Compliance Corner Archives
Healthcare Reform 2022 Archive
On December 12, 2022, CMS released the proposed Notice of Benefit and Payment Parameters Rule for 2024. This notice is issued annually preceding the applicable benefit year and, once final, adopts certain changes. Additionally, CMS issued Premium Adjustment Percentage and related guidance to inform the payment parameters for the 2024 benefit year.
While the proposed rule primarily impacts the individual market and the Exchange, CMS’s Premium Adjustment Percentage and related guidance addresses certain ACA provisions and related topics that impact employer-sponsored group health plans. Below are the highlights.
Annual Cost-Sharing Limits. The ACA requires non-grandfathered group health plans to comply with an out-of-pocket maximum on expenses for essential health benefits. CMS proposes that this maximum annual limitation on cost-sharing for 2024 will be $6,350 for self-only coverage and $18,900 for family coverage (a decrease from $9,100 and $18,200 for self-only/family coverage respectively in 2023).
Premium Adjustment Percentage and Payment Parameters. CMS announced the premium adjustment percentage for the 2024 benefit year as 1.4899877401 ($7,292/$4,894), which indicates an increase in employer-sponsored insurance premiums of approximately 48.9% over the period from 2013 to 2023. This premium adjustment percentage will also be used to index the Employer Mandate provision’s penalty amounts for the 2024 benefit year.
The proposed Notice of Benefit and Payment Parameters Rule provides proposed Marketplace requirements, including network adequacy, updated standardized plan options and fair marketing standards. For further details of the specific proposed rule, please refer to the CMS Notice .
Once the regulations are finalized, employers should review them and implement any changes needed for the 2024 plan year.
Proposed Rule »
Fact Sheet »
2024 PAPI Parameters Guidance »
On December 15, 2022, the IRS published a final rule regarding information reporting under Sections 6055 and 6056. We covered the 2021 proposed rule in the December 7, 2021, edition of Compliance Corner.
Extension of Time to Furnish Forms
The final rule provides an automatic 30-day extension each year to Forms 1095-B or 1095-C distribution to individuals. Therefore, employers must distribute Forms 1095-B or 1095-C to individuals by March 2, 2022, instead of the original January 31, 2022, deadline. If March 2 falls on a weekend or legal holiday, statements must be furnished by the next business day to be considered timely. The final rule follows the 2021 proposed rule with the exception that the proposed regulations mentioned an automatic extension not to exceed 30 days, and the final rule added clarification by expressly stating an automatic 30-day extension.
Keep in mind the final rule does not impact the deadlines to file the forms with the IRS. Those deadlines remain February 28 (if filing by mail) and March 31 (if filing electronically).
Elimination of Good Faith Relief
The final rule also affirms the elimination of good faith relief from penalties if entities could show they made good faith efforts to comply with reporting requirements. This relief was intended to be transitional, and both the proposed rule and final rule confirm the elimination of good faith relief.
Alternative Method to Furnish 1095-B
Form 1095-B reports the months in which an individual is enrolled in qualified health coverage. The final rule allows an entity to use an alternative manner to furnish this information to covered individuals. The entity must post a “clear and conspicuous notice on the entity’s website stating that responsible individuals may receive a copy of their statement upon request.” The notice must include an email address, physical address and telephone number an individual can use for questions or to request a statement.
It is important to remember that Form 1095-B is only used by small employers (those not subject to the employer mandate) who sponsor a self-insured medical plan, or by large employers who sponsor a self-insured plan and cover individuals who are not considered full-time employees.
Minimum Essential Coverage and Limited Medicaid Services
And lastly, the final rule reiterates that Medicaid plans that provide only COVID-19 testing and diagnostic services under the Families First Coronavirus Response Act (FFCRA) are not considered Minimum Essential Coverage (MEC) under a government-sponsored program.
The IRS recently released the final instructions for Forms 1094/1095-C and 1094/1095-B for the 2022 reporting year. With these final instructions, employers and insurers have all the IRS documents needed to complete the 2022 reporting.
The 2022 final instructions mostly mirror the draft instructions that were released in October. For more information about the draft instructions and general purposes of Forms 1094-B/C and 1095-B/C, see the article published in the October 25, 2022, edition of Compliance Corner.
The key change from prior years, and the draft instructions, is that the deadline for furnishing Forms 1095-B/C to individuals is permanently extended. Employers must distribute Forms 1095-B or 1095-C to individuals by March 2, 2022, instead of the original January 31, 2022, deadline (see our article in this edition of Compliance Corner). Keep in mind that the deadlines for employers to file the forms with the IRS remain the same. For filing by mail, the deadline is February 28, 2023, and the electronic filing deadline is March 31, 2023.
