The Consolidated Appropriations Act, 2021 (Act) that was signed into law on December 27, 2020 contains provisions impacting employer sponsored group health plans, including protecting group health plan participants from surprise medical bills, ensuring health plan price transparency, and offering relief related to health and dependent care flexible spending accounts. These provisions are summarized below.
Temporary Special Rules for Health and Dependent Care Flexible Spending Arrangements (Division EE, Title II, Section 214)
The Act offers optional relief to plan sponsors of healthcare flexible spending accounts (HCFSA) and dependent care flexible spending accounts (DCFSA). This relief includes:
- Permitting the carryover of unlimited amounts of unused HCFSA or DCFSA balances from the plan year ending in 2020 to the plan year ending in 2021
- Permitting the carryover of unlimited amounts unused HCFSA or DCFSA balances from the plan year ending in 2021 into the plan year ending in 2022
- Permitting the extension of an existing grace period for a plan year ending in 2020 or 2021 for 12 months after the end of the plan year for both a HCFSA and a DCFSA
- Permitting an employee who ceases participation in a HCFSA during the calendar year 2020 or 2021 to continue to receive reimbursements from unused benefits or contributions through the end of the plan year in which participation ceased (including any grace period, if applicable)
- Permitting a DCFSA to extend the eligible dependent child age from under age 13 to under age 14 to allow participants to receive reimbursement for an eligible dependent child’s care expenses who aged out of eligibility for the remainder of the plan year (if the enrollment period ended before January 31, 2020)
- Permitting prospective participant election change opportunities under a HCFSA or DCFSA, for plan years ending in 2021, without regard to a change in status
To take advantage of the permissible changes above, the HCFSA or DCFSA must be amended no later than the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective. For example, calendar year 2020 plan amendments must be adopted on or before December 31, 2021. The HCFSA and DCFSA must operate consistently with the terms of the amendment retroactive to its effective date.
Considerations and Comments
The Act answers the call many employers have faced from HCFSA and DCFSA participants with unused dollars in their flexible spending accounts due to the coronavirus (COVID-19) pandemic. This gives an employer considerable flexibility in offering participants in a HCFSA and/or DCFSA to carryover dollars into the next two plan years from those ending in 2020 and 2021 or to extend any grace periods. Plan sponsors should pay close attention to how extending any grace period or offering the carryover will impact eligibility under a health savings account (HSA) for any employee that may make a high deductible health plan/HSA election for upcoming plan years.
While the provisions in the Act align with calendar year plans, the application of the rules do not align for non-calendar year plans that have closed their plan years for 2020. Employers wanting to take advantage of the flexibility offered under the Act should contact their third-party administrators (TPA) to ensure the TPA has the ability to accommodate whatever flexibility the employer will adopt into its HCFSA and DCFSA.
SURPRISE MEDICAL BILLING (DIVISION BB, TITLE I – NO SURPRISES ACT)
Within the Act is the “No Surprises Act,” which prohibits surprise medical billing from out-of-network providers, emergency service providers, and air ambulance providers. Specifically, the No Surprises Act:
- Prohibits balance billing participant by an out-of-network provider for services received at an in-network facility, unless the out-of-network provider provides notice to the participant and the participant consents. The consent rules are narrowly drafted and require consent to be given at least 72 hours prior to receiving treatment.
- Requires coverage of emergency services at in-network rates and without prior authorization. Prohibits out-of-network air ambulances from charging participants more than the in-network cost-sharing amounts for their services.
- Requires a 30-day open negotiation period for group health plans and issuers to settle out-of-network claims with providers, including out-of-network air ambulance claims.
- Establishes an “Independent Dispute Resolution” process (i.e., binding arbitration) for plans/issuers and out-of-network providers who cannot agree on a rate during the open negotiation period.
While, in recent years, individual states have enacted legislation to address surprise billing among their fully insured constituents, federal action was necessary in order to reach self-insured employer-sponsored group health plan participants. Note that these provisions will apply to both grandfathered and non-grandfathered group health plans.
The No Surprises Act also contains other “patient protections” that are tangentially related to surprise billing, including:
- A requirement that insurance ID cards include in- and out-of-network deductible amounts and maximum out-of-pocket costs
- A requirement that the Secretaries of HHS, Labor, and the Treasury (collectively, the Departments) issue proposed regulations under the Affordable Care Act’s “Provider Nondiscrimination” protections
- An extension of the Affordable Care Act’s external review process to adverse benefit determinations under the surprising billing provisions
- A requirement that group health plans and issuers provide an “Advanced Explanation of Benefits” containing good faith estimates of the costs of services the participant is likely to receive and associated disclaimers.
