Quarterly Insurance Brief: July 2020
Updated: Sep 15, 2020
In this Issue:
Brown & Brown Relief Center, Section 1557 Discrimination Update, 2021 Benefits Update, 2019 PCORI Fees
Brown & Brown Relief Center
The Brown & Brown Relief Center is available to anyone in need, whether you are a Brown & Brown customer or not. Through the Relief Center website, companies and their current or former employees can access products and services at a discount. The Relief Center includes Financial Wellness services by Prudential*, including financial tools and strategies to help navigate these challenging times.
How to Access the Relief Center
Visit bbinsrelief.benefithub.com to explore discounts, products, and services including the following:
Health and behavioral health services
Family care & child learning
Home & home office discounts
Food & food delivery services
General household & office supplies
Questions or issues? Email the Brown & Brown Employee Benefits Technology Center at [email protected].
COVID-19 Resource Center
Brown & Brown has also developed a reference site with numerous resources to help companies navigate employee benefit and insurance issues related to COVID-19. This site can be found at bbinsurance.com/covid19.
Section 1557 Discrimination Update
On June 12, 2020, the Department of Health and Human Services (HHS) finalized the rule implementing Section 1557 of the Affordable Care Act (ACA). This new rule is set to go into effect on August 18, 2020. The final rule amends the previous regulations in several ways including the following:
Redefining the definition of discrimination “on the basis of sex” so that it no longer includes gender identity or termination of pregnancy.
Eliminating the requirement that health plans distribute non-discrimination notices and “taglines.”
Revising the current “one-size-fits-all” enforcement structure to ensure that enforcement differs for discrimination claims that have different underlying bases (i.e. sex, race, disability).
Revising the scope of HHS’ enforcement of Section 1557, for certain entities, so that the rules only apply to those activities of the entity that are funded by HHS.
Adding a regulatory provision requiring that Section 1557 enforcement be consistent with the “healthcare conscience protections” of the ACA, which protect health care providers who refuse to perform, accommodate, or assist with certain health care services on religious or moral grounds.
Shortly after the final rule was announced the U.S Supreme Court ruled in Bostock v. Clayton County that Title VII’s prohibition of employment-based discrimination “because of sex” applies to discrimination based on sexual orientation or transgender status. These employment protections and access to healthcare coverage are governed by separate statutes. Therefore, the Supreme Court ruling does not override the administration’s Final Rule. Historically the Supreme Court has looked to Title VII and its interpretations when determining decisions on Title IX provisions so the Supreme Court’s decision this week could indicate their opinion in any future litigation regarding Section 1557. Two lawsuits have already been filed, one by Lambda Legal and the other by the Human Rights Campaign (HRC). The HRC lawsuit names the HHS and its Secretary, Alex Azar II.
For more information, please see the HHS Frequently Asked Questions (FAQ) Factsheet.
2021 Benefits Updates
The IRS has released the 2021 cost-of-living adjustments affecting HSAs and HDHPs. Here are the details:
HSA Contribution Limits. The 2021 annual HSA contribution limit for individuals with self-only HDHP coverage is $3,600 ($50 increase from 2020), and the limit for individu-als with family HDHP coverage is $7,200 ($100 increase from 2020).
HDHP Minimum Required Deductibles. The 2021 minimum annual deductible for self-only HDHP coverage is $1,400 (no change from 2020), and the minimum annual deductible for family HDHP coverage is $2,800 (no change from 2020).
HDHP Out-of-Pocket Maximums. The 2021 maximum limit on out-of-pocket expenses (including items such as deductibles, co-payments, and co-insurance, but not premiums) for self-only HDHP coverage is $7,000 ($100 increase from 2020), and the limit for family HDHP coverage is $14,000 ($200 increase from 2020).
Post-55 “Catch-Up” Limit: $1000
Health and Human Services has released regulations with the 2021 final benefit and payment parameters and other insurance market and Exchange-related regulations, including the 2021 annual cost-sharing limits. Here are the highlights:
Annual Cost-Sharing Limits. The maximum annual limits on cost-sharing for 2021 will increase to $8,550 for self-only coverage and $17,100 for other than self-only coverage (up from $8,150 and $16,300 for 2020).
