Don’t Let Vendor Solutions Lead to Compliance Problems

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Amber Posthauer: Good afternoon, everyone. Thank you for joining us today. We're going to get started here in 60 seconds to allow for all registrants to get connected. We'll get started shortly.

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Amber Posthauer: Welcome, everyone, to Don't Let Vendor Solutions Lead to Compliance Problems. Thank you all so much for joining us.

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Amber Posthauer: The Benefits Compliance Team will be answering the questions you send through the Q&A today. We'll try our best to answer all of your questions, but if for whatever reason we are unable to get to your question today, please follow up with your advisor for further assistance.

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Amber Posthauer: Today's presentation is being recorded. We will be sharing the recording in the followup email and on the NFP website. If there are any portions of this call that you missed, by Monday, you'll receive an email with a link to the full recording.

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Amber Posthauer: The PowerPoint slides used during this presentation will be shared in the same email.

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Amber Posthauer: At this time, I'll hand it over to Molly Sled, Vice President of NFP Benefits Compliance, and Patrick Myers, Vice President and Council of NFP Benefits Compliance. Patrick, the floor is yours.

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Patrick Myers: Thank you, Amber, and hello, everyone, and welcome to our discussion today about vendor solutions in the employee benefits space.

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Patrick Myers: Before we get started, let's go ahead and do our,

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Patrick Myers: obligatory disclaimer in that the following presentation is going to be for general guidance purposes only. We're not going to be providing any specific tax or legal advice here. If you've got any questions about the application of the law, then you should address those questions to either your lawyer or your tax advisor.

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Patrick Myers: And finally, the information we're going to be providing you today is current as of today.

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Patrick Myers: Next slide.

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Patrick Myers: And here are your wonderful and talented speakers who will be walking you through vendor solutions, issues today.

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Patrick Myers: Molly and Patrick.

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Patrick Myers: Next slide.

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Patrick Myers: Employers often turn to vendors to supplement their employer benefit plans.

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Patrick Myers: And these vendors, in turn, offer what we call point solution programs, which often target services ranging from specific condition management to digital solutions and apps to overall benefit program simplification.

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Patrick Myers: And while these can provide helpful addons to your group health plan offerings.

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Patrick Myers: they can also give rise to several significant compliance issues. And so that's why we're having this talk today. We're going to start by giving you an overview of what we mean by vendor point solutions, then we're going to start getting into the nittygritty. Molly will walk you through

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Patrick Myers: A highlevel overview of the federal group health plan laws that are implicated by these vendor solutions.

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Patrick Myers: then I will address some practical solutions.

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Patrick Myers: For some of those compliance issues that may arise when you're evaluating a vendor solution.

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Patrick Myers: Then we'll get into a little more specifics. We'll talk about, first, the impact of VIN solutions, or potential impact, on HSA eligibility.

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Patrick Myers: We'll touch briefly on taxation, and then we will wrap it up with some discussion on reporting requirements, and then, finally, some key takeaways from our presentation.

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Patrick Myers: So let's go ahead and get started with an overview of those point solutions.

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Patrick Myers: Now, a point solution program are specific vendor solutions that add value to an employer's major medical plan. It's a pretty popular trend in this employee benefits space.

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Patrick Myers: And they come in various shapes and sizes, and address a broad range of employee health and wellbeing needs through counseling, referrals, physical therapy programs, and conditional management services.

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Patrick Myers: And they're generally provided through thirdparty vendors, and any premiums that are paid for those services are usually paid by the employer.

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Patrick Myers: But they could be paid, pretax. That is, employees could be paying it on a pretax basis through the cafeteria plan.

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Patrick Myers: If those benefits are… constitute medical care.

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Patrick Myers: Now, the phrase medical care and the question of whether or not a vendor solution actually constitutes medical care is going to be a key concept in this presentation. And Molly will go through some of that analysis in a minute, but it's something to keep a pin in and keep in mind when we talk about the various issues that may arise when we talk about vendor solutions.

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Patrick Myers: Next slide, please.

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Patrick Myers: And some examples of this growing field of point solution programs include things like clinical services for mental health.

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Patrick Myers: Musculoskeletal disorders, fertility, diabetes, heart disease, weight management, hearing impairment, or basically any other health condition.

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Patrick Myers: There can be a vendor solution to address that particular condition.

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Patrick Myers: Next slide, please.

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Patrick Myers: And just to give you a heads up of the kinds of regulations that could be implicated when you're analyzing or looking at a vendor solution to a problem or a condition.

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Patrick Myers: You're looking at, potential ACA issues, or the Affordable Care Act.

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Patrick Myers: potential COBRA issues, plan documentation or ERISA issues, HIPAA privacy and security, taxation, which we'll be touching on, health savings accounts, HSAs, eligibility, which we'll also be touching on, as well as potential stop loss issues and member communication.

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Patrick Myers: So, some themes that we'll be touching on throughout this presentation include the idea that, ultimately, employers are going to have discretion to determine eligibility criteria for the point solution offerings they're going to offer to employees, as well as how those benefits will interact with the group health plan overall.

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Patrick Myers: Depending on the employer's workforce composition, point solutions can be offered to all employees, only to employees in certain classifications, only to employees enrolled in the group health plan, or to that employee's family members, for instance, or spouses, domestic partners, other dependents, that sort of thing.

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Patrick Myers: And the other thing you want to keep in mind is.

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Patrick Myers: that sometimes, or often, these vendors are not going to consider their solutions or their services as an insured product. So, you're not going to necessarily expect, like, a Schedule A from them, for instance.

