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An Arkansas law regulating pharmacy benefit managers’ (PBMs) generic drug reimbursement rates, and affecting the cost of prescription drugs provided under ERISA-governed benefit plans and the administration of those plans, is not preempted by ERISA, the U.S. Supreme Court has held unanimously. Rutledge v. Pharmaceutical Care Management Association, No. 18-540, 2020 U.S. LEXIS 5988 (Dec. 10, 2020).

With Justice Sonia Sotomayor writing for the unanimous court, the Court held that Arkansas’s law is simple rate regulation and “ERISA does not pre-empt state rate regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage.” The Court explained that the law only sets a floor for pharmacy reimbursements by PBMs. It is not directed at ERISA plans, and the fact that PBMs may pass their increased costs on to ERISA plans is not ERISA’s concern.  More…

Most employers know that if a group health plan provides mental health or substance use disorder (MH/SUD) benefits in any of six specified classifications, the plan must provide MH/SUD benefits in all specified classifications in which the plan provides medical or surgical (M/S) benefits. Additionally, the 2008 Mental Health Parity and Addition Equity Act (MHPAEA) requires plans to ensure that the financial requirements and treatment limitations (quantitative or nonquantitative) imposed on MH/SUD benefits are no more restrictive than those imposed on M/S benefits. While the United States Department of Labor’s Employee Benefits Security Administration (EBSA, which enforces employer-sponsored plans’ compliance with the MHPAEA) has proclaimed that it already has issued multiple compliance navigation guides for plans, the truth is that the guidance issued to date has lacked sufficient detail and failed to account for the actual circumstances necessary to be helpful to employers. Meanwhile, EBSA is investigating employer plans for compliance, publicly naming those that it deems fall short, and encouraging plan participants to demand written disclosures of details that are largely unavailable.

The Road and Navigation Systems Still Are Under Construction

EBSA has issued multiple requests for comments and guidance over the past couple of decades in connection with the MHPAEA. EBSA’s guidance includes 2013 final regulations, a self-compliance tool, 2019 FAQs (in which it listed examples of nonquantitative treatment limitations or NQTLs), and 2021 FAQs (in which it announced that it would begin investigating plans for compliance with the NQTL comparative analysis documentation requirements that became effective that year). One thing all of the prior guidance has in common is a failure to acknowledge that the employer, who’s usually ultimately accountable for compliance, has virtually no way to assess whether its group health plan complies with the mental health parity requirements. Except in rare circumstances, employers don’t select network providers, don’t negotiate reimbursement rates, don’t determine what preauthorization requirements will apply for what covered services, don’t know what’s medically necessary, and don’t know what claims have been approved or denied or why. So, for employers, the road to compliance is like driving through a construction zone without navigation and with multiple speed traps and caution signs posted in a foreign language. Employers need a roadmap and a way to navigate the many obstacles and construction zones on the route to compliance.

The recently-issued proposed regulations we blogged about last month are somewhat helpful because they provide more specific information about what data plans must collect and consider in order to design and apply NQTLs. This includes evaluating historical data comparing in- and out-of-network utilization rates and provider reimbursement rates – information the employer has to extract from the plan’s third-party administrator. While EBSA acknowledged the challenges employers face in collecting and evaluating the data needed to determine compliance, it still expects plans to show the analysis undertaken and the steps taken to mitigate material differences in access to MH/SUD benefits compared to M/S benefits. The EBSA (and other federal agencies) annual reports to Congress, which describe the agencies’ findings in enforcement investigations and highlight the agencies’ primary concerns regarding mental health parity, are also potentially helpful. For example, chief among the concerns highlighted is network adequacy. The agencies cite what’s been reported as a “growing disparity” in in-network reimbursement rates between MH/SUD providers and M/S providers, which drives down MH/SUD providers’ network participation and, therefore, increases the cost of MH/SUD services for patients.

How Employers Can Navigate A Road That’s Still Under Construction

It’s obvious that federal agencies are still gathering the information they think is relevant and necessary to provide meaningful guidance and enforcement. So, for now, employers should develop and document a compliance program using what is available to show a good faith effort to comply with the MHPAEA, including the NQTL comparative analysis requirement.

