Group Health Plan and Cafeteria Plan Issues Related to COVID-19
Group Health Plan and Cafeteria Plan Issues Related to COVID-19
As a growing number of the workforce is being affected by the COVID-19 pandemic, employers are raising several benefit related questions, particularly with respect to group health plans. The Employee Benefits Group at Hanson Bridgett will be providing updated information on possible issues arising in the benefits area through Benefits Alerts and postings on Hanson Bridgett's online COVID-19 Resource Center. Regulatory and legislative changes are occurring rapidly, and we will make every effort to keep our clients informed of new developments occurring in this area as they occur.
Below are answers to some of the most frequent questions received thus far related to group health plans and cafeteria plan coverage. Of course, your particular benefit plan provisions may impact the answer to some of these questions. Please feel free to reach out to your contact in the Employee Benefits Group with more specific questions about your benefits issues.
Additional resources for employee benefit plan sponsors regarding COVID-19 related issues can be found at the following websites:
IRS Coronavirus Tax Relief
U.S. Department of Labor Coronavirus Resources
CalPERS COVID-19 Webpage
Question 1: Is an employer health plan required to provide testing for and treatment of COVID-19 without a deductible or at a reduced cost?
Answer 1: With the enactment of the Families First Coronavirus Response Act (FFCRA) on March 18, 2020, group health plans, including grandfathered health plans, and health insurance issuers must cover without cost-sharing COVID-19 testing, as well as items and services provided during visits to health care provider offices (including telehealth visits), urgent care centers and emergency rooms that result in an order for or administration of COVID-19 testing, to the extent the item or service relates to the testing, or evaluation of the patient’s need for a test. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, enacted on March 27, 2020, clarifies that this requirement applies to all types of diagnostic testing for COVID-19, regardless of whether the test has been approved yet by the FDA. These coverage requirements do not apply to group health plans that provide only “excepted” benefits or cover only retirees, although COVID-19 testing now must be covered with no cost-sharing under Medicare, Medicaid, and CHIP. The new COVID-19 testing coverage requirements took effect on March 18, 2020.
The FFCRA and CARES Act do not include any requirement with respect to costs for treatment of COVID-19. However, under the CARES Act, any vaccine or preventive treatment for COVID-19 that is developed will be fast-tracked for inclusion in the list of preventive services that non-grandfathered group health plans are required to cover without cost-sharing under the Patient Protection and Affordable Care Act (ACA). Generally, plans are afforded a one-year interval period to begin providing coverage without cost sharing of any newly-listed preventive services. Under the CARES Act, coronavirus preventive items and services will need to be covered with no cost-sharing within 15 business days after the item or service qualifies as a covered preventive health service under existing ACA rules.
On March 12, 2020, the Centers for Medicare & Medicaid Services (CMS) of the U.S. Department of Health and Human Services (HHS) issued a set of FAQs about “essential health benefits” (EHB) coverage under ACA and COVID-19. Under the ACA, self-insured and insured large group health plans are not required to cover all EHB, but cannot impose annual or lifetime dollar limits on any category of EHB that is covered. Non-grandfathered health plans in the individual and small group markets must provide coverage for EHB. The recent CMS guidance provides that EHB generally includes coverage for the diagnosis and treatment of COVID-19, and medically necessary isolation and quarantine required by and under the supervision of a medical provider during a hospital admission. Quarantine outside of a hospital setting is not a medical benefit, nor is it required as EHB. Other medical benefits that occur in the home that are required by and under the supervision of a medical provider, such as home health care or telemedicine, may be covered as EHB, but may require prior authorization or be subject to cost-sharing or other limitations.
For fully-insured plans subject to state regulation, a growing number of states, including California, are requiring insurers of health plans to waive copays and other out-of-pocket expenses for COVID-19 testing to make sure cost does not impede public health efforts to control the spread of the virus. On March 5, under the direction of Governor Gavin Newsom, the California Departments of Managed Health Care and Insurance directed all commercial and Medi-Cal health plans and insurance carriers regulated by the Departments to immediately reduce cost-sharing to zero for all medically necessary screening and testing for the COVID-19. This includes waiving cost-sharing for emergency room, urgent care or provider office visits when the purpose of the visit is to be screened and tested for COVID-19. The need for COVID-19 testing is based on medical necessity, a clinical determination made on a case by case basis by medical professionals.
CalPERS has announced that state and local agency employees who have health coverage under the Public Employees’ Medical and Hospital Care Act (PEMHCA) will not have to pay anything out of pocket for screening and testing of COVID-19. CalPERS has indicated the free testing applies to members in both their health maintenance organization (HMO) and preferred provider organization (PPO) plans.
