The year 2024 was a tumultuous one for health and welfare benefit guidance, which included disaster relief, a detailed final rule for Mental Health Parity and Addiction Equity Act (MHPAEA) compliance, and a Supreme Court ruling that might impact the interpretation of even well-established benefit regulations. The year ends with uncertainty about whether health savings account (HSA)-compatible high-deductible health plans (HDHPs) will be able to continue first-dollar telehealth coverage for plan years commencing in 2025. HSA vendors also face compliance with the final rule for investment advice fiduciaries, as well as uncertainty about whether the incoming Trump Administration will retain the rule in its current form. Flexible spending accounts (FSAs) and other consumer directed health plans saw guidance on expanding eligible medical expenses, as well as the usual cost-of-living updates. Employers are reminded that they might face a 2024 year-end deadline to amend their cafeteria plans to allow new election change events involving Exchange enrollment.
Health and welfare plans faced increased litigation risks over the past year. More plans found themselves facing litigation involving tobacco use surcharges and wellness programs. Prescription drug coverage was also a source of litigation, as well as regulator involvement, involving plans and their service providers. Such litigation brought renewed focus on health and welfare plan fiduciary committees.
Plans and their vendors saw significant guidance about data privacy and security compliance from multiple federal agencies, including the Department of Labor (DOL) and Department of Health and Human Services (HHS). HHS provided final regulations on reproductive health rights that require plans to act by December 23, 2024. Plans also need to be aware of 2024’s Part 2 final regulations for the confidentiality of substance use disorder records, as well as watch out for proposed HIPAA security rule updates at the end of 2024. The DOL also clarified that its cybersecurity guidance applies not only to retirement plans but to all ERISA health and welfare plans.
The year was likely just the beginning of a busy time for health and welfare plan compliance because the incoming Trump Administration is likely to have its own priorities and goals.
Mental Health Parity and Addiction Equity Act Final Rule
The HHS, Labor, and Treasury departments published the final rules on MHPAEA requirements in the Federal Register on September 23, 2024 (first issued online for public inspection on September 9, 2024). These lengthy rules primarily focused on requirements for nonquantitative treatment limitations (NQTLs) and the codification of the requirement to perform an NQTL comparative analysis as mandated by the Consolidated Appropriations Act, 2021 (CAA) (and as further described in related FAQs and self-compliance tools). Although the final rules are generally effective January 1, 2025, some of the requirements are not effective until January 1, 2026, including the requirement that the MHPAEA apply to individual policies of health insurance. See our in-depth advisory Final Mental Health Parity Rules: A Plan Sponsor’s Implementation Guide for a detailed explanation of the final rule, including effective dates for various parts of the rule.
What plan sponsors need to be doing now for MHPAEA compliance
- Plan sponsors should be prepared to have an updated comparative analysis completed by the first day of the plan year beginning on or after January 1, 2025. We would expect that all comparative analyses would need to be updated. There are very short turnaround times if a department or a participant or beneficiary asks for this comparative analysis. Now that the rule is final, we anticipate the departments’ investigations of plans for MHPAEA compliance will accelerate.
- Agreements with service providers need to be reviewed – in particular, administrative services only (ASO) and third-party agreements (TPA) – to make sure that they are clear on the allocation of responsibilities for preparing a comparative analysis.
- Plan fiduciaries for ERISA-covered plans should be made aware of the certification requirement and the need to engage in “a prudent process to select one or more qualified service providers to perform and document a comparative analysis.” That fiduciary certification should be in place on January 1, 2025 for calendar-year plans.
- Work with your ASO or TPA to identify any areas where there may be a plan design issue with the meaningful benefits/core treatment standard and be prepared to address those for plan years beginning in 2026.
- For the design and application requirements, seek verification from the TPA/ASO that they are not using any biased or discriminatory information in designing the NQTL, including historical data.
- There are still many unknowns about the relevant data collection requirement, but at the very least, plans should start collecting the data identified in the final rule as well as other relevant data suggested in the preamble and examples – especially related to the network composition NQTLs. Discuss with the TPA/ASO their ability to collect and analyze the data, including whether they have the technology required for data collection.