Any such compliance program should include these steps:

  • Determine which vendors to contact to gather the necessary documentation and information. In addition to the insurer or third-party administrator (TPA) for the group health plan, this may also include, for example, a behavioral health administrator and/or pharmacy benefit manager.
  • Develop a list of specific questions for the insurer/TPA and other vendors that will enable the employer to gather the information needed to determine whether the plan complies with the MHPAEA, including the NQTL requirements. It is helpful to reference the DOL self-compliance tool to develop an effective list of questions and to use its framework to document the compliance review effort. One should also incorporate the data elements in the recently issued proposed regulations. If the plan service provider has conducted and documented a compliance review itself, particularly the required NQTL comparative analysis, this will save the employer an enormous amount of time and other resources.
  • Document all communications with the insurer/TPA and other vendors, particularly those from whom one requests assistance gathering the data necessary to ensure MHPAEA compliance.
  • Analyze the data provided by the insurer/TPA and other vendors, both on a granular level and in the aggregate, using available EBSA guidance to help spot disparities. If needed, develop follow-up questions to the insurer/TPA and other vendors regarding any coverage disparities between MH/SUD and M/H benefits, the application of utilization review to MH/SUD benefits, and/or the reasoning behind MH/SUD claims denials.
  • If needed, identify areas of concern and pursue corrective action.  Retain all communication with the insurer/TPA or other vendor involved. 
  • If needed, update administrative services agreements to ensure ongoing cooperation from TPAs and other plan service providers in evaluating compliance, correcting compliance issues, and making required disclosures.

Bear in mind that MHPAEA compliance is an ongoing trip and should be revisited annually and whenever EBSA issues meaningful additional guidance. Employers can attend a free webinar on the proposed regulations that the federal agencies sponsor on September 7, 2023. Also, employers or employer groups interested in helping shape the final regulations have until October 2, 2023, to submit written comments on the proposed regulations. 

The attorneys in the Employee Benefits Practice Group are available to assist clients with developing and documenting their MHPAEA compliance programs and preparing comments on the proposed regulations. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.

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With another National Employee Benefits Day upon us, it is a good reminder for all involved in the world of Employee Benefits to pause (take three deep breaths) and use it as an opportunity to look back at where we’ve been over the last year and where we are going. While the challenges are many, the work is more valuable than ever.

One constant over the last few tumultuous years is change. From the compliance perspective, employers like certainty (plan advisors do, too), and recently there has been anything but. This is true now more than ever across all areas of benefits and is likely to be the case for years to come.

It is no surprise (pun intended) that health and welfare plan administration continues to occupy more time and attention than ever before. Plans continue to grapple with compliance with Mental Health Parity, Transparency in Coverage, the No Surprises Act, and other recent changes that define how group health plans need to operate (both at the federal and state level). Traditionally, an area in which plans operated more autonomously, health plan administration and compliance have become increasingly complex and will continue to grow more complicated, particularly for multi-state plans. Add to that already full plate the need to navigate the issues following the U.S. Supreme Court’s decision in Dobbs, many of which will continue to evolve for years to come, and recent state and federal attention on pharmacy benefits.

As we approach the end of the Public Health Emergency and National Emergency, benefit plans should also pay close attention to unwinding the temporary relief provided at the outset of the pandemic. This includes close attention to COBRA, special enrollment and claims deadlines, and decisions on coverage of COVID-19 diagnostic testing, treatment, vaccines, and telehealth under group health plans. And for good measure, plans now need to consider a recent court decision invalidating the ACA’s preventative care mandate.

Retirement plan design and administration are not immune from the wave of change. Eagerly awaited retirement plan legislation in the form of SECURE 2.0 finally arrived at the end of last year, bringing with it a panoply of mandatory and optional changes for the consideration of plan sponsors. With an eye toward increasing retirement savings and expanding coverage within the private plan system, SECURE 2.0 will spawn more guidance and implementation efforts for years to come. Plan fiduciaries are also confronting the push and pull of the role of ESG investments in retirement plan fund lineups – including trying to keep straight the regulatory, legislative, and judicial attempts to weigh in on the proper role of ESG investments, and for that matter, what even is an ESG investment. All of this change comes against the broader backdrop of market volatility and continued concerns of a recession/inflation, increasing the spotlight on financial wellness initiatives.

Finally, and perhaps most important, well-being, balance, and mental health remain at the forefront. Clearly not confined to the pandemic, attention to the needs of all employees’ pursuit of the elusive “work-life balance” is more important now than ever, especially as the lines between work and home promise to be blurred for the foreseeable future given the persistence of remote/hybrid work. While many of these change-inducing events are far beyond our control, as benefits professionals, we have ridden this wave before and will continue to do so. We are reminded that change creates new opportunities to design important, sustaining benefits that serve the lives of employees and their families. Keep up the fight, and Happy Employee Benefits Day!