The good faith penalty relief for incorrect or incomplete information was eliminated permanently with the 2021 reporting year. Therefore, employers should focus on accuracy and thoroughly completing the forms. The penalty for failure to provide a correct form or statement in 2022 increased by $10 to $290 per form/statement.
Aside from the two changes noted above, the forms should be familiar to employers who have filed them in prior years. Employers should be aware of the updated forms and instructions headed into this next reporting year.
2022 Instructions for Forms 1094/1095-B »
2022 Instructions for Forms 1094/1095-C »
The IRS released Notice 2022-59, which announces that the adjusted applicable dollar amount for PCOR fees for plan and policy years ending on or after October 1, 2022, and before October 1, 2023, is $3.00. This is a $0.21 increase from the $2.79 amount in effect for plan and policy years ending on or after October 1, 2021, but before October 1, 2022.
PCOR fees are payable by insurers and sponsors of self-insured plans (including sponsors of HRAs). The fee doesn’t apply to excepted benefits such as stand-alone dental and vision plans or most health FSAs. The fee, however, is required of retiree-only plans. The fee is calculated by multiplying the applicable dollar amount for the year by the average number of lives and is reported and paid on IRS Form 720. The PCOR fee is generally due by July 31 of the calendar year following the close of the plan year.
The PCOR fee requirement was reinstated through the Further Consolidated Appropriations Act, 2020 and will be in place until the plan years ending after September 30, 2029.
On October 11, 2022, the IRS finalized its proposed rule to fix the “family glitch” in eligibility rules for the ACA premium tax credit (PTC). The new final rule will be effective starting in the 2023 tax year.
Under the so-called “family glitch” circumstance, family members were previously ineligible for a PTC if the cost of self-only coverage was affordable. A PTC for purchasing health insurance on the ACA’s marketplace is available to people who do not have access to “affordable” coverage through their jobs. Previously, spouses and children were ineligible for the PTC if the employee’s contribution for self-only coverage in the employer-sponsored plan did not exceed 9.5% of household income (indexed annually) without considering any additional employee cost-share contribution for family coverage.
To increase access to PTCs for low-income families, the new rule applies a separate PTC affordability standard for family members based on the full cost-share contribution for family coverage. Under the rule, an eligible employer-sponsored plan will be treated as affordable for family members (i.e., the spouse if filing jointly and tax dependents) if the portion of the annual premium the employee must pay for family coverage, that is, the employee's required contribution, does not exceed 9.5% of household income (indexed annually). As a result, an employee’s family may qualify for a PTC even if the employee does not.
Importantly, the new rule does not impact the employee affordability test and does not increase exposure to employer shared responsibility (employer mandate) penalties. Applicable large employers will continue to base affordability tests on the cost of self-only coverage, and employer mandate penalties will continue to be triggered only by an employee’s receipt of a marketplace PTC and not by a PTC granted to their spouse or dependents. However, employers may see an indirect impact with more families dropping employer-sponsored coverage for newly subsidized ACA marketplace coverage.
Family members of some employees may be eligible for PTCs effective January 1, 2023, if coverage under the group health plan is determined to be unaffordable under the final rule. Related Notice 2022-41 provides an additional permitted qualifying event to allow employees who participate in non-calendar year cafeteria plans to drop coverage for such family members mid-year so they can enroll in a qualified health plan through the marketplace. Certain conditions apply, and the plan must be formally amended to recognize this optional new qualifying event. Interested employers who sponsor non-calendar year cafeteria plans should consult with their document providers and carriers, as applicable, regarding the possible adoption of such an amendment.
November 8, 2022, UPDATE. The IRS revised its guidance to remove the non-calendar year requirement from the new mid-year election event. Now both calendar year and non-calendar year plan documents can be amended to allow participants to make prospective mid-year elections to take advantage of the fact that the family glitch is fixed. This mid-year election is limited in that it should only allow an employee to revoke prospectively an election of family coverage under a group health plan that is not a health FSA and that provides minimum essential coverage provided both of the following conditions are satisfied:
(1) One or more related individuals are eligible for a special enrollment period to enroll in a QHP through an Exchange or one or more already-covered related individuals seeks to enroll in a QHP during the Exchange’s annual open enrollment period; and
(2) The revocation of the election of coverage under the group health plan corresponds to the intended enrollment of the related individual or related individuals in a QHP through an Exchange for new coverage that is effective beginning no later than the day immediately following the last day of the original coverage that is revoked.
