Employee Benefits Compliance Updates (Benefit Minute)

Posted in: Benefit Minute, Employee Benefits

HSA Limits for 2021

The limits for qualified high deductible health plans (QHDHPs) and health savings accounts (HSAs) for plan years beginning in 2021 are set forth below.

  • HSA Contribution Limit (individual) – $3,600
  • HSA Contribution Limit (family) – $7,200
  • QHDHP Minimum Deductible (individual) – $1,400
  • QHDHP Minimum Deductible (family) – $2,800
  • QHDHP Out-of-Pocket Maximum (individual) – $7,000
  • QHDHP Out-of-Pocket Maximum (family) must include an embedded individual amount not to exceed $8,550 – $14,000

For health plans that are not QHDHPs, the out-of-pocket maximums for plan years beginning in 2021 are $8,550 (individual) and $17,100 (family – must include an embedded individual out-of-pocket maximum not to exceed $8,550).

Supreme Court Rules on Sex Discrimination in the Workplace

In a 6-3 decision, the Supreme Court ruled that employers violate Title VII of the Civil Rights Act when they terminate employees for being homosexual or transgender.  Title VII makes it unlawful  for an employer to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to compensation, or terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.  In the three cases, the employers at issue terminated their employees because they were homosexual or transgender.

The Court determined that discrimination on the basis of sexual orientation or gender identity is implicitly and inescapably on account of an individual’s sex which is unlawful under Title VII. The decision is effective immediately.

This Supreme Court decision is narrow and relates specifically to employment termination due to sexual orientation or transgender status.  It does not address whether compliance with Title VII would infringe on an employer’s religious liberties under the First Amendment.

Even though this decision addressed employment termination, employers who sponsor benefit plans should take note of this and proceed with caution if health and welfare plans discriminate in eligibility or benefits as Title VII relates to all terms and conditions of employment.  Potentially discriminatory provisions include limiting eligibility to opposite sex spouses,  providing sex-specific care based only on an individual’s sex assigned at birth or recorded gender, excluding coverage for medically necessary services related to diagnosis/treatment of gender dysphoria, or failing to provide disability benefits for a disability due to gender dysphoria or medically necessary gender affirmation services.

This Supreme Court decision came just days after the Trump administration rolled back protections for transgender individuals under section 1557 of the Affordable Care Act.  Section 1557 prohibits discrimination based on race, color, national origin, sex, age or disability in any health program or activity that receives federal financial assistance.  The prior administration had interpreted this provision broadly to include discrimination on the basis of gender identity.

While the Supreme Court’s Title VII decision is far more impactful than the change in the Section 1557 guidance, both will likely result in additional lawsuits that will further shape employment protections and health insurance coverage for homosexual and transgender individuals.

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Prescription Drug Financial Assistance Programs

Prescription drug manufacturers often offer financial assistance to individuals for certain specialty drugs to reduce the net cost to the individual and encourage compliance with taking prescribed medications.  In general, the financial assistance benefits the individual by eliminating or significantly reducing the out-of-pocket cost (deductible, co-payment or coinsurance) while still counting towards satisfaction of the individual’s group health plan cost-sharing limits.  As a result, certain health insurers and group health plans have implemented copay accumulator programs.  In these programs, the savings is shifted from the individual to the health plan or insurer because drug manufacturer financial assistance is not counted towards an individual’s cost sharing limits since the individual is not actually paying these amounts.

The Department of Health and Human Services (HHS) initially issued regulations which stated that drug manufacturer financial assistance was not required to be counted towards an individual’s cost-sharing  limits if an appropriate generic equivalent drug was covered.  This seemed to imply that copay accumulator programs were not permitted if a generic was not available, which was potentially problematic for qualified high deductible health plans since certain amounts must be paid by the individual before the plan provides benefits.  In response, HHS provided clarifying guidance that group health plans and health insurers are not required to count drug manufacturer financial assistance amounts towards an individual’s cost-sharing limits whether or not a generic is available.  This guidance has now been formalized in a regulation that applies for 2021.   Health insurers and group health plans have flexibility to determine if and when copay accumulator programs will be used, unless a state insurance law specifically prohibits them.

PCORI Fee

The Further Consolidated Appropriations Act signed into law at the end of 2019 extended the patient-centered outcomes research institute (PCORI) fee for an additional ten years.  With this extension, PCORI filings will now be due for plan years ending before October 1, 2029, with the last Form 720 filings due July 31, 2030.   The PCORI fee was originally set to end on October 1, 2019, with the last filing on Form 720 due July 31, 2020 (for plan years ending January to September 2019).  As a result of the extension, Form 720 will also be due July 31, 2020 for plan years ending October 2019 through December 2019.

The IRS announced the PCORI rate is $2.54 per covered life per year for plan years ending between October 2019 and September 2020.  For these plan years only, plan sponsors may use any reasonable method for calculating the average number of covered lives. This special accommodation is available since PCORI was reinstated after the beginning of the plan years to which the fee applies.

For fully-insured health plans, the insurance carrier is responsible for paying the PCORI fee.  For self-insured health plans (including health reimbursement arrangements), the plan sponsor is responsible for paying the fee and filing Form 720.  For more information or employee benefits compliance related questions, contact tbull@psafinancial.com.