Health Plan Compliance Issues to Consider

Many employers are in the final stages of designing their 2016 health benefit programs, contribution strategies, vendor terms, and employee communications.

To assist in this effort, Mercer has recently published the top 10 compliance-related issues with respect to the Patient Protection and Affordable Care Act (ACA) and other health benefit regulations employers should address in planning for the upcoming year.

At the top of the list are refining the ACA employer shared-responsibility (ESR) strategy and getting ready for ESR reporting. Employers should ensure that their intended goal of avoiding or paying ESR assessments for 2016 coverage is supported by coverage offers, administrative and recordkeeping processes, and benefit documents.

Judy Bauserman, interim leader of the Washington Resource Group and partner at Mercer in Washington, D.C., notes that 2015 was the first year employers were required to offer coverage meeting certain requirements for employees or to pay assessments. “The rules are complex and the definition of full-time employee is not intuitive, so employers have had a challenge determining who full-time employees are,” she tells PLANSPONSOR. “The law requires coverage of a certain percent of the employee population and employers have had to learn how to determine that and make sure changes in the employee population will not trip them up.” Bauserman says employers should have figured most of this out for 2015, but many employers will still be refining strategies in 2016.

Bauserman adds that reports are due for the first time in the beginning of 2016 to both the Internal Revenue Service (IRS) and employees related to health coverage in 2015. Employers will need to arrange data sources, systems, and administrative processes to collect all information about enrollees with minimum essential coverage (MEC), full-time employees, and coverage offers needed for reporting. They should also create a process for correcting any erroneous IRS filings and personal statements.

“The reporting is complicated and electronic filing is required,” she says. “Employers have to figure out how to develop software themselves or what vendors can do this for them. Some employers are well on their way and many have outsourced, but what providers are developing and what employers are expecting don’t always align properly.”

Bauserman says these first two items have been so all-consuming for employers this year, but there are many other issues related to health benefits on which to focus.

According to Mercer’s list, employers need to ensure “non-grandfathered” group health plans comply with the final ACA rules and recent guidance about cost-free preventive services. Plans must cover certain services that are considered preventive services without any cost-sharing. Bauserman explains that the government updates these on an ongoing basis, so employers should make sure they are aware of changes, and they should have procedures in place to stop covering services that go off the list. She warns that there is no set timing on when the government makes updates; whenever the scientific body addressing an issue publishes a new recommendation and the government changes its list, the employer has until the beginning of plan year following a year after the recommendation is made to change its coverage.                 

There are other ACA reporting and disclosure requirements. Mercer suggests employers review delivery operations for summaries of benefits and coverage (SBCs) and watch for revised SBC templates. Employers should also prepare for round two of online submission and payment of ACA’s reinsurance fee. Bauserman says SBCs describe the terms of a plan in fairly generic terms, and are supposed to allow employees to compare plans since all are presented in the same format. “Regulators are working on revising templates and anticipate releasing a revised version in January,” she says. “Employers will have to adapt to changes in 2016. She also reminds plan sponsors that in the last quarter of this year, the second round of reinsurance fee submissions is due, with the covered-lives count delivered by November 15, and initial payments dues soon thereafter.

In planning for 2016, employers need to decide whether to permit midyear changes to cafeteria plan elections for either or both of the status-change events in IRS Notice 2014-55. Bauserman explains that one event is when an employee changes from full-time to part-time status and wishes to cease coverage under the employer’s plan. The second event is when an employee wants to drop coverage in the employer plan to purchase in a public exchange either at annual enrollment of upon an event that allows enrollment in a public exchange.

Employers may have been hoping that regulators would make changes to the ACA’s out-of-pocket maximum rules, but the Department of Health and Human Services says no changes are planned, according to Bauserman. Employers should verify that self-only and other (e.g., family) coverage tiers in “non-grandfathered” plans meet ACA’s 2016 out-of-pocket (OOP) limits for in-network care, and confirm that family coverage also satisfies ACA’s self-only OOP limit for each enrollee.

Mercer recommends employers review fixed-indemnity and supplemental health insurance policies to ensure they qualify as excepted benefits under the ACA and the Health Insurance Portability and Accountability Act (HIPAA). Bauserman explains that these are types of policies that pay a certain amount for critical illness or a certain amount for each day in the hospital. If they are structured properly they are considered excepted benefits, meaning they don’t have to comply with all of ACA health reform requirements for plan design, such as annual and lifetime dollar limits and the obligation to cover preventative services. She says a few pieces of guidance have been issued to limit the types of plans that can be considered excepted. For example, a fixed-indemnity policy must pay on a per period basis not a per service basis—a new requirement. “Some plans had to be amended for some provisions, and some rules are not clear, so employers should not assume their policy is an excepted benefit. They should talk to their insurance company about changes,” Bauserman suggests.

In June, the U.S. Supreme Court ruled that under the Fourteenth Amendment, states cannot deny same-gender couples the right to marry, and it is illegal for states to not recognize same-gender marriages performed in another state. Employers should assess how this decision affects their benefit programs and employment policies. 

The Supreme Court decision will affect who is eligible for health benefits, Bauserman says, particularly if employers have a self-funded plan and do not already offer coverage to same-gender spouses. In addition, employers that have been offering domestic-partner coverage are considering whether to drop it or not. According to Bauserman, this consideration is more complex for multi-national employers if they have employees working in a country where same-gender marriage is not recognized.

Mental health parity rules should also be a focus for health benefits plan sponsors. Mercer suggests making sure that plan designs and operations provide parity between medical/surgical and mental health/substance use disorder (MH/SUD) coverage. Federal audits of health plans now evaluate compliance with the final Mental Health Parity and Addiction Equity Act (MHPAEA) rules that took effect in 2015.

Bauserman says that although the rules have been in effect for most plans for several months already, they are complicated, particularly in the way plan sponsors must evaluate non-quantitative rules such as pre-authorization for mental services but not others. “Parity rules require processes to set those types of limitations to be comparable; the analysis to figure that out is difficult and time-consuming,” she states. “Many employers don’t have the bandwidth to focus on these rules, but litigation, Department of Labor (DOL) audit activity and state attorney general efforts are increasing, so the risk associated with plan design features that may not provide full parity will be greater in the coming years.” She adds that some plan provisions that may have been common are being called into question, so employers will have to turn their attention to whether design changes are needed.

In April, the U.S. Equal Employment Opportunity Commission (EEOC) published a Notice of Proposed Rulemaking (NPRM) describing how Title I of the Americans with Disabilities Act (ADA) applies to employer wellness programs that are part of group health plans. Mercer suggests that employers review employee wellness programs against the proposed EEOC rules requiring voluntary participation and restricting incentives for completing health risk assessments and/or biomedical screenings, and they should be prepared to make changes after EEOC finalizes these rules.