Generally, a plan that chooses to recognize this mid-year election event must be amended by the last day of the plan year in which the election changes are permitted. An amendment can be effective retroactively to the first day of the plan year if the plan operates in accordance with the amendment from the effective date and notifies participants. However, for a plan year beginning in 2023, the amendment deadline is the last day of the plan year beginning in 2024.
On October 1, 2022, the US District Court for the Northern District of Texas in Texas v. EEOC issued an order vacating HHS guidance concerning gender-affirming care as arbitrary, capricious and in violation of the Administrative Procedure Act.
On March 2, 2022, HHS issued guidance that interpreted Section 1557 of the ACA. Section 1557 prohibits healthcare programs that receive federal funds from discriminating against patients on the basis of sex. The guidance interpreted Section 1557 to prohibit federally funded entities from restricting an individual's ability to receive medically necessary care, including gender-affirming care, from their healthcare provider solely on the basis of their sex assigned at birth or gender identity. The guidance also stated that restrictions on the receipt of medically necessary care on the basis of gender dysphoria, gender dysphoria diagnosis, or perception of gender dysphoria could violate the Americans with Disabilities Act (ADA). HHS based this guidance in part on the United States Supreme Court case, Bostock v. Clayton County, which held that Title IX (whose definition of sex discrimination was incorporated into Section 1557) prohibited discrimination based on gender identity or homosexuality.
HHS issued this guidance after the Texas governor instructed the state’s department of family and protective services to investigate incidents of sex change procedures performed on minors as child abuse.
The state of Texas sued HHS, as well as the EEOC (which issued similar guidance a year earlier) and Attorney General Garland, asking the court to declare the guidance unlawful, vacate it, and enjoin the agencies from enforcing it. The court agreed with the state, declaring the guidance unlawful and vacating it.
The court concluded that the guidance took the Bostock decision too far. According to the court, the holding in that case was limited to the status of being homosexual or transgender and did not go so far as to cover all conduct correlated with that status. Accordingly, the court stated that the Bostock decision did not provide support for the HHS guidance. In addition, the court found that HHS acted in an arbitrary and capricious fashion by failing to explain how the Bostock decision applied to gender dysphoria and by implying that gender dysphoria was a disability under the ADA (which the court found to be a misstatement of the law). Finally, the court determined that the guidance was a substantive rule and found that HHS did not follow the Administrative Procedure Act when it issued its guidance without notice and an opportunity for interested parties to comment first.
Employer-sponsored health plans should be aware of this legal development. Although this is a district court order that may be appealed, it demonstrates how the sex discrimination prohibitions under Section 1557 and gender dysphoria treatments, in particular, are in legal flux. Several states, including Texas, are restricting or prohibiting gender dysphoria treatments. The federal government is trying to prevent the states from doing this, asserting that such prohibitions are a form of sex discrimination prohibited under federal law. As of now, the matter is not settled. Employers should keep an eye on these developments.
On September 7, 2022, the US District Court for the Northern District of Texas issued a ruling in Braidwood Management Inc. v. Becerra, which challenged aspects of the Affordable Care Act’s (ACA) preventive services coverage mandate.
Under the ACA, insurers and group health plans offering non-grandfathered individual or group health coverage must cover certain preventive services without cost-sharing. The covered requirements include services given an “A” or “B” rating from the US Preventive Services Task Force (PSTF), vaccines recommended by the Advisory Committee on Immunization Practices (ACIP), and preventive care and screenings for children and women recommended by the Health Resources and Services Administration (HRSA).
In this case, the plaintiffs include two businesses and six individuals who challenged the preventive-care mandates under the Constitution and the Religious Freedom Restoration Act (RFRA). Each plaintiff wanted to obtain or provide health insurance that excludes or limits coverage currently required by the preventive-care mandates, including PSTF-recommended pre-exposure prophylaxis (PrEP) drugs to prevent HIV infection for individuals who are at high risk of HIV acquisition and HRSA-recommended coverage of contraceptives. They objected to the services required by the preventive-care mandates for a variety of religious and economic reasons. The defendants are the Secretary of HHS, Xavier Becerra; the Secretary of the Treasury, Janet Yellen; the Secretary of Labor, Martin Walsh; and the United States.
The plaintiffs brought five claims against the defendants, including allegations that the ACA preventive-care mandates violate the Constitution's Appointments Clause because the appointment process for members of the PSTF, ACIP and HRSA did not satisfy the constitutional method for appointing officers of the United States. On this issue, the court ruled that the appointment of officers of ACIP and HRSA satisfied the constitutional requirements, but the appointment of PSTF officers did not.
