PPI in the News Compliance Corner - December 22, 2022 Archive
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On December 12, 2022, CMS released the proposed Notice of Benefit and Payment Parameters Rule for 2024. This notice is issued annually preceding the applicable benefit year and, once final, adopts certain changes. Additionally, CMS issued Premium Adjustment Percentage and related guidance to inform the payment parameters for the 2024 benefit year.

While the proposed rule primarily impacts the individual market and the Exchange, CMS’s Premium Adjustment Percentage and related guidance addresses certain ACA provisions and related topics that impact employer-sponsored group health plans. Below are the highlights.

Annual Cost-Sharing Limits. The ACA requires non-grandfathered group health plans to comply with an out-of-pocket maximum on expenses for essential health benefits. CMS proposes that this maximum annual limitation on cost-sharing for 2024 will be $6,350 for self-only coverage and $18,900 for family coverage (a decrease from $9,100 and $18,200 for self-only/family coverage respectively in 2023).

Premium Adjustment Percentage and Payment Parameters. CMS announced the premium adjustment percentage for the 2024 benefit year as 1.4899877401 ($7,292/$4,894), which indicates an increase in employer-sponsored insurance premiums of approximately 48.9% over the period from 2013 to 2023. This premium adjustment percentage will also be used to index the Employer Mandate provision’s penalty amounts for the 2024 benefit year.

The proposed Notice of Benefit and Payment Parameters Rule provides proposed Marketplace requirements, including network adequacy, updated standardized plan options and fair marketing standards. For further details of the specific proposed rule, please refer to the CMS Notice.

Once the regulations are finalized, employers should review them and implement any changes needed for the 2024 plan year.

Proposed Rule »
Fact Sheet »
2024 PAPI Parameters Guidance »

On December 15, 2022, the IRS published a final rule regarding information reporting under Sections 6055 and 6056. We covered the 2021 proposed rule in the December 8, 2021, edition of Compliance Corner.

Extension of Time to Furnish Forms

The final rule provides an automatic 30-day extension each year to Forms 1095-B or 1095-C distribution to individuals. Therefore, employers must distribute Forms 1095-B or 1095-C to individuals by March 2, 2022, instead of the original January 31, 2022, deadline. If March 2 falls on a weekend or legal holiday, statements must be furnished by the next business day to be considered timely. The final rule follows the 2021 proposed rule with the exception that the proposed regulations mentioned an automatic extension not to exceed 30 days, and the final rule added clarification by expressly stating an automatic 30-day extension.

Keep in mind the final rule does not impact the deadlines to file the forms with the IRS. Those deadlines remain February 28 (if filing by mail) and March 31 (if filing electronically).

Elimination of Good Faith Relief

The final rule also affirms the elimination of good faith relief from penalties if entities could show they made good faith efforts to comply with reporting requirements. This relief was intended to be transitional, and both the proposed rule and final rule confirm the elimination of good faith relief.

Alternative Method to Furnish 1095-B

Form 1095-B reports the months in which an individual is enrolled in qualified health coverage. The final rule allows an entity to use an alternative manner to furnish this information to covered individuals. The entity must post a “clear and conspicuous notice on the entity’s website stating that responsible individuals may receive a copy of their statement upon request.” The notice must include an email address, physical address and telephone number an individual can use for questions or to request a statement.

It is important to remember that Form 1095-B is only used by small employers (those not subject to the employer mandate) who sponsor a self-insured medical plan, or by large employers who sponsor a self-insured plan and cover individuals who are not considered full-time employees.

Minimum Essential Coverage and Limited Medicaid Services

And lastly, the final rule reiterates that Medicaid plans that provide only COVID-19 testing and diagnostic services under the Families First Coronavirus Response Act (FFCRA) are not considered Minimum Essential Coverage (MEC) under a government-sponsored program.

Final Regulations on ACA Reporting »

The IRS recently released the final instructions for Forms 1094/1095-C and 1094/1095-B for the 2022 reporting year. With these final instructions, employers and insurers have all the IRS documents needed to complete the 2022 reporting.

The 2022 final instructions mostly mirror the draft instructions that were released in October. For more information about the draft instructions and general purposes of Forms 1094-B/C and 1095-B/C, see the article published in the October 25, 2022, edition of Compliance Corner.

