Transparency in Coverage Enforcement

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.  As a reminder, for fully insured plans the plan sponsor is considered the insurance carrier. However, for self or level funded medical plans the plan sponsor is the employer so they will be the one responsible making sure they are meeting the transparency disclosure requirements. 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, The July 1st deadline is right around the corner.

ACA Reporting Deadline Reminder

• By Feb 28th if filing via paper
• By March 31st if filing electronically

ACA Reporting Deadline Reminder

• By Feb 28th if filing via paper
• By March 31st if filing electronically

New PCORI Fee Amounts Announced for the 2022 Reporting Period

The IRS just released IRS Notice 2022-04 that provides the updated fee for Patient-Centered Outcomes Research Institute (PCORI) paid by fully insured and self-funded health plans for the upcoming tax reporting period.

Even though the original PCORI fee assessments under the Affordable Care Act were scheduled to end after September 30, 2019, Congress extended these fees to be assessed by the IRS under the Further Consolidated Appropriations Act of 2020 for another ten years, until at least September 30, 2029.

The updated PCORI fee is now $2.79 per covered life for all plan years ending on or after October 1, 2021, and before October 1, 2022, up from $2.66 for the prior period.  As a reminder, fully insured plans are to be assessed the applicable PCORI fee amount through their monthly premium payments made to their health insurance carrier.  Self-insured plans pay this fee as part of the annual IRS Form 720 filing due by July 31 of each year.

Draft Instructions for Forms 1094-C and 1095-C Make Accurate Completion of the Forms Imperative for the 2021 Reporting Season

The draft instructions for the Forms 1094-C and 1095-C for the 2021 reporting season were released in late September 2021 with subtle, but important changes. To an untrained eye, these changes may fly under the radar. However, for the first time since the Affordable Care Act’s (ACA’s) inception, employers who file incorrect or incomplete Forms 1095-C with the IRS may suffer costly penalties. The remainder of this article will explore the changes made in the draft instructions for the Forms 1094-C and 1095-C in 2021.

The 2020 instructions to the Forms 1094-C and 1095-C included language that asserted no penalty would be imposed under IRC sections 6721 or 6722 for incorrect or incomplete Forms 1095-C so long as the employer showed that it made good-faith efforts to comply with the information reporting requirements. Similar language has been included in Notices released by the IRS that correspond to all the ACA reporting seasons to date. However, Notice 2020-76, the Notice that extended the good-faith efforts relief for the 2020 reporting season and was incorporated into the final instructions for the Forms 1094-C and 1095-C in 2020, stated that the good-faith efforts relief would not continue for tax reporting seasons past 2020.

As a result of the good-faith efforts relief no longer applying, if an employer submits a Form 1095-C to the IRS or furnishes a Form 1095-C to an employee that is incorrect or incomplete, the employer could be penalized $280 per return. It should be noted that this penalty would apply twice to the same Form 1095-C, once for the Form 1095-C that is furnished to the employee and once for the Form 1095-C that is submitted to the IRS for a total of $560.

The chart below details the cost an employer could incur depending on the percentage of its Forms 1095-C that are filed incorrectly or incompletely. While the chart only discusses the penalty under IRC section 6721, if the IRS were to aggressively penalize an employer, the penalty could be doubled by the IRS by utilizing the penalty under IRC section 6722. The column labeled “# of Forms 1095-C” states the number of Forms 1095-C filed by the employer. The columns labeled with a “x%” state the presumed number of Forms 1095-C that are hypothetically filed incorrectly or incompletely. The dollar figure in the chart states the hypothetical penalty.

As the chart above displays, an employer who submits 1,000 Forms 1095-C to the IRS with 10 percent of the Forms 1095-C being incorrect could be subject to a penalty of $28,000 under IRC section 6721. Additionally, that employer could be subject to a separate $28,000 penalty for furnishing incorrect Forms 1095-C to employees under IRC section 6722. Many employers and service providers in the ACA space have submitted Forms 1095-C to the IRS that have a much higher error rate than 10 percent in previous years. Consequently, it is easy to envision staggering penalties under IRC sections 6721 and 6722 if the IRS stringently enforces these penalties. As a result, employers must be confident that the information reported to the IRS on the Forms 1094-C and 1095-C is complete, meticulous and error free in order to avoid IRS penalties.

Additionally, for the first time in ACA reporting history the IRS appears set on keeping the deadline of January 31, 2022 to furnish the Forms 1095-C to employees. The 2021 draft instructions provide guidance on how an employer can request a 30 day extension. This extension is not automatically granted and therefore should not be relied upon by employers.