Additionally, the plaintiffs asserted that the PrEP mandate violates the RFRA. On this issue, the court ruled in favor of the plaintiffs. The court determined that the PrEP mandate substantially burdened the exercise of religion by the plaintiffs and that the defendants failed to show that the PrEP mandate furthers a compelling governmental interest and is the least restrictive means of furthering that interest.
On both rulings, the court reserved ruling on the appropriate remedy. The court also did not address the plaintiffs’ objections to contraceptive coverage under the RFRA, although the court is expected to rule on this issue in the future. The court granted summary judgment to the defendants on two other claims brought by the plaintiffs.
Although this order may be appealed, and litigation is ongoing, employers should be aware that a basic ACA requirement is currently under legal scrutiny and monitor future developments.
On August 26, 2022, in Franciscan Alliance, Inc., et al v. Becerra, et al, the US Court of Appeals for the Fifth Circuit upheld a federal district court injunction against HHS that stopped the agency from interpreting and enforcing Section 1557 of the ACA in a way that would require a Catholic hospital system and other religious institutions to provide coverage for (or to perform) gender-reassignment surgeries or abortions in violation of its sincerely held religious beliefs.
Section 1557 prohibits healthcare programs that receive federal funds from discriminating against patients based on sex, using the definition of prohibited sex discrimination found in Title IX. HHS has the authority to issue regulations implementing and enforcing Section 1557, and this case highlights the agency’s efforts to do so over the course of the last several years. In 2016, the Obama administration promulgated rules that interpreted this section to include discrimination based on gender identity and the termination of pregnancy. The Franciscan Alliance, a group of Catholic hospitals, along with a handful of other plaintiffs, challenged this interpretation by asserting that the agency exceeded its authority by extending the definition of sex discrimination beyond that established in Title IX. The plaintiffs also asserted that the rule violated the Religious Freedom Restoration Act (RFRA) by forcing it to perform abortions and gender-reassignment surgeries inconsistent with its sincerely held religious beliefs.
The district court agreed with Franciscan Alliance and vacated the parts of the 2016 rule that the plaintiffs complained of but declined to issue a permanent injunction against the agency. However, the plaintiffs wanted a permanent injunction, so they appealed.
The litigation was stayed pending the result of a US Supreme Court case, Bostock v. Clayton County, in which the definition of sex discrimination under Title IX was an issue. In the meantime, HHS (now part of the Trump administration) promulgated an amended version of the regulations in 2020 that removed the 2016 definition. Within days of that change, the Supreme Court issued its ruling in the Bostock case, holding that Title IX prohibited discrimination based on gender identity or homosexuality. The Court’s decision became the basis of several other court decisions that resurrected parts of the 2016 rule. We discuss the ramifications of this decision in the May 11, 2021, edition of Compliance Corner.
The Fifth Circuit heard the plaintiff’s appeal in 2021 and, with the changes to the regulatory landscape that had occurred, remanded the case back to the district court. This time, the district court agreed with the plaintiffs and issued the permanent injunction against the agency enforcing both the regulations and Section 1557. The appeal of the permanent injunction serves as the basis for the Fifth Circuit’s recent decision.
Although the Fifth Circuit acknowledged that the recent changes to the regulatory landscape made challenges to the 2016 version of the rules moot, the appellate court did rule that the regulations violated the RFRA and that an injunction against enforcing Section 1557 was appropriate since the agency had made clear that it intended to enforce it (and did not decline to say that it would not enforce it against the plaintiffs).
Employers should be aware of these developments and that the situation concerning Section 1557 continues to develop. Although the Fifth Circuit upheld the permanent injunction against HHS, the agency could appeal that decision. In addition, several cases in other federal appeals courts with implications for Section 1557 are pending.
On August 1, 2022, the IRS published Revenue Procedure 2022-34, which provides the 2023 premium tax credit (PTC) table and the employer contribution percentage requirements applicable for plan years beginning after December 31, 2022.
The ACA's employer-shared responsibility rules (also known as the "employer mandate") require an employer to provide affordable, minimum value coverage to its full-time employees. The IRS' required contribution percentage is used to determine whether an employer-sponsored health plan offers an individual "affordable" coverage, and the affordability percentage is adjusted for inflation each year. In addition, the ACA also provides a refundable PTC, based on household income, to help individuals and families afford health insurance through insurance exchanges. The IRS provides the PTC percentage table for individuals to calculate their PTC.