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Patrick Myers: So, if there's an issue there, or a question about whether or not it is an insured product, or whether or not it even indeed offers medical care, which would then trigger some of these other issues, it's a good idea to

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Patrick Myers: Seek, assistance from a lawyer.

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Patrick Myers: Because that'll help… they can help determine the exact compliance obligations associated with certain offerings, including methods for imputing income at least once annually as applicable, and to assure that they structure the programs relative to the other group health plan offerings in the plan as a whole.

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Patrick Myers: So those are kind of… these are the things to keep in mind when you're looking at a vendor solution, and things we'll be hitting on or touching on as we go through this today.

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Patrick Myers: So, let's go ahead and get started on some of the more specifics, and so I'm going to pass it on over to Molly to talk more about the federal group health plan laws.

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Mollie Sledd: Yeah, thank you, Patrick. So, yeah, these vendor solutions, or point solutions, as we call them, a lot of times they sound like these really wonderful offerings. Maybe it's something that, an employee has brought to a company's attention and asked

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Mollie Sledd: to be offered along with the group health plan benefits, and, you know, the employer wants to very happily do so, and provide this wonderful benefit. But there are some things to keep in mind, and that is, chiefly, you know, from our perspective here in NFP benefits compliance.

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Mollie Sledd: What are the compliance considerations to offering these programs? What are the laws that you need to remember to potentially have to comply with? So, we're going to look at the federal group health plan laws that may be triggered by these vendor point solution programs.

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Mollie Sledd: Alright, and the first thing that you need to consider when you're analyzing what federal group health plan laws may or may not be triggered by these benefits is.

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Mollie Sledd: Is this program providing what is called medical care?

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Mollie Sledd: And at a high level, for purposes of these federal group health plan laws that we're talking about, medical care means, generally.

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Mollie Sledd: Amounts paid for the diagnosis, cure, mitigation.

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Mollie Sledd: treatment, or even just the prevention of disease, or payments made for the purpose of affecting any structure or function of the body. That's gonna be medical care.

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Mollie Sledd: Now, that is pretty broad, so a lot of… a lot of these programs are going to fit under this category. As a result, they are considered group health plans under federal law that are going to be subject to ERISA,

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Mollie Sledd: Cobra.

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Mollie Sledd: and the HIPAA privacy and security rules.

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Mollie Sledd: And, and many of them, as well, are going to trigger some additional federal group health plan requirements, specifically, mental health parity, or what we call MAPIA.

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Mollie Sledd: and the ACA, the Affordable Care Act, which Patrick already mentioned before.

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Mollie Sledd: So let's dive into this medical care analysis a little bit more. When you have a program or a vendor solution.

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Mollie Sledd: Usually there's going to be some sort of

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Mollie Sledd: Resource or expert providing some sort of advice, right?

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Mollie Sledd: So the first thing you need to look at is whether that individual

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Mollie Sledd: Is a physician or therapist who is actually trained and licensed as a medical professional.

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Mollie Sledd: Second part of the analysis, Whether that individual is making any sort of actual diagnosis themselves.

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Mollie Sledd: Or, are they simply responding to, or is the information coming to the user as a result of some sort of selfdiagnosis or selfreported condition?

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Mollie Sledd: Third, consider whether or not the advice is offered through the program specifically to the individual or to the employee who's using it.

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Mollie Sledd: Or is it more broad or general advice for, you know, just anyone who might have that kind of condition?

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Mollie Sledd: Finally, look at whether or not there is any specific direction or prescription specific to an individual or an employee. Or is it just kind of general suggestions that broadly pertain to the condition?

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Mollie Sledd: So this… I know this… this sounds kind of difficult to… to parse, but…

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Mollie Sledd: We have some examples. So, example one. We have a vendor solution program that, is accessed through a mobile phone app, like many of them are, and we have an employee, his name is John, and he, wants to get some advice about type 2 diabetes.

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Mollie Sledd: So first, he goes ahead and he verifies with the app, with the program, that he does indeed have type 2 diabetes.

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Mollie Sledd: As a response to that affirmation, the program gives John a list of general coaching, you know, advice, general services, general things that he can do to address his type 2 diabetes, such as diet, exercise, and sleep habits that, you know.

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Mollie Sledd: Have the, on average, have the effect of mitigating type 2 diabetes.

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Mollie Sledd: This type of general coaching is not considered medical care. It is general enough in nature, there is not a kind of specific diagnosis or specific prescription involved here.

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Mollie Sledd: Alright, Example 2.

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Mollie Sledd: We have, a similar program. We have another employee, her name is Nora. She is, also trying to find out some information.

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Mollie Sledd: So she, actually goes into the program and interests in her eating habits.

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Mollie Sledd: a… an expert, through the program, a therapist, provides some specific advice after looking at Nora's eating habits. This person or the program responds with, you should consume less soda, eat less sugar, eat more, you know, leafy greens, and you might want to look into getting a prescription for XYZ drug.

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Mollie Sledd: That type of specific advice is a treatment, and if they go ahead and prescribe that medication, that is obviously a prescription for Nora's particular condition.

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Mollie Sledd: So that would constitute medical care.

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Mollie Sledd: Specific coaching, in this case, would be considered medical care that would trigger these group health plan laws.

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Mollie Sledd: Here's a third example of a program design that we might see. A vendor sends a kit to our employee Carrie's home to collect a blood sample via a finger prick.

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Mollie Sledd: That blood sample is then sent away to a lab where it's tested for food allergies and other sensitivities, and Carrie receives the results by email.

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Mollie Sledd: And with those results comes some specific recommendations to, to treat or, you know, mitigate those, those conditions that are identified.

