components of the system.
• Appropriately respond to any past cybersecurity incidents. When a cybersecurity breach or incident occurs, appropriate action should be taken to protect the plan and its participants, including informing law enforcement and participants and fixing the problem that caused the breach.

Plan sponsors can assist participants in protecting confidential personal and plan asset information, and reduce the likelihood of fraud, by encouraging participants to routinely monitor online benefits accounts. Strong and unique passwords should be used in addition to multi-factor authentication. 

Plan sponsors should also ensure that they maintain the most current contact information for participants in the event needed to immediately communicate any cybersecurity breach. Additionally, the plan sponsor should have a policy of advising participants to avoid the use of free Wi-Fi networks, such as the public Wi-Fi available at airports, hotels, or coffee shops pose security risks that may give criminals access to personal information. 

Plan sponsors should have processes in place to mitigate phishing attacks intended to trick participants into sharing passwords, account numbers, and sensitive information, and access to accounts. Plan sponsors are encouraged to implement and maintain trustworthy antivirus software installed and updated to protect workplace computers and mobile devices to protect against viruses and malware. Software should also be kept current with the latest patches and upgrades. 

Last, the FBI and the Department of Homeland Security have set up the following valuable sites for reporting cybersecurity incidents that plan sponsors are encouraged to utilize: https://www.fbi.gov/file-repository/cyber-incident-reporting-united-message-final.pdf/view    https://www.cisa.gov/reporting-cyber-incidents 

This information is general and is provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.

Q1: I have heard that the ARP included temporary COBRA premium assistance to pay for health coverage. I would like more information.

The ARP provides temporary premium assistance for COBRA continuation coverage for Assistance Eligible Individuals (see Q3 to determine if you are eligible). COBRA allows certain people to extend employment-based group health plan coverage, if they would otherwise lose the coverage due to certain life events such as loss of a job.

 

Individuals may be eligible for premium assistance if they are eligible for and elect COBRA continuation coverage because of their own or a family member’s reduction in hours or an involuntary termination from employment. This premium assistance is available for periods of coverage from April 1, 2021 through September 30, 2021. This premium assistance is generally available for continuation coverage under the Federal COBRA provisions, as well as for group health insurance coverage under comparable state continuation coverage (“mini-COBRA”) laws.

 

If you were offered Federal COBRA continuation coverage as a result of a reduction in hours or an involuntary termination of employment, and you declined to take COBRA continuation coverage at that time, or you elected Federal COBRA continuation coverage and later discontinued it, you may have another opportunity to elect COBRA continuation coverage and receive the premium assistance, if the maximum period you would have been eligible for COBRA continuation coverage has not yet expired (if COBRA continuation coverage had been elected or not discontinued).

 

Q2: Which plans does the premium assistance apply to?

The COBRA premium assistance provisions apply to all group health plans sponsored by private-sector employers or employee organizations (unions) subject to the COBRA rules under the Employee Retirement Income Security Act of 1974 (ERISA). They also apply to plans sponsored by State or local governments subject to the continuation provisions under the Public Health Service Act. The premium assistance is also available for group health insurance required under state mini-COBRA laws.

 

Q3: How can I tell if I am eligible to receive the COBRA premium assistance?

The ARP makes the premium assistance available for “Assistance Eligible Individuals.” An Assistance Eligible Individual is a COBRA qualified beneficiary who meets the following requirements during the period from April 1, 2021 through September 30, 2021:

• Is eligible for COBRA continuation coverage by reason of a qualifying event that is a reduction in hours (such as reduced hours due to change in a business’s hours of operations, a change from full-time to part-time status, taking of a temporary leave of absence, or an individual’s participation in a lawful labor strike, as long as the individual remains an employee at the time that hours are reduced) or an involuntary termination of employment (not including a voluntary termination); and
• Elects COBRA continuation coverage.

However, you are not eligible for the premium assistance if you are eligible for other group health coverage, such as through a new employer’s plan or a spouse’s plan (not including excepted benefits, a qualified small employer health reimbursement arrangement (QSEHRA), or a health flexible spending arrangement (FSA)), or if you are eligible for Medicare. Note that if you have individual health insurance coverage, like a plan through the Health Insurance Marketplace®, or if you have Medicaid, you may be eligible for ARP premium assistance. However, if you elect to enroll in COBRA continuation coverage with premium assistance, you will no longer be eligible for a premium tax credit, advance payments of the premium tax credit, or the health insurance tax credit for your health coverage during that period.

 

Note: If the employee’s termination of employment was for gross misconduct, the employee and any dependents would not qualify for COBRA continuation coverage or the premium assistance.

Q4: If I am eligible for the premium assistance, how long will it last?

Your premium assistance can last from April 1, 2021 through September 30, 2021. However, it will end earlier if:

• You become eligible for another group health plan, such as a plan sponsored by a new employer or a spouse’s employer (not including excepted benefits, a QSEHRA, or a health FSA), or you become eligible for Medicare**, or
• You reach the end of your maximum COBRA continuation coverage period.

If you continue your COBRA continuation coverage after the premium assistance period, you may have to pay the full amount of the premium otherwise due. Failure to do so may result in your loss of COBRA continuation coverage. Contact your plan administrator, employer sponsoring the plan, or health insurance issuer for more information.

 

When your COBRA premium assistance ends, you may be eligible for Medicaid or a special enrollment period to enroll in coverage through the Health Insurance Marketplace® or to enroll in individual market health insurance coverage outside of the Marketplace. A special enrollment period is also available when you reach the end of your maximum COBRA coverage period. You may apply for and, if eligible, enroll in Medicaid coverage at any time. For more information, go to: https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/.

 

**Individuals receiving the COBRA premium assistance must notify their plans if they become eligible for coverage under another group health plan (not including excepted benefits, a QSEHRA, or a health FSA), or for Medicare. Failure to do so can result in a tax penalty.

Q5: Who is eligible for an additional election opportunity for COBRA continuation coverage?

A qualified beneficiary whose qualifying event was a reduction in hours or an involuntary termination of employment prior to April 1, 2021 and who did not elect COBRA continuation coverage when it was first offered prior to that date or who elected COBRA continuation coverage but is no longer enrolled (for example, an individual who dropped COBRA continuation coverage because he or she was unable to continue paying the premium) may have an additional election opportunity at this time. Individuals eligible for this additional COBRA election period must receive a notice of extended COBRA election period informing them of this opportunity. This notice must be provided within 60 days of the first day of the first month beginning after the date of the enactment of the ARP (so, by May 31, 2021) and individuals have 60 days after the notice is provided to elect COBRA. However, this additional election period does not extend the period of COBRA continuation coverage beyond the original maximum period (generally 18 months from the employee's reduction in hours or involuntary termination). COBRA continuation coverage with premium assistance elected in this additional election period begins with the first period of coverage beginning on or after April 1, 2021. Individuals can begin their coverage prospectively from the date of their election, or, if an individual has a qualifying event on or before April 1st, choose to start their coverage as of April 1st, even if the individual receives an election notice and makes such election at a later date. In either case, please note that the premium assistance is only available for periods of coverage from April 1, 2021 through September 30,2021.

 

Due to the COVID-19 National Emergency, the DOL, the Department of the Treasury, and the IRS issued a Notice of Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID–19 Outbreak (“Joint Notice”). This notice provided relief for certain actions related to employee benefit plans required or permitted under Title I of ERISA and the Code, including the 60-day initial election period for COBRA continuation coverage. The DOL’s Employee Benefits Security Administration (EBSA) provided further guidance on this relief in EBSA Disaster Relief Notice 2021-01.4 This extended deadline relief provided in the Joint Notice and Notice 2021-01 does not apply, however, to the 60-day notice or election periods related to COBRA premium assistance under the ARP.

Q6: Does the ARP change any State program requirements or time periods for election of continuation coverage?