- A requirement that certain participants receive up to 90 days of continued coverage at in-network cost-sharing rates when their provider moves out-of-network
- A requirement that group health plans and issuers offer a price comparison guidance via telephone and an online cost comparison tool
- The establishment of a grant program to create and improve “State All Payer Claims Databases,” under which the Secretary of Labor is required to establish a standardized reporting format for voluntary reporting to such databases by self-insured group health plans
- A requirement that group health plans and issuers to provide participants up-to-date provider directories, and participants who rely on incorrect information received will only be liable for in-network cost-sharing amounts
These protections generally apply with respect to plan years beginning on or after January 1, 2022.
Considerations and Comments
The No Surprises Act attempts to end a two-year-long debate on how to best protect patients from surprise medical bills while balancing provider concerns. Back in September, the president issued an executive order that focused, in part, on surprise medical billing. But given the bipartisan support for this provision and the fact that eliminating surprise billing was also part of President-elect Joe Biden’s healthcare agenda, we anticipate the incoming Biden administration will move forward with substantial regulations.
The most notable provision of the No Surprises Act is the Independent Dispute Resolution (IDR) process. After a now-required 30-day open negotiation period, either the plan or provider who is still not satisfied with the plan’s out-of-network reimbursement rate may initiate IDR. Both sides will offer a rate and the arbitrator will select one of the two offers based on the marker-based median in-network rates and other relevant information. However, the out-of-network provider’s actual billed charges and public payer rates are excluded from consideration.
There is no minimum rate that must be at issue to access IDR; however, the No Surprises Act does build in some protections to prevent abuse. Plans must make an interim payment to the provider while the rate is being negotiated (though no minimum amount is specified). The party whose rate is ultimately not chosen by the arbitrator is responsible for paying for all fees charged. And the party who initiates the IDR is prohibited from initiating another IDR with the same party related to the same item or service for 90 days following the arbitrator’s determination.
While this is a win for participants who are held harmless and get to stay out of the IDR process, it does not grant them license to go to any out-of-network provider and expect to pay in-network rates. In addition, it creates an additional administrative hurdle for group health plans and issuers. Plan sponsors will want to address these issues ahead of time with their TPAs before January 1, 2022. It is likely that self-insured group health plans will have additional contracting considerations, determining if and to what extent they want their TPAs to take control over the IDR process. It also is unclear how often IDR will be utilized, especially in the first few years following enactment. Although the goal of the No Surprises Act is to reduce unexpected out-of-pocket costs for participants, it seems likely IDR will force issuers and TPAs to increase their costs, which will ultimately be passed onto plan participants in the form of increased premiums.
TRANSPARENCY PROVISIONS (DIVISION BB, TITLE II – TRANSPARENCY)
The Act adds several requirements to enhance group health plan transparency. These transparency enhancements include:
- Prohibiting a group health plan from entering into a services agreement that, directly or indirectly, restricts the group health plan from disclosing provider-specific costs, quality of care information, or electronically accessing de-identified claims data. A group health plan is required to annually report compliance with this requirement. There is no effective date in the statute for this provision, which means it is effective when enacted. Plan sponsors should review existing contracts with TPAs and modify as necessary to ensure compliance.
- Requiring that group health plans conduct comparative analyses of the nonquantitative treatment limitations used for medical and surgical benefits as compared to mental health and substance use disorder benefits (This was previously recommended, but not required to be compliant with the Mental Health Parity and Addiction Equity Act (Mental Health Parity). The tri-agencies are required to develop reporting process for this data to be submitted for evaluation and compliance. We expect regulations within the next 18 months to address this requirement.
- Requiring disclosure by health benefit brokers and consultants to plan sponsors regarding at the time of contracting their reasonably expected direct and indirect compensation for referral of services to group health plans. These changes take effect one year after enactment of the Act.
- Requiring group health plans to annually report on plan medical costs, prescription drug spending, premiums, and any manufacturer rebates received by the plan to the Departments. The first reporting is due one year after enactment of the Act. Each subsequent report would be due by June 1 of each year.
Considerations and Comments
Most notably, the Act’s transparency provisions impose a new requirement on group health plans to conduct comparative analyses of the nonquantitative treatment limitations used for medical and surgical benefits as compared to mental health and substance use disorder benefits. It also requires the Departments to request comparative analyses of at least 20 plans per year that involve potential violations of Mental Health Parity, complaints regarding noncompliance with Mental Health Parity, and any other instances in which the Departments determine appropriate. This may lead to the Departments’ request for correction actions, which must be done within 45 days and the plan is required to notify all enrolled individuals within seven days of such noncompliance determination. While the Departments are only required to request comparative analyses of at least 20 plans per year, this may ultimately lead to additional Mental Health Parity audits and additional Mental Health Parity guidance by the Departments. Therefore, plan sponsors should take steps now to ensure that it is fully complying with Mental Health Parity and be prepared to conduct the new required comparative analyses.