The Fact of the Month
Here’s something to talk about when you are discussing plan design options with your clients.
Due to mandated COVID-19 closures, many previously thriving businesses in our area have been forced to close their doors temporarily or are experiencing a significant decline in revenues due to “social distancing.” As they look to cut costs just to stay afloat, many employers are seriously reevaluating their health coverage benefits. When helping your clients make tough choices and communicate with employees, it may be helpful to have data in hand about how employee benefits play a major role in employee retention. According to this survey data from America’s Health Insurance Plans, employees typically significantly underestimate the amount their employer pays for their benefits, but favorability towards their employer significantly increases when they have accurate knowledge. The survey, which was conducted far before the current crisis, showed that 77% of employees felt much better about their employer when they learned the company was paying between 70-80% of their health coverage costs.
The Big Three
Each month GPAHU identifies three top public policy or legal developments that could impact our members and their clients. Here are this month’s big three!
Federal Policy Activity to Provide COVID-19 Relief
What a difference a month makes! Over the course of March, the United States has been overwhelmed by the COVID-19 pandemic. So far, three major pieces of legislation have been enacted to provide economic and health coverage protections for individuals and American businesses. Provisions in two of the measures, the Families First Coronavirus Response Act (“FFCRA”) and the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, and the related emergency regulations and guidance have substantial implications for our industry. We know that your clients are asking a lot of questions about the new programs and related rules and guidance, so we have highlighted the information you will need to pass along. That way, GPAHU members will be well-positioned to help group health insurance clients through this crisis.
New Health Coverage Requirements
The new laws expanded coverage requirements in a few critical ways. All private individual and group health insurance issuers, including self-funded employer groups and grandfathered health plans, must cover all forms of COVID-19 diagnostic testing. Qualified High Deductible Health Plans (HDHPs) may now cover all kinds of telehealth services before the application of the deductible in plan years beginning on or before December 31, 2021. Finally, people may now use all tax-favored health care accounts, like HSAs and FSAs, to buy over-the-counter medicines tax-free without a prescription. The Departments of Health and Human Services, Labor and Treasury recently issued new FAQs to clarify some of these coverage terms for plan sponsors.
Your clients may ask about the terms of the new COVID-19 testing mandate. It includes newly developed tests too, and issuers cannot apply any cost-sharing, prior authorization requirements or medical management practices. Cost-sharing also may not apply to any services at an office visit, telehealth visit, urgent care, or emergency room visit that trigger the need for someone to be tested for coronavirus or any related services people receive to administer the test. This mandate lasts as long as there is a declared federal health emergency for COVID-19. Right now, the public health emergency status will expire on June 18, 2020, but the status may be extended.
The guidance also specifies that plan sponsors and issuers will not suffer enforcement consequences for failing to send plan participants an updated summary of benefits and coverage (SBC) 60 days prior to a material modification of the plan that relates to coverage of COVID-19 testing or coverage of telehealth services and HDHP plans. This relief applies during the public health emergency, but plan sponsors and issuers should send updated SBCs and modify plan documents as soon as practicable.
New Paid Leave Requirements
The FFRCA establishes that employees of businesses with fewer than 500 employees benefit from two new kinds of paid leave mandates that started on April 1, 2020 and last through December 31, 2020. To offset costs for up to 10 days of new emergency paid sick leave and up to 12 weeks of emergency leave, the law creates a refundable payroll tax credit for affected employers. The amount of the credit includes both the payroll costs for employees on leave and the employer’s costs for their allocable share of group health plan expenses.
Brokers need to fully understand how the new leave requirements will apply to group clients. Additionally, GPAHU members may be asked to assist clients with correctly calculating and allocating their qualified group health coverage costs, discussed below. The federal Department of Labor released a temporary final regulation to enforce the national paid leave provisions and issued very detailed FAQs for employers and employees about the new paid leave requirements. To address tax credit implementation questions, including how to calculate and allocate health plan expenses, the Internal Revenue Service (IRS) published 66 FAQs.
The emergency sick leave requirements give full and part-time employees who cannot work or telework for six reasons related to coronavirus up to ten days of paid sick leave. Depending on the qualifying reason, employees are eligible for either full or 2/3 pay up to a daily maximum of either $511 or $200 per day. Temporary changes to the Family Medical Leave Act (FMLA) to address the public health emergency allows qualified employees with at least 30 days of service to take up to 12 weeks of emergency FMLA leave if they cannot work or telework due to a need to care for a child(ren) who cannot attend school or childcare due to COVID-19 related closures. The first ten days of the leave may be unpaid (employees may use other accrued paid leave or the emergency sick leave if they wish.) For the remaining ten weeks, employees must be paid 2/3 of their regular rate of pay up to a daily maximum of $200 ($10,000 aggregate over the ten weeks.)
