2022 End of Year Plan Sponsor “To Do” List (Part 1) Health and Welfare

We are pleased to present our annual End of Year Plan Sponsor “To Do” Lists. This year, we present our “To Do” Lists in four separate Employee Benefits Updates. This Part 1 covers year-end health and welfare plan issues. Parts 2, 3, and 4 will cover executive compensation issues, qualified plan issues, and cost-of-living increases, but not necessarily in that order. We are publishing Part 1 to coincide with fall open enrollment. We expect to publish the other Parts later this year. Each Employee Benefits Update provides a checklist of items to consider before the end of 2022 or in early 2023. We hope these “To Do” Lists help focus your efforts over the next few months heading into 2023.

Although we identify many action items below, we expect employers will focus their 2023 compliance efforts in three areas: (1) how the Supreme Court’s Dobbs v. Jackson Women's Health Organization decision impacts their health plans’ coverage of abortion services; (2) how the end of the COVID-19 emergency declarations, when announced, will impact their health plans’ coverage of COVID-19 and related services; and (3) how to comply with the requirements under the Consolidated Appropriations Act, 2021 (“CAA”), including, but not limited to, the prohibitions against surprise billing under the No Surprises Act, the Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”) comparative analysis, broker and consultant compensation disclosures under Section 408(b)(2) of the Employee Retirement Income Security Act of 1974 (“ERISA”), and the medical and drug cost reports that are initially due December 27, 2022, and every June 1 thereafter.

Part 1 - Health and Welfare Plans “To Do” List

• Reconsider Abortion Benefits following Dobbs: As reported in our SW Benefits Blog, “Rethinking Reproductive Healthcare Benefits After Roe: Three Initial Benefits Questions for Employers to Consider,” the Supreme Court decision in Dobbs v. Jackson Women's Health Organization overturned previous Supreme Court abortion-related decisions Roe v. Wade and Planned Parenthood of Southeastern Pa. v. Casey.  As a result, various state civil and criminal laws restricting or prohibiting abortion services have taken effect, including some civil “aiding or abetting” laws that allow civil actions against any person who knowingly aids or abets an abortion, including paying for or reimbursing the costs of an abortion.  Although this area of the law is not settled, and likely will not be settled for many years, employers may want to consider the following:
  • • ERISA Preemption of State Abortion Laws:  ERISA, which generally preempts state laws “insofar as they may . . . relate to any employee benefit plan,” may prevent some state abortion laws from applying to self-funded group health plans.  However, although ERISA preemption is generally broad, the preemption issue for state abortion laws will likely need to be litigated before it can be determined with certainty that any given law is preempted.  Further, ERISA does not preempt a generally applicable criminal law of any state and therefore plan sponsors, including those of self-funded plans, should monitor state criminal laws that may apply in this context.
    • Abortion Services Covered under the Plan: Employers may want to consider reviewing their plan documents to understand whether and how their group health plan covers abortion services (e.g., elective abortions, non-elective abortions, drug-induced abortions, etc.). Employers may find that a plan amendment is necessary to clarify abortion-related coverage or, more specifically, to clarify that the plan only covers abortion services or drugs if they are legal where provided or prescribed, factoring in compliance with the Emergency Medical Treatment and Labor Act. Including clear language regarding abortion coverage in ERISA plan documents may also be helpful for plans to obtain the benefit of ERISA preemption, when applicable.
    • Travel Benefits for Abortion Services: In response to Dobbs, many large employers announced they will pay for employees to travel out of state to obtain legally provided abortions and other reproductive care services. It is not currently clear how states will treat these travel benefits, which present potential civil and/or criminal liability risks. Employers interested in adopting these benefits may want to carefully consider: (1) weighing the risks associated with state abortion law; (2) identifying appropriate parties that need to be involved in the decision-making process (e.g., executives, directors, fiduciary committees, etc.); (3) expanding travel benefits to other services (e.g., reproductive care, gender affirmation services, services unavailable within a specified distance, etc.); (4) complying with applicable federal laws (e.g., ERISA, the Affordable Care Act (“ACA”), MHPAEA, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), etc.); and (5) structuring the benefit to limit potential risks and administrative issues (e.g., by adding the benefit to a self-funded group health plan to potentially obtain the benefit of ERISA preemption and avoid creating a separate group health plan).
