PPI in the News Compliance Corner - August 18, 2022 Archive
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On August 1, 2022, the IRS published Revenue Procedure 2022-34, which provides the 2023 premium tax credit (PTC) table and the employer contribution percentage requirements applicable for plan years beginning after December 31, 2022.

The ACA's employer-shared responsibility rules (also known as the "employer mandate") require an employer to provide affordable, minimum value coverage to its full-time employees. The IRS' required contribution percentage is used to determine whether an employer-sponsored health plan offers an individual "affordable" coverage, and the affordability percentage is adjusted for inflation each year. In addition, the ACA also provides a refundable PTC, based on household income, to help individuals and families afford health insurance through insurance exchanges. The IRS provides the PTC percentage table for individuals to calculate their PTC.

In 2023, the ACA's affordability percentage will decrease to 9.12% (down from 9.61% in 2022). For the employer mandate and affordability, this means that an employee's required premium contribution toward single-only coverage under an employer-sponsored group health plan can be no more than 9.12% of the federal poverty line or of an employee's W-2 income or rate of pay (depending on which of the three affordability safe harbors the employer is relying upon).

The 2023 PTC table used to determine an individual's eligibility for PTCs is provided below:

The revenue procedure is effective for plan years beginning on and after December 31, 2022.

Employers should be mindful of the upcoming 2023 affordability percentages and make sure that the premium offerings for 2023 remain affordable for full-time employees to avoid any employer-shared responsibility penalties.

Revenue Procedure 2022-34 »

The US Department of Health and Human Services (HHS) has released additional guidance to help plans and insurers navigate independent dispute resolution (IDR) when processing claims covered by the No Surprises Act (NSA) balance billing protections. The NSA passed as part of the Consolidated Appropriations Act, 2021, includes surprise billing protections for emergency services, air ambulance services and non-emergency services delivered by nonparticipating providers at in-network facilities. Participant cost-sharing for covered items and services in these protected categories is limited to the in-network cost-sharing amount. The plan or insurer must then address the remaining balance of the bill with the provider. If the parties cannot agree on payment after a 30-day open negotiation period, the IDR process can be initiated to determine the out-of-network rate.

To that end, the chart helps determine whether a claim is subject to the federal IDR process or a state process. The federal IDR process applies to self-insured plans except where the plan has opted into a specified state law process, or an All-Payer Model Agreement applies. As to fully insured plans, while the federal IDR process applies in most states and US territories, a state IDR process applies in Alaska, Georgia, Maine and Michigan. In 18 other states, a “bifurcated process” applies. Plans and insurers in bifurcated process states should consult with the proper state authorities regarding which process applies to a particular payment dispute. When the plan or issuer and provider or facility are in different states, the federal IDR process will apply.

Applicable IDR Process Chart »

For further information on the federal IDR process, please see our Compliance Corner articles on the following dates: February 3, 2022, February 17, 2022, April 26, 2022, and June 23, 2022.

On August 3, 2022, President Biden issued an executive order that provides more direction to the Department of Health and Human Services (HHS) to provide access to reproductive healthcare services in response to the recent Dobbs decision. The order defines “reproductive healthcare services” to mean medical, surgical, counseling, or referral services relating to the human reproductive system, including services relating to pregnancy or the termination of a pregnancy.

First, the order instructs HHS to consider actions that advance access to reproductive healthcare services, including, to the extent permitted by federal law, through Medicaid for patients traveling across state lines for medical care.

Second, the order instructs HHS to promote the understanding of and compliance with federal nondiscrimination laws by healthcare providers that receive federal financial assistance. Such actions may include:

• (a) Providing technical assistance for healthcare providers that have questions concerning their obligations under federal nondiscrimination laws.
• (b) Convening healthcare providers to provide information on their obligations under federal nondiscrimination laws and the potential consequences of noncompliance.
• (c) Issuing additional guidance, or taking other action as appropriate, in response to any complaints or other reports of noncompliance with federal nondiscrimination laws.

Third, the order instructs HHS to evaluate the adequacy of data collection and analysis at HHS agencies, such as the Centers for Disease Control and the National Institutes of Health, in accurately measuring the effect of access to reproductive healthcare on maternal health outcomes and other health outcomes. Based upon the results of that evaluation, HHS must then take steps to improve those efforts.

Note that it is up to HHS to carry out the directions provided by this order, so some of these instructions may take time to implement. Although the order does not address employer requirements directly, employers should be aware of the administration’s efforts to protect access to reproductive healthcare.

Executive Order on Securing Access to Reproductive and Other Healthcare Services »

On August 3, 2022, the IRS issued Notice 2022-33, which extends deadlines for amending nongovernmental qualified retirement plans, 403(b) plans, and IRAs to reflect changes under the SECURE Act and certain provisions of the CARES Act. Absent this relief, the plan amendments would have been required by the last day of the first plan year ending on or after January 1, 2022.

