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Compliance Corner

Federal Updates

HHS Issues Patient Fact Sheet on Surprise Medical Bill Protections

January 19, 2022

On January 3, 2022, HHS issued a fact sheet directed to patients to promote understanding of the No Surprises Act (the Act) that was part of the Consolidated Appropriations Act, 2021 passed by Congress in late 2020.

Beginning January 1, 2022, the Act prohibits surprise medical bills (i.e., balance billing) for most emergency services provided at both in- and out-of-network facilities and without prior authorization; out-of-network charges and balance bills for certain additional services such as anesthesiology or radiology, furnished by out-of-network providers as part of a patient’s visit to an in-network facility; as well as services provided from out-of-network air ambulance service providers. Further, the Act established an independent dispute resolution process for payment disputes between health plans and providers, as well as new dispute resolution opportunities for self-pay individuals. (For more information on the Act and the interim final rules, see the articles published in the July 7, 2021, and November 9, 2021, editions of Compliance Corner.)

Moreover, the fact sheet explains that the Act creates minimum consumer protection standards against surprise bills at the federal level; therefore, if a state’s surprise billing law provides at least the same level of consumer protection against surprise bills as does the Act, the state law generally will apply for fully insured plans and individual policies.

Fact Sheet. No Surprises: Understand Your Rights Against Surprise Medical Bills »
CMS No Surprises Act Main Site »

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CMS Updates External Review Requirements for Surprise Medical Billing

January 19, 2022

On December 30, 2022, CMS issued guidance related to the external review requirement under the No Surprises Act (NSA). The NSA requires insurers and group health plans to have an external review process for any adverse determination related to NSA compliance matters. Examples of such matters, as provided by HHS regulations, include:

  • Patient cost-sharing and surprise billing for emergency services.
  • Patient cost-sharing and surprise billing protections related to care provided by nonparticipating providers at participating facilities.
  • Whether patients are in a condition to receive notice and provide informed consent to waive NSA protections.
  • Whether a claim for care received is coded correctly and accurately reflects the treatments received and the associated NSA protections related to patient cost-sharing and surprise billing.

Rather than adopt new external review procedures for this purpose, the DOL, HHS and the Treasury Department (“the departments”) have expanded the existing ACA external review procedures to include NSA matters. The ACA requires insurers and group health plans to adopt external review procedures for participants to appeal adverse benefit determinations of any amount for any reason. The participant must first exhaust the plan’s internal review process. For a fully insured plan, the insurer must follow the state external review process. If the state does not have a process, the insurer would use the federal process administered by HHS. For a self-insured plan, the employer (or the third-party administrator, if so contracted) will utilize the Independent Review Organization (IRO) process. These programs would now also review adverse determinations related to the NSA. If a state program is unable to expand its review in this manner, the insurer may use the HHS or IRO programs.

An employer sponsoring a fully insured group health plan should be aware of these changes. An employer sponsoring a self-insured group health plan should work with its third-party administrator to determine which party is responsible for maintaining the external review process and update contracts accordingly.

CMS Guidance, NSA External Review Process »

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Eighth Circuit Addresses Termination of Disability Benefits

January 19, 2022

On December 27, 2021, the Eighth Circuit Court of Appeals decided Roehr v. Sun Life Assurance Co. of Canada (“Sun Life”), a case involving Sun Life’s termination of long-term disability (“LTD”) benefits of Dr. Todd Roehr, an anesthesiologist who developed intermittent tremors in his hands and finger. Sun Life terminated Roehr’s ERISA LTD benefits as of January 27, 2017, after they paid him the benefits for nearly ten years on the grounds that Roehr had failed to provide proof of disability. Although Roehr lost his challenge with Sun Life’s internal appeal process as well as with the district court initially, the Eighth Circuit overturned the district court’s decision and directed the court to order the reinstatement of Roehr’s LTD benefits. The Eighth Circuit determined that Sun Life abused its discretion by terminating Roehr’s benefits based substantially on the same medical records as when Sun Life found him continuously disabled for ten years and without new significant evidence.

Roehr worked as a board-certified anesthesiologist in Iowa for twelve years before he began experiencing intermittent tremors in both of his hands and fingers. Because he has a strong family history of Parkinson’s disease, he was greatly concerned that his tremors could expose his patients to a risk of paralysis, serious injury or even death. As a result of his concern, Roehr stopped working as an anesthesiologist and applied for LTD benefits under the “own occupation” provision of his employer’s plan underwritten by Sun Life.