No. The ARP does not change any requirement of a State continuation coverage program. The ARP only allows Assistance Eligible Individuals who elect continuation coverage under State insurance law to receive premium assistance from April 1, 2021 through September 30, 2021. It also allows Assistance Eligible Individuals to switch to other coverage offered to similarly situated active employees if the plan allows it, provided that the new coverage is no more expensive than the prior coverage. See Q15 and Q17 for more information.

Q7: How do I apply for the premium assistance?

If you were covered by an employment-based group health plan on the last day of your employment or a family member’s employment (or the last day before your or your family member’s reduction in hours causing a loss of coverage), the plan or issuer should provide you and your beneficiaries with a notice of your eligibility to elect COBRA continuation coverage and to receive the premium assistance. The notice should include any forms necessary for enrollment, including forms to indicate that you are an Assistance Eligible Individual and that you are not eligible for another group health plan (this does not include excepted benefits, a QSEHRA, or a health FSA), or eligible for Medicare.

 

If you believe you are (or may be, upon a COBRA election) an Assistance Eligible Individual and have not received a notice from your employer, you may notify your employer of your request for treatment as an Assistance Eligible Individual (for example, using the “Request for Treatment as an Assistance Eligible Individual Form” that is attached to the Summary of COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021) for periods of coverage starting April 1, 2021. If you are an Assistance Eligible Individual, the ARP provides that you must be treated, for purposes of COBRA, as having paid in full the amount of such premium from April 1, 2021 through September 30, 2021. Accordingly, plans and issuers should not collect premium payments from Assistance Eligible Individuals and subsequently require them to seek reimbursement of the premiums for periods of coverage beginning on or after April 1, 2021, and preceding the date on which an employer sends an election notice, if an individual has made an appropriate request for such treatment. You should contact your plan or issuer directly to ask about taking advantage of the premium assistance.

Q8: How will the premium assistance be provided to me?

You will not receive a payment of the premium assistance. Instead, Assistance Eligible Individuals do not have to pay any of the COBRA premium for the period of coverage from April 1, 2021 through September 30, 2021. The premium is reimbursed directly to the employer, plan administrator, or insurance company through a COBRA premium assistance credit.

Q9: Am I required to pay any administrative fees?

If you are an Assistance Eligible Individual, you will not need to pay any part of what you would otherwise pay for your COBRA continuation coverage, including any administration fee that would otherwise be charged.

Notices

Q10: Does the ARP impose any new notice requirements?

Yes, plans and issuers are required to notify qualified beneficiaries regarding the premium assistance and other information about their rights under the ARP, as follows:

• A general notice to all qualified beneficiaries who have a qualifying event that is a reduction in hours or an involuntary termination of employment from April 1, 2021 through September 30, 2021. This notice may be provided separately or with the COBRA election notice following a COBRA qualifying event.
• A notice of the extended COBRA election period to any Assistance Eligible Individual (or any individual who would be an Assistance Eligible Individual if a COBRA continuation coverage election were in effect) who had a qualifying event before April 1, 2021. This requirement does not include those individuals whose maximum COBRA continuation coverage period, if COBRA had been elected or not discontinued, would have ended before April 1, 2021 (generally, those with applicable qualifying events before October 1, 2019). This notice must be provided within 60 days following April 1, 2021 (that is, by May 31, 2021).

 

The ARP also requires that plans and issuers provide individuals with a notice of expiration of periods of premium assistance explaining that the premium assistance for the individual will expire soon, the date of the expiration, and that the individual may be eligible for coverage without any premium assistance through COBRA continuation coverage or coverage under a group health plan. Coverage may also be available through Medicaid or the Health Insurance Marketplace®. This notice must be provided 15 - 45 days before the individual’s premium assistance expires.

Unless specifically modified by the ARP, the existing requirements for the manner and timing of COBRA notices continue to apply. Due to the COVID-19 National Emergency, DOL, the Department of the Treasury, and the IRS issued guidance extending timeframes for certain actions related to health coverage under private-sector employment-based group health plans. The extensions under the Joint Notice and EBSA Disaster Relief Notice 2021-01 do not apply, however, to the notices or the election periods related to COBRA premium assistance available under the ARP. Therefore, plans and issuers must provide the notices according to the timeframes specified in the ARP (outlined above).

DOL is committed to ensuring that individuals receive the benefits to which they are entitled under the ARP. Employers or multiemployer plans may also be subject to an excise tax under the Internal Revenue Code for failing to satisfy the COBRA continuation coverage requirements. This tax could be as much as $100 per qualified beneficiary, but not more than $200 per family, for each day that the taxpayer is in violation of the COBRA rules.

Q11: What information must the notices include?

The notices must include the following information:

• The forms necessary for establishing eligibility for the premium assistance;
• Contact information for the plan administrator or other person maintaining relevant information in connection with the premium assistance;
• A description of the additional election period (if applicable to the individual);
• A description of the requirement that the Assistance Eligible Individual notify the plan when he/she becomes eligible for coverage under another group health plan (not including excepted benefits, a QSEHRA, or a health FSA), or eligible for Medicare and the penalty for failing to do so;
• A description of the right to receive the premium assistance and the conditions for entitlement; and
• If offered by the employer, a description of the option to enroll in a different coverage option available under the plan.

Q12: Will there be model notices?

Yes. DOL has developed model notices that are available at https://www.dol.gov/cobra-subsidy.

Individual Questions for Employees and Their Families

Q13: How much time do I have to enroll in COBRA continuation coverage?

In general, individuals who are eligible for COBRA continuation coverage have 60 days after the date that they initially receive their COBRA election notice to elect COBRA continuation coverage. Due to the COVID-19 National Emergency, DOL, the Department of the Treasury, and the IRS issued guidance extending timeframes for certain actions related to health coverage under private-sector employment-based group health plans. The extensions under the Joint Notice and EBSA Disaster Relief Notice 2021-01 do not apply, however, to the notices or elections related to COBRA premium assistance available under the ARP. Potential Assistance Eligible Individuals therefore must elect COBRA continuation coverage within 60 days of receipt of the relevant notice or forfeit their right to elect COBRA continuation coverage with premium assistance. Similarly, plans and issuers must provide the notices required under the ARP within the timeframe required by the ARP.

 

Assistance Eligible Individuals do not need to send any payments for the COBRA continuation coverage during the premium assistance period. For additional information about this guidance visit: https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/disaster-relief.

Q14: I am an Assistance Eligible Individual who has been enrolled in COBRA continuation coverage since December 2020. Will I receive a refund of the premiums that I have already paid?

No. The COBRA premium assistance provisions in the ARP apply only to premiums for coverage periods from April 1, 2021 through September 30, 2021. If you were eligible for premium assistance, but paid in full for periods of COBRA continuation coverage beginning on or after April 1, 2021 through September 30, 2021, you should contact the plan administrator or employer sponsoring the plan to discuss a credit against future payments (or a refund in certain circumstances).

Q15: I am currently enrolled in COBRA continuation coverage, but I would like to switch to a different coverage option offered by the same employer. Can I do this?

Group health plans can choose to allow qualified beneficiaries to enroll in coverage that is different from the coverage they had at the time of the COBRA qualifying event. The ARP provides that changing coverage will not cause an individual to be ineligible for the COBRA premium assistance, provided that:

• The COBRA premium charged for the different coverage is the same or lower than for the coverage the individual had at the time of the qualifying event;
• The different coverage is also offered to similarly situated active employees; and
• The different coverage is not limited to only excepted benefits, a QSEHRA, or a health FSA.

If the plan permits individuals to change coverage options, the plan must provide the individuals with a notice of their opportunity to do so. Individuals have 90 days to elect to change their coverage after the notice is provided.

Q16: Only part of my family elected COBRA continuation coverage but all of us were eligible. Can I enroll the others and take advantage of the premium assistance?