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Mollie Sledd: This type of individualized diagnosis and treatment plan would be considered medical care, okay?

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Mollie Sledd: So, what does that mean? It means that the programs, in those last two examples

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Mollie Sledd: would be subject to federal group health plan laws, such as ERISA, COBRA, and HIPAA. However, there are some additional considerations to flag whether or not the program is also subject to

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Mollie Sledd: mental health parity, and the ACA. That is because there is a potential exception from those laws, under what is called the accepted benefit exception. And this applies to what we call employee assistance programs, or the EA… we call it the EAP definition for accepted benefits.

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Mollie Sledd: In order for a program to meet the definition of an accepted benefit.

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Mollie Sledd: and qualify for this kind of EAP exception from the ACA and MAPIA. It has to qualify for 6 different, which are listed here.

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Mollie Sledd: So, first, the program cannot provide significant benefits in the nature of medical care. So, it does provide some medical care, right? We already… we already kind of established that, but does it provide significant benefits? And that is taking into account the amount, scope, and duration of those covered services.

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Mollie Sledd: This is kind of a nebulous, definition. It's definitely a facts and circumstances,

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Mollie Sledd: consideration. There's no black and white definition of what significant benefits are. There are some examples that are provided in, the regulations.

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Mollie Sledd: But it is something that you would probably need to get some help considering whether or not that program rises to this level.

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Mollie Sledd: Second, you want to consider whether or not the program coordinates with benefits under another group health plan. If it does, then it's definitely going to be considered, kind of a full group health plan and not an accepted benefit.

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Mollie Sledd: Third, are participants required to exhaust benefits under the program before they're eligible for another plan? For example, is that program considered a gatekeeper in order to obtain benefits from the underlying medical plan?

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Mollie Sledd: If it is structured that way, then it is not going to meet the accepted benefit exception.

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Mollie Sledd: Fourth, if participation in the program is dependent on participation in another group health plan, then it's not going to be an accepted benefit.

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Mollie Sledd: Fifth,

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Mollie Sledd: Employee premiums are contributions, whenever those are charged for a program, it's not going to qualify as an accepted benefit. In order for it to meet this accepted benefit exception, the program has to be completely employer paid.

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Mollie Sledd: And then finally, you want to look at whether or not there's any cost sharing from the employees when they actually use the services. You know, is there a copay or a coinsurance or something like that?

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Mollie Sledd: To access those benefits. If there is, it's not going to be an accepted benefit. And we go through this in quite a lot of depth in a recent NFP observation article that we write in our newsletter, Compliance Corner. We covered this in our July 1st, 2025,

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Mollie Sledd: article entitled, Is Your Point Solution a Group Health Plan? So, go ahead and take a look at that if you want some more information about, this whole idea of accepted benefits.

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Mollie Sledd: So what does it mean if these laws do apply? What if you have a point solution program that is definitely providing medical care? What does that mean? It means that it's going to be subject to ERISA, COBRA, and the HIPAA privacy and security rules.

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Mollie Sledd: Now, each one of these items is, you know, each one of these laws we could spend an entire, you know, we could do an entire series of webinars on, so this is very, very, highlevel, kind of.

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Mollie Sledd: cursory information, but…

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Mollie Sledd: In brief, with ERISA comes certain disclosure and reporting obligations. You have to have a written plan document, you have to distribute summaries of

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Mollie Sledd: you know, summary plan documents and summaries of material modifications, if you have any changes to participants. Depending on the, the, you know, employee count, you have to file Form 5500.

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Mollie Sledd: There are fiduciary obligations that come along with administering this benefit, as well as claims and appeals procedures that might be triggered.

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Mollie Sledd: For COBRA, that is, of course, the obligation to offer continuation coverage due to qualifying events, such as termination of employment.

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Mollie Sledd: You have to make sure that you include a mention of this benefit in the initial notice. Make sure it's clear to, you know, to participants that this is a qualifying benefit.

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Mollie Sledd: You have to do certain administrative tasks that go along with COBRA, such as calculating the rate.

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Mollie Sledd: And making sure that you have an administrator who's able to include that.

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Mollie Sledd: Cobra in particular is a real kind of compliance risk, because if you have an individual who's kind of midtreatment.

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Mollie Sledd: with a service that is being offered by your Point Solution Program, let's say you have a fertility benefit, and they are midIVF cycle, they are absolutely going to be invested in making sure that they have access to continue that benefit.

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Mollie Sledd: And then finally, if it is medical care, then it… that triggers HIPAA privacy and security regulations as well. So that means that you would have to make sure that there are written policies and procedures for handling PHI, make sure that any staff

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Mollie Sledd: in the plan, who handles PHI, receives training, doing a security risk assessment, making sure a business associate agreement is signed with the vendor, etc.

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Mollie Sledd: Now, if you have, a benefit that is… maybe it's providing medical care, but, it's…

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Mollie Sledd: Let's say it, is also not considered an accepted benefit, it doesn't meet those six

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Mollie Sledd: conditions that we talked about before, then it's going to be subject to even more federal group health plan laws, including mental health parity, which requires you to take a look at the mental health and substance use disorder benefits that might be on offer, and make sure that they're on par with medical surgical benefits.

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Mollie Sledd: And it's gonna be subject to the ACA, which can bring its own, you know, myriad, kind of.

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Mollie Sledd: obligations and burdens, such as PCOR fee filing and, having to comply with certain, insurance market reforms, such as the prohibition on dollar value limits and the requirement to cover

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Mollie Sledd: preventive care, first dollar. And then there are other requirements that could be triggered as well, as if it is not considered an accepted benefit, such as RXDC reporting, GATT clause attestations, and additional HIPAA, requirements under the nondiscrimination portability rules.