Specifically, the notice extends plan amendment deadlines for changes made by the Secure Act until December 31, 2025. Additionally, the extension applies to optional provisions of the Miners Act that allow defined benefit pension plans to lower the minimum age for in-service distributions from age 62 to 59 1/2. The guidance also postpones the amendment deadlines to adopt CARES Act relief for 2020 required minimum distributions until December 31, 2025. However, plans that adopted CARES Act optional loan and/or withdrawal provisions still must be amended by the original deadline (i.e., December 31, 2022, for a calendar year plan).

The IRS also indicated that it intends to issue SECURE Act guidance with the 2023 Required Amendment list. This will enable plan sponsors to adopt necessary amendments simultaneously.

Employers that sponsor retirement plans should be aware of the extensions and consult with their document providers for further information.

IRS Notice 2022-33 »

The ACA requires medical insurance companies to pay annual Medical Loss Ratio (MLR) rebates to policyholders by September 30, 2022, if the insurer spent less than a specified minimum percentage of the premium on medical claims and certain healthcare quality improvement initiatives in the prior calendar year.

Depending on the employer and plan type, insurers will issue MLR rebates in the form of a premium credit or reduction (sometimes through a so-called “premium holiday”), or a lump-sum premium refund (via cash or check). Employers are then tasked with determining the proper use of an MLR rebate, which often requires distribution of a pro-rata share of the rebate to eligible plan participants within three months of the employer’s receipt of the rebate from the insurer.

Plan documents often include rules for treating these rebates, so it is a good idea to consult those documents when determining how to distribute them. When it comes to plans subject to ERISA, in which the employer’s contributions towards coverage comes from general assets (i.e., most plans), applicable guidance provides four steps to follow to determine how to use the rebate.

The first is that the employer must determine the plan(s) to which the MLR rebate applies. MLR rebates generally apply only to a specific plan option (such as an HMO, PPO or an HDHP). The insurer’s MLR rebate notice will specify the plan(s) to which it applies, and only the participants who contribute to the cost of the named plan option(s) should benefit from the rebate. If a rebate relates to two or more separate plan options with different MLR rebate factors, then the rebate should be applied separately by the employer based on the separate plan-specific calculations of the insurer. Remember that using an MLR rebate generated by one plan for the benefit of another plan’s participants or for the benefit of nonparticipants is likely a breach of fiduciary duty.

Second, the employer must determine the portion of the rebate that relates to employee contributions versus employer contributions toward the plan’s premium. The portion of the MLR rebate that relates to employee contributions is generally considered an ERISA “plan asset,” which may only be used for the benefit of plan participants (and any related administrative expenses). For example, if plan participants contribute 30% of the premium, then 30% of the rebate must be used for the benefit of plan participants. The employer may keep the portion of the rebate that relates to employer contributions; the employer portion of the rebate is simply returned to the employer’s general assets. However, if the plan pays benefits through a trust and the plan or trust is the policyholder, the entire refund amount would be considered plan assets and must be used for the benefit of participants.

Third, the employer must determine the participants to whom it will distribute the rebate. This is often the step that generates the most controversy. Note that DOL guidance gives employers some discretion when allocating the rebate among plan participants, provided employers follow ERISA’s general standards of fiduciary conduct. In determining whether to distribute the MLR rebate to all participants who contributed to the plan during the reporting year or only to current plan participants, and whether to weight the rebate ratably according to each participant’s actual contribution amount or to distribute the rebate in equal dollar amounts to all eligible plan participants, employers can follow these general guidelines:

• The allocation method must be reasonable, fair and objective (but does not have to reflect each participant’s actual contribution cost). This means that the employer could choose to provide a flat amount rebate to each participant or a percentage of each participant’s actual contribution, so long as the method is reasonable, fair and objective.
• If the administrative cost of distributing rebates to former participants approximates or exceeds the amount of the rebate, the employer may limit rebates to current participants only. The DOL guidelines do not specify what constitutes an administrative cost. It is generally accepted that these costs include only “hard costs” (such as the cost of producing a check and the related postage and handling) and do not include the effort to track down former participants. Note that the opportunity to exclude participants from MLR rebate actions based on a cost/benefit analysis pertains only to former participants and does not also apply to current participants.

Finally, the employer must determine the method for distributing the rebate to plan participants. MLR regulations provide four possible methods for distributing the rebate to plan participants:

• Premium reductions for plan participants.
• Benefit enhancements to the plan (adding a benefit or service).
• A refund back to plan participants, either through cash or check.
• A premium holiday (either by the employer passing along the insurer’s premium holiday or creating its own).

If it is not cost effective to distribute refunds to participants (both current and former) because the refund amounts approximate the distribution costs or would result in a taxable event to the participants, the employer may use the plan asset portion of the MLR rebate for other permissible plan purposes, such as making near-future premium reductions, premium holidays or benefit enhancements to the plan. Note that any such benefit plan enhancements must be implemented in full within the three-month time limit for using MLR rebates.

In any event, the employer should document the method it used for administering an MLR rebate according to the four steps outlined above or per the controlling ERISA plan document, as applicable. It should maintain records of all per-participant premium reductions or refunds according to its record retention policy. In general, records related to ERISA plans should be retained for eight years.

For more information on MLR rebates, download our white paper on this topic.