Employee Benefit Plan Developments: 2020 Year in Review

Employee Benefit Plan Developments: 2020 Year in Review

Employers have seen changes to almost every aspect of employee benefits in 2020, from state and local laws and new benefits legislation to an avalanche of guidance aimed at helping employers cope with the pandemic. The following is not a comprehensive review of every change, but a highlight of several key developments for employers to note as 2021 approaches.

Required Coverage of COVID-19 Vaccines

Under the Affordable Care Act (ACA), non-grandfathered group health plans are required to cover certain preventive care services without cost-sharing. The general deadline for implementation of new preventive recommendations and guidelines is the plan year beginning one year after the new recommendation or guideline is issued. Prior ACA regulations provide for coverage only for vaccines listed for “routine use” and generally allowed plans to apply cost-sharing if the preventive service is delivered by an out-of-network provider.

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The CARES Act accelerates the time by which a COVID-19 vaccine is required to be offered as a no-cost preventive service to 15 business days after a recommendation for a COVID-19 vaccine is made. Unlike many aspects of COVID-19 relief, this CARES Act provision does not sunset at a future date.

The Departments of Treasury, Labor, and Health and Human Services issued regulations that implement the CARES Act requirement that most group health plans cover, without cost-sharing, a COVID-19 vaccine as a preventive service even if not listed for “routine use” and also that cost-sharing cannot be imposed regardless of whether the vaccine is provided in- or out-of-network. Plans must cover the cost of a vaccine’s administration, even if the cost of the vaccine itself is paid by a third party such as the federal government. Plans may impose cost-sharing for office visits that are billed separately, but office visits not billed separately must be covered without cost-sharing if the primary purpose of the visit is administration of the vaccine.

Required Coverage of COVID-19 Testing

The FFCRA, as amended by the CARES Act, requires most group health plans to cover COVID-19 testing, including certain related items and services, without cost-sharing and prior authorization or the use of medical management techniques.  If testing is performed by an out-of-network provider, plans are required to pay the provider’s posted rate, unless another rate is agreed upon. 

Reimbursement of Over-the-Counter Medicines and Drugs

The ACA prohibited FSAs, HRAs, and HSAs from reimbursing expenses for medicines and drugs (other than insulin) without a prescription. Effective for expenses incurred on or after January 1, 2020, the CARES Act eliminated that ACA restriction and also provides that menstrual care products qualify as a reimbursable expense.

Most health FSA and HRA plan documents specifically restrict reimbursement to prescription drugs and medications, including insulin.  Therefore, if an employer chooses to adopt these permissive changes and allow reimbursements of OTC and menstrual care produces, plan amendments will most likely be required.

Additional Flexibility for Cafeteria Plans and FSAs

IRS Notice 2020-29 provides employers flexibility to allow additional mid-year cafeteria plan elections for group health plans, health FSAs, and dependent care assistance plans (DCAPs) during calendar year 2020. This notice also provides increased flexibility for the grace periods that apply unused amounts in health FSAs to medical expenses incurred through December 31, 2020 and to similarly apply unused amounts in DCAPs incurred through December 31, 2020.

ACA Taxes and Fees

Calendar year 2020 is the last year that the health insurance tax (HIT) applies.  Legislation was enacted at the end of 2019 that repealed the tax effective 2021.  The same legislation repealed the Cadillac tax that would have gone into effect starting in 2022.

The PCORI fee was extended for 10 years, so that it now applies to plan years ending before October 1, 2029.  For policy and plan years ending after September 30, 2019 and before October 1, 2020, the fee was $2.54 per covered life.  For policy and plan years ending after September 20, 2020 and before October 1, 2021, the fee is $2.66 per covered life.

Suzanne D’Amato is an employee benefits attorney with 15-years of experience in the field who leads Hilb Group’s national compliance practice.