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Mollie Sledd: All right, so Patrick is now going to talk us through, you know, what some of the kind of practical solutions are for approaching those federal law requirements.

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Patrick Myers: Thank you, Molly. As Molly talked about just a minute ago, the definition for whether or not a vendor or point solution program provides medical care can be quite broad, and it can be difficult to argue that a particular point solution program doesn't provide medical care.

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Patrick Myers: So… In other words, it will often trigger those compliance concerns that Molly alluded to earlier.

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Patrick Myers: But, one of the conservative approaches to this problem

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Patrick Myers: is to assume that these programs do provide medical care, and that, therefore, those regulations, ERISA, COBRA, HIPAA, the ACA, MAPIA, and other similar mandates will apply.

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Patrick Myers: And so, if that's the case, there are some practical ways to address those concerns that arise relative to those laws, you know, that come as a result of trying to comply with those regulations.

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Patrick Myers: And one of the easiest or conservative ways to do that is to

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Patrick Myers: to, integrate the Point Solution Program into your medical plan via the plan documents.

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Patrick Myers: In practice, this means adding the Point Solution Program as a benefit under one or more of the employer's existing medical plans, and thereby becoming a part of the plan, and achieving compliance with group health plan requirements as a result of that integration.

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Patrick Myers: Notably, integration with the Point Solution program into your medical plan will require that the benefit is offered only to employees or former employees. That is, you know, those COBRA participants that might be, that might have access to those programs.

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Patrick Myers: And those, those former employees who are enrolled in the employer's group health plan, or who certify that they're enrolled in another ACAeligible group health plan, would then have access to that vendor solution.

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Patrick Myers: Now, if the point solution benefit remains outside the medical major plan, or medical plan, rather.

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Patrick Myers: It could be reviewed as a standalone group health plan with its own issues.

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Patrick Myers: But…

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Patrick Myers: What we're looking at here is a way of integrating that point solution with the major medical plan and some of the issues or things that that helps solve.

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Patrick Myers: We can go to the next slide, please.

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Patrick Myers: So, an ERISA requires that, that there be a… if it's a med… if it provides medical care and becomes a medical plan, then it has to be documented, there has to be some reporting to the federal government through that Form 5500, as well as reporting to your employees.

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Patrick Myers: As well as the disclosure of certain information to your employees through things like the summary plan document.

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Patrick Myers: a summary of modification, if you're modifying the plan at all, and that sort of thing. So, including the point solution into the major medical plan.

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Patrick Myers: would allow or basically integrate it into the documentation that you already have for your major medical plan, and that will help comply… meet those ERISA compliance issues.

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Patrick Myers: Similarly, with COBRA, if you're limiting that solution, that point solution program only to those enrolled in the employer plan, then they would be included as part of that COBRA package that would be offered to the employee or former employee on… upon the,

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Patrick Myers: Event, of a qualifying event, such as, you know, termination of employment.

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Patrick Myers: But it would be included in that, so it would comply with COBRA that way.

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Patrick Myers: But you would have to work with the vendor regarding postemployment participation rules, you know, what will… how that will actually work in that COBRA context. And you'll also need to work with your COBRA administrator to include the point program

00:24:43.160 - 00:24:52.549
Patrick Myers: in the actual election notices and packets and so on that would be provided to the employee or former employee, as part of that COBRA compliance.

00:24:53.030 - 00:24:58.559
Patrick Myers: And then there are some particular COBRA challenges here, determining COBRA rates for point solutions.

00:24:58.960 - 00:25:14.299
Patrick Myers: Some COBRA vendors can't or won't administer COBRA for the point solution program, so that might have to be handled inhouse. So that's something to keep in mind when you're evaluating whether or not you want to include a vendor solution to your overall benefit package.

00:25:14.790 - 00:25:16.200
Patrick Myers: Next slide, please.

00:25:17.760 - 00:25:32.560
Patrick Myers: And so, the other issues that might arise are, like, HIPAA. You will need to review HIPAA privacy security obligations and run a risk analysis to make sure that if any PHI or personal health information

00:25:32.560 - 00:25:41.189
Patrick Myers: At all will be implicated in this service that will be provided through the vendor, and how that will be shared through the program.

00:25:41.270 - 00:25:50.129
Patrick Myers: That will need to be considered and integrated into the HIPAA privacy and security obligations and policies and procedures that the plan will have to have in place.

00:25:50.710 - 00:25:57.830
Patrick Myers: And in addition, with the ACA, you'll want to integrate that Point Solution Program with the major medical plan, because that will help

00:25:57.830 - 00:26:13.900
Patrick Myers: with ACA compliance by virtue of medical plan compliance. So, in other words, if it's part of the medical plan, then if the medical plan is compliant with the ACA, then chances are pretty good that the Point Solution Program will also comply with the ACA requirements.

00:26:15.250 - 00:26:29.239
Patrick Myers: And then integration with the ACE would be achieved by, much like with ERISA, by adding that point solution program to your plan doc, your wrap document, and your summary plan documents that you'll be distributing to your employees.

00:26:31.010 - 00:26:36.810
Patrick Myers: Next slide, please. So, if you don't integrate that solution with the plan.

00:26:37.000 - 00:26:53.710
Patrick Myers: Then there are going to be some challenges you're going to have to face, and that includes basically treating it as its own medical plan. So, it'll be its own group health plan, and so it's going to have to have its own plan documents, it's going to have to have its own SPDs, you'll have to file a separate Form 5500 for it.

