Washington, D.C. Roundup

Diving Into Federal Updates, Including COVID-19, the New Stimulus Bill, Agent Disclosure Requirements and Grandfathered Health Plan Rules

By Dorothy Cociu

There has been so much going on in Washington, D.C. that it’s definitely hard to keep up. Just after I finish writing a lengthy article on something important, more of course happens, meaning that more lengthy articles are waiting to be written — 2020 and now 2021 have definitely kept us all busy!


As a reminder, there are some important deadlines from previous COVID-19 legislation (pre-CAA). Paid leave under the Families First Coronavirus Response Act (FFCRA) expired on December 31, 2020. This was a hard stop. In California, AB 1867, which had many of the same provisions of FFCRA but applied to groups with over 500 employees (FFCRA applied to groups with fewer than 500 employees), also ended on December 31, 2020. Although if someone were in the middle of a leave on Dec. 31, that leave could continue until completed. Keep in mind, California AB 1867 did not have tax credit provisions. For paid leave under FFCRA, employers are reminded to disclose in box 14 of the W-2 form, the amount of qualified wages paid under FFCRA. The IRS has updated its FAQs and items 25, 25a and 31-36 focus on the tax credit provisions of FFCRA. Under the CARES Act, over-the-counter medicines used for medical care, as well as menstrual products, may be reimbursed by an HSA, health FSA, HRA, or Archer MSA, and applies to expenses incurred and amounts paid as of Jan. 1, 2020.

You should be sure to have plan amendments in place and coordinate with your TPA. Mid-year cafeteria plan election changes implemented during the 2020 calendar year require a plan amendment by Dec. 31, 2021. In addition, Health FSA carryover provisions were increased to $550, and also require a plan amendment by Dec. 31, 2021.

Furthermore, the mandate to provide COVID-19 testing without cost sharing was recently extended another 90 days, so it now expires on April 21, 2021, unless further extended. This was part of the HHS Public Health Emergency. COVID-19 vaccines are required under Section 3203 of the CARES Act for non-grandfathered group and individual health plans. The cost of a coronavirus vaccine must be with no cost-sharing 15 business days after the vaccine is recommended as preventive care. Grandfathered plans and excepted benefits are not subject to this mandate but may voluntarily comply. In addition, during the Public Health Emergency (as of the writing of this article it was through April 21, 2021 but we consider this subject to potential additional extensions), vaccines must be provided without cost-sharing. This whether they are provided by an in-network or out-of-network provider, including multi-dose vaccines and the cost of administering the vaccine.

Reimbursements for out-of-network providers must be made at a “reasonable rate.” You should also review, of course, OSHA, EEOC and state guidance on vaccines and workplace issues related to COVID-19. As a reminder, under the FFCRA and CARES Act, during the HHS Public Health Emergency, all group and individual health plans, including fully-insured, self-funded grandfathered or non-grandfathered plans, must cover testing (not treatment) for the detection or diagnosis of COVID-19, and related items and services. These include in-person visits, telehealth, urgent care and ER visits without cost sharing (no co-pays or deductibles), and they cannot require prior authorization or medical management. Tests that must be covered include at-home testing, multiple COVID-19 tests, and antibody tests. Testing for employment purposes, however, is not covered. Therefore, if an employer requires a COVID-19 test before you return to work, those tests are not required to be covered at no-cost under the FFCRA and CARES Act, so an employee could be billed for those services. Employees and employers should coordinate to determine who will pay for required COVID-19 tests to return to work.


If you’ll recall, time frame extensions were granted in 2020, which stated that for plan participants, beneficiaries or claimants, the:

● Outbreak Period, beginning March 1, 2020, was disregarded in connection with the period to request HIPAA Special Enrollment
● 60-day election period for COBRA coverage
● date for making COBRA premium payments
● 60-day period for individuals to notify the plan of a COBRA-qualifying event or determination of disability
● date to file a benefit claim
● date to file an adverse benefit determination
● date for a claimant to file a request for an external review after the receipt of an adverse benefit determination or final adverse benefit determination, or
● date for a claimant to file information to file a request
for external review upon finding that the request was not complete.