The key change from prior years, and the draft instructions, is that the deadline for furnishing Forms 1095-B/C to individuals is permanently extended. Employers must distribute Forms 1095-B or 1095-C to individuals by March 2, 2022, instead of the original January 31, 2022, deadline (see our article in this edition of Compliance Corner). Keep in mind that the deadlines for employers to file the forms with the IRS remain the same. For filing by mail, the deadline is February 28, 2023, and the electronic filing deadline is March 31, 2023.

The good faith penalty relief for incorrect or incomplete information was eliminated permanently with the 2021 reporting year. Therefore, employers should focus on accuracy and thoroughly completing the forms. The penalty for failure to provide a correct form or statement in 2022 increased by $10 to $290 per form/statement.

Aside from the two changes noted above, the forms should be familiar to employers who have filed them in prior years. Employers should be aware of the updated forms and instructions headed into this next reporting year.

2022 Instructions for Forms 1094/1095-B »
2022 Instructions for Forms 1094/1095-C »

Congress recently passed the Respect for Marriage Act (RMA), which continues protections extended to same-sex and interracial marriages and repeals a provision of the Defense of Marriage Act (DOMA). DOMA contained a provision that stated that it did not require states to recognize same-sex marriage if that marriage was entered into in another state or treated as valid under other states’ laws. The RMA repeals that provision and prohibits states from denying the full faith and credit to any public act, record, or judicial proceeding of any other state pertaining to a marriage between two people on the basis of the sex, race, ethnicity or national origin of those people. In addition, a state may not deny a right or claim arising from such a marriage on the basis that such marriage would not be recognized under the law of that state on the basis of the sex, race, ethnicity, or national origin of those individuals. RMA also states that federal law recognizes any marriage between two people that is valid in the state into which it is entered.

The RMA does not require states to perform same-sex or interracial marriages. It explicitly states that it does not abrogate religious liberty or conscience protections that are otherwise available to individuals or organizations under the Constitution or federal law. The RMA does require states to recognize legal marriages performed in the past and in states where such marriages are legal. Accordingly, it does provide some certainty about this issue where recent Supreme Court opinions called it into question. The Dobbs case concerned abortion rights (see our article on the Dobbs opinion in the July 7, 2022 edition of Compliance Corner), but in a concurring opinion, Justice Thomas called for a re-examination of same-sex marriage using the same analytical framework used to overrule the case that provided for a right to abortion. The RMA is a response to that concurring opinion.

The direct impact of this decision on benefits is unknown at this time, as there has not been any regulatory guidance or amendments made to the current regulation in response to this statute. However, plan administrators may use this opportunity to review their plan documents and the definition of spouse in those documents, considering this federal recognition of same-sex marriage.

Respect for Marriage Act »

On December 8, 2022, the IRS released Revenue Ruling 2022-24, which provides covered compensation tables for the 2023 plan year. The tables can be used in determining benefits for qualified plans that use a permitted disparity formula for employer-provided contributions or benefits.

A permitted disparity contribution formula allows an employer to provide additional benefits to employees whose compensation exceeds certain levels, such as the Social Security wage base, without violating applicable nondiscrimination requirements. All employees receive employer-provided Social Security benefits based on their compensation up to the taxable wage base, but not on compensation beyond that level. Under the permitted disparity rules, an employer’s contribution formula can be integrated with Social Security to take this difference into account, within certain limits.

The regulations define covered compensation as the average of the taxable wage bases in effect for each calendar year during the 35-year period ending with the last day of the calendar year in which the employee reaches the Social Security retirement age. For purposes of determining covered compensation for the 2023 year, the taxable wage base is $160,200. To determine an employee’s covered compensation, a plan can use the IRS-provided tables listed in the Revenue Ruling, which are developed by rounding the actual amounts of covered compensation for different years of birth.

Employers who sponsor retirement plans that use a permitted disparity formula for employer contributions should be aware of the ruling and availability of the updated tables.

Revenue Ruling 2022-24 »

On December 7, 2022, the Pension Benefit Guarantee Corporation (PBGC) published a final rule amending the allocation of assets in single-employer plans. PBGC administers the pension plan termination insurance program that ERISA provides to defined benefit plans. The amended rule provides methods for valuing plan benefits when pension plans undergo distress or involuntary termination.

When PBGC involuntarily terminates an underfunded plan, the asset allocation rules determine the amount of the plan’s underfunding. As a part of that allocation, early retirement benefits are valued based on the annuity starting date or the expected retirement age. These final rules update the table that identifies expected early retirement ages for 2023.

Since this update is routine, PBGC has determined that public comment is unnecessary. Defined benefit plan sponsors should be aware of the changes.