Rx Data Collection

As group health plan sponsors, employers are responsible for ensuring compliance with the prescription drug data collection (RxDC) reporting requirements added to ERISA by the Consolidated Appropriations Act of 2021 (CAA).  Under ERISA section 725, enforced by the US Department of Labor (DOL), group health plans (not account-based plans, e.g., health reimbursement arrangements and health savings accounts, or excepted benefit arrangements) must report details regarding the plan’s prescription drug benefit utilization, including the drugs most frequently dispensed, the most expensive drugs, and the drugs with the highest cost increase for a given calendar year.  Reporting is to be made annually to the US Department of Health and Human Services’ (HHS) CMS enterprise portal’s Health Insurance Oversight System (HIOS) module, starting with the report due by December 27, 2022, for the 2020 and 2021 calendar years.  After that, annual reporting is due by June 1st following the calendar year (so, the 2022 calendar year report is due by June 1, 2023).  The DOL must thereafter post aggregated information on its website so that the public can see trends in prescription drug utilization and pricing.        

What’s required.  Under regulations issued jointly by HHS, DOL, and the US Treasury Department, plans must submit RxDC reports which include –

  • General information about the plan like the plan sponsor, plan year, number of participants, market segment (small or large group and fully-insured or self-insured), insurer and other vendors, and the states in which coverage is offered, etc. (“plan list” information – see the template document for reporting, using code P2 for group health plans, at this link);
  • Eight data files:
    • Premium/cost and life-year (average number of covered members) data (D1),
    • spending by six categories – hospital, primary care, specialty care, other medical costs and services, known medical benefit drugs, and estimated medical benefit drugs (D2),
    • top 50 most frequently dispensed brand name drugs by state and market segment (D3),
    • top 50 most costly drugs by state and market segment (D4),
    • top 50 drugs by spending increase by state and market segment, excluding drugs issued an Emergency Use Authorization or not FDA-approved (D5),
    • prescription drug spending totals (D6),
    • prescription drug rebates by therapeutic class (D7),
    • and prescription drug rebates for the top 25 drugs by state and market segment (D8); and
  • A narrative that describes the impact of prescription drug rebates on premium and cost-sharing, how the employer size was estimated (for self-insured plan sponsors), how bundled or alternative payment arrangements attributable to drugs covered under a medical benefit were estimated, and how net payments from government reinsurance and cost-sharing reduction programs were considered (if applicable).  The narrative also is used to identify any drugs prescribed for which a National Drug Code (NDC) was not on the CMS RxDC code crosswalk, and the types of rebates and other remuneration included in or excluded from the D8 data file.     

How to comply.  HIOS issued specific reporting instructions which explain the reporting requirements in detail and assure plan sponsors that submission for a plan “is considered complete if CMS receives all required files, regardless of who submits the files.”  Many group health plan vendors (insurers, third-party administrators, pharmacy benefit managers, etc.) have proactively contacted plan sponsors to assure them that the vendor will report at least some of the information on the plan’s behalf.  However, not all vendors are willing to accept responsibility for the RxDC reporting requirements.  Employers need to know which reporting obligations will be fulfilled by the group health insurer or other vendor and which reporting obligations must be satisfied by the plan sponsor.  Most plan sponsors are wise to be prepared to upload at least some of the data to the HIOS module themselves, which means first setting up a HIOS account on the CMS portal.  HIOS accounts can take a couple of weeks to set up, so it’s important for plan sponsors to act on this now if they’ve not already done so.  CMS has provided detailed instructions for setting up the HIOS account. 

Compliance issues.  The statute and regulations impose the RxDC reporting requirements on group health plans, which, by default, usually means that requirements and liability for noncompliance are imposed on plan sponsors (generally, employers).  Thus, each group health plan sponsor should ensure that all of the RxDC reporting requirements are satisfied for each group health plan subject to the reporting requirements.  Employers should obtain written agreements from plan vendors identifying what data each vendor will upload.  Note that the employer remains liable for noncompliance (and subject to excise tax and potential civil penalties), even if it has an enforceable agreement with its vendor to ensure compliance unless the plan is fully-insured and the agreement is with the insurer.  Unfortunately, only the reporting entity can view the files it uploads to HIOS, so there is no way for an employer to confirm on the HIOS module that a vendor uploaded the file(s) it agreed to upload on behalf of the employer’s group health plan.  Instead, the employer should obtain written assurance from the plan’s vendor(s) and rely on contractual provisions for recourse if a vendor fails to fulfill its RxDC reporting service as agreed.    

