On May 29, 2019, the IRS released Rev. Proc. 2019-25, which provides the 2020 inflation-adjusted limits for HSAs and HSA-qualifying HDHPs. According to the revenue procedure, the 2020 annual HSA contribution limit will increase to $3,550 for individuals with self-only HDHP coverage (up $50 from 2019) and to $7,100 for individuals with anything other than self-only HDHP coverage (family or self+1, self+child(ren), or self + spouse coverage) (up $100 from 2019).
For qualified HDHPs, the 2020 minimum statutory deductibles increase to $1,400 for self-only coverage (up $50 from 2019) and $2,800 for individuals with anything other than self-only coverage (up $100 from 2019). The 2019 maximum out-of-pocket limits increased to $6,900 for self-only coverage (up $150 from 2019) and up to $13,800 for anything other than self-only coverage (up $300 from 2019). Out-of-pocket limits on expenses include deductibles, copayments, and coinsurance, but not premiums.
The 2020 limits may impact employer benefit strategies, particularly for employers coupling HSAs with HDHPs. Employers should ensure that employer HSA contributions and employer-sponsored qualified HDHPs are designed to comply with 2020 limits.
Rev. Proc. 2019-25 »
DOL Updates Model Summary Annual Report for Welfare Plans
On May 30, 2019, the DOL updated the model Summary Annual Report (SAR) for Welfare Plans. The changes were not substantial, but they appear to include updated contact information for the DOL. As a reminder, SARs summarize the annual Form 5500 and are required to be distributed by large insured health plans. Unfunded self-funded plans of any size are exempt from the requirement to distribute SARs.
While the updated version of the SAR doesn’t result in any substantial changes, employers should utilize the new DOL model.
DOL Health Plan Model Notices & Disclosures »
FAQ
What is the appropriate correction when, due to an administrative error by the employer or COBRA vendor, a COBRA participant has been charged incorrect premium rates?
Generally, if the plan documents and COBRA election notices clearly provide that COBRA premiums will be 102% of the applicable premium, and if there has been a clear or mathematical error which results in an undercharge for COBRA coverage, it is likely permissible to correct the error on a prospective basis.
Specifically, the IRS COBRA regulations state that if a plan is charging less than the maximum permitted amount, it may increase its rates to that level. Thus, it’s widely understood that the employer is allowed to make the change to increase the premiums going forward. That said, there isn’t specific guidance as to how the employer should specifically engage in such a correction. The intent would be to put the COBRA participants and beneficiaries back in the position that they would’ve been had the employer not made the mistake.
If a COBRA participant has already elected COBRA under the presumption of the incorrect amount, the conservative position would be to renotify each COBRA participant who was incorrectly informed so that they are made aware of the correct premium amount. They would then charge the appropriate amount going forward.
As for correcting the undercharge retroactively, there is no explicit guidance on collecting a shortfall (that is, retroactive collection). The regulations do not appear to specifically allow or prohibit it. The employer could explain the mistake to each impacted COBRA participant and ask for the shortfall payment. But if the COBRA participant refused and the employer wanted to demand retroactive payment, they would not likely have statutory grounds to collect it. So, collecting shortfalls as a result of a mistake may be problematic, both in success as well as the administrative burden on either the employer or the COBRA vendor. Thus, if an employer wants to proceed in retroactive collection, they’d be best served by speaking with outside counsel for guidance.
State Updates
Connecticut
On May 6, 2019, the Insurance Department published Bulletin HC-126. The bulletin relates to stop-loss insurance policies in Connecticut. According to the bulletin, the department will not approve stop-loss policies that have an annual attachment point for claims incurred per individual that is lower than $20,000. For groups of 50 or fewer, the department will not approve polices that have an annual aggregate attachment point that is lower than the greater of $4,000 times the number of group members, 120% of expected claims, or $20,000; for groups of 51 or more, that aggregate attachment point must be higher than 110% of expected claims. Lastly, the department will not approve polices that provide direct coverage of health care expenses of an individual.
The bulletin also outlines several provisions in stop-loss policies that will not be allowed, including claims denials that the employer is legally obligated to pay under the health plan, medical necessity and usual or customary determinations, experimental or investigational determinations, case management requirements and mandated provider networks, or benefits incentives for enrollees. The bulletin includes a full list of such prohibited provisions. The bulletin also states that lasering (the practice of assigning different attachment points or deductibles, or denying coverage for, individual employees or dependents with pre-existing, high cost medical conditions) is allowed during the stop-loss process, but that no attachment point for an enrollee can exceed three times the attachment point for the policy. Finally, the bulletin states that retiree-only stop-loss policies are not subject to the above restrictions, but that the department will review each such policy on a case-by-case basis.
