Compliance in Motion – January 2025

Jan 15, 2025

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JANUARY 2025

Congress Has Not Yet Passed Telehealth Relief for HSAs

The bipartisan deal originally struck to prevent government shutdown included a two-year extension allowing telehealth benefits at low- or no-cost before the deductible in an HSA-qualified plan. However, that deal ultimately did not pass, and what Congress settled on did not include an extension of telehealth relief for HSAs.

WHO THIS APPLIES TO:

Employers of all sizes with an HSA-qualified HDHP coupled with a telehealth benefit.

As a reminder, high deductible health plans (HDHPs) qualified to couple with a health savings account (HSA) can only allow payment for preventive care expenses before the federal minimum deductible is met. Otherwise, to be an HSA-qualified HDHP (or QHDHP), all non-preventive care must be subject to the deductible until the individual or family meets the federal minimum deductible. For telehealth, this means charging a fair market value (FMV) the remote care provider is willing to accept as payment in full for the care provided.

Since COVID, relief allowed QHDHPs to charge low- or no-cost sharing for telehealth without applying the deductible. However, unless Congress grants yet another extension, it looks like that relief is coming to a close.

Practical Impact to Employers:

Plan years beginning on or after January 1, 2025, need to plan on charging a FMV for non-preventive telehealth visits until the individual has met the federal minimum deductible required of QHDHPs.

If Congress eventually passes another extension, the employer should be ready to flip a switch allowing low- or no-cost sharing telehealth visits, possibly back to January 1, 2025.

GO DEEPER:

ACA Reporting Relief

The US Senate unanimously consented to passing two ACA reporting bills passed by the US House in June 2023. Both bills have been signed by the President and should help ease some of the ACA reporting burdens on applicable large employers (ALEs).

WHO THIS APPLIES TO:

Applicable Large Employers (ALEs) who must provide 1095-C forms.
Non-ALEs with level-funded or ICHRA plans who must provide 1095-B forms.

GO DEEPER:

Congress intends to ease administrative burdens on entities responsible for providing ACA reporting:

The Paperwork Burden Reduction Act (H.R. 3797):
- The IRS historically provided relief allowing entities responsible for providing 1095-B forms to notify plan participants on a public website that the 1095-B is available upon request (rather than automatically providing them to everyone enrolled).
- Congress is now making that relief official.
- As a reminder, small employers who sponsor level-funded or ICHRA plans must provide their own 1095-B forms to report months an employee and family members were enrolled in the level-funded or ICHRA plan.

NEW: Congress Also Extending the Same Relief to ALEs for Providing 1095-C Forms to Full-Time Employees:

The IRS historically required ALEs to actively provide 1095-C forms to all full-time employees.
Electronic delivery was possible with employee consent, but many ALEs were mailing the forms to most or all full-time employees.
Now, the ALE can provide notice on their public website that forms 1095-C are available upon request.

As a reminder of how the relief currently works, the entity’s public website must include a clear and conspicuous notice the average person could reasonably be expected to see and understand. For example, the entity’s main webpage could include a prominent link to “Tax Information” which takes the individual to a secondary page with all of the following:

“IMPORTANT HEALTH COVERAGE TAX DOCUMENTS” in all caps
Explanation of how to request a copy of Form 1095-B or 1095-C
Include the entity’s email address, mailing address, and telephone number

https://www.congress.gov/bill/118th-congress/house-bill/3797/text

The new law applies “for calendar years after 2023”. So, the 2024 1095-C forms ALEs provide in early 2025 are granted the new relief.

NOTE: The new law requires providing statements “not later than the later of January 31…or 30 days after the date of such request.”

With the new law’s wording, we will have to see if the IRS has authority to keep allowing an extra 30 days following January 31 to provide 1095 statements to individuals.
Currently, the final instructions for the 2024 forms due in early 2025 provide a 30-day extension after January 31 to provide statements to individuals, giving employers until March 2, 2025. It is possible the final instructions may have to be amended to remove that flexibility.

