Compliance Monthly Update: January 2024
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.
DOL issues FLSA independent contractor regulations.
On January 10, the DOL published final regulations (and an associated news release, fact sheet, and FAQs) for determining whether a worker is classified as an employee or an independent contractor for purposes of the Fair Labor Standards Act (FLSA) effective on March 11, 2024. The final regulations restore a totality-of-the-circumstances approach in assessing the economic reality of the working relationship, requiring a balanced consideration of six factors.
The six factors are the worker’s opportunity for profit or loss, investments by the parties, the work relationship’s permanency, the nature and degree of control over the work, whether the work is an integral part of the potential employer’s business, and worker skill and initiative. Other factors may also be relevant. The outcome ultimately depends on whether the worker is economically dependent on the employer for work or is in business for themself.
- The result of this new independent contract rule should result in more workers being classified as employees under the FLSA.
- Note that most employee benefit plan rules determine employee status (and who is an eligible employee) under ERISA or the IRC (not the FLSA) in conjunction with the common-law standard. The FLSA standard, on the other hand, governs minimum wage and overtime requirements that apply to employees but not independent contractors. In other words, the definition of an employee under ERISA/IRC is different than and does not line up with the definition of an employee for purposes of the FLSA.
- For group health plan purposes, a common-law employee is distinguished from a worker who is an independent contractor or an employee of another entity. The test for common-law employee status generally focuses on the right to control the manner and means by which the work product is accomplished and considers the facts and circumstances of the particular situation under a multi-factor test in which no single factor is determinative. It is important to properly classify workers under the appropriate set of rules—particularly for purposes of the IRC’s rules regarding retirement plans, cafeteria plans, and employer shared responsibility penalties.
DOL issues 2024 adjusted penalty amounts for group health plan violations.
On January 11, the DOL published the 2024 annual adjustments to civil monetary penalties for a wide range of benefit-related violations. The adjustments are effective for penalties assessed after January 15, 2024, with respect to violations occurring after November 2, 2015. Here are the highlights:
- Form 5500 maximum penalty for failing to file increases from $2,586 to $2,670 per day that the filing is late.
- Summary of Benefits and Coverage (SBC) maximum penalty for failing to provide the SBC increases from $1,362 to $1,406 per failure.
- Multiple Employer Welfare Arrangement (MEWA) annual report (Form M-1) filing failures increases from $1,811 to $1,942 per day.
- Children’s Health Insurance Program (CHIP) notice penalty for failing to provide the notice increases from $137 to $141 per day.
2024 federal poverty levels released—and the impact on affordability determination.
2024 poverty guidelines were released on January 17 and set the federal poverty line (FPL) at $15,060 (up from $14,580 in 2023) for a person living in the lower-48 states. The FPL is $17,310 for Hawaii and $18,810 for Alaska. Applicable large employer (ALEs) that utilize the FPL affordability safe harbor may use the FPL that is in effect within six months before the start of the plan year. So, January 1, 2024, plan years are still required to use the 2023 FPL because the new 2024 guidelines were not released prior to the beginning of the plan year. However, non-calendar plan years starting in 2024 can use the 2024 guidelines to increase the FPL safe harbor amount due to the increased 2024 guidelines. For example:
- 2024 calendar-year plans. The maximum affordable employee-only contribution for the lowest-cost plan based on the FPL safe harbor = $101.94 = (8.39% x $14,580 FPL for 2023) / 12.
- 2024 non-calendar-year plans. The maximum affordable employee-only contribution for the lowest-cost plan based on the FPL safe harbor = $105.29 = (8.39% x $15,060 FPL for 2024) / 12.
ACA FAQs (Part 64) released regarding the coverage of contraceptives as preventive care.
On January 22, the regulatory agencies issued FAQ guidance addressing required coverage of contraceptive drugs.
- As a reminder, the ACA requires non-grandfathered plans to cover (without cost sharing) at least one form of contraception in each of 17 FDA-identified contraceptive categories, as well as any newer contraceptive service or FDA-approved, -cleared, or -granted contraceptive product that an individual and their medical provider have determined to be medically appropriate for the individual (regardless of whether those products have been specifically categorized).
- Plans may utilize reasonable medical management techniques within a specified category of contraception, so long as there is an “easily accessible, transparent, and sufficiently expedient” exceptions process that is not unduly burdensome and defers to the attending provider’s recommendation. And with respect to those newer contraceptive products and services, the departments have allowed plans and insurers to use reasonable medical management techniques to determine which specific products or services to cover without cost-sharing so long as at least one of multiple, substantially similar products or services have been made available, and provided that it is medically appropriate for the individual.
- This FAQ guidance was in response to reports of “unreasonable medical management techniques and other problematic practices” imposing barriers to contraceptive coverage without cost-sharing including:
- Requiring individuals to satisfy step therapy protocols using other products within the same category of contraception before approving coverage for the newer product.
- Applying age-related restrictions for a product.
- Imposing onerous documentation requirements or multiple levels of processes that result in denials of coverage or the imposition of cost-sharing requirements.
- Requiring cost-sharing for services (e.g., anesthesia, pregnancy tests needed before the provision of certain forms of contraceptives, etc.) that are integral to the preventive services provided.
- So, the FAQs provide for an alternative “therapeutic equivalence approach” to compliance for contraceptive drugs and drug-led devices (i.e., combination contraceptive products comprised of a drug and a device). Under this approach, a medical management technique will be deemed reasonable if all FDA-approved contraceptive drugs and drug-led devices in a category are covered without cost-sharing, not including any for which there is at least one therapeutic equivalent drug or drug-led device that the plan or insurer covers without cost-sharing. Additionally, there must be an exceptions process available to individuals that allows them to access a specific therapeutic equivalent determined to be medically necessary by their attending provider. A drug or drug-led device will be considered therapeutically equivalent based on the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (Orange Book).