00:26:54.070 - 00:27:00.016
Patrick Myers: And then you're gonna have to be mindful of potential ACA violations. You know, ACA prohibits…

00:27:00.620 - 00:27:15.010
Patrick Myers: dollar limits that exceed certain annual limits, and there are preventive service requirements that have to be met under the ACA, so you want to make sure that if that vendor solution is not part of your plan, it's going to be its own plan, and it's going to have to meet those

00:27:15.180 - 00:27:21.899
Patrick Myers: Those requirements and not exceed those prohibit… prohibited limits on its own.

00:27:22.290 - 00:27:32.450
Patrick Myers: And then, of course, as I mentioned, there will also be additional HIPAA compliance challenges there. You might have to have policies and procedures specifically for that particular solution.

00:27:32.700 - 00:27:51.599
Patrick Myers: And then, of course, if it's its own plan, then it might have its own COBRA obligations, and so there will be challenges inherent with that as well. So you're going to have to also think about if the vendor solution is offered to your nonmedical population, then there are some COBRA issues there.

00:27:51.620 - 00:27:57.039
Patrick Myers: How are you going to offer that to those persons who are not actually enrolled in the medical plan?

00:27:57.820 - 00:28:14.279
Patrick Myers: And then, of course, just those general administrative and HR inefficiencies. You're gonna have to be doing… not only are you doing administrative work for your medical plan itself, but you'll also have to be doing administrative work separately for the vendor solution.

00:28:14.350 - 00:28:25.540
Patrick Myers: Which the vendor itself may not be doing for you, so you'll have to be sure that you have the proper procedures and personnel in place to handle those inefficiencies.

00:28:26.350 - 00:28:28.490
Patrick Myers: Inhouse, so to speak.

00:28:29.330 - 00:28:42.859
Patrick Myers: So, those are the kinds of issues that you'll be dealing with if you are not integrating the vendor solution with the program, or with your plan that you already have in place. So, often, it's the better way to go is to…

00:28:43.060 - 00:28:47.489
Patrick Myers: Is to consider integrating it with the plan that you already have in place.

00:28:48.770 - 00:29:05.169
Patrick Myers: So, the next thing we want to touch on are some more specific issues that are inherent with vendor solutions that we wanted to spend some time on, starting with the potential impact of vendor solutions and point solutions to HSA eligibility. And so, I'll pass it back over to Molly.

00:29:06.030 - 00:29:19.210
Mollie Sledd: All right. Thank you, Patrick. Yeah, so, kind of separate from the consideration of whether or not it's a group health plan, and whether or not it's an accepted benefit, is the consideration of whether or not you're adopting this program.

00:29:19.220 - 00:29:34.890
Mollie Sledd: In conjunction with, or on top of, your highdeductible health plan that you may be offering to employees. If you have a highdeductible health plan with an HSA, you need to take some extra steps before you kind of go ahead and, dive in

00:29:34.890 - 00:29:39.340
Mollie Sledd: fully to the vendor point solution, sphere.

00:29:39.580 - 00:29:43.100
Mollie Sledd: Alright? So, the reason for that is because

00:29:43.600 - 00:29:52.679
Mollie Sledd: Enrollment in a Point Solution Program can potentially affect participants' ability to contribute to their health savings account, their HSA.

00:29:52.700 - 00:30:12.029
Mollie Sledd: And that's because it could potentially be considered impermissible coverage. Now, to back up, as you probably know, in order to be able to contribute to an HSA, in order to even be able to establish an HSA, an individual needs to both be a participant in a qualified highdeductible health plan.

00:30:12.300 - 00:30:26.470
Mollie Sledd: And they need to make sure that they are not participating in any sort of what's called impermissible coverage. Now, impermissible coverage is defined as coverage that provides significant benefits in the nature of medical care, there's that term again.

00:30:26.500 - 00:30:38.670
Mollie Sledd: Or treatment before that statutory minimum high deductible amount is met by the employee. Okay, so if it's providing services for free or at a reduced rate before that

00:30:39.170 - 00:30:41.670
Mollie Sledd: HDHP's deductible is met.

00:30:41.870 - 00:30:47.100
Mollie Sledd: or the statutory deductible amount is met, then that's going to be a problem for their HSA eligibility.

00:30:47.520 - 00:30:53.159
Mollie Sledd: Right? So, anytime you have a point solution program that's providing a significant medical benefit.

00:30:53.220 - 00:31:08.320
Mollie Sledd: at no cost to the employee, that's going to be triggering impermissible coverage, which is going to make every single one of those participants who might be, you know, also participating in a highdeductible health plan unable to contribute to their HSA for the year.

00:31:08.950 - 00:31:11.990
Mollie Sledd: So again, what is significant? It's… it's…

00:31:12.100 - 00:31:26.819
Mollie Sledd: The same kind of thing that we were talking about before when we were talking about the accepted benefit exception, although remember that that's just one of the qualifications, one of the conditions that is met when you're doing the accepted benefit test.

00:31:27.310 - 00:31:39.740
Mollie Sledd: For, for purposes of HSA eligibility and impermissible coverage determination as well, it's a fact and circumstances determination. There's no black and white rule. There's no, like, oh, it's 10 visits.

00:31:39.740 - 00:31:51.149
Mollie Sledd: Or it's to this kind of doctor, but not that kind of doctor. It's… when you look at the program as a whole, is it providing a lot of care, a significant amount of care from, you know, various

00:31:51.530 - 00:31:53.330
Mollie Sledd: different venues.