He consulted three separate neurologists regarding his condition, and all the neurologists ruled out Parkinson’s disease, though none of them could provide a definitive diagnosis. Nevertheless, Sun Life approved Roehr’s disability claim and paid him benefits of $10,000 per month for nearly ten years before deciding to terminate his benefits in late 2017 with the reason that he was fit to return to work.

In November 2017, Sun Life retained an independent neurologist to review Roehr’s file. The neurologist concluded that the medical evidence did not preclude Roehr from returning to his occupation as an anesthesiologist. Sun Life then terminated Roehr’s claim based on some of the reasons which had long existed with Roehr’s claim, although Sun Life never challenged these reasons previously.

The Eighth Circuit concluded that, while Roehr had a responsibility to provide the medical evidence necessary to substantiate his claim, “a plan administrator’s reliance on the same evidence to both find a disability and later discredit that disability does not amount to a reliance on ‘substantial evidence.’” The court found that Sun Life’s decision was “nothing more than a sudden change of heart on essentially the same record after almost a decade — and with no notice to Roehr prior to his benefits’ termination.” Consequently, Sun Life had left Dr. Roehr “without any meaningful opportunity to respond or seek other treatment.”

The key takeaway from the Roehr decision is that while an initial approval of benefits is not a guarantee of ongoing payment, disability insurers and plan administrators need to be cautious when they terminate benefits in the absence of new findings because it may require “substantial evidence” to terminate the disability benefit payments.

Plan administrators of disability benefits should be aware of this court’s decision.

Roehr v. Sun Life Assurance Co. of Canada »

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HHS Issues Instructions for Reporting Prescription Drug and Other Information to the Government

January 04, 2022

On November 23, 2021, HHS issued instructions and supporting documents to report data under a transparency provision of the Consolidated Appropriations Act, 2021 (CAA), which requires group health plans and insurers to annually report certain information regarding spending on prescription drugs and health care treatment to the government. These documents describe the data submission methods for plans and insurers for the 2020 calendar year (“reference year”). Additionally, the instructions and supporting documents explain who must report and when, as well as provide detailed explanations of spending categories, data aggregation rules by state and market segment, and rebate and fee allocation methods.

This material supplements the IRS, HHS and DOL interim final regulations outlining the content and timing requirements for the reports. See our recent article on the interim final regulations in the December 7, 2021 edition of Compliance Corner.

Fully insured plan sponsors will not be required to report but may need to work with the insurer on collecting data. Employer plan sponsors of self-insured plans should review agreements with third party administrators to determine reporting responsibility.

CMS Prescription Drug And Healthcare Spending »

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IRS Releases 2022 Mileage Rates and Vehicle Values

January 04, 2022

The IRS recently announced the optional 2022 standard mileage rates for taxpayers to use in calculating the deductible costs of using an automobile for business, charitable, medical or moving expense (for members of the Armed Forces) purposes. Further, the notice announced the amount that must be included in the employee’s income and wages for the personal use of an employer-provided automobile.

Beginning on January 1, 2022, the standard mileage rate for transportation or travel expenses is 58.5 cents per mile for all miles of business use (an increase from 56 cents per mile in 2021). Taxpayers have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

These new rates are effective for the expenses incurred on or after January 1, 2022.

The new changes are summarized below:

The standard mileage rates used for: 2022 2021
Business 58.5 cents/mile 56 cents/mile
Medical care 18 cents/mile 16 cents/mile
Certain moving expenses by members of the Armed Forces on active duty 18 cents/mile 16 cents/mile
Use by charitable organizations (under the Sec. 170) 14 cents/mile 14 cents/mile

For the complete 2022 released rates and additional details, please refer to the IRS Notice 2022-03.

Employers should be aware of these changes.

IRS Notice 2022-03 »
IRS News Release, December 17, 2021 »

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DOL Announces Temporary Enforcement Policy for Service Provider Disclosures

January 04, 2022

On December 30, 2021, the DOL issued Field Assistance Bulletin No. 2021-03, which announces a temporary enforcement policy for group health plan service provider disclosures under ERISA Section 408(b)(2). The bulletin also attempts to address certain questions regarding the required disclosures and indicates the DOL does not intend to issue regulatory guidance at this time.

The Consolidated Appropriations Act, 2021 (CAA) amended ERISA Section 408(b)(2) to require group health plan service providers to disclose specified information to the “responsible plan fiduciary” (i.e., typically, the employer as plan sponsor) about compensation that the service provider expects to receive in connection with its plan services. Specifically, the new disclosure requirements apply to those who provide brokerage or consulting services to an ERISA group health plan pursuant to a contract or arrangement, and reasonably expect to receive $1,000 or more in related direct or indirect compensation. Effective December 27, 2021, the disclosure must be provided reasonably in advance of the service provider and plan entering, renewing or extending a contract, so the plan fiduciary can assess the reasonableness of the service provider’s compensation and identify potential conflicts of interest. 

