Employer-sponsored health plan compliance issues in 2024 will continue to generate extensive federal and state regulatory activity, legislation, and litigation. Issues in the spotlight include preparing for sweeping new mental health parity rules proposed for 2025, ongoing compliance with numerous group health plan transparency requirements, and efforts to rein in healthcare and prescription drug costs. Employers must also contend with the growing patchwork of state rules, particularly ones targeting prescription drug pricing and paid family/sick leave. Active litigation continues on several key health policy issues, including surprise billing, Affordable Care Act (ACA)-required preventive services and ERISA preemption of state benefit laws, especially those affecting prescription drug benefits. Major reforms in a divided Congress are unlikely, but bipartisan efforts to lower healthcare costs and regulate pharmacy benefit manager (PBM) practices this year could result in some new requirements for 2024 or later.
This GRIST summarizes expected 2024 compliance and policy developments affecting health and leave benefits and suggests action steps for employers. Topics covered include:
Congressional outlookA significant bipartisan, bicameral drive aims to pass legislation lowering healthcare costs through increased transparency and competition. A broad array of bills would reform PBM practices, add new and expand existing transparency requirements, address provider and hospital billing practices, extend pandemic-related telehealth flexibilities, enhance access to mental healthcare, and ease employers’ ACA reporting duties. At the same time, potential legislative threats to ERISA preemption of state laws are emerging. Whether any legislation might become law with 2024 compliance implications for plan sponsors probably will not become clear until the end of this year. Any measure that does pass Congress late in the year would probably delay most effective dates until 2025, though some provisions still could apply in 2024.
Regulatory outlookExtensive proposed Mental Health Parity and Addiction Equity Act (MHPAEA) regulations and heightened enforcement will remain a major compliance issue in 2024. Federal agencies continue to implement the transparency provisions in the 2021 Consolidated Appropriations Act (2021 CAA, Pub. L. No. 116-260), including the prescription drug data collection (RxDC) reporting — which completed its second round in June — and the surprise billing ban. Plans will also have to continue submitting the annual attestation of compliance — first due by Dec. 31, 2023 — with the 2021 CAA’s “gag clause” prohibition. In addition, the required scope of items and services in the consumer-facing cost-sharing tool required under the transparency-in-coverage (TiC) rule will significantly expand in 2024.
Litigation outlookLitigation will likely continue to limit the Biden administration’s efforts to implement and expand healthcare reforms. Legal challenges to existing healthcare reforms target the ACA’s preventive services mandate and the 2021 CAA’s surprise billing regulations. Ongoing litigation over ERISA preemption of state PBM laws and regulations will have major implications for employers’ pharmacy benefit programs.
State outlookAt the state level, employers can expect states to continue implementing paid leave laws and prescription drug pricing reforms, along with health insurance coverage mandates.
Numerous bipartisan healthcare proposals have a chance of making their way into an expected major “must pass” year-end bill that ties up a host of legislative loose ends. Examples include measures that would increase the transparency of PBMs’ and other providers’ business practices, foster greater competition among providers and hospitals (including site-neutral payment reforms), expand access to telehealth and mental healthcare, and ease employers’ ACA reporting duties.
The shape of any healthcare legislation included in a larger bill will likely take form first as separate Senate and House measures that may see floor votes this fall. Both packages would incorporate provisions from a spate of bills that have already passed key committees in both chambers, often by wide bipartisan margins. With the exception of legislation to extend the ability to offer excepted-benefit, stand-alone telehealth benefits beyond this year, the effective dates in these bills largely do not apply until after 2024. However, the legislative process is in flux, leaving the chance some requirements could hit next year. Legislation that does not cross the finish line this year will remain on the congressional agenda for 2024.
Outlook for healthcare proposals with bipartisan support
PBM reforms. Reducing drug prices by increasing transparency and reforming how PBMs do business is a top bipartisan priority this year. Reforms in an expected Senate healthcare package will likely draw from provisions in the Pharmacy Benefit Manager Reform Act (S 1339), including:
- Extensive new PBM annual disclosures to plan sponsors about rebates and fees received from drugmakers and other third parties, the amount of prescription drug copayment assistance funded by drug manufacturers, total out-of-pocket spending by plan beneficiaries, formulary placement rationale, a list of covered drugs billed under the health plan, and the total gross and net drug spending by the health plan
- A requirement to pass all rebates, fees, alternative discounts and other remuneration related to utilization through to the health plan
- A broad-based commercial market ban on “spread pricing” (a PBM charging a plan sponsor more than the amount reimbursed to the pharmacy dispensing the drug)
In addition, the measure would direct the Department of Labor (DOL) to conduct a study on whether PBMs should serve as ERISA fiduciaries to plans. Some plan sponsor groups are urging Congress to go further and make PBMs plan fiduciaries without conducting a study. These groups are also pushing back on an attempt by independent pharmacies to add language limiting ERISA preemption of expanding state PBM reforms, which can interfere with multistate employers’ ability to design pharmacy benefit programs.