While directed to stop-loss carriers, employers with self-insured plans that use a stop-loss policy issued in CT should be aware of the bulletin. Such employers can work with their adviser or carrier on any questions regarding the bulletin.
Bulletin HC-126 »
Iowa
Extended Relief for Non-ACA-compliant Small Group and Individual Policies and Plans
On April 4, 2019, Ins. Commissioner Ommen released Bulletin 19-02, extending the ability of health insurance carriers in the individual and small group market to continue transitional health insurance plans that renew for a policy year starting on or before October 1, 2020, as long as the transitional policy ends by December 31, 2020.
As background, on March 25, 2019, CMS provided guidance for a transition policy extension that allows insurers the option to renew non-grandfathered non-ACA-compliant plans, as long as the state allows for such an extension. Such transition policies are not required to be in compliance with certain ACA mandates including community rating, coverage of essential health benefits, prohibition on pre-existing condition exclusions and the annual out-of-pocket maximum limit. This bulletin applies this most recent federal extension to Iowa and allows the issuer to renew these non-ACA compliant plans.
Small employers that are interested in renewing their non-ACA-compliant plan should work with their advisors and insurers.
Bulletin 19-02 »
Maine
On May 28, 2019, Gov. Mills signed into law LD 369, which is a new paid sick leave law. Effective January 1, 2021, the new law requires employers with 10 or more employees to provide an hour of paid sick leave for every 40 hours worked, up to a maximum of 40 hours of paid leave per year. Accrual of leave begins at the start of employment, although the employer is not required to permit use of the leave until the employee has worked 120 days. During the leave, employees must be paid at least the same base rate of pay that the employee received immediately prior to taking the paid leave, and must receive the same benefits as those provided to employees under other types of paid leave. Employees can use paid sick leave to take care of their own illness or serious condition or that of a family member. Employees are expected to provide advanced notice to employers, where possible.
We anticipate the Maine government and regulatory agencies providing additional detail on this new law prior to the 2021 effective date; we’ll continue to monitor any developments and report them here in Compliance Corner.
LD 369 »
Ohio
On April 29, 2019, Director Froment released Bulletin 2019-02, extending the ability of health insurance carriers in the individual and small group market to continue transitional health insurance plans that renew for a policy year starting on or before October 1, 2020, as long as the transitional policy ends by December 31, 2020.
As background, on March 25, 2019, CMS provided guidance for a transition policy extension that allows insurers the option to renew non-grandfathered non-ACA-compliant plans, as long as the state allows for such an extension. Such transition policies are not required to be in compliance with certain ACA mandates including community rating, coverage of essential health benefits, prohibition on pre-existing condition exclusions and the annual out-of-pocket maximum limit. This bulletin applies this most recent federal extension to Ohio and allows the issuer to renew these non-ACA compliant plans.
Small employers that are interested in renewing their non-ACA-compliant plan should work with their advisors and insurers.
Bulletin 2019-02 »
Wisconsin
On April 3, 2019, Commissioner Afable released a bulletin that extended the ability of health insurance carriers in the individual and small group market to continue transitional health insurance plans that renew for a policy year starting on or before October 1, 2020, as long as the transitional policy ends by December 31, 2020.
As background, on March 25, 2019, CMS provided guidance for a transition policy extension that allows insurers the option to renew non-grandfathered non-ACA-compliant plans, as long as the state allows for such an extension. Such transition policies are not required to be in compliance with certain ACA mandates including community rating, coverage of essential health benefits, prohibition on pre-existing condition exclusions and the annual out-of-pocket maximum limit. This bulletin applies this most recent federal extension to Wisconsin and allows the issuer to renew these non-ACA compliant plans.
Small employers that are interested in renewing their non-ACA-compliant plan should work with their advisors and insurers.
Bulletin 20190403 »
This material was created by PPI Benefit Solutions to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The service of an appropriate professional should be sought regarding your individual situation. PPI does not offer tax or legal advice. "PPI®" is a service mark of Professional Pensions, Inc., a subsidiary of NFP Corp. (NFP). All rights reserved.