On October 27, 2023, the DOL, HHS, and IRS (the departments) proposed a rule imposing new requirements for group health plans, insurers and healthcare providers under the No Surprises Act (NSA) federal independent dispute resolution (IDR) process. According to the departments, the proposed rule is designed to streamline the current IDR process and address legal challenges to previously issued rules.

The NSA provisions, which took effect in 2022, protect participants from surprise bills by limiting their cost-sharing for out-of-network (OON) emergency and air ambulance services and certain OON services received at in-network facilities. In states with an applicable All-Payer Model Agreement or specified state law (which generally applies to fully insured plans), the OON provider rate for covered items and services is determined by such agreement or state law. Otherwise, if a plan or insurer (a “payer”) and healthcare provider (“provider”) cannot agree on the OON payment amount after a 30-day open negotiation period, either party can initiate the federal IDR process. To use the federal IDR process, each party must pay an administrative fee; additionally, a fee is payable to the certified IDR entity (i.e., the entity that determines the final payment amount).

To implement the surprise billing prohibitions and federal IDR process, the departments have issued multiple rules, including interim final rules in July 2021 and October 2021 and final rules in August 2022. However, some of the departments’ guidance has been vacated in a series of lawsuits brought by the Texas Medical Association and other providers. As a result, the federal IDR process has been halted several times while the departments drafted new guidance to conform to the court rulings. Additionally, disputing parties have initiated the federal IDR process far more than anticipated, although some are not even eligible to use it. These factors, among others, have led to case backlogs and delayed payment determinations.

Proposed Changes to the IDR Process
Accordingly, the proposed rule seeks to respond to the outstanding legal issues and create a more efficient federal IDR process through several specific changes.

First, the proposed rule aims to improve early communications between payers and providers so both parties have the necessary information to engage in meaningful negotiations, determine if they wish to initiate a dispute, and assess whether the claim is eligible for the federal IDR process. In particular, the proposed rule requires that payers provide additional information, including plan data, claim adjustment reason codes and related supplemental information, to the provider with the initial payment or denial of payment.

Second, the proposed rule would require that a party provide an open negotiation notice, with further details regarding the disputed payment, to the other party and the departments through the federal IDR portal to initiate the 30-day open negotiation period. The party receiving the notice would be required to provide a response notice to the other party and the departments by the 15th business day of the 30-day open negotiation period. The proposed rule would also require payers subject to the federal IDR process to register with the departments, provide general information regarding the items and services covered by the plan or coverage, and receive a registration number. The departments believe these changes may reduce the number of ineligible disputes, which they view as the primary cause of delays in processing disputes.

Third, the departments propose changes to the timing and process for determining whether parties are eligible to use the federal IDR process. For example, the proposed rule requires a certified IDR entity to determine eligibility within five business days of their selection and to notify both the disputing parties and the departments. Furthermore, a process would be established for the departments to make eligibility determinations during periods of systemic delays or extenuating circumstances affecting the federal IDR process to enable the certified IDR entity to focus primarily on payment determinations.

Fourth, the departments propose changes to expand the current batching rules, which allow parties to include multiple claims for resolution in a single proceeding to improve efficiency and minimize costs. For example, the provisions would allow for batching of items and services billed under the same service code or provided to a single patient on one or more consecutive dates that are billed on the same claim form by the same payer (e.g., insurer or self-insured plan). However, the departments propose to limit batched determinations to 25 qualified IDR items and services to ensure the certified IDR entity can make timely eligibility and payment determinations.

Finally, the departments propose changes to the collection of administrative fees to ensure timely collection and fair allocation. The departments propose the fees be paid directly to the departments (instead of the certified IDR entity) within specific timeframes. Additionally, fee reductions would apply under certain circumstances, such as when the dispute is determined to be ineligible for the federal IDR process.

Many employers rely upon their carriers or TPAs to address out-of-network payment disputes. However, employers, particularly those who sponsor self-insured plans, should be aware of the proposed changes to the federal IDR process, which is an integral part of the NSA surprise billing requirements. Comments regarding the proposed rule can be submitted through January 2, 2024, in accordance with the specified instructions.

Departments' Guidance – November 3 Proposed Rules »
CMS – No Surprises Act Independent Dispute Resolution Process Proposed Rule Fact Sheet »

On September 29, 2023, the DOL entered into a settlement agreement with EmblemHealth Inc. (“Emblem”), a New York-based insurer and third-party administrator (TPA) of ERISA group health plans, resolving claims that Emblem breached its fiduciary duties under federal law by engaging in a practice known as “cross-plan offsetting.”