If you have questions about this or any other employee benefits matter, contact the Jackson Lewis attorney with whom you usually work or anyone in the firm’s Employee Benefits Practice Group. 

As we enter the fourth quarter of 2022, sponsors and administrators of employee benefit plans have a lot to juggle.  From open enrollment and required notices to plan document deadlines, it is a busy time of year.  Yet, there always seems to be something new to add to the mix.   This year is no different.  Following are some 4th quarter topics for consideration: 

RxDC Reporting Is Due December 27, 2022.   The Prescription Drug Data Collection (RxDC) reporting requirement was added as part of the Consolidated Appropriations Act, 2021.  It requires plans to annually submit to the Department of Health and Human Services, Department of Labor, and Department of Treasury a report detailing the plan’s prescription drug usage, including the most frequently dispensed, the most expensive, and those with the greatest increase in cost, among others.  The Centers for Medicare & Medicaid Services (CMS) is collecting this information on behalf of the Departments and has issued detailed reporting instructions.

Although plans can contract with their third-party administrators, pharmacy benefit managers or other plan providers to meet these requirements, not all providers are willing to report all of the data elements.  This means that employers may need to register for a Health Insurance Oversight System (HIOS) account to submit some of the required information. 

With the first RxDC reporting deadline of December 27, 2022, fast approaching, plan administrators should discuss RxDC reporting with their providers now to develop a compliance plan.  As the CMS warns, HIOS accounts can take up to two weeks to create.  So, waiting until December to start working on this is not recommended.  

HDHP Amendments to Cover Insulin.  Making a splash across the headlines was the Inflation Reduction Act of 2022 (IRA), which President Biden signed on August 16, 2022.  The 273 pages of text make sweeping changes.  However, few will affect employer-sponsored benefit plans, and most of those will have only indirect effects. 

One change that does directly affect a High Deductible Health Plan (HDHP) is the exception added to Section 223 of the Internal Revenue Code effective for plan years beginning after December 31, 2022, to enable HDHPs to cover the cost of insulin without first meeting the deductible.  This first dollar coverage for insulin will protect Health Savings Account (HSA) eligibility for those who require an insulin regimen.  Employers should determine if their plan requires an amendment to implement this change. 

Contraceptive Coverage Requirements, Reimbursements.  On July 28, 2022, the Departments of Labor, Treasury, and Health and Human Services (collectively, the Departments), jointly issued Frequently Asked Questions About Affordable Care Act Implementation Part 54 (the FAQs).  The FAQs address required coverage of contraceptives by non-grandfathered group health plans and insurers, including guidance designed to:

  • Confirm the contraceptive coverage mandate;
  • Clarify the rules regarding medical management techniques for contraceptive coverage;
  • Address federal preemption of state law; and
  • Discuss enforcement actions for noncompliance. 

The FAQs also confirm that health reimbursement arrangements, health savings accounts, and health flexible spending accounts can reimburse the costs of over-the-counter contraception that is not otherwise paid or reimbursed by a health plan or issuer.  Employers should review their plans to determine if any amendments are needed to conform to the FAQs. 

Sponsors of retirement plans will get some welcome relief, however:

The CARES Act and Relief Act Amendment Deadline for Retirement Plans generally is delayed until December 31, 2025.  In August, the IRS issued IRS Notice 2022-33 extending the deadline for sponsors to amend their retirement plans to reflect certain changes under the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), Section 104 of the Bipartisan American Miners Act (Miners Act), and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). That guidance failed to delay the deadline to adopt other amendments due by the end of 2022, including amendments to implement certain optional pandemic-related distribution and loan provisions permitted under the CARES Act and the provisions of Section 302 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act) affording favorable tax treatment to qualified individuals with respect to qualified disaster distributions.

To align the amendment deadlines for the referenced Acts, the IRS issued Notice 2022-45 on September 26, 2022.  Notices 2022-33 and 2022-45, together, postpone the deadline for sponsors of nongovernmental plans to adopt amendments to conform their retirement plans to the Acts until December 31, 2025. The deadline for governmental plans likewise is extended generally until 90 days after the close of the third regular session of the applicable legislative body that begins after December 31, 2023. 

By that time, sponsors may have additional amendments to make, owing to a number of legislative proposals (referred to colloquially as SECURE 2.0) that have been under consideration since the passage of the SECURE Act of 2019.  These proposals include the Securing a Strong Retirement Act, the RISE & SHINE Act, and now the Senate’s Enhancing American Retirement Now (EARN) Act, which was approved by the Finance Committee in June, but not formally introduced until the Act language was released in September.  Monitor our blog for more on these developing laws and contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.