- Watch for developments in the courts and whether the final rule is challenged under Loper Bright or otherwise. In particular, there may be challenges to the relevant data evaluation and meaningful benefits requirements. Action from the incoming Administration or Congress is also possible, such as under the Congressional Review Act or by administrative procedure.
Loper Bright Enterprises v. Raimondo
In Loper Bright Enterprises v. Raimondo, the Supreme Court ruled that courts cannot defer to agency interpretation of laws because a statute is ambiguous. This decision overruled the Court’s 1984 decision in Chevron U.S.A. vs. Natural Resources Defense Council, which the Court believed was based incorrectly on the assumption that Congress intended to delegate interpretative authority to federal agencies when the law is ambiguous. The Court noted that the Administrative Procedure Act of 1946 requires courts, not agencies, to “decide all relevant questions of law” when reviewing agency action.
Currently, the full impact of the Court’s decision on benefits regulations and subregulatory guidance is unknown. Ultimately, it seems likely that parties to litigation will challenge agency interpretations based on Loper. The scope of the impact of Loper on current and future benefits regulations and guidance is yet to be determined.
Health Savings Accounts, Flexible Spending Accounts, and Other Consumer Directed Accounts
HSA/telehealth extension ends for plan years beginning on or after January 1, 2025
Generally, telehealth services provided before the statutory minimum HDHP deductible is met (except for permissible coverage like preventive care or certain permitted insurance/coverage) can cause a loss of HSA eligibility. The CARES Act enacted during COVID allows pre-HDHP deductible coverage for telehealth and other remote care services. This provision has been extended twice in the past but is set to expire at year-end for new plan years commencing in 2025. Without a further extension, for plan years beginning on or after January 1, 2025, pre-HDHP deductible coverage for telehealth and other remote care services will disqualify an individual from contributing to an HSA.
Final rule for ERISA investment advice fiduciaries
On April 25, 2024, the DOL published its final rule on the definition of an ERISA investment advice fiduciary. Although most discussions on this final rule focus on ERISA qualified retirement plans, the rule also applies to HSAs. This means entities that provide investment recommendations (which the new final rule broadly defines) and receive compensation must comply with the rule (and prohibited transaction exemption 2020-02) or they risk engaging in a prohibited transaction. The final rule was initially set to begin on September 23, 2024 (150 days after publication), but challenges in two Texas courts have blocked the rule from going into effect. It also remains to be seen if the incoming Administration will retain the rule in its current form. In the meantime, entities that provide investment recommendations to HSAs should get familiar with the new rule and compliance steps for prohibited transaction exemption 2020-02. Also see Interpretive Bulletin 96-1 ,which includes a limited exception for investment education.
Employee choice programs – Private Letter Ruling 202434006
In Private Letter Ruling 202434006, which is binding only on the taxpayer requesting it, the IRS approved an arrangement that allows employees to make an annual irrevocable election to direct employer contributions to an HSA, retiree health reimbursement arrangement (HRA), education assistance program, or the employer 401(k) plan. This arrangement apparently avoids violating the constructive receipt doctrine and HRA rules because the choice is made annually before the start of the calendar year and employees do not have a choice to receive the contribution in the form of taxable income. Compliance considerations for such an arrangement include: the funds must be an employer contribution, not salary reduction; the arrangement must conform to plan limits; potential nondiscrimination testing issues; and the variety of choice creating additional administrative complexity.
New eligible expense for HSAs, FSAs, and HRAs, as well as pre-deductible preventive care for HSAs
The IRS issued a safe harbor that treats condoms as medical care under Code Section 213(d). As a result, FSAs, HRAs, and HSAs can now reimburse expenses for condoms. Similarly, the IRS expanded pre-deductible preventive care coverage for HSA-compatible HDHPs to include condoms, as well as over-the-counter oral contraceptives, breast cancer screenings other than mammograms (for example, MRI or ultrasound) for individuals who have not been diagnosed with breast cancer, continuous glucose monitors for individuals diagnosed with diabetes (as is the case with other glucometers), and insulin products regardless of whether prescribed to treat an individual diagnosed with diabetes or prescribed to prevent exacerbation of diabetes or development of a secondary condition. However, the IRS did not extend pre-deductible preventive care for HDHPs to include other male contraceptives, such as male sterilization.