To keep you up to date, after I initially wrote this article, very important information was released by the Department of Labor in EBSA Disaster Relief Notice 2021-01. So that you understand the original information plus the update, I am going to attempt to frame this with “THEN and NOW” information, to be sure that you’re not confused (at least as much as possible) with conflicting information that is out there. Of course it’s confusing… it all changed with one notice release!
According to ERISA sections 518 and Code Section 7508A, the Secretary may, notwithstanding any other provision of law, prescribe, by notice or otherwise, a period of up to 1 year which must be disregarded in determining the date by which any action is required or permitted to be completed under this chapter. The IRS/DOL guidance states that subject to the statutory duration limitation in ERISA section 518 and Code Section 7508A, all group health plans, disability plans and other employee welfare benefit plans, and employee pension benefit plans subject to ERISA or the Code must disregard the period between March 1, 2020 until 60 days after the announced end of the National Emergency or such other date announced by the Agencies in a future notice (the “Outbreak Period”).
What this means (or meant) is that with the March 1 start date in 2020, the period of one-year period defined in ERISA and the Code ended February 28, 2021, which, unless further extended by an agency extension, emergency order or other, means that the Outbreak Period should’ve ended on Feb. 28, 2021. This means anyone with pending COBRA elections and premium payments would be asked to pay up.
Because I heard so little talk about this in the industry, I asked two attorneys to tell me their thoughts on the ending of the Outbreak Period (again, this was prior to Notice 2021-01, so THEN).
In a recent conversation with John Hickman, attorney from Alston & Bird in Atlanta, John responded, “While generally not well known, and absent further agency action, the Outbreak Period tolling should expire by statute, on Feb. 28, 2021. This means that any affected tolled periods (COBRA election period or premium payment period or claims submission period) will begin to run again, with any previously tolled periods tacked onto the end. The Outbreak Period is kind of like Groundhog Day. You wake up on March 1, 2021 and all tolled periods start to run again.”
Marilyn Monahan of Monahan Law Offices felt the same. In a recent podcast we discussed this topic, where Marilyn stated “… the duration of the Outbreak Period would be subject to a one-year limitation that’s contained in Section 518 of ERISA … That being the case, based on a strict reading of the regulations, the Outbreak Period should end on Feb. 28, 2021.”
Marilyn continued, “However, events are changing rapidly these days in Washington, so keep your eye out about whether this period might be extended by the government.” I asked Hickman if the federal agencies would or could extend this Outbreak Period. Or could the new Biden Administration extend it by Executive Order? Is this something Congress can do?
John responded: “Congress most certainly could extend the Outbreak Period, but it would take a hastily enacted law. The
agencies are also currently considering their options. We understand that at least one of the tri-agencies believes that they are constrained by the 12-month period, because it is used for other statutory requirements as well. They will need to get creative to find a way to extend the relief.”
As a former TPA executive, I have to think of the administrative considerations of the end of the Outbreak Period. I asked Hickman if he felt that health plans or their COBRA Administrators need to send notices to participants and COBRA qualified beneficiaries. “Much of the notice obligation will depend on the approach taken with regard to the Outbreak Period,” he explained. “Was coverage continued (unlikely) or merely made available if an election/payment was made (generally the case)?
Look at what was communicated previously and determine what should be communicated now. Back in mid-2020 neither the agencies nor TPAs considered the Outbreak Period would continue for a full 12 months. Under current COBRA law, some notices will most likely be required: coverage termination notices, premium contribution notices, etc., because situations vary based on past notices and practices, TPAs should seek the advice of counsel on these issues.”
How does the end of the Outbreak Period impact Health FSA run out periods? Can plans voluntarily extend it? Hickman had this response: “In most cases the runout period for 2019 and 2020 plan years will resume (along with any tolled days) as of March 1. This means that the FSA TPA may have 3 separate years against which to process claims – 2019-2021.”
So here is where it gets crazy!
Now we move on to the NOW… On Feb. 26, 2021, the DOL issued Notice 2021-01, which offered their very important and much needed interpretation of prior guidance. Under the new notice, the one-year limitation discussed above provides the ability to extend the deadlines through regulatory action to basically apply on an individual-by-individual basis! In the notice, the DOL interprets the Tolling Period to end the earlier of one year from the date the deadline would have begun running for that individual or 60 days from the end of the National Emergency. As we all know, the national emergency has not yet ended. Let’s dig into this a bit further…
What this means is that every person has his or her own “tolling period.” So, the extension begins on the date that the clock would have started for a particular deadline, on a rolling basis. 