    • Contraceptive Coverage:  Although the contraceptive coverage requirements under ACA and the Public Health Service Act (the “PHSA”) are not new, the Departments of Labor (“DOL”), Health and Human Services (“HHS”), and the Treasury (collectively, the “Departments”) are focusing on compliance with such requirements.  A few days after the Dobbs decision, the Departments issued a reminder to group health plan sponsors about contraceptive coverage requirements, as reported in our SW Benefits Blog,  “Federal Agencies Issue Guidance After Dobbs Ruling.” Additionally,on July 28th, the Departments released FAQs About ACA Implementation Part 54.  The FAQs clarify the contraceptive coverage requirements for group health plans.  In light of the new FAQs, employers may want to consider: (1) reviewing their plan documents to confirm plan language is consistent with the latest contraceptive coverage requirements, including updated Health Resources and Services Administration (“HRSA”) guidelines that take effect in 2023; (2) confirming any third party administrators (“TPAs”) and pharmacy benefit managers (“PBMs”) are operating the plan in compliance with such coverage requirements; and (3) confirming the plan maintains an accessible, transparent, and expedient exceptions process that is not unduly burdensome and enables participants and providers to request other medically necessary female-controlled contraceptive items approved by the Food and Drug Administration (“FDA”).  For more information about ACA’s and the PHSA’s preventive service rules, see our “Cover Preventive Services without Cost Sharing in Non-Grandfathered Health Plans” bullet below.
    • HIPAA and Information Relating to Reproductive Health Care:  When a group health plan obtains information regarding a participant’s reproductive health care, that is protected health information (“PHI”) subject to various protections under HIPAA.  Although a group health plan generally cannot use or disclose PHI without an individual’s signed authorization, HHS sub-regulatory guidance clarified that there are certain situations that permit, but do not require, a covered entity such as a group health plan to disclose PHI without an individual’s authorization.  These exceptions allow disclosures required by law, disclosures for law enforcement purposes, and disclosures to avert a serious threat to health or safety.  If a covered entity such as a group health plan discloses PHI without authorization pursuant to one of these exceptions, it should ensure that such disclosure complies with all the requirements of the exception.  Failure to do so may constitute a HIPAA breach that is reportable to HHS and to the individual involved.  Accordingly, group health plans may want to reconsider their HIPAA compliance efforts and carefully consider any communications to employees that suggest that the group health plan will never disclose PHI related to reproductive health care.
• Consider Health and Welfare COVID-19 Issues: The COVID-19 pandemic and the federal government’s response have transformed the 2020, 2021, and 2022 employee benefits landscape. While some of these changes are permanent, many are temporary and may come to an end during the 2023 plan year. As noted in more detail below, employers that make changes to their health and welfare plans, whether required by law or voluntarily, must remember to adopt appropriate plan amendments and provide participants with SMMs explaining changes. Generally, it is important to provide SMMs as soon as possible so participants are aware of the benefits to which they are entitled.
  • • The Public Health Emergency: Pursuant to his authority under section 319 of the PHSA, effective January 27, 2020, the Secretary of HHS declared a public health emergency as a result of the COVID-19 pandemic (the “COVID-19 Public Health Emergency”).  Since this date, the Secretary of HHS has renewed the COVID-19 Public Health Emergency multiple times.  Because the Biden Administration has indicated that it will give states a 60 day notice before the COVID-19 Public Health Emergency expires, it is very likely that the COVID-19 Public Health Emergency, which is currently set to expire mid-October 2022, will extend into 2023.
    • The National Emergency: On March 13, 2020, by Proclamation 9994, then President Trump declared a national emergency concerning the COVID-19 pandemic that began effective March 1, 2020 (the “COVID-19 National Emergency”). On February 18, 2022, President Biden declared the COVID-19 National Emergency must continue in effect beyond March 1, 2022.
    • Once the COVID-19 Public Health Emergency and COVID-19 National Emergency end, it will affect the myriad COVID-19 laws and implementing guidance that have been enacted over the years. Below are some plan design and plan administration issues employers may want to consider:
• Implement Changes under the CAA:  On December 27, 2020, former President Trump signed the CAA into law.  The CAA includes numerous provisions that impact employer-sponsored group health plans, including rules regarding surprise medical bills.  Although the Departments intend to undertake rulemaking to fully implement the CAA, they previously acknowledged that they would not begin to do so until after January 1, 2022. The Departments have issued regulations addressing some CAA requirements in 2022, but they have not yet completed their efforts.  Plans must implement the CAA’s requirements using a good faith, reasonable interpretation of the statute while awaiting regulations from the Departments.  Accordingly, employers should continually evaluate their CAA compliance obligations.  See our CAA chart for more information regarding the principal requirements under the CAA that apply to employer-sponsored group health plans.