Cafeteria plan amendment for enrollment in a qualified health plan
In 2022, the IRS added a new election change event for cafeteria plans to coordinate with enrollment in a qualified health plan through an exchange.
The IRS allowed employers to amend their cafeteria plans for this new election change event at any time on or before the last day of the plan year that begins in 2024. Thus, employers that offered the new permitted election change event for a plan year that begins in 2023 should adopt an amendment and notify participants by the end of their cafeteria plan’s 2024 plan year, which for calendar-year plans is December 31, 2024.
Cost-of-living adjustments
The IRS has adjusted certain limits for 2025, including:
Health and Welfare Fiduciary Committees
Litigation aimed at fiduciaries of health and welfare plans was on the rise in 2024, particularly with respect to the cost of prescription drugs and fees paid to pharmacy benefit managers (PBMs). Transparency requirements that went into effect in recent years, which require plans to post their prescription drug costs online, may have played a role, as well as increased scrutiny at the federal level of PBMs generally. When excess fee litigation began to hit qualified retirement plans a couple of decades ago, plan sponsors responded by appointing fiduciary committees to manage and oversee the process of choosing and monitoring plan services providers, but often these committees do not have oversight of the health and welfare plans. These lawsuits serve as a reminder to plan sponsors that ERISA’s fiduciary duties also apply to the selection and monitoring of service providers to the health and welfare plans.
Some basic best practices to get started include:
- Formally establish and document a fiduciary committee for the health and welfare plans.
- Consider a committee charter to provide clarification of the responsibilities delegated to the committee and specify any limitations on committee authority.
- Schedule routine committee meetings and maintain a compliance calendar to stay on top of routine compliance items.
- Obtain fiduciary liability insurance for the health and welfare committee. If your organization already has fiduciary liability insurance, check the policy to make sure that it covers the health and welfare plan fiduciaries. Note that fiduciary liability insurance is not the same as an ERISA bond.
- Train fiduciaries on key responsibilities related to their fiduciary duties. Fiduciaries should also be able to identify when an arrangement with a service provider could raise prohibited transaction red flags.
- Hire experts to assist with the selection and monitoring of service providers when the committee lacks expertise.
Tobacco Use Surcharge Litigation
In addition to DOL actions, over 20 class action cases have been filed against plans with tobacco use surcharges. These actions typically have three common claims:
- The plan did not provide proper notice of a reasonable alternative standard. Regulations require notice of a right to a reasonable alternative standard in all materials describing the terms of the program.
- The plan did not apply the reward retroactively when the participant satisfied the reasonable alternative standard. Regulations require the same reward to be available to those who complete the reasonable alternative standard.
- The time for completing the reasonable alternative standard is too short. Notably, the regulations do not specify a specific period to complete the reasonable alternative standard.
Plans should review their wellness programs (including tobacco surcharges) to ensure compliance with applicable rules, particularly with respect to reasonable alternative standards. Litigating and settling claims involving tobacco surcharges can be costly. Plaintiffs have even been known to add tobacco surcharge claims to other unrelated claims, such as wage-and-hour claims.
Preventive Services Litigation
In Braidwood Management Inc. v. Becerra, the Fifth Circuit held unconstitutional the requirement under the Affordable Care Act (ACA) for plans to provide certain preventive services recommended by the U.S. Preventive Service Task Force (USPSTF). The Fifth Circuit ruled the requirement unconstitutional because the USPSTF’s members were not nominated by the President and confirmed by the Senate as required by the Constitution. However, the Fifth Circuit reversed the lower court’s earlier decision to vacate all actions to enforce the USPSTF recommendations and enjoin enforcement nationwide. Accordingly, HHS is only enjoined from enforcing the USPSTF recommendations against the parties named in the suit. The Fifth Circuit remanded to the lower court the decision of whether the Constitution requires members of the Health Resources and Services Administration and Advisory Committee on Immunization Practices, which also have input on ACA preventive coverage, to be nominated by the President and confirmed by the Senate.
No Surprises Act Qualifying Payment Amount
The Texas Medical Association (TMA) has launched numerous challenges to the qualifying payment amount (QPA) under the No Surprises Act (NSA). The QPA is used to determine a participant’s cost sharing and factors into what the plan pays the provider if a claim goes to the NSA’s independent dispute resolution (IDR) process. The Biden Administration lost each of the TMA’s challenges involving the QPA in district court. However, in Texas Medical Association v. Becerra, the Fifth Circuit reversed the district court and upheld the Biden Administration regulations on several aspects of calculating the QPA.