The DOL provided examples to illustrate the duration of the relief under the notices: If a qualified beneficiary (QB) would have been required to make a COBRA election by March 1, 2020, the Notice delays requirement until Feb. 28, 2021, which is the earlier of 1 year from March 1, 2020 or the end of the Outbreak Period (still ongoing). Similarly, if a QB would have been required to make a COBRA election by March 1, 2021, the notice delays that election requirement until the earlier of one year from that date (i.e. March 1, 2022), or the end of the outbreak period. Likewise, if a plan would have been required to furnish a notice or disclosure by March 1, 2020, the relief under the Notices would end with respect to that notice or disclosure on Feb. 28, 2021. The responsible fiduciary would be required to ensure that the notice or disclosure was furnished on or before March 1 2021. In all of these examples, the delay for actions required or permitted that is provided by the Notices does not exceed one year
“While the relief can be important in cases where 2020 FSA amounts remain unused, many employers have already incorporated the May 2020 IRS FSA relief and allowed an extended grace period for years ending in 2020, and for 2020 elections. So, whether the enhanced grace period/carryover relief is appealing to an employer will very much depend on whether unused amounts will still remain after any ‘normal’ or ‘2020 extended’ grace period or carryover. Also, employers with HSA programs and HDHPs should take extreme care in coordinating their HSA eligibility with any enhanced grace period or carryover.” — John Hickman
So, what does all this mean for your TPAs, insurers or others when administering all of this? Think about it. They literally only had two days’ notice (expected end date was Feb. 28 and the notice was released on Feb. 26, 2021).
So it’s highly unlikely that they would have had time to do necessary programming to accommodate these changes! They will literally have to create custom COBRA, special enrollment and claims deadlines on a person-by-person basis.
The DOL stated in the Notice that plan administrators or other fiduciaries “should consider affirmatively sending a notice regarding the end of the relief period.” In addition, they stated, “plan disclosures issued prior to or during the pandemic may need to be reissued or amended if such disclosures failed
to provide accurate information regarding time in which participants and beneficiaries were required to take action, e.g. COBRA election notices and claims procedure notices.” They also encouraged plans to ensure that participants and beneficiaries losing coverage are made aware of other coverage options, such as marketplace coverage.
Marilyn Monahan was kind enough to give me an updated comment on these changes. “The new guidance will complicate plan administration, particularly with regard to COBRA, but also with regard to claims processing for medical benefits and health FSAs. Good record keeping, and working closely with your TPA and COBRA administrator, will be essential.” Regarding the notices, Marilyn commented: “Implementing the new guidance will have to start with creating and distributing any necessary notices to explain when the Outbreak Period will end and participants will have to act.” I’m guessing a lot of extensions will need to be made, which is going to make this a very confusing, very difficult process, so stay tuned!
The new CAA is extensive, with HR 133 containing 2,124 pages of bill text alone. The entire Act is 5,593 pages in length. For the purposes of this article, I will focus only on the employer plan sponsor and benefits perspective. Keep in mind, at this point we only have bill text. So, we have the “what” but until we have regulations and guidance, we do not have the “how.” I’m sure some of the “how” will be released in the next few months.
First, CAA has some provisions to extend provisions of the FFCRA related to paid leaves. As mentioned above, the two paid leave provisions in the FFCRA expired as of Dec. 31, 2020, which means that employees no longer have a right to paid leave and employers are no longer obligated to provide such leave in the event of a COVID-19 diagnosis. The CAA, however, gave employers the option to provide paid sick leave and receive a tax credit through March 31, 2021, under the terms and conditions set forth in the FFCRA. Note that this provision does not include any additional sick days. In short, employers had the choice of paying the applicable mandatory paid sick and family leave through Dec. 31, 2020, as previously required by FFCRA. Or they could’ve extended payment eligibility through March 31, 2021, subject to all other obligations under FFCRA. This also applies to self-employed individuals.
If employers should elect to extend the FFCRA paid sick leave provisions through March 31, 2021, they could then also extend the business tax credits for emergency paid sick leave or expanded family medical leave through that March 31, 2021, date. (This would have otherwise ended on Dec. 31, 2020).
I would like to add as a personal comment that although CAA offered the option to continue the FFCRA leaves, employers hopefully didn’t feel obligated.