According to the DOL’s investigation, Emblem used “cross-plan offsetting” to recoup alleged overpayments made to healthcare providers under employer-sponsored group health plans. Specifically, Emblem recovered its overpayments to providers by withholding subsequent payments owed to the same providers for healthcare expenses incurred by participants covered under completely different ERISA group health plans. The DOL alleged that this practice violated Emblem’s ERISA fiduciary duties because Emblem benefitted at the expense of the ERISA group health plans and their participants by wrongfully retaining assets from one health plan for a debt allegedly owed by a different health plan.

Additionally, cross-plan offsetting harms participants in the out-of-network setting because participants are at risk of being balance billed by out-of-network providers for the offset claims. Balance billing is when an out-of-network provider charges a participant the difference between the provider’s charge and the allowable amount under the plan. In this case, the balance billing may happen because the insurer withheld payment to the provider to recoup the overpayment made on another group health plan even though the participant’s healthcare services obtained from the out-of-network provider should have been covered by Emblem.

Under the settlement, the insurer agreed to stop engaging in cross-plan offsetting and amend its policies, procedures, and practices no later than January 1, 2024, or as soon as reasonably practical for insured plans prospectively. Additionally, with respect to retrospective corrective actions dating back to July 16, 2015, the insurer must repay current and former participants and beneficiaries whose reimbursements were reduced due to its cross-plan offsetting practice according to the details outlined in the settlement agreement.

In response to this settlement agreement, employers, especially self-insured ERISA plan sponsors, should carefully review their plan’s terms relating to the claim overpayment recovery process to ensure that it complies with the ERISA rules. Moreover, self-insured employers should review the administrative services contract or other contracts with their TPA that administers plan claims to determine whether the plan’s TPA engages in the cross-plan offsetting practice. If the plan terms include cross-plan offsetting practice, it is advisable to review these issues with legal counsel.

Settlement Agreement »
News Release »

On November 3, 2023, the DOL published a proposed rule broadening the definition of an investment advice fiduciary under ERISA. The newest iteration of this rule is the most recent attempt by the DOL to update the definition of fiduciary after the 2016 Conflict of Interest Rule (the 2016 rule) was set aside by the US Court of Appeals for the Fifth Circuit in litigation.

Ultimately, the DOL seeks to again update the original five-part test that has been used to identify fiduciaries who render investment advice for a fee. Under the five-part test, an investment advice fiduciary is one who: 1) renders advice as to the value of securities; 2) on a regular basis; 3) pursuant to a mutual agreement; 4) the advice serves as the primary basis for investment decisions; and 5) the advice is individualized. The DOL views the five-part test as outdated, given the developments in retirement savings vehicles and changes in the investment advice marketplace. They posit that the five-part test is “underinclusive” in its application. Specifically, they argue that the “regular basis,” “mutual agreement,” and “primary basis for investment decisions” requirements defeat investor expectations of impartial advice and allow for some retirement advice to occur without an applicable best interest standard.

The proposed rule deems a person to be an investment advice fiduciary if they:

• Provide investment advice or make an investment recommendation to a retirement investor (including a plan, plan fiduciary, plan participant or beneficiary, IRA, IRA owner or beneficiary, or IRA fiduciary).
• Charge a fee or receive other compensation, direct or indirect.
• Make the recommendation in one of the following contexts:
  • They directly or indirectly have discretionary authority or control with respect to purchasing or selling securities or other investment property for the retirement investor.
  • They make investment recommendations to investors on a regular basis as part of their business. The recommendations are based on the particular needs or individual circumstances of the retirement investor, and the investor may rely upon the recommendations as a basis for investment decisions that are in their best interest.
  • They represent or acknowledge that they are acting as a fiduciary when making investment recommendations.

The DOL believes this proposed rule will create a uniform standard for investment transactions that are not currently covered by federal securities laws (including the SEC’s Regulation Best Interest), state laws, or conduct standards. They also believe it to be more narrowly tailored than the 2016 rule and responsive to the Fifth Circuit’s arguments.

The DOL proposes that the rule take effect 60 days after the publication of a final rule in the Federal Register. They are requesting comments on many aspects of the rule.