- “Ghost rates” – These are described as rates for a service negotiated between a provider and a plan/insurer for which there are no actual claims. The district court held these “ghost rates” could not be used in calculating the QPA. The Fifth Circuit ruled they could.
- Incentives – The district court held that risk sharing, bonus, penalty, or other incentive-based or retrospective payments or payment adjustments must be included in calculating the QPA. The Fifth Circuit said they could be excluded.
- Special case-specific agreements with providers – The district court held that these agreements must be considered when calculating the QPA even though the regulations said they could be excluded. The Fifth Circuit held that they cannot be considered.
The Fifth Circuit also held that plans do not need to provide more information on the QPA than the regulations require currently. However, the Fifth Circuit upheld the district court’s decision that a 30-day period for a plan to decide an NSA claim runs from the receipt of the claim rather than 30 days from the receipt of a “clean claim,” as the regulations provided. The Fifth Circuit did not address the district court’s ruling that a third-party administrator must calculate the QPA on a plan-by-plan basis rather than its entire self-funded plan “book of business.” This aspect of the district court’s decision appears applicable and could present an issue for smaller self-funded plans in particular. It is not clear how calculating the QPA on a plan-by-plan basis works for a small level-funded plan.
Issues in Prescription Drug Coverage
Prescription drug coverage has been under scrutiny from several directions for the last few years, from PBMs to drug manufacturer assistance programs. We review where we are and what’s ahead in 2025.
Which drugs are EHBs
The final 2025 notice of benefit and payment parameters (NBPP) requires prescription drugs in excess of those covered by a state’s essential health benefit (EHB) benchmark plan to be treated as EHBs for non-grandfathered individual and small group insurance market plans. This means drugs in excess of the EHB benchmark must count toward the ACA’s maximum out-of-pocket amount (MOOP). Regulators have not applied this requirement to large group and self-funded plans. However, regulators indicated that they intend to propose rulemaking that would apply to large group and self-funded plans. Plans with copay accumulator and maximizer programs in particular should watch for these regulations.
Suits against copay accumulator programs
In late 2023, in HIV and Hepatitis Policy Institute, et al. v. HHS, the U.S. District Court for the District of Columbia vacated a 2021 NBPP drafted by the first Trump Administration that allowed plans to exclude manufacturer assistance in calculating the ACA MOOP. HHS dropped its appeal and, consistent with the 2020 NBPP, now plans are not required to count copay assistance for EHBs toward the ACA MOOP if a generic drug is available. If a generic is not available then, under the district court’s decision, there is a requirement to count the manufacturer assistance toward the ACA MOOP. In the litigation, however, HHS indicated that, pending final rulemaking, it would not take legal action against employers who continued to not to apply the manufacturer’s assistance toward the ACA MOOP in all instances. That informal nonenforcement position of HHS would not apply to private litigants. Additionally, fully insured plans might be required by state law to count copay assistance toward the ACA MOOP. It remains to be seen if and how the incoming Trump Administration will react to the court’s decision to vacate its rule.
Note that this applies to the ACA MOOP and not the issue of whether to apply the manufacturer’s assistance to the deductible. HDHPs are still prohibited from counting the manufacturer assistance toward the HDHP minimum deductible. This could ultimately create systems issues where “accumulators” are tracked differently – excluding the manufacturer assistances for the deductible but including them for the ACA MOOP.
Attack on rebate retention practices by the Federal Trade Commission
The Federal Trade Commission (FTC) issued an administrative complaint against three PBMs. The complaint alleges that these PBMs “created a perverse drug rebate system that prioritizes high rebates from drug manufacturers, leading to artificially inflated insulin list prices. The complaint charges that even when lower list price insulins became available that could have been more affordable for vulnerable patients, the PBMs systemically excluded them in favor of high list price, highly rebated insulin products.” On November 19, 2024, the PBMs filed suit against the FTC in the Eastern District of Missouri, seeking an injunction against the FTC’s administrative proceedings. The PBMs allege that the Constitution prohibits the FTC from deciding private rights and revising private contracts. The PBMs also allege that FTC proceedings violate their Due Process rights because the same FTC commissioners that issued the complaint will decide it.