Each COBRA qualified beneficiary may independently elect COBRA continuation coverage. If a family member did not elect COBRA continuation coverage when first eligible and that individual would be an Assistance Eligible Individual, that individual has an additional opportunity to enroll and qualify for the premium assistance. However, this extended election period does not extend the maximum period of COBRA continuation coverage had COBRA continuation coverage been originally elected. See Q3 and Q5 above for more information.

Q17: I received my COBRA election notice. Can I change my coverage option from the one I had previously?

In general, COBRA continuation coverage provides the same coverage that the individual had at the time of the qualifying event. However, under the ARP, a plan may offer Assistance Eligible Individuals the option of choosing other coverage that is also offered to similarly situated active employees and that does not have higher premiums than the coverage the individual had at the time of the qualifying event. See Q15 for more information.

Q18: I am currently enrolled in individual market health insurance coverage, but I am potentially an Assistance Eligible Individual. Can I switch to COBRA continuation coverage with premium assistance?

Yes, Potential Assistance Eligible Individuals can use the election period to change from individual market health insurance coverage (that they got either through a Health Insurance Marketplace®, such as through HealthCare.gov, or outside of the Marketplace) to COBRA continuation coverage with premium assistance. Additionally, you may apply for and, if eligible enroll in Medicaid at any time. If you elect to enroll in COBRA continuation coverage with premium assistance, you will no longer be eligible for a premium tax credit, or advance payments of the premium tax credit, for Marketplace coverage you otherwise would qualify for during this premium assistance period. You must contact the Marketplace to let them know that you’ve enrolled in other minimum essential coverage or you may have to repay some or all of the advance payments of the premium tax credit made on your behalf during the period you were enrolled in both COBRA continuation coverage and Marketplace coverage. This repayment would be required when filing your income tax return for 2021 (see additional information about contacting the Marketplace below).

Q19: Can I end my individual health insurance coverage retroactively if I can qualify for COBRA with premium assistance starting on April 1?

Enrollees generally are not permitted to terminate coverage purchased through a Marketplace retroactively. You must do so prospectively. If you want to end coverage that you got from a Health Insurance Marketplace®, such as on HealthCare.gov, because you want to change to COBRA continuation coverage with premium assistance, you must update your Marketplace application or call the Marketplace to do so. If you enrolled in coverage through HealthCare.gov, you can call 1-800-318-2596 (TTY: 1-855-889-4325). If your state has its own Marketplace platform, find contact information for your State Marketplace here: https://www.healthcare.gov/marketplace-in-your-state/.

 

If you want to end individual health insurance coverage that you got outside of a Marketplace, such as directly from an insurance company, you must contact the insurance company to do so.

Q20: What should I consider when making a decision whether to continue with individual market health insurance coverage or change to COBRA continuation coverage with premium assistance?

You should consider the factors you normally would when deciding on which health insurance coverage is right for you and your family. For example, in addition to premium cost, you may want to compare cost-sharing requirements such as plan deductibles and copays. You may also want to consider how much progress you have made toward your deductible and other plan accumulators, and compare different plans’ and coverage options’ provider networks and prescription drug formularies based on your family’s medical care needs. Note, however, that if you are currently employed by the employer offering the COBRA continuation coverage with premium assistance, you may enroll in Marketplace coverage but are ineligible for a subsidy or a premium tax credit for the Marketplace coverage for the period you are offered the COBRA continuation coverage with premium assistance.

Q21: Can I qualify for a special enrollment period (SEP) to enroll in individual market health insurance coverage, such as through a Health Insurance Marketplace®, when my COBRA premium assistance ends on September 30? What about if my COBRA continuation coverage ends sooner than that?

When your COBRA premium assistance ends, you may be eligible for a SEP to enroll in coverage through a Health Insurance Marketplace®, or to enroll in individual health insurance 10 coverage outside of the Marketplace. You may also qualify for a SEP when you reach the end of your maximum COBRA coverage period. For more information about this SEP, see: https://www.healthcare.gov/unemployed/cobra-coverage/.

 

For more information about enrolling in Marketplace coverage, see: HealthCare.gov, or you can call 1-800-318-2596 (TTY: 1-855-889-4325). If your state has its own Marketplace platform, find contact information for your State Marketplace here: https://www.healthcare.gov/marketplace-in-your-state/.

 

You may apply for and, if eligible, enroll in Medicaid coverage at any time. For more information, go to: https://www.healthcare.gov/medicaid-chip/getting-medicaid-chip/

 

Q21: How can I get more information on my eligibility for COBRA continuation coverage or the premium assistance, including help if my employer has denied my request for the premium assistance?

For group health plans sponsored by private-sector employers, guidance and other information is available on the DOL web site at https://www.dol.gov/cobra-subsidy. You can also contact one of EBSA’s Benefits Advisors at askebsa.dol.gov or 1.866.444.3272.

 

EBSA’s Benefits Advisors may also be able to assist if you feel that your plan or employer has improperly denied your request for treatment as an Assistance Eligible Individual. Employers and plans may be subject to an excise tax under the Internal Revenue Code for failing to satisfy the COBRA continuation coverage requirements. This tax could be as much as $100 per qualified beneficiary, but not more than $200 per family, for each day that the plan or employer is in violation of the COBRA rules. If you feel you may have been improperly denied premium assistance, contact EBSA at askebsa.dol.gov or 1.866.444.3272.

 

If you work for a state or local government employer and have questions regarding the premium assistance, please contact the Centers for Medicare & Medicaid Services via email at phig@cms.hhs.gov or call 410-786-1565

Part 1

President Trump Signs Act into Law

Updated 12/28/2020

On December 28, 2020, President Trump signed the Consolidated Appropriations Act, 2021  (Appropriations Act), which includes the No Surprises Act (Act), into law. President Trump initially refused  to sign the Appropriations Act until amended to increase the COVID-19 stimulus payment from $600 to  $2,000, but signed the legislation, in part, to avoid a government shutdown. The legislation includes  roughly $900 billion in COVID-19 relief, including a number of provisions beneficial to hospitals and health  systems. The No Surprises Act seeks to protect consumers from surprise medical bills for emergency  services provided by out-of-network providers and facilities, non-emergency services provided by out-of network providers at in-network facilities, and air ambulance services. The Act also establishes other  means for protecting consumers. The Act amends Title XXVII of the Public Health Service Act (PHSA),  Part 7 of Title I of the Employee Retirement Income Security Act of 1974 (ERISA), and Chapter 100 of the  Internal Revenue Code of 1986 (IRC), effective for plan years beginning on or after January 1, 2022,  unless otherwise noted. The Act applies to group health plans or health insurance issuers offering group  or individual health insurance coverage and healthcare providers and facilities. This Advisor provides a  high-level summary of the No Surprises Act, which will be supplemented as additional guidance develops.

Preventing Surprise Medical Bills

Emergency Services

Under the Act, group health plans, or health insurance issuers offering group or individual health  insurance coverage, that provide or cover any benefits with respect to services in an emergency  department of a hospital (this includes a hospital outpatient department that provides emergency  services) or an independent freestanding emergency department (in-network or out-of-network, also

referred to as participating and non-participating), the plan or issuer must cover the emergency services  without the need for any prior authorization determination and without regard to any other term or  condition of such coverage. Exceptions include exclusion or coordination of benefits, or an affiliation or  waiting period, permitted under the Patient Protection and Affordable Care Act (ACA), and incorporated  pursuant to ERISA and the Internal Revenue Code, and other applicable cost-sharing.