The new rules and FAQs from the DOL and IRS clarify the following:
- There is a small employer exemption for businesses with less than 50 employees that can document compliance would “jeopardize the viability of the small business as a going concern.” It is available for both types of paid leave, but only for the provisions that apply to leave related to a parent who needs to take care of a child who cannot attend school or daycare due to a COVID-19 related closure. There is a self-certification process for businesses that wish to exercise the exemption, but also a strict compliance standard as to what constitutes ongoing business jeopardy.
- The new FMLA and emergency sick leave provisions do not apply if: (1) an employee is furloughed; (2) an employee is on unemployment benefits; (3) the worksite closes, either before or after April 1.
- Both new types of paid leave are in addition to any state or local paid leave requirements.
- The Department of Labor will not bring enforcement actions against any public or private employer for violations of the Act that occur between March 18 and April 17, 2020, provided the employer has made reasonable, good faith efforts to comply with the Act. After April 17, 2020, this limited stay of enforcement will be lifted, and the Department will fully enforce violations of the Act as appropriate and consistent with the law.
- Employers must maintain group health coverage during expanded FMLA leave and employees continue to pay regular contributions toward the cost of coverage. Plan eligibility requirements, including waiting periods, also still apply.
- When determining qualified health plan expenses for tax credit purposes, all amounts paid or incurred by the employer to provide and maintain the group health plan allocable to the employee’s qualified leave wages apply, including both employer contribution and employee pre-tax contributions.
- Group health plan expenses include all benefits subject to COBRA (medical, dental, vision, etc.), as well as traditional HRA contributions, individual coverage HRA contributions and health FSA contributions. They do not include employer contributions to an employee’s health savings account, Archer medical savings account or a qualified small employer HRA.
- Employers may use any reasonable method to determine and allocate the share of plan expenses attributable to each employee that takes leave. Acceptable methods include: (1) COBRA premiums; (2) one average premium rate for all employees; (3) an average premium rate for employees with self-only and other than self-only coverage; (4) any reasonable actuarial method to determine the estimated annual expenses of the plan. Employers must determine the rate for each plan component separately and then consider each employee’s specific plan elections.
New Economic Protections for Businesses
The CARES Act creates many new forms of financial relief that will flow directly to companies specifically to help them retain workers and keep them covered through group health insurance arrangements. Brokers need to know about the basics of each program, since clients may ask for assistance with continuing their group health plan coverage during these challenging economic times. Also, to access these relief mechanisms, companies may need help determining their relevant group benefit expenses.
Companies with fewer than 500 employees that are affected by the COVID-19 economic downturn may benefit from Paycheck Protection Program loans beginning on April 3, 2020. The Retention Tax Credit is an option for most businesses of all sizes that can document that the business is either fully or partially suspended due to governmental COVID-19 orders, or the business is experiencing significant financial losses due to the pandemic. Emergency Economic Injury Disaster Loans will also help small and mid-sized businesses, including sole proprietors ensure cash flow.
The Paycheck Protection Program, which began accepting applications on April 3, 2020 and runs through June 30, 2020, is designed to help small businesses to keep their workers on the payroll. Loan forgiveness is possible if employers use the funds for payroll costs (including group health insurance coverage), interest on mortgages, rent, and utilities. When applying, employers need to provide information about their health insurance coverage premium costs either over the past 12 months or during the 2019 calendar year, so some of your clients may be contacting you for help.
The Trump Administration issued three interim final rules to govern the program and they also updated the program’s application for employers. A new FAQ document provides answers to common borrower questions, and a collection of other program resources can be found online.
The CARES Act Retention Tax Credit is available to help all businesses, regardless of size, keep workers in the payroll during the COVID-19 economic crisis. The amount of the credit is 50% of qualifying wages paid up to $10,000. Qualified wages include the eligible employer’s health plan expenses that are properly allocated to the wages. New IRS FAQs provide guidance about how to claim the credit.
To qualify for a retention credit, an employer must fall into one of two categories: (1) the business is fully or partially suspended by government order due to COVID-19; or (2) the employer’s gross receipts were below 50% of the comparable quarter in 2019. The only business entities ineligible are state and local governments and companies that take CARES Act SBA loans. The credit can apply to wages (and qualified health plan expenses) paid after March 12, 2020 and before January 1, 2021.