Let’s face it; many employers had a terrible financial year in 2020 due to COVID-19 shutdowns, etc., and although they will get a tax credit for continuation of 2021 leaves through March, they still had to put the money out first, and many just simply couldn’t afford that.
For self-employed individuals, they may now elect to use earnings from the prior taxable year rather than the current taxable year for emergency paid sick leave or expanded family medical leave.
The CAA provides for temporary relief for Health FSAs and Dependent Care Accounts, which allow participants to carry over any unused FSA funds from plan years ending in 2020 or 2021. Prior to this provision, DCAPs could not have a carry-over feature, and FSA accounts had a $550 limit. In essence, Health FSA and DCAP balances that are unused in 2020 may be carried over into 2021, and unused balances in 2021 may be carried over into 2022. This came about because people put off surgeries, overestimated dependent care amounts, etc. due to COVID-19. Note that the temporary relief provisions can be found in Pub. L. No. 116-260, Div. EE Section 214 (2020). You should also review 2020 relief under IRS Notice 2020-29.
Grace periods were also extended in the CAA for FSAs and DCAPs. Prior to the CAA, grace periods could extend for 2 1/2 months. Under CAA, for plan years ending in 2020 or 2021, the plan may extend their grace period to 12 months after the end of the plan year. Keep in mind, these selections are optional, and you should adopt Plan Amendments for all applicable CAA selections. The Relief Act does not address whether the extended grace period can be limited by plan design in amount or duration. Grace period guidance pre-COVID-19 allowed plan sponsors to limit their carryovers to a specified amount (such as no more than $1,500, or no more than $2,000). The 12-month grace period extension appears to be flexible, and employers may be able to adopt an extension less than the 12-month allowance. (Please consult with your legal counsel).
FSAs can have a carryover or grace period, but not both. Your carryover or grace periods can impact HSA eligibility in the following year. Another important provision is that ongoing grace period coverage in a general-purpose health FSA would make an individual ineligible for an HSA for the entire period of coverage. This also applies to the carryover. Health FSAs have post-termination reimbursement provisions under CAA. If an employee terminates participation in a health FSA during the 2020 or 2021 calendar year, the individual may continue to receive reimbursements from unused FSA account balances through the end of the plan year, including any grace periods. In the CAA, the DCAP plan may change the age of a “qualified individual” for DCAP reimbursement purposes. For dependents who have aged out of eligibility during the COVID-19 pandemic, plans may extend the maximum age limit to age 14 (previously it was age 13). This applies during the last plan year with a regular enrollment period ending on or before January 31, 2020. The same relief applies for the next plan year, but only for unused grace period amounts from the 2020 plan year or other amounts carried over into the 2021 plan year.
In my recent conversation with Hickman, we discussed the extent of provisions on FSA relief, carryover, post termination FSA spend-downs, expansions of eligible DCAP from age 12 to 13, as well as election changes in plan years ending in 2021 under the CAA. He discussed “Points to Ponder” in a recent update he did on the CAA. I asked if he would share his thoughts on whether Amendments should be adopted, timing considerations and TPA capabilities.
“Sure,” stated John. “While the relief can be important in cases where 2020 FSA amounts remain unused, many employers have already incorporated the May 2020 IRS FSA relief and allowed an extended grace period for years ending in 2020, and for 2020 elections. So, whether the enhanced grace period/carryover relief is appealing to an employer will very much depend on whether unused amounts will still remain after any ‘normal’ or ‘2020 extended’ grace period or carryover. Also, employers with HSA programs and HDHPs should take extreme care in coordinating their HSA eligibility with any enhanced grace period or carryover.”
The Internal Revenue Code (IRC) allows for employers to set up an educational assistance program under section 127 of the Code. Prior to the CARES Act, this program could only be used for tuition reimbursement. The CARES Act allowed employers to also reimburse for student loan debt, but that provision has since expired (as of January 1, 2021)
The CAA extends the CARES Act tuition assistance program change through December 31, 2025. The maximum is $5,250 for both tuition and student loan repayment, allowing the employer to contribute up to the $5,250 on student loans on a tax-free basis, and such payment would be excluded from the employee’s income. This change has captured the interest of tech companies and other companies; particularly those that tend to hire engineers or other tech positions straight out of college. Some of these companies may not be able to compete with other firms on salary, but offering to reimburse for student loan debt could help in their recruiting efforts. This provision applies to any student loan payments made by an employer on behalf of the employee after the date of enactment and before Jan. 1, 2026. In order for an employer to use this provision, they must first set up a written Section 127 Plan Document and follow the applicable rules established by the IRC.