Preemption of state PBM laws by ERISA
In August 2023, in Pharmaceutical Care Management Association v. Mulready, the Tenth Circuit reversed a district court’s ruling and held that ERISA and Medicare Part D preempted parts of Oklahoma’s Patient’s Right to Pharmacy Choice Act. At issue are the law’s:
- Geographic standards imposed on networks (network access standards).
- Prohibition against requirements or incentives for using a particular network (discount prohibition).
- Any willing pharmacy requirement (AWP).
- Prohibitions against terminating pharmacists from networks because they are on probation.
Oklahoma petitioned for a rehearing and filed a motion to stay so that it could enforce the law, but the Tenth Circuit denied both. In May 2024, Oklahoma petitioned the U.S. Supreme Court for review. The Court has not decided whether to review the case yet, but on October 7, 2024, it invited the U.S. solicitor general to file a brief expressing the views of the United States.
HIPAA Privacy Updates
Reproductive health care updates
HHS published its final HIPAA Privacy Rule to Support Reproductive Health Care Privacy on April 26, 2024. The rule prohibits HIPAA covered entities and their business associates from using or disclosing protected health information (PHI) related to reproductive health care for certain investigatory-type purposes if the health care itself is provided lawfully. For uses and disclosures for certain permitted purposes, the plan will need to obtain an attestation from the requestor even if the PHI is only “potentially” related to reproductive health care. This attestation is not required for uses and disclosures to other covered entities or business associates, but it is still required for uses and disclosures for investigatory-type purposes when the health care was not provided lawfully.
Unless the covered entity is the same person or entity that provided the reproductive health care related to the request, the final rule allows HIPAA-regulated entities that receive such requests to presume that the reproductive health care was provided lawfully. The requestor can provide information to rebut that presumption, but even then, the regulated entity can deny the request.
- The final rule is effective June 25, 2024, and the compliance deadline is generally December 23, 2024.
- The compliance deadline for updating notices of privacy practices (NPP) is February 16, 2026.
- Regulated entities will need to take the following compliance steps by December 23, 2024:
- Review HIPAA policies and procedures and update to comply with the final rule.
- Review business associate agreements and amend if inconsistent with the final rule.
- Train any personnel that handle requests for PHI on the use of attestations and changes to the policies and procedures.
Final Part 2 regulations align with HIPAA rules
On February 16, 2024, HHS, through the Substance Abuse and Mental Health Services Administration and the Office for Civil Rights (OCR), published final regulations on the confidentiality of substance use disorder (SUD) patient records under 45 CFR Part 2. Many of the entities that use, disclose, and maintain SUD records are also covered entities under HIPAA or HIPAA business associates. In general, Part 2 protects SUD information obtained by any federally assisted program and are more stringent than HIPAA. They generally prohibit disclosure of the records in investigations or procedures against the patient without written consent or a court order. The final regulations align aspects of the Part 2 rules regarding patient confidentiality of SUD records with the HIPAA Privacy Rule as required by Section 3221 of the CARES Act.
Plan sponsors need to be mindful of the ways HIPAA Part 2 regulations affect compliance for their own employer health plans. For example, SUD records may be used or disclosed for an employee assistance plan (EAP), or for mental health/substance use disorder benefits offered through the major medical plan. Updates consistent with these new Part 2 requirements include amendments to service agreements and HIPAA business associate agreements for any vendors with access to SUD records. Plan sponsors will also need to update the HIPAA notice of privacy practices, HIPAA policies and procedures, and participant forms.
The Part 2 regulatory update:
- Applies the HIPAA breach notification rules to SUD records.
- Applies HIPAA enforcement approach and authorities (including the HITECH culpability tiers) to noncompliance with Part 2 regulations.
- Allows complaints to HHS regarding SUD records.
- Adds a patient notice obligation for SUD records and allows covered entities to combine with the HIPAA notice of privacy practices.
Enforcement of the Final Part 2 Regulations begins February 15, 2026.