In addition to the proposed rule, the DOL proposed amendments to several Prohibited Transaction Exemptions (PTEs):

• PTE 2020-02 – This PTE provides the conditions by which investment advice fiduciaries may be compensated for investment advice. The proposed amendment would build on the existing PTE by proposing additional disclosures to inform retirement investors and providing more guidance to financial institutions and investment professionals on impartial conduct standards. In a departure from the 2016 rule, the proposed amendment to the PTE will not require a contract for investment advice to IRAs. Instead, financial institutions will be tasked with reporting any nonexempt prohibited transactions stemming from fiduciary investment advice to the IRS through excise tax filings.
• PTE 84-24 – This PTE allows IRA fiduciaries to receive compensation when plans and IRAs enter certain insurance and mutual fund transactions that the fiduciaries recommend. The proposed amendment would impose conditions but provide exemptive relief to independent producers who serve as fiduciaries and recommend non-securities annuities or other insurance products to retirement investors on a commission or fee basis.
• PTEs 75-1, 77-4, 80-83, 83-1, and 86-128 – These PTEs currently provide investment advice fiduciaries with relief for different types of transactions involving employee benefit plans and IRAs. The proposed amendments would remove fiduciary investment advice from the purview of these PTEs, allowing the application of a single standard of care (as dictated in PTE 2020-02) to all fiduciary investment advice, regardless of the specific type of product or advice provided. They also make certain other administrative changes.

The industry will likely provide robust commentary to the DOL on this rule. While the rule goes through the rulemaking process, it’s important for retirement plan fiduciaries to remember their duties under ERISA. Taking steps to ensure that any investment decisions are made in the best interest of plan participants and beneficiaries remains the standard under ERISA, and plan sponsors should work with their service providers to document adherent processes.

Retirement Security Rule: Definition of an Investment Advice Fiduciary »
Fact Sheet: Retirement Security Proposed Rule and Proposed Amendments to Class Prohibited Transaction Exemptions for Investment Advice Fiduciaries »

On November 1, 2023, the IRS issued Notice 2023-75, which provides certain cost-of-living adjustments for a wide variety of tax-related items, including retirement plan contribution maximums and other limitations. Several key figures are highlighted below. These cost-of-living adjustments are effective January 1, 2024.

The elective deferral limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan increases from $22,500 to $23,000 in 2024. Additionally, the catch-up contribution limit for employees aged 50 and over who participate in any of these plans remains at $7,500. Accordingly, participants in these plans who have reached age 50 will be able to contribute up to $30,500 in 2024.

The annual limit for Savings Incentive Match Plan for Employees (SIMPLE) retirement accounts has increased from $15,500 to $16,000. The catch-up contribution limit for employees 50 and over who participate in SIMPLE plans remains $3,500 for 2024.

The annual limit for defined contribution plans under Section 415(c)(1)(A) increases to $69,000 (from $66,000). The limitation on the annual benefit for a defined benefit plan under Section 415(b)(1)(A) also increases to $275,000 (from $265,000). Additionally, the annual limit on compensation that can be considered for allocations and accruals increases from $330,000 to $345,000.

The threshold for determining who is a highly compensated employee under Section 414(q)(1)(B) increases to $155,000 (from $150,000). The dollar limitation concerning the definition of a key employee in a top-heavy plan increases from $215,000 to $220,000.

Employers should review the notice for additional information. Sponsors of benefits with limits that are changing will need to determine whether their plan documents automatically apply the latest limits or must be amended to recognize the adjusted limits. Any applicable changes in limits should also be communicated to employees.

Notice 2023-75 »

Under Section 125, employees make annual elections under a cafeteria plan that are irrevocable during the plan year. However, regulations allow midyear changes to those elections when an employee or their dependents experience specific qualifying events. One of these events occurs when an employee, their spouse, or their dependent experience a change in status, such as a change in residence. However, there are limits to the change in residence qualifying event.

The change in residence becomes a qualifying event when that change affects the employee’s or dependent’s eligibility for coverage. Unless the relocation makes the moving individual ineligible or newly eligible under the plan, the move would not be considered a change in status qualifying event.

On the other hand, there would likely be a qualifying event if the relocation resulted in the employee or dependent moving outside of a network that would provide service. For example, if the plan were an HMO and the employee or dependent moved out of the HMO service area and therefore couldn't receive any coverage where they lived, then that move would be a qualifying event. However, if the employee or dependent is eligible under the plan before and after the move (which is often the case for PPO plans or HDHPs with a national network), then a change in residence is not a qualifying event.

It is important to understand these limits. Employers that allow midyear changes without a qualifying event risk disqualifying the entire plan. If the plan is disqualified, then neither the employer nor employees can pay for their coverage on a pretax basis.

That said, there could be other qualifying events that would apply, given the circumstances. For example, a cafeteria plan may permit a qualifying event for a loss of coverage under any group health coverage sponsored by a governmental or educational institution, including a foreign government group health plan. If the relocating dependent has coverage through their government and will lose it by virtue of moving to the US, then that could make the move a qualifying event.

There are a few other points to keep in mind. Changes in residence and the loss of coverage under a governmental health plan are permissible qualifying events, which means that employers can choose whether to include them in their plan. Additionally, these events do not apply to health FSAs, so the employee could not change their health FSA election on account of either of those qualifying events.