Deadline

On April 19, 2022, the Departments of Labor, Health and Human Services, and the Treasury issued additional guidance under the Transparency in Coverage Final Rules issued in 2020.  The guidance, FAQs About Affordable Care Act Implementation Part 53, provides a safe harbor for disclosing in-network healthcare costs that cannot be expressed as a dollar amount.  They also serve as a timely reminder of the pending July 1, 2022, deadline to begin enforcing the Final Rules.

Background

The Final Rules require non-grandfathered health plans and health insurance issuers to post information about the cost to participants, beneficiaries, and enrollees for in-network and out-of-network healthcare services through machine-readable files posted on a public website.  The Final Rules for this requirement are effective for plan years beginning on or after January 1, 2022 (an additional requirement for disclosing information about pharmacy benefits and drug costs is delayed pending further guidance).   The Final Rules require that all costs be expressed as a dollar amount.  After the Final Rules were published, plans and issuers pointed out that under some alternative reimbursement arrangements in-network costs are calculated as a percentage of billed charges.  In those cases, dollar amounts cannot be determined in advance.

FAQ Safe Harbor

The FAQs provide a safe harbor for disclosing costs under a contractual arrangement where the plan or issuer agrees to pay an in-network provider a percentage of billed charges and cannot assign a dollar amount before delivering services.  Under this kind of arrangement, they may report the percentage number instead of a dollar amount.  The FAQs also provide that where the nature of the contractual arrangement requires the submission of additional information to describe the nature of the negotiated rate, plans and issuers may describe the formula, variables, methodology, or other information necessary to understand the arrangement in an open text field.  This is only permitted if the current technical specifications do not support the disclosure via the machine-readable files.

Public Website Requirement

This guidance is pretty narrow and of most interest to plans, issuers, and third-party administrators responsible for the technical aspects of the disclosure.  Still, it is a helpful reminder to plan sponsors that the July 1st enforcement deadline for these requirements is rapidly approaching.  Plans sponsors should remember that these machine-readable files must be posted on a public website.  The Final Rules clearly state that the files must be accessible for free, without having to establish a user account, password, or other credentials and without submitting any personal identifying information such as a name, email address, or telephone number.  If a third-party website hosts the files, the plan or issuer must post a link to the file’s location on its own public website.  Simply posting the files on an individual plan website or the Plan Sponsor’s company intranet falls short of these requirements.  Regardless of how a plan opts to comply, enforcement begins in two months.

We are available to help plan administrators understand these requirements.  Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.

As employers and insurers continue to establish programs to enable participants in group health plans to receive at-home COVID-19 tests at no cost, even without a prescription, the Department of Labor (DOL) has issued additional guidance and an updated FAQ providing further clarification and flexibility to insurers and plan sponsors in providing coverage to eligible individuals.  This additional guidance is effective February 4, 2022.

As a recap, effective January 15, 2022, all insurers and other group health plans must cover all types of COVID-19 tests, including those performed or prescribed by a physician or other health care provider, and for in-home COVID-19 tests procured without a doctor’s order.  The DOL issued FAQ Part 51 to provide guidance about how insurers and plans can comply with the obligation to provide at-home COVID-19 tests at no-cost, including the establishment of two “safe harbors” that plans and insurers can follow to ensure compliance:

Safe Harbor #1: The plan or insurer can satisfy its coverage obligation by providing “direct coverage” of at-home COVID tests through network pharmacy arrangements and other direct contract arrangements, with the participant paying no up-front cost to receive COVID testing kits through these services at the counter or other points-of-service.  If a participant submits invoices for COVID tests purchased through other non-pharmacy or retailer arrangements, the insurer or plan must reimburse the participant for the cost of such COVID tests at the lessor of the actual cost of the test purchased or $12 per test (noting that if a “kit” comes with two tests per kit, the amount to be reimbursed would be up to $24 in total).

Safe Harbor #2:   The plan or insurer can limit the total number of COVID tests to 8 per person, per month (or 4 kits, if the kit includes two tests).  A separate limit applies for each covered family member (e.g., a family of 4 could receive up to 32 tests per month (or 16 kits, if it includes two tests each).  There is no annual maximum limit.

FAQ Part 52 Update

On February 4, 2022, the DOL issued FAQ Part 52 to further clarify what COVID tests qualify for the no-cost coverage options under Safe Harbor #1, how a plan or insurer provides “direct coverage” of COVID-19 tests at no cost to the participant, and provides flexibility in coverage when the plan or insurer experiences supply shortages.  Lastly, the latest guidance confirms the coordination of plan coverage between the plan or insurer and related health flexible spending plans and health savings account arrangements.