The bulletin emphasizes that a significant goal of the new disclosure requirements is to enhance fee transparency, especially for service arrangements that involve the payment of indirect compensation (i.e., compensation received from a party other than the plan or employer). Therefore, when evaluating a service provider’s compliance efforts, the DOL indicates that consideration will be given to whether the provider’s disclosure is reasonably designed to provide the required information and promote transparency. Additionally, if a service provider makes the disclosures in accordance with a good faith, reasonable interpretation of the law, the DOL will not treat the service provider as failing to satisfy the requirements. Conditional relief is also available for plan fiduciaries in connection with disclosure failures by covered service providers.

Therefore, pending future guidance or rulemaking, covered service providers and plan fiduciaries are expected to implement the disclosure requirements using a good faith, reasonable interpretation of the law. To assist with the implementation process, the bulletin provides guidance (in the form of questions and answers), which is summarized as follows:

  • According to the DOL, consideration of the 2012 final regulations for pension plan service provider disclosures would be viewed as a good faith and reasonable compliance step for a group health plan service provider. In the DOL’s view, this prior guidance may be helpful in analyzing the new CAA requirements and related terminology, despite differences in the nature of health plan compensation arrangements.
  • The disclosure requirements apply to insured and self-funded ERISA group health plans, including grandfathered plans, and regardless of plan size. There is no exception for limited scope dental and vision plans.
  • The disclosure requirements are not limited to group health plan service providers who are licensed as, or market themselves as, “brokers” or “consultants”, but any plan service providers who reasonably expect to receive indirect compensation from third parties in connection with advice, recommendations or referrals regarding services defined as brokerage or consulting services under ERISA Section 408(b)(2).
  • If service provider compensation is not known at the time the contract is entered, the compensation may be expressed as a monetary amount, formula or a per capita charge for each enrollee. If the compensation cannot be expressed by any other reasonable method, the disclosure may include a description of the circumstances under which the additional compensation may be earned and a reasonable and good faith estimate, which explains the methodology and assumptions used to prepare such estimate. Disclosure of compensation in ranges may be reasonable if contingent on future events.
  • Generally, greater specificity in the disclosure of compensation information is preferred, if possible. The objective is to provide the plan fiduciary with sufficient information to fulfill its ERISA obligations and evaluate the reasonableness of the service provider compensation and identify any associated conflicts of interest.
  • Only contracts for services that are entered, extended or renewed on or after December 27, 2021, are required to comply with the disclosure requirements. A contract is considered entered on the date of execution. Pending further guidance, a contract through use of a broker of record (BOR) agreement is considered entered on the earlier of the date on which the BOR agreement is submitted to the insurer or the date on which a group application is signed for insurance coverage for the following plan year, provided that the submission or signature is done in the ordinary course and not to avoid disclosure obligations.
  • The DOL will monitor comments from stakeholders and enforcement activities to assess whether additional guidance may be necessary to assist covered service providers and plan fiduciaries in complying with the new disclosure requirements. The DOL is interested in input regarding specific aspects of the disclosure requirements that would benefit from regulatory guidance.

Generally, the bulletin does not provide significant new information, but serves to confirm the disclosure requirements as set forth under the CAA. Additionally, the guidance provides insights regarding the DOL’s initial enforcement approach with respect to plan service providers and fiduciaries.

Field Assistance Bulletin No. 2021-03 »

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IRS Releases Guidance on Surprise Billing 2022 Qualifying Payment Amount Determination

January 04, 2022

On December 28, 2021, the IRS issued Rev. Proc. 2022-11, which provides information necessary to implement the surprise billing prohibitions under the No Surprises Act (NSA) of the Consolidated Appropriations Act, 2021. Specifically, the guidance provides the methodology for calculating the qualifying payment amount (QPA) for 2022. (See our recent article on the NSA surprise billing prohibitions in the July 7, 2021 edition of Compliance Corner.)

The NSA provisions, which are applicable to both insured and self-funded group health plans, are effective for plan years beginning on or after January 1, 2022. These provisions protect participants from surprise bills for certain unexpected out-of-network (OON) items and services, including, but not limited to, emergency services.

The QPA is a significant component of the NSA surprise billing prohibitions and the related independent dispute resolution (IDR) process. The QPA is the median contracted rate for an item or service for a geographic region. A participant’s cost-sharing for protected OON services would be based upon the QPA in the absence of an applicable state surprise billing law or All-Payer Model Agreement. Additionally, if the IDR process is invoked to resolve plan and provider payment disputes, the IDR entity must consider the QPA in the determination. (See our recent article on the IDR process in the October 12, 2021 edition of Compliance Corner.)

