Heading Into Open Enrollment - Health and Welfare Plan Considerations
This alert discusses several health and welfare items for plan sponsors to consider as they prepare for open enrollment for the 2019 plan year.
New Jersey’s Out-of-Network “Surprise Medical Bills” Act
New Jersey’s recently enacted Out-of-Network Consumer Protection, Transparency, Cost Containment and Accountability Act (Act) took effect on August 30, 2018. The Act imposes on health care providers and health insurance carriers regulated by New Jersey law certain disclosure/transparency requirements related to out-of-network services. Most pertinently to plan sponsors, the Act prohibits a provider from billing a covered person for “inadvertent” and emergency or urgent out-of-network services in excess of any deductible, copayment or coinsurance amount at the in-network rate applicable under the covered person’s health plan. “Inadvertent services” generally are those provided by an out-of-network provider when an in-network provider was not available, even though the covered person utilized an in-network facility (e.g., laboratory testing ordered by an in-network provider but performed by an out-of-network laboratory). While some provisions are similar to other state “surprise medical bills” laws (e.g., California’s Surprise Bill Statute, New York’s Emergency Medical Services and Surprise Bills Law), the Act is different because a plan sponsor or self-funded group health plan can elect to opt into its requirements.
If a plan sponsor of a self-insured group health plan with participants in New Jersey elects to be subject to the Act, the following will apply:
The plan sponsor will need to file an annual election with the New Jersey Department of Banking and Insurance. We don’t know yet how the election must be made, but the Department is expected to issue guidance.
Participants will not be balance-billed for out-of-network charges for inadvertent services or emergency care in excess of the deductible, copayment or coinsurance amount at the in-network rate applicable under the plan.
Out-of-network providers may bill the plan directly for the excess amount. If the plan and the provider are unable to agree on a reimbursement amount, either the plan or the provider may initiate binding arbitration pursuant to which the arbitrator will choose between the parties’ two final offers.
Identification cards issued to plan participants must indicate that the plan has elected to be subject to the Act.
The Act includes automatic assignment of payment to out-of-network providers. This means the plan must pay reimbursements directly to the provider with an explanation of the applicable deductible, copayment or coinsurance amounts owed by the covered person. Plan documents and summary plan descriptions that include anti-assignment language may need to be updated.
If the plan sponsor of a self-insured group health plan decides not to elect to be subject to the Act, no action is necessary. Note that the Act includes an arbitration process that can be initiated by an out-of-network provider or a participant in a self-insured plan (that is not subject to the Act) when the parties cannot agree on a reimbursement amount; the goal of the non-binding arbitration is to have the arbitrator issue a recommendation to the plan sponsor of an amount that would be reasonable to pay the provider. While a potential resource for resolving this type of dispute is useful, it is highly likely that the provision would be pre-empted by ERISA.
Drinker Biddle Note: Before opting into the requirements of the Act, a plan sponsor should contact the plan’s third-party administrator for an estimate of the additional cost to the self-insured health plan.
What to Do About Incentive Limits for Wellness Programs Subject to the ADA
Plan sponsors may want to reconsider their wellness program incentives before open enrollment for 2019. To be nondiscriminatory under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA), a wellness program, among other things, must be “voluntary.” The EEOC regulations setting the incentive limits for a wellness program to be considered voluntary expire December 31, 2018, pursuant to the district court’s decision in AARP v. EEOC (see our previous discussion [link]). No new regulations are likely to be issued until President Donald Trump’s EEOC appointees are confirmed by the Senate. The choices available for plan sponsors include: (i) continue providing incentives that meet the current definition of “voluntary” in the EEOC regulations; (ii) provide incentives using the HIPAA rules even if the program is not a group health plan; or (iii) stop providing any incentives for ADA- and/or GINA-covered wellness programs (i.e., those making disability-related inquiries or requiring medical examinations). In addition, plan sponsors should discuss this with their wellness program providers – one provider has developed a program with an alternative it believes will cause the health risk assessment and/or biometric screenings included in the program to be considered actually voluntary, and has agreed to provide indemnification for liabilities related to a lawsuit alleging otherwise. Note: the other EEOC requirements -- such as notice, reasonable design, and confidentiality -- applicable to ADA- and GINA-covered wellness programs do not expire and continue to apply.
ACA Employer Shared Responsibility Penalties Increase
For 2019, the Affordable Care Act (ACA) employer shared responsibility penalties are set to increase. As a reminder, these penalties apply to any month in which at least one full-time employee of an applicable large employer (ALE) receives a premium tax credit for purchasing coverage through the marketplace and either:
The ALE does not offer minimum essential coverage (MEC) to at least 95 percent of its full-time employees (and their dependents). (4980H(a) Penalty)
The ALE offers MEC to at least 95 percent of its full-time employees (and their dependents), but the coverage offered is unaffordable or does not provide minimum value. (4980H(b) Penalty)
The penalty amounts are adjusted each year based on the “premium adjustment percentage” determined by the Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS). Applying the premium adjustment percentage for 2019 that was published by HHS and CMS earlier in 2018, the penalty amounts for 2019 (determined on a monthly basis) will increase to:
4980H(a) Penalty = 1/12 of $2,500 × total number of full-time employees employed by the ALE (full-time employee count is reduced by 30 for this purpose)
4980H(b) Penalty = 1/12 of $3,750 × each full-time employee who receives the premium tax credit
Note that for 2019, health coverage will satisfy the requirement to be affordable if the lowest-cost self-only coverage option available to an employee does not exceed 9.86 percent of the employee's household income. Additionally for 2019, to meet the federal poverty level safe harbor to determine affordability, an employee’s premium payment cannot exceed $99.75 per month.
DOL Issues Updated Health Insurance Marketplace Coverage Notice
Here is a link to the updated health insurance marketplace coverage notice issued by the Department of Labor for use by employers that sponsor group health plans. Employers are required to provide the notice to each new employee within 14 days of his or her start date.
IRS Issues FAQ on ACA Applicability to Association Health Plans
The IRS has issued guidance confirming that the determination of whether an employer member of an association that offers coverage through an association health plan (AHP) is an applicable large employer (ALE) that is subject to the ACA employer shared responsibility provisions is specific to each employer. In other words, whether an employer member of an association is an ALE is unrelated to whether the employer offers coverage through an AHP – if the employer employed at least 50 full-time (including full-time equivalent) employees in the prior calendar year, then it is an ALE. The only circumstances in which multiple employers are treated as a single employer for purposes of determining whether the employer is an ALE is if the employers have a requisite level of common or related ownership.