Last week’s government funding bill = Significant new benefit plan rules

U.S. Congress Building

On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law. The Act imposes significant new requirements on employee benefit plans. Coupled with other rules and legal developments already set to go into effect, the Act will create significant compliance obligations for employers and their benefit plans.[1]

Here is a summary of some, but not all, of the new requirements.

Health & Welfare Plans

  1. 2021 – New flexibility for FSAs. Under the Act, employers have new flexibility related to their flexible spending accounts, including the option to allow:
    • FSA carryovers. Any unused funds for 2020 or 2021 may be carried over to the next plan year.
    • FSA extended grace period. For FSAs that have a grace period, the grace period can be extended for up to 12 months (instead of 2.5 months).
    • Terminated employees. If an employee terminates participation in the FSA in 2020 or 2021, the plan may reimburse expenses through the end of that year (plus any grace period).
    • Change in status. For plan years ending in 2021, employees may make any prospective changes in their FSA contributions without regard to a change in status.
  2. 2021 – Group health plans cannot agree to gag clauses. The Act requires health plans to ensure they have access to certain cost and quality-of-care information. Plans may not agree to restrictions in contracts (e.g., network contracts) that would prevent them from accessing cost and quality-of-care information and providing that information to participants. This includes provider-specific cost and quality-of-care data.
  3. 2021 – Mental health – nonquantitative treatment limitations. Beginning next month, group health plans that provide mental health or substance use disorder benefits that impose non-quantitative treatment limitations on such benefits are required to perform and document comparative analysis of the design and application of these limitations, and make these available to the Department of Labor, Health and Human Services, or Internal Revenue Service upon request.
  4. 2022 – Broker and consultant disclosure of compensation. The Act imposes significant new fee disclosure requirements on health brokers and consultants. For many years now, retirement plan service providers have been required to disclose every source of direct and indirect compensation, while the health plan industry has in many ways been the Wild West. The Act imposes new disclosure requirements on health plan brokers and consultants, which should give employers better information to ensure no conflicts of interest.
  5. 2022 – Pharmacy benefit and drug cost reporting. Group health plans will be required to annually report certain information related to prescription drugs to the Secretaries of HHS, DOL, and Treasury. For example, plans will be required to report the top 50 brand prescription drugs paid for by the plan and the total number of paid claims for each such drug. Initially, the report will be required within one year of December 27, 2020, but then it will be required each year by June 1.
  6. 2022 – Identification card cost-sharing disclosure. For plan years beginning January 1, 2022, plans must include certain information on any identification card issued to participants and beneficiaries, including any deductible or out-of-pocket maximum.
  7. 2022 – “No Surprises Act” = new surprise billing rules. For plan years beginning January 1, 2022, the Act imposes significant new surprise-billing requirements that apply to group health plans, including self-funded plans. Surprise billing often occurs when the patient (a) receives care from an out-of-network provider at an in-network facility; or (b) receives care at an out-of-network facility, such as in an emergency.
    • Emergency services. In emergency situations, the Act is generally intended to ensure that patients (i) have the same cost-sharing responsibility for services, regardless of whether the provider is in-network; and (ii) receive credit towards any applicable in-network deductible or out-of-pocket maximums for these payments. Under the Act, if a group health plan covers any benefits with respect to services in an emergency department of a hospital or emergency services in an independent freestanding emergency department, the plan must cover the emergency services:
      1. without the need for prior authorization;
      2. regardless of whether the provider is a participating provider or a participating emergency facility; and
      3. if the services are provided by an out-of-network provider or facility, (a) the services will be provided without any extra prior-authorization requirements, (b) the cost-sharing requirement cannot be greater than the requirement that would apply if the services were provided by a participating provider or facility, (c) the cost-sharing requirement is calculated as if the total amount had been charged by a participating provider or facility, (d) initial payment must be made within 30 days after receiving the bill, and then total payment must be made within certain timing rules, (e) any cost-sharing payments made by the participant must be counted toward any in-network deductible or out-of-pocket maximums, in the same manner as if they were made for services furnished by an in-network provider.
    • Non-emergency situations. In non-emergency situations, the facility or provider will have to (i) give the patient a detailed notice and an estimate of charges, generally 72 hours prior to the patient receiving out-of-network services; and (ii) obtain the patient’s consent to receive out-of-network care. Without this notice and consent, the patient can only be held liable for their in-network cost-sharing amount.
      • Health plan disclosure. It appears that plans that receive the provider’s estimate will then have to quickly give the participant a notice with certain information including a good-faith estimate of how much the plan will pay.
      • Air ambulance surprise billing. Surprise billing requirements that are similar to those described above will apply to air ambulance providers.

Retirement Plans

  • Partial plan termination relief. Generally, if the sponsor of a retirement plan terminates 20% of plan participants during a plan year, the plan must 100% vest all affected participants. The Act provides that a plan will not be treated as having a partial plan termination during any plan year that includes the period beginning March 13, 2020, and ending March 31, 2021, if the number of active participants in the plan covered on March 31, 2021, is at least 80% of the number on March 13, 2020. Thus, if an employer terminated part of its workforce in 2020 but its business rebounded and the employer rehired participants, such employer’s plan will not have had a partial plan termination.

[1] The Act is 5,593 PDF pages of new rules, most of which were signed into law on December 27, 2020 (approximately one week ago). This summary was put together quickly to give us a roadmap of the new requirements and may need to be later corrected or adjusted.