Like S 1339, wide-ranging House legislation — the Lower Costs, More Transparency Act (HR 5378) — could soon see a floor vote. This measure would mandate extensive semiannual PBM reports to plan sponsors with detailed information on rebates, drug spending, total out-of-pocket spending and formulary placement rationale, among other things. Another provision would require PBMs and third-party administrators (TPAs) to disclose extensive information about their direct and indirect compensation to plan fiduciaries.
PBM reforms affecting public programs proposed in both chambers would:
- Delink list drug prices and PBM compensation in Medicare
- Increase transparency into PBM business practices related to Part D benefits
- Require a study of how vertical integration in the pharmacy space is affecting Medicare drug costs and spending
- Ban spread pricing in Medicaid
Speeding more generics to market and capping out-of-pocket costs for insulin are also bipartisan priorities in both chambers.
Increased transparency and provider competition. Another major bipartisan theme of bills in both chambers is to lower overall healthcare costs through transparency and competition.
The above-mentioned HR 5378, which combines separate bipartisan bills approved by several House committees, would implement more price and operational transparency in the healthcare industry. Proposals include codifying and strengthening current price transparency rules for hospitals, including enhancing the transparency-in-coverage (TiC) rules and requiring new price transparency for services like diagnostic lab tests, imaging, and ambulatory surgical centers owned by hospitals.
The bill also advances “site-neutral” Medicare payment policies that plan sponsor groups hope lawmakers will eventually extend to the commercial market. Provisions would require that Medicare and Medicare beneficiaries pay the same rates for physician-administered drugs in off-campus hospital outpatient departments and in physician offices. Other provisions would require that each off-campus outpatient department of a Medicare provider obtain and include a unique provider identifier on claims for payment.
The bill also would mandate a slew of new government reports on various topics, including how well current price-transparency requirements are working and whether adding quality-of-care metrics to those requirements would be feasible. Another provision would strengthen the No Surprises Act’s gag clause prohibition by ensuring that employer plan sponsors are not contractually restricted from obtaining cost or quality-of-care data related to their own plans from service providers.
The Senate, meanwhile, is forging its own path on transparency and encouraging more provider competition. A bill passed by the Health, Education, Labor and Pensions Committee (S 2840) would:
- Bar anti-competitive contract provisions that prevent plans from directing employees to higher-value, lower-cost providers
- Require off-campus hospital outpatient departments to provide a unique identifier on all bills, which would help employers determine whether charges are appropriate
- Ban hospital facility fees for telehealth and certain other services
Virtually all these transparency and PBM reforms have strong backing from the plan sponsor community. While drawing fire from PBMs and other providers, the measures have widespread bipartisan support, as shown in the often-overwhelming approval votes by House and Senate committees. That support suggests that, despite uncertainty about how the two chambers might reach agreement, some proposals could land in any final healthcare package that Congress might pass this year.
Extension of telehealth flexibilities. Bipartisan legislation to make permanent two temporary pandemic-related telehealth provisions have cleared House committees and are expected to see a full House vote this fall. The Senate outlook is clouded, however, by opposition from some Democrats and participant-rights groups.
The Telehealth Benefit Expansion for Workers Act (HR 824) would make permanent the pandemic-related relief that treats stand-alone telehealth benefits and other remote care services for certain employees like an excepted benefit, exempt from many ERISA and ACA group health plan mandates. The temporary relief, and the permanent extension proposed in HR 824, only extends that treatment to employees ineligible for any other group health plan offered by the same employer (e.g., part-time or seasonal workers). While this temporary policy is tied to the public health emergency (PHE) that ended on May 11, employers now offering this stand-alone telehealth benefit may continue to do so through the end of the plan year that began on or before May 11 (e.g., through Dec. 31, 2023, for calendar-year plans).
