Employee Benefit Rules – the Gifts That Keep on Giving
As employers look back at 2023 and ahead to 2024, there are so many compliance-related items to consider relating to their employee benefit plans. The rules employers are supposed to be complying with keep growing and growing – they literally are the gifts that keep on giving (and changing). Here are some of the key items to consider at this time:
- Health Plans: Gag-Clause Attestation Due December 31, 2023. Self-funded group health plans are now prohibited from entering into an agreement with a health care provider, network, third-party administrator, or other service provider offering access to a network of providers that would directly or indirectly restrict a plan from providing provider-specific cost or quality of care information or data, through a consumer engagement tool or any other means, to (a) referring providers, (b) the plan sponsor, (c) participants, (d) beneficiaries, (e) enrollees, or (f) individuals eligible to become participants, beneficiaries, or enrollees of the plan. There are other related requirements. Plans must now annually submit an attestation of compliance with these requirements to the Departments of Labor, Health and Human Services, and the Treasury (collectively, the Departments). The Centers for Medicare & Medicaid Services is collecting these on behalf of the Departments. The first gag-clause attestation is due December 31, 2023. Employers and/or their plan fiduciaries need to ensure this is handled asap.
- Retirement Plans: Increased Cash-Out Limit Option January 1. Many defined contribution retirement plans – such as 401(k) plans – automatically cash out small account balances when a participant terminates employment. Currently, an employer can force a terminated participant with a balance of $5,000 or less to take a distribution. Effective January 1, 2024, plan sponsors can optionally push this to $7,000 – thereby forcing out more small account balances. Terminated participants with small account balances often create “missing participant” issues later when plan administrators cannot find them. Employers and/or their plan fiduciaries should consider now whether they want to increase this cash-out limit.
- Health Plans: Mental Health Parity Comparative Analysis Required Now. The mental health parity rules are intended to provide people covered by group health plans that include mental health/substance-use-disorder benefits access to treatment for covered mental health conditions (such as anxiety or post-traumatic stress disorder) or substance use disorders that is comparable to treatment for covered medical/surgical conditions (such as diabetes or heart disease). When the relevant statute was amended a few years ago, a provision was added that requires plans to perform and document a comparative analyses of the design and application of their non-quantitative treatment limitations (e.g., pre-certification or medical management standards) to demonstrate parity and provide those analyses to the Secretaries of the Departments upon request. Employers and/or their plan fiduciaries are supposed to have already done this but this required comparative analysis is very difficult to put together and few plans have done it and/or done it correctly. On July 25, 2023, new proposed rules were issued that, if finalized, will add a number of additional related rules and will only give plans a minimum of 10 business days to respond to a request from the government for the comparative analysis. These proposed rules will likely be finalized in 2024 and will likely be effective in 2025. Employers and/or their plan fiduciaries should be working on this right now. This is absolutely critical as the comparative analysis will likely be a focus of any government inquiry or audit now and going forward. It is very unlikely that your consultant and/or TPA will do this for you without you asking and pushing.
- Retirement Plans: Student Loan Matching Contributions Allowed January 1. For plan years beginning after December 31, 2023, an employer may “match” a qualified student loan payment made by an employee outside of a qualified retirement plan up to a certain limit. The employee must certify that the payment on the loan was made. This is an optional addition to a retirement plan. While employers and/or their plan fiduciaries can technically consider adding this to their plan for 2024, very few have done so so far. Employers and/or their plan fiduciaries should discuss this optional feature with their consultant and/or recordkeeper.
- Health Plans: PBM Legislation Increasing Costs on Employers and Employees. Many states have passed legislation regulating pharmacy benefit managers (PBMs), the third-party intermediaries between pharmacies and health plans. Arkansas and Oklahoma have been on the front lines of this issue. For example, in 2019, the Oklahoma legislature unanimously passed the Patient’s Right to Pharmacy Choice Act. While the Act was allegedly intended to target PBMs, it also resulted in significant cost shifting to self-funded employers and their employees. On August 15, 2023, a panel of the United States Court of Appeals for the Tenth Circuit ruled in part that several of the Act’s key provisions – including a provision that effectively prohibited an employer from incentivizing an employee to use one pharmacy (e.g., mail order) instead of another (e.g., retail) – are preempted by the Employee Retirement Income Security Act of 1974 (ERISA). The Oklahoma Insurance Commissioner then filed a petition for rehearing en banc asking for reconsideration. On December 12, 2023, the Tenth Circuit entered an order stating: “The petition for rehearing en banc was transmitted to all of the judges of the court who are in regular active service. As no member of the panel and no judge in regular active service on the court requested that the court be polled, that petition is also denied.” (emphasis added). Thus, the challenged provisions of the Act remain preempted, which is great news for employers and employees. New proposed legislation is being considered at the federal level, and in many states, that could have a significant impact on employers and employees. Employers and/or their plan fiduciaries should keep a watchful eye on all proposed “PBM” legislation.
- Health Plans: Prescription Drug Reporting Due June 1. The Internal Revenue Code, ERISA, and the Public Health Service Act were all previously amended to require group health plans to report certain information related to prescription drugs and other health care expenditures. This information includes, among other things, general information regarding the plan; the 50 most-frequently-dispensed brand prescription drugs; the 50 most-costly prescription drugs by total annual spending; and the 50 prescription drugs with the greatest increase in plan expenditures over the preceding plan year. The deadline to report for the 2023 calendar year is June 1, 2024. Employers and/or their plan fiduciaries must keep this deadline on their radar and ensure that their plan meets the deadline.
- Health Plans: Online Shopping Tool Required for All Covered Items and Services Effective January 1. The transparency in coverage final rules require non-grandfathered group health plans to make cost-sharing information available to participants, beneficiaries, and enrollees through an internet-based self-service tool and in paper form, upon request. This information was first required to be made available for plan years beginning on or after January 1, 2023, with respect to the 500 items and services identified by the Departments. Effective for plan years beginning on or after January 1, 2024, this online shopping tool is required to include all covered items and services (not just 500 as it was in 2023). Employers and/or their plan fiduciaries should ensure their plan is compliant with this requirement.
- Health Plans: Prescription Drug Machine-Readable Files. The transparency in coverage final rules also require non-grandfathered group health plans to disclose on a public website information regarding in-network provider rates for covered items and services, out-of-network allowed amounts and billed charges for covered items and services, and negotiated rates and historical net prices for covered prescription drugs in three separate machine-readable files. The machine-readable file requirements are applicable for plan years beginning on or after January 1, 2022. On August 20, 2021, the Departments released FAQs announcing the deferral of enforcement regarding certain requirements, including the requirement that plans publish machine-readable files related to prescription drugs, pending further consideration by the Departments. On September 27, 2023, the Departments announced that they have rescinded their prior decision/policy of deferring enforcement of the prescription drug machine-readable file requirement. The Departments will now address enforcement decisions on a case-by-case basis, as the facts and circumstances warrant, and also intend to develop technical requirements and an implementation timeline in future guidance. Thus, employers and/or their plan fiduciaries need to be talking to their consultant and PBM now about compliance with the machine-readable file requirement related to prescription drugs.
Brandon Long is an experienced, AV Preeminent-rated employee benefits attorney and a member of McAfee & Taft's Employee Benefits and Executive Compensation Group.
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