Surprise billing in the No Surprises Act, which was part of the CAA, seeks to protect patients from surprise medical bills in situations where patients have little or no control over who provides their care. This includes non-emergency services provided by out-of-network (OON) providers and in-network facilities, emergency services provided by OON providers, and facilities, and air ambulance services. Surprise billing practices are commonly known to undermine the control and affordability of a health plan, take advantage of people when they are the most vulnerable, and jeopardizes the overall satisfaction of the employer sponsored health plan. In these circumstances, plan participants/patients should not be penalized for the services that were provided outside of their control, such as an ER physician, an anesthesiologist, or lab work that could not be completed in a PPO lab and was sent elsewhere.
Previously we had the No Surprises Act of 2019, and 17 states now have passed laws on balance billing. The applicability is for plan years on or after Jan. 1, 2022, for group health plans and group health insurers. It applies to grandfathered and non-grandfathered health plans, but does not apply to excepted benefits or retiree health plans.
The No Surprises Act mandates that in-network cost sharing applies to out-of-network services in the following circumstances:
● Emergency services at a hospital emergency department (ED)/freestanding ED*
● Ancillary services provided by an out-of-network provider at an in-network facility*
● Non-emergency services performed by an out-of- network provider in an in-network facility (exceptions apply if provider provides notice and individual consents to using an out-of-network provider, or not applicable to ancillary services or services arising from unforeseen, urgent medical needs)*
● Cost sharing counted as if in-network
● In-network coinsurance is based on the “recognized amount”
● Providers may not balance bill the amount in excess of the in-network cost sharing for the services listed above.
Under this Act, “certain services*” includes emergency medicine, anesthesiologist, pathology, radiology, neonatology, assistant surgeon, hospitals, intensivisits, diagnostic services (x-ray/lab) services for which there is no in-network provider available, and other services as directed by the Secretary. The No Surprises Act requires plans to make an initial payment or make an initial denial within 30 days; the provider or health plan must open negotiations regarding any cost dispute within the 30 days of receiving an initial payment or denial. If negotiations fail, a 30-day cooling off period happens, followed by a “baseball-style” independent arbitration, where each side submits a payment offer and the arbitrator chooses which side is acceptable. In the event of an air ambulance service, similar rules will apply (not applicable to ground ambulances). The air ambulance must report to HHS/DOT, and plans must report to DOL/HHS/IRS.

The No Surprises Act requires advance EOB disclosures. Upon receiving notice from a provider or facility of scheduled services or a request form a participant or beneficiary, the plan must notify the participant or beneficiary within the applicable timeframe, and provide the following information:

● Whether the provider/facility is in-network or OON
● A good-faith cost estimate of the amount the plan will pay and the amount of the individual’s cost-sharing
● A good faith estimate of the amounts the individual has incurred towards financial limitations such as deductibles and out-of-pocket accumulations
● A disclaimer if a medical management technique is applied
● A disclaimer that this is just an estimate
● Other pertinent or relevant information
Consumer Protection Provisions in the No Surprises Act include transparency for all patients, consistent with the Transparency in Coverage Rules, which I discussed in detail in a previous article. In general, the consumer protection provisions include transparency for in-network and out-of-network provisions and out-of-pocket provisions, the maintenance of a price comparison tool (see my prior Transparency in Coverage article for details), provider directory information (web-based), and disclosure of billing protections within your state.
The CAA also includes significant broker compensation disclosure requirements, effective one year from enactment, or Dec. 27, 2021. This disclosure provision modifies ERISA to add a disclosure requirement of both direct or indirect compensation by brokers or consultants, if they enter into a contract or arrangement with a group health plan, or reasonably expect broker services or consulting compensation to equal $1,000 or more per year (group health plan insurance commissions would likely count toward the $1,000 threshold in all cases).
