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.
The Act offers optional relief to plan sponsors of healthcare flexible spending accounts (HCFSA) and dependent care flexible spending accounts (DCFSA). This relief includes:
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.
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:
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:
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.
The Act adds several requirements to enhance group health plan transparency. These transparency enhancements include:
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.
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