Compliance Monthly Update: December 2023
A brief update on what happened the prior month in group health plan compliance at the federal level, organized chronologically. An update for the state and local level are further down. If you would like additional information, please reach out to the GBS Compliance Team.
HHS intends to preserve copay accumulators.
As background, and as discussed in our October compliance update, a court set aside a 2021 HHS rule that changed how direct drug manufacturer assistance accrues towards the ACA annual limits on cost-sharing. The HHS rule that was struck down had allowed (but did not require) plans and insurers to exclude the value of a drug manufacturer’s coupon towards an individual’s out-of-pocket costs (also referred to as a copay accumulator program). The ruling may require plans to comply with a prior HHS rule that only permitted copay accumulators when there is a medically equivalent generic available and only if permitted by state law. However, HHS has now stated they plan to issue regulations addressing this court’s ruling (and the court’s concerns with the 2021 HHS rule). And until those new regulations are issued, HHS will not take any negative enforcement action. So, health plans and PBMs are free to operate copay accumulators as they have been since 2021 without fear of enforcement from HHS. The future of how copay accumulators can be implemented is uncertain, but HHS has indicated that they view manufacturer copay assistance with skepticism, and they are willing to use various tools (litigation, rulemaking, etc.) to preserve the use of copay accumulators.
2024 standard milage rates released.
The IRS issued Notice 2024-08 (and a news release) with the 2024 standard mileage rates for business, medical, and other uses of an automobile. The 2024 business standard mileage rate is 67 cents per mile (up from the 65.5-cent rate for 2023). The rate when an automobile is used to obtain medical care (which may be deductible under IRC Section 213 if it is primarily for, and essential to, the medical care) is 21 cents per mile for 2024 (down from the 22-cent rate for 2023). Transportation expenses that are deductible medical expenses under Section 213 generally can be reimbursed on a tax-free basis by a health FSA, HRA, or HSA. However, some health FSAs and HRAs are designed to exclude medical transportation expense reimbursement (to simplify plan administration).
DOL proposes to rescind association health plan regulations.
The DOL issued proposed regulations on December 20 that would officially and formally rescind prior association health plan (AHP) regulations issued in 2018 (that a court had struck down). The 2018 AHP guidance had attempted to broaden the definition of an AHP to allow more groups of unrelated employers to join together to get better pooled rates. But a court struck down those rules in 2019, and the DOL gave employers a short period of time to wrap up any AHP that had relied on the 2018 guidance. It is not clear why the DOL took so long, but they are now going to officially rescind those prior AHP rules to “resolve and mitigate any uncertainty” regarding the 2018 rule. This should not impact any current plan sponsors because there should not be any AHPs currently in existence that rely on the 2018 rule. Any current AHP needs to comply with the more restrictive pre-2018 AHP guidance.
No Surprises Act IDR portal fully reopened, and final rule issued regarding IDR fees.
The regulatory agencies have set the administrative fees for using the independent dispute resolution (IDR) process in a final rule that was published on December 21. The agencies also issued an associated fact sheet. This rule is in response to a court ruling that had vacated prior guidance that had increased the IDR fees. The IDR administrative fee will now be $115 per party per dispute. Certified IDR entities may charge a fixed certified IDR entity fee ranging from $200 to $840 for single determinations and from $268 to $1,173 for batched determinations, with a $75 to $250 fixed tiered fee for every additional 25 line items in batched disputes containing more than 25 line items. These amounts will remain in effect until changed by future regulations. These final regulations (as well as recently updated process guidance for disputing parties and certified IDR entities) demonstrate the agencies’ ongoing efforts to address the inefficiencies of the IDR process while complying with various court rulings.
Updated model Exchange Notice.
The DOL has updated the model Marketplace Notice (also called the Exchange Notice) that is available on the DOL Notice to Employees of Coverage Options webpage. As a reminder, employers are required to provide the Exchange Notice to all newly hired employees
(including employees who are not eligible for benefits) within 14 days of the employee’s start date.
State/Local Compliance Update: December 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.
- New surprise ambulance billing law. There is a new California law effective this year that participants in fully insured plans will only have to pay for an out-of-network ambulance the equivalent of what they would have paid for an in-network ambulance. And the fully-insured plan and the ambulance company will then have to settle the bill directly even if they don’t have an existing contract. Note that this is similar to the federal No Surprises Act that prohibits balance billing for certain services including for air ambulance services. But the federal law applies to air ambulances and this new California law applies to prevent surprise billing for ground ambulance services for fully insured plans.
- Updated FAQs and model poster released for California’s amended paid sick leave law. As background (and as discussed in our October update), Governor Newsom signed Senate Bill 616 which expands existing paid sick leave requirements under the Healthy Workplaces, Healthy Families Act of 2014. The amendment, that takes effect on January 1, 2024, increases the annual amount of California paid sick leave from three days (or 24 hours) to five days (or 40 hours) for eligible employees. The amendment also raises the accrual cap from 48 hours to 80 hours. In December, California published updated FAQ guidance explaining the transition to the expanded paid sick leave requirements. And they published an updated workplace poster to be used under the amended paid sick leave law. Generally, the FAQs set forth requirements regarding employees’ annual entitlement to paid sick leave, eligibility criteria, accrual versus frontloading, use of paid sick leave, payment and tracking of earned and taken leave, and information to be provided to employees.
