As the year comes to a close and we move toward further widespread implementation of the Affordable Care Act (ACA) in 2016, we want to keep our friends and clients up-to-date on the latest ACA developments by summarizing recent legal news and regulatory guidance relevant to employee benefit plans. This Compliance Update covers the following topics:
- PCORI Fee Increase (IRS Notice 2015-60)
- Adjustment to Household Income for purposes of determining “affordable” employer-sponsored coverage ( Proc. 2014-62)
- Repeal of the ACA’s automatic enrollment provision (Bipartisan Budget Act of 2015)
- Guidance on the ACA’s preventive care requirements, wellness programs, and mental health parity (Department of Labor FAQ XXIX)
- Proposed Rule regarding incentives in wellness programs for employees’ spouses to provide health information
PCORI Fee Adjustment
The Internal Revenue Service (IRS) has provided the adjusted dollar amount for purposes of determining the Patient-Centered Outcomes Research Institute (PCORI) fee imposed by the ACA. For policy years and plan years ending on or after October 1, 2015, and before October 1, 2016, the adjusted applicable dollar amount is $2.17 (an increase from $2.08 for plan years ending on or after October 1, 2014, and before October 1, 2015). The PCORI fee is included in the cost of fully insured group health plans; however, employers sponsoring self-insured plans, including health reimbursement arrangements (HRAs) must pay the fee once per year on the second quarter Form 720 by its due date, July 31. Under the statutory terms of the ACA, the PCORI fee is set to expire in 2019.
Adjustment to Household Income for “Affordability” Purposes
The IRS has increased the threshold for determining whether an employer has offered affordable coverage to an employee for purposes of the ACA’s “pay-or-play” requirements. The IRS guidance increases the percentage from 9.56% to 9.66%. This increased percentage is primarily used by the government to determine whether or not an individual has been offered affordable coverage to further determine whether he/she is eligible for a subsidy on the exchange. The 9.66% could be used by an employer assessing the affordability for employee-only coverage for its least expensive plan in 2016 by taking into account total household income. An employer using entire household income as its measure of affordability can now require an employee to pay up to 9.66% of his or her household income. It is important to note, however, that this increase to 9.66% threshold has no impact on the vast majority of employers who use one of the three safe harbors to measure affordability (W-2, Rate of Pay, and Federal Poverty Level). An anomaly the IRS refuses to fix is that the 9.5% affordability safe harbors are not indexed for inflation.
Repeal of the ACA’s Automatic Enrollment Provision
On November 2, 2015 the President signed the Bipartisan Budget Act of 2015. While the main purpose of the Budget Act was to set a budget and to avoid default on federal debt, it included a nice, bipartisan gift to America’s largest employers. The Budget Act repealed the ACA’s automatic enrollment requirements. Under the ACA as originally passed, all employers with 200 or more employees would have been required to automatically enroll their full-time employees into their group health plans. This provision of the ACA did not include an effective date and it had therefore been delayed since the ACA’s inception, awaiting guidance from the federal regulators. The regulations would have been very difficult to draft and even more difficult for large employers to implement.
Then Speaker of the House Nancy Pelosi once famously said: “we have to pass the bill so that you can find out what is in it, away from the fog of the controversy.” She was right. Five years out from its effective date and most reasonable people have come to see that there are many positive provisions of the ACA. Similarly, reasonable people have identified less positive provisions. The automatic enrollment provision would have affected employers with over 200 employees. It was going to be very difficult to draft regulations around this provision and would have been a nightmare for large employers to administer. It is now repealed. Let us hope that this same spirit of identifying what works (and what doesn’t) in the ACA will continue.
Department of Labor FAQ #29
Women’s Preventive Services
In the 29th installment of its FAQ series on ACA implementation issues, the Department of Labor (DOL) clarified several issues related to women’s preventive care. The FAQs remind plans and issuers that they must provide a list of in-network lactation counseling providers as part of the SPD or upon request, and if the network does not include lactation counseling providers the plan cannot impose cost sharing with respect to out-of-network lactation counseling services. Also, plans and issuers must cover lactation counseling performed by any provider acting within the scope of his or her license or certification under applicable State law (e.g., a registered nurse). Meaning, if a state does not license lactation counseling providers and the plan only covers counseling by licensed providers, it will need to cover lactation counseling provided by another provider type acting within the scope of his or her license or certification (for example, a registered nurse), and the plan or issuer would be required to provide coverage for the services without cost sharing.
Further, plans and issuers cannot provide coverage for lactation counseling only on an inpatient basis. The FAQs clarify that limiting coverage for lactation counseling to services provided on an inpatient basis is not a permitted medical management technique. Plans and issues are also prohibited from requiring participants to obtain breastfeeding equipment within a specified time period (e.g., within 6 months of delivery) in order for the breastfeeding equipment to be covered without cost sharing. Breastfeeding equipment must be covered with no cost sharing as long as the participant remains enrolled in the plan.
The US Preventive Services Task Force (USPSTF) has designated screening for adult obesity as a preventive service. Thus, the FAQs provide that plans cannot categorically exclude weight management services for adult obesity. Additionally, plans must cover weight management programs for individuals with certain risk factors. This is one for employers to watch. It will not be a very long jump in the future for the federal regulators to move from “cannot exclude weight management” to “must include the following weight management” services. The cost of employer-sponsored group health insurance will rise dramatically if at some point in the future the government requires all plans to cover the cost of diet products and food plans.
The USPSTF has also designated colonoscopies as a preventive care service for certain individuals. The FAQs clarify that a medically-appropriate screening procedure prior to the colonoscopy must be covered with no cost sharing. Likewise, post-screening pathology exams must also be covered, as a pathology exam of a polyp biopsy is an integral part of a colonoscopy. Because earlier guidance on this issue was unclear, this clarification generally applies for plan years beginning in 2016.
