The Consolidated Appropriations Act (the “Act’”) was signed into law by the president on December 27, 2020, and includes significant health and welfare benefits provisions that affect group health plans and health insurance issuers. The Act is the most comprehensive single piece of legislation to impact group health plans since the Affordable Care Act (ACA).
This On the Subject summarizes the key provisions of the Act that apply to group health and welfare plan sponsors. The Act includes provisions regarding (1) flexible spending arrangements; (2) surprise medical billing; (3) mental health and substance use disorder benefits; (4) pharmacy benefits reporting; and (5) disclosure of service provider compensation. (For a summary of the Act’s key health provisions, please click here.)
Flexible Spending Arrangements (FSAs)
FSA plan sponsors are allowed, but not required, to amend their cafeteria plans to take advantage of the new relief provisions described below by the end of the first calendar year beginning after the end of the plan year in which the change takes effect. (For example, if mid-year election changes are allowed in 2021, a calendar year plan must be amended by December 31, 2022.) In addition, the plan must be operated in accordance with the amendment terms as of the effective date of the amendment.
- Mid-Year Election Changes
For plan years ending in 2021, a plan may allow participants to change the number of their contributions to healthcare or dependent care FSAs prospectively, without regard to any change in status.
- Carryover of Account Balances
A plan may allow participants to carry over any unused amounts or contributions remaining in a healthcare or dependent care FSA from the 2020 plan year to the 2021 plan year, or the 2021 plan year to the 2022 plan year.
- Grace Period Extension
Both healthcare and dependent care FSAs may extend their grace period to 12 months after the end of the plan year, for plan years ending in 2020 or 2021.
- Unused Healthcare FSA Account Balances
A plan may allow an employee who terminates their participation in a healthcare FSA during the 2020 or 2021 calendar year to continue to receive reimbursements from unused account balances through the end of the plan year in which such participation ended (including any applicable grace period).
- Dependent Care FSA & Aging Out
For dependents who aged out of eligibility during the pandemic (specifically, during the last plan year with a regular enrollment period ending on or before January 31, 2020), plans may extend the maximum age from 13 to 14.
Surprise Medical Billing Provisions
For plan years beginning on or after January 1, 2022, employer-sponsored medical plans that cover emergency services must offer services without requiring preauthorization determinations, regardless of whether a health provider that delivers the services is a participating provider in the plan’s network or the emergency facility. Such non-ancillary services now must be furnished without coverage limits or requirements that are more stringent than those for emergency services delivered by participating providers. In addition, any cost-sharing requirements for out-of-network services may not be greater than those for services provided by in-network providers. The Act also prohibits air ambulance services from balance billing individuals covered by a group health plan or individual or group health insurance.
- Out-of-Network Rate Determinations: Independent Dispute Resolution Process
Like many state surprise billing laws, the Act includes open negotiation and independent dispute resolution (IDR) procedures for use by plans or insurers and non-participating providers to determine the amount that will be paid for a provided service. The parties can participate in a 30-day open negotiation process that begins on the day the provider receives the plan’s initial payment (or denial notice) regarding the service.
If the plan or insurer and provider cannot agree to a payment amount during the 30-day open negotiation period, either party may then invoke the IDR process by providing notice to the other party and the Department of Health and Human Services (HHS). If this occurs, a “certified IDR entity” will determine the payment amount for the service. Under implementing guidance concerning the IDR process (to be issued in the future), there will be criteria for jointly determining the payment amounts as to multiple disputed items (for example, if services are related to treatment for a similar condition). More detail is expected in the form of agency guidance.
- Health Plan Advance Estimates
Beginning in 2022, if a participant schedules a healthcare service to be performed by a provider with sufficient advance notice, the provider must provide advance notice to the health plan. Group health plans and insurers that receive the provider’s notice regarding a participant’s scheduled service must furnish the participant a notice—in most cases, within one business day of receiving the provider’s notice—that contains specified coverage information.
For example, the plan’s notice to a participant must state whether the provider is a participating provider as to the scheduled service and, if so, the contracted rate for the service based on relevant billing and diagnostic codes. The notice must also include a good faith estimate of how much the health plan will pay for the scheduled services.
- External Review and Surprise Medical Billing
On or before January 1, 2022, health plans must apply the external review procedures of the ACA to benefit denials relating to the Act’s surprise medical billing provisions.
Mental Health and Substance Use Disorder Benefits
Plan sponsors that provide both medical/surgical benefits and mental health or substance use disorder benefits and that impose non-quantitative treatment limitations (NQTLs) on mental health or substance use disorder benefits are required to perform and document comparative analyses of the design and application of NQTLs. Beginning February 10, 2021, these analyses must be made available to the Department of Labor (DOL), HHS or Internal Revenue Service (IRS) upon request. Employers whose plans impose separate limitations on mental health benefits (e.g., precertification) will need to test the program and keep a copy of the current test in the event one of the agencies requests it.
Pharmacy Benefits Reporting
By December 27, 2021, and annually thereafter, plans will be required to submit to the DOL, HHS and IRS a report with specific information on the benefits paid for prescription drugs provided to participants and beneficiaries. As a result, plan sponsors must immediately begin recording:
The dates of the plan year, number of participants and beneficiaries, and each state in which coverage is offered;
- The 50 brand prescription drugs most frequently dispensed and the total number of paid claims for each drug;
- The 50 most costly prescription drugs by total annual spending;
- The 50 prescription drugs with the greatest increase in plan expenditures over the preceding plan year;
- Average monthly premium paid by the employer and by participants and beneficiaries; and
- Impact of rebates, fees and other remuneration paid by drug manufacturers on premiums and out-of-pocket costs.
Disclosure of Service Provider Compensation
Service providers for welfare plans were temporarily exempt from the Employee Retirement Income Security Act (ERISA) requirement to provide fee disclosures to plan fiduciaries; however, the Act ends that reprieve and extends the fee disclosure rules to group health plans. Service providers for group health plans must comply with fee disclosure rules effective December 27, 2021. Such fee disclosure potentially applies to any group health plan vendors—including brokers and consultants—that provide services to a group health plan funded with plan assets.
Plan sponsors will need to take action to comply with the Act. Most immediately, plan sponsors should determine whether to incorporate the elective FSA relief provisions of the Act for the 2021 plan year and communicate any such changes to participants as soon as possible. In addition, plan sponsors should begin collecting appropriate data to ensure compliance with required reporting under the Act that must occur before the end of 2021. In addition, plan sponsors should update plan documents and summary plan descriptions for a number of the Act’s provisions, as well as related forthcoming guidance. Finally, plan sponsors should review their vendor agreements, such as administrative services agreements and pharmacy benefit manager agreements, to ensure that any data collection and reporting provisions are consistent with the requirements of the Act.
We anticipate that most employer-sponsored group health plans will attempt to meet the Act’s disclosure obligations (some of which appear to overlap with the obligations of the recently issued price transparency regulations) by using third-party providers on behalf of the plan. Plan sponsors should exercise caution when contracting with third-party providers to fulfill their obligations under the Act, to ensure both that they are able to meet the heavy burdens of the Act and that the plan and company are sufficiently indemnified and protected should the provider fall short.