Drug Manufacturer Coupons. The regulations include changes regarding how direct drug manufacturer support, including coupons, may accrue toward the annual limits on cost-sharing. Under the regulations, HHS will permit, but not require, plans and insurers to count direct support offered to enrollees by drug manufacturers for specific prescription drugs toward the annual limits on cost-sharing, regardless of whether a generic equivalent is available. However, HHS did not finalize a change it had proposed to its interpretation of the definition of cost-sharing (see our article), advising that it will not interpret the definition of cost-sharing to exclude expenditures covered by drug manufacturer coupons or other drug manufacturer direct support. Acknowledging that its proposed interpretation would be inconsistent with the flexibility it is seeking to provide, HHS advised that if these amounts are counted toward the annual limit on cost-sharing, the value of direct drug manufacturer support will be considered part of the overall charges incurred by the enrollee. If not counted toward the cost-sharing limit, the value will be considered a reduction in the amount that the enrollee incurs or is required to pay.
Medical Loss Ratio (MLR) Calculation. In an effort to lower premiums by ensuring they reflect the full benefit of prescription drug rebates, the regulations amend (effective with the 2022 MLR reporting year) current MLR rules to require insurers to deduct from incurred claims not only prescription drug rebates received by the insurer, but also price concessions received and retained by the insurer, as well as prescription drug rebates and other price concessions received and retained by any entity providing pharmacy benefit management services to the insurer.
2019 PCORI Fees
The Patient Centered Outcomes and Research Institute (PCORI) fee, also known as the Comparative Effectiveness Research (CER) fee, is due annually using IRS form 720 by July 31.
Background: This fee applies to both insured and self-insured medical plans. It is based on the number of covered lives—employees and dependents. For insured plans, the fee is paid by the carrier and included in premiums. For self-insured plans, the employer plan sponsor must calculate and pay the fee. The fee is based on the average number of covered lives for the 12-month policy period that ended in the preceding year.
Rates: For policies ending between January 1, 2019 and September 30, 2019, the cost is $2.45 per person. For policies ending between October 1, 2019 and December 31, 2019 the cost is $2.54 per person.
Counting Methods: Because of the anticipated termination of the PCORI fee prior to its extension, plan sponsors may not have anticipated the need to identify the number of covered lives for plan years ending on or after Oct. 1, 2019, and before Oct. 1, 2020. Thus, IRS Notice 2020-44 provides transition relief for this period. Plan sponsors may use any reasonable method for calculating the average number of covered lives for this period, in addition to the methods outlined below, as long as it is applied consistently for the duration of the Plan year.
Actual Count Method: Plan sponsors calculate the sum of lives covered for each day of the plan year and then divide that sum by the number of days in the year. This count includes employees plus dependents.
Snapshot Method: Plan sponsors calculate the sum of the lives covered on one or more dates in each quarter of the plan year and then divide that number by the number of dates used. Each date must be within three days of the date used for the first quarter. E.g. If using February 15th (1st quarter), then must use a day between May 12-18 (2nd quarter). Under this method, the plan sponsor can count the number of covered employees and multiply that number by 2.35 to obtain the spouse and dependents count.
The 5500 Method: By adding the total number of employee lives on the first day of the plan year to the total number of lives on the last day of the plan year as reported on the Form 5500 (without dividing by 2). Can only use this method if the 5500 for that plan year is filed no later than the due date for the fee imposed for that plan year. E.g. Calendar plan year 2018, the 5500 is due by 7/31/19, and the employer obtains an automatic 2.5 month extension. The employer is not eligible to use the Form 5500 method because they did not file by the 7/31 fee due date.
Health Reimbursement Account (HRA): An HRA that only provides excepted benefits (e.g. dental and vision) is excluded. In the event the employer has a self-funded medical plan and a medical HRA with the same Plan year, the fee will only be payable on the self-funded medical plan. If the employer has a fully insured medical plan and a HRA covering the same group, the fee is payable on the HRA. Most HRA third-party administrators are able to provide the covered lives count required to make payment.
Retiree Coverage: The fee applies to health insurance policies and self-insured health plans that provide accident and health coverage to retirees, including retiree-only policies and plans.
COBRA Continuation Coverage: COBRA and similar continuation coverage (Cal-COBRA, for example) must be taken into account when determining the PCORI fee.
The information the newsletter is intended to provide accurate and authoritative information on legislative and market news. It is distributed with the understanding that Brown & Brown is not rendering tax or legal advice. Employers should consult their attorneys or tax advisors for specific compliance information and assistance.