The FAQs clarify prior guidance related to BRCA testing. Women found to be at increased risk of BRCA (breast cancer) must receive coverage without cost sharing for genetic counseling and testing for BRCA mutations.
The FAQs confirm the DOL’s position that the value of non-financial wellness program rewards such as gift cards, thermoses, and sports gear must be considered when determining whether the program has complied with the DOL’s limits on rewards provided under health contingent wellness programs. The DOL limits incentives offered under such programs to 30% of the total cost of coverage under the terms of the group health plan (50% for wellness programs that include tobacco cessation).
The restriction on rewards applies only with regard to wellness programs that are part of group health plans (or that rise to the level of a group health plan in their own right based on the level of medical care provided). Many employers offer wellness programs that are not group health plans or part of group health plans. For example, an employer might pay for health club memberships, subsidize healthy food choices at an on-site cafeteria, provide pedometers to encourage employee walking and exercise, or ban smoking on employer facilities and campuses. These are not typically considered to be group health plans and thus would not be subject to the limitations described above.
Mental Health Parity
The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) requires parity between mental health/substance use disorder benefits and medical/surgical benefits with respect to financial requirements and treatment limitations. Group health plans providing mental health/substance use disorder benefits generally may impose financial requirements (such as deductibles, copayments, coinsurance and out-of-pocket limitations) or quantitative treatment limitations (such as frequency of treatment, number of visits, days of coverage or other similar limits on the scope or duration of treatment) on mental health/substance use disorder benefits, as long as the requirements or limitations are on par with those imposed on medical/surgical benefits. The rules confirm a separate parity requirement for nonquantitative treatment limitations (“NQTLs”). NQTLs are limits on the scope or duration of treatment that are not expressed numerically (such as medical management standards, formulary design and methods for determining usual, customary and reasonable charges).
The FAQs address an issue that can occur when a participant in a group health plan is denied prior authorization for an inpatient stay to treat a mental health condition due to the lack of “medical necessity.” Some participants were finding that their requests for information from the plan regarding its processes, strategies, and other factors used in developing the medical necessity criteria were being denied on the basis that such information was “proprietary” and/or of “commercial value.”
The FAQs clarify that a group health plan subject to the Employee Income Security Act of 1974 (ERISA) must provide upon request the criteria for making medical necessity determinations, as well as any processes, strategies, evidentiary standards, or other factors used in developing the underlying NQTL and in applying it regardless of any assertions as to the proprietary nature or commercial value of the information. Further, the information must be disclosed with respect to both mental health/substance use disorder benefits and medical/surgical benefits,
A group health plan may provide a document that summarizes its medical necessity criteria in layperson’s terms; however, providing such a summary document is not a substitute for providing the actual underlying medical necessity criteria, if requested.
Proposed Rule Regarding Spousal Wellness Incentives
The Equal Employment Opportunity Commission (EEOC) published proposed rules in the Federal Register on October 30, 2015. The proposed rules amend regulations under Title II of the Genetic Information Nondiscrimination Act (GINA) to provide employers more flexibility when designing their wellness programs. The proposed rules would permit employers to offer financial incentives to an employee whose spouse provides information about his or her current or past health status in connection with participating in the employer’s group health plan. For these purposes, incentives may take the form of rewards or penalties, and may be financial or in-kind (e.g., gift cards, thermoses).
Information about current or past health status usually is provided as part of a health risk assessment (HRA), which may include a questionnaire or medical examination, such as a blood pressure test or blood test to detect high cholesterol or high glucose levels. Incentives to provide such information are permissible (within certain limits, as described below) as long as the HRA is part of a wellness program that is “reasonably designed to promote health or prevent disease.” For example, collecting information on an HRA without providing any follow-up information or advice would not be reasonably designed to promote health or prevent disease.
Also, spouses must provide knowing, written, and voluntary authorization for the employer to collect genetic information, and the authorization must describe confidentiality protections and restrictions on disclosure of genetic information.
The proposed regulations limit the amount of an incentive that may be provided. The total incentive for an employee and spouse to participate in a wellness program that is part of a group health plan and collects information about current or past health status cannot exceed 30% of the total cost of coverage. Moreover, the maximum portion of an incentive that may be offered to an employee alone may not exceed 30% of the total cost of self-only coverage. For example, if an employee and his or her spouse are enrolled in family coverage that costs $14,000, the maximum incentive the employer may offer the employee and spouse to provide information on current or past health status as part of a wellness program is $4,200 (30% of $14,000). However, the maximum portion of an incentive that may be offered to an employee alone may not exceed 30% of the total cost of self-only coverage. So, if the employer offers self-only coverage at a total cost of $6,000, the maximum portion of the $4,200 incentive that may be offered for the employee’s participation is $1,800 (30% of $6,000). The rest of the incentive ($2,400 in this example) may be offered for the spouse’s participation or for the employee, spouse, and/or employee’s other dependents who are covered by the health plan participating in activities designed to promote health or prevent disease. These could include programs that reward participants for walking a certain amount each week or for attending nutrition or weight loss classes.
Lastly, the proposed rules prohibit wellness programs from collecting information on the current and past health status of children. The EEOC believes that the possibility that an employee may be discriminated against based on genetic information is greater when an employer has access to information about the health status of the employee’s children, as there is a higher likelihood of discovering information about an employee’s genetic make-up or predisposition to disease from information about the current or past health status of the employee’s children as opposed to the current or past health status of an employee’s spouse.
Employers should review their group health plan practices and plan documentation (including their summary plan descriptions) carefully in light of this latest guidance, and review their wellness programs for compliance with the EEOC’s proposed amendments to the GINA regulations.