Although HR 824 is sponsored by lawmakers from both parties, it passed out of committees over the objections of some Democrats. They expressed concern that continued relief from many ACA and ERISA requirements for stand-alone telehealth could encourage smaller employers to offer telehealth instead of major medical benefits. The practice could create confusion among workers, causing some to think they have more comprehensive coverage.
The bipartisan Telehealth Expansion Act (S 1001, HR 1843) would make permanent the pandemic-related relief that allows high-deductible health plans (HDHPs) qualifying to work with health savings accounts (HSAs) to cover telehealth and other remote care services on a pre- or no-deductible basis. The temporary relief also permits an otherwise HSA-eligible individual to receive pre- or no-deductible telehealth coverage from a stand-alone vendor outside of the HDHP. In both cases, the individual would remain eligible to make or receive HSA contributions. Originally provided in the 2020 Coronavirus Aid, Relief and Economic Security (CARES) Act (Pub. L. No. 116-136) for plan years starting on or before Dec. 31, 2021, this relief was most recently extended by the 2023 CAA (Pub. L. No. 117-328) for plan years beginning after Dec. 31, 2022, and before Jan. 1, 2025. Without a permanent or another temporary extension, the relief will expire on Dec. 31, 2024, for calendar-year plans (and during 2025 for noncalendar-year plans).
Similar legislation has been introduced in the Senate. Democrats have concerns that the policy might discriminate against communities facing obstacles to telehealth, such as a lack of broadband, and that HSAs favor more affluent individuals. Those concerns make the prospect of any extension uncertain.
Eased employer ACA reporting duties. Two bipartisan passed by the full House would make some relatively minor but welcome changes to employer reporting requirements under the ACA’s employer shared-responsibility (ESR) provisions.
The Paperwork Burden Reduction Act (HR 3797) seeks to codify existing IRS rules allowing the use of the alternative method for furnishing Forms 1095-B and some Forms 1095-C. The bill would also expand those rules to allow the alternative method for furnishing Forms 1095-C to all employees (not just nonemployees and employees not considered full-time under the ACA, as limited under current IRS guidance). The method, implemented by IRS after Congress reduced the ACA’s individual mandate penalty to $0, excuses an employer from having to mail paper copies of the forms if its website contains a “clear and conspicuous notice” that employees may receive paper copies on request.
The Employer Reporting Improvement Act (HR 3801) would make other amendments to the ACA’s employer reporting rules. Those changes would allow substituting any covered individual's birthdate for the person's taxpayer identification number (TIN) if the reporting entity has been unable to collect that TIN. Current IRS rules allow substituting birthdates for TINs if reporting entities have been unable to collect individuals' TINs through “reasonable efforts,” which generally include three attempts. In addition, the bill generally would codify current IRS rules on electronic delivery (which requires individuals’ affirmative consent) of Forms 1095-B and C to employees. Another provision would give employers more time —90 days instead of the current 30 days — to respond to proposed IRS assessments (via Letter 226-J) for alleged violations of the ESR rules. Finally, the bill would set a six-year statute of limitations for ESR assessments. IRS’s current position is that no statute of limitations applies to ESR assessments.
These noncontroversial ACA reporting changes have a decent chance of becoming part of any House-Senate deal on final healthcare legislation.
Mental health parity and access. Bipartisan legislative efforts on these issues — particularly to strengthen provider networks and extend telehealth flexibilities — are ongoing. However, lawmakers and agencies also will continue to focus on parity enforcement, with DOL’s proposed overhaul of MHPAEA regulations set to dominate the policy agenda.
A Senate Finance Committee hearing earlier this year on inaccurate mental health provider directories and network access problems in Medicare and Medicaid suggests employer plans could face the same scrutiny from Democrats. Committee Chair Ron Wyden, D-OR, may reintroduce a new version of “ghost network” legislation from last year. That bill aimed to increase reporting accuracy, strengthen enforcement and create civil monetary penalties for employer plans found out of compliance with parity rules. Like last year’s bill, however, a reintroduced measure is unlikely to draw any support from Republicans.