Updated model CHIP Notice released.
The DOL has released a new model employer CHIP Notice
(available HERE) with information current as of January 31, 2024. 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.
State/Local Compliance Update: January 2024
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 DC Paid Family Leave notice/poster issued. The DC Department of Employment Services issued an updated Paid Family Leave notice/poster. The new poster must be posted by February 1, 2024, in a conspicuous place such as where the employer posts employment-related information. The notice also must be provided to employees by February 1, 2024.
- New pay transparency act passes. On January 12, DC Mayor Bowser signed the Wage Transparency Omnibus Amendment Act of 2023 that (effective June 30, 2024, and upon passage of a 30-day congressional review period) will require DC employers to include a pay range in job postings and inform prospective job applicants of healthcare benefits associated with the position. Employers will also be prohibited form inquiring about job applicants’ prior wage history and must post a workplace notice to employees informing them of their rights under the new Act.
- FDA approves Florida application to purchase prescription drugs from Canada. The FDA sent a Letter of Authorization for Florida’s Section 804 Importation Program, dated January 5, that approves Florida’s application to bulk purchase prescription drugs from Canada (subject to certain conditions). However, in a Statement from Health Canada on FDA decision on Florida bulk drug importation plan, Health Canada says they will restrict external sales of Canadian drugs if it would cause a shortage in Canada. As a result, Florida may be approved to import, but Canada may be unwilling to export. Note that the FDA approval is based on existing FDA authority that specifically allows states to import drugs from Canada. By contrast, the FDA has not approved any corresponding rule that would enable group health plans or individuals to do so.
- Governor Murphy signs comprehensive privacy law. On January 16, Governor Murphy signed Senate Bill 322 (the Act) making New Jersey the 14th state to enact a comprehensive consumer data privacy law (joining California, Virginia, Colorado, Connecticut, Utah, Iowa, Indiana, Tennessee, Montana, Florida, Texas, Oregon, and Delaware). This law aims to protect consumer privacy by creating strict requirements for how applicable companies may use and collect personal data from New Jersey consumers and provides consumers with rights of access, modification, and deletion of their personal data. The Act has no broad exemption for HIPAA-covered entities and business associates, instead exempting specific types of health data, including HIPAA-covered PHI. HIPAA-covered entities and business associates that hold some personal data that is not PHI (for example, data of employees and certain marketing-related data) will have to conduct detailed assessments of their compliance obligations under the Act based on the nature and status of the personal data they process. The Act will take effect on January 16, 2025.
- 2024 updates to NY PFL weekly benefit maximums and contribution rates. As background, under the New York Paid Family Leave Law (NY PFL), eligible employees may receive up to 12 weeks of job-protected paid leave in a 52-week period for qualifying absences such as bonding with a newly born, adopted, or fostered child, caring for a family member with a serious health condition, or assisting loved ones when a spouse, domestic partner, child or parent is deployed abroad on active military service. Here are the 2024 updates:
- Employees who are approved for NY PFL receive 67% of their average weekly wage, up to a cap of 67% of the current New York State Average Weekly Wage (“NYSAWW”). For 2024, the NYSAWW increased to $1,718.15, which means the NY PFL maximum weekly benefit increased to $1,151.16. This is $20.08 more than the maximum weekly benefit for 2023, which was $1,131.08. The new benefit rate applies to leaves that commence in 2024. For approved leaves that began in 2023 but extended into 2024, the 2023 benefit rate will apply.
- For 2024, employees will contribute 0.373% of their gross wages per pay period, up to a maximum annual contribution of $333.25. The 2024 rate is $66.18 less than the maximum amount employees contributed in 2023.
- See the NY Paid Family Leave webpage for more information.
- Updated guidance for Paid Leave Oregon. As a reminder, Paid Leave Oregon (PLO) went into effect on January 1, 2023, and employees began applying for benefits by September 3, 2023. PLO provides an employee with paid time off from work to care for and bond with a child following the child’s birth or adoption, to recover from a serious health condition or care for a family member’s serious health condition, or to take leave if the employee or the employee’s family member has experienced domestic violence, sexual assault, stalking, or harassment. PLO applies to employers with at least one employee in the state of Oregon. Large employers (those that employ 25 or more employees worldwide) must contribute to the PLO fund. Small employers (those that employ fewer than 25 employees worldwide) can opt out of contributions. However, employers of all sizes with at least one employee in Oregon must withhold an Oregon employee’s PLO contributions from their paychecks. And employees have job protection rights under PLO regardless of the size of their employer. Oregon provides a PLO model notice for employers to post in their workplaces.
- On January 12, Oregon implemented new regulations clarifying procedures and criteria for implementing PLO. These regulations relate to benefits administration, appeals, and equivalent plans (among other topics).
- On January 25, Oregon issued a bulletin with guidance on the expectation of insurers who write STD policies (in light of the new PLO program). If the terms of a STD policy allow an insurer to reduce STD benefits due in any part to the availability of PLO benefits, all plan documents must clearly and conspicuously inform consumers that: (1) they might be eligible for medical leave benefits under the PLO program; (2) the insurer might require the consumer to apply for PLO and, if so, the extent to which the person must pursue their PLO application, and; (3) the extent to which STD benefits will be reduced on account of PLO benefits received by the worker.
- See the Paid Leave Oregon webpage for more information.