New ACA Affordability Limit and Top 10 Compliance Issues for 2021
Amid the twin health and economic crises caused by the COVID-19 pandemic, employers face unprecedented challenges in managing health and leave benefit offerings, contribution strategies, vendor terms, plan operations, future financial outlook, and employee communications. These challenges, along with public health and political uncertainties, make planning for 2021 more complicated than ever. To help ensure that compliance issues don’t get lost in the shuffle, we’ve summarized the top 10 developments to address or monitor when planning group health benefits and paid leave programs for the upcoming year.
We’ll start with the ACA’s affordability limit for 2021, since it was just released by the IRS this week. For the 2021 plan year, employer-sponsored health coverage will meet the Affordable Care Act’s affordability standards if the required employee contribution doesn't exceed 9.83% of household income (up from 9.78% in 2020). For calendar-year plans using the federal poverty line (FPL) affordability safe harbor, the monthly employee required contribution for the lowest-cost, self-only option with minimum value cannot exceed $104.53 (up from $101.79 in 2020).
As a reminder, this affordability percentage can affect individuals' eligibility for federally subsidized coverage from a public exchange, as well as employers' potential liability for shared-responsibility (or "play or pay") assessments. To determine liability for play-or-pay assessments, three employer safe harbors allow replacing household income in the affordability calculation with one of these figures: Form W-2 wages, rate of pay, and FPL. Read our full GRIST for more information about the affordability standards and how to calculate the FPL safe harbor contribution limit for non-calendar-year plans.
Top 10 compliance issues for 2021 health and leave benefit planning
This list highlights 10 top compliance-related priorities for 2021 health and leave benefit planning and recommends general actions for each item. Read the full summary and download the full GRIST for detailed information and resources related to each compliance priority.
- COVID-19 issues for group health plans. COVID-19 considerations for group health plans will extend into 2021 if the public health emergency and related agency guidance remain in place past 2020 year-end or sponsors choose to keep certain benefits adopted during the pandemic. When strategizing for 2021, employers should review this year’s coverage mandates, communications to plan participants and agencies’ COVID-19 relief. Some employers may want to continue certain benefit enhancements beyond the required coverage period, while others may want to revert back to terms predating the pandemic. In either case, communications with plan participants and plan documentation is key. Opportunities to expand telehealth, EAPs and on-site clinics could continue into 2021.
- Transition back to a safe, healthy workplace. Plan how to adapt and reset so at least some employees furloughed or telecommuting early in the pandemic can safely return to the workplace. Monitor local conditions, and prepare contingency plans as pandemic and economic conditions evolve. Stay focused on diversity and inclusion goals in light of the recent global protests for racial equality and a Supreme Court decision confirming civil rights protections for the LGBTQ employees. Recognize the need to have an individualized operating plan for 2021 that reflects local pandemic conditions while prioritizing employee safety, health, diversity and inclusion.
- Paid leave. Assess employer-sponsored paid leave programs, including sick, disability, parental and family leave. Monitor state and local legislation for new or expanded leave mandates and programs, and track the status of emergency measures requiring paid leave for COVID-19 (or other public health emergencies) that may stretch into 2021. Evaluate processes for integrating COVID-19 paid leave requirements and nonemergency state and local paid leave mandates with existing benefit plans; revise plans as needed to comply. Multijurisdictional employers should consider developing a long-term strategy for equalizing leave benefits across jurisdictions and administering increasingly complex programs.
- State activity. Review state laws raising concerns for group health plans. For insured plans, expect more activity on surprise medical bills and new benefit mandates for health insurers. State initiatives that could affect all employers include health plan reporting for individual-coverage mandates, PBM regulations, new or continuing health plan assessments, and expanded telemedicine laws. Employers should also track state innovation waivers under ACA Section 1332 to identify any restrictions that may affect plan design. Employers should work with vendors to ensure compliance with these initiatives.
- Prescription drug costs and coverage. Review new payment models and plan designs aimed at lowering plan costs for gene therapies and specialty medications to ensure compliance with regulatory requirements. Monitor federal and state legal and other developments targeting the increasing cost of prescription drugs. Evaluate the impact of these changes on prescription drug benefits, and reassess health plans’ drug-purchasing strategies.
- Transparency rules. Review the final transparency regulation for hospitals, as well as the proposed rule for group health plans and insurers. Work with plan experts to review the prices that hospitals make public in 2021, under the final transparency rule. Prepare to comply with the transparency rule for group health plans and insurers, which may take effect in 2021 for noncalendar-year plans. Watch for litigation that may delay or invalidate these rules.
- Data privacy and security. Evaluate each new tech vendor that has access to health and welfare plan data to determine whether the HIPAA or other data-protection and privacy laws apply. Wellness and transparency tools, mobile apps, and artificial intelligence may implicate HIPAA and other laws. Regularly review vendor compliance, since any breach or violation could implicate plan sponsor obligations under HIPAA, ERISA fiduciary rules or state law. Monitor how HIPAA guidance evolves to address not only the pandemic but emerging technologies. Track whether new healthcare data interoperability rules have an impact on information sharing in the private sector.
- HSA, HRA and FSA developments. For 2021, ensure administrative practices comply with optional or required COVID-19 relief, and timely adopt any necessary plan amendments. Update HDHPs and account-based health plans for indexed dollar limits. Consider adding newly HSA-eligible preventive services to HDHP coverage and allowing reimbursement of over-the-counter (OTC) drug costs without a prescription and, if permissible, fees for direct primary care arrangements (DPCAs). Identify pre- or no-deductible health benefits, programs or point solutions that could jeopardize HSA eligibility, and determine whether to make changes. Now may also be the time to consider offering one of the new types of HRAs — an individual-coverage HRA or an excepted-benefit HRA. Monitor pending COVID-19 relief legislation that could provide greater FSA flexibility or enhance HSAs for 2021.
- Preventive services. Confirm that nongrandfathered group health plans cover ACA-required in-network preventive services without any deductible, copay or other cost sharing. Modify preventive benefits for the 2021 plan year to reflect the latest recommendations from the US Preventive Services Task Force (USPSTF), the Health Resources and Services Administration (HRSA), the Advisory Committee on Immunization Practices (ACIP) of the Centers for Disease Control and Prevention (CDC), and ACA guidance. Adjust benefits for new or revised recommendations. Monitor development of COVID-19 preventive services or vaccines, which nongrandfathered health plans must cover without cost sharing on an expedited basis. Nongovernmental employers with sincerely held religious or moral objections to contraceptives may exclude ACA-mandated coverage of some or all women’s contraceptives approved by the Food and Drug Administration (FDA), under final regulations recently upheld by the Supreme Court. Update plan documents, summary plan descriptions (SPDs), SBCs and other materials as needed.
- Other ongoing ACA concerns. Review 2021 group health plan coverage and eligibility terms in light of ESR strategy, ESR and minimum essential coverage (MEC) reporting duties, and ACA benefit mandates. Determine whether the proposed grandfathered health plan rule, if/when finalized, will help preserve grandfathered status (if applicable). Use updated SBC templates for 2021 health plans. Continue to calculate and pay the PCORI fee, manage MLR rebates, and confirm the health insurance tax (HIT) is not built into 2021 premiums. Review potential sex discrimination concerns in benefit eligibility and plan terms in light of recent developments in federal nondiscrimination laws. Monitor ongoing litigation challenging the ACA and any congressional response, as the outcome will likely have implications for employer group health plans. Reconsider any benefit changes to minimize the Cadillac tax in 2022, since Congress repealed it in a federal spending package late last year.