Employer Reporting Improvement Act (H.R. 3801):
- The IRS historically provided relief allowing enrolled dependents to be reported using their date of birth (DOB) when the employer can demonstrate making at least three attempts to request the dependent’s SSN or TIN. Congress has now made this relief official.
- The IRS historically allowed individuals to provide consent to electronic delivery of their 1095-B or 1095-C. This is now officially in the law, and such consent can be relied upon for future years until they withdraw their consent in writing.
- NEW: ALEs must be given at least 90 days to respond to §4980H ACA Employer Shared Responsibility Penalty (ESRP) letters starting with letters sent in 2025.
- NEW: The IRS has a six-year statute of limitations to collect an ESRP from an ALE, starting from “the due date for filing…(or, if later, the date such return was filed)”, for ACA reporting due in 2025 or after. To this point, ALEs had no statute of limitations on how far back the IRS could assess §4980H penalties.

Practical Impact to Employers:

Non-ALEs historically had the relief these bills discuss, so there is no new relief for non-ALEs (and possibly the removal of relief providing an extra 30 days after January 31 to provide statements to those who request it). However, Congress is providing welcome new relief for ALEs.

Not having to send 1095-C forms to everyone (as long as proper disclosure is on the ALE’s public website) should save a lot of postage costs, time assembling envelopes, and employee confusion around what they need to do with the form.
ALEs have often requested 30-day extensions to respond to an ESRP letter 226-J. So, automatically having 90 days for new letters sent starting in 2025 is welcome news.
In a huge win for employers, ALEs now have a statute of limitations on ESRP collections that is similar to recordkeeping requirements under ERISA (six years following the due date of the ACA reporting, or the date actually submitted if later).

Employers should review these administrative changes and consider the implications for upcoming ACA reporting deadlines in early 2025.

US District Court Strikes Down New Group Hospital Indemnity Notice Requirement

A US District Court for the Eastern District of Texas issued a final judgment vacating the new group hospital indemnity notice requirement nationwide.

The lawsuit was filed by hospital indemnity insurers who viewed the final rule issued in April 2024 as exceeding regulators’ authority on two fronts:

Failing to provide the new notice would make the group hospital fixed indemnity coverage lose its excepted benefits status, meaning it must comply with the ACA’s comprehensive major medical insurance rules.
- The statutes only require such a notice for individual, not group, fixed indemnity plans, so the insurers argued that regulators exceeded their authority in creating a new fourth requirement for group indemnity plans to be excepted benefits.
The new notice said the indemnity coverage is “not health insurance” when the proposal had been for it to say it is “not comprehensive health insurance.”
- The judge agreed this revised language “was not a logical outgrowth” of language previously proposed. It could be misconstrued by plan enrollees that fixed indemnity coverage is not insurance at all, when it actually is insurance but is not comprehensive coverage.
- As a result, the court also reversed the problematic new language needing to apply to individual indemnity plans, meaning they can continue to provide the notice they have been providing since 2014.

Practical Impact to Employers:

Employers who have adopted the new notice into their plan materials and/or enrollment websites may want to review this decision and determine whether to remove the new notice since it cannot be altered to add the word “comprehensive” to it.

https://litigationtracker.law.georgetown.edu/wp-content/uploads/2024/05/ManhattanLife-Insurance-and-Annuity-Company-et-al_2024.12.04_FINAL-JUDGMENT.pdf
https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-L/part-2590/subpart-E/section-2590.732#p-2590.732(c)(4)(ii)(D)

PCORI Fee Amount Adjusted for 2025

Employers with a level-funded or self-funded health plan or a health reimbursement arrangement (HRA) must file and pay a Patient Centered Outcomes Research Institute (PCORI) fee each July. Insurance companies file and pay this fee for fully insured medical plans.

The IRS issued IRS Notice 2024-83 to increase the fee amount for plan years ending on/after October 1, 2024, and before October 1, 2025.