Two other small changes were made in the draft instructions to the Forms 1094-C and 1095-C. First, the maximum penalty under IRC sections 6721 and 6722 increased from $3,392,000 in 2020 to $3,426,000 in 2021. Second, two new codes were added for individual coverage health reimbursement arrangements (ICHRAs). Each new code involves employers who offered ICHRAs to the employee and the employee’s spouse.

• Code 1T – Individual coverage HRA offered to employee and spouse (no dependents) with affordability determined using employee’s primary residence location ZIP code.

• Code 1U – Individual Coverage HRA offered to employee and spouse (not dependents) using employee’s primary employment site ZIP code affordability safe harbor.

Since both new codes deal with ICHRAs and both should never be used, as the new codes do not offer coverage to dependent children, these new codes will have little impact on employers. Any employer who is using an ICHRA as part of their ACA strategy should be utilizing codes 1M, 1N, 1P, or 1Q depending on who in the employee’s family is eligible to utilize the ICHRA.

We anticipate the final instructions will be released any week with minimal, if any, changes compared to the draft instructions. While it is still possible the IRS may release a Notice extending the good-faith efforts relief to 2021 reporting and extend the due date to furnish the Forms 1095-C to full-time employees, employers should not rely on such a Notice this year. As a result, it is essential that employers make sure that every line 14 and 16 code combination submitted to the IRS is error free. 

Affordable Percentage Will Shrink for Employer Health Coverage in 2022

New Guidance Delays Some Key CAA and Other Health Benefit Effective Dates

New regulatory guidance from three federal agencies that enforce private-sector benefits laws will make employers’ daunting 2021 health benefit to-do lists slightly—but only slightly—more manageable heading into 2022.

Most importantly, the frequently asked questions (FAQ) guidance delays several of the most challenging 2021 and 2022 compliance requirements under the Consolidated Appropriations Act, 2021 (CAA) and the Patient Protection and Affordable Care Act (ACA): so-called “advanced explanations of benefits” (EOBs) providing good-faith estimates of the out-of-pocket costs for scheduled medical services; a “price comparison tool” to enable participants to compare cost-sharing amounts for specific network providers; extensive drug cost information that was to have been reported to the federal regulators in December 2021; and public pricing disclosures related to in-network rates, out-of-network allowed costs, and prescription drug prices.

The FAQ guidance, issued August 20, 2021, by the U.S. Department of Labor, U.S. Department of Health and Human Services, and U.S. Department of the Treasury, also provides some relief or useful clarifications related to other key 2021 health benefit compliance items for employers, including gag clauses, identification cards, continuity-of-care requirements, and provider directories.

The FAQ guidance neither delays nor provides other relief related to the new surprise medical billing requirements under the No Surprises Act, which was enacted as part of the CAA and is set to take effect January 1, 2022, or the Mental Health Parity and Addiction Equity Act “comparative analysis” required by the CAA, which is already in effect.

Here is a summary of the key employer takeaways in the new FAQ guidance.

Advanced EOBs

Under the No Surprises Act, plans are required to provide good-faith estimates of expected provider charges for a specific scheduled service, along with good-faith estimates of the cost sharing that would apply to a participant, and the amount already incurred toward any financial responsibility limits. This was initially set to take effect January 1, 2022, but the guidance indicates that the agencies will defer enforcement until regulations are issued on these plan disclosures and the disclosures required by medical providers. (Question 6)

Price Comparison Tool and Public Price Disclosures

Under the No Surprises Act, plans are required to offer online tools and phone support to enable participants to compare cost-sharing amounts for specific network providers in a specific region. Separately, under the ACA, plans are required to offer three “machine-readable files” on a public website covering in-network rates, out-of-network allowable amounts, and prescription drug prices. Both the No Surprises Act and ACA requirements were set to take effect on January 1, 2022. The guidance delays the effective date of the No Surprises Act requirements to January 1, 2023, and the ACA in-network and out-of-network requirements to July 1, 2022. The ACA prescription drug requirement is delayed until the agencies issue regulations on the matter. (Questions 1-3)

Drug Cost Reporting

The CAA requires employer plans to report very detailed prescription drug cost information to the agencies, including the 50 most commonly covered drugs per plan, the 50 most expensive drugs per plan, and the total health spending for each plan broken out into specific categories. The initial reports were to be provided to the agencies by December 27, 2021, and then by June 1, 2022. The agencies will defer enforcement related to the 2021 and 2022 reports until they issue further guidance, though the agencies “strongly encourage plans” to get ready to report 2020 and 2021 plan year data no later than December 27, 2022. (Question 12)