Proposed rule on cybersecurity and expanded OCR enforcement forthcoming
HHS filed recently an abstract of a proposed rule with the White House Office of Information and Regulatory Affairs. According to the abstract, the proposed rule will formalize certain cybersecurity requirements and allow OCR to expand enforcement. The proposed rule is likely a response to the rise of ransomware and hacking incidents to gain access to electronic protected health information. The proposed rule will likely align with HHS’s cybersecurity performance goals released earlier this year. The proposed rule may also include HHS’s tracking technologies guidance. HHS is expected to publish the proposed rule by the end of 2024.
DOL Cybersecurity Guidance
In September 2024, the DOL clarified that its April 2021 cybersecurity guidance generally applies to all employee benefit plans, including health and welfare plans. The DOL intended the 2021 guidance to help plan sponsors, fiduciaries, service providers, and participants in plans safeguard plan data, personal information, and plan assets. The guidance has three parts:
- Tips for hiring a service provider: Includes recommended RFP questions and contract terms for plan sponsors.
- Cybersecurity program best practices:
- Lists 12 cybersecurity best practices for service providers that the DOL would expect to see if auditing the plan or a service provider.
- States that pension and health and welfare plans are tempting targets for cyber criminals because the plans (1) often hold millions of dollars in assets; and (2) store and/or transfer participants’ personally identifiable data.
- Online Security Tips: Includes tips for participants and beneficiaries to reduce the risk of fraud.
Health and welfare plans should ensure compliance with the DOL’s cybersecurity guidance now that the department has clarified that the guidance does not apply only to retirement plans.
Gag Clause Changes
Group health plans (GHPs) and health insurance issuers must annually attest compliance with gag clause prohibitions and submit gag clause prohibition compliance attestations (GCPCAs) by December 31 every year. The Centers for Medicare and Medicaid Services says brokers, agents, TPAs, PBMs, and other entities attesting on behalf of GHPs and issuers should notify the GHP or issuer. GHPs or issuers, or those submitting on their behalf, should submit GCPCAs via the CMS portal.
Short-Term, Limited-Duration Insurance Notice Requirement
On March 28, 2024, HHS, the DOL, and the Department of the Treasury released final rules for short-term, limited-duration insurance (STLDI) and certain fixed-indemnity-excepted benefit coverage. The rule is intended to reduce confusing STLDI and fixed-indemnity coverage with ACA-compliant coverage. For STLDI, the final rule adopted the proposed rule published on July 12, 2023. However, the final rule did not adopt most of the proposed rules for fixed-indemnity coverage, with the notable exception of the proposed rule’s notice requirement for fixed-indemnity coverage that as finalized takes effect January 1, 2025.
This notice requirement applies to both plans and insurance issuers. The plan or issuer must display the notice prominently on the first page (either in paper or electronic form, including on a website) of any marketing, application, and enrollment materials provided to participants before the time they are given the opportunity to enroll. The notice must be in 14-point font and include the language in the final rule. Employers should ensure they are in compliance with this notice requirement because it applies to plans and, depending on the circumstances, might not be satisfied by the insurance issuer for their plan.
Although the final rule is in effect, it has been challenged by the American Association of Ancillary Benefits, as well as Manhattan Life Insurance and Annuity Company, in the Eastern District of Texas. In a December 4, 2024 “final judgment” in favor of Manhattan Life, the district court vacated the rule’s notice requirements for fixed-indemnity insurance policies, but the court did not rule on the notice requirement for STLDI policies. The court ruled that the notice requirement for fixed-indemnity coverage exceeded HHS’s statutory authority and was not a logical outgrowth of the compelled notice in HHS’s notice of proposed rulemaking. The scope of the court’s decision and whether HHS chooses to appeal remain to be seen. Additionally, the court’s decision in American Association of Ancillary Benefits is still forthcoming.
Disaster Relief Filing Extensions
Deadlines vary depending upon the disaster and locality. Details on all recent disaster relief for presidentially declared disasters are on the IRS’s Around the nation page. Currently:
- Taxpayers in all or parts of Connecticut, Florida, Illinois, Kentucky, Louisiana, Minnesota, Missouri, New York, Pennsylvania, Puerto Rico, South Dakota, Texas, Vermont, Virgin Islands, and Washington State have until Feb. 3, 2025 to file their 2023 tax year returns.