Q/A-1 confirms that employers have flexibility in establishing a “direct coverage” arrangement to satisfy Safe Harbor #1 in FAQ Part 51.  At a minimum, the plan or insurer must provide at least one “direct-to-consumer shipping mechanism” and at least one “in-person mechanism.”

  • A direct-to-consumer shipping mechanism is any program that provides direct coverage of over-the-counter COVID-19 tests without requiring the individual to obtain the test at an in-person location. It can include an online or telephone ordering system provided through a pharmacy network or other non-pharmacy retailer that has contracted with the insurer or plan to provide COVID-19 tests to eligible participants at no-cost at the time of ordering.
  • The guidance emphasizes that systems and technology changes need to be modified to the extent necessary to ensure that pharmacy networks and retailer arrangements, including all direct-to-consumer shipping mechanisms, operate sufficiently with no upfront cost to the participant for the purchase of at-home COVID-19 test kits.
  • Plans and insurers must pay for all shipping costs consistent with the plan’s mail-order shipping arrangements.
  • When implementing an in-person mechanism, the plan or insurer can satisfy this requirement by offering alternative COVID-19 testing at in-person distribution sites with drive-through or walk-up testing services at no-cost to the participant. These services can also be provided through participating pharmacies and other contracted service providers available based on the locality of participants and beneficiaries and the current utilization of participants at each location.  Key information must be provided to all participants to ensure they are aware of each location and what other information they need to have available to receive COVID-19 testing coverage at no-cost.

Q/A-2 provides a crucial clarification that plans and insurers will not be deemed to violate Safe Harbor #1 if they are temporarily unable to provide over-the-counter COVID-19 tests due to supply shortages, as long as they have taken all other steps necessary to establish direct coverage arrangements in the manner required under Safe Harbor #1.  In that case, the plan or insurer can still meet its coverage responsibility by reimbursing the cost of COVID-19 tests/kits purchased outside of the prescribed direct coverage arrangement for up to $12 per test.

Q/A-3 clarifies that plans and insurers can disallow reimbursement for tests purchased by participants from a private individual via an in-person, online person-to-person sale, or any seller using online auctions or other resale marketplace arrangements.  Proof of purchase through a verified retailer with actual documentation of the item purchased will not violate the obligations set forth above or from previous guidance issued that restricts any medical management of COVID-19 coverage (see DOL FAQ Part 44).

Q/A-4 clarifies that the type of COVID-19 tests that must be covered under FAQ Parts 51 and 52 do not include COVID-19 tests that use a self-collected sample that must be processed by a lab or other health care provider to return a valid result—the type of COVID-19 tests referred to under FAQ Parts 51 and 52 are only tests that can be self-administered and self-read without the involvement of a health care provider.

Q/A-5 also clarifies that the cost of a COVID-19 test covered under the group health plan is not eligible for reimbursement under a health flexible spending arrangement (FSA), health reimbursement arrangement (HRA), or a health savings account (HSA) for the same expense.  To the extent an individual mistakenly receives reimbursement for the same COVID-19 test costs from a health FSA, HRA, or HSA arrangement separately covered and paid through an employer’s or insurer’s group health plan, such individual would need to contact their plan administrator for correction of the error or could be subject to income tax on the amounts overpaid.

As with the previous guidance on this topic, these obligations will continue until at least the end of the current national emergency period.

Members of the Jackson Lewis Employee Benefits group are available to discuss these latest updates and other options and alternatives for compliance.

At Home COVID Tests

In fulfillment of President Biden’s promise to make at-home COVID tests more available for all of us, two significant action steps have now occurred:

  1. Every U.S. household has access to free at-home COVID-19 tests. As of January 18, 2022, any individual with a residence in the United States may request up to four (4) at-home COVID test kits.  There is no cost to register or for the kits themselves.
  1. At-home COVID-19 testing is available at no cost without a prescription under an employer’s group health plan. On January 10, 2022, the Department of Labor (DOL) released updated guidance and an FAQ that, as of January 15, 2022, now extends an employer’s obligation to cover all types of COVID-19 tests, between those performed or prescribed by a physician or other health care provider,  and for in-home COVID-19 tests provided without a doctor’s order.

Key Points:

All group health plans and insurance carriers must now cover the cost of at-home COVID-19 test kits, passing none of that cost to employees or individuals covered under the plan, and without requiring a medical diagnosis or prescription from a health care provider.

