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June 22, 2020
In the last couple weeks, the government agencies (the EEOC, IRS, DOL and HHS) have held public meetings, released proposed and final rules, and updated forms and fees affecting employee benefit offerings. The following items are summarized below:
The PCORI fee for plan years ending in 2019 is due no later than July 31st, 2020.
The IRS provided indexed PCORI fees for plan years ending in October – December 2019 in IRS Notice 2020-44 (https://www.irs.gov/pub/irs-drop/n-20-44.pdf). The payment amounts are as follows:
The updated Form 720 can be found here – https://www.irs.gov/pub/irs-pdf/f720.pdf.
The IRS released proposed rules indicating that most direct primary care (DPC) arrangements and health care sharing ministries will be considered “medical coverage” or “medical insurance” and thereby meet the definition of a qualifying medical expense under §213(d). While these IRS rules clarify some of the tax issues surrounding these arrangements, they do not address other compliance questions such as ERISA applicability, COBRA, ACA compliance, and others. Note that these rules will not take effect until after the final rules are published.
In the proposed rules, a DPC arrangement is defined as “a contract between an individual and one or more primary care physicians under which the physician or physicians agree to provide medical care…for a fixed annual or periodic fee without billing a third party.” However, there are many different arrangements that fall under the category of a DPC arrangement, so the IRS guidance also requests comments on this definition, suggesting that it may need to be expanded to include individuals beyond just physicians (e.g. nurse practitioners, physician assistants or dentists).
Whether a DPC arrangement is considered “medical care” or “medical insurance” depends upon the specifics of the arrangement. It seems likely that the final rule will provide more guidance on how to categorize a DPC arrangement and will clarify whether the expenses are reimbursable only by an HRA, or by an HSA and health FSA as well. An HRA is permitted to reimburse any qualifying medical expenses, while HSAs and health FSAs are permitted to reimburse all qualifying medical expenses except for medical insurance premiums.
The proposed regulations define a health care sharing ministry as an organization:
The proposed rules indicate that a health care sharing ministry is “medical insurance,” and therefore the costs are reimbursable by an HRA, but not by an HSA or health FSA (because HSAs and health FSAs are not permitted to reimburse insurance premiums).
The proposed rules also clarify that participation in a DPC arrangement or health care sharing ministry will generally make individuals ineligible to contribute to an HSA. To be HSA-eligible, an individual must be enrolled in a qualifying HDHP and not have any other disqualifying coverage. A health care sharing ministry will always be considered disqualifying coverage, and most DPC arrangements (including those paid for by the employer) will also be disqualifying coverage.
Wellness programs involving disability-related questions (e.g. health risk assessment) or medical testing or examinations (e.g. biometric screening or annual physical) must comply with EEOC wellness rules to avoid violating the Americans with Disabilities Act (ADA). The original rules provided by the EEOC in 2016 indicated that an incentive limit of 30% or less was acceptable. However, following a court decision challenging whether the 30% limit was “voluntary,” the EEOC vacated the incentive limit without providing any definitive guidance in regard to what level of incentive, if any, could be provided with violating the ADA.
Just last week, the EEOC held a remote public meeting during which the Commission voted in favor of approving new proposed rules. The proposed rules will likely be released for public comment soon. During the public meeting, the Commission described two key components of the proposed rule:
We will get more details once the proposed rules are officially released, but in the meantime, wellness programs with an incentive of 30% or less tied to the group health plan (e.g. reduction in cost-sharing or monthly premium) are likely acceptable. These rules will not be effective until after the proposed rules are released, time for public comment is provided, and the final rules are published.
§1557, added by the ACA, prohibits covered entities from discriminating against individuals on account of race, color, national origin, sex, age, and disability.
Late last week, HHS finalized rules that roll back several of the requirements of previous agency guidance interpreting §1557 requirements. The following changes were made:
Employers sometimes question whether plans are required to provide coverage for conditions relating to gender identity such as gender dysphoria. To the extent that §1557 was previously interpreted to require such coverage by covered entities, that may no longer be the case. However, whether a plan is subject to §1557 requirements or not, employers considering excluding such coverage should consider whether doing so would violate broader federal and state nondiscrimination requirements (e.g. Title VII), especially in light of the most recent Supreme Court decision regarding the definition of sex for purposes of employment discrimination.
The views and opinions expressed within are those of the author(s) and do not necessarily reflect the official policy or position of Parker, Smith & Feek. While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it.