Credit eligibility ends after the quarter when the employer’s gross receipts rise above 80% of the revenue from a comparable quarter in 2019. To access the credit, employers reduce their required payroll tax deposits withheld from employees’ wages by the amount of the credit and document it on their quarterly tax filings. If the tax money does not cover their retention credit, businesses can get the remaining refunded by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Emergency Economic Injury Disaster Loan program applies to companies with fewer than 500 employees, including sole proprietors.It provides an emergency loan advance of up to $10,000 which may be forgiven if it is used to fund payroll, paid sick leave, interest on mortgage obligations, rent, and utilities, or other debt.
Finally, both the FFCRA and the CARES Act provide for a significant expansion of existing state-level unemployment insurance benefits, which is collectively known as Pandemic Unemployment Assistance. Brokers may be asked about the new unemployment benefits, since workers who have been “furloughed” by an employer can still qualify for the new unemployment insurance if the furloughed person remains part of the employer’s group benefit plan.
The two new laws require states to ease their unemployment application standards and make state benefits more generous by adding a $600/week increase to every qualified beneficiary’s benefits through the end of July. The law also expands unemployment eligibility up to 39 weeks, which is 13 weeks longer than what most states typically allow. The laws also grants eligibility for people who normally might not qualify for state unemployment programs, including the self-employed and independent contractors, gig workers and workers laid off from churches and religious institutions.
Pennsylvania Actions to Address COVID-19
In addition to the myriad of federal policy activity to protect people and businesses during the COVID-19 crisis, individual states are acting too. Pennsylvania policymakers have worked in the following ways to ensure
Pennsylvania Insurance Commissioner Jessica Altman issued a notice to all health insurance carriers in the Commonwealth requesting that they relax premium deadlines, extend grace periods and waive late fees. The notice also asks issuers to allow payment plans to prevent lapses in coverage and to exhaust all possible efforts before cancelling coverage.
A second notice applies to insurance licensees, including agents and brokers. It temporarily suspends all in-person classroom education and encourages CE courses to be offered via webinar instead. The department is also extending license renewal timeframes and temporarily waiving CE requirements for license renewals for people affected by the COVID-19 pandemic.
To help newly unemployed state residents, the Office of Unemployment Compensation has new online resources, including a helpful chart of new state and federal leave benefits people may qualify for as a result of COVID-19 related employment events. The insurance department, in partnership with the Departments of Health and Human Services, also developed an FAQ that provides information and answers to common questions related to insurance coverage and COVID-19.
Finally, while many people who have lost job-based health insurance coverage due to the COVID-19 outbreak qualify for special enrollment rights through healthcare.gov, CHIP and Medicaid are available to families and individuals that meet eligibility requirements. However, not all uninsured people qualify. In response, Governor Wolf sent a formal letter to U.S. federal agencies requesting a Special Enrollment Period (SEP) for uninsured or underinsured Pennsylvania residents affected by the pandemic.
PA Exchange Authority Seeks Broker Input
In non-coronavirus news, the PA State Exchange Authority has reached out to PAHU to increase collaboration and feedback from the broker community. They would like our members to assist the Exchange Authority with its mission of increasing the access and affordability of individual market health coverage in Pennsylvania. As such, they are inviting association members to join their new Exchange Authority Broker Workgroup. The group will meet monthly, via one-hour web-based conference on the 2nd Friday of each month at 11am. The next call will be on May 8, 2020. The agenda items include the timeline leading up to and during Open Enrollment and broker training.
Two broker training issues under consideration where GPAHU input would be helpful, include:
- Requiring exchange-certified brokers to obtain appointments for all medical insurers participating in the exchange, regardless of geography or commissions. If this proposal is approved, then a broker in Erie might need to obtain an appointment from Independence Blue Cross.
- Prohibiting exchange-certified agents from selling short-term limited duration insurance to Pennsylvania individual market consumers off the exchange.
Interested members who would like to join the meeting this month or in future months via Skype can use this link: https://meet.lync.com/pagov/chaangelo/Y55TFVGD. Alternatively, brokers can call into the meeting using this number and access code: +1 (267) 332-8737, access code: 177275098. If you cannot make the meeting and would still like to give feedback about either of the two proposals, ask questions, or submit suggestions, please do so through the Exchange Authority’s web portal.
Check This Out!
If you want to expand your health policy knowledge beyond this newsletter, here is a resource to check out!
If you like to listen to podcasts, check out The ShiftShapers Podcast. Hosted by former NAHU National President, David Saltzman, it is a weekly interview show with people dedicated to shaping and transforming the benefits industry.
The various federal Departments implementing COVID-19 relief requirements have centralized information for affected individuals and employers on the following sections of their websites:
Department of Labor: https://www.dol.gov/coronavirus
Internal Revenue Service: https://www.irs.gov/coronavirus
Small Business Administration: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
Department of Health and Human Services: https://www.hhs.gov/about/news/coronavirus/index.html