HSA reforms. Bills advanced by the House Ways and Means Committee would expand access to HSAs but are unlikely to be taken up by the Senate. The Bipartisan HSA Improvement Act (HR 5688) would allow using HSA funds to pay for “direct primary care (DPC) service arrangements” and care provided by work site medical clinics, without jeopardizing an individual’s HSA eligibility, among other things. Another measure, the HSA Modernization Act (HR 5687), includes proposals to increase contribution limits and broaden the types of services that individuals can use HSAs to reimburse before reaching the deductible.
2024 health and leave benefit planning
The following list highlights 10 top compliance-related priorities for planning 2024 health, leave and fringe benefits and recommends general actions for each item. The links below take readers to more detailed information. The appendix provides resources related to each compliance topic.
Download the 84-page print-friendly PDF to read the complete coverage.
As state and federal regulators continue pushing to rein in PBMs and control Rx costs, expect new PBM legislation to pose challenges for plan sponsors. Watch for a possible progress report from the Federal Trade Commission (FTC) on its expansive investigation of the PBM industry. Prepare to meet the June 1, 2024, deadline for submitting the third prescription drug data collection (RxDC) reports to the Centers for Medicare & Medicaid Services (CMS). Monitor CMS’s Rx price negotiations (and ongoing litigation) under the Inflation Reduction Act of 2022 (Pub. L. No. 117-69) and the downstream impact on group health plan costs. Keep an eye out for potential industry changes that could impact employer plans. Watch for coverage issues concerning new or emerging drugs, and pay attention to new and recent Rx market entrants offering alternative solutions. Keep tabs on any Food & 1. Drug Administration (FDA) news about importing prescription drugs. Track developments from a district court decision related to counting drug manufacturer assistance toward cost sharing and the impact on copay accumulator programs.
Prepare to offer the self-service cost-comparison tool (with data available for all items and services), as required by the final TiC rule for plan years starting on or after Jan. 1, 2024. Confirm that machine-readable files (MRFs) are updated monthly. Make sure those files have accurate and complete in-network provider rates and out-of-network allowed payments, including facility fees. Include additional data for alternative reimbursement arrangements when applicable, since nonenforcement relief is ending. Prepare to post MRFs for prescription drugs, and watch for more agency information on MRFs. Ensure that required gag clause attestations and prescription drug RxDC reports are timely submitted in 2024. Look for analyses of healthcare prices made public under the final transparency regulation for hospitals and by TPAs and insurers. Watch for new transparency legislation and guidance — especially on advanced explanations of benefits (EOBs) — and continue good-faith efforts to comply in the interim. Work with vendors to ensure compliance, and update contracts as necessary — most plan sponsors don’t have the required information for these disclosures. Consider requesting reporting and performance guarantees from vendors related to transparency compliance.
Identify plans subject to the MHPAEA and ensure they comply with MHPAEA and current guidance, including the requirement to have a written comparative analysis of nonquantitative treatment limitations (NQTLs). In light of continuing enforcement efforts, verify that the plan’s comparative analysis conforms with agency guidance. Update the comparative analysis as necessary so it reflects current plan terms and coverage, as written and in operation. Review proposed MHPAEA rules and recent agency reports. Consider how plan design and operations, as well as the comparative analysis, would be impacted if the rules are finalized as proposed. Consider parity requirements when improving a group health plan’s medical or surgical benefits. Watch for new legislation and guidance, and monitor parity and behavioral health coverage litigation.
To mitigate heightened ERISA fiduciary risks, reassess with legal counsel relevant fiduciary roles, responsibilities, delegations, processes and insurance coverage. Monitor litigation against group health plans and their service providers. Some of these cases concern service provider fees (including “hidden” fees), cross plan-offsetting and plan failures to obtain data from service providers. Stay on top of recent DOL enforcement priorities. Timely comply with ERISA’s reporting and disclosure requirements, including long-standing duties like filing Form 5500 and newer transparency obligations, such as gag clause attestations and RxDC submissions. Select and monitor service providers for their qualifications, quality of services, and compensation, including broker and consultant compensation disclosures. Ensure service providers mitigate cybersecurity risks, don’t have contractual gag clauses, and make plan data available on request when required. Consider how increased plan costs affect participants, and analyze those costs using the vast amount of newly available transparency data. Review all other applicable fiduciary matters (e.g., ERISA plan asset and bonding issues) for compliance. Update plan documents and communications as needed.