Compensation includes anything of monetary value, but does not include non-monetary compensation valued at $250 or less,
in aggregate, during the contract term. The broker and consultant disclosure requirements include health plans, which would include excepted benefits like stand-alone dental and vision, health FSAs, EAPs, and HRAs. Disclosure is required under Section 408(b)(2) of ERISA and is very similar to retirement plan disclosures that have been required since 2012.
In summary, the broker/consultant must provide in advance of the contract date to the employer/plan sponsor all expected compensation, and communicate any changes no later than 60 days from the date the broker is aware of the change, or upon written request. Brokers/consultants will be required to provide a disclosure notice to each client.
In general, the CAA Broker compensation disclosure notice must include:
● A description of services (what are you doing for your client?)
● A statement indicating if the broker/consultant plans  to  offer fiduciary services to the plan, if applicable  (yes or no – in  most cases, this should be NO for most brokers)
● All direct compensation, in the aggregate, or by service
● All indirect compensation, including vendor incentive
payments, a description of the arrangement under with the compensation is paid, the payer name, and any services for which compensation will be received
● Any transactional-based compensation, for example, commissions, finder’s fees for services and the payers and recipients of the compensation
● A description of any compensation expected with regard to the contract’s termination
Note that bonuses and overrides, etc. were not clearly specified in the bill text. The coming regulations/rules/guidance should give us more clarity on this.
In general, the services you provide to your clients must be included in your disclosure notice. Examples of services include, but are not limited to:
Note that bonuses and overrides, etc. were not clearly specified in the bill text. The coming regulations/rules/guidance should give us more clarity on this.
SERVICES INCLUDED In general, the services you provide to your clients must be included in your disclosure notice. Examples of services include, but are not limited to:
● Development or implementation of plan design, insurance or insurance selection
● Recordkeeping services
● Medical Management vendor
● Benefits Administration (including dental and vision)*
● Stop-loss insurance placement or recommendations
● PBM services
● Wellness program services
● Transparency tools and vendors
● Group purchasing organization preferred vendor panels
● Disease management vendors or products
● Compliance services
● EAP Programs
● Third Party Administration (TPA) services *
Consulting services are nearly identical to the brokerage services, but do not need to involve the actual broker services. At this time, it is unclear whether “consulting” just involves brokers serving in a consulting capacity (for example, consulting for a self-insured employer in a self-funded health plan), or other service providers who “consult” such as TPA consulting on plan design or implementation.
We assume that further guidance will be coming soon. I’d like to point out that in many states, including California, administration services (indicated by the asterisks above) require a license, and in many cases, providing administrative services that would be covered under that license as a broker could be considered prohibited transactions under ERISA (but that is a topic for another article on another day).
I also wanted to mention that in California, the Department of Insurance issued a bulletin some time ago that basically states that for insured products, if you’re getting a commission, you cannot also take a fee, unless you are doing other services. So please check with your legal counsel to determine what you can and cannot charge fees for (self-funded plans with ERISA jurisdiction are separate and fees and stop loss commissions are acceptable and common).
Direct compensation is defined as compensation from the plan itself, through plan assets. Amounts paid by the plan sponsor/employer would not be considered plan assets, but participant contributions, keep in mind, are always plan assets. Indirect compensation is generally amounts received from anyone other than the plan or the employer/plan sponsor. For example, if a consultant receives compensation from an insurance carrier, an industry vendor, or TPA not in the form of commissions. I know that many brokers are in panic mode about these disclosure requirements. I, however, welcome them. I guess that is because I have worked in the ERISA world for all of my career, where disclosure is already required in most cases (particularly over 100 lives). I believe that this disclosure requirement is actually a way to show your value as a broker and consultant. If you provide fewer services than many other brokers, this could alarm you, but if you are providing a number of services for your clients, this should be a way to prove your worth to your clients.
I would recommend that brokers/consultants begin now to identify all group health plans where broker or consulting services are provided, to determine all sources of direct and indirect compensation, and determine all compensation that meets the $1,000 threshold. Then, you should begin to design your disclosure notice and determine the best way to produce this to your clients. For most, particularly large agencies, this would be easier if automated, so that timely disclosures can be provided at the end of the year.