WHO THIS APPLIES TO:

Employers of all sizes with a level-funded, self-funded, or HRA plan that ended in 2024.

Impacted Individuals Eligible for Relief:

The updated PCORI fee amount is $3.47 multiplied by the average number of lives covered under the plan.

For employers with a 2024 calendar year plan, $3.47 is the fee payable in July 2025.
For plan years that ended in 2024 but before October 1, 2024, the fee payable in July 2025 is $3.22 multiplied by the average number of lives covered under the plan.
For HRAs, the respective fee is multiplied by the average number of covered employees instead of covered lives.
The fee is also payable for short plan years. This can result in potentially having to pay two fees for two plan years that ended in 2024, but they can be submitted together on one Form 720.

Below is a list that helps illustrate the fee based on plan year. Plan years ending in 2024 will owe the following PCORI Fee by July 31, 2025:

Typical 12-Month Plan Year (level-funded, self-funded, or HRA) will owe $3.22 for the following plan dates:
- Feb 1, 2023 through Jan 31, 2024
- Mar 1, 2023 through Feb 29, 2024
- Apr 1, 2023 through Mar 31, 2024
- May 1, 2023 through Apr 30, 2024
- Jun 1, 2023 through May 31, 2024
- Jul 1, 2023 through Jun 30, 2024
- Aug 1, 2023 through Jul 31, 2024
- Sep 1, 2023 through Aug 31, 2024
- Oct 1, 2023 through Sep 30, 2024

Typical 12-Month Plan Year (level-funded, self-funded, or HRA) will owe $3.47 for the following plan dates:

Nov 1, 2023 through Oct 31, 2024
Dec 1, 2023 through Nov 30, 2024
Jan 1, 2024 through Dec 31, 2024

Practical Impact to Employers:

The PCORI fee must be reported each year on the second-quarter version of IRS Form 720. The fee can be paid electronically or mailed to the IRS using the Form 720-V payment voucher.

Employers that are subject to PCORI fees but no other types of excise taxes should file Form 720 only for the second quarter. In other words, no filings are needed for the other quarters, only the second quarter.

Please note employers cannot file and pay this for the plan year that ended in 2024 until the updated second quarter form is released in mid-June 2025. There is no way to file and pay it before then.

Employers should keep records on file for four years demonstrating they filed and paid the fee along with the supporting documentation relied upon to determine average enrollment counts.

Agencies Withdraw Proposed Rule on Mandatory Contraceptive Coverage

Federal regulators at the Departments of the Treasury, Labor, and Health and Human Services are jointly withdrawing a proposed rule introduced February 2, 2023. In light of the 44,825 public comments received, they “have determined it appropriate to withdraw the proposed rules at this time to focus their time and resources on matters other than finalizing these rules. Additionally, in light of the volume and breadth of scope of the comments received, the Departments want to further consider the proposals made in the proposed rules.”

WHO THIS APPLIES TO:

Health plans of all sizes, but particularly those where the employer has a religious or moral objection to some or all of the contraceptive and sterilization coverage mandate.

Impacted Individuals Eligible for Relief:

The proposed rule sought to remove an exemption for employers who object for moral reasons to one or more aspects of the mandate to cover contraceptives and sterilization without cost sharing. This would have just offered religious objections, not moral objections, to the mandate.

For those with religious objections, the proposed rule sought to allow “any willing provider” (such as a pharmacy or a prescribing physician) to establish a pathway to provide no-cost contraceptives or sterilization for women.

By withdrawing the proposed rules, both of those proposed changes are not being considered at this time.

Practical Impact to Employers:

Most employers with a religious or moral objection are able (for now) to rely on final rules enacted under the first Trump administration in 2018 that exempt them from the parts of the coverage mandate to which they object without having to arrange alternative coverage (the “accommodation process” was deemed “optional” by these final rules). In 2022, ACA FAQs parts 51 and 54 provided further clarifications of the contraceptives mandate as applicable today.