Assess how heightened cybersecurity risks change data security priorities for group health plans. Look for updated Health Insurance Portability and Accountability Act (HIPAA) standards, and focus on how to address telehealth and digital solutions for behavioral health and other targeted health conditions. Evaluate vendors, new technologies, and apps to determine whether HIPAA or other data-protection and privacy laws apply. Regularly review vendors’ HIPAA compliance and cybersecurity measures to reduce risk. Use compliance tools from regulating agencies to identify and address security vulnerabilities, and monitor federal enforcement.
Verify emergency services are covered to the full extent required, and plan administrators are properly administering emergency service claims. Confirm plan administrators are complying with cost-sharing and external review requirements for services protected under the No Surprises Act (NSA), part of the 2021 CAA. Make sure the plan is providing the required NSA notices online and in explanations of benefits (EOBs). Review the frequency and outcomes of independent dispute resolution (IDR) proceedings. Consider the appropriateness of additional vendor fees related to surprise billing compliance and/or any shared-savings program charges. Monitor ongoing litigation, and watch for new or revised regulations and other guidance.
Several states — including Colorado, Delaware, Illinois, Maine, Maryland and Minnesota — have paid family and medical leave (PFML) programs or accrued paid leave laws that take effect in 2024 and 2025. Carefully review these requirements as regulatory guidance comes out. States will continue to focus on paid leave (particularly in the Midwest), PBM limitations, caps on insulin cost sharing and telehealth expansion. Monitor the progress of these laws. ERISA preemption of state PBM laws continues to generate debate, but a pending appellate court decision could provide clarity.
Confirm nongrandfathered group health plans cover without cost sharing all ACA-required in-network preventive services. Modify 2024 benefits for the latest ACA guidance and any new or updated recommendations from the United States Preventive Services Taskforce (USPSTF), the Health Resources & Services Administration (HRSA), and the Advisory Committee on Immunization Practices (ACIP). Review group health coverage of COVID-19 testing and vaccines, and determine whether coverage will change now that the PHE has expired. Determine the starting age for mandated cost-free coverage of breast cancer screening. Ensure continued coverage without cost sharing of ACA-mandated women’s contraceptives, unless an exemption applies. Monitor proposed rules that, if finalized, would eliminate the moral exemption and amend the religious exemption from mandated coverage of women’s contraception. Watch ongoing litigation that would allow employer plan sponsors with religious objections to exclude coverage of preexposure prophylaxis (PrEP) HIV medications. Also track the legal challenge to ACA-mandated in-network cost-free coverage of many USPSTF-recommended preventive services. Decide whether to cover over-the-counter (OTC) oral contraceptives (i.e., Opill) under the group health plan. Ensure the group health plan covers — without cost sharing — instruction in fertility awareness-based methods of family planning. Update plan documents, summary plan descriptions (SPDs), summaries of benefits and coverage (SBCs), and other materials as needed.
Review 2024 group health plan coverage and eligibility terms pertaining to ESR strategy, and ESR and minimum essential coverage (MEC) reporting duties. Confirm compliance with ACA benefit mandates, and monitor litigation over the scope of such mandates (see, for example, Preventive services). Make sure that certain benefits, such as hospital and other fixed-indemnity plans, stand-alone telehealth and employee assistance programs, satisfy the requirements for exception from certain ERISA and ACA market reforms. Consider the plan impact (if any) now that the “family glitch” for affordable coverage is fixed. Continue to calculate the Patient-Centered Outcomes Research Institute fee for self-funded health plans, and prepare for medical loss ratio (MLR) rebates. Watch for final rules and monitor litigation involving the scope of ACA Section 1557’s nondiscrimination protections.
Health savings account (HSA), health reimbursement arrangement (HRA) and flexible spending arrangement (FSA) developments.Prepare to discontinue temporary COVID-19 relief (unless further extended or made permanent) that lets HDHPs qualifying to work with HSAs provide pre- or no-deductible coverage of (i) telehealth and other remote care services, and (ii) COVID-19 testing and treatment. Update HSA-qualifying HDHPs and account-based health plans for indexed dollar limits. Identify pre- or no-deductible health benefits, programs, or point solutions that could jeopardize an individual’s eligibility for HSA contributions, and confirm strategy. Consider whether pending IRS regulations on individual-coverage health reimbursement arrangements (ICHRAs) or direct primary-care (DPC) arrangements will impact benefit strategies and compliance efforts. Review future IRS guidance on the definition of a tax dependent for any impact on account-based health plans.