If the emergency services are provided by a non-participating provider or non-participating emergency  facility, the plan or issuer must cover the emergency services subject to several requirements. For  example, requirements for prior authorization or any limitation on coverage that is more restrictive than  the requirements or limitations that apply to emergency services received from participating providers and  participating emergency facilities cannot be imposed. In addition, there can be no cost-sharing that is  greater than the requirement that would apply if the emergency services were provided by a participating  provider or a participating emergency facility. The cost-sharing requirement is calculated as if the total  amount that would have been charged for emergency services by the participating provider or  participating emergency facility were equal to the recognized amount (the amount specified by state law,  or a qualifying payment amount, or an amount determined under an All-Payer Model Agreement entered  into by the state) for the services, plan or coverage, and year.

Services Furnished by a Non-Participating Provider

In the event services are provided by a nonparticipating provider (e.g., physician) at a participating facility  or at a nonparticipating emergency facility, providers may not bill beyond an allowed cost-sharing amount  (based on the recognized amount). In addition, there must be an initial payment (determined by the plan)  directly from the plan to the provider, or a notice of a denial, within 30 days from when the provider

transmits the bill to the plan. If the provider is not satisfied with the payment from the plan, the parties  may begin a 30-day open negotiation period. If an agreement cannot be reached in the open negotiation  period, the plan or provider has four days to notify the other party and the Secretary of the Department of  Health and Human Services (HHS) that they are initiating the Independent Dispute Resolution (IDR)  process.

Ending Surprise Air Ambulance Bills

For air ambulance services furnished by a non-participating provider that would be covered if provided by  a participating provider, the plan or issuer must:

• Impose the same cost-sharing requirement for the air ambulance services that would apply had the services been furnished by a participating provider. Any coinsurance or deductible must be based on rates that would apply for the services had they been furnished by a participating  provider.
• Provide an initial payment or notice of denial of payment within 30 days after the bill for the services is transmitted by the provider.
• Pay a total plan or coverage payment directly to the provider within 30 days after determination of the payment amount is made (see the section on determination below) with application of any initial payment, equal to the amount by which the out-of-network rate for the services exceeds the  cost-sharing amount for the services and year.
• Count any cost-sharing payments made by an individual covered under the plan with respect to the services toward any in network deductible or out-of-pocket maximums applied under the plan or coverage (and in-network deductible and out-of-pocket maximums must be applied) in the  same manner as if the cost-sharing payments were made for items or services furnished by a  participating provider.

Each health plan and health insurance issuer must submit a report to HHS no later than 90 days after the  last day of the first calendar year beginning after the date on which HHS finalizes a rule implementing the  Act and no later than 90 days after the last day of the calendar year immediately following the plan year.

Audit Process and Regulations for Qualifying Payment Amounts

The Act instructs HHS to issue regulations by October 1, 2021, to provide an audit process under which  group health plans and health insurance issuers offering group or individual health insurance coverage  will be audited to ensure the plans and coverage are correctly calculating the qualifying payment amount  for items and services. Under the Act, HHS may audit any group health plan or health insurance issuer if  HHS has received any complaint or other information about a plan or coverage regarding their  compliance with the qualifying payment amount requirement.

The Act also instructs HHS to issue regulations by July 1, 2021, to establish the methodology that group  health plans and health insurance issuers must use to determine the qualifying payment amount, the  information plans and issuers must share with out-of-network providers or facilities when determining the  qualifying payment amount, the geographic regions applied, and a process to receive complaints of  violations of the qualifying payment requirement.

Determination of Out-of-Network Rates to be Paid by Health Plans and Independent Dispute  Resolution Process

Under the Act, if an item or service is furnished by a non-participating provider or a non-participating  facility for a group health plan or health insurance issuer in a state that does not have a specified law that  determines the price for an item or service that a health plan or issuer must pay, the provider or facility  may initiate open negotiations within 30 days beginning on the day the provider or facility receives an  initial payment or a notice of denial of payment from the plan or coverage to determine an agreed upon  amount (including any cost-sharing) for the item or service. The open negotiations may last no longer  than 30 days beginning on the day the negotiations were initiated for the item or service. If open  negotiations do not result in an agreed-upon amount of payment for the item or service by the last day of  open negotiations, the provider or facility, or group health plan or health insurance issuer, may initiate an  IDR process during the four-day period beginning on the day after the open negotiation period ended.  The independent resolution process must be initiated by providing notice to the other party and to HHS  (the notice must contain information as specified by HHS). The parties may agree on a payment amount  before the certified entity for the independent resolution process has determined the amount. Under the

Act, HHS, the Department of Labor (DOL), and the IRS are to issue regulations to govern this process  within one year of enactment of the law.

Transparency Regarding In-Network and Out-Of-Network Deductibles and Out-Of-Pocket  Limitations

Under the Act, a group health plan or health insurance issuer offering group or individual health insurance  coverage must include the following information on any physical or electronic plan or insurance  identification card issued to participants, beneficiaries, or enrollees under the plan:

• Any deductible applicable to the plan or coverage
• Any out-of-pocket maximum limitation applicable to the plan or coverage
• A telephone number and Internet website address through which an individual may seek consumer assistance information

Maintenance of a Price Comparison Tool

A group health plan or health insurance issuer offering group or individual health insurance must offer  price comparison guidance by telephone and provide a price comparison tool on the Internet website of  the plan or issuer that allows an individual enrolled under the plan or coverage to compare the amount of  cost-sharing that the individual would be responsible for regarding a specified item or service by any of  the providers, with respect to the plan year, geographic region, and participating providers,.

Provider Directory Information

Beginning January 1, 2022, health insurers, health plans and other coverage providers (coverage  provider) must establish a database and disclose on its website, each provider and facility (and directory  information) with which it has a contractual relationship for furnishing items or services, including contact  information for each provider and facility. The coverage provider must establish a verification process that  verifies and updates the database described below at least every 90 days, removes a provider or facility  that is unable to be verified. A response protocol is also required to be established which requires that  health service recipients receive responses to telephone calls within one day after requesting information  on whether a provider or facility has a contractual relationship with the plan or issuer for furnishing items  or services.

If a participant or beneficiary was furnished an item or service from a non-participating provider or facility  in reliance on incorrect information in the database regarding the provider’s participation status, the plan  or issuer must not impose a cost-sharing amount for the item or service that is greater than the cost sharing amount that would apply had the item or service been furnished by a participating provider and  apply the deductible or out-of-pocket maximum that would apply had the item or service been furnished  by a participating provider or facility.

Disclosure of Billing Protections

For plan years beginning January 1, 2022, plans and issuers must disclose the requirements and  prohibitions against balance (surprise) billing, any state law requirements regarding balance billing, and  contact information for the appropriate state and federal agencies that may be contacted by individuals  that believe a provider or facility has violated the prohibitions against balance billing. This information is

required to be made publicly available, posted on a public website, and is required to include and  explanation of benefits for emergency services and non-emergency services that are subject to the  requirements preventing balance billing.

12/23/2020

Updated 12/28/2020

Part 2

Broker and Consultant Compensation Transparency,  Prohibition on Gag Clauses

Broker and Consultant Compensation

ERISA imposes penalties on prohibited transactions between covered benefit plans and individuals who have a relationship with the plan to ensure that these “parties in interest” do not use their influence with the plan for their own benefit or in a manner that is not most beneficial to the plan. One of the prohibited transaction rules prohibits the furnishing of goods and services between a plan and party in interest. However, an exception applies if the party in interest receives no more than “reasonable compensation” from the plan for the services rendered or supplies furnished. Further, the services provided to the plan must be based upon a reasonable contract or arrangement. The Appropriations Act amends ERISA to provide that, in order to satisfy the “reasonableness” requirement, the service provider must provide several disclosures to the fiduciary responsible for the plan. Prior to the enactment of the Appropriations Act, ERISA also contained a compensation disclosure obligation. The new rules, however, have increased the required level of transparency in the disclosures.

