PPI in the News Compliance Corner - April 14, 2022 Archive
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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.

Proposed Rule »
Fact Sheet »

On March 14, 2022, a federal district court in the Eastern District of Texas concluded in Coalition for Workforce Innovation et al v. Walsh that the Biden Administration’s delay in the implementation and ultimate withdrawal of the Trump Administration’s final rule regarding independent contractors (the “Final Rule”) violated the federal Administrative Procedures Act (APA). As a result, the Trump Administration’s Final Rule is in effect.

As discussed in the January 21, 2021, edition of Compliance Corner, the Final Rule featured a five-factor test that employers could use to determine whether a worker was an employee or independent contractor. As discussed in the May 13, 2021, edition of Compliance Corner, the Biden Administration withdrew the Final Rule because it believed that the Final Rule conflicted with the Fair Labor Standards Act (FLSA). According to the Biden Administration, the test established in the rule made it easier for employers to label workers as independent contractors and, therefore, no longer subject to that statute’s worker protections. The test also affected which workers an employer considers full-time employees subject to the employer mandate and, indeed, which workers qualify for benefits at all. See this FAQ in the December 9, 2021, edition of Compliance Corner for a discussion of the issues surrounding the provision of benefits to independent contractors.

In the current case, the trial court determined that the Biden Administration did not comply with the APA because it did not provide interested parties with an opportunity to “meaningfully comment” on the proposed delay and withdrawal and because the Biden Administration acted in an “arbitrary and capricious” fashion when doing so. Although the Biden Administration provided a notice and comment period as required by the APA when it proposed to delay the implementation of the Final Rule, the trial court found that the comment period was only 19 days when a 30-day comment period was the minimum length of time for people to “meaningfully comment.” In addition, the trial court determined that the Biden Administration acted in an “arbitrary and capricious” manner when it withdrew the Final Rule because it failed to consider alternatives to the withdrawal, such as proposing different factors to consider when determining independent contractor status.

In the short term, the Final Rule is in effect. Since this action was taken at the trial court level, it is possible that the Biden Administration will appeal the ruling or subject the Final Rule to the administrative process again so that it may withdraw the rule in a manner that satisfies the court’s interpretation of the APA. Employers should consult with employment law counsel when considering how to implement and follow this rule.

Coalition for Workforce Innovation et al v. Walsh»

Effective March 17, 2022, the HHS has increased penalty amounts adjusted by inflation related to Summary of Benefits and Coverage (SBC), Medicare secondary payer (MSP) and HIPAA privacy and security rules violations. The new amounts are applied to penalties assessed on or after March 17, 2022, for violations occurring on or after November 2, 2015.

Summary of Benefits and Coverage (SBC)

The ACA requires insurers and group health plan sponsors to provide SBCs to eligible employees and their beneficiaries before enrollment or re-enrollment in a group health plan. The maximum penalty for a health insurer or plan’s failure to provide an SBC increased from $1,190 to $1,264 per failure.

Medicare Secondary Payer (MSP) Rules

The MSP provisions prohibit employers and insurers from offering Medicare beneficiaries financial or other benefits as incentives to waive or terminate group health plan coverage that would otherwise be primary to Medicare. The failure to comply with the MSP rules increased from $9,753 to $10,360.

The maximum daily penalty for the failure of an insurer, self-insured group health plan or a third-party administrator to inform HHS when the plan is or was primary to Medicare increased from $1,247 to $1,325.

HHS Administrative Simplification

The HIPAA administrative simplification regulations provide standards for privacy, security, breach notification and electronic health care transactions to protect the privacy of individuals’ health information.

The penalty amounts vary depending on the violators’ level of intentions and situations broken down by HIPAA’s four-tiered penalty structure. The chart below summarizes the new and prior penalty amounts.

With this latest increase in penalties, employers may want to review their compliance with the SBC, MSP and HIPAA requirements to help prevent violations, agency audits and potential penalties.

HHS Final Rule - Inflation Adjusted Civil Penalty Amounts for 2022  »

On April 4, 2022, CMS released the 2023 parameters for the Medicare Part D prescription drug benefit. This information is used by employers to determine whether the prescription drug coverage offered by their group coverage is creditable or non-creditable. To be creditable, the actuarial value of the coverage must equal or exceed the value-defined standard Medicare Part D coverage provides.

For 2023, the defined standard Medicare Part D prescription drug benefit is:

• Deductible: $505 (increase from $480 in 2022)
• Initial coverage limit: $4,660 (increase from $4,430 in 2022)
• Out of pocket threshold: $7,400 (increase from $7,050 in 2022)
• Total covered Part D spending at the out-of-pocket expense threshold for beneficiaries not eligible for the coverage gap discount program: $10,516.25 (increase from $10,012.50 in 2022)
• Estimated total covered Part D spending at the out-of-pocket expense threshold for those eligible for the coverage gap discount programs: $11,206.28 (increase from $10,690.20 in 2022)
• Minimum cost-sharing under catastrophic coverage benefit: $4.15 for generic/preferred multi-source drug (increase from $3.95 in 2022) and $10.35 for all other drugs (increase from $9.85 in 2022)

Employers should use these 2023 parameters for the actuarial determination of whether their plans’ prescription drug coverage continues to be creditable for 2023.

