Stimulus Redux: What It Means for Welfare Benefit Plans

Seyfarth Synopsis: On December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021 which includes several provisions affecting employer-sponsored benefit plans, and provides voluntary relief related to the COVID-19 public health emergency that employers may choose to offer. Given the length and complexity of the Act, this Legal Update summarizes some of the key provisions affecting health and welfare plans.

Flexible spending arrangements (FSAs)
The Act contains several provisions intended to provide flexibility for participants in flexible spending account programs.

• Mid-year election changes. For plan years ending in 2021, a plan may allow participants to change the amount of their contributions to health or dependent care FSAs prospectively, without regard to any change in status.
• Carryover of account balances. A plan may allow participants to carry over any unused amounts or contributions remaining in a health or dependent care FSA from the 2020 plan year to the 2021 plan year, or from the 2021 plan year to the 2022 plan year.
• Grace Period Extension. For plan years ending in 2020 or 2021, plans may extend their grace period to 12 months after the end of the plan year.
• Unused Health FSA Account Balances. A plan may allow an employee who terminates his or her participation in a health care FSA during the 2020 or 2021 calendar year to continue to receive reimbursements from unused account balances through the end of the plan in which such participation ended (including any applicable grace).
• Dependent Care FSA & Aging Out. To qualify as an employment-related expense which is reimbursable from a dependent care FSA, the expense must be for care for a “qualifying individual” - which means a dependent who has not attained age 13. For dependents who aged out of eligibility during the pandemic (specifically, during the last plan year with a regular enrollment period ending on or before January 31, 2020), plans may extend the maximum age from 13 to 14.

Plan sponsors that want to take advantage of any of these relief provisions must adopt a plan amendment by the end of the first calendar year beginning after the end of the plan year in which the change takes effect. (For example, if mid-year election changes are allowed in 2021, a calendar year plan must be amended by December 31, 2022.) In addition, the plan must be operated in accordance with the amendment terms as of the effective date of the amendment.

Surprise Billing
A section of the Act called the “No Surprises Act” protects plan participants from surprise medical bills for certain emergency and non-emergency services rendered by out-of-network providers.

Emergency Services. If a plan provides any benefits with respect to “emergency services”, then the plan must cover such emergency services without the need for any prior authorization, regardless of whether the provider is in-network or out-of-network. With respect to services provided by out-of-network providers:

• The cost-sharing amounts for such services cannot be greater than if the services were provided by an in-network provider, and are calculated as if the total amount charged was equal to the median of contracted rates;
• A plan must make an initial payment or issue a notice of denial of payment to the provider within 30 days after receiving the provider’s bill, and must pay a total amount equal to the amount by which the out-of-network rate exceeds the cost-sharing; and
• Any cost-sharing payments made by the participant or covered beneficiary must be counted toward the plan’s in-network deductible or out-of-pocket maximum.

With respect to an item or service furnished by an out-of-network provider, the Act provides for a 30-day open negotiation period to agree on the out-of-network rate to be paid, and an independent dispute resolution (IDR) process to resolve disputes. The IDR process will be run by independent entities with no affiliation to the plan or provider.

Non-Emergency Services. If a plan provides any coverage of non-emergency services performed by out-of-network providers at an in-network facility, the plan must cover such services under requirements similar to the emergency services requirements described above. The participant shall only be required to pay the in-network cost for out-of-network care provided at in-network facilities, unless the out-of-network provider notifies the patient of its out-of-network status and estimated charges 72 hours prior to receiving the out-of-network services, and the patient consents. In this case the out-of-network provider may balance bill the patient.

Air Ambulances. If a plan would cover air ambulance services from an in-network provider, the plan must cover such services provided by an out-of-network provider, under the parameters set forth above for emergency services.

Mental Health and Substance Use Disorder Benefits
In an attempt to strengthen parity between medical benefits and mental health benefits, plans and insurers that provide both medical/surgical benefits and mental health or substance use disorder (“mental health”) benefits and that impose non-quantitative treatment limitations (NQTLs) on mental health or substance use disorder benefits are required to perform and document comparative analyses of the design and application of NQTLs. Beginning February 10, 2021, these analyses must be made available to the DOL, HHS or IRS upon request.