  • Medical and Drug Cost Reporting:  As noted in the CAA chart, group health plans must report certain information related to plan medical costs and prescription drug spending to the Departments. The first reports, for plan years 2020 and 2021 are due on December 27, 2022, and subsequent reports are due no later than June 1 of every subsequent year. Very generally, in accordance with the Prescription Drug Data Collection (RxDC) Reporting Instructions, a group health plan must provide plan-specific information and aggregate data by submitting one or more plan lists (e.g., P2 Group health plan list), eight data files (D1 Premium and Life-Years, D2 Spending by Category, D3 Top 50 Most Frequent Brand Drugs, D4 Top 50 Most Costly Drugs, D5 Top 50 Drugs by Spending Increase, D6 Rx Totals, D7 Rx Rebates by Therapeutic Class, and D8 Rx Rebates for the Top 25 Drugs), and a narrative response.  As we approach the December 27, 2022 deadline, employers should consider confirming what information their TPAs, PBMs, and other vendors (or insurance companies for insured plans) will submit to CMS on their behalf and what information the employer will submit to CMS and, to the extent necessary, coordinate amongst the third parties to ensure that the plan satisfies its reporting obligations.  Employers should also consider reviewing and revising their contracts with TPAs, PBMs, and vendors as necessary to reflect reporting responsibilities.
  • ERISA Section 408(b)(2) Disclosure Requirements for Covered Service Providers: The CAA amended ERISA Section 408(b)(2) to require “covered service providers” to group health plans to disclose specified information to a responsible plan fiduciary about the direct and indirect compensation that the covered service provider expects to receive in connection with its services to the plan. A covered service provider includes a person who provides “brokerage services” or “consulting” to ERISA-covered group health plans and reasonably expects to receive $1,000 or more in direct or indirect compensation in connection with providing those services.  Failure to comply with the disclosure requirements means that the service arrangement is not reasonable and is therefore a prohibited transaction.  Although the DOL emphasized in Field Assistance Bulletin 2021-03 that a “covered service provider” is not limited solely to those who call themselves brokers or consultants, but rather whether a service provider provides the “consulting” services, the scope of this new requirement is not entirely clearly. Accordingly, prior to entering into, extending, or renewing a contract or arrangement for brokerage or consulting services, group health plans should request and review the Section 408(b)(2) disclosure.  If a group health plan fails to obtain such a disclosure, it may want to consider requesting a good faith explanation from the service provider regarding why the disclosure requirement is not applicable, reporting the service provider to DOL, and/or terminating the arrangement.  Hopefully, the DOL will clarify this requirement when it issues “Improved Fee Disclosure for Welfare Plans” rules as noted in its Agency Rule List - Spring 2022. 
  • Surprise Medical Bills:  The No Surprises Act and implementing regulations Requirements Related to Surprise Billing; Part I, Requirements Related to Surprise Billing; Part II, and Requirements Related to Surprise Billing: Final Rules do not completely eliminate surprise billing, but they provide relief from some of the more common scenarios when an individual may experience unexpected medical costs including: (1)  emergency services; (2) non-emergency services performed by nonparticipating providers at participating health care facilities; and (3) air ambulance services.  Most recently the Agencies issued FAQs About ACA and CAA Implementation Part 55 that address a broad range of issues related to regulations issued pursuant to the No Surprises Act.  Employers should consider working with their TPAs to update their plan documents and confirm that their plans are administered in accordance with this law which took effect on January 1, 2022. For more information about the No Surprises Act and its impact on employer-sponsored group health plans, see our SW Benefits Update, “Not All Surprises Are Good – Phase I of the Surprise Billing Rules.”
  • Mental Health Comparative Analysis:  The CAA includes a requirement that group health plans perform a mental health comparative analysis by February 10, 2021.  More specifically, group health plans that offer medical and surgical benefits and mental health or substance use disorder benefits and impose nonquantitative treatment limitations (“NQTLs”) on the mental health or substance use disorder benefits, must perform and document a comparative analysis of the design and application of the NQTLs, and must make the analysis available upon request to applicable state or federal authorities, participants, beneficiaries, or enrollees.  The DOL has indicated that mental health parity is one of the agency’s highest priorities, accordingly, employers who have not prepared this analysis may want to refer to the DOL’s MHPAEA Self-Compliance Tool and 2022 MHPAEA Report to Congress and coordinate with their TPAs and PBMs as soon as possible to do so.
• Continue to Comply with Transparency in Coverage Rules: In November 2020, the Departments issued Transparency in Coverage Final Rules that require group health plans and issuers to: (1) disclose to participants, beneficiaries, or enrollees upon request, through an internet self-service tool, cost-sharing information for a covered item or service from a particular provider or providers, and make such information available in paper form upon request effective January 1, 2023 (500 items and services) and January 1, 2024 (all covered items and services); and (2) disclose pricing information to the public through three machine readable files regarding payment rates negotiated between plans or issuers and providers for all covered items and services (the “In-Network File”), the unique amounts a plan or issuer allowed, as well as associated billed charges, for covered items or services furnished by out-of-network providers during a specified time period (the “Out-of-Network File”), and pricing information for prescription drugs (the “Prescription Drug File”).  Pursuant to  FAQs About ACA and CAA Implementation Part 49 , the Departments required group health plans to disclose the In-Network File and the Out-of-Network File by July 1, 2022 for plan years on or after January 1, 2022, and will not require group health plans to disclose the Prescription Drug File until further notice.  FAQs About ACA and CAA Implementation Part 55further clarified how group health plans without a website may satisfy the requirements of the Transparency in Coverage rules by relying on a service provider (such as a TPA).  The Transparency in Coverage requirements are extensive and plan sponsors should work with their TPAs to ensure compliance.