In 2023, the ACA's affordability percentage will decrease to 9.12% (down from 9.61% in 2022). For the employer mandate and affordability, this means that an employee's required premium contribution toward single-only coverage under an employer-sponsored group health plan can be no more than 9.12% of the federal poverty line or of an employee's W-2 income or rate of pay (depending on which of the three affordability safe harbors the employer is relying upon).
The 2023 PTC table used to determine an individual's eligibility for PTCs is provided below:
| Household Income Percentage of Federal Poverty Line | Initial Percentage | Final Percentage |
| Less than 133% | 1.92% | 1.92% |
| At least 133%, but less than 150% | 2.88% | 3.84% |
| At least 150%, but less than 200% | 3.84% | 6.05% |
| At least 200%, but less than 250% | 6.05% | 7.73% |
| At least 250%, but less than 300% | 7.73% | 9.12% |
| At least 300%, but not more than 400% | 9.12% | 9.12% |
The revenue procedure is effective for plan years beginning on and after December 31, 2022.
Employers should be mindful of the upcoming 2023 affordability percentages and make sure that the premium offerings for 2023 remain affordable for full-time employees to avoid any employer-shared responsibility penalties.
On July 25, 2022, HHS issued a proposed rule revising regulations that implement Section 1557 of the Affordable Care Act. Section 1557 prohibits healthcare providers, health plans and insurers from discriminating on the basis of race, color, national origin, sex, age and disability. The previous administration scaled back many of these protections, despite court rulings that prevented the previous administration from implementing those changes. The proposed rule will reinstate the protections.
The proposed revisions clarify that Section 1557 generally applies to health insurance issuers that receive federal financial assistance and prohibits discrimination in health insurance and other health-related coverage (including telehealth services).
HHS states that the proposed rule will align Section 1557 regulation with legal precedent. On June 12, 2020, HHS issued a final rule that scaled back explicit protections based upon gender identity introduced by the previous administration, relying instead on broader protections against discrimination on the basis of sex provided for in the ACA. However, the Supreme Court ruled in Bostock v. Clayton County that discrimination based upon sexual orientation or sexual identity is prohibited under Title VII of the Civil Rights Act of 1964. You can find a discussion of these events in the June 23, 2020, edition of Compliance Corner. The proposed revisions delete the changes made by the previous administration and reassert that Section 1557 prohibits discrimination on the basis of sex, including gender identity and sexual orientation. The proposed rule also clarifies that discrimination on the basis of sex includes discrimination on the basis of pregnancy or related conditions, including “pregnancy termination.” The revisions will also update the related CMS regulation to reflect these changes.
In addition to reinstating these protections, the proposed rule requires health insurance issuers that receive federal financial assistance to implement Section 1557 anti-discrimination policies and procedures (with reasonable modifications to policies and procedures for people with disabilities), and to provide language assistance services for limited English proficient individuals. They will also be required to train relevant staff on these policies and procedures and provide a notice of nondiscrimination along with a notice of the availability of language assistance services and auxiliary aids and services.
In addition, the proposed rule provides a process by which health insurance issuers that receive federal financial assistance (among others subject to Section 1557) under investigation for alleged violations of Section 1557 may inform the HHS Office of Civil Rights (OCR) of their views that the application of a specific provision or provisions of this part to them would violate federal conscience or religious freedom laws. The OCR may then decide that they are exempt from, or entitled to a modification of the application of, applicable provisions of Section 1557.
Group health plan sponsors should be aware of the proposed rule, which is open for public comment for 60 days after it is published in the Federal Register. It is anticipated the rule may undergo changes by HHS and through court challenges. Employers should consult with their counsel on the proposed rule’s potential impact on their group health plans.
Notice of Proposed Rulemaking: Nondiscrimination in Health Programs and Activities »
On July 28, 2022, the DOL, IRS and Department of Treasury jointly issued Part 54, FAQs About Affordable Care Act Implementation. The newly issued guidance includes 14 frequently asked questions related to coverage of preventive services, specifically women’s preventive services and contraception. As a reminder, the ACA requires non-grandfathered group health plans to provide coverage for certain preventive care services with no cost-sharing for participants. Please note that male sterilization is not considered preventive care for this purpose.
The preventive services requirement includes coverage for items and services that are integral to the preventive service, regardless of whether the item or service is billed separately. For example, previous guidance provided that plans must cover the cost of polyp removal and anesthesia without cost-sharing when connected with a preventive screening colonoscopy. Similarly, the new guidance clarifies that anesthesia must be provided without cost-sharing when in connection with a tubal ligation and a pregnancy test when in connection with an insertion of an intrauterine device, as these are preventive services under the ACA.