- San Diego issues guidance on compliance with State and City paid leave requirements. The City of San Diego issued guidance to help employers comply with both the new expanded State paid leave requirements under Senate Bill 616 (discussed above) and the San Diego local ordinance that already required employers to provide no less than 40 hours of earned sick leave.
- Reminders about the San Francisco Health Care Security Ordinance (HCSO). The San Francisco HCSO requires employers that have at least one individual who works in San Francisco and has 20 or more employees worldwide (or 50 or more worldwide for nonprofit organizations), to spend a minimum amount per hour on health care for eligible San Francisco employees. And if a self-funded plan has not yet made the required expenditures for 2023, they have until the end of February 2024 to “top off” expenditures. San Francisco also released an updated 2024 HCSO poster which is required to be posted in any workplace or job site where any covered employee works. See the San Francisco HCSO website for more information.
- California long term care task force actuarial report released. California has been looking into establishing a state mandated long term care program, and they established a task force that released an actuarial report in December (available HERE) that explored the feasibility of five different program designs. The state legislature has not yet proposed legislation to implement any specific long term care program, and if they do move forward, legislation most likely wouldn’t happen until 2025, but we will be keeping an eye on it.
- 2024 California State Disability Insurance (SDI) payroll tax rate updated. California has a new payroll tax rate for the State Disability Insurance (SDI) Program of 1.1% for 2024 (which is up from 0.9% for 2023). And starting in 2024 there will no longer be a taxable wage limit and maximum withholdings for each employee subject to SDI contributions—so all wages will be subject to the 1.1% SDI payroll tax.
- Chicago paid leave ordinance effective date delayed. The City of Chicago passed a new paid leave ordinance this past November that was originally scheduled to go into effect on December 31, 2023 (that we covered and discussed last month). But on December 13, the City amended the ordinance delaying the effective date to July 1, 2024. This delay was likely in response to the rushed nature of the passage of the ordinance, to provide time to enact rules for implementation, and to give employers time to update their leave policies accordingly. Note that The Illinois Paid Leave for All Workers Act (PLAWA), which takes effect on January 1, 2024, does not apply to any employer located in a municipality or county where the employer is required by local law or ordinance to provide paid leave time to its employees. So, employers located within Chicago or Cook County will be subject only to the requirements of those specific ordinances.
- Cook County passes paid leave ordinance. On December 14, Cook County passed a new Paid Leave Ordinance (that replaces the preexisting Cook County Earned Sick Leave Ordinance) that requires employers to offer paid leave that can be used for any reason to most employees in Cook County. Under the new ordinance (that is effective December 31, 2023) covered employees can earn and use up to 40 hours of paid leave annually. Employers must post a paid leave notice that will be provided by the County in a conspicuous place at each facility in the County. A notice must also be provided to employees when they are hired. The new County ordinance largely mirrors that of the statewide Paid Leave for All Workers Act (PLAWA) which took effect on January 1, 2024. Employers covered by this new ordinance are covered only by the local law and not the statewide PLAWA. See the Cook Country Paid Leave Ordinance webpage for updates and future guidance.
- Massachusetts Paid Family and Medical Leave (PFML) updated 2024 workplace poster and notices released. Massachusetts issued its updated 2024 PFML notices and workplace poster. The 2024 contribution rates were previously issued and discussed in last month’s update. All Massachusetts employers must display a workplace poster prepared or approved by the State that explains the benefits available under the PFML program. In addition, the 2024 notices for individuals have been released. New workers must be provided the applicable notice within thirty days of hire. See the State’s Department of Family and Medical Leave (DFML) website for more information and links to the 2024 workplace poster and notices.
- Saint Paul amends its Sick and Safe Time Ordinance to line up with the Minnesota ESST law. The City Council for Saint Paul, Minnesota, has adopted amendments to its Sick and Safe Time Ordinance. Minnesota’s separate statewide Earned Sick and Safe Time (ESST) mandate does not preempt related ordinances enacted in four Minnesota cities, but the changes to Saint Paul’s Ordinance were made to align with language implemented by Minnesota’s ESST legislation. Both this amendment and the statewide ESST go into effect on January 1, 2024.
- Philadelphia COVID Paid Sick Leave Ordinance ending. The Philadelphia COVID Paid Sick Leave Ordinance expired on December 31, 2023. The ordinance required covered employers to provide up to 40 hours of additional paid sick leave to eligible employees when they are unable to work for certain COVID reasons. Note that covered employers will still be required to keep all compliance records for this law for two years (through December 31, 2025).
- Seattle Hotel Ordinance 2024 poster released. The 2024 Seattle Hotel Ordinance workplace poster was recently released which is required to be displayed in a noticeable area at the workplace for hotel industry employees. The Seattle Hotel Ordinance requires certain large hotels and certain ancillary hotel businesses to make minimum monthly healthcare expenditures for covered employees and to display the workplace poster.
- Washington Paid Family and Medical Leave 2024 premium rates and poster/paycheck insert released. Washington’s Paid Family and Medical Leave (PFML) program premium rate for 2024 will be 0.74% (down from 0.8% for 2023). Employers are also required to notify employees about the paid leave program using a workplace poster and paycheck insert that is available on the Washington PFML website. Note also, that effective starting in 2024, Washington PFML eligibility has expanded to include collectively bargained workers who were previously excluded from the program. So, impacted employers will need to communicate and start withholding premiums for these newly eligible union employees.