• Comply with Large Employer Shared Responsibility Rules or Face Penalties:  The IRS continues to enforce large employer shared responsibility penalties under Internal Revenue Code (“Code”) Section 4980H and takes the position that there is no statute of limitations for failure to comply.  Large employers can be subject to penalties if any full-time employee receives a premium tax credit and either (a) the employer fails to offer minimum essential coverage (“MEC”) to 95% of its full-time employees (and their dependents) or (b) the coverage is either not affordable or does not provide minimum value. Missing the 95% test even slightly (e.g., coming in at 94%) will require the employer to pay a penalty for each full-time employee (minus the first 30 full-time employees). Important penalties, percentages, and premiums under Code Section 4980H can be found in our 2022 Cost of Living Adjustment Newsletter.  In addition, more detailed information can be found in our “Health Care Reform’s Employer Shared Responsibility Penalties: A Checklist for Employers” and in our SW Benefits Blog, “For the Long Haul: SCOTUS Ruling Means ACA Coverage and Reporting Rules Here to Stay.”
• Consider Amendments to Align Plan with Code Section 4980H Full-Time Employee Determinations: Some employers make eligibility determinations under their health plans align with full-time employee status under Code Section 4980H. Employers who want to do so may need to amend their health plans to reflect these complicated eligibility rules.  Employers may also need to consider how to administer COBRA if they are using the look-back measurement method to determine full-time status under Code Section 4980H.
• Complete Code Sections 6055 and 6056 Reporting:
  • All Employers with Self-Insured Health Plans are Required to Report MEC: Code Section 6055 requires all entities providing MEC to submit information concerning each covered individual for the calendar year to the IRS and to certain individuals. Reporting is again required in early 2023 for coverage offered in 2022. In general, entities reporting under Code Section 6055 are required to use Form 1094-B (the IRS transmittal form) and Form 1095-B (individual statements). Large employers that sponsor self-insured health plans may use combined reporting to comply with both Code Section 6055 and Section 6056 by completing a Form 1095-C in lieu of Forms 1094-B and 1095-B.  Certain alternative distribution methods may be available in limited circumstances.  More information can be found in our “2021 End of Year Plan Sponsor “To Do” List (Part 1) Health and Welfare.” 
  • Large Employers are Required to Report on Health Coverage Offered to Full-Time Employees: Code Section 6056 requires applicable large employers (“ALEs”) to report to the IRS and to certain individuals information regarding health coverage offered to full-time employees for each calendar year. Reporting is again required in early 2023 for coverage offered in calendar year 2022.  In general, employers are required to use Form 1094-C (the IRS transmittal form) and Form 1095-C (the individual statements) to complete this reporting. Certain alternative distribution methods may be available in limited circumstances.  More information can be found in our “2021 End of Year Plan Sponsor “To Do” List (Part 1) Health and Welfare.” 
  • Penalty Assessments for Coverage Failures: The IRS continues to issue Letters 226J to ALEs that failed to offer compliant health care coverage under Code Section 4980H. Employers that receive a Letter 226J are required to respond or request an extension within 30 days. More information can be found in our “2021 End of Year Plan Sponsor “To Do” List (Part 1) Health and Welfare.”
  • Penalty Assessments for Late or Incorrect Filings: In addition to penalty assessments for coverage failures under Code Sections 4980H(a) and 4980H(b), the IRS assesses penalties against ALEs that failed to file, or filed incomplete or inaccurate information returns. These penalties can be significant. More information can be found in our “2021 End of Year Plan Sponsor “To Do” List (Part 1) Health and Welfare.” 
  • Record Retention:  Employers may want to give careful consideration to all potential records they might need to defend against penalty assessments in the Code Section 4980H context. For more information, including a list of documents to consider keeping, see our SW Benefits Blog, “IRS Letters 226J: Having the Right Section 4980H Records Can Be Worth a Small Fortune.” 
• Consider Amending Plans to Permit Reimbursement of OTC Medical Products as Qualified Medical Expenses:   HSAs, Archer medical savings accounts, Health FSAs, and HRAs may reimburse OTC medical products and menstrual care products (i.e., a tampon, pad, liner, cup, sponge, or similar products), effective as early as January 1, 2020. For more information see our SW Benefits Update, “The CARES Act – What Are the Health and Welfare Plan Issues to Consider?”