In 2020, the US Supreme Court had determined 7-2 in the Little Sisters of the Poor lawsuit that the 2018 final rules can stand. But as we have seen, this requirement has been subject to numerous lawsuits and changes in rules over the years, so the rules as they exist today (and since 2018) may not last as long as an objecting employer might hope. So, it is helpful to know the current way an employer can object to part or all of the mandate as the years progress.

GO DEEPER:

FAQ: How should benefits be handled when an employee takes a leave of absence?

A: When an employee is no longer working full-time (FT) due to a leave of absence, the employer cannot just leave the employee on benefits for as long as they like. There can be some flexibility, but there should be written guardrails ensuring most leaves are treated similarly so no one is discriminated against and to ensure the insurance/stop-loss carrier will ultimately pay covered claims.

USERRA Protection: The Uniformed Services Employment and Reemployment Rights Act (USERRA) permits the employer to treat military leaves of 31 days or longer as moving to COBRA (for 24 months instead of 18 months) due to reduction in hours.
USERRA leave shorter than 31 days must maintain benefits.
FMLA Protection (and state/local leave laws):
- Health benefits must be maintained during the protected leave, but the employer can usually arrange how the employee must pay their share of premiums.
- Requiring the employee to keep paying their share along the way is typically fine (unless a state/local leave law prohibits it). If this is required of FMLA, then it must be required of non-FMLA leaves, too.
- However, most employees only have a limited amount of paid leave, so there could be many weeks which are unpaid or only part of their income is replaced. Since keeping up their share of premiums may be difficult, many employers allow the employee to rack up a tab and then make double paycheck deductions once they return to full-time work.
Other benefits are not required to be maintained under FMLA (but may be required by state/local leave laws). However, any benefits that lapse must be immediately reinstated upon resuming FT work. Resuming benefits the first of the next month is compliant.
If the life or disability plan will require evidence of insurability before benefits can resume, that can cause issues with the employer’s requirement to reinstate.
The employer should discuss with the insurance carrier beforehand how long people taking FMLA (or a state/local leave) may remain on non-health benefits and what is required to reinstate if their coverage lapses.

No Other Federal Protections: It is a common misperception that work comp, ADA, or PWFA protect benefits (similar to benefit protections under USERRA or FMLA).

Work comp is actually state law, not federal, and must pay expenses related to the employee’s injuries. There is no requirement to maintain other benefits when not working FT.
The Americans with Disabilities Act (ADA) and Pregnant Workers Fairness Act (PWFA) require an interactive process to determine whether reasonable accommodations can be provided. If accommodations result in a reduced work schedule to PT (usually below 30 hrs/wk) or a leave of absence, benefits do not have to be maintained if another protection does not apply.
ACA Lookback Method FT Stability Period Protection: An employer utilizing the lookback method under the Affordable Care Act (ACA) would want to keep an employee in a full-time stability period enrolled in the FT medical plan at FT rates in order to avoid potential ACA penalties.
- Some employers word their plans to allow someone in a FT stability period to also be eligible for dental, vision, or other benefits, so those benefits may also be able to remain intact.
Approved Leave Protection: From there, the default is going to be the month any protections end (or the last month the employee worked FT if there are no protections available) is the final month the employee has coverage and is offered COBRA due to reduction in hours, or other continuation as applicable.
- However, the employer might negotiate with the insurance/stop-loss carrier to allow extra time, perhaps a month or two, before a move to COBRA is required. This can help ensure people are not moving in and out of COBRA unnecessarily when they are anticipated to resume FT work within a few weeks.

When an employee must be moved to COBRA, the employer can certainly consider whether to offer a COBRA subsidy for a limited time to keep the employee’s share of the premium the same. If an employer wants to pursue this, the subsidy arrangement should be in writing, only last for a limited time, and be developed in consultation with qualified counsel to ensure they do not set a precedent, do not discriminate, and do not inadvertently convey legal rights/obligations not intended by the employer or carrier.