Compliance Monthly Update: August 2023

A brief update on what happened the prior month in group health plan compliance at the federal level, organized chronologically. If you would like additional information, please reach out to the GBS Compliance Team.

Surprise billing IDR process (continuing) litigation and portal shutdowns.

There were two new court rulings this month that struck down HHS guidance related to the No Surprises Act’s independent dispute resolution (IDR) process. As a reminder, the No Surprises Act expanded patient protections to shield individuals from surprise medical bills for certain out-of-network emergency and non-emergency services and provides an IDR process to resolve payment disputes between health plans and providers.

Following on prior court ruling that had vacated portions of HHS rules on the IDR process, on August 3, a federal court ruled that HHS violated the Administrative Procedure Act (APA) when it issued IDR process guidance that increased the IDR fee from $50 to $350 per disputing party and provided a batching rule that made it difficult to “batch” related claims for resolution in a single proceeding. The court ruled that HHS had improperly bypassed the APA’s notice-and-comment requirement when it issued the fee and batching guidance. In response to the ruling, HHS announced the temporary suspension of the federal IDR process (including the ability to initiate new disputes) pending further instructions.
On August 11, HHS issued FAQ guidance addressing the August 3 court ruling and in part announced a reversion back to the $50 IDR process fee until the agencies take action to set a new administrative fee amount.
On August 24, the same federal court vacated additional portions of regulations implementing the surprise billing IDR rules regarding how to calculate the qualifying payment amount (QPA) when resolving disputes. The QPA generally is the median of the plan’s contracted rates with participating providers for the item or service in the geographic region. The court vacated provisions that: allowed the inclusion of “ghost rates” (rates for services that a particular provider has not provided) and rates for providers outside the applicable specialty; excluded bonus or other incentive payments from the rate calculation; and allowed self-insured plan calculations to be based on the rates of other self-insured plans administered by the same TPA.
In response to the August 24 decision, all federal IDR process operations have (again) been temporarily suspended in order to make changes necessary to comply with the court’s opinion and order. The agencies indicate that disputing parties should continue to engage in open negotiation.
This litigation seems unlikely to be resolved any time soon. There has been a growing backlog of IDR cases due to the continued litigation and the unexpectedly high number of filed disputes. The regulatory agencies previously advised they were considering improvements to speed up IDR determinations and payments. But, the continued litigation and the suspension(s) of the IDR process will exacerbate the growing backlog.

Updated model CHIP Notice released.

The DOL has released a new model employer CHIP Notice (available HERE) with information current as of July 31, 2023. As a reminder, group health plans that maintain a plan with participants who reside in a state that provides premium assistance under Medicaid or CHIP have an annual notice requirement to notify employees of the potential opportunities for premium assistance. The model CHIP notice is updated periodically to reflect changes in the states that offer premium assistance and changes to the relevant state contact information.

DOL releases a publication for employees to help understand mental health benefits.

The DOL released a publication titled “Understanding Your Mental Health and Substance Use Disorder Benefits” that is designed to help employees with the following (related to Mental Health Parity rules):

(1) figure out whether your health plan must provide parity and follow these rules,

(2) explains the protections the law provides,

(3) highlights ‘red flags’ to look out for,

(4) tells you how to learn about your mental health and substance use disorder benefits, and

(5) walks you through what to do if coverage of your mental health and substance use disorder benefits has been denied. Following on the Mental Health Parity proposed rules and report to Congress that was released and discussed in last month’s compliance update, this employee publication further demonstrates the regulatory agencies’ enforcement focus and prioritization of the Mental Health Parity rules.

2024 ACA affordability percentage decreases significantly to 8.39%.

The IRS announced ACA affordability percentage indexing adjustments for plan years beginning in 2024. The affordability percentage for 2024 is 8.39% (dropping significantly from 9.12% for 2023). This is by far the lowest affordability percentage since the ACA employer mandate took effect in 2015. As a reminder, the failure to offer affordable, minimum value coverage to full-time employees may result in employer shared responsibility penalties. So, the adjustments to the affordability percentage will be of interest to applicable large employers (ALEs) in setting their 2024 plan year employer contribution rates.

Tenth Circuit Court rules in favor of ERISA preemption of state PBM law.