The Act also requires the agencies to issue a compliance program guidance document to help plans comply with the mental health benefit requirements and to finalize guidance and regulations relating to mental health parity no later than 18 months after enactment (i.e. by June 27, 2022).

Transparency Rules
Gag Clauses. The Act prohibits “gag clauses” regarding price or quality information. Plans may not enter into agreements with health care providers (or a network of providers), third-party administrators or other service providers that would restrict the plan from:

• providing provider-specific cost or quality of care information to referring providers, plan sponsors, participants, beneficiaries or individuals eligible to become participants or beneficiaries;
• electronically accessing de-identified claims information for each participant or beneficiary in the plan, upon request and consistent with the HIPAA privacy rules, GINA and the ADA; or
• sharing this information, or directing that such information be shared, with a business associate, consistent with the HIPAA privacy rules, GINA and the ADA.

The Act requires group health plans to submit an annual attestation to HHS that the plan is in compliance with these requirements.

Cost Sharing Disclosure. For plan years beginning January 1, 2022, plans must include the following information on any identification card issued to participants and beneficiaries:

• Any applicable deductibles and out-of-pocket maximum limits.
• A telephone number and website address through which participants can obtain plan-related information.

Good Faith Estimates. For plan years beginning January 1, 2022, plans that receive a health care provider's good faith estimate of expected charges for providing a service to a participant must furnish the participant a notice - in most cases within one business day of receiving the provider's notice - that contains specified coverage information. For example, the plan's notice to a participant must state:

• Whether the provider is a participating provider with respect to the scheduled service and, if so, the contracted rate for the service based on relevant billing and diagnostic codes.
• A good faith estimate of how much the health plan will pay for the items and services included in the provider’s estimate.

Loss of Network Provider Status. For plan years beginning January 1, 2022, if a plan has a contractual relationship with a health care provider or facility and either the contract or benefits provided under the contract are terminated while the individual is a “continuing care patient”, the plan must notify each such patient of the termination and permit the patient to elect to continue receiving benefits from the provider. Continuing care patients include those who are: undergoing a course of treatment for a pregnancy or serious condition, scheduled to undergo non-elective surgery or receive postoperative care, or receiving treatment for a terminal illness.

Reporting on Pharmacy Benefits
By December 27, 2021, and annually thereafter, plans will be required to submit to the DOL, IRS and HHS a report with specific information on the benefits paid for prescription drugs provided to participants and beneficiaries, including:

• The dates of the plan year, number of participants and beneficiaries, and each state in which coverage is offered.
• The 50 brand prescription drugs most frequently dispensed and the total number of paid claims for each drug.
• The 50 most costly prescription drugs by total annual spending.
• The 50 prescription drugs with the greatest increase in plan expenditures over the preceding plan year.
• Average monthly premium paid by the employer and by participants and beneficiaries.
• Impact of rebates, fees and other remuneration paid by drug manufacturers on premiums and out-of-pocket costs.

Within 18 months after the first pharmacy drug reports are received, the agencies will post a report on the internet on prescription drug reimbursement under group health plans, with pricing and premium trends.

Student Loan Repayments
Although the Act did not extend further relief for the actual repayment of student loans, it did extend the ability for employers to provide tax-preferred payments to employees for student loans. [See link here for our earlier post about the CARES Act relief on this.] The Act extends the ability of employers to make these payments under IRC Section 127 of up to $5250 per employee for five more years through December 31, 2025.

Disclosure of Compensation for Service Providers
Effective in 2012, employee benefit plan fiduciaries were required to get fee disclosures from service providers pursuant to ERISA Section 408(b)(2). However, service providers for welfare plans were temporarily exempt from that requirement until further guidance was issued. The Act ends that reprieve and extends the fee disclosure rules to group health plans, which means that service providers will have to comply with the fee disclosure rules, effective December 27, 2021.

Deductible Medical Expenses
Expenses incurred for medical care are deductible on an individual’s income tax return to the extent they exceed 7.5% of adjusted gross income. That was scheduled to increase to 10% beginning in 2021. The Act makes the 7.5% threshold permanent.

Plans will likely need assistance from their TPAs and pharmacy benefit managers complying with the new reporting and disclosure requirements. Please feel free to reach out to your Seyfarth benefits attorney for help with appropriate amendments to plans and service agreements. Also watch for additional Legal Updates addressing specific employee benefit provisions of the Act and related guidance.