00:31:54.340 - 00:32:05.490
Mollie Sledd: All right. The IRS has also clarified that a nonhighdeductible health plan carveout benefit would also be impermissible coverage. So, let's

00:32:05.490 - 00:32:20.110
Mollie Sledd: say you have a carveout prescription drug or pharmacy program, or carveout mental health benefit. That's, you know, if it's not itself highdeductible health plan qualified, then it's gonna, you know, it's gonna be considered impermissible coverage.

00:32:21.300 - 00:32:34.210
Mollie Sledd: Remember, this is separate from the consideration of whether ERISA, COBRA, HIPAA, and other federal group health plan laws apply. This is just for the question of whether or not it makes, your highdeductible health plan participants

00:32:34.580 - 00:32:37.240
Mollie Sledd: ineligible to contribute to their HSA.

00:32:39.440 - 00:32:55.400
Mollie Sledd: All right, so there are some general exceptions, when we're talking about impermissible coverage. First, preventive care. Preventive care that falls within the IRS Safe Harbor definition of preventive care is not going to adversely impact HSL eligibility.

00:32:56.470 - 00:33:02.559
Mollie Sledd: This is going to include Periodic health evaluations, such as your annual physical.

00:33:02.840 - 00:33:08.720
Mollie Sledd: Any related tests or diagnostic procedures that go with that? Routine prenatal and well child care.

00:33:08.940 - 00:33:12.719
Mollie Sledd: Your immunizations for adults and children.

00:33:13.790 - 00:33:19.790
Mollie Sledd: Tobacco cessation and weight loss programs, and other, specific screening services.

00:33:21.090 - 00:33:26.509
Mollie Sledd: If the program is providing what's known as permitted coverage.

00:33:27.000 - 00:33:37.050
Mollie Sledd: then it's not going to adversely impact HSL eligibility. Permitted coverage under this definition here means coverage for accidents, disability.

00:33:37.260 - 00:33:42.730
Mollie Sledd: Dental care, vision care, fixed indemnity coverage, or longterm care.

00:33:43.660 - 00:33:48.070
Mollie Sledd: And then finally, there is an exception for telehealthonly services.

00:33:48.180 - 00:34:01.199
Mollie Sledd: And employers are allowed to rely on that telehealth exception to preserve HSA eligibility. So in this case, it means that all the program's benefits are received via telehealth, it's not just, like, one component of the program.

00:34:02.300 - 00:34:21.800
Mollie Sledd: And as a reminder, this was temporary… originally, this was temporary relief that was created during the COVID era, but this relief, saying that telehealth benefits could, you know, be compatible with HSAs, it was made permanent this past year by the One Big Beautiful Bill Act.

00:34:24.310 - 00:34:33.459
Mollie Sledd: Now, there are some possible approaches if you do have a high deductible health plan with an HSA for your employees, and you want to be able to offer a vendor point solution.

00:34:34.139 - 00:34:53.850
Mollie Sledd: So first, the first approach is what we call the siloed approach. It is the more cautious strategy, and this involves offering the program only to those employees who are enrolled in nonhigh deductible health plan coverage. So this is a very cautious approach.

00:34:53.969 - 00:34:55.619
Mollie Sledd: I, I know that…

00:34:55.790 - 00:35:10.869
Mollie Sledd: This might not appeal to all employers, they want to be able to make these benefits available to, you know, to everyone, especially to HSA participants who they might be trying to kind of steer towards the highdeductible health plan for, you know, cost reasons.

00:35:11.180 - 00:35:16.080
Mollie Sledd: But, it is the more cautious approach for dealing with this kind of mismatch.

00:35:16.310 - 00:35:26.390
Mollie Sledd: Taking this approach would require amending eligibility provisions in the related plan docs and SPDs to make it clear who can and cannot participate in the program.

00:35:27.870 - 00:35:32.220
Mollie Sledd: The more inclusive approach, which is kind of a more aggressive take on things.

00:35:32.540 - 00:35:39.889
Mollie Sledd: Is to build the program benefits into the overall plan, and then charge highdeductible health plan participants

00:35:40.000 - 00:35:46.280
Mollie Sledd: For the fair market value of the benefits provided under the program, for as long as they are under that high deductible.

00:35:47.080 - 00:35:51.810
Mollie Sledd: Now, the IRS is not expressly approved of this approach, but it is kind of a…

00:35:52.130 - 00:35:58.319
Mollie Sledd: That's kind of an intuitive approach to dealing with the issue of impermissible coverage.

00:35:59.040 - 00:36:09.269
Mollie Sledd: there are some challenges inherent with this approach, the main one being, what is fair market value? What does that mean? How do you calculate that? How do you determine that?

00:36:09.270 - 00:36:21.149
Mollie Sledd: Is that the retail cost of these services that are being provided, or is it the contracted rate that the program vendor has been able to contract with the providers to get? Is it some other number?

00:36:21.310 - 00:36:24.620
Mollie Sledd: We do recommend that you consult with your counsel.

00:36:24.820 - 00:36:32.480
Mollie Sledd: If you are considering this kind of blended or inclusive approach to including a vendor solution with your highdeductible health plan.

00:36:33.180 - 00:36:44.469
Mollie Sledd: Bottom line is that, employers do need to be very mindful of these considerations if they have a high deductible health plan and would like to consider offering a point solution program.

00:36:46.230 - 00:36:49.000
Mollie Sledd: Patrick, on to you to talk about taxation.

00:36:49.820 - 00:36:50.850
Patrick Myers: Thank you, Molly.

00:36:51.430 - 00:36:55.900
Patrick Myers: An important consideration when we're talking about benefits is

00:36:56.190 - 00:36:59.720
Patrick Myers: The taxable status of that benefit.