The Tenth Circuit issued a ruling that ERISA preempts provisions of an Oklahoma law regulating pharmacy benefit managers (PBMs). The state law was intended to curtail the power of PBMs and support independent pharmacies by imposing network restrictions that establish geographic parameters for PBM networks; prohibit PBMs from promoting in-network pharmacies by offering cost-sharing discounts; and require that every pharmacy willing to accept the PBM’s terms be allowed into its preferred network. In addition, the law prevented PBMs from terminating a pharmacy’s contract because one of its pharmacists is on probation with the state pharmacy board.

As background, ERISA’s broad preemption language has historically prevented states from regulating ERISA-covered plans if the state law included an impermissible reference to or had an impermissible connection with the ERISA-covered plan. An impermissible connection with a plan can arise when the state law dictates the benefit design of the plan, upsets nationally uniform plan administration, or imposes parallel or additional requirements on central matters of plan administration governed by ERISA.
This court ruled that—in contrast with state PBM laws that have been held not preempted because they merely increase costs or altered incentives for ERISA plans without forcing them to adopt any particular coverage—here, the network restrictions governed central matters of plan administration and thus had an impermissible connection with ERISA plans. Also, the probation provision effectively dictated which pharmacies must be included in a plan’s PBM network since PBMs could not oppose those employing pharmacists on probation. Therefore, the court held that the network restrictions and the probation provision were preempted as applied to ERISA plans.
There will likely be continued state attempts to mandate benefit plan structure through PBM legislation, and therefore litigation will continue surrounding those attempts and the complicated ERISA preemption legal framework.

State/Local Compliance Update: August 2023

A brief update on what happened the prior month in group health plan compliance at the state and local level, listed alphabetically. If you would like additional information, please reach out to the GBS Compliance Team.

California

San Francisco 2024 HCSO expenditure rates posted. San Francisco has posted the 2024 minimum healthcare expenditure (HCE) rates under the San Francisco Health Care Security Ordinance (HCSO). The HCSO applies to employers that must obtain a San Francisco business registration certificate and have at least 20 employees in any location if at least one works in the city or county of San Francisco. The HCE is the minimum amount covered employers must spend on healthcare for each hour worked by a covered employee. Employers subject to the HCSO also need to submit an annual reporting form by each April 30 and comply with notice posting requirements. Also note that self-insured employers have until February 1st each year to top-off expenditure rates for the prior year if the employer failed to make the required healthcare expenditures during the prior year.
California issues alert on false and misleading marketing tactics related to long-term care. As background, in 2019, California passed a law creating a task force to examine the design and implementation of a potential long-term care (LTC) insurance program. The task force is expected to release a final recommendation, along with an actuarial report, by the end of this year—after which the State legislature will decide whether to pass legislation enacting a LTC program. The State Department of Insurance (DOI) received complaints about false and misleading communications by some brokers and LTC insurers that a new payroll tax will be imposed in the near future and that consumer should rush to buy LTC insurance before the end of 2023 (in part to meet a presumed opt-out deadline). In response to these complaints, the CA DOI issued an alert stating that:
- The Legislature has not created a public LTC insurance program.
- No payroll tax is being implemented at this time.
- There is no enactment date or deadline to buy LTC insurance before a state-imposed deadline.
- California law protects consumers from misleading statements by insurers and agents.
- Any communication that states that a public LTC program will be enacted on January 1, 2024, or on any other specific date, is untrue and a presumed knowing violation of the law.

Colorado

New definition of wages adopted for Colorado’s Family and Medical Leave Insurance (FAMLI) program. The state of Colorado announced newly adopted regulations that made changes to the definition of “wages” that will go into effect in 2024. In an attempt to make things simpler, under the new definition, FAMLI “wages” will mean “gross wages” and will include typical employer compensation. Premiums and benefits will be calculated using this new definition starting January 1, 2024.
Colorado contraceptive coverage mandate goes into effect. On August 7, SB23-284 went into effect that requires state-regulated carriers that offers a health benefit plan or a pharmacy benefit management firm that administers or manages contraception coverage under a health benefit plan (PBM) to provide coverage for, and reimburse a prescribing provider or in-network dispensing entity for, the single dispensing or furnishing of contraception intended to last the covered person for a duration of 12 months, as permitted by the covered person’s prescription, dispensed or furnished at one time, unless requested otherwise by the covered person.