  • The plan or insurer need not provide this coverage to employees not covered under the employer’s plan.
  • For these purposes, the coverage can be provided through an employer’s medical plan, pharmacy benefit plan/PBM, or both. Employers should discuss the options and costs for administering this arrangement under their particular plan with their brokers and consultants or insurance carriers.
  • The guidance allows a plan or insurer to meet this coverage obligation in one of two ways:
    • The plan can work with its insurance carrier or third-party claims administrator (TPA) to create “direct contract” arrangements with retailers (e.g., Walmart, RiteAid, Walgreens, etc.) and other insurance network providers to provide COVID tests to covered individuals at no cost to the individual at the counter; costs are negotiated and paid between the plan/insurer/TPA with the retail service provider directly.
    • Individuals can also purchase COVID tests through any other resource and submit the receipt for reimbursement through the plan or insurer’s established process, either through the insurance carrier, TPA or PBM. The maximum amount to be paid in reimbursement is the lesser of: (a) the actual cost of the COVID test; or (b) $12 per test (note: if the COVID kit comes with two tests, the cost to be reimbursed would be per test or a maximum of $24).  The plan or insurer does not have to reimburse for COVID tests purchased before January 15, 2022.
    • Suppose a plan or issuer is unwilling or unable to satisfy the above criteria in providing the opportunity to receive COVID testing coverage under either of the above criteria. In that case, the plan or issuer must still provide reimbursement of at-home COVID tests without the above cost limitations.
  • The plan or insurer can limit the total number of COVID tests to 8 per person per month (or 4 kits if the kit includes two tests). A separate limit applies for each covered family member (e.g., a family of 4 could receive up to 32 tests per month (or 16 kits, if it includes two tests each).  There is no annual maximum limit.
  • An individual need not provide proof of medical need, but the plan can require the individual to attest that they are purchasing only for personal use (not for resale).
  • Employers are encouraged to communicate to all covered individuals about the alternatives available and processes for seeking reimbursement of purchased tests.
  • The obligations for coverage of at-home COVID tests remain in effect for at least the remainder of the Public Health Emergency period, which has now been extended to at least April 15, 2022.
  • COVID testing and other related costs provided at a health care provider or other health care facility as part of a medical assessment must still be covered 100 percent by the plan or issuer without being subject to the test or cost limits that apply for over-the-counter COVID tests, under previous guidance under the CARES Act, and the First Families Coronavirus Response Act (FFCRA).

Employer sponsors of group health plans are likely to have received at least some information from their TPA, insurance carrier, or other brokers and consultants about the steps to be taken related to the guidance provided under the most recent DOL FAQ.  Members of the Jackson Lewis Employee Benefits group are also available to discuss options and alternatives.  Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.

According to Forbes.com, more employers are considering imposing a premium surcharge on employees participating in the company’s health plan who are not vaccinated for COVID-19. Whether positioned as rewards or penalties, wellness program incentives have become vehicles of choice for encouraging behaviors believed to be healthy and reducing health plan costs. For years, tobacco users have faced health plan premium surcharges if they failed to cease using tobacco products (and if they also failed to comply with reasonable alternatives, such as completing a smoking cessation program). More COVID-19 “unvaccinated” employees may start facing similar surcharges if they choose to remain unvaccinated for COVID.

Implementing a COVID-19 premium surcharge wellness program to provide an incentive for more plan participants to get vaccinated comes with some compliance challenges. Those challenges depend largely on the design of the program and the administration of it. And, unfortunately, the guidance surrounding wellness programs, particularly from the Equal Employment Opportunity Commission (EEOC), remains less than clear. Check out a brief history of the EEOC’s position on wellness (prior to recent updated to its pandemic guidance).

Employers considering a health plan premium surcharge for plan participants who remain unvaccinated have some issues to consider in structuring the program, such as:

  • How much will the surcharge be?
  • How does a vaccination surcharge interact with other wellness incentives the employer offers?
  • Will the surcharge apply only with respect to employees who remain unvaccinated? What about spouses and dependents (assuming a COVID-19 vaccination is available)?
  • How long should plan participants have to get fully vaccinated?
  • What proof will be required to establish vaccination? There has been a rise in fake vaccination cards, and a warning from the FBI that making or buying such cards is a crime. What are the consequences under the plan for a participant who submits a fake card?
  • Is the vaccination requirement “participatory,” or is it “health-contingent”? If health contingent, and considered “activity only,” what reasonable alternative standard will be made available should vaccination be medically inadvisable for the participant?
  • What protections are in place for the handling of vaccination data and, in some cases, medical data supporting a reasonable alternative standard, all of which constitute protected health information under HIPAA?
  • Does the Americans with Disabilities Act apply even if vaccination does not constitute a disability-related inquiry or a medical examination? In other words, what reasonable accommodations need to be made available, if any?
  • As COVID-19 variants continue to emerge along with more talk of vaccine boosters, should the program also include boosters, if available?