• Review Plan Eligibility Provisions in Light of California Assembly Bill 5 (“AB 5”): AB 5, which has been in place since 2019, sets forth a new test for determining whether workers are employees or independent contractors for purposes of the California Labor and Unemployment Insurance Codes. Employers with operations in California should ensure they properly classify workers for this purpose.  Employers need to keep in mind that ERISA and the Code have their own tests for determining whether workers are employees for health and welfare plan purposes. AB 5 has been subject to legal challenges and California voters approved Proposition 22, which generally allowed certain app-based drivers to be classified as independent contractors despite AB 5.  Although AB 5 will continue to be subject to legal challenges, employers generally will need to comply with AB 5 as it remains the law in California.  For more information on AB 5, see our Legal Alert, “A New Law Passed Raising the Standard for Classifying Workers as Independent Contractors in California,” and our Legal Alert, “Not So Fast: California Judge Strikes Down Proposition 22, Finding That Rideshare and Delivery Drivers Are Employees—Not Independent Contractors.”
• Follow State Individual Mandate Laws and Associated Reporting: Despite the repeal of the individual mandate under ACA, California, the District of Columbia, Massachusetts, New Jersey, Rhode Island, and Vermont have implemented their own statewide individual mandates. Employers with operations in these states, or other states that adopt individual mandates, should be prepared to comply with these mandates and also should monitor any associated reporting requirements.
• Consider Providing Free Preventive Care for Chronic Conditions: As reported in our SW Benefits Blog, “Preventive Care Can Now Be Covered for Specified Chronic Conditions Before HDHP Deductible,” in July 2019 the IRS released Notice 2019-45 that allows health plans to provide free preventive care before a deductible is met for certain chronic conditions, such as asthma, diabetes, and heart disease, without jeopardizing a plan’s status as an HDHP.  The Appendix to the Notice contains an exhaustive list of the medical services and drugs that are deemed to be preventive care for the treatment of the specified chronic conditions. Employers interested in providing this free preventive care should consider contacting their insurers and TPAs to confirm that they can implement the coverage and that they will limit it only to those services and drugs listed in the Appendix.
• Consider Whether to Count Drug Discounts Toward Maximum Out-of-Pocket Limits (“MOOP”): The Departments have clarified that group health plans are not required to count coupons against deductibles or MOOP until they issue further guidance regarding the impact of this requirement on HDHPs.  HHS also clarified in its May 2020 NBPP for 2021 Rules, that amounts paid toward reducing the cost sharing incurred by an enrollee using any form of direct support offered by drug manufacturers for specific prescription drugs may be, but are not required to be, counted toward the annual limitation on cost sharing.
  • Considerations for Self-Funded and Insured Plans:  Sponsors of both self-funded plans and insured plans may decide the safer approach is to not count drug discounts or coupons towards deductibles or MOOP so they do not risk disqualifying their HDHPs or rendering their HDHP participants HSA-ineligible.  However, state insurance laws may not permit insured plans to follow this approach.  For example, Arizona has its own rules regarding when drug discounts and coupons count towards MOOP, deductibles, copayments, coinsurance, or other applicable cost sharing requirements. Employers who offer insured health plans in those states need to consider whether these state laws mean their health plans cannot operate as HDHPs, which would also make participants HSA-ineligible. For more information regarding this issue, please see our SW Benefits Blog, “Must Drug Manufacturer Coupons Count Toward Annual Maximum Out-Of-Pocket Limits? Stay Tuned …” 
• Consider Duty to Monitor TPAs for Cross-Plan Offsetting Practices: “Cross-plan offsetting” occurs when a TPA overpays a provider under one plan and then underpays that same provider under another plan to recoup the overpayment.  The Eighth Circuit Court of Appeals called the practice into question in Peterson v. UnitedHealth Group, as did the U.S. District Court for the District of New Jersey in Lutz Surgical Partners v. Aetna.  The DOL filed an amicus brief in Peterson v. UnitedHealth Group, Inc., clarifying its position that cross-plan offsetting violates ERISA Sections 404 (duty of loyalty) and 406 (prohibited transactions).  In light of this case law and the DOL’s position on cross-plan offsetting, employers determine whether their plans permit cross plan offsetting and, if they do, employers should weigh the risks of allowing their TPAs or insurers to use cross-plan offsetting to recoup overpayments.  Doing so may expose employers to potential liability for ERISA violations.