00:37:00.140 - 00:37:18.569
Patrick Myers: Generally, only medical benefits qualify for tax exclusion for employees. And just to make sure that we're on the same page… next slide, please. Make sure that we're on the same page. Tax exclusion, when I talk about tax exclusion, I mean that the value of the benefit

00:37:23.950 - 00:37:27.850
Patrick Myers: The value of any benefit provided to employees

00:37:29.140 - 00:37:37.950
Patrick Myers: That is not medical care, would likely need to be… included in your W2s.

00:37:38.360 - 00:37:48.270
Patrick Myers: And as we've been discussing, most health and welfare benefits provided by employers are considered medical care, and so are going to be excludable.

00:37:48.570 - 00:37:53.560
Patrick Myers: However, some point solution program benefits are not going to be medical care.

00:37:53.980 - 00:38:02.310
Patrick Myers: And even more complicated, some of those programs may contain a mix of medical care and nonmedical care.

00:38:02.870 - 00:38:10.600
Patrick Myers: And an HRA, for instance, can't reimburse taxable expenses, even if it's mixed with benefits that

00:38:11.380 - 00:38:13.960
Patrick Myers: For nontaxable medical care expenses.

00:38:14.490 - 00:38:21.209
Patrick Myers: An example of this is going to be, like, your fertility benefit solution.

00:38:21.540 - 00:38:38.639
Patrick Myers: For instance, while temporary egg storage freezing expenses may be considered medical care, and therefore not taxable, longterm egg storage, generally for a year or more, is rarely considered a medical benefit unless it is deemed medically necessary.

00:38:38.670 - 00:38:43.610
Patrick Myers: So that would mean that that elective longterm egg freezing benefit is taxable.

00:38:44.190 - 00:38:49.879
Patrick Myers: And so, when you're dealing with a solution that has

00:38:50.080 - 00:38:54.469
Patrick Myers: A potential mix of medical and nonmedical benefits.

00:38:54.690 - 00:39:02.150
Patrick Myers: It's important to be able to parse those out, for no other reason than to determine what's going to be taxable and what's not.

00:39:02.350 - 00:39:16.740
Patrick Myers: So, it's a good idea to have those… to discuss those with a lawyer or your tax advisor to determine whether any components of the particular vendor solution is going to be medical care, and therefore nontaxable.

00:39:18.130 - 00:39:21.099
Patrick Myers: In addition to determining if a

00:39:21.260 - 00:39:25.500
Patrick Myers: point solution is going to be taxable. Another challenge is that

00:39:25.630 - 00:39:29.500
Patrick Myers: You may not know which employer is actually receiving the benefit.

00:39:29.960 - 00:39:45.020
Patrick Myers: one way to address that is to have the vendor communicate the benefits back to the employer, and then have the employer report it on those employees' forms W2. You know, employers are generally the party responsible for reporting that gross income via W2,

00:39:45.020 - 00:39:50.780
Patrick Myers: Even if they engage a payroll provider to help do that, it's still going to be ultimately the employer's responsibility.

00:39:51.500 - 00:39:59.799
Patrick Myers: So, another approach, though, is to have that vendor issue a Form 1099 directly to each employee who receives a benefit under the Point Solution Program.

00:40:00.590 - 00:40:05.110
Patrick Myers: That may or may not work, depending on how willing the vendor's gonna be to do that.

00:40:06.010 - 00:40:13.249
Patrick Myers: Now, while the mechanics of the taxation may depend on that relationship with the vendor and the client.

00:40:13.420 - 00:40:29.000
Patrick Myers: the employer needs to consider the best way to administer and report additional income related to any taxable benefit that's going to be provided by the employee. So, it's a challenge to, especially when you have these mixed benefits, to determine

00:40:29.100 - 00:40:47.760
Patrick Myers: what's going to be included in that gross income and what's not. So, if there's any question about that, it's a good idea to talk to a lawyer or a tax advisor, just to make sure that your I's are dotted and your T's are crossed, and to come up with some way of making sure that the right employees get the right information in time for tax.

00:40:47.760 - 00:40:50.250
Patrick Myers: For entitled to file their taxes, I should say.

00:40:50.860 - 00:40:53.839
Patrick Myers: So, that's a consideration to keep in mind.

00:40:54.980 - 00:41:02.489
Patrick Myers: The next thing we want to talk about are reporting requirements and issues that might be there, so I will pass this back over to Molly.

00:41:02.910 - 00:41:12.859
Mollie Sledd: Yeah, thanks, Patrick. So, similar to the issue of taxation, what needs to be reported to the government when it comes to offering these programs?

00:41:12.930 - 00:41:26.560
Mollie Sledd: So, first, as Patrick just mentioned on the previous slide, there is W2 reporting involved, under the ACA. This is the ACA's requirement that the total cost of coverage, or that aggregate reportable cost.

00:41:26.860 - 00:41:38.469
Mollie Sledd: be reported on each employee's W2. If it's medical care, it's going to be included in the cost of medical care. And that is, true whether it is considered taxable or nontaxable.

00:41:39.790 - 00:41:47.780
Mollie Sledd: Also under the ACA is the obligation to file the… PCOR fee, and…

00:41:48.010 - 00:41:56.349
Mollie Sledd: That is going to be true if, the program is considered to be providing medical care, then…

00:41:56.470 - 00:42:10.229
Mollie Sledd: That involves counting up all the enrolled employees, getting a covered life headcount, multiplying that by whatever the PCOR fee rate is for that year, filling out a Form 720, sending that along with a check to the IRS.

