In response to the National Emergency declared by President Trump on 3/1/2020, the DOL’s Employee Benefits Security Administration (EBSA) is taking efforts to help workers who have had a reduction in hours and could be at risk for unnecessary high costs.
What?
COBRA timeframes, Special Enrollment timeframes, as well as Claim Procedure and External Review Process timeframes, have all been extended after the Outbreak Period ends, which is determined to be 60 days after the National Emergency is declared over. As of this writing, the National Emergency has been ordered through 7/25/2020. That means the Outbreak Period would end on 9/23/2020. So essentially, the “Qualifying event” is the date the Outbreak Period ends for these timeframes, not the date of the actual event or loss of coverage.
For example, in the case of a termination of employment on 3/15/2020, that employee would have until 11/22/2020 to elect COBRA. Remember, the final date to elect COBRA is a 60 day extension from the end of the Outbreak period. For an employee who previously declined group health plan coverage and had a baby on April 17, 2020, they have a special enrollment period and have until October 23, 2020 (30 days after Outbreak period), to enroll herself and her child in coverage. These extensions are effective back to 3/1/2020.
Who?
The Joint Notice technically applies only to plans subject to ERISA and the Code. However, it appears HHS intends to adopt a policy to extend similar timeframes to non-federal governmental group health plans and insurers. HHS encourages governmental group health plans to provide similar relief.
When?
These extensions are unprecedented, and employers and plan administrators will need to take steps to ensure that participants understand the new rules. Employers and plan administrators may want to consider supplementing and modifying COBRA forms, special enrollment notices, and summary plan descriptions, to reflect these extensions.
Although it is not required, we feel it is the responsibility of the plan administrators to notify plan participants and their beneficiaries of their COBRA rights. Below you can find model notices from the DOL, along with an FAQ, that you can use to help communicate with your employees. You should work with your COBRA vendor to help notify plan participants that would be eligible. Please note that providing these notices will NOT necessarily protect you from potential COBRA related litigation.
Effective
January 1, 2020, employers can establish two new Health Reimbursement Accounts
(HRAs) — an Individual Coverage HRA (ICHRA) and an Excepted Benefit HRA (EBHRA).
This could be a significant development for employers sponsoring employee
health benefit plans — both insured and self-funded.
Questions Employers Should Ask
Employers should
consider the following questions regarding the impact of the new rules.
Will the
new HRA rules change how your organization delivers health benefits? If
so, how?
Do you
believe these new rules will facilitate more job mobility? If so, how will that
trend impact your ability to retain talent, or attract new associates?
How Did We Get to this Point?
You may recall that
in October 2018, proposed regulations were released by the Departments of
Health and Human Services, Labor, and Treasury to enable employers of all sizes
to use a Health Reimbursement Arrangement (HRA) to finance individually-purchased
health insurance on a tax-preferred basis.
Comments on the
proposed regulations were due by December 28, 2018. In June 2019, final
regulations were released and generally apply for plan years beginning on or
after January 1, 2020.
Individuals can
currently purchase health insurance from either the ACA Marketplace (i.e. the
public “exchange”) or directly from an insurer.
Employers with less than 50 full-time employees can currently reimburse an employee for individual health insurance premiums using a Qualified Small Employer HRA (QSEHRA). In 2019, the amounts an employer can contribute to a QSEHRA are limited to $5,150 for Single coverage or $10,450 for Family coverage.
What Changed?
Effective January 1,
2020, two new HRAs can be established.
Individual Coverage HRA (ICHRA)
As long as the individual purchases ACA-compliant health
coverage, the employer (of any size) can reimburse the employee for those
premiums subject to these rules:
The employer cannot also offer a traditional group health plan in addition to the ICHRA
Offering an ICHRA will satisfy the ACA employer mandate under Section 4980H so long as a) the affordability threshold is met; and b) the employer makes the ICHRA available to entire classes of employees, such as FTEs, or PTEs. However, there are minimum class sizes:
For those employers with less than 100 employees: minimum class of 10 employees
For employers with 100-200 employees: the minimum class is 10% of total employees
For employers with more than 200 employees: the minimum class is 20 employees
A notice of the availability of an ICHRA must be provided at least 90 days prior to the beginning of the plan year (a model notice accompanied the final regulations)
When an employee or their dependent gains access to an ICHRA, a Special Enrollment Period applies
The amounts contributed to the HRA must not favor highly compensated individuals—there are only two instances in which the employer’s HRA contributions can vary: a) older employees may receive higher amounts (but not to exceed a 3:1 age band); or b) employees with greater numbers of covered dependents may receive a higher amount
There is
no limit on the amount the employer can contribute to the ICHRA and
The
amount of the ICHRA reimbursement is not taxable to the employee
Excepted Benefit HRA (EBHRA)
Those employers
wishing to continue offering traditional health benefits (including PPOs, HMOs,
or qualified high deductible health plan/HSA plans) can offer an EBHRA to pay:
Out-of-pocket
medical expenses
Dental
benefits
Vision
benefits or
STLDI
premiums
Although these
reimbursements are also tax-exempt, the amount that can be contributed by the
employer is limited to $1,800 per year. This amount will be indexed for
inflation after 2020.
An employee could
opt-out of his/her employer-sponsored health plan and still be eligible for the
EBHRA. However, an employee cannot have both an ICHRA and
an EBHRA.
Now What?
A defined
contribution (DC) approach to employee health benefits is not new. A few
years ago, private health insurance exchanges were a hot topic. However,
they did not catch on for active employees, primarily because the insured
models were inefficient due to state premium taxes, ACA market share fees and
broker commissions. In addition, they had an unsatisfactory record in
providing long-term rate stability.
The ICHRA promises
to be more viable, assuming the individual health insurance market remains
healthy. Remember, the ACA still applies to the individual market in that
a person can’t be denied coverage due to pre-existing condition, or have his/her
premiums increased because of health status.
When HIPAA was
enacted in 1996, a key objective was to facilitate portability of health
insurance and end “job lock”. However, that goal was not fulfilled in an
employer-sponsored health benefits environment. But with individually-purchased
health insurance, portability is achieved. As a result, will employees be more
apt to change jobs and either look for employers with ICHRAs or negotiate
additional compensation to pay their health insurance premiums? If so, how
does this impact an employer’s employment value proposition, or their ability
to retain qualified talent?
Although the Trump
Administration believes these HRA rules will appeal mostly to small-to-medium
employers, it is likely larger employers looking for an effective DC approach
to health benefits will take a serious look at ICHRAs. Although health
care cost trends have moderated somewhat in recent years, they are still accelerating
at three times inflation. Any opportunity to budget health benefit
expenses on the same basis as wage and salary increases is very important to
all businesses.
Findley will
continue to follow HRA developments. To learn more about how these rules impact
your future health care strategy, appropriate employee communications, or
suitable HRA administrative arrangements, contact your Findley consultant or
Bruce Davis at bruce.davis@findley.com or 419. 327.4133.