Question 2: Can an employer amend its high deductible health plan ("HDHP") to allow testing for and treatment of COVID-19 without a deductible or with a deductible below the current required minimums?
Answer 2: Yes. On March 11, 2020, the IRS issued Notice 2020-15 making clear that until further notice all medical care services received and items purchased associated with testing for and treatment of COVID-19 that are provided by a health plan without a deductible, or with a deductible below the minimum annual deductible otherwise required for a HDHP will be disregarded for purposes of determining the status of the plan as a HDHP.
Question 3: Can an employer with a high deductible health plan ("HDHP") allow telehealth and other remote care services to be covered without a deductible?
Answer 3: Yes. Under the CARES Act, a HDHP can cover telehealth and other remote care services without a deductible, effective as of March 27, 2020 (the date of enactment of the CARES Act). Such coverage will be treated as “permitted insurance” for purposes of health savings account (HSA) compatibility, meaning employees covered by the HDHP will remain eligible to make and receive HSA contributions, for plan years beginning on or before December 31, 2021.
Question 4: Can employers allow changes to employee elections under their Internal Revenue Code (“Code”) section 125 cafeteria plans to reflect changes in circumstances due to COVID-19?
Answer 4: Treasury Regulations Section 1.125-4 describe the situations under which employees may revoke or change elections made prior to the beginning of the plan year under a Code section 125 cafeteria plan. If provided for in the cafeteria plan, the types of changes that may create the ability to revoke elections include a change in the employment status of the employee (or the employee's spouse or dependents) or the offering of a special election period under the plan by the employer.
The change in the election has to be consistent with the change in status, which could include situations where as a consequence of COVID-19 the employee (or his/her spouse or dependents) have a reduction in work hours such that eligibility for or cost of coverage changes.
For employers with dependent care flexible spending account (FSA) plans that provide for mid-year election changes corresponding to a significant cost change, employees may have either an increase or decrease in qualified dependent care costs due to school closures. In that case, the employee could elect to increase or decrease salary reduction contributions (or to start making contributions, for those who did not previously elect to participate for the plan year), if there is a significant cost change with respect to qualified dependent care (except in the case of a cost change imposed by a dependent care provider who is a relative of the employee).
We will also be watching to see if further guidance is issued by the IRS in this area. In addition, we note that legislation introduced on March 11 (S3442) would require private health insurers to provide for special enrollment periods for individuals diagnosed with COVID-19.
Employees who are absent from work due to their own illness or to care for a family member may be eligible for Family and Medical Leave Act (FMLA) leave. During an unpaid FMLA leave, an employee must be permitted to revoke their health coverage, including coverage under a health flexible spending account (health FSA), or to continue coverage but discontinue payment of the employee’s share of the premium costs under the health plan, or discontinue FSA contributions during the unpaid FMLA leave. Generally, employees may be permitted to pay their premium share upon returning to work, during the leave using after-tax dollars, or to “pre-pay” before taking leave. Employers should review their plan documents to determine which options are provided, and whether employees who discontinue health FSA coverage during a FMLA leave may resume coverage upon returning to work at the original contribution level, or at a pro-rata level such that the employee’s payroll deductions are not increased for the remainder of the year.
Question 5: Are there special privacy issues under the Health Insurance Portability and Accountability Act (HIPAA) that apply to an employer’s group health plan with respect to COVID-19? How does HIPAA apply to health care providers using telehealth services during the COVID-19 emergency?
Answer 5: The Office for Civil Rights (OCR) of the Department of Health and Human Services (HHS) has issued guidance about how HIPAA covered entities, such as group health plans, can share protected health information related to COVID-19 about participants in the plan. The guidance reminds covered entities that the HIPAA privacy rules are not suspended during an emergency. However, covered entities may need to disclose protected health information to help public health authorities and others responsible for ensuring public health and safety carry out their public health duties. For example, a covered entity may disclose to the Centers for Disease Control and Prevention (CDC) protected health information on an ongoing basis as needed to report all prior and prospective cases of patients exposed to or suspected or confirmed to have COVID-19. Disclosures of protected health information for a public health purpose must be the minimum necessary to accomplish the purpose, and a covered entity can rely on representations by the CDC that the protected health information requested by the CDC about all patients exposed to or suspected or confirmed to have COVID-19 is the minimum necessary for the public health purpose. The CARES Act directs HHS to issue guidance on the sharing of patients’ protected health information during the COVID-19 emergency, including information on compliance with existing HIPAA regulations and policies, as well as any new policies that may take effect during the emergency.