Disclosure Obligation

A service provider must disclose, in writing, the following information to a responsible plan fiduciary in connection with contracts or arrangements for services between a plan and a service provider in the amount of $1,000 (indexed annually) or more:

• A description of the services to be provided to the plan pursuant to the contract or arrangement;

• If applicable, a statement that the service provider, an affiliate, or a subcontractor will provide, or reasonably expects to provide, services pursuant to the contract or arrangement directly to the plan as a fiduciary;
• A description of all direct compensation, either in the aggregate or by service, that the service provider, an affiliate, or a subcontractor reasonably expects to receive in connection with the services;
• A description of all indirect compensation that the covered service provider, an affiliate, or a subcontractor reasonably expects to receive in connection with the services described (including compensation from a vendor to a brokerage firm based on the structure of incentives not solely related to the contract with the plan including: i) a description of the arrangement between the payer and the covered service provider, an affiliate, or a subcontractor, as applicable, pursuant to which such indirect compensation is paid; ii) identification of the services for which the indirect compensation will be received, if applicable; and iii) identification of the payer of the indirect compensation;
• A description of any compensation that will be paid among the covered service provider, an affiliate, or a subcontractor, in connection with the services described if such compensation is set on a transaction basis (such as commissions, finder’s fees, or other similar incentive compensation based on the business placed or retained); and
• A description of any compensation that the covered service provider, an affiliate, or a subcontractor reasonably expects to receive in connection with the termination of the contract or arrangement, and how any prepaid amounts will be calculated and refunded upon such termination.

A service provider must also disclose, in writing, to the responsible plan fiduciary, a description of the manner in which the compensation will be received.

Types of Services

Examples of the types of services subject to the disclosure obligation include: brokerage and consulting services by a service provider, an affiliate, or a subcontractor, related to plan design; insurance product selection; recordkeeping; medical management vendors; benefits administration; stop-loss insurance; pharmacy benefit management; wellness; transparency tools and vendors; group purchasing organization preferred vendor panels; compliance services; employee assistance programs; or third-party administration services.

Timing of Disclosure

Upon the written request of the responsible plan fiduciary or plan administrator, a service provider must furnish any other information relating to the compensation received in connection with the contract or arrangement that is required for the plan’s timely compliance with the reporting and disclosure requirements under ERISA. The information disclosure is required to be made upon the occurrence of the following events.

1. Contract Execution
   1. The information required above must be disclosed to the responsible plan fiduciary not later than a date that is reasonably in advance of the date on which the contract or agreement is entered into, and extended or renewed. Accordingly, the plan fiduciary must have this information to enter into the contract with the service provider. Failure of the fiduciary to obtain the required information prior to contract execution could be a breach of fiduciary duty. The service provider must disclose a description of the services to be provided, reasonably in advance of the date on which the responsible plan fiduciary or plan administrator states that it is required to comply with the applicable reporting or disclosure requirement, unless the disclosure is precluded due to extraordinary circumstances beyond the covered service provider’s control, in which case the information must be disclosed as soon as practicable.
2. Contract Changes
   1. A service provider must disclose any change to the information required above as soon as practicable, but not later than 60 days from the date on which the service provider is informed of such change, unless such disclosure is precluded due to extraordinary circumstances beyond the service provider’s control, in which case the information must be disclosed as soon as practicable.

Relief for Errors

A contract or arrangement will not fail to be reasonable solely because the service provider, acting in good faith and with reasonable diligence, makes an error or omission in disclosing the above information or to change such information as required, if the service provider discloses the correct information to the responsible fiduciary as soon as practicable, but not later than 30 days from the date the service provider knows of the error or omission.

Fiduciary Relief

A responsible plan fiduciary will not be held responsible for the failures of service providers to disclose the required information provided that the responsible plan fiduciary:

• Did not know that the service provider failed or would fail to make the required disclosures and reasonably believed the service provider disclosed the required information; or
• Requests in writing that the covered service provider furnish such information upon discovering the service provider’s failure. If the service provider fails to comply with the written request, the responsible plan fiduciary must notify the Department of Health and Human Services (HHS) of the service provider’s failure not later than 30 days following the earlier of: 1) the service provider’s refusal to furnish information; or 2) 90 days after the written request is made. If the requested information relates to future services and is not disclosed after the end of the 90-day period, the responsible plan fiduciary must terminate the contract or arrangement consistent with the ERISA duty of prudence.

The provisions regarding disclosure of compensation will apply beginning December 27, 2021, which is one year after the enactment of the Appropriations Act.

Prohibition on Gag Clauses

The Appropriations Act also amends the Public Health Service Act (PHSA), ERISA, and the Internal Revenue Code (IRC) to prohibit a group health plan or health insurance issuer offering group health coverage from entering into an agreement with a health care provider, network or association of providers, third-party administrator, or other service provider offering access to a network of providers, that would directly or indirectly restrict the group health plan or health insurance issuer from:

• Providing provider-specific cost or quality of care information or data, through a consumer engagement tool or any other means, to referring providers, the plan sponsor, enrollees, or individuals eligible for coverage; and
• Electronically accessing or sharing de-identified claims and encountering information or data for each enrollee in the plan upon request, provided that the request complies with Health Insurance Portability and Accountability Act (HIPAA) and the Americans with Disabilities Act (ADA).

Each year, group health plans must submit HHS an attestation that the plan is in compliance with the above requirements.

12/29/2020

 

Update 2/22/21: The Internal Revenue Service (IRS) issued Notice 2021-15 clarifying the relief provided under the Appropriations Act for health FSAs and DCAPs and provides additional cafeteria plan relief.

The Consolidated Appropriations Act, 2021 (Appropriations Act), enacted on December 27, 2020, contains temporary rules to provide relief for participants in health flexible spending arrangements (FSAs) and dependent care flexible spending arrangements (DCAPs) in light of the COVID-19 pandemic. The Appropriations Act builds on previously issued Internal Revenue Service (IRS) guidance (IRS Notice 2020-29 and 2020-33), by expanding the opportunities for plan sponsors to amend their plans to give employees additional opportunities to use their currently unused health FSA and DCAP amounts through 2022.

Carry Over of Unused Amounts

The Appropriations Act provides that health FSAs and DCAPs may permit participants to carry over any unused amounts remaining from the 2020 plan year to the plan year ending in 2021. Additionally, health FSAs and DCAPs may permit participants to carry over any unused amounts remaining in the health FSA or DCAP from the 2021 plan year to the plan year ending in 2022. IRS Notice 2021-15 clarifies that this carryover relief may be applied to plans that have a grace period, carry over, or neither. An employer has the discretion to allow the entire unused amount to be carried over or an amount less than the entire amount. An employer also has the discretion to limit the date by which the carried over amounts must be used during the subsequent plan year. Employers may allow participants to opt out of the carryover in order to have health savings account (HSA) eligibility (general purpose health FSA coverage is disqualifying coverage for HSAs). Note, the rule prohibiting health FSAs (and DCAPs) from adopting both a carryover and a grace period still applies. The IRS clarifies that amounts carried over will not be taken into account for purposes of the nondiscrimination rules applicable to Section 125 cafeteria plans and to DCAPs under Section 129. Unused amounts carried over from prior years are not taken into account in determining the annual limit applicable for the following year.

Extended Grace Period

The grace period for using health FSA and DCAP amounts has also been extended. The Appropriations Act permits health FSAs and DCAPs to extend the grace period for participants to use remaining amounts for a plan year ending in 2020 or 2021, until 12 months after the end of the plan year. IRS Notice 2021-15 clarifies that an employer has the discretion to extend the grace period to less than 12 months after the end of the plan year. IRS Notice 2021-15 further clarifies that an employer may apply this grace period for health FSAs and DCAPs that do not have a grace period, but the rule prohibiting an employer from implementing a grace period and a carryover for health FSAs (and DCAPs) still applies. Unused amounts available during an extended grace period are not taken into account in determining the annual limit applicable for the following year.

