Let our team help you navigate the ever-changing benefits compliance landscape each month. Check out this month’s latest alerts, additional updates, and resources – hot off the press:

Employee Benefits Compliance Alerts

The Facts About Potential California Long-Term Care Legislation

  • State-managed Long-Term Care (LTC) programs are a focus of many state legislatures, including California.
  • California released the results of a Long-Term Care Task Force feasibility study in December 2022 and intends to release an actuarial study in January 2024.
  • While no legislation has been introduced in California yet, employers and employees should be aware of its potential.
  • Considering LTC as a voluntary benefit for employees can be an important value-add for employer-sponsored benefit packages.

Mental Health Parity – Agency Guidance & Enforcement

  • On July 25, 2023, the Departments released proposed rules on mental health and substance use disorder requirements for health plans.
  • An updated report to Congress was released, outlining the results of compliance efforts with the comparative analysis requirements.
  • The proposed rules do not significantly change the framework of the parity requirements but do clarify existing definitions; add additional examples to the non-exhaustive list of non-quantitative treatment limitations (NQTLs), add requirements for analyzing NQTLs, set specific requirements for achieving parity for network composition; and build on what is required to be analyzed and documented in the NQTL comparative analysis.

Medicare Part D Creditable Coverage Notice & Reporting Requirements

  • Medicare-eligible individuals must make an informed decision about whether to enroll in Medicare Part D prescription drug coverage.
  • Plan sponsors may use different methods to determine creditable status.
  • Plan sponsors must provide notice of creditable status to individuals at different times throughout the year, most notably before the beginning of Part D enrollment, October 15.
  • Plan sponsors must provide notice to Centers for Medicare and Medicaid Services (CMS) of creditable status annually no later than 60 days after the start of the plan year.

Circuit Court Holds that ERISA Preempts State PBM Law

  • The Oklahoma Patient’s Right to Pharmacy Choice Act (Oklahoma Act), passed in 2019, contains specific requirements for pharmacy benefit managers (PBMs) such as requirements for network access standards, mail-order pharmacies, advertisement and solicitation, claim reimbursement, and certain rights of plan participants.
  • The Oklahoma Act was challenged as preempted by federal laws Employee Retirement Income Security Act (ERISA) and Medicare Part D.
  • In August 2023, the 10th Circuit Court of Appeals held that the Oklahoma Act is preempted by both ERISA and Medicare Part D.
  • Considering this ruling and the 2020 Supreme Court ruling in Rutledge v. PCMA, it remains difficult to predict the future of other state PBM legislation.
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Additional Updates & Resources

ACA Affordability Updated for 2024

The Internal Revenue Service (IRS), through IRS Revenue Procedure 2023-29, has decreased the affordability percentage from 9.12% in 2023 to 8.39% in 2024. This percentage determines which applicable large employers may face penalties under ACA §4980H(b) for failure to offer affordable coverage, as well as which individuals may qualify for subsidized coverage through a public Exchange. 8.39% is the lowest the ACA affordability percentage has been since its inception. Plan sponsors should take this percentage into account when designing plans and updating employee contribution amounts for the 2024 plan year. EPIC will provide a detailed analysis of the affordability requirement in the October issue of Compliance Matters.

DOL Provides Updated CHIP Model Notice

Twice annually, the Department of Labor (DOL) releases a model notice as required by the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) to be distributed to employees. Passed in 2009, the Children’s Health Insurance Program (CHIP) provides federal funding to states to help employees provide employer-sponsored insurance coverage to low-income children instead of providing benefits through state Medicaid programs. Loss of CHIP coverage is a Section 125 qualifying event that allows dependents to enter an employer’s cafeteria plan midyear and may also trigger Health Insurance Portability and Accountability Act (HIPAA) special enrollment rights.

CHIPRA requires employers to notify employees about any premium assistance program available in the state where the employee resides. The DOL model notice contains contact information for the states where CHIP premium assistance is available and is updated twice annually, usually in January and July, to reflect any changes. The notice was most recently updated on July 31, 2023. The DOL does not require separate notices for each state where employees reside, one notice which lists all applicable states is sufficient, and notice must be provided annually. The DOL provides both English and Spanish versions.

The notice must be distributed to all employees who are eligible to participate in the health plan. It is often combined with open enrollment materials, but according to the DOL instructions, the notice should “appear separately and in a manner which ensures that an employee who may be eligible for premium assistance could reasonably be expected to appreciate its significance.”

Employers should obtain a copy of the DOL model notice to distribute to all employees prior to the first day of their next plan year. Employers should also make sure that the notice is updated and distributed annually to employees.

San Francisco OLSE Updates 2024 HCSO Expenditure Rates

In August 2023, the San Francisco Office of Labor Standards Enforcement (OLSE) updated the health care expenditure (HCE) rates used to determine the health care security ordinance (HCSO) expenditure requirement for 2024. As of January 1, 2024, the required HCE amount to satisfy the HCSO expenditure requirement for large businesses (those with 100 or greater workers) will be $3.51 per payable hour on behalf of all covered employees, an increase from the 2023 rate of $3.40 per employee per hour. For medium size businesses (those with 20 to 99 workers) the HCE will be $2.34 per payable hour on behalf of all covered employees, an increase from the 2023 rate of $2.27 per employee per hour. Employers with less than 20 employees are exempt from the HCSO expenditure requirement. The 2024 exemption threshold for managerial, supervisorial, or confidential workers will be $121,372 annually (or $58.35 hourly).

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