• Consider Impact of Nondiscrimination Rules: Employers may want to consider the impact of the following nondiscrimination rules in the context of providing health and welfare benefits:
  • Title VII of the Civil Rights Act of 1964: Title VII prohibits employers from discriminating against employees with respect to compensation, terms, conditions, or privileges of employment on the basis of race, color, religion, sex, or national origin.  The Supreme Court held in Bostock v. Clayton County Georgia that the term “sex” under Title VII includes sexual orientation and gender identity.  Although Bostock specifically addressed the hiring and firing of LGBTQ employees, the ruling has wide-ranging employee benefit implications.  Accordingly, employers should consider assessing whether their employee benefit plans discriminate against their LGBTQ employees (e.g., by denying coverage to transgender employees or by providing coverage to opposite-sex but not same-sex spouses).   Employers also should monitor the progress of several cases interpreting Bostock, including those arguing for religious exemptions.  More information about Title VII and Bostock can be found in our SW Benefits Update, “Supreme Court Holds Employers Cannot Discriminate Against LGBTQ Employees: Are Your Employee Benefit Plans Up to Snuff?” and in our “2021 End of Year Plan Sponsor “To Do” List (Part 1) Health and Welfare.” 
  • Section 1557 of ACA:  Section 1557 of ACA prohibits discrimination on the basis of race, color, national origin, age, disability, or sex under any health program or activity that receives federal financial assistance from HHS.  The application of Section 1557 has proven controversial with several competing regulations and numerous ongoing legal challenges.  The latest round of proposed rulemaking would replace certain Trump-era regulations with more robust Obama-era rules designed to safeguard transgender health issues.  For more information, see our SW Benefits Update, “What’s Old Is New Again: HHS Proposes to Reinstate and Expand Transgender Nondiscrimination Rules.”
  • Other Considerations: In addition to the nondiscrimination rules described above, employers may want to be mindful of other non-legal considerations. In particular, the Human Rights Campaign (“HRC”) Corporate Equality Index (“CEI”) which is a national benchmarking tool on employer policies affecting LGBTQ+ employees.  The 2022 CEI criteria required that employers provide equal coverage for transgender individuals without exclusion for medically necessary care to receive a 100 percent score.  These criteria mandated baseline coverage for transgender benefits, including mental health benefits, pharmaceutical coverage, coverage for medical visits or laboratory services, coverage for reconstructive surgical procedures related to gender reassignment and short-term medical leave.  The HRC modified the CEI criteria for 2023 to require that employers additionally cover puberty blockers for youth and at least five of the following essential services and treatments which have generally been excluded as cosmetic: hair removal (either as required for reconstructive surgery or otherwise), tracheal shave/reduction, facial feminization surgeries, voice modification surgery or therapy, lipoplasty/filling for body masculinization or feminization, and travel and lodging expenses.
• Identify and Correct COBRA Notice Failures: If applicable, COBRA requires employers to distribute general and election notices. Employers that fail to timely comply with these notice rules are subject to significant excise taxes and must self-report to the IRS. An employer may avoid the excise tax penalty and the related filing requirement if the failure was due to reasonable cause and the failure is corrected within 30 days of the date that it was discovered or should have been discovered using reasonable diligence. Employers should consider regularly confirming they are complying with the COBRA notice requirements and, if necessary, correct any failures immediately upon discovery. This vigilance is especially important given the rise of litigation alleging deficient COBRA notices.
• Be Mindful of State Mini-COBRA Laws: In general, COBRA applies to employers who have 20 or more employees. Many states (including Arizona, Nevada, and California) have adopted “mini-COBRA” statutes that largely mirror the continuation coverage requirements of federal law but for employers with fewer than 20 employees. Small employers should consider the states in which they operate and evaluate their compliance with any applicable mini-COBRA law.
• Ensure Compliance with COBRA Requirements under ARPA: ARPA provided (1) a subsidy for certain COBRA premiums, (2) an opportunity for certain individuals to enroll or re-enroll in COBRA continuation coverage, and (3) an option to elect less expensive health coverage.  ARPA also imposed significant notice requirements related to these modified COBRA rights.  Although the ARPA COBRA subsidy period expired as of September 30, 2021, employers may want to evaluate whether their notices were issued timely and whether any extended election periods remain open.  Employers may also consider whether they claimed applicable premium subsidy credits for COBRA coverage provided under ARPA.  For more information, see our SW Benefits Update, “2021 End of Year Plan Sponsor “To Do” List (Part 1) Health and Welfare.” 
• Be Proactive with HIPAA Compliance: Currently most of HHS’s HIPAA and COVID-19 guidance is directed at health care providers, rather than health plans. However, because COVID-19 has accelerated the transition to both remote health care and remote work, employers would be wise to focus on their compliance efforts, and may want to consider the following:
  • Perform Risk Analysis and Risk Management: If an employer’s workforce has transitioned to be largely remote, including those workforce members who have access to PHI, it likely has new risks and vulnerabilities to consider. The Security Rule requires covered entities to perform a risk analysis as part of their security management processes. Risk analysis is an ongoing process and includes, but is not limited to: (1) evaluating the likelihood and impact of potential risks to e-PHI; (2) implementing appropriate security measures to address the risks identified in the risk analysis; (3) documenting the chosen security measures and, where required, the rationale for adopting those measures; and (4) maintaining continuous, reasonable, and appropriate security protection.
