The September Monthly Minute highlights yet another tobacco surcharge case brought by the DOL, reminds plan administrators to prepare and submit the first annual gag clause attestation, and addresses the newly lowered ACA affordability percentage for 2024.
When Smoke Gets in Your Eyes, You’re Entitled to a Reasonable Alternative
In a recent Illinois district court case, Su v. Flying Food Group (N.D. Ill. Aug. 30, 2023), the DOL takes issue with the imposition of a tobacco surcharge on health plan participants who reported tobacco use given the lack of any alternative standard, “reasonable or otherwise,” which would allow tobacco-users to obtain discounted premiums offered to participants who reported that they had not used tobacco. In the Flying Food Group case, the DOL contends the failure to provide a reasonable alternative standard (or waiver) and associated notice violates the HIPAA nondiscrimination requirements, and asks that the plan be required to reimburse (with interest) those plan participants who paid the noncompliant $20/month surcharge.
KMK Comment: Although the desire to incentivize healthy living and trim medical plan costs is a laudable goal, health plans must be designed and administered with compliance in mind. While these rules are not new (the latest requirements for “health contingent” wellness programs to offer a reasonable alternative standard have been in place for over a decade), administration errors are common. Plan administrators should review their wellness programs with legal counsel to ensure compliance with HIPAA nondiscrimination rules and avoid becoming the next in line for tobacco surcharge scrutiny from the DOL or a participant.
Gag Clause Annual Attestation Deadline Approaches
Among the many changes brought about by the Consolidated Appropriations Act, 2021 (CAA), coming up next is the gag clause attestation requirement. The first attestation is due by December 31, 2023, and requires group health plans to annually attest to their compliance with the prohibition against “gag clauses.” In CAA parlance, gag clauses generally refer to contractual provisions in agreements with providers, networks of providers, or entities offering access to a network of providers that directly or indirectly restrict specific information that the plan can make available to another party. The required attestation acknowledging compliance with the gag clause prohibition must be submitted through CMS’s online portal (HIOS) by year end.
KMK Comment: Now is a good time to review contract provisions to ensure no prohibited gag clauses are included and to determine how the plan’s attestation requirement will be handled. Although the legal requirement to timely submit the attestation lies with the plan, self-insured plans may satisfy it by entering into a written agreement under which the plan’s service provider(s) (such as a TPA) will attest on the plan’s behalf. With respect to fully-insured group health plans, the plan and the issuer are each required to annually submit an attestation. However, when the issuer of a fully-insured group health plan submits an attestation on behalf of the plan, the Departments will consider the plan and issuer to have satisfied the attestation submission requirement.
Lower Affordability Percentage Increases Employer Costs
The IRS recently announced the new ACA affordability percentages in Rev. Proc. 2023-29. For plan years beginning in 2024, coverage is deemed to be unaffordable if the cost of employee-only coverage exceeds 8.39% of the employee’s household income – a significant drop from 9.12% which applied in 2023 and the lowest affordability threshold since the employer mandate took effect. Applied to the federal poverty line (FPL) safe harbor for determining affordability, this means employer-provided medical coverage offered in 2024 that costs more than $101.93/month for employee-only coverage will not be deemed affordable.
KMK Comment: The lowered affordability threshold puts added pressure on employers looking to control health care costs. If the FPL safe harbor is not met, employer-provided coverage should be designed to satisfy either the forward-looking rate-of-pay safe harbor or the retrospective W2 safe harbor to avoid triggering ACA penalties.