For an item or service provided during 2022, the plan or insurer must calculate the QPA by increasing the median contracted rate for the same or similar item or service under the plan or coverage on January 31, 2019, by the combined percentage increase in the consumer price index for all urban consumers (U.S. city average) (CPI-U) over 2019, 2020 and 2021. For an item or service provided during 2023 or a subsequent year, the QPA is calculated by increasing the QPA determined for the item or service provided in the immediately preceding year by the applicable percentage increase, as published by the IRS.

The guidance specifies that for items and services provided on or after January 1, 2022, and before January 1, 2023, the combined percentage increase to adjust the median contracted rate is 1.0648523983. Plans and insurers are permitted to round any resulting QPA to the nearest dollar. To illustrate the methodology, an example is provided where the median contracted rate for a covered service (as identified by service code) was $12,480 as of January 31, 2019. For a service with the same code provided during 2022, the 2019 median contracted rate would be increased by the combined percentage increase of 1.0648523983, resulting in $13,289.36 or a 2022 QPA of $13,289 (rounded to the nearest dollar).

Although the actual QPA calculation may be performed by the plan’s insurer or third-party administrator, employers should be aware of this guidance.

Rev. Proc. 22-11 »

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IRS Releases 2022 Instructions for Forms 1099-SA and 5498-SA

December 21, 2021

The IRS recently released the 2022 Instructions for Forms 1099-SA and 5498-SA. The Form 1099-SA is used to report distributions from health saving accounts (HSAs) and other medical savings accounts. The 5498-SA reports contributions to these accounts for the applicable tax year.

The IRS updates the form instructions annually to incorporate any recent administrative, reporting or regulatory changes. The 2022 instructions reflect no significant changes.

HSA custodians are responsible for filing the forms with the IRS and providing copies to accountholders. However, employers who offer HSAs should be aware of the updated publication.

2022 Instructions for Forms 1099-SA and 5498-SA »

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IRS Releases Draft Employers Tax Guide to Fringe Benefits

December 21, 2021

On December 7, 2021, the IRS provided an updated draft of the 2021 IRS Publication 15-B, the Employer’s Tax Guide to Fringe Benefits. This publication provides an overview of the taxation of fringe benefits and applicable exclusion, valuation, withholding and reporting rules.

The IRS updates Publication 15-B each year to reflect any recent legislative and regulatory developments. Additionally, the revised version provides the applicable dollar limits for various benefits for the upcoming year. As standard procedure, the IRS releases a preliminary draft of the updated guide before the final publication.

Further, the IRS will also issue a new draft of the form to alert users of any changes made to the prior version. This publication was most recently updated to note that the American Rescue Plan Act (ARPA) increased the employer-provided dependent care exclusion to $10,500 ($5,250 for a married employee filing a separate return) for calendar year 2021.

As a reminder, the business mileage rate for 2021 is 56 cents per mile, which can be used to reimburse an employee for business use of a personal vehicle and, under certain conditions, to value the personal use of a vehicle provided to an employee. The 2021 monthly exclusion for qualified parking is $270, and the monthly exclusion for commuter highway vehicle transportation and transit passes is $270. For plan years beginning in 2021, the maximum salary reduction permitted for a health FSA under a cafeteria plan is $2,750.

Employers should be aware of the availability of the updated publication and most recent modifications.

Draft Publication 15-B »

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IRS Published Information Letter Concerning Expanding HDHP-Compatible Coverage

December 21, 2021

The IRS recently released an information letter that reiterates guidance regarding high-deductible health plan’s (HDHPs) coverage of primary and behavioral health care visits before the minimum required deductible is met, as well as HDHP rules generally.

The letter responds to an inquiry that asked the IRS to reconsider prior guidance that stated that male contraceptives are generally not considered to be preventive care. As such, a health plan providing benefits for male sterilization or male contraceptives before satisfying the minimum deductible is not an HDHP. As of now, the IRS considers that request a submission for a guidance recommendation.

In addition, the information letter reiterates general HDHP information, explaining that an HDHP generally may not provide benefits until the deductible for the plan year has been satisfied with an exception for preventive care services (which can be provided prior to the deductible being satisfied). Further, for purposes of HDHP administration, preventive care services include periodic health evaluations, routine prenatal and well-child care, immunizations and various screening services and exclude “any service or benefit intended to treat an existing illness, injury, or condition.”

This letter does not provide any new or updated information, but it does serve as a good reminder of the HDHP deductible requirement and what is considered preventative care for purposes of HDHP administration.

IRS Information Letter »

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