New Benefits Requirements Due to the Consolidated Appropriations Act
January 21, 2021
When the Consolidated Appropriations Act (CAA) was signed on December 27, 2020, it did not just fund government for the 2021 Fiscal Year but also made some changes to benefit offerings. Specifically, changes were made to Flexible Spending Accounts (FSA), student loan assistance programs, mental health and substance abuse benefits, pharmacy benefits reporting, disclosure of service provider compensation, and surprise medical billing.
With respect to FSAs, employers can amend their cafeteria plans to take advantage of the new relief provisions by the end of the first calendar year beginning after the end of the plan year in which the change takes effect. For example, if mid-year election changes are allowed in 2021, a calendar year plan must be amended by December 31, 2022. The FSA changes under the CAA include:
- Allowing mid-year changes to contributions to both a healthcare and dependent care FSA
- Allowing carry over of any unused amounts or contributions remaining in a healthcare or dependent care FSA from the 2020 plan year to the 2021 plan year, or the 2021 plan year to the 2022 plan year
- Letting healthcare and dependent care FSAs extend their grace period to 12 months after the end of the plan year, for plan years ending in 2020 or 2021
- Allowing an employee who terminates their participation in a healthcare FSA during the 2020 or 2021 calendar year to continue to receive reimbursements from unused account balances through the end of the plan year in which such participation ended (including any applicable grace period)
- Permitting dependents who aged out of eligibility during the pandemic (specifically, during the last plan year with a regular enrollment period ending on or before January 31, 2020), plans may extend the maximum age from 13 to 14
Employers can make the use of FSAs more flexible for employees, but it will be important that they follow the strict legal guidelines to do so.
As to student loan assistance, employers can now make nontaxable payments of up to $5,250 each year to employees as student loan repayment assistance, but only if the payments are made by December 31, 2025, extending it from 12/31/20 under the CARES act, under an educational assistance program that meets the requirements of Internal Revenue Code (Code) Section 127. To take advantage of this benefit, employers who already maintain an educational assistance program will need to amend their program, and employers who do not already maintain such a program will need to adopt one. There are no specific requirements as to the form of the written plan document, but the document should fully describe the eligibility, benefits, and rules of operation and should be formally adopted by the employer.
Plan sponsors that impose non-quantitative treatment limitations (NQTLs) on mental health or substance use disorder benefits are required to perform and document comparative analyses of the design and application of NQTLs and these analyses must be made available to the Department of Labor (DOL), HHS or Internal Revenue Service (IRS) upon request.
The CAA also requires plans by December 27, 2021, and annually thereafter, to submit to the DOL, HHS and IRS a report with specific information on the benefits paid for prescription drugs provided to participants and beneficiaries. Plan sponsors must immediately begin recording:
- The dates of the plan year, number of participants and beneficiaries, and each state in which coverage is offered
- The 50 brand prescription drugs most frequently dispensed and the total number of paid claims for each drug
- The 50 most costly prescription drugs by total annual spending
- The 50 prescription drugs with the greatest increase in plan expenditures over the preceding plan year
- Average monthly premium paid by the employer and by participants and beneficiaries
- Impact of rebates, fees, and other remuneration paid by drug manufacturers on premiums and out-of-pocket costs
This reporting is expected to put pressure on reducing pharmacy costs over time by requiring greater transparency in pricing.
Another approach to transparency is a requirement in the CAA that group health plan service providers, including brokers and consultants, must comply with fee disclosure rules effective December 27, 2021.
Finally, for plan years beginning on or after January 1, 2022, employer-sponsored medical plans that cover emergency services must offer services without requiring preauthorization determinations, regardless of whether a health provider that delivers the services is a participating provider in the plan’s network or the emergency facility. Furthermore, any cost-sharing requirements for out-of-network services may not be greater than those for services provided by in-network providers.
Therefore, HR needs to consult with their benefit advisors, if not done already, sooner than later to incorporate these CAA requirements to their healthcare plans.