Under the Appropriations Act, health FSAs may permit participants who cease to participate (due to termination of employment, change in employment status, or a new election, as clarified by IRS Notice 2021-15), during calendar year 2020 or 2021 to continue to use the remaining amounts for reimbursements through the end of the plan year (including any grace period) in which the participation ceased. IRS Notice 2021-15 clarifies that an employer may set a specific date within the plan year by which a terminated participant may continue to use the remaining amounts. IRS Notice 2021-15 further clarifies that an employer has the discretion to limit the unused amounts in the health FSA to the amount of salary reduction contributions the employee had made from the beginning of the plan year in which the employee ceased to be a participant. Note, this post-participation relief cannot be used if an employer is also implementing the carryover relief described above.

IRS Notice 2021-15 clarifies that employers may allow participants to opt out of the extended grace period or post-termination coverage in order to have health savings account (HSA) eligibility (general purpose health FSA coverage is disqualifying coverage for HSAs). The IRS also clarifies that amounts available during an extended claims period will not be taken into account for purposes of the nondiscrimination rules applicable to Section 125 cafeteria plans and to dependent care assistance programs under Section 129.

See Appendix A for examples.

DCAP Carry Forward

The current DCAP rules limit reimbursement of qualifying dependent care expenses to children under age 13. The Appropriations Act provides that DCAPs may extend the maximum age for dependents from 12 to 13 for eligible dependents who turned 13 (i.e., aged out of eligibility) during the last plan year with an open enrollment period ending on or before January 31, 2020. Participants are therefore permitted to use unused balances for qualifying reimbursements for expenses incurred on behalf of dependents who aged out during the pandemic. Employers can allow unused DCAP amounts for children until they turn age 14, at least through the end of the 2021 plan year (i.e., An employer can allow a participant to continue to reimburse expenses during the eligible plan year for a child under 14 subject to any applicable grace period. Or an employer could implement a carryover and allow a participant to continue to reimburse expenses during the subsequent plan year until the child(ren) turn age 14). Note, an employer is not required to implement a grace period or carryover under the relief described above in order to implement the DCAP relief under this section.

IRS Notice 2021-15 notes that employers may report the salary reduction amount elected by the employee for the year for dependent care assistance (plus any employer matching contributions) in Box 10 of an employee’s W-2 and are not required to adjust the amount reported in Box 10 to take into account amounts that remain available in a grace period. The IRS provides that this rule continues to apply with respect to employers who amend their DCAP plans to provide for the DCAP carryover, extended grace period, or DCAP carry forward.

See Appendix B for examples of implementing a DCAP carry forward.

Midyear Election Changes for Health FSAs and DCAPs

In recognition of the continued impact that COVID-19 has had on the ability of participants to maximize the use of their health FSA and DCAP benefits, the Appropriations Act affords participants the opportunity to prospectively change existing health FSA and DCAP elections for 2021 at any time during the plan year ending in 2021 without a change in status. An employer may amend one or more of its Section 125 cafeteria plans to allow employees, on a prospective basis, to (1) revoke an election, make one or more elections, or increase or decrease an existing election, for plan years ending in 2021 regarding a health FSA, or (2) revoke an election, make one or more elections, or increase or decrease an existing election, for plan years ending in 2021 regarding a DCAP. Prospective election changes may include an initial election to enroll in a health FSA or DCAP for the year (for example, a participant that had previously declined enrollment may be permitted to enroll). IRS Notice 2021-15 clarifies that an employer may limit the time period during which these prospective election changes may be made and may determine which prospective elections will be allowed. Employers are permitted to limit these midyear election changes to amounts that are not less than amounts that have already been reimbursed under the plan. The availability of 2021 midyear election changes in the absence of a change in status is consistent with IRS Notice-2029, which permitted such midyear elections during 2020. The health FSA and DCAP rules continue to prohibit the refund of previously contributed amounts.

An employer that allows employees to revoke elections midyear under their health FSA or DCAP may provide that amounts contributed before the election is revoked remain available to reimburse medical care expenses or dependent care expenses incurred for the rest of the plan year. Alternatively, the plan may provide that if the election is revoked, amounts contributed before the revocation will be available only to reimburse eligible expenses incurred before the revocation takes effect (and not later incurred expenses), or that amounts contributed before the revocation will be forfeited. These alternative two options would provide employees an opportunity to enroll in or contribute to their HSAs after the revocation takes effect.

See Appendix C for examples.

Health FSA Relief and COBRA

Under IRS Notice 2021-15, if an employer allows an employee who ceases to be a participant in a health FSA (for example, due to termination of employment or reduction in hours) to continue to reimburse expenses from unused amounts in the health FSA, this event would be a COBRA qualifying event (presuming the employer is subject to COBRA). The employer may allow the employee to request to continue to access the unused amounts (i.e., what has been contributed so far) or the employee may elect COBRA and have access to the full health FSA limit by paying the COBRA premium.

Under IRS Notice 2021-15, if an employer adopts a carryover or extended grace period, the maximum amount that a health FSA may require to be paid as the applicable COBRA premium does not include unused amounts carried over or available during the extended grace period. The amounts carried over or available during the extended grace period are included in the amount of the benefit that a COBRA qualified beneficiary is entitled to receive during the remainder of the plan year in which a COBRA qualifying event occurs.

Midyear Election Changes for Cafeteria Plans

IRS Notice 2021-15 added that, similar to relief provided by IRS Notice 2020-29, an employer may amend one or more of its Section 125 cafeteria plans to allow employees to:

• make a new election for employer-sponsored health coverage on a prospective basis, if the employee initially declined to elect employer-sponsored health coverage;
• revoke an existing election for employer-sponsored health coverage and make a new election to enroll in different health coverage sponsored by the same employer on a prospective basis (including changing enrollment from self-only coverage to family coverage);
• revoke an existing election for employer-sponsored health coverage on a prospective basis, provided that the employee attests in writing that the employee is enrolled, or immediately will enroll, in other health coverage not sponsored by the employer.

It appears than an employer may allow these election changes during the 2021 calendar year. However, an employer has the discretion to determine which of the above permitted election changes it will allow and the time period in which the election change may be made. The IRS noted that adoption of any of these permitted election changes will not cause the plan to fail Section 125 nondiscrimination testing.

In order for an employer to accept an employee’s revocation of an existing election for employer-sponsored health coverage when the employee does not make a new election to enroll in different health coverage sponsored by the employer, the employer must receive from the employee an attestation in writing that the employee is enrolled, or immediately will enroll, in other comprehensive health coverage not sponsored by the employer. The employer may rely on the written attestation provided by the employee, unless the employer has actual knowledge that the employee is not, or will not be, enrolled in other comprehensive health coverage not sponsored by the employer. The IRS provides the following example of an acceptable written attestation:

Name: _______________________ (and other identifying information requested by the employer for administrative purposes). I attest that I am enrolled in, or immediately will enroll in, one of the following types of coverage: (1) employer-sponsored health coverage through the employer of my spouse or parent; (2) individual health insurance coverage enrolled in through the Health Insurance Marketplace (also known as the Health Insurance Exchange); (3) Medicaid; (4) Medicare; (5) TRICARE; (6) Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA); or (7) other coverage that provides comprehensive health benefits (for example, health insurance purchased directly from an insurance company or health insurance provided through a student health plan).

Signature: ______________________

HSA Compatible and General-Purpose Health FSAs and HSA Contributions

IRS Notice 2021-15 provides that an employer may amend a cafeteria plan to allow an employee to make a midyear election to be covered by a general-purpose health FSA for part of the year and an HSA-compatible health FSA for part of the year. Only those expenses both allowed by the HSA-compatible health FSA and incurred during the months in which the employee was covered by the HSA-compatible health FSA may be reimbursed by that health FSA. Note, although unused amounts in the HSA-compatible health FSA may be added to the general-purpose health FSA (for example, if an employee makes a change from an HSA-compatible health FSA to a general-purpose HSA), the general-purpose health FSA may reimburse only allowable medical care expenses incurred after the change in coverage. If an employee is switching from a general-purpose health FSA to an HSA-compatible health FSA, any allowable medical care expense incurred during the months before the change in coverage may be reimbursed by the general-purpose health FSA. Note, although unused amounts in the general-purpose health FSA may be added to the HSA-compatible health FSA, only expenses both allowed by the HSA-compatible health FSA and incurred during months after the change in coverage may be reimbursed by the HSA-compatible health FSA.