“The new guidance will complicate plan administration, particularly with regard to COBRA, but also with regard to claims processing for medical benefits and health FSAs. Good record keeping, and working closely with your TPA and COBRA administrator, will be essential.” —Marilyn Monahan
There are four significant provisions of Division BB of the CAA, Gag Clauses (effective Jan. 1, 2021), Compensation Disclosure (effective Dec. 27, 2021), Mental Health Parity (effective Feb. 10, 2021, and Pharmacy Benefit & Drug Cost Reporting (effective Dec. 27, 2021). The gag clause section states that health plans may not enter into an agreement with a provider, TPA or other service provider that would restrict the plan (directly or indirectly) from providing provider-specific cost or quality of care information or data, electronically accessing de-identified
claims and encounter information, and sharing such information with a business associate. I discussed the compensation disclosure in the broker disclosure section.
The Mental Health Parity section states that group and individual plans that provide medical and surgical benefits and mental health/substance abuse benefits must perform and document comparative analysis. The pharmacy benefit section requires plans to disclose the cost of commonly prescribed medications annually. These are only simple explanations of the transparency requirements in the CAA.
The CAA includes an extension and phase-out of unemployment benefits, including extending benefits to current recipients with benefits remaining to March 14, 2021, including relief for governmental entities and nonprofit organizations. The CAA provisions limit unemployment assistance to any week prior to April 5, 2021, and increases the number of weeks from 39 to 50. In addition, it adds additional unemployment funding of $300 per week for weeks of unemployment beginning on or after Dec. 26, 2020, and ending before March 14, 2021.
On Dec. 11, 2020, the U.S. Departments of Labor, Health & Human Services, and Treasury released the final rule for Grandfathered Health Plans. The final rule amends the requirements for grandfathered group health plans and grandfathered group health insurance coverage to preserve their grandfathered status. The final rule provides greater flexibility to increase cost-sharing amounts without loss of grandfather status; for example, you could increase the deductible of a HDHP to comply with HSA limits, or you could use a new standard for calculating increases in co-pays. The final rule applies to plan changes that are effective on/after 6/15/21. Grandfathered plans are subject to the ACA’s requirements, such as the prohibition on pre-existing conditions and prohibitions on waiting periods that exceed 90 days, the prohibition on lifetime or annual dollar limits, the prohibition on rescissions, and the requirement for plans that offer dependent coverage of children do so up to the age of 26, but grandfathered plans are exempt from certain other requirements. The final rule clarifies that grandfathered group health plans that are High Deductible Health Plans (HDHP) may increase fixed-dollar amount cost sharing requirements, such as deductibles, to the extent necessary to maintain its status as a HDHP, without losing grandfathered status. The final rule provides for an alternate method of measuring permitted increases in fixed-amount cost-sharing that allows plans and issuers to better account for changes in the costs of health coverage over time.
Provisions in the 2015 final rules specify circumstances which changes to terms will cause the plans to cease to be a grandfathered plan, including the elimination of all or substantially all benefits to diagnose or treat a particular condition; any increase in a % cost-sharing requirement (such as co-insurance), any increase in a fixed-amount cost-sharing requirement (other than a co-payment), such as a deductible or OOP Maximum that exceeds certain thresholds, any increase in a fixed-amount co-payment that exceeds certain thresholds, a decrease in contribution rate toward the cost of coverage of any tier of coverage for any class of similarly situated individuals by more than 5%, and the imposition of annual limits on the dollar value of all benefits for group health plans and insurance coverage that did not impose such a limit prior to March 23, 2010.
High Deductible Health Plan (HDHP) Changes: The 2020 final rules include amendments to the 2015 Final Rules for HDHP limits, including: an increase to fixed-amount cost-sharing requirements effective on/after 6/15/21 will not cause the plan to relinquish its grandfather status—but only to the extent such increases are necessary to maintain its status as an HDHP under IRC section 223.
● IRS Example: A grandfathered HDHP had a $2,400 deductible for family coverage on 3/23/10. The plan
is amended after 6/15/21 to increase the deductible
limit by the amount that is necessary to comply with the requirements for a plan to qualify as an HDHP under section 223(c)(2)(A). This change exceeds the maximum percentage increase under the Grandfathered regulations.
● IRS Conclusion: The increase in the deductible at that time does not cause the plan to cease to be a grandfathered health plan because the increase was necessary for the plan to continue to satisfy the definition of an HDHP under section 223(c)(2)(A). An important note related to this provision: The annual cost-of-living adjustment to the required minimum deductible for an HDHP has not yet exceeded the maximum percentage increase that would cause an HDHP to lose grandfather status—but it may in the future, causing participants to lose HSA eligibility—and that is the reason for the change in the regulations.