Plans must also cover without cost-sharing any contraceptive services and FDA-approved, cleared, or granted contraceptive products that a participant and their healthcare provider have determined to be medically appropriate for the participant. The requirement applies even if the service or product is recently approved, cleared, or granted by the FDA and does not fit into one of the previously identified 17 categories of FDA-approved contraceptive methods. If there are multiple substantially similar services or products, the plan may use reasonable medical management techniques and cover only one.
The following are considered by the departments to be unreasonable medical management techniques:
- Denying coverage for all or particular brand name contraceptives, even after the participant’s healthcare provider determines and communicates to the plan that a particular service or FDA-approved contraceptive product is medically necessary with respect to that participant.
- Requiring individuals to fail first using numerous other services or FDA-approved contraceptive products within the same category of contraception before the plan or issuer will approve coverage for the service or product that is medically necessary for the individual, as determined by the participant’s healthcare provider.
- Imposing an age limit on contraceptive coverage instead of providing these benefits to all individuals with reproductive capacity.
This coverage must also include the clinical services, including patient education and counseling, needed to provide the contraceptive product or service. Similarly, in relation to fertility awareness-based methods, lactation and amenorrhea, instruction must be included in coverage.
The guidance clarifies that plans and insurers must cover emergency contraception (levonorgestrel and ulipristal acetate) and over-the-counter (OTC) products when the product is prescribed for an individual by their healthcare provider, including an advanced prescription. Plans and insurers are further encouraged to cover these products even when they are not prescribed.
An HSA, health FSA or HRA may be used to reimburse an individual for the cost (or portion of the cost) incurred for OTC contraception to the extent that cost is not paid or reimbursed by another plan or coverage. Thus, if the cost of OTC contraception is not covered by the plan, the cost may be reimbursed from the HSA, health FSA or HRA.
Importantly, in light of the Supreme Court’s Dobbs decision and the discussion involving ERISA preemption, the guidance states that federal law (specifically PHS Act section 2724(a) and ERISA section 731) preempts state law that prevents the application of PHS Act section 2713 (requiring coverage of preventive services). A state law is considered to prevent application if it makes it impossible for an insurer to comply with the federal requirements.
Employer plan sponsors, particularly those who sponsor a self-insured plan, should familiarize themselves with the new guidance to make sure that their plan’s design complies.
The IRS recently released an updated Form 720, Quarterly Federal Excise Return, and instructions. The new versions reflect the PCOR fee applicable rate increase announced in IRS Notice 2022-4.
Specifically, the form and instructions now indicate that the PCOR fee for policy and plan years ending on or after October 1, 2021, but before October 1, 2022, is increased to the applicable rate of $2.79, multiplied by the average number of lives covered under the policy or plan. The fee for policy and plan years ending on or after October 1, 2020, but before October 1, 2021, remains at the applicable rate of $2.66, multiplied by the average number of lives covered under the policy or plan.
PCOR fees are payable by insurers and sponsors of self-insured plans (including sponsors of HRAs). The fee doesn’t apply to excepted benefits such as stand-alone dental and vision plans or most health FSAs. The fee, however, is required for retiree-only plans. The PCOR fee is generally due by July 31 of the calendar year following the close of the plan year.
Affected employers should be aware of the availability of the updated form and instructions and ensure they file and pay the applicable fee by the July 31 deadline.
On April 28, 2022, CMS released the Final Benefit and Payment Parameters for 2023, along with an accompanying fact sheet. The regulations are primarily intended for health insurers and the marketplace but include important information that also affects large employers and self-insured group health plans. The effective date is July 1, 2022.
These annual parameters specify the uniform standards for health plans subject to the Affordable Care Act (ACA). The guidance also describes related regulatory and reporting issues. Accordingly, the guidance can serve as a useful planning tool for insurers and employers.
Overall, the 2023 regulations cover a range of topics, including standardized plan options requirements for issuers in the marketplaces, marketplace network adequacy standards, special enrollment period verifications, a framework for discriminatory benefit design, and indirect quality improvement activity (QIA) exclusions from medical loss ratio (MLR) calculations.
For the standardized plan options requirement, CMS requires issuers in the marketplaces to offer standardized plan options for every product network type, at every metal level, and throughout every service area where they offer non-standardized options in plan year 2023. For example, if an issuer offers a non-standardized gold HMO plan in a particular service area through a marketplace, the issuer needs to also offer a standardized gold HMO plan set by CMS in the same service area. Further, beginning for plan year 2023, CMS will evaluate plans sold in many of the marketplaces for compliance with quantitative network adequacy standards based on time and distance standards. CMS will use this information to add appointment wait time standards in plan year 2024.