Allocation of Assets in Single-Employer Plans; Valuation of Benefits and Assets; Expected Retirement Age »

On December 8, 2022, the DOL released informational copies of the 2022 Form 5500 Series Annual Return/Report. While the forms have not been finalized, they provide insight into the changes for plan year 2022.

Specifically, the informational copies of Form 5500 and its instructions reveal several changes to specific retirement filings. The Changes to Note section of the instructions mentions the following changes:

• New characteristics codes have been added to Form 5500, and technical changes have been made to the instructions for multiple-employer plans.
• Instructions now include the increased maximum civil penalties that can be imposed for failure to file.
• Schedule MB instructions have been revised to require an attachment and clarify and revise certain lines.
• Schedule R has been revised to require information to be reported on the plan’s highest contributors.
• Schedule SB has been updated to add a new line that requires an attachment of a projection of expected benefit payments.

The announcement also mentions that the DOL is modernizing the EFAST2 system by updating its website authentication process. Beginning January 1, 2023, new filers will have to use the unified login.gov single sign-on solution for US government websites. Existing filers will be able to use their existing login through August of 2023 but will have to use the new login.gov system beginning in September 2023.

Plan sponsors and administrators that are required to file Form 5500 should be aware of these changes.

Announcement »
Informational Form 5500 »
Informational Form 5500 Instructions »

Effective for plan years beginning on or after January 1, 2023, the Transparency in Coverage Final Rule (TiC) requires most group health plans and carriers to make personalized out-of-pocket cost information available to participants through an internet-based self-service tool or in paper format (upon request). The requirements do not apply to grandfathered plans, account-based plans (e.g., HRAs and FSAs) and excepted benefits (e.g., stand-alone dental and vision benefits).

The purpose of the self-service tool is to provide participants with real-time, accurate estimates of their cost-sharing liability for healthcare items and services from different providers. This information may help participants to understand how costs for covered items and services are determined by their plan and to shop and compare healthcare costs prior to receiving care.

Specifically, the internet self-service tool must provide a participant with the following information:

• An estimate of the participant’s cost-sharing liability for a requested covered item or service.
• Accumulated amounts to date that the participant has incurred towards the plan deductible and out-of-pocket limit.
• The in-network (INN) rate (expressed as a dollar amount) and if applicable, the fee schedule for an INN provider’s services.
• The out-of-network (OON) allowed amount if the request is for an OON provider’s services.
• If the request involves a bundled payment arrangement, a list of the items and services for which the cost-sharing information is being disclosed.
• Any prerequisites (e.g., pre-authorization, concurrent review, step therapy or first-fail protocols) applicable to an item or service.

The information must be provided in plain language and be accompanied by a notice that reflects certain disclosures. Amongst other items, the notice must indicate that the cost-sharing is only an estimate, not a guarantee of coverage, and that participants may still be balanced billed for OON services.

Participants must be able to conduct a search using the tool by entering a descriptive term (e.g., rapid flu test) or billing code, provider name and other factors relevant to determine cost-sharing (e.g., facility name, service location). Where there are multiple results for in-network services, the search must allow participants to reorder information by geographic proximity and estimated cost-sharing amount. If information is requested in paper form, it must be mailed not later than two business days after the request is received.

Importantly, the TiC provided phased-in effective dates for the internet self-service tool requirement. An initial list of 500 “shoppable” items and services must be made available through the tool for plan years beginning on or after January 1, 2023. The current list of 500 items and services is available on the CMS website: CMS 500 Items and Services List for Price Comparison Tool. The list will be updated quarterly. For plan years beginning on or after January 1, 2024, all items and services, including prescription drugs and durable medical equipment (e.g., blood testing strips for diabetics), must be made available.

Employers that sponsor group health plans should consult with their carriers or third-party administrators (TPAs) to ensure the implementation of the self-service tool requirement, including any instructional materials for participants, is on schedule. Like the other TiC requirement (the machine-readable file disclosures), it is anticipated that employers will contract with their carriers and TPAs to assist with fulfilling the requirements. Fully insured plans can contract with their carrier to assume liability for the tool disclosures. Self-insured plans can contract with TPAs or other vendors but remain responsible for satisfying the requirements. It is advisable for employers to engage counsel in the contracting process.

For further information regarding the TiC and self-service tool requirements, please review the following: Transparency in Coverage Final Rule, Fact Sheet and our November 12, 2020 article.