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On December 27, 2020, the Consolidated Appropriations Act, 20211 (the Act) was signed into law. The Act includes COVID-related and other provisions that impact health and retirement plans, including the following.

Surprise Billing

The Act includes the “No Surprises Act.” Effective for plan years beginning in 2022, health plans must apply in-network cost-sharing to out-of-network emergency services performed in an emergency department (without requiring prior authorization), non-emergency items and services furnished by out-of-network providers at an in-network facility, and out-of-network air ambulance services.  Patients cannot be balance billed by providers for these items and services.2 Billed amounts for such services must also count toward participant deductibles and out-of-pocket maximums.

Health plans must issue the out-of-network providers an initial payment or denial notice within a certain timeframe. If state law doesn’t dictate pricing and the plan and provider cannot agree through a negotiation process, then the Act provides for arbitration.3 The arbitrator will only be allowed to choose between the provider or the plan’s offer; no middle-ground is permitted. Additionally, the arbitrator cannot consider certain factors—such as Medicare, Medicaid, CHIP, and TRICARE reimbursement rates, usual and customary charges, or the amount ordinarily billed by such provider before the Act—but must consider a plan’s median contracted rate for the geographic region, among other criteria.

The No Surprises Act also has provisions intended to increase transparency—for example, by requiring deductibles and out-of-pocket maximums to be included on health ID cards and requiring maintenance of provider directories and price comparison tools—adding to the Act’s other transparency-focused provisions (discussed below).4 The No Surprises Act also requires plans to provide an explanation of benefits in advance of a individual’s scheduled item or service, which includes information such as whether the provider is in-network and the contracted rate, good faith estimates of the provider’s charges, the plan’s responsibilities, cost-sharing responsibilities, and amounts incurred towards plan maximums, and certain disclaimers (such as whether prior authorization is required).

Transparency in Healthcare

Price and Quality of Providers—The Act prohibits health plans from entering contracts with providers or provider networks which restrict the plan from disclosing provider-specific cost and quality information.5 Such contracts must also permit the plan to access de-identified claims information.

Broker and Consultant Compensation—The Act requires brokers and consultants to disclose to a health plan’s responsible fiduciary prior to contracting, any direct or indirect compensation they expect to receive for providing such services. They also must give the plan at least 60 days’ notice before making changes to its compensation arrangement.6

Mental Health Parity Compliance—The Act requires health plans offering mental health or substance-use disorder benefits to conduct a detailed comparative analysis of the non-quantitative treatment limitations applicable to such benefits in compliance with the Mental Health Parity and Addiction Equity Act’s (MHPAEA) requirements.7 Under the Act, plans must respond to requests by the DOL, HHS, or Treasury Department for these comparative analyses beginning as early as February 10, 2021. However, it’s unclear how soon these agencies will begin making these requests.

The Act also requires these agencies to issue guidance for assessing MHPAEA compliance, including guidance on conducting and recording the Act’s comparative analysis requirement.

Pharmacy Benefits and Drug Costs—The Act requires group health plans to submit annual reports (by December 27, 2021 and June 1 each year thereafter) to the DOL, HHS, and Treasury Department detailing plan spending, drug costs, participant premiums and manufacturer rebates, plus the effect of manufacturer rebates on premiums.8 These agencies must then publish a biannual report on prescription drug reimbursements, pricing trends, and the role of prescription drug costs on premiums.

Health and Dependent Care Flexible Spending Accounts

With limited exceptions, participants who contribute to a health or dependent care flexible spending account (FSA) must use their balances by year’s end or forfeit the unspent balance. Due to changes in circumstances resulting from COVID-19 (for example, postponed surgeries or closures of childcare centers), some participants were unable to spend down their FSAs in 2020. In response, the Act temporarily relaxes FSA rules:9

  • A plan may allow participants to carry over any unspent health or dependent care FSA funds remaining at the end of plan years ending in 2020 and 2021 (ordinarily, only health FSA funds up to $550 may be carried over).
  • If an FSA instead uses a grace period, it may be extended for plan years ending in 2020 and 2021 from the ordinary 2½ months after year’s end to a full 12 months.
  • For plan years ending in 2021, a plan may allow participants to prospectively change their FSA contribution election. However, refunds are not permitted.
  • For dependent care FSAs, plans may temporarily increase the upper age limit for reimbursable expenses from 12 to 13 for dependents who aged out during the last plan year in which regular enrollment ended on or before January 31, 2020. If the participant has any unspent amounts remaining at the end of that year, this rule also extends to the following year to the extent of those amounts.
  • A plan may allow employees who cease to participate in a health FSA during calendar year 2020 or 2021 to nonetheless continue to receive reimbursements of unused contributions, through the end of the year (plus any grace period) in which they stopped participating.

Plan amendments are required by the last day of the calendar year following the plan year the amendment is effective.

Partial Terminations

As a result of the large number of job losses in 2020 and continuing into 2021 some retirement plans faced the prospect of a partial termination, which may occur when a large percentage (typically 20% or more) of a plan’s participants are terminated during an applicable period (usually a single plan year).10 In the event of a partial termination due to employee turnover, participants who were terminated during the period are fully vested.

Under the Act, a plan is not partially terminated if the number of active participants on March 31, 2021, is at least 80% of the active participants as of March 13, 2020.11 This relief applies for any plan year that includes the period from March 13, 2020, through March 31, 2021.

Disaster Relief

The Act permits sponsors to amend individual account retirement plans to add special disaster relief distributions and loans.12 Similar to relief enacted previously for natural disasters, the law permits distributions up to $100,000, increased loan limits, delayed loan repayments, and recontributions of prior withdrawals intended to purchase a home. This relief applies to individuals affected by disasters (other than the COVID-19 pandemic) with a FEMA declaration between January 1, 2020 and February 25, 2021. Such disaster-related distributions may be made until June 25, 2021, and other date ranges apply to the disaster-related loan and recontribution relief.

Retirement plans may be amended to include these provisions until the last day of the plan year beginning on or after January 1, 2022.

From all of us here at MMPL, your employee benefits law firm.

Not intended as legal advice.

  1. Pub. L. No. 116-260, 134 Stat. 1,182 (2020).
  2. Div. BB, tit. I, §§ 102, 105. A special exception to the cost-sharing and balance billing rules applies for non-emergency services performed by out-of-network providers at in-network facilities where advance notice and consent rules are satisfied. However, this exception does not apply to certain services, including “items and services related to emergency medicine, anesthesiology, pathology, radiology, and neonatology, whether or not provided by a physician or non-physician practitioner, and items and services provided by assistant surgeons, hospitalists, and intensivists,” diagnostic services (including radiology and laboratory services but subject to any HHS restrictions), items and services provided by out-of-network providers if there is no in-network provider who can provide the item or service at the facility, and other items or services provided by specialty practitioners as determined by HHS. The notice-and-consent exception also does not apply to items or services furnished due to unforeseen urgent medical needs arising when the consented to item or service is furnished.
  3. Id. § 103.
  4. Id. § 107.
  5. Div. BB, tit. II, § 201.
  6. Id. § 202.
  7. Id. § 203.
  8. Id. § 204.
  9. Div. EE, tit. II, § 214.
  10. See Rev. Rul. 2007-43.
  11. Id. § 209.
  12. Div. EE, tit. III, § 301.