CMS Announcement of Calendar Year (CY) 2023 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies »

On April 6, 2022, the Office of Civil Rights published a Request for Information (RFI) related to certain provisions of the Health Information Technology for Economic and Clinical Health (HITECH). The request includes 30 specific questions. Entities may choose to answer all or just some of the questions.

Specifically, OCR would like to hear how covered entities and business associates are complying with HIPAA’s Security rules related to the safeguarding of electronic PHI. Under those rules, entities are not required to utilize encryption but must consider and address the security of electronic PHI in a reasonable manner. OCR would like information on the standards, guidelines, best practices, methodologies, procedures, and processes the entity has considered, implemented, and plans to implement.

OCR is also considering compensating individuals who are harmed by an act that constitutes a violation of the HITECH Act. Such individuals could receive a percentage of any civil penalties or monetary settlement collected by OCR related to the violation. Harm may include physical, financial, and reputational harm or harm that hinders one’s ability to obtain health care. OCR is requesting information on how to define compensable harm.

Comments are due by June 6, 2022.

OCR Request for Information, HITECH »

On March 29, 2022, the US House of Representatives (the “House”) passed the Securing a Strong Retirement Act of 2022, which is also known as the SECURE Act 2.0. This comprehensive bill includes many provisions which, if enacted into law, would impact employer-sponsored retirement plans.

In December 2019, Congress passed the SECURE Act, which significantly changed existing retirement plan regulations. The SECURE Act sought to increase participation in employer-sponsored retirement plans and the availability of in-plan lifetime income options. The legislation also modified required minimum distribution (RMD) regulations. The recently passed House bill largely expands on the SECURE Act provisions.

For example, to expand participation, the SECURE Act requires employers to allow part-time employees to make elective deferrals to a defined contribution plan upon reaching age 21 and being credited with at least 500 hours-of-service in three consecutive years. The new bill reduces the hours-of-service requirement to two consecutive years, which would allow part-timers to participate earlier (i.e., potentially in 2023 rather than 2024). Additionally, beginning in 2024, the bill would require most new plans to adopt an automatic enrollment feature with automatic increases in the default elective deferral percentage.

With respect to RMDS, the SECURE Act changed the required beginning date (RBD) to April 1 of the year following the later of the year a participant reaches age 72 (previously 70 ½) or retires (as permitted by the plan). The bill further postpones the RBD by replacing age 72 with age 73, 74 and 75, beginning in 2023, 2030 and 2033, respectively. The bill also allows participants to choose plan annuity options with certain accelerated payment features without violating the RMD rules.

Furthermore, the bill introduces a special catch-up contribution. Under current law, those who have reached age 50 and participate in a 401(k) plan can contribute up to an additional $6,500 in 2022. Under the bill, participants who are at least age 62 but less than age 65 at the end of the tax year could make larger catch-up contributions (up to $10,000 annually) beginning in 2024. However, under the House bill, beginning in 2023, all catch-up contributions must be made on an after-tax or Roth basis.

Amongst other items, the bill includes a provision to create an online database for workers and retirees to find "lost" retirement accounts left at former employers that may have gone out of business or merged with another organization. The bill also expands self-correction opportunities, such as those for participant loan errors.

Employers who sponsor retirement plans may want to be aware of these developments. However, it is important to emphasize that the Secure Act 2.0 has only passed the House. Throughout the upcoming months, the Senate will review the bill and negotiate with the House on potential final legislation. We will be monitoring these developments.

Securing a Strong Retirement Act of 2022: HR 2954 »

Employers with workers employed in the state of Illinois should be aware of the Illinois Consumer Coverage Disclosure Act (or CCDA). The law became effective on August 27, 2021. The CCDA requires all private employers and non-federal governmental employers to provide Illinois employees with a disclosure that compares their coverage to essential health benefits (EHBs) required for coverage received through the Illinois marketplace. The employer must provide a disclosure for each group health plan that covers Illinois employees. The CCDA does not impose additional coverage requirements on these employers, only the disclosure requirements. Ask your account executive for a copy of our whitepaper on the CCDA, which includes links to the IL DOL FAQs and the model disclosure form.

The Illinois Department of Labor (IL DOL), the agency charged with administering and enforcing this requirement, maintains a list of FAQs that provide general guidance on this requirement. Although the IL DOL has not updated this information, the agency has provided us with a few answers to questions raised concerning the agency’s model form.

Many employers use the model form provided by the IL DOL. The form asks for the “Name of the Issuer.” According to the IL Department of Labor, the “Name of the Issuer” is the name of the plan’s issuer or carrier. Note that this would not apply to self-insured plans. The IL DOL has not provided guidance on that point, but one possible response for a self-insured plan is to provide the name of the employer, followed by “(self-insured, administered by [name of TPA]).”

The form also requires employers to identify the “Plan Marketing Name.” According to the IL DOL, this is the name the issuer uses or assigns to the major medical product. If the plan is self-insured, a possible response is the name of the employer followed by “(self-insured).”

The most important criteria to remember when completing the disclosure form is that the employee should be able to identify the plan(s) that the employer offers and which Illinois EHBs those plans provide. It should be emphasized that the disclosure requirement does not require plans to provide EHBs that they do not already provide.