Additionally, the 2023 regulations confirmed that issuers’ expenditures for activities that improve health care quality (a.k.a., quality improvement activity (QIA)) that can be included in the MLR formula and that would improve the MLR ratio must be restricted to only direct QIA expenses, such as salaries of the staff performing QIA functions and not indirect expenses, such as issuers’ IT infrastructure expenditures.
CMS did not finalize the proposed changes that would have amended the ACA guaranteed-availability regulations to explicitly bar discrimination based on sexual orientation and gender identity across a range of requirements. Those changes will be deferred to future rulemaking on Section 1557 of the ACA.
Employers may find this annual guidance helpful in designing their plan benefit offerings.
2023 Benefit and Payment Parameters Final Rule »
2023 Benefit and Payment Parameters Fact Sheet »
On April 13, 2022, the HHS renewed the COVID-19 pandemic Public Health Emergency (PHE) for an additional 90 days, effective April 16, 2022. With this extension, the PHE is now set to expire on July 15, 2022. The PHE is being extended for the ninth time since it was initially declared in January 2020, when the coronavirus pandemic began. The Biden Administration has said that it will give states a 60-day notice before the PHE expires. The PHE impacts several important benefits for employer sponsored plans, including coverage of COVID-19 testing and treatment.
Private insurers have been required to cover the full cost of COVID-19 tests and vaccines for the duration of the PHE. Beginning January 15, 2022, this requirement expanded to include up to eight over-the-counter at-home COVID-19 tests authorized or approved by the FDA per covered member per month. Once the PHE is ended, private insurers can charge co-pays or other costs so that COVID-19 tests and vaccines will no longer be free for insureds. The federal government has been paying for tests, vaccines and certain treatments for those covered by its Medicare and Medicaid health insurance programs.
Employers should be aware of the latest PHE extension and monitor the developments as the current July PHE ending date approaches to assess the impacts on their plans, including COVID-19 tests and vaccine coverage.
HHS: Renewal of Determination That a Public Health Emergency Exists »
On March 17, 2022, in Vista Health Plan, Inc. v. US Department of Health & Hum. Servs., the US Court of Appeals for the Fifth Circuit ruled in favor of the Department of Health and Human Services’ (HHS) risk-adjustment program.
The ACA prohibits health insurers from denying coverage or charging higher premiums based on someone’s health status. To disincentivize these prohibited practices, HHS administers the risk-adjustment program by redistributing enrollees’ actuarial risk among health insurers. Plans with healthier enrollees in any given state pay fees into a pool from which funds are distributed to plans insuring sicker individuals in that same state.
Several small health insurers around the country have unsuccessfully argued that risk-adjustment calculation favors larger insurers. In this case, Vista Health Plan, Inc., a small insurer in Texas, was assessed risk-adjustment fees that exceeded its premium revenue, causing it to cease operations in 2019. After Vista sued HHS, this advanced many constitutional, statutory interpretation, and administrative procedure arguments challenging the program.
The Fifth Circuit’s decision to uphold the program serves less as an assessment of HHS’s risk-adjustment calculation but rather more of an analysis of the administrative process the government undertook to implement the program. Although this case is focused on carriers, employers should be aware that the risk-adjustment program will remain a fixture in health insurance markets, having survived yet one more test by judicial review. This is especially important in the small group market, where premiums are community rated and stabilized in part by the risk-adjustment program.
Vista Health Plan, Inc. v. US Department of Health & Human Services »
On April 5, 2022, the IRS and Treasury Department announced a proposed rule to fix the “family glitch” in eligibility rules for the ACA premium tax credit (PTC). In a press statement, the Biden administration reported the “family glitch” affects about 5 million people.
A PTC for purchasing health insurance on the ACA’s marketplace is available to people who do not have access to “affordable” coverage through their jobs. Under current regulations, spouses and children are ineligible for the PTC if an employee’s access to employer-sponsored coverage is deemed affordable (for 2022 plan years, less than 9.61% of household income) based on the cost of self-only coverage, without considering any additional cost of family coverage.
To increase access to the PTC for low-income families, the proposed rule applies a separate PTC affordability standard for family members based on the full cost of family coverage. As a result, an employee’s family may qualify for the PTC even if the employee does not. Importantly, the proposed rule does not increase exposure to employer shared responsibility penalties. Penalties will continue to be triggered only by an employee’s receipt of a marketplace PTC, not their spouse’s or dependents’ PTC. However, employers may see an indirect impact with more families dropping employer-sponsored coverage for newly subsidized ACA marketplace coverage.
