The Fact of the Month
Here’s something to talk about when discussing plan design options and employer contribution strategy with group clients in the New Year.
In a recent study, the Employee Benefits Research Institute examined the differential effect of copayments and coinsurance on health care services. They found that coinsurance reduces inpatient care and specialist physician office visits, but copayments do not. Specifically:
- For inpatient health care, each 1 percent increase in coinsurance led to a 0.18 percent decrease in utilization.
- For specialty physician office visits, each 1 percent increase in coinsurance led to a 0.19 percent decrease in utilization.
- Those who were more likely to want a telehealth visit but did not receive one were more likely to have an unmet need for care because of the pandemic.
- There was no evidence that demand for inpatient and specialty visits correlates with copayments.
The Big Three
Each month GPAHU identifies three top public policy or legal developments that could impact our members and clients. Here are this month’s big three!
The Latest COVID-19 Stimulus Law Includes Many Health Insurance Provisions
Last week, President Biden signed the American Rescue Plan Act (ARPA) into law. Besides providing public health funding and direct economic relief to both individual Americans and to businesses and industries, the legislation also contains many health insurance coverage provisions. Specifically, the new law includes:
- A full premium subsidy for COBRA-eligible individuals to last between April 1, 2021, and September 30, 2021. COBRA-eligible people who qualify due to involuntary reasons, such as a job loss or reduction of hours, can access this subsidy if they do not have another offer of employer-based coverage or Medicare coverage available to them, through September 30, 2021. The subsidy will flow directly to the employer group plan sponsor in the form of a payroll tax credit against the Section 3111(b) Medicare tax. It applies to those with existing COBRA elections, as well as to people who did not elect COBRA on or before April 1 but would be eligible if they had. The subsidy will also apply to people who elected COBRA initially but then discontinued their coverage before April 1, 2021, as long as they are still within their maximum coverage period.
- An expansion of exchange-based health insurance premium tax credits makes subsidized individual coverage more accessible to many more Americans for 2021 and 2022. The ACA previously limited subsidized exchange coverage to people with family incomes between 100-400% of the federal poverty level. For the next two years, there will not be an upper-income level cap for premium tax credits. Instead, for 2021 and 2022 only, no enrollee will pay no more than 8.5% of their income for individual market exchange-based premiums.
- An extension of the retention tax credit through December 31, 2021. This refundable payroll tax credit is available to any size business that experienced a 20% decrease in gross receipts as compared to the same quarter in 2019. Depending on business size, employers can claim the credit for either actively working and/or furloughed employees. The maximum credit amount is $7000 per qualified employee per quarter, and recipients can use it to pay for both salary and health insurance benefit costs.
- More funding for both the Paycheck Protection Program and the Small Business Administration’s Targeted Economic Injury Disaster Loan program. Qualified borrowers can use these largely forgivable loan funds to help offset health insurance expenses and other costs.
- An extension of the payroll tax credits for employers still opting to offer paid sick and family leave created by the Families First Coronavirus Response Act (FFCRA) through September 30, 2021. These tax credits cover the cost of wages and health insurance premiums for employees who are out on FFCRA leave.
- An expansion of the FFCRA provisions to 501(c)(1) governmental organizations with less than 500 employees.
- The addition of new FFCRA leave qualification criteria. Eligible employees can now take FFCRA sick leave when they need days off related to a COVID-19 vaccination. Further, for expanded paid family leave, the eligibility criteria now includes all of the reasons why an employee might be eligible for the FFCRA paid sick leave, and not just that their child’s school or daycare option is closed due to COVID-19.
- An expansion of Dependent Care Assistance Program allowances for 2021 only. If they choose, employers can let eligible employees increase their dependent care assistance program contributions to $10,500 for this year only, provided the group plan makes a cafeteria plan document change.
New Federal Guidance to Clarify Permissible Section 125 Changes and Address Health Coverage Extensions Due to the “Outbreak Period” Rule
The Biden Administration recently issued two different pieces of critical sub-regulatory guidance about group health plans. The Internal Revenue Service Notice 2021-15 clarifies some of the most crucial details aboutthe COVID-19 relief options for employer-sponsored Section 125 plans created by the Consolidated Appropriations Act of 2021 (CAA). Meanwhile, Disaster Relief Notice 2021-01, issued by the Employee Benefits Services Administration, gives benefit plan administrators directions about winding down pandemic-related deadline extensions created by last year’s “outbreak period” regulation.