  • Update HIPAA Policies and Procedures and Training: After performing a risk analysis, employers may want to consider reviewing and, if necessary, updating their HIPAA privacy and security policies and procedures and training materials to address their new work-from-home environment and any other vulnerabilities discovered during the risk analysis. If an employer has been delayed in performing an updated risk analysis, it may consider reminding workforce members that their responsibilities under HIPAA continue to apply and taking steps to ensure that workforce members comply with the employer’s existing HIPAA policies and procedures (e.g., through monitoring and training exercises).
  • Limitation of Liability under HIPAA for Security Practices:  As demonstrated by HHS’s Office for Civil Rights 2016-2017 HIPAA Audits Industry Report, covered entities and business associates are generally lagging behind with their HIPAA compliance likely because HIPAA privacy, security, and breach notification rules are complex, involve efforts from various departments of a covered entity/business associate, and can be time consuming and expensive to implement.  Nonetheless, group health plans may want to continue their compliance efforts, particularly in light of Pub. L. 116-321, which amended the HITECH Act to require HHS to consider whether a covered entity or business associate has had recognized security practices in place for at least 12 months when determining fines, audits, and other remedies related to HIPAA security violations.
• Review Wellness Programs: Depending on the particular benefits a wellness program offers, a wellness program may be subject to a unique combination of requirements under statutes such as ERISA, the Code, HIPAA, ADA, Genetic Information Nondiscrimination Act (“GINA”), and COBRA, to name a few. This leaves substantial compliance risk when trying to design wellness programs. Minor changes can have a major impact. Periodically reviewing wellness offerings may help avoid costly mistakes. For more information see our SW Benefits Update, “2021 End of Year Plan Sponsor “To Do” List (Part 1) Health and Welfare.” 
• Comply with Mental Health Parity Requirements: In general, the mental health parity rules require group health plans to ensure that financial requirements (e.g., co-pays, deductibles, and coinsurance) and quantitative and non-quantitative treatment limitations (e.g., visit limits, days of coverage maximums, and medical necessity standards) applicable to mental health or substance use disorder benefits are no more restrictive than the predominant requirements or limitations that apply to substantially all medical/surgical benefits. The parity rules concerning financial requirements and treatment limitations were created by the MHPAEA, which supplemented the Mental Health Parity Act of 1996. In November 2013, final regulations were issued implementing the provisions of MHPAEA. The final MHPAEA regulations apply to group health plans for plan years beginning on or after July 1, 2014. Employers sponsoring plans were required to comply with these parity requirements in 2015. Employers who have not done so yet may want to consider reviewing their plans and consulting with their insurers and TPAs to ensure that they are complying with these rules.  Agency enforcement is ongoing. In early 2022, the DOL issued a Fact Sheet and Compendium that summarize its mental health parity enforcement data and enforcement strategy for 2021.
• Continue Complying with ACA Changes: Employers may want to consider ACA compliance issues. See our updated checklist that provides a more detailed summary of the principal requirements under ACA.
• Cover Preventive Services without Cost Sharing in Non-Grandfathered Health Plans: Under ACA, non-grandfathered group health plans are required to provide coverage for preventive services without cost sharing.  The preventive services such plans are required to cover are described in the recommendations and guidelines, which change from year-to-year. The Departments released FAQs on July 19, 2021 to provide clarification and temporary relief for the required coverage of HIV PrEP support services (e.g., pregnancy testing and sexually transmitted infection screening), which we discussed in our SW Benefits Update, “Departments Clarify that HIV PrEP Services Must be Free by September 17.”However, the United States District Court for the Northern District of Texas ruled on September 7, 2022 that this mandate is unconstitutional.  Additionally, as noted above under “Reconsider Abortion Benefits following Dobbs”, the Departments issued guidance reminding group health plans of their obligation to cover contraceptives, including emergency contraceptives, as preventive care.  Plan sponsors should consider consulting with their insurers and TPAs each year to make sure that their employees are receiving the free preventive care to which they are entitled. Further, they may want to confirm that preventive care is actually free in order to encourage employees to use their free preventive care benefits. See our SW Benefits Blog, “Why Isn’t My ‘Free’ Preventive Health Care Free?”
• Consider Health Care Exchanges and Notification Requirements: Employers may determine that Health Care Exchanges benefit their employees and former employees. For example, coverage under a Health Care Exchange may sometimes be cheaper than COBRA coverage under the employer’s group health plan. In any event, employers have an obligation to provide each employee with a written notice regarding coverage under the Exchange at the time of hiring.  More information on Health Care Exchanges is available here.  There are two Model Exchange Notices, one for employers who offer a health plan to some or all of their employees, available here and one for employers who do not offer a health plan to their employees, available here.