Gag Clauses

Under the CAA, plans cannot enter into network or other agreements that would prevent them from making available provider-specific cost or quality-of-care information to providers or participants, electronically accessing de-identified claims and encounter information for each participant (consistent with privacy laws), or sharing either of those types of information with business associates. Plans have to attest to the agencies each year that they have no such clauses in their agreements. This requirement took effect on enactment of the CAA on December 27, 2020, and is not changed by the FAQ guidance. The agencies have indicated that additional guidance is forthcoming on how plans will attest to their compliance. (Question 7)

Insurance Cards

Under the No Surprises Act, plans have to update physical or electronic insurance cards to include network and out-of-network deductibles and out-of-pocket limits and consumer assistance contact information. This is set to take effect on January 1, 2022, a date unchanged by the FAQ guidance. The guidance does clarify, though, that the agencies will consider both data actually on the cards and data “made available through information that is provided on the ID card.” (Question 4)

Continuity of Care

Under the No Surprises Act, when a provider or network contract is terminated, plans have to take steps to protect hospitalized or other continuing care patients. This requirement will take effect on January 1, 2022. The guidance clarifies that the agencies intend to issue formal regulations on this requirement, but will not do so before the effective date. Until such regulations take effect, plans will be held to a good-faith compliance standard. (Question 10)

Provider Directories

Under the No Surprises Act, plans are required to take several steps to improve provider directories, such as updating them at least every 90 days, and more promptly notifying participants about whether a particular provider is in the network. These requirements will take effect on January 1, 2022, and the guidance does not change that. The agencies do indicate that they intend to issue formal regulations in the future, and may also have specific additional guidance on required disclosure of balance billing information. (Questions 8 and 9)

Smaller Employers Beware: IRS Doesn’t Want Paper ACA Filings Next Year (or Paper W-2 and Similar Filings)

The IRS has proposed two significant changes to electronic filing requirements for various information returns including not just the Forms 1094-C and 1095-C filings required of many employers by the Affordable Care Act (ACA), but common payee statements like Forms W-2 and 1099. If the proposed changes are finalized – we expect that to happen by this autumn – all but the very smallest employers will be required to file these forms electronically for filing due dates falling in 2022 and beyond. Employers wishing to engage an ACA reporting and/or payroll vendor to comply with electronic filings requirements will need to begin making changes to comply.

Background: ACA filings and electronic media

Under current e-filing rules, an employer subject to the ACA’s employer mandate is not required to file its Forms 1094-C and 1095-C electronically unless the employer is submitting at least 250 of the forms to the IRS. When determining whether the employer crosses the 250-return threshold, the employer separately counts the different returns it files, such as its Forms 1094-C and 1095-C, and even payee statements like Forms W-2, 1099, etc.

For example, an employer with 150 ACA full-time employees and 50 part-time employees over the course of the calendar year may be required to file 200 Forms W-2, 150 Forms 1095-C and one Form 1094-C, but because the employer is not filing at least 250 of the same form, the employer is not required to file any of the forms electronically.

The proposed rule: Nearly every employer would be in the e-filing boat

The new IRS proposal would drop the 250-return threshold to 100 for returns due in 2022 (and to 10 for returns due in 2023 or later years), and, most significantly, would require employers to aggregate the number of different returns it files when determining whether the 250-return threshold is reached. In the example above, for returns due in 2022, the employer would aggregate the 200 Forms W-2, 150 Forms 1095-C and the one Form 1094-C, for a total of 351 returns. Because the aggregated total of returns due from the employer is at least 250, all the returns must be filed electronically.

Lining up an ACA (and perhaps payroll) reporting vendor

Many employers that until now have filed their Forms 1094-C/1095-C, W-2, 1099, etc. on paper will be required – assuming the IRS shortly finalizes the newly proposed regulations – to submit those forms to the IRS electronically for filings due in 2022. Almost all employers will be required to e-file by 2023. For employers wishing to engage a vendor to conduct electronic filing – particularly those for whom the e-filing status quo will change next year – the search for an e-filing vendor should begin. 

No More Surprises? New Rule on Surprise Medical Bills

The U.S. Departments of Health and Human Services, Labor, and Treasury, and the Office of Personnel Management have issued “Requirements Related to Surprise Billing; Part I,” an interim final rule to implement the No Surprises Act passed late last year as part of the Consolidated Appropriations Act, 2021. The No Surprises Act, which generally becomes effective January 1, 2022, minimizes the amounts that participants in a group health plan must pay for medical care received from physicians or other healthcare providers who are, unknown to the participant, outside of the plan’s network; this is referred to as “surprise billing.” In addition, the No Surprises Act limits situations in which out-of-network providers can bill directly for amounts not paid for by the group health plan; this is referred to as “balance billing.”