00:42:11.710 - 00:42:21.879
Mollie Sledd: So, if it is a fully insured plan, if you have a fully insured plan generally, just remember that Point Solutions generally are structured as,

00:42:22.080 - 00:42:25.579
Mollie Sledd: Reimbursement plans or selfinsured arrangements.

00:42:26.240 - 00:42:37.139
Mollie Sledd: there would be a PCOR fee due, separately for that selfinsured point solution plan, even if you otherwise, sponsor a fully insured medical plan.

00:42:37.700 - 00:42:41.449
Mollie Sledd: Alright? And then, if it's medical care, that…

00:42:41.590 - 00:42:49.129
Mollie Sledd: triggers ERISA, right? And part of ERISA is the obligation to file a Form 5500 annually with the Department of Labor.

00:42:49.210 - 00:43:03.579
Mollie Sledd: If it is not integrated into your major medical plan, as Patrick discussed on an earlier slide, then you would have to file a separate Form 5500, depending on the number of employees who are enrolled in the benefit.

00:43:03.840 - 00:43:12.709
Mollie Sledd: Vendors probably won't provide a Schedule A, though, so there would be special Form 5500 instructions that would apply.

00:43:15.250 - 00:43:19.689
Mollie Sledd: And then, RXDC reporting. So if, you have.

00:43:19.990 - 00:43:33.490
Mollie Sledd: a point solution program that is providing medical care, but it does not qualify as an accepted benefit under that test that we were talking about earlier. It is going to be subject to RXDC, or prescription drug, disclosure reporting.

00:43:34.170 - 00:43:53.030
Mollie Sledd: So, RXDC reporting applies both to insured and selfinsured group health plans that include any sort of prescription drug coverage. There is a specific exception under the requirement for HRAs and FSAs, EAPs, hospital fixed indemnity insurance, diseasespecific insurance, and standalone dental and vision plans.

00:43:53.770 - 00:44:01.539
Mollie Sledd: If your Point Solution Program offers prescription drug coverage in any form, then the employer has to consider how to complete

00:44:01.540 - 00:44:13.999
Mollie Sledd: this RXDC reporting. The employer, as the plan sponsor, does have the responsibility to complete it, although you can get the vendor to agree to complete it on your behalf, if you, you know, if you can get that in writing.

00:44:14.340 - 00:44:28.819
Mollie Sledd: And if you are offering a carveout, a prescription drug is kind of a carveout benefit, which a lot of them are structured as. There are specific instructions in the official RXDC instructions on how to, how to report that correctly.

00:44:31.360 - 00:44:51.220
Mollie Sledd: So, those are the main reporting obligations, and we just want to leave you with some key takeaways from this presentation. Point Solution Programs are, they're often provided by thirdparty vendors, and they're a common way for employers to kind of enhance their medical or benefit plans, maybe to tackle a specific

00:44:51.370 - 00:44:58.800
Mollie Sledd: Disease, or condition, or, you know, an expense, maybe, that is coming up for their plan or for their employees.

00:44:59.830 - 00:45:06.990
Mollie Sledd: Now, employers who decide to offer point solution benefits have to consider federal group health plan compliance.

00:45:07.020 - 00:45:25.760
Mollie Sledd: with laws such as ERISA, COBRA, and HIPAA, and depending on whether or not it is considered an accepted benefit or an EAP, there may be implications under the Affordable Care Act and mental health parity as well. There could also be tax implications, depending on the benefits being provided and to whom they're being provided.

00:45:26.960 - 00:45:40.059
Mollie Sledd: Employers can ensure compliance by, one approach to addressing compliance is by incorporating or integrating their point solution benefit into their existing group health plan.

00:45:40.850 - 00:45:54.350
Mollie Sledd: Sometimes, however, it is going to be necessary to consult an expert, especially a lawyer, to assess whether or not the Point Solution Program qualifies as medical care, and whether or not it's being administered correctly.

00:45:55.190 - 00:46:02.829
Mollie Sledd: NFP does have resources to help you, consider point solution programs and the compliance considerations.

00:46:02.840 - 00:46:13.200
Mollie Sledd: that go along with them. Please go ahead and ask your NFP account team for a copy of our Point Solution Programs, A Guide for Employers publication.

00:46:13.200 - 00:46:26.229
Mollie Sledd: There's also the, NFP observation article in our Compliance Corner newsletter that we published, this past July that talks about some of the issues with point solution programs.

00:46:27.240 - 00:46:37.460
Mollie Sledd: If there's anything else, please, again, don't hesitate to reach out to your NFP account team, for any more guidance on, point solution programs.

00:46:38.050 - 00:46:42.319
Mollie Sledd: And we appreciate your time here today. Thank you so much.

00:46:42.750 - 00:46:45.520
Mollie Sledd: And I hope you have a wonderful rest of your afternoon!

00:46:46.200 - 00:46:47.200
Patrick Myers: Thank you, everyone.

00:46:48.660 - 00:46:54.219
Amber Posthauer: All right. Well, thank you, Molly and Patrick, for sharing your valuable time and expertise with us today.

00:46:54.450 - 00:47:09.320
Amber Posthauer: To reiterate, today's presentation was recorded. We'll be sharing the recording in the followup email and on the NFP website. If there are any portions of this call that you missed, by Monday you'll receive an email with a link to the full recording. The PowerPoint slides used during this presentation will be shared in the same email.

00:47:09.580 - 00:47:21.089
Amber Posthauer: At the end of this call, a survey will populate in a new window. Please take a brief moment to complete the survey, as it lets us know what topics are important to our listeners, and helps make our education program as current and relevant as possible.

00:47:21.210 - 00:47:26.010
Amber Posthauer: That concludes our webinar for today. Thank you, everyone, for joining us, and have a great day!