Employee Benefits Compliance Updates (Benefit Minute)
This issue of the Benefit Minute provides a recap of some recent regulatory activity affecting employee benefits compliance.
HSA Limits for 2020
The limits for qualified high deductible health plans (QHDHPs) and health savings accounts (HSAs) for plan years beginning in 2020 are set forth below.
For health plans that are not QHDHPs, the out-of-pocket maximums for plan years beginning in 2020 are $8,150 (individual) and $16,300 (family – must include an embedded individual out-of-pocket maximum not to exceed $8,150).
IRS Expands QHDHP Preventive Care List to Include Care for Chronic Conditions
Effective July 17, 2019, the IRS has expanded the list of preventive care benefits that may be paid by a qualified high deductible health plan before the minimum deductible has been met. These services/items relate to care for certain chronic conditions. The objective of this expanded preventive care list for chronic conditions is to eliminate financial barriers and allow individuals to actively manage their chronic conditions, thereby reducing the higher cost related to emergency room visits and other medical treatment that may result when they are not managed. The IRS used the following criteria to develop the list:
- The service/item is low cost;
- Medical evidence supports high cost efficiency of preventing exacerbation of the chronic condition or developing a secondary condition; and
- Strong likelihood, documented by clinical evidence, that for individuals prescribed the specific service/item, the service/item will prevent exacerbation of the chronic condition or the development of secondary conditions which would require significantly higher cost treatments.
The IRS has provided a list of the specific preventive care service/item and the required underlying diagnosis, which is set out below. This guidance only expands the preventive care definition for individuals diagnosed with the condition specified in the list below. It does not expand the preventive care definition to other services/items that may meet the IRS stated criteria of preventive care for a chronic condition. The IRS expects to revisit the list every five to ten years to determine if any changes are necessary.
This guidance does not impact the ACA definition of preventive care services that must be provided without cost sharing; therefore, participants can be charged a copay or coinsurance for the chronic condition preventive services/items. In addition, this expanded preventive care list is optional, not required. A QHDHP may choose whether or not to cover these items before the deductible has been met.
Update on Association Health Plan Regulation
In June 2018, the Department of Labor (DOL) issued a final regulation intended to make it easier for sole proprietors and small employers to join together via Association Health Plans (AHPs) and obtain health insurance coverage in the large group market, which generally imposes fewer coverage requirements and offers more economies of scale. The final regulation expanded the availability of AHPs by broadening the definition of employer under ERISA, thereby allowing more employers to participate in these arrangements. Almost immediately, 11 states and DC filed a lawsuit to invalidate the final regulation, arguing that it was detrimental to the small group and individual insurance markets. In March, a district court judge agreed, ruling that the new AHP regulation unlawfully expanded the scope of ERISA and was an “end run around the ACA.”
The DOL has appealed this ruling and has announced that it will not pursue enforcement action against existing AHPs that relied on the new rules as long as health claims are paid by the AHPs as promised. As of now, a date for the appeal hearing has not been scheduled.
Prescription Drug Rebate Proposal Withdrawn
The Trump administration has announced that it intends to withdraw the prescription drug rebate proposal that was announced on January 31, 2019. The intent of the proposal was to reduce incentives for drug manufacturers to continuously increase list prices, with the expected result of lowering out-of-pocket costs to Medicare Part D and Medicaid MCO consumers. The regulation was also intended to curtail the current practice of using rebates to negotiate favorable formulary placement. However, there was growing concern that the proposal would actually benefit drug companies, and the Congressional Budget Office projected that the proposal would increase federal spending by $177 billion from 2020 to 2029. It appears the administration will focus more attention on legislative action to control drug prices.
ACA Affordability Threshold for 2020
For plan years beginning in 2020, the required contribution percentage used to determine whether the cost of employee-only coverage is affordable has decreased to 9.78% of household income (certain wage-based safe harbors apply for employer-sponsored coverage). The affordability percentage for 2019 is 9.86%. If an Applicable Large Employer fails to offer affordable minimum value coverage to full time employees, the employer may be subject to an ACA employer shared responsibility penalty if one or more employees obtain subsidized Marketplace coverage.