On May 28, 2021, the EEOC updated its pandemic guidance to clarify that employers may offer employees an incentive if the confirm they have been vaccinated on their own from a pharmacy, public health department, or other health care provider. According to the same guidance, employers may even offer an incentive to employees for voluntarily receiving a vaccination administered by the employer or its agent, so long as the incentive (a reward or penalty) is not “so substantial as to be coercive.” However, the incentive may not extend to the employee’s family members receiving a vaccination administered by the employer or its agent as that could violate Title II of the Genetic Information Nondiscrimination Act, according to the EEOC.

Prior to its May 2021, guidance, the EEOC had issued a notice of proposed rulemaking (NPRM) attempting to clarify its position on wellness program. Withdrawn by the incoming Biden Administration, the NPRM is summarized here. Notably, the general rule that would have permitted only de minimis incentives, came with an exception for health-contingent wellness programs that (i) are part of, or qualify as, group health plans and (ii) are subject to and comply with the applicable provisions of the ACA/HIPAA wellness rule. Such programs would have been able to provide more than de minimis incentives, provided there were not greater than what is permitted under the ACA/HIPAA wellness rules.

Some employers are moving beyond incentives, including surcharges, to simply mandate COVID-19 vaccinations on the condition of employment. That approach comes with its own set of issues and risks. However, organizations choosing a health plan premium surcharge wellness program approach will want to consider these and other related issues carefully.

You didn’t know it was a thing?  Or maybe, like most, you just lost track of what day it is?  Or maybe it ranks somewhere behind New Beer’s Eve (the day before the end of prohibition) and National Tartan Day, both of which are most certainly things and also fall on April 6th.

If there was ever a year to celebrate National Employee Benefits Day, this is the year.  The last year needs no introduction, but it is worthwhile to take just a moment to acknowledge the role employee benefits and all the tireless employee benefit professionals have played in getting us through.

Last year showed us how central employer provided benefits are to our daily lives.  And in the time of the largest national crisis for most, employers, their benefits providers, and the entire system of employer-provided benefits rose to the occasion to provide flexibility and much-needed support to workers.  Whether it was voluntarily extending subsidized health coverage to those who would typically lose coverage because of a reduction in hours or termination, offering needed access to 401(k) assets through coronavirus related distributions and loans through the CARES Act, or allowing flexibility for mid-year changes in health care and flexible spending account elections, employers, vendors, and Washington, D.C. moved rapidly to respond.  At the same time, retirement plan fiduciaries weathered the increased threats of class action litigation over plan investment fees, new concerns related to protecting plan data, investment processes related to ESG funds and proxies, and a roller-coaster market.  Not to mention responding in real time to the ever expanding state and federal leave requirements.

So far, the year ahead appears to be full of its own twists and turns, albeit of a different vein.  As evidenced by the recent COBRA subsidy provisions in the American Rescue Plan Act of 2021, health care will continue to take center stage and the role of employer provided coverage against the backdrop of strengthened ACA Marketplaces, a bright spotlight on pharmacy benefits, transparency requirements, and rollouts of vaccines (and incentives) will keep us on our toes.  There will be other areas of focus for employers too—new opportunities to assist employees with student debt, expanding options in 401(k) plans such as withdrawals for birth and adoption assistance, and a new focus on voluntary benefits offerings alongside the traditional core offerings, plus new legislation around the bend on qualified retirement plans.  And as some begin the long march back to the office (and others continue to work remotely), we will confront pesky remote worker tax questions, a renewed focus on wellness benefits (including mental health), and a growing demand for financial wellness programs alongside changes that address our new normal, like the ability to pay for face masks, hand sanitizer and disinfecting wipes from our health flexible spending accounts.  There is much to do and no offseason for benefits professionals, but great opportunity to reevaluate benefit offerings, given changing employee needs and demands and a changing regulatory landscape under an ambitious new administration.

So, for now, take a minute and raise your copy of ERISA (and, of course, your favorite libation) to appreciate how much has been accomplished over the past year in the face of unchartered demands and stressors.  We are all looking forward to the year ahead for so many reasons and the changes (and opportunities) it brings in employee benefits and beyond.