The IRS provides that if an employee is covered under a high-deductible health plan (HDHP) at the beginning of the plan year without a health FSA and then elects coverage by a plan that is not an HDHP and coverage by a health FSA that can be used to reimburse medical expenses incurred while the employee was covered by the HDHP, the health FSA must be operated as an HSA-compatible health FSA for the months that the employee was otherwise an HSA-eligible individual in order for the employee to contribute to an HSA for those months. For months after the change in coverage, the health FSA may be operated as a general-purpose health FSA and may reimburse any allowable medical care expense incurred during the period after the change in coverage.

Additionally, the IRS permits employers to amend their plans to offer employees a choice between an HSA-compatible health FSA or general-purpose health FSA during the period to which a carryover or the extended grace period (that is implemented as noted above) for incurring claims applies. Also, employers are permitted to implement a plan design in which employees who elect an HDHP are automatically enrolled in an HSA-compatible health FSA.

Amendment Deadline

Employers may amend their health FSAs and DCAPs, to take advantage of the flexibility offered by the Appropriations Act, no later than the last day of the first calendar year beginning after the end of the plan year in which the change took effect. Accordingly, if the change takes effect January 1, 2021, the plan will need to be amended no later than December 31, 2022. Further, the plan must be operated in accordance with the amendment retroactive to the effective date.

Menstrual Care and OTC Drug Coverage Under Health FSAs and HRAs

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows employers to amend their account-based plans such as health FSAs, health reimbursement arrangements (HRAs), and HSAs to reimburse menstrual care products and over-the-counter (OTC) drugs without a prescription as qualified medical expenses that are incurred after December 31, 2019. Generally, for self-funded plans, such as health FSAs and HRAs that are subject to Section 105(b), qualified medical expenses may only be reimbursed if the plan covered the expense on the date the expense was incurred. Similarly, for plans provided through a Section 125 cafeteria plan, payment or reimbursement of expenses under the plan may only be made for expenses incurred after the later of the amendment’s adoption date or effective date for the new benefits. However, under IRS Notice 2021-15, health FSAs, and HRAs may be amended to provide for reimbursement of expenses for menstrual care products and OTC drugs without prescriptions incurred on or after January 1, 2020.

12/30/2020

Updated 2/22/2021

The Consolidated Appropriation Act, 2021 (Appropriations Act) signed into law on December 27, 2020, includes several provisions requiring that group health plans and health insurance insurers provide comparative analysis regarding utilization and compliance with the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (the MHPAEA), with the goal of monitoring and improving access to mental health and substance use disorder benefits. The MHPAEA is a federal law that generally prevents group health plans and group and individual health insurance issuers that provide mental health and substance use disorder benefits from imposing less favorable benefit limitations on those benefits than imposed on major medical coverage. The rules reflect Congress’ intent to have such benefits treated in the same manner as major medical benefits in regard to coverage and limitations. The MHPAEA generally applies to most group health plans and group health insurance coverage. Please also see our Advisors Part 1, Part 2, and Part 3 on the Appropriations Act for an overview of provisions affecting group health plans and group health insurance coverage outside of the MHPAEA.

Parity in Mental Health and Substance Use Disorder Benefits

The Appropriations Act amends the Public Health Service Act (PHSA), the Employee Retirement Income Security Act (ERISA), and the Internal Revenue Code (IRC) to require that group health plans or health insurance issuers offering group or individual health insurance coverage perform and document comparative analysis of the design and application of nonquantitative treatment limitations (NQTLs) on mental health and substance use disorder benefits. The comparative analysis obligation only applies if the health coverage provides both medical and surgical benefits and imposes NQTLs on mental health and substance use disorder benefits.

On February 10, 2021 (that is, within 45 days of enactment of the Act), plans and issuers must make the comparative analysis and additional requested information available to the applicable state authority, the Department of Labor (DOL), or Department of Health and Human Services (HHS) upon request. The information required to be disclosed includes the following information.

1. The specific plan or coverage terms or other relevant terms regarding the NQTLs and a description of all mental health or substance use disorder and medical or surgical benefits to which each such term applies in each of the following six classifications: (i) inpatient in-network services, (ii) inpatient out-of-network services, (iii) outpatient in-network services, (iv) outpatient out-of-network services, (v) emergency care services, and (vi) prescription drugs.
2. The factors used to determine that the NQTLs will apply to mental health or substance use disorder benefits and medical or surgical benefits.
3. The evidentiary standards used for the six factors noted above, when applicable, provided that every factor must be defined, and any other source or evidence relied upon to design and apply the NQTLs to mental health or substance use disorder benefits and medical or surgical benefits.
4. The comparative analyses demonstrating that the processes, strategies, evidentiary standards, and other factors used to apply the NQTLs to mental health or substance use disorder benefits, as written and in operation, are comparable to, and are applied no more stringently than, the processes, strategies, evidentiary standards, and other factors used to apply the NQTLs to medical or surgical benefits in the benefits classifications.
5. The specific findings and conclusions reached by the group health plan or health insurance issuer with respect to the health insurance coverage, including any results of the comparative analyses that indicate that the plan or coverage is or is not in compliance with the NQTL requirements.

If HHS determines that a plan or issuer is not in compliance with the NQTL requirements based on its review of the requested comparative analyses, the plan or issuer must disclose to HHS the action the plan or issuer will take to become compliant and provide additional comparative analyses that demonstrate compliance with the NQTL requirements not later than 45 days after the initial determination by HHS that the plan or issuer is not in compliance. If the plan or issuer is still determined to not be in compliance with the NQTL requirements following the 45-day period, HHS will notify all individuals enrolled in the plan or insurance coverage that it has been determined to be not in compliance.

Not later than June 27, 2022, HHS will finalize draft or interim guidance and regulations relating to the MHPAEA’s NQTL requirements as amended by the Appropriations Act.

The Appropriations Act provides that the DOL, HHS, and the Treasury will issue a compliance program guidance document to assist plans and issuers in complying with the NQTL requirements as they have been amended. The Appropriations Act further instructs the DOL, HHS, and the Treasury to issue additional guidance for plans and issuers regarding compliance with the NQTL requirements.

1/25/2021

 

On December 27, 2020, former President Trump signed the Consolidated Appropriations Act, 2021 (Appropriations Act). The Appropriations Act amends Title XXVII of the Public Health Service Act (PHSA), Part 7 of Title I of the Employee Retirement Income Security Act of 1974 (ERISA), and Chapter 100 of the Internal Revenue Code of 1986 (IRC). This Advisor summarizes additional requirements that plans should be aware of and will generally be effective for plan years beginning on or after January 1, 2022, unless otherwise noted.

Advance Explanation of Benefits

Under the Appropriations Act, a group health plan or health insurance issuer offering group or individual health coverage that receives a required notice from a provider or health care facility that contains a good faith estimate of the expected charges for furnishing an item or service to a plan participant, beneficiary, or enrollee, must provide an advance Explanation of Benefits (EOB) to the participant, beneficiary, or enrollee no later than one business day after the plan or coverage receives the required notice from the provider or health care facility. However, if the item or service is scheduled at least 10 business days before such item or service is to be furnished, the plan or issuer must provide the advance EOB within three business days of receiving the required notice from the provider or health care facility. Also, if a plan participant, beneficiary, or enrollee requests the advance EOB, the plan or issuer must provide the advance EOB within three business days of receiving the request.