- For Hurricanes Helene or Milton, taxpayers in all of Alabama, Florida, Georgia, North Carolina, South Carolina, and in affected parts of Tennessee and Virginia will have until May 1, 2025 to file their 2023 tax year returns.
The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. The DOL automatically recognizes these extensions for Form 5500 filing.
The DOL Employee Benefits Security Administration and the Treasury/IRS also published an extension of time frames in the Federal Register on November 8, 2024 for Hurricane and Tropical Storm Helene and Hurricane Milton. These “disaster areas” are those areas designated as eligible for individual assistance by FEMA due to a particular storm. It is narrower in some states than the IRS’s tax filing relief. The extension of time frames for relief applies to:
- A participant, beneficiary, COBRA-qualified beneficiary, or claimant in group health plans, disability, and other employee welfare benefit plans (including pension) subject to ERISA or the Internal Revenue Code who (1) resided, lived, or worked in one of the disaster areas at the time of the hurricanes or tropical storm; or (2) whose coverage was under an employee benefit plan that was directly affected.
- Group health plans subject to ERISA and the Internal Revenue Code and their sponsors and TPAs affected by the hurricanes or tropical storms.
For participants, beneficiaries, COBRA-qualified beneficiaries, and claimants, the DOL and IRS provide mandatory extensions until May 1, 2025 that operate similar to those of the COVID outbreak period in that the “relief period” must be disregarded for certain deadline and timeframes. The agencies give group health plans the ability to disregard a “relief period” for COBRA election notices.
Please see our advisory for more details: When Disaster Strikes: Issues and Relief for Health Benefit Plans.
ACA Nondiscrimination 1557
On May 6, 2024, HHS finalized the latest rule for nondiscrimination in health programs and activities under Section 1557 of the ACA. Section 1557 prohibits a “health program or activity” that receives federal financial assistance (FFA) from discriminating against an individual on the basis of race, color, national origin, sex, age, or disability. The mandate also applies to a program or activity that is administered by an executive agency or by an entity established by Title I of the ACA. HHS has issued final regulations under Section 1557 twice before – once in 2016 and again in 2020. The 2024 rule resurrects and revises several concepts and policies from the 2016 rule that the 2020 rule had repealed or amended (e.g., notices and grievance procedures). HHS also revised its interpretation of Medicare as constituting FFA (and thus triggering Section 1557) and provisions related to discrimination on the basis of sex.
Generally, any health program or activity that receives FFA from HHS or that is administered by an executive agency or by an entity established by Title I of the ACA is covered by the 2024 rule (with a limited exemption for federal religious freedom and conscience objections).
In a departure from the 2020 rule (and a return to the 2016 rule), the definition of “health program or activity” includes “health insurance issuer,” which has implications for insurer TPAs and the self-insured plans they administer.
The 2024 rule does not apply to any “employer or other plan sponsor” of a group health plan with regard to its “employment practices,” including the “provision of employee health benefits,” which “includes when the Federal financial assistance received is for their employee health benefits.” The 2024 rule applies to telehealth and treats Medicare Part B as FFA. What does a covered entity need to do to comply with the 2024 rule?
- Provide an assurance when applying for FFA that it will comply as a condition of receiving the FFA. Duration of this obligation lasts for as long as the FFA is extended.
- If the covered entity employs 15 or more employees, the covered entity must designate a Section 1557 coordinator to ensure compliance, manage the grievance procedure, and coordinate training.
- Implement written policies and procedures, including a nondiscrimination policy, grievance procedures, language access procedures, effective communication procedures, and reasonable modification procedures.
- Provide training to the relevant employees to implement the policies and procedures.
- Provide the following notices:
- Notice of nondiscrimination, which must include (among other things) how to obtain language assistance services and appropriate auxiliary aids, contact information for the Section 1557 coordinator, and how to file a grievance with the covered entity and a complaint with OCR.
- Notice of availability of language assistance and auxiliary aids and services.
Conclusion
Those involved with health and welfare plan administration and compliance have a lot to think about before 2024 closes. It’s not likely that 2025 will bring any respite for year-end efforts. It seems inevitable that the incoming presidential administration will have new goals and priorities that will require action by health and welfare plans and their vendors.
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If you have any questions, or would like additional information, please contact one of the attorneys on our Employee Benefits & Executive Compensation Team.