AMENDMENTS TO THE 2015 FINAL RULES: There was a new definition of maximum percentage increase provided in the final rules, which allowed for a new Fixed Amount Cost-Sharing provision. Under the 2015 rules, there is a formula for plans used to determine if the fixed cost-sharing amount exceeds certain limits; if the plan exceeds the limits, the plan uses status. The formula relies on the “maximum percentage increase.” Under the 2015 rules, the maximum percentage increase is medical inflation from 3/23/10 (tied to CPI-U) plus 15 percentage points. Under the new rules, on or after 6/15/21, the maximum percentage increase is the greater of (a) the current standard or (b) the change in the premium adjustment percentage plus 15 percentage points.
So why the change? In essence, according to Monahan, the alternative standard is considered a better reflection of the cost of group coverage. In other amendments to the 2015 Final Rule, a new Definition of Maximum Percentage Increase was defined. To best describe the new definition of maximum percentage increase, I’m going to use two of the examples from the regulations, and the analysis done by my benefits attorney, Marilyn Monahan (with her permission) in a recent webinar we did jointly, which was modified slightly for educational purposes.
Example 4—Facts: On 3/23/10, a grandfathered plan charges a copayment of $30 per office visit for specialists; this is later increased to $40. The plan subsequently increases the $40 copayment requirement to $45 for a later plan year, effective before 6/15/21. Within the 12-month period before the $45 copayment takes effect, the greatest value of the overall medical care component of the CPI–U (unadjusted) is 485.
● Conclusion: The increase in the copayment from $30 to $45, expressed as a percentage, is 50% (45 – 30 = 15; 15 ÷ 30 = 0.5; 0.5 = 50%).
● Medical inflation from March 2010 is 0.2527 (485 – 387.142 = 97.858; 97.858 ÷ 387.142 = 0.2527).

● The increase that would cause a plan to cease to be a grandfathered health plan is the greater of the maximum percentage increase of 40.27% (0.2527 = 25.27%; 25.27% + 15% = 40.27%), or $6.26 (5 × 0.2527 = $1.26; $1.26 + $5 = $6.26).

● Because 50% exceeds 40.27% and $15 exceeds $6.26, the change in the copayment at that time causes the plan to cease to be a GR health plan.
● Example 5—Facts: Same facts as Example 4, except the grandfathered group health plan increases the copayment to $45, effective after 6/15/21. The greatest value of the overall medical care component of the CPI–U (unadjusted) in the preceding 12-month period is still 485. In the calendar year that includes the effective date of the increase, the applicable portion of the premium adjustment percentage is 36%.
● Conclusion: In this Example 5, the grandfathered health plan may increase the copayment by the greater of: Medical inflation, expressed as a percentage, plus 15 percentage points; or the applicable portion of the premium adjustment percentage for the calendar year that includes the effective date of the increase, plus 15 percentage points.
The latter amount is greater because it results in a 51% maximum percentage increase (36% + 15% = 51%) and, as demonstrated in Example 4, determining the maximum percentage increase using medical inflation yields a result of 40.27%. The increase in the copayment, expressed as
a percentage, is 50% (45 – 30 = 15; 15 ÷ 30 = 0.5; 0.5 = 50%). Because the 50% increase in the copayment is less than the 51% maximum percentage increase, the change in the copayment requirement at that time does not cause the plan to cease to be a grandfathered health plan.
Note: The percentages used are hypotheticals. I’ve obviously shared a lot of information, which may take you a bit of time to absorb. The best thing I can tell you is to stay tuned, because the way things are changing, this could all be modified in the coming weeks and months, as new rules, technical releases, guidance and FAQs are released. Until then, to everyone out there, stay safe and stay healthy!
Author’s Note & Disclaimer: I’d like to thank attorneys Marilyn Monahan of Monahan Law Office and John Hickman of Alston & Bird for their assistance with this article. The information contained in this article is informational only and should not be construed as legal advice. We always recommend that you work with your legal counsel as situations vary.
DOROTHY COCIU, RHU, REBC, GBA, RPA is VP, Communications, California Association of Health Underwriters and president of Advanced Benefit Consulting & Insurance Services, Inc.