The rule implements portions of the No Surprises Act by placing restrictions on group health plans, as well as health insurance issuers, physicians, and other healthcare providers. The rule requires plans to treat certain services from out-of-network providers and facilities as in-network in applying cost-sharing, such as deductibles and co-insurance. Thus, the participant will have the same out-of-pockets costs for such services regardless of whether the facility or provider has a contract with the plan. Similarly, the rule forbids out-of-network providers from billing participants for amounts in excess of the participant’s in-network cost-sharing responsibility, subject to the participant’s ability to waive this protection in some situations.

Specifically, among other provisions, the rule implements certain consumer protection provisions of the No Surprises Act as follows:

• Bans high out-of-network cost-sharing for emergency services. A group health plan must treat emergency services provided by out-of-network providers or facilities as in-network for applying cost-sharing requirements. Out-of-network providers and facilities are prohibited from billing a participant for amounts more than the participant’s in-network cost-sharing responsibility, and this prohibition generally cannot be waived by a participant. However, such providers and facilities may balance bill participants for post-stabilization services if they provide notice to the participant and obtain his or her consent to be balance billed before such services are provided.

• Bans out-of-network charges for ancillary care at an in-network hospital or ambulatory surgery center. If a hospital or ambulatory surgery center is in-network, a group health plan must treat anesthesia, pathology, radiology, laboratory, neonatology, assistant surgeon, hospitalist, or intensivist services as in-network when applying cost-sharing requirements. Such providers are prohibited from billing a participant for amounts more than the participant’s in-network cost-sharing responsibility, and this prohibition cannot be waived by a participant.

• Bans other out-of-network charges without advance notice. If a hospital or ambulatory surgery center is in-network and services other than those described above are provided, a group health plan must still treat the services as in-network when applying cost-sharing requirements. However, the out-of-network providers may balance bill the participant for these services if they provide notice to the participant and obtain his or her consent to be balance billed before the services are provided.

The issuance of the rule is accompanied by fact sheets for health plans and issuers, as well as consumers. The Department of Labor has also issued instructions and a model notice that plans and issuers could use to meet requirements to make certain information publicly available, post on a public website, and include in each explanation of benefits.

The rule will take effect for healthcare providers and facilities on January 1, 2022. For group health plans, health insurance issuers, and Federal Employees Health Benefits Program carriers, the provisions will take effect for plan, policy, or contract years beginning on or after January 1, 2022. Comments on the rule are due within 60 days after the rule is published in the Federal Register. It is likely that this rule will generate significant comments. The rule may also change in response to those comments.

What A Big Surprise Before My Eyes… Advanced EOBs Coming in 2022

The No Surprises Act (part of the Consolidated Appropriations Act introduced earlier this year) is poised to eliminate some of the surprises that group health plan participants encounter from unexpected charges.  One way the new legislation intends to accomplish this is with Advanced Explanation of Benefits (EOBs).

Beginning in plan years that start on or after January 1, 2022, group health plans are required to provide, upon request, what the No Surprises Act refers to as an Advanced EOB.  This new form is required to provide information on the estimated costs of procedures and services, especially the additional costs of non-participating providers.  The request for an Advanced EOB may be made by the participant or their representative and must include the billing and diagnostic codes for the anticipated services.  The Advanced EOB must then be provided within one business day of request for scheduled procedures (three business days if the request is made at least 10 business days before the scheduled procedure). 

The Advanced EOB must include:

• Whether or not the provider or facility is in-network, and if so, the contracted rate under the plan for the provider or service. If the provider/facility is not in-network, the Advanced EOB must include a description on how the participant can obtain information on in-network providers/facilities.
• A good faith estimate of the cost of the services to be provided, based on the billing and diagnostic codes provided, that must include:
  • the total cost for the services;
  • the amount of participant cost-sharing;
  • the accrued amounts already met by the participant towards deductibles and out-of-pocket maximums (as of the date of the notice); and
  • the amount the plan is responsible for paying.
• A disclaimer regarding the requirement to obtain any medical management techniques for services subject to medical management techniques (such as prior authorization);
• A disclaimer that the information is only an estimate and subject to change and any other information or disclaimer the plan determines is appropriate.

Plan Sponsors will be relying on insurers and TPAs to meet this new responsibility.  But, in the meantime, what should Plan Sponsors be doing so that they’re not surprised come January 1st?

• Amend Summary Plan Descriptions to include a description of the right to request an Advanced EOB and the steps needed to do so;
• Ask insurers/TPAs what steps they are taking to get ready for Advanced EOB requirements; and
• Review service provider agreements and revise as necessary to include responsibility for providing Advanced EOBs (and responsibility for any penalties and/or costs that may be associated with missing deadlines or providing egregiously incorrect information).