• PCORI Fees: Health insurance issuers and sponsors of self-insured health plans are required to report and pay PCORI fees on the Form 720 by the July 31 following the last day of the plan year. The PCORI fee for a plan or policy year is equal to the average number of lives covered under the plan or policy, multiplied by an applicable dollar amount for the year. The applicable dollar amount for plan years that end on or after October 1, 2021 and before October 1, 2022 is $2.79. For more information regarding this issue, please see our SW Benefits Blog, “Congress Giveth and They Taketh Away – Recent Health Plan Changes.”
• Consider Leave-Sharing Program Best Practices: Employers often sponsor leave-sharing programs to allow employees to donate leave on a pre-tax basis to co-workers who are experiencing a medical emergency or who have been adversely affected by a major disaster. Employers should consider close review of applicable rules and best practices when establishing and administering leave-sharing programs in order to avoid unintended tax and other undesirable consequences.  For more information, see our SW Benefits Blog, “IRS Approves Additional Leave-Based Donation Programs for COVID-19 Relief,” and our SW Benefits Blog, “Design Considerations for Medical Emergency Leave-Sharing Programs.”
• Reconsider Offering Domestic Partner Benefits: The HRC requires employers to offer domestic partner benefits to both same-sex and opposite-sex couples for employers to score 100% on the CEI. Offering same-sex and opposite-sex domestic partner benefits may not only help an employer obtain a 100% score on the CEI, but it also may make it easier to hire younger workers, and older workers who do not want to give up Social Security survivor benefits. Employers who do not already do so might consider offering domestic partner benefits for 2023.
• Distribute Revised SBCs: ACA requires employers offering group health plan coverage to provide employees with an SBC, which summarizes the health plan or coverage offered by the employer. Information about the SBC requirement, and links to the SBC instructions and template are available on the DOL website. Employers should review their SBCs (or those prepared by their TPAs) to ensure they comply with the SBC rules.  Employers may also want to ensure that SBCs are provided at requisite times including open enrollment, initial or special enrollment, upon request, and 60 days in advance of making material modifications to benefits or coverage that take effect mid-plan year. Otherwise, the penalties for failure to issue SBCs can be significant. 
• Update and Distribute SPDs if Needed: Employers are required to update SPDs once every five years if they have materially amended their plans during this period.  They are required to update SPDs once every ten years if they have not materially amended their plans during this period. Further, an updated SPD is required to incorporate all material amendments that occurred during the five-year period, even if the changes were communicated in a timely manner through SMMs. In addition to updating SPDs, employers must also distribute updated SPDs to participants and beneficiaries. Posting updated SPDs on intranet sites is not an effective method of distribution.
• Distribute Summary Annual Report: Distribute a summary annual report, which is a summary of the information reported on the Form 5500. The summary annual report is generally due nine months after the plan year ends. If the Form 5500 was filed under an extension, the summary annual report is required to be distributed within two months following the date on which the Form 5500 was due.
• Electronic Distribution Rules: Employers waiting for updates to the existing electronic distribution rules for health and welfare plans must continue to wait, although 2020 guidance might provide temporary relief.
  • COVID-19 Relief:  EBSA Disaster Relief Notice 2020-01 provided employee benefit plans and responsible plan fiduciaries with extra time to furnish ERISA-required notices, disclosures and documents (e.g., SPDs and SMMs) during the COVID-19 National Emergency, which began on March 1, 2020.  The relief extends until 60-days after the announced end of the COVID-19 National Emergency and is available as long as the plan and responsible fiduciary act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances.  For this purpose, acting in good faith means using electronic means (including email, text message, and continuous access websites) to communicate with participants and beneficiaries who the plan and responsible plan fiduciary reasonably believe have access to electronic means of communication.  The scope of this relaxed standard is not entirely clear and therefore employers should consider limiting use of the standard.  Further, employers who rely on electronic communications with plan participants may want to consider following up with a paper communication when it becomes administratively practicable to do so.
  • Safe Harbor for Pension Plans: On May 21, 2020, the DOL announced a final rule establishing a new electronic safe harbor for pension plans. The final rule is not available to health and welfare plans. For more details on the final rule, see our SW Benefits Blog, “Department of Labor Issues Final Electronic Disclosure Rule.” In the meantime, employers should comply with the existing electronic distribution rules available here.
• Reflect Cost-of-Living Increases: The IRS announces cost-of-living adjustments on an annual basis. Our 2022 Cost of Living Adjustment Newsletter summarizes the changes in the health and welfare context.