Connecticut

Connecticut’s new healthcare affordability law. The state of Connecticut passed An Act Protecting Patients and Prohibiting Unnecessary Health Care Costs (set to take effect July 1, 2024) that includes provisions to provide a state-level Rx discount program and to increase price transparency for high-cost drugs. Under the law, residents of Connecticut will be eligible to receive a Rx discount card with discounts of up to 20% on name-brand drugs and up to 80% on generic drugs. The law also bans anti-competitive contracting provisions including: (a) anti-tiering clauses that require a health plan to extend preferred value tier status to all facilities in a health system, (b) anti-steering clauses that prohibit insurers from using incentives to direct patients to high value providers, (c) “all-or-nothing” clauses that require health plans to accept all providers in a health care system, and (d) gag clauses that prevent the parties from disclosing price, terms, or other relevant information to a third party.

Florida

Florida issues informational memorandum related to new PBM law. The Florida Office of Insurance Regulation (OIR) issued Information Memorandum OIR-23-04M on July 19 to PBMs to notify how OIR will implement portions of the Prescription Drug Reform Act that was signed into law this past May.

Illinois

Amendment to VESSA expands leave available for grieving families. Governor Pritzker signed HB 2493 on July 28 that amended the Illinois Victims’ Economic Security and Safety Act (VESSA) to expand leave available to Illinois employees grieving a family member’s death arising from a crime of violence. The law will go into effect January 1, 2024.
- Prior to the amendment, VESSA permitted employees to take leave for the following reasons: to seek medical attention or counseling services related to domestic or sexual violence or crimes of violence; to obtain services from a victim services organization; to obtain legal assistance; and to participate in safety planning.
- Under the amendment, employees also may take leave: (1) to attend the funeral or alternative to funeral or wake of a family or household member who is killed in a crime of violence; (2) to make arrangements necessitated by the death of a family or household member who is killed in a crime of violence; or (3) to grieve the death of a family or household member who is killed in a crime of violence.
- Note that the Illinois Family Bereavement Leave Act (FBLA) entitles eligible employees to up to two weeks of unpaid leave time following the death of a covered family member, among other reasons. Employees are entitled to up to six weeks of leave in the event of the death of more than one covered family member in a 12-month period. FBLA covers only employees eligible for federal Family and Medical Leave Act leave, while VESSA covers all Illinois employees. If an employee is entitled to leave under FBLA, amended VESSA does not create a right for the employee to take bereavement leave that exceeds or is in addition to leave to which the employee is entitled under FBLA.
Illinois passes law to provide extended child bereavement leave. Illinois passed a new law that will extend the amount of unpaid leave that employees are entitled to for certain categories of child bereavement. Governor Pritzker signed the Child Extended Bereavement Leave Act (CEBLA) on August 4, 2023, and it will take effect on January 1, 2024. The CEBLA requires covered Illinois employers with 50 or more employees to allow additional amounts of unpaid leave to employees who suffer the loss of a child due to homicide or suicide.

Oregon

Paid Leave Oregon benefits beginning. As of September 3, 2023, employees can now receive paid leave benefits through Paid Leave Oregon. Employer and employee contributions began January 1, 2023, and employees can apply for paid leave benefits starting September 3, 2023. Eligible employees can take up to 12 weeks paid leave in a 52-week period—and, may be able to take an additional 2 weeks (up to 14 total weeks) for pregnancy, birth, or health needs because of childbirth. See the Paid Leave Oregon website for more information.

Puerto Rico

First Circuit holds Law 41-2022 null and void. On August 10, the First Circuit affirmed a prior ruling declaring Puerto Rico’s Law 41-2022 null and void. Law 41-2022 sought to repeal some of the reductions in benefits enacted by the 2017 Labor Reform (Law 4-2017) for employees hired on or after January 26, 2017, including the reduction in the vacation accumulation rates, the increase in the number of hours worked to qualify for the Christmas bonus, the cap on the statutory severance, the extension of the automatic probationary period, and the shortening of the statute of limitations to file employment-related claims. This means that Puerto Rico employers must continue to follow the employment regulations in force prior to July 20, 2022 (the effective date of Law 41-2022), which were incorporated by the 2017 Labor Reform.

Compliance Monthly Update: August 2023