On March 17, 2020, OCR announced that, effective immediately, OCR will exercise its enforcement discretion and will not impose penalties for noncompliance with the regulatory requirements under the HIPAA Rules against covered health care providers in connection with the good faith provision of telehealth during the COVID-19 nationwide public health emergency.
In a notice issued on March 23, 2020, OCR clarified that the enforcement discretion applies to telehealth provided for any reason, regardless of whether the telehealth service is related to the diagnosis and treatment of health conditions related to COVID-19, but only with respect to non-public facing audio or video communication products. The notice lists third-party applications that could be used for telehealth visits, without risk that OCR might seek to impose a penalty for noncompliance with the HIPAA Rules related to the good faith provision of telehealth during the COVID-19 emergency. The notice also lists several video communication vendors that represent they provide HIPAA-compliant video communication products and will enter into a HIPAA business associate agreement with covered health care providers.
OCR also issued a series of questions and answers about telehealth and HIPAA during the COVID-19 emergency. The Centers for Medicare & Medicaid Services (CMS) issued a separate set of questions and answers about the use of telehealth by covered health care providers, including information about mid-year amendments of fully-insured health plans to provide or expand coverage for telehealth services, consistent with governing state law.
The California Departments of Managed Health Care and Insurance also have urged health plans and insurance carriers to work with their contracted providers to use telehealth services to deliver care when medically appropriate, as a means to limit individuals’ exposure to others who may be infected with COVID-19, and to increase the capacity of insurers’ contracted providers and facilities. Health plan sponsors will want to coordinate with their insurer or provider network to provide appropriate information to employees, including, where applicable, information about using telehealth services.
OCR also has a webpage dedicated to planning for and responding to emergency situations, that includes a link to a decision tool to help covered entities determine how the HIPAA privacy rules apply to disclosures related to the emergency, including whether the source of the disclosure is in fact a HIPAA covered entity.
Question 6: Has the IRS changed the employer shared responsibility payment (ESRP) rules under the ACA for employers that reduce employees’ hours of work because of the COVID-19 emergency?
Answer 6: No, the ESRP rules remain in effect and applicable large employers (those with 50 or more full-time or full-time equivalent employees) could be liable for an ACA penalty if employees whose hours are reduced are not offered minimum essential coverage during an applicable “stability period.” Under the ESRP rules, an employer could be liable for a penalty (“Penalty A”) for each month in the calendar year in which the employer does not offer minimum essential coverage to at least 95 percent of its full-time employees (and their dependent children), if at least one full-time employee receives a premium tax credit for purchasing coverage through the Health Insurance Marketplace (e.g., Covered California). Many employers use the “look-back” measurement method to determine whether employees are “full-time” for purposes of complying with this requirement. Under that method, an employee who meets the definition of full-time during the measurement period must be counted as a full-time employee during the corresponding stability period, regardless of the employee’s number of hours during the stability period. Accordingly, employees who are currently treated as full-time employees under a stability period will need to be counted as full-time employees under the ESRP rules, even if their hours are reduced during the stability period due to the COVID-19 emergency.
If applicable, the monthly amount of Penalty A is calculated by multiplying the number of the employer’s full-time employees (less the first 30) by one-twelfth of $2,000 (as indexed). For example, an employer with 450 employees would owe 420 X $2,000 (as indexed) X 1/12, or $70,000 for each month that Penalty A applies.
Question 7: Has the IRS extended the March 31, 2020 deadline for filing ACA Forms 1094-C and 1095-C regarding coverage provided in 2019?
Answer 7: No, the IRS has not extended the March 31, 2020 deadline for filing Forms 1094-C and 1095-C to report information about offers of health coverage made to full-time employees by applicable large employers in the 2019 calendar year. However, employers may submit IRS Form 8809 on or before the filing deadline to obtain an automatic 30-day extension, and may request an additional 30-day extension using a second Form 8809. if hardship conditions apply.
Question 8: Did the CARES Act expand the definition of “qualified medical expenses” under Code section 223(d) to include over-the-counter medical products, including those needed in quarantine and social distancing, that are obtained without a prescription from a physician?
Answer 8: Yes, the CARES Act amends Code sections 223(d) and 106 to remove the restriction that qualified medical expenses include amounts paid only for prescribed medicine or drugs, and to provide that amounts paid for certain menstrual care products are treated as paid for medical care, for purposes of reimbursement from health savings accounts (HSAs), health flexible spending arrangements (FSAs) and health reimbursement arrangements (HRAs).
