January 05, 2021

On December 27, 2020, the President signed into law H.R. 133, a wide-ranging law that includes COVID-19 relief, regular federal spending, and a number of extensions and new requirements related to employee benefits. We summarize below the provisions most relevant to employers and their group health plans.

Health & Welfare Benefits

H.R. 133 includes the following provisions related to employer-sponsored health and other benefits:

• Health flexible spending account (health FSA) and dependent care assistance program (DCAP) carryovers. Participants can carry over unused balances from the 2020 plan year to 2021 and from the 2021 plan year to 2022. Grace periods for plan years ending in 2020 and 2021 can be extended to 12 months after the end of the plan year. In addition, for the 2021 plan year, participants will continue to be able to make mid-year election changes even if a change in status has not occurred. Employers can amend plan documents retroactively to incorporate these new rules, provided amendments are adopted no later than 1 calendar year after the year amendments are effective.
• Employer tax credit for paid family and medical leave. The business tax credit for employers providing 2-12 weeks of annual paid family and medical leave was extended through March 31, 2021. We recommend that employers evaluate current family and medical leave benefits to determine if (and to what extent) they are eligible for or want to apply this tax credit.
• Student loan assistance. The annual $5,250 allowance for employers to provide student loan repayment and other educational assistance benefits on a tax-advantaged basis was extended through 2025.
• Mental health parity. Employer-sponsored group health plans must conduct comparative analyses of the nonquantitative treatment limitations used for medical and surgical benefits, as compared to mental health and substance use disorder benefits. This requirement is effective 45 days after the enactment of H.R. 133; we expect that the Departments of Health and Human Services (HHS), Labor (DOL), and the Treasury will issue additional guidance on this requirement and its effective date. In many cases, plans may already be doing this analysis. We recommend connecting with your TPAs or other vendors to determine if any new analysis is necessary.
• Price and quality transparency. Beginning in 2021, employer-sponsored group health plans must report annually on certain medical and prescription drug costs to HHS, DOL, and Treasury. This requirement may overlap with the new price transparency rules slated to become effective from 2022-2024. H.R. 133 also (1) bans gag clauses in provider-health plan contracts that prevent employers and employees from seeing cost and quality data and prevent employers from accessing de-identified claims data and (2) requires more transparency in benefits consultant and broker compensation.

Surprise Billing

In somewhat of a surprise, H.R. 133 included the “No Surprises Act”—designed to protect patients from surprise medical bills. Highlights of the Act include, among many other provisions, the following:

• The Act holds patients harmless from surprise medical bills in certain circumstances: (1) out-of-network emergency care, (2) certain ancillary services from out-of-network providers at in-network facilities (e.g., anesthesiology, radiology), (3) out-of-network care provided at in-network facilities without the patient’s informed consent, and (4) out-of-network air ambulance bills. Patients can be billed for in-network cost-sharing amounts, and those amounts must count toward their in-network deductibles. Notably, bills for ground ambulance services are not included in these protections.
• Certain out-of-network providers must provide advance notice to patients of their network status and obtain patient consent for out-of-network care.
• In the case of out-of-network claims, providers and payers (including self-insured plans) have 30 days to negotiate payment. If the parties cannot reach an agreement, they can enter a binding arbitration process. Arbitrators are required to consider the median in-network rate for the services at issue and any other information the parties present. However, arbitrators cannot consider provider billed charges or Medicare/Medicaid payment rates. Parties cannot arbitrate the same items or services for 90 days following an arbitration decision.
• The Act also requires group health plans to provide:

• 1 | transparency on in- and out-of-network deductibles and out-of-pocket limits;
• 2 | an Advance Explanation of Benefits for scheduled services that includes a good faith estimate of contracted rates, participant cost-sharing, and applicable medical management techniques (e.g., prior authorization);
• 3 | a price comparison tool that allows cost-sharing comparisons for specific items and services from participating providers; and
• 4 | up-to-date in-network provider directories.

These requirements will overlap with many of the new price transparency rules slated to become effective from 2022-2024. Therefore, we expect that the forthcoming rulemaking process will provide critical details on how plans are to comply with these requirements. We recommend starting discussions with TPAs and other vendors to determine what plan changes may be necessary by 2022.

Generally, the No Surprises Act is effective beginning January 1, 2022; agencies are required to begin finalizing regulations to implement the Act by July 1, 2021.

This new law’s—and in particular, the arbitration provision’s—effect on the overall cost of care remains to be seen. While a number of parties projected that arbitration could result in higher overall costs, implementing regulations ultimately will determine arbitration’s effect on health care costs and network participation. We expect that in the coming weeks and months, numerous parties—including the Business Group—will communicate and work with the relevant federal agencies to advocate for an arbitration structure that protects employer-sponsored plans and their participants. In addition, because the Act’s requirements for group health plans may overlap with a number of other ERISA, ACA, and other requirements, we expect that that an extensive notice and comment rulemaking process will provide many of the necessary details for compliance.

Other Items

• All payer claims databases. The bill includes grants for states to establish or improve all payer claims databases (APCDs) and requires development of a standardized reporting format that self-insured plans can use to voluntarily report their claims data to APCDs.
• Meals. There is now a 100% employer deduction for business food and beverage expenses paid or incurred from 2021-2022.
• Retirement. The bill also includes changes to some retirement plan rules. HR and finance departments may need to evaluate retirement offerings, taking these provisions into account.

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