The advance EOB must contain the following information:

• Whether or not the provider or facility is a participating provider or a participating facility under the plan or coverage with respect to the item or service.
  • If the provider or facility is a participating provider or facility under the plan or coverage with respect to the item or service, the advance EOB must include the contracted rate

 

• under the plan or coverage for the item or service based on the billing and diagnostic codes provided by the provider or facility.
• If the provider or facility is a nonparticipating provider or facility under the plan or coverage, the advance EOB must include a description of how the individual may obtain information on providers and facilities that are participating providers and facilities under the plan, if any.

• The good faith estimate included in the notification received from the provider or facility (if applicable) based on such codes.
• A good faith estimate of the amount the plan or coverage is responsible for paying for items and services included in the estimate.
• A good faith estimate of the amount of any cost sharing for which the participant, beneficiary, or enrollee would be responsible for the item or service (as of the date the advance EOB is being provided).
• A good faith estimate of the amount that the participant, beneficiary, or enrollee has incurred toward meeting the limit of the financial responsibility (including with respect to deductibles and out-of-pocket maximums) under the plan or coverage (as of the date the advance EOB is being provided).
• If the item or service is subject to a medical management technique (including concurrent review, prior authorization, and step-therapy or fail-protocols) for coverage under the plan or coverage, the advance EOB must include a disclaimer that coverage for such item or service is subject to such medical management technique.
• A disclaimer that the information provided in the advance EOB is only an estimate based on the items and services reasonably expected, at the time of scheduling (or requesting) the item or service, to be furnished and is subject to change.
• Any other information or disclaimer the plan or coverage determines appropriate that is consistent with information and disclaimers required as noted above.

Choice of Health Care Professional and Access to Care

Choice of Health Care Professional

Under the Appropriations Act, a group health plan that requires or provides for designation by a participant or beneficiary of a participating primary care provider must allow each participant and beneficiary to designate any participating primary care provider who is available to accept such individual.

Access to Pediatric Care

In the case of a person who has a child who is a participant or beneficiary under a group health plan and the plan requires or provides for the designation of a participating primary care provider for the child, the plan must allow the person to designate a physician (allopathic or osteopathic) who specializes in pediatrics as the child’s primary care provider if the provider participates in the network of the plan.

Access to Obstetrical and Gynecological Care

A group health plan that provides coverage for obstetric or gynecological care and requires the participants or beneficiaries to designate their primary care provider under the plan may not require authorization or referral by the plan, issuer, or any person (including a designated primary care provider) in the case of a female participant or beneficiary who seeks coverage for obstetrical or gynecological care provided by a participating health care professional who specializes in obstetrics or gynecology. Such professional shall agree to otherwise adhere to such plan’s policies and procedures, including procedures regarding referrals and obtaining prior authorization and providing services pursuant to a treatment plan (if any) approved by the plan.

Consumer Protections Through Application of Health Plan External Review in Cases of Certain Surprise Medical Bills

The Appropriations Act instructs the Department of Health and Human Services (HHS), the Department of Labor (DOL), and the Department of the Treasury (Treasury) to require group health plans and health insurance issuers offering group or individual health insurance coverage to apply the federal external review process, under paragraph (1) of Section 2719(b) of the Public Health Services Act with respect to any adverse determination by the plan or issuer regarding surprise medical bills, including air ambulance bills, as defined in the No Surprises Act, including whether the item or service is protected from balance billing under the No Surprises Act.

Ensuring Continuity of Care

Under the Appropriations Act, if an individual is a “continuing care patient” (see below for definition) in relation to a provider or facility with a contractual relationship under a group health plan or group or individual health insurance coverage offered by a health insurance issuer and

• the contractual relationship between the group health plan or group or individual health insurance issuer and a provider or facility is terminated;
• benefits provided under the plan or health insurance coverage with respect to the provider or facility are terminated because of a change in the terms of the participation of the provider or facility in the plan or coverage; or
• a contract between the group health plan and the health insurance issuer offering health insurance coverage in connection with the plan is terminated, resulting in a loss of benefits provided under the plan with respect to the provider or facility;

the plan or issuer must:

• notify each individual enrolled under the plan or coverage who is a continuing care patient with respect to the provider or facility at the time of a termination described above affecting the provider or facility on a timely basis of such termination and the individual’s right to elect continued transitional care from the provider or facility;
• provide the individual with an opportunity to notify the plan or issuer of the individual’s need for transitional care; and
• permit the individual to elect to continue to have benefits provided under the plan or coverage under the same terms and conditions as would have applied with respect to the items and services as would have been covered under such plan or coverage had such termination not occurred, with respect to the course of treatment furnished by the provider or facility relating to the individual’s status as a continuing care patient during the period beginning on the date on which the plan or issuer provides the notice described above and ending on the earlier of a) the 89th day following the day the plan or issuer provides the notice described above; or b) the date on which the individual is no longer a continuing care patient with respect to the provider or facility.

Note “termination” as used in this section does not include termination due to failure to meet quality standards or fraud.

A “continuing care patient” is an individual who, with respect to a provider or facility:

• is undergoing a course of treatment for a serious and complex condition from the provider or facility;
  • A serious and complex condition is a) an acute illness that is serious enough to require specialized medical treatment to avoid the reasonable possibility of death or permanent harm; or b) a chronic illness or condition that is life-threatening, degenerative, potentially disabling, or congenital; and requires specialized medical care over a prolonged period of time.
• is undergoing a course of institutional or inpatient care from the provider or facility;
• is scheduled to undergo nonelective surgery from the provider, including receipt of postoperative care from such provider or facility with respect to such a surgery;
• is pregnant and undergoing a course of treatment for the pregnancy from the provider or facility; or
• is or was determined to be terminally ill (as determined under section 1861(dd)(3)(A) of the Social Security Act) and is receiving treatment for such illness from such provider or facility.

Reporting on Pharmacy Benefits, Drug Costs, and Other Health Care Services

Beginning no later than December 27, 2021, and no later than June 1 of each year after, a group health plan or health insurance issuer offering group or individual health insurance coverage (except for a church plan) must submit to the HHS, DOL, and the Treasury, the following information with respect to the health plan or coverage in the previous plan year:

• The start and end dates of the plan year.
• The number of enrollees.
• Each state in which the plan or coverage is offered.
• The 50 brand prescription drugs most frequently dispensed by pharmacies for claims paid by the plan or coverage, and the total number of paid claims for each such drug.
• The 50 most costly prescription drugs with respect to the plan or coverage by total annual spending, and the annual amount spent by the plan or coverage for each such drug.
• The 50 prescription drugs with the greatest increase in plan expenditures over the plan year preceding the plan year that is the subject of the report (i.e., looking at the plan year that was two years ago compared to the previous plan year) and, for each such drug, the change in amounts expended by the plan or coverage in each of those plan years.
• Total spending on health care services by the group health plan or health insurance coverage, broken down by:
  • the type of costs, including a) hospital costs; b) health care provider and clinical service costs, for primary care and specialty care separately; c) costs for prescription drugs; and d) other medical costs, including wellness services; and
  • spending on prescription drugs by the health plan or coverage; and the enrollees.
• The average monthly premium paid by employers on behalf of enrollees, as applicable; and paid by enrollees.
• Any impact on premiums by rebates, fees, and any other remuneration paid by drug manufacturers to the plan or coverage or its administrators or service providers, with respect to prescription drugs prescribed to enrollees in the plan or coverage, including the amounts paid for each therapeutic class of drugs; and the amounts paid for each of the 25 drugs that yielded the highest amount of rebates and other remuneration under the plan or coverage from drug manufacturers during the plan year.
• Any reduction in premiums and out-of-pocket costs associated with rebates, fees, or other remuneration described in the immediately preceding bullet point.

2/10/2021

 

 

 

This information is general and is provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.