The CAA allows employers that sponsor Health Flexible Spending Arrangements (Health FSAs) and Dependent Care Assistance Programs (DCAPs) the option of allowing employees to carry over unused funds to the next plan year. It also permits extending a spending grace period for up to 12 months for plan years ending in 2020 or 2021. Plan sponsors may also allow prospective Health FSA and DCAP election changes without a corresponding status change and raise the age limit for qualified dependent care beneficiaries to under age 14, rather than under age 13, for the 2020 plan year if specific criteria apply. While most employers welcomed the Section 125 plan relief in the CAA, it also raised many administrative questions. Notice 2021-15 contains many needed answers and clarifies that employers have flexibility if they choose to make any of the newly allowable changes to their Health FSA and/or DCAP plans.
The notice also gives employers the option to allow mid-year health plan elections during 2021 without a qualifying event on a prospective basis. Suppose an employer permits it (and the carriers involved with underwriting the benefits allow it). In that case, the IRS will allow employees to make a new election for medical, dental, or vision coverage if they declined coverage during open enrollment. Employers (and any involved carriers) could also allow people to revoke an existing election and enroll in a different plan sponsored by the same employer or drop coverage, provided they will enroll immediately in other health coverage. Finally, the guidance offers plan amendment timing relief for sponsors of Health FSA plans and health reimbursement arrangements (HRAs) that opt to reimburse employees for newly qualified expenses authorized by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
The second piece of guidance, Disaster Relief Notice 2021-01, gives group health plan sponsors more information about the ending of the COVID-19 “outbreak period” regulation. Last May, the Departments of Labor (DOL) and Treasury issued an interim final rule that “stopped the clock” as of March 1, 2020, for purposes of (1) COBRA notices, elections, and payment, (2) HIPAA special enrollment (i.e., the ability to enroll in a health plan after marriage or birth of a baby), (3) claims and appeals procedures, and (4) external review. The rule created an “outbreak period” that started on March 1, 2020, and was intended to last for 60 days past the end of the COVID-19 national emergency.
The legal authority for the rule stems from Section 518 of ERISA, which allows the Departments to delay otherwise applicable deadlines by “a period of up to one year.” One year from March 1, 2020, was February 28, 2021, but the COVID-19 national emergency is still ongoing. Fortunately, Disaster Relief Notice 2021-01 explains that the deadline will expire on a rolling basis determined by each individual’s triggering event, unless the overall outbreak period ends sooner.
While this guidance is vital from a legal perspective, it also makes life more complicated for everyone involved in group benefits plan administration. So the guidance explicitly notes that “plan fiduciaries should make reasonable accommodations…and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time frames.” The guidance also promises employers with enforcement relief, provided they act “in good faith and with reasonable diligence under the circumstances.”
Pennsylvania Ends Insurance Pandemic-Related Licensing Renewal and CE Extensions
The Pennsylvania Department of Insurance recently issued Notice 2021-02, which revokes the extended licensing renewal and continuing education deadlines related to COVID-19 that have been in effect since last March. Effective May 14, 2021, the Department will require all licensees to fully comply with all licensing renewal, payment, and continuing education requirements.
- All licensees with license expiration dates on or after May 14, 2021, will no longer qualify for the temporary renewal extensions.
- Effective May 14, 2021, the Department will no longer extend renewal deadlines for licenses that expired from March 16, 2020, through May 13, 2021. Any licensee whose license was scheduled to expire during this period should submit all requirements for renewal before May 14, 2021.
- All licensees who were granted, benefitted from, or affected by the temporary continuation of license renewal deadlines, including continuing education requirements and licensing fees, must comply with all applicable Commonwealth insurance requirements by May 14, 2021. Failure to comply with renewal requirements by the deadline will result in late fees or license expiration, or both, where applicable.
- Any licensee with insurance company appointments that remained active during the extension will terminate effective the date of the licensee’s expiration date if the licensee fails to renew by May 14, 2021.
- The Department encourages individuals to take advantage of the Department’s online resources to renew their license. Individuals can renew their license electronically at www.sircon.com/pennsylvania or www.nipr.com.
- Any licensee with a CE requirement whose CE compliance period expires between March 16, 2020, and May 13, 2021, will be required to complete the required number of CE credits by May 14, 2021. Failure to comply with renewal requirements by the deadline will result in late fees or license expiration, or both, where applicable.
- In-person classroom education approved by the Department may resume beginning May 14, 2021. Providers must adhere to all guidance and safety orders issued by Governor Tom Wolf, the Department of Health, and the Center for Disease Control and Prevention related to in-person operations in the Commonwealth.
- Licensees are encouraged to visit www.sircon.com/pennsylvania for information about approved CE classes and to view their CE transcript.
Check This Out!
If you want to expand your health policy knowledge beyond this newsletter, here is a resource to check out!
America’s Health Insurance Plans just released this infographic highlighting the importance of the employer-based health insurance system.