As part of the rulemaking process, comments may be submitted through June 6, 2022. If finalized, the new PTC affordability standard would take effect on January 1, 2023.
On March 23, 2022, CMS announced an extension of its nonenforcement policy for specific ACA compliance requirements for certain non-grandfathered individual and small group coverage known as “grandmothered” policies. Under the latest extension, states may permit insurers that have continually renewed eligible grandmothered policies since January 1, 2014, to renew that coverage again for a policy year beginning on or before October 1, 2022. The nonenforcement policy remains in effect until the agency announces that coverage renewed under this policy must comply with the relevant requirements.
On November 14, 2013, CMS issued a letter outlining a transitional policy concerning health care reform mandates for coverage in the individual and small group markets. Under the policy, state authorities could allow health insurance issuers to continue certain coverage that would otherwise have been canceled for failure to comply with the ACA requirements.
This initiative allowed individuals and small businesses to elect to re-enroll in such coverage. Specifically, the nonenforcement policy provided relief from the following market reforms:
- Community rating
- Guaranteed issue and renewability of coverage
- Prohibition of coverage exclusions based on pre-existing conditions
- Nondiscrimination based on health status
- Nondiscrimination regarding health care providers
- Comprehensive coverage (i.e., coverage of essential health benefits and the application of maximum out-of-pocket limits)
- Coverage for participation in clinical trials
Since the initial announcement, the nonenforcement policy has been continually extended, thus permitting grandmothered policies to maintain an exemption from the above-mentioned requirements.
Although the CMS bulletin allows for the temporary continuation of these noncompliant plans at the federal level, it is important to note that the practice must still be approved by state regulators for policies to be available in a particular state. Insurers will then have a choice as to whether to keep offering the policies. The bulletin includes a notice that insurers can use in the event they issue coverage cancellation notices and will now provide the policyholder with the option to continue the coverage.
Accordingly, small employers who are currently covered by such grandmothered policies should be aware of the most recent nonenforcement extension. These employers should work with their advisors and insurers regarding the possible renewal of the coverage.
On December 28, 2021, HHS issued the proposed Notice of Benefit and Payment Parameters Rule for 2023. This notice is issued annually preceding the applicable benefit year and, once final, adopts certain changes. While the proposed rule primarily impacts the individual market and the Exchange, it also addresses certain ACA provisions and related topics that impact employer-sponsored group health plans. Highlights include:
- Annual Cost-Sharing Limits. As background, the ACA requires non-grandfathered group health plans to comply with an out-of-pocket maximum on expenses for essential health benefits. This maximum annual limitation on cost-sharing for 2023 is proposed to be $9,100 for self-only coverage and $18,200 for family coverage (an increase from $8,700 and $17,400 for self-only/family coverage respectively in 2022).
- Medical Loss Ratio Rebates. HHS proposes to clarify that Quality Improvement Activity (QIA) expenses that may be included for MLR reporting and rebate calculation are only those expenses that are directly related to activities that improve health care quality. The appropriate QIA expenses include salaries of the staff actually performing QIA functions. On the other hand, indirect expenses, such as a portion of overhead (e.g., holding group overhead), marketing office space, IT infrastructure and vendor profits that have no direct connection to QIA should not be included in QIA expenses.
- Premium Adjustment Percentage and Payment Parameters. HHS announced the premium adjustment percentage for the 2023 benefit year as 1.4408219719, which indicates an increase in employer-sponsored insurance premiums of approximately 44.1% over the period from 2013 to 2022. This premium adjustment percentage will also be used to index the Employer Mandate provision’s penalty amounts for the 2023 benefit year.
- Enhancing Options & Health Equity at Exchanges. HHS plans to conduct network adequacy reviews of plans in all federally facilitated Exchanges prospectively during the Qualified Health Plan (QHP) certification process. Moreover, HHS proposes to require issuers in the Exchanges to offer standardized plan options at every product network type, metal level, and throughout service area when insurers offer non-standardized options in plan year 2023. Additionally, HHS proposes to prohibit Exchanges, issuers, agents and brokers from discriminating against consumers based on sexual orientation and gender identity to increase access to health care, and align with the Executive Order released from the Biden Administration last January.
Once the regulations are finalized, employers should review them and implement any changes needed for the 2023 plan year.
Proposed Rules »
Fact Sheet »
2023 PAPI Parameters Guidance »